6.0. SR 05-11-1998Item 6.
ELK RIVER MUNICIPAL uTILITIES
AND
ELK RIVER CITY COUNCIL
JOINT MEETING
AGENDA
MAY 11, 1998
ELK RIVER CITY OFFICES
1. Call meeting to order at 7:00 P.M., May 11, 1998
2. Consider Agenda
3. Present Elk River Municipal Utilities Annual Report
4. Review Elk River Municipal Utilities Eastern Area Participation and Costs
5. Review Electric Deregulation Issue
6. Utility Contribution to City
7. Utility Contribution to Watermain Lateral Projects
8. Other discussion items
.y of
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
Mayor & City Council
Pat Klaers, City Administrator
May 7, 1998
Joint Meeting with Utilities
Commission
The joint meeting between the City Council and Utilities Commission is an
opportunity to get together and discuss issues which are common to both
bodies. The Utilities Commission has essentially set this agenda for the joint
meeting and has provided all of the background material. In response to the
material provided by the Utilities General Manger, I offer the following
comments:
4. East Elk River Proiect
It should be noted with the smaller developer driven project, that
about half of the sewer and water shortfall will eventually be collected
by way of deferred assessments. There are over 300 acres of
assessable property in the developer driven commercial project
(excluding the industrial area) and in the developer driven residential
project. The 1998 Patchin Appraisal indicates that these properties
may benefit at a higher level than the 1996 figure of $6,000 per acre.
If a higher level of assessment is approved by the City Council, then
the trunk sewer and water shortage for both the small and large
project goes down. Nonetheless, a shortage still exists and this
emphasizes the need for a redevelopment TIF project at the Hohlen
Mobile Home Park area. Funds from such a TIF District would benefit
both the water utility and sewer utility components of the project and
it is anticipated that sufficient funds would be available to also assist
the electric utility component of the project. All of this is in addition to
TIF assistance being provided to the developer in order to create a
'qevel playing field" for the developer.
In order to address the water shortage, reference was made to
connection and rate increases. In light of the most recent water
13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · TDD & Phone: (612) 441-7420 · Fax: (612) 441-7425
Joint Meeting City Council/Utilities Commission
May 7, 1998
Page 2
connection and rate increases and the increase in net profit in the
water utility as identified in the 1997 audit, caution should be taken
before any more increases are approved. The project costs at this point
are estimates and a "wait and see approach" before approving
increases is supported. Additionally, the phasing in of the project, as
noted in the attached memo, may be one way which will soften the
financial impact of this project.
6. Contributions to the City
The city is very comfortable with the relationship we have with the
Utilities regarding its financial contribution to the city. The city is
dependent upon this revenue for our capital outlay program. These
funds help support some of the larger fire department expenditures
(i.e. trucks) along with the street equipment program which is planned
to increase significantly in the future.
It is noted in the memo that the city would benefit by going to a Kwh
formula so as to not see a decrease in city funds if the rates go down or
ff the sales decrease or ff wheeling and/or deregulation takes place. At
this time the city strongly prefers to stay with the existing system.
The city feels like it can respond to deregulation or wheeling prior to it
arriving and we need not react to this future concern at this time. It
should be noted that conversely to the rates going down, if rates go up
or sales go up, so does the city revenues under the current system. We
have always viewed the Utilities and the city as partners in the city's
growth and, as additional revenues are generated due to growth, then
to a certain degree, these funds should be shared.
A comment was made in the memo that with retail wheeling on the
horizon we may want to renegotiate our franchise agreement with
AEC. It should be noted that this long term contract was negotiated
by the Utilities with AEC and if any renegotiation is to take place,
they must take the lead. Quite frankly, the city doesn't know enough
about the "ins and outs" of the electric industry to negotiate such a
contract amendment.
7. Lateral Water Proiects
The discussed project is taking place in the western part of the city.
The city has established a $3,800 per acre trunk sewer and water rate
to cover the expenses of the trunk system. This trunk rate was not
planned to cover smaller lateral connections that loop and improve the
water system. This maybe should have been considered, but it was not
Joint Meeting City Council/Utilities Commission
May 7, 1998
Page 3
five years ago. Staff concurs that a higher level of involvement by the
water utility with water assessment projects is appropriate and we will
make sure that increased awareness and communication takes place.
Regarding the 28 percent overhead question, it should be noted that ff
prepayment is made by the Utilities for this improvement, then the
overhead is estimated to be in the 10 to 14 percent range. We have
used this range for other entities that prepay (i.e. the county).
!
ABDO
EICK&
Cen~fied Pu]~lic Accountants & Consultants
7241 Otnns Lane
Suite 200
Minneapolis. MN 55439
March 3, 1998
To the Chairperson and Members of the Commission
Elk River Municipal Utilities
Elk River, Minnesota
Professional standards require that we provide you with the following information related to our audit
Our Responsibility Under Generally Accepted Auditing Standards and Government Auditing Standardu
As stated in our engagement letter, our responsibility, as described by professional standards, is to plan and perform our audit
to obtain reasonable, but not absolute, assurance that the combined financial statements are free of material misstatement and
are fairly presented in accordance with generally accepted accounting principles. Our audit is designed to provide reasonable
assurance of detecting misstatements that, in our professional judgment, would have a material effect on the financial
statements taken as a whole. Consequently, our audit will not necessarily detect misstatement less than this materiality level
that might exist due to error, fraudulent financial reporting or misappropriation of assets.
As part of our audit, we considered the internal control of the Utilities. Such considerations were solely for the purpose of
determining our audit procedures and not to provide any assurance concerning such internal control. As part of obtaining
reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of
compliance with certain provisions of laws, regulations, contracts and grants. However, the objective of our tests was not to
provide an opinion on compliance with such provisions.
Accounting Estimates
Accounting estimates are an integral part of the combined financial statements prepared by management and are based on
management's knowledge and experience about past and current events and assumptions about future events. Certain
accounting estimates are particularly sensitive because of their significance to the general purpose £mancial statements and
because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive
estimates affecting the financial statements were depreciation on fixed assets.
Management's estimate of depreciation is based on estimated useful lives of the assets. We evaluated the key factors and
assumptions used to develop those estimates in determining that it is reasonable in relation to the fmancial statements taken
as a whole.
Significant Audit Adjustments
For purposes of this letter, professional standards define a significant audit adjustment as a proposed correction of the general
purpose financial statements that, in our judgment, may not have been detected except through our auditing procedures. We
proposed no material audit adjustments.
