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BACKGROUND On March 20, 2018, the City Council approved a new Franchise Agreement with PGS for solid waste, recyclable materials, and organic materials collection. The new Franchise Agreement commenced on July 1, 2018. The negotiations process included a detailed analysis of PGS's proposed costs of providing the services required under the new Franchise Agreement, and resulted in a 13.3 percent reduction in overall annual costs to the rate payers. The City Council applied the 13.3 percent reduction to rate structure for Rate Period One selecting the "Balanced"scenario with Alternative 1. This scenario reduced the residential 35-gallon cart rate and commercial one and two times per week collection bin rates (all sizes) to below comparable agencies' corresponding rates, and evenly applies any remaining balance to all other commercial rates. Alternative 1 raised the 35-gallon cart rate to Dublin's new proposed rate $26.06, which became effective on July 1, 2018. This decreased the difference between the City's 96-gallon and 35-gallon cart rates and reduced the incentive to migrate to the smaller cart. It also retained Pleasanton's goal of matching the lowest rate amongst our neighboring cities for the 35- gallon cart service. The Franchise Agreement outlines that for Rate Periods Two through Six an Index- Based Adjustment Methodology is to be used to determine annual rate increases. This process requires PGS to submit an Application to the City by April 1 of each year that presents the calculations of the annual percentage change in various costs indices, total calculated annual costs for the Rate Period, the Rate adjustment factor, and all supporting documentation for the calculations. The application must also present the Rates for the then-current Rate Period and the proposed Rates for the coming Rate Period. DISCUSSION PGS submitted a Rate Application for Rate Period Three (Attachment 1) as required by the Franchise Agreement. The Application was reviewed by HF&H Consultants, LLC who provided a Summary of Findings that concluded that PGS submitted its Application on time, and in accordance with Exhibit H of the Franchise Agreement. PGS submitted a rate increase request of 2.0 percent. Per HF&H's analysis, this rate was adjusted to 1.7 percent due to a decrease of $60,000 resulting from a one-time cost in the same amount from the prior year, which was inadvertently reflected as an ongoing expense. The adjusted rates provided by PGS have been corrected to reflect the 1.7 percent increase and are correctly calculated. The Rate Application submitted by PGS for Rate Period Three complies with the Franchise Agreement requirements and has been evaluated for accuracy by HF&H Consultants and City staff. It is recommended that the City Council adopt the proposed rates to be effective as of July 1, 2020 in accordance with the terms of the Franchise Agreement. Page 2 of 3