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07-14-2020 ERMU MINELK RIVER MUNICIPAL UTILITIES REGULAR MEETING OF THE UTILITIES COMMISSION HELD AT CITY HALL COUNCIL CHAMBERS July 14, 2020 Members Present: Chair John Dietz, Vice Chair Al Nadeau, Commissioners Paul Bell, Mary Stewart, and Matt Westgaard ERMU Staff Present: Theresa Slominski, Interim General Manager Melissa Karpinski, Finance Manager Tom Sagstetter, Conservation & Key Accounts Manager Michelle Canterbury, Executive Administrative Manager Mark Fuchs, Operations Director Tom Geiser, Electric Superintendent Mike Tietz, Technical Services Superintendent Dave Ninow, Water Superintendent Chris Kerzman, Engineering Manager Tony Mauren, Communications & Administrative Coordinator Others Present: Cal Portner, City Administrator 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 Chair Dietz requested to add agenda item 5.4 Customer Delinquencies and Disconnections, to Business Action. Commissioner Westgaard requested to add an agenda item, Windsor Park Third Addition Update, to Other Business. Moved by Commissioner Bell and seconded by Commissioner Nadeau to approve the amended July 14, 2020, agenda. Motion carried 5-0. 2.0 CONSENT AGENDA (Approved By One Motion) Elk River Municipal Utilities Commission Meeting Minutes July 14, 2020 Page 1 Commissioner Stewart noted that her last name was misspelled in the first paragraph of page 3 of the June 9, 2020 Regular Meeting Minutes. Staff responded they would make that correction. Moved by Commissioner Westgaard and seconded by Commissioner Stewart to approve the Consent Agenda, with the requested correction to the June 9, 2020 Regular Meeting Minutes, as follows: 2.1 June 2020 Check Register 2.2 June 9, 2020 Regular Meeting Minutes 2.3 Hold Harmless Agreement— City of Elk River Motion carried 5-0. 3.0 OPEN FORUM No one appeared for open forum. 4.0 POLICY & COMPLIANCE 4.1 Annual Commission Performance Self -Evaluation Per Governance Policy G.2c Agenda Planning, and consistent with the 2020 Governance Agenda adopted by the Commission in 2019, the Commission is to conduct a self -evaluation of their own performance in the third quarter of each fiscal year. Following the evaluation, the Commission, with support from the general manager, will arrange for governance education for the next fiscal year, including education related to the determination of desired results. Prior to the Commission meeting, the Commissioners had completed an online survey regarding their performance. Ms. Slominski presented the survey results and facilitated discussion on each of the points the Commission evaluated themselves on. Ms. Slominski noted comments made for Question 3 — Relationship with the City which stated, "I felt we were strong armed into increasing our contribution to the City so they could balance their budget." Chair Dietz stated he took offense to this comment, suggesting those with objections should have voted against it. Chair Dietz went on to say that ERMU benefits from its relationship with the City in many ways including being given autonomous authority from the City Council and having the ability to bond for projects. Ms. Slominski concurred that ERMU has a win -win relationship with the City. Commissioner Westgaard added that he would hope commission members would feel comfortable enough to voice their disagreement or discomfort with a course of action. Commissioner Bell noted that some commissioners have greater background information on certain issues from fulfilling other municipal roles. Elk River Municipal Utilities Commission Meeting Minutes July 14, 2020 Page 2 Commissioner Westgaard encouraged all members to be comfortable asking for more time to come to a decision on their vote. For Question 7 — One Voice there was a vote of "neither agree nor disagree" with the standard that the commission members support the majority decision even without a unanimous vote. There was also a comment that stated, "On occasion it was not a unanimous vote, but it was upheld as one." Chair Dietz commented that this can be challenging when members of the public want to know how specific commission members voted on an item, and how important it is to communicate that regardless of how they voted they support the decision of the board. For Question 8 — One Employee, there was a "disagree" vote on the standard that the Commission as a body never gives direction to any ERMU staff member other than the general manager. Chair Dietz shared that he disagreed with the perspective that the Commission only has one employee, rather that all employees are responsible to the Commission as the governing body of the company. Commissioner Stewart contributed her perspective that the standard was suggesting that it was the general manager's responsibility to disseminate the commission's requests to staff. Ms. Slominski concurred. Commissioner Westgaard suggested a wording change to clarify that the general manager is the commission's single direct report staff. There was agreement to change the wording in future surveys. The survey included five open-ended questions regarding the Commission's performance and asked what, if anything, they should start or stop doing, as well as what they should do more or less of. The Commission went over the open ended questions, and had discussion on the following comments from the survey, "During the financial review, does the commission desire higher sales and profits month -to -month or a balanced approach of conservation and reliability at an affordable cost and rate?" Commissioner Westgaard noted that this was his question and that he was seeking to understand the Commission's expectation between improving sales and profits month -to -month and delivering services at a lower rate. Commissioner Westgaard noted that the Commission is running a business that needs to complete projects, replace equipment, and compensate staff. Commissioner Stewart responded that ERMU is a