06-29-2009 ERMU MIN SPECIAL - Laserfiche WebLink

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Special City Council and ERMU Commission Page 2 June 29,2009 financing the$2.6 million internally and would have the opportunity to roll the loan into the $90 million loan when the plant opened.The$2.6 million loan with interest would be about $3.2 million. Councilmember Westgaard stated there is the risk of owing$3.2 million if the financial close does not happen and the city would be in a worse position because it would still need to find a power supplier and owe back the$3.2 million. Councilmember Zerwas stated another risk with Scenario#2 is that Elk River Municipal Utilities would fold because he doesn't see how they could pay back the$3.2 million loss. Utilities staff disagreed.Mr.Zerhinger stated an additional penny per kilowatt hour could be charged to customers. Mr.Adams stated they recently bonded a$3 million loan without any issues. Councilmember Zerwas questioned what the collateral would be for this loan. Ms.Johnson stated the city would need legal authority to issue the bonds.She stated this is not a typical capital project for bonding purposes;possibly a short operating debt could be obtained but more research would need to be completed to determine if such debt was allowed through special electric bonding authority by statute. Mayor Klinzing stated all the scenarios addressed potential changes and that Scenario#2 didn't address potential changes. She stated it should be noted that there will be changes that should be added to the risk list. Mr. Zehringer stated if the Big Stone II project didn't move forward,and the loan had to be paid off;the Utilities would still be competitive in the market with its rates. Mayor Klinzing noted that with Scenario#4 the city would have options for negotiating rates. Councilmember Gumphrey questioned if the$1.8 million bond on the city hall building (noted in the handout)is calculated from today's rate or from 2018. Mr.Adams stated it is the portion that is owed currently. Ms. Slominski stated it would be paid off in 2022. Ms.Johnson noted there is no bond on the City Hall building;only on the Utilities building. Mayor Klinzing asked if the Utilities Commission had a recommendation for Council. Commissioner Dietz stated he has mixed feelings on whether to join the Big Stone II project.He stated it sounds like a good deal but noted there are many unknowns. He stated the rate Big Stone II would charge in 10 years would be less than what the city is paying now.He stated he is encouraged that Connexus may be more willing to negotiate with the Utilities.He stated he sees advantages to both sides. Councilmember Gumphrey stated he liked the idea of negotiating with Connexus.He stated he had concerns with Ottertail backing out of the Big Stone II project.