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Agenda 07/08/2014 Item #16C 67/8/2014 16.C.6. EXECUTIVE SUMMARY Recommendation to direct the County Manager or his designee to advertise a Resolution adjusting the Collier County Water -Sewer District Bulk Services Water Rates within the Hammock Bay Service Area, as authorized by the Potable Water Bulk Services Agreement between the Collier County Water -Sewer District and the City of Marco Island, dated May 9, 2006. OBJECTIVE: Advertise a Resolution (Exhibit 1) adjusting the Collier County Water -Sewer District Bulk Services Water Rates within the Hammock Bay Service Area, as authorized by the Potable Water Bulk Services Agreement between the Collier County Water -Sewer District and the City of Marco Island, dated May 9, 2006 (Exhibit 2). CONSIDERATIONS: The City of Marco Island (City) currently receives wholesale water service within the Hammock Bay Service Area from the Collier County Water -Sewer District (District) water system. Pursuant to the "Potable Water Bulk Services Agreement between the Collier County Water -Sewer District and the City of Marco Island" dated May 9, 2006, (Agreement), the City receives treated potable water from the District for resale. The initial wholesale water service rate of $2.96 per thousand gallons was established by the Agreement pursuant to an evaluation performed by Public Resources Management Group, Inc., (Consultant). The Agreement allows the District to annually adjust the rate by the change in the Miami - Ft. Lauderdale MSA, FL All Items Index as reported by the U.S. Bureau of Labor Statistics. Annual indexing was applied through October 1, 2010, in which the rate was $3.31 per thousand gallons. Alternatively, the Agreement also allows the District to adjust the Water Service Commodity Charges by resolution to recover not less than the cost of providing service. On February 8, 2011, Item 8C, the Board of County Commissioners (Board) adopted Resolution 2011 -31, which increased rates $0.23 (6.9 percent) effective for Fiscal Year 2012, and $0.10 (2.8 percent) for Fiscal Year 2013. Further the Board approved the FY2014 District budget with no rate increase for FY2014. The current rate is $3.64 per thousand gallons. The District requested that the Consultant prepare an updated analysis of the cost and corresponding rates to provide water service to the City. As set forth in the attached executive summary (Exhibit 3), the Consultant calculates and the staff recommends the bulk water service rate be increased from $3.64 per 1,000 gallons to $3.75 per 1,000 gallons effective October 1, 2014; the bulk rate be increased to $3.82 per 1,000 gallons effective October 1, 2015; and increased to $3.85 per thousand gallons effective October 1, 2016. On June 10, 2014, the Board approved the Water, Wastewater, Irrigation Quality Water and Bulk Potable Rate Study and directed the County Manager or his designee to prepare a resolution to bring to the Board for approval to advertise. FISCAL IMPACT: The additional revenue anticipated to be generated by the recommend rate increase over the next three years is approximately $13,000. Packet Page -1107- 7/8/2014 16.C.6. LEGAL CONSIDERATIONS: This item is approved as to form and legality, and requires majority vote for Board approval. —SRT GROWTH MANAGEMENT IMPACT: The proposed bulk service water rate is designed to provide funding for operation and maintenance, repair and replacement costs. RECOMMENDATION: That the Board of County Commissioners direct the County Manager or his designee to advertise the attached Resolution adjusting the Collier County Water -Sewer District bulk services water rates within the Hammock Bay Service Area, as authorized by the Potable Water Bulk Services Agreement between the Collier County Water -Sewer District and the City of Marco Island, dated May 9, 2006, Prepared by: Laura Zautcke, Senior Management and Budget Analyst, Public Utilities Division - Operations Attachments Exhibit 1 – Resolution Exhibit 2 – Potable Water Bulk Services Agreement Exhibit 3 – PRMG Executive Summary Packet Page -1108- 7/8/2014 16.C.6. COLLIER COUNTY Board of County Commissioners Item Number: 16.16.C.16.C.6. Item Summary: Recommendation to direct the County Manager or his designee to advertise a Resolution adjusting the Collier County Water -Sewer District Bulk Services Water Rates within the Hammock Bay Service Area, as authorized by the Potable Water Bulk Services Agreement between the Collier County Water -Sewer District and the City of Marco Island, dated May 9, 2006. Meeting Date: 7/8/2014 Prepared By Name: ZautckeLaura Title: Management/Budget Analyst, Senior, Utilities Finance Operations 6/16/2014 11:12:45 AM Submitted by Title: Management/Budget Analyst, Senior, Utilities Finance Operations Name: ZautckeLaura 6/16/2014 11:12:46 AM Approved By Name: Joseph Bellone Title: Director - Operations Support, Utilities Finance Operations Date: 6/16/2014 12:42:58 PM Name: HapkeMargie Title: Recycling Coordinator, Solid & Hazardous Waste Management Date: 6/16/2014 1:42:03 PM Name: Steve Messner Title: Director - Water, Water Date: 6/18/2014 8:54:54 AM Name: TeachScott Title: Deputy County Attorney, County Attorney Packet Page -1109- 7/8/2014 16.C.6. Date: 6/20/2014 2:20:27 PM Name: YilmazGeorge Title: Administrator - Public Utilities, Public Utilities Division Date: 6/23/2014 4:40:16 PM Name: FinnEd Title: Management/Budget Analyst, Senior, Transportation Engineering & Construction Management Date: 6/25/2014 9:27:05 AM Name: KlatzkowJeff Title: County Attorney, Date: 6/26/2014 5:24:15 PM Name: OchsLeo Title: County Manager, County Managers Office Date: 6/30/2014 5:03:48 PM Packet Page -1110- 7/8/2014 16.C.6. RESOLUTION NO. 2014 - A RESOLUTION OF THE BOARD OF COUNTY COMMISSIONERS OF COLLIER COUNTY, FLORIDA, AS THE GOVERNING BODY OF COLLIER COUNTY AND AS EX OFFICIO THE GOVERNING BOARD OF THE COLLIER COUNTY WATER SEWER DISTRICT, ADJUSTING THE COLLIER COUNTY WATER -SEWER DISTRICT BULK SERVICES WATER RATES WITHIN THE HAMMOCK BAY SERVICE AREA, AS AUTHORIZED BY THE POTABLE WATER BULK SERVICES AGREEMENT BETWEEN THE COLLIER COUNTY WATER -SEWER DISTRICT AND THE CITY OF MARCO ISLAND, DATED MAY 9, 2006. WHEREAS, on May 9, 2006, the Collier County Water -Sewer District (District), through the Board of County Commissioners, entered into an agreement with the City of Marco Island, entitled the Potable Water Bulk Services Agreement Between the Collier County Water - Sewer District and the City of Marco Island (Agreement); and WHEREAS, the Agreement provides that: "The Water Service Commodity Charges may be adjusted by the DISTRICT by Resolution in order to recover not less than the costs of providing service. Notwithstanding the ability to adjust the Water Service Commodity Charges, the DISTRICT may apply a price index rate adjustment to such rates annually effective October 1. The price index adjustment factor shall represent the change in the Miami — Ft. Lauderdale MSA, FL, All Items Index as reported by the United States Bureau of Labor Statistics, or such other Adjustment formula as the DISTRICT may then be applying uniformly to Bulk Water Service Commodity Charges that may be in effect at the time of the application of the price index rate adjustment. "; and WHEREAS, the DISTRICT has retained Public Resources Management Group Inc. (Consultant) to review the existing bulk water rates and to recommend appropriate changes to those rates; the Consultant has recommended an increase of $0.11 (3.0 percent) effective for the Fiscal Year 2015, an increase of $0.07 (1.9 percent) for the Fiscal Year 2016, and an increase of $0.03 (.8 percent) for the Fiscal Year 2017; and WHEREAS, staff has thoroughly reviewed the Consultant's findings and recommendations and staff concurs with the recommendation to increase the bulk water rates, and staff recommends that the Board of County Commissioners adopts this Resolution to implement the recommended changes; and WHEREAS, the Board of County Commissioners finds that it is in the interest of health, safety and welfare to accept the recommendations of the Consultant and staff. NOW, THEREFORE BE IT RESOLVED BY THE BOARD OF COUNTY COMMISSIONERS OF COLLIER COUNTY, FLORIDA, AS THE GOVERNING BODY OF COLLIER COUNTY AND AS EX OFFICIO THE GOVERNING BOARD OF THE COLLIER COUNTY WATER SEWER DISTRICT, that C� Packet Page -1111- 7/8/2014 16.C.6. The Board of County Commissioners hereby declares, after advertised public hearing, that the bulk water rates set forth in the revised Schedule to Section 4) b) of Exhibit D to the Potable Water Bulk Services Agreement between Collier County Water -Sewer District and The City of Marco Island, attached hereto, and incorporated be reference herein as Exhibit "A, are fair and reasonable. BE IT FURTHER RESOLVED that these revised bulk services water rates will take effect as of 12:01 A.M. on Wednesday, October 1, 2014, for Fiscal Year 2015, as of 12:01 A.M. on Thursday, October 1, 2015, for Fiscal Year 2016, and as of 12:01 A.M on Saturday, October 1, 2016, for Fiscal Year 2017. THIS RESOLUTION ADOPTED after motion; second and majority vote favoring adoption this day , 2014. ATTEST: DWIGHT E. BROCK, CLERK LION Approval as to form and legal Sufficiency: e Scott R. Teach Deputy County Attorney Deputy Clerk N BOARD OF COUNTY COMMISSIONERS OF COLLIER COUNTY, FLORIDA, AS THE GOVERNING BODY OF COLLIER COUNTY AND AS EX OFFICIO THE GOVERNING BOARD OF THE COLLIER COUNTY WATER SEWER DISTRICT Lo TOM HENNING, CHAIRMAN Packet Page -1112- EO 7/8/2014 16.C.6. EXHIBIT A Exhibit D, Section 4) b) of the Potable Water Bulk Services Agreement Between the Collier County Water -Sewer District and the City of Marco Island Agreement Dated May 9, 2006 Existing/per Thousand Gal [ 1 ] Effective 10/1/2012 Commodity Charge: All metered Potable Water Flow [1] Adopted by Resolution 2011 -31 $3.64 Packet Page -1113- Proposed /per Thousand Gal Effective Effective Effective 10/1/2014 10/1/2015 10/1/2016 53.75 $3.82 $3.85 G l ♦ _t- 7/8/2 014 16.C.6. .�/7 /off, POTABLE WATER BULK SERVICES AGREEMENT BETWEEN THE COLLIER COUNTY WATER -SEWER DISTRICT AND THE CITY OF MARCO ISLAND THIS AGREEMENT, is made and entered into this ( day of _M AV AV 2006, by and between The Collier County Water -Sewer District, a political subdivision of the State of Florida, ( "DISTRICT ") acting by and through its Board of County Commissioners, (District Board) the governing body thereof, and the City of Marco Island, Florida, ( "CITY "), acting by and through its City Council, the governing body thereof. RECITALS WHEREAS, the CITY owns and operates a water system located in Collier County, which provides service to an area referred to herein as the. Hammock Bay Service Area; and WHEREAS, the CITY desires that the Collier County Water- District (herein "DISTRICT ") provide cost - effective, long -term bulk potable water service only within that part of the CITY'S potable water service area as is depicted on Exhibit B, attached hereto, and desires to receive potable water production and treatment services from the DISTRICT, all as specified in this Agreement; and WHEREAS, the CITY has determined that the most cost effective alternative to provide potable water service to the said potable water service area is through the purchase of the subject bulk potable water service from the DISTRICT pursuant to this Agreement; and WHEREAS, the DISTRICT has adequate water production and treatment capacity within its regional water system to meet the CITY'S Initial Contracted Capacity (as defined herein); and WHEREAS, the CITY hereby agrees to connect its potable water system to the DISTRICT'S potable water system to enable the DISTRICT to provide the mutually agreed to quantities of potable water service to the CITY ( "Wholesale Water Services ") for resale to the CITY'S customers in that geographic area; and WHEREAS, subject to the conditions and limitations cited herein, the DISTRICT agrees to sell bulk potable water service to the CITY (purchaser) for resale to the CITY'S potable water customers within that specific geographic area; and WHEREAS, the DISTRICT and the CITY desire to enter into and execute this Packet Page -1114- 1 7/8/2014 16.C.6. Agreement setting forth the terms and provisions for the subject sale and purchase of these Bulk Water Services. NOW THEREFORE, the DISTRICT and the CITY hereby covenant and agree as follows: SECTION 1. RECITALS. The above recitals are true and correct and are incorporated herein. SECTION 2. DEFINITIONS. The following words shall have the following meanings unless the context hereof requires otherwise: "Agreement" shall mean this Potable Water Bulk Services Agreement between the DISTRICT and the CITY. "Average Daily Flow" or "ADF" means the average potable water use measured by metering at the Point of Delivery for any period of time and shall equal the total quantity of potable water delivered divided by the number of days for that period of time corresponding to such quantity of water delivered. "Bulk Water Services" shall mean the potable water services, provided to the CITY by the DISTRICT at the Point of Delivery, and associated with the production, treatment, and transmission of such bulk potable water for exclusive use by the CITY for only resale to the CITY'S retail potable customers situate within CITY'S Service Area as defined in this Agreement. "Billing Period" means that period of time for which bulk potable water is delivered by the DISTRICT to the CITY for Bulk Water Service which serves as the billing determinant basis for which the Commodity Charges are imposed by the DISTRICT, which period will generally average thirty (30) days. "CITY " means the City of Marco Island, a political subdivision of the State of Florida. "City's System" means the potable water system that serves the CITY'S potable water customers. "City Service Area" means that geographic area of the CITY as shown in Exhibit B hereto. "Commodity Charge" means the bulk service water rates charged by the Packet Page -1115- 2 7/8/2014 16.C.6. DISTRICT to the CITY for Bulk Water Services provided by the DISTRICT to the CITY pursuant to this Agreement during a Billing Period based on all metered or estimated water flow delivered by the DISTRICT to the CITY at the Point of Delivery. "Contracted Capacity" means the gallonage amount of potable water production and treatment capacity measured at the Point of Delivery expressed on a maximum month daily flow basis that is reserved through this Agreement between the CITY and the DISTRICT for the CITY'S exclusive use for resale to the CITY'S potable water customers only within the geographic area depicted in Exhibit B, attached hereto. Florida. "County" means Collier County, Florida, a political subdivision of the State of "CPI" means a price index adjustment factor used to adjust rates based on the "Miami -Ft. Lauderdale MSA, FL. All Items Index" as reported by the United States Bureau of Labor Statistics, which from time to time shall be applied uniformly to all rates for this rate classification of bulk potable water service. "Customers" means the CITY'S potable water customers situate in the subject geographic service area and who purchase the subject water from the CITY. "Days" means calendar days unless otherwise specified. "District Board" means the Board of County Commissioners, Collier County, Florida, as the Ex- Officio Governing Board of the Collier County Water -Sewer District. "DISTRICT System" means the potable water system that serves the DISTRICT and will deliver the subject bulk potable water the CITY Service Area pursuant to this Agreement. "Equivalent Residential Connection (ERC)" means, with regard to water service, the equivalent gallonage usage requirements of a single- family residential customer. For these purposes, each ERC will have an assigned value of 1.0. The ERC gallonage is and shall continue to be based upon statistical data accepted by the DISTRICT establishing an average residential use, and it is recognized that the usage for some types of residential units may be greater or smaller than the average ERC gallonage assumed for this calculation; Also the ERC may change from time -to -time based upon the rates calculated in the DISTRICT'S then most recent Impact Fee Study. As of the effective date of this Agreement an ERC equals 350 gallons per twenty -four (24) hour day. Packet Page -1116- 3 7/8/2014 16.C.6. "Excess Flow" means all metered potable water deliveries at the Point of Delivery expressed in gallons, received during a Billing Period by the CITY from the DISTRICT that exceeds the then Contracted Capacity for the applicable Billing Period. "Fiscal Year" means the twelve month period beginning October 1 St and ending September 30th. "Force Majeure" shall include, but not be limited to, acts of God, strikes, lockouts, or other industrial disturbances, acts of any public enemy, wars, blockades, riots, acts of armed forces, epidemics, delays by carriers, inability to obtain materials or rights -of -way on reasonable terms, acts or failures to act by public authorities not under the control of either party to this Agreement, or acts or failures to act by regulatory authorities. "GPD" means "gallons per day." "Maximum Month Daily Flow" or "MMDF" means the Maximum Monthly Flow divided by the number of days for that period of time expressed in days corresponding to such quantity of water delivered for which the Maximum Monthly Flow was measured. "Maximum Monthly Flow" means the highest total potable water use metered at the Point of Delivery for the number of days reflected in any calendar month during the respective calendar year. "MGD" means "million gallons per day." "Point of Delivery" means that geographic point, as identified on sheet _ of the design plans attached hereto as Exhibit A, where the CITY'S System shall be physically connected to the DISTRICT System for the purpose of delivering the subject bulk potable water to the CITY'S System. "Price Index" means the index used by the DISTRICT to adjust its Water Service Commodity Charges to account for inflationary effects of the DISTRICT'S costs of providing potable water service, to avoid expenses of frequent detailed Water Service Commodity Charge rate evaluations. "Transmission Facilities" means those utility facilities, including but not limited to, water mains, valves, continuous read out telemetry, meters, and appurtenant facilities, used directly or indirectly throughout the term of this Agreement to connect the CITY'S System to the DISTRICT'S System at the Point of Delivery, as shown on Exhibit Packet Page -1117- 4 7/8/2014 16.C.6. A attached hereto. "Water System Capacity Fees" means the capacity or impact fees expressed on a "per gallon of capacity reserved basis" adopted from time to time by the DISTRICT which shall be charged by the DISTRICT to the CITY to reserve potable water capacity from the DISTRICT'S System. SECTION 3. CITY CONNECTION AND POINT OF DELIVERY. 