HomeMy WebLinkAboutContractAGREEMENT FOR 2024 COMPREHENSIVE RATE STUDY AND
RECOMMENDATION FOR SYSTEM DEVELOPMENT CHARGES
FOR WATER, WASTEWATER, AND SURFACE WATER UTILITIES
THIS AGREEMENT, dated for reference purposes only asJanuary 31, 2024, is by and between the
City of Renton (the “City”), a Washington municipal corporation, and KLJ Financial Consulting
(“Consultant”), a registered Washington Sole Proprietorship. The City and the Consultant are
referred to collectively in this Agreement asthe “Parties.” Once fully executed by the Parties, this
Agreement is effective as of the last date signed by both parties.
1. Scope of Work: Consultant agrees to provide provide consultant services as specified in
Exhibit A, which is attached and incorporated herein and may hereinafter be referred to
as the “Work.”
2. Changes in Scope of Work: The City, without invalidating this Agreement, may order
changes to the Work consisting of additions, deletions or modifications. Any such changes
to the Work shall be ordered by the City in writing and the Compensation shall be
equitably adjusted consistent with the rates set forth inExhibit B or as otherwise mutually
agreed by the Parties.
3. Time of Performance: Consultant shall commence performance of the Agreement
pursuant to the schedule(s) set forth in Exhibit C. All Work shall be performed by no later
than March 31, 2025.
4. Compensation:
A. Amount. Total compensation to Consultant for Work provided pursuant to this
Agreement shall not exceed $141,648, plus any applicable state and local sales taxes.
Compensation shall be paid based upon Work actually performed according to the
rate(s) or amounts specified in Exhibit B. The Consultant agrees that any hourly or flat
rate charged by it for its Work shall remain locked at the negotiated rate(s) unless
otherwise agreed to in writing or provided in Exhibit B. Except as specifically provided
herein, the Consultant shall be solely responsible for payment of any taxes imposed
as a result of the performance and payment of this Agreement.
B. Method of Payment. On a monthly or no less than quarterly basis during any quarter
in which Work isperformed, the Consultant shall submit a voucher or invoice in a form
CAG-24-068
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specified by the City, including a description of what Work has been performed, the
name of the personnel performing such Work, and any hourly labor charge rate for
such personnel. The Consultant shall also submit a final bill upon completion of all
Work. Payment shall be made by the City for Work performed within thirty (30)
calendar days after receipt and approval by the appropriate City representative of the
voucher or invoice. If the Consultant’s performance does not meet the requirements
of this Agreement, the Consultant will correct or modify its performance to comply
with the Agreement. The City may withhold payment for work that does not meet the
requirements of this Agreement.
C. Effect of Payment. Payment for any part of the Work shall not constitute a waiver by
the City of any remedies it may have against the Consultant for failure of the
Consultant to perform the Work or for any breach of this Agreement by the
Consultant.
D. Non-Appropriation of Funds. If sufficient funds are not appropriated or allocated for
payment under this Agreement for any future fiscal period, the City shall not be
obligated to make payments for Work or amounts incurred after the end of the
current fiscal period, and this Agreement will terminate upon the completion of all
remaining Work for which funds are allocated. No penalty or expense shall accrue to
the City in the event this provision applies.
5. Termination:
A. The City reserves the right to terminate this Agreement at any time, with or without
cause by giving ten(10) calendar days’ notice to the Consultant in writing. In the event
of such termination or suspension, all finished or unfinished documents, data, studies,
worksheets, models and reports, or other material prepared by the Consultant
pursuant to this Agreement shall be submitted to the City, if any are required as part
of the Work.
B. In the event this Agreement is terminated by the City, the Consultant shall be entitled
to payment for all hours worked to the effective date of termination, less all payments
previously made. If the Agreement is terminated by the Cityafter partial performance
of Work for which the agreed compensation is a fixed fee, the City shall pay the
Consultant an equitable share of the fixed fee. This provision shall not prevent the
City from seeking any legal remedies it may have for the violation or nonperformance
of any of the provisions of this Agreement and such charges due to the City shall be
deducted from the final payment due the Consultant. No payment shall be made by
the City for any expenses incurred or work done following the effective date of
termination unless authorized in advance in writing by the City.
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6. Warranties And Right To Use Work Product: Consultant represents and warrants that
Consultant will perform all Work identified in this Agreement in a professional and
workmanlike manner and in accordance with all reasonable and professional standards
and laws. Compliance with professional standards includes, as applicable, performing the
Work in compliance with applicable City standards or guidelines (e.g. design criteria and
Standard Plans for Road, Bridgeand Municipal Construction). Professional engineers shall
certify engineering plans, specifications, plats, and reports, as applicable, pursuant to
RCW 18.43.070. Consultant further represents and warrants that all final work product
created for and delivered to the City pursuant to this Agreement shall be the original work
of the Consultant and free from any intellectual property encumbrance which would
restrict the City from using the work product. Consultant grants to the City a non-
exclusive, perpetual right and license to use, reproduce, distribute, adapt, modify, and
display all final work product produced pursuant to this Agreement. The City’s or other’s
adaptation, modification or use of the final work products other than for the purposes of
this Agreement shall be without liability to the Consultant. The provisions of this section
shall survive the expiration or termination of this Agreement.
