Loading...
CM-2015-682 - 2/13/2015City of Round Rock ere 50RO° Agenda Item Summary Agenda Number: Title: Consider executing Supplemental No. 1 to "City of Round Rock Agreement for Professional Consulting Services for a Water and Wastewater Utility Rate Study with Raftelis Financial Consultants, Inc." to modify the scope of services and increase the compensation. Type: City Manager Item Governing Body: City Manager Approval Agenda Date: 2/13/2015 Dept Director. Michael Thane, Director of Utilities and Environmental Services Cost: $29,730.00 Indexes: Utility Fund Attachments: SA#1_RFC_UtilityRateStudy_CM2.13.15 Department: Utilities and Environmental Services Text of Legislative File CM -2015.882 In May of 2014, the City Council awarded a Professional Consulting Services Agreement to Raftelis Financial Consultants, Inc. for a Water and Wastewater Utility Rate Study. The study determined what the water and wastewater charges and rates needed to be to keep the City current with the costs and funding necessary in order to sufficiently maintain operations as a self-funded utility. This study helped determine the charges and rates for all City utility customers to ensure that all customer classes are being charged fairly based on the cost of providing service. At the end of the study the rate model will be handed over to the City. Staff will have been trained on the model and will be able to manipulate the model to account for changes that will occur over the course of time. This will allow City staff to periodically make minor modifications and make recommendations for changes to utility rates and charges. A Request for Proposals (RFO) was undertaken to select a firm to perform the study. Of the seven requests sent out, three were received. Two of the three firms were interviewed and evaluated. After checking references, Raftelis Financial Consultants, Inc. was chosen by the selection committee made up of staff from both the Finance and Utility Departments. A contract was negotiated, and the result is a contract not to exceed $109,820. The rate study is 95% complete. This Supplemental Agreement No. 1, in the amount of $29,730, will cover additional services and payment for hours that were not provided under the original contract and Ctyoraoanditck ft, 1 PdMede WWO15 AgenCe Item Snmmery COMMYW (C&2016624) scope. This brings the total cost of the rate study to $139,550. The increase was due primarily in the area of acquiring all of the financial data needed to input into the model. Since this was RFC's first time to provide this service to the City, not enough time was originally estimated for this task. There were also additional hours needed to address all of the wholesale customers' cost questions and meetings. This Supplemental Agreement will take the Rate Study through to completion which is the presentation and recommendation to council for updated utility rates. Staff recommends approval. City Of Round Rock Page 2 Printed on VIV2015 LEGAL DEPARTMENT APPROVAL FOR CITY COUNCILICITY MANAGER ACTION Required for Submission of ALL City Council and City Manager Items Department Name: Pubkc Works Project Name: suaq si w waera waswwaer uwn, reale swey Project Mgr/Resource: Dwld Frekelch Contractor/Vendor: Rahelis Financed Consultants, Inc. Council Action: ORDINANCE RESOLUTION QCity Manager Approval CMA Wording Consider executing Supplemental No. t to "City of Round Rock Agreement for Professional Consulting Services for a Water and Wastewater Utility Rate Study with Naftalis Financial Consultants, Inc." to modify the scope of services and increase the compensation. O:\wdox\SCClnta\0127\1502\MISC\00329358.XLS Updated 6/3/08 CITY OF ROUND ROCK STATE OF TEXAS 4 KNOW ALL BY THESE PRESENTS: COUNTY OF TRAVIS COUNTY OF WILLIAMSON SUPPLEMENTAL AGREEMENT NO. 1 TO "CITY OF ROUND ROCK AGREEMENT FOR PROFESSIONAL CONSULTING SERVICES FOR A WATER AND WASTEWATER UTILITY RATE STUDY WITH RAFTELIS FINANCIAL CONSULTANTS, INC." THIS SUPPLEMENTAL AGREEMENT NO. 1 to "City of Round Rock Agreement for Professional Consulting Services for a Water and Wastewater Utility Rate Study with Raftelis Financial Consultants, Inc.," hereinafter called "Supplemental Agreement No. 1," is made by and between the City of Round Rock, Texas, a home -rule municipality, hereinafter called the "City" and Raftelis Financial Consultants, hic., hereinafter called the "Consultant" WHEREAS, the City and Consultant executed the referenced "City of Round Rock Agreement for Professional Consulting Services for a Water and Wastewater Utility Rate Study with Raftelis Financial Consultants, Inc.," hereinafter called the "Agreement," on May 22, 2014 by Resolution No. R-2014-1439; and WHEREAS, the Consultant's total compensation set forth in the Agreement was not to exceed $109,820.00; and WHEREAS, it has now become necessary to execute Supplemental Agreement No. 1 to amend the Original Agreement to modify the scope of services and increase the compensation by $29,730.00 for a total of $139,550.00; and NOW THEREFORE, in consideration of the mutual promises and obligations in the Agreement and this Supplemental Agreement No. 1, the City and Consultant agree that said Agreement is amended and