The city of Coeur d’Alene is considering a property tax increase to help balance the budget. 

Katie Ebner, finance director and treasurer, told the City Council during a workshop Monday that the tentative budget calls for the 3% allowable property tax hike and 1% from forgone taxes.  

That would cost the owner of a residential property with a taxable value of $1 million about $8.15 a month, or nearly $100 a year. A commercial property with a taxable value of $1.8 million would see a tax hike of $14.89 a month, or about $350 a year. 

"Even with the maximum allowable increase to property taxes, the city's FY25 budget is in deficit — and that deficit is projected to grow in FY26," according to the report.

Ebner said the only way the city can increase revenue is through property taxes. It is projected to receive $25.7 million in property taxes in the current budget, and $27.1 million in the fiscal year 2026 budget. 

A 4% property tax increase would generate about $1.1 million. 

Ebner said she sent a letter to department heads asking them to trim 1% of their budget. 

“None of us want to do that,” she said.

She is also recommending the city "keep wage increases conservative," and leave unfilled positions vacant.

This year’s proposed budget calls for $21.5 million for police, down $4.3 million primarily due to capital improvement projects in the current budget. 

“We’re not cutting public safety,” Ebner said. 

The spending plan calls for $15 million for fire (up $569,846); $7.2 million for streets and engineering (up $568,263); $3.2 million for parks (up $210,370); $3 million for municipal services (up $173,310); and $1.2 million for building inspection, (up $84,516 with one new full time position added). 

Ebner said she is projecting a few major changes in revenue, including a decline of $225,000 in state liquor tax to $1.3 million in FY26 from $1.5 million, which drew some light-hearted comments. 

“Let’s talk about booze,” said Councilor Dan Gookin. “It doesn’t seem like Idaho is drinking any less.” 

Ebner said nonetheless, state liquor tax money will be down.

“I don’t keep track of drinking rates,” she said. 

In a letter to The Press Monday afternoon, Ebner wrote as of the end of FY24, the general fund reserves stood at about $12 million, a decrease from just under $13 million at the close of FY23.  

“While we anticipate some cost savings in the current fiscal year — primarily from unfilled positions — these savings will only partially mitigate the impact of the $2.2 million structural deficit,” she wrote. “We estimate that the City will still need to draw at least $1 million from fund balance reserves to sustain operations in FY25.” 

The proposed FY26 budget includes $2.5 million in fund balance to supplement revenues and afford operations.

She said a key driver of thie fiscal pressure is the limited availability of new revenue from construction growth, which no longer offsets the increased cost of services required for new residents.  

Last year, the city received $183,000 in new revenue from growth. In the proposed budget, it's expected to bring in $185,000. Both figures are among the lowest in 25 years.

"There is a common misconception that the city's growth generates substantial new revenue — this is not the case," the report said. "Due to state-imposed formula limitations, property tax revenue from new construction remains minimal, even though growth continues at a steady pace."

Ebner said to make up for the lost revenue that would typically come from new growth, "the city must rely on the only remaining mechanism available to support service demands in a growing community, which is approving a property tax increase."

Ebner pointed out several positives for the city's finances. Voters approved a $16 million general obligation bond for the fire department in May; inflation has cooled off and assessed values have stabilized.

She also cited operational efficiencies, such as despite rapid growth, city staffing levels have remained steady, with no reduction in services. The city has about 425 employees, only three higher than three years ago.

Last year’s operating budget of about $139 million also included a 3% property tax increase.

The city will continue to work on the budget and will adopt it later this year.