the old days. as you recall, we spent the money first and were repaid over time. with the new contract, wholesale customers share in the contract as we incur them in the first place. there were these stranded assets that had not been fully paid off under the old methodology. at the time we said you could pass all over the next 25 years, which was our cost of funds at the time. if they can go out and sell any amount of that or less, they save money, so it is great for them. if they give us more cash up front, it avoids the large rate increase, which we need to have for coverage -- >> i am just going to leave. >> for $60 million, you would

not need any rate increase. >> there are a variety of things that become much more possible over the next 10 years, if the wholesale customers went ahead and made that kind of payment. there may be a need for sizable rate increases. if we believe that that can happen, it makes a huge difference in that 10-year outlook. >> can they increase the rates? the rate of repayment? >> they can be repaid any time. we want to check to make sure they can do it.

they said that while the rates were good, we should see if we can do this. >> delaying their -- delaying the increase until fiscal 15, does that mean the numbers are not going to be operative in the rate increase? >> if we made that decision to defer the transfer over the next three years, that would mean that the rate increase for retail customers to be lower by that amount. >> by the lagging, does that imply that it could be reconstituted? >> it presumes that it could go forward in a subsequent year. at that point in a subsequent year, a rate increase would be necessary. the idea was to isolate one year, said there would be just the impact in the case of the water transfer, year,

there would be an increase in rates. >> there would be an increase in fiscal 15 in 16? >> pardon me. >> there would be an increase in 15 and 16? >> the decision here would be to not delay water transfer allowing us to shave a couple of percent off. like those are the delays, correct? >> isolating the delays, 1.8% would be the value to the retail customer. >> if they decided to operate these projects in 2016, the increase would be 3.5% on top of that?

>> it would be an increase for when you would want to take delivery for the water. if you want to take delivery starting in 16-17 -- >> the difficulty that we are having is that the delay represents three years' worth of water and three years' worth of savings. it would be three years worth of savings if you did not start in 2015. accumulating 15 years' worth. some of them are discreet. one year, yes no. those of the capital sale repayments, multi-year in nature. just because of the five-year adopted rates. >> these are not recommendations. this is just the value of those types of decisions, if you would like to look at them. >> the delay of the west side

recycle water project, i have been following the press that we have been seeing and the comparative numbers, compared to the other cities and counties in the state. i feel that we need to have more of a lead on the recycle water work. i am not really happy seeing that on the list, especially with the small percentage that we would gain. if there was anything else that we can identify? >> we wanted to show you how little the amount was. people were saying -- if we did not do that, but said a lot of money. because we are borrowing, we would not get a modest set -- a lot of savings. >> then we could take it off the list. >> depending on what happens,,

but we will have property sales. they will at least be reduced by the 2.8%. those are worth about $5 million. >> also on the land use, that is what we know. there might be other opportunities as we get the policy together to say that this is redundant. right? >> one of the things that is an important issue, you never know what you will find out until you see it on the day. i think that it was referred to as a classification creep.

i am curious about what we will find in the record. if possible, would you mind going over the attachments? if you could explain it a little bit better for us? certainly so that the public can get their arms around it. it is easy to see in front of me, but i would like your take on it. >> i will turn to the fifth attachment, e as part of the packet. we put on hear what the cumulative impact was for substitutions. we show that by every enterprise. we also have on the screened for the public what it means in the context for the total budget.

what would be before you is that 34 position substitutions by way of comparison of the 2400 authorized positions that we have my in the sf puc. it is a small percentage of the budget. and even smaller percentage of the financial budget. there are two choices of staff, as we but at operations. sometimes there is a need to change the position classification to make sure it is what it needs to be for job descriptions. this budget does not come to you and ask for new positions, largely. if there are not 2400 authorized positions, the general manager has asked us to rearrange those not as general positions, but to substitute out. you will see by their summaries that while some of those are up,

for example in the waste water department, up slightly, others in hetch hetchy power are slightly down. the water enterprise is slightly down. the second page of attachmente, you have the bureau of infrastructure that shows slight increases. in the context of our nearly a billion dollar budget, you will see it is a small percentage of the budget. nevertheless, 34 positions substituted, as opposed to asking for new ones, and it has a small impact on the line item of the budget. >> if i may, with respect to -- let's go to hetch hetchy. that is where refined -- is that a salary savings? is that correct? >> in that case, it would be a

