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BACKGROUND The Refuse Collection Agreement between the City of Pleasanton and PGS dated May 16, 1989, as amended, allowed PGS to accumulate a rate reserve to cover fluctuations in annual costs to the company. The new agreement for solid waste, recyclable materials, and organic materials collection services dated March 20, 2018 went into effect on July 1, 2018 and eliminated the franchise rate reserve. The Rate Reserve Agreement was entered into on March 20, 2018 by the City and PGS to outline the process for the dissolution of the franchise rate reserve. DISCUSSION As outlined in the summary of findings (Attachment 2) prepared by HF&H Consulting LLC, on March 22, 2019, PGS provided the proposed calculation of the Rate Reserve along with its audited financial statement for the year ending June 30, 2018. The proposed calculations and audited financial statement were reviewed by the City and HF&H. HF&H summary findings concurred with PGS's submittal that the balance due to the City is $5,342,285. Per the Rate Reserve Agreement, the City Council must approve the calculation. When the Rate Reserve Agreement was executed it was anticipated that the Rate Reserve balance would be at least $2,000,000 to be allocated in accordance with Section 3.e of the Rate Reserve Agreement as follows: Apply from the rate reserve amount due to the City an amount equal to 0.5 percent of the sum of actual gross rate revenues and transfer station revenues (estimated to be $28,827,973) each rate year to fund the 0.5 percent franchise fee increase included in the current agreement increasing the annual franchise fee to 4 percent (Section 7.1 of the agreement). The amount due to the City under Section 3.e. is $2 million, which staff estimates will cover the 0.5 percent increased franchise fee over the eleven year period of the franchise agreement (2018 through 2029). PGS' franchise fee is a General Fund revenue. Therefore, $2 million of the $5,342,285 will be deposited into the City's General Fund. Staff recommends that City Council approve the PGS Rate Reserve Calculation of $5,342,285 so it can receive the funds from PGS. Staff will bring options for expenditure of the remaining $3,342,285 from the rate reserve account to the City Council for their consideration in advance of the budget discussions this spring. Submi4 d by: Fiscal Review: Approved A ., Brian Dolan Tina Olson Nelson Fialho Assistant City Manager Director of Finance City Manager Page 2 of 3