AGENDA ITEM
Public Utilities Commission
City and County of San Francisco
DEPARTMENT Business Services AGENDA NO. 16
MEETING DATE February 8, 2022
Adopt the SFPUC 10-Year Capital Plan for FY 2022-23 to FY 2031-32: Regular Calendar Manager: Charles Perl
Summary of
Proposed
Commission Action:
Public Hearing to consider and possible action to adopt the San Francisco Public Utilities Commission 10 -Year Capital Plan for FY 20 22-23 through FY 2031-32 totaling $9,893,091,608.
Background &
Description:
Background
Under Charter Section 8B.123, this Commission must hold public hearings on an annual basis to review, update, and adopt a Long- Term Capital Improvement Program (referred to herein as the “10 -Year Capital Plan” or “Capital Plan”) and a Long - Range Financial Plan (“10 -Year Financial Plan” or “Financial Plan”). The Capital Plan is to contain a list of projects to be executed during the 10- year planning horizon, including cost estimates and schedules. The Financial Plan is to contain estimates of operations and maintenance expenses, repair and replacement costs, debt costs, and projected rate increases. Together, the two plans provide visibility into the capital investment required to meet serv ice levels and the rate impacts of these investments. In addition, they serve as a basis and supporting documentation for the Commission’s capital budget and the issuance of revenue bonds and other indebtedness to support the SFPUC capital program.
The SFPUC General Manager and staff presented the preliminary proposed SFPUC 10-Year Capital Plan for FY 2022-23 through FY 2031- 32 to the Commission at duly noticed public meetings held on January 7, January 14, and January 20, 2022, for the Water Enterprise, W astewater Enterprise, and Hetch Hetchy Water and Power (including CleanPowerSF). The project details presented at those public meetings, including a list of projects, cost estimates, and schedules are attached.
A Capital Plan document describing the SFPUC’s final adopted 10-year Capital Plans and FY 2022- 23 Capital Budget will be published during the summer of 2022. The document will describe the capital planning process, identify high priority elements of the plan and present project - level details. Specifically, it will provide project descriptions and justifications, details on asset classification plans, project implementation schedules by phases, and budget information at a project level.
APPROVAL:
COMMISSION
SECRETARY Donna Hood
Authorize: Adoption of 10-Year Capital Plan
Commission Meeting Date: February 8, 2022
Capital Plan Development
The SFPUC 10-Year Capital Plan provides an assessment of the agency ’s capital needs aligned with the Commission ’s Strategic Plan goals and the required investments to meet those needs . The development of the plans occurred from June through December 20 21. This effort was guided by a project charter , was directed by the Budget Steering Committee comprised of the SFPUC executive team , and further supported by the Capital Planning Subcommittee . As a preliminary step to Capital Plan development, a baseline review of all existing project appropriations was completed for potential closeout or repurposing to new capital budget needs. This important step focused on capital project delivery and reduced the FY 2022-23 capital budget request resulting in a more efficient us e of ratepayer resources.
Capital Plan Quality Review
The SFPUC Infrastructure Bureau reviewed and validated the proposed Capital Plan project submissions, to assure a consistent and comprehensive capital planning approach across the agency comprised of individual project datasheets describing the project budget, schedule, and scope. The three Enterprises’ Capital Plan submissions also went through a separate project quality review process involving (1) validation of costs and schedule of al l proposed projects, ( 2) assessment of the ability to deliver projects as scheduled including looking at historic versus planned spending and available resources, and ( 3) the Enterprises ’ assessment of their ability to onboard new assets as planned. This new capital planning effort helps assure the 10-Year Capital Plan meets the Enterprises’ long- range capital needs , reflects a sound project prioritization process, and supports affordability by promoting efficient use of ratepayer funds.
Project Deliverability
The Capital Plan development process addressed the issue of project deliverability, by associating project scope, schedule , and costs to available Infrastructure Bureau staffing and contracted resources to execute the projects . Progress has been made this year to better align capital plans to a more realistic deliverable level. However, a full-scale effort is needed to better identify current and future project management and contracting capacity and assess whether the capital pl ans are deliverable.
Therefore, SFPUC staff will undertake a capital planning review process during 2022 to look at project delivery capacity and tie this to a revised capital plan that will be brought to the Commission next year as part of the mid -cycle budget update
. The focus of this effort will be on
deliverability, prudent prioritization, realistic phasing of projects, and understanding the resources available to implement capital plans. This effort will include the FY 2023-24 Capital Budget for the agency.
