city of rollingwood utility commission agenda · 2019-09-27 · hdr proposes an overall fee for...

CITY OF ROLLINGWOOD UTILITY COMMISSION

AGENDA

Tuesday, October 01, 2019 Notice is hereby given that the Utility Commission of the City of Rollingwood, Texas will hold a regular

meeting, open to the public, in the Municipal Building at 403 Nixon Drive in Rollingwood, Texas on

October 01, 2019 at 7:00 PM, where the following items will be discussed:

CALL UTILITY COMMISSION MEETING TO ORDER

1. Roll Call

PUBLIC COMMENTS

Citizens wishing to address the Utility Commission for items not on the agenda will be received at this time. Please limit comments to 3 minutes. In accordance with the Open Meetings Act, the Utility Commission is restricted from discussing or taking action on items not listed on the agenda.

Citizens who wish to address the Utility Commission with regard to matters on the agenda will be received at the time the item is considered.

CONSENT AGENDA

2. Discussion and possible action on the minutes from the September 3, 2019 meeting.

REGULAR AGENDA

3. Discussion and possible action on a recommendation to the City Council regarding the selection of a utility rate consultant.

DEPARTMENT REPORTS

4. Meter Report on 3 Pleasant Cove.

5. Financials as of August 31, 2019

ADJOURNMENT OF MEETING

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Utility Commission – Agenda Tuesday, October 01, 2019

CERTIFICATION OF POSTING

I hereby certify that the above Notice of Meeting was posted on the bulletin board at the Rollingwood Municipal Building, in Rollingwood, Texas and to the City website at www.rollingwoodtx.gov on September 25, 2019 at 3:15 p.m.

__________________________________

Ashley Wayman, City Secretary

NOTICE -

The City of Rollingwood is committed to compliance with the Americans with Disabilities Act. Reasonable modifications and equal access to

communications will be provided upon request. Please contact the City Secretary, at (512) 327-1838 for information. Hearing-impaired or

speech-disabled persons equipped with telecommunication devices for the deaf may call (512) 272-9116 or may utilize the stateside Relay

Texas Program at 1-800-735-2988.

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CITY OF ROLLINGWOOD UTILITY COMMISSION MEETING

Tuesday, September 3, 2019

MINUTES

The Rollingwood Utility Commission met in a Regular Meeting beginning at 7:00 p.m. in the City

Council Chambers of the Rollingwood City Hall Building located at 403 Nixon Drive, Rollingwood,

Texas. Acting Chair Clark Wilson called the meeting to order at 7:04 p.m.

Present members were: Clark Wilson, Christopher Meakin, Jonathan Miller, and Andrew Zachary.

2. PUBLIC COMMENTS

City Administrator Amber Lewis introduced and welcomed Ashley Wayman, the new City Secretary

for the City of Rollingwood.

3. ADOPTION OF MINUTES FROM THE AUGUST 6, 2019 MEETING

Christopher Meakin motioned to approve the final meeting minutes from the August 6, 2019

meeting. Jonathan Miller seconded the motion. The motion passed 4-0.

4. WATER PAYMENT APPEAL - 309 PLEASANT DRIVE

Jonathan Miller Spoke on behalf of Rose McGovern regarding a water appeal for her property at

309 Pleasant Drive. He stated that she could not be in attendance due to schedule conflicts but that

he witnessed the water leak and that it was fixed in a timely manner.

Public Works Director Jackie Bob Wright explained the steps that could be taken to remedy the

situation.

Andrew Zachary motioned to offer to adjust the bill to charge the base rate on the 30,000 gallon

average usage in August, and the wholesale rate plus ten percent (10%) on the 18,000 gallon

overage. Jonathan Miller seconded the motion. The motion passed 4-0.

5. DISCUSSION AND POSSIBLE ACTION ON A RECOMMENDATION TO CITY COUNCIL ON

ENGAGING A RATE CONSULTANT TO ANALYZE WASTEWATER RATES TO INCLUDE

WINTER AVERAGING PROCEDURES AND A BASE RATE.

City Administrator Amber Lewis stated that the City has engaged a law firm to pursue refunds from

Austin Water to recover costs for the zebra mussels/water boiling incident and extra fees that were

charged. This law firm recommended a firm to review the City’s winter averaging and base rate, but

they have limited availability.

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Utility Commission – Agenda Tuesday, September 3, 2019

Amber stated that she will come back to the Utility Commission with some alternative consultants or

open discussions with the new consultant.

No action was taken.

6. DISCUSSION AND POSSIBLE ACTION ON ESTABLISHING AN ANNUAL MEETING SCHEDULE FOR THE PUBLIC.

City Administrator reported a suggestion by Council Member Buck Shapiro that the Utility

Commission (and all City commissions) have four spring and four fall meetings and hold summer

meetings on an as needed or optional basis.

Jonathan Miller motioned to adjust the meeting schedule of the Utility Commission to be the first

Tuesday of the month at 7:00 p.m. in the months February through May and September through

December. Andrew Zachary seconded the motion. The motion passed 4-0.

7. REPORT ON FINANCIALS AS OF JULY 31, 2019.

City Administrator Amber Lewis gave a report on the financials for the Water Fund as of July 31,

2019. This was not an action item. No formal action was taken.

8. ADJOURNMENT OF MEETING

Clark Wilson motioned to adjourn the meeting at 7:37 p.m. Jonathan Miller seconded the motion.

