HomeMy WebLinkAbout7 Finance Master Plan i
Agenda Item #
Memorandum
To: Board of Directors
From: Peter Holzmeister
Date: October 11, 2002
Subject: Finance Master Plan
The Strategic plan for 2003 recognizes that the District has undertaken several large
projects and has stressed its cash position. The Plan also recognizes that we have
incurred significant levels of new debt and we have committed to the purchase of
wholesale power at a rate that was inflated by California's dysfunctional wholesale
power market. These circumstances have put our financial position in question. We
need a clearer financial picture in front of us as we move forward.
The Strategic Plan calls for us to prepare a Finance Master Plan. More specifically, the
Plan says:
Issue 6. Financial Master Plan
Issue:
Who should do this? Answer: Consultant
Must collect a lot of data for use by a consultant.
Elements: Growth Needs, capital needs, maintenance / replacements needs, current
fees, current rates, debt/bonding, cash flow, personnel needs, reserves
How much do current customers pay? How much do new customers pay? Meeting
legal requirements. Political issue. Revise long term plan (10-20 years) with annual
cash flow analysis to provide financial guidance to the Board.
Action:
Bring in a financial consultant on a limited basis to clarify the requirements for a financial
plan - maybe a few days of a reconnaissance visit.
When:
November 2002
Mary Chapman and I have asked three consultants to submit proposals to help us get
started with the Finance master plan. Their proposals are attached. We have met with
Boris Prokop of BORISMETRICS and with Mike Bell of R.W. Beck. We have not yet met
with the staff of Muni-Financial, but we plan to do so as soon as possible.
BORISMETRICS is a one person firm consisting of Boris Prokop. Mr Prokop comes
highly recommended by staff of NCPA. He works for several NCPA members and has a
good reputation. However, he is a small firm and does not have the depth of exposure
to overall District financial issues that RW Beck has or that Muni-Financial has.
RW Beck has worked for us in the past, and we have always been very happy with their
work. In fact, we recruited Joe Horvath away from Beck when we were looking for a
staff engineer. Beck has significant depth and experience in District finance issues, but
we believe their proposal is not as detailed as that from Muni-Financial.
Muni-Financial is currently working for us in regard to the Donner Lake Assessment
District administration. We have become familiar with their staff and have confidence in
their ability. Their staff appears to have more significant experience in preparation of
finance master plans than even Beck. Their proposal is more detailed and seems to be
exactly what we are looking for.
At this point we believe the Muni-Financial proposal is the strongest. We also believe
that the Muni-Financial staff is very strong. I am tentatively recommending that we
accept the proposal from Muni-Financial, but I want the chance to meet with them to
discuss some of its specifics. I hope to meet with them before Wednesday evening. I
will have a more complete report for you on Wednesday evening.
CONSULTING SERVICES AGREEMENT
BORISMETRICS
Billing Address
P.O. Box 2746
Lodi,CA 95241
(425)922-2853
Work Order g
This Consulting Services Agreement is made between BORISMETRICS, (hereinafter
"BORISMETRICS") and Truckee Donner Public Utility District whose place of business is located at 11570 Donner
Pass Road, Truckee, California 96160(hereinafter"CLIENT")for a Project generally described as Financial Modeling,
Rates,and Cost of Service.
I. SCOPE AND QUALITY OF CONSULTING SERVICES
BORISMETRICS will provide assistance to the Client in the area of revenue requirement analysis, financial modeling
rates,and cost of service. The attached letter proposal provides the scope of service for this project
II. COMPENSATION AND REIMBURSEMENT OF COSTS
Services provided and costs incurred (with the exception of travel, food and lodging expenses) by BORISMETRICS
under this Agreement will be compensated according to the following:
Principal and Associate $105lhour
BORISMETRICS will submit monthly invoices to CLIENT for work completed and reasonable expenses incurred, to
the date of the invoice. All invoices will be itemized to reflect the employees performing the requested tasks,the billing
rate for each employee and the hours worked.
CLIENT shall pay all out-of-pocket travel, food, lodging and incidental expenses incurred by BORISMETRICS that are
reasonably associated with the provision of services under this Agreement. These expenses will be compensated for by
the CLIENT at their cost to BORISMETRICS. BORISMETRICS will keep receipts for such expenses in compliance
with IRS requirements. These receipts will be available to CLIENT for inspection upon request.
All invoices sent by BORISMETRICS to CLIENT shall be paid within thirty (30) days of receipt. All billings that
remain unpaid after thirty (30) days shall bear interest until paid at the rate of twelve percent (6%) per annum. If
CLIENT fails to pay any invoice within thirty(30)days and such failure continues ten(10)days after BORISMETRICS
gives CLIENT notice of such failure, BORISMETRICS shall have the right to terminate this Agreement immediately
without liability to CLIENT. The right to terminate under the terms of this section shall be in addition to all other legal,
equitable,or contractual remedies available to BORISMETRICS.
