5.3. ERMUSR 06-14-2005Elk River
Municipal
13069 Orono Parkway
Elk River, MN 55330
June 3, 2005
To: Elk River Municipal Utilities Commission
Jerry Takle
John Dietz
Jim Tralle
From: Bryan Adams
Subject: Monthly P & L Projections
phone: 763.441.2020
Fax: 763.441.8099
At our May 2005 commission meeting, John Dietz asked some great questions
concerning our electric profit/loss statements and why we showed a loss in May.
Attached is a projected profit/loss statement for the electric and water department for the
entire year of 2005. The bottom of these spread sheets reflect the monthly cash balance
projections as well.
ties
Also enclosed is a narrative explaining the details. Theresa Slominski will cover the
details and any questions at our meeting.
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MONTHLY CASH FLOW INTRODUCTION
In reviewing the Cash Flows Report last month, the question was asked "Why are there
such large changes in the cash balances from month to month?" To better answer that
question, I have prepared a Monthly Cash Flow Projection Report that can be used to
identify the swings to be expected in upcoming months and explain the swings for prior
months. This report takes the Income Statement results and then adjusts for any noncash
items (such as depreciation and accrued interest), and the cash items that result from the
balance sheet accounts (such as money going out with Accounts Payable, and money
coming in with Accounts Receivable) to arrive at the ending cash balance.
The months of January, February, March, and April have the actual numbers reported,
and the months of May through December are projections. You can see that for each of
the water and electric funds, there is an expected increase of approximately $200,000 at
year's end. However, there is considerable fluctuation throughout the year to get there.
The Electric fund starts at 2.2 million and consistently drops down, reaching .6 in
September before it begins the climb back up to 2.4 in December. The 1.6 million
fluctuation is a result of capital items and inventory being purchased early in the year,
and paying larger purchased power costs in the summer months before the revenue for
those same months is actually received, and also the large bond principle payments in
January and February.
The Water fund sees smaller fluctuation, decreasing only .6 million from January to July
before starting to climb again. The expenses related to water are more consistent and do
not vary as greatly as the electric expenses do when the demand is increased. Water's
largest cash outlay is in February with the bond principle and interest payments. The
biggest fluctuation in water is the connection fees, which are very difficult to predict.
Last meeting we reviewed the Cash Balance Projections for the next 10 years that Bryan
had prepared. The projections were made using the Springstad studies original
projections, and then modifying them for the actual audited results and any known
changes in future years. This Monthly Cash Flow Projection Report is a further
breakdown of those annual cash projections in a monthly format and is consistent in
predicting the same results. While we cannot predict the future with absolute certainty,
we can make fairly accurate assumptions to base our projections on, and then we can use
it as a measuring device throughout the year. This will be a tool to use in monitoring our
cash balances and preparing for the low points so there are no surprises.
YEAR TO DATE PROFIT AND LOSS NARRATIVE
ELECTRIC
The year to date income for 2005 is $4,807,151.40, as compared to year to date income
for 2004 of $4,336,376.45, is an increase of $470,774.95. The increase in income from
customers usage and rate increases is $339,180.46. The remainder is attributable to a
$60,000 increase in Connection Fees, a $10,000 increase in Penalties, $35,000 in Security
Sales (not reflected at all in 2004), and a $37,000 increase in Miscellaneous Sales (of
which $21,000 is from Connexus Energy.) There is a decrease in interest income
comparing 2005 to 2004 because there were 4 Certificates of Deposit that matured in
April of 2004 that were cashed in recognizing $26,770.64 in interest, and none cashed in
year to date in 2005.
The year to date expense for 2005 is $4,451,828.27, as compared to year to date for 2004
of $3,820,810.66, is an increase of $631,017.61. The largest increase in expenses relates
to the associated increase in Power Costs from the customer use mentioned above, and
accounts for $221,721.53 of the increase. The second largest increase is in Depreciation,
which accounts for $155,775.00 of the increase. The remaining increases are as follows:
$14,000 increase in Landfill Gas Expense (no expense recognized Jan 2004), $41,000 in
Security Expenses (not reflected at all in 2004), $52,000 in Interest (a large catch-up was
don in December 2004), $20,000 in Donated Labor/Services to the City, $60,000 in
Revenue Transfers (large catch-up was done in December 2004), and a $60,000 increase
in Administrative & General (insurance increases of $25,000 and payroll prior year's
expenses of $35,000.)
WATER
The year to date income for 2005 is $545,085.70, as compared to year to date income for
2004 of $460,902.20, is an increase of $84,183.50. The largest part of this increase is in
the Connection Fees, which increased $56,000. The remaining increase, $28,000, is from
customer usage and rate increases.
The year to date expense for 2005 is $626,978.86, as compared to year to date for 2004 of
$307,180.02, is an increase of $319,798.84. The largest increase is depreciation,
accounting for $165,000 or 52% of the total increase. The remaining increases are as
follows: $30,000 in Pumping Expense (increased maintenance on wells), $50,000 in
Distribution (a 5% payroll split in 2004 and 25% split in 2005), $50,000 in
Administrative & General (5% 2004 split versus 25% 2005 split, as well as increased
insurance premiums.)