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10-08-2019 ERMU MIN ELK RIVER MUNICIPAL UTILITIES REGULAR MEETING OF THE UTILITIES COMMISSION HELD AT UTILITIES CONFERENCE ROOM October 8,2019 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,Administrations Director Mark Fuchs,Operations Director Mike Tietz,Technical Services Superintendent Dave Ninow,Water Superintendent Tom Sagstetter,Conservation&Key Accounts Manager Michelle Canterbury, Executive Administrative Manager Tom Geiser, Electric Superintendent Jennie Nelson,Customer Service Manager Tony Mauren,Communications&Administrative Coordinator Jeff Murray, Meter Technician Zac Johnson, Lead Lineworker Scott Thoreson, Lead Lineworker Eric Jean,Water Operator Others Present: Cal Portner, City Administrator;and Peter Beck,Attorney 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 Nadeau and seconded by Commissioner Stewart to approve the October 8,2019,agenda. Motion carried 5-0. Elk River Municipal Utilities Commission Meeting Minutes October 8,2019 Page 1 1.4 Introduction of New Employee Mr. Fuchs introduced Tyler Meyers as the new lineworker.The Commission welcomed the new employee. 1.5 Recognition of Electric Service Territory Transfer Completion As the final transfer of customers under the March 20,2015 electric service territory transfer agreement recently occurred, Mr.Adams stated that he'd like to take a moment to recognize this major milestone. Mr.Adams spoke to the multiple phases that were involved in the territory transfer initiative. He stressed that the support, dedication, and hard work of every employee, as well as many stakeholders outside of ERMU, is what contributed to this initiative's success. Mr. Fuchs shared how the implementation of this initiative impacted the field staff, and noted that a lot of hard work went into the installation of over 22 miles of electric cable. Mr. Fuchs also commented on the positive working relationship with Connexus Energy and the benefits it offered throughout the process. Ms. Nelson and Mr.Adams spoke to the collaboration between departments. It couldn't be stressed enough that the opportunities for collaboration and problem solving became stretch opportunities for all staff, and that many employees grew professionally through this initiative. Mr. Sagstetter shared some examples of how the departments worked together to address load management challenges and unique meter installations. Mr. Sagstetter and Mr.Tietz praised the high level of customer service that ERMU employees exhibited throughout the transfer.There was discussion. The Commission acknowledged all of the hard work that went into this initiative and thanked everyone for their contributions.The milestone, which was completed one year ahead of schedule, was celebrated with a round of applause. 2.0 CONSENT AGENDA(Approved By One Motion) Chair Dietz had a question on the City of Dayton Electric Franchise Fees.Staff responded. Moved by Commissioner Westgaard and seconded by Commissioner Bell to approve the Consent Agenda as follows: 2.1 September 2019 Check Register 2.2 September 10,2019 Regular Meeting Minutes 2.3 City of Dayton Electric Franchise Ordinance and Electric Service Franchise Fee Ordinance Motion carried 5-0. Elk River Municipal Utilities Commission Meeting Minutes October 8, 2019 Page 2 3.0 OPEN FORUM No one appeared for open forum. 4.0 POLICY&COMPLIANCE 4.1 Policy Manual Initiative Mr. Adams shared that per the initiative schedule,the items for consideration in October are from the Personnel section.This section contains 22 policy documents with action requests for consideration. As outlined in the initiative overview, there are nine policy documents in the Personnel section which are proposed to be moved and incorporated into the Governance section. This retains the Commissions' direct authority over these documents as they will become part of the Commission Policy Manual. There are 12 policy documents in the Personnel section which are proposed to be moved to the Management Policy Manual.As this action would delegate the authority over these policies to management, Mr. Adams reached out to the Commission to see if they had any questions or concerns. For the P.10 Home Computer Assistance Policy that was proposed to move as a new section in the Employee Handbook, Commissioner Stewart suggested it be located in the benefits section of the handbook. She also suggested keeping the terminology within the policy consistent, noting that in some areas it's referred to as computer purchase assistance and in others a computer loan. Moved by Commissioner Bell and seconded by Commissioner Nadeau to approve the following,to include Commissioner Stewart's suggestions: • Removal of policy P.6,sections 11.0—12.0,and policy P.7 from the ERMU Policy Manual. • Moving the following policies to the Commission Policy Manual: P.1, P.5, P.6, P.10, P.11, P.12, P.13, P.13a,and P.15. • To delegate authority to management and move the following policies to the Management Policy Manual: P.2, P.2a, P.2b, P.2c, P.3, P.4, P.8, P.9, P.9a, P.9b, P.14, and P.14a. Motion carried 5-0. 