LINCOLN PIPESTONE RURAL WATER SYSTEM East Highway 14, P.O. Box 188, Lake Benton, MN 56149 (507) 368-4248 or (800) 462-0309 fax (507) 368-4573 email: [email protected] MEETING MINUTES August 26July 29, 2013

The regular scheduled meeting of the Lincoln Pipestone Rural Water (LPRW) System Board of Commissioners was held at the LPRW office in Lake Benton on Monday, August 26July 29, 2013 starting at 6:00 p.m. Chairman Rod Spronk called the meeting to order with Commissioners Frank Engels, Joe Weber, Jan Moen, Norris Peterson, Ken Buysse, Jerry Lonneman , Brent Feikema, Earl DeWilde, Mitch Kling and Bill Ufkin were present. Commissioner Earl DeWilde was absent. Also present were Board Attorney, Ron Schramel; DGR eEngineer Darin SchrieverGordon Krause: Field Superintendents Shawn Nelson while Field Superintendent Tom Muller was absent and Water Resource Technician Don Drietz; CEO, Mark Johnson; and Dennis Healy of Healy Consulting also attended. Troy Larson, Director, and Dan Zulkosy of Lewis and Clark Regional Water System was present.

Agenda: M/S/P-U Engels/Buysse to Ufkin/Kling to approve the Agenda and to change the order to hear from Troy Larson first.

Lewis and Clark: Troy Larson and Dan Zulkosy reported on the Capital Call vote slated for October 24, 2013. Larson stated he was not there to persuade LPRW’s vote and that it is up to LPRW to decide. The choices as to the Capital Call are 1) Take a wait and see stance to see what the Federal Government will do and that has been the status quo for some time; 2) Say never; 3) vote yes on the first and no to all others; 4) vote according to LPRW’s desires on a series of capital calls. This call is $18.4 million + $3.2 million coupled to it from Federal Dollars. If the call is rejected the Fed funds must be spent but the pipe would go nowhere. Also any Fed dollars gained in the future goes to reimburse the principle monies of the members as to the construction costs on any call. Anything over budget the members are responsible to pay. The Sioux Falls issue was discussed. Schramel asked if the vote could be structured that if Sioux Falls did not participate then the call is null and void. Any resolution between Sioux Falls and Lewis and Clark will be in the spring of 2014 and the billing from Lewis and Clark will be delayed until then. A later discussion revolved around as to which court system the Sioux Falls matter would move, state and which, or the federal courts? It was asked what reason is there for the 11 hooked up members to vote yes on the call. Larson pointed out that Lonneman had given the best argument at a Lewis and Clark board meeting in that the 11 would not have been hooked up if not for the other 9 members and their states funding and there is a moral ground to vote yes. Larson noted that putting on all members will lower the water rates. Discussion ensued on the rates and penalty for excessive use. Abandonment was discussed. LPRW can get all the principle monies it directly put into Lewis and Clark even any principle monies on the capital call build out. Also discussed was if LPRW could build its own line to Lewis and Clark. Larson said it was not good for a member to go it alone. Also it was asked what Iowa and its members were doing. Then the issue of the Minnesota members going to the State of Minnesota was discussed. It would be at most $32 million with the members participating ½ and then asking the Federal Government to pay $32 million. This pipe would have to be owned by a Minnesota entity but could be nominally leased to Lewis and Clark. Page 1 of 7 Final discussion was on whether the Capital Call would help or hurt with the Federal Funding. Larson said some feel it brings pressure on the Feds to do what that to which it is committed or the Feds could say the members don’t need help with what they can do for themselves. After Larson left and in later discussion, the Board agreed to move the matter of how it should instruct Lonneman to vote on the Capital Call to next month. with a late addition from Engels to add under item J about considering a lease of antenna space on a water tower.

Minutes: M/S/P-U Engels/Lonneman Lonneman/Kling to approve the minutes of the July 29une 24, 2013.

Treasurer's Report: M/S/P-U Buysse/FeikemaFeikema/DeWilde to approve Treasurer’s report. The CEO presented that LPRW’s ratio of retail sales to wholesale sales is 2:1, that retails sales are some $139,000 behind budget and even with the rate increase he does not expect them to reach projected budget for the year. However wholesale sales are some $187,000 above budget and should improve due to the rate increase and that Worthington is soon to take more water through the west hookup. Worthington accounts for a major portion of the wholesale sales. is at the 50% financial mark for the year and that retails sales lag about 6% (or $183,000) for the year but generally are stronger in the last half of the year yet since this year is wetter he is concerned not all those revenues may make. Wholesale sales lead 17% (or $163,000) for the year with Worthington pushing these sales above budget. Gross Profits are close to being on the 50% target for the year. Some $778,000 in assessments have been deposited to restricted funds in June.

