PAVLETIC CONSULTING LLC
2014 Mann Pkwy, Celina, TX 75009
Proposal for Preparation of a
Five-Year Rates Plan and Annual Rate Reviews
for the
Water, Sewer and Garbage Utilities
Submitted January 21, 2025
EXHIBIT A
PAVLETIC CONSULTING LLC i
Table of Contents
Letter of Transmittal............................................................................................................................................1
1. Scope of Work............................................................................................................................................1-1
1.1 Scope of Work .................................................................................................................................1-1
1.1.1 Task 1—Develop Customer Use Characteristics............................................................1-1
1.1.2 Task 2—Develop Financial Plan and Revenue Requirements ......................................1-1
1.1.3 Task 3—Develop Rate Alternatives .................................................................................1-2
1.1.4 Task 4—Prepare Preliminary, Draft and Final Reports ..................................................1-2
1.1.5 Task 5—Prepare Presentations and Attend Meetings...................................................1-3
1.1.6 Task 6—Annual Review of Adopted Rates......................................................................1-3
1.2 Deliverables.....................................................................................................................................1-3
2. Budget........................................................................................................................................................2-1
2.1 Budget by Fiscal Year .....................................................................................................................2-1
3. Schedule ....................................................................................................................................................3-1
3.1 Schedule for Project Completion ...................................................................................................3-1 PAVLETIC CONSULTING LLC 1
Letter of Transmittal
January 21, 2025
Mr. Kevin Werner
City of Ripon
259 N. Wilma Avenue
Ripon, CA 95366
Subject: Proposal for Preparation of a Five-Year Rates Plan and Annual Rate Reviews for the Water, Sewer and Garbage Utilities
Dear Mr. Werner:
Pavletic Consulting LLC is pleased to submit our proposal for preparation of a Five-Year Rates Plan and Annual Rate Reviews for the Water, Sewer and Garbage Utilities. This proposal documents our proposed scope of work, deliverables, schedule and budget for providing services to the City. The proposal is in three sections which are summarized below.
Scope of Work and Deliverables. This section describes each task in the scope of work and provides a list of deliverables.
Budget. Budget hours and dollars are fungible among tasks within each utility budget and between enterprises in the event the budget for any enterprise is entirely spent. The hourly rate used in this proposal is $160 per hour – the same rate as used in the previous five-year study. The number of hours proposed is 225 which is 21 more hours than proposed in the previous five-year study. The budget is “not-to-exceed” and any hours not used will not be billed.
Schedule. The schedule is based on the timeline for the City’s next rate increase scheduled for February 1, 2026. Annual reviews are scheduled to be performed during August – December of each subsequent fiscal year following adoption of the five-year rate plan. The work schedule begins with the Notice to Proceed in March 2025 and runs through December 2030.
We appreciate the opportunity to submit our proposal. If you have any questions or wish to discuss changes in the proposal, please call (510) 439-6264.
Very truly yours,
Tommy Pavletic
Pavletic Consulting LLC
PAVLETIC CONSULTING LLC 1-1
Section 1
Scope of Work
The section describes our scope of work for the project and provides a list of deliverables.
1.1 Scope of Work
We will perform the following tasks as part of our scope of work. Note that all tasks apply to water, sewer and garbage utilities.1,2 Note that this scope of work excludes the development of fees or charges for penalties, service work, temporary service, capacity charges and other special fees and charges.
Tasks 1 through 5 will be performed in FY 2025/26 and include the five-year rate study. Task 6 is for the annual review of rates adopted in FY 2025/26 to determine whether the rates should be implemented in each of the subsequent four fiscal years.
1.1.1 Task 1—Develop Customer Use Characteristics
We will obtain detailed customer data from the City’s billing system. We will verify the most recent 12 months of customer data for Fiscal Year 2023-2024 (FY 2023/24) by categorizing the data according to the existing rate structure components, multiplying the customer use or account data times the applicable rate in the rate structure, and calculating the amount of revenue. We will compare that amount of revenue with the amount of revenue shown in the general ledger. If the two amounts of revenue are approximately the same, we know that the customer characteristics data will serve as a good basis for projections for future use. We will coordinate with City staff to ensure they export data from the utility billing system to an Excel spreadsheet that meets our data analysis needs.
We will analyze the customer water use data in sufficient detail to facilitate the development of rate structures selected by the City for implementation. We will discuss with key City staff their expectations of the rate structures and the advantages and disadvantages of the various types of rate structures.