3.1. The CITY shall design and construct all Connection Facilities within the CITY'S System that are necessary to receive the subject bulk potable water from the DISTRICT at the Point of Delivery. The construction of the Connection Facilities as identified on Exhibit C shall be the responsibility of the CITY and such Connection Facilities shall remain the property of the CITY. 3.2. The CITY, at no cost to the DISTRICT, shall obtain all necessary governmental approvals, including permits, for the construction of the Connection Facilities for the connection of the CITY'S System to the DISTRICT System at the Point of Delivery. The design of the Connection Facilities is the sole responsibility of the CITY and shall be adequate to meet the Contractual Capacity requirements at the delivery pressure identified in this Agreement. 3.3. The CITY will construct the Point of Delivery in accordance with the then current Collier County Utilities Standards and Procedures Ordinance and the then current Utilities Standards and Procedures Manual, which shall include, but not necessarily limited to, isolation valves, backflow prevention device, by -pass, and a potable water master meter for the purposes of determining the amount of Potable Water Services being provided to the CITY by the DISTRICT pursuant to this Agreement. The CITY will be responsible for the design, construction, and testing of all facilities comprising the Point of Delivery and will convey title to all of the same to the DISTRICT in accordance with the County's Utilities Standards and Procedures Ordinance. Upon execution of this Agreement, the CITY will immediately initiate the design and Packet Page -1118- 5 7/8/2014 16.C.6. construction of the facilities comprising the Point of Delivery and will have such facilities placed into service within three hundred (300) days after execution of this Agreement. The CITY shall pay for all costs of the construction of the Point of Delivery. The CITY shall be responsible for constructing the Connection Facilities and connecting the City System to the District System at the Point of Delivery. The DISTRICT shall have the right to inspect the connection of the CITY Connection Facilities at the Point of Delivery prior to providing the subject Water Service to the CITY in accordance with this Agreement. Upon conveyance of the facilities constituting the Point of Delivery to the DISTRICT, the DISTRICT shall own, operate and maintain such facilities. 3.4. The receipt of Bulk Water Service pursuant to this Agreement shall commence when the Connection Facilities and the facilities constituting the Point of Delivery have been constructed and placed into service by the respective Parties, and the CITY has paid in full for the amount of Contracted Capacity as specified in this Agreement. SECTION 4. METERING OF SERVICE. 4.1 All potable water delivered to the CITY by the DISTRICT under this Agreement shall be measured at the Point of Delivery by meter equipment of standard manufacture. 4.2 The quantity of potable water delivered to the CITY shall be determined based on meter readings calculated based on the difference in quantity registered from the previous meter reading, said meter reading being made by the DISTRICT. The CITY can have a representative present at each time the meter is read; notification being provided by the CITY to the DISTRICT of the request to be present at the meter read forty -eight (48) hours in advance of such meter reading by the DISTRICT. 4.3 The DISTRICT will attempt to read the meter on the same day that other meters in that billing cycle are read nearby to the City's Service Area to Packet Page -1119- 6 7/8, have each such Billing Period of approximately thirty (30) recognizing holidays, weekends, and Force Majeure incidents may affE the timing of such meter readings. 4.4 The DISTRICT will test and calibrate the meter for service at the Point of Delivery once every six (6) months, which will be a cost of the DISTRICT borne by all customers of the DISTRICT. The CITY may install additional metering equipment on its side of the Point of Delivery, to serve as a check meter, which additional metering equipment will be owned, repaired, maintained and, if necessarily replaced, by the CITY. The DISTRICT'S meter will serve as the basis for the determination of potable water delivered at the Point of Delivery for the evaluation of Contracted Capacity utilization and commodity service billing purposes. 4.5 At the request of the CITY, the DISTRICT within thirty (30) days of receiving said request shall provide the CITY with a certified copy of the meter calibration report of the subject Water Service meter at the Point of Delivery. Should the calibration result in finding the meter inaccurate, the DISTRICT will as soon as possible repair or replace the meter so that meter's measurement will be accurate. For purposes of billing charges based on the metered flow, the amount billed during the period that the meter was determined to be inaccurate shall be the average of the prior twelve (12) monthly meter readings. If twelve consecutive monthly readings are not available, then the adjustment to correct the inaccuracy will be made promptly after twelve (12) months of accurate historical readings become available. SECTION 5. RESERVATION OF POTABLE WATER CAPACITY. 5.1. The CITY will receive an allocation of the Water Capacity from the DISTRICT for its resale pursuant to this Agreement upon the payment of Water System Capacity Charges in full to the DISTRICT. The CITY shall have an exclusive right to resale the Contracted Capacity as specified in Packet Page -1120- 7 7/8/2014 16.C.6. this Agreement. The CITY will have an entitlement to the Conti Capacity. The CITY will not be responsible for operation, mainten repair or replacement of any facilities owned by the DISTRICT. 5.2. 1. Coincident with the execution of this Agreement, the CITY agrees to reserve Contracted Capacity from the DISTRICT as stated on Exhibit D, Section 1. This reservation is referred to as the "Initial Contracted Capacity" and will be vested in the CITY only upon payment in full to the DISTRICT of the applicable Water System Capacity Fees. The CITY will pay the DISTRICT based on the Initial Contracted Capacity and the current Water System Capacity Fee as stated in Section 2 on Exhibit D. 2. At such time as the CITY may determine its need to purchase additional potable water Contracted Capacity from the DISTRICT pursuant to this Agreement, the CITY shall provide to the DISTRICT "Notice to Reserve Additional Potable Water Capacity" to request the purchase of an additional increment of Contracted Capacity. The Notice to Reserve Additional Potable Water Capacity shall include, but not be limited to, the increment of capacity requested for reservation, and the requested actual service date for such additional requested potable water Contracted Capacity. If the CITY agrees to purchase additional potable water Contracted Capacity from the DISTRICT, the CITY shall purchase such capacity in increments of not less than 10,000 gallons per day (GPD). 3. In no case shall the Capacity Availability Date for any additional potable water Contracted Capacity being requested by the CITY be less than ninety (90) days nor more than one hundred and twenty (120) from the requested Capacity Availability date specified in the respective Notice. Within ninety (90) days of receipt of said notice from the CITY, the DISTRICT shall inform the CITY in writing whether the additional potable water Contracted Capacity as requested by the CITY will be available as Packet Page -1121- 8 7/8/2014 16.C.6. of the requested Capacity Availability Date. If such potable water capacity is determined by the DISTRICT to be available for the subject use by the CITY pursuant to this Agreement, the CITY shall enter into an Additional Contracted Capacity Payment Agreement and pay for such additional Contracted Capacity (in the amount of money determined by using the same methodology as identified in Section 5.2, and promptly thereafter Section 1(a) in Exhibit D shall then be amended by the DISTRICT to include such increased available Additional Contracted Capacity. Furthermore, with respect to the CITY'S purchase of additional Contracted Capacity, the rate for such additional capacity to be charged by the District shall be at the then current prevailing market rates established by the DISTRICT via Resolution in accordance with the County's then applicable Ordinance. The amended (updated) Section 1(a) in Schedule D will identify the then applicable total amount of revised (increased) potable water Contracted Capacity purchased by the CITY, and the total cost of said additional capacity. The Amended