Bills: M/S/P-U Lonneman/Moen Weber/Engels to approve paying the bills for payment after noting an amendment to the bills pending statement to correct/adjust the amount to be paid Healy Consulting to $3,182.

Attorney’s Report: Ron Schramel presented: That CAPX Company would not furnish the agreement between its owners and Great River for confidential reasons and offered to make monthly advance payments in lieu thereof which was acceptable. He further related that he had visited the Lincoln County Board about the reappointments of Weber, Spronk and Lonneman. There he recounted the legal basis for appointing LPRW board members; that there is a statutory process to be followed and which is being properly followed by LPRW; that there is no term limits set by law; that LPRW has had turnover and added new board members over the recent years, etc. . He responded to the Lincoln County Board whether a board member could come from a city served by LPRW; Ufkin was given as the positive example. He was received well and the Lincoln County Board approved the slate of reappointments. That he had found a DNR memo in response to a North Dakota inquiry where the DNR recognized that the interbasin transfer law dealing with surface watersheds is not applicable to LPRW as it uses ground water which is not necessarily controlled by topography features and can have sources among different surface watershed basins. He states LPRW’s arguments to the DNR are 1) by law it is per permit not entity; 2) ground water is not a transfer according to the DNR itself; 3) out of state waters are not affected by this law as that violates the Constitution

2 provisions of the interstate and commerce clause and South Dakota does not have a statute prohibiting interbasin transfer. It was then asked if LPRW should even file a yearly interbasin transfer report and cite this memo as its basis. However, Schramel, before he would tell LPRW to move forward as to the annual report and moving on with capital improvement projects, would want to study the matter further. And he wants to reserve use of the memo for legal cross examination purposes rather than a direct confrontation tool. In later discussion, Schramel reported he had emailed Starpoint as to the delinquent bill but had not received a response and feels he needs more contact information. Engels said he is served by this company and will get the contact information to him.

Engineer’s Report: Darin SchrieverGordon Krause discussed the following items: • 2008-10 Expansion Project: Quality Control and its radio supplier have just about resolved all the issues but two problems have arisen in the south and QC is on the job now to resolve those matters. The CEO reported that Ron Car is working with QC this evening. Also the CEO stated he has authorized Ron to secure and renew the contract with QC set to expire August 1st.and the radio supplier appear to have resolved the telemetry and SCADA issues. Pump Station #1 has lightning damage so the System has been operated the “old way”. The CEO reported that even more damage than initially has been found. Regional Water Development Report: SchrieverKrause discussed the following items: • City of Madison: Nothing new to report. • City of Dawson: From the meeting of June 26th it appeared that Dawson is interested in working with LPRW to sell water. However, the CEO reported that a more recent email from the city manager seemed to indicate that water pricing could be relatively higher than LPRW is hoping for. The CEO related he had answered this email stating that LPRW is seeking a relation that will work for both sides.The City is working on draft proposal. • Garvin: Red Rock RWS still intends to do test drilling.

• New Verdi SD Wells: Steffl is installing the second wells this week and will likely run the 8 hour test early next week. A combined 72 hour test is yet to be scheduled. In later discussion Engels mentioned that the Verdi wells had gone low during several droughts. Ufkin asked if a 3 day test is enough and for the CEO to check with DGR/ Liesch about this. now and flow tests will soon be taking place.. • Big Sioux CWS: Nothing new to report. except the utility is willing to work with LPRW as to a water source. • Preliminary Engineering Report: -DGR is making good progress on the PER XXXXSeveral components: Holland WTP, north end water source, the Verdi WTP, new distribution in Cottonwood Area and North Area and miscellaneous improvements, and a water tower in the Lincoln area. -Continuing to make progress, DGR had a good meeting with the CEO on August 23 rd to discuss several items. • General: The hydraulic model update is proceeding with some work yet to be done.g. This includes a study of Lewis and Clark water being modeled and what it will take to deliver this water to appropriate areas. • Holland Discharge Permit: Biottta pilot system performance continues to be good with respect to nitrate/nitrite levels and turbidity removal. Pilot will likely run through the end of September. The primary emphasis now is manganese removal, disinfection testing, and challenge testing.

Page 3 of 7 The open house was held on August 21 st with several agencies represented, but not PCA Krause reported that Schriever has written the DNR as to what is happening with the pilot study. A meeting and an 0pen house are planned around the 21st of August for the MN regulators, board and certain staff. All parties have been notified.. CAPX: Pipeline relocation with Carstensen is progressing well. The 4 miles of 8” is installed and 7 “loop arounds” are done up to County Road 7.