7. Record Maintenance: The Consultant shall maintain accounts and records, which
properly reflect all direct and indirect costs expended and Work provided in the
performance of this Agreement and retain such records for as long as may be required by
applicable Washington State records retention laws, but in any event no less than six
years after the termination of this Agreement. The Consultant agrees to provide access
to and copies of any records related to this Agreement as required by the City to audit
expenditures and chargesand/or to comply with the Washington State Public Records Act
(Chapter 42.56 RCW). The provisions of this section shall survive the expiration or
termination of this Agreement.
8. Public Records Compliance: To the full extent the City determines necessary to comply
with the Washington State Public Records Act, Consultant shall make a due diligent search
of all records in its possession or control relating to this Agreement and the Work,
including, but not limited to, e-mail, correspondence, notes, saved telephone messages,
recordings, photos, or drawings and provide them to the City for production. In the event
Consultant believes said records need to be protected from disclosure, it may, at
Consultant’s own expense, seek judicial protection. Consultant shall indemnify, defend,
and hold harmless the City for all costs, including attorneys’ fees, attendant to any claim
or litigation related to a Public Records Act request for which Consultant has responsive
records and for which Consultant has withheld records or information contained therein,
or not provided them to the City in a timely manner. Consultant shall produce for
distribution any and all records responsive to the Public Records Act request in a timely
manner, unless those records are protected by court order. The provisions of this section
shall survive the expiration or termination of this Agreement.
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9. Independent Contractor Relationship:
A. The Consultant is retained by the City only for the purposes and to the extent set forth
in this Agreement. The nature of the relationship between the Consultant and the City
during the period of the Work shall be that of an independent contractor, not
employee. The Consultant, not the City, shall have the power to control and direct the
details, manner or means of Work. Specifically, but not by means of limitation, the
Consultant shall have no obligation to work any particular hours or particular
schedule, unless otherwise indicated in the Scope of Work or where scheduling of
attendance or performance is mutually arranged due to the nature of the Work.
Consultant shall retain the right to designate the means of performing the Work
covered by this agreement, and the Consultant shall be entitled to employ other
workers at such compensation and such other conditions as it may deem proper,
provided, however, that any contract so made by the Consultant is to be paid by it
alone, and that employing such workers, it is acting individually and not as an agent
for the City.
B. The City shall not be responsible for withholding or otherwise deducting federal
income tax or Social Security or contributing to the State Industrial Insurance
Program, or otherwise assuming the duties of an employer with respect to Consultant
or any employee of the Consultant.
C. If the Consultant is a sole proprietorship or if this Agreement is with an individual, the
Consultant agrees to notify the City and complete any required form if the Consultant
retired under a State of Washington retirement system and agrees to indemnify any
losses the City may sustain through the Consultant’s failure to do so.
10. Hold Harmless: The Consultant agrees to release, indemnify, defend, and hold harmless
the City, elected officials, employees, officers, representatives, and volunteers from any
and all claims, demands, actions, suits, causes of action, arbitrations, mediations,
proceedings, judgments, awards, injuries, damages, liabilities, taxes, losses, fines, fees,
penalties, expenses, attorney’s or attorneys’ fees, costs, and/or litigation expenses to or
by any and all persons or entities, arising from, resulting from, or related to the negligent
acts, errors or omissions of the Consultant in its performance of this Agreement or a
breach of this Agreement by Consultant, except for that portion of the claims caused by
the City’s sole negligence.
Should a court of competent jurisdiction determine that this agreement is subject to RCW
4.24.115, (Validity of agreement to indemnify against liability for negligence relative to
construction, alteration, improvement, etc., of structure or improvement attached to real
estate…) then, in the event of liability for damages arising out of bodily injury to persons
or damages to property caused by or resulting from the concurrent negligence of the
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Consultant and the City, its officers, officials, employees and volunteers, Consultant’s
liability shall be only to the extent of Consultant’s negligence.
It is further specifically and expressly understood that the indemnification provided in
this Agreement constitute Consultant’s waiver of immunity under the Industrial
Insurance Act, RCW Title 51, solely for the purposes of this indemnification. The Parties
have mutually negotiated and agreed to this waiver. The provisions of this section shall
survive the expiration or termination of this Agreement.
11. Gifts and Conflicts: The City’s Code of Ethics and Washington State law prohibit City
employees from soliciting, accepting, or receiving any gift, gratuity or favor from any
person, firm or corporation involved in a contract or transaction. To ensure compliance
with the City’s Code of Ethics and state law, the Consultant shall not give a gift of any kind
to City employees or officials. Consultant also confirms that Consultant does not have a
business interest or a close family relationship with any City officer or employeewho was,
is, or will be involved in selecting the Consultant, negotiating or administering this
Agreement, or evaluating the Consultant’s performance of the Work.
12. City of Renton Business License: Unless exempted by the Renton Municipal Code,
Consultant shall obtain a City of Renton Business License prior to performing any Work
and maintain the business license in good standing throughout the term of this
agreement with the City.
