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Crowe Hocwath. Mr. Steven Bocian Page 8 December 23, 2013 The data used by RRRS is dated(2006),cannot be validated, and is from a limited population of two vendors There likely is no real market-based hourly rate for the services provided.' Even though we do not agree with the approach used to set these hauling charges, absent another definitive approach (or identifiable rate setting method),we attempted to assess the reasonableness of these charges to City ratepayers using the comparable hourly rate method.As an example, independent analysis indicates that the$145 per hour figure is above the"market rate"for hauling service. In its August 2011 report titled Operational/Efficiency Assessment of Pleasanton Garbage Service, SloanVazquez, LLC, indicates"third party haulers will charge in the range of$100 per hour for transportation to the landfill." Our own survey of hauling rates supports SloanVazquez's conclusion.Table 7 shows rates charged by ten(10)California hauling companies for an assignment similar to that required by PGS.The average rate for these ten (10)companies was$110.82 per hour.These prices also are likely to include a profit component,which suggests that these vendors' actual cost of service is lower than the quoted prices would indicate. Taking into account the average hourly rate shown in Table 7,we conservatively used a$125 per hour rate to calculate hauling costs.This is$10 per hour higher than the prior year 2012 treatment for this item. Our preference for this hauling cost item would be for RRRS to allocate PGS a reasonable portion of its costs to the City for hauling the City's refuse and wood waste.To assess how this approach might impact. the rate,we requested copies of RRRS financial statements.We were provided limited visual access to an unaudited CY 2012 RRRS income statement. From this limited observation, we determined that were we to remove profit amounts from the PGS portion of RRRS's business(amounts in excess of the return on equity the City already provides PGS under this franchise),we would make an adjustment that would well exceed the magnitude of the one we made to this category using the comparable rate approach noted above. Table 7 Third Party Hauling Company Hourly Rates (2012) Company Location of Service Hourly Rate 1.Tiger Lines Bay Area $135.00 2.Santoro'Transportation Inc. (prevailing wage) Oakland 125.00 3. RCS Trucking(prevailing wage) Bay Area 125.00 4. Dillard Trucking, Inc. (Teamster's wage,fuel surcharge) Byron 114.45 5. R&A Trucking Company Oakland 105.00 6. GCU Trucking Oakdale 105.00 7. D&S Trucking(union wages) Castro Valley 102.50 8. Chavarin T rucking Fairfield 101.80 9. Economy Trucking Services Union City 97.85 10. C.J.C.Trucking Co. Discovery Bay/Byron 96.60 Average (10 Companies) $110.82 We make this observation for a number of potential reasons such as(1)RRRS realizes economies of scale due to the ongoing nature of the service provided(that likely would not be available to a third party),(2)RRRS trucks are housed at the same physical location as PGS,(3)RRRS vehicles and equipment may be in use that already have effectively been fully rate-funded by City ratepayers(i.e.,fully depreciated).