tv Public Utilities Commission SFGTV January 19, 2022 12:00pm-4:21pm PST
sfgov tv staff for their assistance during this meeting. if you wish to make public comment, dial (415)655-0001. meeting i.d. 2495 031 4287, pound pound. to raise your hand to speak, press star 3. this is a special meeting to sfpuc. there will be no general public comment period. public comment will be called at the conclusion of the items noted on the agenda. you must limit your comments to the topic of agenda items discussed. i like to note that commissioner paulson has joined. >> vice president ajami: thank
you. i like to announce that the san francisco public utilities commission acknowledges that own the and stewards of unseeded land located within territory of tribe. the san francisco also recognizes that every citizen residing within the greater bay area has and continues to benefit from the use and occupation of the -- we acknowledge and honor the fact that the land which we reside also the acknowledge and honor
the fact that the tribe has established a working partnership and productive members within the many greater san francisco bay area communities. please call the first item. >> clerk: thank you. your item number 3 is a summary of the january 7, budget hearing question. online agenda was updated at 6:30 to include the summary of these questions if people want to review that. thank you. >> thank you for posting responses to questions. this item will be discussed with you.
>> good morning, everybody. ready for another good hearing this morning. as donna and gm herrera mentioned, the questions have been provided to the commission by e-mail and also in the agenda. we took a note of all the questions that were asked in the last friday hearing. we provided responses in the form of a table. any information that is required is in the attachment. you can see all the information is there. there are a few questions that will be responded to in the financial plan that will be presented at the first meeting in february. we like to get moving with the
water presentation. if there's any follow-up questions on the questions, will be pleased to answer them and look forward to discussion. >> commissioner harrington: i think it's more important to have this here. i asked what the effect not having a rate increase for the next year will be. i guess the strangest thing to me in the response, it said that the retail rate increase is not tied to specific impact on the capital plan. that's because we chosen to have unfunded capital plan. if you're looking at the budget of the p.u.c., single biggest things that happen is rates and capital. by having unfunded portion, it makes these decisions appear to
be free. when they really aren't. by delinking and having unfunded amount, it's a free decision. it's really free. it makes things lot easier not to have connect these hard decisions. somebody in the next 10 years is going to have to decide what falls out of that capital plan. because we chosen not to raise rates. by having unfunded amount just as a global negative, we don't know what that's going to be. right now, everything i care about is in there. hundreds of millions of won't be done because we have unfunded amount. we haven't chosen what that will be. i understand again, it's easy to do.
this program with 50 million and may be it's 40 now and we can postpone with bit more. i realize the flexibility. it does avoid the hard decisions that we really should be making as a commission. for example, if you look at what you responded to in terms of rate increase, you said rate increase will make difference in $8 million in the next year. if you look over 10 years of the capital program, that means it has difference of the water department of at least $80 million. unfunded capital budget for water -- that would cut that dramatically. we are avoiding that and not seeing what that is and seeing the effects of that because of how we made multiple decisions here. i'm not sure we can fix that
today. we are choosing not to decide what point will be happening in truth of our capital program for the next 10 years because the decision we're making this year without understanding the consequences. without knowing what's going to fall off. because we chosen not to do this, something won't get done. we are deciding what that will be. that ultimately is the problem for me. i'm not sure if there's an answer to that. i think it's a real serious concern that we are making a short-term decision with long-term consequences and we don't know what they are. >> commissioner, i'm happy to provide a bit of response to that. that was a lot of comment there. we had 18 years of rate change at the sfpuc. we understand that raising rates and we had lot of success with raising rates to cover our capital needs over many years. our rates currently are outlier. when you look at agencies, our
rates are on the far right -- >> commissioner harrington: i don't mean to be rude. i get that. i understand we don't want to raise rates and then cut the capital budget. we're choosing not to make that part of the decision. that's the part that bothers me. >> i appreciate having unfunded capital is new to this agency and for you specifically, something that you prefer not to have. i think what i presented at the last meeting, we will be working on a reimagining of our capital plan over the next year. we fully anticipate having a balanced capital plan over the ten years. if i didn't make that point clear, i'm making that point clear today. we have a balanced capital plan for fiscal '23, which is the budget before you. meaning there are specific sources of funding uses. i completely concur that there's
an unbalanced portion, unfunded portion for the remaining 9 years. our commitment to you is to work with the a.g.m.s to talk to them about prioritization of capital but needs of agency. and, how many resources we have within the resource team to deliver that capital. right now there's an imbalance. what's being proposed is future for the infrastructure team to deliver in the years provided. even if we were to approve the capital plan today, we wouldn't be able to deliver on executing those projects over year. at least with the given resources provided to the infrastructure team. with all of that said, we will definitely be working on a rebalanced capital plan over this current year, calendar '22. when we're talking to you about the updates of the capital plan a year from now and the campaign budget for fiscal '24, the year
after the year that is on the plan for approval, our hope and our goal is to have a balanced capital plan at that point. or to your point, be very clear which projects are not funded. i'm hoping this is helpful. our preference would not be to have unfunded capital plan. we didn't want to simply raise rates and move on. we wanted to put a line in the sand from affordability perspective. >> commissioner harrington: so, it makes no sense for us to talk about the capital plan past the first year then, right? it's not funded and we don't know what it's going to be. which is, okay, if that's what you want to do. if that's what the results of what you're saying. i guess we move on.
unless there's other comments. >> i'm not sure what you like me to say commissioner. >> commissioner harrington: what we're saying, we don't believe in at least the -- >> i don't agree that we don't believe in the capital plan. again, if you misheard something that i presented or that any of this team has presented, please let me know how i can be clearer. we have an unfunded portion of the capital plan between 10% and 15% of the capital plan. that's not to say 100% of the capital plan is worth reviewing. we have a funding issue that we need to resolve and prioritization issue we need to resolve. >> commissioner harrington: i you wants what you're saying. my -- i understand what you're saying. if the capital plan is off by $200 million, it doesn't make lot of sense to arguing if we
have $30 million for a specific project. we can have a conversation about it. it's impossible to make a meaningful decision with something that's so far out of balance. it doesn't kind of matter if almost any particular project is in or out. >> vice president ajami: let me add something here. charles, may be a different way of asking this question, how many of these items that are in the budget -- i wanted to ask this in a different way. which one of these we are looking at in a serious way. we think it's there's a demand for it. which one of them are in our wish list that we would like to have time to think about and reevaluate? >> in terms off our capital projects?
what you will get from steve ritchie is capital plan that is large and complex. we have a very broad series of infrastructure that spans several counties that requires attention over the next ten years. that's what you will hear from him. we typically don't spend lot of time speaking to the commission around funding, how we pay for it. typically the answer to that is revenue bond. we will issue debts and raise rates to cover that. the focus is on the spending side. everything that we teed up for you today is following that same framework. we're talking about what the infrastructure needs of the agency are. the difference is that we are not just raising rates to cover the needs. we are needing to suggest that a prioritization is required here.
in the capital plans before you, subsequent to today, we will be looking at what's the priority in terms of deliverability. again, if the infrastructure team has 100 engineers, they need 150 engineers, we have two choices. we can hire more engineers to cover the what's being proposed and issue debt to pay for it. or, we work more closely with the a.g.m. to talk about priority. what is the criticality of our infrastructure? how do we better prioritize what's before us? those are the types of conversations we need to have. like i said, we're very clear that fiscal '23 is funded. it's completely -- we have sufficient sources discover what's being proposed before you. we are admitting that there is a need out there for us to look at
the other 90 years of this plan. like our said, our commitment is to rebalance this. i wish i could provide more clarity. perhaps, commissioner ajami this is a question they can speak to more specifically in terms of their projects and their plan and details win they present those to you. >> vice president ajami: i didn't mean to jump in i wanted to follow-up. go ahead. >> commissioner paulson: the tension is palpable right now. i would like to see a path forward. i'm going to give one example. 150 years ago when i was elected to be the director of the labor council, i immediately upon
looking at books and budgets and whatever, saw some things that i didn't feel were put together in such a way. we started a planning process, which is similar to what these four particular meetings are going to be. in which aspirations and plans were put together. whether or not things were funded or not. they seem to be congruent with the planning and the ultimate budget which i hear mr. norby saying, we are going to be funded for 2023 and the next nine years, we'll deal with this as we move by. to me, that's not totally incompatible. although, i do feel, i hear very
loudly what commissioner harrington saying being guarantee of balanced budget. are we going to be putting all these presents underneath the christmas tree before the macy's bill come in? i get that idea. it took a while in the example that i'm giving to be able to reshape the staffing levels, much smaller budget than what we're talking about now in terms of this agency. i would like to think that we have consensus to move forward without having the field in we're being irresponsible by doing that planning stuff. i feel that tension, which i think was going to be quite up there on the level that i'm hearing it right now.
i want to take that more seriously. i respect commissioner harrington and his -- he was our city controller for a while. he knows little something about budgets and financing. i hope we have a path to go forward and may be that's where madam chair, the general manager could address those issues. i want to acknowledge that i very much feel a sense of tension as we get into the second budget meetings. thank you. >> i would offer and chair ajami offer this commission to have a fully funded capital plan as being a priority for consideration. we can tell you what additional costs it would take to fund the
capital plan completely. we can make that change here as part of this conversation. that's not my recommendation but obviously, we're happy to provide you that information and make that change if this commission chooses. >> vice president ajami: one quick comment here, personally i would like to see if we are -- if the demand for our services we're providing is not on the ever-increasing trajectory and you're investing in all this infrastructure, i hope there will be a demand for them in the future. regardless what kind of financing mechanism to use. it will be good to have some sort of certainty around this. demand is ongoing. who's going to pay for this?
you're building all these things. at some point someone has to pay for them. the concern will be like how are we going to be able to manage this without making our services we're providing unaffordable? especially for people. i mentioned this a few times, especially for people who do not have the resources to build a great water system in their home. slowly, these people are gradually coming off the grid using less. somebody has to pay for these services. that's one thing. the second thing is, the rules of financing and, i do not want to claim i know as much as others on this thing, we have looked into this little bit over the years. there are so many other options and ways to look into financing
infrastructure. especially as you're sort of building into this world of multi-benefit solutions, solutions that go across different sectors or different organizations. i think it's worth looking into that, in addition to the financing. which we all know it's nothing new. i know like, that is how utilities have been financing their infrastructure for many years. the revenue with the financing. it would be good to have a portfolio of this is the size, these are our options. just a few talks to share here. >> looking at all alternative financing is a big piece of what the capital financing does every day. we'd expanded.
we over billion and a half dollars of governmental loans at very low cost interest rates. we have loans that we've executed for the wastewater. all of those roughly 1.5% interest rates. very low, 30-year debt versus what you heard from richard morales earlier this week was around 3% interest rates in revenue bonds. if we can do more at less cost, those are the things we are looking at in order to continue the ball moving forward with our infrastructure. believe me, we don't want to be in the way in terms of finance issues being a bottleneck or stopping a infrastructure. that's not what we're talking about here. >> vice president ajami: there used to be some checks and balance.
we cannot have everything in the world if we can't finance or pay for it. it's important that we make sure -- >> doing it is the biggest issue. we don't have enough people to do the work. that's the biggest issue here. we're budgeting, we have $2 billion of appropriations sitting unused as an agency. our charge here is to be efficient with appropriated resources as possible. that is the focus. we don't have enough engineers in infrastructure to get the job done. even if we went out and contracted as many contractors as possible, we still couldn't get all the work done. we need look at what we can take on realistically with the resources that we have or go find a way pulling additional resources. this is the point that we need to focus on over out next year. whatever those rates point to is what those rates will be
ultimately. >> vice president ajami: is there something you want to interject here? >> i'll keep it brief. i thought it was important to slide in couple of comments. to kick off the conversation -- as charles and laura know, i think my time at wastewater enterprise, i can tell each of you, commissioners with 100% confidence and let me put become to this, within six months, starting here, one of the things that rapidly was becoming very clear to me was if i asked the question why this case of capital program for the wastewater enterprise. we couldn't answer the question. there was a lot of good intention but when i looked
around wastewater enterprise, what i saw was an organization kind of drowning in campaign program. it was just overwhelming. the staff were overwhelmed. the pace, safety has suffered as a result. when we look at the critical aspects that we don't typically pay attention to that happened on the tail end of capital delivery such as asset onboard and non-high profile activity that's critical to setting up infrastructure and all of the priorities reflected in the commission asset management policy that we adopted in late 2019. what i can see was, yes, we the money and upstream we had plenty of horsepower to push these projects. if you asked me, is wastewater absorbing these projects? are they sustainable? are we setting them up for
long-term success for the rate payers to get maximum value out of it? the answer i concluded was no. we haven't been. not of any poor intent, of course. simply it was an area that we've gotten out of balance on. i made it a priority in all of my efforts on this topic with laura and charles and the rest of the team with infrastructure, to really use the last 18 months to dig into this topic and make sure that we were understanding the full landscape and then thinking less about money than it is first and foremost about deliverability. to the point charles made, which i can validate for you from another perspective of the organization, what charles is saying is, partly is there's really no answer than to bring more people on. i agree with that. it would not help me to add more
people per se just to absorb this program. it's not a matter of more money. it's not a matter of more people. from our conclusion, it is largely for wastewater enterprise, i won't speak for the other two, it is about our ability to deliver and absorb these projects. that's one point so you can understand why we're taking the path we are in this two-step approach that laura's team and others outlined. commissioner harrington, i want to address your concerns with make 100%, they are clear. i want to add two things. if the impression is that the projects are below the line, that we're setting aside. if it's not clear how we got there, their placement below the line is not random. to charles' point, we clarified and prioritized as best we can up to this point and for
wastewater, i'll tell you the projects below the line are the ones we have logical basis for why they are the lowest priority. commissioner ajami to your point, if you say what are the things we really need and what are the anythings we need to set aside, those will be the ones below the line. from those traditional framings, that is where we're at. it's not like we have no answers. we have about 80% of the answer. i want to clarify, can we look beyond the one year, yes, we can. it may be primarily qualitative in thinking about high priority how we make decisions more so the money. lastly, again, this is a point that's been made that i want to
reemphasize from wastewater perspective. other thing that i concluded was as you know, there's been some groundbreaking work in affordability that's quantifiable and ties it to socioeconomic impact. i was like holy cow, my organization is an outlier and not in a good way. we're high in the right in every way to our peers. the issue of affordability is not like a social value or a nice to have. you can look at it as a business imperative. when you're that far an outlier, cost of service is something you need to look at. our capital program right now is what drives our costs. commissioner harrington you made this point. i will stop there. i think you will hear me certainly emphasize these same points in more detail when we look at them with the wastewater
end. i want to add to rep really support and hopefully help add some context to what laura and charles are communicating to you this morning. thank you. >> vice president ajami: thank you, greg. please go ahead. >> president moran: this has been a very useful discussion. when we first looked at this issue, the way it was -- at least the way i heard it, number one, people have been beating up by rate increases over a long time. they would like some relief. we accumulated bunch of money we couldn't spend. it's time to take a pause and consume that money and give the rate payers a break and move on. which is basically a balancing of the flow of funding into the capital program.
