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HomeMy WebLinkAboutResolution - 2016-R0032 - Newgen Strategies And Solutions - 01/28/2016Resolution No. 2016-R0032 Item No. 5.8 January 28, 2016 RESOLUTION BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: THAT the Mayor of the City of Lubbock is hereby authorized and directed to execute for and on behalf of the City of Lubbock, Professional Services Contract by and between the City of Lubbock and NewGen Strategies and Solutions, LLC, and any related documents. Said Contract is attached hereto and incorporated in this resolution as if fully set forth herein and shall be included in the minutes of the City Council. Passed by the City Council on January 28, 2016 ��ZAIII G C. A013tRTSON, MAYOR ATTEST: Rebe ta Garza, Citv Secretary APPROVED AS TO CONTENT: 1cQ Aubrey A. Spe P.E., Directo of Water Utilities APPROVED AS TO FORM: RES.Contract-NewGen Strategies and Solutions, LLC 1.08.16 Resolution No. 2016-RO032 PROFESSIONAL SERVICES CONTRACT STATE OF TEXAS § COUNTY OF LUBBOCK § This contract (the "Contract"), effective as of the2!-8111 day of January, 2016 (the "Effective Date"), is by and between the CITY of Lubbock, (the "CITY"), a Texas home rule municipal corporation, and NewGen Strategies and Solutions, LLC. (the "CONSULTANT"), a corporation authorized to conduct business in Texas. WITNESSETH WHEREAS, the CITY desires to obtain consulting services related to reviewing, evaluating, designing and implementing water and wastewater cost of service, rates, and financial models (the "Activities"); and WHEREAS, CONSULTANT has a professional staff experienced in, and is qualified to provide, consulting services related to the Activities, and will provide the services, as defined below, for the price provided herein, said price stipulated by CITY and CONSULTANT to be a fair and reasonable price; and WHEREAS, the CITY desires to contract with CONSULTANT to provide consulting services related to the Activities and CONSULTANT desires to provide the Services related to same. NOW THEREFORE, for and in consideration of the terms, covenants and conditions set forth in this Contract, the CITY and CONSULTANT hereby agree as follows: ARTICLE I. TERM The term of this Contract commences on the Effective Date and continues without interruption until February 1, 2017. If the CONSULTANT determines that additional time is required to complete the Services, the Director of Water Utilities may, but is not obligated to, in his discretion, execute an agreement to grant up to an additional six (6) months of time so long as the amount of the consideration does not increase. An amendment to this Agreement resulting in an Water & Wastewater Rate Structure Evaluation Page 1 of 12 increase in the amount of the consideration must be approved by the CITY acting through its governing body. ARTICLE H. SERVICES AND COMPENSATION A. CONSULTANT shall conduct all activities and within such timeframes as set forth on Exhibit "A", attached hereto (the "Services"). B. CONSULTANT shall receive as consideration to be paid for the performance of the Services set forth in Exhibit "B", for a lump sum price of one hundred twenty thousand dollars ($120,000). ARTICLE II1. TERMINATION A. General. CITY may terminate this Contract, for any reason or convenience, upon thirty (30) days written notice to CONSULTANT. In the event this Agreement is so terminated, the CITY shall only pay CONSULTANT for services actually performed by CONSULTANT up to the date CONSULTANT is deemed to have received notice of termination as provided herein. B. Termination and Remedies. In the event CONSULTANT materially breaches any term and/or provision of this Contract and fails to cure within 10 days after notice of same, the CITY shall be entitled to exercise any right or remedy available to it by this Contract, at law, equity, or otherwise, including without limitation, termination of this Contract and assertion of an action for damages and/or injunctive relief. The exercise of any right or remedy shall not preclude the concurrent or subsequent exercise of any right or remedy and all rights and all remedies shall be cumulative. ARTICLE IV. NON - ARBITRATION The CITY reserves the right to exercise any right or remedy available to it by law, contract, equity, or otherwise, including without limitation, the right to seek any and all forms of relief in a court of competent jurisdiction. Further, the CITY shall not be subject to any arbitration process prior to exercising its unrestricted right to seek judicial remedy. The remedies set forth herein are cumulative and not exclusive, and may be exercised concurrently. To the extent of any conflict Water & Wastewater Rate Structure Evaluation Page 2 of 12 between this provision and another provision in, or related to, this Contract, this provision shall control. ARTICLE V. REPRESENTATIONS AND WARRANTIES A. Existence. CONSULTANT is a corporation duly organized, validly existing, and in good standing under the laws of the State of Texas and is qualified to carry on its business in the State of Texas. B. Corporate Power. CONSULTANT has the corporate power to enter into and perform this Contract and all other activities contemplated hereby. C. Authorization. Execution, delivery, and performance of this Contract and the activities contemplated hereby have been duly and validly authorized by all the requisite corporate action on the part of CONSULTANT. This Contract constitutes legal, valid, and binding obligations of the CONSULTANT and is enforceable in accordance with the terms hereof. D. Consultant. CONSULTANT maintains a professional staff and employs, as needed, other qualified specialists experienced in providing the Services, and are familiar with all laws, rules, and regulations, both state and federal, including without limitation, the applicable laws, regarding the Activities contemplated hereby. E. Performance. CONSULTANT will and shall conduct all activities contemplated by this Contract in accordance with the standard of care, skill and diligence normally provided by a professional person in performance of similar professional consulting services in Texas, and comply with all applicable laws, rules, and regulations, both state and federal, relating to professional consulting services, as contemplated hereby. F. Use of Copyrighted Material. CONSULTANT warrants that any materials provided by CONSULTANT for use by CITY pursuant to this Contract shall not contain any proprietary material owned by any other party that is protected under the Copyright Act or any other law, statute, rule, order, regulation, ordinance or contractual obligation relating to the use or reproduction of materials. CONSULTANT shall be solely responsible for ensuring that any materials provided by CONSULTANT pursuant to this Contract satisfy this requirement and CONSULTANT agrees to Water & Wastewater Rate Structure Evaluation Page 3 of 12 indemnify and hold CITY harmless from all liability or loss caused to CITY or to which CITY is exposed on account of CONSULTANT's failure to perform this duty. ARTICLE VI. SCOPE OF SERVICES CONSULTANT shall accomplish the following: Professional Consulting Services related to the Activities, as defined and provided in Exhibit "A," "Scope of Services". ARTICLE VII. INDEPENDENT CONTRACTOR STATUS CONSULTANT and CITY agree that CONSULTANT shall perform the duties under this Contract as an independent contractor and shall be considered as independent contractor under this Agreement and/or in its activities hereunder for all purposes. CONSULTANT has the sole discretion to determine the manner in which the services are to be performed. During the performance of the Services under this Agreement, CONSULTANT and CONSULTANT's employees and/or subconsultants, will not be considered, for any purpose, employees or agents of the CITY within the meaning or the application of any federal, state or local law or regulation, including without limitation, laws, rules or regulations regarding or related to unemployment insurance, old age benefits, workers compensation, labor, personal injury or taxes of any kind. ARTICLE VIII. INSURANCE CONSULTANT shall procure and carry, at its sole cost and expense through the life of this Agreement, except as otherwise provided herein, insurance protection as hereinafter specified, in form and substance satisfactory to CITY, carried with an insurance company authorized to transact business in the state of Texas, covering all aspects and risks of loss of all operations in connection with this Agreement, including without limitation, the indemnity obligations set forth herein. CONSULTANT shall obtain and maintain in full force and effect during the term of this Agreement, and shall cause each approved subcontractor or subconsultant of CONSULTANT to obtain and maintain in full force and effect during the term of this Agreement, commercial general liability, professional liability and automobile liability coverage for non -owned and hired vehicles with insurance carriers admitted to do business in the state of Texas. The insurance companies must Water & Wastewater Rate Structure Evaluation Page 4 of 12 carry a Best's Rating of A-VII or better. All policies will be written on per occurrence basis except Professional Liability, subject to the following minimum limits of liability: Commercial General Liability: Per Occurrence Single Limit: General Aggregate Limit: Professional Liability: Per Claim: Automobile Liability: Combined Single Limit for any auto: $1,000,000 $2,000,000 $1,000,000 $1,000,000 Per Occurrence CONSULTANT shall further cause any approved subcontractor or subconsultant to procure and carry, during the term of this Agreement, Professional Liability coverage, as specified above for CONSULTANT, protecting CITY against direct losses caused by the professional negligence of the approved subcontractor or subconsultant. The CITY shall be listed as a primary and noncontributory additional insured with respect to the Automobile Liability and Commercial General Liability and shall be granted a waiver of subrogation under those policies. CONSULTANT shall provide a Certificate of Insurance to the CITY as evidence of coverage. The certificate shall provide 30 days notice of cancellation. A copy of the additional insured endorsement and waiver of subrogation attached to the policy will be included in the Certificate. CONSULTANT shall elect to obtain worker's compensation coverage pursuant to Section 406.002 of the Texas Labor Code. Further, CONSULTANT shall maintain said coverage throughout the term of this Agreement and shall comply with all provisions of Title 5 of the Texas Labor Code to ensure that the CONSULTANT maintains said coverage. The CONSULTANT may maintain Occupational Accident and Disability Insurance in lieu of Worker's Compensation. In either event, the policy must be endorsed to include a waiver of subrogation in favor of the CITY. If at any time during the life of the Agreement or any extension hereof, CONSULTANT fails to maintain the required insurance in full force and effect, CONSULTANT shall be in breach hereof and all work under the Agreement shall be discontinued immediately. Water & Wastewater Rate Structure Evaluation Page 5 of 12 Notwithstanding anything contained herein to the contrary, the professional liability policy shall be maintained at CONSULTANT'S sole cost and expense. The retroactive date shall be no later than the commencement of the performance of this Contract and the discovery period (possibly through tail coverage) shall be no less than ten (10) years after the completion of work specified in the Contract. The provisions of this Article VIII shall survive the termination or expiration of this Agreement. ARTICLE IX. EMPLOYMENT OF AGENTS/RETAINING OF CONSULTANTS CONSULTANT may employ or retain consultants, contractors, or third parties (any of which are referred to herein as "Subconsultant"), to perform certain duties of CONSULTANT, as set forth on Exhibit "A", attached hereto, under this Contract, provided that CITY approves the retaining of Subconsultants. The CITY hereby approves the retention of the "NewGen Team" as described in Exhibit "A," attached hereto. CONSULTANT is at all times responsible to CITY to perform the Services as provided in this Agreement and CONSULTANT is in no event relieved of any obligation under this Contract upon retainage of any approved Subconsultant. Any agent and/or Subconsultant retained and/or employed by CONSULTANT shall be required by CONSULTANT to carry, for the protection and benefit of the CITY and CONSULTANT and naming said third parties as additional insureds, insurance as described above in this Contract. CONSULTANT represents that such services are either under applicable value thresholds or are otherwise exempt from notice and/or bid requirements under Texas Law. ARTICLE X. CONFIDENTIALITY CONSULTANT shall retain all information received from or concerning the CITY and the CITY's business in confidence and shall not reveal such information to third parties without prior written consent of the CITY, unless otherwise required by law. It is hereby agreed that the following information is not considered to be confidential under this Agreement: a) Information already in the public domain; b) Information disclosed to CONSULTANT by a third party who is not under a confidentiality obligation; Water & Wastewater Rate Structure Evaluation Page 6 of 12 c) Information developed by or in the custody of CONSULTANT related to work with clients before entering into