10-14-2025 ERMU MIN - Laserfiche WebLink

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which is due to large capital projects being put into service, an expected 10% increase to medical insurance premiums and the addition of Minnesota's paid leave, which take effect January 1, 2026. The budgeted Payment in Lieu of Taxes (PILOT) amount for 2026 is $2.227 million. PILOT is comprised of $1.955 million based off 4.5% of the City of Elk River sales calculation, and $272,000 in donated utilities and labor. The 2026 budget for water expenses is a 3.2% increase compared to the current year's budget. Most notable accounts are depreciation which is due to large capital projects being put into service, dues & subscriptions —fees due to a Minnesota Department of Health water connection fee increase, medical insurance due to an expected 10% increase to premiums, and the addition of Minnesota's paid leave which takes effect January 1, 2026. Both the Electric and Water budgets include a 4%wage adjustment effective on January 1, 2026. The budgets also account for adding an IT Technician position and filling the vacant Systems Engineer and Lineworker positions during 2026. In response to a note that ERMU would be handling tree trimming in house during 2026 rather than contracting the work, Commissioner Stewart asked if staff felt there were resources available to complete the work that needed to be done. Mr. Gieser explained that after doing an internal tree trimming audit, staff felt the work could be managed internally. Ms. Karpinski explained that based on forecasts from ERMU's power provider, Minnesota Municipal Power Agency, staff was budgeting for a purchased power increase of about 3%. She added that there will be a Cost of Service and Rate Study presented by Dave Berg at the November commission meeting. Staff explained that purchased power constitutes about 70% of the electric budget. 5.3 Payment in Lieu of Taxes to City of Elk River Mr. Hanson presented the report which provided background on the electric Payment in Lieu of Taxes (PILOT) program, financial breakdown of its components, and regional comparisons. The report also showed 5-year cash reserve and funding source projections for the electric and water departments. The report noted that ERMU's current payment of 4% of revenue is below regional medians. It also showed that ERMU's electricity and labor being donated to the City equated to an additional 0.62% in PILOT value. Staff proposed two approaches to the program going forward. • Option 1- Raise the PILOT percentage to 4.5% and continue to offer electricity and labor donations to the City. • Option 2 - Raise the PILOT percentage to 5% and begin to invoice the City for electricity and labor. Staff then brought forward the concept of a PILOT for water service, proposing either • Option 1- A payment of 2% of revenue with continued donated contributions. Elk River Municipal Utilities Commission Meeting Minutes October 14, 2025 Page 3