10.a 2020 Scandia Sewer Utilities Budget 12-21-2021DRAFT DRAFT
14727 209th Street North
Scandia, Minnesota 55073
651-433-2274
www.cityofscandia.com
CITY OF SCANDIA
2022 Final Proposed
Utilities Budget
Presented: December 21, 2021
With Supporting Documentation
DRAFT Presented 12/21/2021
MEMORANDOM
DATE: December 21, 2021
TO: Honorable Mayor and City Council Members
FROM: Ken Cammilleri, City Administrator
RE: 2022 Draft Utility Budget Transmittal Letter
This year’s utility budget process aims to achieve sustainable long-term operation of the City’s two
utility enterprises within a positive financial condition. The following draft document is intended to
both meet state compliance requirements, best accounting practices, and to provide the necessary
guidance to staff and its elected City leadership as to how to manage each utility’s activities in relation
to long-term strategic goals. Because this is an annual process, budgets can be influenced by many
factors including changing economic conditions, introduction of regulatory mandates, and
unanticipated failures, that require a budget to consider both current operational needs but also
future ones. This process may even potentially identify the need to set future goals to address
challenges. To that end, this year’s budget has been developed with the utilization of a rate study in
combination with a line-item budgeting approach to help set utility rates, outlay capital expenses, and
meet operational demands in a manner that takes into account the financial impacts on its utility
users.
The City is implementing its utilities budget on a modified accrual basis consistent within Generally
Accepted Accounting Principles as set forth by the Government Accounting Standards Board due to
its operation is for profit. The only exception to adhering GAAP applies to the methodology used
for capital assess purchases and depreciation. In which case, the budget accounts for capital
transactions as a budgeted expense rather rather than depreciating individual existing assets
summarized on the fund’s balance sheet. A modified accrual basis means that revenue is recognized
at the time it becomes measurable and available, and expenses are recognized when they are
measurable, fund liability is incurred, and the liability will be liquidated with resources included in the
budget including principal and interest expenses on long-term debt. Revenues are included in the
budget in the year they are expected to become measurable and available. Expenses are included in
the budget when they are measurable, a fund liability is incurred, and the liability will be liquidated
with resources included in the budget.
Budgetary practices included in the methodology of this year’s budget include utilizing set cash flow
targets and improved forecasting of debt service expenses. The cash flow methodology accounts
for debt service expenses and 50% of operational expenses (less depreciation) for the year following
each budget year. Estimates for debt now attempt to account for balanced or balloon payment
amortization.
The utilities budget is divided into two sections; the Big Marine Sewer Utility and the Uptown Sewer
Utility each section has 4 key documents. Here is an explanation of each document and how it may
be used for budget decision making:
• Utility Report Letter - this includes critical background information for decision making
and a brief summary of budgetary highlights and capital expenses anticipated within the
next two years. Most importantly, it includes a utility rate plan summary.
Page 2 of 2
City of Scandia
14727 209th St. N. PO Box 128, Scandia, Minnesota 55073
Phone (651) 433 -2274 | Fax (651) 433-5112 | http://www.cityofscandia.com
• The Cash-Flow Analysis Summary. This document is a statement of previous, budgeted
and predicted activity that can be used to visualize fund performance. The key is to
confirm that revenues not only meet expenditures but also keep pace with the level of
targeted cash balance. The document helps with identifying adjustment needs with
regard to rates, the timing and size of capital expense, and adjustment to individual line-
item capital expenses.
• The Fund Capital Improvement Plan – This document delays anticipated capital
expenditures and schedules the timing of completion while attempting to account for
cost variables such as inflation. These totals from this document are fed into the cash-
flow analysis.
• The Line-Item Budget – This document lays out the budget revenue and expense
categories and can include notes that detail transactions that are associated with it. It
can also be used as a tool to evaluate operational budget, in general.
Please let me know if you have any questions.
2022 Draft Utilities Budget Final Report
Big Marine Sewer Utility
Presented December 21, 2021
DRAFT UTILITIES BUDGET Page 1 of 8
What is the purpose of this report?
The Big Marine Sewer Utility, owned and operated by the City of Scandia, operates two community
septic systems, the Bliss Wastewater Treatment Plant (Collector) and the Anderson-Erickson
Treatment Plant (WWTP) or Collector. Both systems are community septic systems that treat
wastewater from user’s homes starting at the holding tank to finally discharging into drainfields at
the treatment sites. The treated effluent is returned into the water table.
This report is intended to both present the Utility’s 2022 Budget and to educate the public and
decision makers on pressing improvement needs and suggested financial strategies to address
them.
What does the Bliss sewage treatment system entail and how is it designed to operate?
The facility serves approximately 80 households within a defined service area that predominantly
services the Bliss Addition Neighborhood, but not the entirety of it. The facility processes around
7,000 gallons/day in winter and over 11,000 gallons/day in wet summer months. The total designed
capacity is said to be 19,800 gallons per day.
The 2040 Comprehensive Plan suggests that the system could be potentially used to support greater
residential densities and mixed-use commercial activity in the future. However, there are significant
barriers to this that would require us to take this into consideration. First, the system’s current
capacity would require more land and space to produce capacities. Second, the current zoning
density requirements preclude such developments from occurring until appropriate service capacity
is introduced. Both the Plan and the Development still currently limit density to four buildable
lots over a 40-acre area. Add financial limitations and the lack of political will, change is not likely to
be anytime soon. New ordinance controls and thoughtful zoning decisions will be the most
effective tool to keep this facility capacity compliant.
What does the Bliss Wastewater Treatment Nitrate Upgrade and & Primary Lift Station
Rehab Project entail, and why do we need to invest in it?
Earlier this year, the City Council approved a request to the State of Minnesota to obtain state
bonding grant assistance to help cover half of the total project cost of a major upgrade of the Bliss
Wastewater Treatment System on the west side of Big Marine Lake. The estimated $1.43 million
dollar project includes rehabilitation of the system's main lift station** (at approx. $430k), AKA Lift
Station #2, and, most significantly, the introduction of digester systems for the treatment and
reduction of nitrate nitrogen**, as part an unfunded state mandate (at approx. $1 mil).
