Loading...
HomeMy WebLinkAboutAgenda - 06-12-2007-4ggORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: June 12, 2007 Action Agenda Item No. ~--~q~ SUBJECT: Contract Approval with Raftelis Financial Consultants to Conduct a Rate Study for the Efland Sewer System DEPARTMENT: Purchasing, County Engineer PUBLIC HEARING: (Y/N) No ATTACHMENT(S): Request for Proposals (RFP) Raftelis' Response to RFP INFORMATION CONTACT: Pam Jones, 245-2652 Paul Thames, 245-2304 PURPOSE: To award a contract for professional services associated with conducting a rate study for the Efland Sewer System to Raftelis Financial Consultants of Charlotte, North Carolina. BACKGROUND: The Efland Sewer System (owned by Orange County) currently provides sewer service to approximately 200 customers in the Efland area, a small, unincorporated community lying along Interstate 85/40 in central Orange County: The rates being charged today were originally set in 1987 and have not been adjusted since that time. The system currently operates with an annual shortfall of approximately $100,000 which is made up through the General Fund. In prior discussion, the Board determined that the time has come to bring sewer rates in line with the cost of operating the system, and the best way to do this would be by hiring a consultant to conduct a rate study. A Request for Proposals (RFP) was developed to select the consultant (see attached). Although costs were submitted to conduct the study, staff also asked for the qualifications of the firms so they could be considered while making a recommendation. Selection criteria included, but were not limited to, the quality of the proposal, technical capabilities, similar experience, innovation and creative methods and experience with .low income rate payers. The RFP was sent to four firms and advertised on the County website with two firms responding. A team consisting of the County Manager, Purchasing Director, County Engineer, Finance and Budget Directors evaluated the proposals. The team unanimously selected Raftelis Financial Consultants of Charlotte, North Carolina to conduct the study at a $14,829. This includes a final report and a presentation of results at a BOCC meeting. Raftelis has conducted several studies in the area, including work for OWASA, the City of Durham, Durham County and the City of Burlington. The firm has also successfully completed a studies involving low income rate payers for Charlotte Mecklenburg Utilities, Columbus (Georgia) Water Works, and the Birmingham Water Works Board. FINANCIAL IMPACT: The cost of the rate study would be $14,829. An amount of $10,000 was allocated in the 2006-2007 CIP for this study. The additional amount of $4,829 has been included in the 2007-2008 CIP,to cover remaining costs. Work will not commence until July 1, 2007. RECOMMENDATION(S): The Manager recommends that the Board: 1) award a contract to Raftelis Financial Consultants of Charlotte, North Carolina at an amount not to exceed $14,829 and 2) authorize the Purchasing Director to execute the contract pending final review by staff and the County Attorney. 3 opntP of O ~ ~a! y~ ra p + x'-'--, 17 ra x+ i e t'~~h ~aC°~~~ Count y of Orange Department of Purchasing & Cent ral Services Pamela K. J ones, Director County of Orange, NC Request for Proposals #5130 Rate Study for Small Wastewater Collection Utility February 5, 2007 PURPOSE: Orange County was given your name and the name of your company by staff of the Orange Water and Sewer Authority (OWASA) as potential utility rate study consultant for a small wastewater collection utility owned by Orange County. The purpose of this RFP is to obtain a statement of qualifications and proposal for developing acost-of-service/rate study for a small, Orange County-owned wastewater collection utility system. BACKGROUND: This utility, generally known as the Efland Sewer System, currently provides sewer service to approximately 200 customers in the Efland area, a small, unincorporated community lying along Interstate 85/40 in central Orange County: Most of the customers are single family residential users, but the system does provide service to three businesses (two industrial customers and aself- service car wash), two churches, an elementary school and aCounty-owned community center, none of which generates more than 4000 gallons per day of wastewater flow. The entire system generates an average of approximately 1,000,000 gallons of wastewater flow per month, exclusive of ground water infiltration and inflow (which has been known to increase flow by approximately 50%). An expansion of that system, currently in the regulatory review process, is expected to provide sewer service to another 50-75 customers, including several more businesses and churches. The Efland Sewer System is unusual in a number of ways, beginning with system operation. While Orange County actually owns the system, the County has no staff that deals with the utility, other than the County Engineer and his assistant. They provide general system oversight and planning. Routine and repair system maintenance is performed under contract by OWASA or its sub-contactors. Wastewater treatment is provided by the Town of Hillsborough (wastewater is conveyed via pumping station and force main some five miles to Hillsborough's wastewater collection system). Billing for system customer accounts is performed under contract by the Orange-Alamance Water System, a private non-profit water utility that provides water service to the area and to most of the sewer system customers (and thus bill collecting leverage, though a few customers still rely on wells). The Orange County Board of Commissioners set the utility rates for the Efland Sewer System, though the Board has not seen fit to increase the rates since they were first set in 1987. The current cost of operating the system now exceeds system rate-based income by approximately $100,000 per year. The shortfall is met by funding transfers from the County's General Fund. The County Commissioners have historically been reluctant to raise rates because the existing customer base is comprised of low income, elderly and minority households. However, of late, a number of much higher income households have been added to the existing system and the proposed system expansion also promises to serve a higher income community. Accordingly, the Board has determined that the time has come to bring sewer rates in line with the cost of operating the system. The Board has also P.O. Box 8181 ~ 129 East Ong St reet ~ Hillsborough, Nort h Carolina 27278 Telephone: Area Code 919 245-2651 Fax: 644-3001 E-mail: Dcannell@co.orange.nc.us instructed staff to develop strategies that may ultimately provide some level of support - in Perms of financial assistance or lowered utility bills - to lower income households. Orange County staff has determined to pursue Board of County Commissioner directives in this matter, either. in whole or in part, by looking for assistance from consultants with expertise in developing a sound financial basis for setting utility rates. While it would be very helpful if the County could engage a rate study consultant having expertise in creating a programmatic process for providing assistance to low- income ratepayers, we recognize that this particular aspect of Board goals may not be one that can be addressed in the context of a rate study. SUBMITTAt_ REQUIREMENTS: Each submittal must include: The Statement of Qualifications/ Proposal should included the following information: 1. General background information about the firm (name, address, year established, telephone numbers, electronic address, contact person) 2. Relevant information about the firm's history and experience in sewer utility cost of service and rate making studies. (include current contact information of past clients) 3. Statement of significance of firm's capabilities, experience, and approach to this project; 4. General project approach and schedule timeline 5. Examples of innovation and creativity in such projects; 6. Familiarity, if any, with assistance to low-income rate payers; 7. Statement or listing of information to be provided by Orange County 8. Listing of relevant experience with reference information; 9. Listing of key personnel who will work on the study 10. Cost proposal to conduct the study, please also include optional cost to make presentation at a night meeting in either Chapel Hill or Hillsborough. N.C. RFP Format Orange County has once again achieved the highest verifiable waste reduction rate in the State of North Carolina as calculated by the NC Waste Management Division. The 2002-2003 45% reduction rate exceeds the 2001-2002 rate by a full 5%. In keeping with our efforts to reduce waste at its source,~we are asking that respondents double-side copies on recycled content paper to the extent practicable. Each respondent is requested to submit one hard copy of your proposal and one (1) copy on CD or via E-Mail (dcannellC~co.orange.nc.us) containing the complete RFP in Adobe Acrobat format by the submittal deadline at 5:00 pm EST, February 19, 2007. Proposals shall include a separate (in sealed envelope attached only to original) clearly marked "Cost Proposal" along with the name of your firm. Most of the selection team members will conduct their individual reviews from the material provided in PDF format, so please ensure that they are'readable before they are Please submit your proposal to the Orange County Purchasing Agent, 129 East King Street, PO Box 8181; Hillsborough, NC 27278. Orange County reserves the right to interview any and all firms prior to selection. The Orange County Purchasing contact is David Cannell. He can be contacted at (919) 245-2651 or via Email at dcannell@co.orange.nc.us (preferred). A copy of this RFP as well as addendum will be posted on the Orange County website at: http://www.co.orange.nc.us/purchasing/current_bids.htm.. Orange County reserves the right to reject any and all proposals and waive minor variances. Proposals received after the due date/time shall not be considered. S '=' ~~~ ,r .