what we're hearing is quite different. also, i think more important it says that if the current set of projects accurately reflects the needs of the utility in terms of maintaining an infrastructure that can deliver the products that we need to deliver, we have real capacity problems for doing that. whether it's the ability of the organization to absorb new facilities or whether it's the ability to manage contracts or the staff engineering efforts. we are not equipped currently to do what we have told ourselves in the past needs to be done. i think that mismatch is something that is really vitally
important to get to the bottom of it. i think it's probably true that we can't do that in this budget process. that's a bigger discussion. i think there is value in keeping the program on paper whether it's funded or not so that in our effort to rationalize so we don't lose track of all that stuff. for me, it's more of that full list of projects is the best definition that we have to date of the need that we have. i don't want to see that disappearing. i think we really do need to get into the discussion of how we deliver on that. i was glad to hear, rate
increases are not what's limiting this discussion at the moment. it's other organizational capacity issues. i want to be really clear about that from my standpoint, we need to fund what we need to do. greg, your comment resonates. we do need to pay attention to that. as we go forward, i want to make sure that our objectives are clear and what we are clear. rates from my perspective, shouldn't be a hard constraint. we need to may lot of attention
to whether we can think of it as a hard constraint. >> vice president ajami: any other comments? >> i don't know if commissioner harrington has additional questions -- >> commissioner harrington: only question i have actually, this conversation has been great. i appreciate it very much. mr. norby said projects are above line, we don't have that in our document. should there be things that aren't the highest priority. i love to see that. go ahead. >> vice president ajami: i think he meant it in the wastewater. [ indiscernible ] >> greg, can you make sure that information is provided to the
commissioners? >> yes. >> okay. let's make sure they get that information and to sort of wrap up the discussion, i think that commissioner moran, i think you sort of hit. on the issue that the issue deliverability and the issue of asset management once something comes online really goes to a broader issue that we have. it's not just about money. it's about p.u.c. capability from a resource perspective mostly in terms of us having the abilities that we talked about before the personnel and what not to manage these projects and to deliver them and operate them. which i know that greg has been very clear in discussing with me since i came on board. when charles and laura came to me and they gave us -- to
continue on this path, i fully supported this approach. i think that it is -- we have to strike the balance this terms of delivering in a responsible way but also balancing that need against rate payer sensitivity. i do not believe that rate payer rate should be the sole determinant. we have to make sure that we can deliver on projects in a timely way, fiscally responsible way and operate those assets once they come online. that was why we came to you with this program sort of committing that in a year, we would have a better picture of where we're going to be able to go moving forward in a responsible way. i think that hopefully greg providing you the information will give you at least some
short-term sense of what our priorities are and going forward, we will continue to right-size this so we can create a budget that is balanced that can fund the projects that we need and demonstrates the rate payers this we are going to do in a fiscally, operationally and responsible way. i think it's been a great discussion. >> vice president ajami: one comment i have here. one thing to remember, i think you should go back and think about that as you're looking at how we're doing budgeting, infrastructure and planning. we are right now dealing with a lot of different problems that we even dealt with 20 years ago. we have a different social
calling that we have to pay attention to. paying attention to discrepancies, challenges with affordability, challenges with accessibility. all of that is already important. also internally making sure there's focus on diversity and inclusion and equity. the second thing, another very big item is climate change. it's the level that is impacting our sources, our infrastructure, our system as a whole. it's really putting lot of stress and challenging us in different ways. the third piece is that the utility business is evolving. it we are still running our utility the way we did 30 years ago, we are not involving the time we have to be evolving.
we can't do the same thing we have done year after year because things are changing around us. we have to make sure we are evolving with that and we need to make sure we are capturing challenges sort of adjusting to them and sort of coming up with new ways of dealing with the challenges that we are facing. i think the calling for us as a utilities to kind of recalibrate ourselves to the challenges rather than constantly trying to meet the challenges we faced in the past with the same solutions we had in the past and hope that we get a different answer. i think one other thing on that list is the demand. demand is definitely not the way it used to be. we have to incorporate that. we have to think about, what happens if this doesn't evolve the way we think?
is it going to kill us or break us? what do we need to do to make sure we have a financially healthy utility that can provide service and observe and deliver. if we are using the same model we had, it's going to -- [ indiscernible ] it's very important to remember these three demands to climate change and equity and afford ability -- affordability as the three major drivers how we want to provide service in the future. >> president moran: let me add one other thing to the discussion, back in the days we had annual rate increases we would try to deal with.
that was set up horrible dynamic that year. financial planning ended up being subject to the moment. what various people thought you could or couldn't afford. we moved away from that. we got the first we did as 5-year rate plan. what we told people was, here's an important work that needs to be done. it needs to be funded. it needs to be planned in an orderly way. those rate increases were significant but it also, took it out of the realm being these are the things beyond our control and unreasonable. it's part of a thoughtful plan. that ends up not only a funded
predictability breeds trust. if we say something needs to be done and here's how we're going to do it and we get it done, then that builds trust. we hit a bump in the road here. we thought we knew what we needed to do. there's a little bit on that. we're having a hard time delivering. we're not sure how we're going to respond to that. at the moment, we took that nice plan that we sold to people and we said, we need to recalibrate. i think we need to be aware of what the stakes are in terms of our own reputation, the credibility that we have whether in the business community, as an agency that can get done what needs to be done. at the end of this process, we
need to be in position where we can reestablish that kind of framework. >> vice president ajami: okay, great. this was an important and timely discussion. we need to call public comment on this item? >> clerk: yes. members of the public who wish to make two minutes of public comment specifically on item number 3, dial (415)655-0001, meeting i.d. 2495 031 4287, pound pound. to raise your hand to speak, press star 3.
do we have any callers? >> we have three callers in the queue. >> caller: good morning, this is david pilpel. number of quick points here. i agreed strongly with commissioner harrington for example, m.t.a. has a way with the capital program. that suddenly a concern. i hadn't heard that before. rates were set several years ago based on the budget and the capital plan at the time it doesn't seem to me that the costs are down or that the need for those projects or programs has diminished.
as we learned on tuesday, water sales and wastewater use are down both trends are likely to continue. the combination of less use and a rate freeze leads to less rate revenue and we may be back to the downward spiral in the 1990s all over again. which led to the reconstitution of the commission. i worry we can be led back there all over again. today's conversation marks a substantial change in tone on organizational capacity and priorities. i would review existing commission policies including the asset management policy as applies to this budget cycle. i would encourage you to ask the staff to bring those policies
forward at the next discussion. thank you. item 7 on today's agenda should read thursday january 20th. please be clear with the public on the continuance. my request for full set of organizational chart is under way and will be coming soon to a mailbox near me. thank you very much. more on item 4 shortly. >> thank you for your comments. another caller has joined the queue. next caller. i have unmuted your line. >> caller: commissioners, it is wrong and pathetic to say that you cannot deliver projects and you're a policymaker. staff stated we don't have enough engineers? really. what you have is that the fact that you failed to treat humans as humans.
14 other staff at p.u.c. hired their own family members to work with them. now, as we seek and as of last month, now we selected another irish on $3 million construction contract and part of the communication agenda so the public would not know about it. if you cannot build these projects, please do something else that makes it beneficial.
replace the old garbage can. this is why you cannot -- [ indiscernible ] if you leave it to professionals, yes you can. but the corruption within your organization is so strong -- shame on you! >> thank you for your comments. next caller. >> caller: commissioners, you listen to the comments and you've been listening to the comments what we've been saying all these years. i know some of you are just joined the commission in couple of years ago. nothing much has changed. you commissioners had an
opportunity to choose general manager who is not tainted. you did two things wrong. first you chose a person who is tainted and secondly, you listen to the mayor. you as commissioners have no accountability and no transparency. you just talk the talk but cannot walk the walk. but the corruption or the cancer of the san francisco public utilities today is more or less the same. it's a cancer. this cancer can only be cured by
removing those who have tarnished the name of the city. i will ask you to reflect on what is really accountability and transparency and stop telling us what to say and what not to say at public comment. you don't deserve to be spoken to as human beings. you tarnished your morals, your ethics, your standards and everything. thank you very much. >> thank you for your comments. next caller. >> caller: good morning, commissioners. i just listened to your commission remarks and staff remarks. i have to say i'm not pleased to
hear them, i'm pleased to hear the challenging of yourselves to consider what's not working and what you have to do to change it. -- we agree with this idea that using previously appropriated funds that's appropriate now. different comments we don't have enough staff resources to get the work done, by just adding staffing resources will not resolve the problem. you find yourselves in a spot where you have to actually rethink how you deliver the projects that you're committed to doing to met your obligation to the public. in all of the conversations here, the one thing i didn't hear very clearly from my perspective, is that your primary obligation is to deliver
the reliable water supply at least from the water enterprise, reliable water supply, high quality to the public that you serve. that is your job. that's your public responsibility. i think these conversations are critically important. i would hate that for the commission to go back to -- [ indiscernible ] i remember those times. they are very poor. i look forward to continue engage in this conversation with you. it is critically important to your success moving forward. >> thank you for your comments. the call queue is clear. >> clerk: thank you. public comment on item number 3 is closed. >> vice president ajami: any other comments? otherwise, madam secretary, read
the next item. >> clerk: item 4, the water enterprise budget and capital plan presented by a.g.m. ritchie. >> good morning commissioners. steve ritchie general manager of water. i found that invigorating discussion. lot of issues there. it's a big challenge. we have the wherewithal to pond -- respond in a constructive way. hetch hetchy reservoir is not the only picturesque spot in the reservoir. i wanted to make sure i included this.
again, the size of our system is actually stunning. it does span the width of california. it's our system. it's not state or federal system. it is ours. it's anchored by the three reservoirs in the sierra, the two in alameda county and santa clara county. our customer area is a large system. there are 2.7 million customers of the water system including the wholesale customer that are served by us. this map you probably seen before. basically, it chose san francisco and 26 wholesale customers and the depth of blue is the percent of their reliance on the san francisco regional water system for water. you see the peninsula is largely blue, hayward is dark blue, alameda county water district is white.
that presents an interesting situation because when state contract is not available, they come to us looking for more. it's a very interesting dynamic that we have to deal with in the system. many of our customers do rely on the hetch hetchy regional water system for their supply. then, there are elements within the system of how it operates. this shows those things. it shows the reservoirs and then down stream it shows the power houses that we operate as part of the water system. then the treatment facilities beginning at tesla with the uv treatment facility coming through the range and then snow valley water treatment plant. then harry tracy water treatment plant up the peninsula.
those are the moving parts here as well as all the pipelines and tunnels. one of the things that we'll talk about throughout this presentation and others is that most of the cost of the system is not driven by demand as much as it is by the base level just operating the system. that's something that we want to make sure is made clear that there is a cost operating the system. [please stand by]
managed by angela chung is responsible for management of the system in the bay area that's outside of san francisco but it is not the complete regional system, of course, hetch hetchy is part of that as well, but basically starting with the tesla treatment facility and then the tunnels and things starting at alameda east portal going up to the line in san francisco is managed by the water treatment division. natural resources and lands management division is managed by tim ramirez, that's where we are responsible for managing the 61,000 acres of our watershed land here in the bay area as well as other environmental compliance issues. and right-of-way is something that they deal with a lot. on the bottom row there is the water quality division, managed by andrew de grassea. they are responsible for technical work on water quality, but also compliance with our drinking water permits. so they work a lot with the
state of california and the federal government within terms of direct regulation, but also they're very active in dealing with new regulations, which are coming all the time on the drinking waterfront. and we'll talk about some of those later and they're driving one of the budget challenges that we're looking for. and then the lower right is our water resources division, managed by paula kio, where we deal with new and alternative water supplies. that has been a significant portion of the discussion that -- that we've had, i think that one of the things that we wanted to make clear -- and i will emphasize again -- we're looking at planning for all of our obligations, but we're looking at building for what are our actual demands are. so that's something that we're very, very aware of. and the water enterprise is in excess of a thousand people and it's a great position that i'm in, frankly, and have the honor and opportunity to manage this
group and the system that they take care of and make work. next slide, please. i'm going to be talk about what we do before we get into the budget and what we do is driven by our water enterprise level of service goals. these were established in 2008 as part of the water system improvement program and i think that they were a major step forward for the commission in terms of establishing what was going to happen in the water system improvement program. and there were a couple of great benefits from that. one is it really made clear the extent of what the operation needed, you know, throughout the system. and it also, secondly, made it clear with some very specific numbers what engineers needed to design to. and that was something that i think that most agencies fall short on, without being really,
really clear on what exactly is expected from the engineers. they made statements, well, make the water system safe. and how big of an earthquake and things like that that you need to deal with. so these were established in 2008 for water quality, seismic reliability, and delivery reliability, and water supply and sustainability and cost effectiveness. as we looked at these over the years, they work well for certain things. they didn't work so well for other things going forward. so what i'm going to talk about in the next few slides is how we view implementation of the level of service goals. there's a whole set of objectives that go with these and a lot of those were included in the implementation but some of them have been added or modified in the slides that i'll show coming up next. next slide. the first is water quality. with the goal being maintain
high water quality. so what does that mean? well, first, we have to comply with and/or surpass all current and foreseeable drinking water regulations. provide clean unfiltered water originating from the hetch hetchy reservoir and filtered water from the watersheds and treated water from other sources. continue to implement watershed protection measures. in our watersheds to protect watershed ecosystems and drinking water quality. and somewhat mundane but very important, to respond to inquiries or complaints regarding water service, which are usually water quality driven within two business hours. we also to respond to them on a regional level. so water quality is, you know, it is listed first here. it is co-equal of the others but it does drive a lot of what we do. next slide. seismic reliability.
reduce vulnerability to earthquakes. so design water system improvements to meet the current seismic standards was the basic objective and we added regularly evaluate the system to meet current seismic standards. so it was established as a baseline, and it is something that we need to keep on top of over time to make sure that we're not losing ground to the current state of seismology. and basically, how do we make sure that we are able to provide service within 24 hours after a major earthquake. and so the objective was for design of a system at 220 million gallons per day and to make sure that we can deliver water to 70% of the turnouts in each region, with specific numbers for each of the regions that we serve. that's the objective of how it was designed. you know, none of us are looking
forward to the actual experience, experiencing that kind of earthquake, where we have to find out how well it works. i'd soon just as not find out, but we have to be ready for it. and then restore facilities to meet an average annual demand of 265 million gallons per day, within 30 days after a major earthquake. and the number 265 here is actually not driven by the supply assurance, but it's rather by what our facilities can achieve. i think that originally this had been written to be 300 million gallons per day and that's true of the name plates on our facilities, but it's not really true of our ability to operate them. because of things that you need to take into account in terms of operations. so this is still very much a clear objective of ours. but it's not at that higher level of demand that seeing an
average demand of 300 million gallons per day is incredibly unlikely. next slide, please. delivery reliability -- there are two slides on this one. the first one is more general. basically providing operational flexibility to allowed planned maintenance shutdown of individual facilities without interpreting the customer service. again, providing flexibility to minimize the risk of service interruption due to unplanned facility upsets or outages. and maintain our response and recovery plans for assets to minimize the outings. and to have flexibility and system capacity to replenish reservoirs as needed. so each one of these is important. these are a little bit more general, on the next page we'll get into more specificity. and the first one is one that is really critical to us and this
originally said a demand of 300 million gallons per day, again, more based on what our facilities really can do, we have modified that down to 265 mcd, under the conditions of one planned shutdown of a major facility for maintenance. and that really is defined as a region in the san joaquin pipeline or another pipeline. so it's not just, you know, generic planned shutdown but it's a very specific planned shutdowns. and concurrent with one unplanned facility outage due to a natural disaster, emergency or a failure or upset. and one of the keynotes on this that we need to make clear is that planned shutdowns, the hetch hetchy water and power system, are restricted to the period november 1st-march 31st, and no longer than 60 days with the special exceptions for shutdowns up to 100 days. that note is really important to understand about our system,
that we can have a short shutdown of the hetch hetchy system but we can't have longer shutdowns so one of the things that we need to make sure that we design and operate to, is making sure that we don't fall into a position where we would have an unplanned facility shut down that lasted for a much longer time. the next is tied to the infrastructure plan so we take security positions that meet or exceed those standards set forward in the plan. this is both physical security and cybersecurity. and then provide wholesale customers with timely information and data sufficient to support operational decision-making of their retail system. so there's a lot of stuff in this on delivery reliability, and we've only done it for the regional system. we have a draft that has been put together for the local
system that we're still working through to refine to make sure that we are setting the specific service goals for the local system as well. next slide. implementing a level of service goals for water supply, meeting the customer water needs in drought and non-drought periods and the next is new, to support the proper operation of the water system and related power facilities. this is where we wanted to make sure that we acknowledged that operation of many of our power facilities are critical to our water supply operation. casin has to comply with state and federal regulations but if we can't operate it, we have a hard time delivering water. meet average annual demand of 265 from the watersheds and retail and wholesale customers,
for consistent demands consistent with 2009 water supply agreement. this is where the 265 ndg does relate to the supply assurance. so, again, this is a goal and a thing to recognize and to respond to. but the 184 million gallons today for our customers is a contractual obligation, but one they are not expected to exceed in the near future. and and deliver rationing to 20% of reduction of water service during extended droughts. and here we're non-specific in this. what we mean by extended droughts. because we know that at some point in the future we'll get into a discussion about how we look at that. but then also we are clear that we need to diversify our water supply options for both non-drought and drought periods, strengthen diversity is
something that we recognize on the water supply side. next slide. and some of the things that actually were not in the level of service goals and objectives but actually were in the companion documents, like the adopting resolution and others, which included improved use of new water systems and drought management, and including conservation and transfers. one that we added, maintaining potable water use below 50 gallons per capita per day. we're currently at 42 capita per day and we may go lower. so this basically says that, you know, we're going to keep it low and we may want to move this number down over time. but it's an important thing to keep in mind. and realize annual real water losses of less than 10% of the water supplied to san francisco there's a lot of focus in this stage on minimizing water loss. very appropriately. and we do a lot of that right now.
and our performance is less than 10%, which is in the upper 10% of systems nationwide. it is usually running more like 15% or 20%, and, of course, there's some horrendous systems that are losing even more. so real water losses is carefully defined in the state guidance document. we want to keep it less than 10%. and then specifically meet 80% of the recreation and parks department irrigation management recycled water by the end of the year. the key element in that is golden gate park and that's where we're headed right now is to make sure that we can get that served by the end of the year. next slide. environmental stewardship. actually what we called it in the original was sustainability, and it wasn't a lot more than meet all current and anticipated environmental legal requirements. so it says to meet your legal
obligations. well, that's a good start. we thought that it was worth it to add more things to that. which is manage out watershed right-of-way lands to restore ecological resources and to minimize wildfire risks. then provide the public with appropriate educational opportunities by maintaining active education programs and recreational opportunities where appropriate, in cooperation with other federal, state and local agencies. and then manage and operate the water enterprise asset consistent with the environmental stewardship policy, which was adopted by the commission in 2006. it's general, and it's specific to our facilities. it is brought up from time to time relative to don pedro, and downstream of that, but that doesn't apply -- the policy doesn't apply to that because it's not our facility. it's other people's facilities. but as you will see in the discussion later, this does apply to how we want to manage the river downstream. next slide.
and then we actually got more expansive here in sustainability. because it is a very broad area so we've said it really includes environmental and economic and social issues. so energy utilization. we want to maintain as much as possible our gravity-driven system and minimize the carbon footprint of all of our operations through sustainable design and operational practices. workforce support. attract develop and retain a healthy, safe, well-trained productive and well-equipped workforce, reflect itch of the communities that we serve. that probably needs to be expanded to make sure that it is clear that this is where the rubber meets the road for us in terms of the racial equity action plan and diversity and equity and inclusion, because we need to make sure that those are core parts of what we do to be really sustainable. and provide and promote opportunities for knowledge transfer and staff development in areas critical to meeting
goals and objectives. and community support. that's something that is essential to what we do. we have to be mindful and responsive to community needs throughout the water system, consistent with operating and maintaining the system. and maintaining active program of public outreach regarding all aspects of the water system. and finally, cost effectiveness ensure cost effective use of funds and provide water for fair and timely billing of wholesale and retail water customers as well as effective management water supplies. in implementing the programs for all assets. basically this is where we make sure that there's a clear statement on asset management that, we regularly update our asset inventoryies and do inspections and maintenance and appropriate repair and replacement. and we felt that it was important to also to include strategic planning here as continually looking forward on
the changing environmental fiscal and social conditions that are all important to us. so that is actually a very brief overview of kind of what we do in our business. and, you know, i can stop here and take some questions, or i can just move on with the presentation if you would like. >> president moran: colleagues, any questions, we can just move on. >> sounds good. then, you know, looking -- coupling with all of that, the budget themes and objectives that we are continuing with. so our two-year budget proposals followed by the following objectives: access and affordability, and supporting people in communities. which are a lot of the things that are reflected in the levels of service. but specifically, in the areas of responsible management, providing reliable 24/7 water service to our customers. and acting as good environmental stewards.
meeting all of our regulatory requirements. managing or increasing risks. and properly operating and maintaining our infrastructure, including our new facilities. and getting to the right size in the capital budget. deliverability is very important. i'm going to take a short break here to lower my shades that are going to kill me if i sit here. >> one of the beauties of the new building that the shades operate on their own. >> the winter sun in 525 golden gate is a challenging thing to deal with. so that's one of those things that you just have to learn to live with. next slide, please. access and affordability. we already talked about the no retail rate increase.
and i really enjoyed that discussion because it raises some really important issues for us to grapple with. but we still need to continue to provide access to critical services to all of our customers. and supporting people in communities. we do need to make progress on racial equity. and that's something that we actually started to address in the last budget. so i want to make sure that we recognize that, because there's nothing in the water enterprise budget, there is in the hetch hetchy and we will talk about that, but in the last budget we had funding to complete a couple of things. one was the mentoring program talked by alan johansson at the last meeting and that is something that i think we initiated the process, or maybe they initiated as well, but we thought that it was an important thing to do for promoting capability within our staff. and then we're also going forward with cultural competency training for all of our supervisors, managers, to begin with, and then expanding to our
staff to make sure that we are culturally competent in terms of working with everybody that we have to deal with, both internally and externally. and then improving retention and recruitment of staff is an ongoing issue that we have to work with. so those are the things that we are thinking about in the budget. this slide, actually, i showed the commission at a prior budget process. and it really hasn't changed much, but it may start to change. this is operate and maintaining new facilities and equipment. and when you talk about what -- what the costs are that we have to work with, the challenges that we have, we need to recognize that we've added a lot of new things in our system. and most of them are not driven by supply. they are driven by various other things, maybe the science of some things are driven by
supply, but when you talk about seismic reliability and new water quality requirements and even fire hydrants in san francisco, a lot of things have changed for us over time. so the numbers of reservoirs, pump stations and groundwater wells and treatment plants and treatment processes and the miles of in-city pipeline and the miles of regional pipeline. and the number of flow control valves to work into the system. all are things that have grown substantially. and that's -- that's one thing that affects our budget. we have not kept up with making sure that we have staff to do all of the -- deal with all of these new things and we're behind on that, but it is a substantial thing. and we are learning as we go, and i definitely relate to greg norby's comments that these are challenging things and we have to take into account, and i don't think that we did a good job of protecting it coming in. we did the wisp but we didn't
plan for the staffing of the future. so each budget process we have been trying to catch up more and you will see future budget requests in addition to some today that we'll be looking for. and this does not include also regulatory changes. regulatory changes are really important to what the size of our budget is and the staffing levelings, what our capital needs are. we have been seeing new regulations from the division of safety of dams, following the orville situation. we have drinking water regulations that are constantly being reevaluated. you will see a proposal a little bit on how we have to spend money on removing lead, and we may need to expand to the customer side of the meter as well.
so we could have a bigger issue to deal with there. the bay delta plan, obviously, is a big deal, i won't belabor that at all at this point, but we certainly are looking hard at that as well as the licensing on don pedro with the irrigation district. and the wildfire mitigation regulations we had to deal with those are just a few of the examples of the regulatory change coming along. so those also have a major impact on what we either have to build or what we have to operate or how we have to operate it. and speaking of how we have to operate it, i neglected to mention in our rebuilt dams and modified dams, when they were built because we have a very old system there were no environmental regulations. so now we have in-stream flow obligations, both on alameda creek and san mateo creek that represent, you know, significant new changes in our operations that we have never anticipated before.
so lots of changes going on in our system, partly driven by recognizing that we needed to catch up as mentioned that we had to catch up with wstd bit we have ongoing changes as well. next slide, so detailing some of those and managing the increasing risks, dam safety, there's no question that the oraville situation really raised a lot of attention and it really caused us to division to the safety of dams back in -- i believe it was january of 2020. that we sent a letter to the division of safety dams consistent with our prior capital plan of what we expected to be able to do relative to all of our dams in the next 15 years. and so we're about to say, look at this plan and say, okay, how does that plan change now.
and they were very appreciative of that, of us being on top of it, because that is, of course, you know, their primary charge. so it's a big deal. and employee safety. i don't need to remind the commissioners that we had an employee who was killed in a job site, traffic accident, about three years ago. and it was -- this was a horrible event. and something that was a big wake-up call for us that we really needed to get on top of our on-site traffic control and staff training relative to that and it applies to other things, but traffic control is just a real primary thing. and then our lands management, wildfire mitigation plans, and vegetation management around our facilities is an ongoing issue, both up at hetchie and down here.
next slide. this is not to belabor that, but we have to deal with habitat improvement projects. we need to pay the irrigation district to provide in-stream flows that, is an obligation for a while and we expect it to be maintained in the new license. laboratory resources are needed for expanded and changing regulatory requirements for additional constituents. there will be a proposal in this budget that is part of that. and resources are needed to support renewal of services potential led component. san francisco did a great job back in the 1980s about getting the vast majority much the lead out of the system, but we're finding that there are traces that we still need to deal with. and we'll talk about that a little bit later. next slide. so here we get to the proposals so there's just a few slides on these. first, as part of our responsible management on our water quality laboratory, we have proposed three positions
for increased laboratory staffing to meet regulatory requirements. there's a program called the elap program which is a new set of regulations on how we do water quality and sampling analysis. so we have had to put some additional resources to staffing here. and on the water streetment front, we are looking at significant supply chain issues that have come to pass in the last year, and the cost of water treatment and chemicals has gone up dramatically. so we are simply adding, you know, money to actually pay for the additional costs. and this has been actually somewhat of a crisis for us, both on the water and the wastewater side in terms of hypochloride and to make sure that we can have sufficient quantities of those, because disinfection is essential.
and looking at adding staff to provide support for new projects, ongoing and environmental compliance for existing projects. so there are two positions there. one of the water quality side. as a project funded position. and one on the natural resources side, which is taking a temporary position and moving it to a permanent position for fisheries monitoring and something that we are obligated to do. and then on facilities management, we're adding staff to direct facilities management contracts, because we realize, you know, we probably can't keep up with just managing these things with staff. so we're going to have to move contracts, and so we're adding staff as well to actually to manage them, what you see in the photo is the construction of the alameda creek facility, a new facility that should start operations either late 2022 or early 2023, where we basically
have to contract out the operation and maintenance of that facility. and one of the things that we have, of course, and we have known about over time is that we had 15 watershed cottages in the bay area watersheds and those have been handled not in the most efficient way and we will change the management of those done largely by contract. so we're adding contract staff to make sure that that can be carried out properly. and the staff that is dedicated to those can be relieved to deal with the other issues in terms of new facilities. next slide. so these are just basic budget slides about water enterprise budget and the use of funds in fiscal 2022-2023-2024. and you can see that the budget for the enterprise, the operating budget, goes from $634
million for fiscal 2022, to $658 million, requested for fiscal 2023, and $670 million requested for 2024. and a substantial part of the increase in that is debt service. that's really a big driver of the cost of the operation for the water enterprise. and one of the things that actually -- back to the discussion of no rate increase for this year, made it extra challenging to figure out how we could make sure that we maintained our debt service coverage without any additional, you know, rate funds coming in this year. so it's want just projects but it's debt coverage as well that we need to worry about. next slide. and then on the total budget, this is kind of the breakdown shown in a different fashion. and so, again, you see from 2022 to 2023 there's a 4% increase in the operating budget. 3% of that is because of the
capital program activities which is the combination of debt service and revenue, capital and projects, which we had a decrease in, but, again, it's a lot driven by capital. and in the fiscal 2024 request, again, about a 2% increase. and about half of that is driven by capital as well. so, again, the impacts of the capital program, even as it stands now, because of the debt services involved. and then our positions, we're looking at the new requests for fiscal 2023, two in the operating budget and three project-funded positions for about a 1% increase. and then in 2023-2024, two on the operating side does one on the project side which calculates to a zero percent increase so that's a matter of rounding -- at least i hope that it's a matter of rounding the --
zero percent is an odd number to see there. that's the operating budget. now we'll talk about the capital budget and i know that there was a lot of discussion about that so i'll have some observations to make as part of that. this was our -- excuse me -- approved 2022, through 2031 capital plan, which was basically about $2 billion and that proposed for 2023-2032, is about $2.1 billion. which represents about a 5% change in the plan. when you discussed that earlier, i was thinking that we basically have a lot of things that we didn't do as part of this capital plan. and one of those things i think that we need to continue to account for is inflation. i think we accounted for it in some places but not in others, so that's something else that we need to get more on top of.
