5.1. ERMUSR 11-17-2009~/
Elk River -~
Municipal Utilities
13069 Orono Parkway • P.O. Box 430
Elk River, MN 55330-0430
November 9, 2009
To: Elk River Municipal Utilities Commission
John Dietz
Jerry Gumphrey
Daryl Thompson
From: Troy Adams
Subject: Review 2010 Budget
Phone: 763.441.2020
Fax: 763.441.8099
Enclosed for commission review and consideration is the proposed 2010 Budget. The budget
reflects some minor changes to the capital budget and expense budget. And, the format has been
simplified from that of years past.
Also included is a summary of the proposed electric rate increase. This rate change results in an
overa113.76% increase in electric revenue. A verbal update on the water budget will be provided
at the commission meeting.
Elk River Municipal Utilities
Summary of Proposed 2010 Electric Rate Increase
With the proposed 2010 Great River Energy (GRE) wholesale rates still pending board approval,
the affective impact to ERMU is a 3.87% increase in wholesale power cost. This is down from
the double digits originally projected for this year and down from the 13.2% affective impact
implemented last year. Worth noting is GRE's 4.2% increase in their summer demand rate and
an 18.3% reduction in critical-peak energy rate. Another change that GRE has implemented is
changing ancillary service charges from demand based only to demand and energy based.
With the current state of the economy, the assumption was made that ERMU sales will continue
on the trend of declining sales in 2010. The residential customer power sales are projected at the
trend of a 1% decrease, the commercial non-demand customers at a 4% decrease, and the
commercial demand customers (excluding data centers) at a 4% decrease. The data center
demand customers trend at a 15% growth.
There are a few options for rates. Based on these projections, the result of ERMU implementing
a 0% rate increase this year would be an approximate reduction of $670,000 from reserves, or
half of the current reserves. This is really not an option. An increase in rates would be needed to
overcome the increase in wholesale power costs as well as to overcome the reduction in revenue
resulting from the projected decrease in sales. To reach a breakeven 0% profit, a uniform ERMU
rate increase of approximately 3.25% would be needed. To reach 3% profit, a uniform ERMU
rate increase of approximately 7% would be needed. In the current state of the economy a 7%
rate increase to achieve a 3% profit maybe excessive by public perception. Although operating
with a 3% profit maybe good business, it might be better to temper that until the economy
begins to bottom out and recover. There are other rate constraints to be considered as well.
Connexus Energy and Anoka have both indicated they have been give instructions not to raise
rates. Although their intentions may not come to fruition, it is noted that they are concerned
about passing rate increases on to their customers. We need to be aware of this. In general, our
rates need to be competitive. By taking into consideration the local utilities' rates as well as
profitability, the solution falls in between the 3.25% and 7%.
Proposed is a rate design to provide a 1.5% profit through an ERMU blended rate increase of
3.76%. In this case, a uniform rate increase doesn't provide the required revenue while
remaining within the local constraints. The required rate increase is better implemented with
different allocations for different items. Specifically, there is a need to be conservative in rate
increases for the commercial demand customer demand charge. Also, there is a need to be
conservative in rate increases for the residential and commercial non-demand customer summer
energy charges. If sales have already bottomed out and remain consistent with 2009 sales
(excluding data centers), this rate design would have an approximate 2% increase in profit.
The following is the proposed 2010 electric rate increase:
Rate Classes 2009 Proposed
2010 %Increase
from 2009
Meter Char a ($/Meter) $8.50 $9.00 5.9%
Residential Summer Energy Char e ($/kWh) $0.1090 $0.1139 4.5%
Winter Energy Charge ($/kWh) $0.0950 $0.1012 6.5%
Commercial Meter Char e $/Meter) $16.00 $16.00 0.0%
Non- Summer Ener Char e ($/kWh) $0.1050 $0.1097 4.5%
Demand Winter Energ Char e ($/kWh) $0.0850 $0.0905 6.5%
Meter Charge $/Meter) $50.00 $50.00 0.0%
Commercial Ener y Char e $/kWh) $0.0515 $0.0543 5.5%
Demand Summer Demand Char e ($/kW) $15.50 $15.89 2.5%
Winter Demand Char e ($/kW) $11.75 $11.02 2.5%
The impact to a typical residential customer would be a 5.6% cost increase. To a commercial
non-demand customer, the proposed rate increase would result in a blended impact of a 5.4%
cost increase. Depending on the size of the commercial demand customer, the impact would
range between 4.1 % and 4.7% cost increase.
