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HomeMy WebLinkAbout15 - 2019 Water Rate StudyPORT CITY OF O � _ i NEWPORT BEACH City Council Staff Report <i FO RN March 12, 2019 Agenda Item No. 15 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Mark Vukojevic, Utilities Director - 949-644-3011, mvukojevic@newportbeachca.gov PREPARED BY: Joshua Rosenbaum, Senior Management Analyst, jrosenbaum@newportbeachca.gov PHONE: 949-644-3057 TITLE: Approval of Professional Services Agreement with Raftelis Financial Consultants, Inc. for the 2019 Water Rate Study ABSTRACT: The Utilities Department requests City Council approval to enter into a Professional Services Agreement with Raftelis Financial Consultants, Inc. for the purpose of conducting a comprehensive Water Rate Study. The City's previous Water Rate Study was conducted in 2009 and the last water rate adjustment took effect in January of 2014. RECOMMENDATION: a) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; b) Approve the Professional Services Agreement for the 2019 Water Rate Study with Raftelis Financial Consultants, Inc. for $153,400; and c) Authorize the Mayor and City Clerk to execute the Agreement. FUNDING REQUIREMENTS: The current adopted budget includes sufficient funding for this Agreement. The $153,400 contractual cost will be expensed to the Water Enterprise Fund, Water System Service - Services Professional account in the Utilities Department, 7019052-811008. DISCUSSION: In 2009, the City retained a consultant to conduct a Water Rate Study. This study included the development of a five-year financial plan including an estimate of the Water Fund's annual projected operating expenses. The study also included a funding plan for the updated Water Master Plan and a new Reserve Policy. The result of this study included a commodity and fixed rate with gradual increases in each fiscal year starting in 2010 and ending in 2014. 15-1 Approval of Professional Services Agreement with Raftelis Financial Consultants, Inc. for the 2019 Water Rate Study March 12, 2019 Page 2 The City has had the same water rates since January 2014 (i.e. no rate increases in the past five years). The two elements of the City's existing water rates comprise the commodity or "variable" charge for actual water use and the water meter or "fixed" charge. Currently, these elements recover the costs of providing water to our customers. The self- sustaining Water Fund has been able to operate under the current water fixed and variable commodity rate structure, through efficient operations by the Utilities Department and oversight of the City Council. However, with increasing costs over the last five years (i.e. cost for groundwater and imported water, electricity, maintenance and operations, materials, capital projects, etc.), expenditures are forecast to exceed revenues in the coming fiscal year requiring a dip into the residual working capital (operational reserve). As a result, the ability of the Water Fund to continue to sustain itself under the current rate structure requires a thorough review, analysis and formal Water Rate Study by an independent third party. Staff developed a Request for Proposal (RFP19-51) with a defined scope of services to perform a comprehensive water rate study and invited qualified firms to submit their proposals. Key deliverables of this study will include: Long Range Financial Plan, Cost of Service Analysis, Evaluation and Design of Proposed Rate Structure, Administrative Record/Report, a Proposition 218 Notice and a Public Hearing. In addition, through RFP19-51, the Utilities Department requested proposers to submit proposals for three optional tasks: Recycled Water Rate Study, Reserve Policy Review, and a Water Conservation Ordinance Review/Update. Staff sent out the RFP on December 21, 2018 and proposals were due January 22, 2019. The City received four proposals in response to the RFP. With oversight from the Finance Department, a panel of four evaluators from the Utilities Department and Public Works Department reviewed the proposals and evaluated their qualifications, experience and their project approach. The evaluators, along with the City's Purchasing Agent, RFP Administrator, and Utilities Department Director, met to discuss the panel's technical scores of each proposal. Raftelis Financial Consultants, Inc. earned the highest technical scores from each evaluator and was then interviewed to confirm the evaluation. Raftelis' qualifications and experience was the strongest of the competitors, having a great deal of experience in water rate studies, especially relating to deep dive financial analyses and compliance with State Law if a future drought is implemented. Their proposed project approach was efficient, clear and flexible to allow input. Based on these findings, staff then selected Raftelis, and the City's Purchasing Agent and Utilities Department staff evaluated the sealed cost proposal. The Utilities Department recommends that the Professional Services Agreement for the 2019 Water Rate Study be awarded to Raftelis Financial Consultants, Inc., with a total contract amount not -to -exceed $153,400. The scope of work includes the three options tasks and a contingency. After City Council contract approval, a preliminary Water Rate Study report will be prepared within six months. Public outreach and review by the Finance Committee is also planned. The Utilities Department anticipates bringing the Final Water Rate Study back for City Council review and approval at the end of summer. 15-2 Approval of Professional Services Agreement with Raftelis Financial Consultants, Inc. for the 2019 Water Rate Study March 12, 2019 Page 3 Should the findings and recommendations of the Water Rate Study result in any proposed water rate adjustments, the Utilities Department would request City Council approval to initiate a Proposition 218 process at that time. ENVIRONMENTAL REVIEW: Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). ATTACHMENT: Attachment A — Professional Services Agreement 15-3 ATTACHMENT A PROFESSIONAL SERVICES AGREEMENT WITH RAFTELIS FINANCIAL CONSULTANTS, INC. FOR 2019 WATER RATE STUDY THIS PROFESSIONAL SERVICES AGREEMENT ("Agreement") is made and entered into as of this 12th day of March, 2019 ("Effective Date"), by and between the CITY OF NEWPORT BEACH, a California municipal corporation and charter city ("City"), and RAFTELIS FINANCIAL CONSULTANTS, INC., a North Carolina corporation ("Consultant"), whose address is 227 West Trade Street, Suite 1400, Charlotte, North Carolina 28202, and is made with reference to the following: RECITALS A. City is a municipal corporation duly organized and validly existing under the laws of the State of California with the power to carry on its business as it is now being conducted under the statutes of the State of California and the Charter of City. B. City desires to engage Consultant to conduct the City's 2019 Water Rate Study ("Project"). C. Consultant possesses the skill, experience, ability, background, certification and knowledge to provide the professional services described in this Agreement. D. City has solicited and received a proposal from Consultant, has reviewed the previous experience and evaluated the expertise of Consultant, and desires to retain Consultant to render professional services under the terms and conditions set forth in this Agreement. NOW, THEREFORE, it is mutually agreed by and between the undersigned parties as follows: 1. TERM The term of this Agreement shall commence on the Effective Date, and shall terminate on March 31, 2020, unless terminated earlier as set forth herein. 2. SERVICES TO BE PERFORMED Consultant shall diligently perform all the services described in the Scope of Services attached hereto as Exhibit A and incorporated herein by reference ("Services" or "Work"). City may elect to delete certain Services within the Scope of Services at its sole discretion. 3. TIME OF PERFORMANCE 3.1 Time is of the essence in the performance of Services under this Agreement and Consultant shall perform the Services in accordance with the schedule included in Exhibit A. In the absence of a specific schedule, the Services shall be performed to completion in a diligent and timely manner. The failure by Consultant to strictly adhere to 15-4 the schedule set forth in Exhibit A, if any, or perform the Services in a diligent and timely manner may result in termination of this Agreement by City. 3.2 Notwithstanding the foregoing, Consultant shall not be responsible for delays due to causes beyond Consultant's reasonable control. However, in the case of any such delay in the Services to be provided for the Project, each party hereby agrees to provide notice within two (2) calendar days of the occurrence causing the delay to the other party so that all delays can be addressed. 3.3 Consultant shall submit all requests for extensions of time for performance in writing to the Project Administrator as defined herein not later than ten (10) calendar days after the start of the condition that purportedly causes a delay. The Project Administrator shall review all such requests and may grant reasonable time extensions for unforeseeable delays that are beyond Consultant's control. 3.4 For all time periods not specifically set forth herein, Consultant shall respond in the most expedient and appropriate manner under the circumstances, by hand -delivery or mail. 4. COMPENSATION TO CONSULTANT 4.1 City shall pay Consultant for the Services on a time and expense not -to - exceed basis in accordance with the provisions of this Section and the Schedule of Billing Rates attached hereto as Exhibit B and incorporated herein by reference. City shall pay to Consultant and Consultant accepts as full payment for all Work performed in accordance with this Agreement, including all reimbursable items the sum of One Hundred Thirty Nine Thousand Four Hundred Twenty One Dollars and 00/100 ($139,421.00). Additionally, the City has allocated a contingency amount of Thirteen Thousand Nine Hundred Seventy Nine Dollars and 00/100 ($13,979.00) for unexpected costs, for a total not to exceed amount of One Hundred Fifty 'Three Thousand Four Hundred Dollars and 00/100 ($153,400.00). No portion of the contingency shall be expended without prior written approval of City's Project Administrator. 4.2 No billing rate changes shall be made during the term of this Agreement without the prior written approval of City. 4.3 Consultant shall submit monthly invoices to City describing the Work performed the preceding month. Consultant's bills shall include the name of the person who performed the Work, a brief description of the Services performed and/or the specific task in the Scope of Services to which it relates, the date the Services were performed, the number of hours spent on all Work billed on an hourly basis, and a description of any reimbursable expenditures. City shall pay Consultant no later than thirty (30) calendar days after approval of the monthly invoice by City staff. 4.4 City shall reimburse Consultant only for those costs or expenses specifically identified in Exhibit B to this Agreement or specifically approved in writing in advance by City. Raftelis Financial Consultants, Inc. Page 2 15-5 4.5 Consultant shall not receive any compensation for Extra Work performed without the prior written authorization of City. As used herein, "Extra Work" means any Work that is determined by City to be necessary for the proper completion of the Project, but which is not included within the Scope of Services and which the parties did not reasonably anticipate would be necessary at the execution of this Agreement. Compensation for any authorized Extra Work shall be paid in accordance with the Schedule of Billing Rates as set forth in Exhibit B. 5. PROJECT MANAGER 5.1 Consultant shall designate a Project Manager, who shall coordinate all phases of the Project. This Project Manager shall be available to City at all reasonable times during the Agreement term. Consultant has designated Sanjay Gaur to be its Project Manager. Consultant shall not remove or reassign the Project Manager or any personnel listed in Exhibit A or assign any new or replacement personnel to the Project without the prior written consent of City. City's approval shall not be unreasonably withheld with respect to the removal or assignment of non -key personnel. 