units. supervisor chu: which could be a configuration of six, eight, or 10? >> correct. supervisor chu: thank you. any other questions for the committee? seeing no one, is there a motion. without objection, motion is approved. madam clerk, are there any other items before us? >> no, madam share supervisor chu:. -- no, madam chair. supervisor chu: thank you, we are adjourned.

commissioner chu: good morning. welcome to a special meeting of the transportation authority plans and programs committee. madam car, please call item two. >>

update on the financial plan for the san francisco municipal transportation agency's central subway project. this is an information item. commissioner chu: this was an item that we heard last week and we asked for an update. >> this is an item that was continued from last week. i am continued -- happy to say that we have worked with sfmta staff over the past week. i am about to introduce the central manager for the central subway project to show you a presentation that shows you our attempt to close the funding gap as well as an overall context and where regard to the road map of getting the full funding grant agreement from the transportation administration.

>> good morning, supervisors, my name is john, the central subway program manager. i'm also joined by mr. carter wrote hand, the director of construction. they have reviewed this briefing that i'm about to give you. before i start the presentation, i want to provide you with a bit of context in terms of how the financial plan fits into the over all sfga process. i will highlight some of the accomplishments that the mta has achieved in meeting some of the ssga roadmap deliverable. i will discuss the fund's utilize to close the funding gap to fully fund the cap and then the next tax. >the central subway is currently

on track to achieving a full funding grant agreement. the sfta process began with the final approval dated january 7 of this year and continues with monthly meetings fta washington and region 9 staff, along with tsa staff, and it continues to meet and satisfy all the obligations under the ssga road map process. submitted must and that we achieved on november 19 where the project received approval for the letter of no prejudice that would allow us to move forward with the utility relocation contract in the union square area. this is an significant milestone which allows for the federal authorization of an early construction activity. identified before you are the remaining sfga some metals

necessary on schedule to receive the $942 million in federal funding. a key milestone in the application is a submission of an updated financial plan, which is scheduled for february 15 of 2011, that identifies the funds committed to this $1.58 billion project. the sfmta is now moving forward with revisions to the central subway financial plan in order to meet the ssga obligation. the central subway financial plan is comprised of federal, state, and local funding sources, as outlined on this slide. the great majority of the funds have already been committed, and they are highlighted in yellow. as you can see, there is a remaining federal obligation of aid and its $69.7 million. that is the remaining fund that

would be authorized under the full grant agreement. what is currently shown is the $137 million funding gap which is part of today's discussion. earlier this year, sfmta convened a mind the gap committee, which was comprised of members of the sfcta, mayor's office, and others to explore a number of the funding options we are about to present to you today. this slide show the proposed capital funds committed to fully fund the program. only capital programs are -- funds are being used to fund the central subway program. no operating funds are being utilized for the central subway program. the alliance structure of the funds used to fill the remaining gaps of the funds are used here. $31 million in prop k, $32

million in problem be. the combination of these funds, along with a projected savings from current capital projects are what is identified as a solution for closing the remaining funding gap for the central subway program. as a maximum -- since central subway have received the maximum allocation under prop k, as you can see, the items identified under kapor reprogramming, a number of projects would require the reprogramming of prop k and sfmta, along with the sfcta will be working on a reprogramming efforts that will start immediately and conclude prior to the submission of the financial plan in february of next year. a $34 million in prop 1a is part of the $61 million state funds for high-speed rail. one of the conditions of that

funding was connectivity. central subway provides a direct link to caltrain and imposed high speed rail station at fourth and townsend. earlier this year in march, we put in a programming request to the california transportation commission for $27 million, and we were approved by the ctc to move forward with $27 million of the $61 million. a $31 million represents the balance of that funding source. prop1b, there is $78 million left in the program listed as uncommitted. 72.3 of that $70 million of and committed funding will be allocated to the central subway program. we have been receiving $9

million in savings from this been climate for project phase one, so we will be looking at reprogramming that prop k effort back to central subway. phase two, we recently received federal allocations that allows us to unallocate some of the funds for islais creek. geneva can be project, that project is in close out, $1.2 million in savings for that effort that would be allocated to the central subway project. finally, the its radius system replacement program. there will be some lower-cost program that will be allocated back. some of the lower priority options are like a digital,

