>> thank you. commissioners? >> we have a resolution in front of us to approve that program, can i get motion? >> so moved. >> moved and seconded. any discussion? any public comment? all those in favor? opposed? the motion carries. >> item 20. discussion and possible action to approve the terms and conditions and authorize the general manager of the san francisco public utilities commission and/or the director of property to execute a purchase and sale agreement in the amount of $1.3 million and any related documents to facilitate the purchase of a fee interest in that certain to under 59.32 acres of agricultural land identified as assessor's parcel in the county of alameda.

>> we had a little confusion appear, but i think we are straight now. >> and the division manager for natural resources and land management. we somehow neglected to include a map in your agenda packet. we have extra copies here for members of the public. this is the second acquisition we brought to you in the last few months. this is above san antonio reservoir. we hope to wring a few more of these during the course of the year. this is one of those cases where we prefer to have it in fees. the ones coming in the near future will be a mixture but will not involve us in terms of the title or owner. i would be happy to answer any

questions and want to acknowledge -- when i arrived almost six years ago, we did not have the capacity set up to it do this. it has taken a long time to get there but between the services and my staff and the city attorney's office, it has gotten to the point where we are running on all cylinders and are able to respond to all the people responsible for this. i would be happy to answer questions. >> >> the appropriate supervisors have been informed? >> we have been very public about this. >> we have a joint agreement

which the commission approved in the spring where we partner with the district and they are a key partner in our projects and the county keeps a close eye on things like this. >> what about the supervisors? >> i could contact them and i could talk to their staff but i have not talked to them in the last few weeks. >> what is the nature of this project? we are trying to do what we can to protect the watershed where most agencies do not on the land and the watershed. most of the land we own we purchased from the spring valley with everything else that came with it. >> this land will be held in sacrosanct in perpetuity? >> yes. >> that is important to put in doubt.

not many agencies make the effort to go out and protect the environment and land is so important and valuable, so i applaud these efforts? >> thank you very much. we feel the same way. >> commissioners? >> i love these projects. thank you for bringing them before us. >> and do i have a motion? moved and a second it. >> i know this seller, so i want to disclose that i know the seller, so i understand i don't have to recuse myself. >> as long as you can make a decision, a fair decision then that is not required to disclose, but it's a better practice to put it on the record. >> thank you. public comment?

it has been disclosed on the records and the minutes will reflect. >> two. added to the use of the property. that will be consistent with the land management policy which will come in due course. that is a good point that is raised that the legislative affairs gang, whenever there is something in alameda county, should keep them apprised whosever district is, they should know what we are doing out there. >> every county, the supervisors, they matter. mr. ramirez made reference to a larger concept.

is there some intent that i missed a few years back as part of the process? something we are attempting to purchase more property when it becomes available? is there some overall intent there we could make clear this is a piece of? it sounded like that but i was not clear. the guidance is provided a as a policy from the alameda watershed which predates my arrival to the commission and was adopted in 2000. as part of that document, it describes how we manage the land we already own and it also describes our efforts when people approach as to acquire land when it's in our interest to protect it.

what we are doing now is consistent with those documents and any land we would require falls under the guidelines and it is covered by the document. what we did recently is dedicated some bond funds to that and to stand ready when land came to us and proposed sellers came to us. this is a bond-fund project and is implementing the plan plan -- as you have heard me talk about in the past, it because it is the one area that is privately held, there is no older except for us. there is a handful of players and we are working with them. those are the folks that you will see in the coming months when we bring the projects to your attention. >> member collection was $50

million? >> $20 million on the bond fund and then the investment over 10 years and now we are at your 6. >> thank you. any additional public comment? >> commissioners, i want to talk about three separate issues connected in three separate ways. it is always good for us to purchase land to protect our assets. in this case, the right thing was done. it i would suggest believe that area where we have our quarries, we do the same so that the after effects of our quarries do not pollute our rivers. there is a connection there. if you read today's newspaper,

there is an arctic there -- there is an article about a lake in the presidio called mountain lake. the spaniard's first came and that's where they got their water from. today, because actions like what we are discussing today were not taken, that lake, the lake that once sustained people for thousands of years is very polluted. some relief has been made, but once you create a cesspool, it is very difficult to bring it back to the pristine condition it was. it is always a pleasure to see what we own board generations to

come. a vision such as this where we take care of our assets. somehow, at just like some people you have heard, they're going to africa -- i was born in africa, so i am very sensitive to issues like that. i was born in nairobi, kenya and participated in a lot of lot of projects going on with water, etc. we here in california, especially san francisco, we cannot take for granted that week -- we have that hedge apache and we have at calaveras. -- what we have at hetch hetchy.

we are moving in the right direction. thank you very much. >> any additional public comment? we have a resolution in front of us. could i have a motion. >> so moved? -- so moved. >> all those in favor. opposed? the motion carries. let me suggest we take a brief five minute break and we will reconvene under the gavel of commissioner came for the budget hearing.

