2022 Series ABCD Taxable Water — CleanPowerSF Sfpuc Commission, April 12, 2022 (part 1 of 3)

Approve Two Refunding Bond Transactions:

Up to $950M 2022 Series ABCD Water
Revenue Refunding Bonds
&
Up to $475M 2022 Series ABCD Wastewater
Revenue Refunding Bonds
April 12, 2022
Charles Perl, Deputy Chief Financial Officer
1 Agenda
• 2022 Series ABCD Water Revenue Refunding
Overview
• 2022 Series ABCD Wastewater Revenue
Refunding Bonds Overview
• Plan of Finance
• Disclosure Q&A
2 3
Series 2022 ABCD Water Revenue Refunding
Bonds
• Up to $950M of advance refund, taxable bonds
• Sub-Series A: WSIP (Green Bonds)
• Sub-Series B: Regional Water
• Sub-Series C: Hetch Hetchy Water
• Sub-Series D: Local Water
• Under current tax laws, advance refundings can only be done on taxable basis
• Similar to the Water taxable refunding in Dec 2019
• Taxable interest rates currently may achieve $22.6M debt service savings
• Issued in compliance with “Debt Management Policies & Procedures”
Proposed Indenture Amendments-
Water
4 • 43rd Supplemental Indenture contains new
amendments to Indenture
• Designed to more efficiently and cost-effectively meet goals of funding Water’s CIP
• Modernizes Indenture to align with current market-
accepted standards and Wastewater’s Indenture
• Updated definitions and modification of covenants
provides for greater debt structuring flexibility
• Allows for more effective use of variable rate debt
• Incorporates use of low-cost federal WIFIA loans
• Clarifies rate-setting obligations of the Water
Enterprise
• Amendments become effective when 51% of
bondholders and credit providers consent
5 Series 2022 AB Wastewater Revenue Bonds
• Up to $475M of refund and advance refund, taxable
bonds
• Sub-Series A: Tax Exempt-Refunding SSIP (Green)
• Sub-Series B: Tax Exempt-Refunding Non-SSIP
• Sub-Series C: Taxable Advance Refunding SSIP (Green)
• Sub-Series D: Taxable Advance Refunding (Non-SSIP)
• Under current tax laws, advance refundings can only be done on taxable basis
• Tax-exempt interest rates may achieve $32M of debt
service savings
• Issued in compliance with “Debt Management Policies & Procedures”
6 Plan of Finance
• Expected sale dates
• Water Revenue Refunding Bonds – week of April 19th
• Wastewater Revenue Refunding Bonds– early May
• Both to be sold on negotiated basis
• Water Revenue Refunding Bonds - underwriter syndicate led by Morgan Stanley
• Wastewater Revenue Refunding Bonds– underwriter
syndicate led by Citi
• Underwriters selected from pre-qualified list of Controller’s Underwriter Pool and independent competitive RFP process • Minimum 3% Net Present Value (NPV) savings
• Rising interest rates are impacting entire municipal market • Per policy, transaction will only be completed if meets minimum NPV savings.

Disclosure Q&A
7 • In keeping with last year’s Commissioner Disclosure Training, the following is disclosure Q&A for each
transaction; also presented in Staff Reports
Water and Wastewater Revenue Refunding ABCD Bonds:

Q. What is the size of the bond issue?
A. Water Refunding Bonds not-to-exceed $950 million;
Wastewater Refunding Bonds not-to-exceed $475 million
Q. Why are bonds being issued?
A. To provide debt service savings to the ratepayers.

Disclosure Q&A (cont’d)
8 Q. What is the bond structure?
A. The 2022 Water Revenue Bonds will consist of up to four series of senior lien, fixed rate taxable bonds having maturities equal to the maturities of the bonds being refunded. The 2022 Wastewater Revenue Bonds will consist of up to two series of senior lien, fixed rate tax-exempt bonds and up to two series of taxable bonds having maturities equal to the maturities of the bonds being refunded. No debt service reserve fund will be used.

Q. How will the bonds be sold?
A. The bonds will be sold through a negotiated sale, where pricing terms are set after negotiating with the underwriters based on investor demand and market conditions.

Disclosure Q&A (cont’d)
Q. How will debt service on the bonds be paid?
A. Debt service will be repaid from the rates and charges for the respective enterprises.

Q. What impact will the issuance of the bonds have on rates? A. Debt service and debt service coverage requirements have been included in the current Water and Wastewater Enterprise 10-Year Financial Plans, which projects average annual retail rate increases of 3.4% and 6.6% for the period of FY 2022-23 through FY 2031-32, respectively. However, projected savings related to the 2022 Water and Wastewater Refunding Bonds have not yet been included in planning assumptions.

Q. Will issuance of the bonds have a negative impact on the SFPUC credit ratings?
A. Staff does not anticipate negative rating action from issuance of these bonds.
9 Questions?
10 AGENDA ITEM
Public Utilities Commission
City and County of San Francisco

APPROVAL:

COMMISSION

SECRETARY

Donna Hood

DEPARTMENT:

Financial Services:

AGENDA NO. 14

MEETING DATE

April 12, 2022

Water Revenue Refunding Bond Authorization: Regular Calendar Project Manager: Charles Perl

Authorize the Issuance of up to $950 Million of 2022 Series ABCD Taxable Water Revenue Bonds to Refund Outstanding Water Revenue Bonds to Achieve Debt Service Savings

Summary of
Proposed
Commission
Action:

Authorize the Issuance of up to $ 950 million of the 2022 Series ABCD Taxable Water Revenue Bonds to refund all or a portion of the outstanding Series 2015A, 2016A, 2017A, 2017B, 2017C, 2017D, and 2020B Water Revenue Bonds to achieve debt service savings.

The Commission resolution will approve the issuance of the 2022 Series ABCD Taxable Water Revenue Bonds, consisting of four separate sub -series of bonds (Sub- Series A (Refunding – Federally Taxable - WSIP, Green Bonds), Sub- Series B (Refunding – Federally Taxable – Regional Water), Sub-Series C (Refunding – Federally Taxable – Hetch Hetchy Water) and Sub-Series D (Refunding – Federally Taxable – Local Water), and approve the form of, and authorize the execution and delivery of, related documents; authorize the General Manager to sell the bonds in one or more series on either a competitive or negotiated basis, as the General Manager determines is in the best financial interest of the San Francisco Public Utilities Commission (SFPUC); and delegate to the General Manager , authorization to award each series of bonds to the highest bi dder (lowest cost).

Background: 2022 Series ABCD Taxable Water Revenue Refunding Bonds: The 2022 Sub-Series A Bonds, 2022 Sub- Series B Bonds, 2022 Sub- Series C Bonds and 2022 Sub- Series D Bonds (collectively, the “2022 Water Refunding Bonds”) will be issued pursuant to San Francisco City Charter Section 9.109 which authorizes the issuance of refunding bonds that are expected to result in debt service savings calculated on a present value basis .

Adoption of the Commission resolution authorizing the 2022 Water Refunding Bonds is conditioned on the approval of an ordinance regarding refunding debt service savings proposed to be adopted by the Board of Supervisors prior to the sale and issuance of the 2022 Water Refunding Bonds.

Staff regularly monitors outstanding debt to identify refunding opportunities. Based on the current historically low interest rate environment, the 2022 Water Refunding Bonds will refund (on an advance basis, as explained below) all or a portion of the out standing 2015A, 2016A, 2017A, 2017B, 2017C, 2017D, and 2020B Water Revenue Bonds. The Execute Agreement: Authorize the Issuance of up to $950M of Taxable Water Revenue Refunding Bonds Commission Meeting Date: April 12, 2022

Series 2022 Water Refunding Bonds are to be authorized at an aggregate not-to-exceed par amount of $950 million. Collectively, the 2022 Water Refunding Bonds would generate debt service savings benefiting all Water Enterprise ratepayers. Given current market rates, estimated present value debt service savings are in excess of $63 million or approximately 8.10% of the amount of refunded bonds.

Actual results may differ, and savings may be higher or lower depending on prevailing interest rates on the day of sale of the refunding bonds.

The sale and issuance of the 2022 Water Refunding Bonds is being done in compliance with the SFPUC’s “Debt Man agement Policies & Procedures”, including meeting the minimum 3% present value savings threshold and minimum 50% refunding efficiency threshold.

Overview of the Transaction: Municipal bonds are often issued with “optional redemption” provisions which provide for the refunding of outstanding debt. A refunding executed on or after the first optional redemption date of the bonds is referred to as a “current refunding” and a transaction executed before the first optional redemption date is referred to as an “advance refunding.” The use of revenue bond advance refundings has been a longstanding effective way for municipal agencies throughout the United States to optimize their debt portfolios and achieve debt service savings. Such transactions allow issuers to lock in lower interest rates rather than waiting until the first optional redemption date when interest rates could have risen.

The 2022 Water Refunding Bonds will be advance refunding bonds sold on a taxable basis. The SFPUC has previously sold its advance refunding bonds on a tax-exempt basis, given the lower interest rate advantage typically prevailing on tax-exempt bonds .

However, the 2017 Tax Cuts and Jobs Act federal tax l aw, which became effective January 1, 2018, prohibits the issuance by municipal agencies of tax-exempt advance refunding bonds. However, taxable advance refunding bonds are not prohibited. With historically low interest rates, staff and its municipal advisors identif ied an opportunity to issue taxable advance refunding bonds that can result in significant debt service savings to the ratepayers. The SFPUC could wait to do a tax -exempt current refunding at a later optional redemption date of the bonds, as is allowed under federal tax law, but the SFPUC would assume interest rate risk and should interest rates rise the SFPUC could miss an opportunity to achieve significant savings by doing a taxable advance refunding today given the very low taxable interest rates. Numerous other municipal agencies throughout the United States have issued taxable advance refunding bonds to take advantage of these unique market conditions. Further, the SFPUC successfully issued its fir st taxable advance refunding bonds (the 2019 Series ABC Water Revenue Bonds) in December 2019.

The use of advance refundings has been an important debt management tool for the SFPUC, allowing it to execute refundings that have resulted in significant debt service savings to the ratepayers. Since 2015, the SFPUC has executed the following advance refundings for the Water Enterprise that have resulted in significant present value (PV) debt service savings to the ratepayers (PV savings are expressed both on a dollar basis and as a percentage of refunded bonds):
• $429.6 million Series 2015 A Water Revenue Bonds (tax-exempt):

Savings: $48.6 million; 10.3%
• $893.8 million Series 2016 AB Water Revenue Bonds (tax-exempt):

Execute Agreement: Authorize the Issuance of up to $950M of Taxable Water Revenue Refunding Bonds Commission Meeting Date: April 12, 2022

Savings: $107.2 million; 11.5%
• $442.2 million Series 2017 DEFG Water Revenue Bonds (tax-exempt):

Savings: $51 million; 10.7%
• $656.9 million Series 2019 ABC Water Revenue Bonds (taxable):

Savings: $86.6 million; 14.0%
• $664.4 million Series 2020 EFGH Water Revenue Bond (taxable):

Savings: $75.2 million; 12.0%

From a percentage standpoint , the savings from the taxable Series 2019 ABC D Water Revenue Bonds refunding was notably greater than the savings in each of the previous tax-exempt refundings due to improved market interest rates. Given current market rates, estimated PV savings for the proposed 2022 Water Refunding Bonds is approximately $63 million or 8.10% of the amount of refunded bonds, which, on a percentage basis, i s higher than the savings achieved in any of the previous refunding issues shown above.

Water Indenture Amendments: As part of the issuance of the 2022 Water Refunding Bonds, the Commission will be asked to approve a supplemental indenture (the “43rd Supplemental Indenture”) that will contain certain provisions that amend the Water Indenture upon future bondholder consent and certain other conditions under the Indenture. These amendments, already made to the Wastewater Indenture, will bring the existing Indenture up to more modern and market-accepted standards for issuing variable rate debt, and short-term debt which is projected to be refinanced rather than paid from net revenues. The 43rd Supplemental Indenture will also contain proposed amendments with respect to the potential use of low-cost federal Water Infrastructure Finance and Innovation Act (“WIFIA”) loans and includes clarity on the rate-setting obligations of the Water Enterprise. Such changes will provide the SFPUC with debt portfolio flexibility for the Water Enterprise to consider in future financings.

Method of Sale/Underwriting: Staff recommends that the transaction be sold on a negotiated basis given advance refunding structuring considerations and the need to

optimize refunding savings. In addition, it will be important to reach out to investors to ensure the transaction is well received. . On December 7, 2021, a Request for Proposals to select underwriters was sent to pre-qualified firms in the Controller’s Office of Public Finance Underwriter Pool. On December 21, 2021, 13 proposals were received. After review and scoring of the proposals by SFPUC debt management staff and its independent municipal advisors, Morgan Stanley achieved the highest score.

Consequently, s taff is recommendin g that Morgan Stanley be selected as the most responsive and cost -effective proposal to serve as Senior Manager for the transaction.

Also, to assist in the marketing and sale of the 2022 Water Refunding Bonds , staff is recommending a syndicate of other underwriters as follows: Siebert serving as Co-Senior Manager, and Wells Fargo, Jeffries, and RBC serving as Co-Managers.

Bonds t o Be Sold With “Green Bond” Designation: SFPUC staff has previously received a certification from an independent consultant confirming that bonds issued to fund WSIP (whether they are new money or refunding bonds) qualify for “Green Bond” designation. The 2022 Sub- Series A Bonds, which refunds bonds related to past WSIP funding, will be designated as “Green Bonds” . The SFPUC has pre viously issued the 2016 Series A Water Revenue Bonds , 2016 Series C Water Revenue Bonds, 2017 Sub- Execute Agreement: Authorize the Issuance of up to $950M of Taxable Water Revenue Refunding Bonds Commission Meeting Date: April 12, 2022

Series A Water Revenue Bonds, 2017 Sub-Series D Bonds, 2017 Sub-Series G Bonds, 2019 Sub-Series A Bonds , 2020 Sub-Series A Bonds, and 2020 Sub- Series E each o f which were sold to fund the WSIP, as “Green Bonds”. The issuance of Green Bonds allows the SFPUC to demonstrate to interested stakeholders and investors that it is a sensitive environmental steward. In addition, Green Bonds are in high demand by certain types of investors that seek to hold bonds with positive environmental impacts in their portfolios. By offering Green Bonds, the SFPUC can increase its bond investor base, which in turn can increase demand in its bonds.

Analysis of Financing Alternatives: As part of the 10-Year Financial Plan, the SFPUC conducts market analysis for funding of the capital program, taking into consideration capital project funding needs and timing, available financing alternatives, market conditions and impacts on our ratepayers. For each financing, SFPUC Finance staff examines the most cost -effective financing structure within the context of the overall capital plan and capital market dynamics at the time of issuance.

SFPUC Finance staff has reviewed the Water Enterprise’s outstanding debt portfolio and capital financing needs and recommends primary funding through revenue bonds and low-cost State Revolving Fund (SRF) loans. When interest rates are at low levels, such as they are currently, SFPUC Finance staff also recommends low -cost refundings of outstanding revenue bonds. Based on this review, staff has determined that this refunding transaction will result in significant savings to Water Enterprise ratepayers.

Transaction Schedule: Depending on market conditions, it is expected that the 2022 Water Refunding Bonds will be sold on a negotiated basis, with pricing in mid-April and closing in late April.

SB 450 Legislation Compliance: In 2017, Senate Bill 450 (SB 450) was enacted. The law requires the governing body of a local public body to obtain and disclose, prior to authorization of a new bond issue, good faith estimates of the following financing-related information:

1. True Interest Cost (TIC) of the bonds.

2. Finance charge of the bonds: Representing the sum of all fees and charges paid to third parties.

3. Amount of proceeds received: Representing proceeds of the bonds net of fees and charges paid to third parties and any reserves or capitalized interest funded by the bonds.

4. Total payment amount: The sum of all debt service payments on the bonds calculated to the final maturity of the bonds.

SB 450 requires that the good faith estimates be obtained from either the issuer’s municipal advisor, underwriter, or third-party lender. The Commission has been presented with this information in past staff reports requesting approval of bonds issued or loans executed since the enactment of SB 450.

The following represent s a good faith reasonable estimate of certain costs of the 2022 Water Refunding Bonds for purposes of compliance with SB 450 and based upon information as of March 11, 2022. Staff has consulted with its municip al advisor, Montague DeRose & Associates, and obtained estimates reflecting the expected closing date with regard to the 2022 Water Refunding Bonds. Actual results may vary.

Execute Agreement: Authorize the Issuance of up to $950M of Taxable Water Revenue Refunding Bonds Commission Meeting Date: April 12, 2022

1. True Interest Cost (TIC): 2.75%

2. Finance Charge of the Bonds: $3,568,260 (reflects both costs of issuance and underwriter’s discount).

3. Amount of Proceeds Received by the Public Body for Sale of the Bonds: $899,501,074

4. Total Payment Amount: Total Net Debt Service of $1,155,520,456 (represents total estimated debt service, net of capitalized interest, if any).

Bond Documents: The Commission is being asked to approve the form and aut horize the execution of documents relating to the 2022 Water Refunding Bonds , as described below.
1) Official Statement (Preliminary/Final) – This document is the primary potential investor disclosure document that describes the terms of the bonds, source of repayment, risk factors, financial and operating results and projections, and the most current background information of the Water Enterprise and the SFPUC. The document will be provided to rating agencies and prospective investors. The preliminary offici al statement contains all material information about the Water Enterprise and is intended to be substantially final (except for certain pricing information and updates that may occur prior to sale), and through the authorizing resolution, the General Manager is permitted to make such changes as are necessary to make such document complete and accurate.
2) Indenture (as amended by the Forty -Third through Forty-Sixth Supplemental Indentures) – The Indenture is an agreement between the SFPUC and the Trustee which sets forth the contractual terms for the bonds, including pledge of revenues, flow of funds, covenants, defaults and remedy provisions, and provisions to issue additional debt. The Supplemental Indentures set forth the terms of each individual series of bonds, including maturities, interest rates and terms of early redemption. 3) Continuing Disclosure Certificate – Agreement between the Trustee and the SFPUC setting forth (in this case, for the Water Enterprise) the SFPUC’s commitment to providing annual financial and operating data disclosure, and the ongoing disclosure of certain enumerated material events as set forth by the Securities and Exchange Commission’s (SEC) Rule 15c2-12
. It is required that the SFPUC execute a
continuing disclosure certificate (CDC) to enable the underwriters to underwrite the bonds. The Continuing Disclosure Certificate is contained as an appendix within the Official Statement.
4) Bond Purchase Contract – Related to a negotiated sale, it is the agreement between the SFPUC and the Underwriters setting forth conditions upon which the bonds will be offered and underwritten by the Underwriters, including provisions allowing the Underwriters to not underwrite the bonds in the event of certain circumstances. 5) Escrow Agreement – Related to an advance refunding, it is the agreement with the escrow agent (typically the Trustee) to hold the escrow securities that are purchased with proceeds of the advance refunding bonds and used to legally defease the refunded bonds through the bonds’ first optional redemption date. The agreement also outlines the roles and responsibilities of the escrow agent to pay debt service on the refunded bonds until their redemption date.

Execute Agreement: Authorize the Issuance of up to $950M of Taxable Water Revenue Refunding Bonds Commission Meeting Date: April 12, 2022

6) Notice of Intention to Sell – Related to a competitive sale, the document is published up to 15 days prior to the bond sale date alerting prospective bidders of the sale. 7) Notice of Sale – Related to a competitive sale, the document invites bids and describes details of the bonds, including the method of delivering bids, the date, time and place of bid opening, and the basis for determining the winning bid.

Legal and Advisory Team: SFPUC Finance worked collaboratively with outside financial advisors, the Office of the City Attorney , and outside bond, disclosure, and underwriters’ counsel, to develop all aspects of the documents associated with the sale of the 2022 Water Refunding Bonds, including all attachments. The parties working with the SFPUC on this financing are as follows:
• City Attorney’s Office of the City and County of San Francisco • Disclosure Counsel: Orrick, Herrington & Sutcliffe LLP • Co-Bond Counsel: Norton Rose Fulbright U.S. LLP; Law Office of Monica M.

