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A Crowe Horvvath. Mr. Steven Bocian Page 12 December 23, 2013 This hourly rate has no relation to PT&E's actual cost of providing the service to PGS Ti There likely is no equivalent market-based rate for the services provided for various reasons (e.g.,the repair and maintenance shop is co-located at the PGS facility) Other survey data do not support the hourly rate. Even though we do not agree with the approach used to set these PT&E labor 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. We provide a limited sample of four hourly rate pricing quotes in Table 9.The average rate for four service providers was$103.50 per hour. These prices are likely to include a profit component,which suggests that these vendors'actual cost of service is lower than the quoted prices would indicate. We used a$103.50 per hour rate for CY 2013 to calculate repair and maintenance labor costs.We escalated this rate by the 2.56 percent CPI to project CY 2014 repair and maintenance labor costs. Our preference for this repair and maintenance cost item would be for PT&E to allocate PGS a reasonable portion of its costs to the City for repair and maintenance of PGS's vehicles and equipment. To assess how this approach might impact the rate, we requested copies of PT&E financial statements. We were provided limited visual access to an unaudited CY 2012 PT&E income statement. From this limited observation,we determined that were we to remove profit amounts from the PGS portion of PT&E's business(amounts in excess of the return on equity the City already provides PGS),we would make an adjustment that would be relatively similar in magnitude to the one we made to this category using the comparable rate approach noted above. Another point of reference for our contention that City costs for repair and maintenance may be too high is that PGS truck maintenance costs appear to exceed industry averages. In its August 2011 report titled Operational/Efficiency Assessment of Pleasanton Garbage Service, SloanVazquez, LLC, indicated(1)the average annual cost to maintain automated side loaders exceeded industry standard, (2)the average maintenance costs for front loaders slightly exceeded industry standard, and (3)the average maintenance costs for roll-off vehicles exceeded the industry standard.„12 Table 9 Third-Party Repair and Maintenance Hourly Rates (2012) Company Location of Service Hourly Rate 1. Steven's Bay Area Diesel Service South San Francisco $110.00 2. Kelly's Truck Repair San Leandro 105.00 3.JJJR's Trucking Repair and Maintenance Hayward 105.00 4. Berini's Trucking Repair San Leandro 94.00 Average (4 Companies) $10340_ Impact(s): Decrease in repair and maintenance costs by$150,846 in CY 2013 and$167,757 in CY 2014. 12 Some of the difference between PGS's truck repair and maintenance costs and industry average repair and maintenance costs may be due to the fact that some PGS trucks are nearing the end of their useful life.