2.4 ERMUSR AGENDA 07-02-2013
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UTILITIES COMMISSION MEETING
TO:
Elk River Municipal Utilities Commission
John Dietz – Chair
Al Nadeau – Vice Chair
Daryl Thompson – Trustee
FROM:
Theresa Slominski – Finance and Office Manager
MEETING DATE:
July 2, 2013
AGENDA ITEM NUMBER:
2.4
SUBJECT:
2012 Year-End Reserve Balances
BACKGROUND:
Per our Reserves Policy, annually after the audit, the year-end reserve balances shall be reviewed and the
Utilities Commission shall consider any balances above or below target levels.
DISCUSSION:
At the June Commission Meeting, the following amounts were presented with the conclusion of our audit:
a review of the cash balances of $14,625,194, with $11,370,664 for Electric and $3,254,530 for Water,
determined that our current reserves balances are at target levels. The three Reserve Classifications and
respective calculated amounts for the Electric Department are Unrestricted Designated Reserves,
$5,793,402; Reserve Restricted for Debt Service, $724,500; and Unrestricted Reserves, $4,852,762. The
Reserve Classifications and respective calculated amounts for the Water Department are Unrestricted
Designated Reserves, $1,248,571; Reserve Restricted for Debt Service, $0; and Unrestricted Reserves,
$2,005,959.
Per the policy, the Unrestricted Reserves default as working capital. At the June Commission Meeting,
discussion determined the allocation of the Unrestricted Reserves and it was requested to bring back the
reserve calculations with narrative documenting the decisions. Documentation has been added outlining
the use of $1,000,000 in the electric department and $700,000 in the water department per 2013 budget
approval for infrastructure projects. Also documented is the electric department’s use of up to $500,000
for PCA offset, with the remainder for future territory acquisition and power contract funding; and the
water department’s use for future infrastructure projects scheduled over the next five years.
ACTION REQUESTED:
Approval of calculations, with narrative, as attached.
ATTACHMENTS:
Reserve Balance Calculations for the Electric and Water Departments, with narrative,
documenting June’s decisions.
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Elk River Municipal Utilities - Reserves Policy 6/2013
ERMU Electric Fund - 61
Description Annual Average Monthly
2013 Budgeted Expenditures 30,381,914$ 2,531,826$
2013 Budgeted Interest Expense 217,661$ 18,138$
2013 Budgeted Depreciation 2,154,900$ 179,575$
2013 Budgeted Purchased Power Cost 21,658,688$ 1,804,891$
2014 Budgeted Pricipal and Interest 813,179$ n/a
2012 Peak Monthly Purchased Power Cost 2,564,677$ 1,708,314$
2013 Reserves 2012 Reserves
2012 Audited Cash Balances 11,370,664$ 9,104,896$
Unrestricted
Designated 2013 Calculated Reserves 5,793,402$ 5,407,463$
Restricted for
Debt Service 2013 Calculated Reserves 724,500$ 724,500$
Unrestricted 2013 Calculated Reserves 4,852,762$ 2,972,933$
2013 Calculated Required Reserves, per Policy 6,517,902$
Per discussion at 6/11/2013 Commission Meeting, Calculated Reserves will remain as per policy for total noted above,
of $6,517,902 as Designated and Restricted.
The Unrestricted amount of $4,852,762 shall be allocated for Working Capital with $1,000,000 to be used for the
North Substation as per budget approval for 2013, up to $500,000 for potential Power Cost Adjustment offset, and the
remainder for future territory and power contract funding.
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Elk River Municipal Utilities ‐ Reserves Policy 6/2013ERMU Water Fund ‐ 62DescriptionAnnual Average Monthly2013 Budgeted Expenditures2,412,237$ 201,020$ 2013 Budgeted Interest Expense109,182$ 9,099$ 2013 Budgeted Depreciation1,083,998$ 90,333$ 2014 Budgeted Pricipal and Interest639,043$ n/a2013 Reserves2012 Reserves2012 Audited Cash Balances3,254,530$ 2,619,574$ Unrestricted2013 Calculated Reserves1,248,571$ 1,150,992$ DesignatedRestricted for2013 Calculated Reserves‐$ ‐$ Debt ServiceUnrestricted 2013 Calculated Reserves2,005,959$ 1,595,581$ 2013 Calculated Required Reserves, per Policy1,248,571$ Per discussion at 6/11/2013 Commission Meeting, Calculated Reserves will remain as per policy for total noted above,of $1,248,571 as Designated. The Unrestricted amount of $2,005,959 shall be allocated for Working Capital with $700,000 to be used for theFreeport Water Tower painting as per budget approval for 2013, and the remainder for future infrastructure projectsscheduled over the next five years.40