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Contract - HF & H 2011-11-28 AGREEMENT FOR CONSULTANT SERVICES Wastewater Rate Study This Agreement is made and effective as of November 28, 2011, between the Costa Mesa Sanitary District, a sanitary district ("District") and HF&H Consultants, LLC a limited liability company ("Consultant") In consideration of the mutual covenants and conditions set forth herein, the parties agree as follows: Recitals WHEREAS the District is responsible for providing a sewer collection system to residents and businesses throughout Costa Mesa and a portion of Newport Beach and the County of Orange; and WHEREAS the District must provide proper maintenance of its sewer collection system to ensure proper operations and avoid sanitary sewer overflows, and WHEREAS, funding for maintenance and operations of the District's sewer collection system comes from fees collected on the property tax bill as special assessments; and WHEREAS, the District desires to hire the services of a qualified consultant who has experience performing sewer fee studies; and WHEREAS, the Consultant is a company providing financial, economic and general consulting services to public officials in the areas of rate-setting, cost-of service studies, and financial planning and budgeting, and WHEREAS the Consultant has submitted a proposal to perform a sewer fee study for the District; and WHEREAS, the District finds it is in the public's best interest to accept Consultant's proposal as 'Best Value and enter into an agreement to provide said services. NOW THEREFORE the parties hereto do hereby agree as follows 1 TERM This Agreement shall commence on November 28, 2011 and shall remain and continue in effect until tasks described herein are completed as stated in the proposal dated September 30 2011 unless sooner terminated pursuant to the provisions of this Agreement. 1 2. SERVICES Consultant shall perform the services under Tasks 1 through 6 of the Work Plan corresponding to Option 1 as described in the Compensation Estimate and set forth in Exhibit A, attached hereto and incorporated herein as though set forth in full. Consultant shall complete the tasks according to the schedule of performance which is also set forth in Exhibit A. 3. PERFORMANCE Consultant shall at all times, faithfully competently and to the best of his/her/its ability experience, and talent perform all tasks described herein. Consultant shall employ at a minimum, generally accepted standards and practices utilized by persons engaged in providing similar services as are required of Consultant hereunder in meeting its obligations under this Agreement. 4. DISTRICT MANAGEMENT District's General Manager shall represent District in all matters pertaining to the administration of this Agreement, review and approval of all products submitted by Consultant, but not including the authority to enlarge the Tasks to be Performed or change the compensation due to Consultant. The General Manager shall be authorized to act on District's behalf and to execute all necessary documents which enlarge the Tasks to be Performed or change Consultant's compensation subject to Section 5 hereof 5. PAYMENT (a) The District agrees to pay Consultant up to thirty-five thousand ($35,000) for services rendered in accordance with this Agreement. This amount shall not exceed the total sum during term of the Agreement unless additional payment is approved as provided in this Agreement. Said sum includes travel and other costs. (b) Consultant shall not be compensated for any services rendered in connection with its performance of this Agreement which are in addition to those set forth herein, unless such additional services are authorized in advance and in writing by the General Manager Consultant shall be compensated for any additional services in the amounts and in the manner as agreed to by the General Manager and Consultant at the time District's written authorized is given to Consultant for the performance of said services. The General Manager may approve additional work not to exceed the greater of Three Thousand Five Hundred ($3,500) or ten percent (10%) of the total contract sum. Any additional work in excess of this cumulative amount shall be approved by the Board of Directors. 2 (c) Consultant will submit monthly invoices and be paid monthly for properly performed services by Consultant the previous month. Payment shall be made within, thirty (30) days of receipt of each invoice as to all non-disputed fees. If the District disputes any of Consultant's fees it shall give written notice to Consultant within thirty (30) days of receipt of an invoice of any disputed fees set forth on the invoice. 6. SUSPENSION OR TERMINATION OF AGREEMENT WITHOUT CAUSE (a) The District may at any time, for any reasons, with or without cause, suspend or terminate this Agreement, or any portion hereof by serving upon the Consultant at least ten (10) days prior written notice. Upon receipt of said notice, the Consultant shall immediately cease all work under this Agreement, unless the notice provides otherwise If the District suspends or terminates a portion of this Agreement, such suspension or termination shall not make void or invalidate the remainder of this Agreement. (b) In the event this Agreement is terminated pursuant to this Section the District shall pay to Consultant the actual value of the work performed up to the time of termination, provided that the work performed is of value to the District. Upon termination of the Agreement pursuant to this Section, the Consultant will submit an invoice to the District pursuant to Section 5 7 DEFAULT OF CONSULTANT (a) The Consultant's failure to comply with the provisions of this Agreement shall constitute a default. In the event that Consultant is in default for cause under the terms of this Agreement, District shall have no obligation or duty to continue compensating Consultant for any work performed after the date of default and can terminate this Agreement immediately by written notice to the Consultant. If such failure by the Consultant to make progress in the performance of work hereunder arises out of causes beyond the Consultant's control, and without fault of negligence of the Consultant, it shall not be considered a default. (b) If the General Manager or his/her delegate determines that the Consultant is in default in the performance of any of the terms or conditions of this Agreement, he/she shall cause to be served upon the Consultant a written notice of the default. The Consultant shall have ten (10) days after service upon it of said notice in which to cure the default by rendering a satisfactory performance. In the event that the Consultant fails to cure its default within such period of time, the District shall have the right, notwithstanding any other provision of this Agreement, to terminate this Agreement without further notice and without prejudice to any other remedy to which it may be entitled at law in equity or under this Agreement. 3 8. OWNERSHIP OF DOCUMENTS (a) Consultant shall maintain complete and accurate records with respect to the professional services required by this Agreement and will produce a final project report that will document the. Financial Plan including multi-year revenue requirement projections, cost of service analysis, and rate increases for the existing rate structure. The Financial Plan will allow for adoption of new rates in compliance with Proposition 218. In addition, Consultant will deliver a spreadsheet model that will be used to create the Financial Plan The model will be a conventional spreadsheet model prepared in Microsoft Excel The District will receive electronic copies during the study for its review and at the conclusion of the study for its future.use. These-copies are not subject to any proprietary restrictions by Consultant and are provided at no additional cost. (b) Upon completion termination or suspension of this Agreement, all work products reduced to any medium and other documents prepared in the course of providing the services to be performed pursuant to this Agreement shall become the sole property of the District and may be used reused or otherwise disposed of by the District without the permission of the Consultant. 9 INDEMNIFICATION (a) Indemnification for Professional Liability When the. law establishes a professional standard of care for Consultant's services, to the fullest extent permitted by law Consultant shall indemnify protect, defend and hold harmless District and any and all of its officials, employees and agents ("Indemnified Parties') from and against any and all losses, liabilities damages, costs and expenses, including attorney's fees and costs to the extent same are caused iri whole or in part by any negligent or wrongful act, error or omission of Consultant, its officers, agents, employees or sub consultants (or any entity or individual that Consultant shall bear the legal liability thereof) in the performance of professional services under this Agreement. (b) Indemnification for Other than Professional Liability Other than in the performance of professional services and to the full extent permitted by law Consultant shall indemnify defend and hold harmless District, and any and all of its employees, officials and agents from and against any liability (including liability for claims, suits, actions, arbitration proceedings, administrative proceedings, regulatory proceedings, losses, expenses or costs of any kind, whether actual, alleged or threatened, including attorney's fees and costs court costs, interest, defense costs and expert witness fees), where the same arise out of are a consequence of or are in any way attributable to in whole or in part, the performance of this Agreement by Consultant or by any individual or entity for which Consultant is legally liable, including, but not limited to officers, agent, employees or sub consultants of Consultant. 4 10 INSURANCE Consultant shall maintain prior to the beginning of and for the duration of this Agreement insurance coverage of at least One Million Dollars ($1 000 000 00) for commercial general liability at least One Million Dollars ($1 000,000 00) for automobile liability and at least One Million Dollars ($1 000,000 00) for professional liability Consultant should also provide proof of workers compensation coverage. Each insurance policy required by this Agreement shall name the District and its officers, agents and employees as additional insureds and each insurance policy shall require an endorsement naming District as an additional insured Such coverage must provide that it is not to be cancelled except upon thirty (30) days notice to District. Insurance is to be placed with insurers with a current A.M Best's rating no less than A- VIII, and licensed to do business in California. 