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HomeMy WebLinkAboutItem 2f - Budget Based Water and Sewer Rate Studyv � �r 5, 1903 Igo Igo 3 of VAW STAFF REPORT Public Works Services Department DATE: February 4, 2014 TO: Honorable Mayor and City Council FROM: Tom Tait, Public Works Services Director By: Ken Herman, PE, Principal Civil Engineer Maria Taylor, Senior Management Analyst SUBJECT: PROFESSIONAL SERVICES AGREEMENT WITH CAROLLO ENGINEERS FOR THE BUDGET BASED WATER AND SEWER RATES STUDY IN THE AMOUNT OF $89,905, AND APPROPRIATE AN ADDITIONAL $9,905 FROM THE WATER FUND TO BE ADDED TO THE PROJECT BUDGET Recommendation: Approve SUMMARY The Fiscal Year 2013 -14 Capital Improvement Budget includes the Budget Based Water and Sewer Rates Study. The purpose of this project is to develop and apply new rate structures for single - family and multi - family customers that will address equity, encourage more efficient water use, and provide adequate revenues to ensure the sustainability of City -owned water and sanitary sewer systems. The Public Works Services Department recently solicited proposals for a Professional Services Agreement for the project. Based on the evaluated proposals, it is recommended that the City Council authorize and direct the City Manager to execute a Professional Services Agreement with Carollo Engineers for the Budget Based Water and Sewer Rates Study in the amount of $89,905, and appropriate $9,905 from the Water Fund to be added to the project budget. BACKGROUND The City provides and maintains water and sewer services to more than 55,000 residents. Utility rates fund the operations, maintenance, and capital improvements of the water and sanitary sewer systems to provide quality services to Arcadia residents. Currently, the City of Arcadia's water and sewer rates are uniform flat rates based on consumption. Additionally, previous annual water and sewer rate adjustments were vetted through the Proposition 218 process and were tied to the previous year's Consumer Price Index. Water and sewer rate adjustments approved through this PSA for the Water Budget Based & Sewer Rates Project February 4, 2014 Page 2 of 4 methodology were last adjusted in Fiscal Year 2013 -14. Future rate adjustments for water and sewer rates will require the City to go through the Proposition 218 process. In 2009, state legislation S137 mandated reduction of California's urban water use by 20% per person by December 2020. The purpose of this legislation is to prevent unnecessary and wasteful use of water resources. Most recently, amid California's driest year on record, Governor Jerry Brown declared a drought emergency for the State of California. In Fiscal Year 2010 -11, the Public Works Services Department completed a tiered water rate study that recommended the implementation of an inclining block rate structure. Following significant concerns raised by Arcadia residents regarding the inequity of such rate structure, the City Council directed staff to look at another water rate structure that would be more equitable and take into consideration lot sizes. City staff looked into various water rate structures with the goal of proposing a rate structure that encourages water use efficiency and is equitable to all residents. One such alternative was a budget based water rate structure. A budget based rate structure includes personalized indoor and outdoor water budgets for every customer based on the unique characteristics of that individual property. This kind of water rate structure addresses issues of equity and fairness needed to accommodate the variety of customers, home sizes, property sizes, and landscaping needs that make up the City's water customer base. Likewise, the City's current sewer rate for single family and multifamily customers is a flat rate. Regardless of the size of the home or the number of units in a multi - family structure, the sewer rate charged is the same. The industry standard for sewer rates is mostly based on charging a percentage of the amount of water that is discharged from the property to the City's sewer system. It was also apparent that since domestic water use is directly tied to the flow in the sanitary sewers, this would also be an appropriate time to develop a new sewer rate structure. DISCUSSION Budget based water rate structures have recently become recognized as an equitable and reasonable method for water agencies to encourage water use efficiency. Budget based rates are designed to provide each customer with a personalized water budget to meet their specific indoor and outdoor water needs. Those who stay within their own budgets use the lowest -cost water and pay the lowest rates. Customers who go over their designated budgets will pay more for the increasing cost of inefficient water use. The revenue collected at the highest rate theoretically could be used to promote water conservation and water use efficiency programs and projects designed to offset wasteful water use. This revenue stream could also be used to pay for the more expensive replacement water that the City buys at the end of the fiscal year when water demands exceed the City's decreed water rights. PSA for the Water Budget Based & Sewer Rates Project February 4, 2014 Page 3 of 4 In order to properly address the important issues surrounding budget based water pricing, and developing an equitable sewer rate schedule, the Public Works Services Department solicited a Request for Proposal for the development and application of budget based water and sewer rate structures. The scope of services included the following: • Provide a predictable and stable revenue stream; • Encourage the efficient use of water and discourage wasteful use; • Establish a justifiable sewer connection between use or potential use and rates (e.g. rates based on fixture units or domestic water use); • Promote fairness and equity; • Maintain simplicity and effectiveness in establishing rates and billing customers; and • Comply with all applicable laws. Request for Proposals were sent to various firms known to be experts in the field of utility rates studies. Four proposals were received and evaluated based on their experience, their understanding of the needs of the City pertaining to this project, the approach or project plan proposed by the consultant, and the cost associated to perform this work. All of the firms who submitted proposals were invited for an interview to present their proposals personally. Three firms accepted this offer and their ranking, and associated cost are listed below: RANK FIRM LOCATION COST 1 Carollo Engineers Pasadena, CA $89,905 2 Raftelis Financial Consultants, Inc. Pasadena, CA $72,000 3 Robert D. Niehaus, Inc. (RDN) Santa Barbara, CA $54,713 4 Willdan Financial Services* Temecula, CA $103,895 * Declined to participate in the personal interview process After careful review and consideration, it was determined that Carollo Engineers demonstrated themselves to be the best qualified firm for this particular project. Carollo Engineers has been an industry leader for conducting cost -of- service, water rate studies, in addition to developing water budgets. They have provided such service for clients with service area populations ranging in size from several hundreds to millions of residents. Additionally, they are extremely knowledgeable of Proposition 218 requirements, which will assist the City in achieving its desired result of detailing a defensible cost -of- service framework while providing ratepayer equity. Furthermore, given the complexity of tiered water rate structures, Carollo Engineers has excelled in achieving stakeholder acceptance and buy -in through their clear understanding of the importance and necessity of public outreach and engagement process. PSA for the Water Budget Based & Sewer Rates Project February 4, 2014 Page 4 of 4 FISCAL IMPACT $80,000 has been budgeted for this project in the Fiscal Year 2013 -2014 Capital Improvement Program. An additional $9,905 is requested to be appropriated from the Water Fund to fund the total project cost of $89,905. While other firms may be selected at proposed rates within the adopted budget, Carollo Engineers demonstrated the greatest understanding and expertise in the public outreach component of the project as well as in developing budget based water structures. Based on this, the additional funds are warranted to ensure an effective and successful process. RECOMMENDATION It is recommended that the City Council authorize and direct the City Manager to execute a Professional Services Agreement with Carollo Engineers for the Budget Based Water and Sewer Rates Study in the amount of $89,905, and appropriate an additional $9,905 from the Water Fund to be added to the project budget. Approved. Dominic Lazzar City Manager