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Home My WebLink AboutPSA Exhibit A_COSA-GFC Update Exhibit A SOW-FINALFirm Headquarters Redmond Town Center 7525 166th Ave NE, Ste D-215 Redmond, Washington 98052 Established in 1988 Washington | 425.867.1802 Oregon | 503.841.6543 Colorado | 719.284.9168 EXHIBIT A CITY OF BREMERTON 2022 UTILITY COST OF SERVICE AND GENERAL FACILITY CHARGE UPDATE The following work plan identifies the tasks required to complete a Utility Cost of Service and General Facilities Charges Update for the City of Bremerton’s (City). The cost of service update will be completed for the water, sewer and stormwater utilities with the exception of Task 1.4 cost of service analysis will only be completed for the water and wastewater utilities. Similarly, the general facility charge update will only be completed for water and wastewater as the stormwater GFCs were recently updated in 2020. The City’s needs were discussed with Tom Knuckey, Director of Public Works and Utilities and Mike Riley, Director of Financial Services. The services provided as part of this scope are described below. TASK PLAN – COST OF SERVICE UPDATE TASK 1.1: INITIAL PROJECT MEETING An initial project meeting is scheduled at the commencement of the project with the consultant and the City project team. Meeting participants would include a representative from departments that can address issues related to finance, engineering, operations, customer service and administration. The intent of the meeting is to confirm the goals and objectives of the overall rate study and focus the efforts of the project team. The items covered at the meeting include reviewing the scope of work; identifying project objectives, expectations and deliverables; outlining the project schedule and key milestone review points; and discussing appropriate lines of communication. TASK 1.2: DATA COLLECTION & VALIDATION FCS GROUP will provide a data needs list encompassing historical and projected revenue, expenses, fiscal policies, capital plans, fund balances and comprehensive plans. The data will be reviewed, analyzed and validated for inclusion in the study process. A detailed customer billing statistics validation will be completed for the water and wastewater utilities. Individual customer data including number of accounts, meter size, equivalents residential units and billing usage patterns (annual use, winter use and summer use) will be evaluated and validated against actual revenues collected. This revenue reconciliation will identify anomalies to be corrected prior to developing future projections for customer counts and use / demand under “normal” conditions. Validation of the customer statistics data set with customer demands and revenue generation is critical to the rate study as it establishes the foundation for all of the major analytical phases (revenue requirement, cost of service and rate design). The process has also proven beneficial in uncovering anomalies in data that can impact forecast revenue and cost allocation. DocuSign Envelope ID: 4FCEC18E-058E-4F60-B026-39839CF4B3D5 City of Bremerton January 2022 2022 Utility Cost of Service and GFC Update page 2 www.fcsgroup.com TASK 1.3: REVENUE REQUIREMENT This task updates the multi-year (e.g., 5/10/20 year) financial plan that meets the projected total financial needs of the water, wastewater and stormwater utilities through the generation of sufficient, sustainable revenue. Annual cash flow needs are developed by identifying expenses incurred to operate and manage the systems including:  Capital investment funding (improvements, expansion, and replacement)  Expenses incurred to operate, maintain, and manage the systems  Debt repayment  Cash flow needs  Fiscal policy achievement Tasks are as follows: » Develop an updated forecast of operating revenues and expenses to reflect the most recent approved budgets. Adjust for any known future changes in annual non-capital costs associated with the operation, maintenance, and administration of each of the systems. Changes may include additional staffing needs and other operating costs associated with maintaining the system along with initiating new or enhanced program activities. » Incorporate the most recent capital plans identifying the capital projects required to maintain each system in good repair. Develop a capital funding analysis that balances available funding from rate revenue, reserve funds, contributions and additional debt, if needed. » Evaluate cash flow needs to meet existing and anticipated new annual debt service requirements and debt coverage requirements. » Test the sufficiency of each system’s current revenues in meeting all annual system obligations. Identify any projected shortfalls over the forecast period. Rate revenue sufficiency will be tested from two perspectives: the ability to meet all cash obligations, and the attainment of any debt coverage requirements. » Design a rate implementation strategy that meets each system’s financial obligations over the multi-year planning horizon and provides smooth and moderated impacts to ratepayers. » Develop rate scenarios to evaluate the impact of changes to key variables such as funding sources, growth rates, capital project need and timing, or others identified by the City. The budget includes three (3) alternative scenarios for each utility. TASK 1.4: COST OF SERVICE ANALYSIS (WATER AND WASTEWATER ONLY) The cost of service analysis (COSA) establishes a defensible basis for assigning “cost shares” and establishing “equity” for system customers based on industry standard methodologies that are tailored to the City’s unique systems and customer characteristics. The COSA develops a series of functional allocations that distribute cost pools to classes of customers linked to a proportionate share of costs required to serve their demand. Specific consideration will be given to total utility costs in relationship to the functions identified below. DocuSign Envelope ID: 4FCEC18E-058E-4F60-B026-39839CF4B3D5 City of Bremerton