Loading...
HomeMy WebLinkAboutCC AG PKT 2015-02-23 #E AGENDA STAFF REPORT DATE: February 23, 2015 TO: Honorable Mayor and City Council THRU: Jill Ingram, City Manager FROM: Sean Crumby P.E., Director of Public Works SUBJECT: APPROVE PROFESSIONAL SERVICES AGREEMENT WITH NBS FOR THE 2015 WATER AND SEWER RATE STUDY SUMMARY OF REQUEST: That the City Council adopt Resolution No. 6537 approving a professional services agreement for the 2015 Water and Sewer Rate Study with NBS for $67,925. BACKGROUND: The City of Seal Beach operates enterprise funds for operation of both the water and sewer systems. The revenue and cost for operation of both systems are independent of each other and other operations of the City. Periodically, the City adjusts rates for each enterprise based upon the cost of service. The adjustments are analyzed in rate studies and public participation is organized to comply with California State Law (Proposition 218). In Seal Beach, the water rates were most recently adopted by the City Council on April 12, 2010 and the sewer rates on November 14, 2005. The City's water system is comprised of: • Approximately 75 miles of pressurized pipeline, • 2 reservoirs, • 2 booster stations, • 4 active wells, and • Approximately 5,700 water service connections The City's sewer system is comprised of: • Approximately 35 miles of gravity sewer pipe, • Approximately 5 miles of sewer force mains, • 5 sewage pump stations, Agenda Item E Page 2 • 730 manholes, and • Approximately 5,000 connections In the past, rate studies have not always been conducted simultaneously for both enterprises. This is an opportunity to review and adjust both at the same time. In addition to a rate study, the requested services include preparation of a policy for reserve accounts and appropriate levels within the enterprise accounts. Proposals were requested from six (6) firms with proposals being submitted from four (4) qualified firms. A panel comprised of staff from the Public Works and Finance departments reviewed the proposals and the firm of NBS was deemed to be most qualified and understands the needs of Seal Beach. NBS has successfully completed numerous rate studies and has provided financial support to over 300 public agencies. The fee proposal of $67,925 is appropriate for the service being provided. ENVIRONMENTAL IMPACT: The Water and Sewer Rate Study is exempt from the California Environmental Quality Act ("CEQA") pursuant to Section 15601(b)(3) of the State CEQA Guidelines because it can be seen with certainty that there is no possibility that the study will have a significant effect on the environment LEGAL ANALYSIS: The City Attorney has approved the professional services agreement and proposed resolution as to form. FINANCIAL IMPACT: Adequate funds have been budgeted within the FY 2014/15 Budget and are as follows: Fund Amount Fund 019 —Water Capital Fund $100,000 Fund 044 — Sewer Capital Fund $100,000 RECOMMENDATION: That the City Council adopt Resolution No. 6537 approving a professional services agreement for the 2015 Water and Sewer Rate Study with NBS for $67,925. Page 3 SUBMITTED BY: NOTED AND APPROVED: e a n Crumby 6 Jill R. ngram, Director of Public Works Cit anager Attachments: A. Resolution No. 6537 B. Professional Services Agreement RESOLUTION NUMBER 6537 A RESOLUTION OF THE SEAL BEACH CITY COUNCIL APPROVING A PROFESSIONAL SERVICES AGREEMENT WITH NBS FOR THE 2015 WATER AND SEWER RATE STUDY THE SEAL BEACH CITY COUNCIL DOES HEREBY RESOLVE: Section 1. The City Council hereby approves the Professional Services Agreement ("Agreement') dated February 23, 2015 between the City of Seal Beach and NBS for the 2015 Water and Sewer Rate Study. Section 2. The Council hereby authorizes and directs the City Manager to execute the Agreement. Section 3. The City Clerk shall certify as to the passage and adoption of this resolution. PASSED, APPROVED AND ADOPTED by the Seal Beach City Council at a regular meeting held on the 23`d day of February, 2015 by the following vote: AYES: Council Members; NOES: Council Members ABSENT: Council Members ABSTAIN: Council Members Mayor ATTEST: City Clerk STATE OF CALIFORNIA } COUNTY OF ORANGE } SS CITY OF SEAL BEACH } I„ Tina Knapp,, City Clerk of the City of Seal Beach, do hereby certify that the foregoing resolution is the original copy of Resolution Number 6537 on file in the office of the City Clerk, passed, approved, and adopted by the City Council at a regular meeting held on the 23 d day of Fetruary,2015. City Clerk PROFESSIONAL SERVICES AGREEMENT for Water and Sewer Rate Study Between APO Ar City of Seal Beach 211 - 8th Street Seal Beach, CA 90740 NBS 32605 Temecula Parkway Temecula, CA 92562 This Professional Service Agreement ("the Agreement") is made as of February 23, 2015 (the "Effective Date"), by and between NBS ("Consultant"), a California Corporation, and the City of Seal Beach ("City"), a California charter city, (collectively, "the Parties"). S7296-0001\1236808v1.doc RECITALS A. City desires certain professional services. B. Consultant represents that it is qualified and able to provide City with such services. NOW THEREFORE, in consideration of the Parties' performance of the promises, covenants, and conditions stated herein, the Parties hereto agree as follows. AGREEMENT 1.0 Scope of Services 1.1. Consultant shall provide those services ("Services") set forth in the attached Exhibit A, which is hereby incorporated by this reference. To the extent that there is any conflict between Exhibit A and this Agreement, this Agreement shall control. 1.2. Consultant shall perform all Services under this Agreement in accordance with the standard of care generally exercised by like professionals under similar circumstances and in a manner reasonably satisfactory to City. 1.3. In performing this Agreement, Consultant shall comply with all applicable provisions of federal, state, and local law. 1.4. Consultant will not be compensated for any work performed not specified in the Scope of Services unless the City authorizes such work in advance and in writing. The City Manger may authorize extra work to fund unforeseen conditions up to the amount approved at the time of award by the City Council. Payment for additional work in excess of this amount requires prior City Council authorization. 2.0 Term This term of this Agreement shall commence as of the Effective Date and shall continue for a term of 1 year unless previously terminated as provided by this Agreement. 