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06/05/2017-CC-Agenda Packet-Work SessionSTRge�c TEXAS AGENDA CITY COUNCIL WORKSESSION MONDAY, JUNE 5, 2017 5:30 PM 502 ELM STREET 1. Call Meeting to Order. 2. Presentation by Jeffrey Davis on Potential Redevelopment of Mobile Home Park at 817 Keaton Road. 3. Presentation by Joe Palmer, Consilium Capital Group, on Modified Proposal for Apartment Complex Project on Indian Lane. 4. Presentation from New Gen Strategies on Conducting Electric, Water, and Wastewater (Utility) Rate Study. 5. Overview of Items on Regular Agenda. 6. Adjourn. I, the undersigned authority, do hereby certify that this Notice of Meeting was posted on the bulletin board, at the City Hall of the City of Sanger, Texas, a place convenient and readily accessible to the ge eral public at all times, and said notice was posted on the following date and time: / / at .1C,o,�9 A.m. and shall remain posted until meet' g is adjourned. Cheryl e, City Secretary City of Sanger, Texas ` 0 This facility is wheelchair accessible and accessible parking spaces are available. Requests for accommodations or interpretive services must be made 48 hours prior to this meeting. Please contact the City Secretary's office at (940) 458-7930 for further information. NewGen Strategies & Solutions PROPOSAL TO PREPARE AN ELECTRIC, WATER, AND WASTEWATER FINANCIAL PLANNING AND RATE STUDY I -- * * -- - -" 00 & Boo E Lookout Dr., Suite ioo • (972) 232-2234 • cekruta newgenstrategies.net 40 fi http://www.newgenstrategies.net/ Dear Mr. Gray, NewGen Strategies & Solutions, LLC (NewGen) is pleased to have this opportunity to propose our assistance to the City of Sanger, TX (City) to prepare a five-year Financial Plan and Rate Study specific to the City's Electric, Water, and Wastewater utilities. Given the anticipated growth to be experienced by the City, and the capital improvements needed to support that growth, NewGen is excited to be considered to assist the City in preparing and implementing this critical financial plan which represents a cornerstone for achieving future success. NewGen recognizes the importance of this engagement to the long-term success of the City. To that end, we have assembled a Project Team with unmatched expertise and experience in electric, water, and wastewater rate -making specific to the State of Texas. Members of our Project Team possess decades of professional experience, are routinely called on to provide technical expertise to the states regulatory agencies, and translate and defend detailed and technical industry methodologies into a product that can be easily understood by our clients and all key stakeholders. However, it is not only the years of professional and consulting experience which differentiate NewGen for this project, but also our reputation for providing quality rate design studies that meet the goals and objectives of our clients while also withstanding the scrutiny of regulatory and judicial bodies. The following proposal details our Project Team's experience and anticipated plan for conducting the proposed engagement. We appreciate the opportunity to submit this proposal and look forward to assisting the City in this engagement. Should you have any questions regarding the following proposal, please do not hesitate to contact me at 972.232.2234 or via e-mail at cekrut@newgenstrategies.net. Sincerely, Chris Ekrut Director NewGen Strategies & Solutions r- NewGen Strategies & Solutions is a management and economic consulting firm specializing in serving the utility industry and market. NewGen Strategies & Solutions provides data analytics, strategy implementation, financial planning, asset valuation, stakeholder engagement, and sustainability initiative services to public and private clients. Our expertise includes utility business and financial planning, litigation support and provision of expert witness testimony in regulatory proceedings, and sustainability strategy for water, wastewater, stormwater, solid waste, electric and natural gas utilities. NewGen Strategies & Solutions has been in business for over four years, however, the five founding members of NewGen Strategies & Solutions possess in excess of 15o years of consulting experience. This experience has been acquired while members and/or owners were at recognized national consulting groups such as R. W. Beck, Inc. (now SAIC and Leidos), Navigant Consulting, and Touche Ross (now Deloitte), and regional practices such as Reed Stowe & Yanke. Additionally, NewGen Strategies & Solutions professionals come from the nationally recognized engineering firms of CDM Smith, Inc. and HDR, Inc. Individuals from NewGen Strategies & Solutions provide the expertise gained from more than 130 Cost of Service studies and 125 expert witness cases or filings supporting utility customers, regulatory staff, and utilities. R.W. Beck SAIL/leidos NewGen Strategies Solutions Reed Stowe Monte Co. Education: University of North Texas, MPA - City Management West Texas A&M University, BA Public Administration Chris Ekrut - Director PROJECT MANAGER Mr. Chris Ekrut will serve