REPORT TO MAYOR AND COUNCIL

Transcription

1 Concord REPORT TO MAYOR AND COUNCIL AGENDA ITEM NO. 3.a TO THE HONORABLE MAYOR AND COUNCIL: DATE: March 2, 2009 SUBJECT: SOLID WASTE CONSULTANT SERVICES CONTRACT Report in Brief Staff is recommending the City Council approve a professional services agreement with NewPoint Group in the amount of $99,750 to provide consultant services to assist the City in a Base-Rate application review of residential solid waste rates in preparation for discussions with Concord Disposal Services (CDS) regarding a requested rate increase. The cost of this contract will be equally shared with Concord Disposal Services. On October 2, 2007, the City Council approved the Ninth Amendment to the Solid Waste Franchise Agreement between the City and CDS to implement a single stream recycling system, a tiered rate structure with new levels of solid waste and recycling services, and corresponding rates. It was anticipated that the implementation of a new rate structure and service levels would potentially require an interim rate adjustment in The Ninth Amendment included a provision for allowing CDS to submit for a residential interim year rate change anytime between September 30, 2008 and June 30, 2009 (Attachment 1). On December 19, 2008, CDS requested a residential rate adjustment (Attachment 2). CDS submitted two separate draft rate applications that include an Interim-Year rate increase of percent and a 2010 Base-Year rate increase of percent (Attachments 3 and 4). The Interim-Year rate increase addresses a revenue shortfall associated with the implementation of the single stream recycling program and the Base-Year rate increase addresses several potentially long term complex and significant rate setting issues. Staff recommends instead of conducting an Interim-Year and a 2010 Base-Year rate review that both rate increase requests be reviewed through a single 2010 Base-Year rate review. The 2010 Base-Year rate review would be the most efficient way to evaluate the significant rate increases being requested, synchronize the timing of the Interim-Year rate review with the 2010 Base-Year rate review, examine the complex nature of rate setting issues, and address CDS's request for near-term rate increase relief. The 2010 Base-Year rate review would be implemented approximately mid-calendar year During Base-Year reviews, the City has historically hired a consultant to assist in conducting the rate review process. It is recommended the City Council authorize the City Manager to enter into a professional services agreement with the NewPoint Group to provide residential solid waste Base-Year consultant services (Attachment 5, Exhibit A). The cost is a not-to-exceed fixed price of $99,750, which would be shared equally between the City and CDS. The City's cost would not exceed $49,875.

2 SOLID WASTE CONSULTANT SERVICES CONTRACT March 2, 2009 Page 2 Background In February 1993, the City Council adopted the Rate Setting Process and Methodology Manual for Residential Solid Waste Fee (Attachment 6). The Manual was updated in 1997, 2006 and The City of Concord was the first jurisdiction in Contra Costa County to adopt a rate setting manual for solid waste fees. The national accounting firm Ernst & Young LLP developed the Manual. It provides an accountable public process to assure garbage rates in Concord are fair to residents and justified by audited financial records. The Manual incorporates the audit standards of the American Institute of Certified Public Accountants (AICPA) which issues Generally Accepted Auditing Standards (GAAS). Under GAAS the auditor examines whether the accounting procedures of the audited company comply with Generally Accepted Accounting Principles (GAAP). GAAS standards require the auditor review source documents to substantiate transactions, review the company ' s internal controls, observe assets to verify existence, perform test checks of accounts and transactions and collect independent confirmations from external parties. Discussion Staff recommends that a single rate review process be conducted through a 2010 Base-Year Rate Application review because of the significant rate increase being requested, the close timing of the Interim-Year review with the Base-Year review, the complex nature of rate setting issues, and to address CDS's request for near-term rate increase relief. Also, the single Base-Year Rate Application review would reduce the overall rate review costs to the residential ratepayers by conducting a single rate increase review instead of two separate rate reviews. NewPoint Group's Scope of Work Proposal NewPoint Group is qualified to assist the City in conducting a Base-Year Rate Application review. NewPoint Group assisted the City in the 1997, 2002, and 2006 Base-Year reviews and is familiar with the requirements of the Manual. NewPoint Group has been qualified by the State of California Department General Services Office of Procurement under the Department's, "Business and Management Consulting Services Master Services Agreement" (MSA). NewPoint's MSA state contract number is # The expiration date of the MSA is 12/30/09. The MSA provides state agencies, cities, counties, special districts, educational and other public entities with professional consulting services and was compiled through a competitive bidding process. The inclusion of NewPoint Group in the State MSA demonstrates the company's professional qualifications and competitive rates. The NewPoint Group's Scope of Work Proposal for the Base-Year Rate Application review is attached to the proposed Professional Services Agreement (Attachment 5, Exhibit A). Fiscal Impact NewPoint Group has quoted a not-to-exceed cost including any travel and administrative overhead of $99,750 (Attachment 5, Exhibit A, Scope of Services, Project Hours and Fees, page 17). The rate setting Manual provides that this cost be shared equally with CDS. CDS has deposited with the City $49,875, which is one-half the cost of the study. The City's portion of the study cost, which is $49,875, will be funded under the City's

3 SOLID WASTE CONSULTANT SERVICES CONTRACT March 2, 2009 Page 3 Franchise Program Operating Budget. City staff will have full control of the disbursement of funds as the consultant submits monthly invoices for study costs. Public Contact Posting of the agenda. A copy of this staff report has been mailed to NewPoint Group and CDS. Recommendation for Action Staff recommends the City Council authorize the City Manager to enter into a contract with NewPoint Group in an amount not to exceed $99,750 to provide consultant services to assist the City in the Base-Year Rate Application review of residential solid waste rates. Prepared by: Phillip Woods, AICP Principal Planner pwoods@ci. concord. ca.us Daniel. Keerf Reviewed by: Valerie Barone CityManager Assistant City Manager Daniel. Keen@ci. concord.ca.us Valerie.Barone@ci. concord.ca.us Attachment 1 - Ninth Amendment to Franchise Agreement Attachment 2 - Concord Disposal Service letter, dated December 19, 2008 Attachment 3 - Draft Interim Year Rate Change Application Attachment 4 - Draft Base Year Rate Change Application Attachment 5 -Agreement for Professional Services with NewPoint Group with Exhibit A - NewPoint Group Scope of Services Proposal Attachment 6 - Rate Setting Process and Methodology Manual for Residential Solid Waste Fees, dated October 1, 2007

4 ATTACHMEN 1 I NINTH AMENDMENT TO FRANCHISE AGREEMENT THIS AMENDMENT is entered into on October 2, 2007 by and between the CITY OF CONCORD, a municipal corporation (hereinafter "CITY"), and CONCORD DISPOSAL SERVICE, INC, a California corporation (hereinafter "CONCORD DISPOSAL"). WHEREAS, on July 14, 1980 CITY and CONCORD DISPOSAL entered into an Agreement entitled "Agreement to Extend Franchise" (the "Agreement") which provides for CONCORD DISPOSAL to collect and dispose of refuse in the CITY and provide recycling services subject to the terms and conditions set forth therein; and WHEREAS, the Agreement has been amended eight times since July 14, 1980; and WHEREAS, The CITY and CONCORD DISPOSAL desire to enter into this Agreement entitled, "Ninth Amendment to Franchise Agreement"; and WHEREAS, the CITY is satisfied with the services of CONCORD DISPOSAL; and WHEREAS, CONCORD DISPOSAL's residential and commercial solid waste collection rates compare favorably to surrounding communities; and WHEREAS, City of Concord residents rate customer service provided by CONCORD DISPOSAL as excellent as shown by the CITY's Bi-Annual Customer Satisfaction Survey; and WHEREAS, conversion of CONCORD's DISPOSAL's waste collection and recycling systems to semi-automated and fully-automated status will provide customers with greater choice of service levels and is anticipated to contribute to increased recycling within the City of Concord. NOW, THEREFORE, in consideration of the mutual promises, covenants, and agreement set forth herein, the parties agree to the following terms, conditions, and amendments to the Rate Setting Manual: 1. New Cart Purchases. On or before April 30, 2008, CONCORD DISPOSAL SERVICE shall purchase the following minimum quantities of new wheeled carts for City residential collection services: n Refuse (32-, 64-, or 96-gallon) -27,913 n Curbside Recycling (64-gallon) - 27,913 Ninth Amendment 721-J 10/17/07 cc; Concord Disposal Service, inc., CM, File

5 I II n Yardwaste (96-gallon) -16,382 a Total carts - 72,208. CONCORD DISPOSAL SERVICE shall retain the use of the 11,531 carts, currently used for refuse collection, and included in the regulated rate base, for yard waste carts in the new three-cart system. In addition, CONCORD DISPOSAL SERVICE shall purchase a minimum of an additional ten (10) percent of the 72,208 new cart total, or 7,221 carts, to have on-site for use as additional cart inventory. The amortization of cart purchases will be considered an allowable cost for rate setting purposes. The amortization period will be set at seven (7) years and the allowable interest rate will be 7.75 percent annually. 2. Cart Delivery Timing and Rates. On or before September 30, 2008, CONCORD DISPOSAL SERVICE shall deliver each City residential customer with three carts each, including one for refuse (either a 32-, 64-, or 96-gallon cart), one for curbside recycling (a 64-gallon cart), and one for yard waste (96-gallon cart). The approved rate for each level of service (either a 32-, 64- or 96-gallon refuse cart) including weekly pick-up of a 64-gallon cart for single-stream recycling and a 96-gallon cart for yard waste: 32 gallon refuse cart -- weekly pick-up service $22.00/month 64 gallon refuse cart-- weekly pick-up service $27.00/month 96 gallon refuse cart - weekly pick-up service $31.00/month CONCORD DISPOSAL SERVICE shall only begin to charge a City residential customer the new rate approved by the City Council for the three-cart automated/semi-automated system on the date that the three carts (refuse, curbside recycling, and yard waste) are delivered to that residential customer. 3. Automated Truck Purchase and Use on City Residential Routes. On or before September 30, 2008, CONCORD DISPOSAL SERVICE shall purchase and begin to serve City residential customers with eleven (11) new automated trucks for residential refuse collection. CONCORD DISPOSAL SERVICE shall only begin to charge a City residential customer the new rate approved by the City Council for the three-cart automated/semi-automated system after the Ninth Amendment 2

6 I City has confirmed that CONCORD DISPOSAL SERVICE has begun to serve that residential customer with an automated truck for refuse collection. 4. Costs to Process City Curbside Rec clables at a Facili Other than the Planned Materials Recovery Facility Sort Line. CONCORD DISPOSAL SERVICE shall begin to deliver curbside recycling materials for processing at the newly constructed Materials Recovery Facility (MRF) Sort Line, located at the Pittsburg Transfer Station, on or before September 30, If the MRF Sort Line is not operational and accepting City curbside materials, beginning October 1, 2008, until such time as the MRF Sort Line is operational, the City ratepayers shall not be responsible for costs incurred by CONCORD DISPOSAL SERVICE to consolidate, deliver, or process City curbside recyclable materials, collected by CONCORD DISPOSAL SERVICE, at a facility other than the MRF Sort Line located at the Pittsburg Transfer Station. 5. Year 2009 Interim Year Rate Change Submission Timing. For Interim Year 2009 only, CONCORD DISPOSAL SERVICE has the option to submit an application. for a residential Interim Year Rate Change at any time between September 30, 2008 and June 30, This lengthens the period that the 2009 Interim Year Rate Application will be accepted by the City by nine (9) months from the submission date of September 30, 2008 specified in the City's Rate Setting Manual. The City will make an effort to expedite the review process so that the rate change can be implemented in a shorter period of time, than the three-month formal review timeline (shown in Exhibit 11-5 of the Rate Setting Manual). Following this one-time application submission extension for Interim Year 2009, the process will resume the submission schedule stated in the City's Rate Setting Manual. 6. Mail Survey of City Residential Customer Refuse Cart Preferences. CONCORD DISPOSAL SERVICE shall mail a query to all City residential customers on, or before, October 12, The query shall be designed to identify each City residential customers' refuse collection cart size preference, either a 32-gallon, 64-gallon, or 96-gallon cart, for the initial refuse cart delivery that is scheduled for a date on, or before, September 30, For customers responding to the query, CONCORD DISPOSAL SERVICE shall deliver each customer the refuse cart size preference identified in the returned query. For non responding customers, CONCORD DISPOSAL SERVICE shall deliver the refuse cart size that is equivalent to the customers' current refuse service level. Ninth Amendment 3

7 I Treatment of Former 20-Gallon Mini Can Customers. On or before September 30, 2008, CONCORD DISPOSAL SERVICE shall provide each existing 20-gallon refuse can customer with a 32-gallon refuse cart, 64-gallon curbside recycling cart, and 96-gallon yard waste cart. Upon delivery of the three carts, CONCORD DISPOSAL SERVICE shall begin to charge these former 20-gallon refuse can customers a rate of $18.00 per month. CONCORD DISPOSAL SERVICE shall continue to charge these former 20-gallon refuse can customers the $18.00 per month rate, subject to future rate changes determined through the City's rate setting process, until such time as the customer either discontinues service or changes to a refuse cart service level other than 32- gallon. Beginning October 1, 2008, CONCORD DISPOSAL SERVICE shall no longer offer City residential customers the 20-gallon refuse can service. 8. Treatment of Former 32-Gallon Senior Citizen Customers ith Age Only Qualification). On or before September 30, 2008, CONCORD DISPOSAL SERVICE shall provide each existing customer with a 32-gallon senior citizen discount rate (age 65 and over qualification) with a 32-gallon refuse cart, 64-gallon curbside recycling cart, and 96-gallon yard waste cart. Upon delivery of the three carts, CONCORD DISPOSAL SERVICE shall begin to charge these former 32- gallon can senior citizen customers (age 65 and over qualification) a rate of $18.50 per month. For each former 32-gallon senior citizen customer (age 65 and over qualification), CONCORD DISPOSAL SERVICE, shall continue to charge this rate, subject to future rate changes determined through the City's rate setting process, until such time as the customer either discontinues service or changes to a refuse cart service level other than 32-gallon. Beginning October 1, 2008, CONCORD DISPOSAL SERVICE shall no longer offer City residential customers a 32-gallon senior citizen rate (with an age 65 and over qualification only), 9. New 32-Gallon Senior Citizen Customers (With Age and Low Income Qualification. Beginning October 1, 2008, CONCORD DISPOSAL SERVICE shall provide a new 32-gallon refuse cart rate, to qualifying low income senior citizen customers. CONCORD DISPOSAL SERVICE shall charge these low income senior citizen customers a rate of $18.50 per month. This new $18.50 per month rate will be subject to future rate changes determined through the City's rate setting process. 28 Ninth Amendment 4

8 To qualify for the low income senior citizen rate, for the year in question, the customer must verify to CONCORD DISPOSAL SERVICE that the customer (1) is 65 years, or older, and (2) has an income below the Housing and Urban Development (HUD) guideline for "very low income" for the Oakland-Fremont area. For example, for 2007, this limit was $29,350 for one person, $33,500 for two persons, and $37,700 for three persons. For verification purposes, the senior citizen customer must provide CONCORD DISPOSAL SERVICE with (1) a copy of his/her current driver's license or birth certificate, (2) a copy of a federal or state tax return (Social Security number blocked) showing net income, for the year prior to the verification year, or a copy of a Pacific Gas & Electric bill noting the customer has a low income qualification. 10. Base Year 2010 Application Restriction for Failure to Im plement New System. If CONCORD DISPOSAL SERVICE does not (1) deliver the three new carts to each residential customer, (2) provide eleven (11) new automated trucks for residential refuse collection, and (3) begin operations at the Pittsburg Transfer Station MRF Sort Line by December 31, 2008, the City will not accept a 2010 base year rate application (nor will it accept an interim year rate application for 2010). This restriction is necessary because there will not be sufficient actual financial information on the new threecart automated/semi-automated system operations at the time the 2010 base year application is due on June 30, The City will continue to delay acceptance of a base year rate application until such time as CDS can provide at least six (6) months of actual financial information for the new three-cart automated/siautomated system. 11. Maintenance and Recycling Facility Relocation - The Eighth Amendment to the Franchise Agreement required that CONCORD DISPOSAL SERVICE relocate its maintenance and recycling facilities from their current location on Mallard Drive in the City of Concord to the Pittsburg Transfer Station location, or an equivalent location in the City of Pittsburg or surrounding area (e.g., Bay Point), within seven (7) years of the effective date of the Eighth Amendment. This facility relocation was intended to provide CONCORD DISPOSAL SERVICE the opportunity to maximize future waste diversion efforts. The Eighth Amendment stated that CONCORD DISPOSAL SERVICE shall not cause rates to increase as a result of the relocation. By implementing the requirements of this Ninth Amendment 5

9 Ninth Amendment CONCORD DISPOSAL SERVICE has satisfied the intention of the relocation requirements of the Eighth Amendment. All recycling operations will be transferred from Mallard Drive to the Pittsburg Transfer Station and future waste diversion has been maximized by CONCORD DISPOSAL SERVICE constructing a single-stream recycling facility at the Pittsburg Transfer Station. The costs of the relocation will not cause rates to increase. The requirements of the Eighth Amendment with respect to relocation are therefore met and CONCORD DISPOSAL SERVICE may retain maintenance functions at Mallard Drive in the City of Concord. 12, Except as specifically amended herein, the terms and conditions of the July 14, 1980, Agreement and amendments thereto shall remain in full force and effect. IN WITNESS WHEREOF,. the parties have executed this NINTH AMENDMENT TO FRANCHISE AGREEMENT the day and year written above. CONCORD DISPOSAL SERVICE, Inc. a California Corporation, CITY OF CONCORD, a municipal corporation APPROVED AS TO FORM: r.n.. Rp^il Craig La a e City Atto Ninth Amendment 6

10 ATTACHMENT 2 Concord Disposal Service 4080 MALLARD DRIVE a P0, BOX 5397 CONCORD, CALIFORNIA (925) CE VED DEC 19 2OO MWSe OFFICE December 19, 2008 Mr. Dan Keen City of Concord 1950 Parkside Drive Concord, CA Dear Mr. Keen: The purpose of this letter is to request a rate adjustment pursuant to the ninth amendment of our franchise agreement. The ninth amendment dated October 2, 2007 allows for a residential interim year rate change at anytime between April 30, 2008 and June 30, 2009 as a result of the recently implemented three (3) toter curbside system. The new curbside recycling system has been very successful. Our participation rates have increased from 40% to 70% weekly. Our recycling volumes have dramatically increased. As a result, we have had to add three additional routes that were not anticipated in our last rate analysis. This is the primary reason why we will be requesting a residential interim year rate change. We anticipate a submitted date no later than January 15, We are requesting that you expedite the process. We would appreciate your consideration in setting a meeting as soon as possible. SG:gl Attch.

11 ORIGINAL 2 BEFORE THE CITY COUNCIL OF THE CITY OF CONCORD COUNTY OF CONTRA COSTA, STATE OF CALIFORNIA A Resolution Adopting the Ninth Amendment to the Garbage Franchise between the City of Concord and Concord Disposal Service Resolution No WHEREAS, on July 14, 1980 CITY and CONCORD DISPOSAL SERVICE entered into an 7 Agreement entitled "A r rent to Extend Franchise" tithe "Agreement") which provides for 8 CONCORD DISPOSAL SERVICE to collect and dispose of refuse in the CITY and provide recycling 9 services subject to the terms and conditions set forth therein; and 10 WHEREAS, the Agreement has been amended eight times since July 14,190; and I I WHEREAS, The CI'T'Y and CONCORD DISPOSAL SERVICE desire to enter into the 12 Agreement entitled, "Ninth Amendment to Franchise Agreement"; and 13 WHEREAS, the CITY is satisfied with the services of CONCORD DISPOSAL SERVICE; 14 and 15 WHEREAS, the City of Concord has made substantial investment in the collection and 16 service support infrastructure provided by CONCORD DISPOSAL SERVICE, much of which is now 17 amortized, and collection vehicles and equipment, routing reaps and schedules, database development, 18 and customer service equipment and procedures have been developed and funded through service fees 19 paid by City of Concord ratepayers and the City ofconcord wishes to continue to enjoy these 20 efficiencies; and 21 WHEREAS, CONCORD DISPOSAL SERVICE's residential and commercial solid waste 22 collection rates compare favorably to surrounding communities; and 23 WHEREAS, City of Concord residents rate customer service provided by CONCORD 24 DISPOSAL SERVICE as excellent as shown by the CtTY's Bi-annual Customer Satisfaction Survey; 25 and 26 f If 11 R No.O7-'i6 1

12 I AREAS, in 1993, the CITY and CONCORD DISPOSAL SERVICE entered into the Sixth 2 Amendment to the Franchise Agreement wherein CITY and CONCORD DISPOSAL SERVICE 3 adopted a "Rate Setting Process and Methodology Manual for Residential Solid Waste Fees" (the 4 Rate Setting Manual") for the purposes of deternnining garbage collection rates which- are fair to City 5 of Concord residents while at the same time providing a fair return to the franchise hauler, and 6 ARIAS, the CITY and CONCORD DISPOSAL SERVICE have agreed to changes in the 7 Rate Setting Manual. 8 NOW, THEREFORE, in consideration of the mutual promises, covenants, and agreement set 9 forth herein, the parties agree to the following terms, conditions, and amendments to the Rate Setting 10 Manual; I 1 1. New Cart Purchases. On or before April 30, 2008, CONCORD DISPOSAL SERVICE shall purchase the following minimum quantities of new wheeled cuts for City residential collection services: Refuse (32-, 64-, or 96-gallon) - 27,913 Curbside Recycling (64-gallon) -- 27,913 Yardwaste (96-gallon) - 16,382 7 r Total carts -- 72, CONCORD DISPOSAL SERVICE shall retain the use of the 11,531 carts, 19 currently used for refuse collection, and included in the regulated rate base, for yard 20 waste carts in the new three-cart system. In addition, CONCORD DISPOSAL 21 SERVICE shall purchase a minima of an additional ten (10) percent of the 72, new cart total, or 7,221 cants, to have on-site for use as additional cart inventory. The 23 amortization of can purchases will be considered an allowable cost for rate setting 24 purposes. The amortization period will be set at seven (7) years and the allowable 25 interest rate will be 7.75 percent annually. 26 If 27 Ii 28 if Res. 1 o

