>> i think we are now -- now we are at rates and affordability. todd will come and give that portion. >> good afternoon. this is the part of the discussion where we have balanced affordability and rate impact with the needs that you have heard about. i would like to walk you through eight slides. they are very similar to what you have seen at the workshop that we did. this puts it in the perspective of the three phases as outlined by karen and dan. the first part is the water bill. it started out at about $31 per month. that would be projected to increase to $82 over the next 20 years. this is all the good work you have already planned, bringing on another $1 billion for

replacement to keep the system running well. that is why that is going up over time. it levels off because we assumed that we are in a steady stage for our water mains. next would be the portion of the bill for customers that is related to store operation. this is the 24-7 operation of the storage system that we currently have today. you can see that that goes up modestly once you put it on top of the water bill. it grows to about $135 over that 20-year period. we have also gone through and looked at your capital plan and brought the level of investment up to 15 miles per year.

that moves it towards a 100-year replacement cycle for the sewer mains as well as the water mains. in these numbers, part of what you have stacked up is a steady state of best management practices for repair replacement for what our existing system is, including the 995 mile sewer mains, replacing 15 miles each year. president moran: the assumed rate of inflation is what? >> 3%. that has typically been what inflation has been over the last 30-40 years. if you compare this bill increased over 20 years, it is needing to increase about 3.9%, almost 4% per year. 1% more than inflation per year. we can fit a lot within the inflationary changes. we cannot quite make it exactly

3%. that would be the existing operation, the existing repair and replacement. taking those into account. the next slide looks at phase one of the three phases that dan and cara an outline for you. based upon what we know today and the needs that are present for treatment as well as some of the more vital collection systems that there would need to be further increases to fund the first $2.7 billion worth of the sewer improvement program. that would take the average bill to about $204 by 200032. the comparison that is helpful is $158 would have been the bill anyway with the existing repair and replacement, keeping it as it is. to do the first $2.7 billion,

the bill would need to be about $50 more in order to do that. the lion's share of that was the $33 number that was related to the biosolids and the digester projects that were outlined earlier. what is eliminating about this chart is it you see there is a number of years that the deep green impacts of phase one do not come online. that is because we have tried to smooth this in overtime using our commercial paper program, by planning the use of capitalized interest. having a decision on $2.7 billion of phase one would require the ability and the customer willingness and customer receptivity to take into effect what was a 10-12 your discussion of gradual rate ran up to pay for that entire

$2.7 billion. the risk of not doing it sooner means the costs are just tired. to bring on the second phase of the sewer system improvement program would be the next grain stack, about $3.3 billion over that 20-year period. that would bring the average bill increase up to just over twice the inflation, 6.2% over a 20-year period. some of the rate increases would need to be greater sooner. that is because of the way the service would need to be paid. it wraps up faster than just gradual over 20 years. the benefit is all the money because we are able to contract sooner what are typically lower cost because we save on inflation. it would mean that average rate increases over the next 14 years would need to be 8.3% and flat

and off to under 2%. lastly, phase three, which is nearly a $1 billion complement to the $6.933 billion number, a small sliver on top. this balance of affordability and timing meets your level of service goal of keeping the bill below 2.5% of household income and allows it to gradually ramp up over time. i am happy to answer any questions. i know she will walk through the outreach and the discussion that will occur with rate payers and stakeholders. president moran: you could not have a better introduction for her part of the presentation. commissioner vietor: i have a question with low income

residents. >> it allows for a 15% discount on the water bill and 35% discount on the sewer bill. as rates go up, the lower income discount program, the rates would also go up in proportional terms. the discount right now is about $25 per month for low income families. if you would see the need for additional low-income subsidies as we are taking a bill from $82 per month to about $262 in 20 years. but it would be very gradual. >> that subsidy would come from the other repairs? >> for us, it is within the operating funds. we also operate an angel fund that allows other ratepayers to donate money. we do receive a little bit there. we received a few hundred thousand dollars per year for prior balance closeouts,

unclaimed deposit money. every time we come through the process and say, here is some money that is unclaimed. in addition, we looked at other revenues that might be available. as it grows, the bigger number would be something we want to consider, how to fund it. >> i would love to hear, in the not too distant future, some thinking around or a recommendation from you on what we could be looking at to subsidize that number. i think it is really going to be something we address early on. >> i think you are right. we are required to do the rate study every five years under the charter. as part of that, we are asking the independent consultant to look at how the 10 largest california cities as well as all of the neighboring bay area cities are finding their programs.

