Loading...
HomeMy WebLinkAbout25C - AGMT - SEWER AND WATER FINANCIAL PLANREQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE: FEBRUARY 18, 2014 TITLE: AMENDMENT TO AGREEMENT WITH BLACK & VEATCH CORPORATION FOR PREPARATION OF A SANITARY SEWER AND WATER FINANCIAL PLAN CITY MAAAGER RECOMMENDED ACTION CLERK OF COUNCIL USE ONLY: ❑ As Recommended ❑ As Amended ❑ Ordinance on 1" Reading ❑ Ordinance on 2nd Reading ❑ Implementing Resolution ❑ Set Public Hearing For CONTINUED TO FILE NUMBER Authorize the City Manager and the Clerk of the Council to execute a second amendment to the agreement with Black & Veatch Corporation, subject to nonsubstantive changes approved by the City Manager and City Attorney, to prepare the City's Sanitary Sewer and Water Financial Plan, in an amount not to exceed $100,000. DISCUSSION Approval of this recommended action will allow Black & Veatch Corporation (B &V) to perform additional analysis and evaluation to complete the Sanitary Sewer and Water Financial Plan. This plan is needed to address the City's long -term water and sanitary sewer infrastructure needs. On October 17, 2011, the City Council approved a consultant agreement with B &V, in the amount of $230,000, to prepare a Sanitary Sewer and Water Financial Plan. The report would assess the City's water and sanitary sewer system and provide, among other items, a Rehabilitation and Replacement schedule, a Capital Asset Management & Prioritization System model, and a rate analysis. On February 4, 2013, the City Council approved an amendment to the agreement with B &V, in an amount not to exceed $150,000, for additional analysis to evaluate the potential impacts of a possible sanitary sewer transfer between the Orange County Sanitation District and the City. Such a change in ownership could result in a substantial change in costs to the City's Sewer Enterprise. Over the course of the past year, several financial and operational issues have been subsequently identified that require further analysis and inclusion in the final report. City management has identified the goals and criteria of this analysis, such as appropriate reserve levels and additional program costs. The added work is necessary to properly evaluate potential impacts financially, managerially, and operationally, to both the water and sewer enterprises. 25C -1 Amendment to Agreement with Black & Veatch for Preparation of a Sanitary Sewer and Water Financial Plan February 18, 2014 Page 2 Staff recommends that the agreement be amended in order to complete the study. B &V has performed well and has made all adjustments that the City has required. In addition, B &V has demonstrated a successful record of assisting other utilities through the complex Proposition 218 requirements. The firm recently worked with the cities of South Gate, Downey, San Juan Capistrano, Oxnard, and Long Beach on water and wastewater financial analyses. In the last five years, B &V has conducted more than 30 such rate studies in accordance with Proposition 218 requirements. ENVIRONMENTAL IMPACT There is no environmental impact associated with this action. FISCAL IMPACT Funds are available in the Water Administration and Engineering Fund (Account 06017645- 62300). Edwin "William" alvez, P.E Interim Executi e Director Public Works Agency EWG /NS /RR Exhibits: 1. Consultant Contract Agreement APPROVED AS TO FUNDS AND ACCOUNTS: Francisco Gutierrez Executive Director Finance & Management Services Agency 25C -2 SECOND AMENDMENT TO AGREEMENT THIS SECOND AMENDMENT TO AGREEMENT is entered into on February 18, 2014, by and between Black and Veatch Management Consulting, a California corporation ( "Contractor ") and the City of Santa Ana, a charter city and municipal corporation organized and existing under the Constitution and laws of the State of California ("City"). RECITALS: A. The parties entered into Agreement A- 2011 -238, dated October 17, 2011 (hereinafter "said Agreement ") by which Contractor has provided financial and engineering services required to prepare a sanitary sewer and water utility financial plan. B. By Amendment A- 2013 -026, dated February 4, 2013, the parties amended the Scope of Services and added compensation to pay for the additional services. C. In accordance with the terms and conditions of said Agreement, the parties again wish to amend the Scope of Services to provide additional study services related to setting appropriate reserve levels and capturing program costs. In addition, the consultant will assist with implementation of the fee study and training in the asset management database. WHEREFORE, in consideration of the covenants contained in said Agreement, and subject to all the terms and conditions of said Agreement, except those amended in this Amendment to Agreement, the parties agree as follows: 1. Section 1, SCOPE OF SERVICES, shall be deleted in its entirety and replaced with the following: "Consultant shall provide financial and engineering evaluation services to prepare a sanitary sewer and water utility financial plan for the City, as set forth in Exhibit A, attached to said Agreement. Said financial plan shall include separate analysis of both water and sewer utility services. Consultant shall 1) update the CAMPS model, provide preliminary condition assessments for currently planned water and sewer projects, and 2) assist the City to update and implement the water and sewer rate studies, as set forth in Exhibit A -1, attached to the First Amendment to Agreement. Additionally, Consultant shall provide the additional financial support services, meeting attendance and report delivery required to complete the water and sewer service utility fee study, as set forth Consultant's Proposal dated December 16, 2013, attached hereto as Exhibit A -2, and incorporated by this reference. The City Manager may authorize additional services, in writing, if such services are necessary to complete the fee study, implementation or database training." 2. Section 3.a., COMPENSATION, shall be amended to add $80,000.00 to pay for the additional study services, meeting attendance and report delivery, as set forth in Exhibit A -2. An additional $20,000 contingency is available for unanticipated costs and /or services required to complete the study. The total sum to be expended pursuant to said Agreement shall not exceed $480,000, during the term of said Agreement. Section 4, TERM, shall be amended to extend the termination date to December 31, 2014. Exhibit 1 25C -3 4. Except as hereinabove amended, all terms and conditions of said Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment to Agreement on the date and year first written above. ATTEST: CITY OF SANTA ANA MARIA D. HUIZAR DAVID CAVAZOS Clerk of the Council City Manager APPROVED AS TO FORM: Laura Sheedy Assistant City Attorney RECOMMENDED FOR APPROVAL: EDWIN "WILLIAM" GALVEZ, P.E. Executive Director - PWA BLACK AND VEATCH ANN T. BUI Director 25C -4 City of Santa Ana, CAI SANITARY SEWER AND WATER FINANCIAL PLAN Scope of Work PROJECT UNDERSTANDING The City of Santa Ana wishes to obtain a qualified consultant to 1) conduct an evaluation of the City's sanitary sewer and water systems and 2) to perform a comprehensive sanitary sewer and water rate study. The study will entail an assessment of the City's infrastructure to develop a Rehabilitation and Replacement (R &R) Program and then design both sanitary sewer and water rates that comply with all legal requirements and protect the long -term financial health of the systems. The major goals identified include: R1 Develop sanitary sewer and water rates that are fair, objective and fiscally appropriate over a 20 -year study period. iJ Assess the City's operations and budgets to determine current and future level of service. 01 Evaluate the City s sanitary sewer and water infrastructure and determine necessary improvements. KI Develop an R &R Program and long -range budget for both the sanitary sewer and water systems. Provide alternative funding mechanisms to fund operations and capital improvements while minimizing rate impacts. 11 It is also understood that the City may deem it necessary to perform the following additional duties: Project growth and water demands for the sanitary sewer and water systems. Conduct a rate analysis on the basis of available water supply. it Build a complete and comprehensive CIP program for both the sanitary sewer and water systems. 0 Develop a Water Master Plan using existing City GIS data. Similar to other sewer and water systems in California, the City is facing several challenges presented by reduced water demand, water supply shortages, cutbacks in personnel, the recent adoption of S130-7, and increased environmental regulations. in light of these, the City is striving to provide reliable sewer and water services at affordable rates to its residents. The result of this study will assist the City in meetings its goals. City of Santa Ana Operations The City of Santa Ana serves a population of about 320,000 residents in Orange County, California. It obtains its potable water supply from groundwater and import water via Metropolitan Water District, The BLACK & VEATCH I Scope of Work Exhibit A 25C -5 City of Santa Ana, CAI SANITARY SEWER AND WATER FINANCIAL PLAN water system consists of 20 wells, 8 reservoirs for a total capacity of 49 million gallons, 7 import water interconnections, 7 booster pumping stations, and 16 emergency interconnections with neighboring utilities. The sanitary sewer system is a collection only system with 2 lift stations, 45,000 laterals, 8,000 manholes and 390 miles of pipelines. PROJECT APPROACH Black & Veatch has developed a project approach that relies on the fundamental principle of first understanding the needs and priorities, recognizing the evolving nature of the sewer and water