11 INDEPENDENT CONSULTANT (a) Consultant is and shall at all times remain as to the District a wholly independent Consultant. The personnel performing the services under this Agreement on behalf of Consultant shall at all times be under' Consultant's exclusive direction and control. Neither District nor any of its officers, employees, or agents shall have control over the conduct of Consultant or any of Consultant's officers, employees, or agents, except as set forth in this Agreement. Consultant shall not at any time or in any manner represent that it or any of its officers, employees, or agents are in any manner officers, employees, or agents of the District. Consultant shall not incur or have the power to incur any debt, obligation, or liability whatever against District, or bind District in any manner (b) No employee benefits shall be available to Consultant in connection with the performance of this Agreement. Except for the fees paid to Consultant as provided in the Agreement, District shall not pay salaries, wages, or other compensation to Consultant for performing services hereunder for District. District shall not be liable for compensation or indemnification to Consultant for injury or sickness arising out of performing services hereunder 12. LEGAL RESPONSIBILITIES The Consultant shall keep itself informed of State and Federal laws and regulations which in any manner affect those employed by it or in any way affect the performance of its service pursuant to this Agreement. The Consultant shall at all times observe and comply with all such laws and regulations The District, and its officers and employees, shall not be liable at law or in equity occasioned by failure of the Consultant to comply with this Section. 5 13. UNDUE INFLUENCE Consultant declares and warrants that no undue influence or pressure has been used against or in concert with any officer or employee of the Costa Mesa Sanitary District in connection with the award terms or implementation of this Agreement, including any method of coercion, confidential financial arrangement or financial inducement. No officer or employee of the Costa Mesa Sanitary District will receive compensation, directly or indirectly from Consultant, or from any officer employee or agent of Consultant, in connection with the award of this Agreement or any work to be conducted as a result of this Agreement. Violation of this Section shall be a material breach of,this Agreement entitling the District to any and all remedies at law or in equity 14 NO BENEFIT TO ARISE TO LOCAL EMPLOYEES No member officer or employee of District, or their designees or agents, and no public official who exercises authority over or responsibilities with respect to the Project during his/her tenure or for one year thereafter shall have any interest, direct or indirect, in any agreement or sub-agreement, or the proceed thereof for work to be performed in connection with the Project performed under this Agreement. 15. RELEASE OF INFORMATION ! CONFLICTS OF INTEREST (a) All information gained by Consultant in performance of this Agreement shall be considered confidential and shall not be released by Consultant without District's prior written authorization. Consultant, its officers, employees, agents or sub consultants, shall not without written authorization from the General Manager or unless requested by the District Counsel, voluntarily provide declarations, letters of support, testimony at depositions, response to interrogatories, or other information concerning the work performed under this Agreement or relating to any project or property located within the District. Response to a subpoena or court order shall not be considered 'voluntary' provided Consultant gives District notice of such court order or subpoena. (b) Consultant shall promptly notify District should Consultant, its officers, employees, agents or sub consultants be served with any summons, complaint, subpoena, notice of deposition, request for documents, interrogatories, requests for admissions, or other discovery request, court, order or subpoena from any person or party regarding this Agreement and the work performed thereunder or with respect to any project or property located within the District. District retains the right, but has no obligation, to represent Consultant and/or be present at any deposition, hearing, or similar proceeding. Consultant agrees to cooperate fully with District and to provide the opportunity to review any response to discovery requests provided by Consultant. However District's right to review any such response does not imply or mean the right by District to control, direct, or rewrite said response 6 (c) Consultant covenants that neither he/she nor any officer or principal of their firm have any interest in, or shall acquire any interest, directly or indirectly which will conflict in any manner or degree with the performance of their services hereunder Consultant further covenants that in the performance of this Agreement, no person having such interest shall be employed by them as an officer employee; agent or subconsultant. Consultant further covenants that Consultant has not contracted with nor is performing any services, directly or 'indirectly with any developer(s) and/or property owner(s) and/or firm(s) and/or partnership(s) owning property in the District or the study area and further covenants and agrees that Consultant and/or its subconsultants shall provide no service or enter into any agreement or agreements with a/any developer(s) and/or property owner(s) and/or firm(s) and/or partnership(s) owning property in the District or the study area prior to the completion of the work under this Agreement. 16. NOTICES Any notices which either party may desire to give to the other party under this Agreement must be in writing and may be given by (i) personal service (ii) delivery by a reputable document delivery service, such as but not limited to Federal Express, which provides a receipt showing date and time of delivery or (Hi) mailing in the United States Mail, certified mail, postage prepaid, return receipt requested addressed to the address of the party as set forth below or at any other address as that party may later designate by notice To District: Costa Mesa Sanitary District 628 West 19th Street Costa Mesa, California 92627 Attn District Clerk To Consultant: HF&H Consultants, LLC 201 North Civic Drive Suite 230 Walnut Creek, California 94596 Attn John W Farnkopf 17 ASSIGNMENT, The Consultant shall not assign the performance of this Agreement, nor any part thereof nor any monies due hereunder without prior written consent of the District. Because of the personal nature of the services to be rendered pursuant to this Agreement, only John Farnkopf Rick Simonson and Sima Mostafaei shall perform the services described in this Agreement. 7 John Farnkopf may use assistants, under his direct supervision, to perform some of the services under this Agreement; however all client contact and interaction regarding professional services shall be provided by John Farnkopf or Rick Simonson. Consultant shall provide District fourteen (14) day's notice prior to the departure of John Farnkopf or Rick Simonson from Consultants employ Should either one leave Consultant's employ the District shall have the option to immediately terminate this Agreement, within three (3) days:of the close of said notice period. Upon termination of this agreement, Consultant's sole compensation shall be payment for actual services performed up to and including, the date of termination or as may be otherwise agreed to in writing between the Board of Directors and the Consultant. 18. LICENSES At all times during the term of this Agreement, Consultant shall have in full force and effect, all licenses required of it by law for the performance of the services described in this Agreement. 19 GOVERNING LAW The District and Consultant understand and agree that the laws of the State of California shall govern the rights, obligations, duties and liabilities of the parties to this Agreement and also govern the interpretation of this Agreement. Any litigation concerning this Agreement shall take place in the municipal, superior or federal district court with jurisdiction over the Costa Mesa Sanitary District. 20 ENTIRE AGREEMENT This Agreement contains the entire understanding between the parties relating to the obligations of the parties described in this Agreement. All prior or contemporaneous agreements, understandings, representations, and statements, oral or written, are merged into this Agreement and shall be of no further force or effect. Each party is entering into this Agreement based solely upon the representations set forth herein and upon each party's own independent investigation of any and all facts such party deems material 21 CONTENTS OF REQUEST FOR PROPOSAL AND PROPOSAL Consultant is bound by the contents of the proposal submitted by the Consultant, Exhibit A hereto In the event of conflict, the requirements of District's Request for Proposal and this Agreement shall take precedence over those contained in the Consultant's proposal. 8 22. MODIFICATION No modification to this Agreement shall be effective unless it is in writing and signed by authorized representatives of the parties hereto. 23. AUTHORITY TO EXECUTE THIS AGREEMENT The person or persons executing this Agreement on behalf of Consultant warrants and represents that he/she has the, authority to execute this Agreement on behalf of the Consultant and has the authority to bind Consultant to the performance of its obligations hereunder 24 INTERPRETATION In the event of conflict or inconsistency between this Agreement and any other document, including any proposal or Exhibit hereto, this Agreement shall control unless a contrary intent is clearly stated. IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed this day and year first above written COSTA MESA SANITARY DISTRICT HF&H CONSULTANTS, LLC General Manager Si! ature ATTEST‘-a> �� aoha (J Paiznko z4 P. E. - = Typed Name Distric lesk- Sea to,z V.ece Paw dent Title APPROVED AS TO FORM: -(L District Counsel 9 HF&H CONSULTANTS, LLC STANDARD HOURLY RATES AND BILLING ARRANGEMENTS) (Effective January 1,2011) • If a client's change to a previously scheduled meeting results in penalties being assessed by a third party (e.g. airline cancellation fee), then the client will bear the cost of these penalties. While no minimum fee for a consulting engagement has been established, it is unlikely (given the nature of our services) that we can gain an understanding of a client's particular requirement,identify alternatives,and recommend a solution in less than twenty-four hours. Insurance We maintain the following policies of insurance with carriers doing business in California: a Comprehensive General Liability Insurance ($2,000,000) e Workers'Compensation($1,000,000) • Professional Liability Insurance ($2,000,000) o Hired and Non-Owned Auto Liability($2,000,000) All costs incurred in complying with special insurance, licensing, or permit requirements, including but not limited to naming client as an additional insured and waiver of subrogation, become the responsibility of the client and are not included in the fees for services or direct charges but are billed in addition to the contract at cost,plus any professional or administrative fees. Invoices and Payment for Services Our time reporting and billing system has certain standard formats that are designed to provide our clients with a detailed invoice of the time and charges associated with their engagement. (We typically discuss these with our clients at our kick-off meeting.) We are also pleased to provide our clients with a custom invoice format but we will have to bill the client for any additional costs associated with their unique requirements. Billings for professional services and charges are submitted every month, in order that our