October 1991 Shore ReportMAYOR
Barb Brancel
OCTOBER, 1991 COUNCIL
Kristi Stover
Bob Gagne
Rob Daugherty
Daniel Lewis
CITY OF
SHOREWOOD
5755 COUNTRY CLUB ROAD • SHOREWOOD, MINNESOTA 55331 • (612) 474 -3236
TO: Shorewood Residents
SUBJECT: Considering Expansion of the Municipal Water System
Over the last several months the Shorewood City Council has been considering whether to
construct a complete municipal water system for the City. This letter is intended to explain
the reasons why the water system expansion is even being considered; to report on the status
of the current municipal water system; to describe what is being proposed; to share with the
Shorewood citizens the various considerations in making such a decision; and to describe
avenues of public input.
Why is a Water System Expansion Being Considered at this Time?
Although the Shorewood City Council is responsible for only eighteen cents of your property
tax dollar, the Council wants to be sure that that eighteen cents is spent well. Public
improvement projects need to be timed and financed carefully to minimize the impact on
property taxes.
To do this the Council is developing a Capital Improvement Program (CIP). The CIP
identifies public improvements projects to be done over the next 20 to 25 years, plans and
schedules them over the next 5 years, and budgets for those projects planned in 1992.
Water, sanitary sewer, parks, drainage, and public facilities are being reviewed along with
public works equipment. A summary of the CIP was published in Shorewood's Fall
Newsletter. The CIP will be reviewed and updated each year.
During review of the status of the current City water system and condition of City streets,
the question of expanding the water system was raised. A simple but important point to
keep in mind during this planning process is to be sure that all likely underground
improvements are installed before a street is rebuilt. Thinking ahead makes sense!
Financial planning saves dollars!
The Current Municipal Water System
Shorewood's existing municipal water system consists of seven wells, four hydro - pneumatic
tanks for pressure regulation without storage, and one elevated storage tank. The system
is not currently interconnected, and consists essentially of five different service areas.
The southeast service area is the most operationally viable. With a 400,000 gallon elevated
storage tank and a connection to the Minnetonka and Chanhassen water systems, a water
outage is unlikely. Water treatment for iron removal is currently under construction and
is scheduled for completion in late 1991.
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#'y This publication is printed
� recycled paper.
Public Input
At this time a majority of the City Council feels the proposal for the construction of a
complete municipal water system has merit. The Fall City Newsletter and this letter are
intended to inform the general public on the issue. But what are the avenues for public
input?
In this representative democracy your elected City Council is responsible for making such
decisions. They are interested in your thoughts. The following are methods of
communicating your thoughts to the City Council:
• Write your thoughts in a letter to the City Council in care of City Hall, 5755
Country Club Road, Shorewood, MN 55331.
• Call or stop them on the street to voice your opinions.
• A professional research firm will be conducting a public opinion telephone poll
on the issue within the next week. If you are called Tease spend a few minutes
with the poller offering your opinions.
• A public information meeting on the proposal for municipal water will be held:
Monday, November 4, 1991
7:30 pm
Multi- Purpose Room /Gym
Minnewashta Elementary School
26350 Smithtown Road
Shorewood
• A second public information meeting will be held on the other elements of the
Capital Improvement Program (sewer, drainage, streets, public buildings, etc.).
Comments on the water proposal will be heard at this meeting as well, at the
same location on Monday, November 18, 1991 at 7:30 pm.
• A public hearing on the Capital Improvement Program will be held before the
Planning Commission, at the same location on Tuesday, November 19, 1991 at
7:30 pm.
• If the City Council adopts the CIP with a water system expansion included, each
affected property owner will be invited to a public hearing on the proposed
improvement. During or after installation of the improvement a final public
hearing will be held on the proposed assessment for affected property owners.
Your input will be greatly appreciated.
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The wells for the remaining four service areas are located in Badger Park (serving the area
near City Hall), Amesbury (in the northeast portion of town), Boulder Bridge (serving the
western part of town including Shorewood Oaks), and the Woodhaven well serving an area
along Apple Road. Of these, only the Badger Park system has a backup, with a connection
to Tonka Bay's elevated storage.
The City's water system currently serves approximately 30 percent of the households within
the City. Because the water system actually consists of five separate sub - systems, and
because some of the systems are under- utilized, the system as a whole has been very
inefficient financially. During the 1980's, the water fund ran up a deficit which, at its worst,
totaled $243,000; this deficit has been financed by the City's general operating fund reserves.
With a greater number of users being added onto the system, and with the addition of an
efficient system in the southeast area, the water fund has made a comeback of sorts in 1989
and 1990.
During that period, for the first time in years, the deficit was reduced. However, at the end
of 1990 there still was a fund deficit of over $200,000. These figures also ignore the cost of
long -term maintenance to the system for which funds should be set aside each year.
Because of the tenuous financial position of the water fund, the setting aside of such funds
has not been possible.
