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Crowe Hawaii. Mr. Steven Bocian Page 15 December 23, 2013 Impact(s): Decrease in landfill maintenance and closure costs by$599 in CY 2013 and$1,232 in CY 2014. Recycling Subsidy—CARI PGS projected 2013 materials sales revenue by annualizing the actual first three months of data for CY 2013. PGS projected 2013 diversion and handling revenue, and operating expenses, by doubling the actual first three months of data for the first half of CY 2013 and applying the estimated 3.00 percent annual CPI increase for the second half of CY 2013. PGS projected CY 2014 diversion and handling revenue,and operating expenses, by applying the CPI index to the prior year estimate,with an exception for material sales which are expected to stay constant. We adjusted PGS' CY 2014 expenses by applying our adjusted CPI index to 2013 estimates. Impact(s): Decrease in recycling subsidy expenses by$26,384 in CY 2014. Regulatory Costs PGS'CY 2013 regulatory cost estimate is equal to a 1.50 percent increase to the CY 2012 actual, and its CY 2014 cost projection is equal to a 3.00 percent increase on its CY 2013 estimate. We calculated 2013 and 2014 costs by multiplying expected tonnage volumes and tips by expected regulatory rates.We assume that in both CY 2013 and CY 2014, tonnages and tips will be 69,812 and 3,493, respectively based on our adjustments noted in the Dump/Tip/Diversion section above.We assume a dumping rate of$29.87($38.87-$9.00)in CY 2013 and $30.87($39.87 $9.00)in CY 2014. We assume a tip fee of$16.00($25.00-$9.00) in CY 2013 and$16.64($25.64-$9.00)in CY 2014. Impact(s): Decrease in regulatory costs by$19,486 in CY 2013 and$12,259 in CY 2014. City Franchise Fee PGS estimates franchise fees of$450,451 in CY 2013 and $490,201 in CY 2014. Revenues are expected to stay constant at$22,522,544 over these two years. We also project a slight adjustment to revenues in CY 2013 and CY 2014, and we do not expect:an increase in the City's two(2,00)percent fee on collected revenue. Due to various changes in the revenue requirement(noted throughout the report),we adjusted franchise fees so that they represent two(2.00) percent of the total revenue requirement(see Attachment B). Impact(s): Increase in franchise fee expenses of$22,932 in CY 2013 and decrease in franchise fees by $11,743 for CY 2014. Return on Equity Exhibit A of the franchise agreement provides the following guidance on the return on equity: