HomeMy WebLinkAbout17- Professional Services Agreement - AE2S Nexus, LLC - Water and Wastewater Rate Study PROFESSIONAL SERVICES AGREEMENT
THIS AGREEMENT is made and entered into this— ij day of N- e (n 201_1,
by and between the CITY OF BOZEMAN,MONTANA,a self governing municipal corporation
organized and existing under its Charter and the laws of the State of Montana, 121 North Rouse
Street, Bozeman, Montana, with a mailing address of PO Box 1230, Bozeman, MT 59771,
hereinafter referred to as "City,"and,AE2S Nexus, LLC, hereinafter referred to as "Contractor."
In consideration of the mutual covenants and agreements herein contained, the receipt and
sufficiency whereof being hereby acknowledged,the parties hereto agree as follows:
1. Purpose: City agrees to enter this Agreement with Contractor to perform for City
services described in the Scope of Services attached hereto as Attachment "A" and by this
reference made a part hereof.
2. Term/Effective Date: This Agreement is effective upon the date of its execution
and will terminate upon completion of the work included in the Scope of Services of Exhibit A.
3. Scope of Work: Contractor will perform the work and provide the services in
accordance with the requirements of the Scope of Services. For conflicts between this Agreement
and the Scope of Services,unless specifically provided otherwise,the Agreement governs.
4. Payment: City agrees to pay Contractor the amount specified in the Scope of
Services. Any alteration or deviation from the described services that involves additional costs
above the Agreement amount will be performed by Contractor after written request by the City,
and will become an additional charge over and above the amount listed in the Scope of Services.
The City must agree in writing upon any additional charges. In addition to payment methods see
disclosure in Exhibit B.
5. Contractor's Representations: To induce City to enter into this Agreement,
Contractor makes the following representations:
a. Contractor has familiarized itself with the nature and extent of this
Agreement,the Scope of Services,and with all local conditions and federal,state and local
laws, ordinances, rules, and regulations that in any manner may affect cost, progress or
performance of the Scope of Services.
b. Contractor represents and warrants to City that it has the experience and
ability to perform the services required by this Agreement;that it will perform said services
in a professional,competent and timely manner and with diligence and skill;that it has the
power to enter into and perform this Agreement and grant the rights granted in it; and that
its performance of this Agreement shall not infringe upon or violate the rights of any third
Professional Services Agreement For Water and Wastewater Rate Study I
parry,whether rights of copyright,trademark,privacy,publicity,libel,slander or any other
rights of any nature whatsoever, or violate any federal, state and municipal laws. The City
will not determine or exercise control as to general procedures or formats necessary to have
these services meet this warranty.
6. Independent Contractor Status/Labor Relations: The parties agree that
Contractor is an independent contractor for purposes of this Agreement and is not to be considered
an employee of the City for any purpose. Contractor is not subject to the terms and provisions of
the City's personnel policies handbook and may not be considered a City employee for workers'
compensation or any other purpose. Contractor is not authorized to represent the City or otherwise
bind the City in any dealings between Contractor and any third parties.
Contractor shall comply with the applicable requirements of the Workers' Compensation
Act, Title 39, Chapter 71, MCA, and the Occupational Disease Act of Montana, Title 39, Chapter
71, MCA. Contractor shall maintain workers' compensation coverage for all members and
employees of Contractor's business, except for those members who are exempted by law.
Contractor shall furnish the City with copies showing one of the following: (1)a binder for
workers' compensation coverage by an insurer licensed and authorized to provide workers'
compensation insurance in the State of Montana; or (2) proof of exemption from workers'
compensation granted by law for independent contractors.
Contractor shall indemnify, defend, and hold the City harmless from any and all claims,
demands, costs, expenses, damages, and liabilities arising out of, resulting from, or occurring in
connection with any labor problems or disputes or any delays or stoppages of work associated with
such problems or disputes and for any claims regarding underpaid prevailing wages.
7. Indemnity/Waiver of Claims/Insurance: For other than professional services
rendered, to the fullest extent permitted by law, Contractor agrees to release, defend, indemnify,
and hold harmless the City, its agents, representatives, employees, and officers (collectively
referred to for purposes of this Section as the City) from and against any and all claims, demands,
actions, fees and costs (including attorney's fees and the costs and fees of and expert witness and
consultants), losses, expenses, liabilities (including liability where activity is inherently or
intrinsically dangerous) or damages of whatever kind or nature connected therewith and without
limit and without regard to the cause or causes thereof or the negligence of any party or parties
that may be asserted against, recovered from or suffered by the City occasioned by, growing or
arising out of or resulting from or in any way related to: (i) the negligent, reckless, or intentional
misconduct of the Contractor; (ii) any negligent,reckless, or intentional misconduct of any of the
Contractor's agents; or (iii) the negligent, reckless, or intentional misconduct of any other third
party.
Professional Services Agreement For Water and Wastewater Rate Study 2
For the professional services rendered, to the fullest extent permitted by law, Contractor
agrees to indemnify and hold the City harmless against claims, demands, suits, damages, losses,
and expenses, including reasonable defense attorney fees, to the extent caused by the negligence
or willful misconduct of the Contractor or Contractor's agents or employees.
Such obligations shall not be construed to negate, abridge, or reduce other rights or
obligations of indemnity that would otherwise exist. The indemnification obligations of this
Section must not be construed to negate, abridge, or reduce any common-law or statutory rights of
the indemnitee(s)which would otherwise exist as to such indemnitee(s).
Contractor's indemnity under this Section shall be without regard to and without any right
to contribution from any insurance maintained by City.
