goodç relationship with staff n this. ç>> your answer to ms. jackso's question was that there was nothing in here that affected the a semblance? >> correct. this motion has to do with some low rent security leases and permits, where we collect very miniscule increases every year in security deposits. in response to audits that it suggested that we obtain a resolution. we do not have to collect them anymore. it would release ease the administrative burden not to have to collect that increase every year. let's ok. we have a motion in a second and have received public comment. all of those in favor of the

motion? >> aye. >> can those amounts of money be collected every five years? >> the commissioner would still require authorization from the commission, as well as an amendment to each lease with a blanket resolution. we do like to collect them annually, so that we get income annually from the puc. >> was that an aye? >> yes. >> the motion carries. thank you. item 12, i would like to continue to a future meeting. if that is susceptible? >> second. >> i was just going to suggest, since it is just a presentation and there are speakers here on that, we might want to hear a presentation.

i do not think that there was action on that and i do not think that it precludes further discussion. >> just a matter of time, if we're going to put the items over. but that is correct. >> we're just trying to manage time to get to the budget items today. >> let me see the hands of people were here to talk about item 12. >> if we could just take those comments white -- while you are here. recognizing that we will come back with a full presentation. if you have something you would like to deliver to us now, this would be the time. thank you. >> commissioners, speaking in the absence of the presentation, we had a meeting with staff

yesterday. the general point that i would like to make is that we are excited about the possibility of the two sites, and we appreciate the staff soliciting feedback from the agricultural alliance and the numerous other groups that have met with. we simply encourage the commission in the staff to make sure that in addition to the conversation, the people who are near the site, that there be some available process for the public, through an open comment formñr, which allows people that we do not know about, to provide comments on these pilots, and that there be some time line placed on this about when we want to see these projects up and running. staff has lots of meanings that

they are talking to to help move this along, so that it does not stretch out further that needs to. thank you. >> thank you, thank you very much, mr. president. i appreciate your letting out the options of the presentation. i want to say that i am representing the san franciscan urban agriculture alliance, an alliance of the community forms of various sorts are around the city. i am from the eight valley farms. a 2.2 acre farm in the center of the city that grew out of the directive for healthy and sustainable food. one of the reasons that we were really excited that the puc was doing so much to make more land available put was that -- available was that the farm was

going to close them. one of the biggest examples for urban agriculture and the flagship of healthy, sustainable food, would be closing down in the next year. i would echo eli in saying that we are excited to see these projects going forward quickly. we would love to see the puc somehow make the process open to the public. there are interests, community interests in urban agriculture projects. it would be great to have a request for proposals so that people could give their input, as there seemed to be more and more requests as the project go and go. thank you very much. >> why are you closing down? >> the agreement -- the mayor's executive directive at budget city agencies to make land available. we were a project with economic workforce development. this was always land slated for

development. it was given to us on an interim basis. turned into something productive in a big community space, we were always aware that it would thank you. >> thank you for your comments. as a reminder, part of the reason that the puc came into this space was in response to the mayoral directive for public agencies to identify land that might be available for these purposes. i want to thank the staff and community for helping us move forward with this. i have a big interest in it as well. i want to help it proceed in any way possible, moving through the workshop and open house, where in the next meeting it might be too soon. i do not know if it is the commission orchid is offline,

getting everyone to hear about the purposes and needs out there, as it would be what it is really about, being what they're looking for in these parcels. in terms of resources, growing food, and what have you, i am happy to help with that process, so come back to the next meeting for shirt and we will help. that -- help keep this moving forward. >> thank you. let's move on to the budget. we have three items under the budget. one is the financial plan. we also have the operating to tackle. i would discuss the financial plan first, which shows us how we are doing against that nasty rate increase. a reminder to the commission, this is the fourth time it has been in front of us.

