DUNKIRK – An increase in water rates was approved Monday by the City Council.

The action followed a public hearing at which two residents questioned how the rate increases were determined.

Mayor Anthony J. Dolce said the base rates will increase from $22.50 for the first 5,000 gallons to $33.75 starting Jan. 1. The proposal calls for a $45 base rate in 2014. The mayor said the city is faced with about $17 million in debt due to needed upgrades to the water system.

He said that the city is in the process of applying for financing for some of the changes and that a favorable interest rate to help pay the debt may result in a reduction of the $45 rate for 2014.

The city continues to work toward upgrading its water distribution system. Public Works Director Tony Gugino talked about a proposal to improve the transmission system along Route 5 West in the city. The “West End Project” is projected to cost $8,8000 for planning and preliminary engineering and another $10,500 design. Funding for the project will come from a state grant of $250,000. Gugino said he looks at this project as providing a favorable position for the city to participate in a regional water distribution project in the future.

In other matters:

• A lease with the Brown Bean Restaurant to open on the boardwalk was approved in the amount of $3,900. The lease begins Dec. 1 and will continue for two years.

City leaders voted to turn over events on the boardwalk and city pier to the Dunkirk Local Development Corp. Events previously had been under the city planning office. The annual events include Thursday evening music on the pier, the Fourth of July Celebration, the Beach Bash and the Wreck and Roll Festival.

• Council members approved a spending plan for the Community Development Block Grant funding. They approved $46,500 in public facility funding, including parking, street and sidewalk improvements. A total of $32,500 was established for employment training and senior and youth services in the city.

• The city will be holding open meetings this week on the 2012 budget.

City Fire Chief Keith Ahlstrom said he wanted to explain issues about the firefighters contract for the coming years. He said firefighters agreed to take no pay increase in contract year 2012 or 2013. He said the members of the union also agreed to contribute 10 percent toward health insurance.