Loading...
HomeMy WebLinkAboutStaff Report 4.C 12/07/2015Agenda Item #4.0 LU'`� rs5$ DATE: December 7, 2015 TO: Honorable Mayor and Members of the City Council through City Manager FROM: Da St . RASCE — Director, Public Works and Utilities Kent aro hers, P.E. — Operations Manager SUBJECT: Resolution Authorizing the City Manager to Execute a Professional Services Agreement for the 2016 Utility Rate and Capacity Fee Study RECOMMENDATION It is recommended that the City Council adopt the attached Resolution Authorizing the City Manager to Execute a Professional Services Agreement for 2016 Utility Rate and Capacity Fee Study. BACKGROUND. The Reed Group prepared the most recent utility rate study in November 2011. The finding in the study increased wastewater rates by four percent and included the issuance of new debt for the sewer treatment plan. The study made recommendations for utility rates for the period of 2012 to 2016 that were adopted by Council on December 5, 2011 by Resolution Numbers 2011- 165 N.C.S and 2011 -166 N.C.S. The rates have automatic escalators to account for increases in consumer price index and cost of wholesale water. The utility capacity fees were revised on August 27, 2012 during the process of restructuring all City development fees under Resolution Numbers 2012 -126 N.C.S and 2012 -127 N.C:S. Bartle Wells performed the related study for the water and wastewater capacity fees based on the best available financial information at the time, including the demand analysis from the 2010 Urban Water Management Plan. The capacity fees are increased by the Engineering News Record construction cost index every year. In order to rely on automatic annual rate escalators, California Prop 218 requires a new rate study every 5 years. A new rate study is also recommended to respond to changes in recycled and potable water demand, operational costs, capital improvements, and the impacts of future development. The study will use conclusions from the 2015 Urban Water Management Plan. The proposed action meets Council Goal: "Prepare Financial Forecasts and Establish/Revise Reserve Policies for Enterprise and Special Revenue Funds ". DISCUSSION On July 29, 2015, a Request for Proposal (RFP) for the Utility Rate Study for User Rates and Capacity Fees was distributed to six firms by the Public Works and Utilities Department. The following firms responded to the RFP: Bartle Wells Associates, HF &H Consultants and Willdan Financial Services. After careful consideration, review of similar project deliverables, review of cost proposals, and interviews with two firms, Bartle Wells Associates of Berkeley, CA was determined to be the firm best suited to perform these services. There were eight criteria identified in the RFP used by the selection committee to determine the most qualified proposal: responsiveness to terms and conditions of the RFP, demonstrated understanding of the project requirements, qualifications and experience, the firm's overall professional quality, demonstrated success of clients adopting the recommended fees, project schedule, project approach and scope of services, and ability to execute the City's standard Professional Services Agreement. Bartle Wells Associates was selected because they provided the most comprehensive proposal, which illustrated their extensive experience providing water, sewer, and recycled water rate analysis with local municipalities. Bartle Wells Associates scope of services includes data collection, development of a ten -year financial plan, cost -of- service rate analysis for user rates, and capacity fee analysis. The services provided will also include Proposition 218 compliance, benchmarking and comparisons of rates to other similar cities and districts, and analysis of recycled water cost of services. Bartle Wells Associates satisfactorily prepared the 2012 Capacity Fee Study and has done rate studies for the City in the past. The proposed scope of work is included in Attachment 2. The rate study is scheduled to be completed by the end of 2016 and adopted in early 2017. Any adjustments to the existing rates would be expected to be made beginning July 1, 2017. FINANCIAL IMPACTS The consulting services will be performed on a time and materials basis, not to exceed $98,990. Sufficient funds were allocated in the FY 15/16 budget in Water (6700.67100.54140) and Wastewater (6600.66100.54110) to support the project. ATTACHMENTS 1. Resolution 2. PSA Agreement 2 Attachment 1 RESOLUTION AUTHORIZING THE CITY MANAGER TO EXECUTE A PROFESSIONAL SERVICES AGREEMENT FOR THE 2016 UTILITY RATE STUDY PROJECT WHEREAS, the City of Petaluma wishes to update the Utility User Rates and Capacity Fees; and WHEREAS, this project requires the services of a qualified professional financial consulting firm familiar with similar projects; and WHEREAS, the City of Petaluma circulated a Request for Proposal on July 29, 2015 and three (3) proposals were received; and WHEREAS, the proposals were reviewed and evaluated and Bartle Wells Associates of Berkeley, CA was selected as the consultant for the project; and WHEREAS, Bartle Wells Associates ability to produce quality work on financial rate study projects has been demonstrated in the City of Petaluma and in other Northern California municipalities; and WHEREAS, staff recommends the City execute a professional services agreement with Bartle Wells Associates for financial consulting services in order to complete the 2016 Utility Rate Study. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Petaluma hereby authorizes the City Manager to sign the Professional Services Agreement for financial consulting services with Bartle Wells Associates for the 2016 Utility Rate Study in the amount not to exceed $98,990. 3 Attachment 2 PROFESSIONAL SERVICES AGREEMENT Utility Rate Study for User Rates and Capacity Fees (Title of Project) FY Fund # Cost Center Object Code Project # Amount $ For multi -year contracts or contracts with multiple accounts: FY 15/16 Fund # 6600 Cost Center 66100 Object Code 54110 Project # Amount $24,747.50 FY 15/16 Fund # 6700 Cost Center 67100 Object Code 54140 Project # Amount $24,747.50 FY 16/17 Fund # 6600 Cost Center 66100 Object Code 54110 Project # Amount $24,747.50 FY 16/17 Fund # 6700 Cost Center 67100 Object Code 54140 Project # Amount $24,747.50 FY Fund # Cost Center Object Code Project # Amount $ THIS PROFESSIONAL SERVICES AGREEMENT ( "Agreement ") is entered into and effective as of , 20 ( "Effective Date "), by and between the City of Petaluma, a (city use only) municipal corporation and a charter city ( "City ") and Bartle Wells Associates a California Corporation ( "Consultant ") (collectively, the "Parties "). WHEREAS, the Parties enter into this Agreement for the purpose of Consultant providing professional services to City under the terms and conditions set forth herein. THEREFORE, in consideration of the mutual covenants contained in this Agreement, the Parties agree as follows: 1. Services. Consultant shall provide the services as described in and in accordance with the schedule set forth in Exhibit. "A" attached hereto and incorporated herein ( "Services "). 