Utility Expense & Cost Mgmt Consulting Services
THE CITY OF ~
DUB E
~ck~
MEMORANDUM
August 26, 2006
TO:
The Honorable Mayor and City Council Members
FROM:
Michael C. Van Milligen, City Manager
SUBJECT: Management Consulting Services Agreement for the Utility Expense and
Cost Analysis Study
The City of Dubuque franchise agreements with the gas and electric utilities provide for
a franchise fee of 2% of the gross receipts derived from the utility's sale of its services
to its customers in the City.
The Iowa Supreme Court in Kragnes v. City of Des Moines held that an Iowa city has
the authority to assess a franchise fee expressed as a percentage of the gross receipts
derived from the utility's sale of its services to the public, so long as the charge is
reasonably related to the reasonable costs of inspecting, licensing, supervising, or
otherwise regulating the activity that is being franchised. The Supreme Court also said
that, "In fixing upon the fee, it is proper and reasonable to take into account, not the
expense merely of direct regulation, but all the incidental consequences that may be
likely to subject the public to cost in consequence of the business licensed. In some
cases, the incidental consequences are much the most important, and indeed, are what
are principally had in view when the fee is decided upon... And all reasonable
intendments must favor the fairness and justness of a fee thus fixed; it will not be held
excessive unless it is manifestly something more than a fee or regulation."
On July 17, 2006, the City Council approved the selection and commencement of
contract negotiations with Springsted, Inc. to conduct the Utility Expense and Cost
Analysis Study.
City Engineer Gus Psihoyos recommends City Council approval of the Management
Consulting Service Agreement with Springsted, Inc.
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I concur with the recommendation and respectfully request Mayor and City Council
approval.
(J1;,.! {('1 i()(~
Michael C. Van Milligen ~
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Attachment
cc: Barry Lindahl, City Attorney
Cindy Steinhauser, Assistant City Manager
Gus Psi hoyos, City Engineer
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MEMORANDUM
August 25, 2006
TO:
Michael C. Van Milligen, City Manager
Gus Psihoyos, City Engineer V
SUBJECT: Management Consulting Services Agreement for the Utility
Expense and Cost Analysis Study
FROM:
INTRODUCTION
The purpose of this memorandum is to seek City Council concurrence and
approval of the Management Consulting Services Agreement with Springsted,
Inc. for the Utility Expense and Cost Analysis Study.
BACKGROUND
The City of Dubuque franchise agreements with the gas and electric utilities
provides for a franchise fee of 2% of the gross receipts derived from the utility's
sale of its services to its customers in the city.
The Iowa supreme court in Kragnes v. City of Des Moines held that an Iowa city
has the authority to assess a franchise fee expressed as a percentage of the
gross receipts derived from the utility's sale of its services to the public, so long
as the charge is reasonably related to the reasonable costs of inspecting,
licensing, supervising, or otherwise regulating the activity that is being
franchised. The supreme court also said that, "In fixing upon the fee, it is proper
and reasonable to take into account, not the expense merely of direct regulation,
but all the incidental consequences that may be likely to subject the public to cost
in consequence of the business licensed. In some cases, the incidental
consequences are much the most important, and indeed, are what are principally
had in view when the fee is decided upon. . . And all reasonable intendments
must favor the fairness and justness of a fee thus fixed; it will not be held
excessive unless it is manifestly something more than a fee or regulation."
The City issued an RFP to qualified professional consulting firms to conduct the
Utility Expense and Cost Analysis (Analysis) for the City of Dubuque to determine
whether the City's utility franchise fees are consistent with the Kragnes decision.
DISCUSSION
On July 17, 2006, the City Council approved the selection and the
commencement of contract negotiations with Springsted, Inc. of St. Paul,
Minnesota, to conduct the Utility Expense and Cost Analysis Study (Analysis).
The Analysis will:
Identify the City's administrative expenses in exercising its police power in
regulating the utilities as well as all incidental consequences that may be
likely to subject the public to cost in consequence of the business licensed.
Account for negative disruptions of economic and transportation activities, as
well as any adverse environmental impact of public right-of-way work zones.
The Analysis will include degradation, repair, disruption, and administrative
management activities such as planning, record-keeping, issuance of permits,
enforcement and inspections of right-of-way construction.
