HomeMy WebLinkAboutCC Resolution 11462 (MSS Rates Review; HF&H)RESOLUTION NO. 11462
A RESOLUTION AUTHORIZING AN AGREEMENT WITH HILTON,
FARNKOPF & HOBSON, LLC TO PERFORM A REVIEW OF MARIN
SANITARY SERVICE'S 2004 RATE APPLICATION (AGREEMENT
ENDING ON JUNE 30, 2004).
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, Farnkopf & Hobson, LLC for Refuse
Rate Review of Marin Sanitary Service's Rate Application for the 2004 calendar year, 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 Monday the 15th day of December, 2003, 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
MManagement services- WorkFile\Finance- WorkFile\Council Material\Resolutions\2003\City\I-lilton Audit 2004.doc
AGREEMENT
FOR: Review of Marin Sanitary Service's
2004 Rate Application
This Agreement is made and entered into this 15th of December. 2003, by and
between the CITY OF SAN RAFAEL (hereinafter "CITY"), and Milton Farnkopf and Hobson, LLC
hereinafter "CONTRACTOR").
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.
CONTRACTOR shall perform the duties and/or provide services as described in
Exhibit " A " attached and incorporated herein.
CITY shall cooperate with CONTRACTOR in his performance under this
agreement and shall compensate CONTRACTOR as provided herein.
For the full performance of the services described herein by CONTRACTOR, CITY
shall pay CONTRACTOR an amount NOT to exceed $99,950, 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.
»01CRAIC101111
The term of this Agreement shall commence upon the date of execution of this
agreement and shall end on June 30, 2004.
,I. ;1
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.
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.
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.
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.
i ► :1►
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.
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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.
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.
wilowkN• ►�►: •►
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.
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.
ilk 10111 OM 1
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.
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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 Farnkopf 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.
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.
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.
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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.
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.
• - •WIN•
.10 011
The laws of the State of California shall govern this Agreement.
6
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day, month
and year first above written.
CITY OF SAN RAFAEL CONTRACTOR
City Manager
Name: A/7" � t
ATTEST:
CiClerk
Ci
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PRO V O F RM:
ty Attorne
Title: ; cf e.t I
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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-consultants.com
December 5, 2003
Ms. Jean Bonander
City Manager
City of Larkspur
420 Magnolia Avenue
Larkspur, CA 94939
Mr. Barry K. Hogue
District Manager
Ross Valley Sanitary District
2000 Larkspur Landing Circle
Larkspur, CA 94939
Mr. Alan H. Petrie
District Manager
Las Gallinas Sanitary District
300 Smith Ranch Road
San Rafael, CA 94903
EXHIBIT "A"
Northern California
Southern California
Central California
Robert D. Hilton, CMC
John W. Famkopf, PE
Laith B. Ezzet, CMC
Mr. Gary Broad
Administrator
Town of Ross
31 Sir Francis Drake Blvd.
Ross, CA 94957
Mr. Kenneth A. Nordhoff
Director of Administrative Services
City of San Rafael
1400 Fifth Avenue
San Rafael, CA 94915-1560
Mr. Jeff Rawles
Manager, Special Projects
County of Marin
3501 Civic Center Drive, Room 404
San Rafael, CA 94903-4155
Subject: Review of Marin Sanitary Service's 2004 Rate Application
Dear Ms. Bonander and Messrs. Broad, Hogue, Nordhoff, Petrie and Rawles:
Hilton, Farnkopf & Hobson, LLC (HF&H) is pleased to present this engagement letter that
describes the scope of services, schedule, engagement team, and fee estimate for performing a
review of Marin Sanitary Service's (MSS) 2004 Rate Application (Application) for rates to be
effective January 1, 2004. This proposal supersedes and replaces our proposal of August 13,
2003, and is based on the results of our meeting of November 17, 2003.
Background
In 1995, the Cities of San Rafael and Larkspur, the Town of Ross, the Ross Valley and Las
Gallinas Sanitary Districts, and the County of Marin (Franchisors) adopted a new methodology
that would be used to set MSS's rates for refuse collection and disposal, as well as recyclable
and yard waste collection and processing. The methodology is based on a detailed review
(performed every three years), with summary reviews (based largely on the detailed review, the
use of indices, and the review of a few key matters, such as revenues and disposal costs) during
the intervening years.
