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YEAR END NARRATIVE <br />These financial statements are year end unaudited amounts. They include adjustments for year <br />end accruals of payables, receivables, and capitalized items. The auditors will be here March 5"' <br />through March 7"' to review our 2008 year and recommend any adjustments or corrections. There <br />will be finalizing entries, but the majority of the items should be accounted for. <br />Electric <br />The year ended ahead of budget and very comparable to the prior year, despite a declining <br />economy and the challenges that were presented. The data centers coming to Elk River played a <br />huge part in how our year ended. The residential customers were down 1,423,366 KW and <br />commercial customers were down 4,745,369 KW from the prior year. The large industrial <br />category, however, increased 19,554,200 KW from the prior year (Target was just getting started <br />and United Health Group wasn't even in the picture yet.) The net result was an additional <br />$540,000 in revenue. <br />Other Revenue items were higher than budget as well -across the board -totaling an additional <br />$255,000 in revenue over budget. Our investments had good returns even with some declining <br />rates. Customer Penalties is not necessarily an item you like to see increase, and yet is certainly <br />representative of the times. (We do waive penalties for customers who contact us stating their <br />hardship and abiding to some payment arrangement.) The landfill performed well and we benefit <br />from that. Connection fees were actually down most of the year and then picked up towards the <br />end. Security did well consistently throughout the year. The Miscellaneous Revenue is comprised <br />mainly of two items: $95,000 from the sales tax capital equipment refund and $29,000 from <br />temporary services. <br />For expenses that were over budget, the Landfill had some increased maintenance expenses <br />related to the engine heads that were wearing quickly, and Distribution was higher as we focused <br />more on maintenance of infrastructure rather than building it. Two other categories over budget <br />were Services to the City and Administrative & General Expenses. Services to the City increased <br />with the payment in lieu of taxes increasing (as a result of the data centers' usage); also a review <br />of city properties midyear resulted in the addition of some accounts for donated electricity, and <br />the library was a new large donated electricity addition this year. Administrative & General <br />Expenses had large increases in legal fees at $30,000 over budget (reflective of the year's <br />activities) and environmental compliance at $11,000 over budget (our assessments increase as our <br />size increases.) Also, Dues and Subscriptions had a large CAPX2020 dues expense of $102,000 <br />(approximately $25,000 per quarter) for our share of administrative and development costs in this <br />project. The CAPX2020 project is an organized effort on the part of various utilities (private, <br />public, municipal, etc.) to research and evaluate, and then put into action, what large transmission <br />infrastructure and generation needs to be in place and compliant with legislative guidelines to <br />meet the electric needs of the citizens by the year 2020. We have taken the most conservative <br />approach in expensing these costs. As the project moves forward in future years, not all costs <br />will be expensed, some will become an intangible asset. <br />Water <br />The water department finished the year at a loss of only $32,000. Revenues for the year were <br />down .5% from the prior year and 3.8% from budget. A couple of factors contributed to this -the <br />lq <br />