we would look at every factor that we could. of course, you asked about each budget hearing. the other part of that, other than adjusting the pay-as-you-go projects, we are looking at these projects come in many cases, as a stand-alone. to the extent that things went truly crazy, like in the 1980's, you could defer a project for awhile. it is simply too expensive. just a couple of other things as you think about sizing and

timing. 100 to $2 billion, if we borrow at 5%, that $100 million affects the average monthly bill about $1.82. to put that in perspective, if you want to add or subtract $1 million from any single year, that would change the average monthly bill about $1.80. >> $100 million? >> $100 million a project. that is because we are spreading it out over 30 years. >> are you looking for the commission to give your feedback with respect to the rate increases, is this just informational?

>> it is an informational today, but it is meant to help us, as you start talking about services this afternoon, when you think we need to pursue more aggressively or not. as you give us that feedback, the level of feedback is more difficult to say. i think a real impact is as we start to bring back the actual projects in the capital plan. then you will see the real rate impact. it is much easier to make those decisions. for example, if you all said 10% seems unreasonable, that would make us look at how we bring something back to you later on. >> are we going to have that discussion later on today or now? >> you may have it whenever you would like to.

this is certainly not your only chance to have a discussion. we can certainly talk about the capital program and what is affordable, but i am happy to answer anything now. >> i am less concerned with the actual percentage than i am that actual decisions -- whether the story be straightforward. whether we have ta clear explanation. what i fear it is a series of rate increases that have an erosive effect on people's confidence. after a few years, it becomes harder to explain that.

i like what we did with the water and sewer rates a couple of years ago that said, here are the jobs that need to get done, i this is the cost. it was a clear set of projects. and the implementation of that stretch out over several years, but the story is straight forward. so i would be looking for that kind of structure. the decisions we ask, make ourselves, ask the ratepayers to sign off on, be clear in their intent. we did not want to hear five years from now, what are you four times the rate of inflation? if that record is clear and it happens not to go above 10%, that does not bother me. >> what you will find is, this

one big program, we are going to do it straight away. there are components of the sewer system program that people are worried about if we do not get done quickly. you will notice, at least -- you will notice two blips. we wanted to get the first priority done. then you will see lowering and the second blip of phase two. how we are already trying to be as aware as possible of the affordability.

besides that, you can only tear up so much. we can work on how that rules out. these are the most critical projects. this is the cost, this is phase one. here are the separate projects that we think are in phase two. >> the r&r piece of that, we have not been doing the level of sewer replacement that we have been doing, getting ourselves on the right track -- is that something that you can talk about? that is why i wonder about the rate flow. if there is a decision or explanation that says we're going to do it right, you do not

want to say that twice. you have to make sure the program makes sense. >> and there is only a small blip there. it is meant to be pay as you go. we should not be borrowing for that. >> that will take an increment to the rates so that we can afford it. >> right, a substantial amount of that is in the structure that we have set up. maybe a better philosophy would not be to jump to 10% but to a gradual increase. rate payers never believe that we are going to lower their rates. that brings up the question, with water rates, are we not

going to lower them at some point? >> the percentage growth slows down. the idea of growth, probably not. >> if we raise rates at 10%, 12%, we expect to drop down to 5, 6% lower, but to have negative rates probably is not going to happen. >> the way that we have been issuing the debt, as you have directed us to do, we will have locked in place the average bill. we have locked in place with a 0% growth that fixed-rate portion. we all have inflation working in our favor, so to speak.

you can see on the one slide here, the affordability. they will decline as a percentage of the total budget. in absolute terms, they will stay relatively flat.

break. there was one item we were going to discuss before lunch and go after that for the rest. but if you'd like to take a break now and start back up before 1:30, we can do that.

what is your preference? >> let's take a break now. [laughter] >> take a break now. >> ok. thank you. so see you after the break.

>> we are now returned from closed session. if you could make the report. >> ok. we are reconvened after closed session. i would ask my colleagues at this point in time, we had a number of items. number seven, no action, eight and nine were settled and number 10 there was no action. i would like to entertain a motion whether to disclose or not disclose what was dutssed in closed session. >> not disclose. >> the ayes have it. next item, michael.

>> mr. president agenda item four, discussion and possible tooks authorize the general managers of san francisco public utilities commission to enter into a sewer line relocation agreement on behalf of the -- to relocate existing sanitary sewers on block 730 -441 part of university campus and adopt findings pursuant to the california environmental quality act. >> commissioners, gary dowd. i believe the description is self complan torre. i am happy to answer any questions you might have. >> i have no speaker cards on this item. >> no public comment on number four. thank you mr. dowd.

