HomeMy WebLinkAboutDocumentation_Regular_Tab 07_08/11/2016 �
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Comprehensive Analysis
Utilities Department
To: Michael Couzzo, Village Manager
From: Sam Heady, Deputy Director of Utilities
Date: 6'30'16
Subject: Stormwater Rate Evaluation
I respectfully present the following Camprehensive Analysis to the Village Manager.
The Village desires to have a Consultant (Kimely Horn) perform a review of our cu�ent
Stormwater Utility rate structure and revenue generation in support of upcoming
capitalrrenewal and replacement projects.
This analysis will include the following:
• Preparation of a financial forecast to evaluate the current near-term fiscal position of the
Utility
� Development of a prospective financing plan to fund the Utilities capitai
improvernent�renewal and replacement progam.
• Determine projected expenditure requirements.
• Make an evaluation of the overall sufficiency of the rate revenues to meet the Village
objective for sustained utility service, assistance in validating customer statistical
infonnation received from Palm Beach County regarding billing of the Utility.
• Restructure the Village's existing Utility rates where appropriate.
Staff recommends approval of the work authorization.
The cost is: $43,250
VILLAGE OF TEQUESTA
ENGINEERING SERViCES WORK AUTHORIZATION
S70RMWATER UTILITY REVENUE SUFFIC�ENCY AND RATE EVALUATION
This Wark Authorization authorizes Kimley-Horn and associates, inc. to perform work set farth
herein and is issued pursuant to The Prafessional Engineering Services Agreement, between
the Village of Tequesta ("Client° or "Village") and Kimley-Horn and Associates, Inc. ("Kimley-
Horn" or "Consultant"), dated May 12, 2016 ("Agreement"). All terms and conditians of said
Agresment are hereby incorporated and made part of this Wark Authoriza#ion.
PROJECT UNDERS7ANDING
The Village desires to have the Consultant perForm a review of their current Stormwater Utility
("Utility") rate structure and revenue generation in support of upcoming capital/renewal and
replacement projects. This analysis will include the following;
+ Preparation of a financial forecast to evaluate the current near-term fiscal position af the
Utility.
• Developmen# of a prospective financing plan to fund the Utifities capital
improvement/renewal and replacement program (the "Program").
• Determine projected expenditure requirements.
� Make an evaluation of the overall sufficiency af the rate revenues to meet the Village
objectives for sustained utility service, assistance in validating customer statistical
information received fram Palm Beach County regarding billing of the Utility.
• Restructure the Village's existing Utility rates where apprapriate.
Based on aur discussions with the Village, this Project will primarily consist of preparing a six-
fisca( year financial farecast (current budget year plus an additional five fiscal years) of the
service needs and expenditures for the Utility, developing a financial management benchmark
analysis as part af a fnancial model to evaluate the financial pasition of the Utility, the
development of the capital funding plan, and determination of the need for future user rate
adjustments (if any) as appropriate in arder to meet #he overaEl financial needs and capital
funding requirements of the Utility
The Consultant shall engage Public Resources Management Group, lnc. (PRMG) as their sub-
cansultant for the perFormance of the financial aspects of this project.
SCOPE
Kimiey-Horn wi[I perform the foilowing services:
Task 1— Data Acquisition and Review: ln arder to perform the evaluation, it will be necessary
to callect existing available infarmation related to the existing rate structure and Utilities capita(
improvementlrenewal and replacement program. This data wi(I be reviewed at the beginning of
the evaluation process in order to complete the financial forecast.
Task 2— Customer Statistical and Svstem Demand Forecast: Based on an up-to-five-year
historical trend of customer statistics, a six-year customer statistical forecast of the Utility will be
prepared. The Test Year for the forecast will be Fiscal Year 2016 and the forecast periad will
consist of the Fiscal Years ending September 3Q, 2017 through 2021 (collectively the Test Year
and the subsequent five-year forecast is referred to as "Forecast Periad"). As part of this task,
the Consultant will alsa review the current customer statistical information and estimated
impervious surface area data received from Palm Beach County regarding the Village's Utility in
order to test the accuracy of the information being pravided to canfirm that existing rates for
service are being applied correctly to the existing custorner base.
Task 3— Develoqment af Revenue Proiections from Existina Rates: This task involves the
deve(opment of projections of the Utility rate revenues for the Forecast Period from existing
rates recognizing: i) the results of the customer statistical farecast perFormed in Task 2; and ii)
the Village's existing rates for service. Additionally, this task will involve a rate-revenue
"reasonableness" test (reconcile model results to reported amounts on Village financial
statements) ta determine if the revenue model and billing determinants are reasonable relative
to the modeling process. The Consultant will prepare a forecast of the Utility rate revenues from
existing rates based on the customer forecast delineated above as currentfy allowed by Village
ordinance. The customer and carresponding revenue forecast will serve as the basis for the
review of net margins and availabiiity of funds associated with the overall �scal evaluation of the
Utility.
Task 4— Development of Operatinq Expense Proiections: This task involves the
development of the estimated amount of operating expenses required to be funded from Utility
rates for the Forecast Period. The Consuftant wi(I work with the Village to identify changes in
uti(ity operations that may result due to the implementation of the anticipated Program for the
Village, or as a result of changes in regulations or operating practices by the Village which may
affect #he operatians of the Utility. The Consultant projections wil} be based on recent historical
trends and changes in cost of providing service, estimates provided by the Village as it relates
to ongoing operations, and the recognition of inflationary allowances for the general cost of
operations. Finally, o#her operating expenses such as inter-fund transfers, administrative
allocations, contingency reserves, insurance needs, and other expenses will be evaluated to
ensure fhat the full recavery of casts are reflected in the rate sufficiency analysis.
