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HomeMy WebLinkAboutCC Resolution 10791 (MSS Rate Review)RESOLUTION NO. 10791 A RESOLUTION AUTHORIZING AN AGREEMENT WITH HILTON, FARNKOPF & HOBSON, LLC TO PERFORM A REVIEW OF MARIN SANITARY SERVICES 2001 RATE APPLICATION. THE CITY COUNCIL OF THE CITY OF SAN RAFAEL RESOLVES as follows: The CITY MANAGER and CITY CLERK are authorized to execute, on behalf of the City of San Rafael, an agreement with Hilton, Farnkor)f & Hobson, LLC for Refuse Rate Review for the 2001-2002 fiscal vear a copy of which is hereby attached and by this reference made a part hereof. I, JEANNE M. LEONCINI, Clerk of the City of San Rafael, hereby certify that the foregoing resolution was duly and regularly introduced and adopted at a regular meeting• of the City Council of said City held on Mondav the 19th day of March, 20 01, by the following vote, to wit: AYES: COUNCILMEMBERS: Cohen, Heller, Miller, Phillips & Mayor Boro NOES: COUNCILMEMBERS: None ABSENT: COUNCILMEMBERS: None JEANNE M. LEONCINI, City Clerk WAManagement services- WorkFile\Finance- WorkFile\Council Material\Resolutions\2001\Hilton audit 2001 reso.doc 1 AGREEMENT FOR: Review of Marin Sanitary Service's 2001 Rate Application This Agreement is made and entered into this 19th day of March, 2001, by and between the CITY OF SAN RAFAEL (hereinafter "CITY"), and Hilton Famkopf and Hobson, LLC hereinafter "CONTRACTOR"). PROJECT COORDINATION A. CITY. The City Manager shall be the representative of the CITY for all purposes under this Agreement. The Assistant City -Manager, Ken Nordhoff, is hereby designated the PROJECT MANAGER for the CITY, and said PROJECT MANAGER shall supervise all aspects of the progress and execution of this Agreement. B. CONTRACTOR. CONTRACTOR shall assign a single PROJECT DIRECTOR to have overall responsibility for the progress and execution of this Agreement for CONTRACTOR. Robert D. Hilton is hereby designated as the PROJECT DIRECTOR for CONTRACTOR. Should circumstances or conditions subsequent to the execution of this Agreement require a substitute PROJECT DIRECTOR for any reason, the CONTRACTOR shall notify the CITY within ten (10) business days of the substitution. 2. DUTIES OF CONTRACTOR CONTRACTOR shall perform the duties and/or provide services as described in Exhibit " A " attached and incorporated herein. 3. DUTIES OF CITY CITY shall cooperate with CONTRACTOR in his performance under this agreement and shall compensate CONTRACTOR as provided herein. 4. COMPENSATION For the full performance of the services described herein by CONTRACTOR, CITY shall pay CONTRACTOR an amount NOT to exceed $70,000, including the cost of local business license taxes as described in Section 20. Payment will be made monthly upon receipt by PROJECT MANAGER of itemized invoices submitted by CONTRACTOR. 5. TERM OF AGREEMENT The term of this Agreement shall commence upon the date of execution of this agreement and shall end on August 31, 2001. 6. TERMINATION A. Discretionary. Either party may terminate this Agreement without cause upon thirty (30) days written notice mailed or personally delivered to the other party. B. Cause. Either party may terminate this Agreement for cause upon ten (10) days written notice mailed or personally delivered to the other party, and the notified party's failure to cure or correct the cause of the termination notice, to the reasonable satisfaction of the party giving such notice, within thirty (30) days of the receipt of said notice. C. Effect of Termination. Upon receipt of notice of termination, neither party shall incur additional obligations under any provision of this Agreement without the prior written consent of the other. D. Return of Documents. Upon termination, any and all CITY documents or materials provided to CONTRACTOR and any and all of CONTRACTOR's documents described in paragraph 7 below, shall be delivered to CITY as soon as possible, but not later than thirty (30) days after termination. 7. OWNERSHIP OF DOCUMENTS The written documents and materials prepared by the CONTRACTOR in connection with the performance of its duties under this Agreement, shall be the sole property of CITY. CITY may use said property for any purpose, including projects not contemplated by this Agreement. 8. INSPECTION AND AUDIT Upon reasonable notice, CONTRACTOR shall make available to CITY, or its agent, for inspection and audit, all documents directly related to CONTRACTOR'S performance of its duties under this Agreement. CONTRACTOR shall fully cooperate with CITY or its agent in any such audit or inspection. 9. ASSIGNABILITY The parties agree that they shall not assign or transfer any interest in this Agreement nor the performance of any of their respective obligations hereunder, without the prior written consent of the other party, and any attempt to so assign this Agreement or any rights, duties or obligations arising hereunder shall be void and of no effect. 