The timing and extent of this project is not exactly ideal for our small utility of just around 111
customers between both systems. Given utility rates have not been historically set with consideration
of major long-range infrastructural costs, the utility is currently underprepared for major
infrastructural improvements such a recent unfunded state mandate to introduce nitrate treatment at
Bliss WWTP. The cash balance needed to cover a cost of this nature is not in the fund. At mid-year
the fund had $64,942.59, which is less than 90% of the cost of the mandated nitrate project.
Presented 12/21/2021
FINAL DRAFT BIG MARINE SEWER BUDGET
Page 2 of 8
However, the Big Marine Utility's outlook is not completely disparaging. Besides the hopeful
prospect of grant for 50% of the project through the State's bonding program, the City has also
received federal aid that is eligible for use on this upcoming major project. Earlier this year, the
City accepted American Rescue Plan Act (ARPA) funds that, due to its limited permitted uses, are
most practically limited for use on improvements to sewer utility infrastructure and broadband
expansion.
The City Council has yet to make a determination on the allocation of these funds. As a result, this
year's new utility rate study has gone through several revisions to accommodate the funding
scenarios based on the receipt of outside funds. We also want to assemble an argument from the
Sewer Committee to support receipt of ARPA funds. My hope is that we can at least set forth a
recommendation this evening.
As a contingency to assure we make the project construction deadline in the spring of 2025, we have
also prepared an application to have the Bliss project added to the State's Project Priority List (PPL)
through the Public Facilities Authority (PFA). This request is critical both for the credibility of our
state bonding request and obtaining eligibility for possible forgivable loans for this project. (Of
which, based on the ranking that the State places on our project, the nitrate project could potentially
receive as much as 80% loan forgiveness for the nitrate treatment component. (Upgrades to other
infrastructure only qualify for low interest loans.) Here is a time line of action that has been laid out
for this project:
· Dec 2021 - Submit PPL application and scoring worksheet to MN Pollution Control Agency
(MPCA)
· Sept 2022 - We are required to submit a report based on our compliance track under the
permit’s mandate.
· Dec 2021 to March 4, 2022 - We will need to submit a “draft” Facilities Plan (FP) to
MPCA. (The draft plan work has been mostly completed as part of the renewal of the operator
permit for the facility.) Feedback is provided back to the City and Bolton & Mink as to any desired
adjustment or information for inclusion.
· June 3, 2022 - Submit request for placement on the Intended Use Plan (IUP) (This identifies
projects and activities that the PFA intends to fund from the Clean Water Revolving Fund (CWRF)
during the state fiscal year, which runs July 1 to June 30.
· June 30, 2022 - Preliminary approval of Facilities Plan by MPCA.
· Month of July 2022 - We then become eligible to submit our Point Source Implementation
Grant (PSIG) application to PFA.
· Then in Late September 2023 – the 2024 IUP and PSIG list adopted (starts 6-month P&S
clock) and we can submit engineered Plans and Specifications (P&S) and our loan application.
Seeking other grant funding from the state for this project, and future ones will be the most practical
way to improve our utilities without overly burdening our users. Even though the process remains
highly competitive, qualifying for state grant funding still presents prospects for potential grants and
loan forgiveness. In addition, the New federal Build Back Better legislation has the potential to
introduce more funding for these types of projects. It includes a provision in which 49% of
allocations will be intended to be offered in the form of grants and forgivable loans. The caveat for
obtaining such financing is that it may take years past to obtain a funding award.
Presented 12/21/2021
FINAL DRAFT BIG MARINE SEWER BUDGET
Page 3 of 8
That is why ARPA funds and state bonding, which have no waiting lists, to close our funding
shortfall without significantly adversely affecting users or the utility’s cash position.
Can the City consider Special Assessments for the Bliss WWTP-Lift Station Project and
Other Future Projects?
Yes. The City can, at least partially finance this project through property assessment as both the
WWTP and lift station are statutorily eligible (Mn § 429.021). (Coincidentally, the statute also
suggests that the special assessment process can be utilized for internet expansion, as well.) Special
assessments can be a dependable source of revenue to cover project costs, a means to avoid taking
on additional debt, and most importantly, it helps distribute the cost of the benefit directly to
benefactors. This financing mechanism may be best suited for service mains and tank replacements,
though.
Consideration of special assessments may be worth investigating, but I am not confident that it will
yield the share of revenue we need to bring the utility into a financially stable condition. It also fails
to help ease the financial impacts on utility users.
The following are a few important points that should be considered with regard to assessments:
· It is likely virtually impossible to assess 100% of the cost short of receiving waiver agreements
from all affected property owners. It is more likely that only a portion may be eligible. The State
Supreme Court has developed a “special benefit test” for special assessments, which implies that the
cost of the improvement must not exceed the benefit to affected property owners. Benefits are
considered based on the estimated impact to market value. In general, there are two ways
communities have approached this test and successfully avoided legal challenges to the Minnesota
Property Tax Court:
o The first option is to assess only a smaller portion of effective owners in a
uniform fashion. This often weakens instances of challenges, but the key is that the
assessment needs to be at least within the projected market value of the benefit.
o The second and more reliable method of limiting challenges is to hire a licensed
appraiser to value the effect of improvements on benefiting properties. The
challenge can be that such appraisals can be tricky when valuations need be made on
improvements that do not directly abut or encroach on property. The quality of the
appraisal will need to be able to stand on its own merits, as legal challenges can often
include a counter appraisal. The only times I have seen an appraiser willing to make
such a valuation is when they can actually identify valuations that were done for
similar type improvements.
· Consider asking yourself these questions…if an upgrade was made to the community
wastewater treatment system that served your home, how much more would you expect a buyer to
offer by way of value? How much more would you be willing except for such an
enhancement? These questions are what are at the center of an appraisal. Given it is difficult for
most any average person to come up with a value for this on their own, it stresses the challenges
faced by this approach.
This is why assessments are often applied to more directly tangible improvements that serve a home
directly, like utility service mains and street frontages which have more outwardly tangible impacts to
the property.
