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2.3 ERMUSR 02-14-2023J� City of Elk Special Meeting of the Elk River City Council Weer and Elk River Municipal Utilities Held at the ERMU Field Services Training Room Tuesday, January 10, 2023 Members Present: Mayor John Dietz, Councilmembers Cory Grupa, Mike Beyer, Matt Westgaard, Jennifer Wagner, ERMU Commissioners Paul Bell, Allan Nadeau, and Mary Stewart Members Absent: None Staff Present: City Staff. City Administrator Calvin Portner, Public Works Director Justin Femrite, Community Development Director Zack Carlton, and Engineering Project Manager Brandon Wisner ERMU Staff. General Manager Mark Hanson, Administrations Director Sara Youngs, Operations Director Tom Geiser, Water Superintendent Dave Ninow, Engineering Manager Chris Kerzman, Executive Administrative Manager Tony Mauren, Finance Manager Melissa Karpinski Others Present: Attorney Jared Shepherd; WSB Water/Wastewater Engineer Ursinio Puga; Ehlers Director of Fiscal Consulting Jessica Cook; Capstone Homes, Inc. Community Development Manager Matthew Barker; and Capstone Homes, Inc. Land Manager Heather Lorch I. Call Meeting to Order Pursuant to due call and notice thereof, the meeting of the Elk River City Council and the Elk River Municipal Utilities (ERMU) meeting was called to order at 5:00 p.m. by Mayor Dietz. 2. Pledge of Allegiance Pledge of Allegiance was recited. 3.1 Discuss Options for NE and NW Utility Services Following a round of introductions, Mr. Femrite explained that the goal of the meeting is for the Council and Commission to learn what improvements would be necessary for the expansion of water and sewer services. He added there would be discussion on financial impacts and options as well as a chance for staff to receive direction on policies for providing one service or both. Mr. Puga presented the Northeast and Northwest Urban Services Expansion Study completed by WSB and Ehlers, Inc. It consists of descriptions of the study areas, usage projections, standards of service, utility layouts, and financial discussion. 36 City Council Minutes January 10, 2023 Page 2 Mr. Puga noted that the proposed annexations are significant in size and create a 60% increase in service area. Mr. Puga noted that there are multiple wetland areas throughout the northeast section which create challenges for infrastructure installation while the northwest section has wetlands mostly in its northwest corner. In presenting usage projections, Mr. Puga shared that the northeast expansion would generate a 23% increase in water demand while the northwest expansion would increase demand by 22%. Wastewater projections show a 33% increase with the northeast expansion and 32% from the northwest. Mr. Puga laid out the standards of service for water service which call for specified pressure, velocities, pumping, and storage to meet maximum day demands. Sewer service standards describe the required flow, sewer depth, excess system capacity, and velocities. In the northeast area the proposed trunk water main is in the high-pressure zone and would not require the creation of a new pressure zone. Mr. Puga explained that this area could be served by extending the 12-inch trunk water main with looping. He added that a new well would be needed in 5 to 10 years and a new water tower would be needed in 10 to 15 years. It won't be known whether a treatment facility will be necessary until the new well is operational, but for funding purposes it is safer to assume it will be. Mr. Puga stated that the northwest area will be significantly more challenging to provide water service to due to elevation differences of close to 200 feet. The lower pressure in the area cannot currently provide adequate volume to serve the proposed expansion. Mr. Puga explained that in Elk River the high-pressure and low-pressure zones run independent of one another so with the system as it exists the northwest expansion would require new wells, treatment facilities, water tower, trunk line, and water main immediately. Mr. Puga then explained a hybrid model had been developed to use pump stations to serve the northwest area's high-pressure zone from the existing low-pressure zone. This model would require two booster stations and a well immediately, with another well required in a 5-10-year range. Mr. Puga cautioned this approach could ultimately draw too much water from the existing low-pressure zone for it to maintain adequate pressure for the areas currently being served. Mr. Puga presented an opinion of probable cost for providing water service with the northeast area totaling $31,635,000 and the northwest totaling $43,977,000. 37 City Council Minutes January 10, 2023 Page 3 Mr. Puga presented findings on the sewer service portion of the study, noting challenges for the northeast area include its distance from facilities and limited available capacity to connect to the existing system. This necessitates at least three lift stations and a regional lift station to pump directly to the treatment plant. Mr. Puga went on to explain that, with one exception, a lift station would not immediately be required in the northwest area like it is in the northeast area. Service to the far northwest corner would require a lift station as the existing gravity pipe is not deep enough to connect. He added that a regional lift station would be needed if and when the mining areas are developed, and that the lift station would support future development to the north. Mr. Puga presented an opinion of probable cost for providing sewer service with the northeast area totaling $13,143,00 and the northwest totaling $15,335,000. Ms. Cook presented the Financial Analysis Methodology which provides options for funding the projected expenses. Ms. Cook reported that for water and sewer service the cost per single family unit in the northeast area is $22,144 per single family unit in development fees/assessment while the total for the northwest area