The SFPUC convened a special public hearing (first in a multi-hearing series) to begin public review of the proposed biennial operating budget (FY 2026-27 and FY 2027-28), a proposed $12.5 billion 10-year Capital Improvement Plan (CIP), and the 10-year financial plan that underpins projected rate impacts. Staff emphasized four overarching budget priorities: financial sustainability/affordability, operational excellence (including regulatory compliance), climate leadership, and people & community. Presenters highlighted near-term water and wastewater rate pressures largely driven by capital needs (especially wastewater), while also noting a proposed 20%–25% CleanPowerSF generation rate decrease intended to offset household utility bill impacts. Attendance & Opening - Roll call: President Arce, Vice President Leveroni, Commissioners Jamdar and Thurlow present; Commissioner Stacey excused. - Land acknowledgement recognizing stewardship of unceded lands of the Muwekma Ohlone Tribe and other descendants. Public Comments & Testimony - Ann Schneider (former Mayor of Millbrae; stated she is a BOSCA representative for Millbrae) said SFPUC property ownership in Millbrae appears under-listed online and argued that tax-exempt public agency land ownership (citing “28% of Millbrae” owned by public regional agencies that do not pay property tax) creates a financial disadvantage for the city. She urged stronger SFPUC collaboration with impacted communities. - Patricia (Millbrae resident) urged the Commission to not convert a Millbrae commercial site (referencing OSH hardware and KFC/A&W) into SFPUC storage/workshop space, asserting it would cost “$250 million plus” and harm working-class jobs (stating “50” workers would lose jobs) and reduce local commercial tax revenue. Public comment on Item 3 (Budget Hearing): - Steve Rinaldi (Vice Mayor of Millbrae) opposed the Millbrae Operations Center Improvement Project, stating it is “$366 million” and arguing it lacks sufficient transparency and scrutiny. He stated it was not reviewed/approved by BOSCA and urged halting the project until Millbrae can weigh in and BOSCA provides oversight. - Ann Schneider (BOSCA representative) argued wholesale customers subsidize San Francisco water costs, stating “67% of the infrastructure getting water to your borders is paid by BOSCA members”. She urged comparisons against the 26 member agencies’ customer bills rather than other large cities and raised concerns about environmental justice impacts in Millbrae. - Denise Louie criticized the presentations for not addressing reservoir/water quality and raised concerns about muddy water in Bayview Hunters Point. - Rush Rem (Redwood City; former SF resident) said Redwood City recently saw a “21% increase” (single-family dwelling) and urged SFPUC to reexamine its design drought assumptions, arguing the assumed drought return period is extremely rare (citing “7,800 to 25,000 years”). - Eileen Boken (Coalition for San Francisco Neighborhoods; speaking for herself) alleged a budget document description of the Auxiliary Water Supply System (AWSS) is incorrect, asserting AWSS pumps provide the primary water source using salt water, not fresh water; she reiterated support for transferring AWSS from SFPUC back to the Fire Department. - Mark Shehennian (Sierra Club SF Executive Committee; SFPUC ratepayer) argued demand will drop and criticized SFPUC for building “too much infrastructure,” citing a “$400 million” project at “2000 Mariposa” (as stated) as symbolic of overspending; he urged reduced watershed withdrawals. - Peter Drekmeyer (Policy Director, Yosemite Rivers Alliance; formerly Tuolumne River Trust) said the 10-year plan does not include the Alternative Water Supply (AWS) plan, which he stated could add “$17 billion to $25 billion”. He argued the design drought is far less likely than drought assumptions used by other agencies and cited return-period comparisons: 420 years (drought of record, 1987–1992) vs 8,000 years (design drought), calling the design drought “19 times longer”. - Dave Warner criticized SFPUC’s financial planning and commissioner engagement, contrasting SFPUC with Metropolitan Water District practices, and suggested forming a subcommittee to strengthen early guidance and rate-impact transparency. Public comment on Item 4 (Bureau operating budgets): - “Mr. DeCosta” alleged workplace mistreatment and inequities in promotions/discipline, urging leadership accountability. - Mary Butterwick (SF resident, retired) expressed concern about rate hikes on fixed income; opposed investing in very expensive AWS that she said will not be needed; urged reassessing the 8.5-year design drought and demand assumptions. - Denise (caller) raised concerns about firefighting readiness and referenced projected water/sewer rate increases (stating “23% in the coming two years” and “10% annual” thereafter) and asked that emergency fire-fighting water needs be