CC 2013-05-28_08.d. Agreement with Raftelis for Water and Wastewater Rate Studyff
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RECOMMENDATION:
It is recommended that the City Council approve a consultant services agreement with
Raftelis Financial Consultants, Inc. in the amount of $39,990 to prepare a Water and
Wastewater Rate Study Update.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
The current Capital Improvement Program includes $ 22,500 from the Water Fund and
$ 7,500 from the Sewer Fund. Staff is requesting that an additional $ 8,000 be allocated
from the Water Fund and an additional $2,000 from the Sewer Fund for a total of
$40,000 to prepare the Water and Wastewater Rate Study Update. Impact to personnel
resources would involve staff time to meet with consultants, data collection and report
review.
BACKGROUND:
Studies of the City's water and wastewater rates are completed approximately every
five (5) years. The purpose of a periodic rate study is to analyze the Water Fund,
Sewer Fund, and Lopez Fund for adequacy of the revenue under the existing rates to
meet current and future fund obligations. In addition, the periodic rate study update is
intended to develop reliable 5 -year financial plans for the Water Fund, Sewer Fund, and
Lopez Fund that includes adjustments to revenue to meet anticipated changes in fund
obligations. Finally, rate study updates help create schedules of water and wastewater
rates and charges that are fair and equitable, that provide predictable sources of
revenue developed in the financial plans, and that meet Proposition 218 requirements
for rates and charges.
On March 22, 2013 staff distributed a Request for Proposals (RFP) to qualified
consultants for the preparation of a Water and Wastewater Rate Study Update. The
update will include an analysis of data showing the number of customers, water sales
Item 8.d. - Page 1
volumes, water revenues, sewer service charge revenues, future capital improvements
and operation and maintenance expenses for both the water and sewer systems.
On April 23, 2013 the City received three proposals from qualified consultants to
prepare the update.
ANALYSIS OF ISSUES:
The City last updated the water and wastewater rates in March 2009. The update
prepared a rate structure that will remain in effect through the end of fiscal year
2013/14. It is necessary to complete a new rate study to establish a five -year schedule
of rates, beyond 2014. A Request for Proposal process was used to secure a
Consultant firm to assist the City with preparation of the next five (5) year rate schedule.
Proposals submitted by the three Consultants were evaluated on the following criteria:
• Understanding of the work to be preformed
• Firm and staff experience with similar rate study projects
• Ability to meet the City's schedule requirements
• Responsiveness to the City's Request for Proposal
• Cost
Staff has reviewed the proposals based on the criteria listed above and established a
final Consultant ranking as indicted in the attached document. Raftelis Financial
Consultants Inc. received the highest ranking from the consultant evaluation team made
up of the Public Works Director, Administration Services Accounting Specialist and the
Utilities Supervisor and is considered the best qualified to prepare the Water and
Wastewater Rate Study Update. Raftelis Financial Consultants, Inc. did not have the
lowest cost, but was selected based on their strength in financial modeling capabilities,
presentation skills, and previous experience with similar rate studies.
It is recommended the Council approve a consultant services agreement with Raftelis
Financial Consultants, Inc. to prepare the Water and Wastewater Rate Study Update.
ALTERNATIVES:
The following alternatives are provided for the Council's consideration:
- Approve a consultant services agreement with Raftelis Financial Consultants,
Inc. to prepare the City's Water and Wastewater Rate Study Update;
- Select another of the qualified consultants;
- Direct staff to solicit additional proposals; or
- Provide direction to staff.
ADVANTAGES:
Updating the rate structure provides an opportunity to develop fair and equitable water
and wastewater rates and fees that meet federal, state and local requirements, while
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encouraging water conservation. The update will address operating and capital costs
for each utility, provide for rates that are fair and equitable, identify adequate reserves
and consider all costs to provide service.
Raftelis Financial Consultants has the necessary experience, staffing and presentation
capabilities to produce a high quality water and wastewater rate study.
DISADVANTAGES:
Selecting another of the qualified consultant firms may provide the City with an
adequate water and wastewater rate study, but may not provide the service level and
final product comparable to Raftelis Financial Consultants, Inc. Should the Council
choose to not select any of the qualified consultants, the City will need to solicit
additional proposals which will delay the water and wastewater rate study update and
potentially the implementation date of next five -year rate schedule.
ENVIRONMENTAL REVIEW:
No environmental review is required for this auction.
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted in front of City Hall on Thursday, May 23, 2013. The Agenda
and staff report were posted on the City's website on Friday, May 24, 2013. No public
comments were received.
Attachments:
1. Consultant Ranking
2. Consultant Services Agreement
Item 8.d. - Page 3
ATTACHMENT 1
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WATER R RATE STUDY UPDATE
CONSULTANT
DATE: MAY 13, 2013
CONSULTANT PROPOSALS SUBMITTED:
The following Consultant firms submitted proposals for the Water and Wastewater Rate
Study Update prior to the Request for Proposal due date of April 23, 2013:
1. Tuckfield & Associates,
2549 Eastbluff Drive, #450B
Newport Beach CA 92660
2. Black & Veatch Corporation,
800 Wilshire Blvd. Suite 600
Los Angeles CA 90017
3. Raftelis Financial Consutlants, Inc.
201 S. Lake Avenue, Suite 301
Pasadena CA 91101
CONSULTANT RANKINGS/ SCORES:
Following are the results of the Consultant proposal review and rating process
conducted by the Water and Wastewater Rate Study Update Review Committee using
the attached grading criteria.
