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I IN I CONSULTANTS LLC .` Managing Tomorrow's Resources Today Ms. Becky Hopkins May 24, 2021 Page 2 of 3 A. PGS's Index-Based Rate Adjustment Application Worksheet dated March 29, 2021 (Worksheet) Rate Period 3 Column"Annual Costs"agreed with the annual costs from the prior year's approved requested rate increase. B. PGS's Worksheet Adjustment Index Column (showing the indices to be used in the adjustment) agrees to Exhibit H Table 2 with one exception for the Adjustment Index for Landfill Maintenance/Closure. Exhibit H, Section 3.C.9 provides that the "Landfill Maintenance and Closure Costs for each Rate Period shall mean the amount to which Contractor is entitled for the prior Rate Period pursuant to the terms of that certain 'Agreement Approving an Expenditure of Funds to Close Former Landfill between the City and the Contractor' dated October 7, 1986, and attached as Exhibit 0". PGS has included $117,842 of expenses for Rate Period Four, which represents actual expenditures from January to December 2020, including engineering services, gas monitoring,and,State Water Resources Control Board permit fees.This represents a decrease of$23,924 compared to Rate Period Three, which appears reasonable and allowable under the Landfill Closure Agreement. C. The calculations in the PGS Worksheet Rate Period Four column were reviewed and agreed to with one exception. In the Vehicle Maintenance and Vehicle DMV categories, PGS listed 35 vehicles. However, per the Franchise, only 34 vehicles in use (as described in the original cost of service proposal) are allowed in the calculation, and therefore the additional vehicle is not an allowable expense. Had PGS wanted to modify the number of allowed vehicles they would have needed to trigger a special rate review. The exclusion of this additional vehicle from Rate Period Four's index review resulted in a decrease in total calculated costs of $83,842 directly, and additional decreases from recalculations of profits and fees. D. The Current Monthly Rates and Proposed Monthly Rates (effective July 1, 2021) (Schedule 4 Current and Proposed Customer Collection Rate Schedules)were reviewed and updated to reflect the adjusted proposed increase of 0.9% (see Attachment C for revised Schedule 4). E. PGS did not include in its Application an amount for the line item "[0.50% Franchise Fee funded by Prepaid Rate Reserve Credit]". Section 3.e.i of the Reserve Agreement between PGS and the City made as of March 20,2018 permits, but does not require,the City to"apply from the Reserve an amount equal to 0.5% of the sum of the actual Gross Rate Revenues and Transfer Station Revenues each rate year to supplement the 3.5% franchise fees required under the New Collection Agreement".As of the completion of this review,the City has not elected to utilize any of the Reserve funds in Rate Period Four. PGS's Index-Based Rate Adjustment Worksheet (including supporting documents) was reviewed and agreed to with the exceptions described above. We appreciate this opportunity to be of service to the City. Please contact me if you have any questions.