Section 1(a) to such updated Schedule D shall thereby specify the increase in capacity above the "Initial Contracted Capacity" as originally identified in this Agreement. Any purchase of additional Contracted Capacity will utilize the methodology in effect for the DISTRICT at that date of actual payment to the DISTRICT, which may require payment in full before any such capacity is reserved to the CITY. 4. The DISTRICT will promptly make available, upon request of the CITY, a copy of the monthly Operating Reports which had been submitted by the DISTRICT to the Florida Department of Environmental Protection (FDEP) which will quantify the average daily flow or capacity use for each individual water plant as all of the same are public records under Florida Law. 5.3. The CITY shall pay a Water System Capacity Fee to the DISTRICT for all potable water Contracted Capacity reserved by the CITY as set forth in Exhibit D. The Initial Water System Capacity Fee on Exhibit D, Section 2 Packet Page -1122- 9 7/8/2014 16.C.6. (b) is based on a study as prepared by the DISTRICT and shall remain in effect until revised from time -to -time by the DISTRICT pursuant to County Resolution as adopted by the Board of County Commissioners. The DISTRICT may, but has no obligation to, give special notice to the CITY of changes to the Water System Capacity Fee. The Water System Capacity Fee will be expressed on a "per gallon of Contracted Capacity" basis and will always be rounded to the nearest cent for billing and calculation purposes. 5.4. The DISTRICT is named as the permit holder of the potable water facilities required to provide the potable water Contracted Capacity as it relates to the operation of such facilities by the FDEP and any other regulatory agency which may have jurisdiction with respect to such facilities. The DISTRICT at all times will attempt to operate its utility facilities in accordance with generally accepted utility operating procedures such that its operations should not be in violation of State and /or Federal regulations governing the operation of the facilities with such permit(s); and at all times the DISTRICT shall attempt to renew such permits on a timely basis in accordance with then applicable regulations to maintain such permit(s) in an approved active status mode. In the event that the DISTRICT is not in compliance with the operating permits for all facilities required to provide the Contracted Capacity to the CITY and the DISTRICT is fined or required to implement capital or operational improvements to such facilities as required by any regulatory agency, the CITY will be responsible pro -rata with the DISTRICT'S other potable water customer's costs, including penalties, if any, to the greatest extent than allowed by law. 5.5. The District shall endeavor to deliver the subject Bulk Potable Water Service at the Point of Delivery in accordance with the then current edition of the DISTRICT'S Utilities Standards and Procedures Ordinance and Manual. Packet Page -1123- - 10 7/8/2014 16.C.6. SECTION 6. RATES FOR MONTHLY USE OF CONTRACTED CAPACITY 6.1 The CITY will be responsible for the payment of all charges associated with the monthly use of its potable water Contracted Capacity. Per this Agreement, all potable water use will be metered at the Point of Delivery. The rates for service as billed by the DISTRICT will be fair and reasonable and shall reflect at least the DISTRICT'S cost of providing such Bulk Water Service to the CITY. The CITY shall pay the DISTRICT the then applicable Commodity Charge for all metered Bulk Water Service delivered by the DISTRICT to the CITY at the Point of Delivery. The initial Bulk Water Service Commodity Charge is shown on in Section 4 (b)(i) in Schedule D, which is based on a study prepared by the DISTRICT. Beginning on October 1 st of each Fiscal Year and absent a formal review of the Bulk Water Service rates as provided in this Agreement, the DISTRICT will be allowed to adjust the Bulk Water Service Commodity Charge by the application of not less than the Price Index as such Index is defined in this Agreement. The DISTRICT may notify the CITY in advance of changes in the Bulk Water Service Commodity Charge. The Bulk Water Service Commodity Charge will be expressed on a "per thousand gallons of metered potable water as delivered to the Point of Delivery" basis and will always be rounded to the nearest cent for billing and rate calculation purposes. 6.2. Nothing in this Agreement is intended, nor shall be construed, to be inconsistent with any original Exhibit. If it is claimed that there is inconsistency between this Agreement and any original Exhibit (or amended Exhibit), the text of the Agreement shall control to the extent of such conflict(s), if any. When and If any original Exhibit is amended after the commencement date of the Agreement, the Agreement shall continue to control over each Exhibit except to the extent, if any, the amended Exhibit expressly states that the amendments to the respective Exhibit are in fact acknowledged to be inconsistent with the Agreement, and the acknowledgements expressly specifies the precise extent that the Packet Page -1124- 11 7/8/2014 16.C.6. respective Exhibit, as then being amended, is modifying the Agreement. For example, the respective Exhibit, as amended, must state that "This amendment to Exhibit supersedes the Agreement only as follows: ." Whenever an Exhibit is amended, each amended Exhibit must be re- titled and must state the effective date of the amendments such as, for example: "First Amended Exhibit [applicable Exhibit letter] , effective on the day of , 200_, which supersedes the original Exhibit [applicable Exhibit letter]." 6.3. The Bulk Water Service Commodity Charges to be billed to the CITY by the DISTRICT will be established periodically, but not less frequently than every three (3) years, by an independent study of the costs associated with providing service as provided in this Agreement. Such study will be performed concurrently with any evaluation of the retail rates of the DISTRICT to provide consistency in the rate determination process. The rates to be applied to the CITY shall be the same as the rates charged to other of the DISTRICT'S customers in the same rate class. 6.4. Subject to the terms and conditions of this Agreement, the DISTRICT shall invoice the CITY on a monthly basis in accordance with billing cycle meter readings, calculated charges and other applicable service fees. The invoice shall include, at a minimum, the billing period of service, the amount of Bulk Water Service flows as metered and billed, the rates for service, the amount of the invoice, contact person for questions regarding the invoice, and other information deemed acceptable by the parties. The CITY shall make payment based upon the invoice amount within thirty (30) days after receipt of the invoice from the DISTRICT. If payment is not received by the DISTRICT within thirty (30) days after receipt of the invoice, the CITY shall be liable for the payment of any penalties on the outstanding balance as established from time to time by the DISTRICT, which penalty charges being the same as those applied to all other customers of the DISTRICT as established by Ordinance or Resolution as Packet Page -1125- 12 7/8/2014 16.C.6. appropriate. The charging of penalties shall not extend the due date for any payment and any failure to pay may be considered a default under the terms of this Agreement. 6.5. As then specified by Collier County Ordinance No. 2003 -71, as hereafter amended (or superseded by another Ordinance), or as provided in the DISTRICT'S Special Act, the subject water service from the DISTRICT to the CITY can be temporarily terminated when bills are delinquent for non- payment. 6.6. If the CITY disputes the accuracy of any meter reading or billed amount, it must in writing notify the DISTRICT of the claimed meter inaccuracy and /or claimed billed amount within forty -five (45) days of the date on the respective disputed billing cycle invoice. All claimed billing cycle invoice errors not thus disputed within forty -five (45) days of receipt of each respective invoice by the CITY shall be considered final and not subject to dispute. However, if it is determined that the master water metered potable water flows through the master meter were incorrectly determined by the meter during a time period, as determined as a result of meter testing, reimbursement based upon a claim of the master meter inaccuracy shall not be applied further back in time than one hundred and eighty (180) days from the date of the DISTRICT'S receipt of such master meter error claim. If the CITY disputes an invoice for the subject Water Service for a specific Billing Period, the CITY shall nevertheless promptly pay in full the monetary amount billed by the DISTRICT. Unless the DISTRICT'S staff agrees that the claimed error is self - evident or obvious when compared to typical average usage and /or historical flows, and therefore agrees that the invoice shall be summarily adjusted prior to the scheduled payment date. If, after payment in full, it is subsequently determined that the billing was in error, then the CITY shall be reimbursed or credited by the DISTRICT, for the respective above stated time period allowed refund (or credit) within thirty (30) days after such determination. Packet Page -1126- 13 7/8/2014 16.C.6. 