going to call us to order. >> could we have a roll call please? president stacey you're vice president are say here commissioner gender here commissioner leave aroney you have a quorum thank you. before calling the first item i'd like to announce that the san francisco public utilities commission acknowledges that it owns and are stewards of the unceded lands located within

the ethno historic territory of the mohawk maloney tribe and other familial descendants of the historic federal recognized mission san jose verona band of alameda county. the puc also recognizes that every citizen residing within the greater bay area has and continues to benefit from the use and occupation of the mohawk moloney tribe's aboriginal lands since before and after the san francisco public utility commission's founding in 1932. it is vitally important that we not only recognize the history of the tribal lands on which we reside but also we acknowledge and honor the fact that the mohawk moloney people have established a working partnership with the sfp. you see and are productive and flourishing members within the many greater san francisco bay areag communities today.

thank you. please call the first item. item three approval of the minutes of january 28th 2025. commissioners any comments corrections or questions on the minutes? no public comment please. >> remote callers please raise your hand if you wish to provide comment on item three. are there any members of the public present who wish to provide comment? if so, please approach the podium seeing none. moderator are there any callers with your hand raised? >> ms. linear there are no callers that wish to be recognized. thank you. thank you. could i have a motion in a second to approve the minutes of january 28th? >> i move that we approve the minutes seconded. >> thank you. roll call. president stacey i. >> vice president r.c.. hi. commissioner jam da. hi. >> commissioner ferrone.

the item passes. thank you. >> please read the next item. item four general public comment. members of the public may address the commission on matters that are within the commission's jurisdiction and are not on today's agenda. and i'd like to note as i do every meeting that the commission values civic engagement and encourages respectful communication at the public meeting. we ask that all public comment be made in a civil and courteous manner and that you refrain from the use of profanity. thank you. remote callers please raise your hand if you wish to provide general public comment. are there any members of the public present who wish to provide comment? if so, please approach the podium seeing none. >> moderator are there any callers with their hand raised ? >> ms. linear there are no callers that wish to be recognized. thank you. >> please call the next item. item five is report of the general manager. >> thank you ms..

lynn. madam president, nothing to report in the general manager report other than as you know we are probably going to get another big rainstorm this week in our wastewater storm response team is, you know, up and running and ready to work with all city agencies to minimize potential flooding in the city just like they did a fabulous job doing over the last series of storms. and i want to compliment our wastewater storm response team. >> they've done a wonderful job. thank you. thank you and thank you to staff. every time i get an email talking about a water main break a flood problem i think of the staff out there no matter what hour of day it is, no matter what the weather they are out there and feels like they're truly unsung heroes in addressing these various situations at any hour. so thank you to staff and to the department. thank you. that's good. >> please read the next item. item six fiscal year 20 2324

audited financial statements. >> may i have two slides? police thank you. >> good afternoon. president stacy vice president of state and commissioners. >> my name is vivian chen. i'm the deputy chief financial officer overseeing as a financial reporting and accounting services. >> today we are pleased to present the audited financial statements for the fiscal year ending june 30th, 2024 and provide a brief overview of the results of the independent audit and highlight key aspects of the agency's financial performance.

>> i'm joined today by amy louis, assurance partner at mgi ,an independent auditing firm who performs a thorough review of our financial statements. >> she will later present details of our financial statements and their financial statement audit. >> i'm happy to report that all three sets of audited financial statements one for each enterprise were issued on november 12th, 2020 for no all defendants, no material misstatements in the financial statements or internal control deficiencies observed. >> we receive an unwieldy find opinion for all three sets of financial statements meaning our financial statements were presented fairly in all material respects in accordance with applicable accounting standards. >> this is the highest level of assurance an audit can provide and reflects the integrity and transparency of our financial reporting.

subsequently we issued the annual comprehensive financial report afr and the popular annual financial report paper on december 20th, 2024. these are included in your communications packet today. the effort goes beyond the basic financial statements providing a more detailed and transparent view of the organization financial health to investors, ratepayers and the general public. in addition to the financial section, the report incs transmittal letter and sections for statistical supplementary demographic economic and operating information. only the financial section is audited by engle. >> the pav on the other hand is a simplified user friendly summary of financial data. primary aim at the general public and stakeholders. >> who doesn't have a financial background? >> the fia is a 268 page

document versus the power for its 12 pages. >> i would like to highlight the sipc has been the recipient of the certificate of achievement for excellence in financial reporting from the government finance officers association for both the fia and pow for annually since two thousand nine and 2010 respectively. next i will hand the presentation over to emmy for her to present the results of their financial statement audit. >> thank you. thank. >> good afternoon. my name is annie lui and the audit partner from sc history neil cano mdo for short and as introduced by vivian today i am here to present the audit results to you. we made it to the pcs fiscal year 24 financial statements audits. >> the scope of the audit included several deliverables.

three separate enterprise reports for each of pwc's enterprise operations as well as a combined annual comprehensive financial report relating to the commission as a whole. >> our audit responsibilities as communicated in our engagement letters is to is to present our audit opinion based on our audit under aicpa auditing standards as well as government auditing standards with subject us to presenting and reporting on compliance issues that may have been impacted a financial statements as well as part of our audit process. >> we do look at internal controls over financial reporting and compliance with standard but can requirements but not to opine on internal controls itself. if we do identify any deficiencies in relation to such review we will report that to you in a direct communication to the commission . and then lastly in terms of findings that will be reported in the respective reports under professional standards as well management's responsibilities i know this is a lot on one slide

as further detailed in our report to the commission on the respective areas. these are standard requirements on what auditors has to report on as part of the audit process . >> i am happy to report that there are no significant issues in our audit processes. so along with these communications the standard for your information there have been a couple of pronouncements that were implemented in the financial statements for fiscal 2324 with no significant impact to the commission's financial statements. >> in terms of the audit we sorrells as mentioned previously we issue unmodified opinions on each of the financial statements for the enterprises as well as for the annual comprehensive financial report. and that is the highest level of surance that you can achieve. we did not identify any internal control matters or scientific and compliance issues to report as part of the financial statement preparation. >> it requires the management

to prepare a series of estimates relating to the financial statements. these are the more significant ones that do affect the enterprises as well as the acc first financial statements here. nothing new in terms of the the commission's policies, accounting policies and procedures related to these different areas. and again a lot of the details are also included in the disclosures and the disclosures to each of the enterprise financial statements as well as in the acronyms that okay, these are the more standard requirements to report. as you can see no matter as we point it's good news in this case if we had identify any issues we would report that to you in such reporting. and lastly i'd like to close out with some accounting updates for pronouncements that will impact or that may in fact impact the financial statements for the commission going forward. >> there are four outstanding pronouncements that will be implemented by the commission in the current fiscal year

fiscal year 20 2425 as well as in the next fiscal year in 20 2226. and with that i like to close out my presentation and take any questions that you might have. thank you for your presentation. commissioners questions or comments? no. could we call for public comment please? remote callers please raise your hand if you wish to provide comment on item six if there are any members present who wish to provide comment please approach the podium seeing none. moderator are there any calls with their hand raised? ms. linear there's one caller that wish to be recognized. thank you. >> caller i'm a minute you're your line. >> you have two minutes. oh, hi. this is dave warner. just while i'm on the line i thought i'd comment and forgive me if this is just a review and a statement of the obvious but you know, you commissioners are of the primary one of the

primary audience audiences for the audit and it tells us we're getting good quality financial reports. it's a huge amount of work as you know and reflects very well on a staff and it means we've got a good foundation for the financials and the projections that we also get from staff. so anyway, that's it. and just thanks for all the great work by vicki. thank you. ms. leonard there are no callers that should be recognized. >> thank you so much. all right. thank you for your work in the presentations. it's really appreciate. i really appreciate especially the popular report because it helps me translate a little bit. so thank you for all the good work. >> please call the next item. the next item is item seven consent calendar. >> commissioners any comments or questions on the consent

calendar? no. >> please call public comment. remote callers please raise your hand if you wish to provide comment on item seven the consent calendar. if there are any members present who wish to provide comment please approach the podium seeing none. >> moderator are there any calls with your hand raised or ms. linear? there are no callers that wish to be recognized. thank you. >> okay. commissioners, could i have a motion in the second to approve item seven motion to approve second. >> thank you. roll call. vote please. president stacy i. vice president r.c.. i. commissioner gender. commissioner leave aroney. the item passes. >> thank you. please read the next item. >> the next item. items eight and nine will be

presented together. >> eight approve in support of the san francisco public utilities commission's water enterprise interim funding program. the form of first amendment to the reimbursement agreement with sumitomo mitsui banking corporation. >> item nine approve in support of the san francisco public utilities commission's power enterprise interim funding banking. the form of reimbursement agreement with sumitomo mitsui banking corporation. >> good afternoon commissioners . before i begin with our presentation i've been asked to read a quick statement by the environmental management team and city attorney. upon further review of these items staff identified the need to supplement the california environment quality act sequel findings and has updated the staff reports and resolutions

with supplemental sequel information and clarification of the relationship of prop e, prop a and sequel. the director of commission affairs has distributed the updated staff reports and resolutions to the commission and public copies are available here today. >> so thank you very much. you may recall on january 14th as part of the general managers report we provided you with an information overview of our interim funding program. the interim funding program is one of the ways that we manage the costs of our capital program and lower the costs to ratepayers. it's a significant undertaking. i want to thank my team who's here today edward earl, eric and giuseppe. we also have one of our financial advisors vince and mccauley of baxter mccarley with us today as well. as we explained in january we

first came to you for approval to expand this program. many of you were not on the commission at the time that then subject and we went to the board of supervisors for approval was signed by the mayor and became effective on december 25th. and now we are proceeding with implementing the expanded credit facilities. and that's what we're here for today. >> so if i can bring up the slides please. >> so in short, you may recall that this program saves us money in three basic ways. first, after you have approved capital appropriations they go on comptrollers reserve the most efficient way for us to release those funds and demonstrate to the comptroller that we have financing is not to issue bonds prematurely but instead to use

low cost credit facilities. so that's the first way. the second way is that we as we need to spend funds we can borrow only what we actually need in the form of smaller increments of commercial paper. and then as we accumulate that commercial paper we can take it out with more efficient long term financing in the form of bonds. and finally, it's an efficient way of aggregating the financing and taking advantage of low rates. so this presentation combines two separate staff reports item eight and nine. we will review water facility fees, one new facility and one renewal and one new facility for the power enterprise. we then intend to come back to you on february 25th with two more facilities one for each enterprise.

that's a slightly different type of facility and required some additional legal work. so as you'll recall we had $500 million of authority for the water program that has been expanded by another 250. and we will implement 150 of that. >> today upon your approval with the help of baxter mccarley our our municipal visor we solicited proposals from the city's credit pool. the credit pools currently maintained by the airport and we leverage that as an efficient way of procuring facilities. we received bids, evaluated those and i'm very excited to say that despite the fact that we were expanding the number of facilities which could put pressure on pricing, we actually received very favorable pricing. and moreover here we were able

to add new banks which diversifies our exposure to our credit facilities. so following that evaluation we would like to present the following recommendations. first for the expiration of the sumitomo tomo facility upon review they offered the lowest price that facility will actually be renewed for or five years at a lower fee. so we are recommending keeping sumitomo on that facility. and then for the new facility we're excited to add pnc bank which is a pennsylvania based bank that has become quite active in our marketplace. and they also have provided a very attractive fee for us to the power enterprise. we're also adding a new facility there. again, we had $250 million.