5.2 Consultant, at the sole discretion of City, shall remove from the Project any of its personnel assigned to the performance of Services upon written request of City. Consultant warrants that it will continuously furnish the necessary personnel to complete the Project on a timely basis as contemplated by this Agreement. 5.3 If Consultant is performing inspection services for City, the Project Manager and any other assigned staff shall be equipped with a cellular phone to communicate with City staff. The Project Manager's cellular phone number shall be provided to City. 6. ADMINISTRATION This Agreement will be administered by the Utilities Department. City's Utilities Department Director or designee shall be the Project Administrator and shall have the authority to act for City under this Agreement. The Project Administrator shall represent City in all matters pertaining to the Services to be rendered pursuant to this Agreement. 7. CITY'S RESPONSIBILITIES To assist Consultant in the execution of its responsibilities under this Agreement, City agrees to provide access to and upon request of Consultant, one copy of all existing relevant information on file at City. City will provide all such materials in a timely manner so as not to cause delays in Consultant's Work schedule. 8. STANDARD OF CARE 8.1 All of the Services shall be performed by Consultant or under Consultant's supervision. Consultant represents that it possesses the professional and technical personnel required to perform the Services required by this Agreement, and that it will perform all Services in a manner commensurate with community professional standards and with the ordinary degree of skill and care that would be used by other reasonably Raftelis Financial Consultants, Inc. Page 3 15-6 competent practitioners of the same discipline under similar circumstances. All Services shall be performed by qualified and experienced personnel who are not employed by City. By delivery of completed Work, Consultant certifies that the Work conforms to the requirements of this Agreement, all applicable federal, state and local laws, and legally recognized professional standards. 8.2 Consultant represents and warrants to City that it has, shall obtain, and shall keep in full force and effect during the term hereof, at its sole cost and expense, all licenses, permits, qualifications, insurance and approvals of whatsoever nature that is legally required of Consultant to practice its profession. Consultant shall maintain a City of Newport Beach business license during the term of this Agreement. 8.3 Consultant shall not be responsible for delay, nor shall Consultant be responsible for damages or be in default or deemed to be in default by reason of strikes, lockouts, accidents, acts of God, or the failure of City to furnish timely information or to approve or disapprove Consultant's Work promptly, or delay or faulty performance by City, contractors, or governmental agencies. 9. HOLD HARMLESS 9.1 To the fullest extent permitted by law, Consultant shall indemnify, defend and hold harmless City, its City Council, boards and commissions, officers, agents, volunteers and employees (collectively, the "Indemnified Parties") from and against any and all claims (including, without limitation, claims for bodily injury, death or damage to property), demands, obligations, damages, actions, causes of action, suits, losses, judgments, fines, penalties, liabilities, costs and expenses (including, without limitation, attorneys' fees, disbursements and court costs) of every kind and nature whatsoever (individually, a Claim; collectively, "Claims"), which may arise from or in any manner relate (directly or indirectly) to any breach of the terms and conditions of this Agreement, any Work performed or Services provided under this Agreement including, without limitation, defects in workmanship or materials or Consultant's presence or activities conducted on the Project (including the negligent, reckless, and/or willful acts, errors and/or omissions of Consultant, its principals, officers, agents, employees, vendors, suppliers, consultants, subcontractors, anyone employed directly or indirectly by any of them or for whose acts they may be liable, or any or all of them). 9.2 Notwithstanding the foregoing, nothing herein shall be construed to require Consultant to indemnify the Indemnified Parties from any Claim arising from the sole negligence or willful misconduct of the Indemnified Parties. Nothing in this indemnity shall be construed as authorizing any award of attorneys' fees in any action on or to enforce the terms of this Agreement. This indemnity shall apply to all claims and 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. ill�V191NI,=I.1114: 901a[1fsLK*l 7 It is understood that City retains Consultant on an independent contractor basis and Consultant is not an agent or employee of City. The manner and means of Raftelis Financial Consultants, Inc. Page 4 15-7 conducting the Work are under the control of Consultant, except to the extent they are limited by statute, rule or regulation and the expressed terms of this Agreement. No civil service status or other right of employment shall accrue to Consultant or its employees. Nothing in this Agreement shall be deemed to constitute approval for Consultant or any of Consultant's employees or agents, to be the agents or employees of City. Consultant shall have the responsibility for and control over the means of performing the Work, provided that Consultant is in compliance with the terms of this Agreement. Anything in this Agreement that may appear to give City the right to direct Consultant as to the details of the performance of the Work or to exercise a measure of control over Consultant shall mean only that Consultant shall follow the desires of City with respect to the results of the Services. 11. COOPERATION Consultant agrees to work closely and cooperate fully with City's designated Project Administrator and any other agencies that may have jurisdiction or interest in the Work to be performed. City agrees to cooperate with the Consultant on the Project. 12. CITY POLICY Consultant shall discuss and review all matters relating to policy and Project direction with City's Project Administrator in advance of all critical decision points in order to ensure the Project proceeds in a manner consistent with City goals and policies. 13. PROGRESS Consultant is responsible for keeping the Project Administrator informed on a regular basis regarding the status and progress of the Project, activities performed and planned, and any meetings that have been scheduled or are desired. 14. INSURANCE Without limiting Consultant's indemnification of City, and prior to commencement of Work, Consultant shall obtain, provide and maintain at its own expense during the term of this Agreement or for other periods as specified in this Agreement, policies of insurance of the type, amounts, terms and conditions described in the Insurance Requirements attached hereto as Exhibit C, and incorporated herein by reference. 15. PROHIBITION AGAINST ASSIGNMENTS AND TRANSFERS Except as specifically authorized under this Agreement, the Services to be provided under this Agreement shall not be assigned, transferred contracted or subcontracted out without the prior written approval of City. Any of the following shall be construed as an assignment: The sale, assignment, transfer or other disposition of any of the issued and outstanding capital stock of Consultant, or of the interest of any general partner or joint venturer or syndicate member or cotenant if Consultant is a partnership or joint -venture or syndicate or co -tenancy, which shall result in changing the control of Raftelis Financial Consultants, Inc. Page 5 15-8 Consultant. Control means fifty percent (50%) or more of the voting power or twenty-five percent (25%) or more of the assets of the corporation, partnership or joint -venture. 16. SUBCONTRACTING The subcontractors authorized by City, if any, to perform Work on this Project are identified in Exhibit A. Consultant shall be fully responsible to City for all acts and omissions of any subcontractor. Nothing in this Agreement shall create any contractual relationship between City and any subcontractor nor shall it create any obligation on the part of City to pay or to see to the payment of any monies due to any such subcontractor other than as otherwise required by law. City is an intended beneficiary of any Work performed by the subcontractor for purposes of establishing a duty of care between the subcontractor and City. Except as specifically authorized herein, the Services to be provided under this Agreement shall not be otherwise assigned, transferred, contracted or subcontracted out without the prior written approval of City. 17. OWNERSHIP OF DOCUMENTS 17.1 Each and every report, draft, map, record, plan, document and other writing produced, including but not limited to, websites, blogs, social media accounts and applications (hereinafter "Documents"), prepared or caused to be prepared by Consultant, its officers, employees, agents and subcontractors, in the course of implementing this Agreement, shall become the exclusive property of City, and City shall have the sole right to use such materials in its discretion without further compensation to Consultant or any other party. Additionally, all material posted in cyberspace by Consultant, its officers, employees, agents and subcontractors, in the course of implementing this Agreement, shall become the exclusive property of City, and City shall have the sole right to use such materials in its discretion without further compensation to Consultant or any other party. Consultant shall, at Consultant's expense, provide such Documents, including all logins and password information to City upon prior written request. 17.2 Documents, including drawings and specifications, prepared by Consultant pursuant to this Agreement are not intended or represented to be suitable for reuse by City or others on any other project. Any use of completed Documents for other projects and any use of incomplete Documents without specific written authorization from Consultant will be at City's sole risk and without liability to Consultant. Further, any and all liability arising out of changes made to Consultant's deliverables under this Agreement by City or persons other than Consultant is waived against Consultant, and City assumes full responsibility for such changes unless City has given Consultant prior notice and has received from Consultant written consent for such changes. 17.3 All written documents shall be transmitted to City in formats compatible with Microsoft Office and/or viewable with Adobe Acrobat. Raftelis Financial Consultants, Inc. Page 6 15-9 18. CONFIDENTIALITY All Documents, including drafts, preliminary drawings or plans, notes and communications that result from the Services in this Agreement, shall be kept confidential unless City expressly authorizes in writing the release of information. 19. INTELLECTUAL PROPERTY INDEMNITY Consultant shall defend and indemnify City, its agents, officers, representatives and employees against any and all liability, including costs, for infringement or alleged infringement of any United States' letters patent, trademark, or copyright, including costs, contained in Consultant's Documents provided under this Agreement. 20. RECORDS Consultant shall keep records and invoices in connection with the Services to be performed under this Agreement. Consultant shall maintain complete and accurate records with respect to the costs incurred under this Agreement and any Services, expenditures and disbursements charged to City, for a minimum period of three (3) years, or for any longer period required by law, from the date of final payment to Consultant under this Agreement. All such records and invoices shall be clearly identifiable. Consultant shall allow a representative of City to examine, audit and make transcripts or copies of such records and invoices during regular business hours. Consultant shall allow inspection of all Work, data, Documents, proceedings and activities related to the Agreement for a period of three (3) years from the date of final payment to Consultant under this Agreement. 