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| Information |
| TITLE: |
| Consideration and Approval of Contract: Consultant Agreement; Utility Rate and Capacity Fee Study (Approval of the Agreement will allow Willdan Financial Services, Inc. to prepare a Utility Rate and Capacity Fee Study for the City of Flagstaff) |
| RECOMMENDED ACTION: |
1) Approve the Agreement with Willdan Financial Services, Inc. for the amount of $114,380
2) Authorize the City Manager to execute the necessary documents
3) Authorize change order authority for the City Manager for the amount of $11,438 (10%) to cover the expense of additional items or other unanticipated work
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| Policy Decision or Reason for Action: |
| On November 6, 2013 the City issued a Request for Proposals (RFP) for professional consulting services to provide an economic model and a complete cost analysis, resulting in its recommendations for rates and charges for water, wastewater, reclaimed water, capacity fees, septage fees and stormwater fees and assessments. We received six (6) responses to the RFP. An interdivisional group of five (5) City employees evaluated the proposals and selected Willdan Financial Services, Inc. as the most qualified to perform the requirements of the RFP. In accordance with the draft policy A.3, Rate Design Elements, of the Utilities Water Policies under consideration by City Council, Utilities will perform a formal rate study every three (3) years. |
| Financial Impact: |
| The rate study is currently in the FY 2014 CIP budget at $150,000 |
| Connection to Council Goal: |
1. Repair, replace, maintain infrastructure (streets & utilities)
5. Retain, expand, and diversify economic base
11. Effective governance.
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| Has There Been Previous Council Decision on This: |
No
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| Options and Alternatives: |
1) Award the contract to Willdan Financial Services, Inc..
2) Do not award the contract to conduct the rate study and financial model development, and continue with the current system. The current model does need a comprehensive revision based on a rate study determination.
3) Remand the contract and scope to staff for further consideration. This will delay the initiation of the process and require a new procurement process . |
| Background/History: |
Since at least the early 1980’s, the Utilities Division has historically based the rates, fees, and assessments charged to customers by using an economic model to predict the cost of amortized operation and upkeep of the City Utilities infrastructure.
Costs of Service rates are based on a systematic approach to the allocation of user charge revenue requirements to customer classes. Equitable rates are rates that are based on cost of service norms, and where the customer who is charged for the service is charged in proportion to the cost burden caused by that customer class.
An important aspect of assigning rates, fees, and rate classes is the establishment of revenue components in a legally defensible format. Additionally, this study will use sound financial principles outlined in Section A – Finance of the draft Utilities Water Policies under development by City Council. This study will accomplish that goal for the Utilities Division and the City.
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| Key Considerations: |
The goal of the rate study is to ensure that the Utility has sufficient revenues to cover O&M and Capital costs as well as to meet the City’s debt coverage requirements and working capital guidelines.
The economic model and analysis will evaluate the current rates and provide recommendations for fee structures that will meet cost and revenue requirements for a base fiscal year and ten subsequent years.
Six (6) firms submitted proposals for performing the rate study. A five (5) person evaluation committee independently reviewed each proposal and scored the firms on the following criteria: experience and qualifications, presented approach and creativity, ability to meet schedule commitments, project delivery system, and fee. The initial scoring tabulation resulted in a short-list of three (3) firms to be invited to perform an interview with the evaluation committee. There were a total of 500 points possible in the initial evaluation.
The interview component provided for an additional 100 possible points to be calculated as an aggregate total of 600 possible points. The scoring results are on the attached Scoring Tabulation document. |
| Expanded Financial Considerations: |
The rate study is currently in the FY 2014 CIP budget at $150,000 in account number 201-08-370-3179-0-4421
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| Community Benefits and Considerations: |
This rate study will assist in achieving a fair and equitable rate structure, user fees and capacity charges that reflect the actual cost of the operation, maintenance, repair and replacement of the Utilities infrastructure. Costs will be distributed according to the value to the user class, or as the Council ultimately decides.
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| Community Involvement: |
Inform
Involve
This rate study will go through a comprehensive review by City Staff and by the Water Commission. This project will include extensive public outreach including data and analytical details. Public meetings for comment will be conducted during the Water Commission meetings as well as during Council meetings.
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