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OUR APPROACH In order to address your specific requirements with regard to rate structure, specifically ERU assignments for land uses, and the subsequent analyses that may be required, depending upon the results of the rate structure analysis, our approach to this project will include three phases. Phase I - Review Background Data and Evaluate the Fairness and Equitv of the County's Current Equivalent Residential Unit (ERV) Land Use Assignment Chart In Phase I, we will review relevant background information and data and will directly address the County's concerns regarding the fairness and equity of the current ERU Land Use Assignment Chart. Although we will review the process of determining appropriate ERU assignments in general and for all land uses, we will specifically address the concerns regarding the allegation by certain per - manufactured and mobile home customers that an ERU assignment of 1 ERU exceeds the ERU assignment that would be justified by their water usage. We will base our conclusions and recommendations upon analysis of usage by land use type within the County from County billing records, authoritative research on ERU assignment and standards adopted and/or recommended by agencies such as the Florida Department of Environmental Protection, the State Health Department and others identified during the course of the study. Phase II - Develop a Conceptual Design of the Water and Wastewater Rate Systems In Phase II, if authorized based upon the results of Phase I, we will develop a conceptual design of the utility rate systems for the aforementioned County utilities. This conceptual design will consist of 1) the conduct of a revenue sufficiency analysis and the development of a five year rate plan and financial management program - including a borrowing program which will identify sizing, timing and financing source of required borrowing, 2) an analysis of elements of the current water and wastewater rate structures not evaluated in Phase I, and 3) development of recommendations as to rate structure modifications to meet the County's objectives and comply with generally accepted rate making practice. We will develop a five year financial management program, rate plan and rate structure recommendations using interactive work sessions with County staff in which we will examine the impact of alternative scenarios upon key financial indicators by use of graphical representations projected on a large screen from our computer rate models which will be up and running and upon which we will conduct the alternatives analyses interactively with County staff. Phase II can be completed quickly. Our approach focuses concentrated attention during Phase II to 1) quickly integrate County staff into the process, 2) quickly determine the overall financial outlook for the Utility, and 3) determine the goals and parameters for development of specific rates and charges in Phase III. Phase III - Conduct a Cost of Service Analysis and Calculate Rates and Fees In Phase III, we will conduct a fully allocated cost of service and rate study to properly identify and allocate costs (including indirect and interdepartmental costs), conduct a bill frequency analysis to derive the necessary customer and billing data for rate computations and develop specific rates, charges and impact fees for each utility integrated with a detailed customer impact analysis. Rates and fees will be developed in accordance with the rate structure recommendations of Phases I and II and a customer impact analysis will be performed simultaneously with rate calculations, allowing us to include the County staff in interactive work sessions to calibrate cost allocation and rate structure variables according to customer impact. As in Phase II, in these work sessions, we will conduct alternative scenario analyses interactively with County staff with our rate models up and running on the computer. This allows us to develop final rates and fees that generate sufficient revenues, yet are structured so as to be sensitive to the County's objectives with regard to customer impact. Customer impact will be examined for each utility rate and for the combined impact of all subject utilities upon customers of varying sizes and with various usage profiles within customer classes. Examples of two types of customer impact analysis charts are presented on the following page. NOVEMBER 5, 1997 -25- 0 J ,.