KETCHIKAN PUBLIC UTILITIES 2016 ANNUAL BUDGET TABLE OF CONTENTS

Transcription

1 2016 ANNUAL BUDGET TABLE OF CONTENTS BUDGET RESOLUTION Resolution No A 1 TRANSMITTAL LETTER... B 1 SUMMARIES Revenues and Appropriations Summary... C 1 Summary of Expenditures All Divisions... C 2 Number of Employees Comparative Schedule... C 3 Summary of Funding by Operating Utility... C 4 Compliance with Resolution No and KPU Bond Covenants... C 5 Annual Debt Service by Utility... C 6 Schedule of Current and Future Annual Debt Service... C 7 REVENUE Electric Revenue Summary Report... D 1 Telecommunications Revenue Summary Report... D 2 Water Revenue Summary Report... D 3 Other Revenue Summary Report... D 4 Combined Revenue Summary Report... D 5 DIVISION APPROPRIATIONS AND PERSONNEL SCHEDULES General Manager Division Summary...E 1 General Manager Division Administration...E 2 General Manager Division Capital...E 7 Sales, Marketing & Customer Service Summary... F 1 Sales, Marketing & Customer Service Operations... F 2 Electric Division Summary... G 1 Electric Division Operations... G 2 Electric Division Capital... G 14 Telecommunications Division Summary... H 1 Telecommunications Division Operations... H 2 Telecommunications Division Capital... H 14 Water Division Summary...I 1 Water Division Operations...I 2 Water Division Capital... I 11 - i -

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3 November 6, 2015 The Honorable Mayor Lew Williams III and Members of the City Council City of Ketchikan, Alaska 334 Front Street Ketchikan, Alaska Pursuant to Section 5 2 of the Ketchikan City Charter, the proposed 2016 Operating and Capital Budget (the 2016 Budget ) for Ketchikan Public Utilities (KPU) is respectfully submitted. In accordance with Section 5 4 of the Charter, the City Council must adopt a final spending plan no later than the third day before the beginning of the next fiscal year, which is December 29, At least one public hearing on the proposed budget is required prior to adoption of the final spending plan. INTRODUCTION The 2016 Budget attempts to reflect the ongoing efforts of the City Council to maintain and deliver cost effective electric, telecommunications and water utility services to the community of Ketchikan. Staff believes that the proposed spending plan for 2016 effectively balances the available financial resources of KPU against the utility service needs of the community. The programs and services contained within the proposed spending plan were developed by the KPU Division Managers and were subsequently reviewed and modified as necessary by the Office of the General Manager and the Finance Director. The operating goals and programs of the Electric, Telecommunications and Water Divisions were predicated on the continuation of basic service delivery and long range issues that manifested themselves over the course of the past year and during the development of the Capital Improvement Program. The economic issues facing the community of Ketchikan were considered during the preparation of the proposed spending plan for KPU. Although KPU is not supported by tax dollars, it does depend on its residential and commercial ratepayers to provide the resources B - 1

4 necessary to finance its operations. The table below lists key operating statistics for KPU for the past five years Number of Electric Customers 7,418 7,443 7,518 7,514 7,606 Energy Sales mwh 156, , , , ,939 Telecommunications Access Lines 7,103 7,057 6,434 6,083 5,863 Water Customers 3,233 3,247 3,243 3,244 3,162 The number of electric and water customers have remained relatively flat since After declining slightly in 2009 and 2010, energy sales increased to a record 172,190 mwh in 2012 and leveled off in Warmer weather was the primary reason for the decrease in energy sales in The number of telecommunication access lines continues to decline although at a much slower pace. Competition from GCI and wireless phones has made significant inroads into the local market for telecommunication services MAJOR BUDGET AND FISCAL ISSUES During the course of preparing the proposed KPU budget for the next fiscal year, certain issues were identified that may affect the long term finances of KPU, its operations and the proposed spending plan for Staff believes that the City Council should be aware of these issues and may want to consider them during its budget deliberations. Each issue is outlined below along with recommendations from staff, if warranted. In most cases, staff has incorporated its recommendations into the proposed budget in order to show the effects of the recommendations on the draft spending plan. Staff recognizes that the final resolution of these issues will be determined by the City Council and that the proposed spending plan may be adjusted accordingly. Utility Rates: Management continues to express concerns about the adequacy of utility rates to finance the cost of operations, the capital cost of replacing or maintaining its utility systems, and the cost of complying with unfunded mandates imposed by federal and state regulatory bodies. These concerns can be best understood by reviewing the following table, which summarizes the audited operating results of KPU for the past five years. B - 2

5 Operating Revenues (000's): Electric $ 15,953 $ 16,687 $ 17,232 $ 19,346 $ 16,617 Telecommunications 14,446 14,501 14,587 15,242 16,161 Water 2,576 2,985 2,984 3,129 3,209 Total 32,975 34,173 34,803 37,717 35,987 Operating Expenses (000's): Electric 15,557 15,705 16,441 19,051 16,667 Telecommunications 12,372 13,222 14,550 14,456 15,547 Water 2,667 3,061 3,287 3,870 3,758 Total 30,596 31,988 34,278 37,377 35,972 Non Operating Rev (Exp) (000's): Electric (388) (323) (237) (556) (564) Telecommunications Water (164) (143) (253) (145) (114) Total (480) (364) (386) (569) (553) Payment In Lieu of Taxes (000's): Electric Telecommunications Water Total Net Income (Loss) (000's): Electric (343) (643) (996) Telecommunications 1,952 1,190 (51) Water (438) (402) (749) (1,084) (861) Total $ 1,171 $ 1,093 $ (589) $ (1,015) $ (1,324) Several observations can be made from reviewing the table: Total operating expenses are rising at an annual rate of 4.13%. The electric utility has incurred annual losses in three out of the last five years and the amounts of the annual losses are increasing. The telecommunications utility can no longer be relied upon to subsidize the electric and water utilities. Its net income has declined significantly since What the telecommunications utility does earn should be reinvested in its own operations so that it may remain competitive. The City Council s decision to suspend or reduce an aggressive plan to raise water rates has resulted in a reversal of the progress that was being made to improve the financial position of the water utility. The amounts of the annual losses were trimmed from $1 B - 3

6 million annually to $402 thousand in Beginning in 2012, the losses began to increase again and reached $1.08 million in The Summary of Funding by Operating Utility on page C 4 illustrates another concern: the current rate structure is inadequate to support a reasonable level of capital spending. Of the $4.91 million capital budget proposed for 2016, 74.1%, or $3.64 million will be funded from reserves. This places more reliance on grants and bonds to finance KPU s capital improvement program. Relying on grants could result in the deferral of important capital improvements if KPU is unsuccessful in securing the appropriate grants in a timely manner. Relying on debt to finance capital improvements will result in higher interest costs, which are ultimately passed on to the rate payer in the form of higher utility rates. To address these concerns, management is recommending the following utility rate increases: A 5% increase in electric utility rates, effective April 1, The last time the electric rates were raised was in March 2008 when the Council approved a 1.65% rate increase. Since 2008, the Alaska CPI has increased 13.9%. The proposed 5% rate increase does not keep up with inflation. This increase will raise the rate for residential electric service from $.0958 per kwh to $.1006 per kwh. Assuming average consumption of 925 kwh per month, a residential customer s electric bill will increase from $88.62 per month to $93.05 per month. An 8% increase in water utility rates, effective April 1, The recommendation is partially consistent with the rate increases proposed in the cost of service and rate study prepared by FCS and restores the long term plan to improve the finances of the water utility that was approved by the City Council in This increase will raise the rate for residential water service from $48.19 per month to $52.05 per month. Management is of the opinion that these utility rate increases will improve the overall finances of KPU and, most importantly, avoid the deferment of critical improvements to the utilities infrastructure and excessive future rate increases. Failure to raise utility rates in a timely and appropriate manner puts KPU and its rate payers at risk for rate shock. Whitman Lake Surcharge: In August 2014, the City Council approved a true up agreement for the Whitman Lake Hydroelectric Project. The agreement requires the City of Ketchikan dba Ketchikan Public Utilities to pay the Southeast Alaska Power Agency (SEAPA) 6.8 cents per kwh for spill from a SEAPA hydroelectric project that is caused by KPU s operation of the Whitman Lake Hydroelectric Project. The payment that will be required under this agreement is difficult to project but management believes that the City should put into place a mechanism to provide for a funding source. Although not incorporated within the draft spending plan, management is recommending that the City Council consider a Whitman surcharge similar to the existing diesel surcharge. B - 4

7 The conventional wisdom is that generation from the Whitman Lake Hydroelectric Project is cheaper than diesel generation. From the ratepayer s perspective that is mostly true, but it is never true from the electric utility s perspective. When KPU Electric operates its diesel generators, a diesel surcharge is assessed against its rate payers in an amount that reduces the effective cost of diesel generation to approximately $0.068 per kwh. The actual cost of diesel generation is currently $ per kwh but is expected to decrease to $ per kwh once KPU Electric burns through about 313,000 gallons of diesel fuel inventory. In 2015, it cost KPU Electric $ per kwh to operating the Whitman Lake Hydroelectric Project plus $0.068 per KWh for as required under the Whitman Lake true up agreement for a total cost of $ Management is suggesting a surcharge based on the annual payments required under the Whitman Lake true up agreement and recovered over a period of several months. If approved, this surcharge would reduce the effective cost of generation from the Whitman Lake Hydroelectric Project to $ per kwh. Absent such a surcharge, utility rates in general would eventually have to be raised to cover the cost of the true up agreement. SIGNIFICANT BUDGET ASSUMPTIONS In order to present a complete spending plan for 2016, it was necessary for management to make certain assumptions regarding the operations and finances of KPU. Management recognizes that some of the assumptions will require further direction from the City Council and that the direction provided may result in different assumptions, which could materially affect the proposed spending plan. The key assumptions used to compile the spending plan for 2016 are as follows: Staffing level remains the same as Step increases have been programmed but no cost of living adjustment has been programmed. KPU is currently negotiating with the International Brotherhood of Electrical Workers Local No to replace a collective bargaining agreement that expired on December 31, The fiscal impact of a new agreement cannot be determined at this time but KPU anticipates that some of the new terms will be applied retroactively to January 1, Annual debt service will increase by $87,300 due the completion of the Jackson and Monroe Streets water main replacement project. Financing for this project was obtained through the Alaska Department of Environmental Conservation s low interest Drinking Water Loan Program. A 10 percent increase in health insurance has been programmed, effective July 1, The 2016 KPU Budget is structured upon the assumption that a KPU branded or Verizon wireless voice offering will become available on or about January 1, As discussions B - 5

8 are ongoing regarding a final determination, budget projections may need to be modified accordingly. The cost of power purchased from the Southeast Alaska Power Agency has been programmed to remain at the current rate of 6.8 cents per kwh. A purchased power rebate from the Southeast Alaska Power Agency in the amount of $450,000 has been programmed. In 2015, the City Council scaled back KPU s participation in the Community Grant Program. Prior to 2015, the cost of the program was shared equally between General Government and KPU. In 2015, the City Council reduced KPU s support from $175,940 to $52,685 and limited participation to the Telecommunications Division. The 2016 Budget has been programmed in accordance with the City Council s new policy. Liability and property insurance premiums have been projected to remain stable in The divisions may experience some differences in their insurance accounts due to the fine tuning of the methodology used to allocate the cost of insurance. In addition, the requests for 2016 may be higher than the insurance cost estimates for 2015 because the City received a $97,000 rebate in 2015 that temporarily lowered the cost. Electric and water utility rates have been programmed to increase by 5% and 8%, respectively, effective April 1, The Proposed 2016 Budget is a working document intended to initiate discussion by the City Council and the public over next year s spending plan. As the City Council and the public review and evaluate service delivery and long range issues, alternate concepts and additional concerns may materialize that will warrant consideration. It is staff s desire that the final product which emerges from this process will be a spending plan for 2016 that is acceptable to the community at large and will allow KPU to continue to provide adequate and reliable electric, telecommunications and water services to its customers. FINANCIAL OVERVIEW OF THE KETCHIKAN PUBLIC UTILITIES 2016 ANNUAL OPERATING AND CAPITAL BUDGET The 2016 Budget includes all operating and support divisions of KPU. The total amount requested for appropriations is $45.9 million, a decrease of $1 million from the amount appropriated with the adoption of the 2015 Budget. The key components of total appropriations for 2016 and a comparison with 2015 appropriations are as follows: B - 6

9 Budget Estimate Budget Operating Expenditures $ 32,165,312 $ 31,720,034 $ 32,856,621 Debt Service 3,278,880 3,278,880 3,366,176 Payment in Lieu of Taxes 786, , ,000 Total Cost of Operations 36,230,192 35,784,914 37,008,797 Capital Expenditures 4,696,252 6,405,245 4,906,700 Total Expenditures 40,926,444 42,190,159 41,915,497 Appropriated Reserves 3,965,664 7,659,252 3,986,555 Total Appropriation $ 44,892,108 $ 49,849,411 $ 45,902,052 Number of Employees Appropriations Capital Expenditures 10.7% Payment in Lieu of Taxes 1.7% Debt 7.3% Appropriated Reserves 8.6% Operating Expenditures 71.7% The balance of this overview will include a discussion and analysis of the following areas: (1) revenues; (2) expenditures; (3) personnel; (4) debt management; and (5) compliance with City Council mandated financial objectives. For additional summary information regarding the proposed spending plan for 2016, please refer to the C pages in the budget document. REVENUES Operating revenues for utility services in the amount of $38.24 million have been programmed for The table below identifies the major revenue sources by operating utility. B - 7

10 Actual Budget Estimate Budget Electric $ 16,761,284 $ 17,143,900 $ 16,577,100 $ 17,331,200 Telecommunications 16,087,661 16,003,000 16,673,542 16,947,000 Water 3,206,470 3,568,300 3,589,200 3,824,600 Other 101, , , ,000 Total $ 36,157,081 $ 36,855,200 $ 36,979,842 $ 38,242, Revenues Water 10.0% Other 0.4% Electric 45.3% Telecom 44.3% Electric Revenues: The projection for 2016 electric utility revenues is based on a two year average of energy sales and the current average electric revenues per kwh, adjusted for new loads and other trends such as conversions from heating fuel to electric heat and a 5% rate increase effective April 1, There are three variables that can significantly affect the revenue projections. The first is weather. Cold temperatures and high winds increase the demand for electric energy. Another variable is the general state of the economy. A strong economy usually generates a strong demand for energy. A weak economy has the opposite effect. A third variable is the price of heating oil, which has caused some residents to switch from heating their homes with fuel to electricity. The table below summarizes the major operating revenues of the Electric Division. B - 8

11 Actual Budget Estimate Budget Residential $6,796,723 $6,950,200 $6,705,500 $6,999,900 Harbor 298, , , ,300 Business 6,690,774 6,681,400 6,559,900 6,784,600 Industrial 1,750,002 1,888,800 1,822,100 1,897,200 Yard Lights 49,172 49,100 49,900 51,800 Demand 514, , , ,200 Street Lights 127, , , ,100 Diesel Surcharge 96,283 Other 437, , , ,100 Total $16,761,284 $17,143,900 $16,577,100 $17,331,200 As was noted, electric revenues are difficult to project because of the many variables that can affect consumption. For example, energy sales increased from 157 MWh in 2010 to MWh in 2012 and then decreased to MWh in The estimate for 2015 is MWh and the forecast for 2016 is MWh. A slight increase in energy sales along with the proposed 5% rate increase is projected to increase revenues in 2016 by about $555,000 or $740,000 annually. Telecommunications Revenues: The Telecommunications Division derives its revenues from three primary sources: regulated local phone services; regulated network access services; and nonregulated services such as DSL, IPTV, payphones, wireless and sales of PBX systems. The table that follows summarizes the major operating revenues of the Telecommunications Division Actual Budget Estimate Budget Local Network Services $2,032,109 $1,925,000 $2,019,000 $1,912,000 Network Access Services 9,259,709 8,634,000 8,953,000 8,623,000 IP Network DSL and IPTV 3,930,439 4,091,000 4,264,000 4,479,000 4G/LTE 360, , ,000 1,454,000 Directory Revenue 328, , , ,000 Payphones 9,700 5,000 4,600 3,000 Miscellaneous 167, , , ,000 Total $16,087,661 $16,003,000 $16,673,542 $16,947,000 Revenues from local network services have been projected to decline as a result of continuing competition from GCI and wireless providers for local customers. Network access services, or separations revenues, are not expected to increase. The projection for network access services was derived from a proprietary separations model developed by a telecommunications cost study consultant. The model uses data from the proposed 2016 Telecommunications Division Budget and information about the Telecommunications Division s investment in plant to project network access services revenue. Revenues from the IP Network have been projected to increase by 9.5% B - 9

12 from the 2015 Budget due to a growing customer base. Third year operating revenues from 4G/LTE service have been projected to reach $1.45 million as efforts continue to rollout the service locally and expand into markets in other communities. Water Revenues: The operating revenues of the Water Division have been projected to increase because of a 4 percent rate increase that was approved for 2015 and a proposed 8% increase for The table that follows summarizes the major operating revenues of the Water Division Actual Budget Estimate Budget Residential $1,377,255 $1,509,000 $1,515,300 $1,621,900 Apartment 294, , , ,900 Business 1,102,474 1,207,000 1,205,400 1,290,500 Industrial 79,182 79,000 83,600 89,400 Seafood 149, , , ,000 Port 172, , , ,000 Raw Fish Tax 100, , ,000 Miscellaneous 31,570 33,300 42,600 35,900 Total $3,206,470 $3,568,300 $3,589,200 $3,824,600 Beginning in 2015, the City Council directed that a portion of the proceeds from the State of Alaska s Raw Fish Tax Program be directed towards supporting the operations of the water utility and minimizing the losses that are occurring because the seafood processor water rates are heavily subsidized other customer rate classes. The revenue projection for 2016 assumes that this policy will continue. The proposed across the board rate increase of 8%, effective April 1, 2016 is projected to increase revenues for 2016 by $202,000, or $269,000 annually. For more information about KPU operating revenues, please see the D pages. EXPENDITURES Operating expenditures, including debt service and payments in lieu of taxes, in the amount of $37 million have been programmed for 2016, an increase of $779 thousand over the amount originally appropriated with the adoption of the 2015 Budget. The table below identifies the major operating expenses by division. B - 10

13 Budget Estimate Budget General Manager $385,857 $380,490 $393,786 Sales, Marketing & Customer Service 2,319,282 2,266,402 2,352,910 Electric 16,846,572 16,274,484 16,951,807 Telecommunications 13,510,194 13,910,892 14,109,246 Water 3,168,287 2,952,646 3,201,048 Total $36,230,192 $35,784,914 $37,008,797 The largest increase in operating expenses is occurring within the Telecommunications Division. Expenses are projected to increase from $13.5 million to $14.1 million, or $599,052. Approximately 75% of the increase in the Telecommunications Division is in the contract/purchased services category and is being driven by customer demand for services. For example, broadcast content fees have increased by $253,750, or 23.8%, to $1.32 million. The cost of operating the Telecommunications Division has been rising in recent years as a result of its efforts to stay competitive in a very competitive industry and a growing customer base. The Telecommunication Division s profit margins have been tightening but it continues to generate a surplus. The division s recent entrance into the wireless services market via Verizon has proven thus far to be a contributing factor to the division s profitability. The following graph identifies operating expenses by operating utility. The cost of operating the General Manager and the Sales, Marketing and Customer Service Divisions have been allocated to the operating utilities in the same a manner as identified on page C 2. B - 11

14 2016 Operating Expenses by Utility Water 8.96% Electric 47.99% Telecom 43.05% The amount of capital appropriations requested for 2016 is $4.9 million. The table below identifies the major capital expenses by utility Budget Estimate Budget Electric 2,135,490 1,797,500 3,175,600 Telecommunications 1,910,000 1,908,750 1,615,000 Water 650,765 2,698, ,100 Total $4,696,255 $6,405,245 $4,906,700 Electric 64.7% 2016 Capital Expenses by Utility Water 2.4% Funding for the proposed capital budget is as follows: Telecom 32.9% B - 12

15 Amount Percentage Revenues from Operations 1,269, % Reserves 3,637, % $4,906, % Sources of Funding for 2016 Capital Expenses Reserves 74.1% Revenues from Operations 25.9% Compared to 2015, the funding of KPU s capital budget from revenues from operations has improved slightly. In 2015, approximately 21.7% of the capital budget was funded from revenues from operations. For 2016, the percentage of funding from revenues from operations has improved to 25.9%. If the proposed rate increases for the electric and water are not approved, the percentage of the capital budget funded from operations drops to 10.4%. Please see the proposed KPU Capital Improvement Program for information about the projects planned for PERSONNEL The proposed 2016 KPU Budget requests funding for full time equivalent (FTE) employees, net of Swan Lake personnel (4.0 FTE). This represents no change from Please see page C 3 for a summary of personnel by division. The cost of personnel services includes salaries and wages for regular and temporary employees, overtime, and employee benefits. Employee benefits include health insurance, retirement, workers compensation, social security, unemployment and accrued leave. The table below identifies the major components of the cost of personnel services. B - 13

16 Budget Estimate Budget Salaries and Wages Regular Employees 8,135,483 $7,930,800 8,216,553 Salaries and Wages Temporary Employees 92,800 88, ,500 Overtime 508, , ,000 Payroll Taxes 668, , ,700 Pension 1,532,000 1,410,000 1,552,200 Health and Life Insurance 2,194,400 2,109,800 2,257,900 Workers Compensation 268, , ,100 Other Benefits 170, , ,000 Allowances 47,330 43,930 46,140 Total $13,617,213 $13,361,980 $13,779, Number of FTE's by Division The total cost of personnel is project to increase by $161,880 to $13.78 million. Regular salaries and wages are projected to increase by $81,070 to $8,216,553 as a result of step increases for employees whose compensation is not tied to the journeyman lineman pay scale and a 1.6% cost of living adjustment for non represented employees that was approved in Nearly two thirds of total compensation is tied to the journeyman lineman pay scale. Health insurance costs are projected to increase by $63,500 due to rising health insurance premiums. No cost of living adjustments have been programmed in the 2016 Budget. As was previously discussed, the employees represented by the International Brotherhood of Electrical Workers B - 14

17 Local No have been working without an agreement since December 31, KPU management is currently negotiating a new agreement. The cost of a 1% cost of living adjustment for this employee group is approximately $77,000. Depending on the final terms and conditions of the new agreement and whether or not it is retroactive to January, 1, 2015, the fiscal impact on the proposed budget for 2016 could be significant. For example, a retroactive 2% cost of living adjustment for 2015 and a second 2% cost of living adjustment for 2016 could potentially cost as much as $465,000. The cost of a 1% cost of living adjustment for KPU s non represented employees is approximately $21,000. If a 2% cost of living adjustment was approved for this employee group, the cost of living adjustments for both employee groups for 2016 could total $507,000. B - 15

18 DEBT In 2016, KPU will have outstanding nine revenue bond issues or loan agreements totaling $25,894,554. The table below summarizes KPU s bond issues that will be outstanding in Balance Outstanding Final 2015 Debt Service Issue January 1, 2016 Maturity Type Budget Estimate Budget Series T $ 2,510, Revenue $ 1,300,930 $ 1,300,930 $ 1,307,080 Series V 2014 Revenue Series W CREB 560, Revenue 84,800 84,800 84,200 ADEC ,560, Revenue 107, , ,118 ADEC ,109, Revenue 70,543 70,543 70,544 ADEC ,223, Revenue 205, , ,022 ADEC , Revenue 6,230 6,230 6,230 ADEC , Revenue 18,779 18,779 18,779 ADEC Revenue 81,544 Series X Whitman 12,790, Revenue 1,059,250 1,059,250 1,059,450 Interfund Loan 3,733, Interfund 426, , ,209 Total $ 25,894,554 $ 3,278,880 $ 3,278,880 $ 3,366,176 The graph below provides a ten year history of outstanding debt balances for KPU. $30 $25 Outstanding Debt Balances Millions $20 $15 $10 $5 $ The increase in 2013 was caused by the issuance of the bond to finance the Whitman Lake Hydroelectric Project and the $4 million interfund loan from General Government. Series T and X have been issued through the Alaska Municipal Bond Bank. The interest rates for B - 16

19 these bonds vary, but they are based on the Bond Bank s AAA credit rating. Series W CREB has been issued through Bank of America as a clean renewable energy bond and qualified for a federally subsidized interest rate of.75 percent. The ADEC Series is a group of loans issued through the Alaska Department of Environmental Conservation s Drinking Water Loan Program. KPU has acquired six loans through this program all with an attractive interest rate of 1.5 percent. The $4 million interfund loan is a loan from three General Government funds. In 2013, the Port, Community Facilities Development, and Self Insurance Funds loaned the KPU Fund $2.7 million, $700,000 and $600,000, respectively, for the purpose of financing the construction of a wireless network and a microwave radio link. The loans will be repaid over a period not to exceed 12 years with interest at an annual rate of four percent. Principal payments began in Twelve annual installments of $426,209 will be required to retire this interfund loan. The final payment will be made in KPU is currently required by its bond covenants to maintain debt service coverage of net revenues equal to 1.25 times annual debt service. Resolution No requires that KPU maintain a debt service coverage ratio of net revenues equal to no less than 1.5 times annual debt service and no more than 2.0 times annual debt service. The proposed spending plan will be in compliance with the debt service coverage requirements of Resolution No and KPU s bond covenants. Please see page C 5 for more information regarding KPU s projected debt service coverage. Total annual debt service in the amount of $3,366,176 has been programmed in the 2016 Budget. On January 1, 2016, the total debt service required to maturity, including interest of $9,876,596, will be $35,771,150. Please see pages C 6 and C 7 for more information regarding KPU debt. COMPLIANCE WITH CITY COUNCIL MANDATED FINANCIAL OBJECTIVES Resolution No , adopted by the City Council in 1990, established certain financial objectives for KPU. In 2013, the Council adopted a new fund balance policy that superseded the fund balance policy contained in Resolution No The new policy requires KPU to maintain a reserve requirement of no less than 25% of operating expenses. The schedule on page C 5 documents compliance with the reserve requirement and shows that the proposed spending plan for 2016 is not in compliance. As discussed earlier, KPU is required to maintain a debt service coverage ratio of annual net revenues between 1.5 and 2.0 times annual debt service and the proposed spending plan for 2016 satisfies this requirement. CONCLUSION The 2016 Budget allows for the continuation of basic utility services. Staff believes that this document provides the community and the City Council with the opportunity to begin the process of confronting the challenges that lie ahead for KPU in Over the next few weeks, staff looks forward to working with the City Council to develop a spending plan that moves the B - 17

20 (Note: This transmittal letter does not reflect any subsequent action taken by the City Council during its budget deliberations to modify the spending plan proposed for 2016.) B - 18

21 Revenues and Appropriation Summary Adopted Amended Estimate Budget Funds Available, January 1 8,036,908 8,036,908 11,114,574 7,654,252 Revenues: Electric 17,143,900 17,143,900 16,577,100 17,331,200 Telecommunications 16,003,000 16,003,000 16,673,542 16,947,000 Water 3,568,300 5,323,295 5,344,195 3,824,600 Other 140, , , ,000 Total Revenues 36,855,200 38,610,195 38,734,837 38,242,800 Appropriations: Administration 385, , , ,888 Sales, Marketing & Customer Service 2,319,282 2,319,282 2,266,402 2,356,403 Electric 18,982,062 19,499,182 18,076,984 20,138,093 Telecommunications 15,420,194 15,917,554 15,819,642 15,737,472 Water 3,819,049 5,973,859 5,651,641 3,322,651 Total Appropriations 40,926,444 44,105,034 42,195,159 41,953,507 Funds Available, December 31 3,965,664 2,542,069 7,654,252 3,943,545 C - 1

22 Summary of Expenditures All Divisions Sales, Marketing & General Customer Manager Service Electric Telecom Water Total Operating Costs: Personnel Services and Benefits 356,588 1,573,387 5,219,580 5,348,800 1,327,200 13,825,555 Supplies 5, ,550 6,732,400 1,062, ,850 8,195,225 Contract/Purchased Services 12, , ,700 6,031, ,400 8,176,776 Minor Capital Outlay 21,000 26,000 81,000 19,600 1, ,600 Interdepartmental Charges 3,700 14,500 1,102,090 1,026, ,215 2,553,475 Operating Costs Before PILOT and Debt Service 398,888 2,356,403 14,134,770 13,489,905 2,519,665 32,899,631 Payment in Lieu of Taxes 381, , , ,000 Operating Costs Before Debt Service 398,888 2,356,403 14,516,763 13,696,263 2,717,314 33,685,631 Debt Service 2,450, , ,237 3,366,176 Operating Costs Before Allocation of Overhead 398,888 2,356,403 16,967,493 14,122,472 3,206,551 37,051,807 Allocation of Overhead to Operating Utilities: General Manager (398,888) 199, ,500 19,944 Sales, Marketing & Customer Service (2,356,403) 612,665 1,649,482 94,256 Total Operating Costs 17,779,601 15,951,454 3,320,752 37,051,807 Major Capital Outlay 3,170,600 1,615, ,100 4,901,700 Total Expenditures 20,950,201 17,566,454 3,436,852 41,953,507 C - 2

23 Number of Employees Comparative Schedule Adopted/2016 Division Actual Adopted Amended Estimate Budget Incr(Decr) % 5100 GENERAL MANAGER % 5110 SALES, MARKETING & CUSTOMER SERVICE % 5200 ELECTRIC Administrative % Generation % Transmission/Distribution % Maintenance % Swan Lake % TOTAL ELECTRIC Less Personnel Allocated to Swan Lake (4.00) (4.00) (4.00) (4.00) (4.00) 0.0% NET ELECTRIC % 5300 TELECOMMUNICATIONS Administrative % Engineering Operations % Plant Specific Operations % Plant Non Specific Operations % Non Regulated Operations % TOTAL TELECOMMUNICATIONS % 5400 WATER % TOTAL KPU EMPLOYEES % Less Personnel Allocated to Swan Lake (4.00) (4.00) (4.00) (4.00) (4.00) 0.0% NET KPU EMPLOYEES % C - 3

24 Summary of Funding by Operating Utility Electric: Operating Bonds/ Total Revenues Grants Loans Other Reserves Operating Costs 14,946,879 14,946,879 Debt Service 2,450,730 2,384,321 66,409 Payment in Lieu of Taxes 381, ,993 Major Capital Outlay 3,170,600 70,000 3,100,600 Total 20,950,202 17,331,200 70,000 3,549,002 Telecommunications: Operating Costs 15,318,887 15,318,887 Debt Service 426, ,209 Payment in Lieu of Taxes 206, ,358 Major Capital Outlay 1,615, ,546 70, ,454 Total 17,566,454 16,947,000 70, ,454 Water: Operating Costs 2,633,866 2,633,866 Debt Service 489, ,237 Payment in Lieu of Taxes 197, ,649 Major Capital Outlay 116, ,100 Operating Surplus 387,748 (387,748) Total 3,436,852 3,824,600 (387,748) Total 41,953,507 38,102, ,000 3,710,708 C - 4

25 Compliance With Fund Balance Policy, Resolution No and KPU Bond Covenants Description Amount Operating Revenues: Electric 17,331,200 Telecommunications 16,947,000 Water 3,824,600 Other 140,000 Total Operating Revenues 38,242,800 Operating Costs: Personnel Services and Benefits 13,825,555 Supplies 8,195,225 Contract/Purchased Services 8,176,776 Minor Capital Outlay 148,600 Interdepartmental Charges 2,553,475 Payment in Lieu of Taxes 786,000 Total Operating Costs 33,685,631 Net Revenue 4,557,169 Add Back Payment in Lieu of Taxes 786,000 Net Revenue Available for Debt Service 5,343,169 A. Compliance with Fund Balance Policy: Total Operating Costs 33,685,631 Reserve Requirement at 25 Percent of Total Operating Costs 8,421,408 Estimated Reserves, December 31, ,943,545 Over (Under) Reserve Requirement (4,477,863) B. Compliance with the Debt Service Coverage Requirements of Resolution No : Net Revenue Available for Debt Service 5,343,169 Debt Service 3,366,176 Debt Service Coverage (Required Debt Service Coverage: ) 1.59 C. Compliance with the Debt Service Coverage Requirements of KPU's Bond Covenants: Net Revenue Available for Debt Service 5,343,169 Debt Service 3,366,176 Less Debt Not Subject to Bond Covenants (915,446) 2,450,730 DebtService Coverage (Required Debt Service Coverage: 1.25) 2.18 C - 5

26 Annual Debt Service By Utility Principal Interest Total Electric Electric Telecom Telecom Water Water Total Total Issue Due Due Due Percent Amount Percent Amount Percent Amount Percent Amount C - 6 Revenue Bond Debt: Series T 1,230,000 77,080 1,307, % 1,307, % 1,307,080 Series W CREBS 80,000 4,200 84, % 84, % 84,200 Series W ADEC # ,023 23, , % 107, % 107,118 Series W ADEC # ,108 16,436 70, % 70, % 70,544 Series W ADEC # ,255 47, , % 205, % 205,022 Series W ADEC # ,778 1,452 6, % 6, % 6,230 Series W ADEC # ,404 4,375 18, % 18, % 18,779 Series W ADEC # ,544 21,000 81, % 81, % 81,544 Series X Whitman 495, ,450 1,059, % 1,059,450 1,059,450 2,180, ,855 2,939,967 2,450, ,237 2,939,967 Other Debt: Advances from Other Funds 276, , , % 426, % % 426,209 Total 2,456, ,207 3,366,176 2,450, , ,237 3,366,176

27 Schedule of Current and Future Annual Debt Service Series Series W Series W Series W Series W Series W Series W Series W Series X Interfund Year T CREBS ADEC ADEC ADEC ADEC ADEC ADEC Whitman Loan Total C ,307,080 84, ,118 70, ,022 6,230 18,779 81,544 1,059, ,209 3,366, ,306,240 83, ,118 70, ,022 6,230 18,779 81,544 1,061, ,209 3,367, , ,118 70, ,022 6,230 18,779 81,544 1,061, ,209 2,059, , ,118 70, ,022 6,230 18,779 81,544 1,060, ,209 2,058, , ,118 70, ,022 6,230 18,779 81,544 1,061, ,209 2,058, , ,118 70, ,022 6,230 18,779 81,544 1,058, ,209 2,054, , ,118 70, ,022 6,230 18,779 81,544 1,059, ,209 2,055, ,118 70, ,022 6,230 18,779 81,544 1,059, ,209 1,975, ,118 70, ,022 6,230 18,779 81,544 1,060, ,209 1,976, ,118 70, ,022 6,230 18,779 81,544 1,061, ,209 1,977, ,118 70, ,022 6,230 18,779 81,544 1,061, ,209 1,976, ,118 70, ,022 6,230 18,779 81,544 1,058,875 1,548, ,118 70, ,022 6,230 18,779 81,544 1,059,625 1,548, ,118 70, ,022 6,230 18,779 81,544 1,058,375 1,547, ,118 70, ,022 6,230 18,779 81,544 1,060,000 1,549, ,118 70, ,022 6,230 18,779 81,544 1,059,375 1,548, ,563 70, ,022 6,230 18,779 81,544 1,061,375 1,497, , ,022 6,230 18,779 81,544 1,060,875 1,442, ,544 81, ,544 81,544 2,613, ,800 1,767,451 1,269,792 3,690, , ,022 1,630,880 19,084,050 4,688,299 35,771,150

28 Revenue Summary by Utility Adopted/2016 Electric Revenues Actual Adopted Amended Estimate Budget Incr(Decr) % Operating Revenue Residential 6,796,723 6,950,200 6,950,200 6,705,500 6,999,900 49, % Harbor 298, , , , ,300 1, % Business 6,690,774 6,681,400 6,681,400 6,559,900 6,784, , % Industrial 1,750,002 1,888,800 1,888,800 1,822,100 1,897,200 8, % Yard Lights 49,172 49,100 49,100 49,900 51,800 2, % Large Commercial Demand 316, , , , ,600 11, % City Street Lights 127, , , , ,100 1, % Industrial Demand 198, , , , ,600 8, % Diesel Fuel Surcharge 96,283 NA Total Operating Revenue 16,323,845 16,508,800 16,508,800 16,039,300 16,696, , % Other Operating Revenue Service Charges 110, , , , , % Penalty 25, , ,000 78, , % Pole Rentals External 66,254 66,100 66,100 66,100 66, % Pole Rentals Interdepartmental 154, , , , , % Other Revenue 11,773 4,000 4,000 9,800 4, % Surveillance and Trouble Call Services 30,819 30,000 30,000 31,100 30, % Reimbursable Projects 36, , ,000 75, , % Other Revenue 1,433 7,000 7,000 3,600 7, % Total Other Operating Revenue 437, , , , , % Total Operating Revenue 16,761,284 17,143,900 17,143,900 16,577,100 17,331, , % Nonoperating Revenue Grants 2,500,000 NA Total Nonoperating Revenue 2,500,000 NA Total Electric Revenue 19,261,284 17,143,900 17,143,900 16,577,100 17,331, , % D - 1

29 Revenue Summary by Utility Adopted/2016 Telecommunications Revenues Actual Adopted Amended Estimate Budget Incr(Decr) % Local Network Services Business & Residential 834, , , , ,000 (17,000) 2.1% Local Special Circuits 859, , , , ,000 17, % Other Local Revenue 337, , , , ,000 (13,000) 4.3% Total Local Revenue 2,032,109 1,925,000 1,925,000 2,019,357 1,912,000 (13,000) 0.7% Network Access Services Interstate Flat Rate End User 886, , ,000 1,052,688 1,042, , % Interstate Access Charges 5,215,493 4,617,000 4,617,000 4,600,718 3,954,000 (663,000) 14.4% Interstate Special Access Charges 1,586,174 1,529,000 1,529,000 1,771,781 2,140, , % Intrastate Access Charges 1,571,991 1,553,000 1,553,000 1,527,852 1,487,000 (66,000) 4.2% Total Network Access Services Revenue 9,259,709 8,634,000 8,634,000 8,953,039 8,623,000 (11,000) 0.1% Miscellaneous Directory Revenue 328, , , , ,000 (1,000) 0.4% Miscellaneous Revenue 52,484 75,000 75,000 64,851 91,000 16, % Total Miscellaneous Revenue 381, , , , ,000 15, % Nonregulated & Other Revenue Customer Premise Eq Sales/Service 18,057 19,000 19,000 21,476 21,000 2, % Payphone Revenue 9,700 5,000 5,000 4,606 3,000 (2,000) 40.0% Long Distance Revenue 67,090 65,000 65,000 74,031 81,000 16, % IP Network 3,930,439 4,091,000 4,091,000 4,264,002 4,479, , % 4G LTE 360, , , ,000 1,454, , % Miscellaneous 29,375 32,000 32,000 24,354 (32,000) 100.0% Total Nonregulated & Other Revenue 4,414,831 5,085,000 5,085,000 5,338,469 6,038, , % Total Operating Revenues 16,087,661 16,003,000 16,003,000 16,673,542 16,947, , % Total Telecommunications Revenue 16,087,661 16,003,000 16,003,000 16,673,542 16,947, , % D - 2

30 Revenue Summary by Utility Adopted/2016 Water Revenues Actual Adopted Amended Estimate Budget Incr(Decr) % Operating Revenue Residential 1,377,255 1,509,000 1,509,000 1,515,300 1,621, , % Apartment 294, , , , ,900 35, % Business 1,102,474 1,207,000 1,207,000 1,205,400 1,290,500 83, % Industrial 79,182 79,000 79,000 83,600 89,400 10, % Cannery 149, , , , ,000 11, % Port 172, , , , , % Fire Hydrant 23,539 25,000 25,000 25,800 27,600 2, % Total Operating Revenue 3,198,439 3,460,000 3,460,000 3,472,400 3,716, , % Other Operating Revenue Penalty 4,504 8,000 8,000 16,000 8, % Other Revenue 3, % Raw Fish Tax 100, , , , % Total Other Operating Rev 8, , , , , % Total Operating Revenue 3,206,470 3,568,300 3,568,300 3,589,200 3,824, , % Water Nonoperating Revenue Bond Proceeds 1,754,995 1,754,995 NA Total Nonoperating Water Revenue 1,754,995 1,754,995 NA Total Water Revenue 3,206,470 3,568,300 5,323,295 5,344,195 3,824, , % D - 3

31 Revenue Summary by Utility Adopted/2016 Other Revenues Actual Adopted Amended Estimate Budget Incr(Decr) % Operating Revenue Interest Income 11,666 50,000 50,000 50,000 50, % Gen Gov Billing and Collections 90,000 90,000 90,000 90,000 90, % Total Operating Revenue 101, , , , , % Nonoperating Revenues Bond Reserve Account Transfer 0.0% Total Non operating Revenue 0.0% Total Other Revenue 101, , , , , % D - 4

32 Revenue Summary by Utility Adopted/2016 All KPU Revenues Actual Adopted Amended Estimate Budget Incr(Decr) % Operating Revenues Electric 16,761,284 17,143,900 17,143,900 16,577,100 17,331, , % Telecommunications 16,087,661 16,003,000 16,003,000 16,673,542 16,947, , % Water 3,206,470 3,568,300 3,568,300 3,589,200 3,824, , % Other 101, , , , , % 36,157,081 36,855,200 36,855,200 36,979,842 38,242,800 1,387, % Nonoperating Revenues Electric 2,500,000 NA Telecommunications NA Water 1,754,995 1,754,995 NA Other NA 2,500,000 1,754,995 1,754,995 NA Total Revenue All Divisions 38,657,081 36,855,200 38,610,195 38,734,837 38,242,800 1,387, % D - 5

33 CITY OF KETCHIKAN General Manager Summary The General Manager's Office serves as the chief executive of Ketchikan Public Utilities. The office oversees the daily operation of four (4) divisions that have a combined budget of $42 million. Administration Sales, Marketing and Customer Service Electric Telecommunications Water The Ketchikan Public Utilities General Manager's Office is comprised of one operating division and oversees one Capital Improvement Program. DEPARTMENT EXECUTIVE SUMMARY Adopted/2016 Divisions/Cost Center/Programs Actual Adopted Amended Estimate Budget Incr(Decr) % Operations 355, , , , ,888 13, % Capital Improvement Program 7,415 20,000 20,000 10,000 20, % Total 362, , , , ,888 13, % Adopted/2016 Expenditures by Category Actual Adopted Amended Estimate Budget Incr(Decr) % Personnel Services and Benefits 344, , , , ,588 16, % Supplies 3,551 6,025 5,915 5,355 5,525 (500) 8.3% Contract/Purchased Services 5,433 12,859 12,969 10,210 12,075 (784) 6.1% Minor Capital Outlay 1,023 2,500 2,500 2,175 1,000 (1,500) 60.0% Interdept'l Charges/Reimbursable Credits 1,317 4,500 4,500 3,600 3,700 (800) 17.8% Major Capital Outlay 7,415 20,000 20,000 10,000 20, % Total 362, , , , ,888 13, % Adopted/2016 Funding Source Actual Adopted Amended Estimate Budget Incr(Decr) % KPU Enterprise Fund 362, , , , ,888 13, % Total 362, , , , ,888 13, % Adopted/2016 Personnel Actual Adopted Amended Budget Salary Incr(Decr) % Administration , % Total , % E - 1

34 CITY OF KETCHIKAN General Manager Administration 5100 MISSION STATEMENT The mission of Ketchikan Public Utilities is to provide quality municipal utility services as efficiently and effectively as possible within guidelines established by federal and state law; the Charter of the City of Ketchikan; the Ketchikan Municipal Code; and the ratepayers of the Utility as represented by the City Council. The General Manager s Office exercises line authority over all Utility divisions with combined operating and capital improvement budgets in support of daily service delivery and furtherance of long range goals. The General Manager s Office ensures implementation, supervision and evaluation of all Utility activities, programs and facilities. This includes the normal range of programs and projects associated with all Utility divisions and special projects and/or tasks that do not fall within the scope of KPU s traditional departmental structure. The mission of the Administration Division is to ensure that these responsibilities and duties are carried out in a timely and efficient manner that reflects positively on Ketchikan Public Utilities. General Manager Assistant General Manager Executive Assistant Custodian GOALS FOR 2016 Provide timely information and recommendations to the City Council. Coordinate and improve citizen participation and public information efforts. Coordinate and improve employee outreach and recognition programs. Strengthenemployee focus on customer serviceand improvement of all municipal programs and services. Encourage team building among staff. Continue management oversight of General Government. Work with the division managers, in order to move forward with City Council approved Capital Improvement Programs. Work with Alaska Department of Environmental Conservation, in order to resolve ongoing issues associated with higher than permitted disinfection byproducts and excessive coliforms in the raw water supply, including completion of the two point chlorination project. Continue to build upon the successfulroll out of the new 4G/LTE service offering for the Telecommunications Division. Work with Southeast Alaska Power Agency, in order to dispatch the Whitman Lake Hydroelectric Project in as efficient and cost effective manner as possible. E - 2

35 CITY OF KETCHIKAN General Manager Administration 5100 Collaborate with the Southeast Alaska Power Agency, in order to commission new sources of power for the greater Ketchikan community. Work with Victor Four Labor Relations to negotiate a successor collective bargaining agreement with IBEW, Local 1547 to replace the contract that expired December 31, ACCOMPLISHMENTS FOR 2015 Continued management and oversight of General Government. Submitted the draft 2015 Ketchikan Public Utilities Annual Budget and Capital Improvement Program to the City Council for formal consideration and adoption. Completed construction of the Whitman Lake Hydroelectric Project. Completed the deployment of a 4G/LTE service offering for the greater Ketchikan community. Completed the construction of a redundant Telecommunications Division microwave radio circuit to Prince Rupert, British Columbia. Continued to participate as staff to the Ketchikan Gateway Borough/City of Ketchikan Cooperative Relations, Lobbying Executive and Legislative Liaison Committees. Continued to update and keep current the General Government and Ketchikan Public Utilities website. DIVISION SUMMARY Adopted/2016 Expenditures by Category Actual Adopted Amended Estimate Budget Incr(Decr) % Personnel Services and Benefits 344, , , , ,588 16, % Supplies 3,551 6,025 5,915 5,355 5,525 (500) 8.3% Contract/Purchased Services 5,433 12,859 12,969 10,210 12,075 (784) 6.1% Minor Capital Outlay 1,023 2,500 2,500 2,175 1,000 (1,500) 60.0% Interdept' Charges/Reimbursable Credits 1,317 4,500 4,500 3,600 3,700 (800) 17.8% Total 355, , , , ,888 13, % Adopted/2016 Funding Source Actual Adopted Amended Estimate Budget Incr(Decr) % Ketchikan Enterprise Fund 355, , , , ,888 13, % Total 355, , , , ,888 13, % Adopted/2016 Personnel Actual Adopted Amended Budget Salary Incr(Decr) % General Manager , % Assistant General Manager , % Executive Assistant , % Custodian , % Total , % E - 3

36 CITY OF KETCHIKAN General Manager Administration % 3.2% 0.3% 2016 Expenditures by Type Personnel Services and Benefits Supplies Contract/Purchased Services Minor Capital Outlay 95.0% OPERATING BUDGET CHANGES FOR 2016 Changes between the adopted operating budget for 2015 and the proposed operating budget for 2016 that are greater than 5% and $5,000 are discussed below: Personal Services and Benefits increased by $16,615, or by 4.9%, due to annual employee step increases; and a 1.6% cost of living adjustment and decreased employee health insurance co pays for non represented employees that became effective January 1, As a new collective bargaining agreement has yet to be reached, no cost of lising adjustments have been programmed for employees represented by IBEW, Local 1547 for either FY 2015 or FY A proposed 2.0% cost of living adjustment for non represented employees has been budgeted for 2016 as well as an increase in compensation for the General Manager Budget Adopted/2016 Operating Expenditures Actual Adopted Amended Estimate Budget Incr(Decr) % Personnel Services and Benefits Regular Salaries and Wages 218, , , , ,608 6, % Overtime Wages 2,000 1,000 1,000 2, % Temporary Wages 3,776 2,000 1,500 1,500 2, % Payroll Taxes 14,865 17,200 17,850 17,850 17, % Pension 49,068 47,000 46,100 46,100 48,960 1, % Insurance Benefits Health 45,068 45,500 47,700 47,700 51,700 6, % Insurance Benefits Workers Comp 2,540 3,400 3,400 3,400 3,230 (170) 5.0% Other Benefits 9,729 2,600 9,900 9,900 4,090 1, % Allowances Add'l Life Benefit % Personnel Services and Benefits 344, , , , ,588 16, % Supplies Office Supplies 1,223 2,000 1,935 1,500 1,500 (500) 25.0% Janitorial Supplies 1,554 2,000 2,000 2,000 2, % Vehicle Maintenance Materials % Postage % Motor Vehicle Fuel & Lubricants % Business and Meal Expenses 159 1, , % Supplies 3,551 6,025 5,915 5,355 5,525 (500) 8.3% E - 4

37 CITY OF KETCHIKAN General Manager Administration Budget Adopted/2016 Operating Expenditures Actual Adopted Amended Estimate Budget Incr(Decr) % Contract/Purchased Services Travel Business 2,410 6,875 6,875 5,000 6, % Advertising & Public Announcements (250) 50.0% Assn Membership Fees & Dues % Vehicle Licenses (50) 50.0% Licenses and Fees Bank & Merchant NA Machinery & Equip Maint Services 1,900 1,900 1,900 1, % Technical Services % Telecommunications 2,858 2,584 2,584 2,000 2,000 (584) 22.6% Contract/Purchased Services 5,433 12,859 12,969 10,210 12,075 (784) 6.1% Minor Capital Furniture & Fixtures 233 1,500 1,500 1,500 1,000 (500) 33.3% Computers, Printers & Copiers 790 1,000 1, (1,000) 100.0% Minor Capital Outlay 1,023 2,500 2,500 2,175 1,000 (1,500) 60.0% Interdepartmental Charges Interdept'l Charges Insurance 1,317 4,500 4,500 3,600 3,700 (800) 17.8% Interdepartmental Charges 1,317 4,500 4,500 3,600 3,700 (800) 17.8% Total Expenditures by Type 355, , , , ,888 13, % NARRATIVE Regular Salaries and Wages: $226,608 This account provides for the cost of the annual salaries paid to the employees of the General Manager s Office Overtime Wages: $2,000 This account provides for the compensation paid to the Executive Assistant for hours worked in excess of a regular working cycle. These excess hours typically occur during budget and legislative preparation periods Temporary Wages: $2,000 This account provides for the compensation paid for temporary secretarial/clerical help for those occasions when the Executive Assistant is absent or for additional hours worked when workloads are unusually heavy Payroll Taxes: $17,700 This account provides for employer contributions to Social Security and Medicare and other similar payroll taxes Pension: $48,960 This account provides for employer contributions to retirement plans Insurance Benefits Health: $51,700 This account provides for employer contributions to employee health and life insurance plans Insurance Benefits Workers Compensation: $3,230 This account provides for employer contributions to workers compensation Other Benefits: $4,090 This account provides for expenditures for direct claims from former employees for unemployment benefits paid by the State of Alaska and accrued vacation and sick leave Allowances Add'l Life Benefit: $300 This account provides for the reimbursement of life insurance premiums paid by the General Manager E - 5

38 CITY OF KETCHIKAN General Manager Administration Office Supplies: $1,500 This account provides for expendable office supply items Janitorial Supplies: $2,000 This account provides for expenditures for cleaning and sanitation supplies used by inhouse janitors Vehicle Maintenance Materials: $300 This account provides for the cost associated with the materials to maintain the department s vehicle Postage: $100 This account provides for the cost for postal related services such as postage and mailing materials Motor Vehicle Fuel & Lubricants: $625 This account provides for expenditures that involve the purchase of gasoline and other lubricants used for the operations of the division s vehicle Business and Meal Expenses: $1,000 This account provides for general expenses incurred by the General Manager s staff during the course of the year Travel Business: $6,875 This account provides for the cost associated with the business travel by the General Manager and office staff Advertising and Public Announcements: $250 This account provides for public notice and classified advertising expenses Assn. Membership Fees & Dues: $900 This account provides for the cost of membership in the International City/County Management Association and the Alaska Municipal League Vehicle Licenses: $50 This account provides for expenditures for licensing City vehicles for operations on public highways Machinery & Equipment Maintenance Services: $1,900 This account provides for routine and non routine maintenance associated with equipment located in the 3 rd and 4 th floor copier rooms and KPU s share of the City and KPU s anticipated website maintenance Technical Services: $100 This account provides for the cost of framing government awards and certificates Telecommunications: $2,000 This account provides for monthly charges, long distance services, long distance facsimile transmission, line rentals and maintenance of the phone system in the General Manager Operations Division's Office Furniture & Fixtures: $1,000 This account provides for the cost of office equipment and furniture Interdepartmental Charges Insurance: $3,700 This account provides for the cost for risk management services. E - 6

39 CITY OF KETCHIKAN General Manager Capital Budget Budget Adopted/2016 Major Capital Projects Actual Adopted Amended Estimate Budget Incr(Decr) % Software 7,415 20,000 20,000 10,000 20, % Total Major Capital Outlay 7,415 20,000 20,000 10,000 20, % 2016 Capital Improvement Projects Project # Project Funding Sources KPU Enterprise Fund Total Software Financial & Accounting Info System Replacement 20,000 20,000 Total Machinery and Equipment 20,000 20,000 Total 2016 Capital Budget 20,000 20,000 Expenditures by Type Expenditures by Funding Source Software KPU Enterprise Fund 100% 100% E - 7

40 Sales, Marketing and Customer Service Summary The Sales, Marketing and Customer Service Division is committed to providing quality and timely customer and billing services to the ratepayers of Ketchikan Public Utilities. Ketchikan Public Utilities Sales, Marketing and Customer Service KPU Sales, Marketing and Customer Service is comprised of one operating division. DEPARTMENT EXECUTIVE SUMMARY Adopted/2016 Divisions/Cost Center/Programs Actual Adopted Amended Estimate Budget Incr(Decr) % Operations 2,177,797 2,319,282 2,319,282 2,266,402 2,356,403 37, % Total 2,177,797 2,319,282 2,319,282 2,266,402 2,356,403 37, % Adopted/2016 Expenditures by Category Actual Adopted Amended Estimate Budget Incr(Decr) % Personnel Services and Benefits 1,453,235 1,531,362 1,531,362 1,499,200 1,573,387 42, % Supplies 104, , ,950 99, ,550 (11,400) 9.9% Contract/Purchased Services 596, , , , ,966 3, % Minor Capital Outlay 23,996 20,000 20,000 20,000 26,000 6, % Interdepartmental Charges Insurance 17,400 17,400 13,900 14,500 (2,900) 16.7% Total 2,177,797 2,319,282 2,319,282 2,266,402 2,356,403 37, % Adopted/2016 Funding Source Actual Adopted Amended Estimate Budget Incr(Decr) % KPU Enterprise Fund 2,177,797 2,319,282 2,319,282 2,266,402 2,356,403 37, % Total 2,177,797 2,319,282 2,319,282 2,266,402 2,356,403 37, % Adopted/2016 Full time Equivalent Personnel Actual Adopted Amended Budget Salary Incr(Decr) % Operations , % Total , % F - 1

41 Sales, Marketing and Customer Service Operations 5110 MISSION STATEMENT The Sales, Marketing & Customer Service Division is responsible for marketing and selling telecommunication services and products and serving and meeting the needs of all Utility customers. General Manager Sales, Marketing and Customer Service Division Manager Sales & Marketing Manager (2.0) Customer Service Manager IPTV Content Specialist Credit Coordinator Billing System Analyst Customer Service Rep (10.0) GOALS FOR 2016 Achieve continued positive growth in all key residential and business product categories. Emphasize KPU strengths in advertising: local support/management, exclusive and superior product, excellent customer service, exclusive fiber optics, unlimited Internet, TV Everywhere and competitive new wireless products. Expand advertising to include additional TV spots and target younger demographic with Web advertising. Rotate ideas/messages and ensure that ideas stay fresh. Exploit KPU s strong and successful business offerings by emphasizing professional business staff/products in media, marketing materials and on the website. Develop separate hosted business suite product campaign. Capitalize on phone switch upgrade/replacement to market new features and products to new and existing Hosted IP customers. Continue to build on KPUtv s software strengths (multi stream recording, Whole Home, multi screen) to grow and capture IPTV customers. Challenge the Telecommunications Division to continue developing mobile OTT video options. Continue to revamp and re energize the KPU Telecommunications Division website through monthly updates and rotating banner ads. Continue enhancement of local TV content by utilizing new technologies to allow scheduling, streaming and to get all local content shows to automatically integrate into VOD when launched on air. Continue to freshen local content by rotating hosts and by reworking production of annual events so that the events appear different year to year. F - 2

42 Sales, Marketing and Customer Service Operations 5110 Expand VOD content to include series and shows from networks in addition to existing movie assortment. Continue to utilize social media as key marketing product; tie efforts to the website and Internet click through advertising as a unified digital marketing presence. Sustain sales culture in Customer Service Reps by preserving weekly team huddle meetings to review successes/misses in addition to current call coaching. Utilize additional employee rewards such as personal notes and recognition in addition to sales incentives to keep staff motivated. Utilize consultants, Hiring Solutions and Measure X, to ensure staff is equipped with appropriate sales skills prior to hire/post hire. Continue to identify process improvements needed and technical issues in new electrical billing system so that work can continue to be streamlined to allow CSRs to focus on Telecommunications sales. ACCOMPLISHMENTS FOR 2015 Year to date 2015, KPU has achieved growth in the following categories; +3% in IPTV accounts, +6% in PVR/DVR sales and +3% in DSL service. Year over year KPU has achieved growth of +6% in IPTV, +9% in PVR/DVR and +3% in DSL service. Additionally, KPU successfully launched and sold Hospitality TV into the local hospitality market. These increases are directly attributable to the Sales, Marketing & Customer Service Division s redefined sales team culture: competitive location, compelling advertising, sales training, incentive plan and competitive products, which include superior business services, extensive TV offerings and exclusive locally produced content. Year to date 2015, the division has achieved +10% growth in Hosted VOIP phone system sales. Year over year, the Sales, Marketing & Customer Service Division achieved +14% growth in Hosted VOIP phone systems. KPU s hosted phone system is a powerful, cutting edge phone system that can be deployed in very small to extraordinarily large businesses. Selling hosted phone systems is a key strategic initiative, ensuring long termretention of KPU s critical business customers. KPU successfully launched and marketed Hosted Wi Fiservices and a Hosted Data Center services to the business community. Like Hosted VOIP, this allows businesses to focus on running their business vs. managing their network. Customers have been added each month since launch. Marketing Managers continued to sign long term agreements with strategic business customers as well as small business owners. This, combined with the division s Hosted IP, dedicated business staff and business service offerings, has helped to preserve KPU s business line penetration at more than 85% of the business market. The Marketing Managers coordinated and managed more than 15 complex phone and local area circuit/network jobs for businesses in the community including two emergency phone system installations. They were all completed timely and accurately, without disruption of business. KPU Marketing successfully responded to the 2015 KGB School District RFP for telecommunications services to win all phone services, Internet and LAN circuits for the School District. This proposal will secure this business for an additional three years. In late 2011, the Utility launched a very strong package of KPU branded long distance. This enhanced its ability to sell phone services and retain customers by offering consolidated billing. In the last 12 months the division has increased its long distance subscribers by 26% and continues to add customers monthly. One of the new strengths of KPU's LD is its redundant path off island that was created in If microwave connectivity fails, thepath revertstothefiber path. KPU Sales and Marketing launched the new Watch TV Everywhere service in It is included free to KPUtv customers, along with their standard TV service. Customers may stream live and new TV programming on computers, tablets and smartphones using their KPUtv cable account. Additional channels were integrated in Now more than 60 channels are available on this platform, with kids and sports programming being the most popular. l d k hl d h l h d l b k l F - 3

43 Sales, Marketing and Customer Service Operations 5110 KPU Sales and Marketing continues monthly to update the re launched KPU Telecommunications website, to keep the site fresh. The site was designed for easier navigation and to be more user friendly and intuitive. Pages were designed to be interactive, including a bandwidth use calculator, a click to ask a question/order a service, and links to the online directory. Traffic to the site has increased from a few per day to hundreds of visits per day. The division continues to utilize CBS SE TV as a new ad medium. KPU created an additional TV spot. One features unlimited internet and one focuses on KPU's exclusive local content. The 30 second spots are targeted to run during prime time and sporting events. The ads are visible to GCI, satellite, and KPU customers. The Sales, Marketing and Customer Service Division actively recruited for any open positions, targeting individuals with excellent customer service skills and sales mentality. Management utilized Hiring Solutions to test CSR candidates for inherent sales skills and/or attributes and combined that with team interviews to select the most qualified candidates. To retain its competitive advantage of excellent customer service skills, the Sales, Marketing & Customer Service Division has continued to contract with Measure X to assist with sales training, sales skill reviews and to conduct mystery shops with CSRs to test for product and process knowledge. Additionally, consolidation of the sales and marketing team with the Customer Service Division into one location has continued to allow easy one on one counseling, coaching and leading by example. New additions to training are recorded call review with CSRs and weekly sales meetings. The KPU Sales, Marketing & Customer Service Division once again was awarded first place for the KPU Yellow Pages Directory by the Alaska Telephone Association. This win was for the 2014 directory competition. This was the sixth consecutive year that KPU took top honors in the ATA competition. The cover photo was of the Ketchikan waterfront, taken by local photographer Carlos Rojas. KPUtv was awarded four top awards in three separate competitions for its local TV Content in In March, KPUtv was awarded Best of the Northwest for Overall Excellence in Public/Educational/Government Programming,as wellasbestofthe Northwest for Community Involvement. In April, KPUtv took top honors for Local Content from the NTCA The Rural Broadband Association for the category of Phone Company with 5,000 10,000 access lines. In July, KPUtv won third place in the NATOA Government Programming Award for the commercial "We Are Ketchikan." KPUtv also received honorable mention in March for three other entries at Best of the Northwest. In each instance KPUtv was selected for first place from hundreds to thousands of entries. This is the sixth consecutive year in which KPU was recognized for its outstanding TV shows and documentaries. These awards bring recognition, not only to KPU but to the entire community, by highlighting the diverse events, activities, and colorful personalities found here. KPU Sales, Marketing & Customer Service successfully completed the transition to off island bill printing for both Telecommunications and Electric. By moving off island, KPU will be able to produce PDF copies of the bills that will be accessible to customers through an on line portal. The new bill is simpler to read, fewer pages and is delivered in a more timely fashion. KPU Sales & Marketing managed the outreach effort for the conversion of KPUNET google mail to Zimbra through Neonova. Letters, s, and personal calls were used and all residential and business customers were converted by the target cut date without disruption. The Sales, Marketing & Customer Service Division has continued to utilize social media such as Facebook as a key tool for communicating with customers regarding KPU s image, products, presence and approachability. Staff maintains three specific Facebook pages: KPU/Live in Ketchikan: CommVision s local TV programming and events. KPU Telecommunications: Promotes/advertises Telecom s services and products. KPU Electric: To promote energy conservation, share energy news, and create an approachable image. Facebook allows staff to immediately reply to customers, post public information regarding outages, address service issues and introduce/sell products. The regular use of this media has led to increased sales of services, winbacks from the competition, and saved many potential lost customers. F - 4

44 Sales, Marketing and Customer Service Operations 5110 DIVISION SUMMARY Adopted/2016 Expenditures by Category Actual Adopted Amended Estimate Budget Incr(Decr) % Personnel Services and Benefits 1,453,235 1,531,362 1,531,362 1,499,200 1,573,387 42, % Supplies 104, , ,950 99, ,550 (11,400) 9.9% Contract/Purchased Services 596, , , , ,966 3, % Minor Capital Outlay 23,996 20,000 20,000 20,000 26,000 6, % Interdepartmental Charges 17,400 17,400 13,900 14,500 (2,900) 16.7% Total Expenditures 2,177,797 2,319,282 2,319,282 2,266,402 2,356,403 37, % Adopted/2016 Funding Source Actual Adopted Amended Estimate Budget Incr(Decr) % KPU Enterprise Fund 2,177,797 2,319,282 2,319,282 2,266,402 2,356,403 37, % Total Funding 2,177,797 2,319,282 2,319,282 2,266,402 2,356,403 37, % Adopted/2016 Full time Equivalent Personnel Actual Adopted Amended Budget Salary Incr(Decr) % SM & CS Manager , % Marketing Manager , % Customer Service Manager , % IPTV Content Specialist/Marketing Rep , % Credit Coordinator , % Billing System Analyst , % Customer Sales Rep III , % Customer Sales Rep II , % Customer Sales Rep I , % Total , % 27.42% 0.62% 2016 Expenditures by Type 4.44% 66.32% Personnel Services and Benefits Supplies Contract/Purchased Services Interdepartmental Charges F - 5

45 Sales, Marketing and Customer Service Operations 5110 OPERATING BUDGET CHANGES FOR 2016 Changes between the adopted operating budget for 2015 and the proposed operating budget for 2016 that are greater than 5% and $5,000 are discussed below. Personnel Services and Benefits increased by $42,025, or by 2.7%, due to annual employee step increases; and a 1.6% cost of living adjustment and decreased employee health insurance co pays for non represented employees that became effective January 1, As a new collective bargaining agreement has yet to be reached, no cost of living adjustments have been programmed for employees of IBEW, Local 1547 for either FY 2015 or FY A proposed 2.0% cost of living adjustment for non represented employees has been budgeted for Office Supplies (Account No ) decreased by $3,000, or by 16.7%, to cover additional advertising expenses. Account No increased so overall the budget reflects a zero net change year over year for the accounts. Operating Supplies (Account No ) decreased by $5,000, or by 38.5%, to cover additional advertising expenses. Account No increased so overall the budget reflects a zero net change year over year for the accounts. Marketing (Account No ) increased by $8,000, or by 4.1% to cover additional advertising expenses. Account Nos and decreased the exact same amount for a zero net change year over year for the accounts. Bank and Merchant Charges (Account No ) decreased by $6,000, or by 5.3%, to equal projected fees charged by Wells Fargo for customer credit card use in Machinery & Equipment (Account No ) increased by $8,500, or by 154.5%, due to the need to replace a failing camera used for local content filming. Also included are replacement batteries and a case. DIVISION OPERATING BUDGET DETAIL Adopted/2016 Operating Expenditures Actual Adopted Amended Estimate Budget Incr(Decr) % Personnel Services and Benefits Regular Salaries and Wages 798, , , , ,677 16, % Overtime Wages 43,353 15,000 23,100 23,100 15, % Temporary Wages 13,417 6,300 11,000 11,000 11,000 4, % Payroll Taxes 65,236 66,900 66,787 65,500 68,530 1, % Pension 171, , , , ,060 4, % Health and Life Insurance 310, , , , ,800 17, % Workers Compensation 4,519 5,400 5,513 5,500 5, % Other Benefits 19,871 17,200 17,200 17,200 15,880 (1,320) 7.7% Allowances Medical Expenses (900) 100.0% Incentive Pay 27,085 28,000 28,000 26,000 28, % Allowances Vehicles 2,000 2,000 2,000 2, % Personnel Services and Benefits 1,453,235 1,531,362 1,531,362 1,499,200 1,573,387 42, % F - 6

46 Sales, Marketing and Customer Service Operations Adopted/2016 Operating Expenditures Actual Adopted Amended Estimate Budget Incr(Decr) % Supplies Office Supplies 14,234 18,000 15,000 15,000 15,000 (3,000) 16.7% Operating Supplies 7,411 13,000 13,000 8,000 8,000 (5,000) 38.5% Safety Program Supplies % Janitorial Supplies 766 1,200 1,200 1,200 1, % Food & Catering 1,276 NA Vehicle Maintenance Materials 1,300 1,300 1,000 1,000 (300) 23.1% Bldg Machinery Equip Maintenance 633 NA Express Postage (100) 28.6% Postage 3,366 3,000 3,000 1,500 3, % Bulk Mailing 70,880 72,400 68,400 68,000 69,500 (2,900) 4.0% Vehicle Motor Fuel & Lubricants (100) 16.7% Periodicals % Professional & Technical Publications % Allowances Business and Meal Expense 523 1,300 1,300 1,000 1, % Allowances Uniforms/Clothing/Badges 3,324 3,000 3,000 2,000 3, % Supplies 104, , ,950 99, ,550 (11,400) 9.9% Contract/Purchased Services Travel Business 5,958 10,450 10,450 10,200 13,450 3, % Travel Training 2,591 7,000 7,000 6,800 7, % Travel Training and Education 14,872 15,000 15,000 15,000 15, % Ads & Public Announcements 329 1,500 1,500 1,100 1, % Marketing 202, , , , ,000 8, % Printing and Binding 18,465 18,000 18,000 13,000 18, % Community Promotion 6,299 6,000 6,000 6,000 6, % Assn. Membership Dues & Fees 175 1,400 1,400 1,400 1, % Building & Operating Permits 922 NA Vehicle Licenses % Bank and Merchant Charges 106, , , , ,000 (6,000) 5.3% Broadcast Content Fees 2,000 2,000 2,300 2,230 2, % Janitorial & Cleaning Services 7,200 7,200 7,200 7,200 7, % Machinery & Equipment Maint Services 3,322 5,000 4,700 3,500 3,500 (1,500) 30.0% Technical Services 9,489 36,000 34,500 33,340 33,000 (3,000) 8.3% Other Contractual Services 1,800 NA Management & Consulting Services 93,192 95,000 95,000 95,000 95, % Rents and Leases Land & Buildings 83,935 84,000 85,500 85,262 86,496 2, % Rents and Leases Machinery & Equip 1,777 2,000 2,000 2,000 2, % Telecommunications 30,198 30,000 30,000 30,000 30, % Electric, Water, Sewer & Solid Waste 5,047 6,000 6,000 6,000 6, % Contract/Purchased Services 596, , , , ,966 3, % Minor Capital Furniture and Fixtures 969 5,000 5,000 5,000 1,000 (4,000) 80.0% Machinery & Equipment 7,282 5,500 5,500 5,500 14,000 8, % Computers, Printers & Copiers 9,730 9,000 9,000 9,000 10,500 1, % Software 6, % Minor Capital Outlay 23,996 20,000 20,000 20,000 26,000 6, % F - 7

47 Sales, Marketing and Customer Service Operations Adopted/2016 Operating Expenditures Actual Adopted Amended Estimate Budget Incr(Decr) % Interdepartmental Charges Interdepartmental Charges Insurance 17,400 17,400 13,900 14,500 (2,900) 16.7% Interdepartmental Charges 17,400 17,400 13,900 14,500 (2,900) 16.7% Total Expenditures by Type 2,177,797 2,319,282 2,319,282 2,266,402 2,356,403 37, % NARRATIVE Regular Salaries and Wages: $869,677 This account provides for compensation paid to all regular salaried and hourly employees of the Sales, Marketing and Customer Service Division Overtime Wages: $15,000 This account provides for compensation paid to all hourly employees for hours worked in excess of a regular working cycle or beyond the hours listed in the bargaining agreement Temporary Wages: $11,000 This account provides for the compensation paid to temporary, part time camera operators for the filming of televised events when more than one camera is required or for when events to be filmed are scheduled to occur simultaneously. This has also contributed to a reduction in overtime wages paid to the full time cameraman Payroll Taxes: $68,530 This account provides for employer contributions for Social Security and Medicare and other similar payroll related taxes Pension: $207,060 This account provides for employer contributions to retirement plans Health and Life Insurance: $350,800 This account provides for employer contributions to employee health and life insurance plans Workers Compensation: $5,440 This account provides for employer contributions to workers compensation Other Benefits: $15,880 This account provides for expenditures for direct claims from former employees for unemployment benefits paid by the State of Alaska and accrued vacation and sick leave Allowances Incentive Pay: $28,000 This account provides for employee incentive and suggestion programs. Specifically this refers to the Upgrade Sales Incentive Program for CSRs I, II and III for add on sales. OSP Techs have also begun to upsell services when onsite, making them also eligible for the program Allowances Vehicles: $2,000 This account provides for an allowance for employees use of personal vehicles while on official City business. These benefits are taxable to employees. This was new for 2015 to allow for the retirement of two SM &CS vehicles that are now inoperable. Rather than incur expense for replacement cars, employees can be reimbursed for use of a personal vehicle for KPU business Office Supplies: $15,000 This account provides for paper, pens, pencils, adding machine ribbons and tape, note pads, file folders, scotch tape, toner, ink cartridges, photocopy charges for leased copiers, small desk accessories and minor office equipment such as adding machines, staplers, tape dispensers and paper shredders Operating Supplies: $8,000 This account provides for supplies that are normally not of a maintenance nature and are required to support department operations. Included are supplies such as credit forms, letterhead, envelopes, adjustment forms, deposit slips, books, ink stamps, brochures, postage machinery, DVDs, terabytes, water, supplies for Celeb Chef, Outdoor Challenge, employee awards and recognition pins Safety Program Supplies: $200 This account provides for the City safety program. Included are safety information brochures and safety training audio and video programs Janitorial Supplies: $1,200 This account provides for cleaning and sanitation supplies used by in house and contracted janitors. F - 8

48 Sales, Marketing and Customer Service Operations Vehicle Maintenance Materials: $1,000 This account provides for the repair and maintenance of the vehicles used by the Sales, Marketing & Customer Service Division, which includes one SUV and a filming flatbed truck Express Postage: $250 This account provides for express delivery postal services Postage: $3,000 This account provides for postal related services such as incidental postage, mailing materials and postage machine refill Bulk Mailing: $69,500 This account provides for bulk mailing of monthly bills and invoices for City and KPU services, brochures, mass public notices and other similar types of mailings Vehicle Motor Fuel and Lubricants: $500 This account provides for gasoline and lubricants used in the operations of Sales, Marketing and Customer Service Division vehicles Periodicals: $300 This account provides for newspapers, magazines and trade journals. Specifically, this accounts for the Ketchikan Daily News subscription Professional and Technical Publications: $300 This account provides for professional and technical publications. Included are professional handbooks, print and electronic subscription services for Sales, Marketing & Customer Service Business and Meals Expense: $1,300 This provides for meal expense incurred with vendors, at trade shows, recruitment meal expenses and employee award/recognition cakes, etc. It also provides for Chamber of Commerce monthly lunch tickets Allowances Uniforms/Clothing/Badges: $3,000 This account provides for direct purchases of or reimbursements to employees for work related clothing required by department policies. Included are nameplates, name badges, KPU logowear for CSRs I, II and II. Also includes logo embroidery for other items such as hats, aprons, etc Travel Business: $13,450 This account provides for transportation, lodging, meals, per diems and other incidental expenses associated with travel for business, trade and board meetings. For 2016, several meeting have moved to the East Coast, which adds to the airfare and requires additional travel days Travel Training: $7,000 This account provides for transportation, lodging, meals, per diems and other incidental expenses associated with travel for CommSoft Annual training for the Billing Analyst and New World Annual Training for the Electric Billing CSR III Training and Education: $15,000 This account provides for registration fees, training fees, and training materials associated with training and educating employees; and on premises training programs provided by staff or a third parties, such as Measure X Ads and Public Announcements: $1,500 This account provides for advertising and announcements in publications, newspapers, trade journals, and the Internet for recruitment Marketing and Advertising: $203,000 This account provides for advertising, image building and promotion in publications, newspapers, Internet, radio and TV broadcasts. Included are promotional KPU logo products and media. Production and design costs for the creation of ad and marketing materials are also included in this account Printing and Binding: $18,000 This account provides for job printing and binding services. Included are designing and printing of forms, posters, flyers, user manuals and channel guides for distribution in the Sales, Marketing & Customer Service Division Community Promotion: $6,000 This account provides for the promotion of community activities and programs. Included are donations to civic organizations, sport teams and hosting or sponsoring community events Assn. Membership Dues & Fees: $1,400 This account provides for memberships in professional and trade associations, such as National Association of Telecommunications Officers and Advisors, Alliance for Community Media, Progressive Business Publications and Rotary Vehicle License: $20 This account provides for license fee for KPU vehicles Bank and Merchant Charges: $108,000 This account provides for monthly bank account service charges, merchant fees paid to banks for customer use of credit and debit cards and other fees for banking services. F - 9

49 Sales, Marketing and Customer Service Operations Broadcast Content Fee: $2,400 This account provides for license fee for use of music database and covers use of copyrighted music. Included is Megatrax Janitorial and Cleaning Services: $7,200 This account provides for services to clean facilities owned or leased by the Sales, Marketing and Customer Service. Included are janitorial and carpet cleaning services Machinery and Equipment Maintenance Services: $3,500 This account provides contractual services for the repair and maintenance of office equipment, machinery and other operating equipment used by the Sales, Marketing & Customer Service Division. This account includes contract labor and materials required to provide the service. It also includes maintenance service agreements from Neopost, SE Business Machines and Tongass Business Center Technical Services: $33,000 This account provides for services that are not regarded as professional but require technical or special knowledge. Included are CBC Innovis (credit reporting), Weather Central (weather channel server maintenance), PIVOT Webhosting, GoogleBiz Apps, Computer HQ and Advanced Communications Management and Consulting Services: $95,000 This account provides for management and consulting services. This refers to Pivot Group Quality Assurance, Hiring Solutions, independent film editors, and OSG Billing Services (bill print vendor.) Rents and Leases Land and Buildings: $86,496 This account provides for the lease of retail space at the Plaza Mall for the Sales, Marketing and Customer Service Division and for off site storage for file retention Rents and Leases Machinery & Equipment: $2,000 This account provides for the rent and lease of machinery and equipment, sports filming lifts and incidental equipment needed for Expo and events Telecommunications: $30,000 This account provides for telecommunication services. Included are charges for wired and wireless telecommunications services, cell phones, Internet, long distance and toll free numbers Electric, Water, Sewer & Solid Waste: $6,000 This account provides for electric, water, sewer and solid waste utility services Furniture & Fixtures: $1,000 This account provides for acquisition of furniture and fixtures. Included are desks, chairs, tables, workstations, file cabinets, storage cabinets and shelving. This is specifically for a hanging display for wireless products Machinery & Equipment: $14,000 This account provides for the acquisition, repair and replacement filming equipment Computers, Printers & Copiers: $10,500 This account provides for the acquisition of desktop, laptops, and computers, copiers and fax machines. This is specifically for the replacement of 5 CSR II computers and a copier for SM&CS Division Software: $500 This account provides for acquisition of software systems and upgrades not covered by maintenance agreements Interdepartmental Charges Insurance: $14,500 This account provides for the cost for risk management services. F - 10

50 Electric Division Summary The Electric Division is one of three utilities operated by Ketchikan Public Utilities, a non regulated public utility owned by the City of Ketchikan. The Electric Division operates four hydroelectric projects, three of which are owned by Ketchikan Public Utilities and six diesel generating units. The Electric Division serves a community of nearly 14,000 and is capable of meeting an annual customer demand for energy in excess of 180,000,000 kwh. Ketchikan Public Utilities Electric Division The Electric Division is comprised of one operating division and oversees one Capital Improvement Program. DEPARTMENT EXECUTIVE SUMMARY Adopted/2016 Divisions/Cost Center/Programs Actual Adopted Amended Estimate Budget Incr(Decr) % Operations 15,997,011 16,846,572 16,904,103 16,274,484 16,967, , % Capital Improvement Program 4,372,461 2,135,490 2,595,079 1,802,500 3,170,600 1,035, % Total 20,369,472 18,982,062 19,499,182 18,076,984 20,138,093 1,156, % Adopted/2016 Expenditures by Category Actual Adopted Amended Estimate Budget Incr(Decr) % Personnel Services and Benefits 4,810,239 5,156,739 5,156,739 4,986,400 5,219,580 62, % Supplies 6,742,928 6,762,400 6,763,700 6,383,500 6,732,400 (30,000) 0.4% Contract/Purchased Services 885, , , , ,700 95, % Minor Capital Outlay 33,212 66,000 66,000 66,000 81,000 15, % Interdepartmental Charges 972,791 1,129,760 1,141,880 1,062,800 1,102,090 (27,670) 2.4% Debt Service 2,170,496 2,444,980 2,444,980 2,444,980 2,450,730 5, % Other Costs 381, , , , , % Major Capital Outlay 4,372,461 2,135,490 2,595,079 1,802,500 3,170,600 1,035, % Total 20,369,472 18,982,062 19,499,182 18,076,984 20,138,093 1,156, % Adopted/2016 Funding Source Actual Adopted Amended Estimate Budget Incr(Decr) % KPU Enterprise Fund 17,869,472 18,982,062 19,499,182 18,076,984 20,138,093 1,156, % Grants 2,500,000 NA Total 20,369,472 18,982,062 19,499,182 18,076,984 20,138,093 1,156, % Adopted/2016 Full time Equivalent Personnel Actual Adopted Amended Budget Salary Incr(Decr) % Operations ,128, % Total ,128, % G - 1

51 Electric Division Operations 5200 MISSION STATEMENT The mission of the Electric Division is to provide safe, reliable electric service to meet the current and growing needs of the community at the lowest practicable rates Electric Division Statistics Metered Customer Base Count: 7,591 System Transformer Count: 1,827 Poles: 4,749 Fuses & Switches: 2,089 Street Lights: 1,749 Substations: 13 Distribution Line: 97 miles of kv Transmission Line: 96 miles of 34.5 kv Secondary Radial Line: 122 miles Hydro Generators: 9 machines across 5 Lake Regulatory Compliance: FERC Dam Safety, Systems Part 12 Diesel Generators: 6 machines from 1.75MW to EPA/DEC Title 5 Air Quality 10.5 MW DEC/USCG Spill Prevention SPCC General Manager Electric Division Manager Generation Control Swan Lake Operations and Maintenance (4.0) Senior Project Engineer Electric Operations Manager Secretary II Sr. Electric System Engineer Chief Electric System Dispatcher Mechanical Maintenance Engineering Tech (1.4) Line Crew Warehouse Worker Secretary I Electricians Sr. SCADA Tech (2.0) Electric System Dispatcher (3.0) Electric System Dispatcher Relief (1.0) Journeyman Powerplant Mechanic Foreman Service Crew Foreman Line Crew Foreman Warehouse General Laborer (.5) Journeyman Meter Relay Control Foreman Journeyman Powerplant Mechanic (5.0) Journeyman Powerplant Mechanic Relief (1.0) General Laborer Journeyman Lineman (2.0) Journeyman Lineman Apprentice Journeyman Lineman (3.0) Journeyman Meterman Journeyman Wireman (4.0) Meter Reader Warehouse General Laborer (.5) GOALS FOR 2016 Safety and Environmental: o Continue to raise issues of concern, especially related to safety, at the weekly foremen s meeting and during on thejob tailboard sessions; o Revise safety protocols as necessary; o Remain current on all regulatory agency required policies; o Continue safety surveillance and monitoring of the utility's dams; and o Keep current on HAZWOPER and SPCC training. G - 2

52 Electric Division Operations 5200 Customer Service: o Review outages to identify failure trends impacting reliability; o Improve the content and use of the Electric Division s website, Facebook page, and FlashAlert to inform customers and raise awareness during outages and, system events; and o Develop customer coordinated plans for new services. Generation: o Continue to work with SEAPA staff and member communitiesto optimize resources; o Provide support in development of future generation projects; and o Explore electric rate options designed to promote electric energy conservation. Transmission and Distribution facilities: o Continue with system wide pole replacements; o Continue to work with the Department of Transportation for opportunities to improve utilities; o Support the Department of Transportation s Water Street utility relocation effort; o Continue to develop the Geographical Information System s database for incorporation into day to day use; o Continue a LED street light replacement initiative; and o Develop sectionalizing capability to minimize outage impacts and ease cold load pick up. ACCOMPLISHMENTS FOR 2015 Safety and Environmental: o Met DEC Title V air quality requirements for a renewed permit for Bailey diesels; o Filed an accepted USCG Spill Prevention & Counter Controls plan (SPCC); o Completed FERC requirementsfor Ketchikan and Whitman Dams; o Continued OSHA training requirements for employee safety compliance o Greater than (>) 30,000 hours without a lost time injury; o Maintained DOT requirements for traffic control flagging; and o Updated Emergency Action Plans (EAP) for Ketchikan and Whitman o Staged "super sack" barriers for future flood control. Customer Service: o Installed/connected 41 new services; o Permanently disconnected/removed 32 services; o AMR/AMI implementation now at 4,819 out of 7,591 meters or 63% implemented; and o Supplied new metering systems for USCG, Federal Building, High School, Valley Park School, Tatsuda IGA, Copper Ridge Mini Storage and others. Generation: o Generated a record 89 GWhr of energy with KPU Hydro for FY2015; o Limited diesel generation to a record low of less than 1 GWhr; o Completed Beaver Falls No. 1 rewind; o Completed BAG No. 4 Turbocharger rebuild; o Completed Ketchikan No. 3 rewind; o Implemented bearing temperaturemonitor upgrades for Ketchikan No. 5; and o Upgraded mechanical speed switches to digital speed switches for Ketchikan Plant Generators Nos. 3, 4 and 5. G - 3

53 Electric Division Operations 5200 Transmission and Distribution facilities: o Updated/repaired dock float lighting and power meter pedestals; o Installed 232 LED street lights; o Exchanged 31 power poles; o Continued a LED street light replacement initiative; and o Updated/upgraded protective relays for the new 3rd Avenue underground transmission line. DIVISION SUMMARY Adopted/2016 Expenditures by Category Actual Adopted Amended Estimate Budget Incr(Decr) % Personnel Services and Benefits 4,810,239 5,156,739 5,156,739 4,986,400 5,219,580 62, % Supplies 6,742,928 6,762,400 6,763,700 6,383,500 6,732,400 (30,000) 0.4% Contract/Purchased Services 885, , , , ,700 95, % Minor Capital Outlay 33,212 66,000 66,000 66,000 81,000 15, % Interdepartmental Charges 972,791 1,129,760 1,141,880 1,062,800 1,102,090 (27,670) 2.4% Debt Service 2,170,496 2,444,980 2,444,980 2,444,980 2,450,730 5, % Payment in Lieu of Taxes 381, , , , , % Total Expenditures 15,997,011 16,846,572 16,904,103 16,274,484 16,967, , % Adopted/2016 Funding Source Actual Adopted Amended Estimate Budget Incr(Decr) % KPU Enterprise Fund 15,997,011 16,846,572 16,904,103 16,274,484 16,967, , % Total Funding 15,997,011 16,846,572 16,904,103 16,274,484 16,967, , % Adopted/2016 Full time Equivalent Personnel Actual Adopted Amended Budget Salary Incr(Decr) % Division Manager , % Senior Project Engineer , % Operations Manager , % Senior System Engineer , % Secretary II , % Secretary I , % GENERATION Chief System Dispatcher , % System Dispatcher , % System Dispatcher Relief , % SCADA Senior SCADA Technician , % LINE CREWS Line Crew Foreman , % Service Crew Foreman , % Lineman , % Lineman Apprentice , % G - 4

54 Electric Division Operations Adopted/2016 Full time Equivalent Personnel Actual Adopted Amended Budget Salary Incr(Decr) % ELECTRICIANS Meter Relay Control Foreman , % Meterman , % Wireman/Electrician , % Meter Reader , % Warehouse Relief Meter Reader , % MAINTENANCE Powerplant Mechanic Foreman , % Powerplant Mechanic , % Powerplant Mechanic Relief , % SWAN LAKE Foreman , % Maintenance & Operations Person , % OTHER Warehouse Worker , % Warehouse/General Laborer , % Engineering Tech CADD & GIS , % General Laborer , % Subtotal ,444, % Less Personnel Allocated Directly to Swan Lake: Foreman (1.00) (1.00) (1.00) (1.00) (86,526) 0.0% Maintenance & Operations Person (3.00) (3.00) (3.00) (3.00) (229,947) 0.0% Total ,128, % 7.50% 2.86% 2016 Expenditures by Type 50.49% 39.15% Personnel Services and Benefits Supplies Contract/Purchased Services Payment in Lieu of Taxes G - 5

55 Electric Division Operations 5200 OPERATING BUDGET CHANGES FOR 2016 Changes between the adopted operating budget for 2015 and the proposed operating budget for 2016 that are greater than 5% and $5,000 are discussed below. Personnel Services and Benefits increased by $62,841, or by 1.2%, due to annual employee step increases; and a 1.6% cost of living adjustment and decreased employee health insurance co pays for non represented employees that became effective January 1, As a new collective bargaining agreement has yet to be reached, no cost of living adjustments have been programmed for employees of IBEW, Local 1547 for either FY 2015 or FY A proposed 2.0% cost of living adjustment for non represented employees has been budgeted for Small Tools and Equipment (Account No ) decreased by $5,000, or by 12.5%, as many identified tools have been purchased for new vehicles and Whitman Powerhouse. Machinery & Equipment Maintenance Materials (Account No ) decreased by $30,000, or by 37.5%, as repairs are not necessarily required annually. Generation Oil Lubricants (Account No ) increased by $25,000, or 294.1%, due to a proposed engine oil change for Bailey Generator No. 4. Assn. Membership Dues & Fees (Account )decreased by $5,000,or by 18.5%,due to decreased memberships. Building & Operating Permits (Account No ) decreased by 15,000, or by 12.0%, as a result of fluctuating regulatory agency fees. Software Maintenance Services (Account No ) decreased by $12,000, or by 17.1%, due to a reduction in CAD and GIS support services. Building & Grounds Maintenance Services (Account No ) increased by $7,000, or by 100.0%, due to increased maintenance of grounds owned or leased by the City. Infrastructure Maintenance Services (Account No ) increased by $10,000, or by 100%, due to upkeep of City owned or leased infrastructure. Disposal Fee (Account No ) increased by $20,000, or by 400.0%, due to the proposed removal and disposal of a 20,000 gallon fuel tank at the Bailey fuel farm. Other Contractual Services (Account No ) increased by $13,000, or by 130%, due to anticipated concrete repairs. Engineering & Consulting Services (Account No ) increased by $50,000, or by 100.0%, due FERC accelerated inspection requirements of the Whitman Lake Hydroelectric Project. Management & Consulting Services (Account No ) increased by $25,000, or by 25%, due to identified services for compliance permits and licenses such as FERC Part 12. Computers, Printers, and Copiers (Account No )increased by $15,000,or by 75%,to replace the office copy machine. Interdepartmental Finance (Account No ) increased by $26,420, or by 6.2%, due to rising personnel costs caused by step increases and cost of living adjusdtments. Interdepartmental Information Technology (Account No ) decreased by $10,720, or by 4.9%, due to a reduction in staffing when a planned retirement occurs in April G - 6

56 Electric Division Operations 5200 Interdepartmental Insurance (Account No ) decreased by $37,500, or by 18.4%, because excess marine liability insurance premiums allocated to the Electric Division for the 2015 Budget were incorrect. The estimate for 2015 and the amount requested for 2016 reflects the proper allocation of the premiums for excess marine liability insurance. The decrease was also due to a rebate from the insurance pool. DIVISION OPERATING BUDGET DETAIL Budget Adopted/2016 Operating Expenditures Actual Adopted Amended Estimate Budget Incr(Decr) % Personnel Services and Benefits Regular Salaries and Wages 2,931,189 3,100,139 3,084,039 3,003,600 3,128,290 28, % Overtime Wages 248, , , , , % Temporary Wages 55,948 70,000 70,000 62,900 70, % Payroll Taxes 244, , , , ,980 2, % Pension 481, , , , ,850 5, % Insurance Health 698, , , , ,200 40, % Insurance Workers Compensation 144, , , , ,100 (1,000) 0.7% Other Benefits 1,017 69,700 91,547 91,500 57,660 (12,040) 17.3% Allowances KPU Clothing 5,426 9,000 9,000 9,000 9, % Allowances Medical Expenses % Personnel Services and Benefits 4,810,239 5,156,739 5,156,739 4,986,400 5,219,580 62, % Supplies Office Supplies 12,338 14,500 14,500 14,500 14, % Operating Supplies 6,962 5,500 7,000 7,000 7,000 1, % Safety Program Supplies 17,167 25,500 34,500 34,500 30,000 4, % Janitorial Supplies % Small Tools & Equipment 27,521 40,000 40,000 35,000 35,000 (5,000) 12.5% Vehicle Maintenance Materials 74,202 70,000 79,600 79,600 70, % Building & Grounds Maint Materials 17,461 32,000 32,000 30,000 30,000 (2,000) 6.3% Furnitures & Fixtures Maint Materials % Machinery & Equip Maint Materials 28,143 80,000 60,200 50,000 50,000 (30,000) 37.5% Infrastructure & Plant Maint Materials 360, , , , , % Postage 906 1,000 1,000 1,000 1, % Freight Materials & Supplies 24,026 18,000 18,000 18,000 18, % Generation Diesel Fuel 423, , , , , % Generation Oil Lubricants 7,559 8,500 8,500 8,500 33,500 25, % Heating Fuel 5,005 6,000 6,000 5,000 6, % Vehicle Motor Fuel & Lubricants 55,410 55,000 55,000 55,000 55, % Purchased Power 5,978,764 6,120,000 5,685,000 5,685,000 6,120, % Purchased Power Rebate (462,411) (425,000) (425,000) (787,000) (450,000) (25,000) 5.9% Machinery & Equip Fuel & Lubricants 1,291 3,000 3,000 3,000 3, % Whitman Lake SEAPA True up 157, , ,000 NA Periodicals 447 1,000 1,000 1,000 1, % Professional & Technical Publications ,500 1,500 1,500 1, % Moving Expenses 15,000 15,000 15,000 15, % Business and Meal Expenses 2,457 3,000 3,000 3,000 3, % Special Protective Clothing 3,050 3,000 3,000 3,000 3, % Supplies 6,742,928 6,762,400 6,763,700 6,383,500 6,732,400 (30,000) 0.4% G - 7

57 Electric Division Operations Budget Adopted/2016 Operating Expenditures Actual Adopted Amended Estimate Budget Incr(Decr) % Contract/Purchased Services Travel Business 1,615 9,000 9,000 9,000 9, % Travel Training 3,361 20,000 20,000 20,000 20, % Travel Training and Education 32,810 51,200 51,200 51,200 51, % Ads & Public Announcements 16,650 15,000 14,000 14,000 14,000 (1,000) 6.7% Community Grant Program 87,710 NA Professional and Technical Licenses 4,000 4,000 4,000 4, % Assn. Membership Dues & Fees 14,305 27,000 22,000 22,000 22,000 (5,000) 18.5% Building & Operating Permits 82, , , , ,000 (15,000) 12.0% Vehicle Licenses 235 1,500 1,500 1,500 1, % Janitorial and Cleaning Services 3,600 6,000 6,000 6,000 6, % Vehicle Maintenance Services 5,000 25,411 25,411 5, % Software Maintenance Services 41,507 70,000 58,000 58,000 58,000 (12,000) 17.1% Bldg & Grounds Maintenance Services 130 7,000 7,000 7,000 7,000 New Machinery & Equipment Maint Services 1,721 NA Infrastructure Maintenance Services 23,754 10,000 10,000 10,000 10,000 New Disposal Services 5,000 5,000 5,000 25,000 20, % Technical Services 205, , , , ,000 3, % Other Contractual Services 12,298 10,000 24,400 24,400 23,000 13, % Engineering & Architectural Services 53,990 50,000 50,000 50, ,000 50, % Management & Consulting Services 101, , , , ,000 25, % Rents & Leases Land & Buildings 23,572 25,000 25,300 25,300 25, % Rents & Leases Machinery & Equip 2,203 2,000 2,000 2,000 2, % Telecommunications 135, , , , , % Electric, Water, Sewer & Solid Waste 41,761 42,000 42,000 42,000 42, % Contract/Purchased Services 885, , , , ,700 95, % Minor Capital Furniture and Fixtures 10,236 15,000 15,000 15,000 15, % Computers, Printers, and Copiers 13,186 20,000 20,000 20,000 35,000 15, % Infrastructure and Plant 7,500 7,500 7,500 7, % Software 9,790 23,500 23,500 23,500 23, % Minor Capital Outlay 33,212 66,000 66,000 66,000 81,000 15, % Interdepartmental Charges Interdept'l Administrative 186, , , , ,050 (4,820) 2.3% Interdept'l Human Resources 64,140 71,390 71,390 69,880 70,340 (1,050) 1.5% Interdept'l Finance 406, , , , ,180 26, % Interdept'l Information Tech 204, , , , ,820 (10,720) 4.9% Interdept'l Insurance 111, , , , ,700 (37,500) 18.4% Interdepartmental Charges 972,791 1,129,760 1,141,880 1,062,800 1,102,090 (27,670) 2.4% Debt Service Debt Service Principal 1,459,090 1,735,000 1,735,000 1,735,000 1,805,000 70, % Debt Service Interest 711, , , , ,730 (64,250) 9.0% Debt Service 2,170,496 2,444,980 2,444,980 2,444,980 2,450,730 5, % Other Costs Payment in Lieu of Taxes 381, , , , , % Other Costs 381, , , , , % Total Expenditures by Type 15,997,011 16,846,572 16,904,103 16,274,484 16,967, , % G - 8

58 Electric Division Operations 5200 NARRATIVE Regular Salaries and Wages: $3,128,290 This account provides for compensation paid to all regular salaried and hourly employees of the Electric Division Overtime Wages: $200,000 This account provides for compensation paid to all regular and temporary hourly employees for hours worked in excess ofa regular working cycle Temporary Wages: $70,000 This account provides for compensation paid to temporary salaried and hourly employees of the Electric Division Payroll Taxes: $259,980 This account provides for employer contributions for Social Security and Medicare and other similar payroll related taxes Pension: $545,850 This account provides for employer contributions to retirement plans Health and Life Insurance: $806,200 This account provides for employer contributions to employee health and life insurance plans Workers Compensation $142,100 This account provides for employer contributions for workers compensation Other Benefits: $57,660 This account provides for expenditures for direct claims from former employees for unemployment benefits paid bythe Stateof Alaska and accrued vacation and sick leave Allowances KPU Clothing: $9,000 This account provides for employer provided protective clothing and flame resistant protective clothing allowances paid directly to represented employees of Ketchikan Public Utilities pursuant to collective bargaining agreementsor the Personnel Rules Allowances Medical Expenses: $500 This account provides for employee medical exams paid directly to employees. These benefits are taxable to the employees Office Supplies: $14,500 This account provides for paper, pens, pencils, adding machine ribbons and tape, note pads, file folders, scotch tape, toner, ink cartridges, photocopy charges, small desk accessories and minor office equipment such as adding machines, staplers, comb binding machines and tape dispensers Operating Supplies: $7,000 This account provides for supplies that are normally not of a maintenance nature and are required to support department operations. Included are supplies such as, medical supplies, general materials for public programs, and engineering materials Safety Program Supplies: $30,000 This account provides for safety training audio and video programs, safety equipment such as gloves, hard hats and hearing protection, OSHA medical exams, specialized hazardous materials handling and disposal information, and specialized traffic control, and protective safety equipment and clothing Janitorial Supplies: $500 This account provides for cleaning and sanitation supplies used by in house and contracted janitors Small Tools and Equipment: $35,000 This account provides for minor tools, operating and office equipment with a value of less than $1,000. Included are hand tools, chain saws, blow torches, hydraulic jacks, sump pumps, computer accessories, space heaters, kitchen and dining equipment, radios, calculators, file cabinets and similar types of minor tools and equipment Vehicle Maintenance Materials: $70,000 This account provides for the repair and maintenance of vehicles owned or leased and operated by the division. Included are licensed and unlicensed rolling stock and boats Building and Ground Maintenance Materials: $30,000 This account provides for expenditures for the repair and maintenance of buildings and upkeep of the grounds owned or leased and operated by the City. G - 9

59 Electric Division Operations Furniture & Fixtures Maint Materials: $500 This account provides expenditures for the repair and maintenance of furniture and building fixtures owned or leased and operated by the City Machinery and Equipment Maintenance Materials: $50,000 This account provides for the expenditures for the repair and maintenance of machinery and equipment owned or leased and operated by the City. Included are office equipment, operating equipment, computer networks, and computers Infrastructure and Plant Maintenance Materials: $350,000 This account provides for the expenditures for the repair and maintenance of infrastructure and plant owned or leased and operated by the division. Included are hydroelectric facilities, dams, electric substations, generators, fuel tank farms, overhead and underground electric and telecommunication facilities and telecommunications Postage: $1,000 This account provides for postal related services such as postage, express delivery, mailing materials and the rent of post office boxes and postage machines Freight Materials and Supplies: $18,000 This account provides for shipping and transporting supplies and material to and from vendors Generation Diesel Fuel: $334,900 This account provides for diesel fuel to operate the electric generators used to produce electric energy for resale by Ketchikan Public Utilities Generation Oil Lubricants: $33,500 This account provides for lubricants required for the operation of diesel generation equipment Heating Fuel: $6,000 This account provides for heating fuel to heat facilities owned or leased and operated by the division Vehicle Motor Fuel and Lubricants: $55,000 This account provides for gasoline, diesel fuel, propane and lubricants used in the operations of the division s vehicles and vessels Purchased Power: $6,120,000 This account provides for electric energy purchased from SEAPA for resale by Ketchikan Public Utilities Purchased Power Rebate: ($450,000) This account provides for the credits for electric energy purchased from a thirdparty utility for resale by Ketchikan Public Utilities Machinery and Equipment Fuel and Lubricants: $3,000 This account provides for the expenditure for gasoline, diesel fuel, propane and lubricants used in the operations of City and Ketchikan Public Utilities machinery and equipment Periodicals: $1,000 This account provides for the expenditures for newspapers, magazines and trade journals Professional and Technical Publications: $1,500 This account provides for professional and technical publications. Included are professional handbooks, print and electronic subscription services for management, electrical engineering, building codes, professional standards and technical journals Moving Expenses: $15,000 This account provides for direct payments or reimbursements to employees for expenditures incurred to relocate to Ketchikan Business and Meal Expenses: $3,000 This account provides for reimbursements to employees for business and job related meals and other business related expenses Special Protective Clothing: $3,000 This account provides for employer provided clothing purchased for use by department or division personnel. G - 10

60 Electric Division Operations Travel Business: $9,000 This account provides for transportation, lodging, meals, per diems and other incidental expenses associated with travel for business and trade meetings and recruitment efforts. Travel expenses incurred by candidates during recruitment searches are charged to this account Travel Training: $20,000 This account provides for transportation, lodging, meals, per diems and other incidental expenses associated with travel for training Training and Education: $51,200 This account provides for registration fees, training fees, training materials, tuition reimbursements and other incidental expenses associated with training and educating employees Ads and Public Announcements: $14,000 This account provides for advertising and announcements in publications, newspapers, trade journals, Internet or broadcasts over radio and television. Included are legal notices, public service announcements, community issues, recruiting, requests for proposals, contracts and sales of property and equipment Professional and Technical Licenses: $4,000 This account provides for expenditures for licensing professional, technical, and other employees requiring a license in order to perform their duties. Included are fees paid to license engineers, accountants, attorneys, commercial drivers: and fees paid for technical certifications required by medical technicians, notaries, surveyors, divers and operators of special equipment Assn. Membership Dues & Fees: $22,000 This account provides for memberships in professional and trade associations such as Northwest Public Power Association and Southeast Alaska Petroleum Resource Organization Building and Operating Permits: $110,000 This account provides for permits required for construction, environmental, occupancy and operations required by the Federal Energy Regulatory Commission, Alaska Department of Environmental Conservation, and Department of Transportation for right of way and traffic control permits Vehicle Licenses: $1,500 This account provides for licensing the division s vehicles for operations on public highways Janitorial and Cleaning Services: $6,000 This account provides for expenditures for services to clean facilities and equipment owned or leased by the City. Included are janitorial, carpet cleaning and laundry services Vehicle Maintenance Services: $5,000 This account provides for expenditure for the repair and maintenance of the division s vehicles by third party providers. Included are licensed and unlicensed rolling stock and boats. This account includes contract labor and materials required to provide the service Software and Equipment Maintenance Services: $58,000 This account provides for maintenance agreements to support licensed software systems and other technology based systems that include both software and hardware components such as OSI for the SCADA system, Cannon for the automated meter reading system and AutoCAD for the computer aided geographic information system (GIS) Buildings and Grounds Maintenance Services: $7,000 This account provides for repair and maintenance of buildings and the upkeep of grounds owned or leased by the City. This includes contract labor and materials required to provide the service Infrastructure and Plant Maintenance Services: $10,000 This account provides for repair and maintenance of infrastructure owned or leased by the city. This includes contract labor and materials required to provide the service Disposal Services: $25,000 This account provides for the disposal of hazardous materials such as PCBs, asbestos and lead, transformers and other environmentally sensitive material Technical Services: $208,000 This account provides for services that are not regarded as professional but require technical or special knowledge. Included are tree pruning and substation vegetation control. G - 11

61 Electric Division Operations Other Contractual Services: $23,000 This account provides for contractual services not identified in the account classifications under contractual services such as oil and water analysis, abatement, and equipment and tool dielectric tests Engineering and Architectural Services: $100,000 This account provides for engineering services for system protection, FERC required dam surveys and hydrology studies Management and Consulting Services: $125,000 This account provides for management and consulting services. Included are project management, rate studies, management studies and other management and consulting engagements requiring persons or firms with specialized skills and knowledge such as OSHA and National Electric Safety Code Rents and Leases Land and Buildings: $25,000 This account provides for the rent and lease of land and buildings for storage yards and covered storage facilities Rents and Leases Machinery & Equipment: $2,000 This account provides for the rent and lease of machinery and equipment. Both operating and capital leases are accounted for in this account Telecommunications: $132,000 This account provides for wired and wireless telecommunication services. Included are landline and cell phone services, network and data services, charges for wired and wireless telecommunications services, Internet,long distance and toll free numbers. Purchases of cell phones are also charged to this account Electric, Water, Sewer & Solid Waste: $42,000 This account provides for electric, water, sewer and solid waste utility services Furniture and Fixtures: $15,000 This account provides for acquisition of furniture and fixtures. Included are desks, chairs, tables, workstations, file cabinets, storage cabinets and building fixtures Computers, Printers and Copiers $35,000 This account provides for expenditures for machinery and equipment usually composed of a complex combination of parts. Included are office equipment and operating equipment required to provide services or maintain capital assets Infrastructure and Plant: $7,500 This account provides for the acquisition of large scaled capital assets other than buildings which are generally constructed and have estimated economic lives between 30 and 100 years. Included are, hydroelectric facilities, dams, electric substations, generators, fuel tank farms, line extensions and overhead and underground electric infrastructure. Architectural, engineering and construction costs relating to infrastructure and plant would be charged to this account instead of Contract/Purchased Services Accounts Nos. 600 through Software: $23,500 This account provides for acquisition of software systems and upgrades not covered by maintenance agreements Interdepartmental Charges Administrative: $201,050 This account provides for administrative and management services provided by the departments of the City Council, City Clerk and City Attorney and the administrative office of the City Manager Interdepartmental Charges Human Resources: $70,340 This account provides for human resource services provided by the Human Resources Division Interdepartmental Charges Finance: $455,180 This account provides for financial, accounting, payroll, accounts payable, billing, customer service and budgeting services provided by the Finance Department Interdepartmental Charges Information Technology: $208,820 This account provides for information technology services provided by the Information Technology Department Interdepartmental Charges Insurance: $166,700 This account provides for risk management services and claims. G - 12

62 Electric Division Operations Debt Service Principal: $1,805,000 This account provides for principal on revenue bonds Debt Service Interest: $645,730 This account provides for interest on revenue bonds Payments in Lieu of Taxes: $381,993 This account provides for payments in lieu of taxes assessed against the enterprise funds of the City. G - 13

63 Electric Division Capital Budget Budget Adopted/2016 Major Capital Projects Actual Adopted Amended Estimate Budget Incr(Decr) % Vehicles and Moving Equipment 26, , , , , , % Machinery and Equipment 741,357 1,172,490 1,207, ,500 1,200,200 27, % Infrastructure 3,604, ,000 1,269, ,000 1,637, , % Total Major Capital Outlay 4,372,461 2,135,490 2,595,079 1,802,500 3,170,600 1,035, % 2016 Capital Improvement Projects Funding Sources Project # Project KPU Enterprise Fund Grants Bonds Total Vehicles and Moving Equipment Vehicle and Moving Equipment 333, ,300 Total Vehicles and Moving Equipment 333, , Machinery and Equipment Generator Cleaning & Testing 180, ,000 Whitman Oil Water Separator 50,000 50,000 Whitman Lake Hydroelectric Project 260, ,000 Substation 34.5 kv Tie Breaker Spare 45,000 45,000 Substation Transformer Testing 75,700 75,700 AMI Meters & Meter Replacement Parts 150, ,000 Operating Equipment 279, ,500 Bailey Exhaust Stack Painting 160, ,000 Total Machinery and Equipment 1,200,200 1,200, Infrastructure Transmission & Distribution Maintenance 350, ,000 Downtown Underground Upgrade 110, ,000 System Sectionalizing Fault Study 135, ,000 Transformer Purchase 150, ,000 Reimbursable Projects 87,600 87,600 Ward Cove Expansion 45,000 45,000 Pennock KIA Upgrade 50,000 50,000 North Tongass Highway Preliminary Design 50,000 50,000 Additional Projects 154, ,500 Beaver Falls Powerhouse Exterior 300, ,000 Electric Division Headquarters Exterior 125, ,000 Ketchikan Lakes Log Boom 80,000 80,000 Total Infrastructure 1,637,100 1,637,100 Total 2016 Capital Budget 3,170,600 3,170,600 G - 14

64 Electric Division Capital Budget 2016 Expenditures by Type 2016 Expenditures by Funding Source 10.51% 51.63% 37.85% 100% KPU Enterprise Fund Vehicles and Moving Equipment Machinery and Equipment Infrastructure G - 15

65 Telecommunications Division Summary The Telecommunications Division is one of three utilities operated by Ketchikan Public Utilities and owned by the City of Ketchikan. Operations include both regulated and non regulated activity and provide service to approximately 6,600 customers. Ketchikan Public Utilities Telecommunications Division KPU The Telecommunications Division operates operates one division one division and oversees and oversees one Capital oneimprovement Capital Improvement Program. Program. DEPARTMENT EXECUTIVE SUMMARY Budget Adopted/2016 Divisions/Cost Center/Programs Actual Adopted Amended Estimate Budget Incr(Decr) % Operations 12,097,217 13,510,194 14,008,804 13,910,892 14,122, , % Capital Improvement Program 3,079,763 1,910,000 1,908,750 1,908,750 1,615,000 (295,000) 15.4% Total 15,176,980 15,420,194 15,917,554 15,819,642 15,737, , % Budget Adopted/2016 Expenditures by Category Actual Adopted Amended Estimate Budget Incr(Decr) % Personnel Services and Benefits 4,893,754 5,300,812 5,300,812 5,252,100 5,348,800 47, % Supplies 1,230, , , ,950 1,062, , % Contract/Purchased Services 4,633,492 5,596,135 6,087,245 6,075,745 6,031, , % Minor Capital Outlay 43,970 16,000 16,500 10,500 19,600 3, % Interdepartmental Charges 923,748 1,042,730 1,042,730 1,011,030 1,026,970 (15,760) 1.5% Debt Service 165, , , , , % Payment in Lieu of Taxes 206, , , , , % Major Capital Outlay 3,079,763 1,910,000 1,908,750 1,908,750 1,615,000 (295,000) 15.4% Total 15,176,980 15,420,194 15,917,554 15,819,642 15,737, , % Budget Adopted/2016 Funding Source Actual Adopted Amended Estimate Budget Incr(Decr) % KPU Enterprise Fund 13,821,486 15,420,194 15,917,554 15,819,642 15,737, , % Interfund Loan 1,355,494 NA Total 15,176,980 15,420,194 15,917,554 15,819,642 15,737, , % Budget Adopted/2016 Full time Equivalent Personnel Actual Adopted Amended Budget Salary Incr(Decr) % Operations ,261, % Total ,261, % H - 1

66 Telecommunications Division Operations 5300 MISSION STATEMENT The Telecommunications Division is committed to providing high quality telecommunication products and services to residents and businesses of the City of Ketchikan and the Ketchikan Gateway Borough at competitive rates. Management and staff strive to maintain quality customer service and competitive pricing, while concurrently working to maximize the Utility s value to its owner, the City of Ketchikan. The Telecommunications Division will continue to introduce new cost effective technologies that will aid in the community s economic revitalization. The division stands ready to assist its customers as efficiently and effectively as possible within guidelines established by federal and state law, the Charter of the City of Ketchikan, the Ketchikan Municipal Code and the ratepayers of the Utility as represented by the City Council. Warehouse Person Warehouse Worker/General Laborer Assistant Telephone & Regulatory Affairs Manager Administrative Assistant Accounting Technician Access Rate Specialist Tariff Rate Specialist Telecommunications Division Manager Telephone Engineer Journeyman Central Office Network Technician (3) Journeyman Central Office Network Technician (4) General Manager Network Operations & Engineering Manager Customer Support Specialist (3) Outside Plant Manager Plant Service Clerk (3) Journeyman Combination Person (8) Outside Plant Foreman Telecom Apprentice (2) Outside Plant Engineer Engineering Technician Journeyman Cable Splicer (2) Sales Marketing & Customer Service Division Manager ISP Foreman (Business) Journeyman Central Office Network Technician (Business) (2) GOALS FOR 2016 The division s 2016 capital budget goals are essentially divided between Revenue & Competitive Strategy, Efficiency & Quality of Service, and Ongoing Operations: Revenue & Competitive Strategy: 2015 marked completion of the Microwave to Canada project. This project, in conjunction with the undersea fiber IRU, fiber to the home, new Hosted IP platform and Verizon 4G/LTE partnership, ensures that the Telecommunications Division's network is well positioned to compete with other carriers. Going forward the division's capital requirements relative to revenue and competitive strategy are primarily focused on more routine network moves, additions and other changes withone notable exception. The 2016 budget includes $95,000 to add components to the microwave system, which will enable KPU Telecommunications to secure cross border frequency for growth in capacity. H - 2

67 Telecommunications Division Operations 5300 Efficiency: The 2016 budget includes replacement of a single vehicle, a division line truck ($300,000). This vehicle is necessary to support daily maintenance, repair and installation of the division's aerial cable plant. This vehicle is very near the end of its useful life and is the division's only line truck equipped with hydraulic and related built in tools necessary for construction of aerial cable plant. Quality of Service/Ongoing Operations: The balance of the 2016 budget funds acquisition of material necessary to serve new customers (blade server, set top boxes) and the ongoing operations of the overall network. The division s 2016 operating budget is essentially flat compared to 2015, with the exception of Contract/Purchased Services (an increase of $435,500). The primary causes of the increase in this category include the addition of a redundant circuit in Skagway ($50,000 in Account No ); continued increases in network broadcast content fees and rates; customer growth ($253,750 in Account No ); and a projected increase in consulting services due to the complex nature of network rearrangement and related maintenance activity in 2016 ($66,450 in Account No ). ACCOMPLISHMENTS FOR 2015 KPU completed construction of the Ketchikan Prince Rupert Microwave project. This new microwave link establishes a terrestrial redundant off island link to the mainland, providing the second of two off island network connections to the 4G/LTE core as well as redundancy for the KPU network (should the submarine fiber fail). KPU expanded its cellular serving area by deploying Ericsson Cellular Radios in Herring Cove, Beaver Falls and Skagway. Very High Digital Subscriber Loop (VDSL) was deployed at several additional locations. VDSL allows KPU to push fiber closer to its apartment dwelling customers while continuing to use the existing house wiring within the apartment complex. VDSL services include enough bandwidth to allow High Definition TV services, fast Internet speeds and Personal Video Recording capabilities that were limited prior to the VDSL deployment. The division continued to make excellent progress on the structured cabling renovation project, which is necessary to create an orderly and fail safe network cabling environment. The division continued to support the Sales, Marketing & Customer Service Division s successful sale of Hosted Business Telephone Systems. Year to date, this strategically important product line has grown 21% in customers and lines served. The division s customer list has grown to include most of Ketchikan s largest and most important businesses. The division had an active year regarding personnel including one long term employee retiring, multiple internal promotions and several new hires. The division continued to actively cut over customers to fiber optic service. Over 1,600 customers are now served via fiber to the home. The division successfully completed the complex and time consuming Water Street Trestle project. The division completed placing fiber optic cable throughout the downtown area to prepare for a fiber to the business upgrade offering. The division implemented battery replacement programs, to ensure that backup systems in KPU facilities, as well as in subscribers premises, are in good working order. Significant efficiencies have been gained via the division s new managed dispatching effort. H - 3

68 Telecommunications Division Operations 5300 The division began hosting its monthly safety meeting at the Ted Ferry Civic Center and hired ESCI to provide monthly safety training. Safety meetings are now well attended and the division is on track with required federal, state and locally required safety training. The division plans to upgrade its 700mghz radio telephone and data service to Loring and Moser Bay in late The division plans to deploy a submarine fiber optic cable upgrade to the Ketchikan International Airport in late 2015, providing a redundant/back up to the existing under channel copper cable presently serving the airport area. DIVISION SUMMARY Budget Adopted/2016 Expenditures by Category Actual Adopted Amended Estimate Budget Incr(Decr) % Personnel Services and Benefits 4,893,754 5,300,812 5,300,812 5,252,100 5,348,800 47, % Supplies 1,230, , , ,950 1,062, , % Contract/Purchased Services 4,633,492 5,596,135 6,087,245 6,075,745 6,031, , % Minor Capital Outlay 43,970 16,000 16,500 10,500 19,600 3, % Interdepartmental Charges 923,748 1,042,730 1,042,730 1,011,030 1,026,970 (15,760) 1.5% Debt Service 165, , , , , % Payment in Lieu of Taxes 206, , , , , % Total Expenditures 12,097,217 13,510,194 14,008,804 13,910,892 14,122, , % Budget Adopted/2016 Funding Source Actual Adopted Amended Estimate Budget Incr(Decr) % KPU Enterprise Fund 12,097,217 13,510,194 14,008,804 13,910,892 14,122, , % Total Funding 12,097,217 13,510,194 14,008,804 13,910,892 14,122, , % Budget Adopted/2016 Full time Equivalent Personnel Actual Adopted Amended Budget Salary Incr(Decr) % EXECUTIVE & PLANNING Division Manager , % Administrative Assistant , % GENERAL & ADMINISTRATIVE Assistant Manager , % Tariff Specialist , % Access Rate Specialist , % Accounting Technician , % ENGINEERING SERVICES Engineering Manager , % Engineer , % Outside Plant Engineer , % Engineering Technician , % H - 4

69 Telecommunications Division Operations Budget Adopted/2016 Full time Equivalent Personnel Actual Adopted Amended Budget Salary Incr(Decr) % PLANT SPECIFIC Outside Plant Foreman , % Journeyman Cable Splicer , % Journeyman Combination Tech ,288 (1.00) 11.1% Apprentice Telecom , % Inside Plant Foreman , % Journeyman CO Network Tech , % Customer Support Specialist , % PLANT NON SPECIFIC Plant Manager , % Plant Service Clerk , % Warehouse Worker , % Warehouse Worker/Laborer , % Total ,261, % 2016 Expenditures by Type 1.63% 42.28% 47.68% Personnel Services and Benefits Supplies Contract/Purchased Services Payment in Lieu of Taxes 8.40% OPERATING BUDGET CHANGES FOR 2016 Changes between the adopted operating budget for 2015 and the proposed operating budget for 2016 that are greater/lesser than 5% and $5,000 are discussed below Personnel Services and Benefits increased by $47,988, or by.9%, due to annual employee step increases; and a 1.6% cost of living adjustment and decreased employee health insurance co pays for non represented employees that became effective January 1, As a new collective bargaining agreement has yet to be reached, no cost of living adjustments have been programmed for employees of IBEW, Local 1547 for either FY 2015 or FY A proposed 2.0% cost of living adjustment for non represented employees has been budgeted for Infrastructure & Plant Maint Materials (Account No ) increased by $138,600, or by 30.4% as the historical trending for this account has increased in 2014 and Much of this expense is based on sales of equipment and installation services to customers such as Hosted PBX systems, which have been consistently increasing year over year. Additionally, the division has been adding new products such as managed router and Wi Fi services. Freight Materials & Supplies (Account No ) increased by $10,000, or by 21.7%, as the historical trending for this account has increased in 2014 and The division had reduced the budget for this account by approximately the same amount in the 2015 budget. H - 5

70 Telecommunications Division Operations 5300 Advertising and Publishing General (Account No ) increased by $23,000, or by %, due to the reclassification of certain advertising expenses from Account No to Account No Note that Account No decreased by the same amount so overall the budget item for advertising is flat year over year. Ads & Public Announcements (Account No ) decreased by $23,000, or by 29.7%, due to the reclassification of certain advertising expenses from Account No to Account No Note that Account No increased by the same amount so overall the budget item for advertising is flat year over year. Building & Operating Permits (Account No ) increased by $59,300, or by 25.7%, primarily due to an increase in the amount of Federal Universal Service Fund (USF) contributions that are required to be paid to the Universal Service Administrative Corporation. This contribution is mandated by the Federal Communications Commission. Broadcast Content Fees (Account No ) increased by $253,750 or by 23.8%, due to customer growth in the division s IPTV service, as well as increases to annual programming costs from content providers. There are antiquated "Retransmission Consent" rules that the networks have been using to demand ever increasing content fees. Janitorial & Cleaning Services (Account No ) increased by $9,000, or by 60%, due to hiring a professional cleaning service that will properly clean division facilities. KPU Telecom has had substandard service for the past few years which has been rectified with the new vendor, albeit at a higher cost. Software & Equipment Maintenance Services (Account No ) decreased by $114,000, or by 22.6%, due to reclassification of certain technical services from Account No to Account No Account No increased the exact some amount for a zero net change year over year for the two accounts. Technical Service (Account No ) increased by $114,000, or by %, due to the reclassification of certain technical services from Account No to Account No Account No decreased the exact some amount for a zero net change year over year for the two accounts. Engineering and Consulting Services (Account No ) increased by $66,450, or by 41.9%, due to the need for increased professionalip engineeringservices to enhance the division's core network, security and redundancy schemes. Management and Consulting Services (Account No ) decreased by $10,000, or by 7.4%, due to increased reliance on industry trade associations for advocacy instead of professional consulting services. Rents and Leases Land & Buildings (Account No ) increased by $15,000, or by 9.4%, due to an upward trend in this account from escalation clauses in lease contracts. Interdepartmental Finance (Account No ) increased by $21,030, or by 6.2%, due to rising personnel costs caused by step increases and cost of living adjusdtments. Interdepartmental Information Technology (Account No ) decreased by $18,270, or by 4.9%, due to a reduction in staffing when a planned retirement occurs in April Interdepartmental Insurance (Account No ) decreased by $13,600, or by 15.1%, because excess marine liability insurance premiums allocated to the Telecommuknications Division for the 2015 Budget were incorrect. The esimate for 2015 and the amount requested for 2016 reflects the proper allocation of the premiums for excess marine liability insurance. The decrease was also due to a rebate from the insurance pool. H - 6

71 Telecommunications Division Operations 5300 DIVISION OPERATING BUDGET DETAIL Budget Adopted/2016 Operating Expenditures Actual Adopted Amended Estimate Budget Incr(Decr) % Personnel Services and Benefits Regular Salaries and Wages 2,993,864 3,203,712 3,098,012 3,097,300 3,261,940 58, % Overtime Wages 239, , , , , % Temporary Wages 8,148 14,500 14,500 13,200 14, % Payroll Taxes 241, , , , ,180 4, % Pension 533, , , , ,110 13, % Health and Life Insurance 765, , , , ,300 (18,700) 2.2% Workers Compensation 58,641 86,600 86,500 82,800 83,210 (3,390) 3.9% Other Benefits 49,322 65,200 65,300 65,300 59,860 (5,340) 8.2% Allowances KPU Clothing 3,721 3,700 3,700 3,700 3, % Allowances Medical Expenses (500) 100.0% Personnel Services and Benefits 4,893,754 5,300,812 5,300,812 5,252,100 5,348,800 47, % Supplies Office Supplies 13,715 16,900 16,900 16,900 16, % Operating Supplies 14,554 15,000 15,000 15,000 15, % Safety Program Supplies 11,999 10,000 17,000 17,000 14,000 4, % Janitorial Supplies 6,045 7,500 7,500 7,500 6,000 (1,500) 20.0% Small Tools & Equipment 36,800 34,750 34,750 34,750 34, % Food & Catering New Inventory for Resale 220, , , , % Vehicle Maintenance Materials 27,626 30,000 30,000 30,000 28,000 (2,000) 6.7% Building & Grounds Maint Materials 22,083 15,000 15,000 15,000 15, % Machinery & Equipment Maint Materia 747 NA Infrastructure & Plant Maint Materials 964, , , , , , % Postage 883 2,500 2,500 2,500 1,500 (1,000) 40.0% Freight Materials & Supplies 54,362 46,000 46,000 46,000 56,000 10, % Heating Fuel 5,135 9,000 9,000 9,000 9, % Vehicle Motor Fuel & Lubricants 37,409 39,500 39,500 39,500 35,000 (4,500) 11.4% Periodicals 298 NA Professional & Technical Publications 769 1,900 1,900 1,900 1,000 (900) 47.4% Moving Expenses Non Taxed 31,454 12,000 12,000 12,000 12, % Business and Meal Expenses 1,081 3,500 3,500 3,500 2,000 (1,500) 42.9% Uniforms/Badges/Clothing 739 2,000 2,000 2,000 1,500 (500) 25.0% Supplies 1,230, , , ,950 1,062, , % H - 7

72 Telecommunications Division Operations Budget Adopted/2016 Operating Expenditures Actual Adopted Amended Estimate Budget Incr(Decr) % Contract/Purchased Services Travel Business 56,680 42,500 42,500 42,500 45,000 2, % Travel Training 16,719 33,600 32,150 32,150 30,000 (3,600) 10.7% Travel Training and Education 32,088 14,150 15,600 15,600 15,250 1, % Advertising and Publishing General 18,830 23,000 23,000 New Ads & Public Announcements 52,306 77,500 77,500 77,500 54,500 (23,000) 29.7% Community Promotion 250 4,000 4,000 4,000 4, % Community Grant Program 69,810 52,685 52,685 52,685 52, % Professional Licenses & Cert New Assn. Membership Dues & Fees 38,731 45,000 45,000 45,000 44,000 (1,000) 2.2% Building & Operating Permits 181, , , , ,000 59, % Vehicle Licenses % Bank & Merchant Fees % Broadcast Content Fees 1,056,395 1,064,000 1,255,000 1,255,000 1,317, , % Software Licenses New Service Charges and Fees (250) 33.3% Janitorial & Cleaning Services 16,491 15,000 15,000 15,000 24,000 9, % Vehicle Maintenance Services 8,610 12,000 12,000 10,000 10,000 (2,000) 16.7% Software & Equip. Maint. Services 392, , , , ,000 (114,000) 22.6% Building and Grounds Maint. Svc 10,581 5,000 20,500 20,500 9,000 4, % Machinery & Equipment Maint. Svc 18,623 15,000 15,000 15,000 16,500 1, % Infrastructure Maint. Services 87,421 94,200 94,200 94,200 94, % Subscription Services New Technical Services , , , , % Marketing Services 137 NA Other Contractual Services 129, , , , , % Legal and Accounting Services 95,425 67, , ,500 67, % Engineering & Architectural Services 217, , , , ,000 66, % Management & Consulting Services 67, , , , ,000 (10,000) 7.4% Rents and Leases Land & Buildings 172, , , , ,000 15, % Rents and Leases Machinery & Equip 2,142 NA Rents and Leases Infrastructure 1,556,532 2,390,000 2,390,000 2,390,000 2,429,000 39, % Telecommunications 136, , , , , % Electric, Water, Sewer & Solid Waste 197, , , , , % Contract/Purchased Services 4,633,492 5,596,135 6,087,245 6,075,745 6,031, , % Minor Capital Buildings 22,316 NA Furniture and Fixtures 4,988 6,000 6,000 6, % Vehicles and Moving Equipment 3,100 3,100 New Machinery and Equipment 16,337 10,000 10,000 10,000 10, % Software % Minor Capital Outlay 43,970 16,000 16,500 10,500 19,600 3, % Interdepartmental Charges Interdept'l Administrative 148, , , , ,020 (3,830) 2.3% Interdept'l Human Resources 65,600 73,020 73,020 71,460 71,930 (1,090) 1.5% Interdept'l Finance 323, , , , ,290 21, % Interdept'l Information Tech 349, , , , ,230 (18,270) 4.9% Interdept'l Insurance 37,479 90,100 90,100 71,300 76,500 (13,600) 15.1% Interdepartmental Charges 923,748 1,042,730 1,042,730 1,011,030 1,026,970 (15,760) 1.5% H - 8

