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R-86-921 - 10/9/1986RESOLUTION NO. 91I /�, WHEREAS, the Council has determined that it would be desirable for a study to be performed regarding the city's wrier • and sewer rates, and WHEREAS, Willis, Graves and Morgan, Inc. of Austin, Texas. Utility Consultant; have submitted a contract to perform c:ne desired rate studies, and WHEREAS, the Council desires to enter into said conirac with Willis, Graves and Morgan, Inc., Now Therefore BE. IT RESOLVED BY THE COUNCIL OF THE CITY OF ROUND F_IC:K, TEXAS That the Mayor is hereby authorized and directed - CO execute on behalf of the City a contract for a utility rate study with Willis, Graves and Morgan, Inc. a copy of said contract. Weird attached hereto and incorporated herein for ail purposes. RESOLVED this 9th day of October, 1986. ATTEST: ULW /jmb 10/6/86 Multimate program Resolution Disk Titled: RateStudy MIKE ROBINSON, Mayor City of Round Rock, Texas July 25, 1986 Mr. Sam Huey, Director of Finance City of Round Rock 214 East Main Round Rock, TX 78664 Re: Proposal to Perform Water and Sewer Rate Study for the City of Round Rock Dear Mr. Huey: Willis, Graves & Morgan, Inc. UTILITY CONSULTANTS Pursuant to our discussions, I am pleased to submit the following pro- posal in the form of a letter agreement to perform a study of the water and sewer rates of the City of Round Rock. Due to the informal procedure used in requesting the proposal, I have prepared a scope of work that I feel reflects what is desired. However, if our firm is selected to do the work for the City and there are elements in the scope of services that are not required, we will be glad to amend the proposal and maximum fees if necessary. We are prepared to start working on the study by mid- August. It is anticipated that the study could be completed within 8 to 10 weeks. The following scope of services, terms and conditions are proposed: SCOPE OF SERVICES Work under this agreement shall include the research, documentation and analysis of data necessary to accomplish four major tasks described as follows: (1) (2) I. Retail Water & Sewer Rates Projection of demand for water and sewer service based on growth in number of connections, changes in consumption patterns, and sales to large users. These projections shall be based on the City's in- ternal planning forecast of population and water demands and will form the basis for expense projections and rate design; Projections of the cost of service based on anticipated growth rates, inflation factors, engineering data from the City's Consult- ing Engineers, data from the City's Capital Improvements plans, and debt service data from the City's financial advisors; 9501 CAPITAL OF TEXAS HIGHWAY NORTH AUSTIN, TEXAS 78759 SUITE 301 [512] 346 -8240 Mr. Sam Huey Page 2 July 25, 1986 (3) Determination of the City's estimated revenue requirements for water and sewer services as a combined fund for the fiscal years 1987 through 1991, based on the cost of providing each of these services; (4) Revisions to the current rate structures as necessary to provide proper price signals to the consumer, to ensure that each service rate is reflective of the associated costs, and to comply with the requirements of applicable regulatory authorities; and (5) Determination of retail water and sewer service rates for FY 1987 and estimated annual percentage increases for the following years which will generate the required revenues. II. Wholesale Water Rates (1) An analysis of the peak demand factors for both the City and the wholesale customer; (2) Determination of invested capital (net plant plus working capital) as related to the supply of water on a wholesale basis. Invested capital shall exclude those elements that are necessary only for retail sales. This analysis will serve as the basis of future wholesale water rate determinations; (3) (4) Determination of a proper measure of return on investment to be applied to the invested capital. Factors to be considered shall include but not be limited to the embedded interest cost, the cost of the City's most recent borrowings, and rates of return allowed to other public utilities; and Design of wholesale water rates based on the cost of service as determined in the steps defined above. The wholesale rate shall be a two -part rate which incorporates a demand charge based on peak usage and a volume charge based on actual consumption of water. III. Review of Capital Recovery Fee Review of water and sewer capital costs to be recovered through the capital recovery fee; Review of projected additional connections and timing of such con- nections relative to new