The Analysis will be completed in approximately ten weeks (mid-December,
2006), under the general direction and coordination of the City of Dubuque
Engineering Department.
RECOMMENDATION
I recommend that the Management Consulting Services Agreement for the Utility
Expense and Cost Analysis Study with Springsted, Inc. be submitted to City
Council for consideration and approval.
BUDGET IMPACT
The summary of the project costs is as follows:
Task I: Review Background Information and Collect Data
Task II: Develop Preliminary Fee Schedule
Task III: Present and Review Draft Report of Findings
Task IV: Prepare and Review Final Report
Microsoft Access Computer Model to Maintain Administrative
Costs on an Ongoing Basis .
Incidental Expenses (Travel, Special Mailing Deliveries,
Conference Calling, and Document Reproduction)
$28,520
32,375
1 0,420
6,520
2,500
5,000
Total Project Costs
$85.335
The funding will be derived from the Eagle Point Rock Bluff Stabilization Capital
Improvement Program, with a balance of the $289,000.
ACTION TO BE TAKEN
I request City Council to approve the Management Consulting Services
Agreement for the Utility Expense and Cost Analysis Study with Springsted, Inc.
and to authorize the City Manager to enter into the Agreement for the study.
Prepared by Steven Sampson Brown, Project Manager
cc: Barry Lindahl, City Attorney
Dawn Lang, Budget Director
Ken TeKippe, Finance Director
Don Vogt, Public Works Director
Steven Sampson Brown, Project Manager
,
.
RESOLUTION NO. 403-06
RESOLUTION APPROVING THE AGREEMENT FOR MANAGEMENT
CONSULTING SERVICES BETWEEN THE CITY OF DUBUQUE, IOWA, AND
SPRINGSTED, INC. FOR THE PUBLIC UTILITY EXPENSE AND COST
ANALYSIS STUDY
Whereas, the City of Dubuque is conducting an expense and cost analysis
to identify the City's administrative expenses in exercising its police power in
regulating the utilities as well as all incidental consequences that may be likely to
subject the public to cost in consequence of the business licensed; and
Whereas, Springsted, Inc. has prepared an agreement for management
consulting services outlining the terms of the Public Utility Expense and Cost
Analysis Study.
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF DUBUQUE, IOWA:
Section 1. That the City Council hereby approves the Springsted, Inc.
for the Public Utility Expense and Cost Analysis Study.
Section 2. That the City Manager be authorized and directed to execute
three copies of the said Management Consulting Services between the City of
Dubuque and Springsted, Inc for the Public Utility Expense and Cost Analysis
Study.
Passed, adopted and approved this 5th day of September, 2006.
Roy D. Buol, Mayor
Attest:
Jeanne F. Schneider, City Clerk
.
AGREEMENT
FOR MANAGEMENT CONSULTING SERVICES
BETWEEN
THE CITY OF DUBUQUE, IOWA
AND
SPRINGSTED INCORPORATED
THIS AGREEMENT is dated for reference purposes the day of , 2006, by and
between the City of Dubuque, Iowa, ("Client") and Springsted Incorporated ("Consultant").
WHEREAS, the Client wishes to retain the services of the Consultant on the terms and
conditions set forth herein, and the Consultant wishes to provide such services;
NOW, THEREFORE, the parties hereto agree as follows:
1. Services. Consultant shall provide management consultant services to the Client with
respect to a Public Utility Expense and Cost Analysis. The scope of services to be provided
is set forth in the Appendix A attached hereto.
2. Compensation. The Client shall compensate the Consultant at the rates set forth in
Appendix A attached hereto.
3. Term and Termination. This Agreement shall commence as of the date hereof, and shall
continue until terminated by either party by written notice given at least 10 days before the
effective date of such termination.