1.1.2 Task 2—Develop Financial Plan and Revenue Requirements We will obtain from the City all financial data necessary for the development of rates including annual projection of capital and operating expenditures, existing and projected annual debt service obligations, recent revenue from rates and other sources, fund balances and debt coverage covenants.
We will develop an Excel-based spreadsheet that evaluates the annual amount of revenue required from rates for each utility. These revenue requirements will include operations and maintenance expenses, capital improvement program (CIP) expenditures, and debt service costs to be recovered via rates.
We will work with City staff to ensure that operating and capital expenditures are clearly defined in the rate study to facilitate customer understanding of the need for the expenditure and the program related to those expenditures.
1 The City’s financial statements use the term “Refuse Fund.” The City’s budgets use the term “Garbage Fund.” The terms are interchangeable and refer to Fund 120. The term “Garbage” is used in this proposal. 2 The City’s financial statements use the term “Sewer Fund.” The City’s budgets use the term “Ripon Municipal Sewer District No. 1.” The terms are interchangeable and refer to Fund 130. The term “Sewer” is used in this proposal.
Section 1 Scope of Work
1-2 PAVLETIC CONSULTING LLC
We will confer with the City to obtain their consensus approach for financing capital expenditures that includes cash from rates, State of California grants, or a low interest loan from the State of California State Revolving Fund.
We will use Excel’s standard financial functions for calculating interest and principal payments to develop debt service schedules for projected new financing or create a customized debt service schedule based on parameters provided by the City. We will evaluate debt service coverage ratios and “days of cash”. We will develop debt service coverage calculations that match the methodology described in the covenant(s) as provided to us by the City.
We will develop fund balance target amounts (reserves) using a classical approach. The classical approach involves quantitative methods of developing reserves requirements for working capital, capital improvements and rate stabilization. The study period for projected revenue requirements and rates will be FY 2025/26 through FY 2030/31 (five years).
1.1.3 Task 3—Develop Rate Alternatives
The three rate studies will each have two steps of technical analysis – the development of revenue required from rates and the development of rate alternatives. The rate development step of allocation of costs among functional cost categories (cost-of-service analysis) is not included in this scope of work.3 The revenue required from rates is net of non-rate revenues (for example interest earned on fund balances, loan disbursements, revenue from capacity charges, lease and rental income, various reimbursements, other charges for services). The development of rate alternatives will test different “across the board” rate increases and the impact on cash flow.
The proposed rates and monthly bills based on those rates will be compared with those of neighboring, comparable cities that provide similar services.
1.1.4 Task 4—Prepare Preliminary, Draft and Final Reports We will document findings and recommendations in report form. We will prepare a single report for the water, sewer and garbage utilities (unless directed otherwise by the City). We will prepare and submit three versions of reports: 1) a preliminary report for internal review with staff; 2) a draft for staff, Council and public review; and 3) a final report (incorporating any final Council and staff changes) following the Proposition 218 Notice of Public Hearing. Preliminary, draft and final reports will be submitted in electronic format.
All versions of the report will show the development of the rates and document findings as an administrative record that demonstrates the cost-rate relationship.
All information shall be presented in a clear, concise, and easy-to-understand manner. The reports will include the following: 1) a brief physical description of the utility systems; 2) service area description, including population characteristics; 3) overview of recent financial operations; 4) description of the necessary capital improvement program over time (five years); 5) tables from the comprehensive revenue and expense models supplemented with text that describes and supports how rates were derived; and 6) a survey of rates of other nearby municipalities. 3 The City’s enterprise utilities are about 92 percent residential. In the water enterprise, 95 percent of water meters are charged the same rates. The rates for all enterprises are fair and equitable for application to the homogeneous customer bases in each enterprise and meet the cost-of-service nexus requirements found in laws of the State of California.
Scope of Work Section 1
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1.1.5 Task 5—Prepare Presentations and Attend Meetings
We will prepare slides for presentations and attend up to two (2) meetings at City Hall for meetings or workshops with the City Council to present findings and recommendations. We will conduct conference calls supplemented with internet meeting technology as frequently as necessary to complete the work.
We will develop tables and figures for presentations that clearly describe findings and recommendations.
We will coordinate with City staff to create a defined message, supported by findings, for each meeting (or workshop) with the City Council. The message at the initial meetings (or workshops) with City Council will be designed to facilitate discussion about the projected expenditures, revenue requirements and educate customers on the types of costs incurred by the utilities and how those costs are recovered. We will work with the Staff to provide data and information for development of a public awareness campaign for the rate study.