>> i would like to call to order the continuance of the last meeting for the budget. we don't have to do roll call. mr. general manager questor >> good afternoon, commissioners. we started on january 12 with discussions on water and waste water budget. today, the focus is on hetch hetchy and we would get a combined overview on that and we can talk about the water side and take care of the low countries and other distribution efforts in terms of power.

then, we thought we would go through any outstanding questions or issues from the wages -- the waste water items. we have some talking points for that and that we will go through the bureau's and business services and general managers bureau. the final vote on the february 14 meeting. so we will bring it back on february 14. >> today is a notable day for one reason in particular. this will be the first time

before you as a commission we have a balanced capital plan for hetch hetchy. we have a balanced proposed budget before you for the liberation it can change daily, but as of today, we have a balanced proposal to consider. we have heard a lot with discussions and deliberations over the degradation discussion. we had to balance the fort -- had to balance the shortfall in operating funds by year 10 of the prior year plan. in addition, we were short of meeting your print threshold for reserves required for a -- for

it. having a go decision also required $19.5 million of start up funding. the proposal you see before you includes bridging all of those gaps and solving the $95 million at the bottom. the power rate increase has helped you along with of other policy makers, moving ford, a twopenny increase which resulted in $68 million worth of additional revenues to fund both capital programs, prioritizing mission critical programs which you will hear about more. the power rate also helps balance the operating budget of hetch hetchy water and power and

the power rates allow us to issue low-cost power bonds. that is a new thing to help balance in the $95 million of needs. taking that global look of both the financial plan and the budget applying it to the capital plan you see for the next 10 years, the capital plan started out 63 short and that is solved by power bonds and power rates. the rates that were before you in november and december that allowed us to balance the financial plan -- this is a slide that will look very familiar to you. it brought on revenues of $2.3 billion and an annualizing one fully to $9.1 million thereafter. that allows for the startup of clean power san francisco and allows us to do bond funding, meet our uprooted reserves,

however, it did not give us enough money to do everything so the cuts you had to take and deliberate on are there at reduced levels for energy efficiency and city-amount rate nobles. -- city-owned real goals. it is balanced with relatively minor changes on slide at five. if i could start on the top at $204 million, you funded a great deal of street improvements and that country improvements. our adopted 12-13 budget was $179 million. the changes you will hear about today from our general assistant manager for power and water as well as the person who runs the hetch hetchy is theferc and nerc

costs and then the water transfers. the additional capital investment -- as was the case with the water and sewer, the mayor's office has asked us to come forward with the bundling of the capital because the capital that is before you is very large numbers, to bundle all of the capital and move that in tandem with the operating budget. you will hear both again today as you did for water and sewer. the positions -- you have added a number of positions over the past two years and those are already in the budget. very minor adjustments, a couple of transfers, and you will hear about those later in the presentation. the graphics are very similar. there in your supporting packet which you review each year, as is the capital plan summary which we will talk about later. every component of that capital plan, including that detail

sheet by rampaging through for the viewing audience to reference -- with that, i will turn it over to the water department of upcountry discussion of the proposed budget. >> good afternoon. on the general manager for water. if we could have the slides up. >> this part of the presentation is under hetch hetchy in back of all the large capital sheets. >> to carve out the water piece of this, this is the total budget here, the 11-12 budget with the reduction in capital

projects moving forward into 12- 13 and reclassification, where projects need to be done on the water side or power side. these projects have been assigned in the adopted budget to the water side as opposed to the power side, so our request we're going to take some and send them back the other way to the power side -- that shows the negative side there in the 12-13 proposed. the other two are increases for federal energy regulatory commission proceedings which i will talk about later. funds for the proposed order transfer with modesto irrigation district. 12-13, you see an increase in the programmatic costs and a reclassification between water and power. moving from the water side to the power side.