Task 5— Practram Cost Development: The Consultant will work with the Viilage to identify
praposed capital improvement and renewal/replacement projects within the Village during the
Forecast Period, and will develop conceptual opinions af probable cost #o be used in the
financiai evaluation.
Task 6— Capitai Improvement and Fundinct Anatvsis: This task involves a review of the
Vi(lage's current budget and subsequent five-year or applicable capital Program requirements
and other engineering planning documents, and the performance of a funding analysis to
identify available sources of funds for financing of the Programs and the estimated impact on
utility rate revenues associated with the capital funding program fior the Forecast Period. This
task will include the deveiopment of the estimated fund balance by individual fund / account and
the development of a flow af funds analysis for liquidity evaluation purposes.
Task 7— Other Revenue Requirement Identification and Manaqement Dashboard: In order
for the Village to meet the financial obligations of the Utility, the Consultant will review the
financial aspects af the Village's utility systems in order to potentially recognize other revenue
requirements or funding requirements that may need ta be allocated or inc(uded in the rate
analysis and in the development of the financial farecast model. This task wifl include
assistance in the devefopment of fiscal palicies in terms of working capital maintenance, the
funding of capitai re-investment for long-term planning needs, the #unding of other departmental
capital or maintenance reserves for items such as vehicles and equipment, and the recognitian
of any other transfer requirements that may be associated with the Utility. As part of this task,
the Consultant will develop a'°management dashboard" to allow for the review of the financial
position of the Utility and the ability to perform sensitivity analyses in order to finalize the
financial forecast. The Consultant will work with the Village to identify any fiscal policiss and
financial performance targets that wili provide guidelines and support for the financial forecast
and revenue sufficiency fiscal policies necessary to address the need for goals related to
financia( performance indicators, such as debt service coverage ratios and reserve fund levels
which the Village may deem necessary.
Task 8— Rate Desican Analvsis: The Consultan# will review the Village's existing Utility rate
structure and recommend changes as necessary in order to align future cost recovery with the
cost of praviding service to the custamers.
Task 9— Rate Comparisons with Neiqhbarinq Utilities: As part of the svaluation of the
su�ciency af rates, the Consultant will prepare a rate camparison of the Village's existing Utility
rates, rate structure and impervious surFace area per unit costs with other neighboring utilities
and illustrate the potential custamer impact on any recommended rate adjustmen# associated
with the development of the financial forecas# and rate evaluation.
Task 10 — Development of Net Revenue Re4uirements, Rate Impact Analvses and Staff
Presentation: Based on the aforementioned tasks, the Consultant will prepare a summary of
the total net revenue requirements of the Utility and the accompanying rate irnpact requirements
for each fiscal year of the Forecast Period. A meeting with Village staff will be held in order #o
present tF�e results of the initia( study findings and observations. Based on the results of the
Village staff meeting, the Consultant will make modifications to the analysis prior to the
presentation of the utility rate and financial evaluation to the Village Council.
Task 11 — Re ort Pre aration and Presentation: The Consultant will prepare a technical
memorandum in support of the evaluation of the sufficiency of rates ta meet the expenditure
requirements of the Utility, which encompasses the financial plan and capital the Program
funding analysis. This task wili also include a presentation af financia! ratios and targets to
illustrate the overall financial position of the Utility in relation to the funding needs, especially as
it pertains to the Program requirements.
Task 12 — Meetings: During the course of this project, it is anticipated that the Consultant will
attend a total of three (3) on-site meetings with the Village and attend three {3) WebEx
(teiecanference} mee#ings to present ongoing results with Village staff.
ADDITiC�NAL SERVICES
Any services not specifically provided for in the above scope, as well as any changes in the
scope requested by the Viflage, will be considered additional services to this Work Authorization
and wil! be perFormed based on subsequent Wark Authorizations approved prior to performance
of the additional services.
INFORMATION AND SERVICES PROVIDED BY THE VILLAGE
Kimley-Horn assumes that all information provided by the Village can be relied upon in the
performance of professional services. The following informatian shal( be provided to Kimley-
Horn and/or the fallowing services will be performed by the Village.
• Customer statistical infarmation required to develop a detailed revenue model for rate
estimation purposes as it relates to the service area needs.
+ Utility financial and billing data.
• Customer usage profiles.
• Stormwater utility rate reso[utions.
� Comprehensive Annual Financial Reparts.
• Current Capital Improvement Program and Renewal / Replacement Program
Information.
• information regarding the operating expenses of the Utility.
* Inforrnation regarding the funds availability by type of fund.
ASSUMPTIONS AND CLARlFICATIONS
The fees stated in this Work Authorization are based on the following assumptions and
clarifications:
1. The Owner will pay for any/all public advertisements and any general public mailings ta
residents if required.
2. Kimley-Horn is not giving advice or making recommendations with regard to municipal
securities or financial products. If such advice or recommendations are needed, the
Client should retain a Municipal Advisor registered with the Securities and Exchange
Commission.
3. The lump sum compensatian as set forth herein is based upon the rate structure
included in the Agreement.
SCHEDULE
Kimley-Horn wil! complete the work set forth herein within 120 days after receipt of an executed
Wark Authorization and Purchase Order, exclusive of delays beyond the contral of the
Consultant.
COMPENSATION
Kimley-Horn will perform the services described in the Scope of Services {Tasks 1 thru 12
above) on a lump sum basis fee in the amount of forty three thousand finro hundred and ffty
dollars ($43,250.00}.
Accepted by {STORMWATER UTILITY REVENUE SUFFICIENCY AND RATE EVALUATION)
Village of Tequesta Kimley-Horn and Assaciates, Inc.
Michael R. Couzzo, Village Manager Kevin Schanen, P, E., Vice President
Da#e: Date: 'L � � L