comfortable reducing the amount of contingency and given the demand to the dollars and that programming 65 percent is an appropriate level of risk by no means do we have a crystal ball but it's a professional judgment at this point what we believe to be a judicious use of funds in our overall capital program. >> and that has been the level throughout the program? >> we've had higher levels earlier because we had more projects in construction now we're 80 percent through construction the number of projects out there are smaller and the number of risky projects are smaller so the most risky part of tunnelling is done so we do believe the

risk profile has diminished and 65 percent would be an appropriate level for where we stand today. >> certainly it is a policy call and so as the policy component of our organization if you would like us to revisit that 65 percent we would certainly be willing to do that but this is what we believe to be the best but if there's concern over 65 percent and a desire to go with a higher contingency profile certainly we would do that. >> i think i want to add i want to thank commissioner torres i think the conversation is valuable and then your response about whether or not we want to take a long hard look at that policy but i want to thank commissioner torres it's an important line of questioning. are we going to continue the

report. >> thank you very much emilio. >> i guess we're not going to revisit the policy of 65 percent at this point. i'm fine with it i just want to make sure 65 percent is a comfortable number i had the same reaction seems like a low number but in understanding how that number is derived at -- >> i think a bullet form of one or two page list of rational that way i begin to understand it much better my own experience is my own remodelling and sometimes these contractors get out of hand [laughter]. >> and you also don't want to

tell your contractor that just in case you have another hundred thousand tucked away in in a corner. >> so to cover a hundred percent of it we think would be inappropriate but we also think 50 percent is too low, 65 seems appropriate. >> before you start again so the will of the body is we want a short memorandum and once we receive that memorandum we'll discuss whether we want to revisit or change or delete or leave it as is -- is that our will? >> i don't think it's a commission policy more a policy as it relates to industry type of practice when you are doing a program of what is a ri of a program that you are willing to accept and there are a lot of factors on, you know, for example, what is the exposure i mean you can have people look at it and maybe the exposure

which is the cost of it, may not be as big as we are indicating so i mean there's a lot of engineering factors that go with that and i just think looking at everything, we felt very comfortable that you don't want to budget a hundred percent of everything that's possible that would happen, i mean, no one would do that. so we felt 65, 70 is a good spot but i think the message we're trying to convey here is we're not out of the woods yet there's still a lot of risk out there. >> thank you. >> thank you. >> so we'll provide the 2 page -- >> so i'll quickly go through the rest of my update here as i mentioned at the end of the reporting period there were 3 projects in preconstruction the seismic upgrade and ground

water storage and recovery and as i mentioned the regional ground water storage and recovery it's important to mention that the eir will go to the planning commission to consider certification this summer and hope to come to you to request project approval late summer. >> this slide, i just wanted to include it serves as a good reminder really what we're aiming for in this program in terms of seismic upgrade this slide shows the projects in blue are complete and a handful of projects in green not complete and the tunnel which is 95 percent and and the seismic upgrade pipeline 3 and

4, 92 percent and the peninsula upgrade so you can see we're making significant progress towards meeting that level of service goal and just quickly moving to construction, we talked extensively about the calaveras dam replacement so i won't go into a lot of detail here other than to update you that the concrete replacement of the foundation that we talked about in the last meeting had had a begun and in fact a significant amount of concrete placed to date so the project is moving forward expeditio u.s. ly and we have an extension of the program due to this project. last time i

mentioned that the tunneling was completed last october all of the pipe has been installed and space between the pipe and tunnel and we do plan to have this project in service this fall so it's going to be a major milestone for the program. similarly the bay tunnel all of the pipe has been installed the grouting has been completed and that work is advancing efficiently and finally there's a major milestone on the seismic upgrade ushgsz upgrade.

>> there's really only one more piece of pipe needed to connect this up so the ball joints and slip joints are in place and this will be a significant reduction to the program overall because those were significant risks prior to getting those in place. and then on the crystal springs san andreas upgrade -- we continue work on the crystal springs structure with plan completion by this fall as i mentioned before we do have some significant work to do with the contractor to resolve some cost and schedule issues but the physical work is on track to be complete this fall and finally, this shows a picture of the new water reservoir

long-term improvements. there's only one major shut down left on the project and the project is going very well on schedule and on budget and lastly i'd like to mention that the program gets some industry awards this got national recognition and the sunol valley treatment plant got national recognition as well and pipeline number 2 got local recognition so we continue to honor our project teams for their hard work so thank you. >> thank you very much for being here. >> if i can add one more thing commissioners dan kind of glossed over it because he lives and breaths this but that's really a marvel and puts

the puc on the map with technology that slip joints is a joint of our major pipeline that crosses the hayward fault that slip joint is designed to shift 6 and a half feet in each direction in the event of a major earthquake and not interrupt the supply of water to our customers there's not a design like that in the world and we've broken the ceiling. >> who manufactures the joint. >> it was manufactured by a small firm by the name of stress engineering [laughter] and it was very stressful because we ran into major incidents where. >> it's an american company. >> it is a u.s. company from texas. >> well that's not american

