Don't underestimate city's financial problems

It was recently stated that the city of Coeur d’Alene is not about to fall off a financial cliff. But if the preliminary budget submitted to the Coeur d’Alene City Council is any indication, the city should be like Wiley Coyote and look out for the Road Runner.

Key numbers to be alarmed about:

• $3 million deficit: what the city is projecting its expenses are above revenues.

• $2.17 million: new taxes to be levied, a 7% increase.

• $1.86 million: additional salaries and benefits are proposed.

Finance Director Katie Ebner, with a thankless job to do, has proposed to fix the deficit:

• $477,000: spend annexation fees, presumably remaining from Coeur Terre.

• $250,000: delay new street maintenance.

• $150,000: delay buying new pickup trucks.

• $280,000: delay hiring new employees.

• $1.24 million: delay filling current vacancies.

Remaining deficit:

• $680,000: To be paid from existing reserves (cash).

This last part is especially concerning, because the city’s independent auditors identified last year the city’s reserves were at 21.5% of expenditures. This is already 3.5% under the city’s historical benchmark of 25% for reserves. Removing an additional $682,000 only puts the city’s finances in additional jeopardy.

It’s also not a sound idea to use one-time revenues like annexation fees to cover ongoing expenses. This only delays the inevitable and the cliff gets closer.

How did all of this happen? I checked back to the beginning of this century and the FY 2000 city budget, as it’s easy to calculate today’s dollars with those of 2000. That’s because everything has basically doubled since then, based on the Federal Consumer Price Index (CPI):

• Example: $12,000 was the average Social Security Benefit in 2000.

• Today it is $24,060.

I noted the increase in salaries and benefits above. Let’s look at those since 2000, using the average Salary and Benefits as adjusted for CPI.

• 2000: $87,556 average per employee: adjusted in today’s dollars.

• 2026: $113,955 average per employee: a 30.6% Increase since 2000.

• $11.6 million: Additional impact on the budget from salaries and benefits.

• This means if the city had simply applied the CPI index to its employees’ compensation since 2000 the impact on the budget would reflect a property tax difference of over $11.6 million.

Caution! The city’s employees are worth it! I appreciate the hard work each one provides to me and my family every day. Indeed, we saw that ultimate dedication last year and it’s been evident every day, both before and after that terrible time. And, with the cost of living higher here, mostly because of our high real estate prices, the city must be competitive on salaries and benefits if it’s to retain the best employees.

Now, however, because the Idaho Legislature has capped how much the city can increase our property taxes, and the reduction in key State funding (see below), the money to cover additional Cost of Living Adjustments (COLAs) is limited. For that reason, I believe the City Council should bite the bullet and reopen its contract negotiations with its three Employee Associations. They all deserve the right to help with the financial issues facing the city and come up with viable solutions.

Other concerns:

• $1.16 million less State Highway User Fees: the City’s revenue from the State Highway User Fees (the gas tax we pay at the pump) dropped by $1.16 million. Apparently, it was expected since the State funding was much higher in previous years because of COVID or other factors. It raises the question of how the city council hoped to make that up this year, while balancing the budget last year.

• $202,000 less in State Liquor Taxes since 2023: of all things, booze. But it’s not because people in town may be drinking less. It’s because some of the money is being diverted by the state for other uses, like the Idaho State Police.

Finally, the Idaho Legislature needs to see the hardships it has caused local governments, including when they cap budgets when needs arise or new construction exceeds what’s allowed to be levied. One solution to lobby for:

• Local Option Tax on Hotels and Restaurants: The State should allow cities over 10,000 population to ask voters for a Local Option Tax to be levied on hotel and restaurant visits. Smaller cities like Kellogg already have this option and it funds a large portion of their budget. This would mean tourists who flood our city every year could be paying something toward its maintenance.

Summary and recommendations:

• Adopt the budget adjustments as recommended to save $2.3 million.

• Reopen the employee associations’ contracts to deal with the $682,000 deficit.

• Do not rely on one-time fees like from annexations to fund ongoing expenses.

• Develop a multi-year financial plan to deal with ongoing expenses.

• Work with the Legislature to allow cities like Coeur d’Alene to ask voters for a Local Option Tax to help tourists pay for their impact on residents.

I am positive there are other options to consider as well. Let’s talk about that, so together we can all work to continue to make this city an even better place to live. Besides, as one columnist often noted, “It is just common sense.”

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John Austin is a former city treasurer and finance director for the city of Coeur d’Alene.