Approval of Agenda

Council Member Feehan made a motion to approve the agenda as presented, supported by Council Member Miller.

The question on the motion was called and the result of the voting is as follows:

            Ayes:               Council Members Miller, Feehan and Gunderson

            Nays:               None

Public Comments

There were no public comments.

Presentation

1. SAW grant update – Dawn Lund, Vice President of Utility Financial Solutions, LLC, and David W. Bluhm, Division Manager of Fleis & VandenBrink

Council Member Feehan made a motion to bring the presentation to the floor, supported by Council Member Miller. 

The question on the motion was called and the result of the voting is as follows:

            Ayes:               Council Members Miller, Feehan and Gunderson

            Nays:               None

David Bluhm introduced Dawn Lund from Utility Financial Solutions LLC, and Elaine Venema, and Rob Behnke from Fleis & VandenBrink.

David Bluhm gave a power point presentation.  He noted that all field work is complete.  They focused on wastewater collection and will be talking about wastewater tonight.  DEQ requires a rate study six months prior to the end of the grant.  A wastewater risk analysis was done evaluating the assets for risk.  A capital improvements plan has been developed.  Dawn Lund has drafted the wastewater rate study.  The rate study must be in to DEQ by May 1.  After May 1, the same will be done for the stormwater system.  No rate study is required for stormwater, they just determine the type of capital to improve the system.  They will draft an asset management plan report in July for wastewater, and for stormwater in July or August.  GIS is the engine of managing the utility system, and that is getting developed.  Equipment will be purchased and staff will be trained in August and September.  The round two grant draft deadline is October 31, 2017.  The core components of the Asset Management Plan are asset inventory, level of service, critical assets, rate methodology and capital improvements planning.  He read the level of service statement draft.  That should be put on the website and must be approved by city council.    

Mayor Gunderson stated they could do a public hearing at the next meeting. 

Mr. Bluhm stated they would take the data collected and determine:

1. Likelihood of failure – LOF.  Each pipe is assigned a condition. 
2. Consequence of failure – COF.  How critical is the risk?

A risk score is applied to compare asset to asset.  A risk category is created from the individual risk score. 

Risk categories:

Extreme risk - assets are evaluated immediately and a 1-2 year rehabilitation plan is developed. 

High risk – assets are looked at closely and inspected with short to immediate plans in 3-5 years.  Medium risk – a long term rehabilitation plan is developed. 

Low and Negligible risk – inspections are done and long term strategies developed.

Collection system and manhole statistics were discussed.  A map was distributed of the collection system based on risk categories for manholes and pipes.  There are different types of rehabilitation including lining of pipes, replacement and repair.  Demonstration photos of the different conditions of pipes were reviewed.  A map was distributed on the rehabilitation phases and the type of rehab for each asset.  The 5-year capital improvement plan was reviewed.  It will cost $750,000 over five years to upgrade the collection system pipes and manholes.  There will also be a 6-20 year plan to look at in the future.

Elaine Venema stated the wastewater treatment plant is a lagoon plant with large ponds for treatment.  It was built in 1965 and will last longer than mechanical plants.  Minor improvements were done in 1991, with the installation of floating aerators in pond 2, and other minor improvements were done in the 1990’s and early 2000’s.  A risk evaluation was done on the conditions at the lagoons and lift stations.  That includes the main going down Wells Rd. and down to the plant.  It is an influent pressure sewer with rating of high to extreme.  It takes all the sewage from the whole city into the plant.  There are non-functioning aerators at pond 2.  Four aerators need to be replaced.  The other two have been replaced and some of the lift stations need repair.  Photographs were shown of the lagoons and lift stations.  A 1-5 year capital improvement plan was developed for extreme and high risk which would replace a large portion of the influent pressure system from M-44 to the first pond which would be a $2M project.  Forcemain replacements would be $1M.  Aeration improvements would be $78,000.  Sludge removal from pond 1 would be $676,000.  Those improvements will be reflected in the rate study.  There will be long term planning for the longer term.  The treatment plant has a five year permit.  There are four years left on the permit.  DEQ may look at the ammonia levels in the future.  The current plant could not treat ammonia the way it may have to with new limits.  They would build new tankage, blowers and aerators before going into the lagoon. That would be a $10.9M project if it was ever needed due to new discharge limits.  The city would have about five years to figure out a plan, probably a hybrid system with mechanical components. 

