Willdan Financial Services
Established on June 24, 1988, Willdan Financial Services, is a national firm and is one of the largest public sector economic and financial analysis con sulting firms in the United States. Since that time, we have helped over 800 public agencies successfully address a broad range of infrastructure challenges. Our staff supports our clients by conducting year -round workshops and on -site training to assist t hem in keeping current with the latest developments in our areas of expertise.
Willdan Financial Services
Professional Services
▪ User fee studies;
▪ Cost allocation plan studies;
▪ Utility rate and cost of service studies;
▪ Real estate economic analysis;
▪ Municipal advisory services;
▪ District administration services;
▪ Property tax audits;
▪ Economic development strategic plans;
▪ Development impact fee establishment and analysis;
▪ Tax increment finance district formation and
amendment;
▪ Feasibility studies;
▪ Housing development and implementation strategies;
▪ Arbitrage and continuing disclosure services;
▪ Debt issuance support; and
▪ Long-term financial plans and cash flow modeling.
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Water and Sewer Rate Study 21
City of Lynwood, CA
Project Team
Our management and supervision of the project team is very simple: f ill every position with experienced, capable personnel in sufficient numbers to deliver a superior product to the City, on time and on budget. With that philosophy in mind, we have selected the following professionals for this engagement. We are confident that our team possesses the depth of experience that will successfully fulfill your desired work performance. With our team’s extensive in-house experience, no subconsultants will be utilized for this project.
City of Lynwood Project Team
Key Team Member Project Role & Office
Location Responsibility to the Engagement
Chris Fisher
Principal-in-Charge /
Project Manager
Temecula, CA
▪ Technical guidance;
▪ Project oversight;
▪ Responsible for project deliverables;
▪ Stakeholder outreach;
▪ Review of deliverables and Quality Control; and
▪ Meeting and presentation attendance.
Michael Cronan
Lead Financial Analyst
Orlando, FL
▪ Collect, coordinate, interpret, and analyze key data; ▪ Lead development of the model and financial plan;
▪ Attendance at presentations and meetings; and
▪ Report preparation.
Kevin Burnett, MA
Technical Advisor /
Quality Control Manager
Aurora, CO
▪ Task oversight;
▪ Report evaluation;
▪ Quality assurance & control; and
▪ Ensures procedural integrity.
Staff Continuity
Mr. Fisher has been assigned to serve as the City’s representative; and has been selected for this role due to his extensive experience, which includes the preparation and supervision of numerous utility rate studies, as well as his experience presenting t o governing bodies, stakeholders, and industry groups.
Willdan is composed of over 1,500 employees, including a cadre of public finance experts. If necessary, Mr. Fisher can recruit additional, qualified individuals from our employee roster to assist with the completion of this engagement to deliver the final materials on time and within budget . We do not anticipate staffing changes during the course of the project, however, should the situation arise , any change in team members will be discussed and approved in concert with the City prior to the change being made.
Resumes
Resumes for Willdan’s project team are presented on the following pages.
It is important to note that Mr. Fisher
has been with Willdan for 23 years,
ensuring the City of Lynwood of
continuity and dedication in staffing
during the completion of the project.
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Water and Sewer Rate Study 22
City of Lynwood, CA
Chris Fisher
Principal-in-Charge / Project Manager
Mr. Chris Fisher has been selected to serve as principal-in-charge and project manager of the City’s engagement, due to his experience managing multi-disciplinary teams. He also possesses extensive knowledge specific to Proposition 218 compliance.
Mr. Fisher is a Willdan Financial Services Vice President and Financial Consulting Serv ices Director. With 23 years at Willdan, he has managed an array of financial consulting projects for public agencies throughout California, Arizona, Texas, Colorado, and Florida; coordinating the activities of resources within Willdan, as well as those from other firms working on these projects.
Select Relevant Experience
City of Lakeport, CA – Water and Wastewater Fee Study : Mr. Fisher led the engagement for Lakeport in the role of the principal -in-charge. The project included the completion of a comprehensive financial model, with multiple iterations and alternatives to address a situation where the City had not increased rates in several years. He led discussions with staff to outline the options and make adjustments as necessary. He also worked closely with the City and its legal counsel to update rates and to incorporate tiers while ensuring compliance with Proposition 218 and the San Juan Capistrano Court decision.
City of Grover Beach, CA – Water and Wastewater Rate Study: In the role of principal -in- charge, Mr. Fisher led the City’s utility rate study, which included the preparation of a comprehensive financial plan, along with cost -of-service analysis and development of updated rates. The financial plan prepared contained various options and scenar ios for City Staff’s consideration, including shifting from a uniform water rate structure to either a two- or three-tiered structure. The City’s utilities were in relatively good health, so major increases were not recommended.
City of Sebastopol, CA – Water and Wastewater Rate Study: Mr. Fisher led the City of Sebastopol engagement in the role of the principal-in-charge. The objective of the study was to update water and wastewater rates to address capital needs for both utiliti es, and ensure rates provided adequate funding for ongoing operations and maintenance. Project work included development of a comprehensive financial model and preparation of rate scenarios for evaluation by staff and the City Council. Mr. Fisher and the p roject team presented the results to the City Council and instructed staff on the use of the model.
City of Guadalupe, CA – Water and Sewer Utility Rate Study : Mr. Fisher served as the principal-in-charge for the City’s recent water and sewer rate study, providing technical assistance throughout the project , conducting working discussions with City Staff to evaluate financial and rate options, and coordinating the project . He oversaw the development of the comprehensive financial plan, and preparation of r ate alternatives and analysis. This engagement include d the development of a comprehensive financial model and updated water and sewer rates, including identification of the rates of comparable jurisdictions and a comparative rate and cost analysis.
City of Richmond, CA – Wastewater Rate Study: Mr. Fisher led the City of Richmond engagement as the principal -in-charge. The objective of the study was to prepare a comprehensive financial plan and u pdated wastewater rates to address funding for capital and operating needs. The effort included development of a comprehensive financial model and report, and preparation of rate scenarios , including revised scenarios to address the impacts of the COVID pandemic, for evaluation by staff and the City Council. Mr. F isher and the project team presented the results to the City Council, whereby rate increases were approved.
McKinleyville Community Services District, CA – Water and Wastewater Capacity Fee Study: Mr. Fisher served as principal-in-charge of this project. The prior connection fees had not been updated for a number of years and were relatively low in comparison to similar agencies. In addition, there were several new local development projects in the planning stages requiring the District to provide utility services; placing even greater demand upon existing facilities and possibly requiring expansion of existing facilities, or construction of new ones. Willdan worked with staff to compile a list of proposed capital improv ements and their estimated cost and co nducted an analysis of existing and proposed development within the District’s service boundaries.
Education
Bachelor of
Science, Finance;
San Francisco
State University
Areas of Expertise
Multi-disciplinary Team
Management
Special District
Formations
Cost of Service
Studies
Proposition 218
Utility Rate Studies
Affiliations
California Society of
Municipal Finance
Officers
Municipal Management
Association of
Northern California
California Municipal
Treasurers Association
23 Years’
Experience
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Water and Sewer Rate Study 23
City of Lynwood, CA
Education
Bachelor of Arts
and Science;
University of Central
Florida
Areas of
Expertise
Utility Rate Studies
User Fee Studies
Financial Forecast
Modeling
5 Years’
Experience
Michael Cronan
Lead Financial Analyst
Mr. Michael Cronan is a senior analyst with five years of experience within Willdan’s Financial Consulting Services group. His primary function is to support project managers and senior analysts with utility rate studies. He specializes in analysis for a variety of clients, including cities, water districts, and public utilities.
Select Relevant Experience
City of Richmond, CA — Wastewater Rate Study: Mr. Cronan served as the project analyst and provided support for the City’s rate study. He gathered and verified data for the project manager and lead project consultant and played a significant role in the development of the customer database and financial model.
City of Lakeport, CA — Water and Sewer Rate Study : Mr. Cronan provided analytical support to the senior project team members and led the development of the financial model as the project analyst for the City’s ongoing utility rate study. He worked directly with staff at the City to evaluate financial plan alternatives, particularly for sewer where y ears of deferred rate increases, and a significant capital plan required careful consideration. He also led the revamp of the City’s cost - of-service approach, working closely with a leading Prop 218 attorney, to ensure rates were compliant with State law.
McKinleyville Community Services District, CA — Water and Sewer Utility Rate Study:
Willdan was retained to update the models, develop the CSD’s water and sewer rates and assist with the required Proposition 218 noticing process. Mr. Cronan provid ed analytical support to the project’s senior team and is providing the same support for the ongoing update to the previous study.
City of Claremont, CA — Sewer Rate Study: Mr. Cronan provided analytical support for the City’s sewer rate study. He gathered and veri fied data for the project manager and principal consultant.
City of Twentynine Palms, CA — Sewer Treatment Facility Fair Share and Sewer Rate Analysis: Mr. Cronan provided analytical support in the development of the model to support to the project’s senio r team on the City of Twentynine Palms’ sewer treatment facility fair share analysis. This study also include d a sewer rate study, specific to the new treatment plant and its customers.
City of Denver, CO — Sanitary Sewer and Storm Drainage Benchmarking an d Storm Drainage Impact Fee Study: Mr. Cronan served as the lead analyst on a benchmarking study to review and compare the City’s current rate structures to those of other front range and national utilities. The intent of the study was to identify potential areas for refinement to the City’s current rate structures. Mr. Cronan also served as the lead analyst for developing and implementing first time storm drainage impact fees for the City.
City of Fruita, CO — Sewer Rate Study: Mr. Cronan provided analytical support to the project manager and principal consultant for the City’s comprehensive sewer rate study. The study sought to determine the costs of operating the utility for a five-year period while equitably recovering costs from each customer class. An evaluation of changing the current flat rate approach for residential customers to a volume based average winter consumption approach was also evaluated.
City of College Station, TX — Electric Rate Study: Mr. Cronan was the analyst for the City’s electric retail rate and cost-of-service study.
GRU/Gainesville, FL — Combined Utility Rate Project: Mr. Cronan assisted senior project staff on Willdan’s recent combined utility rate project conducted for Gainesville Regional Utilities, in Gainesville, Florida and included a comprehensive revenue requirement, cost of service analysis, and rate design for their electric, water, wastewater, and natural gas utility systems.
City of Oviedo, FL — Utility System and General Financial Services: Mr. Cronan provides analytical support to the project team members serving the City’s on -call engagements for Utility System and Financial Services.
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Water and Sewer Rate Study 24
City of Lynwood, CA
Kevin Burnett, MA
Technical and QA Advisor
Mr. Kevin Burnett is a Senior Project Manager with 21 years of utility analysis experience, possessing extensive experience with utility rate and cost of service studies for retail and wholesale use. His project experience includes water, wastewater, reuse, and stormwater rate studies using state-of-the- art utility financial planning tools. He has developed both short and long-term financial plans for utilities of all sizes – including regional water authorities and regional wastewater providers with individual wholesale service contracts.
Select Relevant Experience
City of Avenal, CA — Water and Sewer Rate Study: Served as project manager for the City’s rate study. The objectives of this analysis were to develop a tiered rate structure for customers that: 1) generate sufficient revenues to meet operating and capital expenses associated with water in response to th e rising cost of purchased water; 2) technically defensible and equitable across the customer classes (meeting Proposition 218 requirements); and 3) developed within spreadsheet models that are user-friendly and can be easily updated by City staff in the future.
City of Sebastopol, CA — Water and Wastewater Fee Study: Mr. Burnett served as the lead project consultant for Sebastopol’s water and wastewater utility rate study. The objective of the study was to update water and wastewater rates to address capi tal needs for both utilities, and ensure rates provided adequate funding for ongoing operations and maintenance. Mr. Burnett led the development of the financial model and scenarios for the City and presented the report and results to the Council.
City of Calexico, CA — Water and Sewer Rate and Capacity Fees Study: As lead project consultant, Mr. Burnett conducted a water and sewer rate study for the City of Calexico. Their previous rate study was dated, and the City wished to complete a new study to meet future revenue requirements and planned substantial capital improvement projects, and to make sure new rates followed Prop 218 cost of service requirements. The City also requested the establishment of capacity fee charges. Mr. Burnett created the financia l and rate model, completed the technical analysis, and worked through financial scenarios and options with City Staff. He was also responsible for the preparation of the report and other study documents.
City of Tulare, CA — Water and Wastewater Rate Stud y: As project manager Mr. Burnett led the model and rate development, in addition to facilitating presentations to both the City Council and Public Utilities Board in preparation of the City’s water and wastewater utility rates. He generated updated rate structures for the City, which met the requirements of Proposition 218.
City of Fillmore, CA — Water and Sewer Rate Study: The City’s rates were outdated and not generating sufficient revenue needed to operate, maintain, and enhance the system. As project manager, Mr. Burnett led the Willdan team and worked closely with the City, to redesign the rate structure. The Willdan team was responsible for the model and rate development, and generation of multiple alternative rate structures.
Town of Apple Valley, C A — Wastewater Rate Study: Mr. Burnett was the technical project lead for the comprehensive wastewater rate study for the Town. The study encompassed the preparation of a financial plan and rate model, and a thorough review and update of the Town’s rate structure. The Town uses an EDU based wastewater rate structure, which Willdan evaluated and adjusted where necessary. Mr. Burnett created the financial and rate model and completed the technical analysis and preparation of the report and other study documen ts. He worked extensively with the Town’s legal counsel on the report to ensure that it provided the necessary level of detail to support defensibility.
The analytical portion of the project is complete and pending the completion of the Proposition 218 approval process.
Education
Master of Arts ,
Economics, State
University of New
York, Buffalo
Bachelor of Arts ,
University of
Waterloo, Ontario
Areas of Expertise
Financial Planning
Cost of Service
Studies
Rate Design
Impact Fees
Bond Feasibility
Affiliations
American Water
Works Association
21 Years’
Experience
City Council Regular Meeting - Page 1015 of 1385
Water and Sewer Rate Study 25
City of Lynwood, CA
References
Provided below are recent project descriptions, including client contact information, which are similar in nature to those requested by the City. We are proud of our reputation for customer service and encourage you to contact our clients regarding our commitment to completing these assignments within the agreed upon project budget and schedules.
McKinleyville Community Services District, CA | Water & Sewer Rate & Capacity Fee Study
Willdan recently assisted MCSD with a water and sewer rate study, where rates were successfully adopted for five years, for both utilities. The project included a rigorous evaluation of the CIPs for both utilities, testing of scenarios to understand the financial impacts on customers and mitigate rate increases. The District takes a conservative and aggressive approach to completing capital projects and accumulating reserves to protect itself from unanticipated events, so our modeling included multiple provisions to present, discuss and evaluate options. The project included the preparation of the comprehensive model and financial plan, which analyzed projections for both utilities for ten years, preparation of reports, preparation and mailing of Prop 218 notices, and presentation of results to the Board of Directors. Rates were successfully adopted in November 2022.
Client Contact: Mr. Patrick Kaspari, PE, General Manager 1656 Sutter Road, McKinleyville, CA 95519
Tel #: (707) 839-3251 | Email: [email protected]
City of Lakeport, CA | Water and Sewer Rate Study
Willdan assisted the City of Lakeport with the development of a water and wastewater utility rate study. The scope of services included development of the financial plan, model , and reports, including the adjustment of the tiered rate structure . The City was in th e position of needing potentially significant rate increases, so we worked collaboratively with them throughout the process to evaluate options for the financial plan to address the needs of the utilities, while balancing the impact on ratepayers.
Willdan team members worked closely with the City’s Proposition 218 legal counsel to update the City’s water rate structure while ensuring compliance with the applicable provisions of the California Constitution, as well as the San Juan Capistrano court decision.
Client Contact: Nick Walker, Assistant City Manager, Finance Director 225 Park Street, Lakeport, CA 95453
Tel #: (707) 263-5615 x 301 | Email: [email protected]
City of Sebastopol, CA | Water and Wastewater Fee Study Willdan was selected in 2019 to assist the City of Sebastopol with a water and wastewater rate study, and preparation of a financial plan. The overall objective of the study was to update water and wastewate r rates to address capital needs for both utilities, and ensure rates provided adequate funding for ongoing operations and maintenance.
For this project, Willdan gathered and validated extensive data for the project, including budget and customer usage data, simplified the water and wastewater rate structures, prepared a comprehensive financial model, and presented alternatives and scenarios to City staff.
We presented the results and recommendations to City Council, addressing questions and concerns from the public and from Council, and assisted Staff after the conclusion of the project to understand how to use the model on their own going forward. The study is now complete, and Council has adopted the study’s recommendations.
Client Contact: Ana Kwong, Administrative Services Director 7120 Bodega Avenue, Sebastopol, CA 95472
Tel #: (707) 824-4879 | Email: [email protected]
City Council Regular Meeting - Page 1016 of 1385
Water and Sewer Rate Study 26
City of Lynwood, CA
City of Grover Beach, CA | Water and Wastewater Rate Study Willdan was selected in 2020 to complete a water and sewer rate study for the City of Grover Beach. The project included the completion of a comprehensive financial plan, along with cost -of-service analysis and development of updated rates. We collected and evaluated the necessary data, prepared the financial plan with various options and scenarios for City staff’s consideration , including shifting from a uniform water rate structure to either a two- or three-tiered structure, and prepared and submitted the rate study report with the selected approach.
The City’s utilities were in relatively good health, so major increases were not recommended. Currently the City Council has received the rate report and recommendations, the date has been set for the Public Hearing as required by Proposition 218.
Client Contact: Deanne Purcell, Administrative Services Director 154 South 8th Street, Grover Beach, CA 93433
Tel #: (805) 473-4555 | Email: [email protected]
City of La Palma, CA | Water and Wastewater Utility Rate Study In 2021, Willdan was re -selected to work with the City on its latest water and sewer rate study. This followed our previous work with the City in 2016/17. Our team worked with City Staff to evaluate alternatives for both utilities, particularly for water, where the City is preparing for the drilling and completion of a new well in eight ye ars. We evaluate options to help them prepare for this key capital project. The study included the development of a comprehensive financial plan and model, the evaluation of alternatives for rate adjustments, and the preparation of reports and Prop 218 documents.
Willdan gathered and validated financial data for the project, including budget, fund balances, capital plans, historical financial results, and policy documents. The study also included the required cost -of-service analysis and entailed some adjustments based on changing customer usage characteristics.
We guided the City through the Proposition 218 process and developed and mailed Prop 218 notices. The study is complete, and the Public Hearing was conducted in April 2022.
Client Contact: Mike Belknap, Community Development Director 7822 Walker Street, La Palma, CA 90623
Tel #: (714) 690-3356 | Email: [email protected]
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Water and Sewer Rate Study 27
City of Lynwood, CA
Project Schedule
The following proposed schedule outlines the estimated number of weeks to complete each task outlined in our scope of services. While we recognize the City’s stated goal in the RFP for having the final draft report by March 31, 2023, we feel the following timeline accounts for the extent of effort and analysis necessary to complete the data gathering and validation, preparation of the model, financial plan, report, and required Prop 218 documents, while still meeting the goal of adopting rates in time for implementation for the 2023/24 Fiscal Year. As necessary, a specific project schedule will be developed following consultation, and in concert, with City staff.
5 12 19 26 2 9 16 23 30 6 13 20 27 6 13 20 27 3 10 17 24 1 8 15 22 29 5 12 19 26 Task 1.1 Data Collection and Review
Task 1.2 Kick-off Meeting and Planning Discussion
Task 2.1 Revenue Requirements and Rate Determinants
Task 2.2 Capital Plan Analysis
Task 2.3 Cost-of-Service Allocations
Task 2.4 Rate Analysis and Design
Task 3.1 Preliminary Draft Report
Task 3.2 Final Report
Task 4.1 Proposition 218 Notice Preparation and Mailing Task 5.1 Meetings and Presentations
Prop 218 Notice Period
Public Hearing (June 2023)
Meetings and Presentations
Reports and Deliverables
Proposition 218 Notice and Public Outreach Materials
City of Lynwood
Water & Sewer Rate Study
Project Timeline
Scope of Work
Project Initiation
Water & Sewer Rate Study
December January February March April May June
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Water and Sewer Rate Study 28
City of Lynwood, CA
Copy of a Rate Study
Provided below is a link to a copy of a rate study performed by Willdan for the City of Lakeport, CA that most closely fits the Study Objectives, Study Requirements, Study Elements, and Services to be provided.
https://willdan.box.com/s/kcnpxleg1s539lhwgs3gyzwkpztyn3c4
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Water and Sewer Rate Study 29
City of Lynwood, CA
Addenda
The signed addenda are provided as requested.
City Council Regular Meeting - Page 1020 of 1385
27368 Via Industria, Suite 200
Temecula, CA 92590-4856
951.587.3500 | 800.755.6864 | Fax: 951.587.3510
www.willdan.com
City Council Regular Meeting - Page 1021 of 1385
T 951.587.3500 ▪ 800.755.6864 | F 951.587.3510 ▪ 888.326.6864 | 27368 Via Industria, Suite 200, Temecula, CA 92590 | www.willdan.com
November 29, 2022
Mr. Ernie Hernandez
City Manager
City of Lynwood
11330 Bullis Road
Lynwood, California 90262
Re: Cost Proposal to Conduct Water & Sewer Rate Study for the City of Lynwood Dear Mr. Hernandez:
Willdan Financial Services (“Willdan”) is pleased to present the following cost proposal to conduct a Water and Sewer Rate Study for the City of Lynwood.
This submission reflects our understanding of the City’s Request for Proposal (RF P).
Willdan is excited about this opportunity to continue serving the City of Lynwood. To discuss any aspect of our technical and/or cost proposal, please contact me directly at (951) 587 -3528 or via e -mail at [email protected].
Sincerely,
WILLDAN FINANCIAL SERVICES
Chris Fisher
Vice President / Director
City Council Regular Meeting - Page 1022 of 1385
Water and Sewer Rate Study 1
City of Lynwood, CA
Cost Proposal
Water & Sewer Rate Study
Based on our work plan provided in the scope of services, we propose a not-to-exceed fixed fee of $ 55,625.
The table below provides a breakdown of this fee by task and project team member.
Proposition 218 Fees
The fixed fee includes direct costs associated with the printing, processing, and mailing of Proposition 218 notices. We will bill the City for these at our cost-plus 10 percent, based on actual quotes provided by our mailing house. These costs are estimated at $.75 per mailed piece and they will be billed directly to the City at the time of the mailing once the actual costs are known.
Notes
▪ The City will be invoiced on a monthly percentage-completion basis. ▪ Invoices will include a description of services, as well as a summary of costs to date by task. ▪ We will perform additional tasks, outside our scope of services, as requested and authorized by the City for an additional fee.
▪ Willdan will rely on the validity and accuracy of the City’s data and documentation to complete our analysis. Willdan will rely on the data as being accurate without performing an independent verification of accuracy, and that we will not be responsible for any errors that result from inaccurate data provided by the client or a third party. ▪ The City shall reimburse Willdan for any costs Willdan incurs, including without limitation, copying costs, digitizing costs, travel expenses, employee time and attorneys' fees, to respond to the legal process of any governmental agency relating to the City or relating to this project. Reimbursement shall be at Willdan's rates in effect at the time of such response.
C. Fisher
Principal-
in-Charge
K. Burnett
Technical and
QA Advisor
M. Cronan
Analytical
Support
$250 $185 $125 Hours Cost
Task 1.1 Data Collection and Review 1.0 1.0 12.0 14.0 1,935$ Task 1.2 Kick-off Meeting and Planning Discussion 1.0 - 2.0 3.0 500 Task 2.1 Revenue Requirements and Rate Determinants 12.0 3.0 96.0 111.0 15,555 Task 2.2 Capital Plan Analysis 4.0 1.0 8.0 13.0 2,185 Task 2.3 Cost of Service Allocations 4.0 2.0 16.0 22.0 3,370 Task 2.4 Rate Analysis and Design; Review of Other Fees 16.0 6.0 26.0 48.0 8,360 Task 3.1 Reports and Deliverables 10.0 8.0 56.0 74.0 10,980 Task 3.2 Proposition 218 Notice Preparation and Mailing 12.0 2.0 16.0 30.0 5,370 Task 4.1 Meetings and Presentations 18.0 2.0 20.0 40.0 7,370 Total Cost Proposal 78.0 25.0 252.0 355.0 55,625$ Scope of Work
Total
City of Lynwood
Water & Sewer Rate Study
Project Budget
Project Initiation
Meetings and Presentations
Water & Sewer Rate Study
Reports and Proposition 218 Notices
City Council Regular Meeting - Page 1023 of 1385
Water and Sewer Rate Study 2
City of Lynwood, CA
Hourly Rates
Additional services may be authorized by the City and will be billed at our then-current hourly rates. Our current hourly rates are listed below.
Willdan Financial Services
Hourly Rate Schedule
Position Team Member Hourly Rate
Vice President - Director Chris Fisher $250
Managing Principal $240
Principal Consultant $210
Senior Project Manager Kevin Burnett $185
Project Manager $165
Senior Project Analyst $135
Senior Analyst Michael Cronan $125
Analyst II $110
Analyst $100
City Council Regular Meeting - Page 1024 of 1385
City of Lynwood
Water and Sewer Rate Study
Robert D. Niehaus, Inc. │ November 29, 2022
Jack Lyon 805-618-1356 │ [email protected]
140 East Carrillo Street, Santa Barbara, CA 93101
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November 29, 2022
Kristan Lloyd Anthony Elowsky, Project Manager
Administrative Assistant Robert D. Niehaus, Inc.
City of Lynwood 140 E Carrillo Street
11330 Bullis Road Santa Barabra, CA 93101
Lynwood, CA 90262 Phone: (805) 962-0611
Email: [email protected]
Subject: Proposal for City of Lynwood Water and Sewer Rate Study Dear Ms. Lloyd,
Robert D. Niehaus, Inc. (RDN) is pleased to submit our proposal to conduct the Water and Sewer Rate Study (Study) for the City of Lynwood (City). We are an economic and financial cons ulting firm that provides rate - and fee-setting consulting services to California water and wastewater utilities. RDN staff have completed over 700 projects with economic, financial, and market analysis experience across California and worldwide since the firm’s founding in 1983. Our proposed project team has over 100 years of combined public-sector consulting experience.
We are committed to providing the highest quality analysis for our clients, evidenced by the fact that our proposed rates have never been successfully protested under Proposition 218 or subject to successful litigation.
The City is seeking a qualified consultant to perform a comprehensive review of water and sewer rates to ensure sufficient revenues are collected over the next five years. RDN is excited for the opportunity to help the City make the financial adjustments necessary to continue to provide safe and reliable service. The enclosed proposal details our project approach, project team qualifications and experience, and references who can speak to the quality of care and service we provide.
RDN’s project team is led by Dr. Robert Niehaus as Project Director and Mr. Anthony Elowsky as Project Manager.
Dr. Niehaus and Mr. Elowsky have supported dozens of water and wastewater agencies acr oss California. They are supported by a deep bench of financial, economic, and communications staff, with offices in Santa Barbara and San Francisco. To further bolster our experience and proposed solutions to the City, RDN has partnered with Mr. Sanjay Gaur of Water Resources Economics, who will serve as a Senior Advisor. Mr. Gaur is a leading expert in California water utility financial planning and rate design and is particularly known for his work helping agencies prepare for customer outreach and regulatory compliance.
We are proud of the team and resources we can offer the City on this important project. Please coordinate with Jack Lyon, Director of Business Development, (805) 618-1356, [email protected], if you would like to discuss our prop osal, which is valid for a 120 -day period. RDN is a C -Corporation. We affirm that we have carefully reviewed the RFP in its entirety, including the City standard professional services agreement, and take no exceptions. We have no conflicts of interest. We look forward to a successful, collaborative, and productive partnership.
Respectfully submitted,
Robert D. Niehaus, Ph.D. Anthony Elowsky, M.A.
Managing Director, Principal Economist Prioject Manager, Financial Analyst
Robert D Niehaus
Anthony Elowsky
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TABLE OF CONTENTS
Executive Summary ................................ ................................ ................................ ................................ ........ 1 Firm Overview ........................................................................................................................................................ 1 Approach to The Project ................................ ................................ ................................ ................................ . 3 Project Understanding ............................................................................................................................................ 3 Scope of Services .................................................................................................................................................... 4 Task 1. Project Management/Meetings ......................................................................................................... 4 Task 2. Long-Term Financial Plan.................................................................................................................... 5 Task 3. Cost of Service Analysis ...................................................................................................................... 7 Task 4. Rate Design ......................................................................................................................................... 8 Task 5. Reports and Models ......................................................................................................................... 11 Task 6. Proposition 218 Support ................................................................................................................... 14 Experience ................................ ................................ ................................ ................................ ................... 16 Qualifications ................................ ................................ ................................ ................................ .............. 17 Team Qualifications .............................................................................................................................................. 17 Subconsultants ..................................................................................................................................................... 18 References ................................ ................................ ................................ ................................ ................... 19 Schedule ................................ ................................ ................................ ................................ ...................... 21 Project Schedule ................................................................................................................................................... 21 Additional Information................................ ................................ ................................ ................................ . 23 Appendix ................................ ................................ ................................ ................................ ..................... 23
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EXECUTIVE SUMMARY
FIRM OVERVIEW
RDN is a professional economic and financial consulting firm, headquarted in Santa Barbara , which delivers solutions to California utilities, State/Local entities, and Federal agencies.
RDN has provided consulting services for water, sewer,
stormwater, housing, and energy projects throughout
California and worldwide since the firm’s founding in 1983.
Our staff ha s completed over 700 projects with economic, financial, and market analysis experience. Our proposed Project Team has decades of experience in water and sewer rate analyses, development impact fees, data management, public relations support, and econometric modeling and forecasting of demand. RDN affirms our ability and willingness to execute the City’s Professional Service agreement with no changes. RDN is not involved in any pending litigation, nor has RDN been a target of past litigation. No member of our firm is or has been the target of investigation by County, State, or Federal autorities. Figure 1 shows RDN’s proposed project team which will support the City’s rate study.
Figure 1. Team RDN Project Organization, Key Personnel
RDN BY THE NUMBERS
➢ $4M Annual Revenue/24 Employees
➢ 700+ Projects Accomplished Worldwide
➢ 100+ Years of Project Team Experience
➢ 48 States Served
➢ 38 Years Consulting for Utility Systems
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RDN has prepared this proposal by tailoring our rate-setting approach to meeting the City’s goals for this study.
Major tasks are summarized below:
Long-term Financial Plan: RDN will review City data to develop a 10 -year financial plan based on revenue generated from current rates, fees, and other revenue sources, budgeted and projected expenses, potential debt service payments, and reserve contributions. The cash flow projections and revenue requirements will plan for the study period. To project revenue and costs, we use an econometric, data-driven approach that provides a high level of accuracy and reliability for the City’s financial plan.
Cost of Service Analysis: RDN will allocate costs among customers commensurate with their service requirements.
We will evaluate existing customer classes and recommend changes to cost allocations, as necessary. The cost of service analysis will ensure that costs are equitably distributed to ratepayers in compliance with Proposition 218 and that established rates adequately cover the costs to provide reliable service.
Rate Design: RDN will design water and sewer rates that follow cost-of-service ratemaking principles as outlined in the American Water Works Association (AWWA) Manual 1: Principles of Water Rates, Fees and Charges (M1) and Water Environment Federation (WEF) Manual of Practice 27: Financing and Charges for Wastewater Systems (Manual 27). We will review the City’s current rate and fee structures for all customer classes and recommend how to balance fixed and volumetric charges to ensure revenue adequacy while maintaining rate affordability.
Recommended rates will have a clear connection between the costs and pricing to ensure compliance with all legal requirements, including Proposition 218.
Rate Models: RDN will design an Excel-based, ten-year financial planning model built to the City’s specific needs.
The model will include a management dashboard with graphical displays of the key economic and financial metrics used for the study. RDN will train City staff on all aspects of the model.
Draft and Final reports: RDN will provide draft and final executive reports for the Water and Sewer Rate Study to City staff upon project completion. Our reports will describe the process of the rate studies in sufficient detail to meet Proposition 218 and 26, AB 1600, California Government Code Section 66000, Article XIII C & D of the California Constitution, and all other relevant legal requirements.
Proposition 218 Support: RDN will design Proposition 218 Hearing Notices that clearly convey proposed rate adjustments. We will design a notice as well as present the Study f indings at the Proposition 218 Hearing and answer any questions.
Project Management/Meetings: RDN is committed to providing transparent project management that fosters collaboration and ensures study success. We will prepare a Project Management Plan that will guide project administration. Our quality assurance processes will ensure that products are delivered error -free. Ahead of the kick-off meeting, we will provide the City with a detailed data request form. At the kick-off meeting, we will solidify the project timeline and priorities. We will also hold weekly meetings to discuss project progress.
Project Schedule: Figure 4 presents a preliminary schedule for completing the City’s study for a July 1, 2023 implementation date for new rates. The schedule assumes timely kick-off, City data, feedback, and availability for meetings. The final schedule will be set at the Kick-off Meeting.
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APPROACH TO THE PROJECT
PROJECT UNDERSTANDING
The City of Lynwood, incorporated in 1921, serves a population of approximately 69,887 in southeast Los Angeles County. The City distributes groundwater and import water through its 3 million gallon reservoir and 90 miles of distribution pipelines. The City’s water service area is approximately 4.7 square miles in size and covers approximately 90 percent of the land within the City’s municipal boundaries. Groundwater is pumped from the Central Groundwater Basin through five active wells located throughout the City. The City supplem ents its groundwater with water purchased from Metropolitan Water District through the Central Basin Municipal Water District. Residential customers account for the majority of water use; however, the largest water users in the City include industrial, government, and institutional users. The City’s wastewater collection system consists of about 80 miles of gravity sewer pipe, 1,800 manholes, 30 inverted siphons and about 10,000 sewer lateral connections.
The City’s system conveys untreated wastewater into various trunk sewers for transmission, treatment and disposal.
The City last completed a water and sewer rate study in 2017. Following that study, the California State Auditor found that the City was at high risk due to some of its financial practices. Wh ile the State’s audit was mostly concerned with general fund practices, it directed the City to develop proper overhead levels which could be legally charged to the City’s enterprise funds, so that utilities are not subsidizing the general fund. After reviewing the City Utility Authority’s planned lease payments for water and sewer infrastructure, the State Auditor determined, “Lynwood's transfers of water and sewer revenue to its general fund violate Proposition 218.” It appears that multiple cost allocation plans were developed and not implemented.
A key component of RDN’s approach to the Water and Sewer Rate Study will be to ensure that rates are Proposition 218 compliant through the design of appropriate reserve targets, capital improvement scheduling, debt service coverage, and a detailed, impartial and independent, review of the City’s cost allocation plan. We will design rates that recover cover the correct costs to provide service, while not overly impacting ratepayers. Our rate design services will ensure financial stability by being based on long -term econometric projections of water use, population growth, and expense inflation. Additionally, we will provide customer outreach in coordination with Water Resource Economics’ Sanjay Gaur, one of the lea ding voices in California utility rate setting, who is renowned for communicating the value provided by utility services. RDN is consistently recognized by our clients for providing the practical solutions with an experienced , multi-disciplinary team with a heavy emphasis on economic modeling and innovation.
