>> good afternoon everyone. i am joined by supervisor avalos, breed, wiener. i want to thank the members of sfgtv. do we have any announcements? >> yes mr. chair, submitted to the clerk. items after the date will appear on the may 6, 2014 board of supervisors agenda unless otherwise stated. >> thank you. can you call item number one please? >> item number one, hearing to receive update on the budget for fiscal years 2014, '15 and fiscal year 2015, '16.

this is >> this is a first of two herings we have today. i want to thank you for being here and all the [inaudible] thank you for being here. you can take it away. >> thank you. good afternoon chair farrell and supervisor avalos, breed and wiener. my name is har long kelly and i'm the general manager of the san francisco public utilities commission. this is my first two year budget and i am posing as a general manager so supervisor farrell asked for me to give a brief high level presentation today and then on may 21 we will go a deeper presentation on our two year budget proposal. today's presentation is organized in the following ing manner. first i'd like to give a p

bird's eye view of our bud jed and a year ago at this committee and also give you updates on our capital programs, rate sending process, the ring fire and the draught response. finally i will close with the big picture of key updates and challenges that are in our bud get. so the p and c is guided by three core principles and priorities. one, to provide high quality services of water power and sewer, maybe tan critical enfra structure to ensure our assets are in a state of good repair. we are constantly working to balance these priorities. so how are we moving forward on

these core priorities. as far as water enterprise, we are over 80 percent complete with our water system rebuild and we're on track to replace 15 miles of water mane every year. with the power enterprise we are focusing on our ageing assets. my priority is investing in our street lights to promote public safety. as far as a waste water enterprise we are on track to replace 145 place 15 miles of sewer every year and rebuild. the key is to rebuild the southeast treatment plant. there are a number of ways that we are working to preserve rate

pair affordability while making capital improvements. we will see these reflected in our current two year budget, as well as up coming proposed for the next two years. first we have nearly a flat staffing so we minimize the increase of staff. we also -- we proposing a relatively flat operating budget with just the costs of inflation adjustments. our finance team has also been successful and lacking in some of the lowest bond financing costs since the 1960's. . finally we are consistently considering how the time and phase our projects so we can make these improvements in a way that has the least impact to our rate payers. and i will talk more about in more depth of how this translates to the rates. it's about a 7 to $10 increase

in the monthly bill for the proposed rate increases that our commission is considering. here's a snapshot of our budget. the main take away here is that we're up about $140 million and the question is what is that? the break down that we show here is that the major investment is really driven by critical capital investments, whether we're investing in projects or paying the debt on these projects once we built them. the big picture or reason for this proposed budget increase is related to our capital needs. there are additional elect ricity costs that we will incur. these are based on the transmission and distribution costs that we are paying pg ande and we also will see our

personnel and operating costs increasing ing rough ly by 2 percent, which is roughly about the cost of inflation. now i wanted to give a brief review, some updates from the pnc since the last time i made my budget recommendation. this includes our rate setting process, as well as the fire and draught. thankfully there's no locusts yet, but the year's not over. april marks the ten year an niversary of the first project in the water system improvement program going into construction. we are now about 80 percent complete with the program. we had a wonderful ceremony monday at [inaudible] reservoir with supervisor yee. i'd like to thank the board of

supervisors. you also see some of the key numbers related to the water system rebuild. we are very proud of this program and how it's progressing. we have critical projects that are still underway, including [inaudible] dam, and the bay tunnel. we project that this program will be completed by 2019. on the sewer side -- san francisco is really fortunate to have a sewer system that's been serving the city for over 100 years, but the system is old, is ageing and is in need of an upgrade. in august 2012 our commission acknowledged the need to invest nearly $7 million to ib invest in our sewer system to bring it to a state of good repair.

