6.2. SR 06-17-2019 - Laserfiche WebLink

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CITY OF ELK RIVER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018 NOTE 13: OTHER INFORMATION — CONTINUED C. Territorial Acquisition Agreement In 1991, the Utilities entered into a 20 year agreement to transfer ownership of electric plant and electric service to customers in certain areas receiving electric service from Anoka Electric Cooperative, Inc. (AEC). In 2010 the Utility completed the final purchase under this agreement. The agreed cost of property purchased from AEC is net book value. The Utilities also pays AEC for loss of revenue for each area acquired based on a formula outlined in the agreement. In addition, the Utilities will compensate AEC for the loss of revenue from the future sale of electricity to electric customers in the areas acquired from AEC for a period of ten years from the date of sale of each individual area. The Utilities paid $0 in 2018 for loss of revenues under this agreement. All amounts paid are included in property and equipment. In 2015, the Utilities entered into an agreement to transfer ownership of electric plant and electric service to customers in eight designated areas receiving service from Connexus Energy. Specific payment terms have been negotiated for 5 years, and if any of the eight areas are not acquired within this timeframe, the payment terms may be renegotiated. The agreed cost of property purchased from Connexus Energy is net book value, integration expenses, and a loss of revenue payment. The loss of revenue payment for each area acquired is based on a formula outlined in the agreement, payable for the subsequent ten years after initial purchase. The Utilities acquired designated service area 1 in 2015 for $877,807 and service area 2 in 2016 for $663,586. Service areas 3 and 4 were acquired in 2017 for $276,776, and service areas 5 and 6 were acquired in 2018 for $298,736. The loss of revenue payments made were $411,157 in 2017, $570,725 in 2018, and will be $751,860 in 2019. All amounts paid are included in property and equipment, and loss of revenue payments are included in intangible assets. D. Conduit Debt Obligations From time to time, the City has issued revenue bonds to provide financial assistance to private -sector entities for the acquisition and construction of industrial and commercial, multi -family and educational facilities deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payment received from the benefited entity. Neither the City, the state, nor any political subdivision thereof is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of December 31, 2018, there were two series of revenue bonds outstanding, with an aggregate principal payable amount of $5,165,000. E. Commitments The Utilities has received notice from their power supplier exercising their right to give ten years notice to cancel the existing power contract. The cancellation date was effective September 30, 2018. On May 14, 2013 the Utilities signed a new agreement with Minnesota Municipal Power Agency (MMPA), and started taking power on October 1, 2018. The Utilities entered into an agreement in 2007 with Central Municipal Power Agency/Services (CMPAS) to acquire an interest in the CAPX Initiative Brookings Project, a power transmission line in Minnesota. The project is a 250 mile, 345 W AC transmission line with a rating of 2,300 MW, between Brookings, South Dakota, and the Southeast Twin Cities. In 2011 there was increased opportunity for investment, and subsequent agreements provide the Utilities with an ownership share of $5.6 million or 18.89 percent. The return on this investment through CMPAS is designed to provide approximately $124,000 annually over the 40 -year project life. To ensure bond payment obligations, cash distributions for 2018 were curtailed. In 2018, the principal bond payment increased approximately by $700,000. This increase remains in effect through 2020. In 2021, the bond payment drops nearly $1,000,000. A contributing factor in reduced O: