City of San Juan Capistrano Agenda Report

TO: Honorable Mayor and Members of the City Council

FROM: Tom Bokosky, Human Resources Manager

DATE: September 15, 2015

9/15/2015

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SUBJECT: Status Report and Authorization on Phase 4 of the Potential Change in the Organization of the City's Water, Sewer and Stormwater Utility; Amendment to the Agreement with Brownstein Hyatt Farber and Schreck and Appropriation of Funds

RECOMMENDATION:

By motion:

1. Receive and file update from Brownstein Hyatt Farber Schreck; and,

2. Authorize the commencement of Phase 4 of the Work Plan; and,

3. Provide the following authorization on Phase 3 and 4:

a. Authorize the Mayor to execute an Amendment to the Agreement with Brownstein Hyatt Farber Schreck, for a total amount not to exceed $215,000, for Phases 1, 2, 3 and 4 of the Work Plan; and,

b. Authorize Brownstein Hyatt Farber Schreck to amend its Agreement with HDR Engineering for engineering and technical services associated with Phases 3 and 4 for a total amount not to exceed $117,700; and,

c. Authorize Brownstein Hyatt Farber Schreck to amend its Agreement with Laer Pearce & associates to assist with public relations services associated with Phases 3 and 4 for a total amount not to exceed $58,000.

4. Approve an appropriation of $166,345 from the Water Enterprise Operations Fund Reserve; $27,398 from the Sewer Enterprise Operations Fund Reserve and $1,957 from the General Fund Reserve for the cost of the agreements.

City Council Agenda Report September 15, 2015 Page 2 of 3

EXECUTIVE SUMMARY:

Brownstein Hyatt Farber Schreck has provided a Memorandum dated September 10, 2015, (Attachment 1 ), which provides an update; and requests City Council direction and authorization to move forward with Phase 4 of the potential change in the organization of the City's Water, Sewer and Stormwater Utility.

DISCUSSION/ANALYSIS:

On March 3, 2015, the City Council approved an Agreement with Brownstein Hyatt Farber Schreck for Phase 1 and Phase 2 of the proposed work plan for investigating a potential change in the organization of the City's water, sewer and stormwater utility.

On June 2, 2015, the City Council authorized Brownstein Hyatt Farber Schreck to retain HDR Engineering for engineering and technical services associated with Phase 2; retain Laer Pearce & Assoc. to assist with public relations services associated with Phase 2; and authorized the City Manager to retain additional legal counsel expertise on municipal bond and finance matters.

On August 4, 2015, the City Council authorized an Amendment to the Agreement with Brownstein Hyatt Farber Schreck for Phases 1, 2 and 3 of the Work Plan.

Attachment 1 outlines a status report on the implementation of the City's Work Plan.

FISCAL IMPACT:

The following is a summary of the cost authorized to date and the additional budget requested to complete Phases 3 and 4:

Fees/Costs Additional Budget Consultant Authorized Requested for Subtotal

to Date Phases 3 and 4

BHFS $120 000 $95,000 $215,000

HDR Engineering $65 000 $52,700 $117,700

Laer Pearce & Associates $10,000 $48,000 $58,000 Bond Counsel - Orrick, Herrington & Sutcliffe, LLP $10 000 $0 $10,000

Total $205,000 $195,700 $400,700

The additional funding required for Phase 3 and 4 work is $195,700 and would be funded as follows:

Water Enterprise Operations Fund Sewer Enterprise Operations Fund General Fund Total

$166,345 27,398

1,957 $195,700

City Council Agenda Report September 15, 2015 Page 3 of 3

These costs will increase the Water Enterprise Operations Funds projected deficit from $730,388 (based on the Fiscal Year 2015-2016 Amended Budget) to $896,733 as of June 30, 2016. The Sewer Enterprise Fund and General Fund have sufficient reserves to fund these amounts and meet the City Council contingency reserve policy of 25%-50% of operating expenses.

ENVIRONMENTAL IMPACT:

Not applicable.

PRIOR CITY COUNCIL REVIEW:

• On March 3, 2015, the City Council approved an Agreement with Brownstein Hyatt Farber Schreck for Phase 1 and Phase 2 of the proposed work plan for investigating a potential change in the organization of the City's water, sewer and stormwater utility.

• On June 2, 2015, the City Council the City Council authorized Brownstein Hyatt Farber Schreck to retain HDR Engineering for engineering and technical services associated with Phase 3; retain Laer Pearce & Assoc. to assist with public relations services associated with Phase 2; and authorized the City Manager to retain additional legal counsel expertise on municipal bond and finance matters.

• On August 4, 2015, the City Council authorized an Amendment to Amendment to the Agreement with Brownstein Hyatt Farber Schreck for Phases 1, 2 and 3 of the Work Plan.

COMMISSION/COMMITTEE/BOARD REVIEW AND RECOMMENDATIONS:

Not applicable.

NOTIFICATION:

Not applicable.

ATTACHMENT(S):

Attachment 1- September 10, 20152015, Memorandum from Brownstein Hyatt Farber Schreck

Attachment 2 - August 4, 2015, City Council Agenda Report, which included as attachments the March 3, 2015, City Council Agenda Report, and the June 2, 2015, City Council Agenda Report

Brownstein Hyatt Farber Schreck

bhfs.com

Memorandum

DATE: September 10, 2015

TO: Keith Till, Interim City Manager

FROM: Stephanie Osler Hastings

Stephanie Osier Hastings Attorney at Law 805.882.1415 tel 805.965.4333 fax SHastings@bhfs.com

RE: Status Report on Utility Reorganization Work Plan; Request for Further Authorization

I. INTRODUCTION

This memorandum provides BHFS's update on implementation of the City's Utility Reorganization Work Plan ("Work Plan"). The Work Plan is described in detail in BHFS's February 25, 2015 memorandum to the City Manager which is attached to Agenda Report 0 10 for the March 3, 2015 City Council Meeting.

