Ms. Lanier, can you please kindly read the roll?

President Arce.

Here.

Vice President Leveroni.

Here.

Commissioner Jamdar is excused.

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 Mwakma Ohlone tribe and other familial descendants

of the historic federally recognized Mission San Jose Verona Band of Alameda County.

The SFPC also recognizes that every citizen residing within the greater Bay Area has and

continues to benefit from the use and occupation of the Mwakma 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 Muwekma 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, approval of the minutes of January 27, 2026.

Colleagues, are there any corrections to the minutes of January 27, 2026?

Seeing none, can we take public comment, Ms. Lanier?

Remote callers, please raise your hand if you wish to provide comment on item 3.

Are there any members of the public present who wish to comment on the minutes of January 27?

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

Ms. Lanier, there are no callers who have their hands raised.

Thank you.

All right, colleagues, can we get a motion to approve the minutes of January 27, 2026?

So moved.

Motion from Commissioner Stacey.

Second.

Second from Vice President Leveroni.

President Arce.

Aye.

Vice President Leveroni.

Aye.

Commissioner Jamdar is excused.

Commissioner Stacey.

Aye.

Commissioner Thurlow.

Aye.

Item three passes.

Item four, general public comment.

Remote callers, please raise your hand if you wish to provide general public comment.

First up, I have Mr. Francisco DaCosta.

And as members of the public, step to provide comment, I just want to remind everyone 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.

Welcome, Mr. DaCosta.

Commissioners, I really don't like coming here.

I really don't like coming here.

Because you all treat us like kids.

I've read all the audits.

And I've read all the regulations regarding the environment.

I'm an environmentalist.

What is pathetic is you don't take into consideration the precautionary principle,

the

spoiler

pace

prevention and ratification

of the resources.

Three

innocent

employees.

Innocent

because of the empirical data.

Here's the empirical data.

The narrative, as well as the legal pointers that will show you that San Francisco, which was once something which has had standards,

today has no standards whatsoever.

Y'all don't care if those employees now have, they are traumatized and we have to look after them.

The women came here, the mothers came here, the friends came here, and you commissioners have not got back to us.

So this matter is going to go first to the inspector.

Thank you for your comment.

Next up we have Demetrius Williams.

Thank you.

Good afternoon, commissioners.

First of all, my name is Demetrius Williams.

I'm the president of the San Francisco Hyperlocal Building Trades

Contractors Collective. We are a group of contractors that meet every Tuesday, 8 a.m.

at 1550 Evans. We want to say thank you to the SFPUC, Dennis Herrera, Steve Robertson,

Ben Poole for helping us organize and getting our collective together. With that being said,

you know, it's a lot of work that's going on in Bayview-Hunters Point from the SFPUC.

we have still yet got the opportunity to help facilitate and build and get contracts in our community.

We have got minor contracts, but it's billions of dollars being spent in Bayview Hunters Point,

and it's being outsourced.

It's going to other contractors, and it's community benefits for the community.

We have yet to see where the resources are for the community benefit package that's supposed to be for Bayview Hunters Point.

Our contractors here is advocating, and we want to see the project continue to be built.

But in the same aspects, we want to be a part of our community being built.

I don't know how many times we have to come and ask, where is the community benefits?

Why we're not involved in the contracts?

Why we're not getting the opportunities?

We have general contractors that's out there that's constantly giving us the okay that they're going to come and include us, but yet have not included us.

So we want to make sure that the resources is going to the right allocated people and the contracts, contracts that's supposed to be coming to the community contractors.

We wouldn't be here today if we had a contract for today because we would be too busy working.

that's why we are all here organizing and hoping we get an opportunity to be on

the biosolids and finish of the community thank you thank you mr. Williams

when's that next meeting again

February 17th see you there thanks for coming and if you had additional

thoughts other members of the collective can can provide comment as well

Mr. Bob Hall?

Yes, I received it.

Mr. Hall first, and then you will be called.

Would it be okay to...

Sure.

Would you be okay with that?

We're in the presence of a lifetime leader here in Brother Oscar James,

who was celebrated just last night, and we can't celebrate him enough.

Thank you for everything and for joining us, everything you've done, Mr. James.

Appreciate you.

Oscar James, native resident, baby hunters point, 79 years, homeowner.

Grandmother's a first person, African-American, bought a home in baby hunters point in the early 30s.

Like he was saying, our concerns is making sure our young people, our contractors,

these are young people standing behind me, who went out and became contractors, became union persons.

I'm a union man 100% and we are there being denied getting contracts in their

own community where they were born and raised where I was born and raised we

have strong concerns about peoples in our community not being able to get

these contracts not being able to train these young brothers and sisters in our

community of all nationalities in our community because we are suffering you

wonder why the young kids are killing themselves they don't have any jobs they

don't have any opportunities. They don't have a promising future. This is the future that they

can give them, our contractors. We plead that you guys open your minds and make sure persons on your

staff make sure we have contracts. You have a person on staff that I heard by ear, not knowing

for sure, said they wouldn't want to come to any of our hyper-local meetings. I personally demand

someone from this Commission one of your staff members be president all of our

hyper local Commission meetings so they could be informed on what our concerns

are and bring them back to the staff thank you very much

mr. James please good afternoon Commissioners my name is a Rhonda

Sterling I'm San Francisco based contractor community advocate vice

president of the bayview hunting sport coordinating council as well and i'm here to address the sfpuc

disparity study and how it must drive real change not just analysis what we are seeing today

excuse me what we are seeing today directly contradicts the intent of equity major sfpuc

projects continue to be awarded to out-of-town developers and prime contractors who bring in

their own networks control the entire scope and include only two one to three local contractors

often in limited low impact roles the step 7 project awarded to pcl is a clear and recent

example projects of this scale should not be structured in a way that concentrates opportunity

with a single outside prime while san francisco contractors are left competing for leftovers

This is not a capacity issue.

San Francisco has qualified, experienced, local firms ready to perform.

The problem is how projects are structured.

The SFPUC must require carved out scopes of work, intentionally broken down so multiple local contractors can participate meaningfully, build bonding capacity, retain workers, and grow.

Equally important, community engagement must be formal and ongoing.

Organizations like the San Francisco Hyperlocal Building and Trades Contractors Collective

and the Bayview-Hundreds Point Coordinating Council already represent local contractors

and residents and should be engaged before procurement decisions are made, not after

awards are finalized.

If the disparity study does not result in enforceable changes to procurement, contracting,

and accountability, then it becomes reported without impact.

San Francisco cannot continue funding equity studies while delivering

inequitable outcomes. This is the moment to structurally change how work is

rewarded. Thank you. Thank you, Mr. Sterling. Thank you. Mr. Bob Hall, thank you for your patience.

Hi. I'm commenting on the toxic chemicals found in runoff from several San Francisco

artificial turf fields based on testing conducted by SFPUC and records obtained through the

Sunshine Act. The results show a concerning pattern. Beats chalet, chromium, copper, lead,

nickel, zinc, many in love, antimony, chromium, copper, lead, nickel, zinc, south sunset,

dissolved copper and iron, manganese, and DEHP. Garfield Square, dissolved copper and iron.

These are not benign substances. Many of these metals are toxic to aquatic life at very low

levels and can accumulate in sediments and organisms. Lead and chromium pose well-known

human health risks. Copper can harm fish, even at trace concentrations. The detection of DEHP at

South Sunset is especially alarming. EPA classifies DEHP as probable human carcinogen, and it's a

known endocrine disruptor. The European Union has banned it in children's toys. It's present in

storm waters from fields used by children should raise serious concern. An independent engineer

reviewing the data identified additional red flags. The summaries emphasize human health criteria,

but ecological criteria are equal important, and many of these chemicals are more toxic to

aquatic life. Yet only copper appears to have been consistently evaluated that way. In addition,

about two dozen semi-volatile organic compounds appear to exceed health screening levels,

but are not clearly flagged. And for many others, reporting limits are higher than health-based

criteria. That means non-detect does not necessarily mean safe, and the true number of

exceedances may be understated. These fields are acting as ongoing sources of metals and hazardous

organic chemicals to the stormwater system and ultimately to the bay. I urge the commission to

inform the public about these results and stop Rec Park from spreading more toxic artificial turf

into our community. Thank you. Next we have Susan Mullaney.

The most recent rainwater runoff test that I know of of artificial turf fields was performed by the PUC in 2024.

The PUC did not test for PFAS compounds, 6-PPD, or 6-PPD-quinone.

Since then, the EPA has developed new testing methods for these chemicals.

There are currently approximately 17,000 PFAS chemicals.

Unlike EPA testing method 1633 that detects 40 of these, the newer method, 1621, measures

proxy compounds and a specific configuration of fluorine that indicate the presence of

PFAS without directly testing for individual compounds.

1621 measures absorbable organic fluoride and extractable organic fluoride.

The EPA says this is an effective screening method for PFAS.

6-PPD is added to rubber to prevent cracking.

It is an antioxidant that readily oxidizes, forming 6-PPD quinone.

6-PPD quinone is extremely toxic to aquatic life, particularly salmon and trout, which it kills quickly at very low exposure levels.

The EPA names synthetic turf infill as a source of 6-PPD, including the virgin SPR type at Beach Chalet and Minnie and Levy Ward.

The EPA has developed testing method 1634 to measure 6-PPD and 6-PPD quinone in stormwater runoff.

I'm asking the PUC to test the rainwater runoff from Beach Chalet and Minnie and Lovey Ward fields using EPA methods 1621 and 1634.

Each of these fields has tens of thousands of pounds of plastic grass blades releasing PFAS into our drinking water aquifer

and hundreds of thousands of pounds of SBR rubber releasing 6-PPD and 6-PPD-quinone into our drinking water aquifer.

Thank you.

Thank you for your comments.

Moderator, are there any calls who have their hand raised?

Ms. Lanier, there is one caller with their hands raised.

Thank you.

Caller, your line has been unmuted.

You have two minutes.

Caller, are you still there?

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

Thank you.

Item 5, report of the general manager.

Thank you.

Item 6, San Francisco Public Utilities Commission, fiscal year 2024-25, audited financial statements.

May I please have the slides?

Deputy CFO Vivian Chen

I oversee the Accounting Services and Financial Reporting and Analysis

Teams

Good afternoon, President Arce

Vice President Leverani and Commissioners

I'm here to give an update on the results of the

Fiscal Year 2025

fiscal year 2024 to 2025 financial statement audit.

Our external auditor, Macias Ginny and O'Connell, MGO,

completed the audit and issued their opinions on November 5, 2025.

The audit covers three sets of financial statements

representing our major enterprise operations,

water, wastewater, HH water and power, and clean power asset.

I'm pleased to report that all three received the unmodified or clean audit opinions.

In addition, the auditor identifies no material misstatements and no internal control deficiencies.

These results confirm that the SFPUC's financial statements are presented fairly in all material respects in accordance with applicable accounting standard.

Turning to the annual comprehensive financial report or EFA, it was issued on December 10,

2025. The EFA provides a broader transparent view of the SFPUC's financial position for investors,

ratepayers, and the public. As a reminder, only the financial section is audited by MGO.

I would like to highlight that the SFPUC has received the Government Finance Officers

Associations, or GFOA, Certificate of Achievement for Excellence in Financial Reporting every

year since 2009.

In addition, we prepare a popular annual financial report to make our financial information more

accessible to the public.

We have received the GFOA's reward for this report every year since 2010.

2010. These national recognitions reflect the SFPUC's ongoing commitment to accuracy,

transparency, and consistency in financial reporting. And a clean audit with no findings

and no internal control deficiencies speaks to the strengths of our financial management

and reporting controls and the sustained efforts of all staff across the organization,

particularly our accounting services and financial reporting and analysis team.