612.835.9090 * Fax 612.835.3261
Municipal Utilities
Elk
River
March 3, 1998
Page Two
Disagreements with Manae;ement
For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not
resolved to our satisfaction, concerning a financial accounting, reporting or auditing matter that could be significant to the
general purpose financial statements or the auditor's report. We are pleased to report that no such disagreements arose
during the course of our audit.
Issues Discussed Prior to Retention of Independent Auditors
We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with
management each year prior to retention as the Utilities' auditors. However, these discussions occurred in the normal course
of our professional relationship and our responses were not a condition to our retention.
Difficulties Encountered in Performin~ the Audit
We encountered no significant difficulties in dealing with management in performing our audit.
Reportable Conditions
In planning and performing our audit of the combined financial statements of the Elk River Municipal Utilities for the year
ended December 31, 1997, we considered its internal control in order to determine our auditing procedures for the purpose of
expressing our opinion on the financial statements and not to provide assurance on internal control. We noted no matters
involving internal control and its operation that we consider to be reportable conditions under standards established by the
American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating
to significant deficiencies in the design or operation of internal control that, in our judgment, could adversely affect the
Utilities' ability to record, process, summarize and report financial data consistent with the assertions of management in the
financial statements.
A material weakness is a reportable condition in which the design or operation of one or more of internal control components
does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to
the financial statements being audited may occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions.
Our consideration of internal control would not necessarily disclose all matters in internal control that might be reportable
conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material
weaknesses as defined above. Our previous management letter discussed a reportable condition due to a lack of segregation
of accounting duties. With the addition of staff over the past few years, we feel the accounting functions are now adequately
separated.
Other Matters
The following are areas that came to our attention during the audit that We feel should be reviewed:
The results of the Electric and Water Enterprise Funds are as follows:
Electric Fund
1997 1996
$7 281 411 $6 642 320
5 647 061 5 608 662
1 634 350 1 033 658
535 395 437 247
Charges for services
Operating expenses excluding depreciation
Operating income before depreciation
Depreciation expense
Operating income $1 098 955 $ 596 411
Electric Fund
Operating cash and investments
Restricted cash and investments
Total
Elk River Municipal Utilities
March 3, 1998
Page Three
1997 1996
$ 513 064 $ 132 085
326 959 440 608
$ 840 023 $ 572 693
The following table tracks cash balance, unreserved retained earnings and fixed asset additions for the previous five years in
the Electric Fund.
Operating Unreserved
Cash Retained Fixed Asset
Balances Earnings, Additions
1997 $ 513 064 $ 8535224 $ 1652085
1996 132 085 7 150 377 1 445 986
1995 290 631 6 540 533 1 014 220
1994 274 310 6 016 135 1 123 234
1993 219 693 5 184 241 1 236 314
The effects of rate increases and new customers were reflected in a 9.6% increase in charges for services. The operating
expenses stayed fairly consistent with the prior year and the final payment on the remaining bond issues was completed.
Completing the bond issues reduced restrictions on cash totaling $109,083. These factors all contributed to the increase in
operating cash. We set a target cash balance last year of approximately $950,0000 based on one and a half months operating
expenses and one month of budgeted capital improvements. The budgeted operating expense for 1998 is $6,882,080 and the
capital budget for 1998 is $1,334,000. At these levels, the cash balance should be approximately $970,000. Significant
progress was made in 1997 but there still is a long way to go to reach the recommended minimum.
Water Fund
Charges for services
Operating expenses excluding depreciation
Operating income before depreciation
Depreciation expense
Operating income
Cash and investments
1997 1996
$ 525 646 $ 388 837
253 622 199 164
272 024 189 673
127 693 121 417
$ 144 331 $ 68 256
$1 302 976 $1 203 653
An increase in consumption, rates and new customers caused the increase in revenue and cash balances. The current cash
balance is adequate to provide for working capital needs but will need to be monitored as new debt is issued and more capital
needs are budgeted.
Collateral of Deposits
The Utilities is required by Minnesota Statutes Section 118A.03, subd. 3, to have pledged collateral for its deposits in excess
of FDIC insurance. At year end, $33,635 of deposits were not secured. We recommend the adequacy of coverage be
evaluated each month.
Other Items
Elk River Municipal Utilities
March 3, 1998
Page Four
Year 2000 Issue
The Year 2000 Issue results from a computer's inability to process year-date data accurately beyond the year 1999.
Except in recently introduced year 2000 compliant programs, computer programmers consistently have abbreviated
dates by eliminating the first two digits of the year, with the assumption that these two digits would always be 19.
Thus January 1, 1965 became 01/01/65. Unless corrected, this shortcut is expected to create widespread problems
when the clock strikes 12:00:01 a.m. on January 1, 2000. On that date, some computer programs may recognize the
date as January 1, 1900, and process data inaccurately or stop processing altogether.
The Year 2000 Issue is likely to affect computer applications before January I, 2000, when systems currently
attempt to perform calculations into the year 2000. Furthermore, some software programs use several dates in the
year 1999 to mean something other than the date. Examples of such dates are 01/01/99, 09/09/99 and 12/31/99. As
systems process information using these dates, they may produce erratic results or stop functioning.
The Year 2000 Issue presents another challenge - the algorithm used in some computers for calculating leap years is
unable to detect that the year 2000 is a leap year. Therefore, systems that are not year 2000 compliant may not
register the additional day and date calculations may be incorrect.
The Utilities staffhas evaluated year 2000 issues and made necessary changes but will still need to review all
information received from new vendors, service providers, bankers, customers and other third-party organizations
with whom it exchanges date-dependent information.
This report is intended solely for the use of management, the Commission and others within the Organization. However, this
report is a matter of public record and its distribution is not limited. If you have any questions concerning our audit, we
would be pleased to discuss them with you.
March 3, 1998 ABDO, ABDO, EICK & MEYERS, LLP
Minneapolis, Minnesota Certified Public Accountants
ELK RIVER MUNICIPAL UTILITIES
322 King Avenue
Elk River, Minnesota 55330
Phone (612) 441-2020
Fax (612) 441-8099
To: Elk River Municipal Utilities Commission
Elk River City Council
May 3,1998
From: Bryan C. Adams
Subject: Eastern Area Expansion
Enclosed is the following information for your review:
1) 11 X 17 Drawing of East Elk River Utility Alignments
2) Portions of East Elk River feasibility study reflecting street, sanitary, water main and storm drain
construction costs and assessment revenue.
