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Smoothing of Garbage Rates. City staff and the Waste and Recycling Subcommittee discussed smoothing garbage rates and are not recommending this option for rate period five as the increases are specifically tied to indexes and the actual costs for implementing state law SB 1383. However, the City Council may elect to consider smoothing rates and could use either the waste and recycling special revenue fund (Fund 171), or funds which PGS is currently holding as a result of the 35 -gallon residential solid waste cart rate being set above the original staff recommendation upon the commencement of the current agreement', as a one-time credit against the increased costs seen in the application for rate period five. This is common practice for many cities with reserve funds that wish to lower the coming rate increase with a one-time payment in order to lessen above average increases. This amount would need to be generated through the rates the following year unless another credit amount is applied. Table 5 illustrates the impact on residential rates as a result of applying different funding levels. To reduce the coming rate increase from 5.8 percent to 5 percent, reserves would need to fund $210,000. To reduce the rate period five increase to 4 percent, reserves would need to fund $500,000, and to reduce the rate period five increase to 3 percent, reserves would need to fund $790,000. Table 5 Rate Period Four Reserve Funding Net Rate Increase Rate Period Five Rates 1 Y Rates 35 gallon $27.58 $ - 5.8% $29.18 96 gallon $48.12 $ - 5.8% $50.91 35 gallon $27.58 $ 210,000 5.0% $28.96 96 gallon $48.12 $ 210,000 5.0% $50.53 35 gallon $27.58 $ 500,000 4.0% $28.68 96 gallon $48.12 $ 500,000 4.0% $50.04 35 gallon $27.58 $ 790,000 3.0% $28.41 96 gallon $48.12 $ 790,000 3.0% $49.56 Should the City Council elect to use reserve funds to lower the rate impact in rate period five, it should be noted that the amount of reserve funds used only delays the increase required for one year. For example, should the City elect to contribute $500,000 from ' On July 3, 2018 the City Council set the rates for rate period one. The City Council selected to adjust the staff recommended rate for the 35 gallon residential cart from $24.90 to $26.06 per month. This was to address concerns from PGS regarding cart migration from the 96 gallon cart to the 35 gallon cart. It was noted that City staff would return to the City Council to discuss how this increase in revenue would be applied from this change in the future. The migration anticipated by PGS did not occur so the funds accumulated have been set aside by PGS for the City Council to determine allocation. City Council has not provided direction to date. There is currently $494,869 in this fund. Page 5 of 7