supervisor chu: hello. welcome to the regular meeting -- actually, a special meeting of the budget and finance committee.

mr. young, do we have any announcements? then i guess. please turn off all cell phones. if you wish to speak during public comment, please fill out a speaker card and turn them in to myself. if you submit documents to the city, please provide copies to the clerk for inclusion in the file. items discussed today will appear on the board of supervisors agenda on june 2, 2011, unless otherwise stated. supervisor chu: thank you. we had a number of items that are not part of the budget process budgetper se, -- part of the budget process, per se, but we would like to dispense with those first. >> item 1, resolution approving the issuance of water revenue bonds and water revenue refunding bonds to be issued by the public utilities commission of the city and county of san francisco, affirming covenants

contained in the indenture pursuant to which the water revenue bonds are issued, authorizing the taking of appropriate action in connection therewith and related matters. >item two, ordinance approving the issuance and sale of water revenue bonds by the san francisco public utilities commission, not to exceed $49,100,000 to finance improvements to the cuw260 water main, the commission's hetch hetchy water and power system, and the treasure island project pursuant to amend its to the charter of the city and county of san francisco. >> good morning. general manager of the sfpuc. if you would like, we can call one through four and discuss the budget because the idea of how we pay off the bonds is part of the budget discussion, and that might make for a complete discussion if that is easier. supervisor chu: if we could, i'd like to keep the budget is

separate and apart from the issuance of bonds. we can call item three. >> item 3, ordinance amended the san francisco administrative code to create the public utilities water enterprise environmental enhancement surcharge fund. >> i would be happy to give you a brief overview. on the water revenue bonds, it is an additional $700 million for the bonds. we have been issuing these bonds for several years now. the water system improvement program is a $4.5 billion program, mostly done by issuing debt, and we retain that over 30 years or so. when there are regional projects involved, 2/3 of the retain and is from wholesale customers. for in-city projects, it is mostly in-city rate payers that pay for that. this is one of a number of charges of bonds we have issued over the past few years. it follows the normal pattern we have given to you before in

prior years. approval of -- mr. rose is recommending approval, i believe. item two is for $49 million of non-wsip projects. the big ones are a realigning of a tunnel in the mountains and work on the san joaquin pipeline. there is also a project for treasure island for backed up water and water supplies on treasure island. again, that follows the same pattern we have had on all of the issues we have done. the third, the environmental enhancement surcharge -- as part of our negotiations with wholesale customers, we limited the amount of water we promised to take off the ptolemy river through the year 2018 -- the tuo9lome -- tuolome river through the year 2018. we had to have encouragement to not take additional water. it is not something where you

can simply turn the tap off and not take the water, so we created environmental enhancement surcharge that said that if we collectively use more than 265 million gallons of water per day, we will then start charging a surcharge over the regular cost of water that would encourage people not to take that water off the ruolumne -- the tuolumne. the surcharge is high enough that it would encourage people to do other things instead of taking water of the rivers. water usage has gone down so much over the past three years that none of our projections show this kicking in. we do not believe the surcharge will ever be charged, and we do not believe anybody will ever be in this fund. we're doing it to be in compliance with the contract, but again, and less water usage changes dramatically from what it has been the last four years, there's no reason to ever believe it will be above 255 million gallons a day. supervisor chu: thank you.

with regards to the treasure island project, i wonder if you could expand further on what the project is. >> there are several things we have to do for treasure island, whether there is a new development or not. water for treasure island comes across the bay bridge from san francisco's side, but should that be disrupted that you need a secondary source of water, there's two ways to do that. one, there are some tanks on the island, on yerba buena island in particular, that are cracking and in need of repair. there is also a pump station on the eastern side under the current bay bridge. when demolished, that station will also be demolished, and that is the back of source for getting water on to treasure island. -- that is the backup source. we have several options for taking care of that, but what is currently in our budget is over the next two years, to put enough money aside to rebuild

the pump station. the new bridge has pipes. one of the pipes is for us to provide back up water to the residents of treasure island -- backed up -- backup water to the residents of treasure island. supervisor chu: thank you. mr. rose, i believe part of your report covers this. >> yes. on page 6 of our report, regarding item 1, and i have some revised numbers on the bottom of page 6 in terms of how these revenue bonds would impact the average single-family residence. the correct numbers are the water bill would be impacted 23 cents per month in 2011-2012. 35 cents per month -- and this is for the average single-family residence, i should say -- 35 cents a month in 2012-2013.

