Plans to spend $400,000 to start designing a $15.6 million downtown Rochester district energy system received a green light Monday.

The Rochester City Council unanimously approved a plan to move toward replacing the city’s reliance on Olmsted County’s steam supply, which is scheduled to be shut down on Oct. 31, 2023.

“City Hall is unique in that it depends on steam for both cooling and heating, so if that system were to shut down, the City Hall will be out of heating and cooling,” Scot Ramsey, the city’s manager of facilities and property, told the City Council on Monday.

What happened: The Rochester City Council approved spending $400,000 to start design efforts for a $15.6 million district energy system.

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Why does this matter: The city needs an alternative for heating and cooling City Hall and other nearby buildings by Oct. 31, 2023, when the current steam supply will be shut down.

What's next: The council will face final budget approval in the first half of 2022, with construction set to start in 2023.

The steam system also serves the rest of the city-county Government Center, as well as nearby city and county buildings.

After facing a $25 million to $30 million price tag for replacing the aging infrastructure that delivers steam downtown from the county’s Waste-to-Energy facility, county commissioners opted to transition to heating and cooling the county’s downtown buildings with local systems, while steam service will continue to be available for the county’s east campus.

The City Council was presented with two options Monday: create its own building-based heating and cooling systems, or adopt a district energy plan.

The proposed district energy plan would heat and cool City Hall, the Rochester Public Library, Mayo Civic Center and Rochester Art Center, while also having the ability to expand to service private buildings, which would reduce the city’s operating costs.

“As we connect more buildings, the system becomes more efficient,” Ramsey said.

While the building-based option is expected to cost $2 million less to construct, Destination Medical Center funds are available to bridge the funding gap related to the city’s anticipated cost of the district option.

Additionally, the district plan is expected to provide reduced heating and cooling costs on an annual basis.

“Option B has a lot more options for renewable and sustainable energy,” Ramsey added in regard to the district plan.

The council supported the district energy plan, but noted that how the final project will be funded remains uncertain, even as they discussed the potential for state bonding next year.

“I don’t think we can assume that in our 2022 budgeting,” said council member Patrick Keane.

Deputy City Administrator Aaron Parrish said the default option is to fund it through borrowing, but the city will seek state and federal funding, as well as look at the potential funding.

“We would love to have other options,” he said.

Ramsey said a final budget for the project is expected to be presented to the council in the first half of 2022, with construction expected to start in February 2023.