ERMUSR Misc Issues 02-08-2005Elk River
Municipal
13069 Orono Parkway
Elk River, MN 55330
February 2, 2005
To: Elk River Municipal Utilities Commission
.Terry Takle
James Tralle
John Dietz
From: Bryan Adams
Subject: Miscellaneous Issues
phone: 763.441.2020
Fax: 763.441.8099
Enclosed is the packet for Tuesday, February 8, 2005 commission meeting at 4:00 p.m.
The City Council has reappointed Jim Tralle to another three year term on the Elk River
Municipal Utilities Commission, congratulations Jim.
It has been a number of years since the job positions in the office have been re-evaluated
from a comparable worth perspective. Many of the original job duties within particular
jobs have changed. Originally Hay Group evaluated these jobs and assigned points to
each position. Unfortunately, Hay Group has closed their Minneapolis offices. We can
either hire Hay Consultants to re-evaluate these positions or learn to do it ourselves. The
nearest Hay Job Evaluation Seminar is April 13 & 14, 2005 in Chicago. I would like to
attend unless this commission desires otherwise. Total cost is approximately $2500.
This will allow us the ability to utilize the Hay Group methodology in house instead of
paying consultants.
Enclosed is the following information for your review.
1) H.R. article from "Kiplinger Letter", dealing with Anti-body-piercing Hiles
discrimination based on personal appearance.
2) Graph reflecting Landfill Gas electric generation facility output for power and
energy for years 2003 and 2004. In 2004 this facility had a capacity factor of
102.17% fora $24,542.91 bonus to Waste Management. This facility was
ties
operating at peak capacity all 12 months at time of Great River Energy's
monthly peak.
3) Copy of 2004 Building Permit Report. Also included is the 2003 report for
reference. These reports reflect the construction activity in Elk River.
4) Project Status Report dated December 29, 2004 from Terry Maurer addressing
2005 major projects.
5) Article titled, "Can Competition Be Made To Work?" from Jan.-Feb. 2005
Public Power magazine.
6) Article titled, "Great River Energy Seeks Power Resource Proposal" for their
January newsletter.
7) MMUA's January 28`" issue of "The Capital Tattler", addressing the States
potential legislation effecting municipal utilities.
8) Preliminary copy of benefit survey which will be sent to other utilities. We
will be surveying the surrounding utilities benefits and comparing them to Elk
River Municipal Utilities. I still need to simplify this survey, particularly the
insurance area so we get all of the information without making it to
complicated and to time consuming to complete.
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about the programs
The Hay Guide Chart"-Profile Method is the most widely used method of work measurement and
role valuation in the world. If you want to learn how to evaluate jobs reliably and consistently,
these courses are a must. The Introduction to Hay Job Evaluation and Advanced Hay Job Evaluation
seminars are designed to teach you how to value work in your organization through both discussion
and hands-on practice, learning from the expertise of a senior Hay Consultant and the shared
experiences of Hay clients.
key objectives of the seminars
• Understand the business case for evaluating work and how it fits into the broader
lntroduCtlon reward process.
t0 Hay Job .Analyze jobs and roles in your organization.
Evaluation
(2-day 'Develop insight into the concepts underlying the Hay Method of valuing work.
foundation Practice evaluating a variety of jobs in the overall context of an organization.
course)
• Be prepared to address gttestions about work valuing in terms that are
meaningful in your organization.
• Use job evaluation as an analytical tool to understand complex organizational
structures and determine the value of jobs and work within the structure.
• Use job evaluation as a tool to clarify accountabilities in complex organizations.
Advanced .Facilitate succession and capability planning through assessing people relative
Hay Job to jobs and job levels using job evaluation methodologies.
Evaluation
(2-day Use job evaluation to facilitate development of career ladders and determine
advanced appropriate career pathing.
course) Identify the linkages between job evaluation and competencies and how to
effectively integrate the two.
• Use job evaluation to enhance market pricing capabilities.
• Build skills in using job evaluation as a diagnostic tool through case studies.
who should attend
These programs are open to organizations that are using or considering using the Hay Guide Chart`~-
Profile Method, or who participate in one or more of Hay's compensation surveys. They are designed
for individuals who are accountable for valuing work in their organizations, including compensa-
tion management, organization effectiveness, and human resources development.
• Introduction to Hay Job Evaluation is designed to teach a basic understanding of how to
value work using the Hay Guide Charts°. This course is intended for professionals who
need to evaluate jobs and roles, and who have little or no previous experience with
Hay's Methodology.
• Advanced Hay Job Evaluation is designed for individuals who are experienced using the
Hay Guide Chart"-Profile Method of Job Evaluation, and who have knowledge of alter-
native job measurement methodologies. This course is intended for individuals who want
to build on the job evaluation skills taught in the introductory seminal; as well as learn
the linkages of Hay Job Evaluation to other HR functions.