Should any indemnitee described herein be required to bring an action against the
Contractor to assert its right to defense or indemnification under this Agreement or under the
Contractor's applicable insurance policies required below the indemnitee shall be entitled to
recover reasonable costs and attorney fees incurred in asserting its right to indemnification or
defense but only if a court of competent jurisdiction determines the Contractor was obligated to
defend the claim(s) or was obligated to indemnify the indemnitee for a claim(s) or any portion(s)
thereof.
In the event of an action filed against City resulting from the City's performance under this
Agreement, the City may elect to represent itself and incur all costs and expenses of suit.
Contractor also waives any and all claims and recourse against the City or its officers,
agents or employees, including the right of contribution for loss or damage to person or property
arising from, growing out of, or in any way connected with or incident to the performance of this
Agreement except"responsibility for his own fraud,for willful injury to the person or property of
another, or for violation of law, whether willful or negligent" as per 28-2-702, MCA.
These obligations shall survive termination of this Agreement and the services performed
hereunder.
In addition to and independent from the above, Contractor shall at Contractor's expense
secure insurance coverage through an insurance company or companies duly licensed and
authorized to conduct insurance business in Montana which insures the liabilities and obligations
specifically assumed by the Contractor in this Section. The insurance coverage shall not contain
any exclusion for liabilities specifically assumed by the Contractor in subsection(a)of this Section.
Professional Services Agreement For Water and Wastewater Rate Study 3
The insurance shall cover and apply to all claims, demands, suits, damages, losses, and
expenses that may be asserted or claimed against,recovered from, or suffered by the City without
limit and without regard to the cause therefore and which is acceptable to the City and Contractor
shall furnish to the City an accompanying certificate of insurance and accompanying endorsements
in amounts not less than as follows:
• Workers' Compensation—statutory;
• Employers' Liability- $1,000,000 per occurrence; $2,000,000 annual aggregate;
• Commercial General Liability - $1,000,000 per occurrence; $2,000,000 annual
aggregate;
• Automobile Liability - $1,000,000 property damage/bodily injury; $2,000,000
annual aggregate; and
• Professional Liability- $1,000,000 per claim; $2,000,000 annual aggregate.
The above amounts shall be exclusive of defense costs. The City of Bozeman, its officers,
agents, and employees, shall be endorsed as an additional or named insured on a primary non-
contributory basis on both the Commercial General and Automobile Liability policies. The
insurance and required endorsements must be in a form suitable to City and shall include no less
than a sixty (60) day notice of cancellation or non-renewal. The City must approve all insurance
coverage and endorsements prior to the Contractor commencing work. Contractor shall notify City
within two (2)business days of Contractor's receipt of notice that any required insurance coverage
will be terminated or Contractor's decision to terminate any required insurance coverage for any
reason.
The City must approve all insurance coverage and endorsements prior to the
Contractor commencing work.
8. Termination for Contractor's Fault:
a. If Contractor refuses or fails to timely do the work, or any part thereof, or
fails to perform any of its obligations under this Agreement, or otherwise breaches any
terms or conditions of this Agreement, the City may, by written notice, terminate this
Agreement and the Contractor's right to proceed with all or any part of the work
("Termination Notice Due to Contractor's Fault"). The City may then take over the work
and complete it,either with its own resources or by re-letting the contract to any other third
party.
b. In the event of a termination pursuant to this Section 8, Contractor shall be
entitled to payment only for those services Contractor actually rendered.
Professional Services Agreement For Water and Wastewater Rate Study 4
C. Any termination provided for by this Section 8 shall be in addition to any
other remedies to which the City may be entitled under the law or at equity.
d. In the event of termination under this Section 8, Contractor shall, under no
circumstances,be entitled to claim or recover consequential,special,punitive,lost business
opportunity,lost productivity,field office overhead,general conditions costs,or lost profits
damages of any nature arising, or claimed to have arisen, as a result of the termination.
9. Termination for City's Convenience:
a. Should conditions arise which,in the sole opinion and discretion of the City,
make it advisable to the City to cease performance under this Agreement City may
terminate this Agreement by written notice to Contractor ("Notice of Termination for
City's Convenience"). The termination shall be effective in the manner specified in the
Notice of Termination for City's Convenience and shall be without prejudice to any claims
that the City may otherwise have against Contractor.
b. Upon receipt of the Notice of Termination for City's Convenience, unless
otherwise directed in the Notice,the Contractor shall immediately cease performance under
this Agreement and make every reasonable effort to refrain from continuing work,
incurring additional expenses or costs under this Agreement and shall immediately cancel
all existing orders or contracts upon terms satisfactory to the City. Contractor shall do only
such work as may be necessary to preserve,protect, and maintain work already completed
or immediately in progress.
C. In the event of a termination pursuant to this Section 9,Contractor is entitled
to payment only for those services Contractor actually rendered on or before the receipt of
the Notice of Termination for City's Convenience.
d. The compensation described in Section 9(c)is the sole compensation due to
Contractor for its performance of this Agreement. Contractor shall, under no
circumstances,be entitled to claim or recover consequential,special,punitive,lost business
opportunity,lost productivity,field office overhead,general conditions costs,or lost profits
damages of any nature arising, or claimed to have arisen, as a result of the termination.