we've expanded the authorized portion by 200 will use 100 today and we'll have another 100 million that will come back for us at the february 25th meeting for this facility sumitomo bank provided its first facility for our power enterprise again provided a very low fee of 32 basis points and also provided a longer term of five year. so very favorable pricing. all of these bank both of these banks have very strong short term ratings and are great additions to our our program. it's important to understand that with these facilities we do have the ability to extend the facilities for up to nine years. we typically don't we typically go out and solicited solicit the best pricing but we have that flexibility if market

conditions warrant locking in those those low fees for longer . and these facilities also have provisions that would cause the fees to go up if our rating is down graded. but we are taking advantage of their very low rating when we issue our commercial paper. our commercial paper rates currently on our recent rolls have been about 275 to 80. so much lower than the rate on longer term bonds. we're taking advantage of that short term financing. >> so for today what we're asking is approval for series a one you would be asked to approve not only the credit facility itself call a reimbursement agreement but

also the fee letter with the bank that separately establishes the fees. and then separately we also approve the offering memorandum which is the document that is used to market the bonds to investors. the dealer agreements for the commercial paper with the commercial paper dealers who roll the paper and find the investors for us. and we will do that for both the water and power. >> and with that i'm happy to take any questions. >> thank you, commissioners comments questions. commissioner john dyer. go ahead first. commissioner roni doris. that's okay. thank you. >> thank you. thank you to your team too. it is a good arduous task to go through all of these. overall, what is our total

facilities? is it in the lake five, six, seven, 800 million or is it a billion? >> sure. so over the three programs our existing authorization had been 1.5 billion and we're adding 950 million of authorization. we're not using all that authorization today. we still have authorized ocean for wastewater enterprise. we don't quite need that yet but we have that to be able to come back to you when those funds are needed. >> okay. and the majority of this was approved in 21 and we're increasing that by the numbers you just. >> so the program has been in place for a number of years and i'm i don't have the slide in this presentation but in the january presentation we show how that program has grown over

time as our borrowing increases ,our short term program increases. what we're doing is we're trying to make sure that we're not issuing bonds any earlier than we need to. so we don't incur those interest costs. i wanted to ask as you said, it becomes converted into a bond at some point. is that is there precedent for that and or when when does that happen for this 1.5 plus the 900? when does that get rolled into a bond down the line? >> oh, so as so we monitor the need for both releases from the controllers reserves as far as contract or letters as it as we need to spend funds and we also monitor the actual cash

spending. and as we approach the limit of these programs we then issue long term bonds that frees up the credit facilities and we can then use those to release more controllers reserves. so it's a way of continuously moving forward but having the flexibility that we don't have to issue bonds in unfavorable conditions as well. >> and do bonds have to be voted on electorally or do we have that facility available? >> no, they are the board of supervisors approves. after you've approved the budgets and then we issue bonds based on that and we will be coming back to you will be coming back to you in late february the 25th with an overview of our bond program to

help understand exactly how that works. and then on march 11th we will come back to you with our first water bond for this group of commissioners. so we'll we'll provide you with that information in detail. >> thank you. thank you. and i have certainly appreciated all of the groundwork you've provided to the commission over the years and the education that you provide on an ongoing basis. it has helped me learn this area. thank you. thank you. >> could we call public comment please? remote callers please raise your hand if you wish to provide comment on numbers eight and or nine if there are any members of the public present who wish to comment on these items please approach the podium and identify which item you would like to speak to.

>> seeing none. moderator are there any callers with their hand raised? >> mr. leonard there are no callers are wish to be recognized. thank you. >> thank you. commissioners, could i request a motion in the second? can we approve both items eight and nine together? >> or should we take separate votes to approve the commissioners is taking one vote. okay with you all on items eight and nine as corrected. just to be clear that the the changes that staff provided to us today would be the resolutions that we're voting on for both eight and nine. we we have taken public

comment. we did yeah. i move that we approve items eight and nine second. >> thank you roll call vote please. >> president stacey i. vice president r.c.. high commissioner jim da. commissioner level ronnie. the item passes. >> thank you. please read the next item. >> the next items ten through 13 will be presented together. item ten is a public hearing to consider and possible action to amend the fiscal year 20 2526 san francisco public utilities commission operating budget. item 11 is a public hearing to consider and possible action to authorize the general manager to seek board of supervisors approval for the issuance of 1,054,138,857 aggregate principal amount of water revenue bonds and other forms of indebtedness. >> item 12 is a public hearing to consider and possible action to adopt the san francisco

public utilities commission ten year capital plan for fiscal year 20 2526 through fiscal year 2034 35 totaling 11,062,520,691. item 13 is a public hearing to consider and possible action to adopt the san francisco public utilities commission ten year financial plan for fiscal year fiscal year 2025 through 26 through fiscal year 2034 35. >> thank you, ms. bush. >> hi everybody. laura bush, deputy cfo of spc. >> may i please have the slides ? >> it's a really big day for finance here today. so now that we've gone through the financial statements and nicholas's time on the commercial paper we now have four items related to our budget and our financial plan

before before we launch into these items. >> i wanted to give you a reminder of where we're at in the process and the work that we've done leading up until today which has been several years of work. >> so as you know pc has a two year fixed operating and capital budget. we are at the midpoint of that two year cycle with f fy 2526 next year beginning july 1st being the second year of that fixed budget. >> but we do adopt a ten year sip capital plan and ten year financial plan annually under the charter. >> we started developing our two year budget and sip almost two years ago. >> we began in march 2023 with staff level budget development including baseline budget reviews, project assessments and budget proposal formation in fall of 2023. we held weekly meetings of the executive team which formed the budget steering committee to thoroughly vet our budget, go over the various options, prioritize and make

recommendations to the general manager before it was brought to the commission and january 2024 just over a year ago we had four special meetings of the commission to go over each enterprise's budget and capital plan in detail prior to the commission adopting the two year budget and capital plan on february 13th, 2024. so just shy of a year ago in total there was around 12 hours of meetings about the budget last year so significantly less of a left for the commission and staff this year after it was adopted by the commission it went through the normal mare and board process and the final budget was adopted last july and we did provide an update to the commission on the changes that occurred during mare and board phase of the 20th september 24th 2024 meeting. >> then last time i was here was a month ago january 14th i presented on our budget priorities as that as we were required to do under the admin code and today hopefully we are ready to actually adopt the

amendments. >> the fy 26 budget and the ten year along with our ten year financial plan that goes hand in hand with that. >> after today the budget will be then sent to the mayor's office and then to the board to go through the normal adoption process and we're already thinking about the next budget cycle beginning in the spring. the next two year budget and sip development process will start to happen which will be a full in-depth process to put in place the next biennial budget antonio financial taniya capital plan and ten year financial plan. >> so just a quick reminder here because i know i went through this last time i was here. we have three priorities for this budget that we use when we develop the budget and those continue to be our priorities going into the second year. these priorities are affordability, responsible management and investing where it matters. so again i won't go into detail now because we had a whole hearing on this a month ago. the first of the three items before you right now budget

related and i wanted to preface english versus american accent coming in the preface these by noting that not very much has changed relatively speaking to the budget and capital plan that were developed last year on the operating budget year two of the fixed biennial budget there are minimal changes. there was actually no change to the f y 26 capital project budget. there are minor changes to the f y 26 capital funding sources and there are minimal changes to the ten year cip relatively speaking since the last version of the plan. this includes cuts to some council projects and some known project increases. >> so now i get to introduce you to an important person who has just joined p c we have a new budget director and dunning ana comes to us from the mayor's budget office where she's worked since 2018 and she served as the mayor's budget director for the last two years. she brings a wealth of experience in public budgeting and navigating san francisco

finances. so she'll be presenting the next part of the presentation and i'm glad to hand this role over to her. and then she will also be joined by trey hunter who is also a member of the budget team, the capital budget manager and then lastly the financial plan will be prevent presented by erin corvin over our financial planning director. >> so thank you. and i was anna great. >> hello. it's great to be here and nice to meet you all and look forward to getting to know you as budget matters come before you over the next year and beyond. so i'm happy to bring the slides back up. i'm going to talk specifically about item ten and these are some modest changes to the second year of the fixed budget . >> so just a reminder about pwc's operating budget. it's about to billion dollars a year the largest categories of spending are as there is a pattern here capital and that's both the revenue funded capital as well as the debt service costs to pay debt on debt

finance capital following that is power purchase and distribution and then personnel and non personnel costs. okay so a lot going on in this slide but the main takeaway is that we are making very minimal changes to next year's operating budget and we tried to make as few changes as possible as to not open our full budget to board of supervisors review and we were successful in that. the board of supervisors only needs to approve a few of the capital changes here. so overall the budget is actually going down by about $30 million. that's only 1.5% of the overall 2 billion budget. this is largely due to a revenue reduction in clean power. srf based on updated volume forecasts. that's that first line there. >> there's also some changes in how we are funding our capital projects. so we undertook a process to optimize the balance of debt versus cash funded capital

projects that results in a reduction here in revenue funded capital in the operating budget and then in our capital budget it results in an increase in debt authorization which my colleague trey will talk about in a moment. but the capital budget itself, all the projects we're funding those all remain unchanged. and then there are a few other ups and downs in this budget contribution to fund balance and clean power stuff in alignment with our reserves policy some minimal changes to our labor costs but no changes in overall positions and an increase the facilities maintenance budget and hatchery . >> so those are the changes. this is just a few more overview slides about our operating budget. it has grown over the last three years so from last fiscal year to this next fiscal year it will grow by 20% and that is almost entirely driven by capital costs. meanwhile our fte again we did not make any changes to positions in next year's budget

but we want to highlight that we have about 1800 budgeted positions and the fte growth has been fairly moderate over the last few years and relative to the size, the growth and the complexity of the budget. so that's it on the operating budget and with that i'm going to hand it over to trey who's going to talk about some changes in the capital budget. >> thank you and welcome to the c. thanks, ana. my name is trey hunter. i'm the acting capital budget manager. this is my first time presenting before you all here. so delighted to be here with you all. may i have the slides please? so i have two items before you today. the first item is an augmentation to our water revenue bond debt authorization. i'll talk a little bit about what that is in a minute. and then the other item is an update to our ten year capital plan. before we get into that, i

think it's helpful just for purposes of understanding for this body what makes up our capital budget since it can be a little bit complicated. the multiple components of it. >> firstly there's a two year capital budget that's our near-term term appropriations that provides our spending authority in the immediate term. there is also debt authorization which is independent from our two year budget. so a large portion of our capital budgets are funded by debt and that debt because we have the ability to issue it ourselves must be approved. the authorization for it must be approved both by this body and by the board of supervisors. it's important to note that just because we may approve or recommend an increase to debt authorization that doesn't actually mean we're going to fully expend that funding. it's simply a maximum in there. and then the last item is our ten year capital improvement

plan. that's our long term vision that city departments must provide on an annual basis and we're providing an update on the annual annual update of that to you today. >> so they all work together in that the ten year capital plan that's the vision of our capital program two year capital budget that's our there our actual authority to spend and then our debt authorization is the authority the maximum authority for debt that we're allowed to issue. so the first item that will discuss here is just an overview of our capital budget. what's important here is there's no changes that we're asking for in this fiscal year and in fact we're really proud of that coming into fiscal year 2526. this is the first time in five years that we are not making a mid-cycle adjustment to our in the mid-cycle of our capital budget in front of you.

before the meeting we handed out the gfr magazine which is the government finance review magazine. we recently received an award and the award was published on page 31 about magazine for our capital planning improvement initiative and we believe that a lot of the work that we've undertaken in this initiative has allowed us to come to you before you today and not request any mid-cycle changes to our capital budget where we feel really strongly about the work that that's going on there . i also just want to note that two year budgets are relatively common for government entities that have stable revenue sources such as utilities. so that's relatively common here as well. you'll see on this slide that some of the projects that are mentioned here those are major project appropriations that will be effective as of july 1st of 2025. some of those appropriation

funds are rather large and as we talk further talk about our ten year capital improvement plan, you'll see that we do anticipate some of these some of the spread being lower in the outer years of our capital plan. so let's talk about the first item that we're requesting your approval for. that is our debt authorization. i talked about this a little bit earlier but we need that authorization because it's it's separate from our actual budget authority because we have the ability to issue our own debt. we need that authorization this year our financial planning team and like they regularly do undergone optimization process to figure out what was the most strategic levels of revenue versus debt that we that would be appropriate to fund the fiscal year 2526 budget and in this year's budget there are some small changes to that.

we're really proud of some of the minimal changes here as well. you'll see that in wastewater there's a small decrease to our debt funded portion and both water regional and local there's a small increase and in hatchery water there's an increase to our debt authorization. >> and then in our power bond authorization there's a small decrease. it's important to note that we don't need to request decreases to our debt authorization but we do need to request when there are small increases. >> so last year we requested a $3 billion debt authorization for the two year budget. we moved through fiscal year or right in the middle of fiscal year 2425 going into 2526 and we're requesting just 2.6% increase in our debt authorized portion here. most of this is so that we can meet our debt service coverage requirements and water and so

that that's driving most of the changes there. i think it's important to note that our budget is staying the same for next year. it's just our debt authorization that we're requesting a small change to for next year. >> so this brings us to our final item here which is an update to our ten year capital improvement plan. this is an annual charter requirement that we request approval of this from you on an annual basis. >> this first slide here is an overview of our capital plan starting from fiscal year 26 through fiscal year 35. on the left you'll see some of the major projects outlined in the capital plan that would be funded in this ten year period. and on the right the pie chart makes up what share of the capital plan each respective enterprise takes up. >> you'll see here that this is

relatively similar to last year for commissioner stacy being here last year. this wastewater was just a little over 50% of our capital plan. it's important to note here that our capital plan is much smaller than last year and we'll talk about this a little bit in the coming slides. but looking at 11.1 billion this year so we are in the mid-cycle and it has been mentioned before that we didn't go through our full rigorous two year capital planning process. the one that where we've received the award for and from jeff ohm. but some of the what's important to note here is that what we did change is we added the 10th year of our financial plan which is in that red box and then we made some changes to include where there were where there were known increases to certain capital projects and then where there were certain capital projects

that may have either either been removed or decreased for different reasons. so what you're looking at here is not the full iteration and we'll be back a year from now to after we've gone through this full rigorous process. most of what that process focuses on is doing a full review of ensuring that we're able to deliver capital projects but then then tenure frame and then also just being clear that we're using any unspent balance as before we're requesting new appropriations. >> this is an overview of our ten year capital plan. >> it's important to note here and something another thing that we're very proud of because this is not completely common throughout the city that our cap the capital plan that we're proposing is a balanced capital plan. that means that we've identified sufficient sources to pay for the uses that this capital plan would drive.