but in that, you know, as i recall, i think that it was two budget cycles ago or three, that we actually did have what we called candidate projects. those were kind of the below-the-line projects where some candidates were funded, but there were a whole lot of candidate projects that were not funded. and we wanted to make sure that we recognized that in some way. so i think that is a thing that we should be clear on as we go forward in this. but, again, this is still about $2 billion on the water enterprise, this is both regional and local water on the 10-year plan. and actually, i would say to make a comment that if requested that if somebody said, okay, there's $210 million unfunded, you know, you need to cut $210 million out of this, we would look at it and do that, and just the important thing, of course, in all of this and the important thing, whether it's an
affordability discussion or whatever, we have to be clear on the consequences of not doing things. and as long as we're clear on the consequences of not doing things, i think that is something that certainly i can live with. i might be a little less comfortable, but that's the way that it goes. next slide. so this is looking at the two-year plan for regional water. so there was the 2021 approved budget, you can see it on the left-hand column. and the 2021-2022 approved budget that you see in the center column. and it's interesting to note that we talk about cutting the capital plan because we had so much appropriations that we were sitting on and we were actually in that position prior to the 1920, 1921 fiscal year and that's why you saw water storage, there were no for 2021,
2022, there were no additional requests. but following that trend we have expanded the area where we're asking for less money in the 2022-2023 proposed budget of only $47 million. so that is a decrease from the 2021 and 2022. water enterprise staff have worked very hard to make sure that we are in a position to actually spend that money that we get this fiscal year, along with the prior money. and it's spent by the end of fiscal 2024. assuming that we can, you know, do a better job of spending. i think that a lot of people are committed to that. so, frankly, from the water enterprise, we think that the deliverability questions are incredibly important, because there are some things that we
think that are really needing to get done, that aren't getting done as fast as they should. but there are also some things that maybe we could defer. next slide. >> can you expand on the monitoring program? >> yeah, communication and monitoring -- that is really more, you know, for example, we funded a couple years ago a new radio project that was going to be a big thing. so this is not a real focus area of big spending, because we have most of our communication and monitoring is -- this is not monitoring of everything. it's only monitoring of a few things. so that all of the water treatments and the water transmission projects and the water supply and storage have all built into them monitoring programs. so this is really more just a
communication program. i think that monitoring has kind of been a word that has been used in there and it isn't really that important anymore. or for things like security cameras and things like that. where we have that kind of security control. so it's relatively small portion of the budget. but, yeah, these titles have been this way for a long time, maybe to do for a refresh of our titles so that it is much more clear of what we're doing. >> okay, good, thank you so much. >> okay, next slide. so since we're focusing on one year that was the fiscal year 2023-2024 budget, i wanted to talk about some of the key projects that are going on now, and will be going on during that period. and actually, that will last beyond that period. first, the snow valley water treatment plant has a number of
projects there, particularly the addition of ozone treatment is a major component of this program and it is something that we really need to get finished. there are other critical improvements there, but the vast majority of the money in the next year or so is for spending at the sunol valley water treatment plant. and we are spending money now on an issue that came up into the last budget so we reallocated money for that particular project. and on the water transmission front, we have four major pipeline repair, replacement and rehabilitation projects. one of the things that is clear, certainly for the operators and for me, is that the water system improvement program was really good at fixing a lot of the system, but not all of the system. and so in this case, for example, i think that two or three of these projects are related to crystal springs
pipeline number two, which was -- there was a major project for dealing with a portion of that in the water system improvement program. but there was only money to go so far. so we need to continue working on that pipeline, which is, again, one of very old pipelines in our system. and on the building and grounds front, we have millbrae yard improvements. so we basically rebuilt the sunol maintenance yard and we're doing the center there, so we're turning our attention to the millbrae yard now and we added a project a year or two ago called the millbrae lab and shop project and that includes a new laboratory facility, and new offices as part of that. and part of that project is to eliminate the need for the property that we own now on wallen road which was a rental property for our water quality
and natural resources divisions, and we actually had the right of first refusal when the owners wanted to sell, so we acquired that property for about $10 million a couple of years ago. and if you followed the press in the "san francisco chronicle", there's a redevelopment plan that's out now, which is pushing for mixed-use development there and so it's -- it makes a lot of sense for us to relocate staff away from there and, frankly, sell the building at what might be a substantial profit, soon to help to pay for some of this. but the lab and shops project is a real important one for us. and then storage projects, pillarcitos and san andreas are noted here and we have improvements that need to be done in those and we have done assessments of them and we know that there are needed improvements. i want to make sure that it is clear that those are things that were not fully funded as part of this program.
and oftentimes we put a large placeholder number out there in the future year, and just so that we don't lose track of it, but those two dams need work. and we need to, you know, to carefully consider what we do in terms of repair and/or replacement of some of those facilities. this is also true of bay division pipeline number four project. we know that there's going to be a project there because of what we're seeing right now. but we haven't gotten far enough into the process to know how big it's going to be. so those are examples of projects that -- they weren't even below the line, it's just that we know that they're going to need funding, a substantial amount of funding, some time in the next 10 to 15 years. and, of course, i didn't include on this list the alternative water supply projects that we're evaluating right now and those are all in the planning stage and we know that we're going to have to do something on that
front, and we still need to work through the what. so that plan is expected to come before the commission in june of 2023, and hopefully we'll have clarity on the bay delta issues because obviously that is a major piece what we might have to do on the alternative water supply front. so that's the regional picture. let's move on to the local side on the local water budget, the same kind of display here for the fiscal 2021 approved budget, and the fiscal 2022 approved budget. and then the fiscal 2023 plo proposed budget. and systems monitoring and control is a small number there again, because it's just a small work here and there. and reality is that the big -- the big number here is always local water conveyance and distribution. that's basically the main replacement program, and certain other activities that we engage
in, but the main replacement in san francisco is a big driver of what we have to do on the capital side. and so we ended up with an approved budget of $65 million total in fiscal 2021, and $126 million in fiscal 2022 budget. and it's been pared back on many fronts, again, to make sure that we are funding only what we think that needs to be done. and so you have lots of blanks there in fiscal 2023, but still a big number, you know, proportionally for local water conveyance and distribution. next slide. so on the local front, some of the key projects for us are the water pipeline replacement projects. again, it's the largest ongoing element of local, and actually in the 10-year plan it was somewhat reduced. there's a smaller number than normal in the 2023 years and the
next two years have it getting to be a bigger number than we had seen before to try to take care of certain things. but the overall number for the 10 years is actually somewhat reduced. and so there's a couple of reasons for that that i'll get to in a moment. one is the lead component services replacement. this is funded at about $30 million over the next three years, or four years, to replace pipes that are using galvanized connections. so it would take a galvanized pipe during one era of our construction and connect from the water main to the water meter. galvanized pipe is a very rigid pipe. so in those systems there was something called lead whips or basically two or three-foot long pieces of lead pipe that were very malleable to correct for whatever offset needed to be done, where it was connected to the main line. and so making sure that we're removing all of the galvanized
lines and the lead whips that are part of that, that are a few thousand that are still left in our system. but we are absolutely, you know, required to remove those up to the meter. and as i mentioned, there's a lot of discussion nationwide about removing customer service lines that are galvanized between the meter and the edge of the building. in fact, interestingly enough, that's what they're doing in michigan now as part of, you know, moving beyond the horrible disaster and trying to make up for it, which not makeable for, but other communities are doing that as well. in california this is a very active topic of discussion with the state regulators, and the water agencies and environmental groups who are all in conversation about this. so that $30 million could double to $60 million or something more like that. so, again, that's where new
regulations make a difference but lead removal is a critical one that i don't think that there would be much argument about. a big part of our project program that was added in last cycle is a new cbd headquarters at 2000 aurin, the property that we acquired recently. and that is basically constructing a whole new yard there, and we are basically through the conceptual design on that, and actually i believe that the commission will be seeing a contract at the next commission meeting for final design of that, with an architectural firm and engineering support. that is a big hit on our budget but it is basically replacing the facility that has been in use for 60 years. and if you have ever seen some of the shots, the best example is that we can't -- in the vehicle shop, we have to work on
many of the trucks outside of the shop because it's not big enough to fit the trucks into the shop. that's the kind of problem that we're dealing with. so we need to basically to end up with a new facility here. and it's a high priority for us throughout. and then another one they wanted to highlight -- that i wanted to highlight is the lake merced water level restoration. that is basically adding money to an existing pot so that we can carry out a joint project, a major flood control project for them. for water that drains down through the lake merced basin that currently all by-passes lake merced and flows out through a tunnel to the pacific ocean. we've been working with them for a long time to try to come up with a way to -- find a way to add additional water to lake
merced so we could maintain the water levels there without any -- you know, having to resort to treating drinking water and putting it into the lake or things like that. because we basically cut off the drainage on all sides of lake merced and scratching our heads why the water level fluctuates so much, because there's no water going into it. and this will come before the commission as well. and here we're talking about alternative water supply projects, including purified water in san francisco, which means basically treating wastewater to the level that can be drunk. again, how much we do of that is really going to be dependent ultimately on what we do in -- in the bay delta program arena. and my closing comment would be on the operating budget and on the capital improvement program, you know, if you -- you know, i
think that we have all have been through the exercise, if people need to have more money, yes, i need more money and more staff, but in a lot of cases those are critical needs. i think we have fallen behind in meeting some of those critical needs, but we understand, you know, that we have to work within the constraints of the budget and try to make it work as best we can. and so that's what it represents. but when we look at things to cut, keep in mind that there's already a lot of things that have been cut to get to this point. and so that's something that is a challenge for all of us. so we can bring some of those back to light if necessary during any further discussions. both on projects and on staffing that we -- we really would prefer to be doing more, but totally recognize the issue of affordability as one that we absolutely have to be on top of because we're in that painful position of being -- what is
perceived as a very rich area but a huge gulf between those who can afford a lot and those who can't afford a lot, you know, and solving that problem is real clear. and as i said, i think that the thing that we have to make clear is that if we are basically going to trim costs for affordability that we are just clear what the consequences are. and that is something that i think we can well articulate as needed. so i'd be happy to answer any questions, i couldn't help but to have a slide of hetch hetchy in here just to close out. but precurse what will come in the next presentation as we get to that. >> president moran: great, thank you so much, steve. any questions, colleagues? i'll ask a question, steve. on the slide that you showed the water organization on charts, you had 273 vacant positions.
right? >> that's correct. >> president moran: are these -- i'm trying to match this to the ask for more resources for staffing, and is that on top of the recent positions? i'm trying to wonder if you can't even fill out positions ps that you already have, right, should we put more focus on maybe using resources to recruit more people to these positions, rather than keep adding positions that we can't even fill? >> well, the vacant positions fall into two categories. those that are vacant because people have moved on or retired or whatever that we need to fill. and i think that is all been articulated by many folks and it's a real challenge in san francisco to get through the hiring process so there's an amount that that you are behind
on all of the time. and it takes time to get them in the door. and we have positions that basically we on the state side we used to call it salary saves and i forget the name, attrition is what we call it in san francisco. where you are clearly budgeted at a number of positions to basically -- or you are funded for those positions, and that -- you're not funded for those positions, that is built into the budget that those are going to stay vacant. what we've done over the last -- oh, four budget cycles that i have been through, is each year we go through an exercise of, okay, you got these proposals for new positions. how many can you substitute out for positions that you maybe need less than the one that you are requesting? because, again, things are changing all the time. so our needs are changing.
i remember the last version of substitutions that we went through, a couple of budget cycles ago, it was painful. we were at the point where positions were much harder to come by because we had already substituted -- i don't recall the number off the top of my head, it's probably approaching 40 or 50 positions that we had gone through that process on already. each year, you know, we look again -- are there substitute opportunities and that well is pretty dry right now. so you will see -- i think that you will see in the budget process and i think that they were presented last on the budget by finance, that there are a lot of substitutions in the overall budget. i don't think that many of those came from water because we felt that we had bled that turnip completely. >> commissioner ajami: great. so maybe i'm a little confused
here. okay, but does that, again, as you are trying to add more positions or if -- if you have full time staff to the chart or the budget, would that take away from 273 or add to 273? >> well, at the beginning it would add -- hope. ly not too much at 273 and we'd get better at filling some of the positions. >> vice-president ajami: of course, of course. >> but it would add to it and those are positions that we have a need for now and we couldn't find a suitable way to substitute for them. so they are additional positions that we would need to hopefully hire and hire somebody who is going to be with us for a while so they wouldn't go back on the vacancy list once they got hired in first place.
>> vice-president ajami: because these other positions that you are putting in are new needs for totally new skill sets and everything? >> yeah, or expanded. they might be service of an existing classification, but for additional work that's been identified. >> vice-president ajami: thank you. >> so a couple of questions, first is the voluntary agreement and we have talked about early implementation of that, if we had it approved tomorrow, or if we wanted to implement all of the things that we think that we could implement, are there all of the things in the budget that you need to do that? >> in the last two years, we have put $5 million a year each year into the hetch hetchy budget to start to implement the voluntary agreement. so we're basically sitting on about a $10 million pot to start
implementation. >> commissioner harrington: is that sufficient? >> we have to do some planning work and, again, it's with the districts so not sure how fast that would go. it would get us started. and we could -- we could definitely move on that. we also have in terms -- in terms of doing good things there, in terms of if we were, you know, going to contribute more water, that's where the alternative water supply funding comes in. which we have a fair amount that is dedicated to planning. not necessarily for, you know, constructing a project if we have to construct something. so we've gotten resources that we can bring to bear to make the voluntary agreement work. >> commissioner harrington: good, thank you. you mentioned the lead program. are we talking about trying to
pay for replacing lead on the customer side of the meter, or just the utility side of the meter? >> yeah, the $30 million that i mentioned is just the utility side of the meter. that's the program that we had been implementing. in terms of the customer side of the meter, that is something that we and many others haven't done. we could unilaterally decide to do that or we could, you know, see where things are going in the regulatory system and may very well end up there. so that's -- that's something that could be a policy decision that the commission could make. of course, there are a lot of implications of doing work on the other side of the meter in terms of access and endemification and things like that that would have to be worked through to make it happen. but those are the things that stand in the way. we just always said that we own this, we take care of it.
you own that, you take care of it. >> commissioner harrington: you're right that, we always said that and you're right that a lot of places are not changing that. i think that denver is going to spend $800 million -- billion dollars on doing the customer side and they got a private ruling from the i.r.s. saying they could bond fund those things though it's not owned by the utility when it's over. so there are some things changing. it would be great in the next year if you could talk about what that might costs and what those issues might be and the health impacts, those kind of things. that would be great. >> along the same lines there was a court decision in michigan that was a prop 218 kind of lawsuit saying that, yeah, you can't spend ratepayer money on the other side of the meter. and in michigan the courts said, yeah, you can. >> commissioner harrington: yeah. we expanded our view of part of what the utility is. and the third and the last -- the level of service goals. i'm a big fan. i love those. and i'm glad that they're not
>> yeah. we have folks looking into that and from there, we can take advantage of the money in there and i think we would like to do that. >> commissioner: great. the next question i have for you is the water bank. we've had questions this year because we have a challenge drawing from the water bank and due to the way it's set up and
i know we're having a budget discussion, but i would like for us to somehow spend some time thinking or dedicating resources to rethink the water banking and what needs to happen to make sure water that you're saving there, it's accessible to us in the times that we need it, especially considering the new regulations that are coming in place and all the new challenges we are facing in the delta. so that's something -- i'm not sure which category it would fall under, but make sure we can zoom in on that. >> and it might even fall under a legal category where we need to think about doing that in closed session, but that's where we would consult with the city attorney's office to decide, but i think that kind
of conversation certainly is a worthy one to have. >> commissioner: and then the last thing i want to say is, sorry, i can't see this one, i think it's slide 31 i was under the impression that the water supply projects was alternative water supply. >> yeah. the recycled water project is for the west side recycle water project, one that should be coming into service late this year. >> commissioner: okay. so the alternative water products are the ones you're looking at regionally? >> no. we're looking locally and there's also money that has already been appropriated so that a $9.4 million is just
some of the money. there's actual additional money that i don't recall what that number is right now. it's both local and regional. >> commissioner: and the purified water project that you mentioned, i wasn't aware that we are looking into that for san francisco. is that something i probably missed and you have been talking about for awhile, but can you expand on that a little bit? >> sure. it's actually included in the water supply suite of projects we're looking at and that's the one waste water facility we have under our control, so that's why we're looking at what could san francisco do relative to purified water in san francisco. so we have not done a lot on that project, yet. we have done some. one of the things we're going through right now is trying to figure out, you know, how big we could make it. we were thinking relatively
small, but given we need to look, you know, at potentially creating the supply to cover the entire deficit that we might -- we're trying to scope out what it would -- what we could do on that front in san francisco or potentially with others down the peninsula to expand that. one of the things that as a challenge in san francisco is finding the place where you can build a plant like that. and we've got some candidates in mind, but property is hard to come by in san francisco and the down side is really expensive too, but we would be looking at a plant in san francisco that would generate purified water that would go into the storage tank and the
drinking water system. that's anticipated and so we're trying to position ourselves so we can do that. one of the things is finding a place in the near term where we can have something somewhere to what san diego has. you want to come have recycled water, come on up and see us because they're planning on it being 30% of their supply in the future as i think you saw in one of the workshops. can we do a similar thing? i can see some challenges to doing that. i think an honest evaluation is very much in order. >> commissioner: so following up on that, two things. one is you talked about the location. are we looking at the location on the west side of the city or the east side of the city? which way are you looking at
and then i'll ask you in a follow up. >> we're looking any place we can find to put a plant. and, believe me, just imagine yourself trying to build a new industrial facility in san francisco. >> commissioner: i can't imagine that. >> yeah. >> commissioner: the reason i'm asking you this is two things, one is we already -- we are already investing in the recycled water project on the west side which i'm assuming we counted for using the amount of waste water we have to be recycled and we used for different purposes. so how would that impact the capacity of that recycling plant? can it be augmented or is it like a totally new facility and we changed the capacity of these two? >> yeah. the plan on the west side includes reverse osmosis.