Baranovsky
• Co-Municipal Advisors: Montague DeRose & Associates ; Backstrom McCarley Berry
• Trustee: U.S. Bank National Association
• Escrow Verification Agent: [TO COME]
• Independent Pricing Verification Agent: Kitahata and Company

Because this transaction will be sold on a negotiated basis, in conformance with the SFPUC’s debt policies, an independent pricing verification agent —a financial advisor not involved in the transaction—will be engaged to provide an independent pricing report and comparative sales details to reassure that the sale provided best possible pricing f or the rate payers.

Disclosure Considerations: Under federal securities laws, the SFPUC must disclose the financial condition of the Water Enterprise to prospective investors as included in the Preliminary Official Statement and the final Official Statement for the bonds, and such disclosure must be complete and accurate with no material misstatements or material omissions.

The following sets forth the disclosure considerations related to the Preliminary Official Statement.

The preparation of the Preliminary Official Statement reflects a rigorous and iterative drafting and review process including subject matter experts and senior management within the Water Enterprise, Infrastructure and WSIP program managers, the City Attorney’s Office and the SFPUC’s financing team. In addition, the SFPUC has been assisted in the preparation of the document by Orrick, Herrington & Sutcliffe LLP, disclosure counsel.

Prior to distribution to investors, the Preliminary Official Statement will be updated to reflect the most current information of the Water Enterprise. The final Official Statement will be distributed subsequent to the sale of the b onds and will include relevant pricing- related information.

Counsel has advised that prior to approval of the form of Preliminary Official Statement, Commissioners should review the attached documents and be satisfied that:
1) They understand the key terms of the bond transaction, including commitments undertaken by the SFPUC.

Execute Agreement: Authorize the Issuance of up to $950M of Taxable Water Revenue Refunding Bonds Commission Meeting Date: April 12, 2022

2) The process followed in the preparation of the Preliminary Official Statement and final Official Statement is adequate.
3) SFPUC officers or the City Attorney’s Office are aware of all matters important to the financial condition of the SFPUC and the Water Enterprise of which Commissioners have personal knowledge.

A summary level bond disclosure “Questions and Answers” is set forth below:

Q. What is the size of the bond issue?
A. The SFPUC expects to issue an aggregate not-to-exceed $950 million of the 2022 Water Refunding Bonds.

Q. Why are bonds being issued?
A. The 2022 Water Refunding Bonds are being issued as advance refunding bonds to provide debt service savings to the ratepayers.

Q. What is the bond structure?
A. The 2022 Water Revenue Bonds will consist of four series of senior lien, fixed rate taxable bonds having maturities equal to the maturities of the bonds being refunded. The 2022 Water Refunding Bonds will not fund a debt service reserve fund.

Q. How will the bonds be sold?
A. The 2022 Water Refunding Bonds will be sold through a negotiated sale where the pricing terms of the bonds are set after negotiating with the underwriters based on investor demand and market conditions.

Q. How will debt service on the bonds be paid?
A. The 2022 Water Refunding Bonds will be repaid from the “net revenues” of the Water Enterprise, in accordance with the Water Indenture, the source of which is rates and charges. Net revenues are those revenues remaining after the payment of Operating and Maintenance Expenses of the Water Enterprise.

Q. What impact will the issuance of the bonds have on Water Enterprise rates? A. Debt service and debt service coverage requirements have been included in the current Water Enterprise 10-Year Financial Plan, which projects average annual retail rate increases of 3.5% for the period of FY 2022-23 through FY 2031-32.

However, the projected savings related to the 2022 Water Refunding Bonds have not yet been included in the 10-Year Financial Plan.

Q. Will issuance of the bonds have a negative impact on the SFPUC credit ratings?
A. The SFPUC will apply for ratings for the 2022 Water Refunding Bonds. Staff does not anticipate any negative rating action from the issuance of the 2022 Water Refunding Bonds.

If there is any information Commissioners believe they need to understand of the transaction as presented for approval, or to evaluate the adequacy of disclosure, or if Commissioners have important information concerning the Water Enterprise of which they are not sure the SFPUC is aware, Commissioners are encouraged to contact SFPUC finance staff or the City Attorney’s Office.

Execute Agreement: Authorize the Issuance of up to $950M of Taxable Water Revenue Refunding Bonds Commission Meeting Date: April 12, 2022

Environmental
Review
The Environmental Review Officer has previously issued the certificates required by subsection (b) of Section 8B.124 of the Charter with respect to the projects financed with the proceeds of the bonds to be refinanced with 2022 Water Refunding Bonds. All projects listed in these certificates that proceeded to construction have undergone any applicable California Environmental Quality Act review.

Result of
Inaction:

A delay or denial in approving this agenda item will potentially result in not achieving debt service savings for ratepayers.

Recommendation: SFPUC staff recommends that the Commission adopt the attached resolution.

Attachments: (1) Form of Preliminary Official Statement (POS); (including Form of Continuing Disclosure Certificate)
(2) Forms of Forty-Third through Forty-Sixth Supplemental Indentures (3) Form of Bond Purchase Contract
(4) Form of Escrow Agreement
(5) Form of Notice of Intention to Sell
(6) Form of Notice of Sale

PUBLIC UTILITIES COMMISSION

WHEREAS, At a duly called and held election on November 5, 2002, a majority of voters voting on the measure approved Proposition E (“Proposition E of 2002”) which, among other things, amended the Charter of the City and County of San Francisco (“City”) to authorize the Public Utilities Commission (“Commission”) of the City to issue revenue bonds, including notes, commercial paper or other forms of indebtedness, when authorized by ordinance approved by a two -thirds vote of the Board of Supervisors of the City (“Board”), for the purpose of reconstructing, replacing, expanding, repairing or improving water facilities under the jurisdiction of the Commission, subject to satisfaction of certain conditions; and
WHEREAS, The authority to issue revenue bonds pursuant to Proposition E of 2002 is expressly notwithstanding, and in addition to, the authority granted to the Board under Section 9.107 of the City Charter (“Charter”), which provides for the issuance of revenue bonds of the City upon the assent of a majority of the voters upon any proposition for the issuance of revenue bonds; and
WHEREAS, At the duly called and held revenue bond election on November 5, 2002, a majority of voters voting on the measure further approved, under the authority of Charter Section 9.107, Proposition A (“Proposition A of 2002”) which, among other things, authorized the Commission to issue its revenue bonds and/or other forms of revenue financing in a principal amount not to exceed $1,628,000,000 (such authorized amount being subject to reduction to the extent projects designed and intended in substantial part to improve the reliability of the City’s regional water system are issued by the San Francisco Bay A rea Regional Water System Financing Authority) for the purpose of financing the costs of acquisition and construction of improvements to the City’s water system, capitalized interest and all costs and expenses incidental to such improvements, including but not limited to engineering, inspection, auditing, legal and fiscal agent fees and costs of issuance; and
WHEREAS, Pursuant to Proposition E of 2002 and various ordinances and resolutions adopted by the Board and this Commission thereunder, there has been authorized $4,617,099,036 aggregate principal amount of water revenue bonds or other forms of indebtedness, including notes, commercial paper, and other short -term indebtedness (not counting refunding bonds), of which authorization $3,660,525,000 aggregate principal amount has been utilized; and
WHEREAS, Pursuant to Proposition A of 2002 and various ordinances and resolutions adopted by the Board and this Commission thereunder, there has been authorized $1,628,000,000 aggregate principal amount of water revenue bonds or other forms of indebtedness, including notes, commercial paper, and other short -term indebtedness (not counting refunding bonds), of which authorization $1,499,230,000 aggregate principal amount has been utilized; and
WHEREAS, Charter Section 9.109 authorizes the Board to provide for the issuance of revenue refunding bonds, for which no voter approval is required, for the purpose of refunding any outstanding revenue bonds of the City provided such refunding bonds are

expected to result in net debt service savings to the City on a present value basis, calculated as provided by ordinance; and
WHEREAS, Pursuant to Charter Section 9.109 and a related ordinance regarding debt service savings proposed to be adopted by the Board, the Commission expects to be authorized to issue refunding water revenue bonds without limitation as to principal amount, so long as such refunding bonds comply with Section 9.109 of the Charter and, among other conditions, the refunding results in at least 3% net present value debt service savings; and
WHEREAS, It is proposed, conditioned on adoption by the Board of the proposed ordinance described in the preceding clause, that the Commission issue, subject to the other limitations as provided herein, one or more series of taxable or tax -exempt water revenue refunding bonds (“2022 Refunding Bonds”) for the principal purpose of refunding for debt service savings outstanding water revenue bonds in an aggregate principal amount not to exceed $950,000,000, pursuant to the terms of the Amended and Restated Indenture, dated as of August 1, 2002 (as supplemented and amended, the “Indenture”), by and between the Commission and the U.S. Bank Trust Company, National Association, as successor trustee (the “Trustee”), and one or more supplemental indentures (“Supplemental Indentures”), between the Commission and the Trustee, as herein provided; and WHEREAS, The refunding of certain of the Commission’s outstanding water revenue bonds as proposed will be accomplished by depositing proceeds of the 2022 Refunding Bonds and certain other amounts in one or more irrevocable escrow funds, each established and held in trust by the trustee for the bonds to be refunded (the “Refunded Bonds”) pursuant to one or more escrow agreements between the Commission and said trustee (collectively, the “Escrow Agreements”), which moneys and the investment income thereon are to be applied to pay the principal of and the interest and redemption premium, if any, on the applicable Refunded Bonds as provided therein; and WHEREAS, The Indenture permits amounts in such irrevocable escrow funds to be invested in Federal Securities (as defined in the Indenture) or general obligation bonds of the State of California; and
WHEREAS, It is proposed that the 2022 Refunding Bonds be sold in one or more series or subseries by competitive sale pursuant to one or more official notices of sale (each, an “Official Notice of Sale”) and a corresponding notice of intention to sell bonds (each, a “Notice of Intention to Sell”), or in a negotiated sale pursuant to one or more Bond Purchase Contracts (each, a “Bond Purchase Contract”), or in some combination of competitive and negotiated sales; and
WHEREAS, It is proposed that one or more preliminary official statements for the 2022 Refunding Bonds (each a “Preliminary Official Statement”) and one or more final official statements for the 2022 Refunding Bonds (each an “Official Statement”) be used in connection with the offering and sale of the 2022 Refunding Bonds from time to t ime; and

WHEREAS, It is proposed that one or more continuing disclosure certificates (each a “Continuing Disclosure Certificate”) be executed and delivered with respect to the 2022 Refunding Bonds in order to assist the underwriters thereof in complying with Securities and Exchange Commission Rule 15c2-12 (“Rule 15c2-12”); and WHEREAS, The Commission has been presented with and has examined proposed forms of Supplemental Indentures for each series of 2022 Refunding Bonds, and forms of Official Notice of S ale, Notice of Intention to Sell, Bond Purchase Contract, Escrow Agreement, Preliminary Official Statement and Continuing Disclosure Certificate; and WHEREAS, The proposed forms of Supplemental Indentures include amendments to the Indenture to conform them to corresponding provisions in the indentures related to the Commission’s other enterprises, which amendments will become effective only upon compliance with the Indenture’s requirements for Bondholder consent and otherwise as set forth in the Indenture; and
WHEREAS, Subject to the requirements set forth in applicable Board resolutions and ordinances, Section 9.109 of the Charter and the related proposed ordinance described above, and the requirements of the Indenture, the Commission will be duly authorized and empowered, pursuant to each and every requirement of law, to authorize the foregoing transactions and issue the 2022 Refunding Bonds and to authorize the execution and delivery (as applicable) of one or more Official Notices of Sale, one or more Noti ces of Intention to Sell, one or more Bond Purchase Contracts, one or more Preliminary Official Statements, one or more final Official Statements, one or more Escrow Agreements, one or more Continuing Disclosure Certificates and related documents, each as appropriate for the issuance of the 2022 Refunding Bonds, for the purposes, in the manner and upon the terms provided herein; and
WHEREAS, In compliance with California Government Code Section 5852.1, the Commission has obtained from Montague DeRose and Associates, LLC, one of the municipal advisors to the Commission with respect to the 2022 Refunding Bonds, good faith estimates of the following information: (a) the true interest cost of the 2022 Refunding Bonds, (b) the sum of all fees and charges paid t o third parties with respect to the 2022 Refunding Bonds, (c) the amount of proceeds of the 2022 Refunding Bonds expected to be received net of the fees and charges paid to third parties and any reserves or capitalized interest paid or funded with proceeds of the 2022 Refunding Bonds, and (d) the sum total of all debt service payments on the 2022 Refunding Bonds calculated to the final maturity of the 2022 Refunding Bonds plus the fees and charges paid to third parties not paid with the proceeds of the 2022 Refunding Bonds, and such estimates are disclosed and set forth in the staff report provided to the Commission in connection with this resolution; and
WHEREAS, The Environmental Review Officer has previously issued the certificates required by subsection (b) of Section 8B.124 of the Charter with respect to the projects financed with the proceeds of the bonds to be refinanced with 2022 Water Refunding Bonds and all projects listed in these certificates that proceeded to construction have undergone any appli cable California Environmental Quality Act review; ; now, therefore, be it

RESOLVED by the Public Utilities Commission of the City and County of San Francisco, as follows:

Section 1. Issuance of the 2022 Refunding Bonds. The issuance of the 2022 Refunding Bonds, as currently anticipated in four subseries (2022 Sub- Series A Bonds (Refunding – Federally Taxable) (WSIP) (Green Bonds), 2022 Sub-Series B Bonds (Refunding – Federally Taxable) (Regional Water), 2022 Sub-Series C Bonds (Refunding – Federally Taxable) (Hetch Hetchy Water) and 2022 Sub-Series D Bonds (Refunding – Federally Taxable) (Non-WSIP), one or more of which subseries may be issued as green bonds, or in such other or additional series or subseries as may be determined by the General Manager (all references in this resolution to the General Manager of the Commission to include any authorized designee thereof pursuant to Section 11 hereof) and on one or more dates, in an aggregate principal amount not exceeding $950,000,000 is hereby authorized and approved by the Commission, subject to the limitations and conditions provided herein.

The issuance of the 2022 Refunding Bonds is authorized and approved subject to the limitations and conditions of Section 9.109 of the Charter and a related ordinance regarding debt service savings proposed to be adopted by the Board and the requirements of the Indenture, including without limitation Section 3.04, Section 3.05 and 3.06 of the Indenture and the applicable requirements of the Commission’s policies and procedures for refunding bonds. The Refunded Bonds shall be selected by the General Manager, in consultation with Montague DeRose and Associates, LLC and Backstrom McCarley Berry & Co., LLC, the municipal advisors to the Commission with respect to the 2022 Refunding Bonds (together, the “Municipal Advisors”), upon a determination that the refunding meets the requirements described in the preceding sentence and would be financially advantageous to the Commission and its operations. The proceeds of the 2022 Refunding Bonds shall be applied (a) to retire the Refunded Bonds and (b) to pay the costs of issuance of the 2022 Refunding Bonds.

The General Manager is hereby authorized and directed to determine the aggregate principal amount of 2022 Refunding Bonds to be issued from time to time (subject to the maximum amounts and further limitations and conditions set forth herein) and to determine the various titles and series designations of the 2022 Refunding Bonds. The 2022 Refunding Bonds may be issued as obligations the interest on which is or is not subject to federal income tax. The forms of the 2022 Refunding Bonds, in substantially the forms set forth in the forms of the Supplemental Indentures presented to this meeting, are hereby approved. The General Manager of the Commission is hereby authorized and directed to approve and to execute the 2022 Refunding Bonds by manual or facsimile signature, and the Secretary of the Commission is hereby authorized and directed to attest, by manual or facsimile signature, with such changes, additions, amendments or modifications thereto which they may approve with the advice of the City Attorney, such approval to be conclusively evidenced by the issuance of the 2022 Refunding Bonds, subject to the limitations set forth in Section 2 hereof.

Section 2. Sale of 2022 Refunding Bonds. The sale of the 2022 Refunding Bonds, in one or more series or subseries and on one or more dates, is hereby authorized and approved by the Commission, subject to the limitations and conditions provided herein.

The Commission delegates to the General Manag er the authority to determine, with the advice of the Municipal Advisors, whether to sell the 2022 Refunding Bonds from time to time by negotiated sale or competitive sale, provided that the General Manager shall not approve the sale of the 2022 Refunding Bonds on a negotiated basis until he determines, upon consultation with the Municipal Advisors, that (i) the sale of the 2022 Refunding Bonds through a negotiated process is likely to enhance the ability of the Commission to timely sell the 2022 Refunding Bonds or to achieve a lower overall cost to the Commission, or both, and (ii) the requirements of the Commission’s Debt Management Policies and Procedures, as the same may have been amended and in effect at the time of such determination, have been satisfied. Subject to the other limitations provided herein, the interest rate or rates on the 2022 Refunding Bonds shall not exceed twelve percent (12%) and the final maturity of any 2022 Refunding Bonds shall not exceed 40 years from their date of issuance.

Section 3. Escrow Agreement. The proposed form of Escrow Agreement submitted to this Commission, and the terms and conditions thereof, is hereby approved.

In order to implement any refunding authorized herein, the General Manager is hereby authorized to enter into one or more Escrow Agreements with the trustee of the Refunded Bonds, substantially in the form presented to this meeting and on file with the Secretary of the Commission, with such changes and additions as the General Manager may approve upon consultation with the City Attorney, each such approval to be evidenced conclusively by the delivery to the trustee of such Escrow Agreement. The Secretary of the Commission is directed to file a copy of said form of Escrow Agreement with the minutes of this meeting.

Section 4. Disposition of Revenues; Rate Covenant . Section 5.01(b) of the Indenture which sets forth the disposition of Revenues (as defined in the Indenture) applicable to the Commission’s Water Enterprise Bonds is hereby confirmed by the Commission and the Commission further confirms, pledges and covenants with the holders of the 2022 Refunding Bonds that the Revenues shall be appropriated and expended in the order of priority set forth in Section 5.01(b) of the Indenture, as the same may be amended from time to time. This Commission also declares that the Commission will comply with all of the terms, provisions and covenants contained in the Indenture, as the same may be amended from time to time, including the covenants to establish, fix, prescribe and collect rates, fees, and charges sufficient to enable the Commission to comply with the terms, conditions, and covenants of the Indenture.

Section 5. Supplemental Indentures . The proposed forms of Supplemental Indentures for each series of 2022 Refunding Bonds submitted to this Commission, and the terms and conditions thereof, are hereby approved. The General Manager of the Commission is hereby authorized and directed to execute and deliver and the Secretary of the Commission or the Secretary’s desig nee is authorized to attest to one or more Supplemental Indentures in such form or forms, with such additions thereto or changes therein which they may approve with the advice of the City Attorney, such approval to be conclusively evidenced by the execution and delivery of such Supplemental Indentures.

The Secretary of the Commission is directed to file a copy of each form of Supplemental Indenture with the minutes of this meeting. Subject to the further limitations hereof, the

principal amount, date, matur ity date or dates, maximum interest rate or rates, series designation, interest payment dates, forms, registration privileges, place or places of payment, terms of redemption, insurance provisions and other terms of the 2022 Refunding Bonds shall be as provided in the Indenture.

Section 6. Preliminary Official Statement and Official Statement. One or more Preliminary Official Statements, in substantially the form submitted to the Commission, is hereby approved, and the General Manager is hereby authorized t o certify from time to time, for and on behalf of the Commission, that such Preliminary Official Statement, with such changes, additions and supplements as they may deem necessary or appropriate in the interest of the Commission, in consultation with the C ity Attorney, is deemed final as of its date, within the meaning of Rule 15c2- 12 (except for the omission of certain final pricing, rating and related information as permitted by Rule 15c2- 12). Such Preliminary Official Statement is hereby authorized to be used from time to time in connection with the marketing of the 2022 Refunding Bonds. In connection with the sale of all or a portion of the 2022 Refunding Bonds, the General Manager is hereby authorized and directed, for and on behalf of the Commission, t o execute one or more final Official Statements for such 2022 Refunding Bonds in substantially the form of such Preliminary Official Statement, and to cause the delivery of such Official Statement to the underwriters or successful bidders for the 2022 Refunding Bonds for distribution to purchasers of such 2022 Refunding Bonds. Notwithstanding the foregoing authorization, Commission staff is hereby directed to return to the Commission for authorization of any Preliminary Official Statement or Official Statement to be used in connection with any sale of 2022 Refunding Bonds that is to occur more than ninety (90) days following the date hereof.

