10-28-2015 HUCMMINUTES
Regular Meeting — Hutchinson Utilities Commission
Wednesday, October 28, 2015
Call to order — 3:00 p.m.
President Hanson called the meeting to order. Members present: President Anthony
Hanson; Vice President Donna Luhring; Secretary Mark Girard; Commissioner Monty
Morrow; Commissioner Dwight Bordson; Attorney Marc Sebora; General Manager
Jeremy Carter.
Guest: Bob Wendorff
1. Conflict of Interest
2. Approve Consent Agenda
a. Approve Minutes
b. Ratify Payment of Bills
A motion was made by Vice President Luhnng, seconded by Commissioner
Bordson to approve the Consent Agenda. Motion was unanimously carried.
3. Approve Financial Statements
GM Carter presented the financial statements. After discussion, a motion was
made by Commissioner Bordson, seconded by Secretary Girard to approve the
financial statements. Motion was unanimously carried.
4. Open Forum
President Hanson welcomed guest, Bob Wendorff. Hanson explained due to
Commissioner Bordson's term expiring December 31, 2015, Mr. Wendorff will be
the new HUC commissioner, effective January 2016. IMr. Wendorff previously
owned and operated Wendorff Insurance and is currently the manager of Crow
River Mutual Insurance Company.
5. Communication
a. City Administrator— Matthew Jaunich
i. The City Council approved the aquatic center project which is scheduled to
begin next spring.
ii. Working on the 2016 budget.
b. Divisions
i. Randy Blake —
1. Nothing to report.
ii. Dan Lang —
1. Nothing to report.
iii. Dave Hunstad —
1. Nothing to report.
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iv. John Webster -
1 . On October 14, 2015, HUC shut down the pipeline for approximately 7
hours to install an insulating gasket at Northern Border. Service to the
customers remained seamless.
2. Working with 3M on a natural gas purchase agreement. The Hutchinson
plant would like HUC to start purchasing their gas in 1-, 2-, and 3 -year
strips versus month-to-month strips.
3. HUC's automatic metering infrastructure (AMI) is paying off well;
especially the Brownton system. Working with Sue Winter to get
consumption off the AMI system for all Brownton customers on any day
to split the bill out for the customers.
4. There will be a public hearing at the City of Lafayette on November 9 to
discuss which natural gas provider the City of Lafayette is going to
choose - HUC or United Natural Gas.
c. Legal — Attorney Sebora
i. Nothing to report.
d. General Manager — Jeremy Carter
i. There will be EPA follow-up meetings in the next couple weeks.
ii. Attending tomorrow's Missouri River Energy Services (MRES) meeting with
Jared Martig.
iii. Finalizing a draft letter to MRES regarding RUC's base load contract.
iv. Will start working on the capital expenditure program with staff again next
week.
v. HUC staff are having discussions with different vendors regarding how solar
could be part of our community.
vi. GM Carter will be arranging a date for Miles Seppelt of the City of
Hutchinson's Economic Development Association to give a presentation to
the Commission Board on what's happening in economic development.
6. Policies
a. Review Policies
i. Employee Handbooks — Attendance/Tardiness
ii. Employee Handbooks — Inclement Weather
No changes were recommended at this time.
b. Approve Changes
i. Employee Handbooks — Use of Facilities During Off -Duty Hours (Non -
Exempt Only)
The addition of "or manager" to this policy addresses the current
organizational structure and maintains consistency with other recent policy
updates.
ii. Budget Payment Plan
The changes requested were to clarify the requirements of this policy.
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After discussion, a motion was made by Secretary Girard, seconded by
Commissioner Morrow to approve the changes to Employee
Handbooks — Use of Facilities During Off -Duty Hours (Non -Exempt Only),
and Budget Payment Plan. Motion was unanimously carried. (Changes
attached.)
7. Unfinished Business
a. Approve Investment Policy
A draft of this policy was presented at last month's regular commission meeting
and has been reviewed by HUC's auditors, an investment broker and the
Board. The policy allows HUC to invest idle cash as the cash balance grows.
After discussion, a motion was made by Vice President Luhring, seconded by
Secretary Girard to approve the Investment Policy. Motion was unanimously
carried. (Investment Policy attached.)
8. New Business
a. Approve Requisition #6493 for Gas Specific Gravity and Gas Energy
Equipment at New Ulm and Fairfax Interconnect Stations. The proposed
additional equipment would be installed at two of HUC's interconnect stations in
2015 to enable HUC to measure and update the specific gravity factor to the
HUC flow computers on a real time basis. Additional equipment is to be
budgeted for in 2016 for installation at the remaining stations.
After discussion, a motion was made by Commissioner Morrow, seconded by
Secretary Girard to approve Requisition #6493 for Gas Specific Gravity and
Gas Energy Equipment at New Ulm and Fairfax Interconnect Stations. Motion
was unanimously carried. (Requisition attached.)
b. Discuss Preliminary 2016 Budget
GM Carter distributed a summary of the preliminary 2016 budget and reviewed
high level items with the Board.
GM Carter requested the Board further review the preliminary budget and
forward any changes or suggestions they have to him. GM Carter will then
present a revised version at the November regular commission meeting with
the approval of the 2016 budget taking place at the December regular
commission meeting. (Preliminary 2016 Budget summary attached.)
Due to the upcoming holidays, a discussion was held regarding the rescheduling of
the November and December regular commission meetings. It was decided to
keep the November meeting date of Wednesday, November 25 and reschedule
the December meeting to Wednesday, December 16 at 3:00 p.m.
GM Carter reported the HUC annual open house went well with approximately 470
attending.
Brenda Ewing reported she will be distributing the General Manager's annual
review forms.
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9. Adjourn
There being no further business, a motion was made by Vice President Luhring,
seconded by Commissioner Bordson to adjourn the meeting at 4:15 p.m. Motion
was unanimously carried.
M rk Girard, Secretary
ATTEST: ImLiovl
Anthony Han on, President
In
NON-EXEMPT ONLY
USE OF FACILITIES DURING OFF-DUTY HOURS
Employees are not allowed on-site during off-duty hours without prior approval of a Director or
Manager.
Budget Payment Plan
A budget payment plan is available for residential customers who have been at their present
location for 12 continuous months or greater more. Procedures are in place for setting up and
reviewing the budget payment plan calculation. Changes are made at the discretion of the
Customer Service Department based on the customer's average bill from the previous 12
months. Customers will be notified of any changes. A customer may concurrently participate
in Tthe budget payment plan and automatic bank payment plan san be dere at the same time.
eia-GHINL-4
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1/rl LITI�CS
INVESTMENT POLICY
ADOPTED OCTOBER 28, 2015
HUTCHINSON UTILITIES COMMISSION INVESTMENT POLICY
PURPOSE
The purpose of this policy is to establish specific guidelines Hutchinson Utilities Commission will
use in the investment of Commission funds. It will be the responsibility of the General Manager
and Financial Manager to invest Commission Funds in order to attain the highest market rate of
return with the maximum security while meeting the daily cash flow demands of the Commission
and protecting the capital of the overall portfolio. Investments will be made in accordance with
all state and local statutes governing the investment of public funds.
II. SCOPE
The General Manager and Financial Manager are responsible for the investing of all financial
assets of the Hutchinson Utilities Commission, excluding pension funds. These funds are
accounted for in the Commission's Audited Financial Statements and Supplementary
Information.
III. PRUDENCE
Investments shall be made with judgment and care, not for speculation, but for investment,
considering the probable safety of the capital as well as the probable income to be derived.
The standard of prudence to be used by investment officials shall be the "prudent person"
standard and shall be applied in the context of managing the overall portfolio. Investment
officers acting in accordance with this policy, with MN Statutes, Chapter 118A, and exercising
due diligences shall be relieved of personal responsibility for an individual security's risk or
market price change, provided that reasonable action is taken to control adverse developments
and unexpected deviations are reported in a timely manner.
OBJECTIVE
A. Safety - Safety of principal is of critical importance to the investment program.
Investments of the Commission shall be undertaken in a manner that seeks to ensure the
preservation of principal in the overall portfolio. The objective will be to mitigate credit risk
and interest rate risk.
1. Credit Risk - the risk of loss due to failure of the security issuer or backer, will be
minimized by:
- Limiting investments to the types of securities listed in Section VIII of this investment
policy.
- Pre -qualifying the financial institutions, broker/dealers, intermediaries, and advisors
with which the Commission will do business in accordance with Section VII.
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HUTCHINSON UTILITIES COMMISSION INVESTMENT POLICY
- Diversifying the investment portfolio so that the impact of potential losses from any
one type of security or from any one individual issuer will be minimized. Insurance or
collateral may be required to ensure return of principal.