and we are at the end of an audit from the comptroller's office for the assistance we have for the low income people. they have made a number of recommendations for that system to be improved. you will be getting a lot of information about that and how we can do business differently. >> what rate are you assuming for the financing? >> we are assuming 5%. we have been very fortunate to get closer to 4% with our recent financing. we do not know for sure if we will get that lucky in the future. that is a very large potential swing of affordability to be conservative and show you, the policymakers, as well as the stakeholders, what it could look like. this is a possibility. it is a likely number.

we could get lucky again but we are not guaranteed it yet. president moran: any other questions? are we ready to hear miss ellis tell us how people are going to learn to love this. >> as i introduce myself, julia ellis, not the savior. i am here to provide you with a preview on the approach we will be using for the public education and engagement program as part of the sources the engagement program. at the last two workshops, the importance of having a robust public education and outreach an engagement program was assessed by the commission. as staff, we have this as an integral part of the source system improvement program since its inception.

our plan is to develop a public education outreach strategy that will stretch citywide and engage stakeholders from all of the districts in san francisco. our goal is to have an informed, engaged, and it's hard stakeholder and neighborhood partner during the whole life cycle of the ssip. in order to do this, we have developed five strategies. the first is to provide opportunities that have meaningful and sustained engagement with stakeholders' at their point of discovery. what this means is that, typically, government agencies and entities like that do their outreach by holding meetings where they ask constituents to come to them. our approach is going to wear the constituents are, whether it is going to street fairs, a grocery stores, partnering with business and civic leaders with the hope of being able to engage

a wider array of individuals and groups so they can have a deeper understanding of the source system. this is a strategy based on the commitment that we need to move beyond the usual suspects. to engage folks who do not typically engage with us while continuing to work with those who are in the inner circle. the second strategy is around utilizing community partizan the poor planning. there will be multiple opportunities to do this. we will be speaking to involve stakeholders, whether it is residents, businesses, community partners, from the beginning to the end of the product impacting their specific neighborhoods and tying the projects to the overall program. we will leverage opportunities for participants to engage in the strategic planning, design, development of the project, trying to build upon their understanding of how the system functions and the value that it has over the years to come.

when a example the we have been talking about a lot is early implementation projects. these are all planned to be visible, neighborhood-based projects where stakeholders will be able to engage from the beginning. it will provide a platform for us to educate them about the larger platform. it will include physical, tangible neighborhood impact. whether it is st. sidewalks, it will be things that people will be able to see. from an engagement perspective, that is a huge opportunity for us. so much of the work is invisible and underground. we are looking for opportunities for things that people can see and 0.2. -- and point to. the second -- the third strategy is leveraging innovative communication tools. we know that a lot of people get their information using

technology. we will be going after their computers, their phones, and using technology as a way to get stakeholder attention in new ways and to reach out to more people. this will be in addition to the more traditional tools we use, including direct mail, public advertisement. the benefit of using technology with the understanding that not everyone has access to technology so that we will be going into the community and allowing face time with members, but the technology can track the breath of the scale of people we are reaching. we recently did ipad surveys at the sunday street fairs and farmers' markets. we had over 100 individuals participate. we were able to find other familiar their -- their familiarity with the sewer system and other information.