- 1 ~` ~~ k~ '; i t ,~ ,~ `.1~t s ~ ~ s ~; ~ ~ ~ ~-.. t s, 4 ~, a ~ C®U NTY ®~ ®1 \/ \ N ~-- - ~..~ PROPOSAL FOR RATE STUDY FOR SMALL WASTEWATER COLLECTION UTILITY February 19, 2007 EFLAND SEWER SYSTEM Proposal for Rate Study for Small Wastewater Collection Utility COMPANY OVERVIEW Raftelis Financial Consultants, Inc. ("RFC") was established in 1993 by George A. Raftelis to provide national environmental and management consulting services of the highest quality to public and private sector clients. Specifically, we focus our services in the areas of environmental finance, utility financial plann+ng and pricing, strategic planning, resource conservation, and related areas. We believe that we bring a unique combination of leadership skills and experience to help our clients address their most important issues. LOCATION AND SIZE OF FIRM RFC is currently comprised of 18 consultants and three administrative support positions. RFC places a high priority on being responsive to our clients. On average, each staff consultant is involved with four to five projects at any one time in an effort to balance worldoad while maintaining responsiveness. Charlotte Office Kansas City Office Pasadena Office 511 East Boulevard 3013 Main Street 201 S. Lake Avenue -Suite 203 Charlotte, NC 28203 Kansas City, MO 64108 Pasadena, CA 91101 Phone: 704-373-1199 Phone: 816-285-9020 Phone: 626-583-1894 Fax: 704-373-1113 Fax: 816-285-9021 Fax: 626-583-1411 CONSULTING PHILOSOPHY, VALUES AND MISSION STATEMENT As a consulting philosophy, RFC maintains the practice of providing senior level assistance to our clients. While, as necessary, we utilize staff support for specific data gathering and analysis functions, it is not our practice to leverage our senior people with large teams of junior level consultants. Instead, we provide skills, experience, and maturity gained through many years of consulting experience to best meet our clients' needs. RFC's values include quality, teamwork, integrity, client responsiveness, innovation, knowledge and flexibility. As such, our mission is to be the most highly regarded innovative leader in providing financial., economic, and management consulting to environmental utilities. RFC has extensive experience on the state, regional, and national level and is particularly well qualified to meet your project requirements and goals. The majority of our current projects relate to rate studies, development fee studies, or bond feasibility studies for water and/or wastewater utilities. PROJECT CONTACT The main contact for the proposed Rate Study for Small Wastewater Collection Utility ("Study") will be Mr. Lex Warmath, Vice President Mr. Wannath will serve as Project Manager and services will be provided from the Charlotte office. He may be reached by phone (704) 373-1199 or by email, lwarmath@raftelis.com. RAFTELIS FINANCIAL .._ CONSULTANTS, INC. 0`~~~c~ [~~~~ r -<<. rx~.,.. EFLAND SEWER SYSTEM Proposal for Rate Study for Small Wastewater Collection Utility FIRM'S HISTORY .AND EXPERIENCE As discussed previously, RFC is afull-service water and wastewater finance, pricing, and management consulting firm founded by George Raftelis in 1993. Our primary focus is water and wastewater rates studies, but we also provide other financial.-related services. We are well qualified to assist the County with its Study, as well as other financial or pricing issues that may arise. Two areas where RFC has capabilities that separate us from other firms are our experience in evaluating affordability and our database of rate structures and rate data from across the country. Each of these will be valuable as part of the County's Study. Specifically, our services include: ECONOMIC ANALYSIS Cost of Service and Rate Analysis Economic Feasibility Analysis and Forecasting System Development Fee Studies Capital Financial. Planning Consolidation Analysis Extension Policy Review SPECIAL ENVIRONMENTAL ASSISTANCE Litigation Support Industrial Pretreatment Studies Automated Meter Reading Implementation Rate Filing and Reporting Commercial Consulting UTILITY ACQUISITIONS Valuation Acquisition Bond Feasibility Economic Rate Impact Analysis Expert Testimony Acquisition Strategy Development PROCUREMENT ASSISTANCE Feasibility Analysis Request for Proposals Preparation Financial P]anni~ Privatization Procurements Contract Negotiations MANAGEMENT AND ORGANIZATIONAL STUDIES Organizational Structure Review Management Audits Policies and Procedures Review Personnel and Compensation Analyses Operating Practices Review RFC is an industry leader in preparing water and wastewater rate studies for municipalities. The map below and list of recent clients below represents the breadth of our client base. In addition, we have grouped brief project descriptions in the Relevant Experience/References section to amplify our experience in North Carolina, the Southeast, and across the Country. It is important to note that many of these projects involved assisting utilities such as the Orange Water and Sewer Authority, City of Durham, Durham County, City of Burlington, and the Town of Hillsborough. CONSULTANTS, NC.I A ^v t ~~~t Ca~.i~ EF~AND SEWER SYSTEM Proposal for Rate Study for Small Wastewater Collection Utility n gyp. ~,~~ F` l r '~ ...y-. * ~ - - ~ F * .~ '~: t '. '. ~ ~ '., `,. . YC ,.,` ~ ~.~~.~ ' ~ ~~{ -;. ~ _ ','~' ~ 0 NORTH EAST REGION k ~ SOUTH FAST REGION ,~' ._ 1 OMI04JEAREGION ~~`' ` ..~ , ;i:d WEA REGION ~ `kr ~. ~~ 1 4.r ./" North Carolina Project Experience RFC personnel have worked with the following clients in North Carolina: Asheville/Buncombe Water Authority Brunswick County Charlotte-Mecklenburg Utilities City of .Albemarle City of Burlington City of Charlotte City of Concord City of Durham City of Hendersonville City of Kinston City of Oxford City of Lexington City of Raleigh City of Roxboro City of Salisbury City of Wake Forest City of Wilmington City of Wilson City of Winston-Salem Dare County Durham. County Fayetteville Public Water Commission Greenville Utilities Commission Lower Cape Fear Water and Sewer Authority Mecklenburg County Neuse Regional Water & Sewer Authority Orange Water and Sewer Authority Piedmont Triad Water Authority Shelby Utilities South Brunswick Water and Sewer Authority Sumter Public Works Town of Archdale Town of Cary Town of Garner Town of Hillsborough Town of Jamestown Town of Mills River Town of Oaksboro Union County Wake County Water and Sewer Authority of Cabarrus County (Concord) ONSULTANTS, NC? •~ A i` EF~AND SEWER SYSTEM Proposal for Rate Study for Small Wastewater Collection Utility Recent National Clients In the past two years, RFC has assisted clients in 23 states including North Carolina.. Below is an example from each state. • Birmingham (AL) Water Works Board Charlotte-Mecklenburg (NC) Utilities • City of Phoenix, AZ City of Hobbs, NM • City of San Diego, CA City of Henderson, NV • City of Wilmington, DE City of Buffalo, NY • Paducah (KY) Joint Sewer Agency Northeast Ohio Regional Sewer District • Columbus (GA) Water Works City of Portland, OR • Town of Olathe, KS Allegheny County (PA) Sanitation Authority • Town of Winthrop, MA City of Newport, RI • City of Baltimore, MD Nashville ('TN) Metro Water Services • City of Saginaw, MI Spartanburg (SC) Water System • City of Lee's Summit, MO Newport News (VA) Waterworks ONSULTANTS, NC 3 c'~. A .i ~`~! Cs+•1~~ EFLAND SEWER SYSTEM Proposal for Rate Study for Small Wastewater Collection Utility STATEMENT OF SIGNIFICANCE Cost of Service and Pricing The goal of cost of service studies is to develop rates and charges that best meet a utility's goals and objectives. RFC has conducted 150 such projects in the last five years and our personnel have conducted more than 600 during their careers. As a result of our experience with numerous utilities, both large and small, we have developed many different rate structures based on the needs and preferences of the utility and/or its customers and stakeholders. RFC's typical methodology for conducting a rate study includes the following tasks: Conceptual Design - to identify the utility's objectives in order to ensure that we develop the most appropriate rates and rate structures. During this task, we work with the client to identify and prioritize objectives such as rate equity and affordability, revenue sufficiency, conservation orientation, and rate stability. Development of a Rate Model -the model is the tool by which rates are calculated, and it allows for ongoing financial planning and sensitivity analyses. Each rate model is custom built for the utility; however, we do have a project proven rate model template that we use as a basis for developing a utility's rate model We develop models so that they may be manipulated and updated by utility staff. Public Outreach and Education - incorporates varying degrees of stakeholder/customer input throughout the study. Due to our extensive experience with cost of service and pricing studies, we are very comfortable presenting results to a utility's governing body (city council, board of commissioners, etc.) Rate