13 1 2. Cart Delivery Tintiu2and Rs es. On or before September 30, 2009, CONCORD 2 DISPOSAL SERVICE shall deliver each City residential customer with three carts 3 each, including one for refuse (either a 32-, 64-, or 96-gallon cart), one for curbside 4 recycling (a 64-gallon cart), and one for yard waste (96-galloncan). The approved rate 5 for each level of service (either a 32-, 64- or 96-gallon refuse cart) including weekly 6 pick-up of a 64-gallon cart for single stream recycling and a 96-gallon cart for yard 7 waste: 8 32 gallon refuse cart-- weekly pick-up service /month 9 64 gallon refuse cart -- weekly pick-up service $27.00/month gal Ion refuse cart - weekly pick -up service $3 1.00/rnortth I 1 CONCORD DISPOSAL SERVICE shall only begin to charge a City residential 12 customer the new rate approved by the City Council for the three-cart automated/semi- 13 automated system on the date that the three carts (refuse, curbside recycling, and yard 14 waste) are delivered to that residential customer Automated Truck Pub a and Use on Ci Residential Routes, On orbefore 16 September 30, 2008, CONCORD DISPOSAL SERVICE shall purchase and begin to 17 serve City residential customers with eleven (11) now automated trucks for residential 18 refuse collection, 19 CONCORD DISPOSAL SERVICE shall only begin to charge a City residential 20 customer the new rate approved by the City Council for the three-cart automated/semi- 21 automated system after the City has confirmed that CONCORD DISPOSAL SERVICE 22 has began to serve that residential customer with an automated track for refuse 23 collection, Costs Lo Process Cl Curbside Rec elables at a Faciit Other than ft Planned 25 Materials Recovery Facility Sort Line, CONCORD DISPOSAL SERVICE shall 26 begin to deliver curbside recycling materials for processing at the newly constructed 27 Materials Recovery Facility (MRF) Sort line, located at the Pittsburg Transfer Station, 28 on or before September 30, Pa. No. D7-76 3

14 I If the IMF Sort Line is not operational and accepting City curbside materials, beginning October 1, 2008, until such time as the MRF Sort Line is operational, the City ratepayers shall not be responsible for costs incurred by CONCORD DISPOSAL SERVICE to consolidate, deliver, or process City curbside recyclable materials, collected by CONCORD DISPOSAL SERVrCCE, at a facility other than the MRF Sort Line located at the Pittsburg Transfer Station. 5. Year 2009 interim Year Rate Change Sub salon Timirr. For Interim Year 2009 only, CONCORD DISPOSAL SERVICE has the option to submit an application for a residential Interim Year Rate Chang: at any time between September 30, 2008 and,lure 30, This lengthens the period that the 2009 Interim Year Rate Application will be accepted by the City by nine (9) months from the submission date of September 30, 2008 specified in the City's Rate getting Manual. The City will make an effort to expedite the review process so that the rate change can be implemented in a shorter period of time than the three-month formal review timeline (shown in Exhibit 11.5 of the Rate Setting Manual), Following this one-time application submission extension for Interim Year 2009, the process will resume the submission schedule stated in the City's Rate Setting Manual. 6. MIM Serve of i Residential Customer Re se Cart Preferences. CONCORD DISPOSAL SERVICE shall mail a query to all City residential customers on, or before, October 12, The query Shall be designed to identify each City residential customers' refuse collection cart size preference, either a 32-gallon, 64-gallon, or 96- gallon cart, for the initial refuse'cart delivery that is scheduled for a date on, or before, September 30, For customers responding to the query, CONCORD DISPOSAL SERVICE shall deliver each customer the refuse cart size preference identified in the returned query. For non responding rustowners, CONCORD DISPOSAL SERVICE shall deliver the refuse cart size that is equivalent to the customers' current refuse service level. 11 I, Rcs, No,

15 1 7. Treatment of Former 20-Gallon Mini Can Customers, On or before September 2 30, 2008, CONCORD DISPOSAL SERVICE shall provide each existing 20-gallon 3 refuse can customer with a 32-gallon refuse cart, 64-gallon curbside recycling cart, and 4 96-gallon yard waste cart. Upon delivery of the three carts, CONCORD DISPOSAL 5 SERVICE shall begin to charge these former 20-gallon refuse can customers a rate of 6 $18.00 per month. CONCORD DISPOSAL SERVICE shall continue to charge these 7 former 20-gallon refuse can customers the $18.00 per month rate, subject to future rate 8 changes determined through the City's rate setting process, until such time as the 9 customer either discontinues service or changes to a refuse cart service level other than gallon. Beginning October 1, 2008, CONCORD DISPOSAL SERVICE shall no 1 t longer` offer City residential customers the 20-gallon refuse can service. 12 S. Treatment of Former 3Z lion Senior Citizen Customers QNVith Age Cfnd 13 Oualif eatiorr). On or before September 30, 2008, CONCORD DISPOSAL 14 SERVICE shall provide each existing customer with a 32-gallon senior citizen discount 15 rate (age 65 and over qualification) with a 32-gallon refuse cart, 64-gallon curbside 16 recycling cart, and 96-gallon yard waste cart. Upon delivery of the three carts, 17 CONCORD DISPOSAL SERVICE shall begin to charge these former 32-gallon can 18 senior citizen customers (age 65 and over qualification) a rate of $18,50 per month. For 19 each former 32-gallon senior citizen customer (age 65 and over qualification), 20 CONCORD DISPOSAL SERVICE, shall continue to charge this rate, subject to future 21 rate changes determined through the City's rate setting process, until such time as the 22 customer either discontinues service or changes to a refuse cart service level other than gallon, Beg mingoctober 1, 2008, CONCORD DISPOSAL SERVICE shall no 24 longer offer City residential customers a 32-gallon senior citizen rate (with an age 65 and 25 over qualification only). 26 it 27 /1 28!f Ilea. No,

16 1 ivew 2- flan Senior Cozen Customers itri A e and ow Income ustiacgtio. 2 Beginning October 1, 2008, CONCORD DISPOSAL SERVICE shall provide a new 3 32-gallon refuse cart rate, to qualifying low income senior citizen customers. 4 CONCORD DISPOSAL SERVICE shall charge these low income senior citizen 5 customers a rate of S per month. 'T'his new $18.50 per month rate will be subject 6 to future rate changes determined through the City's rate setting process. 7 To qualify for the low income senior citizen rate, for the year in question, the 8 customer must verify to CONCORD DISPOSAL SERVICE that the customer (1) is 65 9 years, or older, and (2) has an income Wow the Housing and Urban Development 10 (HUD) guideline for "very low income" for the Oakland Fremont area. For example, 11 for 2007, this limit was $29,350 for one person, $33,500 for two persons, and $37, for three persons. 13 For verification purposes, the senior citizen customer must provide CONCORD 14 DISPOSAL SERVICE with (1) a copy of his/her current driver's license or birth 1 $ certificate, (2) a copy of a federal or state tax return (Social Security number blocked) 16 showing net income, for the year prior to the verification year, or a copy of a Pacific Gas 17 & Electric bill noting the customer has a low income qualification Base Yeaar 2010 Application Restractioiir Failure to mulemeat New SAft t n. If CONCORD DISPOSAL SERVICE does not (1) deliver the three new carts to each residential customer, (2) provide eleven (11) new automated trucks for residential refuse co11ection, and (3) begin operations at the Pittsburg Transfer Station MRF Sort Line by December 31, 2008, the City will not accept a 2010 base year rate application (nor will it accept an interim year rate application for 2010). This restriction is necessary because there will not be sufficient actual financial information on the new three-cart automated/semiautomated system operations at the time the 2010 base year application is due o 330, The City will continue to delay acceptance of a base year rate application until such time as CDS can provide at least six (6) months of actual financial information for the new tree-cart autornated/semi-automated system. Res. NC

17 11, Maintenance and Recyclin Faculty Relocation The Eighth Amendment to the 2 Franchise Agreement required that CONCORD DISPOSAL SERVICE relocate its 3 maintenance and recycling facilities from their current location on Mallard Drive in the 4 City of Concord to the Pittsburg Transfer Station location, or an equivalent location in S 6 7 the City of Pittsburg or surrounding area (e.g., Bay Point), within seven (7) years of the effective date of the Eighth Amendment. This facility relocation was intended to provide CONCORD DISPOSAL SERVICE the opportunity to maximize future waste diversion Forts. The Eighth Amendment stated that CONCORD DISPOSAL SERVICE shall not cause rates to increase as a result of the relocation. By implementing the requirements of this Ninth Amendment CONCORD DISPOSAL SERVICE has satisfied the intention of the relocation requirements of the Eighth Amendment. All recycling operations will be transferred from Mallard Drive to the Pittsburg Transfer Station and future waste diversion has been maximized by CONCORD DISPOSAL SERVICE constructing a single-stream recycling facility at 15 the Pittsburg Transfer Station. Tlse costs of the relocation will not cause rates to 16 increase. The requirements of the Eighth Amendment with respect to relocation are 17 therefore met and CONCORD DISPOSAL SERVICE may retain maintenance is functions at Mallard Drive in the City of Concord Except as specifically amended herein, the terms and conditions of the duly 14, 1984, 20 Agreement and amendments thereto shall remain in full force and effect. 21 NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF CONCORD DOES 22 RESOLVE AS FOLLOWS. 23 Section 1. This resolution shall become effective immediately upon its passage and adoption. 24 Secsoff. The Mayor of the City of Concord is authorized to execute the Ninth Amendment 25 to the Garbage Franchise Agreement lwtween CONCORD DISPOSAL SERVICE and CITY. 26 1f I ital. No,

18 I PASSED AND ADOPTED by the City Council of the City of Concord on October 2, 2007, 2 by the following vote: 3 AYES: Councilmrnnbers - H. Allen, G. Bjerke, B. Shinn, M. Peterson 4 NOES: Councilmembers - None S ABSTAIN: Counaihembers - None 6 ABSENT: Counciimembers - L. Hoffineister 7 1 HEREBY CERTIFY that the foregoing.resolution No was duty and regularly 8 adopted at a regular joint meeting of the City Council and the Redevelopment Agency of the City of 9 Concord on October 2, f1 12 Mary Raelehm City CI APPROVED AS TO FORM: Craig e City Attorney Res. Na

19 City of Concord Interim Year Rate Change Application Section I--Changes in Uncontrolled Costs ATTACHMENT 3 Change in Uncontrolled Cost I Prior Year Tipping Fees per Ton $ Plus: Prior Year Regulatory Fees Per Ton Equals: Total Prior Year Uncontrolled Costs Per Ton $ 69,50 4 Projected Interim Year Tipping Fees Per Ton $ Plus: Projected Interim Year Regulatory Fees Per Ton 6 Equals: Total Projected Interim Year Uncontrolled Costs Per Ton $ Projected Change in Uncontrolled Costs. L17.46% Section II-Explanation of Changes in Uncontrolled Costs Tipping fee rates increase annually by the CPI as per contract with the disposal site, plus govermental fees. The rate in the Base Year Rate Application was $57.50 per ton, based on tipping fees in The Projected Interim Year tipping fee is $72.25 per ton effective No interim increase has been granted for Tipping Fees DRAFT Section lv--certification To the best of my knowledge, the data and information in this application is complete, accurate, and consistent with the instructions provided by the City of Concord Name: Silvio Garaventa, Jr Title: CEO Signature: Date: 1/ Year.2009 Page 1 of 4

20 City of Concord Interim Year Rate Change Worksheet Summary Percent Residential Rate Change Requested 11.66% Rate Schedule Residential -- Minican Residential - Senior Citizen Residential Residential Residential Adjusted New Current Rate Rate Adjustments Rate , Fr Year:2009 Pa ge 2 of 4

21 City of Concord Financial Information Interim Year Rate Change Worksheet Section I--Base Year Costs Base Year Controlled Costs 1 2 Plus: 3 Plus: 4 Minus: 5 Equals: Base Year Uncontrolled Costs 5 6 Plus: 7 Equals: Total Operating Costs Allowable Operating Profit Trucking Charges Tipping Fees (Profit Allowed) Total Controlled Costs Tipping Fees (Profit Allowed) Tipping Fees (Pass Through) Total Uncontrolled Costs $ 14,039,303 1,559,923 5,291,977 5,727;810 $ 15,163,393 $ 5,727,810 $ 762,813 6,490, Qa/o [ 6 Base Year Revenue Requirement (Less Franchise Fee) $ 21,654,016 [ /a Section 11--Changes in Costs Change in Controlled Cost 9 Projected Change in Consumer Prick: Index 10 Adjustment Factor from Prior Interim Year 11 Adjusted Projected Change in Consumer Price Index 10.12% -9.90% 0.z Change in Uncontrolled Cost Plus: Equals: Prior Year Tipping Fees Per Ton Prior Year Regulatory Fees Per Ton - Total Prior Year Uncontrolled Costs Per Ton $ $ Plus. Equals: Projected Interim Year Tipping Fees Per Ton Pmjected Interim Year Regulatory Fees Per Ton Total Projected Interim Year Uncontrolled Costs Per Ton $ i $ 18 Projected Change in Uncontrolled Costs 17.48% Section ill-calculation of Percentage Change in Rates Weighted Change in Controlled Costs 19 Controlled Costs as % of Base Yr. Revenue Requirement 20 Multi lien! by: 70% of Change in Consumer Price index 21 Equals: Weighted Change in Controlled Costs Weighted Change in Uncontrolled Costs 22 Uncontrolled Costs as % Base Yr. Revenue Requirement 23 Multi lied b Pro ected Cho a in Uncontrolled Costs 24 Equals: Weighted Change in Uncontrolled Costs 70.0% 0.16% 30.0% 7.48% 5.24% Total Change Unweighted Change for extraodinary increase Total Percent Change in Costs Year Page 3 of 4

22 City of Concord Interim Year Rate Chance Worksheet Consumer Price Index as ofl (effective date of last rate adjustment) Consumer Price Index as of 01/01/ Change in CPI 20,59 % change in the CPI 10.12% Trucking Charges per Rate Application 5,291,977 Adjusted rate app for 3 additional trucks 5,625,792 Increase due for Trucks 333,815 Labor Costs per Rate Application 4,526,419 Adjusted rate app for 3 additionni drivers 4,735,857 Increase due for Labor 209,438 OR on Labor 23,271 Increase from Base Year 566,524 Divided by.- Total Residential Revenue per rate app 8,977,017 Unweighted Change for Extraordinary Increases 6.31% Year :2009 Page 4of 4

23 ATTACHMENT 4 City of Concord Base Year Rate Change Application Summary Percent Residential Rate Change Requested 19.04% Adjusted Rate Schedule Current Rate Rate Adjustments New Rate 2. Minican Senior Citizen Service 3. Residential--32 gallon 4. Residential--64 gallon 5. Residential-95 gallon DRAFT To the best of my knowledge, the data and information in this application is complete, accurate, and consistent with the instructions provided by the City of Concord. Name: Tide: Signature: pate: Fiscal Year.2009 pame 1 of 3

24 City of Concord Financial Information Base Year Rate Change Application Prior Year Current Year Audited Estimated Information Information Year , Direct Labor 6. Tipping Fees (Profit Allowed) 7. Corporate Overhead 3, Office Salaries 9. Other General & Administrative Costs 10. Total Operating Costs 5,138,274 $,176,792 5,435,632 5,500, ,302 5,227, , , , , , ,203 1,361,499 2,278,474 2,360,499 13,088,525 13, 912, ,523, Operating Ratio 12. Allowable Operating Profit Sectin» 111--Pass Through Cost 13. Trucking Charges 14. Regulatory Fees 15. Tipping Fees (Pass Through) 16. Residential and Commercial Franchise Fee (No Change in Base Year 17. Total Pass Through Costs 6,830,928 7,677,203 A-^7,819, ,420 1,449,858 2,178,1 25 1,250,000 1,250,000 1,250,000 9,049,348 10,377,061 11,247,614 S$Ctl0n llr^ -R6veriue ltepurrement, fa Revenue Requirement Residential Revenue without Change Current Account Type Rate/Month Months Residential -One Minican Residential-Senior Citizen Residential-$ Residential-64 27,00 12 Residential HOA-Exempt Nov-08 Projected Accounts Total 139, ,630 1,146,816 1,844,208 5,568, , Sub-total 23. Less: Allowance for Uncxr lectible Residential Accounts 24. Total Residential Revenue (No Change in Base Year) 8,344,215 8,865, ,562 92, Commercial Revenue with Change 26. Less: Allowance for Uncollectible Commercial Accounts 27. Total Commercial Revenue (with Change in Base Year) 28. Recycled Material Sales (with Change in Base Year) 29. Total Revenue Sectipn Vl iaet Shnrtfail (Surolus) 30. Net Residential ShortfaIVSurplus Percent Change in Total Revenue 19.04% Residential Franchise Fee Adjustment Factor (1-6.4%) % Percent Change In Existing Residential Rates 19.04% DRAFT Fiscal Year., 2009 Pa e 2 of 3

25 AGREEMENT FOR PROFESSIONAL SERVICES THIS AGREEMENT ("Agreement") is entered into on March 2, 2009 between the City of Concord (the "CITY") and NewPoint Group, 2555 Third Street, Suite 215, Sacramento, CA (the "CONSULTANT"). THE PARTIES ENTER THIS AGREEMENT based upon the following facts, understandings and intentions: The CITY desires to contract with NewPoint Group and NewPoint Group to contract with the CITY for provision by NewPoint Group to the CITY for professional services in connection with the Rate Review of Concord Disposal Service's 2009 Base Year Rate Application as further described herein, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and promises of the parties herein contained, the parties hereto agree as follows: 1. Effective Date. The effective date of this Agreement is March 2, Services. CONSULTANT shall provide the basic services described in detail in Exhibit A, Scope of Services, attached hereto and made a part hereof. 3. Amendment. If authorized, CONSULTANT shall furnish additional services, which are in addition to the basic services. If additional services are requested by CITY, this Agreement may be amended, modified, or changed by the parties subject to mutual consent and in accordance with the Municipal Code by execution of an addendum by authorized representatives of both parties setting forth the additional scope of services to be performed, the performance time schedule, and the compensation for such services. 4. Authorized Representatives. Authorized representatives shall represent CITY and CONSULTANT in all matters pertaining to the services to be ordered by CITY or rendered by CONSULTANT under this Agreement except where approval for the CITY is specifically required by the City Council. All requirements of CITY pertaining to the services to be rendered under this Agreement by CONSULTANT shall be submitted through these representatives and CITY shall cooperate with CONSULTANT in all matters relating to this Agreement in such a manner as will result in the performance of such work without delay. CITY's authorized representative is authorized to execute on behalf of CITY, amendments to 1

26 the agreement, including amendments providing for additional compensation to CONSULTANT, not to exceed $20,000, over the base contract amount, throughout the remaining term of the agreement. The City Manager is authorized to execute on behalf of CITY, amendments to the agreement, including additional compensation to CONSULTANT, not to exceed $40,000, over the base contract amount, throughout the remaining term of this agreement beyond that authorized in section 6 must be approved by the City Council. The CITY authorized representative is Phillip Woods, Principal Planner of the Planning and Economic Development Department. The CONSULTANT authorized representative is James A. Gibson, Director. 5. Compensation. CONSULTANT shall be compensated on a $99,750 basis for basic services rendered under Section 2, as more particularly described in Exhibit A, Compensation; and CONSULTANT shall be compensated for additional services rendered under Section 3, as more particularly described in a fully approved and executed addendum to this Agreement. CONSULTANT may submit monthly statements for basic and additional services rendered. It is intended that payment to CONSULTANT will be made by CITY within (30) days of receipt of invoice. 6. Term. The term of this Agreement, subject to termination as set forth in Section 13, shall be from the effective date through March 2, The CITY's Authorized Representative or City Manager may extend the term of the agreement for a period not to exceed twelve months if necessary for the CONSULTANT to complete the Scope of Work or any additional Scope of Work previously authorized by the CITY. Such Extension of time shall be in writing by a duly executed addendum or amendment to this agreement. 7. Standard of Performance. CONSULTANT represents to CITY that the services shall be performed in an expeditious manner, and with the degree of skill and care that is required by current, good, and sound procedures and practices. CONSULTANT further agrees that the services shall be in conformance with generally accepted professional standards prevailing at the time work is performed. 8. Performance by Consultant CONSULTANT shall not employ other consultants or 2

27 contractors without the prior written approval of the CITY. CONSULTANT hereby designates the CONSULTANT'S representative as the person primarily responsible for the day-to-day performance of CONSULTANT'S work under this Agreement. CONSULTANT shall not change the CONSULTANT'S representative without the prior consent of the CITY. Unless otherwise expressly agreed by the CITY, CONSULTANT'S representative shall remain responsible for the quality and timeliness of performance of the services, notwithstanding any permitted or approved delegation hereunder. 9. Ownership and Maintenance of Documents. All documents furnished by CONSULTANT pursuant to this Agreement are instruments of CONSULTANT's services in respect to this project. They are not intended nor represented to be suitable for reuse by others on extensions of this project or on any other project. Any reuse without specific written verification and adoption by CONSULTANT for the specific purposes intended will be at user's sole risk and without liability or legal exposure and expenses to CONSULTANT, including attorney's fees arising out of such unauthorized reuse. CONSULTANT's records, documents, calculations, and all other instruments of service pertaining to actual project shall be given to CITY at the completion of the project. The CITY reserves the right to specify the file format that electronic document deliverables are presented to the CITY. If agreement is terminated per Section 13, deliverables shall be provided based on Section 13 requirements. 10. Indemnification. CONSULTANT agrees to defend, indemnify and hold harmless the CITY, its officers, agents, employees and volunteers from and against any and all claims, demands, actions, losses, damages, injuries, and liability (including all attorney's fees and other litigation expenses) arising out of the negligent acts or omissions of CONSULTANT in the performance of this Agreement. 11. Insurance. CONSULTANT shall, at its own expense, procure and maintain in full force at all times during the term of this Agreement the following insurance: A. Commercial General Liability Coverage. CONSULTANT shall maintain commercial general liability insurance with limits of no less than one million dollars 3

28 ($1,000,000) combined single limit per occurrence or two million dollars ($2,000,000) aggregate limit for bodily injury, personal injury, and property damage. B. Automobile Liability Coverage. CONSULTANT shall maintain automobile liability insurance covering all vehicles used in the performance of this Agreement providing a One Million Dollar ($1,000,000) combined single limit per occurrence for bodily injury, personal injury, and property damage. C. Professional Liability Coverage. CONSULTANT shall maintain professional liability insurance with coverage for all negligent errors, acts or omissions committed by CONSULTANT, its agents and employees in the performance of this Agreement. The amount of this insurance shall be not less than five hundred thousand dollars ($500,000) on a claims made annual aggregate basis or a combined single limit per occurrence basis. D. Compliance with State Workers' Compensation Requirements. CONSULTANT covenants that it will insure itself against liability for Workers' Compensation pursuant to the provisions of California Labor Code 3700, et seq. CONSULTANT shall, at all times, upon demand of the City Council and properly authorized agents, furnish proof that Workers' Compensation Insurance is being maintained by it in force and effect in accordance with the California Labor Code. E. Other Insurance Provisions. The policies are to contain, or be endorsed to contain the following provisions: (1) CITY, its officers, agents, employees, and volunteers are to be covered as additional insureds as respects: Liability arising out of activities performed by or on behalf of CONSULTANT and operations of CONSULTANT, premises owned, occupied, or used by CONSULTANT. The coverage shall contain no special limitations on the scope or protection afforded to CITY, its officers, officials, employees, or volunteers. (2) CONSULTANT'S insurance coverage shall be primary insurance with respect to CITY, its officers, officials, employees, and volunteers. Any insurance, risk pooling arrangement, or self-insurance maintained by CITY, its officers, officials, 4

