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improve the City diversion rate by 15 to 20%. As a result, if the Council determines it is more advantageous to retain the current practice of operating a comingled recycling program, it is requested to provide feedback to the City Council Subcommittee. Further, if there are additional programs that the Council would like to see explored, feedback is requested. Franchise Extension and Construction and Demolition Debris The Subcommittee has also explored the potential of a short term franchise extension as a means of spreading out the costs of these programs over a longer period of time to reduce the initial rate adjustment. Unfortunately, the discussions have just begun and no proposals or responses have been exchanged. In addition to the above, PGS and the City have agreed to finalize a Construction and Debris (C&D) policy or ordinance that will improve opportunities for recycling construction material at construction sites. The City has made previous attempts to address this matter, but discussions have stalled for a number of reasons including allowing professional recyclers in the City may violate the PGS Franchise and may result in more trucks on City streets. Also using multiple recyclers makes if difficult to track recyclable material and as a result it may in fact be credited to another City or not tracked at all. Finally, because PGS services all C&D, the majority of revenue collected from this activity should be retained in the franchise to offset costs which affect customer service rates. Non-franchised haulers would generally be free to profit from the sale of recyclables without remuneration to the City. DISCUSSION While the Council has preferred to approve all rates at one meeting, the uniqueness of this review warrants a different course based on the number of program changes being explores and the fact that staff and the Subcommittee are concerned that further delay will worsen the company's revenue and expense situation which will ultimately result in a higher rate adjustment. Also, due to the complexities involved with designing and pricing the new recycling services, it will take approximately six months to resolve these issues. Finally, staff anticipates that the Franchise extension discussions may require detailed legal analysis which will also be time consuming. Based on the above, staff has identified a number of Options as follows: Approve the 12% across the board rate increase to address those reserves or cost centers where there is agreement between PGS and the City. Doing this places PGS in a better financial position to continue providing a high level of service while addressing most short term expenses with available revenue. Considering the fact that another rate increase is highly probable, the two step process may help lessen the impact of the full increase at one time. 2. Do not approve a rate increase at this time but direct staff and the Subcommittee to resolve all issues related to current services within 30 days with the expectation that this rate will be reviewed and if appropriate, approved by the Council. This option Page 6 of 7