not -for - profit business so the focus should be on reasonable rates and reliability. She noted that the recently completed rate study gives the Commission information on how much revenue is required for operations. There was discussion. Chair Dietz commented that there is a fine line between providing reasonable rates and fulfilling debt obligations. Chair Dietz commented that he thinks ERMU is doing a good job with this balance, noting that at the end of the projections from the rate study, ERMU will have only raised electric rates about 1.5% over six years. There was discussion. For next year, Commissioner Stewart requested analysis and year-to-year comparisons of the evaluations to see if there are changes that should be identified and discussed. Elk River Municipal Utilities Commission Meeting Minutes July 14, 2020 Page 3 4.2 Annual Strategic Plan Review Ms. Slominski shared the purpose of the Strategic Plan and provided some background on the process the leadership team goes through to determine organizational goals and initiatives. Presented for review were highlights from the 2020 initiatives, and newly identified go/no-go initiatives for 2021. Ms. Slominski explained that staff is looking for discussion on the high-level strategic themes and initiatives that have been identified, and to reach consensus on the themes leading into the budgeting process. Ms. Slominski presented the strategic plan as outlined in her memo. Commissioner Westgaard had a question on Theme 2: Personnel and Governance, wondering if the strategic plan should include a proactive approach to employee retention in conjunction with the more reactive approach of succession planning. Commissioner Stewart noted that those items are directly related to the planned hiring of a human resources staff member who can conduct exit interviews to gather ideas and see if there is a consistent reason for employee departures. Ms. Slominski inquired if the Commission was asking for employee retention to be added as its own initiative or added to an existing one. Commissioner Bell suggested that it be added to the succession planning initiative. For Theme: 4 Technology, Chair Dietz asked how many other municipal utilities have Advanced Metering Infrastructure. Mr. Fuchs estimated that many utilities have the system and agreed it would cost a couple million dollars for ERMU to obtain it. Ms. Slominski noted the system offers great benefits. For Theme 5: Growth, Chair Dietz asked if staff knew the cost to ERMU for the Highway 169 Redefine project. Ms. Slominski commented that the plans are preliminary. Mr. Fuchs agreed and suggested the plans would be better defined this fall. Chair Dietz asked Mr. Fuchs for clarification on the work that is taking place on Highway 10. Mr. Fuchs responded. Chair Dietz also asked for clarification on the proposed evaluation of the water model. There was discussion on the progress of the field services building expansion project. Commissioner Stewart recommended a new format for the monthly financials balance sheet which would be similar in presentation to Minnesota Municipal Power Agency's. Ms. Karpinski stated that she would work with NISC to develop a custom statement to accommodate this request. Commissioner Bell noted that IT staff is going to be very busy as a recurring element within many of the themes is IT related. The Commission had consensus to support the high-level strategic themes that were presented. Elk River Municipal Utilities Commission Meeting Minutes July 14, 2020 Page 4 5.0 BUSINESS ACTION 5.1 Financial Report — May 2020 Ms. Karpinski presented the May 2020 financial report as outlined in her memo. Chair Dietz had a question on the classification of the $169,000 COVID-19 expense, in relation to it being posted as an administrative expense versus payroll. Staff provided explanation of the classification. Moved by Commissioner Nadeau and seconded by Commissioner Westgard to receive the May 2020 Financial Report. Motion carried 5-0. 5.2 Leadership Transition — Search Committee Update Chair Dietz provided an update on the status of the General Manager (GM) search and selection process. He reported that the active recruitment effort to find a GM has brought forward excellent candidates. The Committee received 20 quality resumes for the GM position, and many bring excellent qualifications and experience from within the municipal utility industry. The Committee has reviewed the resumes and determined who should move forward in the process to participate in the behavioral interviews conducted by Ms. Englund. Chair Dietz noted that Ms. Englund will be reaching out to candidates soon to schedule the interviews. To facilitate full Commission participation, a Special Commission meeting for the purpose of interview training and conducting interviews with the final candidates was set for Thursday, July 30 at 8:30 a.m. Chair Dietz talked through the proposed timeline for the meeting, and stated that it would be adjourned no later than 6:00 p.m. Moved by Commissioner Westgaard and seconded by Commissioner Stewart to hold a Special Commission Meeting on July 30, 2020 for the purpose of interview training and conducting interviews with final candidates for the General Manager position. Motion carried 5-0. 