directive to the waste water team and staff to make sure we are taking care of what needs to be done, the soonest, the most critical. the age of the system, a lot of it is 85 for 90 years old and the technology we have for treatment plants which are very large and they are at the need where over the next 10 years, but they are going to need a significant investment because they are nearing their useful life. it is incumbent upon us to make sure we right size it and time it and that is going to come out of our summer workshops with the commission and infrastructure team there is a lot more you are going to hear about this. supervisor chu: with regard to

financing instruments, we have tended to borrow in 30 year terms. those are going to last us much longer than that. is it typical to borrow for a longer time or does the market not afford that kind of term? >> there are two parts to that answer. if we were able to go out further, the longest we could go out is 40 years. whenever we can come we try to go out for years the easily the assets will last twice that long. in the case of the state revolving loan funds, they are only allowing borrowing up to 20 years, so we're working with their team to say here would be some useful changes if the state government wants to do something in public finance, it would be to link in those terms to more of a matching useful life. we will go out as long as we can.

we are typically issuing fixed- year debt so that we can refinance them to a degree that would offer savings in a future year. we have taken the opportunity to do that whenever it would save ratepayers money. but this is not just something we state. every utility in the country has this same issue. supervisor avalos: i know we have to build the source system and keep that moving, but do we see any real savings if we demand a strong recycling program? is that going to help to alleviate some of these costs? >> we are considering that in our low impact development, whether for rain water retention are swells, it helps us for temporary diversions so that

much doesn't go down the pipe into the treatment plant and perhaps additional harvesting. we are doing that and that is part of what is before you today. if i may touch on that, with this question as well as the other question -- the average illustrations look like a very large growth. they are in today's dollars terms, if i could turn your attention to slide at 35, inflation happens regardless of whether we do this investment over the next 20 years. what we have done to provide context to this is pushed the average bill in terms of what it would mean as a% of average household income. this is something that epa looks at when they do affordability in different communities and

typically we see 3% inflation in the economy in the u.s.. at 3% inflation, everything doubles. someone making $10,000 today, if they got a 3% raise, it would be $20,000. while it would be higher than 3%, it does level off. we know our customers are not at the average, so we have programs like the low-income programs that help. >> this chart shows the percentage of that sewer and eat -- to water and sewer. you are assuming it is growing by 3%. that may or may not be true. >> that is correct. in some years, and has actually grown more. not necessarily for everybody

but the average has been greater. >> if you can turn to slide 36, luckily we are starting off at a point that is already one of the medium-range bills at average family budget. you can see where we would significantly be over the next 10 years, we would projected to be less than the average bill. we have a very good system. it is cost-effective but it is old. luckily, we are starting off with what is a lower initial bill which will help our customers. >> thank you. supervisor avalos: i know we have a rebate program for buying devices that use less water.

do we have anything being planned -- and mentioned recycled water, but for tap going into our trains and stuff like that. >> we have a variety of different programs. >> on the general manager for water. we do have a variety of programs. when we are looking at this is a pilot program that we are moving into individual homes with gray water usage. we give large landscape grants to promote efficient irrigation. we are looking at ways to promote new developments > of 40,000 feet and how they can actually look at plumbing gray

water into their facilities. >> and for existing households, we have a program as well? >> yes. we are taking water from laundry out to the art for irrigation purposes. supervisor avalos: thank you. >> the history of most base -- most waste water programs as they wait until they have an epa violation and then they can blame the federal government for having to borrow money and going out to have to fix their systems as opposed to polluting the waterways. we have been trying to do it the right way and making sure we take care of the bay and the oceans and neighborhoods that we impact. because of that, the epa has not been on our case. the largest program right now is a philadelphia.

as we look at it, we need to figure out what's right for our people and what's right for the environment and what we need to do to make sure we stay within the regulations of the united states. what i would suggest when you ask about how the reserve money and stay involved in these discussions, we would like to have discussions a lot this summer and may i suggest what you might want to do is the money going into waste water is about half a billion dollars. the second portion is to under $55 million. if you wanted to reserve that, we could continue to do work next year and come back this fall and talk about where does the larger picture and what is the next 10 or 20 years look like?

