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02-20-2007 ERMU MINELK RIVER MUNICIPAL UTILITIES REGULAR MEETING OF THE UTILITIES COMMISSION February 20, 2007 Members Present: Jerry Takle, President; Jerry Gumphrey, Trustee Member Absent: James Tralle, Trustee Staff Present: Bryan Adams, General Manager; Glenn Sundeen, Line Superintendent; David Berg, Water Superintendent; Theresa Slominski, Finance Director/Office Manager; Troy Adams, Engineering Manager; Judy McSpadden, Recording Clerk Others Present: Lori Johnson, City Administrator; Tim Simon, City Finance Director; Peter Beck, City Attorney 1. Call meeting to order February 20, 2007 President Jerry Takle called the February 20, 2007, meeting to order. 2. Consider Utilities Agenda Jerry Gumphrey moved to approve the February 20, 2007, Utilities Agenda. Jerry Takle seconded the motion. Motion carried 2-0. 2a. Election of Officers for 2007 Jerry Gumphrey moved to re-appoint Jerry Takle, President; Jerry Takle moved to appoint Jerry Gumphrey, Vice Chair and be added to the financial signature card. Jerry Gumphrey seconded the motion. Motion carried 2-0. 3. Consider Consent Agenda After a few questions regarding the check register, Jerry Gumphrey moved to approve the Consent Agenda as follows: January Check Register January 9, 2006, Minutes Financial Reports Jerry Takle seconded the motion. Motion carried 2-0. 5.1 Staff Up-dates Bryan Adams reported that Northstar Access has installed a wireless Internet modem at James Tralle's residence as part of their study to verify the technology and how applicable it is for northern Elk River. The City is planning two street reconstruction projects this year which will affect the utilities, however, the final drawing has not been completed as to the scope of the Utility impact. Connexus sent out a newsletter in January 2007 informing the customers that there would not be a rate change in 2007, however, we will watch to see if and how the PCA will come into play. Page 2 Regular meeting of the Elk River Municipal Utilities Commission February 20, 2007 Glenn Sundeen gave an update on current projects, Otsego work has been completed except for the removal of poles which will be done after frost. Asplundh continues to do a good job tree trimming. The new Feeder 97 is now energized to support western Elk River. Troy Adams informed the commission the map books were completed and printed for both electric and water. Staff will start working with coordinating the GPS system, along with replacing the old style meters to radio read. The fuse coordination study is still in progress. The Security System sales for the month of January were 15. Sales have been on the rise due to word of mouth, and homeowners existing contracts with other monitoring companies expiring so they renew with us instead due to lower monitoring fees. Because we have over 500 accounts with Wright Hennepin International Response Center, the monthly fee per account has been reduced. David Berg said there are two filter plants needing maintenance, the others are completed. Currently the pump for Well #5 is in for repair. Theresa Slominski said the new employee, Peggy Ferguson, that was hired to fill the vacant position is doing a good job. Majority of focus has been in fmalizing 2006 for the auditors that will be here the beginning of March. Staff has been looking into an alternative payment processing procedure. Jerry Gumphrey questioned why we do not take credit card payments. Staff responded there are -fees involved. 5.2 Review GRE / ERMU Waco Substation Agreement Great River Energy finalized the land purchase for the new Waco Substation. This new substation will serve, in part, the United Health Group data center. Great River Energy (GRE) purchased approximately five acres of land of which the Elk River Municipal Utilities will utilize approximately one acre. GRE is asking for a one time payment of $1.00/sq. ft. or $43,560 for one acre of land. GRE's policy addressing shared facilities was reviewed. Staff recommends approval of this agreement. Motion by Jerry Gumphrey to approve GRE's joint use of the new Waco Substation Site policy. Jerry Takle seconded the motion. Motion carried 2-0. 5.3 Review MMUA Position Papers MMUA held its Winter /Legislative Conference in St. Paul on February 14-16, 2007. Discussion followed regarding the position papers presented at the conference. 