as the Project Manager for the engagement and will serve as the day-to-day contact for the engagement. In this role, he will also serve as the primary communicator before the City Council. Chris has been providing rate -making consulting services since 2004, with the majority of his consulting experience centered in the water, wastewater, and electric industries. He has filed expert witness testimony with regards to COS determination and rate design, as well as provided litigation support and expert witness testimony development before other rate regulatory agencies. He has also conducted a number of wholesale and retail water and wastewater rate studies, developed water wastewater rate models, storm water fee models, and assisted in the negotiation and/or litigation involving a number of wholesale water contracts. Education: University of North Texas, BA Accounting QUALIFIED REVIEWER Mr. Jack Stowe, Jr. has more than 45 years of professional consulting experience and is a recognized expert in water, wastewater, natural gas, and electric rate matters, having testified numerous times as an expert witness on rate -making matters before regulatory agencies, as well as federal and state courts. Jack will provide the peer level review of all work products for this engagement, ensuring that they meet the expectations of the City while being of sufficient quality to withstand internal and external scrutiny. Education: University of Texas at Dallas, MBA Organizational Strategy Texas A&M University, BBA Management Certifications: Certified Public Manager (CPM) Certified Government Finance Officer (CGFO) SENIOR PROJECT CONSULTANT Mr. Mathew Garrett is an Executive Consultant with NewGen and has completed a variety of cost of service and rate design studies for engagements with water, wastewater, and stormwater utilities. Mr. Garrett has also assisted in the completion of impact fee, valuation, litigation support, and feasibility engagements. Prior to joining NewGen, Matthew served over five years as the Director of Finance for the Town of Prosper, Texas where he was responsible for implementing the Town's cost allocation plan during the budgeting processes. In that capacity, he oversaw not only the Budget and Accounting functions, but also managed Human Resources, Utility Billing and Information Technology. Before Prosper, he worked for Collin County for over five years holding the titles of Senior Financial Analyst, HR Supervisor and HRIS Analyst. Matthew's diverse experience enhances each project with a depth of pragmatic management perspectives. Education: Texas A&M University, BBA Accounting FINANCIAL ANALYST Ms. Kim Bostik is a Senior Consultant with NewGen who has provided rate consulting services since 2007. Ms. Bostik has also served as a risk analyst for the energy industry as well as a consultant for municipal utilities. During her consulting career, Kim has provided a variety of services to utilities including, but not limited to, wholesale and retail cost -of -service and rate design studies, impact fee design, economic feasibility, advanced metering procurement, CCN valuations, and litigation support. Education: University of Texas at Dallas, MS Business Analytics -(May 2o18) St. Edward's University, BBA Accounting FINANCIAL ANALYST AND DATA ANALYTICS EXPERT Mr. Michael Sommerdorf provides financial modeling, large data manipulation, and financial analysis for a variety of industries. He joined NewGen Strategies and Solutions, LLC as an Analyst in 2o16 shortly after attaining a Bachelor of Business Administration in Accounting. He is currently working towards a Master of Science in Business Analytics at the University of Texas at Dallas. Prior to joining NewGen, Mr. Sommerdorf held positions as a finance intern at the Electric Reliability Council of Texas (ERCOT), a volunteer tax preparer, and an internal audit intern at a small semiconductor firm. The City of Sanger, TX is looking to engage a qualified consultant to assist in analyzing the historical and projected performance of the City's Electric, Water, and Wastewater Utilities. Based on our prior e-mail and telephone conversations, multiple objectives should be satisfied by the selected consultants' work product, which includes the following: • Fully Fund Water, Wastewater, and Electric Utilities • Project increases necessary to fund the projected Capital Improvements Plan requirements over the next five (5) year period • Achieve financial and debt coverage policies, as applicable • Minimize Customer Monthly Bill Impacts, where possible .fi. NewGen maintains a strong and active presence before the State of Texas' rate regulatory authorities and is routinely requested to provide expert opinions on rate matters by legal counsels representing clients throughout the State of Texas. For NewGen to maintain its reputation and presence within the regulatory environment, our product must be of such quality to withstand intense scrutiny. The product developed by NewGen for this engagement will withstand such scrutiny. To achieve this, as part of our work plan, NewGen has one of its