Presented 12/21/2021
FINAL DRAFT BIG MARINE SEWER BUDGET
Page 4 of 8
· The City’s Liability Insurance through LMCIT does not cover the costs of litigation that seeks
only to reduce or invalidate a special assessment. The cost of this defense will fall directly on the
Utility and the City.
· Besides possible appraisal costs, there will be costs to computation and the initial
administration and formulation of the special assessments. These costs may be negligible, but it’s
worth the City consulting a financial advisor to see if it would be worthwhile to include assessments
within this project’s financing when considering all of the variables before committing to it. It may
also be helpful to get the City’s Engineer’s impressions on the practicality of developing an
assessment that could stand up to community challenge, as they often perform assessment
computations.
· Assessment for the Bliss Project will require being limited to customers served by that system,
which would more fairly distribute the benefit to the 80 affected properties. Distributing the cost
fully over the affected property owners at the full cost of $1.43 Million would be $17,875 per
property. Applying only 20% of that cost would be $3,575 for $286,000. So, not taking into
account any of the unknown implementation costs, this may be a viable option to offset a portion of
the financial impact. This may reduce the likelihood of a challenge, but again, it does not place us in
the free and clear way to quantify a market value.
· Assessments do require a funding contingency plan if a challenge is successfully made if part or
all of the cost is overturned. Thoughtful consideration of payback terms and the setting of interest
rates for assessments should also be made. The maximum 30-year payback would NOT be
conducive to the utility’s cashflow or the timing of other projects under its capital
plan. Additionally, interest rates should reflect the interest on the direct project’s debt or interest
rates the city would have received in its normal investment process. This is where consulting an
advisor could be helpful.
· Given the utility’s limited cash balance, the timing of payment will necessitate temporarily
drawing on City cash reserves (fund balance) between funds to cover immediate short-term project
costs. Prolonged payback of a significant amount of funds will require interfund loans or debt
service financing. This is important to consider when weighing the term of assessment.
How should we approach project funding?
What every financing option that is ultimately selected will require coordination with grant deadlines
and the end of next year’s legislative session. If we do ultimately receive a bonding request for 2023,
our next attempt should be to get ranked for an award on the PPL in advance of our project
completion deadline.
The costs that are being incurred now should have been collected in the rates leading up to today.
Given the City is responsible for the operation of this utility, it is actively working to obtain relief for
utility users that does not draw upon the property taxes of those who do not use this system. To that
end, the city is actively seeking grant opportunities that can help reduce impacts including applying
for direct state bonding requests to potentially cover half of the Bliss Project’s cost.
Presented 12/21/2021
FINAL DRAFT BIG MARINE SEWER BUDGET
Page 5 of 8
The project will likely be funded through a combination of utility rates, state and/or federal funding,
and debt service financing.
The allocation of ARPA funds could relieve an even more substantial step closer to the financial
position it should be in far less time and with less burdensome impacts on users by way of rate
increases or special assessments. Alternative funding scenarios in this budget suggest the benefits to
this approach.
What does the Anderson-Erikson sewage treatment system entail and how is it designed to
operate?
The Anderson-Erickson System, which serves 33 homes on the eastside of lake as part of the Big
Marine Lake Utility, is also in need of significant capital investment. Although the issues remain
only at emergent levels, it should not to be ignored. The system is not triggering any compliance
issues as of yet with either the state or Washington County, there is still a reasonable likelihood that
issues may come on the horizon. In wet summer months, the facility has exceeded daily permitted
flows in multiple events. Regardless of these constantly obvious operational issues, there have
been no changes to the treatment design since construction. The maximum treatment design of
6,700 gallons/day was originally intended to serve only 15 properties of which many served as
seasonal residences.
Since the system was built, the neighborhood has undergone a significant transformation. Many
seasonal cabins are now in year-round use, and many of them have been replaced and/or enlarged
that have dramatically impacted service demand. The system officially serves 33 properties.
Given sump pump inspections and smoke tests have failed to identify point sources of illegal
discharges or inflow-infiltration (I&I), a facility plan is the logical next step. Avoiding system
overloading is critical because it can risk system failure and costly replacement and relocation costs.
It is highly recommended to build out capacity to the point where the system can serve the
properties within its service area and have the capacity to handle the I&I that we are unable to
mitigate. Upgrading the system to provide services at the level of Bliss will come with greater cost
and more operational challenges under a state permit, which would likely include a requirement to
introduce nitrogen and phosphorus treatment processes similar to that of Bliss.
New legislative limits in the City Code will go a long way to protect this system from failure, but it
will not be enough. Capacity improvements will be necessary to prevent system overloading and
more legislative control on development will be required to prevent development with service
demand levels harmful to the system, and in turn, the other properties served.
Presented 12/21/2021
FINAL DRAFT BIG MARINE SEWER BUDGET
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What are the forecasted and proposed rates for the Big Marine Sewer Utility? 20212022202320242025202620272028202920302031% Change in Rates10.00%15.50%15.50%15.50%15.50%15.50%15.50%15.50%15.50%15.50%Base ChargeAnnual897.56 987.32 1,140.35 1,317.10 1,521.26 1,757.05 2,029.39 2,343.95 2,707.26 3,126.89 3,611.55 Quarterly224.39 246.83 285.09 329.28 380.31 439.26 507.35 585.99 676.82 781.72 902.89 IncreaseAnnual89.76 153.03 176.75 204.15 235.79 272.34 314.56 363.31 419.63 484.67 Quarterly22.44 38.26 44.19 51.04 58.95 68.09 78.64 90.83 104.91 121.17 Energy Adj ChargeAnnual8.00 8.80 10.16 11.74 13.56 15.66 18.09 20.89 24.13 27.87 32.19 Quarterly2.00 2.20 2.54 2.93 3.39 3.92 4.52 5.22 6.03 6.97 8.05 Projected Revenue99,629.16 109,592.08 126,578.85 146,198.57 168,859.35 195,032.55 225,262.59 260,178.29 300,505.93 347,084.35 400,882.42 Target Balance70,625127,170134,928149,115146,540(54,216)109,591463,403262,86349,373397,174Over (Under Target(21,203)301,224(32,626)(97,165)(120,707)338,501296,745(311,343)(68,952)451,86652,553Balance Projected49,422428,393102,30251,95025,833284,285406,336152,061193,911501,239449,728* Highlight rate % changes are a change since the proposal was 1st presented to the Sewer Committee on 12/15/2021. previous precentage was 10% This change was made to offset the debt in 2023 that origionally included the project's full cost. ARPA must be approated to an eligible expense.Fund 602 Big Marine Sewer Budget Proposal with ARPA but with no State Aid
Presented 12/21/2021
FINAL DRAFT BIG MARINE SEWER BUDGET
Page 7 of 8
This year’s budget proposal introduces a rate structure that is predicated on the allocation of the
funds that have been distributed to the City as part of the American Rescue Plan Act (ARPA), but
the expectation that state bond grant financing does not materialize.
