September 22, 2026
Agenda Item No. 9
TO:
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM:
Mark Vukojevic, Utilities Director - 949-644-3011, [email protected] PREPARED BY:
Joshua Rosenbaum, Senior Management Analyst - 949-644-3057 [email protected] TITLE:
Professional Services Agreement with Water Resources Economics, LLC for Water, Wastewater, and Recycled Water Rate Study ABSTRACT:
The Utilities Department requests City Council approval to enter into a Professional Services Agreement with Water Resources Economics, LLC for a comprehensive water, wastewater and recycled water rate study. The City of Newport Beach’s (City) previous comprehensive studies were completed in 2023.
RECOMMENDATIONS:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; and b) Authorize the Mayor and City Clerk to execute a Professional Services Agreement with Water Resources Economics, LLC for Water, Wastewater, and Recycled Water Rate Study for a term of two years and a contract compensation amount not-to-exceed $185,000.
DISCUSSION:
Every four years, the City prepares a comprehensive water, wastewater and recycled water financial plan and rate study. The last review began in 2022 and the study was completed in 2023. The study includes separate cost of service analyses for each enterprise fund and detailed evaluations of current and future capital, operational, inflationary and reserve expectations. The report recommended a five-year rate structure and the final reports were reviewed by the City Council on August 22, 2023, and then approved on September 26, 2023. The report and proposed rates were noticed to the public and City Council approved the final rates at a public hearing on November 14, 2023.
Utilities and Administrative Services Department staff recommend that new studies be conducted this fiscal year to keep up with the four-year cycle review. Following a review of available options and current request for proposals (RFP), staff found that Water Resources Economics, LLC has been selected as the top vendor in several other requests for proposals. The Utilities Department determined that a new agreement with Water Resources Economics, LLC to perform the study would better align with the City’s enterprise operational structures and management needs. Pursuant to Council Policy F-14 and Administrative Policy AP-001, the City may utilize another public agency’s competitive procurement process for substantially similar services completed within the previous 24 months.
In January 2025, the City of San Clemente issued an RFP for rate services and received six proposals. Following interviews conducted by a review panel consisting of City of San Clemente representatives, Water Resources Economics, LLC was recommended for award of the agreement based on its qualifications and service approach. The firm provided the best proposal due to its significant experience with utility rates, its record of success on similar projects, and the presentation provided by the team. Water Resources Economics, LLC comes highly recommended as a very knowledgeable and responsive firm to assist the City of Newport Beach with its needs. The principal previously worked with the City under a different firm and has knowledge to reduce the learning curve.
Water Resources Economics, LLC submitted a detailed proposal to study the City’s existing rate structures, examine the costs to provide water and sewer services, and review existing practices in the industry within California and recent changes in the law. The objective is to provide the City with updated financial plans and equitable and legally sound rate models to recover the cost of services. Rates need to be adequate to recover the expenses of each Enterprise Fund while ensuring that costs are equitably and legally allocated. The proposal also includes additional features such as studying emergency water rates and capacity fees. The consultant team will prepare the analysis, reports and public notices and present the information as requested by staff.
The Utilities Department recommends that the professional services agreement for the 2027 Water, Wastewater and Recycled Water Rate Study be awarded to Water Resources Economics, LLC, with a total contract amount of $185,000. This is based on the recent competitive solicitation conducted by the City of San Clemente and the Utilities Department’s independent evaluation. The proposal rates are slightly higher than in San Clemente’s agreement to account for inflationary increases.
The scope of work includes all the necessary tasks to perform both studies, an estimate regarding the number of anticipated meetings, and a contingency. Although the studies and communications would be performed simultaneously, each study would stand on its own as an independent study of each respective enterprise fund. Should the City Council approve this agreement, a preliminary rate study report will be prepared within six months. Public outreach and a review by the Finance Committee are also planned. The Utilities Department anticipates bringing the final rate studies for City Council review and approval in the current fiscal year.
FISCAL IMPACT:
The adopted budget within the Utilities Department includes sufficient funding for the agreement. The total cost of the rate study is $185,000 including a contingency. $125,000 will be expensed to the professional services account of the Water Fund, 7019052-811008; $60,000 will be expensed to the Wastewater Fund, 7119061-811008.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item).
ATTACHMENT:
Attachment A – Professional Services Agreement with Water Resources Economics, LLC Professional Services Agreement with Water Resources Economics, LLC for Water, Wastewater, and Recycled Water Rate Study September 22, 2026
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