2. Interest Rate Risk — the risk that the market value of securities in the portfolio will fall
due to changes in market interest rates will be minimized to:
- Provide for liquidity by reviewing cash flow requirements and make investments to
meet the shorter cash flow needs, thereby avoiding the need to sell securities in the
open market prior to maturity.
- Manage the average maturity of the overall portfolio to be consistent with the risk of
the Commission.
B. Liquidity - The Commission's investment portfolio will remain sufficiently liquid to enable
the Commission to meet all operating requirements reasonably anticipated. The portfolio
will be structured so that the portfolio emphasizes liquidity and consists largely of
securities with active secondary or resale markets (dynamic liquidity). A portion of the
portfolio may be placed in money market mutual funds or local government investment
pools which offer same day liquidity for short-term funds.
C. Yield - The Commission's investment portfolio shall be designed with the objective of
attaining a market rate of return. The core of investments is limited to low-risk securities
in anticipation of earning a fair return relative to the risk being assumed. Securities shall
generally be held until maturity with the following exceptions:
• A security with declining credit may be sold early to minimize loss of principal.
• A security swap would improve the quality, yield, or target duration in the portfolio.
• Liquidity needs of the portfolio require that the security be sold.
IV. DELEGATION OF AUTHORITY
Authority to manage the Commission's investment program is derived from MS 118A which
authorizes the Commission to invest any funds not presently needed in obligations in which
commission debt service funds may be invested. This law applies to all types of funds not
presently needed, including all general, special revenue, permanent, trust or other funds
regardless of source or purpose. Under this chapter a Government Entity may invest idle funds
in state or national banks, savings and loan associations, or credit unions. No person may
engage in an investment transaction except as provided under the terms of this policy and the
procedures established by the policy.
Management responsibility for the investment program is hereby delegated to the General
Manager and Financial Manager, who shall be responsible for all transactions. The Financial
Manager shall establish procedures for the operation of the investment program, consistent with
this policy. Such procedures may include delegation of authority to persons responsible for
investment transactions.
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HUTCHINSON UTILITIES COMMISSION INVESTMENT POLICY
V. ETHICS AND CONFLICTS OF INTEREST
The General Manager and Finance Staff involved in the investment process shall refrain from
conducting personal business activity that could conflict with proper execution of the investment
program, or which could impair their ability to make impartial investment decisions. Investment
staff shall annually disclose to the Commission any material financial interests as required by
state statute. Investment staff shall subordinate their personal investment transactions to those
of the Commission, particularly with regard to the time of purchases and sales, and shall refrain
from undertaking personal investment transactions with the same individual with whom business
is conducted on behalf of the Commission.
VI. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The Commission will annually, by resolution, approve depositories and a list of financial
institutions authorized to provide investment services.
A. Only approved security broker/dealers, selected by creditworthiness, shall be utilized,
with a minimum of $10,000,000 capital and at least five years of operation.
B. Financial institutions must be qualified as a "depository" by the Hutchinson Utilities
Commission; these may include "primary" dealers or regional dealers that qualify under
Securities & Exchange Commission Rule 15C3-1 (Uniform Net Capital Rule).
C. All investments must be insured, or registered, or securities must be held by the
Commission or its agent in the Commission's name.
D. No public deposit shall be made except in a qualified public depository, as established
by state laws.
E. When investments purchased by the Commission are held in safekeeping by a
broker/dealer, they must provide asset protection of $500,000 through Securities
Investor Protection Corporations (SIPC), and at least another $2,000,000 Supplemental
Insurance Protection, provided by the broker dealer.
F. Before engaging in investment transactions with the Hutchinson Utilities Commission,
the supervising officer at the securities broker/dealer shall submit a certification of
"Notification to Broker and Certification by Broker Pursuant to MN Statute 118A". Said
certification will state that the broker/dealer has reviewed the investment policies and
objectives, as well as applicable state law, and agrees to disclose potential conflicts or
risk to public funds that might arise out of business transactions between the securities
broker/dealer firm and the Commission. All financial institutions shall agree to undertake
reasonable efforts to preclude imprudent transactions involving the Commission's funds.
VII. AUTHORIZED AND SUITABLE INVESTMENTS
It shall be the policy of the Hutchinson Utilities Commission that available funds be invested to
the best rates obtainable at the time of investment in conformance with the legal and
administrative guideline outlined herein. US Treasury Obligations and Federal Agency
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HUTCHINSON UTILITIES COMMISSION INVESTMENT POLICY
Securities will be given preference when the yields are equal to or greater than alternative
investments.
The investments of the Hutchinson Utilities Commission will be made in accordance with
Minnesota Statutes, section 118A, which lists all permissible investments for Government
Entities.
COLLATERAL
Interest-bearing deposits in authorized depositories must be fully insured or collateralized.
Collateralization will be required on Certificates of Deposits (where the dollar amount is in
excess of FDIC coverage). In order to anticipate market changes and provide a level of security
for all funds, the collateralization level will be 110% of the market value of principal and accrued
interest. When the pledged collateral consists of notes secured by first mortgages, the collateral
level will be 140% of the market value of principal and accrued interest. Collateral shall be
deposited in the name of the Commission, subject to release by the Financial Manager.
VIII. SAFEKEEPING AND CUSTODY
Securities purchased shall be held in a segregated account for the Commission's benefit at a
third party trustee as safekeeping agent. The investment dealer or bank in which the security is
purchased shall issue a confirmation ticket to the Commission listing the specific instrument,
issuer, coupon, maturity, CUSIP number, purchase or sale price, transaction date, and other
pertinent information. The financial service provider which executes the transaction on the
Commission's behalf shall deliver all securities on a delivery versus payment method (DVP) to
the designated third party. Delivery versus payment (DVP) is a way of controlling the risk to
which securities market participants are exposed. Delivery of securities (i.e. the change in their
ownership) is done simultaneously with payment. This means that neither the buyer nor the
seller is exposed to the risk that the other will default. The Commission may not invest in
securities that are uninsured. Securities will be held in the Commission's designated accounts.
Investments, contracts and agreements may be held in safekeeping with:
- Any Federal Reserve bank;
- Any bank authorized under the laws of the United States or any state to
exercise corporate trust powers, including, but not limited to, the bank from
which the investment is purchased.
- A primary reporting dealer in United States government securities to the
Federal Reserve Bank of New York; or
A securities broker-dealer having its principal executive office in �Roo
rma
man
Minnesota, licensed under chapter 80A, or an affiliate of it, and
regulated by the Securities and Exchange Commission; provided that the
government entity's ownership of all securities is evidenced by written
acknowledgments identifying the securities by the names of the issuers,
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HUTCHINSON UTILITIES COMMISSION INVESTMENT POLICY
maturity dates, interest rates, CUSIP number, or other distinguishing
marks.
Forma
IX. DIVERSIFICATION Roman
The Financial Manager or investment designee will attempt to diversify its investments
according to type and maturity. The Commission will attempt to match its investments with
anticipated cash flow requirements. Extended maturities may be utilized to take advantage of
higher yields. Diversifications strategies shall be determined and revised periodically by the
Commission for all funds.
A. Institutions — Diversity between financial institutions used.
a. The Financial Manager or investment designee will attempt to diversify its
investments amongst investment companies, keeping in mind that some
temporary fluctuations may occur throughout the year (i.e. GO Bonds for
projects, etc.)
b. No funds may be invested in any one investment company in excess of the
amount insured by it.
B. Maturities — Diversity in length of maturities.
a. Investments shall be made to assure that funds are constantly available to
meet immediate payment requirements
b. No investments shall be made with a term of more than 10 years..
C. Investments — The Commission should maintain a diversity of investments.
a. Depending on market conditions, with the exception of US Treasury
Securities, authorized pools, and Federal Agencies (backed by the full faith
and credit of the US Government or its agencies), no more than 50% of the
Commission's total investment portfolio may be invested in any one of the
following: Certificates of Deposit or Commercial Paper.
X. POOLING OF INVESTMENTS
For the purpose of making the maximum amount of funds available for investment, the cash for
Commission Funds, as listed in Part II, is pooled in an investment account. Interest earnings
are allocated among the various funds based upon their average cash balance.
XI. INVESTMENT POLICY ADOPTION
The Commission's Investment Policy shall be adopted by resolution by the Hutchinson Utilities
Commission. The Policy shall be reviewed on an annual basis and any modifications made
thereto must be approved by the Hutchinson Utilities Commission.
