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ATT ACHMENT K <br />CONTRACTOR’S COMPENSATION AND RATE SETTING PROCESS <br />REV: 03-16-18 MI <br />ATTY/AGR/2018.054/RECOLOGY OF SAN MATEO ATTACHMENT K <br />Page 11 of 24 <br />D. Depreciation for All <br />Contractor Vehicles <br />including Collection <br />Vehicles, Support <br />Vehicles, and <br />Supervisor’s Vehicles <br />The annual depreciation amount shall equal $3,056,022, <br />which is the projected amount for 2021 as specified in <br />Attachment N. <br />• A vehicle equipment replacement schedule prepared <br />by the Contractor is included in Attachment N. It <br />shows the timing of anticipated vehicle purchases, <br />estimated vehicle acquisition costs, and estimated <br />annual depreciation and interest expenses for Rate <br />Years Eleven (2021) through Twenty-Five (2035). In <br />preparing this schedule, Contractor estimated vehicle <br />acquisition costs in 2017 dollars and escalated the <br />amounts annually by two percent (2%) as reflected in <br />the equipment replacement schedule. <br />• For Rate Years Twelve (2022) through Sixteen <br />(2026), the annual depreciation amount shall be <br />equal to the projected amount for 2021 specified in <br />Attachment N. <br />• After completion of the new vehicle acquisitions in <br />accordance with the equipment replacement <br />schedule in Attachment N, the vehicle depreciation <br />amount shall be adjusted to reflect actual vehicle <br />acquisition costs in a manner that remaining <br />undepreciated costs shall be depreciated evenly over <br />the remaining Rate Years of the Agreement. The <br />recalculation of the annual vehicle depreciation <br />amount to be effective for Rate Years Seventeen <br />(2027) through Twenty-Five (2035) shall be included <br />in the Application submitted in 2026 for Rate Year <br />Seventeen (2027) Contractor’s Compensation. The <br />recalculation of vehicle depreciation expense shall be <br />as follows: <br />- “Annual Depreciation Cost Difference” = Actual cost of <br />vehicles less projected vehicle costs of $48,724,246, <br />divided by 9 years. <br />- The annual vehicle depreciation amount specified in <br />Attachment N ($3,056,022) shall be adjusted by 50% of <br />the Annual Depreciation Cost Difference; however, the <br />adjustment, whether positive or negative, shall not <br />exceed $350,000. Thus, the annual vehicle depreciation <br />expense shall not be less than $2,706,022 or greater <br />than $3,406,022. This adjusted depreciation amount 6.2.B. - Page 215