3.0 Consultant's Compensation City will pay Consultant in accordance with the hourly rates shown on the fee schedule set forth in Exhibit B for Services but in no event will the City pay more than $_67,925. Any additional work authorized by the City pursuant to Section 2 of 9 S7296-0001\1236808v 1.doc 1.4 will be compensated in accordance with the fee schedule set forth in Exhibit B. 4.0 Method of Payment 4.1. Consultant shall submit to City monthly invoices for all services rendered pursuant to this Agreement. Such invoices shall be submitted within 15 days of the end of the month during which the services were rendered and shall describe in detail the services rendered during the period, the days worked, number of hours worked, the hourly rates charged, and the services performed for each day in the period. City will pay Consultant within 30 days of receiving Consultant's invoice. City will not withhold any applicable federal or state payroll and other required taxes, or other authorized deductions from payments made to Consultant. 4.2. Upon 24-hour notice from City, Consultant shall allow City or City's agents or representatives to inspect at Consultant's offices during reasonable business hours all records, invoices, time cards, cost control sheets and other records maintained by Consultant in connection with this Agreement. City's rights under this Section 4.2 shall survive for two years following the termination of this Agreement. 5.0 Termination 5.1. This Agreement may be terminated by City, without cause, or by Consultant based on reasonable cause, upon giving the other party written notice thereof not less than 30 days prior to the date of termination. 5.2. This Agreement may be terminated by City upon 10 days' notice to Consultant if Consultant fails to provide satisfactory evidence of renewal or replacement of comprehensive general liability insurance as required by this Agreement at least 20 days before the expiration date of the previous policy. 6.0 Party Representatives 6.1. The City Manager is the City's representative for purposes of this Agreement. 6.2. Greg Crumpler is the Consultant's primary representative for purposes of this Agreement. 7.0 Notices 7.1. All notices permitted or required under this Agreement shall be deemed made when personally delivered or when mailed 48 hours after deposit 3of9 S7296-0001\1236808v1.doc in the United States Mail, first class postage prepaid and addressed to the party at the following addresses: To City: City of Seal Beach 211-8th Street Seal Beach, California 90740 Attn: City Manager To Consultant: NBS 32605 Temecula Parkway, Suite 100 Temecula, CA 92592 Attn: Michael Rentner, President& CEO 7.2. Actual notice shall be deemed adequate notice on the date actual notice occurred, regardless of the method of service. 8.0 Independent Contractor 8.1. Consultant is an independent contractor and not an employee of the City. All services provided pursuant to this Agreement shall be performed by Consultant or under its supervision. Consultant will determine the means, methods, and details of performing the services. Any additional personnel performing services under this Agreement on behalf of Consultant shall also not be employees of City and shall at all times be under Consultant's exclusive direction and control. Consultant shall pay all wages, salaries, and other amounts due such personnel in connection with their performance of services under this Agreement and as required by law. Consultant shall be responsible for all reports and obligations respecting such additional personnel, including, but not limited to: social security taxes, income tax withholding, unemployment insurance, disability insurance, and workers' compensation insurance. 8.2. Consultant shall indemnify and hold harmless City and its elected officials, officers, employees, servants, designated volunteers, and agents serving as independent contractors in the role of City officials, from any and all liability, damages, claims, costs and expenses of any nature to the extent arising from Consultant's personnel practices. City shall have the right to offset against the amount of any fees due to Consultant under this Agreement any amount due to City from Consultant as a result of Consultant's failure to promptly pay to City any reimbursement or indemnification arising under this Section. 9.0 Subcontractors No portion of this Agreement shall be subcontracted without the prior written approval of the City. Consultant is fully responsible to City for the performance of any and all subcontractors. 4of9 S7296-0001\1236808v1.doc 10.0 Assignment Consultant shall not assign or transfer any interest in this Agreement whether by assignment or novation, without the prior written consent of City. Any purported assignment without such consent shall be void and without effect. 11.0 Insurance 11.1. Consultant shall not commence work under this Agreement until it has provided evidence satisfactory to the City that Consultant has secured all insurance required under this Section. Consultant shall furnish City with original certificates of insurance and endorsements effecting coverage required by this Agreement on forms satisfactory to the City. The certificates and endorsements for each insurance policy shall be signed by a person authorized by that insurer to bind coverage on its behalf, and shall be on forms provided by the City if requested. All certificates and endorsements shall be received and approved by the City before work commences. The City reserves the right to require complete, certified copies of all required insurance policies, at any time. 11.2. Consultant shall, at its expense, procure and maintain for the duration of the Agreement, insurance against claims for injuries to persons or damages to property that may arise from or in connection with the performance of this Agreement. Insurance is to be placed with insurers with a current A.M. Best's rating no less than A:VIII, licensed to do business in California, and satisfactory to the City. Coverage shall be at least as broad as the latest version of the following: (1) General Liability: Insurance Services Office Commercial General Liability coverage (occurrence form CG 0001); (2) Automobile Liability: Insurance Services Office Business Auto Coverage form number CA 0001, code 1 (any auto); and, if required by the City, (3) Professional Liability. Consultant shall maintain limits no less than: (1) General Liability: $2,000,000 per occurrence for bodily injury, personal injury and property damage and if Commercial General Liability Insurance or other form with a general aggregate limit is used, either the general aggregate limit shall apply separately to this Agreement/location or the general aggregate limit shall be twice the required occurrence limit; (2) Automobile Liability: $1,000,000 per accident for bodily injury and property damage; and (3) Professional Liability: $1,000,000 per claim/aggregate. 