By BRIAN WALKER

Staff Writer

You’ve heard it before, and you’re hearing it again now:

“New growth should pay for itself!”

That oft-uttered refrain is part of the public workshop banter as area taxing agencies prepare budgets for the next fiscal year in this sizzling economy.

What some elected officials have learned in the workshops, however, is that despite rapid growth, property tax hikes are also being requested along with funding generated by new growth to keep pace with the cost of doing business and an increase in demand for services.

At Post Falls' budget workshop last week, City Councilor Joe Malloy had a quick question when he learned that staff might consider a tax increase to go along with new growth funds.

"As the city expands and there's more taxpayers, shouldn't (the budget come) without an increase?" he asked.

City administrator Shelly Enderud explained that new growth would fund new positions required by an increase in demand for services, but a tax increase might also be needed to keep pace with the increased costs of doing business.

"It would be nice (for new growth) to cover it all, but it doesn't," Mayor Ron Jacobson said during the workshop.

As of its last workshop, Post Falls hadn't decided the amount of tax increase, if any, that it will request for its proposed budget.

While requesting a property-tax increase is historically far from automatic, it is clearly the norm this budget season.

Most cities, the county and highway and fire districts are asking for at least a portion of the allowable property tax increase of up to 3 percent in their budgets.

Agencies are allowed to choose which budget of the past three years they want to increase, but most choose the previous year because it's typically the highest amount.

BY THE NUMBERS

Rathdrum city administrator Leon Duce said officials are seeking a 1.92 percent tax increase. He said Rathdrum is in a similar position as Post Falls, looking at a tax increase in addition to using new-growth funds.

Duce said the new-growth dollars will fund a new police officer and parks worker, but like most other cities, more money is needed from a tax hike to pay for expenses including cost-of-living allowances (COLAs), merit pay raises and rising fuel and electrical bills.

"There are additional costs of doing business that are not caused by new growth," Duce said. "Nobody likes to see tax increases, but they help with those kinds of expenses. Just like personal budgets, business expenses go up every year, but we try to be very cautious on keeping (tax increases) down."

Duce said new growth, however, should be able to at least cover the additional expenses that are created specifically because of that growth.

This year, Rathdrum's income from new growth — $149,000 — is three times the amount that would be generated from the 1.92 percent tax hike — $49,000.

Post Falls will receive $551,541 from new growth and would receive an additional $105,203 with a 1 percent tax hike, $210,406 with a 2 percent increase and $315,610 with a 3 percent bump.

Troy Tymesen, Coeur d'Alene's city administrator, said that city is planning to receive $492,918 from new growth and would receive $640,573 with its proposed 3 percent tax increase.

That new growth amount is the highest for the city in the past three years.

Dena Darrow, Kootenai County's finance director, said that agency is planning on using $1.17 million in new growth funds along with a 1.5 percent tax increase that will fetch $687,982.

Hayden has budgeted $45,005 in funds generated from new growth.

Hayden city administrator Brett Boyer said it is "common sense" to add the new construction to tax rolls.

"That is part of the formula for having growth pay for itself," he said. "The mechanisms for having growth pay for itself have multiple facets and are not perfect."

He said Hayden’s and other cities’ strategies for having growth pay for itself also involves collecting impact and sewer capitalization fees.

"Those fees are adjusted regularly as we review how new construction can pay for itself," Boyer said.

THE BIG QUESTION

Duce said new growth is designed to pay for itself, but that ultimately depends on what kind of services are needed and expected.

"If something is brought in that creates a high crime rate, new growth may not pay for itself," he said. "If you bring in something that doesn't use a lot of city services, it definitely does. There's a balancing act and you truly don't know the effect of it until you see the effect of new growth. It could go either way depending on the type of services you want, and that's what we're trying to create a balance for."

Duce said that while it can be murky if residential growth pays for itself, commercial definitely does.

When asked whether she believes new growth pays for itself, Enderud called that "a very complicated question."

"Several years ago, the city engaged with a firm to create a feasibility study on what type of growth pays for itself and what type doesn't," she said. "The firm was unable to provide a conclusive program that fully answered this question."

Enderud said she's also spent time researching and reading studies on whether or not residential growth pays for itself.

Factors include state methodologies used to allocate gas and sales tax back to the cities and counties, the location of the growth and if areas are already receiving services, and if it's in an urban renewal district because cities can't receive growth dollars until districts close, she said.

Another factor is the level of service citizens expect as the city grows, Enderud said. For example, smaller cities may not have street lights or parks.

"As a city grows, the expectation of service level will usually increase," she said. "Larger businesses looking to locate in communities are also looking for a higher level of service."

Enderud said it's critical for cities to engage in long-term planning to ensure they are providing the level of service its residents expect.

Tax hikes and taking funds generated from the market value increase caused by new growth are ways agencies can fund additional service needs brought on by that growth.

Agencies almost always use the new growth dollars in their budgets as a way of easing the tax burden on residents who have been living there. Tax increases, meanwhile, vary from year to year and past decisions on those can even arise during political campaigns.

The amount of funds agencies use in their budgets from new growth is determined by multiplying the total taxable market value of the new growth from the previous year by last year's levy rate. The market value figure includes new construction activity, land-use changes, annexations and URD closures.

After that, though, it’s just a matter of how much to spend — and where.