With the East Bethel City Council vote on the preliminary 2013 budget coming Sept. 5, the council took time at its Aug. 15 meeting to discuss the most recent projections for the sewer and water bond repayment budget.
The former council in November 2010 approved three separate bond issues totaling $18,525,000 to pay for the sewer and water project. The plan was that property owners hooking up to the system and those assessed for road projects in the sewer and water project area would cover the costs.
There are numerous variables that could change this number, but for now the cash flow of the sewer and water bond payment fund is projected to have a negative cash balance of $91,376 at the end of 2013, according to City Administrator Jack Davis.
To date, the city has made three bond payments, Davis said. There was money from the bond issue set aside to help the city in the first year-and-a-half when there would be no development. The city will start needing connections next year to begin paying off its debt.
One of the assumptions made is that the city will have what amounts to 67 equivalent residential units (ERUs) hooked up by the end of 2013. This is not referring to housing though. ERU is a measurement tool the Metropolitan Council uses to determine impact on the infrastructure. One ERU is the average household. The Muller Family Theater in East Bethel is preliminarily anticipated to account for 27 ERUs, for example.
This projection of 67 ERUs does include 16 ERUs for Aggressive Hydraulics, to which the city may offer tax increment financing (TIF) so this company can close a funding gap and move from Blaine. A public hearing on this TIF concept is scheduled for early October.
When the city sold bonds in November 2010, it projected no ERUs in 2011 and 2012, which is where the bond revenue helped out. There were 76 ERUs projected in 2013, so having 67 ERUs would be nine less than anticipated and thus negatively impact revenue.
Davis said the big reason for fewer ERUs is because the council chose to construct a much smaller water treatment plant that does not have the reverse osmosis feature the other plant would have had. The $5.8 million water treatment plant the former council wanted to build would have accounted for 40 ERUs.
The $1.88 million water treatment plant the current council is only one ERU, according to Davis.
Another factor in the deficit is the assumption had been made that the city would start seeing special assessment revenue from the road reconstruction project starting in 2013. The project was delayed, however, so this pushed back the first payments to 2014, according to Davis.
The theater and Aggressive Hydraulics could be the largest users by far to hook up to the sewer and water system in 2013 unless another new developer comes along. River Country Co-op and Village Bank at four ERUs each are the next largest businesses that could hook up. Most existing businesses would each count for only two or one ERUs.
Davis said that one property the city is keeping its eye on is a 40-acre parcel on the northwest corner of Highway 65 and Viking Boulevard that is in foreclosure.
Councilmember Robert DeRoche said because the 2013 projections are mostly anticipating existing businesses hooking up and not much for new business besides Aggressive Hydraulics, it will be just as important to the city to retain existing businesses as it will be to attract new businesses.
At one point, the council did bring up an ERU reduction policy idea to help existing businesses, but nothing has been approved. Davis said the revenue will be needed to cash flow this project. One idea the former council did look at as a concept was spreading the special assessment payments over multiple years.
Davis said there are some options the city has to cover the over $90,000 shortfall should it happen. The city saved about $50,000 by reducing its police coverage contract with the Anoka County Sheriff’s Office this year from 40 hours of daily deputy coverage to 36 hours. Other budget savings could also be used, Davis said.
There is another factor the city will have to consider when budgeting for 2013. The city has a signed agreement with the Metropolitan Council that it would have 100 ERUs hooked up to the sewer system by the end of 2013.
The Metropolitan Council is paying for a $13 million water reclamation plant. If there are not 100 ERUs, the city would have to make up the difference.
Davis said the city met recently with staff at the Metropolitan Council to discuss re-adjusting the time frame for this requirement considering the project is taking longer to complete than anticipated. S.R. Weidema of Maple Grove had been contractually obligated when it received the bid in December 2010 to complete the installation of the sewer and water pipes by July 31, 2012.
Mild winter conditions allegedly made it difficult for crews to work on the project for 44 days, according to the company.
The council in February agreed that Weidema would have until Dec. 1, 2012 to complete the water pipes installation and until June 30, 2013 to complete the sewer pipes.
Councilmember Heidi Moegerle said it will be important for the city to look beyond 2013 to have a plan in place for any future deficits seeing how there are even higher deficits anticipated in future years.
Eric Hagen is at [email protected]