29 employees, or volunteers shall be in excess of CONSULTANT'S insurance and shall not contribute with it. (3) Any failure to comply with the reporting provisions of the policy shall not affect the coverage provided to the CITY, its officers, officials, employees, or volunteers. (4) The aforementioned policies shall be issued by an insurance carrier having a rating of Best A-7 or better which is satisfactory to the City Attorney and shall be delivered to CITY at the time of the execution of this Agreement or as provided below. In lieu of actual delivery of such policies, a Certificate issued by the insurance carrier showing such policy to be in force for the period covered by the Agreement may be delivered to CITY. Such policies and certificates shall be in a form approved by the City Attorney. Except for worker's compensation and professional liability insurance, the policies mentioned in this subsection shall name CITY as an additional insured and provide for thirty (30) days notice of cancellation to CITY. Said policies shall not be canceled earlier than, nor the amount of coverage reduced earlier than, thirty (30) days after the CITY receives notices from the insured of the intent of cancellation or reduction. 12. Suspension of Work. CITY may, at any time, by ten (10) days' written notice, suspend further performance by CONSULTANT. All suspensions shall extend the time schedule for performance in a mutually satisfactory manner, and CONSULTANT shall be paid for services performed and reimbursable expenses incurred prior to the suspension date. During the period of suspension, CONSULTANT shall not receive any payment for services, or expenses, except for reasonable administration expenses, incurred by CONSULTANT by reason of such suspension. 13. Termination. CITY may terminate this Agreement for any reason upon ten (10) days written notice to the other party. CITY may terminate the Agreement upon five (5) days written notice if CONSULTANT breaches this Agreement. In the event of termination, CONSULTANT shall promptly deliver to the CITY any reports or other written, recorded, photographic, or visual materials and other deliverables prepared for the CITY prior to the effective date of such termination. After 5

30 receipt of deliverables, CITY will pay CONSULTANT for the services performed as of the effective date of the termination. 14. Compliance with Civil Rights. During the performance of this contract, CONSULTANT agrees as follows: A. Equal Employment Opportunity. In connection with the execution of this Agreement, CONSULTANT shall not discriminate against any employee or applicant for employment because of race, religion, color, sex, or national origin. Such actions shall include, but not be limited to, the following: employment, promotion, upgrading, demotion, or transfer; recruitment or recruitment advertising; layoff or termination; rate of pay or other forms of compensation; and selection for training including apprenticeship. B. Nondiscrimination Civil Rights Act of CONSULTANT will comply with all federal regulations relative to nondiscrimination in federally assisted programs. C. Solicitations for Subcontractors including Procurement of Materials and Equipment. In all solicitation, either by competitive bidding or negotiations, made by CONSULTANT for work to be performed under a subcontract including procurement of materials or leases of equipment, each potential subcontractor, supplier or lessor shall be notified by CONSULTANT of CONSULTANT'S obligation under this Agreement and the regulations relative to nondiscrimination on the grounds of race, religion, color, sex, or national origin. 15. Independent Contractor. In assuming and performing the services, CONSULTANT is an independent contractor and shall not be eligible for any benefits, which the City may provide its employees, except as expressly provided for in the Agreement. All persons, if any, hired by CONSULTANT shall be employees or subcontractors of CONSULTANT and shall not be construed as employees or agents of the City in any respect. CONSULTANT shall have responsibility for and control over the means of providing services under this Agreement. 16. Compliance with Laws. CONSULTANT shall comply with all applicable Federal, State of California, and local laws, rules, and regulations and shall obtain all applicable licenses and permits for the conduct of its business and the performance of the services. 6

31 Choice of Laws. This Agreement shall be construed and interpreted in accordance with the laws of the State of California, excluding any choice of law rules which may direct the application of the laws of another jurisdiction. 18. Non-Waiver. The waiver by either party of any breach of any term, covenant, or condition contained in the Agreement, or any default in their performance of any obligations under the Agreement shall not be deemed to be a waiver of any other breach or default of the same or any other term, covenant, condition, or obligation, nor shall any waiver of any incident of breach of default constitute a continuing waiver of same. 19. Enforceability. In the event that any of the provisions or portions of application of any of the provisions of the Agreement are held to be illegal or invalid by a court of competent jurisdiction, CITY and CONSULTANT shall negotiate an equitable adjustment in the provisions of the Agreement with a view toward effecting the purpose of the Agreement. The illegality or invalidity of any of the provisions or portions of application of any of the provisions of the Agreement shall not affect the legality or enforceability of the remaining provisions or portions of application of any of the provisions of the Agreement. 20. Integration. The Agreement contains the entire agreement and understanding between the parties as to the subject matter of this Agreement. It merges and supersedes all prior or contemporaneous agreements, commitments, representation, writings, and discussions between CONSULTANT and CITY, whether oral or written. 21. Successors and Assigns. CITY and CONSULTANT respectively, bind themselves, their successors, assigns, and legal representatives. CONSULTANT shall not assign or transfer any interest in the Agreement without the CITY's prior written consent, which consent shall be in the CITY's sole discretion. Any attempted assignment or transfer in breach of this provision shall be void. 22. Attorney's Fees. If either party to this Agreement commences any legal action against the other party arising out of this Agreement, the prevailing party shall be entitled to recover its reasonable litigation expenses, including court costs, expert witness fees, discovery expenses, and attorney's fees. 23. Financial Records. Records of CONSULTANT's direct labor costs, payroll costs, 7

32 and reimbursable expenses pertaining to this project covered by this Agreement will be kept on a generally recognized accounting basis and made available to CITY if and when required. 24. Notices. All notices required hereunder shall be in writing and mailed postage prepaid by Certified or Registered mail, return receipt requested, or by personal delivery to the CITY's address as shown below, or such other places as CITY or CONSULTANT may, from time to time, respectively, designate in a written notice given to the other. Notice shall be deemed received three (3) days after the date of the mailing thereof or upon personal delivery To CITY Phillip Woods, Principal Planner Planning and Economic Development Department City of Concord 1950 Parkside Drive Concord, CA Phone: (925) Fax: (925) To CONSULTANT James A. Gibson, Director NewPoint Group 2555 Third Street, Suite 215 Sacramento,, CA Phone: (916) Fax: (916) IN WITNESS WHEREOF, the parties have executed this Agreement in one (1) or more copies as of the date and year first written above. CONSULTANT CITY OF CONCORD, a Municipal Corporation By: Name: James A. Gibson Name: Daniel E. Keen Title: Director Title City Manager Address: 2555 Third Street, Suite 215 Address: 1950 Parkside Drive Sacramento,, CA Concord, CA Telephone: (916) Telephone: (925) APPROVED AS TO FORM: ATTEST: City Attorney City Clerk By: 8

33 1 2 3 FINANCE DIRECTOR'S CERTIFICATION: Concord, California Date: I HEREBY CERTIFY THAT ADEQUATE FUNDS EXIST OR WILL BE RECEIVED DURING THE CURRENT FISCAL YEAR 2008/09 TO PAY THE ANTICIPATED EXPENSES TO BE INCURRED PURSUANT TO THIS CONTRACT. THE SUM OF $99,750. Account Code Z Finance Director's Signature Exhibit A: NewPoint Group Scope of Services Reference: The agreement entered into on March 2, 2009 between the City of Concord and NewPoint Group, 2555 Third Street, Suite 215, Sacramento, CA

34 NewPoint Group Management Consultants February 10, 2009 Mr. Phillip Woods, AICP Principal Planner City of Concord 1950 Parkside Drive, MS/53 Concord, California Subject: Rate Review of Concord Disposal Service, Inc. Enclosed is NewPoint Group, Inc.'s proposal to conduct a review of Concord Disposal Service's (CDS) 2009 Base Year Rate Application (Base Year Application). In accordance with the City's Rate Setting Process and Methodology Manual for Residential Solid Waste Fees (Manual), CDS submits a Base Year Application every four years. The City expects that CDS will submit a Base Year Application in March, 2009, for rates to be set mid-year 2009 and continuing through This proposal is to conduct the review of the 2009 Base Year Application. The review will focus on actual 2006, 2007, and 2008 financial results, estimated 2009 financial results, and projected 2010 financial results. This proposal is organized into four (4) sections as follows: A. Project Background B. Scope of Work C NewPoint Group Qualifications D. Project Schedule and Costs. 'This timing is approximately five (5) months in advance of the Base Year rate review timeline specified in the Manual, which would normally require CDS to submit the Application by July 31, 2009, for rates to be set on January 1, Due to the numerous potentially complex and signficant rate setting issues involved with this Base Year review ( i.e., following implementation of a new residential rate structure, experience with single stream recycling operations, and development of a large new materials sort line at the Pittsburg facility), the City elected to expedite the timing of this Base Year rate review. The City desires to minimize overall rate review costs to City ratepayers (by avoiding two separate detailed rate reviews, including one for a potentially large 2009 Interim Year rate request followed immediately by another for a potentially large 2010 Base Year rate request) and to address CDS's potential need for near-term rate relief Third Street Suite 215, Sacramento, California Phone: (916) Fax: (916) http; //www, newporntgroup. Com

35 NewPoint Group Mar.^ger-^enl Consults nos Mr. Phillip Woods Page 2 February 10, 2009 A. Project Background Every four years, the City conducts a Base Year rate review of CDS. Since the Manual's development in 1993, the City has conducted four Base Year rate reviews in 1993, 1997, and 20022, and This rate review will be the fifth Base Year rate review conducted by the City. Rate changes since the Rate Manual's inception are as follows: 1993: rate increase of 16.3 percent (base year) 1994: rate decrease of 8.6 percent (interim year) 1995: no rate change 1996: no rate change 1997: rate decrease of 17.9 percent ( base year) 1998: rate increase of 4.6 percent (interim year) 1999: no rate change 2000: rate increase of $2.75 per customer, per month (new greenwaste program) 2001: no rate change 2002: rate increase of 3.07 percent (base year) 2003: no rate change 2004: no rate change 2005: rate increase of 6.43 percent (interim year)' 2006: rate increase of 6.22 percent ( base year) 2007: no rate change 2008: residential rate restructuring with automation (an effective 7.62 percent increase). In addition to keeping rate changes reasonable over time, the City and CDS are working together to meet Assembly Bill 939 diversion goals. Recent diversion levels have been as follows: 1998: 31% 1999: 44% 2000: 53% 2004: 51% 2005: 46% 2006: 49%. 2 The 2001 Base Year review was initiated in 2001 and completed in February, Ibid. 4 Approved by the City Council on April 5, 2005.

36 NewPoint Group Mar.^gemerl Consults n^s Mr. Phillip Woods Page 3 February 10, 2009 Current residential rates are as follows: Residential Service Level Rate (per customer, per month) 20-gallon $ gallon $ gallon $ gallon $31.00 Senior 32-gallon $18.50 B. Scope of Work NewPoint Group will review CDS 's Base Year Rate Application (Application) in accordance with the Manual requirements. The current version of the Manual was completed January 1, The City' s rate setting review process contains eleven ( 11) steps as shown in Exhibit 11-3 (page II- 23) of the Manual. We propose a five-task work plan as follows: Task 1 - Initiate and Administer Project At the formal kick-off meeting with the City's project manager, NewPoint Group will discuss key project issues, obtain additional background information, and set up initial interviews. NewPoint Group will provide the City with verbal monthly progress reports, which will summarize work completed in the prior month, work planned for the next month, and any problems which may have arisen. NewPoint Group also will prepare monthly invoices that summarize level of effort and charges for the month. Subtasks 1.1 Conduct project kick-off meeting 1.2 Submit requests for initial documents and data 1.3 Coordinate initial interviews with the City and CDS 1.4 Modify work plan, if necessary 1.5 Revise project schedule, as needed 1.6 Perform ongoing project management 1.7 Provide monthly progress reports Deliverable(s) 11 Revised work plan, if necessary 11 Monthly verbal progress reports.

37 NewPoint Group Mar.^gemerl Consults n^s Mr. Phillip Woods February 10, 2009 Page 4 Task 2 - Review Rate Change Application The Base Year process presented in the Manual describes 11 steps, seven of which are the responsibility of the City. The franchise hauler is responsible for the other four steps. NewPoint Group will assume the role of the "City" as described in the Manual for all steps excepting 8.a. which is posting the notice of the Public Hearing. Tasks and their deliverables are summarized in Table 1 below. The work NewPoint Group will perform during each of these tasks is described in Sections I, II, III and the Appendix of the Manual. In this task 2, we will complete the first three Work Tasks shown in Table 1 below (i.e., Work Task 1, 2, and 3). Work Tasks 4, 5, 6, and 7 shown in Table 1 below will be completed as part of task 5 of our work plan. Table 1 Rate Change Application Review Work Tasks and Deliverables Work Task Deliverables 1. Verify completeness of rate change application 11 Letter notifying CDS that the application (Step 11-2 of Manual) is either complete or incomplete 2. Review rate change application and prepare 11 Documentation of review findings response (Step 11-3 of Manual) 11 Request to CDS for additional data and clarification, if necessary 3. Survey services in similar service areas (Step Summary of survey results for at least ten of Manual) (10) Bay Area communities 11 Residential service and rates 11 Commercial service and rates 11 Trucking costs 11 Office space costs 4. Prepare draft report and recommendations (Step 11 Draft report and recommendations 11-6 of Manual) 5. Conduct public hearing (Step II-8b of Manual) 11 Participate at public hearing 6. Prepare final report and recommendations (Step 11 Final report and recommendations 11-9 of Manual) 7. Present final report and recommendations to 11 Participate in City Council City Council (Step of Manual) meeting/presentation

38 NewPoint Group Mar.^gemerl Consults n^s Mr. Phillip Woods Page 5 February 10, 2009 As part of Work Task 2 in Table 1 on the prior page, we will: Reconcile the application with financial statements Compare actual results with prior projections Analyze fluctuations in major cost categories Examine the relationship between operating and financial data for reasonableness Evaluate revenue and cost projections Identify major drivers for requested changes in rates. For Work Task 3 in Table 1 on the prior page, the survey services in similar service areas, NewPoint Group will provide the City with detailed comparative survey information. This will include survey information for residential and commercial rates and services offered in the jurisdictions selected for comparison. NewPoint Group will provide, as a part of this survey, a discussion regarding differences in rates offered in similar service areas and those offered by CDS. This discussion will include a brief analysis of why differences in rates exist between the communities surveyed (e.g., geography, landfill costs, size of service, frequency of service, etc). Subtasks 2.1 Review rate application for completeness 2.2 Conduct applicable rate review tasks in accordance with Manual requirements 2.3 Prepare and submit formal data requests to CDS 2.4 Develop analytical rate model 2.5 Conduct comparative rate survey Deliverable(s) 11 Letter of completeness Data requests Rate survey Workpaper documentation of rate review. Task 3 - Conduct Operational, Engineering, and Economic Assessment of Selected Rate Application Components and Requested Rate Change Drivers In this task, we will perform a detailed assessment of a range of complex and interrelated factors that impact the requested rate change for this Base Year rate review. This assessment may require us to perform activities including on-site visits, reviews of collection routes and practices, reviews of operations and maintenance practices, and analytical engineering and operational calculations.

39 NewPoint Group Mar.^gemerl Consults n^s Mr. Phillip Woods Page 6 February 10, 2009 Some of these potential rate setting areas are described below: 1. Additional residential curbside recycling operations requirements. We will review CDS's operations, including conducting some route observations (as needed), reviewing customer participation and recycling tonnage data, developing some "engineering-like" recycling volume calculations, and assessing results against industry benchmarks, to determine whether an additional up to three (3) new routes, drivers, and trucks are necessary to support increased City participation in the curbside recycling program following implementation of the 64-gallon cart. 2. Increases in landfill tipping fees. We will review the landfill tipping fees charged to CDS for disposal (at Potrero Hills Landfill, owned by Republic Services). 3. Increases in transfer station costs. We will review increases in transfer station costs resulting from the new City of Pittsburg facility improvements, including new material sort line costs, new buildings, facility improvements, overall cost overruns, and financing requirements. 4. Reductions in landfill disposal tonnages. With declining economic conditions, most California jurisdictions have recently experienced dramatic reductions in overall disposal tonnages. We will evaluate to what degree these reductions are occurring in the City and how these reductions affect the City's tipping fee costs. 5. Increases in trucking charges. We will assess the impact of upgrading the fleet to meet California Air Resources Board (CARB) engine retrofit requirements as well as the changes to fleet maintenance costs charged by SEG Trucking. 6. Reductions in recycled material sales revenues. With declining economic conditions in the recycling markets, the amounts recovered for sales of curbside recyclables are lower. However, this represents a relatively small portion of CDS's overall revenue requirement. We will evaluate how recycling market conditions impact the City's recycling revenues. 7. Increases in interest charges for recent cart purchases. With the recent roll-out of the new threecart system, we will review, and account for, the major capital investment in over 80,000 new carts, including how cart depreciation and financing charges are included in the rates. 8. Franchise fees. As part of our review, we will work with the City and CDS to determine appropriate adjustments to the City's franchise fee included in the rate base. As of July 1, 2010, the franchise agreement requires the annual franchise fee paid to the City to increase to equal the greater of (1) $1,500,000 annually, or (2) 6.4 percent of gross residential revenues and 5.0 percent of gross commercial revenues. 9. Dynamically changing residential rate structure. We will assess how potential changes in residential rates could impact residents' decisions regarding residential cart sizes and associated rates (i.e., how does the distribution of customers, within the rate structure, change with changes in rates charged).

40 NewPoint Group Mar.^gemerl Consults n^s Mr. Phillip Woods Page 7 February 10, Other requests from CDS for alternative rate setting treatment. CDS has indicated that its Application may contain, and/or CDS may want to discuss, alternative treatment of Rate Manual provisions as part of this review (e.g., corporate overhead cap levels). We will make recommendations to the City related to these alternative Rate Manual provision proposals and assess their impact, if applicable, on this rate review. 11. Mitigation of potential rate impacts to residential customers. CDS has initially indicated to the City that the application will contain a large requested residential rate increase. Based on results of our review, should the City be faced with a large rate increase, we will work with the City and CDS to develop a mutually agreeable alternative to a large one-time rate increase (e.g., multiple rate changes phased over time ). This likely is particularly important to the City in light of the current unfavorable economic conditions and the associated negative climate for any kind of public sector rate or fee increase. We will review that the projected revenue requirements for 2009 for consistency with the following current key rate setting policies: 11 Corporate overhead capped at two (2) percent of gross revenues 11 Franchise fees set equal to franchise agreement requirements 11 Interest expense allowed with profit 11 Legal fees allowed with profit up to $150, Office rent allowed with profit (with comparable lease rates) 11 Profit allowed at an operating ratio of 88 to 92 percent, adjusted to 90 percent in base years 11 Tipping fees allowed with profit up to $51 per ton, but over $51 per ton a pass through expense 11 Trucking charges treated as a pass-through expense (we will review the level of profit contained within trucking charges for reasonableness). Subtasks 3.1 Conduct operational and field assessments, as needed 3.2 Perform engineering and operational calculations 3.3 Determine revenue and cost impact of recent changes resulting from the three-cart system and new refuse, recycling, and yardwaste collection operations 3.4 Develop rate setting drivers and rate treatment recommendations 3.5 Quantify impacts of rate setting drivers on revenue requirement and rates 3.6 Develop rate setting discussion topics document 3.7 Meet with City and CDS to review and discuss results 3.8 Identify recommended rate change

41 NewPoint Group Mar.^gemerl Consults n^s Mr. Phillip Woods Page 8 February 10, 2009 Deliverable(s) Working analytical rate model, reflecting rate treatment of issues Meeting with City and CDS to review rate setting issues Rate review findings and recommendations Workpaper documentation of operational, engineering, and economic assessment. Task 4 - Review the Company's Audited Financial Statements and Supporting Documentation CDS submits audited financial statements with its Base Year Application. NewPoint Group will work with the City to determine the specific operational or financial information that may be needed that is not already presented in the financial report. NewPoint Group will check the accuracy and veracity of the information contained in the audited financial statements. If the hauler's auditor gives a "qualified" opinion on the financial statements, NewPoint Group will work with the hauler and their auditor to determine the cause and effect of the qualified opinion. NewPoint Group will determine if the issue is with controls at the company to prevent errors occurring and if the nature of the error is material or not. Controls should exist to achieve the following objectives: 11 All transactions are recorded Each recorded transaction is: Real Properly valued Reflected in the proper time period Correctly classified. The cause for the qualified opinion will determine the type of documents or information NewPoint Group will need to review. After review of appropriate documentation, NewPoint Group will issue a written analysis of the accuracy of financial information provided by the hauler in the rate application. The year 2005 audit used for the 2006 Base Year Rate Review was completed by Blanding Boyer & Rockwell, LLP. The 2005 audit was unqualified. We understand that CDS will use Blanding Boyer & Rockwell, LLP for the 2008 audit. We will identify selected large dollar transactions and ask that CDS provide supporting documentation for these transactions. Examples of supporting documentation may include invoices/receipts, copies of checks, payroll registers, ad hoc reports, and accounting reports. CDS has indicated that it plans to finalize its financial audit by April 30, 2009, and that this process could be delayed. We plan to begin the rate review, based on internal financial statements

42 NewPoint Group Mar.^gemerl Consults n^s Mr. Phillip Woods Page 9 February 10, 2009 and without the formal financial audit, and we will update our results and complete this Task 4 following CDS's submission of its year 2008 financial audit. Subtasks 4.1 Obtain and review the company's financial statements provided with rate application 4.2 If qualified opinion provided, determine cause and impact 4.3 Conduct testing of a sample of large transactions 4.4 Assess impact on Application of the cause for qualified opinion, if provided. 4.5 Conduct checks on the accuracy and veracity of the audited financial statements whether a clean or qualified opinion is provided by the hauler's auditor Deliverable(s) Workpaper documentation of analysis of financial statements. Task 5 - Prepare Draft and Final Rate Review Reports In this task, NewPoint Group will prepare the draft and final reports of the rate review. The report will include all findings and recommendations from the rate review. Once NewPoint Group has completed a final draft report, NewPoint Group will provide copies of this document to the City and CDS. Comments received from the City and CDS will be incorporated into the report, as appropriate. The City generally holds an initial meeting with the Infrastructure and Franchise Committee. We will attend this meeting and answer specific questions that the committee may have on our review. The City then brings the matter in front of the City Council. We will present results of our rate review to the City Council and answer questions of the City Council and the public as needed. Subtasks 5.1 Develop initial draft report 5.2 Review draft report with the City and CDS 5.3 Revise report, as necessary 5.4 Submit final draft report 5.5 Assist the City with presenting final draft report to the City Council subcommittee and answering questions 5.6 Present results at City Council meeting 5.7 Revise final draft report, as required, and submit final report

43 NewPoint Group Mar.^gemerl Consults n^s Mr. Phillip Woods February 10, 2009 Page 10 Deliverable(s) Draft report Presentation materials for an Infrastructure and Franchise Committee meeting, a City and hauler meeting, and a City Council meeting Final report. C. NewPoint Group Qualifications As background, NewPoint Group personnel have provided solid waste consulting assistance to the City for over sixteen (16) years, since assisting with development of its Rate Setting Process and Methodology Manual for Residential Solid Waste Fees (Manual) in Additionally, in the past we have assisted the City with evaluating and negotiating favorable terms associated with a franchise extension request from CDS. As a result, our firm is uniquely familiar with CDS' operations, performance, customer service, recycling operations, facilities, and its financial condition. We have assisted the City to stabilize rates and to implement new program changes for City residents for the past decade. The City Council has continually approved of the benefits that have accrued to the City from the use of the rate setting process and Manual. NewPoint Group personnel have assisted the City with solid waste rate setting since the early 1990s. Projects we have been involved with have included: 11 Develop the City's Rate Setting Manual (1993) 11 Update the City' s Rate Setting Manual (1997) 11 Base Year Rate Review of CDS (1993) 11 Base Year Rate Review of CDS (1997) 11 Base Year Rate Review of CDS (2002) 11 Evaluation of Franchise Extension (1997, 2004) 11 Interim Year Rate Review of CDS (2005) 11 Base Year Rate Review of CDS (2006) 11 Review of CDS Application for Three-Cart Automated/Semi-Automated Collection System (2007). NewPoint Group maintains a solid presence in Contra Costa County solid waste management consulting. We have recently reviewed refuse collection operations and rates for three of Contra Costa County's haulers, including Allied Waste Services, Republic Services, and Garaventa Enterprises (a related party to CDS). We also have assisted the City of Martinez in developing a rate setting process, reviewing rates, adding a new single stream recycling program, as well as evaluating a franchise agreement extension request from its franchise hauler.