2. Compensation, Business Tax Certificate. A. For the full performance of the Services as described herein, City shall compensate Consultant in accordance with the rates specified in Exhibit A. B. Consultant shall submit detailed monthly invoices reflecting all services performed during the preceding month, and including a revised schedule for performance and additional documentation requested by City, as applicable. C. Consultant shall be compensated for services in addition to those described in Exhibit A, only if Consultant and City execute a written amendment to this Agreement describing the additional services to be performed and the compensation to be paid for such services. In no case shall the total compensation under this Agreement exceed $98,990 without prior written authorization of the City Manager. Further, no compensation for a section or work program component attached with a specific budget shall be exceeded without prior written authorization of the City Manager. D. Notwithstanding any provision herein, Consultant shall not be paid any compensation until such time as Consultant has on file with the City Finance Department a current W -9 form available from the IRS website (www.irs.goy) and has obtained a currently valid Petaluma business tax certificate. PROFESSIONAL SERVICES AGREEMENT (609321) August2015 4 E. City's obligation to pay compensation to Consultant as provided herein is contingent upon Consultant's performance of the Services pursuant to the terns and conditions of this Agreement and any amendments thereto. 3. Term. The term of this Agreement commences on the Effective Date, and terminates on December 31, 2017, unless sooner terminated in accordance with Section 4. Upon termination, any and all of City's documents or materials provided to Consultant and any and all of the documents or materials'prepared for City or relating to the performance of the Services, shall be delivered to the City as soon as possible, but not later than fourteen (14) days after termination of the Agreement. 4. Termination. City may terminate this Agreement without cause upon ten (10) days' written notice. City may immediately terminate or suspend this Agreement for cause. Cause for immediate termination or suspension shall include, but not be limited to, any breach of this Agreement by Consultant or Consultant's bankruptcy or insolvency. Upon receipt of notice of termination or suspension for cause, Consultant shall immediately stop all work in progress under this Agreement. In the event of early termination of this Agreement by City, Consultant shall be entitled to payment for all Services performed to the date of termination to the extent such Services were performed to the satisfaction of City in accordance with the terms and conditions of this Agreement. If City terminates this Agreement for cause, Consultant shall be liable to City for any excess cost City incurs for completion of the Services. 5. Consultant's Representation; Independent Contractor. Consultant represents that Consultant possesses distinct professional skills in performing the Services. City has relied upon said representation as a material inducement to enter into this Agreement. Consultant shall, therefore, provide properly skilled professional and technical personnel to perform all Services under this Agreement. It is expressly understood that Consultant and its agents and employees, shall act in an independent capacity and as an independent contractor and not as officers, employees or agents of City. This Agreement shall not be construed as an agreement for employment. 6. Facilities and Equipment. Consultant shall, at its sole cost and expense, furnish all facilities and equipment that may be required for furnishing Services pursuant to this Agreement. City shall furnish to Consultant no facilities or equipment, unless the City otherwise agrees in writing to provide the same. 7. Licenses, Permits, Etc. Consultant shall, at Consultant's sole cost and expense, keep in effect at all times during the term of this Agreement any licenses, permits or other such approvals which are legally required for performing the Services. 8. Time. Consultant shall devote such time to the performance of the Services as may be reasonably necessary for satisfactory performance of Consultant's obligations pursuant to this Agreement. 9. Inspection. Consultant shall provide the City every reasonable opportunity to ascertain that the Services are being performed in accordance with the requirements and intentions of this Agreement. All work done and materials furnished, if any, shall be subject to 5 inspection and approval by the City. The inspection of such work shall not relieve Consultant of any of its obligations pursuant to this Agreement. 10. Progress Reports. Upon the City's request, Consultant shall provide, in a form acceptable to City, written progress reports of all oral and written observations, opinions, recommendations, analyses, progress and conclusions related to Consultant's performance of the Services. 11. Confidentiality. In the course of Consultant's employment, Consultant may have access to trade secrets and confidential information, disclosure of which is protected or limited by law. Consultant shall not directly or indirectly disclose or use any such confidential information, except as required for the performance of the Services. 