Section 7. Competitive Sale; Official Notice of Sale . If the General Manager determines to sell all or a portion of the 2022 Refunding Bonds by competitive sale from time to time, the proposed form of Official Notice of Sale inviting bids for such 2022 Refunding Bonds, submitted to this Commission, is hereby approved, and the Municipal Advisors are hereby authorized and directed to disseminate the Official Notice of Sale to prospective bidders in connection with each sale of such 2022 Refunding Bonds, with such additions, changes and corrections thereto as the General Manager shall approve with the advice of the City Atto rney, such approval to be conclusively evidenced by the dissemination thereof to prospective bidders. In a competitive sale, electronic proposals shall be received on such date or dates as shall be selected and changed as necessary by the General Manager for the purpose of the sale of the 2022 Refunding Bonds, in accordance with the terms and conditions of the applicable Official Notice of Sale. In a competitive sale, the General Manager is hereby authorized to award the 2022 Refunding Bonds of each series or subseries (or in any aggregate thereof) to be sold to the best responsible bidder whose bid represents the lowest true interest cost to the Commission with respect to such series or subseries, and provided, such bid shall provide a true interest cost to the Commission of not to exceed twelve percent (12%) per annum, and the price to be paid to the Commission for such series or subseries of 2022 Refunding Bonds (or aggregate thereof) shall not be less than ninety- five percent (95%) of the par value ther eof. If such true interest cost and price are acceptable to the General Manager and satisfy the foregoing criteria, the General Manager is hereby authorized and directed to accept, on behalf of the Commission, the best responsive bid for such 2022 Refundi ng Bonds. The Secretary of

the Commission is directed to file a copy of the proposed form of Official Notice of Sale with the minutes of this meeting.

Section 8. Notice of Intention to Sell. The proposed form of Notice of Intention to Sell submitted to this Commission is hereby approved. If the General Manager determines to sell all or a portion of the 2022 Refunding Bonds by competitive sale, the General Manager is hereby authorized and directed to cause a Notice of Intention to Sell, subject to such corrections, revisions or additions as may be approved by the General Manager (such approval to be conclusively evidenced by the publication thereof), to be published once at least five (5) days before the date of sale of the applicable series or subseries of 2022 Refunding Bonds in a financial newspaper of general circulation in the City and in a financial publication generally circulated throughout the state or reasonably expected to be disseminated among prospective bidders for the 2022 Refunding Bonds.

The Secretary of the Commission is directed to file a copy of said form of Notice of Intention to Sell with the minutes of this meeting.

Section 9. Negotiated Sale; Bond Purchase Contract . If the General Manager determines to sell all or a portion of the 2022 Refunding Bonds by negotiated sale from time to time pursuant to the authority granted in Section 2 hereof, for such 2022 Refunding Bonds, the General Manager is hereby authorized to select and appoint one or more underwriters (each, an “Underwriter” and, collectively, the “Underwriters”) from the Commission’s or the City’s pool of prequalified underwriters in accordance with the City’s policies and procedures with respect thereto, subject to the limits on underwriter compensation set forth below. The General Manager is hereby authorized and directed, for and on behalf of and in the name of the Commission, to sell such 2022 Refunding Bonds at one or more negotiated sales in such principal amount as the General Manager may determine, subject to the further limitations and conditions hereof. The General Manager is hereby authorized to enter into one or more Bond Purchase Contracts with one or more of the Underwriters, individually or collectively as the General Manager deems appropriate, substantially in the form presented at this meeting and on file with the Secretary of the Commission, with such changes and additions as the General Manager may approve upon consultation with the City Attorney, such approval to be evidenced conclusively by the execution and delivery of each such Bond Purchase Contract; provided, however, that the total compensation to the Underwriters shall not exceed one-half percent (0.50%) of the par value of the 2022 Refunding Bonds to be sold pursuant to any such Bond Purchase Contract. 2022 Refunding Bonds sold in a negotiated sale shall be delivered to the Underwriters upon payment of the purchase price agreed upon in the applicable Bond Purchase Contract, together with accrued interest, if any.

Section 10. Continuing Disclosure Certif icate. The proposed form of Continuing Disclosure Certificate for the 2022 Refunding Bonds, submitted to this Commission, is hereby approved. The General Manager is hereby authorized and directed to execute one or more Continuing Disclosure Certificates for the 2022 Refunding Bonds from time to time, substantially in the form submitted to this Commission, with such additions, changes, and corrections thereto as the General Manager shall approve with the advice of the City Attorney, such approval to be conclusively evidenced by the execution and delivery of such Continuing Disclosure Certificate. The Secretary of the Commission

is directed to file a copy of said form of Continuing Disclosure Certificate with the minutes of this meeting.

Section 11. General Authority. The General Manager, the Deputy General Manager and Chief Operating Officer, the Assistant General Manager, Business Services and Chief Financial Officer, and each Deputy Chief Financial Officer of the Commission and the officers of the City are hereby authorized and directed, each acting alone, for and in the name and on behalf of this Commission, to execute and deliver any and all documents, certificates and representations, including, but not limited to, signature certificates, no-litigation certificates, tax certificates, letters of representation relating to book-entry registration, custody agreements, filing agent agreements, listing agreements and certificates concerning the contents of any Official Statement and any Preliminary Official Statement, to contract for municipal bond insurance for all or a portion of the 2022 Refunding Bonds if determined by the General Manager, with the advice of the Municipal Advisors, to be beneficial to the Commission, to contract for one or more surety bonds or insurance policies for the debt service reserves for the 2022 Refunding Bonds if determined by the General Manager, with the advice of the Municipal Advisors, to be beneficial to the Commission, to do any and all things and take any and all actions which may be necessary or advisable, in their discretion, to accomplish the intent and purposes of this resolution including the issuance and sale of the 2022 Refunding Bonds, the refunding of Refunded Bonds and the other actions which the Commission has approved in this resolution. The General Manager is authorized to delegate any of the responsibilities or duties set forth in this resolution to the Deputy General Manager and Chief Operating Officer, to the Assistant General Manager, Business Services and Chief Financial Officer, or to any Deputy Chief Financial Officer of the Commission, each of which is an authorized designee for purposes of this Resolution. The other officers of the Commission are hereby authorized to delegate any of the actions on their behalf set forth herein to another officer or employee of the Commission.

Section 12. Ratification. All actions heretofore taken by the officers, employees, and agents of the Commission with respect to the authorization, sale, and issuance of the 2022 Refunding Bonds prior to the date hereof and in accordance with the provisions hereof are hereby approved, confirmed, and ratified.

Section 13. Effective Date. This resolution shall take effect from and after its adoption.

I hereby certify that the foregoing resolution was adopted by the Public Utilities Commission at its meeting April 12, 2022.

Secretary, Public Utilities Commission
DRAFT
4/4/2022
PRELIMINARY OFFICIAL STATEMENT DATED APRIL __, 2022

This Preliminary Official Statement and the information contained herein are subject to completion and amendment. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of such jurisdiction. 4163-6481-6438.1

In the opinion of Norton Rose Fulbright US LLP, San Francisco, California, and The Law Office of Monica M. Baranovsky, Novato , California, Co-Bond Counsel to the SFPUC, under existing law, interest on the 2022ABCD Bonds is exempt from personal income taxes imposed by the State of California. Co-Bond Counsel express no opinion with respect to the exclusion from gross income for federal income tax pur poses of the interest on the 2022ABCD Bonds. Such interest is not intended to be excluded from gross income for federal income tax purposes. See “TAX MATTERS” herein.

$__________*

PUBLIC UTILITIES COMMISSION OF THE CITY AND COUNTY OF SAN FRANCISCO San Francisco Water Revenue Bonds, 2022 Series ABCD

$__________*
2022 Sub-Series A Bonds
(Refunding – Federally Taxable)
(WSIP) (Green Bonds)

$__________*
2022 Sub-Series B Bonds
(Refunding – Federally Taxable)
(Regional Water)
$__________*
2022 Sub-Series C Bonds
(Refunding – Federally Taxable)
(Hetch Hetchy Water)

$__________*
2022 Sub-Series D Bonds
(Refunding – Federally Taxable)
(Non-WSIP)
Dated: Date of Delivery Due: November 1, as shown on inside cover pages

General. This cover page contains certain information for quick reference only. It is not intended to be a summary of the security or terms of the water revenue bonds captioned above. Potential investors are instructed to read the entire Official Statement, including the appendices hereto, to obtain information essential to making an informed investment decision.

Authority for Issuance. The Public Utilities Commission of the City and County of San Francisco (the “SFPUC”) is issuing the San Francisco Water Revenue Bonds, 2022ABCD Bonds in four Sub-Series: (i) the 2022 Sub-Series A Bonds (Refunding – Federally Taxable) (WSIP) (Green Bonds) (the “2022A Green Bonds”), (ii) the 2022 Sub-Series B Bonds (Refunding – Federally Taxable) ( Regional Water) (the “ 2022B Bonds”), (iii) the 2022 Sub-Series C Bonds (Refunding – Federally Taxable) (Hetch Hetchy Water) (the “2022C Bonds”), and (iv) the 2022 Sub-Series D Bonds (Refunding – Federally Taxable) (Non-WSIP) (the “2022D Bonds” and, together with the 2022A Green Bonds, the 2022B Bonds and the 2022C Bonds, the “2022ABCD Bonds”), pursuant to authority granted by the Charter of the City and County of San Francisco (the “City”).

The 2022A Green Bonds will be issued under a Forty-Third Supplemental Indenture, dated as of April 1, 2022 (the “Forty-Third Supplemental Indenture”), by and between the SFPUC and U.S. Bank Trust Company, National Association, as trustee (the “Trustee ”). The 2022B Bonds will be issued under a Fort y-Fourth Supplemental Indenture, dated as of April 1, 2022 (the “Forty-Fourth Supplemental Indenture”), by and between the SFPUC and the Trustee. The 2022C Bonds will be issued under a Forty-Fifth Supplemental Indenture, dated as of April 1, 2022 (the “Forty-Fifth Supplemental Indenture”), by and between the SFPUC and the Trustee. The 2022D Bonds will be issued under a Forty-Sixth Supplemental Indenture, dated as of April 1, 2022 (the “Forty-Sixth Supplemental Indenture”), by and between the SFPUC and the Trustee. The Forty-Third Supplemental Indenture, Forty-Fourth Supplemental Indenture, Forty-Fifth Supplemental Indenture and Forty-Sixth Supplemental Indenture supplement the Amended and Restated Indenture, dated as of August 1, 2002 (as supplemented and amended to date, the “Indenture”), by and between the SFPUC and the Trustee. See “SECURITY FOR THE BONDS.” Plan of Refunding. The 2022ABCD Bonds are being issued to (i) refund and defease all or a portion of certain outstanding water revenue bonds of the SFPUC , as applicable, and (ii) pay the costs of issuance of the 2022ABCD Bonds . See “PLAN OF REFUNDING” and “ESTIMATED SOURCES AND USES OF FUNDS – 2022ABCD Bonds.”
Denominations and Interest. The 2022ABCD Bonds will be available in denominations of $5,000 or any integral multiple thereof and will mature in the years and amounts and accrue interest from their date of delivery at the rates set forth on the inside cover pages of this Official Statement. Interest on the 2022ABCD Bonds is payable semiannually on May 1 and November 1 of each year, commencing November 1, 2022. See “THE 2022ABCD Bonds.” Book-Entry Only. The 2022ABCD Bonds will be issued as fully registered bonds, registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), New York, New York, and will be available to ultimate purchasers (the “Beneficial Owners”) under the book-entry only system maintained by DTC. Beneficial Owners will not receive physical certificates representing their interests in the 2022ABCD Bonds. The principal of, premium, if any, and interest on the 2022ABCD Bonds are payable to DTC by the Trustee, and, so long as DTC is acting as securities depository for the 2022ABCD Bonds, disbursements of such payments to DTC Participants is the responsibility of DTC and disbursements of such payments to the Beneficial Owners is the responsibility of DTC Participants.

See “THE 2022ABCD Bonds.”
Redemption. The 2022ABCD Bonds are subject to redemption prior to maturity as described herein. See “THE 2022ABCD Bonds – Redemption.” Security. Under the Indenture, the SFPUC has irrevocably pledged the Revenues of its Water Enterprise and all R efundable Credits (in the case of Bonds (defined herein) issued as Build America Bonds) received by the SFPUC to the punctual payment of principal of, premium, if any, and interest on the 2022ABCD Bonds and all outstanding parity revenue bonds, notes or other evidence s of indebtedness authorized under the Indenture, subject to the allocation of funds provided in the Indenture. The 2022ABCD Bonds are payable on parity with certain Outstanding Bonds previously issued by the SFPUC under the Indenture and all o utstanding

* Preliminary, subject to change.

NEW ISSUE – Book-Entry Only Ratings:

S&P: “ ___”
Moody’s: “ ___”
(See “RATINGS.”)
4163-6481-6438.1

parity revenue bonds, notes or other evidence s of indebtedness authorized under the Indenture. No Bond Reserve Account will be established for the 2022ABCD Bonds. See “SECURITY FOR THE BONDS.”
Limited Obligation. The SFPUC is not obligated to pay the principal of, premium, if any, or interest on the 2022ABCD Bonds except from Revenues. The SFPUC has no taxing power. The General Fund of the City is not liable for the payment of the principal of, premium, if any, or interest on the 2022ABCD Bonds, and neither the credit nor the taxing power of the City is pledged to the payment of the principal of, premium, if any, or interest on the 2022ABCD Bonds. The 2022ABCD Bonds are not secured by a legal or equitable pledge of, or charge, lien or encumbrance upon, any of the property of the City or of the SFPUC or any of its income or receipts, except Revenues. The 2022ABCD Bonds are not secured by the revenues of the SFPUC’s Wastewater Enterprise of Power Enterprise or the revenues of CleanPower SF. See “SECURITY FOR THE BONDS.”

MATURITY SCHEDULES
(See inside cover pages)
The 2022ABCD Bonds are offered when, as and if issued by the SFPUC and received by the Underwriters, subject to the approval of validity by Norton Rose Fulbright US LLP, San Francisco, California, and The Law Office of Monica M. Baranovsky, Novato, California, Co-Bond Counsel to the SFPUC, and to certain other conditions. Certain matters will be passed upon for the SFPUC and the City by Orrick, Herrington & Sutcliffe LLP, San Francisco, California, Disclosure Counsel, and by the City Attorney of the City and County of San Francisco. Backstrom McCarley Berry & Co., LLC, San Francisco, California, and Montague DeRose and Associates, LLC, Walnut Creek, California, Co-Municipal Advisors to the SFPUC, assisted in the structuring of this financing. Certain matters will be passed upon for the Underwriters by Nixon Peabody LLP, San Francisco , California. It is expected that the 2022ABCD Bonds in fully reg istered form will be available for delivery in book-entry form through the facilities of DTC, on or about _____________, 2022.

Morgan Stanley Siebert Williams Shank & Co., LLC
Jefferies RBC Capital Markets Wells Fargo

The date of this Official Statement is April ___, 2022.

4163-6481-6438.1

MATURITY SCHEDULES*

2022 Sub-Series A Bonds
(Refunding – Federally Taxable) (WSIP) (Green Bonds)
$___________ Serial Bonds
Maturity
(N
ovember 1)
Principal
Amount Interest Rate Price†
CUSIP‡
Base Number
79771F
ISIN‡
Base Number
US79771F

Common
Code§

$_________ _____% Term Bonds due October 1, ____ Price† ______ CUSIP‡ _______; ISIN‡ ________; Common Code§ ________

$_________ ____% Term Bonds due October 1, ____ Price† ______ CUSIP‡ _______; ISIN‡ ________; Common Code§ ________

2022 Sub-Series B Bonds
(Refunding – Federally Taxable) (Regional Water)
$___________ Serial Bonds
Maturity
(November 1)
Principal
Amount Interest Rate Price†
CUSIP‡
Base Number
79771F
ISIN‡
Base Number
US79771F

Common
Code§

* Preliminary, subject to change.
† Reoffering prices have been provided by the Underwriters. See “UNDERWRITING.” ‡ CUSIP is a registered trademark of the American Bankers Association. CUSIP and ISIN data herein are provided by CUSIP Global Services (“CGS”), which is managed on behalf of the American Bankers Association by FactSet Research Systems Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CGS data base. Neither the SFPUC nor the Underwriters assume any responsibility for the accuracy of the CUSIP or ISIN data.
§ The Common Codes are provided herein by Euroclear Bank S.A./N.V. Common Codes are provided for convenience of reference only. Neither the SFPUC nor the Underwriters assume any responsibility for the accuracy of the Common Codes data.

4163-6481-6438.1

$_________ _____% Term Bonds due October 1, ____ Price† ______ CUSIP‡ _______; ISIN‡ ________; Common Code§ ________

$_________ ____% Term Bonds due October 1, ____ Price† ______ CUSIP‡ _______; ISIN‡ ________; Common Code§ ________

2022 Sub-Series C Bonds
(Refunding – Federally Taxable) (Hetch Hetchy Water)
$___________ Serial Bonds
Maturity
(N
ovember 1)
Principal
Amount Interest Rate Price†
CUSIP‡
Base Number
79771F
ISIN‡
Base Number
US7991F

Common
Code§

$_________ _____% Term Bonds due October 1, ____ Price† ______ CUSIP‡ _______; ISIN‡ ________; Common Code§ ________

$_________ ____% Term Bonds due October 1, ____ Price† ______ CUSIP‡ _______; ISIN‡ ________; Common Code§ ________

2022 Sub-Series D Bonds
(Refunding – Federally Taxable) (Non-WSIP)
$___________ Serial Bonds
Maturity
(November 1)
Principal
Amount Interest Rate Price†
CUSIP‡
Base Number
79771F
ISIN‡
Base Number
US7991F

Common
Code§

$_________ _____% Term Bonds due October 1, ____ Price† ______ CUSIP‡ _______; ISIN‡ ________; Common Code§ ________

4163-6481-6438.1

$_________ ____% Term Bonds due October 1, ____ Price† ______ CUSIP‡ _______; ISIN‡ ________; Common Code§ ________

4163-6481-6438.1

Map of Hetch Hetchy Regional Water System

Figure 1-1 (Not to Scale) – The above map depicts the Hetch Hetchy Regional Water System, which delivers water approximately 160 miles from the Hetch Hetchy Reservoir to San Francisco. The Water Enterprise consists of over 1,235 miles of pipeline, 11 reservoirs, six groundwater wells, eight storage tanks, 24 pump stations, eight hydropneumatic stations and 17 chlorination stations located within the San Francisco city limit and further comprises over 389 miles of pipeline, over 74 miles of tunnels, 11 reservoirs, 13 groundwater wells, five pump stations, and three water treatment plants located outside of San Francisco . For further description of the SFPUC’s Water System, see “THE WATER ENTERPRISE.” The 2022ABCD Bonds are not secured by a legal or equitable pledge of, or charge, lien or encumbrance upon, any of the property of the SFPUC or any of its income or receipts, except Revenues. See “SECURITY FOR THE BONDS.”

4163-6481-6438.1

Map of Service Area and Locations of Wholesale Customers

1. Alameda County Water District

2. City of Brisbane

3. City of Burlingame
4a. CWS - Bear Gulch
4b. CWS - Mid-Peninsula
4c. CWS - South San Francisco

5. Coastside County Water District

6. City of Daly City

7. City of East Palo Alto

8. Estero Municipal Improvement District

9. Guadalupe Valley MID

10. City of Hayward

11. Town of Hillsborough

12. City of Menlo Park

13. Mid-Peninsula Water District

14. City of Millbrae

15. City of Milpitas

16. City of Mountain View

17. North Coast County Water District

18. City of Palo Alto

19. Purissima Hills Water District

20. City of Redwood City

21. City of San Bruno

22. San Jose Municipal Water System

23. City of Santa Clara

24. Stanford University

25. City of Sunnyvale

26. Westborough Water District

Figure 1-2 (Not to Scale) – The above map depicts the Water Enterprise service area (not including the Groveland Community Service District) and the locations of the Wholesale Customers (not including Cordilleras Mutual Wate r Company). The Water Enterprise serves over 2.7 million residential commercial and industrial customers in the San Francisco Bay Area region delivering approximately 185 million gallons per day of water. For further description of the Wholesale Customers, see “THE WATER ENTERPRISE – Wholesale Deliveries.”