Rate Review 120503.doc
HILTON FARNKOPF & HOBSON, LLC
Ms. Bonander and Messrs. Broad, Hogue, Nordhoff, Petrie and Rawles
December 5, 2003
Page 2 of 8
In 2000, the last detailed review was performed. In 2001 and 2002, rates were set using the
"Indexed Method." In November and December 2002, MSS began providing services to the
City of San Anselmo and the north area of the Ross Valley Sanitary District, respectively.
During 2003, MSS, at the direction of the Franchisors, developed a method for allocating costs
among the Franchisors based on the relative costs of providing services, rather than on the
revenues received from providing such service, as was done in the past. The specific
calculations using this methodology were presented to you at your November 17, 2002 meeting.
At the November 17, 2003 meeting, you decided to proceed with the review of the Company's
application, to be submitted sometime in December 2003. In addition to the normal procedures
involved in that review, you decided to:
1. Accept, review, and resolve an unspecified claim by the Company for under -compensation
during 2002;
2. Consider the implementation of the cost of service methodology; and,
3. Provide consulting assistance to members in order to mitigate any dramatic effect on the
rates of any member agency.
Because of the change in procedures (i.e., the allocation of costs based on the cost of service), we
have included an optional service to update the documentation of the rate review procedures to
incorporate these changes.
Scope of Services
Our scope of services is comprised of the following tasks:
Task 1: Preliminary Application Review
1.1 Kick -Off Meeting with Company. HF&H will meet with the Company to receive the
Company's applications for both prior -year under -compensation, as well as future -year
compensation (Application); and view a presentation by the Company of the major
matters leading to the under compensation, as well as any future compensation
increases.
1.2 Completeness and Compliance Review. Upon receipt of the Application, HF&H staff
will test the compliance of the current Application to the current procedures, as well as
test the consistency of the current Application to the 2002 Application (the last detailed
review). We will seek explanations for any unusual findings and inform the Company
in writing of any matters that lead us to believe the Application is either not in
compliance or is inconsistent.
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HILTON FARNKOPF & HOBSON, LLC
Ms. Bonander and Messrs. Broad, Hogue, Nordhoff, Petrie and Rawles
December 5, 2003
Page 3 of 8
1.3 Mathematical Accuracy and Logic Consistency Review. HF&H staff will test the
mathematical accuracy of all of the tables contained in the Application. We will verify
that the Application is internally consistent (e.g., consistency of operating results or
projections and corresponding expenses) and that any summary schedules agree to the
supporting schedules or worksheets. We will seek explanations for any unusual
findings and inform the Company in writing of any matters that may lead us to believe
the Application is mathematically incorrect or logically inconsistent.
1.4 Reconciliation to Financial Statements. 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 be necessary to reconcile the Application to the financial statements.
Task 2: Revenue Testing
HF&H staff will review the Company's reported actual 2002-, estimated 2003-, and projected
2004 revenues from services at current rates and fees using sampling, analytical, and
comparative techniques. We will seek explanations for any unusual findings, and inform the
Company in writing of any necessary adjustments to these estimated and projected revenues.
Task 3: Expense Testing
3.1 Review Prior -Year Claim for Under -Compensation. HF&H will review the Company's
claim for prior -year under -compensation. We will test the claim for mathematical
accuracy and logical consistency. We will perform a variance analysis of the account
line items claimed with the prior detailed review and the interim indexed adjustments.
We will review specific transactions, as necessary, to determine the reasonableness and
accuracy of the claim. We will calculate the effect of the reimbursement of the under -
compensation on future rates. We will identify the cause of the under -compensation
(e.g., methodological-, procedural-, or calculation error, etc.) in an attempt to prevent
such a result in the future.
3.2 Review Forecasted Annual Cost of Operations. HF&H staff will review the Company's
reported actual 2002-, estimated 2003-, and forecasted 2004 annual cost of operations.
We will test the following expenses for reasonableness based on historical trends,
consistency with operating data, and consistency with management's plans:
• Wages and Salaries;
• Benefits Expense;
N Transfer, Transport, Disposal, and Processing Expense;
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HILTON FARNKOPF & HOBSON, LLC
Ms. Bonander and Messrs. Broad, Hogue, Nordhoff, Petrie and Rawles
December 5, 2003
Page 4 of 8
• Fuel and Oil Expense;
• Equipment and Vehicle Maintenance Expense;
• Depreciation/ Lease Expense; and,
• Miscellaneous Expenses.
HF&H will test individual transactions to ensure non -allowable costs are excluded from
the 2004 forecasted annual cost of operations. We will seek explanations for any
unusual findings and inform the Company in writing of any necessary adjustments to
these estimated and projected expenses.
3.3 Review Allocation Methodology. HF&H will review the methodology used by MSS to
allocate operating expenses to the individual jurisdictions, and the system of collecting
and reporting the data used to allocate the costs. We will seek explanations for any
unusual findings, and inform the Company in writing of any necessary adjustments to
the estimated and projected expenses.
Task 4: Profit Calculation
HF&H staff will calculate a reasonable profit using a 90.5 operating ratio, applied to the
forecasted annual cost of operations, as those submitted in the Application may be adjusted.
Task 5: Calculation of Necessary Rate Adjustments
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
2004 (including any amounts related to claim for prior -year under -compensation).
Task 6: Comparison of Actual to Forecasted Results
HF&H staff will compare the actual results for 2001 and 2002, to those anticipated when the
rates were set using the indexed methodology, and obtain and document Company
explanations of any variations.
Task 7: Communication of Results
7.1 HF&H staff will meet once with MSS management to discuss the preliminary findings
from our review and receive additional information from the Company that may revise
our preliminary findings.
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HILTON FARNKOPF & HOBSON, LLC
Ms. Bonander and Messrs. Broad, Hogue, Nordhoff, Petrie and Rawles
December 5, 2003
Page 5 of 8
7.2 HF&H staff will draft an initial report, based on the results from the above meeting;
provide it to MSS management for review. Thereafter, we will confer with MSS
management to discuss its comments regarding our initial draft report.
7.3 Based on the above meeting, HF&H will make any appropriate adjustments to our initial
draft report and present a preliminary draft to the Franchisors. Thereafter, we will
confer with the Franchisors to discuss its comments regarding our preliminary draft
report.
7.4 Based on the comments from the Franchisors in Task 7.3 and the results of Task 8, we
will amend the preliminary draft report and issue the final report.
Task 8: Assist in the Implementation of the Cost of Service Methodology
The procedures described above are intended to result in the resolution of the Company's claim
for prior -year under -compensation, as well as its request for future year rate adjustments, and
will allocate costs in accordance with both the historical revenue allocation methodology, as
well as the cost of service revenue allocation methodology. During this task, HF&H staff will
work with the Franchisors in preparing for, and participating in, up to two meetings with the
Franchisors and the Company to develop a transition strategy (e.g., phased implementation)
from the prior allocation methodology to the new allocation methodology.
Task 9: Task Engagement Management
HF&H will prepare detailed work plans, perform internal quality reviews of all interim and
final analysis and work products, and perform administrative tasks, such as progress reporting.
Schedule
Normally, the Company's application would be submitted in early September. The Company
stated in the November 17, 2003 meeting that it would submit its application in a few weeks.
We assumed our contract could be approved by, and the Company would be prepared for, a
Kick-off Meeting the week of December 15, 2003. Because of the holidays, we assumed our field
work to commence the first week of January. Recognizing that we rely on the Company for the
timely preparation of documents and response to our questions, and for review of our findings
and draft report, we plan to perform this engagement in accordance with the following
schedule:
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HILTON FARNKOPF & HOBSON, LLC
Ms. Bonander and Messrs. Broad, Hogue, Nordhoff, Petrie and Rawles
December 5, 2003
Page 6 of 8
Activitv
Kick -Off Meeting
Commence Fieldwork
Present Preliminary Findings to MSS
Provide MSS Draft Report
MSS Provides Comments on Draft Report
Provide Franchisors with Draft Report
Franchisors Provides Comments on Draft Report
Provide Franchisors and MSS with Final Report
Development of Transition Strategy
Individual Franchisor Support
Completion Date Week of
December 15, 2003
January 5, 2004
February 8, 2004
February 15, 2004
February 22, 2004
March 1, 2004
March 8, 2004
March 22, 2004
March 29, 2004
As Scheduled
If possible, we will accelerate this schedule to complete our review and present our findings as
quickly as possible.
Enqaqement 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.
We have assigned staff to the engagement based on their familiarity with the Franchisors and
Company from previous engagements, as well as to minimize fees to the Franchisors, while
applying appropriately qualified staff to the engagement.
