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SECTION 3: PROJECT UNDERSTANDING <br />NBS' Overall Understanding and Approach to the Study <br />We understand that the City of Santa Ana is embarking on a high-level and confidential third party <br />peer -review of its rates, fees, direct and indirect charges, and cross charges from other City <br />agencies to its four enterprise funds: Refuse Collection, Water, Sanitary Sewer and Federal Clean <br />Water Protection. In light of the increased scrutiny on utility rates due to recent Prop 218 rate -related <br />court decisions, it is imperative to ensure the City's rates are in-line with generally accepted industry <br />standards and are defensible from a legal perspective. We realize this is an important project for the <br />City and we have developed our proposal with this in mind. <br />Our proposed deliverables for this project include an evaluation of whether the City's current <br />practices align with industry standards and recommended technical approaches. Where a range of <br />acceptable practices exists, we will endeavor to objectively describe the range. Our efforts will <br />culminate in a report of strengths, weaknesses, and opportunities for improvement and, where <br />appropriate, recommendations for implementation. <br />This review consists of three major work plan components: <br />1. Utility Rates for the Water, Sanitary Sewer, Refuse Collection and Federal Clean Water <br />Protection Enterprise Funds <br />2. Direct, Indirect, and Cross Charges to the Enterprise Funds <br />3. Land Development and Permit Operation Fees <br />Within the course of analysis of all Prop 218 and Prop 26 fees and charges, NBS will apply its <br />decades of professional experience in the areas of developing utility rates, overhead cost allocation <br />plans, evaluating Internal Service Fund charges, and establishing direct and indirect costs and <br />charges. Our ultimate goal is to help the City ensure that all costs allocated to the enterprise funds <br />are reasonable, are aligned with industry standards, and represent rational and defensible rate <br />designs. <br />NBS' review of fees and charges will also include fees charged for land development and permit <br />operations, otherwise known as user and regulatory fees. These fees are governed primarily by <br />Proposition 26, as well as subsequent government codes such as GC 66014 and GC 66016: <br />In November 2010, California voters adopted Proposition 26 (Prop 26), which amended <br />the California Constitution — prohibiting a local agency from adopting or increasing a levy, <br />fee, or charge of any kind without voter approval unless a specific exemption contained in <br />Prop 26 applies. If a levy, fee, or charge satisfies a specific exemption, it may be adopted <br />by a simple majority of the local agency's legislative body. <br />Permit fees for services such as improvement plan review, encroachment permit approval, and <br />discretionary planning approvals, all fall under one of Prop 26's seven stated exceptions, the <br />exception for Licenses and Permits: <br />"A charge imposed for the reasonable regulatory costs to a local government for issuing <br />licenses and permits, performing investigations, inspections, and audits, enforcing <br />agricultural marketing orders, and the administrative enforcement and adjudication thereof." <br />NB City of Santa Ana <br />(�j RFP No. 17-081 Comprehensive Proposition 218 Fees and Charges Compliance Assessment 8 <br />