salary increase of 36 dives in dollars. a positive number here would be a slight increase in cost. a negative number would be savings on the sheet. >> reading it correctly, with respect to that particular chart, the first two classifications listed, the first one is 1842, the second one is 1646. am i to assume that the individual in the 1446 classification has been promoted to an 1832? is that what this chart is showing me? >> no, it is not. it is saying that of our 2300 or so positions, at any one time, about 10% to 12% of those positions are vacant and that really fund but we need for operations in we assume some natural turnover of retirements.

this is saying that operationally, within hetch hetchy water, in that example, there is a proposal to change the funding and authorization from a secretary to a management position. that would be a slight upgrade. that is regardless of the individual, whether or not that position is filled or not failed, currently, by a person. >> with respect to the same chart, those classifications contained in parentheses where the final figure on the column to the right is in red, those positions will no longer be with hetch hetchy water, and instead be substituted by the ones in the black. >> that is right. to the degree that a person is eligible to apply, what they

would be applying for is a slightly higher paid jobs in this case. >> 1.4%, i would rather work with that figure. we are not bringing in any new positions in this budget. at what point do you consider that to be the baseline or what was far below what is acceptable. certainly for the public, are we running amok behind closed doors? or is this really good news that we want to share? it that we are doing things on the up and up? it is very transparent, raised by the public. 1.4, is that really low? >> it is a very small% of the total, reflecting in particular what is before us.

we can provide services to the ratepayer within those means. meaning that we would have to substitute positions at a slightly higher pay. >> i think that it is great that we got that information. i am excited about it. i am excited about what it says about management. so, thank you. >> on that point, what is the management assistant? >> a management assistant -- >> i am sure that it varies from department to department. >> it is someone who can do much of the functions, in addition to some of the basic, basic assistance and analytical work. so, as we become more

sophisticated with online document management, much of our world is becoming more sophisticated and meeting a slightly enhanced skills that. in this case, there are slight enhancements. >> i would like to go back to the 30% increase. >> there are two companions lives to that as well, commissioner. so, the 30% is here as attachments a. if i could highlight the attacould you sharpen it up, a

little bit, commission secretary, foon your side? >> better? >> it is right here. >> there we go. that seems good. so, this is a host of options. no one is an easy choice. but to put this in context of the slides you saw in the liberation, there is not a lot of variable costs in the budget anymore. what we have done, add your request, was to look at the average monthly bill for customers. we have taken what is in your packet, and was during the water budget package, it makes up the average bill for customers. from this we can see that the operating cost is the blue and

is growing very gradually with inflationary costs. it is not that that is driving the rate increases. it is the program service that is coming on line with additional capital investment, with cash, rather than capital investment. and repair replacement and other means. when the water rate increases, we are actually investing and upgrading the system that ratepayers and voters wanted us to do as they approved proposition in 2002. it was a nice enhancement to the financial planning documents. it helps to explain that it is not operating costs run amok.

when you track this chart, every single year, you can see that a lot of the decisions that we make, particularly those related to capital, it means that in any one year a cut to that capital budget does not result in that much savings. commissioner, you highlighted that with your question about the west side recycling project. it is a very small percentage of savings, even if that were delayed into a further budget year. >> with respect to the 30% problem, we do not have, at this point, a plan, really, for reducing that. is that not correct? there are tools and new optionsn

debt. my question is, what should we do as a part of this budget cycle? how should we portray rates looking forward, given that uncertainty. it lacks a great question. february 14, we will be asking you to adopt your 10-year financial plan to show great increases. sitting there, we think we have options for getting rid of something that could cause undue concern.

i would go back and reduce that to a different number and in the footnotes, show the options for how you get there. we would show the options and get there in different ways. >> i am reluctant to change plans until you have one in place. just putting us in wishful thinking is not a good idea. if you do have options that we can actively pursue and are worthy of a robust footnote, and where we can do something more explicit, where there is less uncertainty, that is the number to go with. that will be coming back to us on the 14th. >> right. >> why can any of these be appropriated now in future thinking?