3) Peter J. Patchin & Associates East Elk River limited appraisal summary report. Water and Sewer
Trunk Assessments (City Council already has their copy)
In the Spring of 1998 Springsted completed a financial and debt study for Elk River Municipal Utilities
(ERMU). This study indicated ERMU could finance the necessary wells and water towers, estimated at
- ',700,000, for East Elk River with the current rates and WAC fees. At the February ERMU Commission
~,eeting, City staff suggested that ERMU finance the shortfall in constructing the trunk water system for the
East Elk River project. The water trunk shortfall is in the $500,000 to $710,000 range. The Utility Commission
indicated they would seriously consider this proposal. The attached Patchin report indicates acceptable
assessment ranges for the necessary trunk utilities. Further analysis will be required to determine more
accurately the water shortfall. This value can then be analyzed using our Springsted model to determine the
effects on water rates and WAC fees.
The proposed Eastern Area development will also have a significant impact on our electric department which
is also not included in the City's feasibility report. We have made some initial cost estimates to determine the
financial impact on our electric utility. The estimated cost breakdown is as follows:
a) Upgrade Substation #14
will be completed May 1998
b) Underground crossing of highway 169
c) overhead line on County Road 12 looped
back to County Road 13. This line will also
aid us in territory acquisition efforts. (If underground
is required instead of overhead add 9000' X $25)
d) Underground Feeder to serve Area South of
County Road 12
e) Underground Feeder to serve Area North of
County Road 12 to County Road 13
$225,000
$500,000
$100,000
$524,500
$368,000
$344,000
f) Residential Development in W. Schultz development
600 lots @ $1,400 each
This cost will be offset by:
i) Developer 600 lots @ $300/Iot
ii) Builder/Owner 600 lots @ $600/Iot
Total investment
Assessment Reimbursement
Out of Pocket Costs
Already Spent (Substation)
Final Cash Outlay to be Spent
<$180,000>
< $360,000>
$840,000
$2,676,500
$ 540,000
$2,136,500
$ 500,000
$1,636,500
These figures do not include the service lines to industrial/commercial customers of which historically the
utility and customer share equally in these costs. The area south of the heavy yellow line on the drawing is in
AEC service territory.
Possible alternatives to finance the Eastern Area electric expansion:
1) Increase rates
2) Increase connection fees
3) Borrow money
4) City contribute to construction costs
5) Spread over longer period of time (phase construction)
The total estimated financial impact on ERMU due to eastern area expansion is as follows:
Future Well & Water Tower $1,700,000
Finance Shortfall of Trunk Water System $ 700,000
Trunk Electric System $1,672,500
TOTAL $4,072,500
There is no question that the Eastern Area expansion will happen, the only question is timing. Utility staff
also supports City staff recommendations of letting the developers drive the schedule for Eastern Area
expansion.
As another related issue, the City of Otsego is very seriously studying installing sewer and water on Parrish
Avenue or County Road 42. In recent conversation with their engineers, the plan is to start construction this
summer. This will drastically effect the development rate in this area. The prime commercial/industrial area is
between County Road 42 and Highway 101 which is in our service territory. The same financial issues will be
faced in this area as in the Eastern Elk River Area.
PROJECT AREA A
TABLE I
EAST ELK RIVER URBAN SERVICE AREA
PHASE I IMPROVEMENTS
ESTIMATED PROJECT COSTS
Street Construction
Main Street Improvements and Signal System
$1,200,740.00
$166,587.00
Signal System- County Road 12/CSAH 13 $145,000.00
Sanitary Sewer Construction $1,739,100.00
Watermain Construction $1,379,994.00
Storm Drainage Construction $561,605.00
Subtotal $5,193,026.00
Overhead (28%)
Total Estimated Project Cost
PROJECT AREA B
$1,454,048.00
$6,647,074.00-
Street Construction $1,593,855.00
Main Street Improvements and Signal System $166,587.00
Signal System- County Road 12/CSAH 13 $145,000.00
Sanitary Sewer Construction $1,835,020.00
Watermain Construction
Storm Drainaoe Construction $1,661,913.00
~' $902,605.00
Subtotal $6,304,980.00
:PROJECT .4JLEA C
Overhead (28%)
Total Estimated Project Cost
$1,765,394.00
$8,070,374.00
Street Construction
Main Street Improvements and Signal System
$2,861,450.00
$166,587.00
Signal System - Count).-Road 12/CSAH 13 S145,000.00~
Signal System - TH 10/171st Avenue $165,000.00
Railroad Crossing $50.000.00
Sanitary Sewer Construction $2,316,160.00
Watermain Construction $2.547,619.00
Storm Drainage Construction $1,287.682.00
Subtotal $9,539,498.00
Overhead (28%)
Total Estimated Pro. iect Cost
$2,671,060.00
$12,210,558.00
Fca~-SOO. t ~0 :~"~ 17 lqq] 26
When in the future an S JR warrants the construction of a signal system at the intersection
of TH 10 and 171st Avenue, MnDOT funds should be available for the two MnDOT legs
of the intersection. The City's share of the signal system cost for the 171st Avenue leg
would be MSA-fundable. If in the future a signal system is justified at the proposed
intersection of County Road 12 and CSAH 13. County funds may be available for the
respective County legs of the intersection.
Proposed financing methods are shown in Table 2.
TABLE 2
EAST ELK RIVER URBAN SERVICE AREA
PHASE I IMPROVEMENTS
PROPOSED FINANCING
PROJECT AREA A
Trunk Sanitary Sewer and Water Assessment
Lateral Sanitary Sewer and Water Assessment
Street Assessment
Storm Drainage Assessment
Total Assessment
Total Estimated Project Cost
Shortfall
PROJECT AREA B ~ -
Trunk Sanitary Sewer and Water Assessment $2,809,224.00
Lateral Sanitary Sewer and Water Assessment $930,110.00
Street Assessment $1,750,179.00
Storm Drainage Assessment $396,653.00
.... Total Assessment $5,886,166.00
Total Estimated Project Cost $8,070,374.00
Shortfall
i PROJECT AREA C
;Trunk Sanitao' Sewer and Water Assessment
Lateral Sanitary Sewer and Water Assessment
!Street Assessment
$1,639,620.00
$930,1 I0.00
$1,750,179.00
$396,653.00
$4,716,562.00
$6,647,074.00
$<1.930,512.00>
<$2.184,208.00>
S4,205,142.00
$930,110.00
$1,750,179.00
[Storm Drainage Assessment
I $396,653.00
TotalAssessmentI S7,282,084.00
Total Estimated Pr~ect Cost S12,210,558.00
Shorthll $<4,928,474.00>
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DEVELOPMENT
LEGEND
PROPOSED TRANSPORTATION
AND UTILITY CORRIDOR
ELECTRIC
TRUNK SANITARY SEWER
LATERAL SANITARY SEWER
FOROEMAIN
TRUNK WATERMAIN
LIFT STATION
TO DEVELOPMENT
!