6.7. In the event that the South Florida Water Management District or other governmental unit (including the Board of County Commissioners or its equivalent) with just cause and authority declares a water shortage, then the DISTRICT shall have the right to restrict service to the CITY by the same manner as the DISTRICT restricts service to all of its other customers located within the DISTRICT potable water service territory on a pro -rata share but will not adjust the Bulk Water Service Commodity Charge being billed by the DISTRICT as a result of such restricted service. 6.8. The DISTRICT hereby agrees to use its best efforts to produce, treat, and transmit to the CITY for potable water for resale in the CITY Service Area based on the then Contracted Capacity reservation as purchased by the CITY and paid for in full. 6.9. The billing of the subject Bulk Water Service will commence no later than thirty (30) days after the completion of the construction of the Point of Delivery by the DISTRICT and the completion of the construction of the Connection Facilities by the CITY for the amount of potable water delivered to the CITY by the DISTRICT and will be subject to rates, fees, and charges as provided in this Agreement. In the event that the potable water flow requested by the CITY to serve the CITY'S Service Area as metered at the Point of Delivery exceeds the Contracted Capacity, as expressed on a maximum monthly flow basis for a Billing Period, the amount of potable water flow above the Contracted Capacity is defined as "Excess Flow" and will be subject to additional Commodity Charges. The additional charges are being imposed upon the CITY to discourage the CITY from using potable water capacity of the DISTRICT System that has not been reserved by and allocated to the CITY by this Agreement. The additional charges for the daily Excess Flow, with the exception of potable water used for emergency purposes or circumstances beyond the control of the CITY (at the sole discretion of the DISTRICT consistent with the Packet Page -1127- 14 7/8/2014 16.C.6. application in other areas of the DISTRICT), shall be determined based on the following schedule: 1. For the Excess Flow during each Billing Period that is above the Contracted Capacity but less than 125% of the Contracted Capacity, an Excess Flow charge equal to 115% of the DISTRICT'S then otherwise applicable Commodity Charge shall be imposed and shall be paid by the CITY. 2. For the Excess Flow during each Billing Period that is above 125% of the Contracted Capacity but equal to or less than 150% of the Contracted Capacity, an Excess Flow charge equal to 125 % of the DISTRICT'S then otherwise applicable Commodity Charge shall be imposed and be paid by the CITY. 3. For any Excess Flow during each Billing Period that is 150% above the Contracted Capacity, such Excess Flow above 150% of the Contracted Capacity will be charged an Excess Flow Charge equal to 150% of the DISTRICT'S then otherwise applicable Commodity Charge. 4. Any decision made at the sole discretion of the DISTRICT concerning excessive potable water usage by the CITY for emergency purposes or under circumstances not under the control of the CITY may be appealed to the Board of County Commissioners of Collier County by the CITY subject to the City providing the County written notice of the Appeal within forty-five (45) days of the date of the invoice for excessive usage by the DISTRICT to the CITY. 6.10. The CITY and the DISTRICT -will cooperate with each other in good faith to coordinate the deliveries of the subject potable water to the Point of Delivery so that such deliveries should not exceed the Contracted Capacity for Bulk Water Service then being provided by the DISTRICT to the CITY. If the CITY exceeds 150% of the Contracted Capacity of the monthly average daily flow for three (3) consecutive months, OR four (4) Packet Page -1128- 15 7/8/2014 16.C.6. months in any twelve (12) consecutive month period, the DISTRICT will have the right to require the CITY to contract and pay in full for an increase in the CITY'S Contracted Capacity in an amount sufficient to eliminate such Excess Flow conditions. At no time during the term of this Agreement is the DISTRICT obligated to provide Contracted Capacity in excess of the gallonage than specified in the applicable Exhibit D. 6.11. Notwithstanding anything elsewhere in this Agreement, the DISTRICT shall not be liable for any consequential damages, and the DISTRICT shall not be liable for any direct damages as the result of the inability or failure to provide to CITY Bulk Water Service pursuant to this Agreement on a temporary, emergency or permanent basis due to Force Majeure or other circumstances not reasonably within the control of the DISTRICT. The DISTRICT shall use its best efforts to provide the Bulk Water Service needed by the CITY to the then applicable Contracted Capacity per the then applicable Exhibit D. Moreover, in the event of restrictions imposed upon the DISTRICT by any regulatory authority or authorities, the DISTRICT reserves the right to reduce the Contracted Capacity and the corresponding and metered Bulk Water Service for the CITY to the extent deemed necessary by the DISTRICT as a result of such imposed restrictions. 6.12. With regard to the quality of potable water delivered by the DISTRICT at the Point of Delivery, the DISTRICT will endeavor to meet all Federal, State, and local water quality standards as imposed upon the DISTRICT or as may be adopted by the DISTRICT in all then applicable Collier County Ordinances and Resolutions (the "Quality Standards ") during the term of this Agreement. To the extent the quality of the potable water delivered by the DISTRICT at the Point of Delivery does not meet the Quality Standards, the DISTRICT will issue notice to the CITY as then required by law. Packet Page -1129- 16 7/8/2014 16. C .6. 6.13. If the DISTRICT System is unable to deliver potable water to the CITY pursuant to this Agreement, the DISTRICT will attempt to notify the CITY within twenty -four (24) hours of the DISTRICT'S inability to provide such Water Service. The DISTRICT should attempt to notify the CITY with a minimum of twenty -four (24) hours of advance notice of when the DISTRICT will be able to recommence providing such Water Service to CITY. SECTION 7. OWNERSHIP, MAINTENANCE AND REPAIRS. 7.1. The CITY shall own and maintain in accordance with applicable laws and regulations and prudent utility management, solely at its own expense, its water facilities on the CITY'S side of the Point of Delivery. Following conveyance from the CITY, The DISTRICT shall own and be responsible for the facilities comprising the Point of Delivery. 7.2. The DISTRICT, in accordance with applicable laws and regulations, shall own and endeavor to maintain all raw water wells, treatment facilities, mains, lines, pumps and the other facilities necessary to treat, transport, and deliver the subject agreed upon potable water to the CITY Service Area at the Point of Delivery pursuant to this Agreement. 7.3. All potable water received by the CITY from the DISTRICT at the Point of Delivery will become the responsibility of the CITY for the distribution to its customers and users within the CITY service area as then depicted on Exhibit B, attached hereto. SECTION 8. NOTICES. 8.1. All notices, requests, demands or other communications hereunder shall be in writing and shall be deemed to be properly given if hand - delivered, mailed by certified or registered U.S. Mail, or delivered by a generally Packet Page -1130- 17 7/8/2014 16.C.6. accepted overnight courier service, such as Federal Express or United Parcel Service. Written notices shall be addressed as follows: Collier County: City of Marco Island: Collier County Government 3301 East Tamiami Trail Naples, FL., 34112 Attn: County Manager City of Marco Island 50 Bald Eagle Drive Marco Island, Fl., 34145 Attn: City Manager 8.2. Either party may, by notice in writing given to the other, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. Any notice shall be deemed given on the date such notice is delivered by hand or three days after the date mailed. Each party to this Agreement shall have a continuing duty to promptly notify the other party of any change to any of this information. 8.3. In emergency situations, it may be necessary to use more expeditious methods of notification, including but not limited to phone calls. In those instances, the respective party's emergency contact phone number shall be as follows: City of Marco Island: Manager Utility Operations Phone (239) 825 -9003 Collier County: South County Regional Water Plant Plant Manager Phone (239) 455 -6188 Packet Page -1131- - 18 7/8/2014 16.C.6. SECTION 9. TERM. 9.1. This Agreement shall continue until terminated by (a) mutual agreement of the CITY and the DISTRICT, (b) by the CITY pursuant to Section 9.2, or (c) by default per Section 10 herein below. 