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Elk River <br /> Municipal Utilities UTILITIES COMMISSION MEETING <br /> TO: FROM: <br /> ERMU Commission Theresa Slominski—Finance & Office Manager <br /> MEETING DATE: AGENDA ITEM NUMBER: <br /> October 10, 2017 5.2 <br /> SUBJECT: <br /> 2018 Business Plan/Budget: Water and Electric Expenses <br /> ACTION REQUESTED: <br /> None <br /> BACKGROUND: <br /> In preparation for submittal in November, staff continues to work through the 2018 budget <br /> process. The first cut of the expense portion of the 2018 budget has been completed for <br /> commission review. The expense budget will change as the complete 2018 budget is assembled <br /> and the finalized wholesale power costs are reflected. Wholesale power costs, as well as <br /> revenues and rate increases for 2018 will be presented in November. <br /> DISCUSSION: <br /> Attached is the following information for your review. Additional budget detail is available upon <br /> request. Please contact staff for additional information. <br /> 1. Water Department Expense Budget—The 2018 forecast for water expenses are a 4% <br /> increase over the current year budget. Most notable are increases on the administrative <br /> side, due to hiring an IT staff person, increases in health insurance, and allocation <br /> distributions for employee related expenses. <br /> Currently we are projecting a 2%rate increase to produce near 0%reserve impact.As <br /> numbers are finalized, and revenue projected, this will be brought back in November. <br /> 2. Electric Department Expense Budget—The 2018 forecast for electric expenses are a 5% <br /> increase over the current year budget. Wholesale power costs make up between 70-75% <br /> of the operating budget, and are estimated here at 1%. Typically,there is some <br /> adjustment of the rate structure that impacts us more than percent increase provided by <br /> GRE. <br /> The budgeted Payment in Lieu of Taxes (PILOT) amount for 2018 is approximately$1.4 <br /> million. The PILOT is comprised of$1.16 million with the 4%of Elk River City's sales <br /> calculation, and$232,000 in donated utilities and labor. <br /> Currently, we are estimating a 1%rate increase to produce near 0%reserve impact. <br /> Growth through our acquisition is helping to keep the rates down. We will have more <br /> information with the presentation of the revenue projections in November. <br /> Page 1 of 2 <br /> 70 <br />