clients can more closely monitor our services. HF&H Consultants, LLC Page 3 of 3 HF&H CONSULTANTS, LLC STANDARD HOURLY RATES AND BILLING ARRANGEMENTS1 (Effective January 1,2011) Billing Policies Our policy is to bill for our services and direct expenses based on the standard hourly rates of the staff member assigned, multiplied by the time required to perform the client-related tasks, plus the subcontractor services as described above. In implementing this policy we adhere to the following practices: • The client would be billed on a time-and-expenses, not-to-exceed basis according to our schedule of hourly rates. No out-of-scope work will be undertaken without prior written approval from the client. Out-of-scope work is either (1) work on additional new tasks or (2) extra work (i.e. hours in excess of the estimated hours above that are not due to inefficiencies on our part) on existing tasks, which is requested for reasons beyond our control. Such reasons could include unusual effort in gathering data of unforeseen requests by elected officials for additional analysis. The client would not be billed for hours in our estimate that are not required. • We round to the nearest one-half hour(e.g. if two hours and 50 minutes are spent on a task, it is recorded as three hours, if two hours and 10 minutes are spent on a task, it is recorded as two hours). A minimum charge of one-half hour is charged for any client work performed in a day • We attempt to schedule travel time before and after normal work hours and we do not bill for this time. If travel occurs during normal work hours and we can use public conveyances, we attempt to use the time productively for the benefit of the client or for another client and this time is billed to the appropriate client. If we must travel during business hours and cannot use the time productively or use a public conveyance,we bill the time to the client on whose behalf we are traveling. • Because public meetings (e.g. Board of-Supervisors, City Council, and Board of Directors meetings) generally occur after business hours and are not conducted in accordance with strict schedules,our standard policy is to bill a minimum two-hour charge. • We do not mark up out-of-pocket expenses, however, we may charge administrative or professional time related to the provision of the goods and services associated with these charges. Costs for outside consultants and subcontractors are billed at actual cost plus a 15 percent administrative fee. • Mileage fees are based on the round-trip distance from the point of origin. HF&H Consultants, LLC Page 2 of 3 HF&H CONSULTANTS, LLC STANDARD HOURLY RATES AND BILLING ARRANGEMENTS' (Effective January 1,2011) Professional Fees Hourly rates for professional and administrative personnel are as follows: Position Rate President $245 Senior Vice President&Vice President $185 $245 Senior Manager $185 $195 Senior Associate $150 $190 Associate Analyst $125 $165 Assistant Analyst $100 $105 Administrative Staff $80-90 Direct Expenses Standard charges for common direct expenses are as follows: Automobile Travel Prevailing IRS mileage limit Document Reproduction 15 cents per page(black&white) 75 cents per page(color) Facsimile No charge Telephone No charge Public Conveyances Actual Postage Actual Overnight Mail and Couriers Actual All other direct expenses are billed at cost. Litigation Support and Expert Witness Services are not covered by this schedule of fees and expenses. HF&H Consultants, LLC Page 1 of 3 „,s 4(43 .., k '” R, g."- "TIP', " a • --Le; 41'"I''''''' I-1 ' -4 '404.4 ■Z: ..!'t" 4:414, -r 0;410.4". „ 1. #r• f.A.,;4?c., . '4 ;,:itr--c. • , t,',.;; . , ,.t.„filtyr-v ...;e' w--4: 41,---' 7,,' -.<-14.1, —fttna„21.A ' ''isktA's t' '4•4 "'; -; .". .ii.. '1”44,4■ .44.1. ,41 . . . - 1 ..t.l."‘"n.. t,,7,-1;t4Fir 't.;$ .." 6'i 4. ..ir. ;„$,;41.-A=1 T • -,-.,,,p;.- , • „4,,4 -."474, ,',4,'Itil;04" 4 •-t, '4444 ,,,) , 4,-4;4' (.44-41.'"NIC14.7iCii■W‘ . 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"Nittr,istY-1/4: 4: fifir,Y\--- ‘-, .?"?.--111$54.•f • -Is, tar is ;., ir.fe •4.7f-r: - ..,„'''- 4,14t,„;`'" 1.a.„,o, , • •,...09 •4. c'n ■ S y '''; PI'-14.k.-Tit .. -•, ‘-';44.:044,4,-4.kt- , .-..4.04-04, Le-V-144''Z." ‘, ,t.--04- -,440; . ir,*--.-{, , it,r4,3 '4Zit . . ,., irf Ps- 45C:t , .0 re i rir.• . 1. ‘ :p4, ,,," -fi 7(}k . _ Art 'St -,.... , Vv.;; ,,, '4• 44 4 '44' .11: s l'i.44 • „, et,j1,, ,'- „`" r7■ ? „9.,4'el:/- .Th <e. ''',/.`C.:/1:", ', .„,:er T. . • ,,/.ft,'!.e6 t' ttt44,4-:.-5 . ni.‘, 1,;.Ar;'..?; ‘• , ..ks ift=::,. '4 tic' atIL -4: . I.ttr,;kr_.= ‘ , ' •gv....-- „,. ec,,,, ....., __. 4 • (-4 .4,4‘; '\, 1,1 , 1414,4„, 7 *44 457;44 ' 414‘; :Mt•- ",,,, - :Toot' fintitt., ..- i44 •-b. 4t ice ' 4--, te, , -tt,44 4 mt, '44 ,44 7,4(, • • 4 ,14,...A$4,44 44,41' 44 tt,,!oat • • '',"17 ri - or roN tr i ; ti. tn. % kp < .rd, A4 , P,'p �t�ir lucov� trpi,. t-,r , qgf H'^..e�m`ilit d < a, w CI!�int M. , Pyp f'Stuc y ^Year 4a�s 1'ro ex t Em hisis S l ;`. Sharon Heights Golf& Water Supply Reliability 2000 Shortage Allocations,.Water Supply Country Club Alternatives Water Supply Reliability 2009 Update Action Plan Snell&Wilmer Expert Witness Testimony(Arbitra- 1995 Groundwater Contamination Dam- tion) ages(Citizens Utilities Company) South Bayside System Flow Equalization Basin Study 2003 Economic Evaluation of Lease Op- Authority dons Southeast Water Coali- Cost Allocation Analysis of Reple- 2006 Interbasin Subsidy tion nishment Assessment Cost Allocation Analysis 2009 Update South El Monte Joint Groundwater Remediation Damag- 2004 Evaluation of Damage Claims Defense Group es Stanford University Water Supply Assessment 2008 Shortage Allocations Straw&Gilmartin Expert Witness Testimony(Arbitra- 1995 Groundwater Contamination Dam- Hon) ages(Citizens Utilities Company) Tamalpais Community Wastewater Financial Plan 2004 Capital Improvement Program Fund- Services District Mg Alternatives City of Ukiah Water Rates,Sewer Rates,and Ca- 2009 Financial Stability During Water pacity Charges Supply Shortage On-Going Services 2010-11 Sanitary District Detachment Water Connection Fees 2011 Update Union Sanitary District Connection Fees 1990 Project Financing,Cost Allocation Internal Financial.Controls 1998 Management Practices Joint Powers Financing Authority 1999 Debt Retirement Review Reserve Fund Review 2000 Adequacy of Reserves United Water Cruiser Wholesale Water Rates 2011 Proportionality vation District Veterans Home of Cali- Water Rates 2001 Surplus Water Charges forma,Yountville Wastewater Rates 2001 Contract Compliance West Bay Sanitary Dis- Flow Equalization Basin Study 2003 Economic Evaluation of Lease Op- trict lions Sewer Rates and Connection Fees 2011 Financial Plan Western Municipal Retail Water Rates 2003 Alignment with Wholesale Water District (MWDSC)Rate Structure Retail Water Rates 2004 Elevation Surcharges Town of Windsor Water,Wastewater,Recycled Water 1993 Water Conservation,Cost Allocation Rates and Capacity Fees City of Winters Water and Wastewater Rates 2005 Debt Financing;Conversion to Me- tered Rates City of Woodland Wastewater Buy-In Charge 2010 Sale of Treatment Plant Capacity vr yAu!flL•,- l.+,fexf;nua4%++%..F.. 4'4 d i§ y_ r.r• _w%.ar-�, t x t t rnA e PtoletLm V p f: s+s ' " San Juan Water District Water Rates 1998 Wholesale and Retail Cost Alloca- tions City of San Leandro Management Study 1997 Environmental Services Program Audit San Mateo Countywide Stormwater Funding Strategies 2008 Permit Renewal Water Pollution Pre- vention Program City of Santa Clara Urban Water Management Plan 1992 Water Shortage Contingency Plan Santa Clara Valley Ur- Cost Allocation/Program Manage- 2005 Cost Allocation Formula;Program ban Runoff Pollution ment Cost,Scope,Term,Benchmark Prevention Program Comparison Santa Clara Valley Wa- Cost of Service Analysis 2000 Cost Allocation Approaches ter District Expert Witness Testimony 2008 Rate Analysis Litigation Support 2009 Cost of Service Santa Margarita Water Water Rates 1998 Irrigation Rates District City of Santa Monica Environmental Program Cost Allo- 2007 Proposition 218 Compliance cations to Enterprise Funds City of Santa Paula Wastewater JPA Formation 2002 Treatment Plant Financing,Cost Al- locations,JPA Agreement City of Santa Rosa Water and Sewer Rates 1998 Public Participation Process Net Benefits Analysis 2003 Regional Recycled Water Alterna- tives Sausalito-Marin City Sewer Financial Plan 2002 Capital Funding Options,Public Par- Sanitary District ticipation Process Contract Negotiations 2002 Regional Wastewater Treatment Sewer Rates and Capacity Fees 2004 Update Financing Plan 2007 Update Sewer Rates 2010 Debt Financing State Revolving Fund Application 2011 Credit Review Checklist Customer Billing Process 2011 Billing on Tax Rolls Scotts Valley Water Water Rates 2004 Restructure Increasing Block Quanti- District ty Charges Water Rates 2005 Update Water Rates 2006 Update Water Rates 2007 Update Financial Projections Water Rates 2008 Update Financial Plan Water Rates 2009 Update Rate Projections Water Rates 2010 Update Rate Projections Water Rates 2011 Update Rate Projections Costa Mesa Sanitary District Consulting Services for Wastewater Rate Study Proposal implementation steps required to make the conversion. The report will also serve as the foundation for setting rates for FY 2012-13 and beyond. We expect as part of the Board presentation to present a range of rates and the corresponding impacts to assist the Board in making a final determination. It is possible that input from the Board and public may need to be further studied and brought back to the Board for final consideration. Task S. Identify Implementation Steps In addition to preparing the project report, we will assist in preparing the legal documents that are required for rate adoption, which can include the notice that is mailed to property owners and rate payers and any enabling legislation (e.g. ordinance, resolution, municipal code) In the event that the District retains the services of a public outreach consultant, we can work with the consultant to assist in the preparation of media (e.g. newsletters, website uploads, press releases). The proposed budget has a small allowance for working with District Staff on public outreach. A major consideration in implementation will be cost. The District currently prepares its billings for the tax rolls. Estimates can be solicited from consultants for the cost of billing non-residential customers on the tax rolls based on flow A comparison will be made summarizing the differences to assist in supporting the recommendation. Task 6. Proiect Management There is a small allowance for project management. III. SCHEDULE AND COMPENSATION SCHEDULE The work needs to be completed in time for the District to adopt the rates in compliance with Proposition 218's procedural requirements, which will then be submitted to the County of Orange by August 10, 2012. In order to ensure that the District has adequate time to prepare the tax roll submittal, it is advisable for the Proposition 218 hearing to be held by May or June 2012. Prior to that date, the District can prepare a draft tax roll, which can be finalized to reflect the final rates that are adopted at the protest hearing held at least 45 days after notices are mailed to rate payers. We propose to complete our analysis and to present of draft report to the Board no later than March 2012 so that the Board can authorize Staff to mail Proposition 218s to rate payers in early April. Allowing time to print and mail notices, the protest hearing can be held 60 days later in early June, which will allow sufficient time for final adoption before the August 10 submittal to the County September 30, 2011 Page 9 HF&H Consultants, LLC Costa Mesa Sanitary District Consulting Services for Wastewater Rate Study Proposal COMPENSATION ESTIMATE Our compensation estimate represents our current understanding of the required level of effort and our previous experience with similar projects. We will confirm the District's required scope of services and finalize the fee estimate to reflect any deletions or additions to the scope. For present purposes of consultant selection, we estimate our compensation as follows: 1 Financial Plan — Includes multi-year revenue requirement projections, cost of service analysis, and rate increases for the existing rate structure, which will be documented in a project report prepared in draft and final versions. It also includes assistance with implementation including preparation of the notice to rate payers and review of the ordinance or resolution. Estimated cost: $35,000. 