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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. 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. 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. 4 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. �K•��_\kJ197_'12ri7:7�1'Ky0:I� 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 G PRO V O F RM: ty Attorne Title: ; cf e.t I WAManagement Services- WorkFile\Finance- WorkFile\Agreement and Contracts\Professional Contracts\2003\HF&H refuse contract 03.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-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. S:\Clients\S\San Rafael\ 2003\ SW\ Proposals\ Rate Review 120503.doc 44 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; S:\Clients\S\San Rafael\ 2003\SW\ Proposals\ Rate Review 120503.doc 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. S:\Clients\S\San Rafael\2003\ SW\ Proposals\ Rate Review 120503.doc 0 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: S:\Clients\S\San Rafael\2003\SW\Proposals\Rate Review 120503.doc 47�� 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 S:\Clients\S\San Rafael\ 2003\SW\ Proposals\ Rate Review 120503.doc 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. S:\Clients\S\San Rafael\ 2003\SW\ Proposals\ Rate Review 120503.doc 0 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 S:\Clients\S\San Rafael\ 2003\ SW\ Proposals\ Rate Review 120503.doc 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.