Next, I will now turn this over to our audit partner from MGO, Annie Lee,

who will present the auditor's required communications and conclusions.

Thank you.

Thank you.

May I have a slide back, please?

Good afternoon, commissioners.

My name is Annie Louis.

I'm the engagement partner from MGL,

and I was in charge of the commission's audit for fiscal year 2425.

This highlights the scope, as was covered in the earlier presentation

of what the financial statement audits covered.

We audited the annual comprehensive financial statements

as well as each of the standalone enterprise financial reports.

We issued two separate audit reports.

One is the audit opinions on each of the enterprises as well as the ACFER

and also a report on internal cultural over financial reporting.

And that report is not an opinion on internal controls,

but if there were any deficiencies that were identified as part of our audits,

we would report that to you directly in that particular report.

In terms of auditor responsibilities, I do want to highlight what the audit covers.

We were engaged to provide an audit opinion on whether the financial statements were properly presented

in accordance with U.S. GAAP, the Generally Accepted Accounting Principles.

We followed the Generally Accepted Auditing Standards as well as government auditing standards,

which is more restrictive for government entities.

We also cover internal controls over financial reporting as part of an audit,

but as I mentioned, that is not sufficient to opine specifically on the effectiveness of controls.

But if we were to identify any deficiencies in terms of the sign of controls

or the operation controls, that would be reported to you as well.

Lastly, in terms of findings, we have not communicated any particular findings,

but if there were any issues that were brought up to us

or that we have observations to make that would be reported directly to you as the governing body of the commission.

The second report that is included in your pocket is a required communications that is addressed directly to the board,

and that highlights the qualitative part of the audit in terms of any disagreements we might have with management or any significant disclosures.

Now, this table is a very high-level summary of what is included in the report,

but I would like to point out that there are no matters to be reported.

These are standard items.

So in this situation, no news is good news.

That's what I always like to say.

We do want to highlight that there were two new accounting standards

that were implemented in fiscal year 2014-25.

And as you can see in the bullet in the first row here,

it's GASB-101 related to compensated absences,

so your sick leave and vacation leave accruals,

as well as certain required risk disclosures.

Next, I know there's a lot on this slide here, but again, more details is included in the report.

We do cover significant estimates that go into the financial statements.

As you can see here, the fair value of investments, the allowance of Delphi accounts for your receivables,

these are items that we do consider as significant to the financial reporting process,

and we have developed other procedures to ensure that the assumptions that are used in the development,

the estimates are reasonable in the circumstances.

Lastly, I'd like to close out with a couple of accounting updates

that will be effective for the Commission's financial statements

in the upcoming fiscal year.

In fiscal year 25-26, there will be two new accounting standards

that we're working with management to implement,

so that will be reflected in next year's financial statements.

And then two years down the line, the Gatsby just released

the new standards, Gatsby 105, on significant events,

So more information will be coming in those fiscal years.

And lastly, I'd like to close out by thanking management's cooperation

and collaboration with us during the audit process,

and I will be happy to take any questions that you might have.

Thank you so much for the presentation,

and thank you to the general manager, CFO Nancy Hum,

the whole team, everyone involved in getting us to this great place.

It looks like a terrific audit.

But I wonder if there's any questions or discussion.

Commissioner Stacy, did I read your mind?

Okay.

I haven't quite gotten to my button yet.

Thank you.

I don't have any questions.

I thought the reports were really clear.

I really appreciate the popular financial report, too.

I think that is a really good way of providing the information to the public.

I really just wanted to thank you for your work, Ms. Louie, and your firm's work.

I think it's really important to get that outside perspective and audit,

and to also thank the financial team for the transparency and the clarity internally.

We've seen so much of budget and financial work lately.

it's also it's just really important to know that you that that we are transparent and that we are careful in how we report and make that information available.

So I just wanted to say thank you all for your work.

Thank you.

All right.

Unless there's any other discussion, can we take public comment on the audited financial statements?

Remote callers, please raise your hand if you wish to provide comment on item 6.

Are there any members of the public present who wish to comment?

Seeing none, moderator.

Are there any callers who have their hand raised?

Ms. Lanier, there are no callers with their hands raised.

Thank you.

All right, so this is discussion only, no action required.

And with that, unless there are any final comments, we can go to the next item, Ms. Lanier.

Item 7, consent calendar.

Colleagues, any questions or discussion on the single item on our consent calendar today?

All right, can we take public comment on the consent calendar, Ms. Lanier?

Remote callers, please raise your hand if you wish to provide comment on the consent calendar.

Are there any members of the public present who wish to comment?

Seeing none, moderator, are there any calls that have their hand raised for item 7?

Ms. Lanier, there are no callers with their hands raised.

Thank you.

All right.

Thank you, Ms. Lanier.

So at this time, I think I can maybe leave it to you, Ms. Lanier, to kind of talk through

how we're going to treat items 8, 9, 10, and 11, or would you like me to do that?

I'd like to first take a motion and a second to approve the consent calendar.

Yes, I turned the page too quickly.

So we've got our consent calendar with one item,

which is the amendment number one to the specified contracts for project scheduling

and cost control staff augmentation services.

Can we get a motion to approve the consent calendar?

Motion to approve.

Motion from Vice President Leveroni.

Is there a second?

Second.

From Commissioner Stacey.

President Arce.

Aye.

Vice President Leveroni.

Aye.

Commissioner Jemdar is excused.

Commissioner Stacey.

Aye.

Commissioner Thurlow.

Aye.

Item 7 passes.

Agenda item numbers 8, 9, 10, and 11 will be presented together by staff and commission will take a separate vote on each agenda item.

Again, numbers 8, 9, 10, and 11.

Item 8, public hearing to consider and possible action to adopt the San Francisco Public Utilities Commission by INEO operating budget,

including the revenue transfer for capital in the amount of $2,166,698,799 for fiscal year 2026-27

and $2,344,066,873 for fiscal year 2027-28.

Item 9.

Public hearing to consider and possible action to adopt two-year capital budget of the San Francisco Public Utilities Commission consisting of $1,163,787,041 for fiscal year 2026-27 and $1,316,552,550 for fiscal year 2027-28

and authorize the general manager to seek Board of Supervisors approval for the issuance of $551,871,916 aggregate principal amount of water revenue bonds and other forms of indebtedness, including commercial paper and state revolving fund loans,

to $1,165,736,266 aggregate principal amount of wastewater revenue bonds and other forms of indebtedness,

including commercial paper and SRF loans,

and three, $138,164,938 aggregate principal amount of power revenue bonds and other forms of indebtedness,

including commercial paper and loans.

Item 10, public hearing to consider impossible action to adopt the San Francisco Public Utilities Commission

10-year capital plan for fiscal year 2026-27 through fiscal year 2035-36,

totaling $12,558,987,332.

and item 11, public hearing to consider and possible action to adopt the San Francisco Public Utilities 10-year financial plan

for fiscal year 2026-27 through fiscal year 2035-36.

All right. Thank you, Ms. Leneer. Good afternoon, Ms. Dooney.

Good afternoon, Commissioners. Thank you, Ms. Leneer, for reading all of those items and all of those numbers.

So the finance team is back today seeking your approval of several items related to our upcoming budget.

The last few weeks you heard from us as well as leaders from across the SFPUC describing the work they're doing and the priorities they're committed to in the years ahead.

Thank you, commissioners, for your time, your attention, and your thoughtful questions along the way.

We hope you've seen the disciplined approach we've taken to this budget process.

It's involved a lot of collaboration as well as compromise across our team.

We significantly scaled back new requests in the operating budget, and we managed to

reduce our 10-year capital plan by over $3.5 billion, prioritizing the most critical projects

while deferring others over a longer time horizon to smooth out rate impacts.

We are proud that over the next several years, our rates in water and wastewater will adhere

to our affordability policy, despite real increases.

And throughout this period, we are committed to continuing to make discount programs available

for our customers, to transparency about what these rates pay for, and to consistently looking

for opportunities to find cost savings and bring rates down in the future.

I want to thank the budget team for their tireless work balancing billions of dollars,

all the AGMs and their teams for their input and presentations, and Nancy, Ron, and Dennis

for their leadership.

So with that, I have a few slides reminding you of what we're asking you to approve.

Then I'll turn it over to Erin, our financial planning director, to speak to the longer

term financial plan.

All right, so I'm going to start with item eight, the biennial operating budget.

Here is a look at the major changes across SFPUC's budget from the current fiscal year

over the next two.

is the largest driver, with the total budget growing by over $256 million in the next two

years. This slide is a look at some of the changes in the budget. So debt service, which

is part of our capital costs, will increase to around $687 million by the second year

of the budget. This is a large number, and I want to assure you that this level of debt

has been carefully calibrated to align with our debt policies and is supported by our

long-term financial plan. The second largest cost in our budget is power purchase, and it will

actually decrease slightly based on the most up-to-date power cost projections. Personnel

costs are growing. This is driven by citywide cost of living adjustments on salaries and benefits.

We're also proposing to add 37 new FTE, and the majority of those are currently filled by staff

in temporary roles. Finally, you've heard about various operating budget proposals. These are

largely non-discretionary costs to maintain existing services as well as

cost to operate brand new facilities that are coming online in the next few

years. Power also talked about their customer incentive programs and we're

adding ongoing operating budget funds for several community programs

previously funded through board ad backs. I'm going to move on to the capital

budget items 9 and 10. The capital plan encompasses hundreds of projects this

This includes $9.1 billion in the water and wastewater enterprises for upgrades responsive

to regulatory mandates and to renew aging infrastructure.

Power's $3.4 billion portfolio makes strategic investments towards San Francisco's clean

energy future, modernizes the grid, and builds resiliency in our power supply.

Taking a look at the two-year capital budget, it's around $1 billion in fiscal year 26-27

around $1.2 billion in the second year.

The investments, as you can see here, are dominated by the wastewater enterprise.

Item 9 also requests your approval to authorize debt issuances, not to exceed the amounts

listed on this slide in each year of the budget.

As a reminder, in the next two years and over the 10-year capital plan, around 70% of the

plan will be financed by debt proceeds, again in alignment with our financial policies.

Finally, here's a look at the 10-year capital plan.

These numbers here represent the SFPUC's most comprehensive and disciplined capital

planning effort to date, prioritizing projects that ensure reliable and compliant operations

and upgrades to critical infrastructure while balancing long-term ratepayer affordability.

And with that, I can take questions on the operating and capital budgets now, and then

I'm going to turn things over to Aaron to talk about the financial plan.

Thank you, Ms. Dooning.

Is there any questions on operating and capital budgets?

Commissioner Stacey.

Thank you.

I, on item nine, I'm sorry, I've got to pull up the page.

I tried to match up on the two-year capital budget.

I tried to sort of match up the budget with the bond authorizations.

Yes, I have an answer to that question.

Oh, great.

The difference is financing costs.

So we project about 15% of the capital appropriation debt needs to help pay for financing costs,

which is why the total debt levels are slightly higher than the total capital budget.

What I tried to do is to look at the budget and match up the bond authorization.

I don't know if that was appropriate, but I noticed that there was some discrepancy that the Hetch Hetchy Power bond authorization amount was much higher than the budget amount itself, whereas Hetch Hetchy Water was lower.

And I wondered if that was because so many projects are combined projects.

Is that, that's the answer?

Hi.

Hi, Erin Corvanova, Financial Planning Director.

So what we refer to as the Hetchy Water 10-year CIP includes water, power, and joint projects.

So the power bond authorization has to include both the Hetchy Power CIP as well as the power share,

which is power and 55% of joint from the Hetchy Water CIP.

So even though the budgets are broken out, the bond authorization has more overlap.

