Report Prepared by: Ken F. Elwin, PE, Director of Public Works
Title
SUBJECT: Approval of a First Amendment to Professional Services Agreement with Hildebrand Consulting, LLC, for a Sewer and Water Rate Study in a not to Exceed Additional Amount of $10,000 for a Total Contract not to Exceed $93,250
REPORT IN BRIEF
Considers approving a First Amendment to Professional Services Agreement with Hildebrand Consulting, LLC, to conduct a Sewer and Water Rate Study.
RECOMMENDATION
City Council - Adopt a motion:
A. Approving a First Amendment Professional Services Agreement with Hildebrand Consulting, LLC, in the additional amount not to exceed $10,000, to prepare a comprehensive sewer and water rate study; and,
B. Authorizing the City Manager to execute the necessary documents.
Body
ALTERNATIVES
1. Approve the agreement, as recommended by staff; or
2. Deny; or
3. Refer to staff for reconsideration of specific items.
AUTHORITY
Charter of the City of Merced, Section 200 et seq.
Services with an estimated value greater than $38,000.00 are made by written contract in accordance with Merced Municipal Code, Title 3 - Revenue and Finance, Chapter 3.04.
CITY COUNCIL PRIORITIES
As provided for in the Fiscal Year 2024/2025 Adopted Budget.
DISCUSSION
The City’s water utility is accounted for as self-supporting enterprise fund, with 100% of its supply sourced from pumped groundwater. Revenue is derived primarily from water service charges and must be adequate to fund the City’s operating and capital programs. The City last revised its water service charges in 2017, with set rates through 2021. The revisions maintained an existing yearly inflation index increase beyond the year 2021 [per Merced Municipal Code sections 18.36.045 & 050]. The City recently transitioned all customers to metered billing.
Residential sewer rates are a flat rate regardless of house size and occupancy. With the installation of water meters on all customer classes, the City desires to evaluate water consumption based sewer rates as a part of the study. Also, commercial sewer discharges are based on water consumption including irrigation usage, driving up commercial billings during the summer. The water consumption-based sewer charges need re-evaluation as part of the study. The City last revised its sewer rates in 2010 with a yearly inflation index increase; however, Council has approved resolutions stating the sewer rates would not increase in January 2022 and January 2023, pending the approval of the Sewer Master Plan and completion of the Sewer Rate Study. The City adopted its latest Sewer (Wastewater Collection System) Master Plan at its February 9, 2023, Council meeting.
The City seeks a rate study and financial plan that addresses how the capital improvement program and operations plan can be financed relative to proposed rates, and how adequate reserves can be achieved consistent with standard American Water Works Association (AWWA) guidelines.
The study includes a review of existing revenues, operating expenses and non-operating revenues (expenses) to determine if these allocations are generally conforming to standards adopted by voters of the State of California with the passage of Proposition 218 in 1996.
The object of the rate study is to produce a 5-year revenue program with incremental adjustments annually, which will meet all requirements of the EPA, and bond coverage tests. The revenue program must reflect a rate structure that is tailored to meet the specific needs of the City. In general, the scope of work shall involve a comprehensive review of the City’s sewer & water enterprise fund’s historical and projected revenues, usage, expenses, reserve policies, billing and collection procedures, rates and charges, current budgets, Sewer & Water Master Plans, future Groundwater Sustainability Plans impacts, Capital Improvement Plans, future growth potential, and any other information deemed pertinent.
First Amendment
At the October 16, 2023, meeting, Council approved the Professional Services Agreement with Hildebrand Consulting, LLC, to conduct the Sewer and Water Rate Study for a not to exceed amount of $83,250. The original contract had a project completion date of July 2024. An amendment is necessitated as there have been delays due to adjustments to staff salaries as a result of the City’s most recent negotiated Memorandum of Understanding with the various employee unions. With the operating budgets largely based on staffing, it was prudent that these new salaries were accounted for in the budget forecast for the respective utilities. Additionally, the City did a long overdue refinement of future water and sewer capital improvement projects spending plans. To account for these delays, as well as contingency for additional potential delays, staff is recommending approval of an amendment not to exceed $10,000.
The City Attorney has prepared and approved to form the amendment to professional services agreement, and it is signed by the consultant (Attachment 1).
IMPACT ON CITY RESOURCES
Funding is available in Fund 6001-Water System Operations and Fund 6000-Wastewater System Operations under the professional service account for this amendment.
ATTACHMENTS
1. First Amendment
2. Original Agreement