~._ 2 i-vs
Look for another solid uptick in IPOs (initial public offerings)
this year. About 400 privately held firms are likely to go public
in 2005, raising something over $55 billion. That continues the uptrend
since 2003, when a mere 85 firms opted to sell shares to the public.
Tech, biotech, financial services, energy, media and utility firms
are all good bets to make the move as business owners and managers
eye a strong stock market. The rush signals a rebound in capital spending
and business investment, which will help buoy growth in the coming year.
One big-growth business: Payday lending...small cash loans
repaid with personal checks postdated for payday or electronic drafts
of borrowers' bank accounts. Storefront operations are big business...
$40 billion a year, collecting $6 billion a year in finance charges.
Now lenders are turning in droves to the Internet to increase profits.
Online loan sharks work from states with few or no protections
for consumers and/or lax enforcement. They charge exorbitant fees...
as much as $30 per $100 borrowed, equivalent to an APR of a whopping 780%.
But federal authorities show scant interest in stepping in.
There's little tracking of online-lending sites and few complaints filed.
Many consumers are embarrassed to admit they're in such desperate straits.
Want help picking mutual funds? Kiplinger's Mutual Funds 2005
ranks more than 2500 funds and provides comprehensive data on them.
It's available for $5.95 plus shipping and handling. To order,
call 888-547-5464, or go to www.kiplinger.com/annuals/mutualfunds.html.
® Unemployment insurance rate hikes won't sting quite so much
this year. They'll climb just 10% on average, a welcome reprieve
after a two-year increase averaging 50% in 2003-2004. Employers in Okla.,
N.H., Ore., Tenn. and Texas have even more to celebrate...2005 decreases.
One more legal pitfall for employers: Anti-body-piercing rules.
Employee suits charging discrimination based on personal appearance...
tattoos, dreadlocks or other hairstyles and items of religious dress,
as well as piercings...are on the rise. So far, courts have mostly ruled
that employers have the right to set standards for employee appearance.
But compromising is safer. Costco Wholesale's offer to let a cashier
cover her pierced eyebrows with bandages won its case. Domino's Pizza
allows a Sikh to substitute a turban with a logo for the standard cap.
Who selects the health care plan for your company?
Increasingly, it'll be finance officers, not personnel managers,
who make the decisions. That's another sign of how critical health costs
have become to firms' bottom lines and means even more fiscal discipline.
® A home health care boom is in the works. The aging population
'~ and tremendous pressure to trim hospital and nursing home costs
spell at least 10% annual growth for the industry for five years or so.
States, including N.H., Tenn. and Wis., as well as private health plans,
are turning to home care as a cheaper alternative to institutional care.
But there are clouds on the horizon, too: Home health care companies
can't find enough workers, and some states want to trim Medicaid payments.
Look for more specialty hospitals to crop up. Members of Congress
will let a ban on them expire in June. A federal study says that hospitals
that specialize in lucrative fields such as cardiac care and orthopedics
don't have a lasting impact on the health of full-service facilities.
'_~,; -' I Remember, your subscription includes The Kiplinger Letter online ~
Elk River Municipal Utilities LFG Power Output
3000
