SUBJECT: Resolutions
Title
A Resolution Authorizing The Engagement Of Raftelis Financial Consultants For Completion Of A Water, Wastewater and Storm Drainage Rate And Fee Study; And Authorizing And Directing The Appropriate Town Officers To Enter Into An Agreement For Such Services
Body
DEPARTMENT: Finance
PRESENTER: Steve Felten
TIME ESTIMATE: N/A - Consent
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FISCAL INFORMATION:
Cost as Recommended: $65,810
Balance Available: $62,500
Budget Line Item Number: 500-70-110-560100, 510-70-110-560100, 520-70-110-560100
New Appropriation Required: No
STAFF RECOMMENDATION: Approval of resolution for entering into an agreement with Raftelis Financial Consultants to complete a water, wastewater and storm drainage rate and fee study.
SUMMARY AND BACKGROUND OF SUBJECT MATTER:
The Town’s municipal code requires the performance of a professional water, wastewater and storm drainage rate and fee study at least every five years in order to determine the adequacy of rates and fees charged. Bond covenants on the various enterprise fund debt issues also require periodic studies to ensure rates and fees are set at levels as specified in the covenants. The Town’s last rate study was performed in 2013 (completed in 2014). In response to that study, the Board established new water, wastewater and storm drainage rates for the period 2015-2019. The last increase in rates pursuant to that ordinance went into effect on January 1, 2019. As a result, in accordance with policy and pursuant to various bond covenants, it is time to perform a new rate study for rates to go into effect beginning January 1, 2020.
As the Town continues to grow, expansion of its water, wastewater and storm drainage systems are required to support new businesses and residents. The Town has historically taken steps to ensure that it has adequate water supplies and the necessary treatment plants and related infrastructure to supply the utility needs of all residents and businesses. Town staff continue to take such steps, most significantly as evidenced in recent years by the Town’s ongoing participation in the Windy Gap Firming Project and the Northern Integrated Supply Project (NISP), the 2017 purchase of additional Windy Gap units, construction of a solids handling building and installation of related equipment to enhance the water treatment system, and initial construction of a reuse water system, among other capital projects.
But in a state with limited water resources and big increases in demand along the Front Range, the cost of these resources generally go in only one direction - up. And while staff endeavors to carry out its water, wastewater and storm drainage operations in as efficient a manner as possible, routine operating costs also grow each year. Though tap fees can generate large amounts of revenues in good years, they can fluctuate significantly from year-to-year and it can be risky to place too much reliance on tap fees to cover debt service requirements. In addition, projects such as Windy Gap and NISP require significant amounts of funding, more than can be funded currently, and as a result will require the issuance of bonds to fund the costs.
A rate study will enable the Board and Town staff to determine the appropriate levels of water, wastewater and storm drainage monthly usage rates and tap and raw water fees for the next five years to generate sufficient revenue to cover operating, capital and debt service. The study will also help ensure the rates and fees appropriately allocate costs based on the service demands (including the total demand as well as the relative time of day and season of peak demand) created by the various classification of users.
To conduct this rate study, staff recommends engaging Raftelis Financial Consultants (Raftelis) at an estimated cost of $65,810 (see attached proposal), to be paid for on a pro rata basis by the water, wastewater and storm drainage funds. The approved 2019 Budget includes funds for this purpose. Budget savings will cover the approximate $3 thousand gap between the project cost and the available budget. (Note: Last December the Town originally contracted with another firm to perform the utility rate study. Town staff decided to cancel that contract for various reasons and conducted an RFP process to select a new consultant. There were four respondents, with Raftelis being the strong consensus choice by staff.)
Raftelis will begin its study upon signing of a contract, which would follow the Board’s approval of this resolution. Staff and the consultant anticipate the study will take several months to complete. As part of the project, staff will provide opportunities for input from residents and businesses in the course of the study. In addition, there will be one or more presentations to the Board in a study session setting.
This rate and fee study will help ensure that water, wastewater and storm drainage usage fees and tap and water resource fees are established at appropriate rates, with the objective of implementing any resulting changes effective January 1, 2020.
ATTACHMENTS:
a. Resolution
b. Raftelis Financial Consultants Proposal for Services - 2019-07