it's also important to note that this year's capital plan is 29% revenue funded, which is a significant increase versus last year. last year's capital plan was about 22% revenue funded and our policy our internal policy is that we revenue fund 15% of our capital plan. so that's a signifier and significantly higher than the policy minimum. >> and then finally the last thing that i'll the last thing to point out here are just some of the major projects that are funded in our capital plan. there's three slides here and i don't want to go through each of the projects here but i will just note that in the next year every two years we do publish a capital plan report that's available on our website that goes through our capital planning process, our capital priorities and it also outlined some of the deferred projects that didn't make it in the capital plan. but i would just note that'll

be here two years from now and overall that completes my presentation and i'll now turn it over to our financial planning director aaron kaufman over. thank you. thank you. >> hello. good afternoon, commissioners. for those of you i have not met. my name is aaron corvin ivanova i'm your financial planning director and i'm happy to be here today to present on our ten year financial plan. >> i could click ahead. >> there you are. so just to start off, what is the ten year plan? >> first it's a requirement of the san francisco charter. each year we must adopt a rolling ten year forecast of revenues expenditures and the resulting rate increases. >> it's a tool we use to evaluate our financial metrics and our long term financial sustainability. >> the detailed written report that accompanies this presentation transparently presents all of our assumptions

and the results of these plans. >> the ten year plans are the heart of our agency's forward looking financial planning. >> our capital and operating budgets, our debt assumptions all of them flow through to show you a picture of what the impact of the proposed changes we're putting through will be on our customers. >> i want to especially thank the financial planning staff and the others throughout our agency who put months of efforts into this year's plan. i'm extremely grateful to get to work with such a talented group of individuals who are really committed to making thoughtful, careful financial decisions to protect our agency when developing the plans we always follow legal requirements, bond covenants and contract obligations. in addition, this commission has approved many financial policies that set guidelines for rate setting and budgeting decisions. >> i've highlighted three that are particularly salient for this year's plan the fund balance reserve policy sets a minimum level of reserves to ensure that we have a cushion against emergencies or unexpected events. >> the debt service coverage policy is a crucial test of our

ability to pay the debt service on bonds and loans and the affordability of policy was adopted in the last couple of years to provide guidance for what an affordable wastewater and water bill is and a process to address identified issues. >> prudent financial planning is all the more important since the utility industry as a whole faces growing challenges including climate change an uncertain economy, regulatory complexity and aging infrastructure. >> bond rating agencies have expressed concern about the financial health of the utility sector broadly and so we are taking steps in this plan to make sure that we are responsive to and safeguarding of our financial health. >> the projected revenues in the ten year financial plan meet and exceed all policy requirements. >> however, this year's plan goes further, including concrete steps to reinforce our financial position so that we have the resources to cushion against unexpected events. >> we are targeting financial metrics that are higher than

the minimums required by our policy as well as higher than those that were in last year's plan. this includes higher debt service coverage and increasing the revenue funded portion of the total agency ip. >> as my colleagues have previously mentioned, this is all going up to almost a third which is helping to reduce our long term reliance on debt and allowing for a more sustainable balance of capital financing. >> while we reexamine this every year, that's a shift that we're trying to make. generally the goal of these conservative financial forecasts is to ensure that we can perform as good or better than what's shown in these plans. there are many external factors that impact our costs that are beyond our agency's control. >> but the finance team is taking proactive steps to reduce the risk of budget overruns and revenue shortfalls . >> these steps have strengthened our financial metrics but do require higher rate increases as we will discuss later in this presentation our methodology for forecasting expenses has not changed significantly from prior years.

>> for operating costs we begin from the proposed budget adjusting for savings where realistic and assume inflationary growth over time. >> for clean paris f and hatchery power we work closely with the power enterprise to develop the detailed forecasts that are needed to handle their complex interrelated factors. >> we have to look at power generation, customer demand, power market purchases and transmission delivery costs all on a monthly basis for the life of the ten year plan. on the capital side our plan models a way to finance the projects in prior budget authorizations as well as the projected proposed ten year cip. >> as noted previously, we fund a portion of our capital with cash or revenue funded capital. this year we've increased that to almost 30% across the entire agency. >> the rest of our capital plan is funded by debt in response to some external pressures. >> we took particular care to review our capital financing assumptions internally and with our financial advisors to ensure that they are sufficiently conservative.

>> we're assuming 6% interest rates which i'll note is higher than what we've received on all of our recent bond transactions. >> so we do not underestimate our future debt service expenses. >> and while we've previously received state and federal low cost loans and we are actively pursuing as many opportunities as we can, we do not assume that we will receive any of those instead find funding all of our debt through our own revenue bonds. >> almost all of our wholesale water revenues and approximately 85% of our retail water and wastewater revenues are based on sales volumes. so sales projections are a key factor in our plan. >> as part of our risk mitigation work we've lowered our sales forecasts versus last year's plan in san francisco, water sales as shown on this chart dropped during the pandemic and subsequent drought. while we include some modest drought recovery in this plan, we assume that the lingering pandemic impact represents a new normal for utility sales. >> while we certainly hope that

water sales will come up, we're not banking on that happening. >> on the wholesale side you can see recovery over the next few years from the lows of the recent drought. and then in both retail and wholesale water usage, the long term trend lines are driven by modest population job growth conservation which decreases sales and price elasticity where as the rates go up customers buy less of their water because wastewater build volumes are based on metered water usage. >> the trend line for wastewater shows a similar trajectory as the retail water graph shown here. >> this chart shows the ten year expense forecast for the water enterprise including their share of hetch hetchy water water forecasts modest growth during the planning period driven primarily by capital costs. >> i'd like to also remind the commissioners that our operating and capital costs for the regional water system so that's the assets at hetch hetchy and those that are outside of the city of san francisco are shared between

our retail and wholesale customers. >> while the cost of san francisco's inner city system is paid for only by retail rates, this chart shows both together but when we actually calculate the necessary rate increases we do adjust for that and account for who's paying for what portion of the system . >> this chart shows the same information for wastewater enterprise where the growth is much more dramatic over the ten years. annual expenses are projected to more than double the driver is the capital plan billions of dollars of projects paid for either as revenue funded capital or with bonds. >> we've already discussed some of the major projects in wastewater cip earlier in this presentation but they're all extremely crucial projects to respond to climate change some extremely aging infrastructure that needs to be replaced as well as regulatory requirements that are increasingly facing our agency. >> issuing bonds to finance these projects is estimated to increase our debt service so the annual payments going out each year up to 56% of wastewater annual expenses by

the last year of the plan. >> while these critical process projects are necessary, they do present a significant financial challenge. and unlike in water, wastewater costs are paid for entirely almost entirely through retail rates borne by san francisco ratepayers. >> this table shows our tenure rate forecast as well as the increase in the combined bill for water and wastewater average typical customer. i'll go through this slowly because i know there's a lot on this slide. in the first column the water rate increase you can see that over the ten year period water rates are forecast to go up by a compound average annual rate of 6% while wastewater rates over that same ten year period are forecast to go up by 10.5%. >> putting that together and adjusting for changes in usage as well as some shifts in our rate structures the average single family residential

customer bill is forecasted to increase by 8.6% annually over the ten year period. and i'll note that your printed materials did have a typo and it said 9.6% and that combined bill column the correct number is 8.6 only rates for next fiscal year that's fiscal year 20 2526 have been approved and adopted by this commission. everything else shown here is a forecast that does reflect the c ip and the budget but is subject to change and must be approved by this commission in future years. >> this chart shows a 20 year forecast for that average household bill with lines on the chart showing the affordability targets for typical and low income households as defined in our affordability policy. >> the significant capital investment in our wastewater enterprise combined with our more conservative forecasting assumptions this year means that without changes the average water and wastewater bill is forecast to exceed our

affordability targets by fiscal year ending 2037 for the low income household and fiscal year ending 2040 for the typical household target. >> while it's still an estimated 12 years until these targets would be unmet, this is the early warning that the affordability policy is meant to provide telling our agency that we have over a decade to develop a strategic approach to address these affordability challenges. >> during the next capital planning process staff will look for all potential opportunities for reducing capital costs while still meeting regulatory requirements and not deferring critical investment in the system. >> the forecasted rate increases, while significant, are a financially responsible approach to the challenges facing our agency. >> maintaining our bond credit ratings is a requirement of the san francisco charter but moreover it's crucial to avoiding even higher rate increases. >> our strong credit rating is what allows us to sell our bonds at low interest rates because our large capital plans rely so heavily on debt. >> demonstrating a strong

fiscal position to our markets and creditors and therefore maintaining our credit rating will help keep borrowing costs low and save our customers money. >> for example, our team estimated that a change from a 6% interest rate to an 8% interest rate on the bonds issued across the ten year period would increase debt service expenses over the life of those bonds by $5.8 billion. >> that would result in much higher rate increases than are shown here. for context, our team also performed a survey of the average water and sewer bills in our peer california cities which is the graph that shown on the slide as shown in the chart. >> even with the approved rate increases for next fiscal year our bills are currently in the middle of the road. >> obviously we'd also like to look out further than this since many of the increases are in the future. >> but unfortunately almost no other utilities provide similar public rate forecasts and targets as the sfp you see. >> so our 20 year forecast and are defined affordability

policy is actually making us an industry leader in transparency about the impacts of our decisions on our customers. >> our peer utilities are also facing many of the same challenges as we are. aging infrastructure and climate change and regulation are not unique to san francisco. these are industry wide issues and it's expected that rates will be going up everywhere. >> that said, we take affordability very seriously. as i stated before during the development of our next two year budget and ten year cip, we're going to rigorously evaluate the ways that we can help fully try to bring save costs and bring rates down. and we'll update this commission on our work throughout the next year. turning now to the power enterprise. this graph shows how hhi powers forecasted retail sales volumes. >> hetch ag continues to forecast significant long term customer growth. >> this includes electrification projects by existing city department customers as well as new developments in infill and redevelopment areas. >> as with water and wastewater, this year's

forecast is more conservative, reflecting the potential for project delays due to economic and city budget uncertainty as well as a new normal of lowered sales from pandemic related shifts. this chart shows the expenses forecast for hetch hetchy power over the ten year planning period. the largest area of growth is in purchase power and electricity. the purchase power and delivery these are costs to buy power supply that we cannot meet with our own generation as well as charges that we pay to the california iso. >> that's the independent system operator and to pga and to transmit and deliver our power to our customers. >> capital expenses are also a growing portion of the plan as hetch hetchy constructs facilities to serve new customers and make our existing system reliable. >> notably purchase power and delivery costs are highly variable based on customer demand. >> what that means is that much of the growth in that purple wedge of this chart is in response to the forecasted

customer increases we saw on the prior slide. >> a large customer base spread those costs out over more customers offsetting the need for rate increases. >> this also helps mitigate risk if projects are delayed and customer growth is lower than expected, expenses fall as well. >> clean power assets expenditures are almost entirely comprised of power supply costs. after several years of volatility and high increases we're seeing market prices stabilize somewhat and we currently forecast relatively level expenditure growth over the planning horizon. >> that said, power markets are influenced by many risk factors beyond our agency's control tariffs, weather disasters, regulation and geopolitical issues could all lead to higher than expected costs. >> to address these risks the expenses shown here include a dedicated power supply contingency. >> we assume that costs will be 10% higher than our median forecast and budget that in. >> of course things could