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APPENDIX A — MS STATUTE 118A. DEPOSIT AND INVESTMENT OF LOCAL
PUBLIC FUNDS.
118A.01 DEFINITIONS.
Subdivision 1.Application.
The definitions in this section apply to sections 1 18A.01 to 1 18A.06.
Subd. 2.Government entity.
(a) "Government entity" means a county, city, town, school district, hospital district,
public authority, public corporation, public commission, special district, any other
political subdivision, except an entity whose investment authority is specified under
chapter 11 A or 3 56A.
(b) For the purposes of sections I I8A.02 and 1 18A.03 only, the term includes an
American Indian tribal government entity located within a federally recognized American
Indian reservation.
Subd. 3.Financial institution.
"Financial institution" means a savings association, commercial bank, trust company,
credit union, or industrial loan and thrift company.
Subd. 4.Public funds.
"Public funds" means all general, special, permanent, trust, and other funds,
regardless of source or purpose, held or administered by a government entity, unless
otherwise restricted.
History: 1996 c 399 curl I s 2; 1999 c 151 s 39
118A.02 DEPOSITORIES; INVESTING: SALES, PROCEEDS, IMMUNITY.
Subdivision 1.Designation; delegation.
(a) The governing body of each government entity shall designate, as a depository of
its funds, one or more financial institutions.
(b) The governing body may authorize the treasurer or chief financial officer to:
(1) designate depositories of the funds;
(2) make investments of funds under sections 118A.01 to 118A.06 or other applicable
law; or
(3) both designate depositories and make investments as provided in this subdivision.
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Subd. 2.Sale; proceeds; immunity, if loss.
(a) The treasurer or chief financial officer of a government entity may at any time sell
obligations purchased pursuant to this section and the money received from such sale, and
the interest and profits or loss on such investment shall be credited or charged, as the case
may be, to the fund from which the investment was made.
(b) Neither such official nor government entity, nor any other official responsible for
the custody of such funds, shall be personally liable for any loss sustained from the
deposit or investment of funds in accordance with the provisions of sections 1 18A.04 and
118A.05.
History: 1996 c 399 art I s 3
118A.03 WHEN AND WHAT COLLATERAL REQUIRED.
Subdivision 1.For deposits beyond insurance.
To the extent that funds on deposit at the close of the financial institution's banking
day exceed available federal deposit insurance, the government entity shall require the
financial institution to furnish collateral security or a corporate surety bond executed by a
company authorized to do business in the state. For the purposes of this section, "banking
day" has the meaning given in Federal Reserve Board Regulation CC, Code of Federal
Regulations, title 12, section 229.2(f), and incorporates a financial institution's cutoff hour
established under section 336.4-108.
Subd. 2.In lieu of surety bond.
The following are the allowable forms of collateral in lieu of a corporate surety bond:
(1) United States government Treasury bills, Treasury notes, Treasury bonds;
(2) issues of United States government agencies and instrumentalities as quoted by a
recognized industry quotation service available to the government entity;
(3) general obligation securities of any state or local government with taxing powers
which is rated "A" or better by a national bond rating service, or revenue obligation
securities of any state or local government with taxing powers which is rated "AA" or
better by a national bond rating service;
(4) general obligation securities of a local government with taxing powers may be
pledged as collateral against funds deposited by that same local government entity;
(5) irrevocable standby letters of credit issued by Federal Home Loan Banks to a
municipality accompanied by written evidence that the bank's public debt is rated "AA" or
better by Moody's Investors Service, Inc., or Standard & Poor's Corporation; and
(6) time deposits that are fully insured by any federal agency.
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Subd. 3. Amount.
The total amount of the collateral computed at its market value shall be at least ten
percent more than the amount on deposit at the close of the financial institution's banking
day, except that where the collateral is irrevocable standby letters of credit issued by
Federal Home Loan Banks, the amount of collateral shall be at least equal to the amount
on deposit at the close of the financial institution's banking day. The financial institution
may furnish both a surety bond and collateral aggregating the required amount.
Subd. 4.Assignment.
Any collateral pledged shall be accompanied by a written assignment to the
government entity from the financial institution. The written assignment shall recite that,
upon default, the financial institution shall release to the government entity on demand,
free of exchange or any other charges, the collateral pledged. Interest earned on assigned
collateral will be remitted to the financial institution so long as it is not in default. The
government entity may sell the collateral to recover the amount due. Any surplus from the
sale of the collateral shall be payable to the financial institution, its assigns, or both.
Subd. 5.Withdrawal of excess collateral.
A financial institution may withdraw excess collateral or substitute other collateral
after giving written notice to the governmental entity and receiving confirmation. The
authority to return any delivered and assigned collateral rests with the government entity.
Subd. 6.Default.
For purposes of this section, default on the part of the financial institution includes,
but is not limited to, failure to make interest payments when due, failure to promptly
deliver upon demand all money on deposit, less any early withdrawal penalty that may be
required in connection with the withdrawal of a time deposit, or closure of the depository.
If a financial institution closes, all deposits shall be immediately due and payable. It shall
not be a default under this subdivision to require prior notice of withdrawal if such notice
is required as a condition of withdrawal by applicable federal law or regulation.
Subd. 7.Safekeeping.
All collateral shall be placed in safekeeping in a restricted account at a Federal
Reserve bank, or in an account at a trust department of a commercial bank or other
financial institution that is not owned or controlled by the financial institution furnishing
the collateral. The selection shall be approved by the government entity.
History: 1996 c 399 art I s 4; 2003 c 51 s 15,16; 2004 c 151 s 1, 2; 2004 c 1 74 s 2; 2007
c 44 s 7; 2007 c 57 arl 3 s 39; 2008 c 154 art 10s I
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118A.04 INVESTMENTS.
Subdivision 1.What may be invested.
Any public funds, not presently needed for other purposes or restricted for other
purposes, may be invested in the manner and subject to the conditions provided for in this
section.
Subd. 2.United States securities.
Public funds may be invested in governmental bonds, notes, bills, mortgages
(excluding high-risk mortgage-backed securities), and other securities, which are direct
obligations or are guaranteed or insured issues of the United States, its agencies, its
instrumentalities, or organizations created by an act of Congress.
Subd. 3.State and local securities.
Funds may be invested in the following:
(1) any security which is a general obligation of any state or local government with
taxing powers which is rated "A" or better by a national bond rating service;
(2) any security which is a revenue obligation of any state or local government with
taxing powers which is rated "AA" or better by a national bond rating service; and
(3) a general obligation of the Minnesota housing finance agency which is a moral
obligation of the state of Minnesota and is rated "A" or better by a national bond rating
agency.
Subd. 4.Commercial papers.
Funds may be invested in commercial paper issued by United States corporations or
their Canadian subsidiaries that is rated in the highest quality category by at least two
nationally recognized rating agencies and matures in 270 days or less.
Subd. 5.Time deposits.
Funds may be invested in time deposits that are fully insured by the Federal Deposit
Insurance Corporation or bankers acceptances of United States banks.
Subd. 6.High-risk mortgage-backed securities.
For the purposes of this section and section l 18A.05, "high-risk mortgage-backed
securities" are:
(a) interest -only or principal -only mortgage-backed securities; and
(b) any mortgage derivative security that:
(1) has an expected average life greater than ten years;
(2) has an expected average life that:
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(i) will extend by more than four years as the result of an immediate and sustained
parallel shift in the yield curve of plus 300 basis points; or
(ii) will shorten by more than six years as the result of an immediate and sustained
parallel shift in the yield curve of minus 300 basis points; or
(3) will have an estimated change in price of more than 17 percent as the result of an
immediate and sustained parallel shift in the yield curve of plus or minus 300 basis points.
Subd. 7.Temporary general obligation bonds.
Funds may be invested in general obligation temporary bonds of the same
governmental entity issued under section 429.091, subdivision 7, 469.178. subdivision 5,
or 475.61, subdivision 6.
Subd. 8.Debt service funds.
Funds held in a debt service fund may be used to purchase any obligation, whether
general or special, of an issue which is payable from the fund, at such price, which may
include a premium, as shall be agreed to by the holder, or may be used to redeem any
obligation of such an issue prior to maturity in accordance with its terms. The securities
representing any such investment may be sold by the governmental entity at any time, but
the money so received remains part of the fund until used for the purpose for which the
fund was created. Any obligation held in a debt service fund from which it is payable may
be canceled at any time unless otherwise provided in a resolution or other instrument
securing obligations payable from the fund.
Subd. 9.Broker; statement and receipt.
