preside vietor: i would like to call this meeting to order, at the meeting of the san francisco public utilities commission, december 14, 2010. thank you, mr. secretary. next item, please. secretary housh: roll call. commissioner caen is excused. madam president, the next item is the approval of the minutes from november 23, 2010, and i will call your attention to a minor amendment to clarify the intent of summer marks.

-- the intent of some remarks. president vietor: may i have a motion to approve the minutes as amended? all in favor? opposed? thank you. next item. secretary housh: general public comment. this is an opportunity for members of the public to address the commission on matters that are within the commission's jurisdiction and are not on the agenda. president vietor: public comment? welcome. all of the hard work filling out the card there, mighke. >> commissioners, my name is francisco. first and foremost, i had to go to the board of supervisors, and i would like to thank commissioner crowley for the

work that he has done. i told him that now and then, i participate in those deliberations. i was on a radio show talking about water resources all over the nation, and millions of dollars are expended, but much of the water resources are being taken over, so this sends a signal to us. the san francisco public utilities commission, they are

one of the largest agencies having a large amount of water that we distribute to over 2.4 million customers. we are also fortunate, as i state again and again, that this water, the hetch-hetchy, within the granite rocks, it is one of the best in the world. when you mix it with the of the waters as it comes over here, and i do not know if that was the original concept, but that is how we have it. it is not available to everybody, but it is a pretty good documentary that shows out

california will have difficulties distributing good water. i say this because you know that spending $4.60 billion on our clean water system, and we get some according to reports, and we still need empirical data on the quality of the water, and today, if i am not mistaken, i sent a document to you, general manager, from the environmental protection agency, so i am here from time to time to remind you that these resources are -- [bell] we have to respect those resources, and we have to be thankful that we enjoy them.

thank you very much. president vietor: thank you very much. >> hello. president vietor: hello. >> my name is barbara, and i am here to talk about the unresolved issues at the golf course. i am here on behalf of the wild equity institute, the national park conservation association, the audubon society, and others. many of these groups provided public testimony to the commission in the recent past regarding problems at the golf course. there was a 60-day notice of an intent to sue. it is a belief that resolving these concerns will require a short-term changes to the land

use of sharp park. because there was a decision to move forward with the sharp park program, that is associated with our 60-day notice. we wanted to be sure that the sfpuc's future decisions are informed. as always, members of these groups are willing to meet with you should there be an interest in the commission. thank you. i ha coffee -- copy for you of the notice. thank you. president vietor: thank you for your comments. anymore? mr. secretary, next item, please. secretary housh: this is

involving agenda item 10 as well as other items sent electronically. also, this item covers the advance calendar. this would be the time for any questions about any items on the advance counter, and there are the staff report. -- reports. president vietor: commissioners? commissioner: i do not know if this is the place for it, but one thing that is clear is that we will have a very busy january. we want to make sure the electronic copies are the same as, not similar to, but the same as the paper documents that come to the commission, as well.

we're going to be getting an awful lot of information, in disparities will cause problems. -- and disparities will cause problems. commissioner: -- secretary housh: i am looking for a little more feedback on whether the meetings should start at a certain time. dj am, 1:00 p.m., or a different time, -- 10:00 a.m.. and we're also looking for the planning commission to have a hearing on calaveras. it is the first item on the planning commission's tentative agenda. if the commission is meeting in the morning of the 27th, we are not sure you will still be in

session by around 3:00, and this could be coming to was around 3:30, so there could be a special meeting on the 28 -- could be coming to us around 3:30. so there could be a special meeting on the 28th. president vietor: i prefer the morning, and i could even go a little bit earlier, but i do not know, commissioner caen is not here and does not like to start early. mornings were quite a bit better for me. -- work quite a bit better for me. we have got all three of those thursday's -- thursdays. commissioner: that would work

for me. secretary housh: on the 27th, if we started later, a working assumption is that the planning commission, since this is the first item, we would probably be finished within the first two hours of their meeting. president vietor: at 1:00 on the 27th. commissioner: that is not good for me. do we require a quorum for this meeting? secretary housh: they all do, but commissioner caen will be available. president vietor: maybe we need to do another poll. secretary housh: why not 10:00

a.m., and on the 27th, we will check. this includes both budgets and calaveras. president vietor: will the 28 work for you? commissioner: know. -- no. president vietor: i will have to check for me, too, but the afternoon of the 27th. commissioner: and we do have a room booked in city hall than already. president vietor: and our fifth commissioner has been nominated, correct?

commissioner: it would be unlikely that he be sworn in until the middle of the month, at the very earliest, but most likely at the end of january. secretary housh: we can check. president vietor: ok, great. anything else on communications? next item, please. president vietor: -- secretary housh: other commission business. president vietor: seeing none, next item, please. secretary housh: a report of the

general manager. >> this is our first meeting without fx crowley. we will talk about the financials and start getting your thinking about budget priorities and the budget situation that we have for the puc. >> good afternoon, todd r ydstrom. as you know, we work on four years at one time. what we have before you write knelt is the last year's financial audit, we do what we have before you right now is the last year's financial audit -- what we have before you right now is the last year's financial audit.

