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Elk River <br /> Municipal Utilities UTILITIES COMMISSION MEETING <br /> TO: FROM: <br /> ERMU Commission Theresa Slominski—Administrations Director <br /> MEETING DATE: AGENDA ITEM NUMBER: <br /> November 12, 2019 5.3 <br /> SUBJECT: <br /> 2020 Annual Business Plan: Rates and Review, Stakeholder Communication <br /> ACTION REQUESTED: <br /> None <br /> DISCUSSION: <br /> In preparation for budget approval in December, staff continues to work through the 2020 <br /> budget process. Based on the wholesale rate increase and projected expense increases and <br /> capital expenditures, a preliminary balanced budget and rates have been drafted. <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. Electric Department Expense Budget—2020 forecast for electric expenses are a .5% <br /> increase over the current year budget. Wholesale power costs make up 67%of the <br /> operating budget. Most notable increases are for contracted tree trimming, and <br /> administrative expense increases for the website redesign, IT projects, and staff related <br /> expenses due to the reorganization. <br /> The budgeted Payment in Lieu of Taxes (PILOT) amount for 2020 is$1.5 million, based <br /> upon the recalculation to include recently acquired territory customers. The PILOT is <br /> comprised of$1.36 million with the 4%of Elk River City's sales calculation, and $218,000 <br /> in donated utilities and labor. <br /> At this time there is a 0% rate increase proposed. The necessary goal of a 2.83% margin <br /> to cover 110% of our annual average debt service is narrowly obtained with a <br /> conscientious trimming of expenses and conservative growth and usage estimates for <br /> revenues based on 2019's low usage. If there is a more comfortable margin desired, <br /> please be prepared to discuss. <br /> 2. Water Department Expense Budget—The 2020 forecast for water expenses are a 2.7% <br /> increase over the current year budget. Most notable increases are on the <br /> administrative side for the website redesign, IT projects, and staff related expenses due <br /> to the reorganization, as noted above for electric. <br /> Page 1 of 2 <br /> 195 <br />