on either a competitive or negotiated basis and delegate to the gm authorization to award each series of bonds to the highest bidder. >> good afternoon, commissioner charles perl, this item before you today is to request authorization to remupbd existing water revenue bonds to a lower interest rate. we continue to see interest rates at historic lows and given the situation with reduced water revenues and the water enterprise we wanted to take advantage of this at that time before the expected rise in interest rates later this year. we have been keeping an eye on these bonds to refund and thought this would be a good time to bring this to you. so if i could just have the slides? so the good thing with these revenue bonds is that the board of supervisors has already given us preapproval to refund bonds. the basic concept here is that we aren't requesting any new authorization, we're actually trying to save the

organization and rate payers money. in 2012 a couple years ago we received the authorization to refund up to $500 million in bonds from the board of supervisors. we used a little bit of that in that year, 2012, so we are coming forward to you today to use the rest of that existing authorization. so what we're proposing is to request from you an approval of to refund up to $450 million dollars of outstanding bonds. we look forward to bringing that to the market probably next month in march. they will be tax exempt bonds and right now we're looking at interest rates of around 2.7 percent for those bonds and just to give you a sense what that means, our current bonds are right around 4 1/2 percent so we're bringing the 4 1/2 percent bonds down to an average of about 2 1/2 percent. up to 30

year bonds but the vast majority of the savings that we will recognize will be over the next 5 to 6 years because, again, the interest rates over the next 5, 6 years versus 30 years is a bigger differential than 30 year when you compare 30 year bonds to 30 year bonds. right now we're looking at savings of about $53 million dollars. that will help us not so much in the current year but over the next few years 1212 and 14 million years per year in debt service savings so it's really savings for our users and we will share that with both our wholesale and retail customers. the bonds that we're proposing to refund, believe it or not, it's our first wsip bonds that we issued in 2006 a and some of our 2009 a and b bonds. we have an estimated savings rate of about 11 percent. the city has a general savings rate of 3

percent at a minimum so we are able to get over that threshold quite well. and as this slide notes, we're looking to refund about 476 million dollars in bonds. so the city charter allows us to bring forward refunding bonds to achieve rate payer savings. we've already received the authorization so we're looking for your approval on this today. we will bring forward a report to the board of supervisors once the transaction is sold to show them the actual savings that we're able to lock in. the documents you have before you today are very similar to what you've seen before, the preliminary official statement, we go through a supplemental indenture which shows the nuts and bolts of this particular transaction, the continuing disclosure certificate is our promise to talk to the investment community about this

each year and how we're doing on our revenues no big changes in these documents, they are all very similar to what you have seen before of and with that i will take your questions. >> only a comment, it's real money. >> i guess my only statement is wow. >> we're taking advantage of the last big opportunity to do refunding. so there won't be much after this, assuming that interest rates do come up as expected. >> well that's true but we've been hearing about that for a long time, haven't we? so that could be to our advantage if it doesn't happen. may i have a motion? >> i have move it. >> second. >> further discussion? all those in favor? oh, sorry, public comment? i will call for the vote. all those in favor. opposed? the motion

carries. thank you. next item. >> item 9, public hearing to consider and possible action to adopt the san francisco public utilities commission 10 year financial plan for fiscal year 2015-16 through fiscal year 2024-25. >> good afternoon again, commissioners, charles perl i wanted to let you know that this update is similar to what you've seen in prior years for our 10 year plan updates so i look forward to spending the next 5 or so minutes with you just talking about the changes that have occurred from what you saw a year ago. so many of the slides haven't changed much so i will spend more of my time on the slides where there has been a change. with that, we don't have any rate actions before you in this budget cycle and next year's fiscal 16 is the second year of our two year budget cycle, so most of the changes are due to the fact that average customers are using less water and how that has impacted our 10 year

plan, as well as some capital plan revisions. so the way that this 10 year plan is structured for those folks watching on tv we have the key assumption slide in front of each of our 3 enterprises then we have the money slide. so this is the key assumption slide again talking about what has changed, those are noted as new, new issues or new items. again, as has been mentioned previously we have reduced water sales, both retail and wholesale water sales, that we are needing to manage around, of course. that has impacted the 10 year plan by about $150 million over 10 years and the revenue bond refunding that you just approved will help offset some of those lower sales and lower revenues by about one-third. as noted there are some, you'll hear more about this when we talk about the capital plan, but there have been some changes to the capital plan.