10. Limitation on Contractor's Damages; Time for Asserting Claim:
a. In the event of a claim for damages by Contractor under this Agreement,
Contractor's damages shall be limited to contract damages and Contractor hereby expressly
waives any right to claim or recover consequential, special, punitive, lost business
Professional Services Agreement For Water and Wastewater Rate Study 5
opportunity,lost productivity,field office overhead,general conditions costs,or lost profits
damages of any nature or kind.
b. In the event Contractor wants to assert a claim for damages of any kind or
nature, Contractor shall provide City with written notice of its claim, the facts and
circumstances surrounding and giving rise to the claim, and the total amount of damages
sought by the claim, within thirty (30) days of the facts and circumstances giving rise to
the claim. In the event Contractor fails to provide such notice, Contractor shall waive all
rights to assert such claim.
11. Representatives:
a. City's Representative: The City's Representative for the purpose of this
Agreement shall be City Finance Director, or such other individual as City shall designate
in writing. Whenever approval or authorization from or communication or submission to
City is required by this Agreement, such communication or submission shall be directed to
Kristin Donald as the City's Representative and approvals or authorizations shall be issued
only by such Representative;provided,however,that in exigent circumstances when City's
Representative is not available, Contractor may direct its communication or submission to
other designated City personnel or agents as listed above and may receive approvals or
authorization from such persons.
b. Contractor's Representative: The Contractor's Representative for the
purpose of this Agreement shall be Shawn Gaddie or such other individual as Contractor
shall designate in writing. Whenever direction to or communication with Contractor is
required by this Agreement, such direction or communication shall be directed to
Contractor's Representative; provided, however, that in exigent circumstances when
Contractor's Representative is not available, City may direct its direction or
communication to other designated Contractor personnel or agents.
12. Permits: Contractor shall provide all notices, comply with all applicable laws,
ordinances, rules, and regulations, obtain all necessary pen-nits, licenses, including a City of
Bozeman business license, and inspections from applicable governmental authorities, and pay all
fees and charges in connection therewith.
Professional Services Agreement For Water and Wastewater Rate Study 6
13 Laws and Regulations: Contractor shall comply fully with all applicable state and
federal laws, regulations, and municipal ordinances including, but not limited to, all workers'
compensation laws, all environmental laws including, but not limited to, the generation and
disposal of hazardous waste, the Occupational Safety and Health Act (OSHA), the safety rules,
codes,and provisions of the Montana Safety Act in Title 50,Chapter 71,MCA,all applicable City,
County, and State building and electrical codes,the Americans with Disabilities Act, and all non-
discrimination, affirmative action, and utilization of minority and small business statutes and
regulations.
14. Nondiscrimination: The Contractor agrees that all hiring by Contractor of persons
performing this Agreement shall be on the basis of merit and qualifications. The Contractor will
have a policy to provide equal employment opportunity in accordance with all applicable state and
federal anti-discrimination laws, regulations, and contracts. The Contractor will not refuse
employment to a person, bar a person from employment, or discriminate against a person in
compensation or in a term, condition, or privilege of employment because of race, color,religion,
creed, political ideas, sex, age, marital status, national origin, actual or perceived sexual
orientation, gender identity,physical or mental disability,except when the reasonable demands of
the position require an age, physical or mental disability, marital status or sex distinction. The
Contractor shall be subject to and comply with Title VI of the Civil Rights Act of 1964; Section
140,Title 2,United States Code,and all regulations promulgated thereunder. The Contractor shall
require these nondiscrimination terms of its sub-Contractors providing services under this
agreement.
15. Intoxicants; DOT Drug and Alcohol Regulations/Safety and Training:
Contractor shall not permit or suffer the introduction or use of any intoxicants, including alcohol
or illegal drugs, by any employee or agent engaged in services to the City under this Agreement
while on City property or in the performance of any activities under this Agreement. Contractor
acknowledges it is aware of and shall comply with its responsibilities and obligations under the
U.S. Department of Transportation (DOT) regulations governing anti-drug and alcohol misuse
prevention plans and related testing. City shall have the right to request proof of such compliance
and Contractor shall be obligated to furnish such proof.
The Contractor shall be responsible for instructing and training the Contractor's employees
and agents in proper and specified work methods and procedures. The Contractor shall provide
continuous inspection and supervision of the work performed. The Contractor is responsible for
instructing his employees and agents in safe work practices.
16. Modification and Assignability: This Agreement may not be enlarged,modified
or altered except by written agreement signed by both parties hereto. The Contractor may not
subcontract or assign Contractor's rights, including the right to compensation or duties arising
Professional Services Agreement For Water and Wastewater Rate Study 7
hereunder,without the prior written consent of City. Any subcontractor or assignee will be bound
by all of the terms and conditions of this Agreement.
17. Reports/Accountability/Public Information: Contractor agrees to develop and/or
provide documentation as requested by the City demonstrating Contractor's compliance with the
requirements of this Agreement. Contractor shall allow the City, its auditors, and other persons
authorized by the City to inspect and copy its books and records for the purpose of verifying that
the reimbursement of monies distributed to Contractor pursuant to this Agreement was used in
compliance with this Agreement and all applicable provisions of federal, state, and local law. The
Contractor shall not issue any statements,releases or information for public dissemination without
prior approval of the City.
18. Non-Waiver: A waiver by either party any default or breach by the other party of
any terms or conditions of this Agreement does not limit the other party's right to enforce such
term or conditions or to pursue any available legal or equitable rights in the event of any subsequent
default or breach.
19. Attorney's Fees and Costs: That in the event it becomes necessary for either Party
of this Agreement to retain an attorney to enforce any of the terms or conditions of this Agreement
or to give any notice required herein, then the prevailing Party or the Party giving notice shall be
entitled to reasonable attorney's fees and costs,including fees,salary,and costs of in-house counsel
to include City Attorney.
