tv [untitled] January 2, 2012 5:31am-6:01am PST
would do is result in less issues of -- conflict or controversy, so hopefully -- the past practice has been that it takes this amount of time to get through this. and hopefully we can make efficient -- efficient use of this time. and so -- i think the task on that -- is that we make certain to close the loop with the commissioners and come up with times on those three days. >> i get this, exactly what we need. >> i don't know if you are meeting with this or anything like that but this is very helpful for me, and you can get some time options. >> ok. thank you.
>> good afternoon. i am the general manager. part of that responsibility is to help you as you go through your deliberations of the budget. the mayor gave all of the department heads, across the city budget, this was a continuation of the lean years, and contingencies that are needed. for instance, the general support was 5%, of the general fund support over the next few years, as well as 1% reductions in position. as the general city budget instruction, the enterprise -- we have had a very tight budget with the water sale for charles -- shortfalls, going over to waste water.
the item before you later will be the power rates. with the decrease water sales environment, they're telling department heads to target a flat operating budget. and you will see in our budget, the budget was going up each year for the current year, but $38 million is the planned service for the water program going on line. it was relatively flat save for that service, and the french benefit cost increase. the entire city has 27 bargaining labor contracts after the renegotiation, and the expiration of the 12 floating furlough days, and this came with the additional cost that we have assumed in the budget
production -- budget perception. we really do want your input, on a couple of key items. one of them is how to look at the proposals that come before us, and how to present to view the proposals that will be coming for you in january and february, and what it will mean for us in the first item, with proposition a, which we asked of voters in san francisco. we will fully implement this based on the option to move the airport -- to the two-year budget. this will be the first time that we have a fixed, two-year budget and we will be presenting to you what you think that -- what we think that we need with sharpened pencils, for the next 24 months, and then roll forward in the next two years.
we will say, this is what we really need and this is part of the policy that was recently adopted by the board, >> let me pause there because this is very important. >> there was the second-year look out and this year, for the first time there will be legal authority for two years. if nothing changes there will be no action required by this commission by january 2013. >> and no need for the meetings. >> sometimes things do change, but even more than that, they'll be taking a look at how the budgets go in, and what we should know about -- with the performance review as opposed to setting up the budget authorization.
this is a different -- difference in the process that we will be doing this year. i did not take that from your time. >> and what is this meeting? >> this is the two-year budget. >> we will come to you with as sharpened pencils as we can with what is needed for this deliberation and we will come back to you for the next 10-year plan, with the capital plan, and what this would need to be. we require you to deliberate on the 10-year financial plan. and there will be a two-year budget as well. i wanted to go through some of the key things that you had us consider and incorporate into the budget, -- into the budget process. these were your policy initiatives, being maintained,
with sustainability and resources -- capital development, and there was no indication from you to add to those, and we would continue to look at some of those as well as providing high-quality services and promoting green, -- green, sustainable city. and investing in our communities and people. these were some of the key policies and strategies that you had and we would be happy to continue that if you would like for us to. in addition, we're also considering items with the level of service that you deliberated on, the reliability of systems, for the health and safety and susceptibility of resources, affordability and the adoption of the benefits policies that you have done. last but not least is the
revenue generation, because bills have to be paid on time, with water revenues. you ask us each year, to come back before you and update you on if we apply these to the 10- year financial plan and the rate projections, and the capacity -- the next two slides do that for you, for each of the enterprises. the first is the water enterprise. you heard about this in the quarterly report, with lower retail by about $6 million, and the lower wholesale collection. we continue to maintain the five-year adopted retail rate plan, and we work with you and the wholesale customers to smooth the recovery of the balance -- and the funded
replacement, and the repair for the local program through 2018 and also, what we are doing to make certain that we can fit within the budget is managing to a hiring plan and considering, if there is any further weakness on water, that we would have to look at a budget freeze, and possibly even some reductions. we are not there yet, but to the degree we have further revenue issues -- it would put them in perspective. this is historic sales of water from the water department and you can see that some years we were in excess back in 2003 and 2004. over the last five-seven years we have used less and less of this resource from the local watersheds and right now we're
going to be trending to about 205 -- dependent upon how cool the winter and spring yes, for an entire year. do not lose sight of that. that has been a great impact for us because we have adopted the five-year rates and did not assume that we would have this much of a protracted decline in water consumption. this is on the retail and wholesale customers. people are doing a good job of conserving but the economy has not come back as quickly as we had hoped. but what this means for retail rates and planning -- the charter requires us to look out, and have there be more transparency, that we could potentially have an unpleasant surprise of needing larger rate increases, then what we would have otherwise planned in 2014
and 2015. the same as for wholesale customers. they absorbed a 38% rate increase because of the planned debt service increase, but there were water sales by customers of the retail. as projected we would need a 22% rate increase in 2012. the waste water enterprise -- is protected predominantly by the same factors as retail water, as you have read about in the quarterly report, as well as the need to look at the timing -- specifically of the sewer system improvement program in particular. and we manage to the hiring plans as well.
