Fort Walton Beach Council agenda — 02-12-08 regular agenda — reading text

of capital facility charges to more adequately recover costs; v) the review of miscellaneous charges for special customer requested services; and vi) design of monthly service rates which will be sufficient to meet the operational capital and rate covenant needs of the utility system. Financial Plan for Capital Expansion Program Due to the increased growth and capacity reservation within the Martin County Utilities System Martin Downs service area, the County had a need to expand both the water and wastewater Wastewater Treatment Evaluation For The City ofFort Walton Beach TWWOPUBO01  Match Mott MacDonald Additional Information & Attachments capacities to meet future needs. PRMG developed a detailed capital finance plan to fund the costs of expansion. Based on a detailed evaluation of the financial position of the utility system, PRMG developed a funding plan which included: i) the use of unencumbered capital facility charges ( impact fees) and operating reserves to fund the project; ii) the funding of the renewal and replacement fund requirement from available reserves in order to improve the additional bonds test and bonds compliance requirements as stated in the governing bond resolution of the system; iii) the utilization of a surety to satisfy the debt service reserve requirement, which was previously funded from bonds issued in 1993 (the use of a surety provided for the release of funds from the existing funded debt service reserve fund); and iv) structuring of external indebtedness to finance the remainder of the project costs. As part of the development of the financial plan, PRMG also performed several other analyses related to the comprehensive financial plan. These analyses included: i) evaluation of historical costs and the current budgeted costs and the identification of any cost savings due to changes in operations; ii) performance of additional bonds test on both a historical and prospective basis to ensure compliance; iii) evaluation of guaranteed revenues and its impact on bond compliance based on the provisions of the bond resolution; iv) evaluation of external debt requirements recognizing both senior and junior lien ( both variable and fixed) debt requirements for capital finance purposes; and v) development of a capital needs analysis to ensure that other capital requirements of the system were being adequately funded. The finance plan was presented to utility staff, as well as the County's finance committee, which included, among others, the County' s financial advisor and County Administrator, and was approved. As a result of the capital finance plan, PRMG assisted in the subsequent development of a project feasibility report with the County's consulting engineers so that long -term indebtedness could be secured at favorable interest rates and that the project could be placed underway immediately. PRMG has annually updated the financial forecast to assist the County with its strategic planning efforts for the utility system. Utility Acquisition Services Over the past several years, PRMG has assisted the County in the acquisition of several utility systems to improve service to such customers and remove small wastewater treatment plants from the service area ( regionalization of service area). PRMG has assisted the County with nine utility system transactions. Services provided by PRMG included: development of detail financial evaluations of the utility systems, including the development of a debt capacity analysis going concern analysis, pay -back evaluation and comparable sales analysis of the systems acquired; assisted the County with the review of the engineering analysis ( Replacement Cost New Less Depreciation); assisted the County in strategic planning for the acquisitions and in negotiation of the purchase with the owners; provided assistance in mediation activities associated with a utility transaction of the County; prepare presentation materials and presentations to the Board of County Commissioners) associated with the public interest hearing ( public hearing) as required by Chapter 125, Florida Statutes. assisted in transition activities, as requested ( accounts receivable verification, drafting of notices, etc.) Bulk / Reclaimed Water Rates Wastewater Treatment Evaluation For The City ofFort Walton Beach TWWOPUBO01  Hatch Mott Additional Information & Attachments MacDonald PRMG assisted the Utilities Department of Martin County in the design and implementation of bulk wastewater rates for wastewater transmission and treatment services with the neighboring City of Stuart and IQ water rate. With respect to the bulk wastewater rates, PRMG developed an expenditure classification analysis to identify cost based rates, presented the analyses to both the City and the County for comment, and developed a Memorandum of Understanding identifying all of the general terms and conditions for service between the two entities. The rates and the terms were presented to both entities with PRMG acting as a facilitator in the negotiations between the two parties. The proposed rates and terms were accepted by both parties. With respect to the design of high pressure reclaimed water (irrigation quality or IQ) for service to a major development being constructed in the County's service area, PRMG' s responsibilities included a review of the capital cost for reclaimed water service to the