Information regarding acquiring a city business license can be found at:
https://www.rentonwa.gov/Tax
Information regarding State business licensing requirements can be found at:
https://dor.wa.gov/doing-business/register-my-business
13. Insurance: Consultant shall secure and maintain:
A. Commercial general liability insurance in the minimum amounts of $1,000,000 for
each occurrence/$2,000,000 aggregate for the Term of this Agreement.
B. In the event that Work delivered pursuant to this Agreement either directly or
indirectly involve or require Professional Services, Professional Liability, Errors and
Omissions coverage shall be provided with minimum limits of $1,000,000 per
occurrence. "Professional Services", for the purpose of this section, shall mean any
Work provided by a licensed professional or Work that requires a professional
standard of care.
C. Workers’ compensation coverage, as required by the Industrial Insurance laws of the
State of Washington, shall also be secured.
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D. Commercial Automobile Liability for owned, leased, hired or non-owned, leased, hired
or non-owned, with minimum limits of $1,000,000 per occurrence combined single
limit, if there will be any use of Consultant’s vehicles on the City’s Premises by or on
behalf of the City, beyond normal commutes.
E. Consultant shall name the City as an Additional Insured on its commercial general
liability policy on a non-contributory primary basis. The City’s insurance policies shall
not be a source for payment of any Consultant liability, nor shall the maintenance of
any insurance required by this Agreement be construed to limit the liability of
Consultant to the coverage provided by such insurance or otherwise limit the City’s
recourse to any remedy available at law or in equity.
F. Subject to the City’s review and acceptance, a certificate of insurance showing the
proper endorsements, shall be delivered to the City before performing the Work.
G. Consultant shall provide the City with written notice of any policy cancellation, within
two (2) business days of their receipt of such notice.
14. Delays: Consultant is not responsible for delays caused by factors beyond the
Consultant’s reasonable control. When such delays beyond the Consultant’s reasonable
controloccur, the City agrees the Consultant is not responsible for damages, nor shall the
Consultant be deemed to be in default of the Agreement.
15. Successors and Assigns: Neither the City nor the Consultant shall assign, transfer or
encumber any rights, duties or interests accruing from this Agreement without the
written consent of the other.
16. Notices: Any notice required under this Agreement will be in writing, addressed to the
appropriate party at the address which appears below (as modified in writing from time
to time by such party), and given personally, by registered or certified mail, return receipt
requested, by facsimile or by nationally recognized overnight courier service. Time period
for notices shall be deemed to have commenced upon the date of receipt, EXCEPT
facsimile delivery will be deemed to have commenced on the first business day following
transmission. Email and telephone may be used for purposes of administering the
Agreement, but should not be used to give any formal notice required by the Agreement.
CITY OF RENTON
Teresa Phelan
1055 South Grady Way
Renton, WA 98057
CONSULTANT
Karyn Johnson
4810 Pt. Fosdick Dr., Suite 180
Gig Harbor, WA 98335
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Phone: (425) 430-7332
tphelan@rentonwa.gov
Fax: (425) 430-7241
Phone: (425) 749-6030
karynljohnson@outlook.com
17. Discrimination Prohibited: Except to the extent permitted by a bona fide occupational
qualification, the Consultant agrees as follows:
A. Consultant, and Consultant’s agents, employees, representatives, and volunteers
with regard to the Work performed or to be performed under this Agreement, shall
not discriminate on the basis of race, color, sex, religion, nationality, creed, marital
status, sexual orientation or preference, age (except minimum age and retirement
provisions), honorably discharged veteran or military status, or the presence of any
sensory, mental or physical handicap, unless based upon a bona fide occupational
qualification in relationship to hiring and employment, in employment or application
for employment, the administration of the delivery of Work or any other benefits
under this Agreement, or procurement of materials or supplies.
B. The Consultant will take affirmative action to insure that applicants are employed and
that employees are treated during employment without regard to their race, creed,
color, national origin, sex, age, sexual orientation, physical, sensory or mental
handicaps, or marital status. Such action shall include, but not be limited to the
following employment, upgrading, demotion or transfer, recruitment or recruitment
advertising, layoff or termination, rates of pay or other forms of compensation and
selection for training.
C. If the Consultant fails to comply with any of this Agreement’s non-discrimination
provisions, the City shall have the right, at its option, to cancel the Agreement in
whole or in part.
D. The Consultant is responsible to be aware of and in compliance with all federal, state
and local laws and regulations that may affect the satisfactory completion of the
project, which includes but is not limited to fair labor laws, worker's compensation,
and Title VIof the Federal Civil Rights Act of 1964, and will comply with City of Renton
Council Resolution Number 4085.
18. Miscellaneous:The parties hereby acknowledge:
A. The City is not responsible to train or provide training for Consultant.
B. Consultant will not be reimbursed for job related expenses except to the extent
specifically agreed within the attached exhibits.
C. Consultant shall furnish all tools and/or materials necessary to perform the Work
except to the extent specifically agreed within the attached exhibits.
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D. In the event special training, licensing, or certification is required for Consultant to
provide Work he/she will acquire or maintain such at his/her own expense and, if
Consultant employs, sub-contracts, or otherwise assigns the responsibility to perform
the Work, said employee/sub-contractor/assignee will acquire and or maintain such
training, licensing, or certification.
