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City of ~ City Sewer Rate Study Exhibit A 2 . The relationship between fixed costs and fixed charges. . Alternative sewer rate structures that achieve the rate-making objectives through incentives, rather than penalties, wherever possible. . Any conditions in John Whitcomb's sewer rate software that would affect potential rate alternatives. . Any limitations in the City's utility billing system that would affect the potential rate alternatives. . Potential relationships between rates and fees for administrative and field services, as well as fines for unauthorized actions. . The classification of nonresidential sewer customers. . The strength concentrations for each of the sewer customer classes. . The linkages and parallelism between water and sewer rates. . The types of reserves and the adequacy of funding levels. . Potential improvements in the format of the utility bill. . The features of the models that will be desirable. . The transition from the current sewer and storm water rates to the recommended rates. At the conclusion of this task, the consulting team will have a clear understanding of the alternative rate structures that will be modeled for possible implementation. In order to do this, we will coordinate closely with John Whitcomb so that the alternatives that are evaluated can be modeled by his rate software. By knowing which alternatives will be modeled, cost allocations can be made accordingly. Task 2. Develop Business Plan and Sewer Rate Model The 10-year Business Plan will be developed by expanding the existing 5-year Business Plan with the City's input to assure that it meets the City's needs. We are anticipating that the model will need to perform the following functions: . Estimate separate and combined revenue requirements for the Sewer and Stormwater Funds for the 10-year planning period. . Estimate wastewater discharges by customer class, reflecting the City's and SBSA's growth projections. These estimates will conform to state and federal guidelines wherever possible. . Allocate the revenue requirements to each customer class based on appropriate measures of use (e.g., flow, BOD, TSS, and EDUs). The loading characteristics that we assume for each customer class will be reconciled as closely as possible with the SBSA's plant data. The Business Plan will have lO-year revenue requirement projections that will be used for setting sewer rates for FY 1999-00. The revenue requirements for FY 1999-00 will serve as the basis for detailed cost of service analyses, which will determine each customer class' share of the overall revenue requirements. We will coordinate closely with SBSA staff to assure that the projections for treatment costs and all assumptions regarding loadings are consistent with SBSA's Revenue Program. The revenue requirements for each customer class will then be fed into John Whitcomb's rate software to calculate rates. We recognize that it is essential for the Hilton Farnkopf & Hobson, LLC 1/27/99