HomeMy WebLinkAboutDocumentation_Regular_Tab 10-J_2/12/1998 t
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½11age o Tequesta Memo
To: Thomas G. Bradford, Village Manager ,�
From: Thomas C. Hall, Water System Manager ,.)
Date: February 6, 1998
Subject: Water System Cost Evaluation; Agenda Item
Please find attached, an Engineering Services Proposal from our
Consulting Engineers, Reese, 'Macon & Associates, Inc. relative to
the above.
The purpose of this Evaluation is to provide the Village
technical assistance pursuant to the possible acquisition of the
water system. The Evaluation will consist of two components,
engineering and economic. Our system will be evaluated by using
three methods : (1) Replacement cost new, less depreciation; (2)
Sales comparison and (3) Income method.
Although this project is not budgeted, funding may be provided by
the Water Enterprise Fund, Retained Earnings Account, which has a
fund balance of $6, 311, 073 . 00 as of September 30, 1997.
Please place this item on the Village Council Agenda for the
February 12, 1998 Meeting, for discussion and review. Mr. Reese
will be present at that meeting to answer any questions regarding
this matter.
TCH/mk
Attachs.
Hall'eMemorandum.Agendaitem.2.6.98
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Reese,Macon and Associates,Inc.
February 4, 1998
Village of Tequesta
P.Q. Box 3474
Tequesta,FL 33469-0474
ATTN: Thomas C.Hall, Water System Manager RE: Water System Cost Evaluation
Dear Mr. Hall:
We are pleased to submit this proposal for engineering services in connection with the above
referenced project. REESE,MACON and ASSOCIATES, INC., 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 Engineer understands this project shall entail the provision of technical assistance to the
Village pursuant to the possible acquisition of their water system. The project will have two
fundamental components: (1)an engineering component which will generate basic data, technical
opinions and costs of the facilities and(2)an economic component which will evaluate rate and
other financial or cost matters. To a large extent the engineering component will provide the
input for the economic component. The Engineer will perform the work associated with the
engineering component and sub-contract the economic component to Public Resource
Management Group Inc. (PRMG). Note that this project will be performed under an accelerated
time frame. Items identified within the Scope to be performed by the Village will need to be done
expeditiously and submitted to the Engineer in a usable format in order to avoid delays in
completing this project. It is recommended that the Village commence identification of system
assets(equipment, property, and easements)which would be transferred at this time.
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The system shall be evaluated by three(3)methods;i)replacement cost new less depreciation
• (RCNLD), ii)sales comparison, and iii) income approach. Based upon the subjective weighing
of the three methods above, an estimated system value range will be determined. The Engineer
will also assist the Village in the identification of potential engineering and financial impacts and
strategic issues as they relate to the potential acquisition. The following specific scope of work
for each phase as set forth below shall be performed by the Engineer:
6415 Lake Worth Road • Suite 307 • Lake Worth,FL 33463-2907
Tekphone(561)433-3226 • Facahnlk(561)433-8011
e-mall • rina(a is.netcom.com
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The following items are excluded from the Scope and costs. Note that these items could be
performed by the Engineer upon written approval from the Client, subject to adjustment in cost
and time.
• Attendance at Public Hearings
• Development of a Purchase/Sales Agreement
• Negotiations with the Potential Purchaser
• Environmental Audit
• Confirmation of Easements
• Appraisal of water system properties, equipment, and easements(to be included at a later
date).
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Task 1_
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A system evaluation using the RCNLD method will be conducted which recognizes the net value
of replacing the utility system at current cost. The following specific tasks will be performed.
a. Collect and review the layout and design(record drawings)of all water main, raw water
main system,well sites/equipment,pumping and storage facilities and water treatment
facilities.
b. Examine selected excavated and removed pipe sections from the raw water main and
water main system. The Engineer will identify locations for the excavations_ The Village
will perform the necessary field work. It is anticipated that a minimum of eight(8) such
excavations and removals will be required.
c. Inspect the water treatment and well facilities to determine condition. Develop and report
an opinion as to costs and other issues relevant to their condition and anticipated life
expectancy.
d. Secure and review the Consumptive Use Permit, FDEP Operating Permits, and raw
water/fuush water analyses performed over the past twelve months. Comment on any
concerns or apparent short-comings which could impact proper abandonment,if any.
e. Perform drawdown pump tests on each well,if possible, and compute specific capacity.
Secure well completion reports and comment on the well construction.
f. Review fire department hydrant test results performed within the last six(6)months and
flow selected hydrants, if required to resolve the systems fire demand capability. Note that
hydrants selected to be flowed will be done by the Village.
g. Review all relevant permits for status and compliance.