E. This is a non-exclusive agreement and Consultant is free to provide his/her Work to
other entities, so long as there is no interruption or interference with the provision of
Work called for in this Agreement.
F. Consultant is responsible for his/her own insurance, including, but not limited to
health insurance.
G. Consultant is responsible for his/her own Worker’s Compensation coverage as well as
that for any persons employed by the Consultant.
19. Other Provisions:
A. Approval Authority. Each individual executing this Agreement on behalf of the City
and Consultant represents and warrants that such individuals are duly authorized to
execute and deliver this Agreement on behalf of the City or Consultant.
B. General Administration and Management. The City’s project manager is Teresa
Phelan. In providing Work, Consultant shall coordinate with the City’s contract
manager or his/her designee.
C. Amendment and Modification. This Agreement may be amended only by an
instrument in writing, duly executed by both Parties.
D. Conflicts. In the event of any inconsistencies between Consultant proposals and this
Agreement, the terms of this Agreement shall prevail. Any exhibits/attachments to
this Agreement are incorporated by reference only to the extent of the purpose for
which they are referenced within this Agreement. To the extent a Consultant
prepared exhibit conflicts with the terms in the body of this Agreement or contains
terms that are extraneous to the purpose for which it is referenced, the terms in the
body of this Agreement shall prevail and the extraneous terms shall not be
incorporated herein.
E. Governing Law. This Agreement shall be made in and shall be governed by and
interpreted in accordance with the laws of the State of Washington and the City of
Renton. Consultant and all of the Consultant’s employees shall perform the Work in
accordance with all applicable federal, state, county and city laws, codes and
ordinances.
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F. Joint Drafting Effort. This Agreement shall be considered for all purposes as prepared
by the joint efforts of the Parties and shall not be construed against one party or the
other as a result of the preparation, substitution, submission or other event of
negotiation, drafting or execution.
G. Jurisdiction and Venue. Any lawsuit or legal action brought by any party to enforce or
interpret this Agreement or any of its terms or covenants shall be brought in the King
County Superior Court for the State of Washington at the Maleng Regional Justice
Center in Kent, King County, Washington, or its replacement or successor. Consultant
hereby expressly consents to the personal and exclusive jurisdiction and venue of
such court even if Consultant is a foreign corporation not registered with the State of
Washington.
H. Severability. A court of competent jurisdiction’s determination that any provision or
part of this Agreement is illegal or unenforceable shall not cancel or invalidate the
remainder of this Agreement, which shall remain in full force and effect.
I. Sole and Entire Agreement. This Agreement contains the entire agreement of the
Parties and any representations or understandings, whether oral or written, not
incorporated are excluded.
J. Time is of the Essence. Time is of the essence of this Agreement and each and all of
its provisions in which performance is a factor. Adherence to completion dates set
forth in the description of the Work is essential to the Consultant’s performance of
this Agreement.
K. Third-Party Beneficiaries. Nothing in this Agreement is intended to, nor shall be
construed to give any rights or benefits in the Agreement to anyone other than the
Parties, and all duties and responsibilities undertaken pursuant to this Agreement will
be for the sole and exclusive benefit of the Parties and no one else.
L. Binding Effect. The Parties each bind themselves, their partners, successors, assigns,
and legal representatives to the other party to this Agreement, and to the partners,
successors, assigns, and legal representatives of such other party with respect to all
covenants of the Agreement.
M. Waivers. All waivers shall be in writing and signed by the waiving party. Either party’s
failure to enforce any provision of this Agreement shall not be a waiver and shall not
prevent either the City or Consultant from enforcing that provision or any other
provision of this Agreement in the future. Waiver of breach of any provision of this
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Agreement shall not be deemed to be a waiver of any prior or subsequent breach
unless it is expressly waived in writing.
N. Counterparts. The Parties may execute this Agreement in any number of
counterparts, each of which shall constitute an original, and all of which will together
constitute this one Agreement.
IN WITNESS WHEREOF, the Parties have voluntarily entered into this Agreement as of the date
last signed by the Parties below.
CITY OF RENTON
By:_____________________________
CONSULTANT
By:____________________________
Armondo Pavone
Mayor
Karyn Johnson
President
_____________________________
Date
_____________________________
Date
Attest
_____________________________
Jason A. Seth
City Clerk
Approved as to Legal Form
By: __________________________
Shane Moloney
Renton City Attorney
Contract Template Updated 5/21/2021
3/19/2024
Approved by Cheryl Beyer 2/13/2024
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EXHIBIT A – SCOPE OF WORK
The following Scope of Work identifies the tasks to be performed for the City of Renton’s
Comprehensive Water, Wastewater and Surface Water Rate and SDC Study for the 2025/2026 budget
cycle.
Task 1 | Project Management
Perform administrative / management procedures for efficient study performance. Submit monthly
invoices and progress reports describing recent and forthcoming efforts, potential challenges and/or
needs from the City, and a status of the study progress, schedule, and budget adherence. Maintain
regular contact with the City’s project manager to address any issues as they arise.
