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HomeMy WebLinkAboutCM MSS Rate Review 2010CITY OF � - / Agenda Item No: 4 n' /✓•fes+ Meeting Date: August 17, 2009 SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: MANAGEMENT SERVICES Prepared by: Ken Nordhoff, City Manager Approval: SUBJECT: RESOLUTION AUTHORIZING THE CITY MANAGER TO ENTER INTO AN AGREEMENT WITH HF &H CONSULTANTS, LLC TO PERFORM A REVIEW OF MARIN SANITARY SERVICE'S 2010 RATE APPLICATION RECOMMENDATION: Adopt Resolution. BACKGROUND: A number of local agencies within Marin County have franchise agreements with Marin Sanitary Service (MSS) to provide refuse collection and recycling services to residential and commercial customers. The agencies under contract with MSS include the cities of San Rafael and Larkspur, the Town of Ross, Marin County, and the Las Gallinas Sanitary District. For a number of years, the agencies have worked together to make certain that the ratepayers (citizens and businesses) are being properly charged for the various levels of service provided. In order to substantiate the rate schedules, the agencies have developed a jointly sponsored program designed to conduct routine reviews of Marin Sanitary's operating efficiencies and expenses. Staff is recommending that the 2010 review be performed by HF&H Consultants ("HFH"). ANALYSIS: HFH has worked with the various agencies noted above to provide a true assessment of the operations of MSS. In 1995, the franchising agencies adopted a new methodology that would be used to set MSS' refuse collection and disposal rates. The methodology was designed to provide a detailed review of MSS' operations every three years. In the interim two-year period, annual summary reviews would be conducted. The 2010 review will be a detailed review. HFH will compare the proposed rates to specific indexes and perform a survey of similar rates from cities in the Bay Area receiving comparable services. Results from this review shall be used to establish 2010 refuse and recycling rates for all participating Franchisors (agencies). FOR CITY CLERK ONLY File No.: Council Meeting: Disposition: SAN RAFAEL CITY COUNCIL AGENDA REPORT / Pale: 2 HFH submitted a proposal dated August 6, 2009 setting forth a scope of services for the review for the participating Franchisors, and a fee estimate for that work not to exceed $76,000. The cities of San Anselmo and Fairfax have expressed an interest in joining the Franchisors Group. Therefore, in addition to the regular contract for the existing Franchisors Group, HFH provided a scope of services for the analysis that would be required to provide a recommendation to the existing Franchisors Group on the impact of adding the two cities. HFH projects the cost of the analysis to be $15,000, as set forth in Attachment B of the HFH proposal. This cost will be borne by San Ansehno and Fairfax if they choose to move ahead, so is not included in the Agreement before the Council. The attached Resolution would authorize the City Manager to execute an agreement with HFH on the terms set forth in HFH's proposal dated August 6, 2009, in a form to be approved by the City Attorney. FISCAL IMPACT: The proposal from HFH for the detailed review is estimated not to exceed $ 76,000. The cost for this contract is passed through to MSS and is not an expenditure of either the City of San Rafael or the other Franchisors. All participating agencies have received a copy if this agreement and are aware of the scope of work and project costs. The contract payments are absorbed into MSS operating expenses and distributed to all participating agencies as part of developing the next year rates. ACTION REQUIRED: Accept the report and adopt the resolution as presented. ATTACHMENT: Resolution with attached HFH Proposal dated August 6, 2009 RESOLUTION NO. RESOLUTION AUTHORIZING THE CITY MANAGER TO ENTER INTO AN AGREEMENT WITH HF &H CONSULTANTS, LLC TO PERFORM A REVIEW OF MARIN SANITARY SERVICE'S 2010 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 HF & H Consultants for Refuse Rate Review of Marin Sanitary Service's Rate Application for the 2010 calendar year, in a form to be approved by the City Attorney. The agreement shall be on the terms described in the August 6, 2009 HF &H Consultants, LLC Proposal attached hereto as Exhibit A and incorporated herein by reference, excluding the services relating to the Towns of Fairfax and San Anselmo described in Attachment B of the Proposal. I, ESTHER C. BEIRNE, 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 