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applies to the ROE and all allowable expenses that have been included in previous rate reviews. 4. Amend the current 50% rate payers /50% company formula for sharing the revenue generated from the sale of recyclable materials. In 2009 the City approved a refuse collection rate adjustment to transition from a comingled recycling program to a single stream residential recycling program. Prior to this time, PGS operated a "dirty" material recovery system. To facilitate the single stream recycling program, the rate adjustment included revenue to replace the "dirty material recovery system/belt" designed to facilitate the removal of recyclable material from refuse with one designed to sort recyclable material. At the time, the City indicated that the 50% profit incentive included in Section 18.2 Collection Rates and Billing warranted adjustment due to its inconsistency with Section 26.1(a) of the Refuse Collection Agreement that states in part "Operate a recycling program which will remove and prepare for sale recyclable material from refuse..." and Section 26.1(b) that states, in part "...establish a "picking station" at its Busch Road Transfer Station for the purpose of facilitating the removal of recyclable material..." . The current program is designed to sort recyclable material. The City has expressed its interest to renegotiate the 50/50 split on recycling revenue but PGS has not responded to the City's requests. 5. Explore the potential for a short term extension to the existing franchise agreement. The current franchise agreement expires June 30, 2019. While staff anticipates that some of the above issues may be resolved through mutual negotiation or legal review, others may require incentives for PGS to agree to franchise modification. Therefore, staff will explore the potential of a short term extension to the franchise. Notwithstanding the outcome of franchise extension discussions, staff intends to seek resolution to the other four issues. 6. Explore the current commercial rate structure to assure that it is reflective of the requirements set forth in Stopwaste.org's mandatory commercial recycling ordinance. At its meeting of October 16, the City Council adopted a resolution "opting in" to the Stopwaste.org's mandatory commercial recycling ordinance. Currently, the PGS rate structure is not fully reflective of a rate and service structure that provides clear service options for businesses that are required to recycle. Staff will work with PGS to amend rate categories to address this matter. In early 2013, the Council will be asked to appoint new members to the Council Refuse and Recycling Subcommittee to proceed with the review of the franchise issues included in this report. Page 4 of 6