i was just driving around minding my own business...

when it came out of nowhere. suddenly, there were lights all around me. i'm like, "they're coming for me!" yeah, it was crazy. i just never thought they'd find me. not out here. it doesn't matter where you drive. if you don't buckle up, you will get caught. cops are cracking down all across the country. click it or ticket. president vietor: good afternoon, i like to call the meeting of the san francisco public utilities commission to order. >> [roll call] the entire commission is

present, madam president. president vietor: of like to welcome -- i would like to welcome commissioner torres to the commission. >> approval of the minutes of the regular meeting of november 9, 2010. >> second. president vietor: all those in favor? next item. >> members of the public may address the commission on matters within the jurisdiction and not on today's agenda. president vietor: welcome, mr. decost. -- decosta. >> i like to go over a little

history of the bond measure, and i will send the general manager, i will send you some of the information that i have going back. i could start a long time ago, but let's start with diane feinstein. they affected the water department and the san francisco public utilities system. having said that, you know that we have the water system improvement project. there were a number of workshops, and they were all good. from time to time, i have come over here and i speak about a few issues. there are others, like [unintelligible]

they don't come, and i don't know why. i have been coming to keep the fire alive. in 2010, because of the economic situation not only in this nation, but all over the world, china, india, russia, brazil. we have to look at our resources in a different way. on this commission we do have commissioners to understand that. they must not forget that. we are very fortunate that we can pass an initiative and have

a $600 million bond measure. we have to think about it. finally, let me remind the commissioners that i brought the first people over here. i will bring them again. we have to remind ourselves that for thousands of years, we preserve the waters. it is our moral duty -- i know some of the commissioners are for conservation and sustainability. it is our duty to do the right thing. whether it is clean water or waste water, it is all connected. [chime] thank you very much. i am off to the board of

supervisors who are trying to do something over there. president vietor: thank you. >> we have no other speaker cards. president vietor: next item, please. >> the commissioners have seen received copies of all of the communications listed in the summary, and this is also the time that any commissioner might make a request regarding any items on the advance calendar as well. president vietor: commissioners? comments on communications for the calendar? many members of the public like to comment on this item? next item. >> any new business items that would like to propose at this time? >> i do. there was a piece about water

transfer. this is regarding the project, and the transfer. how would we be involved in that? >> the way that we would be involved in that is have a wholesale supplier, in this case, one of the developments being developed as apparently obtained a purchase agreement with a family in the county area that has received water from the state water project. the water could make its way to the public oppose the development by transfer or

exchange with a state water project contractor. there are a couple in our district. we share common customers with them. if either one of those were to have an exchange, then they would have to transfer a portion of their supply to the city of redwood city. they would have to provide more water to a common customer and they would transfer supply to redwood city. there is a line in the water supply agreement that says if customers wish to obtain water, there is a very limited role in determining if it is possible to move out water into the customer that is the receiving transferee.

the phrase is, not to reasonably withhold approval. it is very much, can the plumbing work? >> but it would be an even exchange. >> that would be correct. president vietor: thank you. any other business? hearing none, next item. >> the report of the general manager. >> before we get items on the agenda, there are a couple of things that i thought i should mention. the water system improvement program regional construction program has achieved 1 million facebooking hours.

it is really stunning. about 1 million save hours and includes the shutdown of the coast range tall and includes work on 17 projects in the region. it is a good mark that we should celebrate. safety has always been important to us. we have safety requirements in all of our contracts, but the contractors have really embraced this, really working as partners to make sure that all of the web sites are safe. the puc will start to recommend a state -- recognize safety achievement. we will be displaying banners and we will be presenting a project milestone to all of the people working on the projects. this would not happen without

our construction team headed by [unintelligible] in particular, the sfpuc and wsip construction oversight team. they stand to be recognized. [applause] president vietor: on behalf of the commission, i would like to think the general manager and the staff for this milestone. congratulations on behalf of the commission. >> the second item is less of the happy item. one of the press concerns was about the lease is that we have. we immediately went to the comptroller's office and asked them to start scheduling