The motion passed 4-0.

Minutes were taken by Utility Commission member Andrew Zachary and reviewed and prepared

by City Secretary Ashley Wayman.

Minutes adopted on the _____ day of _______________, 2019.

__________________________

William Teten, Chairperson

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hdrinc.com

4401 Westgate Blvd., Suite 400, Austin, TX 78745

T 512.912.5100 F 512.912.5158

Texas Registered Engineering Firm F-754

September 12, 2019

Ms. Amber Lewis

City Administrator

City of Rollingwood

403 Nixon Drive

Rollingwood, TX 78746

Dear Ms. Lewis:

HDR Engineering Inc. has been asked to update the City of Rollingwood’s wastewater rate model for the FY20 study period. The requested efforts to update the wastewater rate model will incorporate end-of-year expenditures for FY19, the approved budget for FY20, and various utility customer and production information. It is anticipated that this effort examine winter averaging and any wastewater rate structure changes. This effort will include two meetings with City staff to review the updated wastewater rate model and two meetings with the Utility Commission to present findings from the study and to receive comments. Finally, one meeting with the City Council is also included. Should more meetings be needed or requested, additional fee will be negotiated prior to those meetings being held.

HDR proposes an overall fee for this project of $8,038 (Table 1) proposed on a time and materials basis and not to be exceeded without advance written authorization from the City. Any work beyond this scope will require an amendment and additional budget and schedule. Billing will be made monthly based on the monthly level of effort incurred. Standard terms and conditions are attached.

Should you find this agreeable, please counter-sign below and return a copy to HDR. If you have any questions, please call me at 512-214-6154.

Sincerely,

Grady Reed Project Manager

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T 512.912.5100 F 512.912.5158


Agreed: ____________________ ______________________ Shay Ralls Roalson, PE Authorized Representative Vice President City of Rollingwood ______________________ Date

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hdrinc.com


T 512.912.5100 F 512.912.5158


A. LABOR EXPENSES

Project Project Total

Activity Principal Manager QA/QC Clerical Total Hours Cost

Task 1 - Gather Data 4.0 4.0 837$

Task 2 - Update Rate Models 12.0 2.0 14.0 2,969$

Task 3 - Coordination/Reporting 1.0 16.0 2.0 19.0 3,981$

Total Hours 1.0 32.0 2.0 2.0 37.0

Total Salary-related Expenses 387$ 6,699$ 457$ 245$ 7,788$

B. NON-LABOR EXPENSES Total

Item Cost

Mileage - Round-trip San Marcos/Rollingwood 5 round-trips 50$ per trip 250$

Total Non-Labor Expenses 250$

C. TOTAL PROJECT FEE 8,038$

TABLE 1

PROPOSED PROJECT FEE

ROLLINGWOOD RATE MODEL UPDATE

Quantity Price

Unit

Hourly Effort

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HDR Engineering, Inc. Terms and Conditions for Consulting Services

1. STANDARD OF PERFORMANCE The standard of care for all professional engineering, consulting

and related services performed or furnished by CONSULTANT and its employees under this Agreement will be the care and skill ordinarily used by members of CONSULTANT’s profession practicing under the same or similar circumstances at the same time and in the same locality. CONSULTANT makes no warranties, express or implied, under this Agreement or otherwise, in connection with CONSULTANT’s services.

2. INSURANCE/INDEMNITY CONSULTANT agrees to procure and maintain, at its expense,

Workers' Compensation insurance as required by statute; Employer's Liability of $250,000; Automobile Liability insurance of $1,000,000 combined single limit for bodily injury and property damage covering all vehicles, including hired vehicles, owned and non-owned vehicles; Commercial General Liability insurance of $1,000,000 combined single limit for personal injury and property damage; and Professional Liability insurance of $1,000,000 per claim for protection against claims arising out of the performance of services under this Agreement caused by negligent acts, errors, or omissions for which CONSULTANT is legally liable. OWNER shall be made an additional insured on Commercial General and Automobile Liability insurance policies and certificates of insurance will be furnished to the OWNER. CONSULTANT agrees to indemnify OWNER for third party personal injury and property damage claims to the extent caused by CONSULTANT's negligent acts, errors or omissions. However, neither Party to this Agreement shall be liable to the other Party for any special, incidental, indirect, or consequential damages (including but not limited to loss of use or opportunity; loss of good will; cost of substitute facilities, goods, or services; cost of capital; and/or fines or penalties), loss of profits or revenue arising out of, resulting from, or in any way related to the Project or the Agreement from any cause or causes, including but not limited to any such damages caused by the negligence, errors or omissions, strict liability or breach of contract.

3. ESTIMATES Any estimates of project cost, value or savings provided by

CONSULTANT are intended to allow a comparative evaluation between alternatives and do not constitute a detailed evaluation or prediction of actual project costs, value or savings. Any such estimates are made on the basis of information available to CONSULTANT and on the basis of CONSULTANT's experience and qualifications, and represents its judgment as an experienced and qualified professional engineer. However, since CONSULTANT has no control over the impact of various factors that impact the actual project cost, value or savings, CONSULTANT does not guarantee that the actual project cost, value or savings will not vary from CONSULTANT’s estimates.