11.3. The insurance policies shall contain the following provisions, or Consultant shall provide endorsements on forms supplied or approved by the City to state: (1) coverage shall not be suspended, voided, reduced or canceled except after 30 days prior written notice by certified mail, return receipt requested, has been given to the City; (2) any failure to comply with reporting or other provisions of the policies, including breaches of warranties, shall not affect coverage provided to the City, its directors, officials, officers, (3) coverage shall be primary insurance as respects the City, its directors, officials, officers, 5of9 S7296-0001\12368080.doc employees, agents and volunteers, or if excess, shall stand in an unbroken chain of coverage excess of the Consultant's scheduled underlying coverage and that any insurance or self-insurance maintained by the City, its directors, officials, officers, employees, agents and volunteers shall be excess of the Consultant's insurance and shall not be called upon to contribute with it; (4) for general liability insurance, that the City, its directors, officials, officers, employees, agents and volunteers shall be covered as additional insureds with respect to the services or operations performed by or on behalf of the Consultant, including materials, parts or equipment furnished in connection with such work; and (5)for automobile liability, that the City, its directors, officials, officers, employees, agents and volunteers shall be covered as additional insureds with respect to the ownership, operation, maintenance, use, loading or unloading of any auto owned, leased, hired or borrowed by the Consultant or for which the Consultant is responsible. 11.4. All insurance required by this Section shall contain standard separation of insureds provisions and shall not contain any special limitations on the scope of protection afforded to the City, its directors, officials, officers, employees, agents, and volunteers. 11.5. Any deductibles or self-insured retentions shall be declared to and approved by the City. Consultant guarantees that, at the option of the City, either: (1) the insurer shall reduce or eliminate such deductibles or self-insured retentions as respects the City, its directors, officials, officers, employees, agents, and volunteers; or (2) the Consultant shall procure a bond guaranteeing payment of losses and related investigation costs, claims and administrative and defense expenses. 12.0 Indemnification, Hold Harmless, and Duty to Defend Consultant shall defend, indemnify, and hold the City, its officials, officers, employees, volunteers and agents serving as independent contractors in the role of city officials (collectively "Indemnitees") free and harmless from any and all claims, demands, causes of action, costs, expenses, liability, loss, damage or injury, in law or equity, to property or persons, including wrongful death, in any manner arising out of or incident to any acts or omissions of Consultant, its employees, or its agents in connection with the performance of this Agreement, including without limitation the payment of all consequential damages and attorneys' fees and other related costs and expenses, except for such loss or damage arising from the sole negligence or willful misconduct of the City. With respect to any and all such aforesaid suits, actions, or other legal proceedings of every kind that may be brought or instituted against Indemnitees, Consultant shall defend Indemnitees, at Consultant's own cost, expense, and risk, and shall pay and satisfy any judgment, award, or decree that may be rendered against Indemnitees. Consultant shall reimburse City and its directors, officials, officers, employees, agents and/or volunteers, for any and all legal expenses and costs incurred by each of them in connection therewith or in enforcing the indemnity 6 of 9 S7296-0001\1236808v1.doc herein provided. Consultant's obligation to indemnify shall not be restricted to insurance proceeds, if any, received by Consultant, the City, its directors, officials, officers, employees, agents or volunteers. All duties of Consultant under this Section shall survive termination of this Agreement. 13.0 Equal Opportunity Consultant affirmatively represents that it is an equal opportunity employer. Consultant shall not discriminate against any subcontractor, employee, or applicant for employment because of race, religion, color, national origin, handicap, ancestry, sex, sexual orientation, or age. Such non-discrimination includes, but is not limited to, all activities- related to initial employment, upgrading, demotion, transfer, recruitment or recruitment advertising, layoff, or termination. 14.0 Labor Certification By its signature hereunder, Consultant certifies that it is aware of the provisions of Section 3700 of the California Labor Code that require every employer to be insured against liability for Workers' Compensation or to undertake self-insurance in accordance with the provisions of that Code, and agrees to comply with such provisions before commencing the performance of the Services. 15.0 Entire Agreement This Agreement contains the entire agreement of the parties with respect to the subject matter hereof, and supersedes all prior negotiations, understandings, or agreements. This Agreement may only be modified by a writing signed by both parties. 16.0 Severability The invalidity in whole or in part of any provisions of this Agreement shall not void or affect the validity of the other provisions of this Agreement. 17.0 Governing Law This Agreement shall be governed by and construed in accordance with the laws of the State of California. 18.0 No Third Party Rights No third party shall be deemed to have any rights hereunder against either party as a result of this Agreement. 7 of 9 S7296-0001\1236808v 1.doc 19.0 Waiver No waiver of any default shall constitute a waiver of any other default or breach, whether of the same or other covenant or condition. No waiver, benefit, privilege, or service voluntarily given or performed by a party shall give the other party any contractual rights by custom, estoppel, or otherwise. 