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6642 - Supply of Cost and Rate Study Services for Solid Waste, 3.Statement of Work/ SpecificationsProject Description Denton’s Municipal Solid Waste (MSW) Department desires to more accurately match costs with established rates, within rate classes, while maintaining competitiveness with other regional solid waste providers to the best extent possible. The Department also desires to meet citizen and customer expectations and divert recoverable materials through recycling, and to sell recovered recyclable materials and commodities at best price. This solicitation project requests respondents provide proposals for one or both of the distinct analytical Parts listed below, and their appropriate recommendations. The City of Denton may select two separate respondents to provide the work efforts listed within the two main topic Parts outlined below, one respondent for each work Part, or the City may select one respondent to provide work efforts for both Parts below. Respondents are requested to submit documentation soliciting to provide work efforts for Part I below, Part II below, or for both Parts I and II below. Part I: Municipal Solid Waste Cost of Service and Rate design. This Part will include providing a cost of service analysis of every customer class identified by the Solid Waste Department, and developing a rate design for each customer class identified to fully fund all costs within the class. Part II: Wholesale Customer Market Study and Wholesale Cost of Service and Rate Design. This Part will include analyzing Denton‘s Wholesale customer market and wholesale customers utilizing the City of Denton’s landfill. They should evaluate these customers alternative disposal and processing options, and provide rate recommendations that the City of Denton could charge these customers and still maintain their business. Additionally, a review, analysis and report regarding best practices concerning the sale of recyclables and commodities will be required. The report should include recommendations for maximizing the sale of these or additional commodities. The purpose of this solicitation is to analyze and provide the cost of servicing all solid waste & recycling customer classes, and provide recommended rate designs, as well as analyzing wholesale customers through a market study and a providing a more detailed wholesale rate analysis, rate design recommendation and a commodity sales review and model. In addition to analyzing the cost of service, the project should include long range recommendations for rate design in order to enhance the department’s rate competitiveness and meet revenue requirements for the next five years. A five year forward financial model is to be provided for both areas of the RFP, Part I and II above. The selected consultant should provide reporting summary information for review by management, and the working cost of service and rate design models, completed within an appropriate software product, which is provided to the department staff with final data intact, and a written description and training on how to update the data file. This will allow the departmental staff to update the models at their own determination for both Parts I and II above. Scope of Services PURPOSE The purpose of the Municipal Solid Waste Department cost of service and rate design analysis and the Wholesale Customer market analysis, and commodities sales model is to: Part I: Determine the costs of service associated with Denton’s collection, recycling, landfill, processing, and other services, and provide their recommended rate designs to fully recover costs. (Exception: cost of service for wholesale to be provided in Part II.) Part I: Determine the costs allocated with each retail rate class based upon a cash basis cost allocation methodology. Retail rate competitiveness in Denton’s market is important and may be considered in the cost allocation process. Existing rate classes may be eliminated and/or additional rate classes may be created. (Exception: Rate evaluation for wholesale to be provided in Part II.) Part I: Provide all reporting documentation, electronic files, and descriptions needed relative to the cost of service and rate design models for continued use by staff to provide continued updates over a five year period. Provide training to staff, enabling them to understand the functionality and use of the models. Part II: Provide a market analysis of Denton’s wholesale customer class and determine the costs of service associated with Denton’s wholesale customer class, and provide a market rate analysis enabling the City staff to understand what rates could be charged to maintain or discontinue receiving these customer’s materials. This analysis will include an analysis of the overall effect of wholesale sales on Denton customers. This analysis should include debt coverage, use of landfill space, and any subsidization that may raise or lower costs to Denton customers. Part II: Provide all reporting documentation, electronic files, and descriptions needed related to the wholesale market study and rate design model, for continued use by staff, enabling them to provide continued updates over a five year period. Provide marketing tools for sale of recycled and reuse commodities. Provide training to staff, enabling them to understand the functionality and use of the models. Part I and II: Final product is to be prepared for presentation to the Public Utility Board and City Council, if requested, for both Part I and II. Alternative cost allocation or rate design methodologies may be used to enhance rate competitiveness for individual rate classes. This permits existing competitive rate classes to continue to provide competitive rates, while enhancing the ability of any potentially non- competitive rate classes to provide more competitive rates. These issues should all be fully discussed with the department director and project staff. The department desires to continue to use pricing and rate design to meet its strategic goals, to further benefit its customers, to accomplish its financial strategies, and to establish equity and fairness within each rate class. The respondent should consider five year rate design goals and an incremental plan to phase in rates to promote increased waste diversion, maintain revenue stability, better manage wholesale customer use, and to more accurately reflect actual cost of service within all identified rate classes. PART I: SCOPE OF SERVICES – MUNICIPAL SOLID WASTE & RECYCLING DEPARTMENT COST OF SERVICE A. RESIDENTIAL