Proposing Firm
Average Score
RAFTELIS
8.85
TUCKFIELD
8.55
BLACK & VETCH
7.56
Item 8.d. - Page 4
ATTACHMENT 2
THIS AGREEMENT is made and effective as of June 3, 2013, between RAFTELIS
FINANCIAL CONSULTANTS, INC. ( "Consultant "), and the CITY OF ARROYO
GRANDE, a Municipal Corporation ( "City "). In consideration of the mutual covenants
and conditions set forth herein, the parties agree as follows:
1. TERM
This Agreement shall commence on June 3, 2013 and shall remain and continue
in effect until December 31, 2013, unless sooner terminated pursuant to the provisions
of this Agreement.
2. SERVICES
Consultant shall perform the tasks described and comply with all terms and
provisions set forth in Exhibit "A ", attached hereto and incorporated herein by this
reference.
Consultant shall at all times faithfully, competently and to the best of his /her
ability, experience and talent, perform all tasks described herein. Consultant shall
employ, at a minimum generally accepted standards and practices utilized by persons
engaged in providing similar services as are required of Consultant hereunder in
meeting its obligations under this Agreement.
4. AGREEMENT ADMINISTRATION
City's Director of Public Works, Geoff English, shall represent City in all matters
pertaining to the administration of this Agreement. Sudhir D. Pardiwala shall represent
Consultant in all matters pertaining to the administration of this Agreement.
5. PAYMENT
The City agrees to pay the Consultant in accordance with the payment rates and
terms set forth in Exhibit "B ", attached hereto and incorporated herein by this reference.
6. SUSPENSION OR TERMINATION OF AGREEMENT WITHOUT CAUSE
(a) The City may at any time, for any reason, with or without cause, suspend
or terminate this Agreement, or any portion hereof, by serving upon the Consultant at
least ten (10) days prior written notice. Upon receipt of said notice, the Consultant shall
immediately cease all work under this Agreement, unless the notice provides otherwise.
If the City suspends or terminates a portion of this Agreement such suspension or
termination shall not make void or invalidate the remainder of this Agreement.
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(b) In the event this Agreement is terminated pursuant to this Section, the City
shall pay to Consultant the actual value of the work performed up to the time of
termination, provided that the work performed is of value to the City. Upon termination
of the Agreement pursuant to this Section, the Consultant will submit an invoice to the
City pursuant to Section 5.
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This Agreement shall terminate automatically on the occurrence of any of the
following events:
(a) Bankruptcy or insolvency of any party;
(b) Sale of Consultant's business; or
(c) Assignment of this Agreement by Consultant without the consent of City.
(d) End of the Agreement term specified in Section 1.
(a) The Consultant's failure to comply with the provisions of this Agreement
shall constitute a default. In the event that Consultant is in default for cause under the
terms of this Agreement, City shall have no obligation or duty to continue compensating
Consultant for any work performed after the date of default and can terminate this
Agreement immediately by written notice to the Consultant. If such failure by the
Consultant to make progress in the performance of work hereunder arises out of causes
beyond the Consultant's control, and without fault or negligence of the Consultant, it
shall not be considered a default.
(b) If the City Manager or his /her delegate determines that the Consultant is in
default in the performance of any of the terms or conditions of this Agreement, he /she
shall cause to be served upon the Consultant a written notice of the default. The
Consultant shall have ten (10) days after service upon it of said notice in which to cure
the default by rendering a satisfactory performance. In the event that the Consultant
fails to cure its default within such period of time, the City shall have the right,
notwithstanding any other provision of this Agreement to terminate this Agreement
without further notice and without prejudice to any other remedy to which it may be
entitled at law, in equity or under this Agreement.
9. LAWS TO BE OBSERVED. Consultant shall:
(a) Procure all permits and licenses, pay all charges and fees, and give all
notices which may be necessary and incidental to the due and lawful prosecution of the
services to be performed by Consultant under this Agreement;
(b) Keep itself fully informed of all existing and proposed federal, state and
local laws, ordinances, regulations, orders, and decrees which may affect those
engaged or employed under this Agreement, any materials used in Consultant's
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performance under this Agreement, or the conduct of the services under this
Agreement;
(c) At all times observe and comply with, and cause all of its employees to
observe and comply with all of said laws, ordinances, regulations, orders, and decrees
mentioned above;
(d) Immediately report to the City's Contract Manager in writing any
discrepancy or inconsistency it discovers in said laws, ordinances, regulations, orders,
and decrees mentioned above in relation to any plans, drawings, specifications, or
provisions of this Agreement.
(e) The City, and its officers, agents and employees, shall not be liable at law
or in equity occasioned by failure of the Consultant to comply with this Section.
10. OWNERSHIP OF DOCUMENTS
(a) Consultant shall maintain complete and accurate records with respect to
sales, costs, expenses, receipts, and other such information required by City that relate
to the performance of services under this Agreement. Consultant shall maintain
adequate records of services provided in sufficient detail to permit an evaluation of
services. All such records shall be maintained in accordance with generally accepted
accounting principles and shall be clearly identified and readily accessible. Consultant
shall provide free access to the representatives of City or its designees at reasonable
times to such books and records; shall give City the right to examine and audit said
books and records; shall permit City to make transcripts therefrom as necessary; and
shall allow inspection of all work, data, documents, proceedings, and activities related to
this Agreement. Such records, together with supporting documents, shall be maintained
for a period of three (3) years after receipt of final payment.
(b) Upon completion of, or in the event of termination or suspension of this
Agreement, all original documents, designs, drawings, maps, models, computer files,
surveys, notes, and other documents prepared in the course of providing the services to
be performed pursuant to this Agreement shall become the sole property of the City and
may be used, reused, or otherwise disposed of by the City without the permission of the
Consultant. With respect to computer files, Consultant shall make available to the City,
at the Consultant's office and upon reasonable written request by the City, the
necessary computer software and hardware for purposes of accessing, compiling,
transferring, and printing computer files.
