The Shakopee Public Utilities Commission estimated the water capacity charge for the recently approved splash pad at Lions Park would be $211,000 — a price tag that left City Administrator Bill Reynolds scratching his head.
Reynolds couldn’t believe the water capacity charge for the Lions club, which will have an area the size of a small putting green and will operate for three months out of the year, was more than $200,000.
“Once again,” Reynolds said, “someone has been SPUC’d.”
The managing director for the water division of Landscape Structures, Greg Stoks, has offered his patent-pending hydraulic activator system and equipment worth $50,000 to the Lions Club for a splash pad at Lions Park. It allows children with mental and/or physical disabilities an accessible area to play. The city would just have to cover water usage costs.
But the Lions Club would have to foot the $211,000 water capacity charge, or WCC, which SPUC Utilities Manager John Crooks said helps cover the cost of much-needed additional water capacity in rapidly growing Shakopee: including wells, water towers, water treatment facilities, and more.
Reynolds sent a letter to Crooks on Friday, June 7 outlining his frustration with SPUC’s “stunning” water capacity charges, which have also slowed movements with prospective small business owners looking to plant their locations in Shakopee, including Willy McCoy’s restaurant.
The splash pad will use 10,000 gallons of water per day in the summer: the equivalent of the water usage in 35 to 40 homes.
“That’s a significant water usage,” Crooks said.
Reynolds said the Lions Club will look for a way to lower the $211,000 water fee, but if they can’t find one, plans for the splash pad could be scuttled.
‘They’ve been SPUC’d’
Unlike other cities in Minnesota, SPUC is a separate entity from the city. A voter referendum in the 1950s moved Shakopee’s water utilities outside the city’s umbrella to an “external cooperation” because voters wanted to make sure electricity and water bills weren’t influenced by politics. The Shakopee City Council appoints SPUC commissioners to oversee SPUC.
To determine water capacity charges, SPUC uses an outside consultant that looks at all the future charges in Shakopee, taking into account parking areas, zoning, and water usage projections, all the way to the ultimate build-out of the city.
Since 2007, the water capacity charge has risen from $2,846 to $6,039 per unit.
That charge is adjusted annually based on what the cost of construction will be, Crooks said. So if the cost of construction goes up 3 percent, the water capacity charge will be increased by 3 percent.
Water capacity charges are issued per unit, based on projected water usage. A house is usually charged one unit, while a restaurant — which uses much more water — could be charged for 20 units.
Reynolds said he’s frustrated because SPUC seemed to ignore the advice of its consultant, and raised its rates higher than its consultant recommended. In May 2003, SPUC’s consultant advised it raise its WCC rates from $831 to $854 per unit. SPUC raised it to $1,213.
“What were the reasons for not following the advice of your consultant?” Reynolds asked in his letter.
A few months later, in July, SPUC approved a $2,035 per unit WCC charge to fund additional water towers and water treatment plants.
“Where are these plants in your capital improvement plan?” Reynolds wrote. “Fees have been collected since 2003 with no apparent planning.”
In 2007, fees for water trunk charges and water capacity charges were increased 12 percent higher than the construction cost index because SPUC said “actual material and labor costs have escalated significantly above and beyond the amount indicated by the CCI.”
Shakopee’s got water problems
Crooks said there are a number of reasons why Shakopee’s water capacity charge seems high. Because of the city’s proximity to the Minnesota River, SPUC is limited in where it can put its water facilities.
“We have to stay a step ahead of development knowing the pace of development in Shakopee,” Crooks said, noting that SPUC doesn’t want to have to make prospective developers wait to build until additional water systems have been put in place to accommodate the addition.
Councilman Matt Lehman isn’t bothered by what people like Reynolds consider “simply stunning” prices.
“Shakopee’s water and electrical rates are comparable or less than competitors,” Lehman said. “The issue is development fees. They have to plan out the future infrastructure to serve lands. When Shakopee decides to increase its density, wells and everything else have to be supersized to supply its demands.”
Crooks also said he doesn’t believe Shakopee’s water capacity charge is anything out of the ordinary when compared to other cities of its size.
“There are similar surrounding cities that have costs similar to us,” Crooks said. “Chanhassen’s prices are also high.”
The water capacity charge is $6,039 per unit in Shakopee. In Chanhassen, the fee is $5,210, plus a $2,233 charge for water hookup. Chaska charges $4,230 per unit.
Other cities, such as Bloomington, don’t have a water capacity charge because they buy their water from the city of Minneapolis, which also means they don’t need to install water treatment facilities. In those cities, the water usage fee is typically higher, Shakopee Director of Planning and Development Michael Kerski said.
In the Minnesota River bottoms, bedrock comes right up to the ground, so drilling wells into bedrock is expensive, Crooks said.
He also said most developers he’s worked with understand the issue, so SPUC hasn’t received many complaints. Bloomington, for example, is very built out, so the city doesn’t need to set aside funding for future water facilities.
“We’re unable to drill wells in certain parts of the cities,” he said. “Anything east of County Road 83, we can’t drill wells. So we have to drill in other parts of the city and then move water around.”
Wells also cannot be drilled on Shakopee Mdewakanton Sioux Community-owned land.
Who should pay for the pie?
Kerski isn’t convinced that difficult topography and a growing city should lead to $6,000-per-unit water access fees. He’s the person who has to tell business owners and developers the water capacity prices they’re going to have to cough up before they can build.
“They usually just look at me and say, ‘You’re joking, right?’” Kerski said.
Kerski recognized Shakopee’s topography isn’t ideal, and that it’s a growing city. But he said he’s wondering where the money from major development projects goes. Kerski said Evan Doran was charged $1.9 million in water access fees for the Doran Apartments, part of the Canterbury Commons project. And he said D.R. Horton, with Windermere Townhomes, paid between $5 and $8 million in access fees.
“(Developers) are paying for the entire region’s facilities,” Kerski said.
Building a new water tower in Shakopee will cost between $9 and $14 million, not including the five acres of land needed to build, Crooks said. That’s because SPUC would most likely need to add a well and pump house, plus a treatment plant if there are water quality concerns. Crooks said SPUC is in the process of purchasing land for a new water tower.
Crooks said new developers, not everyone else, should pay for the city’s new water towers, treatment plants and wells.
“They pay for their fair share of the water system,” he said, adding that it wouldn’t be fair for a restaurant like Muddy Cow to have to pay an extra water capacity cost in order to facilitate the addition of a new restaurant in the area.
Kerski disagrees. He compared water capacity fees to power lines, saying the model should be similar for water towers, wells, water storage tanks and water treatment facilities.
“When Xcel puts in a new line, everyone in the area shares the cost, because everyone benefits from the additional capacity,” Kerski said.
As far as the Lions Park splash pad goes, Crooks said the $211,000 water capacity charge is just an estimate.
“We believe it’s still preliminary as far as the charge for the splash pad,” Crooks said. “We’re trying to offer solutions to mitigate what that cost would be. Based on our policy, ($211,000) is the potential for the water connection charge. Then there’s also a charge for water.”
The Lions Club has not yet responded to a request for comment.