ever. when he and i are both coming up and raising strong concerns that the sfpuc needs to stay this land, this is a powerful statement. thank you. >> good afternoon. i am the superintendent of recreation and community services with the rec and park department. one year ago, our apartment entirely restructure the way that we deliver recreation services. prior to that, we were limited in scope of programs we could actually offer. you have a recreation director at the center. if that recreation director like tennis and soccer, that is what you got. he did not have much of a choice. we cannot be responsive to what community needs work. our new model allows us to be responsive not only to community needs but the different properties and communities around the city. our competencies that we are now

engaged with our cultural arts, sports and athletics, community services, and the one i am here to speak to about -- leisure services. that has outdoor education programs, waterfront, aquatics and alternative extreme sports. we see the property as a wonderful opportunity for children and families of the city had to engage in recreational activities at the lake. this past summer, we partnered with the dragon boat folks. it was our first reintroduction to the lake. things went very well. we were recently able to purchase kayaks and we are working on sailboats that are being donated to us as well. we have had a number of camps that we did this past 12 months. we have engaged in a stand up paddling, canoe trips, surf

lessons, shark camp, fishing camps. there are a number of things we would like to do at the property. we are at the early stages of implementing those. i absolutely feel it is our mission and responsibility to provide recreation program at that property, as a child who grew up in the exiles your district in san francisco. it played an in the outdoors. it is our responsibility to increase the reach of the folks to use the property who can attend a fishing camp or fishing program. i am looking color to it. i have our leisure services manager here. he can speak in more detail if you have any questions. president moran: are there any other public speakers? commissioners?

>> i want to go on record as banking the public speakers for showing up today. -- as thanking the public speakers for showing up today. i grew up by the lake. the water level situation was always a concern of mine. i think what the advocates have done is certainly commendable. i am torn because i have a strong relationship with the recreation advocates in the city and county. i see that the recreation and parts department has moved in a direction in -- i will give you an example, the pga golf tournament that we just completed. it is not a privatization move. it is a managing plan.

that managing plan has been accepted by the workers. it has been accepted by the public golf community. it has addressed what i have heard calls talked about today, that is a level of accountability that i think the citizens are entitled to. if you do have sat out there, you have to make sure that you manage them accordingly. i also spent a lot of time in the area when the boat house was, as mr. ritchie said, was going on. i grew up out there. it hits me right here. i would like to see us do something. i was glad that you were able to show up today. i was expecting that the recreation and parks department is getting kind of a raw deal as we sit here today.

i also understand the motivation behind it. i want the record to reflect that i am torn because i think that there is a lot of recreational activities that could be taking place for the families and the use in the city at lake mercd . there is ample parking out there. the weather is incredible. the sunset over the life from the boat house is just amazing. we have to have long-term vision for that location. i see illustrations in the record. i want to remind the group that he the purpose of the mou is to define a framework of cooperation is between the puc and recreations and parts

apartment as it pertains to the beneficial uses of lake merced. i was under the impression, not only that with the rfp has a related to the boat house project, we would be collaborating on that as well. i think that there are points taken had the proposed mou may be insufficient in terms of tying down the management. i also heard that the public utilities commission is not responsible, necessarily, for the recreational aspects of that land. i probably would be inclined to suggest that if we were not entertaining the appointment of an ombudsman or something like that, that the commission reestablished the lake merced task force and bring the

attorney out of retirement and have this happen again. i do want to thank you for your work. i also want to tell you what i was thinking, because i had not made a comment on it yet. i do have a familiarity with rec and park staff. i also want to defend them in terms of what i think they are capable of doing. also, the rec and park staff have welcomed management models that the shore all of us that there is greater accountability to staff. president moran: commissioner molokai and. -- commissioner moller caen. commissioner moller caen: perhaps we should continue this item and work on the mou. it does not use -- it does not

seem to be in a completed state right now. perhaps that would be the best approach. >> i would concur. a couple of thoughts also. it did resonate with meet the reminder that lake merced is part of our water supply. and is a -- and is an emergency source of water in san francisco. that is significant. from my environmental lines of climate change, which we know is approaching, and the water issue that we know we will face state wide and locally, i think that is a significant issue to remind ourselves and place it squarely under our responsibility as a water supply system. there was another piece in the comments that i heard that resonated with me. i think that the mou does need

a greater clarification on accountability and who is responsible for what. the harding golf course falls -- feels like a piece that falls under rec and park jurisdiction. beyond that, there could be some subcontracting relationship, subcontracting relationship with the recreational aspects. i do not really know, but it feels like those pieces could be better thought out. for the record, i have similar feelings about the gun club that i do about the quarry. that is out of the puc core competency and is not something we should be involved in. from an environmental

perspective, it is quite devastating, especially in a beautiful area that has already been somewhat compromised, like lake merced, to have begun shooting going on out there. i just want to put that on the record as something that i have concerns with on an ongoing basis. those kind of tenancies. i feel like we are in the business for just economic reasons and not any social or environmental reasons. >> i would also support continuing the item. it seems to me that there are two distinct issues here. on one is whether we should take over recreation and anything else. the other is whenever we set out to do, is this mou appropriately specific and transparent with its financial impact? i think the answer to the second question is no it is not yet.

