City of Culver City, California
Agenda Item Report
Meeting Date: 05/07/12 Item Number: C-8
CITY COUNCIL AGENDA ITEM: Approval of Professional Services Agreement with
NBS Government Finance Group dba NBS for (1) Preparation of the Annual Sewer
User Service Charges and (2) Update to the Sewer User Service Charges
Contact Person/Dept.: Mate Gaspar/PW Phone Number: (310) 253-5602
Fiscal Impact: Yes [X] No [] General Fund: Yes [] No [X]
Public Hearing: [] Action Item: [] Attachments: []
Commission Action Required: Yes [] No [X] Date: _______________
Public Notification: (E-Mail) Agenda and Meetings – City Council (05/02/12); NBS and
Creelman and Associates (04/30/12).
Department Approval:
Charles D. Herbertson (04/25/12)
City Attorney Approval:
Carol Schwab (by H. Baker) (04/30/12)
Chief Financial Officer Approval:
Jeff Muir (by K. Marsden) (05/01/12)
City Manager Approval:
John M. Nachbar (05/02/12)
RECOMMENDATION:
Staff recommends the City Council approve professional services agreement with
NBS Government Finance Group dba NBS for the preparation of the annual sewer
user service charges and an update to the sewer user service charges.
BACKGROUND:
A major challenge confronting agencies responsible for wastewater infrastructure,
transportation, treatment, and disposal is acquiring adequate funds to finance and
operate facilities and capital equipment, along with implementation of appropriate
pricing structures to ensure the self-sufficiency of the utility. The financing vehicle
that is used by the utility and the timing of the financing are crucial in ensuring that
wastewater customers are appropriately paying for facilities that they need and not
inappropriately financing facilities for future customers. It is a major goal of an
effective financial plan to ‘match’ the economic impact on customers with the
benefits received from the service.
Regulations governing Federal and State grant funds require the City of Los Angeles
to maintain a Cost Recovery Program (Sewer User Charges System) which includes
all operations and maintenance costs directly or indirectly related to the treatment
and collection of liquid waste discharge by residents and businesses. As a result of
Culver City’s contractual relationship with the City of Los Angeles for wastewater
treatment at the Hyperion Treatment Facility, Culver City is also required to recover
from each wastewater user their proportionate share of the costs incurred for
wastewater collection capital improvements within Culver City, wastewater system
operation and maintenance, City of Los Angeles capital improvements for City of Culver City, California
Agenda Item Report
conveyance to Hyperion and operation and maintenance at Hyperion. Accordingly,
Culver City adopted a plan to collect wastewater user charges and implemented it
for the first time in fiscal year 1980/1981.
The City recovers wastewater user charges on an annual basis. Since the plan’s
inception, the County Auditor-Controller’s Office and the annual property tax bill,
have been utilized as the vehicle for both billing and collection. This method has
proven to be both functionally satisfactory and exceptionally economical over the last
thirty-one years.
In order to achieve a fair and equitable system of wastewater user charges, users
are charged in a manner consistent with their actual use of the system. This
comprises not only the flow quantity, but also the wastewater strength (quality) as
characterized by BOD (biochemical oxygen demand) and SS (suspended solids).
Pursuant to the Culver City Municipal Code, in fiscal year 2003/2004 the City
reviewed and approved an update to the Sewer Users’ Service Charges (SUSC)
structures and billing formulas to ensure that the City utilizes an effective pricing
structure that fully complies with the requirements of Proposition 218. Additionally,
the City wanted to ensure that its sewer pricing structure continues to achieve the
goals and objectives of the community, while maintaining a fair and equitable
distribution of costs to all of its customers.
DISCUSSION:
Since 1997, the City has utilized consultants to prepare the annual SUSC. There
are approximately 12,756 parcels with a total of 16,700 residential or business units
in Culver City that are charged a SUSC. The charges are due to the Los Angeles
County Assessor’s Office in early August of each year. The consultant is required to
obtain the water data from Golden State Water Company and from the City of Los
Angeles’ Department of Water and Power for a very small portion of parcels served
by them. The data is then used to calculate the charge based on the City Council
approved SUSC formulas.
The existing contract with Karen Scott Associates for the preparation of the annual
SUSC has concluded. Karen Scott Associates has served the City very well since
2002 and also as a sub-consultant under another consultant from 1997 to 2002, for
the same preparation of the annual SUSC.
Staff sought proposals from several firms specializing in the preparation of charges
on the annual property tax roll. The results are as follows:
City of Culver City, California
Agenda Item Report
Name of Firm Amount
NBS Government Finance Group dba NBS $15,500
Creelman and Associates $34,360
Karen Scott Associates Declined to submit
NBS is a consulting firm that specializes in the processing of the annual assessment
levies to assessment districts for many agencies in the region. The City and the
former Redevelopment Agency have contracted with NBS to prepare landscape
assessment districts and other assessment studies. They have provided excellent
services and are recommended by other agencies. Staff recommends that the City
Council approve a professional services agreement with NBS for the calculation of
the SUSC for fiscal year 2012/2013. Staff also recommends that the City Council
authorize the Public Works Director/City Engineer to administratively approve 1 year
extensions to the professional services agreement up to total of 5 years.
In addition NBS is capable of conducting rate analysis of charges levied by
agencies. Their staff is well versed with many years of experience on the placement
of new or update of existing charges or assessments levied by government
agencies. As such, staff requested a proposal from NBS to conduct an in-depth
review of the existing SUSC and to determine if they are fair and equitable across
users groups in light of the cost of operating and maintaining Culver City’s sewer
system and the cost passed on to the City of Los Angeles to treat the sewage. Also
the rate analysis will include a review of concerns expressed by restaurants
regarding the SUSC charges.
NBS has provided a proposal in a not-to-exceed amount of $26,700 for this effort.
The following is the scope of work determined in communication between staff and
NBS:
• Restaurant charges, particularly strength factors used to calculate BOD and
TSS-related charges.
• Commercial and multi-family residential customer classes, particularly the 15%
landscape irrigation credit for multi-family accounts.
• Use of a 42% credit for landscape irrigation, what impacts this has on residential
rates, and whether there are better alternatives and/or mechanisms for handling
these irrigation credits.
• Whether revenue requirements are appropriately allocated to each customer
class
• How capital improvement projects, including repair and replacement costs,
should be funded going forward.
• Sewer fund reserve balances and establishing and maintaining sufficient
reserves.
• Reviewing the description of base charge and commodity charges and
recommend revised language that is understandable to rate payers.
City of Culver City, California
Agenda Item Report
Should the City Council approve the proposed agreement this evening, the final
report by NBS will be presented with recommendations to the City Council at the
June 25, 2012 public hearing for the annual levy of SUSC for fiscal year 2012/2013.
FISCAL ANALYSIS:
The sewer operating account number 20466100.618900 has sufficient funds
available for these proposed services.
MOTIONS:
That the City Council:
1.) Approve a professional services agreement with NBS Government Finance
Group dba NBS for the preparation of the annual sewer user service charges
for an amount not to exceed $15,500, including expenses with up to four
additional one-year extensions subject to the approval of the Director of Public
Works/City Engineer; and,
2.) Approve a professional services agreement with NBS Government Finance Group
dba NBS for the rate analysis of the sewer user service charges, in an amount not-
to-exceed $26,700; and
3.) Authorize the City Attorney to review/prepare the necessary documents; and,
4.) Authorize the City Manager to execute such documents on behalf of the City.
MEETING DATE: 5/07/12
AGENDA ITEM: Award of Contract to NBS Government
Finance Group dba NBS for preparation of
the Annual Sewer User Service Charges on
the Los Angeles County Assessor's
Property Tax Roll and Update to the Sewer
User Service Charges
ATTACHMENTS
Proposal to provide enhanced tax roll billing services for the
City of Culver City sewer charges
2 Proposal for sewer rate advisory services
Pages
1-3
4-7 Nu.
