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13-1001_RAFTELIS FINANCIAL CONSULTANT, INC._Personal Services AgreementPERSONAL SERVICES AGREEMENT THIS AGREEMENT is made, entered into, and shall become effective this day of ('TC1� , 2013, by and between the City of San Juan Capistrano (hereinafter referred to as the "City") and Rafelis Financial Consultant, Inc. (hereinafter referred to as the "Consultant"). RECITALS: WHEREAS, City desires to retain the services of Consultant regarding the City's proposal to perform a water and sewer rate study; and WHEREAS, Consultant is qualified by virtue of experience, training, education and expertise to accomplish such services. NOW, THEREFORE, City and Consultant mutually agree as follows: Section 1. Scope of Work. The scope of work to be performed by the Consultant shall consist of those tasks as set forth in Exhibit "A," attached and incorporated herein by reference. To the extent that there are any conflicts between the provisions described in Exhibit "A" and those provisions contained within this Agreement, the provisions in this Agreement shall control. Section 2. Term. This Agreement shall commence on the effective date and shall terminate, and all services required hereunder shall be completed, no later than June 30, 2014. Section 3. Compensation. 3.1 Amount. Total compensation for the services hereunder shall not exceed $100,000 in total contract amount and shall include compensation includes expenses as set forth in Exhibit "B," attached and incorporated herein by reference. 3.2 Method of Payment. Subject to Section 3.1, Consultant shall submit monthly invoices based on total services which have been satisfactorily completed for such monthly period. The City will pay monthly progress payments based on approved invoices in accordance with this Section. 3.3 Records of Expenses. Consultant shall keep complete and accurate records of all costs and expenses incidental to services covered by this Agreement. These records will be made available at reasonable times to the City. Invoices shall be addressed as provided for in Section 16 below. Section 4. Independent Contractor. It is agreed that Consultant shall act and be an independent contractor and not an agent or employee of the City, and shall obtain no rights to any benefits which accrue to Agency's employees. Section 5. Limitations Upon Subcontracting and Assignment. The experience, knowledge, capability and reputation of Consultant, its principals and employees were a substantial inducement for the City to enter into this Agreement. Consultant shall not contract with any other entity to perform the services required without written approval of the City. This Agreement may not be assigned, voluntarily or by operation of law, without the prior written approval of the City. If Consultant is permitted to subcontract any part of this Agreement by City, Consultant shall be responsible to the City for the acts and omissions of its subcontractor as it is for persons directly employed. Nothing contained in this Agreement shall create any contractual relationships between any subcontractor and City. All persons engaged in the work will be considered employees of Consultant. City will deal directly with and will make all payments to Consultant. Section 6. Changes to Scope of Work. For extra work not part of this Agreement, a written authorization from City is required prior to Consultant undertaking any extra work. In the event of a change in the Scope of Work provided for in the contract documents as requested by the City, the Parties hereto shall execute an addendum to this Agreement setting forth with particularity all terms of the new agreement, including but not limited to any additional Consultant's fees. Section 7. Familiarity with Work and/or Construction Site. By executing this Agreement, Consultant warrants that: (1) it has investigated the work to be performed; (2) if applicable, it has investigated the work site(s), and is aware of all conditions there; and (3) it understands the facilities, difficulties and restrictions of the work to be performed under this Agreement. Should Consultant discover any latent or unknown conditions materially differing from those inherent in the work or as represented by City, it shall immediately inform the City of this and shall not proceed with further work under this Agreement until written instructions are received from the City. 2 Section 8. Time of Essence. Time is of the essence in the performance of this Agreement. Section 9. Compliance with Law. Consultant shall comply with all applicable laws, ordinances, codes and regulations of federal, state and local government. Section 10. Conflicts of Interest. Consultant covenants that it presently has no interest and shall not acquire any interest, direct or indirect, which would conflict in any manner or degree with the performance of the services contemplated by this Agreement. No person having such interest shall be employed by or associated with Consultant. Section 11. Copies of Work Product. At the completion of the work, Consultant shall have delivered to City at least one (1) copy of any final reports and/or notes or drawings containing Consultant's findings, conclusions, and recommendations with any supporting documentation. All reports submitted to the City shall be in reproducible format, or in the format otherwise approved by the City in writing. Section 12. Ownership of Documents. All reports, information, data and exhibits prepared or assembled by Consultant in connection with the performance of its services pursuant to this Agreement are confidential to the extent permitted by law, and Consultant agrees that they shall not be made available to any individual or organization without prior written consent of the City. All such reports, information, data, and exhibits shall be the property of the City and shall be delivered to the City upon demand without additional costs or expense to the City. The City acknowledges such documents are instruments of Consultant's professional services. Section 13. Indemnity. To the fullest extent permitted by law, Consultant agrees to protect, defend, and hold harmless the City and its elective and appointive boards, officers, agents, and employees from any and all claims, liabilities, expenses, or damages of any nature, including attorneys' fees, for injury or death of any person, or damages of any nature, including interference with use of property, arising out of, or in anyway connected with the negligence, recklessness and/or intentional wrongful conduct of Consultant, Consultant's agents, officers, employees, subcontractors, or independent contractors hired by Consultant in the performance of the Agreement. The only exception to Consultant's responsibility to protect, defend, and hold harmless the City, is due to the negligence, recklessness and/or wrongful conduct of the City, or any of its elective or appointive 3 boards, officers, agents, or employees. This hold harmless agreement shall apply to all liability regardless of whether any insurance policies are applicable. The policy limits do not act as a limitation upon the amount of indemnification to be provided by Consultant. Section 14. Insurance. On or before beginning any of the services or work called for by any term of this Agreement, Consultant, at its own cost and expense, shall carry, maintain for the duration of the agreement, and provide proof thereof that is acceptable to the City, the insurance specified below with insurers and under forms of insurance satisfactory in all respects to the City. Consultant shall not allow any subcontractor to commence work on any subcontract until all insurance required of the Consultant has also been obtained for the subcontractor. Insurance required herein shall be provided by Insurers in good standing with the State of California and having a minimum Best's Guide Rating of A- Class VII or better. 14.1 Comprehensive General Liability. Throughout the term of this Agreement, Consultant shall maintain in full force and effect Comprehensive General Liability coverage in an amount not less than one million dollars per occurrence ($1,000,000.00), combined single limit coverage for risks associated with the work contemplated by this agreement. If a Commercial General Liability Insurance form or other form with a general aggregate limit is used, either the general aggregate limit shall apply separately to the work to be performed under this agreement or the general aggregate limit shall be at least twice the required occurrence limit. 