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than our neighboring communities. It should also be noted that the senior discount for residential customers will carry forward in the new rates assuming approval of the attached rate resolution. RATE MIGRATION CONSIDERATIONS PGS has expressed concern over the potential for the proposed rate structure to induce migration from the 96-gallon residential cart to the 35-gallon cart, which would result in revenue loss for each account that changes their cart size. The City's consultants at HF&H do not believe that migration will be significant because the 96-gallon rate will remain at the current rate. Staff and the City Council Refuse and Recycling Subcommittee concur with this position. However, in response to PGS's concern, staff is recommending that the Council authorize the City Manager to implement a process with PGS that commits the City to meet and confer both at the 6 and 12 month time period to review whether significant migration from the 96 gallon residential cart to the 35-gallon cart results in operating franchise revenue not being sufficient to cover annual franchise expenditures in the first year of implementation. The review would be verified by a qualified third party and would assess revenue impacts from service migration, as well as from new growth, approved regional transfer station enhancements, and other related franchise revenue activities. If there was a decline in revenue, the City would also be provided access to detailed expenditure information and would expect to see a demonstrated decline in operating expenditures through efficiency, reduction in overhead, and other operational cost reduction efforts to address the revenue shortfall. The solution could also include a possible onetime rate adjustment to offset unforeseen and immitigable annual operating impacts that hinder the company's ability to fulfill its service obligations. City staff also proposes to set aside funds ahead of time for the potential revenue shortfall, should it occur. The Rate Reserve Agreement included as part of the new Franchise Agreement specifies a detailed sequential schedule for use of the existing Rate Reserve Funds accumulated over the last franchise agreement (estimated to be approximately $4 million). Portions of the Reserve are committed to PGS for costs associated with the transition to the new Franchise Agreement and the remainder will be returned to the City. Under this process, City staff recommends setting aside $1 million from its portion of the Rate Reserve in a separate City reserve account to address possible operating shortfalls resulting from migration. Alternative Rate Options for City Council Consideration: While City staff believes that the concession described above is a fair approach to the migration concern, the Council could also consider the following options: Alternative 1: This alternative would raise the 35-gallon cart rate to Dublin's new proposed rate $26.06, which is scheduled to become effective on July 1, 2018. This would decrease the difference between the City's 96-gallon and 35-gallon cart rates Page 4 of 5