executive level consultants, who is outside of the study's day-to-day process; provide an independent review of the study to test the assumptions and validity of the results and recommendations. Mr. Jack Stowe, who is a recognized expert in rate regulatory matters, will provide the quality control and assurance review for the project. NewGen will utilize the QA/QC procedures as outlined within this proposal. To perform the requested study, the Project Team proposes the following general work plan. This proposed work plan closely follows the approaches and methodologies utilized by NewGen's Project Team members in all of their cost of service and rate design studies. Therefore, the City can be assured that the work plan proposed by NewGen has been tested and proven in numerous studies across the state and nation. It is understood that, if selected, the Project Team will refine, customize, and finalize the work plan with the City upon award of the project and reflective of the City's anticipated work schedule and budget. Phase I. Determine the Water, Wastewater, and Electric Revenue Requirements In Phase I, NewGen will gather the necessary data required to determine the cost of providing utility service to City customers. Data to be collected will include City's budgets, audited financial statements, capital improvement plan, contractual documents, wholesale power purchase records, water pumpage and usage records, metered flow reporting, wastewater discharge monitoring reports, etc. NewGen will plan a teleconference to meet with the appropriate City staff in order to confirm our understanding of the provided data provided, as well as to discuss the capital improvements and said funding of improvements, projected for the next five (5) years. Once the necessary data has been collected, NewGen will review the historical and forecasted trends with regard to operations and maintenance costs, cash capital outlays, debt service, capital improvements, utility usage, and others as appropriate. NewGen will adjust expenditures as necessary (normalize, annualize, etc.) in order to develop an annual revenue requirement that is representative of each utility's financial needs. Upon completion of this phase we will have developed a five (5)-year revenue requirement forecast specific to each utility service. Phase II will involve calculating amended rates under the City's current rate structures that will recover the revenue requirements, as defined in Phase I, specific to each utility. In performing Phase II, the Project Team will also review the City's currently approved rate design structures and suggest changes based on industry standard methods, recent regulatory changes, and best practices as endorsed by the Texas Legislature. The impact of these potential rate design changes will be discussed with City staff to determine which potential changes should ultimately be discussed with the City Council. Please note that, at this time, our proposed pricing does not anticipate a change in the City's current rate design structure. To the extent City staff or the City Council wish to examine a potential change, these changes will be discussed with staff as commensurate changes may be needed to the anticipated project price. Upon completion of the first two phases of the Study, NewGen will issue a draft letter report for review by City Staff. Upon receipt of any comments, a final electronic copy of the study report will be provided to the City. As requested, NewGen will discuss the study and present the findings in up to two (2) meetings with the City Council. Additional meetings will be provided at a to be agreed upon rate if requested. Summary The scope of services outlined above reflects the activities the Project Team believes are necessary to meet the goals and objectives outlined by the City. However, we recognize that additional services may be desired by the City to increase the overall effectiveness of the contemplated engagement. Such services may include, but may not be limited to, those outlined in detail below. Please note that the additional services as outlined are optional in nature and are not included in the standard, not -to -exceed price as previously outlined. Said services will only be provided upon receipt of the City's express, written permission. The development of a financial forecasting and rate model for City use will occur throughout the course of the project. Once the project has been finalized, and if requested by the City, the Project Team will work to form this model into a "user-friendly" program for use by City staff. NewGen prides itself in developing user-friendly models which are specific to, and reflect the unique operational characteristics of, each client. While our Project Team utilizes standard best practices in developing rate models, each model we develop is unique and does not reflect a "canned" or "off -the -shelf" product. Given the unique nature of each of our clients, we believe it is important that the product created as part of a rate study also be unique and reflective of our client's overall goals and