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City of ~ City Sewer Rate Study Exhibit A 3 lO-year Business Plan model to link with John Whitcomb's software. We are confident that our Excel spreadsheets, which will be used to prepare the Business Plan, will synchronize electronically with John Whitcomb's rate software. We are also confident that, because of advance work during the project initiation, the cost allocations in the Business Plan will be consistent with the rates that John Whitcomb's software is capable of modeling. We will evaluate various options for implementing the new rate structure. The desire to avoid "rate shock" and to develop a plan for transitioning into the new rates will be an important aspect of this project. Using the model, we will examine different sequences of revenue requirements to determine the optimal financial profile during the planning horizon. Transfers to and from reserves will be made to modulate year- to-year changes in revenue requirements. It will also be necessary to evaluate the impacts on typical customer bills, impacts on the funding of capital improvements, repayment of debt service, and the other financial obligations of the City in analyzing various alternatives for phasing in the new rates. We will prepare typical customer bills, cash flows, and sensitivity analyses as required to illustrate the impacts of the alternative rate structures. Once the draft Business Plan and rates are complete, the results will be presented to the Utilities Committee for its review and comment. Each of the alternatives will be explained so that the Utilities Committee's input can be used to refine the analysis and rank the alternatives. The Utilities Committee's comments will be incorporated into a revised lO-year Business Plan that will identify the recommended alternative. Task 3. Prepare Project Report An integral part of the process of converting the City's sewer rate structure from a fixed monthly rate to a variable, use-driven rate will be to prepare a final report. The primary purpose of this report will be to document the study process leading to the conclusions and final recommendations. The report will also serve as the "users manual" for the City's subsequent use in modeling rates. The contents of the report will include: . An overview of the study. . The components involved in setting rates, such as: - revenue requirements, - capital improvements, - revenue bond financing, - state and federal grant guidelines, - SBSA Revenue Plan considerations, - descriptions of customer classes, - effluent loadings by customer class - cost allocation procedures. . The results of the evaluation of the rate options. Hilton Farnkopf & Hobson, LLC 1/27/99