City hears presentation on sewer plant financing options

City Council
By: 
Kim Brooks
Express Editor

     Much of the Feb. 15 Monticello City Council agenda was consumed with items relating to the sewer plant project.

     The council heard an update from Matt Stoffel with PFM, the financial group the city is working with concerning how to pay for such a massive project and undertaking.

     Basically, Stoffel said no matter which route the city chooses to help cover the costs of the $12.3 million project, sewer rates will have to go up.

     Option 1 involves using 100 percent sewer revenues to pay for the project. Right now, an average sewer bill is $33.26 a month. That could jump to $68.18 and higher.

     “With Option 1,” said Stoffel, “there is no financial impact other than sewer rates. You’d have to double the rates to financially cover the debt over 20 years.”

     Option 2 involves the city using multiple loans and TIF funding, as well as sewer fees to cover the cost. Rates could jump to $46.56 a month and higher.

     If the city goes this route, Stoffel suggested they city should look into amending its ordinance and eliminate the sewer rates being tied to the water rates. (Current sewer rates are set at 150 percent of water rates.)

     Option 1 is essentially 308 percent of the water rates. Option 2 is 210 percent of the water rates.

     “You’re the biggest city I’ve seen (with its sewer rates) tied to water usage,” commented Stoffel. “It makes sense to separate the two and base it off of gallons used with a base fee for both. That way, one wouldn’t impact the other.”

     City Clerk Sally Hinrichsen said the city’s water rates have not gone up for a couple of years.

     Furthermore, he said Option 2 “helps to moderate the impact” on customers/users/taxpayers, and it uses $6 million of the city’s General Obligation Debt capacity. So, half of the cost of the project would be covered by sewer revenues and the other half by TIF.

     The construction phase of the sewer project would tentatively start in late 2021 and go into early 2023.

     Council member Tom Yeoman asked about raising sewer rates to cover half the cost of the project, yet saving the money sitting in the city’s debt service for emergency situations. Stoffel said that is a possibility.

     The council doesn’t have to act immediately on how to fund the sewer plant project. Stoffel said that will come once a design has been finalized and a final project cost is in place.

     The city’s submission of an application to the state Revolving Loan Fund (RLF) was approved to assist with planning and design for the project, at a not-to-exceed cost of $595,000. Now, the city is placed on the RLF’s Intended Use Plan list for further consideration.

     The council set a public hearing for Monday, March 1, at 6 p.m. concerning borrowing $595,000 for planning and designing of the project.

     Related to the sewer project, the council approved an engagement letter with Dorsey & Whitney LLP. The company is serving as the bond counsel for financing the sewer project. The estimated fees are $4,000.

In other city business:

   • The council held a public hearing regarding the maximum tax dollars the city can collect from certain levies for FY 2022. No comments were received.

     The proposed tax collections for the General Fund Levy are $8.10 per $1,000 of taxable valuation. The Employee Benefits Levy sits at $3.36 per $1,000. This totals $1,506,785, which is a 1.35 percent increase over the last fiscal year. Hinrichsen said the overall tax levy will stay the same at $11.46941, which is the maximum amount.

     The council approved the resolution.

     • The council set a public hearing for Monday, March 15, at 6 p.m. on the city’s proposed 2022 fiscal year budget.

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