Mrs. Gerry’s Kitchen Inc. needs to expand and hopes to expand in Albert Lea, but has been considering Lake Mills, Iowa, because the company has concerns over Albert Lea’s sewer rates.

There are possible other factors, too, but the issue has prompted talk among Albert Lea’s decision-makers about the sewer rates. The Albert Lea City Council will address the issue on Monday.

“This is really about being competitive for companies wanting to expand or companies wanting to come into town,” said Dan Dorman, executive director of the Albert Lea Economic Development Agency.

Dorman is hoping the city won’t increase sewer rates for industry in the coming year.

Dorman said it is his job to sell Albert Lea to companies but it can be difficult if factors such as property taxes and sewer rates are higher than neighboring communities. He has shared his research on sewer rates with members of the Albert Lea Port Authority board and City Council. For wet industries — companies such as Mrs. Gerry’s and Schweigert Foods that use a lot of water — it can be difficult to come to Albert Lea, he said.

Albert Lea in 2007 reported a $326,728 gain in its sewer fund, even with depreciation subtracted out. City officials had projected a loss of $180,000. City officials then decided to increase sewer rates for 2008 by 3 percent.

“The city can afford to lower rates,” Dorman said. “We really shouldn’t use the sewer as a profit center.”

City officials raised sewer rates by 20 percent for 2004, 15 percent for 2006 and 20 percent for 2007. City officials use a five-year cash flow forecast, which he said looks at homeowners. Dorman charged that city officials fail to include industrial users in making sewer projections.

For July 2008. What Mrs. Gerry’s would pay elsewhere in Minn.

Albert Lea $43,664

Owatonna $21,346

Faribault $35,399

Rochester $25,932

Mankato $26,367

— Figures from

Albert Lea Economic Development Agency

“I told them I think their forecast is off,” he said.

Albert Lea City Manager Victoria Simonsen disagrees with Dorman on many points.

She said having a plus-side year in 2007 after five years of losses, some half-million-dollar losses, is not a city trying to make a profit. She said the initial rate hike came after the plant for the largest user — Farmland Foods — burned down. The sewer plant was built in 1982 to accommodate the company’s meatpacking plant, pig barns and killing facility. It burned in 2001.

The city was left with a wastewater treatment plant with half of its capacity unused.

“There’s no way to run half a plant,” Simonsen said.

The 15 percent hike for 2006 came because the city continued to correct for the loss, she said, and the 20 percent jump for 2007 was for needed repairs and equipment. She said the 3 percent hike for this year was the city hoping to maintain a regular increase, with less volatility. The city is considering a 3 percent increase for 2009 and 2 percent increases in 2010 and 2011. She said there is even consideration for no increase in 2011 because that is the year the bonded indebtedness on the plant is paid off.

She said the 3 percent increase will help build up funds so some of the older sewer lines, such as beneath downtown, can be replaced without the city incurring debt. She added it is easier for businesses to budget for small increases and decrease than large ones.

The City Council on Monday will consider whether to keep the 3 percent increase for industry to start in February 2009 or find a new figure after considering economic development reasons.

Simonsen said the city’s forecasts for sewer rates take into consideration state Department of Natural Resources requirements (after treatment, Albert Lea empties its cleaned-up waste into the Shell Rock River), comparability to other cities, equity and impact among the customer base, and one other factor — which Dorman and Simonsen disagree on.

Whether the state requires the city’s sewer operation to pay for itself.

Simonsen presented a letter from the Minnesota Auditor’s Office telling the city it should not use general-fund money to pay for sewer operations.

Dorman said it is only a suggestion and said other cities — he pointed to Minneapolis — supplement the sewer expenses with general-fund dollars. He also said Albert Lea used to do it under former City Manager Paul Sparks. He asked, if the sewer operations pay for itself, then why have it in the hands of government and instead turn it over to a private enterprise?

“Enterprise funds should pay for themselves,” Simonsen said. “I’m going to run it the way the state auditor suggests we run it.”

