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HomeMy WebLinkAboutCC AG PKT 2008-10-13 #OAGENDA STAFF REPORT DATE: October 13, 2008 TO: Honorable Mayor and City Council THRU: David Carmany, City Manager FROM: Vince Mastrosimone, Director of Public Works SUBJECT: APPROVE PROFESSIONAL SERVICES AGREEMENT WITH WILLDAN FINANCIAL SERVICES TO CONDUCT A WATER RATE STUDY SUMMARY OF REQUEST: It is respectfully requested that the City Council adopt Resolution No. 5794 approving a Professional Services Agreement with Willdan Financial Services to conduct a water rate study for the City owned water utility. BACKGROUND: The last water rate study conducted by the City was completed in June 2003 and resulted in the adoption of Resolution No. 5159 which set rates for five fiscal years through FY 08/09. There have been many changes in the water industry over the past five years including concern over water supplies from the Colorado River and the State Water Project. This puts more pressure on local groundwater supplies which are impacted by the current drought. The bottom line is that water conservation is more important now than ever. The water industry is moving toward water rate structures which promote water conservation. Another factor influencing water rate structures is the California Supreme Court decision in the Bighorn-Desert View Water Agency V. Beringson. This decision confirmed that water rates are a property related service and as such, are subject to certain requirements of Proposition 218. Please see Attachment A for details on this case. Staff received proposals from three qualified firms experienced in conducting water rate studies. After a thorough review of the proposals, staff recommends that the City retain Willdan Financial Services to conduct a water rate study for the City. Their proposal is attached as Exhibit A to the Professional Services Agreement. Agenda Item ~ Page 2 FINANCIAL IMPACT: Willdan proposes to conduct the water rate study for a fixed fee of $42,800. This project is not budgeted. The funds will need to be appropriated from the Water Fund. This is being addressed in a separate agenda item prepared by the Finance Department. RECOMMENDATION: It is respectfully requested that the City Council adopt Resolution No. 5794 approving a Professional Services Agreement with Willdan Financial Services to conduct a water rate study for the City owned water utility. MITRED B Vince Mastrosimone, Director of Public rks Attachments: NOTED AND APPROVED: ~~ David Carmany, ity Manager A. Prop 218 -Impact of Bighorn General Advice Letter B. Professional Services Agreement C. Resolution No. 5794 Prop 218 -Impact of Bighorn General Advice Letter In 2006, the California Supreme Court decided Bighorn-Desert View v. Virgil (Kelley). This case clarifies that the provisions of Proposition 218 apply to local governments' charges for water delivery, whether the charges aze calculated on the basis of consumption or are imposed as a fixed monthly chazge. I. Background Proposition 218 added Articles XIIIC and XIlID to the California Constitution in 1996. As relevant here, Article XIIIC provides that the constitutional initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local taxes, assessments, fees or chazges. Additionally, the relevant provisions of Article X1I1D provide various procedural and substantive requirements for local governments that impose or increase a "fee" or "charge" as defined by Article XIlID. Article XIIID defines a fee or charge as a levy "imposed by a local government upon a pazcel or upon a person as an incident of property ownership, including a user fee or chazge for a property related service." For convenience, such fees or charges aze referred to as "property related." Since the enactment of Proposition 218, it has been unclear whether certain charges for public services fall within the definition of fee or chazge in Article X1IID and therefore, aze subject to the requirements of Article XIIID. An argument existed that certain public utility chazges, such as water, sewer and refuse collection chazges, are outside the scope of Article X11ID when the charges aze based on consumption of the service because such charges aze related to use of the service and not related to property ownership. See e.g. Apartment Assoc. of Los Angeles County v. Los Angeles, 24 Cal. 4th 830 (2001) (holding that a fee on landlords was not governed by Proposition 218 since the fee was imposed on the voluntazy act of renting property and not imposed solely because a person owned property), Howard Jarvis Taxpayers Assoc. v. Los Angeles, 85 Cal. App. 4th 79 (2000) (holding that because water rates were based on the amount consumed they were not property related). Relying on this interpretation, some local governments adopted or increased consumption-based fees without complying with the procedural requirements of Article X11ID. II. The Bighorn Decision In Bighorn, the California Supreme Court considered a challenge to the use of the initiative power in Article XIIIC. The Bighorn-Desert View Water Agency is a special district that provides water service. Local voters submitted an initiative to reduce the Agency's chazges for delivering water to existing customers and to require voter approval for any future increase in those charges or for the imposition of any new charge. The Agency argued that the initiative was invalid because it interfered with the Agency's exclusive power to set water rates. 912703.4 The Court held that the initiative power conferred by Article XiIIC applies to the Agency's water chazges but ultimately determined that the initiative was invalid because Article XIIIC does not grant voters the right to impose voter approval requirements on future water chazges. In reaching its conclusion, however, the court held that the Agency's charges for ongoing water delivery aze property related charges subject to Article X11ID. The Court concluded that "once a property owner or resident has paid the connection chazges and has become a customer of a public water agency, all chazges for water delivery incurred thereafter are chazges for a property related service, whether the charge is calculated on the basis of consumption or is imposed as a fixed monthly charge." The Court expressly disapproved the decision of the court of appeal in Howard Jarvis Taxpayers Association v. City of Los Angeles to the extent it held that consumption-based water rates were exempt from Proposition 218. Thus, Bighorn holds that Proposition 218 does not exempt consumption-based water rates. III. Implications of Bighorn The Bighorn decision is important case law because it helps local governments understand the scope of Articles XIIIC and XIIID. More specifically, it clarifies that most fees or charges for water are "fees" or "charges" within the meaning of and subject to Articles XIIIC and ~~. The following discussion provides a summary of the practical implications of this decision. Local governments cannot impose or increase a property related fee or charge without following the procedural requirements of Article X11ID. Specifically, local governments must provide 45-days' mailed notice, hold a protest hearing, detemune that a majority protest does not exist and, except for fees or charges for water, sewer or refuse services, obtain voter approval. A majority protest exists if a majority of the owners of the property subject to the proposed fee or charge file written protests. These procedural requirements apply to property related fees or charges imposed or increased after July 1, 1997. Furthermore, the substantive provisions of Article XIIID apply to property related fees or chazges even if a local government has taken no action to extend, impose or increase the fee or chazge since July 1, 1997. See Howard Jarvis Taxpayers Association v. Fresno, 127 Cal. App. 4th 914 (2005). In general, Article XIIID requires fees or charges for a property related service to not exceed the cost of providing that service and prohibits the use of property related charges for general governmental services. Thus, all property related fees or charges currently levied by a local government must not exceed the cost of providing the service for which they aze charged or be used for general governmental services. IV. Conclusion Bighorn clarifies that consumption-based fees or charges for water services are not exempt from the provisions of Proposition 218. 9 X2703.4 RESOLUTION NUMBER 5794 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEAL BEACH APPROVING THE AGREEMENT WILLDAN FINANCIAL SERVICES FOR A WATER RATE STUDY THE CITY COUNCIL OF THE CITY OF SEAL BEACH DOES HEREBY RESOLVE: SECTION 1. The City Council hereby approves the Agreement between the City of Seal Beach and Willdan Financial Services for a Water Rate Study. SECTION 2. The Council hereby directs the City Manager to execute the Agreement for the Water Rate Study. PASSED, APPROVED AND ADOPTED by the City Council of Seal Beach, at a meeting hereof held on the 13th day of October , 2008 by the following vote: AYES: COUNCILMEMBERS NOES: COUNCILMEMBERS ABSENT: COUNCILMEMBERS ABSTAIN: COUNCILMEMBERS Mayor ATTEST: City Clerk STATE OF CALIFORNIA } COUNTY OF ORANGE } SS CITY OF SEAL BEACH } I, Linda Devine, City Clerk of Seal Beach, California, do hereby certify that the foregoing resolution is the original copy of Resolution Number 5794 on file in the office of the City Clerk, passed, approved, and adopted by the City Council of the City of Seal Beach, at a regular meeting thereof held on the 13th day of October , 2008. City Clerk AN AGREEMENT FOR WATER RATE STUDY between City of Seal Beach 211 - 8th Street Seal Beach, CA 90740 Willdan Financial Services 27368 Via Industria, Suite 110 Temecula CA 92590 THIS AGREEMENT is made and entered into this 13th day of October 2008, by and between the City of Seal Beach, a municipal corporation ("City") and Willdan Financial Services ("Consultant"). 1 of 37 57296-0200\1067636v4.doc RECITALS A. City desires to conduct a water rate study for the City of Seal Beach Water Utility (the "Project"), which Project requires the engagement of a Professional Consulting/Engineering firm. B. Pursuant to the authority provided by its City Charter and Government Code Section 37103, if applicable, City desires to engage Consultant to provide a Water Rate Study in the manner set forth herein and more fully described in Section 1. C. Consultant represents that the principal members of Consultant firm are qualified professional consulting/engineering firm and are fully qualified to perform the Consultant services contemplated by this Agreement in a good and professional manner; and it desires to perform such services as provided herein. NOW, THEREFORE, in consideration of performance by the parties of the mutual promises, covenants, and conditions herein contained, the parties hereto agree as follows: AGREEMENT Consultant's Services. 