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6.1. ERMUSR 05-13-2008~i Elk River Municipal Utilities 13069 Orono Parkway • P.O. Box 430 Elk River, MN 55330-0430 Apri128, 2008 To: Elk River Municipal Utilities Commission Jerry Takle John Dietz Jerry Gumphrey From: Bryan Adams Subject: Financial Contribution to City Phone: 763.441.2020 Fax: 763.441.8099 APPA on an annual basis does a survey addressing Municipal Utilities payment and contributions to State and Local Governments. Attached is a copy of 2007 survey. This survey reflects a median contribution of 5% electric operation revenues. This % varies from year to year and I have seen it as high as 5.5%. The table below- reflects Elk River Municipal Utilities contribution to the City. , 2006 2007 2007 Connected for PCA Elk River Revenue $14,002,207 $16,372,504 $16,100,000 Services to City $328,148 $358,029 $358,029 Cash Transfer @ 3% $420,000 $483,000 $483,000 Total Contribution $748,147 $841,029 $841,029 °~o of ER Revenue 5.34% 5.14% 5.22% It appears our contribution to the City is in the appropriate area. The actual cash contribution will grow significantly due to continued electric growth from the two data centers and GRE's projected rate increases. This cash contribution is established at 3% of Elk River electric revenues. Staff desires some guidance on the calculation of services to the City. Should the electricity for the parks be donated? Staff has not been consistent on this issue. Below is a time line of commission decisions. 11-14-89 Motion by Mr. Simpson, seconded by Mr. Zabee to begin in January 1, 1990 to donate all electricity not associated with enterprise funds to the City of Elk River. This would include: the garage on UPA Drive, a pole building on UPA Drive, the new City garage, City Hall, and the Fire Station. Motion carried. Does this include parks? It may appear so. 11-20-89 Mayor Tralle indicated that the Utilities Commission has decided not to charge the City for electrical usage. He indicated that the only areas which will be charged will be softball, Wastewater Treatment Plant and Liquor Store and Lift Stations. This appears that parks will pay for electric. 8-11-92 Motion by Mr. Simpson, seconded by Mr. Tralle, to donate the electricity for the softball field lighting and concessions for a period of five years starting now. The motion carried. 2-12-97 Mr. Adams presented detail of the 1996 Contribution to the City of Elk River, including the 3% of Elk River Customer Revenues, street lights, traffic signals, electricity donated and miscellaneous. The donation amount for 1996 is $336,000.00. Mr. Tralle moved to remove the cap on the amount of dollars for the street light contribution, which was previously set at $50,000.00. Mr. Dietz seconded the motion. Motion carried 3-0. 11-12-97 In August 11, 1992 the ERMU Commission moved to approve a donation of electricity for the ball fields for a period of five years. In August 1997, the ERMU Commission extended the donation to the end of 1997. Dave Anderson appeared to request further donation and to explain the benefits of the softball fields to the community and to the City. Discussion continued considering the benefits and the costs involved. Mr. Dietz moved to pay the first $5,000.00 of electrical charges as a donation, the City to be billed at year end for the excess amount. (Policy to begin 1-1-98). Mr. Zabee seconded the motion. Motion carried 3-0. This would imply the parks are not included in the donation. The electric costs to the parks is estimated to be in the $10, 000 range excluding the ball fields. For your information, the City has approximately 125 utility accounts which are attached. The CX or CXX designation indicates donated accounts. As the cost of electric energy continues to increase, conservation efforts are becoming more important. The City has no incentive in conserving in their facilities since the Elk River Municipal Utilities is paying the electric bill. Somehow we should encourage meaningful conservation. American Public Power Association A~^-r~® March 17, 2008 MEMORANDUM TO: Officials of Public Power Systems FROM: Paul Zummo, Research Analyst 1875 Connecticut Avenue, NW Suite 1200 Washington, DC 20009-5715 SUBJECT: Payments & Contributions to State and Local Governments Ph: 202.467.2900 Fax' 202.467.2910 www.APPAnet.org As an APPA member service, I am enclosing for your information APPA's report: Payments and Contributions by Public Power Distribution Systems to State and Local Governments, 2006. The report summarizes the value and type of payments and contributions made by public power systems, and includes selected breakdowns by