supplemented as follows: Section 2.01 of the Agreement is hereby amended to read as follows: 2.01 PROPOSAL FOR SERVICES For the purposes of this Agreement, the City agrees to furnish the Consultant the information set forth in Exhibit "A" titled "City Services," which document is attached hereto and incorporated herein for all purposes. For purposes of this Agreement, Consultant has issued 00328737i.2 tM-a6%5- loba its proposal for services for the tasks delineated herein, such proposal for services being attached to this Agreement as Exhibit `B" titled "Project Scope of Work," and the Supplement to Exhibit "B," titled "Project Supplemental Scope of Work." Section 3.01 of the Agreement is hereby amended to read as follows: 3.01 SCOPE OF SERVICES Consultant shall satisfactorily provide all services described herein and as set forth in Exhibit "B," "Project Scope of Work," and the Supplement to Exhibit "B" titled, "Project Supplemental Scope of Work," according to the schedule set forth in the amended Exhibit "C" titled "Work Schedule," which document is incorporated herein for all purposes. Consultant's undertaking shall be limited to performing services for City and/or advising City concerning those matters on which Consultant has been specifically engaged. Consultant shall perform services in accordance with this Agreement, in accordance with the appended "Project Scope of Work" and the "Project Supplemental Scope of Work," and in a professional and workmanlike manner. Section 4.01 of Agreement is hereby amended to read as follows: 4.01 LIMITATION TO SCOPE OF SERVICES Consultant and City agree that the scope of services to be performed is enumerated in Exhibit "B" and the Supplement to Exhibit `B," and herein, and Consultant shall not undertake work that is beyond the Scope of Work set forth in Exhibit `B" and the Supplement to Exhibit "B," however, either party may make written requests for changes to the Scope of Work. To be effective, a change to the Scope of Work must be negotiated and agreed to and must be embodied in a valid Supplemental Agreement as described in 10.01. Section 5.01 of the Agreement is hereby amended to read as follows: 5.01 CONTRACT AMOUNT In consideration for the professional consulting services to be performed by Consultant, City agrees to pay Consultant in accordance with Exhibit "D" and the Supplement to Exhibit "D," entitled "Fee Schedule" and "Project Supplemental Scope of Work," which documents are attached hereto and incorporated herein for all purposes, in payment for services and the Scope of Services deliverables as delineated in Exhibit "B" and the Supplement to Exhibit "B." Not -to -Exceed Total Payment for Services: Consultant's total compensation for consulting services hereunder shall not exceed One Hundred Thirty -Nine Thousand Five Hundred Fifty Dollars and no/100 ($139,550.00). This amount represents the absolute limit of City's liability to Consultant hereunder, unless same shall be changed by Supplemental Agreement, and City shall pay strictly within the not -to -exceed sum recited herein, Consultant's professional fees for work done on behalf of the City. Payment for Reimbursable Expenses: There shall be no payments for reimbursable expenses included in this Agreement. Deductions: No deductions shall be made for Consultant's compensation on account of penalty, liquidated damages or other sums withheld from payments to Consultant. Additions: No additions shall be made to Consultant's compensation based upon project claims, whether paid by the City or denied. II. This Supplemental Agreement No. 1 shall amend the original Agreement only as set forth herein with no other changes in terms or conditions of the original Agreement. IN WITNESS WHEREOF, the City and Consultant have executed this Supplemental Agreement to be effective as of the last date of due execution by both parties. CITY OF ROUND ROCK, TEXAS ATTEST: By: Sara L. White, City Clerk FOR CIT PROVE AS TO FORM: By: Steph r L. Sheets, City Xttorney RAFTELIS FINANCIAL CONSU TS, INC. By: Printed Name,:Ic r Title: /" a"Astr Date Signed: V Z/11lZ0IS Exhibit A - Services to be Performed by the City RiC recognizes the challenges City Staff face with their day-to-day responsibilities. Even though R will require some effort from the Staff during the Project, we will minimize the time required by staff as much as possible. The areas where staff time will be required are listed below: • Providing necessary and relevant data requested by the Consultant; • Participating in Project Kick-off meeting; • Participating in calls/meetings to discuss preferred approaches (financial plan, rate design); • Participating in calls/meetings to discuss preliminary results of each project element; • Responding to questions; • Make time/ decisions on policy matters that will affect the conduct of the study; • Reviewing draft deliverables (reports, presentation packages); and • Coordinate the scheduling of the Council meeting during which the Consultant will present findings of the study. Page 1 Exhibit 8 — Project Scope of Work Project Work Plan The tasks of our proposed project scope are summarized below and based on our understanding of the project