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To ensure that ratepayers and the company are "insured" in the first year of implementation of the new rates, this staff report also outlines a process for evaluating operating franchise revenues and expenditures at the 6 and 12 month time period. This will enable both parties to monitor the situation, and if necessary address the necessary gap in revenue and operating efficiencies to sustain operations and the health and safety of the community. RECOMMENDATION Approve resolution (Attachment 3) to adopt new rates for solid waste, recyclable materials and organic materials collection and approve the process outlined in this report to address significant cart size migration, should it occur. FINANCIAL STATEMENT There is no cost to the City to approve the reduced rates to PGS customers. BACKGROUND On March 20, 2018, following several months of negotiations, the City Council approved a new Franchise Agreement with PGS for solid waste, recyclable materials, and organic materials collection. The new Franchise Agreement will commence on July 1, 2018 and will replace the City's current Franchise Agreement with PGS, which was scheduled to expire in 2019. The negotiations process included a detailed analysis of PGS's proposed costs of providing the services required under the new Franchise Agreement, and resulted in a 13.3% reduction in overall annual costs to the City. The Subcommittee for Refuse and Recycling, City staff, and our consulting team from HF&H Consultants, LLC met to discuss the various options to apply the 13.3% to the rate structure. The goal was to set rates that reflect the terms of the new Franchise Agreement in a manner that best meets the City's overall refuse and recycling goals, and is competitive with regional rate structures. DISCUSSION The beginning of a new Franchise Agreement presents the City with an opportunity to consider restructuring its collection rates. City staff and HF&H Consultants performed a preliminary analysis which assesses the impacts of multiple different strategies for incorporating the 13.3% reduction into customer rates. The 13.3% reduction in annual PGS costs may be passed-through to ratepayers in the form of rate reductions. However, as was discussed at the March 20, 2018 City Council meeting, such rate adjustments are not required to be applied uniformly across all subscription levels, but rather, could be applied in a manner which more accurately reflects City goals and regional rate surveys. For purposes of this analysis, "subscription levels" refers to the size of a customer's solid waste, recyclable materials, or organic materials container, and the frequency of collection (e.g. 96-gallon organic materials cart collected one time per week, or 4-cubic yard solid waste bin collected two times per week). Page 2 of 5