Since 1998, Raftelis has assisted the City of Phoenix (City) with various water and wastewater projects. The projects have included: an audit of Land Use Assumptions (LUA), Infrastructure Investment Plan (IIP) as used in determining impact fees, completion of development impact fee study; rate analyses; bond feasibility analyses; calculating an environmental fee; benchmarking studies; and a design/build/operate procurement.
Raftelis most recently assisted the with a comprehensive water and wastewater rate study. The study included a review of the existing cost-of-service methodology and environmental charge cost components. Raftelis made recommendations to the City to improve interclass equity through updated cost-of-service allocations. The cost allocations included the identification of costs eligible to be recovered by the environmental charge (costs associated with complying with federal, state, and local environmental regulations). As part of the study, Raftelis rebuilt the water cost-of-service and rate model and updated the wastewater rate model to better enable City staff to use the models for future rate updates. The study also involved water rate alternative analyses, a comprehensive affordability analysis, and the development of a public outreach strategy regarding the affordability analysis and changes in the rate structure.
The affordability analysis included working the City’s rates advisory committee to identify the appropriate affordability method and metric for gauging affordability in the City’s service area. The affordability analysis combined customer usage characteristics, demographics, and delinquent bills by census tracks to determine customers at risk. Th results of this analysis were then compared to the City’s existing affordability program (including bill discounts and conservation measures) to determine if any changes were required and was used to determine the affordability of future water/sewer rate projections. Raftelis presented preliminary results of the affordability analysis and the cost-of-service analysis to the City’s rates and advisory committee for input. The project team conduced an on-site model workshop to train City staff on each model’s functionality so they can continue to update them internally. The study was completed in 2019 with the delivery of updated cost-of-service and environmental fee models.
Raftelis also conducted a biennial audit of LUA, IIP, and a development impact fee study. The City assesses libraries, parks, fire protection, police, major arterials (roadway facilities), stormwater, water, and wastewater development impact fees and a water resource acquisition fee, implemented in 2015 in compliance with the requirements of Arizona Revised Statutes (ARS §9-463.05). The water resource acquisition fee is assessed to areas throughout the City that do not have a 100-year assured water supply and it is not assessed in area with a 100-assured water supply. The eight other development impact fees are assessed within growing areas closer to the periphery of the City that vary within eight different service areas. Study findings will be documented within a report. This study is anticipated to be completed in February 2018 with the issuance of the final report.
The City engaged Raftelis to complete a review of the financial forecast for its water system and provide an opinion with respect to the need for a rate increase. This review was necessary to address resistance to the requested increase by members of the Phoenix City Council. Raftelis completed the review and prepared a letter to City Council confirming the reasonableness of the forecast and the need for the requested rate increase. Raftelis’ Project Manager for the engagement, also attended the City Council meeting at which the rate increase was approved.
Raftelis was also engaged by the City to analyze data from several peer utilities in an effort to determine the impact of large water rate increases on user demand. The study involved analyzing the relationship between the average customer consumption patterns and the change in the average customer’s monthly cost over a historical period of five to ten years. Raftelis contacted a total of 65 utilities to participate, and the report presented case studies of results for 10 utilities, including the City of Phoenix.
Raftelis also served as the financial/economic consultant for the evaluation of alternative project delivery models and Design/Build/Operate (DBO) procurement of the 80 MGD Lake Pleasant Water Treatment Plant. Phase I of the project consisted of a Multiple Criteria Analysis of various alternative project delivery methods that the City was considering for the project. Based on the analysis, the City decided to implement a DBO procurement. In Phase II, Raftelis assisted with the DBO procurement. Raftelis also developed the financial model that was utilized to determine the long-term costs associated with each proposal. Raftelis developed a contract administration tool for the Lake Pleasant project that the City currently uses to confirm that its private partner is adhering to the terms of the DBO contract.
Finally, Raftelis has assisted the City with nine of the City’s water and wastewater debt issuances including preparation of bond feasibility analyses and/or parity tests. In addition, Raftelis prepared parity test letters for loans from the Arizona Water Infrastructure Finance Authority for water and sewer system improvements.
