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.

They're much more prevalent and common in the Northeast and with older, large cities.

We operate three wet weather treatment plants and one wet weather treatment facility.

32 pump stations.

This just grew by four this past year as we've taken on new assets on Treasure Island.

So as TIDA redevelops the island, we're taking on new assets from that effort.

And hopefully, we plan to take on a new treatment plant later this year.

That will be a PUC asset.

We have eight transport and storage facilities,

which can hold up to 200 million gallons of storage,

over 240 green infrastructure facility installations,

and 25,000 catch basins connected to 1,000 miles of pipes

that route everything to our treatment plants,

where we treat approximately 34.6 billion gallons of wastewater in a typical year.

We also produce biosolids, which is used as a synthetic fertilizer replacement and soil amendment.

We currently produce a Class B biosolid, which can be applied to non-human consumption crops.

I'll get into our BDFP project a little later, which is about to be completed in the next coming years.

And once that is done, we'll be producing a Class A biosolid, which can be applied to all crops, including human consumption crops.

And we're made up of over 500 positions in eight divisions with each of the division manager.

So I will introduce those divisions now.

Also, and I ask my staff to please stand up as I call you out.

Operations is Angela Chung.

Operations is responsible for operating the treatment and pumping station facilities.

My maintenance manager, Michael Maravilla, cannot be here today,

but the maintenance crews on that team are responsible for keeping those assets running

for the pumping and treatment facilities.

Engineering, Joe Wong.

Engineering supports all divisions across the enterprise

and with ongoing construction projects.

My collections, the collection system manager, Linda Candelaria.

Linda is in charge of all the gravity sewers.

So anything that does not get pumped flows by gravity that goes through our sewer pipes.

Her group is responsible for that, as well as the pre-treatment industrial users programs.

Business strategy and performance is Elaine Leeming.

And under Elaine's team, we handle all the HR budget and other admin functions throughout

the enterprise.

I'd also like to acknowledge in this group Matt Brown, who has been instrumental in the operating budget here today.

He's in charge of our budget team.

Enterprise capital planning is George Engel.

He also could not be here today, but he's represented by Emma Mack.

Emma Mack has also been an instrumental part of putting this budget together,

and specifically on the capital planning side, along with working with our infrastructure teams

and some very valued consultants that we have working with us.

Urban watershed planning is Sarah Minnick, and Sarah Minnick's crew takes care of all the green infrastructure and other real development areas.

And then finally, our regulatory compliance, Amy Chastain, who the Small But Mighty team interacts with all of our state agencies and federal regulators to ensure we're seeing compliance and doing any reporting that needs to be done.

I will go over some high-level goals of our enterprise.

And so we meet all of our regulatory requirements

and have plans in place to meet future ones.

We actively work to strengthen our employees' core competencies.

I'd also like to note that during a recent employee survey,

we actually achieved the new high marks for both participation

and overall favorability.

We minimize asset failures and maximize runtime by providing uninterrupted service all day, every day.

And we effectively manage all of the resources entrusted in our care in a fiscally responsible manner.

So now we'll dig into the details of our operating budget.

This is an overview of our budget and the proposed changes going into the next two years.

I'd like to point out here the $139 million increase in debt service, which jumps out at us.

San Francisco is the second most expensive city to do construction in, right behind New York.

And that's reflected in this debt service.

We're on the cusp of completing some major capital projects like Hedberg's BDFP and others.

Not to interrupt, but second highest construction cost in the planet Earth, correct?

not just the country. Yes. Did I say comp? Sorry. Yes. The planet or the entire world.

You did say second highest. Just making sure we all remember. Second highest

on this planet. Yeah, on this planet. Construction on the moon might eventually be

more expensive, but we'll get there later. Also

standing out here, there was our cost of living increases, which is 1.3 million.

And then five temporary to permanent positions.

These are the only new positions. We actually did not increase our budget by

any standalone new positions.

The only ones are temporary to permanent placements.

And so we're replacing that temp PCN with a permanent PCN

to hopefully fill that with a permanent employee.

Another $4 million for new power,

$2 million in furnishings, and $1.5 million in chemicals.

These are mainly to support our new projects,

and I'll get into those a little later.

And then $2 million worth of new equipment

at our southeast plant, and that's primarily lab equipment to keep us up with compliance with our regulators.

These next two slides will list all of our new budget proposals.

For most of these items, I will actually go into with individual slides,

but a few here that I'll point out, again, is the temp-to-perm conversions.

So in our admin group, we have an 1824 capital lead, 0923 training workforce manager, and an 1840 management assistant.

And then our regulatory compliance division, which I mentioned earlier is only three staff right now.

Our regulatory needs are not getting any smaller, and so we want to make sure that that group is staffed adequately going forward.

So we're converting two temp PCNs there to two permanent 5620 regulatory specialists.

And then additionally on this slide, you'll see a request for an ongoing $500,000 funding for events and programming at our Southeast Community Center.

So this is part of a larger initiative that our finance spoke about earlier in these hearings,

where we're seeking to eliminate our reliance on add-back funding,

because providing these types of services are going to be permanent and ongoing,

so we want to make sure we account for those properly.

This next slide, these will actually all be covered later, but I do want to note that

this initial slide had the incorrect division under the first item.

It said it was under the lab, but I think you should have some updated slides that were

handed out to you today to make that correction, and we have an updated slide in the public

book.

Okay.

Our first new proposal to dive into is our biosolids digester facilities and O&M costs.

So once the BDFP project is done, it will provide a new solids processing system for the Southeast Treatment Plant.

It's scheduled to begin testing this year and go into operational startup early in 2027.