Dorman took Mrs. Gerry’s sewer use for July 2008 and compared the same amount of use for sewer rates from July 2002. He discovered a 70 percent increase in cost.

Dorman also compared Mrs. Gerry’s sewer use for July 2008 to rates in other cities. The company paid 104 percent more than it would in Owatonna, 23 percent more than it would in Faribault, 68 percent more than it would in Rochester and 65 percent more than it would in Mankato.

“I’m telling the city, ‘You need to do something dramatic because we are out of the ballpark’,” he said.

Simonsen said comparisons change from year to year. Some years Albert Lea is high. In some, it is low. She said from a capacity standpoint, Albert Lea is attractive, while other cities of similar size are not. She also said Dorman’s figures fail to include a phosphorus surcharge, which are billed in some cities but not Albert Lea.

City Engineer Steve Jahnke spoke with some communities and produced a City Hall memorandum. It says Owatonna has only a single wet industry, and it only discharges in the winter months. In addition, the city lacks capacity and will go through an expansion in coming years, which will result in increased sewer rates, the memo states.

Faribault, Jahnke’s memo says, is going through a $28 million plant expansion, and when a study comes in this fall, city leaders expect a hike in rates and the start of a phosphorus surcharge.

It says Rochester has been able to keep rates low with high fees to residents and companies that move to town, one benefit of rapid growth. Rochester also has a phosphorus surcharge. The memo says Mankato has a large plant and a large industrial base, with lower fees than Albert Lea now and in the future.

User 12 months 12 months

@ present @ proposed % annual

rates rates increase increase

Mrs. Gerry’s $356,076 366,676 2.98 $10,600

Schweigert 294,520 306,026 3.91 11,506

Exol 105,522 109,718 3.98 4,196

Ventura Foods 46,865 48,528 3.55 4,349

Merrick’s Inc. 42,441 43,432 2.33 991

Select Foods 40,105 40,968 2.15 863

SoyMor 16,498 16,865 2.22 366

— Figures from Albert Lea City Hall

Dorman said Sparks used to offset the cost of utility repair with general funds and now that burden has been moved to heavy water uses. He argued that it isn’t going to come from the general fund, it should be a burden spread over all uses through the fixed rates on the sewer bill, not the rates based on flow. This, he said, would make Albert Lea more attractive to wet industries.

Dorman said, the tax structure is set up so that the remaining wet industries bear the burden of a large treatment plant.

“If we lose the largest sewer customer, that’s not the fault of the second biggest sewer customer,” Dorman said.

Simonsen said the city rates are based on a rate study done in 1997. She said the city plans to have an engineering firm perform a new rate study. It will also survey the sewer plant to make it more efficient. She said the city will consider adjusting rates when the study is finished.

Mrs. Gerry’s is a company that started in the kitchen of Gerry Vogt 35 years ago on the south side of Albert Lea. Alan Oliver has been CEO for 22 years. The company now operates on the north side of Albert Lea immediately east of Albert Lea High School at the corner of Hammer Road and Y.H. Hanson Avenue in the Northaire Industrial Park.

Oliver said he finds the city to be cooperative on the issue of sewer rates and said city officials are willing to talk about the problem and talk about possible solutions. He declined to discuss the company’s expansion plans but added that they will be made public eventually.

Randy Kehr, director of the Albert Lea-Freeborn County Chamber of Commerce, didn’t want to step into the middle of the debate on sewer rates but did want to make a comment.

“Mrs. Gerry’s is a very important and integral part of the Albert Lea community, and we should do everything in our power to make sure their expansion takes place in Albert Lea,” he said.

Lake Mills has a settling pond with capacity, while Albert Lea has a mechanical treatment system.

Marlyn Hoffman of the Lake Mills Chamber Development Corp. said Lake Mills is speaking with Mrs. Gerry’s but declined to comment further.

“I would prefer that to come from Mrs. Gerry’s,” she said.

Albert Lea City Councilor Al “Minnow” Brooks introduced the resolution for the present sewer rates last year. He said the council will look at what’s best for industry but also consider what is best for the community before making a decision.

“I need to do what’s best for both,” he said.