1 San Francisco Public Utilities
Commission
Budget Priorities: Public Hearing
Operating Budget Overview
Capital Plan Overview
10 Year Financial Plan Overview
January 7, 2022
Dennis Herrera, General Manager
Charles Perl, Deputy CFO
Laura Busch, Budget Director
Agenda For Today
1. Budget Priorities: Public Hearing (Administrative Code Section 3.3(b))
• Opportunity for the public to hear about our proposed budget and weigh in on priorities
2. FY 2022-23, FY 2023-24 Operating Budget Overview
3. 10-year Capital Plan, Capital Budget Overview
4. 10-Year Financial Plan Overview
5. Bureaus budget presentations
1. Infrastructure
2. General Manager’s Office and HRS
3. External Affairs
4. Business Services
2 We Provide Essential Services
3 The SFPUC is a growing, revenue-generating public utility that:
• Delivers drinking water to 2.7 million people in the San Francisco Bay Area;
• Collects and treats wastewater and stormwater for the City and County of San Francisco; and
• Generates clean power and serves electricity to over
385,000 residential, business, and municipal customers
in SF.
Diverse Workforce Serving Diverse
Communities
4 Budget Context
• Economic uncertainty
• Drought
• Evolving labor market:
o Retirements
o Great resignation
o High number of open positions and hiring difficulties • Continuing implementation of racial equity action plan • Growing regulatory requirements
• Higher expectations from customers and stakeholders
• Climate change resilience
• Maintenance of our infrastructure
5 Budget Priorities
• Responsible Management
• Access and Affordability
• Supporting People and Communities
6 7
Responsible Management
• Financial sustainability
• Environmental stewardship
• Reliable services
• Climate change resiliency
• Acquire PG&E local distribution system
• Management and maintenance of our
infrastructure
• Meeting regulatory requirements
• Deliver cost savings by aligning long term capital
budgets with project delivery and spending
Access and Affordability
• No retail rate increase for Water and Wastewater
in FY 2022-23
• More efficient use of capital funding to deliver
long-term savings and more affordable rates
• Access to critical services – ensuring people
continue to have reliable water, power and sewer
service amid economic uncertainty
• Payment assistance for past-due accounts
• Minimize cost to ratepayers by applying for
Federal and State funds
8 Supporting People and Communities
• Delivering on jobs, economic stimulus, and
community benefits
• Investing billions through our capital
program, supporting local labor and
businesses
• Racial Equity initiatives
• Retention and recruitment of staff
• Modernizing customer experience
9 Budget Overview
• Commission Budget Actions & Schedule
• Operating and Capital Budgets
• 10-Year Capital and Financial Plans
10 Commission Budget Actions
February 8, 2022—Scheduled SFPUC Public
Hearing to approve:
1. Operating budgets, FY 2022-23 & FY 2023-24
2. Capital budgets, FY 2022-23
• Capital financing authorization, FY 2022-23
3. 10-Year Capital Plans, FY 2022-23 to FY 2031-32
4. 10-Year Financial Plans, FY 2022-23 to FY 2031-32
11 12
Commission Budget Hearing Schedule
Date Presentation Presenter(s)
TODAY Budget Overview Dennis Herrera
Charles Perl
Laura Busch
Infrastructure Bureau Alan Johanson
GM Office, Human Resource Services Dennis Herrera
Rachel Gardunio
External Affairs Bureau Emily Lam
Business Services Ron Flynn
January 14
th Water Enterprise, Hetchy Water Steve Ritchie
Wastewater Enterprise Greg Norby
January 20rd Power Enterprise, CleanPowerSF Barbara Hale January 27th Meeting held if needed
February 8th • 2-Year Operating Budget
• 2-Year Capital Budget
• 10-Year Capital Plans
• 10-Year Financial Plans
Dennis Herrera
Charles Perl
Laura Busch
13 SFPUC FY 2022-23
Total Uses by Enterprise
$1.6 billion total FY 2022-23 Operating Budget
Water
42%
Wastewater
25%
CleanPowerSF
18%
Hetchy Power
9%
Hetchy Water
6%
14 SFPUC FY 2022-23
Total Uses by Budget Category
Capital Uses
8% Debt
29%
Personnel
17%
Energy
21%
Non-
Personnel
22%
Programmatic
Projects
3%
Budget process – timeline to date
15 Date Milestone
March 2021 • Began budget planning
April 2021 • Planning meetings, development of Project Charter May 2021 • Project Charter finalized, including Racial Equity tool plan • Budget kick off with Executive team held
June 2021 • Baseline operating budget review
• Capital - existing balance information shared
• Development of Racial Equity tool
July 2021 • First revenue projection
• Developed base case deficit projections and targets
August 2021 • Issued budget instructions, including Racial Equity Tool September 2021 • Departments working on requests
• Budget kickoff meeting with Commission
October 2021 • Budget requests due from departments
• Steering committee meetings began
November 2021 • Steering committee meetings
December 2021 • Budget finalization at staff level
Budget Approach
Operating:
• Baseline review process to assess operating budget needs • Base case projection allowed us to set targets to limit budget growth from outset and prioritizing absorbing cost increases where possible
• Racial Equity tool guided departments to assess how proposals impacted equity
Capital:
• Capital baseline review to detail remaining balances on every project, to ensure we used up existing fund before requesting new money
• Goal of constraining overall capital plan based on affordability and delivery capacity, balancing investment need
16 17
Budget Development Process
• Established project charter governing budget process
• Ensured budget proposal is within Commission policies and approved rates
• Prioritized efficiencies and absorbing new costs within existing budget and using existing vacant positions before requesting new ones
• 60 substitutions
• Cut the cost of new proposals back by 26% and the FTE request by 31% • Held 8 Steering Committee meetings held to develop budget strategy and review proposals
• Held 10 Capital Subcommittee meetings
• Held Mayor’s office meetings on budget priorities
• Vehicle requests vetted by Fleet Management for policy compliance • Position requests reviewed by Human Resources Services to ensure requests are appropriate and within guidelines
18 FY 2021-22 to FY 2023-24
Total Uses
1,503 1,581 1,624
5% 3%
FY2022 FY2023 FY2024
Natural Gas & Steam Pass Through 12.9 13.3 13.7
Programmatic Projects 56.1 50.5 51.0
Services of SFPUC Bureaus 120.8 120.8 124.9
Non-Personnel 217.4 220.9 228.6
Revenue Funded Capital 170.8 136.1 151.7
Purchase of Power 267.3 326.8 321.3
Personnel 251.5 261.3 270.6
Debt Service 406.8 452.0 462.0
Total Uses of Funds 1,503.5 1,581.8 1,623.9
-
200.0
400.0
600.0
800.0
1,000.0
1,200.0
1,400.0
1,600.0
1,800.0
$ Million
19 FY 2022-23 & FY 2023-24
Budget Changes
($ Millions) Budget Change $ Change %
FY 2021-22 Adopted 1,503.5$
Labor & Benefits Base COLA Adjustment 10.2
Operations & Maintenance Base Adjustment (2.3)
Debt Service 45.2
Revenue Funded Capital (34.7)
Purchase of Power 59.9
COWCAP Adjustment (6.7)
Decrease to DPW Work Order (5.7)
Bureau New Proposals 2.0
Wastewater New Proposals 1.5
Water New Proposals 2.3
Hetchy Water New Proposals 4.1
Hetchy Power New Proposals 2.5
FY 2022-23 Proposed 1,581.8$ 78.3$ 5%
Labor & Benefits Base COLA Adjustment 9.0
Operations & Maintenance Base Adjustment 1.6
Debt Service 10.0
Revenue Funded Capital 15.6
Purchase of Power (5.1)
Bureau New Proposals 2.0
Wastewater New Proposals 2.4
Water New Proposals 0.3
Hetchy Water New Proposals 0.5
Hetchy Power New Proposals 5.7
CleanPowerSF New Proposals 0.1
FY 2023-24 Proposed 1,623.9$ 42.1$ 3%
(1)
(7)
19 18
(19)
55 55
(30) (20) (10) - 10 20 30 40 50 60
$ million
Budget Growth Drivers
Debt Service
Purchase of Power
Revenue Funded Capital
New Proposals
Labor/COLA
COWCAP Adjustment
Other
Budget Change Drivers
• Capital spending, power purchases are major drivers of the 8%, $120M budget growth over 2 years
20 FY 2022-23 and FY23-24 total budgetary change drivers Capital Impact on Operating Budget
• Capital program is largest cost driver:
• Debt + revenue funded capital make up 38% of
operating uses
• Debt service costs increasing due to prior debt
issuance to fund capital projects
• Revenue funded capital decreasing to focus
project spending on existing appropriation before
requesting new funding
• Project spending will continue at prior year levels as agency focuses on tying appropriation to project
deliverability
21 22
Position Changes: Highlights
• 60 substitutions repurpose vacant positions for
changing operational needs, and align job duties
with classifications
• 57 new positions requested:
• Addressing staffing shortages in key areas
• Shoring up construction inspection capacity
• Strengthening our cybersecurity, GIS and data
management
• Modernizing customer service
• Adding staff to ensure we meet regulatory requirements • Temporary to permanent conversions to ensure permanent operating positions are filled with PCS staff, helping with retention and recruitment
23 • 57 new positions proposed over 2 years,
2% increase
• 21 operating, 36 project
FY 2021-22 Positions 2,466 FY 2022-23 Proposed 2,504
Operating Positions Operating Positions
New Requests 16 New Requests 18
Temporary Salary Reductions (5) Temporary Salary Reductions (1) Offsetting increase in Attrition Savings (3) Offsetting increase in Attrition Savings (4) Subtotal 8 Subtotal 13
Off Budget Project Positions 30 Off Budget Project Positions 6 Total 38 2% Total 19 1%
FY 2022-23 Proposed 2,504 FY 2023-24 Proposed 2,523
FY 2022-23 & FY 2023-24
Net Position Changes
FY 2022-23 & FY 2023-24
Net Position Changes
24 Enterprise/Bureau FY 2022-23 FY 2023-24 Total
Water 4 3 7
Hetchy Water - 1 1
Wastewater 6 4 10
Power 16 6 22
CleanPowerSF - 1 1
External Affairs 2 1 3
Business Services 10 3 13
Total 38 19 57
Operating Budget
New Proposal Summary
Responsible Management
• Cyber security
• Data
• Meeting regulatory requirements
• Managing chemical cost increases
• Maintenance and replacement of
equipment
• Wildfire resilience
• Construction inspection
• Risk management
• GIS
25 Budget
increase over
base $M
One time $M Ongoing $M Substitutions Net new A Net new O FY 22-23 12.4 4.4 8.0 54 8 30
FY 23-24 19.7 3.1 16.6 6 13 6
Total 32.1 7.5 24.6 60 21 36
Access and Affordability
• Modernizing customer service
People and Communities
• Workforce: temp to permanent to
manage retention, addressing worker
shortages
26 FY 2022-23 to FY 2031-32
10-Year Capital Plan Development
What is the 10-Year Capital Plan?