1.1. Scope and Level of Services. Subject to the terms and conditions set forth in this Agreement, City hereby engages Consultant to perform the Water Rate Study ("Services") set forth in Exhibit A, which is hereby incorporated by this reference. Such services shall include, without limitation: 1.1.1. Project Meetings Analysis Effort 1.1.2. Feasibility Analysis Related to Water Budget Based Rate Structure 1.1.3. Data Analysis, Financial Planning and Revenue Requirement 1.1.4. Utility Rate Model Design 1.1.5. Preparation of Draft Comprehensive Utility Rate Analysis Report 1.1.6. Review, Revise and Present Comprehensive Report & Findings 1.1.7. Proposition 218 Strategy Development and Community Education 1.1.8. Final Water Rate Study Report 1.2. Time for Performance. Consultant shall perform all services under this Agreement according to the project schedule set forth in the Project Schedule submitted as a part of Exhibit A. 2 of 37 S7296-0200U 067636v4.doc 1.3. Standazd of Caze. As a material inducement to City to enter into this Agreement, Consultant hereby represents that it has the experience necessary to undertake the services to be provided. In light of such status and experience, Consultant hereby covenants that it shall follow the customary professional standazds in performing all services. 1.4. Familiarity with Services. By executing this Agreement, Consultant represents that, to the extent required by the standazd of practice, Consultant (a) has investigated and considered the scope of services to be performed, (b) has cazefully considered how the services should be performed, and (c) understands the facilities, difficulties and restrictions attending performance of the services under this Agreement. Consultant represents that Consultant, to the extent required by the standazd of practice, has investigated the project and is reasonably acquainted with the requirements thereof. Should Consultant discover any latent or unknown conditions, which will materially affect the performance of services, Consultant shall immediately inform City of such fact and shall not proceed except at Consultant's risk until written instructions aze received from the City Representative. 2. Term of Agreement. This Agreement is effective as of October 13, 2008 (the "Effective Date"), and shall remain in full force and effect until Consultant has rendered the services required by this Agreement, unless sooner terminated as provided in Section 13 herein. 3. Compensation and Expense Reimbursement. 3.1. Compensation. City shall compensate Consultant in accordance with Exhibit C for the services provided pursuant to Section 1 of this Agreement. In no event shall the City pay Consultant more than the total sum of $42,800.00 unless additional services aze provided pursuant to Section 3.2. City shall not withhold any federal, state or other taxes, or other deductions. 3.2. Additional Services. City shall not pay Consultant for additional services unless the City Representative authorizes, in advance, such services. City shall compensate Consultant for any authorized extra services at the hourly rates set forth in Exhibit B. 4. Representatives. 4.1. City Representative. For the purposes of this Agreement, the contract administrator and City's representative shall be the Director of Public Works, or such other person as the Director designates in writing (hereinafter the "City Representative"). It shall be Consultant's responsibility to assure that the City Representative is kept informed of the progress of the performance of the services, and Consultant shall refer any decisions that must be made by City to the City Representative. Unless otherwise specified herein, any approval of City required hereunder shall mean the approval of the City Representative. 4.2. Consultant Representative. For the purposes of this Agreement, Brian Jewett is hereby designated as the principal and representative of Consultant authorized to act in its behalf with respect to the services specified herein and make all decisions in connection therewith (the "Responsible Principal"). It is expressly understood that the experience, knowledge, capability, and reputation of the Responsible Principal were a substantial inducement for City to enter into this Agreement. Therefore, the Responsible Principal shall be responsible 3 of 37 S7296-0200\1067636v4.doc during the term of this Agreement for directing all activities of Consultant and devoting sufficient time to personally supervise the services hereunder. Consultant may not change the Responsible Principal without the prior written approval of City, which approval shall not be unreasonably withheld. 5. Consultant's Personnel. 5.1. All Services shall be performed by Consultant or under Consultant's direct supervision, and all personnel shall possess the qualifications, permits, and licenses required by State and local law to perform such Services, including, without limitation, a City of Seal Beach business license as required by the Seal Beach Municipal Code. Consultant personnel shall be those designated on Exhibit C. 5.2. Consultant shall be solely responsible for the satisfactory work performance of all personnel engaged in performing the Services and compliance with the standard of care set forth in Section 6 below. 5.3. Consultant shall be responsible for payment of all employees' and subconsultants' wages and benefits, and shall comply with all requirements pertaining to employer's liability, workers' compensation, unemployment insurance, and Social Security. 5.4. Consultant shall indemnify and hold harmless City and its elected officials, officers and employees, servants, designated volunteers, and agents serving as independent contractors in the role of city or agency officials, from any and all liability, damages, claims, costs and expenses of any nature to the extent arising from Consultant's alleged violations of 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 5. 6. Standard of Performance. Consultant shall perform all services to customary professional standards and in a manner reasonably satisfactory to City. 7. Status as Independent Contractor. Consultant is, and shall at all times remain as to City, a wholly independent contractor. Consultant shall have no power to incur any debt, obligation, or liability on behalf of City or otherwise act as an agent of City. Neither City nor any of its agents shall have control over the conduct of Consultant or any of Consultant's employees, 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, agents or employees are in any manner employees of City. Consultant shall pay all required taxes on amounts paid to Consultant under this Agreement, and to indemnify and hold City harmless from any and all taxes, assessments, penalties, and interest asserted against City by reason of the independent contractor relationship created by this Agreement. Consultant shall fully comply with the workers' compensation law regarding Consultant and Consultant's employees. Consultant further agrees to indemnify and hold City harmless from any failure of Consultant to comply with applicable workers' compensation laws. 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 4 of 37 57296-0200\1067636v4.doc Consultant's failure to promptly pay to City any reimbursement or indemnification arising under this Section 7. 8. Confidentiality. Consultant may have access to financial, accounting, statistical, and personnel data of individuals and City employees. Consultant covenants that all data, documents, discussion, or other information developed or received by Consultant or provided for performance of this Agreement are deemed confidential and shall not be disclosed by Consultant without prior written authorization by City. City shall grant such authorization if applicable law requires disclosure. All City data shall be returned to City upon the termination of this Agreement. Consultant's covenant under this section shall survive the termination of this Agreement. 9. Conflict of Interest. 9.1.1. 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 "fmancially 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. 9.1.2. Consultant further represents 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. 9.1.3. Consultant has no knowledge that any officer or employee of City has any interest, whether contractual, noncontractual, 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. 10. Indemnification. 10.1. Indemnity for Design Professional Services. In connection with its design professional services, Consultant shall defend, hold harmless and indemnify City, and its elected officials, officers, employees, servants, designated volunteers, and those City agents serving as 5 of 37 S7296-0200\1067636v4.doc independent contractors in the role of city or agency officials (collectively, "Indemnitees"), with respect to any and all claims, demands, damages, liabilities, losses, costs or expenses (collectively, "Claims" hereinafter), including but not limited to Claims relating to death or injury to any person and injury to any property, to the extent to which they arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of Consultant or any of its officers, employees, subcontractors, or agents in the performance of its design professional services under this Agreement, but not to the extent the result of the negligence or willful misconduct of the City or of other third parties not under the control or the supervision of Consultant. Consultant's obligation to defend pursuant to this Section shall apply independent of any prior, concurrent or subsequent misconduct, negligent acts, errors or omissions of Indemnitees. Consultant shall defend Indemnitees in any action or actions filed in connection with any of said claims with counsel of Consultant's choice, subject to City's reasonable approval, and shall pay all costs and expenses, including all attomeys' fees actually incurred in connection with such defense, provided that in the event that any damages are determined by the court to have been caused in part by persons or entities other than Consultant, Consultant's obligation hereunder shall be in proportion to Consultant's share of fault. 