Hillsborough County

Tampa, Florida, United States

Raftelis (previously Public Resources Management Group, Inc. (PRMG)) has been serving the utility enterprise for over 20 years on variety of rate, financial, and business consulting projects. The County’s Utility System provides: i) retail water service to approximately 158,000 accounts which translates to over 215,000 Equivalent Residential Connections (ERCs); and ii) retail wastewater service to approximately 133,000 accounts which equates to approximately 207,000 ERCs. Since 2013, the firm has also been assisting in rate and financial issues for the Solid Waste Division. The County’s Solid Waste System disposes of over 800,000 tons of waste annually and includes a 1,800 ton per day waste-to-energy facility (WTE), landfill, and a yard waste processing facility, serving over 302,000 residential disposal units and additional commercial establishments. Raftelis has developed detailed financial and business models for the two enterprise funds, evaluated rates for services, assisted in system financings and has provided other ongoing financial and business support projects. The following summarizes the services that have been recently provided to the County:

Water, Wastewater, and Reclaimed Water Rate Services

In 1995, Raftelis provided assistance to County’s Financial Advisor in the review of the financial condition of the water and wastewater utility system with emphasis on revenue recovery, use of capacity (impact) fees, and financial sufficiency and prepared report of our findings which included a list of several rate and cost recovery options to improve financial position. Subsequent to this financial evaluation, Raftelis assisted the County in what is referred to as the “Blue Ribbon Committee” sessions to develop an overall business and rate implementation plan for the utility. Raftelis assisted in the sessions and was responsible for developing detailed issues and recommendations regarding financial, rate, and capacity fee issues, performed detailed financial analyses as requested by the Committee, made presentations of financial results and evaluations, and attended all sessions with County. Subsequent to the sessions, Raftelis assisted in the development of a financial forecast of the System and attended presentations before Credit Rating Agencies and Bond Insurance Companies to promote the plan to improve the creditworthiness of the System.

During 1999, Raftelis developed a comprehensive rate evaluation and five-year revenue sufficiency analysis. Major highlights included:

  • The development and implementation of an ERC-based Base Facility Charge (which increased fixed cost recovery (revenue stability) by approximately 20%)
  • The imposition of a Reclaimed Water Capital Charge to provide a funding mechanism to fund the backbone transmission system
  • Imposition of an Accrued Guaranteed Revenue Charge (AGRF) designed to recover the carrying cost of capacity for the benefit of new development (recovered both interest on financing of infrastructure as well as fixed operating costs for water production/wastewater treatment
  • Updated the Wholesale Service Charges
  • Implemented Capacity Assessment Unit Program with Builder Payments to provide for an installment-based payment of capacity fees by developers as a non-ad valorem fee on the property tax bill to improve developer cash flows for projects to encourage growth
  • Phased-in two successive 4% rate adjustments; all in support of the financial/creditworthiness improvement plan

In 2002, and as part of the revenue sufficiency evaluation, Raftelis assisted in the imposition of a Purchased-Water Pass-Through Adjustment Charge to assure that all purchased water rate adjustments were automatically passed through without the need for a formal rate evaluation. The analysis also included the implementation of revised water conservation consumption blocks to further promote water conservation as a result of increased mandatory water use restrictions being imposed by the Southwest Water Management District. Additionally, Raftelis designed revised reclaimed water rates to promote water resource conservation and for the full recovery of allocated costs for this business segment.

Since these studies, Raftelis has assisted the Department with the preparation of annual updates to the financial plan and rate implementation program and has assisted in making further refinements and rate adjustments as conditions have changed to assure that the System continues with its financial plan.

Raftelis has annually updated the financial model and revenue sufficiency evaluation each year to: i) evaluate compliance with the rate covenants as required by the Bond Resolution that authorized the issuance of the outstanding debt; and ii) to assure compliance with the overall financial plan developed for the County. Activities have included:

  • Changes in the method of price index and purchased water pass-through adjustment charges
  • Designed new impact fees to recover the cost of capacity from new development
  • Developed debt expansion factors for both Tampa Bay Water and County debt in compliance with Bond Resolution and to evaluate legal use of impact fees
  • Updated miscellaneous charges and other rate-related activities

Franchise Utility Rate Consulting Services

The County regulates the rates of private utilities located in the County; this jurisdiction does not rest with the Florida Public Service Commission. Raftelis has provided regulatory rate consulting services as requested. Raftelis assisted the County in the evaluation of a utility rate filings submitted by the Windemere Utility Company (formal rate application) and Sunset Plaza Utilities, Inc. (staff assisted rate case).

