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APPROVE FINDINGS AND AWARD A PROFESSIONAL SERVICES AGREEMENT TO HDR ENGINEERING, INC. TO DEVELOP A WATER RATE STUDY
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution to:
1. Approve findings pursuant to Stockton Municipal Code section 3.68.070 in support of an exception to the competitive bidding process.
2. Award a Professional Services Agreement to HDR Engineering, Inc. of Folsom, CA, in the not-to-exceed amount of $209,957 for the Municipal Utilities Department Water Rate Study.
It is also recommended that the City Manager be authorized to take appropriate and necessary actions to carry out the purpose and intent of this resolution.
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Summary
The Municipal Utilities Department (MUD) is comprised of three enterprise funds including Water, Wastewater and Stormwater Utilities. The Water Utility provides drinking water service to the northern and southern regions of the Stockton Metropolitan Area, with the California Water Service Company and San Joaquin County serving the central region. The Delta Water Treatment Plant (DWTP) began operation in May 2012, providing up to 30 million gallons per day of treated surface water from the San Joaquin Delta and Mokelumne River.
It is a best practice to review rates for water utility charges every five years to confirm that rates reflect changes in the cost of providing water service, and that the utility maintains adequate financial resources to provide an essential public health service to the community. The most recent water rate study was adopted by the City Council in 2021, and it is timely to perform another comprehensive rate study to determine adequate revenue for the next five years.
If approved, this action will retain HDR Engineering, Inc. to develop a new water rate study for the utility.
DISCUSSION
Background
The Water Utility treats and distributes high-quality drinking water that meets all State and Federal regulations to properties in north and south Stockton through an extensive water production system and distribution infrastructure. The objective of the Water Rate Study is to review the Water Utility costs related to administration, production, distribution, maintenance, and future capital improvement needs. The Study also considers the Water Utility debt service coverage, depreciation, and purchased water costs. Rate studies are necessary to maintain a sound fiscal base and provide a framework for responsible utility management. In addition, Water Utility activities are supported by ratepayers, and the rates charged to provide water services must reflect the cost of operating the utility.
Water rates are distinct from water service connection fees; the first funds the operating and capital needs of the Water Utility, while the latter funds the expansion of the water production and distribution system.
The comprehensive Water Rate Study must meet the requirements of California Constitution article XIII D, Section 6, commonly referred to as Proposition 218, and will evaluate whether a rate adjustment is necessary based on the most recent actual costs and future budget projections.
Present Situation
On April 3, 2025, the City issued a Request for Proposals (RFP) to conduct a Water Rate Study.
On May 1, 2025, the City received the following two proposals:
|
Company |
Location |
Cost |
|
Raftelis |
Charlotte, NC |
$117,435 |
|
HDR Engineering Inc. |
Folsom, CA |
$209,957 |
A committee comprised of MUD staff evaluated both proposals based on each firm’s understanding of the scope of work, project approach, relevant experience, team qualifications, and cost. HDR Engineering Inc. met or exceeded all requirements and was determined to be the most qualified firm. The firm is familiar with the City’s processes and procedures and will bring industry subject-matter experts in utility operations and management to conduct a water rate study.
The water rate study process and the proposed contract award to HDR Engineering, Inc. were reviewed and discussed by the Water Advisory Group (WAG) on July 3, 2025, and with the Council Water Committee (CWC) on July 10, 2025.
Staff recommend that the City Council adopt a resolution to award a Professional Services Agreement to HDR Engineering, Inc. for $209,957 to conduct a comprehensive Water Rate Study (Exhibit 1 to the resolution).
Findings
Pursuant to the Stockton Municipal Code section 3.68.070, the City Council may approve findings which support and justify an exception to the competitive bidding process.
The following findings support and justify an exception:
1. Water Utility activities are supported by ratepayers, and the rates must reflect the cost of operating the utility.
2. State statute and Proposition 218 define requirements for conducting rate studies, including the amount of the fee or charge proposed for each parcel, and how the amount is calculated.
3. The City does not have the technical expertise to prepare the study in a timely and cost-effective manner for completion in 2026.
4. Use of the RFP process is appropriate for this Professional Services Agreement because it relies on the evaluation of professional qualifications and performance as the basis for selection of a vendor. Use of these criteria helps ensure selection of a vendor that will provide the highest quality professional service, which is in the public interest.
5. It is also in the public interest to have well established rates to ensure proper funding for the operation of the water utility and that ratepayers are paying appropriate rates for the service provided.
The recommended resolution will award a Professional Services Agreement to HDR Engineering, Inc., in the not-to-exceed amount of $209,957, to conduct a comprehensive Water Rate Study.
FINANCIAL SUMMARY
There are sufficient funds in the Water Administration professional services account (6511-504-630006-600-000-00-65-000-000) to award this contract for $209,957.
This action has no impact on the General Fund or any other unrestricted funds.