(a) For the purpose of this section and section I I8A.05, the term "broker" means a
broker-dealer, broker, or agent of a government entity, who transfers, purchases, sells, or
obtains securities for, or on behalf of, a government entity.
(b) Prior to completing an initial transaction with a broker, a government entity shall
provide annually to the broker a written statement of investment restrictions which shall
include a provision that all future investments are to be made in accordance with
Minnesota Statutes governing the investment of public funds.
(c) A broker must acknowledge annually receipt of the statement of investment
restrictions in writing and agree to handle the government entity's account in accordance
with these restrictions. A government entity may not enter into a transaction with a broker
until the broker has provided this written agreement to the government entity.
(d) The state auditor shall prepare uniform notification forms which shall be used by
the government entities and the brokers to meet the requirements of this subdivision.
History: 1996 c 399 cart 1 s 5
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118A.05 CONTRACTS AND AGREEMENTS.
Subdivision l.May enter into.
In addition to other authority granted in sections 1 18A.01 to 1 18A.06, government
entities may enter into contracts and agreements as follows.
Subd. 2.Repurchase agreements.
Repurchase agreements consisting of collateral allowable in section 118A.04, and
reverse repurchase agreements may be entered into with any of the following entities:
(1) a financial institution qualified as a "depository" of public funds of the
government entity;
(2) any other financial institution which is a member of the Federal Reserve System
and whose combined capital and surplus equals or exceeds $10,000,000;
(3) a primary reporting dealer in United States government securities to the Federal
Reserve Bank of New York; or
(4) a securities broker-dealer licensed pursuant to chapter 80A, or an affiliate of it,
regulated by the Securities and Exchange Commission and maintaining a combined capital
and surplus of $40,000,000 or more, exclusive of subordinated debt.
Reverse agreements may only be entered into for a period of 90 days or less and only
to meet short-term cash flow needs. In no event may reverse repurchase agreements be
entered into for the purpose of generating cash for investments, except as stated in
subdivision 3.
Subd. 3.Securities lending agreements.
Securities lending agreements, including custody agreements, may be entered into
with a financial institution meeting the qualifications of subdivision 2, clause (1) or (2),
and having its principal executive office in Minnesota. Securities lending transactions may
be entered into with entities meeting the qualifications of subdivision 2 and the collateral
for such transactions shall be restricted to the securities described in this section and
section 118A.04.
Subd. 4.Minnesota joint powers investment trust.
Government entities may enter into agreements or contracts for:
(1) shares of a Minnesota joint powers investment trust whose investments are
restricted to securities described in this section and section I I8A.04;
(2) units of a short-term investment fund established and administered pursuant to
regulation 9 of the Office of the Comptroller of the Currency, in which investments are
restricted to securities described in this section and section 118A.04;
Hutchinson Utilities Commission Investment Policy Page 12
HUTCHINSON UTILITIES COMMISSION INVESTMENT POLICY
(3) shares of an investment company which is registered under the Federal Investment
Company Act of 1940 and which holds itself out as a money market fund meeting the
conditions of rule 2a-7 of the Securities and Exchange Commission and is rated in one of
the two highest rating categories for money market funds by at least one nationally
recognized statistical rating organization; or
(4) shares of an investment company which is registered under the Federal Investment
Company Act of 1940, and whose shares are registered under the Federal Securities Act of
1933, as long as the investment company's fund receives the highest credit rating and is
rated in one of the two highest risk rating categories by at least one nationally recognized
statistical rating organization and is invested in financial instruments with a final maturity
no longer than 13 months.
Subd. 5.Guaranteed investment contracts.
Agreements or contracts for guaranteed investment contracts may be entered into if
they are issued or guaranteed by United States commercial banks, domestic branches of
foreign banks, United States insurance companies, or their Canadian subsidiaries, or the
domestic affiliates of any of the foregoing. The credit quality of the issuer's or guarantor's
short- and long-term unsecured debt must be rated in one of the two highest categories by
a nationally recognized rating agency. Should the issuer's or guarantor's credit quality be
downgraded below "A", the government entity must have withdrawal rights.
History: 1996 c 399 art I s 6; 1997 c 219 s 1; 2000 c 493 s 1; 2005 c 152 cat 1 s 2
118A.06 SAFEKEEPING; ACKNOWLEDGEMENTS.
Investments, contracts, and agreements may be held in safekeeping with:
(1) any Federal Reserve bank;
(2) any bank authorized under the laws of the United States or any state to exercise
corporate trust powers, including, but not limited to, the bank from which the investment
is purchased;
(3) a primary reporting dealer in United States government securities to the Federal
Reserve Bank of New York; or
(4) a securities broker-dealer having its principal executive office in Minnesota,
licensed under chapter 80A, or an affiliate of it, and regulated by the Securities and
Exchange Commission; provided that the government entity's ownership of all securities is
evidenced by written acknowledgments identifying the securities by the names of the
issuers, maturity dates, interest rates, CUSIP number, or other distinguishing marks.
History: 1996 c 399 art 1 s 7; 2010 c 234 s 2
Hutchinson Utilities Commission Investment Policy Page 13
HUTCHINSON UTILITIES COMMISSION INVESTMENT POLICY
118A.07 ADDITIONAL INVESTMENT AUTHORITY.
Subdivision 1.Authority provided.
As used in this section, "governmental entity" means a city with a population in
excess of 200,000 or a county that contains a city of that size. If a governmental entity
meets the requirements of subdivisions 2 and 3, it may exercise additional investment
authority under subdivisions 4, 5, and 6.
Subd. 2.Written policies and procedures.
Prior to exercising any additional authority under subdivisions 4, 5, and 6, the
governmental entity must have written investment policies and procedures governing the
following:
(1) the use of or limitation on mutual bond funds or other securities authorized or
permitted investments under law;
and
(2) specifications for and limitations on the use of derivatives;
(3) the final maturity of any individual security;
(4) the maximum average weighted life of the portfolio;
(5) the use of and limitations on reverse repurchase agreements;
(6) credit standards for financial institutions with which the government entity deals;
(7) credit standards for investments made by the government entity.
Subd. 3.Oversight process.
Prior to exercising any authority under subdivisions 4, 5, and 6, the governmental
entity must establish an oversight process that provides for review of the government
entity's investment strategy and the composition of the financial portfolio. This process
shall include one or more of the following:
(1) audit reviews;
(2) internal or external investment committee reviews; and
(3) internal management control.
Additionally, the governing body of the governmental entity must, by resolution,
authorize its treasurer to utilize the additional authorities under this section within their
prescribed limits, and in conformance with the written limitations, policies, and
procedures of the governmental entity.
If the governing body of a governmental entity exercises the authority provided in
this section, the treasurer of the governmental entity must annually report to the governing
body on the findings of the oversight process required under this subdivision. If the
Hutchinson Utilities Commission Investment Policy Page 14
HUTCHINSON UTILITIES COMMISSION INVESTMENT POLICY
governing body intends to continue to exercise the authority provided in this section for
the following calendar year, it must adopt a resolution affirming that intention by
December 1.
Subd. 4.Repurchase agreements.
A government entity may enter into repurchase agreements as authorized under
section 1 18A.05, provided that the exclusion of mortgage-backed securities defined as
"high-risk mortgage-backed securities" under section I I8A.04, subdivision 6, shall not
apply to repurchase agreements under this authority if the margin requirement is 101
percent or more.
Subd. 5.Reverse repurchase agreements.
Notwithstanding the limitations contained in section 1 18A.05, subdivision 2, the
county may enter into reverse repurchase agreements to:
(1) meet cash flow needs; or
(2) generate cash for investments, provided that the total securities owned shall be
limited to an amount not to exceed 130 percent of the annual daily average of general
investable monies for the fiscal year as disclosed in the most recently available audited
financial report. Excluded from this limit are:
(i) securities with maturities of one year or less; and
(ii) securities that have been reversed to maturity.
There shall be no limit on the term of a reverse repurchase agreement. Reverse
repurchase agreements shall not be included in computing the net debt of the
governmental entity, and may be made without an election or public sale, and the interest
payable thereon shall not be subject to the limitation in section 475.55. The interest shall
not be deducted or excluded from gross income of the recipient for the purpose of state
income, corporate franchise, or bank excise taxes, or if so provided by federal law, for the
purpose of federal income tax.
Subd. 6.Options and futures.
A government entity may enter into futures contracts, options on futures contracts,
and option agreements to buy or sell securities authorized under law as legal investments
for counties, but only with respect to securities owned by the governmental entity,
including securities that are the subject of reverse repurchase agreements under this
section that expire at or before the due date of the option agreement.