this Agreement; and d) Information developed by CONSULTANT through its work with other clients ARTICLE XI. INDEMNITY CONSULTANT SHALL INDEMNIFY AND SAVE HARMLESS THE CITY OF LUBBOCK AND ITS ELECTED OFFICIALS, OFFICERS, AGENTS, AND EMPLOYEES FROM ALL SUITS, ACTIONS, LOSSES, DAMAGES, CLAIMS, OR LIABILITY OF ANY KIND, CHARACTER, TYPE, OR DESCRIPTION, INCLUDING WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ALL EXPENSES OF LITIGATION, COURT COSTS, AND REASONABLE ATTORNEY'S FEES, FOR INJURY OR DEATH TO ANY PERSON, OR INJURY TO ANY PROPERTY, RECEIVED OR SUSTAINED BY ANY PERSON OR PERSONS OR PROPERTY, TO THE EXTENT ARISING OUT OF, RELATED TO OR OCCASIONED BY, THE NEGLIGENT ACTS OF CONSULTANT, ITS AGENTS, EMPLOYEES, AND/OR SUBCONSULTANTS, RELATED TO THE PERFORMANCE, OPERATIONS OR OMISSIONS UNDER THIS CONTRACT AND/OR THE USE OR OCCUPATION OF CITY OWNED PROPERTY. THE INDEMNITY OBLIGATION PROVIDED HEREIN SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THIS AGREEMENT. ARTICLE XII. COMPLIANCE WITH APPLICABLE LAWS CONSULTANT shall comply with all applicable federal, state and local laws, statutes, ordinances, rules and regulations relating, in any way, manner or form, to the activities under this Contract, and any amendments thereto. ARTICLE XIII. NOTICE A. General. Whenever notice from CONSULTANT to CITY or CITY to CONSULTANT is required or permitted by this Contract and no other method of notice is provided, such notice shall be given by (1) actual delivery of the written notice to the other party by hand (in which case such notice shall be effective upon delivery); (2) facsimile (in which case such notice shall be effective upon delivery); or (3) by depositing the written notice in the United States mail, properly addressed Water & Wastewater Rate Structure Evaluation Page 7 of 12 to the other party at the address provided in this article, registered or certified mail, return receipt requested, in which case such notice shall be effective on the third business day after such notice is so deposited. B. CONSULTANT's Address. CONSULTANT's address and numbers for the purposes of notice are: NewGen Strategies and Solutions, LLC Attn: Chris Ekrut, Director 1300 E. Lookout Dr., Ste. 100 Richardson, Texas 75082 Telephone: (972) 232-2234 C. CITY's Address. The CITY's address and numbers for the purposes of notice are: CITY of Lubbock Attn: Aubrey A. Spear, P.E. P. O. Box 2000 1625 13th Street Lubbock, Texas 79457 Telephone: (806) 775-2585 Facsimile: (806) 775-3027 D. Change of Address. Either party may change its address or numbers for purposes of notice by giving written notice to the other party as provided herein, referring specifically to this Contract, and setting forth such new address or numbers. The address or numbers shall become effective on the 15th day after such notice is effective. ARTICLE XIV. CITY -PROVIDED DATA CITY shall furnish CONSULTANT non -confidential studies, reports and other available data in the possession of the CITY pertinent to CONSULTANT's Services, so long as CITY is entitled to rely on such studies, reports and other data for the performance of CONSULTANT's Water & Wastewater Rate Structure Evaluation Page 8 of 12 Services under this Contract (the "Provided Data"). CONSULTANT shall be entitled to use and rely, so long as such reliance is reasonable, upon all such Provided Data. ARTICLE XV. MISCELLANEOUS A. Captions. The captions for the articles and sections in this Contract are inserted in this Contract strictly for the parties' convenience in identifying the provisions to this Contract and shall not be given any effect in construing this Contract. B. Audit. CONSULTANT shall provide access to its books and records for time -based and reimbursable expenses to the CITY. The CITY may audit, at its expense and during normal business hours, CONSULTANT's books and records with respect to this Contract between CONSULTANT and CITY. C. Records. CONSULTANT shall maintain records that are necessary to substantiate the services provided by CONSULTANT. D. Assignability. Neither party may assign this Contract without the prior written approval of the other party. E. Successor and Assigns. This Contract binds and inures to the benefit of the CITY and CONSULTANT, their permitted successors and assigns. F. Construction and Venue. THIS CONTRACT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. THIS CONTRACT IS PERFORMABLE IN LUBBOCK COUNTY, TEXAS. THE PARTIES HERETO HEREBY IRREVOCABLY CONSENT TO THE SOLE AND EXCLUSIVE JURISDICTION AND VENUE OF THE COURTS OF COMPETENT JURISDICTION OF THE STATE OF TEXAS, COUNTY OF LUBBOCK, FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS CONTRACT OR THE ACTIONS THAT ARE CONTEMPLATED HEREBY. Water & Wastewater Rate Structure Evaluation Page 9 of 12 G. Severability. If any provision of this Contract is ever held to be invalid or ineffective by any court of competent jurisdiction with respect to any person or circumstances, the remainder of this Contract and the application of such provision to persons and/or circumstances other than those with respect to which it is held invalid or ineffective shall not be affected thereby. H. Amendment. No amendment, modification, or alteration of the terms of this Contract shall be binding unless such amendment, modification, or alteration is in writing, dated subsequent to this Contract, and duly authorized and executed by CONSULTANT and CITY. I. Entire Agreement. This Contract, including Exhibits "A" and `B," attached hereto, contains the entire agreement between the CITY and CONSULTANT, and there are no other written or oral promises, conditions, warranties, or representations relating to or affecting the matters contemplated herein. J. No Joint Enterprise. Nothing contained herein shall be construed to imply a joint venture, joint enterprise, partnership or principal — agent relationship between CONSULTANT and the CITY. K. Documents Owned by CITY. Any and all documents prepared by CONSULTANT as part of the Services hereunder used by the CONSULTANT in its normal course of business, shall become the property of the CITY when CONSULTANT has been compensated as set forth in Article II, above. The CONSULTANT shall make copies of any and all work products for its files. Any reuse or modification of such Documents for purposes other than those intended by CONSULTANT herein shall be at CITY's sole risk and without liability to the CONSULTANT. L. Notice of Waiver. A waiver by either CITY or CONSULTANT of a breach of this Agreement must be in writing and duly authorized to be effective. In the event either party shall execute and deliver such waiver, such waiver shall not affect the waiving party's rights with respect to any other or subsequent breach. M. Third Party Activities. Nothing in this Agreement shall be