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ATTACHMENT 1 µ,.. Managing Tomorrow's Resources Today 590 Ygnacio Valley Road,Suite 105 Robert D.Hilton,Emeritus Walnut Creek,California 94596 John W.Farnkopf,PE Telephone:925/977-6950 Laith B.Ezzet,CMC www.hfh-consultonts.com Richard J.Simonson,CMC Marva M.Sheehan,CPA Robert C.Hilton April 13, 2023 Becky Hopkins Assistant to the City Manager City of Pleasanton P. O. Box 520 Pleasanton, CA 94566-0802 Re: Review of Pleasanton Garbage Service, Inc. 35-gallon Residential Cart Migration Liability Account Dear Becky Hopkins: Following are the findings from HF&H Consultants, LLC.'s (HF&H) review of Pleasanton Garbage Service, Incorporated's(PGS)35-gallon Residential Cart Migration Liability Account. Executive Summary PGS has been holding revenues in a liability account as a result of the 35-gallon residential customer rate being set by City Council at a rate slightly higher than recommended by staff, in order to ease fears of customers migrating to this lower rate, and PGS facing detrimental impacts to their revenues. After one year under the new Franchise Agreement and lowered rates, 329 or 3.6% of PGS's 96-gallon residential customers had migrated from the 96-gallon rate to the lower 35-gallon rate. This resulted in a loss of revenue of$52,602 during the year, less than 0.25% of PGS's projected annual revenues. This 35-gallon rate has been continually adjusted through the index-based rate adjustment process, and the amount in excess of the staff recommended rate has accrued $622,093 as of 6/30/2022. The liability fund was originally established to capture this additional revenue from the higher than recommended rate, and based on the analysis described in this report, it does not appear that migration resulted in significant revenue loss in Rate Period 1. Background In 2018 when setting rates for Rate Period 1 (FY 18/19), City Council voted to increase the 35-gallon residential solid waste cart rate above the original staff recommendation in order to offset PGS's expressed concerns regarding migration of residential customers to this smaller cart size.The City Council approved that rate on the basis that the number of customers that migrated from the 96-gallon container to the 35-gallon container were to be tracked, along with the excess amount collected as a result of the rate implemented for the 35-gallon cart instead of the recommended rate as described in "Alternative 1" of Attachment A to this document. It was determined that the City and PGS would meet after Rate Period 1 to determine if significant migration had occurred as a result of the lower rates and if PGS would need to generate additional income from the higher than recommended rate or if it should be remitted back to the City and its ratepayers.