History: 1996 c 399 arl 1 s 8
Hutchinson Utilities Commission Investment Policy Page 15
HUTCHINSON UTILITIES COMMISSION INVESTMENT POLICY
118A.08 NO SUPERSEDING EFFECT.
Except as provided in Laws 1996, chapter 399, article 1, section 11, sections I I8A.01
to 118A.06 shall not supersede any general or special law relating to the deposit and
investment of public funds.
History: 1996 c 399 arl I s 9
Hutchinson Utilities Commission Investment Policy Page 16
HUTCHINSON UTILITIES COMMISSION REQUISITION FORM
Supplier: MICRO MOTION INC Ship To: HUTCHINSON UTILITIES COMMISSION Requisition No. 006493
7070 WINCHESTER CIRCLE
BOULDER, CO 80301-3501
Phone: 612-670-5640
Fax:
175 MICHIGAN ST SE
HUTCHINSON, MN 55350
Phone: 320-587-4746
Fax: 320-587-4721
Item #
Qty-
(Part Num.) Description
Request Date
Acct #
WO #
Unit Price
Per
Item Total
1
2
(000-00000)
12/01/2015
1073690100
61502
32,364.00
Each
64,728.00
Line Remarks: SGM3AAAAC2B1EZZXTG, GAS SPECIFIC
GRAVITY MODEL SGM, Micro Motion SGM Gas Specific Gravity
and Gas Energy Meter, Transmitter Output Options: Integral
Transmitter, Channel B = mA output, Channel A = mA + HART,
Channel C = RS485 Modbus, Two Line Display, Intrinsicaly Safe
Class 1 Div 1 Groups A,B,C, D, 4mA = 0, 20mA = 1, English
Manual and Software, Standard 1/2" NPT Conduit Connections,
Includes 316 Insulated Housing with 115 VAC Heater, Pressure
Regulator, Coalescing Filter, Roto Meter, Barriers, Valves,
Wallmount Brackets as a Complete Assenbly. Proposal No.
617496-1
2
1
(000-00000)
12/01/2015
1073690100
61502
1,600.00
Each
1,600.00
Line Remarks: 3098SG/SGM Startup Assistance, First Unit.
Proposal No. 617496-1
Page 1 of 2
HUTCHINSON UTILITIES COMMISSION REQUISITION FORM
Supplier: MICRO MOTION INC Ship To: HUTCHINSON UTILITIES COMMISSION Requisition No. 006493
7070 WINCHESTER CIRCLE 175 MICHIGAN ST SE
BOULDER, CO 80301-3501 HUTCHINSON, MN 55350
Phone: 612-670-5640 Phone: 320-587-4746
Fax: Fax: 320-587-4721
Sales Tax 4,560.05
Special Charges 0.00
Total 70,888.05
Requisitioned By: WEBSTER, JOHN Date: 10/06/2015
Approved By: Date:
Page 2 of 2
2016 Operating Budget - Electric Division
General 2016 Budget Items
o Budget reflects a reduction in (2) Electric Division FTE's from the 2015 budget and (1) shared FTE
between the Electric & Gas Divisions. Plant Operator, Plant Mechanic, & Purchasing Agent.
o Budget currently reflects a 0% Health Insurance Plan increase based on the current 3000/6000
deductible program, which includes the HRA embedded within the insurance plan. In addition,
the budget reflects an 80/20 split for exempt employees and a continual 80/20 split for non-
exempt employees. The Dental plan, LTD, and Basic & voluntary life remain the same as the
2015 rates. The Worker's Comp is estimated at a 5% increase over 2015 rates.
o Budget reflects the same rates in 2016 as where charged in 2015 on purchased power from
MRES.
o Budget reflects a continual allocation of benefits to the various cost centers. (System
Controls/Load Dispatch, Electric Distribution, Electric Production, Customer Service, and General
Administration)
o Budget reflects a slight decrease in the budgeted amount for 2016 to administer the
Conservation Improvement Plan (CIP) to the current intentions of the State Program and State
Statute language. (1.5% energy savings goal) 2015 Budget $603,112 2016 Budget $540,657;
budget amount will not necessarily all be expended in 2016.
o Budget reflects a HUC transfer amount of $1,506,183. Reinstates the 2.75% PILOT transfer
formula amount while maintaining street light reimbursement, Tree Program, & reimbursement
for IT, HR, Legal.
Electric Operating Revenues
o Retail Sales Forecast:
o For 2016, retails sales are based off the rolling average of billable KWHR's from 2009 -
September of 2015 which equates to 284,543,847 KWHRs (.6% increase over 2015). The
2016 budget reflects the 2015 current electric rates for all classes except the large
industrial. This rate follows a 3 -year phase in schedule.
o Power Cost Adjustment:
o A zero PCA is factored into the 2016 budget. 2016 will be the tenth consecutive year
without a rate increase; last rate increase was in 2006.
o KWHR Allocation for KWHR retail sales by customer classes areas follows:
o Electric Residential 17.4%
o All Electric Residential .9%
o Electric Small General Service 5.9%
o Electric Large General Service 27.4%
o Large Industrial 48.4%
o Wholesale sales (Sales for Resale):
o Capacity Sales for 2016 are budgeted at $675,500
o Energy Sales revenue from an energy contract is budgeted at $1,232,320. This amount is
based on RUC's unit called upon for 16,000 MWHR's (400 Hrs). Currently, no market
sales are budgeted in the 2016 budget.
o Other Revenues:
o The 2016 budget shows the same amounts budgeted for in the misc. revenue areas as
2015. In addition, the 2016 budget shows an increase in revenue from interest earnings
of $25,000. This will be a result of investing cash balances in secondary market
investment instruments.
Electric Operating Expenses
o Purchased Power:
o MRES power expense is budgeted at purchasing 226,008 MWHR's at an average
blended price of $56.66 per/MWHR. HUC will receive 219,000 MWHR's, while 7,008
MWHR's will be system loss power purchased (3.2% system loss). MRES power received
equates to 74.5% of power supply needed based on 2016 projections.
o LMP expense is budgeted on a 2011 -Sept 2015 (4.75 year) average LMP price. Using a
market price of $33.58 per MWHR and purchasing 60,929 MWHRs. LMP power needs
equate to 20.8% of power supply needed based on 2016 projections. The ability to
purchase power off the market at this average rate is directly impacted by HUC's ability
to self -generate power during high market price times.
o 13,720 MWHR's are budget for Hedging. Generation hedging equates to 4.7% of power
supply needed based on 2016 projections.
o Electric Production Expenses:
o Fuel: Includes $329,472 in natural gas contracted at $3.96 per MCF for unit #8 hedging,
$207,432 at a spot price of $3.87 per MCF for units #3, #4, #5 hedging, and $619,200 in
natural gas budgeted for the energy contract. Other misc. budget for fuel oil, water &
sewer, and boilers.
o In addition, includes $647,166 for natural gas transport expense. The transport
expense reflects 1/3 of the annual principal and interest payments on the outstanding
Revenue Refunding Bonds, Series 2012A. The 1/3 transport expense will be adjusted
annually moving forward to reflect the current years P&I schedule.
o Spot market price for natural gas is $3.87. (2011-2015 avg.)
o The 2016 budget reflects generating 13,720 MWHR's for hedging purposes and 500
MWHR's for Market Sales. Market Sales MWHR's generated will fluctuate based on
Market Prices.
o Electric Transmission Expenses:
o Electric transmission expenses are budgeted to increase by $340,000 over the 2015
budget. The 2016 increases are due to two primary factors: 1) 2016 is the last year on a
settlement agreement between HUC and GRE where a $100K annual credit is phased
out and 2) GRE's transmission rate is increasing between 4.5%-6.5% in 2016.
o $10,000 is added to the 2016 transmission budget for GRE to provide transmission
planning for HUC to continual meet NERC reliability requirements.
o Electric Distribution Expenses:
o Roughly 90% of the expenses in the distribution area are personnel related expenses.
This area consists of routine replacement and maintenance related to distribution
infrastructure, work on city infrastructure projects and builds outs for new
developments.
2016 Additional Noteworthy Items
o PCA's could be more prevalent than in 2015 because of the increased cost of
transmitting power in 2016, the consistent cost of purchasing power, and a
lower year-end rate stabilization fund cash balance. PCA's are currently not
budgeted for in the 2016 budget but could provide an additional revenue source
in calendar year 2016.
o Staff is continuing to review the latest EPA rulings (Cross State Air Rule & 111d
Clean Air Act) to understand the future potential impacts to HUC's core business
operations.
o Management is continuing to review the organizational operations for
opportunities to streamline, restructure or reallocate resources within the
organization to achieve cost savings.
