08.01 - Request for Proposals for Water/Sewer Rate Study

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Pequot Lakes,Minnesota Rate Analysis Proposal,February 15,2007,Page 2 of 3 2. You will gain a high level of confidence that your rates and finances will adequately fund the systems for a substantial period of time.The analyses will project your rates,fees,costs, capital improvements and all other important costs and revenues,plus important financial performance measures io years into the future. 3. Being adequately funded,you will more easily be able to satisfy your customers'service and public health desires and maintain compliance with your permit to dispense water and other requirements from the regulatory agencies. 4. You will give potential funders a high level of confidence to make funding decisions in your favor. 5. You will have the documentation necessary to set rates,tap fees and other fees and charges that are fair and equitable to your ratepayers and property owners. In addition to the above returns,the final report for the analysis will include calculations of returns on investment based upon the estimated additional net revenues generated by the proposed rates and fees.Therefore,not having the final product available yet,the following estimates are only illustrative. However,they should be useful in your decision-making process. Your water and sewer systems have a total annual budget of approximately$400,000.It is my understanding that these systems are roughly breaking even on an operating cost basis.However,the systems may not be fully covering the needed costs for equipment replacement and the city is facing substantial capital improvements in the next io years.If you have me determine the rates necessary to pay all expenses,including future estimated debt service,plus build reasonable reserves and get your replacement schedules on track,your returns on investment will likely be whimsically high.The first year the return on investment will likely be over i,000 percent and rise by roughly that amount each year for two to three years.If the rate analyses play a significant role in helping you acquire capital improvement financing,the returns will go markedly higher. Work Coordination I would like for you to designate one contact person to be the primary contact for me to correspond and speak with.That will facilitate good communication and coordination.I will communicate primarily with that person but there will be times when I will need to communicate with others,as well.Certainly, near the end of the project I will discuss the analysis and present my findings to everyone you think needs to be involved. Action Item:Whoever your primary contact person will be,I need their name,e-mail address and other contact information. If I am to make an on-site visit to make presentations of my findings at meetings,I will produce all necessary handouts. I can also provide a data projector for those presentations if you do not have one available. For this analysis I will gather volume usage,rates,fees,other charges,operating costs,revenues, replacement schedules,capital improvement planning information,contractual arrangements and other data concerning your systems.I will analyze this information,coordinating periodically with your contact person.Jointly,we will arrive at a set of financial goals for your systems.I will then devise proposed adjusted rates,fees and charges and give you my recommendations for activities you should complete to achieve those financial goals. Your staff will gather the basic data for me.I suggest you follow the enclosed guide to make that simpler.This is a very iterative process so I will guide your staff and answer any questions they have as they gather data.Send documents and information to me by e-mail,fax or land mail. You should not wait until you have all the data assembled before sending it to me.Rather,send me whatever is readily available when it is available so I can work on that while you gather other data.If some of your data is in,or it can be converted to MS Word,Excel,Access,Rich Text or Adobe Acrobat program formats;e-mail that data to me at carlbrown(&mchsi.com to save time.