Public Utilities Revenue Bond Oversight Committee

MINUTES

Monday, October 15, 2007
9:30 a.m. – 11:30 a.m.
San Francisco Public Utilities Commission
1155 Market Street (between 7 & 8th Streets) 4th Floor

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 and Brian Browne; Lisbet Sunshine, Kyle Rhorer 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. Presentation by Budget Director Carlos Jacobo on sources of capital for WSIP

Ms. Brown explained that due to the second consultant’s report examining WSIP expenditures, project terminology was introduced to the Committee and needed additional explanation. She stated that Mr. Jacobo and Mr. McPartland were invited to clarify CIP terminology/definitions and fund sources which were mentioned in the report. Carlos Jacobo, SFPUC Budgeting Director, and Frank McPartland, SFPUC Capital Project Budgets, reiterated that they were at the meeting as a resource for information regarding CIP definitions. Mr. McPartland clarified that under the SFPUC’s definition, WSIP and Enhancements are both considered capital projects distinguished only by their funding sources. He continued that Enhancements are simply another term for capital improvements that are not attached to the WSIP or its funding. WSIP, which is part of the 10-Year Capital Improvement Program, and is funded by 2002 and beyond Revenue Bonds along with PUC revenue, while Capital Improvements/Enhancements are funded by different bonds including Prop A 1996 as well as 1998 bond funds. In response to a question asked by Ms. Brown, Mr. Jacobo stated that the projects have moved out of WSIP and into Enhancements have no identified funding source and are considered inactive pending identification of funding.

Mr. Jacobo stated that if/when a project is put back into WSIP it would be funded by 2002 revenue bonds while a project taken out of WSIP would be funded by other sources. He confirmed that the process of removing and returning projects to WSIP involves the commission and the Board of Supervisors.

Mr. Browne related specific questions in emails from Mr. Steve Lawrence and Mr. Jacobo stated that responses to Mr. Lawrence’s concerns would have to come from WSIP project managers but confirmed that projects in WSIP will be funded by Prop A bonds. Mr. Browne asked if the removed projects would be paid for by rates and Mr. Jacobo answered that the removed projects are currently inactive and not being paid for by rates or bonds. He repeated that WSIP projects are funded through bonds, and removed projects are inactive pending funding identification.

In response to a question posed by Ms. Brown and Patrick Sweetland, Mr. McPartland stated that any project that the consultants reported as being taken out of WSIP is still a project in need of completion yet it stands without funding or continued expenditures. Mr. Sweetland stated that because the removed projects are Capital Programs, the Commission could finance additional/future bonds with the authorization of the Board of Supervisors. Mr. Browne stated that Mr. Sweetland was incorrect in his statement because additional bonds cannot be issued to cover R&R, O&M projects or any non-Capital Improvement programs. The Committee reminded Mr. Browne that they were discussing Capital Improvements and not O&M or R&R projects, thus Mr. Sweetland was indeed correct in stating that new bonds could be issued to fund projects that were moving out of WSIP (Capital Improvement) into Enhancements. However, the Committee agreed with Mr. Browne that bonds couldn’t be used towards a non-capital improvement project.

Mr. Jacobo informed the Committee that water revenues or a future bond issuance could fund the removed projects. The revenue stream in the water enterprise can be dedicated to R&R or it can be allocated to a Capital Improvement program, which could include an inactive WSIP project. Mr. McPartland added that the funds allocated to a removed project can be moved to a sub-fund for the region, and are either re-appropriated to other projects or the PUC can re-allocate to a project within the same region/group. Removed project funds can also be returned to the fund balance and re-appropriated through the commission, Board of Supervisors and Mayor’s Office approval process in order to spend on another project funded by WSIP funds.

Mr. Browne repeated that he doesn’t think that R&R and O&M can be funded by revenue bonds. Mr. Jacobo confirmed that the revenue bonds have been going to CIP and not R&R or O&M projects. Mr. Browne asked if funds would be restored to the revenue bond account if a WSIP project were moved to an R&R or O&M project. Mr. Jacobo confirmed that at this point his department has not received direction on that issue, as they haven’t dealt with it yet.

