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Assistant to the City Manager Hopkins advised there are additional expenses this year related to the implementation of Senate Bill (SB) 1383. She reported PGS has agreed to conduct the law's required contamination monitoring at an annual cost of $37,178. Staff does not recommend approving proposed additional fees for an extra waste container or a locking charge but does recommend approval of PGS's request to add items to the special service rates list. Assistant to the City Manager Hopkins compared rate period four with the proposed expenses for period five with an expectation of a $1,728,911 shortfall leading to the 5.8% rate increase. She reported on how those would look on both residential and commercial bills. Assistant to the City Manager Hopkins reported neither the City Council's Waste and Recycling Subcommittee nor does staff recommend rate smoothing, but it is an option for Council consideration as a one-time usage of reserve funds. HF&H consultant Senior Project Manager Dave Hilton stated the challenge with rate smoothing is it is only a one-time buy down of the rate increase. He noted the operating costs covered by a potential rate smoothing payment would still be added to bills next year if there is not another rate smoothing payment. He reported the potential decreases to a residential customer's FY 22/23 rates using a variety of potential payments from the reserve fund at increments up to $790,000 creating only a 3% increase and saving 35-gallon barrel users 77 cents a month and 96-gallon barrel users $1.35 a month. He noted the base rate in year six (FY 23/24) will still apply regardless of what the Council would potentially buy down for year five (FY 22/23). He noted there will be another index-based rate adjustment for year six on top of the current year's higher base rate, leading to an even more dramatic rate increase for customers through compounding. In response to Councilmember Arkin, Assistant to the City Manager Hopkins clarified the Reserve Fund is being used for City-related SB 1383 implementation costs and not PGS's implementation costs. She also confirmed there will be no additional charge to residents for composting. In response to Councilmember Balch, Assistant to the City Manager Hopkins stated staff is working with PGS and looking forward to years six and seven on securing a processing facility for commercial organic material as the current facility does not have the proper State certificate. The new facility will lead to a rate increase and it will be brought to Council once the costs are known. She estimated the cost at $250,000. She advised staff and PGS have agreed on an additional organics collection route leading to the purchase of a new vehicle and hiring its staff. She reported there will also be a one-time cost of about $500,000 to ensure all commercial customers have properly color-coded bins to meet SB 1383 mandates. She advised cameras will be added to the collection vehicles to help enforce proper sorting of waste by residents but noted these costs have not yet been finalized. She explained all one- time costs can either be added to future rates or covered by the Reserve Fund. She noted the Consumer Price Index (CPI) is anticipated to be similar to this past year leading to another rate increase for residents in FY 23/24. She noted year seven (FY 24/25) will see a cost-based rate increase and it could potentially be a very high increase. In response to Councilmember Narum, Assistant to the City Manager Hopkins clarified approving the 5.8% increase is not optional as it is a contractual agreement and the City's consultants have found it to be in line with the applicable indexes. In response to Councilmember Narum, Assistant to the City Manager Hopkins clarified residents will still be allowed three bulk item pickups annually. In response to Councilmember Narum, Assistant to the City Manager Hopkins confirmed HF&H validated PGS's figures leading to the rate increase. City Council Minutes Page 6 of 18 June 21, 2022