Exurbs seek relief after sewer facilities built for growth come up short

Wash your hands in Elko New Market and the water that rushes down the drain snakes through miles of farmland at the edge of the metro area in a large pipe built for a boomtown.

But the boom stopped too early — halting development meant to pay for the pipe — and water users across the Twin Cities may end up footing part of the bill.

An idea hatched by the Metropolitan Council 15 years ago to rein in sprawl by offering wastewater service to rural mini-cities hasn't panned out as expected. The agency spent upward of $40 million building the sewer pipe for Elko New Market and a wastewater plant in East Bethel but growth has so far fallen short of aggressive projections, leaving those edge communities stuck with projects they can't afford.

The projects, which the cities requested, came with special requirements to repay the Met Council. Faced with financial doom from the mounting debt, East Bethel won a reprieve last year covered by regional ratepayers. Elko New Market is now preparing to make a similar request to cap its debt at $1.2 million instead of watching it rise to $10.7 million or more.

"The whole structure of the agreement was based at a different place and a different time … that did not anticipate the recession and what the world looked like following the recession," said Elko New Market City Administrator Tom Terry.

The situation illustrates the complexities of planning long-term infrastructure for an evolving region, while raising questions about taming sprawl and the future demand for suburban-style homes carved into cropland 30 miles from Minneapolis.

The Met Council's large wastewater pipes, known as interceptors, shape and respond to development patterns. The area they serve — boundaries monitored closely by cities, builders and anti-sprawl advocates — traditionally grew outward in concentric circles. That changed with a proposal in the waning days of the Jesse Ventura administration to offer service to small cities in otherwise rural areas.

It was a controversial idea. Lakeville sued to block Elko New Market's pipe when it was proposed in 2002. The city administrator warned a legislative committee that it would encourage sprawl and put added burdens on schools and the transportation system.

"It just seemed really outside of what the plan was and the rules that everybody else had to follow about orderly development," said Dakota County Commissioner Mary Liz Holberg, then a state representative.

At the time, Elko and New Market were two separate towns off Interstate 35 south of the Twin Cities, watching rapid growth strain a local water treatment system that drained into the Vermillion River. Their population grew from 804 in 2000 to more than 3,700 in 2007, the year the two towns merged. The Met Council forecast in 2004 that Elko New Market's population would reach 13,000 by 2020 and 20,800 by 2030 — making it about the size of Northfield.

Then, in 2008, the growth dried up. Houses were expected to surround a new elementary school built amid farm fields, but today intersections on the new road there turn into open land.

The wastewater pipe went online in 2011. Planners expected revenue from 840 new hookups by now. There have been 178.

Even assuming growth ratchets up slightly, a consultant projected that Elko New Market's debt to the Met Council could swell to $10.7 million and tank the city's credit rating. A proposal expected to reach the Met Council this spring caps the debt, while still paying the Met Council for development that does occur. It would also freeze a rising hookup surcharge in the future. The council estimates the proposal amounts to an extra 43 cents a year until 2030 for each of the region's ratepayers.

"This seems like the Met Council actually doing something good for cities," Elko New Market City Council Member Josh Berg said during a presentation this month.

In East Bethel, the Met Council capped the city's debt for its wastewater facilities at $2 million after lackluster growth. It could have risen to $28 million if the city's growth stopped altogether.

Still, City Administrator Jack Davis said growth would have leapfrogged outside the seven-county metro area to the north had East Bethel remained completely rural. When growth does pick up, he said, the utilities will encourage more density.

"We're a piece of geography that's bound for development at some time," Davis said.

The council's latest regional plan says it will solicit feedback from the region's ratepayers before pursuing another rural city wastewater project.

Former Met Council Chairman Ted Mondale, who led the body when the change was made, said the policy was intended to invest in more compact areas to combat the spread of developments with 2.5-acre lots. Those houses are generally derided by regional growth experts, since they rely on septic tanks at risk of failing but are too costly to serve with sewers.

"The metro area's growing and there's a need for affordable housing," Mondale said. "I obviously have no expertise on what size the [Elko New Market] pipe should be — and it sounds like it was too big — but sooner or later that's going to pay dividends."

But the council brought sewer service to rural cities without doing enough to halt that unsustainable — and often cheaper — development around them, said Myron Orfield, a University of Minnesota professor and former state senator who researches Twin Cities regional planning.

"They provided these really expensive sewer pipes to rural growth centers and the growth never occurred," Orfield said. "And one of the reasons the growth never occurred is because people just continued to build on septics where [the Met Council] blessed it."

The Met Council has guidelines for new housing developments in rural areas, but local planning assistance manager Lisa Barajas said the agency's ability to curb large-lot development is limited.

Met Council Member Wendy Wulff, who represents the south metro, said the Elko New Market situation was unique because the old wastewater system there was becoming a hazard to the Vermillion River, a designated trout stream.

"The council, I think, did the best it could with the information that it had available at that time," Wulff said. "And now we're dealing with the aftermath of the recession and changing development patterns."