FAIRMONT — Fairmont City Council held a work session Monday to examine a proposed 16.3 percent property tax levy hike to generate about $770,000 in 2020.

Paul Hoye, city finance director, said the increase does not mean property taxes will go up by that percentage. Property owners saw a decrease of 0.33 percent in their 2019 taxes in spite of a levy increase of 3.9 percent.

The additional funding is credited to four areas: $50,000, or 1.1 percent, for the city’s annual street improvement program; $375,000, or 8 percent, to cover debt service on a 20-year bond for the proposed new street/park building; $25,000, or 0.5 percent, for a part-time rental housing/code enforcement position; and $318,000, or 6.7 percent, for cost-of-living increases and capital improvements.

The levy cannot be raised after Sept. 30, but it can be lowered. Hoye said reducing or eliminating any of the four specified areas would be about the only way to lower the proposed levy.

Council members and city staff spent much of the work session discussing ways to accelerate the city’s street improvement program, and how to improve the current method of borrowing money and assessing property owners to pay for the work. The city has had a practice of bonding or borrowing about $3 million dollars every other year for major street improvements, but the cost of borrowing is steep. Hoye estimates that just the cost of issuing the bonds has cost the city’s taxpayers more than $3 million since 2013.

Hoye has been developing a franchise fee program through Minnesota Energy, the local natural gas provider, hoping to raise about $500,000 annually. If the franchise fee is implemented, each gas customer in Fairmont would pay a fee on each month’s bill, and Minnesota Energy would then transfer that money to the city. He predicted the cost for an average household would be about $5 per month.

In a similar program, an infrastructure fee of about $10 per month would be added to Fairmont’s Public Utilities monthly billing, which would raise about $1 million per year.

By generating $1.5 million per year, the franchise and infrastructure fees would spread the cost of street improvements to all residents, thereby replacing street assessments on property owners.

City administrator Mike Humpal suggested doubling the city’s half-cent local option sales tax with the new revenue earmarked for street improvements. This could generate an additional $700,000 to be used for better roads, and anyone driving on those roads to spend money in Fairmont, residents and non-residents alike, would contribute to the streets.

In a separate budget matter, Fairmont Police Chief Mike Hunter told the council that the Southern Plains Education Cooperative plans to move its facility from Winnebago to the new Arise Academy, the site of the former Lincoln School, over MEA weekend in October, and the co-op is proposing to have a part-time school resource officer.

Hunter plans to use a part-time officer initially but would like to add a full-time officer in 2021 to split time between Arise Academy and doing general investigating for the department or filling in for officers on family or medical leave. The co-op would contribute about $40,000 per year for the officer to work 680 hours, or about 20 hours per week, at the academy.

And, finally, Humpal said he and Hoye plan to meet today with the community center committee for an update on proposed building changes and the involvement of the YMCA in the center’s management. He suggested the council hold another work session in early September to discussion the changes and any financial commitment from the city. The city’s current half-cent sales tax, which raises about $700,000 per year, is dedicated to the community center.