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GENERAL INFORMATION
No dealer, broker, salesperson or other person has been authorized by the SFPUC to give any information or to make any representation other than those contained herein and, if given or made, such other information or representation must not be relied upon as having been authorized by the SFPUC.

This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be an y sale of the 2022ABCD Bonds, by any person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the initial purchasers of the 2022ABCD Bonds. Any statement made in this Official Statement involving any forecast or matter of estimates or opinion, whether or not expressly so stated, is intended solely as such and not as a representation of fact.

The information set forth herein other than that provided by the SFPUC, although obtained from sources which are believed to be reliable, is not guaranteed as to accuracy or completeness. The information and expressions of opinion herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the SFPUC or the City since the date hereof.

The Underwriters have provided the following sentence for inclusion in this Official Statement: The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information.

The City maintains a website at http://www.sfgov.org and the SFPUC maintains a website at http://www.sfwater.org.

In addition, certain informatio n and reports found on other websites, and other information and reports, are referred to in this Official Statement. The information and reports available on such websites, and the other referenced information and reports, are not incorporated by reference into this Official Statement and should not be relied upon in making an investment in the 2022ABCD Bonds.

The issuance and sale of the 2022ABCD Bonds have not been registered under the Securities Act of 1933 in reliance upon the exemption provided thereunder by Section 3(a)(2) for the issuance and sale of municipal securities.

IN CONNECTION WITH THE OFFERING OF THE 2022ABCD BONDS, THE UNDERWRITER S MAY

OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 2022ABCD BONDS AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

CONSEQUENTLY, THE MARKET PRICE PAID BY AN INVESTOR DURING THE STABILIZATION PERIOD MAY BE HIGHER THAN THE PREVAILING MARKET PRICE.

This Official Statement is delivered for use in connection with the issuance, sale and delivery of the 2022ABCD Bonds and may not be reproduced or used, in whole or in part, for any other purpose.

FORWARD-LOOKING STATEMENTS

CERTAIN STATEMENTS CONTAINED IN THIS OFFICIAL STATEMENT REFLECT NOT HISTORICAL FACTS BUT FORECASTS AND “FORWARD-LOOKING STATEMENTS.” ALL FORWARD-LOOKING STATEMENTS ARE PREDICTIONS AND ARE SUBJECT TO KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES. NO

ASSURANCE CAN BE GIVEN THAT THE FUTURE RESULTS DISCUSSED HEREIN WILL BE ACHIEVED, AND ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE FORECASTS DESCRIBED HEREIN. IN THIS RESPECT, THE WORDS “ESTIMATE,” “PROJECT,” “ANTICIPATE,” “EXPECT,” “INTEND,” “BELIEVE” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD- LOOKING STATEMENTS. ALL

PROJECTIONS, FORECASTS, ASSUMPTIONS, EXPRESSIONS OF OPINIONS, ESTIMATES AND OTHER

FORWARD-LOOKING STATEMENTS ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. GIVEN THEIR UNCERTAINTY, INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH STATEMENTS.

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INFORMATION CONCERNING OFFERING RESTRICTIONS IN

CERTAIN JURISDICTIONS OUTSIDE THE UNITED STATES
REFERENCES HEREIN TO THE “ISSUER” MEAN THE PUBLIC UTILITIES COMMISSION OF THE CITY AND COUNTY OF SAN FRANCISCO AND REFERENCES TO “BONDS” OR “SECURITIES” MEAN THE 2022ABCD Bonds OFFERED HEREBY. NEITHER THE SFPUC NOR THE UNDERWRITERS ASSUME ANY RESPONSIBILITY FOR THIS SECTION.

COMPLIANCE WITH ANY RULES OR RESTRICTIONS OF ANY JURISDICTION RELATING TO THE OFFERING, SOLICITATION AND/OR SALE OF THE 2022ABCD BONDS IS THE RESPONSIBILITY OF

THE UNDERWRITERS, AND THE SFPUC SHALL NOT HAVE ANY RESPONSIBILITY OR LIABILITY IN CONNECTION THEREWITH. NO ACTION HAS BEEN TAKEN BY THE SFPUC THAT WOULD PERMIT THE OFFERING OR SALE OF THE 2022ABCD BONDS, OR POSSESSION OR DISTRIBUTION OF THIS OFFICIAL STATEMENT OR ANY OTHER OFFERING OR PUBLICITY MATERIAL RELATING TO THE 2022ABCD BONDS, OR ANY INFORMATION RELATING TO THE PRICING OF THE 2022ABCD BONDS, IN ANY NON- U.S. JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED.

Minimum Unit Sales

THE BONDS WILL TRADE AND SETTLE ON A UNIT BASIS (ONE UNIT EQUALING ONE BOND OF $5,000 PRINCIPAL AMOUNT). FOR ANY SALES MADE OUTSIDE THE UNITED STATES, THE MINIMUM PURCHASE AND TRADING AMOUNT IS 30 UNITS (BEING 30 BONDS IN AN AGGREGATE PRINCIPAL AMOUNT OF $150,000). FOR ANY SALES MADE IN KOREA, THE BONDS WILL TRADE AND SETTLE ON A UNIT BASIS (ONE UNIT EQUALING ONE BOND OF $2,500,000 PRINCIPAL AMOUNT) AND THERE IS NO MINIMUM PURCHASE OR TRADING AMOUNT.

Notice to Prospective Investors in the European Economic Area and United Kingdom

THE BONDS ARE NOT INTENDED TO BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE

TO AND SHOULD NOT BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO ANY RETAIL

INVESTOR IN ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA OR THE UNITED KINGDOM (EACH, A “RELEVANT STATE”). FOR THESE PURPOSES, A RETAIL INVESTOR MEANS A PERSON WHO IS ONE (OR MORE) OF: (I) A RETAIL CLIENT AS DEFINED IN POINT (11) OF ARTICLE 4(1) OF DIRECTIVE 2014/65/EU (AS AMENDED, “MIFID II”); (II) A CUSTOMER WITHIN THE MEANING OF DIRECTIVE 2016/97/EU (AS AMENDED), WHERE THAT CUSTOMER WOULD NOT QUALIFY AS A PROFESSIONAL CLIENT AS DEFINED IN POINT (10) OF ARTICLE 4(1) OF MIFID II; OR (III) NOT A QUALIFIED INVESTOR AS DEFINED IN REGULATION 2017/1129 (EU) (AS AMENDED OR SUPERSEDED, THE “PROSPECTUS REGULATION”). CONSEQUENTLY, NO KEY INFORMATION DOCUMENT REQUIRED BY REGULATION (EU) NO 1286/2014 (AS AMENDED, THE “PRIIPS REGULATION”) FOR OFFERING OR SELLING THE

BONDS OR OTHERWISE MAKING THEM AVAILABLE TO RETAIL INVESTORS IN A RELEVANT STATE

HAS BEEN PREPARED AND THEREFORE OFFERING OR SELLING THE BONDS OR OTHERWISE

MAKING THEM AVAILABLE TO ANY RETAIL INVESTOR IN A RELEVANT STATE MAY BE UNLAWFUL UNDER THE PRIIPS REGULATION. THIS OFFICIAL STATEMENT HAS BEEN PREPARED ON THE BASIS

THAT ANY OFFER OF BONDS IN ANY RELEVANT STATE WILL BE MADE PURSUANT TO AN

EXEMPTION UNDER THE PROSPECTUS REGULATION FROM THE REQUIREMENT TO PUBLISH A PROSPECTUS FOR OFFERS OF BONDS. THIS OFFICIAL STATEMENT IS NOT A PROSPECTUS FOR THE PURPOSES OF THE PROSPECTUS REGULATION.

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Notice to Prospective Investors in United Kingdom
EACH UNDERWRITER HAS REPRESENTED AND AGREED THAT:
(A) IT HAS ONLY COMMUNICATED OR CAUSED TO BE COMMUNICATED AND WILL ONLY

COMMUNICATE OR CAUSE TO BE COMMUNICATED AN INVITATION OR INDUCEMENT TO ENGAGE IN INVESTMENT ACTIVITY (WITHIN THE MEANING OF SECTION 21 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (AS AMENDED, THE “FSMA”)) RECEIVED BY IT IN CONNECTION WITH THE ISSUE OR SALE OF THE BONDS IN CIRCUMSTANCES IN WHICH SECTION 21(1) OF THE FSMA DOES NOT APPLY TO THE ISSUER; AND
(B) IT HAS COMPLIED AND WILL COMPLY WITH ALL APPLICABLE PROVISIONS OF THE FSMA

WITH RESPECT TO ANYTHING DONE BY IT IN RELATION TO THE BONDS IN, FROM OR OTHERWISE INVOLVING THE UNITED KINGDOM.

Notice to Prospective Investors in Switzerland

THIS OFFICIAL STATEMENT IS NOT INTENDED TO CONSTITUTE AN OFFER OR SOLICITATION TO PURCHASE OR INVEST IN THE BONDS. THE BONDS MAY NOT BE PUBLICLY OFFERED, SOLD OR

ADVERTISED DIRECTLY OR INDIRECTLY, IN, INTO OR FROM SWITZERLAND WITHIN THE MEANING OF THE SWISS FINANCIAL SERVICES ACT (“ FINSA”) AND NO APPLICATION HAS OR WILL BE MADE

TO ADMIT THE BONDS TO TRADING ON ANY TRADING VENUE (EXCHANGE OR REGULATED TRADING FACILITY) IN SWITZERLAND. NEITHER THIS OFFICIAL STATEMENT NOR ANY OTHER

OFFERING OR MARKETING MATERIAL RELATING TO THE BONDS CONSTITUTES A PROSPECTUS OR

A KEY INFORMATION DOCUMENT PURSUANT TO THE FINSA OR A LISTING PROSPECTUS WITHIN THE MEANING OF THE LIST ING RULES OF THE SIX SWISS EXCHANGE LTD. OR ANY REGULATED

TRADING FACILITY IN SWITZERLAND, AND NEITHER THIS OFFICIAL STATEMENT NOR ANY OTHER

OFFERING OR MARKETING MATERIAL RELATING TO THE BONDS MAY BE PUBLICLY DISTRIBUTED OR OTHERWISE MADE PUBLICLY AVAILABLE IN SWITZERLAND.

ACCORDINGLY, THIS OFFICIAL STATEMENT IS COMMUNICATED IN OR FROM SWITZERLAND TO A LIMITED NUMBER OF SELECTED INVESTORS ONLY. NEITHER THIS OFFICIAL

STATEMENT NOR ANY OTHER OFFERING OR MARKETING MATERIAL RELATING TO THE OFFERING,

NOR THE ISSUER, NOR THE BONDS HAVE BEEN OR WILL BE FILED WITH OR APPROVED BY ANY SWISS REGULATORY AUTHORITY. THE BONDS ARE NOT SUBJECT TO SUPERVISION BY ANY SWISS

REGULATORY AUTHORITY, AN INVESTOR IN THE BONDS WILL NOT BENEFIT FROM PROTECTION OR SUPERVISION BY SUCH AUTHORITY.

THE BONDS DO NOT CONSTITUTE COLLECTIVE INVESTMENTS WITHIN THE MEANING OF THE SWISS FEDERAL ACT ON COLLECTIVE INVESTMENT SCHEMES (“ CISA”). ACCORDINGLY,

HOLDERS OF THE BONDS DO NOT BENEFIT FROM PROTECTION UNDER THE CISA OR FROM THE SUPERVISION OF THE SWISS FINANCIAL MARKET SUPERVISORY AUTHORITY. INVESTORS ARE EXPOSED TO THE DEFAULT RISK OF THE ISSUER.

Notice to Prospective Investors in Hong Kong

THE BONDS MAY NOT BE OFFERED OR SOLD IN HONG KONG BY MEANS OF ANY DOCUMENT

OTHER THAN (I) IN CIRCUMSTANC ES WHICH DO NOT CONSTITUTE AN OFFER TO THE PUBLIC

WITHIN THE MEANING OF THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE (CAP. 32 OF THE LAWS OF HONG KONG) (“COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE”) OR WHICH DO NOT CONSTITUTE AN INVITATION TO THE PUBLIC WITHIN THE MEANING OF THE SECURITIES AND FUTURES ORDINANCE (CAP. 571 OF THE LAWS OF HONG KONG) (“SECURITIES AND FUTURES ORDINANCE”), OR (II) TO "PROFESSIONAL INVESTORS" AS DEFINED IN THE SECURITIES AND FUTURES ORDINANC E AND ANY RULES MADE

THEREUNDER, OR (III) IN OTHER CIRCUMSTANCES WHICH DO NOT RESULT IN THE DOCUMENT

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BEING A "PROSPECTUS" AS DEFINED IN THE COMPANIES (WINDING UP AND MISCELLANEOUS

PROVISIONS) ORDINANCE, AND NO ADVERTISEMENT, INVITATION OR DOCUMENT RELATING TO

THE BONDS MAY BE ISSUED OR MAY BE IN THE POSSESSION OF ANY PERSON FOR THE PURPOSE

OF ISSUE (IN EACH CASE WHETHER IN HONG KONG OR ELSEWHERE), WHICH IS DIRECTED AT, OR

THE CONTENTS OF WHICH ARE LIKELY TO BE ACCESSED OR READ BY, THE PUBLIC IN HONG KONG (EXCEPT IF PERMITTED TO DO SO UNDER THE SECURITIES LAWS OF HONG KONG) OTHER THAN

WITH RESPECT TO BONDS WHICH ARE OR ARE INTENDED TO BE DISPOSED OF ONLY TO PERSONS OUTSIDE HONG KONG OR ONLY TO "PROFESSIONAL INVESTORS" IN HONG KONG AS DEFINED IN THE SECURITIES AND FUTURES ORDINANCE AND ANY RULES MADE THEREUNDER.

Notice to Prospective Investors in Singapore

THIS OFFICIAL STATEMENT HAS NOT BEEN REGISTERED AS A PROSPECTUS WITH THE MONETARY AUTHORITY OF SINGAPORE. ACCORDINGLY, THIS OFFICIAL STATEMENT AND ANY

OTHER DOCUMENT OR MATERIAL IN CONNECTION WITH THE OFFER OR SALE, OR INVITATION FOR

SUBSCRIPTION OR PURCHASE, OF THE BONDS MAY NOT BE CIRCULATED OR DISTRIBUTED, NOR

MAY THE BONDS BE OFFERED OR SOLD, OR BE MADE THE SUBJECT OF AN INVITATION FOR

SUBSCRIPTION OR PURCHASE, WHETHER DIRECTLY OR INDIRECTLY, TO PERSONS IN SINGAPORE OTHER THAN (I) TO AN INSTITUTIONAL INVESTOR (AS DEFINED IN SECTION 4A OF THE SECURITIES AND FUTURES ACT, CHAPTER 289 OF SINGAPORE (THE "SFA")) UNDER SECTION 274 OF THE SFA, (II) TO A RELEVANT PERSON (AS DEFINED IN SECTION 275(2) OF THE SFA ) PURSUANT TO SECTION 275(1) OF THE SFA, OR ANY PERSON PURSUANT TO SECTION 275(1A) OF THE SFA, AND IN ACCORDANCE WITH THE CONDITIONS SPECIFIED IN SECTION 275 OF THE SFA OR (III) OTHERWISE

PURSUANT TO, AND IN ACCORDANCE WITH THE CONDITIONS OF, ANY OTHER APPLICABLE PROVISION OF THE SFA, IN EACH CASE SUBJECT TO CONDITIONS SET FORTH IN THE SFA.

WHERE THE BONDS ARE SUBSCRIBED OR PURCHASED UNDER SECTION 275 OF THE SFA BY

A RELEVANT PERSON WHICH IS A CORPORATION (WHICH IS NOT AN ACCREDITED INVESTOR (AS DEFINED IN SECTION 4A OF THE SFA)) THE SOLE BUSINESS OF WHICH IS TO HOLD INVESTMENTS

AND THE ENTIRE SHARE CAPITAL OF WHICH IS OWNED BY ONE OR MORE INDIVIDUALS, EACH OF WHOM IS AN ACCREDITED INVESTOR, THE SECURITIES (AS DEFINED IN SECTION 239(1) OF THE SFA) OF THAT CORPORATION SHALL NOT BE TRANSFERABLE FOR 6 MONTHS AFTER THAT CORPORATION HAS ACQUIRED THE BONDS UNDER SECTION 275 OF THE SFA EXCEPT: (1) TO AN INSTITUTIONAL INVESTOR UNDER SECTION 274 OF THE SFA OR TO A RELEVANT PERSON (AS DEFINED IN SECTION 275(2) OF THE SFA), (2) WHERE SUCH TRANSFER ARISES FROM AN OFFER IN THAT CORPORATION’S SECURITIES PURSUANT TO SECTION 275(1A) OF THE SFA, (3) WHERE NO CONSIDERATION IS OR WILL BE GIVEN FOR THE TRANSFER, (4) WHERE THE TRANSFER IS BY OPERATION OF LAW, (5) AS SPECIFIED IN SECTION 276(7) OF THE SFA, OR (6) AS SPECIFIED IN REGULATION 32 OF THE SECURITIES AND FUTURES (OFFERS OF INVESTMENTS) (SHARES AND DEBENTURES) REGULATIONS 2005 OF SINGAPORE (“REGULATION 32”).

WHERE THE BONDS ARE SUBSCRIBED OR PURCHASED UNDER SECTION 275 OF THE SFA BY

A RELEVANT PERSON WHICH IS A TRUST (WHERE THE TRUSTEE IS NOT AN ACCREDITED INVESTOR (AS DEFINED IN SECTION 4A OF THE SFA)) WHOSE SOLE PURPOSE IS TO HOLD INVESTMENTS AND

EACH BENEFICIARY OF THE TRUST IS AN ACCREDITED INVESTOR, THE BENEFICIARIES' RIGHTS AND INTEREST (HOWSOEVER DESCRIBED) IN THAT TRUST SHALL NOT BE TRANSFERABLE FOR 6 MONTHS AFTER THAT TRUST HAS ACQUIRED THE BONDS UNDER SECTION 275 OF THE SFA EXCEPT:
(1) TO AN INSTITUTIONAL INVESTOR UNDER SECTION 274 OF THE SFA OR TO A RELEVANT PERSON (AS DEFINED IN SECTION 275(2) OF THE SFA), (2) WHERE SUCH TRANSFER ARISES FROM AN OFFER

THAT IS MADE ON TERMS THAT SUCH RIGHTS OR INTEREST ARE ACQUIRED AT A CONSIDERATION OF NOT LESS THAN S$200,000 (OR ITS EQ UIVALENT IN A FOREIGN CURRENCY) FOR EACH

TRANSACTION (WHETHER SUCH AMOUNT IS TO BE PAID FOR IN CASH OR BY EXCHANGE OF SECURITIES OR OTHER ASSETS), (3) WHERE NO CONSIDERATION IS OR WILL BE GIVEN FOR THE TRANSFER, (4) WHERE THE TRANSFER IS BY OPERATION OF LAW, (5) AS SPECIFIED IN SECTION 276(7) OF THE SFA, OR (6) AS SPECIFIED IN REGULATION 32.

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Notice to Prospective Investors in Indonesia

THIS OFFICIAL STATEMENT HAS NOT BEEN AND WILL NOT BE DISTRIBUTED IN THE

REPUBLIC OF INDONESIA AND THE BONDS HAVE NOT BEEN AND WILL NOT BE OFFERED OR SOLD

IN THE REPUBLIC OF INDONESIA OR TO INDONESIAN CITIZENS WHEREVER THEY ARE DOMICILED,

OR TO INDONESIAN RESIDENTS IN A MANNER WHICH CONSTITUTES A PUBLIC OFFERING UNDER LAW NO. 8 OF 1995 ON CAPITAL MARKETS AND THE APPLICABLE REGULATIONS OF THE FINANCIAL

SERVICES AUTHORITY (OTORITAS JASA KEUANGAN) (OR PREVIOUSLY, THE CAPITAL MARKETS

AND FINANCIAL INSTITUTIONS SUPERVISORY BODY (BADAN PENGAWAS PASAR MODAL DAN LEMBAGA KEUANGAN)).