facilities; and Evaluate the adequacy of the capital recovery fee to recover the cost of the additional facilities over time so as to place the least burden on existing customers for facilities required to serve new customers. Factors to be included shall be timing of payment of fees, debt service paid in water and sewer rates, interest earned or charged, and method of financing of the additional facilities. Mr. Sam Huey Page 3 July 25, 1986 (1) (2) IV. Cash Flow Analysis and Computer Model Tests to determine that the rates will generate cash flow from each utility adequate to maintain coverage and allow issuance of addi- tional revenue bonds as necessary; and A computer model will be prepared using Lotus 123 software and will include cost projections, cost allocations, and rate design. A copy of this model will be furnished to the City upon completion of the study so that the City may make updates and continue to monitor the adequacy of rates as various cost or growth factors change. Work products shall include a draft report for discussion purposes, the final report to be submitted in such quantities as required by the City, and the computer model and supporting documentation. COMPENSATION Services performed under this agreement shall be billed for hours actual- ly required to be expended in performing the study in accordance with the following schedule of rates and fees: Professional services $ 85.00 per man-hour Clerical /word processing $ 15.00 per man -hour Out -of- pocket expenses: Travel ) Postage ) Reproduction ) Actual Cost Long - distance Telephone ) Miscellaneous ) BILLING AND PAYMENT Billings shall be rendered monthly for services performed and expenses incurred during the month immediately preceding, and shall be payable upon receipt. MAXIMUM TOTAL BILLING The maximum total billing for the services and items described above shall not exceed $ 16,600 (sixteen thousand six hundred dollars). .In no case will costs be incurred in excess of the amounts authorized without the written approval of the City. Authorization for payment of any billing in excess of the maximum shall be requested in writing, and such request shall state in detail the reasons for the request and the specific items giving rise to the excess billing (e.g., scope of services expanded, etc.). Mr. Sam Huey Page 4 July 25, 1986 Work under this agreement shall be completed within 8 to 10 weeks of authorization to proceed. Very truly yours, WILLIS, GRAVES & MORGAN, INC. Searcy F. Willis, Jr. President TIME FOR COMPLETION LIMITATION OF LIABILITY The liability of both parties to this agreement shall be limited to the amount of the total compensation described above. Should this agreement not be executed within 30 days of the date shown on page 1. hereof, the terms and conditions may be subject to revision. If the above terms and conditions are acceptable to you, please execute in the space provided and return one executed copy to Willis, Graves & Morgan, Inc. at 9501 Capital of Texas Highway North, Suite 301, Austin, Texas 78759. Accepted and Agreed to this 9day of /22jri/,U) , 1986 City of Round, oc , Texas By Name MAYtR Title ATTEST: /E: /. A&/ Cif. Secretary SEARCY F. WILLIS, JR. President Willis, Graves & Morgan, Inc. 9501 Capital of Texas Highway North Suite 301 Austin, Texas 78759 (512) 346 -8240 Since founding the firm of Willis, Graves & Morgan, Inc., in 1977, Mr. Willis has performed utility rate and financial con- sulting services for numerous municipal and investor -owned util- ities. Among the projects in which he as participated are the following: o Rate studies, including cost of service projections, cost allocation and rate design, for the following municipal utilities: Athens Burleson Cleburne The Colony M.U.D. Corsicana DeSoto Denison Flower Mound Page 1 Gainesville Huntsville Lewisville Longview Marble Falls Mineral Wells Rowlett Sherman o Preparation of rate filing and testimony before the Public Utility Commission of Texas on behalf of the following investor -owned water and sewer utilities: Sunbelt Utilities - Houston Tarrant Utility Company - Fort Worth Associates Utility Company - Houston Bayou Vista Utilities - Hitchcock Gulf Utility Company - Galveston Douglas Utility Company - Houston Chacko Thomas & Associates, Inc. - LaPorte Oakridge Water Co. - Livingston Woodcreek Utilities, Inc. - Wimberly Mitchell County Utility Co. - Colorado City Forest Glen Utility Co. - San Antonio Arbor Oaks Utilities, Inc. - Houston o Review and analysis of gas utility rate filing of Southern Union Gas Company on behalf of the City of Austin, Texas. o Review and analysis of gas utility rate filing of Lone Star Gas Company