12. Conflict of Interest. Consultant represents that it presently has no interest, and covenants that it shall not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of the Services hereunder. Consultant further covenants that, in the performance of this Agreement, it shall not employ any subcontractor or person having such a conflict of interest. Consultant represents that no one who has or will have any financial interest under the Agreement is an officer or employee of City. If such conflict of interest arises during this Agreement or any extension, Consultant will immediately advise City and City may, at its sole discretion, immediately terminate this Agreement. Certain Consultants are subject to the requirements, including the disclosure and reporting requirements, of the City's Conflict of Interest Code adopted pursuant to the Political Reform Act. Such Consultants subject to the City's Conflict of Interest Code include those whose work may involve: making government decisions regarding approval or adoption of rates, rules, or regulations, action on permits or other applications, authorization to enter into or modify contracts, or approval of plans, designs, reports, or studies. Consultant agrees to comply fully with all such requirements to the extent they apply to Consultant's performance of the Services. 13. Consultant No Agent. Except as City may specify in writing, Consultant shall have no authority, express or implied, to act on behalf of City in any capacity whatsoever as an agent. Consultant shall have no authority, express or implied, pursuant to this Agreement to bind City to any obligation whatsoever. 14. Standard of Performance. Consultant shall perform all the Services in a manner consistent with the standards of Consultant's profession. All instruments of service of whatsoever nature, which Consultant delivers to City pursuant to this Agreement, shall be prepared in a substantial, workmanlike manner and conform to the standards of Consultant's profession. All such instruments of service shall become the sole and exclusive property of City upon delivery of the same. 15. Assignment/Transfer. No assignment or transfer in whole or in part of this Agreement shall be made without the prior written consent of City. 16. Subcontractors. Consultant shall directly perform all Services, and shall not subcontract any portion of performance of the Services without the prior written consent of City. Any such subcontractors shall be required to comply, to the full extent applicable, with rel the terms and conditions of this Agreement, including but not limited to, procuring and maintaining insurance coverage as required herein and which shall name City as an additional insured. 17. Compliance With All Laws. Consultant shall fully comply with all applicable local, state and federal rules, laws, regulations and ordinances pertaining to the performance of the Services required hereunder, including but not limited to, the California Building Standards Code as in effect in the City, the Americans with Disabilities Act, and any laws and regulations related to any copyright, patent, trademark or other intellectual property right involved in performance of the Services. Consultant's failure to comply with any law(s) or regulation(s) applicable to the performance of the Services hereunder shall constitute a material breach of this Agreement. To the extent that any other government agency or entity provides compensation for any Services, Consultant shall comply with all rules and regulations applicable to such fiscal assistance. 18. Living Wage Ordinance. Without limiting the foregoing Section 17, Consultant shall comply fully with all applicable requirements of Petaluma Municipal Code, Chapter 8.36, Living Wage (the "Living Wage Ordinance "), as the same may be amended from time to time. Upon the City's request Consultant shall promptly provide to the City documents and information verifying Consultant's compliance with the requirements of the Living Wage Ordinance, and shall within fifteen (15) calendar days of the Effective Date of this Agreement, notify each of its affected employees as to the amount of wages and time off that are required to be provided to them pursuant to the Living Wage Ordinance. The Acknowledgement and Certification Pursuant to City of Petaluma Living Wage Ordinance, attached to this Agreement as Exhibit C shall be a part of this Agreement for all purposes, and Consultants that are subject to Living Wage Ordinance requirements, as determined by the City, must provide a properly completed Exhibit C in accordance with the requirements of the Living Wage Ordinance. Consultant's noncompliance with the applicable requirements of the Living Wage Ordinance shall constitute cause for City's termination of this Agreement pursuant to Section 4 hereof. 19. Discrimination. During the performance of this Agreement, Consultant shall not discriminate against any employee or applicant for employment because of race, religion, creed, color, national origin, ancestry, gender, sexual orientation, age or physical or mental disability in violation of any applicable law. 20. Notice. Except as otherwise specified in this Agreement, all notices to be sent pursuant to this Agreement shall be made in writing, and sent to the Parties at their respective addresses specified below or to such other address as a Party may designate by written notice delivered to the other Party in accordance with this Section. All such notices shall be sent by: (i) personal delivery, in which case notice is effective upon delivery; (ii) certified or registered mail, return receipt requested, in which case notice shall be deemed delivered on receipt if delivery is confirmed by a return receipt; (iii) nationally recognized overnight courier, with charges prepaid or charged to the sender's account, in which case notice is effective on delivery if delivery is confirmed by the delivery service; or 7 (iv) facsimile transmission, in which case notice shall be deemed delivered upon transmittal, provided that (a) a duplicate copy of the notice is promptly delivered by first -class or certified mail or by overnight delivery, or (b) a transmission report is generated reflecting the accurate transmission thereof. Any notice given by facsimile shall be considered to have been received on the next business day if it is received after 5:00 p.m. recipient's time or on a nonbusiness day. City: City Clerk City of Petaluma Post Office Box 61 Petaluma, California 94953 Phone: (707) 778 -4360 Fax: (707) 778 -4554 Email: cityclerk @ci.petaluma.ca.us And: City of Petaluma Kent Carothers 202 N. McDowell Blvd. Petaluma, CA 94954 Phone: 707 - 778 -4580 Fax: 707 - 206 -6034 Email: kcarotherskei.petaluma.ca.us Consultant: Alex Handlers Bartle Wells Associates 1889 Alcatraz Avenue Berkeley, CA 94703 Phone: 510- 653 -3399 Fax: 510- 653 -3769 Email: alexkbartlewells.com 21. Ownership of Documents. All original papers, documents or computer material on disk or microfilm, and copies thereof, produced as a result of this Agreement, shall be the property of City and may not be used by Consultant without the written consent of City. Copies of such documents or papers shall not be disclosed to others without the written consent of the City Manager or his or her designated representative. 