Inflationary costs push Wastewater Treatment Plant project higher

Published 5:00 pm Thursday, July 7, 2022

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New estimated cost sits at $94M, up from $76M estimated last July


City Council members are gradually getting a better understanding as to how much the cost will be to overhaul the Wastewater Treatment Plant.

During a work session following Monday night’s regular meeting, City Engineer Steven Lang laid out preliminary estimates for the plant as well as when council members might expect to get bids.

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Lang revealed that the city is currently looking at a total project estimate of $94 million, nearly $20 million more than the estimate was last year at about this time, which was $76 million.

This price spike is largely being driven by inflationary costs in the range of 18% over the 12 months since 2021 estimates.

As feared, more of this hefty price tax is likely to be shared even more by taxpayers after the state Legislature failed to give Austin the $14.5 million in requested bonding dollars, which was originally approved, but was stripped from the table at the last minute.

“I think the disappointment is with leadership,” Mayor Steve King said in a June City Council meeting during a presentation by Rep. Patricia Mueller. “It’s disappointing overall. We are the losers on that bonding bill. We don’t have the luxury of waiting. We just have to get it done.”

With the bonding money out of the equation this year, sewer user fee increases of 7% over the next three to four years are possibly needed to raise the $7.4 million in revenue to cover any shortfalls.

It also would reflect a hefty increase overall.

“It’s an 80% increase over 10 years to fund this monster of a project,” Lang said.

None of this prevents the council from pulling back on those increases should they receive bonding money next year or the year after, but the fact remains that it puts the city in a difficult position.

As far as how the city will pay for the construction needed, the city is entering into a deal with Hormel Food Corps for repayment of $45 million of industrial costs, and $49 million in domestic costs would be paid through a combination of avenues that includes the sewer user fees, grants, fund reserve dollars and a likely 20-year loan from the state at around 2.5%, 3% interest.

“This is a new cost to us that we need to make sure we’re creating enough revenue to pay off the additional loan,” Lang said. “There’s a lot of big money moving around.

Lang said that a bid date has been set for 2 p.m. on July 12.

A further timeline includes the continuation of refining the numbers by the July 25 meeting with a more finalized picture being ready by August with a hope to have funding in place by Labor Day.

“The goal is to have everything in place … at that first council meeting in August — Aug. 1,” Lang said.

No date has been set as to when construction is likely to start, however, Lang said Thursday that construction will include a combination of renovation and new structures.

Most every building and tank on the site will see work with some being renovated to continue current use, while others will be repurposed for a new treatment process.

Other buildings will be completely demolished to make way for new treatment processes or turned into green space.