Robert Hilton — Engagement Director
I will be the Engagement Director. I will ensure that the Franchisors receive the benefit of the
continuity of our continuing relationship with the Franchisors, which dates back many years. I
will be responsible for ensuring that we fulfill the Franchisors' objectives for the engagement by
communicating directly with the Franchisors' staff. I will review the detailed work plans, as
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Im HILTON FARNKOPF & HOBSON, LLC
Ms. Bonander and Messrs. Broad, Hogue, Nordhoff, Petrie and Rawles
December 5, 2003
Page 7 of 8
well as draft and final work products. I will attend all key meetings with the Franchisors and
with MSS management
Rick Simonson — Engagement Manager
Rick Simonson has more than eight years of experience as an accountant/ auditor. Since joining
HF&H, Mr. Simonson has been involved in the rate reviews for the South Bayside Waste
Management Authority, the cities of Rohnert Park, Union City, and Vallejo, and performed
financial evaluations of proposals for the cities of Albany, Alameda, Livermore, Petaluma, and
Union City, and the Ross Valley Sanitary District. Mr. Simonson was the HF&H consultant who
reviewed the cost allocation methodology developed by the Company.
Mr. Simonson will be assisted by other staff in the gathering and analysis of data under his
direct supervision.
Fee Estimate
Our estimated professional fees, plus out-of-pocket expenses, for the scope of work performed
by the proposed staff total $99,950. This fee is based on our experience during the previous
detailed reviews, certain assumptions regarding the claim for under compensation, the cost -of -
service implementation strategy, the restructuring of franchisors' rates, and includes a 5%
contingency, to be used only with the prior written approval by the Franchisors. Attachment 1
is a budget by task and consultant. We will bill you for our services at our standard rates for
the staff assigned. We will not exceed this budget without prior approval from the Franchisors
and, if our hours are less, we will bill you the lesser amount.
We sincerely appreciate the continued confidence you have expressed in HF&H and we are
committed to do our best to fulfill your objectives.
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HILTON FARNKOPF & HOBSON, LLC
Ms. Bonander and Messrs. Broad, Hogue, Nordhoff, Petrie and Rawles
December 5, 2003
Page 8 of 8
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
Attachment 1: Estimated Hours, Professional Fees, and Out -of -Pocket Expense
Attachment 2: Standard Hourly Rates and Billing Arrangements
cc: Mr. Joseph Garbarino, Sr., Marin Sanitary Service
Mr. Joseph Garbarino, Jr., Marin Sanitary Service
Ms. Patty Garbarino, Marin Sanitary Service
Ms. Mardelle Sarkela, Marin Sanitary Service
Rick Simonson, Hilton Farnkopf and Hobson, LLC
Kathleen Catton, Hilton Farnkopf & Hobson, LLC
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Attachment 1
Rate Review Fee Schedule
Hilton
Simonson
Ga nits
Admin
Total
Billing Rate
$230.00
$170.00
$135.00
$75.00
Task/Step
Desoriotion
Task 1
Preliminary Application Review
1.1
flick -Off Meeting with Company
4
4
1.2
Completeness& Compliance Review
2
2
12
1.3
Math Accuracy & Logical Consistency
2
8
1.4
Reconciliation to Financial Statements
2
B
Sub -total
Hours
6
10
20
B
44
Fees
$1,380
$1,700
$2,700
$600
$6,380
Task
Revenue Testina
Sub -total
Hours
16
24
40
Fees
$0
$2,720
$3,240
$0
$5,960
Task 3
Exoense Testinq
3.1
Review Prior Year Under -Compensation Claim
4
8
40
3.2
Review Forecasted Annual Cost of Operations
4
52
52
3.3
Review Allocation Methodology
4
8
24
Sub -total
Hours
12
68
116
0
196
Fees
$2,760
$11,560
$15,660
$0
$29,980
Task
Profit Calculation
Sub -total
Hours
1
1
Fees
$0
$170
$0
$0
$170
Task 5
Calculation of Necessary Rate Adiustments
Sib -total
Hours
2
8
B
18
Fees
$460
$1,360
$1,080
$0
$2,900
Task
Comparison of Actual to Forecasted Results
Sib -total
Hours
4
12
12
28
Fees
$920
$2,040
$1,620
$0
$4,580
Task 7
Communication of Results
7.1
Present Preliminary Findingsto MSS
8
8
4
7.2
Draft Report
24
34
8
8
7.3
Revise Draft Report and Present to Franchisors
8
B
4
4
7.4
Final Report
8
8
8
8
Sub -total
Hours
48
5B
24
20
150
Fees
$11,040
$9,860
$3,240
$1,500
$25,640
Task 8
Assist in the Implementation of the COSMethodology
8.1
Prepare forand Attend Initial Meeting to Identify Altem
4
8
2
8.2
Perform Analysis Related to the Alternatives Identified
4
16
24
8.3
Prepare forand Attend Second Meeting to Identify Alte
4
8
2
Sib -total
Hours
12
32
24
4
72
Fees
$2,760
$5,440
$3,240
$300
$11,740
Task
EnaaaementManaaement
Sib -total
Hours
24
24
0
0
48
Fees
$5,520
$4,080
$0
$0
$9,600
Total Fees
Hours
108
229
228
32
597
Fees $
24,840
$ 38,930 $
30,780
