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As previously stated, tonight we would like to focus the attention on discussion of the water supply and <br />distribution system. As the CIP and preliminary budgets were being prepared we followed the same assumptions as <br />were included in the sanitary sewer analysis. No acquisition costs are included for easement and/or right-of-way to <br />install the required improvements; it is assumed they are part of a development scenario whereby the applicant <br />would be responsible for all associated costs. The operation and maintenance (O&M) expenses for the water <br />system (with the exception of the water treatment plant - see below) will be funded with user rates, while system <br />expansion will be funded with development/connection fees. The City's current policy requires development to be <br />responsible for all costs associated with the required utility extensions to serve their project; the City does not <br />typically advance utility infrastructure expansion without an available funding source. <br />Finally, the current utility reimbursement agreement with 21st Century Bank related to the NW Sewer and Water <br />Extension project was incorporated as well. Under this agreement we are required to pay back utility connection <br />charges as properties and/or developments tie into this system, which currently stands at approximately $5.3M in <br />outstanding eligible connection charges. The City is still able to offer fee credits for lateral extensions to serve the <br />connecting properties, so the total eligible trunk fee reimbursements from a development would likely be reduced <br />by the infrastructure costs to serve the development. Based upon this information staff has factored in a $2M <br />payback from the water utility through the year 2025. <br />Staff is seeking Council direction on a couple of key items so the water system CIP budget can be refined, and the <br />determination of utility rates can be further analyzed (if necessary). These issues center primarily on treatment and <br />ultimate water source. <br />TREATMENT <br />Whether the decision is to utilize surface water or groundwater for the City's supply needs it is apparent that water <br />treatment in some capacity will most likely be required in the future. The City's current groundwater water supply <br />exceeds secondary standards for iron and manganese content, and as more users are added to the system it is likely <br />that complaints will increase and there will be a demand and expectation for improved water quality. Therefore, <br />staff feels it is imperative to plan for water treatment and include the associated costs in the water system plan. <br />Since there is a relatively low cost differential to construct a surface water treatment plant vs. a groundwater plant <br />staff is proposing that a surface water treatment plant be included in the future plan. A surface water treatment <br />plant allows for greater flexibility in servicing future population demands, provides an infinite source, eliminates <br />concerns with with respect to contamination and/or surface water connections within the aquifer, and potentially <br />introduces additional funding sources if it were to be elevated to a regional supply concern. Based upon previous <br />Council discussions, and to remain conservative in our funding approach, we have proposed that this facility would <br />be funded 80% by the City. <br />Also within this budgeting analysis we have compared the number of users that are projected to be on the <br />municipal system at the time a treatment facility will be necessary, and factored the user rates from this serviced <br />population into paying a portion of the treatment plant construction. Based upon preliminary estimates it appears <br />that approximately 50% of the 2030 MUSA service population will be connected to the water system at the time the <br />plant will be necessary (approximately 2019). Based upon this information staff is recommending an approximate <br />50-50 split as an equitable distribution of costs between user rates (primarily O&M costs) and development fees <br />(primarily system expansions) to fund this future treatment facility. <br />SURFACE WATER VS. GROUNDWATER <br />To meet the demands of the study period the City will need to install four more groundwater wells, at a capacity <br />of 1,000 gpm each, to serve the 2030 MUSA population. We currently have only two wells that meet this output <br />requirement, so if it is the desire of the Council to continue utilizing groundwater sources only we should begin <br />those investigations relatively soon to seek out locations and conduct test pumping. Once locations are determined <br />we would then have to factor all associated costs into the CIP budget, including acquisitions and required <br />infrastructure to connect them to the existing treatment and distribute system. Due to previously expressed supply <br />concerns in the Franconia -Ironton -Galesville aquifer (the City's municipal water supply) from the Minnesota <br />Department of Natural Resources, securing approval for additional wells could also be challenging. While the City <br />may be able to obtain the additional wells needed for growth, treatment would still most likely be required for the <br />