Task 2 | Data Collection and Review
Provide a data request list identifying financial and operational documents, and customer data pertinent
to the performance of the study. Review, analyze, and validate such information as necessary for use in
formulating the technical analyses. Follow-up with additional data needs and/or clarifications, as
necessary. Due to the City’s need for an early preliminary rate run, there will need to be an initial data
collection effort with some of the data needing to be replaced later by the final numbers. The consultant
will append the data needs as needed throughout the rate study. The preliminary data request
identifying the information needed for the study is included in Exhibit D.
Task 3 – Revenue Requirements
Update the City’s 2022 revenue requirement models for each utility for the current year (2024) and six-
year planning horizon, 2025-2030. Determine annual rate revenue needs to fund capital programs,
operating and maintenance costs, fiscal policy achievement, and other financial obligations of each
utility over the study period. Rate adjustments will focus on proposed rates for adoption for the
2025/2026 budget cycle with future rate adjustments provided for planning purposes.
a | Financial Policies Review – Review current financial policies and achievement of metrics for each
utility. Consider existing practices which should be maintained and explore alternative practices that
might further City goals in funding utility obligations. Consistent with the City’s current Policy
Framework, this task will address financial performance, reserve policies, infrastructure replacement
funding, and debt service coverage. Evaluate the need for each reserve or policy, the basis for any
minimum reserve targets, and the financial impacts for establishing any new or revised policies.
Sensitivity analyses will be performed to assess customer impacts and revenue risk for all policy
implications. Key policies to revisit include the King County Metro Reserve and percent achievement of
system reinvestment funding from rates for each utility.
b | Baseline Analysis – Prepare a baseline revenue requirement analysis incorporating the following
information:
x Economic assumptions for inflation, customer growth, and funds earnings rate
x Assumptions for King County wastewater treatment costs
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x Current financial policies for operating and capital reserves, infrastructure funding from rates,
and debt service coverage
x Actual or estimates for beginning cash balances and depreciation expense
x Adopted 2024 budget, draft and final 2025/2026 budgeted revenues and expenses
x Capital projects and associated annual costs for current year (2024) and six-year planning
horizon, 2025-2030 (capitalized and expensed projects)
x Capital funding sources including cash reserves, SDCs, infrastructure replacement funding from
rates, contributions, and potential debt including bonds and public work trust funds loans (if
any)
Compare baseline revenue requirements against projected revenue under existing rates and update the
rate adjustment strategy for the planning period. Potential revisions to financial policies and/or target
threshold achievement will be evaluated in advance of preparing the scenario development task
described in Item (c) below.
c | Scenario Development – Prepare multiple “what if” scenarios to evaluate impacts of incremental
costs associated with potential additional staffing, new programs, equipment needs, and/or other non-
budgeted costs. The City will provide the desired set of scenarios for each utility. It is anticipated that up
to six (6) scenarios will be prepared for each utility.
d | Residential Bill Impacts – Summarize the proposed six-year rate revenue adjustments and typical
single-family residential bill impacts for each utility and on a combined basis for all utilities.
Task 4 – System Development Charges (SDCs)
Update the City’s 2022 SDC models for each utility based on the existing methodology to reflect current
and planned capacity for the current year (2024) and six-year planning horizon, 2025-2030. SDCs will be
calculated for the 2025/2026 adoption cycle based on the planning period (2024-2030).
a | Baseline Analysis – Prepare a baseline SDC analysis including the schedule of eligible capital projects,
costs, and associated capacity (consistent with the approach used for the current adopted SDCs).
Incorporate the following updated information:
x Actual data as of December 31, 2023, for plant-in-service, contributed assets, interest earnings,
construction work in progress, customer data, existing cash balances and outstanding debt
principal. Note that the City has recently modified and updated its fixed asset listing for each
utility. This might require some reformatting of the structure of the “plant-in-service” worksheet
in the models.
x Identified capital projects and costs for the 2024 base year and six-year planning horizon (2025-
2030)
x Review/update the assignment of capital projects to “major maintenance” or
“upgrades/expansions”
x Growth projections from system plans and/or current customer data
b | Scenario Development – Depending on the level of SDC increases, phase-in strategies may be
developed to achieve the proposed maximum calculated SDCs over the two-year budget cycle.
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c | Residential Impact –Summarize the proposed SDC for each utility and on a combined basis for all
utilities for a typical single-family residential customer.
Task 5 – Wholesale Water Rates
Review and update the 2022 wholesale water rate model worksheets and calculate proposed wholesale
rates for the 2025/2026 budget cycle following the cash basis approach and methodology used in the
2022 Rate Study Update.
a | System Demand Factors – Update historical and projected system demand factors for the total
water system and wholesale customer to determine wholesale share of total system demands (e.g.,
accounts, water usage, average day demand and max day demand).
b | O&M Rate Component – Incorporate 2025/2026 operating budget detail, review O&M allocation
factors established in the previous study and update as warranted. Calculate resulting O&M rate
component for 2025 and 2026.
c | Capital Rate Component – Review detail asset data and allocation factors established in the previous
study and update as warranted. Calculate resulting capital rate component for 2025 and 2026. Major
tasks include:
x Review and update water system infrastructure and allocation of applicable assets to wholesale
customer (e.g., pump stations, reservoirs, source, and transmission/distribution pipes).
x Review and update allocation of original cost of total plant-in-service to wholesale customer
based on updated infrastructure allocation factors.
x Review and update the allocation of total system capital-related costs to the wholesale
customer (e.g., expensed capital outlay, debt service and rate-funded capital contribution).
x Sum the capital-related components and derive the total capital rate component for 2025 and
2026.
d | Total Wholesale Water Rate – Combine O&M and capital rate components to derive the total
wholesale water rate for 2025 and 2026. Summarize wholesale customer total water bill impact for 2025
and 2026. A phase-in strategy may be developed to smooth rate impacts over the two-year budget
cycle.