32605 Temecula Parkway, Suite 100
Temecula, CA 92592
Toll free: 800.676.7516 (P) 951.296.1997
nbsgov.com
April 18, 2012
Mr. Charles D. Herbertson
Public Works Director
Public Works Department
City of Culver City
9770 Culver Blvd.
Culver City, CA 90232
Subject: Proposal to Provide Enhanced Tax Roll Billing Services for the City of Culver City
Sewer Charges
Dear Charles:
NBS would like to thank you for the opportunity to perform the above referenced work for the City of
Culver City ("City"). Please find enclosed two (2) copies of our Executed Agreement Upon signing,
please return one copy to the undersigned and keep one copy for your records.
Scope of Services
'Sewer Charges - Enhanced Tax Roll Billing Services'
Project Schedule. NBS will communicate with City staff, legal counsel and other interested parties to:
• Establish lines of communication.
O Clarify the specific project goals, components and criteria that will meet the City's preference.
• Identify and resolve any special circumstances that may be involved in the project
O Develop project schedules to meet legal requirements and provide for effective interfacing of all
involved parties.
• Establish meeting points consistent with the schedule to achieve project milestones.
• Establish and coordinate with City staff a schedule to assure completion of necessary actions and
compliance with statutes.
Database Maintenance. NBS will obtain water use data for the previous calendar year from Los Angeles
Department of Water and Power and Golden State Water Company to calculate the sewer user service
charge and update the database. The City will provide the consultant data regarding change of business
use for parcels during the prior calendar year. Consultant will update water meter, water use, sewer charge
and parcel information in the database.
Charge Calculation and Submittal to the County. NBS will assign the approved rates to each meter
and provide a total sewer charge for each Assessor's parcel. The total levy will be submitted to the Los
Angeles County Auditor Controller per their instructions by their August deadline for placement on the
helping communities fund tomorrow annual property tax rolls. Any rejected parcels will be reconciled, the database updated to reflect these
changes and the parcels will be resubmitted to the Auditor Controller.
Reports. NBS will provide City with an updated database in Excel Format and provide a summary report
that includes the total charges and use by user group.
Support. City staff will answer questions from property owners regarding the sewer user charges on the
tax roll. The City phone number will be on the tax bill. However, NBS will be available throughout the
year for questions regarding the tax roll from City staff.
Fee Structure
'Sewer Charges - Enhanced Tax Roll Billing Services'
Consulting Fees — Base Per Year $15,000 (1)
Estimated Expenses — Maximum Per Year $500 (2)
(1) Subject to annual fee increases described below.
(2) Estimated expenses described below.
'Annual Fee Increases'
A cost of living allowance ("COLA") may be applied to the services listed above on October 1 each year,
beginning with October 1, 2013. The COLA would be based on the U.S. Department of Labor, Bureau of
Labor Statistics, Consumer Price Index for all urban consumers for the Southern California counties,
subject to a minimum of 0%.
'Expenses'
Customary out-of-pocket expenses will be billed to the City at actual cost to NBS. These expenses may
include, but not be limited to mailing fulfillment, postage, supplies, reproduction, telephone, travel, meals,
and various third-party charges for data, maps, and recording fees.
'Additional Services'
The following table shows our current hourly rates. Additional services authorized by the City, but not
included in the scope of services will be billed at this rate or the then applicable hourly rate.
Hourly Rate Vitie
Director
Senior Consultant/Programmer
Engineer
Consultant
Analyst
Clerical/Support
$ 190
150
140
130
100
55
NBS
Page 2 !Terms!
Consulting fees will be invoiced at the beginning of each quarter. Expenses will be itemized and included
in the next regular invoice. If the project is prematurely terminated by either party, NBS shall receive
payment for work completed. Payment shall be made within 30 days of submittal of an invoice. If
payment is not received within 90 days simple interest will begin to accrue at the rate of 1.5% per month.
Either party can cancel contracts with 30 days written notice.
Please feel free to contact me if you have any questions or need further information.