ELK RIVER MUNICIPAL UTILITIES
SUMMARY OF YEAR 2010
BUDGETS
ELECTRIC BUDGET SUMMARY 2010
ELECTRIC REVENUE $ 25,341,014
ELECTRIC EXPENDITURES 24,963,521
ELECTRIC NET FOR CAPITAL 377,494
DEBT RETIREMENT 512,500
PROMISSORY NOTE TO COUNTY 191,323
LESS DEBT PRINCIPAL PMTS (326,329)
CAPITAL EQUIPMENT/CONSTRUCTION 1,442,625
BONDING
NET (1,768,954)
DEPRECIATION 2,125,000
NET TO RESERVES 356,046
BUDGET SUMMARY2010
2010
ESTIMATED BUDGET
WITH NICT(1RY
ACCOUNT # DESCRIPTION 2007 2008 2009 2010
ACTUAL ACTUAL BUDGET BUDGET
TOTAL RESIDENTIAL 7,417,286 7,934,766 8,468,154 8,898,001
TOTAL NON-DEMAND 1,976,224 2,202,142 2,350,173 2,135,665
TOTAL DEMAND B, 632, 019 10,888,466 11,633,572 72,260,705
TOTAL SECURITY LTS 44,972 47,446 48,000 49,000
__ _ TOTAL PUBLIC ST/HWV LIGHTING 217,954 236,623 242,000 250,000
70TALSALES 18,188,455 21,309,444 22,741,899 23,593,370
REVENUE INCREASE FOR CIP
RATE INCREASE
TOTAL SALES WITH CIP/RATEINCREA 18,188,455 21,309,444 22,741,899 23,593,370
TOTAL OTHER 2,502,702 2,215,788 1,878,089 1,747,644
TOTAL REVENUE 20,691,157 23,525,232 24,619,988 25,341,014
prior penod atlj -audit (108,899) (10B,417J
ACCOUNT # DESCRIPTION 2007 2008 2009 2010
ACTUAL ACTUAL BUDGET BUDGET
OPERATING/MTCE
_ PURCHASED POWER 12,176,034 14,778,270 16,079,258 17,026,271
TOTAL 12, 926, 703 15, 659, 935 16, 988, 508 17, 865, 769
DISTRIBUTION ~
TOTAL 189,569 236,252 iB1,250 199,000
MAINTENANCE
TOTAL 720,905 869,335 1,027,100 i 895,000
OTHER EXPENSE
TOTAL 3,244,516 3,512,719 3,591,258 3,715,519
CUSTOMER ACCOUNTS EXP
TOTAL 225,034 242,363 244,000 260,500
~
_
ADMINISTRATIVE/GENERAL EXP ENSE
TOTAL 1,758,705 1,959,257 1,864,546 2,027,733
TOTAL EXPENSE 19,065,432 22,479,861 23,896,662 24,963,521
ELECTRIC 2007 2008 2009 2010
ACTUAL ACTUAL BUDGET BUDGET
TOTAL REVENUES 20,582,258 23,416,815 24,619,988 25,341,014
TOTAL EXPENSES 19,065,432 22,479,861 23,896,662 24,963,521
PROFIT (LOSS 1,516,826 936,954 723,326 377,494
BUDGET COMPARISON ^/
G..~
Elk River Municipal Utilities
2010 Electric Department Capital Budget
Capital Construction Projects -Non-Recurring Normal Distribution, Feeders, and Substations
Priority Cost Description
1 $ 100,000 Rebuild Area 22 taps
2 $ 120,000 Rebuild 1st & 2 st Gates & Evens So of Main St carryover from 2009
3 $ 50,000 Rebuild Area 21 (S of Co Rd 33 -York & Watson) carryover from 2009
4 $ 100,000 Power Plant Sub Conductor Upgrade
5 $ 100,000 Co Rd 30 Engers Addition Rebuild OH to URD
6 $ 40,000 Co Rd 30 South Side rebuild pole mounted URD
7 $ 100,000 Co Rd 30 Convert to 7200 West of Waco
8 $ 50,000 Zane Commons
9 $ 35,000 Rebuild Cretex Facility carryover from 2009
10 $ 150,000 Rebuild Irving 4,5,6 7 to front lot line
11 $ - New Feeder 75 to 194th postponed one year $300,000 project
Subtotal $ 845,000
Capital Construction Projects -Recurring
Cost Description
$ 200,000 Transformers and Meters
$ 150,000 New Development Distribution Installation
$ 100,000 Ongoing URD Equip Replacement (Switches, J-Boxes, Fuse Pads)
$ - Additional Feeders
Subtotal $ 450,000
Capital Equipment Needs
Cost Description
$ 10,000 Hand Held Radios and Pagers
$ 38,000 Trade-in Vactron for new
$ 50,000 Trade-in 1996 Dumptruck for new
$ 12,000 T-14 or T-12 Trailer
$ 8,000 Laptop Computer, Software, Accessories - On-Call Truck
