♪ [ applause ] >> i will be chairing this committee. i would like to thank sfgtv for covering this meeting. mr. young, do we have announcements? >> yes. please close

on the may 14th, 2013. items active today will appear >> thank you very much. we have a long agenda here. please keep moving. please call item no. 1. we have mr. kelly head of puc. perhaps we can hold for questions at the end. >> that would be great. thank you for being here. so knowing that you have a long day ahead of you and you just finished yesterday's meeting this morning. what i would like to do is go over our presentation and i would just want to thank you guys ferrel and members of the budget committee and

manager for the puc and i want to let you know this is my first presentation as my new role and it is to deliver good news. it's always a great opportunity to be in that role. also this is our first time preparing a two year budget and this is a first midyear review. so i would like to spend time to walk through the presentation and just talk about all the changes that we have and mostly good because all increases that we have experienced we are able to offset it with savings and then the second major thing i want to talk about is two of our major infrastructure improvement programs which is a water system improvement program and also the sewer system improvement program and really talk about how the are structured and keep that on

track. and so one of the things also is that because we do a 10 year capital plan and 10 year financial plan, it pretty much helps set the vision to where we are headed to maximize opportunities. we want to go over that. so as part of the presentation, the focus today is to really talk about where we stand in mid cycle update an also i want to talk about the puc priorities and improvement to the infrastructure. and we'll talk about the budget adjustments. as we talk about the presentation one of the things i want to illustrate and hopefully a key theme thank you walk away with is how the puc

approach the physical balancing of three of our core priorities and our first priority is to really deliver high quality 24/hour for water and power and sewer. our second prior is to maintain our critical infrastructure to ensure our assets are in a state of good repair and also which is equally important is to preserve rate affordability. we think those are our guiding principles. in order to to accomplish that, we have certain levers that within our budget that we really try to control and so the first one is our operating budget and staffing and for the most part we keep that pretty much flat other than inflation as it looks at chemicals and labor cost and so for example, in 2013, 2014, we had 2500 and

last year we had 2440 people. we've been able to get low cost financing and we've been able to lock in some of the lowest bond financing rates since the 1960s and we are also taking advantage of refinancing some of the bonds to take advantage of these low rates and together we are saving over $500 million. so they have done a great job. the other lever is measure the capital improvements. we have done an incredible job to make sure our infrastructure is we keep it in an a state of good repair.

that's another important factor. so i want to move into the mid cycle budget updates and so as you know the puc is a large city department that has three enterprises, water, power and sewer. we've had a lot of successes over the past year an i want to highlight a few of them that has a few budgetary impact. on the water side you are very familiar with where we are. we are nearly 75 percent completed on the we sip. one of the big stories that happened last year is we worked with bawsca. the other major component in the power side is

we are moving to the cost services. our an operating budget is close to -- 50 percent of our operating budgeted is associate to water in regional and city. then we have 17 percent is the water enter price and about 29 percent is with waste water.

what we have identified is water facility maintenance unanimous and able to offset that with some savings in capital projects. will is in our water we saved $3 million in savings to keep us in regulatory compliance and that was able to we realize the savings with capital projects and also we didn't do a water transfer that allow us to use those funds to fund those projects. and so i think that was a great opportunity there.

so as part of the 10 year capital plan we are proposed $7.5 billion. capital improvement plan over the ten years. i wanted to quickly go over what are some of the reasons for the increase. the water side of the $76 million we had regional water about $5 million with the regional water projects we have identified and system in monitoring enterprise which included about $13 million, water storage facilities and we had 9 other projects and that led for to us increase that water $76 million on the awsf which is our

auxiliary water supply system which is 30 llcrease that we have. a lot of it as you remember 2 years ago the awsf was transferred to the puc and the earthquake safety and emergency response bond, as you know it's under way to upgrade systems and pump station. the plan is to go to the ballot in 2014 for a hundred million dollar bond which is included in that line item. as far as waste water, when you look at a capital plan. we have a one year capital planning and the ten year is rolling. every year one year drops off and another year comes oun on. the different is the one that adds and the one that drops. it allows the case is we move the

