RFP #07-135
Utilities Financial Modeling
Issue Date: August 21, 2007
Due Date: September 10, 2007 @ 4:00 pm
Addendum #1: Questions & Answers
Issued: 8/29/07
1. What is the status of the City’s existing forecasting models? (i.e. file format, age,
features, etc.) Who developed them?
The City’s existing forecasting models were developed many years ago, ported to
Microsoft Excel in the late 1990s, and “redesigned” (enhanced) most recently in 2004.
The models were developed by Financial Consulting Services Group. Key features
include:

For each fund, there are two separate but linked models: a capital investment (CI)
and a revenue requirements (RM) model.

The CI model provides for a base analysis plus up to 9 user-definable scenarios
(each of which allows the user to select from a limited number of assumptions to
change).

The CI model includes planned short-term (7-year) construction projects plus longterm (75-year) infrastructure replacements, which are projected using replacement
curves for pipe assets and replacement schedules for non-pipe assets. The main
output is the level of annual contributions from rates required to fund capital
improvements over the long term.

The RM model allows users to: project revenues and expenses using various
escalation rates, determine revenue requirements using cash flow and coverage
requirement bases, and estimate required rate increases and resulting service
revenues. The model generates summary-level income and cash flow statements,
and provides limited capability to “levelize” (smooth) rate increases.
Please note that the City is not necessarily looking to duplicate any or all of these
features.
For further information, please see the response to Question #6, below.
2. What is the timeline for this project?
Targeted completion is the end of 2008.
3. Is it fair to say that the City is more interested in a financial planning model and not a
cost of service rate model? Is the City interested in accomplishing any particular rate
design objectives with the rate models, or primarily financial forecasting?
The focus of this project is to develop new financial planning/forecasting tools. At this
time, the City is not looking for a cost of service/rate design model. Nonetheless, the
City’s overarching rate design objectives as they relate to the forecasting models include
revenue adequacy, rate and revenue stability, and long-term intergenerational equity (in
particular, relating to the recovery of infrastructure replacement costs).
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4. In Attachment “A,” reference is made to “potential for integration with other Bellevue
Utilities models.” What other models might be involved?
The City has a number of other tools for cost of service, budget development, budget
monitoring, wholesale cost estimating, costing for capital projects, minor asset
replacements, customer information database, etc., that provide inputs to or utilize the
results of the financial models. To the extent that the new financial models can be
developed to facilitate access to this information without significantly adding to size,
complexity, or cost would be desirable.
5. What is the City’s budget for this project?
For planning purposes, we have estimated $80,000. However, we recognize that the
actual budget could be higher or lower depending on the complexity and capabilities of
the final work products.
6. Can the City provide the existing models for review during preparation of the RFP?
This would help to see what is available now and how that can be enhanced.
The City is unable to provide copies of the existing models to potential responders.
However, we have posted copies of key output reports on the City’s web site (please go
to www.bellevuewa.gov, select “Find”, “Bid Information”, and “Request for Proposals”).
These reports should provide insights into the contents, format, and capability of the
existing models. In addition, we have included flow charts showing a high-level summary
of the processes involved in the existing capital investment and revenue requirements
models.
7. In Attachment A of the RFP , item #5 in Phase I of the scope of services indicates that
after the process of developing the general rate model structure, format and
capabilities for the water model, a scope for Phase II would be developed. For the
purpose of providing a cost estimate for the proposal, is the City interested in an
estimate for Phase II that would be evaluated and possibly revised as part of item #5 of
Phase I, based on the results of the previous tasks? Or, are you looking initially for
cost estimates for Phase I only?
Since the goal of Phase I is to scope the models for development in Phase II, the budget
for Phase II will depend on the results of Phase I. Therefore, the contract will initially be
established using the Phase I budget. However, for planning purposes and to determine
the approximate level of effort envisioned by the consultants, we request a rough
estimate of Phase II costs as well, with the expectation that we will negotiate and contract
for Phase II services at the conclusion of Phase I.
8. How many copies of the proposal would you like?
One original and four copies, please.
9. Please describe what you would consider a successful outcome of this project.
The overall goal of this project is to enhance Bellevue Utilities’ financial forecasting
capabilities by improving the functionality, flexibility, and usability of its forecasting tools.
The desired outcome, therefore, is for Bellevue Utilities to have the tools to effectively
respond to a fairly wide range of needs and knowledge of how to use these tools. These
needs include forecasting of infrastructure replacement costs and related funding needs;
forecasting revenues, expenses, and reserve balances; determining rate increases
needed to finance current operations; evaluating impacts of new projects and alternative
financing mechanisms; and responding to “what if?” types of requests.
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10. What improvements to the City's existing financial forecasting models are desired?
A list of improvements to the existing financial models is one of the primary objectives of
Phase I of this study, so it’s not possible to create a list at this time. However, in general,
a major complaint about the existing models is that they are somewhat cumbersome and
not "nimble" enough to allow quick response to some of the questions we are asked to
answer (for example, "What are the key factors contributing to the need for rate increases
in 200X?" or "What would be the effect of limiting contributions to replacement reserves
to $X million per year?"). Therefore, increased flexibility is probably the most critical
need.
11. Please identify whether Phase 2 includes any presentation of results to utility
management and/or elected officials.
We don't anticipate the need for any formal presentations as part of Phase II of this
study. A presentation of the proposed approach to model development to senior
management (as part of Phase I) is possible.
12. Please identify the selection committee for this project.
This has not yet been determined, but will likely include representatives from key
stakeholders, such as Utilities Finance, Engineering, and Operations & Maintenance.
13. Will the City be conducting interviews to select a consultant?
Our expectation is that the top firm will be asked to attend an informal interview to finalize
the scope and budget for the project. In order to minimize consultant costs, no formal
presentation will be required. Multiple firms will not be asked to attend interviews unless
the ranking is too close to call. However, even in such an event, formal presentations will
not be required.
14. Within the past five years, please identify any consultants the City has hired to
complete utility financial modeling, utility rate studies, or related work.
Over that period, Bellevue Utilities has used Financial Consulting Solutions Group to
enhance the existing financial tools, perform cost of service and rate studies for the
Water and Sewer utilities, and advise on miscellaneous financial issues. However, this
does not give FCSG or any other firm preference for this or any future project. No firm is
"wired" for this work.
15. Prior to the issuance of this RFP, please identify any consultants the City has met with
to discuss this RFP.
Prior to – and subsequent to – the issuance of this RFP, the City has not met with any
consultant to discuss the RFP.
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