10.2. Other Indemnities. In connection with all Claims not covered by Section 10.1, Consultant shall defend, hold harmless and indemnify the Indemnitees with respect to any and all Claims including but not limited to Claims relating to death or injury to any person and injury to any property, which arise out of, pertain to, or relate to and to the extent of the negligent or other wrongful acts or omissions of Consultant or any of its officers, employees, subcontractors, or agents in the performance of this Agreement. Consultant shall defend Indemnitees in any action or actions filed in connection with any such Claims with counsel of Consultant's choice, subject to City's reasonable approval, and shall pay all costs and expenses, including all attorneys' fees and experts' costs actually incurred in connection with such defense. Consultant's duly to defend pursuant to this Section shall apply independent of any prior, concurrent or subsequent misconduct, negligent acts, errors, or omissions of Indemnitees. 10.3. Acknowledgment of Indemnity Duties. below, each party representative hereby acknowledges that accepted the provisions set forth in this Section 10. City 1' ~ r' Consultant By affixing his or her initials the representative has read and Consultant 10.4. Nonwaiver of Ri ts. Indemnitees do not, and shall not, waive any rights that they may possess against Consultant because of the acceptance by City, or the deposit with City, of any insurance policy or certificate required pursuant to this Agreement. 10.5. Waiver of Right of Subrogation. Consultant, on behalf of itself and all parties claiming under or through it, hereby waives all rights of subrogation against the Indemnitees, while acting within the scope of their duties, from all claims, losses, and liabilities arising out of or incident to activities or operations performed by or on behalf of the Indemnitor. 6 of 37 S7296-0200\1067636v4.doc 10.6. Survival. The provisions of this Section 10 shall survive the termination of the Agreement and are in addition to any other rights or remedies that Indemnitees may have under the law. Payment is not required as a condition precedent to an Indemnitee's right to recover under this indemnity provision, and an entry of judgment against a Consultant shall be conclusive in favor of the Indemnitee's right to recover under this indemnity provision. 11. Insurance. 11.1. Liability Insurance. Consultant shall procure and maintain in full force and effect for the duration of this Agreement insurance against claims for injuries to persons or damages to property and professional negligence which may arise from or in connection with the performance of the services hereunder by Consultant, and its agents, representatives, employees and subconsultants. 11.2. Minimum Scope of Insurance. Unless otherwise approved by City, coverage shall be at least as broad as: Insurance Services Office Commercial General Liability coverage (occurrence form CG 0001). Insurance Services Office form number CA 0001 (Ed. 1/87) covering Automobile Liability, code 1 (any auto). Worker's Compensation insurance as required by the State of California and Employer's Liability Insurance. Professional Liability insurance. Consultant shall provide to City the standard form issued by the carrier. 11.3. Minimum Limits of Insurance. Consultant shall maintain limits no less than: General Liability: $1,000,000 per occurrence and in the aggregate for bodily injury, personal injury and property damage. Commercial General Liability Insurance or other form with a general aggregate limit shall apply separately to this Agreement or the ~ general limit shall be twice the required occurrence limit. Automobile Liability: $1,000,000 per accident for bodily injury and property damage. Employer's Liability: $1,000,000 per accident and in the aggregate for bodily injury or disease and Workers' Compensation Insurance in the amount required by law. Professional Liability: $1,000,000 per claim/aggregate. 7 of 37 S7296-0200\1067636v4.doc 11.4. Deductibles and Self-Insured Retentions. Consultant shall inform City of any deductibles orself-insured retentions except with respect to professional liability insurance. 11.5. Other Insurance Provisions. The general liability and automobile liability policies aze to contain, or be endorsed to contain, the following provisions: 11.5.1. City, its officers, officials, employees, designated volunteers and agents serving as independent contractors in the role of city or agency officials, are to be covered as additional insureds as respects: liability arising out of activities performed by or on behalf of Consultant; products and completed operations of Consultant; premises owned, occupied or used by Consultant; or automobiles owned, leased, hired or borrowed by Consultant. The coverage shall contain no limitations on the scope of protection afforded to City, its officers, officials, employees, designated volunteers or agents serving as independent contractors in the role of city or agency officials which are not also limitations applicable to the named insured. 11.5.2. For any claims related to this Agreement, Consultant's insurance coverage shall be primary insurance as respects City, its officers, officials, employees, designated volunteers and agents serving as independent contractors in the role of city or agency officials. Any insurance or self-insurance maintained by City, their officers, officials, employees, designated volunteers or agents serving as independent contractors in the role of city or agency officials shall be excess of Consultant's insurance and shall not contribute with it. 11.5.3. Consultant's insurance shall apply separately to each insured against whom claim is made or suit is brought, except with respect to the limits of the insurer's liability. 11.5.4. Each insurance policy required by this clause shall be endorsed to state that coverage shall not be canceled except after 30 days prior written notice by first class mail has been given to City or 10 days prior written notice by express overnight mail if cancellation is due to nonpayment of premiums. 11.5.5. Each insurance policy, except for the professional liability policy, required by this clause shall expressly waive the insurer's right of subrogation against City and its elected officials, officers, employees, servants, attorneys, designated volunteers, and agents serving as independent contractors in the role of city or agency officials. 11.6. Acceptability of Insurers. Insurance is to be placed with insurers with a current A.M. Best's rating of no less than A:' VII unless waived in writing by City's Risk Manager. 11.7. Verification of Coverase. All insurance coverages shall be confirmed by execution of endorsements on forms approved by the City. The endorsements aze to be signed by a person authorized by that insurer to bind coverage on its behalf. All endorsements aze to be received and approved by City before services commence. As an alternative to City forms, Consultant's insurer may provide complete, certified copies of all required insurance policies, including endorsements affecting the coverage required by these specifications. 57296-0200U 067636v4.doc 8 of 37 11.8. Subconsultants. Consultant shall include all subconsultants as insureds under its policies or shall furnish separate certificates and endorsements for each subconsultant. All coverages for subconsultants shall be subject to all of the requirements stated herein unless otherwise approved in advance in writing by City. 12. Cooperation. In the event any claim or action is brought against City relating to Consultant's performance or services rendered under this Agreement, Consultant shall render any reasonable assistance and cooperation that City might require. City shall compensate Consultant for any litigation support services in an amount to be mutually agreed upon by the parties. 13. Termination. Either party shall have the right to terminate this Agreement at any time for any reason on written notice to the other party. In the event either party exercises its right to terminate this Agreement, City shall pay Consultant for any services rendered prior to the effective date of the termination. Consultant shall have no other claim against City by reason of such termination, including any claim for compensation. 14. Suspension. City may, in writing, order Consultant to suspend all or any part of the Consultant's Services for the convenience of City or for work stoppages beyond the control of City or Consultant. Subject to the provisions of this Agreement relating to termination, a suspension of the Services does not void this Agreement. 15. Notices. Any notices, bills, invoices, or reports authorized or required by this Agreement shall be in writing and shall be deemed received on (a) the day of delivery if delivered by hand or overnight courier service during Consultant's and City's regular business hours or by facsimile before or during Consultant's regular business hours; or (b) on the third business day following deposit in the United States mail, postage prepaid, to the addresses heretofore set forth in the Agreement, or to such other addresses as the parties may, from time to time, designate in writing pursuant to the provisions of this section. All notices shall be addressed as follows: If to City: City Clerk City of Seal Beach 211 - 8th Street Seal Beach, California 90740 Fax: (562) 493-9857 With a copy to: Public Works Director City of Seal Beach 211 - 8th Street Seal Beach, California 90740 If to Consultant: Mr. Brian Jewett Willdan Financial Services 27368 Via Industria, Suite 110 Temecula CA 92590 9 of 37 57296-0200\1067636v4.doc 16. Non Discrimination and Equal Employment Opportunity. In the performance of this Agreement, Consultant shall not discriminate against any employee, subconsultant, or applicant for employment because of race, color, creed, religion, sex, marital status, national origin, ancestry, age, physical or mental handicap, medical condition, or sexual orientation. Consultant will take affirmative action to ensure that subconsultants and applicants aze employed, and that employees aze treated during employment, without regard to their race, color, creed, religion, sex, marital status, national origin, ancestry, age, physical or mental handicap, medical condition, or sexual orientation. 