SR-010808-1D~r
City of
Santa Monica
City Council Report
City Council Meeting: January 8, 2008
Agenda Item: I "- D
To: Mayor and City Council
From: Craig Perkins, Director -Environmental and Public Works Management
Subject: Modification to Contract 8726 (CCS) with Raftelis Financial Consultants,
Inc., for Additional Consulting Services Addressing Proposed Wastewater
Rate Adjustments
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and
execute a modification to existing Contract No. 8726 (CCS) with Raftelis Financial
Consultants, Incorporated, for additional financial analysis and development of
wastewater rates and capital facility fees in the amount of $18,750.
Executive Summary
Raftelis Financial Consultants, Inc. (RFC), was retained to perform a wastewater rate
study in November 2006. Rate increases were discussed with Council at a study
session on May 8, 2007, along with a discussion of staffs intent to refine the analysis in
order to reduce the magnitude of the proposed rate increases. Since then, RFC has
performed numerous rate scenarios in light of updated information from the City of Los
Angeles. In addition, a Nexus Study has been completed which examines the funding
allocations from the City's general fund and the various enterprise funds for
Environmental Program Division programs as it relates to Proposition 218. RFC has
reached the limit of its contract authority under existing contract number 8726 (CCS),
and additional funding is requested so that all required analyses can be completed, and
the results of the Nexus study can be incorporated in the rate analysis. The total
requested modification amounts to $18,750 for a new total not to exceed $104,300.
Discussion
Raftelis Financial Consultants, Inc., (RFC) is a nationally recognized financial and
management consulting firm with substantial experience in performing rate analyses, as
well as other financial and management services. RFC was retained in November 2006
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to perform. a wastewater rate study addressing the City's goals of achieving adequate
fund reserves, rate equity among customer classes, and appropriate debt service
coverage, among others. RFC was selected from among four firms responding to a
request for proposals issued by the city's Water Resources Division. The initial contract
amount was for $40,850. A first modification of the agreement in January 2007
increased the amount by $9,700 for a total amount of $50,550. Subsequent to a
Council study session on May 8, 2007, at which initial rate analysis results were
presented, a second modification to the contract was approved in June 2007 in the
amount of $35,000, for a total amount of $85,500, to allow RFC to continue to refine the
rate analysis in light of more recent information from the City of Los Ahgeles and to
prepare a Wastewater Capital Facility Fee Study. RFC has completed multiple drafts
of the wastewater rate study report and a first draft of the Wastewater Capital Facility
Fee Study.
Significant effort has been expended by RFC in response to staff direction to modify
input parameters to the wastewater rate model. Moreover, staff has commissioned a
Nexus Study to analyze the funding of various Environmental Programs Division
programs by the city's general fund and various enterprise funds, as it relates to
compliance with Proposition 218. Proposition 218 was approved by the voters of the
state in 1996, resulting in an amendment to the State Constitution requiring voter
approval for local government taxes, and limiting certain fees and assessments.
Presently, RFC has reached the limit of its contract authority. Given the importance of
the rate study, and the fact rates have not been reevaluated since 1996 (other than a
uniform CPI adjustment implemented in 2001), staff is desirous of continuing to work
with RFC to refine the proposed revenue and rate enhancement requirements and to
incorporate the results of the Nexus study in the rate analysis. Additional funding for the
existing agreement will be required to do so.
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The total additional contact authority requested as a modification to the existing
professional service agreement for the continuation of the rate study is $18,750.
Financial Impacts and Budget Actions
Funds in the amount of $18,750 are available at account 31661.555060 for the services
described in this staff report.
Prepared by: Gil Borboa, P.E. Water Resources Manager
Approved:
Craig P~rkins
Director, Environment and Public Works
Management Department
Forwarded to Council:
~mont Ewel
Manager
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Reference
Amended Contract
No. 8726 (CCS).