2. Flow-Based Non-Residential Rates — Includes the analysis of metered water use for purposes of designing flow-based rates for non-residential rates, which would be the minimum modification to the District's rates that we would recommend in order to comply with Proposition 218's proportionality requirement. Estimated additional cost: $10,000. If the District only modifies its rates to convert its non-residential customers to flow- based rates, we currently estimate the cost would be $45,000 (i.e. $35,000 plus $10,000). We recommend that the District also consider converting its residential customers to flow-based rates, which would add a final component: 3. Flow-Based Residential Rates— It will take no more effort to request meter reads for all of the customers in the three local water suppliers' service areas. With that data, residential flow-based rates can also be examined. Estimated additional cost: $10,000. This third component would increase the estimated project cost to $55,000 (i.e. $45,000 plus $10,000). Again, these are estimates that we will confirm with the District to make sure that only the required services are included. For example, we are assuming that we would collect the meter data from the water suppliers. Our cost would decrease if the District can collect the data. Assumptions such as these will need to be confirmed in deriving a fixed, not-to-exceed contract amount. We are confident that we can negotiate a competitive fee for the equivalent scope of services. The District will only be billed for the services rendered based on the fee schedule in Appendix C. hence, any services that are reduced or handled by District Staff will reduce our costs. Conversely any additional effort requested by the District that is not included in this estimate could result in additional cost. We will request authorization from the District prior to proceeding with out-of-scope work. September 30, 2011 Page 10 HF&H Consultants, LLC . . .. , 1, „, 44 .. ... . ktfe c ,r0:. . J • ' . ..„- d, ;I' ,[45-" .5. .t 7 .f... +C 1. ....... .4419,- .r,tr,sz 11‘, 0ts*, 0 4-0 ' s A. 4,4":.1*rf.,.• .. ‘ 1141" -4',..41/4:■44, ..til,t .e 4., 04ak ,,, -,-.lyt.".,'-,.;;;.‘":00,0c. s"/0jr.'.. . :is;`-'71.4`'vvi.r0"..“2:4-?.-., ...-0;,-..,,,v.s r A-.0i.t.--4,„.-4;-. '4, T., s.4 s'd- 4 65.ef-54,.. : 5 i - .•,..•.. - 4- 14 k'''.* •.°7 tr'44.4 irAt 5,-`"r-L: ; 4---'""V`,14 5* ••‘4,t;A:15'4,??..4.44.i,'.-. 41. t, ..• ' .t.r..0;) 1..: '545. 5 -`, '5• --"st'Wei "' 4., 5' t'.4-Yd'L, -- 1.:--(.\Lea.r.-. , .. :. .'-'`.,',40, r-4,4" ' '.).. "s 0.,'X'..;i ;: .. Irs's 4"...''-.:'--) "I%-:;'0'4: .C.4],740:4,s▪ b" ' s ..1 ;VW"-‘ 4-''', ''....<‘■":10%..;;'‘ --.":;.• 4',' d: ' --.° 45` .'"554,",-4.. • '4-51•"5dttl 4.•- "5 F.!,444•' ..-','. .•id.W 45,55',5-4•.."''1/4'it,,,,,i,,>., , :4 ;-;414 4'; ‘:.. . '-''■'44 f4"i4...,.. 5„V;,..4.;4;.4.;,, .0;4 , „1,` .'55-. ...t5-y4",„/4'6.° 14 ',' 4,44[,, ,-5- •--5.•..,,,'„41,5',.,t ' 4100.1"r" sti. 'YW "4,- : -- ;r1..4?',c1.,' C.• f4. .-i.:,, 't 4, .1,11-5C rt....-:-.:)t''g'.'vit!„ ..,-,.' -,.:,,,..24..'''',..-e-:" 7. '''''kl(1.5t4.1';'.i:::,'? ..7,.'i..iiii,',:i '''.:.,:ii;?4;.':<.-, -lc,:::,. .1:,..4g,(1:,...??:pk..-•t,:,....t-.4.•,., „1;17,,R 4' ---.,,:f",. i-,4:::t:... 4C t.t t-1' ta St . . f ▪ - .-' ,..4.> .sr., ., AAV,i 4'F.'...17;Pi. , 1,y.„,d, 7., 4.-.44N 134.-,tr43 .,,,,,,„.., a,",:ai... ,,„ .. „loit, --7 if k. '''' .t. "?' .tt -074 ' ' 0 ts.• .:t‘"er 4, ,•sdf ,.. ' Vi?'"W414 , °P.1,''''; - ;140...'41' 's7e; jsk-- 7i?'4.54s 4s° - 1C, "V ,rf f it 4w, T; . S., 1:. - — -4, -, .est ,,,i 4' tr,>11, %.* , 1,„,- ,-,..., if.,,',•,,:,'"t 1 444 ,,,_ -e „... 1 r , ,,,,xo it;.,...), / ,tit,.1., ., )."--1. ,,,, , 41 .40ei*,..4..*444f.;'4 ttAi -‘. 7•4 54;454:444",*"te '5..' t .. „ ....::,.., .. 4., r/' 45 ".,.jt' ' 'It!:-,"1 -0,4:15. "t”, tilt 1i Fr.,--4 4.4 C.VIA ,4 .44 t',- - - Ji ' -' 4 :4;4_ .441_:04 42,:a. _ .. 4.4 i .44\.4,9 ............ . . SI '.1 .1i• '''"4.5; • 1-,t4 - c.„1,:,+' .,",.- 5' 444 P.4(5-', • ot :iv ''' fi -v '41., g. .tr:41. '4,4,t• - .)-)L ik.'0',- 1. .4. . , 14' ..‘, i! ,..., " ,y, ..,,,i, s.. , --r s7 a-' . . .7.'4;144 L qvi. if 0;11;^ . 'la . ' I - if p HF&H Consultants,LLC Résumés John W Farnkopf,P.E. JOHN W FARNKOPF, P.E. Senior Vice President RANGE OF EXPERIENCE Over 30 years of public and private experience in the utility industry, emphasizing consulting to water,wastewater, stormwater,electric,gas, r' /„ of a solid waste utilities. Mr. Farnkopf's consulting activities encompass 0" f. '.);Q 1 x J' 1 the following specialties: z ir • Rate Studies public and investor-owned utilities; wholesale and r 0t. 1 , ,;. retail rates;water,wastewater, and stormwater enterprises. et, 'E • Financing Studies evaluation of the economic justifiability and r.,04. 4f financial feasibility of capital improvement programs; determined trill ns tx optimal bond sizings. • Litigation Support provided litigation support, including expert 41 , i witness testimony and affidavits related to rates, charges, ', t" z 4S" i.,Sr ;, condemnations,and water rights. Regulatory Analysis testimony and submittals before State and Federal jurisdictions. • Resources Management conservation and rationing impact studies; urban water management plan preparation. • Fixed Asset Valuation and Management development and analysis of fixed assets for rate- making purposes. • Design and Construction hydraulic and other structures. EDUCATION B.S. Civil Engineering,University of California,Berkeley B.A. Philosophy University of California, Berkeley PROFESSIONAL REGISTRATION Civil Engineering,California PROFESSIONAL HISTORY HF&H Consultants,LLC. 1989 to present. Price Waterhouse: 1986 to 1989 Leedshill-Herkenhoff, Inc. 1984 to 1986. Stetson Engineers,Inc. 1977 to 1984. Novato Sanitary District No. 6: 1975 to 1976. PROFESSIONAL ORGANIZATIONS American Water Works Association,Utility Finance and Economics Committee member California Urban Water Conservation Council,Utility Operations Committee California Water Environment Association Water Environment Federation HF&H Consultants,LLC Résumés Rick Simonson,CMC RICK SIMONSON, CMC Vice President RANGE OF EXPERIENCE 1 -, n , t'44, Mr. Simonson has over 17 years of experience as an audi- •" SIC e.? tor/accountant in various capacities. During Mr. Simonson's ten r, �„ " '::;K °^rte` `; years with HF&H he has performed as an engagement analyst on wa- 't P'' i. ,t;'1 ter wastewater- and sewer-related projects for the Ross Valley Sani- r ,,44;- ¢= a ,P r rl P J Y " �,� r f tart' District and the cities of Fairfield, Orange, Rohnert Park, Santa ‘,9.`1•74, Rosa, and Willits. Specifically Mr. Simonson was responsible for de- i '3 Y. P Y P r? 5, ,1 t ,nri,`c n veloping a rate model to calculate the necessary sewer service charges wipe., vol r� over a five-year period, which properly accounted for future capital 0, ,Y ' t funding needs, changes in customer strength factors, adequate re- ra: .� g g q r k rit.5 ar ` N, serves, and other funding sources. Mr. Simonson was responsible for a, ,, �,�t;;t g P 1 },',, ttl, developing multiple alternative water rate structures for the City of vY a n Orange. Alternatives included developing graduated services ,. mfg r' tot ip '4 charges, elevation charges, and a premium for serving outside-city customers. For the City of Fairfield, Mr. Simonson conducted debt service coverage tests to verify the projected available net revenues met or exceeded the re- quired debt coverage ratio. Mr. Simonson was responsible for developing multiple alternative Water and sewer rate structures for the City of Rohnert Park. The final structure included con- verting to increasing block rates and developing sewer rates based on average winter water consumption. This work involved a series of work sessions with the City Council to confirm its rate-making objectives and present the results of our analyses. His other rate setting experience includes solid waste rate modeling projects for City of Liver more, the Mann Franchisors Group (a joint powers authority comprised of five jurisdictions), the Central Contra Costa Waste Management Authority(a joint powers authority comprised of six jurisdictions), the*South Bayside Waste Management Authority (a joint powers authority comprised of twelve jurisdictions), the City of Alameda, and the City of Vallejo. In addition, Mr. Simonson's other financial analysis experience includes rate comparison benchmarking analyses, customer service assessments, and conducting a statistical study for the California State Bar Association detailing the relationship between law firm size and disciplinary actions. PROFESSIONAL AND BUSINESS HISTORY HF&H Consultants, LLC. Vice President,2008 to present; Senior Manager 2007 to 2008; Senior Associate 2002 to 2007 and,Associate Analyst 2000 to 2002 Contra Costa County Assessor's Office: Auditor-Appraiser 1996 to 2000 Laidlaw Transit Regional Accounting Department: Staff Accountant 1995 to 1997 PROFESSIONAL ORGANIZATIONS Institute of Management Consultants,Northern California Chapter HF&H Consultants,LLC Résumés Rick Simonson,CMC Solid Waste Association of North America ARTICLES AND PRESENTATIONS SWANA — Western Regional Symposium — May 2005 — Accurate Solid Waste Rate Comparisons' SWANA—Western Regional Symposium—May 2004— Annual Solid Waste Rate Adjustments —Index Method or Cost-of-Service Method?' EDUCATION AND PROFESSIONAL CERTIFICATION B.S. Business Administration,Accountancy California State University Sacramento B.A. Communication Studies,California State University Sacramento Certified Management Consultant(CMC Professional Certification) CARE Lead Verifier HF&H Consultants,LLC Résumés Sima Mostafaei SIMA MOSTAFAEI Associate Analyst RANGE OF EXPERIENCE Ms.Mostafaei's is responsible for developing and maintaining financial and related service and resource planning models. Her professional t y iii career spans the fields of public accounting, forensic accounting and t , ' °0 `, litigation support services prior to joining HF&H. At HF&H,her activ- ities have encompassed the following: Ie A'y• • Rate Studies & Reviews —Cost allocation and rate structure analy- 1 a sis including conservation rates for water service rate desi and °3 analysis for wastewater, detailed rate review audits for solid design l'14 services; "�;�;' ,wr, ' filD j „ttl • Financial Analysis—Financing and debt service analysis, structure p 4 of existing and proposed municipal funds, analysis of financial re- sults,financial projections. Examples projects include the following: • City of Ukiah —Rate modeling and analysis for sewer and water rates; setting sewer rates requires cost allocations between the City and a sanitary district; • City of Belmont—Updating sewer rate model and financial projections; the sewer rates in- clude a portion of the costs of the stormwater program that benefits sewer customers be- cause of reduced inflow and infiltration; • City of Burlingame— Updating the water and sewer models to reflect long term capital financing from reserves and debt; • North Coast County Water District— Updating the revenue requirement projections to reflect significant increases in purchased water from San Francisco and the revised capital improvement program;a fourth tier was added to the residential rates to enhance the price signal. • City of Downey—Cost allocation analysis of the groundwater pumping charges charged by the Water Replenishment District to the member agencies in the two basins. EDUCATION B.S. Accounting and Information Systems,Virginia Polytechnic Institute and State University PROFESSIONAL HISTORY HF&H Consultants,LLC.Associate Analyst,2008 to present Shea Labagh Dobberstein,CPAs,Incorporated: Business Advisory Associate,2006 to 2008 KPMG, LLP• Senior Associate,2004 to 2006 et 'PP 'd k i••'• zi..;130 ■ b Pt AP .