14.2 Comprehensive Automobile Liability. Throughout the term of this Agreement, Consultant shall maintain in full force and effect Comprehensive Automobile Liability coverage, including owned, hired and non - owned vehicles in an amount not less than one million dollars per occurrence ($1,000,000.00). 14.3 Workers' Compensation. If Consultant intends to employ employees to perform services under this Agreement, Consultant shall obtain and maintain, during the term of this Agreement, Workers' Compensation Employer's Liability Insurance in the statutory amount as required by state law. 14.4 Proof of Insurance Requirements/Endorsement. Prior to beginning any work under this Agreement, Consultant shall submit 4 the insurance certificates, including the deductible or self -retention amount, and an additional insured endorsement naming City, its officers, employees, agents, and volunteers as additional insured as respects each of the following: Liability arising out of activities performed by or on behalf of Consultant, including the insured's general supervision 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 special limitations on the scope of protection afforded City, its officers, employees, agents, or volunteers. 14.5 Errors and Omissions Coverage [FOR PROFESSIONS/WORK EXCLUDED FROM GENERAL LIABILITY] Throughout the term of this Agreement, Consultant shall maintain Errors and Omissions Coverage (professional liability coverage) in an amount of not less than One Million Dollars ($1,000,000). Prior to beginning any work under this Agreement, Consultant shall submit an insurance certificate to the City's General Counsel for certification that the insurance requirements of this Agreement have been satisfied. 14.6 Notice of Cancellation/Termination of Insurance. The above policy/policies shall not terminate, nor shall they be cancelled, nor the coverages reduced, until after thirty (30) days' written notice is given to City, except that ten (10) days' notice shall be given if there is a cancellation due to failure to pay a premium. 14.7 Terms of Compensation. Consultant shall not receive any compensation until all insurance provisions have been satisfied. 14.8 Notice to Proceed. Consultant shall not proceed with any work under this Agreement until the City has issued a written "Notice to Proceed" verifying that Consultant has complied with all insurance requirements of this Agreement. Section 15. Termination. City shall have the right to terminate this Agreement without cause by giving thirty (30) days' advance written notice of termination to Consultant. In addition, this Agreement may be terminated by any party for cause by providing ten (10) days' notice to the other party of a material breach of contract. If the other party does not cure the breach of contract, then the agreement may be terminated subsequent to the ten (10) day cure period. 5 Section 16. Notice. All notices shall be personally delivered or mailed to the below listed addresses, or to such other addresses as may be designated by written notice. These addresses shall be used for delivery of service of process: To City: City of San Juan Capistrano 32400 Paseo Adelanto San Juan Capistrano, CA 92675 Attn: Keith Van Der Maaten, Public Works and Utilities Director To Consultant: Raftelis Financial Consultant, Inc. 201 S. Lake Avenue Suite 301 Pasadena, CA 91101 Attn: Sanjay Gaur Section 17. Attorneys' Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which he may be entitled. Section 18. Dispute Resolution. In the event of a dispute arising between the parties regarding performance or interpretation of this Agreement, the dispute shall be resolved by binding arbitration under the auspices of the Judicial Arbitration and Mediation Service ("JAMS"). Section 19. Entire Agreement. This Agreement constitutes the entire understanding and agreement between the parties and supersedes all previous negotiations between them pertaining to the subject matter thereof. Section 20. Counterparts and Facsimile signatures. This Agreement may be executed by the Parties in counterparts, which counterparts shall be construed together and have the same effect as if all the Parties had executed the same instrument. Counterpart signatures maybe transmitted by facsimile, email, or other electronic means and have the same force and effect as if they were original signatures. [SIGNATURE PAGE FOLLOWS] rX IN WITNESS WHEREOF, the parties hereto have executed this Agreement. ATTE MariaTA)Jrris� City Clerk APPROVED AS TO FORM: Hans Va Li ten, City Attorney CITY\OF SAN JUA% CAPISTRANO CONSULTANT By: —D�� — �& . 7 PROJECT APPROACH AND SCOPE OF SERVICES PROJECT APPROACH In today's environment of economic recovery, a consist- ently -arising challenge is meeting an agency's financial needs in a manner that duly considers the concerns of ratepayers who themselves are financially burdened. RFC has delivered creative solutions addressing an extensive range of such situations, built on the firm's ex- perience with serving clients nationwide. Implementation of defensible solutions begins with communication. The project objectives detailed above are developed with the end goal of public understanding and enabling the elected officials to make informed decisions about key financial drivers. As an example, the Financial Plan Model is developed not only for the utility's contin- ued use as a financial analysis tool, it is designed to be an easy -to -update and easy -to -understand presentation tool that provides full documentation to how the rates were derived through a "cost build up" approach. In addition, this project also includes a significant stakeholder that is the Capistrano Taxpayer Association (CTA). Educating the CTA on the rate structure and providing an under- standing of the rationale behind the proposed structure should be addressed as part of this study. As this project may be subject to significant scrutiny and may be time intensive as well, addressing the CTA upfront would be considered a prudent financial and political decision. RFC's Project Approach is based on years of experience that will serve to meet the City's goals and objectives effi- ciently. Our approach consists of the following elements: 1) STRONG AND TRANSPARENT COMMUNICATION WITH CITY STAFF The proposed project approach entails several different RAFIFI i`. F1N1PNC,!/,.I C'C N 1-1A.tv1TS; "IC. yet interrelated work efforts that will require effective co- ordination between City staff and the RFC Project Team. Our management approach stresses communication, teamwork, objectivity, transparency and accountability for meeting project objectives. We believe in a "no -sur- prise" approach so that the client is aware of the status of the project at all times. Our approach includes regular communication and detailed documentation to ensure transparency and thoroughness of the project. RFC will work with City staff on an ongoing basis via sched- uled in-person meetings and web conferences in order to transfer information and to ensure that staff retains ownership over the final work product. For web meet- ings, RFC uses GoToMeetinglr", which allows clients to see in real-time the results of various analyses on their computer screens, thus providing an efficient and effec- tive method of communication. 21 CONSISTENT AND COMPETENT PROJECT MANAGEMENT The project will require effective coordination between City staff, the consultant team, and elected officials (City Council and Utilities Commission). An integral feature of RFC projects is consistent and competent project management which is critical to the timely'and success- ful completion of the project. Our management approach stresses communication, teamwork, adequate resource assignment, objectivity, and accountability for meeting project objectives and includes the following: Assignment of key project team members including: • A strong and knowledgeable! Project Manager, Mr. Sanjay Gaur, who will be responsible for facilitating a close working relationship between the City and RFC staff and who is accountable to the City for meeting CI - v C'F S1',N .!UP N �'!