2.2. ERMUSR 01-08-2019 ELK RIVER MUNICIPAL UTILITIES
REGULAR MEETING OF THE
UTILITIES COMMISSION
HELD AT UTILITIES CONFERENCE ROOM
December 11,2018
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;
Mike Tietz,Technical Services Superintendent;
Eric Volk,Water Superintendent;
Tom Sagstetter, Conservation&Key Accounts Manager;
Michelle Canterbury,Executive Administrative Manager;
Jennie Nelson, Customer Service Manager;
Tony Mauren,Communications&Administrative Coordinator
Others Present: Cal Portner,City Administrator;Peter Beck,Attorney; and
Teri Heaton, Springsted Senior Vice President/Client Representative
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
Ms. Slominski requested to move up agenda item 6.2,Bond Recap,to immediately follow 1.4,
Water Fluoridation Quality Award.
Moved by Commissioner Westgaard and seconded by Commissioner Nadeau to approve the
amended December 11,2018,agenda. Motion carried 5-0.
1.4 Water Fluoridation Quality Award
Mr.Volk announced that the U.S.Department of Health and Human Services for Disease Control
has recognized Elk River for achieving excellence in community water fluoridation by maintaining
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a consistent level of fluoride in the drinking water throughout 2017.He shared that the achievement
of receiving this award is a testament to the attention to detail the water operators demonstrate on a
daily basis. Chair Dietz inquired as to how many water departments receive this award.Mr.Volk
responded that in Minnesota approximately 200 of the 600 possible fluoridating communities are
receiving the award.Ms.Canterbury shared that staff will be promoting this achievement on
ERMU's social media platforms.The Commission congratulated the water department on their
achievement.
6.2 Bond Recap
Ms.Heaton, Senior Vice President with Springsted,was in attendance and brought cake to celebrate
our bonding issuance and sale that took place on August 29,2018.Ms.Heaton provided an update
on the market and shared that the timing of our bonding couldn't have been better. Since the sale of
the bonds,the interest rates have been climbing up,which would have resulted in$360,000 to
$700,000 in additional interest paid for the life of the bonds.Ms.Heaton touched on ERMU's
Moody's investor rating which contributed to a true interest cost of 3.52%the day of sale, compared
to the index at 4.47%;this resulted in almost a whole percentage point less due to the tremendous
Aa3 rating.Ms.Heaton also went over the factors that could lead to a Moody's rating upgrade.
There was brief discussion on rating upgrades and when they may occur.
2.0 CONSENT AGENDA(Approved By One Motion)
Moved by Commissioner Nadeau and seconded by Commissioner Westgaard to approve the
Consent Agenda as follows:
2.1 November Check Register
2.2 November 13,2018 Regular Meeting Minutes
2.3 November 13,2018 Closed Meeting Minutes
2.4 Summary of General Manager Performance Evaluation
2.5 2019 Official Depository
2.6 2019 Official Newspaper
2.7 2019 Utilities Commission Meeting Schedule
Motion carried 5-0.
3.0 OPEN FORUM
No one appeared for open forum.
4.0 POLICY& COMPLIANCE
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4.1 Performance Metrics and Incentive Compensation Policy
Per our policy,the metrics for measurement of the designated year need to be determined
before the start of the designated year; this allows for changes to be made and communicated
in a timely manner before performance measurement begins. Mr. Adams presented the
proposed Performance Metrics and Incentive Policy Score Card.No changes were being
recommended for 2019. Mr. Adams informed the Commission that staff will continue to
evaluate the customer satisfaction survey component of the Utilities Performance Metrics and
Incentive Compensation for viable options to incorporate for measurement in 2020.
Moved by Commissioner Bell and seconded by Commissioner Stewart to approve the
Performance Metrics and Incentive Compensation Score Card for 2019. Motion carried
5-0.
4.2 Agenda Planning Policy and the Annual Governance Agenda
Mr. Adams provided some background on the Agenda Planning Policy. He shared that when it
was developed the rolling two year agenda requirement was a discussion point. It was
questioned whether a two year forward looking agenda was needed, or if an annual agenda
would suffice. After application of this new governance policy, staff recommended changing
the two year requirement to a one year annual requirement. Mr. Adams presented two other
changes to the policy as outlined in his memo.
Mr. Adams presented the proposed 2019 Annual Governance Agenda. Mr. Adams explained
that the annual agenda will provide transparency for the occurrence of the most critical
responsibilities of the commission. Moving forward,the Annual Governance Agenda will be
included in the Future Planning section of the commission meeting agenda.
Moved by Commissioner Westgaard and seconded by Commissioner Nadeau to adopt the
revised Agenda Planning Policy. Motion carried 5-0.
Moved by Commissioner Bell and seconded by Commissioner Westgaard to adopt the
2019 Governance Agenda. Motion carried 5-0.
5.0 BUSINESS ACTION
5.1 Financial Report—October 2018
Ms. Slominski presented the October 2018 financial report. The Commission had a few
questions on the accumulated depreciation. Staff responded.
Moved by Commissioner Stewart and seconded by Commissioner Nadeau to receive and
file the October 2018 Financial Report. Motion carried 5-0.