20. Taxes: Contractor is obligated to pay all taxes of any kind or nature and make all
appropriate employee withholdings.
21. Dispute Resolution:
a. Any claim, controversy, or dispute between the parties, their agents,
employees, or representatives shall be resolved first by negotiation between senior-level
personnel from each party duly authorized to execute settlement agreements. Upon mutual
agreement of the parties, the parties may invite an independent, disinterested mediator to
assist in the negotiated settlement discussions.
b. If the parties are unable to resolve the dispute within thirty(30) days from
the date the dispute was first raised, then such dispute may only be resolved in a court of
competent jurisdiction in compliance with the Applicable Law provisions of this
Agreement.
Professional Services Agreement For Water and Wastewater Rate Study 8
22. Survival: Contractor's indemnification shall survive the termination or expiration
of this Agreement for the maximum period allowed under applicable law.
23. Headings: The headings used in this Agreement are for convenience only and are
not be construed as a part of the Agreement or as a limitation on the scope of the particular
paragraphs to which they refer.
24. Severability: If any portion of this Agreement is held to be void or unenforceable,
the balance thereof shall continue in effect.
25. Applicable Law: The parties agree that this Agreement is governed in all respects
by the laws of the State of Montana.
26. Binding Effect: This Agreement is binding upon and inures to the benefit of the
heirs, legal representatives, successors, and assigns of the parties.
27. No Third-Party Beneficiary: This Agreement is for the exclusive benefit of the
parties, does not constitute a third-party beneficiary agreement, and may not be relied upon or
enforced by a third party.
28. Counterparts: This Agreement may be executed in counterparts, which together
constitute one instrument.
29. Integration: This Agreement and all Exhibits attached hereto constitute the entire
agreement of the parties. Covenants or representations not contained therein or made a part thereof
by reference, are not binding upon the parties. There are no understandings between the parties
other than as set forth in this Agreement. All communications, either verbal or written,made prior
to the date of this Agreement are hereby abrogated and withdrawn unless specifically made a part
of this Agreement by reference.
Professional Services Agreement For Water and Wastewater Rate Study 9
IN WITNESS WHEREOF,the parties hereto have executed this instrument the day and yeal-
first above written.
CITY OF BOZEMAN, MONTANA AE2S Nexus LLC
BY i By
Dennis Tay4or, T- ity Manager Print Name: 5�\Akw-� GNOO t G
�clkeot Sti.w'aa�)
Print Title: GEva1a-*,c NfA�,A G c/Z_
APPR VED AS TO FORM:
y
Greg Sullivan,Bozeman City Attorney
Professional Services Agreement For Water and Wastewater Rate Study 10
Attachment A
Scope of Services and Fee Proposal for Water and Wastewater Rate Study
The attached is the project proposal submitted by AE2S Nexus, LLC in response to the Request
for proposals Issued by the City of Bozeman along with the scope of hours and fees.
Professional Services Agreement For Water and Wastewater Rate Study 11
WORK SUMMARY O5
5
WORK SUMMARY
It is our primary objective to help include/exclude additional components. O AE2S Nexus follows the
you meet your rate-planning and financial We want to put together the scope of recommended approach as
management objectives efficiently and work best suited to meet your needs, outlined in the American Water
effectively. To facilitate construction of and would be happy to discuss the Works Association M-1 Manual-
a work plan designed to do just that,we detailed scope with you. The discussion Principles of Water Rates,Fees,and
have prepared a comprehensive Task List that follows provides an overview of the Charges and the Water Environment
(see below). It should be noted that the proposed Tasks. Federation Manual of Practice
scope of services can be further refined to 27-Financing and Charges for
Wastewater Systems.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
Task I Project Kickoff and Data Review
Task 2: Cost of Service Analysis (COSA)
Task I Integrated Financial Policy & Planning
Task 3a. Financial Implications of Conservation J
Task 3b. Capital Financing Policies and Procedures
Task 3b. Reserve and Fiscal Policies
Task 4: Rate Design
Task 4a. Rate Structure Recommendations
Task 4b. 5-Year Revenue Adequacy r-
Task 4c. Alternative Revenue Forecasting (Other Fees&Charges)
Task 5: Documentation & Presentation of Results
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
AE2S CI"q§OZEMkNtWAqEk&NDIWASTEWKPMUYOLWY91WMIZGSfsWNERVICE&RATE DESIGN STUDY PROPOSAL S.1
WORK SUMMARY O
capital improvements,historic revenues
and expenses,and base user profiles to
' create a representative test year.
As we understand some of the critical
issues serving users in the area,we will
build our COSA model,and Test Year,
to highlight the unique circumstances of
how significant large users,like Montana
State University,are served,as well as
how the new growth areas may differ in
i j �; -' service characteristics from the historic
City. The Test Year is then used to model
_ - how both costs and revenues are realized
--- and demonstrate equitability among user
classes,a critical aspect to maintaining
compliance with State law.
O In the case of Bozeman,how
` conservation is represented in the
Test Year is critical to providing
a comprehensive product. As a
result,the analysis will incorporate
a conservation approach further
outlined in Task 3.