\FIcTF-?ANC, - 0E Exhibit A the schedule, budget, and technical requirements of the project. Mr. Gaur has more than 16 years of consulting experience serving the public sector and is a nationally recognized water budget expert in the water industry. His experience spans the West Coast, with the majority of projects in California. Recent budget -based rate studies include engagements with El Toro Water District, Rancho California Water District, Western Municipal Water District, and the Cities of Huntington Beach and San Clemente. Mr. Gaur is active in a number of utility -related associa- tions. He is a member of the American Water Works Association's (AWWA) Rates and Charges Com- mittee. He is also a frequent speaker at National and California conferences, including AWWA, Utility Management Conference, Association of California Water Agencies and California Society of Municipal Finance Officers. A nationally -recognized and highly experienced Project Director/Technical Reviewer, Sudhir Pardi- wala, who will provide overall guidance and monitor progress and quality of the services provided. With more than 35 years of experience in financial stud- ies and engineering, he has conducted numerous water, storm water, reclaimed water, wastewater, and solid waste rate studies involving conservation, drought management, risk analysis, as well as system development fee studies. He authored the chapter on reclaimed water rates in the Manual of Practice, Financing and Charges for Wastewater Systems, published by the Water Environment Federation (WEF) and presented papers at various conferences. He was vice-chairman of the CA -NV AWWA Busi- ness Management Division and Chairman of the Financial Management Committee. As added value to the City to expedite the comple- tion of this study, Habib Isaac, who has more than ten years of related experience, will serve as Task Leader to ensure consistent workflow with project deliverables and to manage senior consultants at RFC. With a background in Applied Mathematics, Mr. Isaac has developed numerous financial plan and utility rate models and is well -versed in the cost of service and benefit principles of Proposition 218 and has formed numerous assessments districts, including the Cove Assessment District in Cathedral City that converted over 300 parcels from septic to mainline sewer through successful Proposition 218 balloting. Highly qualified staff with many years of combined ex- perience. Sufficient support resources to ensure timely comple- tion. Ample resources to quickly and effectively respond to the City's requirements. Client involvement and control by: • Adoption of procedures for regular and open commu- nication between the RFC project team members and City staff; • Regular progress reports and the project manager's use of RFC's internal project accounting and management system. These reports will also identify potential prob- lems, challenges, and solutions; • Coordination of project activities between RFC and City staff and review of any feedback on project deliverables. RFC will conduct interim meetings to discuss project progress and present preliminary results through a combination of in-person meetings and web conference meetings via GoToMeeting®; and • Assistance in developing and presenting project recommendations. 3) IDENTIFICATION OF OPERATIONAL AND CAPITAL IMPROVEMENT INITIATIVES AND FINANCING OPTIONS The first step in conducting a long-term financial plan study is to review and become familiar with all aspects of the Utility's operations including business process, poli- cies and procedures, operational and maintenance (O&.M) practices, capital improvement program (CIP) planning, organizational structure, financial planning and manage- ment, and the use of technology. We will assist the City in achieving a suitable balance among the financing options when developing the pro- posed financial plans which will accomplish the following: Ensure financial sufficiency to meet operating and capital costs as well as prudent balances for Enterprise Funds; Meet the City's service policies and objectives; and Maintain detailed financial plans to ensure that the City's utilities are operating in a self-sufficient manner and meeting debt covenant requirements. r' !'i': •� r}_. Cry I II'hn' rG`I(- ��/,f\I �... - C C r�N /� (` IC. S.3?:; nl^5 {{\li , 41 QUALITY ASSURANCE/QUALITY CONTROL RFC follows strict Quality Assurance/Quality Control (QA/QC) guidelines to ensure the quality of the work effort and the final product. Typically, senior members of our consulting practice will engage the Project Team on specific issues critical to the project. The QA/QC mem- bers also review the work effort for consistency, accuracy, andvalidity and to ensure nothing is missing from the administrative record. In addition, project budget and progress are reviewed weekly by the Project Manager to track progress, time, and expenses through RFC's project management system. Regular progress reviews are also conducted to ensure progress and to address critical is- sues before they become problems or bottlenecks. 5) DEVELOPMENT OF FINANCIAL PLANNING AND RATE MODELS RFC has developed some of the most sophisticated yet user-friendly computer financial and rate models avail- able. The model is one of the most advanced strategic planning tools available today. It is Excel -based and is easy to learn and use. These models are tools that allow us to examine different policy options and their financial/ customer impacts with great ease. In a workshop envi- ronment with stakeholders and decision -makers, with results summarized in both easy -to -understand graphical and numerical formats, this tool allows us to quickly re- view impacts of changes from different parameters. This helps determine which policy option is feasible and helps the working group to reach consensus quickly. This will promote project efficiency and ease of understanding for staff and decision -makers. Based on input from the City, RFC will design the model to specifically meet the unique needs of the City. We will provide training and consultation to City staff on running the model, and if needed, assist in updates to reflect future operational and capital changes. COST -BASED RATE SETTING METHODOLOGY If rates are perceived to be fair and equitable, users are more likely to support changes in rates and rates structure. In addition, Proposition 218 (California Con- stitution Article 13D) imposes that: 1. A property -related charge (such as water and wastewater rates) imposed by a public agency on a parcel shall not exceed the funds required to provide the property related service. This is one of the most critical components for the new rate study as the court has determined that the adminis- trative record was not sufficient to show a nexus between the rates derived and the cost incurred. Besides allocat- ing costs to distinct customer classes based on demand, it is of equal importance to build up the costs for each defined tier to show a clear connection to the higher cost of water within the higher tiers. 2. Revenues derived by the charge shall not be used for any other purpose other than that for which the charge was imposed. The City is abiding by this as reflected by the utility's re- serve policies and the fact that rate revenue for capital improvements were used to fund capital on a Pay -As - You -Go basis even though it was anticipated that the City was to use debt financing. 3. The amount of the charge imposed upon any parcel shall not exceed the proportional cost of service attributable to the parcel. Proportionality must be shown within the tiered rate structure and cannot be set based on an arbitrary price differential. The price differential must have a basis, and our inclusion of this component will ensure that the City has a thorough administrative record supporting the rates. 4. No charge may be imposed for a service unless that service is actually used or immediately avail- able to the owner of property. The City's cost allocation for recycled water will need to be revisited and a new approach may need to be con- sidered and vetted through with City staff and elected officials to ensure compliance and a sound benefit nexus to show that costs are not solely applied to residential customers to reduce the rate for recycled water. 