always come out worse than that but this is one of the steps that we're taking to ensure that if there's unexpected changes during a fiscal year we have the budget available to procure the power we need to supply our customers. >> this table shows the projected rate increases for hetch hetchy power and clean power srf over the ten year period. >> chelsea power is projected to have a compound average rate increase of 6.4% while clean power ourselves generation rates are projected to go up by just oh point 6% annually. >> much like in water and wastewater hetch hetchy short term rate increases reflect more conservative assumptions around our sales volumes and aim to target higher financial metrics. >> clean power assets low forecasted increases reflect the significant work that this program has done in the last few years to build up its reserves to the levels required by its reserve policy barring unexpected issues. clean parris up is well-placed to continue providing cost effective green energy to san franciscans over the next

decade. >> rates for next fiscal year are not approved for either of our power programs. >> we'll be back before this commission in april with the proposed increases which we currently forecast at 10% for hetch hetchy power and 3% for clean power sf generation rates. >> we'll provide much more information about those increases including comparisons to pge bills as part of that rate proposal. >> this final slide lists all of the financial metrics and targets defined in our financial policies as well as the performance of each enterprise or program in meeting those targets. >> with the more conservative planning assumptions in this year's plan, every enterprise meets and exceeds its policy minimums. >> debt service coverage and fund balance reserves are higher than projected and last year's plans on average and we're funding a larger percentage of our capital plans with pay as you go revenues. reducing our reliance on long term debt and allowing for a more sustainable balance of capital financing for water and wastewater. these conservative assumptions

mean that we're projected to exceed the affordability targets outside of the ten year planning horizon. >> as previously discussed this early warning provides the agency time to develop a strategic approach to bringing those costs down. we'll evaluate these strategies and report back to you. >> our affordability policy does not currently set targets for clean power sf and hach hetchy bills. work is currently underway internally to develop those targets and we do plan to bring policy revisions to the commission for approval later this year. and with that i know that's a lot of detail and i and my colleagues are happy to answer any questions you might have. thank you. commissioners comments or questions? >> that was a lot to take in from the fire. >> just trying to get a view. commission on capital expenditures. work on savings at the few.

how is that taken into consideration? going forward with with our projections on the success of our our bidding and getting contractors to bid and and that to try to come within the bidding budget is that. >> i'll take it. i think this might be a joint answer between myself and stephen robinson when we put the cip and budgets together that represents our best estimate of what we think the costs are going to be. obviously that's a really hard thing to do especially as you get further and further out in the cip. but that's the best we can do is estimate and we have very

skilled people in our infrastructure and enterprise teams that put those cost estimates together and they're thoroughly vetted. once projects are in motion and we can have more accurate information then we kind of figure out where the funding is coming from if it's mid-year. but updating the cip annually and having a rigorous process every two years to really go in depth on those projects allows us for a kind of a rolling approach to acip planning where we can put our best estimates in at the time of adoption. >> okay. >> steve robinson, assistant general manager for infrastructure i'll confess to being distracted not hearing your question if you wouldn't mind repeating it please just take a look at the capital projects and you come up with the these are more important and prioritize them but then it seems that you know affordable already with the contractors. how well do we meet when we we estimate this contract is going to be 50 million and we get it

the bids come in 50 million and then you know what i saw in the last five months was a number of contracts that went over. and so how does that then is are there built in safeguards for these cost overruns? >> yeah, i'll i'll have a good answer your question if i may. and when i think about the project life cycle it depends on where we are in the project and we initiate something in the in the capital planning phase it's with an estimate of what the vision for that project is when needs are identified as it moves into project we go through planning that into design. ultimately we bid it out if it's a design bid, build and then into construction and the bid phase and then the confidence we have run the estimates i think you're getting at as well and there's a lot of work thinking around how do we make those estimates healthy and accurate as best we can. they always allow for contingency and of room for confidence based on the level of design certainty that we have depending on what stage of

the lifecycle the project is in so much earlier in a project's lifecycle we allow much more room for that project to change as we get much closer towards construction we need a lot more detail there. therefore we've got a lot more confidence in what the estimate would be as we think further out in a capital plan our projecting 20 years and the head for financial capital planning reasons you can see that's very early in a process definition. so we add contingency, we make sure that we're comfortable in terms of what that looks like. things have changed in the bidding market of course over the last ten years especially with the pandemic and global supply chain demands and challenges and we continue to wrestle with that. things are changing even as we speak. so we want to make sure that we estimate as carefully and as best we can and benchmark ourselves against other agencies and ways of doing cost estimating and then i saw in the early ons and some of the slides where our capital expenditures are up you know i think to 2027 and then we start to taper back down. is that safe to say that we're catching up with capital

projects or why you know up and then we see it taper down? >> i think that was the slide the projected the history of the size of the capital plan and the last year was the largest we have ever seen 11.8 i think it now should 11.1. it's dropped because of some of the changes noted on that slide. some specific projects have come back down and others are going up and overall the balance shows a reduction which is healthy now that we're getting better understanding of what those projects are okay and also some of them are going to be completed. >> that's right. so we're going to be some projects if you go down the southeast plant you see a number of projects that we're moving along there. they're fairly far along now and they'll be completed so that number is going to come down. >> great. thank you. thank you. commissioner john dyer, thank you so much this is really helpful and as you said transparent. my question is about the affordability projections and because a lot of that is on the wastewater capital improvements it is going to be

borne by san franciscans who live here on the retail side. so do you have confidence that in the next budget planning cycle you can control for capital expenses so that that stays within affordable ranges ? the the goal of the affordability policy was to it's something we are extremely proud of. we center affordability in every single discussion we have about capital expenditures and capital planning and the affordability policy is doing its job which is providing an early warning system more than a decade in advance that we might be just exceeding our own self-imposed quite stricter affordability limits. we will be going through a full rigorous capital planning process in the coming year that is supported by the cpi and award winning work that trey talks about and affordability will be at

the center of that. so obviously we have operational risk as well as financial risk and in that operational risk is aging infrastructure, climate change regulation, things that we'll have to pay attention to. but affordability will be sensitive that discussion and commission chairman if i might just to jump in i mean i think that laura did a good job at summarizing the causes. but one thing that you can't we can't ever get around are certain things that are outside of our control the regulatory requirements are something that is are huge. and just let me give you an example. in the ten year capital plan there was never any there was a placeholder with no dollar amount for nutrient reduction. we saw what happened during the course of the last couple of years with nutrients in the bay and algae blooms we decided we need to be honest about this and you know there had never been a number in there before even though somebody knew that there was going to be

regulatory requirements that came down from the state that we're going to put an added burden on us. we that was an added $1 billion expense that we have to put in to make sure that we meet requirements. now that have come down from the water board a neutral reduction so regulatory requirements are huge and that's something where we're really actively trying to work with our regulatory partners to explain to them the importance of affordability and the impact that that has are some on some of our most vulnerable residents. so that is something that we are in in addition to aging infrastructure and climate change, the regulatory education process is something that we spend a lot of time on to make sure that we strike that balance. but but that's a big part of what we're going to be doing over the next couple of couple of years. okay, commissioner, say for us see this here.

okay. yeah. thanks for that stacy and thanks everyone for the presentations i had a number of questions around affordability some some of the same kind of thoughts or maybe build off of the same some of the same questions that commissioner jim da had raised. but maybe as befits my status as the rate payer advocate on this commission i wanted to go a little bit deeper but before that i'd just out of curiosity there was something on mr. hunter's slide that i thought might be interesting for for us to hear about which is the idea that the capital improvement plan, the ten year cip is kind of a vision statement. and so i was curious maybe just for us to kind of absorb what the team would articulate as the vision that our ten year capital improvement plan paints. when you think about it and i'm sure it's a it's a lot of it's a few different things but just just so that we can kind of

maybe think through or maybe have a kind of shared understanding of what if the ten year cip is to paint a vision? >> what is that vision? i think commissioner, if you if you go back and look at what our the entirety of the budget process when we talked about that in terms of responsible stewardship stewardship, environmental leadership and affordability for our ratepayers and transparency and i think that when you look on the capital side perhaps the most important thing is to be responsible stewards of a system that has to meet the needs of the entirety of our of our residents especially those are the most economically vulnerable and at the same time meeting the responsibilities that we have to be good environmental stewards not just for our residents but for the bay area more generally.

>> thank you very much general manager because i think that's both thorough and i think important for us to kind of think about particularly with respect to some of the questions i have around affordability because capital and tradeoffs around capital seem to be a big part of really the very limited set of tools that we have to avoid. what it looks like is going to start to happen in the more near future than then i think any one of us would have anticipated or maybe even looking back historically in some of our prior projections in terms of the cushion that we have had of 30 to 40% in terms of rates on the water and wastewater side below our affordability target very soon narrows i would i would note there that we did make a significant change in our affordability policy in november of 2023 which made our targets stricter. we centered equity and low income customers in our affordability targets so it

actually made our affordability targets stricter and that's why you're seeing a significant shift in a cushion between our rates and our affordability targets in the last few years. >> it's not because rates suddenly went up or income suddenly went down. it's because we changed our policy and are holding us else to a stricter, more equitable standard. that's helpful context. i'm wondering if if we could put up slide at slide 31 which is the project id water and wastewater rate increases on this one. so i feel like we want to and i appreciate that i think in numerous points in the presentation there's it's been stated that this is exactly why we have our affordability policy because we can especially as commissioners and deferring to to you and the team's expertise and knowledge

and in presenting this information to us as public representatives it gives us the ability as you said this is giving a window into planning now to address what we're seeing in some of the in some of the out years and i feel like that's important to have that conversation now because not knowing what the combined bill increases were prior to 2020 note that in fiscal year 2027 that'll be the the largest single year increase at 11.5% of anything that we've got in the historical record and so i feel like that really accelerates idea of time as now because there's a likelihood we're going to hear it. >> you know once folks see the biggest single year increase at this point that we're projecting now and that's where we get the phone calls or the press starts to take interest in this is a a a big jump. and i think the fact that we're

having this conversation and something i think we should even have more of so that we can help you know, maybe in some ways bring the public into these conversations around the fact that this is information that certainly as a public meeting it anyone can can review this information can can make decisions and can can in themselves as active citizens become kind of versed in what we're doing here. but at the end of the day we collectively have to make the decisions which are really i think with said tradeoffs. and so to that end, one of the things and i do appreciate we've gotten advocate letters and some information that i appreciate because having spent a number of years as an advocate myself, i'm used to writing the letters in public come into public comment and sometimes just wanted someone to listen and someone say hey look, i did my research and or collectively in coalitions we did our research. can someone please read it? so i've read letters that we've gotten in emails and in the couple of questions that i

glean from some of the stuff that we got was around this notion of lower than expected sales that if there's instances where we have projections with respect to sales and we experience in actuality lower than expected sales at what point we see some reflection of what the notion of lower than expected sales has on our anticipated rates. so as i mentioned on the slide we're showing the volume changes right now our water and wastewater rates in particular are highly volumetric. so that means that when sales go down we make less money. >> that's a strategic choice and when we set our rates we'll talk about some of those tradeoffs. >> you can have higher fixed charges but then that means that customers cannot save money by reducing their water usage as easily as they can. >> so that's a tradeoff that we like to think about on that front. some of the ways that we mitigate the financial risk of those decreases one is by

ensuring we have sufficient reserves during the 2014 drought when i first started working at the sfp you see we did have several years in which we were coming in millions of dollars, tens of millions of dollars under budget because of reduced water usage. we wanted that we were telling customers to conserve that was the right thing to do and we were able to use our reserves instead of immediately turning around and raising rates. another thing i think that's important to point out is that if the usage is coming from per capita decreases in water consumption then if we have to turn around and raise our rates in order to make up for that losses, it actually works out to the same bill. so just to very roughly make up some numbers if we had everybody reduce their usage by 10% and then we needed to raise our rates by an additional 1% to collect that loss you would end up back where you were before on an average bill basis because you're using less water and the rates are a little bit

higher. so one of the things that the affordability policy why we based it on customer bills is it accounts for things like that. >> so it actually looks at if customers reduce their usage over time but the rates are going up, how does that factor into the average bill? it can get a little misleading if you just look at the rate itself because it doesn't account for how customers have shifted their usage. >> a final thing i'll note too is that we have various mechanisms that we put in place in our rates themselves that help make up for revenue losses . for example, we during the last drought had drought surcharges that automatically went into place. we asked people to conserve 5% and so the rates automatically went up 5%. if you were meeting your conservation targets you were saying paying the same bill before and after. >> but our agency was ensuring we're covering our costs. there's a lot more to this topic. it's complicated but it's certainly something that we think about significantly when we're setting our rates and doing our financial forecasts. >> it's very helpful.