17h day of August, 2009, by the following vote, to wit: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ESTHER C. BEIRNE, City Clerk 2175 N. California Boulevard, Suite 990 Walnut Creek, California 94596 Telephone: 925/977-6950 Fax: 925/977-6955 www.hfh-consultants.cam August 6, 2009 Sent via e-mail Ms. Jean Bonander City Manager City of Larkspur 400 Magnolia Ave. Larkspur, CA 94939 Mr. Michael Frost Deputy Director of Public Works County of Marin 65 Mitchell Blvd, Suite 200B San Rafael, CA 949034155 Mr. Mark Williams District Manager Las Gallinas Valley Sanitary District 300 Smith Ranch Road San Rafael, CA 94903 Advisory Services to Municipal Management Robert D. Hilton, CMC John W. Farnkopf, PE Laith B. Ezzet, CMC Richard J. Simonson, CMC Marva M. Sheehan, CPA Mr. Kenneth A. Nordhoff City Manager City of San Rafael 1400 Fifth Avenue San Rafael, CA 94915-1560 Mr. Gary Broad Town Manager & Planning Director Town of Ross 31 Sir Francis Drake Blvd. Ross, CA 94957 Subject: Proposal to Review Marin Sanitary Service's Application for 2010 Rates Dear Ms. Bonander and Messrs. Nordhoff, Rawles, Broad, and Williams: HF&H Consultants, LLC (11F&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, 2010. Background In 1995, the Cities of San Rafael and Larkspur, the Town of Ross, the Ross Valley and Las Gallinas Valley Sanitary Districts, and the County of Marin (the 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. i __ Advisory Services to Municipal Management Marin Sanitary Services' Franchisors' Group August 6, 2009 Page 2 of 9 In 2002, MSS was awarded the franchise to provide services to the Town of San Anselmo. Also in 2002, MSS was awarded the franchise to provide services to the north area of the Ross Valley Sanitary District. In 2004, MSS acquired the Fairfax franchise. These expansions of service, and the need to allocate MSS's costs among the Franchisors and these new jurisdictions, 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, Fairfax, and the north area of the Ross Valley Sanitary District. In 2005, customers that were in the Las Gallinas Valley Sanitary District franchise area were integrated into the customer base of the City of San Rafael. The Town of San Anselmo and the City of Fairfax have expressed interest in becoming part of the Franchisors' Group for purposes of the review of rate applications submitted by MSS. You have asked us to provide an estimate of the cost of any additional work for the addition of these two agencies. Attachment B presents the additional work by task and fee estimate for doing so (i.e., limited additional revenue and expense testing and report presentations). Agreement has not been reached among the parties with regard to whether any changes to existing practices may result from the addition of these agencies (e.g., the basis upon which direct expenses, indirect expenses, and overhead are allocated among the agencies). Should such changes be desirable, we would be pleased to work with the agencies and MSS staff in developing the most cost-effective approach to implementing them. In 2006, the last detailed review was performed for rates to be effective in 2007. Rates for 2008 and 2009 were set using the indexed method. For a review of rates to be effective 2010, we have been asked to: Perform a detailed review; • Perform a review of the impact of adding San Anselmo and Fairfax to the Franchisors' Group; and, • Perform a survey of similar rates from cities in the Bay Area receiving comparable services. 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 Application and a presentation by the Company of the major matters leading to any rate adjustments. Advisory Services to Municipal Management Marin Sanitary Services' Franchisors' Group August 6, 2009 Page 3 of 9 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. We will seek explanations for any unusual findings and we will inform the Company of any matters that come to our attention that lead us to believe the Application is either not in compliance or is inconsistent. 1.3 Mathematical Accuracy and Logical 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 and that any summary schedules agree to the supporting schedules or worksheets. We will seek explanations for any unusual findings and we will inform the Company in writing of any matters that may come to our attention that lead us to believe that the Application is not mathematically correct or logically consistent. 