Public Utilities Revenue Bond Oversight Committee

MINUTES

Monday, June 11, 2007
9:30 a.m. – 11:30 a.m.
1155 Market Street (between 7 & 8th Streets) 4th Floor
San Francisco, CA 94103
 

1. Call to Order and Roll Call
 
Chair Aimee Brown called the meeting to order at 9:35 a.m. and roll call was taken. Present: Aimee Brown, Patrick Sweetland, Stan Jones, Kyle Rhorer and David Sutter; Lisbet Sunshine and Brian Browne were not present. There was a quorum.

2. Public Comment - Members of the public may address the RBOC on matters that are within the RBOC’s jurisdiction and are not on today’s agenda.

There were no comments from the public.

3. Chair Report
Chair Brown stated there was no Chair Report at this time.

4. Discussion and possible action regarding briefing on Wastewater Master Plan by Jon Loiacano.

Mr. Jon Loiacano, Manager of the Wastewater-Enterprise Masterplan process, stated that his group has tentatively scheduled a meeting with the San Francisco Public Utilities Commission on July 24th, 2007 in which they will present recommended alternatives with all costs and evaluation criteria. At that time, everything will be available to the public. Mr. Loiacano stated that four alternatives have been developed, which includes design and engineering alternatives for the Southeast plant in the Hunter’s Point/Bayview neighborhood. Currently they are seeing major odor control issues and the digesters are past their useful life as they were built in the 1950’s. The Southeast Plant is a large part of the Wastewater Masterplan. Three 10-year capital improvement programs will be proposed along with one short term plan. The first proposed plan would be to upgrade the existing plant. The second alternative would be to process all dry weather treatment at the Northpoint Plant, divert flow and Eastside drainage to the Oceanside Plant. This would result with the Southeast Plant processing at a much reduced flow rate. The third alternative would be to move all treatment to the Oceanside site and build a new plant to treat all dry weather flow. The fourth and final alternative would be to move the entire plant to another location. Rebuilding the collection system is an item that needs to be addressed as well. By the end of the 30 year mark of the capital improvement program, 50% of the collection system will have been in the ground for over 100 years.

Mr. Loiacano stated that with the approval of environmental review, the 30 year plan will begin at the end of 2009 with the detail planning and design complete by 2010 and construction starting in 2012.

In relation to public outreach, Mr. Loiacano confirmed that the Citizens Advisory Committee (CAC) meets on a monthly basis, and there have been multiple public meetings held in the Bayview, Civic Center, Sunset and North Point neighborhoods. There have also been multiple informational flyers and announcements regarding focus groups. According to Mr. Loiacano, there will be additional focus groups held in the Bayview community as well as two additional major public meetings in September, with one being held in the Civic Center and the other in the Bayview.

In response to a question posed by Mr. Sutter, Ms. Karol Ostberg told the committee that the funding strategy for the Wastewater Master Plan includes Commercial Paper with the bulk of the financing as long term fixed and variable rate bonds along with the use of State revolving fund loans, if available at reasonable rates and conditions.

5. Discussion and possible action regarding update on Wastewater 5-Year CIP by Manfred Wong.

Ms. Karol Ostberg introduced Manfred Wong, the Project Manager for the Wastewater 5-year CIP. Mr. Wong stated that the last Quarterly report was published in December and they are working on the March 2007 report, which will be delivered to PUC staff in the following week.
Mr. Wong reviewed the 5-year wastewater CIP-Spending Plan hand out with the Committee.  Upon Mr. Sutter’s request, Mr. Wong focused his review on the major changes that have occurred on projects instead of reviewing every project and their status. Channel Pump Station Odor Control Phase 1 ran into some difficulty as the returned bids came in around $1.5 million over budget. It may be decided to award at highest price or defer this project to next summer in order to combine phase one and two together. Mr. Wong stated that the high bid came in due to the bidding climate; the projects are very technical and complicated which may keep many contractors from being eligible to bid on the project, and there is a 10% DBE incentive. Mr. Wong stated that the Sunnydale Auxiliary Sewer project will be awarded at the June 12, 2007 Commission meeting.  He stated that all projects are being scheduled to be complete by fiscal year 2010. At this time the wastewater CIP is two full years into the project and at 35%-40% complete.

Mr. Sutter asked for clarification of page 9, section 2.0 in the Waste Water 5-Year CIP quarterly report. This section states that Wastewater Enterprise (WWE) is now responsible for conflict and support costs associated with the SFPUC water pipelines and facilities, therefore construction budgets in the Sewer Improvement Project reports are anticipated to reflect an increase. Mr. Wong informed the committee that historically water lines, unlike sewer lines, were owned and operated privately and were not considered Government facilities. This meant that moving water mains for purposes of sewer construction was at the expense of the private owners. At this time water lines are considered a government utility, which makes each affected entity/enterprise financially responsible for relocation costs if there are conflicts between water and sewer facilities during sewer repair or construction. In addition, DPW is implementing a revised excavation code requiring more street resurfacing work for aesthetic purposes when sewer work is done. Mr. Wong stated that this new cost responsibility is adding to the burden of the wastewater CIP. If the costs are affected greatly there is a chance that a project will fall off of the list as Mr. Wong stated he will not allow an individual project to run over in costs. 

