08.01 - Request for Proposals for Water/Sewer Rate Study

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Bonne Terre,Missouri,December 21,2006,Page 3 of 5 7. Consider reformatting your financial statements so they include calculations for operating and coverage ratios.You may want to use the financial statements template available at http://carlbrownconsulting.com/Tools.htm as a guide to do this.There are other tools and resources at this link you may find useful. 8. Check with your attorney for language and legality of all charges and issues discussed. The remainder of this letter covers specific issues for the sewer system. Action Items The following actions are required to achieve the results predicted by the analysis entitled, "Bonne Terre, MO Proposed Sewer Rates Scenario 2.5." Execution of most of these actions is beyond the scope of my rate analysis project. However,if you desire help implementing any of these actions I would be glad to provide it as a follow-up service. 1. Adjust or establish, as appropriate,water user rates as follows: • Raise the minimum charge 36 percent to $10.54 for all customers. • Raise unit charges to $3.74 for all volume used. • Raise the standard tap fee to $1,50o and other tap fees proportionately. In addition, rewrite the ordinance to allow the city to charge the actual cost of effectuating a tap if that cost is greater than the standard cost. • Set late payment penalties at$10.00 or 10 percent of the outstanding balance each month,whichever is the greater amount,or retain your current penalties if they are greater. • Establish disconnection fees that fully recover the costs of disconnecting service to a customer's property to enable the city to effectuate disconnections without charging those costs to current paying customers. Make sure you capture all costs,including administrative costs. • Establish reconnection fees that fully recover the costs of reconnecting service to a customer's property. 2. The analysis assumes you will adjust your rates very soon and start collecting at the new rates on March 1, 2007. 3. Each subsequent year the city should recalculate the rates needed and adjust them either as soon as practical or have new rates go into effect on the first day of the new fiscal year to make financial tracking easier.This analysis assumes average rate increases in future years of five percent each year. 4. Quarterly, compare your financial performance with the projections of this analysis. If your actual financial performance runs significantly below my projections for a period of six months or more, contact me.As a part of this project I will review your situation to determine if anything needs to be done and what that should be. 5. As described in my service proposal to you, have me conduct a brief review of your situation one year or less from now to assure you are still on track financially.This can probably be done by phone and e-mail between us. If your financial situation changes as predicted in this analysis, I will recommend a simple inflationary adjustment to your rates for the next year. 6. Have me conduct a full rate analysis no longer than three years from now and sooner if your actual financial performance and my projections diverge significantly.That is likely since your capital improvement project will occur during that time.Alternatively,if your staff does future analyses, I suggest you have me review and comment on those analyses as a follow-up service to assure that all important considerations have been covered.A second set of experienced eyes can be very helpful in spotting overlooked or seemingly insignificant issues.