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ATTACHMENT A COMPREHENSIVE WATER, WASTEWATER AND RECLAIMED WATER RATE STUDY SECTION I SCOPE OF SERVICES This comprehensive rate study addresses five primary objectives expressed by the County: 1) revenue sufficiency; 2) appropriateness of existing rate structure; 3) funding of or modification to the Capital Improvement Program (CIP); 4) updating cost recovery associated with ancillary charges and fees; and 5) updating the wastewater industrial surcharge. METHODOLOGY The methodology used for the comprehensive rate study consists of cost of service rate principles with consideration given to community standards. This methodology includes an emphasis on the relationship between customer demand and usage characteristics within each customer classification and budgeted operating fiscal requirements associated with such demand and usage characteristics. The objective is to equitably recover operating expenses from customers in relative proportion to demand and usage characteristics through rates that are easily managed by the utility and understood by the customers. This process includes the avoidance or minimization of subsidization between services. PROJECT APPROACH The Consultant will coordinate with County staff to obtain or develop historic, current and projected information, data and assumptions necessary to formulate findings and conclusions relative to the customer base and operating fiscal requirements. Data will be incorporated into a dynamic computer model where findings and results associated with various scenarios and alternatives can be evaluated for appropriate compliance with financial, legal, customer and utility requirements. Activities include: a) Identifying customer characteristics through a billing frequency analysis for rate design/rate structures, rate setting and revenue projection purposes; b) Evaluation and modification if necessary of the existing water, wastewater and reclaimed water rate structure; c) Allocation of fiscal requirements based on cost of service principles relative to customer service, demand and usage; d) Projection of fiscal requirements based on escalation factors relevant to each budgeted line item; e) Review and development of near and long term sources and uses to address CIP; f) Development of equitable and appropriate user rates and charges, which together with certain other revenues are sufficient to pay 100 percent of all operating expenses, debt service associated with all outstanding debt and any projected revenue bonds, renewal and replacement requirements, debt service coverage provisions, capital provided through user fee revenues, required transfers, and other authorized fiscal requirements not including CIP; g) Development of uniform septic to sewer policy. h) Adjustment of ancillary charges base on review of personnel, equipment and material costs; i) Review, evaluation and adjustment of wastewater industrial surcharge; j) Development of a computer rate model with provisions for multi-year projections to provide options and address future operating requirements; and k) Meetings, discussions and presentations to County staff. A modified cost of service methodology will be used that incorporates reviews, investigations and analyses necessary to identify costs of services and customer determinants required to establish appropriate user rates reflecting just and equitable recovery of water, wastewater and reclaimed water service costs. The approach includes the development of a computer rate and financial feasibility model platform to analyze, develop, review and provide forecasts of customers, usage and fiscal requirements with the ability to activate a strategic funding module addressing the Utility's CIP. The model is designed to provide graphic outputs reflecting the salient results of alternatives and scenarios providing comparisons for quick and understandable presentations. Page 1 of 6