IIL TERMS&CONDITIONS OF CONSULTING SERVICES AGREEMENT
1. Timing of Work. BORISMETRICS shall commence work as specified by the Electric Utility Director.
2. Access to Facilities and Property. The CLIENT will make its facilities accessible to BORISMETRICS as
required for BORISMETRICS's performance of its services and will provide labor and safety equipment as required by
BORISMETRICS for such access. CLIENT will be responsible for all acts of CLIENT's agents or personnel.
3. Relationship of Parties, No Third-Party Beneficiaries. BORISMETRICS is an independent contractor under
this Agreement. This Agreement gives no rights or benefits to anyone not named as a party to this Agreement,and there
are no third party beneficiaries to this Agreement.
4. Subcontracts. BORISMETRICS may use the services of independent contractors to perform a portion of its
obligations under this Agreement with prior approval by CLIENT. Subcontractors will be billed to CLIENT at their cost
to BORISMETRICS.
5. Mutual Indemnification. BORISMETRICS agrees to indemnify and hold harmless CLIENT and its elected and
appointed council, boards commissions, officers and employees from and against any and all loss, cost, damage, or
expense of any kind and nature (including, without limitation, court costs, expenses, and reasonable attorneys' fees)
arising out of injury to persons or damage to property (including, without limitation, property of CLIENT,
BORISMETRICS, and their respective employees, agents, licensees, and representatives) in any manner caused by the
negligent acts or omissions of BORISMETRICS or others with whom BORISMETRICS contracts (" Agents") in the
performance of its work pursuant to or in connection with this Agreement to the extent of BORISMETRICS's or
"Agents"proportionate negligence,if any.
CLIENT agrees to indemnify and hold harmless BORISMETRICS and its employees from and against any and all loss,
cost, damage, or expense of any kind and nature (including without limitation, court costs, expenses and reasonable
attorneys' fees) arising out of injury to person(s) or damage to property (including, without limitation, property of
CLIENT, BORISMETRICS, and their respective employees, agents, licensees and representatives) in any manner
caused by the negligent acts or omissions of CLIENT or other(s)with whom CLIENT contracts("CLIENT's agents")to
perform work pursuant to or in connection with this Agreement, to the extent of CLIENT's or CLIENT's agents
proportionate negligence, if any.
6. Limitation of Liability. The parties liability hereunder shall be limited as follows: (a)for insured liabilities arising
out of either parties negligence, to the amount of insurance then available to fund any settlement, award, or verdict; (b)
for uninsured liabilities,to 50 percent(50%)of the fee earned by BORISMETRICS under this Agreement. In no event
shall either parties liabilities exceed the aforementioned limits of liability.
Each parry's liability for damages provided under this Agreement shall be limited to liability for direct damages and shall
in no event include Liability for the other party's or their respective agents or employees remote, punitive, consequential
or indirect damages for lost profits, loss of use, lost opportunity, financing, interest expense, business interruption or
productivity or production loss, regardless of the breach of contract, breach of warranty, tort (including negligence),
strict liability,or otherwise.
7. Delays. BORISMETRICS will not be liable to CLIENT for delays in performance under this Agreement or for the
direct or indirect cost resulting from delays that may result from labor strikes, riots, war, acts of governmental
authorities, extraordinary weather conditions, natural catastrophes or other events or occurrences beyond control of
BORISMETRICS. In the event CLIENT suspends or interrupts the services of BORISMETRICS for the convenience of
CLIENT,an equitable adjustment in the project's schedule and in compensation to BORISMETRICS will be made.
8. Data,Documents and Records. BORISMETRICS shall be entitled to rely upon the accuracy and completeness of
all data furnished by CLIENT to BORISMETRICS that is used by BORISMETRICS in the providing of services under
this Agreement. BORISMETRICS has the right to retain and use all data famished to it and all plans, designs,
specifications and other work product created by BORISMETRICS in providing services hereunder.
9. Ownership and Use of Documents and Electronic Media Deliverables. All completed reports and other data or
documents provided or prepared by BORISMETRICS in accordance with this Agreement are the property of CLIENT,
and may be used by CLIENT. Ownership shall transfer to CLIENT only if BORISMETRICS has been paid in full for
services under the terms of this Agreement. CLIENT shall release, defend, indemnify and hold harmless
BORISMETRICS from all claims, costs, expenses, damage, or liability arising out of or resulting from the use or
modification of any reports, data, documents, drawings, specifications, or other work product prepared by
BORISMETRICS except use by CLIENT on those portions of the project for which such items were prepared.
10. Resolution of Disputes,Attorneys' Fees. The law of the State of California shall govern the interpretation of and
the resolution of disputes under this Agreement If any claim, at law or otherwise, is made by either party to this
Agreement,the prevailing party shall be entitled to its costs and reasonable attorneys'fees.
11. Termination of Agreement. Either BORISMETRICS or CLIENT may terminate this Agreement upon thirty(30)
days written notice to the other sent to the addresses listed herein. In the event CLIENT terminates this agreement,
CLIENT specifically agrees to pay BORISMETRICS for all services rendered through the termination date.
12. Integration, Modification and Severability. This Agreement, including all Addenda, shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns. This is the entire agreement between the
parties, there are no other agreements or representations not set forth herein, and this Agreement incorporates and
supersedes all prior negotiations, agreements, and representations. This Agreement may not be modified except in
writing signed by an authorized representative of each party.
If any provision of this Agreement is deemed by law to be void, invalid or inoperative for any reason, or any phrase or
clause within such provision is deemed by law to be void, invalid or inoperative,that phrase, clause or provision shall be
deemed modified to the extent necessary to make it valid and operative, or, if it cannot be so modified,then such phrase,
clause or provision shall be deemed severed from this Agreement with the remaining phrases, clauses and provisions
continuing in full force and effect as if the Agreement had been signed with the void, invalid or inoperative portions so
modified or eliminated. In addition, a phrase, clause or provision shall be substituted which is consistent with the intent
of this Agreement and the severed phrase,clause or provision.
13. Notices. All notices,requests,demands,and other communications hereunder shall be deemed given
only if in writing signed by an authorized representative of the sender and delivered by facsimile (with a hard copy
mailed),or,when sent by a courier or express service guaranteeing overnight delivery to the receiving parry.
Notices to BORISMETRICS shall be delivered to: Notices to CLIENT shall be delivered to:
BORISMETRICS,INC. Truckee Donner PUD
P.O. Box 2746 11570 Donner Pass Road
Lodi, California 95241 Truckee,California 96160
ATTN: Boris Prokop ATTN: Peter Holzmeister
Facsimile: 650-429-2063
14. Headings, Assignment and Waiver. The headings in this Agreement are inserted for convenience only and
shall not constitute a part hereof. Neither party to this Agreement shall assign its duties and obligations hereunder
without the prior written consent of the other parry. A waiver by any party of any provision or a breach of this
Agreement must be provided in writing and shall not be construed as a waiver of any other provision or any
succeeding breach of the same or any other provisions herein.
15. Execution of Agreement. The parties agree that the language in this Agreement pertaining to Indemnification,
Limitations of Liability and Insurance are clear and unambiguous and were mutually negotiated by the parties.
BORISMETRICS, INC. Truckee Donner PUD
By:Boris Prokop By Peter Holzmeister
Title: Principal Title: General Manager
Date: Date:
-
October 8,2002
Via E-mail
Mr. Peter L. Holzmeister
General Manager
Truckee Donner Public Utility District
P.O. Box 309
Truckee, California 96160-0309
Subject: Finance Master Plan
Dear Mr. Holzmeister:
It was a pleasure to meet with you and Mary Chapman yesterday to discuss your needs for a
Finance Master Plan for the Truckee Donner Public Utility District(TDPUD or District). Based
on our discussion and my review of the documents that you provided, I have prepared a
proposed Scope of Work and budget for a high-level review of TDPUD's financial reporting
and planning process. As we discussed, I believe that R. W. Beck can provide the greatest value
at this time by reviewing TDPUD's current financial condition, gaining a better understanding
of current reporting and planning measures, and determining the financial issues, such as cash
flow, that need to be addressed in the short tenn. In addition to providing a cash flow model in
the first phase of our work, we will reach preliminary conclusions with regard to rate levels and
be prepared to make recommendations regarding the need for an increase or surcharge.
The result of our work will be a written assessment of current financial planning and reporting
systems, as well as a framework for the creation of a Finance Master Plan. Our proposed
approach will enable us to learn more about what your overall needs are as we create the cash
flow model. This will present us with an opportunity to produce a valuable deliverable before
you commit substantial resources to an overhaul of your financial planning process. The
framework for the Finance Master Plan will be prepared so that future activities can be
prioritized and a plan can be established to assign responsibilities and budgets to the
development of the Master Plan.
Our team will consist of me, Ken Mellor, Scott Martin, and Sebnem Tersezen. I have over
20 years of public utility finance experience having served as the chief financial officer for
major publicly-owned utilities in California and Illinois. Ken has extensive financial expertise
and was formerly the chief financial officer of the Sacramento Municipal Utility District. Scott
has financial and rate experience with both investor- and publicly-owned utilities in California
and Nevada, and Sebnem is an analyst s io will assist in the development of the Excel cash
flow model.
Enclosed you will find a copy of our standard Professional Services Agreement (PSA) that
includes the proposed Scope of Work(Exhibit A).
