Working Session

Mayor and City Council Work Session
January 11, 2006 – 5:00 p.m.
A101

Present: Doug Christensen, Hal Gershman, Eliot Glassheim, Dorette Kerian, Curt Kreun.
Absent: Bob Brooks, Gerald Hamerlik, Mayor Brown.
Others Present: Rick Duquette, Todd Feland, Steve Burian, John Schmisek, John Packett, Al Morken, Kevin Dean, Pete Haga, Roxanne Fiala, Hazel Fetters-Sletten, Brad Gengler.

Gershman called the meeting to order at 5:00 p.m.

1) Lake Agassiz Water Project Funding.

Feland stated that the purpose of this meeting is to update the Council on the project and the research that has been completed since the last presentation, including meeting with Fargo to share thoughts on this project. As discussed at the last presentation the draft EIS was done on December 31, 2005 and the timeline is for the EIS to be finalized on December 31, 2006. He continued that there are some issues that have been identified and he would like to review those with the Council.

The first issue is Capacity. Feland stated that the projected ranges of population growth are between .9 and 1.2% by 2050, with the Bureau of Reclamation using a growth percentage of 1.06% which would mean the City would have grown to a population of 83,000. He added that Fargo is being projected to have a population growth between 1.8 and 2%, however they feel that their growth may actually be at a point where it will plateau and only be about an average of .6%. Feland explained that he believes that we should also be taking a more cautious approach in this area.

Feland explained that we also must try to get a handle on what the actual per capita use would be and what measures we would be willing to take to conserve. He continued that the Grand Forks Air Force Base has used up to 800,000 gallons per day and has currently been using about 400,000 gallons per day and that we will need to be having some conversations with them as to where they see their level of usage being in 2050. Feland stated that we will also need to look at the industrial demand side and whether we are projecting an increase in that area or plan for what we currently have. The group discussed whether it was feasible to be trying to project out that far or if we should be waiting until a later date to do this forecasting. Burian commented that the federal government is looking to project as far out as possible, as the process that they need to go through to develop and accumulate funding takes some years. He added that as this process moves forward they are also looking to get projections from us for 25 years out as well.

Kerian inquired when we would really start seeing large impacts once a drought began. Feland stated that based on a 1930’s type event, Fargo would be impacted first, as soon as year one and two of the drought with our major impacts beginning in years three and four.

The second issue is water supply reliability and quality. Feland stated that in a drought our river water will actually be the return flow of wastewater discharge from Fargo and that we need to get more information on what the quality of the water that we are buying is, whether it will be in a treatable state or if we will have to expend significantly to get drinkable water. Christensen inquired how this would be different from our current situation as Fargo discharges into the river now. Feland responded that we want to make sure if we buy into this project that we are getting the same product for our money as those south of us. Burian added that currently we have 1,000 cfs flowing past our city, whereas in a 1930’s event drought we would have only 100 cfs and it is foreseeable that would only be Fargo’s discharge with no dilution. Christensen commented that this would all come on slowly and he believes that it would be possible to put together a solution within three to four years of the drought developing. Burian responded that the feds have stated that if started today, the soonest they could complete a project would be 2014. Glassheim agreed that we should have a discussion about how much we need and also what quality we get, including how much treatment would be needed on our part and maybe our cost changes based on those discussions. Feland stated that we are trying to defer our nomination as long as possible so that we can get as many of these questions answered as possible before making any determinations.

Feland explained that another concern is the upcoming expenditure for our water treatment plant and that they are trying to work this expense in with the planning for this project. He stated that based on the potential need for additional treatment and the large cost for both the treatment plant and participation in the supply project that we feel they need to be handled together and that the federal and state participation can not address just the supply project alone.

The next issue is the financial impacts on the community. Feland continued that as stated above the costs for the supply project and for the water treatment plant project are both substantial and our community is still handling the costs of the flood protection project and is not in a position to add the others at this time as the costs are too high we can not afford it at the level currently being discussed. He continued that some at the state level have been very positive to those concerns and some have not, as they are being cautious until they find out more about the federal participation level. He added that currently there is $245 million listed in the Dacotah Resources Act as the federal participation amount, but it is in the form of low interest loans and we are impressing on our federal leaders that we need these funds to be as grants and to include the entire water system to the tap as they did for Minot and Sioux Falls. He continued that they are continuing to state that the federal and state participations must be known first and then we will be able to decide whether or not we can afford to join the project. Christensen and Gershman both expressed thanks and agreed that we are on the right path to push for grants and the inclusion of the water treatment plant project with the supply project.

Feland pointed out that in the LAWA document that is included in the information packet sent out today the Council can note that the work plan calls for contracts to be signed with participating entities in December 2006 and then taking this plan to the legislature in 2007 and that we have continued to impress on them that we will not be in a position to commit before hearing of the state participation. He continued that they still view us as a part of the group and they would like to know what our needs will be if we do decide to participate.

Christensen commented that we are talking about projections out to 2050 and there is some disagreement over whether we all buy into projected growth to 83,000 by that time and maybe we should be looking at a range of need, maybe from 67,000 to 83,000. He continued that we have worked hard and spent a lot on developing a rate plan that takes into account our needs for a new water treatment plant and we should not make any moves that will mess up the rate structure that we have in place. He added that perhaps a model should be developed based on what the average wage earner makes and move that out to see what could be afforded and then compare that to the cost that is anticipated to see if this is a feasible project to participate in.