20.0 Prohibited Interests; Conflict of Interest 20.1. Consultant covenants that it presently has no interest and shall not acquire any interest, direct or indirect, which may be affected by the Services, or which would conflict in any manner with the performance of the Services. Consultant further covenants that, in performance of this Agreement, no person having any such interest shall be employed by it. Furthermore, Consultant shall avoid the appearance of having any interest, which would conflict in any manner with the performance of the Services. Consultant shall not accept any employment or representation during the term of this Agreement which is or may likely make Consultant "financially interested" (as provided in California Government Code §§1090 and 87100) in any decision made by City on any matter in connection with which Consultant has been retained. 20.2. Consultant further warrants and maintains that it has not employed or retained any person or entity, other than a bona fide employee working exclusively for Consultant, to solicit or obtain this Agreement. Nor has Consultant paid or agreed to pay any person or entity, other than a bona fide employee working exclusively for Consultant, any fee, commission, gift, percentage, or any other consideration contingent upon the execution of this Agreement. Upon any breach or violation of this warranty, City shall have the right, at its sole and absolute discretion, to terminate this Agreement without further liability, or to deduct from any sums payable to Consultant hereunder the full amount or value of any such fee, commission, percentage or gift. 20.3. Consultant warrants and maintains that it has no knowledge that any officer or employee of City has any interest, whether contractual, non- contractual, financial, proprietary, or otherwise, in this transaction or in the business of Consultant, and that if any such interest comes to the knowledge of Consultant at any time during the term of this Agreement, Consultant shall immediately make a complete, written disclosure of such interest to City, even if such interest would not be deemed a prohibited "conflict of interest" under applicable laws as described in this subsection. 21.0 Attorneys' Fees If either party commences an action against the other party, either legal, administrative or otherwise, arising out of or in connection with this Agreement, the prevailing party in such litigation shall be entitled to have and recover from 8of9 S7296-0001\1236808v1.doc the losing party all of its attorneys' fees and other costs incurred in connection therewith. 22.0 Exhibits All exhibits referenced in this Agreement are hereby incorporated into the Agreement as if set forth in full herein. In the event of any material discrepancy between the terms of any exhibit so incorporated and the terms of this Agreement, the terms of this Agreement shall control. 23.0 Corporate Authority The person executing this Agreement on behalf of Consultant warrants that he or she is duly authorized to execute this Agreement on behalf of said Party and that by his or her execution, the Consultant is formally bound to the provisions of this Agreement. IN WITNESS WHEREOF, the Parties hereto, through their respective authorized representatives have executed this Agreement as of the date and year first above written. CITY OF SEAL BEACH CONSULTANT By: IdU zi__ Jill R. Ingram, City Manager .. Name: Michael Rentner Attest: Its: President By: By: °W Tina Knapp, City Clerk Name: Michael Rentner Approved as to Form: Its: Secretary By: Steven L. Flower, City Attorney 9 of 9 S7296-0001\1236808v1.doc EXHIBIT A - SCOPE OF SERVICES We plan on providing the leadership in helping City staff, City Council members and the public understand the various options, key issues, and how other California communities are addressing similar problems. Ultimately, we want the City to be confident that it is taking reasonable and prudent steps and developing rates and fees that best meet the needs of the City's customers. This section details NBS' proposed methodology and scope of work. These tasks serve as the basis for the proposed budget and can be incorporated into the formal agreement to perform this rate study. TASK 1. KICKOFF MEETING AND DATA COLLECTION Task Objectives: Clearly communicate and work with City staff to obtain necessary data and review study objectives, tasks, and schedule. Task Deliverables: • Data request to City staff prior to the kick-off meeting. • Review of initial data provided. • Kick-off meeting with City staff. • Preliminary plan for Public Outreach workshops and City Council presentations. The kick-off meeting will be used to review and discuss the data from the City's billing and accounting system and data requirements in general. The data the City will need to provide includes customer accounts, meter sizes, monthly consumption records for each customer, total rate revenue collected, and financial data typically reported in financial statements. TASK 2. REVIEW OF CURRENT RATES AND POLICIES Task Objectives: Work with City staff to review and evaluate the City's current rate structures, reserve funds, and related policies at the beginning of the study. This will help set the direction for the study with a greater degree of clarity and avoid unnecessary complications when the final results are presented to the Council and public. For example, policies related to basic equity and fairness, revenue stability vs. water conservation, drought-related supply reductions, reserve fund targets and the level of funding for capital and repair and replacement costs. Task Deliverables: Assessment of current reserve funds and target year-end balances. Assessment of current rate structures(pros and cons, areas for improvement, etc.) Assessment of equity of the rates for the various customer classes Assessment of conservation impacts(current rates and potential new rate designs) Assessment of current rate-related policies compared to industry practices and how they may relate to possible rate alternatives. Summary of pros&cons of current and alternative policies. Recommendations for changes to and/or additional policies for the Council to consider adopting, as well as a greater degree of direction on rate alternatives for further evaluation. TASK 3. FINANCIAL PLAN AND REVENUE REQUIREMENT ANALYSIS Task Objectives: Prepare a detailed financial plan that details the City's revenues, expenditures, reserves, debt coverage ratios, capital improvement costs, repair and replacement costs and net revenue requirements. Based on our review of reserve fund policies, those changes will be incorporated into the financial plans in order to better evaluate the City's current financial management