so we've included that to be allowed for drinking water purposes. the demands we currently will start out serving are about 1.6 million gallons a day. we're going to be adding the zoo and sunset boulevard and some day park merced so we're looking at expanding that. in terms of capacity, we can probably get up to 4 million gallons a day as i recall. there's less waste water on the west side. there's more generated on the east side. the so in terms we would locate a facility, the east side seems much more likely than the west side for a new facility like that and that's where we would be going back. and the east side, you're looking at 30 million gallons a day or so. >> commissioner: with that changed, we are maybe in the future going to be operating
the new system you're building since we're already investing in that. >> one of the things on the west side is we're using most of that water's going to irrigate golden gate park so that then we can repurpose the ground water that's currently being used to irrigate golden gate park. >> commissioner: i meant on the east side. i should have been more clear. >> oh, on the east side, we still have to provide secondary treatment. we have to do at least that there, so it's a matter of how much footprint that takes to provide secondary treatment for all that and then we would go on from there. and then paula just stuck her hand up. >> commissioner: i'm wondering if she wants to say something. >> thank you. paula keyhill, manager of water resources division. i just wanted to jump in on the conversation very quickly. the we are studying the feasibility of purified water both on the west side and the east side of san francisco. so we're looking at the maximum
feasible regulation. so this study is looking at the considerations of the proposed west side recycled water project that's coming online. so it's looking at beyond that plant. this study will be available hopefully march or april of 2022. so we'd be happy to bring the report to all of you for the discussion. >> commissioner: that sounds great and just to make sure, are we also looking at how that would impact our discharge quality and all that because that's going to be definitely an issue with a lot of these recycling projects, especially purified water and the management issues. >> yes. absolutely. >> commissioner: okay. since you are here, paula and
steve's here, my last comment on this is, you have heard me saying this and i will -- i think it is a valuable thing to have on a capital improvement program discussion is that i don't really see it's really smart and sustainable for people to flush down their toilet treated water or, you know, purified recycled water. it just sounds. it is just a wasteful way of doing things and i know this is a broader discussion. as we're doing this planning, we have to think about how we can change the way the city to minimize that waste. so just plugging in for a discussion or something to think about. i think it's very important to have this conversation at some
point. you had a question. >> just to follow up on this discussion, i was noticing in the capital plan that the tunnel of the father pied water and other supplies is dropping from $120 million. i wasn't sure if you were bringing that down to the other lines or if it was a meaningful way of doing purified water. >> it's a different way of budgeting when that amount of money is basically place holders out there and so when i talked about the san andreas dam projects. we took out the place holder knowing we're going to need a bigger money in the future. similarly for purified water.
that was a place holder, but not really having a good idea of what. so those things are all in the category of candidate projects that we, you know, would have to look for additional funding in the future and we could put some ball parks around it in terms of a dollar figure, but those would be consequential projects that currently don't have a lot implementation funding for them because reducing the capital program so far. >> commissioner: please go ahead. >> thank you. this is kind of a really a place holder for future discussion, but commissioner ajami, you mentioned the water bank and associated issues. i guess it's important to know if the water bank is working precisely as it was designed.
it may be a failure in concept, but it's not a failure in function. so i think one of the other things that's true about our operations also from a water right standpoint and the water bank standpoint is that there are some real limitations especially in very dry years. we have talked about diversifying the water fly to minimize the impact of those deficiencies. we haven't really done anything about that in a meaningful way and i think we may need to think about doing that affirmatively and to basically change the mix of supply that we have away and towards some other sources that don't have the same issues associated with them and that would be an investment facility in advance of any demand, you know, driver on it, but something to make a
really diversified supply and i think as we get further into the supply discussion, i would look forward to looking to the other water supply program for developing some projects that do provide a more reliable supply and moving the urgency of those projects up because it's not supply driven, but it's a liability driven. >> commissioner: i appreciate that. i think i do realize that and that's what i sort of wanted for us to have a conversation around is how we need to rethink the system to make sure we don't end up and i think some of the things that was impacting and correct me if i'm wrong, but impacting me with the water bank was the new
regulations that were put in place. >> yeah. it was the curtailing regulations that that upsets the operation of the water bank that has worked just fine since its inception back in the 60s and it was basically a push by the state to do something different outside of a normal process which is what they've been trying to do. >> commissioner: and i think considering the fact that this
and also all the other things that were happening with i can see we have to go back to the drawing board and figure out what this means and if that ends up continuing over the years. >> and just to run that out, i think the change in regulations was an extreme version on our ability. i mean the water bank was an exchange mechanism and that depends on flaws and we have been caught before with too much water in the bank and we had a hard time moving it back
up and there were insufficient flows. i hate to take that but it is. >> commissioner: any other comments, questions? okay. madam secretary, let's go to public comment, please. >> secretary: members of the public who wish to make public comment for the water enterprise budget and capital plan, dial 1 (415) 655-0001. meeting id 24950314870 pound pound. raise your hand to speak press star three.
do we have any callers? >> we have three callers many the queue. caller number one, go ahead. >> caller: can you hear me okay? >> yes. go ahead. >> caller: great. david pillpell again. so in the middle of the discussion just now, staff reached out to me and apparently have my organization chart. so be careful what you ask for, you may get it immediately and wow, you guys are great. i am pretty supportive of the water enterprise budget. i still would try to find a way to trade off, but i get there are additional needs and i am
supportive of that. one of commissioner harrington's accomplishments and i hope that will continue. that is a fabulous legacy. on the issue of maintaining new assets and capital projects, i would try to identify the operations and maintenance cost of projects when they're in the development phase, so it's not just we built the thing, but what do we expect the operating maintenance cost to be of that asset. i would try to find a way to public a summary of asset conditions by class or region or whatever that drive the capital program so it's not just a large number with a bunch of projects, but this is the condition of these assets that drive the need to
maintain, replace, repair. i had a discussion recently about peninsula facilities maintenance work. i think we need an interdepartmental work grew to look at various city functions on the peninsula between the airport rec park, sheriff, p.u.c. sofa silts maintenance work can be done there across departments. please check project department manager names. >> thank you, caller. of next caller. >> caller: good morning, commissioners. [ indiscernible ] requires to meet with p.i.c.
during development including proposed new projects. this requirement reflects the importance of the c.i.p. is implementive of the largest customer group for the purchase of water. this year, with the challenges that have been discussed with developing the c.i.p., that review was incompleted. in particular, there are several new projects that believes are likely warranted. unfortunately, i do not have the necessary information to understand the needs. as you have discussed, staff has proposed the first two years using previously appropriated funds. we talked about that quite a bit, so i won't go too much further. i do expect with this proposed
p.i.c. the such that this is approach is not necessary in the following years. as well as future alternative water supply projects to cover their likely cost. in discussions with p.u.c. staff, they indicate the plan with the findingsing needs for this process once more is known. the concern is that by not having them in here, future decision makers will be surprised by significant budget increases for things that are required and i think it's important for that to be addressed so that we don't have that issue again. and then lastly for clarity of spending purposes. i think a cash flow diagram would be very useful to also kind of align the understanding of not just appropriations, but the cash needed upon necessary
project. thank you. >> thank you, caller. next caller, i've unmuted your line. >> caller: commissioners, i don't know if you're really getting it. i mean, i hear this pep talk by staff, but, please, let me tell you one more time. hopefully you can get it this time. you cannot have progress in projects and the racial equity that was discussed when racism is practiced on a microlevel by the commissioners and the managers who hire their own sons and daughters. you can't have this when the commissioners and managers hire their own color without regard to flow and order. you cannot have this. your comments regarding the l.b.e. is so much out of line when you have multiple one bidder per bid. more than any other public agency because nobody's going to waste their time going through a fixed contract and
then you talk about outreach and how you make phone calls. are you kidding me. have you ever seen anyone getting to an outreach meeting except for dwayne jones and give them work and you can hear them coming in and vouching for him with what happened last tuesday and more. let me give you an example of an outreach meeting and i'm going to give you a real example. a very decent consultant and i'm only going to use her first initials l.r., she's a black woman, educated professional and she was part of the scams. when dwayne jones got $100,000 for his contract with the san francisco p.u.c.. she did the work and at the end of the day was told we don't
care about your work. do a study on your bids and figure out why you have one bidder only. figure out why that bidder has to reflect the color of the project manager and the commissioner. >> madam secretary, another caller has joined the queue. next caller, go ahead. >> caller: good morning, commissioners. my name is tom francis. i'm the water resources engineer for [ indiscernible ] . i want to express my pleasure that we're having a discussion and that your commission discussed the need for these alternative water supply program projects. fox is very supportive of that. i also want to recognize the hard work that his team have been putting into that effort. in particular, the quarterly reports which are very
enlightening and recognized the hard work that is needed to plan for these future projects. i'll give you one example. for example, the efforts that are going on with the water bank and the challenges to access that storage. perhaps, there was a ground water project within the modesto and sherlock areas. also for the water bank could be accessed. so, again, i want to encourage future conversations, very supportive of it and we do think with the challenges of
the bay that's my statement today. thank you. >> thank you for your comments. madam secretary, the call queue is clear. >> secretary: thank you. public comment on item number four is closed. >> commissioner: any comments? any questions, colleagues? thank you so much, steve. madam secretary, please read the next item. >> secretary: next item is item number five, the hetch hetchy water enterprise budget and capital plan. >> okay. continuing commissioners. we're going to talk about the help aw hetch the delivery of
water is really essential in all of that. again, these slides quickly, responsible management. this is a duplicate slide talking about some of the specifics we tried to build in this budget and lastly making progress on racial equity and improving the staff. we do have the racial equity and recruitment item proposed for changing hetchy's budget. so, yeah, if we can go to the next slide. i'm going to talk about what
those proposals are on disaster preparedness. we're looking for additional wildfire mitigation funding for equipment and professional services contract. the equipment is the equipment necessary for wildfire mitigation that we would need to carry out along our transmission and distribution lines. again, that figure on the right you've seen before where the green lines are the transmission and the blue lines are the transmission lines. all of those are basically what's covered by the wildfire mitigation and the professional services contracts are to assist us in carrying out all of the vegetation control and management and the technical facilities necessary to achieve unit successful wild fire
mitigation program. next slide. on the environmental stewardship front. we have two things. one air quality improvements, the california resources board has new emission regulations that are in place for our heavy equipment. so we're replacing a fair number of vehicles that it's not just keeping up with the regulations, but those vehicles are not eligible to be registered each year. so you couldn't even register them anymore after a couple of years. so we need to budget for replacement of a large number of heavy equipment pieces. and then on the in stream floor improvements, something we've been working on for many years now is the upper echo river system project. this actually is a good thing to do, but also something that technically is covered as a mitigation requirement in the
water system improvement program. the program attic e.i.r. was to revisit how we make releases from o'seannsea dam. so that's been led by our staff here in natural resources as well as hetch hetchy staff taking a look at our in-stream flow obligations on the upper river and making sure that we are looking at modifying those in a way to more mimic the natural hydro graph consistent with our environmental stewardship policy. so we basically completed that work a few years ago as we've been working with the national park service to actually put together environmental review for that. and the park service had been
reddisent about doing that but now the park services said they're ready to go through that so there has to be a document prepared that they can rely on for allowing this change to be made and so there's funding in there to actually help carry out the document that's necessary to change our release pattern from o'seannesy dam. and part of the idea that this would allow us to do it on a permanent basis once we get through that process. the next slide. maintaining our infrastructure for system reliability and sustainability. we're adding a chief information security officer that would be responsible for architecture of hetch hetchy's industrial network and also include plans with north america critical liability critical infrastructure and
standards. reliability corporation is often short handed as nerc. that's the power that's very much tied into our basic operation. so it's critical for the power system, but also it's critical for the water system to make sure we can continue to operate effectively and deliver water as well. it's very important to both our water and power operations. next slide. diversity and equity in the work force, we basically have funding proposed for training along the lines of what i talked about relative to the water enterprise funding on cultural competency as well as
basically it's to help our staff get better at reaching out to a diverse work force and also on recruiting because this is an area that hetch hetchy has a challenge recruiting anybody to come and work there because of its location. people think they're interviewing with the city of san francisco and they're actually interviewing in the town of moccasin and so that's a different thing and so trying to make sure we can recruit people up there and recruit folks and bringing diversity to a community that's not particularly diverse in the first place. so it's a special challenge in the hetch hetchy part of the system that needs a special handling on the recruiting to make sure that we are getting viable candidates that represent diversity coming in there. next slide. then payments to other governments. again, on the lower tualamine
river which include funding for flows and potentially habitat improvements and funding for the agency which we're obligated to do. the upper tualamine river, increases for the budgets used for water shed security by both those entities. next slide. this is the similar bar chart that you saw for the water enterprise taking hetch hetchy's budget from $89 million up to $95 million over the three-year period and a bump to the money is on personnel and on nonpersonnel operating costs with program
attic processes. the hetchy total budget. and the biggest one of course is the air resources mandated equipment replacement. next slide. so the total positions changed. there is actually one position request for fiscal '24 for the hetch hetchy critical infrastructure protection staff position. again, it being 0% is less than 6.5, i guess. this is the hetchy 10-year capital improvement program. again, to make sure that folks are familiar. all of the assets that are in
the hetch hetchy system are classified as either water where there are 100% water funded or power where they're 100% power funded or joint where it's 45% water funded and 55% power funded and one of the parts of the discussion we had earlier was about the future of the capital programs and that's one of the challenges we've had all along is the amount of power revenues available to fund worked out in san francisco as well as work for the power components up country. so that challenge has been before us for many years and we've tried different ways to make sure we've successfully carried it out. so looking at the spending plan for '22 through '31 as approved was about $1 billion, $1.03 billion proposed for '23
and 20 p22 was about a 6% change down to a little less than a million dollars. next slide. so the actual spending that's in the approved budget for 2021 on '21-'22, you see on the top line, water infrastructure which is looking at a spending increase and then power infrastructure and then the joint portions of water and power for the reminder so that, again, there was a decrease as i had mentioned previously back in 2021 as we were spending down accumulated appropriations in '22 approved budget had more and we increased in the '22-'23
budget this is given the fact we have this major projects right now. so this slide really is kind of where the work is on the capital side. so in the san joaquin pipeline and entry improvements, that work aunder way right now and as part of the shut down we're making some improvements so we can get work done throughout the system and this is basically being done to make changes to valving so we can suitably isolate portions of the sidewalk to make sure we can work on them safely. the second water project is the mountain tunnel improvement project which the project overall was joined and we successfully negotiated making it part of the water and part
of this joint even though the asset would remain an asset. we had the first big shut down start at the beginning of january and it's expected to last for roughly 60 days. so we're in the middle of that shutdown right now. and up country is working hard as well as our staff down here in the bay area in terms of providing and holding up the system with the water treatment plants down here in the bay area. on the power funding side. the electric transmission side, those are lines on the east side of the san joaquin valley and the foothills. that is expected to go into construction later this year. the design is i think 95% complete. we're getting ready to go out for bid on that project. the moccasin power house and g.s.u. rehabilitation project is another key project that's
under way and it's funded over multiple years. so there is already funding for that project, but more to come. the electric transmission lines. basically it's an ongoing project to clear up a lot of transmission line clearance problems where we have to have certain clearance between our lines and the ground and/or physical buildings or trees or thingses like that. so there's a lot of mitigation work still to be done. and then the moccasin power house bypass upgrade. this is actually a bypass that's built into the power house. it is inside right now and hopefully that project will be moving forward soon because that bypass is in need of upgrading. i was actually physically there
when it was operating so i could get a feel for it. a feel for it is the right word because of the vibrations going on also, we're replacing a couple of bridges in the system that would be critical to our operation. the old power house is a long standing issue such as led and asbestos. my personal goal would be to some day put that building into use if we find a way to do it because i think it's a beautiful building. it's a shame for it to just sit there. moccasin dam and reservoir long term improvements is in the
planning stage now and there may be significant money down the road. we've actually kept that in the budget. we've cut back. it might not cost much, but we'll know once we get through the c.e.r. process. and then the o'seanesy dam. that's a project that's basically started to deal with our outlet works on whether it affects an almost 100 year old dam this year or next year. the plaque says '22, but a lot of people say '23. so i'll take which ever one comes, but it's 100 years old and the valves are 100 years old and we need to make sure we're working there. one of the key projects we're working on now is the access
and drainage improvements to do the work safely. so those are some of the key capital projects on the hetch hetchy side. just like on the water side. that's something we're working really hard on with infrastructure. so i think we've got a pretty tight program at hetch hetchy. that is moving forward with critical projects right now. and i'd be happy to some any questions. >> commissioner: questions, colleagues? thank you so much. no questions, i guess. i guess then we can go to public comment. >> secretary: members of the public who wish to make two minutes of public comment specifically on item five, the hetch hetchy water enterprise budget and capital plan. (415) 655-0001.
