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2.2 ERMUSR 05-08-2018 ELK RIVER MUNICIPAL UTILITIES REGULAR MEETING OF THE UTILITIES COMMISSION HELD AT UTILITIES CONFERENCE ROOM April 10,2018 Members Present: Chair John Dietz;Vice Chair Al Nadeau; Commissioners Paul Bell, Mary Stewart,and Matt Westgaard ERMU Staff Present: Troy Adams,General Manager; Theresa Slominski,Finance and Office Manager; Mark Fuchs,Electric Superintendent; Eric Volk,Water Superintendent; Tom Sagstetter,Conservation&Key Accounts Manager; Michelle Canterbury,Executive Administrative Assistant; Jennie Nelson,Customer Service Manager; Tom Geiser,Assistant Electric Superintendent; Mike Langer,Lead Water Operator Others Present: Peter Beck,Attorney;Andrew Berg, CPA with Abdo,Eick&Meyers; Alyssa Nielsen;Julia Schreifels;Philip Schreifels; and Mark Nielsen 1.0 GOVERNANCE 1.1 Call Meeting to Order The regular meeting of the Utilities Commission was called to order at 3:30 p.m.by Chair Dietz. 1.2 Pledge of Allegiance The Pledge of Allegiance was recited. 1.3 Consider the Agenda There were no additions or corrections to the agenda. Moved by Commissioner Westgaard and seconded by Commissioner Stewart to approve the April 10,2018,agenda. Motion carried 5-0. 1.4 Resolution Recognizing 2018 Lineworkers Day Chair Dietz read the resolution. Page 1 Regular Meeting of the Elk River Municipal Utilities Commission April 10,2018 28 Moved by Commissioner Nadeau and seconded by Commissioner Bell to adopt Resolution No. 18-6 recognizing lineworkers and designating April 18,2018 as Lineworker Appreciation Day. Motion carried 5-0. 1.5 Resolution Recognizing 2018 Drinking Water Week Chair Dietz read the resolution. Moved by Commissioner Westgaard and seconded by Commissioner Stewart to adopt Resolution No. 18-7 recognizing Drinking Water Week,May 6-12,2018. Motion carried 5-0. 1.6 Recognition of ERMU's Tom Bovitz Memorial Scholarship Award Winner Ms. Canterbury provided some background on the scholarship program and introduced High School Senior Alyssa Nielsen who had been chosen as the recipient of ERMU's Tom Bovitz Memorial Scholarship. Ms.Nielsen read her essay and shared what her future plans for college were.The Commission congratulated her on the essay she wrote.Ms.Nielsen's parents were also in attendance. 2.0 CONSENT AGENDA(Approved By One Motion) Moved by Commissioner Westgaard and seconded by Commissioner Nadeau to approve the Consent Agenda as follows: 2.1 March Check Register 2.2 March 13,2018 Regular Meeting Minutes 2.3 Public Electric Vehicle Charging Station Rates Motion carried 5-0. 3.0 OPEN FORUM No one appeared for open forum. 4.0 POLICY&COMPLIANCE 4.1 2017 Financial Audit Mr. Berg was present from the auditing company, Abdo, Eick&Meyers, to present the 2017 financial audit and management letter. He stated that the auditors issued a clean opinion on the financials and that there were no findings to report. Mr. Berg walked through the management letter. Chair Dietz had a few questions for Mr. Berg and staff. Page 2 Regular Meeting of the Elk River Municipal Utilities Commission April 10,2018 29 Both responded. Mr. Berg reached out to the Commission to see if they had any additional questions on the management letter or the annual financial report. Chair Dietz had a question on page 18 of the annual financial report. He inquired as to what the"Transfers to Other City Funds" line item was for. Staff responded that it was the 4% revenue transfer for the payment in lieu of taxes (PILOT). Chair Dietz also had a question on the Long-term Debt referenced on page 19; he asked if everything referenced,with the exception of the 10 million dollar bond for our buy in to Minnesota Municipal Power Agency(MMPA), would be maturing and paid off by 2023. Ms. Slominski stated that was correct. There was discussion on the dollar amount and timing of bonding for the field services expansion project, and additional bonding for the MMPA buy in. Chair Dietz had one final question on the Accounts Receivable total on page 31. He asked for further clarification if that amount was our actual bad debt. Staff responded that it was the reserve amount for bad debts. There was discussion. Commissioner Stewart had a question on page 36 of the annual financial report. For the Capital Assets, she inquired as to why the decrease of$4,678,093 to construction in progress was more than the increase of$4,435,150 for assets being capitalized.Ms. Slominski shared that there were several large construction projects that were started in the prior year. There was discussion. Ms. Slominski stated she would provide a breakdown of those accounts to Commissioner Stewart. Commissioner Stewart commented on the percentage of line loss presented on page 56 and 57, and how that percentage has gone down significantly over the past ten years. She asked the Electric Superintendent what was contributing to the improvement. Mr. Fuchs and staff responded. Moved by Commissioner Stewart and seconded by Commissioner Nadeau to receive and file the Financial Audit for the year ending December 31,2017. Motion carried 5-0. 