6.1b ERMUSR 01-10-2017 Elk River
Municipal Utilities UTILITIES COMMISSION MEETING
TO: FROM:
Elk River Municipal Utilities Commission Theresa Slominski—Finance and Office Manager
John Dietz—Chair
Al Nadeau—Vice Chair
Daryl Thompson—Trustee
MEETING DATE: AGENDA ITEM NUMBER:
January 10, 2017 6.1b
SUBJECT:
Staff Update
DISCUSSION:
The auditors were here Friday, December 10th for preliminary audit work and all went well.
They reviewed contracts and meeting minutes,performed sample testing(for Accounts Payable,
Accounts Receivable, Payroll, and Financial Reporting), analyzed budget compliance, and
evaluated Risk Assessment.
Inventory counts were December 28th for both Water and Electric. Water had 100%accuracy and
Electric had 99.1%accuracy. Both were exceptional! The Auditor was onsite for the Electric
count and did some test counts as well.
We received a check from the League of Minnesota Cities Insurance Trust(LMCIT) in the
amount of$12,070 for our dividend payment for 2016. The documentation accompanying the
check is attached.
Early Performance Metrics Incentive Compensation (PMIC)preliminary reporting for 2016 4th
quarter is also attached, which shows a score of 95 out of 100. The missing 5 points is the
CAIDI metric of 150 minutes, which is over the allowed maximum of 120 minutes. Final
presentation of this will be in April 2017 when the financial audit is completed and those final
numbers are available. We will need to accrue this expense for the audit and will be using the
score of 95 and the multiplier of 2%for our calculations.
ATTACHMENTS:
• LMCIT documentation
• 4th Quarter 2016 PMIC preliminary results
F O W E R E D IT
Page 1 of 1 NATURE
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Reliable Public
Power Provider PDWfRED TO SERVE
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LEAGUE OF CONNECTING & INNOVATING
MINNESOTA SINCE 1913
CITIES
December 8,2016
To: LMCIT Property/Casualty Members
From: LMCIT Board of Trustees
Joel Hanson,Administrator,Little Canada Mark Karnowski,Administrator,Princeton
D.Love,Councilmember,Centerville Dave Canister,Manager,Plymouth
"Rhonda Pownell,Councilmember;"Northfield Todd Prance,Administrator, St.Peter
Dave Unmacht,Executive Director,LMC
Re: 2016 Property/Casualty Dividend
We are very pleased to enclose a check for your share of the$25 million dividend, which the
League of Minnesota Cities Insurance Trust(LMCIT)property/casualty program is returning for
2016.
Also included in this mailing are:
• A memo providing background on the dividend, including a detailed explanation for how your
dividend is calculated.
• A data sheet showing the earned premium and loss data used to calculate your dividend, as
well as graphs showing your written premium and dividend history.
A copy of this same information will also be sent to your insurance agent. We also encourage you
to share this information with your city council or other governing body.
We want to thank you again for your continued participation in LMCIT. Please feel free to contact
Laura Honeck,LMCIT Operations Manager, at lhoneck@lmc.org or 651-281-1280 if you have any
questions or need additional information.
LEAGUE OF MINNESOTA CITIES 145 UNIVERSITY AVE.WEST PHONE:(651)281-1200 MX:(651)281-1298
INSURANCE TRUST ST.PAUL.MN 55103-2044 TOLLFREE:(800)925-1122 WEB:WWW.LMC.ORG
137
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court decisions and the fact that very few new DPPA claims have been submitted means that
the uncertainty of these claims has lessened. This in turn means that LMCIT is now able to
release some of the extra funds. When these claims are ultimately resolved, LMCIT hopes to
be able to return the rest to cities too.
Dividend Determination
Every year the LMCIT Board determines whether a dividend can be returned, and if so,how
much.A number of considerations are weighed,with the ultimate decision involving a comparison
of the LMCIT year-end fund balance(also known as member equity or surplus)to a targeted
amount of fund balance.
Typically the major driver behind whether a dividend can be returned is how rates in recent years
compare to LMCIT's loss experience. Premium rates are designed to pay for projected losses,
expenses, and a safety marginin case losses turn.out to be greater than expected. If losses turn out
to be at or below LMCIT's projections,then the safety margin isn't needed and can either be
returned to members as a dividend or used to strengthen LMCIT's fund balance.
Dividend Calculation
The first step the LMCIT Board takes in determining the dividend amount is to look at LMCIT's
actual fund balance compared to the fund balance targets the Board has established. This year the
Trustees determined that$25 million could be returned to member cities.
The next step is to calculate the dividend.The formula for calculating the dividend is designed to
return proportionally greater amounts to members that have been with LMCIT for a longer period
of time and that have been most successful in avoiding and controlling losses. Here are the steps to
determine the dividend for each individual member:
Step 1: Each member's adjusted losses are subtracted from its gross earned premiums.
Step 2: After calculating Step 1,the remaining dollar amount for each member is added together.
This is the total that is used to calculate each individual dividend amount.
Step 3: The amount for each member calculated in Step 1 is then divided by the sum of all
members calculated in Step 2. This results in each member's percentage, or share,of the
$25 million total that's available as a dividend this year.
The enclosed data sheet shows the exact figures,including your percentage of the dividend share,
that were used to calculate your dividend. A few definitions may help as you look at this
information.
Wage
138
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LEAGUE OF MINNESOTA CITIES INSURANCE TRUST
PROPERTY/CASUALTY
2016 DIVIDEND CALCULATION
AT MAY 31,2016
NCI-BIB LLC
NORTHERN CAPITAL INSURANCE GRP
8200 HIGHWOOD DR
PO BOX 9396
MINNEAPOLIS MN 55440-9396
Elk River Municipal Utilities GROSS EARNED PREMIUM $428,482
13069 ORONO PARKWAY ADJUSTED LOSSES $125,000
PO BOX 430 MEMBERS DIVIDEND PERCENTAGE 0.00048278876
ELK RIVER,MN 55330-0430 DIVIDEND AMOUNT $12,070
ELK RIVER MUNICIPAL UTILITIES
$1130,000• Premium and Dividend History
$160,000-
$140,000•
$120,000 — —
$100,000
$80,000 — —-- Ele
$80,000
$40,000$20,000$0 W os w '.o 'I1 - '12 '13 'ta Y$s
622mton141111161S6 SO to to-__so._.. *0 -_.-SO_ SO 5102,026 $147,160 0540,600
oDiaNWs $0 So So $0 50 $0 SD 01,030.-.---$7.220 $12,070
ELK RIVER MUNICIPAL UTILITIES
Premiums and Dividends Since 1987
$500,000
$450,0000
A b `til
$300.000: ?
$50,00.
�
'{')M0•» � s
n$160,000`MAO ar$100,000 a
y _
Written Premiums Dividends
The"gross earned premium'figure Is the member's total earned premiums as of May 31,2016 for the past 20 years.This Is the premium figure that's used In the dividend calculation.
The"2016 written premium"figure is the member's total premium for the member's most recent renewal prior to May 31,2016(for most members,only a portion of that 2016 written
premium would be earned as of May 31,2016).
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