10-14-2025 ERMU MIN - Laserfiche WebLink

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• Option 2 - A payment of 3% and to begin billing the City for water and labor/materials. Mr. Hansons explained that staff was proposing water PILOT rates of 2% to 3% as a discussion starter after hearing from other municipal utilities in the state with water PILOTS ranging from 1 % to 6%. There was discussion about how ERMU tracks donated water in order to potentially bill the City in the future. Staff explained that ERMU donates water for firefighting, public ice rink filling, and street sweeping with all but the latter posing challenges in tracking usage for billing. Staff stated that in some cases estimates may be required. Staff noted that increases to the PILOT for both electric and water will directly impact margins that fund reserves. Staff added that there are large projects planned for 2026 including a new substation and a large transformer replacement. Staff explained that bonding will be necessary for future capital projects regardless of any PILOT adjustment. Staff shared that during preliminary conversations with Dave Berg who is in the process of developing a cost -of -service and rate design Study for ERMU, he explained that generally the Utility's reserve balances for the water department are about average, whereas electric reserves are lower than average. The Financial Reserves & Investment Committee was tasked with reviewing management's reserve policy and bringing back options for adjustments. The Commission opted to defer action to the November meeting when there will be a preliminary presentation on the cost -of -service and rate design study by Dave Berg Consulting, LLC. Staff explained that the study is operating off a 4.5% electric PILOT. Commissioner Zerwas shared his opinion that there is currently a good relationship between the City, ERMU, and community stakeholders regarding the donation of labor and services. He explained that reduced cooperation over fees is not a preferable result. ERMU staff and Mr. Portner described how that working relationship has developed over the years and expressed a desire for it to continue. Commissioner Stewart shared her opinion that the electric PILOT calculation should not include power costs adjustments passed on by ERMU's power provider during catastrophic events. The Commission asked staff to craft language that would define the circumstances in which power cost adjustments are not included in the PILOT calculation. There was general consensus that both a 5% electric and 3% water PILOT with labor, electricity, and water usage being invoiced to the City offered the most straightforward and transparent approach. However, the Commission felt it was best to hold off on a final decision until the November commission meeting when the preliminary cost -of -service study and the Financial Reserve policy will be discussed. Elk River Municipal Utilities Commission Meeting Minutes October 14, 2025 Page 4