you have in front of you their responses to the questions from the january meetings. questions that were asked by the commission. coming to closure today. >> so, item number 16, first? >> item number 16. >> public hearing to consider and possible action to adopt proposed san francisco public utilities commission 10-year financial plan for 2012-2013. -- for the 2012-2013 through 2021-2022. >> we have set the slides to include the changes that were

made for this hearing. i will spend more time on the slides that have changed. my colleague will then review the operating and capital plans. you will then have an opportunity to get more detail. long-term financial planning is the best practice for government. so, we are here to present forward-looking financial's over the next 10 years, as required by the city charter. this plan helps to put fiscal decision making into an important context. as we spent time looking at it, i have several slides to share in each enterprise. you have seen many before, so i will focus on the ones that have changed. in terms of the assumptions, each of these models and includes basic assumptions that it is good to make note of. many of the salary, pension, and

benefit changes are city-wide. i have made note of some of those changing pension costs, those kinds of things. borrowing costs for the proposed debt is estimated at 5%. we have been very fortunate, as you know, in getting rates lower than 5%, but with -- for modeling purposes, we are sticking with that 5%. general inflation of 3% is anticipated over 10 years. these are a lot of numbers, but i wanted to show you that we go out of our way to show the 10 years of financials for those interested in the details. you will find very few utilities that share this level of detail, as well as projected rate changes over 10 years. we are proud of the fact that we're showing you as much information as we possibly can.

the next couple slides, as we go through the settings for your amount of sales and whenever you use to do in the utility commission, it is a key component. turns have been declining over the past few years. we are very fortunate that over the past few weeks, particularly the past few months, we have seen an uptrend for the very far rate of this slide. it is perhaps an economic upturn, but we are seeing improved numbers. when i get to the changes occurring on the rate, this slight uptick has helped in terms of bringing down the rate change that was projected. you can see that this one is interesting. it shows a stacked amount of water sales. we are projecting flat sales

over the 10-year financial plan. the important thing that i wanted to point out with this slide is that we are 25% below what the water supply agreement is before the enhancement surcharge kicks in. we are well below the level look penalty for the contract with our wholesale customers. you will see that -- first of all, let me reiterate -- the rates that have been improved our through fiscal 2014 for our customers. the area of focus you took with our presentation was beyond that beginning of fiscal 2015. you see in that area where looking at a 15% rate change in the year. how did we get there? we had -- first of all, as i

mentioned, some improving water sales changes that have occurred over the past few weeks. that allowed us to increase our projected deliveries and sales of water by 2% to 3% for both retail and wholesale customers. that's all about half of the issue. the other half was consumption that our wholesale customers will repay us about $50 million for the amount that they owe retail customers for capital cost recovery. you might remember that under our old contract with wholesale customers that there was an amount of money that was estimated that the wholesale customers owed to the resale customers for previous capital work, and at that time, that was estimated to be about $400 million. as of the end of the current fiscal year, the balance of that amount was about $370 million. what we are assuming here is that with wholesale customers beginning to look at this refunding opportunity due to the

low interest-rate environment, we are anticipating that they actually will prepay a portion of that amount that is owed to the retail customers, and that prepayment will occur in fiscal 2015. that solves the other half of the issue in terms of the rate change. >> when will we know that? ç>> the conversations with the wholesale customers there, financial advisor, as well as our folks and our bond counsels is just beginning. so we will keep you posted on how those conversations go. the model is assuming a $50 million repayment, but more than likely, the repayment would be the entire amount that they owe us, frankly. the wholesale contract charges and interest rate of a little over 5%, so their incentive is to get that interest rate down and to pay less. that can i ask a question?

i know we had talked at one of our budget hearings about this big rate increase and the different ways to mitigate that. are you saying that this will do the full length of mitigating that huge rate increase we were talking about? because it was like a whole menu of options. >> right. there still will be many options. the nice thing about long-term planning is there is time between now and then to consider additional options. these are two of the larger ones, and assuming they will forward, we have included those in our modeling. we will continue to look for other solutions as well. >> not to confuse things, but this is the 10-year projection looking out, and you are required to adopt a financial plan each and every year, and that is why we were looking at the structural fix. you also have your operating budget or your capital budget on the agenda today to adopt, and those are two-year budgets. the 30-year rate increase was