ADS Nexus will work closely with you to determine the most appropriate approach for With an established"Test Year"
your circumstances. budget,the industry standard COSA
Task 1—Project Orientation and financial team members will be available typically consists of a three step procedure
Kickoff to travel to Bozeman. of 1)Functionalization,2)Classification,
Under this task,AE2S Nexus will One goal of the kickoff meeting is and 3)Allocation to assign utility costs
perform project administration and to confirm the proposed approach and across customer classes to support
monitoring,project planning,and project schedule. Communications and equitable and defendable utility rates,
scheduling. These activities include review protocols will be confirmed and equal to the cost of service provided.
maintaining contact and liaison with City any questions related to the information Another key consideration in the
staff and internal project staff to ensure request will be addressed at this time. performance of the COSA is determining
that the needs of the City are met in a whether to perform the analysis on a
timely manner. Task 2—Cost of Service Analysis "Cash"or"Utility"basis. This decision is
To kick off the project,we will A detailed Cost of Service Analysis often dependent upon the specific goals
develop a detailed information needs (COSA)will provide the City with an of the City as it relates to the charges
request for completion of the Study. In understanding of the portion of the total established for outside City water and
general,this request will include relevant systems costs that are attributable to each wastewater customers. We have extensive
water and wastewater system operational, user class currently served by the water experience in both methodologies and will
capital,and financial data and established and wastewater systems. A COSA is an work with the City to determine the most
City policies. Upon receipt and review of industry standard evaluation used to appropriate approach. Upon completion
the information,we will coordinate a study determine whether costs allocated to the of a draft Cost of Service Analysis,a
kickoff meeting. Depending on the City's various customer classes correspond to Progress Meeting to review the results will
preference,this meeting can be conducted the level of service provided. The overall be conducted.
either via electronic meeting or our key process includes incorporating proposed
AE2S CIT)WgOftU*NWOER\AMWASfM)ttitRilftMift-WSff M MT4114ERVICE&RATE DESIGN STUDY PROPOSAL 5.2
WORK SUMMARY O
Task 3—Integrated Financial Capital Financing and Long-
PlanningBetter Understanding,Better
Planning:Our work on the recently Term Capital Planning:As the City
As we evaluated the specific items 0
adopted Drought Management Plan has traditionally avoided debt service for
identified in the RFP from the City,and shows the current water supply utility capital infrastructure,many staff
based on our knowledge from previous forecast cannot sustain growth in may not be intimately familiar with the
projects with the City,a key theme the City at existing per capita water process or nuances of incorporating it
emerged:Smart Utility Financial Planning. use. This means action must be into long-term capital and rate planning.
This theme was woven throughout all tasks taken to ensure the City is properly As registered Municipal Advisors,our
of the RFP. We recognized this in how positioned to continue to grow and team has the experience and knowledge
the City requested specific consideration prosper. to guide you through the process and
in the analysis regarding growth forecasts avoid pitfalls. We can explain the types
and impact fees. We also saw this in the of financing available and provide the
As we look to integrate water g
stated requirement that the rate structure background information necessary to
must account for the nuances of how conservation and water supply,we g �'
understand that people's habits may really understand how financing projects
users are served and how conservation can benefit generational equity and the
planning and issues around water rights change in response to both positive and g q �'
P g g negative outside factors. One example utility as a whole. While every issuance
play an important role. Lastly,this theme is a unique circumstance,we will outline
was apparent in how the City requested of a positive factor would be programs q
PP ty re q that provide free or reduced cost low- the commonalities with debt issuance
specific advice on how to set policy and and allow the City to frame out a style of
establish appropriate r•ecedent mourn flow fixtures to replace existing fixtures
P g and lower water use(similar to the City's funding projects that fits with governance
forward. To better serve you,we will style. e will codify this policy
un you frame and existing program). Alternatively,price �' W y into a P y
dedicate time to helping g y increases are often seen as a negative that will then be applied throughout
think through these issues so you have a the remainder of the stud to set forth a
consistent and practical approach to our factor. There are many other measures y
P pp y that can be used to help craft water sustainable long-term capital plan.
financial planning process,an approach
that conservation and supply plans that take
hat reflects how you,as a community,
into account the utility as a whole and
want to serve your existing customers,as
provide options for consumers.
well as plan for new customers on your
system. The final plan will provide the Our background understanding
long-
necessary flexibility and tools required to means that we can start to build a long-
term plan for the City that will effectively
maintain a best-in-class utility for years to
identify goals for water conservation
come. This task will look in-depth at three
in light of both the growth the City is
key issues:
experiencing and the capital planning
How can the City integrate process. As this is incorporated in the rate
conservation and water supply study,our primat y focus will be on how
planning into its rate structure? rates will impact this planning. We will
provide multiple scenarios to demonstrate
What is the best way to integrate what the potential effects of pricing are on
financing into long-term capital usage and the subsequent effect on capital
planning? planning.
What are appropriate reserves for
system renewal and replacement
and what other practical steps
should the community take for a
sustainable utility?
AE2S CITIPOlfBO"A#WMEftNBr 44SfMMtWUPIfIfftgY TfiM NSTVIURVICE&RATE DESIGN STUDY PROMSAL 5.3
WORK SUMMARY
Reserves and Reasonable Fiscal bonds). As the City looks to finance capital Debt service isn't the only
Policies:Related to debt financing for improvements with debt,having well- consideration when setting reserves for a
long-term capital improvements,this task defined fiscal policies can provide utility system. Often,repair and replacement of
will include providing recommendations managers and City administrative staff with existing assets is a more pressing need to
and crafting policies that the City can use the baseline for tracking overall fiscal health establish and fund reserves,but one that is
to develop replacement policies,set reserve and can help reduce the overall cost of quite a bit more complicated to determine.
levels,manage and track spending,and borrowing when not using state-sponsored
meet coverage or other covenants(on new programs.