objectives. The model provided to the City will be built so as to be compatible with Microsoft Excel 2010 or newer versions. Within the model itself, instructions will be built-in so as to ensure that a user has immediate and constant access to understanding on the model's functions. All assumptions will be presented in blue font and all calculations/results presented in black font so the user is aware of fields that can be amended. Additionally, both a fully protected version and an unlocked version of the model will be provided to ensure staff has a tool that can be deployed to all classes of user, from novice to advanced. The City's model will allow staff to run "what -if" scenarios including, but not limited to, changes in operating, capital and wholesale costs, customer and volume growth or decline, debt service structure, source costs, inflation, capital project financing, and funding sources. The model will allow the user to assess the impact various scenarios will have on an existing typical monthly bill for each class of customer. The model will also generate financial statistics such as debt coverage ratios and average dollar and percentage change for each customer class. A visual dashboard will also be included within the model to assist City staff in communicating key financial and performance metrics, as defined by City staff, with the City's key decision -makers. To ensure the model is fully useable by staff, the Project Team will conduct a hands-on training session with key model stakeholders when the model is delivered and will discuss every worksheet within the model and fully demonstrate its functionality. PR Based on the Standard Services outlined above, and assuming notice to proceed is received by the Project Team by May 19th, the Project Team anticipates the starting and completion dates for each Task as noted in the table below. I Determine the Water, Wastewater, and Electric Revenue Requirements II Design the Retail Rates III Prepare and Present Findings June 7th June 23rd June 26th July 14th July 17th August 11th Please note that the Project Team's ability to meet these deadlines will be dependent on the timely receipt of accurate data as requested by the Project Team, and the availability of City staff and/or the City Council for the meetings indicated herein. NewGen Strategies & Solutions, LLC. (NewGen) recognizes that the quality of our analysis and work product is of paramount importance. To serve as a trusted advisor to our clients, it is critical that our work be of the highest caliber. Mistakes challenge our credibility with colleagues and clients. Moreover, errors can lead to serious negative consequences including, but not limited to, potential litigation. NewGen is also proud of its role in serving as a qualified expert before state and federal rate regulatory agencies and courts of law. For us to maintain our credibility as experts, our work must withstand the scrutiny of opposing legal counsels and judicial bodies. Given this, each engagement must be conducted under strict quality assurance/ quality control (QA/QC) procedures. NewGen's internal QA/QC program involves three key levels of review - Personal, Peer and Product. These three levels are as follows: At the first level of our QA/QC program, every consultant is personally responsible for his or her own work product. Any product developed internally should be considered "client -ready" prior to being submitted to higher levels of management for review. To assist consultants in ensuring that their work product meets these standards, NewGen has developed and utilizes a "Check-up" process. Utilizing this as an acronym, NewGen encourages its consultants to apply each of these standards to every analysis conducted or work product prepared. CALCULATIONS • Affirm internal checks are in place and not producing errors. • Review model formula links and named ranges. Remove links to files that should not be included and remove unused named ranges. • Print out and spot check final drafts to ensure accuracy. HOLISTIC • Have you gotten out the details and looked at the big picture? • Look for changes in prior drafts. Dottie changes in the model make sense? • Compare model data with other sources of available information to ensure accuracy. Do our results make sense? ENGLISH Proper grammar Spell check COMPOSITION • How does your prod uctlook? Is it formatted correctly? • Is it organized and easy to follow? Remove unused data and side calculations. KNOWLEDGE • Does it reflect industry standards and represent a quality product? UNDERLYING ASSUMPTIONS AND NOTES Clearly document and affirm assumptions. • Include notes/methodology description in analysis if calculations are complicated. This will help to explain why and how these calculations were done for future reference. PRINT READY • Make sure document is print ready. The second level of our QA/QC process involves a peer review of all analysis and work product. As part of this process, NewGen has designated experts in each subject matter area to serve as "qualified reviewers". For each engagement, a qualified