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02-21-97 WSCITY OF OTSEGO WRIGHT COUNTY, MINNESOTA CITY COUNCIL WORKSHOP CITY SEWER AND WATER FEBRUARY 21, 1997 5 P OTSEGO CITY HALL 1 Mayor Larry Fournier will call workshop order. Mayor Fournier called the Workshop to order at 5:09 PM. Roll ll: Mayor Larry Fournier; Councilmembers: Suzanne Ackerman, Mark Berning, Vern Heidner Absent: Virginia Wendel Staff: Larry Koshak, City Engineer; Elaine Beatty, City Clerk/Zoning Administrator, Judy Hudson, Deputy Clerk 3 Any other discussion on City sewer and water. This was placed first on the agenda. Mayor Fournier introduced John Simola, Monticello Public Works Director and a resident of Otsego. CM Berning said assuming Otsego builds this plant and now Frankfort is no longer in it, has Dayton expressed for more capacity. Mr. Tom Noyes, Bonestroo, said they do not have the capacity in the CAB interceptor or the Elm Creek Interceptor and if Dayton grows to the northwest it will have to be served and they will need more capacity. The historic portion of the City needs it now and there are other properties along the river which may or may not need help. The study will address this. CM Berning said assuming Otsego's capacity stays the same, what is the potential service area that it will be able to be served on the east side. Mr. Koshak said the service area basically takes in current urban service area plus the 101 corridor Mayor Fournier asked if it could be expanded to cover the whole area. Mr. Koshak said yes. You can project for 20 years and it depends on the growth of the City. What needs to be resolved is who pays, the initial cost of the treatment plant, it will be based on capital costs and how much capacity each City has. Tom Noyes said each community will probably commit to a 10 year capacity, as you grow there would be time for expanding and figure out new proportions. Contract would be written so that each community could buy capacity from another. Council Workshop of February 21, 1997, cont'd. Page 2. I Paul Donna of SI)ringsted will give overview of possible financing options and other information Onestions and Answers_ Paul Donna and Alan Erickson from Springsted arrived at 5:17 PM. Mr. Donna briefly went over what services Springsted provides. He also informed the Council he is familiar with the proposed Wastewater Treatment Project. Mr. Donna distributed a Report Municipal Bond Essentials, City of Otsego, which he had prepared. Mayor Fournier invited Council questions and discussion. Mayor Fournier asked about financing. Donna - All cities use the State Revolving Program and Otsego should be put on the priority list, majority of the financing would come from this, typically a 20 year pay back. Two year period for construction and there are no payments, get reimbursed as bills are submitted, most economical way to finance. Certain costs would not be qualified - certain infrastructure associated benefiting industrial and commercial uses and land acquisition. He also briefly explained two other financing means, but said the best fit is the State Revolving Fund. CM Berning - Bonestroo Report refers to over -bonding of approximately 3/4 million dollars. Donna - Can be called capitalized interest and may be or may not be structured, need to capitalize payments within the borrowing which is meant by over -bonding. Mayor Fournier - Is this typical. Donna - Depends on if the City has a start up budget (funds set aside) or if there are immediate users. Alan Erickson noted that during construction period there may not be any revenues and this is where the capitalized interest comes in. CM Berning - Who pays for this. Donna - Done within the borrowing and he gave a scenario. CM Berning - Questioned the engineering costs that are occurring now. Donna - The costs the City is incurring now can be borrowed plus the architect costs are also eligible from the State Revolving Loan. He explained what Istanti recently went through. Mayor Fournier - Therefore, any money spent up front can be eligible for bonding/ Donna - Agreed. CM Berning - It was suggested to Bonestroo that the mobile home park be removed for hookups but in their report it stills leaves 300 existing hookups. Mayor Fournier said the information is not correct and the Council must discuss this. CM Heidner said that is an issue for us to determine and to inform Bonestroo. CM Berning also noted on Page 47 and 48 of the Bonestroo Report regarding the vehicle of ownership of the plant and asked what the Council thought of this 1 or 2. Under the Joint Powers Agreement, one attains the lead role, will that be Dayton or Otsego or is Otsego going to go with