Detailed Income Statement
Electric Division
2015 YTD
2012 Actual 1 2013 Actual 2014 Actual (10/27/15) Actual 2014 Budget I 2015 Budget 1 2016 Budget
OPERATING REVENUES
Energy Sales Revenue
$ 486,057
$ 520,388
$ 467,125
$ 353,162
$ 500,250
$ 455,177
$ 417,549
Office Supplies and Expenses (921)
$ 256,262
$ 281,574
$ 254,183
Sales - Electric Energy (440, 442, 444)
$
25,380,225
$ 24,598,181
$
25,090,910
$
19,571,954
$
24,982,080
$ 24,570,604
$ 24,344,238
Other Energy Sales (447)
$
1,618,582
$ 891,276
$
678,293
$
840,412
$
1,057,400
$ 994,000
$ 1,907,820
Total Energy Sales Revenue (440, 442, 444, 447)
$
26,998,808
$ 25,489,457
$
25,769,204
$
20,412,366
$
26,039,480
$ 25,564,604
$ 26,252,058
Revenue From Other Sources
$ 101,596
$ 95,031
$ 87,491
$ 52,427
$ 103,675
$ 106,136
$ 119,636
Mainl. Of General Plant (935)
$ 48,356
$ 71,061
$ 63,752
Revenue From Other Sources (450,451)
$
299,693
$ 297,525
$
292,778
$
217,384
$
220,000
$ 270,200
$ 270,200
Security Lights (454.01)
$
11,002
$ 11,033
$
11,301
$
8,485
$
10,000
$ 10,000
$ 10,000
Pole Rental (454.02, 454.03)
$
133
$ 32
$
16
$
$ 1,123,897
$
500
$
$
Total Revenue From Other Sources (450, 451, 454)
$
310,828
$ 308,589
$
304,095
$
225,869
$
230,500
$ 280,200
$ 280,200
TOTAL OPERATING REVENUES
$
27,309,636
$ 25,798,046
$
26,073,299
$
20,638,236
S
26,269,980
$ 25,844,804
$ 26,532,258
OPERATING EXPENSES
Production Operations
Operation Supervison & Engineering (546)
$
993,233
$ 1,126,083
$
1,037,894
$
809,813
$
1,072,165
$ 1,677,897
$ 1,681,727
Fuel (547)
$
1,835,135
$ 2,156,277
$
1,381,155
$
1,101,697
$
2,180,050
$ 1,795,025
$ 1,878,370
Operating Supplies and Expense (550)
$
133,010
$ 162,780
$
146,501
$
109,769
$
111,100
$ 117,600
$ 136,500
Total Production Operations (546, 547, 550)
$
2,961,378
$ 3,445,139
$
2,565,550
$
2,021,279
$
3,363,315
$ 3,590,522
$ 3,696,597
Maintenance Operations
Structures (554)
$
822
$ 448
$
6,165
$
2,446
$
100
$ 5,000
$ 7,000
Generating Units (554)
$
291,684
$ 318,352
$
375,626
$
262,789
$
236,200
$ 418,538
$ 451,230
Other Equipment (554)
$
160,409
$ 180,501
$
118,081
$
62,944
$
101,500
$ 35,000
$ 35,000
Total Maintenance Operations (554)
$
452,914
$ 499,300
$
499,872
$
328,178
$
337,800
$ 458,538
$ 493,230
Other Power Supply Expense
Purchased Power (555)
$
14,823,407
$ 13,342,967
$
13,850,238
$
11,361,161
$
13,445,430
$ 14,862,607
$ 14,776,745
System Control & Load Dispatch (556)
$
337,475
$ 330,932
$
328,571
$
260,586
$
304,500
$ 627,005
$ 659,626
Engineering Services (557)
$
18,891
$ 95,932
$
9,162
$
8,148
$
25,000
$ -
$ -
Total Other Power Supply Expense (555, 556, 557)
$
15,179,774
$ 13,769,830
$
14,187,971
$
11,629,895
$
13,774,929
$ 15,489,612
$ 15,436,371
Transmission Expense
Transmission Expense Operation (560)
$
129,568
$ 129,568
$
144,106
$
108,079
$
135,000
$ -
$ -
Transmission Expense Operation (565)
$
969,927
$ 1,289,968
$
1,512,071
$
1,368,438
$
1,150,000
$ 1,535,000
$ 1,875,000
Transmission Expense Operation (567)
$
174
$ 82
$
-
$
-
$
1,000
$ 100
$ 10,000
Transmission Expense Maintenance (574)
$
72,590
$ 73,734
$
28,361
$
20,980
$
24,000
$ 31,019
$ 26,622
Total Transmission Expense (560, 565, 567, 574)
$
1,172,258
$ 1,493,352
$
1,684,538
$
1,497,498
$
1,310,000
$ 1,566,119
$ 1,911,622
Distribution Expense:
Distribution Operation (580, 581, 586, 588, 589)
$
566,646
$ 560,929
$
606,544
$
430,629
$
420,350
$ 1,173,208
$ 1,221,087
Distribution Maintenance (592, 594, 595, 596, 598)
$
267,200
$ 321,821
$
256,554
$
194,676
$
220,500
$ 268,938
$ 256,876
Total Distribution Expense (580 ,581, 586, 588, 589, 592, 594, 595, 596, 598)
$
833,846
$ 882,750
$
863,097
$
625,304
$
640,850
$ 1,442,146
$ 1,477,963
Customer Service and Collection
Meter Reading (902)
$
30,835
$ 18,794
$
17,153
$
19,020
$
17,050
$ 21,108
$ 21,331
Collection Expense (903)
$
87,903
$ 127,589
$
115,324
$
89,390
$
105,545
$ 176,059
$ 180,951
Bad Debt Write offs (904)
$
3,191
$ 5,070
$
10,875
$
6,718
$
3,300
$ 8,250
$ 8,250
Customer Services (906)
$
44,819
$ 40,260
$
47,286
$
37,525
$
41,250
$ 53,347
$ 55,682
Total Customer Service and Collection (902, 903, 904, 906)
$
166,748
$ 191,713
$
190,638
$
152,652
$
167,145
$ 258,763
$ 266,214
Sales Expense
$ -
Supervison(911)
$
6,128
$ 5,684
$
5,010
$
-
$
6,000
$ -
$ -
Misc. Selling Expense (916)
$
199,456
$ 192,057
$
339,637
$
135,594
$
301,500
$ 374,942
$ 360,851
Total Sales Expense (911, 916)
$
205,584
$ 197,740
$
344,647
$
135,594
$
307,500
$ 374,942
$ 360,851
Administrative and General
Adminstrative and General Labor (920)
$ 486,057
$ 520,388
$ 467,125
$ 353,162
$ 500,250
$ 455,177
$ 417,549
Office Supplies and Expenses (921)
$ 256,262
$ 281,574
$ 254,183
$ 223,736
$ 184,125
$ 222,300
$ 222,750
Outside Services (923)
$ 150,240
$ 147,846
$ 109,766
$ 106,060
$ 56,475
$ 112,931
$ 80,306
Property Insurance (924)
$ 104,135
$ 102,512
$ 91,736
$ 67,280
$ 105,050
$ 105,000
$ 105,000
Employee Pension & Benefits (926)
$ 1,186,792
$ 1,240,786
$ 1,266,411
$ 1,018,320
$ 1,324,875
$ 212,705
$ 189,832
Regulatory Expense (928)
$ 52,925
$ 23,980
$ 24,305
$ 22,466
$ 31,900
$ 30,000
$ 30,000
Misc. General Expense (930)
$ 101,596
$ 95,031
$ 87,491
$ 52,427
$ 103,675
$ 106,136
$ 119,636
Mainl. Of General Plant (935)
$ 48,356
$ 71,061
$ 63,752
$ 24,022
$ 37,180
$ 47,861
$ 46,850
Total Administrative and General (920, 921, 923, 924, 926, 928, 930, 935)
$ 2,386,364
$ 2,483,179
$ 2,364,769
$ 1,867,473
$ 2,343,530
$ 1,292,110
$ 1,211,923
Other Expenses
Depreciation Expense (403)
$ 2,289,199
$ 2,612,388
$ 2,744,769
$ 2,025,000
$ 2,700,000
$ 2,700,000
$ 2,700,000
Payment in Lieu of Taxes (408)
$ 738,871
$ 912,000
$ 1,123,897
$ 359,829
$ 1,235,000
$ 384,391
$ 754,469
Contribution To City - Roadway Lighting (408)
$ 148,585
$ 142,666
$ -
$ -
$ -
$ 146,739