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 come to our attention that may be necessary to reconcile the Application to the financial statements. Task 2: Revenue Testing HF&H staff will assess the reasonableness of the Company's reported actual 2008, estimated 2009, and projected 2010 revenues by reviewing the current customer subscription data times the current rates. Additionally, we will select a sample of residential and commercial accounts to verify the proper application of the most recent rate changes. We will review non -rate revenue for consistency and reasonableness. We will seek explanations for any unusual findings, and we will inform the Company of any adjustments that may come to our attention that we may believe are necessary to these estimated and projected revenues. Task 3: Expense Testing 3.1 Review Forecasted Annual Cost of Operations. HF&H staff will review the Company's reported actual 2008, estimated 2009, and forecasted 2010 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; Transfer, Transport, Disposal, and Processing Expense; Fuel and Oil Expense; Equipment and Vehicle Maintenance Expense; Depreciation/Lease Expense; Interest Expense; and, Miscellaneous Expenses. HF&H will test individual transactions to ensure non -allowable costs have been excluded from the 2010 forecasted annual cost of operations. We will seek explanations for any unusual findings and we Marin Sanitary Services' Franchisors' Group August 6, 2009 Page 4 of 9 will inform the Company of any adjustments that we believe are necessary to these estimated and projected expenses. 3.2 Review Allocation Methodology. HF&H will review the methodology used by MSS to allocate operating expenses to the individual jurisdictions to assure consistency with the agreed to methodology previously developed. We will seek explanations for any unusual findings and will inform the Company of any adjustments that may come to our attention that we may believe are necessary 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 forecasted annual cost of operations 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 2010. Task 6: Comparison of Actual to Forecasted Results HF&H staff will compare the actual results for 2007 and 2008 to those anticipated when the rates were set using the indexed methodology and obtain and document explanations from the Company of any variations. Task 7: Review of Impact to Rates from Adding Additional Agencies HF&H staff will review MSS's calculation of its revenue requirement with and without the two additional agencies and communicate to the Franchisors the corresponding impact on the rate adjustment. Task 8: Communication of Results 8.1 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. Marin Sanitary Services' Franchisors' Group August 6, 2009 Page 5 of 9 Management 8.2 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. 8.3 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. 8.4 Based on the comments from the Franchisors, we will amend the preliminary draft report and issue the final report. Task 9: Survey of Comparable Rates We will survey solid waste rates in the San Francisco Bay Area. We will identify communities with comparable services and contact them to solicit their participation and determine whether certain data is available. That data includes, but is not limited to, matters such as governmental fees, whether a transfer station is used, landfill disposal rates, whether employees are organized, and customer subscription data. As part of the survey we will attempt to compare not only the absolute rates but also the rate structures so that we may identify differences in pricing (vs. cost). Task 10: Engagement Management We will prepare and amend detailed work plans, 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. Schedule Recognizing that we are reliant upon the Company for the timely preparation of documents and response to our questions, we plan to perform this engagement in accordance with the following schedule: AcHvi Completion Date Kick -Off Meeting September 1, 2009 Commence Fieldwork Week of September 17, 2009 Marin Sanitary Services' Franchisors' Group August 6, 2009 Page 6 of 9 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 Advisory Services to Municipal Management October 30, 2009 November 13, 2009 November 20, 2009 December 4, 2009 December 11, 2009 December 18, 2009 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 from an audit of financial statements performed in accordance with Generally Accepted Auditing Standards, which is performed by MSS's auditor. • We will perform the tasks presented above 