the fourth system is to develop the educational programs. this is embedded into the larger priority to educate the public about the work of the puc. earlier, we came to you and asked for support to develop a more educational initiatives. as it relates to the sources to improvement program, we will develop a dedicated strategy and partnership with the unified school district where there will be curriculum and programs developed with clear benchmarks and outcomes. kids will achieve these types of educational attainment as it relates to understanding the source system. from a staff perspective, we see young people and children as the next generation of environmental stewards and champions for the system. it is so very important that they understand how the system works and the value of that system. the second part goes beyond

children. it will be developing opportunities to educate the larger public. since most of it is underground, we are looking at tangible ways where we can take folks out and show them how the system works. what does it mean when the systems are 100 years old and you have digesters falling in on themselves? the fifth strategy is to utilize community benefit activities to build support for the program. with the adoption of the community benefits policy and the environmental policy, staff has a goal to reach out to neighbors and educate them about the source system improvement program. as part of the program, we will apply both of those policies from the outset of the project. whether it is putting community benefit projects that result intangible benefits or a 2% requirement into impacted

neighborhoods, those will both be efforts that will allow us to tie these types of activities to ways to educate the public about the source system. in summary, the overarching approach to underpin ease of the strategies is our commitment to engage individuals early and often. what typically happens is it is early decision points we are going out, trying to hustle and get the crowd to support going to a particular meeting. our approach is that we are seeing from the beginning that we will engage folks over a long period of time. they understand what the options and trade offs are and why the program will be important. we want engagement by stakeholders so they can participate in the decision coming out of this program which they will have to pay for.

before i describe how we will carry out the strategy is, i would like to go over what we have done so far. this slide outlines outreach efforts that have been associated with the program as far back as 2005. focus groups, community town hall meetings, different resident task forces. as a result of all of the work from 2005 until today, staff hazmat and interacted with over 3000 people. our most recent effort includes a set of focus groups which we mentioned to you as well as a set of ipad services that we have been doing. what we have heard from participants are they are unfamiliar with how center cisco's combined sewer system operates. once it is described and they hear about the challenges, they generally support it. obviously, they have concerns about the cost. we have spent quite a bit of

time doing focus groups to hone in on the points that resonate with individuals living in san francisco. the age of the system, seismic safety, and public health are the concerns that resonate the most. we have heard from participants that they desire a less intrusive way. we are trying to think. coming to a community meeting does not always work for them. what are ways to provide them timely information and receive feedback? we will be developing these as we develop the strategic plan. moving forward, we will use the tactics highlighted on the slide to build understanding. obviously, public engagement is the central component to this work. it will allow us to go beyond informing and educating the public. we will seek out partnerships, the middle of a, which it -- with a diverse array of organizations. whether it is business groups,

labor partners, with the hope of being able to reach out to individuals and organizations that are new to the sfpuc but have a vested interest. we will expand upon the current channel that we used to reach current stakeholders, using new technology and social media. our next steps are to, from now to the spring of next year, we will complete the development of the communications plan. in addition, we will continue to meet with the decision makers next door at city hall, including folks in the mayor's office and board of supervisors, to educate them on the program. there are some individuals that we intend to have regular contact with because they have been very much interested in the decisions. we need to do more work with the board of supervisors and mayors office.

we will continue to do ipad service, the online telephone service to get additional feedback from the public as we are shaping the program. we will continue our partnerships with educational institutions and we will be finalizing the curriculum and metrics with the school district because they are ready to go and implement this program within the schools. as part of the development of the rate proposals, which is being spearheaded by the finance team, we are working with them to ensure that we will be able to assess what is being done in other jurisdictions. what tools have they used to successfully build support for similar types of capital programs. upon delegation, we will develop a teller strategy to engage local neighborhood residents around the central bayside program. and the early implementation projects will have a process that complement the work that is being spearheaded by several staff.