4.2 Payment in Lieu of Taxes and Other Donations to the City of Elk River At the September 10, 2019 Commission meeting,the Commission reviewed the Payment in Lieu of Taxes(PILOT) policy and discussed the option of increasing the transfer amount to the city.At that meeting, staff presented an option that would increase the PILOT transfer to the city by approximately$169,000 annually during the remaining years of the Elk River Municipal Utilities Commission Meeting Minutes October 8, 2019 Page 3 2015 Electric Service Territory Transfer Agreement payment schedule.This option would release PILOT from recent electric service territory transfers significantly sooner than agreed upon. Mr. Adams presented his report as outlined in his memo. He concluded that staff's recommendation is that we do increase the PILOT transfer.The Commission was also in support of an increase, to be effective January 1, 2020.There was discussion on how to amend the PILOT policy to reflect the change.There was consensus to strike "which are not subject to loss of revenue payment resulting from the March 20, 2015, electric service territory transfer agreement with Connexus Energy" in section 2.0. Moved by Commissioner Bell and seconded by Commissioner Nadeau to amend policy P.17—Payment in Lieu of Taxes (PILOT)and Other Donations to the City of Elk River, section 2.0,to read:The PILOT transfer from Elk River Municipal Utilities to the City of Elk River shall be four percent(4%)of the revenues generated by ERMU's electric customers within the corporate boundaries of the City of Elk River. (The amendment to the policy is effective January 1, 2019.) Motion carried 5-0. 4.3 Employee Recognition Workgroup Update Ms. Nelson presented the Employee Recognition Workgroup (ERW) update. Ms. Nelson provided details on the proposed Years of Service Award Plan. She shared that the proposed changes to the employee years of service awards would result in a $400 impact to the 2020 budget. Commissioner Bell asked for further clarification on what type of refreshments would be provided for the one year anniversary and suggested that it be a little more specific for budgeting purposes. Mr. Adams explained that what the ERW is looking for is Commission support of the concept of the program. If the Commission supports the proposed Years of Service Program,the Public Purchase Expenditure Policy will be updated to reflect the change and brought back for Commission approval. For the change to the policy, Mr. Adams suggested that it be a higher level overview of the program without the specifics of the gifts or dollar amounts associated with it. He explained that on an annual basis during the budgeting process, the Workgroup will review all upcoming anniversaries and the dollar amounts used for each anniversary to determine the budgetary impact.This amount will be presented as a line item within the expense budget for commission review. Commissioner Stewart inquired if the$400 expense that was presented for the 2020 budget included the tax gross-up. Staff stated it did not. It was noted that the gross-up should be included in the proposed expense.After discussion,the Commission had consensus to support the concept of the Years of Service Award Plan and directed staff to move forward with language changes to the policy. Elk River Municipal Utilities Commission Meeting Minutes October 8, 2019 Page 4 5.0 BUSINESS ACTION 5.1 Financial Report—August 2019 Ms. Slominski presented the August 2019 financial report.The Commission had a few questions. Staff responded. Mr. Adams spoke to the margins which are coming in considerably tighter than the prior year. Mr.Adams encouraged the Commission to be thinking about the margin level they feel comfortable with. He noted that this information will be helpful as we move into the next two months of the budgeting process. Moved by Commissioner Nadeau and seconded by Commissioner Westgaard to receive the August 2019 Financial Report. Motion carried 5-0. 