11. INDEMNIFICATION
(a) Indemnification for Professional Liability. When the law establishes a
professional standard of care for Consultant's Services, to the fullest extent permitted by
law, Consultant shall indemnify, protect, defend and hold harmless City and any and all
of its officials, employees and agents ( "Indemnified Parties ") from and against any and
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all losses, liabilities, damages, costs and expenses, including attorney's fees and costs
to the extent same are caused in whole or in part by any negligent or wrongful act, error
or omission of Consultant, its officers, agents, employees or subContractors (or any
entity or individual that Consultant shall bear the legal liability thereof) in the
performance of professional services under this agreement.
(b) Indemnification for Other Than Professional Liabilitv. Other than in the
performance of professional services and to the full extent permitted by law, Consultant
shall indemnify, defend and hold harmless City, and any and all of its employees,
officials and agents from and against any liability (including liability for claims, suits,
actions, arbitration proceedings, administrative proceedings, regulatory proceedings,
losses, expenses or costs of any kind, whether actual, alleged or threatened, including
attorneys fees and costs, court costs, interest, defense costs, and expert witness fees),
where the same arise out of, are a consequence of, or are in any way attributable to, in
whole or in part, the performance of this Agreement by Consultant or by any individual
or entity for which Consultant is legally liable, including but not limited to officers,
agents, employees or subContractors of Consultant.
(c) General Indemnification Provisions. Consultant agrees to obtain executed
indemnity agreements with provisions identical to those set forth here in this section
from each and every subContractor or any other person or entity involved by, for, with or
on behalf of Consultant in the performance of this agreement. In the event Consultant
fails to obtain such indemnity obligations from others as required here, Consultant
agrees to be fully responsible according to the terms of this section. Failure of City to
monitor compliance with these requirements imposes no additional obligations on City
and will in no way act as a waiver of any rights hereunder. This obligation to indemnify
and defend City as set forth here is binding on the successors, assigns or heirs of
Consultant and shall survive the termination of this agreement or this section.
(d) Indemnification for Professional Liability: Notwithstanding anything herein to
the contrary, to the fullest extent permitted by law for all design professional services
arising under this Agreement, Consultant shall indemnify, protect, defend and hold
harmless City and any and all of its officials, employees and agents from and against
any and all losses, liabilities, damages, costs and expenses, including attorney's fees
and costs which arise out of, pertain to, or relate to the negligence, recklessness, or
willful misconduct of Consultant.
12. INSURANCE
Consultant shall maintain prior to the beginning of and for the duration of this
Agreement insurance coverage as specified in Exhibit "C" attached hereto and
incorporated herein as though set forth in full.
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(a) Consultant is and shall at all times remain as to the City a wholly
independent Consultant. The personnel performing the services under this Agreement
on behalf of Consultant shall at all times be under Consultant's exclusive direction and
control. Neither City nor any of its officers, employees, or agents shall have control over
the conduct of Consultant or any of Consultant's officers, employees, or agents, except
as set forth in this Agreement. Consultant shall not at any time or in any manner
represent that it or any of its officers, employees, or agents are in any manner officers,
employees, or agents of the City. Consultant shall not incur or have the power to incur
any debt, obligation, or liability whatever against City, or bind City in any manner.
(b) No employee benefits shall be available to Consultant in connection with
performance of this Agreement. Except for the fees paid to Consultant as provided in
the Agreement, City shall not pay salaries, wages, or other compensation to Consultant
for performing services hereunder for City. City shall not be liable for compensation or
indemnification to Consultant for injury or sickness arising out of performing services
hereunder.
i WIR72
Consultant declares and warrants that no undue influence or pressure was or is
used against or in concert with any officer or employee of the City of Arroyo Grande in
connection with the award, terms or implementation of this Agreement, including any
method of coercion, confidential financial arrangement, or financial inducement. No
officer or employee of the City of Arroyo Grande will receive compensation, directly or
indirectly, from Consultant, or from any officer, employee or agent of Consultant, in
connection with the award of this Agreement or any work to be conducted as a result of
this Agreement. Violation of this Section shall be a material breach of this Agreement
entitling the City to any and all remedies at law or in equity.
15. NO BENEFIT TO ARISE TO LOCAL EMPLOYEES
No member, officer, or employee of City, or their designees or agents, and no
public official who exercises authority over or responsibilities with respect to the project
during his /her tenure or for one year thereafter, shall have any interest, direct or indirect,
in any agreement or sub - agreement, or the proceeds thereof, for work to be performed
in connection with the project performed under this Agreement.
16. RELEASE OF INFORMATION /CONFLICTS OF INTEREST
(a) All information gained by Consultant in performance of this Agreement shall
be considered confidential and shall not be released by Consultant without City's prior
written authorization. Consultant, its officers, employees, agents, or subContractors,
shall not without written authorization from the City Manager or unless requested by the
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City Attorney, voluntarily provide declarations, letters of support, testimony at
depositions, response to interrogatories, or other information concerning the work
performed under this Agreement or relating to any project or property located within the
City. Response to a subpoena or court order shall not be considered "voluntary"
provided Consultant gives City notice of such court order or subpoena.
(b) Consultant shall promptly notify City should Consultant, its officers,
employees, agents, or subContractors be served with any summons, complaint,
subpoena, notice of deposition, request for documents, interrogatories, request for
admissions, or other discovery request, court order, or subpoena from any person or
party regarding this Agreement and the work performed thereunder or with respect to
any project or property located within the City. City retains the right, but has no
obligation, to represent Consultant and /or be present at any deposition, hearing, or
similar proceeding. Consultant agrees to cooperate fully with City and to provide the
opportunity to review any response to discovery requests provided by Consultant.