expectations for the Utility Cost of Service Rate Study. Although we have listed these tasks consecutively, many tasks will overlap and be conducted concurrently. Task 1: Project Development and Management This task provides a solid foundation for the project. During the kick-off meeting, all aspects of the project will be discussed, including the primary objectives of the City, final deliverables, and ongoing project management. In addition, RFC will lead a workshop on pricing objectives and rate setting in order to gain a clearer understanding of what the City would like to achieve through its rate structure. As part of this task, the Project Team will have discussions with City management and staff to obtain a thorough understanding of the financial, operational, regulatory and political environment. Key issues and areas of concern, such as operating procedures, rate and financial philosophies, the current financial vision, and the pricing objectives used to develop the current rate structures will be reviewed and discussed. Historical information will be reviewed related to costs, customers, usage, demand patterns, capital spending, and revenues generated in order to gain a better understanding of recent changes in operating characteristics and to develop information and materials required to facilitate the completion of later tasks. The proposed project approach entails several different, yet interrelated, work efforts that will require effective coordination between the Project Team and the utility staff. Our project management approach stresses communication, teamwork, objectivity, and accountability for meeting project objectives. This includes general administrative duties, Including client correspondence, billing, project documentation, and administration of the study control plan. This provides for consistent and competent project management to insure that all deadlines and objectives are met in a timely and efficient manner. We believe in a no -surprises approach so that the client is aware of the status of the project at all times. Task 2: Financial Planning and Rate Model Development This task Includes the creation of a water and wastewater cost of service and rate design model (Rate Model) tailored to the City's specific situation and needs. The Rate Model will be constructed in Microsoft Excel, will incorporate the comprehensive 10 -year financial plan, and will be user-friendly to run various financial scenarios based on key Inputs. The Rate Model will be used as the primary vehicle Page 1 in the next five tasks. Upon completion of the Study, the Rate Model will be a formal deliverable, and RFC will train City staff on the functionality and use of the model. Task 3: Comprehensive Financial Planning and Revenue Requirement Determination RFC will collect, analyze, and forecast all of the operating expenditures, capital expenditures, debt service, and miscellaneous Items to be included in comprehensive ten-year water and wastewater financial plans for the ten year study period 2015 - 2024. The projections contained in each financial plan will be developed In consultation with the utility and will focus on determining the level of rate revenue required to fund utility operations, meet target reserve balances, comply with debt service coverage rates and ensure long-term financial viability. The financial plan will be incorporated as a module in the Rate Model, discussed in Task 2. Task 4: Water Cost Allocation and Rate Development During this task, RFC will review existing methodologies for compliance with Industry accepted approaches. In our own analysis, RFC will use a multi -step cost allocation methodology based on AW WA standard processes to allocate FY 2015 water utility revenue requirements to each water customer class based on the proportionate demands they impose on the water utility system and to determine the specific revenue requirement for each water service customer class. Additionally, the existing demand and financial relationships, such as subsidies, between classes will be reviewed and will be determined if existing practice should continue or be revised to reflect new objectives or data -driven changes. RFC will discuss the advantages and disadvantages of the existing water rate structure with City staff and recommend alternatives based on pricing objectives, cost of service, and City staff input. Coupled with the results of cost allocation analysis, the existing and alternative rate structures will be examined and evaluated using the Rate Model (Task 2). Customer impact analyses will be performed for comparison, and a proposed water rate structure and schedule of water rates will be recommended. Task 5: Wastewater Cost Allocation and Rate Development Similarly, RFC will review the existing methodology for wastewater allocation and rates for appropriateness according to industry accepted methods. For an updated calculation of wastewater cost of service, RFC will conduct a multi -step cost allocation methodology based on WEF standard processes to allocate FY 2015 wastewater utility revenue requirements to each customer class based on the proportionate demands they impose on the wastewater utility