- .4", t• i& I it-' -04 '`fit•c4 "' it-.1.,W.••[- 444 C‘‘ % 4&4# 1. r...f., - , .0 ..,,, , ... , .,,,,.,;„.r. - , .4, A.40 --0.N -,.. , • , e%.61/4 c't*.lt a-•-t....''Mk- t.:4-:t 1 ,- , -1 4,..,co?. 0, 414'.it.,,,: .i. Tt)., P• . °,4-4,‘ „..4.V If Iii,„‘to C. li • . "L-Wrikt ' OF "V to , .,, . .• D ' 4' t'4, ,a, ;=:' , 4., ,,,,,, ' r-irk 41• 4.1*.■ '''i .. 14•e•- ' •'''' !ftt IP BF&H ,k, ,,go: Q , . -- , „.: , .9ne.nes .„,,-, M. '1 th• , ,‘..J...1";ah. . -4.3 .,9. - ..,,,,'+it at L. ...■e L.:St j.. , '''.,, 1.4 4 '••liti'Aii,C,'" '' • ' ".•-cst V.": ' . •M- - : . ,47414 JP,' l' ,it,'ir•a.,44.: 4itrt./ i• 4, h -,1,1, , 0, ,, te• 7•,.b. r'' Li e' 4, ' ice'*41 ,"-4 1, • 1:4E:"4; P ' sr As . :t., '`ogic !kJ' 'ni ii0• . „ -. ..• c• 44•4•14-V. tr,,,,4w, A • ,. -.. (T, , tA.,. . .4.0- . . .•* . -.1,iffr 1- ?. • .4,.: . ‘)/ '-- . , .. e.' • ` c■ 1 1 644/1 in* .. t.0 rort. • c.,. .t FT t 1.a 1, API:14 • H F. • d. . .4 MI . • li; - . . -. It ;, ,—_________c_ 141,1441, , • ••X i.- ,„ 1 •• 1 illi, • i-' " i %, C . l'e 4', ad'"■ reAr#44: • 't A 44e"I ec 3,4tt: I IP.' , ,,•■• 0-4- ; 0'2, '•4•. 4.), 1,07e. 4; . — . WATER, WASTEWATER & STORMWATER CLIENTS k r 11441 HF&H Water Wastewater and Stormwater Clients r�� *tlu u k4P'crk-A, i 41,6.- AI,y4,Al+'i., 3: .e : t n,4--1 Amr. City of Alameda Stormwater Financial Plan 2001 Sewer and Solid Waste Funding in Compliance with Proposition 218 Alameda County Financial Planning 1991 Project Financing,Debt Issuance Water District Urban Water Management Plan 1993 Cost/Benefit Analyses,Water Con- Best Management Practices servation Capacity Charges 1998 Critique of Methodology Engineer's Certificate 2003 Debt Coverage Alameda Countywide Stormwater Funding 2003 Proposition 218 Compliance Clean Water Program •vvu y i+ (-dent" "�a"a rw4 �T� P of Stl]d �'d`r' ruYl'i 1° �+ K k «Pro ect`Cm h s s'`�� . @ ..-` ..+ aT".. �h Yr) 1::.-- p Amador Water Agency Litigation Support 1996 Dept.of Corrections Water Rates Water Rate Review 1998 Rate Update City of Ashland,OR Water and Wastewater Rates 1994 Demand Management,Debt Issuance Bay Area Stormwater Stormwater Funding Strategies 2008 Permit Renewal Management Agen- cies Association Bay Area Water Supply Review Administration of Whole- 2004 Compliance with Rate-making Provi- and Conservation sale Water Supply Contract sions Agency Overhead Cost Allocation 2005 Benchmark Comparisons Review Flow-Based Allocation For 2007 Simplification of Water Accounting mulas Review Impact of Organizational 2007 Water/Power Allocations Changes on Cost Accounting Rate of Return 2008 National Survey of Industry Practices Wholesale Water Supply Contract 2009 Rate-Making Methodology Negotiations Shortage Allocations 2009 Dry-Year Conditions Supply Allocations 2010 Long-Term Conditions Wholesale Rates 2011 Restructuring Bear Creek Valley Capital Replacement Strategy 1996 Depreciation,Rate Analysis Audi. OR City of Belmont Sewer/Stormwater Rates 1999 Proposition 218 Compliance Regional Wastewater Treatment 2000 Capacity Expansion Options Plant Capacity Sewer/Stormwater Rates 2001 Update Sewer/Stormwater Rates 2002 Update Sewer/Stormwater Rates 2003 Update Sewer/Stormwater Rates 2004 Update Sewer/Stormwater Rates 2005 Update Stormwater Funding 2005 Capital Improvement Financing Sewer/Stormwater Rates 2006 Update Sewer/Stormwater Rates 2007 Treatment Plant Financing Sewer Connection Fees 2008 Update Sewer Rates 2008 Restructuring Fixed Charge Sewer Treatment Charge 2009 Create New Charge Sewer Rates 2009 Update Collection System Charge Sewer Rates 2010 Update Sewer Rates 2011 Update City of Beverly Hills Water System Leasing 1999 Proposition 218 Compliance Regional Wastewater Charges 2000 Revenue Program 1t�`- „,,pc t'ap 11v+' nip>"9't -:." s'' . Tv c of Stud „y .” sYeir r w t Iyro ect;Fm hash! s�;i" ;C1��. 3 "?�,5,$ ��9 �,,�:��'tp��...,��::>� " � - t...,v3�s�,�. n��. lt. ` s ml��.,t �� ._ ��f"ava..�; Bold,Polisner,Mad- Litigation Support(Contra Costa 1996 Water Capacity Fees dow,Nelson&Judson Water District) City of Burlingame Sewer Rate Structure 1997 Alternatives to Minimize Climatic Influences Water and Sewer Rates 2002 Revenue Stability Water and Sewer Rates 2005 Model Development Water and Sewer Rates 2007 $25 Million Debt Issuance Water and Sewer Rates 2008 Update Water and Sewer Rates 2010 Update California Water Ser Cost Allocation(Salinas) 1997 Historic Benefits Analysis vice Co. Water Supply Development 1998 Organizational,Institutional,and Fi- (Tassajara Valley) nancial Aspects Water Supply Feasibility 2005 System Expansion (Visalia) City of Camarillo Water Rates 1997 Conservation Oriented Rates Carmichael Water Dis- Water Rates 1998 Metering Residential Customers trict Water Rates 1999 Proposition 218 Compliance Central Contra Costa Wastewater Capacity Fees 2003 Diagnostic Evaluation Sanitary District City of Ceres Water Rates 2008 Financial Stabilization,$3,000,000 Financing Water Rate Update 2010 Metered Water Rates Regional Wastewater Planning 2010 WA Formation City of Cerritos Street and Stormwater Program 2006 Proposition 218 Compliance Funding Litigation Support 2011 Replenishment Assessment City of Clovis Wastewater Rates 1996 Capital Cost Allocation Commercial Wastewater Rates 2002 Fixed and Variable Charges Water and Wastewater Rates and 2003 Growth Allocations Capacity Fees Water and Wastewater Rates 2004 Restructure Fixed Charges Coastside County Wa- Water System Operations 1989 Fire Protection Charges ter District Contra Costa Water Water Rates 1990 Debt Coverage,Water Conservation District Water Rates 1991 Debt Coverage,Water Conservation Engineers Certificate 1992 Debt Coverage Expert Witness Testimony 1997 Capacity Fees Capacity Fees 1998 Industrial Customers x`• V 2.,; £A4?ik ,a..-102,44,,N:7:11.. Cooley,Godward,Ca- Expert t Witness Testimony(e Pa'�3- 1994 Capacity Fees,Conservation Penal- stro,Huddleson&Ta- lo Alto Park Mutual Water Co.) ties tum Expert Witness Testimony 1995 Groundwater Contamination(Arbi- (Citizens Utilities Company) tration) City of Daly City Water Supply Contract 1990 Conjunctive Use City of Davis Public Works Department Audit 1999 Water,Wastewater,Stormwater,and Solid Waste Divisions Delta Diablo Sanitation Sewer Connection Fees 2001 Improved Documentation District Street Sweeping Fees 2001 Methodology Review Recycled Water Sales 2003 Inter-Agency Agreement East Bay Municipal Litigation Support 1992 Rate Equity Water Conservation Utility District Wet Weather Facilities Regulatory 2006 Benefit-Cost Analysis Strategies City of East Palo Alto Consolidation Study 1996 Water,Wastewater,Stormwater, Lighting Sanitary District Consolidation 2002 LAFCo Process,Public Outreach East Palo Alto Sanitary Management Study 1999 Organizational Restructuring District City of El Monte Sewer Rates 2008 Sewer Enterprise Formation City of Fairfield Water Rates 1989 Debt Coverage,Rate Equity Engineers Certificate 1993 Debt Coverage Engineers Certificate 1996 Debt Coverage Engineers Certificate 2003 Debt Coverage Fairfield-Suisun Sewer Wastewater Rates 1994 Industrial Water Reclamation, District Rate Equity Wastewater Rates and Connection 2002 Rate update and Comparison of Fees Non-residential Connection Fees Fair Oaks Water Dis- Water Rates 1998 Metering Residential Customers trict City of Fillmore Wastewater JPA Formation 2002 Treatment Plant Financing,Cost Al- locations,JPA Agreement City of Folsom Stormwater Utility Formation 2005 Feasibility Analysis City of Fremont Stormwater Funding 2011 Financial Study Greater Vancouver Wholesale Seasonal Rates 1998 Price Elasticity Water District Wholesale Seasonal Rates 2002 Cost of Service Allocations Wholesale Rate Structures 2003 Fixed/Variable Options Groveland Community Water Rates and Capacity Fees 1995 Debt Issuance,Debt Coverage Services District tro vm� j:,r a i ^y{, 3 n • ix'�'MV .+.a hF: ieh aT^' t • U 4 ) !15 3` i h^s l rm. .`C FOCI enf� ri Slype of jtidy5 4 ft' s Yen, „ te" Project,Empha i?e a K . a"'+t. .. . n„ x�a ,;e.� �.". �? e*,rF . :nercxmx a , v..ins Hanson,Bridgett,Mar- Litigation Support(San Francisco 1978-84 Wholesale Water Rates cus,Vlahos&Rudy, Bay Area Water Users Association) LLP Wholesale Water Rates 2007 Contract Negotiations City of Hayward Water and Sewer Capacity Charges 1999 Develop Model City of Imperial Beach Sewer/Stormwater Rates 2004 Consolidate Funds in Compliance with Proposition 218 City of La Puente Sewer Rates and Capacity Fees 2006 Sewer Enterprise Formation Sewer Rate Update 2008 $10,000,000 Financing City of Lincoln Water and Wastewater Rates 2003-05 Rate Payer Sensitivity Water Rate Update 2005 Purchased Water Cost Increase Water Rate Update 2007 Rate Structure City of Live Oak Storm Drain Impact Fee 2010 Charges for Development Zones City of Lodi Sewer Rates 2003 Low-Interest Loan Application Sewer Rate Update 2004 $25,000,000 Financing Sewer Rate Update 2004 Restructure Rates&Capacity Fees Sewer Rate Update 2007 $20,000,000 Financing Sewer Rates 2009 Update City of Long Beach Street Sweeping 2005 Funding Sources City of Los Altos Sewer Rates 2000 Charges for Colleges Town of Los Altos Sewer Rates and Connection Fees 2007 Convert Septic Users to Sewer Facili- Hills ties Los Angeles Depart- Financial Evaluation 2005 Rate-Making Process ment of Water and Strategic Planning 2010 Supply Reliability Power Water Rates 2010-11 Evaluation of Tiers City of Los Banos Wastewater Rates and Connection 2006 Evaluating Alternative Capital Fees Projects Water and Sewer Rates 2010 Treatment Plant Expansion Los Trancos County Future Water Demand 2002 Conversion from Septic to Sewer Sys- Water District tern Lukins Brothers Water Water System Valuation and Sale 2004 California PUC Rate-Making Practic Company es 2006 Negotiations of Sale Malaga County Water Management Study 1998 Incorporation Feasibility District City of Manteca Stormwater Fees 2003 Funding Options