SR-6-J (90)
. 6J 171
Contract No. 7159(CCS)
AUG 0 8 1995 -
EPWM!CP!JM/JSH:wratew3
Councll Meeting: August 8, 1995 Santa Monlca, Callfornla
TO: Mayor and Clty Councll
FROM: Clty Staff
SUBJECT: Recommendatlon to Authorlze the Clty Manager to
Negot1ate and Execute a Contract w1th Davld M. Grifflth
and Associates, Ltd. , to Perform a Water and Wastewater
Rate Study.
INTRODUCTION
ThlS report recommends that the Clty CounCll authorlze the Clty
Manager to negotlate and execute a contract with Davld M.
Grlfflth and Assoclates, L td. , ( DMG ) to perform a Water and
Wastewater rate study ln an amount not to exceed $78,380.
BACKGROUND
The Clty of Santa Monlca funds its water and wastewater
operatlons through revenue generated by water and wastewater
rates. The current water rate structure was adopted ln 1990, and
the wastewater rate structure was adopted in 1991. Both rate
structures include a flxed charge based on water meter Slze and a
varlable charge based on water consumptlon that appear on each
customer's bl-monthly blll. As dlscussed in the budget study
seSSlons and the publlC presentatlons related to the
establlshment of the Stormwater Enterprlse Fee, It 1S proposed
that a rate study be conducted.
1 6J
-
AUG 0 8 1995
-- -------
There are several reasons why staff lS pursU1ng water and
wastewater rate stud1es at this time. Water operatlons are
faclng a mult1-year lncrease ln costs for purchased water from
the Metropolltan Water Dlstrict, and the Wastewater fund 1S
fac1ng a second bond lssue for the C1ty'S share of Hyper10n
Treatment Plant capltal costs. Staff also deslres to evaluate
alternat1ve rate structures Wh1Ch would encourage water use
eff1c1ency and reduce sewer flows, both goals of the Susta1nable
C1ty Program, and prov1de a more equltable rate structure to the
C1ty'S customers. The opt1on of lmplement1ng a reduced
"lifel1ne" rate for sen1ors, d1sabled or low income customers
wl11 also be evaluated. The goals of the rate study lnclude:
- Establ1shlng an lnnovat1ve rate structure Wh1Ch will
encourage water use efflclency, reduce sewer flows,
prov1de equ1ty to the C1ty'S customers, and recommend
methods of creat1ng a llfel1ne rate;
- provld1ng a flve-year forecast of revenue and
expendltures based on water demand and sewage flow
goals as set forth 1n the Sustainable C1ty Program;
- Develop1ng a computer1zed model for Clty staff for
future revenue, expend1tures and demand forecasting;
- Recommendlng a cash reserve policy;
- Evaluat1ng the costs and beneflts of convertlng to a
monthly b1lling cycle:
~ Includlng a publ1C part1c1pat1on process.
2
DISCUSSION
Currently the water rate structure consists of a f1xed bi-monthly
serVlce charge based on meter Slze and type of customer WhlCh
covers most of the City's flxed costs of operatlng the system,
and a varlable two-t1ered consumpt1on charge representlng the
costs of locally-produced water and purchased water. Whlle the
flxed serV1ce charge has provlded a rel1able revenue stream for
the Clty, staff belleves that it may be dlscourag1ng water use
efflclency Slnce ln some cases a customer's bll1 may not vary
sign1flcantly with reduct10n of water use.
The wastewater rate baslcally uses the same methodology, that lS,
there lS a flxed bl-monthly serV1ce charge and a var1able charge
based on water consumptlon tlmes a "d1scharge factor" Wh1Ch lS an
assumptlon of how much water dlscharges to the sewer. As wlth
the water rate, the flxed serVlce charge may dlscourage water use
efflc1ency. Industr1al waste customers (those buslnesses which
fall under the ]urisdlct1on of the Industrlal Waste Control
Ord1nance such as restaurants, photo f1nlshers, auto repa1r,
manufacturing, etc.) pay a higher flxed charge ln addition to a
varlable charge that 1S determ1ned by the amount of the
customer's water consumpt1on, dlscharge factor and sewage
strength. Since strength calculatlons for industrlal waste
customers are dlff1cult to explaln to customers and to
adm1nister, staff bel1eves that the method of recoverlng strength
3
treatment costs should be revised.
