HomeMy WebLinkAboutDocumentation_Special Meeting_Tab 04A_8/22/2002F r
Ste+ s�
9
NcoNMEMORANDUM
TO: Village Council
FROM: Michael R. Couzzo, Jr., Village Manager].
DATE: August 19, 2002
SUBJECT: State of the Utility Study
I am attaching a proposal from our utility engineers (Reese
Macon & Associates), and a utility rate analyst (Public Resource
Management Group) to conduct a state of the utility
study/report.
As discussed the Village's water utility is an essential component
of the services provided to residents, and surrounding
communities. Due to the number of complex issues facing our
utility, I feel it prudent to authorize this review as soon as possible.
This analysis will provide important information in the
development of a strategic plan for the preservation and
sustainability of the Tequesta Water Utility.
Your attention to this matter is appreciated. If I can provide any
additional information please advise.
E/Kim/Village Council/Utility Study
RESOLUTION NO. 77-01/02
A RESOLUTION OF THE VILLAGE COUNCIL OF THE
VILLAGE OF TEQUESTA, PALM BEACH COUNTY,
FLORIDA, ACCEPTING A PROPOSAL FOR ENGINEERING
SERVICES FROM REESE, MACON AND ASSOCIATES, INC.
FOR A COMPREHENSIVE FINANCIAL PROJECTION OF
THE WATER UTILITY SYSTEM IN THE AMOUNT OF
$29,000, WITH FUNDS BEING APPROPRIATED FROM FY
2002/2003 WATER UTILITY FUND #401, AND AUTHORIZING
THE VILLAGE MANAGER TO EXECUTE THE APPLICABLE
DOCUMENTS ON BEHALF OF THE VILLAGE.
NOW, THEREFORE, BE IT RESOLVED BY THE VILLAGE
COUNCIL OF THE VILLAGE OF TEQUESTA, PALM BEACH
COUNTY, FLORIDA, AS FOLLOWS:
Section 1: The Proposal for Engineering Services from Reese, Macon and
Associates, Inc. for a Comprehensive Financial Projection of the Water Utility
System is attached hereto as Exhibit "A" and incorporated by reference as part
of the Resolution is hereby approved.
THE FOREGOING RESOLUTION WAS OFFERED BY Councilmember
, who moved its adoption. The motion was seconded by
Councilmember , and upon being put to vote, the vote
was as follows:
FOR ADOPTION AGAINST ADOPTION
The Mayor thereupon declared the Resolution duly passed this 22" d day of
August, A.D., 2002.
Geraldine A. Genco, Mayor
ATTEST:
Mary Wolcott, Village Clerk
Reese, Macon and Associates, Inc.
July 3, 2002
Village of Tequesta
250 Tegtesta Drive, Suite 300
Tequesta, FL 33469
ATTN: Michael Couzzo, Village Manager
RE: Engineering Services
Gentlemen:
We arc pleased to submit this proposal for engineering services in connection with a financial
evaluation of the Water Utility Department. RE -ESE, MACON and ASSOCIATES, 1W.,
hereinafter referred to as the Engineer, shall perform the services as documented below for the
village of'Tequesta, hereinafter referred to as the Client.
SCOPE
The scope of service; to be performed will include the tasks set forth below. It is noted and
acknowledged that the Engineer will subcontract a significant portion of the work to PRMG, Inc.
In general, the Engineer will supply direction and input to PRMG, Inc., related to capital needs,
costs and system extensions. PRMG, Inc., will use this information in combination with other data
secured from the Village to prepare the evaluation. The following specific tasks will be performed:
Task I - Data Ac yuisitron and Review: Based on information compiled by the Village, the Engineer
will request and evaluate specific information as it relates to the System necessary to complete the
financial forecast. Information to be requested from the Village will include, but not be limited to:
1) Customer statistical information as it relates to the service area needs by franchise
or specific service area component;
11) Bill frequency information required to develop a detailed revenue model for rate
estimation purposes;
111) Information regarding the operating expenses of the System;
IV) Information regarding the funds availability by type of fund;
V) Information regarding potential changes in service area heeds due to the expiration
of franchise agreement as well as extension of service to other areas;
VI) Capital improvement program as estimated by both the: Village and the Village's
consulting engineers; and
VII) Other relevant information (e.g. consumer price index for price index rate
adjustments, etc.) as deemed necessary by the Engineer to prepare the financial
evaluation of the System.
6415 Lake Worth Road • Suite 307 • lake Worth, FL. 33463-2907
Telephone (561) 433-'1226 a Facsimile (561) 433-8011
TO'd VOV=TT Z0-GT-6nV
Michael Couzzo, Village Manager
Re: Engineering Services
Page 2
The Engineer will prepare a date request for response by both the Village and its consulting
engineers to initiate the data compilation efforts and will also attend a kick-off/data review meeting
with both parties to evaluate trends of the System as well as review the compiled data necessary for
project completion.