visual announce the system for cards, along with using their radio system as a means of mapping out the yards. these are lower party options that will be deferred. commissioner campos: commissioner dufty? commissioner dufty: what does that mean, lower priority option. can you go more into what you mean with its? lower priority? i do not know what that means. >> the radius system project is a replacement program read the agency will replace its motorola system with a modern, upgraded system, as mandated. we will be replacing the radio system by 2012. commissioner dufty: and this is a large project? >> it is a large project, essentially replacing all the radio systems within the fleet. we are currently operating

under a 1970's-based system. that said, the base effort of that program is fully funded and there are some out-year options that our options in the contract that are listed as whether or not -- sort of enhancements -- to the system. if the agency would like to move forward and assign those options to the program. $10 million was assigned to this option effort. because of the deferment of these options, it will not have an effect on the overall delivery of river systems. the agency is proposing to move forward to defer some of these lower priority out year options to central subway. commissioner dufty: is this

something that is future, down the road? >> it is currently approved under prop k under the radio replacement project. before you is the proposed central financial plan showing the additional capital funding, and demonstrating a fully funded central subway financial plan. as you can see in yellow, under committed, $29.5 million currently assigned under local, regional, other. that is the pool of funding that will be working with the sfcta to reprogram. identified here are the actual project expenditure needs for

the program. the expenditure needs are shown in light blue, so you can see the expenditure begins in fiscal year 10, 11, and concludes in 2017 through 2020. what is highlighted in dark blue on the top, beginning in fiscal year 2013, is when we will be spending the money we are committing today to close the 1 and $37 million gap. the first spending need for the 137 will be in fiscal year 12, 13, 4 $38.7 million. as you can see, it is proportioned out for the next seven years. concerning cost, central subway is fortunate to take advantage of a competitive bidding environment and has realized $8.5 million in savings for its

second contract, contract 1251, that we are about to award on december 7. we also anticipate receiving approximately another $10 million in savings to our largest contract that we are planning on issuing for bid in the first quarter, february 2011. at this stage in product development, fta requires cost savings be carried in the program as program contingency. the mta is also controlling cost through its utilization of what is known as a contingency management program -- commissioner chu: just to clarify, you commented that cost savings must be carried as contingencies. would you are saying is, even if we are realizing cost savings,

as we are seeing with $8.5 million, hypothetically, the $10 million coming up in the second quarter of 2011, we cannot count those toward reducing the project cost, we just have to put into a contingency bucket at a later point in time? >> that is right. the plan allows us to reduce our contingency levels for the program. further to the point, currently, the program carries $300 million in program contingency. that is part of the $1.58 billion program. this is not allocated, not assigned to any effort in the program, besides program contingency. in the management plan, there are seven intermediate milestones. if the agency meets those milestones, those contingency levels will be reduced, and a radically, it could go down to

zero in 2018, when we finish the program. the effort, as outlined in the risk management plan and contingency management plan, is that when the program matures, levels will drop, and when those contingency levels are essentially freed a by the fta kroger, how -- program, the agency will be able to reprogram those funds back into the capital program. commissioner chu: so the current $300 million that exists in plans, to the extent that we have additional savings, that would add on top of that contingency? so for example, the 18.5? >> exactly. commissioner chu: and as you meet different milestones, by the end of the project, this contingency balances can be reduced? >> yes, requirements will be

lowered, and so the surplus funds, the agency will have the chance to reprogram that money. commissioner chu: so the point i am taking away, the project we have right now, 1.57, that could be down -- brought down in terms of cost savings, but we are not ready to reflect that in the numbers until we meet milestones, until the contingency is released. >> thanexactly. commissioner campos: commissioner david chiu? commissioner chiu: i just wanted to clarify a couple of things. i know we continue to get questions about this from constituents, some of which are here. the overall project is one. $1.578 billion, and the local contribution is only about 10%?

>> right, there is a three-to- one benefit for every local dollar invested in federal allocation. >> i know i get a lot of e-mails from constituents assuming that the city is spending $1.6 billion, and it is a portent to make that point. the gap you have been trying to close is a wonder $37 million gap. $100 million of that will come from state bond money is. -- $137 billion gap. we did not otherwise count on that state but monebond money cs that correct? >> yes, that is correct. commissioner chiu: other pieces coming from savings from current projects. the question i have is, is this money that otherwise would have been used -- will there be more

products delayed as a result of the use of this money? it was not counted on for other projects, right? >> going back to -- currently, the agency, under prop1a, has a balance of $137 million where it can reprogram the funds to a project, and the requirement for that bond fund is that it shows connectivity to high-speed rail. the agency decided to utilize central subway as a way to demonstrate