. TO CITY LIMITS
COUNTY ROAD NO. 12
170TH A~:.
AVENUE
EERCP-UT
RKM
DRAWN:
AJB
APPROVI~:
MARCH1998
800110J
JOB NO.
EAST ELK RIVER
UtILItY ALIGNMENTS
Z/ ELK RIVER MUNICIPAL UTILITIES
322 King Avenue
Sq Elk River, Minnesota 55330
Phone (612) 441-2020
Fax (612) 441-8099
To: Elk R~ Municipal Utilities Commission May 3,1998
Elk River City Council
From: Bryan C. Adams
Subject: Electric Deregulation Issues
Enclosed is Minnesota Municipal Utility Association's (MMUA's) Draft Position on Retail Competition. This
document was put together by MMUA's Industry Restructuring Task Force, of which I am a member. This is
MMUA's draft position on industry restructuring with the hope it will be all Minnesota Municipal Utilities position
as well. This paper does a good job laying out the issues and explaining our position and is worthy of
Commission and Council discussion.
I have also been asked to represent MMUA on the League of Minnesota Cities (LMC) Electric Deregulation
Task Force. This task force is scheduled to meet four to five times this year. The LMC will be utilizing David
rg of R.W. Beck to help the task force through this process. Enclosed for your review is R.VV. Beck's scope
of services for this process.
Minnesota Municipal Utilities Association
Industry Restructuring Task Force
Draft Position on Retail Competition
March 12, 1998
Municipal Utilities and Customer Choice. The Minnesota Municipal Utilities
Association supports customer choice. Municipal utilities were established and exist as a
result of customer choice. We exist to serve our customers and we support policies that
will benefit all consumers. If customer choice is implemented, it should be done in a
manner that benefits all customer classes and minimizes potential drawbacks.
Implementation.
· Timing. A number of issues will have to be addressed in order to implement
retail competition successfully. The timing of the transition to competition
will depend largely on the time it takes to develop consensus on these issues.
· Schedule. Competition should be phased in over a period of several years in
order to provide for as smooth a transition as possible. Introducing choice for
all consumers at the same time would likely prove unduly difficult.
Reliability. The transition to a retail competition regime must be accomplished with no
loss of system reliability.
Independent System Operator. In order to develop a truly competitive electricity
market, the transmission system must be operated in a fair and evenhanded manner. A
strong and effective independent system operator must be established so that owners of
transmission are not able to manipulate the transmission system to their advantage.
Distribution. The current service territory law should remain in effect for electric
distribution. Individual customers should be prohibited from bypassing the local
distribution system in order to avoid placing an undue burden on the remaining
customers.
Stranded Costs. Full recovery should be allowed for legitimate, verifiable, nonmitigable
stranded generation costs. Distribution stranded costs should be eliminated or minimized
by prohibiting distribution bypass.
Local authority. Municipal utilities should retain their long-standing tradition of local
authority and decision making.
Rate setting. The governing body of the municipal utility should determine
the appropriate methodology for unbundling rates and should establish
distribution rates.
· Services such as metering, billing, maintenance. The goveming body of the
utility should have authority to determine whether it is in the best interest of
the community to perform these functions in-house or bid them out.
Right to municipalize or aggregate. Cities should retain the authority to
establish a municipal utility or aggregate customer loads. Barriers to
municipalization or aggregation by cities should be eliminated.
· Franchise Fees. Cities should retain the authority to impose franchise or
similar fees on sales or distribution of energy.
· Default Provider, Provider of Last Resort, Backup Service Provider. A
municipal utility should have the authority to determine whether it will serve
as the default provider, provider of last resort, and backup service provider.
Opt-out. MMUA does not support a provision that would allow municipals and/or co-
ops to opt out of competition. Opting out would likely not be a tenable strategy over the
long term. Further, municipal utilities should not be seen as putting their own interests
above those of their customers.
Open Meetings, Data Practices. Minnesota's Open Meetings and Data Practices acts
should be modified to allow municipal utilities to maintain necessary competitive
confidentiality.
Municipal Utility Partnerships. Municipal utilities and municipal power agencies
should have all authority necessary to enter into partnerships or other business
relationships with cooperatives, investor-owned utilities, or other entities, public or
private, located within or outside of Minnesota.
Multiple Services. Municipal utilities and municipal power agencies should have all
authority necessary to provide retail energy services, natural gas services,
telecommunications services, and other services.
Property Taxes. There should be no shift of property tax burden from customers of
investor-owned utilities to customers of municipal utilities and co-ops.
Transmission Planning and Siting. Transmission planning should be done on a
regional basis through the Mid-Continent Area Power Pool or other similar organization.
A regional siting process for major transmission projects should be developed in order to
take into account needs and impacts throughout the region.
Resource Planning. Integrated Resource Planning should be eliminated, since it is
essentially incompatible with the transition to a market-based approach to generation.
Capacity planning should be done on a regional basis through the Mid-Continent Area
Power Pool or other similar organization.
Plant Siting. Demonstration of need should no longer be necessary. In a market-based
system, the developer of a project assumes the risk that there will be a market for the
output of a plant. Environmental regulation and local land use regulation would
continue.
Renewable Energy and Conservation. If conservation spending and/or reliance on
renewable resources are mandated, municipal utilities and co-ops should retain the
authority to determine how to comply with these requirements.
Public Interest Provisions.
· Consumer Protection.
The cold weather rule and similar protections for low-
income customers would remain essentially unchanged.
Universal Service and Low°Income Customer Assistance. A state fund should
be established to provide assistance to needy customers.
System Benefits Charge. In the event that a system benefits charge is
necessary to provide revenue for customer programs, it should be a non-
bypassable charge imposed on electricity sales.
Vendor Certification. Prospective sellers of electricity to retail customers in Minnesota
should be required to certify compliance with MAPP, NERC, and FERC standards and
requirements.
Market Power and Predatory Pricing.
· The Public Utility Holding Company Act should not be repealed unless FERC
is given full authority to address market power issues in the utility industry.
· The Minnesota Public Utilities Commission, or other appropriate state
authority, should be empowered to address issues of market power and
predatory pricing.
Private Use Restrictions. Municipal utilities often finance large capital projects by
issuing tax-exempt bonds. The "private use" restrictions in the federal tax code severely
limit the ability of a municipal utility with outstanding tax exempt bonds to enter into
customer contracts or market excess energy. These restrictions must be addressed in
order for municipal utilities to fairly compete in a restructured industry.
