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Lake Elmo considers using stormwater revenues for street-related work, staff proposes 8% rate increase
Summary
Council discussed whether stormwater funds can be used for street-related stormwater improvements, heard staff recommend an 8% rate increase and debated financing options (utility fees, bonds, equity for nonprofits and phased rate changes); full utility study and rate proposal will be presented next week.
Council members spent an extended period reviewing the stormwater utility's finances and options for funding stormwater improvements tied to street projects.
Director Hannah (staff) summarized the fee history: "The stormwater fee started at $20 in 2004. It, was up to $95 for '25, 2025. Our recommendation... is an 8% increase," she said, adding staff view the increase as a step toward expense recovery over time.
The conversation turned to financing structure. A council member argued the city should set up the stormwater utility so "everyone that contributes to stormwater pays their share," and urged paying for stormwater capital with the stormwater utility (debt and rates) rather than by placing costs on the tax levy. That speaker also recommended phasing rate increases and identifying minimum cash targets for the stormwater fund.
Staff noted the AUAR and other CIP items affect timing and that, under the current CIP, available revenue sufficiency to transfer money from the stormwater fund likely will not occur until closer to 2030 unless CIP spending changes. Council members discussed trade-offs: borrowing from other enterprise funds would preserve cash but could reduce fund balances and affect credit ratings; issuing bonds would preserve enterprise fund balances but requires the utility to provide the revenue pledge.
Director Hannah said the full utility study and proposed rate for this year will be included in the next packet and that staff can model alternative debt/cash mixes for council review. The council asked staff to return with scenarios that show phased rate increases, debt options, and the equity implications for nonprofit properties.
Next steps: staff to present the complete utility study and rate proposal to council next week and to include modeling of debt versus cash funding options and recommended changes to fee structure and ordinance language where needed.