considered. Discussion Items Item 3 — Public Hearing & Discussion: Proposed Budget and Budget Priorities (Administrative Code §3.3B) Process & timeline - Staff described this hearing as the first in a series; additional hearings were scheduled, including a Friday, January 23, 2026 special meeting (to hear the power enterprise) and later water and wastewater sessions, with formal budget adoption planned for February. - Budget submitted to Mayor’s Office planned for February 21; Board of Supervisors review planned for May 1; adoption in summer. Rate adoption targeted for late April. Rates and affordability framing - Staff stated water and wastewater rates are expected to rise sharply in the short term (driven by capital and unavoidable cost increases), but said the outlook is improved compared with the prior financial plan adopted about a year earlier. - Staff presented a 20-year combined water/wastewater bill outlook against the Commission’s affordability targets, stating projected bills exceed the target by a few dollars around FY2035, and later return under the target by FY2044. A correction was noted: in FY2046, the prior projection bill was stated as $512 versus $490 in the updated projection. - Power: staff stated 8,000 Hetch Hetchy power customers would continue to have the lowest electricity rates in San Francisco. - CleanPowerSF: staff said the Commission would consider a 20%–25% reduction in CleanPowerSF generation rates at the January 27 meeting, with a proposed effective date of March 1, benefiting 380,000+ customers. - Staff asserted that combining water, sewer, and CleanPowerSF changes, the average SFPUC household customer would see just under a 3% overall utility cost increase next year (stated as slightly below projected CPI inflation). Key budget and capital drivers - Operating budget overview (staff): operating budget around $2.1B in the current year, growing to $2.3B+ over two years, driven largely by capital-related costs (debt service and pay-as-you-go capital funding). - Operating cost pressures highlighted: - Debt service growth over two years as bonds are issued for the capital program. - $56M over the next two years for cost-of-living adjustments on existing staff (before adding new staff). - Healthcare escalation stated at about 9% annually versus 6%–7% in prior years. - Total proposed new permanent staffing: 37 new permanent FTE, with staff noting many are conversions of current temporary employees in ongoing roles. - Capital plan (CIP): - Proposed 10-year CIP: $12.5B. - Initial proposals were nearly $16B; staff said the plan was reduced by over $3B through reprioritization and deferrals. - Wastewater represents nearly half of total 10-year costs; the largest project cited was nutrient reduction at $1.5B. - Two-year capital budget: staff said prior-year funds and recalibrated delivery capacity reduced requested appropriations compared with what was projected two years ago. - Construction cost context: staff stated San Francisco is the second most expensive city in the world for construction (behind New York City). Financial plan policies and assumptions - Staff described legal frameworks: City Charter requirements (including maintaining high credit ratings) and Prop 218 limits on cost allocation and cross-subsidies. - Financial Planning Director reported policy metrics in the plan exceed minimums, including: - Debt service coverage minimum policy 1.1x, with plans stated at 1.22x to 7x. - Reserve policy minimum 25% of annual operating expenses; plans exceed by at least 10% each year. - Revenue-funded capital requirements 15%–30%; overall plan stated at 29% pay-as-you-go. - Demand projections: staff said water sales volume forecasts were lowered; noted uncertainty and emphasized conservative forecasting. - Hetch Hetchy: staff stated one-year proposed rate adoption later in spring at 7%, with projected increases around 6.5%–7% until later years when load growth lowers increases. - CleanPowerSF: staff described market-driven supply cost increases from about $211M (five years prior) to $380M (projected “today”), then forecasted flattening; competitiveness issues with PG&E bill components outside SFPUC control were described. Debt and credit - Capital Finance Director stated SFPUC has about $11B outstanding debt and expects to issue about a similar amount in the plan. - Long-term debt assumption: 6% (stated as conservative relative to “about 4.25%” current 30-year transaction). Some loans cited as low as 1.45% (WIFIA draw). - Staff said the plan does not assume refunding/refinancing savings; future refinancings could reduce projected debt service. - Credit ratings: staff referenced S&P placing a negative outlook on wastewater bonds in summer 2024, and emphasized the importance of maintaining AA-level ratings and demonstrating commitment to obligations. Commission questions and discussion - Commissioner Thurlow asked about uncertainty in demand