A rural Anoka County city has persuaded the Metropolitan Council to forgive millions of dollars for a new sewer system designed for future growth that so far has not materialized.

Under the deal, East Bethel’s liability is capped at $2 million on what could have grown to be a $28 million tab by 2040 in a worst-case scenario if no growth occurs, according to city leaders.

Both parties agreed the ambitious growth forecasts in 2010 used to justify the project are unrealistic. Initial projections figured by the city and the regional planning agency indicated the population would more than double from 11,600 in 2010 to 23,500 by 2030.

Revised numbers show that the city actually lost 35 people in the first four years, and a new forecast slashes projections to 15,400 residents by 2030.

“No one stepped forward and said, ‘I burnt the biscuits.’ That wasn’t what we were after,” said City Administrator Jack Davis, who took over the city’s top office after the project was underway. “You cannot place the blame on one sole party. Everyone looked at this with blinders. We are joined at the hip on this. If we fail, Met Council fails. There was mutual recognition there was a common problem.”

Met Council planners believe future growth will eventually pay for some of the project — just on a longer time frame.

“Met Council amended its policy to remedy a difficult situation for the city, and as existing contract provisions allowed,” said spokeswoman Bonnie Kollodge in an e-mail.

In 2010, the East Bethel City Council sought the Met Council’s help to build a wastewater treatment system with the goal of jump-starting growth. The city also issued $18 million in bonds to pay for the sewer collection system and build a water treatment plant and distribution system. Davis said the combined projects cost around $48 million.

The decision by the City Council just after a recession sparked intense debate in the small rural community.

The new facilities, which went on line in 2013, were not designed to serve existing residents but rather to entice new businesses and residents.

New hookup and user fees were to pay for the sewer project over the next three decades — a common arrangement between cities and the Met Council.

Today, only 13 businesses are hooked up to the East Bethel system. Initial estimates envisioned 109 hookups by this time.

The city asked the Met Council for financial help last year. Under the revised agreement, the Met Council would continue to collect new hookup and user fees, but if that didn’t cover the amount owed to the Met Council, the city’s liability is capped.

In addition, the Met Council is writing off $9.5 million the city owes, designating the East Bethel sewer system a “demonstration project” because it uses some new technology. The sewer project discharges treated water across several acres of land to replenish the groundwater, compared with a conventional sewer that dumps treated wastewater into rivers and streams.

The project benefits the entire area, so “its costs are assumed regionally vs. locally,” Kollodge said in an e-mail.

East Bethel Mayor Steven Voss praised the outcome.

“It’s certainly a good deal financially for the city. The potential savings is between $20 [million] and $30 million,” Voss said. “The city and Met Council were able to work together to develop a more realistic and reasonable contract through the amendment that recognized that when the original plans were made, we were in a much different world.”

A misread future

East Bethel’s water and sewer projects were first conceived around 2004, when the housing market was hot and suburban growth seemed a given.

East Bethel was 48 square miles of mostly undeveloped fields and wetlands 28 miles due north of Minneapolis.

A 2006 outside analysis for market potential envisioned a new city center, a “commercial and civic heart of the community” rising from the fields along Hwy. 65 with shopping, houses and condos.

There was anticipation they could be the next northern boomtown — akin to Blaine, which added sewers in the 1980s and experienced explosive growth.

Then came 2008 and the Great Recession. Housing permits, which had peaked at 126 in 2004, dropped to six in 2008.

The Met Council worked to help the city achieve its lofty growth goals, Kollodge said. But council planners questioned some of the city’s initial growth projections before the project was started and insisted the city slash its 2030 population forecasts from 35,500 to 23,500.

Voss, who voted for the sewer project in 2010, said he still believes that long-term planning will fuel growth and prosperity for the city.

“It’s not a question of, ‘Will it happen?’ It’s going to happen,” Voss said. “It will happen in a way that will make our community stronger in the long run.”