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 next year, but also the five-

year plan look at the puc's budget. i notice there are two issues people have raised concerns about. i was going to give you additional information. and finally wrapped up with a discussion about community benefits and jobs. if that works for everybody, we will start with that. the puc budget is -- it is an infrastructure-rich organization, as you know. what we spend money on more than anything else is making sure the assets continue to survive. the water system is needed to bring water to 2.5 million customers in the bay area. the waste water system is critical for getting rid of waste water and storm water in san francisco, and the power grid is critical to providing power to san francisco. because of that, we have a long- term view of the world, so typically, we look 30, 40, or 100 years out.

so our budget is much more heavily dependent on capital projects and on debt. the budget between the current year and the proposed year is going up by $61 million, and that is the slide you are seeing. you will see that almost all of it is in the water department. i was going to go through water and then with water and then power with a current look and then a five-year low. on the water department, the water department budget is going up $54 million of the $61 million total budget increase for the puc. $41 million is debt service, and that is exactly what we were just talking about. as we issued this debt, we have to pay it back, so the assumption is that we will be going ahead and raising rates to continue to pay that debt service. we know that over time, we have been telling people for years that the rates will be going up, and that is what most of the budget has included in it. you will also see an item for rate stabilization reserves,

which means some years we collect a little more money and some years, we spend a little more money. so we avoid rate shock by inadvertently raising rates too much in any given year, and those are for the current year water enterprise. if you look at the side view of that, you will see that over the next five years, our budget is going to grow to a projected $543 million, about $200 million. 85 percent of that is debt load. that is the story of the water department, issuing debt and paying it off. other than the debt service, you're talking a 50% increase in the other items related to the water department. one of the things you should be aware of and somewhat concerned about is that we are able to issue debt because we have a decent fund balance. it assures people that when the debt is due, we will be paying off. notice in your 2011 -- year 2011 test well, the -- notice in year

2015-2016, the budget is about $50 billion. we need to continue to raise rates and have everything -- a flat budget for everything other than debt to make sure we cover debt and continue to issue it and keep a double a rating. i 2015-2016, $23 million is barely enough to do it, but we do not want to raise rates unnecessarily. i would be happy to answer questions as i go along if you would like. on waste water, you can see that between the current year and next year, the waste water total budget goes --

capital projects are going up. that services are going down. the big issue is capital and debt and really nothing else. if you look at the five-year view of that, again, that service is going by about 40% of our total budget. the waste water budget will increase by about $90 million. the sewer system improvement program. we are going to be raising rates over the next five years to start hearing after that, so you

notice the fund balance the start to increase, so we do not have rate shock in years five, six, seven. again, it is a rate we believe will be between 5% for the next couple of years going to as much as 9% to be able to move forward with the sewage system in san francisco. on hedgy, the budget is not a big concern in terms of the total budget for this current year. it is going up for $199 million to $202 million. most of it is in salaries and fringe benefits and some purchasing power. the real issue is the long-term discussion, and that is what i would like to spend a few minutes talking about. most people feel that hetch hetchy has all the money in the world. that is not the case.

they only earn about -- a certain amount of revenue based on power sales. subsidizes the general fund to the tune of $25 million a year. so the money pays for everything -- maintaining water, pays for programs like solar and other things. it pays for energy programs in san francisco. so we have been having some difficulties the last few years. last year, we haven't unbalanced capital plan. this year, we tried to balance it much more closely. you will notice on this slide that even with doing that, by year 2014-2015, we are projecting that had she will run out of money, and if it does, all of this stops. -- that hetch hetchy will run out of money. there is no program for any validation of lighting and emergency things, and the city facilities were general fund

apartments because there is no money left. we are trying to make appropriate and decent decision so that the hetch hetchy system continues to survive. this snapshot shows you that even with very low increases in operations and trying to do some revenue funding capital typical on the waterside, we are still running out of money within four years. so let me walk through the cuts we have already made. if you look at the 10-year capital plan, we looked at city street lights, and we cut those by $18 million over the next 10 years. we look at transmission and distribution systems for hetch hetchy and cut that by $100 million. we look at maintenance of our power houses and cut that by $25 million. if the transmission system fails, if the powerhouses fail, you have no programs, no

substantive general fund, no solar program. all of those programs are canceled because there is no money to fund them. at the same time, we look at renewable generation for city facilities, renewable generation for non-city facilities, and energy efficiency conservation programs for city facilities, which is pretty much a direct general fund subsidy by taking care of lighting, hvac and other types of programs. we cut all three of those programs by a similar amount. in each case, they went from mid-$40 million to about $50 million over the next 10 years. we thought that was judicious. we still think it is. if you look at the non-power side of hetch hetchy, it is basically a flat budget over the next few years. we did not make changes because it was substantially funded through water rates.

>> just a question for you, what kind of work would be done for example in the transmission distribution system line? >> we were hoping to upgrade those lines so we could take more power down from the mountains and sell it differently and make more money. we did not leave the money in to upgrade the systems for additional funds and programs in san francisco. supervisor chu: for your powerhouse line, what does the $69.4 million left allow you to do? >> we have three major power houses. they are aging. they have to be rewound. they have to have a variety of things happening to them. we have put enough money in to hopefully keep them working and in proper condition. if we had more money, again, we would remind those. they would make additional energy, which could be used in the city, or as clean energy and

could be sold. the ability to make those powerhouses more efficient and be able to generate more clean energy is what we're giving up there. supervisor chu: i see. you had mentioned the changes in the energy efficiency/a renewable energy portfolio, which is the improvement to city facilities. looks like you have taken a pretty even reduction across the board, so we are taking a wise percentage from renewable generation. >> that is right. supervisor chu: ok, thank you. >> the next issue i wanted to talk about was the subsidy that hajji -- hetch hetchy provides to city and related parties. supervisor chu: could you actually -- i think this is act like a pretty important slide, and i'm sorry i missed it. the structural shortfall, can

you just walk me through the numbers we are seeing here and help me understand what it is that is driving the structural shortfall? >> yes, supervisor. if you go back to slide 6, it should be there. eight is the shortfall on the five-year -- right, sorry. hetch hetchy tends to produce about $25 million in what you might consider to be net profit each year. when you take into consideration what the revenues bring in and take the normal operating kinds of costs, you have about $25 million left over.

that is not really net revenue because it has to pay for all the power-related capital programs along with any programs we want in san francisco. that is what pays for the energy efficiency, of those solar, city facility kinds of programs. hetch hetchy, for many years, was not taking care of its upcountry assets. five years ago or so, we started having some powerhouse failures. we have been working on the water system improvement program, which has allowed us to shut down the system. we shut down the mountain tunnels last year for the first time in about 45 years, and we were able to finally go in and assess that tunnel. what we are finding is that the tunnel is starting to be great. that tunnel is starting to -- there is the inside of the tunnel. it is just blasted through granite in many cases. the granite is starting to fall into the water. the water starts to become more turbid. if we do not stop that, we have

the possibility of having to filter hetch hetchy water, which would be an incredible expense because we are one of the few agencies that currently does not filter water. we treat it, but we do not have to filter it because it is so pure. we start looking at what it takes to start taking care of those power houses, those tunnels, and the facilities we have throughout the mountain region. our capital spending was going to go up, and last year's 10- year plan, we said, "tell us what you think you need, and we got a lot of suggestions from staff, and that was put into the plan. this year, we said we cannot possibly do all of those things, so start making cuts. we cut $224 million. we actually had to cut closer to $300 million because we are still out $62 million on the 10- year capital plan. that means that by 2014-2015, we either have to make additional cuts, or we have to start charging city departments more money for the power revenue.

if you look at that figure in 2013-2014, you will see that revenue fund capital is going up by $50 million. the biggest portion is the realigning of the mountain tunnel. the problem we have right now is that we are cash funding haji's capital because we cannot issue debt. we cannot issue debt because we do not have a reliable stream of revenue. the debt-rating agencies understand that we are not charging even our cost to deliver water to agencies in the city and school districts, so since we are not even recover our costs, they are reticent to even give us a bond rating, and without a bond rating, we cannot issue debt. unless we do something about the rates that allow us to actually end up being able to bond for haji, we will have to shut down a lot more in three years. if we are able to stabilize our rates, start to grow our rates, and be able to issue debt, then this picture becomes appreciably different over the

long run. supervisor chu: thank you. >> which is a good segue into this slide. the hetch hetchy system is a wonderful system. it provides good, clean power. that power is given at incredibly subsidized rates to general fund departments and school districts. for example, the general fund pays us about $10 million for power every year. it costs us $31 million to generate and deliver that power, and if that power was being purchased from pg&e, it would cost about $47 million. similarly for the unified school district and community college, we are charging them about 27% of what pg&e would charge.

less than 1/3, and less than half of what it costs to deliver power to the community college and school districts. should these be reduced any more, the discussion we just had about the need to raise rates and the discussion about bonding for hetch hetchy or not being able to take care of the infrastructure -- any reduction in these rates would simply make that entire conversation worse. if anything, we have to have conversations over the next few years about increasing those rates to start to least try to recover our costs. we never think we should be making money the way that pg&e makes money, but the idea that we are paying out a subsidy of this size and not even recovering our costs jeopardize the entire infrastructure of the system, and that is the numbers you have before you. for the community college district, i realize they were asking in some venues that we not charge them anything. right now, we charge them $860,000. if we charge them the cost to deliver the power, it would be $2 million. if we charge them what pg&e

charges them, it would be $3 million. we encourage you to not make that decision. >> i will recognize myself. if what some folks are asking for for city college is the reduction were granted to the school district, which is also struggling catastrophically, as well as other enterprise -- or other departments -- for example, an m.t.a. or any of the other departments also have been catastrophic budget situations, what would be hit be on hetch hetchy? >> good question. you are right -- the community college district has certain issues, obviously. so does recreation and park,

sodas unified school district. in total, if they were all relieved of and responsibility to pay their electricity bill, that would be $12 million worth of a hit. i was saying about $25 million was produced. if that one away, all the programs in the city would have to be ended. supervisor wiener: i ask that because there are many of us who are incredibly supportive of city college and are, frankly, disgusted with what is happening in sacramento with respect to city college, and other critical government functions. but i just think it is really important to always take the broad perspective that unfortunately in this budget times, it is a 0 sum game, and that we need to -- you cannot just look at one thing in isolation. you have to look at how this would impact the overall system, and i know that if we do this

for city college -- and i'm looking forward to hearing the public comment, to hear all perspectives on this, but i am sure we will be getting a request from other departments. if i were the school district, i would have sent a letter already. >> there would be no reason not to. supervisor wiener: thank you. >> that brings us to a discussion of those solar. the go solar program, because i know some of you were not here -- was supposed to be a 10-year program. the program was supposed to be funded to the tune of between $2,000,000.5000000 dollars a year. for the first three years, we funded at the full amount of $5 million. as of a few weeks ago, $13.3 million have been requested. that has changed by about $100,000 in the last week or two. we now have, as opposed to $1.4 million, $1.3 million available

in the program as of today. what that means is that even though the program was fully funded at five mills -- so- called fully funded at $5 million, we have only had requests for less than 34 $5 million in funding in the current year, so it is not being used to the tune of $5 million. one of the items always talk about is the job creation aspect for the particularly disadvantaged low-income workers. in the first two years of the program when we spent $10 million, 59 jobs were created. about 10 of those people are still working. in the current year, about 13 jobs were still working. out of the 32 jobs were created out of a $15 million budget item, 23% are still employed. when we say there are 72 jobs created, that is anywhere from a week, two weeks, or a year. it is the number of people, not the full time equivalent of a number of people for a year. this information is what we receive from the goals set -- a

solar community -- which -- the go solar community. supervisor kim: i actually got this morning data that 400 jobs were created. i know that that is a very large discrepancy, so i was wondering if someone could address that. >> thank you. assistant general manager for power. when we compiled the information that the general manager just presented to you, as he said, we worked with the vendors of certified installers to compile that information. we also worked with oewd, and these numbers were confirmed as recently as this morning to the numbers that are accurate representations of the

disadvantaged san franciscans currently employed. supervisor chu: the number is 13 jobs created this fiscal year, 72 total short-term and long- term? >> yes, with 23 hires still employed over the duration of the program. >> we have not seen what ever you have, but we work closely with them on this program. supervisor kim: could summon clarify for me when this number came from? - danny was a came from the mayor's office. perhaps what we can do is request that the mayor's office workforce development folks do come and address that question, and in the meantime, perhaps we can continue with the presentation. >> thank you. >> the next slide is a slide of

the most successful installers and the number of low-income people that they have hired by their own information at the end of april. you will notice that luminalt got $2.4 million of the program. of the other larger groups below them, they have somewhat less than that, but it is a total of 21 for the current certified installers, and there are two more that were hired before. the installers are not in the program, but we are still tracking the at the those other two are still employed. we do not have good tracking on what may have happened to others that were not continue to be employed. the other thing that i think we need to keep in mind is the other programs i talked about were programs that are a direct benefit to the city.

they keep the power lines up. the key power houses going. they work on city facilities for energy conservation, energy efficiency things. they put solar on the roofs of city facilities that generate power that the city and county of san francisco uses. this is the one program that has no direct benefit to hetch hetchy. the people who receive the benefit are not our customers. they are the customers of pg&e. the power they are currently using is not our power. the power that they say it is not our power. the power that they generate does not come to us. nothing related to the current power or the power that is generated has any connections from a business perspective with hetch hetchy. that is not to say this is not a globally good thing to do, but it has no business connection with the hetch hetchy system. supervisor wiener: i'm sure there is unanimity in the room of the importance of solar power, so my question is