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06-04-2024 ERMU MINELK RIVER MUNICIPAL UTILITIES REGULAR MEETING OF THE UTILITIES COMMISSION HELD AT THE UPPERTOWN CONFERENCE ROOM June 4, 2024 Members Present: Chair John Dietz, Vice Chair Mary Stewart, Commissioners Paul Bell, and Nick Zerwas Members Absent: Commissioner Matt Westgaard ERMU Staff Present: Mark Hanson, General Manager Sara Youngs, Administrations Director Melissa Karpinski, Finance Manager Tony Mauren, Governance & Communications Manager Tom Geiser, Operations Director Mike Tietz, Technical Services Superintendent Dave Ninow, Water Superintendent Chris Kerzman, Engineering Manager Megan Zachman, Human Resources Generalist Jenny Foss, Communications & Administrative Coordinator Michelle Martindale, Collection Specialist Jenny Biorn, Accountant Others Present: Amy Schmidt, Attorney; Cal Portner, City Administrator; Sarah Towne, Consulting Manager with Baker Tilly 1.0 GOVERNANCE 1.1 Call Meetina 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 suggested that item 5.5 Compensation Study be moved ahead of item 5.1 Financial Report to respect the time of Baker Tilly staff which would be presenting that item. Moved by Commissioner Stewart and seconded by Commissioner Zerwas to approve the amended June 4, 2024, agenda. Motion carried 4-0 Elk River Municipal Utilities Commission Meeting Minutes June 4, 2024 Page 1 2.0 CONSENT AGENDA (Approved By One Motion) Moved by Commissioner Bell and seconded by Commissioner Stewart to approve the Consent Agenda as follows: 2.1 Check Register — May 2024 2.2 Regular Meeting Minutes — May 14, 2024 2.3 Summary of General Manager Performance Evaluation Closed Session 2.4 Summary of Information Security Committee Closed Session Motion carried 4-0. 3.0 OPEN FORUM No one appeared for open forum. 4.0 POLICY & COMPLIANCE 4.1 Commission Policy Review— G.2e1—Conflicts of Interest Mr. Mauren presented policy G.2e1— Conflicts of Interest for review noting the action request to approve updates was incorrect and there are no recommended updates to this policy. There were no questions, comments, or proposed changes from the Commission regarding this policy. 4.2 Annual Commission Performance Evaluation Mr. Hanson presented the Annual Commission Performance Evaluation stating he was pleased with the overall scoring consistency between management staff and the commissioners. Chair Dietz asked if this was the first time managers have been included in the commissioner review process. Mr. Hanson confirmed it was. Chair Dietz requested that Mr. Hanson lead the evaluation results discussion. While reviewing the results, Mr. Hanson responded to a commissioner's comment asking if there are more opportunities for collaboration between ERMU and the City to bring greater value to the community. Mr. Hanson stated that the partnership between ERMU and city staff is strong, leading to frequent interactions. Mr. Hanson also noted that ERMU staff's consistent attendance at the city administrator's weekly meeting has been beneficial. In response to a manager's comment from the survey, commissioners acknowledged the importance of reducing distractions such as cell phone use in the meeting, while Elk River Municipal Utilities Commission Meeting Minutes June 4, 2024 Page 2 communicating that occasionally their daily responsibilities require them to maintain an open line of communication. Mr. Hanson noted that feedback from managers shows a consensus that direction from the Commission via the general manager has improved. Mr. Hanson expressed appreciation for Mr. Mauren's inclusion of a comparison graph of the scoring between commissioners and managers. When referencing the open-ended portion of the evaluation, Mr. Hanson stated that he was very pleased with the number of positive comments from management which indicated a favorable perception of commission performance. Chair Dietz expressed his appreciation for the improved evaluation process. Commissioner Stewart also acknowledged the improved format, especially pointing out how the evaluation results were displayed. Commissioner Bell asked if the results could be displayed on the screen next year so he can access the comments on his iPad. Mr. Mauren noted the request. Mr. Hanson asked the Commission if they would like to see a similar update to the general manager evaluation to include the consolidation of questions and a focus on written comments, like the commission evaluation updates. The Commission agreed they would like to see an updated general manager evaluation that can be adopted if approved. Mr. Hanson confirmed the same approval process would be followed for a general manager evaluation update as was implemented for the commission evaluation update. 