Survey RFC conducts the most comprehensive national water and wastewater rate survey. The AlY/IYIA/BFC lY/ater and Tl~arte2vater Bate Survey ("Survey' is conducted every two years, with the most recent version completed in 2006. The Survey includes data on rates and charges as well as rate structures and other fees. As a result of conducting this survey, RFC has a large database of rate-related information for utilities across the country. We will be able to use this data as needed to help the City develop rates and rate structures that are consistent with current industry trends. Affordability The challenge of addressing affordability concerns is complicated by the broad diversity of situations, constraints and policy considerations that must be addressed to provide ratepayer assistance. As discussed later in this proposal, RFC has the experience that the County will require in working to develop a rate structure to appropriately accommodate all income levels. ONSULTANTS, NC 4 u ~ EFLAND SEWER SYSTEM Proposal for Rate Study for Small Wastewater Collection Utility PROJECT APPROACH AND TIMELINE Project Understanding Since 1987, Orange County, North Carolina ("County' has owned and operated a wastewater collection system for a small utility serving approximately 200 customers in Efland, North Carolina ("Efland System'. Wastewater collected in the Efland System is conveyed to the Town of Hillsborough, North. Carolina ("Town") for treatment and disposal The Efland System consists primarily of residential customers; however, service is provided to a select number of commercial and industrial accounts. The Efland System generates average monthly wastewater flows of 1.5 .million gallons, including inflow and infiltration. The County is in the regulatory review process of expanding the Efland System to serve 50-75 additional customers. The Efland System's wastewater rates have remained unchanged since they were .first established in 1987. All customers pap a minimum charge of $15.70 which includes the first 3,000 gallons based on water usage. Customers using above 3,000 gallons are then assessed a volumetric rate of X4.50 per 1,000 gallons of water usage. The County has requested proposals from certified consultants to conduct a Wastewater Rate and Financial Planning Study ("Study") for the Efland System. Recently, the County determined that the cost to operate the Efland System exceeded the amount of revenues being collected by approximately X100,000 per year. This revenue shortfall is being subsidized currently by transfers from the General Fund and the County is interested in evaluating the impact of adjusting rates to provide for aself-sustaining operation. However, a significant portion of the customers that receive service from the Efland System are classified by the County as low-income. As such, an important aspect of this Study will be to evaluate the potential impact on customers while considering rate affordability pricing objectives. Scope of Work The scope of work described below is based upon our review of the County's Request for Proposal #5130 ("RFP") and our extensive experience in completing wastewater cost of service and rate studies for numerous other utilities. This approach has been tailored to address the specific objectives and concerns identified in the RFP, while still maintaining those elements that we believe are essential fox completing a successful comprehensive wastewater rate study. The County's RFP listed several objectives which the consultant will be required to address, at a minimum, as part of the scope of work for the Study. Our proposed scope of work and work plan, which is provided below, incorporates each of the items requested by the County. TASg 1: Project Initiation and Management We believe that the execution of a productive kick-off meeting with the County is the most effective way to begin a project of this nature. The goals for this meeting include: • Providing a forum to finalize the work plan and schedule with the County; • Ensuring that we have an understanding of the overall goals of the Study; and • Reviewing the data needs for the project RAFTELIS FINANCIAL5 CONSULTANTS, INC. ~a A fi «. ~.~.,. EFLAND SEWER SYSTEM Proposal for Rate Study for Srnall Wastewater Collection Utility A successful meeting ensures that project participants are in mutual agreement on project goals, expectations, and assignment of responsibilities. Accomplishing these objectives will help to ensure that the project progresses as smoothly as possible. Prior to the kick-off meeting, we will prepare a detailed data request list that will identify the information needed to complete the scope of work. For this study, it is likely that the data requested will include: • Current and historical Operating Budgets that include data supporting the allocation o£ costs to the Efland System; • The most recent Capital Improvements Plan. ("CII'") that identifies the specific projects associated with the Efland System. • Current utility policies, procedures and regulatory requirements; and • Historical billing data and account data for customers served by the Efland System. Data Collection and Review A primary goal of this task is to obtain a thorough understanding of the financial, operational, regulatory, and political environment and understand the concerns regarding the current rates assessed to the Efland System customers. Historical information will be reviewed related to costs, flows, capital spending, and revenues generated, to provide a better understanding of operating characteristics and to develop appropriate trends and growth factors for developing financial forecasts. During the data collection and review process, we will begin to identify assumptions used to allocate and project costs that will be integrated into our model As these assumptions are identified, County representatives will have an opportunity to review our findings to ensure that the assumptions make sense with regard to the County's pricing objectives. The objective of this task is two-fold. The first is for the County, with RFC's assistance, to identify and prioritize their rate setting objectives and to identify any potential opportunities to adjust the existing rate structure such that it more effectively addresses the County's pricing objectives. The second objective of this task is to develop an understanding of the County's operational and financial. data. Project Management Consistent and competent project management is required to ensure project success and adherence to timelines and budgets. Our management approach stresses communication, teamwork, objectivity, and accountability for meeting project objectives. Management responsibilities extend to general administrative duties such as client correspondence, billing, project documentation, and admisusttation of the study control plan. Project management components are as follows. A. Assignment of key j~roject team members including. • A strong Project Manager, Lex Warmath, who is familiar with the County's water and wastewater systems as well as regional utility trends and issues. He will be responsible for RAFTELIS FINANCIAL6 CONSULTANTS, INC. ~3 II 9 ~~~t Ci~~~~~, EFLAND SEWER SYSTEM Proposal for Rate Study for Small Wastewater Collection Utility facilitating a close working relationship between the County and RFC staff and will be accountable for meeting the project schedule, budget, and technical requirements of the project Highly qualified staff. Sufficient support resources to ensure timely completion. Local resources to quickly and effectively respond to the County's requirements. B. Client contrz7l and j»njectguidance Tvill be enru~d thvnugh: • Adoption of procedures for regular and open communication between the project team members and County staff. • Regular progress reports and the project manager's use of RFC's internal project accounting and management system. These reports will also identify potential problems, challenges, and solutions. • Coordination of project activities between RFC and County staff. • Optional assistance in developing and presenting project recommendations. Initiation of the Quality Assurance/Quality Control Process The quality assurance/quality control ("QA/QC") process ensures that all RFC work is accurate and of the highest quality. The QA/QC process begins at the outset of the project when the Project Manager and QA/QC reviewer review the work plan and scope. The QA/QC reviewer is present at all internal project meetings and works closely with both the Project Manager and the lead consultant This person examines project deliverables for consistency and accuracy and verifies that the finanaal model functions correctly and is developed using sound rate making principles and standard industry practice. The reviewer also verifies that that the project report is thorough, accurate, and consistent with the high quality standards of RFC. We have found that a formal QA/QC process helps RFC provide clients with solutions that meet or exceed the high standards that our clients have come to expect TASK 2: Development of Rate Model to Project Revenues and Expenditures The next step is to develop rates based on the Efland System's existing rate structure, as well as any viable modifications to the existing rate structure identified during discussions with County staff during Task 1. At the heart of any successful rate study is the computer model that is used to develop revenue requirements and perform operational and capital financial planning; perform cost distribution, classification and allocation; and calculate rates. As a result of our experience in performing hundreds of cost of service and rate studies, we have determined that while standardized rate models may be inexpensive to create, they do not provide the flexibility needed to address each utility's unique needs, pricing objectives, and compatibility with existing financial systems. For that reason, RFC creates customized cost of service and rate models based on standardized approaches for each of its rate study projects which allows us to tailor the model to meet each client's specific needs. Cost of service and rate models developed by RFC typically consist of three modules: a financial planning module, a cost of service module and a rate calculation module. The financial planning module is used to develop and project revenue requirements over the planning period and incorporates both direct and indirect operational costs, capital costs (including pap-as-you-go capital and debt service), as well as rate revenues and ONSULTANTS, NC? n...