Task 2 — Customer Statistical and Revenue Forecast: Based on a up -to -five-year historical trend
of customer statistics by primary service area and/or franchise, the Engineer will prepare a five-year
customer forecast of the System. The Test Year for the forecast will be the fiscal year 2003 and the
forecast period will consist of the fiscal years 2003 through 2008 time frame. The Engineer will
work with the Village and its consulting engineers to identify potential growth the existing service
area, changes in the service area due to incremental utility extensions required of the System, as well
as reduction in service area due the expiration of franchise and other service agreements that may
occur during the forecast period as reflected in the report. The Engineer will conduct a
corresponding evaluation of the utility rate revenues from existing rates based on the customer
forecast delineated above, recognizing increases rates due to the application of the annual price
index rate adjustment as allowed by utility ordinance. The customer and corresponding revenue
forecast will serve as the basis for the review of net margins and availability in the overall evaluation
of the System.
Task 3 — Revenue Requirement Forecast: A five-year forecast of the operating revenues of the
System will be prepared recognizing current operating conditions and anticipated changes in such
conditions due to changes in the service area, expiration of the bulk water contract with the Town
of Jupiter, and changes in service area growth which may affect the variable related expenses
associated with providing service. The Engineer will work with the Village to identify changes in
utility operations that may result due to changes in service demographics as well as any revisions
to the facilities which are currently in place due to anticipated capital improvement program for the
Village (e.g. — construction of a additional reverse osmosis water treatment train). Projections will
be based on recent historical trends and changes in cost of providing service, estimates provided by
the Village and its consulting engineers as it relates to ongoing operations, and the recognition of
inflationary allowances for the general cost of operations. The operating expense analysis will be
performed to identify the net revenue margins to the utility that are critical in meeting the debt
compliance requirements of the utility as well as identification of fund availability for repayment
of debt and capital funding. A capital funding analysis will be prepared based on the current capital
plan of the system and the recognition of annual funding requirements for renewal, replacements,
upgrades and embetterments of the System. The Village will provide the Engineer with anticipated
capital expenditure plan of the System and the Engineer will work with staff to prepare a capital
funding analysis. The funding analysis will recognize the use of available funds, the receipt of
additional funds due to the transition of assets to other utilities as result of the franchise agreement
expiration provisions, outside senior lien and junior lien bond financing, and other sources of funds.
A cash flow analysis by individual funds will be prepared to identify fund availability and use,
interest in earnings accruing to the benefit of the System, and for financial target analysis.
-2-
Michael Couzzo, Village Manager
Re: Engineering Services
Page 3
Task 4 — Financial Target Analysis: The Engineer will work with Village staff to determine certain
targets of the System for performance measurement and planning considerations. The financial
targets will focus primarily on the income (revenue and expense) provisions of the operations and
will also consider other financial targets as it relates to the financial position of the System. The
Engineer will prepare presentation materials detailing historical projected trends of such target for
use by the Village.
Task S — Report Preparation and Presentation: The Engineer will prepare a results oriented report
dealing with the financial forecast of the System, which encompasses the financial plan and CIP
funding analysis. The report will include delineation of the assumptions and analysis used to
prepare the financial forecast, the available or identified funding sources that meet the overall capital
improvement program needs of the System, and any other aspects of the System (i.e., action plan
items based on noted trends and the attainment of certain financial targets for the System). This task
will also include a presentation of financial ratios and targets. To illustrate the overall financial
position of the System in relation to the funding needs, especially as it pertains to the capital
improvement program requirements.
Task 6 — Meetings: During the course of this project, it is anticipated that the Engineer will attend
a total of four (4) meetings with the Village. The meetings in this scope of services include the
following:
Description Meetings
Kick-Off/Data Review 1
Development and Review of Financial Forecast 2
Presentation of Final Report to Council 1
Total Meetings 4
ADDITIONAL SERVICES
During the course of this engagement, the Village performance of additional services on behalf
of the System. Although no additional services are anticipated at this time, any additional
services will be performed upon written authorization by the Village and as mutually agreed
between the two parties. Examples of additional services that could be performed may include,
but not be limited to, the following activities.
1. Attendance of additional meetings to what is contemplated in the scope of services.
2. Performance of a detailed utility rate study to design proposed rates to meet the financial
requirements of the System.
-3-
Michael Couzzo, Village Manager
Re: Engineering Services
Page 4
3. Development of a project feasibility report associated with any financing activities (debt
service issuance) necessary to fund the identified capital improvement program.
4. Negotiations with third parties associated with franchise agreements, provisions for
services, or other related activities.
5. Performance of substantial changes in the financial forecast due to the receipt of inaccurate
information as provided by the Village.