is $19,724 per single family unit. Ms. Cook provided a comparison chart for seven other communities with development fees for water and sewer services which showed each of Elk River's proposed projects as the highest examples. In presenting options for recovering costs, Ms. Cook noted that sizable investments in the Northwest area need to be incurred in the first five years which is a risk for the party funding the project. She then presented the options. The first option presented was developer payment through an agreed cost sharing approach. Ms. Cook explained that the second option would be to use special assessments which follow the land and are paid whether development occurs or not. Mr. Femrite contributed that the city had done special assessments before. The third option is area trunk charges which are paid when land is platted. Ms. Cook noted that as these options progress there is a greater gap in time between installation of infrastructure and collecting revenue which contributes to a greater risk factor for the city/utility. Option four would be utilizing sewer and water availability charges which are paid by builders through permitting. m City Council Minutes January 10, 2023 Page 4 The final option would be relying on user chargers where new and existing customers contribute to infrastructure costs which provide an immediate and reliable revenue source. Ms. Cook opened it up for feedback. Mr. Femrite requested that the group focus on what was fiscally feasible for the community. Mr. Hanson clarified that current policy dictates that developments within the Urban Services District receive both water and sewer service and those outside the district get neither. Mr. Hanson referred to the map of necessary infrastructure for the northwest area, noting the large costs for the initial phases of water system installation compared to sanitary service where there is already significant infrastructure in place. Councilmember Westgaard noted there had been recent cases where neighborhoods need to connect to only the sewer services due to failing septic systems. He also shared his opinion that developing the northwest area seemed challenging whereas the project in the northeast appeared more systematic. Mayor Dietz shared his opinion that County Road 33 should be the northern boundary for the Urban Services District and expressed concerns with expansion and assessing properties. Mr. Femrite clarified that the Urban Services District had been expanded in the northeast by the Comprehensive Plan. Commissioner Stewart inquired as to whether federal funds could be available. Ms. Cook responded there may be some assistance available with stormwater. Mr. Pago shared that funds are typically devoted to rehabilitation or restoring systems, not expansion. Mr. Hanson shared that he had concerns about water quality and stagnation with the length of pipe needed for the proposed northwest project if the far northwest corner were to develop first. Mayor Dietz shared his opinion that the city/utility should be cost neutral if they move forward with either project. Ms. Cook shared that another funding option would be to wait until there's more demand for services in the area. 39 City Council Minutes January 10, 2023 Page 5 Councilmember Westgaard sought clarification as to whether the city had agreed to expand the Urban Services District to serve the entire proposed development in the northwest area. Mr. Femrite responded that there is a small section of the study outside the district as established by the Comprehensive Plan and there has been no agreement to expand. It was explained that the project proposal includes a request from the developer to expand the district in order serve the entire project. Councilmember Westgaard wanted that clarified so that incorrect information was not publicized. Councilmember Wagner shared that she did not have any interest in changing the zoning in the northwest area from 2.5 acres. Regarding remaining cost neutral, she noted that there will be residual effects such as increased park and trail services that will make it difficult to remain cost neutral. Mr. Femrite sought consensus from the joint body as to whether they wanted to maintain the requirement for developments to have both water and sewer service. Councilmember Westgaard shared his opinion that it makes the most sense to continue to require developments in the Urban Services District to install both sewer and water service. Councilmember Beyer shared his opinion that water and sewer service should both be required for developments in the Urban Services District. Councilmember Grupa shared his opinion the two services should go together. Mr. Femrite requested perspective from the joint body on how they would prefer to see Elk River continue to develop. Councilmember Westgaard stated his opinion that projects should be driven by development as requests are received. Mr. Femrite asked the joint body if conversations with developers should look at the first funding option presented by Ms. Cook, namely cost sharing between them and the city. Mayor Dietz and Councilmember Westgaard stated their agreement with that approach. Commissioner Stewart asked if there are state regulations that will help keep these developments from having failed independent systems like those who needed to connect to the sewer system. .11 City Council Minutes January 10, 2023 Page 6 Mr. Carlton stated that a study had not been done in 20 years but that those systems must be maintained to a standard or the state steps in. Mr. Femrite commended WSB and Ehlers for the work they did on the study. Mr. Femrite stated with the input form the joint body he will go back and discuss next steps with relevant parties. 4 Adjournment There being no further business, Mayor Dietz adjourned the joint meeting at 6:32 p.m. Following the meeting there was a tour of the ERMU Field Services Building. John J. Dietz, Mayor Tina Allard, City Clerk 41