2016

Financial Services

Statement of Qualifications

2

Your Partner in the New Economy

It’s a new economy. Since the global financial collapse, the U.S. and the world entered what some call a ‘new economy’. It’s a place where what used to work doesn’t and where everything is harder than it once was.

Our utility clients have not been immune to the effects of the changing world economy. Historically safe and stable businesses, today’s utilities face new and sometimes unprecedented challenges. Demand for services is falling affecting once stable revenue streams; capital markets are more restrictive and more regulated limiting access to funding; customers have less money and are more resistant to fee increases for public services; and utility infrastructure faces a critical need for reinvestment in the billions of dollars.

Hawksley Consulting provides financial guidance that makes a difference. With the perspective that can only come from partnering with utilities just like yours in multiple locations around the nation and around the world, our financial experts find the root causes of concern, and give you the options you need with results you can trust.

Contents

Financial Planning 3 Data Products 22

General Fund Solutions 8 Our People 25

Cost-of-Service Analysis 10 Project Examples 27

Utility Rates and Fees 15

Affordability Analysis 18

UTILITY FINANCIAL PLANNING

3

4

Optimal Performance Starts Here

The trademark of a great plan is that it safely gets you where you want to go.At Hawksley, our experts understand that the success of your utility is often judged on how well you avoid financial turmoil while you continue to invest in your assets and deliver great service. A financial plan from Hawksley helps you identify difficulties in advance, analyze your options, and plot the course for a safe arrival at your future. Our FAMS-XL modeling platform always result in the lowest possible rates for your customers without sacrificing the financial performance you need.Optimal Results Built-In Customer Focus Performance PlanningOur financial planning models contain years of experience embedded in customized VBA code and scenario management tools that make the task of finding the best financial path as simple as possible. Everyone has a financial model, we have a optimization process to find you the best results possible, every time.

The task of finding the best plan that will minimize impact on ratepayers is a difficult one, which is why we developed proprietary algorithms that quickly find the best mix of debt and cash funding for capital projects with a smooth and predictable plan for rate increases. Our financial plans always find the lowest rates possible.

What are the financial performance metrics most important to you? Whether you need to keep an eye on cash reserves, monitor coverage ratios, or increase your credit rating, Hawksley gives you dozens of financial metrics and ratios as part of our standard reporting outputs so you can plan for your success.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 190%

40%

80%

120%

160%

Years

Cum

ulat

ive

Rat

e In

crea

se

Hawksley Financial Plan93% capital projects funded;50% reduction to rate impact;0% new debt

Actual Client’s Financial PlanBefore Hawksley engagement

Custom Algorithms for Optimal Results

5

It’s not ‘the usual’ model.Microsoft Excel models are the standard in today’s utility financial planning tools. It seems every consultant has one, and for good reason: it’s an excellent and flexible analytical tool that can be customized quickly for your needs.

But ours is no ordinary model. We’ve spent years perfecting customized VBA coding that allows you to quickly find the optimal solution for funding your projects and sustaining operations at the lowest possible cost to your rate payers.

Evaluate Goals & Constraints

Propose a Debt Ceiling

Calculate Level Rate Increases

Recalculate Need for Debt & Reduce

How it Works

Algorithm reads the values input in the model for debt coverage, fund reserve, and others, and stores these values as constraints.

For a selected period between 1 and 3 years, the algorithm ‘proposes’ a debt ceiling to cover the cash flow gaps sufficient to fund projects and reserves.

If a rate increase is necessary to meet the constraints, the algorithm changes rates at an equal level for each of the 1 to 3 years being considered.

If the rate increases raise additional cash, the algorithm reduces the amount of debt in the ceiling to the minimum needed.

The algorithm manages an optimization process that repeats itself as many times as necessary until a solution is found that minimizes both the debt issued and the rate increases needed!

6

A Focus on the Impacts that Matter

We Keep Your Eye on the Real Bottom Line.Publicly owned utilities are made to provide needed services to their communities at the lowest possible cost to the rate payers. A long-term financial plan provides tons of information and metrics to help keep you on track, but its our focus on rate impacts that makes the entire process useful and relevant.

