chairperson chu: good morning, and welcome to the regular meeting of the budget and finance committee. i'm joined by supervisor: shortly and -- i'm joined by supervisor kim and supervisor wiener and supervisor avalos. supervisor cohen will be joining shortly. >> please silence all electronic

devices. documents should be submitted to the clerk. item two will be withdrawn from its risers' agenda unless otherwise stated. >> chairperson chu: will you cal item one, two, three. >> item number one, proposed budget and an annual appropriation ordinance for selected departments, as of may 1st, 2012, fiscal years ending june 30th, 2013 and june 30th, 2014. item number two, proposed annual salary ordinance for selected departments, fiscal years ending june 30th, 2013 and june 30th, 2014. item number 3, proposition "j"

contract/certification of specified contracted-out services previously approved for enterprise departments. irresolution concurring with the comptroller certification that services previously approved can be performed by private contractor for a lower cost than similar work. item -- aye. -- chairperson chu: would you also call item number four? >> item number four, operating $587,756,000 for waste-water capital improvements at the public utilities commission for fiscal years 2012-13 and fiscal year 2013-14.

item number 5, ordinance appropriating $171,001,000 for proceeds for water revenue and income from the public utilities commission for the capital improvement program. item number six, appropriating $141,171,000 for hetch hetchy water and power capital improvements for the public utilities capital improvement program. item number seven, and water revenue bond issuance and sale not to exceed 163 million four hundred thousand dollars approving the issuance and sale of water revenue bonds by the san -- the county and city of san francisco. item number 8, power revenue bond issuance and sale in the

amount not to exceed $12,300,000 for capital projects benefiting the sfpuc enterprise. item number 9, an ordinance for wastewater revenue bond issuance and sale not to exceed 520 two million $810,000. item number 10, reserve funds for the public utilities commission in the total amount of $20 million to fund the electric reliability payments. item number 11, the lease of property at 1455 market street. >> thank you for calling -- chairperson chu: thank you for calling all the items on the agenda. i imagine we will cover these items as we go on in the presentation, so i wanted to make sure that we call them the

first item, this is a continuation of discussion around the budget. why don't we begin with ed harrington with the public utilities commission? >> good morning, supervisors. thank you for having us here today. ed harrington of the san francisco public utilities commission. the items before you today are 1310 of the items on your calendar relating to the -- are items one through 10 of the items on your calendar relating to the sfpuc. the big story at the puc is that we have put forward a five-year rate package three years ago. we have two years left. we have not had as much water falling from the sky and as much water sales in the last year or two, so our revenues are down, but we wanted to stay true to our great package, so we have left those rates in place.

in general, you will see a total budget that is lower the first year and somewhat higher the second year, but its capital and operating. the real story is infrastructure. the other story is that we will be spending a lot of money, even if it is somewhat less than the current year. you can do it right or you can do it wrong. we have been trying to do it right with things like global jobs, benefits, language access and those kinds of things. i also wanted to start off by saying that we are in agreement with mr. rose on his proposed cuts for today. i especially want to thank its staff -- his staff for all the work they did on this budget, and obviously, mr. rose himself, and the budget director from the comptroller's office. very, very helpful. we have had the same person

working in charge of our budget for 31 years now, alex sokobo. [applause] the interactions between our agencies simply would not work without alex. along with that senior staff, i wanted to know that a lot of the work is done by carlos. with that, we are trying to maintain ratepayer affordability, and because of that, you will see very little change in the total budget spending. we're also doing low-cost bond financing. we issued $7 million worth of debt on tuesday morning and we got about a four 0.7% rate -- 4.7% rate on that. we also received for the first time some bonds for hetch

hetchy power, and that is because of the discussions from last year over the ability of having -- ability to have a stable revenue source for hetch hetchy. to put it into perspective, this building, city hall, this next year will pay as $27,000 for power. in the early part of the year for the first quarter, our budget for hetchy is off by $11 million. and that is because it did not rain as much as it normally does. we did not have as much water to create power. we did not sell as much power and we had to buy some. and the volatility of nature creates a swing of as much as $11 million in just one year. the stability of their rates will be very important as we move forward. major capital investments -- and you will see ease again. and the bond issue is there. also, the supplementals that are for you.

>> we have about 20 major projects under construction right now about $2.5 billion for the first tunnel under the bay and then a new tunnel over in the hills of the east bay. a lot of work is going on out there. it is dramatic and we are still on target to finish those projects, virtually all of them in the next couple of years, the last one by 2016. on power, you will see in the budget that we have put in additional money for street lights. fort -- part of the street light money is for van ness, but the additional amounts are for the hearing this week and we have added money into the budget to accommodate those kinds of requests, such as street lights. you will see money in there for

that and other system of grades -- systems upgrade at the puc. we're working to make sure that our power production is stable and meets all of the requirements of the federal government to make sure that we do not bring the western grid of the power grid in the united states by something we do. a lot of what we will do will be equipment for staff training. and other items related to power that you will not see here, i know we have been talking a lot about community choice aggregation. there is an item that could be pending at a hearing in july that could include money set aside for the budget. it really is for a separate item that will be coming year.

-- coming here. on some work, that is the biggest thing coming up. there was a lot of conversation about having a sewer rebuild and a water system rebuild. as the water system rebuilt, the sources to rebuild and got more expensive and pushed aside. in addition, we are having flooding in different parts of the city, certainly, fulsome and 17th street have had flooding. there have been climate changes and will be talking about a new sewer system program. we are doing one major project on the eastern side of san francisco. the big money will be with the

commission tried to figure out what the appropriate size is of the program, what we can be prepared to pay for that program. do we stretched it out, drop things off of it? but how can we control flooding and deal with the major issues our plants in san francisco? in both cases, you will see large increases on the money we spend on local maine -- local increases. we have changed out three to four miles per year of sewer and water mains. we are now at about 6 mi. per year. you will see in the budget for 2015 we hope to get to 15 mi. per year. because without that, we will have continuous street disruptions as we have mains break. you'll notice the budget is pretty flat. is actually down in the first year, up in the second year, with the total budget -- and it is really capital.

the positions are basically flat. there have been some positions moved over from our infrastructure group into our operations group because now that we have finished a lot of the construction we have got to do the environmental litigation on those. there are a couple that we changed out and added a position and reduced salary and those kinds of things. but those are basically flat. over the next two years, 80% of what we're talking about is capital. personal items are just enough to make sure that we are paying for any increases in what was used and in the labor negotiated. the capital supplemental, and you will notice a large amount for water. it is not that much related to the water system improvement program, since that is mostly funded. it is also not related to the water supply system. that is part of the general fund that is the general fund bond that is paying for the water system that the department uses for the water supply.

the big money that you see in water there is to a large degree stepping up the manual replacement, plus some other projects. waste water, similarly, you will notice that it is going up almost $600 million for waste water, and nearly half of that is the seed money for the large infrastructure projects on the sewer system improvement program. and the hetch hetchy is mostly country maintenance work and redoing of power for that, plus the in-the power for street lights and things like that. -- d inthe in-cotyity program. the seas are rising and we are getng