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______________________________________________________________________________ <br /> <br />Page 1 of 2 <br /> <br /> <br /> UTILITIES COMMISSION MEETING <br /> <br />TO: <br />ERMU Commission <br />FROM: <br />Mark Hanson - General Manager <br />MEETING DATE: <br />November 12, 2025 <br />AGENDA ITEM NUMBER: <br />5.03 <br />SUBJECT: <br />Payment in Lieu of Taxes to City of Elk River <br />ACTION REQUESTED: <br />Approve Revisions to Commission Policy G.2a1 - Payment In Lieu of Taxes (PILOT) and Other <br />Donations to the City of Elk River <br /> <br />BACKGROUND: <br />At the October 14, 2025, commission meeting, commission members discussed revisions to <br />ERMU’s Payment in Lieu of Taxes (PILOT) policy. Commission Policy G.2a1, Payment in Lieu of <br />Taxes and Other Donations to the City of Elk River outlines the PILOT agreement between the <br />City Council and the ERMU Commission. The Commission discussed several options for revising <br />ERMU’s PILOT policy to bring it in line with the national (5.1%), regional (4.8%), and revenue- <br />based (5.0%) medians presented in the American Public Power Association’s (APPA) May 2024 <br />Public Power Pays Back report, which was included in the October packet. ERMU’s current <br />revenue transfer is 4.0% plus approximately 0.62% in donated labor, materials, and electricity. <br /> <br />DISCUSSION: <br />The Commission directed staff to review the following potential revisions to the PILOT policy <br />and bring back redline updates for review and approval by the Commission. <br />1) Increase the revenue transfer from 4.0% to 5.0% of the revenue generated by ERMU’s <br />electric customers within the corporate boundaries of the City of Elk River. Customers <br />qualifying for the Transmission Transformed Service (TTS) rate will remain exempt from <br />the revenue transfer. ERMU currently has no TTS customers. For 2026, this would <br />increase ERMU’s revenue transfer by a projected $434,365 to $2,171,826. <br />2) Create a revenue transfer exemption for catastrophic events resulting in an increased <br />energy adjustment clause (EAC) from our power supplier, Minnesota Municipal Power <br />Agency (MMPA). The 5% revenue transfer would not be paid on the increased EAC. A <br />catastrophic event would be defined by MMPA’s use of their rate stabilization fund to <br />offset the impact of the catastrophic event on its members. <br />3) Institute a revenue transfer of 2% of the revenue generated by ERMU’s water <br />customers. ERMU currently does not make a water revenue transfer. For 2026, this <br />would result in a projected revenue transfer of $63,000. <br />82