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.
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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
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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
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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.
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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]
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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
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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
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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.
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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.
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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'
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551,3XI
$51.ax
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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 - _
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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
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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