4. CONTROLLING LAW This Agreement is to be governed by the law of the state where

CONSULTANT's services are performed.

5. SUCCESSORS, ASSIGNS AND BENEFICIARIES OWNER and CONSULTANT, respectively, bind themselves, their

partners, successors, assigns, and legal representatives to the covenants of this Agreement. Neither OWNER nor CONSULTANT will assign, sublet, or transfer any interest in this Agreement or claims arising therefrom without the written consent of the other. No third party beneficiaries are intended under this Agreement.

6. SERVICES AND INFORMATION OWNER will provide all criteria and information pertaining to

OWNER's requirements for the project, including design objectives and constraints, space, capacity and performance requirements, flexibility and expandability, and any budgetary limitations.

OWNER will also provide copies of any OWNER-furnished Standard Details, Standard Specifications, or Standard Bidding Documents which are to be incorporated into the project.

OWNER will furnish the services of soils/geotechnical engineers or other consultants that include reports and appropriate professional recommendations when such services are deemed necessary by CONSULTANT. The OWNER agrees to bear full responsibility for the technical accuracy and content of OWNER-furnished documents and services.

In performing professional engineering, consulting and related services hereunder, it is understood by OWNER that CONSULTANT is not engaged in rendering any type of legal, insurance or accounting services, opinions or advice. Further, it is the OWNER’s sole responsibility to obtain the advice of an attorney, insurance counselor or accountant to protect the OWNER’s legal and financial interests. To that end, the OWNER agrees that OWNER or the OWNER’s representative will examine all studies, reports, sketches, drawings, specifications, proposals and other documents, opinions or advice prepared or provided by CONSULTANT, and will obtain the advice of an attorney, insurance counselor or other consultant as the OWNER deems necessary to protect the OWNER’s interests before OWNER takes action or forebears to take action based upon or relying upon the services provided by CONSULTANT.

7. RE-USE OF DOCUMENTS All documents, including all reports, drawings, specifications,

computer software or other items prepared or furnished by CONSULTANT pursuant to this Agreement, are instruments of service with respect to the project. CONSULTANT retains ownership of all such documents. OWNER may retain copies of the documents for its information and reference in connection with the project; however, none of the documents are intended or represented to be suitable for reuse by OWNER or others on extensions of the project or on any other project. Any reuse without written verification or adaptation by CONSULTANT for the specific purpose intended will be at OWNER's sole risk and without liability or legal exposure to CONSULTANT, and OWNER will defend, indemnify and hold harmless CONSULTANT from all claims, damages, losses and expenses, including attorney's fees, arising or resulting therefrom. Any such verification or adaptation will entitle CONSULTANT to further compensation at rates to be agreed upon by OWNER and CONSULTANT.

8. TERMINATION OF AGREEMENT OWNER or CONSULTANT may terminate the Agreement, in

whole or in part, by giving seven (7) days written notice to the other party. Where the method of payment is "lump sum," or cost reimbursement, the final invoice will include all services and expenses associated with the project up to the effective date of termination. An equitable adjustment shall also be made to provide for termination settlement costs CONSULTANT incurs as a result of commitments that had become firm before termination, and for a reasonable profit for services performed.

9. SEVERABILITY If any provision of this agreement is held invalid or unenforceable,

the remaining provisions shall be valid and binding upon the parties. One or more waivers by either party of any provision, term or condition shall not be construed by the other party as a waiver of any subsequent breach of the same provision, term or condition.

10. CONTROLLING AGREEMENT These Terms and Conditions shall take precedence over any

inconsistent or contradictory provisions contained in any proposal,

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Terms & Conditions for Consulting Services 2 (5/2019)

contract, purchase order, requisition, notice-to-proceed, or like document.

11. INVOICES CONSULTANT will submit monthly invoices for services rendered

and OWNER will make payments to CONSULTANT within thirty (30) days of OWNER's receipt of CONSULTANT's invoice.

CONSULTANT will retain receipts for reimbursable expenses in general accordance with Internal Revenue Service rules pertaining to the support of expenditures for income tax purposes. Receipts will be available for inspection by OWNER's auditors upon request.

If OWNER disputes any items in CONSULTANT's invoice for any reason, including the lack of supporting documentation, OWNER may temporarily delete the disputed item and pay the remaining amount of the invoice. OWNER will promptly notify CONSULTANT of the dispute and request clarification and/or correction. After any dispute has been settled, CONSULTANT will include the disputed item on a subsequent, regularly scheduled invoice, or on a special invoice for the disputed item only.

OWNER recognizes that late payment of invoices results in extra expenses for CONSULTANT. CONSULTANT retains the right to assess OWNER interest at the rate of one percent (1%) per month, but not to exceed the maximum rate allowed by law, on invoices which are not paid within thirty (30) days from the date OWNER receives CONSULTANT’s invoice. In the event undisputed portions of CONSULTANT's invoices are not paid when due, CONSULTANT also reserves the right, after seven (7) days prior written notice, to suspend the performance of its services under this Agreement until all past due amounts have been paid in full.