6. Performance of any anticipated update to the overall financial forecast after substantial
completion of such forecast at the request of the Village, including the preparation of
additional financial forecast scenarios.
TIME OF PERFORMANCE
The Engineer will commence work within seventy-five (75) days of receipt of an executed
authorization and receipt of the information requested to perform the evaluation.
FEES
For Tasks 1-6 the Engineer shall be paid a lump sum fee of twenty-nine thousand dollars
($29,000).
If services are required in the performance of the above scope, beyond those normally provided
by the Engineer, or as described above from PRMG, Inc., which must be sublet, the Engineer
shall order the work after obtaining the written authorization of the Client. If the Engineer is
requested to subcontract other work, a 10% handling charge will be added to the subcontractors
invoice.
Invoices for services rendered are issued on a monthly basis and are due within thirty (30) days
of the invoice date. Interest at a compound rate of one and one-half percent per month shall be
charged to any past due statements. Interest shall be computed on past due statements from the
date of the invoice.
COST ESTIMATES
Construction cost estimates are developed from knowledge of market conditions and based on
the experience of the Engineer. However, the Engineer exercises no control over the competitive
-4-
Michael Couzzo, Village Manager
Re: Engineering Services
Page 5
bidding process and, therefore, makes no guarantee of the accuracy of the estimate when
compared to previous estimates or actual bids.
TERMINATION
This agreement may be terminated by either party by giving thirty (30) days written notice. The
Engineer shall be paid for all services rendered prior to the termination date.
ACCEPTANCE
Acceptance of this proposal may be indicated by executing this document in the space provided
below. This contract shall be considered void if not executed within thirty (30) days from the
above date. Upon execution of this agreement the Client shall return one copy to the Engineer.
Accepted By:
VILLAGE OF TEQUESTA
DATE:
Very truly yours,
REESE, MACON and ASSOCIATES, INC.
William D. Reese, P.E.
-5-
1�Public Resources Management Group, Juic.
PRMG#1056-02
Mr. Michael R. Couzzo
Village Manager
Village of Tequesta
Post Office Box 3273
Tequesta, FL 33469-0273
Subject: Water Utility System Issues
Dear Mike:
As we discussed over the past several months, the composition of the Village of Tequesta's (the
"Village") water system has changed or will be changing significantly in the near future. These
changes are direct result of the following events:
The franchised service area for the Town of Jupiter served by the Village is set to expire
on July 3, 2004. The Town of Jupiter has already provided notice to the Village of its
intension to purchase the assets from the Village and begin serving this franchise area as
the Town's retail customer base. The change in ownership, including their receipt of
proceeds from the transfer could affect the operations of the utility system.
2. Much discussion has occurred with respect to the Jupiter -Martin Association attempting
to sell its utility system to either the Town of Jupiter Island or the Village. Although
discussions are continuing with regard to this transaction, any material change in
revenues derived from the sale of bulk water to the association or any funds received
and/or spent by the Village relative to the transaction, may have an effect on the overall
operation of the utility system.
3. The reverse osmosis water treatment plant was completed during the Fiscal Year 2000
and has now been in operation for several years. Issues regarding the possibility of
expanding or adding the reverse osmosis (R.O.) trains to meet future service needs
coupled with the eventual release of the bulk water purchases from the Town of Jupiter
will have an effect on the operations of the utility system.
4. The evaluation of the potential for utility plant expansion/extension to offset the revenue
loss due to expiration of franchise agreements or other service area transactions needs to
be evaluated.
1056-02TouzzoUrldoc
Mr. Michael R. Couzzo
Village of Tequesta
April 25, 2002
Page 2
5. A comprehensive financial projection of the system has not been performed for
approximately four years. It is always prudent to evaluate trends and utility margins,
financial performance, and to identify the potential effects of the above referenced
transactions to the overall utility system. Additionally, the increases due to inflationary
allowances, potential increases in bulk water rates from the Town of Jupiter, and other
factors that may have an effect on the overall utility operations.
In summary, it may be prudent for the Village to undertake a "state of the utility" review to
identify possible business impacts to the utility over the next several years. As you are
aware, the key to financial efficiency is to provide adequate planning identifying any trends
in meeting the overall financial and operating condition of the utility and to try to modify
policies and/or practices to meet such changes in operations. This letter is intended to
express an overall concern that the utility is, or will be, experiencing changes in the near
future and our belief that a clear understanding of the potential impact of such changes needs
to be estimated and subsequently considered by both the Village council and you. If you
would like to discuss these concerns further or if you have additional issues that we may have
missed, please do not hesitate to give us a call.
Very truly yours,
Public Resources Management Group, Inc.
Robert J. Ori
Reese, Macon and Associates, Inc.
CWilli'arn D. -eese, P.E.
1056-02\CouzzoUrldoc