Task 6 | Cost of Service Analysis
Update the City’s 2018 Cost of Service models for each utility to conduct the technical analyses
necessary to provide a rational basis for allocating utility system costs, assigning cost shares to customer
classes, and recommending rate structures consistent with generally accepted cost-of-service methods
and City goals for pricing of utility services. The objective is to determine if current customer classes
fairly apportion the expenses of the utilities and, if not, what changes are recommended to enhance
customer equity.
a | Customer Data Analysis and Profile – Develop a profile of the existing water, wastewater, and
surface water customer bases by reconciling historical customer billing system data with actual reported
data for each utility. The purpose of this exercise is to calibrate customer statistics so that they generate
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the correct amount of revenue when the corresponding rate structure is applied. To address the
variable nature of water and sewer rates, it is important to evaluate a multi-year trend to mitigate
revenue risks associated with variances in usage patterns due to economic cycles, weather, and
conservation initiatives. Three years of consumption data will be reviewed to determine a “normal year”
usage profile for projecting future water demands. The calibrated statistics will be adjusted for
projected customer growth and demand normalization to form the basis for allocating costs to customer
classes.
b | Functional Allocation – Determine appropriate cost allocation factors and assign system assets and
revenue requirements to functions of service as described below:
x Water functional components will include customer (accounts and meter size), base
demand (average use), peak demand, and fire protection.
x Wastewater functional components will include customer and flow components. Treatment
is provided by King County Metro.
x Surface water cost allocations are typically less complicated than for water and wastewater.
A simplified allocation of costs between “base” and “use” components is adequate for
purposes of establishing credit policies for onsite mitigation. Further parameters may be
warranted to address the City’s interest in evaluating additional tiers to the existing
graduated/multi-tiered rate structure.
c | Customer Class Distribution – Allocate the costs assigned to each function of service to customer
classes using the customer base profile developed in Task 6(a) and allocation parameters from Task 6(b).
Water classes include single family and multi-family residential, commercial, and industrial, private
landscape irrigation, City landscape irrigation, low income and disabled person, and fire protection
meters. Wastewater classes include single family and multi-family residential and commercial/industry.
Surface water classes include single family and non-single family (comprised of commercial properties,
gravel pits and City streets). We do not anticipate the need to revise water and wastewater utility
customer classes to achieve the City’s equity and pricing goals. Modifications to the surface water level
of intensity categories will be considered.
Summarize the resulting cost of service by customer class and compare to existing revenue recovery to
determine potential shifts between customer classes. In addition, we will summarize average unit costs
by customer class both for existing distribution and cost of service distribution. Average unit costs are
derived by dividing the revenues by the usage for each class and are helpful in communicating potential
shifts in customer class cost recovery, prior to establishing the actual fixed and variable rate
components.
d | Unit Costs of Service Development – Derive unit cost of service by functional component to serve as
the building blocks for alternative rate structure designs. This exercise will include identification of the
costs for appropriate recovery between the fixed and variable rate components to balance revenue
stability, efficiency of use, and affordability.
PAGE 15 OF 22
Task 7 | Rate Structure Design Alternatives
The City is interested in evaluating alternative rate structures for the water and surface water utilities.
No alternatives are anticipated for the wastewater rate structure. This task includes evaluating the
performance of existing rate structures and developing alternative structures for the water and surface
water utilities that might better address long-term utility needs and customer concerns. The objective of
this analysis is to evaluate impacts of potential changes to the rate structures in comparison to the
proposed 2025 rates under existing rate structures for potential implementation in future rate update
cycles.
For each rate structure alternative, we will evaluate and demonstrate the ability of the proposed rates
to generate the projected and required revenues by testing rates against composite system customer
demand. Further, we will identify the portion of revenues that are anticipated to be collected from the
fixed and variable rate components and prepare implementation and rate management policies and
procedures as needed.
The alternative rates structures are described in section [a] below. Sample bills and a rate survey will be
prepared for all three utilities as described in section [b].
a | Alternative Rate Structure Evaluation – Review and evaluate the existing utility rate structures as a
baseline for comparing rate structure alternatives. All outside City utility rates will maintain the City’s
existing rate multiplier. The City has identified the following rate structure alternatives to be evaluated.
The proposed approach for preparing the alternatives will be discussed with City staff in advance of
beginning the analyses.
Water Rate Structure Scenarios:
Scenario 1 – An appropriate reduction in the water base charge between the 3/4-inch meter and 1-inch
meter for single family residential (SFR) customers. City code requires installation of a minimum service
size of 1-inch for new single family residential customers to meet requirements for fire sprinklers.
