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REV: 08-25-2022 RL •Capital Improvement Projects: If requested by the Public Works Director or their designee(s), 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 due to growth and water demand pattern fluctuations, such as from 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 water and recycled water financial model that includes revenue requirement, reserves, reserve policies, debt service coverage, and forecasted revenues. Task 2c. Cost-of-Service Analysis Consultant shall prepare a cost-of-service analysis so that revenue requirements are distributed among the customer classes (which includes, but is not limited to, single family, commercial, ADUs, fire service connections, and construction meters) 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 consideration of the Public Works Director or their designee(s). 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 water and recycled water financial model developed for Task 2b. Task 2d. 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 comparable agencies’ rate structures, including all BAWSCA members. Consultant shall also compare the customer bills produced by those rate structures. For both comparisons, Consultant shall use tabular and graphical techniques to clearly communicate the differences. ATTY/AGR.2022.318/HF&H Consultants, LLC (Page 16 of 27)