However, City's right to review any such response does not imply or mean the right by
City to control, direct, or rewrite said response.
17. NOTICES
Any notice which either party may desire to give to the other party under this
Agreement must be in writing and may be given either by (i) personal service, (ii)
delivery by a reputable document delivery service, such as but not limited to, Federal
Express, which provides a receipt showing date and time of delivery, or (iii) mailing in
the United States Mail, certified mail, postage prepaid, return receipt requested,
addressed to the address of the party as set forth below or at any other address as that
party may later designate by notice:
To City: City of Arroyo Grande
Geoff English, Director of Public Works
300 E. Branch Street
Arroyo Grande, CA 93420
To Consultant: Raftelis Financial Consultants, Inc.
Sudhir D. Pardiwala
201 S. Lake Avenue, Suite 301
Pasadena, CA 91101
18. ASSIGNMENT
The Consultant shall not assign the performance of this Agreement, nor any part
thereof, without the prior written consent of the City.
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19. GOVERNING LAW
The City and Consultant
California shall govern the rights,
Agreement and also govern t
concerning this Agreement shall
jurisdiction over the City of Arroyo
understand and agree that the laws of the State of
obligations, duties, and liabilities of the parties to this
he interpretation of this Agreement. Any litigation
take place in the superior or federal district court with
Grande.
This Agreement contains the entire understanding between the parties relating to
the obligations of the parties described in this Agreement. All prior or contemporaneous
agreements, understandings, representations, and statements, or written, are merged
into this Agreement and shall be of no further force or effect. Each party is entering into
this Agreement based solely upon the representations set forth herein and upon each
party's own independent investigation of any and all facts such party deems material.
21. TIME
City and Consultant agree that time is of the essence in this Agreement.
Consultant is bound by the contents of the City's Request for Proposal and the
contents of the proposal submitted by the Consultant. In the event of conflict, the
requirements of City's Request for Proposals and this Agreement shall take precedence
over those contained in the Consultant's proposals.
23. CONSTRUCTION
The parties agree that each has had an opportunity to have their counsel review
this Agreement and that any rule of construction to the effect that ambiguities are to be
resolved against the drafting party shall not apply in the interpretation of this Agreement
or any amendments or exhibits thereto. The captions of the sections are for
convenience and reference only, and are not intended to be construed to define or limit
the provisions to which they relate.
24. AMENDMENTS
Amendments to this Agreement shall be in writing and shall be made only with
the mutual written consent of all of the parties to this Agreement.
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• • 1 11 1 rulakyjakill
The person or persons executing this Agreement on behalf of Consultant
warrants and represents that he /she has the authority to execute this Agreement on
behalf of the Consultant and has the authority to bind Consultant to the performance of
its obligations hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
Tony Ferrara, Mayor
Attest:
Kelly Wetmore, City Clerk
Approved As To Form:
Timothy J. Carmel, City Attorney
Its:
(Title)
Item 8.d. - Page 12
SCOPE OF WORK
TASK 1 — PROJECT INITIATION AND DICK -OFF WORKSHOP
Meeting Agenda and Materials
The kick -off meeting provides an opportunity for the City to provide input on the project's
approach, work plan, schedule, and priorities. RFC will develop a kick -off meeting package that
contains the meeting agenda and presentation materials to guide the discussion. Prior to the kick-
off workshop, RFC will have reviewed the City's current water and wastewater - related budget
items such as operating and capital expenses, reserve policies, debt - service requirements etc.
based on data provided by the City in a data request list. The data request will also include, but
not be limited to information such as accounts and water usage by meter size, capital
improvements projections, and growth assumptions. During the workshop, RFC will work with
City staff to confirm understanding of the current budget and financial outlook.
In addition to project initiation, RFC will discuss the following previously reviewed topics with
City staff during the kick -off workshop:
Current Rates and Fees Review
Prior to the kick -off workshop, RFC will have reviewed each utility's:
1) Current water and wastewater - related capital improvement and rehabilitation plans;
2) Reserve fund policies and other requirements such as debt coverage levels; and
3) Reports for previous revenue requirements assessments.
During the workshop, RFC will work with City staff to confirm understanding of the current
budget and financial outlook.
Meetings/Workshops: One (1) kick -off meeting via GoToMeeting
Deliverables: Workshop discussion package, workshop minutes
TASK 2 — PROJECT REVENUE AND EXPENSE REQUIREMENTS
Upon discussion of project objectives and review of policies and financial information, RFC will
develop projections for the water and wastewater utilities' revenue requirement.
Requirements projections for all of the utilities and funds will be considered and developed
separately in a financial model (Model), and all are thus included within this task.
TASK 2.1 — WATER AND WASTEWATER UTILITIES' REQUIREMENTS Typically, revenue
requirements are projected through an appropriate forecast period based upon historical results,
the current budget, the City's capital improvement plans, and the each utility's debt service and
other capital obligations such as the City's Water Supply Contract with the San Luis Obispo
County Flood Control and Water Conservation District. RFC will forecast operating items in the
City's budget such as operations and maintenance, labor, power, materials etc. In addition, RFC
will project non -rate revenues such as late fees, interest earnings, and miscellaneous fees that
may be used either to build fund balances or to offset water and wastewater rate increases. The
final result will be an exact cash requirement for meeting expenses in each year of the base -
scenario forecast period.