concerns. Task Deliverables: • 20-year financial projection models that will serve as a financial "roadmaps" for the City's water and sewer utilities. • Summary of current and projected net revenue requirements. • Establish reserve fund policies and targets, such as operating, rate stabilization, capital repair and replacement and debt service. • Projected year-end reserve fund levels. • Calculated debt service coverage ratios. These financial plans will lay the groundwork for the cost-of-service and rate design analyses addressed in Tasks 4 and 5. The following subtasks are anticipated: • Projected Revenues and Expenditures — Using a cash-basis reflecting the City's system of accounts for the water and sewer utilities, NBS will prepare a 20-year projection of revenues and expenses for each utility, and increases in rate revenue needed to meet all obligations. This will provide the City with the financial planning tools needed for smoothing out future rate increases and maintaining appropriate reserve fund levels in light of revised budget projections. • Evaluate Reserve Fund Sufficiency — NBS will evaluate the sufficiency of existing reserve funds and related issues such as debt service coverage ratios. We will provide recommendations for target balances for reserves such as operating, capital rehabilitation/replacement and rate stabilization. • Review Capital Improvement Funding — NBS will incorporate the capital improvement plans, and evaluate the timing, costs, and available reserves used to fund various projects. We will work with City staff to develop a well-conceived approach to funding these capital needs Figures 2, 3 and 4 are eg neric examples of the types of charts and tables we use to summarize these results (the City's chart of accounts will serve as the basis for the actual analysis and tables). Figure 2. Summary of Five-Year Revenue Requirements and Rate Increases SL]Mmary of Sources and Uses of Fun�s an d Net Revenue Requirements Sources of{Meter Funds _ Rate Revenue Under Prevailing Rates $ 15,203,655 $15,315,705 $ 15,429,586 $15,546,465 $15,685,153 $15,828,338 Non-Rate Revenues 599,330 635,770 600,769 575,976 571,953 571,970 Total Sources of Funds $ 15,802,985 $15,951,475 $ 16,030,355 $16,122,441 $16,257,107 $10,400,308 Uses of Water Funds .,�,,,,,,� ..-. �.�� .. _.� ....m .o.. �. .•�._.... _... -- �„,rvA.,�w.,..m . ...................... .._ Operating Expenses $ 12,791,032 $ 13,197,960 $ 13,312,000 $13,813,880 $14,928,296 $15,546,000 Debt Service 498,608 489,138 488,652 490,108 492,153 463,855 Rate-Funded Capital Emenses _ 3 515 232 7,,310,656 5,620,544 5,217,171 4,346,899 Total Use of Funds $ 13,289,640 $17,202,330 $ 21,111,308 $19,924,532 $20,637,620 $20,356,754 ®�._.- .-. 7..W..,785 2,450,511 3,561,824 4,565,472 - - - $ 485,070 5 3,498,420 $(1 351 �- � 765,785 1,581,5 3 Additional Revenue from Rate Increases � ,580 $ 818,890 $ 609,026 Sur lus l Deficlenc after Rate Increase $_2,613,346,ww m Debt Covera After Rate Increase' 4.25 1.301 1.30 1.30 1.30 1.30 1 Includes use of cash reserves for coverage calculation purposes only. 2.Total Use of Funds less non-rate revenues and interest earnings.This is the annual amount needed from meter rates. Figure 3. Summary of Five-Year Reserve Fund Balances Efiding Reserve Fund Balances and Operating Reserve $ 1,708,000 $ 1,586,173 $ 1,781,660 $ 1,938,000 $ 1,605,258 $ 2,095,000 095,000 Recommended Minimum Target �wmwm ._..., " 1,6708,000 1,781,000 1w 858 2 015 000 000 1,938,000 2,_ " Capital Rehab&Replacement Reserve $ 1,726,922 $ 1,426,100 $ 1,372,500 $ 1,952,055 $ 1,336,200 $ 1,777,507 Recommended Minimum Taret "mwmw1,565,400 1,426,100 1,372,500 1,320,100 1,336,200 mw 1,249,300 Debt Reserve $ 536,949 $ 536„949 $ 536,949 $ 536,949 $ 536,949 $ 5$6,949 Recommended Minimum Target 536,949 536,949 536,949 536,949 $36,949 ,536,949 �., 77f 1, 777777"777 Total Recommended Minimum Tar t .. .. 3,810„,349 $ ,3 744m049 $ 3,767,449 $ 3 795,049 $ 3,888,149 $ 3,881,249 Figure 4. Summary of Revenue Requirements and Existing vs. Proposed Rates Water Revenue Requirements vs. Revenue Under Existing and Increased Rates $16,000,000 ;14,000,000 tile $12,000,000 %re • ® ® jeee,a%%r W !j C$10,000,000 G $5,000,000 m $5,000,000 $4,000,000 Rate&Reserve Funded Capital Expenses Debt Service Ileses0&M Expenses $2,000,000 —Revenues under Existing Rates ••*Revenues under Increased Rates, $0 2013 2014 2015 2016 2017 2015 2015 2020 2021 2022 TASK 4. COST OF SERVICE ANALYSIS Task Objectives: Equitably allocate the revenue requirements to each customer class and determine the cost of providing water service to each of these classes. Task Deliverables: Cost of service summary tables, to be incorporated into the rate design and rate study report. This analysis provides a critical component necessary for establishing a defensible administrative record for cost-based water rates. 4.1 Cost of Service Analysis(Water) The revenue requirements will be equitably allocated to individual customer classes based on industry standard methodologies. We will review the City's existing customer classes and analyze the historical characteristic of each customer class to determine if any changes should be made, in order to comply with industry standards. If there are any changes to the customer classes resulting from the review of the current rate structures and customer characteristics (i.e., incorporating differential rates for single-, multi-family and commercial, etc.),these changes will be incorporated into this analysis. The main components of the cost-of- service analysis are as follows: FunctionalizationiClassification of Expenses — Functionalizing the expenses means arranging costs into basic categories, such as source of supply, treatment,transmission, and distribution, as well as administrative and overhead costs. Once the costs have been functionalized, they are then classified to their various cost components, such as fixed capacity, variable (commodity), or customer related costs, as illustrated in Figure 5. Figure 5. Classification of Water Revenue Requirements Total Re�ellUe. BkjdgetCatogories q� t no!