Asset Failure Rates on Service Life
Piping —Concrete/Masonry —Fadlities/Equipment
OIn consideration of reserve account —Mechanical Electrical _I&C
funding,a desktop reserve funding 35.00%
analysis based on a comprehensive 30.00%
review of the City's fixed asset 25.00% I
database can be performed to 20.00%
determine how to appropriately 15.00% y
balance capital spending 10.00%
and contributions to reserves "
considering system age,materials, 0.00%
size,and forecasted renewal
.0 125. ISO
rates. To forecast system renewal
needs and associated revenue
requirements,AE2S Nexus technical Annual Replacement . i
experts will develop a customized 09
water and wastewater system
renewal and replacement financial 25.00
forecasting model based on
statistical infrastructure failure rate 20-00
distributions to evaluate appropriate 15.00
annual budgetary amounts for
contributions to reserves and rate "'
funded capital.
.0
..
All of this will be conducted in a and provide you with the information issues and then provide recommendations
constructive manner with City staff. needed to make an informed decision. We with detailed rationale so you can make
As industry experts,we will bring our will hold detailed meetings with City staff well-founded decisions.
knowledge and experience to your service to get to the heart of your philosophy and
AE2S CITWWgOk44A`1FV*fEft"' h$ItW7ttgRrftMiftWM A W3TV(&ERVICE&RATE DESIGN STUDY PROMSAL 5.4
WORK SUMMARY
Task 4-Rate Design
The Rate Design task has two core What is Probabilistic
components to it:1)determining the rate As the(ity of Bozeman ta kes the steps to rea Ily f ine-tune your water
structure as a whole reflects the approach and wastewater rates for u are
the City wants to take to recouping costs asking poignant and informed questions of your rate consultant. These
� changing,growing community �
from the variety of users on the system, are cross-cutting questions that will touch on every task as we look to
and 2)ensuring the rates charged are changesincorporate conservation,
sufficient to recoup all the costs to actually attitudes into a prudenture. ,
run a sustainable utility over the 5-year to this discussion is a probabilistic revenue forecasting model. This tool,
projection period. originally developed by the Alliance for Water Efficiency(AWE)has proven
To evaluate the rate structure invaluable as we incorporate it into our detailed rate studies by allowing
itself,the results of the COSA,which new insights into how revenues may be realized and how water use
will identify what portions of the costs may fluctuate over ' periods t' allow policy ' make
are caused by each user or user class, informed decisions.
will provide a basis for determining
appropriate methods for charging
individual user classes. By seeing how Annual Service Charge and Sales Revenue
they use the system,we will be able to Simulation Distributions
pinpoint what type of charges(fixed lro +-+-+-+-+-+-+-• touts
monthly versus volumetric)make the 140 ��ra y-" 90Y
most sense as a baseline approach. E lzu i soy o
However,our approach will also take into R 1 70% M
consideration the variability that comes o r+� o
with water(and subsequent wastewater) ao soy
40%
use and the price elasticity that results hi c 3tr36
changes to consumption as costs change. LL 40 20% E
This will be done through a probabilistic zo •- -� ' 10% "
revenue forecasting model that takes into o rr' o%
account historic weather data,as well as op3 1��,,m^�yy�11ti sati o01 ti"1 01.11�1�Otis oz�1yti p10 y�o Alp 9�,0 10o ti0a
tip' ti, 'C" titi' ti, ti, ti tin.. titi. titi. 1-1 titi, 1"'' li"' lc�' 13' ellti"' tip' tip
historic rates and rate structures to provide Sales Revenue(Thou.$)
insights into the effects of conservation
and the likelihood of meeting revenue gundrr PropmA.d R.w•s
targets. Once we have established a base The graphic above represents a typical output from AWE sales forecasting and modeling.
rate scenario,we will work with the City to
approach the question of affordability in
the various rate structures. From our work incorporation into the Revenue Adequacy the rubber meets the road,and much of
as co-authors focused on Affordability in Evaluation, the decision-making and development
the latest updates to WEF's MOP-27 to The next step of rate design will that has gone into a rate structure is put
our work in Montana specifically assisting include developing a five-year revenue into practice. Throughout the revenue
the City of Bozeman with updates to adequacy model that allows the City to adequacy evaluation,we will bring the
their low-income assistance program,we see how rates and revenues may need to wide-ranging information from growth
will bring this expertise to aid the City in change over this time period in response patterns and outside revenue streams to
identifying their priorities and the best to growth and system demands. We potential debt service and the desired rate
ways to achieve them. will develop a customized model that is structure and overlay the budget to see
A second Progress Meeting comprehensive and tailored to the unique where rates need to be to have a healthy,
is anticipated to review and select needs and circumstances surrounding the sustainable utility.
preferred rate structure approaches for City. Revenue adequacy is really where
ADS CITVWgHgETW&WOER\AnIVMSfEW)t1'fRrMAft' SYSTEM MSTV44ERVICE&RATE DESIGN STUDY PROMSAL 5.5
WORK SUMMARY O
Specifically,the Revenue Adequacy budget increases for the utility as awhole, Task 5—Study Finalization and
evaluation will use revenue and revenue as well as specific line items. Documentation
requirement(i.e.,expense)projections to In addition to revenue requirements, At the conclusion of all outlined
ensure sufficient revenue is generated to: revenue projections will be developed. We project evaluations,we will prepare a
1. Provide revenue stability will incorporate growth and associated report to document final results and
(particularly in light of impact fees along with other non-rate recommendations. The draft report will
conservation efforts); revenue sources into the model. Baseline be submitted to City staff for review
2. Track on-going cash balances rate revenue projections will be developed prior to finalization. in addition,we will
and ensure that reserve targets based on projected meters and flow for the prepare a presentation summarizing final
are met;and current year,with a multi-year pro-forma results and recommendations from the
3. Project debt service coverage of future projections developed based on Rate Study for presentation to the City
requirements for any planned estimated user and flow growth. We will Commission. A fifth Progress Meeting
debt. again look to integrate the Probabilistic will be conducted at this point to review
As we dive into the Revenue Revenue Forecasting tool here to review and finalize the presentation materials for
Adequacy Evaluation,we will incorporate that rates will likely be sufficient over City Commission.
