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2.2. ERMUSR 03-19-2013 ELK RIVER MUNICIPAL UTILITIES REGULAR MEETING OF THE UTILITIES COMMISSION HELD AT UTILITIES CONFERENCE ROOM February 12,2013 Members Present: John Dietz, Chair; Daryl Thompson,Vice Chair;Al Nadeau, Trustee ERMU Staff Present: Troy Adams, General Manager; Theresa Slominski,Finance and Office Manager; Mark Fuchs, Line Superintendent; David Berg, Water Superintendent; Wade Lovelette, Technical Services Superintendent; Tom Sagstetter, Conservation&Key Accounts Manager; Jennie Nelson,Executive Administrative Assistant Others Present: Cal Portner, City Administrator; Peter Beck,Attorney 1.0 CALL MEETING TO ORDER John Dietz called the February 12,2013 meeting to order at 3:30 p.m. 1.1 Pledge of Allegiance The Pledge of Allegiance was recited. 1.2 Consider Utilities Agenda Troy Adams added 5.6 for Wire Bids. Daryl Thompson moved to approve the amended February 12,2013 Utilities Agenda. AI Nadeau seconded the motion. Motion carried 3-0. 2.0 CONSENT AGENDA(Approved By One Motion) John Dietz had questions about financials,staff responded. Daryl Thompson moved to approve the Consent Agenda as follows: 2.1 January Check Register 2.2 January 8,2013 Regular Meeting Minutes 2.3 Financial Statements Al Nadeau seconded the motion. Motion carried 3-0. 3.0 OPEN MIC Page 1 Regular meeting of the Elk River Municipal Utilities Commission February 12, 2013 No one appeared for open mic. 4.0 OLD BUSINESS 4.1 Loneevity Pay In 2012, the Wage and Benefits Committee considered the idea of longevity pay. The Committee submitted this idea to the Commission for discussion at the December Utilities Commission meeting. The topic was then discussed at the January Utilities Commission meeting. Direction was given to staff to bring back a longevity pay plan for further discussion in February with an analysis on implementing longevity pay for line workers only. Specifically,the direction given was to analyze the impact to the pay plan if longevity pay were to be implemented for the line worker positions only. Troy Adams recommends tabling the consideration of longevity pay until the pay plan could be benchmarked and analyzed as this is the bigger issue. Daryl Thompson said he did not want to change the whole pay plan, but would support analyzing it. John Dietz and Al Nadeau agreed and Al Nadeau wants to take a look at job classifications. Troy Adams will analyze the pay plan and this information will be brought back to the Commission in the fall. 5.0 NEW BUSINESS 5.1 2012 Annual Safety Report Minnesota Rules Chapter 7826 Public Utilities Commission Electric Utility Standards cover safety, reliability, service, and reporting requirements. Per 7826.0100(A),municipal utilities are exempt from these requirements. However, the Elk River Municipal Utilities (ERMU) Commission adopted a number of parts of this chapter as a Distribution Reliability Standard policy. This policy includes an Annual Safety Report requirement. The policy requires ERMU to "file an annual safety performance report with its local governing body. The report will include summaries of all reports filed with OSHA and the Occupational Safety and Health Division of the Minnesota Department of Labor and Industry during the calendar year." In 2012, ERMU only submitted one report that qualifies under this reporting requirement; the OSHA Form 300A, which is a summary of work related first report of injuries and illnesses. Discussion followed. 5.2 2012 Electric Reliability Report Minnesota Rules Chapter 7826 Public Utilities Commission Electric Utility Standards cover safety, reliability, service, and reporting requirements. Per 7826.0100(A), municipal utilities are exempt from these requirements. However, the ERMU Commission adopted a number of parts of this chapter as a Distribution Reliability Standard policy requiring annual reporting on system reliability. Page 2 Regular meeting of the Elk River Municipal Utilities Commission February 12, 2013 John Dietz said the numbers were great and would like to see the Utilities advertise these numbers more often. He also wanted a chart brought back showcasing ERMU's reliability numbers against other utilities. 5.3 Tax Exempt Financing For more than 100 years, the concept that one body of government should not tax another body of government has existed. Currently, the owners of municipal bonds are not required to pay federal income tax on the interest income they receive from the bonds. (And, the owners of federal bonds are not required to pay state and local income tax on the interest they receive from those bonds.) Municipal bonds are a tool that local government entities use to finance their critical infrastructures including but not limited to: electric, water, wastewater, and gas systems; roads and bridges; government buildings, schools, and hospitals. Beginning in 2010 and again with the recent "fiscal cliff'negotiations, Congress and the Executive branch have discussed making changes to the federal income tax exemption on municipal bonds. The elimination of these exemptions would result in one body of government taxing another. This would also result in a crippling effect on local government's ability to finance new(or maintenance on) critical infrastructures. The increased cost of money to finance these critical infrastructures would