22. Indemnification. To the maximum extent permitted by law, Consultant shall, at its own expense, indemnify, defend with counsel acceptable to the City, (which acceptance will not be unreasonably withheld), and hold harmless City and its officers, officials, employees, agents and volunteers ( "Indemnitees ") from and against any and all alleged liability, loss, damage, claims, suits, actions, arbitration proceedings, administrative proceedings, regulatory proceedings; civil penalties and fines, expenses and costs (including, without limitation, claims expenses, attorney's fees and costs and fees of litigation) (collectively, "Liability ") of every nature, whether actual, alleged or threatened, arising out of or in connection with the Services or Consultant's failure to comply with any of the terms of this Agreement, regardless of any fault or alleged fault of the Indemnitees. 8 The Consultant's obligation to indemnify, defend and hold harmless under this provision shall not be excused because of the Consultant's inability to evaluate Liability, or because the Consultant evaluates Liability and determines that the Consultant is not or may not be liable. The Consultant must respond within 30 calendar days to any tender for defense and indemnity by the City, unless the time for responding has been extended by an authorized representative of the City in writing. If the Consultant fails to accept tender of defense and indemnity within 30 calendar days, in addition to any other remedies authorized by law, so much of the money due or that may become due the Consultant under this Agreement as shall reasonably be considered necessary by the City, may be retained by the City until disposition has been made of the matter subject to tender, or until the Consultant accepts the tender, whichever occurs first. In the event that the City must file responsive documents in a matter tendered to Consultant prior to Consultant's acceptance of tender, Consultant agrees to fully reimburse all costs, including but not limited to attorney's fees and costs and fees of litigation, incurred by the City in filing such responsive documents. The Consultant waives any and all rights to express or implied indemnity against the Indemnitees concerning any Liability of the Consultant arising out of or in connection with the Services or Consultant's failure to comply with any of the terms of this Agreement. The Consultant's responsibility of such defense and indemnity obligations shall survive the termination or completion of this Agreement for the full period of time allowed by law. The defense and indemnification obligations of this Agreement are undertaken to, and shall not in any way be limited by, the insurance obligations contained in this Agreement. Notwithstanding the foregoing, to the extent this Agreement is a "construction contract" as defined by California Civil Code Section 2783, as may be amended from time to time, Consultant's duty to indemnify under this provision shall not apply when to do so would be prohibited by California Civil Code Section 2782, as may be amended from time to time. Notwithstanding the foregoing, to the extent that the Services include design professional services subject to California Civil Code Section 2782.8, as may be amended from time to time, Consultant's duty to indemnify shall only be to the maximum extent permitted by California Civil Code Section 2782.8. 23. Insurance. Consultant shall comply with the "Insurance Requirements for Consultants" in Exhibit B -2, attached hereto and incorporated herein by reference. [Indicate attached exhibit, e.g., `B -1, " "B -2, " `B -3, " or "B-4.'] 24. Amendment. This Agreement may be amended only by a written instrument executed by both Parties. 25. Litigation. If litigation ensues which pertains to the subject matter of Consultant's services hereunder, Consultant, upon request from City, agrees to testify therein at a reasonable and customary fee. 26. Construction. This Agreement is the product of negotiation and compromise on the part of both Parties and that the Parties agree that, notwithstanding Civil Code Section 1654, any uncertainty in the Agreement shall not be construed against the drafter of the Agreement. 27. Governing Law; Venue. This Agreement shall be enforced and interpreted under the Taws of the State of California and the City of Petaluma. Any action arising from or brought in connection with this Agreement shall be venued in a court of competent jurisdiction in the County of Sonoma, State of California. 28. Non - Waiver. The City's failure to enforce any provision of this Agreement or the waiver thereof in a particular instance shall not be construed as a general waiver of any part of such provision. The provision -shall remain in full force and effect. 29. Severabifity. If any term or portion of this Agreement is held to be invalid, illegal, or otherwise unenforceable by a court of competent jurisdiction, the remaining provisions of this Agreement shall continue in full force and effect. 30. No Third Party Beneficiaries. The .Parties do not intend to create, and nothing in this Agreement shall be construed to create any benefit or right in any third party. 31. Mediation. The Parties agree to make a good faith attempt to resolve any dispute arising out of this Agreement through mediation prior to commencing litigation. The Parties shall mutually agree upon the mediator and shall divide the costs of mediation equally. 