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One of the most important tasks when projecting revenue requirements is working extensively
with the City's CIP. One year of extensive capital improvements without careful planning can
cause rates to spike drastically. RFC will work closely with City staff to plan the timing of
needed capital improvements, considering the age and condition of the water and wastewater
systems. The rate models will have the ability to explore conventional and low- interest State
Revolving Fund debt financing to mitigate impacts of large capital expenditures and will include
measures that ensure debt coverage requirements for any existing and proposed debt are met.
Another important element of the financial plan is the development of reserves for operating,
capital, rate stabilization, and emergency purposes. RFC will take into consideration the City's
risk management policies in assisting the City with developing funding strategies and draw -down
policies for various reserves. RFC will review and revise targets for existing reserves and, if
warranted, will make recommendations for additional reserves.
Finally, RFC will review each utility's revenues from miscellaneous sources such as interest
earnings and miscellaneous service fees. Miscellaneous fee structures often remain static while
the cost to provide such services rise, and RFC will to evaluate whether the sufficient or proper
amount is being charged for each category to ensure full cost recovery for actual services
provided.
The Financial Plan Model will serve as comprehensive yet flexible planning tools that will
incorporate the City's CIP, forecasted demand projections, operating and capital financing plans,
revenue requirements, user -rate calculations, impact fees, revenue projections, and reserve
balances. Also, by changing key variables, the models can simulate drought scenarios and the
resulting impacts on the City's revenues and expenses.
TASK 2.3 — LOPEz FUND CHARGES REQUIREMENT
RFC will review and analyze the City's charges related to the Lopez Fund for the Lopez Dam
and treatment plant, beginning with a review of City - provided data for expenses related to debt
service, O &M, capital outlay, and cost allocation. Then RFC will evaluate the current fee
structure and payment arrangement between the City and the San Luis Obispo County Flood
Control and Water Conservation District and provide recommendations for an alternative
payment schedule that aligns with the City's long -term fiscal health. For example, the City may
opt to reduce its payments over time; conversely, RFC's evaluation may find that the Lopez
Fund fee structure cannot be funded based on a volumetric -only basis.
RFC rate models are customized to fit the specific needs and unique characteristics of the City.
They contain a variety of user - friendly features including report generation, scenario analysis,
and Dashboard functionality. The Dashboard is a custom -built analytical tool that allows the
Model's user to make changes to critical variables and understand instantly the resulting impacts
on various elements of the City's financial plan. Below, is a sample screenshot from the
Dashboard.
Meetings/Workshops: Two (2) webinars to discuss financial plan options and confirm
assumptions and inputs
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Deliverables: Preliminary revenue requirement projections for the water and wastewater
utilities and recommendations for up to two (2) fee structure alternatives, and Lopez Fund
charges and recommendation for alternative fee structure, if necessary
TASK 3 — COST OF SERVICE ANALYSIS
The water cost of service study will be performed based on industry standards and
methodologies defined in the AWWA M -1 Rate manual. The cost of service allocations will
focus on appropriate service functions, allocating the cost of service (revenue requirements) to
the service functions, determining how those services are used by each customer class, and
developing the cost allocation components of the models. Cost allocations among customer
classes will likely be based on the Base -Extra Capacity approach which focuses on the different
usage patterns (or peaking factors) demonstrated by each customer class. Wastewater rates will
comply with the State Water Resources Control Board (SWRCB) revenue program guidelines.
RFC will review and analyze historical water consumption, revenue records, and billing
summaries to determine water usage and peaking characteristics by customer class or subclass.
For the wastewater utility, we will examine account data and annual flow. We will then estimate
the relative responsibility of each customer class for each of the functional cost elements. This
allocation will be based on billing summary data, other locally available data which may be
applicable, and RFC's experience with other utilities exhibiting similar usage characteristics and
patterns. It will provide the basis for equitable cost allocations to each customer class or
subclass.
The next step is to allocate the cost of service to the various cost components that constitute a
functional classification of the different types of service the City provides. Functional cost
components for water will include base or volume- related costs, extra capacity costs, fire
protection costs, water wheeling costs and customer costs. Functional cost components for
wastewater will include volume and customer costs. These will represent the revenue
requirements to be met through charges and fees over the study period.
Next, the costs associated with the functional components will be allocated to the various
customer classifications on the basis of the relative responsibility of each classification for
service provided. Costs will be calculated based on the determination of units of service for each
customer classification and the application of unit costs of service to the respective units.
Throughout the cost allocation process, RFC will comply with the City's policy considerations,
procedures, and currently known federal, state, and local rules, regulations, and guidelines.
Additionally, RFC will ensure that all proposed rates are in compliance with Proposition 218.
RFC developed Proposition 218 - compliant cost of service -based rates prior to and following the
Bighorn case. I
Meetings/Workshops: One (1) webinar to review preliminary results and cost allocation factors
Deliverables: Preliminary cost of service analysis
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TASK 4 — CALCULATE RATES AND CUSTOMER IMPACTS
After evaluating the existing cost allocation basis and assessing the impact of any proposed
adjustments to the cost allocations, the water and wastewater rates will be calculated according
to the proposed rate design. We recognize that rate- making is an art, so we will work within the
broad industry guidelines to meet the strategic financial objectives of the City. We will calculate
rates under the most appropriate rate structure based on our understanding of the City's primary
pricing objectives and remain consistent with industry accepted guidelines and practices as well
as all federal, state, and local rules and regulations.