RDN follows industry best practices, standards, and principles of rate -setting. In coordination with City staff, our approach employs an interactive decision-making process to address the City’s rate-setting goals. Proposed rates will comply with all relevant legislation, including Proposition 218. Our proposed scope of work is detailed below for City consideration.
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SCOPE OF SERVICES
Task 1. Project Management/Meetings
Project Management
RDN incorporates best practices from the Project Management Institute’s Project Management Body of Knowledge to establish processes that guide management procedures. For a project to be considered a success, all work must be completed on schedule, within budget, and error-free. Our project manager will prepare a Project Management Plan (PMP) to document all information necessary to execute a successful project. The PMP serves as a roadmap for the project team, defining proje ct goals and objectives, scope of work, deliverables, budget, schedule, administrative procedures, and filing requirements.
Data Collection and Validation
Prior to the kick-off meeting, RDN will submit a detailed data request to the City. The data request will include audits, budgets, general plans, capital improvement plans, customer billing records, debt service schedule, and reserve policies. For data validation and quality assurance, RDN may request additional data throughout the study to reconcile any inconsistencies.
Kick-Off Meeting/Progress Meetings
RDN is committed to providing transparent project management and open communication with the City. We proposes to conduct an in-person kick-off meeting, which will serve as a forum where City staff and the RDN team will meet to discuss project objectives, approach, work plan, schedule, and priorities. Weekly progress meetings with City staff will be held via teleconference. At the end of each month, RDN will provide a summary report charting the current progress on each task, data needs, current issues that need to be resolved, project schedule update, and status of action items from the previous report. Should public health protocols allow, RDN proposes up to six in-person meetings with City staff and City Council, potentially including two City Council Meetings, two Community Meetings, and two Public Hearings (which will be detailed in the Proposition 218 Support Section).
Table 1. Task 1 – Project Management
Meetings
▪ Kick-off meeting via teleconference
▪ Progress meetings via teleconference
▪ Community Outreach Meetings
▪ City Council Meetings
▪ Public Hearings
RDN Deliverables
▪ Data request
▪ Meeting agendas and minutes
▪ Monthly progress reports and expenditures
City Deliverables ▪ Respond to data request
▪ Attend meetings and provide input
Objective: RDN is committed to providing transparent project management that fosters collaboration and ensures study success. We will prepare a Project Management Plan that will guide project administration. Our quality assurance processes will ensure that products are delivered error-free. Ahead of the kick -off meeting, we will provide the City with a detailed data request form. At the kick-off meeting, we will solidify the project timeline and priorities. We will also hold weekly meetings to discuss project progress.
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Task 2. Long-Term Financial Plan
Demand Projections/Revenue Analysis
RDN will conduct detailed demand and growth projections to ensure the City’s revenue forecast and cash flow analysis are accurate. Wat er consumption is influenced by price signals, weather/rainfall, high -efficiency technologies, and conservation programs. We will first evaluate how the City’s customers’ water consumption patterns have changed historically, and then incorporate City growth trends and the elasticity of customer demand in response to various rate increase scenarios to project future water demand. We will also model potential drought scenarios and their impacts on rate revenues. Based on the demand projections, we will forecast revenue using the existing rates. We will also identify any changes to other revenue s such as miscellaneous charges, property taxes, and investment income.
Operation and Maintenance Expenses
Using the City’s budgetary documents, we will project
operating and maintenance (O&M) expenses and
develop reasonable inflationary factors for relevant
itemized expenses using reliable published sources or
City’s historical data. We will compare each utility’s costs against appropriate industry benchmarks. We also
incorporate any known changes to personnel, level of
service, or projected growth. We will pay particular
attention to how general fund overhead costs are
allocated to each utility. Each expense item will be
categorized as either fixed or variable and direct or indirect to ensure that costs are allocated to the correct rate structure components when designing rates.
Capital Improvement Funding
RDN will review th e City’s five-year capital projects plan and explore financing options based on the timing of proposed revenue adjustments and scheduled repairs and replacements. We will also incorporate long -term replacement needs detailed in the City’s Master Planning documents. Funding sources may include cash reserves, grant funding, debt proceeds, or PAYGO (pay as you go), each with different rate impacts. The City may also consider changes in capital expenditure timing to mitigate short -term rate impacts and smooth r evenue requirements.
Reserve Funding
RDN will recommend how to best build ideal reserve targets. We will review the City’s reserve policies and develop an implementation plan that maintains recommended balances for each fund that are consistent with the City’s financial goals, risk tolerance, and capital improvement projects.
Revenue Requirements
The cash flow analysis will project revenues, expenses, debt obligations, and future funding needs to determine necessary revenue adjustments for the study period. The total cost will be offset by other sources of revenue such Objective: RDN will review City data to develop a long-term financial plan based on revenue generated from current rates, fees, and other revenue sources, budgeted and projected expenses, potential debt service payments, and reserve contributions. The cash flow projections and revenue requirements will plan for th e study period. To project revenue and costs, we use an econometric, data -driven approach that provides the highest level of accuracy and reliability for the City’s financial plan.
Fixed/Variable Costs
RDN will identify fixed and variable costs
through a detailed analysis of the City’s
current expenses. Fixed cost recovery will
ideally be apportioned through guaranteed
revenue sources to ensure that the City will
not fall short on necessary revenues. However,
rate affordability and bill impact will also be
considered for individual customers with
different usage patterns.
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as property taxes, investment earnings, rental income, and other water service charges. RDN will assess if revenue adjustments are needed to eliminate cumulative revenue deficiency or surplu s by the end of the study period.
Revenue adjustments will also meet debt covenants by maintaining the required debt service coverage ratio. The objective is to minimize customer impacts while achieving a healthy cash flow mechanism for the next five years.
Table 2. Task 2. Long-term Financial Plan Deliverables
Meetings ▪ Progress meetings via teleconference
RDN Deliverables ▪ Demand projection summary
▪ Draft financial planning model
City Deliverables ▪ Financial information and input
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Task 3. Cost of Service Analysis
Review Customer Classes
RDN will evaluate the City’s customer classifications and recommend any necessary changes. Assigning costs accurately to classes of customers based on their service requirements is critical to designing Proposition 218- compliant rates. We will explore alternative cost allocations to find which best aligns with the City’s goals.
Cost Functionalization
A utility system is composed of various facilities that serve a particular function. With input from City staff, each expense identified in the financial plan will be carefully allocated to the industry standardized functions of each system in our model. These functions can be customized based on the City’s organizational structures and account for fixed and variable costs.
Cost Allocation to Cost Causative Components
RDN will employ the base -extra capacity method from the AWWA M1. In this method, functio nalized costs are allocated to appropriate cost causative components for each customer class. The water utility cost causative components include peaking components such as base, maximum day demand (MDD), and peaking hourly demand (PHD). For sewer utilities, cost causative components include flow, strength (BOD and TSS), and customer- related services. Both utilities also have non -peaking components such as meter services and customer billing services.
Cost Allocation to Customer Classes
As a final step of t he cost of service analysis, the costs of each component are allocated back to each customer class commensurate with their service requirements. This analysis permits the City to adhere to the general principle of cost proportionality (particularly relevan t under Proposition 218), under which the rates paid by customer classes are directly proportional to the costs each class imposes on the City as a whole.
Table 3. Task 3. – Cost of Service Analysis Deliverables
Meetings ▪ Progress meetings via teleconference
RDN Deliverables ▪ Cost of service analysis in Excel
City Deliverables ▪ Cost of service analysis feedback
Objective: RDN will allocate costs among customers commensurate with their service requirements. We will evaluate existing customer classes and recommend changes to cost allocations, as necessary. The cost of service analysis will ensure that costs are equitably dist ributed to ratepayers in compliance with Proposition 218 and that established rates adequately cover the costs to provide reliable service. To conduct the analysis, we will employ methodologies approved by the AWWA Manual M1 and WEF Manual 27 and ensure the analysis meets industry standards.
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Task 4. Rate Design
Evaluate the Current Rate Structures & Identify Rate Alternatives We will perform a comprehensive review of the City’s current rate structures to assess the advantages and disadvantages of the existing rates. This will include an evaluation of links between cost parameters, such as peaking, customer service/billing, fixed and variable costs, and the current charges. Our r eview will also identify whether the existing rates optimize fixed and variable rate recovery to enhance stability while ensuring affordability. Based on the financial plan and cost of service analyses, we will evaluate rate adjustment alternatives designed to recover the revenue requirements identified in the financial plan. We will provide three draft rate options for City staff and Council which adequately fund revenue requirements and the City can choose which option best conforms with stated goals.
Develop Recommended Rates
For the water system, we will recommend the rate alternative that best meets the City’s goals and is justified by the cost of service analysis. For the wastewater system, we will review customer class strengths and flows and recommend any necessary rate adjustments. The result for both systems will be rate structure recommendations that are easy to undertand and administer, provide revenue adeqecy, and comply with Proposition 218.
Meter Service Fees
RDN will recommend any appropriate changes to the proportion of rates recovered through fixes charges to ensure that fixed costs are sufficiently funded. Increasing fixed charges reduces revenue volatility and risk from reduced demand or conservation efforts and ensures predictable revenue to cover debt, operating costs, and capital plans.
RDN will also evaluate the changes in fixed charge rates to ensure the adjustments do not place an undue financial burdern on customers. If fixed revenue adjustments are required, RDN will create altern ative five -year rate schedules where the fixed charge adjustments will be incrementally implemented over the five-year study period.
Commodity Rates
Based on the financial plan and Cost of Service analyses, RDN will recommend adjustments to commodity rates .
The City currently bills a single commodity charge for each unit of water used. In order to promote conservation and to align the City’s costs with it’s rates, it is likely that one or more of the proposed rate options will include inclining block rates (tiers). We will evaluate the potential for tiered rates based on the heterogeneous costs between the different water sources used by the City as well as customer peaking characteristics within each customer class. Customer tend to recognize the inherent f airness of tiered rates because of the general undstanding that customers that put more strain on a system should incur more of the costs to provide service.
Sewer Rates
RDN will provide recommendations for any necessary updates to the City’s sewer service rate levels. We will work with City staff to identify if alternative rate structures would better serve the City’s sewer utility and customers.
For instance, different types of commercial customers produce different sewer strengths, such as restaurants which have a high BOD and TSS compared to office buildings which have relatively low sewer strengths. We will evaluate the service requirement differences between commercial sewer customers to ensure that the unit cost Objective: RDN will design water and wastewater rates that follow cost -of-service ratemaking principles as outlined in the AWWA M1 and WEF Manual 27. We will review the City’s current rate structures for all customer classes and provide recommendations on how to balance fixed and volumetric charges to ensure revenue adequacy while maintaining rate affordability. Recommended rates wil l have a clear connection between the costs and pricing to ensure compliance with all legal requirements, including Proposition 218.
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reflect the variety of sewer strengths identified in the cost of service analysis. We will explore this and other alternatives to recommend the rates that best meet the City’s needs and objectives.
Recommendations
RDN’s final recommendation will improve the equity and simplicity of the current rates, be supported by statistical/econometric analyses, data, plans, and comparative examples, and be in full compliance with all legal requirements including Propositions 218. Any review, evaluation, or conclusion regarding the legality o f the rate structures will be performed in cooperation with City staff, and if necessary, City legal counsel. All data will be available for City review in Microsoft Excel or CSV.
Fee Structure
RDN will Review existing customer service fee structure and identify other potential areas for service and system charges (shut -down activities, back -flow devices, plan reviews, water service shut -offs, etc.) and recommend changes, if appropriate. We will also evaluate the existing water connection fees and make recommendations for any changes for “buy-in” and new capacity and a new water resource development fee to offset potable demand for future new service locations.
There are three methods generally used for calculating capacity charges in California:
1) Buy-In Method – system has sufficient capacity to serve new development. 2) Incremental Cost Method – system requires additional capacity to serve new development. 3) Combined Method – system has some capacity but requires additional capacity during planning horizon.
RDN will carefully review the City’s CIPs, master plan, and other relevant data to ensure we use the method that best meets the City’s current and future financial goals. Whichever method is used, the basic formula for calculating capacity charges is:
𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 𝐶ℎ𝑎𝑟𝑔𝑒 = 𝑆𝑦𝑠𝑡𝑒𝑚 𝑉𝑎𝑙𝑢𝑒
𝑆𝑦𝑠𝑡𝑒𝑚 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 × 𝑁𝑒𝑤 𝐶𝑢𝑠𝑡𝑜𝑚𝑒𝑟 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 𝐷𝑒𝑚𝑎𝑛𝑑𝑠
Evaluate Impacts
Traditionally, the financial impacts of proposed rates on customers have been evaluated based on hypothetical monthly usage levels, typically by customer class or meter size. However, an evaluation of hypothetical usage fails to consider City customers’ actual usage patterns, which may be drastically different from the estimated figures.
To overcome the limitations of this type of analysis, RDN has developed a Water Bill Impact Calculator that can evaluate the impact of potential rate adjustments to individ ual customers based on their historical usage. This gives the City a far more accurate understanding of how proposed rate adjustments will impact customers. Figure 2 is a sample chart from the bill impact tool which shows individual annual bill impacts on each customer by meter size.
We employ this tool during the rate -design process to evaluate the impact of various rate alternatives on City customers. Once RDN has proposed rate adjustments, the Bill Impact Calculator is an effective public engagement tool, allowing the City to see which customers would be most impacted by proposed rates and foresee potential challenges, which can be mitigated ahead of the Proposition 218 hearing.
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Figure 2. Sample Bill Impact Analysis by Customer Class
Sensitivity Analysis
Our standard econometric equation implemented for forecasting water demand includes variables for drought level. The United States Drought Monitor provides weekly drought data at the county level across the U.S. Included in this data set is the percentage of the county that was under various drought designations during the given week.
Including these variables for drought in our econometric equation used in the forecasting process enables RDN to examine the effect of drought on customer response. RDN also estimates the price-elasticity of demand for water by comparing the water usage of customers over time as water rates have changed. We include a section that incorporates a Monte Carlo simulation to assess customer’s responses to a wide variety of pote ntial weather, price, and regulatory conditions. By analyzing the results from thousands of simulations, our rates are designed to be prepared for a wide range of potential outcomes.
Rate Comparison Survey
We will prepare a rate comparison survey of at least five comparable agencies to benchmark the City’s current and proposed water and sewer rates. Comparisons will be made for users at high, average, and low consumption levels. We will request City input on agencies to include in the survey and summarize the results for public outreach, presentations, and the report.
Table 4. Task 4 – Rate Design Deliverables
Meetings ▪ Progress meetings via teleconference
RDN Deliverables
▪ Recommended rate adjustments
▪ Draft rate models in Excel (three rate options)
▪ Rate comparison survey
City Deliverables ▪ Policy goals and objectives for rates ▪ Rate feedback
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Task 5. Reports and Models
Rate Models
The models will be developed in an easy -to-use Microsoft Excel format designed to allow City staff to conduct sensitivity scenarios by testing various assumptions through an interactive dashboard (Figure 3). Factors that may be adjusted in the rate models include staff levels and salaries, operating expense levels, CIP spending, capital equipment funding, impacts of rate increases, and pass -through charges. The models will be introduced to City staff early in the study process. We will add worksheets gradually as we perform key analyses through the study and ask for the City’s review. By the time the study is complete, City staff will be fully familiarized with the models and be able to use the models to make data -driven decisions. Any changes to the underlying models will appear instantly in a dashboard for quick executive evaluation.
Rate Study Reports
The draft rate study reports will contain an overview, study objectives, assumptions, regulatory requirements, and methodologies. They will discuss short- and long-term financial planning, capital planning, cost of services, rate - setting analysis, bill impacts, and comparison surveys. Key outputs of data, analysis, and rationale will be visualized in the reports. The visualizations provided in the reports will be an effective tool to communicate conclusions to the City Council, customers, and other s takeholders. The main sections of the draft report at a minimum will include (please note that a sample report is appended to this proposal):
Table 5. Report Sections and Corresponding Contents
Heading Section Brief
Executive Summary A narrative to summarize the scope of the study.
Introduction A brief description of the City including organizational structure, population, service area, water and sewer system.
Methodology Used A description of the methodology used for analyzing the water and sewer rates and how the study complies with Proposition 218 and other applicable laws.
Financial Plan A review of O&M budget, overhead costs, capital plan, revenue analysis, needed revenue adjustments, inflation analysis, and customer growth/demand.
Cost Service A Description of current/proposed customer classes, Prop 218 compliant cost allocation to each class by function, and the total revenue requirements by each class.
Rate Design A detail of the proposed rate structures for water and sewer, proposed inflationary adjustments, and a typical bill for different types of customers.
Rate Impact A summary on the impacts rate changes will have on each customer and the community using RDN's Bill Impact Tool.
Sensitivity Analysis A discussion of how conservation, drought, and future statutory regulations will effect the ability of rates to fund revenue requirements.
Rate Comparison A comparison of monthly bills and of current and proposed rates with similar sized cities within Los angeles County and Gateway Cities.
Fee Design An assessment of the City’s existing customer service fee structure and identification other potential areas for service and system charges. A review of connection fees.
Objective: RDN will provide final executive reports and Microsoft Excel models for the rate studies to City staff upon project completion. Our reports will describe the process of the rate studies in sufficient detail to meet Proposition 218 and all other relevant legal requirements.
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We will incorporate City feedback into the final report and clearly demonstrate the nexus between costs and recommended rates in simple terms to fulfill Proposition 218 reporting requirements.
Table 5. Task 5. – Reports and Models Deliverables
Meetings ▪ Progress meetings via teleconference
RDN Deliverables ▪ Final Rate models in Excel
▪ Draft and final reports in Word and PDF formats
City Deliverables ▪ Comments, responses, and recommendations to draft report City Council Regular Meeting - Page 1042 of 1385
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Figure 3. Sample Management Dashboard
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Task 6. Proposition 218 Support
Proposition 218 Notice
We will work with City staff and legal counsel to prepare a Proposition 218 notice within the 45 -day noticing period. The notice will outline the proposed rate changes, the reasons for the changes, and the right for customers to challenge the rates. It is our understanding that the City will print and mail the notices.
Public Outreach
For public outreach, we believe a three -phase approach will help build community consensus by engaging stakeholders throughout the study process, especially at the two community workshops. The public outreach lead will be sub -consultant, Sanjay Gaur , assisted by our Project Manager , Anthony Elowsky . The three phases for public outreach are outlined below:
Phase I – Policy Objectives
Goal: Establish, codify, and build consensus for study policy objectives.
Community Meeting 1: Sanjay and Anthony will host a workshop with City Council to build consensus on policy objectives for the study. It is well recognized that there are inherent tensions among policy objectives. Sanjay will discuss these trade-offs so City stakeholders can share a mutual understanding of the priorities of the study. We will codify the priorities in a memorandum, which will help guide the study process.
Phase II – Transparency
Goal: Present the financial plans for each utility and demonstrate City transparency.
Phase III – Study Results and Implementation
Goal: Present rate and fee recommendations, help the community understand the trade-offs that were made and why, and build consensus for proposed rates and fees.
Proposition 218 Public Hearing: After mailing the Proposition 218 notice – which will outline the proposed rate changes, the reason for the changes, and the rights for customer to challenge the rates – RDN will present the results of the study and answer questions from the City Council and public at the Proposition 218 Hearing. In coordination with City legal counsel, we will use clear, concise language and visual messaging to communicate the rate study process and why the recommended rate structure was selected.
Community M eeting 2: We will discuss the process and assumptions used, including inflationary factors, to determine the City’s revenue requirements for the next 10 years. The community will have a clear picture of each utility’s financial outlook for the next decade, including reserve levels and anticipated debt, and RDN will present expected revenue under the current rates and fees to identify if there is an anticipated shortfall. Recommended rates and fees will close the gap between revenue projections and requirements for the study period.
Outreach Materials
RDN will develop targeted outreach materials as determined by the rates outreach plan. Targeted methodologies may include, but are not be limited to, survey, FAQs, newsletters, bill inserts, mailers, brochures, flyers and advertising. Our preliminary fee proposal includes a suite of outreach materials detailed in the Outreach Plan.
Additional outreach materials may be ordered.
Objective: RDN’s Proposition 218 support will include Proposition 218 notice design and presentations that effectively communicate the City’s message to customers.
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Table 7. Task 6 – Proposition 218 Support Deliverables
Meetings ▪ Proposition 218 Public Hearing
RDN Deliverables
▪ Outreach materials
▪ Draft and final Hearing presentations
▪ Proposition 218 Hearing Notice
City Deliverables ▪ Comments and recommendations to draft presentation ▪ Mailing Proposition 218 notices
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EXPERIENCE
Our clients appreciate that we take the lead in data collection and analysis, relieving the burden from City staff.
Table 8 presents a selection of our proposed project team’s recent experience with utilities of similar size, demographics, and project scope to the City.
Table 8. RDN Relevant Recent Projects
Agency Project
Lake Arrowhead CSD Water and Wastewater Rate Study (2022) Costa Mesa Sanitary District Wastewater Rate Study (2022) Moulton Niguel Water District Water, Wastewater, Recycled Water Cost of Service Peer Review (ongoing) City of Alhambra Water Rate Study (2022)
City of Loyalton Wastewater Rate Study (2022)
Santa Clarita Valley Water District Ratepayer's Advocate for Water, Recycled Water, Wholesale Rates (ongoing) California City Water and Wastewater Capacity Fees (ongoing) Napa County (LBRID/NBRID) Water and Wastewater Rate Studies (2020); Post-Fire Review (ongoing) Mid-Peninsula Water District Capacity Fee Study (ongoing) Lost Hills Utility District Wastewater Rate Study (2021) West Valley Water District Development Impact Fee Study (2021) Rosamond CSD Water and Wastewater Rate Study (2021)
Ventura River Water District Water Rate Study (2018); Rate Analysis Update (2021) Rand CWD Water Rate Study (2021)
Center Water Company Water Rate Study (2021)
Quartz Hill Water District Water Rate Study (2020)
Hi-Desert MWC Water Rate Study (2020)
Santa Clarita Valley Water District Ratepayer's Advocate for Capacity Fees (2020) Palmdale Water District Water Rate Study (2019)
West Valley CWD Water Rate Study (2019)
Patterson Tract CSD Water Rate Study (2019)
Orosi Public Utility District Wastewater Rate Study (2019) Apple Valley View MWC Water Rate Study (2019)
Juniper Riviera CWD Water Rate Study (2019)
Thunderbird CWD Water Rate Study (2019)
Sheep Creep Water Company Water Rate Study (2019)
CSD - Community Services District; CWD - County Water District; MWC - Mutual Water Company City Council Regular Meeting - Page 1046 of 1385
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QUALIFICATIONS
TEAM QUALIFICATIONS
RDN’s proposed project team is led by our principal economist, Dr. Robert Niehaus, and project manager, Anthony Elowsky. Mr. Elowsky will serve as the City’s main point of contact and lead the conduct of data collection, analysis, rate-setting, and report drafting. Brief bios and responsibilities for all team members and sub-consultants are provided on the following pages. Full resumes for key RDN staff are appended to this proposal. We affirm that our proposed project team has adequate availability to meet project objectives as outlined in the proposed schedule and that our proposed project team will not change without prior approval from the City.
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SUBCONSULTANTS
Water Resources Economics
Mr. Sanjay Gaur will serve as a Senior Advisor, drawing upon his decades of expertise to drive innovative solutions throughout the City’s study. Sanjay Gaur, Principal Consultant at Water Resources Economics, has over 25 years of financial and rate consult ing experience in water and wastewater utility administration . He has provided consulting services to over 100 agencies throughout California. He has co -authored the AWWA’s Manual M1 Principles of Water Rates, Fees and Charges, 7th Edition, AWWA’s Water Rates, Fees, and the Legal Environment, 2nd Edition, and Water and Wastewater Finance and Pricing: The Changing Landscape . Mr. Gaur will provide technical support and advise on public outreach-related solutions.
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REFERENCES
With over 90 percent of our work resulting from repeat business, RDN prides itself on continuing relationships that we have developed over three decades of consulting. We invite you to contact our references to verify our quality of service on similar engagements. A sample of our past and current projects are highlighted below.
Lake Arrowhead Community Services District
Water and Wastewater Rate Study (June 2021 – February 2022) RDN staff: Niehaus, Elowsky, Kido, Kallerud, VanDinther Lake Arrowhead Community Services District retained RDN to develop financial plans and rate recommendations for three unique water utilities and one sewer utility. Historically, the District maintained a primarily seasonal user base. However, during the pandemic, new usage patterns emerged that posed unique challenges to projecting demand.
We used an econometric approach to produce new demand projections that incorporated these new consumption patterns. To smooth the transition of proposed rate adjustments, RDN assisted the District in the timing of capital projects through the study period and beyond. Our proposed rates improved customer equity by adding customer classes to the rate calculations and distributing costs among larger and smaller users. The District’s rates were approved in March 2022.
Rosamond Community Services District
Water & Wastewater Rate Study (November 2020 – June 2021) RDN staff involved: Niehaus, Elowsky, Kido, Kallerud
Rosamond CSD retained RDN to produce water and sewer rates with the primary goal to improve equity between customer classes. RDN recommended different rates for commercial customers that reflect their unique usage characteristics which improved the equity for all District customers. Additionally, we provided recommendations to adjust the width of the District’s water rate tiers that were based on efficient indoor and outdoor water use for residential customers to comply with the new state regulations: AB 1668 and SB 606. For sewer customers, RDN completed a detailed analysis on each individual commercial customer’s flow and effluent strength before rates were presented to the Board and ratepayers. The proposed rates were approved and implemented in July 2021.
Brad Rockabrand
Finance Director
650-591-8941
3 Dairy Lane
Belmont, CA 94002
John O’Brien
Finance Manager
909-336-7108
27307 CA-189
Blue Jay, CA 92317
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City of California City
Water, Sewer, Recycled Water Rates; Water and Wastewater Capacity and Miscellaneous Fee Studies (Ongoing)
RDN staff: Niehaus, Elowsky, Kido, Kallerud
The City of California City engaged RDN to produce water, recycled, and sewer rate studies as well as capacity and miscellaneous fee studies. We evaluated the City’s current rate structures and provided recommendations to ensure rates complied with Proposition 218. Included in those recommendations was an innovative approach to setting water rates, where customers were grouped by meter size within their customer classifications, further improving the equitability of recommended water rates. RDN is currently completing the capacity fee study, evaluating how to best include new customers’ investment into a utility network that was originally sized for a much larger service population that has not yet materialized. The rate and fee studies are scheduled to be completed by August of 2022.
Palmdale Water District
Water Rate Study (April 2019 – December 2019)
RDN staff: Niehaus, Kido, Elowsky, Kallerud
Palmdale Water District retained RDN to improve their previously adopted water budget -based rate structure and create a new five - year rate schedule. RDN gathered historical water usage and geospatial data on all customers and sub -classified commercial accounts into three categories based on usage patterns and peaking factors: Commercial, Industrial, and Institutional. Next, RDN conducted five -year demand forecasts for each meter size and customer class combination. These forecasts supporte d the Cost of Service Analysis and budget -based rate setting. After rates were designed, RDN performed a customer -level bill impacts analysis that supported customer outreach during the Proposition 218 process.
“RDN was incredibly responsive beginning with the proposal process and throughout the study. I cannot think of a time when I waited for more than 12 hours for a response. The project manager often replied to my emails after hours and on weekends. The team worked with District staff to determine the most effective and efficient timeline and then helped us manage our own time in regard to information requests, data analysis time requirements and deliverables. Each RDN team member gently reminded Distr ict staff of upcoming deadlines and helped each of us work through our originally agreed timeline in order to meet the deadlines we had discussed.“
Brad Rockabrand, Finance Director, Rosamond Community Services District
Richard Vazquez
Chief Wastewater Plant Operator
760-373-3720
10935 Nelson Drive
California City, CA 93505
Adam C. Ly
Assistant General Manager
661-456-1062
[email protected]
2029 E Avenue Q
Palmdale, CA 93550
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SCHEDULE
PROJECT SCHEDULE
Figure 4 presents a preliminary schedule for completing the City’s study for a potential July 1, 2023 implementation date for new rates. The schedule assumes timely kick-off, City data, feedback, and availability for meetings. The final schedule will be discussed and agreed upon at the Kick-off Meeting.
Figure 4. Preliminary Project Schedule
Tasks
Task 1. Project Management/Meetings
Task 2. Long-Term Financial Plan
Task 3. Cost of Service Analysis
Task 4. Rate Design
Task 5. Report & Model
Task 6. Proposition 218 Support
Kickoff Meeting
Council Meeting
Community Meeting
Final Report / Rate Model
Proposition 218 Notice
Rate Implementation/Hearing
Feb-23Dec-22 Jan-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23
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This Page Intentionally Left Blank
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ADDITIONAL INFORMATION
APPENDIX
The appendix of this proposal includes full resumes for key RDN personnel and a rate study report similar to the proposed study.
City Council Regular Meeting - Page 1053 of 1385
Robert D. Niehaus, Ph.D.
Managing Director & Principal Economist
OVERVIEW & BIOGRAPHY
Dr. Niehaus is widely recognized for his expertise in the economics of water resources and the environment. He has broad experience managing public and private sector water and land resource economic analyses and planning efforts, with expertise in water and wastewate r fee and rate analysis, cost -benefit evaluations, water demand econometric modeling and forecasting, and regional economics. His expertise extends to river basin planning, groundwater management, economic impacts of water and other resource -use projects, military base realignment, housing, energy, and global climate change. He has provided expert support to senior civilian and military decision -makers for numerous projects. Dr. Niehaus has published a wide range of applied studies in these fields and has directed the successful completion of projects at more than 200 locations worldwide, with much of this experience in Southern California.
RELEVANT PROJECT HIGHLIGHTS
California City, Water and & Sewer Impact Fee Study, Ongoing The City of California City provides water and sewer service for over 4,500 accounts in Kern County, California. California City retained RDN to complete a water and sewer rate and capacity fee study in 2021 which includes a long-term financial plan and a 5-year rate proposal. Dr. Niehaus, working for RDN, serves as a managing director and principal economist for all rate and concerns. This project is ongoing.
West Valley Water District, Development Impact Fee Study 2021 West Valley Water District provides water service for over 22,000 accounts in San Bernardino and Riverside Counties, California. West Valley WD retained RDN to complete a water capacity fee study in 2020 which included a detailed analysis of the District’s capacity fee schedule and growth projections. Dr.
Niehaus, working for RDN, served as the managing director for the fee study, which was completed in 2021.
ADDITIONAL PROJECT EXPERIENCE
City of Alhambra, Water Rate Study
Costa Mesa Sanitary District, Wastewater Rate Study
Rosamond Community Services District, Water and Wastewater Rate Studies Napa County, Water and Wastewater Rate Studies
Mid-Peninsula Water District, Capacity Fee Study
Quartz Hill Water District, Water Rate Study
Palmdale Water District, Water Rate Study
Santa Clarita Valley Water District, Water Rate Study California Rural Water Association, Water & Sewer Rate Studies Ventura River Water District, Cost of Service and Rate Setting Study Moulton Niguel Water District, Cost of Service Peer Review Carpinteria Valley Water, District Cost of Service and Rate Setting Study Manatt, Phelps, & Phillips, LLC, Rate Comparison Study
TECHNICAL SPECIALTIES
Project Management
Regional and Resource
Economics
Rate and Fee Comparison
Economic Impact Studies
Public Sector Water Economic
and Planning Analysis
Technical Report Review
Cost of Service Rate Studies
Development Impact Fees
Resource Planning
Econometric Modeling
Survey Design and
Implementation
PROFESSIONAL HISTORY
Robert D. Niehaus, Inc.
Managing Director
(1983-Present)
EDUCATION
Doctor of Philosophy in
Economics (1979)
University of Maryland
Bachelor of Arts in Government
(1972) Oberlin College
PROFESSIONAL MEMBERSHIPS
American Water Works
Association
American Economic Association
National Association for
Business Economics
City Council Regular Meeting - Page 1054 of 1385
National Resources Defense Council, LADWP Data Collection & Water Rate Analysis
West Basin Municipal Water District, Landscape Irrigation Efficiency Program Las Virgenes Water Budget Model
Fremont Valley Preservation Project, Water Rate, and Revenue Analysis Study Golden State Water Company, Comparative Water Rate Analysis Goleta Sanitary District/Goleta West Sanitary District, Economic Analysis of Development Projections
Santa Barbara County, Economics of Groundwater Management City of Santa Barbara, Desalination Plant Environmental Impact Report United States Army Corps of Engineers, Flood Protection and Recreation Study City of Santa Barbara, Long-Term Water Sales and Revenue Requirements Forecast Analysis
Santa Ynez River Basin, Planning and Cachuma Project Water Allocation Analyses
City Council Regular Meeting - Page 1055 of 1385
Anthony Elowsky, M.A.
Project Manager, Financial Analyst
OVERVIEW & BIOGRAPHY
Mr. Elowsky manages RDN’s utility financial planning projects, including water and wastewater rate - and fee -setting studies. His expertise lies in water and wastewater financial planning, cost of service analysis, rate and fee design, and applied economic research. He manages water and wastewater rate studies, capacity fee studies, and builds customized financial models to help utilities meet their financial goals. He has alsoconducted comparative water rate analyses and compiled and analyzed data on water rates and f inancial information for more than 100 purveyors throughout California. He provides rate setting expertise to professional organizations for both water and wastewater concerns.Mr. Elowsky holds a bachelor’s degree from California State University, Los Angeles as well as a master’s degree from California State University, Fullerton.
RELEVANT PROJECT HIGHLIGHTS
Lake Arrowhead Community Services District, Water & Wastewater Rate Study 2022
Lake Arrowhead Community Services District provides water and sewer service for over 8,000 accounts in San Bernardino County, California. Lake Arrowhead CSD retained RDN to complete a water and sewer rate study in 2021 which included a long-term financial plan and a 5-year rate proposal for four separate utilities. Dr. Niehaus, working for RDN, served as the managing director for the rate study, which was completed in 2022.
City of Greenfield, Water and Wastewater Rate Studies, Ongoing The City of Greenfield provides sewer and water service for over 3,500 customers in Monterey County, California. Through the CRWA, the City of Greenfield retained RDN to complete a water and sewer rate studywhich included a 5-year rate plan and long-term financial model. Mr. Elowsky, working for RDN, serves as the project manager for the rate study. The project is ongoing.
Hilton Creek Community Services District, Wastewater Rate and Connection Fee Study 2022
Hilton Creek Community Services District provides sewer service for over 500 connections in Mono County, California. Hilton Creek CSD retained RDN to complete a sewer rate and fee study which includes a 5-year rate plan, long- term financial model, and a capacity fee analysis. Mr. Elowsky, working for RDN, serves as the project manager and principal contact for the rate and fee study. This project is currently ongoing.
ADDITIONAL PROJECT EXPERIENCE
City of Alhambra, Water Rate Study
Rosamond Community Services District, Water and Wastewater Rate Study Napa County – LBRID/NBRID, Water and Wastewater Rate Studies West Valley Water District, Development Impact Fee Study Mid-Peninsula Water District, Capacity Fee Study
TECHNICAL SPECIALTIES
Financial Planning
Cost of Service Analysis
Rate Design
Database Management
Rate Comparison
Data Analysis
Technical Report Review
PROFESSIONAL HISTORY
Robert D. Niehaus, Inc.
Project Manager/Analyst (2018-
Present)
Market Researcher (2017-2018)
Dudek Environmental, Inc.