That's right.

The bonds are restricted to who pays for those projects,

and so those all come from power rate payers.

Okay.

Yes, and if it would be helpful, we could also provide a crosswalk

that shows how they match up.

It is not obvious.

Oh, no, that's okay.

The table was very helpful.

I just wasn't sure if I was doing the right thing,

and when I saw the discrepancies,

I thought maybe it was because of the combined projects.

I just wanted to check that approach.

Okay. And then on item 10, sorry, I'm leafing through my notes. I did notice that the percentage

of debt funding for the capital plan is going down, which 77.5% down to 70% throughout that

10-year period of time, so that was good to see. I really appreciated the report in item 10 that

sort of summarized by enterprise. It was really good context. We've seen the data sheets, we've

seen the project descriptions, but the part of the report that talks about what was deferred,

what was included, what are the primary projects, it was really helpful to kind of get that

context for the budget altogether, and I really appreciated that part of the report.

I wondered, under the Hetch Hetchy Power projects, there are some big ticket items for Treasure

Island, for the airport. There's one at Spear Street that I think is going to serve the port.

Will there be contributions from either those enterprises or developers on Treasure Island

for some of those projects?

The question just occurred to me

because it looked like they would be serving

those other departments.

That is a good question,

as developers do contribute to capital costs

in some of the major projects.

For those particular ones,

I'm going to turn around and looking at Barb,

who is nodding.

Okay.

Yeah, do you want to say a little bit more?

Okay.

So Power Enterprise and their power rules

and regulations has rules that govern what percentage of new capital infrastructure is

paid for by the developer or the person who's requesting that and what is paid for out of

rate dollars.

So we've gone through our CIP with that lens of what we expect to be paid for.

In the case of Hetchy Power CIP, some of the new larger projects do have expected contributions

from developers that are baked into the financial plan.

and each individual project, it depends on their circumstances

and whether it's only that customer who will benefit

and whether there's other general customers.

And that would apply to the port and the airport as well.

That's correct.

In the case of the airport, they also have,

there's quite a lot of work going on there

and many of the capital projects are actually on their own budget.

So they're paying for significant additional work

that's not on our CIP at all

that's related to building out power infrastructure for SFO.

Okay.

And I also, in the 10-year capital plan,

I was glad to see in the report that we do have a watershed

and land management projects there.

You know, they're not capital per se,

the way that water transmission, storage, wastewater,

sort of engineering projects are, but I really just want to emphasize how important watershed

and land management is to what we do as an entity, but also protection of our water system

and our water supply. And so I was glad to see that it was included. I am sure watershed and

land management took some cuts the way everybody else has.

One thing that I do want to express some disappointment in is the decision to defer alternative water

supply projects.

I know these were all very complicated and difficult decisions, and I know it's just

a deferral, it's not a deletion, but I think it's really important for our water system to really

continue to look at alternative water supplies. There's so much changing in the water world in

the western United States and California. I think we're really going to have to

treat that seriously, and I know we do. It's just hard to see it go out past the 10-year

capital plan, but that's just my view as a commissioner. I understand why. I think

it's important to see what comes in the future with both the State Water Board

and water generally in California and in our region. I think that's it for now.

Thank you. Thank you for your comments and just for other commissioners in the

public, the report Commissioner Stacey is referring to as our capital plan report, which is part of

your packet. I think it's 50 to 60 pages, but it really nicely packages and summarizes all the

capital projects, priorities, deferrals. So it's a great place to refer to what's happening in the

capital plan. It was great, and it really did pull together a lot of information and distill it for

us, and I really appreciated it when I read it. It was really helpful just in giving more context.

And all of the information that you've given us, all the questions you've answered,

all the number detail that you've provided has been really helpful along the way.

So thank you for all of it.

But that report was great to read as kind of a final distillation of the 10-year capital plan.

Thank you, Commissioner.

Other questions, comments?

We've got one more presentation, then discussion, then we'll take public comment on all four items.

Can I get the slides back up, please?

All right, so item 11 is adoption of the 10-year financial plan.

So how is this different than the budget?

The 10-year financial plan is a requirement of the San Francisco Charter.

We update it annually on a rolling basis.

The plan itself is really a financial model that our teams work within the enterprises to build out.

It's very complicated.

There's also an accompanying report, a 75-page report.

If you'd really like to dig into all the details of the assumptions, all of the work that went into this,

and some discussion of the key takeaways, that's a really great document that I would definitely point you to.

One of the things that we think about a lot in financial planning is trade-offs.

It is not possible for the agency to pay for and do all of the things that we would like to do.

And so the budget development process, the financial planning process,

is all about thinking about how to balance our long-term financial sustainability,

maintain regulatory compliance, and infrastructure investment

while looking at the cost and the affordability for our ratepayers.

How do we do this?

The key thing that we start from on a financial perspective is our policies.

These financial policies are adopted by this commission,

and we come back here from time to time to update them.

I've highlighted three on this slide that are particularly important to think about.

The first is our fund balance reserve policy, which sets minimum amounts of reserves that we have to have in case of emergencies.

So we have to have cash on hand in case something goes wrong.

How much cash should we have?

We look to this policy to guide that.

We also have a debt service coverage policy.

Because we are so heavily debt financed for our capital improvement plan,

it's really crucially important that we maintain our credit rating and demonstrate our compliance with our debt service coverage and our bond indentures to our investors.

That policy provides a buffer above and beyond the required minimums in our bond indenture

that we have to collect in revenues and have enough left over to pay for our debt service.

So that's what debt service coverage is all about.

And finally, there's the affordability policy.

We've talked about this before, so I won't dwell on it too much on this particular slide,

but this is really the piece of our financial policies that says,

all right, everything else is pushing our rates up.

How do we put a limit on that?

How do we put a break?

The affordability policy is not binding.

It does not say we must come in over those targets because sometimes there are reasons we have to do work.

However, it aims to provide transparency, and it's a really useful mechanism.

I can say it's been crucial in our budget discussions and helping us think about the cost to rate payers

and put that first in discussions with our enterprises as we make tradeoffs.

So this slide talks a little bit about some of the assumptions that are in our financial models.

We start from the base of the operating budgets that you guys have heard much about over the past few budget hearings.

After that two-year budget time frame, we have to escalate our expenses to get to the end of the 10 years.

We have increased our assumptions for inflationary growth on expenses in this round,

especially around fringe benefits, where it's looking like, especially health care,

there's a lot of uncertainty in how those costs are going to rise.

So for conservatism, we are assuming that they will escalate at 6% annually, which does make it more expensive going forward.

On the power side, for both Hetch Hetchy Power and Clean Power SF, there's a lot more complexity on expenses.

We have to purchase our power, in some cases, for Hetch Hetchy, for what we can't generate ourselves, and for Clean Power SF, for their entire portfolio.

We look at market prices.

We look at customer demands.

On the Clean Power SF side in particular, it's not just the energy.

We also buy greenhouse gas-free and renewable attributes, as well as resource adequacy and

capacity, other regulatory requirements.

Those models are developed in concert with our power enterprise staff.

They're very complicated.

So a lot of assumptions and uncertainty goes into it.

So in addition to those forecasts, we also include a buffer of contingency above and

beyond our forecast in our budget, so that hopefully we have that extra buffer in case

those assumptions are too low and power market prices change.

On the capital side, as you've heard, capital is really the main driver of our costs.

We do pay for some of our capital projects essentially out of pocket.

That's the pay-as-you-go or revenue-funded capital.

But for the remainder, we do finance those.

Our primary tool for financing is revenue bonds.

We first often fund our projects with short-term, low-interest products like commercial paper

and then refund those and issue them in bonds.

The actual process is quite complicated and is managed by our capital finance team, but we simplify it down in the model.

The main thing that is crucial for the bottom line estimates is that those revenue bonds eventually are assumed to fund the entirety of the CIP.

In the short term, we've assumed 3.5% to 4% interest rates.

In the long run, for conservatism, we assume a 6% interest rate on our bonds.

In actuality of our recent transactions, we've come in far below that.

So we always hope when we go to issue bonds that we'll come in under these numbers that

debt service will be lower than what we're projecting.

But there's a lot of uncertainty around financial markets, the Federal Reserve right now.

We don't want to under-forecast that.

Finally, I want to mention low-cost loans from the state and federal government.

The SFPUC historically has been very successful, the most successful utility, I believe, in

the country in securing those WIFIA loans.

We're really happy about that. That gives us lower interest rates. It allows us to extend the repayment period.

We are actively pursuing more of those opportunities. However, we do not count on them.

Again, much like the lower interest rates for our bonds, if and when that happens, if it's going to result in lower costs,

we will incorporate it into our plan, but we do not bank on that actually going through.

So I want to turn now to each of the enterprises and their forecasts.

On the water side, I want to start with water sales volumes.

Before I talk about our actual projections, there was a request at the prior budget hearing

to talk about how those water sales volumes impact our projections.

So in water and wastewater, our costs are mostly fixed.

If people use less water, we still have all those debt service on those bonds to pay.

It really doesn't change most of our costs.

We save a little on chemicals, a little bit on electricity for water treatment, but that's about it.

So when we have lower sales volumes, we lose revenues, but our costs don't really go down.

As a result, lower water sales means rates must be higher.

However, there is a little bit of nuance here that I think it's important to note.

If the reason for the lower water sales is that individual customers are conserving, so they're using less water,

then their water usage goes down and then the rates rise but that individual customer bill

is about the same. That's because they use less water which means their bill would be lower but

then the rates are a little bit higher. However if the reason for declining water sales is that

people leave San Francisco, that there's a recession and businesses shut down and aren't

buying water, that's just fewer people for that same amount of cost. And so in that case the actual

dollar burden on our customers does rise. I point this out because a lot of the long-term

declining supply, declining water purchases and forecasts is because of higher conservation by

our customers. And while that does give you a higher percentage rate change from the individual

customer bill perspective, it's essentially a wash because their lower usage cancels out the higher

rates. That's important when we look at, for example, and why we like to talk about our

affordability policy and the customer bills, because we think that's the best measure of what

it truly costs customers to take our service. Turning now to this graph and the actual forecast

for this year's plan. We aim to be conservative, so we take a lot of external documents prepared by

Bosca and our Wholesale Water customers, prepared by our water resources planning team, and then we

adjust those down. Again, we would rather have our rates come in lower than our forecast, so we would

rather forecast lower water, and then if there is higher sales than expected, we gain more revenues,

we can use those revenues to have future rates be lower than they otherwise would have been.

So this year, we have adjusted down our water sales. It's most notable on the wholesale water

side, informed in part by documents prepared by our wholesale water customers, but again,

adjusted down for conservatism in our planning. We factor in price elasticity, thinking about the

fact that when rates go up, people buy less of something. We factored in some water conservation,

and we factored in expected job and population growth. This graph is of our retail water sales.

There on the bottom, you can see it is slightly declining, although mostly flat, through the 10

years. And with our wholesale customers, we have, again, a slightly inclining but mostly flat

forecast. Wastewater volumes, build volumes, are based on retail water sales. So you can think of

The retail water graph is essentially being the same as the wastewater volume graph.

This chart shows the forecast of the water enterprise expenses over the next 10 years.

As you can see, the largest growth driver is that green wedge, which is our debt service.

Capital in all of our enterprises is really one of the big cost drivers.

One thing that's very important to note is that for our water enterprise, the cost of the regional water system,

so that's the treatment, the delivery of the water, the supply of the water, are shared between our retail and wholesale customers.

That means that that full bar is not only paid for within San Francisco.

I mention this, A, because we also worry about our wholesale customer rates,

but B, because on the wastewater enterprise we do not have that luxury.

