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DISCUSSION Rate Adjustment As indicated above, the full analysis of this rate adjustment request is detailed in the Crowe Horwath report (Attachment 2) which analyzes the factors included as part of an interim rate review. In general, this review looked at the following three factors, which resulted in the following outcomes: . Labor Composite Index — Based on the combination of union wage rates, pension plan costs, and health and welfare costs, PGS's labor composite index will increase by 3.19%. . Landfill Cost — Based on estimates of landfill usage and cost, it is projected that landfill disposal costs will increase by 12.8%. . All Other Cost (Escalated by CPI) - This category includes all other costs (i.e., not labor and landfill disposal costs) and anticipates an increase of 2.29%. The Consumer Price Index — All Urban Consumers (San Francisco-Oakland-San Jose, CA) is used for this analysis. These three components are then weighted and summed to equal 3.87%, which • includes 0.08% to reflect the cost of the City's Franchise Fee. A summary of the three factors included in this rate review is as follows: SUMMARY OF 2016 PGS PROJECTED REVENUE AND EXPENSES Category Projected Percent of Revenue Weighted Change Requirement Change (1) Labor Composite Index 3.19% 33.46% 1.07% Landfill Disposal Costs 12.2% 12.18% 1.48% CPI 2.29% 54.36 1.24% Total Change 3.79% City Franchise Fee 0.08% Total Adjustment 3.87% 1. Revenue requirement multiplied by projected increases. See Interim Year Worksheet in Crowe Horwath Report page 19 for details. If applied across the board, the 3.87% increase would have the following impact on the major rate categories: Across the Board Monthly Service Rate Adjustment Service Type Current Rate Rate Increase New Rate 35-Gallon Service $33.80 $1.31 $35.11 35-Gallon Senior Rate $28.73 $1.12 $29.84 96-Gallon Service $41.43 $1.60 $43.03 96-Gallon Senior Rate $35.22 $1.37 $36.58 Cubic Yard - Commercial $30.22 $1.18 $31.39 Page 3 of 6