the projected revenue requirements for the the study horizon. Recommendations As final results are presented,the
most recent budget year for each system to for reserve accounts and target funding AE2S Nexus Project Team,including
be analyzed. levels identified under Task 3 will be dedicated communications specialists,
utilized. A series of rate planning scenarios is prepared to support the City in a rate
ORevenue Adequacy Evaluation= for both Water and Wastewater will be education campaign designed to engage
Detailed Review and Incorporation developed for review with City staff at a the system users in an effort to gain
of: third Progress Meeting. These scenarios their"buy-in"to necessary changes to
• Water and Wastewater System will be resented alongside data from the
Operations P g utility rates and charges. This can be
O tions and Maintenance
Opera Budgets Annual Rate Survey to see how your rates accomplished through public meetings,
• Capital Improvements Plans compare with those of other Montana key stakeholder meetings,website
(CIPs); communities, as well as other comparable content,and the possible incorporation
• The Cost of Water Supply and communities throughout the region. of informational material with utility bills
Conservation;and The Revenue Adequacy models are to help users understand the purpose and
• Other On-Going Asset designed to be user-friendly. An annual need for any proposed changes to water
Management Considerations
revenue adequacy reconciliation tool will and wastewater rates. With the assistance
be developed and incorporated into the of our on-staff communications experts,
O&M escalation factors will be Revenue Adequacy model to streamline we will work with the City to identify
developed to provide a basis for the multi- the annual rate model reconciliation the most appropriate communication
year pro-forma of O&M expenses and process. This tool,along with the models initiatives for messaging the results of the
future project financing considerations themselves,will be provided to the City Study.
will be incorporated based on CIP y
P for its continued use.
scenario projections. These escalation
factors will be adjusted based on historic 20117
i
0
To support the rate-setting efforts across the region,
we are proud to annually complete a survey of i --------
residential water,sewer,and stormwater charges
for communities in Montana,Utah,South Dakota,
North Dakota,Minnesota. Collection of this data ----------- -------
on an annual basis allows us to provide a valuable ------------
tool to utilities across the region and to gain an
understanding of rate practices for systems of
various sizes in our part of the United States.
10-00 -
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
ADS CITWWBCk1MUWiWER\AMI ASftW)1i'�ER'VntlYfiRSMU COSTW(gERVICE&RATE DESIGN STUDY PROMSAL S.6
City of Bozeman,Montana "
2017 Draft Scope and Fee Estimate -.. NEXUS Water and Wastewater Rate Study
October 10,2017 The Financial Link
Budget Hours(All Labor Fees Expenses Total AE25 Fee
Task Description Labor Categories)
Taskl Project Kickoff and Data
1.1 Kickoff Meeting(On-Site) 14 1 $2,884 1 $1,750 1 41634
1.2 Data Collection&Information Request 22 $3,436 $3,436
Task 1 Subtotal 36 $6,320 $1,750 $8,171
Task 2 Cost of Service Analysis(COSA)
2.1 Client Updates&Coordination 8 $1,648 $1,648
2.2 System&User Profiling 14 $2,432 $2,432
2.2.1 Review and Establish Test Year Budgets and Users Classes 26 $4,000 $4,000
2.3 COSA
2.3.1 Methodology Review 10 $1,608 $1,608
2.3.2 Model Development 82 $12,372 $12,372
2.3.3 Draft Review Meeting 8 $1,422 $1,422
2.4 Final Model Development
2.4.1 Model Updates 13 $2,000 $2,000
2.4.2 Results Review Meeting 1 8 $1,422 1 $1,422
Task 2 Sv r otal- 169 26,904 - 0 26,904
Task 3 Integrated Financial Planning
3.1 Client Updates&Coordination 10 $2,060 $2,060
3.2 Financial Implications of Conservation 56 $9,122 $9,112
3.3 Capital Financing Policies and Procedures 32 $4,792 $4,792
3.3.1 System Renewal Modeling 18 $3,100 $3,100
3.4 Reserve and Fiscal Policies 12 $1,944 $1,944
3.5 Review Meeting 8 $1,422 $1,422
Task Subtotal 136 $22,430 0 $22,430
Task 4 Rate Design
4.1 Client Updates&Coordination 10 $2,060 $2,060
4.2 Rate Design 50 $8,184 $8,194
4.2.1 Probabilistic Forecasting 24 $3,588 $3,588
4.3 Review Meeting 8 $1,422 $1,422
4.4 Revenue Adequacy Model Development 104 $15,774 $15,774
4.5 Rate Model Software Delivery&Training 12 $1,872 $1,872
Task 4 Subtotal 208 $32,900 0 $32,900
Task 5 Documentation and Presentation
5.1 Documentation and Report Preparation 64 $10,246 $750 $10,996
5.2 Presentation to Council 16 $3,296 $1,750 $5,046
Task-1 Subtotal 80 13,542 $2,500 $16,042
TOTAL • • 096 $4,250 $106,346-
ProfessioAal Services Agreement For Water and Wostewater Rote Study I fi
Exhibit B
4 NEXUS
Disclosure of The Financial Link
Conflicts of Interest
AE2S Nexus, LLC, a registered municipal advisory firm, ("Advisor") is providing these disclosures in
accordance with relevant municipal securities laws,rules,and regulations. These disclosures may, or may
not,accompany rates and other types of information for securities and nonsecurities that have been provided
by Advisor for informational purposes only. Provision of these disclosures does not indicate that Advisor has
been retained to provide municipal advisory services as defined by the Dodd-Frank Wall Street Reform and
Consumer Protection Act without an engagement scope of services that meets said definition.