So this chart is showing our wastewater enterprises' forecasted growth.

As you can see from their annual costs this year, which we're projecting at $544 million,

over the 10 years, that's expected to more than double.

That's a growth rate annually of 8.4% each year, and it is really driven by those capital costs.

We're issuing bonds, we're paying higher debt service on those bonds,

and we're having to raise rates in order to meet our debt service coverage policy

and maintain credit ratings, so that is not even more expensive than it already is.

so this is where it all comes together it's the customer bill the table on the right is showing

our forecasted retail water and wastewater rate change as well as the forecasted increase in the

average customers combined bill that average customer bill is what's shown in the bar graph

on the left the boxed and bolded portion are the rates that we are expecting to adopt in this spring

The rest are just forecasts and will be updated as we have future budgets, future CIPs, and actual results.

We've also got our wholesale water rate range there on the right.

We adopt one year of wholesale water rates at a time.

That also will be coming for this commission in the spring.

As you can see, we're forecasting two years of 7% rate increases for our retail water customers.

We're forecasting a 15% and a 14.5% increase for wastewater.

water, and for our wholesale customers, we have a 7.6% increase expected this year for next fiscal

year. Those are very high, and if you look at the 10-year forecast, it is a pretty significant

increase, 8.6% annually over the next few years. The graph there is showing our compliance with

our affordability policy. The dash line and the solid line are the two targets we have for

different household levels. We basically want to stay under those lines. As you can see from

fiscal year ending 2034 through fiscal year ending 2044, we are exceeding the target set in our

affordability policy. But the rate of income growth at that point outpaces the rate of rate growth,

and so we come back down under the line. This is the result of a lot of that trade-offs and

discussion that I mentioned. The current CIP has gone through a lot of work, and I can say from the

agency's perspective, we did everything we could to defer costs without pushing them out too far

and delaying necessary improvements. We did everything we could to say, is this has to have,

or is it a nice to have? And what's left is significant. I don't want to minimize the impact

that this will have on customers, but in our last plan, we were projected to remain over that

affordability target for the entirety of the 20-year projection. And so it's been a lot of those

deferrals, a lot of the very crucial discussions that we've had about priorities that have allowed

us to get through this huge chunk of interim work driven primarily by regulatory requirements,

and then bring costs down in the long term.

One other piece I want to mention is that our affordability policy also has a target for

a customer who receives a bill discount. Our customer assistance program, or CAP, currently

provides around 7,600 households within San Francisco from 25 to 40% discounts off of their

water and wastewater bills. This graph here is showing our target for a bill for a customer

enrolled in those CAP programs, and we are happy to say that that customer is projected to remain

under 5% of their income going to their combined water and wastewater bill throughout the 20-year

period. We're really hoping that we can get eligible customers enrolled in that program so

they can take advantage of these savings. Finally, I'd like to offer a little bit of context.

We often receive feedback that our rates here in San Francisco are very high, but one of the

reasons our rates here, if you look at simply a dollar per CCF rate in a rates book, are high

is because we have one of the lowest water usage in the state. So what we have prepared and showing

on this slide is a comparison of the average water and sewer bill for San Francisco next

fiscal year after our projected increase compared to many of our peers and their bills for the

next year.

We've benchmarked this to the average water usage in each area so that you can truly see

what the actual at-home cost is to rate payers.

And with that lens, you can see that we're about in the middle of the pack, a little

bit more expensive than the city of Oakland, but under Los Angeles, Santa Cruz, San Diego,

and Santa Clara. One thing I'd like to note is that we have that 20-year forecast of our bills.

Essentially, no one else in the water sewer utility industry provides that level of transparency,

and as has been discussed at our budget hearings, we are not alone in the challenges that we're

facing. So we are trying to be as upfront as possible with the public, with our commissioners,

about what we think is coming and how it will impact bills, and I expect that many of our peers

will be facing those same problems, even if they haven't been able to put those into their

financial forecast yet for the longer term. I'm now going to turn to Power Enterprise,

so starting with Hetch Hetchy Power. So as a reminder, Hetch Hetchy Power's customer base is

primarily municipal departments right now. They are projecting significant growth within the 10

years as they enroll new customers. There's a lot of discussion in Power generally in the

electricity sector about growing usage. As people shift from gas to electric heating,

as electric vehicles are on the rise, and as large new sources such as AI data centers are

coming into a lot of places, basically everyone agrees that there will be more demand for

electricity in the future. The question is, how soon will that happen and how fast will it go?

Again, we've taken a conservative approach. For Hetch Hetchy, a lot of the customer growth is

related to redevelopment areas, so that's new residences and businesses in dedicated parts of

the city that are designated as Hetch Hetchy customers. The remainder, the majority of the

city, would go to Clean Power SF, so it's certain geographic regions as well as affordable housing.

In the near term, we have revised down our forecast for customer growth because of slowdowns

in construction in San Francisco that we think are going to delay customers coming online.

In the longer term, and especially in the last two years of the plan, you can see a significant

jump up in Hetch Hetchy's forecast volumes.

That's related to several specific projects

that are large anchor customers.

One thing I will note about power

in contrast to water and wastewater

is that as we have growth,

their costs are much more variable.

So much of the cost,

and we'll see that on the next slide,

is related to purchasing power.

If these customers do not show up,

either at all or if they're delayed,

then we have fewer costs.

And so it's a little bit less risky

compared to water and wastewater because there are savings if this load doesn't materialize.

So this is showing that same graph of expenses for our Hetch Hetchy power. The average growth

over the 10 years is 10.8% annually. So this is a significant growth, but a lot of that is because

of the forecasted higher volumes that we have to serve. Hetch Hetchy, of course, generates power,

our hydroelectric power, but during certain parts of the year, we're not able to generate

We're holding that water.

And so we then do go out to the market to procure the power supply from the market.

So that purple wedge here on this bar is the power supply, purchasing the power, as well

as certain delivery costs.

Within San Francisco, we pay certain fees, the wholesale distribution tariff to PG&E

to some customers.

Those are very expensive.

We also pay transmission access charges to get our power from Hetch Hetchy all the way

into San Francisco.

So that's also included in that purple bar.

I'll also note that unlike all the other charts, this one just doesn't go up and to the right.

There's a little variability in the middle.

One improvement we've made in our financial planning this year is we've coordinated our projections of Hetch Hetchy generation

and our market exposure to their actual construction schedules.

So there's certain capital projects that will require shutdowns of the Hetch Hetchy system,

and they won't be able to generate as much power.

And in those years, we're forecasting higher power supply costs because we're more exposed to the market.

So I really want to thank the folks in the enterprises who helped us refine our forecasts in that way.

And so here's what it looks like for Hetch Hetchy Power's rates.

Because there is so much more uncertainty on the power side about our costs, we're only showing a 10-year forecast.

The starred, bolded one on the right there is that 7% retail rate increase,

which, again, will be coming before this commission in the spring for next fiscal year.

As you can see, the average bill is rising from about $98.

I better check my glasses.

$98 today to $209 at the end of the 10-year period.

But there's a lot of uncertainty, and so we'll see how this actually plays out.

Last but certainly not least, turning to Clean Power SF.

So starting again with the volumes.

Again, a huge upgrade in our financial forecasting this year is an entirely new forecast methodology.

As I mentioned, there's a lot of expectation that power demand will grow,

and we are trying to really dial in what's the appropriate level of growth to bake in.

Again, in the next five years, we've attempted to be very conservative.

We've taken baseline forecasts that are prepared by the California CEC, California Energy Commission,

thank you, that are dialed into each individual power supplier's service area,

and we have adjusted those down.

In the long run, so only in years six and onward,

We have also included some growth related to electrification, so gas phasing out to electricity for buildings, as well as electric vehicles.

And here's that expense chart for Clean Power SF.

This power supply cost has been highly variable.

I think we had a slide on this at one of our budget presentations that over the last five years there was a huge increase in our power supply costs.

but we're forecasting that it's going to levelize where it is right now and that it will hopefully

maintain this level for the next few years. The expenses in Clean Power are, of course,

driven by those supply costs. And again, it's very variable. So if a lot of that growth doesn't show

up in the outer years of the plan, those costs will be lower accordingly. And finally, here's

the Clean Power SF rate plan. You have already approved the 20 to 25 percent rate decrease that

is going to go into effect on March 1st of this year, bringing those rates down to be

essentially using our fund balance.

We are going to be operating a little bit under our costs, a little bit over our costs,

bringing in less revenue than our costs and using our fund balance reserves for the next

year in order to pass those savings that we've built up over the prior few years to our customers

and remain competitive.

And for my last slide here, I mentioned our financial policies.

This is a summary table of each of our adopted financial policies, the target metric that's in those policies, and how each of our enterprises fares in compliance.

The proposed financial plans meet and exceed all policy requirements,

including with significant buffer over our key policies, such as our debt service coverage,

which is really crucial for that credit rating and keeping our costs low.

On the affordability side, we already talked about how we're exceeding that target

and then bringing it back down.

And the policy requires that we disclose that, that we talk about why,

which you've heard about as we've discussed all of our budget proposals

and sort of the need for a lot of this investment,

especially on the wastewater side,

and that we continue to do everything we can to bring those costs down.

So this is not the end.

These are merely forecasts,

and we will keep working throughout the agency to do everything we can

to make sure our finances are on a stable foot going forward.

And with that, I'm happy to take any questions.

Thank you for the very comprehensive presentation.

I'm sure we'll probably have some questions.

I could be wrong. I know I have one. I guess I was telegraphing.

Commissioner Thurlow.

I'm going to follow up on the forecasted revenue projections on the water side.

I'm curious, when you say that you're sort of doing your best to be conservative about the demand projections,

I imagine that you have pretty different uncertainties associated with the retail versus wholesale customers.

Is that true?

Yes.

then how do you, what does it mean to be conservative?

Like where are we in terms of your true estimate

versus what percentile we're at

when you choose something that's below the true estimate?

Yeah, I don't have a numerical answer

for the question you just asked.

A lot of what we do is take, say,

forecast from the planning department of housing growth.

And I think we know historically

a lot of that does not get built at the speed that everyone would like it to be.

And so we will take their forecast and then adjust it down.

Sometimes we get different scenarios from people who supply these projections.

So for example, in the wholesale customers' recent water supply planning documents, they

have a baseline scenario, and then they have more conservative scenarios, low, high.

We sort of roughly, because their numbers don't directly translate to purchases from

SFPUC, but we roughly adjusted down in between their low scenario and their baseline scenario.

So if we're given different options, sort of our rule of thumb is take halfway between the lowest

and the baseline that we're provided. Okay, and their lowest doesn't, it doesn't have a

definition that's consistent across all sort of information inputs that you get.

That's correct. And I think you spoke to uncertainty, right? So we certainly have a

lot more visibility into our retail water users because we have all their billing data, whereas

the wholesale service area is, you know, 26 different customers with different compositions,

different patterns of usage, and so we are more reliant on the data they give us.

They also have more variability in their usage. It's a lot more irrigation, which means they're

much more sensitive to rainfall or drought and things like that. If you look at the historic

data, you'll see they do go up and down a lot more than the in-city customers do.

and because of those different data sources

it's not always that there's a methodology we can consistently

follow so it's generally we take the baseline and we adjust down in some

way but not to the lowest possible forecast because

in a sense that's too far. Perfect, thank you so much.

Commissioner Stacey.

I don't have any questions, I just have another

appreciation for the tables that you provided summarizing the financial plans for water,

wastewater, Hetch Hetchy, and clean power.

It was a really great and much easier way to kind of eyeball how we're going to pay

for all of the enterprises and how that breaks down.