The rate calculation modules will be developed to incorporate and evaluate alternative rate
structures, including tiered rates. The revenues to be derived for fixed and variable portion of the
rates will be developed along with the rate structure alternatives to address as many of the City's
objectives as possible while ensuring revenue sufficiency. The potential financial impacts on
certain customers that may result from the alternative rate structures will also be considered. The
models will include a series of tables and figures that show projected rate impacts on different
types of customers at different levels of usage. The tables and impact figures provide an
invaluable tool for evaluating whether the rate recommendations are impacting targeted customer
groups and /or levels of usage to ensure that conservation and other pricing objectives are being
addressed effectively.
Rates will be calculated for each year in the forecast period and adjusted, where possible, to
provide for a smooth forecast of rate adjustments. For example, changes in the timing of capital
expenditures and the use of reserve funds to mitigate short-term rate impacts are two ways that
rate smoothing could be addressed. The objective is to minimize the magnitude of customer
impacts while still achieving long -term revenue objectives. The recommended rate structure will
include both fixed and variable charges that will ensure revenue stability while still encouraging
conservation. California Urban Water Conservation Council's (CUWCC) BMP 11 recommends
that revenues collected from water fixed charges not exceed 30 percent of the utility's rate
revenues. RFC will review and recommend a rate structure that is balanced and equitable and
does not differ significantly from the current structure to minimize rate shock. RFC will present
the preliminary rate calculations at a workshop with staff.
The rates calculation modules will have options to calculate rates at varying levels of water
supply and projected demand. Based on the usage analysis, we can identify where rates need to
be set in order to ensure that all revenue requirements are met during a period of reduced
consumption. The model will also take into consideration the fact that drought impacts the water
and wastewater utilities differently. Drought rates can also be set for multiple years and will be
ready to implement as soon as conditions warrant so that valuable time is not lost.
Meetings/Workshops: One (1) webinar to review proposed rates
Deliverables: Proposed rates
Page 12
Item 8.d. - Page 16
TASK 5 — REPORT DEVELOPMENT
TASK 5.1 — REPORT PREPARATION The process for developing the proposed revenue
requirements and proposed rate structures along with preliminary rate recommendations will be
described in a draft report of findings and recommendations. This draft report will be submitted
at the time the preliminary models are presented to City staff and will include an executive
summary highlighting the major issues and decisions and an overview of operations, CIP, the
financial plan and the final rates resulting from the study. A comprehensive section on the rate
design assumptions and methodologies used to develop the user -rate calculations and financial
planning will be included. Comments from City staff will be incorporated into the Final Report
as appropriate, and the models will be refined to reflect appropriate issues or concerns raised by
stakeholders. The report will be submitted to the City and will include appropriate supporting
data from the models to address the requirements of Proposition 218. The Report will include
the following elements:
a) Executive Summary
b) Introduction
c) Methodology
d) Capital Improvement Plan
e) Five -Year Financial Plan
f) Proposed New Rate Structure
g) Annual Revenue Adjustments, including inflationary adjustments
h) Rate Schedule
i) Rate Survey
j) Monthly Bill Comparison and Survey
TASK 5.2 — RATE COMPARISON SURVEY RFC will also conduct a survey of the current and
historical water rates for the City and other neighboring communities and agencies of
comparable size and cost of service characteristics within the area. The comparison survey will
consider a variety of parameters such as cost of providing service, seasonal rates, block
consumption rates, fixed charges versus volumetric consumption charges, and customer classes.
RFC has extensive experience in conducting local rate surveys as part of our other rate studies,
benchmarking studies, and from our Water and Wastewater Rate Survey, a national biennial
water and wastewater rate survey conducted by RFC in association with AWWA. RFC also
conducts biennial water rate surveys in California in association with CA -NV AWWA. This
provides RFC with extensive survey experience, a national database, and numerous contacts
throughout the industry that will be extremely useful in collecting financial and rate information
for the rate and cost of service comparison.
Comparing rates with other representative agencies can provide insights into a utility's pricing
policies related to service. Care should be taken, however, in drawing conclusions from such a
comparison, as some factors including geographic location, demand, customer constituency,
level of treatment, level of grant funding, age of system, level of general fund subsidization, and
rate - setting methodology can affect the cost of providing services.
Page 13
Item 8.d. - Page 17
Meetings/Workshops: One (1) webinar to review proposed rates
Deliverables: Five (5) hard copies of the report draft for review and comment (inclusive of rate
survey), five (5) hard copies of the final report, electronic copy of the final report in Adobe PDF
format
TASK 6 — RATES IMPLEMENTATION
TASK 6.1 — PUBLIC WORKSHOP — RFC will be present at a Public Workshop to answer any
questions from the Public. In preparation for the workshop, RFC will have prepared a slide show
to present preliminary findings and recommendations in an easy -to- understand format.
Following the Public Workshop, RFC will present the Final Report to City Council. Our Project
Manager, Habib Isaac, has vast experience in making City Council presentations and has a
successful track record in having rates adopted. Recent examples include the Cities of Camarillo,
Santa Barbara, Merced, Lompoc, Tulare, and Vista, and the Goleta West Sanitary District.
TASK 6.2 — PROPOSITION 218 NOTICE (Optional) — Based on our experience with Proposition
218 since its passage in 1996, RFC will draft and facilitate the mailing of the required
Proposition 218 Notices. The notices will explain: 1) the purpose of the rates; 2) how the rates
are structured; 3) the time and place of the public hearing; and 4) details regarding what
constitutes the existence of a majority protest, as it relates to the implementation of a
new /increased utility rates. RFC will provide guidance to the City for the development of the
Proposition 218 notice and sign an affidavit of mailing.
As part of this subtask, RFC will develop the materials, create a parcel database of properties
subject to the new proposed rates, and coordinate the printing and first class mailing of the
materials.