systems, and then developing a holistic, yet flexible solution aligned with meeting the City's defined goals and stated objectives. Rehabilitation and Replacement Program To meet the City's objective of developing an R &R Program, Black & Veatch will utilize our Comprehensive Asset Management & Prioritization System (CAMPS) model. CAMPS utilizes a holistic approach to managing assets for Capital Asset Management Programs. Due to the City's immediate needs of defining a R &R Program that can be incorporated into the rate study portion, Black & Veatch's approach is to employ the CAMPS model. The CAMPS model is based on projecting the capital rehabilitation and replacement of each asset or grouping of similar assets (e.g, long pipe runs) that will be needed each year to service the City's customers. By aggregating Capital R &R needs by year, financial needs are also identified and can be integrated into the financial plan. As illustrated in the flowchart to the right, the Ivey activities consist of the following: „5 Confirm all capital assets have been incorporated into the inventory to properly project the R &R needs into the future. ,;, Populate the CAMPS Model with available asset inventory data to project R &R schedules and costs for each capital asset by year, considering the following critical elements: Reporting on annual needs for each system. Allowance for criticality rankings to be incorporated into the model for prioritizing expenditures and considering multiple scenarios based on risk tolerance. BLACK & VEATCH I Scope of Work 25C -6 City of Santa Ana, CAI SANITARY SEWER AND WATER FINANCIAL PLAN Develop specific recommendations for the rate study based on the R &R modeling results and appropriate funding policy changes. Sanitary Sewer and Water Rate Study To meet the City's objective of performing a cost of service and rate study, Black & Veatch will utilize the project approach depicted in Figure 1. The key components consist of the following: M Cost of Service. The cost of service analyses will take into consideration the functional aspects of both system operations and cost component's such as capacity costs, commodity costs, customer costs and other direct costs. The analysis will evaluate the existing systems and the relative load placed on the systems by the different customer classes to fairly allocate costs based on services received. rMRate Design. The rate design recommendations will incorporate the City's objectives of examining the rates that promote water conservation goals. Through our experience with multiple utilities, Black & Veatch will help develop rates and charges that are fair, equitable, and defensible and in accordance with AWWA Manual M1 and WEF MOP 27. BLACK & VEATCH I Scope of Work 25C -7 City of Santa Ana, CA I SANITARY SEWER AND WATER FINANCIAL PLAN Methodology Using the project approach as a guide, Black & Veatch has developed a detailed methodology that outlines the required tasks to meet the City's objectives. Task 1— Project Management The objective of this task will be to establish lines of communication, get an in-depth understanding of the study goals and objectives, assign roles and responsibilities, and address questions and concerns. Specific subtasks are: 1.1 Meet to introduce consultant team to City staff, confirm the overall project purpose, and discuss approach and strategies associated with an R &R Program and rate study. 1.2 Obtain financial, operational and other pertinent information based on initial data request. List of data required for the study includes, but is not limited to: I9 Sanitary sewer and water ISIS information (already made available). Additional listing of assets not included in the GIS database. * Historical asset replacement documentation, historical documentation of maintenance, and the latest Sewer and Water Master Plans. Revenue budget data covering rate schedules, basis for billings, revenue data, and usage records for all customer classes for the most recent five years. * Expense budget data covering operation and maintenance (0 &M), water purchases, routine capital outlay. Long-term capital improvement project plan with estimated costs and scheduling. * Debt issuance official statements that provide information about debt service, bond covenants, debt service coverage requirements, etc. REHABILITATION AND REPLACEMENT PROGRAM Task 2 — Asset Inventory Gap Analysis The objective of this task is to conduct an asset inventory assessment and to identify gaps in the dataset. Specific subtasks are: BLACK & VEATCH I Methodology 25C -8 City of Santa Ana, CAI SANITARY SEWER AND WATER FINANCIAL PLAN 2.1 Assess the GIS database provided by the City to confirm that sufficient information is available to model capital rehabilitation and replacement needs. 2.2 Meet with City staff to identify additional assets not in the GIS system that will need to be evaluated. 