Overview of Proposed Capital Plan
The attached proposed 10-Year Capital Plan for FY 2022-23 through FY 2031-32 (Attachment A ), contains project summaries for each Enterprise, as well as the individual project data sheets describing each project’s projected scope, schedule, and cost over the 10-year period.
The costs included in this proposed Capital Plan update have grown almost 10% as compared to last year’s plan due to cost and scope increases and newly identified investment needs. With Capital spending continuing to be the single largest cost driver at the agency, responsible management means efficient use of capit al resources and effective project execution are key components for successful capital plan execution. Capital plan funding was tied to budget targets and lower rate projection goals for the agency. The result of increased project costs over the planning period resulted in a portion of the capital plan being unfunded as shown in the below table.
10-Year Capital
Plan
FYE 2023-2032 Uses FYE 2023-2032
Sources
Unfunded
amount
Unfunded
%
Wastewater 6,127,170,930 5,152,295,522 (974,875,408) 15.9 Water 2,118,034,995 1,907,753,178 (210,281,817) 9.9
Hetch Hetchy
Water
974,442,211 974,442,211 - -
Hetch Hetchy
Power
611,055,026 506,657,646 (104,397,380) 17.1
CleanPowerSF 62,388,446 62,388,446 - -
Total $9,893,091,608 $8,603,537,003 $1,289,554,605 13.0
Given this approach, the capital plan includes only a single year capital budget proposal for FY 2022- 23 as the agency works on the capital reimagining process to better tie the capital plan with the resources to execute it. Staff intends to propose the FY 2023 -24 capital budget with the next capital plan update as a part of the mid -cycle budget update in early 2023.
Wastewater Enterprise: $704 million increase, driven by a $399 million increase of the Sewer System Improvement program (SSIP) ( Biosolids Project increase of $660 million offset with $261 million in other project decreases) and $335 million in Renewal and Replacement cost increases primarily for the Collection System Projects.
Water Enterprise: $110 million increase primarily from a $66 million increase for the Regional Water Treatment and Water Transmission Programs, and $44 million to fund continuing work on the Water Conveyance/Distribution System and the new Customer Service System Project.
Hetch Hetchy Water & Power : $18.5 million increase with a $77.7 million increase from Power projects for new distribution services mostly offset by reductions of $59.2 million in Water projects.
CleanPowerSF: $13.4 million decrease due to a reduction in the funding for buyout options in the later years of the Local Renewable Energy Program.
Capital Plan Approval
If approved by the Commission, the SFPUC 10-Year Capital Plan will be submitted to the Mayor and presented to the Citywide Capital Planning Committee in the Spring for review.
The first year of the 10 -Year Capital Plan forms the SFPUC’s FY 2022- 23 capital budget and is covered under a separate action item scheduled for February 8, 2022.
Result of Inaction: SFPUC would not be in compliance with Charter Section 8B.123.
Budget & Costs:
10-Year
Capital Plan
FYE 2023-2032
Uses
FYE 2023-2032
Sources
Unfunded
Amount
Unfunded
%
Wastewater 6,127,170,930 5,152,295,522 (974,875,408) 15.9 Water 2,118,034,995 1,907,753,178 (210,281,817) 9.9
Hetch Hetchy
Water
974,442,211 974,442,211 0
Hetch Hetchy
Power
611,055,026 506,657,646 (104,397,380) 17.1
CleanPowerSF 62,388,446 62,388,446 0
Total $9,893,091,608 $8,603,537,003 $1,289,554,605 13.0
Environmental
Review:
Approval of funding mechanisms do not constitute a project under the California Environmental Quality Act (CEQA) Guidelines Section 15378(b)(4) related to the creation of government funding mechanisms which do not involve any commitment to any spec ific project which may result in a potentially significant impact on the environment. Subsequent approvals of projects to be funded through this Capital Plan would be considered only after the necessary environmental review process in
conformance with CEQA , Administrative Code Chapter 31, and Proposition E (approved by the voters in 2002 for Water and Wastewater projects) by this Commission.
Recommendation: SFPUC staff recommends that the Commission adopt the attached resolution.
Attachments: Attachment A: SFPUC 10-Year Capital Plan FYE 2023-2032 and Project Datasheets
PUBLIC UTILITIES COMMISSION
City and County of San Francisco
RESOLUTION NO.