~.. ~... A ^i EFLAND SEWER SYSTEM 1~-- Proposal for Rate Study for Small Wastewater Collection Utility revenues from miscellaneous sources. The cost of service module is designed to support the equitable allocation of costs to different customer groups. The rate calculation module determines rates by taking into account the utility's pricing objectives. The model created for this engagement will be developed using Microsoft' Excel® and will be based on a model framework that incorporates industry standard rate setting methodology. During the course of the project, County staff will be provided with working copies of the rate model such that they will be able to provide input into the development of the model, if desired. TASK 3: Forecast Revenue Requirements For this study, revenue requirements will be projected for afive-year forecast period based upon historical results, the current budget and the planned capital costs associated with the Efland system. All costs allocated for the operation of the Efland system will be incorporated into the revenue requirements, including the treatment charges assessed by the Town of i-Tillsborough. It will be important to consider any prospective increases in the cost of treatment from the Town, as these costs will have a significant impact on the forecast of revenue requirements. In addition, the revenue requirements will incorporate any proportionate allocations of County contributions to reserve fund balances and debt service coverage requirements. RFC will work closely with the County's Finance Department in order to develop a plan for funding the capital projects associated with the Efland System, to ensure that these costs can be incorporated accurately into the total revenue requirements. Ultimately, RFC will project exactly how much cash needs to be collected through wastewater rates in order to meet expenses, both operations and maintenance ("O&M'~ and capital, in each year of the forecast period. TASK 4: Rate Calculation Since the Efland System consists primarily of residential customers that exhibit similar flow characteristics, RFC does not anticipate conducting a detailed cost of service analysis that allocates costs into functional components and then to customers classes based on usage characteristics. However, RFC may consider certain modifications to the exiting rate structure that could require the allocation of revenue requirements to different rate components. For example, depending on the usage characteristics of the Efland System's customers, a potential alternative for consideration is the use of a base charge rather than a minimum charge. If it is determined that a significant number of low-income customers are using less than 3,000 gallons per month, a base charge could provide rate relief to those customers who are currently paying for more than they are using. Conversely, those customers that are using more than 3,000 gallons per month will be required to absorb the additional revenue requirements, which is more consistent with cost of service principles. RFC will use projected flows, accounts, and revenue requirements to calculate rates. We will project these rates for five years so the County can gain an understanding of the long-term impact of the proposed rates. Once proposed rates have been calculated, the model will also generate rate impact schedules ,that will demonstrate the impact of the proposed rates on the bills paid by various types of customers. This is especially important since the County is sensitive to affordability issues impacting disadvantaged customers. ONSULTANTS, NC 8 15 O~~f~i • [~~y, u c Rate Affordability EF~AND SEWER SYSTEM Proposal for Rate Study for Small Wastewater Collection Utility As noted previously, the County indicates in its RFP that it is currenflp subsidizing the Efland System by approximately X100,000 per year. The RFP also indicates that this shortfall in revenue is associated with the Board's decision to leave rates unchanged in Efland since they were first established in 1987. The basis of the Board's decision not to increase rates relates directly to the significant number of existing customers that are considered to be low-income. Although the County is interested in the Efland System beconvng self- sufficient, it still wants to evaluate alternative strategies for addressing rate affordability. Since there are so few customers in the Efland System, and since such a high percentage of these customers axe considered to be low income, the County will need to carefully balance the customer impacts of a self- sufficient operation with its desire to provide relief to disadvantaged customers. RFC will work closely with County staff to understand its objectives and goals for addressing rate affordability. Several objectives that will be considered include: • Defining the appropriate target customer group; • Evaluating program alternatives (e.g. life line rates, rate vouchers, low-income rates); • Defining the correct criteria for qualifying participants; • Assessing the feasibility of implementation; and • Understanding program costs, including risk. Care must be take to ensure that affordability options are permissible under state law. RFC will work with the County's legal counsel to ensure affordability recommendations are not in violation with applicable regulations. TASK 5: Finalize Rate Model and Report The financial planning and rate development process will be described along with preliminary rate recommendations in a draft report of findings and recommendations. This report will also include an executive stunmary highlighting the major issues and decisions, the results, findings and recommendations. A comprehensive section on the rate design assumptions and methodologies used to develop the user rate calculations and the financial plan will be included. A preliminary version of the rate model will also be provided to the County for comment. Comments from the County will be incorporated into the final report and the rate model to be delivered to the County. TASK 6: Presentation of Results (Optional) At the County's request, RFC can be available to present the results and recommendations of the Study to the Board and local stakeholders in a comprehensive, yet simplistic format. Any comments at the presentation will be documented and, if appropriate, will be incorporated into the rate model and report so the rate study report can be finalized. ONSUI.TANTS, INI Ci.9 !o o~i•"' `•~•, EF~AND SEWER SYSTEM II S Proposal for Rate Study for Small Wastewater Collection Utility SCHEDULE RFC's Project schedule should provide project participants with a common point of reference for project structure and deadlines. The project schedule provided below assumes that data can be obtained and processed in a timely fashion. 1 Project Initiation 2 Develop Rate Model to Project Revenues & Expenditures 3 Forecast Revenue Requirements 4 Rate Calculation 5 Finalize Rate Model & Report 6 Presentation of Results (Optional) March April May 1 2 3 4 1 2 3 4 1 2 3 4 Represents trip to Efland Represents key deliverables: the draft report, final report, and delivery of the rate model. ONSULTANTS, NC.90 ~~ . s ~ ~f Cap' ~~, EF~AND SEWER SYSTEM Proposal for Rate Study for Small Wastewater Collection Utility INNOVATION & CREATIVITY One of the most important aspects of this Study will be to integrate strategic .financial. planning into the development of a program of rates and charges. RFC has extensive experience developing targeted financial plans that balance a utility's O&M and capital revenue requirements with its pricing objectives. Since such a large subsidy is being provided to operate the Efland System, it will be critical to evaluate the potential impacts on customers as the County moves toward making the system self-sufficient It is important to remember that this process will likely take time, requiring a phased approach that balances customer impacts with the need to generate additional revenue. It will also be important to communicate the fundamentals of revenue sufficiency, rate equity and rate affordability, to ensure that the County's entire customer base, including the Efland System, understand its objectives to operating a utility that is both sound financially and considers the broader impact on customers. FAMILIARITY WITH LOW INCOME RATE PAYERS RFC has successfully structured and implemented affordability programs for a number of utilities across the country including the Charlotte Mecklenburg Utilities, Columbus Water Works (Georgia), Portland Water Bureau (Oregon), Birmingham Water Works Board (Alabama) and Buffalo Water Board (New York). Descriptions of these projects are provided in Relevant Experience and References section. Additionally, Chapter 17-Affordability of Mr. Raftelis' book, Water and Wastewater Finance and Pricing. A Comprehensive Guide. was written by Patrick Smyth, one of RFC's proposed team members. The chapter discusses affordability and related policies and programs, and provides case studies. DATA REQUEST LIST The preliminary information required for this Study is provided in the list below. A formal data request list will. be submitted to the County prior to the Project Kick-Off meeting It is possible that additional data will be requested as the project progresses. Where possible, detailed data should be provided in digital spreadsheet format (®) to allow for efficient data manipulation. The County is encouraged to contact RFC with any questions regarding the data request list • Financial. Policies • Sewer Master Plan • Budgets for the three most recent fiscal years • Audited financial statements for the three most recent years St~mmari7ed annual demand data for the Efland System for the three most recent years • Up-to-date debt service schedules allocated to the Efland System • Number of customers, by class and meter sizes • Five-year capital improvement plan • Capital funding plan, if available • Documentation of utility financial policies • Bond Official Statements, including debt service coverage requirements CONSULTANTS, NC.11 ~~ EF~AND SEWER SYSTEM l~ o~••~° ~ ~•••. A £ ~"~f ta~•NJ EFLAND SEWER SYSTEM Proposal for Rate Study for 5rnall Wastewater Collection Utility RELEVANT EXPERIENCE AND REFERENCES RFC has extensive experience in serving clients on similar engagements across the country. Our experience spans cost of service analysis, rate design, conservation rates, benchmaxking and billing. The principals of the firm have provided assistance to over 400 water and wastewater utilities. As a result of this experience, we axe very familiar with local, national and international issues and challenges that utilities face and we are able to provide our clients with a variety of solutions for their financial planning and pricing needs. Our experience allows us to see client issues from different perspectives and to ensure value-added solutions. PROJECT DETAILS Orange Water and Sewer Authority, North Carolina Cost of Service Study RFC assisted the Orange Water and Sewer Authority ("OWASA") with the development of Rate Study a rate structure that would rovide meanie Incentives to conserve water but would not Rate Model P have undue adverse rate impacts on its customers. OWASA, which had a uniform rate REFERENCE structure, wanted to evaluate a number of different rate structures to determine which Mr. Kevin Ray Director of Finance structure would satisfy the Board of Director's objectives. RFC held a workshop for the and Customer Service Board to describe various conservation rate structures. Based on the workshop and a Orange Water and Sewer Authority conceptual design presentation, the Board directed RFC to evaluate three alternative rate 200 Jones Ferry Road structure scenarios. In order to evaluate these three alternative rate structures for OWASA, Carrboro, NC 27510 Phone: (919) 537-4236 the revenue requirements were developed by updating a cost of service study. RFC then used bill frequency analyses to deterlniue the appropriate block cut-offs, seasons, and rates under each alternative. With this information, RFC was able to calculate customer impacts and to approximate the demand reductions under each alternative. Based on the results of this analysis, the seasonal rate structure was chosen by OWASA as the most beneficial alternative due to its moderate customer impacts, ease of implementation, and additional equity relative to the existing rate structure (by forcing heavy summer users to bear the cost burden for the peak demand). OWASA also asked RFC to review its availability fees. OWASA uses a unique methodology for calculating availability fees. Based on a study they conducted which found that water use was directly related to size of houses, OWASA bases its availability fees on the square footage of the house. PROJECT DETAILS City of Durham, North Carolina Rate and Financial RFC has provided professional assistance to the City of Durham, NC ("City") since 1996. Planning Model RFC is currently engaged in a study to update the City's existing Water and Wastewater Miscellaneous Fee Updates Rate and Financial Planning Model ("Model', originally developed by RFC in 1996; REFERENCE update the City's existing capital facility fees; and calculate certain miscellaneous utility fees Mr. Terry Rolan and char es. S eaficall RFC is u datin the Ci 's Model to both reflect the current cost Utility Director g P Y~ P g ty City of Durham of utility operations and to evaluate the implications of various capital planning scenarios. 101 City Hall Plaza RFC is also reviewing the City's cost basis and methodology for assessing capital facility Durham, NC 27701 Phone: (919) 560.4381 fees, and, if necessary, recommending an alternative methodology that is more consistent with the cost of providing capacity for growth. The study also includes assisting the City to CONSULTA TS, NC.13 ~~ A 9 EFLAND SEWER SYSTEM Proposal for Rate Study for Small Wastewater Collection Utility calculate various miscellaneous utility fees, including public and private fire protection charges and water turn-on services. PROJECT DETAILS Durham Cownty, North Carolina Bond Feasibility For Durham County ("County', RFC prepared a financial feasibility study for the Rate Model issuance of approximately $25 million in revenue bonds, the first such issuance for REFERENCE Durham County. A rate model developed by RFC earlier in 2002 was used to project Mr. Chuck Hill wastewater rates in the feasibility study based on the proposed bond issue. The proceeds Division Manage Durham County of the bond issue were allocated to a portion of the construction cost of a new wastewater 120 E. Parrish Street, Suite 110 treatment plant to replace the lone existing plant in the County's Enterprise System. The Durham, NC 27701 stud included a Service A Bement between the Coun and the Town of C where Phone: (919) 560-7992 y ~ ~ ~~ Cary would use up to four MGD of treatment capacity and in return pay an O&M Charge and a portion of the debt service of the bonds through a Capital. Charge. The resulting rates from the rate model and other financial data regarding the five-year forecast period are incorporated into a bond feasibility model and report. PROJECT DETAILS City of Burlington, North Carolina Rate Study In May 2003, the City of Burlington ("City' engaged RFC to perform a water and REFERENCE wastewater rate and financial planning. study. The key deliverable of the study was the Frank Hope development of a rate and financial. planning model that would be used to evaluate various Revenue Collections Manager alterations of the current rate structure. The City had had difficulty reaching demand City of Burlington P.O. Box 1358 projections with the closing of major industrial users within past pears. Since the City had 425 S. Lexington Avenue more than sufficient water supply, its primacy motivation was to increase usage and Burlington, NC 27216 Phone: (336) 222-5125 revenue. Recent upgrades to the system and expansion along with the loss of industry had left the enterprise fund for water operating at a deficit for the past two years forcing it to be subsidized by City reserves and the sewer enterprise fund to make up the revenue shortfall As part of the study, the City was interested in evaluating opportunities to revise and update the current water and sewer rates; to create self sufficiency of both the water and sewer utility, to provide for increased equity among classes of customers and to place greater emphasis on promoting water sales. The City was interested in improving their financial and capital planning capabilities by developing rates in the context of a 10 to 15 year financial forecast. In addition, the City requested that RFC evaluate the current level of impact fees and assessments and determine a more appropriate methodology for calculating these fees resulting in revised cost justified development impact fees. PROJECT DETAILS City of Oxford, North Carolina Rate Study Bond Feasibility In July 2000, the City of Oxford retained RFC to develop a comprehensive financial planning and rate model to evaluate revenue sufficiency for both the water and wastewater REFERENCE utilities. The City of Oxford was anticipating a significant increase in growth due to its Larry Thomas Public Works Director proximity to the Raleigh-Durham area. The growth was expected to be both residential City of Oxford and industrial customers. Due to the expected growth in the area and the need for P.O. Box 1307 Williamsboro Street renewal and replacement of assets, the City anticipated significant financing needs to Oxford, NC 27565 one: (919) 603.1110 14 CONSULTANTS, NC. as 0`~,~`.. S~~' f u ~ ~«. r.~.