COEUR d’ALENE — The City Council in a 5-1 vote agreed to consider a 3% property tax increase, and set the proposed 2022-23 budget at no higher than $123 million during a workshop on Tuesday.

It was a detailed, 50-minute presentation of city revenues and expenses that included math formulas and explanations of property taxes, levy rates and taxable valuations.

Even if the council later approves taking the allowable property tax hike, it doesn’t mean property taxes will rise, said City Administrator Troy Tymesen. That’s because an urban renewal district, the Lake District, is closing.

“Dollars will go back to our constituents," he said, adding that the city is being good stewards with taxpayer dollars.

But there’s another issue that complicates things: Growth.

The city just learned its estimated preliminary taxable valuation is $12.3 billion, an 83% increase over the current taxable valuation of $6.8 billion. That, in turn, lowers the levy rate, and when the levy rate drops, dollars drop, Tymesen said.

The current levy rate is .00348. The preliminary levy rate for 2023 is .00197. That translates into a reduction of $1.50 per $1,000 of assessed value.

The city expected to have another $1.6 million in next year’s budget from the closing of the Lake District. But with the lower levy rate, it dropped to $891,661.

The proposed 3% increase is projected to generate $710,216, so it basically balances out for property owners.

“It’s really just a math move,” Tymesen said. “Taking the 3% equates to the reduction in the levy rate.”

The city’s current budget is $109 million. The proposed $123 million is largely due to capital expenses, Tymesen said.

Projected capital purchases of $6.1 million include $3 million for police station expansion; $1 million for street department shop remodel and $986,610 for self-contained breathing apparatus for the fire department.

Most of that would be funded by American Rescue Plan Act funding of $6.2 million.

Projected significant expenses include: merit increases, $171,727; cost of living adjustments for full-time staff of 5% at $1.4 million; health insurance increase, $160,265; additional staff, $522,830 and service and supplies, $2.9 million.

The city is proposing to add a communications specialist at $83,590; an IT tech, $82,474; police application analyst, $81,126; firefighter, $105,298 and 1.87 positions in the streets department at $160,718.

Significant revenue changes include $1.6 million from the state, $1.8 million in new growth/annexation and the URD closing, and $5.5 million in federal grant funding.

In 2022-23, the city is projecting revenue of $55.2 million, and expenses of $56.6 million. It would make that up by using $1.4 million from the general fund, projected to be $11.2 million on Sept. 30.

Councilman Dan Gookin, the lone no vote, said even with the lower levy rate, he was reluctant to raise property taxes on people paying so much more for gas and groceries due to inflation.

“I think we need to be very cautious about expanding the size of government when the economy is in the tank,” he said.

Councilwoman Christie Wood said while it’s commendable that in the past nine years the city has taken the allowable 3% only twice, that can’t continue.

She said the city “absolutely” needs to take the 3% and then look at ways to reduce spending.

“We will have to cut some services,” she said.

Councilman Dan English said, “I think we have to be reasonable, prudent. We have to take care of what the people need to have done.”

Tymesen agreed some positions may go unfilled and some services could be reduced to balance the budget.

The council is expected to set a preliminary budget in August, have a public hearing in September and adopt its financial plan in November.