>> so right now, that is a fuzzy number. we do not know what the requirement would have to be. >> fair enough. >> thank you. >> correct me if i am wrong, but i think the funniest part of its is the money that will be spent. you have put enough money in to cover either option. you may have more or less gray, more or less green in the element. that will depend in part on how those early actions turn out. that $57 million, one way i look at it is a pilot project. we are not exactly sure how they are going to perform.

we need to measure it and make our plans accordingly. i think that makes a lot of sense. >> any other questions, commissioners? >> we can pull these additional things up. now, we will go to the next section, the implementation strategy. this is based on commissioner feedback that we have gotten and concerned about minimizing rate impacts on our customers. what we are recommending the commission include is implementation of the program in three phases. what we are looking at trying to move forward with is a first

phase with things that are well- defined such as replacing the digesters and focusing our resources on the highest priority projects so that we can have prudent spending. we are looking at investing phase one time on projects where we need additional planning development, things like the tunnel that we were just talking about. what size will it be? is it 23 or 25? how do the conversations with the regulatory agencies play out? if we look at the three phases, phase one would take us from planning to construction and digesters is a great one. i will go through in detail what is in each phase. we would look at other projects such as central bayside, taking it through planning and environmental review. we would know the regulatory climate and have a better

defined cost. we would also like to include performance-based pilot work like the early implementation projects, which will help us put these puzzle pieces together. phases two and three would continue to implement the things that we had been planning. the other thing to note is, in the past few weeks, as we have looked closer at projects, some of them land to r & r. if we were looking to the pump system. we want to take a close look at those projects and see if they can be folded into the baradar program. that would be happening in parallel. i want to briefly go through the

phases so you get a feel for how we have separated the projects. phase one, this is the phase we are looking to proceed with the planning and developing it. planning and construction would be including for the new biosolids and digesters facilities. we would have the green infrastructure early improvement projects constructed and operating. and we would have a number of other higher priority improvements that are to occur. if you look down to the lower part of the slide, we will look at completing our planning and ceqa work for our treatment process improvement, to be able to look at our citywide green program, where we have to get through our water assessments and conduct additional assessment on our planning to determine what those projects will be. the slide that dan just went through it ended up being about

$273 million of green infrastructure that would be built throughout the city. this list lays out the first chunk. we are not talking about changing the program. we are talking about implementing it in pieces. if we were to roll out what that looks like on the score sheet, phase one would have treatment plants at $2.2 billion. and $354 million collection system and $125 million for program management. i want you to focus on the next slide which is our whole schedule laid out in a very small graphic. it gives you an idea. we are talking about the whole program and slicing its interfaces. phase one would predominantly be about six years to complete with the exception of the digester

project. the digester project is complex because you have a number of maneuvers to go through. you have to obtain a site, clear the site, it takes a little bit longer. in the 10-year range to complete the entire effort. both of those would outline what we are looking at in black. if we were to move on to what would face to entail, it would be taking projects that have completed planning and getting them through design and construction. at the top of the list, you will see demolition of existing digesters. now we have the digesters, they are designed and moved along. we want to go through the public planning process to determine how we want to use that site. how are we going to reprogram

that site? we are going to be demolishing the existing digesters that are there now, just across the street from the residence, and have an opportunity to improve that location. that would be the $371 million that is shown there. there are a number of other large projects for the treatment plants. the first phase of our city wide green infrastructure projects and the combined discharge structure refurbishments. taking all this planning work and getting it through design and construction. when we look at southeast plants, we are looking at doing all of our planning up front in phase one so we will know everything that is going to occur, the timing. we are looking at phasing the construction and the construction dollars. if we were to lay that on the scorecard for phase two, that is

approximately $3.2 billion. the breakdown is shown for treatment, collection, and program management. if you look further at this schedule, the implementation schedule, face to is laid out on the timeline. some of our projects are going all the way out to your 20 of the program. if we look at phase three of our implementation strategy, that is finishing delivering the entire $6.933 million. we are completing other programmatic work. if you look at that, it is just under $1 billion. if we lay it out on the schedule, we have the complete 20-year program. we have three phases of funding. what we would be looking to do is getting planning started,

coming back to the commission as projects get more defined, requesting authorization of funding as we know how big things are going to be and we have a better definition of some of the projects that may be slightly fuzzy. if we lay it all of the phases out together, we are back to art $6.933 billion. we are changing the authorization of the funds, not the timing of the program. president moran: any questions or comments? i have a question. i am looking at the phase three chart. the central bayside, that is the 23-foot versus 30-foot pipe, is

that correct? >> yes. there is also a connector tunnel. it has quite a few things in that scope. my eyes are going. president moran: when in that is the sizing decision made? >> now we have to go back. i am going to click back to go back to phase one. it is phase one when we would be making that decision. i apologize for clicking back, but if we were to look at the central bayside system line, the second line from the bottom, it would be after the green bar. after the planning portion has been completed, we are saying, it is a 28-foot tunnel and we are doing $300 million of green with that. if it is a 27-foot tunnel, we

