CC 2014-02-25_08.d. Amendment to Agreement with Raftelis O� p,RR0le MEMORANDUM
INCORPORATE Z
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TO: CITY COUNCIL
FROM: GEOFF ENGLISH, DIRECTOR OF PUBLIC WORKS
BY: DEBBIE MALICOAT, ADMINISTRATIVE SERVICES DIRECTOR
SUBJECT: CONSIDERATION TO APPROVE AMENDMENT NO. 1 TO
CONSULTANT SERVICES AGREEMENT WITH RAFTELIS FINANCIAL
CONSULTANTS, INC.
DATE: FEBRUARY 25, 2014
RECOMMENDATION:
It is recommended the City Council approve Amendment No. 1 to the Consultant
Services Agreement with Raftelis Financial Consultants, Inc. (Raftelis) in the amount of
$7,580 to prepare a Water and Wastewater Rate Study Update.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
The Water Fund and Sewer Fund budgets include an appropriation for consultant
services, which will be sufficient to provide for the additional cost. No budget
appropriation is required. The Water Fund will provide $5,675 and the Sewer Fund will
provide $1,895 for the contract amendment. Impact to personnel resources will involve
staff time to meet with consultants, verify data and assumptions, and review report.
BACKGROUND:
At the May 28, 2013 meeting, the City Council approved an agreement with Raftelis to
prepare a Water and Wastewater Rate Study. Staff has been working with the
consultant on the study and has provided consumption data as well as other input to the
study. The consultant and City staff has worked through several telephonic meetings to
discuss the rate study and the consultant has completed a large portion of the modeling
necessary to project revenues as well as recommendations for rates and their final
report. Recently, it was discovered that consumption data for 145 accounts was not
provided in the original data file. All consumption data has now been provided to the
consultant. Having accurate consumption data is critical to effectively project revenues,
and therefore, adequately set the required water and sewer rates necessary to achieve
those revenues.
Item 8.d. - Page 1
CITY COUNCIL
AMENDMENT NO. 1 TO CONSULTANT SERVICES AGREEMENT
FEBRURAY 25, 2014
PAGE 2
ANALYSIS OF ISSUES:
Given the late stage of the project, Raftelis will need to incorporate this additional data
into their revenue model and update their analysis, as described more completely in the
amended scope of work attached. The necessary analysis-and modifications to the
recommendations in the draft report will require more time due to the additional
consumption data. Updating the draft to incorporate this additional data is required in
order to help ensure that the results of the rate study are accurate and defensible.
ALTERNATIVES:
• Approve staff recommendation;
• Do not approve staff recommendation; or
• Provide direction to staff
ADVANTAGES:
Amending the contract with Raftelis will provide the City with a rate study that is as
accurate as possible and legally defensible. It will ensure the model used to generate
options is based on information that is fully up to date.
DISADVANTAGES:
There will be a slight delay in the project while the consultant recalculates and analyzes
the additional data. Staff believes this is outweighed by the additional accuracy
provided by including all consumption data in the analysis.
ENVIRONMENTAL REVIEW:
This item is exempt from environmental review per Section 15061(b)(3) of CEQA
Guidelines.
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted in front of City Hall on Thursday, February 20, 2014. The
Agenda and report were posted on the City's website on Friday, February 21, 2014. No
public comments were received.
Item 8.d. - Page 2
AGREEMENT FOR CONSULTANT SERVICES
AMENDMENT NO. 1
This First Amendment ("First Amendment") to Agreement for Consultant Services
("Agreement") by and between the CITY OF ARROYO GRANDE and RAFTELIS
FINANCIAL CONSULTANTS, INC. ("RFC") is made and entered into this day of
2014.
WHEREAS, the parties entered into the Agreement dated June 3, 2013 for preparation of
a water and wastewater rate study update; and
WHEREAS, the parties desire to modify the Agreement as set forth herein.
NOW THEREFORE, for valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. Section 1 (" TERM") of the Agreement, shall be modified in its entirety to read as
follows:
This Agreement shall commence June 3, 2013 and shall remain and continue in
effect until June 30, 2014, unless sooner terminated pursuant to the provisions
hereof.
