MMU commission approves budget, talks ‘what-ifs’

MARSHALL – Members of the Marshall Municipal Utilities Commission met to discuss budget and financial matters in a special meeting Monday night. Commissioners approved the 2014 MMU budget and talked over some hypothetical financial and water rate projections requested by a commissioner last month.

In reviewing the proposed 2014 budget, commissioners made two changes to individual budget items. Commissioners questioned spending a proposed $215,000 on a 350-kilowatt portable generator for the electric department. Commission Chairman Bill Ziegenhagen asked if it was possible to get grant funds for the generator, as one of its major uses would be for city emergencies.

“I’m not totally against the generators, but we should do our homework first,” Ziegenhagen said. Commissioner consensus was to move the generator item to the electric contingency budget.

In the water department’s capital improvement budget, commissioners also decided to hold off on a proposed $525,000 item for additional warehousing or storage space.

The proposed 2014 budget passed, with the commissioners’ changes.

Although the budget took up a large part of discussion, another key focus of Monday night’s meeting was a series of hypothetical water rate and financial projections, that Ziegenhagen had requested the last time the MMU Commission met in December. Ziegenhagen said he was concerned about the potential costs to customers of the planned Sandes pipeline project, connecting Marshall to a third water supply. He said it’s possible other factors could combine with the pipeline project costs to drive water rates up further – for example, if major MMU customers like Archer Daniels Midland start to rely more heavily on private water sources instead.

MMU staff presented commissioners with hypothetical financial projections for the MMU water department, running through 2018. MMU General Manager Brad Roos said the rate projections were calculated with the help of rate analyst Keith Wilkins. The financial projections were created using a model developed by consulting firm Springsted, Roos said.

The “what-if scenarios” presented to the commission examined what might potentially happen if water sales to ADM dropped by an additional 25 percent or an additional 50 percent. Another two “what-ifs” covered the possibility of other large industrial customers joining MMU.

The models showed that changes in purchases by MMU’s largest customers could affect the water rates paid by other customers. According to the hypothetical rate projections, if water sales to ADM dropped 25 percent in 2016, it could possibly mean an overall water rate increase of about 3.9 percent. (Roos said the rate increase figures were aggregated across all the different water customer classes MMU serves.) According to the “what-if” projection, if sales to MMU’s biggest customer dropped an additional 50 percent in 2016, it might mean an overall water rate increase of about 9.5 percent.

However, MMU staff pointed out that the addition of new industrial customers could also affect water rates. In one “what-if” scenario, the addition of another large food-processing customer in Marshall could lead to a decrease in water rates of more than 9 percent.

After going through the hypothetical scenarios, Ziegenhagen said he still had concerns about the possible costs of moving ahead with the pipeline project. Marshall water customers had already been through some big rate increases in the past few years, he said. And, he asked, what would happen if the water department had an unforeseen financial hardship to deal with?

Commissioners – including Ziegenhagen – said they didn’t know what an alternative to moving forward with the pipeline would be. However, Commissioner Jacob Fahl said it was good to look at the hypothetical numbers, “just in case.”

More solid information on the cost of the pipeline project will come over the course of this month, as bids are let for materials and project construction. The first bid opening, for pipeline materials, will take place at 2 p.m. Thursday at MMU. Bids for connection work at the new well field and the Marshall water treatment plant, as well as for construction of the pipeline, will be opened later in January.