FORMS OF COMPENSATION
Pursuant to applicable laws, rules, and regulations, Advisor hereby provides written disclosures about the
actual or potential conflicts of interest presented by various forms of compensation. Advisor provides this
disclosure unless Client has required that a particular form of compensation be used.
The forms of compensation for municipal advisors vary according to the nature of the engagement and
requirements of the client, among other factors. Various forms of compensation present actual or potential
conflicts of interest because they may create an incentive for an advisor to recommend one course of action
over another if it is more beneficial to the advisor to do so. This document discusses various forms of
compensation and the potential timing of payments to a municipal advisor.
Fixed fee. Under a fixed fee form of compensation,the municipal advisor is paid a fixed amount established
at the outset of the transaction.The amount is usually based upon an analysis by the client and the advisor of,
among other things, the expected duration and complexity of the transaction and the agreed-upon scope of
work that the advisor will perform.This form of compensation presents a potential conflict of interest because,
if the transaction requires more work than originally contemplated,the advisor may suffer a loss. Thus,the
advisor may recommend less time consuming alternatives, or fail to do a thorough analysis of alternatives.
There may be additional conflicts of interest if the municipal advisor's fee is contingent upon the successful
completion of a financing,as described below.
,Hourly fee.Under an hourly fee form of compensation,the municipal advisor is paid an amount equal to the
number of hours worked by the advisor times an agreed-upon hourly billing rate.This form of compensation
presents a potential conflict of interest if the client and the advisor do not agree on a reasonable maximum
amount at the outset of the engagement,because the advisor does not have a financial incentive to recommend
alternatives that would result in fewer hours worked. In some cases,an hourly fee may be applied against a
retainer (e.g., a retainer payable monthly), in which case it is payable whether or not a financing closes.
Alternatively, it may be contingent upon the successful completion of a financing, in which case there may
be additional conflicts of interest,as described below.
,Fee contingent upon the completion of a financing or other transaction. Under a contingent fee form of
compensation,payment of an advisor's fee is dependent upon the successful completion of a financing or other
transaction.Although this form of compensation may be customary for the client,it presents a conflict because
the advisor may have an incentive to recommend unnecessary financings or financings that are
disadvantageous to the client. For example,when facts or circumstances arise that could cause the financing
or other transaction to be delayed or fail to close, an advisor may have an incentive to discourage a full
AE2S Nexus,LLC-Disclosures
Professional Services Agreement For Water and Wastewater Rate Study 19
i�
consideration of such facts and circumstances,or to discourage consideration of alternatives that may result
in the cancellation of the financing or other transaction.
Fee paid under a retainer agreement. Under a retainer agreement, fees are paid to a municipal advisor
periodically(e.g., monthly) and are not contingent upon the completion of a financing or other transaction.
Fees paid under a retainer agreement may be calculated on a fixed fee basis (e.g., a fixed fee per month
regardless of the number of hours worked) or an hourly basis (e.g., a minimum monthly payment, with
additional amounts payable if a certain number of hours worked is exceeded).A retainer agreement does not
present the conflicts associated with a contingent fee arrangement(described above).
Fee based upon principal or notional amount and term of transaction.Under this form of compensation, the
municipal advisor's fee is based upon a percentage of the principal amount of an issue of securities (e.g.,
bonds)or,in the case of a derivative,the present value of or notional amount and term of the derivative.This
form of compensation presents a conflict of interest because the advisor may have an incentive to advise the
client to increase the size of the securities issue or modify the derivative for the purpose of increasing the
advisor's compensation.
AFFILIATED ENTITIES
Pursuant to applicable laws, rules, and regulations, Advisor hereby provides the Client a written disclosure
regarding material, actual or potential conflicts of interest. The following represent the material conflicts of
interest known to Advisor as of the date of this Agreement:
• Advisor's affiliated entity, Advanced Engineering and Environmental Services, Inc. ("AE2S") has
provided engineering and related services to the Client, including in relation to projects for which
advisor may provide services,and AE2S may continue to provide such services in the future at the
sole discretion of the Client using Client's customary services procurement process. All services
previously provided by AE2S have been under a separate agreement with the Client. All future
services provided by AE2S will also be under a separate agreement with the Client. Client and
Advisor shall mutually agree to any additional mitigation efforts either party may determine necessary
for any specific circumstances as they arise.
• Advisor's affiliated entity, AE2S Construction, LLC ("ACL") may perform construction work on
behalf of the Client,including in relation to projects for which advisor may provide services, at the
sole discretion of the Client. All work performed by ACL will be provided under a separate
agreement with the Client. Client and Advisor shall mutually agree to any additional mitigation
efforts either party may determine necessary for any specific circumstances as they arise.
No additional material,actual or potential conflicts of interest have been identified by Advisor.
Submitted: f(7Z/(p
Ryan Graf,Ch l
Hance Officer
AE2S Nexus,LLC-Disclosures
Professional Services Agreement For Water and Wastewater Rate Study 20