17. Non-Assi ability; Subcontracting. Consultant shall not assign, transfer, or subcontract any interest in this Agreement or the performance of any of Consultant's obligations hereunder. Any attempt by Consultant to so assign, transfer, or subcontract any rights, duties, or obligations arising hereunder shall be null, void and of no effect. 18. Compliance with Laws. Consultant shall comply with all applicable federal, state and local laws, ordinances, codes and regulations in force at the time Consultant performs the Services. 19. Non-Waiver of Terms. Rights and Remedies. Waiver by either party of any one or more of the conditions of performance under this Agreement shall not be a waiver of any other condition of performance under this Agreement. In no event shall the making by City of any payment to Consultant constitute or be construed as a waiver by City of any breach of covenant, or any default which may then exist on the part of Consultant, and the making of any such payment by City shall in no way impair or prejudice any right or remedy available to City with regazd to such breach or default. 20.. Attornevs' Fees. In the event that either party to this Agreement shall commence any legal action or proceeding to enforce or interpret the provisions of this Agreement, the prevailing party in such action or proceeding shall be entitled to recover its costs of suit, including attorneys' fees actually incurred in connection with such enforcement or interpretation. 21. Exhibits; Precedence. All documents referenced as exhibits in this Agreement are hereby incorporated in this Agreement. In the event of any material discrepancy between the express provisions of this Agreement and the provisions of any document incorporated herein by reference, including but not limited to the Consultant's Proposal and Fee Schedule dated August 27, 2008 and attached hereto as Exhibit A, the provisions of this Agreement shall prevail. 22. Construction. The validity, interpretation, and performance of this Agreement shall be controlled by and construed under the laws of the State of California. In the event of any asserted ambiguity in, or dispute regazding the interpretation of any matter herein, the interpretation of this Agreement shall not be resolved by any rules of interpretation providing for interpretation against the party who causes the uncertainty to exist or against the party who drafted the Agreement or who drafted that portion of the Agreement. 23. Entire Agreement. This Agreement, including any other documents incorporated herein by specific reference, represents the entire and integrated agreement between Consultant 10 of 37 S7296-0200\1067636v4.doc and City. This Agreement supersedes all prior oral or written negotiations, representations, or agreements. This Agreement may not be amended, nor any provision or breach hereof waived, except in a writing signed by the parties which expressly refers to this Agreement. IN WITNESS WHEREOF, the parties, through their respective authorized representatives, have executed this Agreement as of the date first written above. CITY OF SEAL BEACH By: Attest: By: David Carmany, City Manager Linda Devine, City Clerk Approved as to Form: By: Quinn Barrow, City Attorney S7296-0200U067636v4.doc CONSULTANT By: Name: Mark ' co Title: Vice President/Group Manager By: 1 ~~,a Name: Roy L. Gill Title: Secretary, Chief Financial Officer (Two signatures required for corporations under California Corporations Code § 313) 11 of 37 EXHIBIT A Consultant's Proposal Dated August 27, 2008 (Including Scope of Services) 12 S7296-0200\1067636v4.doc WI LLDAN ye vending ,- Financial Services re$ch August 27, 2008 Mr. Vince Mastrosimone Director of Public Works City of Seal Beach Department of Public Works 211 Eighth Street Seal Beach, Califomia 90740 Re: Technical Proposal to Conduct a Water Rate Study for the Clty of Seal Beach Dear Mr. Mastrosimone: Willdan Financial Services, formerly MuniFinancial, (Willdan) is pleased to submit this proposal to the City of Seal Beach to prepare a Water Rate Study for the Seal Beach Municipal Water Utility. We will partner with our colleagues at Integrated Resource Management (IRM) for this engagement in order to provide seamless support in the identification of water rates for each customer class served by the City. The sections that follow this letter provide a~detailed description of our firm's qualifications and experience, project approach, scope of services, and the qualifications of our project team. The City is demonstrating its commitment to high quality public service by ensuring that customer utility rates meet the City's financial policies, comply with the legal requirements of rate and fee setting in California, and promote water resource conservation efforts. To this end, the resulting rate structure must provide adequate cost recovery for your utility while ensuring that rates meet cost of service principles as required by Califomia Constitution Articles XIIIC and XIIID (Proposition 218) and State regulatory requirements. Our solution is to develop a financial plan that will help the City meet these objectives. Our results will provide defensible and quality client deliverables for high levels of integrity and outcomes. We will develop auser-friendly financial model that has the flexibility to generate alternative rate options, illustrates the impacts each alternative would have on ratepayers, and demonstrates Proposition 218 cost of service principles. Because we take pride in the collaborative spirit with which we approach our engagements, we will work closely with City staff members throughout the project to ensure that the financial plan and final rate structure are both useful and reliable to the City for years to come. Our team has a unique combination of expertise in rate setting, water utility engineering, Proposition 218 compliance strategies, and cost allocation procedures so critical to setting utility rates in Califomia. These traits ensure that the City's resulting rate structure will be technically defensible, will meet City's financial and resource goals while reducing the likelihood of potential challenges to the rate structure. We are excited about this opportunity and look forward to hearing from you. If you have any questions regarding our technical and/or cost proposal, please contact me at (800) 755-6864, or directly at (951) 587-3568, or via email at biewettCcDwilldan.com. Sincerely, Willdan Financial Services Brian Jewett, Vice President and Group Manager Financial Consulting Services Group Enclosure Engineering I Geotachnical I Environmental I Financial I Homeland Security 951.587.3500 1800.755.8884 I fax: 951.587.3510 127388 Vla Industria, Suite 110, Temecula, CA 92580 I www.willdan.com 13 W I LLDAN Financial Services TABLE OF CONTENTS FIRM'S QUALIFICATIONS ......................................................:.................. 1 About Willdan About Integrated Resource Management 1 1 PROJECT EXPERIENCE .......................................................................... 2 Client References -Willdan & Integrated Resource Management 3 APPROACH ........................................................................................... 6 Project Understanding Project Methodology 6 7 SCOPE OF SERVICES ........................................................................... 10 Anticipated City Staff Support 13 PROJECT TEAM QUALIFICATIONS .......................................................... 14 PROJECT SCHEDULE ........................................................................... 18 CONTRACT EXCEPTIONS ...................................................................... 19 OTHER REQUESTED DOCUMENTS ......................................................... 20 Proposal to Conduct a Water Rate Study for the City of Seal Beach ~~ WtLLDAN Financial Services Firm's Qualifications About Willdan Willdan Group, Inc. (Willdan) is a nationwide firm serving more than 800 public agencies and private sector clients. We provide engineering, management, and financial consultant services that ensure the quality, value, and security of our nation's infrastructure, systems, facilities, and environment. The firm has been a consistent industry leader in providing all aspects of municipal and infrastructure engineering, public works contracting, public financing, planning, building and safety, construction management, and homeland security services. Currently we are ranked 154 on the Engineering News Record list of the Top 500 Engineering firms. Comprehensive Solutions. Integrated Approach. Founded in 1964 and headquartered in Anaheim, California, Willdan was originally established as a civil engineering firm specializing in providing solutions for our public agency clients. Since that time we have evolved into a professional consulting firm offering a broad array of services that allow us to provide a comprehensive and integrated approach to our clients' planning, engineering, financial, economic, public facility, and public safety challenges. Today, Willdan has over 550 employees operating out of more than 20 offices located throughout Califomia, as well as in Arizona, Nevada, Utah, Colorado, Florida, Maryland, North Carolina, Tennessee, and Wisconsin. Willdan has comprehensive knowledge of public agency operations as well as expertise in city engineering, building and safety, planning, finance, grant funding, emergency plan development and CSA administration and conversion; just to name a few. Willdan's clients include municipalities, counties, special districts, public health agencies, school districts, ports, tribal and state agencies and the federal government throughout the Southwest United States. About Integrated Resource Management Integrated Resource Management, LLC (IRM) is an innovative environmental business development, planning, project management, advocacy and marketing firm comprised of natural resource professionals with extensive experience providing solutions to water, wastewater and environmental issues in both the private and public sectors. IRM was established in 1997 as a resource consulting firm dedicated to providing practical problem-solving techniques to water-related issues. During the past six years, the firm has worked with a variety of companies to provide resource and compliance evaluation, development and security of resources for the future. IRM has also dedicated its staff to the ongoing development of emerging technologies related to water and wastewater conveyance, treatment and disposal, and to environmental compliance and remediation. IRM represents clients in over 200 watersheds throughout the United States and Canada. Proposal to Conduct a Water Rate Study for the City of Seal Beach ./ ~~ W I LLDAN Financial Ssrv+ces Project Experience For the past 11 years, we have prepared cost of service and utility rate analyses for a variety of municipalities and special districts. Our project team is experienced in equipping our clients to face the challenges of utility enterprises in the Western United States. A partial listing of our clients follows: ~ is :.:,~-~`~ .,~u,;''~ .". ~_ .t T~T 3e:;: ,,&"~• i•?.s ":,,`>,e,;•~•A ~~.:,.