Comprehensive Performance Assessment and Cost of Service Study “If You Don't Know Where You're Going, You'll End Up Somewhere Else”

The City of Goodyear, Arizona, is conducting a comprehensive performance assessment and cost of service study for the City's Water Resources Department. This study was a team effort between the City's Finance Department, Water Resources Department, and Red Oak Consulting. It identified the Water Resources Department's true cost of service and the steps necessary to achieve their stated goal “to improve effectiveness and efficiency at all levels, and become self-sustaining through its rates and other local charges.”In 2004 the City created the Water Resources Department (Department), including both water and wastewater utilities. The Department serves a population of 40,000 people, with a water production capacity of 13 million gallons per day. To accommodate this fast-growing community, the City desired a road map towards improved performance, focusing on more efficient management of assets and processes, and improved customer service. The project consisted of three major phases:Phase I: Define Department Business ObjectivesPhase II: Assess Department Operational PerformancePhase III: Prepare Financial Plan and Cost of Service AnalysisFollowing a series of external and internal interviews, workshops, and technical evaluations, The project team provided technical and operational recommendations for short-term and long-term improvement, as well as a 90-day tactical plan that identified “quick wins” to immediately improve efficiency and generate momentum for change. Each technical recommendation was translated into a cost-savings metric (i.e., cost savings per 1,000 gallons delivered) and compared against a financial and operational status-quo scenario. In addition, The project team prepared activity-based costs for Department's various sources of water supply, which provided the basis for comparisons between alternative operational strategies and long-range water supplies.A detailed cost of service analysis will provide the City with accurate cost data reflecting its true cost of services and opportunities for improvement. This information will be essential when assessing long-range water supply and capital investment alternatives, forecasting future operations and maintenance expenses, negotiating wholesale or retail water contracts, adjusting future retail water and wastewater rates, and making meaningful comparisons with other utilities.Rather than start with a rate study and end with a likely “request for more money,” the City conducted this internal assessment to ensure that the Department was maximizing its resources, operating as efficiently as possible, and providing the best value to its citizens. After completing this critical internal review, the senior Water and Finance Department Staff will be prepared to bring their financial plan and rate study recommendations to City Management, Elected Officials, and Utility Customers.