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Crowe Horwath. Mr. Steven Bocian Page 9 December 23, 2013 Impact(s): Decrease in refuse and wood hauling costs by$41,102 in CY 2013 and$45,871 in CY 2014. Grinding Wood and Green Waste PGS projected CY 2013 grinding expenses by applying the 3.00 percent CPI index to the CY 2012 expense. Costs for CY 2014 were projected by applying the 3.00 percent CPI index to the CY 2013 estimate. Like the hauling operations described above,the related party RRRS charges PGS for grinding. RRRS charges PGS a rate of$16.71 per ton to grind the City's greenwaste and wood waste. This activity is performed by RRRS onsite at the Pleasanton Transfer Station.We requested, but were not provided,the actual costs of this grinding operation. We believe charging PGS$16.71 likely overstates the actual costs of the on-site grinding(and includes a profit component to RRRS).8 To assess the reasonableness of this cost,we estimated the grinding cost based on our understanding of the operation(Table 7). Absent further documentation supporting the $16.71 per ton cost, we recommend the City allow the cost as provided in Table 7 within the PGS rate base. Table 7 Recycling&Resource Recovery Systems LLC Estimate Grinding Related Costs For Greenwaste and Woodwaste Description of Cost Annual Cost Peterson 6700 Hog Grinder(full-time use) $50,0009 Loader(full-time use) 41,66710 Wages and Benefits(1 Spotter, 1 Loader Operator) 112,250 Fuel 25,988 O&M and Other Costs 18,000 Total Annual Operating Costs $247,904__ Total Tons of Greenwaste and Woodwaste 23,100 Cost per Ton $10.73 Impact(s): Is Decrease in grinding costs by$232,481 in CY 2013 and $240,546 in CY 2014. Hauling and Dumping Green Waste PGS projected CY 2013 green waste hauling expenses by doubling the actual first three months of data for the first half of the year and applying the CPI index to this figure for the second half of the year PGS applied a 3.00 percent CPI index to the CY 2013 projection to estimate the CY 2014 expense. 8 The$16.71 per ton figure does not include an additional$5.55 per ton charged by RRRS to PGS for hauling wood from the plant to the grinder. 9 Equal to an estimated purchase price of$500,000 depreciated over a 10 year useful life($500,000/10 years=$50,000). 10 Equal to an estimated purchase price of$250,000 depreciated over a 6 year useful life($250,000/6 years=$41,667).