10. INSURANCE A. During the term of this Agreement, CONTRACTOR shall maintain, at no expense to CITY, the following insurance policies: 1. A comprehensive general liability insurance policy in the minimum amount of one million ($1,000,000) dollars per occurrence for death, bodily injury, personal injury, or property damage; 2. An automobile liability (owned, non -owned, and hired vehicles) insurance policy in the minimum amount of one million ($1,000,000) dollars per occurrence; 3. If any licensed professional performs any of the services required to be performed under this Agreement, a professional liability insurance policy in the minimum amount of one million ($1,000,000) dollars to cover any claims arising out of the CONTRACTOR's performance of services under this Agreement. B. The insurance coverage required of the CONTRACTOR by section 11. A., shall also meet the following requirements: 1. The insurance shall be primary with respect to any insurance or coverage maintained by CITY and shall not call upon CITY's insurance or coverage for any contribution; 2. Except for professional liability insurance, the insurance policies shall be endorsed for contractual liability and personal injury; 3. Except for professional liability insurance, the insurance policies shall be specifically endorsed to include the CITY, and other entities in the Franchisors' Group, their officers, agents, employees and volunteers as additionally named insureds under the policies; 4. CONTRACTOR shall provide to PROJECT MANAGER, (a) Certificates of Insurance evidencing the insurance coverage required herein, and (b) specific endorsements naming CITY, and other entities in the Franchisors' Group, their officers, agents, employees and volunteers as additional insureds under the policies; 5. The insurance policies shall provide that the insurance carrier shall not cancel, terminate or otherwise modify the terms and conditions of said insurance policies except upon thirty (30) days written notice to CITY's PROJECT MANAGER; 6. If the insurance is written on a Claims Made Form, then, following termination of this Agreement, said insurance coverage shall survive for a period of not less than five years; 7. The insurance policies shall provide for a retroactive date of placement coinciding with the effective date of this Agreement; 8. PROJECT MANAGER and the City Attorney shall approve the insurance as to form and sufficiency. 3 C. If it employs any person, CONTRACTOR shall maintain worker's compensation and employer's liability insurance, as required by the State Labor Code and other applicable laws and regulations, and as necessary to protect both CONTRACTOR and CITY against all liability for injuries to CONTRACTOR's officers and employees. D. Any deductibles or self-insured retentions in CONTRACTOR's insurance policies must be declared to and approved by the PROJECT MANAGER and the City Attorney. At CITY's option, the deductibles or self-insured retentions with respect to CITY shall be reduced or eliminated to CITY's satisfaction, or CONTRACTOR shall procure a bond guaranteeing payment of losses and related investigations, claims administration, attorney's fees and defense expenses. 11. INDEMNIFICATION CONTRACTOR shall indemnify, release, defend and hold harmless CITY, and other entities in the Franchisors' Group, their officers, agents, employees and volunteers, against any claim, demand, suit, judgment, loss, liability or expense of any kind, including attorney's fees, arising out of or resulting in any way, in whole or in part, from any acts or omissions, intentional or negligent, of CONTRACTOR or CONTRACTOR's officers, agents and employees in the performance of their duties and obligations under this Agreement. 12. NONDISCRIMINATION CONTRACTOR shall not discriminate, in any way, against any person on the basis of age, sex, race, color, religion, ancestry, national origin or disability in connection with or related to the performance of its duties and obligations under this Agreement. 13. COMPLIANCE WITH ALL LAWS CONTRACTOR shall observe and comply with all applicable federal, state and local laws, ordinances, codes and regulations, in the performance of its duties and obligations under this Agreement. CONTRACTOR shall perform all services under this Agreement in accordance with these laws, ordinances, codes and regulations. CONTRACTOR shall release, defend, indemnify and hold harmless CITY, and other entities in the Franchisors' Group, their officers, agents and employees from any and all damages, liabilities, penalties, fines and all other consequences from any noncompliance or violation of any laws, ordinances, codes or regulations. 