PROPOSAL
Analysis of Electa'ic Deregulation
Concerns
League of Minnesota Cities
St. Paul, Minnesota
March 1998
Section 1
SCOPE OF SERVICES
ELECTRIC UTILITY INDUSTRY RESTRUCTURING
Electric customers in other countries and in some parts of the U.S. are
experiencing a fundamental change in the way that their electricity is
bought and sold. Historically, they bought a bundled product made
up of energy production, transmission, distribution and customer
services. More and more, they are being granted a choice of the
commodity, or production, supplier. That is, they can arrange to get
their electric energy from a variety of suppliers and have it delivered
by the distribution or "wires" utility to which they are already
connected. In addition, a new market is emerging for retail services to
electric customers. In addition to metering and energy management
services, customers are being offered packages of services which
include options like equipment and appliance repairs, security
systems, Internet access and consolidated billing. Under most
restructuring scenarios, the wires utilities (transmission and
distribution) will continue to be regulated. The commodities markets
(energy production) and retail services will not.
The basic forces that are driving change in the electric utility industry
are the transference of customer choice expectations from other
previously regulated industries and the existing geographical
disparities in the cost of both wholesale and retail electricity between
different regions of the country. The cost situation is especially
problematic to commercial and industrial customers with facilities
located throughout the U.S., since differences in energy costs can have
sigrdficant effect on the cost of products and services. The overriding
cause of these differences in wholesale and retail pricing of electricity
are the costs which individual utilities have incurred in the past as a
result of major investments in facilities. These "stranded costs" vary
widely among utilities and result from differences in timing of major
utility plant additions, differing regulatory practices, differing local
pricing practices and past investment decisions which have proven to
be high cost (e.g., nuclear plant construction). In a regulated
operating environment, utilities have been allowed to recover all costs,
R.W. Beck, Inc. 1-1
SCOPE OF SERVICES Section I
including a fair rate of return, on facilities that were determined
prudent, without regard to competitiveness. These costs, however,
cannot be passed on to customers in a competitive commodity market.
A major issue facing the utility industry and its regulators is how to
handle these stranded costs in the transition from full to partial
regulation of the industry. In California and most other states which
have enacted restructuring legislation, provision has been made to
mitigate stranded costs through a transition charge. All customers pay
the transition charge, regardless of the source for their electricity,
during a defined phase-in period for the restructuring.
How soon will customers have the opportunity to shop for their
electricity? At least ten states now have restructuring laws (California,
Illinois, Massachusetts, Maine, New Hampshire, Pennsylvania, Rhode
Island, Montana, Nevada and Oklahoma). The American Public
Power Association reports that several other states are likely to pass
restructuring laws in the near future. The Texas legislature came very
close to enacting such legislation during the 1997 session and most
political observers expect that industry restructuring will be a reality
following the next session. During 1997, thirty-eight state legislatures
had restructuring legislation introduced.. California, Massachusetts
and several other states have laws which mandate the phase-in of
customer choice) beginning this year.
EXPECTED FORM OF THE RE-REGULATED ELECTRIC
UTILITY INDUSTRY
Perhaps the most notable current effect of the changing market for
electric utilities is the separation of the traditional vertically integrated
business functions into discrete business units (generation,
transmission, distribution and retail energy services). The utility
model of the past and present, illustrated in Figure 2.1, is one in which
a single utility manages all aspects of the business and is the sole
contact with its customers.
1-2 R.W. Beck, Inc.
Section 1
SCOPE OF SERVICES
Figure 1
Y E S.T E R D A Y
i: i::~:i!!~i~.INTEGPAIED .::. :~..,
i .: i: :'iELEC~IC UTILITY : i:
The future model for the industry, illustrated in Figure 2.2, is one in
which retail and wholesale customers will obtain their services from
multiple providers, either through direct contact or through
intermediaries. In this model, services are provided through a
combination of regulated and unregulated independent business
units. A utility may choose to operate only a single business unit (e.g.,
distribution) or multiple business units under a larger organizational
structure.
R.W. Beck, Inc. 1-3
SCOPE OF SERVICES Section I
Figure 2
TOMORROW
INDEPENDENT SYSTEM OPEI"~ATOR - ISO
..................... :....-T.....7.~F~F.?~.F.~,~,.~~~ .. ~:~:::::~: .'.::~
~ "
In response to the changing electric utility environment, the League is
interested in:
identifying how deregulation could affect its members
[] developing background Lrfformation on electric utility deregulation
for its members, including specific educational material that may
be circulated to members
[] helping its members prepare informed policy positions and
statements that can be used in legislative proceedings
1-4 R.W. Beck, Inc. B~2~
Section I SCOPE OF SERVICES
· helping its members determine how best to position themselves
for a deregulated electric environment
· determining what services the League should provide to its
members in the areas associated with electric deregulation
GENERAL APPROACH TO THE WORK
In proposing to assist the League of Minnesota Cities ("League") in
its continuing service to its member cities, R. W. Beck does not offer a
"one size fits all" approach to the questions and issues that Minnesota
utilities and cities are now confronting. We have, however, developed
an approach for the League which incorporates a number of elements
that we believe are critical to a successful outcome from the consulting
services that you seek. These elements have emerged from our work
over the past 55 years with publicly owned utilities that have faced
major threats to their continued success and were able to overcome
those threats. It has been true in the past and is still true today that
the most successful utilities, as well as entire communities, have
recogrtized the threats early, have asked the right questions, have
looked for innovative answers and have made the changes needed to
quickly move in new directions.
R. W. Beck proposes to provide members of the Deregulation Task
Force and League staff with an analysis of deregulation concerns, by
providing background on deregulation and leading discussions that
will develop understanding of the changing utility environment.
These services will help prepare the League as it develops
legislative proposals, guides League response to deregulation
activities proposed by state electric utilities and develops services
needed by Minnesota cities as they adjust to utility restructuring.
We propose to provide this analysis of deregulation concerns
through a series of workshops covering topics of interest to
Minnesota cities. In addition to these workshops, R. W. Beck will
work with League staff and Task Force members to compile a set of
informative and educational material for member cities of the
League. Our services are described more specifically below.
TASK 1
PROVIDE INFORMATION ON ELECTRIC UTILITY
RESTRUCTURING & DEREGULATION
R. W. Beck will provide background materials on the issue of electric
utility restructuring and deregulation, which are suitable for
R.W. Beck, Inc. 1-5
SCOPE OF SERVICES
Section I
incorporation by League staff into packets for task force meetings.