2500
2000
Y
C
'L 1500
m
3
a°, 1000
500
0
s s
0 G 0 0
~a°~~ ®~~~~ ~a`G.c PQ~ ~~~ ~J~O ,J~ QJ~J~~'~~~~c~~~0c ~~~0c ~~~~c
~0Q ~~ 00
Months
Elk River Municipal Utilities LFG Energy Output
2,000,000
1,900,000
1, 800, 000
t 1,700,000
Y 1,600,000
c
'~, 1,500,000
1,400,000
c
w 1,300,000
1,200,000
1,100, 000
1,000,000
~a~Ja~ ~~a~ ~~iGr PQc ~a~ ,J~~ ,J~ PJ~~y~.'`~~®~ ~o~0t ~~~~ ~~~~
~e ~~Qm ~G C1O,0 O~G0
Months
2004 BUILDING PERMIT REPORT
TOTAL PERMITS ISSUED FOR 2004 4068
(Includes building, grading, housing, sign, street disruption, septic, demo,
plumbing, heating, gas)
PERMITS ISSUED RESIDENTIAL NEW:
SINGLE FAMILY DWELLINGS 301
TWIN HOMES 12
MULTI-FAMILY (3 or more units) 235
APARTMENT BUILDINGS -~-
TOTAL UNITS 548
RESIDENTIAL BUILDING VALUATIONS:
SINGLE FAMILY DWELLINGS $ 56,701,395
TWIN HOMES $ 1,617,200
MULTI-FAMILY $ 37,143,070
TOTAL VALUATION FOR OTHER RESIDENTIAL
CONSTRUCTION, I.E. DECKS, GARAGES, ETC. $ 2,925,506
TOTAL RESIDENTIAL VALUATION $ 98,387,171
* AVERAGE VALUATION FOR SINGLE FAMILY HOMES Ili' 2004: ~' 188, 376
($187, 727 IN 2003)
COMMERCIAL/INDUSTRIAL/INSTITUTIONAL VALUATIONS:
COMMERCIAL/NEW $ 1,507,883
INDUSTRIAL/NEW $ 2,648,167
INSTITUTIONAL/NEW $ -~'
APARTMENT BUILDINGS $ -~-
COMMERCIAL/INDUSTRIAL/INSTITUTIONAL,
ADDITIONS, REMODELING, ALTERATIONS $ 18.186.192
TOTAL COMMERCIAL/INDUSTRIAL/INSTITUTIONAL $ 22,342,242
GRAND TOTAL VALUATION,
RESIDENTIAL/COMMERCIAL/INDUSTRIAL/INSTITUTIONAL FOR 2004: $120.729.413
2004
COMMERCIAL/INDUSTRIAL/INSTITUTIONAL
BUILDING PERMIT HIGHLIGHTS
ADDRESS PROJECT VALUATION
13880 HWY 10 Jail Addition $ 15,900,000
13422 Business Ctr Dr. Orluck Industries $ 1,100,000
17155 Quincy St Pullman Place $ 7,824,000
510 Freeport Ave R&D Sales $ 514,000
11080 Industrial Cir Gradient Technology $ 580,000
15970 Jarvis St Majestic Masonry $ 530,000
18100 Zane St Strip Mall containing: $ 680,000
Anytime Fitness, UPS Store,
Aveda Salon
`'003 ~Lr~i,~~~TC~ I'~P,.1~II'~' R~PO~T
TOTAL PERMITS ISSUED FOR ?003 ~=I76
(Incl~~.cles building, g~°adin~, hoL:sin~, sign, street disruption, septic, demo,
plumbing, heating, gas)
PERhTITS ISSUED RESIDENTIAL NEW:
SINGLE F: tiIILY DWELLINGS 285
TWIN HOMES ~6
MULTI-FAMILY C3 or r.~ore units]-'~`~
APARTMENT BUILDINGS -~-
TOTAL UNITS 550
RESIDENTIIa.L BUILDING VALUATIONS:
SINGLE F~1\~IIL~' DtiVELLINGS ~ 55,50`',SSS
T~~rIN HOMES $ 3,75'?;194
MULTI-FAi1-LILY $ `?9,S46,S19
TOTAL VALUATION FOR OTHEP~ RESIDENTL~L
CONSTRUCTION, I.E. DEChS, G1-~P~AGES, ETC. S 3.791.592
TOT.~,I. RESIDENTIAL V:4LUATION ~ 90,593,2J5
AVEP~GE V_~4Z U_4TION FOR SINGLE F_~I~IIL Y HOMES I1V 2003: $ 187, 727
(~19~,717I1V 2002)
COMMERCIAL/INDUSTRIAL/INSTITUTIONAL VALUATIONS:
COMNIERCIALINEti~' ~ 3,757,29
INDUSTRL~L/NEW ~ 1, 75 r,2ul
INSTITUTIONAL/NEW ~ 43,4`?0
APARTMENT BUILDINGS ~ -0-
COVIMERCI ~L/INDt' STP~L~L%INSTITUTI ON a?,,
ADDITIONS, REMODELING, ALTEP~.'~TIONS S L512.51
TOTAL CONIP~IERCI.~L/INDUSTRIAL/INSTITUTIONAL ~ 7,100,S0~
GRAND TOTAL VALUATION.
RESIDENTIAL/COII~IP~-IERCL~L/INDUSTRIAL/INSTITUTIONAL FOR `?00~: ~ 9i 99.0=16
S./b ~Jclif£'~OOOstr
2003
C OMMER CI_~L/INDL~ STRIAE/INSTITUTIONAL
BUILDING PERMIT HIGHLIGHTS
ADDRESS PP~OJECT VALTATION
525 Dodge Ave. Kentucky Fried Chicken $ 450,000
19021 Freeport St. Briggs Office Bldg. $ 540,000
151 i0 Zane St. Subway / $ 520,000
Batteries Plus
15260 Zane St. Advanced Auto $ 435,000
f ._ 11020 - 1110C 1S3rd Cir. Tl~e Pines $ 1>?55,?55
Town Office Park
11654 219th Ave Greenscape $ 135,000
15210 Zane St. Panes Bread $ 265,000
15703 Jarvis St. Sportech $ 733,000
15790 Jarvis St. BB:D Htg. 8: Plmg $ 600,000
15930 Jarvis St. Midwest $ 415,000
Mini Storage
pity of
..