In response to questions posed by Mr. Jones and Mr. Sweetland, Mr. Jacobo agreed to find out how much funding has been expended on projects that were removed from WSIP and to help identify a list of revenue bonds being used to fund WSIP, which funds are currently in play for the Water Enterprise, and when the funds are anticipated to be completed.

Mr. Browne stated that 1997 A&B bonds were for seismic and water quality, and doesn’t think that a penny should be spent until the ordinance is changed to allow the issuance of commercial paper. He stated that although this is not in the Committees prevue to check on A&B bonds, as a private citizen he would like to know how much has been spent and on what.

In response to a question posed by Chair Brown, Mr. Jacobo explained that the cost ranges for the renewal and replacement program are calculated utilizing decisions made within the enterprise based on revenue projections, available funds for operating as well as the actual priority R&R programs.

Ms. Brown noted that more projects are being considered or being moved into R&R. She expressed concern that there should be more funding sources for R&R and residents need to know that the trade off for these projects being completed is the raising of rates.

No members of the public were present for comment.

4. Chair Report
a. Report on finalization, distribution and follow up of Consultant’s Report

The Committee reviewed the draft of the final report and discussed the format of the executive summary that is to be included with the report. Ms. Brown explained that the executive summary would cover the items of concern as well as positive findings. Ms. Brown noted that the Committee is meeting with Susan Leal, SFPUC GM, and Tony Irons, SFPUC DGM, to review the report and its technical findings. Ms. Brown stated, and the Committee agreed, that there are some issues in the report that need to be edited before the report is finalized. Mr. Sweetland suggested that the entire topic of Enhancements be edited to reflect the definition and funding sources. Mr. Jones requested that SFPUC staff from all effected departments list their issues and concerns so that the consultants can make their final edits and make the report as accurate as possible before going to Ms. Leal and Mr. Irons.

Mr. Browne stated that the consultants should clarify exactly what revenue bonds are appropriated for each project and what the funding sources are for any R&R or CIP project pulled out of WSIP. Mr. Browne stated that he doesn’t feel the report can be issued until the consultants answer these questions.

Mr. Sweetland stated that the consultants completed the work scope that was given to them which did not include revenue bond specification. He continued by stating that he is comfortable with the consultant’s report as it meets the work scope, yet suggests that additional errata be added to the report noting staff request for change and Committee members final observations or needs for clarification.

Mr. Browne asked to go on record stating that he wants the funding sources of the different projects to be listed in the consultant’s report.

Ms. Brown proposed that the Committee meet with Mr. Kuo and for staff to submit a letter or memo to the Committee prior to the November 19th RBOC meeting, including any changes, comments, disagreements or approvals they have.

Ms. Brown stated that she is still interested in meeting with Ms. Leal and Mr. Irons as scheduled. Ms. Brown requested staff to coordinate the Committee’s presentation/meeting with the Commission.
No members of the public were present for comment.

5. Discussion and possible action regarding WSIP project site visit

Committee agreed to a half or full day of site visits preferably on a Friday. Ms. Brown asked staff to supply date options at a future meeting.

6. Discussion and possible action to approve the minutes of the meeting held on September 17, 2007

Mr. Browne requested that he submit corrections to attach to the September 17th meeting minutes.  Ms. Brown moved to accept the minutes with Mr. Browne’s attachment. With Mr. Browns second the Committee approved the September 17th meeting minutes.

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

Mr. Jones asked for clarification on the WSIP engineering resources, specifically with what work is being done in house and what is contracted out. Staff may request Carol Isen to address Stan’s question.

8. Discussion and possible action for future agenda items.

Possible presentation by Julie LaBonte sometime in December.
Possible Transparency Oversight Committee issues presentation or Q&A by Steve Lawrence limited to 10 minutes. Ms. Brown asked staff to schedule for future meeting.
Schedule/present possible meetings dates for 2008. Possible discussion of RBOC Annual Report, which goes out on January.
 
9. Adjournment

With Mr. Sweetland’s motion, Ms. Brown adjourned the meeting at 11:24 a.m.