2 billion of this is invested in the out east treatment plant for the digesters who receive 80 percent of the city waste. a key update since i presented to the commission last year is that we are move ing forward with the plan of the tie jesters. digesters. another big priority over the he past year is we've gone through the rate setting process. it goes for both water and waste water because customers receive a combined bill. this has been a yearlong process. the charter requires we do an independent rate study. our staff has been developing a

four year rate proposal that was considered by our commission last week. i'm extremely proud of the work of our external fair and finance bureau and finance team jointly presented over 100 committee meeting, civic groups, participating in many events and reached approximately 10,000 people. all our materials were developed in multiple languages. in fact, 20 percent of our presentations were done in spanish, cantonese and mandarin. in addition to our in depth outreach and education effort, we also set over 200,000 prop 218 notices, which are legally required, summarized what the

rate proposal will be. we received about less than 100 protest letters . take away from all the outreach, is that customers need further rate increase to implement or rate infrastructure, but no one likes the rate increase. so the question is, what does the rate proposal look like? it's a four year span. the average annual increase is 7 to $10 a month on the average single father mily household bill and what it supports is our 7 day, 24 hour maintenance for replacement of water manes and sewer pipes each year.

and also the planning and early implementation of the sewer system improvement program. the rate fairness board was very involved. that had about ten meetings on the rate setting package. they determined the rate proposal is fair and concur with the staff recommendation. >> just regarding the sewer replacement and now that it's underway, i'm sure those of us that are here all the time -- can you tell us the rate we're doing it today, how that's going and also what we fra digsly traditionally did versus what we're doing now on our streets. >> what we were doing before -- years ago we had a rate freeze on the sewer side and now as it's ageing we're trying

to catch up. the life of a sewer is about 100 years and the sewer is 100 years old. we're experiencing more sewer main brakes and water main brakes so we are in the process of -- doing asset management to determine a replacement program. in order to bring our pipes in a state of good repair, we reupped it from 7 miles to 15 miles per year so we're trying to prioritize and hit each community to really make an impact. >> where are we kind of on pace to be doing that? >> yes. but as you know, it's very challenging with all the other work is being done in the street and it's been really a task to actually participate in coordination, but i think we're trying to do a better job of doing that. i think one of the things we need to work on is new services

because, you know, can't really anticipate in advance when someone wants to do service. >> supervisor mar? >> i wanted to ask mr. kelly if you can go back to slide 16 on the rate package. i know you've brought outreach explaining the rate increases, but it says an annual rate increase -- $7 to $10 per bill for an average single father and mily, so that's about $100 to 120 $120 per year. what's an average bill? >> so it's going up a little bit less than 10 percent. sgh >> it's about 8 percent. thank you.

>> i would like to then talk about the rim fire. the rim fire began on august 17 and it was contained on august 24. the burn area is about eight times the size of san francisco and affected both our water and power operations. the recovery effort is progressing well and i want to give a special thanks for supervisor avalos and breed who went to visit the site after the fire and i just want to let you know it meant a lot to the staff to see you guys out there to see what happened first hand. >> we get our hands dirty. >> but not burnt. >> our feet actually. >> so moving from the fire to the draught, i just want to also thank the board for supporting as we have responded to the draught, supervisor breed held a

hearing that sponsored two resolutions calling for the state and federal funding for san francisco. how have we been responding. well, on january 31, 2014 we officially asked customers to voluntarily reduce their water consumption by o 10 percent. san francisco has responded positively and stepped up and met this goal that we've asked them to achieve. the mayor released executive order on february 10 directing all city departments to reduce their consumption by 10 percent and we've been partnering with the city departments to work towards that goal. we also have identified a project in our water system, which is lower cherry aqueduct. this is a con tingency plan that will bring drinking water into our system as needed.

finally over the summer we will be looking very closely at our supply and our customer's consumption to determine if more stringent water conservation steps are necessary. let's talk about the key issues in our bud yet. budget. at the may 21 hearing we have provided you in depth presentation, but today i'd like to provide you a summary of the challenges we are facing. water and power has been a real asset to san francisco. for nearly 100 years we've been providing clean affordable

water and power because the system is very efficient system. it contributes significantly to san francisco. for example, contribute $678 million in transfers to the general fund between 1998 and 2001 and also contribute $151 million in funding to street lights, both solar energy, efficncy and city owned renewables over the last ten years. they've provided low cost energy to city father mily and as you know, we are providing low cost to the general fund departments like general hospital, call street lights, mta, unified school district and community college for the last 15 years.