12. CHANGES The parties agree that no change or modification to this

Agreement, or any attachments hereto, shall have any force or effect unless the change is reduced to writing, dated, and made part of this Agreement. The execution of the change shall be authorized and signed in the same manner as this Agreement. Adjustments in the period of services and in compensation shall be in accordance with applicable paragraphs and sections of this Agreement. Any proposed fees by CONSULTANT are estimates to perform the services required to complete the project as CONSULTANT understands it to be defined. For those projects involving conceptual or process development services, activities often are not fully definable in the initial planning. In any event, as the project progresses, the facts developed may dictate a change in the services to be performed, which may alter the scope. CONSULTANT will inform OWNER of such situations so that changes in scope and adjustments to the time of performance and compensation can be made as required. If such change, additional services, or suspension of services results in an increase or decrease in the cost of or time required for performance of the services, an equitable adjustment shall be made, and the Agreement modified accordingly.

13. EQUAL EMPLOYMENT AND NONDISCRIMINATION In connection with the services under this Agreement,

CONSULTANT agrees to comply with the applicable provisions of federal and state Equal Employment Opportunity for individuals based on color, religion, sex, or national origin, or disabled veteran, recently separated veteran, other protected veteran and armed forces service medal veteran status, disabilities under provisions of executive order 11246, and other employment, statutes and regulations, as stated in Title 41 Part 60 of the Code of Federal Regulations § 60-1.4 (a-f), § 60-300.5 (a-e), § 60-741 (a-e).

14. EXECUTION This Agreement, including the exhibits and schedules made part

hereof, constitute the entire Agreement between CONSULTANT and OWNER, supersedes and controls over all prior written or oral understandings. This Agreement may be amended, supplemented or modified only by a written instrument duly executed by the parties.

15. ALLOCATION OF RISK OWNER AND CONSULTANT HAVE EVALUATED THE RISKS

AND REWARDS ASSOCIATED WITH THIS PROJECT, INCLUDING CONSULTANT’S FEE RELATIVE TO THE RISKS ASSUMED, AND AGREE TO ALLOCATE CERTAIN OF THE RISKS, SO, TO THE FULLEST EXTENT PERMITTED BY LAW, THE TOTAL AGGREGATE LIABILITY OF CONSULTANT (AND ITS RELATED CORPORATIONS, SUBCONSULTANTS AND EMPLOYEES) TO OWNER AND THIRD PARTIES GRANTED RELIANCE IS LIMITED TO THE LESSER OF $1,000,000 OR ITS FEE, FOR ANY AND ALL INJURIES, DAMAGES, CLAIMS, LOSSES, OR EXPENSES (INCLUDING ATTORNEY AND EXPERT FEES) ARISING OUT OF CONSULTANT’S SERVICES OR THIS AGREEMENT REGARDLESS OF CAUSE(S) OR THE THEORY OF LIABILITY, INCLUDING NEGLIGENCE, INDEMNITY, OR OTHER RECOVERY.

16. LITIGATION SUPPORT In the event CONSULTANT is required to respond to a subpoena,

government inquiry or other legal process related to the services in connection with a legal or dispute resolution proceeding to which CONSULTANT is not a party, OWNER shall reimburse CONSULTANT for reasonable costs in responding and compensate CONSULTANT at its then standard rates for reasonable time incurred in gathering information and documents and attending depositions, hearings, and trial.

17. NO THIRD PARTY BENEFICIARIES This Agreement gives no rights or benefits to anyone other than

the OWNER and CONSULTANT and has no third-party beneficiaries. All work product will be prepared for the sole and exclusive use of the OWNER and is not for the benefit of any third party and may not be distributed to, disclosed in any form to, used by, or relied upon by, any third party without the prior written consent of CONSULTANT, which consent may be withheld in its sole discretion. OWNER agrees to indemnify CONSULTANT and its officers, employees, subcontractors, and affiliated corporations from all claims, damages, losses, and costs, including but not limited to litigation expenses and attorney's fees arising out of or related to the unauthorized disclosure, change, or alteration of such work product.

Use of any report or any information contained therein by any party other than OWNER shall be at the sole risk of such party and shall constitute a release and agreement by such party to defend and indemnify CONSULTANT and its affiliates, officers, employees and subcontractors from and against any liability for direct, indirect, incidental, consequential or special loss or damage or other liability of any nature arising from said party’s use of such report or reliance upon any of its content. To the maximum extent permitted by law, such release from and indemnification against liability shall apply in contract, tort (including negligence), strict liability, or any other theory of liability.

18. DISCLAIMER In preparing reports, CONSULTANT relies, in whole or in part, on

data and information provided by the OWNER and third parties, which information has not been independently verified by CONSULTANT and which CONSULTANT has assumed to be accurate, complete, reliable, and current. Therefore, while CONSULTANT has utilized the customary professional standard

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Terms & Conditions for Consulting Services 3 (5/2019)

of care in preparing this report, CONSULTANT does not warrant or guarantee the conclusions set forth in reports which are dependent or based upon data, information or statements supplied by third parties or the OWNER.