Please review the following supporting documentation for this proposal including the Capital
Improvement Plan, Cash Flow Summary, and the line-item budget labeled “Proposed”.
Scenario B in the budget packet suggests how budgeting should be approached if both state and
ARPA funds are awarded. It was prepared as a template for budget and rates in the event of these
conditions. The scenario includes estimated rates, a capital improvement plan, and cash flow
summary.
Scenario C assumes the state bond grant will be awarded but not funds from the ARPA. It may be
used a template under these conditions. It includes estimated rates, a capital improvement plan, and
cash flow summary.
Scenario D assumes that there will be no financial assistance. It includes estimated rates, a capital
improvement plan, and cash flow summary.
How do each of these rate forecasts compare to one another?
Cost Comparisons
Budget Proposal - Include ARPA but Plan for No State Aid
Average $ Yearly Increase over 10 Yrs.: $271.40
Total Sewer Fee Over 10 Yrs.: $21,439.68
Current Est. for Private Drainfield Replacement: $17k-$20k
Scenario B- Full Funding
Average $ Yearly Increase over 10 Yrs.: $143.05
Total Sewer Fee Over 10 Yrs.: $16,632.83
Current Est. for Private Drainfield Replacement: $17k-$20k
Scenario C- No ARPA but awarded State Aid
Average $ Yearly Increase over 10 Yrs.: $337.06
Total Sewer Fee Over 10 Yrs.: $28,697.36
Current Est. for Private Drainfield Replacement: $17k-$20k
Scenario D- No Grant Aids
Average $ Yearly Increase over 10 Yrs.: $378.49
Total Sewer Fee Over 10 Yrs.: $30,453.94
Current Est. for Private Drainfield Replacement: $17k-$20k
Presented 12/21/2021
FINAL DRAFT BIG MARINE SEWER BUDGET
Page 8 of 8
Please let me know if you have any questions.
Sincerely,
Ken Cammilleri Administrator
City of Scandia
*The Bliss WWTP is mandated to make treatment plant upgrades that include anaerobic digesters as
a condition of the facility's operating permit which has been exceed 10 milligrams per liter parts per
million (ppm) at one of the facility's test wells, which is now the state's new limit. The excessive
result was further investigated by testing of surrounding private wells. The results of these inquiries
have confirmed that there is currently no threat to nearby wells or the drinking water they
produce.
**Rehabilitation of Bliss' Main Lift Station (#2) was included in that state request to help the utility
obtain grant money toward this substantial cost. It can and will likely be delayed as needed should
outside funding sources not come through.
DRAFT 2022 UTILITIES BUDGET Big Marine Sewer Utility Budget Proposal - w/ARPA but no state aid DRAFT
Fund 602 YTD Actual Proj
2019 2020 7/31/2021 2021 2021 2022 2023 2024 2025 2026
REVENUE
Charges for services 81,238 83,175 45,861 79,093 88,045 109,592 (1) 120,551 132,606 153,160 176,900
Special assessments 4,824 6,844 139 139 200 300 - - - -
Intergovernmental 35 47,202 - - - - (2) - - - -
Interest earnings 3,226 353 - - 700 49 428 456 364 293
Miscellaneous - - - - - - - - - -
City Bond Proceeds - - - - - - (3) 1,430,000 - - 700,000
Transfer In - 550 - - 10,000 441,892 (4) - - - - - - - - - -
TOTAL REVENUES 89,323 138,124 46,001 79,232 98,945 551,833 1,550,980 133,063 153,524 877,193 -
EXPENDITURES
Wages 19,476 19,866 6,983 12,566 23,455 25,700 (5) 26,214 26,738 27,273 27,818
Materials 996 1,197 625 667 3,700 3,700 (5) 3,774 3,849 3,926 4,005
Professional Services 20,978 6,850 6,556 11,850 10,200 12,600 (5) 12,852 13,109 13,371 13,638
Repair and Maintenance 17,863 36,668 11,639 17,003 31,200 33,200 (5) 33,864 34,541 35,232 35,937
Other 19,072 13,772 4,809 10,162 18,250 18,050 (5) 18,411 18,779 19,155 19,538
Depreciation 39,630 42,643 - - 51,200 52,200 (5) 53,244 54,309 55,395 56,503
Debt Service Expense - - - - - - (6) - 115,496 115,496 115,496
Capital Outlay 23,276 104,435 - 24,000 29,000 79,612 (7) 1,427,983 13,217 9,652 449,250
Transfer Out - - - - - - - - - -
TOTAL EXPENDITURES (141,291) (225,430) (30,612) (76,248) (167,005) (225,062) (1,576,342) (280,038) (279,500) (722,185)
Change in balance sheet (373)
NET REVENUE OVER
(UNDER) EXPENSE (52,341) (87,306) 15,388 2,984 (68,060) 326,771 (25,363) (146,975) (125,976) 155,009
ENDING BALANCE 91,101 46,438 61,826 49,422 29,578 428,393 456,274 363,608 293,028 504,539
(1)
(2)
(3)
(4)
(5) Small inflationary and market adjustments to operational expenses. See budget detail page.
(6) Debt service payments projected to begin in 2024 for Big Marine Sewer
(7) See attached DRAFT Capital Outlay for details.