32. Consultant's Books and Records. A. Consultant shall maintain any and all ledgers, books of accounts, invoices, vouchers, canceled checks, and other records or documents evidencing or relating to charges for services, or expenditures and disbursements charged to the City for a minimum period of three (3) years or for any longer period required by law, from the date of final payment to Consultant pursuant to this Agreement. B. Consultant shall maintain all documents and records which demonstrate performance under this Agreement for a minimum period of three (3) years or for any longer period required by law, from the date of termination or completion of this Agreement. C. Any records or documents required to be maintained pursuant to this Agreement shall be made available for inspection or audit, at any time during regular business hours, upon written request by the City Manager, City Attorney, City Finance Director, or a designated representative of these officers. Copies of such documents shall be provided to the City for inspection at Petaluma City Hall when it is practical to do so. Otherwise, unless an alternative is mutually agreed upon, the records shall be available at Consultant's address indicated for receipt of notices in this Agreement. D. Where City has reason to believe that such records or documents may be lost or discarded due to dissolution, disbandment or termination of Consultant's business, City may, by written request by any of the above -named officers, require that custody of the records be given to the City and that the records and 10 documents be maintained in Petaluma City Hall. Access to such records and documents shall be granted to any party authorized by Consultant, Consultant's representatives, or Consultant's successor in interest. 33. Headings. The headings used in this Agreement are for convenience only and are not intended to affect the interpretation or construction of any provisions herein. 34. Survival. All obligations arising prior to the termination or expiration of this Agreement and all provisions of this Agreement allocating liability between City and Consultant shall survive the termination or expiration of this Agreement. 35. Entire Agreement. This Agreement, including the exhibits attached hereto and incorporated herein, constitutes the entire agreement between the Parties with respect to the Services, and supersedes all prior agreements or understandings, oral or written, between the Parties in this regard. IN WITNESS WHEREOF, the parties hereto have executed this document the day, month and year first above written. CITY OF PETALUMA City Manager ATTEST: City Clerk APPROVED AS TO FORM: City Attorney APPROVED: Department Director APPROVED: Risk Manager APPROVED: Finance Director CONSULTANT By Name Title Address City State Zip Taxpayer I.D. Number Petaluma Business Tax Certificate Number 11 EXHIBIT A - SCOPE OF SERVICES This section presents a scope of services that forms a sound basis for completing a comprehensive Water and Wastewater Rate Study. Our general project approach is to work closely with staff and other members of the project team, identify objectives, set milestones, have frequent communication, and remain flexible to resolve unanticipated issues. 1. Project Team Orientation To initiate our work, hold a meeting with City staff and others as appropriate, to accomplish the following: ■ Identify members of City staff, City Council, engineering consultants, and others who will participate in the project. • Determine the roles and responsibilities of all project participants. • Identify other parties that may a significant interest in the project, such as community groups, business organizations, developers, and large customers. • Establish project schedule and key milestone dates. • Confirm the key goals and expectations of the project team. BWA recommends holding the kickoff meeting after we have reviewed preliminary information. This will enable the kickoff meeting to be more substantive and facilitate more in -depth discussion of key issues and preliminary observations and potential alternatives. 2. Investigation and Data Collection Assemble the information necessary to understand the City's water, recycled water, and sewer systems, finances, customers and usage, rate and fee structures, capital improvement needs and alternatives, and legal agreements. Assistance and cooperation of City staff will be needed to assemble the relevant background information. The objectives of investigation and data collection are to develop a complete understanding of the City's utilities and finances, and to reach an agreement on basic assumptions to be used in the study as well as key alternatives for evaluation. Task A Deliverables Include: ■ Project kickoff meeting ■ List of project goals and objectives ■ Project schedule and budget ■ Project team contact list ■ Summary of current and historical rates and finances ■ List of key assumptions and alternatives underlying the rate study 12 TASK B. 10-YEAR FINANCIAL PLANS 1. Develop Forecasts and Projections Based on evaluation of the data assembled and input provided by the City, prepare forecasts and projections to be used in the development of financial projections for the City's water and sewer utilities. Develop projections for the following areas (and others as appropriate). Review projections and alternatives with City staff for agreements on assumptions, interpretation of data, and completeness of approach. • Capital Improvements Including Long -Term Repairs & Replacements: Based on input from City staff, identify future capital improvement program costs or alternatives to include in the financial analysis and determine a reasonable amount.to include for future, ongoing capital repairs and replacements. BWA often recommends that agencies phase in funding for long -term system rehabilitation. • Water & Sewer Demand, Supply, & Cost: With City input, forecast water demand, future conservation projections, sources of supply, and the costs associates with the City's various sources of water supply. Identify potential water cutback scenarios for evaluation. • Cost Escalation Factors: Review historical cost trends and work with project team to develop reasonable cost escalation factors for both operating and capital expenditures. Work with City staff to identify any anticipated changes in future staffing, benefits, and /or other operating costs. • Funding for Street Replacements: Work with City staff to determine yearly infrastructure funding for street repairs and replacements that can be recovered from the City's water and sewer utilities. Incorporate funding projections into annual water and sewer revenue requirements. 2. Evaluate Financing Alternatives for Capital Improvements Evaluate options for financing capital improvement projects. Our evaluation will: • Estimate the amount and timing of any debt, if needed, to finance capital projects. • Evaluate the alternative borrowing methods available including bonds, COPS, state and federal loan programs (including the State Revolving Fund Financing Program), bank loans and lines of credit, and other options. • Recommend the appropriate type of debt, its term and structure. • Develop debt service estimates to incorporate in the financial projections. 