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Managing Tomorrow's Resources Today Ms. Becky Hopkins May 17, 2022 Page 2 of 3 Review of Rate Application HF&H compared PGS' Rate Application dated March 30, 2022 to the Agreement (specifically Exhibit H — Index -Based Rate Adjustment Mechanism and Exhibit F — Contractor's Total Proposed Costs for Rate Period One) dated March 5, 2018: A. PGS' Index -Based Rate Adjustment Application Worksheet dated March 30, 2022 (Worksheet) Rate Period 4 Column "Annual Costs" agreed with the annual costs from the prior year's approved requested rate increase. B. PGS' 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 $123,821 of expenses for Rate Period Four, which represents actual expenditures from January to December 2021, including engineering services, gas monitoring, and, State Water Resources Control Board permit fees. This represents a decrease of $5,979 compared to Rate Period Four, which appears reasonable and allowable underthe Landfill Closure Agreement. C. 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 RPS. 3. Added Costs — Fork Truck PGS proposed additional costs for a fork truck used to deliver, switch, and clean customer containers. These costs were calculated based on a proportion of running hours compared to a full-time equivalent fork truck. PGS' calculations resulted in 0.30 FTE of a truck, for a total cost increase of $27,085. HF&H reviewed the additional truck costs and noted they are reasonable to include in the RP5 application. The addition of these costs increases the annual rate increase by approximately 0.10%. 4. SB 1383 Costs The City would like PGS to assist with new services to reach compliance with SB 1383. These services include route reviews of residential and commercial customers to determine if the account is subscribed to required services and is properly sorting all materials and additional organics collection routes. The costs for the route reviews and additional routes were not included in the current Agreement, but the