2.3 Review historical asset documentation including maintenance records, Master Plans, close - circuited television (CCTV) reports, and other documents. 2.4 Conduct field inspections on the assets that are not in the GIS system and have no historical maintenance documentation. Task 3 — Capital Asset Rehabilitation and Replacement Needs Evaluation The objective of this task is to develop the R &R Program based on Comprehensive Asset Management & Prioritization System (CAMPS) that can be used in the rate study tasks. CAMPS is an MS Access tools developed by Black &'Veatch to manage all assumptions for projecting R &R schedules and costs and to model the R &R activities and funding parameters, BLACK & VEATCH „ kuildinga world ofdifference. CAMPS "Comprehensive Asset Management and Prioritization System" Ve.0 Y Ats[taxye4y n v zryuleLSZtNary \kw RHvCtnamnaaa p yRUaJmAilstntbnaaz upe+eYamH \`av: Afsnt Valttfhn O VkYiYy�l(fu[IMPl Way kif eaelMMNSpea]�e"tO [Cdw[a " "VIem�Onty Made • •• Specific subtasks are: 3.1 Develop a draft asset class listing based on the asset inventory provided by the City for both sanitary sewer and water capital assets. 3.2 Populate an Asset Class Library based on the agreed draft set of classes. The library will contain logical units of assets also known as "asset classes." In the context of CAMPS, asset classes are BLACK & VEATCH I Methodology 25C -9 City of Santa Ana, CAI SANITARY SEWER AND WATER FINANCIAL PLAN defined by those assets having a similar function, cost structure, and useful lives and refurbishment intervals. 33 Incorporate into the Asset Class Library the useful lives, rehabilitation program definitions, intervals and costs, and replacement schedules and costs for each asset class based on industry standards. rR Define Useful lives: For each defined asset class a determination as to expected useful life will be made. The useful life is defined as the number of years of normal use that can be expected prior to replacement becoming necessary. The estimate will be based on our industry experience, manufacturers' estimates, previous literature research, and our work for other agencies. These estimates are contained within our CAMPS Library, M Define rehabilitation programs, intervals and costs: Most asset classes require various capital rehabilitations on a cyclic basis in order to sustain or extend the asset's useful lives. Pump stations, for example, can be expected to undergo pump rehabilitation, motor overhaul, replacement of electric components, and mechanical overhaul at intervals shorter than the cycle for the replacement of the assets themselves. Where such programs are applicable, we will define appropriate rehabilitation intervals and costs that might be considered capital expenditures. GI Define replacement intervals and costs: For each asset class an estimate of the base -year replacement cost will be incorporated. The estimates will be based on the experience of our engineers, construction cost estimates we have recently prepared for other clients, industry standards, and our experience with other agencies. For unique assets, we will adjust historical costs to the base year using Engineering News and Report (ENR) indices. rO Where possible, replacement costs, like other asset attributes, will be defined in terms of unit costs to facilitate the class -based estimating approach (dollars per foot of various types of pipe, dollars per gallon for storage facilities, dollars per square foot for buildings of various classes, etc.). €a Facilitate an Asset Class Validation Workshop: Each of these components of the asset class will be presented in detail within BLACK &VEATCH 1 Methodology 25C -10 City of Santa Ana, CAI SANITARY SEWER AND WATER FINANCIAL PLAN a workshop setting to incorporate City - specific experience with each asset class. We anticipate one 2 -hour workshop for each area of capital infrastructure (sanitary sewer and water). PA Understanding the time - sensitive nature of this study, Black & Veatch will leverage our extensive asset class library to the extent possible to collaboratively guide the City. 3,4 Define appropriate method for the City of determining asset value to comply with GASB34 /35 standards, Black & Veatch proposes evaluating the reproduction cost new less depreciation (RCNLD) for assets within the inventory, as it provides a more accurate account of current "value" of the assets than original acquisition cost, less depreciation, CAMPS will be used to generate current asset values and depreciation, 3.5 Develop R &R schedules from CAMPS projecting the specific capitalized rehabilitation, replacement, and costs needed for the next 20 years. Costs are escalated to the year of the R &R. 3.6 Prioritize the R &R schedule based on "needs first" constraint. Needs first relies on the rehabbing or replacing assets that have the highest immediate possibility of failure based on their condition or life cycle. The updated R &R schedule will serve as the basis for R &R activities in the rate analysis portion of the study. 