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Res 2767 4/7/1981RESOLUTION NO. P/1 / 7 RESOLUTION AUTHORIZING THE CITY MANAGER TO EXECUTE A CONTRACT WITH JOE M. NALL & ASSOCIATES, INC. , TO PROVIDE A WATER AND SEWER RATE STUDY AND RELATED FISCAL PLANNING ACTIVITIES-PHASE II, JMN JOB NO. 09-80-WC, CITY OF WICHITA FALLS, TEXAS. BE IT RESOLVED BY THE BOARD OF ALDERMEN OF THE CITY OF WICHITA FALLS, TEXAS, THAT: That certain contract, a copy of which is attached hereto, between the City of Wichita Falls and Joe M. Nall & Associates, Inc. , wherein Joe M. Nall & Associates, Inc. , agrees to provide assistance in setting fair and equable rates for water and sewer services within the City and to provide a developed, computerized fiscal planning program to be used to forecast future funding requirements and rate adjustments is hereby approved, and the City Manager is authorized to execute the same for the City of Wichita Falls. Such contract shall not exceed the sum of $33, 300. PASSED AND APPROVED this the 7th day of April, 1981. A Y 0 R ATTEST: City Clerk STATE OF TEXAS COUNTY OF WICHITA This contract made and entered into this the 7th day of April, 1981, by and between the City of Wichita Falls, Texas, hereinafter called "City", and Joe M. Nall & Associates, Inc., hereinafter called "Nall", WITNESSETH: Whereas, Nall has made a proposal to City for a water and sewer rate study and related fiscal planning activities Phase II, JMN Job No 09-80-WC, and City has accepted this proposal. Now, therefore, for and in consideration of the mutual covenants therein contained, the parties hereto do hereby contract to the terms of such proposal, and that they will p erform the covenants and agreements set out in such ro osal,P P a copy of which is attached hereto and incorporated herein by reference. It is further agreed that the total consideration to be paid by City to Nall under this contract shall not exceed the sum of $33,300, unless a greater amount is agreed to by City in writing. IN WITNESS WHEREOF, the parties hereto have caused this contract to be executed as of the day and year set out above. THE CITY OF WICHITA FALLS, TEXAS BY: Stuart A. Bach City Manager ATTEST: City Clerk Joe M. Nall & Associates, Inc. BY: President ATTEST: Secretary PROPOSED PROGRAM FOR WATER AND SEWER RATE STUDY AND RELATED FISCAL PLANNING ACTIVITIES - PHASE II JMN JOB NO. 09-80-WC CITY OF WICHITA FALLS, TEXAS March 24, 1981 JOE M. NALL & ASSOCIATES, INC. Consulting Engineers and Utility Rate Analyst. 2920 Lennon Avenue East Dallas, Texas 75204 AC 214/522-1121 CONTENTS Page Purpose of Study and Results 1 Flow Diagram 2 Cost of Furnishing Water and Sewer Services 3 Approach to Rate Analysis 3-5 Participation of Cities 6 Computer Programs 6 Study Cost 7 Work Schedule 8 Suggested Work Schedule 9 Experience of Joe M. Nall and Associates and Client References8,10 Experience of Personnel 10 Estimate of Consultants Cost 11 Purpose of Study and Results The purpose of the study is to determine the cost of furnishing treated water and sanitary sewer services to the various customers of the City based on a test period of 1981. Any required support of the results of the study in in- formal or formal proceedings before the City of Wichita Falls, Texas, will be provided. The study will result in the determination of 1) Whether water and sewer rate adjustments will be required during 1981, and, if so, furnishing the suggested rate schedules necessary to ac- complish the change, 2) Whether other services provided require adjustments in their charges as currently applied, and 3) Whether water and sewer rate adjustments are necessary to meet the cost of service for the projected year 1982, and, if so, the suggested rates that have been block analyzed to document the revenue to be produced by each customer class. This proposal is based on City approaching the work in a manner which will result in expanding City expertise. The Flow Diagram on the following page gen- erally describes the work necessary to carry out the study. City personnel would do some of the work in the data collection phase, would participate in the evalua- tion phase, would provide clerical assistance, and would do most of the writing for the training manual on fiscal planning procedure. Because a member of the consultant's staff has already developed a com- puterized fiscal planning program for a large city's water and sewer utility, the consultant anticipates making the program adaptable to the need of the City of Wichita Falls, Texas, in this assignment. 1 JOE M. NAZI & •ASSOCIATES, INC. C 0 T m "3 C •0 N E E E v o c U r0 N L i-- r E N in 1 c rn 4- N O a, 0 7 4-) O_ 3 C +-) 00 0 0 4- N U O > 70) 4-o CD "0 U > i L O C Q, L CL L 0 0 -0 N CI- 0 01 4, 0 r0 Q N 0' W 4- .4--r C a, C7 0r-- 0 -C al 4-) Q 7••- N r0 C C N4-, ML Q, CD 0 0.10 0 0) E L 4-, v 0, O L' O r0 to N L U •.