19 OPERATIONAL TECHNOLOGY SYSTEMS OWNER agrees that the effectiveness of operational technology

systems (“OT Systems”) and features designed or recommended by ENGINEER are dependent upon OWNER’s continued operation and maintenance of the OT Systems in accordance with all standards, best practices, laws, and regulations that govern the operation and maintenance of the OT Systems. OWNER shall be solely responsible for operating and maintaining the OT System in accordance with applicable industry standards (i.e. ISA, NIST, etc.) and best practices, which generally include but are not limited to, cyber security policies and procedures, documentation and training requirements, continuous monitoring of assets for tampering and intrusion, periodic evaluation for asset vulnerabilities, implementation and update of appropriate technical, physical, and operational standards, and offline testing of all software/firmware patches/updates prior to placing updates into production. Additionally, OWNER recognizes and agrees that OT Systems are subject to internal and external breach, compromise, and similar incidents. Security features designed or recommended by ENGINEER are intended to reduce the likelihood that OT Systems will be compromised by such incidents. However, ENGINEER does not guarantee that OWNER’s OT Systems are impenetrable and OWNER agrees to waive any claims against ENGINEER resulting from any such incidents that relate to or affect OWNER’s OT Systems.

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Professional Proposal

City of Rollingwood, Texas

Wastewater Utility Cost of Service and Rate Design Study Proposal

September 25, 2019

Nelisa Heddin Consulting, LLC P.O. Box 341855 Lakeway, TX 78734 (512) 589-1028 [email protected]

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EXECUTIVE SUMMARY

Nelisa Heddin Consulting, LLC (NH Consulting) is pleased to provide the City of Rollingwood (“City”) with a proposal for a cost of service and rate design study for the City’s Wastewater Utility. NH Consulting will work with the City to develop rate recommendations which will assure adequate revenues for operations and capital improvements on a self-sustaining basis, while considering the economic impact on the Utility’s customers, taking into consideration the cost of providing the services. NH Consulting offers the City of Rollingwood unparalleled expertise in the performance of cost of service and rate design analysis.

NH Consulting is a financial and management consulting firm specializing in meeting the needs of municipal utilities.

NH Consulting intends to provide the City with a comprehensive package of services intended to enable the City to more efficiently manage its utilities and fully evaluate the City’s utility rate structure.

The following proposal identifies the project team’s qualifications and outlines our approach to the project.

The project team believes that the successful completion of this project will be dependent on the following requirements:

A project manager who clearly understands the City’s operating environment including long-term and short-term goals and is committed to helping the City identify strategies to achieving those goals

A project manager who is committed to providing value-added services to the City that go beyond simply the performance of a rate study, but assisting the City in planning for the future of its Utilities

A project manager who is experienced in the performance of and specializing in cost of service and rate design studies for numerous entities throughout the U.S and is a recognized expert in the industry having testified before the State Office of Administrative Hearings and the State Legislature

Responsiveness and constant communication with the City

As outlined in this proposal, NH Consulting is uniquely qualified to meet each of these requirements. Ex

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NELISA HEDDIN CONSULTING, LLC PROFILE

NH Consulting is a management consulting firm specializing in the financial planning and management of municipal utilities. NH Consulting works closely with each client to develop strategic, individualized solutions. We provide a full range of services to meet our clients’ complex needs including cost of service and rate design studies, impact fee analysis, and budgeting assistance.

NH Consulting works closely with each client to thoroughly understand their unique needs, goals, issues and challenges and develops strategic solutions customized to address the individualized needs of each client.

Services provided by NH Consulting include:

Cost of Service and Rate Design Studies Comprehensive Fee Analysis Indirect Cost Allocation Studies Impact Fee Analysis Pro Forma Analysis Bond Issuance Support Annual and Long Term Operational Budgeting Cost Benefit Analysis Comparative Benchmarking Analysis Financial Planning and Modeling Financial Planning and Modeling Financial Planning and Budgeting for CIP Programs Public Education Programs Service Area Valuations Feasibility Analysis Regionalization Planning and Implementation Expert Witness Testimony Legislative Support Billing System Reviews and Implementation

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Strategic – Innovative - Excellence

Nelisa Heddin, president of NH Consulting, is Past Chair of the Texas AWWA Rates and Charges Sub-Committee, and is still actively involved in this professional organization. Ms. Heddin brings the most innovative solutions in the industry to each of her clients – allowing her to develop customized strategies to meet each of her clients needs.

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PROJECT TEAM PROFILE

NELISA HEDDIN, PROJECT MANAGER

Ms. Heddin will serve as the project manager for this engagement, bringing over 19 years in utility rate design to this engagement. Ms. Heddin will be performing the financial analysis and will responsible for the overall quality control for this engagement. Ms. Heddin is an industry expert in financial planning and management for municipal utilities, specializing in cost of service and rate design studies, impact fee analysis, cost benefit analysis, and annual and long-term budgeting. Ms. Heddin has over 19 years experience in providing consulting services to utilities of all sizes throughout the Southwest. She is a Past-Chair of the Texas AWWA Rates and Charges Sub-committee and has been invited to speak at numerous industry functions regarding cost of service issues, rate design, water loss and capital financing.

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Expertise You Can Rely On – Quality You Can Trust

NH Consulting assigns a single project manager who services as project manager and analyst for each engagement – this ensures continuity throughout each engagement. Nelisa Heddin, the proposed project manager for this engagement, is a leading expert in cost of service and rate design studies, having worked for entities across the United States such as the Cities of Dallas, Phoenix, Tucson, Little Rock, Webster, Pflugerville, and Georgetown.