revenue size class and geographical region. This report serves two primary industry needs: • The information can assist utility managers in assessing their payments and contributions relative to other public power distribution systems, and • The results clearer show that there is no validity to the claim that "investor- owned utilities provide a benefit to their communities by paying taxes that the publicly owned utilities do not." In fact, the median contribution by publicly owned utilities in 2006 was 19 percent higher than that of the investor-owned utilities (5.0% vs. 4.2% of annual electric operating revenues). Any comments or questions on the report can be directed to Paul Zummo, Research Analyst (at 202-467-2969) or pzummo@appanet.org. Enclosure Payments and Contributions by Public Power Distribution Systems to State and Local Governments, 2006 Data Published March 2008 ® American %•, Public Power A~~~ Association 1875 Connecticut Avenue, NW Washington, D.C. 20009-5715 2021467-2900 www.APPAnet.org I. Overview Public power systems provide a direct benefit to their communities in the form of payments and contributions to state and local government. Using the most current data year, APPA calculated net payments and contributions for 382 public power systems for fiscal year 2006 and determined that the median amount was 5.0 percent of electric operating revenues. The payments are property-like taxes, payments in lieu of taxes, and transfers to the general funds. The contributions are made in the form of free or reduced cost services provided to states and cities. Many communities are not fully aware of the payments and total value of contributions made by their publicly owned electric utility, and some utilities do not quantify all their payments and contributions. APPA conducted a detailed survey of public power systems in order to get a more accurate estimate. The results are presented in this report, which focuses on the "rate" and "type" of payments and contributions made by public power distribution utilities. The report includes: • Summaries by revenue size class and region of the country for both publicly owned and investor-owned utilities; • Details on which types of payments and contributions are most common; • A listing of the typical methods used by utilities to calculate the amount of payments in lieu of taxes or transfers to the general fund of the city. Caution should be used when making direct comparisons with the previous reports (published biannually between 1992-2004) because the utilities included in each year's report are not identical. In addition, in previous reports APPA was able to include information collected from the Energy Administration Administration's Form EIA-412. However, EIA has discontinued that form, so payment and contribution data are now collected exclusively from the APPA survey. Thus the number of public power systems included has fallen from 573 in the 2002 report to 382 in the 2006 report. Appendix 1 describes the data sources and methodology used for this study and Appendix 2 defines the geographic regions. 2 II Payment and Contribution Rates by Revenue Size Class Net payments and contributions as a percent of electric operating revenue are summarized for seven revenue classes. Medians by revenue class range from 4.1 percent to 5.6 percent, as compared to the national median of 5.0 percent. The median is defined as that value where 50% of the utilities had payment and contribution rates rg eater than the median and 50% contributed less than the median. Quartiles are another common tool used in analysis. By definition, one-half of utilities fall between the first and third quartiles. For example, 50% of the 382 systems in this report made payments & contributions between 2.6% and 7.2% of electric operating revenue. TABLE 1 Net Pay ments and Contributions as Percent of Electric O perating Revenue, 2006 -Publicly Owned Systems by Revenue Class- Number First Third Revenue (in millions) of Utilities Median Quartile Quartile Less than $2 58 4.1 1.6 9.1 $2 - $5 59 5.3 2.6 8.7 $5-$10 51 5.0 3.4 9.3 $10 - $20 64 5.1 2.5 7.1 $20 - $50 80 4.5 2.7 6.0 $50 - $100 31 4.9 2.8 6.5 $100 or more 39 5.6 3.1 6.8 TOTAL 382 5.0 2.6 7.2 Median Net Payments and Contributions as Percent of Electric Operating Revenue, 2006 Publicly Owned Utilities by Revenue Size Class 9.0% 8.0% 7.0% 6%- 0 6.0 /o 0 5.0% 5.1 % 4.9% t~" , ~ ~~ ~ , o ~~~` 4.0% 1 ~ ; ~ 4 t r,~ # 3.0% ~ ~ ° i 3~ ~ ° 2.0 /O I ,4 YS t al K '~ ~` ,k _ . ..m __- - 0.0% a .