on behalf of the City of Cleburne, Texas. Mr. Searcy F. Willis, Jr. (Cont Mr. Willis has also worked in concert with Peat, Marwick, Mitchell & Co. on the following projects: o Cost allocation and rate design phase of Mississippi Gulf Coast Water Quality Management Project (Section 208). o City of Houston Industrial Cost Recovery Study and Pre - Treatment Study, with responsibility for industrial data base and construction cost base. Prior to founding Willis, Graves & Morgan, Inc., Mr. Willis served as Manager - Business and Municipal Research Department, Economics and Business Research Division of the consulting engineering firm of Turner, Collie & Braden, Inc., Houston, Texas, where he served as the following: o Project director of Comprehensive Water Rate Study for the City of Houston, including cost of service, cost allocation, rate design and cash flow projections. o Project director of Comprehensive Sewer Rate Study for the City of Houston, involving five -year projections of capital funds, cost of service, cash flow and rate design in com- pliance with EPA regulations. Project director, Wholesale Water Rate Study for the City of Waco. o Project director of Sewer Rate Study for the City of Waco. Project director of Water Rate and Sewer User Charge Study for the City of Orange, Texas. o Project director of various Sewer User Charge Studies to comply with EPA regulations, including Trinity Bay Conserva- tion District, Harlingen and Brenham. o Consultant to the Greater San Antonio Builders' Association for rate design, cost savings, and economic feasibility of policy alternatives of the San Antonio City Water Board. Prior to his employment with Turner, Collie & Braden, Mr. Willis served in various capacities in the Rate Department of Tennessee Gas Transmission Company, where he supervised the preparation of economic studies relating to natural gas pipeline operations, including cost of service, rate of return, rate base, cost allocation, rate design, incremental cost and economic feasibility. He was intimately involved in the preparation and submission to the Federal Power Commission (now FERC), of major rate increase applications, applications for Certificates of Convenience and Necessity, tariff filings and refund reports. Page 2 Mr. Searcy F. Willis, Jr. (Cont'd) Mr. Willis holds a B.A. degree in economics from Austin College, and pursued graduate studies in economics at Florida State University- He is a Certified Public Accountant and holds certificates from numerous seminars and courses in accountancy and utility ratemaking. He is a memeber of the Texas Society of Certified Public Accountants, the American Institute of Certified Public Accountants, and an associate member of the American Water Works Association, the Texas Gas Assocation and the Independent Water and Sewer Companies of Texas. Page 3 THOMAS A. GRAVES Vice President Willis, Graves & Morgan, Inc. 9501 Capital of Texas Highway North Suite 301 Austin, Texas 78759 (512) 346 -8240 Mr. Graves has been Vice President of Willis, Graves & Morgan, Inc., since its formation in 1977. During that time he has applied his expertise to a wide variety of utility rate and regulatory matters for both investor -owned and municipal utilities. Among the projects in which he has participated are the following: o Municipal water and sewer utility rate studies for the Texas cities of Burleson, Cleburne, DeSoto, Sherman, Huntsville, Marble Falls, and Gainesville. o Preparation of Industrial Cost Recovery System for the City of Huntsville, Texas. o Development and implementation of mini - computer software systems for the City of Houston Wastewater Division. o Development and implementation of various computer programs and reports for the City of Huntsville Utility Billing section. o Preparation of rate filing and testimony before the Public Utility Commission of Texas on behalf of the following investor -owned water and sewer utilities: Sunbelt Utilities - Houston Tarrant Utility Company - Fort Worth Resort Utilities - Galveston Lackland City Water Company - San Antonio Southwest Water Services, Inc. - Dallas Resort Water Services, Inc. - Dallas Country Squire Water & Sewer, Inc. - Orange Galco Utilities Company - Houston Hill Country Utilities - Austin Bulverde Utilities - San Antonio Chacko Thomas & Associates, Inc. - LaPorte o Review and analysis of gas utility rate filing of Southern Union Gas Company on behalf of the City of Austin, Texas. o Review and analysis of gas utility rate filing of Lone Star Gas Company on behalf of the City of Cleburne, Texas. Page 1 Mr.'Thomas A. Graves (Cont'd) o Preparation of cost of service, cost allocation, rate