°:~v'~d~;e >~Pl~hivira'Ibcl~ia~1 [:.9.~9or .mss. _`_~•°Y~~'t. °'~ ate.;, b.. a ., • City of Avenal, CA Town of Florence, AZ City of Port Hueneme, CA • City of Brookings, OR City of Fort Bragg, CA City of Port Richey. FL • City of Calexico, CA City of Fountain Valley. City of Rio Vista, CA • City of Claremont. CA CA San Diego County Water • City of Coachella; CA City of Hollister. CA Authority, CA • City of Campton; CA City of India, CA • City of San Fernando, CA • City of Corcoran. CA Laguna Beach County City of South Gate, CA • City of Covina, CA Water District, CA ~ City of Stockton, CA • City of Crescent City, Leucadia Wastewater City of Vista, CA CA District, CA Walnut Valley Water • East Valley Water City af' Lomita, CA District, CA District, CA City of McFarland, CA • City of Wilmington, PVC • Elsinore Water District, City of Merced, CA City of Woodland, WA CA Mesa Consolidated Water • Encino Water Pollution District, CA Control Authority, CA Proposal to Conduct a Water Rate Study for the City of Seal Beach WI LLDAN Financial Services Client References -Willdan & Integrated Resource Management We are proud of our reputation for customer service and encourage you to contact our past clients regarding our commitment to excellence. City of Fountain Valley, CA Water Rate Study Willdan conducted an independent review of the City's water rate structure. The City has local access to groundwater and Metropolitan Water District supplies which are resulting in higher water purchase costs for the City. Furthermore, the City is facing significant capital project investment needs. The former rate structure was inadequate in providing sufficient revenue to face these cost pressures. Willdan developed a 10-year budget requirement analysis for the City's water utility, identified separate fixed and commodity charges through an intensive Proposition 218 analysis, and developed a reserve policy to provide sufficient funding for future operational and capital needs through an integrated planning process. City of Covina, CA Water and Wastewater Rate Study Contact Information Mark Lewis, P.E., Director of Public Works/City Engineer 10200 Slater Ave Fountain Valley, CA 92708 Tel #: (714) 593-4435 Duration September 2007 -January 2008 Willdan conducted a comprehensive water rate analysis for the City of Covina Contact Information in 2004 and subsequently provided an update to the water rate analysis in Steve Hensley 2008 including a separate wastewater rate analysis. The City's water provision Director of Public Works 125 E State College St. system includes inside City customers as well as customers located outside Covina, CA 91723 City boundaries. As part of this analysis, a rate structure consisting of a fixed Tel #: (626) 858-7294 charge, a variable charge, a Capital Improvement Program charge, and a Duration private fire protection charge was developed. A unique project aspect was the 2004 & February 2008 -June creation of a drought pricing formula to be used in times of reliance on outside 2008 water sources, such as Metropolitan Water District, at a significantly higher price per-acre foot than typical City sources. The analysis also included reviewing the cost allocation factor assigned to the water enterprise fund to ensure that the fund is allocated its reasonable share of indirect costs. Recently, Willdan updated the City's water rate structure and also provided the City with a comprehensive wastewater rate analysis to fund significant sewer capital project needs throughout the City. Proposal to Conduct a Water Rate Study for the City of Seal Beach ~ I~, WtLLDAN Financial Services City of Lomita Water System Financing Pfan and Rate Study and Wafer Rate Structure Review Analysis The City of Lomita's last water rate analysis was conducted many years ago, Contact Information and water rates had not been adequately adjusted since 1996. Willdan Tom Odom prepared a water system financing plan and rate study that proposed a rate City Manager 24300 Narbonne Ave structure including an increasing rate block method to promote water Lomita, CA 90717 conservation. Currently, we are providing a water rate structure review Tel #: (310) 325-7110 analysis to support the issuance of water revenue bonds for the re- Duration construction of the City's central water reservoir. 2004, Rate Review 8~ Bond Financing Analysis 2007 - Current City of Imperial, CA Devefapment of Urban Water Management Plan IRM prepared and implemented the City of Imperial's 2005 Urban Water Contact Information Management Plan. The City of Imperial's Water Department runs the City's Jackie Loper water system, while the Imperial Community Development Department helps Director of Community Development /Public plan for the City's future water resource development. The Urban Water Services Management Plan is part of that overall planning initiative. 420 S -mperial Ave Imperial, CA 92251 An Urban Water Management Plan, as defined by the Califomia Legislature in Tel #: (760) 355-1152 the California Urban Water Management Planning Act, informs residents, Duration neighboring agencies and local community groups on how an urban water 2005 agency will provide a safe, secure water supply in the short and long term. The final plan attempts to look 25 years into the future to project what the City of Imperial's water supply will look like in 2030. Included in that long-term projection are predictions concerning future water demand, contingency planning in case of short- or long-term droughts and other catastrophes, and potential strategies to enhance and diversify the City of Imperial's water portfolio with recycled water, desalination and water marketing options. Proposal to Conduct a Water Rate Study for the City of Seal Beach "" W{LLDAN Financial Services City of East Palo Alto, CA !California American Vllater Company Water Rafe Structure Review Analysis & Urban Water Management Plan IRM prepared and implemented with the City of East Palo Alto its 2005 Urban Contact Information Water Management Plan. The City of East Palo Alto contracts its water utility Chris Alario service to California American Water Company. IRM was responsible for vice President 111 North Sepulveda Blvd, coordinating with a private utility service provider while conducting a public Ste 250-41 process for development of the Urban Water Management Plan. Manhattan Beach, CA 90266 Tel #: (310) 863-9440 IRM routinely conducts an independent review of the City's water rate Duration structure for California American Water Company. Goals for this project 2005 include: identify separate fixed and commodity charges, encourage water conservation through a tiered commodity pricing system and generate sufficient rate revenue to accommodate significant capital expenses. Proposal to Conduct a Water Rate Study for the Clty of Seal Beach ~ 1 U WlLLDAN Financ(al Services Approach Project Understanding The City of Seal Beach is seeking an outside consultant to prepare a comprehensive Water Rate Study. The last rate analysis was performed in 2003 with alive-year rate schedule expiring this year. Since that time, water replenishment and imported purchase costs have increased significantly as have other utility-related expenses. In addition, agencies such as the City are facing pressures to encourage water conservation among its customer base. One approach to achieve conservation goals is to develop a tiered commodity rate structure, an approach the City desires through this upcoming rate analysis. Finally, California water agencies are faced with new legal requirements in water rate setting with the 2006 California Supreme Court decision in the Bighorn case. This court decision ruled that water rates in Califomia are property-related and therefore agencies sponsoring new or increased water rates must meet the substantive and procedural requirements of Proposition 218 (Articles XIIIC and XIIID of the California Constitution). Our project team is uniquely qualified to address these significant issues and meet the City's goals for rate setting. Throughout this project, we will collaborate with City staff to ensure that the results meet the City's fiscal policies and community goals for rate equity, customer fairness and resource conservation. Through a simplified and understandable approach, the resulting rate structure will effectively meet these objectives. The results of the analysis are expected to include the following: • Provide an analysis of the advantages and disadvantages of the City moving to a water- based budget structure to promote water conservation similar to structures employed by the Irvine Ranch Water District and City of San Juan Capistrano (this effort will be a feasibility study only); • Generate results of customer class consumption analysis to include the data elements and factors used to categorize customer classes and average water consumption levels per class; • Develop a cost allocation structure that ensures each customer class pays its proportionate share of water service costs through the combination of a fixed service charge based on meter size and a variable or commodity-based rate(s) for each class based on factors such as lot size, occupancy status, system and class peaking factors, and/or meter size; • Prepare atiered-rate structure identifying water sales and consumption by target level or consumption blocks; • Provide an easy-to-understand report that quantifies the short-term and long-term impacts to each customer class of the resulting rate structure; • Prepare an easy to navigate computer rate model for the City's use; • Develop financial reserve policies for the water utility to include, at a minimum, an Operating Reserve, Capital Projects Reserve and Replacement Reserve; • Meet Proposition 218 cost of service principles and State regulatory requirements; and, • , Present the results and recommendations to the City and the community in a clear and concise manner. Proposal to Conduct a Water Rate Study for the City of Seal Beach ~. ~o WELLDAN , Financial