>> -- supervisor chu: i think that is something we can consider. we don't want to stop the project moving ford because we want to move forward but we are asking our residents to shoulder a lot and asking them to see utility bills go up and pay additional money in sales tax measures and a more and parcel taxes. there are a lot of active costs that an individual household will be facing. it is incumbent upon us to make sure we're doing our due diligence, but to make sure the sewer system is working and just being cognizant of the financial impact they may have. >> i am very much in agreement with that. supervisor chu: perhaps if i

could follow offline with regards to individual rate impact on a number of these because we have a number of other departments and issues before us up and i do want to move through it. i know that we have public comment, so we can take action on the budget analysts revise reductions. harvey articulated they are not exactly the same as what is in the report. can we tentatively take that pending public comment? we will do that without objection. supervisor avalos: i did have a couple of other questions and they are really high level and slightly touched upon during the presentation. in particular, how what does the budget reflects the goals of the projects in san francisco?

the next is on urban agriculture and what way the department is moving into that. there also questions about the transfer agreement between the puc and the modesto district as well. >> we originally started the program with about $5 million and net dropped to $3 million. the budget shows $2 million a year for the next few years. we have been cutting everything, including energy efficiency programs and this reflects the lack of money in the budget because we need to make sure the infrastructure has to be kept up to speed and we just don't have that much money. in this current year, we were doing well until the middle of the year and there were folks who figured out a great way to have a small solar program with our subsidy. it became a free installation.

it was not deleveraging we were hoping to get. we have been talking about how to stretch the $2 million as much as we can by making sure we are leveraging the money appropriately and having it available for all parts of the community. you may hear from others that whatever we can do during the next year to figure out how to leverage it to make sure the program continues to grow. what you have now is we have dropped energy efficiency. we hope to make sure it is a productive program with whatever amount of money we have. on urban agriculture, i think there are opportunities to stretch dollars and there is discussion for the housing trust fund and i have been advocating

for that for distressed homeowners and i see that geared toward a lot of households where we have single-family homes that could combine and be able to stretch our dollars and it served a more diverse economic community. >> when we can leverage the money to make something happen, that's the best use of our money. on urban agriculture, we have selected two pilot projects. we are working with the school district to make it an education program. they have given us estimates about how much it might cost to make that happen. we are looking at a project and have been getting different ideas where we are trying to

collect all of those thoughts into one place and make sure we don't have all these pilots wandering the streets. we want to make sure they are comfortable with how we are doing it in terms of how the water is being used. we expect to be expanding that in the next year or two. >> to talk about looking at parks in the district and 11 area? lots of parts that could be activated in ways that could be beneficial in making sure we actually have economic activity where is happening. the last item was the modesto irrigation district transfer. when we did the impact report, we said we would be short about 2 million gallons a day over the

next 50 to 100 years. the discussion was that every year is different. you never get one year that is average, but that is over the length of the entire project. how do you have enough water to never make customers ration more than 20%? we came up with that number because when you have that, you really have economic hardship. we came up with the number and since then, working with fish and game and others, we have had to agree to let more water out of both crystal springs at them and alameda creek to the tune of about 9 million gallons more a day.

the water we thought we had we will now have less of because 3.5 million gallons a day will be going down the creek. we had been looking to try to figure out how to get the $2 million and we are now short the additional nine or 12 million gallons a day. it's not a problem when there is lots of rain but it is a problem when you have for years of drought. we have been talking to the modesto irrigation district. modesto and turlock take about half the water of the river. san francisco's share is about 15%. we are a much lower user of the water. it allows us to take more in good years.

