06-26-2017 CCM HUC-COUNCIL JOINT MTG (PILOT)HUTCHINSON CITY COUNCIL
JOINT WORKSHOP WITH THE HUTCHINSON UTILITIES BOARD
MEETING MINUTES
MONDAY, JUNE 26, 2017 AT 7:30 AM
CITY CENTER — COUNCIL CHAMBERS
1. Call to Order
Mayor Forcier and HUC President Morrow called the meeting to order at 7:30 a.m. Members
present were: Council Member Mary Christensen, Council Member Steve Cook, Council
Member Chad Czmowski, Council Member John Lofdahl, Commissioner Mark Girard,
Commissioner Don Martinez; Commissioner Anthony Hanson; Commissioner Monty Morrow;
Commissioner Bob Wendorf£ Staff present were: Matt Jaunich, Andy Reid, Marc Sebora,
Jeremy Carter and Jared Martig.
2. Discussion of PILOT (Payment in Lieu of Taxes)
Matt Jaunich, City Administrator, explained that a discussion was held approximately five or six
years ago about increasing the HUC's PILOT payment to the City of Hutchinson. No action or
discussion was held at that time and therefore the discussion is coming up again at this time. The
discussion is coming up again now mainly because HUC is looking to do a rate study later this
year. The current HUC PILOT payment is determined by multiplying HUC's operating revenue
for the last audited fiscal year by 2.75%. Discussions were held several years ago about
potentially raising that rate, but nothing transpired. A survey was conducted of other municipal
gas/electric utilities and what they contributed to their individual cities. Generally speaking, the
thought process has been to look at something that is closer to 5%. In addition to the HUC
PILOT payment, there are a set of additional funds the City is reimbursed for as well. Those
reimbursements are due to separate agreements between the City and HUC. The City receives
reimbursements for the HR, IT and legal services provided to HUC. The PILOT is susceptible to
annual fluctuations due to HUC's operating revenues. HUC's operating revenues mainly consist
of electricity and gas sales and can be higher or lower dependent on the year. This instability
then effects the contribution or the PILOT to the City, which places burdens on the City's
budgetary options. The HUC has not raised rates since the early or mid -2000s and in addition the
HUC has established a healthy reserve. Jeremy Carter, HUC General Manager, spoke about
projects that are slated in the near future.
Matt Jaunich spoke on behalf of the City Council who has a desire to increase the percentage for
the PILOT payment. A concern is the fluctuation from year to year. Don Martinez,
Commissioner, stated that to avoid fluctuation the percentage cannot be tied to revenue. An
average was discussed or using a cap. Anthony Hanson, Commissioner, noted that HUC
essentially runs four different business models between gas and utilities so establishing the right
percentage can be somewhat tricky. Mr. Jaunich did note that that the anticipated 2018 PILOT is
20% lower than the 2010 PILOT.
Council Member Cook noted that in 2006 a subcommittee was formed that reviewed different
options for PILOT payment. Cook asked if it would be beneficial for a subcommittee to form
again. It was also noted that a study of comparable cities should be completed. Council Member
Lofdahl asked if a flat amount could be established and agreed to for three years and then
reviewed every three to five years. Two members of the Council can be appointed at tomorrow's
Council meeting and the HUC can appoint members at their meeting on Wednesday.
3. Adjournment
Motion by Cook/Morrow, second by Czmowski/Martinez, to adjourn at 8:30 a.m.
ATTEST:
Gary T. Forcier
Mayor
Matthew Jaunich
City Administrator