(8) There are no changes in 2022 based on either funding scenario. The changes only occur 2023 and forward.
Projected 10% increase Projected for all future years. Debt payments projections to increase to $220K by 2031.
Receipt of State Bond for Bliss Nitrate and Bliss Main Lift Station #2 Upgrade. Projected half the cost of project.
Receipt of Bond proceeds from bonds issued by the City. Debt to be paid by users.
Recommended allocation of ARPA Funds towards addressing financial shortfall in 602
CASH FLOW ANALYSIS SUMMARY
BIG MARINE SEWER FUND SUMMARY BUDGET AND PROJECTIONS PROPOSED FOR APPROVAL
ACTUAL FOR YEAR ENDED DECEMBER 31, 2019 AND 2020, PERIOD TO DATE JULY 31, 2021 AND BUDGET FOR THE YEARS ENDED DECEMBER 31, 2021 & 2022,
AND PROJECTIONS THRU YRS 2023-2026
Actual ProjectedBudget
DRAFT 1 of 6 Presented 12/21/2021
DRAFT UTILITIES BUDGETBig Marine Sewer Utility Budget Proposal - w/ARPA but no state aid DRAFT
CIP Inflation Factor 0.00%4.00%4.00%
2021 2021 2022 2023
Item #Capital Project Name First Year Costs Budget Budget Projected
1 Bliss facility flow meters to be replaced 2022 18,300.00 - 19,032 -
2
Bliss Test Well #8
Abandonment/Replacement 2022 50,000.00 - 52,000 -
3 Bliss nitrate treatment equipment 2023 960,000.00 - 1,038,336
4 LS 1 Control Panel 2027 10,000.00 - - -
5 LS 2 Control Panel 2026 10,000.00 - - -
6 LS 2 Control Panel 2031 1,500.00 - -
7 LS #1 (Layton Ave) 2022 500.00 - 520 -
8 LS #1 (Layton Ave) 2023 500.00 - - 541
9 LS #1 (Layton Ave) 2024 2,500.00 - -
10 LS #1 (Layton Ave) 2025 500.00 - - -
11 LS #1 (Layton Ave) 2026 500.00 - - -
12 LS #1 (Layton Ave) Rehab 2027 350,000.00 - - -
13 LS #1 (Layton Ave) 2028 500.00 - - -
14 LS #1 (Layton Ave) 2029 500.00 - - -
15 LS #1 (Layton Ave) 2030 500.00 - -
16 LS #1 (Layton Ave) 2031 500.00 - - -
17 LS #2 (189th - Main Station) 2022 500.00 - 520 -
18 LS #2 (189th - Main Station) 2023 2,500.00 - 2,704
19 LS #2 (189th - Main Station) 2024 500.00 - - -
20 LS #2 (189th - Main Station) 2025 500.00 - - -
21 LS #2 (189th - Main Station) 2023 350,000.00 - 378,560
22 LS #2 (189th - Main Station) 2027 500.00 - - -
23 LS #2 (189th - Main Station) 2028 500.00 - - -
24 LS #2 (189th - Main Station) 2029 500.00 - - -
25 LS #2 (189th - Main Station) 2030 500.00 - - -
26 LS #2 (189th - Main Station) 2031 2,500.00 - - -
27 LS #3 Pump 1 Replacement 2021 6,000.00 - -
28 LS #3 Pump 2 Replacement 2021 6,000.00 6,000 - -
29 LS #3 (Dosage Tanks) 2022 500.00 - 520 -
30 LS #3 (Dosage Tanks) 2023 500.00 - 541
31 LS #3 (Dosage Tanks) 2024 500.00 - - -
32 LS #3 (Dosage Tanks) 2025 500.00 - - -
33 LS #3 (Dosage Tanks) 2026 2,500.00 - -
34 LS #3 (Dosage Tanks) 2027 500.00 - -
35 LS #3 (Dosage Tanks) 2028 500.00 - - -
36 LS #3 (Dosage Tanks) 2029 500.00 - - -
37 LS #3 (Dosage Tanks) 2030 70,000.00 - - -
38 LS #3 (Dosage Tanks) 2031 2,500.00 - - -
Project
Big Marine Sewer Capital Improvement
Outlay
2022 Proposed CIP
DRAFT 2 of 6 Presented 12/21/2021
DRAFT UTILITIES BUDGETBig Marine Sewer Utility Budget Proposal - w/ARPA but no state aid DRAFT
39 LS #4 Pump 1 Replacement 2021 6,000.00 - -
40 LS #4 Pump 2 Replacement 2021 6,000.00 6,000 - -
41 LS #4 (Dosage Tanks) 2022 500.00 - 520 -
42 LS #4 (Dosage Tanks) 2023 500.00 - 541
43 LS #4 (Dosage Tanks) 2024 500.00 - - -
44 LS #4 (Dosage Tanks) 2025 500.00 - - -
45 LS #4 (Dosage Tanks) 2026 500.00 - -
46 LS #4 (Dosage Tanks) 2027 2,500.00
47 LS #4 (Dosage Tanks) 2028 500.00 - - -
48 LS #4 (Dosage Tanks) 2029 500.00 - - -
49 LS #4 (Dosage Tanks) 2031 500.00 - - -
50 LS #4 (Dosage Tanks) 2030 70,000.00 - - -
51 Repairs 2022 2,500.00 - 2,704
52 Forcemain 2022 500.00 - - 541
53 Forcemain 2026 50,000.00 - - -
54 Forcemain 2028 500.00 - -
55 Forcemain 2030 50,000.00 - - -
56 Forcemain 2028 5,000.00 - - -
57 Forcemain 2031 500.00 - -
58 Connection metering 2028 120,000.00 - - -
59 Connection meter equipment 2028 25,000.00 - -
60 A/E control panel 2029 50,000.00 - - -
61 A/E LS 2022 1,000.00 - 1,082
62 A/E LS 2024 2,500.00
63 A/E LS 2025 1,000.00 - - -
64 A/E LS 2029 350,000.00 - - -
65 A/E LS 2030 1,000.00 - - -
66 A/E repairs 2022 1,750.00 - 1,893
67 A/E forcemain 2022 500.00 - - 541
68 A/E forcemain 2029 50,000.00 - - -
69 A/E forcemain 2030 500.00 - -
70 A/E connection metering and software 2030 65,000.00 - - -
71 A/E Drainfield Improvements 2026 300,000.00 - - -
72 - - -
73 - - -
74 - - -
75 - -
76 - - -
77 - - -
78 Total Capital Projects 3,021,050 12,000 73,112 1,427,983
DRAFT 3 of 6 Presented 12/21/2021
DRAFT UTILITIES BUDGETBig Marine Sewer Utility Budget Proposal - w/ARPA but no state aid DRAFT
4.00%4.00%4.00%4.00%4.00%4.00%4.00%4.00%
2024 2025 2026 2027 2028 2029 2030 2031
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - 12,653 - - - -
- - 12,167 - - - - -
- - - - - - - 2,220
- - - - - - - -
- - - - - - - -
2,812 - - - - - - -
- 585 - - - - - -
- - 608 - - - - -
- - - 442,862 - - - -
- - - - 658 - - -
- - - - - 684 - -
- - - - - - 712 -
- - - - - - - 740
- - - - - - - -
- - - - - - - -
562 - - - - - - -
- 585 - - - - - -
- - - - - - - -
- - - 633 - - - -
- - - - 658 - - -