Our financial plans result in an actionable long-range plan for adjustments to utility rates. Accomplish all your goals without the turmoil. We provide smooth, predictable increases that are always the minimum amounts necessary, guaranteed.

Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5

6% 6% 6% 6% 6%

29% 29%

Step 1: Uncalibrated

Step 2: Step-Calibration

Step 3: Smoothed Calibration

126%

All three will work, but which one would you prefer?

….we thought so.

7

Custom Outputs for Optimal Communication

If we can measure it, you can track it.Most of our clients require some level of customized reporting above and beyond our standard outputs. No matter what your specific needs, if there is a financial outcome you want to track, our consultants can customize your plan to do what you need it do for you.

Simple, attractive reporting tailored for what’s important to you. We reduce the complexity of financial information into simple, understandable reports that are perfect for presenting to elected bodies, or for posting on your websites. Clear, effective communication of financial data is a cornerstone of our financial services practice.

FINANCIAL PLANNING FOR GENERAL FUNDS

8

9

Solving the General Fund Crisis

A New Paradigm for Local GovernmentGeneral funds were not immune from the global financial meltdown. Historically stable revenue streams from property tax, and economic growth fueled by active debt markets came to a halt. The new economy is one with lower tax receipts, high demand for public services, and fewer opportunities for growth. Our clients asked for solutions, and we answered with all the features and benefits of our FAMS-XL utility plan, but tailored for the complexity of general funds.

Uniquely Yours Solutions that Work The Buy-in is Built-inThe general fund is a complex network of reporting entities from police departments, to public works, to parks and recreation and more. No two communities are the same, and so our model is built with the ability to quickly customize everything from the names of the funds, to the way the revenues flow into an among them, to the way you manage and report.

Our structured approach helps focus the evaluation to cost reductions first, diversified revenue sources second and increases to current revenue sources third. The effect upon tax payers is always in focus, and our model accounts for impacts in property tax, sales tax, and fees altogether into a comprehensive cost impact for residents and businesses.

Solving local government funding issues requires a lot of agreement from a lot of stakeholders. Our specially adapted version of FAMS-XL allows you to test all the ideas in a live setting with all stakeholders present and instantly evaluate the results together. It’s an approach that satisfies the curiosities of everyone involved and it often leads to consensus.

2015 2016 2017 2018 2019-$50-$40-$30-$20-$10

$0$10$20$30

Total Unrestricted Reserves

Last Plan FAMS-XL Plan City Target

$ m

illion

s

COST-OF-SERVICE ANALYSIS

10

11

The Key to Unparalleled Defensibility

A truly equitable rate is one that reflects the true cost of service.According to the latest EPA assessment of community water systems, most utilities don’t charge enough to recover their costs completely. You don’t have to be one of them. The key to charging the right amounts to the right customers is a Hawksley cost-of-service analysis. We break down the system costs and produce an air-tight connection between the rate you charge and the costs you incur. It’s the legal standard – it’s Hawksley’s every day practice.

Detailed Cost Knowledge Connected to Rates Sustain Your BusinessWe break utility system costs down into operating and capital costs and determine where exactly in the system those costs are incurred. How much does it cost to treat water? How much for storage and delivery? How about fire fighting? We uncover it all in dollars and cents per unit of service provided as every cost becomes known and measured.

In many jurisdictions, it has become critical to support the rate you charge with the costs you’ve incurred. While this has always been generally true, legal cases are now challenging utilities to justify individual elements of their rate structures with cost justification for each. Our analysis can provide an air tight connection between costs and rates.

Public utilities may be non-profit enterprises, but that doesn’t mean they don’t make money. To the contrary, they must make money in order to be sustainable. The question is how much is appropriate? We can help you find the right spot to become sustainable and stay that way. It’s part of every cost-of-service we do.

$

source of supply

treatment

transmission

pumping

metering

$

Total O&M and Capital

Costs

12

Defensibility is Detailed Cost Knowledge

Your System is Unique, and so are Your Costs.Water systems are like snowflakes: each one looks alike from a distance, but in truth no two are the same. Hawksley’s cost-of-service analysis breaks down the unique costs of your system. Whether yours is a groundwater system with minimal disinfection treatment only, or you have to collect source water from hundreds of miles away and pump it to a dozen elevations after a complex treatment process, our standard techniques will provide you with detailed cost data for every system function so you can know where your costs are incurred and how much you have to charge your customers as a result.