[laughter]. >> but we ran into our challenges there where they were the most advanced from a design perspective but then we put strong requirements on the overall design and as a small firm they didn't want to sign our liability requirements in the overall design so lots of staff work and attorney work that went into this in addition to all the technical work and as dan said we completed a full scale test and the joint passed the test and it's going into installation. >> thank you for adding that that's great news. commissioners do have a comment? >> i wanted to talk about the sewer system improvement program and i have leamon abrams to talk more about an advisory committee that we're forming to talk about

activities that we're doing in the southeast called the southeast working group. >> general manager thank you so much my name is leamon abrams and i wanted to provide and introduce a new working group as the general manager mentioned -- the sfpuc southeast working group that's been formed and that working group is really to coordinate the large investments that sfpuc is making in the southeast and as you know we're making investments in projects and in addition to services like the contractor's assistance center and project milestones as well as to achieve the level of service goals and policies that have been approved. and to make sure we continue our

responsibility to inform and involve stakeholders in a meaningful way. they will follow up to the work that the southeast task force that was formed in 2009 completed as and you probably know dr. jackson was a member of that task force and she's also a member of the southeast working group and to make sure we levelled and harnessed that group so that we leveraged the existing work and make sure that we coordinate all the outreach and activities so we want to thank the task force to continue to move us forward and i should also add that the meetings will be open to the public and we'll host a

public website and provide input to the working group and this was again a quick introduction to the southeast working group. it is made up of about 20 organizations and i should add we have youth involved 3 young people that are involved so we can help in the way of mentorship and help to be a part of this ongoing dialogue and make sure we're responsive to those needs and you will hear a lot more about the working group as we continue to form. and to make sure that we involve stakeholders that represent the diversity of the city and if there's any questions i'd be happy to answer those and you

will hear more in the coming days. >> i think it's going to make a huge difference and it's something that i know the southeast community has been asking for in order to help with communication moving the project forward so i look forward to hearing what you come up with so thank you. >> thank you so much. >> vice president king? >> is there anyone from the sfpuc represented on the working committee? >> the staff is supporting the working group by documenting the findings and making sure we have the experts there to provide the input but the input. >> what is the pet camp? >> pet camp is a pet day care if you will and mark, who was a member of the southeast task

force owns that business adjacent and he's agreed to be a member of the working group. >> i see, thank you. >> it's an incredible facility. >> my dog goes there and mark is -- is a green environmental advocate as well i mean it's just a marvel o u.s. facility and very reasonably priced as compared to a lot of other places in the city [laughter]. >> thank you very much for being here i think it's outstanding please keep us posted. >> we will do. >> okay. >> okay so the last item i would like to talk about or present is the budget and as you know the mayor released his budget may 1st and wanted to just talk about the mayor's budget but first i'd like to talk about what we have done as

the puc, and just talk about what the budget was when we actually approved the budget and sent it over to the mayor's office because there was a lot of decisions that needed to happen because our financial situation as it related to hetch hetchy water and power was one of the biggest challenges that we were facing so what i would like to do is bring up this slide of what our budget looked like when we presented it to the mayor's office. >> so basically this is the graph that we showed you february 11th and it basically shows that our budget, although in in the 2 years we would be close to zero or above zero, that there were a lot of challenges that we really need to address. one of the

challenges was that the general fund rate was -- we need to look at seeing if we can increase the general fund rate to help us and then also there was a mountain tunnel which was something we wanted to look at which was included in here and we had the requirements that we had some assumptions in there and the interconnection agreement with pg and e which was in there and the other thing we started out on the fiscal year 2014 trying to reserve or preserve the the cca $19.5 million we were trying to preserve the go solar 2 million in energy efficiency but as you see in in the 2

years if we were unsuccessful we would have to revisit those policies and also capital cuts depending on what the outcome would be on trying to get the general fund to contribute more and so that is the picture that when we entered into the negotiations with the mayor, this is what it looked like, and so it, you know, going into the mayor's office believe me there are a lot of challenges and choices and hard choices that we had to make to try to bring our financial situation in a place where we felt comfortable and so what i would like to do is present what, who these conversations what the mayors budget included. can you go to the next slide? so this is what it looks like now