This long-anticipated upgrade to our largest treatment plant will enhance the facility's capacity and sustainability

and meet the more stringent regulatory compliance measures to meet the high-quality Class A biosolids that we intend to produce.

Furnishings and non-process equipment are not included in the BDFP construction contract.

And so this requires us to make these one-time purchases separately.

This includes things like desks, chairs, laboratory, and other testing equipment,

and other essential support for facilities maintenance,

such as forklifts and shuttle lifts for performing maintenance on the facilities.

The total cost for this purchase is $1.8 million.

This project, once it's online,

and once it becomes our new biosolids digester facility,

it will no longer be a project.

It will require additional power to power everything, though, to the extent of about 2.6 additional megawatts.

So for the first fiscal year, we anticipate being able to absorb these extra costs through our existing budget in fiscal year 24

because we're going through startup and testing, so we don't anticipate the full load.

But as we go forward, we're requesting a $2.6 million increase to the existing $6 million work order we have with PUC Power Enterprise to pay for that energy.

And finally, once these new processes are online, they will require a greater quantity and a broader range of chemicals compared to our existing facilities.

but similar to the increased power need, we anticipate being able to absorb these additional chemical costs

within our current budget during the initial testing and startup in the first fiscal year.

And so we're not asking for any additional money until the second fiscal year.

That'll be an ongoing increase of $1.5 million starting in fiscal year 28.

along with our new biosolids digestion facility comes a biogas utilization facility so that we

can manage the gas that's produced from the process of digesting solids this facility will

provide 100 percent beneficial use of the biogas generated once the bdf once the biosolids facility

is up and running. This facility will take the digested gas and convert it to natural gas quality

and then compress and inject that gas into an existing PG&E pipeline, which is now running

right outside the plant on Gerald Street, Gerald Avenue. The biogas utilization facilities is a key

component of the new biosolids treatment and must be ready for operation in alignment with the

startup and commission of BDFP. Our objective is to use 100% of that gas from the start of that

project, and so we do not want to be flaring or otherwise releasing any other

gas. The new facility will also require additional power, though,

to keep it running. Smaller demand than BDFP overall, but it is

an additional 1.6 megawatts needed. But again, similar

to the other cost mentioned before, we don't anticipate needing any new funding for

these until the second fiscal year of our budget, so we'll absorb those costs

in the first year. But we are asking an additional 1.35

$25 million to increase that same work order, the existing work order with PUC power, which

is how we pay for our power for our facilities.

And then one last note is the operations and maintenance of this facility.

So because we are bringing on multiple facilities, being BDFP, the Biolids Digestive Facility,

we have Headworks we just brought online, we have Treasure Island coming online, and

the eventual recycled water facility at Oceanside.

we want to have an O&M contract in place for this new biogas scrubbing facility

because it's not equipment that we're familiar with operating or maintaining.

So we're requesting approximately $1 million for an annual $1 million service contract

to maintain and operate that system for the first five years of operation.

other additional equipment furnishings and services so along with the furniture purchases

we spoke about for the bdfp project earlier we have other newly constructed and renovated

facilities at the southeast treatment plant which will require furnishings and non-process equipment

our scp 940 project this is an older maintenance building and we are renovating one of the floors

here for new offices, conference rooms, and a break room.

And we'll be renovating that portion for the maintenance staff.

And then a separate project, SEP7, will replace our operations, engineering, and maintenance buildings.

This project delivers a much-needed new workspace, offices, and maintenance areas for operations,

engineering, and maintenance staff.

These two new buildings will replace a building that was actually built in the same era as

the existing solids equipment, solids treatment equipment.

So it's from the 19, designed in the 40s, built in the 1950s.

Not the most adequate of situation.

So we are in the process of replacing that.

But again, consistently with most of these construction projects,

they do not provide essentially anything that's not bolted down.

And so in order to make sure we have adequate facilities

ready for occupancy when these things are built,

we need to have this extra funding to pay for things

as simple as desks and chairs,

but as complicated also as lifts and other equipment that need to go into the building that aren't permanent for our maintenance staff to be able to perform that maintenance.

The second item here is our Foxborough DCS system.

So our DCS stands for Distributed Control System.

So our Distributed Control System is how we control the entire system from multiple different locations across the city.

We are in the process of upgrading that entire DCS system to a new Emerson suite.

But that project is currently underway, but it will take a few years before it's actually in place.

So in the meantime, we need to maintain this older system.

So this Foxborough Distributed Control Annual Maintenance Support Contract

will provide continuous software and hardware maintenance

for all of the existing Foxborough equipment,

which is primarily at Southeast and Oceanside,

our two biggest centers and it will provide the type of support for technical issues or other

failures or cyber security issues which can come about when we have to get on them immediately and

replace those so it's an important contract to have we have had a project in the past but it was

primarily funded through the operations operating budget and we can no longer sustain that in that

So we're asking for a standalone line item here in the engineering

maintenance budget, or engineering budget for $500,000 annually.

I'm sorry, $712,000 annually.

The lab, finally the lab asset management items.

So these are various items within our lab.

So we maintain labs at Southeast Plant, Oceanside,

and a small one down at North Point.

And we need to make sure that that equipment stays up and running.

stays up and running and so this investment is to keep those items up and

going and spread over two years.

So that ends the operations portion of my budget presentation and so now I think

what we've been doing is stopping here we'll take questions and comments before

moving on to the capital budget. Thank you so much A.J. M. Prather and thank you to

you and your team. Thanks for standing to be recognized and for highlighting the hard

work that they do day in, day out across your team. It was a great presentation. I'm going

to turn to colleagues first. Any questions? Commissioner Stacy.