We estimate that we can complete this work for $15,000, but would like to propose that you
authorize up to $20,000 in case we encounter any unexpected problems. In any case, we will
not exceed the $15,000 budget without your express authorization. If the Scope of Work,
budget, and PSA are acceptable, please let me know and I will send you signed original
documents. If you have any questions or changes, I can be reached at 916-614-8265 or via
1851 Heritage[are. Suite 500. Sacramento. CA 95815-4949,Phone(916)929 3653,Fax(916)929-1710
Mr. Peter L. Holzmeister
October 8, 2002
Page 2
e-mail at mbell@rwbeck.com. We will be able to proceed immediately and expect that we can
complete this work within 30 days of the notice to proceed.
Sincerely,
R. W. BECK, fNC.
/s/
Michael A. Bell
Principal
MAB:jm
Encl.
c: Mary Chapman
001415 160112-6800 1120847 1 CAWINDO WS\I FMF'\Truckee ef.tr.doc
PROFESSIONAL SERVICES AGREEMENT
This PROFESSIONAL SERVICES AGREEMENT ("Agreement") is dated October 8, 2002, by and
between R.W. Beck, Inc. (`Beck"), with offices at 1851 Heritage Lane, Suite 200, Sacramento,
California 95815-4949, and Truckee Donner Public Utility District ("Client"), with offices at
11570 Donner Pass Road, Truckee, California 96161-4947.
NOW, THEREFORE, in consideration of the promises herein and for other good and valuable
consideration, the parties agree as follows:
1. Services: Beck and Client agree Beck will perform the scope of work attached as Exhibit A ("Scope
of Services").
2. Independent Contractor: Beck is an independent contractor and is not an employee of the Client.
Services performed by Beck under this Agreement are solely for the benefit of Client unless specified
otherwise. Nothing contained in this Agreement creates any duties on the part of Beck toward any
person not a party to this Agreement.
3. Standard of Care: Beck will perform services under this Agreement with the degree of skill and
diligence normally practiced by professional engineers or consultants performing the same or similar
services. No other warranty or guarantee, expressed or implied, is made with respect to the services
furnished under this Agreement and all implied warranties are disclaimed.
4. Changes/Amendments: This Agreement may not be changed except by written amendment signed
by both parties. The estimate of the level of effort, schedule and payment required to complete the
Scope of Services, as Beck understands it, is reflected herein. Services not expressly set forth in this
Agreement are excluded. Beck shall promptly notify the Client if changes to the Scope of Services
affect the schedule, level of effort or payment to Beck and the schedule and payment shall be
equitably adjusted. If Beck is delayed in performing its services due to an event beyond its control,
including but not limited to fire, flood, earthquake, explosion, strike, transportation or equipment
delays, act of war, or act of God, then the schedule or payment under the Agreement shall be
equitably adjusted, if necessary,to compensate Beck for any additional costs due to the delay.
5. Fee for Services: Payment for the services under this Agreement will be based on the actual hours
of services furnished multiplied by Beck's billing rates as of the date of its monthly invoice plus all
reasonable expenses directly related to the services furnished under this Agreement.
6. Payment: Client shall pay Beck within 30 days of monthly invoices. If Client disputes any portion
of the invoice, the undisputed portion will be paid and Beck will be notified in writing within 10 days
of the invoice of the exceptions taken. Additional charges for interest shall become due and payable
at a rate of 1% percent per month (or the maximum percentage allowed by law, whichever is lower)
on the unpaid amounts. Any interest charges due from the Client on past due invoices are outside any
maximum billing amounts established for this Agreement and shall not be included in calculating the
maximum. If the Client fails to pay invoiced amounts within 60 days after delivery of invoice, Beck,
at its sole discretion, may suspend services hereunder or may initiate collections proceedings,
including mandatory binding arbitration, without incurring any liability or waiving any right
established hereunder or by law.
R4kB-2035REV 10A1 01 ❑remNo 00;96 Agree meat No.
PROFESSIONAL SERVICES AGREEMENT
7. insurance: Beek shall maintain insurance with the following
required coverages and minimum
limits and upon request, will provide insurance certificates to the Client:
Workers' Compensation ......................................Statutory
Employer's Liability............................................$1,000,000
Commercial General Liability.............................$1,000,000 per occurrence
........ ....................................................................$1,000,000 aggregate
Comprehensive General Automobile...................$1,000,000 combined single limit
Professional Liability...........................................$1,000,000 per claim and in the aggregate
8. Indemnity: Following operation of applicable rights of contribution and to the extent permitted by
law, Beck agrees to indemnify, defend and hold harmless Client and its directors, officers and
employees from and against any and all loss, damage, claim or liability (including without limitation,
reasonable attorneys' fees) incurred by Client to the extent arising out of Beck's negligent acts,
errors or omissions, including claims by any third party or claims made by employees of Beck. Beck
explicitly and expressly waives any right it has to immunity under applicable industrial insurance
laws with respect to any action against Client and agrees to assume liability for actions brought by its
own employees against Client as provided above.
