New treatment plant would result in sewer rate increase, but the amount is unknown
WILLMAR -- Willmar sewer rates will increase if the city builds a new wastewater treatment plant west of town during the next four years. The final amount of that increase won't be known until all costs and financing plans are determined. The Wil...
WILLMAR -- Willmar sewer rates will increase if the city builds a new wastewater treatment plant west of town during the next four years.
The final amount of that increase won't be known until all costs and financing plans are determined.
The Willmar City Council's Public Works/Safety Committee recommended Tuesday night the full council authorize consultants to proceed with preparation of a facilities plan to be submitted to the Minnesota Pollution Control Agency.
The facilities plan will tell the MPCA how the city will address its wastewater treatment issues, identify the proposed type of treatment method, and discuss the plan of action for planning and construction. Approval of the plan by the council and MPCA will trigger a year-long design phase.
The city and consultants had hoped to submit the plan to MPCA by March 1, which is the MPCA's and Public Finance Authority's application deadline for funding requests. Officials hope the city will receive up to $20 million in state and federal grants for the project.
"We didn't know if we were going to make that because we didn't know how the committee meeting would go,'' said Schmit. "Whether we can do that in the next 28 days or not remains to be seen, but I think as a practical matter we'll be submitting the facilities plan in March or April of this year.''
Schmit said there is no question that sewer rates will increase.
A consultant's preliminary report -- using today's costs -- estimates the typical residential sewer rate could more than double from about $167 per year to $406 per year if the city receives the grants, or nearly triple to $491 per year if no grants are received for the estimated $80 million project.
"What's important to note is the numbers that we're using as the projected rates assume you finance $80 million over a 20-year period,'' Schmit said Wednesday. "It's not quite that simple. That is the worst-case scenario. If we get grants, that will be taken off the top of the project cost, and that will lower the rates.''
Also, now that consultants have proposed a treatment method, the city will begin to work with the financial advisers on different financing schemes that will hold down the rate increases, Schmit said.
"For example, we may sell a multimillion-dollar bond issue, but we may structure the debt service of it so that we place a lot of that debt at the end of the bond issue, and probably in all likelihood end up refinancing at some point in time,'' he said. "We can start out small, grow those debt service payments over a period of time, and that's what we don't know yet.''
Rate increase estimates are based on 2005 material costs and are just an example of how the rates could go up. "The final number won't be known until all the costs are determined through bids and financing plans are considered,'' said Schmit.
Also, by the time the new plant is up and running by 2010, the city will have significantly reduced the debt on upgrades at the present plant, from $1.3 million to about $400,000, said Schmit.