-Expect next month a change order of about $75 to $80,000 for 1.5 miles of additional pipeline to be laid due to new CAPX routes. Miscellaneous Work: Worthington, Round Lake and Wilmont Connections- all LPRW piping is done, waiting for the Cityies of Round Lake to take water. The CEO had reported that Wilmont is already taking water and Worthington started taking water 50 gpm on Friday, August 23 rd . The Ghent pressure matter was brought up and Schriever explained that there is a 3” meter at Ghent and several towns but that they were designed with 2” meters and this causes flow and pressure problems. However the pressure in the area per the Ghent Booster shows 60 to 70 psi available. It was pointed out that the staff had put in a pressure recorder to monitor the situation and had worked with the City officials to explain that the Ag plant having a 2” meter pulls too much water too fast and uses the city’s allotted flow while in use. The CEO will be in contact with the City of its monitoring results. Recommended Board Action: Pay Request # 2: $165,098.70 was recommended for approval. M/S/P-U to approve.

Worthington and Wilmont to finalize their construction. The meter houses are complete and LPRW is ready to deliver water. . Water Resources: Then Schriever presented what he, Alan Nelson and the CEO had determined would make sense currently for the 2014 Capital Improvements program. He outlined that Verdi would need a treatment plant and the wells developed and piped thereto and that to move the waters from Verdi a water main needs to be constructed. The apparent most useful route is to go with a 12 “transmission main north several miles and then east some 30 miles with laterals to certain mains. The transmission main would cost about $5 to $6 million dollars. Discussion ensued about interbasin transfer and no action can be taken until that issue is resolved. Aside from the matters already discussed during the engineer’s report, the matter of Lewis and Clark was taken up by Lonneman where he discussed the position Sioux Falls has taken on the interpretation of the ARCA agreement and their two amendments. He related that SF was to protect getting its money back that it would put into L and C and may loan money for the project. It was his recommendation after discussion that the majority of the other members would not support the capital call to vote against this call and for LPRW to look heavily to completing the Holland plant. Discussion also evolved about bringing LPRW line from the L and C main in Minnesota. This will be looked at by DGR and under its modeling. Lobbying efforts, State funding, and what part Worthington should participate with LPRW to get water from L and C including fully funding a main was discussed.

Field Superintendents’ Report Tom Muller: was on vacation.. And Don Drietz reported for him. The land in South Dakota was discussed as to what CRP measures LPRW should do for the renter as there are weeds on the

4 land where grass should be growing. M/S/P-U Lonneman/Engels to turn this measure over to the Water Resource Committee to decide and it was suggested emails would be appropriate.

Shawn Nelson: Weed spraying with a good kill has been done on the South Dakota Wellfields. A burn off is planned but a fire department will need to be present. Then the CRP wants the drilling and reseeding done in the spring. LPRW will be absorbing these costs.nothing to report.

CEO’s Report:  As to Lincoln County and Nobles County Bond Refinancing: Nothing to report since currently the savings are not there.  Healy The number 10 well appears to have had a VFD problem not a motor problem. This has caused Ervin to want LPRW to pay for the second pump pull and the second motor. Ervin will store and try to sell the first motor it installed. The CEO recommended that when the billing comes in that LPRW pay the bill as Ervin is not at fault relying on LPRW’s diagnostics of the problem as it does not diagnose electric systems. The cost is anywhere from $15,000 to $25,000.  Per a call to the CEO, the CEO reported Ten Broke had signed up for several capacities and thus wanted a larger meter than the standard ¾” meter. A three inch line one mile long was installed to service this meter and future customers. Shawn explained that it cost Ten Broke the same for a 1 ½” line as it does for a 3”. The CEO and staff explained that the ¾” meter is used as a conservation control and that he would need to put in storage if it wanted to have sufficient water to water its hogs faster.  Per a call to the CEO, the CEO reported Bob Nelson had called and wanted LPRW to replace the booster pump serving his home since he had low pressure. It had been determined that his pressure was 27 psi which is above the minimum (20 psi). Thus the CEO and staff told him he would have to replace this pump as his cost though the original one was put in and paid for by LPRW. He was not satisfied. However, LPRW will put in a pressure recording gauge to see if the pressure does drop below 20 psi to see if LPRW should put in this pump.  reported that he had meet with the staff and explained that they would be part of the process of long range planning. He had given them minutes of the Board’s retreat of July 18th and reviewed the matter and discussed with them more new and relative events since the meeting. Few comments were forth coming but he expects more in the future after they think on the matters. Spronk asked if all got his email of the survey results and they had. The CEO asked if he should share them with staff and he was advised not at this time. The next retreat will be held at 9:00 a.m. August 21st.  The CAPX matter had been taken care of earlier.  Due to the conflict with the NRWA conference there was a motion by Lonneman/Ufkin P-U to change the meeting date to September 23, 2013 at 7:00 p.m.  M/S/P-U DeWilde/Moen to approve the CEO to attend the NRWA conference.  Engels reported that he had been approached by a company wanting to lease space on a water tower. By consensus the matter was turned over to Ron Schramel and the CEO to handle.

