This meeting focused on the presentation and discussion of the Wastewater Enterprise's operating and capital budgets for fiscal years 2027-2028, featuring comprehensive reviews of major infrastructure investments, regulatory compliance initiatives, and rate affordability considerations.
The commission convened to review the Wastewater Enterprise's proposed budgets totaling approximately $5.9 billion over 10 years in capital investments, alongside significant operating budget increases driven primarily by debt service obligations. Assistant General Manager Joel Prather presented detailed plans for maintaining San Francisco's combined sewer system while balancing ratepayer affordability with regulatory compliance and infrastructure reliability needs.
President Arce opened the meeting with a land acknowledgment recognizing the Muwekma Ohlone tribe as the original inhabitants and stewards of the lands where the SFPUC operates. The commission acknowledged the ongoing partnership with the Muwekma Ohlone people and their continued presence in Bay Area communities.
AGM Prather outlined the Wastewater Enterprise's core mission to protect public health and water quality in the Bay and Ocean. The enterprise operates:
The operating budget presentation highlighted several significant cost drivers:
Debt Service Increase: $139 million increase representing the largest year-over-year cost driver for the entire PUC budget. Deputy CFO Laura Bush explained this increase results from bonds issued for major capital projects (including SSIP projects at Southeast Plant) that are now coming due. The PUC typically capitalizes interest for two years after bond issuance, and these obligations are now becoming active.
New Staff Positions: Five temporary-to-permanent position conversions (no net new positions added):
These conversions are effectively budget-neutral as the temporary positions were already funded, with costs offset through attrition savings adjustments.
BDFP Project Support Costs:
Biogas Utilization Facility: $1.35 million annual increase (starting FY28) for additional 1.6 megawatts of power, plus $1 million annual O&M service contract for five years to operate the new biogas scrubbing system.
Other Operating Costs:
AGM Prather introduced division managers who stood for recognition:
AGM Prather highlighted key enterprise achievements:
The 10-year capital plan totals $5.9 billion, down from $7.4 billion proposed in September 2024—a 20% reduction ($1.5 billion in deferrals) achieved through rigorous prioritization balancing ratepayer affordability with service reliability and regulatory requirements.
Prioritization Framework: Projects evaluated based on:
Key Context: San Francisco has the second-highest construction costs in the world (after New York City, ahead of Zurich, Switzerland), significantly impacting capital project expenses.
Total Budget: $1.47 billion (appropriations FY27-36: $1.42 billion; project extends beyond 10 years)
Purpose: Reduce nutrient levels in Southeast Plant effluent to improve Bay water quality and prevent algal blooms (like the severe 2022 summer bloom that spread across the Bay causing dead fish and unsightly conditions).
Project Approach:
Timeline: Commission to review project approval next week as first step in progressive design-build process. Water Board permit requirements drive this compliance project.
Note: Project is independent of Southeast Outfall project; nutrient reduction requirements apply regardless of outfall location.
Projects: Lower Alamany and Folsom Street improvements
Purpose: Meet San Francisco Regional Water Quality Control Board cleanup and abatement order; provide sewer improvements, flooding mitigation, additional stormwater storage and conveyance.
Components:
Purpose: Ensure reliability of critical asset transporting 100% of sewage and stormwater from northeast San Francisco to Southeast Plant.
Age: Over 50 years old
Approach:
Purpose: Ensure reliability of asset transporting 100% of influent from West Side Pump Station to Oceanside Treatment Plant.
Age: Over 30 years old
Status: Currently in planning phase with condition assessment underway
Total Budget: $1.98 billion (appropriations FY27-36: $154 million)
Age: Original infrastructure built in 1967 (over 70 years old for some components)
Timeline: Construction intentionally scheduled beyond 10-year window to avoid overlap with other major projects (particularly nutrient reduction) and minimize ratepayer impact.
Current Activities:
Future Capacity: Will increase booster station capacity to discharge 100% of Southeast Plant effluent to deep water outfall offshore.
Purpose: Comprehensive shoreline protection addressing erosion threatening critical wastewater assets including:
Partners: California Coastal Commission, Recreation and Parks, SF Zoo, SFMTA, federal partners
Components:
Compliance: Part of California Coastal Commission requirements; multi-benefit project.
Purpose: Consolidate multiple interrelated improvements into coordinated effort addressing:
Objectives:
Rationale: Advance planning necessary as treatment capacity cannot be quickly adjusted; requires years-long lead time.
Total Budget: $2.84 billion (70% complete)
Status: Construction over 70% complete; process equipment, piping, mechanical, electrical, and plumbing installed; biogas utilization facility construction begun.
Timeline:
Benefits:
Scope: 1,000 miles of sewer mains requiring continuous investment
Activities:
Goal: Enable quicker project activation for urgent repair needs.
AGM Prather emphasized deferrals are not deletions—all projects remain necessary for long-term system sustainability:
Reason: High-level planning for post-BDFP campus repurposing requires more integrated affordability analysis before formal capital plan development.
Status: Proceeding with small investment in environmental planning to inform future decisions for 1950s-era digester facility area.
Reason: Tied to SFMTA rail work on Judah Street; MTA lacks committed start date.
Status: Deferred pending MTA project timeline clarity.
Reason: Previous planning based on 2014 data; significant maintenance and R&R work completed since then necessitates data refresh.
Status: Conducting new condition assessments for pump stations and majority of force mains to inform future project decisions (may result in R&R, in-house maintenance, or future capital projects).
