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BACKGROUND In 2004, the City Council approved a professional services agreement with R3 Consulting Group, Inc., to provide technical assistance as part of the refuse collection and recycling rate review. As part of this process, R3 provided significant staff support related to identifying financial impacts of potential rate adjustments, general financial analysis, review of Pleasanton Garbage Service's financial records and rate proposals and presenting rate information to the City Council's Waste and Recycling Committee. Total cost of these services was $49,170. Following this activity, R3 performed a range of services related to refuse and recycling for an estimated total of $30,000. This work was approved in Amendment #1 to the initial contract. The current refuse collection and recycling rate structure approved by the City Council in 2004 will expire in March of this year. As a result, staff has begun preliminary negotiations with PGS regarding a rate review. The rate review covers all collection and recycling rates charged by PGS for commercial and residential customers within City limits. While the term of the new rates will be a subject of the rate review, historically rates have been set for a period of three years. Staff anticipates frequent meetings with PGS regarding a rate adjustment and anticipates making a recommendation to the City Council within ninety days. Following the exchange of initial proposals between the City and PGS, staff will convene the City Council's Waste and Recycling Committee (WRC) and will keep it involved throughout the process. The WRC is comprised of Mayor Hosterman and Councilmember Sullivan. DISCUSSION As detailed in Attachment A, R3 is proposing to provide a range of technical services related to the current refuse collection and recycling rate review. A summary of the key services is as follows: • Review the initial application documents for completeness and notify the City and PGS, in writing, of any missing or incomplete documentation. Conduct a review of PGS' rate application to verify that financial data, including costs, headcounts, capital items, and operational data are consistent with prior rate applications. Review the reconciliation of financial information included in the rate application and from audited financial statements as submitted in the rate application; Review the historical, actual and forecasted revenue generated from the rates and calculate current revenues; Review prior year reserve balances and reconcile them to the beginning reserve balances contained in the rate application; Review projections of expenses for reasonableness; and To the extent additional information is needed to perform the above procedures, R3 will provide a written request to PGS. Page 2 of 3