3. Establish Prudent Minimum Fund Reserve Targets Evaluate the adequacy of the City's current utility fund reserves. Establish prudent minimum fund reserve targets based on the City's operating and capital funding projections. Develop an implementation plan for achieving and maintaining the recommended reserve fund levels. 4. Develop 10 -Year Financial Projections Work with the City's Public Works and Finance Department to develop cash flow projections showing the financial position of the water and sewer enterprises over the next 10 years. The cash flows will project fund balances, revenues, expenses, and debt service coverage, and will incorporate the forecasts developed with staff input. After developing a base -case cash flow scenario, we can develop alternatives for additional evaluation such as capital improvement alternatives, project financing alternatives, the impacts of various levels of water demand, etc. During this phase, BWA will work closely with the project team to evaluate financial and rate projections under alternative scenarios and assumptions. 13 S. Evaluate Rate Increase Options Based on the cash flow projections, determine the annual revenue requirements and project the overall level of required water and sewer rate increases. Evaluate rate adjustment alternatives, such as gradually phasing in required rate increases over a number of years. If appropriate, evaluate different levels of rate increases and their impacts on the City's ability to fund future operating and capital needs. 6. Develop Financial & Rate Models Develop user - friendly water and sewer financial and rate models designed to be used by City staff to update projections, track financial results, and evaluate financial scenarios and their impacts on future utility rates. The models will detail key assumptions and can be used to evaluate alternatives and "what if" scenarios.. BWA has developed numerous rate and financial models for utility enterprises. We have found that keeping a model as straightforward as possible, without unnecessary complexity, can increase the model's usability and improve effectiveness as an in -house planning tool. Task B'Deliverables Include: ■ Summary of 10 -year capital improvement plan & key alternatives if appropriate ■ Evaluation of financing alternatives for capital improvements ■ Recommendations for minimum fund reserve targets ■ Evaluation of cost recovery and accounting alternatives for recycled water ■ 10 -year cash flow projections with supporting tables ■ User - friendly water and wastewater financial and rate models designed to enable staff to update projections and evaluate alternative financial scenarios ■ Evaluation of rate increase options ■ Meet with the City's project team to present findings, discuss alternatives, gain input, and develop preliminary recommendations 1. Identify & Evaluate Water and Sewer Rate Structure Modifications & Alternatives Review the City's current water and sewer rate structures and discuss advantages and disadvantages compared to other rate approaches. Identify potential alternatives and modifications that could help improve rate equity, conservation incentive, or help achieve other City objectives. Discuss pros and cons of different rate structure options and their general impacts on different types of customers. Rate structure options can be refined as the study progresses based on input from the City's project team. 2. Review and Evaluate Recycled Water Rate Alternatives Review existing recycled water contracts. Identify and evaluate potential recycled water rate alternatives. Discuss advantages and disadvantages of different approaches. Work with City staff to develop an implementation plan for possible phase in of new recycled water rates. 14 3. Conduct Survey of Regional Water, Sewer, and Recycled Water Rates and Capacity Fees Review and summarize water and sewer rates and capacity fees of other regional and /or comparable agencies. Summarize results in easily understandable tables and /or charts. Confer with staff on agencies to include in the survey. 4. Analyze Water Consumption & Utility Billing Data Analyze current and historical water usage and utility billing data to determine reasonable and conservative estimates of water and sewer demand to use in developing financial projections and rates. Water use can fluctuate from year to year depending on various factors such as weather and local and regional conservation efforts. Ideally, we would prefer to analyze 3 years of utility billing data in order to determine slightly conservative demand projections. Work with the City to project water and sewer demand under various normal year and water shortage scenarios. S. Allocate Costs to Billing Parameters for Each Utility Allocate costs identified in the water and sewer financial plans to appropriate fixed and variable rate components. Water rates will be based on an equitable allocation of costs to fixed and variable charges and will include a cost -basis to support proposed residential rate tiers. Sewer rates will based on cost allocations to wastewater flow, BOD, and SS to develop underlying unit charges that will then be applied to the wastewater discharge characteristics of different customer classes. Rates will be designed to be equitable to all customers and comply with the substantive requirements of Proposition 218. 6. Develop Preliminary & Final Rate Recommendations with City Input Based on evaluation of rate structure alternatives and the financial plan update, develop draft rate alternatives for City input. The recommendations may include a multi -year phase in of both overall rate increases and proposed rate structure adjustments in order to help mitigate the annual impact on ratepayers. Review preliminary recommendations and key alternatives with the City Council's Utilities Committee and others as directed. Revise recommendations based on input received. Develop a plan for implementing rate increases and rate structure modifications. Final rate recommendations will be designed to: a) fund each utility's long -term costs of providing service, including operating, capital, and deferred maintenance needs b) be fair and equitable to all customers, d) provide a prudent balance of revenue stability and conservation incentive, e) be easy to understand and administer, and f) comply with the substantive requirements of Proposition 218. 