reviewer is assigned as part of the Project Team. The qualified reviewer serves as a third -party advisor during the conduct of each engagement, and is responsible for ensuring the quality of the work product. Each analysis or work product is reviewed periodically during the conduct of the engagement as well as formally approved by a qualified reviewer prior to further transmission to a client. The final level of review in our QA/QC process seeks to ensure that the product we develop and publish is reflective of the high standards of NewGen. Each deliverable is reviewed by our administrative staff to ensure it meets the quality standards of a NewGen product, regardless of the individual or specific office that produced the product. Each product is reviewed in comparison with the templates prepared by NewGen, and reviewed to ensure the technical writing is accurate and can easily be understood by key stakeholders and those outside the day-to-day study process. To implement the above outlined process, NewGen conducts annual training for employees on the QA/QC process. This includes in -person, multi -day workshops on project management and the proper application of the QA/QC procedures. To further emphasize the importance of our QA/ QC process, each employee's annual performance review has an entire section devoted to work quality that assesses the employee's specific application of the above outlined process. This review is key to determining an employee's annual bonus and salary adjustment. Failure to abide by the above standards may have impacts on an employee's compensation package and/or continued employment with the NewGen. NewGen appreciates that an analytical and structured approach to QA/QC is critical to maintaining cost, ensuring credibility, and, most importantly, protecting the client relationship. At its core, NewGen strives to serve as a trusted advisor to our clients, and the consistent application of the QA/QC program outlined above is critical to achieving our long-term success. Based on the work plan outlined herein, the Project Team agrees to perform the requested study for a one-time, not to exceed price of $321500. NewGen proposes to invoice the City on a monthly basis for actual hours worked at our then applicable hourly billing rates, plus out of pocket expenses incurred at cost. Payment is due within thirty (30) days upon receipt. NewGen's hourly billing rates, effective through the term of the engagement, are as follows: General Manager President Director or Executive Consultant Senior Consultant Staff Consultant Analyst Administrative Assistant $295 $265 - $295 $210 - $295 $160 - $210 $140 - $160 $120 - $140 $85 Should the City desire to perform the initial study, and then have annual updates prepared to reflect changing conditions, NewGen proposes the following as optional annual pricing for the next three (3) year period. Under this pricing structure, provided pricing is on a fixed fee basis: Year 1 $27,500 Year 2 $12,500 Year 3 $12,500 By engaging NewGen, you agree that the services rendered by our Firm will be performed in accordance with instructions or specifications received by the City, and will be provided with the degree of skill and judgment exercised by recognized professionals performing services of similar nature and consistent with the applicable industry best practices. You further agree that compensation for services rendered will be provided to NewGen regardless of the final outcome of the engagement. VI =I i •� �II r�, � r r , t i�11 We greatly appreciate the City's consideration of our Firm to conduct the engagement discussed within the proposal. As a Firm, we seek continuing client relationships, not simply projects. We look forward to establishing a relationship with the City of Sanger. As part of establishing this relationship, it is our aim that everything contained within our proposal be transparent and fully understood. This allows us to lay a solid foundation for a great working relationship both now and into the future. Should you have questions after reviewing this proposal, please do not hesitate to let us know. We're happy to clarify any information, or provide additional detail where needed. We are committed to working with the City to develop a scope of services that meets the City's goals and objectives, while recognizing the importance of being proper stewards of public funds. Please feel free to contact Chris Ekrut by phone at 972.232.2234 or via e-mail at cekrut@newgenstrategies.net with any questions or concerns you may have. Once you feel confident in the information provided, the scope of services, and are ready to move forward, please sign below and return this proposal to us. As an alternative, and dependent upon the requirements of your City Attorney, NewGen can also provide a standard Master Services Agreement for consideration, or we are happy to review the City's standard contractual language. Again, we appreciate this opportunity to apply our expertise to help the City of Sanger, TX. Clayton Gray, City of Sanger, TX Chris Ekrut, NewGen Strategies & Solutions