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2.2. ERMUSR 09-13-2016 ELK RIVER MUNICIPAL UTILITIES REGULAR MEETING OF THE UTILITIES COMMISSION HELD AT UTILITIES CONFERENCE ROOM August 9,2016 Members Present: John Dietz,Chair;Al Nadeau,Vice Chair;and Daryl Thompson,Trustee ERMU Staff Present: Troy Adams,General Manager; Theresa Slominski,Finance and Office Manager; Mark Fuchs,Electric Superintendent; Mike O'Neill,Technical Services Superintendent; Tom Sagstetter,Conservation&Key Accounts Manager; Michelle Canterbury,Executive Administrative Assistant; Jennie Nelson,Customer Service Manager; Others Present: Zack Carlton,City Planning Manager;Peter Beck,Attorney 1.0 CALL MEETING TO ORDER John Dietz called the August 9,2016 meeting to order at 3:30 p.m. 1.1 Pledge of Allegiance The Pledge of Allegiance was recited. 1.2 Consider Utilities Agenda There were no additions or changes to the agenda. Daryl Thompson moved to approve the August 9,2016 Utilities agenda. Al Nadeau seconded the motion. Motion carried 3-0. 1.3 Introduction of New Employee Theresa Slominski introduced Melissa Karpinski the new Accountant. The Commission welcomed the new employee. 2.0 CONSENT AGENDA(Approved By One Motion) The Commission expressed some concern with the financials; in particular the June 2016 Electric Department net loss of roughly($331,000). Theresa Slominski explained that part of the reason for this is the financials are recognizing the revenue for May usage and the wholesale power costs from June,and because the summer rates went into effect in June the financials are Page 1 Regular Meeting of the Elk River Municipal Utilities Commission August 9,2016 21 reflecting a summer rate for expenses and a winter rate for revenue;which we should see the flip side of in September. John Dietz asked if there was some way that we could put the same month's power bill into the financials as the month we were billing for.John expressed that it would make more sense to have the appropriate income lined up with the appropriate expense for that month. John directed staff to look into this option with our auditor at the end of the year. Troy Adams added that a few other contributing factors are the 0%electric rate increase and the $2.00 demand credit. With the$2.00 demand credit,we estimated the expense to be roughly $800,000 which would be funded from margins or reserves. Troy noted that if the reserves end up covering this, it's not being reflected on the income statement;also part of the exposure and why it's negative is that the funding that would normally be in the rates is in the reserves.Troy stated that we'll be able to quantify that amount at the end of the year.There was discussion. John Dietz had a question on the increase in the health insurance. Staff responded. Daryl Thompson moved to approve the Consent Agenda as follows: 2.1 July Check Register 2.2 July 12,2016 Regular Meeting Minutes 2.3 Financial Statements 2.4 2016 Second Quarter Performance Metrics an Incentive Compensation Update Al Nadeau seconded the motion. Motion carried 3-0. 3.0 OPEN FORUM No one appeared for open forum. 4.0 OLD BUSINESS 4.1 Historic Water Tower Renovation Update-Verbal At the March 15, 2016 Commission meeting, Zack Carlton, Planning Manager with the City of Elk River,provided an update on where they were at in the grant application process. At that time there were two grant opportunities they were looking at applying for. Zach Carlton was present and he informed the Commission that due to failure on the part of our consultant to provide the additional architectural drawings needed,we missed the deadline for the first grant which would have covered 100%of the remaining$80,000 of work. And that the second grant,the State Capital Project Grant,which would require a 50%match, is not an option due to there being no funds available for the program. As there are no grants currently available to fund the improvements to the tower,they are looking at waiting until next spring to apply for the Minnesota Historical and Cultural Heritage Grant which would cover 100%. As ERMU currently has money set aside for this Page 2 Regular Meeting of the Elk River Municipal Utilities Commission August 9,2016 22 project,John Dietz asked if we could proceed forward with the project and reimburse ERMU once we receive the grant. Zach Carlson responded that the work can't begin before you receive approval of the grant. There was discussion. 4.2 Landfill Gas Plant Engine Repair and Operational Cost Update Tom Sagstetter shared that as part of the ongoing evaluation of the Elk River Landfill Gas Plant (LFGP)generating facility,ERMU met with Waste Management and Sherburne County representatives on July 21'to discuss current and future operations of the facility and followed-up on the nine action items identified at the May 23th meeting. Tom went over the action items and provided a summary of the discussions that took place.There was discussion. Staff opened it up to Peter Beck to see if he had any comments now that he's had the opportunity to review the contracts that we currently have in place.Peter Beck shared his opinion and offered some insight into other options we may want to consider. There was further discussion. 