1.1.6 Task 6—Annual Review of Adopted Rates
Task 6 is for the annual review of rates adopted in FY 2025/26 to determine whether the adopted rates should be implemented in each of the subsequent four fiscal years.
Evaluation of the previously adopted rates will involve only the update of projected expenditures, revenue from rates, number of accounts and water use. The evaluation will include preparation of a Technical Memorandum that summarizes findings and recommendations.
As practiced by other cities, any decision by the City Council to reduce or not implement rates previously adopted would not trigger a requirement for Proposition 218 procedures or a protest ballot process.
1.2 Deliverables
Pavletic Consulting LLC will provide the following deliverables during the study:
• Up to two (2) on-site meetings or workshops
• Schedule of water, sewer and garbage rates to be adopted by Proposition 218 procedures in FY 2025/26
• Excel-based models with tables and figures used in reports and presentations • Electronic copies of Preliminary, Draft and Final Reports • Electronic copies of Preliminary, Draft and Final Technical Memorandums • Electronic copies of PowerPoint Presentations
• Monthly invoices showing project status in terms of labor hours, costs and work performed PAVLETIC CONSULTING LLC 2-1
Section 2
Budget
2.1 Budget by Fiscal Year
The table below shows the project budget and total cost of services for the scope of work. Only hours actually used will be charged. Labor hours not used will not be invoiced. Hours and costs are fungible between tasks for each utility. All costs for travel, shipping, phone, copying etc. are included in the hourly rates.
Table 2-1. Budget
Any additional work agreed to between the City and Pavletic Consulting LLC will be performed at the Hourly Rate shown in Table 2-1.
We will invoice for work performed no more than once a month. Invoices will include a list of all tasks, work performed on each task during the time period corresponding with the invoice, a total amount due, the amounts previously billed, and the budget remaining.
Water Utility Sewer Utility Garbage Utility
Hourly Hourly Hourly Totals
Task Hours Rate Cost Hours Rate Cost Hours Rate Cost Hours Cost Task 1 - Develop Customer Use
Characteristics 8 $160 $1,280 8 $160 $1,280 8 $160 $1,280 24 $3,840 Task 2 - Develop Financial Plan
and Revenue Requirements 15 $160 $2,400 15 $160 $2,400 15 $160 $2,400 45 $7,200 Task 3 - Develop Rate
Alternatives 7 $160 $1,120 7 $160 $1,120 7 $160 $1,120 21 $3,360 Task 4 - Prepare Preliminary,
Draft and Final Reports 10 $160 $1,600 10 $160 $1,600 10 $160 $1,600 30 $4,800 Task 5 - Prepare Presentations
and Attend Meetings 7 $160 $1,120 7 $160 $1,120 7 $160 $1,120 21 $3,360 Task 6 - Perform Annual
Evaluation of Adopted Rates 28 $160 $4,480 28 $160 $4,480 28 $160 $4,480 84 $13,440 Total Costs and Hours 75 $12,000 75 $12,000 75 $12,000 225 $36,000 PAVLETIC CONSULTING LLC 3-1
Section 3
Schedule
3.1 Schedule for Project Completion
Work may commence immediately upon issuance of a written Notice to Proceed by the City. The schedule for project completion is shown in Table 3-1. The schedule is contingent on the timely delivery of customer data and financial data by the City.
Table 3-1. Schedule
2025 2026
Week Start Day/M onth > 10-Mar 14-Apr 12-May 9-Jun 14-Jul 11-Aug 8-Sep 13-Oct 10-Nov 8-Dec 12-Jan 9-Feb 9-Mar TaskCumulative Number of Days from Notice to Proceed > 7 63 91 126 154 182 217 245 273 308 336 364 399 Notice to Proceed Week of M arch 10, 2025
Task 1 - Develop Customer Use Characteristics
Task 2 - Develop Financial Plan / Revenue Requirements
Task 3 - Develop Rate Alternatives
Task 4 - Prepare Preliminary, Draft and Final Reports Prelim Draft Final Task 5 - Prepare Presentations/Attend M eetings Wkshp 218 op 218 cl Note: Council meetings are the second Tuesday of every month and are the dates used in the schedule header.
Legend: Prelim / Draft / Final = Preliminary / Draft / Final reports Wkshp = workshop to review findings/recommendations /set hearing date 218 op = Council meeting to authorize mailing of Proposition 218 Notice of Hearing 218 cl = Council meeting to close Prop 218 hearing and vote on rates New rates effective February 1, 2026