ilk
River
13065 Orono Parkway
Elk River, MN 55330
December 29, 2004
File: 230000M-0325
Mr. Pat Klaers, City Administrator
City of Elk River
13065 Orono Parkway
Elk River, MN 55330
RE: PROJECT STATUS REPORT
Dear Mr. Klaers:
As requested, I have prepared this memo to update you and the new City Council on the
status of various engineering projects now underway or in the planning stages for the year
2005. I have broken the update down into four categories: City-initiated projects, developer
projects, Sherburne County projects, and miscellaneous projects. The status of the various
engineering projects is as follows:
A. City-Initiated Projects
2005 Street Reconstruction Project
This is the second reconstruction project following the City Council adoption in
2002 of the Pavement Management Program. The streets proposed for
reconstruction in 2005 are the Upland/Tipton area between Trunk Highway 10
and Main Street, and 5`h Street from the west end to Trunk Highway 10, together
with the one block side streets of Seymour Avenue, Rush Avenue, Quinn
Avenue, and Norfolk Avenue. The City Council authorized the feasibility study
to be prepared in the Fall of 2004. We are anticipating an informational meeting
to be held on January 20, 2005 with the feasibility study being formally presented
to the City Council in February 2005. There will be a public hearing followed by
the bidding of the project, and an assessment hearing prior to an anticipated May
2005 start of construction.
Line Avenue Cul-de-Sac
The City Council in the Fall of 2004 authorized the preparation of a plan and
specification for the cul-de-sacing of Line Avenue at CSAH 13. In addition to
the construction of the cul-de-sac, this project will include the closure of the left
Phone: 763.635.1000
Fax: 763.6351090
vnuw.ci.elk-river.mn.us
Project Status
December 29, 2004
Page 2
turn lane and median opening along CSAH 13 and the continuation of the
sidewalk adjacent to CSAH 13 through the Line Avenue intersection. The City
Council directed staff to prepare the plan and to bid the project in the Spring of
2005, at which time it would be brought back to the City Council for final
consideration as to whether or not to proceed with construction of the
construction of the cul-de-sacing of Line Avenue.
King Avenue Parking Lot
This project involves the removal of the former Elk River Municipal Utilities
building, the closing of King Avenue at Trunk Highway 10, and the
reconstruction of the entire area into one large parking lot. This project is being
undertaken in conjunction with the Downtown Redevelopment Project, which
will involve amulti-use building being placed in the Jackson Square parking area.
We are currently soliciting quotations from contractors for the environmental
abatement of the necessary items in the former Elk River Municipal Utilities
building prior to its demolition. Quotes will be solicited for the demolition in
about March of 2005. We are working on the design and layout of the parking
lot, taking input from appropriate City staff and preparing to initiate a series of
meetings with a downtown representative group, beginning in early January 2005.
Construction is anticipated to begin as soon as the removal of Spring weight
restrictions will allow, and to be completed in the early part of the Summer of
2005.
Westbound Liquor Store Site Civil Improvements
We are working with Tushie Montgomery, the City's architectural firm, on the
development of the grading plan, parking lot layout, and utility plan for the
construction of the Westbound Liquor Store to be located at the intersection of
Trunk Highway 10 and Joplin Avenue. These plans are completed in a
preliminary fashion and have been submitted to the Planning Department for
consideration of a conditional use permit for the proposed liquor store. Based
on the comments received at the Planning Commission and City Council
meeting, the plans will be revised, bid, and construction will likely begin early in
the Spring of 2005.
County Road 40 (Cleveland Avenue) Reconstruction
The City has been working with the County for over a year to facilitate aturn-
back of County Road 40 to the City. The framework of the turn-back has been
agreed upon. City and County staff are currently working through the details of
a formal turn-back agreement. Under the terms of the agreement, the City will
take the lead on the land acquisition and reconstruction of Cleveland Avenue
between CSAH 13 and CSAH 12. This project has a Federal Grant associated
with it in excess of $700,000. We are currently working on the prelunuiary
Federal paperwork and preluninary layout of the roadway to determine exactly
how much land needs to be acquired so that we are ready to proceed as soon as
the turn-back agreement between the City and County is formally agreed upon.
• Brown Property Development -Based on direction from the City's EDA, we are
preparing to begin work on the infrastructure improvements and platting process
S:\EngineerImprovProj\2005 Improvement Projects\12 29 04 CC memo 2005 projeas.doc
Project Status
December 29, 2004
Page 3
of the Brown property adjacent to Twin Lakes Road. We understand that the
EDA and City staff will be working over the next 60 days on preliminary layouts
for the public right-of-way, and lot configurations for the development of the
Brown property. We will be prepared to proceed immediately with plans and
specifications once direction is given from the City Council and/or the EDA,
such that developable lots can be put on the market by the Fall of 2005.
