3.2. SR 11-18-2019 - Laserfiche WebLink

Home Browse Search

The Elk River Vision A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community engagement that encourages and inspires prosperity Request for Action To Mayor and City Council, Chair and Utilities Commission Item Number 3.2 Agenda Section Joint Meeting Meeting Date November 18, 2019 Prepared by Troy Adams, P.E. – ERMU General Manager Item Description Elk River Municipal Utilities Payment in Lieu of Taxes Policy and Other Donations to the City of Elk River Policy Reviewed by Reviewed by Action Requested Review Elk River Municipal Utilities Commission Policy G.2a1 Payment in Lieu of Taxes and Other Donations to the City of Elk River. Background/Discussion Consistent with ERMU Commission Policy G.2a Commission – City Council Relationship and Roles, the Commission reports to the City Council a change to the Payment in Lieu of Taxes (PILOT) policy that will have a material financial to the city budget. On October 8, 2019, the Commission approved, by motion, a revision to the PILOT policy which will increase the overall transfer from the electric fund to the city general fund. In 2016, the PILOT policy had been revised following the execution of a multi-year electric service territory transfer agreement with a neighboring cooperative electric utility. The agreement included the terms for the cooperative to transfer approximately 2,000 electric accounts and 12 square miles of electric service territory within the corporate boundary of the City of Elk River to ERMU over a five year period. Consistent with state statute, the terms included provisions for loss of revenue (LOR) payments to be made from ERMU to the cooperative over a 10 year defined period of time. The areas of the multi-year orderly transfer would each have their own LOR payment schedule. The effect of the ten year LOR payments over five years of transfers is 15 years of LOR payments to the cooperative. The PILOT from ERMU to the City is calculated on sales to customers within the city limits. The electric sales in the affected areas of the transfer agreement previously served by the cooperative were not included in the calculation for PILOT as they were not ERMU customers. As a way to pay for the costs of electric service territory transfers, ERMU engaged the City about excluding PILOT on the transferred customers until the LOR payments had finished. This exclusion of PILOT was revenue the city was previously not receiving and there was an understanding that this was a partnership effort to invest in the growth of the ERMU electric customer base for significant long term return on that investment.