The Free Press, Mankato, MN

April 30, 2014

Apartment owners plead for rate break

By Mark Fischenich
mfischenich@mankatofreepress.com

---- — MANKATO — For at least the third time, Mankato apartment complex owners and managers are asking the city to reconsider water utility fee changes that will hit rental units hard.

The changes were originally slated to take effect at the beginning of this year, but the Mankato City Council agreed to delay them until July 1 to give apartment complexes time to adjust rents or otherwise prepare to pay a larger water bill each month. With July 1 fast approaching, a quartet of representatives of the industry made their appeal again this week.

"I'm asking you to go backwards," said Dean Doyscher, owner of Security Management and Realty, which manages several local apartment buildings. "Going backwards is better than doing the wrong thing."

The wrong thing, in the eyes of Doyscher and other operators of large apartment buildings, is charging $4.51 a month for virtually every residential unit in the city, whether it's a single-family home, a duplex, a townhome or an apartment. Currently, the city charges the basic water service charge for each water meter in Mankato plus an additional charge for the volume of water consumed.

That approach has favored multi-unit apartment buildings, which typically have just a single meter even if the building has dozens of apartments. The change is being made in part to generate more income because revenue raised by existing water rates wasn't enough to fully cover the operations, maintenance and eventual replacement of the roughly $150 million worth of facilities that provide clean drinking water and treatment of wastewater and sewage.

The city is also mandated by state law to put in place water conservation measures, which is prompting an end to volume discounts for large users of water. Industry and other major consumers of water now get a 40 percent discount on water consumed beyond 225,000 gallons.

Originally, the plan was to eliminate the volume discounts Jan. 1, 2015, and implement the $4.51 monthly basic fee on all housing units — including each apartment — on Jan. 1 of this year. Complaints by apartment owners prompted the council last December to delay the per-unit charge by six months and move up the elimination of the volume discounts by six months, which allowed the budget to stay balanced by boosting revenue from large users sooner while delaying increased payments by apartment owners.

This week apartment owners asked for another delay in the per-unit basic fee or a change in policy to eliminate that fee. But Doyscher also said the owners and managers would be willing to accept a council decision to cut the fee in half for multi-unit apartment buildings.

"The other thing is we'd like to start working more directly with the city staff," Doyscher said of negotiating a change in the policy.

That's preferable to the persistent appearances at council meetings and publicly "looking like we don't agree," he said.

"Well, we don't," City Manager Pat Hentges said.

Hentges said Mankato's new approach isn't unusual, pointing at other cities that charge a basic service fee for every apartment or charge higher rates for higher usage of water.

"I couldn't find one entity that had a single base price regardless of the size (of an apartment building)," said Hentges, who believes that the policy favored by the apartment owners would leave single-family homeowners subsidizing renters.

Ann Dolan, who manages the massive Highland Hills apartment complex near Minnesota State University, was one of the four pleading for a change in the policy or at least a delay. In an earlier interview with The Free Press, Dolan suggested the city was seeking to generate revenue from college students and other renters because they don't vote in municipal elections.

Her company's properties will be paying an additional $50,000 a year in water fees because of the change, she said. And once existing leases expire, the costs will be passed on to already strapped students via higher rents.

"I feel sorry for the kids," Dolan said. "I tried. And if they're unhappy with it, I wish they'd contact the council. And vote. Start voting."

Hentges strongly disagreed with the theory the city was targeting young renters because they aren't engaged in city government and wouldn't complain about having to pay more. The new policy simply requires everyone who wants access to water to pay the monthly service charge regardless of whether they rent an apartment, rent a home or own a home.

"Basically, everybody pays the same," he said.

Council President Chris Frederick said he was struggling to understand why apartment dwellers should be exempt from the monthly access fee that homeowners must pay. Others on the council, including Mayor Eric Anderson and Councilwoman Karen Foreman, said they'd be willing to look at alternatives before the 2015 budget takes effect but weren't interested in making a change before the July 1 implementation of the new policy.

"I'd like to see this discussion happen," Foreman said. "... Middle ground can be reached."

Councilman Jack Considine said he wants to make sure owners of single-family homes are also represented in any discussions.

"We also need to include the homeowner associations," Considine said.

And Councilwoman Tamra Rovney said any changes would have to be judged in the context of whether savings to apartment dwellers result in a higher burden for other water users.

"We also have to look at what Chris brought up," Rovney said. "Is it fair?"