projections (noting demand seemed reduced by about 10% from last year to this year). Staff said they would bring more information at the next hearing and described conservative forecasting and wholesale true-up mechanisms. - Commissioner Jamdar asked why wastewater rates rise more steeply than water. Staff attributed it to wastewater representing about half of CIP costs and to wastewater having only San Francisco customers (versus water costs spread across wholesale and retail customers), highlighting nutrient reduction as a major driver. - Vice President Leveroni asked about how the “3%” overall bill increase was calculated and about CleanPowerSF opt-outs; staff stated CleanPowerSF opt-out rate is about 4%. He also asked about how refinancing savings flow into budgets; staff said refinancing savings are not assumed in projections and would be reflected after execution in future plans/quarterly reports. - Additional discussion addressed the historic 1998 rate freeze and a 2002 ballot measure lifting it and establishing the rate-setting framework; staff noted the rate freeze constrained project delivery and finances. - President Arce stated appreciation for staff efforts to improve near-term outlook compared with last year and emphasized evaluating affordability holistically across water, sewer, and power. Item 4 — Proposed Bureau Operating Budgets (FY 2026-27 and FY 2027-28) General Manager’s Bureau - Presented as a small bureau supporting the agency (racial equity, real estate, executive team, development, facilities management, emergency planning/security). - Proposed budget described as around $2.6M total; request includes $600,000 for dedicated racial equity programming moved/centralized under the GM budget, plus reallocation of $100,000 for a combined $700,000 annual programming for the racial equity team. External Affairs - Bureau functions: public outreach, media relations, education, community engagement, public records, legislative/government liaison. - Budget growth described from about $12M to $14.2M then $15.1M, with most growth attributed to wages/benefits; $1.6M attributed to proposals. - Requested changes: - Permanent funding for an existing but temporarily funded public records staff role ($151,000 request stated). - $1.52M to fund grants and youth employment previously funded via Board add-backs, including: - Project Learning Grants (about $550,000/year, serving 500 youths annually). - SFUSD/College Hill Learning Garden partnership ($750,000/year). - About $200,000 for professional services (curriculum, teacher training, program support). Human Resources Services (HRS) - HR described as serving 2,500 employees. - Requested one additional position funded through temporary funds (described as cost-neutral) and investment in a unified HR/workforce system. - Unified workforce/talent management system: stated $8.8M capital over 3 years; operating subscription request $0.6M in the second year of the proposed budget. - Additional training funding request: about $200,000 for National Fire Protection Association-required health/safety training for electricians and related staff. Business Services (CFO Nancy Hom) - Business services described as six bureaus with 330+ staff; current year budget $102.3M and 332 FTE; proposed two-year total $111.7M and 336 FTE. - Two proposals totaling $1.5M: - 4 new FTE for Automated Metering Infrastructure (AMI) operations to maintain revenue/utility infrastructure and support the upcoming upgrade of a 15-year-old AMI system. - Loans & Grants Bureau: move an existing team from capital to operating budget to support identification/application/administration of low-cost external financing. Infrastructure Division (AGM Stephen Robinson) - Infrastructure (capital delivery) noted processing a record $1.2B of capital-project invoices in the last fiscal year (up from $866M reported at the January 2024 budget presentation). - Budget: current year about $111M, rising to $122.9M by FY 2027-28 (as presented). - Staff time is largely charged directly to capital projects (soft costs), with overhead recovered monthly; no new staff positions requested. - Vacancy snapshot: 80 vacant positions, 62 in active recruitment. - Procurement modernization: development of a new e-procurement system to replace current tools (intended to improve internal and vendor user experience). Key Outcomes - Meeting continuation approved to a special meeting on Friday, January 23, 2026. - Vote (roll call): Vice President Leveroni — Aye; Commissioner Jamdar — Aye; Commissioner Thurlow — Aye; President Arce — excused; Commissioner Stacey — excused. - No final budget or rate adoption occurred at this session; the hearing served as an initial public and Commission review and set the stage for subsequent enterprise-specific budget hearings (including CleanPowerSF rate proposal scheduled for January 27 and a proposed CleanPowerSF rate decrease effective March 1, if adopted).