Best regards,
NBS Government Finance Group,
City of Culver City
DBA NBS
Mike Rentner
Name
President and CEO
Title
4/18/12
Date
Title Date
MNBS
Page 3 3 32605 Temecula Parkway, Suite 100
Temecula, CA 92592
Toll free: 800.6761516 (P) 951.296.1997
(F) 951.296.1998
nbsgov.com
April 18, 2012
Mr. Mate Gaspar
Engineering Services Manager
Public Works Department
City of Culver City
9770 Culver Blvd
Culver City, CA 90232
RE: PROPOSAL FOR SEWER RATE ADVISORY SERVICES
, Mr. Gaspar:
Thank you for meeting with me recently to discuss the City's various sewer rate issues. The proposal
outlined below is intended to address the specific issues we discussed and provide options for resolving
these issues, although these tasks are not 'cast in stone." And can be modified as needed during the
study.
OBJECTIVE
The City's last sewer rate study in 2003 needs to be evaluated and potential changes made to address a
number of concerns including:
• Restaurant charges, particularly strength factors used to calculate BOD and TSS-related charges.
• Commercial and multi-family residential customer classes, particularly the 15% landscape
irrigation credit for multi-family accounts.
• Use of a 42% credit for landscape irrigation, what impacts this has on residential rates, and
whether there are better alternatives and/or mechanisms for handling these irrigation credits.
• Whether revenue requirements are appropriately allocated to each customer class
• How capital improvement projects, including repair and replacement costs, should be funded
going forward.
• Sewer fund reserve balances and establishing and maintaining sufficient reserves.
• Reviewing the description of base charge and commodity charges and recommend revised
language that is understandable to rate payers.
NBS proposes to provide three tasks as a part of the review and analysis of the City's sewer rates. The
primary issues addressed include the following:
• Conceptual Review and Evaluation of Alternatives
• Cost-of-service Analysis of Sewer Rates
• Meetings, Presentation/Workshop, and a Report with Recommendations for Changes
4
helping communities fund tomorrow TASK PLAN
Task 1 - Conceptual Review and Evaluation of Alternatives
1-1. Evaluate Existing Conditions — NBS will review the current sewer rate methodology with particular
attention to the basis for strength charges for restaurants. Other items include customer classes and
the basis for commercial and multi-family charges. This evaluation will include the approach used in
the City's 2003 rate study and options for other approaches that could be used. We will ask the City
for additional data as needed to help with this analysis (e.g., customer billing data, system statistics,
Hyperion treatment charges, financial performance). This evaluation will specifically include:
• Commercial strength factors, particularly restaurant factors, will be evaluated to determine
whether they are appropriately recovering revenue from commercial as well as residential
customer classes.
• Multi-family and residential landscape irrigation credits and an evaluation of alternative
approaches that may be more equitable and a better solution to the issue of irrigation vs.
effluent generation.
1-2. Review Existing Rate Model — NBS will review the City's current rate model as a source of
information and in order to better evaluate the sewer rates by customer class. Consider whether
revenue requirements are being appropriately allocated to customer classes. Also review how the
current model is providing for (or not providing for) capital improvement project costs.
1-3. Prepare a Brief Technical Memo — This memo will outline NBS' findings up to this point and outline
recommendations for how to proceed in order to correct the areas of concern.
1-4. Conduct a Strategy Session with City Staff NBS will conduct a strategy session with City staff to
discuss our finding regarding these issues and the details of the rate analysis prior to proceeding
with Task 2.
Task 2— Rate Analysis
2-1. Develop Recommended Rate Model Changes — Based on the results of Task 1-4, NBS will
evaluate specific changes that might be made to the City's rate model and/or customer classes.
This might also involve changes to how strength charges are allocated to individual customer
classes. While these rate changes can be compared on a "revenue neutral" basis, in that they
would not change the total rate revenue collected from the City's sewer customers, the City needs
an accurate projection of financial components moving forward (i.e., those noted in Task 2-2).