Field Technician (2016-2017)
EDUCATION
Master of Arts in Anthropology
(2020) CSU, Fullerton
Bachelor of Arts in Anthropology
(2014) CSU, Los Angeles
PROFESSIONAL PRESENTATIONS
Wastewater Rate Changes and
the Journey to Acceptance
California Rural Water
Association Expo 2022,
Stateline, NV. March.
Incorporating Customer Use
Distributions when Calculating
Drought Surcharges. Paper
presented at the ACWA Virtual
Fall Conference, October 27-
29, 2020.
City Council Regular Meeting - Page 1056 of 1385
California City, Water and Wastewater Capacity Fee Studies Manatt, Phelps, and Phillips, LLC, Water Rate Comparison Study Palmdale Water District, Water Rate Study
Santa Clarita Valley Water, Water Rate Review
Apple Valley Heights County Water District, Water Rate Study Daggett Community Services District, Water Rate Study
Mariana Ranchos County, Water Rate Study
Apple Valley View Mutual Water Company, Water Rate Study Sheep Creek Water Company, Water Rate Study
Thunderbird County Water District, Water Rate Study
Juniper Riviera Community Water District, Water Rate Study West Valley County Water District, Water Rate Study
Orosi Public Utility District, Water and Wastewater Rate Study City Council Regular Meeting - Page 1057 of 1385
Sanjay Gaur, M.P.A., M.S.
Senior Advisor; Water Resources Economics
OVERVIEW & BIOGRAPHY
Mr. Gaur has over 25 years of financial and rate consulting experience in water and wastewater utility administration . He has provided consulting service s to over 100 different agencies, including the Caribbean Region. He has often provided his insight into utility rate and conservation -related matters for various publications including: authoring articles in Journal AWWA ; being quoted in various newspaper articles including the Los Angeles Times and the New York Times . He has co-authored several industry guide books including AWWA’s Manual M1 Principles of Water Rates, Fees and Charges, 7th Edition, AWWA’s Water Rates, Fees, and the Legal Environment, Second Edition , and Water and Wastewater Finance and Pricing: The Changing Landscape . He is a member of the AWWA’s Rates and Charges Committee. Mr. Gaur was a Peace Corps Volunteer in Bulgaria. He has MS in Applied Economics from UC Santa Cruz and a n MPA/ID from the Kennedy School of Government, Harvard University.
RELEVANT PROJECT EXPERIENCE
Alameda County Water District - Financial Plan Study and Annual Updates, Conservation Tiered Rate Feasibility Analysis, Drought Rate Study, Water Cost of Service and Rate Study, and other Ad-hoc Support
American Water Company - Water Rate Study
Borrego Water District - Financial Planning Study, Groundwater Sustainability Plan, Water Rate Study, and Basin Management Evaluation City of Calexico - Water and Sewer Rate Study
City of Camarillo - Water and Wastewater Rate Study, Financial Plan Study, and Cost of Service Study,
Carpinteria Sanitary District - Sewer Rate and Fee Study Castaic Lake Water Agency - Wholesale Water Rate Study, Drought Rates, Rate Analysis, and Facility Capacity Fees
Central Basin Municipal Water District - Financial Plan City of Chino Hills - Water Budget Rate Design, Financial Plan Study and Cost of Service and Rate Design
City of Chowchilla - Water and Wastewater Rate Study
Coastside County Water District - Water Rate Study
Contra Costa Water District - Financial Plan Study, Water Rate Study and Drought Rates Study
City of Corona - Water Budget Rate Study, Wastewater Capacity Fees Study Cucamonga Valley Water District - Financial Plan, Water Conservation Rate Study, and Drought Rates
East Bay Municipal Utility District - Water and Wastewater Cost of Service and Rate Study
Eastern Municipal Water District - Water Budget Study and Financial Plan Study
East Orange County Water District - Water Budget Study, Sewer Capacity Fees Study, and Financial Plan Study
TECHNICAL SPECIALTIES
Proposition 218 Compliance
Financial Analysis
Cost of Service Studies
Conservation Rate Design
Capacity Fee Studies
Cost Benefit Analysis
Econometric Analysis
PROFESSIONAL HISTORY
Water Resources Economics, LLC
Principal Consultant
(2021-Present)
Raftelis Financial Consultants, Inc.
Vice President (2015-2021)
Senior Manager (2012-2014)
Manager (2009-2012)
Red Oak Consulting (2007-2009)
Munifinancial (2005-2006)
A&N Technical Services (1993-
2003)
EDUCATION
Master of Public Administration
(2003) Kennedy School of
Government, Harvard University
Master of Science, Applied
Economics (1994)
University of California Santa Cruz
Bachelor of Arts, Economics and
Environmental Studies (1992)
University of California Santa Cruz
City Council Regular Meeting - Page 1058 of 1385
Elsinore Valley Municipal Water District – Financial Mode, Drought Rate Analysis, Water and Recycled Water Rate Study, Capacity Fee Study, and Wastewater Rate Study
El Toro Water District - Water Budget Study and Recycled Water Financial Plan Study City of Escondido - Water and Wastewater Rate Study and Capacity Fees Study Fallbrook Public Utilities District - Water, Wastewater and Recycled Water Rate Study City of Glendora - Water Budget Feasibility Study
City of Gridley - Water Rate Study
Helix Water District - Water Rate and Cost of Service Study Hi-Desert Water District - Water Rate Study
City of Hollister - Sewer Rate and Impact Fee Study, Water Rates Study, and Capacity Fee Study City of Huntington Beach - Sewer Rate Study, Water Budget Rate Study, and Financial Plan Study - Water and Wastewater Rate Study
Indio Water Authority - User Fee Study and Water Rate Study Inland Empire Utilities Agency - Conservation Rate Structure Workshop and Financial Plan Study Inyo County Water Department - Water Rate Study
Irvine Ranch Water District - Conservation Study
Jurupa Community Services District - Water Budget Study La Habra Heights County Water District - Wheeling Rate Study and Financial Plan Study La Puente Valley County Water District - Water Rate and Fee Study Las Virgenes Municipal Water District - Water Budget Rate Study, Water, RW and WW Financial Plan and Rate Studies, Capacity Fees Study
City of Livermore - Water Cost of Service Study
City of Livingston - Water Rate Study
City of Lomita - Water Rate Workshop
City of Long Beach - Water, Recycled Water and Wastewater Financial Plan and Rate Studies Los Alamos Community Services District - Water and Wastewater Rate Study Los Angeles Department of Water and Power - Daily Demand Estimates City of Lynwood - Cost Allocation Plan
City of Malibu - Wastewater and Recycled Water Rate Study Mammoth Community Water District - Water Rate Study
City of Merced - Water and Sewer Rate and Impact Fee Study Mesa Consolidated Water District - Financial Plan Study, Cost Comparison Study, Water and Recycled Water Cost of Service and Rate Design Study
Metropolitan Water District of Southern California - Drought Allocation Model, Long Range Financial Plan, and Cost of Service Evaluation
Mill Valley – Tamalpais Community Services District - Financial Plan Study Mojave Water Agency - Financial Plan Study, Financial Impact Analysis for Water Exchange and Leasing Programs and Water Reliability Rate Development
Modesto Irrigation District - Stormwater Fee Study
Monterey Peninsula Water Management District - Water Budget Study Municipal Water District of Orange County - Conservation Potential Study and Rate Study City of Newport Beach - Water Rate Study
City of Palo Alto - Water Cost of Service and Rate Study Pasadena Water and Power - Water Cost-of-Service and Rate Design Study Placer County Water Agency - Cost of Service, Rate, and Financial Plan Study City of Pomona - Rate Study
City of Port Hueneme - Water and Solid Waste Rate Study City of Orange - Water and Sanitation Rate Study
City Council Regular Meeting - Page 1059 of 1385
Ichiko Kido, M.B.A.
Senior Technical Advisor
OVERVIEW & BIOGRAPHY
Ms. Kido has 30 years of experience in utility financial planning. Ms. Kido advises RDN as a leading expert in developing rates and fees that meet Proposition 218 requirements and other laws and regulations. She is widely recognized as a leading consultant for designing conservation -based water rates, including budget-based rate designs. She also managed capacity fee charges throughout the state, ensuring the fees are compliant despite the dynamic regulatory landscape. Her expertise is founded up on her experience working with more than 200 water utilities throughout California. Ms. Kido is a member of the American Water Works Association (AWWA) and promotes best practices in the AWWA’s Manual M1 Principles of Water Rates, Fees and Charges and the WEF Manual of Practice Number 27.
RELEVANT PROJECT HIGHLIGHTS
Costa Mesa Sanitary District, Wastewater Rate Study 2022 Costa Mesa Sanitary District provides sewer service for nearly 27,000 connections in Orange County, California. Costa Mesa SD retained RDN to complete a sewer collection rate study for $29,500 which included a 5-year rate plan and long-term financial model. Ms. Kido, working for RDN, served as the project manager and principal contact for the rate study. Work was completed and the rates designed by RDN were approved in 2022.
Moulton Niguel Water District, Cost of Service and Financial Plan Peer Review 2017 and 2022
Moulton Niguel Water District provides water and sewer service for nearly 170,000 people in Orange County, California. Moulton Niguel WD retained RDN to complete a peer review for all of their internal rate and fee studies in 2021 for $57,890 which included a review of the District’s proposed rates for the next 5 years. Ms. Kido, working for RDN, served as the project manager and principal contact for the rate review, which was completed in 2022. Ms. Kido currently serves as a senior consultant for the capacity fee review, currently ongoing.
Rosamond Community Services District, Water and Wastewater Rate Study 2021
Rosamond Community Services District provides water and sewer service for over 5,000 accounts in Kern County, California. Rosamond CSD retained RDN to complete a Water and sewer rate study in 2020 for $89,060 which included a long-term financial plan and a 5-year rate proposal. Ms. Kido, working for RDN, served as the project manager and principal contact for the rate study, which was completed in 2021.
California City, Water, Recycled Water, and Sanitary Sewer Rate Studies, Ongoing
The City of California City provides water and sewer service for over 4,500 accounts in Kern County, California. California City retained RDN to complete a
TECHNICAL SPECIALTIES
Financial Planning
Cost of Service Analysis
Rate Design
Rate Comparison Analysis
Housing Market Analysis
Data Analysis
Technical Report Review
Survey Interviewing
Statistical Analysis
PROFESSIONAL HISTORY
Robert D. Niehaus, Inc.
Senior Technical Advisor
(2022 – Present)
Program Manager
(2005 – 2022)
EDUCATION
Master of Business
Administration (2014) Martin V.
Smith School of Business &
Economic, California State
University, Channel Islands
Bachelor of Arts in Law (1989)
Fukuoka University, Japan
PROFESSIONAL MEMBERSHIPS
American Water Works
Association
Association of California Water
Agencies
California Rural Water
Association
Association of California Water
Agencies
City Council Regular Meeting - Page 1060 of 1385
water and sewer rate and capacity fee study in 2021 for $85,080 which includes a long-term financial plan and a 5-year rate proposal. Ms. Kido, consulting for RDN, serves as a senior technical advisor for all rate and concerns.
This project is ongoing.
ADDITIONAL PROJECT EXPERIENCE
City of Alhambra, Water Rate Study
Moulton Niguel Water District, Capacity Fee Peer Review Study Quartz Hill Water District, Water Rate Study
California City, Water and Wastewater Capacity Fees
Lake Arrowhead Community Services District, Water and Wastewater Study City of Loyalton, Wastewater Rate Study
Hilton Creek Community Services District, Wastewater Rate and Connection Fee Study West Valley Water District, Development Impact Fee Study Santa Clarita Valley Water Agency, Water Rate Calculator Online Tool Mid-Peninsula Water District, Capacity Fee Study
Santa Clarita Valley Water Agency, Rate Payer Advocate City of Greenfield, Water and Wastewater Rate Studies Lake County Sanitation District, Wastewater Rate Study San Simeon Community Services District, Wastewater Rate Study Manatt, Phelps, and Phillips, LLC, Water Rate Comparison Study Ventura River Water District, Water Rate Study
Palmdale Water District, Water Rate Study
California Rural Water Association, Water Rate Studies Moulton Niguel Water District, Cost of Service Analysis Carpinteria Valley Water District, Cost of Service Analysis Daggett Community Services District, Water Rate Study Mariana Ranchos County, Water Rate Study
Rand Community Water District, Water Rate Study
Sheep Creek Water Company, Water Rate Study
Lost Hills Utility District, Wastewater Rate Study
West Valley County Water District, Water Rate Study
Thunderbird County Water District, Water Rate Study
Orosi Public Utility District, Water and Wastewater Rate Study City Council Regular Meeting - Page 1061 of 1385
LAKE ARROWHEAD
COMMUNITY SERVICES DISTRICT
2022 Water and Sewer Rate Study
Final Report
March 17th, 2022
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LAKE ARROWHEAD COMMUNITY SERVICES DISTRICT
2022 WATER AND SEWER RATE STUDY
FINAL REPORT
Prepared for:
Lake Arrowhead Community Services District
27307 State Hwy. 189
Blue Jay, CA 92317
Prepared by:
ROBERT D. NIEHAUS, INC.
140 East Carrillo Street
Santa Barbara, CA 93101
(805) 962-0611
RDN Project Number 311
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City Council Regular Meeting - Page 1065 of 1385
January 25, 2022
Mr. John Obrien
Finance Manager
Lake Arrowhead Community Services District
27307 State Hwy. 189
Blue Jay, CA 92317
Subject: 2022 Water and Sewer Rate Study
Dear Mr. OBrien,
Robert D. Niehaus, Inc. is pleased to provide this Financial Planning, Revenue Requirements, Cost of Service, and Rate Setting Analysis report to the Lake Arrowhead Community Services District. This rate study includes a financial plan to determine the revenue requirements for the next five years and a comprehensive review of the District’s current rates based on the cost of service principles. This report outlines the approach, methodology, findings, and recommendations of the study. The report also includes an extensive customer billing impact study. Each of the components of this study has enhanced the equitability of the rates we propose.
The proposed rates were developed utilizing the District’s customer usage data, billing records, accounting, operating and management records, capital plan, and reserve policies. Based on the District provided data, key assumptions were made for the study using appropriate resources and our econometric and financial expertise.
We are confident that the rates proposed in this report are cost-based and are fully compliant with Proposition 218 and other legal requirements.
It has been an absolute pleasure and honor to work with your District. We thank you, Ms. Catherine Cerri, and the Board of Directors for the support provided during this study.
Respectfully submitted,
Robert D. Niehaus, Ph.D. Ichiko Kido, MBA
Managing Director/Principal Economist Program Manager/Sr. Financial Analyst
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Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study
TABLE OF CONTENTS
TABLE OF CONTENTS ................................ ................................ ................................ ................................ ...... i LIST OF TABLES ................................ ................................ ................................ ................................ ............. iii LIST OF FIGURES ................................ ................................ ................................ ................................ ............. v EXECUTIVE SUMMARY ................................ ................................ ................................ ................................ ...1 Study Overview .......................................................................................................................................................1 Arrowhead Woods Water System ..........................................................................................................................2 Financial Overview .............................................................................................................................................2 Current Water Rates ...........................................................................................................................................3 Proposed Water Rates ........................................................................................................................................4 Private Fire Protection ........................................................................................................................................5 Deer Lodge Park Water System ..............................................................................................................................5 Financial Overview .............................................................................................................................................5 Current Water Rates ...........................................................................................................................................6 Proposed Water Rates ........................................................................................................................................7 Rimforest Water System.........................................................................................................................................7 Financial Overview .............................................................................................................................................8 Current Water Rates ...........................................................................................................................................8 Proposed Water Rates ........................................................................................................................................9 Sewer System ...................................................................................................................................................... 10 Financial Overview .......................................................................................................................................... 10 Current Sewer Rates ........................................................................................................................................ 11 Proposed Sewer Rates ..................................................................................................................................... 11 1 INTRODUCTION ................................ ................................ ................................ ................................ .... 13
1.1 About LACSD ............................................................................................................................................ 13
1.2 Legal Framework ..................................................................................................................................... 14
1.3 Methodology ........................................................................................................................................... 15
1.4 Key Assumptions ..................................................................................................................................... 16 Escalation Factors ............................................................................................................................................ 16 Equivalent Meter Size ...................................................................................................................................... 18 2 ARROWHEAD WOODS WATER SYSTEM ................................ ................................ ................................ . 19
2.1 Financial Plan ........................................................................................................................................... 19 Account Growth............................................................................................................................................... 19 City Council Regular Meeting - Page 1068 of 1385
ii
Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Demand Projections ........................................................................................................................................ 19 Revenues ......................................................................................................................................................... 20 Operating and Maintenance (O&M) Expense ................................................................................................. 20 Other Obligations ............................................................................................................................................ 20 Revenue Requirements ................................................................................................................................... 21 Financial Plan ................................................................................................................................................... 22
2.2 Cost of Service Analysis ........................................................................................................................... 24
2.3 Water Rate Design ................................................................................................................................... 25 Fixed Charge .................................................................................................................................................... 26 Volumetric Rates ............................................................................................................................................. 30
2.4 Bill Impact Analysis .................................................................................................................................. 33 3 DEER LODGE PARK WATER SYSTEM ................................ ................................ ................................ ....... 35
3.1 Financial Plan ........................................................................................................................................... 35 Account Growth............................................................................................................................................... 35 Demand Projections ........................................................................................................................................ 35 Revenues ......................................................................................................................................................... 36 Operating and Maintenance (O&M) Expense ................................................................................................. 36 Other Obligations ............................................................................................................................................ 36 Revenue Requirements ................................................................................................................................... 37 Financial Plan ................................................................................................................................................... 37
3.2 Cost of Service Analysis ........................................................................................................................... 39
3.3 Water Rate Design ................................................................................................................................... 40 Fixed Charge .................................................................................................................................................... 40 Volumetric Rates ............................................................................................................................................. 41
3.4 Bill Impact Analysis .................................................................................................................................. 42 4 RIMFOREST WATER SYSTEM ................................ ................................ ................................ ................. 43
4.1 Financial Plan ........................................................................................................................................... 43 Account Growth/Demand Projections ............................................................................................................ 43 Revenues ......................................................................................................................................................... 43 Operating and Maintenance (O&M) Expense ................................................................................................. 44 Other Obligations ............................................................................................................................................ 44 Revenue Requirements ................................................................................................................................... 45 Financial Plan ................................................................................................................................................... 45
4.2 Cost of Service Analysis ........................................................................................................................... 46 City Council Regular Meeting - Page 1069 of 1385
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Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study
4.3 Water Rate Design ................................................................................................................................... 47 Fixed Charge .................................................................................................................................................... 48 Volumetric Rates ............................................................................................................................................. 49
4.4 Bill Impact Analysis .................................................................................................................................. 51 5 SEWER SYSTEM ................................ ................................ ................................ ................................ .... 53
5.1 Financial Plan ........................................................................................................................................... 53 Growth Projections .......................................................................................................................................... 53 Revenues ......................................................................................................................................................... 53 Operating and Maintenance (O&M) Expense ................................................................................................. 54 Other Obligations ............................................................................................................................................ 55 Revenue Requirements ................................................................................................................................... 56 Financial Plan ................................................................................................................................................... 56
5.2 Cost of Service Analysis ........................................................................................................................... 58
5.3 RATE DESIGN ........................................................................................................................................... 59 Sewer Rates ..................................................................................................................................................... 60
5.4 BILL IMPACTS ........................................................................................................................................... 60
LIST OF TABLES
Table ES- 1. Proposed Revenue Adjustments for the Arrowhead Woods Water System, FY 2021-22 – FY 2025-26 .............. 2 Table ES- 2. Current Fixed Water Rates ................................................................................................................................ 3 Table ES- 3. Current Variable Water Rates ........................................................................................................................... 4 Table ES- 4. Proposed Fixed Water Rates, FY 2021-22 .......................................................................................................... 4 Table ES- 5. Proposed Variable Water Rates, FY 2021-22 ..................................................................................................... 4 Table ES- 6. Proposed Private Fire Protection Rates ............................................................................................................ 5 Table ES- 7. Proposed Revenue Adjustments for the Deer Lodge Park Water System, FY 2021 -22 – FY 2025-26 .................. 5 Table ES- 8. Current Fixed Water Rates ................................................................................................................................ 6 Table ES- 9. Current Volumetric Water Rates ....................................................................................................................... 7 Table ES- 10. Proposed Water Rates, Deer Lodge Park ........................................................................................................ 7 Table ES- 11. Proposed Revenue Adjustments for the Water System, FY 2021-22 – FY 2025-26 .......................................... 8 Table ES- 12. Current Water Rates ....................................................................................................................................... 9 Table ES- 13. Proposed Fixed Rates...................................................................................................................................... 9 Table ES- 14. Proposed Volumetric Rates, Residential ......................................................................................................... 9 Table ES- 15. Proposed Volumetric Rates, Commercial ...................................................................................................... 10 City Council Regular Meeting - Page 1070 of 1385
iv
Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Table ES- 16. Proposed Revenue Adjustments for the Water System, FY 2021-22 – FY 2025-26 ........................................ 10 Table ES- 17. Current Sewer Rates ..................................................................................................................................... 11 Table ES- 18. Proposed Sewer Rates .................................................................................................................................. 11 Table 1-1. AWWA Equivalent Meter Ratios ....................................................................................................................... 18 Table 2-1. Revenue Forecast for Arrowhead Woods Water System, FY 2021 -22 – FY 2025-26 .......................................... 20 Table 2-2. O&M Expense Forecast for Arrowheads Water System, FY 2021 -22 – FY 2025-26 ............................................. 20 Table 2-3. Revenue Requirements for Arrowhead Woods Water System, FY 2021 -22 – FY 2025-26 .................................. 22 Table 2-4. Financial Plan for Arrowhead Woods Water System, FY 2021-22 to FY 2025-26 ................................................ 23 Table 2-5. Residential Customers Fixed Unit Cost Calculation by Cost Component ............................................................ 26 Table 2-6. Proposed Residential Fixed Charges FY 2021-22 to FY 2025-26, Arrowhead Woods .......................................... 27 Table 2-7. Commercial/Institutional Customers Fixed Unit Cost Calculation by Cost Component ...................................... 27 Table 2-8. Proposed Commercial/Institutional Fixed Charges FY 2021 -22 to FY 2025-26, Arrowhead Woods .................... 28 Table 2-9. Irrigation Customers Fixed Unit Cost Calculation by Cost Component ............................................................... 28 Table 2-10. Proposed Irrigation Fixed Charges FY 2021-22 to FY 2025-26, Arrowhead Woods ........................................... 29 Table 2-11. Private Fire Protection Service Customers Fixed Unit Cost Calculation by Cost Component ............................ 29 Table 2-12. Proposed Private Fire Protection Service Fixed Charges FY 2021-22 to FY 2025-26, Arrowhead Woods .......... 29 Table 2-13. Residential Customers Volumetric Tiered Rates Calculation by Cost Component ............................................ 30 Table 2-14. Proposed Residential Volumetric Charges FY 2021-22 to FY 2025-26, Arrowhead Woods ............................... 30 Table 2-15. Commercial/Institutional Customers Volumetric Tiered Rates Calculation by Cost Component ...................... 31 Table 2-16. Proposed Commercial Volumetric Charges FY 2021-22 to FY 2025-26, Arrowhead Woods .............................. 31 Table 2-17. Irrigation Customers Volumetric Tiered Rates Calculation by Cost Component ............................................... 32 Table 2-18. Proposed Irrigation Volumetric Rates FY 2021-22 to FY 2025-26, Arrowhead Woods ...................................... 32 Table 3-1. Revenue Forecast for Deer Lodge Park Water System, FY 2021 -22 – FY 2025-26 ............................................... 36 Table 3-2. O&M Expense Forecast for Water, FY 2020-21 (Current) and Study Period, FY 2021-22 – FY 2025-26 ............... 36 Table 3-3. Revenue Requirements for Deer Lodge Park System, FY 2021 -22 – FY 2025-26 ................................................. 37 Table 3-4. Financial Plan for Water System, FY 2021-22 to FY 2025-26 .............................................................................. 38 Table 3-5. Proposed Residential Fixed Charges FY 2021-22 to FY 2025-26, Deer Lodge Park .............................................. 40 Table 3-6. Proposed Fire Fixed Charges FY 2021-22 to FY 2025-26, Deer Lodge Park .......................................................... 40 Table 3-7. Residential Customers Volumetric Tiered Rates Calculation by Cost Component .............................................. 41 Table 3-8. Proposed Residential Volumetric Charges FY 2021-22 to FY 2025-26, Deer Lodge Park ..................................... 42 Table 4-1. Revenue Forecast for Rimforest Water System, FY 2021-22 – FY 2025-26 ......................................................... 44 Table 4-2. O&M Expense Forecast for Rimforest Water System, FY 2021-22 – FY 2025-26 ................................................. 44 Table 4-3. Revenue Requirements for Water System, FY 2021-22 – FY 2025-26 ................................................................. 45 Table 4-4. Financial Plan for Rimforest Water System, FY 2021-22 to FY 2025-26 .............................................................. 46 Table 4-5. Proposed Residential Fixed Charges FY 2021-22 to FY 2025-26, Rimforest ........................................................ 48 Table 4-6. Proposed Commercial Fixed Charges FY 2021-22 to FY 2025-26, Rimforest ....................................................... 49 City Council Regular Meeting - Page 1071 of 1385
v
Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Table 4-7. Proposed Fire Fixed Charges FY 2021-22 to FY 2025-26, Rimforest .................................................................... 49 Table 4-8. Residential Customers Volumetric Tiered Rates Calculation by Cost Component .............................................. 50 Table 4-9. Proposed Residential Volumetric Charges FY 2021-22 to FY 2025-26, Rimforest ............................................... 50 Table 4-10. Commercial Customers Volumetric Tiered Rates Calculation by Cost Component ........................................... 50 Table 4-11. Proposed Commercial Volumetric Charges FY 2021-22 to FY 2025-26, Rimforest ............................................ 51 Table 5-1. Revenue Forecast for Sewer System, FY 2021-22 – FY 2025-26 .......................................................................... 54 Table 5-2. O&M Expense Forecast for Sewer, FY 2020-21 (Current) and Study Period, FY 2021-22 – FY 2025-26 ............... 54 Table 5-3. Revenue Requirements for Sewer System, FY 2021-22 – FY 2025-26 ................................................................. 56 Table 5-4. Financial Plan for Sewer System, FY 2021-22 to FY 2025-26 .............................................................................. 57 Table 5-5. Unit of Service, Sewer System ........................................................................................................................... 59 Table 5-6. Proposed Sewer Rates for FY 2021-22 – FY 2025-26 .......................................................................................... 60
LIST OF FIGURES
Figure ES- 1. Cash Reserve Balance with or without Proposed Revenue Adjustments, FY 2020 -21 – FY 2030-31 ................. 3 Figure ES- 2. Cash Reserve Balance with or without Proposed Revenue Adjustments ......................................................... 6 Figure ES- 3. Cash Reserve Balance with or without Proposed Revenue Adjustments ......................................................... 8 Figure ES- 4. Cash Reserve Balance with or without Proposed Revenue Adjustments ....................................................... 10 Figure 1-1. Lake Arrowhead Community Services District Service Area ............................................................................. 13 Figure 1-2. Revenue Escalation Factors Estimated for LACSD, FY 2021 -22 - FY 2030-31 ...................................................... 17 Figure 1-3. Expense Escalation Factors Estimated for LACSD, FY 2021 -22 – FY 2030-31 ...................................................... 17 Figure 2-1. Annual Water Demand Projections for FY 2020-21 – FY 2030-31 ...................................................................... 19 Figure 2-2. O&M (left) and Other Obligation (right) Cost Allocations for Arrowhead Woods Water System ...................... 24 Figure 2-3. Current Cost Allocation vs. Proposed Cost Allocation by Customer Class, Arrowhead Woods .......................... 25 Figure 2-4. Residential Customers’ Bill Impacts by Usage for Median, 75 Percentile, and the Upper Fence, Arrowhead Woods ....................................................................................................................................................................... 33 Figure 2-5. Commercial Customer Bill Impacts by Usage for Median, 75th Percentile, and the Upper Fence, Arrowhead Woods ....................................................................................................................................................................... 34 Figure 2-6. Irrigation Customers Bill Impacts by Usage for Median, 75 Percentile and the Upper Fence, Arrowhead Woods .................................................................................................................................................................................. 34 Figure 3-1. Annual Water Demand Projections for FY 2021-22 – FY 2030-31 ...................................................................... 35 Figure 3-2. O&M (left) and Other Obligation (right) Cost Allocations for Deer Lodge Park ................................................. 39 Figure 3-3. Current Cost Allocation vs. Proposed Cost Allocation by Customer Class, Deer Lodge Park .............................. 39 Figure 3-4. Residential Customers’ Bill Impacts by Usage for Median, 75 Percentile, and the Upper Fence, Deer Lodge Park .................................................................................................................................................................................. 42 Figure 4-1 Annual Water Demand Projections for FY 2020-21 – FY 2030-31 ....................................................................... 43 Figure 4-2. O&M (left) and Other Obligation (right) Cost Allocations for Rimforest Water System .................................... 47 City Council Regular Meeting - Page 1072 of 1385
vi
Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Figure 4-3. Current Cost Allocation vs. Proposed Cost Allocation by Customer Class, Rimforest ........................................ 47 Figure 4-4. Residential Customers’ Bill Impacts by Usage for Median, 75 Percentile, and the Upper Fence, Rimforest ...... 51 Figure 4-5. Commercial Customer Bill Impacts by Usage for Median, 75th Percentile, and the Upper Fence, Rimforest ..... 52 Figure 5-1. Annual Sewer Customer Growth Projections for FY 2020-21 – FY 2030-21 ....................................................... 53 Figure 5-2. Study Period (FY 2021-22 to FY 2025-26) Planned Capital Expenditures by Funding Source ............................. 55 Figure 5-3. O&M (left) and Other Obligation (right) Cost Allocations for Sewer System .................................................... 58 Figure 5-4. Current Cost Allocation vs. Proposed Cost Allocation by Customer Class ......................................................... 59 Figure 5-5. Sewer Bill Impacts by Customer Class .............................................................................................................. 61
City Council Regular Meeting - Page 1073 of 1385
1 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study
EXECUTIVE SUMMARY
Study Overview
Lake Arrowhead Community Services District (District, LACSD) retained Robert D. Niehaus, Inc. (RDN) to develop a comprehensive water and sewer rate study, which includes financial planning, revenue requirements, cost of service, and rate-setting analyses (Study). The District consists of four enterprises, one sewer service and three water services: Arrowhead Woods, Deer Lodge Park (DLP), and Rimf orest. The overall goal of this Study is to develop a financial plan and identify necessary revenue adjustments to meet the District’s financial needs, and design rates that recover the costs from ratepayers commensurate with their service requirements. RDN collaborated with LACSD staff to evaluate each utility’s financial stability given the District’s current and future financial conditions, and amend the District’s current rates to improve equity, promote water use efficiency, and ensure compliance with Proposition 218 (Prop 218) requirements and other legal mandates.
The objectives of the Study include:
1. Evaluating the regulatory environment and performing a comprehensive review of all relevant District documents,
2. Prioritizing capital improvement projects (CIPs) and adjusting the timing of project execution to mitigate rate impacts on customers,
3. Projecting system operating costs and capital costs as well as water sales for the 10-year financial planning period,
4. Developing ten-year financial plan s for the District’s water and sewer system s to ensure financial sufficiency to fund day -to-day operation and maintenance, capital improvement , and replacement projects while maintaining the District’s target reserve levels,
5. Conducting a Cost of Service (COS) analysis to equitably allocate the costs of providing service to customers in accordance with Prop 218,
6. Designing rates based on the results of COS analysis to establish a strong nexus between costs and pricing of rates,
7. Performing a bill impact study to minimize the impact on customers while ensuring sufficient revenue recovery, and
8. Developing an administrative record that effectively communicates the Study's findings.
The District’s three water systems and the sewer system keep separate accounting and budgets ; therefore, individual systems must be self -sustaining with revenues to cover all operating and capital expenses. RDN designed rates that accomplish this goal for each system. A brief outline of the financial recommendations for each system follows.
City Council Regular Meeting - Page 1074 of 1385
2 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Arrowhead Woods Water System
Arrowhead Woods water system currently serves 8,343 accounts and is the only system of the three water systems to qualify as an Urban Water Supplier. The system has three water sources: Lake Arrowhead, imported water from Silverwood Lake via two Crestline -Lake Arrowhead Water Agency (CLAWA) connections , and groundwater from five wells in Grass Valley Basin. The last rate study was done in 2015, and the rates have been adjusted annually according to the recommendations in the Study.
The following concerns were considered during the rate-making process and incorporated into the proposed water rates for FY 2021-22 through FY 2025-26:
• Creating customer class specific fixed rates reflecting the cost of service allocations for the particular cost components of each customer class,
• Developing a second tier for commercial and institutional customer’s volumetric rates to further improve equity between large users and small users,
• Confirming that the tier widths for Residential customers’ volumetric charges reflect usage patterns of median users (Tier 1), the 75th percentile of summer use (Tier 2), and the upper bound of summer use (Tier 3)
• Aligning meter ratios to match AWWA recommendations to provide a basis for cost allocations based on different levels of service requirements between meter sizes Financial Overview
In collaboration with the District ’s staff, RDN determined that the necessary revenue adjustments for the Arrowhead Woods system during the five-year study period are as follows:
Table ES- 1. Proposed Revenue Adjustments for the Arrowhead Woods Water System, FY 2021-22 – FY 2025-26 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26
Revenue Adjustment 5.02% 5.02% 5.02% 5.02% 5.02%
With the proposed revenue adjustments, the system will have sufficient funding to execute all the capital improvement projects in the planning horizon and meet the District’s cash reserve policy. Figure ES- 1 presents an annual change of reserve levels with or without proposed revenue adjustments for the next ten years.
City Council Regular Meeting - Page 1075 of 1385
3 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Figure ES- 1. Cash Reserve Balance with or without Proposed Revenue Adjustments, FY 2020-21 – FY 2030-31
Note: for planning purposes, required revenue adjustments for FY 2026-27 through FY 2030-31 are estimated at approximately 4.0 percent.
Current Water Rates
Currently, all customers with a 5/8-inch meter or a 3/4-inch (the most common meter size s District-wide) pay a fixed service charge of $ 44.51 per month. Additionally, customers are billed volumetric rates for all water use, which vary depending on the customer classes. Table ES- 2 shows the current monthly service charge by meter size for all customers.
Table ES- 2. Current Fixed Water Rates
5/8-in $44.51
3/4-in $44.51
1-in $109.04
1 1/2-in $218.10
2-in $348.51
3-in $697.43
4-in $1,089.53
6-in $2,179.09
CurrentFixed Charges
($20.0)
($15.0)
($10.0)
($5.0)
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
Millions
With Revenue Adjustment Without Revenue Adjustment Minimum Reserve Target City Council Regular Meeting - Page 1076 of 1385
4 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Residential customers are billed based on a four-tiered rate structure, and Commercial and Irrigation customers are billed based on a single-tiered rate structure. Table ES-3 shows the current volumetric rates by customer class.
