Pima County

Arizona

In 2005, RFC was engaged by Pima County, Arizona (County) to provide strategic financial and analytical support related to the long-term revenue and rate implications associated with the investment of approximately $1.4 billion in its wastewater system over the next 15 years. The County is faced with the extraordinary challenge of improving a significant portion of its wastewater system in order to comply with more stringent effluent quality standards imposed by State and Federal regulators and to meet the needs of a growing customer base.  RFC, in association with Greeley & Hansen, developed an economic planning model to assess, at a high level, the long-term rate and customer impacts of various capital investment strategies and system configurations designed to adequately address regulatory requirements and provide sufficient capacity to serve both existing and projected demand. RFC also developed a financing plan for the capital program that considered the use of traditional public financing instruments and the use of non-traditional, alternative financing options, both public and private, that could provide a more cost-effective strategy for funding certain components of the capital program. 

Based on the results of the capital planning analysis, RFC was retained by the County, in two separate engagements, to develop its fiscal year (FY) 2008 Financial Plan and to conduct a more detailed economic analysis of alternative project delivery options.  The development of the FY 2008 Financial Plan included a comprehensive rate study and creation of a Rate and Financial Planning Model (Rate Model), to be updated on an annual basis, covering the County’s operating and maintenance (O&M) and capital improvement financing over a 10-year forecast period.  The Financial Plan was designed to serve as a road-map for funding capital improvements and a basis for developing rates and charges that are fair and equitable.  In 2008, RFC was also retained by the County to update its Financial Plan for FY 2009 and FY 2010.

In 2011, RFC was engaged by the County to conduct a comprehensive review of its connection fee assessment structure and provide a detailed evaluation of an alternative assessment structure on the basis of water meter size. The County previously assessed connection fees to residential, commercial, and industrial customers based on the fixture unit equivalent approach. Under this approach, connection fees were assessed to new structures and demolitions/renovations to existing structures that result in additional fixture units.  As appropriate as it may be for assessing connection fees, the fixture unit methodology is complex and labor intensive.  RFC considered several alternative connection fee assessment approaches including meter size (water meter); equivalent residential units (ERU); square footage; and lot size and density (per acre). Based on this evaluation, the meter size approach was identified as the most effective connection fee assessment methodology in addressing the County’s goals and objectives. Additionally, the simplicity of using water meter size as a basis of assessment appealed to County staff, and the prevalence of this approach in the industry indicates widespread understanding and acceptance.  To determine the appropriate connection fee based on meter size, RFC first calculated the anticipated flow of a residential or commercial connection of 5/8-inch or 3/4-inch meter.  The anticipated flow for a residential customer represented a projected capacity need for customers connecting to the system with the smallest meter size.  Using the residential charge as the basis for calculation, the upfront fees for larger meter sizes were computed from a scale of factors related to either the capacity capability or the average customer demand of the respective meter relative to the average demand of 5/8-inch customers.

Other services provided to the County by RFC include the valuation of a small water reclamation facility serving a community in the County’s outlying service area. The study was conducted to support the County in negotiations with the community as it was evaluating the implications of seeking ownership of this facility. 

Letter of Recommendation