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Managing Tomorrow’s Resources Today MEMORANDUM Page 2 of 11 RWC_Memo_19Dec2024 Study Purpose and Objectives The purpose of this study is to conduct a comprehensive analysis of the City’s franchise fees to determine the amounts the City is entitled to charge for its services, the use of its public right-of-ways, and the impacts on its roads. This objective is met by applying industry best practices and by complying with all applicable laws. FRANCHISE FEE ANALYSIS Based on preliminary analysis, HF&H found the current franchise fees are less than the City is entitled to charge. Figure 1 provides a summary of the three components of the analysis performed: 1) the cost of the services the City provides under the Agreement with Recology; 2) the range of a reasonable fees for Recology’s use of the public right-of-ways for container placement; and 3) the cost to the City to address vehicle impacts caused by Recology’s unique use of City streets. The table provides a range of values that will be discussed in further detail below. For reference, the Fees collected in 2023 totaled $3,260,305. Figure 1. Summary of Franchise Fee Analysis In 2024 the City is projected to collect $3,470,042 in Fees based on initial revenue projections. This justification of the franchise fees is based on 2023 and 2024 costs to date. It is recommended the value justified increases in line with inflation as the costs for City services and value provided by the Agreement increases. It is recommended the value of City services and the encroachment value for use of the right- of-way be increased using the Consumer Price Index for All Urban Consumers, using the San Francisco- Oakland-Hayward, CA area. Similarly, the cost of vehicle impacts is recommended to be increased with the Engineering News Record Construction Cost Index. This escalation of costs ensures paving and road maintenance impacts attributed to Recology keep pace with increases to construction costs. ATTY/RESO.0003/CC RESO 2025 SOLID WASTE COLLECTION RATES & ADOPTING FRANCHISE FEE STUDY - EXHIBIT B REV: 01-14-25 MI Page 2 of 11