Following operation of applicable rights of contribution and to the extent permitted by law, Client
agrees to indemnify, defend and hold harmless Beck and its directors, officers, employees and
subconsultants from and against any and all loss, damage, claim or liability (including, without
limitation, reasonable attorney's fees) incurred by Beck to the extent arising out of Client's negligent
acts, errors or omissions, including claims by any third party or claims made by employees of Client.
Client explicitly and expressly waives any right it has to immunity under applicable industrial
insurance laws with respect to any action against Beck and agrees to assume liability for actions
brought by its own employees against Beck as provided above.
9. Limitation of Liability: No employee of Beck shall have individual liability to Client. To the extent
permitted by law, the total liability of Beck to Client for any and all claims arising out of this
Agreement, whether caused by negligence, errors, omissions, strict liability, breach of contract or
contribution, or indemnity claims based on third party claims, shall not exceed Twenty-Thousand
dollars($20,000).
10. Consequential Damages: In no event and under no circumstances shall Beck be liable to Client for
any interest, loss of anticipated revenues, earnings, profits, increased expense of operations, loss by
reason of shutdown or non-operation due to late completion, or for any consequential, indirect or
special damages.
11. Termination: Either party may terminate this Agreement upon thirty (30) days written notice to the
other party. Client shall pay Beck for all services rendered to the date of termination plus reasonable
expenses for winding down the services. If either parry defaults in its obligations under this
Agreement (including Client's obligation to make payments hereunder), the non-defaulting parry may
suspend performance under this Agreement, after giving seven (7) days written notice of its intention
to suspend performance under this Agreement and if cure of the default is not commenced and
diligently continued.
RWB-203SREV10/11/02 Client No. 001415 Aereement No. R. W. Beck 2035-2
PROFESSIONAL. SERVICES AGREEMENT
12. Reuse of Work Products: All documents, analyses and other data prepared by Beck under this
Agreement ("Work Products") are instruments of service and are and shall remain the property of
Beck. Client shall have the right to make and retain copies and use all Work Products; provided,
however, the use shall be limited to the intended use for which the services and Work Products are
provided under this Agreement. Beck may, at its sole discretion,copyright any of the Work Products;
provided that copyrighting will not restrict Client's right to retain or make copies of the Work
Products for its information, reference and use on the project or services under this
Agreement.
The Work Products shall not be changed or used for purposes other than those set forth in this
Agreement without the prior written approval of Beck. If Client releases the Work Products to a third
party without Beck's prior written consent, or changes or uses the Work Products other than as
intended hereunder, Client does so at its sole risk and discretion and Beck shall not be liable for any
claims or damages resulting from or connected with the release or any third party's use of the Work
Products. If software is intended or expected to be developed under this Agreement, a software
license agreement acceptable to Beck shall be executed by Client.
13, Information Provided by Others: Client shall provide to Beck in a timely manner any information
Beck indicates is needed to perform the services hereunder. Beck may rely on the accuracy of
information provided by Client and its representatives.
14, Opinions of Cost: Beck does not control the cost of labor, materials, equipment or services
furnished by others, nor does it control pricing factors used by others to accommodate inflation,
competitive bidding or market conditions. Beck estimates of operation expenses or construction
costs represent its best judgment as an experienced and qualified professional and are not a guarantee
of cost.
15, Dispute Resolution: Beck and Client shall attempt to resolve conflicts or disputes under this
Agreement in a fair and reasonable manner and agree that if resolution cannot be made to attempt to
mediate the conflict by a professional mediator(except for payment disputes which may be submitted
directly to arbitration). If mediation does not settle any dispute or action which arises under this
Agreement or which relates in any way to this Agreement or the subject matter of this Agreement, it
shall be subject to arbitration under the rules governing commercial arbitration as promulgated by the
American Arbitration Association and arbitrability shall be subject to the Federal Arbitration Act.
16. Miscellaneous:
(a) This Agreement is binding upon and will inure to the benefit of the Client and Beck and their
respective successors and assigns. Neither party may assign its rights or obligations hereunder
without the prior written consent of the other party.
(b) Client expressly agrees that all provisions of the Agreement, including the clause limiting the
liability of Beck, were mutually negotiated and that but for the inclusion of the limitation of
liability clause in the Agreement, Beck's compensation for services would otherwise be greater
and/or Beck would not have entered into the Agreement.
(e) If any provision of this Agreement is invalid or unenforceable, the remainder of this Agreement
sliall continue in full force and effect and the provision declared invalid or unenforceable shall
continue as to other circumstances.
(d) This Agreement shall be governed by, and construed in accordance with, the laws of the State of
Washington.
(e) In any action to enforce or interpret this Agreement, the prevailing party shall be entitled to
recover, as part of its judgment, reasonable attorneys' fees and costs from the other parry.
RW13-203SREV10/11l02 Client No.001415 Agreement No. R. W. Beck 203S-3
PROFESSIONAL SERVICES AGREEMENT
IN WITNESS WHEREOF, the parties have signed this Agreement the date first written above.