reducing that? >> there are some that create property sales. identifying surplus property makes sense. we know that that transaction will close before june, 2014. some of them, they are really predicated upon the decisions, whether you say yes or no. it is not a decision that is made without you making that decision. the other one is increasing it to 15 miles of replacement. even though the numbers are small, that is an area where we look to the commission to say -- is that palatable? do we need that investment?

should they continue through the supply assurances? >> with that particular one, you have to show how many miles we can do. >> part of it is -- what is the target? you would not want an increase of more than 15%. for example, that was the higher end of what was done in the past. to get that, other than the property sale, if we do not have repayments from wholesale customers, the next place that you get real cuts is cutting the operating budget. my concern is i would hate to go ahead and look at cutting positions if we think that the option is going to ultimately happen and be a better option, so that we can show what the effect would be. to have a $5 million cut in the department, that could save 8%.

property sales would take you under 20. that starts to talk about layoffs, if you could implement that. i would want to work on something else, is the point. i would like to work on that transfer. actually cutting the budget, there could be a whole other set of implications out there in the world. you do not want that. >> if we keep it where it is now, it will show that 30%. >> again, it is a plan. it assumes a variety of things. it could assume payment from wholesale customers. if we disclose that, that is possible to do. there are a variety of things in this plan that involves spending money on capital that we do not know if they will happen or not.

you have seen work on the pipeline dropping by $10 million because when we started we realized that they could not drop as fast. plans changed. we are still trying to figure out how, but i would like to show that we are going to do something to get it down and list what those things might be without causing all of the pain of the most drastic in the operating budget. you have to decide if that is good enough, i guess. >> the tough thing about the repayments from wholesale customers is that that is a decision that we do not get to make. in other areas, i am more comfortable projecting that this is what we will plan to do. that is one where we do not have control. absent a single out -- signal --

>> after the thursday meeting, the immediate reaction was -- how fast can you do it? the question there is, we want to make sure. but we have two years. if they can make this payment, they have three years to make it happen. the real issue is, can we do it fast enough when the market is as good as it is? clearly, the boston board made it happen as fast as it could happen. it is not under our control and it is not done, but yes. >> i guess that my question on that would be, given that the intent was to enable every payment, and i think we can, if there would be anything about us

putting a particular number in the budget that would make it more difficult >> i do not think so. they will have the option of deciding just how much they want to pay -- more difficult. >> i do not think so. they will have the option of deciding just how much they want to pay. sorry, i did not realize you were still back there. [laughter] >> art jensen -- >> i was trying to put words in your mouth. >> it is all right. we would certainly want to move ahead. we have been studying this aggressively. if i could give you a number today, more importantly it i am sure the would like the certainty. i do not think anything that you put in your budget documents

would have an adverse impact, going forward. if anything, it might have a positive impact, showing a willingness on the part of the city to deal. speculatively, that is helpful. >> thank you. there were two other attachments said you see them as part of your total deliberations. the fee was the same breakdown in the sioux were built. very flat operating costs. the $13 million that we spend for chemicals. part of the public comment for

capital projects. this is just the first step in taking into consideration the costs and the additional impacts. so, that includes the question and answer follow up. we will do the same for whatever questions you had today for hetch hetchy water bureau. >> one question i had at the last meeting was the facilities renewal program. i was able, and staff helped me to look at some of the facilities that were subject to that plan, and i concluded from that that first of all, there is

not, in the current version of that plan, anything that could be construed as gold plating. i think that there is a real range of need. that there are some facilities that are most notably in pretty bad shape. the same facilities had three very new buildings that improved shop conditions out there. my take away is that that is all work that needs to happen. but that there is a lot of discretion as to how we spend that time. as long as we address those issues in a timely way, nothing forces us to do it. if we need relief, we can take relief in that year and it can be already funded and they will

be all ready to continue with improvements. from my perspective, it was good. the emphasis on the shop and the needs that are being addressed our real needs. >> any other comments? >> i would suggest that we all review these to make sure that everything has been answered to satisfaction. >> homework? >> commissioners, if you do not have additional questions on this, of we were going to go into the bureau's, if that works for you. the first is general services, then manager, and then public comment. >> public comment. >> thanks. i will get to my script in a moment. let me start with