Public Utilities Revenue Bond Oversight Committee

MINUTES

Monday, April 14, 2008
   9:30 a.m. – 11:30 a.m.
San Francisco Public Utilities Commission
1155 Market Street (between 7 & 8th Streets) 4h Floor Conference Rm.
San Francisco, CA 94103

1. Call to Order and Roll Call
 
Chair Aimee Brown called the meeting to order at 9:40 a.m. and roll call was taken. Present: Ms. Brown, Patrick Sweetland, Kyle Rhorer, David Sutter and Stan Jones; Brian Browne and Lisbet Sunshine 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 members of the public present. 

3. Report from SFPUC management regarding 5-Year Capital Improvement Program budget and schedule (continued from previous meeting)

Manfred Wong, SFPUC Project Manager for the Wastewater 5-year Capital Improvement Program (CIP), was present to answer questions from Committee members relating to the report he gave at the last meeting. Mr. Sutter asked for clarification regarding the CIP’s budget, noting that the budget started at $150 million for 39 projects, yet the last Quarterly Report shows a budget of $159 million for the same projects.

Mr. Wong explained that when the Commission approved this program over two years ago, it was anticipated that the Commercial Paper program would be a funding source, yet it was not in place at the time. In order to supplement the funding, available bond fund money was obtained through interest savings as well as a debt service reserve fund that was converted into a surety, which freed up several million dollars. He clarified that the $9 million is not necessarily an “increase” but the associated cost of financing as well as cost to maintain CP. Mr. Wong clarified that five of the 39 projects noted in the Quarterly Report will be deferred since there’s a dollar cap on the program, in part because construction and material costs have increased dramatically.

Mr. Sutter stated that he is concerned that by dropping projects out there is no clearly identified baseline which makes tracking changes and utilizing cost reporting difficult. He added by including deferred projects in Quarterly Reports, the total size of the program is unclear and assessing progress over time is made more difficult because the projects and costs are not fixed to a baseline. 

Mr. Sutter recommended a fixed reference point in order to extract changes as well as getting back to cost reporting and tracking as soon as possible.

Mr. Wong explained that CIP differs from WSIP in that it’s always been a cost specific program, $159m total, $84m for flooding and sewer repair and $75m for infrastructure. When a project in sewer repair needs funds, money cannot be transferred from infrastructure which limits the flexibility. The management of the program is based on the budget and not based on the projects and their needs while WSIP is a flexible program designed to target the projects with the greatest needs. He clarified that the 5-year CIP is considered a $150 million program instead of a 39 project program.

Mr. Sutter noted that WSIP and 5-year CIP utilize the same tracking tool and recommended that a different report tool / program control system be used for the Wastewater program since it is a fixed budget program. Ms Brown expressed concern that it will be difficult to track the progress of projects with the current reporting system and noted that one of the recommendations made to the Former GM was to have a specific baseline for reporting for this purpose.

Mr. Rhorer asked how compliance is tracked on an individual project level with a program that has a top down budget. He asked if costs were to triple for one of the projects, at what point do projects reach a trigger and they are then removed.
Mr. Wong explained that the compliance is tracked and referenced Table 2.2b “Scope Changes” in the Quarterly Report dated December 31, 2007. The table shows the SE Plant Odor project has an approved budget of $3.87m but is now forecasted to cost approximately $500k, this is because bids for this were in the $5 million mark so the project was scaled back. He noted that they focus primarily on forecasting towards the next quarter to decide whether they should proceed or save money for a more critical project.

Mr. Rhorer requested that the Quarterly Report show progress of project budgets, priority methodology. He asked for a section that reviews where projects have been removed and what has been done with the freed up money, if any. Mr. Sutter added that cost reporting and tracking should be on a project level, with an upset report so they can also follow changes. Mr. Wong will work with Program Control Managers to see if the reporting can be improved so that project deferrals and changes can be more easily tracked; he will work to improve this reporting feature in the next 5 Yr CIP Quarterly Report. At that time the committee members can give feedback on whether the new format is sufficient.

In response to a question asked by Mr. Jones, Mr. Wong stated that Commission approval is needed for budget changes but not for overall changes to the program i.e. project deferrals
Mr. Wong referenced the $100 million funding request to fill in the gap between the Interim CIP and the Master Plan, also in part because it looks like the Master Plan is progressing slowly. Mr. Wong also expressed that he hoped there would be continuity between the 5 year CIP and the Master Plan since a gap between projects could result in engineers being pulled into other projects which diminishes maintaining institutional knowledge.
In response to a question asked by Mr. Sutter, Mr. Wong explained prices have gone up considerably since the estimates were made. Often engineers refer to a standard cost estimating manual, which are not often reflective of CA, Bay Area, San Francisco, bid climate, etc. Mr. Wong noted that there’s some overlap between the CIP and WSIP contractors, which also hurts the bidding process.

In response to a question asked by Mr. Sutter, Mr. Wong stated that contingencies are not being adjusted.

Mr. Jones asked for confirmation on whether any of the projects listed in table 2.6 in the Quarterly Report are in the Master Plan. Mr. Wong stated the projects are unique but that projects not picked up in the 5-year CIP will be moved to the Master Plan. He added that the largest project in the Master Plan would be the relocation and/or replacements of the digesters.

There were no members of the public present. 

4. Update from RBOC Contracting Working Group on Upcoming RFQ for Auditing Services

Mr. Sweetland noted that the RFQ is set to go out to the HRC LBE list, Controllers pool, and Academic institutions as well as advertising on the PUC website. M

5. Chair’s Report
a. Discussion and possible action relating to RBOC activities during the 2008 term

Ms. Brown asked the committee for feedback regarding the direction of activities for 2008. Mr. Rhorer suggested that the committee review the WSIP budgeting and procurement process and look into the SF bidding climate. Mr. Sutter requested that the committee look at WSIP change order procedure as the PUC is open to many change orders and should be prepared to keep costs in line. He stated that there needs to be stringent and detailed contract change order negotiation and regulation. Mr. Sweetland suggested the committee work with staff in order to create a process to show a historic understanding of the life span of bond funded projects. He suggested that they look at a way to track deferred projects as well.

b. Discussion and possible action relating to WSIP project site visits

Project site visits will be either May 9th or May 16th. Ms. Brown asked staff to confirm with the Committee by Friday April 18, 2008. 

6. Discussion and possible action to approve the minutes from the meetings held on December 10, 2007, February 11, 2008 and March 10, 2008.

The December 10, 2007 minutes passed unanimously
The February 11, 2008 minutes passed unanimously
Mr. Rhorer submitted a correction on the March 10, 2008 minutes. With his amendment the March 10, 2008 minutes passed unanimously

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

There were no requests at this time.

8. Discussion and possible action regarding future agenda items

Presentation from Finance Director SFPUC relating to financing plan; Confirmation of RBOC funds from staff; Presentation from Parsons CH2M hill; Presentations by WSIP management on Risk Assessment-Comprehensive Annual Budget, Contractor Claims in WSIP-Change order procedure & analysis; Confirm WSIP site visit.; Review WSIP budgeting process, bidding climate; Discussion and possible action relating to Lisbet Sunshine’s; Discussion relating to future administrative support for RBOC; Discussion and possible action to approve the minutes from the April 14, 2008 meeting.

9. Adjournment

Ms. Brown adjourned the meeting at 11:16 a.m.