- - - - - 684 - -
- - - - - - 712 -
- - - - - - - 3,701
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
562 - - - - - - -
- 585 - - - - - -
- - 3,042 - - - - -
- - - 633 - - - -
- - - - 658 - - -
- - - - - 684 - -
- - - - - - 99,632 -
- - - - - - - 3,701
DRAFT 4 of 6 Presented 12/21/2021
DRAFT UTILITIES BUDGETBig Marine Sewer Utility Budget Proposal - w/ARPA but no state aid DRAFT
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
562 - - - - - - -
- 585 - - - - - -
- - 608 - - - - -
- - - - 658 - - -
- - - - - 684 - -
- - - - - - - 740
- - - - - - 99,632 -
2,812 2,925 3,042 3,163 3,290 3,421 3,558 3,701
562 585 - - - - - -
- - - 63,266 - - - -
- - - - - 684 - -
- - - - - - 71,166 -
- - - - 6,580 - - -
- - - - - - - 740
- - - - 157,912 - - -
- - - - 32,898 - - -
- - - - - 68,428 - -
- - - - - - - -
- - 1,217 1,265 1,316 - - -
- - - - - 478,999 - -
- - - - - - - 1,480
1,969 2,047 2,129 2,214 2,303 2,395 2,491 2,590
562 585 608 633 658 - - -
- - - - - 68,428 - -
- - - - - - - 740
- - - - - - 92,515 -
- - 364,996 - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
10,404 8,482 388,417 527,321 207,589 625,093 370,417 20,353
DRAFT 5 of 6 Presented 12/21/2021
DRAFT Big Marine Sewer Utility Budget Proposal - w/ARPA but no state aid DRAFT
Actual Actual Budget Actual Preliminary dif over PY
Summary CategoryType Category Type Code Description 2019 2020 2021 7/31/2021 2022 Budget Notes
Sewer fundSpecial assessments Special assessmentsR602-31951 Special Assessments Principal - - - - - - Proposed Budget is based on only receiving APRA funds. Other funding scenarios have been forecasted
Sewer fundSpecial assessments Special assessmentsR602-31952 SA Penalties & Interest 777 3,575 200 139 - (200) and are available in this budget packet.
Sewer fundIntergovernmental IntergovernmentalR602-33422 Other State Grants & Aids 35 47,202 - - - - 2020 Revenue was a FEMA reimbursement + $30,173 rec'd Sept. 2020
Sewer fundCharges for services Charges for servicesR602-34401 Sewer User Fees & Hookup 81,238 83,175 88,045 45,861 109,592 21,547
Sewer fundCharges for services Charges for servicesR602-34402 Sewer Area Connection Fee - -
Sewer fundSpecial assessments Special assessmentsR602-36100 Special Assessments 4,047 3,269 - - 300 300
Sewer fundInterest earnings Interest R 602-36210 Interest Income 3,226 353 700 - 49 (651)
Sewer fundRefunds and reimbursements R 602-36250 Misc. Refund - 550 - - - -
Transfers from other fundsTransfer in R 602-39200 Interfund Transfers In - - 10,000 - 441,892 431,892 Proposal includes allocation the American Rescue Plan Act
TOTAL 602 REVENUE 89,322 138,124 98,945 46,001 551,833 452,888
Sewer fundWages E 602-43210-101 Regular Wages & Salaries 17,996 19,129 20,000 5,541 21,600 1,600
Sewer fundWages E 602-43210-102 OT Regular Wages 1,354 106 - 220 - - "
Sewer fundWages E 602-43210-120 Pension Expense (2,714) (3,054) - - - - "
Sewer fundWages E 602-43210-121 PERA Coord. Employer Contribute.1,444 1,443 1,500 378 1,600 100 "
Sewer fundWages E 602-43210-122 FICA Employer Contribution 1,131 1,128 1,200 334 1,300 100 "
Sewer fundWages E 602-43210-126 MEDICARE Employer Contribution 265 260 300 87 300 - "
Sewer fundWages E 602-43210-151 Worker s Comp Insurance Prem 585 854 455 422 900 445 "
Sewer fundMaterials E 602-43210-200 Office Supplies 134 - 200 75 200 -
Sewer fundMaterials E 602-43210-210 Operating Supplies 642 803 2,400 550 2,400 - Additives to help break down the nitrogen - add to lift Station #2 -proposal
Sewer fundMaterials E 602-43210-240 Small Tools and Minor Equip 20 147 550 - 550 -
Sewer fundProfessional services E 602-43210-303 Engineering Fees 18,522 4,200 8,000 5,146 10,400 2,400
Sewer fundProfessional services E 602-43210-304 Legal Services - - - - - -
Sewer fundProfessional services E 602-43210-308 Other Professional Services 2,456 2,651 2,200 1,410 2,200 - PACE testing
Sewer fundRepair and maintenance E 602-43210-309 Software Support & Maintenance 1,439 716 1,200 - 1,200 - SCADA computer system
Sewer fundRepair and maintenance E 602-43210-311 Contract Permit Inspections - - - - - -
Sewer fundOther E 602-43210-317 Employee Training 351 508 1,400 130 1,400 -
Sewer fundOther E 602-43210-321 Telephone 2,290 2,255 2,100 1,305 2,100 - SCADA Dialer Com System
Sewer fundMaterials E 602-43210-322 Postage 200 247 550 - 550 -
Sewer fundOther E 602-43210-331 Travel Expenses 156 - 200 - 200 -
Sewer fundOther E 602-43210-334 Licenses & Permits 1,949 754 1,600 714 1,600 -
Sewer fundOther E 602-43210-361 Liability/Property Ins 841 1,052 1,100 $1,648.86 900 (200)
Sewer fundOther E 602-43210-381 Utilities-Electric & Gas 2,209 1,793 2,500 $1,011.50 2,500 -
Sewer fundRepair and maintenance E 602-43210-385 Sewer Pumping & Maintenance 7,243 10,000 9,000 - 11,000 2,000
Sewer fundRepair and maintenance E 602-43210-386 Operation & Maintenance 4,434 9,772 5,000 1,574 5,000 -
Sewer fundRepair and maintenance E 602-43210-404 Repair Machinery/Equipment 4,746 16,180 16,000 10,065 16,000 -
Sewer fundOther E 602-43210-413 Equipment Rental - - 350 - 350 -
