5.2. ERMUSR 01-13-2009 - Laserfiche WebLink

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Minnesota Municipal Utilities Association Memorandum TO: MMUA Boazd of Directors Gary Gleisner, New Ulm; Leslie Hisken, Mazshall; Jim Keinath, Circle Pines; Mike Kumm, Hutchinson; Terry Leoni, Virginia; Leland Lunos, Roseau; Dennis Rykken, Sauk Centre; Steve Shurts, Owatonna; Joe Steffel, Buffalo; Jerry Takle, Elk River FROM: Jack Kegel, Executive Director RE: Update on various activities DATE: January 5, 2009 Best wishes to everyone for a Happy New Year! This memo is intended to provide you with an overview of the primary issues and activities we aze currently working on here at MMUA. As always, if you have any questions or concerns, please give me a call. Board Vacancy. Board member Mark Petsche of Wells has relocated to Wyoming, so we have a vacancy on the MMUA board. Our past practice in the case of mid-yeaz vacancies has been for the President to appoint a new board member with the concurrence of the board. The appointed boazd member would then be eligible for election by the membership to serve the remainder of Mazk's term of office, which expires in 2010. Gas Prepay. For a bit more than two yeazs now, we have been working on a prepaid gas project to enable our municipal gas utilities to purchase a portion of their requirements at a significant discount. Gas prepays have become relatively common in recent years and this structure has been used successfully in other parts of the country. The concept involves having a municipal purchaser issue tax exempt bonds to fund the purchase of a long-term supply of natural gas. The purchaser's tax exempt cost of money is lower than the seller's taxable discount rate, and this is the primary driver of the savings. A pair of mirrored commodity swaps converts the fixed-price gas to a discount from index structure, so the parkicipating municipal gas utilities receive a known discount from the index price regazdless of whether gas prices move up or down. The transaction is structured so that the Midwest Consortium of Municipal Utilities (MCMU), our finance authority, would issue the bonds and be the purchaser of the gas. The newly established Minnesota Municipal Gas Association would take the gas from MCMU and distribute it to the municipal utilities.