>> okay. and and it sounds like conversation is like this is where we would learn what what the actuality was in terms of projected with respect to whether it's sales or conservation or anything like that that gets reflected into this kind of decision point. it sounds like yes. fwc alternative water supplies or alternative water system investments is that that's obviously i imagine part of the part of the trade offs in terms of do we do we or don't we invest in iwc goes initiatives and if we invest in more obviously then there's revenue that goes into a part of that servicing debt that might be a part of that and that impacts rates. it's maybe a little bit too granular from this for this conversation i just wanted to make get get a clear understanding that decision points like that whether to invest in building our alternative water supply systems is something that we

would see reflected in the like on this slide here 31 the capital investment as a as a as a driver of a potential higher rate than if we hadn't invested in the iwc is that right? >> that's right. there are iwc alternative water supply projects within waters capital plan not the full suite of potential iwc projects out there just to a limited few those will and so the capital plan as we do our rigorous capital planning process for those projects would be considered against all of the other priorities that the water enterprise has which include diversifying our water supply as well as maintaining our existing assets. so if there are changes to our iwc project projects in the next iteration of the capital plan we will present that in detail to you around this time next year. >> okay. >> if we could thank you for

that. >> if we could look back at that slide again sorry to go back to it. >> oh thanks tiffany the so i feel like for the next couple of years we're still in that same 30 to 40% headroom with respect to projected rates and our affordability target with the acknowledgment i think from ms. calvino about that it's a recalibrated standard but but nonetheless what what we're looking at on this slide is for at least the next few years is sufficient cushion until we start to get to maybe f y 2029, 2030 by by the time we're at 2032 it's pretty close right? albeit we're outside the ten year window but we're getting pretty close so acknowledging that that there's time to think through and also i think from my perspective something important to do as much kind of public engagement around the steps of the way to the extent

there's ability for members of the public and rate payers to be part of conversations and help us to collectively inform the tradeoffs because if we get to a point where there's an discerned able increase on rates and we're still in some of the same economic environment so we see for every day work in people trying to make ends meet. i feel like those conversations in these years now going forward are part of eliminating the potential for surprises and folks have the ability to say if it's capital tradeoffs well we're in collective conversations. we can hear what tradeoffs people are willing to make and not willing to make and and understand that we're all in this together. and if we agree this isn't a tradeoff that we're ready to make because we can't make then it is going to increase rates in the future years. and again just back to this notion of no surprises, i'm wondering if there's not not for today but for someone at least myself and i bet other commissioners and certainly all

because you're committed this and just appreciate the transparency with which you've provided this is there things we could do like one of the communications we got i think it was from mr. warner it suggested prioritizing projects. is there a sense that we can see well, these are the priority projects. they just have to happen because of the regulatory environment that our general manager just expressed or because of some other urgency or public health consideration. and here's some other optional so that we as commissioners can kind of state kind of thoughts around you know maybe what to defer what to advance and along with the prioritization of projects is their ability to say that this project x, y, z or that project abc has x amount of impact on rates, you know, so we can almost kind of like through a workshop environment or some kind of iterative process no what decisions have would impact on

rates in these future years or is that just kind of treading too much into expertise that doesn't lend itself to kind of a kind of public conversation like that? >> i think you will see some of that as we gear for the next budget process. you'll you'll see some we will be able to have some of that discussion generally. got it. okay. so and we will and in advance of that we will be doing our evaluation and prioritization and we'll can have some of that conversation when we come to you during the budget process which i will tell you is really just getting ready to kick off and you will have come january a series of meetings to go over and discuss and and have some of that like i think that you heard laura talk about we had 12 hours worth of meetings just focus on the budget as we went through the next over a series of 3 or 4. >> so you will have that

opportunity to express your views. >> appreciate it, mr. general manager the only last question i have and maybe kind of preparing for that and just really kind of formatting my mind in advance of that kind of conversation. what other elements as far as the notion of trade offs apart from the capital investments and the timing of the capital investments i guess apart from capital, what are some other elements of trade off that go into strategy years to build more cushion in future years and to try to stay above that afford to try to stay below that affordability target when instead of getting really, really close. >> i'll let mr. bush talk about that. but our biggest driver is capital. so those capital projects are the real driver. but i'll let her add to that. >> yeah, as general manager herrera said, the biggest lever is our spending projected spending. so if we talk about ways to bring down our bills that would

be cutting or deferring and pushing out capital projects obviously that comes with an operational and regulatory tradeoff. there are some other levers that we can pull external funding we are already very aggressive in seeking out state and federal loans. you may have heard us talk about our wifi and srf loans. those are loans that come with very, very very nice interest rates one 2% range much lower than we get on our revenue bonds. the more of those we can get, the lower the cost of debt service will have and those projects get cheaper. there's also on some of our major projects nutrients come to mind a broad coalition developing within the bay area to try and seek external funding for what is a regional problem of addressing nutrients in the bay. so it's cutting spending and seeking non ratepayer sources. >> one other thing i'll add and we mentioned it in this

item is that we can also shift what proportion of our capital plan is funded with cash versus bonds. >> the problem is cash funding. you don't pay the interest but you have to pay it upfront so it's a big rate increase now but it's saving money in the long term. so that's one of the things that we're trying to take a very hard look at this year and we'll definitely be revisiting in the next capital plan. >> i really appreciate it and in my last comments i have a question. it's just a an offer to mr. general manager to you and the team to be a part of any and all advocacy efforts around advocating for non ratepayer non local non our own resources efforts to get as much federal as much state as much other investment to help fund the necessary projects but also to have an eye toward ways to stay below our affordability targets much as possible. whatever there is we can do to

advocate. sign me up anywhere any time for that please. >> vice president our side very much. >> thank you. i have one last comment if possible. so is there any precedent for it's actually going down you said you know, if it is a short term thing and they go up in the short term do they ever come down because that becomes the new normal, right? >> it's just the new floor. our operating expenses almost never go down. >> it's inflation and cost of labor supplies. we do have if you go out 40 years and we start to pay off our bonds, it does show currently that our costs do go down now i'm sure there will be other capital needs, other regulations that show up in the next 20 years. rates have not gone down in the last two decades. i will note that if you bring up that slide again we did have a 0% rate increase in the pandemic in recognition of the

struggles that the city and our customers were facing. we did not raise rates during the pandemic. thank you commissioners. i have a few questions and comments as well and i'll i'll start with the affordability because that is our our touchstone here. everything we do rate payers local and regional are paying for and i know we've heard from staff in past hearings when ms. miller presented on the water capital improvement program she talked about looking hard at what what can we push off with repairs with rehabilitation so that we can you know, maintain the system in a responsible way but maybe defer these bigger capital costs for the future

and then that will help us maintain a more affordable set of rates for the rate payers even though it's outside of our tenure capital improvement plan now i think because our capital projects are so long term and we know that it's 12 years out at this point and we feel the constant pressure of project cost increases at every hearing. i think it's really important that we are getting on top of this sooner rather than later and really think about what can we defer, what is responsible management, how do we manage costs? what i know staff is doing at the staff level is you're looking at individual projects and thinking about what's the tradeoff for $80 million we could get. this is just a wild example.

we could get some additional benefit from this project or some there's some issue that we'd like to address but it's not a it's not absolutely essential. so you're you're constantly looking at projects and way to shave costs and what the tradeoffs are. i haven't been on the commission for a really robust discussion of those kinds of alternative choices for individual projects. i'd be interested in hearing more about them when we have like the nutrient reduction will be a new project in the future. i'd like to hear about that project. what are the alternatives for 100 million more we can do x, y or z for 80 million less we lose a, b and c and so i think that is also a really important part of the capital planning.

i also noted in your report that you are look you you're looking at the the ratios of indentured coverage in the service and current coverage. you have these minimums of 1.35 for annual debt and 1.1 for annual debt service but we're doing better than that i think in every category and i wonder if that will also help reduce our our long term at least our debt costs and ms. corbin over talked about it that it means that rates may go up more now but it means maybe less debt in the future. and i think the financial report also talks about what seems fair to impose on the rate payers now versus what should be spread out over many years of rate payers and i

appreciate the focus on that and ms. corbin of if you have something to add you summarized it very well. >> i don't have a lot to add other than just that was a big theme of this planning process is we are showing these short term larger rate increases to come in above our policy minimums and really demonstrate to the markets and to credit rating agencies that we are planning soundly in order to do everything we can to protect that credit rating and that is crucial for our long term avoiding bigger rate increases than what are already shown. >> yeah. if i might just jump in here for a second, erin and you please feel free a big we alluded to it utilities in general right now are being looked at by rating agencies a lot different than they were before or because the issue of climate change number one. number two, san francisco was always looked at differently by

credit rating agencies because of our economic health and whatnot and probably looked at in a more forgiving way than others. and that is changing. so we made a decision and i gave direction we need to be more conservative here to send a message to the rating agencies in light of those two things that i just described that we are being responsible stewards in an attempt to not have our credit rating rating lowered in any way. so that we don't incur higher debt costs. hopefully we're going to be successful. but i wanted to send a message early that we're taking this really seriously in light of those two things that they're airing. >> all right. >> thank you. thank you. i had a couple of specific questions on specific slides. can you remind me what are of budget positions? it was mentioned on slide ten.

are those positions that we've eliminated now off budget position is a position that doesn't come with operating budget funding gives us the authority to hire it doesn't give us the operating dollars the dollars come from in most cases the capital budget. so these are positions that are intended to be working on capital projects and funded by our capital budget was set which is separate from our operating budget. so got it. >> little technical budget thing. yeah still the same kind of one of our budgets somewhere. >> that's right. thank you and i at the bottom of slide 26 there's a statement that i'm not sure i fully understand where we say the result is higher rate increases and stronger financial metrics. can you expand on what that means please? >> this is what aaron was just saying that we wanted to strengthen our financial position through this financial

plan, ensure that our financial sustainability was really clear that resulted in higher rate increases higher so higher higher than the last version of the financial plan. >> yeah. okay. thank you. and then i have a question and this may be for a separate conversation or a separate item for involving mr. richie. i note on slide 18 it talks about the loss of across reservoir being taken off budget. i know we have an item on our calendar today. >> i also see on that slide 18 that the daily city recycled water project has been removed. i am remembering from the water system improvement program that this is part of a larger project the groundwater storage and recovery project and i wonder how that's come off budget maybe we're going to talk about this at another hearing i just was concerned

about what that meant for that project more generally. yeah. steve ritchie assistant general manager for water this is the appropriate hearing because we've looked at the the capital plan going forward here and one of the things that we in the enterprise did was look hard at our capital spending and where projects were at this particular project in the abc recycled water projects is not actually part of the groundwater storage and recovery project but it has the ability potentially to enhance that project. this project would take wastewater from daly city street into a high level so that we could use it for irrigation the particularly the cemetery is in coma it's a is a project that in terms of the unit costs of the water was was getting quite high and it was you know relying heavily on us

we thought we could interest other parties in sharing in that they were to some extent but we just took one long oh and i should say on that the cemetery is we're not people who are lining up cheering to spend more money on recycled water. so the bottom line was that project looked like it might be a project that we want to do in the future. for example, if there is a point in time when it's legally mandated for cemeteries to use recycled water that might be a very good time to start the project but for now we think it's okay to defer that project. it doesn't yield that much water and given that you know we've talked about some of the financial constraints and i've been sitting here thinking about all the projects we have that might be more important to that project and are going to cost more down the road. so this one seemed like a good

one to say good project let's put it on the shelf for a while. we'll come back to it when the need is greater for that kind of project. >> okay. i was concerned that maybe we weren't fully utilizing that all the resources of that groundwater basin i was remembering that the recycled water was for the cemetery if we use more than a set amount of that groundwater say during a dry year. >> yeah. one of the one of the issues is you know do we we will have mitigation measures that go into effect if we adversely affect their existing groundwater pumping. this is i can always come back to this this is a situation where we are the junior water rights holder in that basin and the overlying landowners or the senior water rights holders. so we're kind of beholden to their interests and it's a far different situation than many of our other situations. and so again this project, you know, is still a reasonably viable project but not a great

cost effective project. so we felt it was a good time to push it out, concentrate on other projects that we think will be more beneficial to the ratepayers than that one. well at this time okay, thank you for that information. >> um i oh i had one more question about a term used in the staff report for item number ten non ratepayer real estate revenue. i feel like i've asked this question before but i don't remember what that is and that's revenue that we receive from real estate that we own. so rents primarily comes from quarries from outside the agency from outside. yes. so it's it's not rape. it's not people buying water or utility services office. >> it's people renting our property. okay. okay. thank you so much for all of

this information. there is a lot and i also appreciate in the last two years that i've been on the commission how much i've learned and and you've taught us over the years with the financial plan and the budgeting and the capital improvement program. i think when commissioner rc asked about the vision i think of slide four as controlling pretty much everything we do. it's it's the statement of the budget priorities i think i forget the title of it but it really it drives all of our budget planning capital projects in in a variety of ways and i appreciate all the effort and the transparency and the attention and worthy of an award. so congratulations on the award as well.

