SR-07082008-1G~~r
~;tYof City Council Report
Santa Monica
City Council Meeting: July 8, 2008
Agenda Item: ~-G
To: Mayor and City Council
From: Lee E. Swain, Director of Public Works
Subject: Contract Modification for Additional Financial Analysis and Development
of Wastewater Rates
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, Inc. for additional financial analysis and development of wastewater rates
in the amount of $4,665.
Executive Summary
Raftelis Financial Consultants, Inc. (RFC) was retained in November 2006 to perform a
wastewater rate study. Rate increases were discussed with Council at study sessions
on May 8, 2007, and April 22, 2008. The rate study was completed, and a five year
schedule of rate increases was approved by Council on May 13, 2008, with direction to
begin the public notice process and return on July 8, 2008 for final adoption of the
revised rate schedule. RFC's contract authority under existing contract number 8726
(CCS) is $104,300. In completing the study, RFC exceeded the limit of its contract
authority by $4,665, and additional funding in this amount is requested in order to fully
compensate RFC for work completed. The total requested modification amounts to
$4,665, for a new total contract amount of $108,965.
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 to perform a wastewater rate study addressing the City's goals of achieving
adequate fund reserves, rate equity among customer classes, and appropriate debt
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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 $85,550, to allow RFC to continue to refine the
rate analysis in light of more recent information from the City of Los Angeles and to
prepare a Wastewater Capital Facility Fee Study.
In January 2008, a third modification to the RFC contract, in the amount of $18,750,
provided funding to complete the rate study and the capital facility fee study. The total
amount of the contract to date is $104,300. The rate study was completed, and a rate
structure was approved by Council at its May 13, 2008 meeting. The Capital Facility
Fee study will be included in the FY 2008/2009 budget proposal.
Considerable effort was expended by RFC in response to staff direction to modify input
parameters to the wastewater rate .model, resulting in runhing numerous iterations of
the model. In particular, a late addition to the scenarios not envisioned at the project
outset was the effect of including a cash infusion into the modeling analysis in order to
assess rate impacts. As changes were requested by staff, modifications to the written
report were also required. .RFC informed project staff that it would be exceeding its
contract authority slightly in accommodating these revisions. In order to present the
completed rate studies to Council in a timely manner, RFC was instructed to complete
the studies, acknowledging the overrun in the contract limit.
RFC responded cooperatively to.staff requests to complete the study. In doingso, RFC
exceeded the limit of its contract authority by $4,665. 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 fully compensating RFC for
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completion of the wastewater rate analysis and Capital Facility Fee Study. Accordingly,
a fourth modification to the existing professional service agreement, in the amount of
$4,665, is requested for the completion of the rate study.
Financial Impacts and Budget Actions
Funds in the amount of $4,665 are available at account 31661.555060 for the services
described in this staff report.
Prepared by: Gil Borboa, P.E. Water Resources Manager
Approved:
~~%7*~ce~asi
Lee E. Swain
Director of Public Works
Forwarded to Council:
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Reference Amendment to
Contract No. 8726 (CCS).