Table ES- 3. Current Variable Water Rates
RES COM & INS IRR
Tier 1 0 - 4 $1.39 $4.32 $7.90
Tier 2 5 - 13 $2.64 $4.32 $7.90
Tier 3 14 - 30 $7.82 $4.32 $7.90
Tier 4 31 + $16.30 $4.32 $7.90
WidthsVolumetric (Per HCF) Current
Proposed Water Rates
The proposed volumetric rates and fixed charges vary by customer class based on their service requirements. The allotment of water for different tiers varies depending on the usage pattern each customer class demonstrates.
Table ES-4 shows the proposed fixed charges by customer class for the test year, FY 2021-22.
Table ES- 4. Proposed Fixed Water Rates, FY 2021-22
RES COM & INS IRR
5/8-in $47.03 $50.37 $52.99
3/4-in $47.03 $50.37 $52.99
1-in $94.00 $96.72 $96.66
1 1/2-in $182.33 $187.75 $187.64
2-in $288.31 $296.99 $296.82
3-in $535.61 $551.89 $551.56
4-in $888.90 $916.03 $915.49
6-in $1,772.11 $1,826.39 $1,825.29
Fixed Charges Proposed
Table ES -5 sho ws the proposed v olumetric rates by customer class. Residential customers have four tiers, Commercial and Institutional customers have two tiers, and Irrigation customers are billed a uniform rate.
Table ES- 5. Proposed Variable Water Rates, FY 2021-22
Widths RES Widths COM & INS Widths IRR
Tier 1 0 - 4 $1.54 0 - 40 $4.54 All Use $8.33
Tier 2 5 - 13 $2.77 40 + $8.86
Tier 3 14 - 30 $8.27
Tier 4 31 + $16.87
ProposedVolumetric (Per HCF)
City Council Regular Meeting - Page 1077 of 1385
5 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Private Fire Protection
In addition to the standard customer classifications, Arrowhead Woods also bills Private Fire P rotection meters based on their service requirements. The proposed fixed charges are shown in Table ES- 6.
Table ES- 6. Proposed Private Fire Protection Rates
Fire
5/8-in -
3/4-in -
1-in $14.34
1 1/2-in $23.01
2-in $33.40
3-in $57.66
4-in $92.31
6-in $178.93
Fixed Charges Proposed
Deer Lodge Park Water System
The Deer Lodge Park (DLP) water system serves 216 connections outside the Arrowhead Woods service area. DLP customers receive water from groundwater wells and one established connection to CLAWA. During the rate - making process, t he following recommendations we re considered and incorporated into the proposed water rates:
• Removing volumetric charges from private fire protection customers in the revenue calculation as the service accounts use water only in emergencies, and
• Aligning meter ratios to match AWWA recommendations to provide a basis for increasing costs between meter sizes
Financial Overview
In collaboration with District staff, RDN determined that the necessary revenue adjustments for the DLP water system during the five-year study period are as follows:
Table ES- 7. Proposed Revenue Adjustments for the Deer Lodge Park Water System, FY 2021-22 – FY 2025-26 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26
Revenue Adjustment 3.50% 3.50% 3.50% 3.50% 3.50%
With the proposed revenue adjustments, the District will meet its reserve target and execute two capital improvement projects scheduled in FY 2022-23. Figure ES- 2 presents the annual change of reserve levels with or without proposed revenue adjustments for the next ten years . Because DLP doesn’t have an explicit CIP plan, building a sufficient reserve balance for unforeseeable repairs and replacements is important t o provide safe service to its customers.
City Council Regular Meeting - Page 1078 of 1385
6 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Figure ES- 2. Cash Reserve Balance with or without Proposed Revenue Adjustments
Note: for planning purposes, required revenue adjustments for FY 2026-27 through FY 2030-31 are estimated at approximately 3.5 percent.
Current Water Rates
There is only one customer class in the DLP service area. Within the Residential customer class, there are meter sizes between 5/8-inch and 2-inch and private fire protection meters ranging from 1-inch to 6-inches in diameter.
The current rates for all meter sizes are shown in Table ES-8.
Table ES- 8. Current Fixed Water Rates
RES FIRE
5/8-in $44.51
3/4-in $44.51
1-in $109.04 $15.03
1 1/2-in $218.10 $19.81
2-in $348.51 $22.24
3-in $34.85
4-in $46.54
6-in $64.27
CurrentFixed Charges
The current volumetric rates include two tiers for residential use and four tiers for fire use. Table ES-9 shows the current tier widths and rates for DLP customers.
$0
$100
$200
$300
$400
$500
$600
$700
FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Thousands
Cash Balance with Revenue Adjustments Cash Balance without Revenue Adjustments City Council Regular Meeting - Page 1079 of 1385
7 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Table ES- 9. Current Volumetric Water Rates
Tier 1 0 - 10 $4.10 0 - 4 $1.39
Tier 2 10 + $4.90 5 - 13 $2.64
Tier 3 14 - 30 $7.82
Tier 4 31 + $16.30
Volumetric (per HCF) Widths RES Widths Fire
Proposed Water Rates
The proposed volumetric rates and fixed charges retain the current rate structure, except that meter charges are set to reflect equivalent meter ratios provided by the AWWA M1 Manual. Additionally, fire meters will no longer be charged a volumetric rate. Table ES-10 shows the proposed fixed and volumetric rates for DLP customers.
Table ES- 10. Proposed Water Rates, Deer Lodge Park
RES Fire
5/8-in $45.04
3/4-in $45.04
1-in $105.76 $14.38
1 1/2-in $206.96 $24.21
2-in $328.40 $36.00
3-in $63.51
4-in $102.82
6-in $201.07
Tier 1 0 - 10 $4.87
Tier 2 10 + $5.78
Fixed Charges
Volumetric (per HCF)
Proposed
Widths Rate
Rimforest Water System
In 2014, LACSD formally incorporated the area known as Rimforest into its water operations. The Rimforest water system serves approximately 300 connections, consisting of Residential and Commercial customers. The system receives its water through one connection to CLAWA and has one reservoir. Rimforest has not increased its rates since 2017. To maintain efficient service, Rimforest will need to add a second storage tank and eventually a new well. The system expects to receive a $3.0 million grant from the California Drinking Water State Revolving Fund administered by the State Water Resources Control Board to cover some of these costs. The following recommendations were considered during the rate-making process and incorporated into the proposed water rates:
• Adding a Commercial customer class to improve equity among customers when allocating different types of costs,
• Creating fixed rates that vary depending on customer class based on specific service requirements each customer class places on the system,
City Council Regular Meeting - Page 1080 of 1385
8 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study • Developing a second variable usage tier for all customer classes to improve equity and promote efficient water use, and
• Aligning meter ratios to match AWWA recommendations to provide a basis for differential costs between meter sizes.
Financial Overview
In collaboration with District staff, RDN determined that the necessary revenue adjustments for the water system during the five-year study period are as follows:
Table ES- 11. Proposed Revenue Adjustments for the Water System, FY 2021-22 – FY 2025-26 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26
20.00% 19.50% 5.00% 5.00% 5.00%
With the proposed revenue adjustments, the system will eliminate the operating deficit and build reserves to $290,000 by the end of FY 2025 -26. Figure ES - 3 presents the annual change of reserve levels with or without proposed revenue adjustments for the study period.
Figure ES- 3. Cash Reserve Balance with or without Proposed Revenue Adjustments
Note: for planning purposes, required revenue adjustments for FY 2026-27 through FY 2030-31 are estimated at approximately 5.0 -6.0 percent.
Current Water Rates
Currently, a customer with a 3/4-inch meter (the most common meter size for Rimforest) pays a fixed service charge of $49.73. Additionally, the customer is billed a volumetric rate of $5.10 per hcf for all water use. Table ES- 12 shows the current water rates by meter size. All customers use the same rate schedule. ($1,200)
($1,000)
($800)
($600)
($400)
($200)
$0
$200
$400
$600
$800
FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Thousands
Cash Balance with Revenue Adjustment Cash Balance without Revenue Adjustment City Council Regular Meeting - Page 1081 of 1385
9 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Table ES- 12. Current Water Rates
3/4-in $49.73
1-in w/Fire $56.69
1-in $90.70
1 1/2-in $114.27
2-in $146.60
3-in $242.46
4-in $321.93
6-in $530.37
All Use $5.10
Fixed Charges Current
Volumetric Charges Current
Proposed Water Rates
The proposed volumetric rates and fixed charges vary by customer class because of the service requirement differences in the system. The allotment of water for each tier varies depending on the usage pattern eac h customer class demonstrates. Additionally, the volumetric portion of fire customers’ rates has been removed, and all applicable costs have been allocated to the fixed charges. Tables ES-13 through ES-15 show the proposed fixed and volumetric rates by customer class.
Table ES- 13. Proposed Fixed Rates
RES COM Fire
3/4-in $54.95 $63.02
1-in w/Fire $88.13 $101.58
1-in $88.13 $101.58
1 1/2-in $171.08 $197.98
2-in $270.61 $313.66
3-in $502.86 $583.57
4-in $834.65 $969.16 $113.64
6-in $1,664.12 $1,933.14 $222.11
8-in $352.26
Fixed Charges Proposed
Table ES- 14. Proposed Volumetric Rates, Residential
Tier 1 0 - 5 $5.40
Tier 2 5 + $8.30
WidthsVolumetric
per CCF Proposed
City Council Regular Meeting - Page 1082 of 1385
10 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Table ES- 15. Proposed Volumetric Rates, Commercial
Widths Rate
Tier 1 0 - 18 $8.28
Tier 2 18 + $11.22
Volumetric
per CCF
Proposed
Sewer System
The primary goal of the sewer system financial plan was to maintain the long -term financial stability of the District’s s ewer system. A CPI -based adjustment that follows g eneral inflationary trends is recommended to ensure that fund levels will be maintained . There are no suggested changes to the rate structure design in the proposed financial plan as customer sewer usage dispositions have remained steady since the previous rate study.
Financial Overview
In collaboration with District staff, RDN determined that the necessary revenue adjustments needed to meet the District’s financial goals for the next five years are as follows:
Table ES- 16. Proposed Revenue Adjustments for the Water System, FY 2021-22 – FY 2025-26 Sewer FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Revenue Adjustment 3.60% 3.60% 3.60% 3.60% 3.60%
With the proposed revenue adjustments, the system will execute all capital projects scheduled for the next ten - year financial planning period. Figure ES- 4 presents the annual change of reserve levels with or without proposed revenue adjustments for the next ten years.
Figure ES- 4. Cash Reserve Balance with or without Proposed Revenue Adjustments
Note: for planning purposes, required revenue adjustments for FY 2026-27 through FY 2030-31 are estimated at approximately 3.6 percent.
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
FY 2020 -21 FY 2021 -22 FY 2022 -23 FY 2023 -24 FY 2024 -25 FY 2025 -26 FY 2026 -27 FY 2027 -28 FY 2028 -29 FY 2029 -30 FY 2030 -31
MILLIONS
Reserves with Revenue Adjustments Reserves without Revenue Adjustments City Council Regular Meeting - Page 1083 of 1385
11 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Current Sewer Rates
The current sewer rates were established based on the service requirements of each customer class (Residential or Commercial). Each connection pays a fixed service charge of $55.40 per month regardless of the customer class.
Commercial customers also pay volumetric rates on all units of water use greater than five hundred cubic feet (CCF). The current volumetric rate is $8.01 per CCF.
Table ES- 17. Current Sewer Rates
Residential $55.40
Commercial $55.40
Volume Fee > 5 CCF Current
Commercial $8.01
Fixed Charges Current
Proposed Sewer Rates
The proposed volumetric rate and fixed charge retain the current rate structure . All connections are billed a monthly fixed charge of $55.72, and Commercial customers are charged a volumetric fee of $8.34 for each unit of use greater than five CCF. All The proposed rates reallocate the District’s costs based on a detailed cost of service analysis which increases customer equity by allocating costs based on the relative wear each customer puts on the system.
Table ES- 18. Proposed Sewer Rates
Residential $55.40 $55.72
Commercial $55.40 $55.72
Volume Fee > 5 CCF
Commercial $8.01 $8.34
Fixed Charges Current Proposed
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12 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study
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13 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study 1 INTRODUCTION
1.1 About LACSD
Lake Arrowhead is an unincorporated community in the southwestern corner of San Bernardino County. Located in the San Bernardino National Forest, it is north of the city of San Bernardino, approximately 80 miles east of Los Angeles. LACSD was formed in 1 978 and serves about 8,850 water customers in three distinct enterprises:
Arrowhead Woods, Deer Lodge Park , and Rimforest. In addition, the District provides sewer service to roughly 10,500 customers. These services are provided by operating two water treatment plants, 19 water pumping stations, two wastewater treatment plants, 21 wastewater pumping stations, 20 reservoir tanks , and several hundred miles of pipelines. LACSD’s s ervice area boundary encompasses approximately 15 square miles and ranges in elevation from 4,500 feet to over 6,000 feet. As a resort area, the District’s commercial establishments are oriented towards tourists and seasonal residents. Approximately half o f the residential dwelling units in the area are second homes. Figure 1-1 shows LACSD’s current service area.
Figure 1-1. Lake Arrowhead Community Services District Service Area
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14 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study
1.2 Legal Framework
The primary goal of this study is to help LACSD establish rate structures that achieve the District’s objectives of revenue stability, equitable cost recovery, and ratepayer affordability. This section of the report describes the legal framework considered in developing the rates to ensure that the calculated cost of service rates provide a fair and equitable allocation of costs to the different customer classes. Article XIII C (Proposition 26), Article XIII D, Section 6 (Proposition 218), and Article X, Section 2 of the California Constitution govern the principles applicable to this rate study.
California Constitution‐Article XIII C (Proposition 26) The application of Proposition 26 in the structuring of water rates is presently undetermined. The San Juan Capistrano decision briefly touched upon one aspect of the Article XIII C provisions enacted by Proposition 26, finding that tiered water charges would not appropriately be characterized as penalties. Other aspects of the application of Proposition 26 to tiered rate structures may be addressed in future judicial decisions and legislative enactments.
The voters in the State approved Proposition 26 on November 2, 2010. Proposition 26 amended Article XIII C of the State Constitution to expand the definition o f “tax” to include “any levy, charge, or exaction of any kind imposed by a local government” with listed exceptions. By means of these exceptions, Article XIII C classifies several types of charges, in addition to property -related charges, that are not tax es, such as charges for specific services or benefits, regulatory charges and penalties.
Article XIII C’s definition of “tax” lists the following exceptions: (1) a charge imposed for a specific benefit conferred or privilege granted directly to the payer t hat is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege; (2) a charge imposed for a specific government service or product provided directly to the payer that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product; (3) a charge imposed for the reasonable regulatory costs to a local government for issuing license s and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof; (4) a charge imposed for entrance to or use of local government property, or the purchase, rental, or lease of local government property; (5) a fine, penalty, or other monetary charge imposed by the judicial branch of government or a local government, as a result of a violation of law; (6) a charge imposed as a condition of property development; and (7) assessments and property-related fees imposed in accordance with the provisions of Article XIII D.
Proposition 26 also provides that the local government bears the burden of proving by a preponderance of the evidence that a levy, charge, or ot her exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payer bear a fair or reasonable relationship to the payer’s burdens on, or benefits received from, the governmental activity. Like the proportionality requirements of Article XIII D, assessment of rates under these requirements, if applicable, would be supported by the cost of service approach.
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15 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study California Constitution‐Article XIII D, Section 6 (Proposition 218) In November 1996, California voters passed Proposition 218, the “Right to Vote on Taxes Act.” This constitutional amendment protects taxpayers by limiting the methods by which local governments can create or increase taxes, fees and charges without taxpayer consent. Between 2002 and 2017, California courts have ruled that fees associated with providing water services are “property-related” and thus under the jurisdiction of Prop 218. The principal requirements for fairness of the fees, as they relate to public water service, are as follows:
1. Revenues derived from the fee or charge shall not exceed the funds required to provide the property related service
2. Revenues derived by the fee or charge shall not be used for any other purpose other than that for which the charge was imposed
3. The amount of the fee or charge imposed upon any parcel shall not exceed the proportional cost of service attributable to the parcel
4. Reliance by an agency on any parcel map, including, but not limited to, an assessor’s parcel map, may be considered a significant factor in determining whether a fee or charge is imposed as an incident of property ownership for purposes of this article
The rates developed in this Report use a methodology to establish an equitable system of charges that recover the cost of providing service and fairly apportion costs to each customer as required by Proposition 218 California Constitution‐Article X, Section 2
Article X, Section 2 of the California Constitution (established in 1976) provides as follows:
“It is hereby declared that because of the conditions prevailing in this State the general welfare requires that the water resources of the State be put to beneficial use to the fullest extent of which they are capable, and that the waste or unreasonable use or unreasonable method of use of water be prevented, and that the conservation of such waters is to be exercised with a view to the reasonable and beneficial use thereof in the interest of the people and for the public welfare.”
As such, public agencies are constitutionally mandated to maximize the beneficial use of water, prevent waste, and encourage efficiency, which this Study achieves.
1.3 Methodology
RDN’s water rate -making practices incorporate methods described in the American Water Works Association (AWWA) Principles of Water Rates, Fees, and Charges Manual of Water Supply Practices Manual 1 (M1). This Study uses the base-extra capacity m ethod built on cost of service principles, in which the costs are distributed to customers commensurate with their service requirements. The cost of service analysis and rates for the District’s Sewer system are consistent with the guidelines detailed in the Water Environment Federation (WEF) Manual of Practice No. 27 Financing and Charges for Wastewater Systems (MOP #27).
The methodology of this Study is broken into four steps which outline the basic procedures of rate-setting norms.
1. Demand Projection: project water/sewer demand for the five-year study period, FY 2021-22 through FY 2025-26, using District customers’ historical usage/account data. Forecast revenues for the study period based on the projected water and sewer demand
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16 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study
2. Financial Planning/Revenue Requirements : develop a five -year financial plan based on the p rojected revenues and annual costs, including operating and capital expenses. The District’s target reserve level s are also considered part of the financial planning. Based on the financial planning, revenue requirements, and necessary revenue, the appropriate adjustments are determined for each year of the study period
3. Cost of Service (COS) Analysis : perform a COS analysis to allocate costs among the customers commensurate with their service requirements. For the water systems, proportionate allocation of costs must consider not only the relative quantity of water used by a customer but also the peak rate at which it is consumed. Flows (Volumes) and strengths of discharges are commonly used to allocate costs to sewer customers proportionally. Determine cost allocation among different types of users based on the demands they impose on the utility
4. Rate Setting Analysis : design rates to equitably recover the rate revenue requirements from each customer given the projected customer demand identified resulting from the COS analysis
1.4 Key Assumptions
A test year, FY 2021-22, was selected for which costs are to be analyzed and rates to be established for this study.
The financial plan was built for the next ten years, including the five -year study period FY 2021-22 through FY 2025-26 with a detailed revenue adjustment plan. The District’s fiscal year starts on July 1 and ends on June 30.
Escalation Factors
The financial plan was built based on an assumption in the projected escalation of revenues and expenses associated with both operations and maintenance (O&M) and capital improvement projects (CIPs). Escalation factors were calculated for seven independent variables using historical Consumer Price Index (CPI) data from Riverside-San Bernardino -Ontario, CA, between the year 2000 and the most current calendar year 1, and projections by the California Department of Transportation (CADOT) 2 and the California Department of Finance (CADOF). Construction costs were determined using a 5-year average building cost index (BCI) for the Los Angeles area published by Engineering News Record (ENR) 3. Additionally, property tax increases were charted using audited financial statements published by the County of San Bernardino. All escalation factors were developed by calculating an average growth rate and projecting that rate into future years. Non -recurring expenses (one-time expenses) and acted service expenses are not escalated. Figure 1-2 and Figure 1-3 display escalation factors estimated for LACSD for the study period.
1 Bureau of Labor Statistics (2021) Consumer Price Indices 2000-2021 Riverside– San Bernardino – Ontario, Not Seasonally Adjusted.
2 California Department of Transportation (2021) Monthly CPI for transportation, 20 Year Average. 3 Engineering News Record (2021) Los Angeles Building Cost Index, Average Annual Change.
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17 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Figure 1-2. Revenue Escalation Factors Estimated for LACSD, FY 2021-22 - FY 2030-31
0.3%
2.0%
0.0% 0.5% 1.0% 1.5% 2.0% 2.5%
Connection Fees
Investment Returns
Figure 1-3. Expense Escalation Factors Estimated for LACSD, FY 2021-22 – FY 2030-31
3.4%
3.1%
2.5%
2.6%
7.0%
4.8%
2.6%
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%
Construction
Fuels and Automobile
Equipment
Employee Expenses
Purchased Water
Utilities
Overall Inflation
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18 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Equivalent Meter Size
When designing fixed monthly water service charges, the potential demand or capacity requirements placed on the water system can be measured by the size of installed meters which receive services from the system. The safe operating flow (or capacity) of a particular size of the meter is essentially the limiting factor in terms of the demand that can be exerted on the water system through the meter. The ratio of the safe operating capacity of various sizes of meters relative to the capacity of a base meter may be used to determine appropriate charges for the larger meter sizes4. It is the District’s policy to consider all meters that are 3/4–inch and 5/8-inch meters as a base meter (equal to one equivalent meter). The capacity ratio is calculated using the meter capacities in gallons per minute (gpm) provided in the AWWA M1 for the meters larger than 3/4 inch.
Table 1-1. AWWA Equivalent Meter Ratios
4 From “Principles of Water Rates, Fees, and Charges” by American Water Works Association, 2017, Seventh Edition, Appendix B, p. 385.
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19 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study 2 ARROWHEAD WOODS WATER SYSTEM
2.1 Financial Plan
RDN built a 10 -year financial model for each water system to meet the District’s long -term financial goals. This report presents the account growth and water use projections for ten years.
Account Growth
All the analyses performed for this Study were based on an assumption of customer account growth. To accurately compute fixed charge revenue, customer growth was projected by customer class and meter size for the next ten years. The number of accounts for FY 2020-21 was derived from customers’ billing records, and the subsequent ten years were projec ted based on the historical data and input from the District. The current number of customers is 8,343. This number is projected to increase approximately 12 accounts per year, resulting in 8,404 by FY 2025-26 (the end of the study period) and 8,481 by FY 2030-31.
Demand Projections
RDN first derived aggregate usage levels for each customer class to project water demand . Next, we calculated per account water usage for each customer class by dividing the aggregate usage by the number of accounts. RDN assumed constant per account usage over the study period. This assumption was introduced to ensure that forecasted deviation in the wake of the C ovid-19 pandemic is conservative. Finally, the forecast number of accounts and per-account usage were multiplied to estimate aggregate use by customer class. Figure 2-1 shows Arrowhead Woods’ total demand projected for the next ten years.
Figure 2-1. Annual Water Demand Projections for FY 2020-21 – FY 2030-31
518 519 519 520 521 523 523 525 525 526
-
100
200
300
400
500
600
FY 2021-
22 FY 2022-
23 FY 2023-
24 FY 2024-
25 FY 2025-
26 FY 2026-
27 FY 2027-
28 FY 2028-
29 FY 2029-
30 FY 2030-
31 Thousands
RES MF IRR INS COM
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20 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Revenues
Based on the account growth and water demand projectio ns, RDN forecasts revenues generated from customer rates using the current water rates for the study period, which totaled approximately $7.3 to $7.4 million annually.
Other operating income and non-operating revenue are estimated to provide supplemental revenue of roughly $0.2 million a year; thus, the system’s total revenue for the study period is estimated to be approximately $7.7 to $7.8 million annually under the status quo rate schedule. Table 2-1 shows the projected revenue flow for the study period (FY 2021-22 – FY 2025-26) without any revenue adjustments.
Table 2-1. Revenue Forecast for Arrowhead Woods Water System, FY 2021-22 – FY 2025-26 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26
Revenue from rates
Service Charges - Water $5,147,040 $5,153,848 $5,158,831 $5,169,857 $5,175,696 Usage Charges - Water $2,176,670 $2,205,174 $2,206,783 $2,216,757 $2,226,501 Rate Revenue Total $7,323,710 $7,359,022 $7,365,614 $7,386,614 $7,402,197 Other operating revenues $196,168 $196,173 $196,178 $196,183 $196,188 Non-operating revenues $216,310 $219,714 $223,186 $226,727 $230,340 Total $7,736,187 $7,774,909 $7,784,978 $7,809,524 $7,828,725
Operating and Maintenance (O&M) Expense
Table 2-2 displays the total O&M expense by cost category through the study period . The major expense items included in the analysis are employee wages and insurance, pension expense, electricity , and repair and maintenance expenses. The overall annual escalation factor for the study period is approximately 2.9 percent.
Table 2-2. O&M Expense Forecast for Arrowheads Water System, FY 2021-22 – FY 2025-26
Other Obligations
Other obligations included in the financial plan are capital improvement projects funded by PAYGO (Pay As You Go), debt service obligations, and reserve contributions made from rates.
FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26
Source of Supply $463,036 $495,544 $530,275 $567,848 $608,048 Pumping $1,323,142 $1,356,812 $1,391,376 $1,427,072 $1,463,733 Treatment $661,571 $678,406 $695,688 $713,536 $731,866
Transmission $1,047,488 $1,074,143 $1,101,506 $1,129,765 $1,158,789 Engineering $165,393 $169,602 $173,922 $178,384 $182,967 Customer Service $220,524 $226,135 $231,896 $237,845 $243,955 Administrative and General $1,819,321 $1,865,617 $1,913,142 $1,962,224 $2,012,633 Conservation $275,655 $282,669 $289,870 $297,307 $304,944 Total $5,976,129 $6,148,928 $6,327,675 $6,513,980 $6,706,935 City Council Regular Meeting - Page 1093 of 1385
21 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Capital Improvement Projects
The District plans to spend approximately $7.2 million in PAYGO and $11.1 million from the Capital Improvement Fund to accomplish all necessary capital improvement projects over the next five years. The major projects included in the financial planning for the study period are New Banff tank ($3.7 million), Spyglass Site Improvements ($2.8 million), Pipe Replacements on Golf Course Rd ($1.9 million), and Blue Jay well ($1.4 million).
Debt Service
The District’s current debt service load totals between $0.6 million and $0.7 million a year during the study period.
Debt obligations include the 2016 Refunding Revenue Bonds Series and an Interfund loan, which is transferred from restricted funds in the Sewer Fund to the Water Fund for payment of the CalPERS side fund.
Reserves
The District must maintain an appropriate reserve balance to ensure the day-to-day operation will continue during emergencies and guarantee the future stability of the system. The District’s financial goal is to build an appropriate level of cash reserves for each reserve fund included in the financial plan of this Study. The current reserve funds are described below:
• Operating Fund: the minimum target balance of the fund should equal three months of budgeted operating expenses for the upcoming year. It was established to maintain working capital for current operations and to meet routine cash flow needs for the general operations and debt service payments of the system.
• Capital Improvement Fund: The fund's minimum annual allocation should equal the budgeted yearly depreciation plus 10 percent for cost increases. This represents the total annual contribution that should be made to the fund and not the minimum fund balance. The fund was established to support capital projects that improve repair, rehabilitate or replace the capital assets, and eliminate the risk of “use it or lose it” type of spending on infrastructure.
• Rate Stabilization Fund: the maximum target for the fund is 20 percent of the budgeted revenue, and accumulation occurs after pooled cash has first been allocated to the Operating Fund and the Capital Improvement Fund. The purpose of this fund is to enable smooth or level annual increases to rates despite uneven increases in underlying costs or variations in annual revenue received.
Necessary reserve contributions to reach the above targets are estimated to equal approximately $2.0 million to $2.3 million per year over the study period.
Revenue Requirements
Table 2-3 displays Arrowhead Woods’ revenue requirements for FY 202 1-22 through FY 2025 -26. The total expense for each year is offset by other operating revenues and non -operating revenues to compute a pure portion of revenue requirements that need to be recovered from customers’ rates. CIP expenses, contributions to reserves, and debt service payments are included in the other obligations. RDN proposes 5.02 percent annual revenue adjustments to reach the financial goal set by the District.
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22 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Table 2-3. Revenue Requirements for Arrowhead Woods Water System, FY 2021-22 – FY 2025-26 Description FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Test Year
Other Operating Revenues ($196,168) ($196,173) ($196,178) ($196,183) ($196,188) O&M Expenses $5,976,129 $6,148,928 $6,327,675 $6,513,980 $6,706,935 Non-operating Revenues ($151,417) ($219,714) ($223,186) ($226,727) ($230,340) Other Obligations $2,811,159 $4,189,959 $7,171,429 $5,021,630 $3,248,592 Net Balance ($748,343) ($1,806,587)($4,548,247)($2,127,381) ($72,711) Revenue Requirements $7,691,360 $8,116,413 $8,531,492 $8,985,318 $9,456,288
Financial Plan
Based on the projected total revenue and necessary costs to be recovered during the study period, RDN built a financial plan that will generate sufficient revenues for the day -to-day operation and annual PAYGO and make appropriate contributions to reserves . The District currently holds $12.0 million in the Supplemental Water Fee Fund. The District plans to spend the accumulated cash down to zero over the next ten-year period on capital projects and other expenditures. Table 2-4 shows the proposed financial plan for the study period with 5.02 percent revenue adjustments per year.
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23 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Table 2-4. Financial Plan for Arrowhead Woods Water System, FY 2021-22 to FY 2025-26 Description FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Test Year
Operating Revenues $7,887,528 $8,312,586 $8,727,670 $9,181,501 $9,652,476 Water Sales - Existing $7,323,710 $7,359,022 $7,365,614 $7,386,614 $7,402,197 Year 1 - 5.02 % $367,650 $369,423 $369,754 $370,808 $371,590 Year 2 - 5.02 % $387,968 $388,315 $389,423 $390,244
Year 3 - 5.02 % $407,809 $408,972 $409,834
Year 4 - 5.02 % $429,502 $430,408
Year 5 - 5.02 % $452,015
Water Sales $7,691,360 $8,116,413 $8,531,492 $8,985,318 $9,456,288 Other Operating Revenues $196,168 $196,173 $196,178 $196,183 $196,188 O&M Expenses ($5,976,129) ($6,148,928)($6,327,675)($6,513,980) ($6,706,935) Net Operating Revenues $1,911,399 $2,163,659 $2,399,996 $2,667,521 $2,945,541 Non-operating Revenues $151,417 $219,714 $223,186 $226,727 $230,340 Other Obligations ($2,811,159) ($4,251,288)($7,232,496)($5,082,697) ($3,309,659) Debt Service Total ($632,100) ($711,810) ($711,810) ($711,810) ($711,810) Contribution to Reserves ($1,903,321) ($2,026,358)($2,063,293)($2,194,885) ($2,258,837) PAYGO $0 ($1,222,144)($4,151,535)($1,853,875) $0
Capital Improvement Fund ($6,015,270) ($1,634,352) ($609,891) ($852,229) ($1,940,926) Annualization of Rates ($275,738) ($290,976) ($305,857) ($322,126) ($339,011) Use of CIP Fund $6,015,270 $1,634,352 $609,891 $852,229 $1,940,926 Net Balance ($748,343) ($1,867,916)($4,609,314)($2,188,448) ($133,778) Beginning Balance $12,306,962 $11,558,619 $9,690,703 $5,081,388 $2,892,940 Ending Balance $11,558,619 $9,690,703 $5,081,388 $2,892,940 $2,759,162 DSCR 3.02 3.04 3.37 3.75 4.14 % Deficit/Surplus -9.7% -23.0% -54.0% -24.4% -1.4%
% Cumulative Deficiency 150.3% 61.3% 20.9% 8.7% 6.4%
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24 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study
2.2 Cost of Service Analysis
The purpose of a Cost of Service (COS) analysis is to allocate costs among customers commensurate with their service requirements. RDN employs the “base -extra capacity” cost of service method promulgated in AWWA’s M1, whereby costs are first allocated to i ndividual functions, which are typical industry-standard activities. The costs of each function are distributed to appropriate cost causative components, which are defined by the cost- driving elements. The results of the COS form a reasonable, equitable basis for designing rates.
Operating costs are functionalized based on input from District staff with expertise on the system and utility industry knowledge. RDN utilized the distribution of the functionalized system asset values to allocate the costs included in the other obligations into the standardized functions.
Once all of the costs are functionalized, the next step in the COS analysis is to allocate the functionalized expenses into the cost causative components. Each water service facility within the system has an underlying average demand exerted by the customers for whom the base cost component applies. For those facilities designed solely to meet average daily demand, 100 percent of the cost should go to the base cost component. Extra capacity requirements associated with demand over average use consist of Max Day Demand (MDD) and Peak Hourly Demand (PHD). The number of bills in one year (the number of accounts multiplied by 12) serves as the basis for distributing billing and customer service costs associated with meter reading, customer billing and collection, and other customer services costs. The number of equivalent meters is used to measure meter-related service costs.
Public fire pro tection costs were allocated to each customer class based on their equivalent meter counts. The final step of a COS analysis determines how the total revenue requirements are allocated to each of the four customer classes.
Figure 2-2 displays the percent of functionalized O&M costs and other obligation costs (capital expenditures, debt service payments, and capital contributions) allocated to cost causative components.
Figure 2-2. O&M (left) and Other Obligation (right) Cost Allocations for Arrowhead Woods Water System
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25 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Using the cost allocations developed in the COS Analysis, RDN equitably allocated costs to Arrowhead Woods’ four customer classes based on their service requirements. Figure 2-3 presents the current cost allocations versus the proposed cost allocations determined in the COS analysis.
Figure 2-3. Current Cost Allocation vs. Proposed Cost Allocation by Customer Class, Arrowhead Woods
2.3 Water Rate Design
RDN, in consultation with District staff, performed multi -level analysis to find the most effective and equitable way to recover necessary revenues from customer rates. RDN proposes the following adjustments to Arrowhead Woods customer water rate structures:
• Creating customer class specific fixed rates reflecting the cost of service allocations to the particular cost components of each customer class,
• Developing a second tier for commercial and institutional customer’s volumetric rates to further improve equitability between large users and small users, • Confirming that the tier widths for Residential customers’ volumetric charges reflect usage patterns of median users (Tier 1), the 75th percentile of summer use (Tier 2), and the upper bound of summer use (Tier 3)
• Aligning meter ratios to match AWWA recommendations to provide a basis for different levels of service requirements between meter sizes
The water rates have two components: 1) a fixed monthly service charge and 2) volumetric rates. Customers must pay the fixed charge regardless of the water use. In addition, the customers pay volumetric rates based on the volume of water use.
1. Fixed monthly service charge: the rates are established based on the size of the meter at the property receiving water service and are calculated to recover a portion of the District’s fixed costs, such as water
88.8%
7.4% 2.6% 1.2%
87.4%
9.0%
2.5% 1.1%
RES COM IRR PFP
Current Proposed
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26 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study facilities repairs and replacements, peaking costs, meter reading, billing, public fire services, and customer service.
2. Volumetric rates: the rates are calculated based on the cost of water supplies, groundwater, and surface water; purchasing water from sources other than Lake Arrowhead; the cost of managing the District’s water resources; and distributing water throughout the system to customers. The remaining fixed costs that are not recovered via fixed charges are also recovered from volumetric charges. The rates are billed per hundred cubic feet (HCF).
Together, the two components (fixed and volumetric) are calculated to recover the proportionate cost of providing water service attributable to each customer.
Fixed Charge
Base, peaking (MDD and PHD), meters, and fire protection service costs are divided by the number of equivalent meters using the AWWA ratio discussed in the Key Assumptions section to compute the unit cost for each cost component. Customer service costs are simply divided by the number of accounts since the service requirements of this cost type are the same regardless of the meter size installed on a property.
