2.2 ERMU 01-12-2016 - Laserfiche WebLink

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they will keep the Economic Development Director in the loop. Based on Commission support, staff will continue working in the direction that has been outlined. Staff will also be working to create a new service application form,a revised commercial service agreement,a credit risk matrix,and final policy revision language that will be brought back to the Commission for approval at a later date. 4.3 2016 Budget Troy Adams shared that the preliminary budget we were looking at in November reflected a 1.2%rate increase for electric and a 2%rate increase for water. After sitting down with Consultant David Berg and estimating the revenue and expense impacts we would have from the territory acquisition of Area 1,we found that the margin from the acquisition provides significant additional revenue to help offset the significant capital construction projects necessary to upgrade the acquired infrastructure,and hold down rate increases. Troy presented the proposed 2016 budget. The proposed budget and rates result in electric fund revenue of $36,297,457 which includes a projected 3.42%margin and a projected$255,394 net to reserves with a 0%rate increase for our electric customers. John Dietz commented that the 0%electric rate increase and the$2.00 per kW temporary demand rate reduction should really benefit the demand group and help to make us more competitive. There was further discussion. The proposed 2016 water budget reflects a 5.4%in revenue with a total budget of$2,603,100. The water budget results in a.06%projected margin,and a projected$1,741 net to reserves. Troy shared that now that we've completed the multi-year plan to bring rates and cash flow projections in line with capital improvement projects,we can implement a smaller rate increase to just the 1St tier and meter charge and leave the 2nd and 3rd tiers where they are at. The proposed 2016 residential water rates reflect a 2.5%increase to the 1St tier and the meter charge. These rate changes result in a projected 2%increase for a typical residential customer.This is the equivalent to a$5.53 per year increase. Troy explained that for commercial customers it's more difficult to classify a typical user,but based on the rate structure and the amount of usage will result in projected increases between 2%to 2.5%. Troy Adams gave the Commission a heads up on a request our auditors have made that will affect the presentation of the financial statements.The change has to do with the way we record the purchase of territory as capital and make the payments for the loss of revenue(LOR)each year. Theresa Slominiski shared the changes the auditors have requested which were to estimate the ten year LOR to capitalize the entire asset, and the related liability, in the year of acquisition. This would require a significant effort in estimating these numbers, and would impact subsequent years with the delta from the estimate necessitating either an expense or revenue adjustment. Additionally, depreciation would be increased significantly in year one, rather than gradually increasing when the LOR payments are paid and capitalized. After further discussion, it was determined that we would reach out to our Page 4 Regular meeting of the Elk River Municipal Utilities Commission December 8,2015 30