B. Developer Projects
This alphabetical listing provides the names of the various private developer projects
currently underway within the City. Some of these are just nearing final completion,
while others have just recently received concept approval. Some of these have
several phases with two or more phases in various states of completion.
• Belmont Estates 29
• Elk Meadows Addition 5
• Elk River Crossing 6`h Addition 2
• Elk River Station 2^d Addition 18
• Hillside Estates 10`h Addition 21
• Hillside Estates 9`h Addition 27
• Jackson Street Villas 76
• Kingdom Estates Addition 29
• Kliever Lake Fields 2nd Addition 11
• Prestigious Woodland Hills 27
• River Park Addition 489
• Trott Brook Farms 10`h Addition 21
• Trott-Brook Farms 11`h Addition 25
• Twin Lakes Estates 70
• West Oaks 2nd Addition 46
• West Oaks 3rd Addition 40
• West Oaks Addition 137
• Windsor Meadows 33
• Windsor Oaks of Elk River 39
• Woods at Hillside 4`h Addition 17
C. Sherburne County Projects
Sherburne County has various projects programmed in the City of Elk River in the
ne_~t few years that are currently being worked on, in addition to the County Road 40
project mentioned earlier. The following three projects are currently being worked
on and/or considered for the foreseeable future:
Count Road 33/County Road 77 Realignment
This is the realignment and reconstruction of the County Road 33 alignment
west of the interchange with Trunk Highway 169. It also includes the lowering
and realignment of County Road 77 (Proctor Avenue) north of the Brentwood
Addition. It is anticipated that County Road 77 will be closed to traffic in the
Spring of 2005 to allow time for the gravel miners in the area to mine the existing
S:\EngineerImprovProj\2005 Lnpcovement Projeas\ 12 29 04 CC memo 2005 projeas.doc
Project Status
December 29, 2004
Page 4
gravel and lower the roadway, along with the relocation of the small utilities. It is
anticipated that some time in 2006, the mining operation will be complete and
the new roadbed will be established by the mining operation. Sherburne County
has received a Federal grant for the paving of the roadway and it is believed that
the project will extend west of the railroad tracks along the existing County Road
33 alignment to CSAH 1.
CSAH 1 Reconstruction
Sherburne County is currently working on plans for the reconstruction of
County Road 1 from County Road 32 to the north City limits. As explained to
the City, this project will involve some minor vertical alignment corrections,
along with the reconstruction of a two-lane roadway. It is anticipated that this
project will begin construction in late 2005 or the 2006 season.
County Road 44~Meadowvale Road) Reconstruction -Sherburne County has
had the reconstruction of County Road 44 on their Capital Improvements
Program for the past few years. It was originally intended to part of the projects
that the County bonded for. However, the bond funds were fully used before
the County got to this project. As we understand it, this project is now high on
their project list, but a funding source has not been fully identified as of yet. It is
anticipated once the discussion between the City and the County regarding the
turn-back of County Road 40 is complete, that County Road 44 will likely be a
candidate for discussion of turn-back options with the City potentially taking the
lead on the reconstruction of the roadway.
D. Miscellaneous Projects
TH 169 Geometric and Environmental Study
The City has been working with MnDOT for the past 12 months to take the TH
169 Inter Regional Corridor Study to the next level, which would include
geometric layouts and environmental documentation. MnDOT has planned for
a corridor study along TH 169 from Elk River to Princeton. We anticipate
sometime in the first quarter of 2005 they will start a consultant search to
accomplish this project.
TH 10 Alternative Anal~is in the Downtown Area
The City has been discussing the potential of trying to get High Priority Project
monies from our congressional delegation through the re-authorization of the
Transportation Act to perform some further alternative analysis relative to the
TH 10 Inter Regional Corridor Study through the downtown area. As you are
aware, the IRC Study called for the TH 10 to be elevated approximately 20 feet
above the downtown area. The City passed a resolution at the end of the IRC
Study, agreeing with the vision of the Study, but questioning several things, most
importantly, the plan to raise the highway in the downtown area.
• Comprehensive Transportation Plan Implementation
In November of 2004 at a workshop, the City Council discussed the
implementation of the Comprehensive Transportation Plan. At the point, the
S:\EngineerImprovProj\2005 Improvement Projects\12 29 04 CC memo 2005 projeas.doc
Project Status
December 29, 2004
Page 5
consensus of the Council was that they wanted to be proactive in pursuing
transportation issues throughout the City of Elk River. I am scheduled to
present to the Planning Corrunission in February of 2005 a "laundry list" of
potential projects, some of which are already being worked on and many of
which have either been discussed or listed in the Comprehensive Transportation
Plan, but no work has begun on them. My hope is that through visiting with the
Planning Comnussion and then the Council at a future workshop, we will
identify the top 3 - 5 priority projects and we can begin work on those.