construed to provide any rights or benefits whatsoever to any party other than CITY and CONSULTANT. Water & Wastewater Rate Structure Evaluation Page 10 of 12 N. Non- Appropriation. All funds for payment by the CITY under this Contract are subject to the availability of an annual appropriation for this purpose by the CITY. In the event of non - appropriation of funds by the CITY Council of the CITY of Lubbock for the services provided under this Contract, the CITY will terminate this Contract, without termination charge or other liability, on the last day of the then -current fiscal year or when the appropriation made for the then - current year for the goods or services covered by this Contract is spent, whichever event occurs first (the "Non -Appropriation Date"). If at any time funds are not appropriated for the continuance of this Contract, cancellation shall be accepted by the CONSULTANT on thirty (30) days prior written notice, but failure to give such notice shall be of no effect and the CITY shall not be obligated under this Contract beyond the Non -Appropriation Date. EXECUTED as of the Effective Date hereof. CITY OF LUBBOCK Gl C. Robertson, Mayor ATTEST: Reb a Garia, CITY Secre Water & Wastewater Rate Structure Evaluation Page I1 of 12 APPROVED AS L. Wo(d Fein, P.E., Director of Public Works Aubrey A. ar, P.E., Director of Water Utilities APPROVED AS TO FORM: M NewGen Strategies & Solutions, LLC —C L — — L � Chris Ekrut, Director Water & Wastewater Rate Structure Evaluation Page 12 of 12 EXHIBIT A SCOPE OF SERVICES WATER & WASTEWATER COST OF SERVICE & RATE STRUCTURE EVALUATION CITY OF LUBBOCK, TEXAS PROJECT OVERVIEW For this project, the consultant will collect, analyze, and evaluate data associated with the Water and Wastewater Funds. This data will include past, present, and projected revenue requirements. In addition, cost of services including debt service coverage data will be evaluated. Appropriate financial models will be developed to evaluate various rate structure scenarios to confirm the adequacy of the current rate structure. Based on the information analyzed and evaluated, recommendations regarding the effectiveness of the current water and wastewater rate structures will be developed. Final recommendations will be presented to City Staff and the Water Advisory Commission. TASK 1— FIVE-YEAR FINANCIAL PLAN & REVENUE REQUIREMENT IDENTIFICATION Task 1 of the proposed scope of services will establish the overall revenue needs of the water and wastewater utility. The goal of this Task will be to establish a financial plan for Fiscal Year (FY) FY 2017 through FY 2021, utilizing a Test Year of FY 2016. The financial plan for the utility will incorporate the capital needs of the utility, reflective of the City's planned funding method (i.e., debt, cash, reserves, grants, etc.). It will also seek to define the revenue needed to meet the City's defined financial metrics including required debt service coverage. Task I will be executed via the subtasks outlined below: 1.1 Development of Initial Data Request The Project Team will develop an initial data request that will be needed to adequately begin the review and evaluation of the City's water and wastewater rates. This data will include, but is not limited to, operating, financial, contractual, management, policy, and ordinance data. The purpose of the initial data request is to gather the necessary data to conduct the Study and to ensure the Team has a good understanding of the City's current operating conditions. The Project Team will issue the initial data request within five (5) days after receiving notice to proceed on the project. 1.2 Initial Data and Information Assessment Once the City has submitted the initially requested data, the data will be reviewed for discussion during the project kick-off meeting. Throughout the course of the project, data received by the Project Team will be sampled and tested for accuracy. The sampling and testing of data is imperative in regards to the billing data used to set rates. It is also essential that the billing data be as accurate as possible in the development of proper cost allocations and reliable revenue projections. The Project Team will work closely with the City's billing staff and software provider to extract the appropriate billing data. In addition, as necessary, the Project Team will conduct informal interviews with City staff during our review of the historical data to ensure that the Project Team understands the information provided. Water & Wastewater Rate Structure Evaluation City of Lubbock 1.3 Project Kick-off Meeting After receiving the initially requested data, the Project Team will work with the City to schedule an on-site kick-off meeting. The primary reason for the kick-off meeting is to allow the key Project Team consultants and participants from the City to be introduced and lay the general framework for how the study will be conducted, as well as to chart the critical path towards successfully achieving the projects goals and objectives. This meeting will also allow for the finalization of the proposed work approach, as well as discussion and clarification of the information previously analyzed. In addition, the project kick-off meeting will allow for the Project Team to gain a better understanding of the goals and objectives, as well as expectations, the City desires to achieve from the study. As part of the kick-off meeting, the Project Team members will also discuss: Political and customer views/opinions of current rates and departmental service/operations; Capital/operational demand changes anticipated over the study's forecasted period; Initial rate design pricing objectives; and, Initial strategies for implementing/communicating possible rate changes. 1.4 Determination of Test -Year Revenue Requirements Revenue requirements will be developed for the water and wastewater utilities using the American Water Works Association (AW WA) accepted cash needs approach, unless otherwise requested by the City. The cash needs approach closely follows municipal budgeting practices and incorporates a utility's operation and maintenance costs, debt service and bond coverage requirements, cash funded capital outlays, reserve requirements, and transfers. In developing the revenue requirements, the Project Team will assess and project each utility's cost of service by analyzing each utility's historical costs, the current budget year (FY 2016), and any forecasts made for fixture fiscal years. The Project Team will develop a test -year revenue requirement for each utility. A test -year is a common term in rate studies that refers to an adjusted fiscal year cost that will be used as a basis for setting rates. The test -year revenue requirements will be adjusted by non -rate revenue sources to develop the test -year revenue required from utility rates. 