REPORT TO THE CITY COUNCIL FROM: PAUL AMICO, PE, Director Department of Public Utilities BY: JILLIAN GAYTAN, Business Manager Department of Public Utilities - Administration CHRISTINA SEMONIOUS, Management Analyst II Department of Public Utilities - Administration SUBJECT ..Title Approve the Third Amendment to the Consultant Services Agreement with Pavletic Consulting LLC., to increase the compensation by $75,000.00, for a total contract amount not to exceed $294,000.00, and authorize the Director of Public Utilities, or designee, to execute the Third Amendment to the Consultant Services Agreement. (Citywide) ..Body RECOMMENDATION Staff recommend City Council approve the Third Amendment to the Consultant Services Agreement (Amendment) with Pavletic Consulting LLC., to increase compensation by $75,000.00 for utility rate plan consulting services, for a total contract amount not to exceed $294,000.00, and authorize the Director of Public Utilities, or designee, to execute the Amendment. EXECUTIVE SUMMARY The City of Fresno (City) has a current agreement with Pavletic Consulting LLC (Consultant), for professional water and wastewater utility rate plan consulting services. Annually analyzing the costs and the revenue required to deliver essential utility services is common practice to determine whether and when revenue increases may be needed to cover increases in operating costs or to maintain capital investment levels. The Consultant has been successfully supporting the City and providing consulting services under this agreement since February 2022, and additional compensation is needed for the Consultant to continue providing these services. Staff recommends a third amendment that increases compensation by $75,000.00, for a total amount not to exceed $294,000.00, without an extension of the contract term. BACKGROUND Routinely assessing and evaluating revenue and expenditure projections and specifically analyzing the rates charged for utility service is vital to identify and address revenue shortfalls that could lead to disruptions or cuts in service. Common practice is for water and wastewater agencies to evaluate revenue annually to determine whether and when revenue increases may be needed to cover increases in operating costs or to maintain or increase capital investment levels. The Department of Public Utilities (DPU) evaluates revenues and expenses annually during the budget setting process, and professional consulting services are commonly utilized for third-party validation, cost of service analyses, and calculating the revenue required to deliver water and wastewater utility services. The Consultant was deemed uniquely qualified by the City Manager to provide professional utility rate planning consulting services on January 10, 2022. The City entered into an agreement with Consultant on February 1, 2022, for these consulting services in an amount not to exceed $144,000.00. The City and Consultant entered into the First Amendment to Agreement on December 16, 2024, to extend the term of the Agreement to June 30, 2025, to allow the Consultant to continue providing rate consulting services for the Water and Wastewater Management Divisions. On May 14, 2025, the City and Consultant entered into Second Amendment to the Agreement extending the term to June 30, 2027, and increasing the compensation by $75,000.00, for total compensation of $219,000.00. DPU is now requesting an increase in compensation by $75,000.00, for a not to exceed total of $294,000, without an additional extension of the contract term, to continue the services. All work performed by the Consultant to date has been completed to DPU's satisfaction in a timely and professional manner. However, the analysis of the cost of service and required revenue have required more effort to align with recent changes in state law and related court rulings. This additional effort has exhausted the total contract amount, and additional compensation is necessary to continue the consulting services. The City Attorney's Office has reviewed and approved the Third Amendment to the Agreement as to form. Upon approval by the City Council, the Third Amendment will be executed by the Director of Public Utilities, or designee. ENVIRONMENTAL FINDINGS By the definition of the California Environmental Quality Act (CEQA) Guidelines Section 15378, this is not a "project" for the purposes of CEQA. LOCAL PREFERENCE Local preference was not implemented because this is an amendment to an existing Consultant Services Agreement. FISCAL IMPACT Funding for the amendment is included in the Fiscal Year 2026 Water and Sewer/Wastewater Enterprise Fund operating budgets. Attachments: Third Amendment to Agreement Second Amendment to Agreement First Amendment to Agreement Original Agreement