we will entertain a motion to adopt number four. >> i will move. >> all of those in favor to adopt number four. >> aye. >> opposed? the ayes have it. going back to business. >> mr. president we can now return to the end of the first workshop. >> good afternoon commissioners. we are going to now start on our journey through the levels of service and goals worksheet. the idea is that we will be having discussion and dialogue about each and trying to get a check mark by each of them as we proceed through the rest of the presentation. so starting off with providing

a resilient and flexible system that can respond to catastrophic events. the wording of the first level of service is full compliance with state and federal regulatory requirements applicable to the treatment and disposal of sewage and storm water. that is what we would do to achieve that is to construct facilities to maintain functions for regulatory compliance, reliability in wet or dry weather. the projects that are intended to address that. the next one under the same goal is critical functions are built with 100% redundant infrastructure. there are two strategies. construct facilities to maintain 100% dry weather

treatment redundancy and that would include biosolids, treatment plant improvements, second strategy is to maintain redundancy and that project centers around the channel tunnel for the 66 inch force vain that has failed four times. the next level of service addresses earthquakes. critical dry weather facilities must be online within 72 hours of a major earthquake. this is built around the fact that we have three days worth of dry weather storage in our system. this would enable us to check, inspect, repair and get back online. it will require that we do seismic upgrades at some of our pump stations and increase in

wet wells. selection system improvements and seismic system upgrades and treatment plant improvements. and the map that we have put together, it highlights all of the locations of all of the different projects, we have upgrades that would be occurring at ocean side, the channel tunnel, which runs from -- north point facility, upgrades at southeast, back flow prevention and the new treasure island plant. so this is a fairly comprehensive list of projects when you think about compliance on this list that makes up about 3.7 to 4.7 billion worth

of the cost. in 2010 dollars that is 2.2 to 2.7. the reason for doing those projects is maintaining compliance during all conditions, having reliable dry and wet weather treatments, protecting public safety and protecting the bay and ocean and insuring that we have the ability to serve after an earthquake. now perhaps it is the discussion point. what we are looking for as we proceed through the prevention this afternoon in the next two hours is to be able to get agreements on the levels of service so that i can earn this check in my left column on my slide. and we can begin moving forward and locking down goals and levels of service.

>> if an earthquake were to happen during the dry season, what would be happening during those 72 hours before the facilities got up and running again? >> after an earthquake situation, what we do is that we are doing a full ip spection of all of our major pump stations and lines we have to also have a visual inspection where wewe had a failure after 9 earthquake. we have known vulnerabilities better in areas. controls, seeing if there are

any other things. power may have knocked out some areas, like the water side. that would require a few days. >> a system to contain it. effectively, this gives us an advantage.

this is one of great concern. >> i guess what i am getting at is a flip side. we should not be note in a permit violation circumstance during the 72-hour period. >> with the readiness. generators. all of these things have to be part of normal operating procedures to have in place.

seismically robust. >> during that 72 hours? >> some of the improvements may be equivalent, where there is readiness. and walk around.

what i need is a check. >> an affirmative nod of the head. >> the commission is happy. we're going to go right into it, and i'm going to change my finder. ok. now, i will move into seven. this is the second.

section 7 of the presentation. the blue section. ok. our first level of service is control and maintenance of a storm of three-hour duration that delivers 1.3 inches of rain. now, this boutique redesigned storm is expected to occur 20% of the time in any given year. this is the basis of our permit, the operation a permit. the strategy to meet this would be to develop projects, and we will utilize the infrastructure flood control projects which could be any combination of these things.

in the low impact design. but i will be talking a little bit about what that could look like. the second level would be to manage flows. that is when we are working with other city departments. as landscapes are being redone, but to show leadership in the area, we have to develop design for any dollar spent double impact positively the problems we might have. this is part of the interdepartmental coordination.

yet another way to be able to impact it. i just want to take a look at a few more things, and then we will go to discussion. there is a low impact design. downspout " disconnection when the annual incentive program where korea $5 million available per year and an incentive program for homeowners and businesses to be able to disconnect their downspouts, use the green cisterns or the buckets to keep storm water out of the collection system. we will be looking at managing the storm water.

then, we have other projects, in the valley and districts, to mitigate problems. we look at all of the flood control projects, they fall into the flood control section of this charge, and is approximately $2.70 billion. what about the flood control projects? right now, when we have an issue, and rc shui-bian -- and are sick to is overwhelmed -- our situation is overwhelmed, property flooding, currently we have a lot of runoff. this would slow the storm water down and contain it. we could get more experience

with this to do a better job and be able to -- to be able to use it for beneficial purposes. some of the things are low- lying. this is to be able to mitigate this. .we may have greater intensity is of rain storms. this is a little bit more of a challenging one. but -- our objective within the program is that we use a triple bottom line tool belt -- toolkits -- toosls, but we will

look at long term, chemicals, going across all of those factors within the confine vote of the watershed. however, the system has to be proven and reliable, and the green infrastructure is an exciting. it is new for us. but in some cases, it will have to be bolstered to make sure we can achieve that. and in our flood control program as we move forward, we will look for some successes. a full watershed analysis. consecutive storms. we also need to determine what the maintenance is.