1.5 Forecast of Revenue Requirements Using the test -year information previously developed, the Project Team will begin the development of a five (5) year revenue requirement forecast and financial plan. As necessary, interviews with City staff may be conducted to gather additional data to complete this task. During this task, it is crucial to thoroughly analyze the assumptions used in projecting the revenue requirements and overall financial performance. These assumptions may include, but may not be limited to: population changes, inflation rates, increase in contractual obligations, contractor costs, and capital improvements. The Project Team will work closely with City staff to examine the City's planned method of financing future capital improvements and the financing methods' impact on rates, operating and capital reserve targets, and debt coverage requirements. In developing this funding plan, the Project Team will also coordinate with the City's current financial advisor to ensure sufficient debt capacity exists for planned future debt funding of capital. improvements. The appropriateness of the defined capital funding plan will also be assessed given the type of infrastructure being funded. Finally, the Project Team will also examine anticipated operational and/or staffing changes over the five-year forecast. 1.6 Determination of Realizable Revenue at Current Rates The results of this task will provide the data to properly evaluate each utility's revenue requirements and the magnitude of overall increases required as well as provide the Project Team the ability to compare the Water & Wastewater Rate Structure Evaluation City of Lubbock actual cost of providing utility service with the anticipated billed revenues of the utility. In the revenue determination, adjustments will be made to the historical billing and collection data to reflect normalized weather conditions and usage, from which a minimum and maximum range of realizable revenue will be calculated. In addition, annual variations in the billing and collection data will be analyzed for its impact on the overall revenue stability of the utility and, as needed, recommendations will be provided to stabilize the revenue stream as balanced against the impact on lower income / fixed income customers. This task will also provide a "check" of the data provided by City staff. 1.7 Task 1 Overview Report At the completion of Task 1, the Project Team will develop a draft summary report outlining the work performed in Task 1. This will include an overview of the Five-year Financial Plan inclusive of the Project Team's assumptions and planning methodology, as well as an estimation of revenue performance under current rates as compared with each utility's calculated revenue requirement. On completion, the draft report will be provided to City staff for review and comment, which will be discussed with City staff via teleconference. After receiving and incorporating Staff comments, the Project Team will present the results of Task 1 to the Water Advisory Commission. Task I Deliverables: Initial Request for Information Minutes from Project Kick-off Meeting (to include discussion of any issues discovered during initial information assessment) Task 1 Overview Report and teleconference with City staff Task 1 Work Session with Water Advisory Commission TASK 2 — COST OF SERVICE ANALYSIS In Task 2, the Project Team will utilize the revenue requirements developed in Task I and properly allocate them to customer classes reflective of industry standards and in compliance with regulatory requirements. The following outlines the key elements of this process. 2.1 Functional ization of Revenue Requirements Functionalization is the process of grouping costs based on the function, or type, of service provided. For example, water utility costs can be functionalized into supply, treatment, transmission, and distribution. Discussions will be held with City staff to understand the types of services provided by the City, and what system information is available from the City, to determine the appropriate functional cost categories to be used in the cost of service determinations. The final selection of the functional cost categories will be discussed with City staff. 2.2 Classification of Revenue Requirements After the development of the f nictionalized costs, costs will be classified into the components of utility service that is provided. For the water utility, it is proposed that costs be classified using the AWWA recommended Base—Extra Capacity method, where costs are classified as base, extra capacity, and customer related so as to recognize the impact peak demand has on the cost of service provision. For the wastewater utility, it is proposed that costs be classified using the Water Environmental Federation (WEF) recognized flow, BOD, TSS, and customer parameters. Please note that the appropriate classification of wastewater Water & Wastewater Rate Structure Evaluation City of Lubbock costs may be influenced by the City's wastewater permits and current industrial strength wastewater program. It should be noted that these are the Project Team's proposed classification methods. Discussions will be held with City staff to determine the appropriate classification methods to utilize in recognition of the City's goals and objectives and available system and billing data. 2.3 Allocation of Revenue Requirements One of the most important considerations in the setting of fair and equitable rates for utility service is the establishment of the appropriate grouping of customers (i.e., customer classes for cost distribution after costs are classified). Generally, a customer class should only include those customers who: (a) are in a similar location in relation to the utility; (b) use the same or similar service from the utility; and (c) receive similar service from the utility and place similar demands upon the utility. The Project Team will analyze the usage patterns of the presently defined customer classes in the above context and evaluate whether a new classification of customers should be recommended. Costs within each utility will be allocated to the selected customer classes based on each customer class' level of service provided by the City. It is vital that the factors that form the basis of costs incurred by the City to provide continuous and adequate service to its customers be appropriately identified. This identification requires a thorough understanding of the influencing conditions controlling the design and/or actual operation of a system. These conditions include normal and peak weather conditions as well as average and peak service demands. Members of the Proj ect Team are