5.4 Review MMTG Agreement & Bond Resolution The CapX 2020 initiative is a group of electric utilities joining together to identify and construct necessary generation and transmission facilities to meet Minnesota's needs for the year 2020. In short, 6300MW of new generation capacity and 3300 miles of additional transmission facilities will be required. Transmission costs alone are estimated to be $2.7 Page 3 Regular meeting of the Elk River Municipal Utilities Commission February 20, 2007 billion. Generation and transmission rates will rise to pay for these additional facilities. Elk River Municipal Utilities' charge is to keep our rates as low as possible for our customers. Municipal utilities in general own very little transmission and tend to rent their transmission needs and therefore are very susceptible to transmission rate increases. This is Elk River's case. One way to reduce transmission costs is to own versus rent. In May 2006, the Elk River Municipal Utilities Commission authorized joining Midwest Municipal Transmission Group (MMTG) as a vehicle to explore the potential to buy into the transmission system. Due to the successful negotiating efforts of MMTG, we now have the opportunity of buying into the transmission system. The first transmission project is a 345 KV line from Brookings, North Dakota to the Twin Cities at a cost of approximately $600 million. Elk River's load share is approximately $2 million. CapX 2020 participants include Wisconsin Public Power Inc. (WPPI), Central Minnesota Municipal Power Agency (CMMPA), Missouri River Energy Services (MRES), Minnesota Power (MP), Otter Tail Power (OTP), Xcel Energy (Xcel), Great River Energy (GRE), Dairyland Power Cooperative (DPC), the City of Rochester (RPU), Southern Minnesota Municipal Power Agency (SMMPA), and Missouri Basin Municipal Power Agency (MBMPA). CMMPA will be executing the agreement on behalf of MMTG and CMMPA members that are participating in the development of the CapX 2020 Brookings-Twin Cities Project. Elk River Municipal Utilities will be part of the MMTG group associated with CMMPA. At the November 21, 2006, Elk River Municipal Utilities special commission meeting, authorization was given for Elk River Municipal Utilities to proceed with MMTG /CMMPA initiative with a cap of $2,000,000. Peter Beck has been working on the details of this agreement along with Lori Johnson, and have concluded that Elk River Municipal Utilities (ERMU) can enter into this development agreement alone instead of the City of Elk River doing it for ERMU. This pre- development agreement with CMMPA allows the ERMU to participate in this project and enter into future agreements that will establish ownership, operation, maintenance, and revenue stream. This agreement addresses the permitting and engineering phases only. Motion by Jerry Gumphrey to proceed with the CapX 2020 project and to adopt the attached resolution. Jerry Takle seconded the motion. Motion carried 2-0. 5.5 Review Water Rule Changes At the January 2007 commission meeting, a number of changes were adopted to our Water Rules. In the process of making these changes, staff found other areas that also needed to be updated. The updates include; utility personnel will be inspecting and sealing all water meters; 2" water meters will require a by-pass loop; Section 103, second paragraph shall read: Water Page 4 Regular meeting of the Elk River Municipal Utilities Commission February 20, 2007 service repairs or renewals that become necessary will be made by a licensed plumber at the expense of the property owner. Utility staff may provide property owner a list of licensed plumbers who do emergency repairs. If owner can not make repairs, water may be shut-off or Water Utility may make the necessary repairs and the charge for such work will be made under a special assessment against the property concerned. Such assessment, including interest at the legal rate for local improvements, shall be certified to the County Auditor and collected and remitted to the City in the same manner as assessments for local improvements. The rights of the Elk River Municipal Utilities/City under this paragraph shall be in addition to other remedial or enforcement rights provided by the City Code of Ordinances or other applicable law. Motion by Jerry Gumphrey to approve the revised water rules as presented. Jerry Takle seconded the motion. Motion carried 2-0. 6.1 Review Territory Acquisition The 2007 budget contains a $260,000 line item to purchase service temtory from Connexus. The $260,000 is an estimated amount for area 17 and the actual cost will vary depending upon numerous factors with Connexus. The service temtory agreement expires in February 2011. Elk River Municipal Utilities plans to purchase area 18 in 2008, and area 22 in 2009 or 2010 depending upon finances. In order to acquire area 17 this year and area 18 next year, a new feeder from the North Substation will be required. The 2007 budget contains a $225,000 item to construct this feeder. Staff recommends authorization be given to acquire area 17 and construct the necessary feeder from the North Substation. Motion by Jerry Gumphrey to authorize acquisition of area 17 and proceed with constructing the necessary feeder from the North Substation. Seconded by Jerry Takle. Motion carried 2-0. 