$0.00

$1.00

$2.00

$3.00

$4.00

$1.10 $0.33

$1.35 $0.41 $0.23

$0.84 $0.24

Cumulative Costs Cost of This Function

$/1,000 gal.

13

Cost ItemCost Item

For Your Rates and So Much More

Cost Items

Function

Demand Type

Joint Useshared by all

ClassA

ClassB

ClassC

ClassD

ClassE

ClassF

wholesaleretail

ClassE

ClassF

wholesale

Detailed Cost Information Gives You More than Just Defensible Rates, it Gives you Actionable Business Intelligence.With our approach, you will have unparalleled knowledge of your costs that will not only make your rates air tight, but will also give you insights to your business you’ve never had before.

What you want to know…

Hawksley

Others

Total and average cost per unit for each customer class Total cost of avg. day, peak-day, and peak-hour demands. Costs by pressure zone or other locational factors. Costs by business activity. Cost of unbilled water. Costs by utility function from source to tap.

Cost ItemCost ItemSpecific Usesshared by some

14

Master the Right Kind of Profitability

Being a Non-Profit Doesn’t Mean “Broke.”Even though municipal utilities are not operated to maximize profits like a normal business, that doesn’t mean they have to lose money. On the contrary, revenues must routinely exceed expenditures on an annual basis in order to promote a balanced budget, and to raise long-term funding for capital projects. It’s not only OK to make money, it’s essential to the sustainability of the utility.

Operating Costs

Debt Service

Operating Costs

Depreciation

Interest Expense

Equity ReturnsReserve & CIP

Ratepayer Savings

Maximum Level of Economic

Profit

Appropriate Municipal Earnings

Model

Rat

e C

harg

ed Rate C

harged

We help you manage earnings to truly sustain your utility and we can measure the benefits

you provide to ratepayers.

UTILITY RATES AND FEES

15

16

Your Bill is One Important Number

The rate you charge says a lot about you, and your customers are listening.Of all the things you do, the rate you charge is the one that all your customers see. Every month they are reminded of the value of everything you’ve done with just one number on their bill. Make that number the best it can be with a Hawksley rate design. We help negotiate the options and find the right one for you and your customers. From the most complex structure to the very simple, we have the perspective help you choose.Your Rate, Your Values Connected to Costs Manage DemandEvery community is different and utility rates that work well in one may not work at all in others. Do you desire conservation? Is rate stability more important? The answers to these questions and others can help your Hawksley team guide you to the right options for you and rate structure that reflects your values.

The foundation of a great rate structure is its link to cost-of-service. Hawksley never provides rate design services without an understanding of your cost-of-service basis. The rates we design are tied directly to your costs making your rates dependable, explainable, and defensible to even the most ardent of critics.

It’s no secret that customers react to prices by changing their demand behaviors. Because of this, a properly designed rate can be a very effective demand management tool. Hawksley knows how to design rates to send the right price signals to the right customers at the right times to give you new ways to sustain.

Perceived fairness

17

Capacity Fees

As systems grow, capacity fees can be an important source of capital to help defray the full costs. As the cost of utility infrastructure has increased, the cost of holding or building new capacity to serve new customers has become its own kind of financial burden. When properly designed, capacity fees will cause new customers to pay their fair share of the capital costs that have been incurred to provide the capacity to serve them. Yet, capacity fees are one of the most contested of all utility charges. Getting it right requires a rigorous evaluation of both the system itself and the costs of expanding it.

Full Cost Recovery Linked to Your Plan Air Tight DefensibilityInvestments in infrastructure carry three types of costs: the raw cost of the assets themselves; the cost of inflation; and full opportunity cost. All of these costs are real and measurable, but not many recover them all. Hawksley elevates your understanding of these costs allowing you to seek out the most equitable fee possible.

Capacity fees are all about growth and the investment required to facilitate it. Part of your investment has already been made, and another is yet to come. Your master plan and CIP are keys to ensuring the charge is set correctly in terms of units of capacity as well as the expected cost of expanding. Our approach gives financial perspective to your plans.

