Public Utilities Revenue Bond Oversight Committee

MINUTES

Monday, September 17, 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, Kyle Rhorer, and David Sutter; Stan Jones and Lisbet Sunshine were not present. There was a quorum. Brian Browne arrived at 9:40 a.m.

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 on WSIP status by SFPUC Deputy General Manager Tony Irons

Mr. Irons provided a brief overview of the current status of WSIP and discussed several recent reports related to the WSIP, including the Water System Improvement Program Risk Assessment by Parsons and CH2M Hill Parsons. Mr. Irons reviewed the suggestions made in the Risk Assessment report and explained why the results were a help to show potential dangers before they can occur.

Mr. Irons noted that one of the primary suggestions in the risk assessment report was regarding the effect of the escalation rates on the program. Mr. Irons pointed out that one of the major challenges with WSIP is getting the right contractors, competitive bids and having a construction management organization robust enough to handle all the high volume of projects. Overall, Mr. Irons thinks that WSIP is in good shape; he stated that numerous projects in the construction phase are coming in very close to the estimate and are showing little deviation in construction costs. Because of this he concludes that the likelihood of a change to project scope remains very small. He explained that projects could still incur costs that were not anticipated, such as environmental mitigation expenses, right of way requisition costs, and legal fees. The Draft Program Environmental Impact Report has been published and is nearing the end of the public comment period, October 1, 2007.  At that time, the Commission has to make a decision on what projects they will approve.

Mr. Irons highlighted examples of environmental mitigation for the Committee in order to illustrate the additional costs that can occur with a given project.  He explained that the cost to mitigate any determined environmental impact could be greater than the cost of the project itself. He stated that these examples should not cause much about the WSIP to change but instead should make staff engage the community with discussions on risk assessment.

A section of the risk assessment report addressed the organizational structure at the PUC at the time that construction begins. Mr. Irons stated that this should be addressed by the City as a whole and not just the PUC, as the ramping of WSIP projects will mean a commensurate increase on work for all support staff and departments, such as city attorneys and the Ethics Commission.

In response to a question by Mr. Sutter, Mr. Irons stated his position on taking additional water from the Tuolumne to increase supply. Mr. Irons explained that the agency could find a middle ground for supply solutions. He explained that although several options are available, there are downsides such as the expense related to recycled water, the energy and brine used in desalination plants as well as the consumer resistance to conservation. He stated that the PUC’s goal is to find a balance of the available solutions. 

In response to a question by Mr. Rhorer, Mr. Irons stated that the PUC has discussed and is involved with several different options of water supply, like recycling, desalination, ground sources as well as the interties between Santa Clara and EBMUD. He stated that the agency wants to diversify sources since the system is currently 85% dependent on Hetch Hetchy, which can pose supply risks.

In response to a question by Mr. Browne concerning the 25 million gallons per day delivered from the Tuolumne, Mr. Irons confirmed that the amount would be an average and not an exact daily assessment. He also confirmed that Mr. Browne’s other questions are thoroughly addressed in the Draft Program Environmental Impact Report.

In closing, Mr. Irons stated that his obligation is to present options to the Commission and ask for their direction. These options will be vetted in a series of workshops over the next three months. He stated that the Commission has a strong policy roll to play in the determination of the direction of the program.

Public Comment: Steve Lawrence noted his concerns with WSIP and the risk assessment report. Mr. Lawrence stated that the environmental work is expected to complete 11 months late and feels that the Risk Assessment doesn’t consider delay as a major risk to the program. Mr. Lawrence also stated that in two years the PUC would be in a fiscal year where over $1 billion of construction contracts will go out and that last year approximately $93 million worth of work was let out. He added that in one year the PUC would be in a fiscal year with $588 million of construction work going out. Mr. Lawrence stated that in his opinion, this gives a tremendous opportunity for delays and feels that this could end up like the Big Dig in Boston.
  
4.  Presentation on options for WSIP project site visit by RBOC members by SFPUC staff.

Mr. Surinderjeet “Jeet” Bajwa, SFPUC Project Management Bureau, and Mr. Howard Fung, WSIP Project Manager, addressed the Committee about scheduling possible project site visits. Mr. Fung stated that there are lots of options for site visits, including pump stations, tanks, reservoirs, pipelines and miscellaneous. Mr. Fung specifically noted East/West transmission main, which is in active construction, Stanford Height Reservoir Project, McLaren Tank Project and Summit Pump station. Mr. Fung suggested that the Committee see a pipeline, reservoir, a tank and a pump station during their visit. In closing, he stated that Friday’s tend to be the most convenient day for project contractors. Mr. Sutter stated that he is unable to attend tours on Fridays. Mr. Browne and Mr. Sutter added that they have interest in viewing the O'Shaughnessy reservoir. Ms. Brown asked staff to send possible dates in November to Committee members so they can decide on next steps.

Ms. Brown asked to revisit Public Comment under Agenda Item 2.

Steve Lawrence asked the Committee if they would consider agenizing the email communications that are directed to the bondoversight@sfwater.org. Ms. Brown confirmed that it is a matter of policy to have those emails forwarded to Committee members in the meeting packets.

