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Crowe Horwath.
<br /> Mr. Steven Bocian Page 4
<br /> December 23, 2013
<br /> PGS Requested Rate Increase,January 1,2014
<br /> On August 5, 2013, PGS submitted its 2014 rate application which is the subject of this report. PGS
<br /> requested a 12.15 percent rate increase effective January 1,2014.With this submission, PGS included a
<br /> Schedule of Actual, Estimated and Projected Franchise Revenue and Expenses for Rate Setting
<br /> Purposes for the Three Years Ended December 31, 2012,2013, and 2014(dated July 31,2013).
<br /> On August 16,2013, PGS submitted audited financial statements for PGS for fiscal year ended March 31,
<br /> 2013 and for City Automatic Recycling, Inc. (CART)for calendar year ended December 21,2012. The
<br /> accounting firm of Bong, Hillberg, Lewis,and Fischesser, LLP(Walnut Creek)completed these financial
<br /> audits.
<br /> In Table 4 below,we show the projected deficits, and recovery periods for these deficits, requested by
<br /> PGS in its 2014 rate application. PGS projects a cumulative deficit of$6.11 million as of December 31,
<br /> 2014. Based on the recovery periods identified for each deficit amount, PGS requests a 12.15 percent
<br /> rate increase effective January 1, 2014.
<br /> Table 4
<br /> Pleasanton Garbage Service
<br /> Projected Deficits and Rate Increase
<br /> (Calendar Year 2014 Rate Application)
<br /> Projected Effective
<br /> Recovery Rate
<br /> Period Deficit Amount Period Increase_ _
<br /> As of 12/31/12, cumulative 5.5 years 2,06%
<br /> As of 12/31/13, estimated 1,570,367 5.5 years 1.27%
<br /> As of 12/31/14, projected 1,987,518 1.0 year 8.82%_
<br /> Total (Combined) $6,108,855 12.15%._
<br /> 3.Scope of Review
<br /> Our scope of services included the following seven (7)tasks;
<br /> 1. Review financial audits and financial material submitted by PGS
<br /> 2. Provide assistance regarding rates structures and adjustment amounts
<br /> 3. Attend meeting(as requested by City)
<br /> 4. Review the current rate structure for consistency with services delivered
<br /> 5. Survey rates in similar service areas
<br /> 6. Prepare report
<br /> 7. Participate in City Council preparation and meeting.
<br /> The City entered into a contract with Crowe on September 17,2013 to provide these services. Crowe did
<br /> not perform a financial audit, but relied on financial audits conducted by PGS's extemal auditor.
<br /> We submitted detailed data requests to PGS on September 19,2013, October 23, 2013, and November
<br /> 7,2013. PGS, and its internal auditor Walt Lupeika,CPA,was cooperative and provided timely responses
<br /> to our data requests. In most cases, PGS furnished the information we requested.
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