~ Less than $2 - $5 $5 - $10 $10 - $20 $20 - $50 $50 - $100 $100 or $2 Revenue Class (in millions of dollars) more 3 III. Payment and Contribution Rates by Region Regional variations in median net payments and contributions range from 2.9 percent in the East North Central to 7.2 percent in the Mountain Region. Regional definitions are included in Appendix 2. TABLE 2 Net Payments and Contributions as Percent of Electric Operating Revenue. 2006 -Publicly Owned Systems by Region- Number First Third Region of Utilities Median Quartile Quartile Northeast 40 3.1 1.7 6.1 Atlantic 35 5.6 2.7 10.4 East North Central 57 2.9 2.1 4.7 East South Central 44 5.8 5.5 6.7 West North Central 114 4.9 2.8 8.3 West South Central 28 7.1 3.2 12.1 Mountain 18 7.2 3.9 10.7 Pacific Northwest 32 5.3 3.0 6.1 Pacific Southwest 14 3.6 2.5 6.8 TOTAL 382 5.0 2.6 7.2 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Median Net Payments and Contributions as Percent of Electric Operating Revenue, 2006 Publicly Owned Utilities by Region 7.2% 7.1 % y - x °` 6% 5.8% x . ~ . ' 4r~~~~ ~, _~ 3_F~% 3.1 % 2.9% y ,~ . `~~ n~ r' NE Atl ENC ESC WNC WSC Mtn PNW PSW Region 4 IV. Comparison with Investor-Owned Utilities (IOUs) In 2006, investor-owned distribution utilities paid a median of 4.2 percent of electric operating revenues in taxes and fees to state and local governments. The 50 percent of utilities in the middle range made payments ranging from 3.1 to 5.9 percent. In comparison, publicly owned distribution utilities paid a median of 5.0 percent in net payments and contributions as a percent of electric operating revenue, with a middle range of 2.6 to 7.2 percent. In this study, most IOUs (91 %) had more than $100 million in operating revenues while most of the publicly owned systems had less than $100 million (90%). The median values of taxes paid by IOUs and tax payments and contributions by publicly owned systems (as a percentage of electric operating revenue) vary by utility size and are summarized below: Investor-Owned Publicly Owned Large Utilities (over $100 Million) 4.4% 5.7% Small Utilities (under $100 Million) 3.1% 4.9% The median value for investor-owned systems was the largest in the Atlantic and West North Central regions, and smallest in the East South Central and Pacific Northwest. Table 3, on the following page presents data grouped by geographic region for investor-owned utilities. The number of investor-owned utilities has fallen from 144 in the 2000 study to 122 in the 2006 study. This is primarily the result of mergers and the elimination of several utilities in Maine and Texas that no longer report sales to consumers. Retail choice taws in those two states changed how utilities account for sales. 5 Net Taxes as Percent of Electric Operating Revenue, 2006 ---Investor-Owned Utilities, by Region--- Number of First Third Region Utilities Median Quartile Quartile Northeast 29 4.3% 2.4% 5.6% Atlantic 18 5.3% 4.0% 6.9% East North Central 29 3.8% 3.4% 6.0% East South Central 8 3.3% West North Central 12 4.5% 4.1 % 6.0% West South Central 11 3.7% 2.8% 5.1 Mountain 1 NA NA NA Pacific Northwest 5 3.6% '' Pacific Southwest 7 4.0% Total 122 4.2% 3.1 % 5.9% Quartiles not provided for fewer than 9 responses. Note: Hawaii is included in the totals, but not in any of the regions. 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 6 V Summary of Amounts and Types of Payments 8 Contributions The study is based on a survey sent by APPA to all publicly owned utilities. The next two sections (sections V and VI) of the report summarize results for 348 public power systems that completed the survey. (Excluded from the summaries are 34 Tennessee Valley Authority distribution utilities, because these utilities' payments and contributions are limited under the terms of their wholesale power contract with TVA.) These 348 systems made a total of just over $1.0 billion in total payments and contributions to state and local government in 2006. As shown in Table 4, the overwhelming majority is payments in lieu of taxes (also called transfers to the general fund). The second largest category is gross receipts taxes; these taxes are collected by the utility, included in the utility's operating revenue and expense accounts, and remitted to the state or local government. In some states the gross receipts tax may be called a public utility tax or privilege tax. Table 4 Net Payments & Contributions to State & Local Governments Amount Percent Millions of Total Payments in Lieu of Taxes $711.5 67.2% Gross Receipts Tax $166.2 15.7% Other Taxes and Fees $126.7 12.0% Free or Reduced Cost Electric Services $40.7 3.8% Use of .Employees $5.8 0.5% Other, including Equipment and Materials 7.4 0.7% Total $1,058.3 100.0% Less: Services & Contributions RECEIVED 12.4' by the Utility