the issue in terms of the rate change. >> when will we know that? ç>> the conversations with the wholesale customers there, financial advisor, as well as our folks and our bond counsels is just beginning. so we will keep you posted on how those conversations go. the model is assuming a $50 million repayment, but more than likely, the repayment would be the entire amount that they owe us, frankly. the wholesale contract charges and interest rate of a little over 5%, so their incentive is to get that interest rate down and to pay less. that can i ask a question? i know we had talked at one of our budget hearings about this big rate increase and the different ways to mitigate that. are you saying that this will do

the full length of mitigating that huge rate increase we were talking about? because it was like a whole menu of options. >> right. there still will be many options. the nice thing about long-term planning is there is time between now and then to consider additional options. these are two of the larger ones, and assuming they will forward, we have included those in our modeling. we will continue to look for other solutions as well. >> not to confuse things, but this is the 10-year projection looking out, and you are required to adopt a financial plan each and every year, and that is why we were looking at the structural fix. you also have your operating budget or your capital budget on the agenda today to adopt, and those are two-year budgets. the 30-year rate increase was beyond those two-year budgets. we still have time to look at what we are assuming in our financial plan and may be finding it as we develop conservation with our wholesale customers or water preservation change or things of that nature.

this is the projecting out into the future. >> if i could add one thing, the charter requires us to do an independent rate study on all of our utility services. we will begin the next rate steady to inform that rate cycle for fiscal 2015 starting at the beginning of calendar 2013. that will be a fairly extensive look at our service and what is the cost to deliver water and sewer to our customers. we will combat to this body to present to you those findings and recommended the changes. >> in the interest of time -- >> yes, quickly, the next slide and showing is the changes on the wholesale side. as on the retail side, the projected rate change has declined also, the projected rate change for 2013 has come down since we last shared with you, due to the improving water delivery story. we're estimating the rate change for fiscal 2013 at the and around 10%, and you will see that in the 2012-2013 colorado

-- colorado -- column. on the wastewater side, similar assumptions. it includes a corporate financing for the capital plan, beginning financing for the sewer system improvement program, etc. similar growth assumptions for inflation as well as debt cost myriad the rate change here is similar to what we showed you before. again, rates are approved through fiscal 2014. no rate change is currently expected in the fiscal 2015 year, and again, that is mainly offset the rate change we are expecting on the water side. this combined bill -- i know this body is very interested in seeing what this looks like. again, this has been revised. it represents the big change for

both water and sewer combined together. if you look at the column that has the big red checked above it, that is the combined rate change. you will see that again the yellow shaded area is the approved rates. those have not changed since we approve them, but beginning in fiscal 15, we are looking at a combined rate change for water and sewer of about 6.5%. again, you will see the subsequent years. we wanted to show 20 years, actually, because some of the questions we receive from you was what it looks like beyond the 10-year story, so we wanted to show 20 years. you will see water, actually, the rate change trails quite a bit, but on the suicide, we will have a number of years of rate change as well. this is the same idea, but just in the dollar format. on hetch hetchy -- commissioner moran: before you

go on, slide 20, there's a footnote that i just want to point out. this is the affordability draft? it is based on an average san francisco household income of $70,000 inflated by 3% annually. our challenge between now and the next time we deal with a budget includes recognizing that there are a lot of people in the city that do not burn $7,000, and there's a lot of them that their income is not keeping up with inflation either. while this may be a good measure of affordability in general, we still have equity issues we need to deal with as we go forward. >> our third enterprise, again very similar assumptions. i want to let you know we are very proud to bring this balanced plan to you for your review. it is the first time we have been able to bring forward a balanced longer-term plan for this enterprise. major changes from the prior

year include some power bond funding. it includes additional revenues related to increases on general fund departments for power provision, and it represents a balanced and reasonable capital plan as well, so we are very proud of that. a lot of detail members as well. and there are the rates. with that, i will be happy to take any questions on the 10- year plan and then pass this off to my colleague on the budget. commissioner moran: on the 10- year plan, any questions or comments? i can tell that commissioner caen is about to have one. [laughter] commissioner caen: no, i'm not. commissioner moran: i would just like to make a comment. during the meetings we have had on the budget and the prior year's budget considerations, there has been a real focus on

what these rate issues were. the discussion that started this commission that led to an increase in the hetch hetchy rates to general fund apartment, which allows you to come forward with a balanced plan for the enterprise. we think it is reasonable not to be projecting 30% rate increases the next time will come before this commission and the board. that reflects a lot of good work and good thought. by all of you. by staff, by bawsca, as well as this commission. this is a plan that as a whole lot better in my view than where we started, and i think it reflects the good work of everybody that was embroiled in doing that. ok, now, this is something that we have to adopt? ok. i have a motion. do i have a second? >> second. commissioner moran: and i had a

secondary discussion from the commission? public comment? >> thank you. just two items. yes, there has been great staff work on this in the last month and the last year and past years. two things that bother me a bit. on slide three, the water enterprise 10-year financial plan, if i'm reading this correctly, the fund balance, three lines up from the bottom, fund balance our operating expense in the year gets to a low of 2.2%. that troubles me in terms of just coverage. i see the other numbers. i hope that is not a typo, but i'm reading this above at 26.1 million projected beginning operating fund balance. that just seems low and troublingly low.