14. NO THIRD PARTY BENEFICIARIES CITY and CONTRACTOR do not intend, by any provision of this Agreement, to create in any third party, any benefit or right owed by one party, under the terms and conditions of this Agreement, to the other party. 0 15. NOTICES All notices and other communications required or permitted to be given under this Agreement, including any notice of change of address, shall be in writing and given by personal delivery, or deposited with the United States Postal Service, postage prepaid, addressed to the parties intended to be notified. Notice shall be deemed given as of the date of personal delivery, or if mailed, upon the date of deposit with the United States Postal Service. Notice shall be given as follows: TO CITY: Mr. Kenneth A. Nordhoff, Assistant City Manager City of San Rafael 1400 Fifth Avenue P.O. Box 151560 San Rafael CA 94915-1560 TO CONTRACTOR: Mr. Robert D. Hilton, President Hilton Famkopf and Hobson, LLC 2175 North California Boulevard, Suite 990 Walnut Creek, CA 94596 16. INDEPENDENT CONTRACTOR For the purposes, and for the duration, of this Agreement, CONTRACTOR, its officers, agents and employees shall act in the capacity of an Independent Contractor, and not as employees of the CITY. CONTRACTOR and CITY expressly intend and agree that the status of CONTRACTOR, its officers, agents and employees be that of an Independent Contractor and not that of an employee of CITY. 17. ENTIRE AGREEMENT --AMENDMENTS A. The terms and conditions of this Agreement, all exhibits attached, and all documents expressly incorporated by reference, represent the entire Agreement of the parties with respect to the subject matter of this Agreement. B. This written Agreement shall supersede any and all prior agreements, oral or written, regarding the subject matter between the CONTRACTOR and the CITY. C. No other agreement, promise or statement, written or oral, relating to the subject matter of this Agreement, shall be valid or binding, except by way of a written amendment to this Agreement. D. The terms and conditions of this Agreement shall not be altered or modified except by a written amendment to this Agreement signed by the CONTRACTOR and the CITY. 5 E. If any conflicts arise between the terms and conditions of this Agreement, and the terms and conditions of the attached exhibits or the documents expressly incorporated by reference, the terms and conditions of this Agreement shall control. 18. WAIVERS The waiver by either party of any breach or violation of any term, covenant or condition of this Agreement, or of any ordinance,law or regulation, shall not be deemed to be a waiver of any other term, covenant, condition, ordinance, law or regulation, or of any subsequent breach or violation of the same or other term, covenant, condition, ordinance, law or regulation. The subsequent acceptance by either party of any fee, performance, or other consideration which may become due or owing under this Agreement, shall not be deemed to be a waiver of any preceding breach or violation by the other party of any term, condition, covenant of this Agreement or any applicable law, ordinance or regulation. 19. COSTS AND ATTORNEY'S FEES The prevailing party in any action brought to enforce the terms and conditions of this Agreement, or arising out of the performance of this Agreement, may recover its reasonable costs (including claims administration) and attorney's fees expended in connection with such action. 20. CITY BUSINESS LICENSE/OTHER TAXES CONTRACTOR shall obtain and maintain during the duration of this Agreement, a CITY business license as required by the San Rafael Municipal Code. CONTRACTOR shall pay any and all state and federal taxes and any other applicable taxes. CONTRACTOR's taxpayer identification number is 94-3097242. and CONTRACTOR certifies under penalty of perjury that said taxpayer identification number is correct. 21. APPLICABLE LAW The laws of the State of California shall govern this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day, month and year first above written. CITY OF SAN RAFAEL CONTRACTOR 1 City Manager ATTEST: CiCI"erk�� . � APPROV . , A M: /16 / City Attorney / By: �,cl - ug Name: ko 4te�,f- .U. 411-leA, Title: Fres 1 7/ - WAManagement services- WorkFile\Finance- WorkFile\Agreement and Contracts\Professional Contracts\2001\HF&H contract 2001.doc 7 HILTON FARNKOPF & HOBSON, LLC Advisory Services to — Municipal Management 2175 N. California Boulevard, Suite 990 Walnut Creek, California 94596 Telephone: 925/977-6950 Fax: 925/977-6955 www. hfh-consu Itants.com March 8, 2001 Mr. Kenneth Nordhoff Finance Director City of San Rafael 1400 Fifth Avenue San Rafael, CA 94915-1560 Mr. Alan Petrie District Manager Las Gallinas Sanitary District 300 Smith Ranch Road San Rafael, CA 94903 Mr. Ned Ongaro District Manager Ross Valley Sanitary District 2000 Larkspur Landing Circle Larkspur, CA 