Thank you. And excuse me. Thank you for the presentation. In agenda item 3AII, where you

show the new, it's a breakdown of the new proposals for the budget? Yes. On a number of them,

they show something that's called attrition savings. Can you expand a little bit on what

that means? Are those vacant positions or are they positions being phased out? I'm actually

going to defer to our finance folks to explain that because they can do it much better than I can.

Okay, thank you.

Hi there, Anna Dooning, budget director.

So Joel explained that to offset the cost of some of the positions that are transitioning from temporary positions,

which mean we are paying for them now, they're on staff, they're just temporary,

so they're not considered full-time permanent FTE, we'll be transitioning those to permanent FTE.

Right, I got that.

And so that is effectively budget neutral because we were already paying for those positions.

How we reflect that change in the budget is by modifying a technical budgetary term called attrition,

which is just a negative offset that represents the natural savings that occur due to attrition or turnover in a budget.

So when we use the term attrition savings, it's just saying we're going to modify the total salary budget available to capture some of the regular attrition and turnover savings that occur throughout the year.

Does that clarify?

So do you mean that the temporary position is the attrition and the permanent position, it's a slight difference or no?

Not necessarily.

We just mean attrition in the budget overall, the amount of salary savings we're seeing due to other vacant positions.

That can be adjusted slightly upward because there have been higher savings than were budgeted in the past,

and that offsets the cost of the new position that's being added.

But if it's just a vacant position, that attrition savings could go away if SFPUC fills that vacant position.

That is correct.

So I should also add that my team also is constantly analyzing vacancies, attrition savings, how they compare to budget, and right sizing so that we're not under budgeting to ensure that we can actually fill all of our vacant positions.

Okay.

Thank you.

And just to reiterate, we have a quarterly hiring plan.

And so every quarter, we're reviewing those with finance

to ensure we're not over exceeding our existing budget.

And so we propose all the positions we want to fill,

and we get that approval from this,

providing there's enough money at different quarters of the year.

So we do actively monitor that to ensure we don't go over budget.

Commissioner Thurlow.

Thank you for the presentation.

I have a question about the revenue-funded capital trends

that we see in the operating budget.

And it seems like what we see is escalating debt service.

But both in an absolute and in a relative sense,

the revenue-funded capital seems to be going down.

Can you help develop some intuition for why that is?

And is that durable?

Is it a project phase issue?

Yeah, I'm going to defer to Aaron for this one.

Hi, Aaron Corvinova, Financial Planning Director.

So this is a great question.

We look at the funding sources in some ways independently

of the specific projects.

There's some projects that are only appropriate to fund

with revenue funding because they, for various reasons,

can't legally be funded with bonds.

And then there's other long-term projects

that we would prefer to fund with bonds

because they will have a longer life cycle,

and so that fits better. Once we've sorted things that way, we really balance the revenue and debt

funding, looking at affordability, looking at rate increases, and following our financial policies,

including our capital financing policy, which mandates a certain percentage. For this year's

cycle, for the agency as a whole across all the enterprises, we have slightly increased our

revenue funding. However, because of the large capital investments in Wastewater's plan,

and the fact that some of those were moved up in the planning cycle,

we're needing to therefore fund more dollars sooner.

We had to increase the debt-funded portion of Wastewater's plan in the 10-year period.

Thank you.

Vice President Leveroni.

Along the same lines, I'm looking at $139 million increase in debt service.

Can you dig a little deeper on that?

Why?

Sorry.

Sorry about that.

Hi, everyone.

Laura Bush, Deputy CFO.

We'll all take it in turns.

Yes, that is a significant increase in debt service,

and that increase in debt service is actually the biggest cost driver

of our year-over-year overall PUC budget increase

between the current year that we're in now and next year.

That is because of all of the large projects

that wastewater has been doing in the last few years

that we've already started,

in many cases completed or are close to complete,

and bonds that we have issued

in order to pay for those projects.

Typically, we capitalize interest for two years,

which means we issue the bond,

and then we don't start paying debt service on that for two years

so that we don't have to adjust our budget.

We're trying to get away from that practice because it's a bit more expensive,

but for now that's what we've done.

So the massive increase you're seeing in debt service next year for wastewater

is for projects that are already done in the ground,

bonds that have already been issued, decisions that have already been made,

and those are our debt service obligations coming online,

largely for the massive SSIP projects that you're seeing at the southeast plant and throughout the system.

And on the, say, projects coming online, do we have an estimated dollar amount of what those will look like over the next, I guess, two years?

Because $139 million would be over two years, not next year.

Yes, so we typically fund about two-thirds of our CIP.

I think what you're asking is, well, we have our 10-year CIP, which says all the projects we plan to do in the next 10 years, and Joel's about to present on that.

I think about 75% of that will be debt funded.

I can't remember the number off the top of my head.

And we have a very specific plan for how much debt service we anticipate in each year.

That was actually provided by Nikolai Sklarov in the first budget hearing and should be in one of the slides there of the anticipated increase in debt service in the wastewater enterprise for each of the next 10 to 20 years.

And I want to think that you're comfortable with the $139 million as best as one could be comfortable as far as how that affects our bond ratings and all of that.

You've gone probably all through that question to be satisfied that your 139 is an okay number.

Absolutely.

It's not a surprise.

We've known about this for a long time.

We have several financial policies in place adopted by this commission to guide us in our sustainable financial management.

So we just make sure that we are managing our finances, increasing rates, and setting our budgets to ensure that we maintain those financial policy metrics.

Crucially, debt service coverage, which is the amount of money we have left to pay our debt service obligations, remains healthy throughout the financial plan 10-year projection.