II. REQUESTED APPROVALS

BHFS requests the following:

1. Authorization to undertake Phase 4 of the Work Plan.

2. Authorization of a budget to complete Phases 2-4 of an amount not to exceedS 95,000 (in addition to prior approvals);

3. Authorization to retain BHFS to retain HDR Engineering for engineering and technical services associated with Phases 3 and 4 for an amount not to exceed S 52,700 (in addition to prior approvals);

4. BHFS to retain Laer Pearce & Assoc. to assist with public relations services associated with Phases 3 and 4 for an amount not to exceedS 48,000 (in addition to prior approvals).

Ill. BACKGROUND

On March 3, 2015, the City Council authorized Phases 1 and 2 of the Work Plan, including an appropriation of funds not to exceed $45,000 for BHFS's legal services associated with implementation of Phases 1 and 2 of the Work Plan.

On June 2, 2015, the City Council authorized:

(a) BHFS to retain HDR Engineering for engineering and technical services associated with Phase 2 for an amount not to exceed $65,000;

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(b) BHFS to retain Laer Pearce & Assoc. to assist with public relations services associated with Phase 2 for an amount not to exceed $1 0,000; and

(c) The City Manager to retain additional legal counsel expertise on municipal bond and finance matters, for an amount not to exceed $10,000.

On August 4, 2015, the City Council authorized BHFS to commence Phase 3 and authorized BHFS's budget of $120,000 for Phases 1-3 combined.

IV. STATUS REPORT

BHFS continues to serve as the project manager for implementation of the City's Work Plan, including communication with City Council members, executive management and staff and coordination of all tasks and activities by all consultants. BHFS provides regular briefings of the City's executive management and staff. BHFS hosts standing weekly calls with the consultant team to facilitate information sharing among consultants, to answer questions, provide direction, and to identify outstanding tasks and issues to be addressed.

The consultant team has completed its inventory and audit of the City's water, wastewater and recycled water systems.

BHFS has conducted an initial evaluation of the various options potentially available to the City, if it should elect to pursue any change in organization. Additional legal services will be required to evaluate the statutory and regulatory requirements of any potential change in organization, the potential benefits and risks of any potential change in organization, as compared to the City's existing utility organization, and to identify all of the necessary tasks that would be required to undertake a potential change in organization.

The consultant team anticipates providing a briefing on the investigation completed to date at the October 6, 2015 City Council meeting and requesting City Council authorization regarding next steps.

V. BUDGETS

A. BHFS

Based on BHFS's anticipated legal services associated with the City's continued investigation of a possible change in organization of the City's water, wastewater and recycled water utilities, BHFS requests the City Council's approval of a budget not to exceed$ 95,000 for BHFS legal services associated with Phases 3 and 4. (This budget does not include previously authorized budgets.)

B. HDR, Inc.

HDR's proposed budget for Phases 3 and 4 is$ 57,700. See attached memorandum from HDR to BHFS. (This budget does not include previously authorized budgets.)

C. Laer Pearce and Associates

Laer Pearce and Associate's proposed budget for Phase 3 and 4 is $16,000 per month, or $48,000 for three months of anticipated work. See attached memorandum from Laer Pearce and Associates to BHFS. (This budget does not include previously authorized budgets.)

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Memorandum

DATE: September 9, 2015

TO: Stephanie Hastings, BHFS

FROM: Dean Gipson, HDR

RE: Reorganization Project - Phases 3 and 4 Proposed Staff Report insert

The City of San Juan Capistrano (City) is investigating alternatives for the operation and organization of the City's water, sewer and stormwater utility. With the assistance of Brownstein Hyatt Farber Schreck (BHFS), the City has developed a five phase work plan to achieve this goal. HDR assisted with Phase 2, Audit of Existmg Utility, wh1ch developed a preliminary understanding of the City's utility assets.

The City now requests, through BHFS, that HDR assist with Phase 3, Evaluation of Feasibility of Options for Changes in Organization and Comparison of Benefits and Disadvantages, and Phase 4, Due Diligence regarding Selected Change in Organization. HDR will provide the engineering technical assistance to support the development of a utility asset registry as well as recommended approaches for implementing a range of potential changes in organization, including identifying potentially interested parties. The effort is for a not to exceed amount of S52, 700.

8690 Balboa Avenue, SUite 200. Sa•l Diego, CA 92123

To: From: RE:

Date:

LAER PEARCE & ASSOC I/\TES

Solu tions through Stratcgtc Communication~

Stephanie Hastings Laer Pearce

MEMORANDUM

Public Outreach/Communications Counsel Summary Phases 3&4 of Water Utility Alternatives Analysis Project September 10, 2015

Laer Pearce & Associates ("LP&A") recommends undertaking the following public outreach and communications during Phases 3 and 4 of the San Juan Capistrano Water Utility Alternatives Analysis Project: Draft content and use the City's existing communications tools to inform City residents, City commissions, other internal City audiences, the Orange County water community and the media about Project developments. Public responses will be encouraged and fac ilitated, and LP&A will database responses received, provide summary reports to the City, and develop answers to respondents as appropriate. LP&A also will review draft materials generated by other Project consultants and recommend changes that would improve public comprehension, and will update the Project's communications strategy and messages to reflect the new information.

Estimated fees for this comprehensive program are $16,000 monthly, or $48,000 for the anticipated three-month Project duration.

23 Blockhow~. Colo de Cozo CA 92679 I Phone: 949.599.1212 I www. loer.corr

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