meeting id 24950314287 pound pound. to raise your hand to speak, press star three. do we have any callers? >> madam secretary, we have one caller in the skwu, two callers in the queue. first caller, go ahead. >> caller: guess who. oh, david pillpell. um, one moment. sorry. so i still think that ultimately hetch hetchy water and power should be under the power enterprise as it was in the previous organization
structure. that would better balance the staffing and the three enterprises and i think is a better approach long-term, not something i would change at the present time, but eventually. i also think that i believe it's cal i.s.o. sets the power cost formulas and right now my understanding is that it's the same cost for power whether it's generated in or transmitted in san diego or humbolt county. i don't think that creates meaningful incentives to contain assets and so we end up having to pay for lines seven and eight and things like that because it's not covered through power rates. i may be misinformed about that, but that's somewhat my understanding of the complications of state power rate setting. i too am a big fan of the old
moccasin power house and hope to put it back into use some day soon. it's a beautiful building. i don't understand why page 124 with the project data sheets is included with the financing cost. all bond projects have financing costs and that didn't make sense to me. and once again on page 134, listed as a project manager and she's probably busy with other things right now. finally, as i was trying to say a moment ago, the destructuring might allow some of the engineering staff to spend more time directly on projects and so that is part of my thinking on decentralizing part of infrastructure. thanks for listening. >> thank you, caller. next caller, i've unmuted your line. >> caller: again. good morning, commissioners. i just have a few final remarks
that i wanted to make. first, in your packet, you got new project data sheets with the project and i wanted to express my appreciation to the staff for their effort in making that happen. i really think that's a helpful piece of information certainly from our perspective. i have appreciated the commission's discussion today. you have highlighted and hit on all of the issues that kind of stood out to me as i went through this and i look forward to continuing our discussion on these important and critical matters and then lastly, while i mentioned that i noticed budget process has been difficult and we didn't get everything we thought we should have, i do appreciate the significant list that's gone on to get this today and i want to make sure that i, you know, extend my appreciation to
mr. richie and his staff and everyone that's made this happen. i know these times are challenging and i want you to know that i do appreciate the efforts to get here and this is just important work. so thank you very much. >> thank you for your comments. madam secretary, the call queue is clear. >> secretary: public comment on item number five is closed. >> commissioner: any other comments, questions, colleagues? okay. madam secretary, please read item number six. >> secretary: item number six is the wastewater enterprise budget and capital plan. are you muted? star six.
>> how about now? >> secretary: yes. perfect. thank you. >> okay. thank you. i have two layers of mute on my phone, apparently. good afternoon or just barely afternoon, commissioners. assistant general manager for the wastewater enterprise. i know it's been a long discussion already this morning. i hope we can get through the wastewater topics and maintain our energy for this discussion which has been very substantial. i know very healthy from my perspective. so this morning or this afternoon, we'll go through -- and i'm going to advance slides i guess by asking is it lee?
so next slide, please. >> yes, sir. >> okay. my apologies, lee. can you step back one. thank you very much. okay. so we'll go through our basic staff organization and introductions. we will go through a very brief review of the baseline of our current budget and our staffing picture and then we will transition to looking at our organizational priorities and how those are driving the changes in our operations and maintenance budget. and then i will hand it over to steve robinson at the end of my section to go through the waste water enterprise capital program budget. next slide. so this is a very familiar slide to all of you at this
point. it's a snapshot of our infrastructure and a summary of our eight divisions. so, i think the point i really want to emphasize when you look at this overview of the city's waste water system and where in reality the vast majority of what we do in terms of capital investment and other needs of the system and operating demands, we collect and complete the roughly 10 million gallons of storm water that falls within the city system each year and i emphasize that
also because a lot of what we're looking at is looking to the future and and discussions related to climate change it's really this system. this infrastructure outline here is 1 of our biggest areas of impact in the city and in this area. that's really the main thing i would emphasize from this slide otherwise it's familiar information. our next slide. this is information we try to use pretty regularly i think we
have most of our staff here today. i know amy leads our executive team and at the last minute, linda condalaria is dealing with our covid outbreaks at the moment. so she's dealing with some late breaking activity within the group he maintains this morning. with that, otherwise, i'll start with operations. critical divisions led by george angle and operations is the core group that is responsible for the safe, efficient operation of our treatment plant and pump stations and as a result of that or the result of their
good work is the core of our compliance with our federal permits and state permits when we often refer to as our eyes and ears for all the automation and operation of our system. when we think about asset management in the real world and we think about activity. joe prather's group is at the center of that. and linda candelaria, i just want to acknowledge the outstanding work she's done in that role. we've had a slew of retirements in that group that has left us
really somewhat short handed at the senior levels and linda and others have really stepped up and are doing an outstanding job. so collection system you can think as the system that runs the system out there. that conveys the wastewater and the storm water. when you think about our wet weather responses and the field crews out there doing that job such as during the october storm cycles, collection systems is the core of that. engineering, that's brian henderson leading that division and brian's group has a number of key responsibilities related to asset management in terms of leading up our facility's r&r project which is that steady reinvestment in the treatment plants and pump stations that we've been working hard to increase because we know the need is there with many of our aging facilities.
and amy chastain. there's really no more important external relationship that we have than our relationship with the state and federal regulatory community. so the state water resources -- the regional water quality control board and the federal e.p.a. and so amy's team leads that effort and helps tie together the cross divisional efforts that result in timely and accurate regulatory reporting of which we have a mountain and also in our many or at the moment, our current very critical negotiations that are ongoing and discussions with the state and federal government. the paramedic team, kind of small but mighty really meets up all of our resiliency and green infrastructure efforts and we'll talk more about that, but we're looking at efforts relating to long-term planning
and cross department partnerships across the city. many of the evolving solutions we think that will drive storm water resiliency for the city looking into the future of climate change, that is the work of sarah's team. and then finally, we have business strategy and performance led by karri ving and when you look at the whole myriad of things it takes to make our enterprise run in terms of staff hiring and staff work force development really improving and driving our financial performance and monitoring that whole range of activity and most importantly i neglected to mention our business planning and i'm very pleased to say that we're on our second in my time, the second of our two-year business planning cycles and we rely heavily on that business plan cycle to drive our clear
priorities and how we make decisions within the waste water enterprise and karri's team leads that as well as several other wastewater enterprises. this is just a snapshot of our current budget. i won't go through the budget in detail. the key thing i would point out to the commission and this slide is you can see very quickly where the money goes which is important, and also where we do and don't have -- you know, what's our ability to influence the cost of service in each of these major areas. and so we point out, for example, you can see that debt service. so even though we're talking about the operations budget here, of course, all of our money only comes from one source. it comes from the rate payer revenue ultimately and then we use that money either for operations budget or for direct funding of capital or for debt
service or borrowing of capital to fund the -- to fund the capital program. so in a way, you're seeing the entirety of our cost only with debt service, of course, leveraged into the very large capital program which we'll talk about later in the presentation. the revenue funded capital which is about 25% of all of our uses, of course, and that's a figure that there's an area of needs there that we know are increasing significantly and you'll see we're one of the largest users of interdepartmental work orders and so between the bureau and the work orders, you can see it's 18% to 20% of our overall cost. ment and the last thing i'll note is if you look at some of the smaller slices such as equipment, material, supplies and nonpersonnel services. even though those three make up about 10% of our total budgets
that covers really the nuts and bolts. that's things like operating supplies. it's replacement of equipment. it's the technical services and so forth that help us keep those facilities operating safely and reliably. even though they're a modest slice of our budget and one of the areas we have the most discretion in a sense, they're also very impactful. next slide, please. okay. i won't go through this. the you've heard our many, you know, comments on staffing. there's really nothing new here other than the specific numbers. we had the same challenges in terms of, you know, steady and reliable drawing of vacancies, running 25% to 30% of vacancies depending on whether you're looking at pond budget or
capital funded positions and similar to how steve -- i think what steve describes in terms of our electrician savings which is reflecting moneys we're not spending because there's an agreed upon number of positions in a sense that we're not planning on filling for the moment. that gives you the complete staffing picture for waste water enterprise. next slide, please. okay. this slide is now taking us kind of turning the corner to the new draft budget. and i won't go through the figures on the left. i will emphasize the items on the right. at the very big picture year on year, you're looking at about just under a 4% decrease in the total budget and the first year of the new two-year cycle. and in the second year, you're looking at about a year on year increase at just under 6% but that's just from the baseline
of the '22-'23. and so if you look at the total change over the new two-year budget of what we look at today, you're looking at a fairly modest 2% increase in our operations budget over the entirety of the two-year fiscal cycle and you can see some of the big drivers there listed. there's a drop in capital outweighs the percentage is big, the dollar value is not very high. some of these are more important than others in terms of driving the financial picture. you will see, of course, i will point your attention to debt service which is our single biggest actual cost increase both in terms of real dollars and not so much in percent, but certainly in real dollars. and the others, again, unless there's any questions on those individual changes, we can go to the next slide.
okay. so at this point, we're going to break down that big picture overview you just saw of the new operations budget and go into our assessment and priorities and how those are translating into some of the specific news and for the budget. so on the left, you have the high level p.u.c. wide themes for this year's budget cycle. responsible management. investing in the people and community and access and affordability which has already been toucheded on several times this morning. so when we look at those and we break them out into a little more detail for the world we work in waste water and storm water, these are the seven areas of priority you see here. they're fairly diverse. everything from critical information system to the g.i.s. transit system to
practical needs like the construction and inspection gap and also i'll point your attention to the last two, of course, which we think are very critical to the successes of the waste water enterprise going forward which is really making progress on implementing the asset policy and operational often with our staff and, of course, again, what's already been toucheded on when, you know, the capital program rebalancing is the term we used. next slide, please. so the first topic here is the g.i.s. transition. and the without getting into the technical leads, you can see the first statement there in the world of water and waste water utilities. asset management represents information management and for
our linear assets this is the additional 200 miles of large diameter. the g.i.s. information system is the core of how we do that effectively and how every major modern utility system tackles this. so at the intersection of g.i.s. and work order information or maximo, that's just the brand name, that's where the power really resides because now you're tying together extremely high volumes of accurate information on your assets and you're tying it with your work flow and what it is you're asking your staff to do on a day-to-day basis through the work order system. so in this case, what that means is how do we deploy crews for cleaning and assessment of the 100-mile sewer. how do we make intelligent decisions about the 15 miles of r&r we're striving to invest in
each year? and the linear assets are also as you'll see later in steven's presentation, are they are one of the largest long-term cost increase areas for our ten-year capital program and that is another consideration that makes our information management capabilities in this area so critical because this -- these information systems will help drive much of that spending you're going to hear about in the second part of this presentation. the back top here is a little bit more inside. the g.i.s. has been provided by public works since the early 90s. some of you have been around a long time know there's an organizational split with wastewater moving into the p.u.c., you know, fast forward to the year 2022 and that
arrangement has reached its logical limit. the p.u.c., of course, is launching, you know, we're really investing in our asset management program. water and wastewater and i.p.s. are striving for an integrated and common information system which, of course, makes sense and that's how you'd want to do this. and our work flow standards and technical standards are really over time separated and digressed those who applied at public works. this information transition system is overdue and the parties are committed to working on it. what that means is we bring it over to waste water enterprise in coordination with our i.t.s. team is there's a need for these three additional positions all of which are off budget or capital program
funded and then there's a one-time cost for some outside services support to help facilitate the transition. we lost the transition officially actually earlier this fiscal year and have been working out the arrangements and agreements with p.u.c. to support that and so we really are looking for this to ramp up and kick into high gear as we move into the new fiscal year. next slide, please. >> can i ask a question on that topic? >> certainly. >> commissioner: you're right. historically when we brought the waste water out of d.p.w. over to the p.u.c., we left a lot of stuff back at public works for all kinds of good and bad reasons. now public works is kind of being blown up, this seems like an opportunity to correct those kinds of things not only with the g.i.s. transition, but the whole staffing issue of having all these people we depend on in a different organization.
