priorities as opposed to taking a different approach to the problem. can we come up with a more clever way of doing this that will only cost 6 billion? the other is that while we only have 6 billion, we will only do these projects. i think that this represents a ladder. >> it does. that is correct. we took the full cost to be able to upgrade the facilities to make a level of service that we have prescribed to the commission process. >> these are not different visions or designs that have different costs attached, this is simply saying for this amount of money, this is what we think that we would prioritize it. the work that does not make the priority list still exists.

>> correct. >> we are deferring it off the page or something. as we proceed and have to help us take a critical look at the program, we might end up coming with an approach alternative that has different answers. i would hope that that would be the case at least in part. it is the nature of this program that this is work that has already been long postponed. when the clean water program came, these issues were on the table and we had been struggling with how and when to bring them forward and they just get worse over time. i wanted to make the point that the work that is out there, the current definition is about $8.5

billion worth of work that we might choose to find now or not but there is it identified need. >> is this 10-years? >> prodi years. >> clearly this shows our decisions or recommendations about what we prioritize. the hope is that with some outside assistance we will do value engineering. you might choose a different priority. it is very different from the staff perspective that we need to do -- once those things that happen, they take a huge amount of money and other things fall off. >> for all of the delay that has taken place, we are at the beginning of this process. -- had some of its origins back in the mid 90's when we put together one of the first

comprehensive 10-year plans. the other part of this decade they went through a transformation and the program changed significantly. we figured out how to make it fit. i would expect that to fit here. we are looking at the current need. >> effectively, the $8 billion program is all of the needs that we have seen that our high priority that need to be addressed and we will talk about those being completed which is the $8.5 billion auction. we did not talk about the booster fund station. this is so that we can pump water out.

we need to pump against a higher level of ocean. >> i want to understand 9%. is that additional money? >> they would be similar to the 10-year request. >> this would be a reduced request if we were looking at getting a budget approved to be able to move forward and we were trying to stick with the single digits, we would be your approving less money.

>> if you do the $8 million project over time, you would have rate increases that might start of small but in some outer years you can have 12%, 18%. what if you will really constrained to not having a rate increase. this is what we would choose to do and what we could afford to do if you are limiting yourself to never going above the rate increase. >> i think that you just answered my question. it would be a different answer if we said the combined rates were not increased. >> we can talk about what you are more or less comfortable with. once he finished the program, he

will not have a major increase for a while. >> thank you. >> we will move on to collection systems. if we are looking from our 8 billion all of the projects included, are 10-year to the right of that. the channel tunnel is included in the first three. we would be able to complete some of the consolidation for the title. we would not be able to complete some of the projects that we have right now we could drop to the facilities to be able to accommodate for climate change. some are located in areas that are expected to be inundated in the future.

this is included for all five and that was the same basin where we had our sinkhole. then, all of the rest of the projects that say flood control or a low impact design, we have a mixed level of things. if we are doing partial improvements with the 6 billion, two basins. we are doing partial improvements with the remaining six% with 7 billion, we are only doing partial improvements. when you look at the 10-year, we have four basins where we are doing partial improvements. but we have a way to go with little impact designed. we have to install some of these solutions and much richer them and see how well they work.

-- and monitor them and see how well they work. we will see what the problems are coming up with the fixes. these will work with sequential rain storms. we continue to study the patterns and storm intensity. we want to have these improvements, actually. that is why this first was not everything. this was to have real projects that can be delivered to solve this flooding problems that we have on the books. if you go down to backed flood prevention, the only project that would resolve all of our overflow structures and prevent a saltwater from coming in is the 200 million under the $8

billion column. control across the board, the urban watershed assessment, which is where we will do that analysis. really, what that $9 million price gets us is a plan that then we can attack each of these areas that is susceptible to flooding and come up with solutions. the very bottom row, better fleets, connections, low impact design. we have a flat amount for the first four and in a reduce the amount. what those are our collaborations with the school district to test out different technologies and different ways of capturing storm water to see if it is affective. also, this is where we allow the funds to be used by homeowners

and businesses to disconnect their downspouts. this is really more educational than something we would be adding into the system. now i wanted to show you so you are not absolutely flummoxed is what we have on the table in terms of the first two years and that is what is locked down. in the 10-year program, what we have rarely locked in are the first two years of funding. i know that was horrible. this is confusing. this is the best way to compare them side by side. we have $10 million. biofuel, about 3.5 million for

the first two years. if we look to the right, we're looking for $15 million in the 11-12 budget these are just treatment projects. if we go to the next slide for a collection system, the funds that we have gotten our $10 million and there was an additional $2 million for low impact design. our two-year request which would be fixed in the budget is that you know we would be coming to you with the 10-year and none would be making changes. we would have more detailed information to share with you. we are looking at 21.5.