44 NewPoint Group Mar.^gemerl Consults n^s Mr. Phillip Woods Page 11 February 10, 2009 We have included selected firm solid waste management consulting qualifications as Attachment A to this proposal. A description of our proposed project consultants is provided in Attachment B to this proposal. D. Project Schedule and Costs We assume a start date of March 2, It is envisioned that our work will be completed by the end of June, 2009, for City Council review and approval during the month of July, 2009, and for rate change implementation in August, Should we encounter any unforeseen delays in the project (e.g., obtaining access to data and information), we will immediately let the City know and work with the City to revise the schedule. We will conduct this engagement for a not-to-exceed fixed price of $99,750. This represents a total of 734 hours of consulting services. A summary of fees by person, and by task, is provided in Attachment C to this proposal. Our hourly rates are $175, $150, and $100 for Director, Principal, and Associate level personnel, respectively. Our fees reflect expenses for administration, word processing, production, and travel. NewPoint Group will bill the City monthly in arrears for our services. NewPoint Group has enjoyed a long-standing consultant relationship with the City. We value this relationship and would be pleased to continue to provide solid waste management consulting services to the City. We look forward to the opportunity to assist the City with the 2009 Base Year rate review of CDS. Please do not hesitate to contact me at (916) or Erik Nylund at (916) , should you have any questions regarding this scope of services or our qualifications to serve the City. Very truly yours, NewPoint Grou Inc. James A. Gibson, Ph.D. Director

45 NewPolnt Group Mar.^_lemerl Consults nos Mr. Phillip Woods February 10, 2009 Page 12 Attachment A NewPoint Group Solid Waste Management Projects (page 1 of 2) 1. Calaveras County Calaveras County Calaveras County Disposal Economics Evaluation 2. Calif. Depart. of Conservation Statewide Over 200 hauling companies Cost of Recycling Study 3. Calif. Depart. of Conservation Contra Costa Co. - Kensington Bay View Refuse Service, Inc. Curbside Program Cost Study 4. Calif. Depart. of Conservation City of San Marino Rodriguez Bros. Disposal Svc. Curbside Program Cost Study 5. Calif. Depart. of Conservation City of Torrance City of Torrance Curbside Program Cost Study 6. Calif. Depart. of Conservation City of Turlock Turlock Scavenger Company Curbside Program Cost Study 7. Calif. Energy Commission County of Del Norte County of Del Norte Disposal Economics Evaluation 8. Calif. Energy Commission County of Lassen County of Lassen Disposal Economics Evaluation 9. California Waste Solutions City of Oakland California Waste Solutions Recycling Cost and Bid Analysis 10. City of Barstow City of Barstow Desert Disposal Service Cost of Service Study, Rate Review, Route Audit, Time and Motion Study 11. City of Campbell City of Campbell Green Valley Disposal Performance Audit 12. City of Commerce City of Commerce City of Commerce Disposal Economics Evaluation 13. City of Concord City of Concord Concord Disposal Service Rate Setting Manual, Base/Interim Year Rate Reviews, Franchise Extension Evaluations, Tipping Fee Study, Three Cart System and Automation Planning, MRF Sort Line Assistance 14. City of Coronado City of Coronado EDCO Solid Waste Mgt. Study 15. City of Farmington, N.M. City of Farmington, N.M. Waste Mgt. of New Mexico Cost of Service Study and Rate Review 16. City of Fremont City of Fremont Waste Mgt. of Alameda County Balancing Account Audit 17. City of Los Gatos City of Los Gatos Green Valley Disposal Performance Audit 18. City of Martinez City of Martinez Pleasant Hill Bayshore Disposal (was BFI co., now Allied co.) Rate Setting Manual, Base/Interim Rate Reviews, Yard/Mixed Paper Recycling Cost Study, Single Stream Recycling Program Review 19. City of Monte Sereno City of Monte Sereno Green Valley Disposal Performance Audit 20. City of San Jose City of San Jose Norcal Curbside Recycling Study 21. City of San Luis Obispo City of San Luis Obispo San Luis Obispo Garbage Rate Setting Manual and Review 22. City of Saratoga City of Saratoga Green Valley Disposal Performance Audit 23. City of Vacaville City of Vacaville Vacaville Sanitary Service Rate Reviews 24. City of Vallejo City of Vallejo Vallejo Garbage/ Vallejo Recycling Refuse and Recycling Rate Reviews, Automation Planning, MRF Operations Assessment 25. Contra Costa County Contra Costa Co. - Bay Point Pleasant Hill Bayshore Disposal (Allied co.) Rate Setting Manual and Base/Interim Rate Reviews

46 NewPoint Group Mar.^_lemerl Consults nos Mr. Phillip Woods February 10, 2009 Page 13 Attachment A NewPoint Group Solid Waste Management Projects (continued) (page 2 of 2) 26. Contra Costa County Contra Costa Co. - El Sobrante 27. Contra Costa County Contra Costa Co. - Rodeo/Oakley Richmond Sanitary Service (Republic co.) Garaventa Enterprises Rate Setting Manual and Base/Interim Rate Reviews Rate Setting Manual and Base/Interim Rate Reviews 28. Contra Costa County Contra Costa Co. - Crockett Crockett Garbage Service Rate Study 29. County of Sacramento County of Sacramento County of Sacramento Operations Review and Rate Study 30. Douglas County, NV Douglas County, NV Douglas Disposal, Inc. Rate Setting Manual and Review 31. Durham Rd. Landfill Trust Authority City of Fremont, Newark, Union City Waste Management of Alameda County Landfill Closure and Post Closure 32. EI Dorado County EI Dorado County El Dorado Disposal Services Rate Setting Manual and Review 33. EI Dorado County EI Dorado County Amador Disposal Service, American River Disposal Service, EI Dorado Disposal Services, Sierra Disposal Service, South Tahoe Refuse Company, and Tahoe-Truckee Sierra Disposal Rate and Service Study; System Planning; Comparative Surveys; Transfer Station/MRF Operations Review; Assessment of Franchise Extension Options; Franchise Valuations 34. Integrated Collection Service Several areas, OR Integrated Collection Service Hauler Profitability Study 35. King County, WA King County, WA King County Performance Audit 36. Morrison & Foerster City of Fremont Waste Management of Alameda County Litigation Support 37. Morrison & Foerster City of Newark Waste Management of Alameda County Litigation Support 38. Morrison & Foerster City of Union City Waste Management of Alameda County Litigation Support 39. Napa County Napa County Napa Valley Disposal Service Rate Setting Assistance 40. Orange County Orange County Orange County Program Audit and Privatization 41. Rouge Disposal Medford, OR Rouge Disposal Hauler Profitability Study 42. Roy F. Weston City of Los Angeles City of Los Angeles Solid Waste Disposal Information System 43. Sacramento County Sacramento County Independent Disposal Service Refuse Rate Review 44. Sacramento County Sacramento County Camarillo Sanitation Service Refuse Rate Review 45. San Bernardino County San Bernardino County Various Develop Solid Waste Rates 46. San Bern. Desert Mountain Waste Management Coalition San Bernardino County Various Financial Review 47. San Diego County San Diego County San Diego County Audit and Financial Review 48. San Diego County Solid Waste Auth. San Diego County Various Bond Financing Pro-Forma 49. Tahoe Basin JPA Tahoe Basin JPA South Tahoe Refuse Company Rate Setting Manual and Review 50. Town of San Anselmo Town of San Anselmo San Anselmo Refuse & Recycling Refuse Rate Review 51. Yuba County County of Yuba County of Yuba Disposal Economics Evaluation

47 NewPoint Group Mar.^gemerl Consults n^s Mr. Phillip Woods Page 14 February 10, 2009 Attachment B NewPoint Group Solid Waste Management Consultant Profiles of 3) Dr. James Gibson, Project Director Dr. Gibson is a founding Director in NewPoint Group's Sacramento office. Dr. Gibson received his B.S. degree in Applied Economics from the University of California, Davis, and his Ph.D. in Resource Economics from Iowa State University. Dr. Gibson was formerly a Director of Ernst & Young's Public Sector Management Consulting Practice. He had 18 years of waste management consulting experience with Ernst & Young. Dr. Gibson served the last nine years with E&Y at the Partner/Principal level. In total, Dr. Gibson has over 30 years of financial and economic consulting experience. Dr. Gibson has participated in over 600 individual projects during the course of his consulting career. Dr. Gibson will be responsible for providing oversight and technical assistance on this project. He will be responsible for quality control of the project deliverables. Dr. Gibson has directed, or been substantively involved, with nearly all of the projects identified in Attachment A of this proposal. Recent projects he has directed have included: 11 City of Concord - Rate Review, Franchise Agreement, Three-Cart System/Automation Planning, MRF Sort Line Implementation, Franchise Extension (Concord Disposal Services) 11 El Dorado County - Overall Refuse System Planning and Review of Rates, Rate Structures, Profitability, Operations, Transfer and Disposal Facilities, AB 939 Levels, and Franchise Valuation and Extension Requests (Amador Disposal Service, American River Disposal Service, El Dorado Disposal Services, Sierra Disposal Service, South Tahoe Refuse Company, and Tahoe- Truckee Sierra Disposal) Contra Costa County - Rate Review (Republic Waste Services) Contra Costa County - Rate Review (Garaventa Enterprises) City of Barstow - Resolution of Rate Dispute, Overall Company Operational Assessment, and Route Audit (Desert Disposal Service) 11 City of Martinez - Rate Review, Program Changes, Franchise Extension (Allied Waste) 11 California Department of Conservation, Division of Recycling - Cost of Beverage Container Recycling, Processing Fees (including up to 300 on-site cost of recycling surveys) 11 California Integrated Waste Management Board - White Paper on Plastics Recycling. Dr. Gibson has been retained as an expert witness on over 150 separate legal cases concerning financial and economic damages. He has presented at least 33 formal court case depositions and participated in 17 judge and jury trials.

48 NewPoint Group Mar.^gemerl Consults nos Mr. Phillip Woods Page 15 February 10, 2009 Attachment B NewPoint Group Solid Waste Management Consultant Profiles lcontinued^ page 2 of 31 Erik Nylund, Principal Mr. Nylund is a Principal with NewPoint Group. He has been with NewPoint Group for twelve years. He has a Master's in Business Administration and a Bachelor's of Science in Civil Engineering, both from the University of California at Davis. Mr. Nylund has 16 years of consulting experience, 15 of which have been in the area of solid waste rate setting for local governments. Mr. Nylund would be responsible for the day-to-day data collection and analysis work for the City. He would be the point person for all communications between the City, the company, and NewPoint Group. He has substantively participated on nearly all of the projects identified in Attachment A of this proposal. For nearly all of the projects noted in Attachment A, Mr. Nylund obtained and reviewed financial statements, conducted detailed revenue and cost testing, compared and benchmarked costs with industry norms and averages, developed engineering and operational calculations and analytics, projected line item revenues and costs, determined a reasonable financial return to the hauler (often using an operating ratio-based methodology), conducted comparative rate and profitability surveys, and recommended new rates by service type. In all cases, he was successful in working with the hauler to obtain the required documentation to perform the review. Selected refuse collection haulers recently reviewed by Mr. Nylund have included: Public Private 11 Allied Waste Industries 11 California Waste Solutions Browning-Ferris Industries 11 Concord Disposal Services Republic Waste Systems 11 Garaventa Enterprises Waste Connections 11 Norcal Waste Systems Waste Management 11 Richmond Sanitary Service 11 South Tahoe Refuse 11 Vallejo Garbage Service 11 Vallejo Recycling. Mr. Nylund often presents results of City rate reviews to City Councils and Board's of Supervisors. In almost every case, he has received a unanimous vote in favor of NewPoint Group rate setting recommendations. Prior to joining NewPoint Group, Mr. Nylund was a consultant in the waste management consulting practices of Deloitte & Touche and Ernst & Young.

49 NewPoint Group Mar.^gemerl Consults nos Mr. Phillip Woods Page 16 February 10, 2009 Attachment B NewPoint Group Solid Waste Management Consultant Profiles lcontinued^ of 3) Lingbo Liu, Associate Ms. Liu is an Associate with NewPoint Group. Ms. Liu joined NewPoint Group this year. She has a Masters degree in Economics from California State University, Sacramento. Ms. Liu also has a Bachelor's degree in Finance from the Shanghai University of Engineering Science. Ms. Liu specializes in cost studies, financial analyses, market research, and rate and rate structure analyses. She has expertise in statistical analysis, econometric modeling, multi-regression analysis, forecasting, and trend analysis. She recently has conducted refuse collection rate reviews for the City of Martinez, City of Vallejo, Contra Costa County, and El Dorado County. She has recently reviewed the following waste management companies: Allied Waste Services, Amador Disposal Service, American River Disposal Service, Crockett Garbage Service, El Dorado Disposal Services, Richmond Sanitary Service, Sierra Disposal Service, South Tahoe Refuse Company, Tahoe-Truckee Sierra Disposal, and Vallejo Garbage Service.

50 NewPoint Group Mar.^gemerl Consul`s n^s Mr. Phillip Woods February 10, 2009 Page 17 Attachment C NewPoint Group Proposed Proiect Hours and Fees Consultant Hourly Rate Gibson Nylund Liu $ 175 $ 150 $ 100 Consultant Hours Task Description Gibson Nylund Liu Total Hours Total Fees 1 Initiate and Administer Project ' $ 10,200 2 Review Rate Change Application ' 9, Conduct Operational, Engineering, and Economic Assessment of Selected Rate Application Components and Requested Rate Change Drivers ' 4,100 Review the Company's Audited Financial Statements and Supporting Documentation ' 10,350 5 ' Prepare Draft and Final Rate Review Reports ,000 Total 1 98 ' 380 ' 256 ' 734' $ 99,750

51 Version 4.0 City of Concord Rate Setting Process and Methodology Manual for Residential Solid Waste Fees October 1, 2007 IVanag ;mg int Consultants Proudly serving our clients for over twelve years

52 Rate Setting Process and Methodology Manual for Residential Solid Waste Fees October 1, 2007 City of Concord

53 Rate Setting Process and Methodology Manual for Residential Solid Waste Fees Versions Original Manual, February 1993 (v. 1.0) Updated Manual, July 1997 (v. 2.0) Updated Manual, July 2006 (v. 3.0) Updated Manual, October 2007 (v. 4.0) Prepared for City of Concord Concord Disposal Service, Inc. Prepared by l wpo nt Group, Inc Third Street Suite 215 Sacramento, California (916) October 1, 2007 Printed on Recycled Paper

54 Rate Setting Process and Methodology Manual for Residential Solid Waste Fees Table of Contents Page Section I. Rate Setting Overview... I-1 A. Introduction... I-1 B. Policies... I-1 C. Using the Manual D. Future Enhancements Section II: Rate Setting Process... A. Base Year Process... II-1 1. Preparation and Submission of Rate Change Application Verification of the Completeness of Rate Change Application Review of Rate Change Application and Preparation of Responses Response to Additional Information Requests from City Survey of Rates in Similar Service Areas Preparation of Draft Report and Recommendations Review of Draft Report and Recommendations Conduct Public Hearing Preparation of Final Report and Recommendations... II Presentation of Final Report and Recommendations to City Council... II Implementation of New Rates... II-21 B. Timing of the Base Year Process... II-22 C. Interim Year Process... II Preparation and Submission of Rate Change Application Review of Rate Change Application Review and Respond to City Analysis and Calculations... II Preparation of Final Report and Recommendations... II Presentation of Final Report and Recommendations to City Council... II Implementation of New Rates II-1

55 Table of Contents (continued) D. Timing of the Interim Year Process... II-33 Page Section III: Base Year Rate Setting Methodology A. Preparation of the Base Year Rate Change Application Entry of Operating Costs and Profit... III-6 2. Determination of Residential and Commercial Revenues Calculation of Allowable Operating Profit and Revenue Requirement... III Calculation of Percent Change In Rates Preparation of Summary Form B. Survey of Rates in Similar Areas Section IV: Interim Year Rate Setting Methodology... IV-1 1. Residential Rate Change Percent Request... IV-5 2. Consumer Price Index (CPI) Information... IV-6 3. Application Certification... IV-7 Appendix: Blank Forms and Worksheets ii City of Concord

56 Exhibits Exhibit Page I-1 Organization of Each Step II-1 Base Year Rate Setting Process Overview... II-2 II-2 Sample Public Hearing Announcement Timing of Base Year Rate Change Process... II Interim Year Rate Change Process... II-25 II-5 Timing of Interim Year Rate Change Process... II-34 III-1 Preparation of Base Year Rate Change Application... III-2 III-2 Sample Base Year Rate Change Application... III-3 Definition of Financial Terms... III-4 Sample Solid Waste Fee Survey... III-3 III-7 III-19 IV-1 Preparation of Interim Year Rate Change Application... IV-2 IV-2 Sample Interim Year Rate Change Application... IV-3 iii City ofconcord

57 Section I Rate Setting Overview

58 Section I. Rate Setting Overview This section of the manual provides an overview of the rate setting process. The section includes four sub-sections: A. Introduction B. Policies C. Using the Manual D. Future Enhancements. A. Introduction This manual is a step-by-step guide for the City of Concord (City) and its franchise hauler to prepare and approve changes in residential solid waste collection fees. The manual establishes rate change policies, provides application forms, specifies reporting formats, identifies required supporting documentation, and describes the procedure for requesting, reviewing, and adopting residential rate changes. Cost and revenue information is required for residential and commercial services; however, only residential rates are established through this rate setting process. Commercial solid waste collection is not covered by this manual. This manual provides a formal structure to establishing residential solid waste fees. Prior to adoption of this manual, there was no formal rate setting process or methodology. The manual has been developed with input and direction from both the City and its current franchise hauler. It is based on the current franchise agreement (and all its subsequent amendments) and existing operating conditions in the City. As the City and franchise hauler use the rate setting methodology described in the manual, the process should be periodically updated, revised, and improved. This is the third version of the manual after more than a decade of use. This manual is organized into four sections: Section I. Rate Setting Overview This section provides an introduction to the manual and discusses the policies followed in establishing the rate setting processes. Section II, Rate Setting Process This section provides a detailed discussion of the rate setting process. The discussion focuses on responsibilities of participants in the process, activities to be performed, and the timing of these activities. Section III, Base Year Rate Setting Methodology This section provides detailed instructions on how to complete the forms used to establish new rates for each base year. Section IV. Interim Year Rate Setting Methodology This section provides detailed instructions for completing the forms used to establish new rates for each interim year. B. Policies The primary goal of the rate setting process and methodology is to determine residential solid waste collection rates which are fair to Concord residents and which provide a reasonable rate of return to the franchise hauler. Three criteria were considered in developing this rate setting approach: The rates requested by the franchise hauler must be justifiable. A formal request to change residential rates submitted by the franchise hauler should provide the basis for all rate changes, include only allowable and necessary costs, and provide accountability for expenditures. City of Concord I-I

