2016-188-E Solid Waste - SCS Engineers, PC for preparation of Solid Waste Financial Plan

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DocuSign Envelope ID:8A735669-3D2F-468A-BF99-3DF97688146A Proposal for Preparation of a Solid Waste Financial Plan The process of allocating the revenue requirement is simply a matter of seeking to identify the cause and effect relationship between various types of cost, and the activities and use of resources that cause those costs to be incurred. Those activities and use of resources that cause cost to be incurred are cost drivers. For example, the waste quantities collected is the cost driver for disposal expense. Direct costs are those types of cost which can be obviously and directly associated with a particular type of service. Facility wages and disposal expenses are examples of direct costs because they can often be attributable to a particular type of service. For example, the wages paid to operators of these facilities can be readily assigned to those customers. The disposal expense incurred when those waste quantities are sent to their ultimate disposal point can also be readily assigned to customers. However, this cause and effect relationship is not always obvious for all types of cost. Indirect costs are those types of costs that are shared among different types of operations and are not readily linked to a particular type of service. Examples of indirect costs include overhead such as building rents, utilities, management salaries, and allocation of cost from other departments. The process of allocating the revenue requirements by SCS is typically a two-step process. First, we assign direct costs to each customer sector based on the appropriate cost driver for each type of cost. Second, the remaining indirect costs are assigned to each customer sector based on each sector's proportionate amount of direct costs. For each customer sector, the combination of direct and indirect costs comprises the revenue requirement. Once the preceding steps are completed, SCS will finalize the Pro Forma Model. SCS will then work with the Department to utilize the Pro Forma Model,which will be constructed specifically for this project, to construct a series of sensitivity analyses to evaluate the fund balance implications of various critical parameters such as changes to the consumer price index (CPI), fuel costs, changes in State laws, changes in population, cash versus debt financing, and alternative levels of services at the Department facilities, etc. Exhibit 5 presents examples of alternative scenario outputs from completed SCS assignments. Exhibit 5. Examples of Types of Scenario Outputs From SCS Assignments COMPARISON OF ENDING FUND BALANCES WITH RATE SCENARIOS W $6,000,000 Z $4,000,000 No Rate change Q $2,000,000 CPI Adjustment Z $0 _ 10.4%Annual Adjustment+Cash Vehicle U_ FY2T" w° X12009 f Y2010 FY2011 Financing Z -10.4%Annual Adjustment+Loan Vehicle G ($4,000,000) Financing Z W ($6,000,000) FISCAL YEAR 10