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HomeMy WebLinkAbout2024 FCS Exhibit A - Scope of Work and Task Plan Rexburg 7525 166th Ave NE, Ste D-215, Redmond, WA 98052 P: 425.867.1802 1 | City of Rexburg Utility Rate Study fcsgroup.com | bowman.com Exhibit A City of Rexburg Water, Sewer and Sanitation Utility Rate Study scope of services. TASK 1: INITIAL PROJECT MEETING An initial project meeting will be 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. Deliverables • Project schedule with task completion and key milestone review points. • Identification of project team communication leads. • Schedule standing project check-in meetings. Approved project work plan. TASK 2: DATA COLLECTION & CUSTOMER STATISTICS VALIDATION FCS will provide a data needs list encompassing historical and projected revenue, expenses, fiscal policies, capital plans, fund balances, comprehensive planning documents, and customer billing data. The data will be reviewed, analyzed, and validated for inclusion in the study process. This task includes a detailed customer billing statistics validation. Individual customer data including number of accounts, meter size, usage patterns (annual use, peak use, etc.) will be evaluated and validated against actual revenues collected. This revenue reconciliation will identify anomalies to be corrected prior to developing future revenue and customer counts and use / demand projections. 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). Deliverables • Validated financial, engineering, and customer usage data that serves as the primary inputs for the study. • Validated customer statistics with accounts, demand, and revenue generation. ✓ Bill frequency analysis to inform conservation-based rate structure • Demand profiles that tie to revenue projections. • Revenue forecast by customer class. 7525 166th Ave NE, Ste D-215, Redmond, WA 98052 P: 425.867.1802 2 | City of Rexburg Utility Rate Study fcsgroup.com | bowman.com TASK 3: REVENUE REQUIREMENT This task establishes a sustainable, multi-year financial management plan that meets the projected total financial needs of each system through the generation of sufficient, sustainable revenue. Annual cash flow needs will be analyzed by identifying expenses incurred to operate and manage each system including cost increases resulting from changes in staffing and/or enhanced programs or initiatives, existing contract cost arrangements, capital repair/ replacement needs, new and existing debt repayment obligations, and fiscal policy achievement. Alternative rate strategies and scenarios will be developed that may consider operational changes, capital prioritization, and overall infrastructure funding approaches for long term capital needs. These scenarios can be used to ultimately inform decision making and optimize proposed rate strategies. Deliverables • Fiscal policy evaluation with recommendations • Self-supporting multi-year financial plan for each utility. ✓ WW system cost analysis for Sugar City and Teton – develop integrated analysis based on existing terms. Review and identify improvements/changes to existing cost sharing. • Capital funding plan and scenario development. • Baseline financial plan plus up to three (3) rate implementation scenarios. TASK 4: COST OF SERVICE The cost-of-service analysis (COSA) involves allocating utility costs to customer classes based on a methodology consistent with industry-accepted ratemaking principles. This analysis establishes a defensible basis for assigning cost shares and defining “cost equity” among the City’s customers in a way that is tailored to the unique characteristics of the City’s water, sewer and sanitation systems and customers. The COSA accounts for differences in the character and nature of service provided to various customer classes when defining “equitable” cost recovery. 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 (see table below). The COSA will evaluate how existing revenue compares to the identified cost recovery by class of service and identify whether cost imbalances are present. An action plan to address imbalances over a multi-year period will be developed, if necessary. WATER FUNCTIONS SEWER FUNCTIONS SANITATION FUNCTIONS Customer Customer Customer Base capacity (avg. demand) Flow Collection Peak capacity (peak demand) Strength – Biochemical Oxygen Demand Disposal Meters and Services Strength – Total Suspended Solids Recycling Fire Strength – Other (if applicable) 7525 166th Ave NE, Ste D-215, Redmond, WA 98052 P: 425.867.1802 3 | City of Rexburg Utility Rate Study fcsgroup.com | bowman.com Deliverables • Water, sewer, and sanitation utility class-based equity evaluation. ✓ Wastewater strength classification and allocation (BOD/TSS) – reconcile and balance to treatment plant reports. ✓ Sanitation – identify total recycling costs. • Cost based unit costs by function, class, and/or service level. • COSA phase-in, if warranted. TASK 5: RATE DESIGN The rate design process