$ .. . �.:. � W..... Administration $ 1,623270 $ 600,610 $ 762,937 $ 259,723 37/0 47% 16/0 Purchased Water $ 704,330 $ 704,330 $ $ 100% 0% 00/0 Water Treatment 3 5,919,390 $ 3,768,410 $ 2,130,980 $ 64% 36% 0% Water Distribution a 4,950,970 $ 1,584„310 $ 1,584,310 $ 1,782,349 32% 32% 36% suhfxAw.Opersung Oxpenses S 13,197,960 $ 6,677,660 $ IM L$ 2A424072 61°6 3d° 169° mm Debt Service $ 489,138 $ 244,569 $ 244,569 1"$$ 50% 0° Rate Funded Cootal $ 3,518.232 $ 7,757,616 $ 1,757,616 50% 50% 0% Less. Non-Rate Revenues $ (47 925 $ t 40,844 $ (179,8881 $ i5851 5 50% 36% 12% MIMI • r r r Allocation of Costs to Customer Classes — These costs are then allocated to individual customer classes based on allocation factors specific to each cost classification, producing fixed and variable revenue requirements for each customer class. These allocations will be used for the actual rate calculations. Figure 6 describes the allocation factors that will be developed in this phase of the analysis and used to allocate costs. Figure 6. Example of Allocation Factors Commodity Capacity Allocation Factors Water Consumption by peak Water Use Number of Accounts Customer Class by Customer Class Costs associated with the maximum Types of Costs Costs associated with the demand required at one point in time Costs associated with having consumption of water over time. or the maximum size of facilities customers connected to the system. required to meet this demand. •Variable Cost of Purchased Water •Meter Reading •Primarily capital facilities •CustomerBillin Examples of Costs •Electricity •Fixed cost of purchased water g •Chemicals •Customer Service As a result of applying the allocation factors to the cost classifications, the revenue required from each customer class is accumulated by customer class, as shown in Figure 7. Figure 7. Allocation of Revenue Requirements to Customer Classes . . Co r on r :, • Commodlity Capacity ppyy y j ee ( x ynrvmwRy�.w,ow,,yy x.rmw , �Mmm Single-Family Residential $ 6,251,321 $ 3,230,845 $ 1,284,960 $ 10,767,126 Multi-Family Residential $ 490,683 $ 206,841 $ 57,405 $ 754,929 Commercial $ 2,988,238 $ 1,385,335 $ 185,862 $ 4,559,436 Total _ $ 9,730,242 $ 4 823,021 $ 1,528 227 $ 16,081,490 4.2 Cost of Service Analysis (Sewer) This task identifies some of the differences in the technical analysis necessary for equitably allocating sewer revenue requirements to each of the customer classes. Sewer Classification of Expenses - Classifying expenses involves arranging costs into basic categories, including flow and strength characteristics (i.e., BOD and TSS), as well as customer costs. Figure 8 illustrates this process NBS used for the City of Culver City. Figure 8. Classification of Sewer Revenue Requirements 61as'ificafioll of Expe rises R ula � $ 646,544 $ .,w38,618 "'T2-6.4g-2 _ - 338,618 $ $ 126,982 $ 253,963 40% 16% 15% 30% Retirement $ 134,715 $ 53,886 $ 20,207 $ 20,207 $ 40,415 40% 15% 15% 30°A Group Insurance $ 151,154 $ 60,462 $ 22,673 $ 22,673 $ 45,346 40% 16% 15% 30% Total Ptersonnel Services S W 1 367,370 546,948 S x205106 205106 $ 410,211 %nnITITIT 159'0.W 15% 30% �.. � �8 �ace a�ratrr� _-,..,.,. � _ tAildllas $ 76,000 $ 66,400 $ $ 6 7,600 90% 0% 0% 10% Contributions to Agencies(1) $ 2,272,000 $ 1,272,320 $ 522,560 $ 477,120 $ 66% 23% 21% 0% Rental of Land $ 360,000 $ 324,000 $ $ $ 36,000 90% 00/6 0% 10% Other Contractual Services $ 733,316 5 659,984 '$ $ $ 73,332 90% 0% 0% 10% Msc.Other Expenses $ 394,305 $ 196,403 $ 27,450 $ 27,450 $ 143,002 50% 7% 7% 38% Total Total Maintnn ante& ( rations .. $°°°° 5,858,475 $ 3,133,804 $ �5�5 X78 .$ 709.676 $ i,28t7rp80Y�1 �...... 0%0°!°� 90% $ $ $ 589 1roetibnotaratfrarrrss ... .... 100% 536 _.--..... 13% 12% 2009 Series A Revenue 3 1 606 800 7$ 80 3,�S' 1�s atrtaa _�,�.�.__.... , w.._.. !m 3,837r004 µt 11:18 818 f.,N k�l 3 2 0 31 G 1% 179TOTL t8EOF SEMR FUNDS $ ?AS'T6 Less Non-Rat®Revenues i (less)Industrial Waste Inspection Fees $ (70,000) $ (37,442) $ (9,022) $ (8,480) $ (15,056) 53% 13% 12% 220A NET R3'USN11E Rt Unad waled' $ 7193 275 $ 3,791,518 $ 1,121,767 i 1078 p28 $ x3446 H 63% 13% t2%. 22% less Interest Earn_ _ _ rot„_,.. 1 _L. .? _, $ 1201576 MOMMMILUMA19111111 IMF= , Allocations to Sewer Customer Classes-The next step in the cost-of-service analysis is allocating the sewer costs to each of the customer classes using the allocation factors for each of the classes of costs, which are shown in Figure 9. Figure 9. Example of Allocation Factors(Sewer) Category �1 Strength Factors Fl../Effl.ent Volume •� Allocation Factors Water Consumption by BOD Effluent TSS Effluent Number of Accounts Customer Class levels(in Mgll_) levels(in Mg/L) by Customer Class Amount of Effluent generated by BOD-Related TSS-Related Costs associated Wth having Types of Costs each Customer Class WWTP WWTP customers connected to the Processing Processing system. •Hydraulic Capacity of WWTP BOD-Related TSS-Related WWTP •Meter Reading Examples of Costs •Effluent Pumping Stations WWTP •Customer Billing •Collection System Costs Equipment Equipment, •Customer Service .�. w.......�� ..... .....—...�.. _ .�_w. a �.., ..._...... A,_.... Sludge Handling .�.�.._._WW...�.. ....�_ .�..o,' As a result of applying the allocation factors to the cost classifications (i.e., the Volume, BOD, TSS, and Customer costs), the revenue required from each customer class is accumulated by customer class, as shown in Figure 10. Figure 10. Allocation of Revenue Requirements to Customer Classes (Sewer) .. *. 7$ 246!.676 Ii t" 0U ai _ % Single-Family Residential $ 962,013 $ 239,608 $ 544,013 $ 1,992,310 Multi-Family Residential $ 1,522,095 $ 390,290 $ 379,107 $ 587,925 $ 2,879,417 Commercial-Business $ 888,087 $ 227,720 $ 221,195 $ 102,998 $ 1,440,000 Commercial-Restaurants $ 225,777 $ 188,523 $ 202,890 $ 15,649 $ 632,839 Commercial-Hotels $ 258,430 $ 84,956 $ 71,316 $ 3,319 '$ 418,021 Institutional $ 113,140 $ 37,194 $ 16,011 $ 5,406 $ 171,751 Schools $ 7,444 $ 1,273 $ 1,053 $ 1,043 $ 10,813 Total 1 $ 3,976,986 S 1,176,632 1 $ 1,131,1801 1,260,353 Tj 7,646,161 TASK 5. RATE DESIGN ANALYSIS Task Objectives: NBS will work with City staff to develop the best suited alternative rate structures for the water and sewer utilities by incorporating the City's broader rate design goals and objectives. Task Deliverables: Rates for the three rate structures for water and sewer, including the evaluation of the pros and cons of various rate structure alternatives. Develop Rate Design Recommendations — While we believe rate design is more applicable to water rates, we will also review the sewer rate design. We will include a discussion of the relative merits (pros and cons) of the City's current rate structures and the new alternatives. This discussion and analysis may include issues such as the amount of revenue collected from fixed vs. volumetric charges, the percentage rate increases between tiers, total quantities of water included in each tier, and amount of revenue collected in each tier. Criteria for Improving the Rate Design —There are a number of criteria that NBS will discuss