Services Project Methodology The approach, philosophy, and methodology of utility rate setting are as important as the final outcome. The final rate structure must be defensible, clearly understood by staff as well as the community, and useful for improving long-term financial performance. By blending the following five key components, our utility rate analyses support these objectives in simple and user-friendly terms: • Financial Planning - We will ensure that cost needs of the City are met through a comprehensive revenue requirements analysis. Our financial models will allow the City to produce optional scenarios and sensitivity analyses of various rate alternatives. Once the revenue requirements are identified, we will allocate them across customer classes using generally accepted cost-based practices as endorsed by the American Water Works Association (AWWA) and Water Environment Federation. • Customer Concerns -When the planning is done, City staff members must be able to deal with the consequences of any rate analysis. We are sensitive to this point and believe that the process of reaching the final result is equally as important as the final result itself. We pride ourselves on our ability to ensure that senior staff members feel confident with the final product through on-going collaboration with staff during the entire project and after the rates are implemented. • Community Support -The final step in executing affordable and stable utility rates is having the support of the community. Without this key aspect, all previous work would be in vain. Our seasoned staff members have actively participated in legislative body meetings to educate and inform policymakers and local constituents on the benefits and risks associated with new rate policy decisions. • Comprehensive Computer Modeling -Our staff members are seasoned computer modelers who can design and develop different economic models. Along with a solid understanding of computer modeling, our staff members also have a deep understanding of finance, economics, and engineering -the foundations of our models. • Proposition 218 Compliance -Recent court decisions have shed light on the relationship between utility rate setting in California and Proposition 218. Our staff is at the forefront of Proposition 218 compliance issues in the areas of taxes, assessments and property-related fees, including water, wastewater, and storm water rates. As part of our relationship with the City, we will provide our Proposition 218 experience in developing a noticing strategy and outreach process for implementation of new rates. Key Aspects There are four critical aspects of this project: Financial Planning Analysis, Cost Allocation, Utility Rate Model Development, and Reports and Presentations. Financial Planning Analysls The objective of the Financial Planning Analysis is to determine a stable revenue stream over a multi-year planning period that produces a sufficient level of cash flow to pay for costs associated with the provision of utility services while taking into consideration foreseeable risks. We ensure that this analysis produces a financial model that takes into account the following important cost factors: • Administrative and ~?peration Costs -Administrative, managerial, and operating costs associated with the provision of utility services over the planning period. • Capital Regaiirements -Full funding of the capital improvement program from reasonable sources, including cash revenues, current surplus revenues, and external funding sources. Proposal to Conduct a Water Rate Study for the City of Seal Beach I ~ ~t W I LLDAN Financial Services The models will allocate the least-cost mix of capital funding sources and will calculate debt service associated with any debt secured by system revenues. • Fund Reserves -There are three main types of reserves that the City may consider for the City's Water Enterprise Fund: ^ ~&M Reserve -Focuses on yearly cash flow circumstances and can be used for Rate Stabilization efforts. A typical O&M Reserve Fund should include 45 days to three months of the annual O&M cost. Our models will incorporate several time periods to determine the sensitivity of longer periods of reserve time on the proposed rates. ^ Capital Improvement Plan (CIP) Reserve -Focuses on maintaining a reserve for future major capital projects, such as expansions and upgrades. The reserve amount can be designed to match the system's annual depreciation schedule or as an annual average of the system's CIP schedule. ^ Replacement Reserve -Focuses on providing capital for minor renewal and replacement of system equipment and related capital needs. This reserve amount can be designed as a matter of City policy or based on historical annual replacement costs. The financial planning model will be developed in concert with City staff input and will not be overly complex and burdensome. Yet, the capabilities of our financial model will allow it to perform sensitivity analyses on the above factors to illustrate potential risks and impacts on the system rate base. By correctly modeling these relationships, senior staff members can make informed decisions on the appropriate revenue requirement for the City's Water Enterprise Funds. Cost Allocation Cost Allocation focuses on the allocation of the revenue requirements from the financial planning model among the City's customer classes. It is at this point that the rate structure reflects a thorough understanding of Proposition 218 cost of service principles. Our model can allocate each line item budget in the Water Enterprise Fund to the appropriate categories of system characteristics. This cost allocation function will ensure that each customer class pays its fair share of providing reliable utility service. Utlllty Rate Model Development The third step is to develop a Utility Rate Model, which translates the customer class fair share of the revenue requirement into an actual rate structure for utility services. This type of analysis addresses the following four policy criteria: • Financial Sustainability -Does the proposed rate structure reduce the volatility of revenue, and are all program costs met to assure the financial feasibility of the system? • Social Responsibility - Is the new rate structure equitable to all customer classes? There may be social and political concerns that certain customer classes cannot afford a higher rate structure. • Defensibitity - Is the new rate structure compliant with existing State law, for example Proposition 218 requirements? • Administrative Ease - Is the proposed rate structure easy to administer and simple to explain? Complex rate structures may create unforeseen administrative challenges, such as adaptation to the City's current utility billing structure, or may require significant public outreach to educate customers on the need for a new rate structure or updated utility rates. We recognize that each agency will place different weights on the above criteria. We will work closely with City staff members to understand the values of the community. Our utility rate Proposal to Conduct a Water Rate Study for the City of Seal Beach ~. ~~ W i LLDAN Financial $er~ices structure approach will embody these values to produce a financially sustainable, equitable, and environmentally sound rate structure that is easily administered and legally justified. Reports 8 Presentations The final and equally important step of the rate analysis project is to develop a thorough and clear report and presentation that describes the approach and process by which the rate structure and corresponding alternatives were determined. A report that is overly complicated will only confuse the stakeholders in the process. Our reports provide information in a clear manner and will enable elected officials to take action on a recommendation as well as provide City staff with a document to explain the rate structure to interested parties and make adjustments in the future, if needed. We understand the environment that agencies work within when it comes to policy-making and rate adoption. It is never an easy task to face the public with new utility rates or a new rate structure. Clear, concise, and consistent messages are critical to the process. Our presentations are designed with these principles in mind. We understand the pressures that elected officials and agency staff face-many of our consultants have served in local government during their careers. Therefore, we focus on the highlights of the rate analysis process, our recommendations, and the potential impacts on ratepayers. In short, we strive to ensure that our presentations assist in building consensus and garnering public support. Proposal to Conduct a Water Rate Study for the City of Seal Beach ~ Z~ WlLLDAN Fnanofai Serv+ces Scope of Services The following scope of services provides detailed steps to ensure that your project is completed successfully and encompasses our approach and methodology to prepare a Water Rate Study for the City of Seaf Beach. 1. Project Kick-off Meeting in Seal Beach To initiate the City of Seal Beach's Water Rate Study project, we propose to meet with City staff for akick-off meeting at City offices to discuss project objectives, schedule, deliverables, and policy considerations of the City. Staff would be able to highlight concerns, and assist us in focusing our work program to its specific needs and policies. We will also discuss the community and public environment during this meeting and determine the best approach to balance these issues with the City's Water Rate Study objectives. After the meeting, introductions could be made with key staff that we will be working with throughout the course of the project. In addition, we will identify our relevant documentation and data requirements and create a project timeline to ensure that the project's milestones are met. 2. Project Understanding i~ Data Requirements To facilitate efficiency in the project schedule, we anticipate receiving the following water-specific documentation at the project kick-off meeting or shortly thereafter: • Financial documentation for the last three years. This request would include past and current operating and capital expenses as well as revenue sources included in such documentation as enterprise fund budgets, audited financial statements, CAFRs, asset records, capital improvement schedules and costs, and official statements with bond covenants and debt service schedules; • Past rate analyses; • Customer characteristic data such as account classifications, number of meters and meter sizes, consumption data by customer class; The most current Water Facilities Master Plan; • Urban Water Management Plan; and, The past three years of the billing database for the water utility. 