WWTP Digester Cover Replacement
The City undertook the replacement of a digester cover at the Wastewater
Treatment Plant in 2004. The old cover was removed and the new cover built
and installed in the Fall of 2004. Weather did not allow final painting of the
digester cover, so minor work still remains to be done in the Spring of 2005.
WV~'I'P Pre-Treatment Improvement
The City Council has recently accepted a preliminary study on pre-treatment
improvements to the headworks of the Wastewater Treatment Plan and
authorized final design to commence. It is anticipated that the final plans and
specifications will be ready for a Spring bid, with most construction activities
being completed in the 2005 season.
WWI"P Master Plan
In 2004 the City Council authorized a Wastewater Treatment Plant Master Plan
to be undertaken. Much of the work was completed and was then put on hold
until the Comprehensive Plan update was formally adopted by the City Council.
Now that the Comprehensive Plan has been approved, the Wastewater
Treatment Plant Master Plan will be completed in the first quarter of 2005. This
Master Plan will include to two parts. It will deal with how to expand the
ultimate treatment capacity at the Wastewater Treatment Plant and will also have
a portion dealing with providing for sewage collection in three areas not
currently urithin the Urban Service District.
Computerized Pavement Management Plan
Recently the City Council authorized the expenditure to acquire software to
computerize the City's Pavement Management Plan. The City Council
authorized an expenditure to acquire stereo photos of all the streets within the
City. It is anticipated that during the 2005 year, Ciry staff will begin to
computerize the City's Pavement Management Plan.
Storm Sewer Map
Utilizing the same stereo photos and work that has been previously done, it is
anticipated that City staff will begin work on a storm sewer map in 2005. The
Ciry has, for many years, had up-to-date water and sanitary sewer maps, but has
lacked a complete storm sewer map of the City system. One of the requirements
in the City's NPDES permit for Phase 2 Storm Water Management Plan is the
completion of a City storm sewer map during the 5-year life of that permit.
S:\EngineerImprovProj\2005 Improvement Projects\12 29 04 CC memo 2005 projects.doc
Project Status
December 29, 2004
If you have any specific questions or would like other information, please call.
Sincerely,
~~~,~
Terry J. Maurer, P.E.
City Engineer
Page 6
S:\EngineerImprovProj\2005 Improvement Projects\ 12 29 04 CC memo 2005 projects.doc
Can Competition
Be Made To Work? .,,o~.,.„,
The promise of competition has
been center stage during more than a
decade of misadventures with electric
utility industry deregulation. It has
been used to rally support and chas-
tise doubters. But a clear statement of
what competition means was rarely
offered. Moreover, the assumption
that it can be made to work has not
been examined carefully. A clear and
appropriate definition of competition
is needed to judge whether the re-
sults of electricity deregulation
comport with what would occur in
truly competitive markets.
Advocates of deregulation rarely pro-
vide aclear statement of the benefits or
delivery date of competition. Lower rates
and more choices were touted as primary
benefits, but when skyrocketing prices ar-
rived instead, unproved efficiency and
proper price signals became the new ra]-
ly2ngcry.
Competition was good, the promoters
of deregulation reminded us, because en-
trepreneurs working in their own
self-interest are guided by the invisible
hand of the market, as described more
than two centuries ago by Adam Smith,
and such pursuits lead to efficient pro-
duction and prosperity.
Usually ignored, however, was Smith's
caution that rarely do people in the same
industry meet that their conversation
does not turn to conspiring to raise
prices. Also given short shrift were the
conditions under which adequate compe-
tition is likely to exist. Proponents of
deregulation ignored the history of pri-
vate monopoly abuse.
More recently, competition advocates
have forgotten one of the cardinal bene-
fits of competition-that it coordinates
economic activities in industries so there
is little or no need for government regu-
lation or entry. They neglect this, perhaps
because deregulatory efforts demonstrate
the need for government intervention.
The market has not automatically pro-
vided essential facilities and coordinated
www. A P PAn et. o rg
activities reduired to provide electricity
that is reliable, environmentally respon-
sible, efficiently produced and efficiently
priced.
The industry is plagued with nagging
problems of adequacy of reserve capacity,
construction of new transmission facili-
ties, reliability of day-to-day operations,
future generating capacity, and collateral
harm to the environment If markets are
in fact competitive, these problems would
not exist.
These problems, along with the Califor-
nia fiasco, Enron scandals, manipulation
of price data, skyrocketing wholesale
prices, and the wave of industry mergers,
indicate something was fundamentally
wrong with initial assumptions about com-
petition in electric power markets.
There are no such things as pure mo-
nopoly or pure competition. These are
theoretical concepts at opposite ends of
an economic spectrmn. Consumers and
enterprises live their real economic lives
somewhere between these extremes. The
notion of "workable competition" at-
tempts to bring real-world practicality to
the economic notion of competition.
