12-12-2018 HUCMMINUTES
Special Meeting — Hutchinson Utilities Commission
Wednesday, December 12, 2018
Call to order — 7:30 a.m.
President Morrow called the meeting to order. Members present: President Monty
Morrow; Vice President Anthony Hanson; Secretary Robert Wendorff; Commissioner Don
Martinez; General Manger Jeremy Carter; Attorney Marc Sebora
Absent: Commissioner Matt Cheney
Others present: Dan Lang, Dave Hunstad, John Webster, Angie Radke.
The purpose of the special meeting is to have a 2019 Budget Workshop.
GM Carter reviewed the documents that were emailed to the Commissioners last week.
GM Carter started the meeting with the Fleet Management program. GM Carter had
asked Staff to review all the equipment/fleet and create a complete inventory list and
prioritize the equipment/fleet. Points of consideration were the type of equipment, future
replacement value, estimated useful life and estimated replacement year. Discussions
amongst Staff were the prioritizing of Equipment to Critical, Very Important, Important and
Future Consideration; along with buying, leasing or reallocating equipment to other areas.
President Morrow inquired of Dave Hunstad, Electric Transmission/Distribution Manager,
how consolidating of equipment has gone in the past. Mr. Hunstad noted that it has
worked out.
GM Carter reviewed the breakout of HUC's total equipment between Light and Heavy
equipment. Majority of the value is in the Heavy Equipment at $1.8M, where Light
Equipment is $635K. Staff prioritized HUC's vehicles to HUC's Operations. HUC's
annual funding requirements are also considered. HUC also has to value time; there are
only certain months of the year to try and complete jobs. Vehicles that provide operational
efficiency along with needed equipment to complete job tasks efficiently are also
considered as part of the long-range fleet/equipment program. GM Carter spoke of the
pictorial graphs, which is a 10-year snap shot. In the past, equipment annual funding was
$150K-$175K to maintain a consistent funding level. However now it is looking to be
$175-$200K a year. As technology changes, so will some of HUC's vehicles.
Management wants to make sure the Commissioners are comfortable with that amount
of funding on a yearly basis. HUC needs to look into the future to see if electric vehicles
or other options should be considered. Last piece of the Fleet Management Program for
the Commission to consider is HUC has not designated a reserve of cash for the Fleet
program. Does the Commission want to see specific cash designation for Fleet? If so, a
line would show on the designation report as Fleet Program. Something for the board to
consider.
GM Carter noted this leads the Special Meeting to the Financial Reserve Policy. The
Financial Reserve policy is on the Commission Agenda for next week; however, a more
in depth look is important. GM Carter asked if the Commissioners are comfortable with
the amounts of current designations.
Commissioner Hanson inquired of the 60 to 90 days operating cash and excess cash
being applied to capital reserves.
GM Carter stated the Capital Reserve is for 5 years of normal infrastructure maintenance
and upkeep at $3.45M; however, the Reserve does not cover new acquisitions or major
capital expenditures. GM Carter probed the Commissioners to the comfort level of how
much cash balance is desired in Operating Reserve. Should Reserves be more towards
60 day than 90 day? HUC's policy reflects Restricted Reserves, Capital Reserve, and
Operating Reserves (which includes the PILOT Reserve).
After discussion, GM Carter added if there is a consensus with a change in the Financial
Reserve, it could be discussed next week at the Commission meeting.
Commissioner Martinez stated that right now it appears 70 percent of dollars are fixed
and 30 percent is not reserved or is earmarked as a placeholder for unforeseen things.
From a management standpoint, this makes sense. GM Carter added there could still be
things that might surface so Staff tries to reserve money for those circumstances.
Commissioner Hanson inquired when the right time to implement would be; is it at end of
year or during strategic planning.
After more discussion, GM Carter informed the Commissioners to ask any other questions
before next Wednesday.
GM Carter reviewed the 2019 budget. Overall, a $60K change was made since the
preliminary budget meeting, this effected three areas. Operating dollars were increased
to update HUC's security system, increase insurance coverage on the NG transmission
line and a slight increase in the budget for Health Insurance premiums. HUC is running
a high-pressure transmission line, if repairs are needed the costs incurred could be
upwards of $1 M. These costs would be for repair; which could take weeks, additional
transportation costs from another party and / or gas revenue loss. Additional insurance
for the Electric Division Transmission lines was not increased. Costs for additional
electrical transmission insurance was nearly double the amount of NG Transmission
insurance and Staff felt that there are redundancies and less risk exposure. Therefore,
transmission infrastructure is better to self -insure. HUC can also self -generate so the risk
of everything going out is unlikely and unlikely for long periods of time. The piece that
made the Electric insurance higher was everything is above ground. The last increase is
the adjustment in Health Insurance. Health insurance increased to 11.12 percent, which
the budget showed 10 percent increase. GM Carter added that Workers Comp may go
down but that final number will not be known until middle of January.
GM Carter noted that Commissioner Hanson had inquired about Energy Consumption
and if any class changes were more than 1 percent. Consumption is fairly flat; however,
Small General has ticked up a little to 2.8%. Large General up to 1.45% with the addition
of Uponor. There was a slight decrease on the industrial side estimated due to operations
and energy efficiency.
Commissioner Wendorff inquired if the Cost of Service Study that was done earlier
impacted the budget. GM Carter stated yes and no. Revenue changed slightly between
classes but the bottom line number had no impact, which was the goal.
After additional discussion, GM Carter looked to the Commissioners for additional
questions or comments.
Commissioner Hanson inquired about what was contributing to the personnel costs. GM
Carter stated that it is a combination of salary, benefits, Work Comp, Pension, FICA, etc.
Many areas increase incrementally as wages increase. GM Carter also noted that every
time salary and benefits increase so do the employer contributions to those various line
items. On average, HUC should see a 4-5 percent increase every year if the current
organizational structure stays in place for the foreseeable future.
Commissioner Hanson inquired about the investment in Unit 8.
Dan Lang, Engineering Services Manager, stated that with talking to Randy Blake,
Production Manager, Unit 8 is still a good solid base unit with life in it.
President Morrow inquired if there were additional questions or comments. President
Morrow thanked GM Carter and Staff for all of the work that was done.
There being no further business, a motion by Commissioner Martinez, second by
Commissioner Wendorff to adjourn the meeting at 8:43 a.m. Motion was unanimously
carried.
Robert Wendorff, S� ry
ATTEST:
Monty M6rADw, President