21. WITHHOLDINGS City may withhold payment to Consultant of any disputed sums until satisfaction of the dispute with respect to such payment. Such withholding shall not be deemed to constitute a failure to pay according to the terms of this Agreement. Consultant shall not discontinue Work as a result of such withholding. Consultant shall have an immediate right to appeal to the City Manager or designee with respect to such disputed sums. Consultant shall be entitled to receive interest on any withheld sums at the rate of return that City earned on its investments during the time period, from the date of withholding of any amounts found to have been improperly withheld. 22. ERRORS AND OMISSIONS In the event of errors or omissions that are due to the negligence or professional inexperience of Consultant which result in expense to City greater than what would have resulted if there were not errors or omissions in the Work accomplished by Consultant, the additional design, construction and/or restoration expense shall be borne by Consultant. Nothing in this Section is intended to limit City's rights under the law or any other sections of this Agreement. Raftelis Financial Consultants, Inc. Page 7 15-10 23. CITY'S RIGHT TO EMPLOY OTHER CONSULTANTS City reserves the right to employ other Consultants in connection with the Project. 24. CONFLICTS OF INTEREST 24.1 Consultant or its employees may be subject to the provisions of the California Political Reform Act of 1974 (the "Act") and/or Government Code §§ 1090 et seq., which (1) require such persons to disclose any financial interest that may foreseeably be materially affected by the Work performed under this Agreement, and (2) prohibit such persons from making, or participating in making, decisions that will foreseeably financially affect such interest. 24.2 If subject to the Act and/or Government Code §§ 1090 et seq., Consultant shall conform to all requirements therein. Failure to do so constitutes a material breach and is grounds for immediate termination of this Agreement by City. Consultant shall indemnify and hold harmless City for any and all claims for damages resulting from Consultant's violation of this Section. 25. NOTICES 25.1 All notices, demands, requests or approvals, including any change in mailing address, to be given under the terms of this Agreement shall be given in writing, and conclusively shall be deemed served when delivered personally, or on the third business day after the deposit thereof in the United States mail, postage prepaid, first- class mail, addressed as hereinafter provided. 25.2 All notices, demands, requests or approvals from Consultant to City shall be addressed to City at: Attn: Utilities Department Director Utilities Department City of Newport Beach 100 Civic Center Drive PO Box 1768 Newport Beach, CA 92658 25.3 All notices, demands, requests or approvals from City to Consultant shall be addressed to Consultant at: Attn: Sanjay Gaur Raftelis Financial Consultants, Inc. 445 South Figueroa Street, Suite 2270 Los Angeles, CA 90017 26. CLAIMS Unless a shorter time is specified elsewhere in this Agreement, before making its final request for payment under this Agreement, Consultant shall submit to City, in writing, Raftelis Financial Consultants, Inc. Page 8 15-11 all claims for compensation under or arising out of this Agreement. Consultant's acceptance of the final payment shall constitute a waiver of all claims for compensation under or arising out of this Agreement except those previously made in writing and identified by Consultant in writing as unsettled at the time of its final request for payment. Consultant and City expressly agree that in addition to any claims filing requirements set forth in the Agreement, Consultant shall be required to file any claim Consultant may have against City in strict conformance with the Government Claims Act (Government Code sections 900 of seq.). 27. TERMINATION 27.1 In the event that either party fails or refuses to perform any of the provisions of this Agreement at the time and in the manner required, that party shall be deemed in default in the performance of this Agreement. If such default is not cured within a period of two (2) calendar days, or if more than two (2) calendar days are reasonably required to cure the default and the defaulting party fails to give adequate assurance of due performance within two (2) calendar days after receipt of written notice of default, specifying the nature of such default and the steps necessary to cure such default, and thereafter diligently take steps to cure the default, the non -defaulting party may terminate the Agreement forthwith by giving to the defaulting party written notice thereof. 27.2 Notwithstanding the above provisions, City shall have the right, at its sole and absolute discretion and without cause, of terminating this Agreement at any time by giving no less than seven (7) calendar days' prior written notice to Consultant. In the event of termination under this Section, City shall pay Consultant for Services satisfactorily performed and costs incurred up to the effective date of termination for which Consultant has not been previously paid. On the effective date of termination, Consultant shall deliver to City all reports, Documents and other information developed or accumulated in the performance of this Agreement, whether in draft or final form. 28. STANDARD PROVISIONS 28.1 Recitals. City and Consultant acknowledge that the above Recitals are true and correct and are hereby incorporated by reference into this Agreement. 28.2 Compliance with all Laws. Consultant shall, at its own cost and expense, comply with all statutes, ordinances, regulations and requirements of all governmental entities, including federal, state, county or municipal, whether now in force or hereinafter enacted. In addition, all Work prepared by Consultant shall conform to applicable City, county, state and federal laws, rules, regulations and permit requirements and be subject to approval of the Project Administrator and City. 28.3 Waiver. A waiver by either party of any breach, of any term, covenant or condition contained herein shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition contained herein, whether of the same or a different character. Raftelis Financial Consultants, Inc. Page 9 15-12 28.4 Integrated Contract. This Agreement represents the full and complete understanding of every kind or nature whatsoever between the parties hereto, and all preliminary negotiations and agreements of whatsoever kind or nature are merged herein. No verbal agreement or implied covenant shall be held to vary the provisions herein. 28.5 Conflicts or Inconsistencies. In the event there are any conflicts or inconsistencies between this Agreement and the Scope of Services or any other attachments attached hereto, the terms of this Agreement shall govern. 28.6 Interpretation. The terms of this Agreement shall be construed in accordance with the meaning of the language used and shall not be construed for or against either party by reason of the authorship of the Agreement or any other rule of construction which might otherwise apply. 28.7 Amendments. This Agreement may be modified or amended only by a written document executed by both Consultant and City and approved as to form by the City Attorney. 28.8 Severability. If any term or portion of this Agreement is held to be invalid, illegal, or otherwise unenforceable by a court of competent jurisdiction, the remaining provisions of this Agreement shall continue in full force and effect. 28.9 Controlling Law and Venue. The laws of the State of California shall govern this Agreement and all matters relating to it and any action brought relating to this Agreement shall be adjudicated in a court of competent jurisdiction in the County of Orange, State of California. 28.10 Equal Opportunity Employment. Consultant represents that it is an equal opportunity employer and it shall not discriminate against any subcontractor, employee or applicant for employment because race, religious creed, color, national origin, ancestry, physical handicap, medical condition, marital status, sex, sexual orientation, age or any other impermissible basis under law. 28.11 No Attorneys' Fees. In the event of any dispute or legal action arising under this Agreement, the prevailing party shall not be entitled to attorneys' fees. 28.12 Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original and all of which together shall constitute one (1) and the same instrument. [SIGNATURES ON NEXT PAGE] Raftelis Financial Consultants, Inc. Page 10 15-13 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the dates written below. APPROVED AS TO FORM; CITY ATTORNEY'S OFFICE Date: By: rA r n C. Harp AwZ•16'I Ci ttorney ATTEST: Date: Leilani I. Brown City Clerk CITY OF NEWPORT BEACH, a California municipal corporation Date: By: Diane B Mayor Dixon CONSULTANT: Consultants, Inc., corporation Date: By: Elaine Conti Vice President Date: Raftelis Financial a North Carolina By: Matthew R. Jackson Corporate Secretary [END OF SIGNATURES] Attachments: Exhibit A — Scope of Services Exhibit B — Schedule of Billing Rates Exhibit C — Insurance Requirements Raftelis Financial Consultants, Inc. Page 11 15-14 EXHIBIT A SCOPE OF SERVICES Raftelis Financial Consultants, Inc. Page A-1 15-15 44 t-* ap? # Scope ofWork Below is a brief list of the tasks for the scope of work. In Appendix A we have provided detailed descriptions for each of the tasks. Task 1 - Kick-off Workshop, Data Collection and Project Management Task 2 - Policy Framework Workshops with City Council Task 3 - Long -Range Financial Plan Development Task 4 - Cost of Service Analysis for Water Services Task 5 - Water Rates Development Task 6 - Water Rate Workshops Task 7 - Preparation of Cost of Service / Preliminary Rate Analysis Report Task 8 - Administrative Record Report Development for Proposed Water Rates Task 9 - Public Meetings to Present the Final Recommendations Task 10 - Proposition 218 Notice Preparation and Public Hearing Task 11 - Simplified Financial Plan Model with Adopted Rates for Future Rate Updates Evaluation 15-16 QUALITY ASSURANCE/QUALITY CONTROL PROCEDURES Quality Assurance ' /'Quality Control Procedurs Credibility is crucial for gaining consensus to implement the pro- posed rates developed as part of the Cost of Service Studies. If the City does not achieve the necessary credibility then the City Council may not approve any recommendation no matter how critical they may be. The fastest way for the City to lose credibility with the public and the City Council is to provide information that is incorrect or flawed. The City must have total confidence that the information provided by the Consultant is as accurate as possible. Raftelis places a premium on providing high-quality and accurate deliverables founded on sound principles of cost of service deter- mination and rate design. While assisting other utilities across the country we have developed a Quality Assurance process that consistently results in accurate deliverables of the highest quality. Each Quality Assurance plan is tailored to the specific project, but there are a number of common elements such as senior perspec- tive, outside perspective, and involvement from project initiation. The Quality Assurance plan that we will implement as part of this project embodies these elements. The Project Team will initiate its Quality Assurance plan during Project Initiation (Task l). The Quality Assurance Manager will be present at all internal project meetings and will work closely with both the Project Director and Project Manager as well as the lead consultants during the course of the project. It is important to note that the Quality Assurance Manager will not be involved in any detailed cost of service analysis or aspect of the cost of service analysis or model development. This lack of involvement in the intricacies of the project will allow the Qualitv Assurance Manager to provide an objective review of the cost of service methodology, rate design, and project deliverables. The Quality Assurance Man- ager's primary responsibilities