More formally, economist John
Maurice Clark defined y~~orkable com-
petition several decades ago as a "rivalry
in selling goods, in which each selling
unit normally seeks maximum net rev-
enue." But he emphasized that the
prices each seller can charge are effec-
tively limited by the free option of the
buyer to buy the same product from a
rival seller. This necessitates "an effort
by each seller to equal or exceed the at-
tractiveness of the others' offerings."
Clark conceded that his definition may
not be complete, but "it focuses attention
on a crucial point which is sometimes ne-
glected, namely the nature of the option
actually open to the buyer." ("Toward a
Concept of Workable Competition," Tl~ie
American Econor~nic Review 30, Issue 2
(June 1940), 242.1
Clark's definition captured the essen-
tial attributes of competition and implied
other attributes that further define it.
The rivalry he described implied that
suppliers do not have effective control
over market prices-they are "price tak-
ers." 7~here is a true rivalry for customers
and sales so goods and services will be
produced efficiently and market prices
will reflect the minimum cost necessary
to attract suppliers. There is also the im-
plication that enterprises are responsive
to consumer demands.
Following Clark's lead, other econo-
mists have studied industry behavior and
performance to determine if the results
are consistent with what would be ex-
pected in workably competitive markets.
The behavioral and performance criteria
for such markets were smnmarized by
economist Frederic Scherer. As for be-
havior, enterprises do not collude to
keep prices high and maintain excessive
profits, nor engage in exclusionary,
predatory, oe coercive tactics. Neither do
they persist in harmful price discrimina-
tion. Information helps customers make
better choices about what and how
much to buy.
Competition leads to: efficient produc-
tion; output levels and quality responsive
to customer demands; profits sufficient to
attract and reward investment, efficiency
and innovation; prices that reflect costs;
opportunities for introducing technologi-
cally superior new products and
processes; promotional expenses that are
not excessive; and success for sellers who
best serve customer wants.
Clark's definition of competition is an
appropriate standard against which to
judge whether competition is present in
electric power markets. Scherers criteria
provide practical standards for judging.
Tuning to the question of whetl~rer
competition can be made to work
requires looking at the conditions
necessary for it to flourish. Important
influences include raw materials,
prevailing technologies, storability of
JANUAFV-FeeRUaav 2005 15
Can Competition Be Made To Work?
products, mobility of facilities, net-
work characteristics, availability of
substitutes, extent of common costs,
size of capital investment, and access
to essential transport facilities.
These factors affect the degree of com-
petitiveness by influencing the number of
buyers and sellers, cost structures, the
degree of vertical integration, and barri-
ers to entry. Taken together, these
influences determine the market struc-
ture.
Two other conditions necessary for
competition are price flexibility and ac-
cess to the same information by buyers
and sellers.
The absence of barriers to entry is vi-
tal. According to economist G.C.
Archibald, economists who have written
classic studies on the nature and practice
of competition found "that the competi-
tive mechanism worked not only through
prices but, most importantly, through en-
try of firms."
Given a situation where barriers to
entry, lack of information, and inflexible
prices exist, no harm is done and signifi-
cant benefits are likely if barriers to en-
try are removed before addressing
information and pricing problems. In
sharp contrast, significant harm is as-
sured if price flexibility precedes
removing entn- barriers, as the Califor-
nia experience showed. Price flexibility
does not imply a concomitant increase in
average prices. A change in the structure
of prices does not mean that returns to
bond or equity holders have to be in-
creased, and, consequently, average
prices need not change.
Entry barriers can be artificial or nat-
ural. The central artificial barrier in the
electric utility industry is the continuing
lack of non-discriminatory access to the
transmission system. Although the Fed-
eral Energy Regulatory Commission has
held numerous hearings and issued nu-
merous regulations and orders aimed at
solving this problem, it has had far
greater success relaxing price regulation,
resulting in significant economic harm to
large groups of consumers, than in pro-
moting effective access.
Federal and state efforts to deregulate
the electric utility industry have generally
produced results that do not comport
with basic notions of what competition
means. The daily pages of the industry
press provide abundant examples of
prices that do not reflect costs, serious
transmission access problems, and private
fine behavior and performance that con-
tradict the conditions and criteria
outlined above.
The belief that competition can be
made to work assumes that the inherent,
economic characteristics of an industry
have little impact in determining where
an industry lies on the monopoly-compe-
tition spectrum.
