RPU approves Kalmar booster station as it weighs developer funding reform

RPU approves Kalmar booster station as it weighs developer funding reformRochester Public Utilities’ board has awarded the Kalmar Booster Station construction contract to Rice Lake Construction Group and increased total project funding to $3.235 million. The utility plans to examine whether future development should contribute more systematically to booster stations and wellhouses rather than relying primarily on rates and negotiated agreements.

The board approved a $2.540 million construction contract with Rice Lake Construction Group of Deerwood, Minnesota, contingent on City Council approval of the amended 2026 Water Utility Capital Budget.

Total authorized funding for the Kalmar Booster Station will rise by $1.085 million to $3.235 million under the proposed second capital-budget amendment.

The station will create the Calmar pressure zone, the utility’s 10th major water pressure zone, to serve development including the Pebble Creek subdivision.

Pebble Creek developers have contributed land, site access, water connections and $322,000 in cash, but RPU said it has no dedicated fee for booster-station or wellhouse infrastructure.

RPU said it expects to use short-term borrowing for the project and will consider water-fee policy changes after completing its water system master plan.

Rochester Public Utilities has approved the construction award for its Kalmar Booster Station, advancing a $3.235 million water-distribution investment that staff said is needed to serve rapid development in the western part of its service area. The Public Utility Board voted to award Rice Lake Construction Group of Deerwood, Minnesota a $2.540 million construction contract, subject to City Council approval of a second amendment to the 2026 Water Utility Capital Budget. The amendment would add $1.085 million and lift total authorised funding for the project to $3.235 million, covering the full delivery cost including design, construction administration, permitting and construction. The project will establish the Calmar pressure zone, described by staff as the utility’s 10th major pressure zone and likely its last new major zone. The western portion of RPU’s service territory is its highest-elevation area, making the booster station necessary to provide water service as development expands. Staff said the immediate trigger was the Pebble Creek subdivision, which moved more quickly into delivery than anticipated when the 2026 budget was prepared. Pebble Creek’s developers have donated the station site and access, made water connections to the future pump-station location, and agreed a $322,000 cash contribution. However, board discussion highlighted an unresolved issue over how growth-related water infrastructure should be funded. RPU currently has a water-availability fee that funds tower storage and a water-connection charge for extensions installed ahead of development. It does not have a dedicated fee for pumping stations or wellhouses. “Historically,” a staff member told the board, booster stations and wellhouses have been “rate-funded capital items.” In the Kalmar case, the utility said the capital had not been included in its five-year rate pro forma and would be financed through short-term debt, with future development contributions to be pursued through negotiated agreements or a potential development fee. Board members raised concern that, without a clearer mechanism, existing ratepayers could bear the cost of infrastructure prompted by new development. Staff said RPU had secured contributions through negotiations and had returned to developers where initial contributions did not align with revised estimates. But they also indicated that a policy-level review of water fees will be needed next year as the water system master plan is completed. The contract attracted only one bid. RPU said it had contacted other contractors and found that firms suited to the project faced capacity constraints, while local contractors may have regarded the station as unusually complex amid a heavy Rochester construction workload. Rice Lake was assessed as a reputable and capable contractor, and has indicated willingness to pursue value-engineering opportunities with RPU. Staff attributed the project’s higher-than-initially-budgeted cost partly to a preliminary estimate that “was low” and to the compressed timeline for bringing an unbudgeted project forward. The developing master plan is intended to allow RPU to identify future development-triggered infrastructure earlier, estimate its cost and incorporate it into capital planning.