6.2 Review 2007 Vehicle Purchase The 2007 budget contains line items to replace three pick-up trucks and add one pick-up truck for the additional water operator. From experience, the utilities try to replace pick-ups on a ten year or 100,000 miles basis. In an effort to get as much life out of our vehicles, the vehicles from higher mileage jobs are transferred to lower mileage jobs as they get older. This year staff is proposing to retire three ten year old pick-ups with mileage ranging from 95,000 to 105,000 miles. Elk River Ford has the State bid on Ford and Dodge''/z ton 4x4 trucks. This year we recommend the '/z ton 4x4 for work crews. The Jeep Compass 4x4 gets far better gas mileage than pick-ups and is recommended for the General Manager. Staff Page 5 Regular meeting of the Elk River Municipal Utilities Commission February 20, 2007 recommends authorization be given to sell three 1997 pick-ups and purchase three Ford F150 4x4's and one Jeep Compass 4x4. Motion by Jerry Gumphrey to authorize the sale of three 1997 pick-ups and to purchase three Ford F150 4x4's and one Jeep Compass 4x4. Jerry Takle seconded the motion. Motion carried 2-0. 6.3 Review & Consider 2007 Electric Revenue Bonds The 2007 budget makes provisions to construct a Waco Substation and underground feeder to support the United Health Group data center facility, along with other customers, with bonds. The materials for the substation and underground feeders are already on order. Also, if we proceed with buying into the transmission system with MMTG/CMMPA group, we will need to free up another $300,000 to be spent over three to five years to complete the necessary agreements. Staff is proposing the following bond amount. Waco Substation $1,200,000 UHG Underground Feeder $1,000,000 Feeder on County Road 1 $ 300,000 $2,500,000 + Issuance and Coverage costs The total bond amount would be $2,875,000 per Ehlers and Associates analysis. We are proposing a 12 year term with interest payments only for the first two years. This will allow UHG load to ramp up to the estimated levels so sufficient revenues are available to pay the bonds. Motion by Jerry Gumphrey to authorize $2,875,000 of electric revenue bonds. Jerry Takle seconded the motion. Motion carried 2-0. 6.4 Review Request for Street Light A petition was reviewed for request to install a street light on County Road 33 by the entrance of AME Ready Mix, Plaisted Companies, and Aggregate Industries. There are numerous poles with overhead lines available in this area to attach street lights. Motion by Jerry Gumphrey to approve the installation of one street light. Jerry Takle seconded the motion. Motion carried 2-0. Page 6 Regular meeting of the Elk River Municipal Utilities Commission February 20, 2007 6.5 Review Safety Program MMUA provides safety training along with OSHA and DOT safety compliance programs. On an annual basis, our safety coordinator evaluates our safety program and involvement. The evaluation for 2006 was reviewed. Jerry Takle commended the staff on their diligence on continuing the safety programs and expects further enthusiastic participation. 6.6 Review Proposed Well Location Due to the continued increase in water usage in Elk River, the 2007 budget contains a $400,000 line item to construct an additional well. This well should be operational by the summer of 2008. An annual load profile of water demands was reviewed and because of the large. disparity between summer and the other season's usage, a peaking well with minimal treatment is desirable. This well would only be used in the summer during periods of heavy lawn sprinkling. The preferred well site is at the Johnson Street Water Tower location. A test well was constructed at this site and reflected great water quantity, but the water quality would require an approximate $1,500,000 treatment plant. The well site in Twin Lakes Estates has good water quality and quantity but will require a small (10' x 15') building to inject fluoride and chlorine. A building may be objectionable to the neighbors. The other option is the River Park development, and the School District will allow us to sample their test well. This will be revisited at a future meeting as test results become available. Other Business There was no other business. The next regularly scheduled meeting of the Elk River Municipal Utilities Commission will be Tuesday, March 20, 2007. President Jerry Takle adjourned the regular meeting of the Elk River Municipal Utilities Commission at 5:20 p.m. Respectfully submitted, ~, ~~~~~ ~ dy McSpadden Recording Clerk