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h. Based upon plans and physical observations, estimate the replacement cost new less
depreciation(RCNLD)of the water distribution system, raw water main system, wells and
water treatment facility. The Engineer will utilize the remaining useful life as set forth in
PSC documentation,but will identify any observed short-comings or problems.
i_ Attend a total of two(2)meetings with the Village to discuss our findings and analysis.
The Engineer has assumed that accurate record information is available-
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Task 2
--- In this task the estimated value of the system is determined based upon the income
approach. The income approach stipulates that the value of the utility is based upon the
expectation of future revenue. In essence,this approach considers customer value_
a. Review compiled financial and utility operational data for the water system in order to
assist the Village staff in their financial and utility due diligence review.. The purpose of
this task is to perform a discovery in order to identify financial and operation issues
regarding the utility.
b. Prepare financial analyses regarding the water system as it relates to the income approach
method. The financial evaluation will include_ i)performance of the review of the financial
operations and identification the net benefits which could be received by a third party in
the determination of an acquisition price range; ii)performance of certain debt capacity
analyses relative to the potential bonding capability of the adjusted net revenues of the
water system; iii)development of customer impact analyses on the water system
customers for full disclosure purposes;and iv)other financial analyses that may arise
during the course of the investigation.
c. Establish a value for the utility based upon future income generation.
Task 3
This task shall include the evaluation of other similar utility transactions to determine a
comparative acquisition price range. The following specific tasks will be performed.
a. Research and evaluate the acquisition transaction characteristics of several similar utilities
for use in the Sales Comparison Approach.
b. Analyze the differences between other utilities and the Village of'1'equesta system as it
relates to value impact and develop an estimated system value based upon the Sales
Comparison Approach.
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Task 4 •
This task summarizes our findings_ The following specific tasks will be performed.
a. Reconcile the fmdings from the three(3)methods as discussed above to conclude a final
system value range. Insummarize
addition,id g identify and summa ze strategic financial and engineering
issues relative to the potential transaction.
b. Compile and complete a summary(results oriented)report incorporating the foregoing
analyses and conclusions. The report shall include system maps and tables which identify
the assumed age, condition and value assigned to various assets, their remaining useful
_. . lives and the amount to be received from the total appraised value when assets are sold or
otherwise disposed of The map consists of existing Village CADD base maps_
c. Attend a total of two(2)meetings with the Village to discuss/present our findings and
analyses.
The above scope is predicated on the assumption that the Client shall furnish, at no cost to the
Engineer, all available pertinent information including previous reports, plans, specifications,
permits and other data relevant to the performance of the above services for the project.. In
addition, the Client shall designate,in writing, a person to act as the representative for services
performed under this agreement.
The following specific information and/or items shall be furnished at no cost to the Engineer:
1. Surveys:topographic, property, boundary,right-of way, permanent reference monuments,
permanent control points.
2. Appropriate professional interpretations.
3. Data prepared by or services rendered by others such as subsurface explorations laboratory
tests and inspections of samples.
4. Title search and abstract of property.
5_ All necessary existing records including,but not limited to, drawings, maps, permits, etc.
required for this analysis.
6. Utility personnel, equipment and material as necessary to perform field investigations_
7. Historical and current financial information regarding non-utility costs and transfers
included in the rates for service.
8. Detailed information regarding utility operations to evaluate common costs allocable to a
third party(acquiring utility).
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9. Detailed information on reserved capacity through developer agreements,excess capacity of
system and relationships to water treatment plant capacity.
10 Updated statistical information regarding customers served,water sales, water produced
and water purchased from what was included in Bond Feasibility Report.
11_ Updated financial information regarding revenues received, expenditures incurred, and
funding of capital projects necessary to effectively perform the economic analysis.
TIME OF PERFORMANCE
The engineering and economic phase of the Scope of Services(Tasks 1 -4)will be completed
within forty(40)calendar days after receipt of an executed authorization except for delays beyond
the control of the Engineer. The Engineer acknowledges that the time frame for this project is
critical and will attempt to complete the project under an accelerated program in advance of the
above time frame stated.
FEES
The Engineer shall be paid a lump sum fee for Tasks 1 -4 of twenty nine thousand seven hundred
fifty dollars($29,750.00).
If services are required in the performance of the above scope,beyond those normally provided by
the Engineer, which must be sublet,the Engineer shall order the work after obtaining the written
authorization of the Client. The subcontractor shall bill the work directly to the Client. Tf the
Engineer is requested to subcontract the work directly,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
bidding process and,therefore,makes no guarantee of the accuracy of the estimate when
compared to previous estimates or actual bids.
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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.
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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.
Very truly yours,
REESE, MACON and.ASSOCIATES, INC.
James T. Macon, P.E.
Vice President
Accepted By:
VILLAGE OF TEQUESTA
BY:
Thomas G. Bradford, Village Manager
DATE:
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