beyond those two-year budgets. we still have time to look at what we are assuming in our financial plan and may be finding it as we develop conservation with our wholesale customers or water preservation change or things of that nature. this is the projecting out into the future. >> if i could add one thing, the charter requires us to do an independent rate study on all of our utility services. we will begin the next rate steady to inform that rate cycle for fiscal 2015 starting at the beginning of calendar 2013. that will be a fairly extensive look at our service and what is the cost to deliver water and sewer to our customers. we will combat to this body to present to you those findings and recommended the changes. >> in the interest of time -- >> yes, quickly, the next slide and showing is the changes on the wholesale side. as on the retail side, the projected rate change has

declined also, the projected rate change for 2013 has come down since we last shared with you, due to the improving water delivery story. we're estimating the rate change for fiscal 2013 at the and around 10%, and you will see that in the 2012-2013 colorado -- colorado -- column. on the wastewater side, similar assumptions. it includes a corporate financing for the capital plan, beginning financing for the sewer system improvement program, etc. similar growth assumptions for inflation as well as debt cost myriad the rate change here is similar to what we showed you before. again, rates are approved through fiscal 2014. no rate change is currently expected in the fiscal 2015 year, and again, that is mainly offset the rate change we are

expecting on the water side. this combined bill -- i know this body is very interested in seeing what this looks like. again, this has been revised. it represents the big change for both water and sewer combined together. if you look at the column that has the big red checked above it, that is the combined rate change. you will see that again the yellow shaded area is the approved rates. those have not changed since we approve them, but beginning in fiscal 15, we are looking at a combined rate change for water and sewer of about 6.5%. again, you will see the subsequent years. we wanted to show 20 years, actually, because some of the questions we receive from you was what it looks like beyond the 10-year story, so we wanted to show 20 years. you will see water, actually, the rate change trails quite a bit, but on the suicide, we will have a number of years of rate

change as well. this is the same idea, but just in the dollar format. on hetch hetchy -- commissioner moran: before you go on, slide 20, there's a footnote that i just want to point out. this is the affordability draft? it is based on an average san francisco household income of $70,000 inflated by 3% annually. our challenge between now and the next time we deal with a budget includes recognizing that there are a lot of people in the city that do not burn $7,000, and there's a lot of them that their income is not keeping up with inflation either. while this may be a good measure of affordability in general, we still have equity issues we need to deal with as we go forward. >> our third enterprise, again

very similar assumptions. i want to let you know we are very proud to bring this balanced plan to you for your review. it is the first time we have been able to bring forward a balanced longer-term plan for this enterprise. major changes from the prior year include some power bond funding. it includes additional revenues related to increases on general fund departments for power provision, and it represents a balanced and reasonable capital plan as well, so we are very proud of that. a lot of detail members as well. and there are the rates. with that, i will be happy to take any questions on the 10- year plan and then pass this off to my colleague on the budget. commissioner moran: on the 10- year plan, any questions or comments? i can tell that commissioner caen is about to have one.

[laughter] commissioner caen: no, i'm not. commissioner moran: i would just like to make a comment. during the meetings we have had on the budget and the prior year's budget considerations, there has been a real focus on what these rate issues were. the discussion that started this commission that led to an increase in the hetch hetchy rates to general fund apartment, which allows you to come forward with a balanced plan for the enterprise. we think it is reasonable not to be projecting 30% rate increases the next time will come before this commission and the board. that reflects a lot of good work and good thought. by all of you. by staff, by bawsca, as well as this commission. this is a plan that as a whole lot better in my view than where we started, and i think it reflects the good work of

everybody that was embroiled in doing that. ok, now, this is something that we have to adopt? ok. i have a motion. do i have a second? >> second. commissioner moran: and i had a secondary discussion from the commission? public comment? >> thank you. just two items. yes, there has been great staff work on this in the last month and the last year and past years. two things that bother me a bit. on slide three, the water enterprise 10-year financial plan, if i'm reading this correctly, the fund balance, three lines up from the bottom, fund balance our operating expense in the year gets to a low of 2.2%. that troubles me in terms of just coverage. i see the other numbers. i hope that is not a typo, but i'm reading this above at 26.1 million projected beginning