Committee Reports: • Executive Committee: Nothing to report.

Page 5 of 7 • Personnel Committee: Minutes of the August 12thJu ne 25th meeting were presented. M/S/P-U Buysse/Peterson to approve. The issue of chain of command changes to the personnel policies were read and reviewed. M/S/P-U Ufkin/Buysse to approve. These changes are to be incorporated into the Personnel Policy Manual and to be put on Dropbox. Then the issue of overtime after 8 hours was reviewed. The committee had at first thought recommend this change based on two other area utilities following this procedure but later found two other utilities that follow the current LPRW policy of giving overtime after 40 hours. This issue still needs some work and the CEO will work with the personnel committee and revisit this policy along with Tom and Shawn. Then the committee presented the CEO’s salary recommendations with some modifications. The committee proposed that there be some job re-classifications and criteria added. Thus there would be a senior operator’s classification based on 15 years and holding a Class “B” license with the proviso that the operator must get a Class “A” license within three years of entering this classification otherwise his wages would be frozen at that point. It is noted also since LPRW is a Class “A” utility that there is no longer a $0.10 premium for holding a Class “A” license. This new classification currently affects Stuefen, Rasmussen, and McCarthy. Also proposed is that the base beginning pay for the Water Clerk’s be adjusted to reflect industry standards. An Administrator Technician classification was proposed which affected Jason Overby only to recognize the responsibility of the position he holds. Then the issue of Don Drietz was discussed and that it is proposed to not increase his salary but to freeze it, move him from being a Technician to the new Senior Operator classification until his wage equals this classification and that in one year’s time his work would be reviewed and he would be supervised by Shawn Nelson, Field Superintendent. Shawn agreed to assume this responsibility. Shawn, Don and the CEO are to get together about this change. It was stated the CEO agreed to holding his annual salary the same as is. Minor adjustment to the proposed budget will need to be made to reflect these changes.. Then the Personnel committee recommended that Steve Lovre be promoted to technician position with a step 1 year 9 pay (a half step up) with a review in six months (December) starting July 1st. M/S/P- U Buysse/Frank to approve this recommendation. .Then the committee presented the matter of how overtime should be calculated whether after 40 hours or 8 hours. Schramel was directed to provide legal language as to overtime for over 8 hours to regard the fact certain personnel are scheduled to work 10 hours per day. Discussion evolved over the 10 hour day and holiday pay. At first the Personnel Committee was directed to handle this matter but later it was returned to the CEO. Then the Personnel Committee read the minutes from July 24th with discussion following. The Board recommended the Personnel Committee along with Rod Spronk have a brief follow-up meeting with the CEO along with Ron Carr, Shawn Nelson, and Tom Muller in the next couple of weeks.

• Budget Committee:. Engels reported that the budget with projected water sales and estimated hookups without a rate increase has an expected profit of $95,000. He related that a basic 5% rate increase of a $1.00 increase to the minimum billing and $0.10/1000 gallons would yield $160,000 in profit and a 10% would yield $400,000 profit. It followed what more would it take to fund capital improvements since it appears future expansion projects are no longer foreseeable that would fund those costs. Depending on the scope and size of anywhere from $15 to $18 million dollars, it was thought $0.50 to $0.65 /1000 gallons would be needed to fund the annual debt payments. The CEO will make a recommendation at the

6 next meeting for an operations rate increase and a capital improvements component rate increase. No report. • Water Resources & Equipment Committee: .No report. • MRWA Director: No report. The CEO is to meet with the various committees: Personnel, Budget and Water Resources as to the budget as soon as possible.

Other: The CEO then presented that the City of Chandler and its large customer Monogram Meats have approached LPRW about providing water service to the City. Both are interested and are contemplating that LPRW should supply all the City’s water about 125,000 gpd. The CEO noted that Muller and he both feel that LPRW would benefit to upgrade this main and move its routing a bit at LPRW’s expense to a 14” transmission main under its long range planning. The Board by consensus approved this upgrade with cost reserved for final approval.. M/S/P-U Lonneman/ Feikema to set the time for the next meeting at 6:00 pm.

Public Comment: None.

Adjournment: M/S/P-U Ufkin/Weber Lonneman/DeWilde to adjourn the meeting at 1110:00p.m. The next Regular Board meeting will be Monday, September 23July 29, 2013 at 6:00 p.m.

______Janice Moen, Secretary

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