transactions. so far, we have two audits that have been issued. their comments like, they did not report their revenues when they were required to. overall, the audit comments has said that the sfpuc does not adequately administered provisions of our leases. they have not uncovered any fraud, but in today's ottawa, the audit was covering the years 2004-2008. the title of the audit is -- resulting up to $635,000 with potential underpayments and other recoveries. in their report, they have

comments like misreporting the royalty rate return. they used an incorrect methodology, underreported company sales, incorrectly did not take groundwater testing costs. they owe late fees and interest on royalty payments. it also concluded that the puc made lease decisions that did not effectively monitor leases with hansen. they do not track compliance with all of these terms and did not verify royalty payments. it does now retain records necessary to ensure compliance. it is very damning, very daunting, and rather accurate. to put this in perspective,

however, the things they are talking about in many cases are incredibly sloppy documentation as opposed to fraud or a major loss of money. those are things we need to fix. you'll be seeing a reorganization of the real estate group. when we announced the new replacement for the assistant general manager, we took real estate out of that organization because we did not think it was being managed as closely as we would have liked. we are reassigning people to work directly for the regional manager or in our business services office. the other part i want to talk about, over the four years, we have received about $6.8 million. that is probably more than anyone else was getting for the kind of work that we got. we have had a basically decent

police. we had four of them that were never combined. as part of the confusion. when we say there is $643,000 of costs, it talks about potential underpayments and other recoveries. that means there is probably about 155,000 real issues. that is about 2% that is questioned. in addition, another big number is the audit costs. if you have problems worth more than 2%, you have to pay the audit costs. we are arguing whether they are a little above for a little below the 2%. it is not something that they would have thought they a load. the last item is really an item

of documentation. the $260,000 calculation related to the methodology of calculating royalties. they also bring in sand and other materials. in some cases, they take the aggregate and sell the country. they are allowed to deduct from that any kind of material that wasn't a source at or above property. the problem is, they did not do a very good job of documenting that. after a two years, they finally gave up and said they can't prove whether they did this right or not. the recommendation is that we hire a mining expert and try to recreate what happened. from a cost benefit perspective, it might not be worth trying to

recreate records that are 4-6 years old. there is probably about $150,000 that we really do think are problematic. we really do think that we need to change how we manage our leases because it is clear that we are not doing it well. there is another of that coming out in a couple of weeks that will say that we are not administering leases. there are $70,000 that would have been required. in each case, it is a matter of doing the work we are supposed to be doing. we will be reassigning staff. you will see a change in how we operate the real estate activities. i did not want you to be surprised by seeing something in the next day year to. i would be happy to answer any questions if you have any.

president vietor: commissioners? >> i don't have any questions, but i would like to make a point, that is why we have a robust audit program. that is something we have chosen to do and we are doing it in a very transparent way. you hate to get results like that. but that is why we ask for the audit. thank you for all of that. also, this is an issue that they had identified to a lesser degree before. the things we have already put in place to start to address that. >> next is the source system improvement program update.

>> i am here today to give you a presentation on a plan that we would like to follow to implement these were system improvement program. when i came on in 2002, 2003, one of the duties that i was responsible for was to get this organization ready to deliver a large program like the wsip. we brought in staff and we obtained a lot of consultants. we were able to do a lot to prepare ourselves for the water system improvement program. what we would like to go over today is the agenda. first of all, we want to talk about the similarities of the csip versus the wsip.

some of the lessons that we would like to apply -- we also want to talk about some of the unique features c thesip -- that the csip offers that wsip did not. let's talk about the similarities between the programs. what we wanted to do is make sure that we have all of the systems in place, the structure in place. we want to utilize all the systems we have put into place. the other big thing, we wanted to make sure -- we got a program manager from the city.

we are responsible for the direction of the programs. we produced a matrix organization, and what is a matrix organization? it is a functional based organization that is based on functional responsibility like mechanical, and electrical, civil, and construction management. when the project is identified, the project manager goes to the functions to get resources to deliver the project. when the project is over, the resources go back to the bureau to be redeployed. that way, we have the flexibility to work on large projects and small projects. that is why we do capital planning to make sure that we have enough resources so that we don't have to lay off during

times when we don't have a lot of work. the other thing is that we wanted an organization where we could integrate consultants. we are able to accomplish that. a lot of consultants are for three types of purposes. one is for specialized work. the second is for workload that we are capable of doing but chose not to hire the staffing levels so that when work is reduced, we don't have to lay people off. we look at staffing levels to make sure that we hire appropriately. and we have more capacity for something that happens unplanned, we want to build capacity of the project because it takes a long time to hire resources through the city system. we wanted to make sure that we had that flexibility in our contract. one of the other important things is that we have to be

committed to our clients. in this case, it is waste water enterprises. if tommy is not happy, we are not happy. one of the lessons that we wanted to make sure that we apply, one of the things is that we used to get annual appropriation, and it is harder run capital projects when you run out at the end of the year. we want more of a long-term upfront appropriation for financing. we are suggesting 18 months or more. one of the other things that we are still working on is project labor group agreement, and also local hiring. the board right now, supervisor avalos is introducing a local ordinance. we are working to make sure that we can really tell roll out and

provide opportunities on projects. we wanted to clear up the conflict of interest. one of the things we have experienced, we have had three different program manager contracts which had three different teams which had a multiple different consultants doing certain things in the early stages. that led to a lot of conflict because in the early stages of the project, once we get a new contract or program management, these firms that assisted us are now complected from going to the next phase. one of the things that kirin will talk about is program management. we want to have a long-term program management where the firms will help us manage these projects, and by being committed

to help us manage the contract, they are conflicted out of doing any detail design or construction management services. they can help us, they can do third-party reviews. they can do check estimates and all of those things because they will never participate in the design because we have a long- term commitment with them. the other thing is that we want to improve our systems. we have invested a lot of money and time in our systems, and wanted to spend more time integrating. one of the things that we wanted to be able to do was integrated asset management. that is one of the things that we are looking at. we also found that we would like to have stronger quality assurance, making sure that the

procedures we have identified are being followed by everyone. it is not to say that those things weren't done, but we are starting this program from scratch with those kind of things. i will turn it over to karen. >> before you do, can you explain again how the conflict of interest, which we really had a lot of problems with as the project went on, how that is going to be different? >> it is always difficult when you break contracts down. if you have won contracts for one consultant to help us to do program management, you would not have any conflict. as it as you break it up and you have a contract that will do design and another one that will

do construction management, there is a conflict. one can't over see the contract. then you have a program in the multiple designs, multiple construction management because what you're trying to do, we broke the contract down so that everybody in the back of the room can participate. what we are trying to do is get the best out of each company to participate so that we can end up with a facility and a program. that is what we are trying to achieve. and we all sobriquet of the week and provide opportunities for local businesses and also some of the middle businesses that have graduated to provide opportunities for them as well.

>> she has a horrible slide, but it is a draft. if you do this, you cannot do things in red. it will give them an up-front load. -- look. >> good afternoon, commissioners. i'm the director of the waste water enterprise project. that includes the csip, the sewer system improvement project. we need to customize existing procedures. they have a very active asset management system, so all of the improvements will have to

integrate with that. any changes to operation or maintenance can be integrated into practices. we also include city staff training. these are some new things that we are bringing, so we are including that. system optimization is something that is also unique. particularly on the collection systems side, what is the appropriate side? how do we look at this during wet weather and dry weather? those are things that we talked about during the workshop process. the program manager will be able to help us with quite a bit. other unique needs that won't be unique in the future, this is really ai