East Bethel is one step closer to creating a total municipal water system, with an eye toward development in part of the largely rural northern suburb.

Last month, the city got the OK to sell $11.46 million in bonds to build a municipal water system to augment the network of private wells that now provide water to residents and businesses. Next, officials will seek $6.5 million in bonding authority from the state to hook users up to a planned wastewater treatment system that the Metropolitan Council would run.

Construction on both phases of the project -- several wells, a water-treatment facility, a water tower and supply lines on one end, and wastewater trunk and interceptor lines on the other -- is expected to start early next year, keeping the city on track for completion of the project in 2012. The Met Council is investing $30 million in the wastewater infrastructure, which is planned for a site near 184th Avenue and Hwy. 65.

East Bethel officials have viewed the total water system as a tool to drive development. Adding municipal water and sewers would allow for new commercial and residential development along Hwy. 65, as the regional economy recovers from recession.

In 2006 and 2007, the city worked with the Met Council to amend its comprehensive plan, changing the city's designation from rural to rural-growth.

The area that will be served by the municipal water and sewer system is bounded by 181st Avenue NE. on the south and Viking Boulevard on the north, and extends three-fourths of a mile on either side of Hwy. 65. Planned additional development is meant to accommodate population growth to about 23,500, which the Met Council has projected by 2030. The city's population now is just more than 12,000.

Focused higher-density development along Hwy. 65 also would allow 55 to 60 percent of the city to remain rural.

Connection and user fees will provide revenue to run both the supply and waste side of the system, and to repay the bonds.

The city hopes the system will lead to development, growth and expansion of the community's tax base, said City Administrator Doug Sell.

"Water and sewer are integral parts of the growth and development plan," he said. "Rather than having private wells and individual sewage treatment systems, we'll provide a municipal system with water and waste treatment."

The city's authority to sell the federal bonds, which came from the U.S. Treasury via Anoka County and the state, comes with an interest rate structure that will save the city $1.2 million over the 20-year life of the loan, compared with a conventional nontaxable bond.

Nationally, the American Recovery and Reinvestment Act of 2009 provided for $10 billion in special bonding authority through the Recovery Zone Economic Development Bond program.

Maria Elena Baca • 612-673-4409