Notice to Prospective Investors in Japan

THE SECURITIES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE FINANCIAL INSTRUMENTS AND EXCHANGE ACT OF JAPAN (ACT NO. 25 OF 1948, AS AMENDED), OR THE FIEA.

THE SECURITIES MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN JAPAN OR TO OR

FOR THE BENEFIT OF ANY RESIDENT OF JAPAN (INCLUDING ANY PERSON RESIDENT IN JAPAN OR

ANY CORPORATION OR OTHER ENTITY ORGANIZED UNDER THE LAWS OF JAPAN) OR TO OTHERS

FOR REOFFERING OR RESALE, DIRECTLY OR INDIRECTLY, IN JAPAN OR TO OR FOR THE BENEFIT

OF ANY RESIDENT OF JAPAN, EXCEPT PURSUANT TO AN EXEMPTION FROM THE REGISTRATION

REQUIREMENTS OF THE FIEA AND OTHERWISE IN COMPLIANCE WITH ANY RELEVANT LAWS AND REGULATIONS OF JAPAN.

Notice to Prospective Investors in Canada

THE BONDS MAY BE SOLD IN CANADA ONLY TO PURCHASERS PURCHASING, OR DEEMED

TO BE PURCHASING, AS PRINCIPAL THAT ARE ACCREDITED INVESTORS, AS DEFINED IN NATIONAL INSTRUMENT 45 -106 PROSPECTUS EXEMPTIONS OR SUBSECTION 73.3(1) OF THE SECURITIES ACT (ONTARIO), AND ARE PERM ITTED CLIENTS, AS DEFINED IN NATIONAL INSTRUMENT 31 -103 REGISTRATION REQUIREMENTS, EXEMPTIONS AND ONGOING REGISTRANT OBLIGATIONS. ANY

RESALE OF THE BONDS MUST BE MADE IN ACCORDANCE WITH AN EXEMPTION FROM, OR IN A

TRANSACTION NOT SUBJECT TO, THE PROSPECTUS REQUIREMENTS OF APPLICABLE SECURITIES LAWS.

SECURITIES LEGISLATION IN CERTAIN PROVINCES OR TERRITORIES OF CANADA MAY

PROVIDE A PURCHASER WITH REMEDIES FOR RESCISSION OR DAMAGES IF THIS OFFICIAL

STATEMENT (INCLUDING ANY AMENDMENT THERETO) CONTAINS A MISREPR ESENTATION,

PROVIDED THAT THE REMEDIES FOR RESCISSION OR DAMAGES ARE EXERCISED BY THE

PURCHASER WITHIN THE TIME LIMIT PRESCRIBED BY THE SECURITIES LEGISLATION OF THE PURCHASER’S PROVINCE OR TERRITORY. THE PURCHASER SHOULD REFER TO ANY APPLICABLE PROVISIONS OF THE SECURITIES LEGISLATION OF THE PURCHASER’S PROVINCE OR TERRITORY FOR PARTICULARS OF THESE RIGHTS OR CONSULT WITH A LEGAL ADVISOR.

PURSUANT TO SECTION 3A.3 OF NATIONAL INSTRUMENT 33 -105 UNDERWRITING CONFLICTS (NI 33 -105), THE UNDERWRITERS ARE NOT REQ UIRED TO COMPLY WITH THE DISCLOSURE REQUIREMENTS OF NI 33-105 REGARDING UNDERWRITER CONFLICTS OF INTEREST IN CONNECTION WITH THIS OFFERING.

Notice to Prospective Investors in Taiwan

THE OFFER OF THE BONDS HAS NOT BEEN AND WILL NOT BE REGISTERED OR FILED WITH,

OR APPROVED BY, THE FINANCIAL SUPERVISORY COMMISSION OF TAIWAN AND/OR OTHER

REGULATORY AUTHORITY OF TAIWAN PURSUANT TO RELEVANT SECURITIES LAWS AND

REGULATIONS OF TAIWAN, AND THE BONDS, INCLUDING ANY COPY OF THIS OFFICIAL

STATEMENT OR ANY OTHER DOCUMENTS RELATING TO THE BONDS, MAY NOT BE OFFERED,

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ISSUED, SOLD, DELIVERED OR DISTRIBUTED IN TAIWAN THROUGH A PUBLIC OFFERING OR IN

CIRCUMSTANCES WHICH CONSTITUTE AN OFFER WITHIN THE MEANING OF THE SECURITIES AND

EXCHANGE ACT OF TAIWAN THAT REQUIRES THE REGISTRATION OR FILING WITH OR APPROVAL OF THE FINANCIAL SUPERVISORY COMMISSION OF TAIWAN. THE BONDS MAY BE MADE

AVAILABLE OUTSIDE TAIWAN FOR PURCHASE BY INVESTORS RESIDING IN TAIWAN (EITHER

DIRECTLY OR THROUGH PROPERLY LICENSED TAIWAN INTERMEDIARIES), BUT MAY NO T BE

OFFERED OR SOLD IN TAIWAN EXCEPT TO QUALIFIED INVESTORS VIA A TAIWAN LICENSED INTERMEDIARY. ANY SUBSCRIPTIONS OF BONDS SHALL ONLY BECOME EFFECTIVE UPON

ACCEPTANCE BY THE ISSUER OR THE RELEVANT DEALER OUTSIDE TAIWAN AND SHALL BE

DEEMED A CONTRACT ENTER ED INTO IN THE JURISDICTION OF INCORPORATION OF THE ISSUER

OR RELEVANT DEALER, AS THE CASE MAY BE, UNLESS OTHERWISE SPECIFIED IN THE SUBSCRIPTION DOCUMENTS RELATING TO THE BONDS SIGNED BY THE INVESTORS.

Notice to Prospective Investors in the Republic of Korea

THE BONDS HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE FINANCIAL

SERVICES COMMISSION OF KOREA FOR PUBLIC OFFERING IN KOREA UNDER THE FINANCIAL

INVESTMENT SERVICES AND CAPITAL MARKETS ACT AND ITS SUBORDINATE DECREES AND REGULATIONS (COLLECTIVELY TH E “FSCMA”). THE BONDS MAY NOT BE OFFERED, SOLD OR

DELIVERED, DIRECTLY OR INDIRECTLY, OR OFFERED OR SOLD TO ANY PERSON FOR REOFFERING

OR RESALE, DIRECTLY OR INDIRECTLY, IN KOREA OR TO ANY RESIDENT OF KOREA EXCEPT AS

OTHERWISE PERMITTED UNDER THE APPLICABLE LAWS AND REGULATIONS OF KOREA,

INCLUDING THE FSCMA AND THE FOREIGN EXCHANGE TRANSACTION LAW AND ITS SUBORDINATE DECREES AND REGULATIONS (COLLECTIVELY, THE “FETL”). WITHOUT PREJUDICE

TO THE FOREGOING, THE NUMBER OF BONDS OFFERED IN KOREA OR TO A RESIDENT IN KOREA

SHALL BE LESS THAN FIFTY AND FOR A PERIOD IN ONE YEAR FROM THE ISSUE DATE OF THE

BONDS, NONE OF THE BONDS MAY BE DIVIDED RESULTING IN AN INCREASED NUMBER OF THE BONDS. FURTHERMORE, THE BONDS MAY NOT BE RESOLD TO KOREAN RESIDENTS UNLESS THE

PURCHASER OF THE BONDS COMPLIES WITH ALL APPLICABLE REGULATORY REQUIREMENTS (INCLUDING BUT NOT LIMITED TO GOVERNMENT REPORTING REQUIREMENTS UNDER THE FETL) IN CONNECTION WITH THE PURCHASE OF THE BONDS.

(Remainder of Page Intentionally Left Blank)

TABLE OF CONTENTS

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INTRODUCTION .....................................................1 General ...............................................................1 Authority for Issuance ........................................1 Plan of Refunding ...............................................2 The SFPUC and the Water Enterprise ................2
SFPUC Water Supply .........................................2 COVID-19 Pandemic .........................................2 Security for the Bonds ........................................2 Outstanding and Future Parity Bonds
and Other Indebtedness ...................................3 Risk Factors ........................................................3 Continuing Disclosure ........................................4 Other Matters ......................................................4 THE 2022ABCD BONDS .........................................4 General ...............................................................4 Securities Depository and Book-Entry
Only System ....................................................4 Redemption ........................................................5 Defeasance........................................................ 13 PLAN OF REFUNDING ......................................... 13 General ............................................................. 13 Refunded Bonds ............................................... 13 Escrow Fund ..................................................... 16

ESTIMATED SOURCES AND USES OF
FUNDS ............................................................. 16

GREEN BONDS DESIGNATION AND
CLIMATE CERTIFICATION ......................... 16
Designation as Green Bonds............................. 16 The Climate Bonds Initiative and
Climate Bonds............................................... 17 United Nations Sustainable
Development Goals ....................................... 18 Use of Proceeds ................................................ 18 Process for Project Evaluation and
Selection ....................................................... 19 Green Bond Reporting ...................................... 19 SECURITY FOR THE BONDS .............................. 19 Pledge of Revenues .......................................... 19 Flow of Funds ................................................... 21 Rate Covenants ................................................. 23 No Bond Reserve Account for the
2022ABCD Bonds ........................................ 25 Additional Series of Bonds ............................... 25 Refunding Bonds .............................................. 26 Other Parity Obligations; Subordinate
Obligations; Obligations Not Payable
from Revenues .............................................. 26 Investments ....................................................... 27

PROPOSED AMENDMENTS TO THE
INDENTURE ................................................... 27

OBLIGATIONS PAYABLE FROM
REVENUES ..................................................... 27 Authority for Issuance of Revenue
Bonds and Other Obligations Payable
from Revenues .............................................. 27

Outstanding Parity Revenue Bonds .................. 29
State and Federal Loans .................................... 30 Contingent Payment Obligations ...................... 30 Subordinate Debt and Interim Funding
Program ......................................................... 30 Other Subordinate Obligations Payable
from Revenues .............................................. 31 Revenue Bond Oversight Committee ............... 31
Debt Service Requirements .............................. 33

THE CITY AND COUNTY OF SAN
FRANCISCO.................................................... 34 THE PUBLIC UTILITIES COMMISSION ............ 35
General ............................................................. 35 Organization, Purposes and Powers ................. 36
Commission Members ...................................... 37 Management ..................................................... 37 Ongoing Investigation ...................................... 39 COVID-19 Pandemic ....................................... 40 Employee Relations .......................................... 41 Employee Benefit Plans ................................... 43 THE WATER ENTERPRISE .................................. 47 General ............................................................. 47 Water Rights and Related Proceedings............. 48
Current Water Supply Sources ......................... 48 Water Supply Storage ....................................... 50 Projected Demand ............................................ 50 Water Supply Reliability and Drought
Planning ........................................................ 52 Water Supply Initiatives ................................... 53 Wholesale Deliveries ........................................ 56 Retail Deliveries ............................................... 64 Historic Water Sales and Top
Customers ..................................................... 65 Recent Drought; Current Water
Conditions ..................................................... 67 Curtailment Actions by the State Water
Resources Control Board .............................. 69 Proposals to Restore Hetch Hetchy
Valley ............................................................ 70 WATER FACILITIES ............................................. 70 General ............................................................. 70 Water Conveyance and Distribution ................. 71
Water Treatment ............................................... 72 Water Storage ................................................... 73 Physical Condition of Certain Facilities ........... 76 Seismic Hazards ............................................... 77 Wildfire Considerations .................................... 78 Safety and Security ........................................... 79 CAPITAL IMPROVEMENT PROGRAM ............. 79
Capital and Financial Planning Process ............ 79
Regional Water Program .................................. 80

TABLE OF CONTENTS
(continued)

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Local Water Program ....................................... 81 Hetch Hetchy Water ......................................... 81 Water System Improvement Program
(WSIP) .......................................................... 82 Environmental Considerations ......................... 84

FINANCING OF CAPITAL
IMPROVEMENTS .......................................... 85 Long Term Financing of Capital
Program ......................................................... 85 Interim Funding Program Facilities .................. 85 Sources of Funding the Capital
Improvement Program .................................. 86 FINANCIAL OPERATIONS .................................. 86 General ............................................................. 86 Wholesale Water Sales Revenue ...................... 88 Retail Water Sales Revenue ............................. 89 Impact of Weather on Revenues ....................... 94 Capacity Charges .............................................. 95 Operating and Maintenance Expenses .............. 95
Financial Management Policies ........................ 96 Investment of SFPUC Funds ............................ 97 Risk Management and Insurance ...................... 98 HISTORICAL OPERATING RESULTS .............. 100
PROJECTED OPERATING RESULTS ............... 102
RISK FACTORS ................................................... 105 General ........................................................... 105 Limited Obligation ......................................... 105 No Bond Reserve Account ............................. 106 Risks Related to Water Enterprise
Facilities and Operations ............................. 106 Cybersecurity .................................................. 107 Construction Related Risks ............................ 109 Limitations on Rate-Setting ............................ 109 Initiative, Referendum, Charter
Amendments and Future Legislation .......... 109
Increased Operating and Maintenance
Expenses ..................................................... 110 Interim Funding Program Facilities ................ 110 Pandemics; COVID-19 Pandemic .................. 110
Climate Change .............................................. 110 Green Bonds ................................................... 114 Inverse Condemnation .................................... 115 Economic, Political, Social and
Environmental Conditions .......................... 115 Bankruptcy or Financial Failure of
Wholesale Customers.................................. 115 Bankruptcy of the City ................................... 115 Limitations on Remedies ................................ 116 Failure to Maintain Credit Ratings ................. 117 Secondary Market ........................................... 117 Uncertainties of Projections, Forecasts
and Assumptions ......................................... 117 Other Risks ..................................................... 117 REGULATORY MATTERS................................. 117 General ........................................................... 117 Drinking Water Requirements ........................ 118 Public Water System Discharges .................... 122 Bay-Delta Water Quality Standards ............... 122
FERC Proceeding to Increase Flows in
the Lower Tuolumne River ......................... 124
Dam Licensing and Safety Issues ................... 125 Hazardous Material Management ................... 129
Endangered Species ........................................ 129 Required Instream Flow
Schedules from Regional Water
System Dams .............................................. 129

CONSTITUTIONAL, STATUTORY AND
CHARTER LIMITATIONS ........................... 130
State Law Limitations..................................... 130 Initiative and Referendum .............................. 132 Charter Limitations ......................................... 132 Future Charter Amendments .......................... 133 LITIGATION ........................................................ 133 TAX MATTERS ................................................... 133 CERTAIN LEGAL MATTERS ............................ 136
RATINGS .............................................................. 137 UNDERWRITING ................................................ 137 FINANCIAL STATEMENTS ............................... 138 CONTINUING DISCLOSURE ............................. 138 CO-MUNICIPAL ADVISORS ............................. 138

VERIFICATION OF MATHEMATICAL
ACCURACY .................................................. 139 MISCELLANEOUS .............................................. 139 APPROVAL AND DELIVERY ............................ 140

APPENDIX A SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE

APPENDIX B SUMMARY OF CERTAIN PROVISIONS OF THE WATER SUPPLY AGREEMENT

APPENDIX C SFPUC WATER ENTERPRISE FINANCIAL STATEMENTS

APPENDIX D PROPOSED FORM OF OPINION OF CO-BOND COUNSEL

APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE

APPENDIX F INFORMATION REGARDING BOOK-ENTRY ONLY SYSTEM AND GLOBAL CLEARANCE

PROCEDURES

4163-6481-6438.1

SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Anson Moran, President
Newsha Ajami, Vice President
Tim Paulson, Commissioner
Sophie Maxwell, Commissioner

PUBLIC UTILITIES COMMISSION OFFICIALS
Dennis J. Herrera, General Manager
Michael Carlin, Deputy General Manager and Chief Operating Officer Steven R. Ritchie, Assistant General Manager, Water Enterprise Masood Ordikhani, Assistant General Manager, External Affairs and Chief Strategy Officer Barbara Hale, Assistant General Manager, Power Enterprise Alan Johanson, Acting Assistant General Manager, Infrastructure Division Gregory J. Norby, Assistant General Manager, Wastewater Enterprise

The position of Assistant General Manager, Business Services and Chief Financial Officer is currently vacant.

CITY AND COUNTY OF SAN FRANCISCO
MAYOR
London Breed

BOARD OF SUPERVISORS
Shaman Walton, Board President, District 10
Connie Chan, District 1 Aaron Peskin, District 3
Matt Haney, District 6 Dean Preston, District 5
Gordon Mar, District 4 Hillary Ronen, District 9
Rafael Mandelman, District 8 Ahsha Safaí, District 11
Myrna Melgar, District 7 Catherine Stefani, District 2

CITY ATTORNEY
David Chiu

CITY TREASURER
José Cisneros

OTHER CITY AND COUNTY OFFICIALS
Benjamin Rosenfield, Controller
Carmen Chu, City Administrator

SPECIAL SERVICES
Co-Bond Counsel Co-Municipal Advisors
Norton Rose Fulbright US LLP,
San Francisco, California

Montague DeRose and Associates, LLC
Walnut Creek, California

The Law Office of Monica M. Baranovsky,
Novato, California

Backstrom McCarley Berry & Co., LLC
San Francisco, California

Disclosure Counsel Trustee
Orrick, Herrington & Sutcliffe LLP
San Francisco, California
U.S. Bank Trust Company, National Association
San Francisco, California

Verification Agent
_____________

1 4163-6481-6438.1

OFFICIAL STATEMENT

$__________*

PUBLIC UTILITIES COMMISSION OF THE CITY AND COUNTY OF SAN FRANCISCO San Francisco Water Revenue Bonds, 2022 Series ABCD
$__________*
2022 Sub-Series A Bonds
(Refunding – Federally
Taxable) (WSIP)
(Green Bonds)
$__________*
2022 Sub-Series B Bonds
(Refunding – Federally
Taxable) (Regional Water)
$__________*
2022 Sub-Series C Bonds
(Refunding – Federally
Taxable) (Hetch Hetchy
Water)
$__________*
2022 Sub-Series D Bonds
(Refunding – Federally
Taxable) (Non-WSIP)

INTRODUCTION
This Introduction is qualified in its entirety by reference to the more detailed information included and referred to elsewhere in this Official Statement. The offering of the 2022ABCD Bonds to potential investors is made only by means of the entire Official Statement. Terms used in this Introduction and not otherwise defined have the respective meanings assigned to them elsewhere in this Official Statement, including “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.”
General
This O fficial Statement, including the cover page and Appendices hereto, is provided to furnish certain information in connection with the offering by the Public Utilities Commission of the City and County of San Francisco (the “SFPUC ”) of its (i) San Francisco Water Revenue Bonds, 2022 Series ABCD , 2022 Sub-Series A Bonds (Refunding – Federally Taxable) (WSIP) (Green Bonds) (the “2022A Green Bonds”), (ii) San Francisco Water Revenue Bonds, 2022 Series ABCD , 2022 Sub-Series B Bonds (Refunding – Federally Taxable) (Regional Water) (the “ 2022B Bonds ”), (iii) San Francisco Water Revenue Bonds, 2022 Series ABCD, 2022 Sub- Series C Bonds (Refunding – Federally Taxable) (Hetch Hetchy Water) (the “2022C Bonds”), and (iv) San Francisco Water Revenue Bonds, 2022 Series ABCD , 2022 Sub-Series D Bonds (Refunding – Federally Taxable) ( Non-WSIP) (the “ 2022D Bonds” and, together with the 2022A Green Bonds , the 2022B Bonds and the 2022C Bonds, the “ 2022ABCD Bonds”).

Authority for Issuance
The 2022ABCD Bonds will be issued by the SFPUC pursuant to authority granted by Section 9.109 of the Charter (the “Charter”) of the City and County of San Francisco (the “ City”) and an ordinance that was passed by the Board of Supervisors of the City (the “ Board of Supervisors ”) on September 29, 2020 (the “ Refunding Ordinance”), and effective as of October 1, 2020. In addition, the 2022ABCD Bonds will be issued under a resolution adopted by the SFPUC governing body (the “Commission”) on April 12, 2022.