5. A written notice of the proposed charge shall be mailed to the record owner of each parcel at least 45 days prior to the public hearing, when the agen- cy considers all written protests against the charge. RFC has facilitated numerous Proposition 218 mailing for utility rates and we will work closely with the City Attorney to develop Notice material that includes all the khI--H i:c.1-1 rq���n� �.,pipr,�;t: - [17 substantive Proposition 218 requirements. As stated in the Manual ML the AWWA Rates and Charges Subcommittee also believes that "the costs of water rates and charges should be recovered from classes of customers in proportion to the cost of serving those customers." To develop utility rates that comply with Proposition 218 and industry standards while meeting other emerging goals and objectives of the utility, there are four major steps: 1. FINANCIAL PLAN DEVELOPMENT for determi- nation of revenue requirements as referred by the Manual M1). The rate -making process starts with the de- termination of future revenue requirements to sufficiently fund the utility's operation and maintenance (O&M), capital replacement and refurbishment (R&R), capital im- provement and perpetuation of the system and to ensure preservation of the utility's financial integrity. The basic revenue requirements of a utility include O&M expenses, debt service payments, contributions to specified reserves and the cost of capital expenditures that are not debt fi- nanced. Major capital projects are typically financed with a combination of long-term debt, equity (or cash from reserves), potential SRF funds, loans and grants. Debt financing enhances equity in cost recovery as the existing users do not have to pay 100 percent of the initial cost of facilities that will be used for many years. However, debt financing is more expensive in the long run. Two key aspects of the financial plan consist of the determination of the appropriate coverage ratio of debt financed capital projects and the required revenue adjustments to ensure financial sufficiency for its operational and capital needs while meeting other emerging goals of the utility, such as water conservation. For most utilities, the total revenue requirements are met through revenues from rates. Non- operating revenues, if any, provide offsets to total revenue requirements. A customized, easy-to-use financial plan- ning Model with Dashboard functionality with graphical and numerical outputs will be developed to allow quick review of various scenarios so that impacts can be visually analyzed and informed decisions may be made. 2. COST OF SERVICE ANALYSIS. The annual costs of providing water services, determined in the financial plan development, should be allocated among the custom- ers commensurate with their service requirements. In this step, costs are identified and allocated to functional cost components and distributed to respective customer classes according to the industry standards provided in the Manual M1 published by AWWA. California Government Code Section 54999 mandates agencies to conduct a thorough cost of service analysis every ten years in determining the utility rates. Due to the City's recent legal challenges, a thorough cost of service analy- sis for water services is recommended to ensure rate equity and regulatory compliance. 3. RATE DESIGN. Rates do more than simply recov- ering costs. Properly designed rates should support and optimize a blend of various utility objectives, such as conservation, affordability for essential needs, and rev- enue stability; and should work as a public information tool in communicating these objectives to customers. In this step, RFC will work within the legal framework and industry standards to design appropriate rates to resolve the City's current issues and achieve the City's objectives. A customized rate model will be developed to assess the customer impacts of different rate alternatives to facilitate informed decision making. The results are sum- marized in both easy -to -understand graphical format and technical tabular format to ease communications with elected officials about the financial consequences of their decisions. 4. RATE ADOPTION. In the last step of the rate -making process and in compliance with the Proposition 218 re- quirements, the results of the analyses are documented in a Study Report to help educate the public about the proposed changes, the rationale and justifications behind the changes and their anticipated financial impacts in laymen terms. 45 days after sending out the public no- tices, RFC will present at the public hearing to assist the City's adoption of the new utility rates. The RFC team is highly qualified in the development of rates and charges for utility agencies. Our expertise enables us to develop defensible rate structures, either in traditional forms or, when appropriate, innovative forms to address specific needs and circumstances. RFC's thor- ough cost of service studies result in charges that are developed based on sound rate -making principles that can be supported before regulatory agencies, commis- sions, elected officials, customer groups, or courts of law. `=phi! _�l!/` C ;s� c RAF.�(� C;F �! !c Ftt. �.I!.; �rtir-�i�,�� -/ h! -c I1\1r. PROJECT TASKS The utility industry consistently seeks RFC as advisor to lead the national discourse concerning rate structures. RFC's value -add to the rate design process is based not only on the level of technical expertise that results from deep experience, but the ability to glean the best ideas and strategies through the collaborative process. In evaluating and updating the City's utility rates and rate structure, RFC will use industry -accepted practices to ensure a robust and defensible rate structure. That said, every agency exhibits different characteristics and faces different issues. RFC's industry -driving technical exper- tise and deep experience — particularly with respect to water budget rate structures — will provide the founda- tion for a collaborative process that will tackle the City's needs and concerns. Earlier this year, for example, the American Water Works Association AWWA requested that Mr. Gaur lead a rate principles and rate design workshop at the Utility Management Conference. Mr. Gaur led the interaction -based strategic full-day workshop with presenters and participants representing agencies from across the country and oversees, of varying sizes, each with their unique challenges. The following sections outline the tasks we believe will be involved to complete a comprehensive rate study that accomplishes all of the City's goals. While tasks are listed consecutively, elements of tasks may be done con- currently with other tasks. TASK 1: PROJECT ORIENTATION, ADMINISTRATION AND DATA COLLECTION The objective of this task is to provide a solid foundation for the project and ensures that project participants are in mutual agreement as to the project's approach, work plan, schedule, and the City's priorities. As part of the meeting, RFC will discuss: 1) the method- ology for the existing rate structure; 2) the implications of Proposition 218 and other legal rulings as they relate to the City; and 3) communicating the value of water supply and reliability to the City's customers. In addition, forecast assumptions, master plans, and the City's poli- cies will be reviewed. A detailed data request list will be submitted to the City prior to the meeting so that all appropriate data in the required format can be forwarded to RFC. Upon receiv- ing the items requested in the data request, the Project Team will conduct a thorough review of the informa- tion provided by the City. It is important for the Project Team to get an understanding of the nature of both the revenue streams and the revenue requirements over the study period, especially for non-recurring expenditures or volatile revenue requirements. In addition, RFC will review the City's current structure of financial funds and reserves and develop recommendations for appropriate reserve levels that are consistent with industry standards as well as the City's risk management practices to main- tain or enhance financial solvency. This task also includes ongoing project management. Management responsibilities include general admin- istrative duties such as client correspondence, billing, project documentation, and administration of the study control plan. Meetings: One (1) Project Orientation Workshop Deliverables: Data Request List, Orientation Workshop Discussion Package, and Workshop Minutes TASK 2A: 10 -YEAR FINANCIAL PLAN The objective of this task is to project the City's revenue needs for the study period. This major task requires an assessment of revenues based on the existing rate and fee schedules, an estimation of future revenue requirements, the City's ability to meet projected revenue requirements, and the determination of the level of revenue adjust- ments and additional financing requirements. RFC will develop forecasts of revenue requirements for Water, Recycled Water and Wastewater Enterprises over the ten-year planning horizon. This will include an estimate of revenues based on current rates, usage characteristics, and other non-operating revenues. Rev- enue requirements will be projected based on historical results, the current budget, capital improvement plans (CIP), existing debt service and other bond compli- ance requirements, pass-throughs from imported water sources —Metropolitan Water District of Southern Cali- fornia — and other obligations and current economic trends. The financial plan will account not only for the I_IA <c ":C. (�- ��,� c rf.