5.0 NEW BUSINESS 5.1 Deposits and Related Services Policies Daryl Thompson had requested to review the Deposits and Related Services Policies; in particular section eight that references the date bills are due and the procedure for applying penalties. Daryl shared that he was approached by a customer who had a concern about a penalty that was applied to his account due to a past due bill. The customer explained that their bill was due on the 15th of the month,which fell on a Sunday, and that they had made the payment on the Monday the 16th at which time they incurred a past due penalty. Daryl Thompson asked for further clarification on how ERMU's policy addresses bills that are due on weekend or a holiday, and if we should consider offering an extra day for bills that are due during those timeframes. Jennie Nelson explained that the way the policy is written right now is pretty black and white. The policy states: Bills are due and payable on the 15th of the month. Bills become past due on the 16th of the month, or the next business day. Any bill not paid by the due date will be charged a penalty amount equal to 10%of the original billing. Jennie shared that customers have a variety of options for paying their bill to ensure the payment is received on time. Jennie also explained the timing of when we pick up and process payments that are made through our drop boxes over the weekend or on a holiday. There was discussion. Jennie stated that for customers that are not habitually late, we will waive one penalty per year if they request we do so; this year we've removed 311 for a total of $13,600. Staff reached out to the Commission to make sure they were good with the way the current policy is written and the practice we've been following. After discussion the Commission was in favor of leaving the policy as is. Daryl Thompson asked if we could put something on our bill that clarifies when the bill is due and when the penalty is Page 3 Regular Meeting of the Elk River Municipal Utilities Commission August 9,2016 23 incurred. Staff thought there was something to that effect currently on the bill, but would follow up to verify that. 5.2 2016 Second Quarter Delinquent Items Theresa Slominski presented the delinquent items for the second quarter which included a delinquent amounts listing report totaling$11,197.04 for all services. Theresa also presented a color-coded recap comparison with last year, identifying the running totals. Theresa noted that we collected approximately$27,000 from Revenue Recapture (RR) in 2016; of that, $10,500 was from a large commercial write-off in 2015. The amount for the second quarter write-offs was ($338.07), a credit due to collections on amounts previously written off, which is typical in the second quarter. Theresa stated that our 2016 budgeted amount for collections and write-offs are $105,000, or.27%uncollectible accounts per revenue dollar. According to APPA's most recent published standard ratios,the industry standard is between .18% and .37%. Our totals, excluding RR, for the year are well below the national average, at .007%(and .047%including RR). The Commission had a few questions on delinquent amounts listing report. Staff responded. Al Nadeau made a motion to approve the Second Quarter Delinquent Amounts Listing. Daryl Thompson seconded the motion. Motion carried 3-0. 5.3 2017 Budget: Schedule; Travel and Training,Dues, Subscriptions and Fees Theresa Slominski gave an overview of the budgeting process schedule and presented the Travel and Training budget which reflected a 14.1%increase over the prior year. She went over the line items for each department and noted which ones had increases from the prior year. John Dietz asked if the increase in the APPA Linemen Rodeo team line item was due to the fact that it was being held out of state. Staff responded that there would be additional expenses due to the event being held in San Antonio, TX in 2017. Another notable line item increase for the electric and water department was for Cross Training School. Mark Fuchs explained how the cross training works and shared how we've benefited from it as a company. John Dietz stated that training is always good, and that he especially liked the idea of cross training the electric and water department so that they have that basic knowledge to be able to help each other out if needed. He added that as we go through the budgeting process we'll need to determine whether we can afford to do everything that is in there. The