~~•' EF~AND SEWER SYSTEM Proposal for Rate Study for Small Wastewater Collection Utility undertake its Capital Improvement Program. In order to generate the revenues needed to address projected increases in operating costs and debt service costs, the City decided to review and update their previous water and wastewater utility rate structure. The financial planning model developed by RFC incorporated the City's intensive capital improvement plan and was structured so that the City could use the model to evaluate revenue impacts under various scenarios. Since July 2000, RFC has updated the model annually for the City of Oxford to ensure that the City has the revenue sufficiency needed to continue to perform its needed capital improvements. RFC is currently performing its FY 2006 rate update for the City. PROJECT DETAILS Town of Cary, North Carolina Cost of Service Study RFC developed afive-year water financial p nning and rate model for the Public Works and Rate Study Utility Department of the Town of Cary ("Town"). The project included a review of cost Bond Feasibility Rate Model allocations between water and sewer to ensure that neither utility was subsidizing the other. Impact Fee Anew water rate structure was recommended based on a three-tiered residential rate to REFERENCE encourage conservation. The Town was planning significant capital expenditures in the near Ms. Karen Mills future to expand the water treatment plant and to accommodate a high rate of growth in Finance Director customers and demand. The model has been used to evaluate rate impacts of alternative Town of Cary 316 N. Academy Street financing plans. In addition, the project involved development of updated and cost justified Cary, NC 27512 development fees for water, sewer, streets, and recreation facilities. Both the proposed rate Phone: (919) 469-4110 structures and development fees were designed to assist the Town in managing growth more effectively. The original engagement took approximately four months and was completed in July 1998. Since that time, RFC has also assisted in the development of a water conservation master plan and utilized the rate model to generate forecasts for bond feasibility studies for inclusion in Official Statements issued in 2001 and 2004 for approximately $19 million and $26 million, respectively. Finally, RFC helped the Town develop water and sewer impact fees. PROJECT DETAILS Neuse Regional Water & Sewer Authority, North Carolina Feasibility Study RFC recently assisted the Neuse Regional Water & Sewer Authority ("NRWASA") in REFERENCE evaluating the financial feasibility of the proposed construction of a 20.0 million gallon per Mr. Harold Herring day ("MGD'~ Regional Surface Water Treatment Plant ("W'TP") and associated distribution Executive Director Neuse Regional Water & Sewer system. The NRWASA was created in 2000 to address the State of North Carolina's Authority mandate to limit future ground water withdrawals from the Black Creek and Upper Cape 327 N. Queen St., Suite 121 Fear aquifers by approximately 15 municipalities in Lenoir County, Pitt County, and Greene Kinston, NC 28501 Phone: (919) 481-4342 County. As a start up regional orates utility, the financing plan for the project incorporated approximately $70.75 million in USDA Rural Development Loans and approximately $26.34 million in SRF Loans issued to pap a portion of the costs to construct the water system. The remaining project funds were provided through various grant funding sources ($34.9 million) and member contributions ($6.275 million). The report focused on the financial feasibility of the NRWASA as a going concern during the construction of the water system assets and ONSULTANTS, NC 15, as o. A 2 EFLAND SEWER SYSTEM Proposal for Rate Study for Small Wastewater Collection Utility the first five years of operations considering the initial unit rate as set forth in the Inter-Local Agreement and agreed upon by the eight (8) original member entities. PROJECT DETAILS Birmingham Water Works Board, .Alabama Cost of Service Study RFC conducted a cost of service study for the Bimvngham Water Works and Sewer Board Rate Study (the `Board"). The Board provides retail water service to over 200,000 customers, retail Bond Feasibility Rate Model sewer service to over 3,000 customers, and raw water to over 100 industrial accounts. RSE Process Through a cost of service study, RFC developed a rate stabilization and equalization ("RSE") Affordability Miscellaneous Fees process. As a part of a legal settlement with the Citp of Birmingham, the Board agreed to come under regulation by the Alabama Public Service Commission ("I'SC'~. Other utilities REFERENCE re ted b the Alabama PSC have develo ed RSE rocesses to sim rate film While Mr. Mac Underwood ~ y p P p~ g' General Manager the existing RSE's are based on rate of return metrics, the Board's RSE had to be developed Birmingham Water Works Board to ensure debt service coverage requirements are satisfied. The RSE process defines when a 3600 First Avenue North Birmingham, AL 35222 rate increase or decrease is warranted. Once the Alabama PSC accepts the RSE, the Board's Phone: (205) 244-4403 rates will increase without the Board being forced to enact the increase. By doing so, rate issues should become depoliticized. As part of the cost of service study, RFC also reviewed the methodology used to develop miscellaneous fees such as tap connection fees, reconnection fee, and bad order plumbing, and provided recommendations for revising the fee calculations. In addition, RFC examined potential affordability programs. RFC has also recently begun a project to develop system development charges for the Board. Over the past four years, RFC has assisted the Board in preparing official. statements for three bond offerings in the amounts of $300 million, $84 million, and $90 million. RFC developed a program. of rate increases necessary to pap the debt service and meet the bond requirements, assisted in preparing a presentation for the rating agencies, and RFC personnel participated in meetings with the rating agencies. PROJECT DETAILS Charlotte-Mecklenburg Utilities, North Carolina Cost of Service Study RFC originally assisted Charlotte-Mecklenburg Utilities ("Utilities") in developing a water Rate Study and sewer financial planning and rate model and related user manual The rate model has Rate Model been used to update rates and assist with Utilities' financial planning. The model focused on REFERENCE providing long-term. rates, management information, and graphic representations of model Mr. Doug Bean ou ut. Since the o al model develo men RFC has rovided assistance in u datin and Director ~' ~ P ~ p P g Charlotte Mecklenburg Utilities refining the rate model on an annual basis. Recently, RFC completed a comprehensive 5100 Brookshire Boulevard revision to the methodology used to calculate certain. industrial. waste charges. As part of Charlotte, North Carolina 28216 Phone: (704) 399-2221 this project, RFC examined many different approaches, calculated the costs and impacts of implementing a new approach, and participated in meetings with Utilities' Advisory Council and the public to discuss the new recommended approach. Additionally, RFC has assisted Utilities in performing risk analysis on its revenue stream. Following years of abnormally dry ~~ weather, the Charlotte area has received above average rainfall. As a result, revenues ONSULTANTS, NC.16 a~ o\•~~~ ~ ~i•..r F ^v EFLAND SEWER SYSTEM Proposal for Rate Study for Small Wastewater Collection Utility declined even though the number of customers has continued to increase. RFC utilized risk analysis techniques to provide insights to Utilities which helped staff develop appropriate estimates of water and sewer billable units and more robust risk contingency plans. City of Buffalo, New York PROJECT DETAILS RFC recently provided financial advisory services for a comprehensive cost of service and Cost of Service Study rate stud for the Buffalo Water Board `Board" The Board's ri ob ectives Rate Study y ( ~• p~~9 p ~ l were revenue sufficiency and equitable cost recovery from all customer classes. To achieve REFERENCE these objectives, RFC performed a cost of service study and developed two alternatives to Mr. Joseph Giambra Commissioner of Public Works the existing three-block, declining block rate structure. The results of the cost of service 65 Niagara Square study indicated that the discount. being realized by large volume customers was not cost Room 502 Buffalo, NY 14202 justified and that only a minor portion of consumption was within the middle rate block. (716) 851-5636 RFC recommended a phased approach to bringing the discount fox consumption in the third rate block closer to a cost justified level and phasing out the middle rate block. Both the Board and the City's Common Council unanimously approved RFC's recommendations. As part of the project scope, RFC examined the Board's existing rate affordability program in order to identify opportunities for improvement and possible alternative programs that would more effectively target disadvantaged customer groups. In order to provide the Board with some meaningful guidance on selecting an affordability assistance approach, RFC prepared multiple evaluation matrices examining different affordability approaches and their relevance to the Board's needs and goals. The analysis included statistical data on the City's economic and demographic makeup. Based on this analysis, RFC was able to make several observations about the goals that should be accomplished by any new program. PROJECT DETAILS City of Portland Bureau of Water, Oregon Wholesale and Retail Rate Study The City of Portland Water Bureau (`Bureau") provides retail water service to customers Rate Model ~~ the City and wholesale water service to 19 agencies under agreements that are Financial Planning expiring within the next couple of years. RFC assistance will be separated into two parts: REFERENCE assistance in developing wholesale rates; and development of a robust modeling tool for Mr. David Hasson on rate calculation and financial l nnin use b the Bureau. Finance Director ~g p g y City of Portland 1120 SW 5"' Avenue, Suite 600 The Bureau is in the process of finalizing a new long-term wholesale agreement with Portland, OR 97204 (503) 823-7158 explicit terms on rate setting. Wholesale customers use 40 percent of the total water produced by the Bureau and generate about 20 percent of the total revenue under the current agreement The new agreements will take into account peaking factors and include take or pay basis arrangements, provide for interruptible water sales, and excess use. Other factors that will enter into wholesale rates are differential losses in the transmission and distribution systems and flexibility to include different asset rate bases for different customers for calculating rates under the utility basis. RFC has been engaged to develop rates consistent with the new agreement for the wholesale agencies, ONSU~TANTS, NC.17 a~- o.