this is a slightly different story and what i would like to show you here -- we have the potentially bad news in the water department. this could be a lower-than- expected increase in waste water with the timing and utilization of commercial paper, that item you approved earlier, making use of the cheaper debt and the variable rates. this could also be helpful and prudent for the rate-payers. the customers we served c one bill from us, and this is the chart you require us to provide in each time you deliberate on the budget. this is on the total combined impact. i would like to draw your eyes to the combined circles, and you can see that if you look at the waste water bill, by the time the retail customers would run off the five-year rate plans,
this is looking at 11.5-11.10% rate increases. and then going into the lower, single-digits. >> i asked him to keep it to 10 minutes. this was an experiment to see how we could compress this. what i am trying to do is preserve as much time for the commission to provide input as possible. if you can conclude as quickly as you can. >> we had a lot of deliberations on the power -- with the joint meeting, so you know about the need to increase rates there, in particular. it always seems to come back to rates and affordability. what we have done here, is put together all of the sections of the charter requiring us to look at the rates, and put this into a document for your consideration, because you wanted to direct staff to
consider the rate policy, and what kinds of constraints we should consider in the support ability, or otherwise as we come to you with the proposed budgets. we go through this process, this is what the scope may be. and this is for your deliberation. we're happy to provide any answers, and elaborate any further if you would like. >> thank you. on the numbers themselves, and i would like to get to the policies -- it looks as if the way you lay this out, the water sales are down. this means we will have to increase rates, -- for the next block of rates that we approved.
we have the opportunity to reduce the impact of that on clean water, so this comes out about neutrally. unfortunately, this is not the case for the wholesale customers. but this is the case for the san francisco customers. in order to make that happen, did you have to do violence to anything to get that? >> in the case -- case of water and wastewater, we did not do further violence but we had to assume all that finding with all the local repair and replacement programs, which we would want to cash fund if we had the money. but we have here -- we do not have this because of the shortfall in water revenue sales. >> we are talking about that funding through 2018. and we could live within the
five-year adopted rate package if we did that and made that difficult decision, and the reality within the general manager's budget hearing -- all of the department heads understand the revenue weakness means that this would have to be a flat budget, with some contingency cuts if necessary. it will feel like a very different year for us for the water department, particularly. >> the five-year rate ordinance is a wonderful thing in many ways. this is the down side. it may be difficult to stay within that constraint, and i think it provides some decent discipline, to stay within that. but what you cannot do, is significantly damage yourself. the looks like we have been able to avoid that. >> legally we could go back and
reopen the s -- but i would hate to damage this if we did not have to. >> it is also likely, that projection may show that we need to maintain the rate increase for more time. keeping faith with this -- this is important getting to the next one. are there any thoughts or comments or guidance -- to the staff before we move on to the rate policy? >> i guess i have one sort of question, and i don't know, maybe this is my environmental idealism coming through. there are additional numbers -- and it may be a bit for you and the team, but there are a lot of numbers coming out, ideas that we have been talking about on
the great potential from economic perspective, that this could reduce some of the water that is going into the treatment facilities, reducing the cost to treat the water. we are talking a little bit farther out, but i am just wondering if that information has been done, and can be factored in with the new data coming on the market. because they are closely connected. >> this is a good thing to talk about and have thus present this to you during the capital plan proposals. and that is where we have some flexibility with the long-term nature of the plan, with what technologies are cutting edge in what may save money over the long run and you could see this for your consideration. >> you will have a chance to talk about this in the january discussion, but we're hoping for
the scoping issues next june. the idea is that we would have the consultants working with the staff, and saying, what are the different options for these programs. when do we have to do this and how does this interact, how is this working? and what is the impact on the rates, and then we say to change this again. this is the discussion we hope to have in late spring -- to say, is this a 10-year program and what is the total price tag? this is also where the bottom line discussion will be of great interest and hopeful up -- hopefully useful as we go through. this is scheduled for the long- term look that is part of the january discussions. it is very big on everyone's minds that is working on this. >> and i think the question is
the right one, that the reduction in water sales affects things, physically. this may present some opportunities to rethink portions of the operation. >> moving under the right policy, -- to leave those four elements undefined. he does have a presentation on that. and what we have been talking about, how we could -- in a meaningful way judge whether the race we were proposing made sense. and this is an outline that i think got us part with their. well i would like to do -- if we could have some discussions on that, if it seems to be something that makes sense to
the commission, i would like to bring that back in january, with the policy guidance over how to proceed with the budget. those four things, if you could spend some time defining what's really include in there. >> the first item is affordability. they spent a great deal of time on the affordability and the charter requires we look at this. if we come back to you with the budget proposal. the affordability and the rates would be considered for the 10- year rate plan, and how that this would change. and as we structure and finance things to keep this affordable for the customers and the family budgets. we have increased the rate reserves, with the consideration so that this is not necessarily higher or lower.
