Affordability of city's new wastewater facility raises some concern

WILLMAR -- The Willmar City Council's Finance Committee had been slated Tuesday evening to receive a financing plan and proposed sewer rates to pay for the new wastewater treatment facility, estimated at $88 million.

WILLMAR -- The Willmar City Council's Finance Committee had been slated Tuesday evening to receive a financing plan and proposed sewer rates to pay for the new wastewater treatment facility, estimated at $88 million.

But committee members talked about the general affordability of the project instead because possible financing prospects could result in a tripling of sewer rates.

City Administrator Michael Schmit told the committee that city staff members have been working hard with financial consultants and the wastewater project engineers to come up with what he considers to a financing plan with affordable sewer rates.

He said much of the problem has to do with rules and regulations of the Minnesota Public Facilities Authority and the city's ability to sell bond issues at favorable, long-term interest rates.

"We wanted to inform the council of the work we've been doing on the financing plan, identify with them some of the obstacles that we've run into, some issues that we've run into and offer options to them to get some direction as to how we should proceed at this point,'' he said.


Schmit said one big factor is the term of the loan that the city would borrow from the Public Facilities Authority.

"We assumed all along that we could take out a loan in the 30-to-40-year range,'' said Schmit. But the authority's rules limit the term to 20 years, he said. That term "just kind of squeezes everything together'' and results in higher debt service payments, he said.

"It is a problem, but we've been able to deal with it in part by limiting the amount of money we borrow from PFA and supplement it with a bond issue that we can stretch out further,'' he said.

One difficulty officials have had is trying to identify how much of the cost should be attributed to each of the various user groups.

Schmit said one of his concerns is to come up with an equitable rate structure for residential, commercial and industrial users. He said he did not think anybody wants to ask any one of those rate-paying groups to pay a disproportionate share of the cost.

Schmit said the job's been difficult to develop a plan that holds rates down to a level that people were expecting a couple of years ago, which was $36 from the facilities plan that was approved by the state in 2006.

Now, rates of about $44 per month are being floated, which do not include the $4 per month utility replacement fee.

Among the options laid out by Schmit were to find cost-savings in the design; find savings in the conveyance system by moving the plant closer to town; or "staying the course'' and continuing with plans to construct the facility at the proposed site west of the city.


Right now, said Schmit, the only funding that the city has in hand for the project, which would reduce financing costs and sewer rates, is a $477,000 wastewater grant.

The 2008 Minnesota Legislature approved a $7 million deferred loan in the bonding bill; the state has approved a $2 million grant to help pay the cost of reducing phosphorus; and Congress has authorized but not appropriated a $15 million grant.

The money won't be factored into the financing plan until the city receives it, said Schmit.

During discussion, committee member Steve Gardner said citizens told the council that they wanted the new plant moved out of town where it's being planned.

The old plant, known for its odor problem, is located near the heart of the South First Street shopping area and is near residential areas.

"It behooves us to look at cost reductions,'' said Committee Chairman Denis Anderson. He said the committee should make a recommendation to the council, but said he sensed there was no agreement among committee members on a direction to take.

Committee member Ron Christianson said he did not like the idea of waiting.

The committee ended up receiving Schmit's report as information.


Because officials were unable to come up with a financing proposal, the Public Works/Safety Committee, which met right after the Finance Committee, did not consider plans, specifications and opening construction bids in July.

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