REPORT TO THE CITY COUNCIL FROM: GEORGEANNE WHITE, Assistant City Manager City Manager's Office BY: CHERYL BURNS, MPA, Senior Management Analyst Department of Public Utilities - Administration SUBJECT ..Title Actions pertaining to retaining financial consulting services for the Department of Public Utilities (DPU) divisions (Citywide): 1. Affirm the City Manager's determination that Municipal Financial Services is uniquely qualified to perform professional utility rate plan consulting services for a five-year rate plan for the water and wastewater divisions 2. Affirm the City Manager's determination that HF&H Consultants is uniquely qualified to perform professional utility rate plan consulting services for a five-year rate plan for the solid waste division 3. Approve Agreement with Municipal Financial Services in an amount not to exceed $144,000 for financial consulting services for DPU Water Division and Wastewater Management Division 4. Approve Agreement with HF&H Consultants, LLC in an amount not to exceed $134,670 for financial consulting services for DPU Solid Waste Management Division ..Body RECOMMENDATION Staff recommends that Council: 1. Affirm the City Manager's determination that Municipal Financial Services is uniquely qualified to perform professional utility rate plan consulting services for a five-year rate plan for the water and wastewater divisions. 2. Affirm the City Manager's determination that HF&H Consultants is uniquely qualified to perform professional utility rate plan consulting services for a five-year rate plan for the solid waste division. 3. Approve Agreement with Municipal Financial Services in an amount not to exceed $144,000 for financial consulting services for DPU Water Division and Wastewater Management Division. 4. Approve Agreement with HF&H Consultants, LLC in an amount not to exceed $134,670 for financial consulting services for DPU Solid Waste Management Division. 5. Authorize the City Manager, or designee, to sign and execute these agreements on behalf of the City. EXECUTIVE SUMMARY On June 16, 2016, City Council awarded agreements to Municipal Financial Services for water and wastewater rate consulting services and to HF&H Consultants, LLC for solid waste consulting services in order to develop five-year rate plans for the DPU divisions, following a competitive bidding process. On December 5, 2019, DPU executed a First Amendment to Agreement with the consultants to extend the term of the agreements to December 31, 2021, to complete the project. For various reasons, rates have not yet been implemented and new rate studies must be completed. DPU is requesting that City Council affirm the City Manager's determination that the rate consultants are uniquely qualified and approve agreements with Municipal Financial Services and HF&H Consultants, LLC to reassess and update the rate studies for the Water Division, Wastewater Management Division, and Solid Waste Management Division. BACKGROUND On June 16, 2016, City Council awarded agreements to Municipal Financial Services for water and wastewater rate consulting services and to HF&H Consultants, LLC for solid waste consulting services in order to develop five-year rate plans for the DPU divisions, following a competitive bidding process. Five-year rate plans were completed for the DPU divisions in September 2018. DPU asked Council for authorization to proceed with a Proposition 218 rate-setting process on October 11, 2018, but the authorization was not given. On January 31, 2019, DPU presented a workshop to City Council outlining the need for rate adjustments for each division, however there was no desire to move forward with the rate setting process at that time. On December 5, 2019, DPU executed a First Amendment to Agreement with the consultants to extend the term of the agreements to December 31, 2021, to complete the project. Due to other priority issues that have arisen in the City over the last couple years, including responses to the COVID-19 pandemic, the rate-setting process has not moved forward. Too much time has passed for the original rate studies that were completed in 2018 to retain their validity. New regulations and other factors have continued to impact DPU division finances, so the rate studies will need to be re-assessed and updated to incorporate these factors. These updates cannot be completed prior to the expiration of the agreement on December 31, 2021. Municipal Financial Services is a qualified financial consulting service provider with expertise in rate setting for water and wastewater utilities and an extensive knowledge of DPU's water and wastewater operations and finances. The consultant has spent the last five years developing a comprehensive understanding of the nuances related to Fresno's complex water and wastewater operations while analyzing and advising on all aspects of rate structures. Municipal Financial Services is knowledgeable in industry best practices and is able to provide input and guidance on the financial impacts of new regulatory requirements impacting water and wastewater services. HF&H Consultants, LLC is a qualified financial consulting service provider with expertise in rate setting for solid waste utilities and has an extensive knowledge of DPU's solid waste operations and finances. The consultant has spent the last five years developing a comprehensive understanding of the nuances related to Fresno's solid waste operations while analyzing and advising on all aspects of rate structures. HF&H Consultants, LLC also has a thorough knowledge of the regulations imposed by Senate Bill 1383, which significantly impact solid waste operations and finances. All work performed by both consultants to date has been completed to DPU's satisfaction in a timely and professional manner. DPU has obtained updated proposals from the consultants to perform the necessary tasks to update the rate studies. Based on the aforementioned qualifications of the consultants, the City Manager has determined that the consultants are uniquely qualified to reassess and update the rate studies for the Water Division, Wastewater Management Division, and Solid Waste Management Division. ENVIRONMENTAL FINDINGS By the definition provided in the California Environmental Quality Act Guidelines Section 15378 this action is not a "project." LOCAL PREFERENCE Local preference was not implemented because it has been determined that Municipal Financial Services and HF&H Consultants, LLC are uniquely qualified. FISCAL IMPACT The expenditures will not have any impact on the General Fund since DPU and its divisions are Enterprise Funds. Adequate funding is available from the Water, Wastewater Management and Solid Waste Management Divisions' operating funds to cover these consulting services. Attachments: Attachment 1 - Uniquely Qualified Memo for Municipal Financial Services Attachment 2 - Uniquely Qualified Memo for HF&H Consultants, LLC Attachment 3 - Agreement with Municipal Financial Services Attachment 4 - Agreement with HF&H Consultants, LLC