Battling costly lawsuits, cash-strapped Coatesville is confronting a $1.4 million shortfall in 2013.

But city council has decided against raising taxes that already are among the highest in the region.

Council last week voted to forgo the finance director's advice to increase taxes for a second consecutive year and instead opted to draw $1.4 million from its trust fund to cover the difference.

David Collins, the council president, said that raising levies would have been "unfair" to Coatesville residents, given that they went up by 5.6 percent last year.

Collins said past and pending lawsuits have burdened the city with "high legal fees."

The city's police department is fighting several suits, including ones alleging sexual and racial discrimination. Collins said he hoped that the recent hiring of a new police chief would "bring some semblance of logic to the department."

Finance Director John Marcarelli said the city has worked to keep down expenses, limiting increases to 1.8 percent, but said revenue shortfalls are "killing us."

He said the practice of dipping into Coatesville's $9 million reserve fund -- which was created after the city sold its water authority and once stood at around $40 million -- can't continue.

"That should be there for emergencies, not for regular operating expenses," he said, adding, "$1.4 million is a lot to take out in one year."

But closing the budget shortfall through tax increases would have resulted in "ridiculously high" taxes, Marcarelli said. The annual bill on an average-price home is about $570, he said -- that's in addition to school and county taxes.

Collins said council's decision was related to declining home values, which dropped 31 percent from 2010 to 2011 in The Inquirer's most-recent price survey.

"We need to really start getting the property values to turn around," he said. "In other areas, property values have stabilized or are starting to increase."

Drawing funds from a reserve in order to keep taxes down isn't unusual, said Rick Schuettler, the executive deputy director of the Pennsylvania Municipal League.

"It's a governing body and if they feel like they don't want to burden their taxpayers, I generally don't think there's anything wrong with that," he said.

Marcarelli said his is hoping the city can increase revenues by applying for grants and encouraging economic development.

Collins said the city is also looking at potential cuts to some programs, which could be decided as early as next Monday, when the council meets to vote on a final budget.

Contact Aubrey Whelan at 610-313-8112 or at awhelan@philly.com, or follow @aubreyjwhelan on Twitter.