This background information will include:
· A summary of activities which are underway in other states,
particularly those which are on the leading edge of deregulation
· An assessment of the extent to which situations or conditions are
different Ln Minnesota and the surrounding region which could be
expected to Lruquence deregulation
· An assessment of the implications that deregulation will have on
property taxes, sales taxes, payments in lieu of taxes and franchLse
fees.
· An assessment of the implications that deregulation will have on
the purchase of electricity for municipal services. Issues to be
addressed include what steps cities can take to make themselves
attractive customers in a deregulated environment and whether
aggregating municipal load with other users would be beneficial,
and if so, with whom they might aggregate load.
· An assessment of the implications that deregulation will have on
the purchase of electricity by retail customers. Related issues to be
addressed include which electric customer classes or load
characteristics are likely to benefit from deregulation and those for
whom regulation may cause higher prices or poorer service
· An assessment of the issues at stake for municipally-owned and
operated electric utilities. Included will be an identification of the
legislative provisions that will be most important for their
continued viability and the strategic positioning moves that
municipal utilities may want to take to better compete in a
deregulated environment. The possible impact that derebmlation
might have on service territory issues will be addressed.
· An assessment as to whether some communities might be affected
differently by deregulation. Related issues include what cities can
do to make their communities more attractive markets for electric
power and what economic competitiveness issues will be raised by
deregulation.
TASK 2
PROVIDE PLANNING SESSION I - OVERVIEW OF
DEREGULATION
R. W. Beck will provide a 2-4 hour planning session at a League Task
Force meeting which will acquaint members of the Task Force and
League staff with an overview of the process of deregulation,
1-6 R.W. Beck, Inc.
Section I
SCOPE OF SERVICES
including state and national players, pros and cons of deregulation,
major issues and implications for the members of the League. This
session will include numerous opportunities for discussion and
interaction. It is assumed all Task Force meetings will be at the
League's office.
TASK 3 PROVIDE PLANNING SESSION II - LEGISLATIVE POLICY
R. W. Beck will provide a 2-4 hours plarming session at a League Task
Force meeting that provides a summary of legislative and regulatory
policy at the federal level, specifically FERC Order 888, and at the state
level, through examination of policy in states where deregulation laws
have already been enacted and are currently being implemented, such
as California, Massachusetts, New Hampshire and Pennsylvania. R.
W. Beck will provide recommendations and lead a discussion
regarding recommendations for Minnesota legislative policy.
TASK 4
PROVIDE PLANNING SESSION III - COMPETITIVE
POSITIONING
R. W. Beck will provide a 2-4 hour planning session at a League Task
Force meeting to begin the process of strategic planning for
deregulation by member cities represented by the Task Force. Topics
covered in this session will include:
· Identifying areas of exposure in the city's relationship with its
utility
· Identifying the city's potential for reducing costs based on access
to another energy supplier
· Examining the effect that open, competitive energy markets could
have on economic development with the city
· Assessing the effect of changes in utility service on tax revenues,
franchise fees, transfers to the city and sales taxes
· Understanding the effect of deregulation on different classes of
utility customers
R. W. Beck will provide recommendations and lead discussions with
Task Force members and League staff to help them begin developing
individual action plans, based on the i_rfformation and discussion
provided in this session.
R.W. Beck, Inc. 1-7
t
SCOPE OF SERVICES Section I
TASK 5 PROVIDE PLANNING SESSION IV - LEAGUE SERVICES TO
MEMBERS
Based on the results of the previous three planning sessions, R. W.
Beck will facilitate a 2-4 hour structured discussion at a League Task
Force meeting regarding problems and opportunities arising from
deregulation, as well as needs of the League's members, in order to
develop a list of potential services to be provided by the League. One
service to be considered is for the League to become an aggregator of
municipal electric demand. Included in the assessment of this service
will be a review of the tasks involved in load aggregation and the pros
and cons of the League providing this service to its members.
TASK 6 COMPILE EDUCATIONAL MATERIAL
R. W. Beck will recommend and assist League staff in developing
educational materials for circulation to League members. This task
includes a total of 8 hours of the consultant's time.
TASK 7 PARTICIPATE IN INFORMATION SESSION
R. W. Beck will participate in a one to two hour Lrfformation session for
League members to be conducted in connection with the League's
annual conference in Duluth, Minnesota on June 17 or 18, 1998.
ADDITIONAL SERVICES
In addition to the services described above, R. W. Beck will provide the
following additional services as directed by the League's Director of
Member Services:
1. Develop a Strategic Business Plan for the League related to
deregulation.
2. Attend additional meetings with the League staff or electric
utility restructuring task force.
3. Provide additional assistance to League staff in preparing
educational materials that may be circulated to members
4. Provide additional services as directed by the League's Director
of Member Services
The cost of these additional services is not included in the total
compensation amount described in Section 3 of this Proposal.
1-8 R.W. Beck, Inc.
Bl2t~
Section I
SCOPE OF SERVICES
Compensation for these additional services will be at the hourly rates
described in Section 3.
B12,68
R. W. Beck, Inc. 1-9
ELK RIVER MUNICIPAL UTILITIES
322 King Avenue
Elk River, Minnesota 55330
Phone (612) 441-2020
Fax (612) 441-8099
To: Elk River Municipal Utilities Commission
Elk River City Council
May 3,1998
From: Bryan C. Adams
Subject: City Contribution Policy
Enclosed for your information are the 12-6-94 Utility Commission minutes. Item 7 reflects the agreement
concerning utility cash donation of 3% for 3 years. This issue was discussed at the October 1997 Elk River
Utility Commission meeting. Because the City's 1998 budgeting process was completed, the Utility
Commission decided to keep the same arrangement for 1 more year and discuss this issue at our next joint
meeting.
The recent history on these contributions are as follows:
1996
Electric Use Donations $166,585
Monetary Donations $169,415
Total Donations $336,000
1997 Proje~ed 1998
$200,424 $210,543
$187,342 $209,192
$387,766 $419,735
,_,.se of E.R. Revenues
Base of E.R. Kwh
Donation as % Revenue
Donation as S/Kwh
$5,647,171 $6,244,722 $6,973,033
85,763,635 93,152,211 99,672,866
5.95% 6.2% 6.02%
$0.003918 $0.004163 $0.004211
For 1998 the City has $166,000 budgeted for Monetary Contributions.
The payment in lieu of tax contribution from a municipal utility to the host city, is a reasonable expectation.
The national average contribution for municipal utilities to cities of our size electric utility is approximately 5.5%
of revenues. It is safe to say the property tax we would pay would be less than our current 6.2% contribution
level. For obvious budgetary reasons I would like to see the contribution as small as possible yet not place any
undo hardship on the City. The City has come to rely on this contribution for equipment acquisition.