they are here today to ensure robust engagement for each of these programs and direct connection that is part of the source improvement program. they are not just one off projects. that is our work plan for the next 12 months. we will issue request for proposals as we develop a communications plan, which we hope to have done by next spring. we appreciate the commission's interest, specifically around the education and outreach, because we think it is integral to get by with support because the neighborhoods will be so impacted but can truly benefit from these programs. i am happy to answer any questions. vice president torres: what was the nature of the demographics for the focus groups? >> we worked with a company and there were five focus groups. vice president torres: they all

came from hunters bayview? >> no, they did not. there was one done with chinese residents, one done with spanish-speaking homeowners, one with -- vice president torres: why would homeowners who are spanish- speaking have concerns about the bay view? >> it was to get feedback from them about the overall program. the whole $7 billion, of which only $2 billion is happening in bayview. are the owners who are living in the sunset, what are the priorities for them and how are they connecting with issues? many thought older would be a high priority. for many folks who are impacted on a daily basis, it was things like the aging system, seismic, public health around the beach. vice president torres: what

element of this program will involve employment procurement? how many jobs are you projecting to go to people in the bay view area? >> is premature to have a number. vice president torres: what is the goal? >> we hope to exceed what the local higher goal is. it is 25%. vice president torres: by then, it will be about 50%. what does that mean in terms of numbers? >> to give context about our commitments, we have seen a lot of attention to this. we are signing a lease that will come before you in september, at the september 11 commission meeting. to have faith in bayview hunters point to launch our contract assistance center. it is focused on building the

capacity of smaller contractors to bid on work specifically related to the ssip and the opportunities that will be available there. vice president torres: you are providing opportunities for vendors as well as construction jobs and working with your colleagues in the labor movement. what part of this involves increasing the capacity of the college site? >> that is another really great example. for the southeast community facility located in bayview hunters point, we are -- the first phase of construction to improve the physicality of the building will begin in october. the first phase is about $1 million of improvements that will be happening in three phases. vice president torres: are their pictures to show what those

improvements look like? >> i would be happy to bring them. vice president torres: do not bring them to me. bring them to the people that testify. >> i was at the meeting last thursday and there were two dozen people in the room. we talked about the commitment to jobs. the contractor that will do the construction is a local contractor from bayview hunters point who has a track record of hiring 100% from the community. i give you those examples just to say there is a serious amount of intentionally making sure that any time there are opportunities for jobs, that we will be maximizing those opportunities and setting us up for success. vice president torres: i have confidence in you and you have done an incredible job. it is impossible to get everyone to know what is going on. communication is key. no matter what you do, people will not give you credit for doing what you have done.

many of the people who testified today do not know what has been going on. they have not been informed. it is not your fault, just thus making sure that we reached out as much as we can. >> definitely. i appreciate the feedback. >> i have asked this question before and i cannot remember the answer. is this going to be a bond issue? >> multiple bonds. >> it seems to me that our interest should not be, and this is going to sound not correct, but are interested should not be the feedback from the rate payers. i think our interest should be an hour process should be the education, getting those people to one of the treatment plants or something on television to

educate. anyone being educated would understand that this has to be done. that is going to be our main pursuit. >> the broader education thing makes perfect sense. a lot of discussion whether we thought we should have focus groups with everyone or just ratepayers. we are anticipating having bonds. this commission can propose the sale of those bonds and the board can approve them without going to the voters. we thought it was much more reasonable to take a look at what the rate payers think as opposed to all of the renters who do not pay the bill directly, who would have to vote on something. if that strategy changes, then i think we have a different outlook on some things. we want to find out the ratepayers' attitude on these things. as commissioner torres said, there are some who do not care

about some issues but care about things like seismic safety and public health. >> with a 20-year projection, that is five mayoral elections. and 10 board of supervisors elections that are out there. if those folks start running against rate increases, that will be a problem for all of us. >> we did a five-year rate increase last time. we could do a 20-year increase this time if you would like and get it done in one fell swoop. >> if you are educating people who are in middle school today. by the time rates hit the fan in 10 years, they will be in their mid-'20s. prime voting time garrett it ends up being more rt