2. Section 2 ("SERVICES") and Section 5 ("PAYMENT") of the Agreement shall be
amended to include the additional services at the increased cost as specified in
Exhibit "A" attached hereto and incorporated herein by this reference.
3. Except as modified herein, all other terms and conditions set forth in the
Agreement, as amended, shall remain unchanged.
IN WITNESS WHEREOF, CITY and RFC have executed this First Amendment on the
day and year first above,written.
Item 8.d. - Page 3
I
CITY OF ARROYO GRANDE RAFTELIS FINANCIAL CONSULTANTS
By: By:
Tony Ferrara, Mayor
Its:
Attest:
Kelly Wetmore, City Clerk
Approved As To Form:
Timothy J. Carmel, City Attorney
Item 8.d. - Page 4
EXHIBIT A
201 S.Lake Avenue Phone 626.583.1894 wwwxaftelis.com
Suite 301 Fax 626.583.1411
Pasadena.CA 91101
R ItFTEL15 '
1IN�.'iCl•l C:IYf u!•r119.IY[.
February 6,2014
Mr.Geoff English
Public Works Director
City of Arroyo Grande
1375 Ash Street
Arroyo Grande,CA 93420
Subject: Amendment to Water and Wastewater Rate Study Update
Dear Mr.English:
In connection with the Water and Wastewater Rate Study Update Agreement between Raftelis
Financial Consultants, Inc. (RFC)and the City of Arroyo Grande((the "Agreement"), please accept this
letter as a formal request to amend the Agreement, pursuant to Item 24 of the Agreement, for
additional work to complete the study. It is anticipated that an additional 40 hours will be required.
These additional 40 hours will be used to update the entire water rate model as a result of the new
account data recently provided by the City that was not included as part of the original data used in
our analysis.
As part of our initial review and due diligence of the original consumption files, we found 186
duplicate accounts. However, the amount of revenue generated by taking the product of the fixed
and variable rates by the respective quantities generated a surplus of revenue when compared to
budgeted revenue. Therefore, eliminating these accounts was appropriate, which resulted in a
slightly lower amount of total meters and water consumption than expected.
On January 30, 2014, RFC received a new data file with the additional 145 accounts that were not
within the original database. At this point in the project, we have completed the cost of service
analysis and are currently finalizing the Report with City staff. However, the additional account data
needs to be incorporated into the model and rate design. Doing so will require RFC to redo the cost
of service analysis by updating the following items:
• Update base revenue analysis by tiers and accounts
• Update Financial Plan
• Update total usage and peaking characteristics by Customer Class
Cost Causation(allocation of cost to each customer class and to each tier)
• Update Rates by Customer Class
• Update Report reflecting new findings
Please note that we have already incurred an additional $5,000 above the current contract amount,
but we are not requesting the City to cover this cost; however,an additional 40 hours of work would
result in an additional $7,580 from this point moving forward. Below is a breakdown of cost by task
identified above.
We will still attend one City Council meeting as part of the original Agreement, and that cost is not
within the hours listed on the following page.
I
Item 8.d. - Page 5
City of Arroyo Grande Page 2
Water and Wastewater Rate Study Update
Proposed Hours and Fees
Task Hours Requirements
Task Descriptions Total Fees
No
HI GT Total
1 Update Base Revenue Analysis 1 4 5 $ 935
2 Update Financial Plan 1 2 3 $ 565
3 Update Total Usage and Peaking Characteristics 4 6 10 $ 1,890
4 Cost Causation 4 6 10 $ 1,890
5 Update Rates by Customer Class 4 2 6 $ 1,150
6 Update Report Reflecting New Findings 4 2 6 $ 1,150
TOTAL ESTIMATED MEETINGS/HOURS 18 22 40
HOURLY RATES $185 $175
;Legend: Total Professional Fees $7,180
HI=Habib Isaac Total Expenses $400
GT=Gregg Tobler TOTAL FEES&EXPENSES $7,580
We appreciate the opportunity to be of assistance on this engagement. Please do not hesitate to
contact me at(951)595-9354 if you have any questions.
Sincerely,
RAFTELIS FINANCIAL CONSULTANTS,INC.
1�au 1;4- w�
Habib Isaac
Manager
Item 8.d. - Page 6