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Home My WebLink AboutItem 19 - Water Rate Update and Award of Contract MEMO TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL Z, FROM: BRUNO RUMBELOW, CITY MANAGER�j� MEETING DATE: FEBRUARY 21, 2017 SUBJECT: WATER AND WASTEWATER RATE UPDATE AND MODEL MODERNIZATION AWARD OF CONTRACT RECOMMENDATION: City Council consider approving a water and wastewater rate update and model modernization contract with NewGen Strategies & Solutions. FUNDING: Funding is available in Utility Administrative Services/Professional Services account 200- 44540-533-1 in an amount not to exceed $32,500.00. BACKGROUND: NewGen has been asked by City Staff to prepare a proposal to evaluate and update the City's water and wastewater rates. Since NewGen last updated our rates and model, the cost to treat and transport water and wastewater in North Texas has experienced significant changes. The recent drought with its resulting water conservation efforts, followed closely by an extremely wet period, has resulted in yearly water usage below those projected in the current model. Additionally, Staff is considering a utility bond issuance for needed capital improvements and needs an updated model to project rate impacts from the sale of the bonds in phases or in one issue. We need to update facts and assumptions currently in place to insure that the rate plan provides a more realistic annual projection for the next five year period. This model update scope is comprised of: • Data collection • FY 2017 revenue requirement and baseline forecast • Capital improvement plan and anticipated rate impacts • Forecasted rate plan over the next five years • Council presentation • Finalize and modernize rate model The attached proposal expands upon the individual elements of the project scope. Staff recommends approval. 1300 E. Lookout Drive . . Suite 100 Richardson, TX 75082 � '� � � & Soiutians Phone: (912) 680-2000 . November 1, 2016 via email Mr. Stan Laster, P.E. Director of Public Works City of Grapevine,Texas 200 S. Main St Grapevine,TX 76051 Subject: Proposal for Water and Wastewater Rate Update and Model Modernization Dear Mr. Laster: NewGen Strategies and Solutions, LLC(NewGen) is pleased to offer our services to the City of Grapevine (City)to assist in updating the City's water and wastewater rates and improving the City's existing water and wastewater rate model previously developed by members of NewGen.As a part of this engagement, and based on our conversations to-date, NewGen proposes to evaluate the City's current water and wastewater rates to reflect the current cost of service and to evaluate the impact to rates of upcoming debt issuances in support of critical capital projects. Additionally, the Project Team wil► evaluate and update key inputs to the City's existing water and wastewater rate model and will update the model to streamline administration as well as to take advantage of recent software improvements. The following engagement letter describes the scope of services, which will be provided by NewGen. In addition,this letter clarifies the overall cost and projected timing for this study. SCOPE Of SERVICES Based on our understanding of the requested services,NewGen proposes the following work plan. Please note that this plan will be revised and adjusted as necessary based on feedback from City staff at the outset of the project. � Task 1—Data Collection At the outset of the Project, NewGen will work with City staff to collect the necessary data to conduct the water and wastewater rate update. As part of this data collection effort,the Project Team will work directly with First Southwest,the City's Financial Advisor,as well as STW, Inc.,the City's Utility Billing provider,to gather needed data to support the work. • Task 2—FY 2017 Revenue Requirement Development and Baseline Forecast After collecting the necessary data,the Project Team will develop a baseline revenue requirement predicated on the City's adopted FY 2017 budget. This baseline revenue requirement will then be forecasted over a five(5)year time-frame. The anticipated revenue performance under the City's current rates will then be evaluated against this baseline to evaluate the impact of anticipated future wholesale cost increases, general inflation and anticipated changes to the City's utility operations. Economics � Strategy � Stakeholders � Sustainability www.newgenstrategies.net L Mr. Stan Laster, P.E. November 1, 2016 Page 2 • Task 3—Capital Improvement Plan Incorporation and Anticipated Rate Impact Utilizing the results of Task 2, the Project Team will overlay the developed baseline revenue requirement with the City's projected capital improvement funding plan. Specifically,the Project Team will evaluate the anticipated rate impact of planned future debt issuances over the next five (5j years. • Task 4—Forecasted Rate Plan Task 4 of the Study will seek to outline a forecasted plan of water and wastewater rate adjustments over the next five (5)years to adequately fund utility operations and planned capital improvements. This plan will be based on the City's existing water and wastewater rate design structure and will seek to minimize, where possible, rate shock to the City's customers. Upon development of the forecasted rate plan, the Project Team will discuss the anticipated impact of the forecasted rate plan with City staff and incorporate feedback received. • Task 5—Council Presentation At the completion of the project analysis,the Project Team will brief the City Council on the work performed and present the forecasted rate plan. In presenting the rate plan, the Project Team will fully brief the Council on the methodofogy and assumptions utilized in the plan's development,as well as present the anticipated impact to a cross-section of the City's customers. • Task 6—Finalize and Modernize Rate Model Upon City Council approval of the forecasted rate plan,the Project Team will finalize the updated water and wastewater rate model for use by City staff in monitoring rates on an on-going basis. As part of finalizing the model, the Project Team will modernize the model to include worksheets that permit the calculation of the annual pass-through adjustment specific to the City's wholesale provider costs. In addition, where possible, inputs will also be streamlined to facilitate easier administration and monitoring of future rate updates on an annual basis. On completion of the rate model, the Project Team will conduct an on-site, hands-on training session with City staff covering the model's function and maintenance. PROJECT TIMING Assuming notice to proceed is received by December 9, 2016 and the timely receipt of all necessary data, NewGen anticipates that the finalized rate plan will be ready for Council presentation within 90 to 120 days. PROJECT fEES Based on the scope of services outlined above, NewGen estimates that the services can be provided for a not-to-exceed project price, including out-of-pocket expenses,of$32,500. Payment will be due within thirty (30) days upon receipt of invoice. Our standing hourly billing rates at this time,which will remain in effect through the duration of the project, are as follows: Mr. Stan Laster, P.E. November 1, 2016 Page 3 NewGen Strategies 8�Solutions Billing Rates Position Billing Rate General Manager�President $265-$295 DirectorlExecutive Consultant/Vice President $210-$295 Senior Consultant $160-$210 Staff Consultant $140-$160 Analyst $120-$140 Administrative Assistant $ 85 This agreement is subject to cancellation within thirty(30)days prior written notice provided to NewGen. In the event of cancellation, all labor and expense charges incurred by NewGen through the date of cancellation will be considered due at the time notice of cancellation is delivered, regardless of work product and/or engagement status. In executing this letter,you agree that the services rendered by 1VewGen will be performed in accordance with instructions or specifications received by the City and will be provided with the degree of skill and judgment exercised by recognized professionals performing services of similar nature and consistent with the applicable industry best practices. You further agree that compensation for services rendered will be provided to NewGen regardless of the final outcome of the engagement. NewGen looks forward to assisting the City in this engagement and appreciates the opportunity to once again work with the City of Grapevine. We believe the project team's personal experience with the City and our firm's collective professional experience provides a unique set of qualifications desired by the City. If this letter is in agreement with your understanding of the scope of services to be provided,and our proposal terms and conditions are acceptable, please execute one copy and return to our Richardson, Texas office. If you have any questions, please feel free to contact Mr. Chris Ekrut at 972.232.2234 or via email at cekrut@new�enstrate�ies.net. Very truly yours, NewGen Strategies&Solutions,LLC C� �. �;�...� Chris D. Ekrut Director, Environmental Practice City of Grapevine—Water and Wastewater Rate Update and Model Modernization ($32,500) Signed Printed Title Date