Capacity charges are among the most litigated of all utility rates. Our consultants have successfully defended their work in courts all over the country, so we know our approach provides undeniable linkage of costs incurred to service provided making your charges defensible.

AFFORDABILITY ANALYSIS

18

19

When Affordability Matters

Utility services are no longer the most affordable household expense.As a utility, you can’t control the macro economy in your community. Like everyone else, you can only react to events as they unfold. One of the biggest issues facing utilities today is the affordability of the services you provide. Whether you’re facing regulatory enforcement, or just trying to make your plan fit with the financial capacity of your customers, an affordability analysis from Hawksley will arm you with a detailed understanding of how much is too much, and for whom.For Every Customer All Income Levels Accuracy is the StandardIn large communities, income levels vary across households and tend to be grouped into neighborhoods. Our affordability analysis examines income and rate impacts for every census tract in the service area and returns a simple color code for each indicating high, medium, or low financial burdens. No customers are excluded.

Normal affordability analyses only look at your average bill for one customer: the one who happens to earn the median household income exactly. Our analysis examines income distribution fully across 16 standard income bands in every census tract. From very high to very low income levels, you will know the impact on all customers, not just one.

Customers don’t receive the ‘average bill’ from you, they receive an actual bill for the services they used. Our affordability analysis cross references actual billing data to each census tract to compare real bills to real household income, resulting in the most accurate assessment of affordability currently available anywhere.

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Water/Sewer Bills CPI-U Income Growth

Water & Sewer bills have increased at 3x the rate of inflation since 2000.

Source: US Census Bureau

20

Affordability Like You’ve Never Seen Before

2020 20262015

Affordable Unaffordable

We provide decision quality analyses in visual formats that are easy to understand.With 53 data points for every census tract, you can imagine that the amount of information in a standard Hawksley affordability analysis might become overwhelming. Take those data points and project them 20 years into the future by linking to one of our financial plans, and the cloud of data becomes even more daunting. We turn all your data into decision-quality information, presented in the format you need so you can use it to make critical decisions.