so what what the mayor chose to do is actually, we were able to increase the general fund from a half cent per year for the next 2 years to $0.01 so there was movement on the general fund which really helped us also gave us the ability because we're increasing the amount of revenue to bond fund our capital projects and the second thing that the mayor's office pretty much recommended is that we reappropriate the cca money, the 19.5 $19.5 million and what he wanted to do is put more money into the go solar and basically put money into one of our drop projects the aqueduct so that was something that he put into his budget. the

challenges that he had, you know, the different scenario, we ran over 30 scenarios, and the challenge he had other than reappropriating money that was sitting in reserve that was selected for cca the other challenge he had was raising the general fund rate so puc felt that the general fund rate should be increased and i think they now recognize it should be increased it's just a rate of increasing and just from the mayor's perspective, that increasing it at a higher rate it would really impact departments like school districts and city and community college, the fire and police so that was the basis behind the gradual increase and so there are still in this graph some unknowns that we are

looking at. we still haven't resolved mountain tunnel in the process of negotiating -- and there's still some risk so i still feel like i felt coming in although the picture may be a little better but we'd like to come back quarterly and just let you know how we're doing. now, the blue line that we show, if we were unable to do anything and just use the cca money and also do the half cent increase in the general fund, , you will see in the outer years we'll be in trouble and the

dotted blue line we'd be on the 15 percent that line represents the 15 percent reserve policy that we have so that we can borrow money and we will be on the black line if we're able to save about $8 million a year and so the challenge that we have is you know not only with the ia negotiations mountain tunnel but we're also aggressively looking for other customers and really defining our business plan plan and that's one thing that we're working on as a group but i'd like todd to come up and go over more details. >> so thank you general manager and todd rydstrom assistant general manager for business services and also the cfo this has been a very herculian task

about a half a billion dollars over 10 years and we came to you on april 22nd nd to run through the various scenarios of difficult choices the combinations needed to be revenues and savings cuts and deferrals and a combination of things. so the mayor's budget included technical updates and as well as well as well as fringe benefit reductions and so it took some good news and higher cost news into place but that's typical for our commission budget to get those adjustments in addition to that the mayor can make policy adjustments as well to the recommended budget that comes from commissions and is

forwarded by his office to the board and as the general manager has said a lot of progress was made so our picture went from a half a million dollars to the bad to all above zero so we're also able to project what would be above zero and satisfying the 15 percent reserve target for the commission so that's incredible progress over the course of 3 months. the key policy measures included capital plan cuts which we last mentioned and brought before you in the april 22nd packet and as well as as well as $155 million over 10 years and then the reprogramming of the cca funding reserves as well as

the appropriation proposed appropriation for drought preparedness in the cherry drought situation so slide five the majority of the changes happened on the capital budget and you will see most of them are cuts and going from the top to the bottom the san joaquin pipeline project that was reduced by by $11 million in the first 2 years however still $78 million is remaining in that project a lot of good work will continue but continue primarily in years 3 through 10 of the capital plan as currently assumed and every year you will get to revisit the capital plan and financial plan and as the general manager mentioned he's also tasking

staff to come back and revisit that quarterly to make sure we stay on track and the other key updates the water quality project the water department determined that was no longer immediately needed so that was cut a hundred percent and with the mountain tunnel again it's no longer needed as a project because mountain tunnel makes it unnecessary so moccasin rehabilitation that was reduced and there was prior year appropriations that the commission had already made so each one of these went through every single line item with myself and the general manager and michael car lin the deputy general manager what is absolutely needed right away or potentially deferrable and so

we did that. >> commissioner torres? >> what is the criteria for deferrable? >> it was was it immediately needed to meet permits as well as health and safety requirements. >> that's it? >> that was the primary criteria. >> thank you. >> thank you todd. >> thank you. >> a couple of others to mention the large one that helped achieve balancing was the streetlight consolidation project and in the capital plan discussed in february assistant general manager hail and myself brought to you many streetlight enhancement projects and this was one project purchasing streetlights from pg and e and

we could not identify a funding source so that unfunded project was eliminated so in the streetlight funding in the proposed budget as well as as well as the capital plan still increases 30 times so your investment that you have still going forward and included in the mayor's budget is significantly larger both repair and rehabilitation as well as a new streetlight work. the moccasin generator rewind was another project for example there's 2 units at moccasin that we were looking at one needs to move forward immediately but one of them doesn't need to move forward so each one of these projects was prioritized and revisited where we believed it was okay to do that at this time. those where

the reductions totalled about 179 $179 million and then there were a couple of policy decisions in the mayor's office as well to increase so the first one mentioned by the general manager was the go solar moving that to $5 million in each of the next 2 years as well as hearing the call to drought preparedness and aqueduct rehabilitation project. so that deserves a special call out. power reductions of 134 $134 million and water reductions primarily related to updates as well as the delays for joint projects like the facilities and you will see large cuts there in the facilities and we wanted to do more work