Residential Customers
Table 2-5 shows the cost per unit calculation by cost causative component, resulting in a 5/8-inch base meter fixed charge for Residential customers . The system will collect 70 percent of total revenue requirements from fixed charge revenue.
Table 2-5. Residential Customers Fixed Unit Cost Calculation by Cost Component Cost Component Cost Allocatiaon Unit Cost/Unit
Source of Supply $326,094 10,005 $2.72 Base $1,551,666 10,005 $12.92 MDD $383,541 10,005 $3.19 PHD $93,402 10,005 $0.78 Meters $88,099 10,005 $0.73 Customer Service $523,859 7,683 $5.68 Conservation $0 10,005 $0.00 Public Fire Reallocation $1,798,754 10,005 $14.98 Total $4,765,413 $41.01
The proposed monthly service charge for the base equivalent meter (5/8-inch) is $41.01 per month. However, the District wishes to maintain the same charge for the meter size 3/4-inch and below. The fixed service charge for a 3/4-inch meter is $58.67, reflecting the meter ratio of 1.5. The revenue requirements need to be collected from these meters divided by the number of accounts, which resulted in $47.03 per month.
The proposed five-year fixed rates for Arrowhead Woods Residential customers are as follows:
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27 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Table 2-6. Proposed Residential Fixed Charges FY 2021-22 to FY 2025-26, Arrowhead Woods Fixed Charges FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 5/8-in $47.03 $49.39 $51.87 $54.47 $57.20
3/4-in $47.03 $49.39 $51.87 $54.47 $57.20
1-in $94.00 $98.72 $103.68 $108.88 $114.35
1 1/2-in $182.33 $191.48 $201.09 $211.18 $221.78
2-in $288.31 $302.78 $317.98 $333.94 $350.70
3-in $535.61 $562.50 $590.74 $620.40 $651.54
4-in $888.90 $933.52 $980.38 $1,029.60 $1,081.29
6-in $1,772.11 $1,861.07 $1,954.50 $2,052.62 $2,155.66
Residential
Commercial and Institutional Customers
Commercial, Institutional, and Irrigation customers’ fixed char ges are calculated using the sam e methodology described above.
Approximately 37 percent of Commercial/Institutional customers’ revenue requirements will be collected from fixed charges. Significant differences in user usage levels were identified for this customer class; thus, the peaking- related costs are allocated to the volumetric rates to ensure equitable cost recovery.
Table 2-7. Commercial/Institutional Customers Fixed Unit Cost Calculation by Cost Component Cost Component Cost Allocatiaon Unit Cost/Unit
Source of Supply $139,589 562 $20.70 Base $0 562 $0.00
MDD $0 562 $0.00
PHD $0 562 $0.00
Meters $4,949 562 $0.73
Customer Service $8,523 125 $5.68 Conservation $0 562 $0.00 Public Fire Reallocation $101,039 562 $14.98 Total $254,100 $42.10
The proposed monthly service charge for the base equivalent meter (5/8-inch) is $42.10 per month. The fixed service charge for a 3/4-inch meter is $60.30, reflecting the meter ratio of 1.5. The revenue requirements that need to be collected from these meters are divided by the number of accounts, resulting in $50.37 per month.
The proposed five-year rates for Arrowhead Woods Commercial and Institutional customers are as follows:
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28 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Table 2-8. Proposed Commercial/Institutional Fixed Charges FY 2021-22 to FY 2025-26, Arrowhead Woods Fixed Charges FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 5/8-in $50.37 $52.90 $55.56 $58.35 $61.28
3/4-in $50.37 $52.90 $55.56 $58.35 $61.28
1-in $96.72 $101.57 $106.67 $112.02 $117.64
1 1/2-in $187.75 $197.18 $207.08 $217.48 $228.40
2-in $296.99 $311.90 $327.56 $344.00 $361.27
3-in $551.89 $579.60 $608.70 $639.26 $671.35
4-in $916.03 $962.02 $1,010.31 $1,061.03 $1,114.29
6-in $1,826.39 $1,918.07 $2,014.36 $2,115.48 $2,221.68
Commercial/Institutional
Irrigation Customers
Approximately 47 percent of Irrigation customers’ revenue requirements will be collected from fixed charges. As seen in the Commercial/Institutional customers’ usage pattern, Irrigation customers usage levels vary significantly among different types of users; thus, the rates are designed to place more weight on volumetric rates for revenue recovery to improve equitability among all Irrigation customers.
Table 2-9. Irrigation Customers Fixed Unit Cost Calculation by Cost Component Cost Component Cost Allocatiaon Unit Cost/Unit
Source of Supply $27,803 193 $12.00 Base $0 193 $0.00 MDD $15,547 193 $6.71 PHD $4,537 193 $1.96 Meters $1,699 193 $0.73 Customer Service $4,773 70 $5.68 Conservation 193 $0.00 Public Fire Reallocation $34,699 193 $14.98 Total $89,057 $42.07
The monthly fixed service charge for the base equivalent meter (5/8-inch) is $ 42.07 per month for Irrigation customers. The fixed service charge for a 3/4-inch meter is $60.27, reflecting the meter ratio of 1.5. The revenue requirements to be collected from these meters divided by the number of accounts resulted in $52.99 per month.
The proposed five-year fixed rates for Arrowhead Woods Irrigation customers are as follows:
City Council Regular Meeting - Page 1101 of 1385
29 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Table 2-10. Proposed Irrigation Fixed Charges FY 2021-22 to FY 2025-26, Arrowhead Woods Fixed Charges FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 5/8-in $52.99 $55.65 $58.44 $61.37 $64.45
3/4-in $52.99 $55.65 $58.44 $61.37 $64.45
1-in $96.66 $101.51 $106.61 $111.96 $117.58
1 1/2-in $187.64 $197.06 $206.95 $217.34 $228.25
2-in $296.82 $311.72 $327.37 $343.80 $361.06
3-in $551.56 $579.25 $608.33 $638.87 $670.94
4-in $915.49 $961.44 $1,009.70 $1,060.39 $1,113.62
6-in $1,825.29 $1,916.92 $2,013.15 $2,114.21 $2,220.34
Irrigation
Private Fire Protection Service Customers
The fixed monthly service charge was also computed for Private Fire Protection Service customers. The customers pay only for the costs related to system capacity and billing as the service is required in case of an emergency.
Table 2-11. Private Fire Protection Service Customers Fixed Unit Cost Calculation by Cost Component Fixed Unit Cost/Unit
Source of Supply $0 1,229 $0.00
Base $0 1,229 $0.00
MDD $11,675 1,229 $0.79
PHD $28,618 1,229 $1.94
Meters $10,826 1,229 $0.73
Customer Service $31,678 465 $5.68 Conservation $0 1,229 $0.00
Public Fire Reallocation $0 465 $0.00 Total $82,798 $9.15
The monthly service charge for the base equivalent meter (5/8-inch) is $9.15 per month. However, the smallest meter size for the fire service is a 1-inch meter. RDN applied a 2.5-meter ratio to the base charge, which resulted in $14.34 per month for the service.
The proposed five-year rates for Arrowhead Woods Irrigation customers are as follows:
Table 2-12. Proposed Private Fire Protection Service Fixed Charges FY 2021-22 to FY 2025-26, Arrowhead Woods Fixed Charges FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 1-in $14.34 $15.06 $15.82 $16.61 $17.44
1 1/2-in $23.01 $24.16 $25.37 $26.64 $27.98
2-in $33.40 $35.08 $36.84 $38.69 $40.63
3-in $57.66 $60.55 $63.59 $66.78 $70.13
4-in $92.31 $96.94 $101.81 $106.92 $112.29
6-in $178.93 $187.91 $197.34 $207.25 $217.65
Private Fire Protection Service
City Council Regular Meeting - Page 1102 of 1385
30 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Volumetric Rates
Volumetric rates are designed based on variable costs such as water purchases, treatment, and energy costs. The peaking costs on the volumetric side are the remaining fixed costs intended to be recovered from volumetric charges. Additionally, water conservation-related costs are all recovered from volumetric rates.
Residential Customers
For Residential customers, the current four -tiered rate structure was maintained to mitigate rate impacts. The system has four water supply sources: surface water, groundwater, and two separate connections from CLAWA.
RDN used the cost differences in the supply costs to build the four tiers accordingly.
Table 2-13. Residential Customers Volumetric Tiered Rates Calculation by Cost Component Cost Components Tier 1 Tier 2 Tier 3 Tier 4
% of Usage Distribution by Tier 42.9% 32.7% 15.0% 9.4%
Volume in HCF 191,542 146,043 66,829 41,961 Source of Supply (in HCF)
Surface Water 191,542 133,048 Groundwater 12,994.55 25,989 CLAWA 1 40,840
CLAWA2 41,961
Water Cost $0.45 $0.59 $2.56 $5.97
Revenue Requirements $85,875.95 $86,448.94 $171,404.45 $250,647.76 Other Source of Supply $1.10 $1.10 $1.10 $1.10
Revenue Requirements $209,892.88 $160,034.88 $73,231.77 $45,980.91 Base $0.00 $0.00 $0.00 $0.00
MDD $3.53 $3.53
PHD $5.19
Revenue Requirements $0.00 $0.00 $235,607.11 $365,870.55 Conservation $1.08 $1.08 $1.08
Revenue Requirements $157,628.56 $72,130.64 $45,289.53
Total $1.54 $2.77 $8.27 $16.87
The proposed five-year volumetric rates for Arrowhead Woods Residential customers are as follows:
Table 2-14. Proposed Residential Volumetric Charges FY 2021-22 to FY 2025-26, Arrowhead Woods Volumetric Charges Widths FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Tier 1 0 - 4 $1.54 $1.62 $1.70 $1.79 $1.88
Tier 2 5 - 13 $2.77 $2.91 $3.06 $3.21 $3.37
Tier 3 14 - 30 $8.27 $8.68 $9.12 $9.58 $10.06
Tier 4 31 + $16.87 $17.71 $18.60 $19.53 $20.51
Residential
Commercial and Institutional Customers
RDN identified a few Commercial customers with a predominantly high level of water usage while analyzing customers billing records. It consists of only one tier under the current rate structure ; thus, the second tier was designed to send conservation signals to reduce excessive usage.
City Council Regular Meeting - Page 1103 of 1385
31 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Table 2-15. Commercial/Institutional Customers Volumetric Tiered Rates Calculation by Cost Component Cost Components Tier 1 Tier 2
% of Usage Distribution by Tier 34.5% 65.5%
Volume in HCF 20,566 39,049 Source of Supply (in HCF)
Surface Water 20,566 27,699 Groundwater 6,941.94
CLAWA 1 - 4,408 CLAWA2
Water Cost $0.45 $1.01
Revenue Requirements $9,220.57 $39,451.15
Base $3.48 $3.48
MDD $2.69
PHD $1.08
Revenue Requirements $71,490.50 $282,648.31
Conservation $0.62 $0.62
Revenue Requirements $12,672.43 $24,061.65
Total $4.54 $8.86
The proposed five-year volumetric rates for Arrowhead Woods Commercial/Institutional customers are as follows:
Table 2-16. Proposed Commercial Volumetric Charges FY 2021-22 to FY 2025-26, Arrowhead Woods Volumetric Charges Widths FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Tier 1 0 - 40 $4.54 $4.77 $5.01 $5.26 $5.52
Tier 2 40 + $8.86 $9.31 $9.78 $10.27 $10.79
Commercial
City Council Regular Meeting - Page 1104 of 1385
32 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Irrigation Customers
Finally, the proposed volumetric rate structure for Irrigation customers is the same as the current rate structure, a uniform rate.
Table 2-17. Irrigation Customers Volumetric Tiered Rates Calculation by Cost Component Cost Components Tier 1
% of Usage Distribution by Tier 100.0%
Volume in HCF 12,054
Source of Supply (in HCF)
Surface Water 9,759
Groundwater 891
CLAWA 1 1,404
CLAWA2
Water Cost $0.85
Revenue Requirements $10,262.52
Base $3.48
MDD $3.01
PHD $0.38
Revenue Requirements $82,713.52
Conservation $0.62
Revenue Requirements $7,427.48
Total $8.33
The proposed five-year volumetric rates for Arrowhead Woods Irrigation customers are as follows:
Table 2-18. Proposed Irrigation Volumetric Rates FY 2021-22 to FY 2025-26, Arrowhead Woods Volumetric Charges Width FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Tier 1 All Use $8.33 $8.75 $9.19 $9.65 $10.13
Irrigation
City Council Regular Meeting - Page 1105 of 1385
33 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study
2.4 Bill Impact Analysis
This analysis compares customers’ bills under current and proposed rates. The rates were calculated at the median, 75th percentile, and upper fence usage points to determine the impacts on different types of customers.
The upper fence wa s calculated as: Upper Fence = Q3 (75th percentile) + (1.5 * IQR) where IQR represents the difference between the 75th percentile (Q3) and 25th percentile (Q1) in a dataset. An observation that lies above the upper fence is often considered an outlier.
Residential Customers Bill Impact
Figure 2-4 shows the dollar change in the bill based on the Residential customer’s usage at selected usage points as described above. The District’s median Residential customer uses water for 4 hcf per month. Additionally, 75 Percent of Residential customers use under 9 hcf. The usage at the upper fence was 14 hcf. Figure 2-4 presents Residential customers’ monthly bill impacts by usage.
Figure 2-4. Residential Customers’ Bill Impacts by Usage for Median, 75 Percentile, and the Upper Fence, Arrowhead Woods
Commercial Customers Bill Impact
Figure 2-5 shows the dollar change in the bill based on the customer’s usage. The District’s median Commercial customer uses 5 hcf of water per month. Commercial custome rs at the 75 th percentile use 23 hcf. Excluding th e outliers, the upper fence of Commercial customers uses 40 hcf a month. $50.07
$63.27
$81.65
$53.19
$67.04
$86.39
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
$100.00
Median 4 HCF 75th Percentile 9 HCF Upper Fence 14 HCF
Current Proposed
City Council Regular Meeting - Page 1106 of 1385
34 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Figure 2-5. Commercial Customer Bill Impacts by Usage for Median, 75th Percentile, and the Upper Fence, Arrowhead Woods
Irrigation Customers Bill Impact
Irrigation customers in the Arrowhead Woods service area have the highest per account usage among all customer classes. Figure 2-6 shows the dollar change in the bill based on the customer’s usage. The District’s median Irrigation customer uses 14 hcf of water monthly. An Irrigation customer at the 75 th percentile uses 30 hcf. The upper fence of irrigation customers is 50 hcf of water per month.
Figure 2-6. Irrigation Customers Bill Impacts by Usage for Median, 75 Percentile and the Upper Fence, Arrowhead Woods
$66.11
$143.87
$217.31
$73.07
$154.79
$231.97
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
Median 5 HCF 75th Percentile 23 HCF Upper Fence 40 HCF
Current Proposed
$219.64
$346.04
$504.04
$213.28
$346.56
$513.16
$0.00
$100.00
$200.00
$300.00
$400.00
$500.00
$600.00
Median 14 HCF 75th Percentile 30 HCF Upper Fence 50 HCF Current Proposed
City Council Regular Meeting - Page 1107 of 1385
35 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study 3 DEER LODGE PARK WATER SYSTEM
3.1 Financial Plan
LACSD assumed ownership and control of the Deer Lake Water Corporation in 1985 . The District has been providing water since to Deer Lodge Park (DLP) residents . All water sold in DLP is either produced from existing wells within the service area or purchased from CLAWA. The District budgets O&M and CIPs separately for each water system; thus, the costs included in the financial plan reflect the costs incurred to provide service to DLP customers.
Account Growth
DLP currently serves 216 customers. RDN projects approximately one new customer per year during the study period. In FY 2025-26, there will be 219 customers: 191 residential and 28 fire protection meters.
Demand Projections
To project water demand, RDN first derived aggregate usage levels. Next, we calculated per account water usage by dividing the aggregate usage by the number of accounts. RDN assumed constant per account usage over the study period. RDN projects a slight increase in water use thro ugh the study period, with one additional account forecasted per year. Figure 3-1 shows DLP’s total demand projected for the next ten years.
Figure 3-1. Annual Water Demand Projections for FY 2021-22 – FY 2030-31
15,502 15,201 15,256 15,309 15,365 15,349 15,404 15,457 15,512 15,567 -
2 4
6 8
10 12
14 16
18 20
FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Thousands
City Council Regular Meeting - Page 1108 of 1385
36 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Revenues
Based on the account growth and water de mand projections, RDN forecast revenues generated from customer rates for the current year and the study period using the current water rates, which totaled approximately $182,247 to $193,487 annually. Other operating revenues and non -operating revenue are estimated to provide supplemental revenue of approximately $ 6,000 a year. The District’s total revenues for the study period are estimated to be approximately $200,000 annually under the status quo rate schedule. Table 3-1 shows projected revenue flow for the study period (FY 2020-21 – FY 2025-26) without any revenue adjustments.
Table 3-1. Revenue Forecast for Deer Lodge Park Water System, FY 2021-22 – FY 2025-26 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26
Revenues from rates
Service Charges - Water $125,374 $125,908 $126,442 $126,442 $126,977 Usage Charges - Water $65,870 $66,100 $66,338 $66,272 $66,510 Rate Revenue Total $191,244 $192,008 $192,781 $192,715 $193,487 Other operating revenues $6,000 $6,000 $6,000 $6,000 $6,000 Non-operating revenues $5,157 $5,261 $5,366 $5,473 $5,583 Total $202,401 $203,269 $204,147 $204,188 $205,069
Operating and Maintenance (O&M) Expense
Table 3-2 displays the total O&M expense by costs category through the study period. The major expense items included in the analysis are employee wages and insurance, pension expense, electricity, and water purchase expenses.
Table 3-2. O&M Expense Forecast for Water, FY 2020-21 (Current) and Study Period, FY 2021-22 – FY 2025-26 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26
Source of Supply $30,261 $32,482 $34,871 $37,264 $40,003 Pumping $91,948 $94,183 $96,479 $98,794 $101,213
Treatment $25,541 $26,162 $26,800 $27,443 $28,115
Transmission $3,405 $3,488 $3,573 $3,659 $3,749
Engineering $3,405 $3,488 $3,573 $3,659 $3,749
Administrative and General $45,974 $47,091 $48,239 $49,397 $50,606 Total $200,534 $206,895 $213,536 $220,215 $227,434
Other Obligations
Other obligations included in the financial plan are capital improvement projects funded by PAYGO (Pay As You Go), debt service obligations, and reserve contributions made from rates.
Capital Improvement Projects
The DLP system an ticipates two capital projects will be accomplished during the study period: Canister Replacements (estimated at $40,000) and the purchase of new valves (estimated at $15,000). While additional CIP projects are needed, the District opted not to schedule an y more during the study period because of the City Council Regular Meeting - Page 1109 of 1385
37 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study impact PAYGO spending would have on customer rates. Instead, DLP will contribute funds to the Capital Improvement Reserve Fund to pay for future CIP needs.
Reserves
DLP maintains the same r eserve funds as Arrow head Woods, namely, Operating, Capital Improvement, Rate Stabilization, and New Facilities Funds. The proposed financial plan brings the reserve total for DLP to $557,882 by the end of the study period.
Revenue Requirements
Table 3-3 displays DLPs’ revenue requirements for FY 2021 -22 through FY 2025 -26. The total expense for each year is offset by other operating revenues and non -operating revenues to compute a pure portion of revenue requirements that need to be recovered from customers’ rates. CIP expense, contributions to reserves, and debt service payments are included in the other obligations. RDN proposes 3.5 percent annual revenue adjustments to reach the financial goal set by the District.
Table 3-3. Revenue Requirements for Deer Lodge Park System, FY 2021-22 – FY 2025-26 Description FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Test Year
Other Operating Revenues ($6,000) ($6,000) ($6,000) ($6,000) ($6,000) O&M Expenses $200,534 $206,895 $213,536 $220,215 $227,434 Non-operating Revenues ($5,157) ($5,261) ($5,366) ($5,473) ($5,583) Other Obligations $54,945 $54,965 $57,688 $57,686 $57,437 Net Balance ($41,158) ($39,506) ($40,519) ($39,488) ($37,489) Revenue Requirements $203,164 $211,093 $219,339 $226,940 $235,800
Financial Plan
Based on the projected total revenue and necessa ry costs to be recovered during the study period, RDN built a financial plan that will generate sufficient revenues for the day -to-day operation and annual PAYGO and make appropriate contributions to the reserves. DLP’s current cash balance in addition to the reserve funds is $0.4 million. The District intends to spend the accumulated cash down over the next ten-year period. Table 3-4 shows the proposed financial plan for the study period with 3.5 percent revenue adjustments per year.
City Council Regular Meeting - Page 1110 of 1385
38 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Table 3-4. Financial Plan for Water System, FY 2021-22 to FY 2025-26 Description FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Test Year
Operating Revenues $209,164 $217,093 $225,339 $232,940 $241,800 Water Sales - Existing $196,294 $197,058 $197,831 $197,765 $198,537 Year 1 - 3.5 % $6,870 $6,897 $6,924 $6,922 $6,949
Year 2 - 3.5 % $7,138 $7,166 $7,164 $7,192
Year 3 - 3.5 % $7,417 $7,415 $7,444
Year 4 - 3.5 % $7,674 $7,704
Year 5 - 3.5 % $7,974
Water Sales $203,164 $211,093 $219,339 $226,940 $235,800 Other Operating Revenues $6,000 $6,000 $6,000 $6,000 $6,000 O&M Expenses ($200,534) ($206,895) ($213,536) ($220,215) ($227,434) Net Operating Revenues $8,630 $10,198 $11,803 $12,725 $14,366 Non-operating Revenues $5,157 $5,261 $5,366 $5,473 $5,583 Other Obligations ($54,945) ($54,965) ($57,688) ($57,686) ($57,437) Debt Service Total $0 $0 $0 $0 $0
Contribution to Reserves ($49,792) ($49,792) ($52,495) ($52,495) ($52,225) Annualized Revenue $0 ($5,173) ($5,193) ($5,191) $0
Total CIPs $0 $0 $0 $0 $0
PAYGO $0 $0 $0 $0 $0
Capital Improvement Fund $0 ($56,892) $0 $0 $0
Use of CIP Fund $0 $56,892 $0 $0 $0
Net Balance ($41,158) ($39,506) ($40,519) ($39,488) ($37,489) Beginning Balance $399,218 $358,060 $318,554 $278,035 $238,547 Ending Balance $358,060 $318,554 $278,035 $238,547 $201,058 % Deficit/Surplus -20.3% -18.7% -18.5% -17.4% -15.9%
% Cumulative Deficiency 176.2% 76.9% 43.9% 27.7% 18.3%
City Council Regular Meeting - Page 1111 of 1385
39 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study
3.2 Cost of Service Analysis
The Cost of Service (COS) analysis was performed for the DLP system to allocate costs between Residential customers and Private Fire Protection Service customers commensurate with their service requirements . RDN employs the “base-extra capacity” cost of service method promulgated in AWWA’s M1, whereby costs are first allocated to individual functions, which are typical industry -standard activities. Public fire protection costs were allocated to each customer class based on their equivalent meter counts. The costs of each function are then distributed to appropriate cost causative components, which are defined by the cost-driving elements. The results of the COS form a reasonable, equitable basis for designing rates.
Figure 3-2. O&M (left) and Other Obligation (right) Cost Allocations for Deer Lodge Park
RDN equitably allocated costs to DLP’s two customer classes based on their service requirements . Figure 3-3 presents the current cost allocations versus the proposed cost allocations determined in the COS analysis.
Figure 3-3. Current Cost Allocation vs. Proposed Cost Allocation by Customer Class, Deer Lodge Park
97.3%
2.65%
97.7%
2.3%
RESIDENTIAL FIRE PROTECTION
Current Proposed
City Council Regular Meeting - Page 1112 of 1385
40 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study
3.3 Water Rate Design
RDN proposes the following adjustments to Deer Lodge Park customer’s water rate structures:
• Removing volumetric charges from private fire protection customers and collecting all fire revenue requirements from fixed charges
• Aligning meter ratios to match AWWA recommendations to provide a basis for increasing costs between meter sizes
Fixed Charge
For DLP customers, base, meters, and fire protection service costs are divided by the number of equivalent meters using the AWWA ratio discussed in the Key Assumptions section to compute the unit cost for each cost component. Customer service costs are simply divided by the number of accounts since the service requirements of this cost type are the same regardless of the meter size installed on a property.
Residential Customers
The costs included in the fixed charge calculation are about 50 percent of the base cost and 100 percent of meters, customer service, and public fire service costs. The DLP system will collect 61 percent of total revenue requirements from fixed charge revenue. The proposed 5-year rates for DLP Residential customers are as follows:
Table 3-5. Proposed Residential Fixed Charges FY 2021-22 to FY 2025-26, Deer Lodge Park
Private Fire Protection Service Customers
The fixed monthly service charge was also computed for Private Fire Protection Service customers. The customers pay only for the costs related to system capacity and billing as the service is required in case of emergencies. The system currently has only 1-inch meter customers. This Study also developed service charges for bigger meters in case new customers join later requesting a larger meter.
Table 3-6. Proposed Fire Fixed Charges FY 2021-22 to FY 2025-26, Deer Lodge Park
Fixed Charges FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 5/8-in $45.04 $46.61 $48.24 $49.93 $51.68
3/4-in $45.04 $46.61 $48.24 $49.93 $51.68
1-in $105.76 $109.46 $113.29 $117.26 $121.36
1 1/2-in $206.96 $214.20 $221.70 $229.46 $237.49
2-in $328.40 $339.89 $351.79 $364.10 $376.84
Residential
Fixed Charges FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 1-in $14.38 $14.89 $15.41 $15.95 $16.51
1 1/2-in $24.21 $25.06 $25.94 $26.85 $27.79
2-in $36.00 $37.26 $38.56 $39.91 $41.31
3-in $63.51 $65.74 $68.04 $70.42 $72.88
4-in $102.82 $106.41 $110.13 $113.98 $117.97
6-in $201.07 $208.11 $215.39 $222.93 $230.73
Fire
City Council Regular Meeting - Page 1113 of 1385
41 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Volumetric Rates
Volumetric rates are designed based on variable costs such as water purchases, treatment, and energy costs. The peaking costs for the DLP customers will be recovered via volumetric rates, and 50 percent of the base costs will be recovered from volumetric rate revenue.
The current two-tiered rate structure and tier widths were kept from the previous study to mitigate rate impacts on different types of users. The system has two water supply sources, including groundwater and one connection from CLAWA. RDN used the cost differences in the supply costs to design two tiers accordingly.
Table 3-7. Residential Customers Volumetric Tiered Rates Calculation by Cost Component
Tiers Tier 1 Tier 2
Tiered Percentages 73% 27%
Total Usage 11,106 4,150
Groundwater 4,749 -
Imported water 6,358 4,150
Water Supply Cost $2.53 $2.88
Revenue from Water Supply Cost $28,103 $11,951
Remaining Source of Supply $0.42 $0.42
Base $1.91 $1.91
Peaking $0.57
Conservation
Public Fire Protection Service
Total Tier Rate $4.87 $5.78
City Council Regular Meeting - Page 1114 of 1385
42 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study The proposed five-year volumetric rates for DLP Residential customers are as follows:
Table 3-8. Proposed Residential Volumetric Charges FY 2021-22 to FY 2025-26, Deer Lodge Park
*Note: volumetric charges include CLAWA water costs of $2.88 per HCF of water use. If CLAWA’s rates increase more than 7 percent in any given year, those additional costs will be added to the cost per hcf as a pass-through charge
3.4 Bill Impact Analysis
This analysis compares customers’ bills under current and proposed rates. The rates were calculated at the median, 75th percentile, and upper fence usage points to gaze at the impacts on different types of customers.
Figure 3-4 displays the changes in bills at the specific usage points.
Figure 3-4. Residential Customers’ Bill Impacts by Usage for Median, 75 Percentile, and the Upper Fence, Deer Lodge Park
Volumetric Charges Widths FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Tier 1 0-10 $4.87 $5.04 $5.22 $5.40 $5.59
Tier 2 10 + $5.78 $5.98 $6.19 $6.41 $6.63
Residential
$60.91
$77.31
$95.31
$64.52
$84.00
$105.30
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
Median 4 HCF 75th Percentile 8 HCF Upper Fence 12 HCF
Current Proposed
City Council Regular Meeting - Page 1115 of 1385
43 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study 4 RIMFOREST WATER SYSTEM
4.1 Financial Plan
LACSD began providing water service to the community of Rimforest in 2014. The previous rates were set by the City of Big Bear Lake, Department of Water and Power through July 2017 and ha ve not been adjusted since. The primary water source supplied to Rimforest customers is from CLAWA. The District budgets O&M and CIPs separately for each water system, thus the costs included in the financial plan reflect the costs incurred to provide service to Rimforest customers.
Account Growth/Demand Projections
Based on the historical trends the data indicated, RDN projects no account growth in the Rimforest service area.
In line with that projection, Residential customers are expected to slightly decrease their per account usage over time. RDN projects Commercial customer usage will slightly increase based on the historical trend. The overall effect is that water use is predicted to remain stable during the study period, increasing from 15,875 hcf a year in FY 2020-21 to 15,917 hcf a year in FY 2025-26.
Figure 4-1 Annual Water Demand Projections for FY 2020-21 – FY 2030-31
Revenues
Based on the account growth and water de mand projections, RDN forecast revenues generated from customer rates using the current water rates for the study period , which totaled approximately $ 270,000 annually. Other operating and non-operating revenue are estimated to provide supplemental revenue of approximately $7,200 a year. The system’s total revenues for the study period are estimated to be approximately $278,000 annually under the status quo rate schedule. Table 4-1 shows projected revenue flow for the study period (FY 2020-21 – FY 2025- 26) without any revenue adjustments.
15,875 15,883 15,892 15,900 15,910 15,917 15,927 15,935 15,945 15,956 15,964 0 2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
FY 2020-
21 FY 2021-
22 FY 2022-
23 FY 2023-
24 FY 2024-
25 FY 2025-
26 FY 2026-
27 FY 2027-
28 FY 2028-
29 FY 2029-
30 FY 2030-
31 COM RES
City Council Regular Meeting - Page 1116 of 1385
44 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Table 4-1. Revenue Forecast for Rimforest Water System, FY 2021-22 – FY 2025-26 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26
Revenue from rates
Service Charges - Water $177,149 $177,149 $177,149 $177,149 $177,149 Usage Charges - Water $93,562 $93,670 $93,767 $93,878 $93,976 Rate Revenue Total $270,710 $270,819 $270,916 $271,027 $271,124 Other operating revenues $6,678 $6,698 $6,718 $6,738 $6,758 Non-operating revenues $648 $661 $674 $688 $702
Total $278,037 $278,178 $278,309 $278,453 $278,585
Operating and Maintenance (O&M) Expense
Table 4-2 displays the total O&M expense by costs category through the study period. The major expense items included in the analysis are employee wages and insurance, water purchases, utilities, and repair and maintenance expenses.
Table 4-2. O&M Expense Forecast for Rimforest Water System, FY 2021-22 – FY 2025-26 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26
Source of Supply $58,178 $62,269 $66,638 $71,326 $76,330 Operations $42,614 $43,728 $44,873 $46,048 $47,255
Field Operations $50,025 $51,333 $52,677 $54,056 $55,473 Physical Plant Maintenance $3,706 $7,605 $3,902 $4,004 $4,109 Engineering $7,411 $3,802 $7,804 $8,008 $8,218
Administrative and General $81,522 $83,654 $85,843 $88,091 $90,400 Total $243,456 $252,392 $261,737 $271,534 $281,785
Other Obligations
Other obligations included in the financial plan are capital improvement projects funded by PAYGO (Pay As You Go), debt service obligations, and reserve contributions made from rates.
Capital Improvement Projects
The Rimforest water system is in the process of securing a major grant to assist in completing required capital projects during the study period. The $3.0 million grant will pay for adding a second water storage take and drilling new wells. Beyond the grant-funded CIP, Rimforest expects to spend approximately $260,000 on various projects during the study period.
Reserves
Rimforest maintains the same reserve funds as the other water systems with the same general funding stipulations. Under the proposed financial plan, total fund balances will reach $290,000 by the end of the study period. The system expects to contribute approximated $50,000 a year to reserve funds from customer rates.
City Council Regular Meeting - Page 1117 of 1385
45 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Revenue Requirements
Table 4-3 displays Rimforest’s revenue requirements for FY 2021 -22 through FY 2025 -26. The total expense for each year is offset by other operating revenues and non-operating revenues to compute a pure portion of revenue requirements that need to be recovered from customers’ rates. CIP expense, contributions to reserves, and debt service payments are included in the other obligations. RDN proposes an annual revenue adjustment schedule of
20.0 percent for the first year, 19.5 percent for FY 2022-23, and 5.0 percent for the remaining years of the study period to reach the financial goals set by the District.
Table 4-3. Revenue Requirements for Water System, FY 2021-22 – FY 2025-26 Description FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Test Year
Other Operating Revenues ($6,678) ($6,698) ($6,718) ($6,738) ($6,758) O&M Expenses $243,456 $252,392 $261,737 $271,534 $281,785 Non-operating Revenues ($648) ($661) ($674) ($688) ($702) Other Obligations $133,300 $158,949 $128,123 $131,067 $177,652 Net Balance ($44,578) ($15,628) $25,451 $33,315 ($1,902) Revenue Requirements $324,852 $388,354 $407,918 $428,489 $450,076
Financial Plan
Based on the projected total revenue and necessary costs to be recovered during the study period, RDN built a financial plan that will generate sufficient revenues for the day -to-day operation and annual PAYGO, and make appropriate contributions to the reserves. Table 4-4 shows the proposed financial plan for the study period with the revenue adjustments outlined above.
City Council Regular Meeting - Page 1118 of 1385
46 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Table 4-4. Financial Plan for Rimforest Water System, FY 2021-22 to FY 2025-26 Description FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Test Year
Operating Revenues $331,530 $395,052 $414,636 $435,228 $456,834 Water Sales - Existing $270,710 $270,819 $270,916 $271,027 $271,124 Year 1 - 20 % $54,142 $54,164 $54,183 $54,205 $54,225
Year 2 - 19.5 % $63,372 $63,394 $63,420 $63,443
Year 3 - 5 % $19,425 $19,433 $19,440
Year 4 - 5 % $20,404 $20,412
Year 5 - 5 % $21,432
Water Sales $324,852 $388,354 $407,918 $428,489 $450,076 Other Operating Revenues $6,678 $6,698 $6,718 $6,738 $6,758 O&M Expenses ($243,456) ($252,392) ($261,737) ($271,534) ($281,785) Net Operating Revenues $88,074 $142,660 $152,900 $163,694 $175,049 Non-operating Revenues $648 $661 $674 $688 $702
Other Obligations ($133,300) ($158,949) ($128,123) ($131,067) ($177,652) Debt Service Total ($43,338) $0 $0 $0 $0
Contribution to Reserves ($49,356) ($49,356) ($49,356) ($49,356) ($92,886) PAYGO $0 ($62,064) ($64,199) ($66,407) $0
Annualized Rates ($40,607) ($47,529) ($14,569) ($15,303) ($16,074) Net Balance ($44,578) ($15,628) $25,451 $33,315 ($1,902) Beginning Balance $4,580 ($39,998) ($55,625) ($30,174) $3,141 Ending Balance ($39,998) ($55,625) ($30,174) $3,141 $1,239 % Deficit/Surplus -13.7% -4.0% 6.2% 7.8% -0.4%
% Cumulative Deficiency -12.3% -7.8% -2.7% 0.2% 0.1%
4.2 Cost of Service Analysis
The Cost of Service (COS) analysis was performed for Rimforest water system to allocate costs among customers commensurate with their service requirements. RDN identified significant differences in the service requirements placed on the system between Residential customers and Commercial customers. Public fire protection costs were allocated to each customer class based on equivalent meter counts. In consultation with the District staff, costs are allocated to the two customer classes proportionally to develop different rates for each customer class.