59 Section I. Rate Setting Overview The estimated costs of service and resulting solid waste collection fees should be reasonable. Charges by affiliated companies (e.g., truck-related costs) should be the same as, or lower than, those charged by other companies for comparable equipment and supplies. The resulting monthly fees for solid waste collection service should be comparable to those charged in other cities for providing similar services. The process should be kept as simple as possible, while ensuring that any rate request is justifiable and reasonable. The process should be easy to explain and not place an undue cost on either the City or the franchise hauler to implement. The following policies have been considered in developing the processes and methodologies described in this manual: Regulation of residential solid waste collection fees Residential solid waste collection fees are regulated by the City, and will represent recovery of allowable costs incurred by the franchise hauler.' These allowable costs include (1) collection/disposal of residential solid waste, (2) curbside collection of recyclable materials, and (3) green waste recycling. Costs incurred by the franchise hauler must be adequately documented in a formal request for a rate change, and the rate request must be supported by company audited financial statements. Revenues received by the franchise hauler from commercial customers currently subsidize to some degree residential service. The City and its current hauler have decided to continue this practice; however, specific subsidy levels have not been established. During each base year rate change review, changes in commercial rates shall be carefully considered, as they directly impact the subsidy level and, therefore, changes in residential rates. Regulation of commercial rates Commercial rates will be set between the franchise hauler and merchants, and will not be regulated by the City. The franchise hauler will provide the City with a current schedule of commercial rates (15 days prior to initiating new commercial rates) for all services provided by the company. Regulation of affiliated companies If the franchise hauler leases trucks and other equipment from an affiliated or parent company, then all trucking charges are considered a pass-through cost and no additional profit is allowed. City staff will be responsible for determining if the truck charges are reasonable. If the franchise hauler rents office and/or warehouse space from a parent or affiliated company, then rent charged by its parent company will be compared with rent charged by property managers for comparable office and warehouse space. At the time a base year rate change application is submitted, the franchise hauler shall provide the City with at least three comparable rates for trucking charges, office space, and warehouse space (i.e., a minimum nine comparable rates). Senior citizen rate The franchise hauler will administer a senior citizen program that includes (1) a legacy, grandfathered (32-gallon) senior citizen program based on prior customers in the program, age 65 and over, and (2) a new (32-gallon) senior citizen low income program based on both age criteria (age 65 and over) and income criteria (HUD low income criteria). Administration of this senior citizen program includes education of 1-2 City of Concord

60 Section I. Rate Setting Overview perspective customers and joint handling of complaints with the City. The franchise hauler shall, upon request from the City on an annual basis provide the City with the quantity of senior citizen accounts. Reasonable costs associated with this senior citizen program shall be considered allowable for rate setting purposes. Mini can rate The franchise hauler will administer a legacy, grandfathered (20- gallon) mini can service level program based on prior customers in the program. Administration of this mini can program includes education of perspective customers and joint handling of complaints with the City. The franchise hauler shall, upon request from the City on an annual basis provide the City with the quantity of mini can accounts. Reasonable costs associated with this mini can program shall be considered allowable for rate setting purposes. Franchise fee Franchise fees paid to the City by the franchise hauler for the period beginning July 1, 2006, up to and including, June 30, 2010, shall be the flat amount of $1,250,000 annually. For the period beginning July 1, 2010, up to and including June 30, 2015, franchise fees shall be the flat amount of $1,500,000 annually. For the period beginning July 1, 2015, up to and including June 30, 2020, franchise fees shall be the flat amount of $1,750,000 annually. Finally, for the period beginning July 1, 2020, to the end of the term of the current franchise, franchise fees shall be the flat amount of $2,000,000 annually. Franchise fees paid to the City shall be allowed to be recovered by the franchise hauler as pass through costs with no allowable operating profit. City drop boxes and bins The franchise hauler shall collect cubic yard debris boxes annually for the City at no cost. In addition, the franchise hauler shall collect cubic yard debris boxes annually for use in the City's Neighborhood Preservation Program at no cost to the City. The franchise hauler also shall provide bin services to the City at no cost. Costs associated with the franchise hauler providing debris box and bin services to the City are considered allowable costs with profit for rate setting purposes. Beginning July 1, 2010, the franchise hauler shall collect cubic yard debris boxes annually for use in the City's Neighborhood Preservation Program at no cost to the City. Beginning July 1, 2015, the franchise hauler shall collect cubic yard debris boxes annually for use in the City's Neighborhood Preservation Program at no cost to the City. Finally, beginning July 1, 2020, the franchise hauler shall collect cubic yard debris boxes annually for use in the City's Neighborhood Preservation Program at no cost to the City. Significant fluctuations in the quantity of City debris boxes and bins provided by the franchise hauler between base years shall be addressed in base year rate reviews. City park waste disposal The franchise hauler shall allow free use of a transfer station by the City's compactor truck which serves City parks. Costs incurred by the franchise hauler to provide free use of the transfer station by the City's compactor truck, which serves City parks, shall be allowed to be recovered with profit by the franchise hauler. Funding of costs to implement State mandated recycling, source reduction, and household hazardous waste programs The City has adopted the Source Reduction and Recycling Element (SRRE) and Household Hazardous Waste Element (HHWE) as required by the Integrated Waste Management Act of City of Concord 1-3

61 Section I. Rate Setting Overview 1989 (AB 939). These elements contain a number of recommended programs whose costs are projected to be funded by solid waste collection fees. The franchise hauler will work closely with the City to meet diversion goals mandated by the California Integrated Waste Management Board (CIWMB). The franchise hauler and City shall agree on specific programs and activities to show a good faith effort to meet CIWMB diversion goals. Examples of these efforts may include 1) increasing materials collected via the current curbside recycling program, and 2) maximizing diversion activities at transfer stations/materials recovery facilities/other disposal facilities that the franchise hauler may use. The franchise hauler shall implement additional recycling programs from time to time at the direction of the City to meet recycling and diversion goals mandated by the CIWMB. In any year that the City's Annual Report to the CIWMB indicates an expected finding of non-compliance, then the franchise hauler, at the City's sole direction shall implement recycling strategies to achieve compliance, including but not limited to: Single stream recycling Expanded range of can sizes Provide a toter for green waste Increased apartment recycling Enhanced industrial, commercial, and retail recycling Strategies for diverting self-haul and construction and demolition waste from the landfill to the transfer station Other diversion programs as directed by the City. Non-compliance with the CIWMB diversion requirements is defined as either (1) a City submitted Annual Report to the CIWMB containing a recycling rate of less than 45 percent, (2) issuance by the CIWMB of an extension under SB 1066, or (3) a finding of non-compliance issued by the CIWMB. This definition of noncompliance may be amended by the City if State-mandated diversion goals are increased or the CIWMB policies for determining compliance change. All these recycling source reduction, household hazardous waste, and diversion programs will be considered regulatory costs for the purposes of this manual. Costs associated with these AB 939 diversion goals are considered allowable costs for rate setting purposes. The franchise hauler will be allowed a profit on these regulatory costs. Indemnification for legal and environmental remediation costs The franchise hauler shall indemnify the City for any legal costs and environmental remediation costs resulting from all past and future disposal sites used and disposal practices employed by the franchise hauler in the transportation and disposal of waste generated within the City. If the City has insurance coverage available to pay for such proceedings, the City should use proceeds actually received from any such insurance before the franchise hauler bears any costs. Costs associated with indemnifying the City are considered allowable costs for rate setting purposes. Profit A profit is allowed, based on a targeted operating ratio ranging between 88 and 92 percent. In the base year, if residential rates remain unchanged at an operating ratio within the range of 88 to 92 percent, and the franchise hauler actually realized an operating ratio within this range, then that same operating ratio resulting in no rate change is used, and no rate change occurs. Otherwise, a 90 City of Concord

62 Section I. Rate Setting Overview percent operating ratio is used for the base year calculation. The operating ratio method is used to establish revenue requirements for setting residential rates. The operating ratio establishes revenue requirements based on allowable expenses. The operating ratio effectively determines the profit allowed to the franchise hauler on operating costs. Total revenue requirements then are determined as the sum of (1) operating costs, (2) allowable profit, and (3) pass-through costs (for which the franchise hauler receives no profit). In the first base year, the operating ratio was set at 90 percent. In each succeeding base year (once every four years), the operating ratio will range from 88 to 92 percent, which will help stabilize rate changes and afford the franchise hauler an incentive to reduce costs. In any succeeding base year, if the franchise hauler earns an operating ratio outside this range, then 90 percent is reestablished. Allowance for profit on recycling A reasonable profit will be allowed on curbside recycling services and green waste recycling provided to the City by the franchise hauler. Curbside recycling and green waste recycling are part of basic service for all residential customers. Profit on trucking charges Trucking charges from companies affiliated with the franchise hauler will be a pass-through cost, and no profit is allowed to the franchise hauler. This is based on the assumption that profits are already included in the trucking charges paid by the franchise hauler. Surcharges imposed for regulatory requirements, and which are collected by the franchise hauler directly, will be pass-through costs with no profit allowed. Three comparable lease rates are required to determine the reasonableness for trucking charges. Profit on tipping fees Limited profit is allowed on tipping fees in each base year. The franchise hauler is allowed to include tipping fees of up to a set amount per ton in the calculation of profit described above. The actual limit is established by City policy. Currently, this limit is set at $51 per ton. Any amounts over this limit are considered pass through costs, and profit is not allowed. If the tipping fee is less than the established limit, the actual fees paid are used to calculate total tipping costs. This tipping fee limit allows the franchise hauler to make a reasonable profit on tipping fees, but removes excess profits caused by dramatically increasing tipping fees. The franchise hauler must conduct certain activities related to tipping fees such as keeping records and making payments to the disposal facility. For example, the franchise hauler will be responsible, in part, for increased reporting requirements under AB 2494 to satisfy state regulations regarding disposal-based reporting. As tipping fees increase, the franchise hauler's workload does not change. To allow the full amount of the tipping fees to be included in the calculation of profit would give the franchise hauler excess and unreasonable profits. If the franchise hauler utilizes a disposal facility owned by an affiliated company, the tipping fee limit still would apply. However, the tipping fee charged by the disposal facility to the franchise hauler must be the same as the rate charged to other non-affiliated franchise haulers for the same service. Tipping fees are defined to include both transfer station and landfill disposal costs. City of Concord 1-5

63 Section I. Rate Setting Overview 2 3 Profit on regulatory charges Regulatory charges assessed on refuse disposed of by the franchise hauler, which are collected by the disposal facility operator (not the franchise hauler) are normally incorporated in tipping fees. The franchise hauler will be allowed a profit on tipping fees and, therefore, on these regulatory costs. To do otherwise would create a significant bookkeeping burden on the franchise hauler to track such charges separately. Allowable profit on other operating costs Among the operating costs which the franchise hauler would be allowed profit on are: (1) corporate overhead, (2) interest expense, (3) office rent, (4) legal fees, (5) depreciation (cart costs), and (6) public education. Corporate overhead is primarily salaries of officers of the parent company of the franchise hauler, if appropriate. The amount allowed will be two (2) percent of total allowable operating expenses. Interest expense is included as an allowable operating cost on which profit is allowed.2 Office space expense is allowed with profit regardless of whether the franchise hauler's parent company owns the office space or the office space is leased from a third party.3 Three comparable lease rates are required to determine the reasonableness for office space. Finally, legal fees are allowed with profit up to a cap of $150,000 per year. Interest expense is allowed in the operating profit calculation, which differs from the practice in some municipalities. If interest becomes a significant factor in the franchise hauler's cost structure, the City may wish to reconsider the treatment of this cost component. Trucking costs and office rent are both paid by the current franchise hauler to affiliated companies. Unlike trucking charges, office rent is included in the calculation of the franchise hauler's operating profit. While this is an inconsistent treatment of similar costs, this inconsistency was negotiated between the City and the franchise hauler. Rate change application process A detailed rate change application from the franchise hauler is required once every four years. This process requires the franchise hauler to submit detailed financial and operating information which are carefully reviewed and analyzed by the City. These detailed reviews are referred to as "base" years in the methodology. In the base year, commercial, residential, curbside recycling, and green waste recycling costs are combined. However, commercial and residential revenues are reported separately. In each of the "interim" three years, rate changes are based on the annual percentage change in the following item: The most recent actual, not forecasted, San Francisco-Oakland- San Jose Metropolitan Area Consumer Price Index, applied to existing residential rates, by category The franchise hauler is required to submit an interim year application for a rate change. The scope of each interim year application is much more limited than a base year request. A formal interim year application is required to increase rates, however, the company has the option to not increase rates even though an interim year adjustment might allow it to do so. The franchise hauler shall use the Consumer Price Index in the interim year rate adjustment calculation that equals seventy (70) percent of the change in the most recently published San Francisco-Oakland- San Jose Metropolitan Area Consumer Price Index (All Items), available at the time the interim year rate change application is submitted. For example, if the interim year rate change application is submitted in March 2006, and the most recently available San Francisco-Oakland-San Jose 1-6 City of Concord

64 Section I. Rate Setting Overview Metropolitan Area Consumer Price Index (All Items) data are for the previous twelve month, February 2005 to February 2006 period, then the previous February to February 12-month period will be used. The franchise hauler shall use the seventy (70) percent of the change in the most recently published San Francisco-Oakland- San Jose Metropolitan Area Consumer Price Index (All Items) to project both uncontrolled and controlled costs (this is equivalent to applying 70 percent of the Index to existing rates). The franchise hauler shall apply the interim year rate increase in any given year such that it will not exceed five (5) percent. Special extraordinary adjustments may be allowed outside of the annual schedules of the base year and interim year adjustments. Both the City and franchise hauler shall be able to initiate the extraordinary rate adjustment process. The extraordinary adjustment shall only be considered in a case where the City or the franchise hauler can demonstrate that the change in one of the cost line items specified in the base year rate change application (i.e., Direct Labor, Tipping Fees (Profit Allowed), Corporate Overhead, Office Salaries, Other General and Administrative Costs, Trucking Charges, Regulatory Fees, Tipping Fees (Pass Through), or Residential and Commercial Franchise Fees) will exceed two (2) times the most recent annual change in the San Francisco-Oakland-San Jose Metropolitan Area Consumer Price Index (All Items) at the time the request is made. For these adjustments, the franchise hauler shall provide necessary information and documentation so the City can make a judgment as to the reasonableness of such a rate adjustment. An extraordinary adjustment shall only be made with City Council approval. A potential framework for balancing actual revenues with projected revenue requirements The City and the franchise hauler may balance projected and actual financial results during each base year rate setting process. In a given base year, the City may measure differences between the previous base year's projected revenue requirement (i.e., allowable costs plus pass through costs plus allowable profit) and actual revenues received in each year since the projection. The City shall utilize audited financial statements submitted by the franchise hauler as part of the base year rate review process as required by the Manual to measure differences in projected and actual results. This framework does not require measuring annual differences (for the combined three interim years) between actual and projected costs alone, nor differences between actual and projected revenues alone. Instead this framework combines costs and revenues by measuring differences between projected revenue requirements (i.e., allowable costs plus pass through costs plus allowable profit) and actual revenues received (for the combined three interim years). If the City and franchise hauler determine that a difference between projected and actual results exists and this balance is material (e.g., falls significantly outside of the range of allowed 88 to 92 percent operating ratio), the procedure for treating this balance may be negotiated. A possible result is that the balance will be incorporated prospectively as part of a residential refuse collection rate change. Factors the City should consider in treating this balance include the amortization period (i.e., how many years the surplus/shortfall should be spread across) and whether the balance may be reoccurring or non-reoccurring. Planned City of Concord 1-7

65 Section I. Rate Setting Overview service level changes, new programs, or other changes in costs of service may also affect how the balance is treated. All balances should be expressed in real dollars (i.e., without interest). Retroactive rate increase There will be no allowance for a retroactive increase in rates. However, provisions will be included to accommodate billing cycles where bills are issued in advance of the City approving new residential rates. C. Using the Manual Each section of the manual has been divided into a number of sub-sections. A sub-section begins with a capital letter and includes a discussion related to a major topic. Many sub-sections of this manual include a series of "steps" which must be completed during a process. Each step begins at the top of a page and is prominently marked for easy reference. The organization of each step is shown in Exhibit I-1, following this page. The manual also contains one appendix. This appendix provides blank worksheets and forms which are used during the various processes. Performance Audits While rates for residential services are evaluated in detail during each base year rate change process, the rate review focuses on actual costs and does not address opportunities for the franchise hauler to improve general operational efficiency. If actions can be taken to improve the franchise hauler's efficiency, this could result in lower total costs, and correspondingly, lower rates for customers. In order to address this issue, performance audits of the franchise hauler could be conducted at regular intervals, such as once every five years. The timing of these audits could be independent of the rate change process described in this manual. In order to maintain objectivity, these audits would be conducted by an independent organization which is selected jointly by the City and the franchise hauler. A two-phase approach may be appropriate for these audits. An overall diagnostic review would be conducted in Phase I, and more detailed and focused work in selected areas would be conducted in Phase II, based on the Phase I findings. D. Future Enhancements As the City and franchise hauler continued to gain experience in working with the rate setting process, refinements and revisions should continue to be identified and incorporated in this document. One area which should be considered for inclusion is performance audits. 1-8 City of Concord

66 Section I. Rate Setting Overview EXHIBIT I-1 Organization of Each Step - Manual Organization - 1. Section A. Sub-Section I. Step ^ a. Task Section Number and Name Step Title Step Number Process or Acliv14' Where This step Occurs hr rriuu II. Haft,.tir rr+irg i'y' nc s Responsibility: Franchise Hauler Timing: Preparation and Submission of Rate Change Application Completed five months prior to the implementation of new rates Party Responsible for Completing the Step Tasks Required to Complete the Step Tasks: a. Prepare Cost Information b. Prepare Revenue Inliirmation C. Prepare Operating Information d. Prepare and Submit Rate Change Application and Supporting, Documents Description of Tasks When the Step Should Be Completed Detailed Descriptions of the Actions Required in Each Task Overview During this step, the franchise hauler prepares the forms which are required to begin the rate change process. Instructions for preparing the application forms referred to in this step. are available in Section 111 of this manual. In general. information provided by the franchise hauler is for three fiscal years: Most recently completed year Current year (year two) Base year (year three). a. Prepare Cost Information Cost inforrnation from the franchise hauler is provided on the Huse Year Rur'r ['hmg'atrtrlirciiionr. Cost information is reported for the most recently completed fiscal year, the current year, and the new base year. Information reported in each line item is tiie total cost for commercial, residential, curbside recycling, and reen waste collection services. A breakdown of costs by service type is not required. The cost information which is reported includes: Direct Labor Tipping Fees Corporate Overhead Office Salaries Other General & Administrative Costs Trucking Charges Regulatory Fees Franchise Fees. By aggregating costs into these [inc items. it is possible to focus on major changes without becoming distracted by large changes in insignificant cost components. For example, if office equipment maintenance doubled from S 10,000 in the current year to S20000 in the base year (i. e.. a 100 percent increase), this might cause other General and Administrative Costs to increase by 11-4 CI 14 olf 'ravenrrl City of Concord 1-9

67 Section I. Rate Setting Overview [This page intentionally left blank.] 1-10 City of Concord

68 Section II Rate Setting Process

69 Section H. Rate Setting Process There are two rate change processes: the base year rate change and the interim year rate change. This section is organized into the following sub-sections: A. Base Year Process B. Timing of the Base Year Process C. Interim Year Process D. Timing of the Interim Year Process. Topics covered in this section of the manual include: Who is responsible for the various steps in each process What tasks must be completed When each task should be conducted. Information about the methodology and how to complete the worksheets and forms for Base Year Rate Changes and Interim Year Rate Changes are provided in Sections III and IV of this manual, respectively. A. Base Year Process The base year is the most detailed of the two rate change processes. Base year rates are generally established every four years, beginning in Major operation changes or program changes may require special rebasing, not on the four-year schedule. An example here would be automation of refuse, recycling, and yard waste collection services. Detailed financial information is utilized to determine rates which are fair to both the residents of the City and the franchise hauler. Fairness is demonstrated through a review of the franchise hauler's actual revenues and expenses. Information required in the rate setting process which is considered confidential by the franchise hauler will not be disclosed at any public meetings (i.e., City Council meetings). This would include operating statistics and employee compensation information. The City and/or its Consultant may sign a Confidentiality Agreement with its franchise hauler for a base year rate review. The existing franchise agreement requires any request by the franchise hauler for a rate change be submitted by the company at least four months in advance of when the proposed rate change would take place. The City has up to 30 days to review the application for completeness before this four month period begins. Unless otherwise notified by the City within this 30-day period, the rate request will be deemed complete, and the four-month time frame would begin. Exhibit II-1, following this page, provides an overview of the base year rate setting process. Following this exhibit is a description of each step in the process. The timing of the base year process is described in Section II-B of this manual. City of Concord 11-1

70 Section II Rate Setting Process EXHIBIT II-1 Page 1 of 2 Base Year Rate Setting Process Overview Step/Task Responsibility 1. Preparation and Submission of Rate Change Application a. Prepare Cost Information b. Prepare Revenue Information c. Prepare Operating Information d. Prepare and Submit Rate Change Application and Supporting Documents Franchise Hauler 2. Verification of Completeness of Rate Change Application a. Verify Financial Data and Format b. Verify Supporting Documents and Schedules c. Notify the Franchise Hauler City 3. Review of Rate Change Application and Preparation of Responses city a. Review Actual and Projected Revenue Requirements b. Review Actual and Projected Revenues c. Review and Verify Operating Ratio d. Determine Components of Requested Change in Residential Rates e. Review Performance Data f. Balance Actual Revenues with Projected Revenue Requirements g. Request Additional Data and Clarification, if Necessary h. Document Staff Review and Prepare Written Response 4. Response to Additional Information Requests from City a. Provide Additional Information, if Requested b. Prepare and Submit Response Franchise Hauler 5. Survey of Rates in SimilarService Areas city a. Survey Residential and Commercial Solid Waste Rates and Charges in Similar Service Areas b. Summarize Survey Results c. Prepare and Submit Summary to the Franchise Hauler 11-2 City of Concord

71 Section II Rate Setting Process EXHIBIT II-1 Page 2 of 2 Base Year Rate Setting Process Overview (continued) Step/Task Responsibility 6. Preparation of Draft Report and Recommendations a. Prepare Draft Report and Recommendations City 7. Review of Draft Report and Recommendations a. Review Draft Report and Recommendations with City Staff b. Resolve Any Remaining Issues c. Prepare Response to Draft Report and Recommendations Franchise Hauler 8. Conduct Public Hearing a. Post Notice of Public Hearing b. Conduct Public Hearing City 9. Preparation of Final Report and Recommendations a. Incorporate Franchise Hauler's Changes in Final Report b. Incorporate Comments from Public Hearing c. Prepare Final Report and Recommendations City 10. Presentation of Final Report and Recommendations to City Council a. Distribute Report and Summary to Council Members b. Obtain Council Approval City 11. Implementation of New Rates a. Prepare Notification of Rate Change b. Implement Rate Change Franchise Hauler City of Concord 11-3