we can't just take it all the time, we have to take it when there is excess. if we paid them to do things that would use water better and save water over time, what day be able to give us some of the water they were able to save? there are always concerns about water and when they see so much of their livelihood is based on the need for water. on the other hand, if you look at water issues in california, you need to figure out ways of having large urban areas willing to pay for water work with agricultural areas that don't have that much money so they can use water better this is a great

pilot to do that. it is an insurance policy. in most years, we would not use the water. when we did the program, we talked about the usage. many people point out we are not using that today. when we talk about things in that the water world, we are looking at the next 50 years, the next 100 years. if we're going to continue to serve customers, we need to always be looking forward. we are contractually obligated to have 255 million gallons a day. we cannot meet those obligations without looking for other ways to get water. to give you an idea of what it is worth, we are willing to pay

modesto about $700 per acre foot of water. the currently charge their farmers about $10 an acre foot. doing things like the recycling project is upward of $4,000 an acre foot. it is incredibly important to have access to different ways of having water that are relatively reasonably priced where they are incredibly prices for agricultural districts that allow them to be the kinds of things to upgrade their use of water. >> and this will be finalized by? >> it was supposed to be in front of them, but they have been having a lot of questions in the valley and have postponed their discussions. >> in our budget deliberations today, how does that discussion

reflect what we're doing? >> your budget includes the amount of money we would pay, about $1.6 million for the first to thousand acre feet. the larger discussion we want to have is an additional 23,000 feet that would require a major environmental report. first one was covered in the report for the water system improvement program. if we can't get back, there is no reason to continue to work and spend money on the larger discussion so we are hearing from all the people right now about whether they like this or not but there is money for the first year's purchase. supervisor chu: thank you. we have no other questions, i would like to move on to the next department.

>> there are two clarifications for item #5. the water legislation, on page 8, row 11, the citation of $18 million should be eight team -- the other non substantive amendment is on item six, the head ceci supplemental -- the hetch hetchy clarification, to add to the bond oversight cost. again, are heightened level of scrutiny is covered and funded in the items before you. supervisor chu: thank you. there are no further questions, we have tentatively taken the recommendations the apartment

did the crew -- the department did the -- the department did agree with. i will take additional access -- additional questions after public comment. i believe we will not need the puc to come back and we will follow-up on urban agriculture and other things we have asked about. i know there are a number of people who might be here to testify on the rates or the parking meters as well as the irrigation district transfer. we will likely be taking half an hour break at noon and we will do the department of environment presentation, and come back half an hour at 12:30 and that do public comment after that. it is want to make that announcement in case you would

like to take a lunch break.

blue >> good morning. i am the director of the and san francisco department of the environment. thank you for the opportunity to present the 2012-2013 budget as well as the resolution approving the department to move to market street. first, i would like to cover our budget. you will see our proposed budget for 12-13 itemized by general expense.

this represents our current budget plus previously approved expenditures. the department of the environment has six major funding sources for its programs and staff. that includes the in pound accounts, anergy watch, recurring grants, one time grants, work orders from other departments as well as liquor fees. approvals come in two forms that are somewhat unique in this fashion. the annual budget process and the accept an extent approvals for grants outside the usual budget process. compared to the previous year, there's an overall decrease in expenses and revenue of $2.2 million, mostly due to be spent down of the federal stimulus funds we received a couple of years ago.

in order to protect the long- term funding, we are looking at what is approved through the accept an extended process. on $5.27 million has already been approved for the process. the budget will be larger since we continue to apply for and received grants throughout the year. this chart on the screen shows all of the funding for the department. first, the impound account -- this is the first bar chart. it's our largest single source

of funds. this comes from refuse rates and have been a stable source of funding for green building, environmental justice, and outreach programs for 25 years. this supports 60.5% of the current account of 111.9 positions. the second source of funding is energy watch. that's funded by the public goods charge that customers are charged on their monthly bills. it has been a consistent source of on going, reliable funding for energy work for the past 10 years. for the next fiscal year, the grant will total $5.68 million and support 14.6 positions. the next source of funding is

for abatement from two sources. $2.5 million from these of cigarettes and $950,000 from other departments. a fourth source of funding is work orders for other departments. for the past 10 years, we have had agreements for work performed by other departments. we will receive $1.3 million. supervisor kim: can you give an example of what type of work orders you do for others? >> we have a work order with the puc.

they fund quite a bit of our client -- quite a bit of our climate work. those are some examples. supervisor kim: 8 green school program you work order to the puc? >> they spent quite a bit of time doing work in the public schools. of the two other sources of funding, recurring grants -- we have for recurring grants to the transportation authority. we have received grant funding annually for the past 12 years and we received annual grants from a state agency from cal recycle for the past 15 years to go toward our waste work. it supports