i think it needs to be approved -- needs to be improved. as for the provisions for park and rec, that is less specific. we do manage a golf course. recon park is not the only people who do that. our approach to that is not necessarily from the objective point to provide recreational opportunities writ it is from a land management standpoint. we have land assets and we want those assets either to protect our watershed and our water supply or to make sure that they are financially productive. we typically do not think about what are the best ways we can provide recreational opportunities to a community area that is not to say that we could not. it does beg the question, if we

take that on, we need to be very clear to ourselves as to how that fits in with everything else we do. what is the protection that the rate-payer has obverses us taking it on for a recreational purpose. if we take that on, what are the balance constraints for how we would position that within our mission. that is new territory. we have not spent a lot of time talking about that. i am hearing a consensus to continue. without objection, we will be able to do that. >> could i ask a question? one suggestion was to have a large for workshop discussion with the entire commission about this. is that of interest? or would you rather have us go back and try to work on this and

bring back a better version. which way do you want to go with it? president moran: what would be your recommendation? i am not sure how this fits in with someone else's schedule and how destructive this is to other things going on and whether or not we need to resolve these issues before the budget is adopted next year. >> from a budget perspective, unless something dramatically different islam to be happening , and even then, if you had a discussion in february or march, we would have plenty of time to fix that, unless you're planning on spending in billions of dollars next year. practically speaking, from a staff point of view, we can talk about making it clearer. right now, it says the sfpuc has ultimate authority, however, we are authorizing rec and park to

be responsible for some portions. if the question is, does the puc believe it should be in charge of the boat house and the activities out of there, that is a larger discussion that we can work on. but it is a policy decision that will not be done by staff. we can bring options and back to you in the morning and you can talk about it or you can do it in a workshop. we do rely on recreation and parks had to do recreation in the city. we do things like golf courses but we do not do things like rowing clubs and those kind of activities. that is a larger policy call that you have to make. president moran: and they are actively -- and there typically ancillary to what we are doing it. perhaps we can do a few things in terms of staff work. one is work on what it would like to tighten that up.

the other is some discussion as to, if we were to take this on, what would it demand of us and what other policy questions would pose? how would we deal with a foreign purpose within our structure and how would the rate-payers be protected? that could come back to us whenever it could come back to us and the commission could review it. it may be very clear from what you come up with what the answer is. >> we can do that. if i could clarify a few statements that the public brought up -- this does -- the mou, has written right now, says any funds earned at the lake merced golf club and would stay with him like merced. everyone agrees with that.

so we would continue to a call of the chair. president moran: without objection, we will do this. thank you very much to the staff to carry it sounds like there is considerable progress on. he is seems like the mission changed somewhere along the line and this is not what you had in mind when you disbanded. i think we need to do this correctly with the benefit of the work. thank you for being here, for your testimony. we look forward to seeing this again. that concludes that item. secretary housh: the next item windy city department electricity rates and charges. future charges for city departments and other public entities.

>> that will be equally fun to discuss. >> good afternoon, assistant general manager and cfo. over the past 12 months, you have had a great deal of deliberations on the san francisco water and power operations. you charge the staff to measure -- to review the measures we need to take to ensure financial sustainability of our operations. the most recent charge you gave us was to come back to you to review what the options might be for rate-setting for city departments, in particular, to move towards the cost-to-service recovery. i have 15 slides to briefly walk through. i would like to frame its -- what this workshop does today is provide you with two options that we believe would make this

financially stable long-term. that being said, we need your input and would like that to help staff perfect what would be the city department municipal rate that we would ask you to deliberate on for adoption in the december meeting. the slides here go through some background information as well for the viewing public. much of it will be a repeat for you so i will go through it quickly. we provide about 1.9 million megawatt hours. in we are having our clean green power on the municipal railway, san francisco general, city hall, and the street lights. the chart on the left shows the delivery of the clean green power. in the case of the water and

power project, the water portion of it is fully recovered from water customers. the power portion of it is recovered through rates charged through city departments as well as other users of our power. you can see that the enterprise department here provides the lion's share of the revenue. those are rates that are equivalent to no more than pg &e's rates. the city has reviewed power rates for city departments for a number of years. slides three and four go through a brief history of some of the things that policymakers have reviewed over the last his 15 years. during those prior deliberations, they're at and policy decisions made that yes, we should move towards cost of service. voters reemphasized that in

proposition e in 2002 when we were told by voters that our rates that we set for essential services and utilities should take into consideration cost of service as part of that measure. in the past, we have begun to ratchet up some city department rates. however, we have not fully implemented prior policy decisions that were passed by the board to move towards total cost of service recovery. this is an opportunity to revisit that rate-setting process. the work that we do is based on cost. there is no profit margin in our electricity rates like there is for pg &e's rates. we are 100% non-profit and provide whatever we can to stretch the dollar as far as we can for our renewable portfolio.