i am very pleased to report to show you on the screen the last three years of results for all three financial statements, and, again, in the fiscal year 2009/2010, we have what equates to a very strong that bill of health, and that means that we have had -- there were no findings of any deficiencies, and an audit manager will go well. we time these audits with others. what this also means is that for the first year, what they directed us to do, we created a separate component for the financial statement for hetch- hetchy water and also hetch- hetchy power, so that was part

of the steps we took to get independent credit rating because of the hetch-hetchy operation. sfpuc and the finance team, in particular, got the distinguished and excellence in financial reporting award. that is for the comprehensive annual financial report. the audits again, as i mentioned, were all clean audits, and we went to get this back to you, soon, commissioner moran. we are getting very good value for the rates that we're collecting from customers.

we are looking to finalize that. it is city. -- soon. we will discuss the budget situation later today and the outlook of our selection, so with that, i will turn it over to the audit manager, karen, and she has the presentation for you. >> good afternoon, commissioners. i in the city manager, karen. -- i am the city manager. this is for one cycle. we have completed the audit of

the water enterprise, the waste water entity, and as todd mentioned, hetch hetchy broken out. as he also mentioned, we had clean audits. so going into the slides that we have prepared, there are the required communications, beginning with our responsibilities under generally accepted principles. we understand to plan to perform the audits to obtain reasonable not absolute assurance that the papers are free of the statements -- missstatements.

things are described in detail in two of the financial statements. as part of the process, we look at the quality and consistency with industry standards, and we found them to be consistent. in terms of estimates, we spend some time -- spent some time. one significant estimate that i would like to bring to your attention is the wholesale balancing of accounts receivable. we evaluated things related to this. another point under the required communications is corrected and uncorrected misstatements, and

we did not find any that would have a material impact. we did discuss with management certain financial misstatements. we have provided some detail on what in the slides that follow. i am not going to go through each of them, but if you of any questions and the like to expand on any, we can do that. the next are items related to water. the following slides it is the items we identified related to waste water enterprise. the last are items we identified separately for hetch-hetchy power and hetch-hetchy water. and for some perspective, in some cases, they are less than

1%. this puts into perspective how material they are. the last slide we have, the first three bullet points we have on this slide, we would be required to inform you of difficulties. there were no major issues discussed. in terms of material written communication, we have representation letters. we receive a signed document. so those are all of the required to medications. i would be happy to take your questions. president vietor: well, that is

good news, is it not? i just want to congratulate mr. rydstrom. hi there any other comments? -- are there any other comments? commissioner: what is your name again? >> kerin. --karen. we have a series of other cities and counties that are a part of our client base. commissioner: given what we are going through now, it is very commendable in terms of what you have been able to achieve. have you seen a clean audit than this? -- cleaner audit than this? there is no other agency that

has had such a commendable review, is there? >> there are other agencies that have no audit findings, so -- commissioner: you are being very noncommittal, as an auditor should be. a job well done. >> it is my understanding that that company audited nanny in the past, so they have a huge client base. >> yes. president vietor: thank you very much. the general managers' report, i believe. -- manager's report. secretary housh: there has comments that have been made

about wanting to have a pre- discussion. we also will be going to staff with recommendations, so we wanted to show to you what we are looking at in terms of the priorities that we were setting so you can help us to work through that today as opposed to being surprised when you come, so we wanted to give you an update of generally important things but also more specific things by agency that we will be dealing with, whether those things seem appropriate, or whether for some reason you would like us to do some research so that when we come back to you in january, the research has been done. i think, globally speaking, it is not going to be a significant

year of growth for the puc. we will be doing a lot of capital work with bond money, but we will not be doing a lot of change, and i will let mr. rydstrom walk through some of that. >> there are some extras here for the public, as well. i would like to walk you through a couple of refreshers slides, and this will be mr. torres' first. commissioner torres: i will not be the excuse for a longer meeting. i am a fast learner. >> key policy initiatives to

prepare the budget with, and we have included that here. we want to make sure that we come back to you in january and give you the budget documents presented in a way that you find most useful. i would like to mention that mr. harrington mentioned that in some ways, our budget may seem a little boring over the next couple of years because we of the operating under a relatively flat operating budget, and that is because we have had to bridge lower sales for water. if you look at our two-year budget that was adopted, it is growing to $860 million that we have adopted already for the two-year budget cycle. just a refresher, $75 million of that growth is planned debt service for the water in.

program. the other $25 million is all cash -- capital. particularly in streetlight programs and also in the waste water program. these are the two changes that explain your one versus year two. -- your -- year one versus year two. what we're doing right now is meeting with the general manager's office, and they are updating the general manager about the planned goals, and this is the same way we presented them to you before.

we will continue to report accordingly. last year, you also said that you were interested in seeing the budget not only by strategic goal but also by initiative, and those were running a world class utility operation, sustainability, greening, as well as work force to the limits, so the attachment in your packet talks about those. -- as well as work force improvements. this is in preparation for your consideration, keeping in mind the prioritized items.

there was the system reliability, regulatory compliance, health and safety, a community benefit, jobs, affordability of rates, revenue generation, and also stewardship policies, so we will continue to look at those and prepare the presentation, and then any other items you would like to add to that. as i mentioned, we are always working on about four fiscal years. there are the quarterly financial projections for the budget, and this is really a continuation of " what you heard about the first quarter financials. we are