4.2 2017 Year End Reserve Balance Ms. Slominski presented the year-end electric reserve balance and calculations. Staff recommended that the unrestricted balance above the target level for the Electric Utility fund be designated toward electric service territory transfer costs, future capital infrastructure costs, and power cost adjustments (PCA's)to be capped at$500,000. In moving forward, Chair Dietz suggested the Financial Reserves and Investment Committee discuss the option of setting aside a portion of the reserves for the field services facility expansion project. There was discussion. Ms. Slominski presented the year-end water reserve balance and calculations. Staff recommended that the unrestricted balance above the target level for the Water Utility fund be designated for future capital infrastructure costs. Page 3 Regular Meeting of the Elk River Municipal Utilities Commission April 10,2018 30 Moved by Commissioner Bell and seconded by Commissioner Westgaard that $500,000 of the unrestricted reserve balance for the Electric Utility Fund be designated for the PCA buffer,and the remaining amount be designated towards electric service territory transfer costs and future capital infrastructure costs; and the unrestricted reserve balance for the Water Utility Fund be designated for future capital infrastructure costs. Motion carried 5-0. 4.3 2017 Utilities Performance Incentive Compensation Distribution Ms. Slominski presented the 2017 performance metrics and incentive compensation score card on which the employees had successfully achieved all of the company performance metrics targets, except for one(the Water Loss metric). Per the policy, qualifying employees would be eligible for a 1.90%distribution. The Commission had a few questions. Staff responded. Moved by Commissioner Nadeau and seconded by Commissioner Stewart to award the Performance Metrics Incentive Compensation distribution of 1.90% to qualifying employees per the terms of the policy. Motion carried 5-0. 4.4 Public Purpose Expenditure Policy Ms. Slominski provided some background on the existing Public Purpose Expenditure Policy that was adopted in 2011. She shared that the policy was originally obtained from the City and modified to fit ERMU's needs. In review of the policy, staff has identified items that have been retained from the City policy that are not necessary, some additional items that have been introduced since 2011, and some items longstanding in practice that were absent. Ms. Slominski presented the revised policy and went over the highlighted changes. Other minor changes were largely due to semantics and clarifying verbiage. Staff indicated that Attorneys Beck and Campbell Knutson had both had the opportunity to review the policy being presented. Moved by Commissioner Westgaard and seconded by Commissioner Nadeau to approve the revised Public Purpose Expenditure Policy. Motion carried 5-0. 5.0 BUSINESS ACTION 5.1 Financial Report—February 2018 Ms. Slominski presented the February 2018 financial report as outlined in her memo. Page 4 Regular Meeting of the Elk River Municipal Utilities Commission April 10,2018 31 In comparing the 2017 to 2018 year to date expenses, Chair Dietz questioned why the Electric Department Maintenance Expense was up more than $108,000. Staff responded that a large part of it was due to tree trimming. Commissioner Stewart pointed out that there was a detailed breakdown of that expense account on page 165. According to the breakdown, the three largest contributors to the increase were: maintenance of overhead lines/tree trimming;maintenance of meters; and transportation expense. Chair Dietz requested that staff analyze those three accounts and provide a further breakdown as to what is contributing to the large increase. For the Electric Department Loss on Disposition of Property line item, Commissioner Stewart noted that there was a$21,962 expense this year, and nothing in the prior year. She was curious as to what that expense was for. Ms. Slominski stated she would need to look into it further and get back to her. Commissioner Stewart also had one other question on the Interest Paid on Meter Deposit line item and what the contributing factor was in the large increase this year from last. Ms. Slominski indicated she would need to look into this further and report back on this as well. Moved by Commissioner Stewart and seconded by Commissioner Bell to receive the February 2018 Financial Report. Motion carried 5-0. 6.0 BUSINESS DISCUSSION 6.1 Staff Updates Mr.Adams provided an update on the Minnesota Public Utilities Commission(PUC)filing for the electric service boundary change for Areas 3 &4. He shared that we just received notice that the PUC has approved the change. Mr.Adams provided a heads up to the Commission that staff would be working to coordinate his annual performance review within the next few months.He noted that per our governance policy,this evaluation should take place sometime during the second quarter of each fiscal year. Ms. Slominski had noted in her staff report that April 15 will mark the end of the cold weather rule and staff anticipates high numbers for shutoffs once this comes to an end. Chair Dietz commented that with the change in billing cycles that it was his understanding that we may potentially disconnect more offenders than in the past. Staff stated that was correct.There was discussion. Mr. Tietz had nothing additional to add to his staff report.Chair Dietz asked if the locate tickets were beginning to pick up.Mr. Tietz shared that while it has picked up within the last month, it's still down from a year ago due to the weather. Mr. Sagstetter provided an update on the DC fast charger and the problems we had been having with the combo unit. Page 5 Regular Meeting of the Elk River Municipal Utilities Commission April 10,2018 32 6.2 Future Planning Chair Dietz announced the following: a. Regular Commission Meeting—May 8, 2018 6.3 Other Business There was no other business. 7.0 ADJOURN REGULAR MEETING Moved by Commission Nadeau and seconded by Commissioner Stewart to adjourn the regular meeting of the Elk River Municipal Utilities Commission at 4:39 p.m. Motion carried 5-0. Minutes prepared by Michelle Canterbury. John J.Dietz,ERMU Commission Chair Tina Allard,City Clerk Page 6 Regular Meeting of the Elk River Municipal Utilities Commission April 10,2018 33