72 Section II Rate Setting Process STEP 1 Base Year Preparation and Submission of Rate Change Application Responsibility: Timing: Tasks: Franchise Hauler Completed five months prior to the implementation of new rates a. Prepare Cost Information b. Prepare Revenue Information c. Prepare Operating Information d. Prepare and Submit Rate Change Application and Supporting Documents Description of Tasks Overview During this step, the franchise hauler prepares the forms which are required to begin the rate change process. Instructions for preparing the application forms referred to in this step, are available in Section III of this manual. In general, information provided by the franchise hauler is for three fiscal years: Most recently completed year Current year (year two) Base year (year three). a. Prepare Cost Information Cost information from the franchise hauler is provided on the Base Year Rate Change Application. Cost information is reported for the most recently completed fiscal year, the current year, and the new base year. Information reported in each line item is the total cost for commercial, residential, curbside recycling, and green waste collection services. A breakdown of costs by service type is not required. The cost information which is reported includes: Direct Labor Tipping Fees Corporate Overhead Office Salaries Other General & Administrative Costs Trucking Charges Regulatory Fees Franchise Fees. By aggregating costs into these line items, it is possible to focus on major changes without becoming distracted by large changes in insignificant cost components. For example, if office equipment maintenance doubled from $10,000 in the current year to $20,000 in the base year (i.e., a 100 percent increase), this might cause Other General and Administrative Costs to increase by 11-4 City of Concord

73 Section H. Rate Setting Process about one percent. Minor components of Other General and Administrative Costs may decrease between the current year and the base year, while others may increase. If one of the major cost line items in the application changes at an unusual rate, then a detailed review of the components of that cost element should be conducted to determine whether the change is allowed. An unusual change in cost is any increase which is greater than the change in the San Francisco-Bay Area Consumer Price Index. The Consumer Price Index used in the analysis should be based on the most current actual information for the San Francisco-Oakland-San Jose Metropolitan Area. This information is available from the United States Department of Labor, Bureau of Labor Statistics, and is prepared monthly. The cost information for the current year and base year must account for any increases or decreases in the number of customers served or tons of waste collected. Actual increases in costs must also be included. For example, if labor costs are expected to increase in the base year due to current labor agreements, this additional cost must be included. If these costs are not included, a rate increase will not be sufficient to compensate the franchise hauler for actual costs and will result in a reduction of the franchise haulers actual profits. The cost information provided in the application is used to calculate the franchise hauler's revenue requirements. This amount is compared to anticipated revenues to calculate the rate change. b. Prepare Revenue Information Revenue information is provided in this task. Similar to cost information, revenues are reported for the most recently completed fiscal year, the current fiscal year, and the projected base year. Residential, commercial, and recycled material revenue must be reported separately. Actual revenue for each category is reported for the most recently completed fiscal year and estimated revenue is reported in the current year. For the base year, the amount of commercial revenue which the franchise hauler anticipates receiving is reported. This includes changes in revenue from servicing more or fewer accounts and from any anticipated rate changes. Recycled material sales revenues also must represent the actual amount of revenue the franchise haulers anticipates receiving during the base year. Again, this would include any changes in scrap prices or quantities of recycled material sold. Residential revenue in the base year is projected without any changes in rates. Revenue projections are prepared based on existing rates and number of customers which the franchise hauler anticipates serving in the base year. Allowances for uncollectible residential and commercial accounts are identified in the application. This provides for a more accurate determination of the franchise hauler's revenue in the base year, as a small number of customers do not pay the franchise hauler for service rendered. Once all revenues have been reported in the application, total revenue without a residential rate change is calculated. This amount is subtracted from the revenue requirement calculated in task a, to determine the net surplus/shortfall. Commercial revenues already include rate changes, which reduces the net shortfall. City of Concord 11-5

74 Section H. Rate Setting Process Recycled material revenue in the base year reflects anticipated amounts and generally is not controlled by the franchise hauler. Therefore, a net shortfall determines the amount of a residential rate change. If there is a net surplus, the franchise hauler should determine if the operating ratio can be reduced to eliminate the surplus (i.e., the franchise hauler retains the surplus as additional profit). If the operating ratio is calculated at 88 percent, which provides the franchise hauler with the maximum amount of profit allowable under current policy, and a surplus still exists, the City must determine if residential rates will be lowered, and over what period of time. c. Prepare Operating Information During this task, non-financial operating information is compiled by the franchise hauler. Information to be provided for both residential and commercial customers includes: Number of customers served Tons of solid waste collected. This information allows both the City and the franchise hauler to monitor changes in the service characteristics and evaluate changes in total cost. Operating information also is provided on the Base Year Rate Change Application. d. Prepare and Submit Rate Change Application and Supporting Documents The completed rate change application is submitted to the City. The rate change application should include the following items: Cover Letter The cover letter transmits the rate change application to the City, and should provide a listing of documents included in the application package. The cover letter also should include a discussion of any specific issues which impact new rates (e.g., significant changes in tipping fees). The Completed Base Year Rate Change Application This document contains information which documents and supports the requested rate change. Supplemental Financial Information The most current financial audit for the franchise hauler should be included, as well as other documentation which support operating and financial data provided in the application. Once the application materials have been prepared, they are submitted to the City. The thirty (30) day review for completeness will begin upon receipt of the application City of Concord

75 Section II Rate Setting Process STEP 2 Base Year Verification of Completeness of Rate Change Application Responsibility: Timing: Tasks: City Completed within thirty (30) days after the rate change application is submitted a. Verify Financial Data and Format b. Verify Supporting Documents and Schedules c. Notify Franchise Hauler Description of Tasks Overview During this step, the City ensures that the application has been fully completed by the franchise hauler and that the data provided are consistent. a. Verify Financial Data and Format City staff reviews the application package to determine if it is complete and ready for analysis. Detailed analysis of the contents of the application occurs during Step 3. The reviewer should determine the following: Has the applicant included all required forms? Are all forms complete? Are all financial calculations mathematically correct? b. Verify Supporting Documents and Schedules Various documents may be included in the application package to support the rate change. The purpose of these supporting documents should be clearly identified by the franchise hauler. c. Notify Franchise Hauler After the application is verified and determined to be either complete or incomplete, the City will send a letter to the franchise hauler noting the status of the application. If the application is complete, the City then begins to evaluate and analyze the proposed rate change. If the application is incomplete, the document is returned to the franchise hauler with application deficiencies clearly noted. City of Concord 11-7

76 Section H. Rate Setting Process STEP 3 Base Year Review of Rate Change Application and Preparation of Responses Responsibility: Timing: Tasks: City Completed within one month after determining that the application package is complete a. Review Actual and Projected Revenue Requirements b. Review Actual and Projected Revenues c. Review and Verify Operating Ratio d. Determine Components of Requested Change in Residential Rates e. Review Performance Data f. Balance Actual Revenues with Projected Revenue Requirements g. Request Additional Data and Clarification, if Necessary h. Document Staff Review and Prepare Written Response Description of Tasks Overview During this step, City staff evaluates the data included in the rate change application. This review includes examining any significant changes in costs or operating performance and evaluating explanations of these changes as provided by the franchise hauler. a. Review Actual and Projected Revenue Requirements In this task, costs and operating profit are reviewed and analyzed. Absolute and percentage changes in costs for the three years identified in the application should be calculated and reviewed. Any unusual increases or decreases should be explained by the franchise hauler. An unusual increase would be a change in cost which is greater than the change in the Consumer Price Index for the Bay Area, and which cannot be attributed to changes in the number of customers serviced or tons of waste collected. If these unusual changes are not adequately explained in the application, the City should request additional clarification from the franchise hauler. b. Review Actual and Projected Revenues Projected revenues should be reviewed, in this task. Current residential rates 11-8 City of Concord

77 Section H. Rate Setting Process provided in the application are verified. Any changes in the number of customers serviced should be identified and explained by the franchise hauler. The application requires the franchise hauler to report three years of commercial and residential revenues: (1) most recently completed fiscal year, (2) current fiscal year, and (3) projected "base" year. The City should reconcile first year revenues with audited financial statements. Revenues for the second year are compared with financial statements and documentation supplied by the franchise hauler. Finally, projected revenues for the third, or "base" year are evaluated by the City for reasonableness. All assumptions made by the franchise hauler in preparing these projections are reviewed. Commercial revenues in the base year should include any anticipated rate changes. Residential revenue should not include any rate changes. Rate schedules submitted by the franchise hauler per the franchise agreement should be consulted to determine average rate changes. Account information included in the application is reviewed to determine changes in the number of accounts served. The commercial and residential revenue figures provided in the base (third) year should represent the prior year plus any changes in the number of customers served. If changes in commercial revenues during the three years reported in the application appears to be inconsistent with known rate changes and customer changes, clarification should be requested from the franchise hauler. Allowances for residential and commercial uncollectible accounts also are reviewed. These figures should be deducted from total commercial and residential revenue projections. These figures maybe based on a straight percentage of total revenues or on actual experience. Assumptions related to allowances for uncollectible accounts should be provided by the franchise hauler. Revenue from the sale of recycled materials also is provided in the application. Amounts identified in the first year of the three years provided should reconcile with the most current financial audit. The amount identified in the current (second) year and the base (third) year should be documented by the franchise hauler. c. Review and Verify Operating Ratio The operating ratio must be between 88 percent and 92 percent. City staff verifies that the operating ratio used in the application is within this range. The allowable operating profit also is re-calculated utilizing the operating ratio stated in the application. If the operating ratio does not fall within the range stated above, or if there are any errors in calculating the allowable operating profit, these deficiencies are noted. d. Determine Components of Requested Change in Residential Rates The City evaluates all costs, revenues, and operating profits provided in the application to determine the components of the requested change in residential rates. This would include determining the proportion of the requested change in rates which is due to changes in each of the following: Costs Commercial revenues Residential revenues Recycled material revenues Operating profit (or loss). City of Concord 11-9

78 Section H. Rate Setting Process e. Review Performance Data City staff reviews and analyzes the performance data which are included in the application. Both actual and percentage increases are examined and any unusual changes in performance are investigated. An unusual change in operating statistics is any increase or decrease of more than two percent. As noted above, changes in accounts served and tons collected generally should correspond to changes in cost and revenue. f. Balance Actual Revenues with Projected Revenue Requirements The City may balance projected and actual financial results during each base year rate setting process. The City may measure differences between the previous base year's projected revenue requirement (i.e., allowable costs plus pass through costs plus allowable profit) and actual revenues received in each year since the proj ection. The City shall utilize audited financial statements submitted by the franchise hauler as part of the base year rate review process as required by the Manual to measure differences in projected and actual results. This framework does not require measuring annual differences between actual and projected costs alone, nor differences between actual and projected revenues alone. Instead this framework combines costs and revenues by measuring differences between projected revenue requirements (i.e., allowable costs plus pass through costs plus allowable profit) and actual revenues received. If the City and franchise hauler determine that a difference between projected and actual results exists and this balance is material (e.g., falls outside of the range of allowed 88 to 92 percent operating ratio), the procedure for treating this balance may be negotiated. A possible result is that the balance could be incorporated prospectively as part of a residential refuse collection rate change. Factors the City should consider in treating this balance include the amortization period (i.e., how many years the surplus/shortfall should be spread across) and whether the balance may be reoccurring or nonreoccurring. Planned service level changes, new programs, or other changes in costs of service may also affect how the balance is treated. All balances should be expressed in real dollars (i.e., without interest). g. Request Additional Data and Clarification, if Necessary After analysis of the application is complete, City staff requests clarification and/or additional data from the franchise hauler to explain unusual changes in costs or operating performance. Any issues related to the operating ratio also are identified. This information is requested in a letter from the City to the franchise hauler. h. Document Staff Review and Prepare Written Response During this task, City staff documents the review process. A memorandum is prepared which lists the activities completed during the review process City of Concord

79 Section II Rate Setting Process STEP 4 Base Year Response to Additional Information Requests from City Responsibility: Timing: Tasks: a. b. Franchise Hauler Completed within two weeks of receiving a request for additional information from the City Provide Additional Information, if Requested Prepare and Submit Response Description of Tasks Overview During this step the franchise hauler responds to requests for additional information from the City. which require clarification or further explanation. The franchise hauler should respond to the City' s request for additional information. Responses will vary depending on the specific requirements of the City. a. Provide Additional Information, if Requested During Step 3, City staff reviewed the application and may have identified missing information, or changes in the financial or operating data between the three fiscal years b. Prepare and Submit Response The franchise hauler prepares written responses to the City's request for additional information. These responses are prepared and forwarded to the City during this step. City of Concord II-11

80 Section II Rate Setting Process STEP 5 Base Year Survey of Rates in Similar Service Areas Responsibility: Timing: City Conducted concurrently with the application review (Steps 2 and 3) Tasks: a. Survey Residential and Commercial Solid Waste Rates and Charges in Similar Service Areas b. Summarize Survey Results c. Prepare and Submit Summary to the Franchise Hauler Description of Tasks Overview The City conducts a survey of residential and commercial solid waste rates in communities similar in size and location to the City of Concord. The City also determines comparable charges for residential truck usage, as well as rental rates for buildings similar to those rented by the franchise hauler. The purpose of this survey is to benchmark the rates proposed by the franchise hauler to determine if the rates are reasonable. Sample survey forms and instructions are provided in Section of this manual. a. Survey Residential and Commercial Solid Waste Rates and Charges in Similar Service Areas In this task, the survey of rates in other areas which are similar to the City of Concord is conducted. The survey covers the following topics: General Information Residential Service Commercial Service. In order to avoid mailing and response delays, the survey is conducted by telephone. A minimum of six other jurisdictions should be surveyed. Jurisdictions selected should be located in Northern California and have operating environments which are similar to the City of Concord's. b. Summarize Survey Results After the survey has been conducted, the results are tabulated and compared. The purpose of surveying commercial rates is to determine if there is an explanation for why residential rates might vary significantly among the surveyed communities. Residential rates proposed in the rate change application should be compared to residential rates in other jurisdictions. If the rates proposed in the application are significantly higher than in other jurisdictions, then City staff should request City of Concord

81 Section II Rate Setting Process the franchise hauler ' s assistance in explaining the differences. If the differences cannot be explained, City staff may consider adjusting the rates in the application. c. Prepare and Submit Summary to the Franchise Hauler The City then prepares a summary report, which includes the following information: Number of agencies surveyed Average monthly charge for one can service Average change for once-a-week commercial service of a three cubic yard bin. A copy of the survey summary is provided to the franchise hauler. If the City requires an explanation and/or clarification from the franchise hauler about how the proposed rates compare to rates in the survey, the City includes this request in its transmittal memo. City of Concord 11-13

82 Section H. Rate Setting Process STEP 6 Base Year Preparation of Draft Report and Recommendations Responsibility: Timing: Tasks: a. City Completed approximately eight weeks after determining the application package is complete Prepare Draft Report and Recommendations Description of Tasks Overview A draft report with recommendations from City staff is prepared and submitted to the franchise hauler for review. The report will be reviewed by the franchise hauler in Step 7. Residents of the City will be able to comment on the rate change process through a public hearing (refer to Step 8). a. Prepare Draft Report and Recommendations In this step, City staff prepares a draft report including recommendations for a rate change. The draft report includes the following sections: Executive Summary Rate Change Review Analysis and Discussion of Rate Change Application Recommendation Attachments. Results of the public hearing (Step 8) also should be included in the draft report. Each of these report topics is discussed below: Executive Summary This is a one or two-page summary of the review process and includes a chart showing current and proposed rates, and the recommended rate change. Rate Change Review This section of the report provides a brief overview of the rate change process and discussion of significant historical issues. Analysis and Discussion of Rate Change Application This section of the report will include a review of the analysis work completed by City staff. This section includes the following sub-sections: Review of Rate Changes, including a discussion of rate changes during each year since the last base year, the relationship of these changes to changes in the Bay Area Consumer Price Index, and an analysis of the significant components of the change in rates (e.g., changes in tipping fees or changes in operating profit) City of Concord

83 Section H. Rate Setting Process Analysis of Projected Costs, including a discussion of any unusual changes in costs which were discovered during the review process. Discussion of Service Issues, including changes in frequency or type of curbside service. If significant service issues are not involved with a rate change, this section would be omitted. Recommendation City staff would present its recommendation regarding specific changes in residential rates in this section of the document. Attachments Attachments to the report would include: Rate change application Revised rate schedule Audited financial statements of the franchise hauler Other relevant supporting materials provided by the franchise hauler Results of the rate survey. After the draft report is complete, copies are provided to the franchise hauler. These copies must be provided two weeks prior to the public hearing date. Copies of the draft report also are prepared for public review prior to and during the public hearing. City of Concord 11-15

84 Section II Rate Setting Process STEP 7 Base Year Review of Draft Report and Recommendations Responsibility: Timing: Franchise Hauler Completed within two weeks of receiving the City' s Draft Report and Recommendations Tasks: a. Review Draft Report and Recommendations with City Staff b. Resolve Any Remaining Issues c. Prepare Response to Draft Report and Recommendations Description of Tasks Overview The franchise hauler reviews the Draft Report and Recommendations. The franchise hauler also may provide additional information related to any issues identified during the City's survey of other communities ' rates. a. Review Draft Report and Recommendations with City Staff During this task, the franchise hauler will review the draft report. Each section of the report should be reviewed to ensure the following: Correct data are included City staff analysis is accurate and fair Rate changes are acceptable. b. Resolve Any Remaining Issues If any issues are identified during this step, the franchise hauler works with City staff to fully explore and resolve these outstanding issues. c. Prepare Response to Draft Report and Recommendations A written response to the draft report is prepared. The response may cover one or more of the following topics: If data discrepancies exist in any of the areas noted in the prior task, the City should be notified of these discrepancies. If the analysis conducted by City staff can be clarified or considered differently, this information should be provided to the City staff. If the report is acceptable and no clarification's or comments can be offered, this should be relayed to City staff City of Concord

85 Section II Rate Setting Process STEP 8 Base Year Conduct Public Hearing Responsibility: Timing: Tasks: a. b. City Completed approximately 12 weeks after determining the application package is complete Post Notice of Public Hearing Conduct Public Hearing Description of Tasks a. Post Notice of Public Hearing City staff will arrange for a public hearing on the proposed change in residential rates. This includes: Selecting a location for the hearing Selecting a date for the hearing Preparing a public notice Submitting the notice to the local newspaper for a publication date 14 days prior to the hearing date Preparing copies of the draft report for public review. Exhibit 11-2, on the following page is a sample public hearing notice for newspaper publication. b. Conduct Public Hearing During this task the public hearing is conducted. Copies of the Draft Report and Recommendations should be made available at the meeting. Representatives from the City should be available to respond to citizens questions about the proposed changes. Representatives from the franchise hauler may choose to attend at their option. All citizen comments should be recorded for consideration and possible inclusion in the final report. City of Concord 11-17

86 Section IT Rate Setting Process EXHIBIT 11-2 Sample Public Hearing Announcement Conord PUBLIC HEARING CITY OF CONCORD PROPOSED AMENDMENT TO THE MASTER FEES AND CHARGES RESOLUTION RESIDENTIAL GARBAGE RATES NOTICE IS HEREBY GIVEN that the City Council of the City of Concord will consider a Base-Year Rate Application by Concord Disposal Service to increase/decrease residential garbage rates by % effective NOTICE IS HEREBY FURTHER GIVEN that the City Council of the City of Concord will hold a PUBLIC HEARING on this matter in the Council Chamber, 1950 Parkside Drive, on Tuesday, April 4, 2006 at 6:30 p.m. (or as soon thereafter as the matter can be heard), at which time and place interested persons may appear and be heard. For further information on the above matter, please contact at ( ) -. If you require this notice in an appropriate alternative format, or seek any other disability accommodation, please contact the ADA Coordinator at O_- DATED: March 24, 2006 March 29, 2006 City Clerk 1950 Parkside Drive Concord, CA (925) City of Concord

87 Section II Rate Setting Process STEP 9 Base Year Preparation of Final Report and Recommendations Responsibility: Timing: City Completed within four weeks of conducting the public hearing and receiving comments from the franchise hauler Tasks : a. Incorporate Franchise Hauler's Changes in Final Report b. Incorporate Comments from Public Hearing c. Prepare Final Report and Recommendations Description of Tasks Overview The City prepares the Final Report and Recommendations, incorporating relevant comments from the franchise hauler and public hearing during this task. a. Incorporate Franchise Hauler's Changes in Final Report Any comments or issues raised during the franchise hauler's review of the draft report are addressed during this task. If necessary, meetings are conducted with representatives from the City and the franchise hauler. Final solutions to outstanding issues are included in the report. b. Incorporate Comments from Public Hearing Relevant comments received during the public hearing are considered during this task. If appropriate, modifications to the report should be made. If significant modifications are to be made, the franchise hauler is notified and allowed an opportunity to respond to these changes. The public contact portion of the report also is completed during this task including a summary of the results of the public hearing process. c. Prepare Final Report and Recommendations After final comments from the franchise hauler and the public have been considered, the Final Report and Recommendation package is prepared. A copy of the Final Report is submitted to the franchise hauler. City of Concord 11-19

88 Section H. Rate Setting Process STEP 10 Base Year Presentation of Final Report and Recommendations to City Council Responsibility: Timing: Tasks: a. b. City Completed two weeks prior to the expected implementation of new rates Distribute Report and Summary to Council Members Obtain Council Approval Description of Tasks Overview During this step, the Final Report and Recommendations is presented to the City Council for review, comment, and approval. should be notified four weeks prior to the meeting at which the rate change will be considered and reports should be provided two weeks prior to the meeting. a. Distribute Report and Summary to Council Members In this task, the Final Report and Recommendations are provided to members of the City Council. The report is included as an agenda item for Council consideration at a regular Council meeting. The rate increase may be placed on either the regular or consent calendar. Copies of the report are provided to the City Clerk for distribution with other agenda materials. The City Clerk b. Obtain Council Approval Council members review the report and proposed rate changes. If the Council agrees with the recommendations of the City staff, the report and rates are approved. If the Council does not agree with the recommendations, the report is returned to City staff for additional analysis. If the report and rates are not approved, the Council should specifically identify deficiencies City of Concord

89 Section II Rate Setting Process STEP 11 Base Year Implementation Of New Rates Responsibility: Timing: Tasks: a. b. Franchise Hauler Conducted following City Council approval of the new rates Prepare Notification of Rate Change Implement Rate Change Description of Tasks Overview During this final step, the franchise hauler implements new residential rates. a. Prepare Notification of Rate Change Once the report is approved, a notification of a rate change is mailed to all customers. This notification may be included with a regular billing or may be mailed separately. b. Implement Rate Change During this final task, the new rates are entered into the franchise hauler's billing system and included in the billing cycle. If the franchise hauler prepares residential billings once every two or three months, and a rate change occurs during the middle of a billing cycle, unbilled amounts in the current billing cycle due to the rate change are calculated and included in the next billing cycle. City of Concord II-21

90 Section II Rate Setting Process B. Timing of the Base Year Process Generally, a base year rate change is implemented at the beginning of the franchise hauler's fiscal year in which the new rates will be in effect. The rate change process should begin seven months prior to the beginning of the new fiscal year and the rate change application should be submitted to the City a minimum of five and preferably six months prior to the implementation of the rates. If the franchise hauler's fiscal year begins on January 1st, then the franchise hauler should begin preparing the application during the prior June, with the document submitted to the City in August. The total time required to complete this process will depend on the complexity of changes in operating conditions and the resulting application. Exhibit 11-3 on the next page shows the timeline for completion of the rate change process. Most of the time frames are recommended; however, certain key points are noted in the exhibit by circled letters City of Concord