are: • To oversee review of cost of service analysis and models for consistency, accuracy, and validity • To ensure that the cost of service model is based on sound rate -making principles and standard industry practice • To comprehensively review the written deliverables • To comprehensively review presentations to the City Council and the public As noted in our proposed project organization chart, our Quality Assurance Manager will report to our Project Director, not the Project Manager. This ensures that the City's interests are not diffused by the detailed activities of the Project Team, We also want to assure that no deliverable will be provided to the City until the Quality Assurance Manager has signed off on it, We have included time in the project approach and schedule to allow the necessary quality assurance reviews. While all deliverables will receive significant review, the cost of service model, which has the most complexity and is the linch- pin of the project, will receive the greatest scrutiny. The quality assurance plan includes periodic reviews of the cost of service model throughout the course of its development. We anticipate these periodic reviews occurring at the following stages of model development: • Once the basic model framework is complete • Upon completion of the financial planning module • Upon completion of the cost allocation schedules • Upon completion of the retail rate calculation module • Prior to the delivery of the final model results 15-17 SCHEDULE AND SCHEDULE CONTROL Schedule & Schedule Control Raftelis will complete the scope of services within the timeframe shown in the schedule below. The proposed schedule assumes a notice -to -proceed by the end of March 2019, and that Raftelis will receive the needed data in a timely manner and be able to schedule meetings as necessary. Project completion is estimated for the beginning of January 2020. This is tentative schedule and we will discuss and finalize with City staff the project schedule during the Kick-off Workshop. March April May June July August September October November December January 1 Kick-off Workshop. Data Collection & Project Management 2_ Policy Framework Workshops wtlh City Council 3. Long Range Finanical Plan Development 4. Cost of Service for Water Services S. Water Rates Development u. Water Rate Workshops 7. Preparation of Cast of Service, Preliminary Rate Analysis Report 8, Administrative Report Development for Proposed Water Rates 9. Public Meetings to Present the Final Recommendations 10. Proposition 218 Notice Preparation and Public Hearing It. Simplified Financial Master Model with Adopted Rates for Future Rate Updates Evaluation 15-18 Recycled Water Rate Study The City operates a small recycled water (RW) system for 6 commercial customers. The majority of the recycled water system is owned by the Orange County Water District and the City primarily passes through its direct cost to the customers. As part of the Study, the City also requests that the Consultant conduct the RW Rate Study for its 6 customers. Similar to Water Rate Study, the RW Rate Study will comprise of the following components: • Financial Plan for RW Enterprise to ensure long-term financial sufficiency for the RW system • Cost of service analysis for the RW system to equitably allocate the RW system costs to the 6 customers based on their own usage characteristics • RW rate calculation module to calculate the multi-year rates along with customer impact analysis Raftelis estimates to complete this task with approximately 40 hours of staff time, billed on a time and material basis and not including public meetings. if the Study is not conducted concurrently with the Water Rate Study, more staff effort might be needed to conduct public meetings to present the results of the Study. 15-19 RESERVE POLICY REVIEW IOPtIOHAL TASK) Reserve Policy Review (Optional Task) If requested by the City, Raftelis will review in detail the Reserve Policy. Each Reserve has its purpose and its target level shall be identified based on justifiable and sound bases. Raftelis will review the logics established for current reserve policy and recommend necessary changes to the policy. Moreover, Raftelis will also utilize the Financial Plan Model to assess the proposed changes in Reserve Policy to help the City making informed decisions. Raftelis will summary the results of the assessment and the rationale for each reserve target level in a short White Paper or Report. ivir. Gaur has recently spoke at the ACWA conference on how to develop the appropriate reserve policy and to understand the different types of financial risk. In addition, Nlr. Gaur in 2014 published an article in the AW WA journal on reserve policy called "Why do Water Agencies need Reserves?" Raftelis expects to complete this task with approximately 30 hours staff time, billed on a time and material basis. 15-20 WATER CONSERVATION ORGANANCE UPDATE (OPTIONAL TASK) Water Conservation Ordinance Update (Optional Task) If requested by the City, Raftelis will review the current Water Conservation Ordinance (WCO). The WCO will identity the policies for each Drought Stage and the corresponding estimated water demand reduction. Utilizing the results in the Water Rate Study For drought rates, Raftelis will also assist the City to update its WCO to reflect the new drought rates to be in effect. Raftelis expects to complete this task with approximately 1Q -lb hours of staff time, billed on a time and material basis. 3} 15-21 APPENDIX A: SCOPE OF WORK All 4 ■ SCOPE M OF WORK 15-22 Scope of Work In evaluating and updating the City's water rates and rate structure, Raftelis will use industry -accepted practices to ensure a robust and defensible rate structure. That said, every agency exhibits different characteristics and faces different issues. Raftelis will utilize our industry -driving technical expertise and depth of experience, particularly with respect to water conservation rate structures, and our thorough understanding and experience with the cost of service principles of Proposition 218. For example, in 2018, Mr. Gaur, proposed Project Manager for this study, led an all - day rate principles and rate design workshop at the California Society of Municipal Finance Officers. This workshop also included lead Proposition 218 attorney, Kelly Salt from Best, Best and Krieger (BBK), and discussed the legal framework of how to develop defensible rate structures. The following tasks define our technical approach in response to the City's requested scope of services. It should be noted that while we have listed these tasks consecutively, some tasks will overlap and may be conducted concurrently. TASK i Project Initiation, Data Collection and Project Management Project initiation and Data Collection We believe that the best way to initiate a study of this nature is the execution of a productive kick-off meeting. The goals for the meeting include: • Providing a forum to finalize the work plan and schedule with City staff • Reviewing the data require- ments for the study Prior to the kick-off meeting, we will prepare a detailed data request list that will identify the information needed to complete the various analyses. Information that is typically required to perform a finan- cial plan and water rate study include, for example: recent Comprehensive Annual Financial Reports (CAFR); recent and current budgets; current and historical billing data; and a long-term capital improvement program. Some of this information will be readily available, whereas other components may require more detailed analyses of operational data, customer billing informa- tion, and costs. Raftelis will review any data received prior to the kick-off meeting in order to address any questions arising from these sources. Project Management Consistent and competent pro- ject management is required to ensure project success and adherence to timelines and budgets. This ongoing task involves multiple interrelated work efforts that will require effective coordination between City staff, the consultant team, the City Council, the public, and other stakeholder groups. Our management approach stresses transparency, commu- nication, teamwork, objectivity, and accountability for meeting project objectives. Manage- ment responsibilities extend to general administrative duties such as client correspondence, billing, project documenta- tion, and administration of the study control plan. Throughout the study, the Raft- elis team will schedule interim status meetings or conference calls/web meetings to discuss project progress and present preliminary results. Status meetings will be conducted via telephone or web conference utilizing GoTbbleeting, a web - based conferencing tool. This tool will help us conduct effi- cient web meetings quickly to discuss issues and review results and impacts more efficiently while minimizing costs. The Raftelis Project Team will also conduct face-to-face meetings as outlined in the scope. As part of the kick-off Work- shop, Raftelis will work closely with staff to identify the list of pricing objectives and develop a policy framework for the study. This mechanism of identifying and ranking pricing objectives serves to promote stakeholder ownership and subsequent buy -in of the final results. Some of the pricing objectives include the following: • Promotion of efficient water use • Reduction in total water use • Affordability for essential use 15-23 • Need for an effective drought management tool • Financial sufficiency and stability • Rate stability • Reduction in peak demand Simplicity and ease of implementation • Customer understanding • Minimization of customer impacts Raftelis will provide City staff the pricing objectives exercise and instructions, which will be presented to the City Council at the subsequent workshop, for review. Taking the time to cover these foundational topics builds the framework for informed collaboration as the Study progresses. The City requests to have up to a total of 10 public meetings, including public workshops, to present rate study findings and rate alternatives and to assist with the required Proposition 218 public hearing. During the Kick-off Workshop Raftelis will discuss with City staff how to best plan out the 10 meetings for the Study. Meeting: One (1) on-site kick-off workshop with City staff Deliverables: Data request list, presentation materials in Microsoft PowerPoint'" and meeting minutes for kick-off workshop in Microsoft Word TASK 2 Policy Framework Workshops with City Council As part of the 10 public meet- ings, Raftelis proposes to conduit a policy framework workshop with City Council or stakeholders. The actual number of meetings for this task will be determined and agreed to during the kick-off workshop. Task 2.1 — Pricing Objective and Policy Framework Discussion Workshop with City Council Raftelis will begin the discussion with a review of the evolution of rate structures and the ben- efits and challenges associated with each structure, including uniform rate, seasonal rates, inclining tiered rates, and water budget rate structures. The goal of this discussion and the pricing objective exercise is for the City's elected officials to share with Raftelis its understanding of available rate structures and for Raftelis to provide the City an overview of all applicable alter- natives according to the City's priorities and currently observed best management practices. Raftelis will present a list of pricing objectives for the members of the City Council to rank. The pricing objectives exercise and instructions prepared in Task I will be provided to the City prior to the workshop. It is important to note that several of these pricing objectives can conflict with each other, especially with conservation rate structures. For example, a rate philosophy focused on improving revenue stability may conflict with minimizing customer impacts. Raftelis will discuss the impli- cations so that stakeholders can make informed decisions. Task 2.2 — Policy Framework Review with City Council Based on the City Council's ranking of pricing objectives and other inputs gathered during the workshop, Raftelis will present the results of the pricing objectives exercise. In addition, Raftelis will