WHEREAS, Under San Francisco Charter Section 8B.123, the San Francisco Public Utilities Commission must annually hold public hearings to review, update , and adopt a long- term Capital Plan covering projects during the next 10- year period, including cost estimates and schedules; and
WHEREAS, The SFPUC General Manager and staff presented the proposed SFPUC 10-Year Capital Plan for FY 20 22-23 through FY 20 31-32 for the Water Enterprise, Wastewater Enterprise, and Hetch Hetchy Water an d Power, including the Power Enterprise and CleanPowerSF, to the Commission at public hearings held on January 7, January 14, and January 20, 2022, and such presentations included a list of projects, cost estimates, and schedules, together comprising the SFPUC 10-Year Capital Plan; and
WHEREAS, On February 8, 2022, staff presented as Attachment A to the staff report the proposed SFPUC 10-Year Capital Plan Summaries FYE 2023-2032 and Project Datasheets, a copy of which is on file with the Commission Secretary; and
WHEREAS, The SFPUC 10-Year Capital Plan provides an assessment of the agency ’s capital needs aligned with the Commission ’s Strategic Plan goals and the investments to meet those needs; and
WHEREAS, As a preliminary step to 10- Year Capital Plan development , a baseline review of all existing project appropriations was completed for potential close -out or repurposing to new capital budget needs; and
WHEREAS, The SFPUC Infrastructure B ureau reviewed and vali dated all 10 -Year Capital Plan project submittals for a consistent and comprehensive capital planning approach across the agency comprised of individual project datasheets describing the project budget, schedule, and scope; and
WHEREAS, Capital Plan project quality review process assured the Capital Plan meets the Enterprise ’s infrastructure needs, reflects a sound project prioritization process , and supports affordability by promoting efficient use of ratepayer funds; and
WHEREAS, The SFPUC Capital Plan development process included an assessment of SFPUC’s ability to deliver projects looking at historic versus planned spending and aligning project plans with available delivery resources; and
WHEREAS, Capital Project cost and scope increases and additional infrastructure needs resulted in a 9% increase in plan costs over the 10- year period, and an associated unfunded portion of the capital plan that has not been included in long range financial planning cost projections; and
WHEREAS, SFPUC staff will undertake a capital planning review process over the coming year with a focus on project deliverability, prudent prioritization, realistic phasing of projects, and understanding the resources available to implement our plans resulting in a revised capital plan that will be brought to the Commission in early 2023; and
WHEREAS, Approval of funding mechanisms do not constitute a project under the California Environmental Quality Act (CEQA) Guidelines Section 15 378(b)(4) related to the creation of government funding mechanisms which do not involve any commitment to any specific project which may result in a potentially significant impact on the environment; and
WHEREAS, The subsequent approvals of projects to be funded through this Capital Plan would be considered only after the necessary environmental review process in conformance with CEQA, Administrative Code Chapter 31, and Proposition E (approved by the voters in 2002 for Water and Wastewater projects) by this Commission; and
WHEREAS, The Commission- approved 10-Year Capital Plan for FY 20 22-23 to FY 2031-32 will be submitted to the Mayor and presented to the City’s Capital Planning Committee, for review; and
WHEREAS, The SFPUC’s 10-Year Capital Plan is used to develop the agency’s capital budget, 10- Year Financial Plan , projected debt issuances, and estimated rate changes; now, therefore, be it
RESOLVED, That the Commission hereby adopts the SFPUC 10-Year Capital Plan for FYE 2023-2032 comprised of the project summaries and project datasheets included in Attachment A presented to the Commission on February 8, 2022, which describ es project costs, scope, and schedule over the 10-year period with total costs as follows:
10-Year Capital Plan FYE 2023-2032 Uses FYE 2023-2032
Sources
Unfunded amount Unfunded %
Wastewater $6,127,170,930 $5,152,295,522 (974,875,408) 15.9 Water 2,118,034,995 1,907,753,178 (210,281,817) 9.9
Hetch Hetchy Water 974,442,211 974,442,211 - -
Hetch Hetchy Power 611,055,026 506,657,646 (104,397,380) 17.1 CleanPowerSF 62,388,446 62,388,446 - -
Total $9,893,091,608 $8,603,537,003 $1,289,554,605 13.0
I hereby certify that the foregoing resolution was adopted by the Public Utilities Commission at its meeting of February 8, 2022.
Secretary, Public Utilities Commission