3. Feasibility Analysis Related to Water Based Budget Rate Structure The City is considering moving to a water-based budget or efficiency analysis. A comprehensive water efficiency analysis is a large undertaking requiring significant resources to develop adequate water budgets for each customer or property type. Before the City embarks on such an analysis, we propose to conduct a feasibility study to examine the advantages and disadvantages of implementing water efficiency allocation factors. Our analysis will consider resources available to conduct the analysis, costs, timing, implementation factors, customer appeal requirements, and allocation factors that would best suit the needs and resource commitments of the City. We will deliver a technical memorandum describing the results of the feasibility analysis. Proposal to Conduct a Water Rate Study for the City of Seal Beach ~ , f n~ WlLLDAN Financial Services 4. Data Analysis, Financial Planning, & Revenue Requirement Analysis During Task 4 we will analyze documentation and data requested above and develop the financial plan and revenue requirements analysis. The spreadsheet models will include elements related to: • Operating and Non-Operating Fund expenses including debt service and related coverage ratios per bond covenants, projected capital improvement costs, depreciation, interest expense, and other related items; • Historical and projected revenues (five years) using growth forecasts in each customer class; • Operating, Capital Project and Capital Replacement Reserve fund development based on City policy and industry standards; and, • Fund cash flow. In the case of the financial model, we will work with City staff members to define the base case scenario by developing a financial table that highlights expenditure levels for operations and capital programs and any other factors that can affect the revenue requirement over afive-year period. The model will have the flexibility to modify the base case scenario to account for sensitivity analysis. We will provide a preliminary model to City staff for review and comment and follow up with staff during a meeting at City's offices and conference calls to discuss the model. The models provide the basis for cost allocation and alternative rate design. They have the requisite flexibility to allow the user to make adjustments to each line item of the revenue requirements spreadsheet, ranging from adjusting cost inflation factors to changing debt service coverage ratios. To enhance the simplicity of the models. the first spreadsheet within the workbook is a comprehensive data input page color-coded for user simplicity. Each color signifies an input function, result function or assumption function. This page allows the user, whether it is City staff or us, to quickly calculate "what if' scenarios and determine the resulting rate impact for each customer class. 5. Utility Rate Model Design Incorporating the results of the financial modeling for the water system, we will conduct a rate analysis that will allocate system costs across customer classes, design altemative rate structures, and determine customer impact from each option. In the case of the utility rate model, we will provide detailed information on water usage pattems based on accounts and/or customer classes. This demographic information will be utilized to develop a comprehensive rate model. The nature of these demographics will provide insight on the appropriate and equitable water rates. We allocate costs functionally across customer classes. This means that we examine customer class water consumption patterns and categorize each customer based on these patterns. Fixed costs, such as billing expenses and automated meter reading costs, will be allocated to each customer class based on meter size and meter equivalency ratio characteristics. We analyze and develop rates using a "cash basis" approach as endorsed by the AWWA. Our cost allocation procedure uses the "base-extra capacity" methodology that incorporates variable components such as average daily water consumption, maximum day demands, and peak hour Proposal to Conduct a Water Rate Study far the City of Seal Beach I ~ 2~ WfLLDAN '~ Financial Services demands. If this information is not readily available, we will use industry standards or employ a different methodology based on a fixed versus variable functionalization of budget line items. In both approaches, a solid cost of service analysis will be evident with the goal of creating an equitable rate structure exhibiting a fixed meter charge element and a variable consumption- based element. 6. Prepare Draft Comprehensive Utility Rate Analysis Report We will prepare Administrative Draft and Preliminary Draft reports that encompass the spreadsheet models and integrate our findings from the previous tasks. We will provide a detailed, yet easy-to-read, report for City staff and policymakers. In the case of the Financial Planning Analysis, we will include the proposed revenue requirements and supporting documentation to show how the proposed revenue requirement has taken into account highly probable risk. Customer Impact Analysis The report will include the altemative rate structures and our recommendation(s) and will illustrate the impacts of each alternative on each customer class within the City using easy to read tables and graphs. Comparative Rate Analysis with Other Jurisdictions We will include a comparative matrix of surrounding jurisdictions that will identify other neighboring utility service providers' utility rates in comparison to the City's current and proposed rate structure. We have found this comparative analysis to be a useful tool for elected officials and agency staff in implementing new water rates. The report will also serve as a manual for City staff. This report will assist in gaining an understanding of how the rate structure is developed and can be modified in the future should budgetary or customer demands change. The report will suggest changes to be made to the language of the rate implementation ordinance. We will prepare and distribute ten (10) copies of the draft study report. We will attend a City Council meeting to present our preliminary findings and the draft report. 7. Review, Revise, & Present Comprehensive Report & Findings After our review of the report with City staff and our City Council presentation, we will refine any questionable areas or concerns. This task will also serve as a quality control review. Input on the draft report will be solicited from staff. Con'ections and clarifications will be added to the final report to ensure full coverage and clear explanations. Following review and comment, we will present the final report, including the recommended rate structure, at one (1) City Council meeting. We are experienced in providing presentations to various stakeholders and legislative bodies. We are particularly skilled at taking complex issues, such as rate studies, and presenting them to laypersons in an understandable and concise manner. We will also attend the Public Hearing to support staff with any questions from the City Council or customers. Proposal to Conduct a Water Rate Study for the City of Seal Beach ~ ~ ~' ^ WfLLDAN Financial Services We will provide the City with up to ten (10) bound copies and one (1) unbound reproducible copy, and copies of any presentations. We can provide our report and model to the City on CD/ROM using Microsoft Word and Microsoft Excel format. 8. Proposition 218 Strategy Development and Community Education Effort We will work with City staff to develop a sound Proposition 218 noticing strategy for implementation of the water rates. Given the recent Bighorn Supreme Court decision, an agency that tries to implement new or increasing water and sewer rates must provide a notice of Public Hearing regarding the rates to each property that is subject to the new or increasing rates. We will work with the City to develop a noticing strategy that explains the rate structure, the reason for the increase, and the date, time and place of the Public Hearing on the matter. Anticipated City Staff Support We anticipate that the City's project manager will (1) coordinate responses to requests for information, (2) coordinate review of work products and (3) help resolve policy issues. To meet the schedule outlined in the Project Schedule section, we will expect responses to initial information requests within five (5) business days, and follow up requests within five (5) business days. If there are delays on the part of the City, we will contact the City's project manager immediately to get the project schedule back on track. Willdan will endeavor to minimize the impact on City staff in the completion of this project. Furthermore, we will rely on the validity and accuracy of the City's data and documentation to complete our analysis. Proposal to Conduct a Water Rate Study for the City of Seal Beach ~~ ~ WiLLDAN Financial Services Project Schedule Willdan understands time is of the essence for the City of Seal Beach's Water Rate Study project. The table below contains general timeframes for the City's project. We will work in concert with City staff to develop specific project dates prior to commencing work. The schedule outlined below can only be met with the cooperation of City staff. Delays in responding to our requests for data and review will result in corresponding delays to the project schedule. ~Prepa~,[~raftzCom~re • i ;~ e A,: Ny w .. ~~~. 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F..~J:•":W ,y, `{.;, ,', ""• .~;~ <. ,~;``~Fr~" .Sahn~le~Bailot;~Not~ce~anc~ z•- ~x. ;>. •.~~ ~-outreacA:=li,for.'tatton..:` ~. !.^~ .. ....>... ::: . /"" .. .~ . ~.: I.l+~. ` ~ : (~" .. to n a~ ,; ., ^ Proposal to Conduct a Water Rate Study for the City of Seal Beach ~ Q 2 ~~ WILLDAN Flnancial Services Contract Exceations Willdan Financial Services' attorney has reviewed the City of Seal Beach's sample Professional Service Agreement. We kindly request the City consider the contract exceptions outlined below. 