provide the City Council with the basis for recommending an alternative rate structure, as appropriate, along with other rate -setting principles and poli- cies to be used for the rate study. Whenever possible, Raftelis' approach to presenting com- plex and multi -faceted topics such as rate structure compar- isons or impacts is to offer a combination of. 1) visual rep- resentation; and 2) a periodic group poll or questionnaire for gauging knowledge and general opinions. This method encour- ages an environment of open and fluid discussion, facilitat- ing real-time understanding of and consensus regarding the subject matter. Raftelis has recently completed a pricing objectives workshop for Santa Margarita Water District (SMWD). Figure l shows the results of the pricing objectives workshop, which categorizes the objectives from most important to least impor- tant based on responses received from the SMWD Board. SMWD was considering an update to their existing inclin- ing tier block rate structure versus a water budget rate structure. Raftelis was able to clearly show the District how well each rate structure met their pricing objectives, with a side-by-side comparison as shown in Figure 2. The stars in Figure 2 represent how well each rate structure meets each particular pricing objective. The Board ultimately instructed Raftelis and staff to continue to develop and evaluate water budget tiered rate structures for Single -Family and Irriga- tion meters, while retaining the current inclining tiered rate for Multi -Family and uniform volumetric rate structure for all other customer classes. Recently, Raftelis has con- ducted similar evaluations of alternative rate structures for Las Virgenes Municipal Water District, Rancho California Municipal Water District, and the Cities of Corona, Chino Hills, Huntington Beach, and San Juan Capistrano. RFC has also developed workshop for- mats utilizing live, clicker -based polling that has proven effective in other settings. Task 2.3 — Water Budget Framework Workshop with City Council If the City Council in the prior Workshop (Task 2?) instructs Raftelis and City Staff to pro- ceed with thorough evaluation of water budget rates for the Study, Raftelis proposes to conduct this Workshop to establish the Water Budget Rate framework for the study`. Ultimately, our goal is to seek input from the City Council regarding the policy options associated with Water Budget Rate structures. Establishing the framework will include determining which customer classes are eligible for water budget -based rate structures, defining indoor and outdoor allocations, and defining the associated tiers. For example, a sample water budget -based rate structure might include residential accounts with a Tier 1 defined as the indoor allocation, Tier 2 defined as the outdoor alloca- tion, and Tier 3 as a percentage of the total indoor and outdoor allocation. As mentioned previously, water budget allocations for residential customers can be determined using a com- 15-24 F I G U R E I Sanra Margarita Water District Pricing Objectives Results Fair to the Public Promoting Efficiency Rate Stability Customer Understanding Equitable in Allocating water Cost Affordability for Essential Use Equitable in Allocating CIP Cost Consistent with Drought Management Action Plan Ease of Implementation Enhance Revenue Stability Mitigate Customer Impacts Targeting Outdoor water Use Consistent Residential Rates (SF & MF) Provide Revenue Source for Recycling/Conservation Ease of Administration Promoting Conservation FIGURE Z Santa Itilargarita Water District Rate Structure Comparison a. ... .. _ Fair to the Public MOST IMPORTANT Promoting Efficiency Rate Stability Customer Understanding Equitable in Allocating Water Cost VERY IMPORTANT Affordability for Essential Use Equitable in Allocating CIP Cost Consistent with Drought Management Action Plan Ease of Implementation IMPORTANT Enhance Revenue Stability Mitigate Customer Impacts Targeting Outdoor Water Use Consistent Residential Rates OF & MF) Provide Revenue Source for Recycling/Conservation IEASTIMPORTANT Ease of Administration Promoting Conservation plea equation that accounts for numerous demographic features. For example, some demographical features con- sidered in determining indoor water budget allocations might include the following: • Average or actual residen- tial density per household • Average water use per capita per day In addition, some demographic features that ;night be consid- ered in determining outdoor water budget allocations might include the following: • Average / estimated / meas- ured irrigation area • Weather data measured by EvapoTranspiration' (ET) data Raftelis will work with the City to identify the methodologies and policy options used to deter- mine water budget allocations and to perform the analysis on the City's customer class demo- graphics as necessary. For example, when consid- ering the methodology used for determining indoor water budget allocations, different options for evaluating house- hold size can be used, each with its own set of benefits and drawbacks aimed at meet- ing various objectives. Using actual residential density in determining indoor alloca- tions, as compared to average residential density provides a greater degree of accuracy and is a more rigorous approach, but the drawbacks might include a high cost of admin- istration. Going a step further, selecting a higher household density value as opposed to a lower value provides for a more generous budget, which has the benefit of providing a more generous allocation (thus a smaller variance program and lower cost of implemen- 15-25 tation and administration), at the cost of additional water savings that could be realized with a lower allocation. Meetings: TBD Deliverables: Presentation materials in Microsoft PowerPoint and meeting minutes for workshops in Microsoft Word rasK Long -Range Financial Plan Development Atter data has been compiled, Raftelis will begin development of a long-range (up to 10 -year) financial plan for the Water Enterprise. This will include an estimate of water revenues based on current rates, usage characteristics, and other non- operating revenues. Raftelis will analyze these costs and identify primary cost drivers of the financial plan as a percentage of total rates and charges. Revenue requirements will be projected based on calculated water purchase, treatment, and distribution costs, current budget, capital improvement plans (CIP), existing debt service, other obligations, and current economic trends including inflation. Rates, debt, grants, government subsidies, or infrastructure bank loans will be provided as options for capital cost financing. Raftelis will also calculate increases for third -party costs such as purchased water and electricity. Raftelis will determine the necessary revenue adjustments based on the City's capacity for debt, current revenue and expenses, and optimal capital funding mechanisms between pay -go and debt funded capital expenses. Projecting revenue adjustments over a longer planning horizon can illustrate future rate impacts and potential challenges 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. Raftelis will develop a cash flow analysis to determine revenue adjustments needed to meet projected revenue requirements for the planning period, while minimizing sharp rate fluctuations and debt coverage requirements. Revenue requirements will be calculated for each year in the forecast period and adjusted to provide for a smooth forecast of revenue adjustments. For example, 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 will be to minimize the magnitude of customer impacts while still achieving long-term revenue objectives. At the heart of any successful financial assessment is the computer model that is used to develop revenue requirements and perform financial planning. Raftelis will develop a financial plan model (FPM) to meet the City's specific needs and rising challenges and issues. Raftelis builds each client's model from the ground up, carefully tailored to individual needs and preferences. Once completed, the model will serve as a comprehensive yet flexible planning tool that will incorporate the City's operating budget, forecasted demand projections, capital financing plan, revenue requirements, revenue projections, reserve balances, and customer impacts and will allow for scenario analysis. The dashboard is the graphical interface which displays the model's results in an easily understandable format. In Figure 3 on the following page, the dashboard contains several features, including the ability to show or indicate: • Revenue adjustments required for the study period in order to meet debt coverage and target reserve balance(s) (blue bars in the Revenue Adjustments and Debt Coverage chart) • Projected operating costs and revenue streams (shown in the Water Oper- ating Financial Plan chart) • Different funding sources of CIP: PAYGO or debt financed (shown in the CIP and Funding Sources for Water Funds chart) Reserve balances and target levels according to the City's policies (shown in the Projected Ending Fund Bal- ances) with flagging features when projected balances fall below target levels Upon the completion of the financial plan model, Raftelis will hold up to three webinars with City staff to review the model and the assumptions for appropriateness and final- ize the financial plans for the Water Enterprise to be used for the rate design model. Meetings: Up to three (3) web -based workshops with City staff Deliverable(s): Presentation material in Microsoft PowerPointT" and draft financial plan model in Microsoft Excel Cost of Service Analysis for Water Services Following the development of the financial plan, Raftelis will begin to conduct cost of service (COS) analyses for the City's water system. The cost of service analysis portion of the study is often viewed as a compliance measure for reg- ulations such as Proposition 218, another perspective is the defensibility the analysis pro- vides the City in terms of the selected rate structure and rate levels. This level of confidence provides additional support to the City in pursuing the rates and rate structure that are best for the City and its customers. Raftelis will use methodology set by AWWA's ivlanual M1 and WEF's Nlanual of Practice No. 27. Based on the revenue requirements identified in Task 2, utility costs will be allocated to the appropriate service func- tions, determining how those services are used by each cus- tomer class, and calculating the unit cost for each cost category. Step 7 — Conduct Usage Analysis and Determine Customer Class Usage Patterns Raftelis will conduct usage analysis and determine whether the tier levels and number of tiers currently used by the City are appropriate based on actual recent cus- tomer consumption patterns. Raftelis will then determine the peaking characteristics for each customer class or sub- class. Next, we will estimate the relative 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 that may 15-26 46 C Fr OF NEWPOOT BEACH FIGURE 3 Raftelis drill develop customized financial models For the City that incorporates a dashboard to allow you to easily run scenarios and see the impacts in real time. !Wget �Ip l-;111) i F-Adib ;001 ..... Omught Cost Recovery Fees(eHettire CY) ':n.MG 51,04aa 0-0t cart Raovery Fen wledf. FV) 57,130.040 57.0001000 so 4 F Ne F.W 711 Dept i:C.Sq..Sa i5.=Ca.