FROM the Municipality Net Payments & Contributions $1,045.9 The number of utilities making each type of payment or contribution is detailed in Table 5. t The 348 utilities received $12.4 million in contributions and services from the municipality. This amount does not include any contributions or services for which the city has been reimbursed, either through direct billing or a transfer of funds. Free or reduced cost office space and water are the major services provided, while operations & maintenance, legal service, information technology services, engineering services and financial service employees are the predominant type of employee contributions received by the utility. The $12.4 million in free or reduced cost contributions and services provided by the municipality to the utility is subtracted from the $1,058.3 billion in payments and contributions from the utility to state and local government. The result is $1,045.9 billion in net payments and contributions by the 348 utilities in 2006. 7 Table 5:Types of Payments 8~ Contributions (2006) Percentage of Number of Survey Utilities Utilities I. Payments 8 Contributions Provided Payments in Lieu of Taxes 73.3% 255 Taxes and Fees 51.4% 179 Gross Receipts Tax 23.9% 83 State Public Utility Assessments 17.2% 60 Franchise Fees 13.8% 48 Property Taxes 11.5% 40 Other 11.2% 39 Free or Reduced Cost Electric Service 45.4% 158 Streetlighting 35.6% 124 Lighting for Municipal Buildings 24.1 % 84 Recreational Facilities 18.7% 65 Water or Sewer Treatment Facilities 13.5% 47 Traffic Signals 11.8% 41 Water Pumping 10.9% 38 Other 14.4% 50 Use of Employees 63.5% 221 Installation of Temporary Lighting 42.0% 146 Putting Up City Signs & Banners 41.4% 144 Electrical Repair for Other Departments 27.0% 94 Traffic Signal Maintenance 24.4% 85 Tree Trimming for Other Departments 20.7% 72 Non-Utility Locates 11.5% 40 Technical Expertise 10.1 % 35 Rewiring Municipal Buildings 5.7% 20 Reading Water Meters 11.2% 39 Other Services 11.8% 43 Other Resources 40.4% 141 Use of Vehicles & Equipment 31.2% 109 Use of Materials & Supplies 15.8% 55 Other 11.8% 41 II. Services 8~ Contributions RECEIVED 25.6% 89 Use of Employees 14.4% 50 Free or Reduced Cost Service 12.9% 45 Use of Vehicles & Equipment 12.1% 42 Use of Materials & Supplies 6.3% 22 8 VI. Methods Used To Determine Amount of Payments in Lieu of Taxes Payments in lieu of taxes are generally thought of as payments to local government. However, some utilities, particularly those in Kentucky and Washington, make payments in lieu of taxes to the state government. Of the 348 utilities defined in Section V, over 73% (255) made payments in lieu of taxes (also called transfers to the general fund), and the median transfer as a percent of electric operating revenue was 3.5 percent. The most common method used to determine the amount of payments in lieu of taxes was percent of gross electric operating revenue, as shown in the table below. TABLE 6 Methods Used to Calculate Payments in Lieu of Taxes Percent of Number Utilities of Utilities Percent of Gross Electric Operating Revenue 24% 62 Flat Amount Paid Annually 19% 49 Property Tax Equivalent 17% 44 Assessment of Electric Utility and City Budgets 16% 40 Charge per Kilowatt-hour Sold 8% 20 Percent of Net Utility Plant in Service 2% 6 Percent of Income, (Net, Operating or Total) 2% 4 Other 12% 30 The category "assessment of electric utility and city budgets" includes utilities whose payments are set by the city council, the mayor, or a utility commission, and utilities that make payments on an as needed basis. The most common responses in the "other" category are utilities whose payments are based on more than one criterion. Tennessee Valley Authority distribution utilities are not included in the data above. State law determines the payments in lieu of taxes for utilities in the state of Tennessee. The calculation is composed of two parts: (1) percentage of three year average operating revenue less power cost, and (2) property tax rate applied to net utility plant. 