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Hydro dam purchase by city now official

Brainerd Public Utilities Superintendent Scott Magnuson stands at the hydro dam once owned by Wausau paper Monday. Brainerd Dispatch/Steve Kohls2 / 3
Automation improvements could cost $100,000 to $200,000, and should be completed in the next several months. The upgrades would allow the machines to run semi-automatically, therefore reducing staff levels from the current 24-hour-a-day operation to staffing just a single shift. Steve Kohls/Brainerd/Dispatch3 / 3

It's official. The city of Brainerd is now the owner of the hydro dam, formerly operated by Wausau Paper.

All of the papers were signed and documents exchanged last week, said Scott Magnuson, Brainerd Public Utilities (BPU) superintendent.

City council member Gary Scheeler, who serves on the Wausau Task Force and who first brought the idea of the dam purchase forward, said the move marks a "golden" investment.

"I wouldn't sell it for $20 million. It's worth at least that to the city," he said. "It can generate $20 million worth of energy in 15 years."

The purchase price was $2.6 million, which is a drop from the original $4.115 million. It included 37 acres of land and a dam substation.

The dam purchase, as well as the major upgrade projects, will be funded through local bonding.

The biggest factors in the price drop are needed upgrades, including a $1.5 million spillway apron, as well as total generation equipment improvements at the cost of $600,000, which would most likely be spread over a five-year period.

Work will start some time this year for the spillway, Magnuson said. Work for water and sewer connections to the site, which could cost about $330,000, will start in a couple of weeks.

Automation improvements could cost $100,000 to $200,000, and should be completed in the next several months. The upgrades would allow the machines to run semi-automatically, therefore reducing staff levels from the current 24-hour-a-day operation to staffing just a single shift.

"The dam and equipment are in good shape," Magnuson said. The only major issue, he said, was the spillway.

"There's no downside," he said. "The only problem would be is if there's a natural disaster. Otherwise it's a win/win. It's free power."

The dam will generate just under 10 percent of Brainerd's power on a normal day, BPU officials say.

Brainerd residents won't notice a big dip on their electric bill. Instead, it could help keep future rates more level or smaller.

Another benefit, officials say, is that it's cheaper for the city to generate its own power. Currently, Brainerd buys all of its energy from Minnesota Power.

"It's going to be a good thing," Magnuson said of the purchase.

City council member Mary Koep, the sole voice of opposition in the purchase among the council, said buying the dam is a "mistake."

Instead of saving residents money, Koep says it will instead be "very costly."

"It's a disaster for the city," she said. "It's a terrible mistake. There's a lot of misinformation put out. That bothers me. The public has been kept in dark so much on this. Information has all been hush hush."

Koep questioned how the city would repay the bonds, questioning the projected revenue that would be generated from the dam.

Between maintenance, yearly inspection costs, insurance, wage costs and utilities, the annual cost to operate the hydro dam will range from $600,000-$700,000.

The costs that are avoided are what offsets that, said Todd Wicklund, BPU finance director, in a previous interview. The city is expected to save $1 million that would have gone to buying energy from Minnesota Power, he said.

It's a $250,000-$300,000 net benefit a year, Wicklund said.

"It's still the best investment and time will prove it," Scheeler said.

He added that there's already informal talk of extending a trail to the dam and adding a visitor site.

Scheeler said the move puts Brainerd ahead of the curve when it comes to producing good, clean energy.

"It's the way the economy is going," he said.

View a slideshow of 36 photos here: http://brainerddispatch.mycapture.com/mycapture/enlarge.asp?image=521521...