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A fee for all: Councilors bicker over utility hike

A discussion on a proposed increase to the city's gas and electric fees culminated with a face-off between two Bemidji City Council members.

Councilors Nancy Erickson and Onen Markeson ex-changed words Monday as they argued whether increasing fees was a way to raise taxes without raising the city's tax levy.

Markeson argued that raising fees was the same as raising taxes without considering the low-income population. At least with property taxes, he said, low-income households may claim property tax deductions.

Erickson said implementing fees was the only way to get non-taxable properties to contribute to the city's budget.

The council voted 5-2 during Monday's work session to direct staff to consider an increase of 50 percent for the city's gas and electric fees. For residents, this would mean a monthly increase from 50 cents to 75 cents.

The City Council will begin to consider an ordinance encompassing all proposed fee increases during Monday's regular City Council meeting. A public hearing on the proposed changes will be held in November.

Markeson said the council would be taking the "wrong route" if it approved the fee increase.

"This is not a reasonable way to go, in my opinion," he said, voicing support instead for property tax increases.

City staff had proposed a 100 percent increase, which would have raised residential fees from 50 cents to $1 a month.

The gas and electric fees, which now bring in about $150,000, have traditionally gone toward street reconstruction costs. About six weeks ago, the council voted to roll those funds into the general fund. It was proposed during Monday's meeting that the additional dollars - the money generated by fee increases - would be dedicated to street reconstruction.

Councilor Jerry Downs asked if the fee was comparable to other cities' fees. City Attorney Alan Felix replied that 50 cents was probably the lowest fee.

"I think this is a reasonable fee," said Downs, who added that the fees would bring in more funds once the city begins annexing land from Northern and Bemidji townships.

Markeson was not convinced. "Property taxes are the way to go" to generate revenue for the city, he said.

Erickson said she understood Markeson's point and called the fees a "flat tax."

"This fee is a little hard to swallow," she said.

But, Erickson was able to support the fee increase because its revenue would go toward street reconstruction, she said, and everyone uses the streets.

The fees are a way to gather revenue from non-taxable properties, she said, adding that about 47 percent of the city's property is non-taxable.

City staff estimated that about two-thirds of the gas and electric fees are applied to residences. Markeson argued that non-taxable properties only contribute a small percentage of the revenue that is brought in through the fees.

"Fees are the wrong way to build up the city's coffers," he said.

Councilor Ron Johnson suggested that the council table the matter until the end of the 2008 legislative session. He suspects that there will be another push to restore and possible restructure Local Government Aid. Johnson said the city could push to have non-taxable land considerations built into the LGA formula.

Mayor Richard Lehmann proposed that the council take on the increase a little bit at a time. Instead of doubling the fee, he proposed a 50 percent increase for 2008 and a 50 percent increase in two years.

A motion to table the matter until the end of the 2008 legislative session failed 2-5 as Johnson and Markeson were the only two councilors to vote in favor of the motion.

A second motion to continue forward with a 50 percent increase passed 5-2; Markeson and Johnson voted against the motion.