91 Section IT Rate Setting Process EXHIBIT 11-3 Timing of Base Year Rate Change Process Preparation 30 Day Review Formal Review Process Implement Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 1. Preparation and Submission of Rate Change Application 2. Verification of Completeness of Rate Change Application 3. Review of Rate Change Application and Preparation of Responses A B 4. R s e Additional Information Requests from City 5. Survey of Rates in Similar Service Areas O 6. Preparation of Draft Reportand Recommendations 7. Review of Draft Rep ortand Recommendations 8. Conduct Public Hearings 9. Preparation of Final Report and Recommendations O O 10. Presentation of Final Report and Recommendations to City Council 11. Implementation of New Rates O O Legend A. Rate Change Application D. Review of Draft Letter G. Final Report and B. Letter of Completeness E. Notification of Public Hearing Recommendations C. Additional Information from Hauler F. Public Hearing H. Application Approved 1. New Rates Implemented City of Concord 11-23

92 Section H. Rate Setting Process C. Interim Year Process Each rate change request in the three years between base years follows a streamlined process. This process requires substantially less information and preparation time, while still allowing for rate changes which are fair and reasonable. During the three interim years, residential rates can be adjusted annually through application of an index. The index consists of: Changes in the San Francisco-Oakland- San Jose Metropolitan Area Consumer Price Index (CPI) (All Items). In each interim year, the franchise hauler and City staff are responsible for determining the actual annual change in the CPI. They shall use the CPI in the interim year rate adjustment calculation that equals seventy (70) percent of the annual change in the Index, available at the time the interim year rate change application is submitted. The interim year rate increase in any given year shall not exceed five (5) percent. Even if the interim-year adjustment would justify a change in rates, the franchise hauler is not required to apply for the change. This will help stabilize rates even when small changes might be warranted. Exhibit 11-4, following this page, provides an overview of the Interim Year Rate Change Process. Following this exhibit is a description of each step in the process City of Concord

93 Section II Rate Setting Process EXHIBIT 11-4 Interim Year Rate Change Process Step/Task Responsibility 1. Preparation and Submission of Rate Change Application a. Prepare an Interim Year Rate Change Application b. Submit Draft to City Staff Franchise Hauler 2. Review of Rate Change Application a. Identify Appropriate Consumer Price Index (CPI) b. Verify Percentage Change in CPI c. Verify Seventy Percent Change in CPI, but Not to Exceed Five Percent d. Prepare Draft Report and Recommendations City 3. Review and Response to City Analysis and Calculations a. Review City Staff Calculations and Analysis b. Prepare and Submit Response Franchise Hauler 4. Preparation of Final Report and Recommendations a. Incorporate the Franchise Hauler's Comments in Final Report b. Prepare Final Report and Recommendations City 5. Presentation of Final Report and Recommendations to City Council a. Distribute Report to Council Members b. Obtain Council Approval City 6. Implementation of New Rates a. Notify Residential Customers b. Implement Rate Change Franchise Hauler City of Concord 11-25

94 Section II Rate Setting Process STEP 1 Interim Year Preparation and Submission of Rate Change Application Responsibility: Timing: Tasks: a. b. Franchise Hauler Completed three months prior to the implementation of the new rates Prepare an Interim Year Rate Change Application Submit Draft to City Staff Description of Tasks Overview During this first step, the franchise hauler prepares the Interim Year Rate Change Application. a. Prepare an Interim Year Rate Change Application The franchise hauler is responsible for submitting the initial interim year application for which new residential rates are being requested. Current and requested new residential rates, by category, are entered on the Interim Year Rate Change Application. The application is signed by an appropriate representative of the franchise hauler. b. Submit Draft to City Staff The completed application is sent to the City for review and calculation of new residential rates City of Concord

95 Section H. Rate Setting Process STEP 2 Interim Year Review of Rate Change Application Responsibility: Timing: Tasks: City Completed within three weeks of receiving a completed Interim Year Rate Change Application a. Identify Appropriate Consumer Price Index (CPI) b. Verify Percentage Change in CPI c. Verify Seventy Percent Change in CPI, but Not to Exceed Five Percent d. Prepare Draft Report and Recommendations Description of Tasks Overview City staff use the franchise hauler's existing residential rates, by category; verify changes in the Consumer Price Index; and then calculate the rate change and new rates for the next interim year. The Interim Year Rate Change Application is used to complete this step. a. Identify Appropriate Consumer Price Index (CPI) Seventy percent (70) of the annual change in the San Francisco-Oakland-San Jose Metropolitan Area Consumer Price Index (CPI) (All Items) provides the factor for determining new rates during interim years. The interim year rate increase in any given year shall not exceed five (5) percent. The actual change in this index during the twelve months prior to the date the interim year rate change application is submitted to the City is used for this methodology. The CPI information is available from the United States Department of Labor, Bureau of Labor Statistics, and is prepared monthly. b. Verify Percentage Change in CPI City staff prepare their own Interim Year Rate Change calculation of new residential rates during this task. This task requires current rates, per customer, per month. This task also requires the Bay Area Consumer Price Index information collected in Task a. The application form is used to calculate the new residential rates. Detailed instructions on how to complete this application are provided in Section IV of this manual. c. Verify Seventy Percent Change in CPI, but Not to Exceed Five Percent Again, the application form is used to calculate the new residential rates and detailed instructions on how to complete this application are provided in Section IV of this manual. City of Concord 11-27

96 Section H. Rate Setting Process d. Prepare Draft Report and Recommendations City staff prepares a draft report with recommendations of new rates for City Council consideration. This report should be brief and include the following sections: Executive Summary This is a one page summary of the review process and includes a chart showing current and proposed rates, and the recommended rate change. Background This section of the report provides a brief overview of the rate change process and discussion of any significant historical issues. Analysis and Discussion of Issues This section includes a review of the analysis work completed by City staff. This section also includes a discussion of any significant changes in costs and an identification of the seventy (70) percent change in CPI used by the City. Recommendation City staff presents its recommendation regarding any change in residential rates in this section. Attachments Attachments to the report would include: Rate change application Revised rate schedule. After the draft report and recommendations have been prepared, the document should be submitted to the franchise hauler for comment and review City of Concord

97 Section II Rate Setting Process STEP 3 Interim Year Review and Response to City Analysis and Calculations Responsibility: Timing: Tasks: a. b. Franchise Hauler Completed within three weeks of receiving the completed interim year draft report from the City Review City Staff Calculations and Analysis Prepare and Submit Response Description of Tasks Overview The franchise hauler reviews the draft report to ensure that any calculations and analysis completed by City staff are fair, reasonable, and justified. a. Review City Staff Calculations and Analysis The franchise hauler reviews the draft report to ensure the following: Correct data are included City staff analysis is accurate and fair Rate changes are reasonable and acceptable. b. Prepare and Submit Response A written response to the draft report is prepared. The response may cover one or more of the following topics: Data discrepancies in any of the areas noted in the prior task Clarification for the City or alternative analysis of the application Responses to the City's request for additional information. City of Concord 11-29

98 Section II Rate Setting Process STEP 4 Interim Year Preparation of Final Report and Recommendations Responsibility: Timing: City Conducted within two weeks of receiving comments from the franchise hauler Tasks : a. Incorporate the Franchise Hauler's Comments in Final Report b. Prepare Final Report and Recommendations Description of Tasks Overview The City prepares the Final Report and Recommendations incorporating comments from the franchise hauler, as appropriate. with representatives from the City and the franchise hauler. Final solutions to outstanding issues should be included in the report. a. Incorporate the Franchise Hauler's Comments in Final Report Any comments or issues raised during the franchise hauler's review of the draft report are addressed during this task. If necessary, meetings should be conducted b. Prepare Final Report and Recommendations After final comments from the franchise hauler have been considered, the Final Report and Recommendations is prepared. A copy of the Final Report should be submitted to the franchise hauler City of Concord

99 Section H. Rate Setting Process STEP 5 Interim Year Presentation of Final Report and Recommendations to City Council Responsibility: Timing: Tasks: a. b. City Completed within ninety days of receiving a completed Interim Year Rate Change Application Distribute Report to Council Members Obtain Council Approval Description of Tasks Overview The Final Report and Recommendations is submitted to City Council for review, comment, and approval, during this step. a. Distribute Report to Council Members The Final Report and Recommendations is included as an agenda item for Council consideration at a regular City Council meeting. This item may be placed on either the regular or consent calendar. Copies of the report are provided to the City Clerk for distribution with other agenda materials. The City Clerk should be notified four weeks prior to the meeting at which the rate change will be considered and reports will be provided two weeks prior to the meeting. b. Obtain Council Approval Council members will review the report and proposed rate changes. If Council agrees with the recommendations of City staff, the report and rates should be approved. If Council does not agree with the recommendations, the report is returned to City staff for additional analysis. If the report and rates are not approved, Council should be asked to specifically identify deficiencies. City of Concord 11-31

100 Section II Rate Setting Process STEP 6 Interim Year Implementation Of New Rates Responsibility: Timing: Tasks: a. b. Franchise Hauler Conducted following the approval of the new rates by the City Council Notify Residential Customers Implement Rate Change Description of Tasks Overview After new rates have been approved by City Council, the final step in the process is to implement the new rates. a. Notify Residential Customers After the report is approved, a notification of a rate change should be mailed to all customers. b. Implement Rate Change During this final task, the franchise hauler enters the new rates into their billing system and includes the new rates on the next appropriate customer invoice. If a rate change occurs during the middle of a billing cycle, unbilled amounts are calculated and included in the next billing cycle City of Concord

101 Section H. Rate Setting Process D. Timing of the Interim Year Process Generally, interim year rate changes are implemented at the beginning of the fiscal year in which the new rates will take effect. The rate change process should begin four months prior to the beginning of the new fiscal year and the rate change application should be submitted to the City a minimum of three months prior to the implementation of the rates. If the franchise hauler's fiscal year begins on January 1st, the application should be submitted to the City in October. Exhibit 11-5, on the following page, shows the timeline for completion of the rate change process. Most of the time frames are recommended; however, certain key products are noted in the exhibit by circled letters. City of Concord II-33

102 Section IT Rate Setting Process EXHIBIT 11-5 Timing of Interim Year Rate Change Process Preparation Formal Review Implement Month 1 Month 2 Month 3 Month 4 Month 5 1. Preparation and Submission of Rate Change Application 2. Review of Rate Change Application Ao 3. to Review and Response to City y Analysis and Calculations 4. Preparation of Final Report and Recommendations 5. Presentation of Final Report and Recommendations to City Council 6. Implementation of New Rates O O Legend A. Application Submitted to City B. Final Report and Recommendations C. City Council Approval D. New Rates Effective City of Concord

103 Section III Base Year Rate Setting Methodology

104 Section III. Base Year Rate Setting Methodology This section provides detailed instructions for completing the Base Year Rate Change Application and for conducting the Survey of Rates in Similar Areas. The application will be prepared by the franchise hauler and reviewed by the City. The survey will be prepared by the City. This section of the manual includes the following sub-sections: A. Preparation of the Base Year Rate Change Application B. Survey ofrates in Similar Areas. Forms provided in this section identify all areas to be completed with double outlined boxes. If data are to be entered on the forms, the box has no shading. If a calculation is required, the box has light shading. A. Preparation of the Base Year Rate Change Application The franchise hauler is responsible for preparing the Base Year Rate Change Application. This three page form includes detailed financial and operating information and is used to determine the actual costs and revenues of the franchise hauler. Exhibit III-1, following this page, provides an overview of the steps and related tasks which must be completed to prepare the application form. Exhibit 111-2, following Exhibit III-1, is a sample application form as it might be completed by the franchise hauler. Following this exhibit are detailed descriptions of each step and related tasks. Several lines in the application contain three columns. This includes lines 6-21, 31, 34-36, and These columns are intended to show the relationship between the most recently completed fiscal year (year 1), the current year (year 2), and projections for the new "base" year (year 3). These columns are organized as follows: Column One includes information for the franchise hauler's prior fiscal year. This is most recent year that audited financial information is available and that actual costs can be verified. Column Two is for estimating performance during the current fiscal year. The "current year" is the franchise hauler's fiscal year prior to the new base year. The base year rate change application is prepared during the course of the current year. Data in this column should include year-to-date performance plus estimated performance during the remaining months of the current fiscal year. Column Three is used to report projected performance during the new base year. This information is utilized to determine any rate changes. The relationship between these three columns for any given line item should be consistent. Any substantial difference between each of the three years should be explained by the franchise hauler and considered by the City during the review process. City of Concord 111-1

105 Section III. Base Year Rate Setting Methodology EXHIBIT III-1 Preparation of Base Year Rate Change Application Step/Task 1. Entry of Operating Costs and Profit a. Enter Prior Year Audited Information b. Enter Current Year Estimated Information c. Enter Base Year Projected Information d. Enter Operating Data 2. Determination of Residential and Commercial Revenues a. Determine Residential Revenue b. Determine Commercial Revenue c. Determine Allowance for Uncollectible Accounts d. Determine Revenue from Recycled Material Sales e. Calculate Total Revenue 3. Calculation of Allowable Operating Profit and Revenue Requirement a. Calculate Allowable Operating Profit b. Determine Franchise Fee c. Calculate Revenue Requirement 4. Calculation of Percent Change In Rates a. Calculate Net Surplus/Shortfall b. Calculate Percent Change In Rates 5. Preparation of Summary Form a. Calculate New Rates b. Sign and Submit the Application City of Concord

106 Section III. Base Year Rate Setting Methodology EXHIBIT PAGE 1 OF 3 Sample Base Year Rate Change Application City of Concord Base Year Rate Change Application Summary Rate Change 1. Percent Residential Rate Change Requested Rate Schedule Rate Schedule Current Rate Adjusted Rate Adjustment New Rate gallon mini can (legacy) 3, 32-gallon senior citizen (legacy) 4, 32-gallon senior citizen (low income) gallon gallon gallon SAMPLE Certification To the best of my knowledge, the data and information in this application is complete, accurate, and consistent with the instructions provided by the City of Concord Name: John Brown Title: Chief Financial Officer Signature Date: 2/1/2010 Fiscal Year Page 1 of 3 City of Concord 111-3

107 Section III. Base Year Rate Setting Methodology EXHIBIT PAGE 2 OF 3 Sample Base Year Rate Change Application (continued) City of Concord Base Year Rate Change Application Financial Information Section I --Operating Costs Actual Audited Estimated Prior Year Current Year Projected Base Year Direct Labor S 9. Tipping Fees (Profit Allowed) 10. Corporate Overhead 11. Office Salaries 12. Other General & Administrative Costs 13. Total Operating Costs S Section II--Allowable Operating Profit 14. Operating Ratio 15. Allowable Operating Profit Section III --Pass Through Costs 16. Trucking Charges 17. Regulatory Fees 18. Tipping Fees (Pass Through) 19. Residential and Commercial Franchise Fee 20. Total Pass Through Costs S S 21. Total Operating Costs (Line 11) plus Operating Profit (Line 13) plus Total Pass Through Costs (Line 18) Section IV--Revenue Requirement Section V--Revenue without Rate Change in Base Year 22. Residential Revenue Current Rate/Month Months Projected Accounts Total 23. Residential Legacy Mini Can 24. Residential Legacy Senior Citizen 25. Residential Low Income Senior Citizen 26. Residential 32-Gallon 27. Residential 64-Gallon 26. Residential 96-Gallon Sub-total 30. Less: Allowance for Uncollectible Residential Accounts 31. Total Residential Revenue (without Rate Change in Base Year) 32. Commercial Revenue 33. Less: Allowance for Uncollectible Commercial Accounts 34. Total Commercial Revenue (with Rate Change in Base Year) Recycled Material Sales Total Revenue (Lines Section VI--Net Shortfall ( Surplus) R C S S 37. Net Shortfall (Surplus) 38. Total Residential Revenue Prior to Rate Change (Line 31) Section VII--Percent Change in Rates 39. Percent Change in Existing Residential Rates (Line 37-38) Fiscal Year Page 2 of 3 III-4 City of Concord

108 Section III. Base Year Rate Setting Methodology EXHIBIT PAGE 3 OF 3 Sample Base Year Rate Change Application (continued) City of Concord Base Year Rate Change Application Operating Information Prior Year Current Year Base Year Audited Estimated Percent Projected Percent Information Information Change Information Change Section VIII--Operating Data 40. Residential Accounts 41. Commercial Accounts 42 Total Accounts 43 Residential Collected Tons 44. Residential Recycled Tons 45 Residential Yard Tons 46. Commercial Collected Tons 47. Commerical Recycled Tons % 48. City Drop Boxes Provided (Monthly) 49. City Bins Provided Section IX--Change in Commercial Rates Yard Bin--Once per Week Yard Bin--Once per Week 52. Debris Box--Once per Week SAMPLE Fiscal Year: 2010 Page 3 of 3 City of Concord 111-5

109 Section III. Base Year Rate Setting Methodology STEP 1 Application Entry of Operating Costs and Profit Responsibility: Timing: Tasks: Franchise Hauler Prepared during Step 1 of the Base Year Rate Change Process (Refer to Section II-A) a. Enter Prior Year Audited Information b. Enter Current Year Estimated Information c. Enter Base Year Projected Information d. Enter Operating Data Description of Tasks a. Enter Prior Year Audited Information A copy of the prior year financial audit should be obtained. Financial information from the audit is consolidated into specific categories identified in the application. These categories include: Line 6 Line 7 Line 8 Line 9 Line 10 Line 14 Line 15 Line 16 Line 17 Direct Labor Tipping Fees (Profit Allowed) Corporate Overhead Office Salaries Other General & Administrative Costs Trucking Charges Regulatory Fees Tipping Fees (Pass Through) Residential and Commercial Franchise Fee. The specific components of these cost categories are described in Exhibit 111-3, on the following page. This exhibit also identifies cost categories which may not be included in establishing rates. Supplemental documentation should be prepared which reconciles the financial audit to information provided in the application (e.g., a trial balance report). This documentation, along with a copy of the audit, should be included in the application package. Total cost information for both residential refuse collection/curb side recycling and commercial refuse collection should be reported in this initial task, and in tasks b and c, below. A breakdown of costs for commercial, residential, curbside recycling, and greenwaste services is not required at any point in the rate setting process. b. Enter Current Year Estimated Information Current year costs are determined by adding actual costs to-date to estimated costs that will be incurred during the rest of the fiscal year. Total costs for the current year should be similar to the prior audited year, City of Concord

110 Section III. Base Year Rate Setting Methodology EXHIBIT PAGE 1 of 2 Definition of Financial Terms Line Number/Item Definition Allowable Costs Each of the following expense categories, as recorded on the financial hauler's audited financial statements and approved by the City, are allowed to be recovered through the rates: 6. Direct Labor All costs associated with the refuse collectors, including wages, overtime, payroll taxes, health and welfare benefits, workers compensation, and pension benefits 7. Tipping Fees (Profit Allowed) Costs to dispose of solid waste at transfer stations, transformation facilities, or landfills. These fees are capped at a set amount per ton. The per ton limit is established by the City 8. Corporate Overhead Salaries paid to the franchise hauler's corporate officers. The amount of this item cannot exceed two percent of total operating costs (line 11) 9. Office Salaries Wages and related benefits paid to office and administrative staff, including wages, overtime, payroll taxes, health and welfare benefits, workers compensation, and pension benefits 10. Other General and All general and administrative costs with the exception of corporate overhead Administrative (G&A) Costs and office salaries. This item includes the following costs: Accounting Interest expense Collection fees Licenses Computer equipment Medical expenses Dues and subscriptions Office rent Indemnification to City for Office supplies legal and environmental Postage remediation costs Office repair and maintenance Insurance Telephone Janitorial Travel Laundry and uniform Utilities Legal fees 11. Total Operating Costs Sum of direct labor, tipping fees (profit allowed), corporate overhead, office salaries, and other G&A costs 12. Operating Ratio Determines allowable operating profit, and is the ratio of total operating costs to total operating revenue. The operating ratio must be between 88 and 92 percent. If the franchise hauler's actual operating ratio is outside this range, the operating ratio is to be set at 90 percent 13. Allowable Operating Profit Established by the allowable operating ratio 14. Trucking Charges Costs for the lease of trucks and equipment not directly owned by the franchise hauler 15. Regulatory Fees All costs imposed by government which are paid directly by the franchise hauler City of Concord 111-7

111 Section III. Base Year Rate Setting Methodology EXHIBIT PAGE 2 of 2 Definition of Financial Terms (continued) Line Number/Item Definition Allowable Costs (continued) Each of the following expense categories, as recorded on the financial hauler's audited financial statements and approved by the City, are allowed to be recovered through the rates: 16. Tipping Fees (Pass Through) 17. Residential and Commercial Franchise Fee Costs to dispose of solid waste at transfer stations, transformation facilities, or landfills. These fees are that portion of total company tipping fees charged at greater than the per ton limit established by the City Franchise fees paid to the City Non-Allowable Costs Each of the following expense categories are not allowed to be recovered through the rates: Advertising Contributions Entertainment Income Taxes Any costs related to promoting the franchise hauler's services. Because the franchise hauler has exclusive rights to providing solid waste removal and curbside recycling services in the City of Concord, advertising of services should be unnecessary Donations made to charitable organizations or to support political causes Business meals and other business related entertainment State, federal, and local income taxes City of Concord

