next picture shows the constraint of the site. if we work hard to encourage participation. in this case, some of the photos you will see is very tightly constrained. on the left side, you see the six-inch line that is under pressure. if breakage occurs, there will be flooding of the entire building. some of the supports for the important utility pipes are barely hanging on, falling apart. these are the electrical conduits which are the main machinery in the building hot. you can see the dire state of the work.

this is a very important slide. this shows the constraint. there is one small door or the contractor has to bring all they can manage. after the advertisement, a lot of contractors have said that this is very tight space. we include all that, but this was mentioned time after time. even if you don't break up the contract, there are two subcontractors that will have a hard time working in that area. what will be blasting the pipe while others tried to repair things. that is the reason that we could not break the contract. if there are any questions, i have more photographs of which show why this mean -- why this work needs to be done diligently.

>> any other questions? >> how long is the process? >> it will take four-six months. we have to do the process again, all of the steps that we have to go through. they are pretty usable steps. >> these contractors are already preapproved? will it take the long? gosh yes. that is the size of the project, we like to keep it open for four-six weeks. by the time we give notice to proceed, it will be around six months. >> if you were opening day of four bidders, they would need time to get up to speed.

we have had public comment. is there additional public comment? we will let you do that if you keep it brief, but pleased to respond. -- please do respond. >> with respect to the photos, it shows the need to spend the money to prepare the facility. i don't think it indicates the need that is a dire emergency that we should proceed with these irregularities. as far as the access concerns that he outlined, i don't think there was a suggestion that those were be split up. other items were for a negotiated items that were arbitrarily in search of contract.

there was also a backup generator for another part of the digesters. that is a separate area that can be broken out, too. >> the job can be down to what? >> it could be brought down to $7 million or $8 million in value. >> commissioners, what is your pleasure? in the item before us is to have approved the award. and i am not hearing in the ocean. -- a motion. >> your options are to approve

or to do nothing at all. you could refuse to do anything and have us -- or come back with more information, but the auction is -- option of giving it to the second bidder is not an option. >> this facility is very much run down. i have run this for years. i am very concerned about any delay of these projects, because one of the bens has already exploded. it has been delayed in this particular facility. what you see there is only the stuff you see on the exterior. you are talking about six months

to extend that time. i am concerned that the staff has worked diligently on the project to get us to this point. >> commissioners, in the absence of a motion, the item will receive no action. we will put it back in the staff's hands to bring it back another time or to rebid. >> i am going to make one comment. it is pretty difficult for me to sit here because my understanding is there is a perception and that something was done intentionally. but frankly, i am not seeing any evidence that something was done in such a way that somebody was denied an opportunity. one of the public speakers

pretty much said with respect to adjudicating this case, we would need more evidence. i am wrestling with the idea that it is a reasonable delay, the assistant general manager will probably be able to get by. if it is an unreasonable delay, we may want to attempt to tackle that issue because i am not seeing anything that indicates that something was done to manipulate the process to deny the appellant and opportunity to have a successful bid. >> i would echo that, as far as the information has come to us, the information that has been brought here, i understand the

disappointment but i don't see any impropriety, and no reason to invalidate the bids. the question is not on that basis, but whether we think that there was an opportunity not taken to break the job into smaller pieces. the on one hand and to what we are being told, the nature of the facility mitigated against that. i understand this appointment. my own point of view is that i think the process was done correctly. i would be comfortable taking action, but in the absence of a motion and a second, there'll be no action today. >> i don't want to not act

simply because i understand the frustration on the part of the party that didn't get the bid. but what we are confronted with now is probably an unnecessary delay, a lack of evidence to justify that, and of setting the other party that had the successful bid. i am going to move it forward. >> i will second that. that is based on the fact that if we felt it should be done by one contractor, we would have broken into in sections if we felt that that was the better way to go. >> and we have a history of doing that.