� ;��� ��.:'`r�lCl��!-'��C' � f'�4' next ten years, but will also extend out through the City's capital improvement plan. This will ensure that future capital needs are accounted for through a slow, measured buildup of cash reserves as opposed to requiring drastic spike in rates in one particular year. Rates, debt, grants, government subsidies, or infrastructure bank loans will be provided as options for capital cost financing. Project- ing revenue adjustments over a longer planning horizon can illustrate future rate impacts and potential chal- lenges to the City's financial situation and allow the City to make adjustments to expenses, reserve balances or capital projects scheduling to smooth rate impacts and to maintain financial stability. RFC will also ensure that the generated revenue meets the conditions of the California Urban Water Conservation Council's Best Management Practices regarding rates and other most up-to-date in- dustry standards. RFC will develop a ten-year cash flow analysis to de- termine revenue adjustments needed to meet projected revenue requirements for the planning period, while minimizing sharp rate fluctuations and debt coverage re- quirements. Revenue requirements will be calculated for each year in the forecast period and adjusted to provide for a smooth forecast of revenue adjustments. For exam- ple, changes in the timing of capital expenditures and the use of reserve funds to mitigate short-term rate impacts are two ways that revenue smoothing could be addressed. The objective is to minimize the magnitude of customer impacts while still achieving long-term revenue objectives. RFC understands the importance of developing a user- friendly, flexible Model that the City can use for future financial planning development. Following, are some of the features of our Financial Plan Model: • Provides flexibility to change various assumptions by year; • Flags errors and problematic results such as: failure to meet debt coverage, reserves below target levels, etc.; • Performs sensitivity analyses and runs various "what -if" scenarios so that impacts can be viewed in- stantaneously with built in -screen graphics; and • Accounts for and saves multiple scenarios for vari- ous levels of funding through our Scenario Manager. The Scenario Manager will provide the ability to run a comparative analysis between different scenarios to assist the City staff, the Utility Commission, and the City Council with clearly understanding the ad- vantages and disadvantages of each scenario each scenario can be accommodate slight adjustments to financial policies, reserve funding levels, debt cov- erage, rate impact, and, of' course, extent of capital funding. Provides ease of input, report printing, up- dates, understanding and administration. The financial plans will be presented in an easy -to - understand format on an interactive `Dashboard' which shows the impacts of various assumptions so that deci- sions regarding revenue adjustments, capital financing through pay -go or debt and reserve balances can all be made quickly and efficiently. A snapshot of the Dash- board is shown on the following page. RFC builds each client's Model from the ground up, carefully tailored to individual needs and preferences. Several features of the shown Model Dashboard in addi- tion to the basic capabilities described above include the ability to show or indicate: 1. Different funding sources of'CIP 2. Toggle switches for: a. Pass-throughs (SDG&E, MWD) b. Water demand growth rate c. Percent of R&R funding 3. Variable number of years displayed for financial plan 4. Variable funds displayed 5. Variable reserves displayed 6. Spin buttons (dynamic selection options) for scenario analyses As part of this task, RFC will work with City staff to de- termine the features that will be included in the Model. Upon completion of the Financial Plan Model, RFC will hold a webinar with City staff to review the Model and the assumptions for appropriateness, and finalize the financial plans for Water, Recycled Water and Wastewa- ter Enterprises to be used for the Rate Design Model. Meetings: One (1) meeting with City staff to review as- sumption and other inputs Deliverables: Financial Plan component of the Model in MS Excel® 2007 (deliverable in conjunction with Task S) TASK 213: REVIEW AND CALCULATE CONNECTION FEES RFC will review and evaluate the current water and wastewater development impact fees regarding the cal- culation methods to ensure compliance with regulatory and industry standards and to account for capital im- provements that benefit future customers versus existing customers. In addition, RFC will obtain and review the latest planning documents to assess the growth in new users and the related demands that will be placed on the utility systems. Based on the City's 2010 Urban Water Management Plan, the City is expected to reach full build -out in 2035 and will grow by approximately ten percent in population.'1his information will be useful for determining cash flows and impacts on existing custom- ers. Given the relatively limited amount of future growth, connection fees will be a small revenue component of the overall financial plan. RFC will compile the current- assets by function such as land, collection, treatment, pumping, production, etc. to ensure that any existing facilities that are needed to serve new customers are accounted for in the development of impact fees and the financial plan developed in Task 2A. SAMPLE MODEL DASHBOARD Chert i - Revenue Adjustments &Coverage Chart Chart2 - Operating Financial Pian 30%23% 25% -.. 250% 535 - 25%1 200% S1 $30 20% $L 15% ISM $20 100% 515 10% 510 05% 0.07e 5071 SS : i oA% FY 2112 FY 2013 FY 2014 FY MIS Fi 2712 F1' 2013 FY 2014 FY 5715 ,A4 IlezW!MCCA.!We -1104 rr A rt Cm-sge Miliots Chart 3 -Total ReserveChart 525 ; 520 S15 r SIO 56 S5 FY 2D12 P' 2DIS FY W14 FY 200 777f•LL :nL:na 6/an7:ei t-nart s A�e•t bsvrvss --.� NEW Itr.F_d7+g .-_ Aor✓J pe-at�`{ 'Dirts*-v MAats-r-t ^__°LKCC6M „u•tnt 4ru 9-oP�e Aer SIO c 59 Se 57 $6 55 S4 55 S2 51 50 Chart 4 - CIP and Funding Sources iekaed MDejirred CIP Fr m12 SelectOPOptiotrs I Deferred CIP Pas"hru Wate r Costs? A•nnei? SelettNoofYr Displayed 4 Zero Selected Variable SeleRDisplayedReserYe(s) PY 2(115 FY 2014 FY 2015 �Ge btf�rd. nl Select Water Sales5renarin Normal Total Rev Adi 143% 4 0 1.590 25% 254 0OUD 0090 004 005c O D9e DD% Debt Is sues 51,DW,000 i I s0 SO SO SO 50 $0 SO 50 $D Demand Factor 1.0% Narrtol 100.0^:- 100. 0 IMCFi 100.090 10000 100.01r 100050 100.E 10C. i i 1 ► Droug4[ 95. 0�1 :5.'x5 95 � 13D CF:. 100.0F0 100.7+0 100.05v 100 a• iw ()�0 Est Water Sales IAF) 18, 043 AF 2Z700AF 4079 AF L°,158 AF 19,237 AF 19,316.AF 19,395 AF 19,474.,E 19,553 AF 19,632 AF 19,632AF OCVJD r - Annes 4E. 14 50.3;; 52.58 -14.0?.1 , 3 090 7 3.09; 73.091 i 3.0ic 73.0' ✓ 73.090 DCWD%- No Anne% 4E.1>0 50.340 52.590 54 E90 54.O;i 54.056 54.1)">5 54.050 54.0+: 54.09? Fst Water Sales (AF) 106 Narmai 18.D43AF 19,OOCAF 19,D73A,F 19,158AF 1c237AF 19.316 AF 19,395 AF 19,474AF 19,553AF 19,E32AF 19,632 AF DtoWht 1B, 043 AF 19'.3WAF 18, 125 AF 17,290AF 1r 493 AF IE50AF 16,E29AF IE,0 AF 16, 765 AF 16,B33AF 16,833 AF TransferstaReserves SIDO..DD3 Capital I Sl, .070 5100:, 000 51,070, CCC $1, 0001, ax, $1.0m xc :1.: co'30: $1 ox" x10 < 1. �O,:.t70 111'X0000 Emerber7cyj 10.SY -51.00 •15J 2 a0CC 2 COP J 5111 s0 50 5'J 50 S�D 5:, impSerrtaUabirrty 551.C6L' 551,070 591.0x7; 551,3XI $51.ax 551,oa:, 55.Oct) s1'ax' 551.:c:il 551000 coli 1A.n; lc_ tF-( r ' I [ P_ f I1, I ..