most of those changes is the 10th year coming online and the year that we're in now comes off the plan so we're essentially moving forward one year in terms of the 10 year capital plan. this is the money slide and i can appreciate it's small, but this is our 10 year horizon looking forward. sources, revenues and other revenues coming in are at the top, underneath those are uses which is our expenses, o and m and debt service and that kind of thing, then all the revenue requirements are highlighted in yellow there. those are the ones you already approved so you already approved retail rates for water and sewer enterprises through fiscal 18 so we're not proposing of course any changes to those and you have approved the wholesale rate change for the current year and the two things i would note on this slide is that the rate -- i'll describe this in more in a moment -- but the wholesale rate we are

projecting for next year is higher than what you saw a year ago. it's nearly 31 percent and i'll talk a little bit more about why that's the case. the other thing we've added is the very bottom row. you see 5.2 monthly average, 52.and 5.5, the average usage of water has gone down in san francisco. what we presented to you a year ago was 6 units of water on average per month, that's about 4500 gallons, but now we're seeing about 5.2 units per month. what this 10 year plan projects is that we come back a little bit from this low level that we're in this year, we get back to about 5 1/2 units per month. it's actually easier to see on this slide, which is the next one, which shows over the past 12 years how these changes have occurred with water sales. on the far left you see the last drought, you see the dips there, the two

lines are retail and our whole sale customers. the first dip is the last drought that we went through, then the great recession in 2009-10 of course reduced water sales from a more economic perspective, then the far right is where we're at now in terms of the current drought. and the question that's sort of on our plate that we need to answer is where will consumption come back to? as you can see there is a downward trend line in these charts and generally the issue we are needing to manage around is that as folks conserve and use less water it doesn't come back to where it was before and that is seen repeatedly over time here. so as an organization we will just need to manage around that reality. but as you can see, we are assuming that there is a comeback on the far right in fiscal 16 for retail sales. we have about a 6 percent drop in consumption to retail customers

and we're assuming about half of that comes back to retail sales. coming back to that 64 mgd level comes back to that downward trend line that you see. >> on what do you base the water sales going up, consumption going up? >> we do see generally -- well, two things. first of all when we plan, we set budgets and we do planning, we assume a normal water year. so we will assume that there will be, even though there very well could be an additional reduction for water sales and drought for next year we assume a normal year when we set rates and budgets. so that just shows we will need to manage around the realities as they present themselves. this slide just shows on the retail side again water retail. what's in yellow at the top is what has been approved, no changes to that, of course. but in order to keep things in

balance i mentioned roughly a hundred million or so that's dropped in terms of revenues over the 10 years for the water enterprise. that has actually resulted in what we are now projecting to be higher rate changes beginning in fiscal 19. so if you look at fiscal 19 and 20 and 21 you will see not the far right column but the next one over, the 3 percent and 3 percent and 2 percent, that shows you that the projections we have for retail rates in those years is two to three percentage points higher than what we showed you a year ago and that's, again, just to balance things out, lower water revenues needing to balance out with both cost cutting and higher rates. we will come back of course when we do our cost of service study for our water and sewer customers in 2 or 3 years. this will all come back to you for review and we'll do our best to keep those rate changes as low as possible that's our

general commitment to you, but we're letting you know now in the absence of right sizing and cost cutting that the projections we're seeing now for rates are slightly higher in those outer years. the interesting thing, though, is the bill is lower. as rates go up and folks use less water, the average bill goes down. you will see in the far right column compared to 3 years ago and the second to the right column compared to last year folks are using between 5.2 and 5 1/2 units per month, that has translated into lower costs for them. that's an important point to make. even though there are higher rates that we're projecting in later years, that is currently being offset with lower useusage. >> i have a question on that. so the refunding of the bonds that's going to happen, will that affect these numbers yet again? >> we have included an

assumption. the actual data from the actual sale will firm those numbers up but we have included an assumption in here on that. this just shows that over time, 24/7 operations and revenue funded capital and debt service is trending up, but debt service is the larger contributor in terms of the growth of the cost of the average water bill. that's the top piece of this chart. wholesale, as i mentioned whole sale customers, we sent them a letter in january giving them a sense of what the rates could be for next year. we reset whole sale rates annually so unlike on the retail side we've set those rates, retail rates through fiscal 18. wholesale rates we set annually. so we had told you a year ago that the rate for the wholesale customers was projected to be the rate increase was about a 12 percent rate increase. now we are looking at an approximate 31 percent rate increase for next year. that's all driven by the