21

When You Need the Data, It’s There

Current Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected

City/Town MHI 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026150 Pawtucket city 1,736 $42,500 1.02% 1.11% 1.18% 1.20% 1.23% 1.30% 1.41% 1.57% 1.75% 1.85% 1.91% 1.95% 2.00%151 Pawtucket city 1,745 23,882 1.79% 1.94% 2.07% 2.11% 2.16% 2.28% 2.47% 2.76% 3.08% 3.25% 3.35% 3.43% 3.51%152 Pawtucket city 1,451 11,612 3.82% 4.14% 4.40% 4.49% 4.60% 4.84% 5.25% 5.85% 6.53% 6.89% 7.11% 7.28% 7.44%153 Pawtucket city 866 33,281 1.29% 1.40% 1.49% 1.52% 1.55% 1.64% 1.78% 1.98% 2.21% 2.33% 2.41% 2.47% 2.52%154 Pawtucket city 901 33,750 1.28% 1.39% 1.48% 1.51% 1.55% 1.63% 1.77% 1.97% 2.20% 2.32% 2.40% 2.45% 2.51%155 Pawtucket city 1,655 50,670 0.85% 0.92% 0.97% 0.99% 1.02% 1.07% 1.17% 1.30% 1.45% 1.53% 1.58% 1.62% 1.65%156 Pawtucket city 1,024 52,576 0.78% 0.85% 0.90% 0.92% 0.95% 1.00% 1.08% 1.21% 1.35% 1.42% 1.47% 1.51% 1.54%157 Pawtucket city 1,382 52,000 0.86% 0.93% 0.99% 1.01% 1.03% 1.09% 1.18% 1.31% 1.47% 1.55% 1.60% 1.63% 1.67%158 Pawtucket city 1,491 60,223 0.72% 0.78% 0.83% 0.85% 0.87% 0.92% 1.00% 1.11% 1.24% 1.31% 1.35% 1.38% 1.41%159 Pawtucket city 1,108 49,972 0.86% 0.94% 1.00% 1.02% 1.04% 1.10% 1.19% 1.33% 1.48% 1.56% 1.61% 1.65% 1.69%160 Pawtucket city 1,523 27,313 1.56% 1.69% 1.80% 1.84% 1.89% 1.99% 2.16% 2.40% 2.68% 2.83% 2.92% 2.99% 3.06%161 Pawtucket city 1,839 28,456 1.56% 1.69% 1.80% 1.83% 1.88% 1.98% 2.14% 2.39% 2.66% 2.81% 2.90% 2.97% 3.03%163 Pawtucket city 1,135 56,509 0.79% 0.85% 0.91% 0.92% 0.95% 1.00% 1.08% 1.20% 1.34% 1.42% 1.46% 1.50% 1.53%164 Pawtucket city 1,698 30,729 1.39% 1.50% 1.60% 1.63% 1.67% 1.76% 1.91% 2.13% 2.38% 2.51% 2.59% 2.66% 2.71%165 Pawtucket city 1,812 53,682 0.85% 0.92% 0.97% 0.99% 1.01% 1.07% 1.16% 1.29% 1.44% 1.52% 1.57% 1.60% 1.64%166 Pawtucket city 707 35,313 1.24% 1.34% 1.42% 1.45% 1.49% 1.57% 1.70% 1.89% 2.11% 2.23% 2.30% 2.36% 2.41%167 Pawtucket city 1,238 31,421 1.34% 1.45% 1.55% 1.58% 1.62% 1.71% 1.85% 2.07% 2.31% 2.43% 2.51% 2.57% 2.63%168 Pawtucket city 1,308 64,625 0.68% 0.73% 0.78% 0.80% 0.82% 0.86% 0.93% 1.04% 1.16% 1.22% 1.26% 1.29% 1.32%169 Pawtucket city 850 65,455 0.72% 0.78% 0.82% 0.84% 0.86% 0.90% 0.98% 1.09% 1.22% 1.28% 1.32% 1.35% 1.38%170 Pawtucket city 1,762 51,384 0.87% 0.94% 1.00% 1.02% 1.05% 1.10% 1.19% 1.33% 1.49% 1.57% 1.62% 1.66% 1.69%171 Pawtucket city 1,844 39,038 1.11% 1.20% 1.28% 1.31% 1.34% 1.41% 1.53% 1.71% 1.90% 2.01% 2.07% 2.12% 2.17%

Census Tract

Number of Households

Multiple Years of Projections

Easy-to-Read Results That Tell You What’s Going on in an Instant

We give you the data and analysis to pass every kind of scrutiny.Let’s face it: public service brings with it public and sometimes legal scrutiny. Our consultants are nationally recognized experts who understand the need to always support the findings at the highest levels. Our affordability work has been used in EPA consent decree cases where it has been assailed by opposing experts. Our approach stands the test time because, while it offers thousands of degrees of detail more than standard government approaches, it is based entirely on factual data that yield undeniable results.

DATA PRODUCTS

22

23

Municipal Utility Financials

Wouldn’t it be nice know how you compare? With an industry as widespread as the water industry, it’s often been difficult to find simple data to help inform financial policymakers on what is “normal”, or better yet, the difference between “good” and “great.” Hawksley has developed one of the largest repositories of financial metrics for the US water sector precisely to help utility managers answer these questions with real data instead of subjective assumptions. We help utilities make fact-based decisions with our comprehensive warehouse of financial fact.

Accurate and Unbiased Comprehensive EffectiveThere are other data repositories available, but many lack accuracy because the data are self reported and unchecked. Hawksley uses only audited financial statements that are publicly disclosed on agencies’ websites. The data are then hand-entered and go through two quality checks before becoming part of our financial database.

Our data set is completely unbiased with utilities selected randomly from throughout the U.S. Our database grows every day, but currently includes 500 agencies, 4 years worth of reports, and 100 data points for every year of information reported, for a total of 200,000 data points that can be filtered and sorted so you can make it all relevant to you.

We provide standard reporting outputs including dozens of typical financial ratios and a complete common-size set of financial statements. Every ratio and output is easily compared to industry averages. Customized reporting allow us to create custom league tables comparing your utility to industry leaders, or industry neighbors – whatever the need may be.

