ESCANABA — The mood in Escanaba’s City Council Chambers was somber Thursday, as the council voted to set the stage for significant annual rate increases over the next 30 years to fund water projects.

“You’re going to have to be committed to understanding that rate increases will have to come to get this project done, and it also requires concessions from Jeff (Lampi, water superintendent) on other capital projects that he intends to do,” City Controller Melissa Becotte told the council. “It has to come from — both sides have to agree to this, because we can’t do the project and follow all of the capital projects that Jeff has in the works and get it all done. We just can’t do it.”

Thursday’s special meeting was set because bids for upgrades at the water treatment plant came in 70% higher than the engineer’s opinion of costs had originally placed the project, primarily due to inflationary pressures on materials and labor. The lowest bid, from Staab Construction of Marshfield, Wis. came in at $9,783,000, which, with a 10% contingency, brings the total costs of the upgrades to $10,559,950 — roughly $4.2 million more than the city had found funding to support through Community Development Block Grants, the State Revolving Loan Fund, and loan forgiveness programs.

Some of the upgrades included in the project, which was split into two simultaneous projects for funding reasons, are essential, according to city staff. For example, no safety valve was installed on a line running from one of the plant’s treatment tanks under the plant’s parking lot when the line was initially installed in 1952. If the line burst, millions of gallons of treated water could be lost with no way to stop the flow, potentially cutting off water to residents for weeks.

But the water treatment plant isn’t the only financial issue causing what could be as high as an 8% annual increase in both water rates and water meter charges. Two substantial water increases of 45% and 35% were passed only a few years ago to fund a state-mandated replacement of lead service lines across the city. While those rate increases are bringing in the anticipated revenue, the cost of line replacements has rocketed by 250%, with a single replacement now averaging around $16,000.

Facing both issues, the council had few options with regards to the water treatment plant project. They could scrap the treatment plant project entirely, running the risk of catastrophic failures, and focus only on lead service line replacements; they could delay making a decision until next quarter, potentially losing $1.8 million worth of state grant money and facing even higher bids from contractors; or they could approve the project and inform the state by July 6 of the decision, setting the stage significant hikes to fund both the project and line replacements.

Based on the idea that the city would pay for line replacement projects using 60% bond debt — without any reductions due to the use of state revolving loan fund monies, which could reduce rates but are not guaranteed — residents could expect to see an 8% increase in both their water rate and their meter service charge on their water bill annually for the next four years, starting in 2023. In 2028, that would drop to a 5% annual increase until the remainder of the 30 year period is up.

“Really, what this tells us is there’s a path. If you want to do the work, there’s a path,” said City Assessor Jim McNeil.

The calculated projections are based on the idea that expenses will increase by 3.5% annually and that things will largely stay the same in the city, with no major increase in water consumption, no projects forced by regulations, and no other significant capital improvement projects within the water department.

After a lengthy discussion, the council reluctantly voted to approve moving forward with the project by awarding the contact to Staab. Only Council Member Ron Beauchamp voted against the motion.

The council then unanimously approved modifying its bond terms for a portion of the project to extend the repayment terms from 20 years to 30 years. According to Becotte, the extension will help avoid the need for more significant rate increases.

The increases are not set in stone. The council does not have the legal authority to bind the hands of future councils, meaning a new group of council members could scrap the increases entirely. However, any changes to the plan could run the risk of diving the water department into the red.