City Council
Report
City Council Meeting: May 14, 2024
Agenda Item: 5.F
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To: Mayor and City Council
From: Rick Valte, Public Works Director, Public Works, Water Resources Subject: Award Professional Services Contract to NBS Government Finance Group, dba NBS to Analyze the Existing Water/Wastewater Rate Structure and Establish a New Five-Year Rate Structure for Potable Water, Recycled Water, and Wastewater Commodity Charges; Fire Line Rates; and Capital Facility Fee for Calendar Years 2025 to 2029
Recommended Action
Staff recommends that the City Council:
1. Adopt a finding of Categorical Exemption pursuant to Section 15262 (Feasibility and Planning Studies) of the California Environmental Quality Act (CEQA) Guidelines;
2. Award RFP #391 to NBS Government Finance Group, dba NBS to analyze the existing water/wastewater rate structure and establish a new five-year rate structure for potable water, recycled water, and wastewater commodity charges; fire line rates; and a capital facility fee for calendar years 2025 to 2029 for the Public Works Department; and
3. Authorize the City Manager to negotiate and execute an agreement with NBS Government Finance Group, dba NBS in the amount not to exceed $420,000 over a 5-year period, with future year funding contingent on Council budget approval.
Summary
The City of Santa Monica’s Public Works Department - Water Resources Division provides safe and reliable drinking water to over 93,000 residents as well as commercial and institutional customers throughout the City. The Water Resources Division also provides stormwater/urban runoff management, wastewater collection, and water recycling services for the community. These water and wastewater services are supported solely through self-sustaining Water and Wastewater Enterprise Funds. The last water and wastewater rate study was adopted in 2020 for calendar years 2020 2 of 6
through 2024. To ensure the fiscal health of the Water and Wastewater Enterprise Funds, the Water Resources Division issued a request for proposal (RFP) to conduct a water, wastewater, and recycled water rate study, as well as a capital facility fee update, for calendar years 2025 through 2029. Staff recommends that a professional services agreement be awarded to NBS to provide rate study consulting services in an amount not to exceed $420,000 over 3 years.
Discussion
The City’s Water Resources Division operates and maintains an expansive water, wastewater, and recycled water infrastructure network that collectively serve over 93,000 residents and 2,700 businesses in the City. The City’s water and wastewater infrastructure consists of three major groundwater production well fields, three water treatment facilities (Charnock Treatment Plant, Olympic Advanced Water Treatment Facility, and Arcadia Water Treatment Plant), four water storage reservoirs, 200 miles of water mains, over 150 miles of wastewater collection pipes, an advanced water recycling facility (Sustainable Water Infrastructure Project), a stormwater/urban runoff recycling facility, and over 60 miles of storm drains. The cost for providing water and wastewater services to the community is recovered through established water and wastewater rates.
The City has consistently taken a strategic approach to setting future water and wastewater rates that balances a concern for keeping costs affordable to our community while adequately investing in long-term water quality, reliability and sustainability. A water and wastewater rate study are conducted every five years to ensure proper funds are in place to carry out day-to-day operations, conduct routine operation and maintenance activities, and implement capital improvement programs for system resiliency. In total, the water and wastewater funds collect approximately $70 million per year through rates that are used to fund water and wastewater related operating and capital programs, including:
• Water production, treatment, storage, and distribution • Water quality testing and monitoring
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• Wastewater collection and conveyance (e.g. pump station) • Advanced water recycling and groundwater recharge
• Treatment and disposal of City’s wastewater via the City of Los Angeles’ Amalgamated System
• Software and technology system (e.g., billing, system controls, asset management, etc.)
• Water conservation and sustainability programs
• Vehicles, facilities, infrastructure improvements and other projects to support water/wastewater operations
• Capital improvement program to modernize water/wastewater infrastructure through rehabilitation or replacement
In addition, the City’s water and wastewater capital facility fees, also commonly referred to as connection fees, will be evaluated and updated. Capital facility fees are assessed through new or modifications to existing water and/or wastewater services to provide the requested capacity to serve the customer.