operating fund balance. that just seems low and troublingly low. perhaps we could get some comment on that and maybe i missed it in the discussion -- what was the 30% projection drop down to 15%. what were the changes that resulted in that? did that impair or impact the our and our program -- the r&r program? and what got pulled to make that work? commissioner moran: that was covered. there were two big items. one was the projection of discussion, the -- of consumption, and the second was the possibility -- and making the assumption. ok. >> ok, on the first? >> regarding question of fiscal

15, yes, the overall ending fund balance, you will see a number there. $4.7 million. that is low. however, we do still abide by our coverage requirements. coverage in short means you have enough funds in order to pay your debt service to your bond holders. you will see the coverage number in that particular year is 1.45. that simply means 1.25 is our minimum, and we are at 1.45, so there is still enough revenue coming in to meet our bond covenants, so we are still abiding by our reserve policy. it is a load fund balance number, to be sure. but we do still abide by our reserve requirements. commissioner moran: and one that we do not project staying at. >> that is correct. commissioner moran: thank you. we have a motion and a second.

we have heard public comment. all those in favor? >> aye. commissioner moran: opposed? the motion carries. call items 14 and 15. >> public hearing to consider the adoption of the two-year annual operating and programmatic budgets for the enterprises and bureaus of the jurisdiction of the san francisco public utilities commission and item 15, public hearing to consider possible action to adopt the two-year capital budget and 10-year capital plan for fiscal year 2012-2013 to fiscal year 2021- 2022, authorized a request a supplemental appropriation for the enterprises of the san francisco public utilities commission for fiscal year 2012-2013 and fiscal year 2013- 2014 and authorized and directed general manager to submit to the

board proposed ordinances operas in the issuance of not to exceed $163,400,000 aggregate and civil amount of water revenue bonds and $492,810,000 aggregate principal amount of waste water revenue bonds under the terms of proposition e and to the wheel, the issuance of not to exceed $12,300,000 aggregate principal amount of power revenue bonds subject to the terms of charter section 9.107 (8). commissioner moran: thank you, and if he could focus on the changes since the last and the commission looked at this budget. >> good afternoon. i'm here to provide a macro view of the budget. this slide shows that from fiscal year 2011-2012 adopted budget to the fiscal year 2013- 2014 budget, the proposed budget is up $393 million, but

primarily for capital and facilities costs with only a small sliver of $19 million or 5% for operating costs. the operating budget rose from $657 million to $728 million. the growth is accounted by capital debt service, $11 million increase in personnel costs, explained by the employee furlough restoration, health and retirement cost increases, and physician and utilization. 4% for general users and $5 million or 7%, for all other costs, which include the transfers to hetch hetchy water to fund the capital project chemical costs, contract increases, and purchase of power. on the programmatic projects, the $15 million increase is explained by the $13 million of the loading date capital lease

cost, and $2 million of the regulatory compliance costs. the next slide is a recap of the key dollar amounts and% changes between the adopted and proposed budget with capital and programmatic cost accounting for the majority of the increases. on the full time positions, the position counts if kept flat with positions, substitutions, and reassignments. on the sources of funds, only the debt proceeds, as you can see, mark here on the graph, that is going up. everything else stays flat. with the uses of funds, the capital project costs, and the debt service are increasing while, again, other uses remain very flat.

the last slide highlights some of the fiscal impact of major projects, ending on the high note that the infrastructure and free enterprise is managed to have no new positions added in the new budget and struggling with the position substitutions and reassignments. at this time, i would like to also mention that the proposed operating and capital budgets are developed with consideration of the rates compliance and sufficiency, and the rates policy is being proposed in the next item on the agenda. are there any questions that i can answer? >> thank you. just one comment. this is unlike, i think, any budget presentation we have seen before in response to commissioner torres' request that we roll out to the entire puc