Report Prepared by: Ken F. Elwin, PE, Director of Public Works
Title
SUBJECT: Approval of a Professional Services Agreement with Hildebrand Consulting, LLC, for a Sewer and Water Rate Study in the Amount not to Exceed $83,250
REPORT IN BRIEF
Considers approving a Professional Services Agreement with Hildebrand Consulting, LLC, to conduct a Sewer and Water Rate Study.
RECOMMENDATION
City Council - Adopt a motion:
A. Approving a Professional Services Agreement with Hildebrand Consulting, LLC, in the amount not to exceed $83,250, to prepare a comprehensive sewer and water rate study; and,
B. Authorizing the Finance Officer to make the necessary budget adjustments; and,
C. Authorizing the City Manager or Deputy 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. and Section 3.04.120 of the Merced Municipal Code.
Services with an estimated value greater than $37,000.00 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 2023/24 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 the past two years 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 should include 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.
The City issued a request for proposals to create and develop the Sewer and Water Rate Study; proposals were received by the deadline on August 8, 2023 from the following companies:
Bartle Wells Associates
Black & Veatch
Hildebrand Consulting, LLC
Raftelis Financial Consultants, Inc.
Willdan Financial Services
An internal Selection Committee was formed with staff from the Water, Sewer, and Finance Departments. Hildebrand Consulting, LLC, best met the Selection Committee’s consultant evaluation criteria based on staff qualifications, project experience & understanding, reference projects, proposal completeness, City/Administrative compliance issues, and overall approach to timeline and scope of work.
Staff recommends approving the Professional Services Agreement with Hildebrand Consulting to complete the Sewer and Water Rate Study.
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 agreement.
ATTACHMENTS
1. Professional Services Agreement