$ 144,535
Total Other Expenses (403, 407, 408)
$ 3,176,655
$ 3,667,055
$ 3,868,666
$ 2,384,829
$ 3,935,000
$ 3,231,130
$ 3,599,004
Detailed Income Statement
Electric Division
. 2015 YTD
2012 Actual 1 2013 Actual 2014 Actual (10/27/15) Actual 2014 Budget 2015 Budget 2016 Budget
TOTAL OPERATING EXPENSES - WITH ALLOCATION %'s $ 26,535,522 $ 26,630,059 $ 26,569,748 $ 20,642,701 $ 26,180,069 $ 27,703,882 $ 28,453,775
OPERATING INCOME (LOSS) - WITH ALLOCATION %'s $ 774,114 $ (832,013) $ (496,449) $ (4,465) $ 89,911 $ (1,859,078) $ (1,921,517)
NONOPERATING REVENUES/(EXPENSES)
Merchandise & Contract Work, Net
Interest Income
Misc. Income
Bond Service Fees
Interest Expense - Bonds
Gain (Loss) On Disposal
Amortization of Bond Discount and Issuance Costs
Amortization --Development Study
TOTAL NONOPERATING REVENUES/EXPENSES
NET INCOME
COGS
Gross Profit
Gross Margin
Operating Margin (%)
Net Income (%) of Operating Sales
Net Income (%) of Operating Sales (after cap labor)
$ (20,360)
$ (21,474)
$ 41,724
$ 40,000
$ 10,000 $ -
$ -
$ 28,126
$ 37,970
$ 14,860
$ 11,729
$ 30,000 $ 32,500
$ 57,500
$ 294,299
$ 58,031
$ 35,408
$ 32,436
$ 15,000 $ -
$ -
$ (1,850)
$ (2,400)
$ (450)
$ -
$ (3,000) $ (2,400)
$ (2,400)
$ (159,221)
$ (85,537)
$ (40,082)
$ (26,709)
$ (112,849) $ (35,613)
$ (30,613)
$ 4,582
$ 10,000
$ 23,159
$
$ - $
$
$ (1,864)
$ -
$ -
$
$ (21,000) $
$
$ (473,196)
$ (525,943)
$ (525,943)
$ (262,972)
$ - $ (262,972)
$ -
$ (329,484)
$ (529,353)
$ (451,324)
$ (205,516)
$ (81,849) $ (268,484)
$ 24,488
$ 444,630
$ (1,361,366)
$ (947,773)
$ (209,982)
$ 8,062 $ (2,127,562)
$ (1,897,030)
$ 19,766,325
$ 19,207,622
$ 18,937,931
$ 15,476,850
$ 18,786,044 $ 21,104,790
$ 21,537,820
$ 7,543,312
$ 6,590,424
$ 7,135,368
$ 5,161,386
$ 7,483,936 $ 4,740,014
$ 4,994,438
27.6%
2S.S%
27.4%
25.0%
28.5% 18.3%
18.8%
2.8%
41%
-1.9%
0.01Y
0.3% -7.2%
-7.2%
1.6%
-5.3%
-3.6%
-1.0%
0.0% -8.2%
-71%
-
-
-
-
- -7.0%
-6.0%
NET INCOME
2016 Net Income
$ (1,897,030)
PCA
$ -
CapitalizedLabor- Energy Services
$ 19,787
Capitalized Labor - Production
$ 54,100
Capitalized Labor - Distribution
$ 230,364
2016 Net Income
$ (1,592,779)
CASH FLOW STATEMENT
2016 Net Income
$ (1,592,779)
Depreciation
$ 2,700,000
2016 Cap Exp
$ -
2003B Principal
$ (125,000)
2016 Electric Cash Flow
$ 982,221
2016 Cap Exp (As necessary)
$ -
2016 Operating Budget - Gas Division
General 2016 Budget Items
o Budget reflects a reduction in (1) Gas Division FTE from the 2015 budget and (1) shared FTE
between the Electric & Gas Divisions. Welder/Service Person II & Purchasing Agent
o Budget currently reflects a 0% Health Insurance Plan increase based on the current 3000/6000
deductible program with the embedded HRA within the plan. In addition, the budget reflects a
80/20 split for exempt employees and a continual 80/20 split for non-exempt employees. The
Dental plan, LTD, and Basic & voluntary life remain the same as the 2015 rates. The Worker's
Comp is estimated at a 5% increase over 2015 rates.
o Budget continual reflects an allocation of benefits to the various cost centers. (Gas
Transmission, Gas Distribution, Customer Service and General Administration)
o Budget reflects a slight decrease in the budgeted amount for 2016 to administer the
Conservation Improvement Plan (CIP) to the current intentions of the State Program and State
Statute language. (1.5% energy savings goal). 2015 Budget $603,112, 2016 Budget $540,657;
budget amount will not necessarily all be expended in 2016.
o Budget reflects a HUC transfer amount of $1,506,183. Reinstates the 2.75% PILOT transfer
formula amount while maintaining street light reimbursement, Tree Program, & reimbursement
for IT, HR, Legal.
Natural Gas Operating Revenues
o Retail Sales Forecast:
o Retail (Residential & Commercial) sales have been forecasted on a 4+ yearly average
(2011-2015) at 882,779 MCF for 2016.
o Industrial Sales have been forecasted on a 4+ yearly average (2011-2015) at 797,091
MCF for 2016. The industrial sales are based on a spot market price of $3.83. The
industrial sales revenue reflects transport customers, so there is an off -setting expense
to purchase the natural gas. There will be no impact on net income except for the
transporting revenue received across the pipeline and distribution system.
o Power Cost Adjustment:
o A zero PCA is factored into the 2016 budget.
o Other Revenues:
o Budgeted $730,636 for the New Ulm Contract
o Budgeted $647,166 for the capacity used on the pipeline by the Electric Division's
generation/production area. This is a transfer between divisions.
o Operating Revenue to maintain the Brownton system is included in the budget. ($27K)
Natural Gas Operating Expenses
o Purchased Gas Expense
o Retail Customers: The expense for this class is based off a 4+ year average (2011-2015)
consumption level at 882,779 DTH'S. Contracted Gas makes up —76% of the DTH'S needed
for retail customers at an average weighted price of $4.98. The remaining — 24% of retail
gas needed will be purchased swing gas at an estimated price of $3.87. The $3.87 swing
gas price is based on daily pricing so there is more volatility than the swing gas price
used for the Industrial Customers which is based on the 15t of the month pricing. Total
average weighted natural gas price budgeted is $4.71.
o Industrial Customers: consumption based on a 4+ yearly average. (2011-2015). The
budget is based on 797,091 DTH's at an estimated swing gas price of $3.83. * Total
blended budgeted expense is $4.29 per DTH.
o Natural Gas Transmission Expense
o Mostly personnel costs, Routine maintenance & repairs based on MNOPS Program
requirements.
o Natural Gas Distribution Expense
o Mostly personnel costs, Routine maintenance & repairs based on MNOPS Program
requirements.
