2011-11-16 - Item 07 - Contract with Raftelis Financial Consultants for Water Rate and Fee StudySAN DIEGUITO WATER
- DISTRICT
AGENDA REPORT
Meeting Date: November 16, 2011
TO: Board Members
VIA: Gus Vina, District Secretary
Lawrence A. Watt, General Manager
FROM: Jeff Umbrasas, Administrative Services Manager
SUBJECT: Authorization to Enter into a Contract with Raftelis Financial Consultants, Inc. in
the Amount of $39,997, Plus a 10% Staff-Authorized Contingency, to Prepare a
Water Rate and Miscellaneous Fee Study.
BACKGROUND: The District last performed a Water Rate Study in 2009 which recommended
a series of adjustments to the District's water rates and meter services charges. The District
Board approved the results of this study on February 24, 2010, leading to water rate adjustments
occurring on March 1, 2010 and January 1, 2011. The District's Miscellaneous Fee Schedule
was last adjusted in 2007.
On October 6, 2011, District staff distributed a Request for Proposals (RFP) to qualified
consulting firms for a Water Rate and Miscellaneous Fee Study. The goal of the study is to
recommend updates to the District operating, capital replacement and emergency fund levels and
to propose a water rate and miscellaneous fee structure that will meet cost and revenue
requirements for the next two years. The Scope of Services for the RFP is attached as
"Attachment A."
ANALYSIS: The District solicited proposals from nine financial consultants with six of those
consultants attending a mandatory pre-proposal meeting on October 13, 2011. Ultimately, only
Raftelis Financial Consultants, Inc. (RFC) submitted a qualifying proposal.
District staff were prepared to evaluate and rate proposals based upon the following criteria:
1) Expertise and experience of the firm and its project team in performing similar work
2) Consistency of firms' water rate setting methodology with District goals and objectives
3) Quality of the proposal in meeting the directives of the RFP
4) Ability of firm to meet project schedule
5) Cost effectiveness of proposal
Last printed 11/7/2011 10:47:00 AM
11/16/11 ITEM #S7
However, given RFC was the only firm that submitted a qualifying proposal, staff is recommending
the selection of RFC to perform the water rate study. Staff is confident in recommending RFC for
this project, due to the following factors:
1) RFC performed the District's last Water Rate Study in 2009 and their work met all of the
District's goals and objectives.
2) RFC has substantial recent experience in performing similar work with other like agencies
in Southern California.
3) RFC's proposal met all of the Districts criteria for this RFP and would have scored high
even with other competition.
4) RFC developed a successful rate model for the District during the 2009 study. Updating the
existing rate model instead of developing a new model saves the District both time and
money.
5) RFC's cost proposal of $39,997 was well below the District's estimate for these services.
Staff is also recommending that the Board consider appointing two Board Members to a Water Rate
Subcommittee, also comprised of staff from the District and the City of Encinitas Finance
Department. Having Board members on the subcommittee allows the Board to provide input and
perspective to staff and RFC throughout the entire process.
FISCAL AND STAFF IMPACTS: The total cost proposed by RFC, plus a ten percent
contingency is $43,997. In the Fiscal Year 2011/2012 Capital Improvement Program budget
$125,000 has been budgeted for a Water Rate and Fee Study under Project # CW W 125.
RECOMMENDATION: Authorize the General Manager to enter into a contract with Raftelis
Financial Consultants, Inc. in the amount of $39,997, plus a 10% staff-authorized contingency to
prepare a Water Rate and Miscellaneous Fee Study and consider appointing two Board members to
a Water Rate Subcommittee.
ATTACHMENTS: Attachment A - RFP Scope of Services
Last printed 11/7/2011 10:47:00 AM
11/16/11 ITEM #S7 2
"Attachment All
Water Rate and Miscellaneous Fee Study
Scope of Services
The exact range and extent of services is subject to negotiation, but at a minimum the scope of
work should include consultant services and dedicated personnel to perform the following:
Study Objectives
1. Propose water rates that are fair and objective and reflect the cost of services.
2. Propose water rates that encourage water conservation.
3. Review and update existing miscellaneous fees.
4. Propose new miscellaneous fees.
Study Requirements
1. The recommended rate structure shall be based upon cost of service and shall be sufficient to
meet the short and long-term revenue requirements of the San Dieguito Water District's
water utility operations.
2. The study shall identify those portions of water system revenues that fund water system
operating costs.
3. The study shall recommend a rate structure that considers and makes provisions for the
following factors:
a. Current and future cost of providing water in accordance with established and
anticipated standards and regulations.
b. Projected demands.
c. Availability of supply.
d. Age and condition of water system and the need to fund long-term capital
improvements and replacements.
e. Funding improvements identified in the water system master plan capital
improvement program.
f. Other impacts as identified.
4. The recommended rate structures shall be consistent with industry practice for utility rate
making in California. The study shall recommend a rate structure based upon standard rate
practices that meet the criteria.
5. The recommended rate structure shall include a provision for an emergency rate structure to
address loss of supply, drought, and other possible contingencies.
6. The study shall provide a comparison of current water rates between neighboring water
purveyors.
7. The study shall weigh the benefits of any proposed modifications against the financial impact
on the ratepayers.
