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City goals, and provides competitive rates in comparison to the regional rate surveys. <br /> All customers will receive a reduction in their current rate with the exception of the <br /> residential 96-gallon cart customers whose existing rate ranges from 47% to 99% lower <br /> than our neighboring communities. It should also be noted that the senior discount for <br /> residential customers will carry forward in the new rates assuming approval of the <br /> attached rate resolution. <br /> RATE MIGRATION CONSIDERATIONS <br /> PGS has expressed concern over the potential for the proposed rate structure to induce <br /> migration from the 96-gallon residential cart to the 35-gallon cart, which would result in <br /> revenue loss for each account that changes their cart size. The City's consultants at <br /> HF&H do not believe that migration will be significant because the 96-gallon rate will <br /> remain at the current rate. Staff and the City Council Refuse and Recycling <br /> Subcommittee concur with this position. <br /> However, in response to PGS's concern, staff is recommending that the Council <br /> authorize the City Manager to implement a process with PGS that commits the City to <br /> meet and confer both at the 6 and 12 month time period to review whether significant <br /> migration from the 96-gallon residential cart to the 35-gallon cart results in operating <br /> franchise revenue not being sufficient to cover annual franchise expenditures in the first <br /> year of implementation. <br /> The review would be verified by a qualified third party and would assess revenue <br /> impacts from service migration, as well as from new growth, approved regional transfer <br /> station enhancements, and other related franchise revenue activities. If there was a <br /> decline in revenue, the City would also be provided access to detailed expenditure <br /> information and would expect to see a demonstrated decline in operating expenditures <br /> through efficiency, reduction in overhead, and other operational cost reduction efforts to <br /> address the revenue shortfall. The solution could also include a possible onetime rate <br /> adjustment to offset unforeseen and immitigable annual operating impacts that hinder <br /> the company's ability to fulfill its service obligations. <br /> City staff also proposes to set aside funds ahead of time for the potential revenue <br /> shortfall, should it occur. The Rate Reserve Agreement included as part of the new <br /> Franchise Agreement specifies a detailed sequential schedule for use of the existing <br /> Rate Reserve Funds accumulated over the last franchise agreement (estimated to be <br /> approximately $4 million). Portions of the Reserve are committed to PGS for costs <br /> associated with the transition to the new Franchise Agreement and the remainder will <br /> be returned to the City. Under this process, City staff recommends setting aside $1 <br /> million from its portion of the Rate Reserve in a separate City reserve account to <br /> address possible operating shortfalls resulting from migration. <br /> Alternative Rate Options for City Council Consideration: <br /> While City staff believes that the concession described above is a fair approach to the <br /> migration concern, the Council could also consider the following options: <br /> Page 4 of 5 <br />