5.2. ERMUSR 03-14-2006Elk River
Municip al Utilitie s
13069 Orono Parkway
Elk River, MN 55330
March 9, 2006
To: Elk River Municipal Utilities Commission
Jerry Takle
John Dietz
Jim Tralle
From: Bryan Adams
Subject: Electrical Project Update
phone: 763.441.2020
Fax: 763.441.8099
We are getting into our 2006 budget year enough where we are starting to see some
significant electrical capital budget variances. These capital project variances are due to
added projects we were not aware of, larger scope of anticipated projects and under
estimated initial project.
The concerned projects are as follows:
a) Move Overhead line on Co Rd 33. Road improvement received federal funding.
We were planning to do only the gravel pit area.
b) Rebuild Overhead line on Co Rd 40. Road improvement received federal
funding.
Late construction - $100,000 may carry over to 2007.
c) Rebuild Parrish Ave. (Co Rd 42) from Co Rd 39 to H.W. 101 due to Super
Target expansion in Otsego.
d) 3 Otsego feeders became more involved than originally anticipated.
e) Use of more expensive padmount switchgear.
f) Super Target development in Otsego anticipated cost of $268,000 of which
ERMU and developer equally share in this cost of $134,000 each. Our budget
allowance for new development is $330,000 which leaves $196,000 for
remaining 2006 developments.
g) We do not know at this time the budget impact of moving underground lines
from Highland Ave and Dodge Ave road reconstruction projects.
The estimated budget impacts for the above issues are as follows:
PROJECT
Co Rd 33 relocation
Co Rd 40 rebuild
Parrish Ave rebuild
3 Otsego feeders
Higher grade Padmount Switchgear
Otsego Super Target
Highland Ave rebuild
Dodge Ave rebuild
ANTICIPATED COST BUDGET COST
$255,000 $70,000
$150,000 $35,000
$ 3 80,000 --------
$570,000 $400,000
$326,000 $163,000
In development budget
$25,000 ? --------
$15,000 ? --------
$1,721,000
$668,000
We need to find $1,053,000 ($1,721,000-$668,000) - We have the following budgeted
resources to make up this deficit.
Do not rebuild area 16
Do not rebuild area 21
Do not rebuild area 17
Delay service territory
Acquisition area 17
Law suit settlement
$80,000
$90,000
$50,000
$250,000
$279,000
$749,000
We have a couple of choices of funding the remaining $304,000 ($1,053,000-$749,000).
If the other data center develops, we can bond for the additional amount. The other
option is to use our cash reserves to fund it for the year and delay other projects in 2007
to rebuild the cash reserves. Our Springstad cash flow model will be updated to verify if
the last is a reasonable approach.