3.7 Specific considerations in the evaluation will be using NASSCO standards for sewer pipes and the incorporation of the water meter replacement program, SEWER AND WATER RATE STUDY Task 4— Financial Plan The objective of this task is to develop the financial plan for the sanitary sewer and water systems. Specific subtasks are: 4.1 Review the latest Master Plans and Capital Improvement Program (CIP) documents Black & Veatch will examine major CIP to: (1) identify whether the list of proposed projects appears to adequately and thoroughly address sanitary sewer and water improvement needs for the planning period, and (2) determine whether the City's methodology for project cost estimating appears reasonable. 4.2 Develop historical bill tabulation for water based on current billing system. The bill BLACK & VEATCH I Methodology 25C -11 loo =r< Bill Tabulation Blutrlbullmt 80% to zo% a 6090 e w 3DY. p zo% lo% e o =, u 1 to loo t,000 10,000 100,000 bloalhly wmer Usage - Cif ---- ftsiknti�b - - •CommeaW— - - IndWlul so% 80% zo% 6090 3DY. zo% lo% o =, City of Santa Ana, CA I SANITARY SEWER AND WATER FINANCIAL PLAN tabulation is a critical element in examining usage trends, potential structure modifications, and the creating new customer classes, In evaluating bill tabulation data, the basis for establishing new tiers, break points, exceptions and promoting water conservation can be determined, 4.3 Develop an Operating Fund financial plan based on forecasted revenue and expenses for the systems. The financial plan will cover a five (5) year period. The financial plan will incorporate the following elements: 0 Forecast sanitary sewer and water revenues under existing rates for the planning period recognizing projected accounts, volumes, and usage patterns by customer class, Forecast sanitary sewer and water 0 &M expenses, power costs, distribution systems, debt service, transfers, reserves, and other expenditures, 4.4 Develop a Capital Fund long-term financial plan based on the capital needs assessment in subtask 4.1. The financial plan will include considerations for various financing alternatives and include a review for affordability based on current and expected rates. 4.5 Develop a R &R Fund financial plan based on capital needs identified in R &R Program that will incorporate annual depreciation expense. 4.6 Develop a profit and loss statement and cash flow forecast to determine the cash flow needs of the systems, The cash flow will serve as the basis for the cost of service and rate design analysis. 4.7 Review reserve fund levels and policy for operating, capital improvement, R &R, and emergencies. Tasic 5 — Cost of Service Analyses The objective of this task is to perform a cost of service analysis tailored to the City. The goal is to achieve revenue self- sufficiency between services and customer classes within the rate framework. Specific subtasks are: 5.1 Determine the appropriate functional classifications of costs for allocation purposes. 5.2 Classify functional expenses to cost components such as capacity costs, commodity costs, customer costs and other direct costs. BLACK & VEATCH I Methodology 25C -12 City of Santa Ana, CAI SANITARY SEWER AND WATER FINANCIAL PLAN 5.3 Classify plant investment to the functional costs categories such as supply, collection, pump stations, treatment, transmission, distribution, and meters. 5.4 Classify operating, administrative, engineering, 0 &M, power, etc, to the functional costs categories identified in subtask 5.3. 5.5 Allocate the classified costs of the sanitary sewer and water systems to the customer classes based on the cost components identified in subtask 5.2. 5.6 Estimate class service characteristics associated with each of the functional cost elements by recognizing the bill distribution analysis performed in subtask 3.2. 53 Develop unit costs of service based on the cost allocations. The unit costs of service are applicable to all system users and each class' proportional responsibility for total system costs. The relative responsibility of each class customer will be specifically determined based on each class' estimated service requirements. 