9.2. The CITY shall have the unconditional right to terminate this Agreement at any time subject to delivering to the DISTRICT not less than one (1) year's (365 days') advance written notice to the DISTRICT of the decision to terminate this Agreement. Such termination shall be without any financial or other liability whatsoever to the DISTRICT, but shall not affect the CITY'S obligations to pay to the DISTRICT all then unpaid rates, fees and charges or any other then unfulfilled obligations of the DISTRICT. SECTION 10. DEFAULT. If either Party materially fails or defaults in keeping, performing, or abiding by the terms and provisions of this Agreement, then the non - defaulting party shall give written notice to the defaulting party specifying the nature of the default. If the defaulting party does not cure the Agreement provision default within forty -five (45) days after the date of the receipt of the written notice, or upon such other longer reasonable time period to cure as stated in specific notice, then this Agreement, at the option of the non - defaulting party, shall be terminated. Written notice of such termination, including the effective date of the termination, shall be delivered to the termination party to the other party. Each Party hereto also understands that there may be defaults of law, rule and /or regulation apart from this Agreement that as a matter of law, and if possible, must and shall be cured prior to forty -five (45) days of the start of such respective default. Nothing in this Agreement shall be construed to in anyway affect any such obligation to cure. This paragraph is not intended to replace any other legal or equitable remedies available to the non - defaulting party under Florida law, but is in addition thereto. Notwithstanding anything in this Agreement, any failure of the CITY to promptly deliver timely payments to the DISTRICT shall be considered a material default under the Packet Page -1132- 19 7/8/2014 16.C.6. terms of this Agreement without the necessity for any notice from the DISTRICT to the CITY and such nonpayment by the CITY shall be sufficient grounds for temporary termination of the subject Bulk Water Service from the DISTRICT to the CITY. This provision shall not be applicable only if a specific payment is an unusual payment (which excludes all billing cycle payments at the like) whereby the CITY, absent actual notice to pay from the DISTRICT, would not be charged with knowledge of that unusual and non - recurring obligation to pay. SECTION 11. FORCE MAJEURE. With respect to the matters contemplated by this Agreement, neither party shall be liable or responsible to the other as a result of any injury to property or person, which was caused by any Force Majeure event. SECTION 12. ASSIGNMENT. This Agreement shall inure to the benefit of and be binding upon successors or assigns of the parties hereto. However, neither the DISTRICT nor the CITY shall assign or otherwise transfer this Agreement (and /or any duty or obligation within this Agreement) without the express prior written permission of the other party, which permission shall not be unreasonably withheld. Any unauthorized attempt to assign or otherwise transfer this Agreement and /or any party's duties or obligations hereunder shall be void ab initio. SECTION 13. AMENDMENT. No amendment, supplement, modification or waiver of this Agreement shall be binding unless executed in writing by both Parties hereto. No waiver of any of the provisions of this Agreement shall be deemed to constitute a waiver of any other provision(s) of this Agreement, whether or not similar, unless expressly provided in writing to the other party by the waiving party. Each such amendment, supplement, modification or waiver of this Agreement shall be filed with the Clerk to the Board of County Commissioners and with the City Clerk of the CITY. Packet Page -1133- 20 7/8/2014 16.C.6. SECTION 14. INDEMNIFICATION. To the greatest extent then permitted by law, the DISTRICT and the CITY agree to indemnify and hold each other harmless from the negligent acts or omissions of themselves, their officers, employees or agents. SECTION 15. SEVERABILITY. If any part of this Agreement is found invalid or unenforceable by any court, such invalidity or unenforceability shall not affect the other parts of this Agreement if the rights and obligations of the parties contained herein are not materially prejudiced and if the intentions of the parties can continue to be effected. SECTION 16. APPLICABLE LAW AND VENUE. This Agreement shall be governed by, construed, controlled and interpreted according to the laws of the State of Florida. Venue for any action or proceeding to construe or enforce the provisions of this Agreement shall be exclusively in the Circuit Court in and for Collier County, Florida. SECTION 17. EXECUTION IN COUNTERPARTS. This Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 18. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the Parties pertaining to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, negotiations, discussions or representations, either oral or written, Packet Page -1134- 21 7/8/2014 16.C.6. between the Parties and made with respect to the matters contained herein, and there are no warranties, representations or other agreements among the Parties in connection with the subject matter hereof, except as set forth herein. SECTION 19. FILING. Portions of this Agreement may constitute a joint exercise of power, privilege or authority by and between the DISTRICT and the CITY and may be deemed to be an " interlocal agreement" within the meaning of the Florida Interlocal Cooperation Act of 1969, as amended. In recognition thereof, this Agreement shall be filed with the Clerk of the Circuit Court of Collier County and with the Clerk of the CITY. IN WITNESS WHEREOF, the DISTRICT and the CITY have caused this Agreement to be executed effective on the day and year first above written. ATTEST: DWIGHT E. BROCK, Clerk BOARD OF COUNTY COMMISSIONERS, COLLIER COUNTY, FLORIDA, AND EX- OFFICIO AS THE GOVERNING BOARD OF THE COLLIER COUNTY WATER -SEWER DISTRICT. By: �`.,r,�•� Deputy Clerk Frank Halas, Chairman s� �s to ft 4tan s Approved at to form and legal sufficiency: Thomas C. Palmer, Assistant County Attorney CITY OF MARCO ISLAND, FLORIDA BY:,e. I'✓ �> City Manager j Packet Page -1135- 22 ATTEST: City Clerk Approved as to Form and Legal Sufficiency: City Attorney 7/8/2014 16.C.6. Packet Page -1136- 23 7/8/2014 16.C.6. Exhibit A Point of Delivery CITY staff will promptly provide the required Exhibit A to County staff after it has been prepared by a Florida licensed engineer at the CITY'S expense. Packet Page -1137- 7/8/2014 16.C.6. Exhibit B Hammock Bay Service Area Packet Page -1138- 7/8/2014 16.C.6. Exhibit C Connection Facilities CITY staff will promptly provide the required Exhibit C to County staff after it has been prepared by a Florida licensed engineer at the CITY'S expense. Packet Page -1139- 7/8/2014 16.C.6. EXHIBIT D BULK WATER SCHEDULE OF FEES AND CHARGES 1) Reservation of Contracted Capacity (as defined in Section 5.2): a) The CITY agrees to reserve 0.179 MGD of Contract Capacity from the DISTRICT, referred to as the Initial Contracted Capacity. 2) Water System Capacity Fees (as defined in Section 5.2): a) The Initial Contracted Capacity will be secured by the CITY through the payment of the Water System Capacity Fee to the DISTRICT. b) As of the date of this agreement, the DISTRICT charges $2,760 per ERC, which has an equivalent usage of 350 gallons per day as stated in the DISTRICT'S Master Plans, or $7.89 per gallon. c) The CITY will pay the DISTRICT $1,412,310 for the Initial Contracted Capacity 3) Water System Capacity Fee Adjustments a) The Water system Capacity Fees may be adjusted by the DISTRICT by Resolution in order to recover the costs of providing service. Notwithstanding the ability to adjust the Water System Capacity Fees, the DISTRICT may apply a price index rate adjustment to such rates upon the effective date established by the Board of County Commissioners. The price index adjustment factor shall represent the change(s) to the then applicable Index applied uniformly to all rates for Bulk Water System Capacity Fees in effect at the time of the application of the price index rate adjustment. Packet Page -1140- 7/8/2014 16.C.6. 