24

The Largest Database of Utility Financials

• 2,000 municipal utility audits in a single place

• 500 agencies represented

• 100 data points for every reporting year

• Standard and customized reporting features

• Unlimited possibilities

OUR PEOPLE

25

26

Our Strength is our Team

• 29 full-time consultants, more than any other firm in the water sector

• More 20-year+ consultants than any other firm

• More members of the AWWA Rates and Charges Committee

• Over 250 years of combined experience

• Completed over 1,000 utility financial studies

• Located in 8 states and every time zone

Note: not all staff shown

PROJECT EXAMPLES

27

28

Fort Lauderdale, Florida

The City of Fort Lauderdale is a city of approximately 270,000 population in southeast Florida and a well know tourist destination and center of commerce in the region. After the collapse of the financial and housing markets in 2008 and the resultant precipitous drop in City revenues, the City, like many other cities and counties in the country, struggled to balance their budget each year with cost cutting measures, use of reserves and deferral of capital projects.

We have provided utility financial planning and utility rate services to the City for a number of years and in FY 2012, during a review of the water and wastewater utility financial plan with the City Manager, we discussed our recent development of a financial sustainability model for the General Fund that worked much like our FAMS-XL financial plan development model that we had been using for the City’s water and sewer utility. That discussion resulted in the City retaining us to develop a ten year financial sustainability model for the City and the facilitation of a decision support process to assist the City Manager in supporting his City Commission in 1) understanding the depth of the financial challenges facing the City, and 2) developing a plan that if implemented would provide the City a sustainable financial future.

We worked closely with City staff in the population of the model and the development of a sustainable financial plan. The City was facing annual cash flow deficits of about $18 million and we projected that the City would deplete its reserves to a zero balance within about three years if nothing was done. We conducted several interactive work sessions with the City Commission, with our model up and running and projected on a large viewing screen, and worked with them interactively to a solution that included a significant cost saving measure and an increase in the City’s Fire Assessments from 50% cost recovery to 100% cost recovery. We also showed that with the plan that was ultimately adopted, the City could begin to devote significant dollars towards sorely needed capital improvements that had been deferred since the 2008 recession.

The City Commission had us attend its final budget hearing in FY 2013 with our model up and running and projected on a large viewing screen as they made their final decision regarding the level of reserves versus capital expenditures going forward.

Services Provided: Integrated Financial Sustainability Analysis; General Fund, all utility funds and special revenue funds (eight funds total).

Contact: Lee Feldman, City Managerlfeldman@fortlauderdale.gov(954) 828-5013

29

Castle Pines North Metropolitan District

Located 20 miles south of the Denver metropolitan area, Castle Pines North is a bedroom community of approximately 10,000 residents. Like all of its neighbors, the District has relied exclusively on Denver Basin groundwater sources for its entire history. In the 1990s, geologists determined that the Denver Basin aquifer was a nonrenewable groundwater source. Subsequent studies confirmed that rapid growth in the county was over drafting the source. With aquifer pressure falling, and new wells being drilled every day, the District embarked on a plan to acquire a portfolio of surface water rights to replace its reliance on the aquifer.

By 2010, the District had acquired an array of alternative supplies ranging from senior river rights, to agricultural sources, and three major storage alternatives. All told, the District had acquired resources that when viewed together would lead to 392 possible configurations. Since the District had incurred debt in order to acquire all of these resources, it soon became urgent for them to settle on a comprehensive plan and more toward implementation.

Our team engaged with the District by approaching the issue from an economic cost-benefit approach rather than a typical engineering approach. The most important criteria for the District’s board of directors was that whatever alternative was selected would provide the most renewable water at the lowest total cost to the residents. Our team of economists, water resource experts, treatment engineers, and system modelers engaged in a classic business case evaluation process first filtering the 392 possible configurations to 190, to 32, and ultimately to three for the board to choose from. Each step helped identify the best alternatives from the peer group based on the board’s criteria.