The financial figures of the last two years seem to show encouraging signs for the financial
integrity of the water fund. Projections show that, in the short -term, the water fund will
climb out of its current deficit by 1997. These projections, however, still do not consider
long -term maintenance costs. When long -term maintenance costs are considered projections
show that, even with modest growth in users and significant increases in water rates, the
water fund deficit will continue and actually grow. This would result in the general
operating fund continuing to finance the operations of the water fund.
So, with the Council currently planning for future improvements, with many streets in the
position of needing improvement, and with the poor long -term financial outlook of our
current water system, the Council is now considering expansion of the municipal water
system City -wide.
THE PROPOSED WATER SYSTEM
Expanding the municipal water system to encompass the entire City (except for the islands)
is an expensive proposition. It is estimated to cost 13 million dollars over a three year
period. Two - thirds of the estimated cost would be assessed on a per unit basis to those
units not currently hooked up to municipal water. Because the system will have many more
paying customers, it is anticipated that the remaining one -third of the total cost will be
picked up by system revenues and by future connection charges as new structures are built.
Those already connected to or who have been assessed for municipal water will not pay any
assessments for this improvement. Again, it should be noted that those living on Enchanted
and Shady Islands are not directly affected by this proposal. Assessments would pay for
installation and future system improvements and are estimated to be:
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• There are health benefits associated with the chlorination and fluoridation of
water, and both are currently done with our existing wells. Chlorine is widely
recognized and used as a disinfectant. Fluoride has been established as helpful
in the development of teeth free from decay.
• Some people simply prefer water from a private well to water from a City system.
• Because of water quality, quantity, or cost, sometimes neighbors get together to
petition for municipal water. Scattered petitions for municipal water can result
in neighborhood conflicts and significantly varying costs for installation of
municipal water. Some petitions may have to be refused due to the lack of
capacity of the current system.
• There are "economies of scale" associated with installing an entire system over a
three year period which is not likely to be there if petitions are received to install
water in various neighborhoods and the City undertakes those small projects in
a piecemeal fashion.
• There can be peace of mind knowing the Fire Department can hookup to a
reliable fire hydrant nearby. Fire Marshal Neudahl explains: "If we have no
hydrants we must use a tanker water supply system which takes longer to set up
and once the tanker is empty drive to the nearest supply of water, usually the
closest hydrant, to refill and return to the scene ".
• There is more and more concern in the State Department of Health for potential
contamination of individual wells.
Considerations of particular interest for those citizens already served by municipal water are
as follows:
• Unless the water system is expanded significant rate increases are inevitable in
the future to reasonably account for system maintenance and depreciation.
Projections of high water rates will be held down by the increased number of
users in a complete system.
• Currently, four of the five water systems in the City use a hydro - pneumatic tank
to maintain system pressure. These systems are very much like a single home
well /pressure tank system, and therefore are just as vulnerable to power outages.
Also, the constant on -off cycles required of the large motors involved is energy
inefficient, and results in expensive repairs and increased maintenance costs.
• Three of the five systems have no backup to prevent water outage in case of
power failure which causes concern for fire protection.
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• $800 assessment per affected unit, spread over 15 years beginning in 1993, for
trunk main and storage:
Payments at 8% interest on the unpaid balance would decline as shown by this
illustration using years 1, 8, and 15.
Interest on Unpaid
Principal Balance Total Payment
Year 1
$ 53.33
$ 64.00
$117.33
Year 8
53.33
34.13
87.46
Year 15
53.33
4.27
57.65
• An additional $4,000 assessment per affected unit spread over 15 years, beginning
when water is available to the property, for watermain (lateral) installation:
Payments at 8% interest on the unpaid balance would decline as shown by this
illustration using years 1, 8, and 15.
Interest on Unpaid
Principal Balance Total Payment
Year 1
$266.67
$320.00
$586.67
Year 8
266.67
170.67
437.34
Year 15
266.67
21.33
287.95
These assessment costs do not include plumbing costs to bring water from the property line
to the structure and hook it up.
The proposal is being developed under the following City Council policy guidelines:
• Total assessment is estimated at this time to be $4,800 per unit for one and two
unit dwellings. Apartment buildings over 2 units would receive a "combined
service" reduction while commercial units would be increased by a multiplier.
• Those who have municipal water available now and have not paid a special
assessment, can connect by October 1, 1992 by paying $4,000, or connect after
that date by paying $4,800 plus a Consumer Price Index (CPI) annual adjustment.
• To lessen the financial impact, special assessments will be spread over a 15 year
period with as low an interest rate as possible.
• Each buildable lot of record will be assessed a minimum of one unit.
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Each citizen will view these points differently. Some points will be considered in a positive
way, others in a negative way. Some considerations of particular interest to those who are
currently not on the municipal water system are as follows:
• Cost - the program is designed to minimize "sticker shock" by having utility
revenue pick up one -third of the actual cost and allowing assessments to be paid
over 15 years. The fact remains that it is expensive ... an estimated $4,800 plus the
cost of bringing the water into the unit. With this, however, we need to keep in
mind that private wells are also expensive. With a private well, besides the initial
cost of installation, ongoing major and minor maintenance, as well as individual
well replacement cost do not stop. When the municipal system special assessment
is paid off any further expenditures should be covered by system revenues.