commissioners, anything else before we go to public comment ? anything you'd like to add and is bush no. >> okay. and if the commission is okay with this, i'd like to give the public more time since we've we're calling for items together here. so miss linear, if you could set the clock maybe three minutes so that we can hear from people on these items if that is okay. thank you. all right. let's call public remote callers please raise your hand if you wish to provide comment on item numbers ten, 11, 12 or 13 if there are any members of the public present who wish to provide comment on these items, please approach the podium seeing none. >> moderator sir, do we have any college with their hand raised? >> ms. linear there are three

callers i wish to be recognized. >> thank you. caller i have a minute your line you have 2 minutes or 3 minutes. >> oh okay. thank you. this is dave warner. what a terrific conversation. what a terrific questions. a so many things to mention but i'll i'll stick to a few. one is i do think the it's a curious thing the reduction in percentage of use of debt going from 78% to 71% it's curious that we don't see on the back end a lower use of debt or that the expenses go don't grow as much and instead we're still seeing rates exceed the affordability threshold. so it just that's a puzzler to me i think a big comment is you know, this discussion is excellent. i do think it's hard for you not to approve of these financial plans at this point in the process and to commissioner asks comments about wanting to sort of go

through these discussions in more depth as the process moves along. you know general manager herrera talked about next january and next january if again at the tail end of the process and i think it's very hard when you're at the tail end of the process to be able to say, you know, hold on. so we have a little more analysis here. you know, could we do some of that, you know, prioritization or whatever it is we want to ask? and so i very strongly encourage you to say could you modify the process such that we can talk earlier in the budget process about what kind of targets we want to achieve on affordability and other metrics? so that's a second kind of a third comment. i just want to compliment my assistant general manager ritchie what outstanding news to say hey, this particular project this one was daly city just doesn't meet the economics we need to defer something so just very impressive. the next comment i make is and i think there's probably another big one i do think even with demand being virtually

flat i think there's a big risk of demand declining and is despite ms. bush's discussion about how if demand declines and it's because of cd then it affects everyone the same. well i don't think it actually does i think lower income people have a harder time reducing their demand than higher income people and i think i'm probably getting close to out of time but i think that's my last major comment is oh well thank you all for your service. thank you for that. some questions and i do think there's a lot of upside risk to this and the last thing i'll add is if you look at i think it's slide 19, the slide where it shows the ten year plan broken out by year. you can see that much of the spending is now in the next three years and by you know the problem is by not taking action now it's going to be much more difficult to take action two and three years from now. we spent so much money and increased our fixed costs

so much in the event that demand does decline or other costs show up that we didn't expect anyway. >> thank you so much. thank you caller for your comments caller and immediate your line you have three minutes. >> thank you. >> this is peter jurek meyer, policy director for the twomey river trust. >> i want to say i think the cpc is very fortunate to have excellent finance staff. i think the report and the presentations were very, very good. i think they're transparent. i think they've taken into account comments made in the past and that's reflected in these reports. so i commend them for that. they inherited a very, very challenging position and something that i'm hopeful about is that they're still fairly youthful so they might be around for a while and they want to set themselves up for success so you don't just keep kicking the can down the road.

and so i think that's going to really serve us. >> it was mentioned that the increase in combined bills over the next ten years is not going to average 9.6 but yet 8.6 which is about half a percentage point higher than last year's plan projected. but if you look at the coming years this year a 9.7% and then you got 11.5, 12.5, 11.8, 11.7 it's not until 2032 that starts dropping down to the 4 to 6% average increase per year and that's unlikely to happen. i think it's going to stay really high. so you need to worry about a rate payer revolt like what took place in the 90s that froze rates the peaks season, the very precarious financial position and a lot of this is you know poor decisions in the past and i have no advice about that.

if you'd asked me 20 or 30 years ago i would probably have some advice but moving forward i think it's really critical that you address an issue that comes up at all these budget hearings is why are the finance bureau sales projections so much lower than the water enterprise demand projections? the water enterprise projections go into the urban water management plan that suits a lot of things including the alternative water supply plan. >> but the difference is you saw that the projection in sales for 2035 is 196 mgd. the projection in the urban water management plan is to 29. that's more than a 30 mgd difference. and if you look at the the costing and the alternative water supply plan, that's about $6 billion in investment that it's made, it would be a very terrible investment. so i really encourage you to have a workshop on this

difference and focusing on the alternative water supply plan. >> it's really you know, the authors of that plan did a good job with what they were given. but i'm critical of the inputs they were given and the parameters. it's the high end. >> it's the worst case scenario. it suggests seven think your caller your time has expired. >> caller out your line. you have three minutes. >> thank you. it's thomas nagel, ceo of bosco . as you know, bosco closely reviews the ten year kpis for the water enterprise and for catchy with your staff and we're very supportive of investment that are being made to maintain and improve the reliability and water quality of the regional system. and while there's necessarily some projects that fall out of the budget at this time, particularly the one you're going to visit in the next agenda item the loss of cares

project i did want to highlight one item which is a benefit of the staff's analytical capabilities and that was the palo alto pipeline a long technical evaluation of that pipeline which was a significant capital project found it to be in much better shape than expected and as a result they were able to lower the capital improvement program for the regional water system. that palo alto pipeline is a critical element of water delivery to the south bay area of the regional system. so good work by the staff and the support what's being reflected here in the ten year cip update thank you color for your comments miss linear there are no more callers that wish to be recognized. >> thank you. thank you commissioners any further discussion, comments or questions i think will vote on

each item separately so if i could have a motion and a second on item ten the amendment to the fiscal year operating budget fiscal year 2526 operating budget. motion to approve second thank you. >> a roll call vote please. >> president stacy i. vice president r c high commissioner james r commissioner level roni i the item passes. okay thank you commissioners could i have a motion in the second on item 11 authorizing the general manager to seek board of supervisors approval for water revenue bonds and other forms of indebtedness . i move that we approve. >> second president stacy i vice president r c i

commissioner gender high commissioner level roni i the item passes thank you and commissioners on item 12. could i have a motion in a second to adopt the ten year capital plan for fiscal year 2526 through fiscal year 3435 motion to approve second president stacy i. vice president r c high commissioner gender high commissioner level roni i the item passes. >> thank you. >> and finally on item 13 could i have a motion in the second to adopt the ten year financial plan for fiscal years 2526 through 3435. motion to approve second president stacy i vicepresident r c i commissioner gender high commissioner level roni i the

item passes thank you and as the only retired commissioner and a lot of white hair i do want to appreciate our new members of the budget and financial planning team is stunning and mr. hunter welcome good to hear from you today and thank you as always to ms.. bush and ms.. korva nova and mr. circle for a really thorough and excellent presentations and information. thank you. >> okay. shall we call the next item? agenda item 14 ratify the termination of the laws for carol's reservoir joint exercise of powers agreement and the dissolution winding up and liquidation of the laws of carol's reservoir joint powers authority under that.

>> good afternoon again commissioners steve richey assistant general manager for water. this is another project that is no longer in the ten year capital plan. so the upside is you know we've saved money here. the downside is the project isn't happening and that's what happens with projects and so we'll talk a little bit about that and propose the action for the commission if i can have the slides please. >> the loss for carol's expansion project oops there we go. >> the loss for carol's expansion project was a regional partnership project project to expand the existing reservoir owned by the contra costa water district. eight agencies in the bay area formed the lee joint powers authority in 2021 that included contra cost to the owner in san francisco and various others. what it offered to us was the potential for dry air, water

supplies and access to delta water markets. this is, you know, not our first choice of water because we always look for high quality water and delta water quality is lesser than what we might enjoy the rest of the time. but in a drought it might be a very important supply for us to take advantage of. so we were looking into it from that perspective. the project actually had a lot of support from many people and there had been a lot of effort to try to get state and federal funding so there had been an almost $700 million preliminary approved by the state and federal government for the project. but ultimately the jpa members could not resolve significant remaining institutional and financial and financial issues. so there a timeline of events that happened in 2020 for the project seemed to be moving along but there were just you know, there were questions that constantly remained you know,

how much water can i get in, how much water can i get out? what's it going to cost? and various questions like that contract to as the basically the owner of it flagged five major unresolved issues in june i will highlight one of those which is the projects titled is even a little bit of a misnomer talks about most across reservoir expansion which kind of been in play engineering terms oh you put some more dirt on top of the dam, the dam gets bigger, reservoir gets bigger as well. well in this case the expansion that would have to take place required the removal of the existing dam completely and then having a new dam built in its place for contra costa that represented a huge amount of risk that they were you know, they were unwilling to take on and so they had been talking about getting support from other people to mitigate that risk in the ten year period where the reservoir

would just not be there and available for them. and given we've had recent droughts and various other crises coming along, a lot of people just were not willing to step up and provide water for them. our example for us we're not in a position to provide water for them because our our system is separate from the delta so where they could get water wouldn't be from us. it would have to be from one of the other water agencies participating in the project and nobody could come to an agreement on how to provide that mitigation. there were also cost increases coming along and questions about you know, how much risk any party would have assumed going into this that just could not be resolved and in august of 2024, you know, by that time various parties had signed up for a certain volume of storage to help pay for in there because the way the project was conceived it was creating i believe is roughly an extra 200,000 acre feet of water supply or storage capacity.

and so initially not everybody signed up at this time came along and nobody was being charged for it yet people started to say well yeah, maybe i could use more san francisco . we were among those. but as the analysis went forward given the facilities in the project it turned out that that amount of storage really wasn't very useful for us. a good example is that you would lose 8% of the volume of water per year to evaporation. so over ten years if you didn't have a drought in that time to use the water supply we would have a dramatic reduced amount of water available for us just lost evaporation so technically it didn't really pencil allowed as much right? so we reduced the amount of storage we wanted east bay to reduce the amount of storage they wanted santa clara valley water district reduced the amount of storage they wanted. so you know, not everybody really wanted as much out of the reservoir as they could.

so basically in september of 2024 contra costa as the owner of it said this just isn't going to work for us. and they began exploring ways to exit the project and in november their board resolved to work towards the solution of the joint powers authority and withdrawing the state funding application which was something that they had submitted. it was not the joint powers authority that was well after the project was originally conceived of was the jpa was established excuse me. so in january of 2025 the jpa board resolved to terminate the jpa agreement since the project at that point was no longer viable to dissolve the jpa and conduct wrap up activities of the jpa board resolution in february must be ratified by 75% of the member agency boards of which again san francisco

has one. and then going forward in the march there would be various wrap up activities including you know there is some money left over from from the planning that money has been put in by everybody. san francisco for example, has put about $4.5 million into the planning process and so we will be getting some money back from that. so we'll see how that actually plays out. so again this is a project that looked good on paper for a while but as you got into the issues there was just not enough support and people willing to invest in it over time particularly contra costa given the risk. so the status for us you know basically as we talked about earlier, we removed this from the f y 26 to 3510 year capital improvement program which you know reduced the size of the capital program not because, you know, we didn't necessarily ,you know, want to do it but just the project just isn't viable anymore.

i think i hadn't you know i presented not that to this board, this commission in particular but over the years we have always said that we were on the fence. we could go either way. it wasn't clear if it was going to pencil out. we wanted to keep it see if it did. we got to the point where it doesn't so there's no project. the alternative water supply program no longer includes elvie the storage project as a project in it. so that's a project that just goes away from that is for a while it wasn't viable though one of the things that we've all gained from this project was talking to all of the other agencies participating and learning knowledge about the pros and cons of accessing transfers in the delta to supplement our dry air supplies . so we've made a lot of friends in the project. everybody is parting on the mutually respectful terms and we may in the future come back with a project that

provides for us to get some delta transfer in the future for dry air supplies. so today's resolution would ratify the termination of the reservoir joint powers exercise of powers agreement ratify the dissolution winding up and liquidation of the jpa and authorize authorize the general manager and cooperation with the jpa partners to take necessary actions to support this effort and i'd be happy to answer any questions. >> thank you mr. richie commissioners comments or questions commissioner janda quick question is there a budget associated with the the all of the time that went into setting up the gpa and you know doing all of this work that's kind of now just gone away and is that kind of accounted for in the year's budget or how does that yeah, as i said, i think the estimate of the amount of money that we put

into it from this point was about $4.5 million that was equally shared with all of the parties. so they were all putting in other parts of that. the state actually contributed about $24 million to the planning effort. that's the amount of investment it takes sometimes to really find out if a project is viable. i don't recall the exact number it might be in the agenda item of the amount that was totally spent but i would say it was probably on the order of excuse me $40 million in terms of planning the project itself was going to cost well over $1 billion and our share of that might have been, you know, $200 million. you know, we never got to that point of really pinning that down but it was going to be a very large project. but you have to make enough of an investment to know if it's going to work or not. and in this case that was part of contra costa's calculus

and this it's like it's just not going to work for us and nobody could really argue with that. thank you. i appreciate your last bullet looking for some positive in the amount of money we we've sunk is that we have learned a lot more about accessing delta water supplies and getting to know the players in that area. your presentations on the list for caro's project have really helped educate me anyway on who's out there and what the options are. >> yeah and what the options are where there are some people who can find easy ways to potentially transfer water to us and there are others that it's just not easy. in fact it's almost impossible to and so we know that you know, those aren't conversations we want to pursue the ones where it's really potentially doable.