As we get into retail wheeling, we are at a 6.2% disadvantage from our largest competitor, Anoka Electric
Cooperative (AEC), for they pay no franchise fee to the City for the customers they serve within the Elk River
city limits. It would also be more desirable for the City to receive contributions based upon Kwh instead of % of
gross revenues. If rates decrease or energy sales decrease due to retail wheeling, the City will lose financially
at the revenue calculation versus a Kwh calculation.
One alternative is to have the City pay for all the electric services received and the contribution to the City
would be based S/Kwh used by Elk River. This value is currently between $0.0039 and $0.0041. If retail
wheeling comes to pass, the third party power marketer would pay to the City this amount for energy they sell
~" Elk River energy customers. Changing from a % of revenue base to a Kwh base should be done well before
ail wheeling starts. The franchise agreement between AEC and the City of Elk River does not address any
contribution, but in light of retail wheeling, it should be investigated.
ELK RIVER MUNICIPAL UTILITIES
322 King Avenue
Elk River, Minnesota 55330
Phone (612) 441-2020
UTILITIES COMMISSION MINUTES
December 6, 1994
3:00 P.M.
Present Were:
James Simpson
George Zabee
James Tralle
President
Vice Chairman
Trustee
Others Present: Bill Birrenkott
Pat Klaers
Terry Maurer
Bob McCartney
Bruce West
General Manager
City Administrator
City Engineer
Water Superintendent
Fire Chief
1)
2)
3)
4)
5)
5)
6)
The meeting was called to order at 3:05 P.M. by President
Simpson.
Motion by Mr. Zabee, seconded by Mr. Tralle to approve the
agenda as amended. The Motion carried.
Motion by Mr. Zabee, seconded by Mr. Tralle to approve the
minutes of the previous meeting as distributed. The motion
carried.
Terry Maurer reported that the tests of the water at the new
well sight indicated that we would not have to install iron
filtrationat this time, but would probably have to in the near
future. Motion by Mr. Zabee, seconded by Mr. Tralle to
authorize M SA to proceed with the design to add the filtration
equipment at this time. The Motion carried.
Mr. Tralle reported that some churches in the area have
expressed interest in our security systems and he wondered if
we had a special rate for churches. It was decided that he
should work directly with Steve Nordahl to see what the costs
actually are and then get back with us.
The 1995 Budgets were reviewed with the Commissioners. Motion
by Mr. Tralle, seconded by Mr. Zabee to approve the 1995
budgets as presented. The Motion carried.
The pending ordinance requiring residents to connect to the
city water system within two years of availability was reviewed
by the Commissioners. The Commissioners directed the General
Manager to contact the City Attorney and ask that the ordinance
be redrafted to exempt the residences in the Westwood area.
7)
8)
9)
10)
11)
i2)
13)
Motion by Mr. Tralle seconded by Mr. Zabee to increase the
utilities cash donation to the City to 3% of the revenue
generated by Elk River customers. This is to be in effect for
a period of three years at the end of which it will be
reviewed. This is to have no effect on the present policy of
street lights and donated electricity for City operations. The
motion carried.
The Line Superintendent reviewed the status of construction
projects and other operating conditions.
The General Manager reviewed the October financial statements
with the Commissioners. Motion by Mr. Zabee, seconded by Mr.
Tralle to receive and file the operating statements. The
motion carried.
Motion by Mr. Tralle, seconded by Mr. Zabee, to approve the
check register.
Mr. Tralle questioned the amount of our service charge, noting
that it was less than AEC and Wright Hennepin Electric. It was
decided to take no action at this time.
At 4:45 P.M. the meeting was Adjourned into executive session
for purposes of Labor Negotiations.
At 6:00 the regular meeting was reconvened. Mr. Ron Black was
present when the meeting was reconvened.
Motion by Mr. Tralle, seconded by Mr. Simpson for the following
changes in the wages:
a) Raise the wage range of the clerical staff by 2.9%
b) Pay the clerical staff a one time payment of $300 as a
clothing allowance
c) Raise the wage ranges of the APPA salary guidelines by 2.9%
d) Glenn Sundeen to be paid at step 6 plus 75¢ per hour
e) Pat Hemza to be paid at Step 5
f) Bob McCartney to be paid at Step 7
g) Bill Birrenkott to be paid at Step 6
The motion carried.
Motion by Mr. Zabee, seconded by Mr. Tralle to void the
Employment Agreement with the General Manager dated September
1, 1992 and replace it with the Agreement dated with today's
date. The General Manager was in agreement with this motion.
The motion carried.
14) The next meeting was set for Tuesday, January 10,9~'at 3:00
P.M. at the Utilities office.
15) Motion by Mr. Tralle, seconded by Mr. Zabee to adjourn. The
motion Carried. Meeting adjourned at 6:30 P.M.
Bill Birrenkott
General Manager
ELK RIVER MUNICIPAL UTILITIES
322 King Avenue
Elk River, Minnesota 55330
Phone (612) 441-2020
Fax (612) 441-8099
To: Elk River Municipal Utilities Commission
Elk River City Council
May 3,1998
From: Bryan C. Adams
Subject: Utility Contribution to Water Main Lateral Projects
Enclosed for your reference are excerpts from the Guardian Angels, Orono Lake feasibility study. This study
suggest the Elk River Municipal Utilities (ERMU) pay for the difference between the construction costs and the
available assessments. There will undoubtedly be more requests of this nature in the future.
The ERMU and the City Council need an understanding on this issue. I personally do not have a problem
with this request, for if we are a water utility, we should be funding some of these projects. Most of these
projects are extended not only to just serve the customers applying for service but also to loop water mains to
improve water quality and improve fire flow. These projects are very difficult to budget. I also highly question if
the entire 28% overhead should apply if the Utilities fund a portion of the construction.
Since my tenure with the ERMU, City staff and ERMU staff have worked well together on water distribution
ues like size, routing, valve and hydrant locations. This will continue. If the ERMU Commission agrees to
finance projects like this, I would suggest they should have some influence as to the assessment fee level.
1.0 INTRODUCTION
On March 16, 1998, the Elk River City Council adopted Resolution 98-22 authorizing
Howard R. Green Company, Consulting Engineers, to prepare a FeasibiliW Study for
sanitary sewer and water improvements for the proposed Guardian Angels Orono Lake
Development, the Elk Motel, and the Keyser property. This report was initiated by a
petition from the Guardian Angels of Elk River, Inc. The study area is shown by
Exhibit 1. This study will also consider construction of a bituminous trail north of
Trunk Highway (TH) 10 between Guardian Angels development and Gary Street.
