In April 2016, the City Council approved a cooperative agreement with the Santa Ana Watershed Project Authority (SAWPA) for water rate study grant funding. Per the cooperative agreement, the City will receive grant funds in two phases: Phase 1, up to $107,515 for the water rate study and city council presentation and Phase 2, up to $107,515 for the implementation of the conservation-based water rate structure.

In September 2016, the City Council approved an agreement with FG Solutions in the amount of $100,996 to prepare a water rate study for the Water Enterprise Fund. The water rate study will project water revenues, expenses, and rates for a five-year period, define critical water system repairs and improvements, and evaluate a conservation-based water rate structure.

The City charges a bi-monthly Fire Service fee for private fire protection service related to fire sprinkler systems when required by building or fire codes.  This fee is charged to water customers with fire sprinkler systems based on the size of the pipe feeding the sprinkler system.  The cost is for providing and maintaining the related fire protection infrastructure and capacity (e.g., pumping, distribution and water storage systems). The rates for this fee were last evaluated in 2008. The City Staff deems it is necessary and efficent to perform an updated evaluation at this time as the water rate study is being conducted. This type of assessment was not included in FG Solution’s original scope of work, therefore, the consultants have submitted the scope of work and breakdown of the estimated costs associated with this task as the attached Amendment 1. The total budget for Amendment 1 is $6,720.

A key portion of FG Solution’s water rate study is the development of indoor and outdoor water allocations, which is needed to evaluate the impacts of a conservation-based water rate structure. Due to the demanding workload required to complete this task in a timely manner, FG Solutions will be managing a sub-consultant to develop the indoor and outdoor water allocations. The scope of work and breakdown of the estimated costs associated with this task are listed in Amendment 2. The total budget for Amendment 2 is $33,670.

There is no impact to the General Fund. The amendments will be funded from the Water Enterprise Fundand funds have been allocated in the Fiscal Year 2016/17 Water Enterprise budget. The City will receive full  reimbursement of all funds from the SAWPA water rate study grant funding if a conservation-based rate structure is implemented.  In the event a conservation-based rate structure is not implemented, $33,871 of the total cost would not be eligible for reimbursement and would be paid from the Water Enterprise budget.

It is recommended that the City Council:

• Approve Amendment No. 1, in the amount of $6,720 for a fire protection service fee study, and Amendment No. 2, in the amount of $33,670 for a sub-consultant to develop indoor and outdoor water allocations, to the agreement with FG Solutions in preparation of a water rate study for the Water Enterprise Fund; and

• Authorize the City Manager to sign the Amendments on behalf of the City.
  

By:    Katie Victoria, Senior Administrative Analyst