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BFrS PROPOSED TERMS AND CONDITIONS <br /> (continued) <br /> <br /> C. BFI relinquishes its first right of refusal for an agreement to operate these facilities and <br /> the Transfer Station, if the SBTSA purchases these facilities. <br /> <br /> D. Upon the SBTSA's purchase of these facilities, the Transfer Station and Recycling <br /> agreements shall terminate, however, the SBTSA may negotiate with BFI for its <br /> continuation 9f curbside recycling collection. <br /> <br />VI. Compensation <br /> <br /> A. Transfer Station Agreement: The methodology for calculating compensation shall <br /> remain in effect, with the following modifications. <br /> <br /> 1. The asset values shall be adjusted to include the MRF (not including those assets <br /> currently contained in the Recycling Agreement and that were transferred from the <br /> Quarry Road site) which shall be depreciated on a straight line basis over the <br /> remaining term of the agreement. <br /> <br /> 2. The post-tax 10.25% rate of return on assets shall be amended to a pretax 17.12% <br /> rate of return on assets based on a 40.14% effective tax rate for the state .of <br /> California. <br /> <br /> 3. The rate of interest on MRF related debt, which shall equal no more than 50% of <br /> the asset value, shall be reduced to 7.8%. ~' <br /> <br /> 4. The processing of any material from outside the SBTSA service area and the rates <br /> (which shall include their proportionate share of capital and operating costs) <br /> charged for such processing shall be subject to the pre-approval of the SBTSA and <br /> all revenues from such processing shall be subtracted from the cost of transfer <br /> station operations charged to the SBTSA. <br /> <br /> B. The Collection Agreement compensation methodology for calculating compensation <br /> shall remain unchanged. <br /> <br /> C. Recycling Agreement: The methodology for calculatin.(:l compensation shall remain in <br /> effect with the following modifications. <br /> <br /> 1. The recycling surcharge shall be set at 4.24% of refuse collection rates and shall <br /> not be subject to an adjustment upward. (This is anticipated to result in <br /> approximately $23 million in savings when compared to the existing allowance for a <br /> <br /> Page 3 of 5 <br /> <br /> <br />