Existing 3/4-inch SFR customers are grandfathered from this requirement. Since the base rate is
established to recognize the service requirement for domestic use, the incremental upsizing
overburdens the 1-inch customers. Two potential approaches for this alternative are described below:
x Set the SFR 1-inch charge equal to the 3/4-inch charge and calculate the resulting revenue loss
and percentage impact to the SFR class and on a system-wide basis (consistent with the approach
evaluated in the 2018 Comprehensive Rate Study).
x Realign base charges by meter size for all customer classes based on the Cost of Service Analysis,
potential new policy to set the SFR base rate the same for up to a 1-inch meter, and applying
industry standard meters cost and capacity ratios by meter size.
Scenario 2 – Potential modifications / additions to the SFR usage tiers to address affordability issues
such as developing a lifeline block, and to incentivize conservation such as enhancing top tier and
irrigation pricing signals.
Scenario 3 – Evaluate results under a combination of Scenario 1 and 2 above.
PAGE 16 OF 22
Wastewater Rate Structure Scenarios: No anticipated changes to the current wastewater rate
structure.
Surface Water Rate Structure Scenarios:
Scenario 1 – Adding additional graduated/multi-tier categories for non-SFR surface water customers.
Maintain the residential flat rate structure and expand commercial intensity of development categories
and apply the charge based on actual parcel size (consistent with the approach evaluated in the 2018
Comprehensive Rate Study).
Scenario 2 – Option to add a surface water special billing class for properties under construction. Prior
to conducting the analysis for this scenario, the City will review other jurisdictions’ practices for billing
customers under construction for storm water service and provide direction whether or not proceed
with the rate analysis. No budget will be spent for this task if the City decision is not to proceed with
further analysis. If the decision is to proceed, additional data needs to complete the analysis will be
discussed with the City. Depending on the availability of data, the evaluation is anticipated to include
estimating the revenue loss attributed to not billing customers under construction from the time of
construction permit issuance to building permit issuance. As this would be a new procedure for the City,
implementation and triggering procedures will be identified and discussed with City staff.
b | Sample Customer Bill Impacts / Rate Survey – For each rate structure alternative, we will analyze
the potential rate impacts for each customer, and in summary by customer class, based on historical
usage patterns and service attributes. Sample water, wastewater and stormwater bills will be compared
against existing customer bills and a selection of up to six (6) comparable jurisdictions.
Task 8 –Meetings
Prepare for and facilitate a combination of virtual and onsite meetings to review interim findings and
final results. The following meetings are anticipated:
a | Initial Project Meeting – Participate in a project meeting with City staff to discuss study objectives
and major milestones. Prior to this meeting, we will have submitted the data request, received, and
reviewed all readily available information.
b | Revenue Requirement Results – Up to four (4) virtual meetings to review baseline results, run
hands-on modeling of “what if” scenarios under draft and final budget figures, and review finding
results.
c | SDC Results – Up to two (2) virtual meetings to review draft and final SDC results.
d | Wholesale Rate Results – Up to (2) virtual meetings with City staff to review draft and final
wholesale water rate results.
e | Wholesale Rate Meeting with Skyway – Up to two (2) onsite or virtual meetings with City staff and
the wholesale customer to discuss the methodology of setting wholesale water rates and to review rate
results.
PAGE 17 OF 22
f | Cost of Service/Rate Structure Alternatives – Up to two (2) virtual meetings with City staff to discuss
approach and review rate and customer bill results.
g | Committee/Council Meeting – At the City direction, attend one (1) meeting with committee
members and/or City Council to review study outcomes and recommendations.
Task 9 – Rate Model Training and User Guide
Conduct virtual training sessions with utility managers and staff to review model inputs and functionality
for updating the revenue requirement portion of the rate model. The following sessions are anticipated:
a | Utility Manager’s Training – Conduct a working session with utility managers and the study project
manager to provide an overview of model data inputs, model operations / functionality and testing of
“what if” scenarios and results. Review particular areas of interest in more detail as may be requested.
b | Project Manager Training – Conduct an additional working session with the study project manager
to review each section of the models in more depth, including quality control/assurance for testing of
inputs and results.
c | User Guide – Update the City’s current user guide as necessary for in-house updates of the revenue
requirement portion of the models. There is no charge for this task.
Task 10 –Documentation and Study Deliverables
Document final results in a technical memorandum describing major assumptions, findings and
proposed rates and charges. Submit electronic versions of documentation and updated models. It is
anticipated that separate memorandums will be submitted covering the following topics:
x Revenue Requirements and SDCs
x Wholesale Water Rates
x Retail Cost of Service and Alternative Rate Structures
PAGE 18 OF 22
EXHIBIT B – COMPENSATION
The exhibit below presents estimated hours by task, hourly billing rates, and total fees for the Scope
of Work described in Exhibit A.