- J 7 •r- VI +-) 7 4- N -p CT r0 >,-0 4-. C N r- C O r0 L CN r0 •0 F---r(0 W 1--- Q Q, CC U en C C ..-- W N O 0, O > 3 r-v W v, r0 C c N C 7 I 7 C7 d 4- 1 4- L Z 0J Q 17 fX 1 W I-- ea, 3 r v+ rn N r0 a, C rn L C L N a, b.--- 7 r0 a rn to Q, O L X C N C C OI C U N Q) 7 N 7 C C C C o O 0 +-, O O, X Q r C U C N a-• C V 0) CS U L L N C 4' C a, U ro •0 0, 0- E r0 o r0 i CL r0 0.r- 0, C C 4-• L 0. U •.- 0- 0, Q) 0.0 L 4-, rn 7 F_ 1 C L CT 0 0 C 4-, C C.)1 3 Cr) 0 0, a., 4-.r V r- L 0 0 C r0 r0 U rn •.- y 4, ea -p MI E 0- 1 r0 C L r0 0 a, al 0. O a, L r 17 MI ea v E 4-' Q, 0, 0 .— "0 O 7 C t0 C CL C Q r0 c L rn r0 Vf •r- 0 b S- 0 0, C 7 01 L 0 0. O C r0 4-' y 0 N 0, 0, 0- r0 0 4-+ L 0 0, 0 Q,Cr) IA 0. 0 7 03 u 0 2 Cost of Furnishing Water and Sewer Services A minimum level for determining charge:, is a must undertaking for the City in their rate fixing duty. The City normally would use any reasonable basis for fixing rates as may be determined by the council to be appropriate under the cir- cumstances provided, however, the rate fixed in the charge for furnishing water and sewerage treatment must not produce revenues that are less than the amount required to meet the operating expenses and bond coverage requirements of the out- standing debt. Revenue requirements of the Water and Sewer Utilities Fund must be adequate to meet the operating needs of the department, including those regularly recurring capital outlays, must provide funds for retirement of existing debt, and provide coverage in earnings adequate to support the issuance of future revenue bonds. The study proposed here is consistent with this purpose. Approach to Rate Analysis Joe M. Nall and Associates, Inc. approaches a water and sewer rate analysis as an engineering and accounting study and has developed a number of useful tech- niques. Our data management staff supports the study's activities and expedites the analysis of a large amount of data concerning plant investment, revenues, ex- penses, capital costs and rate ,.Lrurture'.. The combined water/sewer utility property, operation, engineering, customer accounting, and other records are basic sources from which the data utilized in our cost of service study is extracted. The costs that are distributed to the various service classes will be the costs used in determining the utility's overall earnings position. Such cost will he adjusted to present normal operat- ing conditions as accurately as possible. 3 Any abnormalities will be distributed to the various classes of service in the proper proportions. It should be recognized that our results are not absolute, but indicate the relative earnings position of the different rate classes. The costs that we distribute to the various classes of service will be directly related to the utility's overall earnings position rather than un- adjusted costs. We first arrange facilities costs according to functions (production, treatment, transmission and distribution) for our convenient handling of the data. Then, we divide costs within the function to recognize non-utilization of certain plant within the function by one or more customer groups. General and administrative costs are related to specific groups of costs and then al- located as the other costs within the function. Operating expense, maintenance expense, and carrying costs are spread among the functions. Then, we must determine the demands of the various rate classes and their interrelationship with the utility's total system demand. Time restraints will dictate that our approach be that of estimating the demands based on volume of use by rate class. In our derivation we anticipate using estimated load factors obtained in previous load study estimates from Wichita Falls. Informed judgements are essential when determining the City's financial need objective for water and sewer operations. The City 's knowledge and data input is essential to our conducting a comprehensive study of service rates, and this proposal contemplates doing so. One important objective of this project is to determine the water utilities department's present fiscal status. The ability of the department to meet its near term financial obligations will be determined. If the present service rates produce an adequate cash flow now, then how long will they do so? If an adjustment must be made to rates, the date that new rates must become effective must be set. 4 Meeting obligations as they mature is not the only objective of this study or any cost of service project. To be truly successful , the study must include a financial plan covering several years. The Cities will need to be able to judge the effect that changes to