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Crowe Horwath. Mr. Steven Bocian Page 11 December 23, 2013 $109,885 for additional carts and containers a $133,328 in other additions. We found the first four(4)of these additions reasonable and supported, but did not find sufficient justification for the$1.33,328 figure.We removed the$133,328 figure from depreciation, resulting in an adjusted increase to PGS capital assets of$376,572.We allowed depreciation of the$376,572 in new capital assets in accordance with PGS depreciation methods. Impact(s): Decrease in depreciation costs by$10,714 for CY 2013 and$21,428 for CY 2014. Repairs&Maintenance PGS projected 2013 repair and maintenance expenses by doubling the actual first three months of data from 2013 for the first half of the year,and then applying the 3.00 percent 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 project the CY 2014 expense. Pleasanton Truck&Equipment(PT&E)provides repair and maintenance services to PGS. PT&E is a related party to PGS,with the same ownership structure as PGS. PT&E charges PGS for repair and maintenance labor on an hourly rate basis. PT&E also charges PGS for parts. PT&E is an authorized Heil distributor, and provides a range of repair and maintenance services to other garbage companies in the area. For its FY 2013, PT&E charged PGS$115 per hour for repair and maintenance labor. PT&E based the $115 per hour repair and maintenance charge on a comparable hourly rate that PT&E believes would be charged by a third party for similar repair and maintenance services.The calculation of this$115 per hour hauling charge is shown in Table 8 below. Table 8 Pleasanton Truck&Equipment Calculation of Related Party Labor Rate Charged to PGS for Vehicle and Equipment Repair and Maintenances (Fiscal Year Beginning July 1,2013) Company Hourly Rate 1. Tech Equipment TEC(Oakland) $143.00 2. Bay Cities Diesel Engine Rebuilders, Inc. $123.00 (San Jose) 3. Mission Valley Ford(Santa Clara) $130.00 4. Coast Counties Truck(Hayward) $137.95 Average $133.49 Discount 15% Average $115.00 We have concerns with the use of this comparable rate methodology used to set the repair and maintenance labor costs paid by City ratepayers, including: 0 There is a material profit component in PT&E related-party charges which we have been unable to precisely determine with the information provided by PGS.This return is in addition to the return on equity provided to PGS in accordance with the franchise agreement