Public Utilities Revenue Bond Oversight Committee

MINUTES

Monday, August 13, 2007
9:30 a.m. – 11:30 a.m.
San Francisco Public Utilities Commission
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 9:37 a.m. and roll call was taken. Present: Aimee Brown, Patrick Sweetland, Stan Jones, Kyle Rhorer and Brian Browne; Lisbet Sunshine and David Sutter 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. Discussion and possible action regarding update on RBOC Audit by Robert Kuo or Member of his Team.

Mr. Kuo’s colleagues, Shannon Gaffney and Larry Doyle, were present to address questions from the Committee regarding the most recent draft of the Audit report.  Ms. Gaffney confirmed Friday, August 17th as the final date for Mr. Kuo to accept comments and requests from the committee in order to finalize the report before the due date of August 24th. In Ms. Gaffney’s opening comments, she noted that an Executive Summary had been added and explicitly laid out the themes and conclusions regarding the three sample projects, project budgets the differences between what was adopted by the Commission and what was loaded into Primavera as well as a list of projects removed from WSIP. The Commission approved WSIP at a project level and not at a phase level, which resulted in rearranging the budgets to accommodate the drilled down phases. The overall budget and scope did not change, but projects did move around. Projects were removed from WSIP because they did not meet level of service goals. These removed projects, total $26 million. The projects that are considered important projects will be put into an R&R or an Enhancement program. She confirmed that the Water Enterprise Capital Program is comprised of three parts: 1.) WSIP 2.) R&R and 3.)  Enhancements. Annual process has been implemented to develop capital budget which reviews and possibly changes budgets on an annual basis. R&R is currently budgeted between $25 and $35 million per year however $60 million is needed. This may effect the time in which projects get completed, and contribute to the slow down of WSIP. 

Ms. Gaffney stated that Deliverable 4 is due to the committee on August 24th, yet her colleagues would like to develop the themes discussion and incorporate committee member statements as well as make the findings and recommendations section more prominent. Mr. Doyle added that an expanded overhead statement has been incorporated in the report as well.

Mr. Rhorer asked Ms. Gaffney if she could find out whether or not the project scope includes specifying which department or bureau is accountable for certain tasks in order to establish organizational accountability. Mr. Rhorer also asked if there could be some explanation of what the differences are between the various Capital projects in order for the committee to have a better understanding of why projects are moved from WSIP to R&R. Ms. Ostberg confirmed that the Enhancement projects are not bond funded. In regard to change control procedures, Mr. Rhorer suggested that the report explain whether they are lax or onerous or whether the procedures vary depending on project specifications.

Chair Brown noted that the draft report recommends the PUC ensure it has the ability to track and explain any budget and scope changes made from the November 2005 approved budget. Chair Brown asked the consultants to clarify which format they suggest the PUC use in order to include the explanation in the WSIP Quarterly Report.

Mr. Sweetland suggested that there be a separate section within the report for the recommendations, numbered to correlate with the sections that they apply to.

Chair Brown stated that communication between Project Control and Project staff is essential. She noted that Mr. Doyle identified vacancies within the SFPUC Accounting Department as a potential problem with maintaining that communication.  Mr. Joseph Yew, Finance Director for the SFPUC, stated that an Accounting Manager has been hired, and confirmed that he is the process of placing high level supervisors in the Accounting Department as well. Mr. Yew stated that because the Accounting Department is the backbone of the PUC with the information and support they provide, he will do everything in his control to have the proper staff in that area.

Chair Brown asked Mr. Doyle to add examples to illustrate how variance applies. Specifically, to show how the deviation would spread if variance was not reconciled, or describe if the average were to continue what type of variation would result.

Mr. Doyle stated that he continues to recommend that PUC staff appoint one person to oversee the FAMIS and P3E reconciliation, as reconciliations are still carried out month after month without entries going into P3E. Mr. Yew confirmed that staff will revisit this before the report is finalized. Mr. Jones asked the PUC staff to format their responses in writing.

Mr. Doyle confirmed that he has not found any inappropriate expenditures. Capital Costs will most likely be paid for by bond funds. PUC has outstanding bonds outside of WSIP only have bond proceeds for WSIP. No available bond proceeds to pay for anything other than WSIP.  Bond funds for enhancements or not WSIP bond funds nor is there an existing authorization for the enhancements. 

Mr. Browne states that with the Calaveras Dam was supposed to be 670,000 cubic acre feet, but now he believes it down to 97,000 acre feet. He asked what sort of impact will there be on system reliability with the project downsize, and when were storage constraints put on the system.

Public Comment: Emeric Kalman stated that he would like to know why there isn’t an official statement from PUC management attached to the Kuo report. Mr. Kalman asked whether the technical projects were certified by the GM or the engineer assigned to certify the accuracy of the projects. He stated that if they were not, he does not understand how a financial expenditure plan can be adopted.  He asked why the computerized accounting system is changing since, according to his knowledge, there have been three or four systems implemented in the last few years. Lastly, he asked if the Mayor’s budget is accurate regarding the capital projects in accordance to the financial figures in the Kuo report.

4. Discussion and possible action to approve the minutes of the meeting held on July 16, 2007
Mr. Browne asked the committee if he could abstain from the vote to approve minutes. With Mr. Sweetland’s motion and Mr. Rhorer’s second, the committee voted unanimously to allow Mr. Browne to abstain his vote.

Mr. Sweetland motioned to approve the minutes, with Mr. Jones’ second the committee approved the 7/16/07 meeting minutes.

5. Discussion and possible action relating to RBOC members requests for information from SFPUC staff
Mr. Jones requested information regarding the RBOC’s process to procure professional services such as consulting. Mr. Jones, specifically, requested whether the City’s regulations/requirements for contracts are applied to RBOC.

6. Discussion and possible action for future agenda items
Tony Irons will be rescheduled to update the Committee on WSIP. Discussion and possible explanation of the definitions of terms under the Capital Projects including the differences between R&R and Enhancements along with their funding sources. Discussion regarding final draft of Mr. Kuo’s RBOC Audit report. 

7. Adjournment

Prior to Adjournment, the Chair and other Committee members requested the opportunity to sincerely thank Ms Karol Ostberg, SFPUC Acting Director of Capital Planning, for of her tremendous assistance and patience supporting the Committee; Ms Ostberg is leaving the PUC in September.

With Mr. Jones’ motion and Mr. Rhorer’s second, Chair Brown adjourned the meeting at 10:46 am.