METROPOLITAN UTILITIES DISTRICT Committee Meetings

& Public Hearing

8:15 a.m. December 2, 2015 AGENDA

1. Roll Call 2. Open Meetings Act Notice 3. Recognition of United Way Committee Members 4. Recognition of Florence Water Taste Award [Joel Christensen, VP – Water Operations]

Construction and Operations – Frost, Friend, Howard

1. Capital Expenditures [Ron Reisner, SVP & Chief Operations Officer] – Tab 5 2. Acceptance of Contracts and Payment of Final Estimates [Ron Reisner, SVP & Chief Operations

Officer] – Tab 6 3. Change Order #1 – 30-inch Water Main Replacement at 27th & “Q” Street [Ron Reisner, SVP &

Chief Operations Officer] -Tab 7 4. Amendment #2 - Engineering Services to Provide Air Emissions Compliance Assistance for

Reciprocating Internal Combustion Engines [Ron Reisner, SVP & Chief Operations Officer] -Tab 8 5. Bids on Materials and Contracts [Jon Zellars, Director of Purchasing] – Tab 9

Services and Extensions – Friend, Cavanaugh, Patterson 1. Main Extensions [Ron Reisner, SVP & Chief Operations Officer] – Tab 10

Marketing and Consumer Information – Howard, Cavanaugh, Begley 1. Annual Marketing Budget [Mark Doyle, SVP & Chief Information Officer] - Tab 11

Personnel – Friend, Patterson, Begley 1. Promotions and Ratifications [Pat Tripp, VP – Human Resources] – Tab 12

Judiciary and Legislative – Cavanaugh, Friend, Howard 1. Legislative Report [Rick Kubat, Government Relations Attorney] – Tab 16

Public Hearing - 2016 Budget

1. Presentation by Management – 2016 Gas & Water Budget [Joe Schaffart, Vice President - Accounting] – Tab 13

2. Proposed Water Rate Increase [Geneva Patterson, Financial Analyst – Rates, Revenue and Regulatory Affairs ] – Tab 14

3. Invitation for Public to Comment

Adjourn Committee Meetings and Public Hearing

METROPOLITAN UTILITIES DISTRICT Regular Meeting

9:00 a.m. December 2, 2015

AGENDA

1. Roll Call 2. Open Meetings Act Notice 3. Pledge of Allegiance 4. Approval of Minutes – Committee Meetings and Regular Board Meeting for

November 4, 2015

CONSTRUCTION 5. Capital Expenditures 6. Acceptance of Contract and Payment of Final Estimates 7. Change Order #1 – 30-inch Water Main Replacement at @ 27th & “Q” Street 8. Amendment # 2 – Engineering Services to Provide Air Emissions Compliance

Assistance for Reciprocating Internal Combustion Engines 9. Bids on Materials and Contracts

SERVICES & EXTENSIONS

10. Main Extensions

MARKETING &

CONSUMER INFORMATION

11. Annual Marketing Budget

PERSONNEL 12. Promotions and Ratifications

ACCOUNTS,

EXPENDITURES, FINANCE &

RATES

BOARD

13. 14.

15.

Approval of 2016 Gas & Water Budget (RESOLUTION) Approval of Proposed Water Rate Increase (RESOLUTION) Other Matters of District Business for Discussion

METROPOLITAN UTILITIES DISTRICT Inter-Department Communication

November 23, 2015

Subject: FIRST LEGISLATIVE REPORT – 2016 SESSION To: Judiciary and Legislative Committee cc: All Board Members; Keep, Doyle, Bucher, Schneider, Reisner; all Vice Presidents; Nowka From: Rick Kubat, Government Relations Attorney

The 2016 legislative session is 60 business days long, is scheduled to start on January 6, and is tentatively scheduled to adjourn on April 20. Major issues that will likely be debated in the upcoming session include Medicaid expansion, prison reform, state aid to education, income taxes, and the property tax credit program. Bill introduction will occur the first 10 days of the session, and the Board will be provided with regular updates on introduced legislation that could potentially impact the District. Please find below an update on lobbying efforts regarding sales tax on potable water.

Potable Water Sales Tax Exemption Legislation

The Proposal The potential legislative proposal would seek to turn-back state sales tax dollars collected for potable water and sewer services. To garner state-wide support of cities, a turn-back tax akin to the arena financing mechanism was considered. A turn-back tax permits cities to maintain their own established levy authority. The proposal would seek to turn back only state sales taxes collected for sewer services, inputs and materials purchased to operate the potable water delivery system and state sales taxes collected on the potable water bill. Lobbying Efforts

Over the interim, several conversations and meetings occurred with representatives from the League of Municipalities (“the League”), Omaha State Senators, the City of Omaha, and the City of Lincoln to gauge their interest in legislation for the 2016 session. Tax exemption proposals in the recent past have failed to advance from the Revenue Committee without the support of the League and its member cities. On September 23, 2015, a legislative presentation was provided to a large forum of city administrators and mayors at the League’s legislative conference. Many in the audience were supportive of any concept that could lower the costs to deliver potable water. However, at this time, the proposed coalition of supporters were unable to reach consensus because of concerns over the viability of any sales tax

exemption request in the upcoming session, the administrative costs associated with a turn-back tax, and the likely significant fiscal impact to state revenues. Recent conversations with potential coalition members indicate that future support of any bill will likely require further work and adjustments to the initial proposal. The Nebraska Economic Forecasting Advisory Board

The Nebraska Economic Forecasting Advisory Board, which provides an estimate of general fund receipts used by the Legislature to create the state’s budget, has recently lowered revenue projections. Estimated sales and use tax receipts were projected to decrease by roughly $132 million through the biennium budget. The Revenue Committee will be far less likely to give serious consideration to any sales and use tax exemption request with a significant fiscal impact given the most recent forecast. The Forecasting Advisory Board will meet again in February of 2016. Research The Association of Metropolitan Water Agencies (AMWA) at the request of the District, sent out a questionnaire this fall regarding other states’ water taxation policies. Fifteen states responded to the AMWA survey and the results indicate that Nebraska is one of a few states that “double tax” water services. Of the 15 states that responded to the AMWA survey, only California and Arizona tax both the inputs and materials necessary to operate the potable water system and tax customers a second time on the back end of their water bill. Six of 15 states did not tax either category. Seven of the 15 responding states tax one category or the other, but not both. Senator Burke Harr, a member of the Revenue Committee, has requested legislative research to canvass how all 50 states tax water. Next Steps Moving forward, it will be important to continue working with potential coalition members to create a proposal that could be potentially supported by multiple parties. Given the recent legislative economic forecast, it is recommended that the District delay moving forward with any legislation in the 2016 session. After the District receives the legislative tax study, further outreach efforts need to occur with state senators to provide information on Nebraska’s water tax policy. Richard A. Kubat Government Relations Attorney (402) 504-7125

Approved:

Ronald E. Bucher, Senior Vice President/General Counsel

Scott L. Keep, President