Mr. Sweetland asked for the cost of annual Repair and Replacement (R&R) in regard to street repaving. Mr. Wong stated that he could look into it and provide those numbers to the committee. This will be provided by staff.
Mr. Wong spoke of the bid process and stated that Contractors must pass prequalification, have project specific required experience, and must be present at the pre-bid meeting in order to be eligible to bid on the projects. Mr. Wong told the committee that they require full bonding on all construction contracts at a fixed price.

Ms. Karol Ostberg then spoke briefly of the funding related to the waste water 5-year CIP. She confirmed that the first draw on Commercial Paper funding was on February 13th for $50 million; June 6th was the second roll out, with several different maturities and different rates. SFPUC is prepared to use Commercial Paper until the end of the 5 year program. She stated that each vendor will be evaluated every quarter. 

6. Discussion and possible action regarding update on RBOC Audit by Robert Kuo.

Mr. Bob Kuo reviewed the revised Task 1b analysis with the Committee, which provides answers to outstanding questions from the initial three project analysis. He explained that his group was able to provide many explanations to questions raised in the first draft, but were unable to provide all answers to the data gaps in project scope and budgetary changes from 2002 to 2005.  Mr. Kuo stated that the level of effort required to fully flush out each of projects analysis would be significant. His team has added much less detail for the remaining twelve projects, however they have included new information such as itemized budgetary changes. Mr. Sutter stated the 2002 budget is supposed to be the benchmark of how all analysis and comparisons are made, yet the cost categories and concepts of cost estimating changed which would leave comparisons and analysis inexact and may give less meaningful data.  He stated that the RBOC sub-committee should reconsider whether they want the consultants to pursue the analysis for the remaining twelve projects which will cost money / time and whether they should use the remaining scope and budget for tracking expenditures against the 2005 budget instead of 2002. Mr. Sutter noted that many of the data gaps and inability to pull consistent analysis could be attributed to the changing methodology of program managers, change in upper management as well as the change in overall processes.  Mr. Rhorer stated that he didn’t see the value in spending hours evaluating the remaining twelve projects from ‘02-‘05, and agreed that Mr. Kuo’s team should start from a consistent point and move forward in order to determine the trends. Mr. Sweetland expressed his expectation to see the explanations of changes to the budgets as well as status of all fifteen projects in the reports. Mr. Kuo confirmed that the reports will provide information that is responsive to the first scope of work, yet the remaining twelve projects will not be as detailed as the first three sample projects.
Mr. Sutter asked if reconciling the 2005 WSIP budget and having it loaded into P3 is part of the current scope. Mr. Kuo said that he would look into it and confirm at a later date.

Chair Brown responded to a question posed by Mr. Jones, and stated that audit work isn’t necessarily the responsibility of RBOC members as the SFPUC program controls are supposed to analyze expenditures to date and identify potential variances.  Mr. Kuo stated that overhead budgets are being looked at and will be included in the upcoming reports.

Ms. Ostberg reminded the committee that WSIP management is currently reassessing the project list, budget and schedule, which may affect the scope.

In conclusion, Mr. Kuo confirmed that the full draft report will keep limited detail on the remaining twelve projects and will be delivered to the committee on June 15th.  At that time, the sub-committee will address what to do with the remaining hours and tasks 1b 2 and 1b 3. 

7. Discussion and possible action to approve the minutes of the meeting held on May 14, 2007.

Mr. Sweetland motioned to approve minutes from the meeting held on May 14, 2007. With Mr. Rhorer’s second, the committee voted unanimously in favor. The minutes were approved. 

8. Discussion and possible action relating to RBOC members requests for information from SFPUC staff.

Mr. Sweetland asked for status on Statement of Incompatible Activities from Ethics Commission. City Attorney Ken Roux stated that the statement was still being developed and would be provided at completion.

Mr. Rhorer requested a copy of Mr. Kuo’s original scope of work for this RFP.

Mr. Sutter requested a status report for the City’s decision on OCIP programs. This will be provided by staff.

9. Discussion and possible action for future agenda items.

The committee would like Tony Irons, DGM of Capital Programs for the SFPUC, to give an overview of the WSIP update including the risk assessments if available by July 16th.

10. Adjournment.

Ms. Brown adjourned the meeting at 11:37 a.m.