7. Evaluate Use of Automatic Rate Pass - Throughs Identify and evaluate the potential for implementing automatic pass - throughs for future wholesale rate increase and /or ongoing cost inflation. BWA has helped many agencies implement pass- through provisions to protect agencies against unanticipated wholesale cost increases and keep rates aligned with the cost of providing service. 15 8. Evaluate Rate Impacts on a Range of City Customers Calculate the impacts of each rate alternative on a range of City customers (e.g. different customer classes, customers with different levels of water use, etc.) Work with the City's project team to identify customer and usage profiles to use for calculating the rate impacts. Discuss additional rate structure adjustments that may reduce the impact on certain customers if warranted. 9. Develop a Series of Escalating Drought Rates Reduced water sales during droughts and water shortages will result in decreased revenues and potentially result in budget deficits. BWA recommends the City consider adopting some form of drought rates to both a) support financial stability during water shortages and droughts, and b) provide additional financial incentive for conservation. BWA recommends agencies phase in drought rates as conditions warrant, and also phase out drought rates as water use gradually returns to normal. BWA has assisted many agencies in evaluating and implanting emergency drought rates. Ideally, drought rates would be included on the City's Proposition 218 rate notice and adopted along with regular rate increases to enable the City to implement and escalate drought rates as water supply circumstances warrant. Task C Deliverables Include: ■ Evaluation of current water and sewer rates and potential rate modifications ■ Evaluate recycled water rate alternatives ■ Water, recycled water, and sewer rate surveys ■ Assessment of alternative sewer rate structures for industrial customers ■ Analysis of historical utility billing data ■ Cost allocations supporting water and sewer rate components, including rate tiers Development of draft rate alternatives for City evaluation and input ■ Development of drought rates to support financial stability with reduced water sales ■ Meet with City as needed to present findings, discuss alternatives, gain input, and develop preliminary and final rate recommendations 1. Review Current Capacity Fees Review the City's current water and sewer capacity fees as well as policies and procedures. Evaluate if the fees equitably recover the full costs of infrastructure and assets benefitting new development and comply with Government Code 66013. As appropriate, identify potential modifications to the fees, fee structure, or how fees are applied. BWA has developed connection fees under a wide range of methodologies and has assisted many agencies in improving fee equity and administration. Work with the City to identify objectives for updated or new capacity fees for the City's utilities. 2. Evaluate Separate Recycled Water Capacity Fee If appropriate, work with the City's project team to identify goals for a separate recycled water capacity fee. Identify methodologies for calculating a separate recycled water capacity fee. 16 3. Conduct Survey of Regional Capacity Fees Review and summarize capacity charges of other regional and comparable agencies. Summarize results in easily understandable tables and /or charts. 4. Evaluate Alternative Capacity Fee Methodologies Identify and evaluate alternative methods for calculating capacity fees. Discuss advantages and disadvantages with the City's project team and determine a recommended approach. S. Determine Current Value & Capacity of Utility Assets Calculate the current value of the City's water, recycled water, and sewer system assets. The current value is generally calculated by adjusting the original or depreciated value of each facility or asset into current dollars using the Engineering News - Record Construction Cost Index, a widely -used measure of construction cost inflation. Also, determine the capacity of major components of the water and sewer systems. 6. Allocate Capital Program Costs to Current & Future Users Equitably allocate capital improvement costs to existing and future users based on input from City staff and /or its consulting engineers. Some projects may entirely benefit one group while others will provide a portion of benefit to both correct existing system deficiencies and provide new capacity for growth. 7. Develop Preliminary Capacity Fee Recommendations Based on appropriate and technically sound methodology, and evaluation of alternative approaches, recommend updated water and sewer capacity fees. Fees will be designed to comply with Government Code Section 66013 (established by A61600). 8. Recommend a Method for Future Development Fee Updates Recommend a method to annually or periodically adjust development fees and miscellaneous charges so they keep aligned with future costs. For example, development fees can be adjusted annually based on the change in the Engineering News- Record's Construction Cost Index, a widely used measure of construction cost inflation. Task D Deliverables Include: ■ Water and sewer capacity fee survey ■ Identification of alternative fee methodologies or approaches' ■ Calculations of new water and sewer capacity fees ■ Evaluation of a separate recycled water capacity fee ■ Meet with City to present findings, discuss alternatives, gain input, and develop capacity fee recommendations !Y 17 warranted to ensure final recommendations reflect Council preferences. Present revised recommendations at a subsequent Council Meeting in order to gain Council approval and receive additional input. BWA can also attend the Proposition 218 Public Hearing and present a summary of findings and recommendations and respond to Council and public comments. BWA has extensive experience presenting financial and rate recommendations to non - technical audiences, dealing with challenging questions, and building acceptance for final recommendations. 