Raftelis (previously Public Resources Management Group, Inc. (PRMG)) has been involved in utility rate and financial planning projects with Charlotte County on an ongoing basis since 1996. The County’s Utility System provides retail water service to approximately 58,000 accounts, which translates to over 70,000 Equivalent Residential Connections (ERCs), and is one of the largest utilities in Florida in terms of service area. The Utility System also receives its potable water supply from the Peace River/Manasota Water Supply Authority (Peace River), and has its own wastewater treatment facilities to meet the demands of the County; because of the service and development characteristics, facility planning can have its challenges. In 2016, the firm assisted the County’s Solid Waste Division in the review of the solid waste collection rates charged by their franchised contract hauler for residential curbside service to over 86,000 units, and commercial service to approximately 2,500 accounts.
Raftelis has an existing contract with the County to provide annual general financial services, which at a minimum, includes an annual review of revenue sufficiency for the water and wastewater systems. The most recent analysis concluded in September 2020, but this study will be updated during the next fiscal year under a new work authorization. The following is a summary of the services recently performed on behalf of the County.
Raftelis has prepared a number of comprehensive water and wastewater rate studies for the County since 1996. The studies included developing a detailed projection of utility customers and service area needs, including billing determinants for revenue development and rate design purposes, and detailed financial projections of the revenue requirements of the system. The financial projections were prepared to evaluate capital improvement funding alternatives and to analyze debt structure alternatives associated with the issuance of new debt to fund capital needs, which has included the issuance of senior lien parity bonds and state revolving fund (SRF) loans. In addition to the financial planning component of the studies, the County’s water and wastewater rates were redesigned to include incentives for water conservation. We have also assisted the County with development of System Connection Charges or impact fees, including charges for accrued guaranteed revenues to recover the carrying cost of reserve capacity for new users. We have also periodically reviewed all of the County’s miscellaneous service charges to ensure full cost recovery. In addition to the comprehensive rate studies, Raftelis also prepares an annual financial forecast update in conjunction with the County’s budget process to assess the adequacy of water and wastewater rates to fund the annual expenditure needs and reserves, and to evaluate the estimated fiscal position of the utility. The results of the rate studies and annual financial plans are consistently presented in public workshops and have been approved by the Board of County Commissioners.
In order to assist the County in the funding of its long-range capital improvement program, Raftelis has prepared bond feasibility disclosure reports documenting the ability of the Utility System to meet the rate, flow of funds, and additional bonds test covenants and requirements associated with the issuance of: i) in the aggregate principal amount of $61.05 million of Utility System Refunding Revenue Bonds, Series 1996A, and Utility System Revenue Bonds, Series 1996B; ii) in the aggregate principal amount of $34.87 million of Utility System Refunding Revenue Bonds, Series 2006; and iii) in the aggregate principal amount of $64.90 million of Utility System Refunding Revenue Bonds, Series 2011, as required in the authorizing Bond Resolution. The bond feasibility disclosure reports included in the County’s Official Statement (bond prospectus) summarized, among other things, the historical and projected operating results for the Utility System. The financial forecasts included projected customers, sales (use), and revenues from water and wastewater rates, projected operations and maintenance expenses, including purchases from Peace River, a presentation of the capital funding plan and corresponding capital expenditures for the Utility System, and a presentation of the estimated fund balances based on the accounts and funds maintained by the County and established by the Bond Resolution. As part of the preparation of the reports, the impact of issuing new debt on utility financial operations was examined. Based on the financial forecast and the repayment parameters of the revenue bond issues, additional bonds tests and projected debt service coverage ratios were calculated pursuant to the requirements set forth in the County’s Bond Resolution, and the loan agreements with the Florida Department of Environmental Protection associated with the State Revolving Loan Fund program. In addition, among other documentation, a consultant’s parity certificate was prepared which summarized the results of the County’s additional bonds test as required by the Bond Resolution.
The County currently regulates the rates for solid waste collection among the franchised collection contractors pursuant to Chapter 4-4 of the County’s Code of Ordinances (the “Solid Waste Ordinance”); currently, the only franchised collection contractor regulated by the County is Waste Management, Inc. of Florida (WMI). Pursuant to the Solid Waste Ordinance, a franchised collection contractor is allowed to file for an increase or change in Collection Rates no less frequent than once every three years. Furthermore, the Solid Waste Ordinance provides the basis for the rate application and the determination of the rates for service.
WMI filed a formal rate application to the County during Fiscal Year 2016 requesting an increase of 28.03% in Solid Waste Collection rates (to become effective on October 1, 2016). PRMG was hired by the County to assist in the review of the Rate Application and to make recommendations as to the rates that should be placed into effect (the “proposed rates”). The responsibilities associated with the review of the proposed rates included: i) a review of the WMI Minimum Filing Requirements filed with the County for consistency with the provisions of the Solid Waste Ordinance; ii) a detailed review of the operating expenses allocable to the customers classes regulated by the County; iii) an evaluation of the net fixed assets in service and the associated annual depreciation expense which would be recovered in the rates for collection service; iv) an evaluation of taxes other than income taxes; and v) the development of a reasonable rate of return using the Operating Margin approach as contained in the Solid Waste Ordinance. Raftelis prepared a detailed rate evaluation report which formed the basis for negotiations with WMI. Based on negotiations between the parties that were managed by Raftelis, and findings of the rate evaluation analysis, a Settlement Agreement in the level of rates to be charged was negotiated between the County and WMI which resulted in i) a 16.49% rate adjustment effective October 1, 2016, and ii) a freeze in the residential collection rates for two additional years. The rates, as negotiated by the parties, were approved by the Board of County Commissioners.
Additionally and subsequent to the implementation of the settlement rates, Raftelis assisted the County in the development of the methodology in the application of a fuel surcharge to account for fluctuations in fuel prices applied to the commercial class. The fuel surcharge was agreed between the parties and also approved by the Board of County Commissioners.
The firm assisted the County in its review and acquisition of the Rotonda Utility System that was owned and operated by AquaSource Utilities, Inc. (Rotonda). Raftelis conducted preliminary financial due diligence on the operations of the utility system and, in conjunction with the County’s consulting engineers, developed an estimate of a reasonable acquisition price for the Rotonda system. Specifically, the financial analysis included the development of a governmental cash flow analysis of the Rotonda system recognizing public ownership and County operating philosophies. Additionally, the firm assisted the County in negotiation meetings with the owners of the utility, performed additional due diligence activities on revenue availability as a condition of sale, and assisted in the review of the Purchase and Sale Agreement. Raftelis also participated in the public hearing process required by Chapter 125.3401, Florida Statutes, regarding the public benefit that would result from the acquisition of the utility by the County.
The County historically regulated private utilities located in the County from a rate determination standpoint; this jurisdiction is now with the Florida Public Service Commission. Raftelis has served as County’s regulatory rate consultant, and has assisted the County in certain applications and filings by the franchised utilities. Raftelis assisted the County in the evaluation of utility rate filings submitted by Sandalhaven Utilities (a subsidiary of Utilities, Inc.) and Little Gasparilla Water Utility. Activities included:
Raftelis has provided general consulting services to the County, including:
