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REV: 08-25-2022 RL •Capital Improvement Projects: If requested by the City, Consultant may build long- term financial planning tools to see the effects of alternative approaches to funding capital improvements. •Future Considerations: Consultant shall evaluate and account for changes in accounts and SVCW costs due to growth and usage pattern fluctuations, such as water shortage concerns and new development. City staff shall be able to adjust future assumption inputs in this model. Deliverables: Consultant shall provide a 10-year sewer financial model that includes revenue requirement, reserves, reserve policies, debt service coverage, and forecasted revenues. Task 1c. Cost-of-Service Analysis Consultant shall prepare a cost-of-service analysis so that revenue requirements are distributed among the customer classes, which shall consider single family residents with accessory dwelling units (ADUs), and conform to the rate structures identified for each customer class. Consultant shall identify the unit costs of service and each class’ proportionate share of the overall revenue requirement. Prior to preparing the cost-of- service analyses, Consultant shall present alternative rate structures for the City’s consideration. In presenting these alternatives, Consultant shall determine whether the City’s customer billing system has the ability to charge the rates. Consultant shall clearly indicate: 1) how much the overall revenue requirement changes; 2) how much the cost-of-service changes for each customer class; 3) how much the rates change for each customer class; and 4) how much customer bills change for representative customers. The cost-of-service analyses shall allocate the revenue requirements between the fixed and volumetric charges, as well as among the various customer classes. Consultant shall work closely with City staff to develop allocation factors based on usage and loading data for each class. Consultant shall compare the result with the revenue from current charges to determine the difference and recommend a transitional strategy that may be needed to align the updated rates with the cost-of-service without causing rate shock or hardships for any class. Deliverables: Consultant shall provide cost-of-service analyses that will be integrated into the 10-year sewer financial model developed for Task 1b. Task 1d. Rate Design and Bill Impacts Consultant shall present a five-year rate design so that impacts are easily understood by staff, elected officials, and rate payers. Consultant shall compare rate structure alternatives with the current rate structure and with rate structures of comparable, representative agencies in the Bay Area region, which shall include the appropriate members of SVCW and the Bay Area Water Supply & Conservation Agency (BAWSCA). Consultant shall also compare the customer bills produced by those rate structures. For ATTY/AGR.2022.318/HF&H Consultants, LLC (Page 12 of 27)