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47 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Figure 4-2. O&M (left) and Other Obligation (right) Cost Allocations for Rimforest Water System
RDN equitably allocated costs to Rimforest’s three customer classes based on their service requirements. Figure 3-3Figure 4-3 presents the current cost allocation s versus the proposed cost allocation s determined in the COS analysis.
Figure 4-3. Current Cost Allocation vs. Proposed Cost Allocation by Customer Class, Rimforest
4.3 Water Rate Design
RDN proposes the following adjustments to Rimforest customer’s water rate structures:
• Adding a Commercial customer class to distribute costs equitably between different types of customers • Creating different fixed rates for each customer class based on total cost of service allocations
82.6%
17.1%
0.3%
74.2%
22.8%
3.0%
R E SID E NT IAL CO M M E R ICAL P R IVAT E FIR E
Current Proposed
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48 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study • Developing a second variable usage tier for all customer classes to mitigate rate impacts for smaller users
• Aligning meter ratios to match AWWA recommendations to provide a basis for differential costs between meter sizes
Fixed Charge
For Rimforest customers, base, peaking, meters, and fire protection service costs are divided by the number of equivalent meters to compute the unit cost for each cost component. Customer service costs are simply divided by the number of accounts since the service requirements of this cost type are the same regardless of the meter size installed on a property.
Residential Customers
For Rimforest customers, 100 percent of the base, meters, customer service, and fire protection service costs, and 50 percent of p eaking costs are recovered from fixed charge revenue. The system collects approximately 70 percent of revenue requirements for Residential customers from the fixed charges.
The proposed 5-year rate structure for Rimforest residential customers is as follows:
Table 4-5. Proposed Residential Fixed Charges FY 2021-22 to FY 2025-26, Rimforest Fixed Charges FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 3/4-in $54.95 $65.67 $68.95 $72.40 $76.02
1-in w/Fire $88.13 $105.31 $110.58 $116.11 $121.92
1-in $88.13 $105.31 $110.58 $116.11 $121.92
1 1/2-in $171.08 $204.44 $214.66 $225.39 $236.66
2-in $270.61 $323.38 $339.55 $356.53 $374.36
3-in $502.86 $600.92 $630.97 $662.52 $695.65
4-in $834.65 $997.41 $1,047.28 $1,099.64 $1,154.62
6-in $1,664.12 $1,988.62 $2,088.05 $2,192.45 $2,302.07
Residential
Commercial Customers
Approximately 37 percent of Commercial customers’ revenue requirements will be collected from fixed charges.
Significant differences in the usage level among users were identified for this customer class, thus the peaking related costs are allocated to the volumetric rates to ensure equitable cost recovery. Approximately 50 percent of the base costs are allocated to fixed charges in addition to 100 percent of meters, customer service, and Public Fire Protection service costs.
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49 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Table 4-6. Proposed Commercial Fixed Charges FY 2021-22 to FY 2025-26, Rimforest
Private Fire Protection Service Customers
The fixed monthly service charge was also computed for Private Fire Protection Service customers. The customers pay only for the costs related system capacity and billing as the service is required in c ase of emergency. The system currently has four fire service accounts, with 4-inch meters or larger.
Table 4-7. Proposed Fire Fixed Charges FY 2021-22 to FY 2025-26, Rimforest
Volumetric Rates
Volumetric rates are designed based on variable costs such as water purchases, treatment, and energy costs. The peaking costs on the volumetric side are the remaining fixed costs intended to be recovered from volumetric charges. Additionally, water conservation-related costs are all recovered from volumetric rates.
Residential Customers
Approximately 50 percent of t he peaking costs for Residential customers will be recovered via volumetric rates, and the remaining fixed source of supply costs will be recovered from volumetric rate revenue.
RDN built two -tiered rate structure by allocating the peaking costs to the second tier. The rate structure is designed to send strong conservation signals to those who exceed the first five hcf water allocation in Tier 1.
Fixed Charges FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 3/4-in $63.02 $75.31 $79.08 $83.03 $87.18
1-in w/Fire $101.58 $121.39 $127.46 $133.83 $140.52
1-in $101.58 $121.39 $127.46 $133.83 $140.52
1 1/2-in $197.98 $236.58 $248.41 $260.83 $273.87
2-in $313.66 $374.82 $393.56 $413.24 $433.90
3-in $583.57 $697.37 $732.24 $768.85 $807.29
4-in $969.16 $1,158.15 $1,216.06 $1,276.86 $1,340.70
6-in $1,933.14 $2,310.10 $2,425.61 $2,546.89 $2,674.23
COM
Fixed Charges FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 4-in $113.64 $135.81 $142.60 $149.73 $157.22
6-in $222.11 $265.42 $278.69 $292.62 $307.25
8-in $352.26 $420.95 $442.00 $464.10 $487.31
Fire
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50 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Table 4-8. Residential Customers Volumetric Tiered Rates Calculation by Cost Component Tiers Tier 1 Tier 2
Tiered Percentages 72% 28%
Total Usage 7,980 3,145
Imported Water $2.88 $2.88
Remaining Source of Supply $2.52 $2.52
Base $0.00 $0.00
Peaking $2.90
Pass - Thru $2.88 $2.88
Total Tier Rate $5.40 $8.30
The proposed five-year volumetric rates for Rimforest Residential customers are as follows:
Table 4-9. Proposed Residential Volumetric Charges FY 2021-22 to FY 2025-26, Rimforest Volumetric Charges Widths FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Tier 1 0-5 $5.40 $6.45 $6.77 $7.11 $7.47
Tier 2 5 + $8.30 $9.92 $10.42 $10.94 $11.49
Residential
*Note: volumetric charges include CLAWA water costs of $2.88 per HCF of water use. If CLAWA’s rates increase more than 7 percent in any given year, those additional costs will be added to the cost per hcf as a pass-through charge
Commercial Customers
All of t he peaking related costs allocated to Commercial customers will be recovered via volumetric rates. In addition, 50 percent of the base cost will be recovered from volumetric rate revenue as well as 100 percent of customer service and public fire protection related service costs.
RDN built two -tiered rate structure by all ocating the peaking costs to the second tier. The rate structure is designed to send strong conservation signals to those who exceed the 18 hcf of water allocation in Tier 1.
Table 4-10. Commercial Customers Volumetric Tiered Rates Calculation by Cost Component Tiers Tier 1 Tier 2
Tiered Percentages 46% 54%
Total Usage 2,188 2,569
Source of Supply $2.52 $2.52
Base $2.89 $2.89
Peaking $2.93
Pass Thru $2.88 $2.88
Total Tier Rate $8.28 $11.22
The proposed five-year volumetric rates for Rimforest Commercial customers are as follows:
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51 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Table 4-11. Proposed Commercial Volumetric Charges FY 2021-22 to FY 2025-26, Rimforest Volumetric Charges Widths FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Tier 1 0-18 $8.28 $9.90 $10.40 $10.92 $11.47
Tier 2 18+ $11.22 $13.40 $14.07 $14.77 $15.51
COM
*Note: volumetric charges include CLAWA water costs of $2.88 per HCF of water use. If CLAWA’s rates increase more than 7 percent in any given year, those additional costs will be added to the cost per hcf as a pass-through charge
4.4 Bill Impact Analysis
This analysis compares customer’s bill under current and proposed rates. The rates were calculated at the median, 75th percentile, and upper fence usage points to gaze the impacts on different types of customers.
Residential Customers Bill Impact
Figure 4-4 shows the dollar change in the bill based on the Residential customer’s usage at selected usage points as described above. The District’s median Residential c ustomer uses water for the amount of 4 hcf per month.
Additionally, 75 percent of Residential customers use under 6 hcf. The usage at the upper fence was 12 hcf. Figure 4-4 presents Residential customers’ monthly bill impacts by those three different levels of usage. RDN performed an extensive bill impact analysis to find the optimal rates with the least impact across all customers. Note that the bill impact shown below only reflect the test year rates.
Figure 4-4. Residential Customers’ Bill Impacts by Usage for Median, 75 Percentile, and the Upper Fence, Rimforest $70.13
$80.33
$110.93
$76.55
$90.23
$140.03
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
Median 4 HCF 75th Percentile 6 HCF Upper Fence 12 HCF
Current Proposed
Commercial Customers Bill Impact
Figure 4-5 shows the dollar change in the bill based on the customer’s usage. Th e District’s median Commercial customer uses 4 hcf of water per month. Commercial customers at the 75 th percentile use 9 hcf. Excluding the outliers, the upper fence of commercial customers uses 18 hcf a month.
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52 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Figure 4-5. Commercial Customer Bill Impacts by Usage for Median, 75th Percentile, and the Upper Fence, Rimforest $70.13
$95.63
$141.53
$96.15
$137.56
$212.11
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
Median 4 HCF 75th Percentile 9 HCF Upper Fence 18 HCF
Current Proposed
City Council Regular Meeting - Page 1125 of 1385
53 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study 5 SEWER SYSTEM
5.1 Financial Plan
RDN built a 10-year financial model for LACSD’s sewer system to meet the system’s long-term financial goals. The account growth and demand projections are presented for 10 years in this report. The detailed rate analysis was performed for the first five years because rate recommendations designed under Prop 218 cannot exceed five years.
Growth Projections
Residential sewer customers are charged a standard fixed charge for each of their sewer connections. Commercial Customers are charged based on their sewer connection, plus a variable charge for water use over 5 hcf a month.
RDN forecast the number of connections and per-connection usage by customer class utilizing observed trends in the historical data . During the study period, a total of 40 new sewer connections are expected. Residential customers are expected to increase by approximately 9 accounts and commercial customers are expected to increase by 3 accounts per year during the study period. Figure 5-1 shows sewer account growth between FY 2020- 21 and FY 2030-31
Figure 5-1. Annual Sewer Customer Growth Projections for FY 2020-21 – FY 2030-21
Revenues
Based on the demand projections RDN conducted a revenue analysis using the current sewer rates. The District currently collects revenues from fixed charges, volumetric charges (from commercial customers) , and other City Council Regular Meeting - Page 1126 of 1385
54 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study operating revenues such as inspection fees. The revenue analysis also includes non-operating revenues such as interest income and property taxes. These revenues are used to offset the revenue requirements that need to be recovered from customers’ rates. This projection was created under the status quo and does not include proposed revenue adjustments.
Table 5-1. Revenue Forecast for Sewer System, FY 2021-22 – FY 2025-26 Description FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Revenues from rates
Volumetric Revenues $662,173 $662,173 $662,173 $662,173 $669,872 Fixed Charges $7,068,818 $7,075,466 $7,081,450 $7,088,098 $7,096,075 Rate Revenue Total $7,730,991 $7,737,639 $7,743,622 $7,750,270 $7,765,948 Other operating revenues $112,932 $113,271 $113,611 $113,951 $114,293 Non-operating revenues $4,012,196 $4,085,644 $4,160,441 $4,236,611 $4,314,182 Total $11,856,119 $11,936,554 $12,017,674 $12,100,833 $12,194,423
Operating and Maintenance (O&M) Expense
The itemized O&M expenses were carefully reviewed by the District and forecast for the study period using escalation factors discussed in the Key Assumptions section . Table 5-2 shows LACSD’s projected O&M expenses for the sewer utility during the study period. O&M Expenses are expected to increase by 2.7 percent annually.
Table 5-2. O&M Expense Forecast for Sewer, FY 2020-21 (Current) and Study Period, FY 2021-22 – FY 2025-26 Description FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Physical Plant Maintenance $288,339 $296,059 $304,008 $312,196 $320,649 Operations $3,150,829 $3,235,187 $3,322,052 $3,411,526 $3,503,890 Field Ops $1,513,782 $1,554,311 $1,596,044 $1,639,031 $1,683,406 Engineering $216,255 $222,044 $228,006 $234,147 $240,487 Administration $2,039,280 $2,093,879 $2,150,100 $2,208,009 $2,267,789 Total $7,208,485 $7,401,480 $7,600,211 $7,804,910 $8,016,221
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55 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Other Obligations
Other obligations included in the sewer system financial plan are capital improvement projects funded by PAYGO (Pay As You Go), debt service obligations, and reserve contributions made through rates.
Capital Improvement Projects
The District estimates between $2.5 million and $13.6 million in capital expenditures per year for the study period.
The majority of CIP expenses are paid for using the CIP Reserve; however, the District projects around $5.3 million in PAYGO expenses during this time. Figure 5-2 shows the total CIP expenditures by funding source which will be accomplished during the 5-year study period.
Figure 5-2. Study Period (FY 2021-22 to FY 2025-26) Planned Capital Expenditures by Funding Source
Debt Service
The District’s sewer system’s debt service payments are currently scheduled for the amount of approximately $1.1 million annually. The payments include $0.9 million for the 2016 Bonds and $0.2 million for the Inter-Fund-Loan, which will be paid off in FY 2026-27.
Reserves
The sewer system maintains the same reserve funds as the three water systems with the same general funding stipulations. The total reserve balance target at the end of FY 2025 -26 is set a t $ 6.2 million, and reserve $13.6
$10.9
$3.8
$2.5 $2.6
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
$16.0
FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26
Millions
PAYGO CIP Reserve
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56 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study contributions to reach this target are estimated to equal approximately between $2.4 million and $3.1 million per year (some of the Capital Improvement Fund is being used to fund study period capital expenses).
Revenue Requirements
Table 5-3 displays LACSD’s sewer revenue requirements for FY 2021-22 through FY 2025-26. The total expense of each year is offset by other operating revenues and non-operating revenues to compute a pure portion of revenue requirements that need to be recovered from customer rates. CIP ex pense, contributions to reserves, and debt service payments are included in the other obligations. RDN proposes 3.6 percent per year, as an annual revenue adjustment to all study years.
Table 5-3. Revenue Requirements for Sewer System, FY 2021-22 – FY 2025-26 Description FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Test Year
Other Operating Revenues ($112,932) ($113,271) ($113,611) ($113,951) ($114,293) O&M Expenses $7,208,485 $7,401,480 $7,600,211 $7,804,910 $8,016,221 Non-operating Revenues ($4,012,196) ($4,085,644) ($4,160,441) ($4,236,611) ($4,314,182) Other Obligations $3,462,521 $7,879,856 $4,473,975 $4,609,105 $4,491,045 Net Balance $1,254,692 ($2,994,081) $585,865 $631,902 $947,818 Revenue Requirements $7,800,570 $8,088,340 $8,386,000 $8,695,354 $9,026,609
Financial Plan
Based on the projected total revenue and necessary costs to be covered during the study period. Table 5-4 shows the reserve balance through the study period under the proposed rate plan. The system currently holds $1.6 million in cash in addition to the reserve funds. It is the District’s plan to spend the accumulated cash down to zero over the next ten-year period on specific capital projects and other expenditures. Table 2-4 shows the proposed financial plan for the study period with 3.6 percent revenue adjustments per year.
By adopting this plan, the District will have a sufficient cash balance of $8.2 million by the end of FY 2025 -26 to execute necessary capital projects and meet the reserve targets for Operating and Rate Stabilization Reserve Funds.
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57 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Table 5-4. Financial Plan for Sewer System, FY 2021-22 to FY 2025-26 Description FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Test Year
Operating Revenues $7,913,502 $8,201,611 $8,499,610 $8,809,306 $9,140,903 Water Sales - Existing $7,730,991 $7,737,639 $7,743,622 $7,750,270 $7,765,948 Year 1 - 3.6 % $278,316 $278,555 $278,770 $279,010 $279,574 Year 2 - 3.6 % $288,583 $288,806 $289,054 $289,639
Year 3 - 3.6 % $299,203 $299,460 $300,066
Year 4 - 3.6 % $310,241 $310,868
Year 5 - 3.6 % $322,059
Annualization of rates ($208,737) ($216,437) ($224,402) ($232,680) ($241,545) Water Sales $7,800,570 $8,088,340 $8,386,000 $8,695,354 $9,026,609 Other Operating Revenues $112,932 $113,271 $113,611 $113,951 $114,293 O&M Expenses ($7,208,485) ($7,401,480) ($7,600,211) ($7,804,910) ($8,016,221) Net Operating Revenues $705,017 $800,131 $899,399 $1,004,396 $1,124,681 Non-operating Revenues $4,012,196 $4,085,644 $4,160,441 $4,236,611 $4,314,182 Other Obligations ($3,462,521) ($7,879,856) ($4,473,975) ($4,609,105) ($4,491,045) Debt Service Principal ($607,122) ($603,826) ($638,020) ($674,864) ($714,619) Debt Service Interest ($502,228) ($517,648) ($483,453) ($446,610) ($406,854) Contribution to Reserves ($2,353,171) ($2,577,841) ($2,826,817) ($3,152,327) ($3,124,613) PAYGO $0 ($4,180,542) ($525,684) ($335,305) ($244,959)
CIP Reserve ($13,599,500) ($6,733,314) ($3,262,897) ($2,118,220) ($2,316,915) Use of CIP Fund $13,599,500 $6,733,314 $3,262,897 $2,118,220 $2,316,915 Net Balance $1,254,692 ($2,994,081) $585,865 $631,902 $947,818 Beginning of the Year Balance $1,601,714 $2,856,406 ($137,676) $448,189 $1,080,092 Ending Balance $2,856,406 ($137,676) $448,189 $1,080,092 $2,027,910 DCSR 4.25 4.36 4.51 4.67 4.85 % Deficit/Surplus 16.1% -37.0% 7.0% 7.3% 10.5%
% Cummulative Deficiency 36.6% -0.9% 1.8% 3.3% 4.8%
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58 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study
5.2 Cost of Service Analysis
In the same way as the water system’s Cost of Service (COS) analysis was performed, a sewer system’s COS analysis also utilizes a three‐step approach to allocate costs proportionally among different customer classes. These steps include 1) functionalization of cost and asset items , 2) cost classification, and 3) cost allocation to customers.
Provided below is a detailed discussion of the sewer COS analysis conducted for the District, and the specific steps taken for the analysis.
The typical major functions included in a sewer study are collection, pumping, sewer treatment, and other sewer services. The District staff carefully distributed each of the O&M expenses and the asset items into these functions.
Special attention was paid to staff’s salaries and wages as one employee’s salary often applies to multiple functions of the system. Once costs were functionalized, RDN further classified the costs into four different types of service categories (cost causative components):
• Volume related costs - those costs which tend to vary with the total quantity of wastewater collected and treated
• Strength related costs - those costs associated with the additional handling and treatment of high “strength” sewer. Strength of sewer is typically measured in biochemical oxygen demand (BOD) and total suspended solids (TSS). Increased levels of BOD or TSS generally equate to increased treatment costs.
• Other sewer service-related costs – those costs which are a function of the number of customers served. Customer related costs typically include the costs of billing, collecting, and accounting.
Once this process was complete, and the customer classes were identified, the unit cost of these classified costs were calculated and further allocated to different customer classes using the unit of services specific to the class.
Figure 5-3 displays the functionalized O&M costs and other obligation costs allocated to cost causative components for the sewer system.
Figure 5-3. O&M (left) and Other Obligation (right) Cost Allocations for Sewer System
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59 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study In developing equitable rate structures, revenue requirements are allocated to Residential and Commercial customers commensurate with customer demand and services rendered. The costs are allocated to customer classes according to the volume of discharge, the relative strength of discharge, and number of connections. Based on the results of the unit of service analysis carried out during this study, there are very minor shifts in the cost allocation among the customer classes. Table 5-5 displays different service requirements based on the type of services provided by the system. As a result of this analysis RDN identified slight shifts in the cost allocation among the customer class es. Figure 5-4 presents the current cost allocation verses the proposed cost al location determined in the COS analysis.
Table 5-5. Unit of Service, Sewer System
Unit of Service
Description Annual Flow % Flow Strength Volume Total Strength % Strengh hcf/year mg/L lbs/year
Residential 527,381 85.3% 225 1,493,373,516 740,772 85.3% Commercial 91,189 14.7% 225 258,219,064 128,087 14.7% Total 618,570 100.0% 868,859 100.0%
Unit of Service
Description Strength Volume Total Strength % Strengh # of Bills % Connections mg/L lbs/year
Residential 225 1,493,373,516 740,772 85.3% 124,512 97.6% Commercial 225 258,219,064 128,087 14.7% 3,096 2.4% Total 868,859 100.0% 127,608 100.0%
WW ServiceTSS
BODVolume
Figure 5-4. Current Cost Allocation vs. Proposed Cost Allocation by Customer Class
5.3 RATE DESIGN
The District’s sewer rates are comprised of a fixed monthly service charge and a volumetric rate for Commercial customers. The fixed service charge is applied to each of the District’s connections.
89.2%
10.8%
88.9%
11.1%
R E S C O M M E R C I A L
Current Proposed
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60 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Sewer Rates
There are no major changes of structure required for the proposed sewer rates as the assumptions used in the last study remain true. The volumetric portion of rates applied to Commercial customers is set to be applied when their water use is above the aver age indoor water use of Residential customers (5 hcf) . Additionally, the fixed charges for R esidential and C ommercial customers remain the same to reflect the fact that the fixed charge includes one residence’s sewer contributions. Table 5-6 shows the proposed sewer rates for FY 2021-22 through FY 2025-26.
Table 5-6. Proposed Sewer Rates for FY 2021-22 – FY 2025-26 Fixed Charges FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Residential $55.72 $57.73 $59.81 $61.96 $64.19
Commercial $55.72 $57.73 $59.81 $61.96 $64.19
Volumetric Charges FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Commercial Use > 5
CCF $8.34 $8.64 $8.96 $9.28 $9.61
Sewer
5.4 BILL IMPACTS
RDN performed an extensive bill impact analysis to find the optimal rates with the least impact across all customers. Note that the bill impact shown below only reflects the test year rates.
Residential and Commercial Customers Bill Impact
This analysis compares customer’s bill under current and proposed rates. Figure 5-5 shows the dollar change in the bill based on the sewer customer’s usage. Residential customers are billed a fixed charge regardless of the flow. Commercial Customers who use more than 5 hcf will see additional bill increases based on the total use.
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61 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study Figure 5-5. Sewer Bill Impacts by Customer Class
$55.40 $55.40
$95.45
$55.72 $55.72
$97.42
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
Residential Commercial 5 HCF Commercial 10 HCF
Current Proposed
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62 Lake Arrowhead Community Services District – 2022 Water and Sewer Rate Study
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City of Lynwood
Robert D. Niehaus, Inc. │ November 29, 2022
Jack Lyon 805-618-1356 │ [email protected]
140 East Carrillo Street, Santa Barbara, CA 93101
Cost Proposal for Water and Sewer Rate Study
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November 29, 2022
Kristan Lloyd Anthony Elowsky, Project Manager
Administrative Assistant Robert D. Niehaus, Inc.
City of Lynwood 140 E Carrillo Street
11330 Bullis Road Santa Barabra, CA 93101
Lynwood, CA 90262 Phone: (805) 962-0611
Email: [email protected]
Subject: Proposal for City of Lynwood Water and Sewer Rate Study Dear Ms. Lloyd,
Robert D. Niehaus, Inc. (RDN) is pleased to submit our cost proposal to conduct the Water and Sewer Rate Study (Study) for the City of Lynwood (City). The following includes a not-to-exceed cost proposal and RDN’s hourly rates for each labor category in our proposed project team.
We are excited for the opportunity to work with the City on this important project. To discuss our technical or price proposal, which is valid for a 120-day period, please coordinate with Jack Lyon, Director of Bus iness Development, at (805) 618-1356 or [email protected].
Respectfully submitted,
Robert D. Niehaus, Ph.D. Anthony Elowsky, M.A.
Managing Director, Principal Economist Project Manager, Financial Analyst
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COST PROPOSAL
The tables below present RDN’s cost proposal and compensation schedule, respectively. Our not -to- exceed price proposal to provide professional consulting services to conduct the City of Lynwood’s Water and Sewer Rate Study, including other direct costs and travel expenses, is $89,900.
Table 1. RDN Not-to-Exceed Cost Proposal
Table 2. RDN Labor Rates
Tasks Principal Project
Manager
Senior
Advisor
Senior
Analyst
Associate
Analyst
Task 1. Project Management/Meetings 4 48 20 16 8 96 $19,720 Task 2. Long-Term Financial Plan 2 24 8 8 40 82 $13,920 Task 3. Cost of Service Analysis 2 24 8 8 40 82 $13,920 Task 4. Rate Design 4 30 8 8 24 74 $13,500 Task 5. Report and Model 2 40 2 16 40 100 $16,300 Task 6. Proposition 218 Support 2 16 10 - 16 44 $8,540 Estimated Direct Expenses $4,000
Total Hours 16 182 56 56 168 478 Hourly Rate $320 $170 $310 $190 $130
Total Project Cost $5,120 $30,940 $17,360 $10,640 $21,840 Robert D. Niehaus, Inc.
$89,900
Total
Hours
Total
Cost
Analyst Labor Category Hourly Rate
Robert Niehaus, Ph.D. Principal $320
Sanjay Gaur, M.P.A., M.S. Senior Advisor $310
Ichiko Kido, M.B.A Senior Analyst $190
Anthony Elowsky, M.A. Project Manager $170
Bjorn Kallerud, M.Sc. Associate Analyst $130
Zachary VanDinther, B.S. Associate Analyst $130
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2023 WATER AND
SEWER RATE STUDY
Bartle Wells AssociatesBlack & Veatch Mangement Consulting, LLCHF&H Consultants, LLCNewGen Strategies and Solutions, LLCRaftelis Financial Consultants, Inc. Robert D. Niehaus, Inc.Willdan Financial Services Project Understanding (20% ) 20 15 20 15 20 20 15
Firm Experience (20% ) 18 15 15 15 20 18 15
Qualifications (20%) 18 15 18 10 18 20 10
References (10%) 8 6 6 8 10 8 8
Project Schedule (20%) 20 20 20 20 20 20 20
Fee Proposal (10%) 6 8 2 8 4 8 10
Total Score 90 79 81 76 92 94 78
Fee Schedule $119,630.00 $98,755.00 $159,770.00 $98,950.00 $131,913.00 $89,900.00 $55,625.00 RANKING 3 5 4 7 2 1 6
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Agenda Item # 20.
AGENDA STAFF REPORT
DATE: December 20, 2022
TO: Honorable Mayor and Members of the City Council
APPROVED BY: Ernie Hernandez, City Manager
PREPARED BY: Julian Lee, Director of Public Works
SUBJECT: APPROVAL OF AN AGREEMENT BETWEEN THE CITY OF LYNWOOD ANDENTERPRISE FLEET MANAGEMENT, INC. FOR VEHICLE REPLACEMENT ANDMAINTENANCE PROGRAM Recommendation:
Staff recommends that the City Council adopt the attached resolution entitled: “A RESOLUTION OF THE CITYCOUNCIL OF THE CITY OF LYNWOOD TO IMPLEMENT THE CITY’S VEHICLE REPLACEMENT ANDMAINTENANCE PROGRAM, INCLUDING APPROVAL OF VARIOUS AGREEMENTS WITHENTERPRISE FLEET MANAGEMENT, INC. FOR THE LEASE AND MAINTENANCE OF THE CITY’SVEHICLE FLEET”.
Background:
The Public Works Department’s light & medium duty fleet includes 28 vehicles assigned to various sections.These vehicles range from regular sedans to vans to specialty trucks. Each section was tasked with procurementof their own vehicles and funding was allocated in their budget. Traditionally the Public Works Department hasreplaced four to five vehicles per year and as a result, more than half of the fleet is over 10 years old. Given ouraged fleet, the City experiences higher maintenance costs, lower fuel efficiency and lower trade in value whenreplacing. Staff began to research various options to improve the status quo vehicle procurement process in hopes ofimplementing a more consolidated and cost-effective Vehicle Replacement Program. A review of other fleetreplacement and maintenance programs in other cities indicated that over the course of the last few years, anumber of cities have opted to adopt a vehicle lease program and use contract services for the replacement oftheir fleet. Their programs have resulted in substantial cost savings while allowing them to benefit from the use ofnew vehicles, which in turn has contributed to reduction of maintenance costs.
Discussion and Analysis:
Staff’s analysis concludes that utilizing Enterprise Fleet Management (Enterprise) as outlined below; through their City Council Regular Meeting - Page 1144 of 1385
maintenance program, structured and methodical vehicle replacement recommendations, Equity MunicipalLeases instead of purchasing, and outsourcing the administration & tracking will lower the Public WorksDepartment’s total cost of ownership by: · Significantly reducing annual maintenance costs· Significantly increasing vehicle resale returns· Reduce fuel spend by increasing fuel efficiency with newer vehicles that have better gasmileage performance & technology· In addition, the program will also reduce staff administrative time, improve vehicle safety, andimprove vehicle emissions. Staff’s review of other Cities fleet replacement and maintenance programs indicated that several cities, over thecourse of the last few years, have opted to adopt a vehicle lease program with Enterprise, as well as using theirservices for maintenance of their fleet. These Cities include Norwalk, Downey, Paramount, Westminster, LaPalma, and several others. Their programs have resulted in substantial cost savings while allowing them to benefitfrom use of vehicles for 3-5 years; which in turn has contributed to the reduction of maintenance & fuel costs, andsignificantly increased resale values. In order to evaluate the feasibility of implementing a similar program in Lynwood, staff has met with representativesof Enterprise Fleet Management to put together a plan for the Public Works Department. In doing so, certainparameters were established:1. The City will establish a list of the vehicles marked for replacement.2. Reduce net operating costs, knowing that newer vehicles significantly lower maintenance expensesand that newer vehicles have increased fuel efficiency.3. A viable vehicle replacement program with a proactive replacement cycle, depending on economicfeasibility and vehicle market conditions4. City staff would identify the required specifications and types of replacement vehicles in order to “righttype” the fleet for current job use.5. Lower the average age of the fleet knowing that 64% of the current light and medium duty vehicles areover ten (10) years old; two (2) out of 28 vehicles predate Anti-lock Brake standards, twenty-four (24) out of28 vehicles pre-date back up camera standards, and seven (7) out of 28 vehicles predate ElectronicStability Control. After several meetings and evaluations of various options based on the above listed parameters, it was decidedthat an Equity Lease & Maintenance Program with Enterprise will best suit the needs of the Public WorksDepartment. Equity Lease Program This program could be addressed through an “open-ended” lease structure which would allow the Public WorksDepartment to replace more vehicles with less upfront capital. During these unprecedented economic times,Cities are tasked to do more with less upfront capital. It is important to evaluate alternative funding options toconserve cash flow, and still get back on track with vehicle replacements. Establishing a sustainable fleetreplacement plan will allow the Public Works Department to replace its vehicles more consistently and maintain allthe rights of ownership. Below are highlights of this program:· No mileage restrictions, no abnormal wear and tear, and no early termination penalties· The City has all rights of ownership and can equip vehicles with the aftermarket equipment required(utility bodies, tool boxes, specialty bodies, lights, etc.)· All the equity after resale belongs to the City, and can be used to fund/lower the costs of futurereplacement vehicles or as a credit back to the City· Leasing will minimize the amount of large capital outlays necessary for purchasing vehicles· The City would establish a proactive fleet replacement plan to acquire vehicles on a more consistentbasis, while significantly reducing maintenance cost and improving fuel economy, safety, and driverdowntime. The proposed plan includes replacement of 28 City vehicles with a current average life of 10.8 years through a“Vehicle Leasing and Replacement Program (“Program”) with Enterprise over the course of the next four (4)years. The analysis performed provides the following plan to replace (see fleet profile & replacement schedulebelow):
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Calendar Year No of ReplacementVehicles2023 102024 52025 92026 4 Maintenance Program With regards to the Public Works Department’s fleet maintenance needs, the City spends $61,124 per year ($181per vehicle per month) on the 28 vehicles being considered for this program. Under the Enterprise programthrough Sourcewell, once fully implemented, the City will spend an estimated $13,471 per year ($40.09 per vehicleper month) over those 28 vehicles. It is proposed that the new leased vehicles be maintained by participating in amaintenance program offered by Enterprise Fleet Management, Inc. (EFM). Through this program (called “FullMaintenance”) the City pays a flat monthly rate at an average cost of $40.09 per vehicle per month; and during theterm of the Agreement, EFM would pay for all costs and expenses incurred in connection with the maintenance orrepair of the leased vehicles. Refreshing the aged fleet will have a positive impact on fuel expenses. With Corporate Average Fuel Economy(CAFE) standards and technology increasing the gas mileage of newer vehicles, the City can increase the milesper gallon of its fleet, which is getting an estimated 10 MPG today versus an estimated average of 13 MPG on thenew leased vehicles. This would decrease our estimated annual fuel spend in year 1 from $99,120 to $90,951. Once all 28 vehicles are replaced over 4 years we estimate our annual fuel cost dropping to $76,246. While thecost of fuel and actual miles driven will impact these estimates, by replacing vehicles more proactively the city willalways be leveraging the best technology and best MPG possible versus the current plan of keeping vehicles forover 15 years. Enterprise will provide a local Account Team to assist the City with implementing and executing the Vehicle Leaseand Replacement program. Their services are included in the program:
· Review the best time to order or sell vehicles· Monitor the fleet to ensure efficiencies with maintenance and fuel· Compile analysis on the best alternative fuel vehicles· Review mileage patterns and fuel miles per gallon· Establish a proactive replacement plan By undertaking this program and using a ten (10) year projected analysis, the City could save about 9.6% or$258,538 over 10 years. Eventually, annual savings through the Enterprises program will be 12.1% or $32,518 peryear. In summary, staff evaluation concludes that by partnering with Enterprise Fleet Management the City will: lower it’stotal costs towards the Public Works Department fleet, reduce administrative time/costs, provide staff with safervehicles that are equipped to meet their job application needs, and improve the fleets overall environmentalemissions. An agreement with Enterprise Fleet Management, Inc can be executed without going through the traditionalbidding process by piggybacking off of the existing Sourcewell (formerly NJPA) RFP & Contract # 030122 forFleet Management Services. Sourcewell is a government agency that has been providing cooperative purchasingprograms throughout North America for over 40 years. This cooperative purchasing system enables memberentities to purchase on an “as needed” basis from competitively awarded contracts with high performancevendors. The City of Lynwood is a current member of Sourcewell and since Enterprise has been awarded acontract with Sourcewell through a competitive process for Fleet Management Services, the City can enter into anagreement with Enterprise pursuant to Sourcewell Contract #030122-EFM.