digester of the project of the improvement program we move it ahead in 18 months. that is the major reason on the water side. on the heche we have the mock sons. on the heche power side we wanted to changes are similar to the waste product side where one year one dropped off and we paid for a lot of the power because we are providing the power as transbay and we had buy a lot of

equipment. the propose capital budget, the changes is about $42 million that we plan to spend less than we anticipated. we are actual reducing our budget and the two major factors is we did a validation for the program an we aligned and scheduled some projects where we were anticipating spending more this year which we were planning to spend a couple years out. so we experience some savings there and then the other big thing is that we reduce financing cost about $20 million because we had more cash because of the bawsca repayment. i have several slides which go into detail, but i will skip over them in the interest of time but the bottom take away is for

every increase we have to pay to cover it. i just want to highlight that. so, i just wanted to talk about our upcoming puc priorities just to give you an idea of what's coming. and, again, we want to kind of recap that, the news was good, we had our cost increases which we were able to cut in other places, but the main thing is we are living within our means and the two year budget cycle served as well. again, our core priorities, are delivering high quality 24 hour 7 day a week essential services and also make sure our infrastructure is in great repair. we are now looking at our sewer system

improvement program and those lesameplto how we go about dealing with the challenges. and so as annoy we -- you know we have a very old system and we've been pretty much operating it limping along and it time to make a new investment. we have invested bring the water to the citizens of san francisco but we haven't invested in taking the water and treating it and putting it into the ocean safely. that is the mantra that we are focusing on. as you know that we have some old infrastructure a lot of a our sewer lines of very

old. we do have some infrastructure that is by recent so, you are collapse on second avenue and lake street whiches in the the paper today. >> i'm just going to comment how up to speed an timely were you on that one. i was talking to supervisor ferrel in his district. it was pretty good that you were able to catch that image. thank you for doing that. >> yeah, you are right, it's timely, just to let you know, that is an 1898 sewer. just to illustrate that we have a lot of facilities that are in a state of disrepair and we really need to address that i also want to thank ferrel for a great job in educating everyone there that we need to invest in

infrastructure. it's going to cost money but it's something that we need to do. >> along with aging sewer lines, we have aging treatment facilities and one of the big ones that we are really focusing on is the southeast treatment plan which treats about 80 percent of our sanitary flow and our storm water and it has leaked in the past years. we have emergencies to keep this plant running. it's time we reinvest in this before it results in regulatory fine. that's our number one priority is to really invest in that plant and also we need to invest in the community who has been putting up with a plant that's been deficient. the other is impact in climate change. we are really

struggling with climate change and how we address it. we really studying it because it leads with a lot of local flooding and it wreaks havoc on our system. that's one of the challenges that we have before us. the next slide is we have a 20 year improvement program and identified $20 billion worth of need. we need to look at and prioritize what we need to move forward on. the commission approved one which is $2.7 billion. so we very excited to really address this and tackle this phase one of the sewer

system improvement program. our second priority with the puc that i want to preview you today is our rate setting. r net cycle. so what i want to do in the next slide is go over the time lines because we have to start early so that these rates can get into effect. later, this summer we plan to have an independent rate study completed towards the end of the year we are going to do a rate fairness board hearing and then we plan to go to the commission in december later this year and hopefully we'll submit to the board of supervisors around february so the rates can go into effect

july 14th. we plan to do a lot of outreach and include everyone and why the rate will be increasing. we set rates for water and waste water and it's a combined bill. so we wanted to point out some key upcoming milestones in there so that's what they are. so the next slide, it's going to be heart doctor -- hard to see it. the area is what is already approved a 5-year rate increase. the other one is a rate increase that we are proposing. if you look at the first roll is really water sewer 24 hour service. that is

keeping the current staff to making sure the chemicals and staff and labor staff and if you look at the out years it's pretty much rising with inflation. the remaining portion of the rate increase is investing in our water and waste water system. we will probably really come back and talk to you about this and go in more detail. the message look at this slide is affordability. we are trying to keep the utility bill under 2.5 percent because that's the definition of the us e p a for each utility but they wanted to