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. • We will conduct our review in accordance with the Contractor's Compensation and Rate Adjustment 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. Further, we have neither included in the scope of our work modifications to any of the individual Franchisor's rates nor rate structures. If any of the Franchisors would like us to perform modifications to their rate structures, we would be pleased to do so based on arrangements made with the requesting Franchisor. Advisory Services to Municipal Management Marin Sanitary Services' Franchisors' Group August 6, 2009 Page 7 of 9 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 Engagement Team Qualifications Since its founding 20 years ago, HF&H Consultants, 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 ten 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 attend 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. Marva Sheehan will serve as Engagement Manager under my direction. Ms. Sheehan was the Engagement Manager for the last four reviews, including the last detailed review of MSS's 2007 rate application. She is currently working with the Town of San Anselmo as it looks at joining the Franchisors Group. She is a Certified Public Accountant with over 25 years of accounting and auditing experience; 17 of which have been in the solid waste industry. She 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 Franchisor's objectives. Nadine Muller will serve as the Senior Associate under Ms. Sheehan s supervision. Ms. Muller has been the Engagement Manager for numerous similar reviews and has over 18 years of experience in the solid waste industry. She served as the Chief Financial Officer of Marin Sanitary Service from 1989 to 1986. She 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 Franchisor's objectives. Advisory Services to Municipal Management Marin Sanitary Services' Franchisors' Group August 6, 2009 Page 8 of 9 We will be assisted by less senior, experienced staff at lower billing rates, who will perform certain tasks under our direction. Fees Based on the tasks performed during our last detailed review, 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, excluding the additional tasks necessary to review the impact to the Franchisors' Group of adding San Anselmo and Fairfax, to be $76,000, as shown on Attachment A. We have separately identified the tasks necessary to review the impact of adding San Anselmo and Fairfax and have estimated our professional fees for those tasks to be $11,975. However, due to the uncertainty of the number of meetings, etc., we recommend adding a contingency of $3,025. Therefore, we estimate our total professional fees to be $15,000 as shown on Attachment B. As in the past, we will bill you in accordance with our standard rates and practices as described in Attachment C up to the $76,000 and $15,000. It is possible that the level of effort to perform the review and address the additional matters may exceed our estimate and, if so, we will contact you 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. We sincerely appreciate the continued confidence you have expressed in HF&H and we are committed to do our best to fulfill your objectives. Should you have any questions, please call me at 925/977-6952. Very truly yours, HF&H CONSULTANTS, LLC 4t,,,.�2 Tc aw la`c Robert D. Hilton, CMC President Marin Sanitary Services' Franchisors' Group August 6, 2009 Page 9 of 9 Attachments: A) Fee Estimate - Franchisors Group B) Fee Estimate - San Anselmo and Fairfax C) Standard Hourly Rates and Billing Arrangements cc: Mr. Joe Garbarino, Jr., Marin Sanitary Service Mr. Joe Garbarino, Sr., Marin Sanitary Service Ms. Patty Garbarino, Marin Sanitary Service Mr. Ray Holmes, Marin Sanitary Service Ms. Marva Sheehan, HF&H Ms. Kim Erwin, HF&H icipal Management This page intentionally left blank ATTACHMENT A Fee Estimate Marin Franchisors Group Review of Marin Sanitary Service's 2010 Rate Application Detail Rate Review Billing Rate Task/Step Description Task 1 Preliminary Application Review 1.1 Kick -Off Meeting with Franchisors Group 1.2 Kick -Off Meeting with Company 1.3 Completeness & Compliance Review 1.4 Math Accuracy & Logical Consistency 1.5 Reconciliation to Financial Statements Sub -total Hours Fees Task Revenue Testing Sub -total Hours Fees Task 3 Expense Testing 3.1 Review Forecasted Annual Cost of Operations 3.2 Review Allocation Methodology Sub -total Hours Fees Task 4 Profit Calculation Sub -total Hours Fees Task 5 Calculation of