So those tables were really helpful to distill that information.

just for anyone listening along at home those tables are after this question slide we've

included them in the powerpoint presentation it's really a summary of the all the revenues

all the expenses all the financial forecasts um for each enterprise yeah they were very helpful

and uh mr president and the commission i had a question about public comment on all these items

I know we've had public comment at each of our special meetings.

Could we give our public commenters more time since we've combined all four of the budget items instead of just two minutes?

Could we go up to three at least if the commission finds that acceptable?

I think we're just taking one public comment on all four items.

Is that right?

It seems reasonable.

Thank you.

Mr. General Manager.

Okay.

Okay.

I think we're ready for it.

It's our last set of comments on the budget.

So, yeah.

Thank you.

Good a time as ever.

All right.

Vice President Leveroni, thanks for your idea, Commissioner Stacey.

Vice President Leveroni.

Thank you for your report.

Excellent.

But the spike that we see, I think it was, I forget what the slide number,

does it have to do with all the, say, commitments that we have for more housing and more development?

Is that what you see over the next 10 years that we see a spike in the usage?

Is it from that?

Are you talking about the water volumes?

Yes, right.

Yeah, so as far as housing and jobs, what's incorporated to this financial plan, we did start from projections that are part of the city's housing element that are provided to the SFUC by the planning department.

We also looked at a historic trend line of population growth in the city.

And what's incorporated in this forecast for the retail service area is halfway in between that.

So a little bit higher than our historic trend line, but not up to the levels of population growth that the planning department is working towards.

So we do have that in here.

That's part of our forecasts that there will be some growth.

But we've adjusted down what I think are sort of optimistic assumptions.

And then on the grants that we've been so successful with, going forward, when you readjusted those going forward, what kind of readjustment does that, are you saying usually we're in this ballpark, but we're going to decrease it by 10, 20, or down to zero?

Yeah, so if we were to receive, say, another state revolving fund loan that's at a lower interest rate than what we've projected for our revenue bonds, we would essentially swap that out in our financial plan, put in the debt service for that state revolving fund, and then reduce the expected revenue bond issuance by that same.

So if it was a $300 million loan, we'd take out $300 million of bonds.

If it's at a lower interest rate than the 6% long-term assumption, then that's going to mean lower ongoing debt service, which translates to lower expenses and higher fund balance, which we can use to reduce rates or spend on capital projects.

Thank you very much.

Thank you.

So I just want to express appreciation that as someone who, on many occasions, as the

ratepayer advocate, seat on the commission, but certainly not the only one on this commission

who cares so much about rates.

We all do.

But you really did something I think was really important, which was to, when we look back

at the projected rates a year ago, you've been able to work hard to bring them down

in the short term, which I think is really important.

We know there's a little bump in the middle and then stabilizing for the long term to meet our affordability goals.

What you, General Manager Herrera, and everyone in the finance team and infrastructure and everyone helped accomplish is you've helped buy us time.

You've helped us to do everything we can to provide as much as we can with respect to the kitchen table issues that are driving the rate payers in San Francisco and San Mateo,

So all around the Bay Area, all of our ratepayers, that is the number one component.

We know that's, we've heard directly from Mayor Lurie, that's his number one issue.

And so you've helped to address that concern.

And just, I think, because we've always talked about we're in this together, as we contemplate

approving the budgets here today, in particular on capital, that we can continue to focus

on addressing the four challenges that we have that are driving most significantly what's

happening with respect to rates. It's one, construction costs. San Francisco is the city

with the second highest construction costs in the world. Two, the increasing cost of

debt financing. Third, increasing regulation, particularly around our critical wastewater

services and our combined system. And fourth, a less than friendly federal environment where

We hope in the longer term we can have access.

Let me see if I got the acronym correctly here.

More WIFIA loans.

More WIFIA loans.

More grants in the future.

And that is when we talk about giving us the time to work for the midterm and the longer term solutions.

You've all done that.

So I'm grateful.

Can we take public comment, Ms. Lanier, unless there's any other questions?

And just, oh, yes, Commissioner Thurlow.

I just want to add that I'm also grateful to know that you're doing this work on maintaining costs with a clear-eyed approach to reliability of services.

Because I think we all know that the water needs to run through any number of situations that we might encounter, and wastewater needs to continue to be managed.

so I appreciate the sort of important balance between those things and trust

in the guidance that's been provided by staff all right thanks again so per the

suggestion of Commissioner Stacy because we're going to take public comment on

all four items 8 9 10 and 11 we'd like to provide up to three minutes per

speaker remote callers please raise your hand if you wish to provide comment on

item numbers 8 9 10 or 11 first up I have Steven Rinaldi afternoon council

member good evening Steve good evening esteemed commissioners Steven Rinaldi

Vice Mayor Milbury here today with you, and I want to wish you a good afternoon and begin

by acknowledging the importance of laboratory capacity and why SFPC is pursuing this project

at the Milbury Yard.

We agreed the need is real, but the alternative analysis presented are insufficient and does

not justify approval of this budget item at this time.

The analysis never examined the efficiency costs, which would benefit ratepayers like

alternative office space off-site, consolidation of shops, and less parking, nor did it

account for the impacts on the surrounding community. In 2020, one alternative left orchard

supply hardware untouched. Yet in 2025, you determined that it must be demolished without

justification or consideration of other parcels of land. The project cost approaching half a

billion dollars is staggering. With that level of investment, you could build vertically and

preserve the $1 million in rental revenue OSH generates. You must question why the new south

shop has grown from roughly 13,000 square feet in prior analysis to 20,000 square feet today,

and why consolidation of shops has not been prioritized. Meanwhile, the design abandons

SFPUC's own transit-first policy, dedicating most of the parcel to surface-level parking,

even though the site is less than a 10-minute walk away from the largest intermodal transit

hub west of the Mississippi. Finally, staff is rushing ahead before BOSC was weighed in,

and without including our community in decisions impacting residents for decades,

and issuing RFQs for public art projects without any city consultation and participation.

For these reasons, I respectfully urge you not to approve this portion of the budget

until a proper alternative analysis is conducted,

one that ensures ratepayers are getting the best deal and project.

Thank you.

Thank you.

Mr. Tom Smagel.

Good afternoon, President Arce and commissioners.

Tom Smagel from Bosca.

We completed our review of the SFPUC's 10-year CIP materials in late January

and provided you all a letter with our comments and questions,

and we did receive a response.

Thank you to your staff for that.

I received that response yesterday and have reviewed it.

The comments that I'm making today incorporate those responses.

We're pleased to see that SFPUC has prioritized the most critical projects

and included them in the 10-year CIP plan.

That approach addresses financial constraints.

But we point out that the work required beyond 2036 is significant,

particularly with respect to the reservoir and dam projects.

We've heard numbers around $10.1 billion for work that needs to be done on those types

of projects.

And the ability to pay for that work is largely reliant on the Bosca membership as a source

of two-thirds of the revenue.

So we do encourage the commission to think about long-term financial stability and how

they're going to manage that additional slug of projects,

which is really about twice the amount of the water supply

improvement program that was done 15 and 20 years ago.

The Millbury Operations Center serves

to provide water supply reliability,

address water quality needs, and for emergency response.

And as you well know, the city of Millbury

has significant concerns with the impact of the project.

It's important that SFPUC continue

to engage with Bosca and the City of Millbrae as the final plans for this

project take place over about the next year or so according to the information

that we have and while the additional materials and fact sheet provided

yesterday are illuminating and they are helpful in answering a lot of the

questions that the city has and that Bosca had I expect there will be a need

to additionally discuss this over that period of time and further communicate

this information in a real clear way to the stakeholders involved whether that

be the Bosca agencies or the City of Millbrae we do find that the 10-year

CIP is robust for water enterprise and Hetch Hetchy it includes all the

projects that we think are necessary at this time and we do support the

Commission's adoption of the 10-year CIP we do thank mr. Ritchie for his

commitment to deeper engagement on things like the moccasin penstocks as

well as the Millbrae campus building. So thank you very much. That ends my statement.

Thank you. Thank you Mr. Smigel.

Ms. Ann Schneider.

Hi Ann Schneider, former mayor, city of Millbrae. Millbrae's representative to Bosca.

Bosca, and I've been on Bosca since January 2023. I thought I'd start out talking about the horribly,

terribly important Millbrae campus. Now here's a slide from the Hetch Hetchy tour that we can take,

and there's no Millbrae campus on this slide. Here's another example of SFPUC documents,

no Millbrae campus on this slide. Here's the Bosca Hetch Hetchy or the Peninsula Watershed tour

2023 that I went on, no tour in Millbrae, no listing on the maps. Another map of SFPUC,

no Millbrae on the map. Along with one of the tours was a history of the Peninsula Watershed.

Now, I grew up there. I actually grew up right across the street from Harry Tracy.

No mention of Millbrae in here. That same tour did have a breakdown of Harry Tracy

on that, an idea in 2023 of what's happening in Harry Tracy or what had already been built there,

but that also shows an awful lot of free land up there, unincorporated San Mateo. Here's the

location map currently that you guys have. No mention of Millbrae on here. Here's a February

7th, 2023 memo from our previous CEO at Bosca talking about the CIP and the projects back then

and the one-year budget plan, no mention of Millbrae.

Kind of changing, and then there's one more big report.

I don't quite have a date.

I think it's 2018 or 2019 on projects, no mention of Millbrae.

So you see, as a new commissioner or a new board member of Bosca,

a lot of this came as a complete surprise.

Then we've got this slide, which I'm sure you've seen.

Millbrae is 100% reliant on Hetch Hetchy Water.

We're one of 11 of the 26 agencies.

We are trying to build recycled water.

Hence, when you take away a revenue-producing property from Millbrae, it has a big impact.

I've invited you down.

I really, really would love to have you all down so that you can see how small we are.

And you can also see how much of Millbrae is actually owned by various entities of San Francisco or BART,

most of which do not pay or contribute into the revenue except for our fire assessment.

In Bosca did a survey that they published in 2023. So this was my second month on Bosca.

And it says one of our top priorities is to increase the supply, diversity and resiliency within the Bosca service area.

So the very Millbrae campus is taking away from our ability to contribute to recycled water.

And I appreciate Commissioner Stacey, your comment on recycled water. We all need to be part of finding new water.

We do, I do hope, I understand you're going to pass this today.

You do have an option to pass it without the Millbrae campus.

You have an option of passing it with the Millbrae campus, saying that we've got a lot of work to do and recognize in the document that there is work to do.

Because otherwise, I have to go back to my rate payer.

Thank you for your comments.

Thank you, Ms. Schneider.

Thank you.

Mr. Tom Williams.

Good afternoon, President Arce and members of the Commission.

My name is Tom Williams, City Manager at the City of Milbrae, and I'm here before you this afternoon to request your help, desperately request your help.

As a public agency, you have great responsibility to provide a fiduciary responsibility to your rate payers

and make sure that water rates and expenditures are kept as low as possible

to ensure rates are as affordable and kept as low as possible.

We just heard that from your finance staff, and it was reiterated by you, President Arce.

And it's never too late to act in the best interest of the ratepayers.

Unfortunately, when it comes to the Millbrae facility, studies are severely insufficient,

and there's no credible alternatives analysis that has been considered

or other assets within your portfolio or less expensive facilities that are available and viable in the marketplace.

As a matter of fact, I believe that what is proposed to you today is one of the most expensive alternatives.

So there needs to be further study and analysis of the cost-benefit for the proposed project.

Closure of the outdoor supply hardware store is not in anybody's best interest.

turning a revenue-generating facility for SFPUC into a revenue loss that will lead to higher water rates

and negatively impact SFPUC is not in the public's interest.