(.CO S:D. cCc, $ss Adhoc O&M [lunges - 711 Water Demandk—arlDs ..:wwn sws.r-rs. sral.n, rmru Ro(aned Water Sal- 7947 MG ].304 ArG _ -1,%M MG 3AS MG RWAdlmb Revenue Adjustments and Debt Coverage ceveragay 12D C 1R0% 1R0% Wz% W.D% 10M 1013% .c 5.0% c $5 300% J i 6.0% a 206% j A U% t 1A% 'r FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 10Q% DAR o.n% - - IN By New Debt • Total CIP FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 >_ Rry Ad}ts � DroughtFees —Debt Cw ga —Trget Dept carerag% E Bund: Ill lL :13 No em9 FY 2018 TV 2nJq FY 20M FY MI FV =2 FY ?021 FY ZG24 SD 50 so so s0 so so Warer Operating Financial Plan Projected Ending Fund Balances 529 s46 t - 515 - 3127 $24- 50 .r 53 f "529 I so FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY ZU19 , FY 2014 FY 201s FY 2416 FY 2017 FY 2016 FY 2019 —Current Re+ -- Propased Rev be appli-cable, and Raftelis' experience with other utilities exhibiting similar usage char- acteristics and patterns. This will provide the basis for equi- table cost allocations to each customer class or subclass. Step 2 — Allocate Costs to Functional Cost Categories Raftelis will functionalize the costs into main functions such as supply, transmission & distribution, stor-age, etc. The costs will then be allocated to cost categories such as water supply, water system costs to meet average demand (or base costs), extra capacity costs to meet maximum hour, maxi- mum day demand, customer service, meter capacity, etc. to determine the unit cost for each cost categories. Step 3 — Allocate Functional Costs to Customer Classes Next. the costs associated with the functional components will be allocated to the various customer classifications on the basis of the relative responsi- bility of each classification for service provided. Costs will be allocated based on the deter- mination of units of service for each customer classification and the application of unit costs of service to the respec- tive units. Throughout the cost allo- cation process, Raftelis will comply 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, Proposition 26, and other regulations. Although not a law a Ending Balanots —Tvget Babies • Aunt Bsinces firm, Raftelis is very familiar with Proposition 218 require- ments and its implications on utility rates. Our Project Team has extensive experience with Proposition 218 and has con- ducted conference sessions on the matter. Meetings: None Deliverables: Cost of service analysis in Microsoft Excel TASK 5 Water Rates Development Task 5.1 — Water Budget Usage Analysis If a water budget rate struc- ture is to be evaluated in detail (based on the frame- work agreed on during Task 2), Raftelis will develop the Water Usage Analysis Module (shown in Figure 4 on the following page for illustra- tive purposes only) to design appropriate budget -based tiers. The key variables and results of the usage analysis are displayed in Dashboard format. Raftelis assumes that City staff will combine the parcel area data with the City's current customer usage data into a single database in order to efficiently conduct the water budget analysis. Allocation Factors for Water Budget: The model will provide the ability to revise different policy options associated with defining indoor and out- door use efficiency such as landscape area and weather. In addition, users can easily adjust variables for house - 15 -27 C1P and Fuodhltg Sources for Water Funds audMCINAnnll $ss $20 ilei sls s10 $5 a FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 By Ozher Agencies . By PayG6 IN By New Debt • Total CIP Warer Operating Financial Plan Projected Ending Fund Balances 529 s46 t - 515 - 3127 $24- 50 .r 53 f "529 I so FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY ZU19 , FY 2014 FY 201s FY 2416 FY 2017 FY 2016 FY 2019 —Current Re+ -- Propased Rev be appli-cable, and Raftelis' experience with other utilities exhibiting similar usage char- acteristics and patterns. This will provide the basis for equi- table cost allocations to each customer class or subclass. Step 2 — Allocate Costs to Functional Cost Categories Raftelis will functionalize the costs into main functions such as supply, transmission & distribution, stor-age, etc. The costs will then be allocated to cost categories such as water supply, water system costs to meet average demand (or base costs), extra capacity costs to meet maximum hour, maxi- mum day demand, customer service, meter capacity, etc. to determine the unit cost for each cost categories. Step 3 — Allocate Functional Costs to Customer Classes Next. the costs associated with the functional components will be allocated to the various customer classifications on the basis of the relative responsi- bility of each classification for service provided. Costs will be allocated based on the deter- mination of units of service for each customer classification and the application of unit costs of service to the respec- tive units. Throughout the cost allo- cation process, Raftelis will comply 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, Proposition 26, and other regulations. Although not a law a Ending Balanots —Tvget Babies • Aunt Bsinces firm, Raftelis is very familiar with Proposition 218 require- ments and its implications on utility rates. Our Project Team has extensive experience with Proposition 218 and has con- ducted conference sessions on the matter. Meetings: None Deliverables: Cost of service analysis in Microsoft Excel TASK 5 Water Rates Development Task 5.1 — Water Budget Usage Analysis If a water budget rate struc- ture is to be evaluated in detail (based on the frame- work agreed on during Task 2), Raftelis will develop the Water Usage Analysis Module (shown in Figure 4 on the following page for illustra- tive purposes only) to design appropriate budget -based tiers. The key variables and results of the usage analysis are displayed in Dashboard format. Raftelis assumes that City staff will combine the parcel area data with the City's current customer usage data into a single database in order to efficiently conduct the water budget analysis. Allocation Factors for Water Budget: The model will provide the ability to revise different policy options associated with defining indoor and out- door use efficiency such as landscape area and weather. In addition, users can easily adjust variables for house - 15 -27 hold size and the gallons used per capita per day. Tier Definitions: The model will have the ability to define appropriate tiers based on usage types. Key Results: 1 A. Usage and bill distri- bution in tiers together with a water budget usage histogram result- ing from the established water budgets summa- rize the current water use efficiency of the agency's customers. For example, in Figure 2 item A, 73% of all customers (44% t 29%) are within tiers l and 2, which is within their, total water budget allotment B. Peaking characteris- tics of bi-monthly usage in each tier represent the relative contribution to peaking costs from each tier. As shown in Figure 2, item B, the peak usage consumed in July -August period is approximately 2.5 times of the usage in January -February period. Tier l indoor usage is rel- atively level throughout the year, whereas Tiers 2 to 4 associated with out- door usage and inefficient usage are approximately five times greater in July -August than in Jan- uary -February. Task 5.2 — Water Rate Model Development Rate Calculations The model determines the revenues recovered in each tier and the associated price for each tier. The model will also have the tlexibility to evaluate different fixed/variable revenue structures to enhance revenue stability. To help communi- cate with customers about the drivers and rationale behind the proposed rates, the water rates will have several cost components, including water supply costs, delivery of the City's fixed peaking costs, con- servation costs, and revenue offsets from other unrestricted revenue sources to provide affordability for essential use. An example of this type of structuring developed for El Toro Water District is shown in Figure 5. Water supply rates are associated with imported water costs, and recycled water program costs are assigned to Tiers 3 and 4 as the next marginal water supply source. The conservation program is funded through the con- sumption in higher tiers. This exercise showing the cost components for each tier will be performed regardless of the rate structure selected. Multiple -year Rate Projec- tions and Pass-through Rate Calculations The Model user will be able to enter the estimated/actual FIGURE 4 Sample Usage Analysis Mod uIe Features denoted are described in the text. i rWater Badger flWBl Baseline Alloation � ego � Household Sae Y wl—S/ho—h.1d Satl%L GPC0 42 cd - + 9Wons ger caplro ger day oR 7I ccf ;(]Wil mdaw draugnr loaor us% rwr. xm„erwyirc -.ia(O -Lbv, .Nlm.r'Or:oa 290 al 3q% 25% Outdoor Water Budget (OWB) 4.n .2 - m%Weather Weather Data 10-yrM 10 -yr ovq/4cr-l; Seosnnar 13% FfAF 90!5, ET4djusrmenr Faaor i% ET,) ss OF w,aW, 100`!5 Rrco •Fr, •F Fa,.J dget Tier Oennitions Tiers Tier Widens tier 1 Indoor Use Tier 2 Outdoor Use Ter 3 Inefficient Use Tier 4 Excessive use Form wooer ewgrr r Iwal - Awa . Awa Current 2 -Tier Oefinitions s% .rdoor 1—oft, forror u% 100% ,f IWB 100% of owe 30; of 7N3 above Tier 3 M increases in annual water purchase costs and the annual revenue adjustments (deter- mined using the Long -Range Financial Plan) for the next 5 years to calculate the pass- through water supply rates and ultimately the 5 -year water rate schedule. Drought Rate Calculations Raftelis will develop drought rates based on the City's drought stages to offset esti- mated reductions in revenue due to drought under the selected rate option. Raftelis will discuss with City staff the policy decisions necessary to create defensible drought rates. Raftelis developed the standard methodology for establishing drought rates and published an article in AWWA journal in January 20 i6 titled Developing Drought Rates: Why Agencies Should Prepare for a blot-So- Rainv Day. In lune 2016, Mr. Gaur presented "the Art of Set - Usage & Hill Oisinbutran Water Budget Usage Histogram wr . t Ef% zs% le% ,Si rl% �-SR SCr.,H IWr Baseline Alloation � ego � Current Revised 5/ 42 at - 3/4 in 42 cd - 1 m 7I ccf 1212 in 144 at. 2 :n 290 al 3in 2,000 ccf - - 4.n 2-500 at - 51n 4,000 ccf - M increases in annual water purchase costs and the annual revenue adjustments (deter- mined using the Long -Range Financial Plan) for the next 5 years to calculate the pass- through water supply rates and ultimately the 5 -year water rate schedule. Drought Rate Calculations Raftelis will develop drought rates based on the City's drought stages to offset esti- mated reductions in revenue due to drought under the selected rate option. Raftelis will discuss with City staff the policy decisions necessary to create defensible drought rates. Raftelis developed the standard methodology for establishing drought rates and published an article in AWWA journal in January 20 i6 titled Developing Drought Rates: Why Agencies Should Prepare for a blot-So- Rainv Day. In lune 2016, Mr. Gaur presented "the Art of Set - Usage & Hill Oisinbutran Water Budget Usage Histogram wr . t Ef% zs% le% ,Si rl% �-SR SCr.,H IWr g i.Monthly Bi16 wtt3tin �lkne Allotadenand Total Wates &dget rr ser u% soar s� 15-28 3i .'N4n[hly Usage Onirr6utian � ego � IgPI sap � ,nn too 0 rutiw x>`oa w,.o.r .rnam u...,wr +uaa.., g i.Monthly Bi16 wtt3tin �lkne Allotadenand Total Wates &dget rr ser u% soar s� 15-28 48 4E ND L4' 3�_AC- .G'iRL 5 Example cost components used to denve zotai rates in eacn tier for EI Toro Water District. WATER RATES WATER DELIVERY RECYCLED ($/HCF) SUPPLY (PEAKING) CONSERVATION WATER - I- ME Tier 1 - Essential Indoor $2.38 $0.15 $0.00 $0.00 -$0.19 $2.34 Tier 2 - Efficient Outdoor Tier 3 - Inefficient Use Tier 4 - Excessive Use Uniform - CII ting Drought Rates" at the 2016 WESTCAS Annual Conference in Santa Fe. Customer Impact Analysis Customer impact analyses are also included as standard features of the Rate !Model. The Impact ,Analysis charts are a great tool to measure a rate structure's effect on cus- tomer bills and has proven particularly useful during the community outreach stage of an upcoming rate adjustment. • Sample SFR bill impacts at various usage levels (Figure 6): A graphical representa- tion of how the proposed rate structure will impact customers' bills. The Model will have the ability to select a particular meter size and see how bills are affected at different usage levels. This tool has proven particularly useful for public outreach campaigns and during the Proposition 318 process. The illustrative chart shown in Figure 6, prepared for San Gabriel County Water District, shows bill impacts for new rates for a typical residential customer with a 518 -inch meter at usage levels ranging from 20 to 50 billing units (I billing unit = $2.38 $0.30 $2.38 $0.45 $2.38 $0.60 $2.38 $0.17 100 cubic feet = 748 gallons). Overall customer impact (Figure 7): Figure 7 illus- trates how City customers will see changes in their bills if