the Sanitary Sewer District, has this been discussed. Mayor Fournier replied the Sewer District has been discussed but the Council needs to address this. Council Workshop of February 21, 1997, cont'd. Page 3. Larry Koshak noted if a Sewer District is formed under State Statute, basically it is another Public entity. How much control each community has is how you run it. A Joint Powers Agreement may have more control by the local governments. Alan Erickson also noted a Joint Powers Agreement, you work within the owners of that. A Sewer District you have your own governing board, which could be council or citizens. Mayor Fournier stated that as the council proceeds in the project this will have to be decided. Larry Koshak encouraged the council to do this early. CM Heidner said whichever method is chosen, there are going to be expenses involved and should know the costs. Mr. Koshak thought it would help the framework to know what you are going to do. There are legal issues that need to be discussed. CM Berning suggested this should be discussed before the next application is sent to the MPCA. CM Heidner thought the Public Meeting needs to be held first. Ted Fields, Bonestroo, for part of the PF Loan Application, you will have to declare which direction you are going. Mayor Fournier invited questions from the audience. John Simola, Otsego resident and Head of Public Works for the City of Monticello, stated that in addition to the up front money PFA will not fund any ROW easements or land acquisition and the City will have to have another source of funding. LeRoy Lindenfelser, resident and member of EDAAC, asked about water facilities and if this would be eligible under the PFA. Paul Donna explained that currently only wastewater treatment facilities are eligible that there are other programs through the Federal Government that are trying to get established. Alan Erickson noted the Clean Water Act is currently trying to set this up. Elaine Beatty said the City has received information and that it looks like 40 million dollars will be available and that Otsego is on this list. Tom Reger, resident, questioned that if the PFA is a State Loan, construction should fall under the prevailing wage law. Everyone agreed it should. Wally Odell, resident, asked about each community's commitment and what happens if the growth that is anticipated doesn't happen. Tom Noyes, Bonestroo, there is a way to purchase capacity from each community, there is a mechanism to do this. You never come out as projected, for borrowing requirements you should have this set as the percentage for each community. CM Berning asked what type of tax structure is the City looking at -under State 444 assessments, as we hook up. The City couldn't handle that because the City doesn't have enough existing. The interest could climb higher than what the fees will be. Sewer District, don't know how many acres are in Phase 1, are they going to split the bill for the first phase. How much money will come out of the City's General Fund. Council Workshop of February 21, 1997, cont'd. Page 4. Mayor Fournier stated that his own personal feelings are that the project has to pay its own way and whatever mechanism will accomplish that he will support. Paul Donna - To start up the facility, the issue is what is the exposure to the City if there are not enough users. With Sewer Revenue Bonds and PFA authority the exposure the City has can be quantified and different scenarios can be given. Another vehicle is to issue straight revenue obligation but is very expensive. That is why Minnesota uses GO or PFA, the exposure the City has can be quantified and different scenarios can be given. An another way to mitigate that exposure is to identify other sources of revenues like certain properties have certain special assessments against them. Sewer district with the ability to hook up is not uncommon to have assessments, there are ways and the City needs to address those issues. CM Heidner said the problem is that to address those issues we need to know those issues. There was discussion about interest and hookup fees. Alan Erickson suggested to run a sensitivity analysis. CM Heidner said the problem is we don't have any idea what the costs are. CM Berning said there is a 3 million dollar estimate for water. Larry Koshak- in regards to financing issues, debt retirement annually, assessments can be done to some portion but by and large you are looking at SAC charges but have to have people ready to hook up and consistently pay that SAC charge to keep it rolling. There is also a service charge every quarter for operation, and sometimes a portion of that can be put towards