Mr. Bluhm stated there are $4.8M total in CIP items needed in five years.

Dawn Lund stated a MDEQ requirement is when they have the asset management plan, they must determine how they can plan financially.  For the rate methodology, she analyzed the current budget on a cash basis to see if there was a revenue gap.  If it is negative, the city hasn’t generated enough revenue to meet expenses.  That is called a gap.  DEQ requirements state 10% of the gap must be recouped in the first three years of the issuance of the grant.  Within the next four years the rest of the gap must be met.  There is a $126,000 gap or 15.4% this year.  With a 5-year projection, if the city did nothing with the rates, they would operate at a loss and the cash balance would decline with the capital improvements needed.   That is not a possibility.  They need financial health over the five year projection period.  The rates must slowly be moved to provide financial health.  The city had 3% rate increases over the last few years to keep up with regular expenses, which was a good thing.  Now they need to keep up with expenses and also plan for capital improvement projects in the future, slowly working toward the targets.  A 5.9% annual increase is needed over the next five years.  MDEQ states the city must meet the gap, and 5.9% would meet the requirement.  The next increases would fund capital improvement plans in the future.   She reviewed what the rates look like and how it impacts the customer.  An average customer uses 5cc a month or 15 cc a quarter.  The current fee is $83.79.  With a 5.9% increase the fee is $89.00, an increase of $1.74 per month.  The increase of 5.9% in year two would bring it to $94.55 a quarter.  In year three, a 5.9% increase would bring it to $100.50 per quarter.  It would take three years to meet MDEQ requirements.  She would recommend beyond that that they continue the 5.9% increase pattern.  Some may ask when they could stop the increases?  The costs do not stop increasing.  They are looking at capital improvements and may have to bump that increase up.  Before year three they will update the projection.  They need to start to prepare for the large improvements.  The bond for the $4M in improvements would need about the same rate of increase for a few years.    

Mayor Gunderson stated with the SAW grant, they find out what the infrastructure is like and they need to raise the rates more.  It is scary.

Ms. Lund stated what they did in the past was great to keep up with costs.  They were not planning for infrastructure replacement.  Now they need to plan for infrastructure replacement in the future    MDEQ is trying to phase in rate plans.  MDEQ requires for the revenue gap, that 10% of the gap must be met before end of the three year grant.  In the next four years, they must cover 90% of the gap.  She pushed it to three years, but they have to look at the overall health and $4M project, and must make rate adjustments to plan for that.  For a $4.6M in the bond market, the city could not afford that debt at this time.  A debt coverage ratio of one is needed.  They  have to meet MDEQ requirements in the time required, and prepare for capital improvement projects, to get there slowly and incrementally.  They should try to keep the rate increases stable. The city did a good job in the past, but now has to prepare for the capital improvement projects that have to be done. 

Mr. Bluhm stated they wanted the communities to look at the gaps.  For the DEQ requirements, the city only has to address the gap, but it will be up to the community on what they want to do with the CIP.  A detailed, analytic approach has been done for capital needs.  They will want to be on the road to continued health.

Ms. Lund stated the city would need a total 5.9% rate increase for 2018.  The bond rate was based on 3% for 20 years.  That could change. 

Mayor Gunderson stated they have been doing a bandaid approach, but now with the report, a 5.9% increase is needed.  These are very low rate increases compared to other communities.  If the city had not moved forward with SAW grant, it would have had severe infrastructure problems that they may not have not known about until it was extreme.  It is good the city has increased rates over the years, but with the requirements of DEQ, they really do not have a choice.

Ms. Lund stated the city must fill the $126,000 gap required by DEQ. 

Council Member Miller stated they may not get a discharge release in a couple of years, and there would be the potential of risk of pipe failure which could be catastrophic.  The city is doing a lot to make things work.  The potential for disaster without a plan is there.  At some point, it must be accomplished so the city does not lose infrastructure. 