2-2. Revenue Requirements by Customer Class — NBS will conduct a cost-of-service analysis of the
current rate methodology to determine if the revenue requirements allocated to each customer
class should be changed. This analysis will specifically evaluate:
• Total annual expenses and revenues that result in annual "net revenue requirements' for the
next 10-15 years. This will be the primary factor that determines the sufficiency of current
rates.
• Year-end reserve fund levels. We will define appropriate types and levels of reserves and
project how those levels change over the projection period. NBS will recommend an
approach to reserve levels and funding for CIP costs. This also will be an important
consideration in whether current rates are adequate or rate increases are needed.
2-3. Develop Recommended Changes to Rate Design — As a result of evaluating the City's rate model
and cost-of-service allocations, we may recommend changes to the City's sewer rate design. The
basis for these changes would be to improve the equity and fairness of the rates, document
compliance with Prop 218 requirements, and address specific complaints the City has received
from various groups of customers. Rate adjustments needed to meet capital funding needs, other
net revenue requirements, and maintain reserve levels will be recommended for the next 10 years.
This will include adjustments to commercial rates and annual revenue requirements.
Page 2 2-4. Revised Description of Base Charge and Commodity Charge Language — Based on our review of
the City's description of existing language, NBS will develop new descriptions of base and
commodity charges with the intent that it accurately describes the recommended rate structure
going forward, is understandable to both rate payers and City staff, and effectively helps implement
the City's recommended new sewer rate structure.
Task 3— Meetings, Presentations and Study Report
3-1. Meetings — NBS will provide one meeting after completing Task 1 to review the initial results with
City staff and a second meeting to review Task 2 results with City staff.
3-2. Presentations — NBS will provide one presentation/workshop with the City Council to summarize
and discuss the study findings, results, and recommendations.
3-3. Study Report — NBS will prepare a draft report covering the purpose and objectives of the study,
methodology used in the evaluation and analysis, key findings and recommendations. Following
review and comments by City staff, NBS will prepare a final report.
TIMING
The approximate time for completing these tasks would be as follows:
Task 1 — Conceptual Review and Evaluation of Alternatives:
Three Weeks
Task 2 — Rate Analysis:
Three Weeks
Task 3— Meetings, Presentations and Study Report:
One to Two Weeks
ESTIMATED CONSULTING FEE
NBS applies the following hourly rates for our staff time recorded directly to this project:
€ Project Manager: $190 per hour
• Senior Consultant: $150 per hour
• Consultant: $130 per hour
• Financial Analyst: $100 per hour
Based on areas of focus for this defined scope of services, we expect our average effective hourly rate for
these services to be roughly $175.00. As shown in the table below, the estimated consultant fee for Tasks
1 through 3 will be $32,650.
TASKS
1-1. Evaluate Existing Conditions
LABOIV
30 hours
CONSULTANT=FEE
$ 5,250.00
1-2. Review Existing Rate Model 24 hours 4,200.00
1-3. Prepare a Brief Technical Memo 6 hours 1,050.00
1-4. Strategy Session with City Staff 8 hours 1,400.00
Estimated Task 1 Fee $ 11,900.00
2-1. Recommend Rate Model Changes 16 hours $ 2,800.00
2-2. Revenue Requirements by Class 30 hours 5,250.00
2-3. Develop Changes to Rate Design 20 hours 3,500.00
2-4. Revised Base/Commodity Charges 10 hours 1,750.00
Estimated Task 2 Fee $ 13,300.00
3-1. Meetings (2 with City Staff) 12 hours $ 2,100.00
3-2. Presentation (1 with City Council) 12 hours 2,100.00
3-3. Study Report 10 hours 1,750.00
Estimated Task 3 Fee $5,950.00
Direct Expenses — 1,500.00
Total Fee — Tasks 1-3 & Expenses $ 32,650.00
Page 3 Please do not hesitate to contact me at any time with questions or discussion: 800.676.7516 (office),
530.297.5856 (cell phone), or email at gclumpner@nbsgov.com .
Page 4