RESPONSE TO ACUSATIONS PRINTED ON FLYER BEING CIRCULATED

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3 RESPONSE TO ACUSATIONS PRINTED ON FLYER BEING CIRCULATED WHY NORTH BRANCH RESIDENTS SHOULD CONSIDER ABOLISHING NORTH BRANCH MUNICIPAL WATER & LIGHT (NBMW&L) 1. In 2008 the average residential water customer used 5.31 thousand gallons of water per month, the customer charge was $2.76 per month and the usage charge was $2.62 per thousand gallons per month, the average residential water bill was $16.67 per month. The treatment capacity (1950 s pressure filter) was 800 gpm, with a storage capacity of 1,000,000 gallons. During this time, the utility imposed watering bans to its customers due to the inability to pump and treat the water needs of its customers in the community. Today, based on the recommendations of WSB and Associates (City s Engineering Consultant) 2003 Comprehensive Water System Plan study (2002 thru the year 2043), based on land use, gross development acreages, and potential ultimate service area, the utility built two new water treatment plants, added new wells, raw water lines to the water system and storage capacity, this to meet the growing need of our community. Today, the treatment capacity is 3,500 gpm and the storage capacity is 2,000,000 gallons. In the first two months of 2016, our average residential customer used 4.22 thousand gallons of water per month, and based partly on the 2015 Cost of Service Study and the recommendations of Dave Berg (DBC Dave Berg Consulting. LLC) the commission adjusted the customer charge (service charge) to $20.00 per month and the usage charge to $7.70 per thousand gallons per month, the average residential water bill today is $ per month. Yes, the Utility water rates have increased dramatically in the past eight (8) years, however, the utility is in a position to grow and meet all the needs of this community well into the future. Unfortunately with all the improvements to the systems, to meet our customer s needs, and growth of the community, it comes with a hefty cost. To me, the Commission has made a huge investment in the community s future. I would encourage the author to look at the sewer rates during this same time frame. 2. I fail to see the duplication of service. If duplication of services exists, I would be very interested in hearing what that might be.

4 3. If the author is referring to the metering of trailer courts in our community, the utility has for a very long time (if not forever) metered the courts at the main taps. The issue is, we have two courts that are partially metered at the main, and the utility is simply asking the court owners to meter the remaining unmetered taps. 4. This is true, in 2014 the utility s bond rating was downgraded. In 2015 the utility s bond rating improved slightly. I would not say the utility s rating didn t have an effect on the City s bond rating, however, if you talk with the right city officials or Springsted (City and Utility financial advisors), they would tell you that the City s rating would have been downgraded no matter what the rating of the utility. 5. I can t and won t speak of the sewer revenues, since those are managed by the city, however, there would be additional revenue of approximately $9,000 to the water fund, and this may be true. What the author has failed to add to the equation is the added additional cost to the utility of meter reading, billing, mailings, disconnect calls and notices as well as the on- going maintenance on meters. When you add those costs, there is no advantage to the utility. The only comment I might include in reference to the sewer is; there might be additional revenues realized due to the fact that the utility does all the billing for the city sewer at no cost to the city. 6. It is true the utility is under the umbrella of the City, the utility has the full authority (through state statutes) to manage the operation and maintenance of the utility, create policies, procedures and set rates. The utility, however, does not have the authority to sell bonds. The City Council and the City Council alone has the authority to sell bonds, so for the author to say the City has no control over the utility borrowing money, is simply not true. Though they are still appointed by the City Council, Commissions were formed years ago to help keep politics out of the enterprise funds (electric, water) and run them as a business. 7. A large number of Cities in Minnesota have enterprise funds (electric, water and sewer). And a large number of those Cities that have enterprise funds have Utility Commissions. If you were to conduct a survey of the Cites that have Utility Commissions, you would find a large percentage of them have the responsibility of the electric, water and sewer funds. North Branch is not an exception. 8. This is basically a true statement, except for selling bonds, and replacing commissioners. The utilities should be run more as a nonprofit business, without political pressure.