~~<<. ~.,.. F i^ EFLAND SEWER SYSTEM Proposal for Rate Study for Srnall Wastewater Collection Utility review rate structure alternatives for its retail customers, review impacts and provide flexibility for plan. Wing for the next 20 years. The Bureau's existing retail rate structure consists of an increasing three-tier rate structure for all customers with fixed tiers for single family customers and tiers based on the average usage in the preceding 12-month period for the remaining customers. The current retail rates apply to all classes and do not take into account peaking factors which can warp significantly from class to class. The Bureau would like to explore different rate structure options for retail customers and explore the creation of more classes to increase equity and fairness and encourage conservation. RFC is developing a computer rate model with several modules that includes the financial plan, wholesale rates and retail rates is an integral part of the study. The Bureau plans to use the rate model for many years and the model will include: • user-friendly features; • the ability to download data from the Bureau's IT systems; • the flexibility to easily revise input data; • the ability to be updated annually; • the inclusion of various rate scenarios the Bureau is looking for in both wholesale and retail rates; • detail and summary reports; • graphical representation of results for easy understanding by the Council and' public; and • ability to complete scenario analysis to investigate options and impacts. PROJECT DETAILS Loudoun County Sanitation Authority, Virginia Cost of Service Study RFC assisted the Loudoun County Sanitation Authority ("LCSA") with an update of its Rate Study Bond Feasibility water and sewer user fee charges. Loudoun County is one of the fastest growing Rate Model communities in the country, presenting the LCSA with many challenges to meet the needs of REFERENCE ~~ rapidly growing customer base. RFC worked with the LCSA to perform. a detailed cost Mr. Dale Hammes of service analysis for the water and sewer systems. This analysis provides the basis for Loudoun County SaDnlitatioon LCSA's conservation-based water and sewer rate structure. The results of the study will be Authority used in a financial feasibility study, which is to be included in an Official Statement for the 880 Harrison Street, SE issuance of revenue bonds to pay for a new sewer treatment plant As a part of the project, Leesburg, VA 20175 Phone: (703) 771.1095 RFC conducted a benchmarking analysis of financial. information. RAFTELIS FINANCIALIB CONSULTANTS, INC. a5 O u BEY PERSONNEL EFLAND SEWER SYSTEM Proposal for Rate Study for Small Wastewater Collection Utility To effectively meet County of Orange's ("County") project objectives for the Efland Sewer System, we have organized a Project Team with extensive experience in providing similar assistance to other public utilities and local governments. Brief descriptions of each team member's capabilities are provided below and complete resumes fox each member of the Project Team are in the Appendix. Mr. Alexis Warmath, Vice President -Project Manager Mr. Warmath is a nationally recognized expert in water finance, management and pricing. He has more than 14 years of consulting experience and has been with RFC for over 12 years. Since joining RFC, Mr. Wasmath has served as project manager or lead consultant in a variety of projects to assist utilities in addressing financial, management, and public policy requirements. These projects include utility cost-of-service and rate studies, management studies, and financial. feasibility studies for numerous clients. Mr. Wannath will serve as the Project Manager and will direct the work of the Project Team to ensure that the project meets all of the County's expectations. Mr. Bart greps, Senior Consultant -Financial Staff Mr. Kreps has participated on a variety of engagements related to cost of service rate studies, development fee studies, bond feasibility studies, and regionalization studies. Most recently, Mr. Kreps served as staff or lead consultant on a variety of rate studies and impact fee engagements for the City of Rock Hill, the Berkeley County Water & Sanitation Authority, the Laurens County Water & Sewer Commission, the City of Florence, and the Hallsdale-Powell Utility District, Tennessee. . Patrick Smyth, CPA, Senior Technical Consultant -Technical Advisor /Quality Control Mr. Smyth joined RFC in 1994 and currently serves as its Senior Technical Consultant. As an employee of RFC, Mr. Smyth has been involved in numerous cost of service and rate design projects for public utilities. Mr. Smyth developed the cost of service model for the Metropolitan Water District of Southern California and served as Lead Consultant on the Dayton/Montgomery County engagement He has extensive financial modeling experience and a broad range of computer-related ~ technical skills. Mr. Smyth maintains his registration as a Certified Public Accountant. In his role as Technical Advisor/Quality Control, Mr. Smyth will be responsible for reviewing the financial forecast model developed for the bond feasibility study and the rate model developed for the water rate study. ONSULTANTS, NI CL19 ~~ EF~AND SEWER SYSTEM a~ o r u EFLAND SEWER SYSTEM Proposal for Rate Study for Small Wastewater Collection Utility TECHNICAL SPECIALTIES AT.FXTS WAR.MATH -Project Manager Utility Cost of Service p flues ("Lex'~ Warmath joined RFC in 1994, being the second fiill time employee and Rate Structure Studies hired by the firm. He has participated in a wide variety of projects, covering all of Bond Feasibility Studies Utility System Valuation Studies the service areas offered by RFC. He has focused primarily on rate and financial Regionalization/Consolidation planning studies and bond feasibility studies. Mr. Warmath has been involved in a Studies number of studies involving transition to new rate structures to address specific Utility Financial Planning Studies pri~„g objectives, including promotion of water conservation. Mr. Warmath's Privatization Assessment and expertise in the theory and practice of utility rate analysis is demonstrated by his Implementation Development Fee Studies position as a member on the Rates and Changes Committee of the AWWA. Mr. Natural Resource Assessment Warmath has also served as the sole arbitrator in a rate dispute in Pickens County, and Management Planning South Carolina. Mr. Warmath has extensive experience in conducting bond feasibility studies, and serves as the practice manager for these types of studies PROFESSIONAL HISTORY ~~ the firm. Raftelis Financial Consultants, Inc. Uce President, 1994 -Present RECENT PROJECT EXPERIENCE Wetlands Center Metropolitan Government of Nashville, Tennessee Duke Research Associate, 1992 RFC engaged in a five-year contract with the Metropolitan Government of Ernst & Whinney Nashville and Davidson County -Metro Water Services ("MWS") in March of Senior Consultant, 1983 -1987 2001. Since then, Ms. Levin has served as the project manager on various analyses EDUCATION and studies performed for Metro Water Services. RFC performs an annual budget Master of Environmental review which involves reviewing the adequacy of budgeted revenues to cover Management, projected operating expenses and debt service requirements, particularly with regard Duke University, 1993 to compliance with the rate covenant test defined by the Water and Sewer Revenue Postgraduate studies in mathematics Bond Resolution. RFC also conducts an analysis regarding the calculation of the University of Notch Carolina average wastewater operations, maintenance and replacement costs per 100 cubic -Charlotte 1990 -1991 feet of wastewater flow. Tbis analysis is performed annually to demonstrate that the Master of Business MWS is in compliance with the user fee requirements of the United States Administration Environmental Protection Agenry. Duke University, 1983 Bachelor of Science in Economics RFC is currently performing a cost of service and rate study for MWS. RFC will Duke University, 1977 determine the cost to serve MWS water retail customers, segregated between specific customer classes, as well as determine the cost to serve wholesale PROFESSIONAL customers. As part of the cost of service study, RFC will review the methodology MEMBERSHIPS American Water Works used to develop miscellaneous fees such as tap fees, meter inspection fees, and flow Association test, and provide recommendations for revising fee calculations. As a last part of the Rates and Charges cost of service study, capital recovery fees will be calculated, so that MWS may Subcommittee recover cost related to growing its system. Other recent projects • Durham County, North Carolina -Wastewater Rate and Bond Feasibility Study • Brunswick County, North Carolina -Bond Feasibility Study ONSULTANTS, NC 21' a~, A ^i EF~AND SEWER SYSTEM Proposal for Rate Study for Small Wastewater Collection Utility • City of Burlington, NC -Water and Wastewater Rate Study • Town of Hillsborough, North Carolina -Development/Impact Fee Study fox mater and Wastewater • Town of Marana, Arizona -Water Financial Ply nn ing/Rate Study • City of Concord/City of .Albemarle -Economic Feasibility and Valuation Assessment • Concord, North Carolina -Bond Feasibility Study and Water and Wastewater Rate Study • Piedmont Triad Regional Water Authority, North Carolina -Feasibility Study • South Brunswick Water and Sewer Authority, North Carolina -Financial Valuation Study and Bond Feasibility Study • Hallsdale-Powell Utility District -Financial Planning and Rate Structure Study • Oxford, North Carolina -Water and Sewer Rate Structure and Financial Planning Study • Cabarrus County, North Carolina -Bond Forecast and Feasibility Study, Wastewater Rate Study • City of Hendersonville, North Carolina -Water and Sewer Rate Study • Fayetteville Public Works Commission, North Carolina -Utility Cost of Service and Rate Structure Study, Development Fee and High-Strength Surcharge Study • City of Wilson, North Carolina -Water and Sewer Rate Study, Bond Feasibility Study, and Wholesale Study • Neuse Regional Water and Sewer Authority, North Carolina -Bond Feasibility Study • White House Utilities District, Tennessee -Water and Sewer Rate Study and Wholesale Study • Town of Cary, North Carolina -Impact Fee Study, Water and Sewer Rate Study, Water Conservation Master Plan, Bond Feasibility Studies, and High- Strength Surcharge Study • Hallsdale-Powell Utility District, Tennessee -Water and Wastewater Rate and Financial Planning Study • City of Wilmington, North Carolina -Revenue Bond Feasibility Study • City of Auburndale, Florida -Water and Wastewater Rate Study and Bond Feasibility Study • City of Avon Park, Florida -State Revolving Fund Assistance ONSULTANTS, Ni Ci.~ a~ o . A 4 EFLAND SEWER SYSTEM Proposal for Rate Study for Small Wastewater Collection Utility TECHNICAL SPECIALTIES BART BREPS -Lead Consultant Rate Stnacture Studies Bond Forecasts Bart Kreps joined the firm in 2002 as a staff consultant During his tenure at RFC, he and Feasibility Studies has participated in a variety of projects related to water and wastewater utility finance Economic Feasibility Studies and pricing. Specifically, Mr. Kreps has served as lead consultant on numerous water Utility Regionalization Studies and wastewater rate studies, cost of service studies, bond feasibility studies, utility Organizational Management Studies regionalization studies, and oxganizational management studies. PROFESSIONAL HISTORY RELEVANT PROTECT EXPERIENCE Raftelis Financial Consultants, Inc. Hallsdale-Powell Utility District, Tennessee Senior Consultant, 2002-Present Mr. Kreps has served as lead consultant on several engagements with the Hallsdale- Wachovia Securities Powell Utility District ("HPUD") in Knoxville, Tennessee. HPUD has faced significant Fixed Income Trading Analyst 1998-2000 challenges related to capital infrastructure repair and replacement to meet the demands of its growing system. Mr. Kreps assisted in developing a water and wastewater rate EDUCATION model that has served as a financial planning tool for the District The model was Master of Business Administration designed to evaluate a variety of financing assumptions and operating scenarios with the (Concentration in Finance and ultimate goal of recommending an appropriate program of rate adjustments to meet Environmental Management) HpUD's projected revenue requirements. The University of Tennessee, 2002 Bachelor of Business Administration City of Wilson, North Carolina (Concentration in Finance) ~, Kreps served as lead consultant on a bond feasibility and rate study for the City of James Madison University, 1998 Wilson. RFC conducted a bond feasibility study for a revenue bond issue of approximately $15 million to finance construction improvements to the City of Wilson's water, wastewater and gas systems. The feasibility analysis utilized the rate model developed by RFC to project water and wastewater rates based on the proposed bond issue and additional financing including several state revolving loans. The resulting rates from the rate model and other financial data regarding the five-year forecast period were incorporated into a bond feasibility model and report The feasibility report was included as part of the official statement to be issued in November 2002. Rock Hill, South Carolina Mr. Kreps has served as both staff consultant and lead consultant on several engagements with the City of Rock Hill, South Carolina (the "City"). Specifically, Mr. Kreps assisted the City in calculating water, wastewater, storm water, and fire development impact fees. In addition, Mr. Kreps has worked with the City to develop a cost of service wholesale rate methodology and associated model to serve as a basis for calculating wholesale water and wastewater rates. Based on a previous regionalization study conducted by RFC, it was determined that it was economically viable for the City to serve as a regional provider of water and wastewater services to wholesale customers within and around York County, SC. ONSUt.TANTS, NC 23 ~~ EFLAND SEWER SYSTEM Proposal for Rate Study for Small Wastewater Collection Utility Other recent projects • White House Utility District, Tennessee -Water and Wastewater Rate Study • Buffalo, New York -Water Cost of Service Rate Study • Pima County, .Arizona -Capital Planning Study • Newport News, Vir~?nia -Bond Feasibility Study • City of Durham, North Carolina -Water and Wastewater Rate Study • Durham County, North Carolina -Wastewater Rate Study • Town of Oak Island, North Carolina -Bond Feasibility Study • Oxford, North Carolina -Water and Wastewater Rate Study • Stanly County, North Carolina. -Water and Wastewater Rate Study • Concord, North Carolina -Wheeling Charge Study • Wilson, North Carolina -Water and Wastewater Rate Study and Bond Feasibility Study • Laurens County, South Carolina -Water and Wastewater Rate Study • Borough of Car]isle, Pennsylvania -Wastewater Rate Study • Watauga River Regional Water Authority -Regional Planning Study ONSU~TANTS, NC 24 31 EFLAND SEWER SYSTEM Proposal for Rate Study far Small Wastewater Collection Utility TECHNICAL SPECIALTIES PATRICg SMYTH, CPA -Technical Advisor /Quality Control Cost of Service Studies As Technology Manager with Raftelis Financial Consultants, Mr. Smyth has been Rate Structure Studies Privatization Feasibility and involved in numerous projects fox public utilities. He has considerable financial Implementation Analysis modeling expertise and a broad range of computer technology skills. Utility Financial Planning Litigation Support Stranded Cost Analysis Mergers & Acquisitions RELEVANT PROJECT EXPERIENCE Feasibility Metropolitan Water District of Southern California PROFESSIONAL HISTORY This project involved a detailed cost of service study for the largest water system in Raftelis Financial North America. Mr. Smyth was responsible for the design and construction of the Consultants, Inc. Technology Manager,1994- ~~~ model, and assisted in producing an exhaustive report examining cost of Present service issues facing the Metropolitan water system. This work was used as the basis for Wachovia Bank, NA the development of new wholesale rate structures for Metropolitan's 27 member Assistant Vice President,1995- 2000 agencies. EDUCATION Bachelor of Environmental Protection Agency SciencelBachelor ofArts in Mr. Smyth was the primary technical and research resource for this project in which Accounting Appalachian State University, RFC was retained by the Department of Justice and the EPA in supporting a civil suit 1988 against the Sewerage and Water Board of New Orleans, the City of New Orleans, and Bachelor of Science in Earth the State of Louisiana under the Clean Water Act The suit sought to compel the Board Science to bring its sewerage system into compliance with national environmental standards and (Magna cum laude), University the CWA. Compliance would have required extensive rehabilitation of the sewer system of North Carolina at Charlotte, 1998 infrastructure plus substantial changes in operational and maintenance programs. RFC was responsible for developing estimates of compliance costs and wastewater rate PROFESSIONAL MEMBERSHIPS im acts. As art of the anal sis RFC develo ed a set of ratios and benchmarks for P p y ~ p North Carolina Association of evaluating rate affordability under different financial scenarios. RFC also developed a CPAs Certified Public Accountant matrix of financial indicators for evaluating the financial strength of the Board and the surrounding community. Other recent projects: • Metropolitan Water District of Southern California (2 projects) • Fort Mill and York County, South Carolina -System Consolidation, Cost of Service and Rate Study • Charlotte-Mecklenburg Utility Department, North Carolina (5 projects) • Columbus Water Works, Georgia (4 projects) • Water Works and Sewer Board of the City of Birmingham (2 projects) • City of Dayton and Montgomery County, Ohio (2 projects) • Salisbury, North Carolina. ONSULTANTS, NC 25