5.6 Prepare a comparison of class revenues under existing rates with allocated class costs of service to determine the level of cost recovery by class, and in total, and to demonstrate any needed adjustments to align class revenues and allocated costs. Task 6 — Rate Design The objective of this task is to evaluate the City's existing rates and identify potential modifications to the rates and rate structures. As part of this task, an analysis of the City's billing system capability will be incorporated. In general the design of rates and rate structures intend to accomplish the following: Be consistent with all applicable laws, statues, rules and regulations governing fees, rates, and charges such as Proposition 218. Address revenue sufficiency, stability, customer clarity, price signaling, and water conservation goals as set forth in SBx7 -7. Specific subtasks are: 6.1 Analyze the existing rate structure and develop alternative rate structures that address, at minimum, the following: Lni A rate structure that incorporates water conservation rate programs BLACK & VEATCH I Methodology 25C -13 City of Santa Ana, CA I SANITARY SEWER AND WATER FINANCIAL PLAN 91 A rate structure that incorporates elderly low-income programs 9 A rate structure that incorporates emergency rates during periods of drought or natural /manmade disasters 6.2 Analyze the current block sizes and seasonal rate differentials and make recommendations to satisfy the California Urban Water Conservation Council Best Management Practices, 6.3 Prepare comparison of revenues expected from each customer class under proposed alternative rates and existing rates to determine the adequacy of cost recovery, 6,4 Prepare comparisons of typical bills under the existing and proposed rates for each customer class under various meter sizes and levels of usage. 6.5 Provide a comparison of existing and proposed sanitary sewer and water rates to selected neighboring municipalities, Task 7 — Rate Model The objective of this task will be to develop two independent Microsoft Excel spreadsheet analyses rate models that establish financial planning, cost of service, and rate design procedures. These models will enable City staff to periodically revise and update the projections of revenue and revenue requirements, financial plans, cost of service analyses, and design of adequate rates on a routine basis. The City will be able to use the model to calculate annual rate adjustments or to conduct "what -it" analyses reflecting the impact of changes in significant system variables such as customer growth and volume projections, revised budgeted revenues and expenditures, allowances for inflation, capital improvement program schedules, and policy decisions. Provided below are some screenshots of the Black & Veatch model that reflects new trends in modeling and takes advantage of software developments, Some examples of new model enhancements include: `t Specifically tailored and designed to recognize the systems' unique needs, characteristics and information base, including compatibility with the City's budgetary and accounting systems. , Fu Flexible capital improvement program scheduling allowing for changes in costs, sources of funds, timing, and allowances for inflation. 0 Ability to develop financial plan cash flow alternatives for changes in customer, volume, and revenue projections; budgetary revisions; variations in timing and amounts of revenue increases; debt service structuring and different capital improvement program scenarios; and changes in other parameters. BLACK & WATCH I Methodology 25C -14 City of Santa Ana, CA I SANITARY SEWER AND WATER FINANCIAL PLAN El Ability to assess impact on cost of service allocations to user classes and utility rates of alternative management decisions. * Capability to independently design and develop rates and charges on an annual basis, thus permitting staff to examine the phase -in needed for rate adjustments over a period of time. The model will test revenue generation by class and in total for proposed rates and indicate impacts on customers served through a typical monthly bill analysis. The following were integrated for simplicity of use. Screen shots are shown below. PR "Virtual' Inputs Management - All inputs are managed through the Inputs navigation function 1 Detailed Assumption Development - customized for each client's needs; this allows for detailed development of revenues, expenses, and capital and operating plans tf Sensitivity Analysis - A dashboard system that allows users to create scenarios for financial planning and rate revenue increases General Navagation - Black & Veatch Model Home page t. Navlgation Foeturos— provides users withthe ability to navigatethfoughoutthe model from onyworksheet. 2. Main — returns users to the Main Me no screen, 3. Inputs —takes users to the Model ranges designated for input variables. 4. Analysls — directs us ors to either the revenue sufficiency s can ario plan or the rate design modules. 6. Revenue Sufpclortcy —leads users through the calculations of the cash flow process. 8. Hatos/Cost of Service— leads usersthrough tha cost of service and rate design process. 7. Reports — directs users to custom ropons for use in meetings, documents or other purposes. 8. Harp— provides users help In understanding rote study components and navlgadng the model. IJ BLACK & VEATCH I Methodology 25C -15 City of Santa Ana, CAI SANITARY SEWER AND WATER FINANCIAL PLAN Inputs Management - The Inputs Page t. Clicking the "Inputs* button on the upper left will direct the user to the Inputs Page. Note the Navigation Features bar is present on every page, to provide only nuvigodon and access to features. 