Meetings/Workshops: One (1) City Council meeting
Deliverables: Presentation materials for Public Workshop and City Council meeting
Page 14
Item 8.d. - Page 18
[WIM1Ic31r �
PAYMENT SCHEDULE
Water & Wastewater Rate Study Update
Proposed flours & Fees (REVISED 5,20.2013)
Task
Task Descriptions
No of
Meetings
Hours Requirements
Total Fees
Expenses';
SP HI K Adinin
Total
1. Project Initiation and Kick-off Work shop
2 8 12 8
30
$4,860
2 Project Revenue and Expense Requirements
21 Water and Wastewater Utilities' Requirements
2 15 40
57
$10,845
2.3 Lopez Fund Charges Requirement
1 4 12
17
$3,260
3 Cost of Service Analysis
2 12 20
34
$5,560
4 Calculate Rates and Customer Impacts
2 8 12
22
$4,300
5 Report Development
2 16 20 4
42
$7,620
6 Rates Implementation
1
8 4
12
$2,545
TOTAL ESTIMATED MEETINGS % HOURS 1
11
71
120
12
714
HOURLY RACES
$250
$185 $175
$60
PROFESSIONAL FEES
$2,750
$13,135 $21,000
$720
$37,605
Mailing Cast for Prop. 218 First Class Notice Is a Direct Charge - 51.00 per Unit
SP SudhirPardiwala
Hl ,p, Habib Isaac
FC Financial Consultants
Total i Fees $37,605
Total Expenses $2,385
TOTAL FEES & EXPENSES $39,990
Page 15
Item 8.d. - Page 19
EXHIBIT C
INSURANCE REQUIREMENTS
Prior to the beginning of and throughout the duration of the Work, Consultant will
maintain insurance in conformance with the requirements set forth below. Consultant
will use existing coverage to comply with these requirements. If that existing coverage
does not meet the requirements set forth here, Consultant agrees to amend,
supplement or endorse the existing coverage to do so. Consultant acknowledges that
the insurance coverage and policy limits set forth in this section constitute the minimum
amount of coverage required. Any insurance proceeds available to City in excess of the
limits and coverage required in this agreement and which is applicable to a given loss,
will be available to City.
Consultant shall provide the following types and amounts of insurance:
Commercial General Liability Insurance using Insurance Services Office "Commercial
General Liability" policy from CG 00 01 or the exact equivalent. Defense costs must be
paid in addition to limits. There shall be no cross liability exclusion for claims or suits by
one insured against another. Limits are subject to review but in no event less than
$1,000,000 per occurrence.
Business Auto Coverage on ISO Business Auto Coverage from CA 00 01 including
symbol 1 (Any Auto) or the exact equivalent. Limits are subject to review, but in no
event to be less than $1,000,000 per accident. If Consultant owns no vehicles, this
requirement may be satisfied by a non -owned auto endorsement to the general liability
policy described above. If Consultant or Consultant's employees will use personal autos
in any way on this project, Consultant shall provide evidence of personal auto liability
coverage for each such person.
Workers Compensation on a state - approved policy form providing statutory benefits as
required by law with employer's liability limits no less than $1,000,000 per accident or
disease.
Excess or Umbrella Liability Insurance (Over Primary) if used to meet limit
requirements, shall provide coverage at least as broad as specified for the underlying
coverages. Any such coverage provided under an umbrella liability policy shall include a
drop down provision providing primary coverage above a maximum $25,000 self -
insured retention for liability not covered by primary but covered by the umbrella.
Coverage shall be provided on a "pay on behalf" basis, with defense costs payable in
addition to policy limits. Policy shall contain a provision obligating insurer at the time
insured's liability is determined, not requiring actual payment by the insured first. There
shall be no cross liability exclusion precluding coverage for claims or suits by one
insured against another. Coverage shall be applicable to City for injury to employees of
Page 16
Item 8.d. - Page 20
Consultant, subContractors or others involved in the Work. The scope of coverage
provided is subject to approval of City following receipt of proof of insurance as required
herein. Limits are subject to review but in no event less than $ 1,000,000 per
occurrence.
Professional Liability or Errors and Omissions Insurance as appropriate shall be written
on a policy form coverage specifically designated to protect against acts, errors or
omissions of the Consultant and "Covered Professional Services" as designated in the
policy must specifically include work performed under this agreement. The policy limit
shall be no less than $1,000,000 per claim and in the aggregate. The policy must "pay
on behalf of" the insured and must include a provision establishing the insurer's duty to
defend. The policy retroactive date shall be on or before the effective date of this
agreement.
Insurance procured pursuant to these requirements shall be written by insurer that are
admitted carriers in the state California and with an A.M. Bests rating of A- or better and
a minimum financial size Vll.
General conditions pertaining to provision of insurance coverage by Consultant.
Consultant and City agree to the following with respect to insurance provided by
Consultant:
1. Consultant agrees to have its insurer endorse the third party general
liability coverage required herein to include as additional insureds City, its officials
employees and agents, using standard ISO endorsement No. CG 2010 with an edition
prior to 1992. Consultant also agrees to require all Consultants, and subContractors to
do likewise.
2. No liability insurance coverage provided to comply with this Agreement
shall prohibit Consultant, or Consultant's employees, or agents, from waiving the right of
subrogation prior to a loss. Consultant agrees to waive subrogation rights against City
regardless of the applicability of any insurance proceeds, and to require all Consultants
and subContractors to do likewise.
3. All insurance coverage and limits provided by Consultant and available or
applicable to this agreement are intended to apply to the full extent of the policies.
Nothing contained in this Agreement or any other agreement relating to the City or its
operations limits the application of such insurance coverage.