Necessary Rate Adjustments Sub4otal Hours Fees Task 6 Comparison of Actual to Forecasted Results Sub -total Hours Fees Task Additional Member Agencies 7.1 Calculate effects of Fairfax & San Anselmo inclusion into Group Sub -total Hours Fees Senior Hilton Sheehan Assoc Associate Admin Total $245.00 $225.00 $180.00 $125.00 $90.00 4 4 Communication of Results 4 4 1 8 1 8 Present Preliminary Findings to MSS 1 8 $980 $1,800 $1,260 $3,000 $0 $7,040 2 14 20 36 $0 $450 $2,520 $2,500 $0 $5,470 2 65 67 2 2 12 27 2 4 77 94 0 177 $490 $900 $13,860 $11,750 $0 $27,000 1 1 $0 $0 $180 $0 $0 $180 2 12 10 24 $0 $450 $2,160 $1,250 $0 $3,860 2 10 15 27 $0 $450 $1,800 $1,875 $0 $4,125 0 0 0 0 0 $0 $0 $0 $0 $0 $0 Task 8 Communication of Results 8.1 Present Preliminary Findings to MSS 4 8 4 8.2 Draft Report 2 4 16 16 4 8.3 Revise Draft Report and Present to Franchisors 4 6 10 4 4 8.4 Final Report 2 14 8 2 4 Sub -total Hours 8 28 42 26 12 116 Fees $1,960 $6,300 $7,560 $3,250 $1,080 $20,150 Task 9 Rate Comparison Study Sub -total Hours 1 4 16 21 Fees $0 $225 $720 $0 $1,440 $2,385 Task 10 Engagement Management Sub -total Hours 4 4 8 5 0 21 Fees $980 $900 $1,440 $625 $0 $3,945 Total Fees Hours 18 51 175 194 28 466 Fees $4,410 $11,475 $31,500 $24,250 $2,520 $74,155 Out -of -Pocket Expenses $1.845 Sub -total $76,000 Contingency Lo Total Budget $76.000 S:\Clients\S\San RafaeK2009\2010 MSS Rate Application Review\Proposal\Attach A- Fee Estimate - Fran Grp ATTACHMENT B Fee Estimate Marin Franchisors Group Review of Marin Sanitary Service's 2010 Rate Application San Anselmo / Fairfax Detail Rate Review Billing Rate Task/Step Description Task 2b Revenue Testing Select 3 commerical and 3 residential customers to ensure the 2b.1 prior year rate adjustment was properly applied Recalculate projected 2010 revenue based on current sevice 2b.2 levels and compare to MSS projected revenue Sub -total Hours Fees Task 3b Expense Testing Review MSS allocation schedules after the addition of San Anselmo and Fairfax for logical consistency and compliance 3b.1 with the accepted allocation methodology Sub -total Hours Fees Task 7b Additional Member Agencies Review MSS's calculation of its revenue requirement with and without the two additional agencies and communicate to the 7b.1 Franchisors the corresponding impact on the rate adjustment. Sub -total Hours Fees Task 8b Communication of Results 8b.1 Present Preliminary Findings to MSS Draft Report - update report to include San Anselmo and 8b.2 Fairfax in text, tables, graphs, etc. 815.3 Revise Draft Report and Present to Franchisors 8b.4 Final Report Sub -total Hours Fees Task 10 Engagement Management Sub -total Hours Fees Total Fees Senior Hilton Sheehan Assoc Associate Admin Total $245.00 $225.00 $180.00 $125.00 $90.00 4 1 2 2 2 2 6 10 $0 $450 $360 $750 $0 $1,560 1 2 3 6 1 2 3 6 0 12 $245 $450 $540 $750 $0 $1,985 2 6 12 4 2 2 6 12 4 2 26 $490 $1,350 $2,160 $500 $180 $4,680 2 8 3 1 2 8 0 3 14 $245 $450 $1,440 $0 $270 $2,405 2 2 1 5 $490 $450 $180 $0 $0 $1,120 Hours 6 14 28 16 5 67 Fees $1,470 $3,150 $4,680 $2,000 $450 $11,750 Out -of -Pocket Expenses 225 Sub -total $11,975 Contingency $3,025 Total Budget $15.000 S:\Clients\S\San Rafael\2009\2010 MSS Rate Application Review\Proposal\Attach B - San Ans & Fair ATTACHMENT C Standard Hourly Rates and Billing Arrangements HF&H CONSULTANTS, LLC (Effective January 1, 2009)1 Professional Fees Hourly rates for professional and administrative personnel are as follows: Position President Senior Vice President & Vice President Senior Manager/Senior Project Manager Senior Associate Associate Analyst Assistant Analyst 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 Billing Policies Rate $245 $210-$245 $210-$225 $170-$195 $125-$165 $100-$105 $80-90 Prevailing IRS mileage rate 15 cents per page (black & white) 75 cents per page (color) No charge No charge Actual Actual Actual 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: I Litigation Support and Expert Witness Services are not covered by this schedule of fees and expenses. Page 1 of 3 ATTACHMENT C Standard Hourly Rates and Billing Arrangements • It is our standard practice to e-mail invoices to our clients, although hard copies of invoices can be sent to clients on request. • 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. 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 ($2,000,000) 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 Page 2 of 3 ATTACHMENT C Standard Hourly Rates and Billing Arrangements 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. Page 3 of 3