with City staff in considering new rate structures, including: • How costs allocated to fixed and volumetric rates affect revenue stability. • How summer peaking patterns are reflected in water rate design. • How meter sizes are used in calculating fixed charges. • The number of tiers that should be implemented. • The amount of revenue that should be collected within each tier. • How to address"price elasticity" reductions in water use in response to rate increases. • Impacts on customer monthly bills. The rate structure alternative selected will, in the end, provide the basis for comparing monthly customer bills under both the current and new rate structure. However, all rate structures will be "revenue neutral" because they will all collect the same amount of revenue from each customer class. Evaluation of Consumption Patterns - NBS will perform a detailed analysis that will identify the number of customers at various levels of consumption and the total water use that occurs within each tier. The City's most recent water consumption data will be used for this analysis. This type of data analysis ensures an accurate projection of the revenue that will be collected within each tier, and allows for testing various rate structure alternatives (e.g., changing tier breakpoints and rates) in order to accurately design water rate tiers and recover sufficient revenues. Figure 11 illustrates the type of distribution curve that summarizes the number of customers by consumption level. Figure 11. Consumption Distribution Analysis . .. Tier 1 Tier 3 Tier 2 Calculate Fixed and Volumetric Charges - Fixed costs consider the number of accounts, equivalent meters, and the number and size of meters. In contrast, variable costs are typically allocated in proportion to consumption. We note that although a strict cost-of-service methodology would determine the percentages of rate revenue collected from fixed and variable rates, other factors are typically considered in this process. Other factors include revenue stability, water conservation goals, ease of understanding, and ease of administration. NBS will recommend a rate structure that provides a balance between fixed and variable charges, with the goal of recovering all or a significant portion of fixed costs from fixed charges and variable costs from variable charges,while also encouraging water conservation. Figures 12, 13 and 14 illustrate how the rate-design analysis recovers customer costs based on the total number of meters, capacity costs from each meter size based on the hydraulic capacity, and how commodity costs are recovered from customers based on water consumption. Figure 12. Example of Fixed Charges Calculations w Total Hydraulic Total Fixed Service , Meter Size N umber of Capacity Equivalent Customer Meters Factor' Meters Costs Service 5/8 x 3/4 inch 34 0.67 23 $4.50 $6.51 $11,01 3/4 inch 30,207 1.00 30,207 $4.50 $9-76 $14.26 1 inch 14,295 1,67 23,825 $4,50 $16.27 $2077 1 1/2 inch 1,280 3.33 4,267 $4.50 $32.55 $37.05 2 inch 2,314 5.33 12,341 $4,50 $52.07 $56.57 3 inch 190 10,00 1,900 $4.50 $97.64 $102.14 4 inch 96 16.67 1 1,600 $4.50 $162.73 $167.23 6 inch 30 33.33 1,000 $4.50 $325.46 $329„96 8 inch 62 53.33 3,307 $4,50 $520.73 $525.23 10 inch 8 80.00 640 $4.50 $781.10 $785.60 Total Figure 13. Example of Commodity Rate Calculations Proposed Uniform Commodity Customer Classes Number of Revenue. . Single-Family Residential 23,257 6,396,362 $ 6,251,321 $0.977 Tiered Multi-Family Residential 1,039 502,068 $ 490,683 $0.977 Uniform Commercial 3,364 3,057,570 $ 2,988,238 $0.977 Uniform Total 27,860 9,956,000 $ 9,730,242 - -- 1.Assumes all customer classes will consume 5%less water than in FY 2012113 due to conservation efforts, Target Con Figure 14. Example of Single-Family Residential,Three-Tier Rate Calculations Upper Price Projected Proposed „ Commodity Water Customer Class Wate r Breakpoint Between 6MM I Generated Tiers Tier 1 11.0 hcf/mo„ 2,686,499 $0.416 $1,118,250 Single Family Residential Tier 2 36.0 hcf/mo. 50% 2,443,475 $1.281 $3,129,777 Tier 3 24% 1,266,388 $1.582 $2,003,294 Total - - 6,396,362 - $6,251,321 Comparison of Monthly Water Bills - We will prepare an analysis of monthly water bills for various types of customers, such as single-family customers with low-, average-, and high-water usage under each rate alternative evaluated in the study. This analysis is useful when evaluating the effects of different rate structures on customers, as illustrated in Figure 15. Figure 15. Example of Monthly Bill Comparison �,'.�nl"11C�1"d170•� O y N � r +FWrM a0 G ~ WINIER B�II � � � a � ff ff Cl) Oi 69 ■Current Rotes MPropos ad Rates , i r %j Five-Year Rate Schedule—We will provide the City with a rate schedule that includes proposed rates for the next five years and a projection of the typical bill for the five year period, as illustrated in Figure 16. Figure 16. Example of Monthly Bill Projection Cur for Fivei-'�ear Period $70.36 I $65.76 D� $61451: $57.43 ' $53.67 $52.12 I% %/„ U 11 a ii//; f�� � l/ TASK 6. PREPARE A WRITTEN STUDY REPORT Task Objectives: Prepare draft and final reports. Task Deliverables: Draft and Final Reports for review by City Staff that include our final recommendations for the financial plans, reserve policies and rate structures. Sufficient information will be provided in the report for staff, the Council and the public to review and understand the study. NBS will prepare draft and final rate study reports that include proposed rates for the next five years, although the financial models will cover a 20-year period. An executive summary and introduction will present the purpose of the report and results of the study. The report will summarize the findings and recommendations, including proposed rates, and present appropriate customer bill comparisons using tables, graphs, and charts as needed.The emphasis will be on providing a clear, concise, and understandable report. Preliminary study results will be forwarded to City staff well ahead of the draft report, and then to the City Council once City staff is comfortable with the results. We typically will review initial results (e.g., revenue requirements, financial plans, cost-of-service analysis, and rate design results)with staff at the time they are developed. This helps ensure that City staff are "on-board" with the results before moving ahead with presenting any materials to the City Council or public. The City's comments'will be incorporated into the final report. TASK 7. MEETINGS AND PRESENTATIONS 7.1 Meetings With City StaK Task Objectives: Facilitate study