94939 EXHIBIT "A" Ms. Jean Bonander City Manager City of Larkspur 420 Magnolia Avenue/City Hall Larkspur, CA 94939 Mr. Rabi Elias Director of Public Works Town of Ross/Town Hall P.O. Box 320 Ross, CA 94957 Mr. Jeff Rawles Grants Manager County of Marin 10 N. San Pedro Road, Suite 1022 San Rafael, CA 94903-4155 Review of Marin Sanitary Service's 2001 Rate Application Dear Ms. Bonander and Messrs. Nordhoff, Petrie, Elias, Ongaro, and Rawles: San Francisco Newport Beach Sacramento Portland In accordance with your request, we have prepared this engagement letter that describes the scope of services, schedule, engagement team and fee estimate for performing a review of Marin Sanitary Service's 2001 Rate Application (Application). We have prepared this engagement letter based on our prior experience, the discussions that led to our January 10, 2001 letter to Mr. Ken Nordhoff, and the directions received from Mr. Nordhoff subsequent to the meeting of the Franchisors. Scope of Services Our scope of services is comprised of the following 14 tasks: MAR 12 2001 L., recycled �, paper 1 Review of 2001 Rate Application March 8, 2001 Page 2 HF&H will prepare for and meet with the Company's representatives (including its officers, Controller and independent accountant) for a half-day to describe the current procedures including the Application preparation and review process and respond to any questions they may have. We believe this will be of assistance to both the Company and Franchisors, due to the turnover of staff responsible for the preparation and explanation of the Application. 2. HF&H will prepare for and facilitate up to two meetings of the Franchisors and representatives of the Company to discuss various policy issues that will guide the Application, review and adoption process. The matters that are anticipated to be discussed at this meeting include but may not be limited to the following: a. Overview of the Current Procedures and Results; b. Concerns Regarding the Current Procedures and Results (including but not limited to): i. The frequency of rate adjustments ii. The adequacy of historical changes in indices when faced with uncharacteristic and volatile increases in costs (e.g., fuel expense) iii. The consideration of rates and profit levels of comparable companies iv. The opportunity for communication between the Franchisors and representatives of the Company, prior to the adoption of rates v. Possible incentives to the Company for the cost effective operation of services vi. The allocation methodologies vii. The rates charged by non -franchised to franchised operations What matters related to the change in the current procedures will be made or investigated? For those matters requiring further investigation, who will be involved in their consideration? When will a decision be made on whether to modify the current procedures to address these matters? At the conclusion of these discussions and based on the direction received, HF&H will prepare a corresponding scope of work and fee estimate related to its further participation in these matters. We anticipate that the adjustments to the current procedures may affect the following tasks. Because we do not currently know what adjustments will be agreed to and, therefore, what adjustments will be necessary, we have prepared the remaining scope of work to be consistent with the current procedures. 3. HF&H will attend one meeting with the Franchisors and the Company to receive the Company's Application and a presentation by the Company of the major matters leading to any rate adjustments. Review of 2001 Rate Application March 8, 2001 Page 3 4. Upon receipt of the Application, HF&H staff will test the compliance of the current Application to the current procedures as well as the consistency of the current Application to the 1998 Application (the last detailed review). We will seek explanations for any unusual findings and we will inform the Company in writing of any matters that came to our attention that lead us to believe the Application is either not in compliance or is inconsistent. 5. HF&H staff will test the mathematical accuracy of all of the tables contained in the Application. We will seek explanations for any unusual findings and we will inform the Company in writing of any matters that may come to our attention that lead us to believe that the Application is not mathematically correct. 6. HF&H staff will test the logical consistency of the Application (e.g., consistency of operating results or projections and corresponding expenses). We will seek explanations for any unusual findings and we will inform the Company in writing of any matters that may come to our attention that lead us to believe that the Application is not logically consistent. 