and tidies the capital costs. the specific programs -- and if we do $10 million more on the water-improvement, what would this mean for the average rate payer in san francisco. this is one item as we talk about capital. >> it is important not only for our own decision process but when we go to ask for increased rates, we would like to demonstrate this quickly, so taking this out of the realm of, this is just a lot of money and putting this in the realm of how approaches these things to leave -- that we value. >> the last one is the life- cycle, i think that some things are more expensive of fraud, and if there was more cutting-edge technology, this would come to
you with the whole -- the entire life-cycle cost. >> let me interject there as well. and one thing that is not in here, we have said the rate increases should not exceed -- and this policy does not have anything to discuss this. and in the life cycle cost of the world, it may make sense to make more money now so in the long term we will spend less. the single-digits and may interfere with sensible financial planning. and on the other hand there is another element to this and i just wanted to raise this as an issue that is not explicitly in here, if you wanted to put something here we would consider this, but the plan at the moment is to try to do the smartest thing, without that kind of constraint.
>> the next definition item is compliance, and we have worked with the city attorney and others, to make certain that the proposal -- that we are following everything that is local -- with the contract you have already signed. this is an example of the rate structures we would have to satisfy. >> and this does include a waste water permits, not to let the system just fall to ruin, so that this is a legal requirement, that keeps us worthy of the permit. >> and then there is the concept -- being sufficient. this is to carry out your mission as stewards of the public utility, to achieve the levels of service -- for this
program, and that some time, for power as well as the sustainability. the repair and replacement was mentioned as well and you also have a policy directive. if there is funding in the budget to provide the meaningful achievement of your environmental justice policy, the environmental stewardship, and the local resource plan, asset management policy and the developing land-use policy and the adoption of the technology policy. whenever directives you think are important, is the rate inclusive of those priorities? >> lite light is a couple of things. this is the way the triple- bottom line will feed into the rate policy, and the job is not just to move around water but we
said we wanted to affect things. those policies have costs and we should recognize this, because this is an important part of the mission. this tied together the non- utility aspects of our world. >> one thing that is always important is transparency. we have a good deal of that and that is one of the strings with customers. this transparency includes the plan and that is open, making the information understandable. we continue to be the only utility i am aware of that shows customers -- the next 10-year's worth of projected rate changes. i would like to congratulate you as a commission for doing this. the oversight includes the mayor's office and the board,
the vice chair -- with the revenue bond oversight, and the citizens' advisory committees are just a few of the important oversight bodies. >> when we talk about the rate increases, -- we can use this as an example of what the rate policy really means, is this affordable and transparent, and we look at how the various offers stack up. are there any thoughts or comments, about any of this? >> what happens with the rate policy? it just seems that there is a laundry list here, do we need to find some way to prioritize, or will we be adopting the old policy -- i don't even remember the old policy, with the
directives in there. what kind of policy adoption process? >> the current policy that you governed under -- that we are responsible to present to you -- will specify exactly what the voters should consider. this is to the degree that you want to direct the staff for the additional consideration with the environmental justice policy, or the new community benefits policy. that comes after 2002. this would be the opportunity to have a living document. you have the important policies that we include in your budget, as well as the comprehensive financial report, and we show these policies. these policies, i know the rating agencies see the strength
of the commission because you have deliberated on these and have been reviewing these, and have not placed something that says to the general manager, or myself, to present this to you as the commission rate plan, to make certain that you are in good financial, sustainable keeping. and we will come back with those projections that show that we need those reserves by the end of 10 years. >> i think that the idea is based on these conversations, to codify what is here. and as you bring back the changes in the future, we took this off. are we really going to need all those things. so this is a nice list as we talk about the rates in the future to say, this works. and we would codify this into
the policy. >> and there would be a dollar figure attached in the budget hearings, to inform what the rates should be? >> this would be very difficult, to go to the budget and say how much the budget is allocated -- local hiring may be easier to do. but it will be very difficult to do that kind of accounting. the staff would probably tell us, you asked us to do this but we cannot. as an example of that, i don't know -- is as part of any policy that we ever adopted? >> it is the policy of the board of supervisors that we have funded. i don't know -- we probably at one time agreed with the policy. >> and if this was a policy that was part of this,