any additional discussion? >> sometimes things are unfortunate, it doesn't mean they are wrong. >> if there is no further discussion, i will call the motion. all those in favor? opposed? the motion carries. this brings us to the regular calendar and item 11. >> approve the plan and specification and award the contract for the reservoir rehabilitation and seismic upgrade in the amount of 27,000,004 under and $53,000 to the lowest, qualified, responsible, and responsive better. -- bidder. sj amoroso. president moran: this is another

case of disappointment where we have to contractors that presumably should know better, failing to meet the requirements of the documentation. my understanding is that we have pretty extensive outreach processes had people in place to help make sure the contractors get it right. what happened? >> one of the two -- both contractors, but what especially had done a lot of work for us. i personally was not part of the finding that the first two were actually not in compliance with the requirements. there may be specifics that she would like to share with us. >> i am i the, manager of the

bureawe had the first two biddee not qualified because of hrc. this is the first time that one of them has not been able to comply. we are making a direct our region and helping to bring the men to really walk them through, step by step, and a partner to make sure that something like this doesn't happen in the future. we modified via administrative code and agency rules and regulations to try to help contractors with a good faith outreach effort. most of the time it works really well, this is just an instance where they did not complete good faith out reach sufficiently in order to gain the points.

>> i would like to say that this has come up in the past and it has been an ongoing problem. the field that they are completely clear on their responsibility? >> again, a couple of these have had specific problems with this before. and because there seemed to be really picky technicalities, we worked to change those things to make it a much more obviously good faith claim, not to show up at these three places at the right time. for these kind of contractors, they know the rules. having said that, our bids are involved and difficult, sometimes they miss a few things. president moran: any public

comment? can i have a motion? >> i will move it. president moran: and seconded. all in favor? opposed? passes. item 12, please. >> the regional habitat restoration in the amount of $3,912,500 to the lowest, qualified, responsible, and risk -- responsive better. president moran: any public comment? do i have a motion? >> no irregularities? dodge there was a protest, but it is not a regular. we sometimes have a protest on

these contracts. >> the protest was the night and we have not followed up. president moran: motion and a second, all those in favor? opposed? item 13. >> authorized the general manager to negotiate and execute a joint exercise of powers agreement with the bay shore sanitary district for sewer service from july 1, 2012 to june 30, 2025. and to be able to negotiate and execute an expansion of the agreement through september 30, 2012. president moran: i know that he would rather be here instead of hawaii. >> we have for finance items for you today. the first is a rate item that

has to do with wholesale services provided to the sanitary district. this item authorizes the general manager to execute and negotiate a new agreement with the district and extends the current agreement by three months to allow us to do that. the first slide it describes the current agreement that is a longstanding one. it was extended by this commissioned a year ago to allow us to conduct an independent rate review that i will describe the moment. it equates to about $800,000 a year for the waste water enterprise and represent about half of 1% of the treatment of flow. in terms of the rate study, we spent time with a consultant to look at alternative methods of cost recovery. the study recommended we

continue the current process of basing the rate on a proportionate share of costs. we will continue to do that in our proposal. another recommendation was to exclude a mobile collection operating and capital costs. the district has its own collection system that they pass on the costs to the retail customer. and also interestingly, they recommended strength charges as we currently do with the non- residential sewer customers so we can allocate costs unfairly as it relates to suspended solids have their treatment. our proposed agreement will take those recommendations from that independent consultant and in particular, looks set excluding

the capital costs of the sewer repair and street cleaning costs as the district has a similar cost to pass along. the last slide shows you a comparison between the existing cost allocation and what is being proposed. they're being carried over into the new agreement and we are recommending a complete exclusion of the collection system costs. as well as introducing the strength charges. it makes the rate more fair. we're recommending a term to coincide with the other wholesale district which is when their agreement expires. in the existing agreement, the cost allocation is very similar.

commissioner caen: why do we have such a long term? i think that is a very long term. >> we have to relatively large flows of perspective and customers south of the city. both customers would like to have the agreement to be fairly similar. the existing agreement expires in 2025, so the intent is to make them both expire at the same time so we can negotiate together. it was approved in the '90s. >> i think that typically, they would want even longer because

if they were going to have to find their own way of treating sewage, it would be a much bigger discussion and much longer term. president moran: commissioners? is there any public comment? do i have a motion? tmoved and seconded. the motion carries. >> item 14, to authorize the issuance of their principal amount of up to $35 million in refunding water revenue bonds, approving the form and authorizing execution and delivery of documents. authorize the general manager to sell one series of bonds of either a negotiated or competitive basis as he determines is in the best financial interest of the sfpuc

