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Mayor Pico asked if the efficiency bonus was a pementage based on Pleasanton <br />Garbage Services equity rate? He asked who determines the equity base, and does the <br />City review the equity base to ensure it is reasonable? <br /> <br /> Mr. Hutchinson said the efficiency bonus is a percentage based on Pleasanton <br />Garbage Services equity rate. Pleasanton Garbage Services determines the equity base, <br />and contractually, the City has no right to review or have any input with respect to the <br />equity base to ensure it is reasonable. The equity base is determined by whatever profit <br />Pleasanton Garbage Services has left in the business, either in the form of cash or <br />invested in assets, plus any monies that it has loaned to the owners that belong to the <br />company. <br /> <br /> Mayor Pico asked if the City had any requirement that stated that any dividends <br />taken be removed from the equity base? <br /> <br /> Mr. Hutchinson said there are no requirements; however, staff did explore this <br />issue with Pleasanton Garbage Services at length. <br /> <br /> Mr. Brozosky asked if the guarantee of eight percent was over the life of the four- <br />year rate increase? <br /> <br /> Mr. Hutchinson said that Pleasanton Garbage Services is guaranteed eight percent <br />per year every year of the franchise agreement. <br /> <br /> Mr. Brozosky believed that the City was front-loading Pleasanton Garbage <br />Services income if the overall rate increase was allowed now with expenses increasing <br />over time. He asked if Pleasanton Garbage Services would have more than the eight <br />percent guarantee at the beginning of the contract but at the end of the contract, <br />Pleasanton Garbage Services would come closer to the eight percent? <br /> <br /> Mr. Hutchinson said that would normally be expected. However, there is a fairly <br />complex set of formulas that are already in place that treat a percentage of that money as <br />deferred revenue in the first year so that Pleasanton Garbage Services pushes it back to <br />the back years when expenses have increased. <br /> <br /> In response to an inquiry by Mr. Brozosky, Mr. Hutchinson said that a deficit was <br />defined as a return less than eight percent. <br /> <br /> Mr. Brozosky asked if Council would be considering an additional rate increase at <br />the end of the first year if it were determined that Pleasanton Garbage Services is not <br />receiving an eight percent return? <br /> <br /> Mr. Hutchinson believed that if the equity base percent was set at 7.5 percent, a <br />subsequent rate increase would not be expected; however, if the equity base percent was <br />set a 1.5 percent, an additional rate increase would be expected. <br /> <br />Pleasanton City Council 18 07/20/04 <br />Minutes <br /> <br /> <br />