Joan Girardot stated that she did not agree with minutes in July reflecting her comments as she felt that they were not properly noted. She clarified that she originally asked whether it was appropriate for San Francisco ratepayers to pay for the recycled water program. Ms. Girardot asked to have the question added and addressed on a future agenda and meeting. She stated that under Proposition 218, ratepayers couldn’t be responsible to pay for costs of services other than the service being delivered directly to those ratepayers. She clarified that she simply wants to know what the recycled water will be used for  -- regional water, irrigation for golf courses or suburban customers -- and who will be responsible for paying for its cost.

Emeric Kalman requested a financial report that shows the transfer of funds from PUC to Infrastructure. Mr. Kalman also would like to know how much money went to the Department of Environment and would like to see the legal or illegal expenditures associated with having a separate Environmental office.

5. Discussion and possible action regarding update on RBOC Audit by Robert Kuo or Member of his Team

Shannon Gaffney gave an overview of the final draft of the Audit. She reviewed the changes and edits that were incorporated and noted that Recommendation 3.2 currently states that the finance director should appoint a point person for the FAMIS and P3E reconciliation but that will be changed to reflect that the “Director of Program Controls” will actually appoint this person. Committee members stated that their comments and concerns were sufficiently addressed yet they all still had a concern with projects in the R&R and Enhancement programs. They requested additional clarification on which projects are moving out of WSIP and into R&R.

Mr. Browne requested that the minutes reflect the articles he brought to the meeting (attached). In response to a question posed by Mr. Sutter, Ms. Gaffney clarified that R&R projects are funded by rates and that no bond money has been authorized or identified for the Enhancement projects. There was additional discussion among Committee members regarding past WSIP projects, plans, budgets and criteria. The Committee stated that they have no further requests for additional changes or alterations to the final report.

Public Comment: Joan Girardot asked where the term Enhancement came from as the public doesn’t understand the term’s origin. She stated that she is very concerned about R&R as the Charter mandates that each utility have a reconstruction and replacement fund. She asked if there is any money in these funds for the Water and Wastewater division. She noted that the 5-year CIP is being funded out of rates, but it’s listed as an enhancement. She added that there was an astronomical rise in wastewater rates in the City in the last three years but the PUC still has $50 million of Commercial Paper outstanding in the Wastewater division.

With Mr. Sweetland’s motion and Mr. Rhorer’s second, the Committee unanimously passed the final draft of the report

6. Discussion and Possible Action on Contracting Working Group Meeting of September 7, 2007.

Mr. Sweetland reviewed the 9/7/07 Contracting Working Group meeting with the Committee. He explained that the Subcommittee discussed future contracting options. He stated that there is a strong consensus that there is follow-up on the recommendations made by Bob Kuo’s group. Mr. Sweetland stated that he would like to reference other oversight Committees to see if they have contracting groups.

7. Discussion and possible action to approve the minutes of the meeting held on August 13, 2007.

With Mr. Sweetland's motion and Mr. Rhorer's second, the Committee voted in favor to approve the minutes from the August 13th meeting.

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

There were no information requests from RBOC members.

9. Discussion and possible action relating to future agenda items.

Items mentioned to be agendized at future meetings include: Contracting Group updates, Kuo Audit follow up, implications of Recycled Water program and Proposition 218, WSIP project site visit, and an explanation from PUC budget staff regarding the three types of capital project funding for the Water Enterprise – WSIP, R&R, and Enhancement.

10. Adjournment.

With Mr. Sweetland’s motion and Mr. Rhorer’s second, Ms. Brown adjourned the meeting at 11:45 a.m.

-----Original Message-----
From: Brian [mailto:brian@h2oecon.com]
Sent: Sunday, October 14, 2007 3:10 PM
To: Brown, Mike
Cc: Aimee Brown; Steve Lawrence; Roux, Kenneth
Subject: Re: RBOC Meeting October 15, 2007
Mr. Brown,

Thank you for the email and attachments.

I have read the minutes. I believe I asked Mr. Irons if there were any negotiations with the irrigation districts (Turlock and Modesto) regarding water right swaps in regard to the planned WSIP increase takes of 25 MGD from the Tuolumne River?  He said "No!" (paraphrasing as best I recall.) If so, I would like this included in the minutes.  I believe (I am not as sure - please check) I thought I said, that I did not believe TR flows, other river demands, and SFPUC's junior riparian rights on the TR would allow for such extractions. This type thinking vis a vis constraints, would be why I asked the question regarding negotiations with the irrigation districts. If I did not say this, I should have, however, minutes are time-dated, sacrosanct, and only about what was actually said and nothing more. Please listen to the recording and verify.

I carefully read Mr. Lawrence's questions that you emailed. I believe these are legal questions.  In this context, I request that Mr. Roux research Mr. Lawrence's questions in the context of 2002 Propositions A, E and P (etc.) and give specific legal guidance to the RBOC. .

Truly,

Brian Browne