and award the series of bonds to the highest bidder. president moran: can we have both items called? >> 15 and 16 are related, this is not. president moran: proceed. >> this item, after last month's successful water bond sale, we have a reaction for the 2012 year. this $35 million in bonds issued in 2002, we were not able to do this last month because we were not within the legal window in order to do so. this is why this one is a little bit of a straggler. if i could go to the slides, please, this talks a little bit about the terms of the proposed

transactions. this is different than the competitive sale method we use recently because of the relatively small sales size and the shorter duration. we can adjust market timing to lock in the highest savings possible. we planned to have the sale in july. traditional tax-exempt revenue bonds of $35 million. the current rates of the bonds y=fe are bringing them down to the current rates. the sale today would be closer to the 2% no.. we are requesting authorization for up to 15 years, but we anticipate having maturities of no greater than eight years. the present value savings is

about $800,000 over the life of the bond, and we want to make note of the underwriter feed their. -- fee there. the authorization to refund bonds comes in a couple ways. the charter allows us to bring forward savings to the ratepayers when it makes sense, that is what we are presenting you today. we have recently approved authorization of the board of funding without additional board approval, so we are presenting to you today this refunding authorization and we will not need to bring this to the board for their approval. the forms of agreement are almost identical to what we showed you a month ago. unless there are questions, i will take your questions. president moran: any questions?

any public comment? can i have a motion? it is moved. and seconded. all those in favor? opposed? the motion carries. the items 15 and 16. >> authorize the general manager to enter into separate agreements with the following commercial paper dealers for the waste water enterprise commercial paper program. a u.s. bank, city grew, wells fargo, and morgan stanley. the agreements combined include annual costs not to exceed $150,000 for a duration of three years with a couple of additional extension times for one year each. the the general manager is further authorized to select the next lowest cost, if negotiations are otherwise not successful.

item 16, authorized the general manager to enter into separate agreements with union bank and the bank of tokyo mitsubishi as the lowest cost, responsive, and responsible bidders to provide credit to secure the 2002 proposition e for the waste water enterprise. the agreement provides $150 million in available credit with annual costs not to exceed $1 million for the duration of three years. should be selected banks be unable to meet contract requirements, the general manager is further authorized to select the next lowest cost better. >> as a reminder, the sfpuc has a commercial program for waste water enterprise that serves as the financing option. the first item proposes new dealer agreements with four firms to serve as dealers for

the waste water commercial paper. these new agreements are meant to replace the ones expiring next month. we will market our paper to investors at the lowest cost possible. the second item proposes a three-year agreement to support the recently increased waste water commercial paper program. these agreements to serve as a security pledge to the investors in our commercial paper in the event that we are not able to repay them. it is essentially security backing for the commercial paper program. the i just have a few slides to share with you. the agreements we have shared with you are essentially identical to the ones we have shared with you previously. there is virtually no change.

in terms of the facility, i want to spend time talking to you about this. we have a commercial paper program for waste water enterprise. in december of last year, you approved an increase to the commercial paper program of $150 million of $300 million. in january, we brought forward a new agreement to back the first $150 million program. the facility is working as expected. what is before you today are two new agreements for the second $150 million. assuming that action is taken today, we will have the four agreements in place of $75 million each. the slide shows a little bit of a comparison and i want to share this with you.

what is being proposed is, in the first column, for union bank agreements for $150 million, it is 0.65%, $975,000 a year. the fee will be covered by the waste water capital program. the term is for three years. i will speak a moment about the downgrade protection. the other two colonies show you a comparison of the agreements we have with j.p. morgan and u.s. bank. also with the prior agreement of the water enterprise. as it relates to the bank hundred protection, that is an important thing.

they provide us with the ability to terminate the agreement. i want to pause here to reiterate the importance of adequate bank ratings. you may have heard about moody's downgrading several banks last week. we have an agreement with bank of america for $250 million, not what is before you today, but for the water enterprise. because of the downgrade, the provision allows us to terminate the agreement. we're currently looking for a replacement credit facility with another bank and will report back to you on replacement alternatives. i want to show you how all diligently are being to keep an eye on these ratings and the action that will take to fix those ratings.