remind you we are looking at ways to minimize costs to ratepayers were ever we can. we are going to be one of the largest, if not the very largest municipal issue were in california, if not for the whole year, except in the state of california, of course, who has delayed their bond sale. so, there is a lot of investor cash on the sidelines. we are always seen as a very attractive credit service utility. in addition to that, we may be able to get additional allocation of tax exempt qualifications. we will be going to sacramento

to have at this for additional allocation of tax exemption for bonds related to private activity use. you'll recall that we sell 15% of our water -- all little less than that actually -- to private enterprise. we typically have to issue private activity bonds. the volume cap application allows us to possibly do some of that in a lower tax exempt setting. the chances of us getting that are very high, because there are not a lot of other sellers in the marketplace. we have an update on the charity program. the attack on the budget. the will pay the debt service

reserves. we continue to monitor that. we will monitor, however, at this point -- we are assuming cash funding of about $170 million for that wsip program. to the degree that we can free up cash, we will come back to you, but we are projecting that at this time. so with that, everything looks promising. we cannot promise to the rate below 4% like we got last year, but nevertheless, we should give tax breaks for a rate holders come july. president vietor: yes? commissioner torres: what is the debt service on these bonds? >> on these bonds?

i will return to that in a moment, sir. [unintelligible] it is in the official statement document, attached. i did not bring my paper copy with me, of course. commissioner torres: you can have a copy of mind. >> i know. our annual debt service will be about $360 million, $370 million a year. commissioner torres: $360 million a year? >> a year. that is about the size of our entire budget. commissioner torres: right. [unintelligible] >> on average, the ones we sold our 4.3%. commissioner torres: [unintelligible] >> it does for the investor, but

it also means the far worse -- it is one of the best rates we have seen. commissioner torres: [unintelligible] what am i going to have to play -- pay? >> on average, it will be about half of your average monthly bill. commissioner torres: half the monthly bill goes to pay this? >> that is right. women go to the 10-year financial plan, we're always showing -- when we go to the 10- year financial plan, we are always showing this. chemical, water treatment is the other half. commissioner torres: can we estimate -- [unintelligible] >> we have done that modeling with the affordability index is

-- indexes, but because of our efficient and low-cost operating system, we have projected one of the more affordable water providers. commissioner torres: compared to whom? >> other california jurisdictions in particular. commissioner torres: [unintelligible] ]well -- >> well -- commissioner torres: you say we are the most affordable in the state. what does that mean to the average voter? >> it means that next year they will be able to buy water at the cost of two-thirds per gallon. we will be about a penny and a half per gallon.

i think customers understand that. whether they are buying milk for a gallon of gas. commissioner torres: [unintelligible] they understand what kind of bargain they are receiving clearly, initiative how the system is operated and how efficient this agency does. if we narrowed it down zero where people understand what they are getting for their money, i think that is important. >> thank you. i will also highlight a chart for you in item number 12 and item number 11 were we will show you the cost per gallon. commissioner torres: we compares to los angeles, to sacramento, to san jose, san diego. again, those are important comparisons. >> it sure is. another thing that is helpful to

note -- sandron cisco compares favorably because we use a little water. our average water use is only 150,000 gallons for dead. -- per day. commissioner torres: since moving here in 1996, i had to give up the high cost of water in los angeles. >> and better water. commissioner torres: and better water. >> i would like to ask -- we have not done that? commissioner torres: i am here. >> i know you are. president vietor: commissioners, any comments? is there a motion to move item number 11? commissioner torres: so moved. >> second. president vietor: any public comment?

>> we have three speaker cards. >> on item 11 or 12? >> i am sorry. item 12. president vietor: all those in favor of item all leaven? all opposed? motion carries. >> the discussion of water supply for fy 2011-12, consider and adopt a reasonable to recover the projected loss of revenue requirement from 27 wholesale customers, as applied to the meter readings, including an adoption of an untreatable still water rate discount factor. this risk of alamance the terms of the 2009 water supplied from between the city and county of san francisco and the wholesale customers, which was approved on april 28, 2009. >> the two things to be thinking

about as we are discussing this -- water usage and accounting. water usage is technical, not policy as such. this draws much of this because it is all about assumptions of water use. one of those assumptions as mr. rydstrom will show you is there are assumptions it will bottom up. we were down to 135,000 gallons per day in 1992. we are in that trajectory. we do not believe we will get there. we are modifying our idea of what will happen with volume usage. the other is really a policy called. that represents the amount our customers os. not that we have not build them. we build them based on usage that was not correct. -- we billed them based on usage