5 9. The State Public Utilities Commission oversees rates, along with other activities for the Investor owned Utilities and Co-ops, due to the fact that they are for profit or member owned utilities. The State recognizes Municipal Utilities are not-for profit entities, and as such, allows City Councils or Utilities Commissions, (which are appointed by the Council from community members to manage the enterprise funds) the ability to set rates, policies and procedures that are in the best interest of all its customers. The Utility does however report to and fulfill requirements of a number of Federal and State agencies, listed here; US Department of Energy, US Energy Information Administration, US Environmental Protection Agency (EPA), Minnesota Public Utilities Commission (MPUC), Minnesota Pollution Control Agency (MPCA), Minnesota Department of Commerce, Minnesota Department of Health (MDH), and the Minnesota Department of Natural Resources. 10. It s easy to question the size of new Water Treatment facilities well after the fact. However, while in the planning stages of new facilities, that have a useful life of forty (40) to sixty (60) years, a great deal of thought and projections have to be included in the process. The Utility in 2003 hired WSB to do a Comprehensive Water System Study based on the existing ageing water plant and the rapid growth of the community. Also considered, was the quantity and timing of future water demands with estimated land use planning maps, estimated developable acreage, and water demand per acre for each land use type. Both average and peak day demands were estimated. The resulting projected average water demand is 1.9 mgd, 3.3 mgd and 7.2 mgd in 10, 20 and 40 years, respectively. Though the Utility hasn t seen this type of growth in the most recent past, I would not like to project the area and quantity of water these facilities will be providing 40 years from now. As areas develop in the community going forward, there will need to be new infrastructure added; this will also come at a cost. At the time of this study, growth would be funded and paid for by those who are in need of the facilities. The new water plants that have been built were built to accommodate growth well into the future. 11. The Utility has come a very long ways in improving its bond rating in the last four years. Yes the water rates are high compared to the surrounding towns. Most communities that have new water treatment plants in the State are experiencing this type of pressure on rates.

6 12. I have to agree, our present bond rating does pose challenges going forward, at least in the next 1-3 years. 13. The Utility s 2016 Electric budget was discussed, and a 6% rate increase was approved at the Commissions November 2015 meeting. The Utility s 2016 Electric and Water budgets will be considered at the March 2016 Commission meeting. In response to the author s allocations of questionable management of money and resources, I would challenge them to provide any information that would substantiate that statement, especially in the last four (4) years of the current General Managers tenure. 14. This can be said about almost any Commission, Council or Board, the potential fraudulent and conflicts of interest, here again, I would challenge the author to provide any information or documentation that this has occurred with the Utility s Commission. 15. The Utility s Commission has three (3) members, all three are appointed by the City Council, two (2) are members of the community and the third is a City Council member. If you would conduct a survey of communities in the State of Minnesota that have utility commissions, you would find a large percentage have three member commissions, while others have expanded to 5 or more. 16. This is a true statement, if the Citizens would vote to abolish the commission, then the responsibility and financial oversight would transfer to the elected City Council. The Electric and Water operations could be combined with the Public Works. Prior to this going to a vote, one might want the following questions asked; does the City Council have the time necessary to oversee all of the enterprise utilities (electric, water, sewer and storm sewer)? What would be the monetary gain if the City Council took over the Water and Electric utilities? Would any rates go down due to this action? Should there be a political presence involved in the management and decision making of the enterprise utilities? Has the Councils management of the wastewater system shown demonstrable better results than Electric and Water under the Commission structure? What similarities are there between Public Works (sewer and storm sewer) and the Electric and Water Utilities, and what qualification would be needed in one person to manage all of the enterprise funds? Would the taxpayers who are not on the water or electric system want to be responsible for the possibility of paying for those systems through a general obligation bond, as they are now for the sewer system? And finally, what are the real motives of the author of this petition?

7 Respectfully Submitted by: Mark Petsche General Manager North Branch Water & Light