BPM006379_Solicitation_Attachment_12_-_Method_of_Approach_Water_Finance_Assistance.docx

Request for Proposal

Solicitation No. BPM006379

Capacity Development/Technical Assistance to Small Public Drinking Water Systems Arizona Department of Environmental Quality (ADEQ) 1110 W. Washington Street Phoenix, AZ 85007

Attachment 12 – Method of Approach

The Offeror shall provide a narrative response to each question that demonstrates their understanding of the Scope of Work requirements and describes the company’s overall method of approach for providing the Service(s) stated in this Solicitation. If there is a question that is not applicable to the Services required by the Scope of Work, you may mark it “N/A”. The narrative should not contain language used for marketing purposes.

Offeror shall provide a response either after each question or in a separate document entitled: “Attachment 12 - Method of Approach.” If a separate document is used, please clearly designate each section and double-check to ensure that each question has been answered. If any information provided is considered CONFIDENTIAL by Offeror, the information must be specifically included in the Confidential Information Designation Attachment and related documentation to be assessed for confidential treatment under A.A.C. R2-7-103. Response to Method of Approach shall not exceed ten (10) pages.

Question 1: How would your approach for a project differ working for a very small community or utility as opposed to a medium or large city or utility?

Offeror Response:

Most of the work of Water Finance Assistance is with small and very small communities, so our typical approach is more geared towards them than towards medium or large cities. Our experience has taught us that staff or volunteers at very small utilities are very dedicated to their communities but may lack the financial or managerial expertise to complete a rate study or other assessment and/or may simply lack the time to complete such a project. The “heavy lifting” of the data analysis will fall on us, but we must explain thoroughly our work so the community can comprehend it. We work with utility staff to understand their timeline and needs and develop a tailored approach to assess their rates. We solicit feedback from governing boards on their priorities for their community. We recognize that staff at small communities are overworked and often need more time to collect and distribute data we need for our analysis, and that is built into our timelines. Most importantly, small communities are most interested in how other small communities have handled particular issues. We share our experiences of working in other small communities across the country and do not share programs run by big cities as examples of what small systems can do. A small community won’t be moved to action by Phoenix or Tucson, but they may be moved to action by a community of similar size and income. Working in very small communities requires some patience and most importantly a personal connection. One advantage of being a two-person organization is that we have a lot direct time working with our communities. They will not see a revolving door of faces or names. We have maintained relationships with several of our communities over many years. This personal touch makes it more likely that the community will be responsive even when staff are overwhelmed and also makes it more likely that our recommendations will be taken seriously by the governing body. Often, this is best achieved by an in-person visit to the community, though much of our work can be handled remotely. As an out-of-state firm, we would look to combine site visits with multiple communities into a single trip or would look to visit a community when traveling to Arizona for other projects in order to keep our costs down.

Offeror shall respond to question #2, if proposing to provide services for one or more of the following deliverables:

5 - Design of water system improvements 7 - Drinking water permit applications (e.g., ATC, AOC, APP, AZPDES) 11- Preparing Corrosion Control Assessments & Treatment Recommendations

Question 2: What is your process when designing and permitting a drinking water treatment system? How would you approach the design & permitting of a treatment system for a small public water system? Describe the steps that you take to select the best treatment technology.

N/A

Question 3: How will you ensure your proposed solution to the assigned task is practical, cost-effective, and sustainable for the small water system?

