For over ten years, HF&H has performed the City of San Rafael’s annual rate review of Marin Sanitary Service’s (MSS’) rate adjustment applications for collection, processing, and disposal services.
HF&H Solutions
In accordance with the franchise agreement between the City and MSS, the annual adjustments to MSS’ compensation are determined using one of two methodologies:
An index-based adjustment, where MSS’ approved compensation from the prior year is adjusted by various CPI’s (i.e., Fuel Index for fuel costs, Benefits Index for health and welfare premium costs, etc.); or,
A cost-based adjustment, where MSS’ compensation is calculated by forecasting costs based on actual results from the most-recently completed rate period, reviewed and adjusted for non-allowable costs.
For example, in 2006 HF&H’s review of MSS' 2007 cost-based adjustment rate application included:
Discussion of policy issues with MSS’ representatives;
Application compliance and consistency testing;
Testing for mathematical accuracy;
Testing for logical consistency;
Verifying that appropriate indices have been applied to agreed-upon costs in accordance with prior year's detailed review of MSS’ actual costs;
Reviewing projected revenues; and,
Calculating a reasonable profit using a 90.5% operating ratio applied to project. In addition, HF&H performed a rate survey of other Bay Area jurisdictions with similar services.
Results
As a result of our 2006 review, the Company's requested rate increase of 10.1% was reduced to 8.1% based on HF&H's $378,000 reduction of MSS' projected revenue shortfall.
City of San Rafael