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ATTY/AGR.2018.054/Recology of San Mateo D. Depreciation for All Contractor Vehicles including Collection Vehicles, Support Vehicles, and Supervisor's Vehicles ATTACHMENT K CONTRACTOR'S COMPENSATION AND RATE SETTING PROCESS The annual depreciation amount shall equal $3,056,022, which is the projected amount for 2021 as specified in Attachment N. Collection Services Franchise Agree nient with Recology San Mateo County Model Agreement for Adaptation by Member Agencies REV: 03-16-18 MI • A vehicle equipment replacement schedule prepared by the Contractor is included in Attachment N. It shows the timing of anticipated vehicle purchases, estimated vehicle acquisition costs, and estimated annual depreciation and interest expenses for Rate Years Eleven (2021) through Twenty -Five (2035). In preparingthis schedule, Contractor estimated vehicle acquisition costs in 2017 dollars and escalated the amounts annually by two percent (2%) as reflected in the equipment replacement schedule. • For Rate Years Twelve (2022) through Sixteen (2026), the annual depreciation amount shall be equal to the projected amount for 2021 specified in Attachment N. • After completion of the new vehicle acquisitions in accordance with the equipment replacement schedule in Attachment N, the vehicle depreciation amount shall be adjusted to reflect actual vehicle acquisition costs in a manner that remaining undepreciated costs shall be depreciated evenly over the remaining Rate Years of the Agreement. The recalculation of the annual vehicle depreciation amount to be effective for Rate Years Seventeen (2027) through Twenty -Five (2035) shall be included in the Application submitted in 2026 for Rate Year Seventeen (2027) Contractor's Compensation. The recalculation of vehicle depreciation expense shall be as follows: - "Annual Depreciation Cost Difference" = Actual cost of vehicles less projected vehicle costs of $48,724,246, divided by 9 years. - The annual vehicle depreciation amount specified in Attachment N ($3,056,022) shall be adjusted by 50% of the Annual Depreciation Cost Difference; however, the adjustment, whether positive or negative, shall not exceed $350,000. Thus, the annual vehicle depreciation expense shall not be less than $2,706,022 or greater than $3,406,022. This adjusted depreciation amount he to me t K pert t e f r ected 2 21 toW de aii n ti"or all on acgorps Qb pensaion andRa{elYel i Croce s Mem er Agencies t�iat was allocate to P9��ylgg>�` er Agency as shown in Attachment N. The allocated depreciation amount shall be included in Contractor's Compensation for Rate Years Seventeen (2027) through