And if we were fortunate like we were last year with the refinancing of the bonds and gaining a significant, in my mind, a significant dollar amount, would that go to reduced debt or would it go, I mean, it does, but then I understand sometimes that savings will go toward a project.

end? Well, we do a 10-year capital plan every year. This is what we project right now, and we've

included very conservative assumptions around our debt. We're constantly looking for ways to

reduce our debt service costs. For instance, we've assumed a 6% interest rate on our future

revenue bond issuances. We've typically come in a bit lower than that, so that would produce

savings. If we managed to refinance and bring down those interest costs, that would lead to

some savings. Those could either be applied to ratepayer

savings to bring down rate increases in the future, or depending on

the decisions made in the future, they could be used to fund

more projects. Thank you.

All right, colleagues, unless there's any other questions or comments, can we

continue with what we've been doing in the past, which is to take public comment

on the enterprise agency operating

budget before we hear the presentation on capital.

Remote callers, please raise your hand if you wish to provide a comment on this item.

Is there anyone present who would like to speak?

Mr. DaCosta.

One of the most important things when this type of presentations are given is like, how

do you inform the people?

How do you inform the residents?

So early on, commitments were made quarterly to inform the residents of what is happening in the Bayview-Hunters Point area, or District 10.

And millions and millions of dollars have been wasted because there has not been transparency and accountability.

I read the audits.

Right now, you can get the audits from 2002 to maybe 2021, 22.

And using AI, you can find out your ratings, which will be F, F minus.

And you can even hear it.

They've done a good job on that.

Secondly, we need to find out why is the taxpayer left out?

We started with a budget of $6 billion.

We are now to $15 billion, and very soon we'll be to $25 billion.

is this the way to do business?

And why do we fire employees that are decent and hardworking?

Why do we fire these people?

And why is there no resolution?

And soon, this will come before the Inspector General,

our San Francisco Inspector General.

Thank you very much.

Thank you. Is there anyone else present who would like to make comment? Seeing

none. Moderator, are there any remote callers? Ms. Lanier, there are no callers that wish

to be recognized. Thank you. Okay, can I have the slide deck again, please? Thank you.

Okay, so now I'll move on to the next item, our capital budget for wastewater enterprise.

So the plan that we're putting forth today delivers high-impact systematic improvements

that protect our communities and the health of the Bay and the Pacific Ocean

through strengthening of our infrastructure and providing a reliable service

for our constituents and our ratepayers.

We followed our rigorous prioritization approach to get to this point,

and we carefully prioritized and deferred where we could,

and we focused our investments on keeping the system compliant,

reliable, and prepared for the future.

So what this plan delivers?

We continue to have a sizable capital plan of over $5.9 billion

over the next 10 years.

This is driven by the age of our infrastructure,

our regulatory requirements,

and factors like population demand and climate change.

I want to start by going through some of the main significant outcomes that we'll see from these investments.

These examples illustrate the citywide impacts of this plan and the investments in some of our most important infrastructure.

We'll go into detail on different projects later in the presentation, but I will start with some highlights here.

So first off, our nutrient reduction project.

So one of the major facilities in a region-wide effort,

our objective is to reduce the nutrient levels in our southeast plant effluent

to improve water quality and help protect against algal plumes in the bay.

Next up, our channel force main and southeast outfall projects,

two more of our most critical assets in our system.

These assets move flows from the northeastern part of our city to the southeast plant

and then provide a deep water discharge for those flows from that plant, respectively.

With this plan, these aging assets will be turned to a state of sustained reliability.

Over in our west side neighborhoods, we have investments at our ocean site treatment plant.

This includes both rehab to keep the plant running smoothly as it stands today

and potentially building out for future capacity increases on the west side of the city.

In the Folsom and 17th and Alamany slash Farmers Market area,

two parts of our city which currently experience some of the most significant flooding issues,

our collection system projects there intend to significantly reduce those impacts as they're built out.

And finally, our ongoing daily investment in inspecting, repairing, rehabbing, and replacing the over 1,000 miles of sewer mains out there

continue to keep the system flowing to protect health and safety of the public and the environment entrusted in our care.

so in order to get to this point i think you've actually seen this chart before in an earlier

presentation from the finance team but our capital plan needed to be needed to balance ratepayer

affordability and our obligation to provide reliable services and meet regulatory requirements

So we invested significant time over the past several months in refining this capital plan.

We worked in close collaboration with our finance team, and we believe that what we have ultimately put forth here strikes the right balance between ratepayer affordability and our obligation to maintain reliable service to ratepayers and meet our regulatory requirements.

we developed this rubric on this on the slide in front of you based on prioritization framework

considering regulatory compliance health and safety environmental risk operational reliability

and risk of failure stormwater management and climate resilience and systematic vulnerabilities

we applied this rubric to all the projects in our plan in order to use that to make informed

decisions that we could comfortably live with making deferrals if we needed to

in order to accommodate the rates that we needed to see.

So using that framework that I mentioned, we whittled this budget down from approximately $7.4 billion in September of last year to the $5.9 billion you see today.

The primary deferrals we made were projects that still had a relatively high level of uncertainty about their scope, cost, or urgency, and we deferred those until we have more information.

I want to echo what AGM Ritchie noted in his presentation last week, and that these are not deletions, these are deferrals.

We don't have nice-to-haves out there.

These are necessary projects to get done.

We are going to have a system that's going to live far beyond any of us.

We need to continue to maintain that system.

So again, we've deferred things.

Nothing necessarily was deleted, though.

The first of those that I'll go through here, just some highlights of those deferred projects,

was our south campus at Southeast Treatment Plant.

So we've been working for some time on a high-level planning agenda for the south campus of the Southeast Treatment Plant.

This will have a different function after BDFP is completed because those digester facilities that were built in the 1950s will no longer be necessary.

