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Study recommends increasing water, sewer rates

A study on Albert Lea’s water and sewer funds is recommending rate increases for both water and sewer users in 2021 with even higher increases possible in the future if additional funding sources aren’t obtained for large upgrades required by the state at the city’s wastewater treatment facility.

Jeanne Vogt with Ehlers, a public finance advisement firm, presented the study to the Albert Lea City Council on Monday during its regular work session.

Vogt said, overall, both the city’s water and sewer funds are presently in good shape, and it is evident staff and the council has worked to keep rates low and maintain healthy fund balances.

With large capital improvement projects planned in the near future, however, these funds will need to increase to cover these projects.

The city has almost $87.8 million in capital projects over the next 10 years focused on water production and treatment, sewer treatment and lift stations, she said. This includes $26 million from the water fund, and $61.8 million from the sewer fund. Of particular significance is the $48.45 million in upgrades to sewer treatment and lift stations to meet requirements by the Minnesota Pollution Control Agency to limit phosphorus in the Shell Rock River. The city in September filed a petition for a contested case hearing with the MPCA to address its questions and concerns with the reports that give these requirements.

A significant project for 2021 is also the new central water tower, which is expected to cost $4.7 million.

Vogt said the firm is recommending a 5% water rate increase for 2021 — which includes 3% for inflation and 2% for increased annual debt service — and a 4% sewer rate increase — which includes 3% for inflation and 1% for debt service.

Albert Lea Finance Director Kristi Brutlag said the sewer fund has not had an increase since 2017 when there was a 1% increase.

Under the recommendation, the impact for a typical residential user who uses about 6,000 gallons a month would be about $2.84 a month, while the impact for commercial properties using 411,000 gallons a month would be about $101 a month. For the average high-strength user, using about 3.5 million gallons per month, the increase would be about $3,019 monthly.

The increases would be larger each year through 2025 if additional funding is not obtained by the Legislature to offset some of the upgrades at the treatment plant.

City Engineer Steven Jahnke said the study helped emphasize the need for funding from the state for the project to take place.

“Without that, rates are going to increase significantly in the next couple years,” he said.

First Ward Councilor Rich Murray said he thought the city had its work cut out for it in the coming years to look into additional funding sources. He said there was no way he would support telling commercial property owners they would have to pay triple what they are paying now, that residential property owners would pay 50% more and that high-end users would have to pay not quite double of what they are paying now in 2025.

“That’s not acceptable at all,” he said.

Vogt said the increases would be burdensome for the Albert Lea taxpayers.