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Mr. Steven Bocian, Assistant City Manager Page 2 <br /> August 7, 2014 <br /> Road). At that time, the City extended the franchise term with PGS to June 30, 2019. <br /> This leaves approximately six (6) years remaining on the franchise. <br /> The franchise grants the City Council the authority to set service rates for refuse and <br /> recycling services. The City has a City Council Waste Management Subcommittee, <br /> composed of two members from the City Council. <br /> Primary PGS services provided to the City include: <br /> Residential and commercial refuse collection services <br /> Recycling services <br /> Operations of the Pleasanton Transfer Station <br /> Green waste program services <br /> Food scrap program services. <br /> In accordance with the Franchise Agreement, allowable PGS expenses for rate <br /> setting include: <br /> • Insurance <br /> Maintenance <br /> Rents <br /> Salaries <br /> : : Vehicles <br /> _: Other operating expenses. <br /> The City's rate setting methodology currently uses a return on equity calculation, and <br /> the City's Franchise Agreement specifies that the intent is to provide the hauler with a <br /> "fair rate of return." The City rate setting methodology has allowed truing up of past <br /> results against actual results in the form of a "prior year(deficit)/credit carry forward." <br /> During 2014, the City and PGS have been involved in ongoing discussions related to <br /> revising and updating certain terms and conditions related to the franchise agreement <br /> with PGS, one of which is development a new rate setting methodology. For this rate <br /> review, the City has asked PGS to use this rate setting methodology in submitting the <br /> 2015 application. Crowe will use this new rate setting methodology as the basis for our <br /> review of the 2015 rate application. This new methodology uses the Operating Ratio <br /> (OR) method for determining profit to the hauler. The new method also eliminates the <br /> balancing account for prior deficits/credits. <br /> PGS has the following ten (10) cost centers, or "reserves," that PGS maintains <br /> separate accounting for in order to capture the revenues and costs of service <br /> associated with each reserve: <br /> 1. Refuse collection services <br /> 2. Existing refuse deficit <br /> 3. Vineyard Avenue Landfill closure <br /> 4. Vineyard Avenue Landfill litigation <br /> 5. Recycling services <br />