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5.4 2015 Year-End Reserve Balances <br /> The purpose for reserves to a public utility is to meet bond covenants and provide a <br /> financial buffer to mitigate unforeseen or volatile operational costs. In 2010,the <br /> Commission adopted a financial reserves policy that defined the structure and formula on <br /> how financial reserves will be calculated for the Electric Utility and Water Utility funds. <br /> As defined by policy,the year-end reserve balances are to be reviewed after the completion <br /> of the audit. These balances, if above their target levels, shall be unrestricted with a <br /> defaulting designation as working capital. The Utilities Commission shall then consider <br /> optimal use of these unrestricted reserves. <br /> Theresa Slominskipresented the year-end reserve balances and went over the Electric and <br /> Water funds in detail. The Commission had a few questions. Staff responded. John Dietz <br /> asked about investing the reserve balances until they are needed. Staff responded that we <br /> do invest them; however we are limited by statue on the investments we can make. Theresa <br /> added that we work diligently with investment brokers to ensure we are in compliance and <br /> taking advantage of the better interest bearing accounts that are available. Staff <br /> recommended that the unrestricted reserve balances above the target levels for the Electric <br /> Utility fund and the Water Utility fund be designated for future capital expenses as <br /> indicated in the budget process. The Commission indicated that they would like the motion <br /> to be more specific as to what the unrestricted reserves would be used for; respectively the <br /> Electric Utility fund for future electric service territory transfer costs and the Water Utility <br /> fund for the Water Filter Plant#7 expansion costs. <br /> Daryl Thompson made a motion that the unrestricted reserve balances above the <br /> target levels for the Electric Utility fund be designated for future electric service <br /> territory transfer costs,and for the Water Utility fund be designated for the Water <br /> Filter Plant#7 expansion costs. Al Nadeau seconded the motion. Motion carried 3-0. <br /> 5.5 2015 Annual Report <br /> Troy Adams presented the 2015 Annual Report. Copies of the report were provided to John <br /> Dietz to share with the City Council at their upcoming meeting. Troy complimented <br /> Michelle Canterbury on coordinating and designing the report and commented that they <br /> turned out very nice. Troy reached out to the Commission to see if they had any questions <br /> for the department heads;the Commission had none. <br /> Al Nadeau made a motion to receive and file the 2015 Annual Report. Daryl <br /> Thompson seconded the motion. Motion carried 3-0. <br /> 5.6 Utilities Performance Incentive Compensation Distribution <br /> Page 4 <br /> Special meeting of the Elk River Municipal Utilities Commission <br /> April 12,2016 <br />