but what's happened with the rest of it? >> i will -- i think i will defer to others on the line, commissioner harington. we haven't really to my knowledge addressed that at a large scale level. we've addressed it at a case-by-case basis i would say. the for example, this g.i.s. transition, we certainly see tremendous amounts of work ongoing with public works because they are the design engineer so to speak. they are the ones, for example, when we talk about the 15 miles of sewer per year, we're planning it, but much of the delivery really resides within the public works engineering group. >> commissioner: because on the water side, it's our staff. on the waste water side, it's their staff and we don't get to work as a team as part of the p.u.c. >> commissioner harington, if i
might. what greg isn't saying but i will is that we have started -- i've asked during the course of this budget review, some things have become apparent that organizationally perhaps would benefit our budget and collaboration between our departments if we took some things over here to the p.u.c., but i determined the best way to go about that is to initiate discussions with d.p.w. about areas where we could have synergies where there could be some transfer of responsibilities and be subject to their budgetary needs and the like. ment so i spoke with the mayor's budget office about initiating those discussions to see where there can be some divisions of responsibility between us that hadn't historically been there to better support what we do and
how we can be better beneficial to them and those discussions are starting this week to talk about those issues and i've asked michael carlin and greg to sit down with the senior leadership team from that carla designates to talk about these issues and she was very receptive to that conversation and we've initiated those and they're in the process of doing exactly what it is you highlighted. so those conversations have started or are starting this week, today. >> yeah. the we're meeting next week actually. >> okay. so that's a start and focusing on the exact issues you're raising. >> commissioner: great. it's a once in a 30-year chance. so don't lose it. >> absolutely. >> okay. thank you. next slide, please. okay. the second item is really fairly pragmatic even though it has a lot of complexity behind it in some ways. we are in the midst of a once
in a generation capital program. we're putting close to $500 million a year of infrastructure into the ground and one of the assessment outcomes we have reached is that in a couple key areas of our capital program, we currently have a significant gap in our construction inspection coverage and really this is pretty intuitive to any of you building a house, we all know enough about construction to recognize you really only get one bite at the apple in terms of quality. once the job is done, once a $50 million facility is built or, you know, miles of sewer are in the ground, you really don't get a chance to have a do-over. so the quality of the construction is so paramount. i think we all know that in our own experiences. the way that works now is which is genere effective, but it's lacking again the volume is we
use a mix of infrastructure, construction management bureau staff, we certainly rely heavily on public works, inspector staff, and we also use a contract service. we do use a diverse mix. so all we're doing is supplementing that mix with some in-house dedicated people that will close that gap. one is the 15 mile per year sewer. in-field development. laterals things like that that occur on the street that we're not able to cover. the other one we're not able to talk about is the massive amount of new development and the hand off of all that that occurs and how do we cover that and that's a big part of what we're trying to do here. and it's five positions as you can see. two construction managers and three inspectors and we'll go
into the need here a little bit in the next two slides. so this is, again, an example of, you know, we have a very hard-working redevelopment team that handles everything from, you know, oversight and ensuring compliance with the many p.u.c. ordinances and, for example, the storm water management ordinance and so forth and at the same time, we have these massive new developments that everyone is very familiar with. treasure island may be the best example. but pier 70, we have a number of big projects and even with some of them being put on hold temporarily to some degree, the ones that are moving are just immense and so you can see by some of these figures in the overall pipeline, are it's 44,000 residential units, almost 13 million units of
retail and what are we inheriting from that? we're inheriting 100 miles of new sewer, 30 pump stations, etc. so it's close to $200 million in infrastructure between now and 2030 approximately and we want to make sure that when that infrastructure is handed off to p.u.c. it then becomes the long term operation and maintenance obligation of our rate payers that are getting a good product and so that's what this is really all about on the redevelopment front. next slide, please. and similarly, the other major area of need is the gravity sewer works. can you see the figures here. you know, that program is only going to be expanding to meet some of the needs and so what you're trying to do here is making sure you're getting a quality product for the approximately $150 million a year of infrastructure that we're putting in the ground. and these projects are also one
of our really high opportunity areas for cross coordination. so we want to make sure they're staffed well and, again, the quality is very high. and the performance of the r&r system or the gravity sewer system following r&r is really a cornerstone of our regulatory compliance and then this last item is a really big one in terms of the need for both changes in our staff skills and thinking and how we deliver the 15 mileses per year and that is the transition we're making. and so i think you've seen the success. of there's others coming in the large diameter work. but what we're really looking to scale up is the construction
of 15 miles. in terms of bringing that to the affordability conversation, the -- our ability to -- i'll say our success over the next several years in moving to a target of approximately 75% of the mileage being done with trenchless methods, that success is really key to containing the overall long-term costs of the gravity sewer r&r program while still achieving the 15-mile a year target and still doing it in the most cost efficient manner is supporting our minimal ideally cost of service and by extension benefitting our affordability efforts. there's a lot of other reasons, practical reasons for the trenchless construction, but in budget language, the biggest driver is the really substantial cost reductions compared to traditional open
cut construction. next slide, please. and moving on to our next priority. steve in the water enterprise certainly sees the same thing and we have a very strong overlap in our labs group. most of that resides under arrangements we have at water enterprise, but there's a host of new needs. big increases in the complexity in the number of regulatory sampling and requirements and some of this is really just playing catch-up in some gaps that have developed over time where we've absorbed those regulatory increases and we're really just trying to make a catch-up here. this request is looking at three additional water staff and, of course, those are water staff whose work is actually directly supporting the span of regulatory compliance and testing that is related to the
waste water enterprise's needs. next slide, please. okay. so we don't have any news and in the racial equity area, but we felt it was important to touch briefly on it in our budget discussion and so, again, to just check the box, we are not constrained by resources in this front and that should be clear. we have resources both in terms of new outside services. i think steve mentioned. so there's some master agreement that we can access across the p.u.c. and we also already have funding from prior commission approvals for the in-house positions that we're planning on hiring. so the main thing we want to emphasize here is two things. number one, waste water enterprise, you can see on the lower half of this slide, those are the five areas that we are
focused on that we think are quantitative and specific we can work on. they're reflected in our business plan. we mentioned in the past presentations, but this is again where we see we can bring a contribution to the table and the racial equity efforts. so i really just wanted to share this as a reminder of how we're approaching this. of the second key comment i'd like to share on racial equity efforts with commission as we all know and i think different parts of the organization are experiencing this, this is such a highly person-dependent process and activity and it's not our normal business. of it's not like i need to go higher three new engineers to do x, y, and z. we are all struggling to figure out what is that mix. what are the skills that we need to bring to the table.
wastewater enterprise was fortunate early on last year when we moved in this direction and we're fortunate to have staff who took a leadership role and helped drive this at an individual staff kind of grass roots level and we've just had a lot of transition. a lot of those staff for different reasons, some have retired, some life plans have taken them other directions and so we'll work with that and we're working across our organization to fill those roleses, but i just thought it was important. i thought it was helpful to share that with commission because, again, it's an error we know that it doesn't have traditional roles in many ways and so we're looking forward to finding those people on organization and take on those roles along with support from myself and senior management, but it's not an effort that fits as cleanly and specifically as we're used to in other more traditional, you know, staffing areas.
so that's all i want to share on that. next slide, please. >> i have a question. >> yes, commissioner. >> commissioner: my question, could you go over the initiated first employment resource group, e.r.g., could you expand on that a little bit? >> absolutely. this was the work that chris mcdaniels and others in our organization helped take on early on and the employee resource group is, you know, kind of a new term we started using, but the specific example here, the group formed what was called the black phoenix alliance and that group early on has served as a forum for people in the waste water enterprise and elsewhere, i think primarily the wastewater enterprise to meet and communicate and share, you know, concerns on information in this whole area. that's a great example, commissioner maxwell, or that group at the moment, i think.
it sort of stalled out in the sense that some of the key folks put it together and drive it. unfortunately, we've just lost another to the various changes. so that's what that's about. moving forward, you'll see a reference to the e.r.g.s below. we think the example of the black phoenix alliance is we know there's interest in these forums. we know there's beneficial purpose for them so they feel they can comfortably discuss and have helpful conversations on things. so it's still a very new concept, but that's what that's referring to. >> commissioner: okay. so what are you doing with the information that i'm sure they collected or you collected? because it says most marginalized staff. so what information did you collect that you think could be helpful moving forward?
>> that's a great question. and i think we have karri ving on but i'll answer a little bit and ask her to share a little bit also. part of that, what came out of really early grass roots conversations was a lot of very frank and specific feedback on how people perceive their opportunity or treatment or the range of perception everyone has about looking at p.u.c. and looking at their individual role through that lens. and so i don't have the details in front of me, but i know we heard some common themes. i'm not sure -- i don't know that i have the things that i'm struggling with, you know, in terms of my employment and my efforts here, are they understood and recognized and
supported as readily as other people in the organization. of there was a lot of very important. that's what i want to emphasize. for example, the reason you hear training program development and you see diversity recruitment and barrier approval and hiring and promotion is because certainly we heard a lot of i don't know the path. i don't have good mentors or things like that. so and it led to some questions about why many of our job classifications have the qualifications they do, right. there are these qualifications when we kind of revisit them, we're like do we really need
that particular 00 or economic backgrounds and so we really want to look at what's needed and what's not needed and. . if i don't need it, let's take it out. those are two examples. i'll stop there, but we have a lot of work to do in this area. >> commissioner: so with or without these groups, you all have a path and a way to go. so if they are no longer, if they don't get reconstituted, you still have basically a set of goals and priorities that you're working on? >> we do. for the near term, for sure. to be clear, we really do want to regenerate and foster those kinds of groups.
another question i have is can you give us an idea of the trenchless. >> sure the most common one is a method that's used throughout the range of piping. anything down from 8" to 12" or even some of our oddly shaped brick sewers and that's a good example of what we're finishing now on mission street. but the method is pretty straight forward. what you do and so you might have a 500' stretch of pipe that you're going to do this for, you insert essentially a sleeve into one end, pull it
through to the other aand then you cure it and that's typically a heat process and when you're done with this installation, you can vision what you now have this relatively thin liner on the old pipe. and that liner, today's technology literally has the structural stability and integrity of the original pipe. and so it's not like you still need the old pipe. that's the whole point. you now have a structure that's not going to collapse and then you come back and you reinstate the laterals and so forth. but it's probably the most widely used. there's several other methods we've used in the city. i won't go into it. to answer your question. the most common one you'll hear
us use is c.i.p.p. >> commissioner: okay thank you. >> next slide, please. okay. here we are. okay so this really goes to much of, you know, of some of the earlier comments and this is to the importance of the role of green infrastructure and flood resiliency across the city and what are we doing to move us in the right direction there. so this is an ask for one new position, a 5602 and this will work and really build on the success that that team has had in long-term planning and in partnership building with our other city departments and in some cases the private sector. but we really see the large scaling up of green infrastructure as key to storm water management and flood resiliency across the city and that in turn has a very new
delivery and strategy to it than what we're used to. we need the owners of the large parcels which is a change in our normal way of thinking. like, hey, you're the customer. ait's a very different conversation. and of course, tied to this is the intersection on the edges of the city, you have and the urban storm water as you see change in our storm water patterns. so the purpose of this position is we have the planning in place. our team has done a fantastic job of looking ahead and
building out the approach and strategy. this position is about resourcing that strategy and helping drive the partnerships across the city. next slide, please. okay. this is a pretty nuts and bolts item. about as basic as you can get. really goes to our asset management plants. our quality control is a key performance factor and we rely heavy on these massive control units. these are really conceptually really simple. like if you went out to oceanside, you see giant systems that bring in outside area, they move through all those under ground spaces and before that air is discharged, it goes through these large odor control units which is charcoal or carbon and other
means to strip the odors. and, same thing, we're going to have a big increase with this. basically all of our facilities, this need is growing. and, traditionally we have run these assets to failure. it is very costly and disruptive and they have a fixed shelf life. other than continue our past practice, what this contract will do is it will simply bring in a standard outside service to help drive the timely change out of these massive odor control units across our facilities. benefits our regulatory performance. safety of the facilities and certainly for all of the surrounding community customer stakeholders around our plants, effective odor control is one of our most visible so to speak impacts to the community.
so we really want to see ourselves do better on this front. that's what this is. >> commissioner: i was just going to say is there a general shelf life, you said to these. is there a general time frame on that? >> no. it's not a fixed one. some spaces have much heavier concentrations which will use up the media quicker. so it is very facility dependent. >> commissioner: okay. thanks. >> but it's on the order of years. think in terms of three to five years, not in ten to fifteen.
>> commissioner: so why are we deciding not to have this in-house. it seems like if it's being constantly maintained, then you would have a problem with the shelf life. and so it wouldn't be technically impossible for us to do it, but it's one of those things that has a long track it's that we weren't doing it enough in the past so what we're really doing is ramping up the level of the outside
services. >> commissioner: so basically, it's maintenance? >> yes, it is. it's what keeps the units running, it's maintenance. next slide, please. okay. similar to the early one on the labs there are demands or requirements for new, more complex lab equipment. so this is purchases for some specific new equipment the lab teamses will be using. . we're near the end here. this is the capital rebalancing
transition. we don't have an operational ask in this area, but i wanted to just capture our thoughts on this because it's maybe one of our top organizational priorities within waste water is the capital rebalancing and so, you know, the numbers are pretty understandable. if you look at the trend, we're going from about $300 million a year in expenditures in 2019 to a protection of about $1.2 billion in 2026. so, you know, you can see the four fold increase over a relatively brief time. the current plan as you know if you compare all the demands as we talked about earlier even with our relatively, you know, strong rate history, we can see gaps developing in our ability to afford the program. and the deliverability review
that we have started and still has a long ways to go, but the early conclusions have been pretty apparent is that we have a real gap in terms of our sustainable capacity both within, for example, infrastructure and within waste water in terms of delivering the capital program. and very rough rule. i want to emphasize, it's just that. it looks like somewhere around $500 million a year where things get very tough to maintain stanably. so we just wanted to share that and so the goal here is very simple. it's really in contest. it's to scale work from a prioritized set of capital projects to all the earlier points and to then once you have that appropriately prioritized set of capital
projects to make sure that the pace is sustainable, that we're bringing on the assets, we're high quality in both of terms of inspection and asset on boards, in terms of service contracts, staff training, all those good things, so that's what this is really all about. i'm going to wrap up. next slide, please. i'm going to wrap up with a couple of standard high level slides that don't have any pretty pictures, but are just the numbers to give you some context. this slide obviously shows you the year on year trend over the last couple of years and what's projected and so these are all figures you've seen, but it gives you sort of a simple graphic cal summary of those and i don't think there's anything we haven't already touched on here. debt service, capital projects, etc. all in all, fairly modest
change in the overall budget as you can see. next slide, please. okay. and this one is a little tricky to read. so you start at the very top, the $411.9 million. that's our current budget and then the first group of numbers below that are the key changes for the new fiscal year or -- pardon me, i misspoke that. starting with 2022, these are the changes and then you can see how you get to the net new ask and the percent change. so we go to about a $397 million budget. it's about a 4% reduction and you can see where some of the changes are and you're looking
at a 2% plus or machines change from our current budget through the end of this two-year cycle. next slide, please. and pretty simple picture on staffing. we're asking for one new operating position for the green infrastructure and scaling efforts and then the rest of our net new staffs and are all capital program funded and will not go directly to the operations budget. next slide, please. and, with that, are i am going to hand it off to steven robinson to transition us to the capital budget discussion. >> commissioner: i actually want to take a pause here for a second. i have a few questions for you, greg and i don't know if any
other commissioners have questions for this part of the presentation.' we also are at 12:42 i really hope we can wrap this up by 1:30 so keep that in mind as steven goes through his presentation. my question ask two of them, one is do you have a sense of, you know, how much we spend per, you know, gallon of waste water, how much do we spend on, are how much energy do we use and how much resources do we use and all that? do we have something like that and the reason, let me just give you a sense of why i'm asking these questions which adds, for example, for years that we have waste water treatment uses or, for example, we have less storm water, how does that impact that part of that for us? not considering the fixed cost?