Professional consulting services are required to assist the City in setting water/wastewater rates and capital facility fees for calendar years 2025 to 2029 and to assist in the public outreach and input process. For property-based charges including water sales, fire line charges, and wastewater service charges (but excluding capital facility fees), rates must be set in compliance with Proposition 218 (California Constitution Article XIII D, Section 6) requirements including charges based on proportional cost of service (the water and wastewater utility cannot charge more than the cost of providing the service), ratepayer notifications of any proposed changes over a maximum term of five years, and a public hearing process. NBS would provide technical assistance to the City to comply with Proposition 218 requirements, including complex cost of service calculations to formulate a thoughtful, defensible rate structure to support the City’s water/wastewater program goals with due consideration given to ratepayers and the financial viability of the Water and Wastewater Enterprise Funds.
The rate study would review:
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• Operating and capital revenue requirements for the City’s Water and Wastewater enterprise funds over a five-year period (2025 to 2029); • Determination of adequate fund reserves and the ability to bond and cover current and future debt obligations;
• Water and sewer rates/structure – potential changes to fixed service charge component, tiered rates, number of tiers, usage allocations by tier, and customer class designations;
• Affordability including low-income discounts/rates;
• Cost of service for each rate/fee/charge by customer class, meter size and tier; • Impact of proposed changes versus existing rates;
• Comparison of City of Santa Monica water/wastewater rates versus other local water/sewer agencies;
• Funding for capital projects;
• Other factors as identified by the public, City Council, advisory groups, and City staff as part of the study outreach process.
Vendor Selection
Bidder Recommendation
Best Bidder NBS
Evaluation Criteria • Cost of Services/Cost Control
• Stability/References
• Ability to Meet Project Work Plan and Timeliness
• Value Add/Breadth of Service
• Experience and Technical Competence
• Quality Control
Municipal Code SMMC 2.24.190
RFPs Received
Black & Veatch NBS Raftelis Financial
Consultants, Inc.
Robert D. Niehaus, Inc.
RFP Data
Posted On Posted On
Advertised In
(City Charter & SMMC)
Vendors
Downloaded
Date Publicly
Opened
1/9/2024 City's Online
Bidding Site Santa Monica Daily Press 23 2/16/2024
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Best Bidder Justification
The proposals were reviewed by a selection panel consisting of staff from the Public Works Department – Water Resources Division. Evaluations were based on the following selection criteria: Cost of Services, Stability/References, Ability to Meet Project Work Plan and Timeliness, Value Add/Breadth of Service, Experience and Technical Competence, and Quality Control. Based on these criteria, the selection panel unanimously ranked NBS as the best qualified firm to provide rate consulting services for the water and wastewater enterprise funds. NBS demonstrated its knowledge of the various master plans (water, wastewater, recycled water, and water conservation) and its impact on the water/wastewater enterprise funding requirements, value added services to audit the utility’s billing structure and staffing levels/compensation to retain skilled operators/staff, and familiarity with the City’s various sources of local water supplies/cost of service. NBS has worked to develop rate and implement rate studies for the City of Victorville, the City of Redding, the Sweetwater Authority, and the City of Santa Monica’s FY19-24 water & sewer rate structure.
Environmental Review
The agreement for professional services for the five-year Water, Wastewater, and Recycled Water Rate Study is exempt from CEQA pursuant to Section 15262 (Feasibility and Planning Studies) of the CEQA Guidelines. Section 15262 exempts feasibility or planning studies for possible future actions which the City has not approved, adopted, or funded. The study is only an assessment of potential rate changes and does not commit to any future action.
Financial Impacts and Budget Actions
Staff seeks authority to approve available funding from the Water and Wastewater Funds to award an agreement with NBS to provide professional rate consulting services. Future year funding is contingent on City Council budget approval.
Agreement Request
FY 2023-24 Account # Future Years Total Contract
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Request Amount Amount Amount
$25,000 50500001.552010 $185,000 $210,000
$25,000 51500001.552010 $185,000 $210,000
$50,000 $370,000 $420,000
Prepared By: Chris Aguillon, Water Resources Protection Specialist Approved Forwarded to Council
Attachments:
A. Oaks Initiative - NBS
B. Levine Act Disclosure Form - NBS