Detailed Income Statement
Gas Division
2015 YTD
2012 Actual 1 2013 Actual 1 2014 Actual 1 (10/27/15)Actual 1 2014 Budget I 2015 Budget 1 2016 Budget
OPERATING REVENUES
$
4,482,870
$ 4,911,812
$
2,148,139
$
4,106,506
$ 4,064,314
Sales - Natural Gas --Retail
$
6,848,463
$ 8,356,513
$ 8,559,893
$ 4,801,810
$ 8,490,262
$ 7,980,628
$ 8,612,023
Contract Sales to Large Customers (Includes 3M & HTI transport)
$
2,826,424
$ 3,646,509
$ 6,066,290
$ 2,401,962
$ 4,533,751
$ 4,034,279
$ 3,578,643
New Ulm Transportation
$
755,472
$ 785,149
$ 808,575
$ 569,730
$ 700,000
$ 725,100
$ 730,636
Transportation -Electric Division
$
1,100,000
$ 1,100,000
$ 700,000
$ 481,375
$ 700,000
$ 641,833
$ 647,166
TOTAL OPERATING REVENUES
$
11,530,359
$ 13,888,170
$ 16,134,757
S 8,254,876
$ 14,424,013
$ 13,381,840
$ 13,568A68
OPERATING EXPENSES
Purchased Gas
Purchased Gas for Retail (807)
Contract Gas for Large Customer
Total Purchased Gas
Transmission
Gas Transmission Operations (856)
Gas Transmission Maintenance (863)
Total Transmission (856, 863)
Distribution Operations
Supervision and Engineering (870)
Mains and Services (874)
Meters (878)
Misc. (880)
Total Distribution Operation (870, 874, 878, 880)
Distribution Maintenance
Lines --Services and Mains (892)
Meters and House Regulators (893)
Maintenance of Other Plant (895)
Total Distribution Maintenance (892, 893, 895)
Customer Service and Collection
Meter Reading (902)
Collection Expense (903)
Bad Debt Write offs (904)
Customer Services (906)
Total Customer Service and Collection (902, 903, 904, 906)
Sales Expense
Supervison (911)
Misc. Selling Expense (916)
Total Sales Expense (911, 916)
Administrative and General
Adminstrative and General Labor (920)
Office Supplies and Expenses (921)
Outside Services (923)
Property Insurance (924)
Employee Pension & Benefits (926)
Regulatory Expense (928)
Misc. General Expense (930)
Maint. Of General Plant (935)
Total Administrative and General (920, 921, 923, 924, 926, 928, 930, 935)
Other Expenses
Depreciation Expense (403)
Payment in Lieu of Taxes (408)
Total Other Expenses (403, 408)
TOTAL OPERATING EXPENSES - WITH ALLOCATION %'s
OPERATING INCOME (LOSS) - WITH ALLOCATION %'s
NONOPERATING REVENUES/(EXPENSES)
Merchandise & Contract Work, Net
Interest Income
Misc. Income
Bond Premium
Misc. Expense
Interest Expense - Bonds
Interest Expense - Customer Deposits
Gain (Loss) On Disposal
Amortization of Bond Discount and Issuance Costs
Amortization -Development Study
TOTAL NONOPERATING REVENUESIEXPENSES
NET INCOME
$ 4,244,213
$
4,482,870
$ 4,911,812
$
2,148,139
$
4,106,506
$ 4,064,314
$
4,161,898
$ 2,156,625
$
2,950,652
$ 5,074,637
$
1,903,450
$
3,695,981
$ 3,516,110
$
3,052,857
$ 6,400,838
$
7,433,522
$ 9,986,448
$
4,051,589
$
7,802,486
$ 7,580,424
$
7,214,755
$ 105,733
$
114,377
$ 106,984
$
90,168
$
109,500
$ 163,151
$
163,915
$ 11,910
$
4,001
$ 23,535
$
3,561
$
11,500
$ 18,018
$
10,171
$ 117,642
$
118,378
$ 130,520
$
93,729
$
121,000
$ 181,169
$
174,086
$ 120,292
$
161,338
$ 145,915
$
125,579
$
155,000
$ 370,308
$
359,020
$ 72,542
$
76,123
$ 104,425
$
68,201
$
129,500
$ 93,799
$
102,192
$ 61
$
240
$ 2,921
$
7,772
$
3,500
$ 759
$
835
$ 199,239
$
168,179
$ 184,837
$
120,209
$
161,100
$ 175,552
$
131,631
$ 392,134
$
405,879
$ 438,098
$
321,761
$
449,100
$ 640,419
$
593,678
$ 147,997
$
126,902
$ 99,918
$
123,009
$
133,000
$ 166,270
$
126,837
$ 20,779
$
9,932
$ 22,554
$
7,566
$
20,000
$ 13,807
$
24,228
$ 57,648
$
47,403
$ 53,973
$
36,944
$
56,000
$ 169,240
$
188,250
$ 226,424
$
184,237
$ 176,445
$
167,519
$
209,000
$ 349,318
$
339,315
$ 25,229
$
15,377
$ 14,034
$
15,562
$
13,950
$ 17,270
$
17,453
$ 71,920
$
104,391
$ 94,356
$
73,137
$
86,355
$ 144,048
$
148,051
$ 2,611
$
4,148
$ 8,898
$
5,496
$
2,700
$ 6,750
$
6,750
$ 36,670
$
32,940
$ 38,689
$
30,702
$
33,750
$ 43,647
$
45,558
$ 136,430
$
156,856
$ 155,976
$
124,897
$
136,755
$ 211,715
$
217,812
$ 2,043
$
1,895
$ 1,670
$
-
$
2,000
$ -
$
-
$ 66,485
$
64,019
$ 113,212
$
45,198
$
100,500
$ 228,170
$
179,806
$ 68,528
$
65,913
$ 114,882
$
45,198
$
102,500
$ 228,170
$
179,806
$ 162,019
$
173,463
$ 155,708
$
117,721
$
166,750
$ 151,726
$
139,183
$ 85,421
$
93,858
$ 84,728
$
74,579
$
61,375
$ 74,100
$
74,250
$ 50,080
$
49,282
$ 36,589
$
35,353
$
18,825
$ 37,644
$
26,769
$ 85,202
$
83,874
$ 75,057
$
55,047
$
85,950
$ 70,000
$
70,000
$ 395,597
$
413,595
$ 422,137
$
339,440
$
441,625
$ 70,902
$
63,277
$ 43,302
$
19,620
$ 19,886
$
18,381
$
26,100
$ 20,000
$
20,000
$ 83,124
$
77,753
$ 71,584
$
42,894
$
84,825
$ 70,758
$
79,758
$ 39,564
$
58,141
$ 52,160
$
19,654
$
30,420
$ 31,907
$
31,233
$ 944,309
$
969,586
$ 917,849
$
703,070
$
915,870
$ 527,036
$
504,470
$ 1,043,234
$
1,027,662
$ 1,002,804
$
792,000
$
1,056,000
$ 1,056,000
$
1,056,000
$ 397,853
$
491,077
$ 605,176
$
193,754
$
665,000
$ 206,980
$
406,252
$ 1,441,087
$
1,518,739
$ 1,607,980
$
985,754
$
1,721,000
$ 1,262,980
$
1,462,252
$ 9,727,393
$
10,853,110
$ 13,528,197
$
6,493,517
$
11,457,711
$ 10,981,229
$
10,686,174
$ 1,802,965
$
3,035,060
$ 2,606,560
$
1,761,360
$
2,966,302
$ 2,400,611
$
2,882,294
$ 41,315
$
57,400
$ 31,269
$
7,168
$
40,000
$ 27,000
$
27,000
$ 105,463
$
37,970
$ 14,860
$
11,729
$
25,000
$ 32,500
$
57,500
$ 227,443
1,008
$ 5,235
$
4,874
$
1,000
$ -
$
-
$ -
$
185,608
$ 185,608
$
139,206
$
-
$ 185,608
$
185,608
$ -
$
-
$ -
$
(14,217)
$
(6,000)
$ -
$
-
$ (1,326,968)
$
(1,271,801)
$ (864,000)
$
(619,125)
$
(867,500)
$ (825,500)
$
(781,500)
$ (351)
$
(2,346)
$ (434)
$
(55)
$
-
$ (1,000)
$
(200)
$ 120
$
-
$ 22,100
$
-
$
-
$ _
$
_
$ (36,187)
$
-
$ -
$
-
$
-
$ -
$
-
$ (989,165)
$
(992,161)
$ (605,361)
$
(470,420) $
(807,500) $
(581,392) $
(511,592)
$ 813,800
$
2,042,900
$ 2,001,199
$
1,290,940
$
2,158,801
$ 1,819,219
$
2,370,702
COGS
Gross Profit
Gross Margin
Operating Margin (%)
Net Income (%) of Operating Sales
Net Income (%) of Operating Sales (after cap labor)
Detailed Income Statement
Gas Division
2015 YTD
2012 Actual 1 2013 Actual 1 2014 Actual 1 (10/27/15) Actual 2014 Budget 1 2015 Budget 1 2016 Budget
$ 6,518,480 $ 7,551,900 $ 10,116,968 $
$ 5,011,878 $ 6,336,270 $ 6,017,790 $
43% 46% 37%
16% 22% 16%
7% 15% 11%
4,145,318
$ 7,913,486 $ 7,761,593
$
7,388,841
4,109,558
$ 6,500,527 $ 5,620,247
$
6,179,627
50%
45% 42%
$
46%
21%
21% 18%
2,266,702
21%
16%
15% 14%
17%
-
- 14%
18%
NET INCOME WITH ADJUSTMENTS
2016 Net Income
$
2,370,702
Capitalized Labor -Natural Gas
$
108,610
2016 Net Income
$
2,479,312
CASH FLOW STATEMENT
2016 Net Income
$
2,370,702
Depreciation
$
1,056,000
2016 Cap Exp
$
-
2012A Principal
$
(1,160,000)
2016 Gas Cash Flow
$
2,266,702
2016 Cap Exp (As necessary)
$
-