2.0
PROJECT SCOPE
The purpose of this study is to analyze the extension of lateral sanitary sewer and
watermain and the looping of the watermain along the north side of TH 10 between
Guardian Angels development and Gary Street. This study will discuss the existing
conditions, proposed improvements, estimated construction costs, and overhead costs
which include city administration, engineering, fiscal, and legal expenses. The City's
Assessment Manual and past practices will be used as guidelines to discuss financing
methods for the proposed improvements.
3.0
FEASIBILITY, COST-EFFECTIVENESS AND NECESSITY
The improvements proposed in this study are necessary as a result of the proposed
Orono Lake Development. The proposed development will consist of 20 townhouse
units, 80 units of assisted living in a centralized collection of buildings and a
commercial building.
Fire flow studies indicate the need to complete a connection to existing watermain at
the entrance to the Elk Bowl, east of the proposed development. This loop is necessary
to provide adequate water pressure and volume for fire fighting service. A system
without this loop cannot provide adequate pressure or volume. Completion of the loop
allows water service to the Elk Motel and the Keyser property.
The proposed improvements, based on a petition from the Guardian Angels of Elk
River, will be developed into a project large enough to ensure a competitive bidding
process. Therefore, the proposed improvements will be cost-effective. Based on the
information contained within this report, the proposed improvements are necessary,
cost-effective, and feasible from an engineering standpoint.
FEAS-230.369 1 230369m-0030
5.3
Modeling of the proposed water improvements was completed using a Cybemet
computer program to verify proposed sizing of the watermain. Fire code
requirements call for sufficient water flow and pressure to be available in the
event of a fire. Modeling of the system with the proposed trunk watermain
sizing and the looped system produced results that satisfied these requirements.
Bituminous Trail
A bituminous trail is proposed as part of this project. The trail will extend from
the southeast comer of the Guardian Angels Lake Orono Development to the
entrance to the Elk Bowl as shown on Exhibit 4. The work will tie in with
restoration involved with the utility placement. In accordance with City
standards, the trail will be 10-foot wide bituminous placed on an aggregate
base. The Park and Recreation Committee has recommended that this trail be
constructed.
6.0
6.2
IMPLEMENTATION CONSIDERATIONS
6.1 Right-of-Way and Easements
As part of the Guardian Angels Planned Unit Development, a 60-foot easement
will be dedicated for the sanitary sewer and watermain facilities. While the
streets and storm sewer will remain private, the sanitary sewer and watermain
will become public. The dedicated easement will allow City forces access for
any required maintenance.
The utilities and bituminous trail east of the Lake Orono Development will be
placed on either Mn/DOT right-of-way, or on private property. If it is placed
within the TH 10 right-of-way, Mn/DOT utility permits will be required. If the
facilities are placed on the Elk Motel and Keyser properties, utility easements
will need to be obtained. Temporary construction easements may need to be
acquired throughout the project area to accommodate utility construction.
Verbal permission will be secured from private property owners during the
construction process should work need to be completed on private property,
outside of obtained rights-of-way.
Permits
Several permits will be required prior to construction of the proposed
improvements. The permits that will be required are listed below:
· Minnesota Pollution Control Agency Sanitary Sewer
· Minnesota Department of Transportation Utility Permits
· Minnesota Department of Health Watermain
· Minnesota Pollution Control Agency Grading
FF_.AS-230.369 3 230369m-0030
6.3 Estimated Costs
6.4
The estimated construction costs and associated overhead costs for the proposed
improvements are shown in Table 1. In accordance with the City's assessment
manual, the overhead costs have been estimated as 28 % of the total project cost.
The overhead costs include city administration, engineering design, construction
staking and inspection, fiscal, and legal costs. No costs have been included for
the acquisition of utility easements or rights-of-way.
TABLE 1
Watermain and Sanitary Sewer Service
Orono Lake Development
Estimated Project Costs
Sanitary Sewer $54,000
Watermain 99,300
Bituminous Trail 8,700
Total Estimated Construction Cost $162,000
Overhead (28%) 45,300
TOTAL ESTIMATED PROJECT COST [ $207,300
Financine
The costs associated with the proposed improvements will be financed through
assessments to the benefiting properties within the study area and City park
funds and Municipal Utility funds. Proposed assessments will be based on the
City's Assessment Manual and current City assessment policies. Those costs
associated with the construction of the Orono Lake Development are proposed
to be assessed entirely to the Guardian Angels of Elk River.
For the portion of the project not a part of the Orono Lake Development, lateral
sanitary sewer and some of the watermain costs will be assessed to the Elk
Motel and the Keyser properties. The full cost of sanitary sewer construction
will be assessed to the two properties. For purposes of assessment, the Elk
Motel was determined to be two units while the Keyser property is one unit.
The two properties will be assessed for a portion of the watermain construction
costs. For the recently initiated Railroad Drive Utility Improvements project,
the benefiting property was assessed $4,000 per unit for watermain installation.
This figure was used for this report. Therefore, the Keyser property is
proposed to be assessed $4,000 for water, while the Elk Motel is proposed to be
assessed $8,000. Municipal Utility funds will be used to finance the remainder
of the watermain construction costs.
City park funds will be used to pay for construction of the bituminous trail.
FEAS-230.369 4 230369m-0030
6.5
The proposed assessments are shown in Table 2 below.
TABLE 2
Watermain and Sanitary Sewer Service
Orono Lake Development Project
Proposed Financing
1. Guardian Angels of Elk River
a. Sanitary Sewer Assessment $ 52,800
b. Water Assessment 77.100
SUBTOTAL $129,900
2. Elk Motel (James Enright and D. Smith)
a. Sanitary Sewer Assessment $10,800
b. Water Assessment 8.000
SUBTOTAL $18,800
3. James and Geraldine Keyser
a. Sanitary Sewer Assessment $ 5,400
b. Water Assessment 4.000
SUBTOTAL $ 9,400
TOTAL ASSESSMENTS $158,100
City Park Funds (Trail) $11,100
City And/Or Municipal Utility Funds ('Water) $38,100
TOTAL ESTIMATED PROJECT COST $207,300
Other Costs
There are a number of other costs associated with connecting existing homes to
city the sanitary sewer and water system. These are described as follows:
Sewer Availability. Charge (SAC)
Each property owner connecting to the city's sanitary sewer system must pay a
fee at the time of the hook-up. This fee is intended to cover the individual
property's "buy-in" to the wastewater treatment plant. This S. AC charge is
currently $1,300 per equivalent single family residential unit.
FEAS-230.369 5 2303691114)030
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City of