Two Harbors audit shows strong finances, council advances watermain projects

Two Harbors ended 2025 with reserves equal to about 11 months of expenditures, and city leaders used that cushion to move ahead with another round of watermain work that will soon affect streets near the hospital and on the city’s east side.

Auditor Andy Grice of BerganKDV told the council the 2025 audit came back clean, with no major problems. The only issues he flagged were the kind that often show up in smaller cities, including the ratio of gallons billed to gallons pumped and the limited separation of accounting duties when a small staff carries many responsibilities. He also pointed to the city’s campground, which produced a surplus in 2025 and added to the city’s financial breathing room.

That strong balance sheet did not stop the council from approving more infrastructure spending. City Engineer Brotzler backed bids from Utility Systems of America, Inc. for the 4th Street Watermain Replacement Project and the 15th Street and alley watermain replacement work. The 4th Street job is the more complicated of the two because the city must keep water service flowing to the hospital while construction is underway, a requirement that pushes up both the difficulty and the cost.

The next visible change for residents is already on the calendar. Brotzler said the 400 block of 6th Avenue will switch to a temporary water main starting May 4, with that phase expected to wrap by June 30. That work is part of the city’s ongoing street and utility sequence, which is being timed so essential service can stay in place while crews replace aging lines.

Financing for the next stage is also moving. Senior Municipal Advisor Todd Hagen of Ehler’s, Inc. walked the council through a presale report for bonds that will help cover Lighthouse Point Road, 15th Street and alley work, and the 4th Street watermain project. After grants were secured for other pieces, the remaining borrowing need is about $3.5 million. The council approved the bond package, which is expected to be ready for sale on May 26.

The meeting also brought a note of outside recognition for a different city investment. Two Harbors Airport’s terminal at Helgesen Field was named the 2025 Project of the Year for Intermediate Large General Aviation Airport by the Minnesota Council of Airports. The new 1,200-square-foot terminal replaced a 640-square-foot building built in 1976, after a $1.14 million federal grant helped fund construction.