system and determine the specific revenue requirement for each wastewater service customer class. Similar to the water cost allocation, RFC will examine existing customer classes and review the existing relationships between customer classes. RFC will discuss the advantages and disadvantages of the existing wastewater rate structure with City staff and recommend alternatives based on pricing objectives, cost of service, and City staff Input. Page 2 Coupled with the results of the cost allocation analysis, the existing and alternative rate structures will be examined and evaluated using the Rate Model (Task 2). Customer impact analyses will be performed for comparison, and a proposed wastewater rate structure and schedule of wastewater rates will be recommended. Task 6: Wholesale Review and Rate Determination The objective of this Task is to perform a detailed wholesale rate review and to evaluate the rate calculation for each of the City's wholesale customers. RFC will conduct a thorough review of the wholesale water and wastewater customers' contracted rates and rate setting methodology. Based on the City's input during the kickoff meeting, RFC will work with the City to make any necessary modifications or changes to the selected rate calculation approach. Rates for wholesale customers will be calculated according to Industry accepted standards and recommended for implementation based on cost of service. The detail of the rate calculation will be documented in a simple, straightforward manner for ease of understanding. This Task will also involve a meeting with the Project Team as well as individual meetings with each of the City's wholesale customers to brief the customers on any changes to the approach, future rates, and to address any questions. Task 7: Benchmarking Study The Study will Include a benchmarking analysis to compare and benchmark the proposed rate structure and rates developed for the City with relevant neighboring communities and utilities of comparable size and service characteristics. RFC will work with City staff to develop an appropriate group of survey communities, and we anticipate that the final comparison group will be six to ten peer communities. Task B: Study Deliverables, Presentation of Results, and Support RFC will document the Study's methodology and results in formal report. RFC will assist the City in drafting relevant policy and procedural language should any changes be necessary. As previously stated, the Rate Model will be a formal deliverable and will accompany the final report. RFC will be create a PowerPoint presentation summarizing Study results and will present to City senior staff and City Council. As additional optional tasks not included in this scope, RFC can provide assistance as needed when conveying the new rate structure to the public, and RFC can serve as expert support in any related rate use should one prise: Page 3 Exhibit 8 —Project Supplemental Scope of Work Proiect Work Plan The tasks of our proposed supplemental project scope are summarized below. They describe additional effort needed on original scope tasks and the understanding of the additional project expectations for the Utility Cost of Service Rate Study. This contract amendment details areas where we have encountered a significant increase in level of effort or additional task items outside the original scope. The scope of this contract amendment addresses: 1) Our time in excess of the level of effort in speck tasks as contained in the original scope; and 2) Additional activities outside of the original scope of the Study. These two areas are discussed below in more detail, and were discussed during our meeting with the City on October 13, 2014 and subsequent teleconference calls. This request identifies the areas of the original scope where our level of effort materially exceeded what we had originally anticipated, additional scope tasks, and a revised project schedule end date. 1) For three tasks, we incurred additional level of effort to complete task objectives that was significantly above the level in the original scope. The table below shows the three tasks, the hours included in the scope, and the actual hours incurred to complete the tasks. In total, we spent an additional 174 hours beyond the level of effort originally anticipated. This cost is estimated at $29,460. ) 174 ) These additional hours were not the result of one specific reason, but a combination of factors. We estimate the costs associated with the additional 174 hours at $29,460. However, based on our experience in completing similar studies we are certainly open to "absorbing/sharine a reasonable portion of this amount, which we've agreed with City staff at 50% of this additional cost. We believe that the following areas provide a sound basis for our requested amendment (a basis for the incremental cost/the 174 hours); our request for additional compensation for items we could not have reasonably anticipated. Page 1 Scope Actual Additional Task Labor Hours Labor Houre Incurred His, Task 2: Financial Rate Model Development 92 151 59 Task 4: Water Cost Allocation antl Rate Development 66 128 72 Task 6: Wholesale Review and Rate