63 cents a month in 2013-2014. and $1.73 per month in fiscal year 2014-2015. we do recommend approval. regarding item two, currently, the puc is permitted to issue commercial paper for the water system improvement project uses. this file would clarify that the puc has the authority to issue commercial paper to provide financing for non-water system improvement project uses. because of that clarification, since that might be considered an expansion of the puc's debt issuance authority, we consider the file to be a policy matter for the board of supervisors. finally, regarding the new environmental enhancement surcharge fund -- that is item

3, file 110579 -- we have a table in our report on page 7, which does indicate based on past water usage that there would not be a surcharge fee imposed. however, since this is a creation of a new surcharge fund with a potential fee, we consider this ordinance to be a policy matter for the board of supervisors. supervisor chu: thank you very much. just a clarification -- the numbers that you represented, that is inclusive of both items one as well as item two? >> that just pertains to item -- excuse me. that is just item one, filed

110555 -- file 110555. supervisor chu: do you have similar information for 110554? >> which is item two? no, on item two, as i understand it, what the department is requesting -- the board of supervisors previously authorized the puc to issue commercial paper for water system improvement projects. as i understand this legislation, it would give them additional authority on an as- needed basis to issue, additional commercial paper -- to issue additional commercial paper for non-water system improvement projects, but this would not directly impact the rates. this is, as i understand it,

considered temporary or bridge financing. ultimately, is the bonds -- it is the bonds in item one that would have the impact on the water rates of both commercial and residential users. supervisor chu: if i could ask the puc to clarify. >> certainly. the larger projects we are talking about, the wsip project, we said the rates would go up dramatically to have a reliable water system. we suggested rates would go from about $40 a month for the regular water bill to about $41 for the wsip program -- from about $14 a month. that is that part of it. $49 million is somewhat in addition to that with the commercial paper. the commercial paper is really just a financing tool. we can borrow money at 1.25%.

if we are borrowing for long- term debt, it is 5%. we issue commercial paper while the budget is happening and then we will look into the long-term debt after we stabilize the project, and we hope to get a better market for the bond rates. it is not a separate discussion. it will roll out ultimately into the regular bond issuance. it is a bridging tool to make sure you get the best rate when you do not need to go out and borrow the money long term. supervisor chu: to be clear, the issuance or item one, the dollar amount that would be raised per month is included as part of the wsip already approved rates that have been communicated? that's absolutely. supervisor chu: in terms of item two, that will be in addition, but because it is currently commercial paper without a bond that is necessarily financing it, you do not have the impact yet? >> our projections on that, we

said it would be about $41 per month for water rates based on wsip. if you add in the new meter system we are going in, we project now that the total rates would be about $49. in addition to wsip, all the other replacement work in the city and the meter program and these things would raise the rate by an additional $8 or so. supervisor chu: thank you. if we do not have any questions on items one through three at this moment, why don't we open up public comment for the first three items? they are not related to the puc's next year's budget, but related to the issuance of water revenue bonds and also the establishment of a water enterprise environment, so enhancements surcharge fund, item three. if there are any members of the public who wish to speak on items one, two, or three, please

come on up. seeing none, public comment is closed. can we entertain a motion to -- i believe on item two, our clerk has just indicated to us that there is a document that needs to be amended. >> yes, i apologize. the city attorney indicated there is an environmental document missing, so i think we are recommending that that portion beat put on reserve until the environmental documents are finalized. supervisor chu: so that i understand correctly, to the city attorney, we need to indicate that the portion related to treasure island --

>> that is appropriate as long as it is sufficient for the controller to understand the amount at work. supervisor chu: thank you. we have a number of items. if we can entertain a motion to send items one and three out with recommendation. supervisor mirkarimi: motion to send items one and three with recommendation. supervisor chu: without objection. we also send item two forward with recommendation, but we ask that we put a controller's office reserve on the portion related to treasure island. supervisor mirkarimi: so moved. supervisor chu: ok, we take that without objection. mr. clarke, call items four, five, six, and 7. >> item four, hearing to review the mayor's proposed a budget

for fiscal year 2011-2012. item five, with and it's appropriate estimated receipts and estimated expenditures for selected parts of the city and county of san francisco for fiscal years ending june 30, 2012, and june 30, 2013. item six, proposed annual salary or and it's in the marine positions in the annual budget appropriation ordinance for selected departments of the city and county of san francisco for fiscal years ending june 30, 2012, and june 30, 2013. item seven, resolution concurring with the certification the services previously approved can be performed by private contractor for a lower cost than similar work performed by city and county employees. supervisor chu: thank you. before we begin, supervisor mirkarimi would like to say a few words. supervisor mirkarimi: i have to go and chair the public safety committee. i do not expected to be a very long meeting, so i am interested

in engaging the department of the environment and department of public utilities commission, and i am interested in renewal programs that i know are coming up for review today. it is extremely important to me. as well as questions about how we might be able to alleviate some of the cost burden to institutions like perhaps city college. i look forward to that discussion. i just wanted to say i will be back. supervisor chu: thank you. why don't we move forward? there are two departments before us today, but the public utilities commission as well as the department of environment -- both the public utilities commission as well as the department of the environment. i would like to start with the public utilities commission. >> good morning again. what i was hoping to do was to give you a fairly broad overview of the budget. as part of that, talking about the changes from this year to the changes from this year to next year, but also the f