so was not correct. the question is how fast can you collect that money back? we have stretched out the payment of that receivable over a further time than we originally projected about a month ago. that is the reason for the 47% dropping to 48%. mr. rydstrom has a lot of information about that. >> this is one of the single largest items for your budget that you look at every year, this item. so, i will go through a few slides to summarize. you heard about this with the quarterly financial report. this is a forward looking, starting on july 1st and comparing the next fiscal year. before you today is the wholesale water rate for treated water, as well as the new

tradeable water discount rate factor, and also, the environmental enhancement surcharge item. i can come - four a presentation for your -- i can combine those four a presentation for you. we are proposing to go from $1.90 to 263 -- $2.63 in july. why is there a cap? we are going up about $40 million in debt service alone plan that based on the $2.7 billion. in addition, as mr. harrington said, we are asking for the repayment under the new contract of $20 million, 5 million from the old account under the old contract, and the new balance of $15 million. that is $20 million projected.

$40 million that would be due from the customers at the end of this year. the wholesale water sales are 150 million gallons per day as sold. i will show you recent trends, a few slides. we do not have a crystal ball, but neither do our wholesale customers. we're always trying to figure out the most reasonable estimate. this assumes a slight reduction, however not as much of a reduction as we have seen. on average, it has been 4.5% lower on wholesale demand. we heard earlier today that even in the current year we are down another 4.7% on top of previous down years. in addition to that, we have provided an insurance mechanism

that in the event that we are wrong -- because we do not have a crystal ball -- that we will have a trigger mechanism to say even if we are below the prior 1990's ration level, if by a longshot we are wrong, we will have a trigger mechanism to be calibrates rates based on actual delivery through sept. and add on 9 cents in july if we are wrong. the next slide in particular went to what commissioner moran has asked for in the past, but also as commissioner torres it is questions -- what does it all cost? it is gallons of water. we are showing for you on slide four just what a heck of a good deal we have on water in the bay area and also from the hetch

hetchy water system. the dark blue bar shows the cost of the gallon of water, and as proposed, if you go to fiscal year 2011, we are seen for the wholesale customer rate, that would be great if we charge countywide from hetch hetchy to the county line for the sale of water. that would mean we are going for a quarter of a penny per gallon to a third of a penny for a gallon. the percentage increase is still very large, but the total cost is very affordable. if you look at what the average cost this -- is once we've reached the sentences the county line -- the san francisco county line, it will cost two-thirds up a penny to have a pristine hetch

hetchy water flow all the way from yosemite down through the pipes and come off the faucet of our customers. and that is two-thirds of a penny per gallon. as we completely turned the clock forward, we go to the far right hand part of that chart. you will see that once we had all the debt service come on line, we will still be one of the best deals in the bay area. we will be selling water for less than three-quarters of a penny per gallon and two retail customers in the city, coming out of the tap, about one penny and a third of a penny per gallon. by the time we did it all done, all the debt service comes on line. that, i think, helps frame what it typically means to a household. the reason for the increases --

it is not because we are staffing up. we kept a flat budget. there are no additional people. there are no additional programmatic costs for the water. why are we going up? we are going -- we have a snapshot of the various will still grates over time. it is all because of capital. we visited numbers every year with our wholesale customers and also within 10 years of projections. where we have been missing the mark is on delivery. we've gone back 30 years to see what delivery has been, and i would like to thank bawsca . they annually published their report that consolidates all the customer data. you can see that the red line at the top is the total wholesale customer usage. it goes up and down over time

with droughts and otherwise. the blue bar is how much of the water they buy from the san francisco public utilities commission. on average, two-thirds of the water is purchased from the san francisco puc. and you can see that a fairly significant downward trend. the downward trend is pretty dramatic if you look at most people, five years in particular. we are coming off a three-year drought, but we have had a lot of rain. that rain has been good news as far as lower demands and lower need to do watering for areas of the bay area. i think that has been a contributing factor to the continued fall in the current year. we are projected to be just short of 5% in the current year. the projections assume we will

only go down slightly, because we are leveling off. we have been lower in the past. we want to know -- we want you to know that on the previous slide. president vietor wanted us to go through some wholesale customers. slide eight goes through deliveries. i a circled the examples -- i circled the example for you. $2.63 would reflect a 43% change in the prior year. if it would be $1.35, that would require a slightly higher prepayment then need to $53 cents before you today.

