Review of an annual audit is normally considered non-controversial duty for public bodies such as commissions or councils.
That wasn’t the case last week when the 2018 audit for Princeton Public Utilities appeared on city leaders’ June 27 agendas.
Mayor Brad Schumacher didn’t waste any time diving into the PUC audit with a number of hard-nosed questions.
For starters, he wanted to know why current city leaders’ names had been removed as trustees.
Schumacher said in his opening remarks that a copy of last year’s audit included the names of the mayor, city council, and city administrator.
Councilor Jack Edmonds, who serves as the council’s liaison to the three-member Princeton Public Utilities Commission, said he would bring up Schumacher’s concern regarding the listing of names at the PUC’s next meeting or sooner.
“I’ll certainly get an answer,” Edmonds said.
PUC Audit Background
The PUC auditor’s report was prepared by Staples-based Mayer, Porter, & Nelson, Ltd.
The May 31 report presented to the PUC stated the financial statements presented fairly, in all material respects, the respective financial position of the business activities and each Princeton Public Utilities Commission major fund on Dec. 31, 2018.
The assets of the Princeton Public Utilities Commission exceeded liabilities at the close of 2018 in the amount of $13.8 million. This is an increase of $703,486 over the utility’s net position in 2017.
The largest portion of PPU’s net position reflects capital asset investments such as buildings, structures, generating plant equipment, water treatment equipment, as well as distribution lines, mains and meters.
When compared to the 2017 audit, revenue from electric sales increased by $30,600. Sales by volume increased slightly due to a warmer summer. Other electric operating revenue decreased $7,140.
This decrease was the result of a reduction in reimbursements from the Southern Minnesota Municipal Power Agency, due to a reduction in residential and commercial rebates. Overall electric operating expenses decreased $66,647 in 2018.
In accordance with applicable state statutes, the Princeton Public Utilities Commission maintains deposits as authorized. The PUC’s bank balance on Dec. 31, 2018, was $5.8 million.
Mayor’s Audit Analysis
Schumacher had Finance Director Steve Jackson turn to Page 10 to start his questioning of the audit, which had been presented to the PUC at its June 26 regular meeting.
That specific audit page included a net statement of financial position for the utility’s proprietary electric and water funds, as well as information about the PUC’s assets, liabilities, and overall net position.
Subsequent pages in the basic audit included statements of revenues, expenses, and cash flows. Schumacher asked Jackson to break down the statement, and its significance.
Jackson replied, “Basically, it’s a balance sheet that shows current assets, cash, and some accounts receivable.”
Regarding specific line items in the statement, Schumacher asked about cash available, which was listed as $3,030,988.
Jackson said if investments were included, that total would be closer to $4 million.
Jackson also explained the utility was setting aside restricted assets, which was mostly cash that was placed in reserve for debt retirement.
“That money could also be used for equipment improvements and replacements,” Jackson said. “We’ve talked about that before in relation to capital improvements for water towers and generators.”
Regarding equipment, Schumacher asked a specific question about the PUC’s diesel generators. “Is that equipment owned by the city or the Southern Minnesota Municipal Power Agency?” Schumacher asked.
City Administrator Robert Barbian replied that the city owns at least three of the engines, but he needed to verify the exact number.
According to the PUC’s website, the generation plant’s five current engines serve as peaking or emergency generators and have 12 megawatts total capacity, power production that’s adequate to meet the electrical demands of the utility’s service area.
Jackson also gave a basic explanation of other statements in the audit including liabilities, accounts payable, a bill list, as well as deposits.
“Are you saying that our city has $240,664 in deposits of taxpayer money?” Schumacher asked. Jackson said that was his understanding, but he added that deposit total probably included businesses in addition to individuals.
Edmonds didn’t like what Schumacher was doing regarding the PUC audit and he eventually interjected during Jackson’s presentation to make a point.
“This is totally out of line,” Edmonds said. “We are scrutinizing an audit from the public utilities commission, and there’s nobody here [from the PUC] but me [as city council liaison] to address anything. If we are going to do this, we ought to have [Keith Butcher] the general manager here at the same time we are doing this.”
Schumacher replied: “Well, we are doing it tonight, and it’s on the agenda. He could have come. He received a copy of the agenda.” Schumacher then asked City Clerk Shawna Jenkins if Butcher had received a copy of the June 27 meeting agenda via email.
“He’s on the list,” Jenkins replied. Schumacher then added: “He was more than welcome to be here.”
Edmonds said the members of the PUC had gone through the audit already.
Mayor’s Cash Concern
Schumacher’s concern was Princeton Public Utilities having a great deal of cash on hand. Edmonds replied it was normal for PPU to operate as multi-million dollar entity that had competitive electric rates with service that was second-to-none.
“Nobody can match us,” he said. “Just ask Walmart. Within half-an-hour during a recent Sunday morning outage, their service was being restored.”
Schumacher said he wasn’t arguing about the quality of the service.
“What I’m saying is that there’s money here,” Schumacher said. “Our neighboring utilities, Connexus, Xcel Energy, and East Central Energy, all gave back a small portion of money in the form of customer rebates.”
Edmonds said PPU did have a rebate program for LED installation, but could not provide additional details about the program off the top of his head.
General Manager Email
Schumacher and Edmonds then started a contentious back-and-forth discussion regarding Butcher’s council meeting attendance, and whether or not he had been received an email invitation.
Schumacher asked Jenkins if Butcher had been invited to attend.
She replied that Butcher had been sent the June 27 meeting agenda.
“He got the agenda. He’s been invited to come to the public meeting,” Schumacher said. “He didn’t show up. I don’t know what to tell you.” Barbian said it was proper for Schumacher to bring his concerns with the PUC audit to the council as a whole for discussion.
“This is the right forum for questions to be discussed,” Barbian said. “To the extent that there are issues, it’s better for a council member to address things here than individually or with the PUC board.”
Edmonds said if he had known the PUC audit was going to be discussed as it was at June 27 meeting, Butcher would have attended.
“I would have asked him to be here,” Edmonds said.
Schumacher replied, “I asked him to be here in an email. I copied the clerk. The clerk sent it to the city council. I invited him to come. He didn’t respond.”
Edmonds said Schumacher should have made the request through him, since he is the city council’s PUC liaison.
“I didn’t see that email,” Edmonds added, referring to Schumacher’s council-wide email that included the invite to Butcher. “I checked my emails just before I came up here, and it was not there,” he added.
Councilor Jules Zimmer then asked for clarification about the email being discussed by Schumacher and Edmonds.
Schumacher replied: “The email where Mr. Butcher was invited to go through the organizational process and how we were going to go through the budget, and how Connexus was charging a base rate of $12.50 per month for a meter and Princeton Public Utilities was charging $15. You’re telling me we can’t be competitive on our meter rates while you have more than $5 million in cash in your checking account?”
Schumacher said he was trying to help working families and retirees by getting them a more competitive rate on their utility bills.
Zimmer told Schumacher he never received the email that invited Butcher to the June 27 meeting. “I didn’t see any invitation.”
Schumacher said he made sure Butcher was copied on the agenda.
Zimmer asked Jenkins how many people received the council agenda in advance of the meeting.
Jenkins said approximately 25 people were emailed the agenda.
Zimmer replied, “Just because somebody is emailed an agenda it doesn’t mean they are individually invited.”
The Union-Times contacted Butcher regarding the email invitation.
In a text message, Butcher stated that he did not recall receiving an email from Schumacher inviting him to the June 27 Princeton City Council meeting.
“I went back and searched my emails and could find no such request,” Butcher’s text stated.