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Crowe Horwath. Mr. Brian Dolan Page 3 October 27, 2015 In Table 2, we summarize residential rates since 2004. Table 2 Pleasanton Garbage Service Residential Rates (2004 to 2015) Service Level 2004 2008 2009 2013 20143 20154 35-Gallon $22.50 $25.20 $29.13 $30.59 $32.98 $33.80 96-Gallon $25.04 $28.04 $34.57 $36.30 $39.13 $41.43 On August 1, 2014, PGS submitted its 2016 Interim Year Rate Application (Attachment A)which is the subject of this report. PGS requested a 3.89 percent rate increase effective January 1, 2016. With this submission, PGS included a complete application in accordance with Rate Manual requirements, including a cover letter, excerpts from the draft Rate Manual, an Interim Year Rate Application, and other schedules supporting the rate change request. 3. Scope of Review Our scope of services included the following six(6)tasks: 1. Review interim year rate application submitted by PGS 2. Prepare the interim year rate change worksheet 3. Provide recommendation regarding rate adjustment amounts 4. Attend meetings (as requested by City) 5. Prepare report 6. Participate in City Council preparation and meeting (as requested by City). 4. Interim Year Rate Review We provide results of the review in the Interim Year Rate Change Worksheet(Attachment B). The Interim Year Worksheet provides the detailed calculation for the proposed 2016 rate increase and the remainder of this discussion in this section relates to this worksheet. The Interim Year Rate Change Worksheet primarily consists of three components, each of which are discussed in more detail below: (A) Labor Composite Index, (B) Landfill Disposal Costs, and (C)All Other Costs(escalated by the Consumer Price Index). To calculate the rate adjustment, each of these three components are weighted based on weightings shown in Lines 4 through 6 of the Interim Year Rate Change Worksheet(i.e., changes in labor costs are 33.46%of the rate change, changes in landfill disposal costs are 12.18% of the rate change, changes in all other costs are 54.36%of the rate change).5 A. Labor Composite Index Based on the combination of increases in union wage rates, pension plan costs, and health and welfare costs, we project the change in PGS' labor composite index(based on a union driver)will increase 3.19 percent between 2014 and 2015 (see Table 3 below). This 3.19 percent increase was used as the labor composite index for the 2016 interim year. 3 Effective April 1,2014. 4 Effective January 1,2015 5 These weightings are based on each component's relative percentage of the total costs which was identified during the previous 2015 base year rate review(shown in the first column of lines 1 through 7) Draft—For Discussion Purposes