'Tis the season to raise taxes

Even with new growth dollars supplementing proposed city and county budgets, raising taxes in fiscal 2017 is the norm as local agencies prepare for public hearings on their budgets.

Kootenai County and the cities of Coeur d'Alene, Post Falls, Hayden and Rathdrum are proposing tax hikes, taking foregone taxes, or both — for various reasons.

Kootenai County, Coeur d'Alene, Post Falls and Hayden are planning 3 percent tax increases — the maximum allowable under state law.

Post Falls, along with Rathdrum, is also taking foregone taxes as both cities are eliminating residents' street light fee on monthly bills and making it a tax that's paid for through their General Fund.

Foregone, a budgeting authority, isn't actual funds but an accounting of money agencies could have received through tax increases in previous years but elected not to. When agencies take foregone, it's the equivalent of raising taxes.

Kootenai County Commission Chairman Dan Green said the county is capturing about $997,000 in new growth funds for its budget.

However, proposed increases, including a $1.7 million rise for medical insurance and a 2 percent merit-based pay hike for employees, more than eat up the new construction dollars.

"The new growth alone will not cover the additional costs," Green said. "There are additional costs that have increased, but compensation-related costs are by far the largest factors."

Green said such factors are a reason for the tax hike proposal.

Post Falls, meanwhile, is increasing taxes and taking foregone to generate a total of $565,484 in property taxes to eliminate the street light fee. That amount is proposed to be split evenly between the tax increase and foregone. Post Falls Finance Director Jason Faulkner said the move is merely an offset or shifting of the same amount of revenue.

What would change Oct. 1, however, is that not every homeowner will pay $3.85 per month as is the case now.

Since street lights would become a tax and be based on home values, the owner of a $200,000 home will see a $12.14 decrease per year on street lights. The owner of a $250,000 home will see an increase of $4.04 per year, and for the owner of a $500,000 home the increase will be $125 per year.

Faulkner said the city's budget was built with no tax increase, but the street light change necessitated the need for the hike and foregone to cover the expense.

Post Falls is planning for merit raises of up to 3 percent for its employees, plus a 1 percent cost of living adjustment (COLA).

Post Falls and Rathdrum are making the switch on street lights amid lawsuit threats that it's illegal to charge for lights as a fee. The U.S. Supreme Court in 1974 distinguished fees from taxes in that fees are based on usage by individual homeowners, while services funded by taxes benefit the general public.

Legal opinions about the fee-tax debate vary as Coeur d'Alene plans to continue charging for lights as a fee. Other cities, including Hayden, already pay for lights through taxes.

Rathdrum isn't planning on a tax increase, but is taking $85,000 in foregone with the elimination of street lights as a fee.

"We're taking foregone only to take street lights off the monthly bill and cover that with property taxes," said Leon Duce, city administrator. "We don't see the need for street lights to be a fee, but it's still something we have to pay for."

Like Post Falls, the cost for street lights will vary based on home values, but Duce, who was out of the office on Friday, didn't immediately know the breakdown.

Rathdrum is planning on a 2.5 percent pay increase for employees based on merit, plus a 2 percent COLA. But the city was able to avoid proposing a tax hike with belt tightening that included pulling purchasing a street sweeper form the budget.

"We thought we'd be better served to rent a sweeper on the occasional times that it's needed rather than buy one outright, so that helped keep property taxes lower," Duce said.

With Coeur d'Alene's budget, most employees can earn up to a 5 percent pay increase based on merit. The budget proposal also includes a 2 percent COLA.

Coeur d'Alene will capture $314,211 this tax year with new construction dollars — the lowest amount since 2012 — plus will receive $533,706 for de-annexing properties in urban renewal districts. However, those amounts aren't enough for the council to refrain from a proposed 3 percent property tax increase.

Hayden City Administrator Brett Boyer said his city needs to increase taxes 3 percent due to a low levy rate of about $1.30 per thousand in valuation compared to about $5 at other area cities.

"We need the increase to cover just the basic increases in operations and try to get some projects done such as road maintenance, an area we are falling behind in," Boyer said.

The city has $340,000 budgeted for road maintenance.

The tax hike will generate $37,994 for the city. It would represent about a $5 increase per month for the owner of a $200,000 home.

Boyer said the average household in Hayden spends less than $200 a year for City of Hayden property taxes or about 11 percent of their total property tax bill.

Hayden is not planning on salary increases or a COLA and no new positions are being requested.

"However, the city did budget to pay for another sheriff's deputy with the county that is designated to the City of Hayden," Boyer said, adding that $145,000 is budgeted for the position, a patrol car, equipment and training.