5.0 BUSINESS ACTION 5.5 Compensation Study Mr. Hanson reviewed the compensation study background information noting that all ten commission -approved comparable peers responded to the request for information and all 35 positions at ERMU had a 75% or greater match in duties and responsibilities, contributing to the validity of the study results. Mr. Hanson then introduced Ms. Towne, consulting manager with Baker Tilly, who was involved in the compensation study process as well as the development of the proposed pay plan. Ms. Towne presented the report from Baker Tilly explaining the methodology and results of the compensation study. After an extensive review of the data, Baker Tilly determined that ERMU's current pay structure is 4.4% below the market minimum, 9.5% below the market midpoint, and 12.8% below the market maximum. Elk River Municipal Utilities Commission Meeting Minutes June 4, 2024 Page 3 Ms. Towne then presented a proposed pay plan that would place ERMU at the market midpoint (average). The pay plan includes the following characteristics which will result in compensation uniformity and fairness: • A nine step plan, up from the current five step plan • 20 position grade assignments, which include all ERMU positions • Plans are aligned to 100% market at midpoint (step 4), this will bring compensation up from the current status of below market value to market midpoint (average) • Provide consistent and predictable percentages between steps Commissioner Bell expressed concern about how the pay plan would be implemented. Mr. Hanson asked that commissioners focus on the pay plan itself and after approving an appropriate plan let management work with Baker Tilly on the implementation details as it is a very complex process. Commissioner Bell noted that the slide related to position grade assignments was missing a grade three. Ms. Towne explained that grade three is not actually missing but rather ERMU does not have a current position ranked at that grade. She also stated that having open grades allows for growth and development as current positions evolve or new positions are added. Chair Dietz asked if cost -of -living adjustments will be added to the dollar amount of each step year after year. Ms. Towne confirmed that it is common practice with organizations to adjust their pay structure each year to keep pace with market averages. Commissioner Stewart asked Ms. Towne to give insight on trends based on her extensive experience with other companies and the Minnesota market. Ms. Towne replied that many organizations are keeping step plans and there is no movement to an open range structure. She continued that both employees and administration tend to like the step plan structure, explaining that they are easy to budget for and understand year over year. Ms. Towne also noted that most organizations in ERMU's market space have between seven and nine steps and that is what is currently trending right now. Mr. Hanson clarified that he asked for nine steps in the proposed plans for two reasons. One was that it would be cost effective to transition to a new pay structure while staying market competitive with nine steps. The other was to foster employee longevity by offering more consistent and desirable wage increases with each step along with cost -of -living adjustments. Commissioner Bell expressed concern for how an approved plan would be funded. Mr. Hanson clarified that the cost of adopting, for example, the proposed plan 1b with an implementation date of August 1, 2024, would be covered by the amount requested by the Commission to be included in the 2024 budget for the compensation study. After additional discussion of the information presented, Ms. Towne presented Baker Tilly's recommendations. Elk River Municipal Utilities Commission Meeting Minutes June 4, 2024 Page 4 Chair Dietz asked if a final report will be provided to the Commission. Ms. Towne said that after meeting with Mr. Hanson to clarify the details needed in the final report, it would take about one month to complete. The Commission was concerned that a nine step pay plan was too long. They requested a new seven -step plan from Baker Tilly that kept the minimum and maximum values presented in the nine -step plan to position ERMU as an employer of choice and foster employee longevity. The Commission also asked for real -life examples of a seven step pay plan using actual ERMU positions. Commissioner Bell inquired about the impact to customer rates if a new pay structure is approved. Ms. Karpinski stated rates would not be affected because funds have already been included in the 2024 budget and there is also room to reduce the electric and margins based on policy. Mr. Hanson confirmed most of the cost could be absorbed by adjusting margins while remaining policy compliant. Commissioner Zerwas asked to include any bonus pay programs in the final report as well. Chair Dietz asked for additional information on how many of the ten comparable organizations also have bonus or longevity pay programs. The Commission decided to postpone action until the July regular commission meeting to review the new and requested information, and to give Commissioner Westgaard, who was absent, a chance to review it as well. Moved by Commissioner Bell and seconded by Commissioner Stewart to postpone action on the Compensation Study until the July regular commission meeting. Motion carried 4-0. 5.1 Financial Report —April 2024 Ms. Karpinski presented the financials for April 2024 noting the graphs only show data through April due to the commission meeting being moved up to the first week in June. In response to a request for information from the Commission, Ms. Karpinski stated that $122,000 between electric and water has been budgeted in 2024 for Utilities Performance Metric Incentive Compensation to be paid in 2025 if all of the metrics are met. Chair Dietz raised a question on footnote 2 in the electric budget. Mr. Hanson explained that a large customer paid upfront for two large transformers that they need. Elk River Municipal Utilities Commission Meeting Minutes June 4, 2024 Page 5 Moved by Commissioner Zerwas and seconded by Commissioner Stewart to receive the Financial Report. Motion carried 4-0. 