7. HF&H staff will reconcile the Application to the Company's most recent financial statements. We will seek explanations for any unusual findings and we will inform the Company in writing of any adjustments that may come to our attention that may be necessary to reconcile the Application to the financial statements. 8. HF&H staff will review the Company's reported actual 1999 and 2000, estimated 2001 and projected 2002 revenues from services at current rates and fees using sampling, analytical and comparative techniques. We will seek explanations for any unusual findings, and we will inform the Company in writing of any adjustments that may come to our attention that we may believe are necessary to these estimated and projected revenues. 9. HF&H staff will review the Company's reported actual 1999 and 2000, estimated 2001 and projected 2002 expenses. We will perform detailed transaction testing of certain expenses (e.g., Administrative, G&A, Related Party transactions with MSS, Dues and Subscriptions, Travel and Entertainment, Promotion, Contributions and Professional and Consulting). We will test other expenses for reasonableness based on historical trends, consistency with operating data and management's plans. We will seek explanations for any unusual findings and we will inform the Company in writing of any adjustments that may come to our attention that we may believe are necessary to these estimated and projected expenses. 10. HF&H staff will calculate a reasonable profit using a 90.5 (or another operating ratio if agreed to by the Franchisors and Company) operating ratio applied to the Review of 2001 Rate Application March 8, 2001 Page 4 projected expenses eligible for profit, as those projected expenses may be -adjusted. 11. HF&H staff will calculate the difference between the projected revenue requirement (expenses plus profit) and revenues at current rates, to determine the amount of any rate adjustment for 2001. 12. HF&H staff will compare the actual results for 1999 and 2000 to those anticipated when the rates were set using the indexed methodology and obtain and document explanations from the Company of any variations. 13. HF&H staff will communicate our findings through the performance of the following subtasks: a. HF&H staff will meet once with the Company's officers, controller and independent accountant to discuss the preliminary findings from our review and receive additional information from the Company that may revise our preliminary findings. b. HF&H staff will draft a preliminary report, based on the results from the above meeting, provide it to the Company's officers, controller and independent accountant and then meet once to receive the Company's comments and additional information that may revise our preliminary draft report. c. HF&H staff will draft a second report, based on the comments and additional information received from the Company above, provide it to the Franchisors, as well as the Company's officers, controller and independent accountant and then meet once to receive comments and additional information that may revise our second draft report. d. Thereafter, HF&H staff will prepare a final report for distribution to the Franchisors, as well as the Company's officers, controller and independent accountant. (We will be available on a time and materials basis to attend any of the board or council meetings of the Franchisors, as requested.) 14. HF&H will prepare detailed work plans, perform internal quality reviews of all interim and final analysis and work products. Additionally, we will perform administrative tasks associated with the engagement, such as progress reporting. Schedule Due to the need for some of the Franchisors to adopt rate adjustment no later than July, we propose the following schedule. Given the scope of work and not having discussed the matter with the Company, we believe this is an aggressive schedule and the actual completion dates may be later. Review of 2001 Rate Application March 8, 2001 Page 5 Completion Date Week Beginning Activitv (Unless Otherwise Noted) HF&H Review Meeting with Company (Task 1) March 28-30 HF&H Policy Meeting with Franchiors and Company (Task 2) April 1-15 Company Presentation of Application to Franchisors (Task 3) April 30 HF&H Preliminary Findings Meeting with Company (Task 13a) May 28 HF&H Preliminary Report Meeting with Company (Task 13b) June 11 HF&H Draft Report Meeting with Franchisors and Company June 25 HF&H Delivery of Final Report July 2 Engagement Team We propose to assign the following HF&H staff members to this engagement. We have briefly described below their qualifications and the role they will perform in the engagement. Robert Hilton — Enaaaement Director Mr. Hilton, who is well known to the Franchisors and the Company, will be responsible for the management of the engagement. Mr. Hilton will be responsible for the satisfaction of the Franchisors and the Company with our performance. In this capacity, he will: • Prepare for and meet with the Company officers, controller and independent accountant to review the current procedures, as described in Task 1; • Prepare for and meet with the Franchisors and Company to review the matters, as described in Task 2; • Review the detailed work plans, prepared by Mr. Bice, our engagement manager, to ensure that they comprehensively and thoroughly address the engagements objectives; • Monitor our performance against the work plan through status reports and detailed reviews of work papers and interim work products; • Direct the assignment of staff to ensure that resources are provided as proposed and, if we should encounter delays, to provide additional staff to help keep the engagement on schedule; • Attend key meetings with the Franchisors and Company; and • Present the results of our analysis to the Franchisors and Company. Review of 2001 Rate Application March 8, 2001 Page 6 Darrell Bice. CPA — Envaaement Manager Darrell Bice is a Certified Public Accountant with more than 20 years of accounting and auditing experience; 11 of which have been in the solid waste industry. He has served as a division and corporate controller of a large regional solid waste company in Southern California and has assisted many California jurisdictions with the financial review of numerous solid waste management companies including a number of Waste Management companies. Mr. Bice has been involved in a range of financial analysis and rate review engagements since joining HF&H. In the past four years he has assisted the South Bayside Waste Management Authority and the cities of Anaheim, Beverly Hills, Carlsbad, Hesperia, La Habra, Livermore, Long Beach, Palo Alto and Union City with the financial review of various aspects of their contractor's solid waste and recycling collection systems. Mr. Bice will be responsible for the following: • Day-to-day management of the engagement; • Preparation for and attendance at all meetings with the City and the PASCO; • Preparation of draft work plans and twice monthly status reports; • Supervision of Mr. Luke in the performance of his tasks and the performance of some of the analytical tasks; and • Preparation of interim and final work products and participate in their presentation. Sterlina Luke — Associate Analvst Sterling Luke has more than 15 years of experience as an accountant/ auditor. He has supervised and performed financial and compliance auditing services to government and the banking industry. Since joining HF&H, Sterling has been involved in the cost of service and rate review for the South Bayside Waste Management Authority, performed a revenue controls review for the same client, performed a financial evaluation of five companies for the City of Livermore, and was the lead auditor on our rate review for the City of Sunnyvale. Mr. Luke will assist Mr. Bice with the gathering and analysis of data under his direct supervision. Review of 2001 Rate Application March 8, 2001 Page 7 Fee Estimate Our estimated professional fees plus out of pocket expenses for the scope of work performed by the proposed staff total $70,000. We have presented below our fee and time estimate by task and staff member. Marin Sanitary Franchisors Review of Marin Sanitary 2001 Application Fee and Time Estimate by Task Task Hilton Bice Luke Admin Total 1 Review Meeting with Company 8 2 Policy Meeting with Franchisors and Company 16 3 Presentation Meeting with Franchisors and Company 4 4 Compliance and Consistency Testing 2 8 8 5 Mathematical Accuracy Testing 2 12 6 Logical Consistency Testing 8 7 Reconciliation to Financial Statements 8 12 8 Revenue Testing 24 24 9 Expense Testing 60 60 10 Profit Calculation 1 11 Calculation of Necessary Rate Adjustments 8 8 12 Comparison of Actual to Projected Results 16 13 Communication of Findings 60 60 24 24 14 Engagement Management 48 16 8 Total Hours 134 151 88 32 405 Hourly Billing Rate $ 225 $ 165 $ 120 $ 65 Total Professional Fees $30,150 $24,915 $10,560 $2,080 $67,705 Out -of -Pocket Expense $ 2,295 Total Estimate Costs $70,000 Review of 2001 Rate Application March 8, 2001 Page 8 We sincerely appreciate the continued confidence you have expressed in HF&H and we are committed to do our best to fulfill your objectives. Should you have any questions or if you would like to schedule a presentation of this proposal, please call me at 925/977-6952. As you are well aware and as we have described above, it is very important that we proceed as quickly as possible to commence this engagement. Very truly yours, HILTON FARNKOPF & //HOBSON, LLC Robert D. Hilton, CMC President cc: Mr. Joseph Garbarino, Sr. Mr. Joseph Garbarino, Jr. Ms. Patty Garbarino Ms. Mardelle Sarkela S:\Clients\M FolderWarin Franchisors\2001\Rate Review Proposal.doc