The city of Menahga did not qualify for a Minnesota Public Facilities Authority (PFA) grant for constructing a new water tower.

Interim Administrator Betty Thomsen shared the news at a special April 25 meeting.

The city applied for low-interest loans and grants from the Drinking Water Revolving Fund (DWRF), which is administered by PFA.

Thomsen explained that the PFA uses the city’s median household income to determine the project affordability rate for the city. This rate is how much the city can afford to pay toward the water tower expenses, including debt service payments, operating expenses, maintenance, expansions and repairs.

“They figured we can do it through a loan,” Thomsen said. “They determined we can afford it, so there’s no grant money for it.”

In February, the council accepted the low bid of $1,117,500 from Maguire Iron, Inc. of Sioux Falls, S.D. to construct the 100,000-gallon water tower. With engineering fees, the total cost is $1,288,000.

PFA recommended borrowing the full amount at 1.7% interest over 20 years.

Mayor Liz Olson suggested paying as much as possible directly from city funds in order to keep loan payments small.

The Wadena County Board recently granted $231,250 in American Rescue Plan (ARP) funds to Menahga to offset the tower’s cost. The city will also receive $142,285 total in ARP from the U.S. Department of Treasury.

Thomsen said the city can use $300,000 of its money market investments, leaving $614,500 to be borrowed from PFA. Loan payments would be roughly $30,000 annually.

Thomsen said the city could utilize an additional $300,000 of its investments as well.

Council member Durwin Tomperi commented, “Interest rates are going to start going up, so if we can capture that 1.7% right now, that’s cheap money.”

Thomsen later clarified that the loan interest rate is 1.309%.

Olson recommended leaving $300,000 of the investments alone, as yields are expected to rise.

Tomperi agreed, saying, “The money market is liquid enough, you can take that money as you need it or put it back in long-term investments six months from now.”

The council agreed to draft the loan at $614,500, using a combination of ARP funds and investments to pay for the rest of the project.

In related business, Public Works Director Ron Yliniemi is working on getting bids for the sanitary sewer and water main replacement project on Main Street W. from Juniper Avenue to Fir Avenue.

Costs have tripled or even quadrupled, he said, from $30,000 to $120,000.

Yliniemi said some trees within the construction area may need to be removed and affected residents need to be notified.

Olson said if the trees are in the right-of-way, it’s the residents’ responsibility.

“Our water main is so close to the edge, too, that some of the trees planted there are big. They’ll have to be taken out, even if they’re on their property,” Yliniemi explained.

One yard, in particular, has 10 evergreens, he said.

Thomsen said she would investigate the ordinances that govern whether or not the city should pay for the tree removal and what kind of notice is needed.

Yliniemi reported he’ll turn on the water at the city campground on May 9. There are already reservations.

On Monday, the council authorized sending a letter to the Minnesota Department of Health requesting that the city’s proposed utility project be placed on the fiscal year 2023 DWRF project priority list. Council member Art Huebner was absent.

The project calls for replacing the cast-iron water main on First Street SW, Balsam Avenue and Second Street N. with PVC pipe. According to city engineer Brian Hiles of Ulteig Engineers, the estimated cost is $487,700.

“Once we get better weather, we’ll be filling in potholes,” Yliniemi also told the council.