>> yeah. let me take that in two parts. one, yes, we do have information on the primary input, so to speak, phish ajami, so things like power issue supplies, chemical demands, are things like that, i don't have them readily available today and since you asked, we had a workshop of updating facility level dash boards that would help us capture and communicate that information more clearly. stay tuned on that. we do have the data. it's just not in a user friendly format. >>. >> commissioner: that would be great. >> yeah. we will get back to you on that. it's a work in progress so we'll be happy to share that with commission. correct me if i'm wrong. sort of the focus of your
second question is what do we see as a relationship between the supply and the demand of our service and the cost if i'm understanding correctly and so, for us, for waste water enterprise, there's a number of counter, you know, there's a number of counter pointing influences, however you want to put that. as you noted, demand is not going up. our demand is driven by steve's demand in terms of the dry weather waste water. so that's not what's driving up our cost. first and foremost. and then, that can be broken into two parts. one part of that demand for reinvestment can be seen as reinvestment for the infrastructure we already have and what we needed to do, existing infrastructure. the second part of ha can be seen as what's coming our way,
right, and that can be anything from regulatory so we're seeing unavoidable impacts, the gravity flow of our csb structures into the bay. it doesn't get much more basic. of those aren't necessarily demand driven, but they're also nonnegotiable because they're coming our way as a result of the climate change and related fundamentals. similarly on the we know that the high doll jooe and the hydrology of the city is likely
changing. . so the need -- that's that second big batch of drivers. it has nothing to do with wastewater demand. it has more to do with these other big drivers. and the last thing i'll say and i'll stop here, similar to most water water utilities around the united states, our cost of service is and our need for rate afor example, the thousand gallons of waste water is so
there is this problem that we as an enterprise need to deal with because as i said at the beginning of this discussion, are climate change and some of the things you're experiencing is totally changing one side of our equation while the other side is so uncertain and actually going in the pop sit direction. so it is important. the second thing i want to say is awhile i do understand the fixed cost even if the variable cost is reduced look not that big of a deal. i think we as a utility, as a whole, we need to kind of do a better job of understanding the relationship between our fixed cost and variable cost and basically also know which -- how many units reduction of service would lead into a unit reduction on our fixed cost,
for example? so it is very important to kind of have these numbers to be able to make intellectual decisions as we look forward. so that's the way i'm going with this comment and questions. the second thing i want to say is, i did notice this number, you said 10 billion gallons of storm water per year, right. so that can be a significant amount of water on a day basis and i wonder how much of that and i think i'm going to sort of sigh that into our green infrastructure effort, even if we can harness half of that water, just a quarter of that
water, that can be an alternate water supply, right. so i'm wondering and i know i've brought this up many times, but i wonder how much of a direct relationship there is into how does what we do in the great infrastructure not only reducing our hopefully demand on our aging of wastewater treatment plants and how best to deal with intensive rainfall events or storm events that we're seeing, but also in many a way it can enhance our water supply. >> yeah. >> and i would like to see more of this conversation happening. >> certainly. i think as you're aware, it's not -- that linkage between storm water management and water supply resiliency, are it's been emergent and it's very prominent now in the western parts of the united states and so it's something
people in the water resources, you know, area have all been thinking about for many years. in the city, of course, and steven and others are much better qualified to talk about this because i'm relatively new, but the west side of the city, of course, is where that is more physically feasible with existing aquafers and so on. i will say this, what you're alluding to is also the importance of making sure every dollar we do spend has as much public benefit as we can get. and that's why we think there's so much long-term value and the focus on these multi-benefit projects where we can identify them. on the west side, we've done technical studies enough to know there's tremendous opportunities there for very significant increases in storm water control via green infrastructure. the west side has percolation
rates they're, you know, it's sand. i mean, the percolation rates are about as high as you can get. we've done very conceptual studies looking at it from a volume reduction perspective that, you know, one of the most affordable things we can pursue in the long term which could add up to 10% or 20% in annual c.s.o. volumes is the next large scale of green ininfrastructure and we're fortunate to have physical conditions on the west side that can support that. i'm getting out there. these are long term questions and issues, but the physical setting is there in a sense to at least suggest that these are really beneficial areas to pursue when you look at the intersection of storm water management. our goal is to reduce c.s.o. volume discharge to the ocean and what can we be doing to tie into the local water supply. so it's a powerful intersection
and we're certainly excited to dig into it. >> commissioner: i want us to do faster digging because we are making all these investments sort of in a parallel way and if we can harness things that can benefit multiple interi appreciate your comments any other comments, colleagues? okay. i guess we're ready to go to steven's presentation. >> thank you. of greg and i talked about this making sure we provide some context.
so i'd like to show a handful of slides back on rebaselining in december, 2020. we've talked through the numbers after that and then we'll have a couple of projects towards the end to give -- to kind of explain the big picture impacts across the entire c.i.p.. i have twelve slides in total. so i can do this in 12 minutes or less if that helps to keep us on track. so the photo we're looking at is a really big hole in the ground. it's the excavations for the new fixtures at the southeast facility. go to the second slide, please. the so for context, rather than going all the way back to the very beginning of s.s.i.p., i thought i'd start here. and how the program has needed to evolve. we've talked a lot about it today. it is one of the themes for our budget cycle this time around
and it's also a primary driver for change within the program. we've talked about historically wastewater infrastructure and post war back in the 50s and the 70s. both of those were federally funded and unregulatory driven, but now infrastructure is approaching it the 50 year reasonable life span. as an agency, we're maximizing the use of those low interest loans as much as we talked about and from the state. but there's the balancing and the tension we've talked about today. levels of service and things have also changed since conception back in 2010. regulatory drivers, power and energy resiliency. storm water. sustainability, climate change. greg, when he came in 2019 really helped provide greater clarity and to the levels of service we already had. conditions, we've talked about
the industry of consolidating with contractors limiting up. material, escalation, labor, the pandemic and supply chain issues, of course. the bottom delivery, greg has mentioned this today too. back in 2020 we were already talking about this and what we're now calling deliverability and we've gone through a process in this budget cycle and we do need to do more and come back in a year with the balance and since some of this is unfunded. so next slide. we talked about asset management, asset p. u.c. policy back in 2020. moved through it the same meeting we baselined the way for a capital plan and the enterprise in this case has been using it more management approach for some time which really helps us get it to where
we want to be and this graphic shows it's not a linear process. and therefore investment strategies need to reflect that and we're definitely living that way. you may remember seeing this slide as well. i've seen it a few times before to show how we're going to do that. and a one-time large investment to a more sustainable strategic capital planning. and back in the 70s, since then, it's not easy to ramp back up again, but instead we're trying to keep pace with a more sustainable reinvestment ultimately trying to smooth that curve and if you look at the chart on the left, it shows the approval program and it's a really significant peak. there's a smaller facility and infrastructure program which overlaps with it and there's the r&r of the rehabilitation work. but now look on the right where we're trying to get to, we're
raising that r&r bar and merging facilities and infrastructure together. this is the vision and we're trying to do this for clarity. one of our themes, of course, this budget cycle is responsible management to right size the capital plan for investment and delivery. and our recent improvements to the quarterly reporting and we first presented just on tuesday of this week one more step towards the station with project husry and communicating s.s.i.p. as one program. you may recall seeing this one as well and very simply we have a roll s. s.i.p. but as we smooth that investment and we want to have the ability to look beyond the ten year and we want to have a longer plan in horizon. we're acknowledging here we need to develop a plan and at the moment, a business plan
works and helps us cast a vision for the future. and we have confidence in the two year. primarily because it's so close and we have pretty good confidence in the ten year because it primarily fallses within our control and we've been thinking about those projects for some time. we can then adapt and prototype as needed. beyond that ten year period, needs outside of our control and many of those require broader city wide interdepartmental strategy on response when we think about climate change and working alongside the port like greg has been mentioning. okay. so now to some of the numbers, second part of this presentation. the slide shows the current way forward. it's presented in your packets today and shows the appropriation spread for all projects and the ten-year total request and the gray box you
can see is $6.1 billion over the ten-year period. that compares to 5.1, the way we presented two years ago in the last cycle which we then brought up to $5.4 billion in the mid cycle in february of last year in 2021. we had a very healthy conversation in today's meeting about the unfunded amount. how much volume there is and standing time and looking at the remainder of the year. and knowing that it will change. so just simply in the box to the right, you can see that funded amount for this plan. it's almost at $1 billion over the 10-year period. but as a reminder, like we talked about in the beginning, there is no shortfall in this first year and we built the plan with lots of thinking that the project by project level to adjust for prioritization level especially as we wanted to introduce some of those new projects and compare their
relative priority to what was already in the plan. and the unfunded amount is the delta between uses and sources and the bottom of the table in the packet, you've heard today we're not at the point of saying which specific projects are unfunded and laura mentioned last week and we've been talking about it today that we're kicking off this capital reimagining process to look at deliverability across all enterprises with a goal to bring it back to the commission next year. what you see had here is a snapshot. and the high level options are to either have uses or resources or some combination of both, but the request today that we talked about earlier for what's above the line and below the line, we can provide a list of the projects that are not shown in the s.s.i.p. at the moment but these were
originally called stage two and three. some of those have been initiated. but they were imagined 10 years ago. so we want to make sure we take the time. and looking at this chart, i'd just like to draw your attention to the early peak in the first ten years. now that we've had investments on our large projects like bio solids, we've broken it down in this chart for clarity. and you can just see the rethese two projects are real and so what you see here is our full request from the c.i.p. acknowledges it's not completely funded, but to visually understand what's going on here, we thought it would help to look at the 10-year plan. it's hypothetical and imagining those two projects were done
and i'm assuming that we checked to see if we're plateauing on a more reasonable and sustainable pace of investment that we've been mentioning here today. so we go to the next slide and this shows what the capital plan would look like. more sustainable, flatter investment overtime. there is a hump that's noticeable in the first half, but it's not so much of a peak. and a reduce in appropriation of requests next year because we're using existing appropriations to reduce the ask and we've made some reductions to make sure we can balance. so just a reminder, this is not the c.i.p., but it's interesting to see what investment looks like over time. this chart shows the appropriation for the first year and how it compares to what was approveded over the
last few years and it has increased and we actually reduced it for affordability and deliverability compared to what could have been since we're lowering the available balance as much as possible. i also noticed i wanted to draw attention that $375 million of the 687 is for bio solids. now that we have a better understanding of what it will cost and that we're deep in construction, that's over half the request for this first year. so this is my last numbers slide. it's another way to summarize the appropriations to date and what's in the proposed ten year and what's left post ten year for projects that are currently identified in the plan. and we combined s.s.i.p. with facilities and infrastructure. and then you can see why when you compare that to r&r on the
next bar down. it's really a significant investment like i mentioned earlier. where we need to go to be reinvesting in our facility its based on the asset management. it's not necessarily building more. it's reinvesting what we have. you can see $4.3 billion appropriated to date. 6.1 over this ten-year period and after the ten-year, $1.8 billion and this number for $1.8 billion is really the project still over that time frame. and so that's something we produce a list of those other. so i wanted to finish them by looking at three of the largest elements of the c.i.p. to see if they're really driving so far. this is the same slide that i presented on tuesday at the
report showing the significant increase and now you can see the impact today on the entire c.i.p. and especially in those early years. i won't take time to repeat the message i provided on tuesday, but we believe in a much more collaborative approach resulting in a more realistic understanding of budget and schedule and we have proof that we test the market with the first wave of bidding resulting in a much more successful outcome. similarly for head, woulds and same slide from tuesday, but i added a few extra things to show the increase and explain verbally, the 12 percent escalation process and then for the design is now at 100%. lastly, greg had mentioned in the collection system for r&r. the commissioner had a question
earlier and we wanted to highlight this because we are reduced the request. our collection work includes our storage boxes around the city. we want to get a better understanding of what's out there feeding into our asset management mission. given the affordability and deliverability challenges. we are transitioning to technologies that greg mentioned which minimizes impacts to help with our communities. and we're taking the opportunity to restructure, so balance various program objectives and tracking
outcomes. this photo is the mission street project we have that i mentioned on tuesday. substantial completion in november is actually an ssip project so much so that we're now budgeting doing much more of this work as part of our work r&r. and this blue kind of structure on the left, you can see a vertical sleeve. that's the large sleeve that greg was talking about. that then gets pulled through the pipe. so a lot less inconvenience with the community and it's actually much faster to do that work and the technology's proving to be just as effective. so my last slide sums up where we are and why we're here. this is the total project budget. so it's not appropriation. i mentioned that at one point before. it's actually a column in the spread sheet. it means if you add up all of the projects that are within the ten-year c.i.p. some of
which started before the ten-year period and some will go on after. if you look at all the projects that form and out of all of their project budgets, you do come to this total. you can see the four distinct programs. and $8.1 billion but it's interesting to look at this then because you see the magnitude of r&r in the collection system and for a comparison of $2.8 billion and then we have r&r treatment on top of that. the this is a total of $12.4 billion total project budget investment for all 200 line items that are now within the wastewater c.i.p. and that finishes my presentation and i'm happy to take questions. >> commissioner: thank you, steven. any comments? questions? colleagues? >> commissioner: i just have one quick comment if i could, madam chair. >> chairman: go ahead.
please. of the. >> commissioner: the two slides and the two bar charts that had all the projects down which is pretty much dividing with and without the first four years, i thought that was incredibly thoughtful and useful tool and we put that one together to get more data than just what we were looking at. i just want to say that was really helpful in terms of the budgeting. thanks. >>. >> commissioner: i think we're all done. it was to the point. thank you for that. >> thanks to a.g.m. norby for inspiring us to look at what life would look like. he challenged us to think what would you chart look like. >> and that was helpful and it
showed. >> any other comments? >> chairman: perfect. thank you so much, steven. and we are going to go to public comment. >> secretary: members of the public who wish to make two minutes of public comment on item number six, the waste water enterprise budget and capital plan, dial (415) 655-0001. to raise your hand to speak, press star three. do we have any callers? >> madam secretary, we have one caller in the queue.
caller, go ahead. >> caller: david pillpell. last time today. so very quickly, the reference to debt service for some reason reminded me of former h.t.m. score cards. maybe we can put one of those back and see if that's worth doing again. i would reduce vacant positions and salary savings to make the budget more accurate for all audiences. i'm just wondering how much of the asset management and i.t. support work should be in the enterprises and how much should be in business services. to commissioner harington's point about d.p.w., the engineering work includes the enterprises, the infrastructure bureaus and d.p.w., it seems like there's too much overhead and now is an excellent time to reexample the relationship. to a.g.m. richie's point, are i'm wondering what the operation and maintenance costs
are with new waste water facilities. we should be thinking about that now. on pages 230, 237, 239 and others, those projects have all zeroses. could those pages be updated or removed if those projects are complete. and business services. customer services doesn't seem to me like a waste water specific project. i'm happy to talk to staff about the waste water c.i.p. and refer to thinking i had from ten years ago when i served on the water water and really got into the capital projects and all of that. and, finally, we should continue to think more about operations and maintenance, the capital project delivery staff, organizational capacity rates and the impact on the p.u.c. from a rate freeze. i'm just continuing to think about those themes going into
next week. thanks, again, to all the staff, the a.g.m.s and everybody for their work on putting the budget presentation together today. thanks, again. >> thank you, caller. madam secretary, the call queue is clear. >> secretary: public comment on item six is closed. >> chairman: thank you so much. madam secretary, could you please read the next item. sophie, do you have a comment? >> commissioner: i do. i just wanted to go back to and we talked about how our rates are higher than other rates that people looked at and i think it wasn't arbitrary. it seems to me there was a decision made to kind of align the real cost of water because our water is so cheap, we were just using it. like it wasn't ignore in. and so i think it was an effort
to align the real cost of water to make people see and get an idea. i also remember seeing commercials on television before we did the sewer improvement and we did the sewer huge hike and it said that some of our pipes were put in when lincoln was president and i think as a consumer,s i thought oh, my goodness, so they kind of paved the way and gave us an education and an idea of what the real cost of whaert and maintaining the system is like having a cadillac versus a a pinto. i don't know if they exist anymore. but we need to really understand what it is we have and why it is. now, people just coming in can say, oh, my gosh, but it just reminds me of when you start cutting your revenue, you've got to rethink cutting revenue. i mean that's kind of what one
of our parties does every time they get into office, they cut the revenue and then we have to start cutting programs. but then we really need to think and talk to people and keep our public educated about the real cost of water and what we are doing public messages would be extremely important. >> chairman: here here. that's a great point that you just made. cost of water is definitely not fully captured, the value it brings in. okay. any other comments? okay. madam secretary. i got muted. could you please read the next item. >> secretary: sure. next item is item seven, a motion to continue the next meeting to a special meeting on thursday, january 20th. not friday january 20th.
thursday, january 20th. >> commissioner: so moved. >> commissioner: second. >> chairman: my apologies. >> secretary: [roll call] you have five ayes. >> chairman: thank you so much. so we'll see everybody on january 20th, thursday, not friday. and, with that, i again want to thank the staff for putting all these presentations together, spending all this time to doing all the work and for their, you know, presentations and the time. and with that, i can see that general manager -- you don't have anymore comments. perfect. okay. so we'll see you guys on the 20th. have a great weekend and have a
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