Cities ask state to free up funds for water projects.

Byline: Brian Johnson

Nearly $60 million worth of state funding for municipal wastewater projects is stuck in the mud because of a lawsuit that challenges the constitutionality of using money from the state's Environment and Natural Resources Trust fund for such projects.

Now, the Minnesota Public Facilities Authority and other stakeholders are urging the Legislature to change the source of funding to free up the money, a move that would allow cities to begin bidding out their projects. Affected projects range from replacing worn-out pipes to making water treatment plants compliant with the latest regulatory requirements.

Jeff Freeman, executive director of the PFA, said cities like Marshall, Little Falls, Silver Bay and Columbia Heights have spent a significant amount of money to get their projects ready for bidding. But they can't proceed without the state money, he said.

"For smaller communities, the financing challenges are even more significant," Freeman said in an interview. "They really need additional help because they have fewer users to spread the cost over. So it gets very expensive for small communities to maintain their wastewater infrastructure."

The House Capital Investment Committee took a step toward creating a fix this week, when it approved a bill that would authorize the sale of general obligation bonds for the projects instead of "appropriation bonds" payable from the Environment and Natural Resources Trust fund.

The bill, House File 80, was referred to the House Ways and Means Committee and is awaiting action in the Senate. It would allow the PFA to release $59 million worth of previously approved funding.

In all, it would free up more than $102 million awarded to the Minnesota Department of Natural Resources, the Minnesota Pollution Control Agency, the Board of Water and Soil Resources and the Metropolitan Council.

Appropriation bonds for those agencies were scheduled to be sold last fall. But before the bonds were sold, a lawsuit filed by environmental groups challenged the sale, claiming it was an illegal use of money from the Environment and Natural Resources Trust fund.

That left the funding in limbo because the bonds can't be sold while there's "litigation pending related to them," according to the nonpartisan House Research Department. "And in general, bonds are not sold while the Legislature is in session."

Like other Minnesota communities, the city of Marshall relies on grants and low-interest loans from the...