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Nelisa Heddin President Professional Background Nelisa Heddin is an industry expert in financial planning and management for water and wastewater utilities; specializing in cost of service and rate design studies, impact fee analysis, cost benefit analysis, and annual and long-term budgeting. Ms. Heddin has over 16 years experience in providing consulting services to utilities of all sizes throughout the Southwest. Ms. Heddin has a Masters of Business Administration with a specialty in Finance. She is a Past-Chair of the Texas AWWA Rates and Charges Subcommittee and has been invited to speak at numerous industry functions regarding water and wastewater rates, rate design, water loss, and capital financing. Education B.S., Biology, New Mexico State University, 1996 MBA, Finance, New Mexico State University, 1999 Professional Affiliations American Water Works Association Past Chairman Texas AWWA Rates and Charges Subcommittee Texas Municipal League Texas Government Financial Officers Association Sample of Relevant Project Experience Cost of Service and Rate Design Projects Bistone Municipal WSC City of Alamo Heights, Texas City of Bastrop, Texas City of Bonham, Texas City of Burnet, Texas City of Cameron, Texas City of Copperas Cove, Texas City of Corinth, Texas City of Cuero, Texas City of Del Rio, Texas City of Friendswood, Texas City of Garland, Texas City of Gladewater, Texas City of Horseshoe Bay, Texas City of Idabel, Oklahoma City of Krum, Texas City of Lago Vista, Texas City of Leon Valley, Texas City of Little Rock, Arkansas City of Lindale, Texas City of Mexia, Texas City of Midland, Texas City of Missouri City, Texas City of Moulton, Texas

City of Murphy, Texas City of New Madrid, Missouri City of North Lake, Texas City of Pecos, Texas City of Pflugerville, Texas City of Phoenix, Arizona City of Richmond, Texas City of Selma, Texas City of Southside Place, Texas City of Sweet Water, Texas City of Webster, Texas City of Wortham, Texas Eldorado Area WSD Fair Management, LC Gorforth SUD La Ventana Utilities MB Wastewater Services, LLC Quail Valley Utility District Southern Crossing Utilities Travis County WCID #17 West Travis County Public Utility Agency Whiterock Water Supply Corporation

Resu

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Impact Fee Studies West Travis County Public Utility Agency City of Southside Place, Texas City of Cuero, Texas City of Bastrop, Texas

City of Burnet, Texas City of Corinth, Texas City of Missouri City, Texas

Valuation Analysis Central Texas UDC West Travis County Public Utility Agency

U.S. Navy City of Dallas, Texas

Green Valley SUD City of Fort Worth, Texas

Operations and Management Reviews Quail Valley Utility District City of Waco, Texas

City of Bastrop, Texas City of Uvalde, Texas

City of Gladewater, Texas City of Galveston, Texas

Other Projects Central Texas UDC - Facilities Acquisition Negotiations City of Georgetown/ Chisholm Trail SUD - Regionalization Feasibility City of Georgetown - Contract Assignment Consents City of Lakeway – Review of Utility Rates of Lakeway MUD

City of Bee Cave - Litigation Support and Expert Witness Testimony La Ventana - Litigation Support and Expert Witness Testimony White Bluff Rate Payers - Litigation Support and Expert Witness Testimony Canyon Lake Rate Payers – Litigation Support and Expert Witness Testimony

Publications and Presentations Texas H2O, November/December 2004, “Finding the Water: How to Cope with HB3338” Office of Rural Community Affairs, 2004 – Water Related Training for Local Leaders Texas Water, 2004 – Professional Paper - Water Audits, Water Loss and HB3338 Texas Rural Water Association Annual Conference 2002– Presentation – Encroachment Issues Incode Education Forum, 2007 – Selling Utility Rate Studies Texas Water, 2006 – Water Loss Determination Munis Education Forum, 2006 – Utility Rate Analysis Incode Education Forum, 2006 – Utility Rate Analysis TAWWA Rate Seminar, 2010 - Utility Rate Analysis GFOAT, 2005 – Capital Financing Seminar GFOAT Gulf-Coast Chapter, 2005 – Presentation – The GFO’s Water Challenges

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PROJECT APPROACH

Analysis of Wastewater Fund Finances and Wastewater Rates

There are many State and Federal regulations surrounding water and wastewater rates. Chapter 13 of the Texas Water Code states, “rates shall not be unreasonably preferential, prejudicial, or discriminatory but shall be sufficient, equitable, and consistent in application to each class of consumers.” Special care must be taken during the development of water and wastewater rates to ensure that the rates developed are in accordance with this statute.

The development of wastewater rates involves four primary steps:

1) Determination of Annual Revenue Requirements for the Study Period

It is particularly important that all costs associated with providing service are included in the revenue requirement. This includes direct costs such as those required to operate the City’s collection system, the contract cost for wastewater treatment from the City of Austin as well as the City’s administrative costs associated with managing this utility. It is imperative that the costs included in the revenue requirements are within the confines of State and Federal regulations.

There are two primary approaches to the development of revenue requirements, the “cash-needs” approach, and the “utility” approach. The “cash-needs” approach ensures that the revenues generated by the utility cover the cash needs of the utility, including debt obligations, as they come due, whereas the “utility” basis does not consider debt obligations. The primary difference is that the “utility” basis considers depreciation rather than debt. NH Consulting will work closely with City staff to determine the approach which is most appropriate in meeting the City’s needs.

