SPIRIT LAKE — Spirit Lake is exploring ways to expand its sewer system capacity without raising rates or taxes.

The city's fast-paced growth forced a building permit moratorium this summer. It’s expected to remain in effect for at least a year because the sewer system is at capacity.

Spirit Lake recently purchased 6.5 acres for $325,000 for additional capacity and is now considering floating a bond to voters in May to construct a new lagoon. The estimated cost is $1.5 million.

Cities can only float such measures in May and November, and it's too late to place it on the November ballot.

"What we're looking at is the possibility of a zero-dollar increase bond that would fund a (USDA) Rural Development loan," Mayor Todd Clary said. "(The bond) would ensure we are going to meet that obligation for debt without any rate increase or additional taxation."

What makes the scenario a possibility, Clary said, is that the city is paying on a sewer loan that is almost paid off.

That payment would go away as part of the sewer upgrades and a new loan with a longer timeframe would result.

"(The new loan) wouldn't require more income; we'd just continue to make payments," Clary said.

The interest of Rural Development loans is hovering around 2 percent.

Clary said a bond would have to be floated before a loan can be approved. State law requires cities to pass a bond with voter approval for incurring long-term debt.

"If voters don't approve the bond, it would be illegal for us to accrue that debt," Clary said.

Clary said new growth should have to pay for itself through impact fees, so the city is trying to fund the improvements without a rate or tax increase.

Spirit Lake's sewer rates are $26 per month — lower than many cities — and haven't been raised since 2006.

Clary said he believes the city will make a decision later this year whether to float a bond. The city hired a bond attorney earlier to discuss financing options.

"The biggest part about passing a bond is community education," Clary said. "There's really no reason for it not to pass as long as we have the opportunity to get out and talk to people and educate them on what's going on."

Clary said a new lagoon would allow the city to temporarily take one of the smaller lagoons off line to deepen it and perform repairs.

The four wastewater storage ponds north of the city are at their 50-million-gallon capacity. The treated effluent is land-applied on sites adjacent to the storage area.

The sewage has to be stored for seven months out of the year because environmental regulations prevent land application in the winter.

The moratorium came after the city spent $1.5 million in upgrades funded by impact fees from new growth during the past two years and during explosive growth.

Engineer Kevin Koesel, with James A. Sewell and Associates, earlier told The Press that adding capacity and making other sewer improvements has been a priority of the city, but growth recently outpaced the work.

A partial moratorium was implemented last spring, limiting growth to four total new connections per month and only one per builder. However, that was lifted after a short time when some builders threatened to sue the city on the grounds it impeded their business.