$ - Trade-in Cable Plow for new postpone 1 year
$ - Replace 1999 pickup postpone 1 year
Subtotal $ 118,000
Total $ 1,413,000
3
ELK RIVER MUNICIPAL UTILITIES
SUMMARY OF YEAR 2010
BUDGETS
WATER BUDGET SUMMARY
WATER REVENUE
WATER EXPENDITURES
WATER NET FOR CAPITAL
DEBT RETIREMENT
2010
$ 2,079,500
2,492,858
(413,358)
527,650
GROSS (941,008)
CAPITAL PROJECTS 187,875
BONDING
NET (1,128,883)
DEPRECIATION 990,000
NET TO RESERVES (138,883)
BUDGET SUMMARY2010 L.~
1
2010
ESTIMATED BUDGET
wrcu wcmov
ACCOUNT # DESCRIPTION 2007 2008 2009 2010
ACTUAL ACTUAL BUDGET BUDGET
TOTAL REVENUES 3,109,674 2,427,447 2,302,500 2,079,500
Prior Period Adjustment p7,4s2) 65so
~
~ -
(sseOND)
20,000
20.000
20,000
20.000
MAINTENANCE
TOTAL 50,991 34,236 37,500 34,000
PUMPING
_ TOTAL 416,141 380,363 401,500 375,000
_ DISTRIBUTION
TOTAL 221,213 182,712 229,100 213,000
OTHER EXPENSE
TOTAL 1,152, 812 1, 267, 304 1, 238, 297 1, 263, 825
CUSTOMER ACCTS EXP
I TOTAL 65,621 72,811 56,1501 67,500
___
ADMIN/GEN EXPENSE ~
TOTAL 459, 298.69 535, 291.92 535, 716.00 539, 533.25
TOTAL EXPENSE 2,366,077 2,472,717 2,498,263 2,492,858
WATER
TOTAL REVENUES 3,032,182 2,418,887 2,302,500 2,079,500
TOTAL EXPENSES 2,366,077 2,472,717 2,498,263 2,492,858
PROFIT LOSS 666,104 53,830 195 763 413 358
BUDGET COMPARISON ~'1
Elk River Municipal Utilities
2010 Water Department Capital Budget
Water Capital Equipment Needs
Cost Description
$ 60,000 Water Main Construction
$ 50,000 Water Main Repair
$ 68,000 Meters/ERTs
SCADA Computers/GIS $10,000 postponed
Subtotal $ 178,000
Water Noteworthy Non-Recurring Expenses
Cost Description
$ 15,000 Miscellaneous Repairs & Maintenance
(4) Well Dehumidifiers $6,000 postponed
Rate Study $10,000 postponed
Subtotal $ 15,000
Total $ 193,000
Elk River Municipal Utilities
2010 Administration and Technical Services Departments Capital Budgets
Administration Capital Equipment Needs
Cost Description
$ 7,000 Computer, Software, Accessories -Upgrades
Subtotal $ 7,000
Administration Noteworthy Non-Recurring Expenses
Cost Description
$ 5,500 Miscellaneous Equipment
$ 1,000 Office Funriture
Subtotal $ 6,500
Total $ 13,500
Technical Services Capital Equipment Needs
Cost Description
$ 8,000 Laptop Computer, Software, Accessories -Meter Downloading
$ 8,000 Laptop Computer, Software, Accessories -Locating/GPS
$ 10,000 Power Quality Testing Equipment and Accessories
Subtotal $ 26,000
Technical Services Noteworthy Non-Recurring Expenses
Cost Description
Subtotal $ -
Total $ 26,000
~~~~-
~~~®~~~~
T®o Elk Rove~° ~>rulagAes c~ou~v~oavoussa®w
~®he~ ®ieta
Jerry Caum~hrey
®arryl Thom~soe~
E~®~o °~'erry B~Baa~rerr
~2Ei/BEbVE~
BY: ~avad berg
®~-TE: ~iovember 6, 2009
Sl1BJECT; 2010 ~/ater 03u~iget
Since last month's Commission meeting, David and I have been working on formalizing our
recommendation relative to WAC rates and water user rates for the 2010 budget. In our
preliminarv~ analysis subrrutted last month we estimated water sales would be lower in 2010
by approximately $100,000 over what was estimated in 2009. Through nine months of 2009,
it appears that actual water sales will exceed the projected level. Therefore, we are raising the
estimate for 2010 to be equal to the proposed water sales for 2009. This will still reflect a
decrease in water sales from 2010 to 2009.
