board and included leased premises. that is new and something fairly unique to san francisco. i think we are seeing other municipalities follow that lead. no pun intended. >> to lease renewals trigger that as well? >> no, a lease renewal would not be classified as a project unless it has a significant tenant improvement that required work there are certain triggers built in. >> for example we have seen several lease renews for human services agency, for example. their offices are incredibly old. in those cases they wouldn't qualify or the policy would not trigger for them. >> that's correct. unless we are making a substantial improvement that qualifies it as a project and kick it up to lead gold certification requirement. >> with bay shore lease with mta, is that going to trigger the lead gold policy? >> it would, yes.

>> i don't remember seeing cost of that incorporated. is that something they will have other sources of funding for? >> just an underlying assumption of the project, which is the approach we'd like to take. an integrated approach to delivering the project. >> that is good to know. i think it would be good, since you bring all the leases before us, to articulate that as part of the costs so we have a better understanding. i think ovener it is a good policy. i appreciate it. i want an idea of the cost. i'm not saying it is not a good way to invest city funds in the way of good environmental policies but i want a sense of the larger impact of that throughout the city, thank you. >> mr. chairman. >> mr. chairman, members of the committee. a clarification. page five of our report,

table 3, we show the improvements -- the funding for the tenant improvements the department has identified we list 1,502,571 as the landlord's contribution to tenant improvements. just to clarify that language. i know the supervisors know that is paid for by the city through repayment to the landlord in rent. so it is really city money that the improves are $1,000,0007 and advancing that so it is not as though the landlord is giving that to the city. the city is paying for it. so the city pays all the tenant improvements. >> is that what the 8% rent as well? 8% as well?

>> this is not borrowed money. there is no interest on this 1.5. it is built into the cost and amortized over the period of the lease. >> was that built into the original is this >> it was. the supervisors have approved that. i just wanted to point that out that it is not -- we list it as a landlord contribution. it is an advance and paid for -- >> those were specifically contemplated in the lease that was approve bid the landlord? >> somewhere in the area actually over $2 million. as ms. nutter stated that was reduced, was contemplated in the original lease, yes. >> seems like mr. updike has a response. >> so most leases come with some level of tenant improvement provided by the

landlord. it is a give-and-take between the amount of improvement provided by them, which isn't really repaid directly. mr. rose is correct. it is paid indirectly through the rental that you pay for the space. you are also negotiating a rental rate at the same time you are negotiating the tenant improvement allowance. i would like to remind the committee we have a rental rate of $28 per square foot. if we were to reapproach the owner, sort of take the last year off the books and start fresh and approach them for the space, we would likely be looking at something closer to $38 per square foot for a base rental rate with a similar tenant improvement allowance. that gives you a sense of how the market dynamic has changed. that is a significant change in rate. we believe we have a fair and reasonable allowance provided. what i think is frankly below market base lease rate.

>> just reminder, what is the condition of this office space as we are negotiations? what is the condition of it in terms of being ready for use? >> cold shell. concrete. bare walls. needs all improvements. as all parties acknowledged when selected. >> a big portion is making it usable, habitable. thank you. why don't we open this up for public comment. members of the public who like to comment, please come forward. >> good afternoon, budget and finance committee. city and department of environment. just listening to the

comments from the project sponsor in item number three it says authorizing additional allowance up to $10 per rentable square foot. then i noticed the sponsor was talking about 550. the there seems to be discrepancy the way this was written and sponsor is talking about. sponsor is talking about 550 per rentable square foot. this is reading $10 per rentable square foot. could somebody please explain the discrepancy. does the 5.50 equal the additional amount of $3,809.27, or is that the calculation with 5.50 as the additional allowance? i understand that it is a

great deal if the city gets it less than $30 because the director of real estate says it would be $30 without the allowance right now. if we get it for $20 and add just the five, then it seems like a good deal. but if you get it for the $10 it doesn't seem like a good deal. could somebody please clarify exactly how much this increases rentable allowance? $10 or $5.50. >> okay. if there are no other members of the public, close public comment. item four. >> i'm not super-excited because of the dollar amount i think we should pass it up with no recommendation. i would like to get clarification on the actually budget if someone could e-mail that, that

would be great so i can make a decision before tuesday. >> we have a motion to move forward without recommendation. >> proposed amendments? >> sure. supervisor elsbernd to move amendments and send forth without recommendation and take that up without objection. okay. could we call i think it is puc items, all related. at the same time. >> item four, hearing to receive update from puc on water system improvement to include information on projects completed to date, corresponding cost of upcoming projects and scheduling corresponding for upcoming projects. five, release or reserve