With a municipal water system there will be quarterly water bills. The City's
charges for water are based on household usage, and averages $37.60 in a typical
winter quarter. This amount may be more or less, depending on usage, and may
increase with seasonal water usage, ie. lawn watering.
This should be considered alongside:
• The cost of a private well pump (1.5 horsepower) which could run two to six
hours per day, depending on usage... Example:
2 hours /day X 16 cents /kilowatt hour = 32 cents day
times 365 days
equals $117 /year
• The resulting improvement in our ISO (Insurance Services Office) rating from
class 9 to class 6 with a municipal water system could, depending on the
insurance company, reduce insurance premiums. Fire Marshal Neudahl
surveyed several insurance companies with the following results:
Value of Home
Range of Annual
Premium Savings
$ 80,000
$120,000
$150,000
$250,000
$64 -$97
$106-$173
$132-$217
$376 -$398
Each property owner should check with their insurance carrier to see what, if any premium
savings would result.
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• The proposal is as "development neutral" as possible. The Council is concerned
that significant water assessments on large undivided parcels would force owners
to subdivide and sell lots sooner than would otherwise be the case. Large tracts
of land will be charged as only one unit until they are subdivided at which time
hookup charges would become due and payable. Those properties which are
subdivided in the future will pay a greater cost. Subdivided parcels adjacent to
watermain will have to pay a $2,500 water access charge plus a $4,000 hookup
charge (adjusted for CPI). Parcels resulting from an "internal" subdivision, which
are not adjacent to the watermain system, will have to pay the $2,500 water
access charge plus the cost of installing all mains to service those parcels. This
should counter balance the tendency of the availability of City water to encourage
development.
• In order to keep a financially viable system with rate increases kept at the rate
of inflation starting in 1993, it appears all properties will eventually have to
hookup to the system. The current proposal would require hookup within five
years of when water is available.
• Individual wells should be able to be kept for outside watering as long as they are
not interconnected to the municipal system.
• Services to property lines for future lots will be installed at the time of main
installation to prevent pavement disturbance in the future.
• A procedure will be established for deferral of assessments for low income
homeowners to mitigate undue hardship.
CONSIDERATIONS IN MAKING A DECISION
The City Council is considering many issues and concerns in shaping a course of action for
the City regarding our municipal water supply. There are a number of points which need
to be taken into consideration in making a good public policy decision.
First there are considerations of City -wide significance:
• A City utility should be financially sound. It should have enough users to make
its operations cost - effective. Shorewood's water utility has not evolved over the
years as had been anticipated. Deficits that have been run up over many years
have made it necessary to subsidize the water utility fund operations and debt
service through general property taxes.
• A complete system would provide water even during power outages for a period
of time, whereas individual wells or a system not connected to an elevated tower
do not function during a power outage.
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• We have recently become eligible for State aid funds to help rebuild some of our
roads. It is the City's intent, if City -wide water is desired in the near future, to
use these funds in rebuilding the roadway after watermain placement. Since the
funds can only be used once for the life of the surface on each roadway, it is
important to be careful to not use the funds and then decide to install water five
or ten years from now.
• The City roadway system will definitely be in a state of disrepair during
watermain construction. While it will be a construction priority to keep the
streets open for travel, some inconvenience will be encountered with regard to
mud, potholes, and detours. Public Safety Departments will have to be kept
notified of road status so that Police and Fire Protection can be maintained at all
times.
• A complete system provides for "looping" of the water mains. Looping is simply
a means for providing more than one path for water to reach a specific service.
This will allow continuous service with one portion down for maintenance; allow
supply from two directions during a fire; increase operating pressure by reducing
friction loss; and eliminate stagnant water in dead end pipes.
• It seems inevitable that eventually all buildable property in Shorewood will be
developed, however, the rate at which it gets developed may be influenced by the
availability of municipal water. Recent experience shows that the availability of
water is an important factor in a developer's site selection process and that
developer's are willing to pay for it. Two examples illustrate:
1) Shorewood Oaks - the developer extended approximately .9 miles of trunk
main to serve his project, resulting in water service costs in excess of $6,000
per lot.
2) Near Mountain - approved in the late 70's, the project was started in
Chanhassen because City water was available. The Shorewood portion of the
project did not start until the water issue was resolved for the southeast area.
• The Metropolitan Council is currently investigating water supply issues in the
metropolitan area. According to the Council's water - planning team head, the
Metropolitan Council plans to be more involved in water planning issues in the
future. We should have our own plans completed prior to metropolitan wide
involvement to be sure that our needs are met. It should be noted that there
already is a metropolitan wide sewer system in place in Shorewood.
• A complete system provides a way to more closely monitor our domestic water
use. This would provide data rn what portion of our sewage flow is actually from
domestic use, and help us to pinpoint areas of excessive groundwater infiltration
and surface water inflow into our sanitary sewer system. Ultimately, this would
help us reduce our sanitary sewer rates.
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