10.2 Other Indemnities. In connection with all Claims not covered by Section 10.1, Consultant shall defend, hold harmless and indemnify the Indemnitees with respect to any and all Claims including but not limited to Claims relating to death or injury to any person and injury to any property, which arise out of, pertain to, or relate to-the and to the extent of the negligent or other wrongful acts or omissions of Consultant or any of its ofFcers, employees, subcontractors, or agents in the performance of this Agreement. Consultant shall defend Indemnitees in any action or actions filed in connection with any such Claims with counsel of Consultant's choice, subject to City's reasonable approval, and shall pay all costs and expenses, including all attorneys' fees and experts' costs actually incurred in connection with such defense. Consultant's duty to defend pursuant to this Section shall apply independent of any prior, concurrent or subsequent misconduct, negligent acts, errors, or omissions of Indemnitees. 11.5.4. Each insurance policy required by this clause shall be endorsed to state that coverage shall not be canceled or-~ratei=#aJty-~edi~+e~l-except after 30 days prior written notice by first class mail has been given to City, or 10 days prior written notice by express overnight mail if cancellation is due to nonpayment of premiums. Proposal to Conduct a Water Rate Study for the City of Seal Beach ~ 2~ ~~ WILLDAN Financial Servlaas C~hr ate ocu ~~ts Pursuant to the City of Seal Beach's Water Rate Study Request for Proposal (RFP), three water rate study reports and the fee proposal are in separately sealed envelopes, and are marked appropriately. Proposal to Conduct a Water Rate Study for the City of Seal Beach ~, 3D EXffiBIT B Fee Schedule and Standard Billing Rates 31 S7296-0200\1067636v4.doc WILLDAN ,,, Financial Services Project Budget Based on our proposed scope of services outlined in this proposal, we propose a Fxed fee of $42,800, including direct expenses related to the project. Note: • Our fee does not include the cost of designing and mailing Proposition 218 notices. Should the City desire our expertise and assistance in this area, we will work with the City to develop a separate fee quote and scope of services for this endeavor. • We will invoice the City of Seal Beach monthly based on percentage of work completed by task. Invoices will include a description of services as well as a summary of costs to date by task. Hourly Rite Schedule Additional services may be authorized and will be billed at our then-current hourly consulting rates. Below is a table outlining our current hourly rates. Proposal to Conduct a Water Rate Study for the City of Seal Beach .X ~~ EXI3IBIT C Consultant Personnel 33 57296-0200\1067636v4.doc ~ W f LLDAN ;; Fnancisl Servtces Project Team Qualifications Our management and supervision of the project team is very simple: staff every position with experienced, capable personnel in sufficient numbers to deliver a superior product, on time and on budget: With that philosophy in mind, we have selected senior professionals for the City of Seal Beach's Water Rate Study. We are confident that the Willdan Team has a depth of experience that will successfully fulfill the City's desired work performance. Resumes of the key team members proposed for the City's project follow for your review. Proposal to Conduct a Water Rate Study for the City of Seal Beach ~, 2~ J w[LLDAN Financial Services Brian Jewett Principal-in-Charge Brian Jewett will serve as the principal-in-charge for this project. He has been selected for this role due his extensive knowledge and experience in utility rate setting and Proposition 218, and in gaining the support of the community by educating and informing key constituents at public meetings. He will oversee the quality of work products and assure timely completion of the project. He will also provide technical oversight to the project. Presently, Mr. Jewett is Vice President and Group Manager of the Financial Consulting Services group at Willdan. His background is in public administration for state and local government. He specializes in fiscal analysis and financial services to local agencies, including user fee and utility rate studies. Related Experience City of Covina: Mr. Jewett conducted a comprehensive water rate analysis for the City of Covina. The City's water provision system includes inside City customers as well as customers located outside City boundaries. As part of this analysis, Mr. Jewett developed a rate structure consisting of the following charges: fixed, variable, Capital Improvement Program, and private fire protection. A unique aspect of this project included the creation of a drought pricing formula to be used in times of reliance on outside water sources, such as Metropolitan Water District, at a significantly higher price per-acre foot than typical City sources. Mr. Jewett was also responsible for reviewing the cost allocation factor assigned to the Water Enterprise Fund to ensure that the fund is allocated its reasonable share of indirect costs. City of Fountain Valley: Mr. Jewett was principal-in-charge for this project to assist the City with a comprehensive water rate analysis. The City is facing higher water purchase costs and significant capital project investment needs. The former rate structure was inadequate in providing sufFcient revenue to face these cost pressures. Our project team, led by Mr. Jewett, developed a 10-year budget requirement analysis for the City's water utility, identified separate fixed and commodity charges through an intensive Proposition 218 analysis, and developed a reserve policy to provide sufficient funding for future operational and capital needs through an integrated planning process. Encina Water Pollution Control Authority: The Encina Water Pollution Control Facility is a Joint Powers Authority consisting of six city and water district member agencies. As project manager, Mr. Jewett assisted in the review of the allocation methodology among the user agencies and made recommendations to the General Manager and agency board members regarding future allocation methodologies for facility expansion projects. Proposal to Conduct a Water Rate Study for the City of Seal Beach 13 Years of Experience Areas of Expertise • Proposition 218 ^ Utility Rate Studies ^ Cost of Service Analyses Education ^ Master of Public Administration, University of Delaware ^ Bachelor of Arts, University of California, Santa Barbara Teaching and Speaking Experience ^ "Water Rate Setting ~ How to Develop an Effective Communications Outreach Programs," California State Municipal Finance Officers' 2006 Annual Conference ^ Adjunct Lecturer, Graduate School of Public Administration, University of Southern California, 2005 & 2006 /rte t WILLDAN Financial Services QuenneUe C~uartararo Project Manager -Rate Analysis Quennelle Quartararo will serve as project manager for the City of 4 Years of Experience Seal Beach's project. Ms. Quartararo has been selected for this role for her extensive utility rates and fee study experience. Areas of Expertise Presently Ms. Quartararo is a Project Manager within Willdan's Utility Rate Studies Financial Consulting Services group. She has prepared the ^ Fiscal Analysis For User Fees 8 Rates following types of analyses: cost of service, cost allocation plan, Impact Fee Studies development impact fee, and utility rate. Ms. Quartararo joined the firm in June of 2005. Education ^ Master of Business Related Expel'iel~ce Administration, Finance Concentration, California Ufilify Rafe Sfudies and Impacf Fees State University, San Bernardino, CA • City of Compton, CA: Water, Sewer, and Solid Waste Rate Bachelor of Science, Study Chemistry, University of Redlands, Redlands, CA • City of Covina, CA: Water and Wastewater Rate Studies magna cum laude • City of Fountain Valley, CA: Water Rate Study American Water Works Association • East Valley Water District, CA: Water and Wastewater Rate Financial Management Study Seminar, 2005 ^ Phi Beta Kappa • City of Merced, CA: Water and Sewer Rate and Impact Fee Studies • Town of Florence, AZ: Water, Sewer and Solid Waste Rate and Impact Fee Studies • City of Rio Vista, CA: Water and Sewer Rate and Impact Fee Studies User Fee Sftrdies • City of Artesia, CA: Comprehensive Fee Study • City of San Carlos, CA: Comprehensive Fee Study • City of Norwalk, CA: Comprehensive Fee Study Proposal to Conduct a Water Rate Study for the City of Seal Beach ~3~0 WILLDAN ' Financial Services Robert W. Bowcock Task Manager - Wafer Budget Feasibility Study Mr. Bowcock is President of Integrated Resource Management, 28 Years of Experience LLC. He will serve as the Task Manager for the feasibility study for a water-based budget analysis. Mr. Bowcock will work with key City Education staff and report to Mr. Jewett, as well as be present at key University of La Verne; La meetings. Veme, CA, Public Administration ^ California State University; Relevant Service Experience Sacramento, CA, Water Watermaster, 1993-present; Main San Ga6rie/ Basin Tneatment Technology Watermaster, AZUSa. CA; 2000- resent: Chino Basin p University of Southern Califomia; Los Angeles, Watermaster, Rancho Cucamonga. CA CA, Hydraulic Engineering • .Appointed by California Superior Court Licenses & Certifications • Principal negotiator for the USEPA's largest Superfund Site California Water Treatment representing settlement of a $300M project. Operator Grade V • National Emerging Chemical Contaminants Chairman Califomia Water Distribution Operator Water Utility Manager; Azusa Light 8 Wafer (1991-1998) Grade IV ^ Califomia State Cross • General management of all activities for a large, full-service Connection Control water and electric utility. Program Specialist & Tester • Initiated and completed acquisition and merger of large water American Society of Civil utility into an existing service area. Engineers Peer Reviewer • Increased revenues from $3M to $12M in three years. State of Califomia Teaching Credential Director of Public Works; City of Hcrntington Park (1987-1991) • Directed municipal field activities, including water, streets, parks, refuse and maintenance services divisions. • Managed the privatization activities and contract services. Water Treatment Plant Operator; MWD of Southern CA (9982-1987) • Supervised the treatment and distribution of a 600 mgd surface water treatment plant. • Conducted laboratory analysis. • Conducted various engineering studies to develop cost-saving approaches to water treatment activities. Wafer Utility Worker: City of La Verne (1984-1982) • Meter Reading, Customer Service. • Construction and maintenance activities. Proposal to Conduct a Water Rate Study for the City of Seal Beach