4. Indemnification; Sole Remedy. The Client and the Consultant each hereby agree to
indemnify and hold the other harmless from and against any and all losses, claims,
damages, expenses, including without limitation, reasonable attorney's fees, costs, liabilities,
demands and cause of action (collectively referred to herein as "Damages") which the other
may suffer or be subjected to as a consequence of any negligent act, error or omission of
the indemnifying party in connection with the performance or nonperformance of its
obligations hereunder, less any payment for Damages made to the indemnified party by a
third party. Whenever the Client or the Consultant becomes aware of a claim with respect to
which it may be entitled to indemnification hereunder, it shall promptly advise the other in
writing of the nature of the claim. If the claim arises from a claim made against the
indemnified party by a third party, the indemnifying party shall have the right, at its expense,
to contest any such claim, to assume the defense thereof, to employ legal counsel in
connection therewith, and to compromise or settle the same, provided that any compromise
or settlement by the indemnifying party of such claim shall be deemed an admission of
liability hereunder. The remedies set forth in this paragraph shall be the sole remedies
available to either party against the other in connection with any Damages suffered by it.
Sprinqsted
Page 1
5. Confidentialitv: Disclosure of Information.
5.1 Client Information. All information, files, records, memoranda and other data of the
Client which the Client provides to the Consultant or which the Consultant becomes
aware of in the performance of its duties hereunder ("Client Information") shall be
deemed by the parties to be the property of the Client. The Consultant may disclose
the Client Information to third parties in connection with the performance by it of its
duties hereunder.
5.2 Consultant Information. The Client acknowledges that in connection with the
performance by the Consultant of its duties hereunder, the Client may become aware
of internal files, records, memoranda and other data, including without limitation
computer programs of the Consultant ("Consultant Information"). The Client
acknowledges that all Consultant Information, except reports prepared by the
Consultant for the Client, is confidential and proprietary to the Consultant, and agrees
that the Client will not, directly or indirectly, disclose the same or any part thereof to
any person or entity except upon the express written consent of the Consultant.
6. Miscellaneous.
6.1 Deleoation of Duties. The Consultant shall not delegate its duties hereunder to any
third party without the express written consent of the Client.
6.2 No Third Partv Beneficiary. No third party shall have any rights or remedies under this
Agreement.
6.3 Entire Contract: Amendment. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof, and supersedes all prior
written or oral negotiations, understandings or agreements with respect hereto. This
Agreement may be amended in whole or in part by mutual consent of the parties, and
this Agreement shall not preclude the Client and the Consultant from entering into
separate agreements for other projects.
6.4 Governino Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Iowa.
6.5 Severabilitv. To the extent any provision of this Agreement shall be determined invalid
or unenforceable, the invalid or unenforceable portion shall be deleted from this
Agreement, and the validity and enforceability of the remainder shall be unaffected.
6.6 Notice. All notices required hereunder shall be in writing and shall be deemed to have
been given when delivered, transmitted by first class, registered or certified mail,
postage prepaid and addressed as follows:
If to the Client:
If to the Consultant, to:
Springsted Incorporated
380 Jackson Street
Suite 300
St. Paul, MN 55101-2887
Attention: Nick Dragisich
Spring
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Page 2
6.7 The Consultant shall at all times durinq the performance of this Aqreement provide
insurance as required bv the attached Insurance Schedule.
6.8 CHANGE IN SCOPE OF SERVICES. No change in the scope of services shall be
permitted without the prior written agreement of both parties.
The foregoing Agreement is hereby entered into on behalf of the respective parties by signature
of the following persons each of whom is duly authorized to bind the parties indicated.
FOR CLIENT
SPRINGSTED Incorporated
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Page 3
APPENDIX A OF AGREEMENT BETWEEN
City of Dubuque, Iowa
AND
Springsted Incorporated
Effective as of
~ Proposal to Provide Utility Expense and Cost Analysis - June 19, 2006 (attached)
~ Cost Proposal to Provide Utility Expense and Cost Analysis - June 19, 2006 Attached
with amendments as follows:
o Springsted will provide the City of Dubuque with a Microsoft@ Access based
computer model that will enable the City to maintain the administrative costs on
an on-going basis for an additional fee of $2,500.
o Out-of-pocket expenses for travel and sustenance will be billed at actual costs
not to exceed $5,000 for the services as proposed.
S ringsted
Page 4
This Appendix is acknowledged to be a part of the Agreement, effective as of the date shown
above, between the Client and the Consultant.
FOR CLIENT
SPRINGSTED Incorporated
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Page 5