HomeMy WebLinkAboutCC Resolution 11164 (HF&H Rate Review 2003)RESOLUTION NO. 11164
A RESOLUTION AUTHORIZING AN AGREEMENT WITH HILTON,
FARNKOPF & HOBSON, LLC TO PERFORM A REVIEW OF MARIN
SANITARY SERVICE'S 2003 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, Farnkopf & Hobson, LLC for Refuse
Rate Review of Marin Sanitary Service's Rate Application for the 2003 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 Tuesday the 3rd day of September, 2002, by the
following vote, to wit:
AYES:
NOES
ABSENT
COUNCILMEMBERS: Heller, Miller, Phillips and Vice -Mayor Cohen
COUNCILMEMBERS: None
COUNCILMEMBERS: Mayor Boro
JEANNE M. LEONCINI, City Clerk
Finance Work File/Council Material/Resolutions 2002/City/Hilton Audit 2003
a : aJ I., L ��o�
AGREEMENT
FOR: Review of Marin Sanitary Service's
2003 Rate Application
This Agreement is made and entered into this 3rd day of September. 2002, by and
between the CITY OF SAN RAFAEL (hereinafter "CITY"), and Hilton 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 "g" attached and incorporated herein.
CITY shall cooperate with CONTRACTOR in his performance under this
agreement and shall compensate CONTRACTOR as provided herein.
WEIIIIIIIINK01 ► 61 -All 1115C►
For the full performance of the services described herein by CONTRACTOR, CITY
shall pay CONTRACTOR an amount NOT to exceed $64,745, 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.
The term of this Agreement shall commence upon the date of execution of this
agreement and shall end on March 31, 2003.
COPY
3-MMEMSTWITUTINI •►
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.
�eltrJl �l �: � � a ► � ►
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.
A. During the term of this Agreement, CONTRACTOR shall maintain, at no
expense to CITY, the following insurance policies:
z
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.
MOD 6*16110NUTAIN
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.
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
i�rsrr.�
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.
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.
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.
1-1111PUFWRI► Plain 9 so 1:4 im FEE
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.
The laws of the State of California shall govern this Agreement.
6
n
HILTON FARNKOPF 6t 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
utaw. hf h-consultants.com
August 22, 2002
Copy by facsimile; original by mail
/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
Ex. ,it A
San Francisco
Los Angeles
Sacramento
Portland
Robert D. Hilton, CMC
John W. Famkopf, PE
L. Scott Hobson, CPA
Laith B. Ezzet, CMC
Ms. Jean Bonander
City Manager
City of Larkspur
400 Magnolia Ave.
Larkspur, CA 94939
Mr. Rabi Elias
Public Works Director
Town of Ross
31 Sir Francis Drake Blvd.
Ross, CA 94957
Mr. Barry K. Hogue Mr. Allen H. Petrie
District Manager District Manager
Ross Valley Sanitary District Las Gallinas Sanitary District
2000 Larkspur Landing Circle 300 Smith Ranch Road
Larkspur, CA 94939 San Rafael, CA 94903
Re: Proposal to Perform a Review of Marin Sanitary Service's
Application for 2003 Rates
Dear Ms. Bonander and Messrs. Nordhoff, Rawles, Elias, Hogue and Petrie:
Hilton Farnkopf & Hobson, LLC (HF&H) is pleased to present this proposal to
perform a review of Marin Sanitary Service's (MSS) application for rates to be
effective January 1, 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 (the Franchisors)
adopted a new methodology that would be used to set MSS's rates f%6ceiVed
fuse
AUG 2 6 2002
HILTON FARNKOPF & HOBSON, LLC
Marin Sanitary Service's Franchisors Group
August 22, 2002
Page 2
collection and disposal as well as recyclable and yardwaste 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.
In 2000, the last detailed review was performed. In 2001, rates were set using the
"Indexed Method" and 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 service. In 2002, MSS proposed to provide
services to the City of San Anselmo, and it is anticipated to receive the franchise for
this City in September 2002. Also in 2002, MSS proposed to provide services to the
North Area of the Ross Valley Sanitary District and a decision on the award of that
franchise is anticipated during September 2002. Services to these service areas may
start as early as November 2002. These expansions of service, and the need to
allocate MSS's costs among the Franchisors and these new jurisdictions, will make
even more important the proper allocation of MSS's costs among the jurisdictions it
services to ensure that the Franchisors are not paying a share of the costs to service
San Anselmo and perhaps the North Area of the Ross Valley Sanitary District.
For 2002, we have been asked to:
Perform the review using the index method and consider the effect of MSS's
additional service area(s) on the costs to be charged the Franchisors;
Allocate costs both on the basis of the costs of providing service as well as
the historical revenue method among the Franchisors and between the
Franchisors and the new service areas; and,
Assist in developing a strategy for moving from the historical revenue -based
method of cost allocation to the cost -of -service -based approach while
minimizing the effect on individual Franchisor's rates in any single year (i.e.,
phasing in the new approach over two or more years).