debt retirement. A problem with assessing is that under Green Acres, the City doesn't get anything. There should be an analysis of land that is being proposed to develop and what best fits that scenario after costs are put together to address this with the financial people. Bonestroo put in a program that may be the best, but there may be other scenarios that can be worked. Information is needed first, then study area to give some good strong basis. Mayor advised that the project must be defined. Tom Noyes, in regards to connection charges at Dayton - there is a reservoir of charges there. CM Heidner pointed out that only helps out Dayton. Rod Bengtson referred to the operating costs and whether there are 40 or 2000 homes the costs would be the same. He wants this reviewed and stated he hasn't seen any reports. CM Heidner stated there is an estimate in the report listed as O & M under annual operation and maintenance costs - $86,000 a year. John Simola reported his operation costs run about $80,000 a year, collection system. Plant is over 400,000 gallons with capacity of 810,000 gallons. There is one user that uses 186,000 gpd and they are billed $150,000 a year just for theirs. Mr. Donna thought that what would be helpful for a decision process is that in Istanti, prior to having concrete numbers they also wrestled with the exposure issue. Reports from the engineers can be put together for a sensitivity analysis and will give an indication Council Workshop of February 21, 1997, cont'd. Page 5. what is needed on different monthly billings and SAC charges what will be needed to arrive at a comfortable level to proceed. Analysis can always be updated. CM Heidner asked what number would they use. Mr. Donna said the engineers were able to give them parameters, maybe a million or two difference depending on where the bids come in. As far as growth, maybe taking 50 or 25% of growth the initial analysis was during the conceptual stages. After the plan was completed, the numbers were touched up. CM Heidner asked if our engineers here can give us numbers to work with. The engineers said these need to be worked up. Mr. Donna said they don't need concrete numbers. Ted Fields handed out proposals dated February 21, 1997 and addressed some items. He also presented the schedule and the cost which came in at $7,700, which he stated was a fixed amount. Mr. Fields also stated he would also be available for contact from the City. Mayor Fournier went over the figures for the public and stated this cost will be shared with Dayton. Rod Bengtson asked what are the proportions for Otsego and Dayton. CM Heidner responded they are looking at about a 60/40 but Dayton is expressing for more capacity. CM Heidner noted Bonestroo costs will be around $12,000 or $13,000 for the total for the plant cost report. Mr. Koshak reported the Trunk and Water Study for the area to be serviced and also the sub -trunk study will be under $15,000. Mayor Fournier said these costs can all be part of the entire project. John Simola asked Mr. Koshak if he will be looking at possible lot widths and the possible assessments as part of his study and assume a certain portion for commercial. Mr. Koshak replied basically looking at density and how many units per parcel of property. New lots will be 75 foot widths, so we can determine number of units and flow. Need to review flows that Bonestroo had originally estimated and will assume a certain portion for commercial. Rod Bengtson referred to the certain portion for commercial and is there any way to do this through the zoning. Mayor Fournier answered that this is already done and will be reviewed during the Comp. Plan update. John Simola said in looking back to Monticello, the money spent on studies was very beneficial. Rod Bengston said numbers are very critical and need to be backed up with facts and not opinions which he feels that is what is sees in the report. CM Heidner questioned him on what he means by that. Mr. Bengtson went on to ask what is the percentage of development currently happening, percentage of flows the City can expect out of commercial development and where are these numbers coming from. Mr. Simola offered to assist the City and Mr. Koshak. Council Workshop of February 21, 1997, cont'd. Page 6. Mayor Fournier accepted his offer. CM Heidner likens building a treatment plant to starting up a new business and you end up making a lot of guesses and are subject to the economy and want to make the best decisions. CM Berning asked if the Bonestroo Report will be outdated in less than a year. Mayor Fournier responded only if there would be more annexation. Mr. Koshak noted another issue