And it certainly fails to implement your mission, which I will read just briefly,

that the mission of SFPUC is to provide our customers with high-quality, efficient, and reliable water,

power, and sewer services in a manner that values environmental and community interest

and sustains the resources entrusted in our care.

The Millbrae Project does not achieve that,

and there is not sufficient analysis.

So I simply ask, again, for your help today,

that you remove the Millbrae Operations Center,

which is on page 42 of 518,

and direct staff to seek alternative locations

for the corporation yard use

and not close the outdoor supply hardware store.

please keep this store open and do not lose a revenue generating use there are alternatives

and lastly I make a plea for those people that do not make a decision please do not make a decision

that will result in people losing their jobs it is bad public policy so I thank you so please

remove that item direct staff to look at alternative analysis and come back to the

Commission so thank you very much for your time moderator are there any

colors you have their hand raised mr. near there are three colors with their

hands raised thank you color your line has been unmuted you have three minutes

thank you and good afternoon Peter Jack Meyer policy director for Yosemite

rivers alliance i want to thank the commissioners for serving it's uh it's a tough job especially

your time and do it right uh you inherited a lot of big challenges and i think it's going to be

increasingly difficult to get qualified people to serve on the commission it's just going to be too

tenuous so thank you i think you're a very bright group of people uh the big challenge is you're new

to a lot of the issues and to the history.

And I've been working on these issues for 18 years.

I understand them. We do our best to always be accurate. We've never been

wrong about at least any major issues. And

yet we're sidelines. We never really get much of an

opportunity to talk. Commissioner Stacey, I want to thank you for the extra minute

now that is helpful. But I will disagree with you on your

comments about the alternative water supply being deferred the reason for that is staff knows those

aren't going to be needed the alternative water supply plan is a political tool it's bolstering

your case against the bay delta plan staff gets red in the face and they say no that's not a

political plan but they don't participate in public forums anymore they're afraid to debate me

and they're afraid for you to hear from me and my colleagues.

Now, when Ed Harrington, former GM, became a commissioner,

he initiated seven deep dive workshops.

He was a leader.

He got that started.

We got through six of them.

Ed was no longer on the commission.

He had stepped down.

And Dennis Herrera tried to prevent the last one, the seventh one,

to focus on the design drop.

This took place in closed session

and the commissioners pushed back and it did happen.

The only reason I know about it

is because the commissioner slipped

thinking it wasn't in closed session

and started talking about it.

Things have really changed a lot over the years.

I would love the opportunity to present a solution

that protects the environment,

the Tuolumne River, the Bay Delta,

with very, very little risk of running out of water.

I can convince anyone outside of the PUC who's willing to listen.

They're all wondering, well, where's the leadership?

Isn't the commission supposed to oversee these things?

And I say, well, you know, they're sharp people, but they're manipulated by staff.

And what you have to do is you have to take over and lead.

I sent you a letter yesterday.

I hope you had a chance to read it.

It gave one example of leadership.

This is in January 2022.

We finally got a couple commissioners that said, yes, we want to see a comparison between

water enterprise demand projections and finance bureau sales projections, which is what you're

presented with today. Huge difference in those numbers. Staff delayed, delayed, delayed. Anson

Moran was president at the time. I said, Anson, you got to do something about this. So he added

topics to the advanced calendar that these were requests from the commissioners that are outstanding.

Delayed, delayed.

Thank you, caller, for your comment.

Caller, your line has been unmuted.

You have three minutes.

Sorry.

Good afternoon, Commissioners.

Thank you for the extra three minutes.

My name is Dennis Williams, Jr. I'm a community based developer, executive director of the

Fillmore Community Development Corporation, and a member of the San Francisco Hyperlocal

Building Trades Collective.

I'm here to speak on inclusion, specifically how inclusion must move beyond policy language

and show up in contracts, workforce opportunities, and decision making.

SFPUC oversees billions of dollars in public infrastructure.

Those investments are funded by ratepayers from every neighborhood in San Francisco,

yet statistics show Black-led organizations, community-based nonprofits,

and local small contractors remain systematically underrepresented in SFPUC contracting,

professional services, and workforce pipeline.

Inclusion is not about outreach, it's about access.

It's about who gets pre-qualified, who gets technical assistance, and who gets early notice

of opportunities, and who has the capacity to support to actually compete.

Too often, community organizations are invited to listen, but not positioned to lead, partner,

or benefit.

I urge the Commission to disagree and publicly report contracting and professional services

data by race, firm size, and geography, expand direct contracting and pilot programs for

community-based and black-led organizations, tie capital projects to real workforce pathways

for residents in impacted neighborhoods, not just aspirational goals, and lastly, include

community representatives early before sculpting RFPs are finalized.

Equity delays is equity denied.

must be measurable and enforceable and reinforced. Mayor Lurie says he publicly he supports economic

growth for all in San Francisco. SFPUC has the opportunity now to set a standard not

just for infrastructure, excellent, excuse me, but for economic justice. All of these

actions can and should be implemented in a Prop 209 compliant, race neutral manner that

that expands access and opportunity.

A clear pathway for local developers

and contractors' inclusion must be implemented immediately.

Thank you for your time and consideration.

Thank you, caller, for your comments.

Caller, your line has been unmuted.

You have three minutes.

Oh, thank you.

This is Dave Warner.

Again, thank you for the three minutes,

and it was also great to hear Mr. Smegel getting three minutes,

so thank you for that.

Thank you for your excellent questions and comments today.

These are stunning increases

and a wonderful question about demand.

Compliments to the financial staff

for lowering demand projections as compared to last year.

Lower demand makes their work harder.

The lower demand is closer to reality, but still too high,

which means there'll be more unplanned rate increases

in our future.

And to the extent Bosca demand declines more

than retail demand, retail rate payers too

will have additional increases as well.

There's an analysis in the works factoring in the impact of droughts on demand projections.

The idea is that droughts have a relatively long-term impact driving demand down, which

are not incorporated into current projections.

Hopefully you'll see such an analysis soon.

I also want to say I respect differing viewpoints, and a comment that I'll make is that I support

the difficult decision to defer, for now, alternative water supply investments.

Our AWS alternatives are very expensive as compared to current supplies and very expensive

as compared to Southern California AWS projects.

Our water rates are jumping, affordability is a challenge, and at least for now we're

seeing flat to declining demand and we're not seeing population growth.

Even if the State Water Board chooses the Bay Delta Plan over the proposed voluntary

agreement, we have adequate water supply to survive longer than at least a year longer

than the worst drought we've experienced without more than 20 percent rationing.

If you're unsure about this, please have a water supply workshop to delve into it further.

I also appreciate the press to increase community engagement.

Maybe next year we can do better at that.

At this point, I expect it's not practical to delay your approval of these plans.

Perhaps you could put the Millbury project on hold, but my main point, which I've mentioned before,

is to ask you to change your planning process

so that you have a real ability to influence the financial plans.

The Metropolitan Water District of Southern California

provides a good example of how to do this.

Again, thank you, and thank you for your service.

Thank you, caller, for your comment.

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

Thank you.

Mr. President, I know that you're going to take this item up.

I just feel compelled to comment on the comments from the city of Millbrae.

First, you are not approving the Millbrae project today.

It has been our capital plan before.

That is a separate item that will come to you at some point in the future,

whatever configuration that it is.

It is not before you today.

But at the same time, I just want to point out,

I think that you're all provided with a copy of a letter

that I sent to Assemblymember Pappin on January 15th,

detailing our commitment to working with the city of Millbrae

and going through the history of,

so you had an accurate picture of the conversations

that have taken place.

In fact, we've given the OSH hardware store three extensions,

one at the specific request of, I think,

someone who Mr. Williams had hired

to come and speak with me personally, and I did that.

So the only reason I say that is as a representative of how we're sensitive to what the city of Milbrae is talking about with respect to its importance.

But we have operational needs that we have, but that should not stand in the way of us continuing our conversation.

And that is a commitment that I have made, we have made, and our conversations will continue with the city of Milbrae.

but we have to balance our operational needs, and I'm sure they have their needs as well.

But I just wanted that to be clear that that letter demonstrates our ability

and our continuing willingness to have a conversation.

And I just want to also point out, it also points out in there some misconceptions

that I think, in fact, were repeated here today.

We do pay property taxes in the city of Millbrae.

So let's just make sure, folks, that we're accurate with the facts,

and we'll continue that conversation.

and I look forward to proceeding with the City of Millbrae in good faith.

And, in fact, I had a conversation with Assemblymember Papin yesterday

reiterating our commitment to continuing to work with you and have those conversations.

Thank you for the clarification, Mr. General Manager.

Commissioner Stacey.

Thank you.

Mr. Herrera, you've confirmed what I was going to check,

that we are not approving any projects

or disapproving any projects as part of the capital plan,

that those will come to us on an individual basis

and we'll get much more specific information

about costs and process and design

when those are before us on an individual basis.

So thank you for confirming that.

I really also just wanted to sum up

what I think about this budget process.

This is only my second rodeo,

and I really appreciate the education

that the commission gets as part of this process,

but I think it's also been an even more thorough

and transparent process

on this two-year process than it even was two years ago.

I appreciate the detailed budget instructions, the process,

the conversations that have gone on throughout 2025

with all of the enterprises, water, wastewater, power, and infrastructure.

I assume you were sitting at all of those tables, if not each and every conversation, you were part of it, because it's a really important part of that long 10-year planning process.

I think also that the staff has been incredibly willing to answer all of my questions as I worked my way through all of the documents that you've provided us.

And I know Mr. Warner commented that we should be involved earlier.

And, of course, I would love to be a fly on the wall or to hear some of those early conversations.

But I really trust the expertise of the staff and the process that you went through.

It's hard for us as commissioners to really assess what is the risk of deferring projects one, two, and three.

What should be, from an engineering standpoint, more of a priority, but I really appreciate that all of the experts for each of the enterprises and infrastructure were at that table to talk about those issues and to struggle through those priorities as part of the budget.

and it's a tough needle to thread.

We are looking hard at keeping rates affordable.

We are looking very hard at the resiliency

of all three of the enterprises,

as Commissioner Thurlow mentioned today,

and those are incredibly important aspects

of this process and what we do.

But I really appreciate all of the information we've gotten

and how willing staff has been through all of the public hearings and all of the questions to talk to us about the details.

And there was an awful lot of detail in all of the budget documents that you provided.

So I really just wanted to say publicly my understanding of the process and the thoroughness of it and the expertise involved in it.

and how long it's gone on in-house.

And I just wanted to say thank you to everybody who's worked so hard

and all of the expertise that's been brought to bear on this process.

And we have waded through a lot of information in the last six weeks,

and it has taken staff and management a year to gather that

and put it together and make decisions.

and I feel comfortable with all of the information that's before us.

So thank you.

Thank you for your eloquent words, Commissioner Stacey,

in summarizing something I think we all agree with.

The only other thing I'll say is just, again, to reiterate the gratitude for the collaboration

between and among our agency and the different enterprises and the teams, leadership, commission,

collaboration with the public stakeholders that gets us to this point, the outreach, the education,

the transparency and availability for participation by so many different people,

the expression of future collaboration from our general manager and all of us in that work.

And then just a reminder, I think, because we spent a lot of time talking about the region,

let's all remember we are here in San Francisco and we have a lot of San Francisco rate payers,

but particularly when it comes to our water customers, two-thirds of all of our water customers are residents and businesses outside of San Francisco,

down the peninsula and around the Bay Area.

So we're grateful for all the stakeholders around the region who come in and the leadership of Bosca, a great partner for us to have,

and a true asset in representing those ratepayer stakeholders outside the city.

All right, with that, and again, thank you for the clarification, Mr. General Manager, about what's before us.