5.2 Customer Satisfaction Survey— First Quarter 2024 Mr. Mauren presented the key findings from the Customer Satisfaction Survey completed in the first quarter of 2024. Mr. Mauren then reported on his follow up with Q Market Research to provide context to the results, specifically related to rates, rebates, and confusion about ERMU's role with the city's trash service. Mr. Portner asked if specific questions about garbage and recycling services could be added to the survey to get a better understanding of why customers are unhappy with aspects of the service. Ms. Youngs acknowledged that it would be beneficial for the City Council to review specific feedback from customers to assist them when making decisions about trash service providers. 5.3 Advanced Metering Infrastructure Update Mr. Tietz reported there have been 136 residential water meter replacements as of May 30. He also noted that the contractor faced some challenges with the initial deployment of residential appointment letters and staffing. The staffing issues resulted in approximately 50 appointments needing to be rescheduled. Chair Dietz asked if the water meter installations would be complete prior to receiving and installing any electric meters. Mr. Tietz could confirm that only water meters are being installed at this time. Mr. Hanson stated supply chain issues still present a challenge for the contractor to move forward with electric meter exchanges without running the risk of a stoppage. Chair Dietz asked if there has been any customer feedback regarding the new water meters. Ms. Youngs said there was one positive customer call and three minor issues reported by customers requiring a second visit from a technician. Mr. Tietz stated that the issues have been addressed with Allegiant, the letter has been corrected, and new technicians are being hired and trained. Allegiant plans to mail another 1500 residential letters once those technicians are trained and available. Commissioner Bell reported that his water meter has been updated to the new meter and he was very impressed with the level of customer service and professionalism from the Allegiant technician. Elk River Municipal Utilities Commission Meeting Minutes June 4, 2024 Page 6 Commissioner Stewart inquired about the two phone numbers on the appointment letter being the same. Allegiant clarified with staff at an earlier meeting that having both numbers listed exactly how they would need to be entered on the specific type of phone line being used eliminated confusion. Landlines require dialing 1 before the number, while cell phones do not. 5.4 East Substation Construction Project Mr. Kerzman presented the East substation construction project information requesting approval from the Commission to authorize the project and authorize staff to begin procurement efforts and to approve the attached Task Order no. 2 from DGR Engineering. Chair Dietz expressed concern for the project's increase in cost and asked for clarification on the budget timeline. Mr. Kerzman said the cost will be shared between the 2025 and 2026 budgets. Ms. Karpinski noted they haven't started the 2025 budget; however, the project is part of the 20-year plan. Mr. Hanson stated that the increase in cost is again due to the nationwide supply chain issues. There was discussion. Moved by Commissioner Stewart and seconded by Commissioner Bell to authorize East Substation Project and authorize staff to begin procurement efforts in accordance with procurement policies. Motion carried 4-0. Moved by Commissioner Bell and seconded by Commissioner Zerwas to approve DGR Engineering Task Order No. 2 for Engineering Services for East Substation. Motion carried 4-0. 6.0 BUSINESS DISCUSSION 6.1 Staff Updates Mr. Hanson reported he will be out of the office attending two separate conferences out of state. Mr. Mauren informed the commission he will be sending them an email with information about the Minnesota Municipal Utilities Association's summer conference. Mr. Tietz updated his staff memo numbers to show that there were 605 locate tickets completed in May 2024 which was a 25% increase from April 2024 and a 7.89% decrease from prior year. He also added that the electrical technicians completed 362 service orders instead of 350. Elk River Municipal Utilities Commission Meeting Minutes June 4, 2024 Page 7 Commissioner Stewart asked if the similarity between utilities in the average service availability number, despite other scores in the reliability report varying, comes down to the number of customers. Mr. Tietz confirmed that is correct. 6.2 City Council Update Commissioner Westgaard was unavailable to provide a City Council update. 6.3 Future Planning Chair Dietz announced the following: a. Regular Commission Meeting —July 9, 2024 b. 2021 Governance Agenda 6.5 Other Business There was no other business. 7.0 ADJOURN REGULAR MEETING Moved by Commissioner Stewart and seconded by Commissioner Bell to adjourn the regular meeting of the Elk River Municipal Utilities Commission at 5:38 p.m. Motion carried 4-0. Minutes prepared by Jenny Foss. Tina Allard, City Clerk Elk River Municipal Utilities Commission Meeting Minutes June 4, 2024 Page 8