73 Telecommunications Division Operations Budget Adopted/2016 Operating Expenditures Actual Adopted Amended Estimate Budget Incr(Decr) % Debt Service Debt Service Principal 266, , , ,857 10, % Debt Service Interest 165, , , , ,352 (10,648) 6.7% Debt Service 165, , , , , % Other Costs Payment in Lieu of Taxes 206, , , , , % Other Costs 206, , , , , % Total Expenditures by Type 12,097,217 13,510,194 14,008,804 13,910,892 14,122, , % NARRATIVE Regular Salaries and Wages: $3,261,940 This account provides for the cost of annual salaries and wages paid to the employees of the Telecommunications Division Overtime Wages: $216,000 This account provides for premium compensation paid to all non exempt regular and temporary hourly employees for hours worked in excess of a regular working cycle. These excess hours typically occur because of callouts, emergenciesarising from outages and equipment failure and spikes in the workload that is driven by customer demand Temporary Wages: $14,500 This account provides for compensation paid to temporary salaried and hourly employees of the Telecommunications Division during peak workload conditions or to assist with special or temporary projects. These projects can include warehouse projects, tree trimming, trouble deskcall support, flagging,etc Payroll Taxes: $267,180 This account provides for employer contributions for Social Security and Medicare and other similar payroll related taxes Pension: $605,110 This account provides for employer contributions to Alaska Public Employees Retirement System and the IBEW Alaska Health and Welfare Trust retirement plans Health and Life Insurance: $837,300 This account provides for employer contributions to employee health and life insurance plans Workers Compensation: $83,210 This account provides for employer contributions to workers compensation insurance Other Benefits: $59,860 This account provides for expenditures for direct claims from former employees for unemployment benefits paid by the State of Alaska and accrued vacation and sick leave Allowances KPU Clothing: $3,700 This account provides for employer provided protective clothing allowances paid directly to represented employees of the Telecommunications Division pursuant to collective bargaining agreements or the Personnel Rules Office Supplies: $16,900 This account provides for paper, pens, pencils, adding machine ribbons and tape, note pads, file folders, scotch tape, toner, ink cartridges, photocopy charges, small desk accessories and minor office equipment such as adding machines, staplers, comb binding machines and tape dispensers Operating Supplies: $15,000 This account provides for supplies that are normally not of a maintenance nature and are required to support department operations. Included are supplies such as engineering materials, signage, printed supplies, and other supplies that do not meet the criteria of office supplies Safety Program Supplies: $14,000 This account provides for safety information brochures, safety training audio and video programs, safety equipment, OSHA required medical exams, specialized protective safety clothing and traffic control signage Janitorial Supplies: $6,000 This account provides for cleaning and sanitation supplies used by in house and contracted janitors. H - 9

74 Telecommunications Division Operations Small Tools and Equipment: $34,750 This account provides for minor tools, operating and office equipment with a value of less than $1,000. Included are hand tools, chain saws, blow torches, hydraulic jacks, sump pumps, computer accessories, space heaters, kitchen and dining equipment, radios, calculators, file cabinets and similar types of minor tools and equipment Food & Catering: $250 This account provides for a small budget item to purchase food and refreshments to recognize special employee milestonessuchas retirement or other special occasions Inventory for Resale: $220,000 This account provides for inventory purchases that are to be resold or rented to end users. Included are 4G LTE devices that the Telecommunication Division will sell to end user customers Vehicle Maintenance Materials: $28,000 This account provides for the repair and maintenance of vehicles used by the Telecommunications Division. Included are licensed and unlicensed rolling stock and our small boat Building and Grounds Maintenance Materials: $15,000 This account provides materials required for the repair and maintenance of buildings and upkeep of the grounds owned or leased and operated by the Telecommunications Division Infrastructure and Plant Maintenance Materials: $595,000 This account provides materials required for the repair and maintenance of infrastructure and plant owned or leased by the division. Included are overhead and underground telecommunication facilities and telecommunications central and remote office facilities including DSL modems, hosted PBX systems, Internet maintenance equipment and installation materials Postage: 1,500 This account provides for postal related services such as postage,express delivery,mailing materials and the rent of post office boxes and postage machines Freight Materials and Supplies: $56,000 This account provides for shipping or transporting supplies and material to and from vendors Heating Fuel: $9,000 This account provides for heating fuel to heat facilities owned or leased and operated by the division Vehicle Motor Fuel and Lubricants: $35,000 This account provides for gasoline, diesel fuel, propane and lubricants for vehicles used by the division Professional and Technical Publications: $1,000 This account provides professional handbooks, labor related publications, technical manuals, telecommunications code standards and industry related periodicals Moving Expenses: $12,000 This account provides for direct payments or reimbursements to employees for expenditures incurred to relocate to Ketchikan Business and Meal Expenses: $2,000 This account provides for reimbursements to employees for business and job related meals, mileage for use of personal vehicles and other business related expenses Uniforms/Badges/Clothing: $1,500 This account provides for payment of all KPU logo clothing that may be needed for Outside Plant employees, management, etc Travel Business: $45,000 This account provides for transportation, lodging, meals, per diems and other incidental expenses associated with travel for business and trade meetings Travel Training: $30,000 This account provides for transportation, lodging, meals, per diems and other incidental expenses associated with travel for training Training and Education: $15,250 This account provides for registration fees, training fees, training materials, tuition reimbursements and other incidental expenses associated with training and educating employees; and on premises training programs provided by staff or third parties. H - 10

75 Telecommunications Division Operations Advertising and Publishing General: $23,000 This account provides for advertising and announcements in publications, newspapers, trade journals, Internet or broadcasts over radio and television. Included are legal notices, public service announcements, community issues, recruiting, requests for proposals, contracts, directory yellow page advertising and advertisements for sales of property and equipment Ads and Public Announcements: $54,500 This account provides for advertising and announcements in publications, newspapers, trade journals, Internet or broadcasts over radio and television. Included are legal notices, public service announcements, community issues, recruiting, requests for proposals, contracts, directory yellow page advertising and advertisements for sales of property and equipment Community Promotion: $4,000 This account provides for the promotion of community activities and programs. Included are scholarships benefitting local high school students and donations to civic organizations, sport teams and hosting or sponsoring community events Community Agency Grants: $52,685 This account provides for KPU s share of the City s Community Grant Program Professional Licenses & Certification: $250 This account provides for any professional licenses or certifications that the company may want to acquire or keep Assn. Membership Dues & Fees: $44,000 This account provides for memberships in professional and trade associations such as the National Telecommunications Cooperative Association, Alaska Telecommunications Association, and Western Telecommunications Association. These industry organizations pool resources to influence regulations and coordinate legislative action plans. Additional memberships include the National Cable Television Cooperative, which provides the Telecommunications Division with much of its television content Building and Operating Permits: $290,000 This account provides for permits for construction, right of ways, and easements and regulatory fees for operations. Included in this account are USAC USF contributions in the amount of $180,000, Interstate TRS for hearing impaired fees and caller ID data dip fees Vehicle Licenses: $500 This account provides for licensing the division s vehicles for operations on public highways Bank & Merchant Fees: $500 This account provides for expenditures for monthly bank account service charges, merchant fees for use of credit and debit cards, wire transfer fees and other fees for banking services Broadcast Content Fees: $1,317,750 This account provides for the right to broadcast copyrighted intellectual property over the Telecommunications IPTV network. Fees are generally paid on a per customer basis. Customer demand for existing services and the addition of new services and customer demand for the new services determine what the Telecommunication Division must pay for its television content Software Licenses: $250 This account provides for miscellaneous software licenses that are not part of the IT departments normal suite of software licenses Service Charges and Fees: $500 This account provides for expenditures for miscellaneous service charges and fees. Included are filing fees, recording fees and fees not accounted for in other accounts Janitorial & Cleaning Services: $24,000 This account provides for services to clean facilities and equipment owned or leased by the division. Includedare janitorial, carpet cleaning and laundry services Vehicle Maintenance Services: $10,000 This account provides for expenditures for the repair and maintenance of KPU vehicles by outside maintenance facilities. This account includes contract labor and materials required to provide the service. H - 11

76 Telecommunications Division Operations Software and Equipment Maintenance Services: $390,000 This account provides for maintenance agreements to support licensed software and equipment systems. All of the primary equipment platforms the Telecommunications Division utilizes in providing services to customers such as its access and switching platforms requirespecializedsoftware and maintenance support agreements so that staff can keep current versions of software and have access to their support services for outages or other technical difficulties. Also included are software services to support the division's automated provisioning and end user and carrier billing systems Building and Grounds Maintenance Services: $9,000 This account provides for expenditure for the repair and maintenance of buildings and the upkeep of grounds owned or leased by the City/KPU. This account includes contract labor and materials required to provide the service Machinery & Equipment Maintenance Services: $16,500 This account provides for expenditures for the repair and maintenance of office equipment, machinery and other operating equipment owned or leased by the City/KPU. This account includes contract labor and materials required to provide the service. It also includes service maintenance agreements for equipment that does not require software support and are paid on either a fixed fee or fee based on usage Infrastructure and Plant Maintenance Services: $94,200 This account provides contractual services for the repair and maintenance of infrastructure owned or leased by the division. This account includes contract labor and materials required to provide the service. Included are overhead and underground telecommunication facilities and telecommunications central office Subscription Services: $250 This account provides for newspaper and magazine subscriptions that are necessary to monitor for competitive situations and to keep current on industry activity and trends Technical Services: $114,000 This account provides for the cost of the division's 24/7 trouble desk support. It is critical to KPU customers that they have access to after hours support to resolve service problem issues. This also covers the cost of after hours network monitoring so that KPU may be notified of any larger outages and respond promptly Other Contractual Services: $148,000 This account provides for contractual services not identified in the account classifications under contractual services such as Signaling System 7 links and database charges, AECA tariff management, engineering design services and customer helpdesk services Legal and Accounting Services: $67,500 This account provides for legal and accounting services. Included are contract attorney services, audit services, accounting and financial services, arbitration services, specialized legal services for complex issues that cannot be addressed by the City s legal department and other legal services Engineering & Architectural Services: $225,000 This account provides for engineering and consulting services such as contract engineering services and other specialized services that fall outside the scope of current division capabilities Management and Consulting Services: $125,000 This account provides for management and consulting services. Included are project management, cost studies, rate studies, management studies and other management and consulting engagement requiring persons or firms with specialized skills and knowledge Rentsand Leases Land and Buildings: $175,000 This account provides for the rent and lease of land and buildings. Included are offices, housing for temporary employees, and space rental for events, storage yards and covered storage facilities. Both operating and capital leases are accounted for in this account Rents and Leases Infrastructure: $2,429,000 This account provides for the rent and lease of telecommunications facilities. Included would be the tower and transport leases for the division's 4G/LTE and microwave systems, charges related to providing Internet connectivity, NECA charges for DSL services, electric pole attachments, and wholesale long distance minutes Telecommunications: $145,500 This account provides for telecommunication services. Included are charges for wired and wirelesstelecommunications services,cellphones, Internet, long distance and toll free numbers Electric, Water, Sewer & Solid Waste: $180,500 This account provides for electric,water, sewer and solid waste utility services Furniture and Fixtures: $6,000 This account provides for acquisition of furniture and fixtures. Included are desks, chairs, tables, workstations, file cabinets, storage cabinets and building fixtures. H - 12

77 Telecommunications Division Operations Vehicles and Moving Equipment: $3,100 This account provides for acquisition of a transport trailer for the Kubota mini excavators. The cost of the trailer will be shared equally by the three utilities operated by KPU Machinery and Equipment: $10,000 This account provides for the acquisition of machinery and equipment usually composed of a complex combination of parts. Included are office equipment, computer equipment and operating equipment required to provide services or maintain capital assets Software: $500 This account provides for any specialized software required for the division to effectively and efficiently manage the business Interdepartmental Charges Administrative: $160,020 This account provides for administrative and management services provided by the departments of the City Council, City Clerk and City Attorney and the administrative office of the City Manager Interdepartmental Charges Human Resources: $71,930 This account provides for human resource services provided by the Human Resources Division Interdepartmental Charges Finance: $362,290 This account provides for financial, accounting, payroll, accounts payable, billing, customer service and budgeting services provided by the Finance Department Interdepartmental Charges Information Technology: $356,230 This account provides for information technology services provided by the Information Technology Department Interdepartmental Charges Insurance: $76,500 This account provides for risk management services and claims Debt Service Principal: $276,857 This account provides for principal on bonds, loans, capital leases and other financing arrangements Debt Service Interest: $149,352 This account provides for interest on bonds, loans, capital leases and other financing arrangements Payments in Lieu of Taxes: $206,358 This account provides for payments in lieu of taxes assessed against the enterprise funds of the City. H - 13

78 Telecommunications Division Capital Budget Budget Adopted/2016 Major Capital Projects Actual Adopted Amended Estimate Budget Incr(Decr) % Buildings 40,000 40,000 40,000 40, % Vehicles & Moving Equipment 220,015 50,000 50,000 50,000 (50,000) 100.0% Machinery and Equipment 35,399 45,000 45,000 45,000 45, % Infrastructure 2,824,349 1,775,000 1,773,750 1,773,750 1,530,000 (245,000) 13.8% Total Major Capital Outlay 3,079,763 1,910,000 1,908,750 1,908,750 1,615,000 (295,000) 15.4% 2016 Capital Improvement Projects Funding Sources Project # Project KPU Enterprise Fund Grants Bonds Total Buildings Regulated Normal Growth and Repair Buildings 40,000 40,000 Total Buildings 40,000 40, Machinery and Equipment Regulated PC Hardware & Software 20,000 20,000 Operating Equipment 25,000 25,000 Total Machinery and Equipment 45,000 45, Infrastructure Regulated Normal Growth and Repair CO Switching 150, ,000 Normal Growth and Repair Copper Cable 20,000 20,000 Normal Growth and Repair Fiber Cable 175, ,000 Normal Growth and Repair CO Transmissions 300, ,000 Normal Growth and Repair Expansion 25,000 25,000 Normal Growth and Repair Provisioning 25,000 25,000 Fiber to the Home 40,000 40,000 Remote Cabinets for Advanced Services 40,000 40,000 Core Network Upgrade 125, ,000 Blade Server 25,000 25,000 Multi Dwelling Unit Project 100, ,000 Power 25,000 25,000 LiveWire Replacement/Design 25,000 25,000 Network Monitoring 40,000 40,000 H - 14

79 Telecommunications Division Capital Budget 2016 Capital Improvement Projects (continued) Funding Sources Project # Project KPU Enterprise Fund Grants Bonds Total Infrastructure (continued) Non Regulated Headend Expansion 85,000 85,000 Internet Expansion 10,000 10,000 Video Set Top Boxes 125, ,000 4G LTE 75,000 75,000 Microwave 95,000 95,000 Wi Fi 25,000 25,000 Total Infrastructure 1,530,000 1,530,000 Total 2016 Capital Budget 1,615,000 1,615,000 Expenditures by Type Expenditures by Funding Source 94.74% 2.48% 2.79% Buildings Machinery and Equipment Infrastructure 100% KPU Enterprise Fund H - 15

80 Water Division Summary The Water Division is one of three utilities operated by Ketchikan Public Utilities, a non regulated public utility owned by the City of Ketchikan. The Water Division servesapproximately 3,330customers. Ketchikan Public Utilities Water Division The Water Division operates one division and oversees one Capital Improvement Program. DEPARTMENT EXECUTIVE SUMMARY Adopted/2016 Divisions/Cost Center/Programs Actual Adopted Amended Estimate Budget Incr(Decr) % Operations 3,234,248 3,168,287 3,190,197 2,952,646 3,206,551 38, % Capital Improvement Program 278, ,762 2,783,662 2,698, ,100 (534,662) 82.2% Total 3,512,727 3,819,049 5,973,859 5,651,641 3,322,651 (496,398) 13.0% Adopted/2016 Expenditures by Category Actual Adopted Amended Estimate Budget Incr(Decr) % Personnel Services and Benefits 1,210,927 1,288,327 1,287,727 1,275,130 1,327,200 38, % Supplies 296, , , , ,850 (10,600) 3.5% Contract/Purchased Services 387, , , , ,400 (56,650) 10.3% Minor Capital Outlay ,500 16,201 16,201 1,000 (14,500) 93.5% Interdepartmental Charges 344, , , , ,215 (405) 0.1% Debt Service 796, , , , ,237 81, % Other Costs 197, , , , , % Major Capital Outlay 278, ,762 2,783,662 2,698, ,100 (534,662) 82.2% Total 3,512,727 3,819,049 5,973,859 5,651,641 3,322,651 (496,398) 13.0% Adopted/2016 Funding Source Actual Adopted Amended Estimate Budget Incr(Decr) % KPU Enterprise Fund 3,512,727 3,819,049 4,218,864 3,896,646 3,322,651 (496,398) 13.0% Bonds 1,754,995 1,754,995 NA Total 3,512,727 3,819,049 5,973,859 5,651,641 3,322,651 (496,398) 13.0% Adopted/2016 Personnel Actual Adopted Amended Budget Salary Incr(Decr) % Operations , % Total , % I - 1

81 Water Division Operations 5400 MISSION STATEMENT The Water Division is committed to providing residents and businesses of Ketchikan with pure and safe potable water as may be required for residential, commercial and industrial purposes. In order to achieve this goal, the division is responsible for the maintenance and operation of more than 33 miles of distribution system within the municipality, several reservoirs and associated pump stations. Daily tasks of the Water Division include continuous monitoring and chemical testing to ensure water purity and quality at all times. The Water Division stands ready to assist its customers as efficiently and effectively as possible within guidelines established by federal and state law, the Charter of the City of Ketchikan, the Ketchikan Municipal Code and the ratepayers of the Utility as represented by the City Council. General Manager Water Division Manager Engineering Tech/CADD & GIS (.60) Water Division Foreman Secretary II Utilities Inspector Journeyman Waterman (6.0) GOALS FOR 2016 Demonstrate to the satisfaction of customers and regulatory agencies that the UV Disinfection and Chloramination Facility has achieved all of its objectives and is delivering pure, safe potable water to the ratepayers. This includes enforcement of the Utility s cross connection program and requiring backflow preventers wherever the possibility of contamination exists. In conjunction with the Public Works Department, continue with designs for the future water and sewer replacement projects that are identified in both the General Government and KPU five year Capital Improvement Programs. Continue to address the issue of cast iron water mains throughout the community. Identify source leaks and reduce the waste of water wherever possible. Continue to provide continuing education classes necessary for division employees to maintain their required certifications. Continue to take whatever actions are necessary for Ketchikan to comply with the latest amendments to the Safe Water Drinking Act while continuing to meet the requirements of the EPA s Administrative Order that allows Ketchikan to remain as an unfiltered system. ACCOMPLISHMENTS FOR 2015 Ensured compliance with EPA s Administrative Order (AO) that allows Ketchikan s municipal water system to remain unfiltered as long as the division can continue to meet all applicable criteria. Although Ketchikan has been able to meet all of the AO s requirements for the past 23 years, a new regulation adopted in 2005 has proven difficult to meet. Even though chloramination that began April 8, 2014 has reduced the amount of haloacetic acids being created by about half, it is still not enough for Ketchikan to be remain consistently below the 60 parts per billion (ppb) level. Further work is necessary and the City Council on December 4, 2014 approved ADEC's Compliance Order By Consent (COBC). I - 2

82 Water Division Operations 5400 This document identifies Ketchikan s exceedance of the EPA s Stage 2 Disinfection Byproducts Rules (DBPR) and the methods by which Ketchikan intends to return to compliance. Although Ketchikan is in violation of the Stage 2 DBPR, such violations are also on the path to compliance (i.e., incorporated into a formal enforcement action by the COBC). Ketchikan s progress will continue to be monitored closely by both the Stateand the EPA until compliance is achieved. Since September2013, KPUand CH2MHillhave run aseriesoffull scale testsusing atemporary secondary chlorination point located downstream of the UV reactors and prior to the point where ammonium hydroxide is added before entering the Bear Valley Reservoir. The results have shown that the amount of haloacetic acids created can be reduced even further by lowering the amount of chlorine added at the Chlorination Plant while adding the remainder needed for chloramine disinfection downstream of the UV Disinfection Facility. The City Council at their meeting of January 8, 2015 approved Change Order No. 1 amending Contract No , a professional services agreement with CH2M Hill to complete the design and to provide construction phase services for the Two Point Chlorination Facility. The plans were submitted well ahead of schedule on March 27 th to ADEC for the agency's review and comment and at the City Council Meeting of April 2 nd, Contract No , Pre Engineered Metal Building for the Two Point Chlorination Facility, was awarded to Dawson Construction, Inc. In comparison to the typical construction contract, this contract was different in that Dawson Construction was only procuring the unassembled metal building and delivering it to the UV Disinfection Facility project site located on Schoenbar Road. The purpose of this contract was to have all the metal building components on site and available for erection once the construction contract for the entire facility was awarded. At the City Council meeting of June 18 th, assignment of Contract No was made from Dawson Construction, Inc. to BAM LLC followed by award of Contract No , Two Point Chlorination Facility, to BAM LLC. Construction is now in progress and weather permitting, this Facility should be complete and fully operational by June 2016 and will meet the specific dates that are stipulated by the COBC. Another item in the COBC testing requirements is 24 months of cryptosporidium testing of the community's raw water. Samples are now being collected monthly from the Ketchikan Lakes watershed that includes source water originating from the Granite Basin portion and are being analyzed by an independent lab for both the presence of cryptosporidia as well as giardia. Since beginning testing this past January, only two giardia cysts with either no internal or just an amorphous internal structure have been found. Through the month of July, no cryptosporidium oocysts have been found. However,as has been seen since 2011,once warm weather begins and the raw water temperature rises, increased total and fecal coliform colonies will occur. Consequently, it may also be expected that these cryptosporidium oocysts will increase. The division complied with EPA regulations requiring all community water systems to annually prepare a Consumer Confidence Report. These reports must contain information on the quality of the water delivered by the Utility s water system and characterize any risks from exposure to contaminants in an accurate and understandable manner. All other potable water analyses made on either a daily, weekly, monthly, quarterly or annual basis have also been completed and the analytical reports delivered to the regulatory agencies on time. DIVISION SUMMARY Adopted/2016 Expenditures by Category Actual Adopted Amended Estimate Budget Incr(Decr) % Personnel Services and Benefits 1,210,927 1,288,327 1,287,727 1,275,130 1,327,200 38, % Supplies 296, , , , ,850 (10,600) 3.5% Contract/Purchased Services 387, , , , ,400 (56,650) 10.3% Minor Capital Outlay ,500 16,201 16,201 1,000 (14,500) 93.5% Interdepartmental Charges 344, , , , ,215 (405) 0.1% Debt Service 796, , , , ,237 81, % Payment in Lieu of Taxes 197, , , , , % Total Expenditures 3,234,248 3,168,287 3,190,197 2,952,646 3,206,551 38, % I - 3