Before our engagement started, the District had been considering a plan that would have cost a five-fold increase in rates and would have resulted in a need to own or otherwise partner in up to four water treatment plants. Our analysis reduced the rate projection in half and provided the District with three alternatives, each of which capable of meeting 97% of the District’s build-out demands with renewable water. It also allows the District to sell off some of the assets it had acquired previously at a gain. Our recommendations saved the District $2.5m annually compared to its original plan, for a capitalized savings of $100 million.

Services Provided: Long-range financial planning, water/wastewater rate design, cost-of-service analysis, water supply feasibility report.

Contact: Jim Nikkel, District Managerjim@cpnmd.org(720) 308-6079

30

Narragansett Bay Commission

The Narragansett Bay Commission's mission is to maintain a leadership role in the protection and enhancement of water quality in Narragansett Bay and its tributaries by providing safe and reliable wastewater collection and treatment services to its customers at a reasonable cost. NBC’s service area includes Providence, North Providence, Johnston, Pawtucket, Central Falls, Cumberland, Lincoln, the northern portion of East Providence and small sections of Cranston and Smithfield. Narragansett Bay Commission owns and operates Rhode Island’s two largest wastewater treatment plants along with an extensive infrastructure of interceptors, pump stations, tide-gates and combined sewer overflows (CSOs). At present, NBC is responsible for discharges from the two WWTFs and from the CSOs, while the individual member communities are responsible for discharges from their separate stormwater drainage systems.

In 1992, NBC first entered a Consent Agreement (CA). In 1994, the Conceptual Design Report (CDR) was approved and NBC began preliminary design of those facilities. With the input of a stakeholder group, NBC revisited the planning effort based on the revised guidelines, which established a three-phase program with the goal of reducing annual CSO volumes by 98 percent, and achieving an 80 percent reduction in shellfish bed closures. The main component of Phase I was a deep rock storage tunnel. Phase II consisted of interceptors to connect additional outfalls to the Providence Tunnel plus several sewer separation projects. The procedure established by the CA requires NBC to initiate preliminary design of the Phase III facilities upon the completion of Phase II.

Hawksley developed a financial model, FCA model and affordability model utilizing the WARi (Weighted Average Residential index) methodology and New 2014 EPA Financial Capability Assessment Framework connected to Integrated Planning, to analyze several different Phase III scenarios. Case studies on a census tract level for Providence, Pawtucket, and Central Falls were developed including sensitivity analysis to consider aging infrastructure and potential costs that could be required of these communities. These studies identified the number of households in specific areas that would face a high burden when comparing rising wastewater bills with income.

Services Provided: Sewer system financial and rate planning including financial capability assessment (FCA) to support consent decree negotiations.

Contact: Tom Brueckner, Directortbrueckner@narrabay.com(401) 461-848

31

Coachella Valley Water District

Coachella Valley Water District is a multi-faceted agency with a 1,000 square miles service area that delivers irrigation and domestic (potable) water, collects and recycles wastewater, manages stormwater, and imports water to replenish its groundwater basin. Hawksley is currently providing a comprehensive cost-of-service and rate design study for canal water, potable water, wastewater and the replenishment program. Rates are being designed to fund the utility’s long-term projected costs of providing service while proportionally allocating costs among customers, providing a reasonable and prudent balance of revenue stability, and complying with the substantive requirements of California Constitution article XIII D, section 6 (Prop 218).

The study has yielded a number of significant recommendations that were collaboratively developed between District staff and the Hawksley team. Among the most significant recommendation was to eliminate a series of service areas that had different water and wastewater rates as a result of historical acquisitions. It was also recommended to merge the three separate replenishment programs into a single program and fund. This will serve to strengthen the three funds as it faces significant revenue challenges in the coming years.

Potable water rates are water budget-based rates; Hawksley employed our water budget model to better understand the current and anticipated effects of the current drought. The rate policies have been refined by using historical data to better understand water use patterns and minimize revenue volatility. The rates are also being adjusted to manage the impact of a recent regulatory decision to require the district to remove chromium VI from its water supply. The “Cr VI” program will need to begin immediately and will cost more than one hundred million dollars, therefore it is critical that the financial strategy make the best use of available reserves, establish strong creditworthiness, and maximize on debt-funding opportunities.