So we've considered including a project that reflects the planning in the CSIP, but we ultimately decided that further planning that is more integrated with the affordability considerations is needed before formulating a formal capital plan for this area.

Meanwhile, though, we are going to proceed with a small investment to do environmental planning, which will help inform our decisions as we move forward for the long-term solution for that part of our southeast treatment plant.

Another project was the Judah Twin Sewer Project.

This is tied to an SFMTA project for rail work on Judah Street.

The timing is dependent on MTA's decision to move forward with that project.

and from conversations with their team

and based on their current lack of a committed start date for that project,

we've decided this makes sense to defer as well.

Another example of a deferral is pump station and forced main condition assessments.

So we had a set of forced main and pump station projects

and varying levels of planning, and only planning, nothing in construction,

but the ones that were in planning, we were looking at data that was gathered in 2014.

And so what we've decided at this point, because so much has gone on since 2014

with smaller maintenance projects or R&R projects,

we're going to do a reset for our pump stations and our force main condition reliability.

And so we're moving forward with doing condition assessments for those pump stations

and for the majority of the forest mains out there which are connected to pump stations

to inform how we move forward on other projects in a future budget.

And that may be R&R or repair and replace.

It may be in-house maintenance or it may be a future capital project.

But we saw this as another opportunity to defer some of those bigger allocations

that were in the budget down the road a little bit

while still maintaining the reliability that we expect.

Next, we'll see the appropriation of those 10 years.

So lots of colors, lots of different projects and groups of projects here.

But it's a representation of our 10-year CIP broken down year by year and

gives a sense through the color categories of how much we're investing in

different types of projects.

So a few ones that I'll highlight here is the stormwater management category in

light blue.

It includes new green infrastructure projects, as well as increased stormwater management capacity through infrastructure projects like the existing Folsom and Lower Alamany projects.

And these will be, Folsom's actually in construction right now, being phased, and Alamany project will be in construction in the next couple of years.

Next, our nutrient reduction project is in Brown.

It's the largest single project by cost over the next 10 years.

We currently anticipate the bulk of that spending,

which is in the construction phase,

to come around the middle of that period.

That's why you kind of see the larger portion there.

And then our Ocean Beach project in orange

will be constructing new assets

to increase our climate resiliency

out in near Ocean Beach

with our Oceanside Treatment Plant

and other critical facilities out there.

And finally, we see BDFP spending in yellow,

which is slowly tapering off over the next couple of years.

But I did want to highlight that it's still being accounted for.

And as we close that project out, I don't want to forget about it.

Okay, now I will jump into some of these larger projects or major projects.

First one I'll talk about is our SEP nutrient reduction project.

If you're not familiar with this picture, it's from the algal bloom

in the summer of 2022, and then there's another smaller one in the summer of 2023. But this

picture here, if you look at the top left and then go across the top, as it gets more and more red,

that was the algal bloom, which was spreading across the bay, which eventually ended up in

a very unsightly situation with dead fish and a soupy green bay. So we never want to see that

again, and the water board agrees with us. So they implemented some permit requirements to make

sure we never have that again. So this nutrient reduction project will meet those demands.

It's a complex project because of the site constraints at Southeast Plant, and we must

maintain complete operability, similar to how we did headworks. We can't just shut the plant down,

so we're going to have to maintain that operability throughout the project. It's a progressive design

build contract, and so this will allow early contract involvement. It will improve

constructability and phasing and allow for scope refinement innovation with contractor

during design. And the intent there is to reduce

the risk of costly redesigns or change orders during construction.

And I'll note that

like our other recent major capital projects such as the

Southeast Community Center, Headworks, and BDFP,

this next large capital investment is also intended to meet and hope to exceed the city's local hiring,

local business requirements, and local business requirements

as this next generational investment moves through construction over the next 10 years.

I believe you will actually be presented with this project next week,

and so it will be the first step of requesting approval and the first step of the progressive design build process.

So this slide, this picture is from two years ago.

Commissioner Stacey may remember this one.

She was here with me.

But we are happily moving that project forward.

It's going at a great pace, and we anticipate being able to meet those permit requirements that we're required to do as it moves forward.

Next project I'll highlight, or projects I'll highlight are our cleanup and abatement order projects.

And so these help to meet a San Francisco regional waterboard quality control cleanup and abatement order and provide sewer improvements and flooding mitigation for additional stormwater storage and conveyance.

The Lower Alamany Project includes construction of a new sewer tunnel and other improvements.

And the Folsom Project includes construction of a new sewer tunnel, enlarging a sewer box, and other improvements.

the Folsom project is underway right now and it's going through various stages of

planning approval and construction and bid the lower alimany project is currently at bid and

awards we anticipate that moving forward shortly and whenever i talk about these projects i do want

to remember that there was a third project here the wawona sewer upgrade which was completed as

part of this cleanup abatement. Also, that project

was completed in 2024,

and through every subsequent

winter since then, we have not had any flooding there.

So that

project worked, and hopefully we

will be saying the same things about these

projects someday.

Next up is our forced main

reliability projects. So we talked a little bit about

forced mains and pump stations earlier, and

how we defer those into a reassessment. These

forced mains are not included in that conversation,

though, these force mains do have dedicated projects that we're moving forward with.

The first one is the Channel Street force main.

So Channel Street force main is a critical asset that

transports all the sewage and storm water from

the northeast part of our city down to southeast plant. And then

similarly, the west side force main transports 100% of the

influence for the Oceanside Treatment Plant from the west side pump station to the

Ocean Site Treatment Plant.

Channel Street Forest Main is over 50 years old,

and Westside Forest Main is over 30 years old.