5.3 Financial Reserves & Investment Committee Update The Financial Reserves and Investment Committee (FR&IC) met just prior to the Commission meeting at 2:30 p.m. At the meeting, the FR&IC reviewed the financial reserves and investment policies, electric and water reserve balances, investment balances, and the audit recommendations for investment strategy. Committee Chair Westgaard provided a verbal update to the Commission. He shared that everything is sitting very healthy. There are presently larger balances in the money market accounts and savings as the interest rates are not much better for CD's. Per auditor Elk River Municipal Utilities Commission Meeting Minutes July 14, 2020 Page 5 recommendations regarding cash liquidity and investment strategy, the Committee discussed possibly investing some of the repo savings account balance into a higher earning investment instrument. Given the state of the economy and the low rates available, the Committee had consensus to wait until the economy turns around. It was noted that the recommendation from the auditor came pre COVID-19, and since then a lot has changed in the financial industry. Chair Dietz asked if some of the reserve money could be used to pay off bonding that will take place for the field services building expansion. Staff responded that some reserve money will be used for the project, but the plan is to replenish the reserves with funds from bonding. Committee Chair Westgaard noted that while investment yields are low in the current financial climate so is the cost to borrow money, and that it may be in the utilities' best interest to use this approach. Commissioner Stewart asked if there was a target percentage on investment rates where staff would feel comfortable investing reserves again. Staff responded that they would reassess the rates towards the end of the year. Three revised Commission policies were presented for Commission approval. Moved by Commissioner Nadeau and seconded by Commissioner Bell to approve the proposed revisions to the Commission Investment Policy, Commission Financial Reserves Policy, and the Commission Financial Reserves & Investment Committee Charter Policy. Motion carried 5-0. 5.4 Customer Delinquencies and Disconnections Ms. Slominski reminded the Commission about the notice we provided to the State of Minnesota Department of Commerce and Public Utilities Commission back in March where we voluntarily agreed to: extend the Cold Weather Rule protections and restricting disconnections; to waive late fees and penalties; and to make payment arrangements with customers as requested, for the duration of the peacetime emergency which has been extended several times. Ms. Slominski explained that most recently, the Attorney General has also requested utilities meet the length of the peacetime emergency, plus an additional 60 days. Given the present date, this would bring the timeline to the beginning of the next Cold Weather Rule which begins October 15, 2020 through April 15, 2021. Through discussions with Minnesota Municipal Utilities Association and other utilities, it has been determined that if a utility is able to identify a delinquency that began before the pandemic, and they track communication efforts, a utility can disconnect customers who do not follow through with payment arrangements or assistance opportunities. Ms. Slominski noted that ERMU is only shutting off egregious offenders who were delinquent prior to the pandemic, and no one impacted by COVID-19 circumstances will be disconnected. Ms. Slominski shared details on the quantity of shut offs and the status of them. She also shared that the number of customers who are 90 days delinquent on payments is $30,000 more than the prior year. Elk River Municipal Utilities Commission Meeting Minutes July 14, 2020 Page 6 6.0 BUSINESS DISCUSSION 6.1 Staff Updates Ms. Slominski stated that she needed to collect signatures from the three commissioners that have been designated authority to sign checks on behalf of ERMU. Commissioner Stewart asked for an update on the virtual American Public Power Association conference Ms. Slominski participated in. Staff responded. Mr. Sagstetter shared that he will not be at the August commission meeting as he will be on vacation. Ms. Canterbury highlighted from her staff report that Minnesota Municipal Utilities Association (MMUA) has made the decision to hold their annual summer conference virtually. The conference will be held August 25-26. Ms. Canterbury requested the commissioners let her know by the end of the week if they are not interested in attending as registrations will be made at that time. Mr. Kerzman reminded Commissioners Bell and Nadeau that there was a meeting for the Field Services Building Committee the following day. Mr. Kerzman also noted that after working with the civil consultant, it would likely be necessary to purchase additional wetland credits for that project. Chair Dietz commented that he had heard concerns from a resident about the look of the finished facility. Mr. Kerzman said that the building should blend well with residential area, incorporating plenty of trees along the street. Mr. Portner noted that the multipurpose facility came online with the opening of the ice rink. He also noted that the facility would be receiving conservation rebates from ERMU. 6.2 Future Planning Chair Dietz announced the following: a. Regular Commission Meeting —August 11, 2020 @ ER Fire Station EOC Conference Room b. Quorum — MMUA Summer Conference —August 25-26, 2020 c. 2020 Governance Agenda 6.3 Other Business Commissioner Westgaard raised an issue for future discussion; the sewer infrastructure for Windsor Park Third Addition. As there has been a request to extend the city sanitary sewer line to this addition, Commissioner Westgaard asked if ERMU would want to consider installing a water line at the same time. There was discussion. The Commission asked Mr. Ninow to research the option of adding a water line and to report back at the next commission meeting. Elk River Municipal Utilities Commission Meeting Minutes J u ly 14, 2020 Page 7 Chair Dietz had a question for Mr. Ninow about the progress of plans for a fire station to be built in the proximity of a new well site. Mr. Ninow responded that architects are still producing plans for this site. 7.0 ADJOURN REGULAR MEETING Moved by Commissioner Bell and seconded by Commissioner Nadeau to adjourn the regular meeting of the Elk River Municipal Utilities Commission at 5:01 p.m. Motion carried 5-0. Minutes prepared by Tony Mauren. Tina Allard, City Elk River Municipal Utilities Commission Meeting Minutes July 14, 2020 Page 8