Expecting growth, New Prague stretched itself thin in ordering a costly new power plant. The state agreed to refinance the loan to give the city some breathing room.
The city of New Prague’s new waste treatment facility came at a tough time for the small town. Many cities invested millions in new plants as exurban growth neared its peak but later crashed, and some have sought refinancing since.
The "severe financial hardship" caused by New Prague's investment in a costly new sewer plant just as its growth was about to tank is reason enough to refinance its loan, a state agency has decided.
A few t's remain to be crossed before the deal is final. But the move marks a key turning point in a prolonged process that started with a jolt of environmental idealism: A small town would bring in seldom-used but state-of-the-art technology.
As it turned out, the timing couldn't have been worse. The housing market collapsed amid a severe jump in gas prices, and exurban communities with long commutes that had seen boom times for years were left exposed.
Here's a backgrounder on the pickle in which the city found itself, and the solution:
Boom, then bust
Planning for the new $30 million plant took place as the pace of new building permits was doubling, from 65 housing units in 2001 to 126 in 2005. By the time the loan came through, though, it was 2008, and the number of new units for the entire calendar year had plummeted to just six. The figure was to bump along at about that same low for years to come.
That meant a town of about 7,400 built a plant sized for about 11,000 and expandable to 16,000. That's the size the city was then expected to reach by 2030, but today even 11,000 seems ambitious.
The city had chosen a pricey option, but an admirable one. The technology was imported from Europe and has been adopted by jurisdictions with strong environmental ethics: The college towns of Northfield and St. Peter, and the casino-rich Shakopee tribe.
The tribe on its website, for instance, boasts of multiple engineering and environmental awards for its use of the technology, which extracts from wastewater things like pharmaceutical residues that are becoming better understood as worrisome pollutants.
Engineers Bolton & Menk report that when, in late 2007, state legislators wanted to tour the best of the best, the state's Pollution Control Agency recommended St. Peter's and the tribe's as "the top facilities in the state."
The tribe reports that fewer than a dozen places in America have imported the technology, adding: "In Europe land is at a premium and water quality standards are very high. In essence, millions of tiny Styrofoam beads provide a home for bacteria which eat suspended and dissolved solids in the wastewater."
A rising price
As the economy sagged, however, the additional households that had been expected to come along and help share the cost didn't materialize.
By August 2012, Mayor Charles Nickolay was writing to the state's Public Facilities Authority, which issued a low-interest loan for the project, to report that revenue had been "drastically" reduced from projected levels, with rate increases "much higher than originally anticipated."
Among the details:
• Hookup revenues, which had peaked at more than $1 million in 2006, had sunk to just $72,000 by 2010.
• The average residential bill for water and sewer -- tending to be higher in small towns to begin with -- had ballooned to more than $1,000 a year.
• The wastewater rate per 1,000 gallons, which had stood for years at just over $3 a month, was heading for more than $13 a month by 2013.
The facilities authority, an obscure state agency that has dished out hundreds of millions in loans to similar communities, has agreed to restructure the loan to 30 years rather than 20. The result is not to drop rates. They keep rising, but more slowly: after a couple more big bumps, 3.6 percent every other year.
"The changes won't have a direct effect until the next principal payment is due, which is August 2013," said Jeff Freeman, public facilities authority executive director.
David Peterson • 952-746-3285