Fiscal Impact:
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The proposed program includes replacement of 10 Public Works Department’s vehicles the first year (CY 2023),and any other vehicles designated in need for replacement by the City, in the following four years of the VehicleReplacement Program through vehicle leasing. The cost for the first year under Enterprise will amount to$261,556. The equity from sales of the replaced vehicles is estimated to be $34,500. In the current FY23 Budget,$2,096,636 of funding is spread out through several sections’ budgets including the water and sewer enterprisefunding sources and procurement processes. The table below is the funding source details for the vehicle purchase. Funding Sources AmountStreet Maintenance - Vehicle (2101.45.410.66020) $250,000.00Right-of-Way - Vehicle (2301.45.615.66020) $72,073.00AQMD - Vehicle (2451.45.621.66020) $500,000.00Street Maintenance - Vehicle (2851.45.410.66020) $250,000.00Water Utility - Vehicle (6051.45.450.66020) $115,000.00Garage - Vehicle (7011.45.420.66020) $909,563.00FY23 Approved Budget $2,096,636.00
Coordinated With:
City Manager’s OfficeDepartment of Finance and Administration Services ATTACHMENTS:Description
Resolution
Master Equity Lease Agreement
Addendum to Master Equity Lease Agreement
Maintenance Management and Fleet Rental Agreement
Addendum to Maintenance Management And Fleet Rental Agreement Maintenance Agreement
Addendum to Maintenance Agreement
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1 RESOLUTION NO._____________
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LYNWOOD TO IMPLEMENT THE CITY’S VEHICLE REPLACEMENT AND MAINTENANCE
PROGRAM, INCLUDING APPROVAL OF VARIOUS AGREEMENTS WITH
ENTERPRISE FLEET MANAGEMENT, INC. FOR THE LEASE AND MAINTENANCE OF THE CITY’S VEHICLE FLEET
WHEREAS, the City’s light & medium duty white fleet includes 28 vehicles assigned to various departments. These vehicles range from SUVs to specialty trucks primarily utilized in City’s Public Works Department; and
WHEREAS, 64% of the City’s fleet vehicles are over 10 years old and have not been replaced on a regular basis, causing the annual cost of maintenance of the aged units to exceed their salvage value. Excessive cost of maintenance due to the overall age and condition of the fleet does not provide opportunities to appropriately fund the City’s Fleet Replacement Fund; and
WHEREAS, the City staff research ed various options to improve the status quo by implementing a viable “Vehicle Replacement and Maintenance Program” ; and
WHEREAS, Staff’s analysis concludes that utilizing Enterprise Fleet Management, Inc. through their maintenance program, methodical vehicle replacement recommendations and Equity Municipal Leases instead of purchasing and outsourcing the administration & tracking will lower the City’s Total Cost of Ownership by 1) significantly reducing annual Maintenance Costs; 2) significantly increasing vehicle resale returns; 3) reducing fuel spend by increasing fuel efficiency with newer vehicles that have better MPG performance & technology; and 4) reducing staff administrative time, improve vehicle safety, and improve vehicle emissions; and
WHEREAS, representatives of Enterprise Fleet Management and staff put together a plan where the following parameters were established: 1) the City will establish a list of the vehicles marked for replacement; 2) reduce net operating costs, knowing that newer vehicles significantly lower maintenance expenses and that newer vehicles have increased fuel efficiency ; 3) implement a viable vehicle replacement program with a proactive replacement cycle, depending on ec onomic feasibility and vehicle market conditions; 4) City staff would identify the required specifications and types of replacement vehicles in order to “right type” the fleet for current job use ; 5) lower the average age of the fleet knowing that 64% of the current light and medium duty vehicles are over ten (10) years old; two (2) out of 28 vehicles predate Anti-lock Brake standards, twenty-four (24) out of 28 vehicles pre-date back up camera standards, and seven (7) out of 28 vehicles predate Electronic Stability Control; and
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2 WHEREAS, based on Staff’s evaluation, the City concludes that by partnering with Enterprise Fleet Management the City will: lower its total costs towards the white fleet ; reduce administrative time/costs ; provide staff with safer vehicles that are equipped to meet their job application needs; and improve the fleets overall environmental emissions by undertaking this program and using a ten (10) year projected analysis, the City could save about $225,180 over 10 years; and
WHEREAS, The City’s Fiscal Year 2021 -2022 budget includes funding for the proposed Vehicle Replacement and Maintenance Program; and
WHEREAS, the City desires to enter into various agreements with Enterprise Fleet Management to implement the City’s Vehicle Replacement and Maintenance Program ; and
WHEREAS, the City and Enterprise Fleet Management have agreed to modify Enterprise Fleet Management’s contract templates in order to tailor provisions specific to the City’s needs in the form of amendments to such template agreements.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LYNWOOD DOES HEREBY FIND, PROCLAIM, ORDER AND RESOLVE AS FOLLOWS:
Section 1. The City Council of the City of Lynwood (“City Council”) hereby finds and declares that the foregoing recitals are true and correct and incorporates them herein as findings and as a substantive part of this Resolution.
Section 2. The City Council finds that for the reasons stated in the above recitals and corresponding Agenda Staff Report, that it is in the best interests of the City to implement the Vehicle Replacement and Maintenance Program .
Section 3. In order to implement the Vehicle Replacement and Maintenance Program , the City Council hereby approves of the following agreements:
1) The Master Equity Lease Agreement and Amendment thereof between the City of Lynwood and Enterprise Fleet Management, Inc.; and
2) The Maintenance Agreement and Amendment thereof between the City of Lynwood and Enterprise Fleet Management, Inc.; and
3) The Maintenance Management and Fleet Rental Agreement and Amendment thereof between the City of Lynwood and Enterprise Fleet Management.
Section 4 . Authorize the City Manager to execute any ancillary agreements needed to implement the Vehicle Replacement and Maintenance Program in a form approved by the City Attorney, including any agreement necessary to authorize Enterprise Fleet Management to liquidate designated surplus vehicles on behalf of the City of Lynwood;
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3 Section 5. Authorize the Mayor to execute the Resolution for and on behalf of the City of Lynwood.
Section 6. The City Clerk shall certify to the adoption of this Resolution and hereafter the same shall be in full force and effect.
PASSED, APPROVED and ADOPTED this 20th day of December, 2022.
______________________________
Oscar Flores
Mayor
ATTEST:
___________________________ ______________________________ María Quiñónez Ernie Hernandez
City Clerk City Manager
APPROVED AS TO FORM: APPROVED AS TO CONTENT:
__________________________ ______________________________ Noel Tapia Julian Lee
City Attorney Director of Public Works
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4 STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
I, the undersigned, City Clerk of the City of Lynwood, do hereby certify that the foregoing Resolution was passed and adopted by the City Council of the City of Lynwood at a regular meeting held on the 20th day of December 2022, and passed by the following votes:
AYES:
NOES:
ABSTAIN:
ABSENT:
________________________
Maria Quinonez, City Clerk
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
I, the undersigned, City Clerk of the City of Lynwood, and the Clerk of the City Council of said City, do hereby certify that the above foregoing is a full, true and correct copy of Resolution No. ____________ on file in my office and that said Resolution was adopted on the date and by the vote therein stated. Dated this 20th day of December 2022.
________________________
Maria Quinonez, City Clerk
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MASTER EQUITY LEASE AGREEMENT
This Master Equity Lease Agreement is entered into this _____ day of ________________, by and between Enterprise FM Trust, a Delaware statutory trust (“Lessor”), and the lessee whose name and address is set forth on the signature page below (“Lessee”).
1. LEASE OF VEHICLES: Lessor hereby leases to Lessee and Lessee hereby leases from Lessor the vehicles (individually, a “Vehicle” and collectively, the “Vehicles”) described in the schedules from time to time delivered by Lessor to Lessee as set forth below (“Schedule(s)”) for the rentals and on the terms set forth in this Agreement and in the applicable Schedule. References to this “Agreement” shall include this Master Equity Lease Agreement and the various Schedules and addenda to this Master Equity Lease Agreement. Lessor will, on or about the date of delivery of each Vehicle to Lessee, send Lessee a Schedule covering the Vehicle, which will include, among other things, a description of the Vehicle, the lease term and the monthly rental and other payments due with respect to the Vehicle. The terms contained in each such Schedule will be binding on Lessee unless Lessee objects in writing to such Schedule within ten (10) days after the date of delivery of the Vehicle covered by such Schedule. Lessor is the sole legal owner of each Vehicle. This Agreement is a lease only and Lessee will have no right, title or interest in or to the Vehicles except for the use of the Vehicles as described in this Agreement. This Agreement shall be treated as a true lease for federal and applicable state income tax purposes with Lessor having all benefits of ownership of the Vehicles. It is understood and agreed that Enterprise Fleet Management, Inc. or an affiliate thereof (together with any subservicer, agent, successor or assign as servicer on behalf of Lessor, “Servicer”) may administer this Agreement on behalf of Lessor and may perform the service functions herein provided to be performed by Lessor.
2. TERM: The term of this Agreement (“Term”) for each Vehicle begins on the date such Vehicle is delivered to Lessee (the “Delivery Date”) and, unless terminated earlier in accordance with the terms of this Agreement, continues for the “Lease Term” as described in the applicable Schedule.
3. RENT AND OTHER CHARGES:
(a) Lessee agrees to pay Lessor monthly rental and other payments according to the Schedules and this Agreement. The monthly payments will be in the amount listed as the “Total Monthly Rental Including Additional Services” on the applicable Schedule (with any portion of such amount identified as a charge for maintenance services under Section 4 of the applicable Schedule being payable to Lessor as agent for Enterprise Fleet Management, Inc.) and will be due and payable in advance on the first day of each month. If a Vehicle is delivered to Lessee on any day other than the first day of a month, monthly rental payments will begin on the first day of the next month. In addition to the monthly rental payments, Lessee agrees to pay Lessor a pro-rated rental charge for the number of days that the Delivery Date precedes the first monthly rental payment date. A portion of each monthly rental payment, being the amount designated as “Depreciation Reserve” on the applicable Schedule, will be considered as a reserve for depreciation and will be credited against the Delivered Price of the Vehicle for purposes of computing the Book Value of the Vehicle under Section 3(c). Lessee agrees to pay Lessor the “Total Initial Charges” set forth in each Schedule on the due date of the first monthly rental payment under such Schedule. Lessee agrees to pay Lessor the “Service Charge Due at Lease Termination” set forth in each Schedule at the end of the applicable Term (whether by reason of expiration, early termination or otherwise). (b) In the event the Term for any Vehicle ends prior to the last day of the scheduled Term, whether as a result of a default by Lessee, a Casualty Occurrence or any other reason, the rentals and management fees paid by Lessee will be recalculated in accordance with the rule of 78’s and the adjusted amount will be payable by Lessee to Lessor on the termination date.
(c) Lessee agrees to pay Lessor within thirty (30) days after the end of the Term for each Vehicle, additional rent equal to the excess, if any, of the Book Value of such Vehicle over the greater of (i) the wholesale value of such Vehicle as determined by Lessor in good faith or (ii) except as provided below, twenty percent (20%) of the Delivered Price of such Vehicle as set forth in the applicable Schedule. If the Book Value of such Vehicle is less than the greater of (i) the wholesale value of such Vehicle as determined by Lessor in good faith or (ii) except as provided below, twenty percent (20%) of the Delivered Price of such Vehicle as set forth in the applicable Schedule, Lessor agrees to pay such deficiency to Lessee as a terminal rental adjustment within thirty (30) days after the end of the applicable Term. Notwithstanding the foregoing, if (i) the Term for a Vehicle is greater than forty-eight (48) months (including any extension of the Term for such Vehicle), (ii) the mileage on a Vehicle at the end of the Term is greater than 15,000 miles per year on average (prorated on a daily basis) (i.e., if the mileage on a Vehicle with a Term of thirty-six (36) months is greater than 45,000 miles) or (iii) in the sole judgment of Lessor, a Vehicle has been subject to damage or any abnormal or excessive wear and tear, the calculations described in the two immediately preceding sentences shall be made without giving effect to clause (ii) in each such sentence. The “Book Value” of a Vehicle means the sum of (i) the “Delivered Price” of the Vehicle as set forth in the applicable Schedule minus (ii) the total Depreciation Reserve paid by Lessee to Lessor with respect to such Vehicle plus (iii) all accrued and unpaid rent and/or other amounts owed by Lessee with respect to such Vehicle.
(d) Any security deposit of Lessee will be returned to Lessee at the end of the applicable Term, except that the deposit will first be applied to any losses and/or damages suffered by Lessor as a result of Lessee’s breach of or default under this Agreement and/or to any other amounts then owed by Lessee to Lessor. (e) Any rental payment or other amount owed by Lessee to Lessor which is not paid within twenty (20) days after its due date will accrue interest, payable on demand of Lessor, from the date due until paid in full at a rate per annum equal to the lesser of (i) Eighteen Percent (18%) per annum or (ii) the highest rate permitted by applicable law (the “Default Rate”).
(f) If Lessee fails to pay any amount due under this Agreement or to comply with any of the covenants contained in this Agreement, Lessor, Servicer or any other agent of Lessor may, at its option, pay such amounts or perform such covenants and all sums paid or incurred by Lessor in connection therewith will be repayable by Lessee to Lessor upon demand together with interest thereon at the Default Rate.
Initials: EFM________ Customer________City Council Regular Meeting - Page 1152 of 1385 (g) Lessee’s obligations to make all payments of rent and other amounts under this Agreement are absolute and unconditional and such payments shall be made in immediately available funds without setoff, counterclaim or deduction of any kind. Lessee acknowledges and agrees that neither any Casualty Occurrence to any Vehicle nor any defect, unfitness or lack of governmental approval in, of, or with respect to, any Vehicle regardless of the cause or consequence nor any breach by Enterprise Fleet Management, Inc. of any maintenance agreement between Enterprise Fleet Management, Inc. and Lessee covering any Vehicle regardless of the cause or consequence will relieve Lessee from the performance of any of its obligations under this Agreement, including, without limitation, the payment of rent and other amounts under this Agreement.
4. USE AND SURRENDER OF VEHICLES: Lessee agrees to allow only duly authorized, licensed and insured drivers to use and operate the Vehicles. Lessee agrees to comply with, and cause its drivers to comply with, all laws, statutes, rules, regulations and ordinances and the provisions of all insurance policies affecting or covering the Vehicles or their use or operation. Lessee agrees to keep the Vehicles free of all liens, charges and encumbrances. Lessee agrees that in no event will any Vehicle be used or operated for transporting hazardous substances or persons for hire, for any illegal purpose or to pull trailers that exceed the manufacturer’s trailer towing recommendations. Lessee agrees that no Vehicle is intended to be or will be utilized as a “school bus” as defined in the Code of Federal Regulations or any applicable state or municipal statute or regulation. Lessee agrees not to remove any Vehicle from the continental United States without first obtaining Lessor’s written consent. At the expiration or earlier termination of this Agreement with respect to each Vehicle, or upon demand by Lessor made pursuant to Section 14, Lessee at its risk and expense agrees to return such Vehicle to Lessor at such place and by such reasonable means as may be designated by Lessor. If for any reason Lessee fails to return any Vehicle to Lessor as and when required in accordance with this Section, Lessee agrees to pay Lessor additional rent for such Vehicle at twice the normal pro-rated daily rent. Acceptance of such additional rent by Lessor will in no way limit Lessor’s remedies with respect to Lessee’s failure to return any Vehicle as required hereunder.
5. COSTS, EXPENSES, FEES AND CHARGES: Lessee agrees to pay all costs, expenses, fees, charges, fines, tickets, penalties and taxes (other than federal and state income taxes on the income of Lessor) incurred in connection with the titling, registration, delivery, purchase, sale, rental, use or operation of the Vehicles during the Term. If Lessor, Servicer or any other agent of Lessor incurs any such costs or expenses, Lessee agrees to promptly reimburse Lessor for the same.
6. LICENSE AND CHARGES: Each Vehicle will be titled and licensed in the name designated by Lessor at Lessee’s expense. Certain other charges relating to the acquisition of each Vehicle and paid or satisfied by Lessor have been capitalized in determining the monthly rental, treated as an initial charge or otherwise charged to Lessee. Such charges have been determined without reduction for trade-in, exchange allowance or other credit attributable to any Lessor-owned vehicle.
7. REGISTRATION PLATES, ETC.: Lessee agrees, at its expense, to obtain in the name designated by Lessor all registration plates and other plates, permits, inspections and/or licenses required in connection with the Vehicles, except for the initial registration plates which Lessor will obtain at Lessee’s expense. The parties agree to cooperate and to furnish any and all information or documentation, which may be reasonably necessary for compliance with the provisions of this Section or any federal, state or local law, rule, regulation or ordinance. Lessee agrees that it will not permit any Vehicle to be located in a state other than the state in which such Vehicle is then titled for any continuous period of time that would require such Vehicle to become subject to the titling and/or registration laws of such other state.
8. MAINTENANCE OF AND IMPROVEMENTS TO VEHICLES:
(a) Lessee agrees, at its expense, to (i) maintain the Vehicles in good condition, repair, maintenance and running order and in accordance with all manufacturer’s instructions and warranty requirements and all legal requirements and (ii) furnish all labor, materials, parts and other essentials required for the proper operation and maintenance of the Vehicles. Any alterations, additions, replacement parts or improvements to a Vehicle will become and remain the property of Lessor and will be returned with such Vehicle upon such Vehicle’s return pursuant to Section 4. Notwithstanding the foregoing, so long as no Event of Default has occurred and is continuing, Lessee shall have the right to remove any additional equipment installed by Lessee on a Vehicle prior to returning such Vehicle to Lessor under Section 4. The value of such alterations, additions, replacement parts and improvements will in no instance be regarded as rent. Without the prior written consent of Lessor, Lessee will not make any alterations, additions, replacement parts or improvements to any Vehicle which detract from its economic value or functional utility. Lessor will not be required to make any repairs or replacements of any nature or description with respect to any Vehicle, to maintain or repair any Vehicle or to make any expenditure whatsoever in connection with any Vehicle or this Agreement. (b) Lessor and Lessee acknowledge and agree that if Section 4 of a Schedule includes a charge for maintenance, (i) the Vehicle(s) covered by such Schedule are subject to a separate maintenance agreement between Enterprise Fleet Management, Inc. and Lessee and (ii) Lessor shall have no liability or responsibility for any failure of Enterprise Fleet Management, Inc. to perform any of its obligations thereunder or to pay or reimburse Lessee for its payment of any costs and expenses incurred in connection with the maintenance or repair of any such Vehicle(s).
9. SELECTION OF VEHICLES AND DISCLAIMER OF WARRANTIES:
(a) LESSEE ACCEPTANCE OF DELIVERY AND USE OF EACH VEHICLE WILL CONCLUSIVELY ESTABLISH THAT SUCH VEHICLE IS OF A SIZE, DESIGN,
CAPACITY, TYPE AND MANUFACTURE SELECTED BY LESSEE AND THAT SUCH VEHICLE IS IN GOOD CONDITION AND REPAIR AND IS SATISFACTORY IN ALL RESPECTS AND IS SUITABLE FOR LESSEE’S PURPOSE. LESSEE ACKNOWLEDGES THAT LESSOR IS NOT A MANUFACTURER OF ANY VEHICLE OR AN AGENT OF A MANUFACTURER OF ANY VEHICLE.
(b) LESSOR MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WITH RESPECT TO ANY VEHICLE, INCLUDING, WITHOUT
LIMITATION, ANY REPRESENTATION OR WARRANTY AS TO CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY LESSEE. THE VEHICLES ARE LEASED “AS IS,” “WITH ALL FAULTS.” All warranties made by any supplier, vendor and/or manufacturer of a Vehicle are hereby assigned by Lessor to Lessee for the applicable Term and Lessee’s only remedy, if any, is against the supplier, vendor or manufacturer of the Vehicle.
Initials: EFM________ Customer________City Council Regular Meeting - Page 1153 of 1385 (c) None of Lessor, Servicer or any other agent of Lessor will be liable to Lessee for any liability, claim, loss, damage (direct, incidental or consequential) or expense of any kind or nature, caused directly or indirectly, by any Vehicle or any inadequacy of any Vehicle for any purpose or any defect (latent or patent) in any Vehicle or the use or maintenance of any Vehicle or any repair, servicing or adjustment of or to any Vehicle, or any delay in providing or failure to provide any Vehicle, or any interruption or loss of service or use of any Vehicle, or any loss of business or any damage whatsoever and however caused. In addition, none of Lessor, Servicer or any other agent of Lessor will have any liability to Lessee under this Agreement or under any order authorization form executed by Lessee if Lessor is unable to locate or purchase a Vehicle ordered by Lessee or for any delay in delivery of any Vehicle ordered by Lessee.
10. RISK OF LOSS: Lessee assumes and agrees to bear the entire risk of loss of, theft of, damage to or destruction of any Vehicle from any cause whatsoever (“Casualty Occurrence”). In the event of a Casualty Occurrence to a Vehicle, Lessee shall give Lessor prompt notice of the Casualty Occurrence and thereafter will place the applicable Vehicle in good repair, condition and working order; provided, however, that if the applicable Vehicle is determined by Lessor to be lost, stolen, destroyed or damaged beyond repair (a “Totaled Vehicle”), Lessee agrees to pay Lessor no later than the date thirty (30) days after the date of the Casualty Occurrence the amounts owed under Sections 3(b) and 3(c) with respect to such Totaled Vehicle. Upon such payment, this Agreement will terminate with respect to such Totaled Vehicle.
11. INSURANCE:
(a) Lessee agrees to purchase and maintain in force during the Term, insurance policies in at least the amounts listed below covering each Vehicle, to be written by an insurance company or companies satisfactory to Lessor, insuring Lessee, Lessor and any other person or entity designated by Lessor against any damage, claim, suit, action or liability:
(i) Commercial Automobile Liability Insurance (including Uninsured/Underinsured Motorist Coverage and No-Fault Protection where required by law) for the limits listed below (Note - $2,000,000 Combined Single Limit Bodily Injury and Property Damage with No Deductible is required for each Vehicle capable of transporting more than 8 passengers):
(ii) Physical Damage Insurance (Collision & Comprehensive): Actual cash value of the applicable Vehicle. Maximum deductible of $500 per occurrence - Collision and $250 per occurrence - Comprehensive).
If the requirements of any governmental or regulatory agency exceed the minimums stated in this Agreement, Lessee must obtain and maintain the higher insurance requirements. Lessee agrees that each required policy of insurance will by appropriate endorsement or otherwise name Lessor and any other person or entity designated by Lessor as additional insureds and loss payees, as their respective interests may appear. Further, each such insurance policy must provide the following: (i) that the same may not be cancelled, changed or modified until after the insurer has given to Lessor, Servicer and any other person or entity designated by Lessor at least thirty (30) days prior written notice of such proposed cancellation, change or modification, (ii) that no act or default of Lessee or any other person or entity shall affect the right of Lessor, Servicer, any other agent of Lessor or any of their respective successors or assigns to recover under such policy or policies of insurance in the event of any loss of or damage to any Vehicle and (iii) that the coverage is “primary coverage” for the protection of Lessee, Lessor, Servicer, any other agent of Lessor and their respective successors and assigns notwithstanding any other coverage carried by Lessee, Lessor, Servicer, any other agent of Lessor or any of their respective successors or assigns protecting against similar risks. Original certificates evidencing such coverage and naming Lessor, Servicer, any other agent of Lessor and any other person or entity designated by Lessor as additional insureds and loss payees shall be furnished to Lessor prior to the Delivery Date, and annually thereafter and/or as reasonably requested by Lessor from time to time. In the event of default, Lessee hereby appoints Lessor, Servicer and any other agent of Lessor as Lessee’s attorney-in-fact to receive payment of, to endorse all checks and other documents and to take any other actions necessary to pursue insurance claims and recover payments if Lessee fails to do so. Any expense of Lessor, Servicer or any other agent of Lessor in adjusting or collecting insurance shall be borne by Lessee.
Lessee, its drivers, servants and agents agree to cooperate fully with Lessor, Servicer, any other agent of Lessor and any insurance carriers in the investigation, defense and prosecution of all claims or suits arising from the use or operation of any Vehicle. If any claim is made or action commenced for death, personal injury or property damage resulting from the ownership, maintenance, use or operation of any Vehicle, Lessee will promptly notify Lessor of such action or claim and forward to Lessor a copy of every demand, notice, summons or other process received in connection with such claim or action. (b) Notwithstanding the provisions of Section 11(a) above: (i) if Section 4 of a Schedule includes a charge for physical damage waiver, Lessor agrees that (A) Lessee will not be required to obtain or maintain the minimum physical damage insurance (collision and comprehensive) required under Section 11(a) for the Vehicle(s) covered by such Schedule and (B) Lessor will assume the risk of physical damage (collision and comprehensive) to the Vehicle(s) covered by such Schedule; provided, however, that such physical damage waiver shall not apply to, and Lessee shall be and remain liable and responsible for, damage to a covered Vehicle caused by wear and tear or mechanical breakdown or failure, damage to or loss of any parts, accessories or components added to a covered Vehicle by State of Vehicle Registration
Connecticut, Massachusetts, Maine, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont
Florida
All Other States
Coverage
$1,000,000 Combined Single Limit Bodily Injury and Property Damage - No Deductible
$500,000 Combined Single Limit Bodily Injury and Property Damage or $100,000 Bodily Injury Per Person, $300,000 Per Occurrence and $50,000 Property Damage (100/300/50) - No Deductible
$300,000 Combined Single Limit Bodily Injury and Property Damage or $100,000 Bodily Injury Per Person, $300,000 Per Occurrence and $50,000 Property Damage (100/300/50) - No Deductible
Initials: EFM________ Customer________City Council Regular Meeting - Page 1154 of 1385 Lessee without the prior written consent of Lessor and/or damage to or loss of any property and/or personal effects contained in a covered Vehicle. In the event of a Casualty Occurrence to a covered Vehicle, Lessor may, at its option, replace, rather than repair, the damaged Vehicle with an equivalent vehicle, which replacement vehicle will then constitute the “Vehicle” for purposes of this Agreement; and (ii) if Section 4 of a Schedule includes a charge for commercial automobile liability enrollment, Lessor agrees that it will, at its expense, obtain for and on behalf of Lessee, by adding Lessee as an additional insured under a commercial automobile liability insurance policy issued by an insurance company selected by Lessor, commercial automobile liability insurance satisfying the minimum commercial automobile liability insurance required under Section 11(a) for the Vehicle(s) covered by such Schedule. Lessor may at any time during the applicable Term terminate said obligation to provide physical damage waiver and/or commercial automobile liability enrollment and cancel such physical damage waiver and/ or commercial automobile liability enrollment upon giving Lessee at least ten (10) days prior written notice. Upon such cancellation, insurance in the minimum amounts as set forth in 11(a) shall be obtained and maintained by Lessee at Lessee’s expense. An adjustment will be made in monthly rental charges payable by Lessee to reflect any such change and Lessee agrees to furnish Lessor with satisfactory proof of insurance coverage within ten (10) days after mailing of the notice. In addition, Lessor may change the rates charged by Lessor under this Section 11(b) for physical damage waiver and/or commercial automobile liability enrollment upon giving Lessee at least thirty (30) days prior written notice.
12. INDEMNITY: Lessee agrees to defend and indemnify Lessor, Servicer, any other agent of Lessor and their respective successors and assigns from and against any and all losses, damages, liabilities, suits, claims, demands, costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) which Lessor, Servicer, any other agent of Lessor or any of their respective successors or assigns may incur by reason of Lessee’s breach or violation of, or failure to observe or perform, any term, provision or covenant of this Agreement, or as a result of any loss, damage, theft or destruction of any Vehicle or related to or arising out of or in connection with the use, operation or condition of any Vehicle. The provisions of this Section 12 shall survive any expiration or termination of this Agreement.
13. INSPECTION OF VEHICLES; ODOMETER DISCLOSURE; FINANCIAL STATEMENTS: Lessee agrees to accomplish, at its expense, all inspections of the Vehicles required by any governmental authority during the Term. Lessor, Servicer, any other agent of Lessor and any of their respective successors or assigns will have the right to inspect any Vehicle at any reasonable time(s) during the Term and for this purpose to enter into or upon any building or place where any Vehicle is located. Lessee agrees to comply with all odometer disclosure laws, rules and regulations and to provide such written and signed disclosure information on such forms and in such manner as directed by Lessor. Providing false information or failure to complete the odometer disclosure form as required by law may result in fines and/or imprisonment. Lessee hereby agrees to promptly deliver to Lessor such financial statements and other financial information regarding Lessee as Lessor may from time to time reasonably request.
14. DEFAULT; REMEDIES: The following shall constitute events of default (“Events of Default”) by Lessee under this Agreement: (a) if Lessee fails to pay when due any rent or other amount due under this Agreement and any such failure shall remain unremedied for ten (10) days; (b) if Lessee fails to perform, keep or observe any term, provision or covenant contained in Section 11 of this Agreement; (c) if Lessee fails to perform, keep or observe any other term, provision or covenant contained in this Agreement and any such failure shall remain unremedied for thirty (30) days after written notice thereof is given by Lessor, Servicer or any other agent of Lessor to Lessee; (d) any seizure or confiscation of any Vehicle or any other act (other than a Casualty Occurrence) otherwise rendering any Vehicle unsuitable for use (as determined by Lessor); (e) if any present or future guaranty in favor of Lessor of all or any portion of the obligations of Lessee under this Agreement shall at any time for any reason cease to be in full force and effect or shall be declared to be null and void by a court of competent jurisdiction, or if the validity or enforceability of any such guaranty shall be contested or denied by any guarantor, or if any guarantor shall deny that it, he or she has any further liability or obligation under any such guaranty or if any guarantor shall fail to comply with or observe any of the terms, provisions or conditions contained in any such guaranty; (f) the occurrence of a material adverse change in the financial condition or business of Lessee or any guarantor; or (g) if Lessee or any guarantor is in default under or fails to comply with any other present or future agreement with or in favor of Lessor, The Crawford Group, Inc. or any direct or indirect subsidiary of The Crawford Group, Inc.. For purposes of this Section 14, the term “guarantor” shall mean any present or future guarantor of all or any portion of the obligations of Lessee under this Agreement.
Upon the occurrence of any Event of Default, Lessor, without notice to Lessee, will have the right to exercise concurrently or separately (and without any election of remedies being deemed made), the following remedies: (a) Lessor may demand and receive immediate possession of any or all of the Vehicles from Lessee, without releasing Lessee from its obligations under this Agreement; if Lessee fails to surrender possession of the Vehicles to Lessor on default (or termination or expiration of the Term), Lessor, Servicer, any other agent of Lessor and any of Lessor’s independent contractors shall have the right to enter upon any premises where the Vehicles may be located and to remove and repossess the Vehicles; (b) Lessor may enforce performance by Lessee of its obligations under this Agreement; (c) Lessor may recover damages and expenses sustained by Lessor, Servicer, any other agent of Lessor or any of their respective successors or assigns by reason of Lessee’s default including, to the extent permitted by applicable law, all costs and expenses, including court costs and reasonable attorneys’ fees and expenses, incurred by Lessor, Servicer, any other agent of Lessor or any of their respective successors or assigns in attempting or effecting enforcement of Lessor’s rights under this Agreement (whether or not litigation is commenced) and/or in connection with bankruptcy or insolvency proceedings; (d) upon written notice to Lessee, Lessor may terminate Lessee’s rights under this Agreement; (e) with respect to each Vehicle, Lessor may recover from Lessee all amounts owed by Lessee under Sections 3(b) and 3(c) of this Agreement (and, if Lessor does not recover possession of a Vehicle, (i) the estimated wholesale value of such Vehicle for purposes of Section 3(c) shall be deemed to be $0.00 and (ii) the calculations described in the first two sentences of Section 3(c) shall be made without giving effect to clause (ii) in each such sentence); and/or (f) Lessor may exercise any other right or remedy which may be available to Lessor under the Uniform Commercial Code, any other applicable law or in equity. A termination of this Agreement shall occur only upon written notice by Lessor to Lessee. Any termination shall not affect Lessee’s obligation to pay all amounts due for periods prior to the effective date of such termination or Lessee’s obligation to pay any indemnities under this Agreement. All remedies of Lessor under this Agreement or at law or in equity are cumulative.
15. ASSIGNMENTS: Lessor may from time to time assign, pledge or transfer this Agreement and/or any or all of its rights and obligations under this Agreement to any person or entity. Lessee agrees, upon notice of any such assignment, pledge or transfer of any amounts due or to become due to Lessor under this Agreement to pay all such amounts to such assignee, pledgee or transferee. Any such assignee, pledgee or transferee of any rights or obligations of Lessor under this Agreement will have all of the rights and obligations that have been assigned to it. Lessee’s rights and interest in and to the Vehicles are and will continue at all times to be subject and subordinate in all respects to any assignment, pledge or transfer now or hereafter executed by Lessor with or in favor of any such Initials: EFM________ Customer________City Council Regular Meeting - Page 1155 of 1385 assignee, pledgee or transferee, provided that Lessee shall have the right of quiet enjoyment of the Vehicles so long as no Event of Default under this Agreement has occurred and is continuing. Lessee acknowledges and agrees that the rights of any assignee, pledgee or transferee in and to any amounts payable by the Lessee under any provisions of this Agreement shall be absolute and unconditional and shall not be subject to any abatement whatsoever, or to any defense, setoff, counterclaim or recoupment whatsoever, whether by reason of any damage to or loss or destruction of any Vehicle or by reason of any defect in or failure of title of the Lessor or interruption from whatsoever cause in the use, operation or possession of any Vehicle, or by reason of any indebtedness or liability howsoever and whenever arising of the Lessor or any of its affiliates to the Lessee or to any other person or entity, or for any other reason.
Without the prior written consent of Lessor, Lessee may not assign, sublease, transfer or pledge this Agreement, any Vehicle, or any interest in this Agreement or in and to any Vehicle, or permit its rights under this Agreement or any Vehicle to be subject to any lien, charge or encumbrance. Lessee’s interest in this Agreement is not assignable and cannot be assigned or transferred by operation of law. Lessee will not transfer or relinquish possession of any Vehicle (except for the sole purpose of repair or service of such Vehicle) without the prior written consent of Lessor.
16. MISCELLANEOUS: This Agreement contains the entire understanding of the parties. This Agreement may only be amended or modified by an instrument in writing executed by both parties. Lessor shall not by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies under this Agreement and no waiver whatsoever shall be valid unless in writing and signed by Lessor and then only to the extent therein set forth. A waiver by Lessor of any right or remedy under this Agreement on any one occasion shall not be construed as a bar to any right or remedy, which Lessor would otherwise have on any future occasion. If any term or provision of this Agreement or any application of any such term or provision is invalid or unenforceable, the remainder of this Agreement and any other application of such term or provision will not be affected thereby. Giving of all notices under this Agreement will be sufficient if mailed by certified mail to a party at its address set forth below or at such other address as such party may provide in writing from time to time. Any such notice mailed to such address will be effective one (1) day after deposit in the United States mail, duly addressed, with certified mail, postage prepaid. Lessee will promptly notify Lessor of any change in Lessee’s address. This Agreement may be executed in multiple counterparts (including facsimile and pdf counterparts), but the counterpart marked “ORIGINAL” by Lessor will be the original lease for purposes of applicable law. All of the representations, warranties, covenants, agreements and obligations of each Lessee under this Agreement (if more than one) are joint and several.