we think that 140 mgd is a good assumption. what is it going to end up being? we do not know for sure. all the new urban water master plans are due july 1. in addition to that, we have our required 20% reduction prior to 2020 for water conservation, and that is something that all of the agencies are considering and we will continue to monitor and report back as we have more information. what it means for the balancing account is another policy decision. what we have assumed is the gradual repayment in earnest, we have three years in particular,

and so asking only to build into the rates, only half the repayment next year, and then $15 million in the 15-year and $5 million in the final year that is equal still water rates -- in the final year. that is the wholesale water rates. the country you're what -- the untreated water rates is a new one. it was basically to set our rates for customers that are benefiting from treatments, and those who do not benefit from treatment at a discount back. we only have one, and it reflects that we would provide a 23 cents discount, and that seems fair and is consistent with the contract we signed. >> i think we should stop there, because the next item is really

item 13. president vietor: great. questions or comments, commissioners? >> i have a comment. i did not know we accepted this logo. >> i did the lucky draw. i think i was the first one to use this. i was the first. president vietor: other comments on this particular item before you, commissioners? maybe we will take a couple -- should we take a couple of public comments on this? it is a significant item. are there public comments on this item at this time? mr. jensen, i believe, has something to say. please come up. >> commissioner caen's comment

was did we vote on this? >> then why did we waste time talking about this. >> we did not change the name of the organization, so we did not bring it up for a vote president vietor: point of order, can we take this up under other commission business? >> thank you. i am here today to speak on behalf of the 26 agencies that buy water from you. we concur. i will cut to the chase. we concur with the wholesale water rate adjustment. we also have recommendations for the future. as the general manager said, there are two parts. one is how much revenue needs to be collected. and then there is how much water repurchase.

-- wheat purchase. our agencies and you are bound by the 2009 water act, and we are bound by that teapot -- to pay our share of the costs. we are tasked by our customers with administrating the rate provisions, and i am confident the providers will pay their fair share, and only their fair share, through that process, just as i'm sure your staff will monitor this as well. we've worked closely with the general manager to projected purchases for this year and next year were proven conservative, and yet not overly conservative. we concur with the basis for the rest -- for the rate recommendation. we also support the idea that

the rate we construction not be pursued this year. alternatives were not pursued and we concur with that recommendation. in the future, we would like to work more closely with staff on three issues. first, if the change in rate structure is to be considered, all of us would benefit from closer coordination to make sure that the evaluation takes alternative stakeholders into account, and we would like to work with staff to understand the water rate records and the analysis used for making projections for the following year, and second, the basis for the cost estimates and numbers. there were changes in the spring and we want to make sure we have a better understanding of the changes and what the basis for them was. third, i would like to work with your general manager and staff to produce clear explanations for the public to clarify why these rate adjustments were

necessary, what they mean to residents and households, and any information in response to the typical questions that arise when rate adjustments are made. this will benefit wholesale customers, and both your general manager and i are asked to explain these things to the media and the public. i think we would benefit by having a common understanding and common perspective. and of the commission will support these three activities. i would like to close by saying we have a number of representatives from wholesale customers. i would like to ask them all to raise their hand. thank you very much. any questions? president vietor: not at this moment. why don't we continue to take public comments on this? if anyone of like to come forwem, please do. >> members of the commission, good afternoon. i currently serve as the mayor

of hillsborough, but i do have strong ties to san francisco as i was born and raised here and i worked for 34 years at one of the iconic companies here. >> welcome home. >> thank you. the issue of water rate increases is important to all puc customers and i believe you received a copy of a joint letter sent to your joint manager, mr. harrington, from the cities of hillsborough, east palo alto, and a third city is pressing our concerns. i am pleased to see the rate increase has been revised downward to 38%, and these projections are in our opinion more realistic. i would be remiss if i did not say 38% is still a significant increase. in addition to having to pay

considerably more, will sell customers have to continue to invest in the refurbishment and reliable operation of our distribution systems. the water rates need to be set in a way that recognizes the financial realities of all who pay for and benefit from puc water. as we look forward to setting rate process is in the future i would ask that they provide additional support in the rate setting process. specifically, i would ask that the puc to identify its revenue needs and rate options at the earliest opportunity and that if fully explains the tabulation methodologies so as we prepare our city budget which friday rates we put into our 2-18

notices, we will be facing a notices on accurate raids information which will ensure we as a city do not under-collect for over-charged our residents. lastly, i would like to say i think it is appropriate that the environmental stewardship is being employed in the $4.6 billion water system improvement program. with that, i thank you very much for your attention. president vietor: thank you very much. more comments, please. >> good afternoon. thank you for letting me speak before you. my name is barbara pierce. i am a member of the residents city council and i and share of bawsca all the communities -- and i am a chair of bawsca . all the communities to rely on san francisco water struggle to make ends meet. i am pleased to see the

recommended increase in the wholesale water rate has been low words to around 38%, but this is still a significant rate increase. we recognize and accept the need for the wholesale customers to pay our full share and in the future to help agencies manage their local rate setting processes. i would ask one thing of the commission following the adoption of the rate increase today. please direct your general manager to work more closely with hours to ensure that both are equally confident in cost estimates and water use estimates as early in the process as possible. certainly, i come from the same perspective as my colleague and we have to comply with all the 2-18 rules. we want