Gershman asked if there were some other variables to the model that could also be looked at, as it appears that all of the needs to date have been based on maintaining our normal usage. Burian commented that is one are where they are looking for direction from the Council, so that they can determine the level of conservation that could be anticipated, range of population that they were comfortable working with, and that given some guidance in those areas they can come closer to determining how little water we could get by with. Kreun commented that is what we’re pushing for and we are all on the same page, but that Director Frink may be on a different path. He commented that the economic impact that the east region has for the state is huge and we may have some lobbying power.

Glassheim inquired whether anyone has researched agricultural processing projections. Feland stated that NDSU did a study on the Valley with a goal being that the State would then cove the cost for ag value added processing, but they suspect that the State will view this differently. He commented that if the state does knock out providing for this, then we may see any future development in this area go elsewhere. Burian added that the study included a low, intermediate and high projection and that we already would be low end with only our current usage and no inclusion of any future development.

Glassheim inquired how long a drought event is projected to last. Burian responded that the worst event was the 1930’s and that lasted about a decade. He continued that the drought event of the 80’s was more intense, but as it was much shorter in duration was easier to handle and that is why the planning is all based on the 1930’s event, as the long duration leads to resources running out. He added that a study was done by Meridian and they concluded that this type of event is not unusual for this region and we should expect another one in the future.

Glassheim inquired if any potential costs had been projected yet. Kreun responded that Mayor Furness of Fargo has been stating that he feels they could sell a project to the public there as long as the cost was at or less than $10 per month per residential customer, but that we would want a significantly lower cost for our community to participate in the project. Burian agreed that Fargo is confident their community would be willing to pay the $10 per month. Feland noted that the charge for commercial customers will be more than that and there is a multiplier that gets applied to the residential charge. He added that the numbers we have been presented thus far for our participation would be challenged to bring in under $5 per month per residential user, and that is assuming a 50% participation from the State and with no federal participation and that these rates would be in place for 40 years. Kreun commented that it has been our position that we will not even consider a plan with this financing structure. Schmisek stated that we will have to look at the costs for the best plan they can come up with and then determine whether or not we can afford to participate or we look at what we can afford and say here’s all we’ll pay and if we participate the state and fed will need to pick up the rest.

Gershman inquired how much is left to assess on the flood project. Schmisek stated that for an average 70’ lot there will be one more assessment of about $500, which breaks down to an annual payment of about a $100. Feland stated that the funding of the project will actually be coming some years into the future. He continued that first we will have nominations as to our capacity, then it will take several years for the fed and state to get their portions of the funding in place before the project could go. Gershman inquired if perhaps we could come into the payback for this program later, for instance, if the project goes in maybe five years, our dike payments are completed in 10 years, and maybe we come into this 8 to 10 years after the start of the project with our payments. Feland responded that LAWA has said they will work with municipalities on the payment timeline.

Kerian commented that perhaps if the water treatment plant project becomes a part of this project that we would also have the money accumulated for that to help with our initial costs. Feland added that right now the water treatment plant project is pushed out to at least 2010, as each year we keep moving it back to meet other needs. Christensen inquired how we will be looking to fund the water treatment plant project if it does not get included with the supply project. Feland responded that we will need to look at the regulations that are in place, but that it is clear we will be looking for an innovative funding package, as it will be too costly for the utility to support through rates, that loans will probably not be a viable solution and that sales tax will probably also not be a viable alternative. He continued that once we get to that time we will need to look at the footprint and see what alternatives are available. Christensen stated that perhaps we should be looking for grants to cover the amount needed based on the current project that we are considering, based on the amount of income and expenses that we are projecting in the rate plan. Feland responded that our goal has always been to try and secure grant funding for at least 50% of the project and that we need to come up with the alternative funding for the other 50%, but also realizes that this will be sometime in the future and we are hoping to lay good groundwork now for those that will be dealing with this matter in the future. Christensen noted that he realizes how important water in to our community and that we have worked hard on the rate structure that is in place and commends staff and the consultants for their work on this. Feland pointed out that each year that we defer the project there is also more money accumulating in the bank.

Christensen expressed that he still has a concern with this and why we are making a policy to have current users pay for something that will only benefit future users and that perhaps we need to change this and let those that will get the benefit pay for it. Kreun noted that the money we are currently accumulating will only be a very small down payment on the full project. Duquette commented that the current rate structure does begin our preparation for the need for a new water treatment plant in the future and we need to make sure that we do not confuse the cost of the supply project with what we are already doing. Kreun noted that perhaps our answer on the supply project will be that we will not begin participating until near the end of the project, but then we will have higher payments over a shorter time.

Burian stated that what they are looking for right now is direction as to will the Council be open to aggressive drought restraints in order to decrease the demands on our supply, which will allow us to nominate for less. Kerian inquired whether this would be for residential only or also for industrial. Burian responded that is what they are looking for direction on, in particular in the industrial, should we be planning for our current amount, or also planning for a growth. Feland stated that they also want to make sure that this is the venue that the Council would prefer to use for discussion of this matter and further updates. The group consensus was yes to continue bringing updates and questions through the Work Sessions.

2) Update on Government Access Channel.

This item was held until the next work session.

3) Adjournment.

Meeting adjourned at 6:00 p.m.


Respectfully Submitted,

Sherie Lundmark
Admin Specialist Sr.