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
By
Its
R. W. BECK, INC.
By
Michael A. Bell
Its Principal
RwB-203sREv10/11/02 Chen[No.001415 AsreementNo. R. W. Beck 203S-4
PROFESSIONAL SERVICES AGREEMENT
Exhibit A
R.W. Beck, Inc.
SCOPE OF WORK
Truckee Donner Public Utility District
Finance Master Plan
Task 1 Assess Current Financial Condition
R. W. Beck will evaluate the current financial condition of TDPUD, as well as assess the effectiveness,
timeliness, and value of the existing financial reporting and forecasting tools employed by TDPUD. Our
analysis will enable us to determine if there is an immediate need for a rate adjustment or surcharge.
Task 2 Identify Immediate and Long-Term Financial Needs
R. W. Beck will prioritize the areas of financial performance that will need immediate attention and
identify those that are either working well or can be corrected at a later date without risk to TDPUD's
financial performance. Examples of areas that will be reviewed include:
■ Cash flow
■ Rate levels
■ Debt coverage
■ Reserves
■ Operating and capital budgets
■ Bond covenant compliance
Task 3 Develop Cash Flow Model and Identify Framework for Creation of a
Finance Master Plan
R. W. Beck will develop an Excel-based model to project cash flow consistent with the District's annual
budget cycle. The model will be developed so that it can easily be updated by District staff as changes
occur through the normal course of business. In addition, based on findings and observations contained
in Tasks 1 and 2, R. W. Beck will create the framework for the development of a Finance Master Plan.
This framework will include a prioritization of actions needed; the steps that would need to be
undertaken to construct the various strategies, reports, and spreadsheets in support of the Master Plan; an
estimate of the time to implement the Master Plan; and an estimate of the cost of creating the Master
Plan.
Deliverable
R. W. Beck will make an initial determination of the need for any adjustment to the District's rates. We
will also develop an Excel model for cash flow. A final report will also contain R. W.Beck's findings
with regard to TDPUD's financial planting and reporting process and how it can be improved. In
addition, the report will prioritize those areas that are critical to the successful financial performance of
the District and identify the steps necessary in order to develop and implement a Master Financial Plan,
including a schedule and budget.
RWB-203SREV10/11/02 Cient No.00I41 Agreement No. R. W. Beck 20IS-5
`! MuniFinancial
A WILLDAN COMPANY
October 9,2002
Peter Holzmeister
General Manager
Truckee Donner Public Utility District
11570 Donner Pass Road
P.O. Box 309
Truckee, California 96160
Sent by email to marychapman@tdpud.org
Re: Draft Proposal to Prepare a Financial Plan
Dear Mr. Holzmeister:
In response to our prior conversations,MuniFinancial is submitting this proposal to prepare
a Financial Plan for the Truckee Donner Public Utility District. This proposal summarizes
our understanding of the objectives of the Plan and describes our scope of services and
schedule,presents our staffing and firm qualifications, and provides a budget.
Current Situation and Study Objectives
The District is absorbing the impact of several recent significant financial decisions. In the
last two years the District purchased two smaller water purveyors (Donner Lake and
Glenshire) and committed to considerable capital expenditures for these new service areas.
These commitments have been largely debt financed so debt management has become an
critical financial issue. The District's electric operations are coping with impacts from the
State's energy crisis last year, specifically expensive wholesale power contracts.
Given this background,the District is seeking outside assistance to prepare a comprehensive
Financial Plan. The Plan would provide guidance to the Board and staff in making financial
decisions that support the District's long-term financial stability. The Plan would include
financial analysis,policies, and recommendations. The District would also receive a long-
range financial modeling tool for continued use developed as part of the Plan.
Scope of Services
The scope of services for this engagement by task is described in detail below.
Task 1:Evaluate existing financial situation and recent trends
The purpose of this task is to gain an understanding of the District's existing financial
situation so that the Financial Plan can focus on the most critical issues facing the District.
We will review all financial documents provided by staff, adjust our approach as needed, and
seek comments from staff to focus the financial modeling and policy review efforts to
follow.
Truckee Danner Pub&c Uiik'ty District October 9,2002.
Financial Planning Proposal Page 2 of 6
We will seek assistance from staff to compile historical actual financial data for the past three
to five years. Analysis of this data will inform the financial projections developed in Task 2.
We will start with data contained in the District's annual financial statements prepared by
outside auditors. We will need assistance from staff to compile more detailed historical
revenue data such as number of accounts,average demand by type of account, and rates.
Detailed expenditure data may include power purchases by type,total labor costs,and total
services/supplies costs. We expect that most if not all this data will be available from
District staff in electronic (e.g. spreadsheet) format, and that the data will"roll up" to the
financial statement schedules.