L1fel1ne Rates
Many customers currently lnquire about the ava1lab1l1ty of
llfel1ne rates. L1fel1ne rates are des1gned to prov1de spec1al
benefit to a part1cular user class or ut1l1ty customer 1n the
form of lower rates. Although Ilfel1ne rates are commonplace 1n
many electr1c and gas ut1l1t1es, they have not been commonly used
1n water and wastewater ut1l1t1es. However, w1th r1S1ng costs of
water supply and wastewater treatment, many ut1l1t1es are
evaluat1ng the need to adopt Ilfel1ne programs. In general, the
emphas1s of a Ilfel1ne rate is to prov1de rate aSs1stance (lower
rates) for quallfYlng residentlal customers. The crlteria that
1S commonly used to accommodate the goals of a llfel1ne program
are: 1) low consumptlon customers, 2) sen10r cltlzen customers,
3) dlsabled customers, and 4) low income customers.
Recommendat1on as to potent1al Ilfel1ne rates wlll be presented
to the C1ty Council along w1th the other rate recommendat1ons 1n
early 1996.
PubllC Partlclpation Process
Staff 1S recommending that the Task Force on the EnVlronment be
1nvolved 1n developlng the f1nal scope of work of the selected
consultant. Once the scope has been flnallzed, staff and DMG
will conduct an 1ntroductory meetlng wlth representative
4
resldentlal and business groups to present the goals and
obJectives of the study, present the general rate study process,
and obtain early publlC lnput for ratemaklng conslderatlons.
Subsequent meetlngs wlth the Task Force on the Envlronment and
resldent/buslness representatlves wlll be held to review
alternatlve rates, the draft report, and the flnal report. ThlS
publlC partlclpation process wlll ensure that the concerns of the
communlty are addressed ln the flnal rate recommendatlons.
Request for Proposal
A request for quallflcatlons (RFQ) was sent to 22 consulting
flrms and a proposer's conference was held on February 16, 1995,
to dlSCUSS the project and answer questlons. Twelve firms
responded to the City's RFQ and SlX of these flrms, after
thorough revlew, were selected to submlt a proposal. The SlX
proposers were as follows:
A & N Technlcal Servlces
Brown and Caldwell
Davld M. Grlfflth & Assoclates, Ltd.
Hllton, Hobson & Farnkopf
Kennedy/Jenks Consultants
Montgomery Watson
The above flrms made presentatlons to staff on July 11 and July
12, 1995. After checklng references and carefully evaluatlng the
breakdown of serVlces to be provlded, staff selected DMG because
of thelr technlcal experlence and prior success ln conductlng
publlC participatlon processes. Two of thelr most recent
5
----- -- -- -
proJects lnclude work on water rates for the Clty of Los Angeles
and water and wastewater rates for the Clty of Oceanslde.
BUDGET/FINANCIAL SECTION
The cost of the rate studles is $78,380 plus a 20% contlngency of
$15,600 for a total of $93,980 WhlCh wlll be SpIlt equally
between the Water and Wastewater funds. Funds for the study are
avallable as follows:
Account No. Avallable Requlred
25-760-671-20096-8900-99317 $100,000 $46,990
31-760-661-20096-8900-99317 $100,000 $46,990
RECOMMENDATION
It lS recommended that the C1ty CounC11 authorlze the Clty
Manager to negotlate and execute a contract with Davld M.
Grlfflth and Assoclates, Ltd. in the amount of $78,380 to perform
a water and wastewater rate study.
Prepared by: Cralg Perkins, Dlrector of EPWM
John Mundy, Utllltles Manager
Susan Munves, Conservatlon Coord1nator
Jean Hlgbee, Senlor Admlnlstratlve Analyst
6