3. Prepare Draft & Final Reports Develop an administrative draft report or Technical Memorandum summarizing key background issues, study objectives, findings, assumptions, draft recommendations and alternatives, impacts on ratepayers, and the rate and fee surveys. The report will include: a) brief descriptions of each utility system and service area, b) overview of historical financial operations, c) discussion of the current water and sewer rates, d) a description of 10 -year water and wastewater capital improvement programs, e) presentation of 10 year financial projections and key assumptions, f) explanation of cost allocation and derivation of recommended rates and capacity fees, g) impacts of proposed rates and capacity fees on a range of customer types and usage profiles, and h) results from the water and sewer rate and capacity fee surveys. The report will be written for a non - technical audience and will clearly explain the rationale for recommendations and key alternatives when applicable. Submit a preliminary draft report for City review and feedback. Incorporate input into a revised draft report for distribution. Incorporate any revisions into a final report and provide the City with printed and electronic copies as needed. 4. Proposition 218 Rate Notice Develop a draft Proposition 218 notice for City review. Incorporate revisions and develop a final notice. BWA recommends the notice go beyond the minimum legal requirements and provide clear and concise explanation of the reasons for any rate adjustments. BWA has helped many agencies adopt rates via the Proposition 218 process. We have found that ratepayers are generally much more accepting of rate increases or rate structure modification when they understand the reasons underlying the adjustments. BWA has also helped a number of agencies coordinate the printing and mailing of the Proposition 218 notices and will remain available to assist the City with these services on a time and materials basis as needed. 5. Public Education and Consensus - Building Rate and fee adjustments are often controversial. BWA has extensive experience developing clear presentations that facilitate public understanding of the need for rate increases. We understand the importance of building consensus and public acceptance for our recommendations and can assist the City in any outreach and public education efforts. 18 Task E Deliverables Include: ■ 6 project team meetings to discuss findings, alternatives, recommendations and obtain input ■ 2 City Council meetings to present findings and preliminary recommendations and receive input ■ PowerPoint`presentations summarizing key findings, alternatives, and recommendations ■ Draft, revised, and final reports summarizing background information, key findings, alternatives, and recommendations ■ Draft of the required Proposition 218 Notice of proposed rate increases 1. Analysis of cost of service for recycled water Identify alternatives for allocating recycled water revenues and expenses to the City's water and wastewater enterprises. Assess the viability of establishing a separate recycled water enterprise fund. Work with City staff to break out operating and capital expenses related to recycled water. Identify potential revenue sources for funding recycled water expenses, including recycled water rates and capacity fees as well as potable water and wastewater rates and /or capacity fees. 2. Rate comparisons and analysis of other industrial cities. Analysis for comparisons on wastewater equivalent living units and water fees not based on meter size. Conduct survey of other agencies with a significant industrial customer base to identify alternative approaches for levying industrial sewer rates. Discuss advantages and disadvantages of other approaches. Work with City staff to identify alternative approaches for allocating expenses to industrial customers. Estimate impacts of alternative rate approaches on a sample of existing City industrial customers. 3. Coordination with the City's Economic Development Department. Work with the Economic Development Department and other City departments as needed. 4. Utility underground street financial analysis and fees. Work with City staff to determine yearly infrastructure funding for street repairs and replacements that can be recovered from the City's water and sewer utilities. Incorporate funding projections into annual water and sewer revenue requirements. S. Additional meetings /other services BWA is available for additional meetings or other services as requested by the City. 19 Fee Summary liggilli � l "1 0 6 TASK A. PROJECT INITIATION & DATA COLLECTION 30 12 18 $5,790 1. Project Team Orientation 2. Investigation & Data Collection TASK B. 10 -YEAR FINANCIAL PLANS 100 40 60 $19,300 1. Develop Forecasts & Projections 2. Evaluating Financing Alternatives for Capital Improvements 3. Establish Prudent Minimum Fund Reserve Targets 4. Develop 1G-Year Financial Projections S. Evaluate Rate Increase Options 6. Develop Financial & Rate Models TASK C. WATER, SEWER, & RECYCLED WATER RATE ANALYSIS 100 40 60 $19,300 1. Identify Rate Structure Modifications & Alternatives 2. Evaluate Potential Separate Recycled Water Rate 3. Conduct Survey of Regional Water & Sewer Rates 4. Analyze Utility Consumption & Billing Data 5. Allocate Costs to Billing Parameters for Each Utility 6. Develop Preliminary & Final Rate Recommendations 7. Evaluate Use of Automatic Rate Pass - Throughs 8. Evaluate Rate Impacts on Customers 9. Develop Drought Rates TASK D. CAPACITY FEE UPDATE 100 40 60 $19,300 1. Review Current Capacity Fees 2. Evaluate Separate Recycled Water Capacity Fee 3. Conduct Survey of Regional Water & Sewer Capacity Fees 4. Evaluate Alternative Capacity Fee Methodologies 5. Determine Current Value & Capacity of Utility Assets 6. Allocate Capital Program Costs to Current & Future Users 7. Develop Capacity Fee Recommendations 8. Recommend a Method for Future Capacity Fee Updates TASK E. MEETINGS /PRESENTATIONS REPORTS & PROP. 218 100 40 60 $19,300 1. Project Team Meeings (6) 2. City Council Presentations (2) 3. Prepare Draft, Revised, & Final Reports 4. Proposition 218 Rate Notice 5. Public Education and Consensus - Building TASK F. ADDITIONAL MISCELLANEOUS SERVICES $15,000 1. Analysis of Cost of Service for Recycled Water 2. Rate Comparisons& Analysis of Other Industrial Cities. Analysis for Comparisons on Wastewater Equivalent Living Units & Water Fees Not Based on Meter Size 3. Coordination with the City's Economic Development Department 4. Utility Underground Street Financial Analysis & Fees 5. Additional Meetings /Other Services TOTAL ESTIMATED HOURS 430 172 258 $97,990 ESTIMATED DIRECT EXPENSES Copies/ binding /phone /fax /mail /miscellaneous $1,000 TOTAL PROJECT COSTS $98,990 20