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Services reflects these as expenditures at the end of the four-year period, it is allowed to cover these expenditures through the rate base, which is how the agreement is set up. Mayor Pico asked if an outside audit fu'm audits Pleasanton Garbage Services? Mr. Fialho said Pleasanton Garbage gervices is audited annually and the City knows the actual medical costs. It is then up to the City to do the analysis and deternrine whether the costs will be passed on to the ratepayers. Ms. Ayala mentioned that private businesses are having employees incur more of the medical costs. Because Pleasanton Garbage Services is a private company, and given the way in which the contract is set up, Mr. Fialho said that the City as an agency cannot dictate to Pleasanton Garbage Services what portion is employer paid and what portion paid is employee paid. Mr. Hutchinson pointed out that the only incentive that Pleasanton Garbage Services has to keep the medical costs down is to have these expenses come from the 8 percent return on equity to the 16 percent. Ms. Ayala asked what the percentage decrease was for workers compensation expenses that were factored into the overall rate increase? Mr. Hutchinson said that the percentage decrease for workers compensation was a minor adjustment of two percent. In response to an inquiry by Mr. Brozosky, Mr. Hutchinson said that revenues could decline by types of changes in service if residents were more cautious in recycling and using less garbage capacity. Mr. Fialho pointed out that there are several commemial/office and industrial buildings that are not occupied, which have an effect on Pleasanton Garbage Services' cash flow, which is one way in projecting for that decrease. He then reviewed the rate survey of jurisdictions in Alameda County. Staff found that with about a 12 pement increase on top of the current rate, the City of Pleasanton would continue to be with its existing standard 90-gallon container service in the middle of the pack on rates; not the lowest but not the highest for residential rates. Many of the lower rate communities only have a 30-gallon container service. He pointed out that the City of Pleasanton has a co- mingled recycling system and provides the most gallons per community. By Pleasanton Garbage Services policy, the City has historically subsidized the residential rates with commemial rates for commercial garbage services. He noted that about two-thirds of the revenue for Pleasanton Garbage Services is collected from the commercial sector; therefore, when commercial rotes are inflated, it has the net affect of holding down the residential rates. Pleasanton City Council 13 07/20/04 Minutes