would come back to you with the alternative analysis and look for authorization to move forward. >> i am looking a couple of lines above that, the green infrastructure, early implementation. those are the projects that we are putting -- piloting. it seems as though the end of those projects is considerably after those decisions. >> we want to build them in the first three years but monitor their performance for up to five years. we may get lucky and get some good it wet weather years. we want to make sure we have enough wet weather data to see how they function. president moran: that is part of my question. how can we make a sizing decision before that has happened? before that is constructed or before we have some experience? >> as we enter into this

negotiation with the epa and regional board, we will get immediate and strong reaction as to how our bayside system has to function. right now, the driver is to get to 10. that will help us. we will be able to narrow down through hydraulic bottling and sizing as to how we can actually achieve that. >> the other thought is that collection is something like 10 or 12 those projects -- >> 8. >> they do not all start at the same time. it should give us enough information as we are making the decision about central bayside to know which ones look the most promising. president moran: so far, this is all ink on paper and it is not -- we are not making appropriations for specific

projects at this point. that said, i want to make sure that the piloting is a meaningful process that produces information we can use in making decisions. and that we do not either oversize the pipe or undersized it because we are being too optimistic. i want to use the information that we get from that. that is my take on this. it would not even be a question if those projects were not starting until sometime after the completion of the early implementation projects. you have moved this much sooner. i like moving faster, but i am concerned about making productive use of the information we are trying for. >> the valencia street project, which is in design now, in construction next summer --

>> we are hoping to have it by spring. >> we are aware of that and rafael is our project manager. that project is currently in design and would start construction next summer. we would have wet weather information the subsequent year, the year of 2014. we are trying to push the projects that would inform the bayside process to move ahead a little bit faster. you bring up a good cautioned. we have to make sure they are in the ground first and that we can collect enough information so that we know how things will perform. >> it does not look like it would significantly change phase one. it might change phase two. one of the things that is in the resolution that is in front of you -- we have had some discussion back and forth.

as we are looking at some of the alternatives, i want to make sure that those alternatives served a purpose. that they recharge the offer in a measurable way. -- the aquafer in a measurable way. so that is going to be a trade- off. we need to have that trade off made in an explicit way. that is reflected in the resolution. i think it will work itself out. >> that is a very good point. >> i just want to echo that. maybe there are a couple of things that you could do, maybe prioritize one of the pilots that is similar in condition to

the site so that that could happen on a faster track. there is a lot of technology being used in other cities. if you cannot bring one online quickly enough, find one that is close enough to condition and it might be a way to collect information pretty soon to be able to inform the decision. >> i second that. as far as prioritizing some of those projects, it is the east side projects that we need to know about. as it turns out, the west side, we do not need those projects as much. it is a lot easier to do them. on the east side, it is tougher to do and we do not know where the performance is going to be. that is where the big money comes from. we can prioritize those projects in a productive way. commissioner moller caen: i do not know how to approach this exactly. this is my third go around with

waste water. the last was in 2002. that is 10 years ago. i am thinking about the folks in southeast. they have waited all this time. i am looking at this time line. those digesters are about 10 years out. i do not think it is right. i think we have to revisit this and see how we can speed up everything. it just is not right. >> i think you are right. certainly, if we can use alternative delivery mechanisms , the ceqa process is three years. a lot gets nested. you have to have a certain amount of planning to get into ceqa. then there will be a little bit of sign work afterwards. that is an up-front issue we will have to deal with. we agree and we want to see it happen sooner. it is such an important part of

phase one. it is important that the funding be included as phase one so we have an opportunity to throw everything at it to get this to happen as quickly as possible. dan, i am not sure that he mentioned, we will be improving the existing digesters so people in neighborhoods to have been nearly so long will have a nominal improvements and impacts from the existing digesters. we agree that we want to deliver this faster and make it happen faster. >> we all had the same reaction. great, we shaved 18 months off. that is still forever. the schedule looks like we will have see " review and schedule and design work which takes about five years. construction takes five more years. does that mean they get no benefits for those five years or are their incremental benefits?