Aleshire&Wynder, Litigation Support 2011 Groundwater Replenishment Cost LLP Allocations aa.1' rd � r"�^'}W 3 2 '�'�wt at, s, , Client ; v� d,T}pe of Study Ntev hds1 v McCutchen,Doyle, Expert Witness Testimony(Arbitra- 1995 Groundwater Contamination(Citi- Brown&Enersen tion) zens Utilities Company) Litigation Support(Groundwater 2001 California PUC Rate-Making Practic Basin Remediation) es(San Gabriel Valley Water Company) City of Menlo Park Water Rates 1995 Customer Billing,Rate Structure Metropolitan Water Capacity(Growth)Charges, 1997 Impacts on Member Agencies and District of Southern Tier I Water Supply Contract 2002 Developers California City of Mill Valley Sewer Rates 2010-11 Regulatory Compliance Sewer Rates 2011 Flow-Based Residential Rates City of Modesto Wastewater Capacity Fees 1996 Cost Allocation,Project Financing Peer Review 2006 Water Rate Revenue Peer Review 2007 Sewer Capacity Charge Peer Review 2007 Sewer Rate Revenue Peer Review 2007 Water Capacity Charge Regional Wastewater Planning 2010 WA Formation_ City of Morgan Hill Water/Wastewater Rates and Ca- 2002 Rate Structure Review pacity Fees City of Mountain View Water and Sewer Rate Review 1998 Qualitative Assessment of Rate Structures National Resources De- Water and Wastewater Rates 2010-11 Tiered Rate Standards,Flow-Based fense Council Sewer Rates,Marginal Cost Pricing City of Newport,OR Sewer Rates 1998 Debt Issuance City of Newport Beach Water Rates 1998 Impact of Annexation City of Nogales,AZ Water and Wastewater Rates 1999 Capital Project Revenue Require- ment,Cost Allocation,Ability to Pay North Coast County Water Rates 2001 Financial Planning Model Water District Water Rates 2002 CIP Financing Water Rates 2004 Update Capacity Fees 2005 Update Water Rates 2006 Update Water Rates 2007 Update Water Rate Update 2010 CII'Financing Water Rates 2011 Water Budget Rate Structures Northridge Water Dis- Water Rates and Capacity Fees 1996 CIP Financing,Rate/Fee Design trict Nossaman,Guthner, Litigation Support(Industries) 2003 California PUC Rate-Making Practic Knox&Elliott,LLP es(Southern California Water Company) Client 'L p e ofStud Year °Pro ect 1 m hisis City of Ogden,UT Water/Wastewater Rates 1996 Water Conservation,Rate Structure Olivenhain Municipal Water Rates 1996 Tier Structure,Equity Water District Operations Review 1996 High Level Diagnostic Review City of Orange Water Rates 1997 Financial Plan Model Water Rate Update 2000 Rate Restructuring,Fire Service Charges Water Rate Update 2001 Policies for Reserves Water Rate Update 2002 Revised CIP Water Rate Update 2003 Pass-Through Costs Orange County Sanita- Operational Audit 1999 Office Support Staff Organization lion District City of Palo Alto Water,Wastewater and Reclaimed 1993 Reclaimed Water,Cost Allocation Water Rates Water Utility Benchmarking 2010 Rate Differences City of Paso Robles Water/Wastewater Rates and Ca- 2001 Rate Structure Design panty Fees Water Capacity Fees 2005 Methodology Review Water/Wastewater Capacity Fees 2006 Update Water Capacity Fees 2008 Developer Negotiations City of Petaluma Wastewater Privatization Agree- 1997 Rate Payer Safeguards ment Water and Sewer Rates and Capin- 2002 Infrastructure Financing,Stormwater ty Fees Funding City of Pittsburg Water Treatment Plant Operations 2009 Privatized Operations Placer County Water Treated and Untreated Water Rates 2005 Consolidation of Geographic Zones Agency Treated Water Rates 2007 Fixed/Variable Revenue City of Pleasanton Water Rates 1993 Increasing Block Residential Rates Water Rates 1994 Seasonal Irrigation Rates Water Rates 1995 Lifeline Rates Water Rates,Water Resources 1996 Water Supply Evaluation Water Rates 1997 Update Water Rates 1999 Update Water Rates 2000 Update Water Rates 2002 Update Water Rates 2003 Update Water Rates 2007 Increasing Block Rates Water Rates 2008 Update Water Rates 2009 Rate Restructuring City of Portland,OR Pretreatment Program Review 1999 Regulatory Program Evaluation .Client .3. ;'Type of Study: Year Pigject Emphasis The Presidio Trust Wastewater Treatment Plant 2010 Feasibility Analysis City of Redondo Beach Water Rate Review 1999 Private Water Company Rate Appli- cation City of Redwood City Sewer/Stormwater Rates 1999 Proposition 218 Compliance In-Lieu Transfer 2006 Proposition 218 Compliance City of Rio Vista Water/Wastewater Contract Opera- 2001 Cost-Plus Contract Negotiations sons City of Rohnert Park Water and Sewer Rates 1999 Unmetered Residential Water Cus- tomers Water and Sewer Connection Fees 2001 Connection Fees Water and Sewer Rate Update 2002 Usage-Based Rates City of Roseville Sewer Rates 1999 Financial Plan 2001 Financial Plan Update Ross Valley Sanitary Sewer Rates 2011 Equity Adjustments Between Zones District Sewer Rates 2011 Flow-Based Residential Rates Saginaw Area Inter Litigation Support(Suburban Water 2004 Review Wholesale Rate-Making Me- municipality Water Agencies) thodology Committee(MI) City of San Bruno Water/Wastewater Rates and Ca- 1992 Water Conservation,Project Financ pacity Fees ing San Francisco Bay Area Litigation Support(Suburban Water 1978 to Wholesale Water Supply Contract Water Users Associa- Agencies) 1984 tion Contract Compliance 1984 to Annual Rate Reviews,Water Short- 2000 age Allocations,Regulatory Analy- sis San Francisco Presidio Recycled Water Development 2009 Financial Feasibility Trust San Francisquito Creek Cost Allocation Study 2000 Regional Flood Control Costs JPA City of Sanger Wastewater Rates 1995 Industrial Water Reclamation,Debt Coverage Sanitary District No.5 Sewer Rate and Capacity Fee Study 2005 Separate User Charges by Zone of Marin County Capital Improvement Funding 2006 Financing Plan (Tiburon/Belvedere) Sewer Rates 2007 Update Sewer Rates 2010 Update Sewer Rates 2011 Flow-Based Residential Rates,Debt Financing City of San Jose Wastewater Pretreatment Program 2005 Source Control Inspector Staffing Evaluation Urban Runoff NPDES Program 2007 Economic Evaluation of Alternatives lihr kitt P., ig . •'AV,. 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Lrf ,-,1•••;,-• :A F „,...4,...„4„.„ t.iy ..;..„.., , ....)...„,.......Th 4.e. . t.,,,..w., , -_ .-- ...y.,54\!;....:,....n. ........=....., ...„ _ September 30, 2011 • ... COnsultants- - *- . 3 , , COSTA MESA SANITARY DISTRICT 628 West 19th Street Costa Mesa, CA 92627 CONSULTING SERVICES FOR WASTEWATER RATE STUDY September 30, 2011 HF&H CONSULTANTS, LLC 201 North Civic Drive, Suite 230 Walnut Creek, CA 94596 0 HFHH CONSULTANTS,LLC ARr* it9 reserved. Tills document Is printed on l %recycled,post mnsumer comenm paper using soy ink Costa Mesa Sanitary District Consulting Services for Wastewater Rate Study Proposal TABLE OF CONTENTS I. FIRM AND TEAM QUALIFICATIONS 1 Firm Description 1 Project Team Members 1 Project Manager —John Farnkopf, PE 1 Financial Analyst— Rick Simonson, CMC 2 Rate Analyst—Sima Mostafaei 2 Relevant Experience and References 2 City of Belmont— Flow-Based Sewer Rates 2 Sanitary District No. 5 — Flow-Based Sewer Rates Evaluation 2 Sausalito-Marin City Sanitary District — Tax Roll Billing 3 II. PROJECT APPROACH. 4 Understanding and Approach 4 Work Plan 4 Task 1. Project Initiation. 4 Task 2. Revenue Requirements and Cost of Service Analysis. 6 Task 3. Analyze Customer Bill Impacts 6 Task 4 Summarize and Present Results. 8 Task 5. Identify Implementation Steps 9 Task 6. Project Management. 9 III. SCHEDULE AND COMPENSATION 9 Schedule 9 Compensation Estimate .10 APPENDIX A. RESUMES APPENDIX B. HF&H PROJECT EXPERIENCE APPENDIX C: FEE SCHEDULE TABLE OF FIGURES Figure II-1. Sample Bill Frequency Distribution 7 Figure II-2. Sample Cumulative Bill Distribution Curves. 8 September 30, 2011 Page i HF&H Consultants, tic This page intentionally left blank f,-15:10k Managing Tomorrow's Resources Today 201 North Civic Drive, Suite 230 Robert D. Hilton,CMC Walnut Creek, California 94596 John W Famkopf, PE Telephone: 925/977-6950 Laith B. Ezzet,CMC Fax 925/977-6955 Richard J. Simonson,CMC www.hth-consultants.com , Marva M. Sheehan,CPA September 30, 2011 Ms. Teresa Gonzalez Accounting Manager Costa Mesa Sanitary District 628 West 19th Street Costa Mesa, CA 92627 Subject: Consulting Services for Wastewater Rate Study Proposal Dear Ms. Gonzalez: HF&H is pleased to submit this proposal in response to the District's August 29, 2011 Request for Proposals. This proposal describes our qualifications, approach, schedule, and level of effort for the proposed project; Appendix A contains résumés and Appendix B contains additional information about our experience. Let me briefly summarize our proposal. Firm Experience. HF&H regularly conducts sewer rate studies as one of its core services. Our experience with flow-based sewer rates is reflected in our recent projects for sanitary districts that have experienced recent, substantial rate increases. This experience includes not only the design of flow-based rates but also preparing the tax roll submittal of individual charges. Project Team. Our project team includes staff with extensive experience in preparing sewer financial plans and customer bill analysis. I will serve as project manager working closely with the District in coordinating the team's efforts. Work Plan. Our work plan was developed fo provide a comprehensive rate analysis as part of a five-year financial plan. Our work includes an evaluation of flow-based sewer rates for non-residential customers as well as for residential customers. Our planned completion will allow for adoption of new rates in compliance with Proposition 218 in time for submitting the charges on the August 2112 Orange County Tax Rolls. Independence. HF&H has no other business interests with the District, which allows us to render independent advice. We are not an engineering firm that could also benefit from providing design services. We are not Financial Advisors who could benefit from Managing Tomorrow's Resources Today Mr Teresa Gonzalez September 30 2011 Page 2 of 2 marketing debt. Because of our independence, the District and public will receive objective advice on a matter with significant, long-term consequences. I would like to thank you for requesting this proposal from us. I hope this proposal is responsive to the District's requirements and look forward to an opportunity to discuss it with you. Very truly yours, HFF&H CONSULTANTS, LLC 45ihn W Farn .f P.E. Senior Vice President Costa Mesa Sanitary District Consulting Services for Wastewater Rate Study Proposal I. FIRM MID TEAM QUALIFICATIONS FIRM DESCRIPTION Founded in 1989, HF&H Consultants, LLC provides consulting services to water wastewater and solid waste agencies. Prior to forming the company the firm's executives worked together for six years at a Big Five' accounting firm. The synergy resulting from our staff's engineering, accounting, economics, and public policy backgrounds provides substantial added value to clients; value that can rarely be achieved by individual engineering, accounting, or management consulting firms. Today HF&H Consultants has grown to a firm of nineteen professionals, which makes us one of the largest, if not the largest, ratemaking firms on the West Coast. With offices located in northern and southern California, HF&H Consultants directs its practice to cities, counties, and special districts in the western United States. As such, HF&H Consultants provides clients with the breadth of experience of a national firm, and the responsiveness, accountability