And so we're going to do a number of items

to get in and inspect first, condition assess,

and then develop projects to rehabilitate

and potentially have other, either redundant lines

or other ways to ensure reliability.

And so right now, there are projects underway

to keep this moving forward.

So we have the Channel Street Intertype project,

which has the ability to divert dry weather flows

from Cesar Chavez Street down to the southeast plant.

That'll provide an opportunity for more inspection,

and it gives us redundancy at that southern portion.

And so as we move forward, we're looking to do a similar effort

for the northern section, and that's what this project is.

And then similarly on the west side,

we're currently in the planning phase,

and we're assessing the condition of that asset right now.

And I will reference AGM Richie one more time

when he talked about the R&R money needed

to keep all of his water mains running.

Similar concept here with the sewer mains.

We have 1,000 miles of sewers out there.

We need to continually reinvest in those and replace those.

This includes the inspecting, cleaning, rehabilitation.

We're looking at alternative ways of construction to better use these funds and timing,

such as no-dig linings and other procedures.

But we're really trying to ramp up this effort.

There's also budget here for R&R of our treatment facilities, which include the pump stations and treatment facilities,

so that smaller projects that are bigger than what our own maintenance staff can handle,

but smaller than what would require a full scope when going out to bid,

we can use these R&R projects to more quickly activate those projects

to repair the needs that we have on the treatment side as well.

Our next big project is our Southeast Outfall and Southeast Booster Pump Station Replacement.

There's a significant cost associated with this project, and so when we consider that construction cost,

we're looking at the timing of that project in conjunction with the other major projects like nutrient removal.

And so we want to mitigate the overlap as much as we can to minimize those impacts on our rate payers.

But in the meantime, we do have intermittent projects underway right now to inspect the current assets and rehab some of the older assets that make up the southeast outfall and booster pump station.

But just to note the age of these, some of them are over 70 years old.

The original pump station outfall was actually built in 1967.

And so we've had this one on our radar for a little bit, and it continues to be on our radar for planning and eventual future build out.

With this build-out, we'll also increase the capacity of that booster station so that we can discharge 100% of our southeast effluent to a deep water outfall off the shore.

Next up, we have our Ocean Beach Climate Adaptation Project.

So this project develops a comprehensive shoreline protection project to address erosion, which is threatening critical wastewater assets, including the Lake Merced Transport and Storage Facility, the Westside Pump Station enforcement that I just mentioned, and our Oceanside Treatment Plant.

so it's part of our compliance requirements working with the california coastal commission

and many other city partners and federal partners out there like rec park the zoo

and others and mta we've had a there's been a lot of a lot of input in this project but it'll also

put in place a a beach access trail so it'll be a nice multi-benefit project that we'll have on

the Oceanside Great Health Cyber plant there, but at the same time it will be

protecting those assets with a buried seawall. It'll also include rerouting the

Great Highway traffic to Slope Boulevard and Skyline, so it's away from this

section of coastline, which is one of the narrowest accessible points in

the city right now, and it will improve beach health by replenishment of the

sand on the beach. Our next project is our Oceanside Plant-wide Facility Capacity Improvements.

The intent of this new project will be to consolidate multiple interrelated improvements

at Oceanside into one coordinated effort. It'll improve seismic reliability, primary and secondary

treatment, and solids handling and odor control. Our objective here is to build out capacity

where necessary to meet current demands,

as well as accommodate potential future increased flows

to Oceanside Plant.

It's an important effort to take on right now

so that we're far ahead of any significant population increases

that could affect our west side collection treatment processes

in the future, such as the proposed tens of thousands

of new residential units on the west side of the city.

We can't simply flip a switch and handle more sewage,

And so we want to get ahead of that to, again, build redundancy, build reliability in the current process, but then plan for future improvements if we need to do them as well.

Finally, I'll end with this last slide on the BDFP project.

And so, again, as this project ramps down, we're over 70% of built.

We've processed equipment, piping, mechanical, electrical, and plumbing equipment is all installed.

And then the construction of the new biogas utilization facility has begun.

We intend to start commissioning and testing equipment this year and eventually coming online for full testing later next year in 2027.

big project, and potentially the last time you'll see this in a budget presentation.

So we'll see. So with that, I will take questions, and I'll just

end on this slide with some of our staff, and a picture of the inside of one of the existing

digesters, the 50-year-old digesters that will be decommissioned when BDAP comes online.

So questions or comments from the commissioners, please?

Thank you, AGM Prather.

And would it be okay to go back to that thank you slide just so we could have another moment to take in your hard work and staff.

And for anyone of them who's in the room as those watching at home, where's that slide if we can?

Big round of applause for the hard work.

Day in, day out.

Doing a lot of work.

Thank you.

Work that has to get done that maybe not a lot of people want to do, but your team's doing it.

No, definitely.

Before we take comments from the commission, I want to point out one of the things that's really important about the work that you and your team did with the general manager, with the finance team.

But in working on the capital plan and moving from $7.4 billion to $5.9, which is a $20 billion, 20% rather,

a $1.5 billion 20% shift in terms of prioritizing those most essentials.

Certainly everything in there, as you said, is essential.

But by finding $20 billion in deferred projects, you've helped navigate something I know that's important to all of us,

not just me as the ratepayer advocate on this commission, but every commissioner, the general manager, the entire staff,

and certainly the public, individuals, families, and businesses, which is to help us address what's driving the rates that we looked at.

And I know today Deputy City Attorney Bregman will want me to make sure I know that we're not talking about rates today,

but we do know that the discussion of capital is the number one driver for rates.