on the operating positions, the and utilization that was just talked about from the increases we have had over the last two years and a transfer in from infrastructure onto the hetch hetchy side. just to go over what we are talking about, this is the hetch hetchy water and power system. we were talking about the lower and bay area into the system, this starts hetch hetchy on the upper right and comes down all the way to the alameda creek siphons. again, the organizational structure, hetch hetchy water and power, a very large division run by itself and we are able to answer any questions you may have.

again, is a large set of facilities we have. the three reservoirs, small regulated reservoirs, to switch yards and two substations. 160 miles of pipeline and 80 miles of tunnels. 50 miles of road and 170 miles of power transmission lines. every time i go through this lights, i'm struck by how much stuff we have out there. that's the nature of the hetch hetchy business -- keeping this stuff running because it provides the water and electricity that pays for the power side of things. coming to the generation, these are the powerhouses -- kirkwood, fall moccasin, this is where the money is generated for the power side of the operation. it is very essential to the operation over all. priorities for hetch hetchy water and power -- we are connected to the water

improvement program, managing shut down, we just went through a such debt -- the ratio down at the hetch hetchy system and we had to bring it on quite quickly so we could shut it down for harry tracy. turning on and off a large system is key to making it work. integrating those projects into the system is the real challenge on the operations side as well as the engineering side. a big thing on of hetch hetchy site is the federal energy regulation commission side for don pedro -- that is owned by the modesto and turlock centers and we are integral to those and help pay for all lot of the studies that will go into the ferc decision. we have been pushing hard for communication upgrades for compliance regulations that are out there. one of the things we have talked about a couple of times is the

need to modernize our shop and powerhouse facilities to make sure a staff are supported up there and it in a safe and efficient manner. on the regulatory side, on the power facilities, compliance is something that began starting in 2008 but has been growing steadily over time. as you saw in the updated report, we have entered an area where we are now a transmission operator. that is leading to an evaluation of all of the existing things we have to do there and it may mean we have to make some changes coming forward as we start to see what is happening there. again, the regulatory system has been changing on a regular basis and we have to deal with that. we want to limit our exposure to catastrophic events, which has been the essence of what this is all about. again on the water facilities

side, complying with the regulations and making sure we do not have failures that are detrimental to the environment. to get to the budget, specifically, the significant changes on the operating side are four ferc support, this is to support our share of the fishery studies for the new don pedro proceedings which will occur over the next two years and the results of these studies will go into the determination by ferc as to what needs to occur on the river and the licensing for the facilities. that is one specific request. the other is the $1.6 million requested funds that would go toward paying for the post 2 million gallon per day water transfer with modesto irrigation district. that would be an ongoing cost as far as the water reliability component.

those are the two specific changes we would make this year. on the capital side, and we've talked about how to present this. very soon, it is time to pull out your 11 by 17 sheets which is where all of the information lies. this is a very highlight sheet in terms of the slide. could you put the slide back up? there are certain changes here. the first one note is we have a reduction of the pipe line rehabilitation line which is actually line #47 on the capital improvement program sheet. that is a reduction of about $10 million because our assessment of the pipeline has proceeded more slowly than we would have liked because of what we had to do with the constraints we have had to work with so that both cost may be out there in the future. we have not been able to get to

them and say we will accomplish them within the time line. the second set of changes are on line 84 which is actually on the second page pillhead -- second page. hear, when we talked about modifying the capital program to capitalize those programs that are more critical than others, we proceed with the warehouse upgrade. these are critical to taking care of the operation and we are proceeding with a power house control room relocation within the facility. we are deferring the administrative offices and that it would be starting around your number eight of the program and we have deferred this for several e years over the cost of the program. we are acknowledging setting

priorities between these is what comes down other changes -- what comes down. other changes -- we have highlighted those in great where it appears to reduce the budget but in reality, what those numbers are in terms of reductions, they were funded in the first -- the last year we just dropped off of the 10-year. they were funded last year. those pieces of that have been completed. those are part of the highlights. it is not a proposed reduction on our part, we do not need that money any more. >> [unintelligible] >> yes. >> where is that? >> what is a pen stock? >> a pipeline that carries water from a higher elevation. it is where you get the energy

to turn the turbines at the bottom. >> the approved change for $750,000? which line is that? 77? >> that money was appropriated last year. we do not need that money anymore. we think that we may need substantial amounts of money into the future, going forward, into the tens of millions. >> the $60 million? >> yes. >> all right. thank you. >> we need to get you up to moccasin. it is impressive when you see it. going to the next slide, we have one particular change worthy of note. that is in line 8, the line item that was added.