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Councilmember Pentin made several inquiries related to the PGS rate-setting model in the City of Dublin <br /> and discussion ensued between the Councilmember and Mr Galvan relative to the 13% decrease <br /> across-the-board, disparity between rate categories, language provisions in the contract, and the rate of <br /> migration that may cause revenue shortfalls for PGS. Mr. Galvan reiterated the reduction in the cost for <br /> the 35-gallon could invite migration. <br /> Councilmember Narum made inquired about the threshold of migration that would potentially impact <br /> revenues and expressed support for the six-month review and meet-and-confer process to address any <br /> extraordinary impacts to the contract. She also noted a shorter timeline for review could be instituted. <br /> Mr. Galvan stated a 3% migration factor is acceptable, however, the impacts of a larger scale migration <br /> were not discussed in collaboration with PGS. He requested language which offers revenue protection in <br /> the contract. <br /> Mayor Thorne affirmed PGS is seeking to address contract rates and provisions if their organization <br /> experiences revenue shortfalls due to the proposed rate-setting. <br /> Mr. Galvan stated PGS submitted proposed contract language which would address migration issues for <br /> year two and beyond. <br /> Councilmember Pentin stated the City's goal is to encourage recycling by incentivizing the 35-gallon <br /> rate, however some users may make the switch to the 35-gallon cart just to avail themselves the lower <br /> rate. <br /> Mr. Galvan noted PGS encourages recycling and provides augmented services (sorting) to encourage <br /> such actions, however, the business must still operate from a profit/loss perspective and expressed <br /> concern with the rates inviting migration. He cannot predict at what percentage migration will impact <br /> revenues. <br /> Mayor Thorne inquired of staff if contract language could be inserted to address potential migration. <br /> City Manager Fialho stated the City has an obligation to set rates to meet the minimum bid amount <br /> agreed upon and that all CPI adjustments are based upon the bid amount compounding each year. If <br /> the rates set by Council do not generate the minimum, the City has an obligation to adjust the rates, as <br /> is implied in the franchise agreement. The proposal for adjustments by rate category, is a step <br /> backwards. <br /> Councilmember Olson noted that the City Council should approve the rates which bring the numbers to <br /> the $28.8 million and expressed concern that the rates suggested by the subcommittee invite migration. <br /> Councilmember Pentin stated the Subcommittee reviewed all the rates pursuant to the request for <br /> proposals process. <br /> Councilmember Narum inquired whether the City has an obligation to make revenues whole if there is a <br /> decrease due to migration. City Manager Fialho noted the approximately $28.8 million in revenue is <br /> based on PGS estimates and their cost of business is approximately $27.5 million, as identified in their <br /> response to the request for proposals. If they are not generating revenues to meet their minimum bid <br /> amount, the City has an annual obligation to adjust rates to meet that minimum bid. PGS can keep any <br /> revenues they generate. It is possible the City will have to adjust out-of-cycle to address revenue losses <br /> below the minimum bid. <br /> Mr. Hilton affirmed the City has discretion over how it elects to address any revenue gaps with PGS. <br /> City Council Minutes Page 3 of 5 July 3.2018 <br />