the proposed rate structure is adopted . For example, approximately 45% of the customers (32 + 13 percent) will see minor increases of less than $5 in their water bills. Approximately 13% of the customers will see no change or some reduc- tion in the bills. This is an invaluable tool to facilitate informed decision making. The Rate Design Dashboard (sample Dashboard shown in Figure 8), which displays key variables and results in real- time, will facilitate discussion to reach a consensus quickly. To help facilitate informed decision making, the Model will also include a summary of financial impacts on customers resulting from the proposed rate structure. Key Variables I Cost allocations to differ- ent rate components - the total revenue requirement is distributed amongst the various costs such as water $0.00 $0.00 $0.00 $2.68 $0.35 $1.86 $4.00 $5.04 $0.35 $3.71 $0.00 $7.04 $0.04 $0.19 -$0.15 $2.63 supply, pumping, treat- ment, etc. Water Supply Costs infor- mation for Incremental 1 Marginal Water Supply Rate Components - the supply costs for the next available source of water supply which is a primary driver of pricing for higher tier usage. Cost recovery in tiers - how the costs to provide service are distributing between tiers. Results 1 Resulting Proposed Rates - the proposed rates based on the parameters set with the key variables. Sample SFR bills impacts at various usage levels - a graphical representation of how the proposed rate structure will impact customers' bills. [dote the ability to change the meter size, lot size, zone and the billing period for the bill calculations. This tool has proven particularly useful for public outreach campaigns and during the Proposition 218 process. Overall customer impact - a summary of how cus- tomers will see changes in their bills if the proposed rate structure is adopted. This is an invaluable tool to facilitate informed decision making. Task 5.3 - Water Rate /Buy- in Capital Connection Survey Raftelis will compare the City's current and proposed rates with up to live neighboring agency rates. While a useful benchmark, it is worth noting that such comparisons only paint a par- tial picture since many factors, such as topography and water sources, affect the total cost of providing water services. Since 2012, Raftelis conducted a cost comparison analysis study on an annual basis for Mesa Consoli- dated Water District to compare the system costs for all special districts within Municipal Water District of Orange County. Raft- elis also publishes the nationally recognized biennial Water and Wastewater Rate Survey, which is co -published with the AW WA, and the California -Nevada Water and Wastewater Rate Survey, which is co -published by the CA -NV AWWA. Using the rate survey data, Raftelis will develop an Excel - based module to compare 15-29 FfGURE 6 Sample Single -Family Customer Bills Illustrating customer impacts of typical resi- dential customers at different usage levels. FIGURE 7 Customer Bill Impact Illustrating impacts on customers resulting from the adoption of the proposed rates Sample Bi -Monthly Customer Bills w/ 5/8 inch meter $1w 35% 32% 5120 30% Sample 5FR Bills & Impacts 25% 580 $aa 53470 :.1 20% $0 15% 13% 13% iii -Monthly Usage 20 hcf 25 hcf 30 hcf 40 hcf 50 hcf ■ CY 2015 Bills $64.21 $73.21 $82.21 $101.31 $120.41 ■ CY 2016 Bills $65.01 $72.81 580.61 $114.41 $140.21 Impact ($) $0.80 -$0.40 -$1.60 $9.10 $19.80 Impact (%) 1.2% -05% -1.9% 9.0% 16.4% %Bills All Custorner Bill Imparts 35% 32% [Mp' 30% Sample 5FR Bills & Impacts 25% s. r 53470 :.1 20% 15% 13% 13% 11% 10% 11% 9% 10% 5% 0% <_ 50 $0-$3 53-$5 55-510 $10-$20 520-550 > $50 SLSl1 $ Change in 8i -Monthly Bills FIGURE 8 Rate Design Dashboard 15-30 [Mp' Sample 5FR Bills & Impacts s. r 53470 :.1 laT•' 3.115!9 +rna.i s=x4!•.+i nra. ae :OL9Oaaf.�a 1 a, SLSl1 .baa �n5s1 - - slml B. .�6rammn Smnr S:oLlW 5]351.11] .• f -'SW ro1M S1f3e13W 55,[]O,Saf £t 09a3.O 31.315 yTe9,ase 55 m],pe 5]!1!00 ti ] 1. Si3W 1 ` I41! id S O ssm 9955 nrs 1 . ." .A -+el � I.10O.-[t S�.r+i e+1 MCY9 TW1 hwewt ♦:.r' ,� __Derr t1O,[1 3Te-.1 .lOed ---H9.ic 9Wtif 1[unK ai-~�3YA? 1610.!••Sesf)p _.- -1an3a ,.� 1'ls+6W u<Mn IylNly � ngy[y■9 15]S.H 59H.3] 53313Pa 329O.r .��• sH,][T[[f ..ane 51191 Sf 95 lis el Hao C4 Imldr ['.h 9.vMtlH Pernwn S13r1.w0 s- ­ W.'. sdsl 56an Hs.0 u.16 suSl An xiul. Customer I mpacts for All Customers $calfsn.1] u ",I.T. _ sa s• saw lx su.n $nn s:sn 13x1 1 nlx s[lsm s[1mf srs3s au ssly ;m[, ;,,,[, ,•_l Ss- :m.ox . s n: Is- Six 51990 jlpAl {IfJW Sill lilt] MW - u9a:s Sna.n Het sa suu slf1,II M_ +i s+son $a5O.79 Sbe�1 Suw Senn ew nu.0 $]usa6 935 s. Sati n !�R SLsO1 Ex £LfO/as SwS.m l -a +5 5=H3O �� r 5 s: -s SLn so.ie so e+ soul {6.1] 5ss _ Sr, srl rpl SL SLw SOA e W. NO Sow r� i SI+1 SIN "13 $om sol, so 00 s�.'.h7 W:. 52-00- 35150- SIROO- Szm- T•n+ ss. al Sa15 sl.:z sono so.H sop smw S2sm SuLm ' f dnrY. M 6Gk *nes Sl u Sid sou so« so m wz] a. SLsI SS.w s_,s fO[., A17 Sow 15-30 so the total monthly water bill amount of a typical residential customer within each agency. The adjustable inputs of the module are water usage and meter size. The model will include the appropriate graphs and figures that display the total bill of a typical customer in each agency's service area as illustrated in Figure 9. Lastly, Raftelis will prepare a comparison study of surround- ing water agencies "buy -in/ capital connection" charges to evaluate if the City should consider such charges. As part of this task, Raftelis will also provide a benchmark rate com- parison of the rate analysis in comparison to other local cities and water agencies. Meetings: Up to five (5) webinars with City Staff to discuss interim results as necessary Deliverables: Water Rate Model in Microsoft Excel TA SV c Water Rate Workshops Task 6.1 — Water Rate Workshops with City Staff Following the completion of the Rate Model, Raftelis will hold three Workshops with City staff to develop different rate scenarios. The goal of these workshops is to identify the water rates that will be pre- sented at the rate workshops with the City Council. Raft- elis will present the interim proposed rates and discuss the benefits and challenges associated with each proposed rate alternative, demonstrated through the Water Rate Model. Changes and suggestions from staff will be incorporated into FIGURE 9 Sample Water Rate Sumey Stinunarp of Residential NVater Bills Residential Water Monthly Bill Comparison for FY 2016 =XtC sa Le,g Mac, 3.rmm ;c-,wna Irile.00e La Angeies SCre.Ye LagunaftX,- j -41C S=re 'N]'cr the analyses prior to presenting the results to the Council. Task 6.2 — Water Rate Workshops with City Council / Stakeholders Upon incorporating City staff comments from the workshop in Task 5.1, Raftelis will present the results of our Study during at least one session with the City Council. The actual number of workshops will be determined in Task I with City Staff as part of the 10 public meetings. The presentation will discuss the proposed financial plan, and the proposed rate structure and rates along with the resulting customer impact analysis. If necessary, Raftelis will use the models to address any concerns raised regarding the results. Any changes, comments, and feedback will then be incorpo- rated into the final models. Meetings: Three (3) Workshops with City staff, TBD number of meetings with City Council/ Stakeholder Deliverables: Presentation materials for the Workshops in Microsoft PowerPoint TASK Preparation of Cost of Service / Preliminary Rate Analysis Report Raftelis will summarize the pre- liminary rate analysis results in the Preliminary Rate Analysis Report. The Report will high- light the comprehensive review of the City's existing rate struc- ture and the existing financial condition of the Water Enter- prise. It will identify the cost of service gaps or discrepancies between the existing rate struc- ture, the projected financial obligations, and the effects of drought and associated reduced water usage demand. As part of the Report, Raftelis will identify the strategy intended to resolve identified concerns and issues. Meetings: One (1) webinar with City staff to review comments on the Draft Report Deliverables: COS/Prelim- inary Rate Analysis Report in Microsoft Word and pdf TASK 8 Administrative Record Report Development for Proposed Water Rates The process for developing the proposed water rates will be described in a draft water rate study report_ This draft report will summarize the major issues and decisions and an overview of operations, CiP, the financial plan, and the final rates resulting from the Study. The Policy Framework discussed and agreed to in Task i will be included. The report will also include a section discussing the gap between existing rates and the antici- pated financial obligations for the Water Enterprise along with any proposed strategies. A comprehensive section on the rate design assumptions and methodologies used to develop the user -rate calculations and financial planning will be included as part ofadministra- tive record for the Final rates. Recent court decisions have emphasized the importance 15-31 of a thorough administrative record and defensible meth- odology of the final rates for service. To ensure that the Study includes a thorough administrative record, the Final Report will include an exhibit listing all rate design assumptions and method- ologies used to develop the financial plan and rates. Comments from City staff will be incorporated into the Final Report and the Model will be refined to reflect appropriate issues or concerns raised. The Final Report will be submitted to the City and will include appropriate sup- porting data from the Model to address the requirements of Proposition 218. It is imperative that the Report clearly show the nexus between the proposed charges for ser- vice and the cost to provide said service. The Report will lead the reader through Raft- elis' methodology to arrive at rates that are equitable, reflect the City's policies and values, and are driven by the City's revenue requirements. The Report's ability to explain the rate development process in a clear and understandable manner will promote Financial transparency, heighten legal defensibility, and uphold the City's strong reputation with the public. Meetings: One (1) webinar with City staff and City's legal counsel to review comments on the Draft Report Deliverabies: Draft Report, Final Report in Microsoft Word and pdf TA=n Public Meetings to Present the Final Recommendations Raftelis will present the find- ings and recommendations of the Study to the City Council at public meetings, The number of meetings will be determined with City staff during kick-off Workshop in Task 1. Mr. Gaur, Project Manager, is consistently called upon by industry associations such as AWWA and ACWA to explain to elected officials the complex issues associated with design- ing conservation water rates and has extensive experience presenting to utilities' govern- ing bodies. The presentation will highlight the collaborative process used to identify and prioritize the important issues facing the City. The proposed rates will be presented along with other recommendations resulting from the Study. Meetings: TBD Deliverables: Presentations for Public Meetings in Microsoft PowerPoint TASK 10 Proposition 218 Notice Preparation and Public Hearing Task 10.1 - Preparation for Proposition 218 Notice Raftelis will assist the City in preparing the Proposition 118 notice for the City to mail within the required 45 -day noticing period prior to hold- ing the Public Hearing. Raftelis recognizes the meeting of Prop- osition 218 requirements as a legal issue and will work with the City attorney, as we have with numerous agencies, to ensure compliant notification materials. In addition, Raftelis will deliver 25 hard copies of the Final Proposition 218 notice to City of Newport Beach. Task 10.2 - Public Hearing Meeting As the last step of the Study, Raftelis will be present at the Public Hearing to adopt the recommended rates and will be available to answer any questions. Raftelis has assisted numerous agencies all over California with the adoption of conservation rate structures. Recent examples include the City of San Juan Capistrano, Las Virgenes Municipal Water District, and Elsinore Munici- pal Water District. Meetings. One (1) Public Hearing Meeting Deliverables: Prop 218 Notice in Pdf and 25 hard copies and Presentation for Public Hearing in Microsoft PowerPoint Simplified Financial Plan Model with Adopted Rates for Future Rate Updates Evaluation Upon the completion and adoption of the new rates, Raftelis will use the adopted rates, remove all unnecessary variables from the Rate Model and develop a simple, easy to update Financial Plan Model for future use by the City's staff. The simplified Financial Plan Model will be used to sup- port annual rate and charges adjustments upon changes in water cost, demand, and oper- ating budgets. Meetings: One (1) webinar with City Staff to identify key features and variables for the Model Deliverables: Simplified Financial Plan Model in Microsoft Excel 15-32 EXHIBIT B SCHEDULE OF BILLING RATES Raftelis Financial Consultants, Inc. Page B-1 15-33 Costs Raftelis proposes to complete the scope of work outlined in our proposal on a time -and -materials basis as shown in the table below. The table provides a breakdown of the estimated level of effort required for completing each task described and the hourly billing rates for the personnel scheduled to complete the project. On the following page, we have included a table for the optional tasks along with the hourly rates. Travel and other expense is estimated to be b%. 