4. None of the coverages required herein will be in compliance with these
requirements if they include any limiting endorsement of any kind that has not been first
submitted to City and approved of in writing.
5. No liability policy shall contain any provision or definition that would serve
to eliminate so- called "third party action over" claims, including any exclusion for bodily
injury to an employee of the insured or of any Consultant or subcontractor.
Page 17
Item 8.d. - Page 21
6. All coverage types and limits required are subject to approval, modification
and additional requirements by the City, as the need arises. Consultant shall not make
any reductions in scope of coverage (e.g. elimination of contractual liability or reduction
of discovery period) that may affect City's protection without City's prior written consent.
7. Proof of compliance with these insurance requirements, consisting of
certificates of insurance evidencing all of the coverages required and an additional
insured endorsement to Consultant's general liability policy, shall be delivered to City at
or prior to the execution of this Agreement. In the event such proof of any insurance is
not delivered as required, or in the event such insurance is canceled at any time and no
replacement coverage is provided, City has the right, but not the duty, to obtain any
insurance it deems necessary to protect its interests under this or any other agreement
and to pay the premium. Any premium so paid by City shall be charged to and promptly
paid by Consultant or deducted from sums due Consultant, at City option.
8. Certificate(s) are to reflect that the insurer will provide 30 days notice to
City of any cancellation of coverage. Consultant agrees to require its insurer to modify
such certificates to delete any exculpatory wording stating that failure of the insurer to
mail written notice of cancellation imposes no obligation, or that any party will
"endeavor" (as opposed to being required) to comply with the requirements of the
certificate.
9. It is acknowledged by the parties of this agreement that all insurance
coverage required to be provided by Consultant or any subContractor, is intended to
apply first and on a primary, noncontributing basis in relation to any other insurance or
self insurance available to City.
10. Consultant agrees to ensure that subContractors, and any other party
involved with the project who is brought onto or involved in the project by Consultant,
provide the same minimum insurance coverage required of Consultant. Consultant
agrees to monitor and review all such coverage and assumes all responsibility for
ensuring that such coverage is provided in conformity with the requirements of this
section. Consultant agrees that upon request, all agreements with subContractors and
others engaged in the project will be submitted to City for review.
11. Consultant agrees not to self- insure or to use any self- insured retentions
or deductibles on any portion of the insurance required herein and further agrees that it
will not allow any Consultant, subContractor, Architect, Engineer or other entity or
person in any way involved in the performance of work on the project contemplated by
this agreement to self- insure its obligations to City. If Consultant's existing coverage
includes a deductible or self- insured retention, the deductible or self- insured retention
must be declared to the City. At the time the City shall review options with the
Consultant, which may include reduction or elimination of the deductible or self- insured
retention, substitution of other coverage, or other solutions.
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Item 8.d. - Page 22
12. The City reserves the right at any time during the term of the contract to
change the amounts and types of insurance required by giving the Consultant ninety
(90) days advance written notice of such change. If such change results in substantial
additional cost to the Consultant, the City will negotiate additional compensation
proportional to the increase benefit to City.
13. For purposes of applying insurance coverage only, this Agreement will be
deemed to have been executed immediately upon any party hereto taking any steps
that can be deemed to be in furtherance of or towards performance of this Agreement.
14. Consultant acknowledges and agrees that any actual or alleged failure on
the part of City to inform Consultant of non - compliance with any insurance requirements
in no way imposes any additional obligations on City nor does it waive any rights
hereunder in this or any other regard.
15. Consultant will renew the required coverage annually as long as City, or
its employees or agents face an exposure from operations of any type pursuant to this
agreement. This obligation applies whether or not the agreement is canceled or
terminated for any reason. Termination of this obligation is not effective until City
executes a written statement to that effect.
16. Consultant shall provide proof that policies of insurance required herein
expiring during the term of this Agreement have been renewed or replaced with other
policies providing at least the same coverage. Proof that such coverage has been
ordered shall be submitted prior to expiration. A coverage binder or letter from
Consultant's insurance agent to this effect is acceptable. A certificate of insurance
and /or additional insured endorsement as required in these specifications applicable to
the renewing or new coverage must be provided to City within five days of the expiration
of the coverages.
17. The provisions of any workers' compensation or similar act will not limit
the obligations of Consultant under this agreement. Consultant expressly agrees not to
use any statutory immunity defenses under such laws with respect to City, its
employees, officials and agents.
18. Requirements of specific coverage features or limits contained in this
section are not intended as limitations on coverage, limits or other requirements nor as
a waiver of any coverage normally provided by any given policy. Specific reference to a
given coverage feature is for purposes of clarification only as it pertains to a given issue,
and is not intended by any party or insured to be limiting or all- inclusive.
19. These insurance requirements are intended to be separate and distinct
from any other provision in this agreement and are intended by the parties here to be
interpreted as such.
Page 19
Item 8.d. - Page 23
20. The requirements in this Section supersede all other sections and
provisions of this Agreement to the extent that any other section or provision conflicts
with or impairs the provisions of this Section.
21. Consultant agrees to be responsible for ensuring that no contract used by
any party involved in any way with the project reserves the right to charge City or
Consultant for the cost of additional insurance coverage required by this agreement.
Any such provisions are to be deleted with reference to City. It is not the intent of City to
reimburse any third party for the cost of complying with these requirements. There shall
be no recourse against City for payment of premiums or other amounts with respect
thereto.
22. Consultant agrees to provide immediate notice to City of any claim or loss
against Consultant arising out of the work performed under this agreement, City
assumes no obligation or liability by such notice, but has the right (but not the duty) to
monitor the handling of any such claim or claims if they are likely to involve City.
Page 20
Item 8.d. - Page 24