Attached is a short survey that city staff undertook to compare SAC and Wt1C rates per unit
for surrounding communities. As you can see from this survey, with the exception of the
Ciry of Ramsey, FRIVIL~'s WAC rate is substantially below other communities. We believe
that the WAC rate should be increased by approximately $1,000. Since this is a fairly large
increase, we would propose a $500 increase for the VUAC rate per unit in 2010 and an
add~nonal $S00 in 2011, to bring the total WAC rate per unit to $3,000 in 2011.
With regard to user rates, we are proposing no changes to the base monthly charge or tl-ie
water use rates in 2010. The water fund has substantial reserves and if revenues are less than
anticipated, a small amount of reserves can be used to balance the 2010 budget. This will
allow- most of 2010 for us to perform a financial analysis and rate analysis which will lead to
amore informed recommendation regarding water rates going into 2011.
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City of
El
fiver
MEMORANDUM
TO: Tina Allard, City Clerk
FROM: Catherine ;~lehelich, Director of Economic Development
DATE: October 19, 2009
SUBJECT: Development Fee Comparison
Earlier this year the EDA Finance Cornrnittee directed staff to conduct a comparison of
commercial industrial development fees in response to a number of concerns being raised
by businesses with built-out or new construction projects.
The following 2009 fee comparison chart is provided as information in the Council's
consideration of the proposed 2010 fee schedule:
City
! SAC WAC Park Dedication
~ ( er unit) er unit) (er acre)
Anoka $2,000 $3,100 $ 0 Comm/Ind
Big Lake $4,580 or Max. 5 units, $3,000 or $ 0 Comm/Ind
$3,664 multi-tenant bldgs $2,500 multi-tenant
>4units bldgs >4units
Elk River $4,079 $2,000 $7,298 Comm
$2,436 Ind
Otsego $6,990 $3,935 $7,000 Comm
$3,500 Ind
Ramsey $2,000 $1,557 $4,738 Comm
$3,966 Ind
Rogers $4,300 first unit $3,000 $6,500 Comm
X1,850/addtn'1 ututs $4,500 Ind
~.~w
Water Date Inca-ease
~Ie have been calculating different scenarios for a water rate
increase. Between a 2%, 3% and 5°/® increase, the 5°/® option seems
to be the best. ®ur data shows that 5 Units is about average for our
elderly population.
A 3% increase would be $0.25 per month, or $3.00 per year.
At the rate of 5 Units per month, we would generate approximately
$46,000.00 per year. Net to reserves is a deficit of $138,000.00
minus the $46,000.00 from the increase we would still have a
deficit of $92,883.00.
An increase of 5% would be $0.40 per month or $4.80 per
year. At the rate of 5 Units per month, we would generate
approximately $74,000.00 per year. Net to reserves deficit is
$138,000.00 minus the $74,000.00 from the increase our deficit
would be $64,883.00.
I know that we have some fairly expensive projects coming
up in the near future and I feel strongly that a 5% increase is not
excessive. A 5% increase is something I feel the homeowners can
absorb now. If next year brings high rainfall and water usage is not
increased, without this small increase in rates we will add to our
deficit very quickly.
Thank you,
Dave Berg