N atural conditions that ~~ork as
barriers to entry in the electric industry
include technology, product dw-ability,
substitutes, cyclical and seasonal
demand, mobility, and network
characteristics. Most important is the
nature of the industry's production fa-
cilities. It is widely recognized that the
electric power industry is very capital-
intensive. Its costly facilities are not
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Page 1 of 3
Bryan Adams
From: "MMUA" <sdowner@mmua.org>
To: <bryada@nsatel.net>
Sent: Friday, January 28, 2005 10:56 AM
Subject: MMUA Capitol Tattler
in this issue
1. Big energy bill brews
2. Bills of interest to certain members
3. Renewable energy incentives debated
4. Personal property tax exemption complicated?
5. Sewer, water locating rule progresses
Big energy bill brews
As of Jan. 27, there were no big energy bills introduced in the 2005 Minnesota legislative session
A major bill dealing with power supply issues, likely to be put forward by Capk 2020_, is expected,
however.
CapX 2020 stands for Capital Expenditures by the year 2020. Participating in the CapX 2020
project are Great River Energy, Missouri River Energy Services, Minnesota Power, Otter Tail Power
Company and Xcel Energy. The utilities say they are "working to create a joint vision of transmission
infrastructure investments required to meet the growing electricity needs of Minnesota and the region."
A hearing on CapX is scheduled for Feb. 1.
CapX 2020's preliminary analysis "anticipates significant line and equipment overloads by 2020,
assuming customer requirements develop as projected. CapX 2020 participating utilities believe now is
the time to start strengthening the backbone of the system, before new power plants are constructed and
in time to meet customers' needs."
Along with technical studies-due to be completed in May 2005-CapX 2020 has an effort
underway to determine whether any changes would be appropriate to Minnesota statutes and rules to,
among other things, ensure that timely additions and upgrades to the transmission grid can be built to
deliver needed energy and capacity.
Of course, any energy bill soon becomes a vehicle for all sorts of initiatives. Consumer and
environmental advocates are active as always.
1/31/05
Vol. 8, No. 1, ]anuary 28, 2005
Page 2 of 3
t3ills of interest to certain memisers
In the meantime, there are still a lot of bills of interest to MMUA members.
A number of these are items that didn't get taken care of last session, like I_1F 50 (SF 199) which
provides funding for renovation offlood-damaged Roseau municipal facilities, or HF 1.99_(SF 240)
which provides flood hazard mitigation grants for a number of MMUA member cities.
There is also a bill (HF_8, sponsored by Rukavina, DFL-Virginia) that pertains to the Hibbing-
Virginiabiomass project. The two cities have formed a joint venture-the Laurentian Energy
Authority-which is asking for $2.5 million to help build a wood waste processing facility.
The House Jobs and Economic Opportunity Policy and Finance Committee heard the proposal
Jan. 19. Hibbing Public Utilities General Manager Jim Kochevar, Virginia Public Utilities General
Manager Terry Leoni and Rep. Rukavina all testified for the measure. Rep. Tony Sertich (DFL-
Chisholm) made the motion to forward the bill for inclusion in the bonding resolution. It passed
unanimously.
Renewable energy incentives debated
The utility bill of most interest so far this young session has been HF__ 21.$ (Cornish, Smith,
Gunther), which was heard Tuesday in the House Regulated Industries Committee. This bill deals with
the Renewable Energy Production Incentive (KEPI). Under this statute, owners of wind energy
conversion systems with a capacity of 2 MW or less receive 1.5 cents for each kilowatt-hour (kWh)
produced for a period of 10 years. The incentive payment is available to only 200 MW of total capacity
statewide. Project owners apply to the Department of Commerce to qualify for the incentive. If they are
deemed eligible, the project must be operational within 18 months, or approval to receive the incentive
payment is withdrawn. Eligibility for all unbuilt projects will expire in May 2005. That stipulation is the
current problem.
Some proposed projects on "the list" have not become operational within 18 months. Those
waiting further down the queue, including Missouri River Energy Services and the Southern Minnesota
Municipal Power Agency, among others, want the process to work as the law decrees. But others want
more time.
The committee tabled the bill Tuesday. Rep. Bob Gunther (R-Fairmont) proposed a possible
compromise, the details of which need to be worked out.
Personal property tax exemption complicated?
Another bill on the MMUA tracking list if HF 41.3 _(Fritz, DFL- Faribault). This is a personal
property tax exemption for the Minnesota Municipal Power Agency gas-fired plant in Faribault. While
MMPA and local officials have seen eye to eye on this project, that is not the case everywhere. The
Goodhue County Board Jan. 4 denied a request for a tax exemption for agas-fired peaking plant near
Cannon Falls proposed by Chicago-based Invenergy. How this will affect the once perfunctory personal
property tax exemption at the Legislature remains to be seen.
Sewer, water locating rule progresses
Have you expressed your concern about the proposed rule that would require 'operators'
of water and sewer systems to locate service laterals located in the right-of-way? The hearing
before the Administrative Law Judge is Feb. 1. Speak now, or forever hold your peace. If you need
more info, contact MMUA.
1/31/05
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