Scope of Work and Schedule
We will perform the following tasks related to the review of MSS's Application.
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=E=E HILTON FARNKOPF & HOBSON. LLC
Marin Sanitary Service's Franchisors Group
August 22, 2002
Page 3
Task 1: Determination of Index Values and Preliminary Meeting with MSS
1.1 For each index used for adjusting expenses, we will obtain and
document the most recent value and calculate the index's value 12
months ago. We will provide these results to MSS for their review
and comment.
1.2 We will meet once with MSS management to discuss the values and
calculations and any differences between its calculations and ours as
well as to discuss any unusual matters (e.g., pilot two -sort versus
three -sort recycling services and new service areas) that may affect
MSS's financial results of operations and, therefore, its application.
Task 2: Pre -Fieldwork
2.1 We will meet once with MSS management to receive the application
and discuss the review schedule.
2.2 Thereafter, we will review the application to ensure that it is complete
and in compliance with the methodology.
Task 3: Review of Revenues
HF&H will review MSS management's projection of collection and non -
collection revenues for the 12 -month periods ending December 31, 2002 and
2003. We will compare the results to MSS's audited financial statements for
rate year 2001 and year-to-date revenues for 2002 and request explanations
for variances.
Task 4: Review of Expenses
4.1 HF&H will review the appropriateness of MSS management's
classification of expenses into the various expense categories.
4.2 We will review MSS management's calculation of rate year 2003
indexed expense and compare it to the calculated expenses for 2002-
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HILTON FARNKOPF & HOBSON, LLC
Marin Sanitary Service's Franchisors Group
August 22, 2002
Page 4
established in our prior report and the calculated changes to the
indices determined in Task 1.
4.3 We will review MSS management's projection of other expenses
including:
Depreciation/ Lease Expense and Interest Expense projections will be
reviewed by evaluating the reasonableness of MSS management's
estimates for these expenses based on historical trends and MSS
management's plans.
Disposal and Recyclables/Yard Waste Processing Expense will be
reviewed by evaluating the reasonableness of MSS management's
estimates for these expenses based on historical trends, management's
plans and adjustments to disposal and processing rates.
4.4 Because of the anticipated expansion of MSS's services into San
Anselmo and its potential expansion into the North Area of the Ross
Valley Sanitary District, both of which are anticipated to be decided
during September 2002, we will analyze their effect on MSS's general
and administrative, supervisory and other non -direct costs.
Task 5: Review of Projected Profit
HF&H will review MSS management's calculation of projected profit for
compliance with the procedures and mathematical accuracy.
Task 6: Review of Revenue and Expense Allocations
HF&H will review the appropriateness of MSS management's allocation of
revenues and expenses among the Franchisors and the new service areas, in
accordance with the procedures developed last year. We will discuss with
MSS management approaches for the implementation of these new
procedures and attempt to develop a single recommended approach to the
Franchisors.
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=E. HILTON FARNKOPF & HOBSON. LLC
Marin Sanitary Service's Franchisors Group
August 22, 2002
Page 5
Task 7: Review of Adjustments
7.1 We will meet once with MSS management to review our adjustments
to their calculated and projected revenues and expenses and their
allocation among the Franchisors based on the recommended
implementation method developed in Task 7, obtain management's
comments, review any additional material and amend our
adjustments.
7.2 Thereafter, we will meet once with the Franchisors Group to present
our adjustments to MSS's calculated revenues and expenses and its
allocation among the Franchisors based on the recommended
implementation method developed in Task 7.
Task 8: Communicate Findings
8.1 HF&H will distribute a copy of our initial draft report documenting
our findings and recommendations for review by MSS management.
Thereafter, we will meet once with MSS management to present and
obtain its comments regarding our initial draft report.
8.2 We will make any appropriate adjustments to our initial draft report
and present a preliminary draft to the Franchisors.
8.3 Based on comments from the Franchisors, we will amend the
preliminary draft report and issue the final report.
Task 9: Engagement Management
We will prepare and amend detailed workplans, monitor engagement
progress, and provide sufficient resources to ensure timely completion of the
engagement, review analytical results and interim findings, review the draft
and final reports, and respond to questions regarding the progress of the
engagement and other issues.
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HILTON FARNKOPF & HOBSON, LLC
Marin Sanitary Service's Franchisors Group
August 22, 2002
Page 6
Limitations
Every approach to an engagement is limited in its scope. The major limitations
regarding our proposed scope of work are:
• The scope of work described above is different than an audit of financial
statements performed in accordance with Generally Accepted Auditing
Standards, which is performed by MSS's auditor.