I know we're going to take individual motions and votes on each of the four items, right, Ms. Lanier?

So with respect to item 8, which is adopting the biennial operating budget, including revenue transfer for capital, can we get a motion to approve item 8?

Move to approve.

Motion from Commissioner Stacey. Is there a second?

Second.

From Commissioner Thurlow?

President Arce?

Aye.

Vice President Leveroni?

Aye.

Commissioner Jamdar is excused.

Commissioner Stacey?

Aye.

Commissioner Thurlow?

Aye.

The item passes.

All right, item nine.

Can we get a motion to adopt our two-year capital budget?

Move to approve.

Motion by Commissioner Stacey.

Second.

Second from Commissioner Thurlow.

President Arce?

Aye.

Vice President Leveroni?

Aye.

Commissioner Jamdar is excused.

Commissioner Stacey?

Aye.

Commissioner Thurlow?

Aye.

Item 9 passes.

Item 10, can we get a motion to adopt our 10-year capital plan?

Move to adopt.

Motion from Commissioner Stacey.

Is there a second?

Second.

Commissioner Thurlow.

President Arsene.

Aye.

Vice President Leverroni.

Aye.

Commissioner Jamdar is excused.

Commissioner Stacey.

Aye.

Commissioner Thurlow.

Aye.

Item 10 passes.

Finally, item 11, can we get a motion to adopt our 10-year financial plan?

So moved.

Commissioner Stacey moves.

Second.

Commissioner Thurlow seconds.

President Arce?

Aye.

Vice President Leveroni?

Aye.

Commissioner Jamdar is excused.

Commissioner Stacey?

Aye.

Commissioner Thurlow?

Aye.

Item 11 passes.

Item 12.

Thank you all, truly.

Approve the water supply assessment for the proposed Mattson Block project

located at 215 Market Street, 215 Market Street Annex, 245 Market Street,

50 Main Street, 77 Beale Street, 45 Beale Street, and 25.

Beale Street. Good afternoon Commissioners, Steve Ritchie, Assistant General Manager for Water.

This is an item for asking your approval of the water supply assessment for the proposed Madsen

Block, which is basically a 3.5 acre rectangular block that's bounded by Market Street, Main

Street, Mission Street, and Beale Street. So it's a very large development area. In the water supply

assessments. This is an assessment of how much water that the project would use. The approval of

the water supply assessment is basically just moving this forward to the planning department

for them to use in the CEQA process. So it is not a project approval. It's merely approval of the

water use report that is actually prepared by the developer. We've reviewed it and it's submitted it

here, but again, it's just moving the CEQA process forward.

It is not approving the project.

I'd be happy to answer any questions.

Thank you, AGM.

Richie, is there any questions?

All right, can we take public comment before considering the item?

Ms. Lanier?

Remote callers, please raise your hand if you wish to provide comment on item 12.

Are there any members of the public present who wish to comment?

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

Miss Lanier there are no callers with their hands rings. Thank you

All right colleagues if there's no questions for AGM Ritchie or discussion can we get a motion to approve item 12?

Motion to approve motion from Vice President Leveroni second second from Commissioner Stacy President Arce aye

Vice President Leveroni aye Commissioner Jim Dar's excuse Commissioner Stacy aye Commissioner Thurlow aye item 12 passes item 13

Award, Progressive Design Build Contract Number DB-141, Southeast Water Pollution Control

Plant Nutrient Reduction to Jacobs PCL, a SF joint venture between Jacobs Project Management

Company and PCL Construction Incorporated.

Good afternoon, Commission President Arce and Commissioners.

May I have slides, please?

Thank you for the opportunity today to speak on a very important project, the DB141 Southeast

Water Pollution Control Plant Nutrient Reduction. My name is Jignesh Desai, and I'm Principal

Project Manager assigned to Bayside Treatment Region. The beautiful black and white photo is

our southeast treatment plant. In front is the completed headworks facility, and in the background

are the primary aeration and new solids processing facilities.

Today, we are here to request your approval

to award a progressive design bill contract,

DB141, Southeast Water Pollution Control Plant,

nutrient reduction to Jacobs and PCL,

a SF joint venture.

We are requesting initial award in the amount of $192 million,

$799000 to perform pre-construction services.

The total contract duration for the contract is 4,850 consecutive calendar days,

of which 1460 is anticipated for pre-construction services.

The anticipated total progressive design bill contract budget is $1 billion.

dollar. As noted by our AGM Prather last week, the project of today's agenda is purely a regulatory

driven project. As we all know, the San Francisco Bay has been experiencing stress over the years

with climate change. It experienced perfect storm of bay conditions and sunlight resulting in a

severe harmful algal bloom and oxygen depletion,

resulting in major fish kills in 2022 and 2023.

As a result, San Francisco Bay Region Water Quality Control

Board issued a region-wide nutrient watershed permit

to require reduction of inorganic nitrogen

from treatment plant effluent.

Southeast plant is one of the 37 dischargers

listed on the nutrient watershed permit.

As a leading utility in the nation

for its environmental stewardship,

SFPUC initiated the project that will plan, design,

and construct the treatment infrastructure at the Southeast

plant to reduce nutrient significantly that

discharge the waters of San Francisco Bay.

I would like to provide steps that department took leading up

today's request for commission. Our procurement approach for DB 141 consisted of three steps.

Our request for interest in December 2024 provided a good market sounding and notified the industry

of proposed project and sought out the feedback from the industry. The second step was request

for qualification in April 2025.

This step was an important step to establish essential

requirements for the firms interested in our project.

And it set minimum qualifications,

such as certain number of projects of similar size

and complexity, past safety record,

and evidence of financial capacity.

The third and final step in the procurement

was the request for proposal in August 2025.

In this step, shortlisted proposer

would submit best qualified team,

their approach to technical and management approach.

We also had a cost component and social impact partnership

component.

As you know, in progressive design bill,

we are looking for the best qualified team.

It is primarily a qualification based selection.

Our procurement rules were based on 75% of qualification weight

and 25% on the cost.

As we know, in Progressive Design Bill,

we are starting from scratch.

We haven't prescriptively defined a site or a technology

to remove the nutrient.

So in order to weigh the cost component,

we had to set equal playing field

in terms of total direct cost.

As you know, direct cost cannot be

determine until the pre-construction services are complete. So we set $600

million as a direct cost of which $300 million would be self-performed work and

a $300 million dollar would be subcontracted and both proposers were

asked to provide markup on those two components. We had two highly qualified

and nationally renowned firms submitted proposals for our project. Jacob's PCL is

SF joint venture and second team consisted of Sunt Construction Inc. The

evaluation consisted of written proposal, oral interview, prize proposal,

DEI submittal and social impact partnership. Final score, Tally, resulted

in Jacobs PCL, SF joint venture as a top-ranked proposal team. As noted in our

staff report, Sun construction submitted protest to our notification of intent to

award. Our contract administration bureau in consultation with city attorney

office and CIP team issued a determination denying the protest. As a

result, Jacobs PCL remains the responsible proposer, submitting the

highest scoring responsive proposal. Back in December, our AGM of infrastructure,

Mr. Robinson and I presented to the Commission the Progressive Design Bill

Sequence that outlined pre-construction and construction activities on the top

Commission actions that will require along the journey will take on a

progressive design build and contract milestones today's proposed action by

Commission would constitute action 1.0 award of the contract the pre-construction

services that we are requesting your authorization today consists of project management, cost,

schedule, and risk management. During this pre-construction phase, we'll work with our

environmental management group for CEQA support. We'll work with workforce planning group to develop

workforce roadmap. In terms of technical scope management, we'll be considering pilot testing

for technologies that fit our site-specific requirement, performance requirements, geotechnical

and other site investigation to support our design.

The pre-construction will result in planning, design and constructability deliverables that

are based on best possible information early, ensuring decisions are grounded in accurate,

reliable data.

This will set solid foundation for implementing the project.

As noted in the staff report, no construction will take place until this commission will have opportunity to review and approve the project's CEQA documents and adopt the mitigation measures associated with CEQA.

so in essence we are here to request commission action 1.0 award of the

progressive design bill contract to Jacobson PCL as subjoint venture with

the initial award of 192.7 million with not to exceed contract duration of 4,850

days of which pre-construction duration of 1460 consecutive calendar days again

Today's authorization consists of pre-construction services, as described in a previous slide.

I also want to acknowledge Project Engineer Rosanna C., who is present here today,

Westwater Capital Manager George Engel, our contracts team,

and project team members who have provided support to date on this project.

With that, I'm happy to take any questions that you may have.

All right. Thank you very much, colleagues.

Commissioner Durlow.

Thank you for this hard work on this really massive project, Mr. Desai.

I am wondering about how the number of potential contractor candidates sort of moved through the pipeline.

Like how many people did you have at RFQ?

Were there qualified potential contractors who did not submit proposals?

And I mean, I just think it's interesting that the final proposal scores were so similar.

and so that just makes me wonder what would it look like if the pipeline had been larger and

what's the limiting factor obviously it's a massive project and then my second question

is since we're kind of on the tail of approving the capital plan in the capital plan the budget

for this project was significantly larger I think 1.48 billion and we're seeing 1 billion here is

it that a fraction of those costs are allocated to the PUC itself or a different portion of the

work, or is that the sort of room for changes in the project as it moves forward? Yeah, thank you,

Commissioner. I'll start with question two. You have amazing memory. 1.47 number is the one went

into the capital plan. So the billion dollar I mentioned is for the contract, progressive design

bill contract.

The remaining amount is for owners, our owner advisors,

and our soft cost component of it.

So that's how they made up of the 1.47.

Question one is very important as well.

This project currently is the biggest wastewater

progressive design bill project in the country.

There is no this size of progressive design

bill in wastewater currently exists.

So being a large project, it's a huge risk.

So we had two proposers submit a request for qualification.

We moved both of them into the next step of RFP.

So that's how it transpired.

Thank you.

Thank you.

Vice President Leveroni.

Thank you for the report.

In looking at the, and you made the point that 75%

was on technical and 25% on price.

So as we see in the proposal here,

that the pricing was higher with the current,

even though when we go through the whole system, the point

system.

So are you saying that one contractor, both very qualified,

as you mentioned, but one, the technical was far superior,

or superior, maybe not far superior,

but superior to the other contractor for the technical?

Yeah, so for both the return evaluation

and oral evaluation, that was done by independent panel,

rank the winning proposer as a higher score for both return

and oral section of the evaluation.

In terms of pricing, as you know, we don't have a solution.

So we had to put a calculated or a plug number for to evaluate.

We did ask them to give us a markup.

So markup is calculated with a assumed quantity.

Now a highly qualified proposer can bring you

a solution that can save you hundreds of million dollars

in a total cost as we progress through.

So that's why in Progressive Design Bill,

we are most of the agencies to qualification based selection.

We want to bring the brightest and the best qualified team to the table.

And that's how the score.

And another thing I would mention is how we score was clearly defined in our proposal.

Even we have a sample table that how PUC will evaluate all these criteria.

So we actually provide a sample table with numbers and how the calculation will happen.

And we followed exactly how RFP was written.

Okay.

And then this is a general question that you may or may not be able to answer.

As I was looking through contracts, we have the LBE.

And then I heard earlier today that sometimes when maybe not being able to reach all the contractors or is – I'm not sure how that –

And this may not be appropriate right now to ask that question,

but from the community to be able to have contractors of that?

This is our major investment in the community.

And in my opinion, Progressive Design will give you really a heads up

because our contractor is on board with the designer from get-go

to reach out to the community.

So there's a more engagement possibility rather than a design bid-bill contract

where on the day of the bid or when the bid is advertised,

they have a limited two months to figure it out,

who they can partner with, who they'll work with.

