SPECIAL UTILITY COMMITTEE

A Special Utility Committee Meeting was held on June 1, 2009 at 5:00 p.m. with Chairman Ruane presiding. Members present were Mr. McGiffin and Mr. Snaman. Mr. Hogan and Major Kosior were absent. Other members of Council present were Mr. Leary and Mayor Carey.

AGENDA ADDITIONS/DELETIONS

Mr. Snaman moved for approval of the agenda, seconded by Mr. McGiffin and unanimously carried.

Financial Forecast

Members were provided a Presentation of the 5-Year Financial Forecast for both the Electric Fund and Water/Wastewater Fund (Attachment #1). Mrs. Mitchell, Controller/Treasurer, advised members that the forecast was developed based on certain assumptions and are subject to change.

Electric Fund

Mrs. Mitchell, Controller/Treasurer, reviewed the 5-Year Financial Forecast for the Electric Fund (see pages 1-10 of Attachment #1).

Responding to Mr. Ruane regarding the carbon tax (also referred to as a cap and trade), Mrs. Mitchell explained that a carbon tax has not been included in the forecast and that such an item would be reflected in the City’s power supply cost. She concurred that this item is a variable that could change the forecast for the future. Mr. DePrima, City Manager, also noted that the carbon tax could be reflected in the value of emissions credit.

Referring to purchased power, Mr. Snaman questioned why the costs are declining each year. Responding, Mrs. Mitchell explained that the hedges the City has in place are at the lower market rates and it is a combination of what is in place and what they are forecasting in the open market position.

Mrs. Mitchell advised members that during the budget process, she suggested that the financial forecasts be conducted in January, before the budget process begins, which would allow for a better understanding of the City’s position before preparing a draft budget. Mr. Ruane concurred and requested that there be an understanding that the committee would be provided a revision of the Financial Forecasts in January.

Mr. McGiffin moved to recommend acceptance of the Electric Fund Financial Forecast with the understanding that the committee would be provided a revision by January 2010, seconded by Mr. Snaman and unanimously carried.

Water/Wastewater Fund

Mrs. Mitchell, Controller/Treasurer, reviewed the 5-Year Financial Forecast for the Water/Wastewater Fund (see pages 11-28 of Attachment #1).

In response to Mr. Snaman regarding the manner in which the rates are raised for those customers who are “out of city”, Mr. DePrima, City Manager, advised members that the rates for “out of city” customers has traditionally been set to be 50% more than the “in city” rate. Mrs. Tieman, Senior City Administrator, indicated that the “out of city” rate is actually 1.5 times the “in city” rate.

Mr. Snaman suggested the possibility of increasing rates for “out of city” customers, explaining its benefits and incentive for annexation of property. Responding, Mr. DePrima stated that the “out of city” rates have not been proven to be an incentive for annexation and does not make up for the added tax that would be instituted. He recommended setting the rates based on a cost of service rather than as an incentive; however, he feared that a cost of service may not support the current “out of city” rate (50%). He also relayed concern with alerting the Public Service Commission, explaining that the City is not currently regulated by the Public Service Commission and he fears that if they began to receive complaints regarding the City’s “out of city” rate, then they may become involved.

Mrs. Mitchell advised members that this information was reviewed by the City’s financial advisor, Public Financial Management, and that they indicated that the forecast is an aggressive plan under a normal economic environment and relayed concern that approximately 30% of the City’s revenue will be attributed to rate increases.

Mrs. Mitchell provided members with “Alternative Forecasts - Combined Revenues and CIP” developed by staff and briefly reviewed and explained the various alternatives (Attachment #2).

Due to time constraints, Mr. Ruane requested that the alternatives be presented back to the committee at a future meeting to allow for further discussion and consideration.

Mr. McGiffin moved to recommend acceptance of the Water/Wastewater Fund - Five Year Financial Forecast, dated June 1, 2009, along with a commendation to Mrs. Mitchell and her staff for the work conducted on this matter. The motion was seconded by Mr. Snaman and unanimously carried.

Mr. McGiffin moved for adjournment, seconded by Mr. Snaman and unanimously carried.

Meeting Adjourned at 6:05 P.M.

                                                                                    Respectfully submitted,

                                                                                    Eugene B. Ruane

                                                                                    Chairman

EBR/AC/jg/tm

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Attachments (to Original Minutes and File Copy)

Attachment #1 -   Presentation of the 5-Year Financial Forecast for both the Electric Fund and Water/Wastewater Fund

Attachment #2 -   Alternative Forecasts – Combined Revenues & CIP