�_ , F _ The City will provide depreciation schedules and a list of assets with their historical values and dates of construc- tion/installation as part of the data request. There are several methodologies for calculating capital fa- cilities fees. the various approaches have largely evolved on the basis of changing public policy, legal requirements, and the unique and special circumstances of every local agency. However, there are two general approaches that are widely accepted and appropriate for water and waste- water capacity facilities fees. Buy -in Approach The "buy -in" approach rests on the premise that new cus- tomers are entitled to service at the same price as existing customers. However, existing customers have already developed the facilities that will serve new customers, in- cluding the costs associated with financing those services. Under this approach, new customers only pay an amount equal to the net investment already made by existing us- ers, based on replacement cost less depreciation. This net equity investment is then divided by the current demand of the system number of customers (or customer equiva- lents) to determine the fee of the new user. Incremental -Cost Approach When new users connect to a water or wastewater system, they use either surplus capacity from the existing system, which must then be replaced, or they require new capac- ity that must be added to the system to accommodate their needs. Under the incremental -cost approach, new custom- ers pay for additional capacity requirements, irrespective of the value of past investments made by existing customers. Based on our analysis of the City's assets, RFC will evaluate the City's utility connection fees based on the buy -in and incremental methodologies or a combina- tion of both methodologies that are most applicable to the City The calculation of the fees will depend on fixed assets, planned capital improvements, capital financing assumptions, system capacities, and the level of service or demand required to serve new customers. Proposed development impact fees will meet applicable regulatory requirements (Government Code 66000) in developing rates and impact fees. TASK 3: COST OF SERVICE ANALYSIS "The City has expressed interest in reviewing its current tiered rate structure, developing a rate structure which continues to promote water conservation, and evaluating its current recycled rate structure to ensure that produc- tion costs are fully recovered by the appropriate customers. As a result, RFC will conduct a cost of service analysis that re-evaluates the cost distribution between different customer classes. Based on the cost of service analysis, RFC will review and provide appropriate rate structures for water, recycled water and wastewater. RFC will also allocate cost of service to current customer classifications. the cost of service analysis portion of the Study is often viewed as a compliance measure for regulations such as Proposition 218; another perspective is the defensibility the analysis provides the City in terms of the selected rate structure and rate levels. 'This level of confidence provides additional support for the City's pursuing the rates and rate structure that are best for the City and its customers. RFC will pay very close attention to the recent court's opinion regarding rate proportionality and cost allocations for recycled water. RFC specializes in the financial and rate development of water and wastewater utilities. Thus, there is no sepa- ration within the firm between a financial knowledge base and an engineering one. Instead, analyses for the City will be subject to technical review from personnel who have decades of experience on both the financial and engineering sides, and continue to be recognized as industry leaders. Based on this, RFC is confident of its determination of the cost allocation factors that steer the cost of service process. RFC will develop cost -based rates based on the City's imported water consumption, peaking, and usage char- acteristics. The cost of service analysis will be conducted according to the following process: Step 1 — Review Customer Class Usage Patterns and Determine Customer Classifications RFC will review and analyze historical water con- sumption, revenue records, and billing summaries to determine water usage and peaking characteristics by customer class or subclass. We will then estimate the rel- ative responsibility of each customer class for each of the functional cost elements. This allocation will be based on billing summary data, other locally available data which may be applicable, and RFC's experience with other util- ities exhibiting similar usage characteristics and patterns. It will provide the basis for equitable cost allocations to each customer class or subclass. Step 2 - Allocate Costs to Functional Cost Categories RFC will f inctionalize the costs into main functions such as supply, transmission & distribution, storage, etc. The costs will then be allocated to cost centers such as commodity, maximum hour, maximum day, customer ac- counts, meter capacity, etc. to determine the unit cost for each cost center. Step 3 - Allocate Functional Costs to Customer Classes Next, the costs associated with the functional com- ponents will be allocated to the various customer classifications on the basis of the relative responsibility of each classification for service provided. Costs will be allocated based on the determination of units of service for each customer classification and the application of unit costs of service to the respective units. Throughout the cost allocation process, RFC will com- ply with the City's policy considerations, procedures, and guidelines applicable to charges for water service and ensure that proposed rates are in compliance with Proposition 218. Meetings: One (I) conference call with City staff to review cost allocation inputs Deliverables: Cost of Service analysis component of the Model (deliverable in conjunction with Task 5) TASK 4: RATE DESIGN & SENSITIVITY ANALYSIS RFC has been instrumental in the evolution of water budget rate structures in California and is very famil- iar with the requirements of Gr SB x7-7 as they pertain to water sales reduction tar- gets and the guidelines for developing rate structures such as for landscape are or water budget allotments. Rates will be calculated in the Model and will be developed to reflect the po- tential financial impacts on customers from the alterna- tive rate structure(s) that will have been evaluated. RFC will utilize the appropriate water consumption data and allocation factors that the City has for developing water budget allocations. The Model will include a series of tables and figures that show projected rate impacts on different types of customers at different levels of usage or generation. Because the Dashboard functionality of the Model inherently serves as a sensitivity -analysis tool (See Step 1, below, for more detail), the Model can serve on an on-going basis to evaluate how adjustments to the rate structure will impact targeted customer groups and/ or levels of usage to ensure that conservation and other pricing objectives are being addressed effectively. The Rate Model will be developed according to the following process: Step 1 - Calculate Water Rates The Model will be developed with the flexibility to change tier widths based on customer class. To help communicate with customers about the drivers be- hind rate increases and the rationale behind why rates between tiers are different, the water rates will have several cost components for each tier including water supply costs, the City's system costs (delivery costs), conservation costs and other revenues to offset water sys- tem costs. An example of this type of structuring is the FY 2010 water rates for El Toro Water District, shown below. Water supply rates in tiers 1 (indoor allocation) and 2 (outdoor allocation) are associated with low water supply costs, and tiers 3 (50 percent of total allocation) and 4 are based on the cost expanding the supplemental water supply and conservation programs. El Toro Wa- ter District has only a limited supply of water available, which is dedicated to efficient indoor and outdoor water aphical interface showing impacts on ustomers to optimize water structure. �...,.