City Council Meeting: January 8, 2008

Agenda Item: 1-D  

To: Mayor and City Council 

From: Craig Perkins, Director - Environmental and Public Works Management

Subject: Modification to Contract 8726 (CCS) with Raftelis Financial Consultants, Inc., for Additional Consulting Services Addressing Proposed Wastewater Rate Adjustments

Recommended Action

Staff recommends that the City Council authorize the City Manager to negotiate and execute a modification to existing Contract No. 8726 (CCS) with Raftelis Financial Consultants, Incorporated, for additional financial analysis and development of wastewater rates and capital facility fees in the amount of $18,750.

Executive Summary

Raftelis Financial Consultants, Inc. (RFC), was retained to perform a wastewater rate study in November 2006. Rate increases were discussed with Council at a study session on May 8, 2007, along with a discussion of staff’s intent to refine the analysis in order to reduce the magnitude of the proposed rate increases. Since then, RFC has performed numerous rate scenarios in light of updated information from the City of Los Angeles. In addition, a Nexus Study has been completed which examines the funding allocations from the City’s general fund and the various enterprise funds for Environmental Program Division programs as it relates to Proposition 218. RFC has reached the limit of its contract authority under existing contract number 8726 (CCS), and additional funding is requested so that all required analyses can be completed, and the results of the Nexus study can be incorporated in the rate analysis. The total requested modification amounts to $18,750 for a new total not to exceed $104,300.

Discussion

Raftelis Financial Consultants, Inc., (RFC) is a nationally recognized financial and management consulting firm with substantial experience in performing rate analyses, as well as other financial and management services. RFC was retained in November 2006 to perform a wastewater rate study addressing the City’s goals of achieving adequate fund reserves, rate equity among customer classes, and appropriate debt service coverage, among others. RFC was selected from among four firms responding to a request for proposals issued by the city’s Water Resources Division. The initial contract amount was for $40,850. A first modification of the agreement in January 2007 increased the amount by $9,700 for a total amount of $50,550. Subsequent to a Council study session on May 8, 2007, at which initial rate analysis results were presented, a second modification to the contract was approved in June 2007 in the amount of $35,000, for a total amount of $85,500, to allow RFC to continue to refine the rate analysis in light of more recent information from the City of Los Angeles and to prepare a Wastewater Capital Facility Fee Study. RFC has completed multiple drafts of the wastewater rate study report and a first draft of the Wastewater Capital Facility Fee Study.

Significant effort has been expended by RFC in response to staff direction to modify input parameters to the wastewater rate model. Moreover, staff has commissioned a Nexus Study to analyze the funding of various Environmental Programs Division programs by the city’s general fund and various enterprise funds, as it relates to compliance with Proposition 218. Proposition 218 was approved by the voters of the state in 1996, resulting in an amendment to the State Constitution requiring voter approval for local government taxes, and limiting certain fees and assessments.

Presently, RFC has reached the limit of its contract authority. Given the importance of the rate study, and the fact rates have not been reevaluated since 1996 (other than a uniform CPI adjustment implemented in 2001), staff is desirous of continuing to work with RFC to refine the proposed revenue and rate enhancement requirements and to incorporate the results of the Nexus study in the rate analysis. Additional funding for the existing agreement will be required to do so.

The total additional contact authority requested as a modification to the existing professional service agreement for the continuation of the rate study is $18,750.

Financial Impacts and Budget Actions

Funds in the amount of $18,750 are available at account 31661.555060 for the services described in this staff report.

Prepared by: Gil Borboa, P.E. Water Resources Manager

Approved:	Forwarded to Council:
Craig Perkins Director, Environment and Public Works Management Department	P. Lamont Ewell City Manager