Task 2:Develop long range financial planning model
The purpose of this task is to develop a modeling tool to analyze probable financial
scenarios for District operations, maintenance,and capital improvements. We anticipate a
10-year planning horizon for the model. The model will have separate components for
electric and water operations,and for O&M and capital programs. The model will provide
an annual estimate of customer demand,revenues, expenditures, and fund balances. All
model values will be in current (inflated) dollars to project utility rates as customers would
see them on their statements.
• Customer demand will be tracked by number and type of account, and use
average and peak factors as appropriate to estimate demand. This scope assumes
that the District will provide guidance to estimate growth in utility connections
consistent with growth projections under the Town of Truckee's General Plan.
Development of growth projection is beyond the scope of this project.
• Revenues for operations will be driven primarily by customer demand, average
billing rates, and capital facility fees. Billing rates will be a key model input
manipulated for each planning scenario to generate the desired result. The
model will start with the revenue line items shown in the District's annual
financial statements, adding more detail as needed.
• Expenditures also will be modeled starting with the line items shown in the
District's annual financial statements and adding more detail as needed.
Additional detail may include, for example,labor costs separate from supplies
and services to apply separate cost inflators to each. Variable expenditures will
be driven by customer demand and capital improvement plans.
• Fund balances will be calculated separately for the electric and water systems, and
combined for the District as a whole. The model will include all funds though
the level of detail will vary depending on the fund's size and significance to the
District's overall financial situation.
We understand the District is currently updating financial information associated with the
Donner Lake Special Assessment District. We will rely on staff to provide the appropriate
data for the financial model for the assessment district.
The model will be in Microsoft Excel format. The model will be designed for use by
District staff with at least intermediate financial expertise. All manual inputs will be color-
coded. Each sheet will be formatted to print as a table if possible. Model documentation
will be embedded using explanatory sheets and cell notes.
Truckee Donner Public UnifiJ'District October 9,2002.
Financial Planning Proposal Page 3 of 6
Task 3:Review monthly cash flow model
The purpose of this task is to review the District's current cash flow model and suggest
improvements. The model is based on the Districts bank accounts such as Local Agency
Investment Fund (LAIF) and the Bank of the West and US Bank accounts. The model
enables the District to manage its cash accounts and plan expenditures over the course of a
budget year. We will provide recommendations for the cash flow model in the Financial
Plan. This scope of work does not include development of a new cash flow model.
Task 4:Review and revise financial policies
In this task we will review and revise,as needed, major District financial policies. These
policies provide guidance for activities such as investments, debt financing,reserves, and rate
stabilization. Recommended policies that would affect the financial modeling conducted in
Task 2 will be integrated into the model as appropriate.
The task will begin with a review of existing policies. With District staff we will identify
those policies that require review and potential revision. If necessary we will research
policies adopted by comparable agencies to identify best practices. The results of this task
will be presented as policy recommendations included in the Financial Plan.
Task 5:Prepare Financial Plan
The purpose of this task is to summarize the results of prior tasks into a comprehensive
Financial Plan for the District. The Plan will include:
• Description of the District,its current financial situation, financial policies,and
major forces and trends affecting the District;
• Projection of the District's financial situation over a 10-year planning horizon,
focusing on issues such as customer rates, capital improvement financing,and
fund balances; and
• Conclusions and recommendations,including recommended revisions or
additions to financial policies.
Given the urgency of this assignment,we will present preliminary findings at the Board's
budget workshop on December 3 . For the Financial Plan document,we will prepare an
administrative draft for staff review,make revisions as appropriate, and present a public
draft to the Board. Any comments received from the Board will be integrated into the final
draft.
Task 6:Meetings
We have budgeted for six meetings for this engagement as follows:
• Task 1: One meeting with staff to review and refine the scope of work,discuss
the District's current financial situation,obtain preliminary data,and review
existing financial planning tools and policies.
• Task 2: Two meetings,one for on-site data gathering and one to seek staff
comments on a preliminary results of the model.
• Task 5: Three meetings,including participation in the December 3`d Board
budget workshop, one meeting with staff to discuss the administrative draft of
Truckee Donner Public Utility District October 9,2002.
Financial Planning Proposal Page 4 of 6
the Financial Plan,and one final meeting with the Board to present the public
draft of the Plan.
Schedule
We anticipate a four-month schedule to complete this engagement. All time frames noted
below are from the time we receive notice to proceed from the District.
• One week:hold kick-off meeting.
• December 3`a: present preliminary findings at Board budget workshop.
• Nine weeks: present preliminary results of financial planning model.
• Fourteen to 16 weeks: discuss administrative draft of Financial Plan with staff,
present public draft to Board,and deliver final draft and financial planning
model.
This schedule is based on staff's cooperation in the timely transmittal of historical financial
data (see Task 1) and response to follow up information requests. MuniFinancial will
provide a monthly status report to District staff during the engagement identifying
outstanding data and policy issues.