17. SUCCESSORS AND ASSIGNS; GOVERNING LAW: Subject to the provisions of Section 15, this Agreement will be binding upon Lessee and its heirs, executors, personal representatives, successors and assigns, and will inure to the benefit of Lessor, Servicer, any other agent of Lessor and their respective successors and assigns. This Agreement will be governed by and construed in accordance with the substantive laws of the State of Missouri (determined without reference to conflict of law principles).
18. NON-PETITION: Each party hereto hereby covenants and agrees that, prior to the date which is one year and one day after payment in full of all indebtedness of Lessor, it shall not institute against, or join any other person in instituting against, Lessor any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States. The provisions of this Section 18 shall survive termination of this Master Equity Lease Agreement.
IN WITNESS WHEREOF , Lessor and Lessee have duly executed this Master Equity Lease Agreement as of the day and year first above written LESSEE: ______________________________________
Signature: ______________________________________
By: ______________________________________
Title: ______________________________________
Address: ______________________________________
______________________________________
______________________________________
Date Signed: _______________________, ___________
LESSOR: Enterprise FM Trust
By: Enterprise Fleet Management, Inc. its attorney in fact Signature: ______________________________________
By: ______________________________________
Title: ______________________________________
Address: ______________________________________
______________________________________
______________________________________
Date Signed: _______________________, ___________
© 2017 Enterprise Fleet Management, Inc. H04945_Master Equity Lease Agreement - Enterprise FM Trust Initials: EFM________ Customer________
Richard Murrell
Regional Manager
1400 N. Kellogg Drive, Suite
Anaheim, CA 92807
City Council Regular Meeting - Page 1156 of 1385
AMENDMENT TO MASTER EQUITY LEASE AGREEMENT
THIS AMENDMENT (“Amendment”) dated this ____ day of December 2022 is attached to, and made a part of, the MASTER EQUITY LEASE AGREEMENT entered into on the ____ day of December, 2022 (“Agreement”) by and between Enterprise FM Trust, a Delaware statutory trust (“Lessor”) and City of Lynwood ("Lessee"). This Amendment is made for good and valuable consideration, the receipt of which is hereby acknowledged by the parties.
Section 3(g) of the Master Equity Lease Agreement is amended to add the following paragraph:
In the event Lessee notifies Lessor of any claim or dispute under this Agreement, and/or any claim involving the Vehicle, Lessor will, in good faith, attempt to resolve the L essee’s claims in a manner satisfactory to all parties and Lessor will provide commercially reasonable assistance to Lessee in any communications and/or negotiations with the Vehicle’s manufacturer with respect to claims relating to such Vehicle.
Section 9(a) of the Master Equity Lease Agreement is amended to read as follows:
LESSEE ACCEPTANCE OF DELIVERY AND USE OF EACH VEHICLE FOR TEN (10) DAYS AFTER THE DATE OF
DELIVERY WILL CONCLUSIVELY ESTABLISH THAT SUCH VEHICLE IS OF A SIZE, DESIGN, CAPACITY, TYPE
AND MANUFACTURE SELECTED BY LESSEE AND THAT SUCH VEHICLE IS IN GOOD CONDITION AND REPAIR AND IS SATISFACTORY IN ALL RESPECTS AND IS SUITABLE FOR LESSEE’S PURPOSE. LESSEE
ACKNOWLEDGES THAT LESSOR IS NOT A MANUFACTURER OF ANY VEHICLE OR AN AGENT OF A MANUFACTURER OF ANY VEHICLE.
Section 17 of the Master Equity Lease Agreement is amended to read as follows:
Subject to the provisions of Section 15, this Agreement will be binding upon Lessee and its heirs, executors, personal representatives, successors and assigns, and will inure to the benefit of Lessor, Servicer, any other agent of Lessor and their respective successors and assigns. This Agreement will be governed by and construed in accordance with the substantive laws of the State of California (determined without reference to conflict of law principles).
All references in the Agreement and in the various Schedules and addenda to the Agreement and any other references of similar import shall henceforth mean the Agreement as amended by this Amendment. Except to the extent specifically amended by this Amendment, all of the terms, provisions, condi tions, covenants, representations and warranties contained in the Agreement shall be and remain in full force and effect and the same are hereby ratified and confirmed.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Amendment to Master Equity Lease Agreement as of the day and year first above written.
City of Lynwood (Lessee) Enterprise FM Trust (Lessor) By: Enterprise Fleet Management, Inc., its attorney in fact
By By
Title: Title:
Date Signed:__________________, _______ Date Signed:_______________________, _______ City Council Regular Meeting - Page 1157 of 1385
MAINTENANCE MANAGEMENT AND FLEET RENTAL AGREEMENT
This Agreement is entered into as of the ______ day of _______, by and between Enterprise Fleet Management, Inc., a Missouri corporation, doing business as “Enterprise Fleet Management” (“EFM”), and ___________________________________________________ (the “Company”).
WITNESSETH:
1. ENTERPRISE CARDS: Upon request from the Company, EFM will provide a driver information packet outlining its vehicle maintenance program (the “Program”) and a card (“Card”) for each Company vehicle included in the Company’s request. All drivers of vehicles subject to this Agreement must be a representative of the Company, its subsidiaries or affiliates. All Cards issued by EFM upon request of the Company shall be subject to the terms of this Agreement and the responsibility of the Company. All Cards shall bear an expiration date.
Cards issued to the Company shall be used by the Company in accordance with this Agreement and limited solely to purchases of certain products and services for Company vehicles, which are included in the Program. The Program is subject to all other EFM instructions, rules and regulations which may be revised from time to time by EFM. Cards shall remain the property of EFM and returned to EFM upon expiration or cancellation.
2. VEHICLE REPAIRS AND SERVICE: EFM will provide purchase order control by phone or in writing authorizing charges for repairs and service over $75, or such other amount as may be established by EFM from time to time under the Program. All charges for repairs and services will be invoiced to EFM. Invoices will be reviewed by EFM for accuracy, proper application of potential manufacturer’s warranties, application of potential discounts and unnecessary, unauthorized repairs.
Notwithstanding the above, in the event the repairs and service are the result of damage from an accident or other non-maintenance related cause (including glass claims), these matters will be referred to the Company’s Fleet Manager. If the Company prefers that EFM handle the damage repair, the Company agrees to assign the administration of the matter to EFM. EFM will administer such claims in its discretion. The fees for this service will be up to $125.00 per claim and the Company agrees to reimburse for repairs as outlined in this agreement. If the Company desires the assistance of EFM in recovering damage amounts from at fault third parties, a Vehicle Risk Management Agreement must be on file for the Company.
3. BILLING AND PAYMENT: All audited invoices paid by EFM on behalf of the Company will be consolidated and submitted to the Company on a single monthly invoice for the entire Company fleet covered under this Agreement. The Company is liable for, and will pay EFM within ten (10) days after receipt of an invoice or statement for, all purchases invoiced to the Company by EFM, which were paid by EFM for or on behalf of the Company. EFM will be entitled to retain for its own account, and treat as being paid by EFM for purposes of this Agreement, any discounts it receives from a supplier with respect to such purchases which are based on the overall volume of business EFM provides to such supplier and not solely the Company’s business. EFM will exercise due care to prevent additional charges from being incurred once the Company has notified EFM of its desire to cancel any outstanding Card under this Agreement. The Company will use its best efforts to obtain and return any such cancelled Card.
4. RENT AL VEHICLES: The Card will authorize the Company’s representative to arrange for rental vehicles with a subsidiary of Enterprise Rent-A-Car Company for a maximum of two (2) days without prior authorization. Extensions beyond two (2) days must be granted by an EFM representative. The Company assumes all responsibility for all rental agreements arranged by EFM with a subsidiary of Enterprise Rent-A-Car Company through an EFM representative or through the use of the Card. All drivers must be at least 21 years of age, hold a valid driver’s license, be an employee of the Company or authorized by the Company through established reservation procedures and meet other applicable requirements of the applicable subsidiary of Enterprise Rent-A-Car Company.
5. NO W ARRANTY: EFM MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WITH RESPECT TO PRODUCTS, REPAIRS OR
SERVICES PROVIDED FOR UNDER THIS AGREEMENT BY THIRD PARTIES, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY, COMPLIANCE WITH SPECIFICATIONS, OPERATION, CONDITION, SUITABILITY, PERFORMANCE, QUALITY OR FITNESS FOR USE. Any defect in the performance of any product, repair or service will not relieve the Company from its obligations under this Agreement, including without limitation the payment to EFM of monthly invoices.
6. CANCELLATION: Either party may cancel any Card under this Agreement or this Agreement in its entirety at any time by giving written notice to the other party.
The cancellation of any Card or termination of this Agreement will not affect any rights or obligations under this Agreement, which shall have previously accrued or shall thereafter arise with respect to any occurrence prior to such cancellation or termination. A Card shall be immediately returned to EFM upon cancellation to:
Enterprise Fleet Management, 600 Corporate Park Drive, St. Louis, MO 63105, Attention: Enterprise Card Department. Notice to EFM regarding the cancellation of any Card shall specify the Card number and identify the Company’s representative. In the case of a terminated representative, such notice shall include a brief description of the efforts made to reclaim the Card.
7. NOTICES: All notices of cancellation or termination under this Agreement shall be mailed postage prepaid by registered or certified mail, or sent by express overnight delivery service, to the other party at its address set forth on the signature page of this Agreement or at such other address as such party may provide in writing from time to time. Any such notice sent by mail will be effective three (3) days after deposit in the United States mail, duly addressed, with registered or certified mail postage prepaid. Any such notice sent by express overnight delivery service will be effective one (1) day after deposit with such delivery service, duly addressed, with delivery fees prepaid. The Company will promptly notify EFM of any change in the Company’s address.
Initials: EFM________ Company________
City Council Regular Meeting - Page 1158 of 1385
8. FEES: EFM will charge the Company for the service under this Agreement $______ per month per Card, plus a one time set-up fee of $_______.
9. MISCELLANEOUS: This Agreement may be amended only by an agreement in writing signed by EFM and the Company. This Agreement is governed by the substantive laws of the State of Missouri (determined without reference to conflict of law principles).
IN WITNESS WHEREOF , EFM and the Company have executed this Maintenance Management and Fleet Rental Agreement as of the day and year first above written.
Company: ______________________________________
Signature: ______________________________________
By: ______________________________________
Title: ______________________________________
Address: ______________________________________
______________________________________
______________________________________
Date Signed: _______________________, ___________
EFM: Enterprise Fleet Management, Inc.
Signature: ______________________________________
By: ______________________________________
Title: ______________________________________
Address: ______________________________________
______________________________________
______________________________________
Date Signed: _______________________, ___________
© 2019 Enterprise Fleet Management, Inc. H02213_MaintManagement Initials: EFM________ Company________
10.00 0
Richard Murrell
Regional Sales Manager
1400 N. Kellogg Drive, Suite G
Anaheim, CA 92807
City Council Regular Meeting - Page 1159 of 1385
AMENDMENT TO MAINTENANCE MANAGEMENT AND FLEET RENTAL AGREEMENT
THIS AMENDMENT (“Amendment”) dated this ____ day of December, 2022 is attached to, and made a part of, the MAINTENANCE MANAGEMENT AND FLEET RENTAL AGREEMENT entered into on the ____ day of December, 2022 (“Agreement”) by and between Enterprise Fleet Management Inc., a Missouri corporation (“EFM”) and City of Lynwood ("Company"). This Amendment is made for good and valuable consideration, the receipt of which is hereby acknowledged by the parties.
Section 5 of the Maintenance Management and Fleet Rental Agreement is amended to read as follows:
The Company acknowledges that EFM does not perform maintenance or repair services on the Company’s vehicles or any rental vehicles and any maintenance or repair services are to be performed by third parties. EFM MAKES NO
REPRESENTATION OR WARRANTY WHATSOEVER OF ANY KIND, EXPRESS OR IMPLIED, WHETHER ARISING
BY COURSE OF DEALING, COURSE OF PERFORMANCE, USAGE OF TRADE OR OTHERWISE WITH RESPECT
TO PRODUCTS, REPAIRS OR SERVICES PROVIDED IN CONNECTION WITH THIS AGREEMENT BY THIRD
PARTIES, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR W ARRANTY AS TO
MERCHANTABILITY, COMPLIANCE WITH SPECIFICATIONS, OPERATION, CONDITION, SUITABILITY, PERFORMANCE, QUALITY OR FITNESS FOR USE. Any defect in the performance of any product, repair or service will not relieve the Company from its obligations under this Agreement, including without limitation the payment to EFM of monthly invoices. All conditions or warranties made by any supplier, vendor and/or manufacturer of a Vehicle are hereby assigned by Enterprise to Company for the applicable Term and Company’s only remedy, if any, is against the supplier, vendor or manufacturer of the Vehicle.
In the event Lessee notifies EFM of any claim or dispute under this Agreement, and/or any claim involving the Vehicle, EFM will, in good faith, attempt to resolve the Lessee’s claims in a manner satisfactory to all parties and EFM will provide commercially reasonable assistance to Lessee in any communications and/or negotiations with the vendor or service provided with respect to claims relating to such Vehicle.
Section 9 of the Maintenance Management and Fleet Rental Agreement is amended to read as follows:
This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that Lessee may not assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of EFM. This Agreement is governed by the substantive laws of the State of California (determined without reference to conflict of law principles).
All references in the Agreement and in the various Schedules and addenda to the Agreement and any other references of similar import shall henceforth mean the Agreement as amended by this Amendment. Except to the extent specifically amended by this Amendment, all of the terms, provisions, conditions, covenants, representations and warranties contained in the Agreement shall be and remain in full force and effect and the same are hereby ratified and confirmed.
IN WITNESS WHEREOF, Company and EFM have executed this Amendment to Maintenance Management and Fleet Rental Agreement as of the day and year first above written.
City of Lynwood (Company) ENTERPRISE FLEET MANAGEMENT, INC.
By By
Title: Title:
Date Signed:_________________, _______ Date Signed:_______________________, _______
City Council Regular Meeting - Page 1160 of 1385
MAINTENANCE AGREEMENT
This Maintenance Agreement (this “Agreement”) is made and entered into this ______ day of ____________, by Enterprise Fleet Management, Inc., a Missouri corporation (“EFM”), and ___________________________________________________ (“Lessee”).
WITNESSETH
1. LEASE. Reference is hereby made to that certain Master Lease Agreement dated as of the ______ day of ____________, by and between Enterprise FM Trust, a Delaware statutory trust, as lessor (“Lessor”), and Lessee, as lessee (as the same may from time to time be amended, modified, extended, renewed, supplemented or restated, the “Lease”). All capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings ascribed to them in the Lease.
2. COVERED VEHICLES. This Agreement shall only apply to those vehicles leased by Lessor to Lessee pursuant to the Lease to the extent Section 4 of the Schedule for such vehicle includes a charge for maintenance (the “Covered Vehicle(s)”).
3. TERM AND TERMINATION. The term of this Agreement (“Term”) for each Covered Vehicle shall begin on the Delivery Date of such Covered Vehicle and shall continue until the last day of the “Term” (as defined in the Lease) for such Covered Vehicle unless earlier terminated as set forth below. Each of EFM and Lessee shall each have the right to terminate this Agreement effective as of the last day of any calendar month with respect to any or all of the Covered Vehicles upon not less than sixty (60) days prior written notice to the other party. The termination of this Agreement with respect to any or all of the Covered Vehicles shall not affect any rights or obligations under this Agreement which shall have previously accrued or shall thereafter arise with respect to any occurrence prior to termination, and such rights and obligations shall continue to be governed by the terms of this Agreement.
4. VEHICLE REPAIRS AND SERVICE. EFM agrees that, during the Term for the applicable Covered Vehicle and subject to the terms and conditions of this Agreement, it will pay for, or reimburse Lessee for its payment of, all costs and expenses incurred in connection with the maintenance or repair of a Covered Vehicle. This Agreement does not cover, and Lessee will remain responsible for and pay for, (a) fuel, (b) oil and other fluids between changes, (c) tire repair and replacement, (d) washing, (e) repair of damage due to lack of maintenance by Lessee between scheduled services (including, without limitation, failure to maintain fluid levels), (f) maintenance or repair of any alterations to a Covered Vehicle or of any after-market components (this Agreement covers maintenance and repair only of the Covered Vehicles themselves and any factory-installed components and does not cover maintenance or repair of chassis alterations, add-on bodies (including, without limitation, step vans) or other equipment (including, without limitation, lift gates and PTO controls) which is installed or modified by a dealer, body shop, upfitter or anyone else other than the manufacturer of the Covered Vehicle, (g) any service and/or damage resulting from, related to or arising out of an accident, a collision, theft, fire, freezing, vandalism, riot, explosion, other Acts of God, an object striking the Covered Vehicle, improper use of the Covered Vehicle (including, without limitation, driving over curbs, overloading, racing or other competition) or Lessee’s failure to maintain the Covered Vehicle as required by the Lease, (h) roadside assistance or towing for vehicle maintenance purposes, (i) mobile services, (j) the cost of loaner or rental vehicles or (k) if the Covered Vehicle is a truck, (i) manual transmission clutch adjustment or replacement, (ii) brake adjustment or replacement or (iii) front axle alignment. Whenever it is necessary to have a Covered Vehicle serviced, Lessee agrees to have the necessary work performed by an authorized dealer of such Covered Vehicle or by a service facility acceptable to EFM. In every case, if the cost of such service will exceed $50.00, Lessee must notify EFM and obtain EFM’s authorization for such service and EFM’s instructions as to where such service shall be made and the extent of service to be obtained. Lessee agrees to furnish an invoice for all service to a Covered Vehicle, accompanied by a copy of the shop or service order (odometer mileage must be shown on each shop or service order). EFM will not be obligated to pay for any unauthorized charges or those exceeding $50.00 for one service on any Covered Vehicle unless Lessee has complied with the above terms and conditions.
EFM will not have any responsibility to pay for any services in excess of the services recommended by the manufacturer, unless otherwise agreed to by EFM.
Notwithstanding any other provision of this Agreement to the contrary, (a) all service performed within one hundred twenty (120) days prior to the last day of the scheduled “Term” (as defined in the Lease) for the applicable Covered Vehicle must be authorized by and have the prior consent and approval of EFM and any service not so authorized will be the responsibility of and be paid for by Lessee and (b) EFM is not required to provide or pay for any service to any Covered Vehicle after 100,000 miles.
5. ENTERPRISE CARDS: EFM may, at its option, provide Lessee with an authorization card (the “EFM Card”) for use in authorizing the payment of charges incurred in connection with the maintenance of the Covered Vehicles. Lessee agrees to be liable to EFM for, and upon receipt of a monthly or other statement from EFM, Lessee agrees to promptly pay to EFM, all charges made by or for the account of Lessee with the EFM Card (other than any charges which are the responsibility of EFM under the terms of this Agreement). EFM reserves the right to change the terms and conditions for the use of the EFM Card at any time. The EFM Card remains the property of EFM and EFM may revoke Lessee’s right to possess or use the EFM Card at any time. Upon the termination of this Agreement or upon the demand of EFM, Lessee must return the EFM Card to EFM. The EFM Card is non-transferable.
6. PAYMENT TERMS. The amount of the monthly maintenance fee will be listed on the applicable Schedule and will be due and payable in advance on the first day of each month. If the first day of the Term for a Covered Vehicle is other than the first day of a calendar month, Lessee will pay EFM, on the first day of the Term for such Covered Vehicle, a pro-rated maintenance fee for the number of days that the Delivery Date precedes the first monthly maintenance fee payment date. Any monthly maintenance fee or other amount owed by Lessee to EFM under this Agreement which is not paid within twenty (20) days after its due date will accrue interest, payable upon demand of EFM, from the date due until paid in full at a rate per annum equal to the lesser of (i) Eighteen Percent (18%) per annum or (ii) the highest rate allowed by applicable law. The monthly maintenance fee set forth on each applicable Schedule allows the number of miles per month as set forth Initials: EFM________ Lessee________City Council Regular Meeting - Page 1161 of 1385 in such Schedule. Lessee agrees to pay EFM at the end of the applicable Term (whether by reason of termination of this Agreement or otherwise) an overmileage maintenance fee for any miles in excess of this average amount per month at the rate set forth in the applicable Schedule. EFM may, at its option, permit Lessor, as an agent for EFM, to bill and collect amounts due to EFM under this Agreement from Lessee on behalf of EFM.
7. NO WARRANTIES. Lessee acknowledges that EFM does not perform maintenance or repair services on the Covered Vehicles but rather EFM arranges for maintenance and/or repair services on the Covered Vehicles to be performed by third parties. EFM MAKES NO REPRESENTATION OR WARRANTY OF ANY
KIND, EXPRESS OR IMPLIED, WITH RESPECT TO ANY PRODUCTS, REPAIRS OR SERVICES PROVIDED FOR UNDER THIS AGREEMENT BY THIRD PARTIES,
INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, COMPLIANCE WITH SPECIFICATIONS, OPERATION, CONDITION, SUITABILITY, PERFORMANCE OR QUALITY. ANY DEFECT IN THE PERFORMANCE OF ANY PRODUCT, REPAIR
OR SERVICE WILL NOT RELIEVE LESSEE OF ITS OBLIGATIONS UNDER THIS AGREEMENT, INCLUDING THE PAYMENT TO EFM OF THE MONTHLY MAINTENANCE FEES AND OTHER CHARGES DUE UNDER THIS AGREEMENT.
8. LESSOR NOT A PARTY. Lessor is not a party to, and shall have no rights, obligations or duties under or in respect of, this Agreement.
9. NOTICES. Any notice or other communication under this Agreement shall be in writing and delivered in person or sent by facsimile, recognized overnight courier or registered or certified mail, return receipt requested and postage prepaid, to the applicable party at its address or facsimile number set forth on the signature page of this Agreement, or at such other address or facsimile number as any party hereto may designate as its address or facsimile number for communications under this Agreement by notice so given. Such notices shall be deemed effective on the day on which delivered or sent if delivered in person or sent by facsimile, on the first (1st) business day after the day on which sent, if sent by recognized overnight courier or on the third (3rd) business day after the day on which mailed, if sent by registered or certified mail.
10. MISCELLANEOUS. This Agreement embodies the entire Agreement between the parties relating to the subject matter hereof. This Agreement may be amended only by an agreement in writing signed by EFM and Lessee. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provisions in any other jurisdiction. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that Lessee may not assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of EFM. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of Missouri (without reference to conflict of law principles).
IN WITNESS WHEREOF , EFM and Lessee have executed this Maintenance Agreement as of the day and year first above written.
LESSEE: ______________________________________
Signature: ______________________________________
By: ______________________________________
Title: ______________________________________
Address: ______________________________________
______________________________________
______________________________________
Attention: ______________________________________
Fax #: ______________________________________
Date Signed: _______________________, ___________
EFM: Enterprise Fleet Management, Inc.
Signature: ______________________________________
By: ______________________________________
Title: ______________________________________
Address: ______________________________________
______________________________________
______________________________________
Attention: ______________________________________
Fax #: ______________________________________
Date Signed: _______________________, ___________
© 2019 Enterprise Fleet Management, Inc. H02213_MaintAgree Equity Initials: EFM________ Lessee________
Richard Murrell
Regional Sales Manager
1400 N. Kellogg Drive, Suite G
Anaheim, CA 92807
City Council Regular Meeting - Page 1162 of 1385
AMENDMENT TO FULL MAINTENANCE AGREEMENT
THIS AMENDMENT (“Amendment”) dated this ____ day of December, 2022 is attached to, and made a part of, the FULL MAINTENANCE AGREEMENT entered into on the ____ day of December, 2022 (“Agreement”) by and between Enterprise Fleet Management Inc., a Missouri corporation (“EFM”) and City of Lynwood ("Lessee"). This Amendment is made for good and valuable consideration, the receipt of which is hereby acknowledged by the parties.
Section 7 of the Full Maintenance Agreement is amended to read as follows:
Lessee acknowledges that EFM does not perform maintenance or repair services on the Covered Vehicles but rather EFM arranges for maintenance and/or repair services on the Covered Vehicles to be performed by third parties. All conditions or warranties made by any supplier, vendor and/or manufacturer o f a Vehicle are hereby assigned by Enterprise to Lessee for the applicable Term and Lessee's only remedy, if any, is against the supplier, vendor or manufacturer of the Vehicle EFM MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER OF ANY KIND,
EXPRESS OR IMPLIED, WHETHER ARISING BY COURSE OF DEALING, COURSE OF PERFORMANCE, USAGE
OF TRADE OR OTHERWISE WITH RESPECT TO ANY EQUIPMENT, PRODUCTS, REPAIRS OR SERVICES
PROVIDED FOR UNDER THIS AGREEMENT BY THIRD PARTIES, INCLUDING, WITHOUT LIMITATION, ANY
REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, COMPLIANCE WITH SPECIFICATIONS, OPERATION, CONDITION, SUITABILITY, PERFORMANCE OR QUALITY.
ANY DEFECT IN THE PERFORMANCE OF ANY PRODUCT, REPAIR OR SERVICE WILL NOT RELIEVE LESSEE
OF ITS OBLIGATIONS UNDER THIS AGREEMENT, INCLUDING THE PAYMENT TO EFM OF THE MONTHLY MAINTENANCE FEES AND OTHER CHARGES DUE UNDER THIS AGREEMENT. EFM represents and warrants that the Services shall be performed in a reasonable and professional manner and in compliance with all applicable laws.
In no event shall EFM or its agents or their respective affiliates be liable for consequential, indirect, incidental, special, exemplary, punitive or enhanced damages, lost profits or revenues or diminution in value, arisi ng out of or relating to this agreement, including, without limitation, any breach or performance of this agreement, regardless of (i) whether such damages were foreseeable, (ii) whether or not EFM or its agents or their respective affiliates were advised of the possibility of such damages and/or (iii) the legal or equitable theory (contract, tort or otherwise) upon which a claim, action, cause of action, demand, lawsuit, arbitration, inquiry, proceeding or litigation is based, and notwithstanding the failure of any agreed or other remedy of its essential purpose.
In the event Lessee notifies EFM of any claim or dispute under this Agreement, and/or any claim involving the Vehicle, EFM will, in good faith, attempt to resolve the Lessee’s claims in a manner satisfactory to all parties and EFM will provide commercially reasonable assistance to Lessee in any communications and/or negotiations with the vendor or service provided with respect to claims relating to such Vehicle.
Section 10 of the Full Maintenance Agreement is amended to read as follows:
This Agreement embodies the entire Agreement between the parties relating to the subject matter hereof. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction sh all, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provisions in any other jurisdiction . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that Lessee may not assign, transfer or delegate any of its rights or obligations under this Agreement without the pri or written consent of EFM. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of California (without reference to conflict of law principles).
All references in the Agreement and in the various Schedules and addenda to the Agreement and any other references of similar import shall henceforth mean the Agreement as amended by this Amendment. Except to the extent specifically amended by this Amendme nt, all of the terms, provisions, conditions, covenants, representations and warranties contained in the Agreement shall be and remain in full force and effect and the same are hereby ratified and confirmed.
City Council Regular Meeting - Page 1163 of 1385
IN WITNESS WHEREOF, EFM and Lessee have executed this Amendment to Full Maintenance Agreement as of the day and year first above written.
City of Lynwood (Lessee) ENTERPRISE FLEET MANAGEMENT, INC.
By By
Title: Title:
Date Signed:_________________, _______ Date Signed:_______________________, _______ City Council Regular Meeting - Page 1164 of 1385
Agenda Item # 21.
AGENDA STAFF REPORT
DATE: December 20, 2022
TO: Honorable Mayor and Members of the City Council
APPROVED BY: Ernie Hernandez, City Manager
PREPARED BY: Julian Lee, Director of Public WorksGeorge Cambero, Interim Utility Manager SUBJECT: AWARD OF CONTRACT FOR WATER WELL CASING INSPECTION, AQUIFERFLOW TESTING, AND WATER QUALITY PROFILING AT LYNWOOD WELLS 5, 21,AND 22 IN THE AMOUNT OF $547,152 Recommendation:
Staff recommends that the City Council adopt the following resolution entitled: “A RESOLUTION OF THE CITYCOUNCIL OF THE CITY OF LYNWOOD AWARDING AN AGREEMENT TO BESST, INC. TO PROVIDEWATER WELL CASING INSPECTION, AQUIFER FLOW TESTING, AND WATER QUALITY PROFILINGAT LYNWOOD WELLS 5, 21, AND 22 IN THE AMOUNT OF $547,152.” Background:
The City provides drinking water to its residents from local groundwater and import water. Groundwater is pumpedfrom the Central Groundwater Basin through five active wells located throughout the City. Import water serves as asupplemental source and is purchased from Metropolitan Water District (MWD). The City distributes groundwaterand import water through its 3-million-gallon reservoir and 90 miles of distribution pipelines. The City’s waterservice area is approximately 4.7 square miles in size and covers approximately 90 percent of the land within theCity’s municipal boundaries. The City recently completed the Water Master Plan Update. As part of that study the consultant identified theCity’s inventory of water wells. The City current operates Well 5, Well 8, Well 9, Well 11, and Well 19. Well 21 andWell 22 have been drilled but not equipped.
Discussion and Analysis:
The majority of the City’s potable water supplies comes from groundwater production from the Central Basin. TheCentral Basin is located in Los Angeles County and covers approximately 270 square miles. The Central Basin isbounded on the north by the Hollywood Basin and the Elysian, Repetto, Merced, and Puente Hills, to the east bythe Los Angeles County/Orange County line, and to the south and west by the Newport-Inglewood Uplift.
City Council Regular Meeting - Page 1165 of 1385
The City must comply with various water quality requirements in order to provide domestic potable drinking waterservice. Chapter 15 of Title 22 California Code of Regulations (Title 22) “Domestic Water Quality and MonitoringRegulations” sets enforceable standards for chemical and bacteriological contaminants in drinking water. The City’s raw water sources currently meet all water quality regulations. The results are noticed in the City’sannual Consumer Confidence Report. It is very important to monitor the groundwater quality and viability of theaquifers the City is using as a drinking water source. Because of the progressive degradation of the aquifers theCity needs to take a pro-active approach of identifying potentials that could put our water source at risk. The well casing inspection, aquifer flow testing, and water quality profiling at the wells will provide hydrogeologydata that will offer better understanding of the current and predictive future condition. This will allow taking a holistichydrogeological approach to finding successful solutions for any areas of concern that can be addressed. The City issued a Request for Proposals (RFP) on June 18, 2022 with a deadline to submit the proposals onAugust 17, 2022. Two proposals were received from very competent companies; BESST, Inc. and ENGEO. An analysis of the two proposals was conducted, which included a review of their Project Understanding andApproach, Firm Experience, Proposed Project Team and Qualifications, References, Project Schedule, and FeeProposal. BESST, Inc. submitted the lower cost proposal and also had the highest rating by the review panel.
Consultant Rating Cost
BESST, Inc. 97.67 $547,152
ENGEO 87.00 $609,602 The proposal cost includes all associated tasks and includes optional tasks that could possibly be needed in thefield such as Well 5 Well Rehabilitation, well brushing and bailing and additional sampling. The fee proposal fromBESST, Inc. with no additional option is $313,505 but staff recommends incorporating the optional items for atotal of $547,152 to avoid any delays during field-testing that would be costlier in the long run. It is estimated that this project will take approximately twenty-one (21) weeks to complete the work set forth in thespecifications. Upon authorization, staff will circulate the contract documents, set up a project kick-off meeting, andschedule work to be accomplished. Staff recommends BESST Inc. to perform and complete the scope of work for the water well casing inspection,aquifer flow testing, and water quality profiling at Lynwood Wells 5, 21, and 22 for a not to exceed amount of$547,152.
Fiscal Impact:
Funding for this project has been approved in the CIP 5-Year Plan and will be shared between separate CIPprojects for a total amount of $547,152.00. The table below is the proposed construction budget and fundingdetails. Construction contract amount $547,152.0010% Contingency $54,715.00Construction Inspection (15%) $84,073.00Project Management (10%) $54,715.00Labor Compliance & Other Cost (5%) $27,345.00Total Construction Cost $766,000.00 LUA Revenue Bonds (Well 5 – 4011.68.102) $350,000.00LUA Revenue Bonds (Well 21 – 4011.67.904) $267,478.00LUA Revenue Bonds (Well 22 – 4011.67.894) $1,221,997.00FY23 Approved Budget $2,346,141.00 City Council Regular Meeting - Page 1166 of 1385
Coordinated With:
City Manager’s OfficeDepartment of Finance and Administration Services ATTACHMENTS:Description
Attachment 1 - BESST, Inc Proposal
Professional-Services-Agreement-Lynwood
City Council Regular Meeting - Page 1167 of 1385
Prepared for: City of Lynwood: Attention: Mir T. Fattahi, MsCE, PE, Acting City Engineer Prepared by: Noah Heller, MS PG (CA 5792) Principal Hydrogeologist, BESST, Inc. Kim Miles, Senior Hydrogeologist / Project Manager and Miles Koehler, Hydrogeologist / Project Manager
August 22, 2022
Proposal for Well Inspection, Testing and Profiling for Wells 5, 21 and 22 City Council Regular Meeting - Page 1168 of 1385
Page i
Table of Contents
Contents
1. Cover Letter ................................................................................................................................................................. 3
2. Executive Summary ....................................................................................................................................................... 4
3. Project Understanding and Approach ............................................................................................................................... 7
3.1 Project Planning ......................................................................................................................................................... 9
3.2 Well Inspection .......................................................................................................................................................... 9
3.3 Aquifer Testing......................................................................................................................................................... 11
3.4 Chemistry Profiling ................................................................................................................................................... 14
3.5 Data Analysis and Preliminary Report (PR) .............................................................................................................. 16
3.6 Project Management and Administration ................................................................................................................ 17
4. Firm Experience .......................................................................................................................................................... 19
4.1 Case study 1 .............................................................................................................................................................. 20
4.2 Case Study 2 ............................................................................................................................................................. 22
4.3 Case Study 3 ............................................................................................................................................................. 23
5. Proposed Project Team and Qualifications ...................................................................................................................... 24 Subcontractors Services and Responsibilities ................................................................................................................ 31 Subcontractor #1 – Tri-County Pump Company ............................................................................................................. 31 Subcontractor #2 -Eurofins Eaton Analytical Laboratories ............................................................................................ 33 Subcontractor #3 -Pacific Surveys .................................................................................................................................. 34
6. References ................................................................................................................................................................. 35
7. Project Schedule ......................................................................................................................................................... 36
List of Figures
Figure 1. Process flow diagram showing the field work and planning. .................................................................................... 7 Figure 2. Process flow diagram showing data analysis and reporting. .................................................................................... 8 Figure 3. Example of a lift and shift with a custom flexible discharge pipe. .......................................................................... 12 Figure 4. Video capture showing sideways injection of dye tracer within a water well. ....................................................... 14 Figure 5. Diagram of the PICO sampler. The VOA vial is housed within a stainless-steel chamber to prevent VOC loss or cross contamination. .............................................................................................................................................................. 15 Figure 6. Project schedule for weeks 1 through 6. ................................................................................................................. 36 Figure 7. Project schedule for weeks 7 through 12. ............................................................................................................... 37 Figure 8. Project schedule for weeks 13 through 18. ............................................................................................................. 38 Figure 9. Project schedule for weeks 18 through 21. ............................................................................................................. 39 Figure 10. Summarized project schedule. .............................................................................................................................. 39
City Council Regular Meeting - Page 1169 of 1385