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5.2 Wage& Benefits Committee Update
At the November 13 Commission meeting,the Commission directed the Wage &Benefits
Committee (W&BC)to benchmark the management pay group and report back to the
Commission at the December meeting. The W&BC met just prior to the Commission meeting
to review the benchmarking data. Mr. Adams shared that after review of the data,the W&BC is
recommending contracting with a third party to do a pay plan evaluation with a concentration
on the management pay group. Chair Dietz elaborated on the benefits of hiring a third party to
evaluate these positions;preferably somebody that is familiar with the utility industry. He
recommended that staff bring back three to four proposals for consideration at the January
Commission meeting.
Moved by Commissioner Nadeau and seconded by Commissioner Stewart directing staff
to solicit proposals for a pay plan evaluation. Motion carried 5-0.
5.3 2019 Annual Business Plan
In November, the preliminary 2019 Annual Business Plan was presented to the Commission.
Mr. Adams shared that there have been several changes due to the finalizing of projects and
expenses, and the most significant change is due to the implementation of electric rate
reductions at the direction of the Commission. As outlined in his memo, Mr. Adams presented
the proposed electric rates and explained that the reset of rates will affect consumers differently
depending on usage. He shared that a typical residential customer should experience an
approximate 5%reduction in electric costs, and commercial customers should experience
between a 4%to 5%reduction. Mr. Adams noted that staff is also proposing the
implementation of a Large Demand Electric Service Rate which is reflected in the budget.
Mr. Adams presented the proposed residential water rates which reflected a projected 1.72%
annual water cost increase for a typical residential customer; this is equivalent to less than a
$5.00 increase for the year. Commercial customers will experience a blended rate increase of
2%or less depending on usage.
Commissioner Stewart had a question on power cost adjustment credits (PCAs)and wanted to
know if we have given them back or if they were still on the books. Staff responded that with
the change in whole power providers,the intent was to pass along the accumulated PCA credits
in their entirety to our customers in 2018.
Commissioner Stewart expressed her concerns about doing a 5%rate reduction and asked if
staff had done a multi-year rate projection. Mr. Adams responded.
Commissioner Stewart also had some questions and concerns about the HWY 169 project and
how that may affect future rates. There was discussion on the infrastructure in that area, and
the impact of it not being fully depreciated. Commissioner Westgaard stated that it may be
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beneficial to identify the assets that would be affected to determine the total impact of writing
them off. Staff shared that until the Minnesota Department of Transportation finalizes their
plans for the project,they have no way of identifying which assets will be impacted.
Commissioner Stewart inquired as to how often staff does a cost of service study. Staff
responded that they had done one in 2016 and that it was based on Minnesota Municipal Power
Agency(MMPA) rates. Commissioner Stewart pointed out that given the timeframe of the
study,the cost of the HWY 169 project wouldn't have been considered. She stated she was
leery about reducing rates so significantly with all the unknowns. There was discussion on
capital projects and the impact on rates and reserves.
Mr. Adams shared that the proposed budget accommodates the rate reduction while still
providing comfortable margins and contributions to reserves. After discussion, a majority of
the Commission was in favor of the rate reduction, citing rates should reflect the cost of doing
business today and ERMU's strong reserves as contributing factors for their support. There
was further discussion.
Moved by Commissioner Nadeau and seconded by Commissioner Bell to adopt the 2019
Business Plan. Motion carried 4-1. Commissioner Stewart opposed.
6.0 BUSINESS DISCUSSION
6.1 Staff Updates
Ms. Slominski brought in a sample of the bullet absorbing rubber material that was placed between
the cabinets and the curved wood facing at the front counter. She shared that the bulletproof glass is
being installed this Friday after regular business hours.
Mr.Fuchs provided an update on the light pole that was struck by a vehicle on HWY 10.He shared
that the replacement pole is on order and will be installed as soon as they receive it in.He informed
the Commission that the driver who hit the pole was uninsured.There was discussion on prosecuting
the driver for the offense, and getting a judgment for the costs associated with the damage. Once the
final costs are determined,Attorney Beck will be working with staff to determine the best course of
action.
6.3 Future Planning
Chair Dietz announced the following:
a. Regular Commission Meeting—January 8, 2019
b. Employee Recognition Luncheon—January 7, 2019, 12:00— 1:00 p.m.
6.4 Other Business
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Commissioner Bell announced that he would not be in attendance at the January and February
Commission meetings as he would be out of town. Chair Dietz suggested that he participate in
at least one of the meetings via Skype. Mr. Adams stated that staff would set up a meeting for
some time next week to go over the requirements of interactive meeting attendance and getting
the Skype account setup on his iPad. Commissioner Nadeau asked to also be included in the
instructional meeting as he may need to Skype in for the February Commission meeting.
7.0 ADJOURN REGULAR MEETING
Moved by Commissioner Nadeau and seconded by Commissioner Bell to adjourn the regular
meeting of the Elk River Municipal Utilities Commission at 4:32 p.m.Motion carried 5-0.
Minutes prepared by Michelle Canterbury.
John J.Dietz,ERMU Commission Chair
Tina Allard,City Clerk
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