this is 81 million. >> i don't see a under control which is at 50 million and no money is spent with odor control. >> we are looking at putting fence and other capital. >> people have to wait until that? >> unless we move the project up in the schedule. this is something that we have done. this has consent the port area

and actually this is getting worse we are actually having exasperated order issues, because they are not going as quickly as they should be. the first-year budget is locked in, but for 2012, that number could be increased, but that is the first year we are looking at getting funds for the perimeter storage transfer box order control. commissioner: are we not doing some odor control now? commissioner: we do not want

everyone to leave here today thinking that we are not going to do anything about the odor control. it has encroached on where it was before. it is a significant project. there was another project, and there was a whole slew of projects, and do not forget, but operating costs to operate and maintain them, now that those projects are done, they will be handling coders as an operation, no longer as a structure -- handling the coders has an operation. -- the odors. >> we have $6 million going in for odor control. the koran year was not rolled in. -- the current year was not

rolled in. commissioner: all of those are zero, as well. finding the odor control numbers on the sheet. >> you would have had $6 million. commissioner: 1 line is that? >> it is line 14. -- what line is that? i would make the objection that it would show six and that year, if we did it that way. the commissioner: it is a simple communication issue. that is all.

>> they are not going to do anything about it until 2012. >> ok, and our last slide, ms. espinola reminded me that we spent 24 months working with the neighbors of the southeast water pollution treatment to control plant, working on odor controls, odor processes, and we actually have staff that specifically their day-to-day is odor control, testing, and meeting facilities. within our other planned upgrades, as well, we have other odor control efforts, negative

pressure, additional carbon facilities, chemical treatments to be able to reduce odors at facilities. the particular line item that i went through in this specific items, in the transfer structures. the other is part of the treatment plant improvements. president vietor: think you, ms. jackson. commissioner: and voluntary staff. >> the first two years of improvement planning is $7.60 million, budgeted, and that is really to get us started, but to start facility assessments. we have an asset management program, but we have to assess all of the assets we have up there, actually do a full assessment as to cover a program

costs. in your 11-12 and 12-13, we have $8.30 million to implement planning, and then steps upper -- and then, it steps up. treasuring the, 2012. our biggest enemies are escalation and inflation. this is a very flattering picture of oceanside. this is taken from the south. if we were to ask about it when it was built in 1992, it was $200 million. if we were to build now that is below the san francisco zoo along the pacific ocean in a canyon below ground with a membrane that has animals running around on the top, it would be $2 billion. if we were to delay and build

oceanside out in the future, the price goes up from there to $4 billion, so this is one of the challenges. when we made this presentation for you, we had to put each project on a schedule, a hypothetical schedule with hypotheticals timing and hypothetical order and figure out what those costs will escalate to be. the further we push demand, the more expensive in debts, and that is quite a challenge for us. so just to recap, we walked through, and i did not change this live, i am sorry, the 9% alternative. we walked through the 10-year note -- 10-year cip, which addresses all of the need that are dire for the system. we look at some lesser systems, which excluded the flood

control. it did not have the biosolids drawing and other improvements. we looked at a $7 billion program, which reduced the flood control and did not have the outflows, and then we walked through an $8 billion program that met all the levels of service, so now, i think i will be joined up here now by our finance person, and we will walk through some of the impact issues. >> kerin what you three hypothetical examples, but it gets real when we get our bill in the mail, and what of the good things for san franciscans, we have very affordable water and sewer rates, but part of the reason is that we have deferred maintenance over the past 25 years, and now, it does have to be some fairly large numbers. we have run the scenarios but