Ms. Lund stated the plan tonight only covers the 5-year plan.  Years 6-20 are not in the rate methodology.  The rate changes will continue and possibly change. 

Mr. Bluhm stated the city needs to maintain the permit, and some things may be dictated in the future.  This plan helps the city do that. 

Council Member Miller asked if there was any support or grants for this?  Will the state help support the improvements?

Ms. Lund stated she had not heard of financial support for the improvements. 

Mr. Bluhn stated there are SRF and Rural Development funds.  DEQ may realize everyone cannot do this and start to invest more money in the infrastructure.  There are no guarantees but it is being discussed. 

Mayor Gunderson stated adjustments will be mandated in other areas of the city. 

Mr. Bluhm stated it will not go away for any of the utilities, it is here to stay.          

Ms. Lund stated the rate methodology must be to MDEQ by May 1.  A signed resolution is needed for the rate plan. 

Mayor Gunderson stated the council knows where they are at now with the study.  A local landfill brings in leachate to the city, and that will help with the cost at the lagoons.  That revenue will be on its own separate line item. 

Consent Agenda

Public Hearing

Reports by Council Liaisons

Council Member Miller stated neither the Planning Commission nor Historic District Commission has met. 

Council Member Feehan stated he missed the Museum Board meeting.

Mayor Gunderson stated at the Library Board meeting, they paid the bills and are putting policies in place.  There was no DDA meeting.

Unfinished Business

There was no unfinished business.

New Business

1. Approval of a joint application to the MNRTF by the Cities of Belding and Greenville for a kayak launch system

The City Clerk read the preamble to the resolution.

Council Member Feehan moved the passage of the resolution and the motion was supported by Council Member Miller.

Public Comments

Joe Feuerstein, 901 W. State, stated approximately 10-15 years ago, where the schools built homes, they built a garage to keep equipment, with an agreement with the board of appeals to have a house built when they were done building.  For 2-1/2 years it fell through the cracks.  It was sold by the schools and they said a house would be built there.  It is still just a garage for storage.  About eight months ago, code enforcement came in with 600 complaints to get things corrected.  They need an update on that.  Nothing is being done.  They need enforcement to have people do things.  A lot will forget it and it will fall through the cracks.  Things have been falling through the cracks for about eight years.  They need to treat everyone equal.  Don’t use enforcement to stick it to somebody.  With the International Building Code, they pick and choose.  There are violations all over the place.  There are apartments with no outside stairway.  There are restaurants with no double doors.  Nobody follows anything or does anything.  They should do things right, not like in the past. 

Jeff Smith, 809 Morgan, stated he is an avid bicycler and uses the Lightning Bend trail.  Someone wanted to put directional signs on the trail.  He asked if they had been approached?

Mayor Gunderson stated Mr. Smith would talk to the city manager on that.

Mr. Smith stated he wants to start riding soon.  He and his girlfriend moved trees out of the way. Others started it.  He asked if there had been any effort to get a group together to maintain the trail?

Mayor Gunderson stated he could contact Keven Krieger at city hall.  He started frisbee golf out there and works with the Rec Board. 

City Manager Comments

There were no city manager comments.

Council Comments

Council Members Feehan and Miller had no comments. 

Mayor Gunderson stated a council meeting is scheduled for July 4.  He would like to move the meeting to July 5 due to the holiday.  He wished to respond to Mr. Feuerstein on blight control.  He has seen the reports.  Things have improved.  Letters have been issued.  Those are proceeding.  It went through the city attorney and then they talk to Marci.  He has seen great strides with it.  Mr. Feuerstein sat on city council and could have done things.  The council can be blamed for not doing things.  The staff under the city manager can be blamed.  He should talk to the city manager first.  He thanked everyone for coming.  Becky and the city manager will be busy with the SAW grant.  The downfall to the SAW grant is the infrastructure is in the condition it is.  The situation has been brought to light in the last two years.  This is what is required of the city and city council relative to the grant.   

Adjournment

Mayor Gunderson moved to adjourn the meeting, supported by Council Member Miller.

Ayes:               Council Members Miller, Feehan and Gunderson

            Nays:               None

The Mayor adjourned the meeting at 9:05 p.m.