de- sign, rate of return and related testimony before state regulatory authority on behalf of the following gas utilities: - Railroad Commission of Texas Markham Gas Corporation, Markham, Texas Eagle Pass Natural Gas Corporation, Eagle Pass, Texas - Oklahoma Corporation Commission Felt Water Development Corporation, Felt, Oklahoma o Expert testimony before the Railroad Commission of Texas on behalf of intervenors in rate proceedings of the following gas utilities: Peoples Natural Gas Company, Texline, Texas Flame Gas, Inc., Cross Plains, Texas Cross Plains Gas Company, Cross Plains, Texas o Review and analysis of electric utility rate filing of McCullough Electric Cooperative (Brady, Texas) on behalf of Texas Mining Company, intervenor in rate proceeding at the Public Utility Commission of Texas. o Comprehensive analysis of utility rate structures, tariff provisions and billing practices related to the provision of electric, gas, water and sewer service to The Methodist Hospital, Houston, Texas. o Review and analysis of telephone utility rate filing of San Marcos Telephone Company on behalf of the City of San Marcos, Texas, in appeal of utility to the Public Utility Commission of Texas. o Preparation of tariffs and financial projections and testi- mony before the Texas PUC in the following radiotelephone certification proceedings: Tel Paging, Inc. - Houston and Dallas Loomis Communications Co. - Houston Prior to his employment with Willis, Graves & Morgan, Inc., Mr. Graves served in various capacities in the management of Browning- Ferris Industries, Inc., an international solid waste management company. Concentrating in the area of financial analysis, he completed projects for management and for the Board of Directors, including the following: Performed cost of service and value of service studies of the collection, processing and disposal of solid waste in over 40 cities in the United States, Canada and Puerto Rico. Page 2 Mr. Thomas A. Graves (Cont'd) Developed and implemented a computerized model for analysis of investment in solid waste management projects. including collection, processing and disposal. Performed economic studies relating to various methods of disposal of wastewater solids from municipal wastewater treatment plants in the U.S. and Canada. Prior to his employment at Browning- Ferris, Mr. Graves was employed as a Rate Engineer in the Rate Department of Tennessee Gas Transmission Company. In that capacity he participated extensively in the preparation of rate increase filings to the Federal Power Commission (now FERC), including all aspects of cost of service, cost allocation, rate design and tariff provisions. He also supervised the preparation of related studies for management or for the FPC in the matters of certificate applications, economic feasibility, incremental costs and federal income taxes. Mr. Graves holds a B.B.A. degree from The University of Texas at Austin, where he majored in Engineering Route to Business Administration. He has participated in numerous accounting and rate seminars and courses. He is a professional member of the Texas Gas Association and the Independent Water and Sewer Companies of Texas. He has presented expert testimony before the following regulatory authorities, legislative bodies and courts: Federal Power Commission (Now FERC) Public Utility Commission of Texas Railroad Commission of Texas Oklahoma Corporation Commission 261st Judicial District Court, Travis County, Texas Senate State Affairs Committee (Texas) House State Affairs Committee (Texas) City of Galveston, Texas City of Cleburne, Texas City of Eagle Pass, Texas Page 3 DATE: SUBJECT: ITEM: October 7, 1986 Council Agenda, October 9, 1986 13A - Consider a resolution authorizing the Mayor to enter into a utility rate study contract. The Council has budgeted funds this fiscal year for a comprehensive utility rate study. This study will examine both inside and outside City utility rates as well as the current Capital Recovery Fee charges. Proposals were solicited from three companies to perform the rate study. All three proposals were the same in scope and services to be performed. The main differences of the proposals are as listed below: FIRM CAMP DRESSER, BLACK & VEATCH WILLIS, GRAVES & MCKEE & MORGAN, INC. Location of principal Denver, CO Kansas City, MO Austin rate study contact Local office Austin Austin Austin Time to complete study 120 days 105 days 75 days Cost of study $32,500 $42,500 $16,600 Based on response to proposals, staff recommends Willis, Graves & Morgan, Inc. to be awarded the contract to perform the rate study. Included are brochures and bio. for this firm.