4) Commodity Charges (as defined in Section 2): a) All Bulk Water Service provided by the DISTRICT to the CITY shall be metered at the Point of Delivery and shall be billed in accordance with the following Commodity Charge schedule: b) Commodity Charge: (i) All metered Potable Water Flow .............. $2.96 per 1,000 gallons 5) Excess Flow Charges (refer to Section 6.7): a) In no event during any Billing Period should the metered Bulk Water Service for any particular month which constitutes such Billing Period exceed the Contracted Capacity. To the extent that the monthly Bulk Water Service to the City as metered at the Point of Delivery exceeds the Contracted Capacity, the amount of metered Bulk Water Service above the then Contracted Capacity will be considered by the DISTRICT as Excess Flow. The DISTRICT will impose an additional charge upon all Excess Flow for the amount of Bulk Water Service that is greater than the Contracted Capacity based on the product of i) the Contracted Capacity expressed on a gallons per day on a maximum month flow basis multiplied by ii) the number of days in the Billing Period based on the following schedule: i) For the amount of the Excess Flow during a Billing Period above the then Contracted Capacity but less than 125% of the Contracted Capacity, an Excess Flow charge equal to 115% of the DISTRICT'S effective Commodity Charge during such Billing Period shall be paid by the CITY. ii) For the amount of the Excess Flow during a Billing Period that is above 125% of the Contracted Capacity but equal to or less than 150% of the then Contracted Capacity, an Excess Flow charge equal to 125% of the DISTRICT'S effective Commodity Charge during such Billing Period shall be paid by the CITY. iii) For the amount of the Excess Flow during a Billing Period that is above 150% of the then Contracted Capacity, an Excess Flow charge equal to 150% of the DISTRICT'S effective Commodity Charge during such Billing Period shall Packet Page -1141- 7/8/2014 16.C.6. be paid by the CITY. Commodity Charge Adjustments a) The Water Service Commodity Charges may be adjusted by the DISTRICT by Resolution in order to recover not less than the costs of providing service. Notwithstanding the ability to adjust the Water Service Commodity Charges, the DISTRICT may apply a price index rate adjustment to such rates annually effective each October 1. The price index adjustment factor shall represent the change in the Miami -Ft. Lauderdale MSA, FL, All Items Index as reported by the United States Bureau of Labor Statistics, or such other adjustment formula as the DISTRICT may then be applying uniformly to Bulk Water Service Commodity Charges that may be in effect at the time of the application of the price index rate adjustment. Packet Page -1142- 7/8/2014 16.C.6. EXEC[TTIVE SUMMARY AND RECOMMENDATIONS Packet Page -1143- 7/8/2014 16.C.6. EXECUTIVE SUMMARY AND RECOMMENDATIONS The Collier County (the "County ") Water -Sewer District (the "District ") water, wastewater and irrigation quality (IQ) water system (the "System ") provides an essential service 24 hours per day and 365 days per year. The utility operates in a highly - regulated environment. Regulatory agencies for the District include the United States Environmental Protection Agency (EPA), Florida Department of Environmental Protection (FDEP) and South Florida Water Management District (SFWMD). Permits issued to the utility by these regulatory agencies require satisfactory performance. If the utility does not comply with all applicable regulations, the County could possibly face future consent orders or fines from the regulatory agencies. The District System is established as a utility enterprise fund. General accounting policies and prudent utility management recommend that the System have revenues (financial resources) at least equal to the costs of providing services by the System. As such, the County should establish rates sufficient to meet the cost of operating, maintaining, and repairing the system and financing the ongoing capital improvements of the System in order to continue to provide a safe and reliable service to the County's water, wastewater and IQ water customers. Because of the County's need to ensure that utility revenues will be sufficient to meet System operating and capital needs as well as comply with the rate covenant provisions of the utility's current Bond Resolution and outstanding State Revolving Fund (SRF) loans, Public Resources Management Group, Inc. (PRMG) was retained to perform a review of the user rates of the System to evaluate the ability of System revenues to meet operating and capital needs. During the course of the current rate study, the utility administration and PRMG determined that certain guidelines should be followed while evaluating the sufficiency of the user rates. These guidelines included: 1. The user rates should be sufficient to recover the costs of providing service. The cost of service includes System operating costs and debt service along with the accrual of funds for working capital and for pay -as- you -go capital financing that is anticipated in future years. 2. The user rates should maintain the overall financial creditworthiness of the System. This guideline entails the following: a. Maintenance of adequate operating reserves consistent with the County's reserve policies. b. Compliance with the rate covenants outlined in both the Bond Resolution which authorized the issuance of the outstanding senior lien bonds and the existing Loan Agreements with the Florida Department of Environmental Protection (i.e., State Revolving Fund loan program), which are considered as subordinate lien bonds of the System. ES -1 Packet Page -1144- 7/8/2014 16.C.6. c. Maintenance of strong financial position consistent with performance criteria used by rating agencies and the utility industry. 3. The proposed rates should promote the continued conservation of water resources. 4. The proposed user rates should be competitive with those of neighboring utility systems. Based on the assumptions relied upon in the development of the System expenditure requirements and discussions with County staff, PRMG is recommending the following revenue adjustments for the System: Summary of Proposed Water, Wastewater and IQ Water Revenue Adjustments Fiscal Year Ending September 30, Water Wastewater IQ Water Combined Effective Date System System System System October 1, 2014 9.00% 9.00% 9.00% 9.00% October 1, 2015 5.00% 5.00% 5.00% 5.00% October 1, 2016 5.00% 5.00% 5.00% 5.00% October 1, 2017 [1] 2.40% 2.40% 2.40% 2.40% October 1, 2018 [1] 2.40% 2.40% 2.40% 2.40% [ 1 ] The actual adjustment is recommended to be 100% of the change in the Miarni- Fort Lauderdale Consumer Price Index (all urban consumers), but not less than 0 %. The primary reasons for the identified revenue adjustments are to: Provide sufficient revenues and cash flow to fund the six -year capital improvement program (CIP) of the District. The projects in the CIP are considered by the utility staff to be critical in order to provide long -term reliable and sustainable utility service to System customers. As previously communicated by the utility staff to the Board of County Commissioners, portions of the aging utility asset base have been identified as being at high risk for breakdowns, service interruptions and spills. The multi -year capital program developed by the District and its consulting engineers as part of the master planning process has been structured to mitigate and manage the System risks. Since the CIP is considered by the utility staff to primarily consist of projects representing ongoing renewals and replacements of assets that are reaching the end of their service lives or operational effectiveness, these projects are recognized in the financial forecast as being funded through annual deposits from system revenues to the District's capital - related funds (i.e., pay -as- you -go funding). This approach provides the District with increased flexibility in the funding of the capital program and promotes rate sustainability. 2. Continue to fund the costs of operations. Since the last time that the water and wastewater user rates were increased for the Fiscal Year 2011, inflation has continued to affect System operating margins. The following table indicates recent inflationary trends as reported by ES -2 Packet Page -1145- 7/8/2014 16.C.6. i the United States Bureau of Labor Statistics, Engineering News - Record and American City and County: Historical Inflationary Trends Historical Annual Compound GroWdt Rate Items 1 -Year Change 5 -Year Change 10 -Year Change 20 -Year Change BUREAU OF LABOR STATISTICS CPI - U.S. City Average 1.10% 2.03% 2.33% 2.39% Electricity - U.S. City Average 3.84% 1.19% 3.91% 2.49% Fuel Od- U.S. City Average 2.94% 11.71% 10.86% 7.92% Water and Sewerage Maintenance Index - U.S. City Average 3.64% 5.96% 5.80% 4.58% ENGINEERING NEWS - RECORD Construction Cost Index 2.80% 2.71% 3.34% 2.99% AMERICAN CITY AND COUNTY Municipal Cost Index 2.11% 2.71% 3.24% 2.71% The costs of operations are projected to continue to increase during the Forecast Period due to, among other things, the following: a. Inflationary effects on the costs of electricity, chemicals, fuel and other major expenditures for the utility; b. Labor costs, including incremental increases in staffing as a result of System growth and the capital program identified by the District; c. Increased costs due to regulatory requirements from the EPA, FDEP and SFWMD; and d. Economic recovery has increased bid prices on contractual services (e.g., more competition for limited resources). 3. Continue to fund the District's payment -in- lieu -of -taxes (PILT) to the General Fund. Since the last user rate study, the County changed its transfer methodology from one based on utility assets (e.g., property tax equivalent) to the current transfer policy of 5% of gross receipts. This policy change has resulted in a higher PILT than what was projected in the user rate study completed in 2011 (the "2011 Rate Study "), as shown in the following table: Fiscal Year 2014 PILT: Comparison of 2011 Rate Study Projections with Actual Results 2011 Rate Study Description Projections Actual Difference Payment -In- Lieu -of -Taxes (PILT) $4,205,700 $5,121,300 $915,600 PRMG has assumed that the current policy would remain in effect throughout the Forecast Period. 