Minnesota Cities Magazine
More from Mar-Apr 2018 issue

Focus on Small Cities: Managing the Unmanageable—The Story of a Small City’s Creative Problem-Solving

By Tad Simons

Mayor John Grutsch decided
to run for mayor after learning
about Avon’s new $8 million
wastewater treatment plant.Back in 2001, the state required the City of Avon to build a larger wastewater treatment plant. It ended up being a much larger facility than the city needed, and they’ve been paying for it ever since.

But with good governance and creative thinking, leaders have managed the seemingly unmanageable and maintained a strong community through it all.

The city’s current mayor, John Grutsch, remembers how he found out about the new facility. At the time, he ran the local laundromat and was enjoying life as a small-business owner in his home city of 1,100, located amid a necklace of lakes 15 minutes away from St. Cloud.

Then one day he received a notice that his business was going to be assessed $75,000 to help pay for the city’s new wastewater treatment facility.

“That’s when I decided to run for mayor,” says Grutsch, who was worried the large assessment would put him out of business.

It all started when the Minnesota Pollution Control Agency (MPCA) told Avon that its existing waste stabilization pond was operating beyond capacity and could no longer meet the permitted “seepage limit” of 500 gallons per acre per day. To meet the state’s regulatory requirements and accommodate future growth in the area, the state had determined that Avon needed to build a state-of-the-art Class A mechanical wastewater treatment plant.

The price tag: $8 million.

Overestimated growth
According to the official project proposal, created by the MPCA in partnership with the Avon City Council, “The purpose of the proposed expansion is to provide the necessary hydraulic and organic treatment capacity for the 20-year planning period and for a projected population of 4,400.”

That number—4,400—was the problem, says Grutsch. “They projected an amount of growth that never happened, and saddled us with a facility that is way more expensive than we can afford, and has four times more capacity than we need.”

Grutsch wasn’t the only person upset. Other business owners got hit with equally onerous assessments, and individual residents were assessed $9,000-$10,000. Community meetings were filled with angry residents voicing their dismay.

But because Avon is considered a relatively wealthy community (with a current median household income of $82,478), there wasn’t much in the way of grants or aid available to soften the blow. The city and its residents had no choice but to figure out a way to make the deal work.

A lesson for others
Avon’s experience is an object lesson in where a wrong turn on the road of good intentions can lead. In 2001, the City Council was presented with both an ultimatum to upgrade its wastewater treatment plant, and growth projections that seemed reasonable at the time, given that Avon is on the I-94 corridor and growth projections for just about everything at that time were overly optimistic.

Mayor Grutsch and City Administrator
Jodi Austing-Traut meet weekly at Avon
City Hall. Both have worked diligently
to find ways to pay for an $8 million
wastewater treatment plant.“They wanted to do the right thing,” says Grutsch, “But nobody asked the question: What if this growth doesn’t happen?”

It didn’t. Avon’s current population is about 1,500, only 400 more than it was in 2001. Current state projections estimate that its population in 2025 will be about 2,000, less than half the expected 4,400 predicted in 2001.

Having committed to the wastewater project, however, the city had to find ways to meet its fiscal obligations without sacrificing essential government services and functions. Today, Avon isn’t completely out of the woods, but it has spent the past decade doing a delicate fiscal dance to stay solvent.

Hard work and ingenuity
Avon’s civic leaders can look ahead today with a sense of optimism, which is a testament to their hard work and ingenuity in the face of seemingly insurmountable challenges.

For years, Avon got through each budget year by “cutting everything that can be cut,” says Grutsch. Road repairs and other infrastructure maintenance were deferred. The local fire station is so old and small that new trucks have to be retrofitted just to get them inside.

Avon also has residents who are committed to making the community the best it can be. For example, Avon’s parks remain beautiful because a citizen has made generous donations to keep them pristine.

These sacrifices alone would not have been sufficient to get the city through these challenging times, however. Strong leadership, persistence, and smart decisions were also necessary.

To begin with, the city partnered with the Minnesota Public Finance Authority (PFA), which offered Avon a loan for the full amount of the wastewater treatment plant project at the low interest rate of 2 percent. The city later refinanced down to 1 percent with a longer repayment schedule, which provided some additional relief.

“Things calmed down for a bit as the city struggled to get through the first of those large bond payments,” says Avon City Clerk Jodi Austing-Traut. “During this time, the city partnered with the Initiative Foundation to walk through the Healthy Communities Partnership program to bring unity back to the city and to develop a shared vision for Avon’s growth and development.”

Growing the city’s population was indeed critical to generate the tax revenue necessary to service the loan and maintain the new plant. Leaders realized that annexation was likely the only way it would achieve that growth.

They had been looking at an ambitious plan to develop 300 acres of land in Avon Township, which surrounds Avon. And they decided to begin the long process of developing a joint powers board and joint orderly annexation agreement with Avon Township.

The annexation process took two years and cost the city an additional $6.5 million. But the investment was deemed necessary to boost the city’s revenue over the long term.

The City of Avon is working to develop the land at
Avon Estates and, so far, 35 homes, an apartment
building, and an assisted living facility have been
built there.Additional setbacks
As soon as the city finalized the annexation agreement, private developers went to work. Plots were laid out, utility hookups installed, and the plan to build 500 new homes was ready to begin in earnest. Everything was going according to plan. Then the housing market collapsed, and so did the plan.

It was 2008, and all nine of the developers involved eventually pulled out of the project. When the last of them bailed, only one house had been built on the 300 acres that had been dubbed “Avon Estates.”

Around that time, John Grutsch was elected mayor, so the problems associated with the wastewater plant were now his to solve. Now the city was on the hook for an $8 million wastewater treatment facility, plus the $6.5 million for the Avon Estates parcel.

There was another miscalculation as well. Hundreds of homes in Avon sit on lakefront property, almost all of which have their own septic systems. It was assumed that once a state-of-the-art water treatment facility was available to them, lakeside homeowners would naturally want to hook up to it, but that was not the case.

The city took steps to encourage lakeside homes to voluntarily hook up to the city system, says Grutsch. “None of them wanted to do it.”

Creative strategy
Still, Avon leaders continued to look for new sources of revenue. The Avon Estates parcel was just sitting there vacant, so the city took the rather bold step of buying back the land from the bank and developing the lots itself. The city also worked with Stearns County to place the land in a tax increment financing district while the lots are being developed.

“The investment hasn’t paid off yet,” says Austing-Traut, “but we believe it will eventually.”

Thirty-five homes have been built since the land was repurchased, as well as a 24-unit apartment complex and a 22-unit assisted living facility. These new homes mean additional tax revenue, and the city is working to sell more lots.

The city has spent most of the last 17 years “dealing with the stranglehold that plant has on this community,” Grutsch says. Yet he and the rest of Avon’s leaders continue to find ways to manage the situation.

In addition to the Avon Estates project, the city is considering an ordinance mandating that homes with access to the city sewer system hook up to it. More refinancing options are also being considered.

And for other small cities that may face a similar decision, Grutsch has this advice: “I’d tell them to make sure their growth predictions are accurate, and to get at least three different engineers to weigh in on what sort of facility they really need.

“It’s been hard,” says Grutsch, who will retire as mayor later this year. But he and the rest of Avon aren’t looking back anymore; they’re looking forward and feel they’ve laid the groundwork that will keep Avon thriving.

Tad Simons is a freelance writer from St. Paul.

Read the Mar-Apr 2018 issue of Minnesota Cities magazine

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