inevitably be passed on through taxes, fees, and rates. For municipal utilities, this additional cost of doing business places additional burdens on the utility's ability to remain competitive. The elimination of tax exempt financing does not provide any real savings to taxpayers. The savings at the federal level would just be passed down to taxpayers at the state and local level. Because of the ramifications of the elimination of tax exempt financing to municipal governments, this topic will be a priority for MMUA this year. Troy Adams asked the Commission to sign a resolution stating ERMU's support to preserve tax exempt financing. Discussion followed. Al Nadeau motioned to approve Resolution 13-1 "ERMU Support of the Preservation of Tax Exempt Financing." Daryl Thompson seconded the motion. Motion carried 3-0. 5.4 Aquifer and Ground Water Supply The 2012 summer drought was tough on ERMU's wells and aquifer and the predictions for 2013 are not looking any brighter. Every month, the wells are measured while they are flowing to see how drawn down the water is, or in other words, how far down the well our water is sitting. In 1997, ERMU had roughly 2,000 customers hooked up to ERMU's water system. In July of 1997, Well #3's water was flowing 46%of the way down the pipe. In 2012, ERMU had roughly 4,500 water customers and in July of 2012 the same well was 61% of the way down the pipe. Page 3 Regular meeting of the Elk River Municipal Utilities Commission February 12, 2013 The drawdown on ERMU's wells combined with another possible drought this summer poses a large problem for the Water Departments revenue. The DNR has talked about enforcing water restrictions to help conserve water. In other words, reducing or banning lawn sprinkling altogether. Summertime is when the bulk of the water department's income is made. Without that revenue, ERMU could potentially have to dip further into the reserves to pay for the necessary planned projects. In the event that the DNR does enforce water restrictions, ERMU will need to take steps to compensate for the potential reduction in water sales. Discussion followed. Troy Adams and David Berg were instructed to bring back some figures for rate increases in the event that the DNR does enforce water restrictions. 5.5 Legal Services ERMU has used a number of different attorneys in the past including the City Attorney, Peter Beck, with Gray Plant Mooty. At the April 2009 Utilities Commission meeting, the Commission approved using the City Attorney for future legal issues. A monthly retainer of $1,000 was established for general legal counsel. At the January 8, 2013 Commission meeting, Peter Beck announced his retirement from Gray Plant Mooty and the opening of his private practice, Beck Law Office. Similar to the arrangement with Gray Plant Mooty, Peter Beck has arranged for Cambell Knutson to provide support and depth of service for work outside of the general retainer. Cambell Knutson has experience representing municipal utilities including North St. Paul and Mora. Peter Beck has provided an Agreement for Legal Services for the Commission to consider. This agreement works under the same rates established in 2009. Peter Beck wanted to point out that this agreement was not intended to change anything, but to just document the arrangement. Daryl Thompson made a motion to approve the "Agreement for Legal Services". Al Nadeau seconded the motion. Motion approved 3-0. 5.6 Wire Bids ERMU went out for bid for wire in February. Troy Adams requested that the Commission give approval to award the wire bid to the lowest bidder during bid opening on March 18, 2013 and give an update to the Commission at the March 19, 2013 meeting. Daryl Thompson made a motion to approve awarding the wire bid to the lowest bidder. Al Nadeau seconded the motion. Motion carried 3-0. Page 4 Regular meeting of the Elk River Municipal Utilities Commission February 12, 2013 6.0 OTHER BUSINESS 6.1 Staff Updates Troy Adams verbally added to his written Staff Update by saying the closing date for the purchase of 1627 Main St.would be on March 25,2013. He also noted that ERMU received a notice from the City that they are considering charging a franchise fee to all residents and businesses.Instead of assessing to cover street projects,they would use the money from the franchise fee to cover those expenses. Troy Adams will provide more information on this topic as it comes. 6.2 Set Date for Next Meeting Due to scheduling conflicts,the regularly scheduled meeting on March 12,2013 is cancelled and the next meeting of the Elk River Municipal Utilities Commission will be Tuesday,March 19, 2013,at 3:30 p.m. The Commission recessed the regular meeting at 4:37 p.m. 6.3 Closing of Meeting: "Meeting to be closed pursuant to MN Statute 13D.05, Subd. 3(c)(3) to develop or consider offers or counteroffers for the purchase or sale of real or personal property." a. Call Closed Session to Order b. Discussion c. Adjourn Closed Session 6.4 Adjourn Regular Meeting Al Nadeau moved to adjourn the regular meeting of the Elk River Municipal Utilities Commission at 5:00 p.m. Daryl Thompson seconded the motion. Motion carried 3-0. Minutes prepared by Jennie Nelson. John J. Dietz Chair,ERMU Commission Tina Allard City Clerk Page 5 Regular meeting of the Elk River Municipal Utilities Commission February 12, 2013