• Comprehensive forecast of capital investment, updated annually • Plan comprised of high-level project categories
• Individual project data sheets with scope, schedule and cost • Capital investment needs beyond planning period identified • 10-year capital plan, typically a 2-Year capital budget Development objectives this cycle:
• Review existing project appropriation spending plans before new funding requested
• Goal of constraining overall capital plan based on affordability and delivery capacity, balancing investment need
• Capital subcommittee to manage process
• Infrastructure team confirms deliverability
New Direction for Capital Planning
• Competing priorities have forged a new path for SFPUC Capital Planning this cycle:
• Plan has grown significantly due to cost increases, expanding scope and identified investment needs
• Focus on tying project planning/budgeting to affordability and deliverability
• Each Capital plan has “unfunded” portion, acknowledging need however the cost doesn’t fit within projected revenues
• Propose FY 22-23 capital budget, to focus on using existing $2B capital appropriation as agency continues capital reimagining effort in 2022; FY 23-24 capital budget supplemental next year 27 FY 2022-23 to FY 2031-32
10-Year Capital Plan
28 Total $9.9 billion
Water
21%
Wastewater
62%
Hetch Hetchy
16%
CleanPowerSF 1%
FY 2022-31 to FY 2023-32
10-Year Capital Plan
29 FY 2022-23 Capital Budget
30 SFPUC Capital Program
31 • Comprehensive look at total capital program including amounts appropriated to date, 10-Year CIP , and post 10-Year amount
FY 2022-23 to FY 2031-32
10-Year Financial Plans Development
• Consistent with City Charter Requirements, Plans
developed and adopted annually for each
Enterprise and CleanPowerSF
• 10-Year Financial Plan developed to:
• Provide multi-year view of Enterprise’s projected rate range
• Show sources and uses trends and financial metrics
• Include SFPUC proposed biennial operating and
capital budgets
• Demonstrate compliance with SFPUC Financial
Policies
32 FY 2022-23 to FY 2031-32
10-Year Financial Plans Key Assumptions
• Sales Volumes
• FY23/FY24 drought modeling with customers meeting water conservation goals
• Economic recovery post pandemic consistent with City Economist Office view – FY 2024 return to new normal of commercial activity • Power Sales Volumes 5.3% average annual increase – driven by redevelopment new load growth
• CleanPowerSF Sales Volumes 0.5% average annual increase • Projected Expenses
• Average annual operating expenditure growth of 3%; base budget + FY 2022-23 and FY 2023-24 New Proposals
• Capital Financing–assumes 4% interest rate with financing costs beginning 6 years after appropriation due to capitalized interest, project and bond issuance timing; Low-cost loans included at 1%-3% for executed loans only
33 Water Sales Volumes
Historical and Projected
34 Wastewater Sales Volumes
Historical and Projected
35 Hetch Hetchy Power Sales Volumes
Historical and Projected
36 CleanPowerSF Power Sales Volumes
Historical and Projections
37 10-Year Financial Plans and
Budget Years Rate Projections
• Water and Wastewater Rate Changes
• No retail water or wastewater rate increases FY 2022-23 • Comprehensive retail water and wastewater cost of service study for multi-year rates package starting FY 2023-24
• Projected retail rate increases through FY 2023-24 to meet financial policies
• Water, 3% average annual rate increase
• Wastewater, 4% average annual rate increase
• Power Rate Changes
• Cost of service study to conclude early Spring 2022; will inform rates for next 5 years
• General Use municipal rates assumes 3 cent increase annually during budget years; increase from 1 cent/year previously • Projected average annual Hetchy Retail rates change of 3% & CleanPowerSF rates change of 5% through FY 2023-24
38 Questions?
39