__� * Offset using Income from Site Lease based on District's policy ;I CON, :,UI IA, ,,T�_ t -proposed Tiers 1,e_ Rates Water Delivery Conserva- Offset * Total Supply tion * Offset using Income from Site Lease based on District's policy ;I CON, :,UI IA, ,,T�_ use. If a customer wants to utilize water above an efficient level, the District will need to secure water from other sources, which include expanding their source of supple- mental water supply. The conservation program is funded through the consumption in the higher tiers as these are the customers that directly benefit from such programs. This build-up cost approach for deriving the rate for each tier develops the rationale for the tiered rates and meets the requirements of Proposition 218. The Model will determine the rates required for each tier to collect the required revenues. The Model will also have the built-in capability to conduct various scenario analyses to address different conservation issues such as drought, loss of water supply etc., and to calculate water rates under each scenario. The Dashboard, which displays key variables and results in real-time on screen, will fa- cilitate discussion to reach a consensus quickly. This has proven to be particularly useful when making presenta- tions to utilities commissions, city councils, and various stakeholder groups, allowing them instantly to appreciate the impacts of their decisions fully. Step 2 — Perform Impact Analysis for Customers RFC will also determine the potential financial impact on customers that may result from the proposed rate structure. The Model will include a series of tables and figures that show projected .rate impacts on different types of customers at various levels of usage. The sample customer impact illustration displayed on the following page shows that 64% (48 + 16) of the customers will see no more than a $2 increase in their bill. Meetings. Up to two (2) we/ inars with City staff, as necessary Deliverables: Rate design and sensitivity analyses compo- nents of Model (deliverable in conjunction with Task 5) TASK 5: RATE WORKSHOPS Task 5.1: Rate Design Workshop with City Staff Following the completion of the Study (inclusive of built-in sensitivity analyses) — Financial Plan, rate design, cost of service analysis — RFC will conduct a workshop with City staff to examine different viable rate scenarios to consider for adoption. The goal of this workshop is to identify the water rates that will be presented at the rate workshop with the Utilities Commission and City Council. RFC will present the interim proposed rates and discuss the benefits and challenges associated with each proposed rate alternative ;as demonstrated through Graphical interface showing impacts on customers to optimize water budget rate structure. . Blended Rates S 783 $ /AF 9,373 F KEY I wr1 100% 1.378,93, 1.721.573 fffid—t Re:ycled Cast S 1.600 $IAF INPUTS: 7 1005, 1.263,221 1.:.3.357 FII Recycled Cost S 2,400 $/AF _ - Water l00% 100::: 323.39 P -1 -ted Sale. 9,100 AF 90 -tia1 fbr 4 KEY supply costs If 509.639:3 Frojftled 7m(eased 9,400 At 9,M At INPUTS: Revenue °' 1OU"T 355.5GE6 5:5 Coit ti Feog— "get szoo,00u ------___. requirements TetaF(c<F) USAGE i&UDISTROUfI(MSWT%U 1,964,001 3.921.981 {f distributions lotal(AF) 4,100 9,001 ' •ulye between tiers 1T -r. 5 Lc3 5 :-66 5 - 5 - $ 1606; S 3.80 •' 9. '­ c 5 2'3 5 : e5 5 c. is 5 ]0% 5 S 220 7." : 3 SC. 5 c.3G c . 7- -za 5 l38 'ery 5 2-^_3 5 57C 5 - _ C.24 c S 5.44 a•�d.a-T a,;e 5 2 C3 5 : 60 S C P 5 S 2.03 • vyseF fom S.t< 1e0rr '°r— CUSTOMER IMPACTS V{R. Ff{RaIRn RESULTS: S 7-6c 5 2 21 S 3.3: :. Customer ._ 5 .5. 5 C 5 _._ $ 5 51 5= RESULTS: :6 - impact _ S 5 341 Proposed , =' ::. :_: analysis water rates S <lun8s in BiNs Ir- 1' 0F c-,/% .tv1 il. hn. Ct' C ^FyIC pF"F (I� �!'.I'i I�.! r^hjC, 1Tpl\l . IP,l The overall financial impacts on customers are a tool for stakeholders to make informed decisions regarding different policy options and variables. 'A of Nils CUSTOMER IMPACTS 5FR+ MfR+IRR iT, sci. :: Is=� $2 ss 510 S35 525 sso >550 t j S change 7n Bins the Model. Changes and suggestions from staff will be incorporated into the analyses prior to presenting the re- sults at the joint meeting with the Utilities Commission and City Council. Task 5.2: Rate Design Workshop with Utilities Commission and City Council Upon incorporating comments from the workshop with City staff into the Study, Mr. Gaur will present the re- sults of the Study with the City's governing bodies. As mentioned previously, Mr. Gaur is consistently called upon by industry associations such as AWWA and ACWA to explain to elected officials the complex issues associated with alternative rate structures and has exten- sive experience presenting to utilities' governing bodies. The presentation will highlight the collaborative process used to identify and prioritize the important issues fac- ing the City. The proposed rates and miscellaneous fees will be presented along with other recommendations resulting from the Study. Meetings: One (1) meeting with City staff to review rate design and cost of service analysis, one (1) joint meeting with Utilities Commission and City Council Deliverables: Presentation materials TASK 6: PREPARATION OF RATE STUDY DRAFT REPORT "The process for developing the financial plan and proposed rate structures along with preliminary rate recommendations will be described in a draft report of findings and recommendation.s. This draft report will be submitted after the City Council Workshop to incor- porate their input into the final result. As a means to ensure that the study includes a thorough administrative record, the Final Report will include an exhibit listing all rate design assumptions and methodologies used to de- velop the financial plan and rates. Comments from the City staff will be incorporated into the Final Report and the Model will be refined to reflect appropriate issues or concerns raised. The report will be submitted to the City and will include appropriate supporting data from the Model to address the requirements of Proposition 218. Also included for update to the City's last rate com- parison study will be a survey of south Orange County water service providers of up to five (5) comparable utili- ties. RFC has extensive experience in conducting rate surveys, as we have partnered with the American Water Works Association (AWWA) to conduct a nationwide biennial survey of water and wastewater rates and with CA -NV AWWA to survey water utilities in California and Nevada. This provides RFC with extensive survey experience, a national database:, and numerous contacts throughout the industry that will be extremely useful in collecting financial and rate information for the rate and cost of service comparison. Comparing rates and costs with other comparable agencies and industry bench- marks can provide insights into a utility's pricing policies related to service. As part of our comparison survey, we will also determine whether the other agencies uti- lize property tax or other dedicated revenue streams for capital improvements, such as, Mello -Roos Districts. Care should be taken, however, in drawing conclusions from such a comparison as some factors including geo- graphic location, demand, customer constituency, level of treatment, level of grant funding, age of system, level of f l.� T � , 1 F-IN/',,NC!,4I CC�\ -c;l1llhf` ITS, ;t.