its financial plans can have upon the department's fiscal status. Therefore, a plan involving income, expenses, capi- tal outlay, bond issues and rate adjustments is needed. Such plans can be made manually, and the first one probably will be manual . But with all the varia- tions that can arise - changes in interest rates, inflation, capital plans and many others - a computer program will be most useful , if not essential . We believe that City personnel should know how to use the program and interpret the results. Besides being useful in the management of the department's cash flows, the financial plan can aid in projecting debt service coverage. It is possible for the department to have adequate cash to meet all obligations, including debt service, and still be in the position of needing a rate adjustment because bond indenture requirements for coverage are not being met. Good financial planning can forecast such an event in time for actions which will lessen its effects to be taken. Another important objective of this project will be to devise sewer rates which will meet the user charges requirements of P.L. 92-500. The City, in accepting federal grants through the Environmenldl Protection Agency (E.P.A. ) is bound to set user charges that will recover at least operating and mainten- ance expenses (including replacements) from users in proportion to the volume and strength of wastewater each discharges into the wastewater system which has been financed through the grants. Participation of City City employees will be used along with the consultant as a steering committee on the project. Their first duty will be to add details to the work plan by making assignments and setting time goals for completing the assign- ments and to designate times for committee reviews. The committee will meet for reviews at the designated times to discuss the progress to date, adjust schedules, assign additional persons to tasks if needed. These meetings are intended to help all members to understand the overall progress and direction of the project. Committee members from the City may expect to have considerable impact on the objectives of this study. Because they will live with the decisions which is City policy, not those of the consultant) , they will want to have their viewpoints heard and considered. Making these decisions, such as whether tax or revenue bonds will be used to finance construction, the level of cover- age to be maintained, cash balances desired and others will assist the City's members in maintaining and understanding the planning system which will be left with them as one of the products of this study. Computer Programs Computer programs of the consultant are expected to be used for actuarial analyses, for documenting the revenue produced by customer class from recom- mended rates, and for fiscal planning. The programs would be run either on city computer equipment or on a service bureau in!,tallation. The five year fiscal planning computer program can be adapted to the City's need and turned over for future use. 6 Study Cost Joe M. Nall and Associates, Inc. normally operates on an open order basis work of the type outlined in this proposal . Bills are rendered monthly and would cover per diem fees and reimbursement of out-of- pocket expenses. At the present time, the standard per diem rates for the classifications of personnel (engineer, accountant, data manager and secretarial ) who might be utilized for this work range from $100 to $400 per eight hour day. The average daily per diem rates would be approximately $333 per day. Per diem fees are calculated from hourly rates and time worked. In addition to the standard monthly billing for personnel involved, Joe M. Nall and Associates, Inc. would be reimbursed, at cost, for all out-of-pocket expenses. These expenses would include telephone, travel and living expenses while away from home base, postage, reproduction and report production costs. Computer costs are billed at a multiple of those incurred in order to compen- sate Joe M. Nall and Asslciates, Inc. for the costs of developing, modifying and maintaining programs. The approximate number of man-days of Joe M. Nall and Associates, Inc. time recognizes an expected level of participation by City personnel . The amount of Joe M. Nall and Associates, Inc. time required would increase with less extensive participation. Most of the work would he done in the City by a consultant working out of our Dallas office, resulting in out-of-pocket ex- penses of approximately 25% of the per diem fees. The work would be under the City's control at all times and could be ex- tended, modified, or terminated at the City's discretion, subject only to pay- for services rendered to date. Any benefit from