mainly, that is hydroelectricity and we also have pv solar and some purchase power. the costs associated with our power and average about 9 cents per kilowatt hour. by way of comparison, pg &e would charge just about 14 cents per kilowatt hour. i want you to know that we have a very low cost, efficient production here, being cheaper than their rates. that being said, we have had in the past, a history of providing even lower costs to city departments that are general fund supported. that is a policy decision that can be made. financially, that is not sustainable when your costs are higher than the charges that we have.

on average in right now, we would charge general fund for supported departments about 3.7 5 cents per kilowatt hour when our costs are about 8.5-9 cents per kilowatt hour. that provides an implicit or general subsidy, perfectly legal to do so, of about $23 million. how that shakes out across the different departments is on the slide 5. i will walk through the rove for the municipal railway. there have been a general fund supported department. the municipal railway, which runs on our clean green greenhouse gas free power pays us about $4.9 million through 333 megawatt hours.

our cost to provide that power is $11.3 million. for the mta alone, our subsidized power provides a discount of $6 million from what our costs are. if the mta had to secure their power through pg &e, they would be paying $13.1 million. we charge them $4.9 million. they would charge and $13.1 million. because we have such an efficient, low-cost system, our subsidy bursa's cost is $6.6 million for it looking at the bottom of the page, our total subsidization, because our rates now currently set are below cost, it is about $23 million. the goose that lays the golden

is often what i call the hedge hajji -- hetch hetchy local power system. it has served us well for a number of years and we had been able to provide subsidized rates for public service like the municipal railway or general hospital, or even city hall. because our costs now on this aging system require us to invest more in maintenance as well as repair and replacement, that is not sustainable. this chart, which is the chart that you've reviewed as part of your 10-year financial and capital plan, showed that we would run out of money on the power enterprise by 2014-2015 unless we some how dealt with setting rates for municipal

departments closer to what the cost actually were. the dark black line shows if we continued on the status quo, subsidized rates, how we would run out of money over 10 years. the charter requires us, in order to do prudent planning, to show you this and show you what the rate impacts would have to be in a 10-year financial plan, just as voters told us we had to do in 2002. the green line also represents the level of proven reserves that you adopted as a commission that said on average, we know that things could go wrong. we could have a drought, and we could have a hydroelectric generator go off line, and what amount of money do we think we need to have in reserve in our fund balances to be able to bridge those emergencies.

that represents about 15% of revenues, 15% of expenses, just as ms. lee in went through earlier in your quarterly report. this starts with what you adopted as a commission with your 10-year plan. you have stretched your dollars as far as you could based upon the resources we have had. the charter requires that you look 10 years out. the last time you looked 10 years out, we were forced to make difficult choices. we had to admit that in the last part of the 10-year plan, we could not fully fund the city- owned city renewals that we might want to. that was a hard choice. we had to take a $32 million cut. we had to take a cut to go solar of $29 million. and a cut to energy efficiency.

all three are important public our programs that are important to you as a commission and other shareholders. he those are 10-year numbers. the shortfalls on the previous page are only as good as they are because we did make these cuts. we are still running out of money, even when making these cuts. what it told us is that the -- is that they are not enough. it only gave us enough money to get to 2014-2015. we knew we would have to revisit this. in addition, we have also done some deferrals for transmission upgrades. we are still funding of the essential facilities maintenance and the essential rebuilds that would upgrade transmission lines that we have a deferred. the options to bring this back into balance and to look at the restoration of some of those

public our programs that we had to cut or defer on the previous slide are twofold. the first is, if we take the 10- year plan as it is today, with those hard cuts we had to make previously and we assume that is as good as it gets, " with the rate increase have to be on general funds in order to bring hetch hetchy back into balance for this commission and the 10- year financial plan. two pennies over two years would do that. two pennies per kilowatt hour over the next two years and the balances in the 10-year financial plan would cancel out to make sure that we do not go into deficit or shortfall territory.

this would also add, in fiscal year 2014, $4.5 million of additional revenue. and $9.1 million of additional revenue every year thereafter in the 10-year plan. this would also allow you, should you want to say yes to the start of a clean power sf, the community choice aggregation system, it would allow for the availability of $19.5 million of start up money to come for hetch hetchy. it would also satisfied policies to make sure you are minding the hetch hetchy in terms of sufficient democracy. it would require us to go into it would require us to go into the bond market to have capital