• The tasks presented above will be performed in a manner that will allow us to
achieve the objectives of the review in a cost effective manner. We will rely on
MSS's auditor with regard to matters related to MSS's internal controls. Our
testing of MSS's application (using judgmental samples of transactions and
analytical procedures) will only be for the purpose of providing evidence that
allows us to reach conclusions and recommendations regarding MSS's
application.
• Our review will be conducted in accordance with the Rate Index Methodology
adopted by the Franchisors Group. This methodology includes the review of
MSS management's projection of the future results of operations. We will
review these projections for reasonableness and propose adjustments as
appropriate. We accept no responsibility to update these adjusted projected
results after the date of our report. Additionally, the projections result from
assumptions regarding future events and management's planned response to
them. Frequently, future events do not occur as anticipated and the difference
can be material.
We have not anticipated meeting to discuss the impact of MSS serving the new
service areas with representatives of San Anselmo or the Ross Valley Sanitary
District. We would be pleased to do so on a time -and -materials basis.
Further, we have neither included in the scope of our work modifications to any of
the individual Franchisor's rates nor rate structures. Such modifications may be
desirable to help adjust to the implementation of the new cost allocation
methodology. If any of the Franchisors would like us to perform these
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HILTON FARNKOPF & HOBSON LLC
Marin Sanitary Service's Franchisors Group
August 22, 2002
Page 7
modifications to their rate structures, we would be pleased to do so based on
arrangements made with the requesting Franchisor.
Finally, we have not included in the scope of our work presentations to the
Franchisors' governing bodies. However, we would be pleased to do so based on
arrangements made with the requesting Franchisor.
Firm and Proposed Enzazement Team Qualifications
Since it founding nearly 15 years ago, Hilton Farnkopf & Hobson, LLC has been
providing independent solid waste rate review services to municipalities
throughout California and the West Coast. Of particular relevance to this
engagement, HF&H has been the Franchisors' consultant in this area for more than
seven years. During that period, we have helped the Franchisors to substantially
reduce the cost of the review through changes in methodology, while ensuring that
both the customers' rates and MSS's level of profit are reasonable.
I will be responsible for directing the project and will perform all sub -tasks related
to the project management task described above, as well as attending all meetings
with the Franchisors and key meetings with MSS management. I have been the
Engagement Director and substantially involved in each of these annual reviews
since 1995, and I am well known to both the Franchisors and MSS management.
During the past 20 years, I have assisted more than 100 municipalities with nearly
400 solid waste consulting engagements, most of which have involved the cost of
solid waste services.
I will be assisted by less senior, experienced staff at lower billing rates who will
perform certain tasks under my direction. The most significant of these staff
members are Jim Arnstein and Sterling Luke.
• Jim Arnstein will serve as Engagement Manager under my close
supervision. Mr. Arnstein will supervise and review the work performed
by the staff assigned to the project to ensure that it is performed in
accordance with the proposed scope of work; our detailed work plans
and meets the City's objectives. Mr. Arnstein has a B.A. in Economics
from the University of California at Berkeley and an M.B.A. with a
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HILTON FARNKOPF & HOBSON. LLC
Marin Sanitary Service's Franchisors Group
August 22, 2002
Page S
concentration in Finance from Columbia University Graduate School of
Business. He has ten years of solid waste management consulting
experience including rate setting reviews, financial analysis of new solid
waste programs, financial feasibility studies, litigation services and
profitability analyses of haulers' financial statements. Mr. Arnstein
gained this experience as an independent financial consultant and as a
Senior Associate and Manager with Coopers & Lybrand. While in these
positions, he also provided financial planning and advisory services to
management, investors, lenders, intermediaries, and legal counsel on
merger and acquisition, business restructuring, reorganization, and
litigation support engagements. Mr. Arnsteiri s background also includes
several years with Wells Fargo Bank as a commercial loan analyst and
officer.
Sterling Luke will serve as Engagement Analyst. Under Mr. Arnstein's
direct supervision, Mr. Luke will perform certain data gathering,
organization and analyses tasks. Mr. Luke has participated in this review
for the past two years. Mr. Luke has an M.A. and a B.A. in History from
San Jose State University. Prior to joining HF&H two years ago, Mr.
Luke had two years experience as a financial analyst and supervisor at
the Port of Oakland. He also has more than 20 years experience as an
internal bank auditor, performing operational, financial, and
administrative audits, as well as writing feasibility studies for audits of
foreign bank branches, teaching internal training classes, and completing
various special projects for management.
Fees
Based on our last Rate Index Methodology and my current understanding of the
additional matters to be considered during this review and the level of effort
necessary to address them, I estimate our professional fees and out-of-pocket
expenses for the scope of work described above to be $64,745, as shown on
Attachment A.
