3 - Laserfiche WebLink

The City believes it has the right to perform a detailed and objective review of PGS' rate application (including all revenues and costs), make reasonable adjustments to PGS' application, and that PGS should incorporate these adjustments into its future budgets and operations. PGS agrees that the City has the right to review certain financial information but does not agree with the adjustments presented by the City. Further, there has not been agreement regarding relationship between the City's rate setting process and its impact on PGS operations and the impact of any accumulated deficit that may occur if expenses exceed revenue (e.g., if PGS presents expenses in excess of prior projected expenses). 2. As part of the City's collection rate review, allow examination of the financial records of PGS related party companies that have transactions with PGS. The examination would be conducted under a confidentially agreement. The related parties currently may include, Pleasanton Truck and Equipment Repair, Inc., Valley Tire Services, Inc., Recycling Resource Recovery (RRR), A-1 Enterprises and others that provide service to PGS. In accordance with Section 18 Collection Rates and Billing, of the Refuse Collection Agreement sets for the process for setting refuse rates. Section 18.2(i) states, in part, "Collector and the City Manager shall determine whether a rate increase should be recommended. The amount of the rate increase submitted to the City Council should take into consideration previous costs and rate experience of the Collector and project expense in the incentive program in this Paragraph 18.2." Based on staff review, this language provides that the City has the authority to fully examine PGS expenses. However, because PGS has not allowed access to the financial records of its related party companies, which represent a considerable portion of its expenses, the City's examination is incomplete. PGS maintains that the City's review of related party companies is limited to the billings and amounts charged to determine if the billed amounts are fair, and that only PGS and CART are subject to full financial audits. (Note: CART provides Busch Road Transfer Station Recycling services.) 3. Develop agreement concerning the applicability of the use of "balancing accounts" and agree to replacement of the return on equity (ROE) and the "balancing accounts" with a "cost plus profit"or other similar model. Exhibit A to the Refuse Collection Agreement which includes information related to determining ROE, states, in part "When resulting annual ROE is less than the minimum ROE limitation , the deficiency in revenues shall be recoverable from future timely rate increases and/or reserves (if any) set up to defray future rate increases." Based on City staff review, the City believes that this language is limited to ROE limitations (8%) and does not require the City to set collection rates or make financial payment to PGS so that all PGS audited expenses are fully covered. The City seeks replacement of the ROE and related "balancing account" language with a "cost plus profit" or other model. PGS has expressed its willingness to consider alternative rate-setting formulas for future rate period but believes the balancing account Page 3 of 6