The 2022A Green Bonds, 2022B Bonds and 2022C Bonds will be issued under a Forty-Third Supplemental Indenture (the “Forty-Third Supplemental Indenture”), a Forty-Fourth Supplemental Indenture (the “Forty-Fourth Supplemental Indenture”), a Forty-Fifth Supplemental Indenture (the “Forty-Fifth Supplemental Indenture”), and a Forty-Sixth Supplemental Indenture (the “ Forty-Sixth Supplemental Indenture”), respectively, each dated as of April 1, 2022, and by and between the SFPUC and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The Forty-Third Supplemental Indenture, Fort y-Fourth Supplemental Indenture , Forty-Fifth Supplemental Indenture , and Forty-Sixth Supplemental Indenture each supplement the Amended and Restated Indenture, dated as of August 1, 2002 (as supplemented and amended to date, the “ Indenture”), by and between the SFPUC and the Trustee.

* Preliminary, subject to change.

2 4163-6481-6438.1

See also “OBLIGATIONS PAYABLE FROM REVENUES – Authority for Issuance of Revenue Bonds and Other Obligations Payable from Revenues.”
Plan of Refunding
The 2022ABCD Bonds are being issued to (i) refund and defease all or a portion of various series of the SFPUC’s Outstanding Bonds (as defined herein) , as applicable, and (i i) pay the costs of issuance of the 2022ABCD Bonds. See “PLAN OF REFUNDING,” “ESTIMATED SOURCES AND USES OF FUNDS – 2022ABCD Bonds” and “OBLIGATIONS PAYABLE FROM REVENUES – Outstanding Parity Revenue Bonds.” The SFPUC and the Water Enterprise
The SFPUC is a department of the City responsible for the maintenance, operation and development of three utility enterprises. See “THE PUBLIC UTILITIES COMMISSION.” The SFPUC owns and operates a municipal water supply, storage and distribution system (the “ Water Enterprise”) that provides drinking water to retail customers in the City and certain retail customers outside of the City (the “ Retail Customers ”) and to wholesale customers in three other San Francisco Bay Area counties (the “Wholesale Customers”). The Water Enterprise consists of water treatment and transmission facilities located outside of the City (the “Regional Water System”) and water treatment and distribution facilities located inside the City (the “In-City Distribution System”). See “WATER FACILITIES.” Water rates for Retail Customers are set by the SFPUC, subject to rejection by resolution of the Board of Supervisors. Water rates for Wholesale Customers are set pursuant to the Water Supply Agreement between the City and the Wholesale Cus tomers, which became effective in July 2009 and was amended and restated in 2018 (the “Water Supply Agreement ” or “WSA ”). See “FINANCIAL OPERATIONS” and “APPENDIX B – SUMMARY OF CERTAIN PROVISIONS OF THE WATER SUPPLY AGREEMENT.”
The SFPUC also provides wastewater services to customers in the City and to several wholesale outside of the City (the “Wastewater Enterprise”), and power, mainly hydroelectric, for City government operations and to other users (the “Power Enterprise”), and manages a Community Choice Aggregation program (“CleanPowerSF”).

The revenues of these other enterprises are not available for, and do not secure, payment of the principal of, premium, if any, or interest on the Bonds (as defined herein), including the 2022ABCD Bonds .

SFPUC Water Supply
The SFPUC’s primary water supply source is the Upper Tuolumne River Watershed in the Sierra Nevada Mountains. The amount of water available to the SFPUC is subject to prevailing hydrological conditions and may be limited during times of drought. The SFPUC has taken a variety of steps to enhance water supply reliability. See “THE WATER ENTERPRISE”.

COVID-19 Pandemic
The outbreak of COVID -19, an upper respiratory tract illness caused by a strain of novel coronavirus, is having significant adverse health and financial impacts throughout the world, including the City. For more information regarding the impact of COVID -19 on the Water Enterprise, see “THE PUBLIC UTILITIES COMMISSION – COVID-19 Pandemic.”
Security for the Bonds
Under the Indenture, the SFPUC has irrevocably pledged the Revenues of its Water Enterprise and all Refundable Credits (in the case of Bonds issued as Build America Bonds) received by the SFPUC to the punctual payment of principal of, premium, if any, and interest on the 202 2ABCD Bonds and all outstanding parity revenue bonds, notes or other evidences of indebtedness authorized by the Indenture (collectively, the “Bonds”), subject to the

3 4163-6481-6438.1

allocation of funds provided in the Indenture. The 2022ABCD Bonds are payable on parity with certain Outstanding Bonds previously issued by the SFPUC under the Indenture.

The SFPUC is not obligated to pay the principal of, premium, if any, or interest on the 2022ABCD Bonds except from Revenues of the Water Enterprise. The SFPUC has no taxing power. The General Fund of the City is not liable for the payment of the principal of, premium, if any, or interest on the 2022ABCD Bonds, and neither the credit nor the taxing power of the City is pledged to the payment of the principal of, premium, if any , or interest on the 2022ABCD Bonds . The 2022ABCD Bonds are not secured by a legal or equitable pledge of, or charge, lien or encumbrance upon, any of the property of the City or of the SFPUC or any of its income or receipts, except Revenues of the Water Enterprise. The Series 2022ABCD Bonds are not secured by the revenues of the Wastewater Enterprise or the Power Enterprise or the revenues of CleanPowerSF.

No Bond Reserve Account will be established for the 2022ABCD Bonds. Bond Reserve Accounts have been established with respect to certain other series of Bonds , but such Bond Reserve Accounts do not secure the 2022ABCD Bonds.

See “SECURITY FOR THE BONDS.”
Outstanding and Future Parity Bonds and Other Indebtedness The SFPUC has previously issued Bonds, and in the future expects to issue additional Bonds, pursuant to the Indenture and secured by Revenues of the Water Enterprise on parity with the 2022ABCD Bonds . See “OBLIGATIONS PAYABLE FROM REVENUES.”
The Indenture provides that additional series of Bonds secured by Revenues on parity with the Outstanding Bonds and the 2022ABCD Bonds (each an “Additional Series of Bonds”) may be issued if certain conditions are met. See “SECURITY FOR THE BONDS – Additional Series of Bonds.” The SFPUC may issue additional Bonds from time to time to fund additional capital projects (see “FINANCING OF CAPITAL IMPROVEMENTS”) and may also issue refunding Bonds (see “SECURITY FOR THE BONDS – Refunding Bonds”).

Amendments Effected by Forty-Third Supplemental Indenture The SFPUC and the Trustee will enter into a Forty-Sixth Supplemental Indenture , dated April 1, 2022 (the “Forty-Third Supplemental Indenture ”), that amends and supplements certain provisions of the Indenture, including provisions relating to the calculation of “Maximum Annual Debt Service,” “Annual Debt Service,” “Average Annual Debt Service,” the incurrence of Parity Loans, the conditions under which Additional Series of Bonds may be issued, the filing of annual audited financial information with the Trustee and the rate covenants . The provisions of the Forty-Third Supplemental Indenture will become effective when the written consents of the Owners of a majority in aggregate amount of the Bond Obligation of the Bonds then Outstanding and of each Credit Provider, if any, have been filed with the Trustee and certain other requirements under the Indenture have been satisfied. By their purchase of 2022ABCD Bonds, the purchasers of 2022ABCD Bonds irrevocably agree to, accept and consent to the provisions of such amendments . See “PROPOSED AMENDMENTS TO INDENTURE” and “APPENDIX A —SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE – FORTY-THIRD SUPPLEMENTAL INDENTU RE—PROPOSED AMENDMENTS TO INDENTURE” for a more detailed explanation of the amendments effected by the Forty-Third Supplemental Indenture.

Risk Factors
Investment in the 2022ABCD Bonds is subject to material risks. For a general overview of certain risk factors which should be considered, in addition to other matters set forth in this Official Statement, in evaluating an investment in the 2022ABCD Bonds, see “RISK FACTORS.”

4 4163-6481-6438.1

Continuing Disclosure
The SFPUC has covenanted for the benefit of the Owners and Beneficial Owners of the 2022ABCD Bonds to provide certain financial information and operating data not later than nine months following the end of its Fiscal Year (presently June 30), beginning on March 31, 2023, with the report for Fiscal Year 2021-22, and to provide notices of the occurrence of certain enumerated events. These covenants have been made in order to assist the Underwriters in complying with Rule 15c2-12(b)(5) of the Securities and Exchange Commission (the “Rule”). See “CONTINUING DISCLOSURE” and “APPENDIX E – FORM OF CONTINUING DISCLOSURE CERTIFICATE.” Other Matters
Brief descriptions of the 2022ABCD Bonds, the security and sources of payment for the 2022ABCD Bonds, the SFPUC, the Water Enterprise, the SFPUC’s capital improvement program are provided herein. Such descriptions do not purport to be comprehensive or definitive. Definitions of certain capitalized terms used herein may be found in “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.” All references made to various documents herein are qualified in their entirety by reference to the forms thereof, all of which are available for inspection at the office of the SFPUC at:

San Francisco Public Utilities Commission
525 Golden Gate Avenue, 13th Floor
San Francisco, CA 94102
Attention: Assistant General Manager, Business Services and Chief Financial Officer (415) 554-3155
THE 2022ABCD BONDS
General
The 2022ABCD Bonds will be dated as of their date of delivery and will accrue interest from their date of delivery at the rates per annum set forth on the inside cover pages of this Official Statement. Interest on the 2022ABCD Bonds will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Interest on the 2022ABCD Bonds is payable on May 1 and November 1 of each year, beginning November 1, 2022.

The 2022ABCD Bonds will mature on the dates and in the principal amounts set forth on the inside cover pages of this Official Statement. The 2022ABCD Bonds will be issued in fully registered form in denominations of $5,000 or any integral multiple of $5,000.

Under the Indenture, the record date with respect to the payment of principal of and interest on the 2022ABCD Bonds is the 15th day of the calendar month immediately preceding an interest payment date, whether or not such day is a Business Day.

Securities Depository and Book-Entry Only System
The 2022ABCD Bonds will be registered in the name of Cede & Co., as nominee for The Depository Trust Company (“DTC”), New York, New York, as the Owner of the 2022ABCD Bonds . So long as DTC, or its nominee, Cede & Co., is the Owner of the 2022ABCD Bonds , all payments on the 2022ABCD Bonds will be made directly to DTC. Disbursement of such payments to the DTC Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners of the 2022ABCD Bonds will be the responsibility of the DTC Participants.

See “APPENDIX F – INFORMATION REGARDING BOOK- ENTRY ONLY SYSTEM AND GLOBAL CLEARANCE PROCEDURES.”

5 4163-6481-6438.1

Redemption*
Redemption of 2022A Green Bonds
Optional Redemption of 2022A Green Bonds . The 2022A Green Bonds maturing on or after November 1, 20__ are subject to redemption prior to their stated maturity, at the option of the SFPUC, from any source of available funds, as a whole or in part, on any date on or after November 1, ____, from such maturities or portions of maturities as are determined by the SFPUC and (except as otherwise provided under the procedures of Securities Depository for the 2022A Green Bonds) by lot within any one maturity, at a redemption price equal to 100% of the principal amount of the 2022A Green Bonds to be redeemed, plus accrued interest thereon to the date fixed for redemption, without premium.

Make-Whole Optional Redemption of 2022A Gr een Bonds. Before November 1, ____, the 2022A Green Bonds, will be subject to redemption prior to their respective stated maturity dates either in whole or in part, at the option of the SFPUC, at any time, at a redemption price equal to the greater of (i) 100% of the principal amount thereof or (ii) the Discounted Value (as defined in “– Definitions for Make -Whole Optional Redemption”) thereof, plus in either case, accrued interest thereon to the date of redemption.

The 2022A Green Bonds may be redeemed in any order of maturity and in any principal amount within a maturity as selected by the SFPUC in its sole discretion. All calculations and determinations referred to under this caption, “Make-Whole Optional Redemption of 2022A Green Bonds,” except as provided in the preceding sentence, are expected (but not required) to be made by the Calculation Agent (as defined in “ – Definitions for Make -Whole Optional Redemption”).

Mandatory Sinking Fund Redemption of 2022A Green Bonds . The 2022A Green Bonds maturing on November 1, ____ (the “2022A Term Bonds (____)”), are further subject to redemption prior to their stated maturity, and payable from the 2022A Sinking Fund Account, on each November 1 on and after November 1, ____, (except as otherwise provided under the procedures of Securities Depository for the 2022A Green Bonds) by lot within any such maturity if less than all of the 2022A Term Bonds (____) of such maturity are then being redeemed, upon payment of the principal amount thereof and accrued interest thereon to the date fixed for redemption, without premium.

The 2022A Term Bonds (____) are subject to mandatory redemption on November 1 in each of the years and in the respective principal amounts as follows (such schedule subject to adjustment as directed by the SFPUC in the event of optional redemption of any portion of such 2022A Term Bonds (____) prior to maturity as described above):

* Preliminary, subject to change.

6 4163-6481-6438.1

Redemption Date
(November 1) Principal Amount

*
____________________
*Maturity.

The 2022A Green Bonds maturing on November 1, 20__ (the “2022A Term Bonds ( ____)”), are further subject to redemption prior to their stated maturity, and payable from the 2022A Sinking Fund Account, on each November 1 on and after November 1, ____ , (except as otherwise provided under the procedures of Securities Depository for the 2022A Green Bonds) by lot within any such maturity if less than all of the 2022A Term Bonds (____) of such maturity are then being redeemed, upon payment of the principal amount thereof and accrued interest thereon to the date fixed for redemption, without premium.

Redemption Date
(November 1) Principal Amount

*
____________________
*Maturity.

Redemption of 2022B Bonds
Optional Redemption of 2022B Bonds. The 2022B Bonds maturing on or after November 1, ____ are subject to redemption prior to their stated maturity, at the option of the SFPUC, from any source of available funds, as a whole or in part, on any date on or after November 1, ____, from such maturities or portions of maturities as are determined by the SFPUC and (except as otherwise provided under the procedures of Securities Depository for the 2022B Bonds) by lot within any one maturity, at a redemption price equal to 100% of the principal amount of the 2022B Bonds to be redeemed, plus accrued interest thereon to the date fixed for redemption, without premium.

7 4163-6481-6438.1

Make-Whole Optional Redemption of 2022B Bonds . Before November 1, ____, the 2022B Bonds will be subject to redemption either in whole or in part, at the option of the SFPUC, at any time, at a r edemption price equal to the greater of (i) 100% of the principal amount thereof or (ii) the Discounted Value thereof, plus in either case, accrued interest thereon to the date of redemption.

The 2022B Bonds may be redeemed in any order of maturity and in any principal amount within a maturity as selected by the SFPUC in its sole discretion. All calculations and determinations referred to under this caption, “Make-Whole Optional Redemption of 2022B Bonds,” except as provided in the preceding sentence, are expected (but not required) to be made by the Calculation Agent.

Mandatory Sinking Fund Redemption of 2022B Bonds. The 2022B Bonds maturing on November 1, ____ (the “2022B Term Bonds (____)”), are further subject to redemption prior to their stated maturity, and payable from the 2022B Sinking Fund Account, on each November 1 on and after November 1, ____, (except as otherwise provided under the procedures of Securities Depository for the 2022B Bonds) by lot within any such maturity if less than all of the 2022B Term Bonds ( ____) of such maturity are then being redeemed, upon payment of the principal amount thereof and accrued interest thereon to the date fixed for redemption, without premium.

The 2022B Term Bonds (____) are subject to mandatory redemption on November 1 in each of the years and in the respective principal amounts as follows (such schedule subject to adjustment as directed by the SFPUC in the event of optional redemption of any portion of such 2022B Term Bonds (____) prior to maturity as described above):

Redemption Date
(November 1) Principal Amount

*
____________________
*Maturity.

The 2022B Bonds maturing on November 1, ____ (the “2022B Term Bonds (____)”), are further subject to redemption prior to their stated maturity, and payable from the 2022B Sinking Fund Account, on each November 1 on and after November 1, ____ , (except as otherwise provided under the procedures of Securities Depository for the 2022B Bonds) by lot within any such maturity if less than all of the 2022B Term Bonds (____) of such maturity are then being redeemed, upon payment of the principal amount thereof and accrued interest thereon to the date fixed for redemption, without premium.

Redemption Date
(November 1) Principal Amount

*
____________________
*Maturity.

8 4163-6481-6438.1

Redemption of 2022C Bonds
Optional Redemption of 2022C Bonds. The 2022C Bonds maturing on or after November 1, ____ are subject to redemption prior to their stated maturity, at the option of the SFPUC, from any source of available funds, as a whole or in part, on any date on or after November 1, ____, from such maturities or portions of maturities as are determined by the SFPUC and (except as otherwise provided under the procedures of Securities Depository for the 2022C Bonds) by lot within any one maturity, at a redemption price equal to 100% of the principal amount of the 2022C Bonds to be redeemed, plus accrued interest thereon to the date fixed for redemption, without premium.

Make-Whole Optional Redemption of 2022C Bonds . Before November 1, ____, the 2022C Bonds will be subject to redemption either in whole or in part, at the option of the SFPUC, at any time, at a redemption price equal to the greater of (i) 100% of the principal amount thereof or (ii) the Discounted Value thereof, plus in either case, accrued interest thereon to the date of redemption.

The 2022C Bonds may be redeemed in any order of maturity and in any principal amount within a maturity as selected by the SFPUC in its sole discretion. All calculations and determinations referred to under this caption, “Make-Whole Optional Redemption of 2022C Bonds,” except as provided in the preceding sentence, are expected (but not required) to be made by the Calculation Agent.

Mandatory Sinking Fund Redemption of 2022C Bonds. The 2022C Bonds maturing on November 1, ____ (the “2022C Term Bonds (____)”), are further subject to redemption prior to their stated maturity, and payable from the 2022C Sinking Fund Account, on each November 1 on and after November 1, ____, (except as otherwise provided under the procedures of Securities Depository for the 2022C Bonds) by lot within any such maturity if less than all of the 2022C Term Bonds ( ____) of such maturity are then being redeemed, upon payment of the principal amount thereof and accrued interest thereon to the date fixed for redemption, without premium.

The 2022C Term Bonds (____) are subject to mandatory redemption on November 1 in each of the years and in the respective principal amounts as follows (such schedule subject to adjustment as directed by the SFPUC in the event of optional redemption of any portion of such 2022C Term Bonds (____) prior to maturity as described above):

Redemption Date
(November 1) Principal Amount

*
____________________
*Maturity.

The 2022C Bonds maturing on November 1, ____ (the “2022C Term Bonds (____)”), are further subject to redemption prior to their stated maturity, and payable from the 2022C Sinking Fund Account, on each November 1 on and after November 1, ____ , (except as otherwise provided under the procedures of Securities Depository for the 2022C Bonds) by lot within any such maturity if less than all of the 2022C Term Bonds (____) of such maturity are then being redeemed, upon payment of the principal amount thereof and accrued interest thereon to the date fixed for redemption, without premium.

9 4163-6481-6438.1

Redemption Date
(November 1) Principal Amount

*
____________________
*Maturity.

Redemption of 2022D Bonds
Optional Redemption of 2022D Bonds. The 2022D Bonds maturing on or after November 1, ____ are subject to redemption prior to their stated maturity, at the option of the SFPUC, from any source of available funds, as a whole or in part, on any date on or after November 1, ____, from such maturities or portions of maturities as are determined by the SFPUC and (except as otherwise provided under the procedures of Securities Depository for the 2022D Bonds) by lot within any one maturity, at a redemption price equal to 100% of the principal amount of the 2022D Bonds to be redeemed, plus accrued interest thereon to the date fixed for redemption, without premium.

Make-Whole Optional Redemption of 2022D Bonds . Before November 1, ____, the 2022D Bonds will be subject to redemption either in whole or in part, at the option of the SFPUC, at any time, at a redemption price equal to the greater of (i) 100% of the principal amount thereof or (ii) the Discounted Value thereof, plus in either case, accrued interest thereon to the date of redemption.

The 2022D Bonds may be redeemed in any order of maturity and in any principal amount within a maturity as selected by the SFPUC in its sole discretion. All calculations and determinations referred to under this caption, “Make-Whole Optional Redemption of 2022D Bonds, ” except as provided in the preceding sentence, are expected (but not required) to be made by the Calculation Agent.