Task / Description
Hours Dollars
Hourly Billing Rate: 215$
Task 1 - Project Management 16.00 3,446$
Task 2 - Data Collection/Review 40.00 8,615$
Task 3 - Revenue Requirements 132.00 28,430$
Task 4 - System Development Charges 54.00 11,630$
Task 5 - Wholesale Water Rates 20.00 4,308$
Task 6 - Cost of Service 136.00 29,291$
Task 7 -Rate Structure Design Alternatives
(a) Water 60.00 12,923$
(b) Wastewater (Rate Survey Only) 6.00 1,292$
(b) Surface Water 40.00 8,615$
Task 8 - Meetings
(a) Initial Project Meeting [1 virtual] 4.50 969$
(b) Revenue Requirement Results [4 virtual] 18.00 3,877$
(c) SDC Results [2 virtual] 9.00 1,938$
(d) Wholesale Water Rate Results [2 virtual] 4.00 862$
(e) Wholesale Rate Meeting with Skyway [2 virtual or onsite] 7.00 1,508$
(f) Cost of Service/Rate Structure Results [2 virtual] 9.00 1,938$
(g) Committee / Council Meeting [1 onsite] 16.00 3,446$
Task 9 -Rate Model Training
(a) Utility Manager's Training [1 virtual] 3.00 646$
(b) Project Manager's Training [1 virtual] 4.50 969$
(c) User Guide (No charge) - -$
Task 10 - Documentation / Study Deliverables
(a) Revenue Requirements and SDCs 30.00 6,461$
(b) Wholesale Water Rates 6.00 1,292$
(c) Retail Cost of Service / Rate Structure Alternatives 42.00 9,046$
Subtotal Labor 657.00 141,503$
Mileage Expense (3 meetings] 145$
Total Fee 141,648$
K. Johnson
PAGE 19 OF 22
EXHIBIT C – SCHEDULE
Based on discussion with City staff, the proposed schedule for completion of major task milestones
is outlined below:
x Notice to proceed and data collection: on or about March 18, 2024
x Revenue Requirement Draft Results: mid-May to early June 2024 (to assist City with budget
recommendations)
x SDC Draft Results: July 2024
x Wholesale Water Rate Draft Results: July 2024
x Revenue Requirement Final Results: mid-August 2024
x SDC Final Results:mid-August 2024
x Wholesale Water Rate Final Results: mid-August 2024
x Cost of Service / Alternative Rate Structure Results:October / November 2024
x Rate Model Training: November 2024
x Final Results and Study Deliverables: December 15, 2024
PAGE 20 OF 22
EXHIBIT D – Preliminary Data Request
1. Economic Assumptions:
a. Labor cost inflation
b. Benefits cost inflation
c. Funds interest earning rate
2. Financial Policies
3. 2022 and 2023 Annual Utility Reports
4. 2023 CAFRS (unaudited financial statements okay at this point)
5. 2023 year-ending cash balances for each utility, including operating, capital, rate stabilization,
Metro and Waterworks restricted debt reserve (unaudited okay at this point)
a. Allocation of restricted debt reserve to utilities
6. Detailed Adopted 2024 budgets
7. Detailed draft 2025/2026 budgets and final budgets (when available)
8. Additional Program requests, timing, and costs
9. Detailed debt service schedules, including principal and interest payments, outstanding balance,
term, interest rates, and any covenant requirements.
10. 2023 detail fixed asset records, including year of purchase, original cost, depreciation expense,
accumulated depreciation and contributed (donated) assets
11. 2023 and 2024 rate schedules
12. Budget year 2023-2024 adopting rate ordinances
13. 2023 and 2024 master fee schedules (SDCs)
14. 2023 actual SDC revenue collections for each utility
15. 2023 actual special assessment revenue collections for each utility
16. Assumed annual level of SDC revenue collections for each utility (2024-2030)
17. Assumed annual level of special assessment revenue collections for each utility (2024—2030)
18. Detailed capital improvement program from CIP budget for each utility (2024-2030)
PAGE 21 OF 22
19. Detailed capital improvement program input from Utility Managers for 2024-2030 [templates
will be provided at start of study for populating requested information]
20. 2023 Monthly water production data
21. SPU 2024 Annual Wholesale Customer Survey for 2023 data
a. Form 1 – 2023 Water Supply & Demand
b. Form 2 – 2023 Billed Water Consumption & No. of Accounts
22. 2023 Summary Customer Data
a. Water:
i. No. of accounts by meter size by customer class
ii. Water usage by customer class and in total
iii. Rate revenue by customer class and in total (separate by fixed and variable
charges)
b. Wastewater:
i. No. of accounts by meter size by customer class
ii. Rate revenue by customer class and in total
c. Surface Water:
i. No. accounts by customer class / category
ii. Total lot area (sq. ft) by category for non-SFR customers
iii. Total impervious surface area (sq. ft) by category for non-SFR
iv. Total acres by category for non-SFR
v. Rate revenue by customer class and in total
23. Detail Customer Billing System data for each utility for 2021, 2022, and 2023. [A template of
requested information will be provided at the start of the study]
24. King County Metro forecasted rates/increases
25. King Country Metro revenue reports for 2022 (Q4) and 2023 (Q1 – Q4)
26. Wholesale Water Data
a. 2023 Monthly Usage Data
b. 2023 Average Day and Max Day Demand (mgd)
PAGE 22 OF 22
27. Water only: 2023 Inventory of transmission and distribution pipes by size (length in feet)
28. Most current system plans
a. Water
b. Wastewater
c. Surface Water