Willmar Utilities Commission OKs transfer payment of over $2M to city

WILLMAR - The city of Willmar will receive an intergovernmental transfer payment of $2,136,842 from the city-owned Willmar Municipal Utilities in 2015, the Municipal Utilities Commission decided Monday.
Most municipal utilities such as Willmar have some sort of agreement with their cities to provide funding as an enterprise function for their host cities, instead of paying taxes as an investor-owned utility would, explained General Manager Wesley Hompe.
“The vast majority of municipal utilities provide their host community with something well in excess of what a normal investor-owned utility would pay to the community,’’ Hompe said.
Revenue from the utility’s annual payment along with other financing sources amounted to 18.6 percent of the $15,530,066 in revenue that the city’s general fund received in 2015. In 2014, the city received $2,075,396 from the utility. The 2015 payment is calculated under a multi-year agreement with the city under which the payment was based on 4 percent of the utility’s value. That agreement expired at the beginning of 2015.
For 2016 and beyond, utility and city officials negotiated a new three-year agreement under which the payment is calculated on megawatt sales of energy over a five-year average. Payments are not to exceed a 2 percent increase over the previous year’s payment. In no event will the annual payment be less than the previous year. Hompe and Finance Director Tim Hunstad said the new agreement for 2016, 2017 and 2018 slows the rate of increase because the previous 4 percent increase far exceeds what other municipal utilities are paying.
Nationally, Hompe said, payments are more often based on actual performance or sales rather than value.
While recently attending the American Public Power Association annual conference, Commission President Matt Schrupp said he was surprised to learn that more than two-thirds of municipal utilities use the sales calculation and very few use the value-based calculation.
“I can support what (Hompe) is saying based on the fact that that is the national way of calculating that transfer,’’ Schrupp said.
Also, the new agreement makes revenue budgeting easier for the city, Hompe said.
In other business, the commission approved the annual contributions of $4,000 each to The Salvation Army HeatShare Program and to Heartland Community Action Agency of Willmar for its winter heating assistance program.
Customer Service Supervisor Stacy Stien said the utility does not have mechanisms in place to assist low-income customers with heating assistance.
In 2014, the utility donated $4,000 to Heartland and $4,000 to The Salvation Army. During the last heating system, Willmar Utilities received over $12,800 from The Salvation Army and nearly $134,200 from Heartland and those programs helped serve 746 customers, Stien said.
Also, the commission approved a revised mission statement. The statement says, “Willmar Municipal Utilities will provide safe, reliable and quality utility services at competitive rates for their customers.’’