>> that's what we want to pursue. yeah. and it really sounds like the process there just wasn't enough interest and enough money to complete the project and once contra costa pulled the plug we don't really have much leverage to do anything else here. >> no. yeah. okay. thank you. should we take public comment? >> remote callers please raise your hand if you wish to provide comment on item 14 if there are any members of the public present who wish to provide comment on this item please approach the podium seeing none. moderator are there any callers with their hand raised? >> mr. linear there's one caller that wished to be recognized. thank you. >> caller i'm a mute your line. >> you have two minutes. thank you, peter derek march

while on the river trust. well, i think it's a no brainer to get away from the cross. i was never very excited by this project. for one, i don't think the species are going to need the water but to you know it's a storage project and what you really are interested in is annual supply. so yeah, $4.5 million minus whatever you get back last. but you know cutting our losses moving forward is important. in 2012 there was an attempt to get a water transfer with the modesto irrigation district. it was $700 per acre but it was take or pay and at the time the puc thought they might need the water every five years. well we've never needed it. we would have been spending $1.5 million a year so 18 million by this point we never really came close. i want to flag that. i think the south bay water purification project probably cannot withstand a proposition to 18 challenge. it violates beneficiary pace.

i think the other two agencies and even san francisco customers would be subsidizing the water to san jose and santa clara and i encourage you to take this up. i'd be happy to share information with anyone who wants to talk about it but let's not again repeat this process of investing a lot of money and studies and then to find out that the project's not going to move forward. >> thank you. thank you. call out for your comments miss linear there are no more callers that wish to be recognized. >> thank you. thank you commissioners. if there are no further comments or questions could i have a motion in the second to ratify the termination of the lowe's for cares reservoir joint exercise of powers agreement i move that we ratify the termination of the joint exercise of powers agreement and the dissolution and liquidation of the joint powers authority. >> second president stacy ai vice president r c i

commissioner jim dyer high commissioner level roni i the item passes thank you. >> please read the next item agenda item 15 a word contract number 6-1263 standard renewable gas interconnection to pacific gas and electric company good afternoon commissioners. i'm daniella brandao, senior project manager with the puc and infrastructure delivery projects for our wastewater enterprise and i'm here today to ask you to award the contract 1263 standard renewable gas interconnection to pacific gas and electric company for an amount not to exceed $7 million and we have a duration of ten years to obtain natural gas conveyance services which require pacific gas and electric company to design, construct install and operate the facility required for pipeline injection of the renewable natural gas that will be generated by the new

digesters and the san francisco blue sea southeast treatment plant. >> as you may recall in october of 2024 this commission awarded a contract db1 38 the bio gas utilization project which is the project that is going to treat the bio gas that'll be generated by the new digester and convert it into a renewable energy for pipeline injection. so today we ask that we award the sole source a sole source contract to pge e so they can actually design and build their interconnection facility to take our gas and convey to end users the competitive solicitation requirement was waived for this contract because pge is the investor owned gas utility for this region and only you can operate its facility. so i'm here to ask you again that your word contract 1263 standard renewable gas interconnection to pacific as an electric company for an amount not to exceed $7 million

and for a duration of ten years . >> question thank you, commissioners comments or questions no, we we've heard from you about this project in the larger context. yes. so thank you for that. early education. you're welcome. could we take public comment please? >> remote callers please raise your hand if you wish to provide comment on item 15 if there are any members of the public present who wish to provide comment please approach the podium seeing none. moderator are there any callers with their hand raised? >> ms. linear there are no callers that wish to be recognized. >> thank you. thank you. commissioners, could i have a motion in the second to award this contract? >> i move that we award the contract. seconded. president stacy i. vice president r.c..

>> right. commissioner jammed our high commissioner level roni. all right. the item passes. thank you. please read the next item. >> item 16 approve an increase of 560 calendar days to the duration contingency for contract number 1-2717. college hill reservoir outlet structure and pipeline with ranger pipelines inc.. >> hi there commissioners. my name is ryan freeborn. i'm a senior project manager for sfp local water corp program. i'm here presenting today on the couch her reservoir structure and pipeline project. this project was awarded by the commission in june of 2021 to ranger pipelines. the amount of 12.1 million and 755 consecutive days this project is part of a phase program to replace 3.8 miles of distribution and transmission pipelines from college hill reservoir to san francisco general hospital with

earthquake resistant ductile and pipe to allow san francisco general to be able to receive water following a major seismic event. this project cultural reservoirs in the bernal heights neighborhood and includes installation of a new control valve replacement of reservoir and letting outlet pipe in and replacement of the first section of transmission pipelines from college hill reservoir up to cortland avenue. we were last at the commission in march 28th of 2023 requesting an increase in the contract contingency of 6.5 million and 270 days to allow for the replacement of the reservoir roof substructure and associated plywood sheathing. to date we've implemented eight contract modifications totaling 6.5 million and 240 days which have been primarily related to the reservoir replacement of the reservoir roof substructure and minor changes related to

different site condition. currently we have 105 remaining days and contractor contract duration contingency and 1.2 million and contract costs contingency. i am here today requesting an increase of 560 calendar days to the duration contingency and no changes to the contract amount due to delays associated with pge any changing the electrical rate tariff associated with permanent power to the site from wholesale to retail which triggered a new service application and designed by genie. these changes in service prevented the contractor from being able to release the electrical panels for fabrication until pge finalized their new design and as delayed the start up and testing of the new facilities. additionally, there's time required for fabrication and installation of a new new meter pedestal prior to any

providing power to the site. so again requesting approval to increase the the duration contingency for 560 days to allow us to finish work on the site and close out and return the reservoir to service. thank you commissioners. thank you. open to any questions? >> thank you commissioners. comments or questions? no. could we take public comment please? >> remote callers please raise your hand if you wish to provide comment on item 16. if there are any members of the public present who wish to comment please approach the podium seeing none. moderator are there any callers with their hand raised? >> ms. linear there are no callers that wish to be recognized. thank you. >> thank you. commissioners, could i have a motion in a second to approve item six a motion to approve

second president stacey i. >> vice president r.c.. >> all right. commissioner gender. commissioner. all right. the item passes. >> thank you. please read the next item. item 17 approve amendment number one the contract number pyro .0140. >>. a construction management services for the east bay region with cpm. s.m. pros joint venture

. >> good afternoon commissioners. my name is james takai with the construction management bureau and i'm here today to request amendment number one for professional services contract pro one for a construction management services for the east bay region pro 140 a is construction management contract that was approved for award under resolution 2237 in december 2020. the contractor is cpms cam pros joint venture the contract amount is 9 million and the contract duration is seven years. the contract was given notice to proceed in june 2021 and expires in june 2028. >> the primary role of the consultant is to provide construction management services for the east bay region specifically three projects alameda creek

recapture signal valley water treatment plant oes anation and snow valley water treatment plant short term improvements. this request is to amend the contract by 25,000,002 years for two for a total contract amount of 34 million and a total contract duration of nine years. there are a total of seven tasks seven task orders currently in this contract. alameda creek recapture the three projects i previously mentioned alameda creek capture as a nation short term improvements. we also added four additional tasks that were not in the original scope for pre and tpe services for ohs anation and a 95% design review for the ozone design and construct ability

analyzes for this and all valley water treatment plant. due to the two concurrent projects that will be occurring at the same time and those additional tasks totaled about 700,000 of additional costs for ozone nation. our request is for an additional 18.6 million to complete the construction of the project and for short term improvements. our request is an additional 6.4 million to complete construction of short term improvements. why this contract amendment is required. since advertisement of the pro and 48 contract which was way back in 2019 a lot has changed. >> there have been significant increases in scope, cost duration and schedule for all three projects. by far the largest increase was due to the a nation project at

the time of advertisement of the rfp back in 2019. i was a nation was in early planning stages and the estimated construction cost was 85 million with a construction duration of two and a half years. >> construction has recently started the actual low bid received was 235 million and the contract duration is four years and two months. this has been a quite significant increase in cost and duration for that project and that is the largest reason for this request and ptp was issued on september 30th 2024 and final completion is scheduled for december 2028 and that is the reason for the request for an additional two years of contract time so that we have sufficient time to complete construction and allow time for closeout activities as well as a contingency for

construction delays. the short term improvements project also increased from 33 million estimated construction cost to and one and a half years construction duration to $45 million and three and a half years of construction duration. bids were recently received. the low bid apparent low bid is 45 million and tpi is anticipated in july of 2025. >> the alameda creek recapture project has been completed. an additional 1.6 million was required to complete that project due to additional staffing needs and also the increased duration of the project from one and a half to two years. >> so i'm here today to seek commission approval for contract amendment number one

in the amount of 25 million and to extend the schedule for two years. and the next step would be to seek subsequent approval by the board of supervisors. that concludes my presentation and i'm happy to answer any questions. thank you. commissioners questions or comments. >> commissioner rc thanks his presence. thanks for the presentation and i think especially for the laying out the justification for the amendment. >> i think you've really sufficiently laid out both the necessity of the additional tasks and the foreseeability of some of the changes in the in the in the industry and and generally speaking that would impact costs going back to the beginning and i just want to say i think we're all in this together when we look at costs because we spent a long time talking about the affordability

and we have no reason to second guess the your hard work and the team and everybody at the agency on really trying to control for costs just just put it out there because it all you know these these are costs that then accrue to the wholesale customers because it's a regional it's a regional investment the east bay with our bosco partners and to our san francisco ratepayers on the retail side it's just i'm fully on board. >> i just wanted to say that it's on my mind as we think about just everyone doing it whatever we can to kind of keep an eye on these costs and again there's no reason for for me or i think any of us to even second guessed the hard work and due diligence that's really pushing to again hone in on necessity and to to determine the foreseeability. and i think that's what led us to here and that's why i'm on board. >> but i think you know, it's just something that's on my mind when i think about how all all the costs roll up into the

the ultimate at least for me as the ratepayer advocate on this commission rates it all it all rolls up into rates and capital. we as we heard today capital is the number one driver of rates and the encroachment upon that affordability target but but i'm on board to support it is kind of wanted to say that thank you mr. lever ernie on this project this is a construction management portion of it. >> yes. going up. yes. so i'm going to assume and you might have touched on it but that all of the construction contractors prices have also gone way up when they originally started. and i was just wondering if you have a feel for where this project originally started on one day and where we are today with it on pricing total pricing well yeah that for the

osage nation project in particular when the professional services contract was advertised back in 2019 that was early planning and at that time in the ten year plan it was supposed to be a $85 million project two and a half year duration because we did a regional multi project contract as opposed to a project specific contract. we were out ahead of it earlier than we would normally be and so there added to the uncertainty to the final scope and duration of the project and so that was the big reason for the difference between the estimated cost at planning and actual bid cost. there were the bids we received were higher than expected. they were higher than our final cost estimates and i believe the pandemic had a lot to do with that.

we saw a lot of cost spikes during the pandemic and contract hours were unable to recover those costs if they were already in a in a fixed price contract. and so i think we're seeing some effect of that now. thank you. thank you, commissioners. i will just echo commissioner archie's concerns. it's hard to see this large an increase to a contract and we've seen a couple of other items for this same water treatment plant at past hearings. so we you know, we we've been able to anticipate that these costs are going up and it's just it's hard when they go up by this high a percentage. i had one clarification question on the alameda creek recapture that's the project that we terminated. that's correct.

a year or two ago. >> that's correct. so it's not really complete. it's just we've pulled the plug but we'll see it again. right. the test the task order under this contract is complete. >> yeah. okay. >> that's all right. thank you. >> so we take public comment. >> remote callers please raise your hand if you wish to provide comment on item 17 if there are any members of the public present who wish to provide comment on this item please approach the podium seeing none. >> moderator are there any callers with their hand raised ? >> ms. leonard there are no callers in the queue. thank you. thank you, commissioners. >> could i have a motion in the second to approve this amendment? i move that we approve the amendment seconded. >> president stacy i. vice president r.c. i. commissioner jambs r i commissioner love irony i. the item passes. >> thank you.

please read the next item. >> item 18 communications. >> commissioners any discussion comments questions on our communications packet? >> nope. all right. thank you. please read the next item. >> item 19 items initiated by commissioners. >> commissioners any items to initiate commissioner ar say. >> thanks president stacy i would like to share that i'm going back to the citizens advisory committee meeting for next week to have a q&a with our cac volunteers and i think i could imagine that a big part of the conversation is going to be our our conversation around affordability and some of the financial plans and elements that we approved today.