involves developing rates (including both fixed and variable charges) for each customer class that recovers its allocated cost. In addition to serving as a mechanism for cost recovery, the City’s rate structures are a valuable tool for promoting key objectives such as revenue stability, conservation, and affordability. Recognizing that the City’s priority of these objectives can change over time, this task includes the selection and development of two (2) alternative rate structure per utility. The rate alternative will be designed to generate sufficient revenue to meet the revenue requirement forecast and address any material inequities identified in the COSA findings. In addition, rate designs will be consistent with the City’s fiscal policies and billing system capabilities. Deliverables • Two (2) preferred rate structure alternative, per utility, aligned with identified City priorities. ✓ Residential conservation-based rate structure ✓ Water right surcharge ✓ Water capacity rental charge ✓ Sewer update strength based fees • Schedule of water, sewer, and sanitation rates for each class. • Bill impact analysis that shows the number of and degree to which different customers are impacted by rate design changes. • Affordability analysis. • Comparative survey of sample monthly bills for up to five (5) jurisdictions of interest to the City. TASK 6 | WATER AND SEWER CAPITALIZATION FEE UPDATE (Water & Sewer Only) Capitalization fees are one-time fees for new or redevelopment used to recover a proportional share of the value of facilities required to provide service. In the 2015 Idaho Supreme Court Case: NIBCA v the City of Hayden the Court referenced a methodology and calculation used in Loomis v. City of Hailey for calculation of capitalization fees. The court held that the fee must be based on the cost of replacing the pipe and equipment that is in the ground today (i.e., the value of the existing system) and the value of the system should represent that portion of the system capacity that the new user will utilize at that point in time. Ultimately, future capital projects are not allowed in the capitalization fee calculation until they are constructed and placed in service. The capitalization fee analysis will calculate gross present day replacement value of each system and identify allowable deductions for bond principal and unfunded depreciation to determine net present day replacement value. FCS will then work with City staff to determine the number of users the current systems (water and sewer) can support. The updated capitalization fees will represent the maximum allowable charges that the City may choose to implement. 7525 166th Ave NE, Ste D-215, Redmond, WA 98052 P: 425.867.1802 4 | City of Rexburg Utility Rate Study fcsgroup.com | bowman.com Deliverables • Functionalized capitalization fees (water: source, treatment, storage, pumping, Transmission/Distribution; Sewer: Treatment, collection (interceptor, lift stations, mains, general) • Water – analysis of costs to evaluate capacity rental charge • Calculate maximum allowable capitalization fee for the water and sewer system. • Schedule of fees. TASK 7 | PROJECT REVIEW MEETINGS/PRESENTATIONS The success of a rate study relies on an open and involved process for informing and educating the City Council and ratepayers on the rate study process. This task includes our attendance and participation in up to six (6) review meetings with City staff. We propose review meetings be conducted remotely, when possible, to minimize budget. Two (2) meetings with the City Council, including development of presentation materials will be scheduled. We recommend these meetings be conducted in a workshop setting to allow for open dialogue and discussion. Deliverables • Six (6) staff-level review meetings and two (2) Council presentations. • Development of presentation materials. 7525 166th Ave NE, Ste D-215, Redmond, WA 98052 P: 425.867.1802 5 | City of Rexburg Utility Rate Study fcsgroup.com | bowman.com TASK 8 | DOCUMENTATION A written draft and final report documenting the rate study process, methodology, key assumptions, results, and recommendations will be provided. The electronic model will provide the technical exhibits. Deliverables • An electronic copy of the draft and final reports. • Copy of the Excel based rate model for each utility. • Copy of the capitalization fee model for the water and sewer utility. SCHEDULE Completion of the analysis is based on a variety of issues. These issues include timeliness of receipt of requested data/information; quality of data; ability to schedule meetings in a timely manner; and the ability of the City to provide policy direction for the study to move forward at key study milestones. A specific project schedule that meets the City’s needs will be developed during the initial project meeting. The City has expressed the need to have rate recommendations in sufficient time for rate implementation effective FY2026 (October 1, 2025).