9 APPENDIX 1 METHODOLOGY AND DATA SOURCES FOR STUDY Study results for publicly owned utilities were calculated from two sources: data collected on APPA's "2006 Survey of Local Publicly Owned Electric Utilities Tax Payments and Contributions to State and Local Government," and data submitted by publicly owned utilities to the Department of Energy/Energy Information Administration (EIA) on Form EIA- 861, "Annual Electric Utility Report." A total of 382 utilities completed the APPA survey. Form EIA-861 provided information on electric operating revenue. Payments and contributions for TVA distributors include an amount equal to 5 percent of the estimated cost of power purchased from TVA---this payment is made by TVA---plus any payments in lieu of taxes or contributions made by the distribution utility. TVA's wholesale power contracts with municipalities limit payments in lieu of taxes to an amount not exceeding the state and local taxes that the system would pay if privately owned. Study results for investor-owned systems were calculated from data submitted on the 2006. Federal Energy Regulatory Commission (FERC) Form 1, "Annual Report of Major Electric Utilities, Licensees and Others." The report includes only distribution utilities that are defined here as those with approximately fifty percent or more of their total kilowatt-hour sales going to retail customers. The investor-owned systems included in the study provide 96 percent of all full- service kilowatt-hour sales to investor-owned utility customers, and the publicly owned systems included in the study provide 49 percent of all kilowatt-hour sales to publicly owned utility customers. Public .power's payments and contributions to state and local governments include taxes and fees such as gross receipts taxes, property taxes (generally on property outside the city limits), franchise fees, payments to state public utility commissions, environmental fees, and licenses. Also included are payments in lieu of taxes (also called transfers to the general fund), and the value of services, such as free or reduced cost electricity, the use of electric department employees and the use of electric department materials and equipment. Federal taxes, Social Security taxes, similar contributions to state unemployment insurance, and other payroll taxes are excluded. The value of free or reduced cost services contributed by the local government to the utility is deducted from total payments and contributions to arrive at net contributions. The net amount is then divided by electric utility revenue. Net taxes for investor-owned utilities include state and local taxes and fees as reported on pages 262-263 of FERC Form 1. Federal taxes, Social Security taxes, similar contributions to state unemployment insurance, and other payroll taxes are excluded. 10 APPENDIX 2 REGIONS The regions specified in Table 2 and Table 3 are comprised of states as shown below. Hawaii is not included in any of the nine regions, but is included in national totals and in summaries by revenue class. 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LL I..L LL LL Li LL LL LL LL LL I..L. LL Ll LL Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y J J J J J J J J J J J J J J J J J J J W W W W W W W W W W W W W W W W W W W LL LL LL. LL LL lL LL LL LL L1_ LL. W W LL U_ LL LL LL LL ~ ~ d d ~ Q~ ~~ Q ~~ ~ Q ~ d ~ ~ 0 ~ F- F- H h- F- F- F- F- F- ~ H F- H ~ H F- H H H ~ V V V V U lJ lJ l.~ V l_1 U V lJ lJ U lJ U V V .~ .I # Q~ Or Lf} N Cri i' i Lf7 ti0 ft 06 ~ O ,--~ Q+ •-+ M d- i'~ N ~.. ~ M Q+ O N t'7 N N N N N ('") ('') ~t ~ I~ ft O~ O N ("') ti7' Lf7 I~ N ~O Q~ Oti ~ O~ ~ Q~ O~ •-+ •-+ N N N C'7 ~ 00 9Q OD 00 ~ Q+ Q+ O~ Q~ J+ Q~ O+ Q~ O O O O O O ~F ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ r+T~ ~ <; rN-( .+, D'-F~ ._.~~ `~ ( {. ~ ELK RIVER MUNICIPAL UTILITIES ~~ 322 King Avenue Elk River, Minnesota 55330 Phone (612) 441-2020 UTILITIES COMMISSION MINUTES December 6, 1994 3:00 P.M. Present Were: James Simpson President George Zabee Vice Chairman James Tralle Trustee Others Present: Bill Birrenkott General Manager Pat Klaers City Administrator Terry Maurer City Engineer Bob McCartney Water Superintendent Bruce West Fire Chief 1) The meeting was called to order at 3:05 P.M. by President Simpson. 2) Motion by Mr. Zabee, seconded by Mr. Tralle to approve the agenda as amended. The Motion carried. 3) Motion by Mr. Zabee, seconded by Mr. Tralle to approve the minutes of the previous meeting as distributed. The motion carried. 4) Terry Maurer reported that the tests of the water at the new well sight indicated that we would not have to install iron filtration at this time, but would probably have to in the near future. Motion by Mr. Zabee, seconded by Mr. Tralle to authorize MSA to proceed with the design to add the filtration equipment at this time. The Motion carried. 5) Mr. Tralle reported that some churches in the area have expressed interest in our security systems and he wondered if we had a special rate for churches. It was decided that he should work directly with Steve Nordahl to see what the costs actually are and then get back with us. 5) The 1995 Budgets were reviewed with the Commissioners. Motion by Mr. Tralle, seconded by Mr. Zabee to approve the 1995 budgets as presented. The Motion carried. 