15-34 Hours Web Number of Total Fees & Tasks Meetings Meetings SG SGn HI KP Admin Total Expenses 1. Kick-otf Workshop, Data Collection & Project Management 1 10 4 2 to 4 30 47,272 2. Policy Framework Workshops with City Council 3 24 12 36 $10,176 3. Long Range FinamcalPlan Development 3 12 2 32 46 $11,384 4. Cast of Service for Water Services 2 2 24 28 $6,477 5. Water Rates Development 5 14 4 90 108 $25,429 5. Water Rate Workshops 2 3 27 4 2 30 63 $16,700 7. Preparation of Cast of Service! Preliminary Rate Analysis Report 2 4 2 20 2 28 $6,381 8. Administrative Report Development for Proposed Water Rates 2 4 2 40 4 50 $11,903 9. Public Meetings to Presentthe Final Recommendations fi 36 2 20 58 $16,218 10. Proposition 218 Notice Preparation and Public Hearing 1 I 8 4 12 (3,392 11. Simplified Financial Master Model with Adapted Rates for Future Rale Updates 3 20 23 $5,390 Evaluation Total Estimated Meetings 1 Hours 15 14 144 22 4 302 10 482 Hourly Billing Rate 5295 $240 $265 $210 $80 Total Professionat Fees $42A60 $5,280 $1,060 $63,420 $600 $113,040 SG - Sanjay Gaur Total Fees $113,040 SGn - Steve Gagnon HI - Habib Isaac Total Expenses - 6% 56,782 KP - Khanh Phan - Staff Consultants Adm Adrn - Admrntsfra6ve Staff Total Fees & Expenses 15-34 Additional Work Included in Scope Raftelis Hourly Rates Position Hourly Billing Hours Vice President $295 Senior Manager $265 Manager $240 Senior Consultant $210 Consultant Total Fees & Tasks SG SGn HI KP Admin Total Expenses Section 9 - RW Rate Study B 2 30 1 39 $9,148 Section 10 - Reserve Policy Review 4 2 20 1 27 $6,296 Section 11 - Water Conservation Ordinance Update is t 17 $4,155 Total Estimated Meetings I Hours 10 20 0 so 3 83 Hourly Billing Rate $295 $240 $265 $210 $80 Total Professional Fees $2,950 $4,800 $0 $10,500 $240 $18,490 SG - Sanjay Gaur Total Fees $18,490 SGn - Steve Gagnon HI - Habib Isaac Total Expenses - 6% $1,109 KP - Khanh Phan SC - Slaff Consultants Admin - Administrative Staff Total Fees & Expenses Raftelis Hourly Rates Position Hourly Billing Rate` Vice President $295 Senior Manager $265 Manager $240 Senior Consultant $210 Consultant $185 Administration $75 Total Not -to -Exceed Amount $139,421.00 ' For services related to the preparation for and participation in deposition and tri- al/hearing, the standard billing rates listed above will be increased by an amount up to 50%. 15-35 EXHIBIT C INSURANCE REQUIREMENTS — PROFESSIONAL SERVICES 1. Provision of Insurance. Without limiting Consultant's indemnification of City, and prior to commencement of Work, Consultant shall obtain, provide and maintain at its own expense during the term of this Agreement, policies of insurance of the type and amounts described below and in a form satisfactory to City. Consultant agrees to provide insurance in accordance with requirements set forth here. If Consultant uses existing coverage to comply and that coverage does not meet these requirements, Consultant agrees to amend, supplement or endorse the existing coverage. 2. Acceptable Insurers. All insurance policies shall be issued by an insurance company currently authorized by the Insurance Commissioner to transact business of insurance in the State of California, with an assigned policyholders' Rating of A- (or higher) and Financial Size Category Class VII (or larger) in accordance with the latest edition of Best's Key Rating Guide, unless otherwise approved by the City's Risk Manager. 3. Coverage Requirements. A. Workers' Compensation Insurance. Consultant shall maintain Workers' Compensation Insurance, statutory limits, and Employer's Liability Insurance with limits of at least one million dollars ($1,000,000) each accident for bodily injury by accident and each employee for bodily injury by disease in accordance with the laws of the State of California, Section 3700 of the Labor Code. Consultant shall submit to City, along with the certificate of insurance, a Waiver of Subrogation endorsement in favor of City, its City Council, boards and commissions, officers, agents, volunteers and employees. B. General Liability Insurance. Consultant shall maintain commercial general liability insurance, and if necessary umbrella liability insurance, with coverage at least as broad as provided by Insurance Services Office form CG 00 01, in an amount not less than one million dollars ($1,000,000) per occurrence, two million dollars ($2,000,000) general aggregate. The policy shall cover liability arising from premises, operations, personal and advertising injury, and liability assumed under an insured contract (including the tort liability of another assumed in a business contract). C. Automobile Liability Insurance. Consultant shall maintain automobile insurance at least as broad as Insurance Services Office form CA 00 01 covering bodily injury and property damage for all activities of Consultant arising out of or in connection with Work to be performed under this Agreement, including coverage for any owned, hired, non -owned or rented vehicles, in an amount not less than one million dollars ($1,000,000) combined single limit each accident. Raftelis Financial Consultants, Inc. Page C-1 15-36 D. Professional Liability (Errors & Omissions) Insurance. Consultant shall maintain professional liability insurance that covers the Services to be performed in connection with this Agreement, in the minimum amount of one million dollars ($1,000,000) per claim and two million dollars ($2,000,000) in the aggregate. Any policy inception date, continuity date, or retroactive date must be before the Effective Date of this Agreement and Consultant agrees to maintain continuous coverage through a period no less than three years after completion of the Services required by this Agreement. 4. Other Insurance Requirements. The policies are to contain, or be endorsed to contain, the following provisions: A. Waiver of Subrogation. All insurance coverage maintained or procured pursuant to this Agreement shall be endorsed to waive subrogation against City, its City Council, boards and commissions, officers, agents, volunteers and employees or shall specifically allow Consultant or others providing insurance evidence in compliance with these requirements to waive their right of recovery prior to a loss. Consultant hereby waives its own right of recovery against City, and shall require similar written express waivers from each of its subconsultants. B. Additional Insured Status. All liability policies including general liability, excess liability, pollution liability, and automobile liability, if required, but not including professional liability, shall provide or be endorsed to provide that City, its City Council, boards and commissions, officers, agents, volunteers and employees shall be included as insureds under such policies. C. Primary and Non Contributory. All liability coverage shall apply on a primary basis and shall not require contribution from any insurance or self-insurance maintained by City. D. Notice of Cancellation. All policies shall provide City with thirty (30) calendar days' notice of cancellation (except for nonpayment for which ten (10) calendar days' notice is required) or nonrenewal of coverage for each required coverage. 5. Additional Agreements Between the Parties. The parties hereby agree to the following: A. Evidence of Insurance. Consultant shall provide certificates of insurance to City as evidence of the insurance coverage required herein, along with a waiver of subrogation endorsement for workers' compensation and other endorsements as specified herein for each coverage. Insurance certificates and endorsement must be approved by City's Risk Manager prior to commencement of performance. Current certification of insurance shall be kept on file with City at all times during the term of this Agreement. City reserves the right to require complete, certified copies of all required insurance policies, at any time. Raftelis Financial Consultants, Inc. Page C-2 15-37 B. City's Right to Revise Requirements. City reserves the right at any time during the term of the Agreement to change the amounts and types of insurance required by giving Consultant sixty (60) calendar days' advance written notice of such change. If such change results in substantial additional cost to Consultant, City and Consultant may renegotiate Consultant's compensation. C. Enforcement of Agreement Provisions. Consultant acknowledges and agrees that any actual or alleged failure on the part of City to inform Consultant of non-compliance with any requirement imposes no additional obligations on City nor does it waive any rights hereunder. D. Requirements not Limiting. Requirements of specific coverage features or limits contained in this Section are not intended as a limitation on coverage, limits or other requirements, or a waiver of any coverage normally provided by any insurance. Specific reference to a given coverage feature is for purposes of clarification only as it pertains to a given issue and is not intended by any party or insured to be all inclusive, or to the exclusion of other coverage, or a waiver of any type. If the Consultant maintains higher limits than the minimums shown above, the City requires and shall be entitled to coverage for higher limits maintained by the Consultant. Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available to the City. E. Self-insured Retentions. Any self-insured retentions must be declared to and approved by City. City reserves the right to require that self-insured retentions be eliminated, lowered, or replaced by a deductible. Self- insurance will not be considered to comply with these requirements unless approved by City. F. City Remedies for Non -Compliance. If Consultant or any subconsultant fails to provide and maintain insurance as required herein, then City shall have the right but not the obligation, to purchase such insurance, to terminate this Agreement, or to suspend Consultant's right to proceed until proper evidence of insurance is provided. Any amounts paid by City shall, at City's sole option, be deducted from amounts payable to Consultant or reimbursed by Consultant upon demand. G. Timely Notice of Claims. Consultant shall give City prompt and timely notice of claims made or suits instituted that arise out of or result from Consultant's performance under this Agreement, and that involve or may involve coverage under any of the required liability policies. City assumes no obligation or liability by such notice, but has the right (but not the duty) to monitor the handling of any such claim or claims if they are likely to involve City. H. Consultant's Insurance. Consultant shall also procure and maintain, at its own cost and expense, any additional kinds of insurance, which in its own judgment may be necessary for its proper protection and prosecution of the Work. Raftelis Financial Consultants, Inc. Page C-3 15-38