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1 <br /> • Navy will still pay ordinance rates at the gate for water and wastewater, therefore <br /> does not lessen the system costs for other ratepayers and citizens. <br /> • Navy will pay the incremental cost of operating and maintaining these utilities for <br /> NSE. Our incremental costs include added staff(3.5 1-.1"Es), supplies, overhead, and <br /> vehicles. <br /> • City is not allowed a profit, however the added staffing and vehicles will be more that <br /> sufficient to operate the base's utilities with some added time to spend throughout <br /> our system—thus add to our overall system operations and maintenance. <br /> • The proposal includes costs to upgrade their system to City standards at a firm fixed <br /> price (essentially lump sum). Our cost proposal includes all costs and overhead to do <br /> so and also allows the city to re-coop our proposal development costs. <br /> • The term offered is for the minimum the Navy will allow — 20 years. This term was <br /> proposed because it should lower the Utility Dept.'s risk of costing future <br /> replacements and repairs. Essentially it keeps the term shorter than the life cycle <br /> replacement of most of the base's infrastructure (NSE utilities were installed in the <br /> late 80 and early 90s. The contract will end in 2025 —or after approximately 40 years <br /> of life. Most of their utilities should have at least 50 year service life or longer). <br /> • Contract terms allow contract changes and also the ability to have price `re- <br /> determinations" after the initial 2 years and every 5 years thereafter. Thus we can <br /> track costs and are allowed to modify costs should the need arise. <br /> S:\MSadlet\WORDWavyUinai docs‘navy memo 050205.doc 2 5/2/2005 <br /> 59 <br />