As in the past, we will bill you in accordance with our standard rates and practices
as described in Attachment B up to the $64,745. It is possible that the level of effort
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HILTON FARNKOPF & HOBSON LLC
Marin Sanitary Service's Franchisors Group
August 22, 2002
Page 9
to perform the review and address the additional matters may exceed our estimate
and, if so, we will contact you immediately and before proceeding to obtain your
approval or direction. Also, it is possible that our level of effort will be less and, if
so, we will of course bill you the lesser amount.
Proposed Schedule
• HF&H Provides Indices and Meets with MSS September 16
• MSS Submits Application
September 23
• HF&H Commences Field Work
September 30
• HF&H Completes Field Work
October 31
• HF&H Reviews Results with MSS
November 1
• HF&H Reviews Results with Franchisors
November 4
• HF&H Provides MSS Draft Report
November 8
• MSS Provides Comments on Draft Report
November 12
• HF&H Presents Recommendations to
Franchisors for Comment
November 15
• HF&H Delivers Final Report
December 2
• Boards/ Councils Receive Report and
Adopt Revised Rates
December
• Rates Effective
January 1
The performance of our review in accordance with the schedule described above is
dependent on:
• The ability of MSS management to prepare its application and respond to
questions in a timely manner; and
• The ability of the Franchisors to provide necessary direction and comments
to draft work products in a timely manner.
We anticipate that neither MSS management nor the Franchisors will have difficulty
performing in the manner we have assumed.
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HILTON FARNKOPF & HOBSON LLC
Marin Sanitary Service's Franchisors Group
August 22, 2002
Page 10
Thank you for this opportunity to again be of service to you. If you have any
questions, please call me at 925/977-6952.
Very truly yours,
HILTON FARNK/OPFr& HOBSON, LLC
Robert D. Hilton, CMC
President
Attachment A: Estimated Hours, Professional Fees and Out -of -Pocket Expense
Attachment B: Standard Hourly Rates and Billing Arrangements
Copies to: Mr. Joe Garbarino, Jr., Marin Sanitary Service
Mr. Joe Garbarino, Sr., Marin Sanitary Service
Ms. Patty Garbarino, Marin Sanitary Service
Ms. Mardell Sarkela, Marin Sanitary Service
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Attachment A
Marin Sanitary Franchisor's Group
Review of MSS Application for 2003 Rates
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Hours by Task and Staff Member
ITask IDescription
Hilton
Arnstein
l l
Luke
l
AdminTotal
l
f
Hourly Ratel
$ 230
$ 155
$ 130
$ 75
n/a
1
Preliminary Activities
1.1 Determine Indices Values
1
4
1.2 Preliminary Meeting
4
4
Task Subtotal
13
2
Pre -Field Work
2.1 Receive Application from Company
4
4
2.2 Review Application for Compliance
4
4
8
Task Subtotal
24
3
Review of Revenues
4
16
8
Task Subtotal
28
4
Review of Expenses
4.1 Classification of Expense
2
8
0
4.2 Calculation of Indexed Expenses
1
4
8
4.3 Review of Other Expenses
12
48
32
4.4 Review Impact of Service to New Areas
8
8
Task Subtotal
121
5
Review of Projected Profit
1
2
Task Subtotal
3
6
Review of Allocations
24
24
16
Task Subtotal
64
7
Review of Adjustments
7.1 Review with MSS Management
4
4
2
2
7.2 Review with Franchisors
4
4
Task Subtotal
20
8
Communicate Findings
8.1 Prepare Initial Draft and Meet with MSS Management
8
12
8
6
8.2 Prepare Preliminary Draft and Meet with Franchisors
4
6
1
8.3 Prepare and Distribute Final Report
4
6
1
Task Subtotal
0
9
Engagement Management
12
16
0
2
Task Subtotal
28
Total Hours
101
170
86
12
369
Fees
$ 23,230
$ 26,350
$ 11,180
$ 900
$ 61,660
Out of Pocket Expense
$ 3,085
Total Budget
$ 64,745
S/Clients/S/San Rafael/2002/Rate Review/Proposal/Prop Fee v1 082002
Attachment B
HILTON FARNKOPF & HOBSON, LLC
STANDARD HOURLY RATES AND BILLING ARRANGEMENTS)
(Effective July 1, 2002)
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 (over 25 pages per run)
Facsimile
Telephone
Public Conveyances
Postage
Overnight Mail and Couriers
Rate
$230
$200
$175
$155-$170
$110-$135
$70-$75
0.365 cents per mile
15 cents per page
No charge
No charge
Actual
Actual
Actual
I Litigation Support and Expert Witness Services are not covered by this schedule of fees and
expenses.
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.
Hilton Fariikopf & Hobson, LLC 2
Insurance
We maintain the following policies of insurance with carriers doing business in
California:
• Comprehensive General Liability Insurance ($1,000,000)
• 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.
Hilton Farnkopf & Hobson, LLC 3