FAIRMONT - With reluctance, Fairmont City Council approved increasing utility rates Monday.
The hikes include a 12 percent increase for water and 8 percent for wastewater. Electric rates will remain the same.
The council discussed different ways to offset those costs, like increasing its customer base, but came to no conclusions.
Unfortunately, the state Department of Natural Resources has said no to adding on one big user - Buffalo Lake Energy. The DNR has said Fairmont's lake levels are not sufficient for the city to withdraw additional surface water to supply to an additional industrial user such as the ethanol plant on the west edge of town.
"I thought the idea of building the plant was to increase the water we could process," said Councilman Wes Clerc.
Another option the city is exploring is to pump its purified wastewater back into the lakes, instead of sending it downstream into the Blue Earth River watershed. If the state says no to this option, the city might be able to sell the purified wastewater to an industrial user.
But there seemed to be no way around raising rates immediately, based on the information presented by city staff on Monday.
It's a catch-22 of sorts: The rates are increasing to pay for the new water plant, but the hike is larger than originally anticipated in part because water sales have been down, and partly because customers doing a better job of conserving water, and also because of state-mandated water restrictions. The city, however, still needs to cover its expenses and pay its bills.
Fairmont finance director Paul Hoye provided an estimate of how the rate changes will impact different levels of water users:
o Smaller households will see their utilities go up about $10.75 per month, a 8.23 percent increase.
o An average family of five will see an increase of around $13.90 per month, a 6.43 percent increase.
o A larger commercial business will pay about $4,435 more per month, a 0.97 percent increase.
o An industrial business, on average, will pay an extra $1,305, a 2.63 percent increase.
Councilman Terry Anderson questioned why the people using the least amount of water are seeing the highest percentage increase in their water bills.
"The people who can least afford it are getting the biggest increase," he said.
City administrator Mike Humpal said the rate increase is 12 percent across the board for all users, but he also pointed out that does not mean everyone's bill is increasing by 12 percent.
"That's a hard pill to swallow," said Anderson, adding that he understands the position the city has put itself in with the new water plant.
"Is there another way?" he asked, suggesting using other city assets to offset the rate increase.
The city does have reserves, Humpal acknowledged, but that money is needed for the city to fall back on if state aid is cut in the future. Also, the city's credit rating is based in part on what it has saved in its reserve fund.
City staff and the Public Utilities Commission already went line by line through the water and wastewater department budgets and made cuts where they could, according to Humpal.
"It's a tough pill for all of us to swallow," he said.
Councilman Joe Kallemeyn asked if the city could look at its low-volume users in the future and see what changes could be made in the way they are charged in order to help those households. A study is planned down the road to examine the rate structure, according to Hoye.
How do Fairmont's water rates rank compared to other cities, asked Mayor Randy Quiring.
While Fairmont is on the high side, Humpal predicts it will level out when other cities start replacing their outdated water plants.
The votes to increase the water and wastewater rates were unanimous, but reluctantly so. "Regrettably, yes," was Kallemeyn's response when his turn came to vote on the water rate hike, and Anderson, after a moment's pause and a deep sigh, said, "Hesitantly, yes." Their comments were similar in regard to the wastewater increase.
In other business, the council:
o Approved a permit for a one-day temporary on-sale liquor license for Interlaken Heritage Days to serve wine at a fund-raiser set for March 7 at the Knights of Columbus Hall.
o Approved a gambling permit for the Fairmont Youth Hockey Association to conduct charitable gambling at The Marina Lodge, formerly Sisseton Saloon, at 501 Lake Ave., Fairmont.
o Approved the mayor's appointments of Bruce Peters and Jeff Militello for the airport advisory board; Craig Nelson for the park board; Ian Bents for the planning commission; and Ralph McMillan and Ken Harris for the board of zoning appeals.
o Set a public hearing for 5:30 p.m. Feb. 11 to review and take public input on changing the city's ordinance to allow signs up to 32 square feet for public, charitable or religious institutions.
o Approved setting a public hearing for 5:30 p.m. Feb. 11 to take public input on selling property at 415 Webster St. for $1,500 to Brian Barnes. A fire occurred at the property in 2010, after which the city purchased the site and demolished a damaged house since the property owner did not have insurance.