And we know that when we look at our earlier projected rates and the work that's been done to bring those down a little bit from where they were,

the original projected increases from a year ago have been brought down in an important kind of decrease projection of where they're going to be.

certainly in the beginning, to buy us time to help get long-term solutions,

a little bit of an increase in the midterm and then back down, you know, for the longer term.

And I just wanted to remind us and make sure that I understand,

and just maybe for the record and for the conversation,

what drives the elements of our capital plan we're reviewing today

and we'll soon consider for approval prior to and subsequent when we look at rates,

It's the four things that you're navigating, you and your team and all of us together,

we're navigating, you said, right out the gate.

We've got the second highest construction costs in the world after New York.

Yes.

And just ahead of Zurich, Switzerland.

We've got the cost of debt service.

I imagine interest rates are a component of that and how we service debt to get to where we need to be.

Increasing regulatory requirements was the third column of what I recall.

and then the fourth was decreased federal support.

And probably certainly now more than even in recent years,

I don't know that this federal administration is necessarily chomping at the bit

to provide relief to San Francisco and the Bay Area,

but these decisions, which I know I support,

buy us time to address these concerns and considerations over the long term.

So I just want to thank you out the gate for all your hard work.

Thank you.

Colleagues.

Vice President, we got Commissioner Stacy first.

Thank you, and thank you for the presentation.

I appreciate that you, as well as the other enterprises, gave us some examples of what

projects were deferred, not deleted, but deferred.

And I think that what drives the budget process is the desire to stay within these affordability

limits and that's why the budget process gets more and more stringent in an effort to stay

within what the PUC has determined are these affordable rates.

And so I think it's hard to ignore rates when we're talking about budget.

It is where all the tough decisions or why all the tough decisions have to be made.

And I appreciate that each enterprise has given us examples of what projects have been deferred.

I had just a couple of very minor questions on the bar chart on your – it's labeled page 16, but it's near the front of your presentation.

is program is the program management component of your budget is that is that really a an employee

a labor cost for managing all of the projects is that what program management means yeah my

understanding is it's a balance of of city staff whether that's puc public works or other programming

staff and outside consultants to provide that expertise that we need on as needed basis it's a

It's a small bar there, but it is a bar, and it is a cost we have to account for.

Okay.

And I just was really a little bit curious why in year four the cost of the nutrient reduction project goes down.

Is that because that's sort of the end of the planning and beginning of the approval stage?

Yeah.

My understanding, and AGM Robinson's also here to explain further if we need to,

but my understanding of the progressive design build in nature,

you're going to front load a little bit with getting everyone on board,

starting to plan that project out.

There could be a lull in that as the contractor goes back

and starts to design that project before we actually come back

and start constructing it going on.

I see.

And this is more a substantive question that I think I asked you earlier.

What the PUC does as part of the nutrient reduction program,

I think you said that it will not really have an effect on what we have to do for the outfall project.

Is that right?

That's correct.

They are two distinct and separate projects.

The nutrient project will address the flows coming out of southeast.

The nutrient loading will be reduced during dry weather flows.

Now, I guess they are connected in that all those flows have to go out through the booster station.

But as long as that booster station is up and running, whether it's in its current design or future design, it's independent of the nutrient project.

So they're not dependent on each other.

So even if we significantly reduce nutrients in our effluent, it won't affect where we have to place the outfall at all.

Is that right?

Correct.

for this project that reduces this pollutant,

yes.

It doesn't matter where it goes necessarily. It can't have nutrients in it.

Or the nitrogen.

Okay. I think that's all I have.

All right. Vice President Leveroni.

Just trying to understand the numbers.

So just take, for example, the SEP nutrient reduction.

We're at, and that will be a new project.

Happy to see you progressive build.

That's just my 1.47 billion.

And then appropriations in 27 to 36, 1.42 billion.

So is that that's going out saying are we going to spend it over that period of time or could it be spent

Actually, even in a shorter period of time was that the length of the project? So as it's laid out today

This project will go beyond the 10 years. That's why

That number is gonna be bigger

Thank you having said that that is also progressive design bill

And so one of those benefits is we will be at various stages throughout that

Potentially looking for savings where we can find them exactly and then

on the other projects that

will there be more projects

that I'm looking at here that are coming up

and seeing the different

estimates there, project budgets

will there be more progressive design bills

do you think going forward

or we don't know at this point

or

Commissioner Levoni

thank you for the question, Stephen Robinson, AGM for infrastructure

yes

I think I've explained before in December when we

presented there are varying methods

of delivery, and one of those is progressive design build. It's a little newer for us at SFPUC,

but the statement that I've given, I suppose, is that we always want to look at the right method

for the right project at the right time with the right team in the right location. There's a number

of factors to make sure we look at it carefully and decide. We do have some others in the works,

but I think A.J. M. Prather is presenting this one, of course, is the largest that we're looking

at right now. Okay, thank you. And then just understanding the biosolids digester facilities

project. Total project was 2.84, where 70%, and I know these are just estimated numbers,

so I might be getting too granular here, but at 2.84, 70% completed. Appropriations for

the remaining time, 93, seems to be a little bit higher than 70% completed. I'm just curious on

that? When we look at the numbers on the tables that are presented, the

appropriations as part of our financial capital planning is appropriation of

funds, giving us authority then to go and spend those. They don't tie necessarily

directly to the spending plan, so in cases like nutrients there's a bleed of

some of that extra appropriation needed after the current tenure. In the case of

BASOL is the vast majority of that project has already been appropriated to

get us to this point now to finish the project. Perfect, thank you. Commissioner

I have a question about what the budget, the total budget numbers for these large capital projects mean in terms of, obviously, their estimates, especially if you don't have an RFP out yet.

How do you come up with those estimates?

Are we thinking that those are kind of like 50% likely to come in higher versus lower?