112 Section III. Base Year Rate Setting Methodology after taking into account increases due to inflation and change in the number of residential, curbside recycling, and commercial customers served. Any significant changes should be explained and documented. A significant change includes any increase in cost which is greater than the CPI, or any decrease in a cost item. c. Enter Base Year Projected Information Base year costs are projected by the franchise hauler. These projected costs then are used to calculate the net surplus/shortfall in revenues and, subsequently, the percent change in residential rates. These projected costs should be developed by estimating anticipated service levels during the base year, and determining the expenses which will be incurred to provide these services. Each cost element in the application should be reviewed and any anticipated change in specific line items should be included in the base year projection. For example, if negotiated labor rates are scheduled to change, or if tipping fees are expected to change, these changes should be included in cost projections for the base year. Actual and estimated franchise fees for the two years prior to the base year (years one and two of the application) should be included in the application in tasks a and b. The franchise fee for the base year (year three of the application) is not estimated in this task, but is determined in Step 3. In addition to the cost information requested in the application, three supplemental financial measures must be provided as an attachment to the application: (1) The total square feet of office space used by the franchise hauler, and the rental or lease rate per square foot per month during the new base year, (2) the fully-loaded lease cost per residential truck during the new base year, and (3) the total square feet of warehouse space and the rate per square foot during the new base year. The franchise hauler must provide three comparable rates for each of these financial measures (i.e., three for trucking charges, three for office space per square foot, and three for warehouse space per square foot). The source of these comparable rates must be identified and documented. d. Enter Operating Data Operating information requested in the application, provides an important indicator of the franchise hauler's performance. If costs are changing at an unusual rate, operating data may provide some explanation of these changes. For example, cost increases could be attributed to the increased level of service provided (i.e., accounts served). Two operating characteristics are required in the application for both residential/curbside recycling and commercial customers: Residential and commercial customer accounts served Residential and commercial tons collected. Additionally, the franchise hauler should report the quantity of drop boxes and bins provided to the City. Similar to cost data, three years of operating data are required in the application. The first year is the "prior" year, the second year is the "current" year and the third year is the "base" year. Prior year data are based on actual annual operating statistics during the last complete fiscal year. This is the same fiscal year used in the financial sections of the application. Current year performance is based on performance to-date plus estimated performance for the remaining months of the City of Concord 111-9

113 Section III. Base Year Rate Se ng Methodology current year. Projected base year data are the franchise hauler's best estimate of service levels during the new base year. Year-to-year percentage changes then are determined for accounts served, tons collected, and drop boxes/bins provided to the City. Any significant changes should be documented and explained by the franchise hauler. A significant change in an operating characteristic is an increase or decrease of more than two percent. Note that line 40 of the application contains the total number of residential accounts serviced by the franchise hauler in the new base year. This total should agree with the account information used to calculate residential revenue (lines 23 to 28) City of Concord

114 Section III. Base Year Rate Setting Methodology STEP 2 Application Determination of Residential and Commercial Revenues Responsibility: Timing: Tasks: Franchise Hauler Prepared during Step 1 of the Base Year Rate Change Process (Refer to Section 11-A) a. Determine Residential Revenue b. Determine Commercial Revenue c. Determine Allowance for Uncollectible Accounts d. Determine Revenue from Recycled Material Sales e. Calculate Total Revenue Description of Tasks a. Determine Residential Revenue Total revenue for each service type is Residential and commercial revenue calculated based on the following: comprise the majority of revenues to the franchise hauler. Of the two, residential revenue is much easier to estimate than commercial revenue because of the simplified rate structure and limited types of service provided. Customers generally use one can service, but a rate for each Multiplied by Equals Multiplied by Rate per month Twelve months Rate per year additional can also is provided. Pick-up is Equals Revenue by service provided one time per week and a standard monthly fee is charged. type Because of the relative simplicity of the residential rate structure, determining the amount of residential revenue in the base year without a rate change is a straight forward process. To calculate residential revenue, enter the current monthly rates by service type in the first column of cells on lines Then enter the projected number of accounts by service type in the second column of cells on lines Projected residential accounts Revenue by service type then is entered in the third column of cells in lines These values then are added together and entered on line 29. The number of accounts in each service category may change throughout the year. For example, some customers may request one can service part of the year and an additional can during the remainder of the City of Concord III-11

115 Section III. Base Year Rate Se ng Methodology year. The average number of accounts by service type is to be used in these calculations. In addition, the number of accounts identified for these calculations must agree with operating data provided in Section VIII (page 3) of the application. b. Determine Commercial Revenue Because of the wide variety of commercial services provided, it is not practical to use the process described in task a to estimate commercial revenue. Instead, the approach to be used is similar to estimating costs for the new base year. Commercial revenue information is entered on line 32 of the application. In the first column of this line, the actual revenue generated by commercial accounts during the prior year is reported. This amount must reconcile with the financial audit of that same year. Commercial revenue for the current year is based on actual revenue todate plus an estimate of the revenue that will be received through the end of the fiscal year. Commercial revenue in the current year should be comparable to revenue in the prior year, after taking into account changes in rates and service levels. Projected commercial revenue for the new base year is entered in the third column of line 34. This amount is based on the estimated annual revenue received during the current fiscal year plus any additional revenue generated from expected rate changes and additional accounts. The commercial rate changes assumed should be documented separately by the franchise hauler, and provided to the City. Operating data provided in Section VIII (page 3) of the application should support any service level changes. In order to analyze changes in commercial rates, information must be provided for the three specific commercial services. These services are: 3 Yard Bin -- once per week 2 Yard Bin -- once per week Debris Box -- once per week. In the columns one, two and four of lines 50-52, the franchise hauler enters the rate for these services for the prior year, the current year, and the base year, respectively. Percentage changes then are entered in columns three and five. This information provides an indication of the overall changes in commercial rates which can be compared to the requested change in residential rates. c. Determine Allowance for Uncollectible Accounts The franchise hauler likely will not be paid by all customers served. While this amount is expected to be relatively small, it must be accounted for in the calculation of base year net revenues. These amounts are reported on line 27, allowance for uncollectible residential accounts, and line 30, allowance for uncollectible commercial accounts. These amounts can be calculated based on a formula, such as one percent of anticipated revenues, or based on actual experience. All assumptions related to the projection of uncollectible accounts must be documented and included as a supplement to the application. d. Determine Revenue from Recycled Material Sales In addition to revenue generated through commercial and residential services, some additional revenue is generated by selling recyclable materials City of Concord

116 Section III. Base Year Rate Setting Methodology collected through the curbside recycling program. The amount of revenue generated through the sale of these materials is dependent upon the quantity of material collected and the market price for these materials. Both of these factors are outside direct control of the franchise hauler. Therefore, revenues generated by recycled material sales are not subject to an across-the-board rate change. In the first column of line 35, actual revenues received during the most recently completed fiscal year are reported. In the second column of line 35, estimated revenues for the current year are reported. For the base year, revenue from recycled material sales is determined by projecting scrap prices for recycled materials and the anticipated quantity of materials sold. The projected scrap prices are multiplied by the projected volume of materials to be sold to determine projected scrap revenue. This projected revenue is reported in the third column of line 35 of the application. e. Calculate Total Revenue Total revenue is determined as follows: Line 31 Total residential revenue Plus Line 34 Total commercial revenue Plus Line 35 Recycled material sales Equals Total revenue Total revenue is entered on line 36. City of Concord

117 Section III. Base Year Rate Setting Methodology STEP 3 Application Calculation of Allowable Operating Profit and Revenue Requirement Responsibility: Timing: Tasks: a. b. C. Franchise Hauler Prepared during Step 1 of the Base Year Rate Change Process (Refer to Section II-A) Calculate Allowable Operating Profit Determine Franchise Fee Calculate Revenue Requirement Description of Tasks a. Calculate Allowable Operating Profit The operating ratio method will be used to establish the total revenue requirement. The operating ratio establishes revenue requirements based on allowable expenses. The equation for the operating ratio is: Divided by Equals Operating costs Total operating revenues Operating ratio. The operating ratio effectively determines the profit allowed to the franchise hauler on its operating costs. In the first base year, the operating ratio will be 90 percent. In each succeeding base year, the operating ratio will range from 88 to 92 percent, which will help stabilize rate changes and afford the franchise hauler an incentive to reduce costs. In any succeeding base year, if the franchise hauler earned an operating ratio outside this range, then 90 percent would be reestablished. Trucking charges from companies affiliated with the franchise hauler are considered pass-through costs, and no profit is allowed to the franchise hauler. The profit on these charges already is included in affiliated company lease costs. Surcharges imposed for regulatory requirements, and which are collected by the franchise hauler directly, are pass-through costs, and no profit is allowed. Regulatory charges assessed on refuse disposed of by the franchise hauler, which are collected by the disposal facility operator (not the franchise hauler) are normally incorporated in tipping fees. The franchise hauler is allowed a profit on tipping fees and, therefore, on these regulatory costs. To do otherwise would create a significant bookkeeping burden on the franchise hauler to track such charges separately. The following operating costs are included as operating costs in the allowable operating profit calculation: Direct labor Tipping fees Corporate overhead City of Concord

118 Section III. Base Year Rate Se ng Methodology Office salaries Other general and administrative costs. A definition of the components of these cost categories is provided in Exhibit The actual operating profit received by the franchise hauler in the most recently completed fiscal year is entered on line 13, column 1. The estimated operating profit for the current fiscal year is entered on line 13, column 2. The actual operating ratio for these two years then is calculated using the operating ratio equation shown on the prior page. For purposes of calculating the operating ratios, total operating revenue equals total operating cost plus allowable operating profit. To calculate the allowable operating profit in the base year, the following equation is utilized: Divided by Equals Minus Equals Operating costs Operating ratio Allowable operating revenues Operating costs Allowable operating profit b. Determine Franchise Fee Franchise fees paid to the City are equal to a fixed amount. Franchise fees should be entered on line 17 of the application. After base year franchise fees are entered, total base year pass-through costs can be calculated. Lines 14 through 17 should be added and the result entered on line 18, total pass through costs. Any significant changes in total pass through costs should be explained and documented. c. Calculate Revenue Requirement The revenue requirement establishes the level of revenue needed to meet all allowable costs and operating profit. This includes commercial, residential, and curbside recycling costs and assumes a reasonable profit margin based on the operating ratio calculation. Total revenue requirements are determined as the sum of: Operating costs Allowable profit Pass-through costs. The revenue requirement is entered on line 19 of the application. The allowable operating profit is entered on line 13, column 3 of the application. City of Concord

119 Section III. Base Year Rate Setting Methodology STEP 4 Application Calculation of Percent Change in Rates Responsibility: Timing: Tasks: a. b. Franchise Hauler Prepared during Step 1 of the Base Year Rate Change Process (Refer to Section 11-A) Calculate Net Surplus/Shortfall Calculate Percent Change In Rates Description of Tasks a. Calculate Net Surplus/ Shortfall The net surplus/shortfall is determined based on the following calculation: Line 21 Less Line 36 Equals Revenue requirement Total revenue Net residential surplus/ shortfall. (Line 37) that no net surplus occurs. The projected amount of revenue generated during the base year from commercial services and the sale of recycled materials was calculated in Step 3; therefore, any change in revenue required must come from an increase or decrease in residential rates. The percent change in existing residential rates is calculated as follows: Line 37 Net surplus/shortfall The net residential surplus/shortfall is entered on line 37. This number is used to calculate the percent change in existing rates. b. Calculate Percent Change in Rates Divided by Line 38 Equals Total residential revenue prior to rate change Percent change in residential rates. The percent change in residential rates is the amount that residential rates must be either raised to generate revenues sufficient to eliminate any net shortfall or lowered so The percent change in residential rates is entered on line 39 of the application City of Concord

120 Section III. Base Year Rate Setting Methodology STEP 5 Application Preparation of Summary Form Responsibility: Timing: Tasks: a. b. Franchise Hauler Prepared during Step 1 of the Base Year Rate Change Process (Refer to Section 11-A) Calculate New Rates Sign and Submit the Application Description of Tasks a. Calculate New Rates The rate change identified on page 2, line 39 should be entered on page 1, line 1 of the Base Year Rate Change Application. Current rates for residential solid waste collection should be entered in the first column of lines 2-7. The adjusted rates then are calculated by multiplying the current rate by one plus the rate increase identified in line 1. These adjusted rates are entered in the second column of lines 2-7. The adjusted rates are rounded up or down to the nearest five cent increment. This simplifies record keeping for the franchise hauler and should not make a material difference to customers. The adjustment required to reach the nearest five cent increment should be calculated and entered in the third column of lines 2-7. To determine new residential rates, column two on lines 2-7 should be added to column three and the result should be entered in column four. This column provides the new rate schedule. b. Sign and Submit the Application An authorized representative from the franchise hauler should sign and date the application. This signature provides a certification of the franchise hauler that the application is complete, accurate, and consistent with the instructions provided in this manual. City of Concord

121 Section III. Base Year Rate Setting Methodology B. Survey of Rates in Similar Areas As a check of the reasonableness of existing and new refuse collection fees, a survey of rates in similar communities should be conducted during each base year (once every four years). This survey covers a variety of topics including: Residential service Commercial service. The survey is conducted by City staff during base year process Step 5. Exhibit 111-4, following this page, is a sample survey form. The survey should be conducted by telephone instead of by mail. A minimum of six cities should be contacted. These cities should be located in the East San Francisco Bay Area, and should be similar in size and demographic make-up to the City of Concord. While all questions in the survey provide valuable comparative information, there are several key questions including: Monthly rates for one and two can residential service Monthly rates for a standard commercial service (e.g., once-a-week pick-up of a three yard bin). After the survey has been conducted, the results are summarized for comparison with the franchise hauler ' s rate application. This summary is included as an attachment to the Final Report and Recommendations package, as described in Section II-A, Step 6. This information also is used in the evaluation of the franchise hauler's application City of Concord

122 Section III. Base Year Rate Setting Methodology EXHIBIT PAGE I OF 2 Sample Solid Waste Fee Survey City of Concord Solid Waste Fee Survey Residential Refuse, Recycling, and Green Waste Collection Rates of Comparable Jurisdictions to the City of Concord Central Contra Costa Solid Waste Authority 1-20 gallon 1-32 gallon 1-40 gallon 1-64 gallon 1-96 gallon Senior container container container container container Citizen Danville $ $ $ $ $ $ Lafayette Moraga Orinda Unincorporated Walnut Creek Antioch Clayton Martinez Pittsburg Pleasant Hill Average without Concord Proposed Concord % Difference from Average % % % % % % Fiscal Year Page 1 of 2 City of Concord

123 Section III. Base Year Rate Setting Methodology EXHIBIT PAGE 2 OF 2 Sample Solid Waste Fee Survey (continued) City of Concord Solid Waste Fee Survey Commercial Refuse, Recycling, and Green Waste Collection Rates of Comparable Jurisdictions to the City of Concord 1 Cu. yd. 2 Cu. yds. 3cu. yds. 6 cu. yds. 1 Cu. yd. 2 Cu. yds. 3cu. yds yard 30-yard 40-yard 6 cu. yds. debris s box debriss box debris box debris box Central Contra Costa Solid Waste Authority Danville $ $ $ $ $ $ $ $ $ $ S $ Lafayette Moraga Orinda Unincorporated Walnut Creek Antioch Clayton Martinez Pittsburg Pleasant Hill Average without Concord Proposed Concord % Difference from Average % % % % % % % Notes Commercial drop box rates for Ant,och, Clayton and Pleasant Hiil are for boxes not to exceed 7 ton. The con-gal drop box rate for Martinez ern Pilsb og is r a box not to exceed 3 tons Fiscal Year Page2 oft City of Concord

124 Section IV Interim Year Rate Setting Methodology

125 Section IV. Interim Year Rate Setting Methodology One form is required to complete the Interim Year Rate Setting Process: Interim Year Rate Change Application This form will be initially submitted by the franchise hauler to request changes in interim year rates. The City will review and approve the two-page application. Page 2 of the application contains consumer price index information. Page 1 of the application applies the CPI information to the current rate schedule. This section provides detailed instructions for completing this document. Exhibit IV-1, following this page, provides an overview of the steps and related tasks which must be completed to prepare the application form. Exhibit IV-2, following Exhibit IV-1, is a sample application as it might be prepared by the franchise hauler. This exhibit includes references to the various steps which must be completed to prepare the application. Following this exhibit is a detailed description of these steps and related tasks. Similar to the base year forms, these forms identify all areas to be completed with double outlined boxes. If data are to be entered in the form, the box has no shading. If a calculation is required, the box has light shading. Please note that data included in these forms are provided for illustrative purposes only and are not intended to reflect actual operating or financial conditions. City of Concord IV-1

126 Section IF. Interim Year Rate Setting Methodology EXHIBIT IV-1 Preparation of Interim Year Rate Change Application Step/Task 1. Residential Rate Change Percent Request a. Summarize Rate Change Requested b. Apply Rate Change to Rate Schedule 2. Consumer Price Index (CPI) Information a. Provide Most Recent Twelve Month CPI Data b. Calculate Percentage Change in CPI c. Calculate Seventy Percent Change in CPI, but Not to Exceed Five Percent 3. Application Certification a. Sign Application b. Submit Application to City IV-2 City ofconcord

127 Section IF. Interim Year Rate Setting Methodology EXHIBIT IV-2 PAGE I OF 2 Sample Interim Year Rate Change Application City of Concord Interim Year Rate Change Application Summary Rate Change f. Percent Residential Rate Change Requested gallon mini can (legacy) gallon senior citizen (legacy) gallon senior citizen (low income) gallon gallon gallon Certification To the best of my knowledge, the data and information in this application is complete, accurate, and consistent with the instructions provided by the City of Concord. Fiscal Year Page 1 of 2 City of Concord IV-3

128 Section IF. Interim Year Rate Setting Methodology EXHIBIT IV-2 PAGE 2 OF 2 Sample Interim Year Rate Change Application (continued) City of Concord Interim Year Rate Change Application Section I -- Consumer Price Index (CPI) Information CPI -All Urban Consumers Not Seasonally Adjusted San Francisco - Oakland - San Jose, CA All Items = 100 U.S. Department of Labor, Bureau of Labor Statistics February February Section II -- % Change in CPI SAMPLE Section III -- 70"/ Change in CPI but Not to Exceed 5% Fiscal Year 2010 Page 2 of 2 IV-4 City ofconcord

129 Section IF. Interim Year Rate Setting Methodology STEP 1 Application Residential Rate Change Percent Request Responsibility: Timing: Tasks: Franchise Hauler Prepared during Step 1 of the Interim Year Rate Change Process (Refer to Section 11-C) a. Summarize Rate Change Requested b. Apply Rate Change to Rate Schedule Description of Tasks a. Summerize Rate Change Requested The first task in this step is to summarize the percent residential rate change requested on line 1, page 1 of the application. This percent is obtained from line 911, on page 2, of the application. b. Apply Rate Change to Rate Schedule The franchise hauler applies the percent residential rate change requested, as an adjustment factor, to the current rate structure. The same percent change is applied to each of the four rate categories. The adjustment factor which is multiplied by each of the current monthly rates is equal as follows: Line 1, in percent, converted to its number equivalent, and this term then added to 1.00 For example, 2.05% = , = = Adjustment Factor City of Concord IV-5

130 Section IF. Interim Year Rate Setting Methodology STEP 2 Application Consumer Price Index (CPI) Information Responsibility: Timing: Franchise Hauler Prepared during Step 1 of the Interim Year Rate Change Process (Refer to Section 11-C) Tasks: a. Provide Most Recent Twelve Month CPI Data b. Calculate Percentage Change in CPI c. Calculate Seventy Percent Change in CPI, but Not to Exceed Five Percent Description of Tasks a. Provide Most Recent Twelve Month 12-month period. The percentage change is CPI Data determined as follows: The franchise hauler identifies the most recent applicable twelve month CPI data. These data are obtained from the U.S. Department of Labor, Bureau of Labor Statistics. The data series are "All Urban Consumers; Not Seasonally Adjusted; San Francisco-Oakland-San Jose, California; =100". The franchise hauler is to use the most recently published CPI available at the time the interim year rate change application is submitted. For example, if the interim year rate change application is submitted in March 2006, and the most recently available CPI data are for the previous twelve months, February 2005 to February 2006, then that previous February to February, 12-month period will be used. b. Calculate Percentage Change in CPI The franchise hauler calculates the percentage change in CPI for the most recent CPI data in Line CPI data in Line 68 CPI data in Line 68 The product of this equation, rounded to the nearest two decimal places, is entered on line c. Calculate Seventy Percent Change in CPI, but Not to Exceed Five Percent The franchise hauler calculates seventy (70) percent change in the CPI. This change is determined as follows: 0.70 x Line 8,10 The product of this equation, again rounded to the nearest two decimal places, is entered on Line 1, page 1, of the application, as long as it does not exceed five (5) percent. If this calculation exceeds five percent, then five percent is entered on Line 1. IV-6 City ofconcord

131 Section IF. Interim Year Rate Setting Methodology STEP 3 Application Application Certification Responsibility: Timing: Franchise Hauler Tasks: a. Sign Application Prepared during Step 1 of the Interim Year Rate Change Process (Refer to Section 11-C) b. Submit Application to City Description of Tasks a. Sign Application b. Submit Application to City An authorized representative from the At this point, the application should be franchise hauler should sign and date the complete. The application is submitted to application. This signature provides the City for review. certification by the franchise hauler that the application is complete, accurate, and consistent with the instructions provided in this manual. City of Concord IV-7

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133 Appendix Blank Forms

134 City of Concord Base Year Rate Change Application Summary Rate Change 1. Percent Residential Rate Change Requested I Rate Schedule Rate Schedule Adjusted Current Rate Rate Adjustment New Rate gallon mini can (legacy) gallon senior citizen (legacy) gallon senior citizen (low income) gallon gallon gallon Certification To the best of my knowledge, the data and information in this application is complete, accurate, and consistent with the instructions provided by the City of Concord. Name: Title: Signature: Date: Fiscal Year. Page 1 of 3

135 City of Concord Base Year Rate Change Application Financial Information Actual Audited Estimated Prior Year Current Year Projected Base Year Section I--Operating Costs 8. Direct Labor 9. Tipping Fees (Profit Allowed) 10. Corporate Overhead 11. Office Salaries 12. Other General & Administrative Costs 13. Total Operating Costs 14. Operating Ratio 15. Allowable Operating Profit 16. Trucking Charges 17. Regulatory Fees 18. Tipping Fees (Pass Through) 19. Residential and Commercial Franchise Fee 20. Total Pass Through Costs 21. Total Operating Costs (Line 11) plus Operating Profit (Line 13) plus Total Pass Through Costs (Line 18) Section 11 --Allowable Operating Profit Section III --Pass Through Costs Section IV-- Revenue Requirement Section V--Revenue without Rate Change in Base Year 22. Residential Revenue 23. Residential Legacy Mini Can 24. Residential Legacy Senior Citizen 25. Residential Low Income Senior Citizen 26. Residential 32-Gallon 27. Residential 64-Gallon 28. Residential 96-Gallon Current Rate/Month Months Projected Accounts Total 29. Sub-total 30. Less: Allowance for Uncollectible Residential Accounts 31. Total Residential Revenue (without Rate Change in Base Year) 32. Commercial Revenue 33. Less: Allowance for Uncollectible Commercial Accounts 34. Total Commercial Revenue (with Rate Change in Base Year) Recycled Material Sales Total Revenue (Lines Net Shortfall (Surplus) 38. Total Residential Revenue Prior to Rate Change (Line 31) Section VI--Net Shortfall (Surplus) Section VII--Percent Change in Rates 39. Percent Change in Existing Residential Rates (Line ) 1$ Fiscal Year. Page 2 of 3