Mandatory Sinking Fund Redemption of 2022D Bonds. The 2022D Bonds maturing on November 1, ____ (the “2022D Term Bonds (____)”), are further subject to redemption prior to their stated maturity, and payable from the 2022D Sinking Fund Account, on each November 1 on and after November 1, ____, (except as otherwise provided under the procedures of Securities Depository for the 2022D Bonds) by lot within any such maturity if less than all of the 2022D Term Bonds ( ____) of such maturity are then being redeemed, upon payment of the principal amount thereof and accrued interest thereon to the date fixed for redemption, without premium.

The 2022D Term Bonds (____) are subject to mandatory redemption on November 1 in each of the years and in the respective principal amounts as follows (such schedule subject to adjustment as directed by the SFPUC in the event of optional redemption of any portion of such 2022D Term Bonds (____) prior to maturity as described above):

Redemption Date
(November 1) Principal Amount

10 4163-6481-6438.1

*
____________________
*Maturity.

The 2022D Bonds maturing on November 1, ____ (the “2022D Term Bonds (____)” and, together with the 2022A Term Bonds (___), the 2022A Term Bonds(___), the 2022B Term Bonds ( ____), the 2022B Term Bonds (___), the 2022C Term Bonds ( ____), the 2022C Term Bonds ( ____), and the 2022D Term Bonds ( ____), the “2022ABCD Term Bonds ”), are f urther subject to redemption prior to their stated maturity, and payable from the 2022C Sinking Fund Account, on each November 1 on and after November 1, ____, (except as otherwise provided under the procedures of Securities Depository for the 2022C Bonds) by lot within any such maturity if less than all of the 2022C Term Bonds ( ____) of such maturity are then being redeemed, upon payment of the principal amount thereof and accrued interest thereon to the date fixed for redemption, without premium.

Redemption Date
(November 1) Principal Amount

*
____________________
*Maturity.

Definitions for Make-W hole Optional Redemption
“Calculation Agent ” means a municipal advisor or other agent selected by the SFPUC to perform the calculations required in connection with the make- whole optional redemption of any bonds of any sub-series of 2022ABCD Bonds.
“Discounted Value” means, with respect to each outstanding maturity of the applicable sub-series of the 2022ABCD Bonds to be redeemed, the sum as determined by the SFPUC or the Calculation Agent of the amounts obtained by discounting all remaining scheduled payments of principal and interest (exclusive of interest accrued to the date of redemption) on such maturity from their respective scheduled payment dates to the applicable redemption date, at a yield (computed on a semi-annual basis, assuming a 360-day year consisting of twelve 30-day months) equal to the applicable Discount Yield.

With respect to the 2022A Green Bonds , “Discount Yield” means, the Blended Treasury Yield determined by the SFPUC or the Calculation Agent with respect to the 2022A Green Bonds maturity to be redeemed, plus ( __) basis points with respect to the 2022A Green Bonds maturing on _______ 1, ____ and ____ (___) basis points with respect to the 2022A Green Bonds maturing on _______ 1, ____. The Discount Yield will be calculated assuming semi-annual compounding based upon a 360-day year consisting of twelve 30-day months.

With respect to the 2022B Bonds , “Discount Yield” means, the Blended Treasury Yield, as determined by the SFPUC or the Calculation Agent with respect to the 2022B Bonds maturity to be redeemed, plus ____ (__) basis points with respect to the 2022B Bonds maturing on _______ 1, ____ and ____ (___) basis points with respect to the

11 4163-6481-6438.1

2022B Bonds maturing on _______ 1, ____. The Discount Yield will be calculated assuming semi- annual compounding based upon a 360-day year consisting of twelve 30-day months.

With respect to the 2022C Bonds, “ Discount Yield” means, the Blended Treasury Yield, as determined by the SFPUC or the Calculation Agent with respect to the 2022C Bonds maturity to be redeemed, plus ____ (__) basis points with respect to the 2022C Bonds maturing on _______ 1, ____ and ____ (___) basis points with respect to the 2022C Bonds maturing on _______ 1, ____. The Discount Yield will be calculated assuming semi -annual compounding based upon a 360-day year consisting of twelve 30-day months.

With respect to the 2022D Bonds, “Discount Yield” means, the Blended Treasury Yield, as determined by the SFPUC or the Calculation Agent with respect to the 2022 D Bonds maturity to be redeemed, plus ____ (__) basis points with respect to the 2022D Bonds maturing on _______ 1, ____ and ____ (___) basis points with respect to the 2022D Bonds maturing on _______ 1, ____ . The Discount Yield will be calculated assuming semi- annual compounding based upon a 360-day year consisting of twelve 30-day months. “Blended Treasury Yield ” means, with respect to the applicable maturity of the applicable sub -series of 2022ABCD Bonds, the yield computed by the SFPUC or the Calculation Agent as the linear interpolation of two Market Treasury Yields such that the maturity that corresponds to the interpolated Market Treasury Yield is comparable to the remaining average life of the applicable maturity to be redeemed from the redemption date. The first Market Treasury Yield shall be the yield on an actively traded U.S. Treasury security or a U.S. Treasury constant maturity with the maturity closest to but no later than the date corresponding to the remaining average life of the applicable maturity to be redeemed. The second Market Treasury Yield shall be the yield on an actively traded U.S.

Treasury security or a U.S. Treasury constant maturity with the maturity closest to but no earlier than the date corresponding to the remaining average life of the applicable maturity to be redeemed , each as more fully described under "Market Treasury Yield" below.
“Market Treasury Yield” means that yield, as determined by the SFPUC or the Calculation Agent, assuming semi-annual compounding based upon a 360-day year consisting of twelve 30-day months, which is equal to:
(i) the yield determined using the average of the bid and ask prices for the applicable maturity of an actively traded U.S. Treasury security, reported, as of 11:00 a.m., New York City time, on the Valuation Date on the display designated as “Page PXl” of the Bloomberg Financial Markets Services Screen (or, if not available, any other nationally recognized trading screen reporting on-line intraday trading in U.S. Treasury securities); or
(ii) if the yield described in (i) above is not reported as of such time or the yield reported as of such time is not ascertainable, the most recent yield published for the applicable U.S. Treasury constant maturity from the federal Reserve Statistical Release H.15 Daily Update (or any comparable or successor publication) reported, as of 11:00 a.m., New York City time, on the Valuation Date; or (iii) if the yields described in (i) and (ii) above are not reported as of such time or the yields reported as of such time are not ascertainable, the yields determined using the bid and ask price for the applicable maturity of any actively traded U.S. Treasury security shall be based u pon the average of yield s determined using the bid and ask price quotations for such security (after excluding the highest and lowest quotations) as of 3:30 p.m., New York City time, on the Valuation Date received from no less than five primary dealers in U.S. Government securities selected by the SFPUC. “Valuation Date” means no less than the third Business Day nor more than the twentieth (20 th) Business
Day preceding the redemption date.

General Redemption Provisions
Purchase In Lieu of Mandatory Sinking Fund Redemption. In lieu of mandatory sinking fund redemption of the 2022ABCD Bonds as described above, the SFPUC may satisfy, in whole or in part, the related minimum Sinking Fund Account payment amounts and redemption of 2022ABCD Term Bonds of the respective Sub -Series by

12 4163-6481-6438.1

depositing with the Trustee 2022ABCD Term Bonds of the respective Sub-Series for cancellation prior to the Trustee’s selection of the 2022ABCD Term Bonds of such Sub-Series for redemption, or may request the Trustee to purc hase 2022ABCD Term Bonds of the respective Sub -Series, at public or private sale as and when and at such prices (including brokerage and other charges and including accrued interest) as the SFPUC may direct, not to exceed the principal amount thereof. The par amount of any of such 2022ABCD Bonds so deposited or purchased in any twelve- month period ending on September 15 in any year will be credited towards and will reduce the par amount of such 2022ABCD Bonds required to be redeemed as described above on the next succeeding November 1.

Selection of 2022ABCD Bonds for Redemption. If the 2022ABCD Bonds are registered in book-entry only form and so long as DTC or a successor securities depository is the sole registered owner of the 2022ABCD Bonds , if less than all of the 2022ABCD Bonds of a maturity are called for prior redemption, the particular 2022ABCD Bonds or portions thereof to be redeemed shall be selected on a “Pro Rata Pass -Through Distribution of Principal” basis in accordance with DTC procedures, provided that, so long as the 2022ABCD Bonds are held in book- entry form, the selection for redempt ion of such 2022ABCD Bonds shall be made in accordance with the operational arrangements of DTC then in effect that currently provide for adjustment of the principal by a factor provided by the SFPUC or the Trustee pursuant to DTC operational arrangements. If the SFPUC or the Trustee do not provide the necessary information and identify the redemption as on a Pro Rata Pass-Through Distribution of Principal basis, the 2022ABCD Bonds will be selected for redemption in accordance with DTC procedures by lot.

It is the SFPUC’s intent with respect to the 2022ABCD Bonds that redemption allocations made by DTC, the DTC Participants or such other intermediaries that may exist between the SFPUC and the Beneficial Owners be made on a “Pro Rata Pass -Through Distribution of Principal” basis as described above. However, the SFPUC can provide no assurance that DTC, the DTC Participants or any other intermediaries will allocate redemptions among Beneficial Owners on such basis. If the DTC operational arrangements do not allo w for the redemption of the 2022ABCD Bonds on a Pro Rata Pass -Through Distribution of Principal basis as discussed above, then the 2022ABCD Bonds will be selected for redemption in accordance with DTC procedures by lot. (See also “APPENDIX F – INFORMATION REGARDING BOOK- ENTRY ONLY SYSTEM AND GLOBAL CLEARANCE PROCEDURES.”)
Subject to DTC’s procedures relating to the selection of bonds for redemption described above, whenever less than all of the 2022ABCD Bonds, of any one tenor and maturity are called for redemption and those 2022ABCD Bonds are redeemable by lot, the Trustee will select the 2022ABCD Bonds of the tenor and maturity to be redeemed from the Outstanding 2022ABCD Bonds of that tenor and maturity, by lot or by any other manner the Trustee deems fair and equitable. For purposes of such selection, 2022ABCD Bonds will be deemed to be made up of $5,000 portions of principal, any of which may be redeemed separately.

Notice of Redemption. Notice of redemption will be mailed by the Trustee at least 30 days but not more than 60 days prior to the redemption date, to DTC (so long as DTC’s book-entry system is used). The actual receipt by the owner of any 2022ABCD Bond of notice of such redemption is not a condition precedent to redemption, and failure to receive a redemption notice or any defect in a redemption notice will not affect the validity of the proceedings for the redemption of such 2022ABCD Bond or the cessation of the accrual of interest on the date fixed for such redemption. See “APPENDIX F – INFORMATION REGARDING BOOK- ENTRY ONLY SYSTEM AND GLOBAL CLEARANCE PROCEDURES.”
Rescission of Notice of Redemption . The SFPUC may, at its option, prior to the date fixed for redemptio n in any notice of optional redemption, rescind and cancel such notice of redemption by written request to the Trustee and the Trustee will mail notice of such cancellation to the recipients of the notice of redemption being cancelled.

Effect of Redemption. When notice of redemption has been duly given as described above, and moneys for payment of the redemption price are held by the Trustee, the 2022ABCD Bonds called for redemption will, on the redemption date designated in such notice, become due and paya ble at the redemption price specified in such notice; and from and after the date so designated interest on such 2022ABCD Bonds called for redemption will cease to accrue, and such 2022ABCD Bonds will cease to be entitled to any benefit or security under the Indenture, and the Owners of said 2022ABCD Bonds will have no rights in respect thereof except to receive payment of the redemption price thereof. The Trustee, upon surrender for payment of any of said 2022ABCD Bonds will pay such 2022ABCD

13 4163-6481-6438.1

Bonds at the applicable redemption price, together with accrued interest thereon. All 2022ABCD Bonds redeemed will be cancelled upon surrender and no 2022ABCD Bonds will be issued in place thereof.

Defeasance
The obligations of the SFPUC and the pledge, lien, covenants and agreements of the SFPUC made or provided for in the Indenture will be fully discharged and satisfied as to any 2022ABCD Bond will no longer be deemed outstanding thereunder if certain conditions set forth in the Indenture are satisfied. See “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE – DEFEASANCE.” PLAN OF REFUNDING*
[Need to settle on Refunded Bonds list for POS]
General
The proceeds of the 2022A Green Bonds, together with certain other moneys available for such purpose, will be applied to (i) refund all or a portion of the SFPUC’s outstanding _______________ , and ( ii) pay the costs of issuance of the 2022A Green Bonds.,
The proceeds of the 2022B Bonds, together with certain other moneys available for such purpose, will be applied to (i) refund all or a portion of the SFPUC’s outstanding ______________, and (ii) pay the costs of issuance of the 2022B Bonds.

The proceeds of the 2022C Bonds, together with certain other moneys available for such purpose, will be applied to (i) refund all or a portion of the SFPUC’s outstanding _______________, and (ii) pay the costs of issuance of the 2022C Bonds.

The proceeds of the 2022D Bonds, together with certain other moneys available for such purpose, will be applied to (i) refund all or a portion of the SFPUC’s outstanding _______________, and (ii) pay the costs of issuance of the 2022D Bonds.

See “OBLIGATIONS PAYABLE FROM REVENUES – Outstanding Parity Revenue Bonds.” The following tables detail the Series, maturity dates and principal amounts of Bonds which will be refunded with proceeds of the 2022ABCD Bonds (the “Refunded Bonds”).

Refunded Bonds
Public Utilities Commission of the City and County of San Francisco, San Francisco Water Revenue Bonds, 2015 Sub-Series A Bonds Maturity
Outstanding
Principal
Amount
Interest
Rate
CUSIP†
(Base
No.
79765R)
Principal
Amount to be
Refunded
Payment or
Redemption
Date
11/1/2026 $20,945,000 5.00% D71 $20,945,000 5/1/2025
11/1/2027 20,530,000 5.00% D89 20,530,000 5/1/2025

* Preliminary, subject to change.
† CUSIP is a registered trademark of the American Bankers Association. CUSIP and ISIN data herein are provided by CGS, which is managed on behalf of the American Bankers Association by FactSet Research Systems Inc. This data is not intended to create a database and does not serve in any way as a substitute for th e CGS data base. Neither the SFPUC nor the Underwriters assume any responsibility for the accuracy of the CUSIP or ISIN data.

14 4163-6481-6438.1

11/1/2028 21,580,000 5.00% D97 21,580,000 5/1/2025
11/1/2029 22,685,000 5.00% E21 22,685,000 5/1/2025
11/1/2030 19,760,000 5.00% F95 19,760,000 5/1/2025
11/1/2031 25,000,000 5.00% E47 25,000,000 5/1/2025
11/1/2032 26,280,000 5.00% E54 26,280,000 5/1/2025
11/1/2036 31,135,000 5.00% E96 31,135,000 5/1/2025
Total: $187,915,000 $187,915,000

Public Utilities Commission of the City and County of San Francisco, San Francisco Water Revenue Bonds, 2016 Sub-Series A Bonds Maturity
Outstanding
Principal
Amount
Interest
Rate
CUSIP*
(Base
No.
79765R)
Principal
Amount to be
Refunded
Payment or
Redemption
Date
11/1/2028 $48,655,000 5.00% H51 $48,655,000 11/1/2026
11/1/2029 51,135,000 5.00% H69 51,135,000 11/1/2026
11/1/2031 34,135,000 5.00% H85 34,135,000 11/1/2026
11/1/2032 35,875,000 5.00% H93 35,875,000 11/1/2026
11/1/2033 37,710,000 5.00% J26 37,710,000 11/1/2026
11/1/2034 39,670,000 5.00% J34 39,670,000 11/1/2026
11/1/2035 41,745,000 5.00% J42 41,745,000 11/1/2026
Total: $288,925,000 $288,925,000
Public Utilities Commission of the City and County of San Francisco, San Francisco Water Revenue Bonds, 2017 Sub-Series A Bonds (WSIP) (Green Bonds)
Maturity
Outstanding
Principal
Amount
Interest
Rate
CUSIP*
(Base
No.
79765R)
Principal
Amount to be
Refunded
Payment or
Redemption
Date
11/1/2026 $2,840,000 5.00% R27 $2,840,000 11/1/2024
11/1/2027 2,990,000 5.00% R35 2,990,000 11/1/2024
11/1/2028 3,140,000 5.00% R43 3,140,000 11/1/2024
11/1/2029 3,300,000 5.00% R50 3,300,000 11/1/2024
11/1/2036 4,685,000 5.00% S42 4,685,000 11/1/2024
Total: $16,955,000 $16,955,000

Public Utilities Commission of the City and County of San Francisco, San Francisco Water Revenue Bonds, 2017 Sub-Series B Bonds (Non-WSIP) Maturity
Outstanding
Principal
Amount
Interest
Rate
CUSIP*
(Base
No.
79765R)
Principal
Amount to be
Refunded
Payment or
Redemption
Date
11/1/2026 $3,465,000 5.00% T90 $3,465,000 11/1/2024
11/1/2027 3,645,000 5.00% U23 3,645,000 11/1/2024

15 4163-6481-6438.1

11/1/2028 3,830,000 5.00% U31 3,830,000 11/1/2024
11/1/2029 4,025,000 5.00% U49 4,025,000 11/1/2024
11/1/2036 5,715,000 5.00% V30 5,715,000 11/1/2024
Total: $20,680,000 $20,680,000

Public Utilities Commission of the City and County of San Francisco, San Francisco Water Revenue Bonds, 2017 Sub-Series C Bonds (Hetch Hetchy) Maturity
Outstanding
Principal
Amount
Interest
Rate
CUSIP*
(Base
No.
79765R)
Principal
Amount to be
Refunded
Payment or
Redemption
Date
11/1/2026 $1,660,000 5.00% X20 $1,660,000 11/1/2024
11/1/2027 1,745,000 5.00% X38 1,745,000 11/1/2024
11/1/2028 1,830,000 5.00% X46 1,830,000 11/1/2024
11/1/2029 1,925,000 5.00% X53 1,925,000 11/1/2024
11/1/2036 2,735,000 5.00% Y45 2,735,000 11/1/2024
Total: $9,895,000 $9,895,000

Public Utilities Commission of the City and County of San Francisco, San Francisco Water Revenue Bonds, 2017 Sub-Series D Bonds (Refunding) (Green Bonds)
Maturity
Outstanding
Principal
Amount
Interest
Rate
CUSIP*
(Base
No.
79765R)
Principal
Amount to be
Refunded
Payment or
Redemption
Date
11/1/2031 $12,550,000 5.00% 2M0 $12,550,000 11/1/2027
11/1/2032 46,855,000 5.00% 2P3 46,855,000 11/1/2027
11/1/2033 59,875,000 5.00% 2Q1 59,875,000 11/1/2027
11/1/2034 61,540,000 5.00% 2R9 61,540,000 11/1/2027
11/1/2035 11,105,000 5.00% 2S7 11,105,000 11/1/2027
Total: $191,925,000 $191,925,000

Public Utilities Commission of the City and County of San Francisco, San Francisco Water Revenue Bonds, 2020 Sub-Series B Bonds (Regional Water) Maturity
Outstanding
Principal
Amount
Interest
Rate
CUSIP*
(Base
No.
79765R)
Principal
Amount to be
Refunded
Payment or
Redemption
Date
11/1/2045 $8,890,000 5.00% 5K1 $8,890,000 11/1/2027
11/1/2050 52,440,000 5.00% 5L9 52,440,000 11/1/2027
Total: $61,330,000 $61,330,000

16 4163-6481-6438.1

Escrow Fund
A portion of the proceeds of the 2022ABCD Bonds, together with other moneys released under the Indenture, in an amount sufficient to refund and legally defease the Refunded Bonds will be deposited in an Escrow Fund established by the Trustee, acting as escrow agent (the “Escrow Agent ”), under an Escrow Agreement, dated as of April 1, 2022 (the “Escrow Agreement”), by and between the SFPUC and the Escrow Agent. A portion of the funds deposited in the Escrow Fund will be invested in federal securities, the principal of and interest on which, when received, will be sufficient, together with other available amounts held in the Escrow Fund, to pay the principal of and interest on the Refunded Bonds on their respective payment or redemption dates. Pursuant to the Indenture and the irrevocable instructions in the Escrow Agreement, the Refunded Bonds will be paid on their respective payment dates or redeemed on their respective redemption dates at a redemption price equal to the principal amount of the Refunded Bonds, plus accrued interest to the redemption date, without premium. As a result of the deposit and application of funds as provided in the Escrow Agreement, the Refunded Bonds will be defeased pursuant to the Indenture as of the date of issuance of the 2022ABCD Bonds.