In this one, we have 1,460, which is almost four years,

to work out the work plan for the participation

of the local business enterprise, the local hire.

So there will be a lot of collaboration from get-go

up to the CEQA gets approved and shovel gets into the ground.

So in fact, the Progressive Design Bill

gives you more opportunity for engagement

with the stakeholders.

OK.

And then, and last, and this is just a comment,

is in looking over and going a little deeper here,

I think probably at some point during the year

we do get a presentation from our SIP program and dashboard

and all of that.

So I'll look forward to that because I

saw that it does have an impact on not just this contract,

but all our contracts as far as end results.

So thank you.

Thank you very much for your report.

Thank you.

Mr. Stacy.

Thank you.

I think you answered this question

for Commissioner Leveroni.

But in the final score summary that you provided in the packet,

I see that Jacobs PCL joint venture

scored higher on the written proposal and oral score.

But could you explain, given that you sort of set a couple, you know, the price and the assumptions about subs,

could you explain a little bit the price differential that Jacobs PCL scored lower on the price proposal than SUNT?

Sure.

If you could just maybe pull that apart a little bit for us.

So as I said, the contract really construction cost is unknown.

at the beginning of progressive design build,

we had to evaluate 25% of the cost metrics

per the rules of RFP.

75% was easy because the evaluation

on the written and oral.

So to be able to do the 25% evaluation,

we had to set some benchmarks into the RFP, where we said,

OK, assume 600 is a direct cost, 300 of which

would be self-performed.

$300 would be subcontracted out.

We also had a phase 1a fixed cost, which is the planning

phase.

So we said that cost will be competitively bid out.

So they put that number.

So we have created this price bid sheet,

which clearly defines which are the criteria we'll

use for 25% cost calculation.

So the rules of engagement for calculation of the price

component was clearly explained in our pre-proposal

meetings through the RIP.

Both proposers had enough chance to ask these questions.

We held confidential meetings with both of them.

There is a QBD process that we allowed to the proposer

to ask further questions.

So we had a good engagement with both,

and both had known what are the rules of engagement.

But that's how the cost component was carried out.

And yet they came out differently on their prices, right?

Is that why the scores are different?

Correct.

So the proposal qualification based 75%

is the higher number, right?

So if a proposal scores higher on the qualification,

they would have upper hand.

However, on the cost, it was assumed cost.

And you are right.

had given us a better percentage markup,

but it's based on a calculated plug number.

And as I said, a good qualified team

could bring your construction costs $100 million less,

which can outweigh this percentage calculation.

Right.

So it was that percentage calculation

that made for their bids to be different.

That's correct.

But you emphasize what I think is really important

about the progressive design build,

and that is the very ongoing and evolving nature

of the contract and how important it is for SFPUC

to engage on every aspect of that contract

so that cost savings can be achieved,

efficiencies can be achieved.

And so I see why the technical aspects outweigh, at this point,

the price aspect by a significant amount, 75% to 25%.

It will be really interesting to hear your progress reports

as this moves forward.

It is a big project, and it's a still somewhat new approach

for the SFPUC, but really important approach for achieving technical, financial, and cost

efficiencies as you go forward in all kinds of ways.

So I appreciate the importance of that technical expertise.

You are absolutely right.

When I was here in December, I did mention progressive design build is a hard work.

It's not a magic bullet.

The owner has to be part and parcel of every step of the progress of the project.

And our project engineer and I are committed to start on a good setting and deliver this project on schedule, on budget.

So it will require some hard decision.

But I think identifying the risk earlier with the contractors present, I think that goes a long mileage to get the right product at the end of the day.

Yeah, and incredibly close collaboration, I think, is really an important component of this kind of contract.

That's correct.

Thank you.

Thank you.

It's a very competitive process.

I'll note, per the same chart, that only 4.4 points separate the two proposals at nearly 1,007 points and 1,002.

The higher score exceeds the second place score by 0.4%.

It's very competitive.

If there's no other comments or questions, we could take public comment.

Remote callers, please raise your hand if you wish to provide comment on item 13.

Are there any members of the public present who wish to comment?

Good afternoon, commissioners.

Thank you again for having me.

Demetrius Williams, president of San Francisco Hyperlocal Building Trades Contractors Collective.

We are definitely, I am also a resident of Bayview Hunters Point, 54 years.

My father was a plumber for the San Francisco Water Department before he deceased for 42 years of his life.

and I'm a plumbing contractor also, CIW and Sons Plumbing.

Our contractors, we meet, again, we meet every Tuesday, 8 a.m., 1550 Evans,

thanks to the SFPUC for giving us a facility to meet in over at our community center.

I'm just, you know, again, alarmed at these numbers that we throw out here,

and in good faith we believe that PCL will do a great job.

The sewer treatment plant that's built right now from the years when we was kids, from the smell, is gone.

So we do see a significant change in this new state-of-the-art biosolids project and Headworks project.

But again, we just have to be very, very cautious here when we talk about opportunities for the community contractors.

against Sutton and Walsh in 2017.

We met with Sutton and Walsh,

and they guaranteed to make sure

that the community contractors will have a part in.

That was a fight.

In 2022, we met with WebCorp with the Biosolids.

That was a fight that we had to have put on a fight with

and wind up meeting with Algie and a few of the other guys

about opportunities to build.

I hope that we can build a relationship that encourages the community to have an opportunity to meet with PCL also to have engagement.

So that's my concern.

And I definitely want to see this nutrient plant built because, like I said, the Airworks Project and the Biosolids is working.

Thank you.

Thank you, Mr. Williams.

Thank you.

Hello again, Mr. Oscar James.

Thank you for allowing us to speak.

I ditto on what Mr. Williams has just got through saying.

But my concern is when these contractors come and they put their packages together,

we would like for them to come to the hyperlocal to let us know

and give us the opportunity to bid on some of these

contracts and also make sure we have peoples in our community, such

as City Built and Young Community Developers, to help

put peoples

in our communities to work, the training and the work.

So those are the things that we would like, if possible,

for all those persons who are going to be bidding on different things

to come to our hyper-local meetings and keep us informed on what's happening.

So we won't have a thing where we're blocking up the jobs

and whatever you're acting, I would call not a...

You know what I'm saying?

And I thank you guys for listening and your participation and helping our community.

Thank you.

Thank you, Mr. James.

Thank you.

Moderator, are there any callers who have their hand raised for item 13?

Ms. Lanier, there are no callers with their hands raised.

Thank you.

Thank you, colleagues.

I had just one question, Mr. Desai.

And I don't want to go too in-depth because I didn't give a courtesy heads-up to our general manager yesterday when we had our check-in.

So I just did want to note I do see there's a pretty robust list of local business enterprises in the proposal.

I see some firms I recognize as doing good work.

I did want to appreciate we got some feedback around the LBE components.

I'm trusting the process.

I'm ready to support the project and the item in front of us.

But one of the things I wanted to comment about this project, and maybe I'll say something later in the agenda,

it does dawn on me that we make the approvals and we have here an 11% LBE allocation here on page,

the penultimate page of it, 3-1-1 of the file.

But we don't always hear kind of how it worked out when the project closed out, right?

Because this is a forward-looking projection that the joint venture here who's reputable,

who is recommended to win through a competitive process,

neither, you know, there'll be a time where the project is done, other projects close out,

especially under SISIP, we're increasingly getting closer and closer to closing out.

so much of the work.

But I wonder if there's a way to kind of get a

kind of a report card.

How did the actual, what was the projected LBE allocation?

And when we close out, what was the actual?

Is Algy here?

I believe we actually post that on our website.

Okay, okay.

We track this.

Okay.

And we generally meet or exceed our goals.

and we post them so it's transparent.

Okay.

And I think I know that.

I'm just trying to reflect on where I would find it again.

Offhand, since we're here, maybe we can share with the public.

Is there an easy place?

Well, obviously.

I mean, I'll type it right now.

What's the website?

Please.

May I make a couple of points quick, Commissioner?

So first one about LBE, you know, outreach.

I did go to, at the request of CMD director, attended LBE Advisory Council meetings specific to this project during the proposal period.

So I did go and outreach the LBE Advisory Council.

It's a robust list.

I'm not second guessing at all.

I mean, it's a robust list.

Closeout.

We, as a project manager, our job is to get the CMD closeout memo that exactly defines did we.

And no longer it's a goal, it's a requirement, right?

In the past days, we used to call LBE goal.

Now it's LBE requirement.

So we do get the closeout memo, which is part of the commission package closeout agenda.

Every closeout agenda has the memo attached to it.

So that's the result of our kind of working with CMD and LBE community.

Got it.

So I'm on sfpuc.gov.

Where do I go to get the data for the projects that have closed out?

About us.

About us.

Got it.

Commissioners, commission, commission agenda.

And then you go through every agenda that has been closing out that has come in front of you.

And every agenda item has a closeout memo.

I'm the president of the commission, and I personally would have a problem or challenges to do that.

What about a member of the public who can't go into all the commission agendas to find everything?

Do we have it at a glance?

We do monitor through our Solis payment system.

Every pay app happens.

The numbers are updated regularly.

So to answer your question.

Yeah, no, I appreciate it.

We could end it there.

I'm going to initiate an idea there that I think maybe that we aggregate that in a place where it's user friendly,

know where to go

and not have to go through all the commission agendas

to try to pick and choose and try to find it.

I think we...

I feel like it too, but I feel like it's a good exercise for us to see.

We'll get back to you on that.

Got it. Okay.

All right. Thank you.

Apologies, Devere. I'll stop there.

I support this.

I think it's just we've gotten some feedback

during general public comment.

We got some feedback here.

I like what I see in the proposal.

These are reputable firms and LVEs.

It's a competitive process.

I support the project.

It's certainly important for the community.

I just started going down a path of personal curiosity about something that's really important to me, which is local business enterprise.

Any other questions?

Commissioner Stacey.

Thank you.

I maybe need a reminder about how the micro and the hyperlocal businesses, do they come within the LBE?

I seem to remember that there's a separate category for the hyperlocal and the smaller, I think we were calling them microbusinesses for a while.

And I just don't remember where they show up.

I look at every closeout memo, and I know that it gives us final data on the LBE compliance

and that most of the contracts that come to us include that memo that shows that we meet or exceed the LBE requirements.

I'm not remembering where the hyperlocal and microbusinesses fit in.

So the Algae Column Construction Management Bureau Manager.

So the micro LBE element is within the LBEs for us.

We don't distinguish one from the other because they are local and they are in the community as well.

So there's no separate distinction for us.

Okay.

Thank you.

All right.

Thank you.

Thank you, Algie.

And thank you all.

It's obviously a very important project.

I personally feel we need to move forward with.

We've got a really strong team to partner with.

Can we get a motion to approve?

Move to approve.

Motion from Commissioner Stacey.

Is there a second?

Second.

From Commissioner Thurlow.

President Arce.

Aye.

Vice President Leveroni.

Aye.

Commissioner Jamdar is excused.

Commissioner Stacey.

Aye.

Commissioner Thurlow.

Aye.

Item 13 passes.

Item 14.

communications thank you miss an air communications they were received right

everybody all right can we go to item 15 item 15 items initiated by commissioners

colleagues I initiated the idea of seeing if we could have a link where at a

glance we could go to for a list of completed projects, what was the projected LBE objective

and what was the actual. It sounds like it might already exist so the action initiated

is a quick one. I'll get back to you. Thank you, Mr. General Manager. But I think

our Deputy City Attorney would say we still have to take public comment on that. No? Okay.

Thank you. All right. Anyone else initiating? Any actions? All right. With that, we are at item 16, which is what, Ms. Lanier?

Adjournment.

The meeting is adjourned.

you

Thank you.