2. Inputs options are grouped by module —revenue sufficiency and cast of service y rate design. All key inputs are accessible through this page, providing the user one place to find all inputs needed to update the model, 3. Select the Budget button to proceed to the next example. BLACK & VEATCH I Methodology 25C -16 City of Sonta Ana, CAI SANITARY SEWER AND WATER FINANCIAL PLAN Scenario Plann 1, Navigation Features— provides titers withthe ability to navigate throughout the Model from anyworksheot. 2. Summary of sign! [ice of output Irate revenue incretsosend debt service coverage) and override functions used In scene rio analysis. 3. Summary graph showing a novel target balances (bars) and so tool turns Ibalances(diamonds) — Fiscal years 2010 through 2012 show actual balances aline target level, indicating a rate revenue adjustment is required to achieve these balances. 4. Summary graph showing a on ual target (horizontal lin as) and a ctu ad debt service coverall a (bars) — Fisoolye ars 2909 and 2010 show actual coverage at the target level, Ind testing a rate revenue adjustment Is required to achieve these results. 6. Summary graph showing the source of proceeds used to fund thaOR . These results are based onuser designated funding selected on the CIP worksheet. 6. Summary graph showing a ran a Irate revenue adjustments. Task 8-- Meetings, Reports and Presentations The objective of this task is to identify meetings and deliverables for the City. Specific subtasks are: 8.1 Attend at minimum one (1) monthly meeting with City staff. Schedule conference calls as needed to update staff on progress of the R &R Program and rate models, 8.2 Draft Report U1 Document the preliminary findings associated with the R &R Program RI Document preliminary findings of financial plan, cost of service and recommended rate structure M Present draft report to the Water Resources Division, Finance Department and member of City Council, as desired BLACK & VEATCH I Methodology 25C -17 City of Santa Ana, CAI SANITARY SEWER AND WATER FINANCIAL PLAN 8.3 Final Report C11 Incorporate changes pursuant to comments from City staff, Subcommittee, and City Council M Present final report to Subcommittee and City Council prior to initiating Prop 218 requirements TO Submit final reports and rate models in MS Word and Excel 2007, and Adobe Acrobat Portable Document [.pdo format Task 9 — optional Tasks The objective of this task is to identify optional duties that the City may engage Black & Veatch to perform. The specific methodologies associated with these items will be expanded upon the City's determination to proceed with any specified item. Specific duties are: H Project growth and water demands for the sanitary sewer and water systems. fs Conduct a rate analysis on the basis of available water supply. Build a complete and thorough CIP program for both the sanitary sewer and water systems. 1 Develop a Water Master Plan using existing City GIS data. BLACK &VEATCH I Methodology 25C -18 City of Santa Ana, CAI SANITARY SEWER AND WATER FINANCIAL PLAN Following are a few highlights and brief synopsis of the project team that demonstrates the capabilities of Black & Veatch. * Collectively the project team has over 100 years of providing consulting services to municipal, special district, and investor owned utilities. * The project team members have deep utility industry knowledge, skill sets and backgrounds that span the necessary technical disciplines to effectively map, assess and make relevant and practical recommendations to improve the sanitary sewer and water systems as well the financial performance of the City's systems. These skills include utility operations, finance, accounting, engineering processes, regulatory and technology. M Senior project team members, including the Project Manager, have engineering backgrounds combined with business acumen that Is unmatched by our competitors. The project manager has served as expert rate witnesses and serves on national rates and financing committees. This access to industry - setting trends and approaches can be brought to bear on the City's study. Project Manager The proposed Project Manager, Ms. Ann Bui, has direct experience in assisting water and sewer utilities conduct cost of service and rate design studies. She recently assisted Marin Municipal Water District with its first cost -of- service study. The project evaluated price elasticity impacts, weather normalization techniques for revenue forecasting, and pricing signals for conservation as well as several alternative rate structures. In Orange County, Ms. Bui has provided financial planning and rate study services to the City of San Juan Capistrano since 2009. She worked with BLACK & VEATCH I Qualifications 25C -19 The senior members