4. Maintain compliance with System rate covenants which include debt service coverage margins and the maintenance of certain funds and accounts. ES -3 Packet Page -1146- 7/8/2014 16.C.6. Maintain adequate operating reserves and margins consistent with County policies to ensure the continued creditworthiness of the System and to provide funds for emergencies (e.g., hurricane preparedness) and other purposes. Offset the loss of Allowance for Funds Prudently Invested (AFPI) fees that were charged on a per Equivalent Residential Connection (ERC) basis to new growth. These fees, which were first adopted in 2006, recovered the carrying cost for "holding" capacity until it is reserved by development. The County stopped collecting these fees in Fiscal Year 2013 due to a sunset provision in the rate ordinance authorizing the fees, and it was assumed that the fees would not be reinstated during the forecast period. During the Fiscal Year 2012, the last full year of AFPI fee collections, the District collected $1,829,186 in AFPI revenue. The rate study completed in 2011 assumed that collection of these fees would continue. The financial evaluation contained in this study included the six fiscal year period ending September 30, 2019 (the "Forecast Period "). The existing and proposed monthly water, wastewater and IQ user rates are shown in Tables ES -1, ES -2 and ES -3, respectively, at the end of this section. Table ES -4 at the end of this section provides a financial overview of forecasted System operations. This table indicates the following for all projected fiscal years: Overall annual debt service coverage [net revenues divided by the annual debt service requirement (senior lien)] of at least 150% after the Fiscal Year 2014. As discussed herein, and based on bond rating agencies, a financial target for the debt service coverage ratio of 150% is recommended. According to the Utility Revenue Bond Rating Guidelines published by Fitch Ratings (a rating agency which evaluates creditworthiness): "For utilities in the most stable operating environments with a suitably diverse and healthy service area economy, I.Sx annual coverage, with consistently maintained unrestricted financial liquidity of at least 90 days of revenues, could be sufficient for 'AA-'or higher ratings. For utilities with substantial growth, compliance demands, or significant annual volatility in revenues or expenditures, greater financial flexibility may be necessary." The District's utility system is currently rated AA+ with a positive outlook. 2. Maintenance of adequate operating reserves consistent with levels recognized in the County's reserve policies. 3. Full utilization of internal funding sources (e.g., operating reserves, capacity charge collections) as the first or primary source of capital before use of external debt financing to fund the System capital improvement program. Based on the assumptions relied upon in the preparation of the financial forecast, the utility should remain in good financial position throughout the Forecast Period identified in this report. ES -4 Packet Page -1147- 7/8/2014 16.C.6. FINDINGS, CONCLUSIONS AND RECOMMENDATIONS Based on our studies, assumptions, considerations, and analyses, PRMG offers the following observations and opinions for consideration by the Board of County Commissioners: 1. The District's water and wastewater user rates have not been adjusted since the Fiscal Year 2011. 2. The District's existing monthly user rates for water, wastewater and IQ water service are not anticipated to recover the District's projected water, wastewater and IQ water revenue requirements for the fiscal years ending September 30, 2014 through 2019. 3. The County should consider adopting the Fiscal Years 2015 through 2017 water, wastewater and IQ water system user rate adjustments as outlined in this report. These adjustments are anticipated to generate the following increases in revenue: Effective Date. October 1, 2014 October 1, 2015 October 1, 2016 Estimated Increase in System Revenue Water Wastewater IQ Water Combined System System System System 9.00% 9.00% 9.00% 9.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 4. The County should consider adopting a price indexing rate adjustment clause in its existing rate ordinance to enable the utility to automatically adjust monthly rates for water, wastewater and IQ water service — without a formal rate hearing or analysis — for inflationary effects on the costs of operations. Based on discussions with County staff, PRMG recommends that the annual index adjustment be calculated by applying one - hundred- percent (100 %) of the percentage change in the Miami -Fort Lauderdale Consumer Price Index (all urban consumers) as reported by the Bureau of Labor Statistics from January 1 st through December 31st of the previous calendar year to the monthly base charges and consumption / volumetric charges, but not less than 0 %. Although the District performs rate studies on a regular basis, having a price indexing rate adjustment clause may benefit the District when its senior lien revenue bonds (new or already- issued) are reviewed by bond rating agencies. Such a clause would help to assure the rating agencies that the District's rates would keep up with inflation and, hence, there would be less implied risk that the District would default on any debt service payments. The first annual indexing adjustment is recommended to be implemented on October 1, 2017 unless superseded by another rate study recommendation. Such price indexing rate adjustment clauses are common among utilities in the State of Florida. 5. The proposed water and wastewater user rates for the Fiscal Year 2015 are comparable with the rates charged by "neighboring" utility systems. At an average monthly usage level ES -5 Packet Page -1148- 7/8/2014 16.C.6. of 6,000 gallons, the typical usage of a single family residential customer of the System, bills for combined water and wastewater service under the proposed rates are lower than the average bill charged by eighteen surveyed utilities for similar service. Moreover, at least twelve of the eighteen surveyed utilities: i) are involved in a rate study; ii) are planning to conduct a rate study; or iii) plan to implement a rate revision within the next twelve months. This comparison is shown in Figure ES -1 at the end of this section. As shown in Figure ES -1, the increase in the monthly bill for a user of 6,000 gallons under the proposed rates would be $7.48. The proposed IQ water user rates for the Fiscal Year 2015 are comparable with the rates charged by "neighboring" utility systems. The District should consider increasing the wholesale or bulk water service rate to $3.75 per 1,000 gallons effective October 1, 2014, $3.82 per 1,000 gallons effective October 1, 2015 and $3.85 per 1,000 gallons effective October 1, 2016. The County is currently securing major user agreements reflecting revised take -or -pay IQ water allocations with its major users. The revised IQ water allocations become effective October 1, 2015 (next year). PRMG recommends that the District consider performing an IQ water rate study next year to possibly redesign the IQ water rates for each customer class based on cost of service principles. The utility is currently performing an audit of its fire protection system. Once the audit results are finalized, PRMG recommends that the District consider a review of its fire protection charges. 10. The actual results achieved during the Forecast Period reflected in this report may vary from those projected, and such variations may be material. For example: a. Actual customer growth and usage may be higher or lower than projected. b. The District's capital needs may be higher or lower than those projected and assumed in this report. The cost of goods and services (e.g., fuel and oil -based products) may be higher than projected which may directly affect the operating margins of the utility and the loner term ability to fund capital improvements. PRMG recommends that the District reevaluate the sufficiency of its water, wastewater and IQ water user rates on at least an annual basis to reconcile actual results with those projected herein and to validate the overall financial forecast for ongoing strategic planning purposes. 11. The proposed rates, when implemented as assumed in this report, are anticipated to be sufficient to meet the rate covenants of the Bond Resolution and Florida Department of Environmental Protection loan agreements. ES -6 Packet Page -1149- 7/8/2014 16.C.6. The ability of the System to meet the debt service requirements and comply with the rate covenants of the Bond Resolution which authorized the issuance of the outstanding System debt is subject to assumptions and considerations identified in this report and information obtained during preparation of the report regarding the System. As such, this report should be read in its entirety relative to such assumptions and considerations and the projections contained herein. 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