ERMUSR EDUCATION 09-21-2004 Elk River
Municipal Utilities
13069 Orono Parkway phone: 763.441.2020
Elk River, MN 55330 Fax:763.441.8099
September 1, 2004
To: Elk River Municipal Utilities Commission
Jerry Takle
James Tralle
John Dietz
From: Bryan Adams
Subject: MMUA Annual Meeting
I had an opportunity to attend MMUA's 72o" annual meeting at Breezy Point, MN. A
summary of this years meeting is as follows:
Based upon 2002 electric sales, Elk River is the 13th largest electric utility in Minnesota
out of 126 electric utilities. We are no longer a small municipal. An excellent
presentation by Stefan Salmonson of Protective Services, where he covered terrorism and
gang activity in Minnesota along with gang hardware seized in Minnesota. Due to the
fact that 70%± of incarcerated gang members are illiterate, he suggests use of warning
signs with more pictures and fewer words. The best strategy to protecting ones self and
businesses is to pay attention to ones environment and harden your home/business so
these people go elsewhere. This presenter would be a great program for our safety
program. As first responders, this presenter rated electric utilities as important as
police/fire.
The Izaak Walton League gave a good presentation on Environmental and Energy Issue.
They did admit that more generation and transmission facilities are needed which is a big
step for them. They desire a huge input on how and where these facilities are
constructed, in other words, not in their backyard.
The Minnesota State Auditor Pat Anderson, gave a presentation on Municipal Enterprise
Activity Special Study and related enterprise transfers. The recommendations from this
study are:
I. Generally, services paid for primarily by user fees should be accounted for in an enterprise fund.
When governments list fee-based activity in the general fund, other revenue in that fund may allow for
subsidization of the activity that is unseen by the public,rendering it nearly impossible to monitor how
much is actually being paid by the user. General and special revenue funds recognize expenditures rather
than expenses, making it more difficult to determine the full cost of the activity. Citizens may not realize
the true costs of the services they receive.
Therefore, the State Auditor's Office recommends that all cities establish activities primarily financed by
user fees as enterprise funds. Doing this will give taxpayers,and local policy makers, a better idea of the
true costs of the services provided.
2. Enterprises for profit should not lose money.
These enterprises are those for which there is generally(or reasonably could be)competition from the
private sector. Liquor stores, retail operations, and other for-profit enterprises should always make a profit.
If they fail to do so,they should not exist.
3. Necessary enterprises should only break even.
Necessary enterprises should only charge enough to cover operating costs and the costs of replacement.
The law often prohibits excessive charges for public services. This ensures that the public is not being
charged an exorbitant amount for a service that they are essentially forced to purchase from the city.
4. Cities should consider public-private partnerships where feasible.
Cities should explore the possible gains in efficiency by contracting with private management companies.
Cities would retain control of the service, while benefiting from the expertise of an experienced provider.
5. Cities should set up enterprise transfer policies.
Enterprise type activity allows the users of a service to pay for it,without using any property tax revenue.
If enterprise activities generate excess profits that are continually transferred to the general fund,then the
reverse is occurring, users are being indirectly taxed to subsidize other city services. Cities should create a
policy of how much they transfer from year to year during the budget process in order for the subsidy of
city functions, by enterprise activities, to be more transparent to the taxpayer.
The League of Minnesota Cities gave a presentation on Fair Labor Standards Act and
overtime. The criteria in determining exempt and non exempt employee status has been
modified. One of our previously non-exempt employees could now possibly be classified
as exempt, although the practical implications would be small. A larger issue is how we
pay overtime. Included in regular pay shall be wages and wage increases, on-call pay
and shift differentials, longevity pay, and educational incentive pay. Elk River Municipal
Utilities has typically not included on-call pay in the regular pay to calculate line and one
half. Statute of limitations is 2 years so we are going back 2 years to rectify this problem.
In the future, on-call pay will be included in the overtime calculation.
The municipal utilities of Hibbing and Virginia talked about their proposed renewable
biomass generation project. This project entails using the existing steam power plant in
Hibbing and Virginia with popular trees as fuel to produce 35MW of electric generation.
Over 600,000 ton/year of trees will be needed. Excel Energy with purchase of the output
at approximately 10.2 0/kWH to satisfy their renewable fuel mandate. This project will
be a great economic development boost for this part of our state.
There are also more charges on the horizon for locating underground utilities. In rule
making now, is the requirement for cities/utilities to locate private service lines (water
service, sewer services, etc.) in public R/W and easements. It was initially proposed to
locate these underground private lines on private property as well. Due to the depth of
water and sewer lines, it is very difficult to locate metallic service lines with any accuracy
and impossible to locate non-metallic (sewer lines) without pot holing. Failure to locate
will result in the cities/utility paying for any repair to these underground utilities
damaged by a 3`d party. MMUA will continue to fight this issue. In the long run, Elk
River Municipal Utilities is going down the right path in using GPS' to locate non-
metallic and metallic underground utilities.
MMUA and LMC are combining efforts and offering the safety compliance groups to
interested Minnesota cities and not just cities involved in MMUA.