6) The pending ordinance requiring residents to connect to the City water system within two years of availability was reviewed by the Commissioners. The Commissioners directed the General Manager to contact the City Attorney and ask that the ordinance be redrafted to exempt the residences in the Westwood area. 7) Motion by Mr. Tralle seconded by Mr. Zabee to increase the Utilities cash donation to the City to 3~ of the revenue generated by Elk River customers. This is to be in effect for a period of three years at the end of which it will be reviewed. This is to have no effect on the present policy of street lights and donated electricity for City operations. The motion carried. 8) The Line Superintendent reviewed the status of construction projects and other operating conditions. 9) The General Manager reviewed the October financial statements with the Commissioners. Motion by Mr. Zabee, seconded by Mr. Tralle to receive and file the operating statements. The motion carried. 10 ) Motion by Mr. Tralle, seconded by Mr. Zabee, to approve the check register. 11) Mr. Tralle questioned the amount of our service charge, noting that it was less than AEC and Wright Hennepin Electric. It was decided to take no action at this time. At 4:45 P.M. the meeting was Adjourned into executive session for purposes of Labor Negotiations. At 6:00 the regular meeting was reconvened. Mr. Ron Black was present when the meeting was reconvened. 12 ) Motion by Mr. Tralle, seconded by Mr. Simpson for the following changes in the wages: a) Raise the wage range of the clerical staff by 2.9°s b) Pay the clerical staff a one time payment of $300 as a clothing allowance c) Raise the wage ranges of the APPA salary guidelines by 2.90 d) Glenn Sundeen to be paid at step 6 plus 75G per hour e) Pat Hemza to be paid at Step 5 f) Bob McCartney to be paid at Step 7 g) Bill Birrenkott to be paid at Step 6 The motion carried. 13) Motion by Mr. Zabee, seconded by Mr. Tralle to void the Employment Agreement with the General Manager dated September 1, 1992 and replace it with the Agreement dated with today's date. The General Manager was in agreement with this motion. The motion carried. 14) The next meeting was set-for Tuesday, January 10, 1994 at 3:00 P.M. at the Utilities office. 15) Motion by Mr. Tralle, seconded by Mr. Zabee to adjourn. The motion Carried. Meeting adjourned at 6:30 P.M. Bill Birrenkott General Manager ELK R7~'FR CZPAL UTZLITZE S DONATIONS TR~iNSFERS CONTRIBUTIONS The Cash Transfer to the City of Elk River from the Elk River Municipal Utilities shall be 3% (three percent) of the revenues generated by Elk River Customers only. To be in effect for a period of three years. ADOPTED 12-06-94 EFFECTIVE 1-01-95 J~ Elk River -~ Municipal Utilities 13069 Orono Parkway • P.O. Box 430 Elk River, MN 55330-0430 May 9, 2008 To: Elk River Municipal Utilities Commission Jerry Takle Jerry Gumphrey John Dietz From: Bryan Adams Subject: Cash Flow Projections Phone: 763.441.2020 Fax: 763.441.8099 At last months' commission meeting, our auditors presented the results of their annual utility audit. One of their comments was that staff continues the cash flow studies which project future revenues and expenses to ensure we have adequate financial resources to carry on business. Attached for your review are the updated Springstad cash flow studies for both the electric and water departments. These studies are updated twice annually, once after the audit and again during the budgeting process. The result of this study is consistent with past studies, that being; our cash reserve continues to rise with time for both departments. The trend is in the right direction. If this trend is correct, we will be able to start funding from cash reserves for some of our larger projects instead of bonding. Our goal in the electric department is to get our restricted account (line 57) to the $3,500,000 for three months operating reserves. This does not occur until the 2012 time frame with a number of critical assumptions which include: 1) Passing on Great River Energy's wholesale rate increases. 2) Customer growth rate of 5%-6% and projected consumption of data centers. 3) No other unexpected large loads requiring large capital expenditures. Our goal in the water department is to maintain a $2,000,000 reserves made up of emergency, unrestricted and cash (line 53). Depending upon the speed of our growth, water production facilities may vary from the assumed three to four year interval. Water main replacements due to the street rehabilitation projects are having a significant influence on future cash reserves and must be watched.