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*/ <br /> Elk River <br /> Municipal Utilities UTILITIES COMMISSION MEETING <br /> TO: FROM: <br /> Elk River Municipal Utilities Commission Troy Adams, P.E. —General Manager <br /> John Dietz, Chair <br /> Al Nadeau, Vice Chair <br /> Daryl Thompson, Trustee <br /> MEETING DATE: AGENDA ITEM NUMBER: <br /> April 12, 2016 5.4 <br /> SUBJECT: <br /> 2015 Year-End Reserve Balances <br /> BACKGROUND: <br /> The purpose for reserves to a public utility is to meet bond covenants and provide a financial <br /> buffer to mitigate unforeseen or volatile operational costs. In 2010, the commission adopted a <br /> financial reserves policy that defined the structure and formula on how financial reserves will be <br /> calculated for the Electric Utility and Water Utility funds. This provides transparency to the <br /> public on the purpose and levels of utility reserves. <br /> DISCUSSION: <br /> As defined by policy, the year-end reserve balances are to be reviewed after the completion of <br /> the audit. These balances, if above their target levels, shall be unrestricted with a defaulting <br /> designation as working capital. The commission shall then consider optimal use of these <br /> unrestricted reserves. <br /> ACTION REQUESTED: <br /> Staff recommends that unrestricted reserve balances above target levels for the Electric Utility <br /> fund be designated for electric service territory transfer costs, and for the Water Utility fund be <br /> designated for future capital infrastructure costs. <br /> ATTACHMENTS: <br /> • ERMU Policy—A.10—Financial Reserves Policy <br /> • Electric Fund Reserve Balances <br /> • Water Fund Reserve Balances <br /> POWERED DI <br /> 3i- : : Page 1 of 1 NATURE <br /> Reliable Public <br /> Power Provider P 0WE 0.E D To S ERV E <br /> 175 <br />