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Elk River; <br />Municipal U <br />UTILITIES COMMISSION MEETING <br />TO: <br />FROM: <br />Elk River Municipal Utilities Commission <br />Troy Adams, P.E. — General Manager <br />John Dietz — Chair <br />Al Nadeau — Vice Chair <br />Daryl Thompson — Trustee <br />MEETING DATE: <br />AGENDA ITEM NUMBER: <br />October 13, 2015 <br />4.2 <br />SUBJECT: <br />Payment in Lieu of Taxes (PILOT) and Other Donations to the City of Elk River <br />BACKGROUND: <br />Minnesota municipal utilities do not pay taxes to their city. It is very typical for the utility to <br />provide a payment in lieu of taxes (PILOT). ERMU has a policy which outlines the details of the <br />PILOT and other donations to the City of Elk River. This policy is reviewed at least once every <br />five years; the last policy changes were made on July 2, 2013. <br />DISCUSSION: <br />Delay for PILOT for Electrical Service Territory Transfer <br />On September 8, the commission reviewed proposed changes to the PILOT Policy that would <br />delay PILOT for the areas acquired from Connexus Energy through the March 20, 2015, <br />electric service territory transfer agreement. The PILOT was proposed to be delayed for each <br />customer acquired until the loss of revenue (LOR) payments that are outlined in the <br />agreement would complete. These LOR payments are made for 10 years after the acquisition <br />with a few exceptions for municipal development. <br />The commission discussed the proposed policy revisions and directed staff to strengthen the <br />language to be specific to the March 20, 2015, electric service territory transfer agreement. <br />This would eliminate any confusion regarding PILOT for LOR payments related to previous <br />acquisitions. The proposed policy has been updated to reflect the commission's request. <br />Shift of Policy Mechanics from Donated Electricity to PILOT <br />The current PILOT Policy outlines in section 3.0 Donated Electricity stating that ERMU <br />"shall donate all electricity to the City of Elk River for all of their facilities not associated <br />with enterprise funds of the City of Elk River." The administrative process associated with <br />this donation is extremely burdensome. Due to its manual nature, this process is also subject <br />to human and keying errors. <br />E. <br />Reliable Plblb <br />Power Provitler <br />Page 1 of 2 <br />P00 E0E0 01 <br />NAWRE <br />POWERED TO SERVE <br />