<C: Cl (',F c,/,,N 11l'n'\' �PP,IITFl,N. , - `� general fund subsidization, and rate -setting methodology Optional Task: Mailers to two (2) mailing lists, presenta- can affect the cost of providing services. tion materials for the Public Meeting Meetings: One (1) meeting with City staff and (1) joint spe- cial meeting with Utilities Commission and City Council Deliverables: Draft Rate Study Report (inclusive of four re- port components) TASK 7: PREPARE RATE STUDY FINAL REPORT Following review of the Draft Report with City staff, City Council, and the Utilities Commission, comments will be incorporated into the Final Report and the Model will be refined to reflect appropriate issues or concerns raised. Meetings: One (1) Public Information Workshop and (1) joint special meeting with Utilities Commission and City Council Deliverables: Final Rate Study Report (inclusive of all Study components) TASK 8: PROPOSITION 218 ASSISTANCE Based on our experience with Proposition 218 since its passage in 1996, RFC will draft the required Proposition 218 notices. The notices will explain: 1) the purpose of the rates; 2) how the rates are structured; 3) the time and place of the public hearing; and 4) details regarding what constitutes the existence of a majority protest as it relates to the implementation of new/increased utility rates. RFC will provide guidance to the City for the develop- ment of the Proposition 218 notice and sign an affidavit of mailing. RFC recognizes the meeting of Proposition 218 requirements as a legal issue and will work with the City attorney, as we have with numerous agencies, to ensure compliant notification materials. Following ap- proval and as an optional task, RFC could mail the notice to property owners as well as customers that are not the property owner. RFC will attend and make a presentation at one (1) pub- lic hearing with the City Council on the adoption of the new rate structures. Meetings: One (1) Public Hearing Meeting Deliverables: Proposition 218 notification materials for approval TASK 9: MODEL DELIVERY AND TRAINING As part of this task, RFC will provide one train- ing session to staff in the use of the Model. However, throughout the course of this engagement, RFC will utilize each in-person meeting to educate and train City staff on each component of the model, which will allow the final day of training devoted primarily to more spe- cific questions regarding the Model. The training session will include working through realistic sample scenarios to fully prepare the staff to independently use and update the model for future analyses. As described and shown in Task 2, the Model's Dashboard is very easy to under- stand and to tailor to various scenarios. Staff's update of inputs such as O&M and CIP to the City's computer software system will be present minimal administrative burden on staff. RFC will continue to provide assistance beyond this training to City :staff to answer questions and clarifications on model updates. Meetings: Training session Deliverables: Model, training materials tf C Tv,)F 1 r/,N _11PA, ^P. PicTPrtt'C �'.^rTr� ��: � al!'1',� � Ifi.L C�t���i.l_'�,�!'c. ft,��. PROJECT SCHEDULE RFC will complete the scope of work outlined in this proposal as shown in the schedule below.This schedule assumes that we receive the notice to proceed by October 2, 2013. It will be necessary to receive the requested data in a timely manner and be able to schedule meetings as necessary. Project Orientation, Administration and Data 111111 1 Collection Deliverable(sl: Hickdl meeting package and data request Is[ 10 -Year Financial Plan 2 Deliverablefsl: 10 -year Financial Plan Model in MS Excel— 2007, presenlaoon materials for Financial Plan Workshop with Staff Cost of Service Analysis _ Deliverablefsl: Cost of Service Analyses for Water, RW and WW Hate Design a Sensitivityy 4 ArulvsCs Deliverable(s): Rate Design Model in MS Excel- 2007, Proposed Water, RW, WW and Wholesale rates, and Sens" Analyses Sensitivity Analysis and Rate _ 5 Workshops,E,, Deliverable(s): Presentation materials for the Workshops Preparation of Draft Report Deliverable(s): Draft Rate Study Report, Summary of each customer classification, Draft Rate Model, Rates comparison for South Orange County water agencies and presentation materials for meetings with Staff and electe 7 Preparation of Final Report Deliverablefsl: Final Rate Study Report, Final summary of each customer ctassificabon, Final Rate Model, and presentation materials for meefingstworkshops with Staff, public and elected officials Proposition 218 Assistance 8 Deliverable(51: Draft Proposition 218 notification materials and presentation materials for the public hearing Model Delivery and Training --k DeliveIL_sh,Final Rate Model in MS Excel- 2007 and training materials for the training sessionwith Staff Project Orientation Workshop with City Staff _ Public Fleadng } { Project Meetings with City Staff Proposition 218 Notice Workshops 7 Meetings with Elected J 1Va Officials (Ulildies Commission and City - Delivery of DraNFinal Reports Council) KlaFl 1 t.,5 FIF�)l-.i�C!!.l CO`.'SIILIIa!�1 �. IN-C.E i Y (?F S/\.ftf JI ��AF'ISI RA 14 C i j - ALTERNATIVE R E C 0 M M E N D A T 1 0 N S In developing alternative recommendations related to rate structure and design, RFC will begin the discussion with a review of the evolution of rate structures and the benefits and challenges associated with each structure, including uni- form rate, seasonal rates, inclining tiered rates, and water budget rate structures. The goal of this discussion is for the City to share with RFC its understanding of available rate structures and for RFC to provide the City an overview of all applicable alternatives according to the City's priorities and currently observed best management practices. Once rate structure alternatives and the City's preliminary preferences have been discussed, RFC will present an overview of pricing objectives. Examples of pricing objectives include: need for an effective drought management tool; financial sufficiency and stability; rate stability; reduction in peak demand; minimization of customer impacts; and affordability for essential use, among others. Sample Pricing Objectives Scorecard This exercise will narrow the selection of alterna- tive rate structures and designs that have the best potential to serve the City's interests and needs. The steps in- volved in considering selected alternatives are outlined throughout our proposed Project Tasks, and the ultimate selec- tion of an alternative rate structure and design will fully consider the satisfaction of regulatory guidelines and impacts on customers. c tv w 0 a F; c, " ! r'C r,� ®-1. I� \'n.` t'�t' ;.`t c;J, _i6`IN, ` . II"T. 4 6 Safi�rit Conservation/Deznmd 7 C A- A Management S Minimization of A B A - Customer Impacts 9 Ease of Implementation A B+ C 10 Simple to Understand and A B+ B - Update Affordability to 11 Disadvantaged Customers C B B 12 Economic Development B B B F; c, " ! r'C r,� ®-1. I� \'n.` t'�t' ;.`t c;J, _i6`IN, ` . II"T. FEE PROPOSAL RFC will complete the scope of work detailed in our Scope of Service in a timely and efficient manner. The table below details the estimated hours for each consultant and administrative support related to each task of the scope of work, and an additional table detailing the pricing for the optional task. Reimbursable expenses are billed at actual cost. Additional meetings will be billed on a time and materials basis, and estimated cost per meeting is shown below. Expenses include costs associated with travel and a $10 per hour technology charge covering computers, networks, telephones, postage, etc. Task Task Descriptions No of Meetings Hours Requirements Total Fees & Expenses Total Fees & Expenses SP SG I FC Admin Total 1 Project Orientation, Administration and Data Collection 1 (per meeting) 10 12 1 23 $5,138 2 10 -Year Financial Plan 1 2 12 50 $260 64 $13,479 3 Cost of Service Analysis $260 2 12 30 44 $9,251 4 Rate Design & Sensitivity Analysis 2 12 60 74 $15,101 5 Sensitivity Analysis and Rate Workshops 2 2 24 30 S6 $12,786 6 Preparation of Draft Report 2 2 20 30 1 53 $11,896 7 Preparation of Final Report 2 2 30 24 1 57 $13,126 8 Proposition 218 Assistance 1 1 8 4 2 15 $3,428 9 Model Delivery and Training 1 10 6 16 $3,898 TOTAL ESTIMATED MEETINGS / HOURS 10 13 ; 138 246 5 402 HOURLY RATES $260 $240 $195 $70 PROFESSIONAL FEES $3,380 ! $33,120 $47,970 $350 $84,820 SP = Sudhir Pardiwala SG = Sanjay Gaur FC= Financial Consultant(s) Total Fees $84,820 Total Expenses $3,283 TOTAL FEES & EXPENSES ESTIMATED $88,103 OPTIONAL TASK Task Optional Task Descriptions No of Hours Requirements Total Fees & Expenses Meetings SP I Admin Total Additional Public Meetings, including preparation time 1 1 8 8 17 $4,068 (per meeting) TOTAL ESTIMATED MEETINGS / HOURS 1 1 8 8 0 17 HOURLY RATES $260 1 $240 $195 $70 PROFESSIONAL FEES $260 $1,920 $1,560 $0 $3,740 SP = Sudhir Pardiwala SG=Sanjay Gaur FC = Financial Consultant(s) Total Fees Total Expenses TOTAL FEES & EXPENSES ESTIMATED $3,740 $328 $4,068 PAI -ID I Flf`I! NC,'A.!_ CCNSULTANIS,'I C. ('I `v OF SAES _ UANI C,TISTRANC - 37 - Exhibit B