Dues, Subscriptions, and Fees budget had a 14.6%increase,reflecting various known and projected increases for 2017. Theresa presented the proposed budget and shared that we had identified some dues and fees that we were paying for that had previously not made it onto this itemized list;those line items were identified with an asterisk. She noted that the items added are not necessarily new expenses, but rather ones that were previously being accounted for in other areas. Page 4 Regular Meeting of the Elk River Municipal Utilities Commission August 9,2016 24 6.0 OTHER BUSINESS 6.1 Staff Updates Troy Adams expanded on his staff update regarding the Lineworkers Rodeo. He shared that as a result of unforeseen expenses relating to the weather during the Lineworkers Rodeo,MMUA is projecting a budget shortfall of$35,000. The big tent,heating,and tent flooring all contributed to this shortage.The MMUA board is looking to the membership to help with the shortfall.In an effort to do so,MMUA will be sending a letter to all of the members to see if they would be willing to donate some additional funds for the event.Troy shared that we had given a$10,000 donation for the event,and that compared to similar sized utilities we donated far less than most. Staff suggested to the Commission that we donate an additional$5,000 to help lessen the lost.Daryl Thompson asked how many other utilities contributed. Staff responded. The Commission asked if MMUA had the power to just assess all the members through their dues. Troy responded that if no one else contributes it will be recovered through the dues. As ERMU had already given a donation,the Commission indicated that they would like to wait to see if others would step up to the plate to help out. Troy agreed to wait and see what happens and asked for Commission support to authorize an additional$5,000 donation if others step up to help to bridge the shortfall. The Commission was open to that option. In Troy's staff report he had shared that the new leadership from Connexus Energy had met with ERMU regarding their differing interpretation on provisions of our 2015 Electric Service Territory Transfer Agreement.,and that he had met with their CEO regarding this and other items. John Dietz wanted to know if there was reason for concern. Troy responded that although we have a signed contract,the item of specific concern is the clause we have in it for municipally developed properties.Troy explained the differing of interpretations and the implications of it.Troy indicated that there would be further discussions and expressed that there would need to be some type of compromise that both parties would need to come to. Theresa Slominski shared that she would be receiving our insurance renewal on August 22. She forewarned the Commission that based on our high usage,this renewal and our increase will be on the higher end of the spectrum. John Dietz said that he was approached by a resident who wanted to know if it would be possible to put up some type of light for the ice rink at Mississippi Oaks Park. John said that he had also run the request by the City Parks and Recreation Director. Staff responded that if the city chooses to do so,they would be the ones who would need to budget for the cost of materials and electricity,and that ERMU would be able to donate the labor for installation. John Dietz shared that the Sherburne County Board is considering adding a pharmacy at their location for employees.They are interested in gauging the interest of the city,utilities,and school district to see if they would also have an interest. After discussion and mixed opinions, staff indicated that they would need more information before consideration. Page 5 Regular Meeting of the Elk River Municipal Utilities Commission August 9,2016 25 6.2 Set Date for Next Meeting A special Commission meeting was scheduled for Tuesday,August 16,2016 at 2:15 p.m.,to be held at Cragun's Resort on Gull Lake,Brainerd,Minnesota. The purpose of the meeting is to discuss development of the Governance Manual with John Miner of Collaborative Learning, Inc. The next regularly scheduled Commission meeting will be held on September 13,2016. 6.3 Closing of Meeting: "Meeting to be Closed pursuant to MN Statute 13D.05, Subd. 3(c) to develop or consider offers or counteroffers for the purchase or sale of real or personal property."—Business Line Valuation a. Call Closed Session to Order at 4:53 p.m. b. Discussion c. Adjourn Closed Session at 5:24 p.m. 6.4 Adjourn Regular Meeting Al Nadeau moved to adjourn the regular meeting of the Elk River Municipal Utilities Commission at 5:25 p.m. Daryl Thompson seconded the motion. Motion carried 3-0. Minutes prepared by Michelle Canterbury. John J.Dietz Chair,ERMU Commission Tina Allard City Clerk Page 6 Regular Meeting of the Elk River Municipal Utilities Commission August 9,2016 26