funds in amount of $62,253,692 to fund the following water system improvement projects. the project management, cuw395 program reserve, san joaquin pipeline system, new irvington tunnel. vegetation restoration of wsip construction sites and program management. item six, resolution adopting finding under the california environmental quality act including adoption of mitigated monitoring and reporting program and statement of overriding considerations related to the san antonio backup pipeline project and directing clerk of the board and supervisors to notify controller of this action. >> thank you, mr. clerk. we have with us julie lavante from puc. >> good morning, supervisor and mr. clerk. if you wouldn't mind connecting computer. we have three items that relates to water system

improvement program. first i would like to give a brief status update on how we are making progress to seismickly retrofit our water system. this is a slide you have seen before where we show the overall status of our 81 projects as of the end of september. the figures in parentheses are number in each phase. also shown is total value. we have five projects i have yet to reach construction. two are in what we call bid and award so only a few months from moving into construction. as with the past several quarters, the main focus has been to construction. we have 18 projects worth nearly 2.6 billion currently active in that phase. to date we have completed 58 of our 81 projects. now i last updated you in march of this year.

since then we is made sitting progress as indicated by the accomplishments shown here. we have issued notice to proceed on six construction contracts including the contracts for the seismic upgrade of beta vision pipeline 3 and 4, one of our most critical seismic reliability projects. last month we were joined by supervisor elsbernd on the last project to be built within the city of san francisco. that is the upgrade of sutro reservoir. we since march reached completion on four projects, including a very critical pipeline segment of the new lifeline that is being built under the -- around the bay to ensure water following a major earthquake. we also reach final completion on five

projects, including seismic retro project in east bay and dam project on the peninsula. i think there is no question that our system is much more seismically reliable since i last updated you last march. we have been able to complete 23 system shut-downs. the reason that is critical is we need to shut down our system 170 times or so to be able to accommodate all the construction work. that is, by far, our most risky work. so far the projects have yet to be delayed because of an unsuccessful shut-down, so we are very proud of that. also a lot of emphasis on safety. maintaining a safe working environment. with so much work going on, so far we have logged in 4.2 million hours of work with our labor and our safety incidents are less

than half industry average. we will show you a few photos of key projects as part of the program. we are updating both treatment plants. >> could i just ask what is the industry average? >> there are calculations based on the number. i could give you the statistic, tell you the truth. like lost time incidents. i don't have the numbers on top of my head. let's say 1.5 industry average, ours is 5.6. it is complicated and to me doesn't make much sense with how they come up with these stats but nonetheless we like to compare ourselvess with industry average. the number of incidents in general for amount of work taking place is really, really good. we have very, very few incidents. 1.5 per what? >> could you actually look -- we could -- why don't i provide that to you in an e-mail and explain the

statistics. >> that would be good. it would be good if you can say this amount of workplace injuries and it would be great. >> we have received major national award last month for those. it would be my pleasure to forward that to all three of you. >> okay, great. >> on our two treatment plants, we are making good progress as well. on the peninsula we have the harry tracy treatment plant where we are building a brew large 11 million gallon treated water reservoirs, as well as five new filters. over there we are 23% complete. we anticipate the completion rate to rise significantly, as we are ramping up activities. in the east bay we are much more further along, 85% complete and anticipate substantial completion in march 2013. irvington tunnel is very

challenging project where we have en counters challenging ground condition presence of large quantities of ground water. hazardous gas. despite all that the contractor has been making very good production rates. we have actually excavated two-thirds of the 3.5 mile tunnel so far. we achieve what we call hold-through in one segment of the tunnel in june where miners coming from two directions met. that was exciting. in june we will have crews working 24/7 for two months to complete the connection between the new tunnel to existing pipelines. over there we are 63% complete. the other very exciting project that we have is a five-mile tunnel under san francisco bay. we are nearing 70% completion. the tunnel-boring machine left the west bay over a year ago. now we are four miles into

the bay. we are currently under the south ponds in newark. we have been making great production rates ahead of schedule there. so we are very pleased and on track to complete this entire project by 2015. now we have en counters some environmental challenges in the field. one of the most common problems is when you have creatures basically making their way to our construction sites. a good example is on our san joaquin pipeline system where we have bird nesting along the alignment. the photo on the left is the chicks from the nest that were actually removed from that project site. in all cases we work closely with environmental agencies to make sure we do protect all these species that are discovered during construction. in addition to responding to these unexpected

environmental challenges, we also pro actively are mitigating all the environmental impacts on our project. we are doing that not only at the construction site but building off-site mitigation projects. this is one where we are creating new creek habitats in the san antonio creek. now we knew all along the calaveras dam project would be the most challenging project. back in june we discovered unexpected surface condition on the slope above the left abutment of the new dam. that is referred to as observation hill there on the slide. we perform extensive exploratory work all summer to better characterize those features. it was concluded that we have multiple ancient landslides on that hillside, as well as the location of an existing