Sewer fundDepreciation E 602-43210-420 Depreciation Expense 39,630 42,643 51,200 - 52,200 1,000
Sewer fundOther E 602-43210-438 Misc. Contractual 10,691 7,410 9,000 - 9,000 -
Sewer fundOther E 602-43210-439 Refunds Issued - - - - - -
Sewer fundPurchase of capital assets E 602-43210-530 Capital Impr Other Than Bldgs.- 104,435 29,000 - 79,612 50,612
Sewer fundPurchase of capital assets E 602-43210-570 Office Equipment - - - - - -
Sewer fundPurchase of capital assets E 602-43210-611 Interest Expense - - - - - -
Transfers to other fundsTransfers out E 602-43210-720 Operating Transfers - - - - - -
TOTAL FUND 602 EXPENDITURES 118,013 225,430 167,005 30,612 225,062 58,057
(28,690) (87,306) (68,060) (68,060) (68,060)
20220 Draft City of Scandia Line-Item Budget Presented 12-21-2021
Big Marine Sewer Fund 602 Budget Proposal w/ ARPA w/o state aid
DRAFT 6 of 6 Presented 12/21/2021
2022 Draft Utilities Budget Final Report
Uptown Sewer Fund 612
Presented Tuesday, December 21, 2021
What is the Uptown Sewer Utility?
Although the Uptown Sewer System only services 9 commercial accounts in total, several businesses and
institutions in the Village Center rely on its services.
The system specifically serves: the Scandia Community Center and Warming House, the Gammelgården
Museum, Elim Lutheran Church, the parsonage, Scandia Pre-School, Apothecary’s Daughter/Libby Law
Offices, Landmark Surveying, the Schmitt Mall, Your Home Café, the Scandia Market & Mercantile, Scandia
Veterinary Clinic, Crimson Aesthetics, Dragonfly Lash Co, and Edward Jones Financial.
The Uptown Collector was originally constructed in 1995 with a design capacity of 2,460 gallons per
day. After subsequent upgrades to capacity, the system is now designed to process 4,060 gallons/day. As of
2018 the average daily use has been around 2,030 gallons/day with peak flow activity at around 7,500
gallon/day.
Is the system at capacity limits that would prevent new connections?
The answer to the question is that we simply do not know. There are too many factors that contribute to the
volume of use including inflow and infiltration (or I&I) of stormwater from weather events, illegal discharges
of building stormwater, and changes in user activity and quantity of people using the system.
Most utilities forecast sewer use, the city included, use a system of standard units of anticipated consumption,
commonly referred to as residential equivalent units (REC) to apply Sewer Area Connection (WAC)
fees. The system applies as standardized average amount of gallons per day used engineered developed
formulas.
But applying these standardized units to a variable system of limited capacity leaves a gap that could result in
an expensive error.
The data collected over the last 3 years have been an anomaly towards this end. Usage has experienced both
spikes and prolonged lulls in volume. Coincidently, this is the primary reason that revenues have not matched
that of projected revenues both this year and last.
There needs to be more investigation to confirm what capacity really does exist. Both because of the newly
proposed Water Tower Barn Arts and Heritage Center Project and the challenges facing adjacent residential
property owners who are currently experiencing compliance issues with their systems. At the upcoming City
Council meeting, staff will be requesting the City Council approve hiring an expert to make a more detailed
evaluation.
Until the City can confirm available capacity, a moratorium on new connections will remain in place.
What are the risks if the system is at capacity or is exceeding it?
Running this system in a manner that regularly exceeds designed capacity can be very harmful and can result
in substantial costs to remedy. When activity on the system spikes beyond the dosage levels that the system
was designed to take in, such as several washing machines running at the same time, it can lead to a damaging
phenomenon called hydraulic overloading which occurs when a system takes in more water than it is designed
to be able absorb over a period of time. An overloaded septic system does not allow solids to adequately
Draft Final Uptown Sewer Budget Report Presented December 21, 2021
Page 2 of 4
settle and limits necessary bacterial activity. This increases the risk of solids moving into and clogging
elements of the drainfield, which can reduce its efficiency and capacity to take in flows.
Can the system be expanded or replaced?
The Uptown Collector is faced with a unique dilemma when it comes to expanding its capacity. If a
drainfield is added to the north of the existing site, the existing site would have to be
abandoned. Alternatively, if the drainfield is expanded to the west, it would eliminate the ability to construct
a replacement drainfield. In short, expanding the drainfield on the existing site will eliminate the
capacity to build a new drainfield on the site in the future. If no future expansion is desired, short-term
system expansion is not anticipated to be an inexpensive undertaking either.