is the information from Elk River the City is waiting for. This would be a key factor in making a decision and this information should be available by end of the month. CM Berning questioned if the Trunk Study for the Water and Sewer Lines is just for Phase I and H. Mr. Koshak said it would be for all of the urban service area, which is bordered by Nashua Avenue and down to 70th Street, 101 corridor and the newly added area to Otsego. CM Berning said the City is contemplating doing 85th Street and asked if there could be a main trunk going down this street. Mr. Koshak replied the plan will locate trunks reasonably close and actually could be one block one way or another. CM Berning asked if the main trunk along 101 will be in the urban area. Mr. Koshak said water lines only have to be 7 to 8 feet deep. The initial sewer trunk line has to go very deep for gravity flow as much as possible. There would be a major lift station so it can serve the whole area. CM Berning referred to the Water Study showing a tower near the current well, tower 2 on top of the hill and asked if it wouldn't make sense to build tower 2 first because of the gravity. Mr. Koshak replied when they do the water study they will have to do pressurized analysis and locations could change. Tower I is for Phase I because of fire flow, second location probably longer term but will select a site. CM Berning questioned if it would be more beneficial to build a tower when the street project is being constructed. Mr. Koshak responded to take water all the way there the pipe would have to sized to take care of the future and involves more costs, take each step at a time and user has a lot to do with water service. CM Heidner said the trade off is the getting the pipe there. Mr. Koshak said letting the Department of Health know the potential cost of water service, and study will include pressure analysis. CM Heidner asked what type of tower. Mr. Koshak said this needs to be evaluated. It may make sense that it would support a tower because of the commercial industrial area and fire flow. CM Heidner asked if you get the same effect if tower goes east side of 101. Mr. Koshak said it is a matter of pressure. More discussion on wells and pressure methods. CM Berning asked if the existing well would be used. Council Workshop of February 21, 1997, cont'd. Page 7. Mr. Koshak replied yes but will need to look at this and possible new well in the near future and the report will address those concerns Elaine Beatty noted for the 85th Street project, Mr. Koshak had originally said the pipe wouldn't go in the street. Mr. Koshak said the water main may have to go along the boulevard in the ROW. CM Heidner noted running something up 85th Street is years away and can show on the map where the pipe would go. CM Berning said looking further down the road and if there are problems with developing 101 for any reason, he has an idea where sewer and water would have to go, in the urban area. Both CM Heidner and Mayor Fournier stated they would have a hard time doing that unless it is petitioned for and they asked Elaine if there is any interest in developing 101. She replied there has been repetitive contact for a industrial park. CM Berning asked what is the City going to do with the west side of the City. Mayor Fournier responded that this will be addressed with the update of the comp. Plan and he is contemplating appointing a subcommittee and will address this at the next council meeting. He also stated he wants to help the west side as much as possible. CM Berning suggested to talk to Albertville. They are looking at extending sewer to the north side and maybe a loop can be done. CM Berning talked about development on the north side of 70th Street and west of CSAH 19. CM Heidner said he would have no problem asking Albertville to run a line up there and Otsego has tried for years to do so. He went on to say maybe after all of this there is no reason there can't be a east and west area of sewer district. 4 Adjourn. Mayor Fournier said the next workshop will be set Monday evening at the City Council Meeting. CM Heidner motioned to adjourn. Seconded by CM Ackerman. All in favor. Motion carried. Workshop adjourned at 6:38 PM. Larr Four , Mayor A est: Elaine Beatty, City Clerk/Zo dmini Recorded by: Judy Hudson, Deputy Clerk CITY OF OTSEGO SPECIAL COUNCIL WORKSHOP ON CITY SEWER AND WATER FEBRUARN' 21, 1997 - 5PM **AGENDA** 1. Mayor Larry Fournier will call workshop to order Roll call: 2. Paul Donnay of Springsted will give overview of possible financing options and other information. Questions and Answers. 3. Any other discussion on City sewer and water. 4. Adjourn