fact that in the current year we are projected to receive about 25 million less than we expected, so we'll take that 25 million that we undercollected in the current year and plug that into next year's rates, which is what's driving that change of going from 12 percent to 31 percent. so that is what's making that change. you can see the other years below that really haven't changed that much, it's truly just what's happened in the current year. sewer is just a similar story just in that of course as we generate revenues for waste water that's driven by potable water sales minus the full factor for outdoor water use, the 10 year impact is an estimated 15 million from lower water sales and we have adjusted those rates again in fiscal 19, 21 and 22 -- 19, 20, 21 and 22 to yuf set that reduction. there also have been some changes in the capital plan which you will hear more about when we go to

the capital plan. this again is the money slide. i won't spend a lot of time here other than to say that the rate changes, this plan is balanced, it abides by all of our financial policies and the rate changes beginning in 19 is what have been updated and those are reflected here similar to the water. the water slide, again what's in yellow is what's already been approved, we aren't proposing to reopen any current rates at this time, but beginning in 19 you will see that those rates have gone up by 2 to 3 percent each year. here is the average bill, the pronouncement again is much smaller again because water consumption assumption has gone down. interesting again just the components of the sewer bill. you have your 24/7 operations,

your revenue funded service. the commission has only taken action on phase i, but we have included in all of our projections here if there were an approval on phase ii and phase iii just so you know phase ii and phase iii are included in our cost projection. here's the combined story. the combined story again is water and sewer together, the rate changes once you look at both of them combined are going from what we had told you last year of right around 10 percent to between 10 and 12 percent a year. again we will bring these rate changes back to you in the next 2 to 3 years once we have our retail cost of service study and in the interim period between now and then we will work on bringing these rate changes down as much as we possibly can. that was the rate side this

is the bill side. again, the average bill is projected to be slightly lower in 19 and 20 because of that reduced usage. we do show 20 years, we've gotten some questions over time about what happens in year 11 and year 12 in our 10 year 12 so we show 20 years of future horizon on this chart. >> can i -- i have a question on that. you know we've been talking a little bit about storm water fees, potentially. has that been factored in at all as a projection? >> right now we haven't made any bifurcation of our waste water rate between what's storm and what's dry weather flows. we are working on that off-line in terms of an internal analysis and that it will be part of our work package that we bring forward when rates

come back. we talked about a variable rate setting, we can give you an update on the question of storm flow. >> and i guess the other question we were talking about earlier is this kind of fixed versus the volume metric, that will be provided too as an option in the rate structure conversation, right? >> that translates to about 15 percent of the bill. (inaudible) we have definitely more expense than 1 would consider being fixed, a lot of our debt service and what not, we can make that a larger part of the fixed rate charge. >> those numbers, so those numbers that you put on that previous slide include some of those conversations or is that kind of business as usual? >> business as usual, yes. affordability i know is a big important thing. as we talk

about fixed numbers and going forward, this commission has created a level of service of 2 1/2 percent of median household income and the san francisco water power bill, combined bill, we are able to keep underneath that 2 1/2 percent again as a factor of folks using less water. that's how we're able to keep below the 2 1/2 percent. so we are able to maintain that level of service goal. >> and i will make my constant observation that that's based on a median household income of $78,000. there are a whole lot of folks that don't make that. for most of us it may be pretty affordable, for a whole lot of folks it's not. i think as we look at rate structures that's something we have to keep our eyes open to as well. >> okay. i'm going to skip forward, if you don't mind to hetch hetchy. hetch hetchy is in

balance, not a lot to talk about here, which is great. we have one cent rate increase that's already been approved that will bring them to 1.78 cents per kilowatt hour. full funding, et cetera, is already included in our budget., has been included. again this plan is balanced, it conforms with our financial policies and i'm happy to take your questions. >> commissioners, questions? this is a public hearing. will this come to us next meeting for a vote? >> actually this is a public hearing for you to take action, so you would close the public

hearing and take possible action. >> why don't i have a resolution in here? >> no, not taking action? we were. >> there should be a resolution in the agenda item. >> i don't have one. >> it's on the back of the agenda item, just a short resolution, item 9. >> on the back? >> oh, it's the next item item 10. >> no, item 9 is actually the public hearing on the 10 year financial plan. >> right. >> and item 10 is the 10 year capital plan. both of these are public hearings to hear the financial plan and the capital plan and close the public hearing and take a vote to adopt them as required by the charter. >> oh, i see. >> can i ask a question? i have a question. so i know that we are moving forward, i guess, with some

version of clean power sf and that that's connected with the business plan that may or may not have an effect on the rate structure, potentially, and some of the things that are currently being funded and the assets that we have may become part of that program. how -- i mean once we've heard from the supervisors and lafco the urgency of moving that forward. how does that fit into the adopting of this financial plan. >> the financial plan is assuming the last cost of service done for the power enterprise back in 2010. we're issuing a rfp for the next cost of service study. as required by the charter we have to do that for each utility at least once every 5 years. we're planning to do that work over the summer so when we come back