development to assist in identifying the most feasible option for service, cost allocation and design of rates for the development, and preparation of a financing strategy to construct the necessary capital improvements for service delivery. Responsibilities included the performance of financial evaluation and due diligence analyses regarding the systems. Subsequent to the evaluation of the high pressure rates, PRMG developed a large user IQ rate analysis on behalf of the utility. The IQ water rate evaluation included a cost allocation analysis and the design of rates based on a " reserved capacity" basis. The rates withstood a review of a third party analysis relative to applicability. The larger user rates were approved and are being phased -in over a three -year period to ease the effects of a change in rate application. Wastewater Treatment Evaluation For The City ofFort Walton Beach TWWOPUB001  Hatch Mott MacDonald Additional Information & Attachments SARASOTA COUNTY DNS DESCRIPTION OF PROJECT OR REPRESENTATION Financial Consulting Services PRMG provided a wide variety of utility rate, financial, and management consulting services on behalf of Sarasota County. These services were primarily a direct result of a financial analysis performed by PRMG of the System operations which focused on the financial condition, ability to meet financial commitments and bond covenants, and the overall business strategies of the utility to improve its financial strength. Activities performed by PRMG have included the following: PRMG prepared a water and wastewater rate study in 2003. The water and wastewater rate study included development of a utility and cash flow computer model, development of a five - year financial forecast and cost recovery plan, modifications to the County's utility rate structure, review of water and wastewater impact fees, capacity reservation charges and miscellaneous service charges. The five -year rate plan adopted was adopted by the Board of County Commissioners. PRMG staff served as the interim financial utility director for the environmental services business enterprise for a period of approximately one year. During this time frame, PRMG was involved in the daily aspects of utility operations, primarily focusing on development of a financial plan for the utility, evaluation of a capital improvement program and funding analysis or needs assessment, evaluation of sludge hauling contractual relationships, and assisting in the daily decision -making process in order to meet the overall needs of the utility system. PRMG was involved in the preparation of a bond refunding analysis in order to refund a portion of its existing debt for overall interest savings. PRMG coordinated the issuance of the bonds on behalf of the utility system, assisted the consulting engineer in the preparation of the financial feasibility component of the issue, as well as assisted in the preparation of the parity certificate associated with the issuance of additional bonds. As a result, the County issued the Utility System Revenue Refunding Bonds, Series 2002C and achieved a debt reduction of approximating $ 350,000 annually. PRMG also assisted the County in the development of a financial plan in support of the issuance of Utility System Revenue Bonds, Series 2007. PRMG developed a cash redemption ( new money used plan that i) resulted in a net debt service reduction of Wastewater Treatment Evaluation For The City ofFort Walton Beach TWWOPUBO01  Hatch Mott Additional Information & Attachments MacDonald approximately $ 1. 0 million annually for the next 10 years; ii) improved the cash flow of the System for capital funding purposes; and iii) increased the debt coverage and financial ratios of the utility system. As part of the issuance of the Series 2007 Bonds, PRMG assisted in the development of a rating agency presentation and provided input to the rating process that resulted in an upgrade in the utility credit for the County. Serving as the utility's regulatory rate consultant, PRMG assisted the County in the evaluation of a utility rate filing submitted by AquaSource Utilities, Inc. This analysis included detailed evaluations of rate base, rate of return, operating expense, customer billing determinants and rate design, and other significant issues including an acquisition adjustment and extraordinary property loss adjustments. PRMG assisted in the conducting field review of the plant and service balances and operating expenses and prepared a report recommending the proposed rates for service. Additionally, PRMG assisted in settlement negotiations with the company and in the presentation of the results before the Hearing Officer and the Board of County Commissioners (and during public information programs before the affected rate payers). PRMG assisted the County in the initiation of its water supply contract negotiations between both Manatee County and the Peace River /Manasota Regional Water Supply Authority. PRMG' s assistance is focused primarily on the business aspects of water resource planning and the contractual terms associated with securing long -term water supply from these entities. In order to present the financial position of the utility system, PRMG assisted the County in the presentation of the Environmental Services Division (which included the water, wastewater, solid waste, and natural resources departments) before the Moody's Investor Services, Standard & Poor's, and Fitch