POST FALLS — De-annexation is quickly becoming a buzzword in the Kootenai County urban renewal world.

Less than a week after Coeur d'Alene passed two ordinances allowing the distribution of more than $1.3 million of property tax revenue because of de-annexation of urban renewal property, Post Falls will consider its own de-annexation proposal tonight.

The Post Falls City Council earlier directed staff to bring back information regarding the possibility of de-annexing a portion of the 237-acre Expo Urban Renewal District on the west side of Post Falls on the north side of Interstate 90.

Shelly Enderud, Post Falls city administrator, said the council's request for information comes in light of developer Jim Watson's proposal to change the zoning of 115 acres of industrial property to 70 acres of commercial and 45 acres of single-family residential for the Expo site between Pleasant View and Beck roads.

"The council wanted us to bring this forward to see if we want to take it out of the urban renewal district," Enderud said.

The council will discuss the possibility tonight at 6.

Whether urban renewal funding should be used on districts with residential zoning has been a hot debate on whether that was the intent when urban renewal was approved as a funding tool for infrastructure to attract business and jobs. However, that's not an issue in this case, Enderud said.

"What we're being told by both urban renewal and the proponent (Watson) is that no funds will be used for residential," Enderud said.

Urban renewal districts created by the cities and administered by the urban renewal agencies have a base tax rate when the district is created. That base tax rate continues to be collected by the county and remitted to taxing entities over the life of the district. As a district is improved, has new construction and increases in value due to improvements, the incremental tax created by those improvements in excess of the base tax is allocated to the URA to pay for the public improvements that have been made within the district.

The Urban Renewal Commission last week unanimously recommended to the council that the district be left alone since the taxing agencies would not begin receiving funding from the de-annexation until 2018 at the earliest and the district will close in 2021.

"The relatively small amount of additional taxes that would be recognized by the taxing agencies in the event of de-annexation seems to make the de-annexation effort futile," Jerry Baltzell, chairman of the urban renewal agency wrote in a letter to the city.

In an interview with The Press, Baltzell said the Urban Renewal Commission couldn't find a reason why de-annexing would benefit the community, urban renewal, Watson or the city.

"It would actually reduce the tax increment over time, which wouldn't be good when there's roadway improvements to be built," he said. "No urban renewal funds will be used for residential. The only thing we'll do is connect arterials to businesses."

De-annexing the property would likely cost $10,000 or less, Enderud said. It would include amending the district plan, creating new maps and legal descriptions and public hearings before the Planning and Zoning Commission and city council. It would also be submitted to the Idaho State Tax Commission for approval.

• In other business, the council will hold a budget workshop in the downstairs conference room at City Hall at 5 tonight.

The proposed General Fund budget is $22.86 million, an 11 percent increase from the current budget.

The council, among other budget items, will discuss whether to continue to charge street lights as a fee on residents' monthly bill or move to charge for lights through property taxes. The proposed budget amount includes $565,484 in property taxes that would be used to cover street lights.

The proposed budget is also being built based on a 1 percent cost of living adjustment (COLA) for employees and up to a 3 percent merit pay hike based on evaluations.

The public hearing on the budget is at 6 p.m., Aug. 16.