To ensure that our proposed solution is practical, our recommendations for rate studies are always rooted in data analysis taking into consideration the financial condition of the utility and the ability of customers to pay higher rates. We would love for every utility to adopt rates that would cover the full cost of providing water service today and for generations, including fully funding operations, preventive maintenance, asset replacement, debt service, and building up reserve funds. Because of economies of scale, this can make rates extremely high for very small utilities, and that may not be practical if the community has less fortunate households. Water Finance Assistance always balances recommended rate increases with a thorough assessment of community demographics and bill payment rates to ensure that customers are likely to pay bills after rates are raised. Otherwise, the utility risks generating less income than it had before raising rates. We also make rate recommendations with an eye towards long-term sustainability, looking at how rates should change in the coming year but also how they may need to change in future years. We identify steps the utility can take to lower its costs in the future and often recommend that utilities receiving a rate study also seek out technical assistance for asset management programs and water audits as well. Our rate recommendations also take into consideration the capacity of the staff and the limitations of billing software. Complicated rate structures are not necessarily better and are often inappropriate for very small utilities. Customers should be able to understand rate structures easily, and staff should be able to implement rate structures easily. Utilities in Arizona often use increasing block rates to promote conservation, so our rate studies will examine how effective that rate design is in lowering unnecessary water use. Often, that goal can be achieved with a simpler rate design, for example. When possible, Water Finance Assistance draws on successful rate structures from communities of similar size and income to the utility being assisted.

Offeror shall respond to question #4, if proposing to provide services for one or more of the following deliverables:

5 - Design of water system improvements 7 - Drinking water permit applications (e.g., ATC, AOC, APP, AZPDES) 11- Preparing Corrosion Control Assessments & Treatment Recommendations

Question 4: When designing a treatment system that modifies water chemistry, how do you ensure this treatment won’t cause or exacerbate other water quality problems?

Offeror Response:

N/A

If your team is backed up or unavailable to finish a job, describe what steps will be taken to get the project delivered on time?

If your subcontractor is falling behind stated deliverable, describe what steps will be taken to get the project on track and delivered on time?

Offeror Response:

Water Finance Assistance maps out a schedule at the beginning of a project based on input from the water system to ensure that their timeline is being met. For example, a small town asking for a rate study would need the results in time for its annual budget process which may begin a few months before the actual budget is passed. Water Finance Assistance will set up interim deliverables and dates by which they will be completed. We have a strong history of completing projects on time. Water Finance Assistance has one of its two employees lead each project. If a project were to fall behind schedule, the other employee is able to step in and help. We are both trained in conducting rate studies. Occasionally, delays happen because we are waiting on data from the water system itself. We recognize that small communities have limited time and capacity. As a result, we ask for data at the very beginning of a project and give the community ample time to provide the necessary information. If our team was completely backed up or unable to finish a job, which has never happened in our 5.5 years as a company, we could draw on our network of water financial experts to help. Water Finance Assistance would clear any additional team members with Arizona before inviting them into the project. We do not anticipate using subcontractors for these projects.

Question 6: Describe your company’s review process to ensure that technical documents are complete and accurate prior to submission to ADEQ. What documents can ADEQ review to verify if the review was completed? If ADEQ finds an issue, who, other than the PM, is the point of contact for resolution?

Water Finance Assistance has a policy that both staff members review all reports and technical documents before submitting them to the water system or to ADEQ. This extra layer of review ensures that our documents are better written and more complete. We also ask the water system to provide feedback on the document if they choose before finalizing the content. We also work from a set of developed spreadsheet templates for our data analysis to ensure that we have consistency between projects and to minimize the likelihood of a formula error in Excel producing an inaccurate number. We thoroughly vet our spreadsheet tools for accuracy before using them with any clients. Water Finance Assistance can provide a report of how a document was reviewed with dates and people listed. ADEQ can contact either Mr. Barnes or Ms. Arnette if issues are found for resolution.

Question 7: Describe a time where obstacles faced during a project resulted in a change to your methodology of approach. What were the obstacles, the impact to the project and what did you do to overcome them?