AND COMMERCIAL COLLECTION COSTS OF SERVICE The residential and commercial collection costs of service shall be completed concurrent with the recycling services cost of service. The five year period for establishing solid waste costs and rates for services shall be for the City’s fiscal year 2019 – 2023 period. The department operates as an enterprise fund, and the largest majority of revenues is received through rates. Residential rates consist of a weekly collection service fee (based on cart sizes) and any additional service fees, charged for additional services provided. Residential fees are used for single family dwellings up to a triplex. The residential rate combines the refuse and recycling cart collection services into one rate based upon the cart sizes selected by the customer. Commercial rates are recovered through a collection fee based on container size, type of container, and frequency of collections per week. Additional service fees are charged when applicable. Commercial recycling is voluntary and is encouraged. Commercial rates should be designed to encourage recycling. Additional rate classes may be established if needed for specific customer groups. The department provides multi-family (apartment) refuse collection and would like to evaluate adding a more robust recycling service. The cost of service model should include an evaluation of this customer class, along with regional comparative data that includes participation data. Currently these residential customers are served and billed commercially through front load truck services. Management desires for residential and commercial refuse and recycling collections to operate as fully self-supporting operations. The costs of commercial recycling services, which may include rates which do not fully recover costs, may require rates to be established which promote and encourage waste diversion, and which require financial support from other departmental operations. B. RATE DESIGN All Solid Waste & Recycling rates shall be reviewed for appropriateness and for cost recovery. The respondent shall identify any potential customer rate subsidization which may be occurring. The intent is that if rate subsidies exist, they will be identified for evaluation and potential elimination. Identify any landfill services which the City currently provides, which are not properly priced to the public. Identify any landfill services which the City is not currently providing, but which can be added as a public service, and provide the pricing the City would charge for providing those services. What additional revenues would the City potentially expect to receive? (Excluding Part II – wholesale) The respondent will provide the completed cost of service and rate design model, for use by city staff in the annual budget and rate development process. The respondent will provide training on the models to the City of Denton staff. C. MUNICIPAL SOLID WASTE RATE SCHEDULES After completion of the cost of service and rate design, and prior to approval of the rates by the city council, the respondent may be asked to provide assistance in developing wording and clarification of the rate schedules. Clarity and simplification of the rate schedules will be critical in order to obtain full customer understanding of all rates. In addition, respondent should be prepared to present the final report to the Denton Public Utility Board and City Council. PART II: WHOLESALE COST OF SERVICE AND WHOLESALE CUSTOMER MARKET STUDY It’s expected that the wholesale cost of service will determine that wholesale rates are under-recovering costs. The subsidization of this customer class should be reviewed to determine if the overall financial effects of the wholesale customer volumes results in lower City of Denton customer costs or will it result in higher City of Denton customer costs if wholesale customer volumes decline. COST OF SERVICE AND WHOLESALE RATE MARKET STUDY Cost of service should consider applicable landfill service costs, long term landfill airspace usage, and debt. Examine fixed costs with and without wholesale customers, and the wholesale customer’s financial impact on Denton’s customer’s rate classes. The wholesale rate market study should include regional rate comparisons for various waste streams. The City of Denton currently assumes that there is an optimum balance for wholesale activity and would like the rates to support this optimization. Provide all reporting documentation, electronic files, and descriptions needed relative to the cost of service and rate design models for continued use by staff to provide continued updates over a five year period. Provide training to staff, enabling them to understand the functionality and use of the models. B. RECYCLABLES AND MATERIALS DIVERTED – COMMODITY SALES When evaluating landfill services, a long term process is to be developed and clearly identified for implementation by the City, which outlines the City’s recyclable materials marketing plan. Identify all non-fiber materials available for sale by the City, recovered and/or processed, and when and where these materials should be sold based on pricing expected to be received. The process put in place will allow the City to maximize the revenues received from the sale of these materials. The marketing strategy should include best practice for obtaining regional prices available for all marketable commodities, and methods for determining when to sell or stockpile these materials? C. MUNICIPAL SOLID WASTE RATE SCHEDULES After completion of the cost of service and rate design, and prior to approval of the rates by the city council, the respondent may be asked to provide assistance in developing wording and clarification of the rate schedules. Clarity and simplification of the rate schedules will be critical in order to obtain full customer understanding of all rates. In addition, respondent should be prepared to present the final report to the Denton Public Utility Board and City Council. CITY OF DENTON DUTIES AND RESPONSIBLITIES The City will be responsible to the awarded contractor for the following tasks: A. Providing utility budget, rate, use, and similar information as needed to complete the proposed project. The City will work to provide all historical documentation requested. B. Assist in the coordination of project activities. The City will work with the consultant selected to maintain a timely schedule. C. The City will provide draft review comments for updating of the document, for added clarification, and for utilization in the development of the final product received.