perhaps we could get some comment on that and maybe i missed it in the discussion -- what was the 30% projection drop down to 15%. what were the changes that resulted in that? did that impair or impact the our and our program -- the r&r program? and what got pulled to make that work? commissioner moran: that was covered. there were two big items. one was the projection of discussion, the -- of consumption, and the second was the possibility -- and making the assumption. ok. >> ok, on the first? >> regarding question of fiscal 15, yes, the overall ending fund balance, you will see a number there. $4.7 million. that is low. however, we do still abide by our coverage requirements.

coverage in short means you have enough funds in order to pay your debt service to your bond holders. you will see the coverage number in that particular year is 1.45. that simply means 1.25 is our minimum, and we are at 1.45, so there is still enough revenue coming in to meet our bond covenants, so we are still abiding by our reserve policy. it is a load fund balance number, to be sure. but we do still abide by our reserve requirements. commissioner moran: and one that we do not project staying at. >> that is correct. commissioner moran: thank you. we have a motion and a second. we have heard public comment. all those in favor? >> aye. commissioner moran: opposed? the motion carries. call items 14 and 15.

>> public hearing to consider the adoption of the two-year annual operating and programmatic budgets for the enterprises and bureaus of the jurisdiction of the san francisco public utilities commission and item 15, public hearing to consider possible action to adopt the two-year capital budget and 10-year capital plan for fiscal year 2012-2013 to fiscal year 2021- 2022, authorized a request a supplemental appropriation for the enterprises of the san francisco public utilities commission for fiscal year 2012-2013 and fiscal year 2013- 2014 and authorized and directed general manager to submit to the board proposed ordinances operas in the issuance of not to exceed $163,400,000 aggregate and civil amount of water revenue bonds and $492,810,000 aggregate principal amount of

waste water revenue bonds under the terms of proposition e and to the wheel, the issuance of not to exceed $12,300,000 aggregate principal amount of power revenue bonds subject to the terms of charter section 9.107 (8). commissioner moran: thank you, and if he could focus on the changes since the last and the commission looked at this budget. >> good afternoon. i'm here to provide a macro view of the budget. this slide shows that from fiscal year 2011-2012 adopted budget to the fiscal year 2013- 2014 budget, the proposed budget is up $393 million, but primarily for capital and facilities costs with only a small sliver of $19 million or 5% for operating costs. the operating budget rose from

$657 million to $728 million. the growth is accounted by capital debt service, $11 million increase in personnel costs, explained by the employee furlough restoration, health and retirement cost increases, and physician and utilization. 4% for general users and $5 million or 7%, for all other costs, which include the transfers to hetch hetchy water to fund the capital project chemical costs, contract increases, and purchase of power. on the programmatic projects, the $15 million increase is explained by the $13 million of the loading date capital lease cost, and $2 million of the regulatory compliance costs. the next slide is a recap of the key dollar amounts and% changes between the adopted and proposed

budget with capital and programmatic cost accounting for the majority of the increases. on the full time positions, the position counts if kept flat with positions, substitutions, and reassignments. on the sources of funds, only the debt proceeds, as you can see, mark here on the graph, that is going up. everything else stays flat. with the uses of funds, the capital project costs, and the debt service are increasing while, again, other uses remain very flat. the last slide highlights some of the fiscal impact of major projects, ending on the high note that the infrastructure and free enterprise is managed to have no new positions added in

the new budget and struggling with the position substitutions and reassignments. at this time, i would like to also mention that the proposed operating and capital budgets are developed with consideration of the rates compliance and sufficiency, and the rates policy is being proposed in the next item on the agenda. are there any questions that i can answer? >> thank you. just one comment. this is unlike, i think, any budget presentation we have seen before in response to commissioner torres' request that we roll out to the entire puc instead of just looking at enterprise by enterprise. any questions? and i had a motion and i have a

second. public comment? >> i support the staff recommendation. good work by everybody. carlos, charles, francis, todd, wherever he is. thank you. commissioner moran: wherever he may be. >> he was reduced in the budget. [laughter] commissioner moran: ok, any other public comment? all those in favor? >> aye. commissioner moran: opposed? \ the budget is adopted. >> that was for items 14 and 15 combined. >> yes, because they were calso. >> yes.