January 2022 2022 Utility Cost of Service and GFC Update page 3 www.fcsgroup.com Water Wastewater  Customer  Base capacity (avg. demand)  Peak capacity (peak demand)  Meters and Services  Fire  Customer  Flow  Strength (BOD/TSS) This analytical exercise will identify the cost to serve each customer class of the water and wastewater systems. The results will identify any warranted shifts in cost burden that could improve equity between customers from the existing rate structure. The cost of service will identify the required revenue to collect from each customer class to cover their individual costs. Unit costs by functional component will be calculated to support the rate design process. TASK 1.5: RATE DESIGN The rate design task will evaluate existing rate structures for alignment with the City’s current and/or recommended fiscal policies, generate sufficient revenue to meet the revenue requirement forecast, and continue to address remaining inequities identified in the COSA findings. Key task outcomes include the following:  Based on preliminary discussion with the City, no rate structure changes are included in this scope of services. Any rate adjustments identified in the revenue requirement and cost of service tasks will be applied on an across the board basis, equally to both fixed and variable charge. TASK 1.6: MEETINGS & PRESENTATIONS During the study process, it will be important to interact frequently with staff throughout the project, to ensure that the findings and recommendations reflect approaches that are understood by impacted parties and can be implemented within the City’s administrative practices. All meetings and presentations are anticipated as remote sessions given the uncertainty of COVID19 restrictions. The following meetings are included:  Three (3) staff project team meetings to review study results at key milestones. » One (1) – two (2) hour meeting with City staff to review draft revenue requirement results for all utilities performed remotely. » One (1) – two (2) hour meeting with City staff to review draft water and wastewater COSA performed remotely. » One (1) – one (1) hour meeting with City staff to review rate designs and final recommendations performed remotely.  One (1) workshop / presentations with City Council to present the study results and incorporate feedback. We are happy to provide additional meetings as requested. The additional meetings will be billed on a time and materials basis. DocuSign Envelope ID: 4FCEC18E-058E-4F60-B026-39839CF4B3D5 City of Bremerton January 2022 2022 Utility Cost of Service and GFC Update page 4 www.fcsgroup.com TASK PLAN – GENERAL FACILITIES CHARGE UPDATE TASK 2.1: PROJECT INITIATION & DATA COLLECTION FCS GROUP will provide a data request outlining key information required to complete the study, working with City staff to resolve questions and obtain additional records as needed. Task 1 includes reviewing and validating data provided for the study, as well as the administrative efforts involved with project initiation and ongoing management. TASK 2.2: WATER & WASTEWATER GFC UPDATE Task 2 includes the analytical elements associated with updating the City’s water and wastewater GFCs. Key tasks include: Updating the existing cost basis including the original cost of existing system assets (net of donated facilities), plus applicable interest (carrying costs) on those assets. The calculation will consider the most recent year-end infrastructure values. Updating the future cost basis to reflect the most recent water and wastewater capital improvement plans. We will work with City staff to allocate capital projects between capacity expansion, renewal and replacement, and upgrades. Determining the number of equivalent residential units (ERUs) that the water and wastewater utilities can serve. Calculating the maximum allowable GFCs and developing a proposed schedule of charges. TASK 2.3: DOCUMENTATION Task 3 involves preparing a technical memorandum that documents study methodology, assumptions, findings, and recommendations. TASK 2.4: MEETINGS & PUBLIC PROCESS Task 4 includes a provision for up to two (2) remote meetings (one attendee) to present study findings to the City Council, plus the level of effort necessary to prepare related presentation materials. We propose to bill for attendance at additional meetings on a time-and-materials basis. DocuSign Envelope ID: 4FCEC18E-058E-4F60-B026-39839CF4B3D5 City of Bremerton January 2022 2022 Utility Cost of Service and GFC Update page 5 www.fcsgroup.com BUDGET Our normal billing practice is to bill based on time and materials actually expended, not to exceed the total budget. The table below includes a $10,000 “management contingency” which requires explicit authorization from the City to use. This contingency intends to provide flexibility in addressing policy questions and other topics of interest to the City that are not contemplated in the “base” scope. Project Senior Project Senior Admin Principal Manager Consultant Analyst Various $280 $215 $175 $155 $90 TASK 1: COST OF SERVICE UPDATE Task 1.1 | Initial project meeting 1 2 1 1 5 1,040$ Task 1.2 | Data collection & validation 8 4 12 1,600 - Customer statistics validation 8 40 48 7,600 Task 1.3 | Revenue requirement (3 scenarios)6 12 22 64 104 18,030 Task 1.4 | Cost of service analysis 4 12 16 36 68 12,080 Task 1.5 | Rate design (across the board)2 2 2 8 14 2,580 Task 1.6 | Meetings & presentations 2 13 15 30 5,980 TOTAL TASK 1: COST OF SERVICE UPDATE 15 41 64 157 4 281 48,910$ TASK 2: GENERAL FACILITIES CHARGE UPDATE Task 2.1 | Project Initiation and Data Collection 1 4 1 6 12 1,835$ Task 2.2 | Water and Wastewater GFC Update 6 20 48 74 13,420 Task 2.3 | Documentation 2 6 12 20 3,710 Task 2.4 | Meetings & Public Process 2 8 8 18 3,520 TOTAL TASK 2: GENERAL FACILITIES CHARGE UPDATE 11 38 0 69 6 124 22,485$ Plus: Management Contingency (Requires City Approval)10,000$ TOTAL BUDGET 26 79 64 226 10 405 81,395$ TASK Total Hours Total Budget DocuSign Envelope ID: 4FCEC18E-058E-4F60-B026-39839CF4B3D5