Hastings Utility Board reviews audited financials as cash is drawn down for capital projects

The Hastings Utility Board reviewed its audited fiscal 2024 financial statements and reconciliations Wednesday, receiving an unmodified opinion from the auditors and a presentation showing lower revenues, large capital reinvestment and a substantial drawdown of cash reserves.

Auditor Marcy Luth of AMGL told the board the primary drivers of the revenue decline were about a $4.3 million drop in SPP market sales and a $2.6 million fall in gas sales; expenses declined roughly in step and the utility’s net position rose about $3.7 million despite the revenue contraction. Luth said auditors proposed six adjustments that together increased net position by $420,000 and highlighted a $450,000 correction to the posting of unbilled accounts receivable.

The audit matters mattered because the board is weighing how much cash to commit to capital work now and when to consider issuing bonds. Board member Jeanette DeWalt asked at what point the utility should bond rather than spend cash; staff said bonding decisions are evaluated in the annual budget process and depend on prevailing interest rates, issuance costs and cash targets.

Financial highlights from the audited statements and auditors’ comments included: a roughly $23 million decrease in cash largely invested in capital projects; an increase in net capital assets of about $27 million; operating cash provided of about $10.2 million; approximately $33.9 million used in capital and related financing (mostly capital asset purchases); and total Hastings Utilities cash and investments of about $38.2 million shown on page 23 of the audit report. Luth also noted a prior-period intercompany restatement of roughly $3.7 million between electric and combined departments that was corrected in the supplemental schedules.

Roger (staff member) and other finance staff told the board there is no statutory requirement to issue a separate utility audit report but the separate HU report provides supplemental detail not always visible in a combined city audit. Staff said the citywide audit that includes utility activity will be presented to the Hastings City Council on March 10, and the utility supplemental report is intended to give the board more granular department-level information.

Auditors recommended two procedural changes: (1) shift the Nebraska Department of Environment and Energy reimbursement request schedule from Dec. 31/June 30 to March 31/Sept. 30 to align with the city fiscal year and federal reporting, and (2) include capital projects in the scope of accounts-payable accrual searches so large construction invoices are not missed in year-end accruals.

Board discussion also covered the utility’s relationship with the Southwest Power Pool (SPP) and the PPGA purchasing arrangement. Staff explained that when market prices fall, the utility’s market sales revenue can drop but purchase costs fall as well; the utility’s generation functions as a reliability resource in SPP and staff said Hastings is exploring its participation options as market rules change. On PPGA finances, staff said those results generally mirror the utility’s production side, noting that in “good years” market revenues exceed costs and in weaker years both revenues and expenses drop.

Several board members pressed staff for metrics used internally and for benchmarking: staff said they track debt-to-equity and other ratios and that a working target used in practice is roughly 50% of operating expenses held as cash reserves (expressed variously as a best-practice target rather than a legal requirement). Staff also agreed to provide the board the actual cash-as-percent-of-operating-expenses ratio as of Sept. 30, 2024, for comparison with current projections.

The board approved routine items on the consent agenda (adopting the meeting agenda and approving the Jan. 9 minutes) by roll call; those votes were unanimous. No formal policy changes or bond issuances were approved at the meeting.

The utility finance presentation and the audited report will be included in the citywide audit presentation to the City Council on March 10; staff said they will continue budget-level briefings with board and council liaisons ahead of the next budget cycle.