All of these changes to rates will have a substantial impact on the local economy (farming and tourism). Hawksley has been working successfully with the district board to find rate design solutions that mitigate impacts on the local economy while staying within the bounds of legal requirements.

Services Provided: Water, wastewater, canal water, and groundwater replenishment program. Long-term financial planning, cost-of-service, and rate design including water budget rates.

Contact: Kay Godbey, Director of Financekgodbey@cvwd.org(760) 398-2661 ext. 2240

32

City of Santa Fe, NM

The City of Santa Fe is located in a semi-arid resort area with very little access to new clean water supplies, so water conservation is extremely important. Since 2001 the City has been directing policies toward an overall reduction in per capita water usage. The city achieved a 25% reduction in the per-capita water usage from 139 gallons in 2001 to 103 gallons in 2009. Per capital water use continues to decline today.

Hawksley’s consultants began working with the City’s water rates in 2001, at the beginning of their demand management program, and developed rates with input from the City’s staff, a citizen’s advisory committee, and elected officials. Our pricing approach in Santa Fe was to anticipate and encourage reductions in demand while providing increased revenue performance in the short term and revenue stability in the long term. We used a comprehensive “Conservation-Impact” model to create a statistical simulation of the City’s customer billing patterns in reaction to changes in user rates. Our model results ended up projecting both revenue and water demand to within 5% of the actual level attained by the City one year after implementing our recommended rates.

The conservation rates we recommended became the City’s permanent rate structure. Since then, the City has been commended by many environmental groups for having the best example of conservation pricing in the Western US. As demand continued to decline in the City, our model has remained accurate. The City is now in its third year of zero rate increases after a seven year turnaround period guided by our long-range financial plan and revenue stability measures. The City has not only improved and stabilized its revenue, but has also turned its bond rating from “junk” status in 1999 to a model of credit quality. The City obtained an AAA rating from Fitch Ratings in 2009 and maintains a positive outlook today.

Due to the success of the water pricing and conservation efforts, the City was able to delay the design and construction of its Buckman Direct Diversion project by approximately 7 years, saving the City about $100M in the process.

Services Provided: Water, wastewater, and solid waste, long-term financial planning, cost-of-service allocation, wholesale rates, rate design and impact fees, conservation rates with elasticity of demand.

Contact: Brian Snyder, City Managerbksnyder@ci.santa-fe.nm.us(505) 955-4271

33

Moulton Niguel

The Moulton Niguel Water District is a retail water, wastewater and recycled water purveyor located in Orange County, CA. The district indirectly purchases wholesale water that originates from Colorado River California Aqueduct. In 2014, the state of California issued drought state of emergency declarations in response to record-low water levels in California’s rivers and reservoirs, thereby impacting the cost of imported water and the availability of water supplies. Water rates are budget-based rates, with residential customers given an indoor and an outdoor water budget for the first two tiers, respectively, and then three additional tiers which are used to fund the conservation program and peaking costs. Commercial customers’ water budgets are calculated based on a three-year rolling average of monthly water use. Irrigation and recycled water customers’ water budgets are calculated in the same manners as residential outdoor water budgets. Hawksley calculated a monthly fire protection charge for properties with private fire suppression systems.

In response to the drought, Hawksley helped the district shape water shortage rates that complement the district’s water shortage contingency plan, which adjusts customers’ assigned water budgets during specified stages. During Stages 2-5, any customer who uses water in excess of their calculated water budget is required to pay a unit-based administrative penalty. The conservation penalty is in addition to the standard volumetric charge.

The district’s wastewater rates were structured to recover the District’s costs to operate and maintain its wastewater collection system, and to pay wholesale costs for treating, and disposing of its wastewater. The district elected to adopt fixed wastewater rates based on the meter size since over 95% of the district’s wastewater costs are fixed in nature.While the district’s Board was concerned about the proposed rate increases, Hawksley and district staff met with the Board on multiple occasions and ultimately garnered the Board’s support.

Services Provided: Water, wastewater, and recycled water, long-term financial planning, cost-of-service allocation, wholesale rates, and conservation rates with elasticity of demand.

Contact: Matt Collings, Assistant GM MCollings@mnwd.com(949) 795-8428