Gruenhagen pushes tax relief for Watertown water tower project

Senator Glenn Gruenhagen (R-Glencoe) is renewing his effort to provide tax relief for the city of Watertown as it moves forward with its long-awaited second water tower and a critical expansion of its wastewater treatment facility. On Wednesday, he presented a bill to the Senate Taxes Committee that would refund sales taxes on construction materials for both projects, easing the financial burden on the small community. 

“Watertown desperately needs this water tower, but major infrastructure projects like this are a heavy lift for small towns,” Sen. Gruenhagen said. “This tax exemption will help keep costs down for local residents, especially those on fixed incomes.”  

The bill, Senate File 167, allows Watertown to receive a refund on sales taxes paid for materials, supplies, and equipment used in building the new water tower. The exemption applies to purchases made between May 1, 2024, and January 31, 2026. The savings will help offset the city’s share of the $6.5 million project, which was only partially covered by a $3 million appropriation from the 2023 bonding bill. 

Mayor Michael Walters, who testified in support of the bill, emphasized the project’s importance for the city’s 4,500 residents, a number expected to grow to 7,200 by 2038. 

“We are a small community with large public infrastructure needs,” Mayor Walters testified. “Watertown needs these new facilities to meet tightening regulations and accommodate for future growth. Expanding these facilities is essential for the fire department as well, which services the surrounding townships and services nearby cities in emergencies.”

Construction of the water tower began in fall 2024 after more than a decade of planning. However, the city is also facing another costly infrastructure upgrade: a $25 million expansion of its wastewater treatment facility to comply with new state permitting requirements set by the Minnesota Pollution Control Agency (MPCA). 

In January 2018, the MPCA issued new effluent discharge limits for phosphorus under Watertown’s National Pollutant Discharge Elimination System (NPDES) permit renewal. To meet these stricter environmental standards and accommodate projected growth, the city was required to expand and refurbish its wastewater treatment facility, replacing equipment that has exceeded its 30-year design life. The project includes a nutrient removal system and upgrades to multiple treatment processes. 

Sen. Gruenhagen’s bill would also provide a similar sales tax refund for materials used in the wastewater treatment facility expansion, covering purchases made between March 1, 2022, and June 30, 2025. 

Sen. Gruenhagen previously introduced this measure in 2024, but it was left out of the final “megabus” bill that was rushed into law in the final moments of the legislative session.   

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