and personal commitment of a local firm. Our consultants are seldom far away and, as a result, our clients always receive a quick, personal response to their needs. HF&H Consultants provides financial, economic and general consulting services to public officials in the following areas: rate-setting, cost-of-service studies, financial planning and budgeting, resource management, public policy development, litigation, and negotiations. By comparison with engineering consultants, our style of consulting is influenced by our prior exposure to private sector consulting: we like to help our municipal clients function as healthy businesses within the regulatory and political framework of the public sector HF&H Consultants has a low staff-to-executive ratio in order to allow the firm's most experienced members to participate actively in client projects, rather than only in practice development and project administration. Unlike firms that delegate critical tasks to junior staff our senior employees are involved throughout our clients' projects. The close working relationship between our management and staff ensures effective supervision and quality control. The executives' national certifications and licenses assure our clients of compliance with the highest professional standards. PROJECT TEAM MEMBERS The project team comprises three HF&H staff. no subcontractors are needed. Copies of their résumés are included in Appendix A. project M naaer—John Farnkopf. PE John Farnkopf will serve as Project Manager He will work closely with the District's staff Board, and legal counsel to ensure that the project fulfills the District's expectations and meets all of the contractual commitments. He will attend all project September 30, 2011 Page 1 HF&H Consultants, LLC Costa Mesa Sanitary District Consulting Services for Wastewater Rate Study Proposal meetings and presentations and will supervise the HF&H project team. He will prepare reports and presentations with assistance from the other team members. He will also be responsible for overall quality control. Financial Analyst—Rick Simonson. CMC Rick's role as financial analyst will entail preparing a 5-year revenue requirement projection that utilizes current budgeted capital and operational costs to determine the necessary rate increases. He will work with District staff to collect loading data if the District determines that a cost of service analysis is required. He will also provide rate calculations to Sima Mostafaei for purposes of calculating customer bill impacts. Rate Analyst—Sima Mostafaei Sima Mostafaei has extensive experience evaluating customer billing databases for purposes of designing wastewater rates based on average winter water use and for designing tiered water rates. She will be responsible for analyzing customer billing data for use in calculating fixed and volumetric charges for alternative flow-based rates. She will also assist in evaluating the feasibility of converting to flow-based rates by determining the potential resource commitments. RELEVANT EXPERIENCE AND REFERENCES The following projects were managed by John Famkopf that included the project team members. City of Belmont—Flow-Based Sewer Rates HF&H has assisted the City of Belmont with its sewer/stormwater rates since shortly after the passage of Proposition 218. The City of Belmont provides wastewater collection service to its residents and businesses, most of which are billed annually on the tax rolls. A financial plan and rate study were first completed in 1998. A key feature of the plan was the funding of the stormwater operating and capital program from sewer user charge revenues (in the form of an inter-fund transfer). The rationale justifying this approach was thoroughly evaluated with lawyers specializing in Proposition 218 interpretations. We also developed usage-based residential sewer service charges using customer billing data from Mid-Peninsula Water District. References: Brooke Lazzari, Controller (650) 595-7434, blazzari@belmontgov. Thomas Fil, Finance Director, (650) 595-7435, tfil @belmontgov Sanitary District No. 5— Flow-Based Sewer Rates Evaluation HF&H has updated the District's sewer rates since 2004 when Belvedere was annexed to the District, creating two zones. Most recently HF&H prepared a 2011 report evaluating rate structures throughout California for sewer agencies that bill flow-based sewer rates on the property taxes. We identified the types of fixed and volumetric rate structures used for both residential and non-residential customers, the flow basis (e.g. September 30, 2011 Page 2 HF&H Consultants, LLC Costa Mesa Sanitary District Consulting Services for Wastewater Rate Study Proposal average winter water use for residential), types of non-residential classes, and the associated strength factors for non-residential classes. We will rely on the research conducted for this study in advising the District on its flow-based sewer rate options. References: Robert Lynch, General Manager rlynch @sani5.org; Samantha Miller Office Manager, smiller @sani5.org; (415) 435-1501 Ross Valley Sanitary District— Flow-Based Sewer Rate Study This district serves 29,000 EDUs in central Marin County including Ross Valley Larkspur and San Quentin Prison. HF&H has assisted the District with its sewer rate increases for FY 2011 12. Several factors influenced the need for a 35% increase. the District incurred accelerated capital improvements in response to an EPA Compliance Order a recent court settlement drew down the District's reserves below minimal requirements; a reduction in the Prison's EDUs, which shifted costs to Larkspur and Ross Valley an adjustment to equalize differences in the amount of property taxes paid by Ross Valley which are not paid by Larkspur The complex interrelationship of these factors was presented at several public meetings to develop understanding and acceptance. To address the public's concerns about the magnitude of the rate increases, the District retained HF&H to study and potentially convert its flat residential rates to flow-based rates, based on average winter water use provided by the regional water supplier This study should be complete by December 2011 References: Brett Richards, General Manager brichards@rvsd.org; Wendy Martin- Miller, Business Manager, wmiller @rvsd.org; (415)259-2949. Sausalito-Marin City Sanitary District—Tax Roll Billing HF&H has updated the District's sewer rates since 2002. Most recently HF&H worked as the District's designated representative in preparing and submitting its FY 2011 12 sewer service charges for billing on the County of Marin tax rolls. HF&H reviewed the prior year's partial documentation left by a former staff member and developed the billing by working with the County of Marin and Marin Municipal Water District (MMWD). MMWD billing data was used for calculating flow-based non-residential sewer rates. Reference: Bob Simmons, General Manager, (415).331-4712, bob @smcsd.net. A complete list of projects is included in Appendix B. John Famkopf managed or served as technical advisor on all of these projects. September 30, 2011 Page 3 HF&H Consultants, LLC Costa Mesa Sanitary District Consulting Services for Wastewater Rate Study Proposal II. PROJECT APPROACH UNDERSTANDING AND APPROACH Our approach is based on our current understanding of the project based on the District's RFP All analyses will be combined in a spreadsheet model that will contain many user friendly features that extend the life of the model for the District's use. For example, each worksheet contains references to the source of the numbers so that it is very easy to trace the flow of numbers among the worksheets. Clearly defined assumptions are centralized and all source documents footnoted. Revenue requirements will be developed for an appropriate planning horizon of at least five years. Expense projections will be based on the District's current operating and capital budgets. Revenue projections will be calculated based on the current rate structure and user information on loadings by class. Reserves are of particular concern. We will review the types of existing operating and capital reserves and confirm or assist in developing the parameters for minimum. balances, annual contributions into reserves, and maximum balances. We will also model debt service coverage based on any existing covenants. Cost of service allocations will be performed to allocate the revenue requirements among the customer classes based on the unit costs of service for flow BOD and TSS. Our analysis will clearly indicate how these unit costs apply equally to all customer classes in order to meet the proportionality standard of Proposition 218. Rates will be designed for each class based on the cost of service. We will work with staff to develop alternative rate structures that make refinements to address the District's concerns. We have significant recent experience with flow-based residential and non-residential rate designs if this rate structure is of interest to the District. The rate structures will be evaluated through a series of comparisons to understand their impacts on customers. The alternative rate structures will be compared with the District's existing rate structure and with the District's neighboring communities. In addition, bills will be calculated using the rate structures to determine customer bill impacts across a range of flows. Customer bills will be compared with the District's existing bills and with the neighboring communities. WORK PLAN We propose the following work plan to meet the District's needs. Task 1. Protect Initiation On-site meetings at strategic points are scheduled during the project to provide the District opportunities for timely involvement without placing excessive demands on Staff's time. To initiate the design of the financial plan, we will conduct a Kickoff September 30, 2011 Page 4 HF&H Consultants, LLC Costa Mesa Sanitary District Consulting Services for Wastewater Rate Study Proposal meeting with District Staff prior to the meeting, we will submit a data request so that data collection can begin immediately The Financial Plan consists of a spreadsheet model that will be developed to fit the District's requirements. We have a general structure that we follow, but, within that structure, the model will provide the functions required by the District not only for setting current rates but for its future use in, for example, monitoring the Sewer Fund's financial position, and in testing the impact of increased costs from the Orange County Sanitation District or in levels of collection system maintenance. In other words, the model will not be static and will be capable of evaluating future conditions should the need arise. The model' contains several logically organized elements: • Summary of assumptions and results —This information is provided up front in tabular and graphical form to facilitate review and understanding. • Multi-year revenue requirement projections —The model will be developed for at least a five-year planning horizon. Expense projections will be based on the current budget. The projections will also include funding to maintain adequate operating and capital reserves. • Revenue projections — Revenue from current sewer service charges will be projected based on the current rate structure and allowing for growth. The projected revenue