Activities included:

  • Review of Minimum Filing Requirements for compliance and sufficiency when compared to the County Franchise Ordinances (to accept the filing), including: i) performing analyses to validate the information contained in the rate filing by the private utility (“Company”); ii) attested to the revenues being generated against the customer billing statistics of the private utility system; iii) reviewed accounting records and other financial/source documents to confirm the information reflected in the company rate filing; and iv) performed other analyses to substantiate the rate filing information and financial results
  • Evaluated utility plant in service and contributed capital to determine rate base (utility investment), including conducting a field review of the plant in service additions, retirements, and ending plant balances and the evaluation of used and useful analyses on functionalized plant based on capacity utilization
  • Reviewed capital structure (rate of return); Analyzed trends in operation and maintenance expenses, including allocated corporate overhead expenses and management expenses, acquisition adjustments and extraordinary property loss adjustments
  • Evaluated revenue requirement cost allocation, designed recommended rates based on determination of appropriate costs to be recovered, and evaluated customer bill impacts
  • Prepared a report documenting review, all proposed adjustments to company rate filing, and basis for recommendation of proposed rates for utility service
  • Assisted in rate settlement negotiations with franchise utility representatives and provided testimony to present the rate evaluation results before the Hearing Officer and the Board of County Commissioners (and during public information programs before the affected rate payers for each specific rate filing)

Raftelis prepared an evaluation of the seven franchised utilities (which were remaining at the time of evaluation) to present information to the County regarding a potential acquisition value of each franchised utility. The analysis included (by franchise owner): i) a determination of a high-level replacement-cost-new-less-depreciation analysis; ii) preparation of an evaluation of the net present value of the estimated future cash flow of the system under private ownership (income approach); iii) prepared a debt capacity analysis (similar to the income approach) under public ownership to the net present value/bondable capacity; iv) prepared a comparable sales analysis for estimated like‑kind transactions; v) identified customer impacts associated with transitioning private rates to County rates; and vi) prepared a report documenting assumptions and analyses for County consideration.

Solid Waste Services

Raftelis has prepared a financial forecast and revenue sufficiency analysis and model of the County’s Solid Waste Division, which includes both disposal and collection services. The financial forecast and model was prepared to evaluate the current and projected fiscal position, support the development of collection and disposal fee rates for service, and develop a funding plan for ongoing capital re-investment. The financial forecast encompassed a six‑year planning horizon. Study tasks have included:

  • Compilation of historical solid waste deliveries received by the County, by waste type, and the projection of solid waste tonnage to estimate residential assessment and tipping fee disposal revenues
  • Preparation of forecast of residential/dwelling unit, and commercial customer growth, and waste generation rates to estimate solid waste collection revenues as well as the delivery of municipal solid waste to the County disposal facilities
  • Projection of electric rate revenues derived from the operation of the waste-to-energy (WTE) facility, recognizing changes in fuel prices, and contractual arrangements for the sale of electricity to other utilities
  • Projection of operating expenses, including contractual fees for:
    • Operation of the landfill and other disposal facilities
    • Providing collection services by the County’s contractors
  • Preparation of change in landfill closure and long-term liability for expense recognition and funding considerations
  • Development of a capital funding plan
  • Developed cost allocation and development of rates based on cost to provide service by customer class, waste type, and service provided (e.g., disposal and residential collection since separately assessed)
  • Assisted in development of residential assessment rate resolution and solid waste rate schedules and presentation to Board of County Commissioners
  • Providing the rate and financial model for County staff’s internal use

Raftelis has annually updated the financial and revenue sufficiency model in support of annual budget process, to review the financial position of the system, and to maintain compliance with the overall business plan adopted by the Board of County Commissioners.