>> there will be incremental. i will ask dan to come up and walk through the in-between phases, if you could talk about the processes as they are coming on line. >> to answer your question directly, the major benefit during construction will be the repair of the existing facilities. the way that construction will take place, we are moving to a new site and the entire facility will be built and brought on line. in this instance, there is not a lot of opportunity. you are working at two different sites as opposed to building on the same site, putting it on line, moving to the next one. there is a significant effort that will be put into improving the existing conditions for those digesters so they are not

a detriment to the neighborhood that they are today. president moran: mike, please? >> i was like, where is mike? we have the code generation that may be in boost. >> the process includes thickening and disposal. as i mentioned, they will be built as a new process. in looking at the construction schedule before, we look at how we were facing some of the water and thickening operations coming on line. we looked to pull those back so they would be ready and we would be able to go through all of the testing and start up so that we were not losing time once the

facilities became available. we can continue to work. there will be continued efforts to look at additional expediting of effort in the front end and if there are creative ways that we could do things on the back end. as karen was saying, it would be difficult to do, but there may be things where we could sequence construction to bring half of the facilities online in a shorter period of time. working back-and-forth within the existing facilities would be a complicated activity. >> i think it is safe to say that if somebody was gunning for the hero of the year award, they would come up with a way of funding this. this commission would be very supportive of anything that can be done on this regard that does not cause bigger problems. i appreciate the work you have done on that. let's not call that the end of

the chapter if there is anything else you can propose to us. >> thank you, dan. >> some of the way we got a lot of the construction done, at least during the earthquake in my district, we gave bonuses to contractors for on time. are you contract -- are you contemplating that? >> i do not want to hear mr. jackson again up here. i want her to talk about something different. >> i know. thank you. >> i think we are now -- now we are at rates and affordability. todd will come and give that portion. >> good afternoon. this is the part of the discussion where we have balanced affordability and rate

impact with the needs that you have heard about. i would like to walk you through eight slides. they are very similar to what you have seen at the workshop that we did. this puts it in the perspective of the three phases as outlined by karen and dan. the first part is the water bill. it started out at about $31 per month. that would be projected to increase to $82 over the next 20 years. this is all the good work you have already planned, bringing on another $1 billion for replacement to keep the system running well. that is why that is going up over time. it levels off because we assumed that we are in a steady stage for our water mains. next would be the portion of the bill for customers that is

related to store operation. this is the 24-7 operation of the storage system that we currently have today. you can see that that goes up modestly once you put it on top of the water bill. it grows to about $135 over that 20-year period. we have also gone through and looked at your capital plan and brought the level of investment up to 15 miles per year. that moves it towards a 100-year replacement cycle for the sewer mains as well as the water mains. in these numbers, part of what you have stacked up is a steady state of best management practices for repair replacement for what our existing system is, including the 995 mile sewer mains, replacing 15 miles each

year. president moran: the assumed rate of inflation is what? >> 3%. that has typically been what inflation has been over the last 30-40 years. if you compare this bill increased over 20 years, it is needing to increase about 3.9%, almost 4% per year. 1% more than inflation per year. we can fit a lot within the inflationary changes. we cannot quite make it exactly 3%. that would be the existing operation, the existing repair and replacement. taking those into account. the next slide looks at phase one of the three phases that dan and cara an outline for you. based upon what we know today and the needs that are present for treatment as well as some of

the more vital collection systems that there would need to be further increases to fund the first $2.7 billion worth of the sewer improvement program. that would take the average bill to about $204 by 200032. the comparison that is helpful is $158 would have been the bill anyway with the existing repair and replacement, keeping it as it is. to do the first $2.7 billion, the bill would need to be about $50 more in order to do that. the lion's share of that was the $33 number that was related to the biosolids and the digester projects that were outlined earlier. what is eliminating about this chart is it you see there is a number of years that the deep

green impacts of phase one do not come online. that is because we have tried to smooth this in overtime using our commercial paper program, by planning the use of capitalized interest. having a decision on $2.7 billion of phase one would require the ability and the customer willingness and customer receptivity to take into effect what was a 10-12 your discussion of gradual rate ran up to pay for that entire $2.7 billion. the risk of not doing it sooner means the costs are just tired. to bring on the second phase of the sewer system improvement program would be the next grain stack, about $3.3 billion over that 20-year period. that would bring the average

bill increase up to just over twice the inflation, 6.2% over a 20-year period. some of the rate increases would need to be greater sooner. that is because of the way the service would need to be paid. it wraps up faster than just gradual over 20 years. the benefit is all the money because we are able to contract sooner what are typically lower cost because we save on inflation. it would mean that average rate increases over the next 14 years would need to be 8.3% and flat and off to under 2%. lastly, phase three, which is nearly a $1 billion complement to the $6.933 billion number, a small sliver on top. this balance of affordability and timing meets your level of service goal of keeping the bill

below 2.5% of household income and allows it to gradually ramp up over time. i am happy to answer any questions. i know she will walk through the outreach and the discussion that will occur with rate payers and stakeholders. president moran: you could not have a better introduction for her part of the presentation. commissioner vietor: i have a question with low income residents. >> it allows for a 15% discount on the water bill and 35% discount on the sewer bill. as rates go up, the lower income discount program, the rates would also go up in proportional terms. the discount right now is about $25 per month for low income families. families. if you would see the need f