WILLMAR -- Willmar Municipal Utilities commission members approved a 2007 budget at their meeting Tuesday, but it came with a word of caution from general manager Mike Nitchals.
Pointing out that energy costs are forecast to continue rising, Nitchals emphasized that it behooves this and other municipal utilities to constantly monitor rates and costs and make adjustments as needed. Gone are the days when utilities could set rates and budgets and expect things to remain unchanged, he said.
The budget calls for total operating revenues and other incomes of $23,609,000 for the combined electric, water and district heat utilities. Total expenditures are projected at $19,258,800. The estimated net cash flow is $174,800.
Electric sales and operations account for the majority of activity with total revenues budgeted at $20,068,000 in 2007. Yet after expenses and transfers to the city, the budget anticipates retained earnings of $495,000, a margin of only 2 percent. Commission members noted that this falls below the 6 percent previously set as a target.
The new electric budget includes an increase in electric rates of about 5.8 percent. The budget also anticipates an overall 2.5 percent increase in sales due to the city's continued growth.
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The 2007 water budget calls for total revenues of $1,954,800. After expenses and a transfer to the city, the retained earnings are projected at $155,400, a 7 percent margin.
The water division budget includes an 8.5 percent overall increase in water rates.
The district heating division budget calls for $824,600 in revenues and $854,300 in expenses, leaving net earnings as a negative $6,000 after other income and deductions are included.
The budget calls for a 10 percent increase in district heating rates for 2007 and a subsequent 10 percent increase in 2008.
The overall budget for all three divisions includes $1,365,100 in capital expenditures for the coming year. Major distribution system projects in the coming year include installing infrastructure for the Wal-Mart super store, improvements to the feeder line in the south portion of the community, and the ongoing effort to place utilities underground. Expenditures for the Water View Business Park where the new Wal-Mart will be located are estimated at $217,600 but are not slated to start until 2008.
Two major projects for the power production side of operations are also slated in 2008. The budget calls for upgrades to the coal plant totaling $888,500.
The proposed wind turbine projects are also placed in the 2008 budget at an estimated $5.5 million.
Nitchals told commission members that work toward erecting two wind turbines is still proceeding. He said that positive outcomes are needed on four main issues before the first turbine could be erected.
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The issues include the development of bids and specification for the project, which is now occurring. The city must also negotiate a lease with Ridgewater College and the Minnesota State College and Universities system to place the turbine on property by the Willmar campus. Once a lease is reached, the utilities must obtain permits from the city to construct and site a turbine.
Perhaps most important, the Municipal Utilities must obtain City Council approval to issue municipal revenue bonds to finance the project. Discussions are occurring with the city, according to Nitchals. The request for bonds is being considered along with other bonding needs of the city, he pointed out.
The city's application for no-interest Clean Renewable Energy Bonds was not awarded by the U.S. Department of Treasury, which saw demand greatly exceed the available funds.