2) Functionalize Revenue Requirements into Functional Cost Components

Wastewater costs are related to the flow and strength of the wastewater returned to the system. The wastewater treatment process is dependent on both the strength of the wastewater and the volume of the wastewater treated. Thus, costs are related to these factors. Wastewater revenue requirements must be functionalized based on:

Flow Costs– Costs incurred by the wastewater utility that can be directly related to the volume of wastewater treated. These costs include pumping costs and wastewater treatment plant capacity.

Strength – Costs incurred by the utility that can be related to the strength of the wastewater treated, such as chemical costs. Strength costs can be further functionalized in terms of BOD, TSS, and NH3, depending on the facility’s specific permit treatment parameters.

Customer Costs – those costs associated with serving customers, irrespective of the amount or rate of wastewater treated.

3) Allocation of Cost Components into Customer Classes

The functionalized wastewater costs are then allocated to customer classes based on projected flow, and, in the case of surcharge design, strength.

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4) Design Wastewater Rates

The design of wastewater rates is a complex task. This is due to the fact that most utilities do not meter wastewater, as they do water. Thus, best estimates must be made during the determination of billing units. This is a particularly sensitive task. It is imperative that a utility normalize the historical data to ensure they do not over-estimate billing units. Additionally, the City must adopt a policy for the determination of wastewater billing. Options include winter averaging and maximum fee capping. Another consideration in setting wastewater rates is the option of wastewater surcharges for industrial customers. Given that the City does not provide partner water utility services directly, NH Consulting will work closely with the City to determine the best means of charging customers for service.

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WORK PLAN

The Project Team has put together a work plan that accomplishes the four steps of rate design and accomplishes the goals/objectives outlined by the City. NH Consulting’s general approach to rate design is to first thoroughly understand the goals of the Utility and design rates which meet those goals. The Project Team will discuss rate design options and project goals with the City in a kick-off meeting, which will set the tone and direction of the project.

Task Number

Task Name Description Deliverable (if any)

1 Revenue Requirement Determination

Development of Revenue Requirements for the base-year utilizing historical actual costs, City budgets, debt service schedules, capita improvement plans and information/input from City staff.

Detailed schedule outlining the base-year revenue requirement and the basis of development, assumptions, and adjustments will be provided to and reviewed with City staff in a work-paper document. Base year revenue requirements will be relied upon to develop five-year revenue requirements.

2 Development of Five-Year Revenue Requirement Forecast

Once the base year revenue requirements for the test year have been developed, NH Consulting will work with City staff to develop a five-year projection of revenue requirements for each utility. Known and measurable changes such as capital improvements, future debt issues and process changes, will be taken into account. The project team will work closely with City staff project these costs into the five-year planning period considering elements including, but not limited to, inflation, personnel changes, growth impacts, etc. Existing costs will be determined as well as the costs for the proposed CIP. O&M reserves repair and replacement reserves and debt service reserves will be established to coincide with the City’s financial policies.

Detailed schedules outlining the five-year projection and the basic assumptions used to make those projections. These schedules will likely be included in the final report of the study.

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Functionalization of Revenue Requirements

Once revenue requirements have been determined and projected for the five-year study period, NH Consulting will functionalize each cost component into functional categories, based on that cost. Wastewater components will be functionalized into flow, treatment, and customer cost categories.

Cost functionalization work-paper schedules will be reviewed with City staff and will be relied upon for the allocation of costs to customer classes.

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4 Customer Demand

Analysis NH Consulting will next examine the historical usage patterns of the City’s current customer classes and will evaluate possible new customer classifications.

NH Consulting will examine the usage patterns of the customer classes and coordinate closely with the City to determine the best means of estimating wastewater use for retail customers. The customer demand analysis is not only useful in cost allocations, it also enables the utility to make future revenue projections, as well as serve as a tool in water resource planning. In addition, NH Consulting will use this analysis to review the City’s current customer classifications as to appropriateness.

Historical customer demands, average use, and peaking patterns will be provided to City staff in detailed work-papers for review and incorporation into the customer cost allocations and future use projections.

5 Customer Count and Demand Projections

The next step in the analysis is to project future customer growth. NH Consulting will examine historical growth patterns, and discuss future growth with the City’s utility and planning departments to make this projection. In addition, NH Consulting will analyze historical usage patterns and customer growth projections to project usage for the five-year study period.

Future projections of customer count and demands will be reviewed with City staff. The final report will summarize these projections and the basic assumptions utilized in making these projections.

6 Allocation of Cost Components to Customer Classes

Once NH Consulting has accurately functionalized costs into cost components and has analyzed customer demands, NH Consulting will be able to allocate costs to customer classes based on their usage patterns, and thus relative demands they place on the utility.

Detailed work-papers allocating costs to customer classes will be reviewed with City staff. The final report will summarize the results of the cost allocation analysis.

7 Rate Design The previous steps have allocated costs to customer classes based on their system demands and have projected customer demands, and thus billing units, into the future. The final step of the analysis is to design rates for the utilities. NH Consulting will first determine cost-of-service based rates for each customer class. Additionally, NH

The final rate design work papers will be reviewed with City staff. The recommended rate design will be incorporated into the final report.

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Consulting will provide alternative rate design options if deemed necessary. The ultimate rates recommended by the project team will be fair and equitable among customers; fully recover the costs associated with providing services; and will meet the goals of the City as defined in the project kick-off meeting.

8 Preliminary Draft Report

NH Consulting will prepare a preliminary draft report for the City that discusses the methodology used during the analyses, the critical assumptions made by the project team, and findings and recommendations. The project team will present the draft report to City staff for comment.