Bond Feasibility Disclosure Reports

Raftelis prepared bond feasibility disclosure reports in support of the issuance by the County for both its Utility System and the Solid Waste System. With respect to the Utility System, Raftelis initially assisted the County and its utility counsel with the issuance in the aggregate principal amount of $150,000,000 Utility Revenue Bonds, Series 2010A, B, and C (included Federally Taxable – Build America Bonds and Recovery Zone Economic Development Bonds) and in the aggregate principal amount of $207,795,000 Utility Revenue Bonds, Series 2016 in support of the County’s capital improvement program. Raftelis recently prepared an updated financial forecast to support the Utility Revenue Refunding Bonds, Series 2019 is currently working on a bond feasibility study to support the issuance of the proposed Series 2021 Additional Revenue Bonds. In preparation of the bond feasibility disclosure reports, Raftelis developed a financial forecast in support of the bonds. Responsibilities included: i) detailed financial projection of customers and sales, revenues, and expenses, recognizing the current economic and market conditions; ii) prepared a capital funding plan and assisted staff in timing of project implementation; iii) prepared an additional bonds test for bond issue compliance; and iv) assisted in rating agency presentations. Raftelis was also instrumental in drafting revisions to the bond resolution to reflect updates in financial reporting, changes in operations (e.g., Build America Bonds subsidies, impact fee use and wholesale water supply, etc.) and to improve ability to comply with the intent of the resolution by the County.

In addition to the utility system bonds described above, Raftelis has prepared a bond feasibility disclosure report in support of the issuance by the County of $89.010 million aggregate principal amount of Solid Waste and Resource Recovery Refunding Revenue Bonds, Series 2016A (AMT) and $25.55 million aggregate principal amount of Solid Waste and Resource Recovery Refunding Revenue Bonds, Series 2016B (Non AMT) to achieve interest rate savings. Raftelis’ services included the preparation of a 6 year historical rate covenant compliance and “flow of funds” trend analysis, development of a detailed financial forecast of Solid Waste System operations and cash flow for bond resolution compliance purposes, preparation of a comprehensive feasibility disclosure report which included financial projections and the evaluation of rate covenant compliance, assisting the County in amending the Solid Waste Bond Resolution, and assisting the County and its financial advisor with the presentation of the system financial position to the bond rating agencies.

Street Lighting Services

In 2007, the County managed 779 street lighting districts consisting of over 125,000 residential property owners (includes single family, multifamily and apartment residential parcel classifications) and a small number of commercial parcels located in the County’s unincorporated area (the “Program”). To serve the approximate 125,000 parcels, the Program includes 33,623 lights or fixtures and 28,910 poles. The rates for street lighting service had not been raised or adjusted in fifteen (15) years. PRMG was tasked to:

  • Identify the expenditures and funding requirements to be derived from the street lighting assessments and develop a five-year forecast of the Program revenue requirements and the overall liquidity position
  • Perform an evaluation of the poles, wires, conduits, fixtures and lights, and appurtenances (street lighting attributes) located within the individual districts necessary for lighting streets and the residential and commercial parcels that comprise such districts
  • Perform a review of the ability of the current street lighting assessment rates (which there were 24 rate classifications at of Fiscal Year 2017) to meet the projected expenditure and funding requirements for the Program
  • Assist in the development of proposed assessments to be applied the residential and certain commercial property owners within each respective district and the assessment roll for submittal to the Property Appraiser’s Office

Raftelis prepared a rate‑phasing plan to adjust rates to fully recover the cost of service and assisted in the update of the Street Lighting Ordinance and the assessment (rate) resolution required for notice to the customers and to adopt the rates, which was approved by the Board of County Commissioners.

Other Professional Services

Raftelis has also assisted the County with the following utility services:

  • Providing assistance in the development of a Uniform Extension Policy, including development of alternative concepts and presentation of such to the various building associations for input and feedback
  • Developing a financial evaluation model for capital project evaluation and prioritization (present value/payback analysis)
  • Providing assistance to the County’s financial advisor and consulting engineer relative to the development of a Strategic Plan for the utility
  • Providing assistance to the County regarding development of a Junior Lien Bond Resolution, which was adopted in support of a variable to fixed rate SWAP issue by the County to achieve interest rate savings for its utility system
  • Developing a comprehensive cost-of-service rate analysis for separate utilities not considered part of Department enterprise fund
  • Performance of due diligence and transitional services associated with assisting the County in acquisition of private utilities located in County service areas