$ 2,400
$ 96,950
Out -of -Pocket Expenses
$1,500
Sub -total
$98,450
Contingency
$1.500
Total Budget
$99,950
S:\Clients\S\San Rafael\2003\SW\ Proposals\ Rate Review 120503.doc
Attachment 2
Hilton Farnkopf & Hobson, LLC
STANDARD HOURLY RATES AND BILLING ARRANGEMENTS'
(Effective January 1, 2004)
Professional Fees
Hourly rates for professional and administrative personnel are as follows:
Position
President
Senior Vice President & Vice President
Senior Manager
Senior Associate
Associate
Administrative Staff
Direct Expenses
Standard charges for common direct expenses are as follows:
Automobile Travel
Document Reproduction
Facsimile
Telephone
Public Conveyances
Postage
Overnight Mail and Couriers
Rate
$230
$200-$210
$185
$145-$180
$110-$125
$70-$80
37.5 cents per mile
15 cents per page
No charge
No charge
Actual
Actual
Actual
' Litigation Support and Expert Witness Services are not covered by this schedule of fees
and expenses.
Rate Review 120503.doc
Attachment 2
Hilton Farnkopf & Hobson, LLC
STANDARD HOURLY RATES AND BILLING ARRANGEMENTS'
(Effective January 1, 2004)
Billing Policies
Our policy is to bill for our services and direct expenses based on the standard hourly
rates of the staff member assigned, multiplied by the time required to perform the client -
related tasks, plus the subcontractor services as described above. In implementing this
policy we adhere to the following practices:
• We round to the nearest one-half hour (e.g., if two hours and 50 minutes are
spent on a task, it is recorded as three hours, if two hours and 10 minutes are
spent on a task, it is recorded as two hours). A minimum charge of one-half
hour is charged for any client work performed in a day.
We attempt to schedule travel time before and after normal work hours and
we do not bill for this time. If travel occurs during normal work hours and
we can use public conveyances, we attempt to use the time productively for
the benefit of the client or for another client and this time is billed to the
appropriate client. If we must travel during business hours and cannot use
the time productively or use a public conveyance, we bill the time to the
client on whose behalf we are traveling.
• Because public meetings (e.g., Board of Supervisors, City Council, and Board
of Directors meetings) generally occur after business hours and are not
conducted in accordance with strict schedules, our standard policy is to bill a
minimum two-hour charge.
• We do not mark up out-of-pocket expenses, however, we may charge
administrative or professional time related to the provision of the goods and
services associated with these charges. Costs for outside consultants and
subcontractors are billed at actual cost plus a 15 percent administrative fee.
• Mileage fees are based on the round-trip distance from the point of origin.
• If a client's change to a previously scheduled meeting results in penalties
being assessed by a third party (e.g., airline cancellation fee), then the client
will bear the cost of these penalties.
While no minimum fee for a consulting engagement has been established, it is unlikely
(given the nature of our services) that we can gain an understanding of a client's
particular requirement, identify alternatives, and recommend a solution in less than
twenty-four hours.
Attachment 2
Hilton Farnkopf & Hobson, LLC
STANDARD HOURLY RATES AND BILLING ARRANGEMENTS'
(Effective January 1, 2004)
Insurance
We maintain the following policies of insurance with carriers doing business in
California:
• Comprehensive General Liability Insurance ($2,000,000)
• Workers' Compensation ($1,000,000)
• Professional Liability Insurance ($1,000,000)
All costs incurred in complying with special insurance, licensing, or permit
requirements, including but not limited to naming client as an additional insured and
waiver of subrogation, become the responsibility of the client and are not included in the
fees for services or direct charges but are billed in addition to the contract at cost, plus
any professional or administrative fees.
Invoices and Payment for Services
Our time reporting and billing system has certain standard formats that are designed to
provide our clients with a detailed invoice of the time and charges associated with their
engagement. (We typically discuss these with our clients at our kick-off meeting.) We
are also pleased to provide our clients with a custom invoice format but we will have to
bill the client for any additional costs associated with their unique requirements.
Billings for professional services and charges are submitted every month, in order that
our clients can more closely monitor our services. A late fee of one and one-half percent
per month is applied to balances unpaid after thirty (30) days.