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Page | 17 SBWMA Recology Negotiations FAX Report 4/20/17 <br /> <br /> <br /> Avoids any increase (or True-Up) during the remaining term of the current Agreement. <br /> Allows Member Agencies to retain the difference between actual revenues and the Total Customer <br />Billed Revenue (Base Contractor’s Compensation plus disposal/processing expense and Member <br />Agency fees). <br /> Includes two reasonable new “Attachment Q fees” for bin relocation services that are 1) particularly <br />applicable for buildings with below street level bin enclosures, and 2) a charge for agency-specific <br />reporting requirements for Abandoned Waste support services. <br />Evaluation and agreement upon Recology’s initial cost proposal for the current agreement’s last rate <br />year (2020) and the start of the presumed new agreement (2021) referred to as the “jump-off point” <br />was negotiated. The agreed upon compensation for 2021 reflects a one -time increase to bring the Base <br />Contractor’s Compensation up to Recology’s actual costs. It includes an amount for inflation between 2017 <br />and 2021 (@2%) except for fuel expense which reflects 2016 fuel prices. It does not include any increase in <br />the cost of operations from the increase to customer subscription levels experienced since the start of <br />Recology’s services. It also includes estimated depreciation and interest expense for the replacement of the <br />existing fleet of collection vehicles. <br />This agreed upon compensation for 2021 will be adjusted according to a methodology as follows: <br /> The projected Base Contractor’s Compensation will not be adjusted for differences between the <br />assumed and actual inflation rate between 2017 and 2021 with the exception of changes in the fuel <br />price index. <br /> The Base Contractor’s Compensation will not be adjusted for costs arising from collective bargaining <br />agreement changes. <br /> The Base Contractor’s Compensation will be adjusted for changes to fuel prices, based on changes <br />in a Bay Area fuel index. <br /> The Base Contractor’s Compensation will be adjusted annual for changes to subscription levels <br />using a 3-year rolling average of subscription levels to moderate the effect of such changes. The <br />subscription level change for 2021 will reflect service level changes from 2016 to 2020. <br /> Effective in 2027 through the remaining term, t he Base Contractor’s Compensation will be adjusted <br />for the difference between the assumed depreciation and interest expense for replacement collection <br />vehicle fleet and the actual expense. (Adjustments by 50% for any depreciation expense increase <br />up to $700,000 and no adjustment for increase greater than $700,000 ; adjustments for change in <br />interest expense from that assumed resulting from the increase in the actual cost of the replacement <br />vehicle fleet.) <br />The Amended and Restated Agreement maintains incentives for Recology to continue to manage <br />costs and provides stability and predictability of changes to the Base Contractor’s Compensation. <br />7.A - Page 27