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Public service commission OKs Elkhorn water utility projects

MADISON — The Wisconsin Public Service Commission this week gave the city of Elkhorn approval to construct $10.2 million in water utility projects, now the projects need approval from the city council.

"Yes, it's kind of backwards," city Finance Director Mary Hinske acknowledged in obtaining state approval before the council committed to spending the money.

The city has been considering replacing the 1895-era Centralia Treatment Plant since 1998. In 2009, the council and Public Service Commission approved drilling two wells and building a new plant and water reservoir, but construction didn't begin within the two years the PSC required.

The city renewed its construction request for the wells, plant and reservoir this summer. The PSC again approved, finding the projects necessary to provide adequate and reliable service for the water utility's 4,318 customers.

The city has conditionally awarded bids to drill two new wells but must commit to spending $800,000 from cash reserves and borrowing about $1.2 million to fund the project, Hinske said.

Next week the city finance committee could recommend the council approve funding for the wells, leaving open a bigger decision on the $7 million new treatment plant, she said.

"It's an expensive project, and we have a split council on when to fund it," she said.

The city could obtain a low-cost loan from the state to construct a new plant and reservoir, which could be delayed until 2015 or 2016, she said.

The two wells could be drilled this year or next and be connected to the new plant when it's built. Wells that supply the treatment plant on Centralia Street aren't expected to produce enough water by 2016 to meet state Department of Natural Resources standards, City Administrator Sam Tapson said this summer.

Public Service Commission staff estimated that funding the $10.2 million project would take a 46 percent increase in water rates. Hinske hopes rates won't have to increase that much because well construction can be financed through 3 percent increases next year and in 2014.