versed in appropriately identifying these costs and are recognized experts before the State's rate regulatory agencies. The factors for the allocation of costs to the customer classes will be dependent on the billing and system information available from the City. The final selection of customer classes and allocation methodologies will be discussed with the City. 2.4 Task 2 Overview Report At the completion of Task 2, the Project Team will prepare a summary report of the work completed. This will include a discussion of the Cost of Service process inclusive of the allocation methodologies utilized and any assumptions made by the Project Team. The report will include a comparison of the cost of service by customer class as compared to the level of revenue currently generated by class under existing rates. This will provide the City with an estimation of the overall revenue adjustments necessary to bring a customer class in-line with its calculated cost of service. In addition, the report will also include an analysis of the stability of the City's revenue stream. Specifically, the Project Team will compare the utility's existing debt service obligations with the level of revenue generated under minimum charges. Additionally, we will also compare the level of fixed charge revenue generated against the allocated excess capacity and customer related costs, as well as the revenue generated under the volumetric rate with the average day allocated costs. This will provide an estimation of the adequacy of the City's base water and wastewater charges, which will further be evaluated as part of Task 3. On completion, the draft report will be provided to City staff for review and comment, which will be discussed with City staff via teleconference. After receipt, staff comments will be incorporated into the final overview report. The Project Team is keenly aware of the sensitive nature of a cost of service analysis. Many times, the analysis will produce a result which is not politically appealing and can be cause of significant stakeholder outcry. While the Project Team anticipates presenting the results of Task 2 to the Water Advisory Commission and has priced such a presentation into the enclosed price proposal, the Project Team will Water & Wastewater Rate Structure Evaluation City of Lubbock work directly with City staff to outline an appropriate strategy for this presentation to ensure minimal stakeholder impact. Task 2 Deliverables: Task 2 Overview Report and teleconference with City staff Task 2 Work Session with Water Advisory Commission' TASK 3 — RATE STRUCTURE EVALUATION On completion of the cost of service analysis, the Project Team will begin an in-depth review of the City's current water and wastewater rate structures. At present, the Project Team understands the City utilizes a customer's average winter consumption (AWC) to determine the first block charge under an inclining block water rate structure. Further, the City's base charges have been decreased steadily over the years, leading to concerns about the stability of the overall revenue stream. During Task III, the Proj ect Team will evaluate the overall effectiveness of the current rate structures and will provide recommendations for amendment. The following outlines the key subtasks as part of Task III. 3.1 Evaluation of Current Rate Design Based on the City's initial request for qualifications, the Project Team understands the primary pricing goals and objectives of the City at this time include revenue stability, affordability, and water conservation. These pricing objectives are particularly important given the reduction the City has experienced in per capita consumption, coupled with the downward adjustments made to the base (minimum) rates charged by the utility. The reduction seen through water conservation and overall efficiencies in water use can have a negative impact on revenue stability. Sufficient monies must be collected in minimum charges to offset declines in consumption, but the level of minimum charges must be carefully balanced with customer affordability, particularly for low and/or fixed income customers who are typically more heavily impacted by the level of minimum charges. At the outset of Task 3, the Project Team will perform an evaluation of the current rate structure's ability to achieve these goals and objectives. We will also develop a listing of strengths and weaknesses of the current rate structure, as well as potential structural changes which may better achieve these goals and objectives. On completion of the evaluation, the Project Team will prepare a memorandum of our analysis and provide to City staff for review. After receiving and incorporating staffs comments, we propose to include this memorandum as part of the presentation to the Water Advisory Commission performed at the end of Task H. Through dialogue with the Water Advisory Commission, we propose to develop a formal rate and fee design plan which will be used to guide our completion of Task 3. In developing the rate and fee design plan, the Project Team will also discuss with the Water Advisory Commission any limitations and/or guidelines when incorporating the cost of services results developed in Task 2 into the alternative rate design. For example, if it is not politically feasible to move immediately to cost of service based rates for a particular class of customers, we will seek to set bounds on the overall changes seen by a customer class and/or identified group of customers. ' In an effort to perform the Study in the most cost effective manner, the Task 2 work session will include a discussion of the memorandum proposed to be developed as part of Task 3.1 Water & Wastewater Rate Structure Evaluation City of Lubbock 3.2 Development of Alternative Rate Design Based on the rate and fee design plan developed in Task 3. 1, the Project Team will develop alternative rate designs for the City's consideration. Please note that the proposed pricing included herein anticipates up to two (2) alternative water rate designs and up to two (2) alternative wastewater rate designs. Additional rate designs requested to be analyzed and/or developed will be provided at a to be negotiated price. 