City and resorts disagree on what is ‘fair and equitable’
At their regular meeting held March 10, the Isle City Council passed an amended resolution establishing water and sewer rates. The newly implemented guidelines would see single owner properties with multiple units incurring new fees per their additional units. These rates have been implemented to build revenue for loan payments in the coming years. Local resort owners have voiced their frustrations with these measures while city clerk Jamie Hubbell explained that the approach was meant to be fair and equitable for all citizens.
According to the language or the resolution: The new passed guidelines will increase rates for single owner properties with multiple residential or commercial properties, instituting a base rate of $63.19 for the main metered location, plus an additional $15 per independent unit. This rate will affect any offices, hotel rooms, condos or apartments on the property. An exception for this rate would also be applied to resort properties during periods they were closed for an “off-season” period of more than 90 days. This would only apply to resorts that were closed for such a period and not just vacant during this time.
The resolution also adds a common interest community (CIC) user rate previously affecting “multi-owner resorts and planned unit development properties.” The rate for such properties is $63.19 on the main meter and $25 for each further unit. The resolution states each owner will be billed this rate separately, and base rate billing will go to parcel owners.
The council unanimously passed this resolution, and the first billing for these rates will be effective April 19 of this year.
Margie Christensen, owner of Hunter Winfield’s Resort, said, “Our stance, as a resort, is that we are a business, just like every other business. We just happen to have cabins.” She added that the resort had high maintenance costs and overhead that came with their additional buildings, never mind utilities.”
Christensen said she understood the city was facing financial difficulties, pointing to upcoming bond payments that had led to these rate increases. Christensen felt properties renting out apartments should be charged on a by-unit basis while the City could implement a commercial rate increase across the board. “Apartments can pass on those rates to their tenants a lot easier than I can do,” she said. While Christensen had looked at a $2 a day increase to offset the new rate expense, she already reduced her rates as much as she could to draw in customers during this period of lower capacity.
Christensen spoke to the negative effects her business had felt due to the recent years of walleye fishing regulations. “Our capacity is half what it used to be,” she said. “ … we shouldn’t be the only ones who are isolated as a business to bear the burden of financial difficulties to the city.” Christensen said that her revenue was flat, making just enough for her to pay bills due to lake regulation with DNR walleye fishing restrictions. “Now they’re expecting me to pay more bills.”
“We’re bringing tourists in,” Christensen added. “Our job is to bring people to this town. People who visit this town visit the grocery store. They go to the Muni. They go on Snacks on Mille Lacs. They go to the bowling alley. If we have no tourists, we have less people going to those businesses. I feel like we are being penalized for bringing tourism to the town.”
Noting that the resorts in the city also paid a lodging tax, which they’ve had to pass on to their customers, Christensen said these new water rates put its resorts at a competitive disadvantage to other Mille Lacs resorts outside the city limits.
Tina Chapman, with Chapman’s Mille Lacs Resort and Guide Service, stated, “I think the City should take a harder look at distributing this rate across all businesses, instead of putting it on us.” As for how these new rates would impact her resort’s business, Chapman said she would have to wait and see.
Tim Potoczny, owner of McQuiod’s Inn, also spoke on the rate increases. “I’m not happy about it,” he said. Potoczny understood that some might say he had more units at his property using city water but added that he already paid a usage rate, echoing a similar statement to McQuoid’s. He also said that many of his buildings were occupied less than 30 days a year, and he would likely need to close these buildings down during the off-season to not incur extra expenses.
Potoczny said he intended to explore his options to fight the rate increases, “But in the greater scheme of the world right now,” he said, “it’s not my biggest concern … between this, the pandemic and the fishing regs, maybe we’ll be here in October, maybe none of us will.”
“I just think there would have been a fairer, more equitable way to do this,” he said, “like spreading the cost across other commercial businesses.”
Hubbell explained the circumstances that have led to the water rate increases. At the City’s current rates, she said, not enough revenue was made to cover current debts along with operation and maintenance costs. These funds have been in the negative for the City since 2016. In addition, the City will need to pay for balloon loan payments in 2027 and 2028, at $303,720 and $306,064 respectively. Rate increases have been made to build a reserve for these forthcoming payments.
Hubbell also cited years of complaints from residential users who were paying the same rates of multi-user apartment and commercial resort properties. The changes addressed multi-user accounts to be more fair and equitable to these single-user accounts, Hubbell said. While the City had looked at a commercial rate increase across the board, such an increase would be between $17-20 per business. “And that still did not solve the issue of the multi-user properties not being charged impartially to all other users,” she said.
The new rates will affect 89 accounts within the city, Hubbell said, along with the CIC accounts and the residential and commercial properties with more than one metered account. She added that the council has been considerate to hardships faced by commercial resort businesses, accounting for their off-season and by extending the effective date to open-season in the determined rates. Due to the pandemic crisis, the council is considering postponing the increase citywide at the recommendation of the Utility Commission of Minnesota. “The City will work with everyone who experiences financial hardship due to quarantine orders and loss of work and business,” Hubbell said.
“We’ve had three total meetings on our water and sewer rates,” Hubbell said, “and this is what the council decided was the most fair and equitable for the whole of the city.” She added that the rate increases were not a decision made lightly, and many years of discussion had informed the decision. “As times get tougher on our community,” Hubbell concluded, “the council will continue to do their due diligence in making the best decisions possible for the city as a whole.”