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Elk River <br />Municipal Utilities <br />COMMISSION POLICY <br />Section: <br />Governance <br />Category: <br />Delegation to Management Policies <br />Policy Reference: <br />Policy Title: <br />GA2 <br />Financial Reserves <br />PURPOSE: <br />With this policy, the Commission sets forth its expectations for the General Manager concerning <br />the maintenance of ERMU's financial reserves. <br />POLICY: <br />The General Manager shall ensure that ERMU maintains cash reserves for its electric and water <br />utility enterprises that are reasonable, prudent and necessary to: <br />1. Meet or exceed the requirements of all bond covenants <br />2. Demonstrate to rating agencies and investors that ERMU's utility enterprises are credit worthy <br />3. Provide liquidity that is adequate, along with other risk -management measures, to ensure <br />ongoing operation of the utility systems <br />4. Stabilize revenue requirements and customer rates <br />5. Manage the level of debt by funding a portion of the capital investments <br />In addition, the General Manager shall implement a Management Financial Reserves Policy that <br />sets forth the designated reserve funds to be maintained, along with their purposes and methods <br />for determining appropriate target levels and requirements for internal controls, monitoring and <br />reporting. Designated reserve funds may include, but are not limited to reserves restricted for <br />debt service and unrestricted designated reserves. <br />POLICY HISTORY: <br />Adopted December 12, 2017 <br />Revised July 14, 2020 <br />Page 1 of 1 <br />150 <br />