progress, communication of results, and meet with City staff. Task Deliverables: Provide up to two (2) on-site meetings with Staff to review work products and study progress. NBS proposes to have two on-site progress meetings with City staff to review initial work products and gain input from Staff on the direction of the study, in addition to the kick-off meeting in Task 1. We also expect to have regular phone conversations with City staff to discuss how the study is proceeding, get input from Staff, and prior to the public meetings to review and discuss the study's initial results and work products. Z.2 gyt�c 'r s abort and iii blic Worksh p Task Objectives: Effectively communicate with the City Council and the public as needed to successfully complete the study. Task Deliverables: Provide on-site presentations with the City Council and public as requested. NBS will plan to meet with the City Council and the public to successfully adopt and implement the recommended rate study results. Additional meetings/presentations can be provided as needed.We propose the following meetings/presentations for this task, however if selected for this study, we would like to refine our approach, in order to best meet the City's needs. City Council Presentations—NBS proposes four(4) City Council presentations: (1)to present an overview of the study objectives, best practices for utility fund management, and solicit input on rate-related policies and rate design, (2)to review and discuss preliminary rate study results, recommendations, proposed rates, and receive general input and answer questions from the Council, (3) to review and discuss final rate study results and the study report which will include proposed rates and seek approval to begin the Prop 218 process, and; (4)attend and present at a Prop 218-related public hearing. Public Outreach Workshops — NBS proposes two (2) public outreach workshops: the first will take place after the second City Council presentation to present preliminary findings made in the rate study, answer m_ We assume City staff comments will be in an electronic Microsoft Word file using track-changes mode to incorporate all City comments. questions from and solicit input from the public on the development of new water and sewer rates. The second workshop will take place after the Prop 218 notices for any proposed rate adjustment is mailed, to review the results of the rate study with attendees and explain the need for any proposed rate increase. These activities will better prepare City staff and the Council by helping them more clearly understand the public's reaction to possible rate increases and what they should expect at the public hearing. If the City would like a more extensive public engagement process than what is described here, such as implementing a Citizen's Advisory Group, we have the expertise in handling these types of programs and can assist the City in designing executing that plan and meeting with the public. We will also prepare all presentation material required for the adoption of new water and sewer rates, including a PowerPoint presentation and any additional worksheets or handouts. 7.3 Informational Mailers Task Objectives: Distribute information about the rate study and any proposed adjustments to water and/or sewer rates. Task Deliverables: Create two(2) informational mailers that will be mailed to the public in order to distribute information about the rate study and any proposed rate adjustment. NBS Staff will provide the whole range of services for such increases, including: Design of the announcement (such as a customized postcard within City branding standards) as well as mailing coordination with a third party mailing house. An example of a postcard we designed and mailed announcing an adjustment in sewer rates for a similar project is included in Appendix. We will work with City staff to finalize the content and format of these two mailers. MANAGING TIMELINES AND PROJECT COSTS We understand that budgets and timelines are critical to the success of this study, and our commitment to the City is that our proposed tasks will not cost more than budgeted or take longer than originally planned (to the extent that NBS has control over the schedule). If additional funds are needed due to tasks not included in the proposal, we will discuss this with the City and propose options for revising the budget and/or the scope of work. No additional work will be undertaken prior to approval by the City's project manager, NBS has standard consulting-industry accounting systems and practices that track consulting hours by task, by team member, and by client. We provide monthly detailed reports and invoicing, but will discuss any particular needs the City may have with regard to invoicing and tracking of costs. Our projects are performed on a time-and-materials basis with not-to-exceed limits, thus guaranteeing that we will not exceed the proposed costs. EXHIBIT B - COST PROPOSAL Our detailed project budget is shown below. We express this honestly and transparently through our price proposal. Additional services requested, such as additional community meetings or additional rate alternatives, can be provided based on the hourly labor rates shown in the budget table below. All tasks would be mutually agreed upon by NBS and the City prior to proceeding. w,. Task 2—Review of Meeting&Data Collection 1'". 26.0 $3,730 Task 1 Kick-0off'M.. ")"), _ _ ..... Current Rates&Policies 4 0 8.0 12.0 $2,180 Task 3—Financial Plan and Revenue Requirements m 6 0 16.0 �. _ 24 0 46..�. ... 6,210 31—POSA:Water Utility repass Flniak Plans � Task 4 Cost : Sere Analyses(CC1 Aj 22.0 1 42.0 $6,210 4.2—C y 22.0 { 42 � COSA:Sewer Utility 0 160 $6,210 34,0 $4730 5 1 Developonaof Consumption s 2 Recommend tions Om 8.0 _ 4 0 18.0 $3130 Tas5.2 Evel Desi 24 0 —.. 5 3—Calculate Fixed&Volumetric Charges 4,0 10.0 16 0 30 0 $4 500 Monthly,.B.� n ._. _ ... _.w .... . . II Comparisons 6.0 11.0 1 0 4.0 $1 615' Task 6—Prepare A Written Study Report 8.0 160 8 0 320 $5,360 Task 7—Meetings and Presentations ... .m..n_.., ® . 54 0 $9 0'30 7.2—P b tcnPreset tatioy Staff(two) 40 71 ' 9 ( 40 120. 200 $3000 Mailers' s six) ( o ( 320 7 3— (as needed) $10, Reimbursable IMxpessaas �. $1„0041' 1 Cost for labor for designing and mailing informational mailers is$5,000 per mailer,plus direct expenses if necessary (e.g.,printing,mailing,postage) Primary staff 411 be Geralin Reyes,Senior Marketing Coordinator($90/hour labor rate). 2.Estimated travel and printing expenses for Boehler to attend eight(8)on-site meetings/presentations.