A draft report will be provided to City staff for comment/edits. Unless otherwise requested by the City, the draft report will be provided in an electronic, PDF format.

9 Issuance of Final Report NH Consulting will incorporate the City’s comments into the draft report, and will issue a final report to the City. This report would include an executive summary, which documents the findings and recommendations in a clear and concise manner.

The project team will provide the City with the final report.

10 Presentation of Findings NH Consulting will present findings in during regularly scheduled or special called meetings/workshops or public hearings. The project team will educate the Council and/or the public on the methodology, findings, and recommendations of the project.

NH Consulting typically presents findings with a Power-Point presentation, or similar format as deemed appropriate.

NH Consulting will present findings during Council workshops and/or regularly scheduled Council meetings. NH Consulting will commit to attending meetings as necessary to ensure the City Council has the information that they need in order to make an educated decision pertaining to the analysis.

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Proposed Fees

NH Consulting proposes to perform the services described herein for a guaranteed-not-to exceed fee of $9,870, plus out of pocket expenses. The City would be billed monthly based upon percentage of completion, with the final payment to be due upon delivery of final report and presentation of findings. The project budget and scope of services presented herein reflect the project team’s understanding of the City’s specific needs. The project team is willing to negotiate price based on an adjusted scope of services to meet the City’s specific needs and budgetary limitations if deemed necessary.

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References West Travis County Public Utility Agency Financial Manager Cost of Service and Rate Design Study Project Description Nelisa Heddin became familiar with the West Travis County water and wastewater

systems beginning in 2007 during a contested proceeding between the Lower Colorado River Authority (LCRA) and the City of Bee Cave and eventually testified on the equitability of the rates implemented by the LCRA before the State Office of Administrative Hearings (SOAH). Ultimately, the City of Bee Cave along with Travis County MUD #3 and Hays County ended up purchasing the systems and created the West Travis County Public Utility Agency (Agency) to own and operate the systems. Ms. Heddin assisted in the acquisition of the systems and the transition of the operation of the systems to the Agency. Ms. Heddin continues to serve as the Financial Manager for the Agency assisting with budgeting, revenue tracking, and the many challenges associated with this large, regional system. Ms. Heddin has completed 3 cost of service and rate design studies.

Project Completion 2012 – present Project Highlights Financial Manager

Annual Budgeting Impact Fee Analysis Wholesale Rate Analysis Cost of Service and Rate Design Capital Improvement Planning Public Education

Contact Jennifer Reichers West Travis County Public Utility Agency General Manager (512) 413-9300 12117 Bee Cave Rd. Building 3, Suite 120 Bee Cave, Texas 78738 [email protected]

City of Southside Place, Texas Cost of Service and Rate Design Study Project Description In 2008, Nelisa Heddin conducted a Cost of Service and Rate Design study for the City of

Southside Place. The analysis evaluated the cost of providing services to residential and commercial customers and made recommendations to adjustments in rates based upon those costs. Ms. Heddin was asked to return in 2014 to conduct a follow-up study; she is scheduled to present recommendations to City Council in May, 2014.

Project Completion 2008, 2014 Project Highlights Cost of Service and Rate Design

Transitional Implementation Plan Capital Improvement Planning

Contact David Moss City of Southside Place, Texas City Manager (713) 668-2341 6309 Edloe Ave Houston, Texas 77005 [email protected]

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City of Webster, Texas Cost of Service and Rate Design Study Project Description Nelisa Heddin started working with the City of Webster in 2004 when she conducted a

Cost of Service and Rate Design study for the City. At that time, the City was not charging residential customers for water and wastewater services – they had a “live free in Webster campaign.” During the post-9/11 economic downturn, the City could no longer utilize tax-revenues to subsidize their utilities. Ms. Heddin worked closely with City staff to develop a transitional implementation plan which would slowly increase rates over time to achieve cost of service. Ms. Heddin has been asked to assist the City in subsequent studies in 2007 and 2013.

Project Completion 2004, 2007 and 2013 Project Highlights Cost of Service and Rate Design

Transitional Implementation Plan Capital Improvement Planning Public Education

Contact Mike Rodgers, CPA City of Webster, Texas Director of Finance (281) 316-4102 101 Pennsylvania Ave Webster, Texas 77598 [email protected]

City of Corinth, Texas Cost of Service and Rate Design Study Project Description In 2006, Nelisa Heddin conducted a Cost of Service and Rate Design study for the City of

Corinth. As the City had difficulty getting rate recommendations passed in the past, Ms. Heddin worked closely with City staff to develop strategies that would ensure adoption by the City’s elected officials and acceptance by the public. The analysis had to consider substantial capital improvements required on the system and developed rates to recover the revenues necessary to keep the system in compliance. Since the original analysis, Ms. Heddin has been invited to assist the City in evaluating rates in 2007, 2008, 2009, 2010 and 2013.

Project Completion 2006, 2007, 2008, 2009, 2010 and 2014 Project Highlights Cost of Service and Rate Design

Benchmarking Analysis Transitional Implementation Plan Capital Improvement Planning

Contact Lee Ann Bunselmeyer City of Corinth, Texas Director of Finance (940) 498-3280 3300 Corinth Parkway Corinth, Texas 76208 [email protected]

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