Tacoma, City of
Cost of Service Study
RFC was recently engaged by the City of Tacoma Public Works Department (City) to provide a cost of service study for wastewater, surface water, and solid waste utilities. The study involves developing user-friendly cost of service models for all three utilities. The project involves training City staff on the use of the models and developing a manual on the use of the models. One of the features of the models is to integrate the data from the City’s mainframe system directly into the models so the models can be easily updated. The models will also be capable of comparing actual and budgeted revenues and expenses so the City can take corrective action if needed.
The cost of service analysis for the solid waste utility incorporates changeover from weekly collection to bi-weekly collection and accounting for the corresponding potential reduction in revenues. Surface water analysis included credits for properties that have direct discharge, revised rates for the incorporation of the open space program, and consideration of peaking factors. Wastewater cost of service analysis allocations to strength are currently at 34%, 33%, 33% to flow, BOD, and SS, respectively. The analysis includes a review of the strength cost allocation parameters to ensure greater equity. All three utilities also had discounts for low-income customers, which would continue in this analysis.
For several years, Tacoma Water prepared a comprehensive biennial business plan (generally over 90 pages long) describing and presenting the organization’s key initiatives. This process was time consuming, but considered valuable by management and the governing body. Prior to initiating the 2009-2010 process, Tacoma Water decided that it would be worthwhile to have an independent consultant review the process and previously developed document and to recommend improvements that would enhance the value of the business planning process and make the resultant business plan a more effective communications and management tool.
The objectives of this engagement were to conduct a detailed evaluation of Tacoma Water’s business planning process, plan format, plan content, and implementation activities and to also review identified areas of concern including performance measures, asset management, financial modeling and planning, capital project prioritization, and operations and maintenance initiatives.
RFC worked closely with management to review the most recent business plan and the status of the 14 previously developed strategic initiatives. Also, the format and presentation of the plan was evaluated and improvements were suggested. At the time this project was conducted (early 2008), the EUM materials had not yet been published. However, RFC was aware of the 10 Attributes of an Effectively Managed Utility and measures were developed that mapped to these Attributes. At the conclusion of the project, detailed recommendations concerning the business plan format and content, the measurement system, the asset management program, process improvement, and the project prioritization approach were documented and discussed with management.
Some of the results/benefits of this project were:
- A more effective business plan that could be presented on about 10 pages instead of over 90 pages
- A reduction of strategic initiatives from 14 to 8, which facilitated greater focus on the most important issues
- A keen focus on key measures that are consistent with the EUM framework
- An enhanced tool to communicate the business plan to key stakeholders
- Improved understanding of the business plan by the entire management team
- Enhanced communication between functions at the senior level
- Understanding of the perspectives and concerns of employees
- Prioritized suggestions for improved performance