keep it under 2 percent of the average household income. that's what we are trying to acco what i would like to do is turn it over to todd for the budget adjustments. if you have questions now, i'm willing to take it or if you have questions after todd's presentation. >> today, assistant general manager and cfo for public utilities. as the general manager explained this is a great time because this is the first time that we come before to you ask for cost implementing savings. there is 5 items on your calendar. the first one is an over

supplemental which is fully funded through cost savings already incurred and if we made through chair request. >> yes. mr. young could you please read the other items? 130364 [de-appropriation and re-appropriation - public utilities commission overtime - $71,016 - fy2012-2013]1303642.sponsor: mayorordinance de-appropriating $71,016 in salaries in the public utilities commission, hetch hetchy department, operating budget and re-appropriating $71,016 to overtime in the public utilities commission, hetch hetchy department operating budget in order to support the department's projected increases in overtime as required per ordinance no. 194-11, and requiring a two-thirds vote of all members of the board of supervisors for approval. 4/23/13; assigned to the budget >> yes. mr. young could you please read the other items? 130364 [de-appropriation and re-appropriation - public utilities commission overtime - $71,016 - fy2012-2013]1303642.sponsor: mayorordinance de-appropriating $71,016 in salaries in the public utilities commission, hetch hetchy department, operating budget and re-appropriating $71,016 to overtime in the public utilities commission, hetch hetchy department operating budget in order to support the department's projected increases in overtime as required per ordinance no. 194-11, and requiring a two-thirds vote of all members of the board of supervisors for approval. 4/23/13; assigned to the budget and finance >> yes. mr. young could you please read the other items? 130364 [de-appropriation and re-appropriation - public utilities commission overtime - $71,016 - fy2012-2013]1303642.sponsor:

mayorordinance de-appropriating $71,016 in salaries in the public utilities commission, hetch hetchy department, operating budget and re-appropriating $71,016 to overtime in the public utilities commission, hetch hetchy department operating budget in order to support the department's projected increases in overtime as required per ordinance no. 194-11, and requiring a two-thirds vote of all members of the board of supervisors for approval. 4/23/13; assigned to the budget and finance committee. 130366 agenda[de-appropriation and re-appropriation - public utilities commission overtime - $250,000 - fy2012-2013]1303663.sponsor: mayorordinance de-appropriating $250,000 in debt service in the public utilities commission, water enterprise department, operating budget, and re-appropriating $250,000 to overtime in the public utilities commission, water enterprise department, operating budget, in order to support the department's projected increases in overtime, as required by board of supervisors ordinance no. 194-11; and requiring a two-thirds vote of all members of the board of supervisors for approval. fiscal impactt4/23/13; assigned to the budget and finance committee 130366 agenda[de-appropriation and re-appropriation - public utilities commission overtime - $250,000 - fy2012-2013]1303663.sponsor: mayorordinance de-appropriating $250,000 in debt service in the public utilities commission, water enterprise department, operating budget, and re-appropriating $250,000 to overtime in the public utilities commission, water enterprise department, operating budget, in order to support the department's projected increases in overtime, as required by board of supervisors ordinance no. 194-11; and requiring a two-thirds vote of all members of the board of supervisors for approval. fiscal impactt4/23/13; assigned to the budget and finance committee 130367 [de-appropriation and re-appropriation - public utilities commission expenditures - $16,546,000 - fy2012-2013]1303674.sponsor: mayorordinance de-appropriating $16,546,000 in existing wastewater capital improvement program project budgets and re-appropriating the funds to wastewater sewer system improvement program budgets adopted by the public utilities commission. fiscal impactt4/23/13; assigned to the budget and finance committee 130366 agenda[de-appropriation and re-appropriation - public utilities commission overtime - $250,000 - fy2012-2013]1303663.sponsor:

mayorordinance de-appropriating $250,000 in debt service in the public utilities commission, water enterprise department, operating budget, and re-appropriating $250,000 to overtime in the public utilities commission, water enterprise department, operating budget, in order to support the department's projected increases in overtime, as required by board of supervisors ordinance no. 194-11; and requiring a two-thirds vote of all members of the board of supervisors for approval. fiscal impactt4/23/13; assigned to the budget and finance committee 130367 [de-appropriation and re-appropriation - public utilities commission expenditures - $16,546,000 - fy2012-2013]1303674.sponsor: mayorordinance de-appropriating $16,546,000 in existing wastewater capital improvement program project budgets and re-appropriating the funds to wastewater sewer system improvement program budgets adopted by the public utilities commission. fiscal impactt4/23/13; assigned to the budget and finance 130366 agenda[de-appropriation and re-appropriation - public utilities commission overtime - $250,000 - fy2012-2013]1303663.sponsor: mayorordinance de-appropriating $250,000 in debt service in the public utilities commission, water enterprise department, operating budget, and re-appropriating $250,000 to overtime in the public utilities commission, water enterprise department, operating budget, in order to support the department's projected increases in overtime, as required by board of supervisors ordinance no. 194-11; and requiring a two-thirds vote of all members of the board of supervisors for approval. fiscal impactt4/23/13; assigned to the budget and finance committee 130367 [de-appropriation and re-appropriation - public utilities commission expenditures - $16,546,000 - fy2012-2013]1303674.sponsor: mayorordinance de-appropriating $16,546,000 in existing wastewater capital improvement program project budgets and re-appropriating the funds to wastewater sewer system improvement program budgets adopted by the public utilities commission. fiscal impactt4/23/13; assigned to the budget and finance committee. >> all four items are cost savings provided so they are self balancing and particular over time savings as well as debt service savings. the capital supplemental for the northshore is to do tishl additional work and it's important to have that additional capacity come online sooner than later. that is fully covered through existing

capital project funds we are asking you to reallocate. the next piece of legislation no. 5 is a consolidation of all of the changes and adjustments in year two of our two year budget and it reflects a reduction of cost in particular about half related to financed cost savings because of the early repayment that the general manager already pointed out. there is also a request for the release of the reserve for the waste water budget at last year's budget for the two year budget for the city the chair also had the waste water department put on repair. so today we reported back to you on the updated scoping and time of the sewer system program and so there is also inside of that legislation a request then to release the reserves to 2013, 2014 for the reducing amount. there are amendments. on page one of item no. 5 of role 11. there would be an updated a reduction of another $40,000 and then to be consistent with the release of reserve's request on page 18 we can strike sentence row one through four the reserve for the finances committee in row four and lastly, to make clear

section 3.3 row 20 through 22. it should say which update today $241 million from finance committee reserve for the waste water enterprises fiscal year 2013-2014 capital budget. if there is any questions i would be haebl to answer them. i would like to thank you for your thorough review. >> thank you, as well as we have the amendment circulated to the committee members. colleagues, any questions on these items? >> okay. thank you very much. we have our budget analyst report.

>> on page two of our report we report that the heche water enterprises budget for over time is $854,000 so that's a deficiency of 71,000 and similarly for the water enterprise there is a projected shortfall of $250,000. we recommend that you approve the proposed ordinance. on page 8

of our report allows the proposed use of 16$16 million $546,000 and $207,000 that totals $19 million you know the enforcement of the drainage project. we recommend that you prove this ordinance. this is justified. on item 5 did you want me to? on item 5, mr. chairman and members of the committee, on page 11 of our report we report that as explained on pages 11 for a

million dollars and that's for the repairs and $500,000 to compliance with regulations. as explained on page 11 in 12 of our report, a decrease in 13-14 capital budget $178 million. that's a deappropriation as noted to me that is certainly not an unusual thing where the department is deobligating although some of that money will be used in the future for projects which are not needed at this time but will be

expended ultimately in the future. you have 2 million development for the projects and $41,000 for street light improvement and programs noted on page 12 of our report, that includes 281,000 for fire is you suppression project. supervisors, again we've reviewed these request and recommend that you prove the proposed ordinance. >> thank you very much. >> colleagues you have any questions for mr.