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amount of $18,500. A mid-year FY 2022/23 budget adjustment will be made for the additional expense. BACKGROUND Per Article 8 of the Franchise Agreement, the City sets all rates for collections services outlined in the agreement. On June 21, 2022, the City Council set rates for Rate Period 5; at that time a potential SB 1383 related cost was identified relative to the processing of commercial organics facilities. Consequently, PGS was notified by Waste Management — as the approved organics processing facility — that is could no longer receive the commercial organic materials due to State permitting requirements. Since that time, City staff has worked with PGS to add an `Approved Facility for Organics Processing' for the commercial organic materials as outlined in the amended franchise agreement and began a special rate review. DISCUSSION PGS notified the City that Waste Management was no longer able to process the City's commercial organic materials and as required by the agreement, and submitted the required materials for the City to review. After a review by City staff and HF&H Consultants the process for a special rate review began wherein the City directed PGS to begin negotiations with Recology Blossom Valley Organics and to provide to the City a draft agreement for processing of commercial organic materials for review and approval. A final draft of the commercial organics processing agreement with Recology Blossom Valley Organic, was provided by PGS in October 2022. City staff and HF&H Consultants reviewed the agreement and on October 25, 2022, the City directed PGS to enter into the agreement with Recology Blossom Valley Organics. The City provided direction to PGS according to the Franchise Agreement Article 5.13.3B which stipulates that "The City shall direct a change to a new Approved Organic Materials Processing Site in the event that the Approved Organics Materials Processing Site is no longer available to process some or all of the city's organic materials due to State or local permit requirements that change the acceptability of organic material types." Working with City and PGS staff, HF&H Consultants finalized the special rate review with a finding that the mid-term Special Rate Adjustment should be set at 0.74 percent which would cover costs beginning on November 1 , 2022, through June 30, 2023. The mid-term Special Rate Adjustment would be effective on January 1, 2023. The action recommended to the City Council is adoption of a resolution approving a mid-term Special Rate Adjustment in the amount of 0.74 percent for solid waste, recyclable materials, and organic materials collection. Page 2 of 3