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$23,922,677. PGS is projecting expenses at $24,822,400. The Crowe report is included as Attachment 3. The information below outlines some of the primary areas that result in the 2014 increase: • Union and non-union labor adjustments, including benefits, and the cost of additional personnel for the mandatory commercial recycling program. • Overall inflationary increases of approximately 2.56% • Overall, projected revenue is inadequate to meet operating expenses • Increased dump and hauling costs Crowe's report (Attachment 3/ page 19) also includes a survey of service rates in other municipalities reflecting that Pleasanton remains 44% below the average for 96-gallon residential service (which is the most common service provided) but 19% above the average for the 32-gallon residential rate. As part of the franchise discussions discussed below, staff has expressed an interest in reviewing the current rate structure to determine if the 32-gallon service rate is appropriate. However, adjustments to this rate will undoubtedly result in increases in other categories, including the 96-gallon container service, which must be studied thoroughly since this is the most common service type. The 32-gallon rate was last lowered in 2009 as part of the City's curbside residential recycling program. Note that the rate adjustment does not include an increase in either the City's franchise fee and does not reflect the Stopwaste.org/Alameda County Waste Management Authority Benchmark Information Service Fee which is added to each bill separately in an amount ranging from $1.81 to $21.72 per year for all Alameda County refuse customers. This charge went into effect July 1, 2013. A detailed impact of the 7.80% rate increase is included in Attachment 2 and the table below lists the increase for most common services: Recommended Monthly Service Rates Effective January 1, 2013 Service Type Current Rate Rate Increase New Rate 35-Gallon Service $30.59 $2.39 $32..98 35-Gallon Senior Rate $26.00 $2.03 $28.03 96-Gallon Service $36.30 $2.83 $39.13 Cubic Yard - Commercial $27.15 $2.12 $29.27 The complete rate schedule is included as part of Attachment 1. Franchise Discussions As indicated, when the City Council approved new collection rates in November 2012, it authorized discussions with PGS regarding amendments to the existing Franchise including such matters as modifications to the rate setting process, PGS's obligations regarding conducting operations consistent with approved rates, deficit recovery, service levels, rate structure, PGS's relationship with its related parties, and potentially a short term extension to the Franchise's term. In response to that direction, staff and PGS met on a number of occasions but an agreement was not reached. After reviewing PGS's position on a number of Page 3 of 4