3.3 Determination of Realizable Revenue with Alternative Rate Structures The Project Team will analyze and compare the revenues forecasted to be generated under alternative rate structures to the forecasted cost of service to determine the adequacy of the alternative rate structures to meet the City's financial goals, including bond coverage requirements and operating and capital reserves. In the revenue determination, adjustments will be made to the historical billing data to reflect normalized weather conditions and usage. Additionally, when projecting revenue under the alternative rates, the Project Team will incorporate the estimated impact of elasticity of demand within the revenue projections. Elasticity of demand is the economic concept that recognizes the relationship between the quantity demanded of a good and a change in the price of that good. Failure to recognize this relationship, particularly with regards to water sales, can result in an inaccurate estimate of revenue on a going forward basis. The Project Team will presume industry standard, long-term elasticity standards within its calculations. Finally, the monthly impact on customer bills under the alternative rate structures will also be examined along with the impact to the City's revenue stability. 3.4 Rate Comparison Review The Project Team will compare the City's current and proposed water and wastewater utility rates and resulting monthly bills to utility rates of municipal utilities of similar size, demographics, geographic location, and/or operational characteristics so as to provide an estimation of the City's comparable and competitive position. 3.5 Task 3 Overview Report At the completion of Task 3, the Project Team will develop a report summarizing the current rate structure evaluation, the rate and fee design plan, and the recommended alternative rate structures for consideration. On completion, the draft report will be provided to City staff for review and comment, which will be discussed with City staff via teleconference. After receipt, staff comments will be incorporated into the final overview report, with a presentation of the report to the Water Advisory Commission. Task 3 Deliverables: Memorandum discussing Current Rate Design Evaluation Memorandum outlining the City's Rate and Fee Design Plan Task 3 Overview Report and teleconference with City staff Task 3 Work Session with Water Advisory Commission TASK 4 — ADMINISTRATIVE RECORD OF PROJECT A clear administrative record, or report, of a Water and Wastewater Rate Study has become a key element in supporting and defending the rate action of a municipality. Recently, a City in California saw its rates challenged by customers and ultimately overturned. One element of the judicial ruling against the City's Water & Wastewater Rate Structure Evaluation City of Lubbock rates was the fact that the rates adopted were not based on a written report — referred to in the judgement as an Administrative Record. While cities in Texas enjoy original rate jurisdiction, a clearly written, comprehensive administrative record of a project is highly recommended to support rate action taken by the City. To fully obtain customer buy -in and ensure compliance with legal precedent, a clear record of the assumptions and methodologies employed as part of the analysis must be developed, along with a record of the key decision points and outcomes which occurred throughout the conduct of the analysis. To ensure the proper development of an appropriate administrative record, the Project Team will develop a final report for the project which will include each of the overview reports and presentations developed from the prior tasks. The final draft report will include an Executive Summary, as well as the inclusion of all necessary tables, charts, and worksheets needed to fully understand and comprehend the study. Once completed, the final draft report will be provided to City staff for review and comment. Upon receipt of City staff edits and comments, the report will be finalized with electronic and hard copies provided to the City for full dissemination to the City Council and the public, as deemed appropriate. The Project Team will also present the findings and recommendations of the Study to the City Council in a workshop setting. Task 4 Deliverables. Electronic and Hard Copies of Draft Report Electronic and Hard Copies of the Final Report, reflective of City Staff edits and comments Presentation to City Council TASK 5 — FINANCIAL FORECASTING & RATE MODEL DEVELOPMENT The development of a financial forecasting and rate model for City use will occur throughout the course of the project. Once the project has been finalized, the Project Team will work to form this model into a "user- friendly" program for use by City staff. NewGen prides itself in developing user-friendly models which are specific to, and reflect the unique operational characteristics of, each client. While our Project Team utilizes standard best practices in developing rate models, each model we develop is unique and does not reflect a "canned" or "off-the-shelf' product. Given the unique nature of each of our clients, we believe it is important that the product produced as part of a rate study also be unique and reflective of our client's overall goals and objectives. The model provided to the City will be built so as to be compatible with Microsoft Excel 2010 or newer versions. Within the model itself, the user guide will be built-in so as to ensure that a user has immediate and constant access to instructions on the model's function. All assumptions will be presented in blue font and all calculations/results presented in black font so the user is aware of fields that can be amended. Additionally, both a fully protected version and an unlocked version of the model will be provided to ensure staff has a tool that can be deployed to all classes of user, from novice to advanced. The City's model will allow staff to run "what -if' scenarios including, but not limited to, changes in operating, capital and wholesale costs, customer and volume growth or decline, debt service structure, source costs, inflation, capital project financing, and funding sources. The model will allow the user to assess the impact various scenarios will have on an existing typical monthly bill for each class of customer. The model will also generate financial statistics such as debt coverage ratios and average dollar and percentage change for each customer class. A visual dashboard will also be included within the model to Water & Wastewater Rate Structure Evaluation City of Lubbock assist City staff in communicating key financial and performance metrics, as defined by City staff, with the City's key decision -makers. To ensure the model is fully useable by staff, the Project Team will conduct a hands-on training session with key model stakeholders when the model is delivered and will discuss every worksheet within the model and fully demonstrate its functionality. Task S Deliverables: Electronic copy of Financial Forecasting and Rate Model On-site, hands-on training session with City staff PROPOSED ADDITIONAL SERVICES The scope of services outlined above reflects the activities the Project Team believes are necessary to meet the goals and objectives outlined by the City. However, we recognize that additional services may be desired by the City to increase stakeholder communication and buy -in throughout the process, or to expand the analysis beyond simply water and sewer rate revenues. Such services may include, but may not be limited to, those outlined in detail below. Please note that the not -to -exceed project fee proposal included herein does not include any of these additional services at this time. Additional Service 1— Cost of Service and Rate Design 101 Workshop Depending on the involvement of City leaders and decision -makers, the Project Team has found it useful in past studies to conduct a Cost of Service and Rate Design 101 workshop. Such a workshop would introduce key stakeholders to the Cost of Service and Rate Design process including key terminology and methodological processes, and provide them an overview of what to expect from the study. This workshop can also be used as a means by which to gather policy direction from the Water Advisory Commission and/or City Council members, or to begin to outline and consider the potential pricing objectives to be included in Task 3. A 101 workshop can best be described as a foundation upon which the remainder of the study is built. It serves as a key introduction to the process and can be a useful step to obtaining buy -in at the outset of the study. Additional Service 2 — Additional Meetings As evident above, there are a number of meetings with the Water Advisory Commission and City Council that have been included within the Standard Services. However, we recognize that additional meetings may be necessary with either body, or with others within the community. Our Team stands ready to support the City as necessary and can be available to attend additional meetings as requested. Additional Service 3 — Stakeholder Engagement Effort For a study such as this to be as successful as possible, ongoing and open communication between the Project Team and Stakeholders much occur. This includes, but is not limited to, community with the City Council, Water Advisory Commission, City staff and, as necessary, communication with the City's customers. Our Project Team understands the complexities and challenges that stakeholder involvement can bring to a Project, and is happy to assist the City in a more extensive stakeholder engagement effort or Citizen Education Plan. Such a plan could include, but would not be limited to: Water & Wastewater Rate Structure Evaluation City of Lubbock Public Presentations and/or Question and Answer Sessions conducted throughout the Community; Presentations and/or Speaking Engagements with local Homeowner's Associations; Development of white papers and/or citizen education pamphlets, newsletters, or press releases; and/or, Development of bill calculation tools for deployment on the City's website. Additional Service 4 — Miscellaneous Service Fee Evaluation Based on our understanding of the proposed project, the City is most interested in an analysis of the current water and wastewater rates. However, the utility may charge other fees for miscellaneous services including, but not limited to, meter tap fees, disconnect / reconnect fees, and late fees. While the revenue stream from such fees is generally minor, maintaining these fees as adequate levels is an important part of utility financial management. The Project Team is well versed in these miscellaneous fee types and can include an evaluation of their adequacy within the scope of services as requested. PROPOSED PROJECT SCHEDULE Based on the Standard Services outlined above, and assuming notice to proceed is received by the Project Team by February 1, 2016, the Project Team anticipates the starting and completion dates for each Task as noted in the table below. Please note that the Project Team's ability to meet these deadlines will be dependent on the timely receipt of accurate data as requested by the Project Team and the availability of City staff, the Water Advisory Commission and/or the City Council for the meetings indicated herein. No Description 1 Five Year Financial Plan and Identification February 1, 2016 April 1, 2016 of Revenue Requirements 2 Cost of Service Analysis April 4, 2016 May 20, 2016 3 Rate Structure Evaluation May 23, 2016 July 15, 2016 4 Administrative Record of Project July 18, 2016 August 5, 2016 5 Financial Forecasting and Rate Model August 8, 2016 August 26, 2016 Development Water & Wastewater Rate Structure Evaluation City of Lubbock EXHIBIT B PAYMENT OF FEES WATER & WASTEWATER COST OF SERVICE & RATE STRUCTURE EVALUATION CITY OF LUBBOCK, TEXAS The City shall pay Engineer for services set forth in Exhibit A on a lump sum basis by task, as indicated in the attached schedule below. The Engineer will invoice the City monthly based on estimated percent complete of each task. The final payment for Task 5 will be paid upon receipt by the City of all deliverables for this Project. Task Description Task Bud et Task 1 Five Year Financial Plan and Identification of Revenue Requirements $ 31,663 Task 2 Cost of Service Analysis $ 35,246 Task 3 Rate Structure Evaluation $ 33,970 Task 4 Administrative Record of Project $ 11,341 Task 5 Financial Forecasting and Rate Model Development $ 7,780 Total Fee $1209000 Attachment A includes a detailed breakdown of the anticipated hours and costs by task as well as the anticipated out-of-pocket expenses to be incurred. 10 Water & Wastewater Rate Structure Evaluation City of Lubbock AttachmentA Water and Wastewater l5ostat Service and Rate Structure Evaluation Oty of Lubbock, Texas Price Proposal Chris Ekmt 8111ing Rate IRA Description Fonk Cmmb Five-year Financial Planand identification of 1 Revenue Repulrements 2 Cost of Service Analysis 3 Rate Structure Evaluation 4 Administrative Record of Frolect 5 Financial Forecasting and Rate Model Development Totall(Hours) Total ($) AttachmentA Water and Wastewater l5ostat Service and Rate Structure Evaluation Oty of Lubbock, Texas Price Proposal Chris Ekmt Dave yanke Matthew Garrett lusun Rasor Fonk Cmmb Leah Hodge Admin Total $235.00 $265.00 $180.00 $140.00 $285.00 $140.00 $ 85.00 labor Expense Sub Markup Total Hns $ Hns g Hra $ Hns ¢ W g tins @ tie 4 tL i g S ; 24.0 $ 5,640 8.0 5 2,120 28.0 $ 5,040 64.0 5 8,960 20.0 $ 5,700 8.0 $ 11120 8.0 $ 680 160.0 $ 29,260 $ 1,721 $ 682 $ 31,663 20.0 4,700 8.0 2,120 32.0 5,760 64.0 8,960 28.0 7,980 22.0 3,080 8.0 680 182.0 33,280 860 1,106 35,246 24.0 5,640 8.0 2,120 40.0 7,200 80.0 11,200 20.0 5,700 - - 8.0 680 180.0 32,540 860 570 33,970 12.0 2,820 4.0 1,060 10.0 118D0 16.0 2,240 6.0 1,710 - - 8.0 680 56.0 10,310 860 171 11,341 12.0 2,820 2.0 530 8.0 1,440 14.0 1,960 - - 2.0 170 38.0 6,920 860 - 7,780 92.0 30.0 118.0 238.0 74D 30.0 34.0 616.0 $21,620 $ 7,950 $21,240 $33,320 $21,090 $ 4,700 $ ;890 $ 112,310 $ 5,161 $ 2,529 $ 120,000