in the fall we will have rate fairness hearing boards and that kind of thing and bring back to you folks the rate fairness board's thoughts on the next two year cycle when we go into the budget conversation, so we will have cost of service study and the power as relates to that. as relates to cca we will build into that cost of service assumption some general assumption of what those revenues would be, but the cost of service work that we would do for the power enterprise wouldn't be to per se set rates for cca, we would be doing that throughout the rest of this year as a separate track. >> so just to understand the context of these two items, they are required by the charter. you can always revisit your financial plan, your capital plan, at any time you want and adopt it, but this is required by the charter for us to submit actually adopted and for the capital plan is goes into the capital planning process for the city overall.

so while it doesn't have all the nuts and bolts and things you are thinking about or contemplating or business plan there, you can always come back to it. but we have to adopt it each and every year and this is the time of year that we actually adopt it. >> i have another question on something that's not in there but i didn't see anyway, this mountain tunnel issue. >> the mountain tunnel is in the capital plan, which is the next item. this is the financial plan. they are actually tied together. what we're presenting first is what are the financial projections, it includes all the capital projects in the next 10 years in the financial plan. so year 11 comes in year 1 becomes year 0, mountain tunnel is in there, they feed into the financial plan and then we start doing projections out into the future. >> okay, thank you. >> good. thank you, mr. perl

is there any public comment on this item? may i have a motion? >> i have move to close the public hearing. >> all those in favor. i already asked for public comment thank you. >> the next item is the 10 year financial plan -- i'm sorry, go ahead. >> item 10, public hearing to consider and possible action to adopt the san francisco public utilities commission 10 year capital plan for fiscal year 2015-16 through fiscal year 2024-25. >> good afternoon, my name is francis lee. i am here to present the fiscal year 2015-16 through 2024 and 2510 year capital plan summary. this table highlights the two plan years capital plan by enterprise. between the two 10 year capital plans, which is one from fiscal year 15 through

2024 and the other one is 2016 through 2025, the change is $157 million, which is primarily explained by the rolling 10 year changes from year to year with programs coming on in the 11th year or the new fiscal year and programs dropping off in fiscal year 2015. i apologize for this slide looking very distracting with all the arrows going in different directions, but to summarize water's 10 year capital plan assumes 120 million of programs added to the new 10 year plan and offset by the wsip one-time funding in 2015. the auxiliary water supply system, 86 million comes off in the 10 year plan as it

is fully funded in the current fiscal year. waste water differential of 16 million is the planned rollout of the sf sip program and hetch hetchy's change is 43 million dollars. this slide illustrates the various changes and the water enterprise and again the changes are really between the two 10 year capital plans due to primarily the passage of time. the awss is fully funded by the general obligation bonds. and waste water fiscal year 2016 through 2025 capital plan changes by $166 million primarily again because of the planned rollout of ssip

this slide shows the changes of the capital plan and hetch hetchy power and hetch hetchy up country. next slide shows the movement of programs within hetchy power from the last 10 year capital plan to the next. and hetchy water up country and hetch hetchy capital plans are down as projects rolled off in the 10th year of the last capital plan. the commissioners requested to adopt the charter mandated capital plan for fiscal year 2016 through 2025, and the plan will be submitted to the capital planning committee on february 23rd and further submitted to the mayor's office and the board of supervisors before march 1st. at this time

i'd be happy to answer any questions. >> commissioners, any questions? seeing none, may i have a motion? >> i will move it. >> second. >> any public comment on item 10? seeing none, i will call for the vote. all those in favor? opposed? the motion carries. prrp. >> item 11, approve budgetary adjustments to sf public utilities commission's adopted fiscal year 2015-16 annual operating budget for the enterprises under the jurisdiction of the san francisco public utilities commission. >> just so you know before we start, we are requesting some additions to the 2 year budget which will have to go to the board of supervisors for approval but miss lee will explain what those are and they're very focused in request.

>> thank you. yeah i will introduce the budgetary adjustments to the sfpuc's adopted fiscal year 2016 annual operating budget and this mid-cycle review. so the commission approved a budget for fiscal years 2015 and 2016. the adopted budget for the 3 enterprises is 988.98 million dollars. the first adjustment to this budget is the mou adjustment made by the controller's office to reflect reduced retirement rates and fringes. after evaluating and rejecting many budgetary adjusting requests, there is only one proposed adjustment presented to you now and this request is half a million dollars for new services installation and the water enterprise to purchase two