Detennination 78 121 43 ) 174 ) These additional hours were not the result of one specific reason, but a combination of factors. We estimate the costs associated with the additional 174 hours at $29,460. However, based on our experience in completing similar studies we are certainly open to "absorbing/sharine a reasonable portion of this amount, which we've agreed with City staff at 50% of this additional cost. We believe that the following areas provide a sound basis for our requested amendment (a basis for the incremental cost/the 174 hours); our request for additional compensation for items we could not have reasonably anticipated. Page 1 Task 2: Financial Rate Model Development • There were several updates to the budget data that was critical to developing the financial plan/model. Each time new/updated data was provided this information had to be inputted to the model and "new" financial plans had to be developed and reviewed with the City. It is unusual to have to update baseline budget data during the course of a rate study. • One unforeseen concern during the project was the historical budgeted to actual expenses and revenues. While this is typically reviewed in our studies, we expended a significant amount of time compiling and modeling the differences between historical projected to actual expenses and revenues, including identifying major changes or causes of discrepancies. This analysis also required an additional meeting with Finance Staff to discuss the results and develop an approach to forecasting expenses and revenues in the Study, and then incorporating these results into the revised Model. Task 4: Water Cost Allocation and Rate Development • Complications and corrections in the customer data and customer classes. Similar to the updated budget data (the Task 2 discussion) our level of effort estimate did not include the types of corrections and updates we actually experienced on this project. • There were many nuances and idiosyncrasies in the cost of service analysis that arose from the City's budget, such as the BCRUA payment, customer classifications, such as inside/outside city Chandler Creek, and the miscellaneous revenue designations, such as the connection between impact fees and debt service. Given the level of available data, extensive review was conducted on impact fee payments, their respective assets, and how current or historical impact fee revenue should be allocated based on Cash versus Utility approaches to retail customers and wholesale customers. • Cost allocation factors were prepared for review, but a separate meeting was ultimately held with Utility Staff on September 24 to discuss allocation factors. Task 6: Wholesale Review and Rate Determination While the Scope included review and calculation of wholesale rates according to existing method (Utility), it was prudent to conduct a comprehensive review and evaluation of both the Cash Needs and Utility Approaches, given the sensitive nature and the response to wholesalers the previous year regarding the Cash approach. Since the decision to stay with the existing Utility Approach was not made until a meeting held on October 13, full cost of service and rate design were evaluated for both Cash Needs and Utility. We also prepared a letter report specifically documenting Wholesale Analysis; this was note anticipated in the original scope of service. 2) As a result of the October 13 meeting, the City identified several out -of -scope areas having a cost of $15,000. Specifically, the City requested: Task 9. Rick Giardina's participation (preparation and attendance/facilitation) in the Wholesale Customer Workshop scheduled for December 91". Task 10. Rick Giardina's participation (preparation and attendance/facilitation) in the Wholesale Customer Consultant meeting TBD. Page 2 Task 11. Rocky Craley's participation (preparation and attendance/facilitation) in the Wholesale Customer Consultant meeting TBD. Task 12. An enhanced retail customer impact analysis that identifies impacts for all customers based on historical data, which in turn is used to categorize levels of respective customer increases or decreases based on percentage of total customers. Finally, this contract amendment acknowledges that the previous contract completion date was September 30, 2014. RFC is proposing a revised completion date of April 30, 2015 to allow adequate time for scheduling of the City Council meeting and finalizing Study results. Page 3 x N N f m t ' b N � E a C y O c R ri i O « m i e p c m m d p fo d e o v a M 0 C 1 d N t0 n M u Y N f I I iii EXHIBIT licit r fl r 0 3 1 a, E E o b o m m c m b p b 6 c y N b: a A p b q C •c O ry R N .c p _ a U b > G'• N f C m LL d R o .0 i7 i V EXHIBIT licit r 71 gu �\LL @aa@e888m | "°000@;@0 �&Eka2;; .2;ggq;@mgq fi}§I§§[§\} ! %){ f {#\!) ) � !) 15 y5 7!r!; o !!!!!§mc �ww�we«a; § SUPPLEMENT TO EXHIBIT "D" � mem o � S eon o 0 N m O m N N Q N N N N Y � m a m LL Yal IJL Yui E o L dm Ud = a n F N n o t- O O d E - o Q N N d C C C O a vii e c c u ag u° d w c v o Z s uY n p C « c E E u o z m c N y E O y Y d � "u�( s i f a v t G A a 6 E m E L a O 'T C d n 3 V b Lx « O m 6 y ry W d_ a a L y N V N y OI M M L O eN1 4 F F SUPPLEMENT TO EXHIBIT "D"