Watertown City Council Tackles Decades-Old Sewer Cost Recoveries, Eyes New Fees to Fund Future Growth
- Steve Jurrens
- 20 minutes ago
- 4 min read
Northeast Radio SD News – Watertown, SD - The Watertown City Council convened tonight for an extensive work session to address a long-standing and complex financial hurdle: the collection of “cost recoveries” for sanitary sewer infrastructure, some of which have been sitting on the books since the 1970s.
The work session—attended by Mayor Holien and Councilmen Allen, Heuer, Jurrens (online), Mohrmann, Peters, and Schutte—was led by City Manager Alan Stager and City Engineer Justin Petersen. The presentation highlighted the logistical challenges of managing historical data and proposed new policies to prevent similar infrastructural backlogs in the future.
Assessments vs. Cost Recoveries
The meeting began with a clear explanation of the difference between “assessments” and “cost recoveries.”
As Engineer Petersen explained to the council, “Both cost recoveries and assessments are used for the city to pay for public infrastructure, whether that’s roadways, curbs, gutters, sanitary sewer, sidewalks, anything like that.” However, a key legal distinction exists. Assessments are a “formalized process guided by South Dakota codified law, and it’s only for properties within city limits.” In contrast, cost recoveries “can be used for projects inside city limits, but also outside city limits.”
Cost recoveries are typically implemented when the city “up-sizes new or existing public infrastructure for future developments or city growth.” Petersen provided a recent local example, noting, “The one that we’ve been dealing with recently was with Dakota Commons. There’s a cost recovery for a sanitary sewer that’s been installed... I’m going to say in the ’80s.”
City Manager Alan Stager provided another scenario to clarify the concept for the council members: “The school district transportation facility outside of the city limits, up in the northeastern part of the city, has a sanitary sewer line running all the way into the city. That would be an example of a cost recovery as property adjacent to that line is annexed in and developed; we would then look to the property owners and seek recovery of those past expenses.”
The Challenge of Historical Data
The core issue facing the city is the sheer age of some of these uncollected cost recoveries and the difficulty in tracking them across decades of changing hands.
“We can’t collect cost recoveries until they are in city limits,” Petersen stated. “Some of these are well over 25 years old. During that time, there’s some landowner turnover, so sometimes the information isn’t passed on to the successors if properties are bought and sold.”
Furthermore, internal record-keeping practices of the past have complicated matters. Petersen noted that the “biggest thing is this information was stored in a paper form.” To modernize the process, this historical data has now been digitized and added to the city’s GIS system, making it transparent and accessible to the public.
Financial Impact and Proposed Write-Offs
During the audit of these historical records, city staff identified approximately $129,000 in existing cost recoveries that are now deemed uncollectible. This includes accounts that are 25 years or older, balances under $2,500, or properties that will likely never be developed, such as city property or designated drainage areas.
Chief Financial Officer Kristen Bobzien clarified the financial impact of writing off this $129,000, ensuring the council that it would not hurt the city’s bottom line:
“When we place these onto the city’s books, they were just done as a balance sheet item, so essentially it’s a receivable and a deferred revenue.” She emphasized, “Any write-off of any of these amounts will not result in a cash write-off at all. This is balance sheet only. Ultimately, it doesn’t have an impact on fund balance or cash at all.”
Despite the proposed write-offs, Petersen confirmed that a significant amount remains available for collection. “There is still $960,000 worth of cost recoveries that we think are available to be collected when they come into the city.” To address these remaining balances, the city plans to send notification letters to affected property owners and file notices with the Register of Deeds to ensure absolute transparency.
Looking Ahead: Funding Future Infrastructure
Looking to the future, City Manager Stager emphasized the need for a sustainable, modernized approach to funding infrastructure for new housing developments to avoid repeating the mistakes of the past.
“Staff’s recommendation is that sanitary sewer is installed by the developer and included as part of the lot costs,” Stager said.
However, he acknowledged the ongoing concerns of developers who argue that high upfront infrastructure costs inherently hinder new housing development.
To find a middle ground, the council reviewed three alternative funding mechanisms currently used by other municipalities, should Watertown decide to front-load infrastructure costs in the future:
· Capacity-Based Fee: A one-time connection fee, likely over $1,000, to “cover future infrastructure improvements, including treatment, lift station up-sizing, and pipe up-sizing.”
· Platting Fee: A per-acre fee, also potentially exceeding $1,000 per acre, assessed when raw land is officially platted.
· Front-Footage Assessment: An annual fee paid through property taxes, ranging from “50 cents per linear foot to... $2.50 per linear foot.”
This option raised council discussions about whether it would apply only to new properties or to all properties across the city to fund broad infrastructure maintenance and replacement.
City Manager Stager urged the mayor and councilmen to consider these options carefully as they plan for the city’s expansion. “We do have opportunities to make this better,” Stager concluded. “All of them carry with them some funding magic that we need to do, but that’s what we go to work to do every day.”
While no final decisions were made during the work session, the in-depth discussion sets the stage for what needs to be brought to the council in a regular meeting to be discussed and voted on.
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