>> thank you. espanola jackson. i talked with staff because i want to know how you operate dealing with the budget, and especially for the southeast facility, commission. i do know there is a budget, but i have never been a prize to how it gets to be. i am submitting to you because i'm understanding that some of this is already in the budget for the southeast. here, sweetheart. i will read this off. i put in that what has -- with the need is is not all of the need for bayview hunters point, but we could start there with some outreach workers. maybe i can get a better understanding on how this budget is going to work, but i would like for you to add a little bit more money in for the southeast

facility because it is very important. because there has been a lot of changes, and there are still some changes to come, and, like the mother hen of the college, i want to make sure that everything works out. thank you very much. commissioner moran: thank you, and there are ongoing discussions about programming that space and changes that need to be made. ok, thank you. mr. secretary, if you would call item 17. >> item 17, rates policy. public hearing to consider possible action to adopt the proposed san francisco public utilities commission rates policy. commissioner moran: commissioners, this is something we have talked about a couple of times. it was before us in i think exactly the same form a couple of meetings ago. this is really a perspective policy. it will apply to the next time we do this, which will be in two

years. so we have time to see how it fits and if we change direction, we can do that. i think there is value in setting that direction today. one thing i would ask staff to do is kind of reflect on if we were looking at the budget we just adopted, through the lens of that policy, how would we have done? >> mr. president, actually, we did ask that question. we looked at the proposed policy. we look at our proposed budget, and looking through the lens, we think that the policy -- the budget reflects the policy. we are going to have to refine a little bit more as we go forward, but i think it does reflect the thinking that you have in january, the discussion that we had, and the revisions we have made to the rates policy. as we carry it forward, even as we do the wholesale rates and such every year, we will be

reflecting on that policy, using that policy, and using that lens. commissioner moran: i think some of the -- the two areas that i think we can look at in the current year is sufficiency and compliance, and that has to do with -- have we put money behind it things that we have said are important to us? in some cases, the answer has to be in part. for the environmental justice policy and some other policies, we are developing a sense of direction. we have money in the budget that is starting that process. undoubtedly as we go, we will want to adjust those allocations. it is not an all or nothing kind of determination. it is not -- have we completely done everything we want to do ever? but we accept that we are making progress. what i was hoping as we make additional discussions is that

we could have a discussion not only in the context of the financial plan but also whether the things we have said are important, how does the budget reflect those values, and to what degree are we proposing to meet that or not? that is the intent of this. we have seen it before. i have a motion and a second. thank you. all those in favor? >> excuse me. commissioner moran: sari, public comment. >> this also is absolutely ready for prime time. i think it got better with additional public review and one to thank everyone for their work on it. commissioner moran: thank you. all those in favor? >> aye. commissioner moran: opposed. >> motion carries. thank you.

>> item 18, motion to color -- calendar public hearing on may 8, 2012, to consider the adoption of wholesale water contract rates for fiscal year 2012-2013, effective july 1, 2012. commissioner moran: this is a motion to set a date for hearing. can i get a motion? >> so move. commissioner moran: and i have a second. thank you. is there any public comment? thank you. all those in favor? >> aye. commissioner moran: opposed? the motion carries and the hearing will be set. >> the next item is our closed session. if you would call for any public comment on any of the closed session items at this time and then entertain a motion to invoke the attorney-client privilege. commissioner moran: do we have public comment on the items in closed session? seeing none, do i have a motion whether to assert attorney- client privilege? move to assert and second.

any comments? all those in favor? opposed? the motion carries. >> if you will give me a moment to read the items, we will then go into closed session. conference with legal counsel existing litigation with defendant. 22, conference with legal counsel, existing litigation as defendant. 23, conference with legal counsel, real estate negotiation. concerning parcel 65, calaveras road. we can now commissioner moran: ok, we are

back in open session. the commission approved settlements on items 21 and 22. no action was taken on item 23. can i have a motion with it to disclose? >> move not to disclose. >> second. commissioner moran: discussion? all those in favor? >> aye. commissioner moran: motion carries. other new business? no other new business. this meeting stands adjourned at 4:00.

>> sanrio famous for the designs for hello kitty. i thought i would try to make it as cute as possible. that way people might want to read the stories. then people might be open to learn about the deities and the culture. ♪ they reached out to make about five or six years ago because of the book published. they appreciated that my work was clearly driven from my

research and investigation. after i contributed my artwork, the museum was really beside themselves. they really took to it. the museum reached out to me to see if i would be interested in my own space inside the museum. i tell them that would be a dream come true. it is the classical, beautiful indian mythology through the lens of modern design and illustration and storytelling. they're all of these great sketch as i did for the maharajah exhibition. i get a lot of feedback on my artwork and books. they complement. they say how original the work is. i am the first person to say that this is so derived from all of this great artwork and storytelling of the past. the research i put into all of my books and work is a product

of how we do things that a-- at pixar. sometimes you will see him depicted monkey-like or as superman. i wanted to honor his monkey coloring. i decided to paint him white with a darker face. it is nice to breathe new life into it in a way that is reverent and honors the past but also lets them breathe and have fun. it is almost a european notion to bring these symbols and icons from southeast asia. they decorate their deities. it was a god they interacted

with every day in a human way. the most important thing has been to create work that is appealing to me. i want to see vishnu to pick did in a modern way. it dawned on me by reinterpreting the deities in a way that is modern and reverent to the history, i am building a bridge for young and old audiences to make friends with the culture and these icons to learn their stories. ♪