Staffing
Below are summaries of the professionals that MuniFinancial has assembled for this
engagement team. We have pulled together a team of senior consultants given the high level
of judgment and expertise needed to successfully complete this engagement. There will be
no changes in the consultants listed without written consent of the District.
Michael McNamara,Vice President and Division Manager of MuniFinancial's Financial
Consulting Services group will be the project manager and principal-in-charge for this
project. Mr. McNamara will organize and direct all work tasks,and provide quality control
by reviewing all client products before delivery. He will be present at the first staff meeting
and the two Board meetings.
Mr. McNamara has over 20 years of city government financial consulting experience. He
has been a finance director and treasurer in two cities (San Clemente and Irvine),one of
which had a water utility. He recently completed a review of the Finance Department in
West Covina,including operations and financial policies and recommendation for changes.
He has extensive experience preparing financing plans for over 15 utility districts,the
Metropolitan Water District of Southern California. He also served as principal in charge
for studies such as the City of Mission Viejo Long Range Financial Master Plan,the City of
West Hollywood Financial Master Plan, and the City of Chino's award winning financing
plan. During a prior nine-year tenure at Fieldman Rolapp &Associates,he prepared over 50
financial studies and was the financial advisor on over forty projects and approximately one-
half billion dollars of successful bond issues.
Mr. McNamara has a master's degree in business administration from Pepperdine University,
and a bachelor of science degree from Eastern Michigan University.
Robert D. Spencer,a Principal Consultant in our Financial Consulting Services group,will
be the project manager for this engagement. Mr. Spencer will be responsible for providing
Truckee Donner Pubkc Utikty District October 9,2002.
Financial Planning Proposal Page 5 of 6
daily supervision to the analyst, and ensuring that the engagement is completed on time and
within budget. He will be the primary client contact and will be present at all meetings.
Mr. Spencer has 15 years experience of financial planning experience with local government.
He has led the Ft.Ord Reuse AuthoritvIs financial advising team for over three years with
responsibility for preparing and implementing a$500 million financing plan to redevelop the
former military base. He recently completed a $300 million financing plan for South Sutter
County. He also has extensive experience preparing operating and maintenance budget
projections for local agencies throughout California to help them plan for the fiscal impacts
of growth.
Mr. Spencer has a master's degree in public policy from the Kennedy School of Government
at Harvard University,and a bachelor of arts in economics from Colorado College.
Jeff Wakefield,a project manager in our Financial Consulting Services group will provide
analytical support for this engagement. He will be responsible for constructing and running
the financial models,and for preparing the policy document. For over 10 years,he has
specialized in cost allocation plans, financial analysis and fee studies for local agencies in
California and Arizona. He has a bachelor's degree in accounting from the University of
Redlands.
Firm Qualifications
MuniFinancial is one of the largest public finance consulting firms in the United States with
corporate headquarters in California and regional offices throughout the country. Since our
founding in 1990 we have helped over 350 public agencies and non-profit organizations
successfully address a broad range of financial challenges. The firm currently has a staff of 70
dedicated professionals with the range of expertise necessary to provide high-quality service
to all our clients.
Given the breadth and depth of expertise among our staff, MuniFinancial is able to offer
clients the full range of financial services
• Financial planning and revenue enhancement,including financial
projections and policy analysis,plus rate,user fee, and cost allocation studies;
• Capital improvement planning and financing,including infrastructure
financing plans and impact or connection fee studies;
• Economic and fiscal policy analysis of proposed projects and plans,including
government reorganizations studies; and
• Special district implementation and administration,including district
formation and voter campaigns,plus administrative services such as delinquency
management, disclosure, and arbitrage rebate analysis
Many of our projects have an engineering component as well,highlighting the benefits of
MuniFinancial as a member of The Willdan Group of Companies. Willdan Associates is a
leading engineering consulting firm in the Western United States and provides contract staff
for building,planning, and engineering departments plus a range of civil engineering
services.With the combined expertise of our firms we can provide a comprehensive
approach to our clients financial, economic,and engineering concerns.
Truckee Danner Public Utility District October 9,2002.
Finanaal Planning Proposal Page 6 of 6
Budget
We will complete this study for a lump sum cost of$50,390. Our invoicing schedule will be
based on percent of the project completed at specific milestones as follows:
• Ten percent (10%) upon receipt of notice to proceed.
• Forty percent (40%) upon presentation of preliminary results of the financial
planning model.
• Forty percent (40%) upon delivery of the administrative draft Financial Plan.
• Ten percent (10%) upon delivery of the final Plan and model.
Authorization
If the terms of this engagement are acceptable to you as stated herein,please sign both
originals where indicated and return one original to me.
We appreciate this opportunity to assist the Truckee Donner Public Utility District in its
efforts to ensure its long-term financial stability.
Sincerely,
MUNIFINAvC1nL
Michael S.McNamara
Vice President
Accepted as stated herein:
Signature Title
Name (print) Date