8. The study shall justify any special classes of customers under the recommended rate
structure.
9. The recommended rate structure shall not decrease the stability of the revenue stream to the
water fund when compared to the current rate structure. Consideration shall be given to
funding past and future depreciation (replacement of facilities).
Last printed 11/7/2011 10:47:00 AM
11/16/11 ITEM #S7 3
10. The recommended rate structure shall consider the type and amount of reserves appropriate
to the District's water operations, taking into consideration reserves for cash flow,
infrastructure replacement, catastrophes and other appropriate purposes.
11. The recommended rate structure shall be easy to administer and understand.
12. The recommended rate structure shall be in compliance with the rate covenants of the
outstanding Water Revenue Bonds and Proposition 218 (Bighorn court decision).
13. The study shall recommend appropriate processes and procedures for water rate adjustments
in accordance with Proposition 218.
14. The recommended rate structure must take into consideration the District's automated billing
system capabilities.
15. The recommended rate structure shall be planned for at least two (2) years.
16. The study shall produce an easy to use electronic model, in either Microsoft Excel or Access,
to be used by the District for future rate setting.
Study Elements
In making its rate structure recommendations, the final report shall explicitly include the
following elements and analysis:
1. Current rate structure: Assess the current rate structure's performance as a baseline for
comparing recommended changes.
2. Equity: Assess the equity of recommended water rates for all types of property ownership,
including single-family residential, multi-family residential, agriculture, commercial, public,
and other types.
3. Conservation Impacts: Assess the interaction between the water conservation elements of the
recommended rate structure and their impacts on the ability to fund water operations as well
as their impact on the economic wellbeing of the community.
4. Drought or Loss of Supply Rate Structure: Assess the impact on a rate structure due to
drought, loss of supply or other water shortage factors. Develop a drought pricing program
that mimics the different water stages of the SDCWA drought response plan and continues to
fund water operations and capital programs.
5. Miscellaneous Fees: Assess existing customer services fee/deposit structure for the
Administrative, Field Operation and Engineering & Planning sections and recommend
changes or new fees, if appropriate. Assessment is to note any resulting increase in liability
the District may incur as a result of assessing the fees.
i. Customer. Classes: Assess existing customer classes that the District current has in place.
Propose additions, deletions and/or changes where appropriate. Currently the District has
over (10) different customer class groups including combinations.
Annual Operating Fund Balance Targets: Recommend reserve levels for operating and
capital replacement as well as cash flow and unforeseen events. Consultant will be required
to supply reasonable backup and comparisons for reserve level recommendations.
New Recycled Water Fees and Charges: Propose new recycled water fees and/or meter
service charges in order to recover the cost of providing services to recycled water
customers.
Electronic Rate Model: Provide an easy to use electronic rate model for the District to use in
future rate setting.
Last printed 11/7/2011 10:47:00 AM
11/16/11 ITEM #S7 4
Services to be Provided by Consultant
1. Review Existing Rates: Conduct a detailed review of the existing water rates and status of
the water fund. Also, develop a general familiarity of the San Dieguito Water District's
billing system.
2. Attend Meetings: Meet or confer with staff as needed. District staff anticipate a minimum of
two meetings with staff, two meetings with the Water Rate Subcommittee, one meeting
(evening) with the District Board at a working session to present the interim status of the
study and obtain their input and one public hearing (evening) where the water rates are
considered for adoption.
3. Conduct Analyses: Conduct analyses as required to address the scope of work.
4. Prepare Preliminary Report:
a. Prepare a preliminary study report and tentative rate structure.
b. Submit 15 copies to the District, as well as one reproducible copy.
c. Present the preliminary report and tentative rate structure to the District Board at a
Board Work Session.
5. Prepare Final Report:
a. Incorporate changes pursuant to comments received at the first presentation.
b. Submit 15 copies to the District, as well as one reproducible copy.
c. Provide a disc with report in MS Word Format and spreadsheets in MS Excel format.
d. Present the final report and recommended rate structure to the District Board and the
members of the public at a regular Board meeting.
6. Time Schedule: Supply a time schedule for developing the preliminary and final reports.
The final report for the Fee and Charge study shall be delivered to the District before
December 14, 2011. The draft Water Rate Study shall be delivered before January 4, 2012.
The final Water Rate Study shall be delivered before February 21, 2012.
7. Electronic Rate Model: Provide an easy-to-use electronic rate model in MS Excel or Access
for the District to use in future rate setting.
Services to be Provided by District
1. Furnish Data: Furnish all reasonably available records and information, including financial
reports, budgets as well as consumption and billing data, meter sizes and customer classes for
the existing District customers.
2. Water System Master Plan: Provide a loaner copy for the Water System Master Plan
prepared in 2010.
3. Capital Improvement Program: Provide information on the recent Capital Improvement
Project list for FY 2012 through FY2017.
4. Budget and CAFR information: Provide the District's FY2011-12 Budget and the most
recently available Comprehensive Annual Financial report.
5. Staff Support: Provide staff support and assistance as required and agreed to in advance of
the study.
Last printed 11/7/2011 10:47:00 AM
11/16/11 ITEM #S7 5