of the Black & Veatch Team are actively Involved with the - Industry's thought leadership; Ann Bui —AWWA o Finance, Accounting and Management Controls Committee, Vice Chair and Head of Accounting / Finance Handbook Subcommittee m Strategic Management Practices Committee, Member Keith Barber — National Association of Clean Water Agencies n Finance Committee, Member Ahmad Habbian — Associate Editor —ASCE Journal of Piping Systems • Trustee —AWWA Distribution & Plant Operation Division • Past Chair - ASCE Pipeline Division Executive Committee, ASCE's Underground Pipelines Asset Management (UPAM) Committee, & ASCE's Technical Committee on Trenchless Installation of Pipelines City of Santa Ana, CA I SANITARY SEWER AND WATER FINANCIAL PLAN Schedule The fallowing schedule assumes receipt of Notice to Proceed (NTP) on or before September 20,20 11. The schedule reflects a high -level schedule that provides time blocks and key dates for the activities. The proposed schedule assumes timely receipt of requested data, timely turn - around on materials submitted for review, and access to City staff for meetings. Black & Veatch understands the time - sensitive nature of both the developments of an R &R Program and the execution of the Rate Study and as such we have the availability and resources to start this project immediately upon receipt of City's NTP. Notice to Proceed 10 i Task 1. Project Management graft Report e• City Presentation(Fele 2012) 0 Regular Meeting Task 2. Asset Inventory GAP Analysis •N Public Hearing Presentation (Tap) Task 3. Capital Asset R &R Needs Eval Task 4. Financial Plan' ==. Task 5. Cost of Service Analyses ME Task 6. Rate Design oo Nil Task 7, Rate Model IN IN Task 8. Meetings & Reports 10 i 10 Noticeto Proceed ❑ graft Report e• City Presentation(Fele 2012) 0 Regular Meeting Final Report IFeb 2012) •N Public Hearing Presentation (Tap) BLACK & VEATCH ( Schedule 4 25C -20 EXHIBIT A -2 December 16, 2013 City of Santa Ana Attn: Brian Ige PWA - Water Division 220 S. Daisy Ave. M -85 Santa Ana, CA 92703 Dear Mr. Ige: Per your request, Black & Veatch is pleased to submit to the City of Santa Ana (City) the following scope of work and fee estimate for additional work items related to the Water and Sewer Rate Studies. Task 1- Financial Support Services The City has experienced many delays and identified several potential issues with respect to moving forward on its planned water and sewer rate adjustments. As a result, under this task, Black & Veatch proposes to perform the following subtaslcs: • Update the water and sewer rate studies. Specifically, Black & Veatch will update the study to reflect fiscal year (FY) 12/13 actuals and preliminary FY 13/14 budget figures. Projections for necessary revenue adjustments will also be updated as necessary • Provide recommendations on cost recovery mechanisms for capital projects. For this subtask, Black & Veatch will work with City staff to help development funding mechanisms for specifically identified needs. As needed, we will work with Finance and City staff to outline any business processes that may be necessary to implement any recommendations. • Assist City with rate implementations. For this subtask, Black & Veatch will work with City staff to help with implementation of the recommendations from the rate studies, as well as other identified issues. Such assistance may include, but is not limited to, development of policies for reserve levels, external department cost allocations, and level of service agreements. • Assist City with Cost Allocation review. Black & Veatch understands that the City is currently updating its indirect cost allocation methodology. Under this subtask, Black & Veatch will work with City staff to help determine the impacts of changes in methodology to the utilities. 25C -21 • Provide the City with CAMPS /iCIP training. Under this subtask, Black & Veatch will provide City staff with training on the Capital Asset Management & Prioritization System (CAMPS) /iCIP asset database. Task 2 - Meetings and Reports This task covers necessary meetings and reports that are generated through the completion of Task 1. Based on our understanding of the City's request, we estimate that the above additional items may be performed for a not -to- exceed fee of $80,000. A summary of the level of effort and expenses for these tasks is provided in the table below. Project Senior Project Total Task Description Manager I QA IQC Leads. Analyst I Cost Taskl. Financial Support Services 80 2 80 116 $55,400 Task 2. Meetings &.Reports 60 8 22 $20,600 '. Total Hours 140 10 80 138 $76,000 Direct Expenses _ ;_$4,000,, We are pleased to proceed with this engagement and look forward to working with the City. If you have any questions, please contact me at (949) 302 -6017 (BuiA @bv.com). Yours very truly, BLACK & VEATCH CORPORATION. Ann T. Bui Director, Black & Veatch Management Consulting 25C -22