5.2 2020 Annual Business Plan:Water and Electric Expenses Ms. Slominski presented the first draft of the expense portion of the 2020 budget. She noted that items are subject to change as the complete 2020 budget is assembled and the finalized wholesale power costs and revenues are reflected. Revenue and rates, and wholesale power costs for 2020 will be presented in November. Electric Department Expense Budget—The 2020 forecast for electric expenses reflected a 7.85%increase over the current year budget. Most notable increases are for contracted tree trimming, and administrative expense increases for the website redesign, IT projects, and staff related expenses due to reorganization.There was discussion on the IT system improvement project that involves shared costs with the city and whether that project will be moving forward in 2020.There was also discussion on the administrative expenses relating to reorganization and additional staff. Mr. Adams shared his opinion on the proposed addition of an HR manager and suggested staff and the Commission further evaluate the need and timing of the addition. Commissioner Stewart had some questions on the dollar amounts budgeted for Maintenance of Plant/Land Improvement, Interconnection Carrying Charge, Mutual Aid, Legal Fees, Dues &Subscriptions, and Schools & Meetings line items. Staff responded. There was discussion on the additional travel and training for the Commission that was included in the Schools& Meetings line item. It was suggested that the dollar amounts for specific Commission expenses be pulled from this line item and shown separately. Water Department Expense Budget-The 2020 forecast for water expenses reflected a 5% increase over the current year budget. Most notable increases are on the administrative side for increases for the website redesign, IT projects, and staff related expenses due to reorganization.The Commission had a few questions.Staff responded. 6.0 BUSINESS DISCUSSION Elk River Municipal Utilities Commission Meeting Minutes October 8, 2019 Page 5 6.1 Staff Updates Mr.Adams provided some background on the$5,000 crossing fee that staff has been disputing with BNSF Railway for the past two years. Mr.Adams was pleased to report that after a great deal of time and effort,we received the revised contract for zero dollars. In her staff report, Ms.Slominski had shared that we received our renewal rates for the ancillary insurances of dental, life,and long term disability. Chair Dietz inquired if the Wage and Benefits Committee would be discussing the renewal rates at their next meeting. Ms.Slominski responded that staff is proposing no changes for the 2020 renewal. Mr. Ninow provided an update on the Auburn Street Water Tower reconditioning project. He shared that the contractor got off to a late start and is working hard to get caught up.They anticipate the project being completed by the end of November. Chair Dietz shared that the City Council just discussed a request from the homeowners association of the Windsor Park Third Addition to extend the city sewer system to their addition. During the discussion it was posed to the city engineer whether it was feasible to also consider bringing city water to the addition.Chair Dietz stated that is was not the recommendation of the city engineer.There was discussion. 6.2 Future Planning Chair Dietz announced the following: a. Regular Commission Meeting—November 12, 2019 b. 2019 Governance Agenda At last month's Commission meeting Commissioner Nadeau announced he would be stepping down as the alternate representative on the Minnesota Municipal Power Agency Board of Directors effective January 1, 2020. Commissioner Nadeau suggested this be included on the November agenda for discussion. Mr.Adams stated that one Commissioner has already expressed an interest, and if there were any others that were interested to please let him know. He noted that the new alternate would need to be appointed by the Commission. Commissioner Westgaard shared what he had learned at the last City Council meeting regarding the Minnesota Department of Transportation (MnDOT) plans for the Highway 169 Redefine project. He noted that the city engineer has the preliminary layout for the project and suggested ERMU staff familiarize themselves with the plan to have a better understanding of how it will impact the relocation of ERMU's infrastructure and the costs to do so. Commissioner Westgaard stated that MnDOT will be holding an open house at Elk River City Hall on October 29.There was discussion. Elk River Municipal Utilities Commission Meeting Minutes October 8, 2019 Page 6 There was discussion on when would be a good time to set up a joint meeting with the City Council. Mr. Portner suggested holding it on a third Monday of the month, immediately following the Economic Development Authority(EDA) meeting. A joint meeting date was set for November 18, 2019 at 6:00 p.m. 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 4:36 p.m.Motion carried 5-0. Minutes prepared by Michelle Canterbury. J n J. Di z, Commission Chair --//7 Tina Allard,City Clerk Elk River Municipal Utilities Commission Meeting Minutes October 8, 2019 Page 7