Is there kind of an uncertainty built into that?

And what does that mean?

There's contingencies built in.

Steve can probably ask.

Yeah, depending on what stage the project is at, we apply certain continuacies and percentages

for unknowns. The American Association for Cost Estimating would say at the very beginning

and concept of a project, before we've even really defined how or what we're doing, it's

a need that needs to be addressed, and we could apply up to 100% or a negative 50 based

on what we first think that estimate is. Then as we progress through the project lifecycle

and into design, you've got a lot more confidence and lower risk in what that product actually

would be. And when you get into construction, obviously, you're much more clear because if you're

in a design bid build environment, you have a hard bid from a contractor. So there's a lot less

risk and contingency later. So some of these projects that are further out in the capital plan

that have not yet started, we have applied a higher risk contingency to it.

And ones that are much further in development and in construction, it's much less.

But it's always a positive risk. It's not minus 50% ever.

Correct. Okay. Thank you.

Commissioner Jamdar.

Thank you, President Arce.

I have a clarification question on the Southeast Bay outfall slide.

So the total budget for that is $1.98 billion,

and then the appropriations are $154 million over the next decade,

and then that's not reflected in the bar chart that you had.

Is that because it's going to start past the decade?

Exactly.

Exactly. We've intentionally put this project's construction further out so that we don't,

the intent is to not overlap with any other large projects such as nutrients because of the impact

that would have on the rate. So we've planned, our planned construction of this goes, the majority of

the planned construction goes beyond the 10-year window. That's why it's not included in that.

There's not a significant amount included in that bar chart.

But that is not one of the deferred projects?

No, no. We're starting planning right now, and we have a number of interim projects

that are constantly doing condition assessment

and watching that asset and doing rehabilitation

of the existing infrastructure.

The other thing we're watching down there

is the port and the waterfront sea level rise efforts.

We want to make sure that we're in coordination

with anything that happens long-term in that area.

And so there is a slight benefit to waiting a little bit

to see what kind of engagement we get from the Army Corps

eventually again and how the port decides what they want to do

along the waterfront.

And this literally sits right on the edge of Islaas Creek.

And so whatever happens there will affect this project.

And we want to make sure we're in conjunction there.

Vice President Leveroni?

You brought up the seawall.

So I was just curious, on the Fisherman's Wharf area,

Is the seawall having to be repaired, does that have anything to do with the SFPUC, or is that totally separate with maybe the port commission or someone else?

It's a port project.

I believe that effort does not affect any of our outfalls.

We do have other outfalls along the port that could be potentially affected by a future project.

But that one, this initial one, the ferry building there, to the best of my knowledge, does not affect any of our current outfalls.

All right.

Well, before we take public comment, I just want to reiterate gratitude because you and your team have done your part to help us address, as you said in the beginning of your presentation, the focus on affordability while delivering the core services.

and you've found 20% of opportunities to defer capital investments,

and in doing so you've helped do your part to help us bring down some of those original estimates going forward for the short term

to allow us to provide in search for additional longer-term solutions with respect to our capital needs and the impact they have on rates.

And if anyone ever wonders what projects AGM Prather has very transparently,

And I really do appreciate it because this is a line-by-line itemized to the penny list of all the projects that we're investing in.

So it's really terrific.

And I think in the spirit of making sure we're all in this together, making the decisions, you've really done your part.

I might have to give credit to our finance and infrastructure teams.

We've done a lot of work in those.

Everyone, the entire agency, we're all in this together.

Thank you so much.

And can we take public comment, Ms. Lanier?

Remote callers, please raise your hand if you wish to provide comment on this item.

Is there anyone present who would like to speak to this item?

Mr. DaCosta.

This is the land of the Muwakma Ohlone.

I have a lot to do with them.

This is San Francisco,

where we have some of the most educated people in the world.

when it comes to our health

when it comes to our infants, our children

our youth

our seniors

those with compromised health

we need to do a needs assessment

when we talk about presentations

like we saw today

when the people come here and tell you

that we don't need artificial turf and all those chemicals.

They'll don't pay attention. They'll give a damn.

But they'll talk about this.

The taxpayer puts their faith in the commission.

All the audits done by the controller's office,

the president has to read those audits.

again and again and again

bullshit is done.

And that's not right.

Language, please.

So, what I'm saying is

people are fed up.

And with what is going on in Washington,

we will have to fight for our rights

on every level.

We.

We don't see that from the SFPUC

because the employees, when a survey is taken

and the employees put in their fillings,

they are not treated well.

So you all need to do something about that.

Thank you very much.

Mr. DaCosta, let's just have a reminder about our language policy

for the next speaker if there's any and any remote callers, Ms. Lanier.

Is there anyone else present who would like to speak to this item?

Seeing none, moderator, are there any callers with their hand raised?

Ms. Lanier, there are no callers that wish to be recognized.

Thank you.

Well, thank you again, AGM Prather and your wastewater team, CFO Nancy Hum and the finance

and capital team and AGM Robinson, the infrastructure team, everyone, to General Manager Herrera.

One last thing to know, I think, why it's really important when we look at wastewater and the faith we put in this list,

because AGM Prather started working with tools, working on these very same types of projects,

and rose through their ranks to be in a position to know firsthand the importance of the work and what it takes.

And I have full faith in the decisions that we're looking at today.

Any other comments before we get to the next item, which is adjournment?

We're not continuing our budget conversation, so this will be the last opportunity to comment.

I guess we have to say specific to the wastewater capital plan.

But, colleagues, any other final comments before we do?

All right.

With that, we can please call the next item, Ms. Lanier.

Item four, adjournment.

The meeting is now adjourned.

Thank you all.

I love you, I love you, I love you