known fault was actually shown incorrectly based on the preliminary data that we had. this has caused some instability on that slope. as a result, our record -- engineer of record, u.s. corporation, recommended we take out a lot more observation hill. we are basically bringing the hill down to a much flatter slope, resulting in an additional three million cubic yards of material having to be excavated and disposed of. though we won't get a formal proposal from the contractors on the cost and schedule impacts of those challenges, we know they will be very significant. originally we placed the cost impact at about $60 million and schedule impact of a year. now we have received new information that shows

those impacts will be greater. we have been working with a contractor on trying to mitigate the schedule impacts, which costs a lot of the additional costs. what we are trying to do is balance scheduled costs and risks. we have committed to going back to our commission with cost and schedule update november 13th. we will do that and keep you appraised as well as where we stand on that. this concludes my program update. i have a few slides summarizing the two action items before you today. in the first item we are seeking your approval for the release of 34.9 million that is currently on reserve with this committee. and 27 million from program reserve to six projects. in a previous appropriation board put on reserve

funding for program management that was after june of this year. now we have reached and are past june we need these funds in order to complete the program and shown on this slide are some of the program management services that are being covered by that funding. in late 2011 the board of supervisors approved the creation of a wsip program management reserve, where we could set aside some of the savings at the project level. we had initial balance in that reserve of $144.5 million. that was put on reserve with this committee. recently our commission approved the increase in budget for six projects, as shown here on this slide. what we are doing today is seeking your approval for reallocating a total of 27.4 million from our program reserve to the individual projects. i think the budget analyst

did an excellent job at summarizing the need for these. that sin included in the attachment to the analyst's report. before i move to the last slide, i want to summarize where we stand budgetwise on the program. if you are to approve the second item i mentioned, the reallocation of funds to the sixth project we will have $117 million remaining in the wsip reserves. at this time we feel comfortable staying we are still forecasting the completion of the program to be under the approved budget. however, we need to keep in mind here these major challenges with caladeras i talked about. in early 2013 or 14 we will need to come before you to seek funding for that additional project that we will take from that reserve. also keep in mind 23 of 81

projects are yet to complete construction. there are some risks associated. the two tunnel projects do involve still some risk. excavation will be done in early 2013 so these will go way down at that time. we have two complex projects listed here the last two harry tracy and transmission upgrade that involves risk that could result in cost increases. we need to be diligent at keeping our eyes on the risks on those projects. finally the third item involves the adoption of seek what finding for san antonio backup pipeline project. that project consists of the construction of 6400 foot pipeline in the valley. that new pipeline will provide flexibility and reliability to the system. the planning commission and the -- our commission both

took action on the eir for that project in september. we were proactive to minimize the impact on the environment. as a result all impacts are being reduced to less than significant accept for some higher quality impacts during construction. i would be happy by to take questions you may have on any of the items. >> thank you. why don't we go on to the budget analyst. then questions after that. mr. rose. >> yes, mr. chairman. members of the committee. on page three of our report we report that regarding the reallocation of the 27.3 million from the water system improvement program reserve for six projects, the reallocated amounts are summarized in table three, on page three of our report. then the attachment on page five of our report provided by the puc details the puc

six project budgets and the expenditure requests. further table one on page three of our report summarizes the requested release of the reserve funds totalling 34.9 million. that is for the program management services cost. in both instances we believe based on our analysis the puc has provided sufficient details and documentation to justify this request which combined totals 62,253,692. that money, by the way, is, as you know, funded through water revenue bonds, which are paid off through puc's water rate payers. we recommend you do approve requested release of reserve funds and reallocation. that would be file 121013 and approve proposed

resolution regarding ceqa, file 120985. >> thank you, mr. rose. just a housekeeping question be about how we make a reallocation. by releasing reserve on the 27 million gives the authorization for puc to just in their budget make reallocation? >> yes, there's two actions. a reserve reserved by the full board of supervisors, a budget and finance reserve. if you released that, your decision would not go to full board. regarding the reallocation for six projects that also would not go to the full board. you are authorized to only the budget and finance committee to release those funds that would be reallocated to six projects. does that respond, supervisor? >> yes, but the reserve was for specific purpose for specific projects. now the reallocations for different project and

original purpose -- >> when the board of supervisors previously approved specifically 144 million, it was called a project reserve. in that legislation it stated that that was funded with surplus funds in the water system. in the legislation you approved it stated if other projects have a deficiency in their project budgets, then the p.u.c. can come back and request you reallocate those funds. that is what they are doing they have identified six projects reallocated from surplus funds. as i stated we have reviewed those six projects and believe the documentation that the p.u.c. has submitted is sufficient. great, thank you.

let's go to public comment. any members of the publics, come forward. that closes the public comment. thank you for your presentation. i always appreciate getting the update on the whole wsip program as well, thank you for that. colleagues, we have these items before us. why don't we continue the hearing number four to the call of the chair. when it comes to release of reserve and allocation, we can approve that here. take that without objection as well. then the environmental report we can move that then. without objection. that is our last items. >> that completes the agenda. >> okay, we are adjourned.