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Elk River <br />Municipal Utilities <br />COMMISSION POLICY <br />Section: <br />Governance <br />Category: <br />Results Policies <br />Policy Reference: <br />Policy Title: <br />G.5a <br />Margins <br />PURPOSE: <br />Consistent with all Results Policies, the Commission shall establish clear expectations for <br />producing the right results for the right people in the right way. With this policy the Commission <br />affirms their commitment to the Organization Fundamentals Policies prioritizing financial and <br />organization health by setting an annual goal for operational margins. <br />The annual strategic and business planning, consistent with the Financial Planning and <br />Budgeting Policy, shall be conducted such that the organization has appropriate operating <br />margins. By establishing clear expectations for operating margins through policy, the Commission <br />creates clear and consistent direction for the General Manager. <br />This clear direction provides stability in organizational vision allowing the General Manager, <br />while developing the annual budget and business plan, to more effectively utilize long range tools, <br />such as multiple year capital improvement plans, to produce both short term and long term <br />financial and organizational health. Additionally, this practice helps to avoid inconsistent <br />direction to the General Manager from year to year such as tight margins one year due to rate <br />competitiveness concerns and concerns another year about revenues and desiring higher margins. <br />POLICY: <br />To promote financial health and organization stability, the General Manager shall develop the <br />annual business plan and budgets for the following services as follows: <br />1. Electric — �' e budget shall e developed wit�uumargms <br />that are at ll e asl: 2 1ya,:.➢ c l....coffVe.lIftf Imo& .�.:.egfta i A bt 1....001wel fW'e. f1i'Wg-il1-"C-41a.l..I. <br />lei 1.5% of total revenue bul:�1. ..1..:be1e:.�11no greater than :.5% of total <br />revenue. <br />2. Water — -x� � .Me budget shall be developed with muii-in tum margins <br />that are at � 4 r; b l.....c e+� n....11" ren ui } 1.: ..:b l..... en..-'44....:be.... <br />1.5 /o of total revenue 1. u1.: vK-1 11 be de-vel-e : d no greater than . 72.5% of total <br />Pagel of 2 <br />55 <br />