will be compared with the projected revenue requirement to determine the impact of annual surpluses and deficits on the Fund balance. • Reserve funds—The Sewer Fund's current reserves will be evaluated in detail. The types of reserves (e.g. operating, capital, rate stabilization, etc.) the annual contributions to each reserve, transfers from reserves, and the target balances will be evaluated for purposes of modeling and for identifying any refinements to the District's current practices that might be warranted. • Capital improvement program —A schedule of the specific projects, their estimated cost, and the construction date will be incorporated in the model so that the appropriate means of funding (e.g. cash, debt, loans, grants, etc.) can be evaluated. In addition to the foregoing key worksheets, other optional worksheets can be added for evaluating alternatives. In developing alternative rate structures, implementation requirements will be discussed. Clearly structures that are conducive to administration are preferable provided that they improve equity During this task, we will rely on our recent research of flow-based residential sewer rates in which we conducted a State-wide survey of other agencies that bill flow-based residential sewer rates on the tax rolls. ' The model will be a conventional spreadsheet model prepared in Microsoft Excel. The District will receive electronic copies during the study for its review and at the conclusion of the study for its future use. These copies are not subject to any proprietary restrictions by HF&H and are provided at no additional cost. September 30, 2011 Page 5 HF&H Consultants, LLC Costa Mesa Sanitary District Consulting Services for Wastewater Rate Study Proposal After these basic structural parameters are determined, the analysis can be performed to derive rates for each of the structural elements for each class. Deliverable: Rate model with five-year revenue projections. Task 2. Revenue Requirements and Cost of Service Analysis After the general rate structure components have been identified, the rate analysis can proceed. The rate model will project the revenue requirements for FY 2012-13 and through FY 2017 18. The projections will indicate the annual revenue increases that will be needed to fund the District's annual operating and capital expenses and to maintain adequate reserves. The FY 2012 13 revenue requirement will be used as the basis for the cost of service analysis that will determine each class' share of the revenue requirement. We will rely on the State Water Resources Control Board's Revenue Program Guidelines for strength concentrations for each customer class to ensure that defensible assumptions are used. Each class will be allocated its share of the revenue requirement based on it proportionate contribution of flow BOD and TSS. The revenue requirement allocations for each class will be used for calculating bills in Task 3. Deliverable: Rate model with updated revenue requirements and cost of service analysis. Task 3. Analyze Customer Bill Impacts Working in parallel with Task 2, metered water use data from Mesa Consolidated Water District, Irvine Ranch Water District and the City of Newport Beach for the most recent winter will be requested and used for analyzing the structural alternatives. Bill distributions will be developed from lowest to highest bills for determining the full range of flows and the patterns of the distribution of the bills across the full range. Figure 11-1 is an example bill distribution that shows the distribution of each winter monthly water bill from 1 hcf to 50 hcf (1,240 gallons per day—there will be higher bills). The most common value (i.e. the mode) is 6 hcf, which represents 4.8% of all bills. The median value is 8 hcf; half of all winter bills are under this amount and half are over this amount. The average bill is 10 hcf. Bills with below-average flow will pay less than the current flat rate bills with above-average flow will pay more than the current flat rate. With this example data, two-thirds of the bills are less than average, indicating that the majority of customers would experience bill reductions by going to flow-based rates. Figure 11-2 plots the water bills cumulatively from lowest to highest. The bills in Figure II-1 are plotted in Figure 11-2 as the 'Cumulative Bills' (top green line) The flow and revenue from these bills is plotted below them. The median bill, 8 hcf is plotted at the 50% point on the y-axis because half of the bills are above and below this amount. For bills up to the average, 10 hcf, there is 37% of the revenue and about two-thirds of the bills. In other words, only one-third of the bills are greater than the average but they account for about 63% of the flow and revenue. This is significant because high-flow customers may decrease their winter flows in response to flow-based sewer rates that September 30, 2011 Page 6 HF&H Consultants, LLC Costa Mesa Sanitary District Consulting Services for Wastewater Rate Study Proposal are based on average winter water use. Anticipating this reduced flow is important because revenue will also be reduced, potentially impacting reserves unless the reduced flow is built into the rate calculations. Figure II-1 Sample Bill Frequency Distribution i I Median Bill 8HCF Average Flow per Bill 10HCF I — — I i I 1 -i 3 3% .-- __- ._ _— —_ _.__._--- ._-_. s m 1 2.3 a 5 6 7 8 910 11121314 15161]1819]0 23 22 33 34 25 36 27 282930 3132333353637 3839 ID 0142 4344 454647 48 4950 HCF per Monthly 0111 September 30, 2011 Page 7 HF&H Consultants, LLC Costa Mesa Sanitary District Consulting Services for Wastewater Rate'Study Proposal — Figure II 72. Sample Cumulative Bill Distribution Curves 100% - �r4 10% 6ladInellhf%Cfrfhlf of _—i _ 4 _--_—___ -. OM an lena,d haH are / 48.1 460 „r 3 ^^%of Cumuli Bias •9‘41 Cumulative 081%18180011 I Averapflow per BPI fOHCF —�•%ofCumWative Re cmm I 20% —_ __—* • 10% 4¢` -- ®4 ________ _ _ ____ _ __ __ 0 2 6 8 10 11 16 16 12 20 12 24 26 28 30 32 34 36 38 42 44 46 e8 50 • HCF per Abnlhq 80I The use of statistical analysis such as this is extremely valuable in understanding the impact of rate structures on customers' bills. For example, the data in these curves indicates that the top 10% of bills (where the top green line crosses 90% on the y-axis), are for 19 hcf or more, nearly double the average. Customers with flow that high will pay a volumetric component of their bills that is nearly double the volumetric component that an average customer would pay We will also provide analyses that indicate the magnitude of the impacts on customers ranging from lowest to highest use. We will focus on various statistical parameters, such as the lowest and highest quartiles, and the median, mode, and mean values. With this information, we can advise staff and the Board as to how many customers will experience either higher or lower bills and by how much. We would expect to present the results of the analysis to staff for review and to make revisions prior to presentation to the Board. Based on the input that is received, a recommendation will be developed for documentation in a report. Task 4. Summarize and Present Results The recommended rate increases and structure will be summarized in a draft report for presentation to the Board. The report will describe the costs and benefits associated with the altematives, implementation advantages and disadvantages, and the feasibility of the recommended flow-based rates. This information will assist the Board in understanding the impact of flow-based sewer rates on its customers as well as the September 30, 2011 Page 8 HF&H Consultants, LLC HF&H Consultants,LLC R€sumes John W Farnkopf,P.E. ARTICLES,SPEECHES,AND TESTIMONY 'Recent Trends in Funding Enterprise Infrastructure' presented at the California Society of Municipal Finance Officers Annual Conference,March 2007 'Implementing Rate Studies, Chapter XI, Financing and Charges for Wastewater Systems, Water Environment Federation Manual of Practice,2004. 'Proposition 218: Are Your Rates In Compliance?' presented at the California/Nevada Annual Fall Conference of the American Water Works Association,October 2004. 'Funding Stormwater NPDES Requirements: Potential Sources, presented at the League of California Cities Annual Conference,September 2003. 'Funding Water, Sewer, and Stormwater Programs under Proposition 218, presented at the League of California Cities Public Works Officers Institute Conference,March 2000. 'Guidelines for Setting Rates in Compliance with Proposition 218, presented at the League of California Cities Annual Conference,October 1999 'Getting Rate Approval, presented at the Water Environment Federation Conference, 1998. 'Privatization as a Means of Managing Municipal Budget Constraints, presented at the Orange County Workshop 'Managing Municipal Budget for the New Millennium, 1997 The Use of Mediation Techniques to Evaluate Rate Alternatives, presented at the California/Nevada Annual Spring Conference of the American Water Works Association, 1996. 'Dissecting Rate Structures: Identifying Where Further Refinements are Warranted, Proceedings of CONSERV96,American Water Works Association Conference, 1996. 'The Palo Alto Reclamation Project: Economic Justifiability versus Financial Feasibility, presented to the San Francisco Bay Area Water Recycling Task Force, 1993. Allocating Reclamation Costs to Water and Waste Water Rates, invited speaker at the 68th Annual Conference of the Western Economic Association International,1993. 'Pricing Reclaimed Water, presented at the American Water Works Association/Water Environment Federation Joint Management Conference, 1993. 'Developing Reclaimed Water Pricing Policies, presented to the San Francisco Bay Area Water Recycling Task Force, 1992. 'Drought Impacts on San Francisco's Wholesale Water Purchases, testimony presented to the State Water Resources Control Board,Bay Delta Hearings,Water Rights Phase,1992. 'The Ability of Manufacturing Industries to Cope with Permanent Water Supply Reductions, testimony on behalf of the Santa Clara County Manufacturing Group presented to the State Water Resources Control Board,Bay Delta Hearings,Water Rights Phase, 1992. 'Characteristics of Conservation-Oriented Rates, Proceedings,American Water Works Association National Conference, 1992. 'Impacts of Water Supply on Bay Area Industrial Water Users, presented at the California Water Planning Conference sponsored by the Association of Bay Area Governments, 1991. HF&H Consultants,LLC Résumés John W Farnkopf,P.E. Allocating Water Supplies during Droughts, Proceedings, American Society of Civil Engineers National Conference on Environmental Engineering, 1991. 'Setting Wholesale and Retail Rates in Times of Drought, presented at the Drought Response Water Rate Structure Workshop sponsored by the San Diego County Water Authority 1991. 'Capacity Charges: Theory Practice, and the Law presented at the California Nevada Spring Conference of the American Water Works Association, 1990. 'Fixed Asset Valuation Procedures, presented at Fixed Asset Valuation and Management for Local Governments and Utilities, a Price Waterhouse seminar, 1988. 'Bay Area Water Supplies: Imported, Reclaimed, and Local Sources, testimony presented to the State Water Resources Control Board,Bay Delta Hearings,Phase I,1987 'Elements of River Meanders, California Engineer 1978.