So given the limited financial capacity of this utility, the Sewer Committee and City Council may want to give
some serious consideration as to what improvements should be undertaken through planning. A facility plan
and possible updates to the existing master plan can guide the use of limited available resources and become a
helpful tool to obtain grants or low-cost financing. An engineered facility plan is a key requirement to apply
for state utility financing, so investment in a plan may be worthy of consideration.
What are the results of the Utility Rate Study?
This year’s budget introduces a much more in-depth process towards forecasting long-term revenue needs
and how to target rate adjustments to meet them. Our newly prepared Utility Rate Study, with the assistance
of Ehlers’ Financial Advisors, has introduced new tools for estimating costs and predicting financial impacts.
Table 1: Projected Rate Changes
2021 2022 2023 2024 2025 2026
%Change in User Rate Revenue 26.05%6.99%14.36%15.95%23.99%25.00%
% Change in Base Charge 15.00%12.00%12.00%20.00%25.00%
Base Charge Annual 350.00 402.50 450.80 504.90 605.88 757.34
Quarterly 87.50 100.63 112.70 126.22 151.47 189.34
Diff over PY 13.13 12.08 13.52 25.24 37.87
% Change in Consumption Rate 5.00%15.00%17.00%25.00%25.00%
Volume Charge per 1,000gals 49.80 52.29 60.13 70.36 87.95 109.93
Average cost/customer diff over PY @ low avg $122.86 $269.92 $342.94 $597.97 $772.70
High End Revenue Proj 20,675 22,023 25,218 29,302 36,401 45,501
Low End Revenue Proj 15,814 16,920 19,349 22,436 27,817 34,772
Avg.Revenue Proj 19,532 20,824 23,838 27,688 34,383 42,979
Target Revenue 14,775 25,367 14,829 14,660 17,969 13,614
Over (Under) target 15,739 (680)4,881 3,122 (28)15,597
Projected balance 30,514 24,687 19,710 17,782 17,940 29,210
Uptown Utility Rate Proposal and Projections
This proposal includes a 2022 increase of Uptown base rates of 15% and 5% of consumption. This is a direct result of
previous utility performance. This system had lower than anticipated consumption in 2020 and this year. The result of this
lower system activity has been much lower revenues than anticipated. To remedy this shortfall staff and the Sewer
Committee recommend this rate change for 2022. There are 3 ranges that have been created to estimate revenues based on
total user consumption over all 9 accounts. Given recent dropping trends the lower average is applied. This change be
adjusted in future years depending on projected activities.
Draft Final Uptown Sewer Budget Report Presented December 21, 2021
Page 3 of 4
Table 2: Long-Range Rate and Revenue Projections
Shown about area recommended rate changes for 2022 and predicted rates for future years.
2022 Base rates need to increase by 15%, in the short-term to make up for lower consumption levels and a
5% increase to volume rates is recommended. Revenues for 2020 and 2021 under-performed from prior
years due to declined consumption. This proposed increase should bring the utility back in line with its
previous performance. However, if any major improvements are planned for the future, this plan will need to
be re-evaluated.
Where is the utility, and what has been done to improve it so far?
Map 1: Location of Uptown Collector and Utility Infrastructure
Courtesy of Bolton & Menk & ESRI GIS, you can see a map of the system and key sites. Note that only
service, holding tanks, are displayed on this map. Service laterals to individual businesses are not shown.
The following is a summary of major changes to the Utility:
• The first upgrade to the system occurred in 1999 when it was expanded to accommodate an addition
1,000 gallon/day for the Community.
• In 2001 capacity was again expanded by 600 gallons/day to serve Gammelgården.
• Leading up to 2009, the city had purchased 2.8 acres lot to the west and demolished the house to
provide additional land to accommodate for future buildout at the collector site.
• In 2012, the Uptown Collector was the first of the City’s three systems to introduce nitrogen and
phosphorus treatment with the installation of an aerobic treatment tank with a blower and air
diffuser due to contaminant levels and mitigate peak flows, which at the time, were exceeding design
capacity. The equalization basin was intended to help even-out larger flows to prevent
overloading. Timers were also added to help control dosing.
2027 2028 2029 2030 2031
25.00%3.00%3.00%3.00%3.00%
25.00%3.00%3.00%3.00%3.00%
Base Charge Annual 946.68 975.08 1,004.33 1,034.46 1,065.50
236.67 243.77 251.08 258.62 266.37
47.33 7.10 7.31 7.53 7.76
25.00%3.00%3.00%3.00%3.00%
137.41 141.54 145.78 150.16 154.66
$965.88 $144.88 $149.23 $153.71 $158.32
High End Revenue Proj 56,876 58,583 60,340 62,150 64,015
Low End Revenue Proj 43,465 44,769 46,112 47,495 48,920
Avg.Revenue Proj 53,723 55,335 56,995 58,705 60,466
Target Revenue 50,641 16,920 23,495 32,000 9,622
Over (Under) target(38,529)12,654 35,359 32,238 54,994
Projected balance 12,112 29,574 58,854 64,238 64,615
Quarterly
Diff over PY
% Change in Consumption Rate
Volume Charge per 1,000gals
Average cost/customer diff over PY @ low avg
Uptown Utility Rate Proposal and Projections
%Change in User Rate Revenue
% Change in Base Charge
Draft Final Uptown Sewer Budget Report Presented December 21, 2021
Page 4 of 4
Where are we at in terms of discovering the sources of I&I in the system?
Smoke tests were completed in 2019 and failed to indicate points where stormwater could be entering the
system, but we will continue to look for something to explain some of the unusual high flow anomalies.
One possible source could be the Old Public Works Garage, which now serves as a storage shed at the
Community Center. Some of the documents that I have come across from Washington County suggested
that this building had been connected to the Uptown Collector. However, no records on file indicate what
was done when the building was understood to be disconnected from the system nearly 20 years ago. We will
be looking into this when the City moves forward with a playground project potentially as soon as next
spring.
Please let Charlie or I know if you have any questions.
Sincerely,
Ken Cammilleri, City Administrator
City of Scandia