completing the study with less input of Joe M. Nall and Associates, Inc. time will accrue to the City, 1 Work Schedule The work schedule on the following page briefly defines the scope of work and outlines the participation of Joe M. Nall and Associates, Inc. Consultants and the City personnel during the study period. If the City dedicate per- sonnel to work on April 1, 1981 , the preliminary report will be ready for owner evaluation by July 1 , 1981, and a final report by August 18, 1981. Much of the project planning and organization effort would be directed toward identifying and evaluating the data bases for expense and investment analyses, determining the analysis procedures to use for each plant function, and identification of City' manpower requirements. The remaining work schedule activities are either discussed elsewhere in this proposal or are considered self-explanatory. Experience of Joe M. Nall and Associates, Inc. Joe M. Nall and Associates, Inc. has considerable experience in conducting Utility Cost of Service Studies. When required, these studies have been sup- ported in formal and informal proceedings before regulatory bodies. 8 1 ; I A.. 1 E 1 1 1 II 4 injimLR. E U r7 w nit, rti B t i a gI N + C 4 664tT fil CO is W Ye it0) r J O) r. 3 to CD W U V) iiI.j C© oW I- A 11 I T.- I 3 n i 1 a C C N E 4- CU O r0 i-O C r- C N +• 7 O r9 cu LL. O O)7 CT r- > 1-' C N >,O C d N O of -C 4--)O C r0 O I ce v) L N N 4--' CL 41:3 0 +-' CU an • r- E d U u x c 7 +' to b to rn C -n Q 3 c v W O O--- r0 U 0) +r r0 O 7 O ea R7 C •'"') d U r0 C L- V)Qr-> tT O O 4--1 r- r0 O) U 4- to -0 Q) 01 1 t1 LL +•' L •.- i C •r- r0 U L N O Q/7 E > N r0 eb W L O -I-r d to (1) N +-r O Q) r- in •.-4-r O 0) C O U u 0) E O U u.. r-- -C) V)N U 7 .a-' L to d CC ^ O) e2) to 4-) Q d W 0 Q GI 7 0) -0 U L O r0 a Cn r C L E r0 U C 7 r- 4-> r-e2) 7 O 4- U Q' C al C Q) r0 0 U L 0 --' r- U U)A to Qi C +- rC CL U) 0 0- Cl U It •r- V)0 U C c .--r 3 to U 0) Q) 4- C •r- X O) -0 C N 4-' C L L 0 •r- O d' Q1 0 N C Q) 4-1 W O -V rir•r- Qr Cl r-0 Q/ Q)4-, r-.- r- 4-C r0 a) u C 4--'SA- 7 E ra E 4-'to -4-' C r0 U_ It 0 >, It) r- C O) i L 7 Qr C 7 •r- 0 7 C ••- r0 7 4-' 0 L L C 7 CL •.- Cl) 0 Q'4-' 0) N U U +' CL 0 4 L 0 -C •U L r0 L) 0) N r0 .--• 00 JC U U.o > C Qr to C rn C r- r0 0) U Cl to 0) Cl- C E a).— L 0 4-' 0 7 0.) N 0 O- .- 7 D 0 4-' +-' Cl U r0 r0 Cl. r- 0) Cl CC UI- UOOQcnO CC L) V) tnliUU r0N0¢ VU V) oa E +-' 0 QJ 7 0) r- CC C) It O It r0 4-) Q)C i r0 C r0 L O! d CD W CC Cl. 0 Li- 9 Listed below are several Municipal client, in Texas for which we have done water and/or sewer rate studies in the last two years. Dallas Customer Cities of: Grand Prairie De Soto Lancaster Carrollton Hutchins Cedar Hill Customer Cities of: Wichita Falls Terrell Coppell The consultant's work in progress and previously performed for the City of Wichita Falls, Texas, isevidence of ability to perform this rate making assignment. Experience of Personnel The organization of Joe M. Nall and Associates, Inc. is task oriented, which permits the establishment of an individual working team for each project. In this way the diversity and depth of their professional experience necessary to carry out particular projects are available in response to the client's needs. The specialized experience of individual consultants representing many years of experience with utility operations is available from the permanent staff of Joe M. Nall and Associates, Inc. For this water and sewer rate study, Joe M. Nall , President, will have the overall responsibility for the project and Philip E. Fox, Senior Examiner, will serve as project director and will be available to provide expert testimony, should such testimony be required. 10 Estimate of Consultants Cost Our proposal contemplates the City will participate with accounting, operating, planning, and engineering personnel on a part-time basis during9 P 9 P99 P 9 the evaluation phase of the study. The number of hours of professional time expected for the assignment is shown as follows: JOB DESCRIPTION HOURS MAN DAYS PERCENT Supervision 64 8 10% Examination 416 52 65 Engineering 80 10 12.5 Data Management 80 10 12.5 644 80 100% The open order basis of work is our normal method of operation and the City's permission with our justification would be needed when certain fee amounts could be exceeded. If the open order basis is accepted, then the minimum of our per diem fees (excluding the travel and other out-of-pocket expenses) of $26,640 could be the fee amount that is not to be exceeded without justification and City approval . The minimum cost for providing the Cost of Service Study is approximately $33,300 at this time, or $1,800 greater than the amount established in July of 1980 for this second Phase of our as- signment. 11