Financial and Rate Consulting
Raftelis concluded a cost of service study for City of Newport News Department of Public Utilities, Waterworks Division (Waterworks) in April 2011. The study helped support Waterworks getting approval of its proposed FY 2012 water rates. It involved a comprehensive cost of service analysis that resulted in modifications to the rate structure. These modifications included increasing the base charge to improve revenue stability for Waterworks, eliminating the summer surcharge, adding a third block to the residential rate structure, and developing separate general class and industrial class rate structures that included a decreasing block for very large industrial customers. Raftelis prepared a report summarizing the study and assisted Waterworks staff prepare materials, such as a presentation and Executive Summary, for City Council.
Raftelis conducted a financial feasibility evaluation for the Waterworks related to the proposed issuance of revenue bonds in 2007. Waterworks, in partnership with other Virginia Peninsula localities, was seeking capital market funds to develop and implement a long-term solution to the area’s water supply needs. The most significant project in the capital plan was the development of a new 12.0-billion-gallon off-stream reservoir and pumping station on the Mattaponi River in King William County, Virginia. Our analysis included a forecast of revenues, expenses, and debt service over a five-year period, to ensure compliance with all bond covenants and debt service coverage requirements.
Raftelis also assisted Waterworks with defining appropriate and effective financial policies to mitigate operational risk, ensure adequate reserves, and improve the credit profile of the utility. Recommendations were provided for specific categories of reserves including rate stabilization funds, operating reserves and capital reserves, among others. Specific metrics were identified that defined target fund levels that balanced risk mitigation and funding requirements with the potential impact on rates and charges.
Strategic Plan Development
Raftelis was engaged by Newport News Waterworks (Waterworks) to lead the organization in the development of a five-year strategic plan. Paramount to this effort was the desire by the client to incorporate the industry’s Effective Utility Management (EUM) framework as a means to deeply engage the organization in the identification of its top strategic priorities, its approach to measuring performance, and the strategies and tactics necessary to achieve its vision for the future.
Waterworks is a department of the City of Newport News and provides water and wastewater utility service to a population of over 400,000. Successfully engaging a high percentage of its 300 staff members required Raftelis to develop and deploy on-line survey instruments, conduct a number of employee focus groups, and engage key internal and external stakeholders.
Raftelis conducted a number of one-on-one interviews using a structured interview process, and also conducted a number of workshops with select administration, management, and operational staff members. Raftelis conducted a SOAR (Strengths, Opportunities, Aspirations, and Results) analysis, which focuses on the concepts of appreciative inquiry. Due to the fact that Waterworks is a sub-set of the City of Newport News, it was an important objective to ensure that Waterworks’ strategic plan mapped closely to the City’s plan and that Waterworks’ goals, objectives, and strategies supported the City’s broader objectives.
Raftelis leveraged the use of the EUM framework by establishing cross-functional work teams that were asked to consider the best practices of EUM’s 10 Attributes of Effectively Managed Utilities and the 5 Keys to Management Success. Each team was provided introductory training regarding EUM and provided Raftelis’ EUM Workbooks. The information developed by these teams was used to generate ideas around organizational objectives and strategies to support the organization’s priority goals.
Ultimately, the planning effort resulted in the development and adoption of a new five-year strategic plan for Newport News Waterworks. This plan is currently undergoing implementation.
