Marshall Municipal Utilities

Budget Overview

Gentlemen:

The proposed 2007-08 Budget for the Water, Electric, Wastewater, Internet, and Natural Gas Departments of Marshall Municipal Utilities is hereby submitted for your consideration. The budget, as presented, reflects a five percent increase in water and wastewater revenue beginning in January. It does not reflect any change in electric rates, but we recognize the need to closely monitor changes in electric income and expenses.

The budget projects operating revenues and other income of $22,292,000 based on moderate growth in all departments. Operating expenses and interest expenses are projected to total $21,086,000. Current operations, capital improvements, and debt retirement will result in a projected decrease of $3,500,000 in reserves.

The budget includes four significant capital expenditure items:

1. The budget reflects continuation of a fiber-to-the-home project that would greatly improve our community’s communication assets. This budget includes $500,000 for this year.
2. The budget reflects $750,000 for construction of a new warehouse at the Service Center.
3. The budget reflects the first year of a two-year upgrade to North Street Substation; $500,000 for year 2007/08 and $1,000,000 for year 2008/09.
4. The budget reflects the first year of a two-year capital upgrade at the Water Treatment Plant; $400,000 in year 2007/08 and $300,000 in year 2008/09.

This budget includes estimates for several other items that bear mentioning.

• This budget includes an allowance for safety related items in each department.
• Automated meter reading system.
• New coal hauling loader at the Power Plant.
• Water main extensions and replacements outlined by the Owner Supervised Program.
• Capital purchase of additional equipment (vacuum excavator, directional boring machine).

The list of major projects attached to this budget includes significant future projects as a reminder of things we expect to see.

This budget reflects our best assumptions and guesses as to revenues and expenses for the next year. As we go through the year, it is likely that some of our assumptions will not prove to be valid. For this reason, we will need to remain watchful of our financial situation.

Respectfully submitted,

___________________
Kyle D. Gibbs
General Manager

Approved this 13^th day of September, 2007.

BOARD OF PUBLIC WORKS

___________________
Jim Heinzler, President