One common obstacle of conducting rate studies is not being able to access data. Water Finance Assistance was working with a small community on a rate study. That community had charged customers using an increasing block rate structure but was forced to revert to a flat fee for unlimited water usage as meters failed. The community wanted to know if their increasing block rate structure was still appropriate for when meters were replaced. One way to answer this question is to look at household level usage each billing period to see where customers fall within the block structure and whether the block structure is promoting water conservation during the summer months. That requires meter-level data. When the utility went to collect these data, however, they found that their meter data system had crashed and that they were unable to access data. They also did not have backup data due to a previous ransomware attack on the utility where all data had been lost. Water Finance Assistance had to come up with a different way to answer the question of the appropriateness of an increasing block rate structure without usage data. We turned instead to household size. Most households in this community had 4-10 people living in them, a high number. Many were multi-generational families with a grandparent or grandparents living with their adult children and grandchildren (and occasionally great-grandchildren). There were a lot of people but not necessarily a lot of workers bringing in income, so affordability was a concern. Average necessary water use is estimated to be 60 gallons per person per day. These large households would be expected to use between 7,200 and 18,000 gallons a month just for normal, everyday indoor water consumption. The utility’s block rate structure was set up so that these customers would have been in the second or third tier and paying higher rates just because they were large families using a regular amount of water. The utility leadership did not want to penalize customers in this way, so we designed instead a uniform block rate structure with a low base charge and higher volumetric charge that would encourage conservation but not disproportionately impact larger families.

Offeror shall respond to scenario #1, if proposing to provide services for one or more of the following deliverables:

4 - Construction Administration & Construction Management 5 - Design of water system improvements 7 - Drinking water permit applications 8 - Funding Assistance 9 - Legal assistance (e.g., forming corporate status, corporate documents) 10- Median Household Income Surveys 12 - Preparing Environmental Documents/Archeological Surveys 13 - Preparing Preliminary Engineering Reports (PER) 14 - Rate studies, rate reviews, rate cases 16 - System Evaluations 19 - Water Quality Compliance Options

Scenario 1: A small, rural public water system has multiple water quality issues. There are 20 current connections; the customers are low income and/or retirees. All the homes are on septic systems. The system consists of one well (located within the floodway of a major river), an elevated storage tank and distribution system.

The water system has maximum contaminant level (MCL) exceedances for uranium. In addition, chloride, sulfate, total hardness and total dissolved solids are well above the secondary MCLs. Sampling of private wells in the area indicated better water quality may be found away from the river. Outline at least three alternatives to address the water quality issues that are cost effective and sustainable for this very small water system. Provide your recommendation for the best alternative for the system.

For your recommendation include the following information for this scenario:

A bullet list of tasks that your firm would conduct to address the water quality issues and implement a solution. The tasks should be presented in the order they would be conducted. Each task should include the purpose of the task (e.g., why are you doing it? What information will be obtained in doing the task? What other information would be included in your summary recommendation report to ADEQ?

Offeror Response (limit response for scenario #1 to two (2) pages):

Water Finance Assistance would take the following steps:

· Consult with a third party expert in technical capacity to assess the viability of four options for solving the problem including cost. The purpose is to understand options and costs:

· Changes to treatment process

· Drilling a new well

· Physically connecting to a neighboring system

· Selling to a system aggregator

· Measure the community demographics to determine how much extra customers could pay.

· Measure the financial health of the utility to determine if they could take on loans or even manage grants.

· Identify and choose the least costly option of the four.

· If the solution is to partner with a neighboring community, facilitate discussions with that community.

· Identify potential state and federal funding sources that could help the community offset the cost of the option.

· Help community prepare an application to the funding program including setting up meetings with funding program representatives.

· Help community adjust its rates so that it is financially stable for funding.

· Train the community on grant/loan management so they can stay in compliance with funding.

As a firm focused on finance and management, we are not in a position to solve technical issues and violations of the SDWA. But we can help the community figure out how to pay for whatever solution is most cost-effective.

If there is a neighboring community, some type of partnership or merger may be their best opportunity to address public health concerns long-term.

Solicitation Attachment – Method of Approach | Revision No. 1 | Revised 11-22 image1.jpg