>> so i would like to, you know, offer up myself as a resource when i think about different community constituencies or collab natives that that staff engage with to also to be an ambassador from the from the commission along with anyone else who would like to join in terms of conversations. an example i give was at the mayor's lunar new year event last week kelly wong who the executive director of the api council had asked about the how we're doing over here at the agency and i didn't work with them in the prior life with the city but we have a standing invitation and i don't know if they're an organization we currently engage. they have so much breadth of so many tens of thousands of individuals that they serve through the organizations. >> there could be a good partner if we're if we're currently communicating with and talking about our services

and and maybe not immediately but you know, maybe in the summer to fall in the build up before our work around the january and early 2026 budget work. someone that an organization i'd certainly love to go visit and talk about the great work that's happening here and would love to follow whatever kind of protocols we have in terms of doing so with the general manager or designee or or anyone at all. >> i just i come from that school of like i just love getting out there and communicating with folks and and talking about the great work that's happening here and then take the feedback back to us to share especially because i would really feel like it's important that we've got a lot of public representatives with us on this journey as we try to solve for these important questions that ultimately are going to impact rates when we're back at this point again a year from now. >> look forward to work with you on that. thanks. thank you. >> commissioners, anything further i will adjourn this

meeting with my gavel. >> there

. >> (music). >> the ferry building one of san francisco most famous that as many of 15 thousand commuters pass through that each gay. >> one of the things that one has to keep in mind regarding

san francisco is how young the city we are. and nothing is really happening here before the gold rush. there was a small spanish in the presiding and were couriers and fisherman that will come in to rest and repair their ships but at any given time three hundred people in san francisco. and then the gold rush happened. by 182948 individuals we are here to start a new life. >> by 1850 roughly 16 thousand ships in the bay and left town in search of gold leaving their

ships behind so they scraped and had the ships in the bay and corinne woods. with sand the way that san francisco was and when you look at a map of san francisco have a unique street grid and one of the thing is those streets started off in extremely long piers. but by 1875 they know they needed more so the ferry building was built and it was a long affair and the first cars turned around at the ferry building and picking up people and goods and then last night the street light cars the trams came to that area also. but by the late 1880s we needed something better than the ferry

building. a bond issue was passed for $600,000. to build a new ferry building i would say 800 thousand for a studio apartment in san francisco they thought that was a grand ferry building had a competition to hire an architecture and choose a young aspiring architect and in the long paris and san francisco had grand plans for this transit station. so he proposed the beautiful new building i wanted it wider, there is none tonight. than that actually is but the price of concrete quitclaim two how and was not completed and killed. but it opened a greater claim and became fully operational before 1898 and

first carriages and horses for the primary mode of transportation but market street was built up for serve tram lines and streetcars could go up to the door to embarcadero to hospitals and mission street up to nob hill and the fisherman's area. and then the earthquake hit in 190 six the ferry building collapsed the only thing had to be corrected once the facade of the tower. and 80 percent of the city would not survive the buildings collapsed the streets budges and the trams were running and buildings had to highland during the fire

after the actuate tried to stop the mask fire in the city so think of a dennis herrera devastation of a cable car they were a mess the streets were torn up and really, really wanted to have a popular sense they were on top of that but two weeks after the earthquake kind of rigged a way getting a streetcar to run not on the cable track ran electrical wires to get the streetcars to run and 2 was pretty controversial tram system wanted electrical cars but the earthquake gave them to chance to show how electrical cars and we're going to get on top this. >> take 10 years for the city to rebuild. side ferry use was

increasing for a international exhibition in 1950 and people didn't realize how much of a community center the ferry building was. it was the center for celebration. the upper level of ferry building was a gathering place. also whenever there was a war like the filipino war or world war two had a parade on market street and the ferry building would have banners and to give you an idea how central to the citywide that is what page brown wanted to to be a gathering place in that ferry building hay day the busiest translation place in the

world how people got around transit and the city is dependent on that in 1915 of an important year that was the year of our international exposition 18 million living in san francisco and that was supposedly to celebrate the open of panama differential but back in business after the earthquake and 22 different ferry boats to alamed and one had the and 80 trips a day a way of life and in 1918 san francisco was hit hard by the flu pandemic and city had mask mandates and anyone caught without a doubt a mask had a risk ever being arrested and san francisco was hit hard by the pandemic like other places and rules about masks wearing and

what we're supposed to be more than two people without our masks on i read was that on the ferry those guys wanted to smoke their pipes and taking off their masks and getting from trouble so two would be hauled away. >> the way the ferry building was originally built the lower level with the natural light was used for take it off lunge storage. the second floor was where passengers offloaded and all those people would spill out and central stairway of the building that is interesting point to talk about because such a large building one major stairway and we're talking about over 40 thousand people one of

the cost measures was not building a pedestrian bridge with the ferry building and the embarcadero on market street was actually added in and in 1918 but within 20 years to have san francisco bay the later shipbuilding port in the world and the pacific we need the iron that. as the ferry system was at the peak two bridges to reach san francisco. and automobiles were a popular item that people wanted to drive themselves around instead of the ferry as a result marin and other roots varnished. the dramatic draw in ferry usage was staggering who was using the ferry that was a

novelty rather than a transportation but the ferry line stopped one by one because everyone was getting cars and wanted to drive and cars were a big deal. take the care ferry and to san francisco and spend the day or for a saturday drive but really, really changed having the car ferry. >> when the bay bridge was built had a train that went along the lower level so that was a major stay and end up where our sales force transit center is now another way of getting into the city little by little the ferry stopped having a purpose. >> what happened in the 40 and 50's because of this downturn we were trying to find a purpose a

number of proposals for a world trade center and wanted to build it own the philly in a terrible idea objective never gotten down including one that had too tall towers a trade center in new york but a tower in between that was a part of ferry building and completely impractical. after the cars the tower administration wanted to keep americans deployed and have the infrastructure for the united states. so they had an intrastate free plan the plan for major freeway systems to go throughout san francisco. and so the developers came up with the

bay bridge and worked their way along embarcadero. the plans were to be very, very efficient for that through town he once the san francisco saw had human services agency happening 200 though people figure out city hall offender that the embarcadero free was dropped and we had the great free to no where. which cut us off from the ferry building and our store line and created in 1989 and gave us the opportunity to tear down the free. and that was the renaissance of ferry building. >> that land was developed for

a new ferry building and whom new embarcadero how to handle travel and needed a concept for the building didn't want- that was when a plan was developed for the liquor store. >> the san francisco ferry building has many that ups and downs and had a huge hay day dribbled adopt to almost nothing and after the earthquake had a shove of adrenaline to revise the waterfront and it moved around the bay and plans for more so think investment in the future and feel that by making a reliable ferry system once the ferry building will be there to

surface. >> shop and dine on the 49 promotes local businesses and challenges residents to do shopping and dining within the 49 square miles of san francisco by supporting local services within

neighborhood. we help san francisco remain unique, successful and vibrant. where will you shop and dine in the 49? san francisco owes the charm to the unique character of the neighborhood comer hall district. each corridor has its own personality. our neighborhoods are the engine of the city. >> you are putting money and support back to the community you live in and you are helping small businesses grow. >> it is more environmentally friendly. >> shopping local is very important. i have had relationships with my local growers for 30 years. by shopping here and supporting us locally, you are also supporting the growers of the flowers, they are fresh and they

have a price point that is not imported. it is really good for everybody. >> shopping locally is crucial. without that support, small business can't survive, and if we lose small business, that diversity goes away, and, you know, it would be a shame to see that become a thing of the past. >> it is important to dine and shop locally. it allows us to maintain traditions. it makes the neighborhood. >> i think san francisco should shop local as much as they can. the retail marketplace is changes. we are trying to have people on the floor who can talk to you and help you with products you are interested in buying, and

help you with exploration to try things you have never had before. >> the fish business, you think it is a piece of fish and fisherman. there are a lot of people working in the fish business, between wholesalers and fishermen and bait and tackle. at the retail end, we about a lot of people and it is good for everybody. >> shopping and dining locally is so important to the community because it brings a tighter fabric to the community and allows the business owners to thrive in the community. we see more small businesses going away. we need to shop locally to keep the small business alive in san francisco. >> shop and dine in the 49 is a

cool initiative. you can see the banners in the streets around town. it is great. anything that can showcase and legitimize small businesses is a wonderful thing. >> come shop dine and play. taraval street is open for business. >> i am a coowner at 19th. this establishment came about when me and my brother andy, coowner, we decided that it time for us to take a step up in the barber industry, and open up a space of our own. ory business is a community

that shows their true artistic side of the barber industry. we are involved in teraival bingo so stop by, get a hair cut and when you do you get the barber sticker made just for us. i say in three words we are community, arts and here to help any way possible we can, so come by, visit at barber lounge, 907 taraval in the sunset. you can find us on instagram. >> time for teraival bingo supporting small business, anyone can participate. it is easy, collect stickers on a bingo gameboard and enter a raffle event.today. >> (clapping.) >> i've been working in restaurants forever as a blood alcohol small business you have a lot of requests for donations if someone calls you and say we

want to documents for our school or nonprofit i've been in a position with my previous employment i had to say no all the time. >> my name is art the owner and chief at straw combinations of street food and festival food and carnival food i realize that people try to find this you don't want to wait 365 day if you make that brick-and-mortar it is really about making you feel special and feel like a kid again everything we've done to celebrate that.

>> so nonprofit monday is a program that straw runs to make sure that no matter is going on with our business giving back is treated just the is that you as paying any other bill in addition to the money we impose their cause to the greater bayview it is a great way for straw to sort of build communicated and to introduce people who might not normally get to be exposed to one nonprofit or another and i know that they do a different nonprofit every most of the year. >> people are mroent surprised the restaurant it giving back i see some people from the nonprofit why been part of

nonprofit monday sort of give back to the program as well answer. >> inform people that be regular aprons at straw they get imposed to 10 or 12 nonprofits. >> i love nonprofits great for a local restaurant to give back to community that's so wonderful i wish more restrictive places did that that is really cool. >> it is a 6 of nonprofit that is supporting adults with autism and down syndrome we i do not involved one the wonderful members reached out to straw and saw a headline about, about their nonprofit mondays and she applied for a grant back in january of 2016 and we were notified late in the spring we would be the recipient of straw

if you have any questions, we'll be happy to answer thems in the month of genuine we were able to organize with straw for the monday and at the end of the month we were the recipient of 10 percent of precedes on mondays the contribution from nonprofit monday from stray went into our post group if you have any questions, we'll be happy to answer theming fund with our arts coaching for chinese and classes and we have a really great vibrate arts program. >> we we say thank you to the customers like always but say 0 one more thing just so you know you've made a donation to x nonprofit which does why i think that is a very special thing. >> it is good to know the owner takes responsibility to know

your money is going to good cause also. >> it is really nice to have a restaurant that is very community focused they do it all month long for nonprofits not just one day all four mondays. >> we have a wall of thank you letters in the office it seems like you know we were able to gas up the 10 passenger minivan we were innovate expected to do. >> when those people working at the nonprofits their predictive and thank what straw is giving that in and of itself it making an impact with the nonprofit through the consumers that are coming here is just as important it is important for the grill cheese kitchen the more

restrictive i learn about what is going on in the community more restrictive people are doing this stuff with 4 thousand restaurant in san francisco we're doing an average of $6,000 a year in donations and multiply that by one thousand that's a lot to okay. okay. >> actually if you could give me one moment. for tv i don't see a video feed on webex