look at the average bill and looks at how rates would have to change as well as the affordability index, which is similar to what the u.s. environmental protection agency does when they determine affordability for water and sewer improvements, so keep in mind, our average monthly water right now is about $32 a month, and our average monthly super bowl xli family resident is about $51 a month, so as we walk through these slides, that will be a helpful frame of reference. the average monthly water bill would be $32 a month. and the average monthly sewer bill would be $51 a month. so about $1 a day for 24-sloven water and less than $2 per day for the past 24/7 sewer. we have done a similar analysis,

but we have shown what that means for rate changes every year over the next 30 plus years. and in the yellow section here in the graph, these are all of the adopted rates through 2014, and those are not going to change and all. we are having deliberations today. but what we do show you is the band of green numbers in the middle, and you can see the significance there is that the larger you get in the program, the $8 billion program on the far right column, then you do need to have larger double-digit increases in fiscal year 2018, 2019, through 2022, 2023, and those rate increases are upwards of 15% to 18% over that band of five years to get to the degree when to keep things to second -- double -- single digits, that is

the second column. we can do that, but that means we have to cut $250 million from the currently discussed capital plan and choose to defer those projects or not do those projects. commissioner: i am sorry. and in that column, you did not include future rate increases to deal with that deferral? >> that is right. we are trying to discretely show you the trade-off. these are the dynamic models that we do each time, and every single change typically has a multiple year change, depending on when you want to spend the dollar, and if you do not spend now, inflation becomes our biggest enemy. typically, the construction cost will go up the longer we differ. >> -- commissioner: we would

probably be looking at 9% increases for a long time. >> that is right. this is, of course, whatever we can borrow money at, and we have been borrowing at record low rates, generational lilo rates that we have not seen since the 1960's, and we have modeled all of this for you because it is such a long time, and we can assume our borrowing is 5.25%, and that is a long-term estimate given a follow-up on the aa credit, and we know interest rates cannot stay as low as they have been. we think that is still a fair estimate to assume 5.25%. we looked at the probst world

war ii note borrowing -- the post world war ii borrowing. we think it is a very, very good time to sell debt, and we have benefited on the waterside. in the long term, we expect to see 5%, 5.25% for a very strong credit quality sewer and water department. commissioner: given the comments of of president, at what point time will we see a potential rate increase? >> i think it is a bill further in the slides, if i may. that gives you an illustration of how fast we would have to ratchet up rates, and if we wanted to manage it to a single- digit increase. the next way we looked at it, taking the same information, we

then put it into the affordability metrics, to say if the u.s. epa uses the average utility bill for affordability index, it should be no higher than 2% of the water bill no higher than 2% for your waste water bill, how would just our waste water bill compare under those scenarios? so what this chart does is the very bottom row, it is the orange row, that takes the 10- year cip and shows are annual bill -- our annual bill, and this is based on our median household income year in the city, but what it shows is that generally, all four of the scenarios that kerin walked us through, they are generally below or at the affordability threshold, mckechnie so it means we are not out of line for

affordability, but, of course, the less expensive, the better, for consumers. >> -- commissioner: does this include the fact that deferred work was not included? >> that is correct. commissioner: it would look different than if the deferred work or included? >> that is correct. and it changes if you combine the water bill in the sewer bill. there, in the u.s. epa affordability index says those two added together, usually, you want them to be below 4% if they are added together, and you see here, once you look at what our total bill would be for water and waste water over the period, we are still significantly below the 4% threshold or limit, but, of course, always less expensive is better for our customers. and then, one more way to look

get it is that we'd get a bill that is a dollar number. this does that. it starts off and about $50, and then it shows how the average bill goes up over time if we do the $10 plan the $8 billion plan or the others, and those are all different colored mines there. to put that into a frame of reference, we also show how that waste water bill is compared to the monthly electric bill that san franciscans received in the mail today from pg&e. its average electric bill is about $70, $74 a month, and historically, the electric bill has gone up anywhere from 469 to 6% a year. to keep in mind how that compares with inflation,

inflation has averaged about 3% per year in the postwar period, so this shows that all of our plan scenarios for the waste water program would somehow fall in between the average electric boat for san franciscans if electric bills went up 4% to 6% over time. we do not know how they would change, but it helps put in context around how bills change. in other metric that we like to read you is if we just have the economy go on the status quo, the status quo on average, inflation is 3%, picasso and the dollar will double to $2 over 20 years with inflation at 3%, so everything gets more expensive, but, on average, in 24 years,