Financial Planning Director Aaron Corvinova explained the balance between revenue-funded capital and debt-funded capital:
Deputy CFO Laura Bush confirmed:
Commissioner Stacy inquired about "attrition savings" shown in budget proposals. Budget Director Anna Dooning explained this technical budgetary term represents natural savings from attrition/turnover, modified to offset costs of temporary-to-permanent position conversions. The approach is budget-neutral as temporary positions were already funded. Stacy noted concern that attrition savings could disappear if vacant positions are filled; finance staff confirmed continuous quarterly analysis and right-sizing to ensure adequate budget for filling vacancies.
Commissioner Thurlow asked about declining revenue-funded capital trends. Financial Planning Director Corvinova explained revenue and debt funding are balanced independently based on project appropriateness, affordability, rate impacts, and financial policies. Wastewater's increased debt funding reflects large capital investments moved earlier in planning cycle.
Vice President Leveroni sought clarification on $139 million debt service increase. Deputy CFO Bush explained this represents the largest PUC budget cost driver year-over-year, resulting from bonds issued for completed or near-complete projects (primarily SSIP) with two-year capitalized interest periods now expiring. Leveroni confirmed comfort level with impact on bond ratings; Bush affirmed no surprises, with financial policies ensuring sustainable management and healthy debt service coverage throughout 10-year projections. Discussion of potential refinancing savings and whether they'd reduce debt or fund projects; staff noted savings could support ratepayer relief or additional projects depending on future commission decisions.
Commissioner Stacy appreciated deferral examples and noted affordability limits drive stringent budget processes. She questioned:
Vice President Leveroni questioned:
Commissioner Thurlow asked about total project budgets and uncertainty: AGM Robinson explained contingencies vary by project stage per American Association for Cost Estimating standards—up to 100% (or -50%) at early concept stage, decreasing through design, with minimal contingency during construction (especially design-bid-build with hard contractor bids). Higher contingencies applied to projects further out in capital plan; lower for projects in construction.
Commissioner Jamdar clarified Southeast Bay Outfall budget ($1.98 billion total, $154 million appropriations over decade, minimal bar chart representation): Confirmed construction intentionally scheduled beyond 10-year window to avoid overlapping with major projects like nutrient reduction, minimizing ratepayer impact. Not a deferred project; planning active with interim condition assessment and rehabilitation ongoing. Timing also coordinates with Port waterfront sea level rise efforts and potential Army Corps engagement given Islais Creek location.
President Arce commended AGM Prather and team for transparently prioritizing affordability while delivering core services. He highlighted the 20% capital plan reduction ($1.5 billion in deferrals from $7.4B to $5.9B) as critical to addressing rate concerns and helping lower projected rate increases, particularly in near-term, buying time for long-term solutions.
Arce emphasized the line-by-line itemized project list demonstrates transparency in decision-making and noted four key cost drivers the enterprise navigates:
Arce praised AGM Prather's career trajectory from hands-on field work to leadership, expressing full confidence in presented decisions. He acknowledged the entire agency's collaborative effort (finance, infrastructure, wastewater teams, General Manager Herrera) in achieving the budget balancing act.
Francisco DaCosta provided comments on both operating and capital budgets, emphasizing:
The meeting adjourned following public comment with no formal votes taken (informational hearing only).
Good afternoon. Today's meeting of the San Francisco Public Utilities Commission will now come to order. Ms. Lanier, can you please call roll? President Arce? Here. Vice President Leverroni? Here. Commissioner Jamdar? Here. Commissioner Stacey? Here. Commissioner Thurlow? Here. You have a quorum. Thank you, Ms. Lanier. 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 Muekma Ohlone tribe and other familial descendants of the historic federally recognized Mission San Jose Verona Band of Alameda County. The SFPUC also recognizes that every citizen residing within the greater Bay Area has and continues to benefit from the use and occupation of the Muekma Ohlone tribe's aboriginal lands since before and after the San Francisco Public Utilities 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 Mwekma Ohlone people have established a working partnership with the SFPUC and are productive and flourishing members within the many greater San Francisco Bay Area communities today. Item 3, Public Hearing and Discussion, Wastewater Enterprise Budget and Capital Plan. Good afternoon, Commissioners. President Arce, my name is Joel Prather, and I am the Wastewater Assistant AGM for San Francisco PEC. I'm here today to present our proposed wastewater enterprise operating capital budgets. This is our final budget here in the cycle, and I think it's only fitting that we followed Water's enterprise budget last week. Between these two enterprises, we provide a critical urban water cycle that helps keep our city running. We have a reliable and robust system, and we don't have to look far to see that. A little over a month ago, we experienced a major utility failure that left many San Franciscans in the dark. But throughout that unfortunate event, fresh water came out of the tap, and the toilets kept flushing. So last week, we got to hear from water what made that happen, and this week, we'll go to the other side of the pipe to hear from wastewater. So with that, can I have the slides, please? And actually, before we jump into the deck, I do want to note what we're covering today. And so first, I will be presenting item 3A-I, which is the Wastewater Enterprise Operating Budget. After that, we'll stop for questions or comments. and then I will proceed to item 3BI, which will be our enterprise capital budget, which we'll stop at the end of that for comments and questions as well. Wastewater Enterprise, here's an overview of our enterprise. Our mission is to manage our wastewater system to protect public health and the water quality of the Bay and Ocean. We value environmental community interests, and we sustain the resources that are entrusted in our care. We do this through operating the San Francisco PUC's combined sewer system. We are the only combined sewer system on the coast of California, one of few on the entire West Coast, the other two being Portland and Seattle. But we're actually one of over 700 throughout the United States.