83 Water Division Operations Adopted/2016 Funding Source Actual Adopted Amended Estimate Budget Incr(Decr) % KPU Enterprise Fund 3,234,248 3,168,287 3,190,197 2,952,646 3,206,551 38, % Total Funding 3,234,248 3,168,287 3,190,197 2,952,646 3,206,551 38, % Adopted/2016 Personnel Actual Adopted Amended Budget Salary Incr(Decr) % Water Division Manager , % Foreman , % Journeyman Waterman , % Utility Inspector , % Eng Tech/KPU CADD & GIS , % Secretary II , % Total , % 12.67% 15.26% 6.16% 2016 Expenditures by Type 41.39% 0.03% 15.42% 9.07% Personnel Services and Benefits Supplies Contract/Purchased Services Interdepartmental Charges Debt Service OPERATING BUDGET CHANGES FOR 2016 Changes between the adopted operating budget for 2015 and the proposed operating budget for 2016 that are greater than 5% and $5,000 are discussed below. Personnel Services and Benefits increased by $38,873, or by 3.0%, due to addition of a temporary employee, an increase in insurance costs and a 2% cost of living adjustment for non representedemployees, effective January 1, Chemicals (Account No ) decreased by $5,000, or by 5%. Each tote load of potable water grade ammonium hydroxide costs about $1700 including the round trip shipping. Now that the system has over a year's worth of operational experience, a slight reduction in the amount of potable water grade ammonium hydroxide can be made. Travel Training and Education (Account No ) decreased by $7,700, or by 39.1%. Although the State mandates that all water purveyors have an effective cross connection control program, it doesn't provide the opportunity to attend training classes or even licensing for backflow assembly testing. Instead, every 3 years KPU brings to Ketchikan qualified instructors licensed in the State of Oregon along with specialized test equipment borrowed from Sitka to conduct a backflow assembly and crossconnection control recertification class for all employees. Last conducted in 2015, this class will not be held again until Advertising and Publishing Marketing (Account No ) decreased by $6,000, or by 75%. Now that the transition to chloramination disinfection has been successfully made, there is no longer a need to continue the extensive public information program. I - 4

84 Water Division Operations 5400 Engineering and Architectural Services (Account No ) decreased by $25,000, or by 20%. This account will provide the funding for continued work with ADEC to obtain the final permit for UV disinfection (KPU only has an interim permit). Also in 2016, continued work will be necessary to address ADEC s concerns expressed in the state's Compliance Order by Consent (COBC) about the number of total coliform colonies that are periodically presentin Ketchikan s raw water source. Electric, Water, Sewer & Solid Waste Services (Account No ) decreased by $11,000, or by 6.3%, despite anticipating a 5% Electric utility rate increase in Electricity is the major portion of this budget item and is predicated by the costs associated with the operation of the UV Disinfection Facility. By itself, it generally consumes between $4,000 to $5,000 of electricity every month. Machinery & Equipment (Account No ) decreased by $11,000, or by 100%, due to a copier having been purchased in No equipment purchases are planned for Interdepartmental Finance (Account No ) increased by $6,470, or by 6.2%, due to rising personnel costs caused by step increases and cost of living adjusdtments. Interdepartmental Insurance (Account No ) decreased by $6,600, or by 19.1%, because excess marine liability insurance premiums allocated to the Water Division for the 2015 Budget were incorrect. The esimate for 2015 and the amount requested for 2016 reflects the proper allocation of the premiums for excess marine liability insurance. The decrease was also due to a rebate from the insurance pool. DIVISION OPERATING BUDGET DETAIL Budget Adopted/2016 Operating Expenditures Actual Adopted Amended Estimate Budget Incr(Decr) % Personnel Services and Benefits Regular Salaries and Wages 738, , , , ,950 6, % Overtime Wages 73,985 75,000 62,283 60,200 50,000 (25,000) 33.3% Temporary Wages 1,139 35,000 35,000 New Payroll Taxes 61,187 63,700 63,700 61,800 64,970 1, % Pension 137, , , , ,900 2, % Insurance Health 180, , , , ,900 18, % Insurance Workers Compensation 27,580 30,100 30,100 29,800 30, % Other Benefits (11,017) 15,600 15,600 15,600 14,130 (1,470) 9.4% Allowances KPU Clothing 1,743 1,680 1,680 1,680 1, % Allowances Medical Expenses % Personnel Services and Benefits 1,210,927 1,288,327 1,287,727 1,275,130 1,327,200 38, % Supplies Office Supplies 3,418 4,000 4,000 3,200 4, % Operating Supplies 31,389 15,000 14,900 12,500 15, % Safety Program Supplies 3,597 3,500 3,600 3,600 3, % Janitorial Supplies % Small Tools & Equipment 6,769 5,000 5,000 4,700 5, % Chemicals 78, , ,000 88,000 95,000 (5,000) 5.0% Vehicle Maintenance Materials 7,192 17,600 17,600 17,000 17,000 (600) 3.4% Building & Grounds Maint Materials 3,687 5,000 8,700 8,700 5, % Machinery & Equip Maint Materials 49,008 50,000 45,439 44,000 50, % Infrastrcture & Plant Maint Materials 85,839 65,000 65,000 55,000 65, % Postage 2,844 3,500 3,500 3,500 2,500 (1,000) 28.6% Bulk Mailing 3,177 6,000 5,300 2,300 3,000 (3,000) 50.0% Freight Materials & Supplies 1,527 2,000 2,700 2,700 3,000 1, % Vehicle Motor Fuel & Lubricants 18,611 22,000 22,000 19,000 20,000 (2,000) 9.1% Professional & Technical Publications 784 1,600 1,760 1,760 1, % Business and Meal Expenses % Supplies 296, , , , ,850 (10,600) 3.5% I - 5

85 Water Division Operations Budget Adopted/2016 Operating Expenditures Actual Adopted Amended Estimate Budget Incr(Decr) % Contract/Purchased Services Travel Training 872 3,500 3,500 2,000 3,000 (500) 14.3% Travel Training and Education 8,448 19,700 19,700 18,300 12,000 (7,700) 39.1% Advertising and Public Announcements 10,127 1,875 1,850 1,000 1,000 New Advertising and Publishing Marketing 12,738 8,000 6,725 2,100 2,000 (6,000) 75.0% Community Grant Program 21, % Professional Licenses & Fees (350) 58.3% Assn. Membership Dues & Fees ,000 1, % Building & Operating Permits 199 3,000 3,000 2,500 3, % Vehicle Licenses (350) 70.0% Software Maintenance Services 6,356 14,000 14,000 9,200 10,000 (4,000) 28.6% Bldg & Grounds Maintenance Services 3,725 5,000 5,000 4,300 5, % Machinery & Equipment Maint Services ,000 28,000 25,000 28, % Infrastructure Maintenance Services 18,525 40,000 40,000 23,000 40, % Technical Services 68,851 85,000 85,000 65,000 85, % Engineering & Architectural Services 49, , ,910 56, ,000 (25,000) 20.0% Rents and Leases Machinery & Equip 3,450 3,450 3,000 3,000 (450) 13.0% Telecommunications 30,908 38,500 38,500 33,000 35,000 (3,500) 9.1% Electric, Water, Sewer & Solid Waste 153, , , , ,000 (11,000) 6.3% Contract/Purchased Services 387, , , , ,400 (56,650) 10.3% Minor Capital Furniture and Fixtures 1,000 1,300 1,300 1, % Machinery and Equipment 11,000 11,001 11,001 (11,000) 100.0% Computers, Printers and Copiers 241 3,500 3,900 3,900 (3,500) 100.0% Minor Capital Outlay ,500 16,201 16,201 1,000 (14,500) 93.5% Interdepartmental Charges Interdepartmental Administrative 45,571 50,420 50,420 48,790 49,240 (1,180) 2.3% Interdepartmental Human Resources 16,035 17,850 17,850 17,470 17,590 (260) 1.5% Interdepartmental Finance 99, , , , ,480 6, % Interdepartmental Information Tech 48,173 51,650 51,650 52,670 49,140 (2,510) 4.9% Interdepartment Engineering 92, , , , ,000 4, % Interdepartmental Insurance 19,205 34,600 34,600 27,720 28,000 (6,600) 19.1% Interdepartmental Bldg Rent 23,579 27,580 27,580 26,705 26,765 (815) 3.0% Interdepartmental Charges 344, , , , ,215 (405) 0.1% Debt Service Debt Service Principal 645, , , , ,112 65, % Debt Service Interest 150,754 97,790 97,790 97, ,125 16, % Debt Service 796, , , , ,237 81, % Other Costs Payment in Lieu of Taxes 197, , , , , % Other Costs 197, , , , , % Total Expenditures by Type 3,234,248 3,168,287 3,190,197 2,952,646 3,206,551 38, % NARRATIVE Regular Salaries and Wages: $764,950 This account provides for the cost of the annual wages of the employees of the Water Division. I - 6

86 Water Division Operations Overtime Wages: $50,000 This account provides for the cost of overtime incurred by employees of the Water Division during the course of the year Temporary Wages: $35,000 This account provides for the cost to salaried and hourly employee for temporary employees of the Water Division during the course of the year Payroll Taxes: $64,970 This account provides for employer contributions for Social Security, Medicare, and other similar payroll related taxes Pension: $152,900 This account provides for employer contributions to retirement plans Health and Life Insurance: $211,900 This account provides for employer contributions to employee health and life insurance plans Workers Compensation: $30,710 This account provides for employer contributions toworkers compensation Other Benefits: $14,130 This account provides for expenditures for direct claims from former employees for unemployment benefits paid bythe Stateof Alaska and accrued vacation and sick leave Allowances KPU Clothing: $1,890 This account provides for employer provided protective clothing allowances paid directly to represented employees of Ketchikan Public Utilities pursuant to collective bargaining agreements or the Personnel Rules Allowances Medical Expenses: $750 This account provides for employee medical exams paid directly to employees. These benefits are taxable to the employees Office Supplies: $4,000 This account provides for the purchase of expendable office supplies used by the division during the course of a year. Included are supplies such as copy and large format plotter paper, toner, ink and fax cartridges, staples, etc Operating Supplies: $15,000 This account provides for supplies that are normally not of a maintenance nature and are required to support department operations. Included are supplies such as laboratory supplies, chemical test equipment, and engineering materials Safety Program Supplies: $3,500 This account provides for the purchase of materials and supplies required to conduct an ongoing safety program for the Water Division Janitorial Supplies: $750 This account provides for the cost of janitorial supplies utilized by the Water Division during the course of the year Small Tools and Equipment: $5,000 This account provides for the purchase and/or replacement of small tools and equipment used by the division Chemicals: $95,000 This account provides for the purchase of the various chemicals including salt, soda ash, phosphoric acid, and ammonium hydroxide that are used for water disinfection and treatment Vehicle Maintenance Materials: $17,000 This account provides for the cost of the division to maintain its vehicles and operating equipment and its share of operating the Electric Division s vehicle maintenance facility Building & Grounds Maintenance Materials: $5,000 This account provides for the cost of materials used by staff for the repair and maintenance of the division s buildings. The buildings operated by the division include the Water Warehouse, the UV Disinfection Facility, the Chlorination Plant, the Ammonia Addition Building and the four water pump station structures including their six associated reservoirs. I - 7

87 Water Division Operations Machinery & Equipment Maintenance Materials: $50,000 This account provides for the cost of materials for the repair and maintenance of the division s machinery and other operating equipment. Examples include such items as rebuild kits for specialized chemical feed pumps, the bearings, seals, couplings, and other parts used in rebuilding large pumps, and the consumable parts and lamps used in the UV disinfection equipment, associated operating equipment and the storage tanks installed at the three disinfection facilities Infrastructure Maintenance Materials: $65,000 This account provides materials required for the repair and maintenance of infrastructure and plant owned by KPU. Included are the three disinfection and chemical addition facilities, all of the water mains located throughout the community, the four pump stations and their six associated reservoirs and thecarlanna Lake Dam Postage: $2,500 This account provides for the cost of mailing division correspondence, water samples for analysis by independent labs and the cost of mailing the annual Consumer Confidence Report Bulk Mailing: $3,000 This account provides for bulk mailings to KPU ratepayers. Specific notifications will include providing relevant water quality information toratepayers asrequiredby EPA regulations Freight Materials & Supplies: $3,000 This account provides for freight expenses incurred with inventory purchases Vehicle Motor Fuel and Lubricants: $20,000 This account provides for the purchase of fuel and lubricants used for the operations of the division s vehicles Professional and Technical Publications: $1,600 This account provides for the purchase of professional and technical publications. Included are engineering journals, textbooks and relevant water technical standards Business and Meal Expenses: $500 This account provides for reimbursements to employees for business related meal expenses Travel Training: $3,000 This account provides for the cost associated with business travel incurred by the division Training and Education: $12,000 This account provides for the annual cost of EPA required training of Water Division personnel. Regulations mandate that the operating staff maintain their current distribution and treatment certifications through annual continuing education credits. Rather than send those employees outside, it is much more cost effective for the division to bring a qualified instructor to Ketchikan and conduct the classes here. The only exception would be for those employees whose educational needs are best met by attendance at a specific technical class being held within the Pacific Northwest metropolitan area Ads and Public Announcements: $1,000 This account provides for advertising and announcements in publications, newspapers, trade journals, Internet or broadcasts over radio and television Advertising and Marketing: $2,000 This account provides for the cost of all division related advertising and communications with the Utility s customers including funding for radio spots and newspaper ads to inform ratepayers of important news of changed conditions or public health implications. Other expenditures include the monthly charges for the telephone directory, street closures due to water main repairs and the advertising of contracts for bid Professional Licenses and Technical Certifications: $250 This account provides for the renewal cost of the State distribution and treatment certifications as required by EPA regulations for each of the division s operating employees in the performance of his or her duties Assn. Membership Dues & Fees: $2,000 This account provides for division memberships in the American Water Works Association, its associated Alaska counterpart and the Alaska Rural Water Association Building and Operating Permits: $3,000 This account provides for permits required for ADEC regulatory functions including plan review, certificates to operate new construction, annual fees for Ketchikan and Carlanna Lakes water rights and the State s annual filtration avoidance inspection. I - 8

88 Water Division Operations 5400 p Vehicle Licenses: $150 This account provides for licensing KPU vehicles for operation on public highways Software Maintenance Services: $10,000 This account provides for acquisition of software systems and upgrades covered by maintenance agreements Buildings and Grounds Maintenance Services: $5,000 This account provides contractual services including labor and materials required for the repair and maintenance of buildings and the upkeep of grounds used by the division. The buildings operated by the division include the Water Warehouse, the UV Disinfection Facility, the Chlorination Plant, the Ammonia Addition Building and the four water pump station structuresincluding their six associated reservoirs Machinery and Equipment Maintenance Services: $28,000 This account provides contractual services including labor and materials for the repair and maintenance of the division s machinery and other operating equipment and maintenance service agreements. Included are hydraulic breakers and gasoline powered tools, specialized chemical feed pumps, the pumps, motors, and switch gear installed in each pump station, operating equipment and storage tanks installed at the three disinfection facilities and the recalibration of hazardous gas monitors Infrastructure Maintenance Services: $40,000 This account provides contractual services including labor and materials required for the repair and maintenance of the division s infrastructure. Contractual repair items include pavement and sidewalk restoration after water main or hydrant repairs are completed, chain link security fencing and emergency standby generators repair Technical Services: $85,000 This account provides for services that are not regarded as professional but require technical or specialized knowledge. Included is the extensive certified and independent laboratory water testing as required throughout the year. Other items include repair or replacement of specialized operating equipment and its control instrumentation Engineering and Architectural Services: $100,000 This account provides for engineering and architectural services. The present ADEC permit to operate the UV Disinfection Facility is only an interim permit that expires on December 31, Before that date it will be necessary to negotiate a final operating permit with ADEC, which will likely have increased requirements. In addition, ADEC's Compliance Order by Consent (COBC) also concerns Ketchikan Lakes raw water quality issues. These might be resolved after KPU's completion of 24 months of additional sampling to determine the quantity of cryptosporidia oocysts actually present in the raw water source. Sampling began in January 2015 and depending on the quantity found, the EPA s Long Term 2 Enhanced Surface Water Treatment Rule may only require 2 log (99%) inactivation disinfection rather than the 3 log (99.9%) than KPU is presently applying. If so and ADEC approves, the increased amount of UV disinfection that KPU is already providing continuously might be used as an off setting credit against the higher than permissible number of total coliform colonies that periodically appear in the raw water source. This will be presented in a Limited Alternative to Filtration (LAF) proposal for ADEC s review and approval to be submitted by the end of After reading the LAF, and particularly since the COBC s 24 month cryptosporidia sampling requirement continues throughout all of 2016, ADEC will likely require additional information or studies during 2016 before even agreeing to consider the LAF Rents and Leases Machinery & Equipment: $3,000 This account provides for the rent and lease of machinery and equipment. This account provides funds to rent certain heavy construction items that are not cost effective to purchase. Rather than purchase seldom used equipment neededin water main reconstruction projects, it is more cost effective to rent Telecommunications: $35,000 This account provides for telecommunication services. In addition to telecommunications used by the division s staff, telephone lines are used to provide direct instrument communication links between the division s pump stations and their associated reservoirs including operational alarms that report through the SCADA system located at the Bailey Power House. Additionally, operational fiber optic links are now providing direct communication and control between the UV Disinfection Facility, the Ammonia Addition Facility and the Chlorination Plant. The equipment and instrumentation installed within each facility is also being continuously monitored through KPU s SCADA system Electric, Water, Sewer & Solid Waste: $165,000 This account provides for electric, water, sewer and solid waste utility services used by the division Furniture and Fixtures: $1,000 This account provides for acquisition of office furniture and fixtures. I - 9

89 Water Division Operations Interdepartmental Charges Administrative: $49,240 This account provides for administrative and management services provided by the departments of the City Council, City Clerk and City Attorney and the administrative office of the City Manager Interdepartmental Charges Human Resources: $17,590 This account provides for human resource services provided by the Human Resources Division Interdepartmental Charges Finance: $111,480 This account provides for financial, accounting, payroll, accounts payable, billing, customer service and budgeting services provided by the Finance Department Interdepartmental Charges Information Technology: $49,140 This account provides for information technology services provided by the Information Technology Department Interdepartmental Charges Engineering: $124,000 This account provides for engineering services provided by the Public Works Department Engineering Division Interdepartmental Charges Insurance: $28,000 This account provides for risk management services and claims Interdepartmental Charges Building Rent: $26,765 This account provides for the cost of office space at the KPU Administration Building Debt Service Principal: $375,112 This account provides for principal on revenue bonds and ADEC drinking water loans Debt Service Interest: $114,125 This account provides for interest on revenue bonds and ADEC drinking water loans Payments in Lieu of Taxes: $197,649 This account provides for payments in lieu of taxes assessed against the enterprise funds of the City. I - 10

90 Water Division Capital Budget Budget Adopted/2016 Major Capital Projects Actual Adopted Amended Estimate Budget Incr(Decr) % Vehicles and Moving Equipment 3,100 3,100 New Infrastructure 278, ,762 2,783,662 2,698, ,000 (537,762) 82.6% Total Major Capital Outlay 278, ,762 2,783,662 2,698, ,100 (534,662) 82.2% 2016 Capital Improvement Projects Funding Sources Project # Project KPU Enterprise Fund Grants Bonds Total Vehicles and Moving Equipment KPU Jointly Owned Transport Trailer 3,100 3,100 Total Vehicles and Moving Equipment 3,100 3, Infrastructure Water Distribution Grid Improvements 30,000 30,000 Additional Projects 30,000 30,000 Water Service Upgrade 15,000 15,000 Backflow Prevention Program 3,000 3,000 West Fairy Chasm Water Improvements 35,000 35,000 Total Infrastructure 113, ,000 Total 2016 Capital Budget 116, ,100 Expenditures by Type 3% Expenditures by Funding Source 97% Vehicles and Moving Equipment Infrastructure 100% KPU Enterprise Fund I - 11