Hastings Utilities staff presented a budget and multi‑year financial forecast to the Utility Board on July 24, outlining planned rate increases from recent cost‑of‑service studies, a proposal to convert the utility’s payment‑in‑lieu of taxes (PILOT) into a separate city “dividend” fee, major capital work and options for future generation.

Derek (utilities staff) framed the budget around cash‑management goals, saying the utility’s target is to hold about 50% of annual operating expenses in unencumbered cash for rate stability and to finance future investments. "Our target for unencumbered cash, for rates and rate stabilization combined is to have about 50% of our total expenses," Derek said.

Staff described the steps embedded in current ordinances derived from prior cost‑of‑service studies: an approximate 5% consolidated increase for electric revenue, a 6.3% step for gas, and the final year of a 5% infrastructure fee increase for water. Staff told the board those steps are intended to restore cash used for recent capital investments and to smooth possible larger increases later.

On the revenue pass‑through for the city, staff proposed converting the amount now collected inside utility rates (referred to in the meeting as the pilot or PILOT) into a separate city dividend fee that would be collected and turned directly to the city general fund rather than passing through utility revenue and expenses. Staff said the change is meant to improve transparency and make Hastings’ rates easier to compare with neighboring utilities when economic‑development prospects evaluate competing sites. Staff and finance noted the draft conversion would leave the overall dollar flow unchanged; drafts cited an approximate amount of $3.7–$3.8 million that would move to the general fund as a separate line item.

The presentation included operational details across electric, gas, water and sewer. Highlights included:

- Electric: staff described past capital spending that reduced reserves and the need to rebuild cash while continuing to fund distribution, substation and generation upkeep. Production work this year includes a control/stop valve and turbine overhaul on the Whelan Energy Center on its scheduled maintenance cycle and replacement work on coal burners and a conveyor. Staff said Solar Phase 2 (4.5 MW) is online in addition to a 1.5 MW older array.

- Distribution and reliability: engineering staff noted AMI meter rollout will be complete this year (roughly 300 electric meters remained to be installed at the time of the presentation) and that the system now includes multiple recently expanded substations to serve the east side.

- Gas: staff said gas holds significant cash but that revenues do not fully cover current expenses in some months, making the system vulnerable to spikes in market gas prices. The utility maintains a peak‑shaving plant and off‑site storage; managers said cash has been used in prior price events to shield customers.

- Water and sewer: staff emphasized ongoing work on nitrate compliance, lead service replacement (a multi‑year obligation), ASR connections and planned main replacements. Water and sewer capital plans include work on the Hastings Southeast project; staff noted they expect developer contributions and state reimbursement to offset a portion of those costs (staff said the list of planned projects totals roughly $14 million, with about $9.5 million attributed to Hastings Southeast and roughly $11 million expected to return to the utility in contribution‑in‑aid over the near term).

On future generation choices, staff flagged several options: do nothing and wait on federal regulatory decisions; study conversion of Whelan Energy Center units to natural gas (including dual‑fuel mixes), update prior studies for other units; expand solar and battery storage; and pursue purchase‑power agreements with neighboring utilities. Staff said those options have differing cost profiles and risk; a council decision in coming years will be required.

Resident Willis Hunt used the meeting’s public‑comment period to press the board about funding for the city budget lines he had seen in the city’s presentation and asked, "So where is it gonna come from?" Staff pointed to the PILOT/city dividend discussion as the mechanism that will route existing utility collections to the general fund, rather than adding a new charge.

Staff said no final budget ordinance or rate change was voted July 24; the presentation was informational and staff will bring ordinance language and final budget numbers to council for action. No formal vote on the draft ordinance or budget measures occurred at the meeting.

Why it matters: the presentation shows how the utility intends to rebuild cash reserves, fund capital work and present a clearer revenue pass‑through to the city general fund. The conversion of the PILOT to a visible city dividend will change how customers see the line items on their bills and could affect how Hastings competes for industrial development when outside entities compare utility cost stacks.

What’s next: staff will finalize ordinance language for the PILOT/dividend change, continue engineering estimates for capital work and return to the board and to city council for formal approvals and any rate ordinance updates.