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Task 12.3 Rate Negotiations with PGS Upon completion of the review of the data and information received by PGS, R3 will initiate negotiations with PGS. This will include the following subtasks: Task 12.3.1 Meetings with City staff Prior to initiating the rate negotiations, R3 will prepare and submit a brief memorandum to the City summarizing the conclusions of Tasks 12.1 and 12.2 and the points that R3 recommends to be negotiated with PGS. R3 will attend up to two (2) meetings with City staff to discuss the results of the review and clarify the negotiating points. Task 12.3.2 Negotiations with PGS R3 will facilitate a series of meetings with City staff and representatives of PGS to evaluate the results of the Rate Review and discuss the proposed rates. R3 will also provide necessary support and documentation to substantiate the rate review findings. Finally, R3 will utilize the Rate Review financial model to provide sensitivity analysis capability during negotiations with PGS. Deliverables Task 12 includes the following deliverables • Initial letter to the City regarding the completeness of the rate application and data submittal from PGS; • Thorough review of PGS financial data, projected operating costs, projected revenues, capital items, etc.; • Preparation and submittal to the City of an updated rate model in electronic format that incorporates the relevant financial and operational data received during the Review. • Preparation and submittal to the City of a memorandum summarizing the results of the review of the PGS rate application, including outstanding issues, recommended discussion points, etc. • Up to two (2) meetings with City staff to review the findings of the review of the PGS rate application; • Up to four (4) negotiation meetings, as necessary, with PGS and City staff to discuss the Rate Review and reach consensus on the proposed rate structure. Task 13: Technical Assistance with AB 939 Diversion Programs In early 2006, the City engaged R3 Consulting Group to prepare a Base Year Study to establish 2005 as the new reference Base Year. The study results indicated that the City's 2005 Diversion Rate was 35% (without credit for inert material recycling) and 49% (with credit for inert material recycling). In addition, only 29% of the total diversion identified in the study resulted from PGS programs. City staff are therefore concerned that PGS is not operating programs in a fashion that guarantees compliance with the 50% diversion mandates of AB 939. In addition, the City is in the process of working towards the 75% waste diversion goal established by the Alameda County Waste Management Authority. The primary objective of this Task is therefore to assist City staff with the technical evaluation and implementation of additional programs and strategies to enhance the City's diversion rate. These tasks may include, but not be limited to, the following: Page 2