Sufficiency of the deposits in the Escrow Fund for the purposes described in the previous paragraph will be verified by _______________. See “VERIFICATION OF MATHEMATICAL ACCURACY.”

ESTIMATED SOURCES AND USES OF FUNDS
The proceeds of the 2022ABCD Bonds are expected to be applied as follows:

2022A Green
Bonds 2022B Bonds 2022C Bonds 2022D Bonds
Total
2022ABCD
Bonds
Sources of Funds
Par Amount
Principal Fund &
Interest Fund Releases
Total Sources

Uses of Funds
Deposit to Escrow Fund(1)
Costs of Issuance(2)
Total Uses
____________________
(1) Represents deposits to the Escrow Fund established under the Escrow Agreement . See “PLAN OF REFUNDING” and “OBLIGATIONS PAYABLE FROM REVENUES – Outstanding Parity Revenue Bonds.” (2) The costs of issuance include underwriters’ discount and amounts for legal fees, Trustee and Escrow Agent fees, municipal advisor fees, Verification Agent fees, escrow bidding agent fees, rating agency fees, printing costs, and other costs relating to the issuance of the 2022ABCD Bonds.

GREEN BONDS DESIGNATION AND CLIMATE CERTIFICATION
Designation as Green Bonds
The SFPUC is committed to providing retail drinking water services to San Francisco and wholesale water to three Bay Area counties in a manner that values environmental and community interests, and sustains the resources entrusted to its care. The information available on such website is not incorporated by reference into this Official Statement and should not be relied upon in making an investment in the 2022ABCD Bonds .

The SFPUC is issuing the 2022A Green Bonds as “Green Bonds” based on the climate adapta tion and/or mitigation benefits of the projects financed and refinanced by the 2022A Green Bonds.

The purpose of designating the 2022A Green Bonds as Green Bonds is to allow investors to invest directly in bonds which finance environmentally beneficial projects (“Green Projects”). For purposes of such determination,

17 4163-6481-6438.1

the SFPUC considers the projects included in its WSIP to be Green Projects. The proceeds of the _____ Bonds, the _____ Bonds and the _____ Bonds were, and proceeds of the 2022A Green Bonds will be, applied to refinance WSIP projects. See “PLAN OF REFUNDING,” “ESTIMATED SOURCES AND USES OF FUNDS”, and “CAPITAL IMPROVEMENT PROGRAM – Water System Improvement Program (WSIP).” The 2022A Green Bonds will not constitute “exempt facility bonds” issued to finance “qualified green building and sustainable design projects” within the meaning of Section 142(a) of the Code.

The 2022B Bonds, 2022C Bonds and 2022D Bonds are not being designated as “Green Bonds.” The Indenture does not restrict the use of proceeds of future issuances of Bonds to the financing of Green Projects and in the future the SFPUC may issue Additional Bonds which are not designated as Green Bonds or certified by the Climate Bonds Initiative as further described herein.

The Climate Bonds Initiative and Climate Bonds
The Climate Bonds Initiative (the “ CBI”) is an international, investor -focused non- profit organization working to focus the global bond market on climate change solutions through the development and promotion of an efficient “green” bond market. The CBI has established and manages the Climate Bonds Standard (the “ Climate Bonds Standard”) under which the 2022A Green Bonds have been certified in accordance with the “Water Criteria” of such standard. The certification of the 2022A Green Bonds reflects only the views of the third-party verifier report approved by the Climate Bonds Standard Board. The explanation of the significance of this cert ification may be obtained from the CBI. The SFPUC has provided a third- party verified report to the Climate Bonds Standard Board, including information concerning prior and anticipated capital project expenditures related to the WSIP (some of which does not appear in this Official Statement). As part of the certification process, the SFPUC retained Sustainalytics U.S., Inc., a subsidiary of Sustainalytics Holding, B.V, Netherlands (collectively, “Sustainalytics”), to provide a third-party verification that the 2022A Green Bonds are aligned with the Climate Bonds Standard.

The certification of the 2022A Green Bonds as “Climate Bonds” by the CBI is based solely on the Climate Bonds Standard and does not, and is not intended to make any representation or give any assurance with respect to any other matter relating to the 2022A Green Bonds or any WSIP project, including but not limited to this Official Statement, the transaction documents, the SFPUC or the management of the SFPUC.

The certification of the 2022A Green Bonds as “Climate Bonds” by the CBI was addressed solely to the SFPUC and is not a recommendation to any person to purchase, hold or sell the 2022A Green Bonds and such certification does not address the market price or suitability of the 2022A Green Bonds for a particular investor. The certification also does not address the merits of the decision by the SFPUC or any third party to participate in any WSIP project and does not express and should not be deemed to be an expression of an opinion as to the SFPUC or any aspect of any WSIP project (including but not limited to the financial viability of any WSIP project) other than with respect to conformance with the Climate Bonds Standard.

In issuing or monitoring, as applicable, the certification, the CBI has assumed and relied upon and will assume and rely upon the accuracy and completeness in all material respects of the information supplied or otherwise made available to the CBI. The CBI does not assume or accept any responsibility to any person for independently verifying (and it has not verified) such information or to undertake (and it has not undertaken) any independent evaluation of any WSIP project or the SFPUC. In addition, the CBI does not assume any obligation to conduct (and it has not conducted) any physical inspection of any WSIP project. The certification may only be used with the 2022A Green Bonds and may not be used for any other purpose without the CBI’s prior written consent.

The certification does not and is not in any way intended to address the likelihood of timely payment of interest when due on the 2022A Green Bonds and/or the payment of principal at maturity or any other date.

The certification may be withdrawn at any time in the CBI’s sole and absolute discretion and there can be no assurance that such certification will not be withdrawn.

The CBI is not a licensed broker -dealer or a nationally recognized statistical ratings organization.

Certification by the CBI is not a recommendation to buy, sell or hold securities, and such certification may be subject

18 4163-6481-6438.1

to revision or withdrawal. The SFPUC will undertake reasonable efforts to ensure that any actions taken with respect to the 2022A Green Bonds will not result in revision or withdrawal of the CBI’s certification; however, there can b e no guarantee future actions or a future revision to the CBI’s criteria for certifying bonds will not result in a withdrawal or revision of the CBI’s certification. The proceeds of the bonds to be refunded by the 2022A Green Bonds were expended on WSIP projects and the SFPUC posts information about WSIP projects on its website.

The Indenture does not restrict the use of proceeds of future issuances of Bonds to the financing of Green Projects and in the future the SFPUC may issue Additional Bonds which are not designated as green bonds or certified by the CBI.

The repayment obligations of the SFPUC with respect to the 2022A Green Bonds are not conditioned on the completion of any particular project or the satisfaction of any condition relating to the status of the 2022A Green Bonds as Green Bonds or the certification of such bonds by the CBI. The SFPUC assumes no obligation to ensure compliance with any legal or other principles of Green Bonds, as such principles may evolve over time. See “SECURITY FOR THE BONDS.”
The terms “Climate Bond” and “green bonds” are neither defined in, nor related to the Indenture, and their use herein is for identification purposes only and is not intended to provide or imply that a holder of the 2022A Green Bonds is entitled to any additional security other than as provided in the Indenture. The SFPUC has no continuing legal obligation to maintain the Climate Bond certification of the 2022A Green Bonds .

United Nations Sustainable Development Goals
Impacts from WSIP projects fin anced by the SFPUC’s Green Bonds are also aligned with several United Nations Sustainable Development Goals (“UN SDG”). By reference to the International Capital Market Association (“ICMA”) “Green and Social Bonds: A High- Level Mapping to the Sustainable D evelopment Goals” (June 20 20), the projects refinanced by the 2022A Green Bonds primarily aim to address goals 6 (Clean Water and Sanitation), 9 (Industry, Innovation and Infrastructure), 11 (Sustainable Cities and Communities), 13 (Climate Action), 14 (Li fe Below Water) and 15 (Life on Land).

As promulgated by the ICMA and most recently updated in June 20 21, the “Green Bond Principles” have four core components (Use of Proceeds, Process for Project Evaluation and Selection, Management of Proceeds, and Reporting), each of which are further described below.

Use of Proceeds
The proceeds of the ____ Bonds, the ____ Bonds and the ____ Bonds to be refunded with the proceeds of the 2022A Green Bonds have all been expended on projects the SFPUC considers to be “Green Projects .” All such projects related to WSIP, which achieves the following goals:
• Improve the system to provide high- quality water that reliably meets all current and foreseeable local, State, and Federal requirements.
• Reduce vulnerability of the water system to damage from earthquakes. • Increase system reliability to deliver water by providing the redundancy needed to accommodate outages.
• Provide improvements related to water supply/drought protection. • Enhance sustainability th rough improvements that optimize protection of the natural and human environment.

These WSIP projects include, but are not limited to, the following:

19 4163-6481-6438.1

• Bioregional Habitat Reserve Program: Coordinate and consolidate approach to preserve, enhance, restore or create about 2,350 acres of various habitats. (UN SDG 14 and 15) • Calaveras Dam Replacement: Replace a seismically-vulnerable old dam with a new dam, including a fish ladder that supports and restores native aquatic resources. (UN SDG 6, 9, 11, 13 and 14) • Harry Tracy Water Treatment Plant Long Term Improvements : Improve seismic and delivery reliability for the water treatment plant for San Francisco Peninsula ’s sole source of emergency water, impacting 2.7 million customers. (UN SDG 6, 9 and 11) • New Irvington Tunnel: Guarantee water service to 2.7 million customers in four Bay Area counties within 24 hours of a major weather or seismic event. (UN SDG 9 and 11) • Peninsula Pipeline Seismic Upgrade: Ensure seismic and supply reliability of pipelines on the San Francisco Peninsula, including preparedness for pipeline ruptures from landslides. (UN SDG 9 and 11)
• Regional Groundwater Storage and Recovery : Store 7.5 years of drinking water supply to use in drought years impacting 2.7 million customers. (UN SDG 6, 9, 11 and 13) • San Joaquin Pipeline System : Improve delivery reliability and provide operational flexibility during maintenance activities or unplanned outages resulting from seismic or extreme weather, impacting 2.7 million customers. (UN SDG 9 and 11)
• Vegetation Restoration of WSIP Sites: Restore and re-vegetate habitat areas temporarily impacted by construction at Water System Improvement Program sites to pre- construction condition. (UN SDG 14 and 15)
See “CAPITAL IMPROVEMENT PROGRAM – Water System Improvement Program (WSIP).” Process for Project Evaluation and Selection
The SFPUC has evaluated capital projects in the Water Enterprise’s Ten- Year Capital Plan as authorized by Proposition A and pursuant to Proposition E to determine whether such projects satisfy the “Water Criteria” of the Climate Bonds Standard, and such projects have been certified. The certification of the 2022A Green Bonds reflects only the views of the third-party verifier report approved by the Climate Bonds Standard Board.

Green Bond Reporting
As part of the certification process, the SFPUC will provide a post-issuance verification of compliance to the CBI. The SFPUC will also provide an annual report to bondholders of the 2022A Green Bonds regarding the projects refinanced by proceeds of t he 2022A Green Bonds and make the report available at https://sfpuc.org/about - us/reports/debt-management-and-disclosure-reports. The information available on such website is not incorporated by reference into this Official Statement and should not be relied upon in making an investment in the 2022ABCD Bonds.

SECURITY FOR THE BONDS
Pledge of Revenues
General. Under the Indenture, the SFPUC has irrevocably pledged the Revenues of the Water Enterprise and all Refundable Credits (with respect to Bonds issued as Build America Bonds) received by the SFPUC to the punctual payment of principal of, premium, if any, and interest on the Bonds, including the 2022ABCD Bonds and the Outstanding Bonds described below (see “OBLIGATIONS PAYABLE FROM REVENUES – Outstanding Parity

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Revenue Bonds”), and any Additional Series of Bonds. This pledge is subject to the allocation of funds provided in the Indenture, as described below. See “– Flow of Funds.” Pursuant to Section 5451 of the California Government Code, the pledge of, lien on and security interest in Revenues and certain other funds granted by the Indenture is valid and binding in accordance with the terms thereof from the time of issuance of the 2022ABCD Bonds without any further action by the SFPUC; the Revenues and such other funds shall be immediately subject to such pledge; and such pledge shall constitute a lien and security interest which shall immediately attach to such Revenues and other funds and shall be effective, binding and enforceable against the SFPUC, its successors, creditors, and all others asserting rights therein to the extent set forth and in accordance with the terms of the Indenture irrespective of whether those parties have notice of such pledge and without the need for any physical delivery, recordation, filing or other further act. Such pledge, lien and security interest are not subject to the provisions of Article 9 of the California Uniform Commercial Code.

Limited Obligation. THE SFPUC IS NOT OBLIGATED TO PAY THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE 2022ABCD BONDS EXCEPT FROM REVENUES. THE SFPUC HAS NO TAXING POWER. THE GENERAL FUND OF THE CITY IS NOT LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE 2022ABCD BONDS, AND NEITHER THE

CREDIT NOR THE TAXING POWER OF THE CITY IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR I NTEREST ON THE 2022ABCD BONDS. THE 2022ABCD BONDS ARE NOT

SECURED BY A LEGAL OR EQUITABLE PLEDGE OF, OR CHARGE, LIEN OR ENCUMBRANCE UPON,

ANY OF THE PROPERTY OF THE CITY OR OF THE SFPUC OR ANY OF ITS INCOME OR RECEIPTS, EXCEPT REVENUES. THE 2022ABCD BONDS ARE NOT SECURED BY THE REVENUES OF THE WASTEWATER ENTERPRISE OR THE POWER ENTERPRISE OR THE REVENEUS OF CLEANPOWERSF.

Water Enterprise. The Indenture defines “Enterprise” (referred to in this Official Statement as the “ Water Enterprise”) as the whole and each and every part of the municipal water supply , storage and distribution system of the SFPUC, located partially within and partially outside of the City, including all of the presently existing municipal water system of the City and all additions, betterments and extensions to that water system. The Water Enterprise is defined to exclude any water supply, storage or distribution facilities under the jurisdiction of the Hetch Hetchy Water and Power Project (“Hetch Hetchy Water and Power”), which consists of upcountry water supply and power generating facilities, including the Power Enterprise, all of which are also under the jurisdiction of the SFPUC. See “THE PUBLIC UTILITIES COMMISSION – General” and “– Organization, Purposes and Powers.” Revenues. The Indenture defines “ Revenues” as all gross revenues of the Water Enterprise, including all charges received for and all other income and receipts derived by the SFPUC or the City from the operation of the Water Enterprise, or arising from the Water Enterprise, including water connection and installation charges, but excluding:
(1) any money received by or for the account of the City or the SFPUC from the levy or collection of taxes;
(2) moneys received from the State of California (the “ State”) and the United States of America and required to be deposited in restricted funds;
(3) refundable deposits made to establish credit;
(4) advances and contributions made to the SFPUC or the City to be applied to construction; (5) moneys required to be paid to the State and the United States of America pursuant to agreements with the City or the SFPUC;
(6) moneys received from insurance proceeds or the sale of or upon the taking by or under the threat of eminent domain of all or any part of the Water Enterprise; (7) proceeds from Bonds issued by the SFPUC or proceeds from loans obtained by the SFPU C;

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(8) moneys or securities received by the City or the SFPUC as gifts or grants, the use of which is restricted by the donor or grantor;
(9) sewer service fees or charges; and
(10) any surcharge imposed by, or upon the direction of any joint powers agency or other governmental entity, other than the SFPUC, the City or any department or agency of the City, whether or not collected by the SFPUC, the City or any department or agency of the City, for the purpose of financing improvements to the facilities comprising the Water Enterprise.

The term “Revenues ” also includes (i) all interest, profits or other income derived from the deposit or investment of any moneys in any fund or account established under the Indenture (excluding any Rebate Fund and any escrow fund pledged for the payment of defeased bonds) or in any fund or account of the Water Enterprise and legally available to pay Debt Service on the Bonds, and (ii) any other moneys, proceeds and other amounts that the SFPUC determines should be “Revenues” under the Indenture.

Refundable Credits. The Indenture defines “ Refundable Credits” as (a) with respect to a Series of Bonds issued as Build America Bonds under Section 54AA of the Code, the amounts which are payable by the Federal government under Section 6431 of the Code, which the SFPUC has elected to receive under Section 54AA(g)(1) of the Code, and (b) with respect to a Series of Bonds issued as Build America Bonds under any other provisions of the Code that creates, in the determination of the SFPUC, a substantially similar direct-pay subsidy program, the amounts which are payable by the Federal government under the applicable provisions of the Code, which the SFPUC has elected to receive under the applicable provisions of the Code. As described below under “ – Rate Covenants – Debt Service Coverage, ” the SFPUC is permitted to include within the calculation of Revenues any Refundable Credits which are required or permitted to be made under Federal sequestration legislation.

Flow of Funds
Deposits to Revenue Fund and Interest Fund. In accordance with the Charter, but subject to the budget and fiscal provisions of the Charter, the entire gross revenue of the Water Enterprise will be deposited into the Revenue Fund held by the Treasurer of the City (the “ Treasurer”). The Treasurer will hold the amounts in the Revenue Fund separate from all other City funds. The SFPUC will transfer to the Trustee for deposit into the Interest Fund all Refundable Credits received by the SFPUC.

Application of Revenue Fund. The Treasurer will pay over to the Trustee all moneys in the Revenue Fund, after paying operation and maintenance expenses and making required deposits into pensions or other funds established with respect to SFPUC employees (as required by the Indenture), to the extent necessary to make the following deposits:

Interest. F
irst, on or before the fifth Business Day preceding each interest payment date, the Treasurer is required to pay to the Trustee for deposit in the Interest Fund an amount equal to the sum of the following:
(1) T
he amount of interest becoming due and payable on the Outstanding Bonds of such Series that are Current Interest Bonds (except for Bonds constituting Variable Rate Indebtedness) on such interest payment date (less any amounts on deposit in such fund, including, but not limited to, Refundable Credits available to pay such interest, but excluding amounts on deposit which are reserved as capitalized interest to pay interest during any subsequent period); and
(2) 110% of the estimated aggregate amount of intere st due on such interest payment date on the Outstanding Bonds of such Series that are Variable Rate Indebtedness. However, the amount required to be deposited to the Interest Fund for any period may be reduced by the amount by which the deposit in the prior period for interest estimated to accrue on Outstanding Variable Rate Indebtedness exceeded the actual amount of interest accrued

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during that period. Also, the amount required to be deposited into the Interest Fund for any period will be increased by the amount by which the deposit in the prior period for interest estimated to accrue on Outstanding Variable Rate Indebtedness was less than the actual amount of interest accruing during that period. Finally, the amount required to be deposited into the Interest Fund for any period will be reduced by any Refundable Credits on deposit in the Interest Fund and available to pay interest for such period.

No deposit needs to be made into the Interest Fund if the amount contained in that fund is at least equal to the interest to become due and payable on the next interest payment date upon all Bonds that are Outstanding (but excluding any moneys on deposit in the Interest Fund from the proceeds of any Series of Bonds or other source and reserved as capitalized interes t to pay interest on any interest payment dates following said next interest payment date). See “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE – REVENUES AND FUNDS – Establishment and Maintenance of Funds for Revenues; Use and Withdrawal of Revenues – Interest Fund, Refundable Credits.” Moneys in the Interest Fund will be used and withdrawn by the Trustee solely to pay the interest on the Bonds as it becomes due and payable (including accrued interest on any Bonds purchased or redeemed prior to maturity under the Indenture).

Principal. S
econd, on or before the fifth Business Day preceding each principal payment date, the Treasurer is required to pay to the Trustee for deposit in the Principal Fund an amount equal to the sum of the following:
(1) t
he aggregate amount of Bond Obligation of such Series (less any amounts on deposit in such fund) becoming due and payable on such principal payment date, plus (2) the Minimum Sinking Fund Account Payments required to be made with respect to any Term Bonds of such Series on such principal payment date, plus (3) if any Letter of Credit Agreement has been entered into on parity with the Bonds, sufficient amounts to pay the obligations of the SFPUC under the Letter of Credit Agreement due on such principal payment date.

If the amounts on deposit in the Principal Fund are insufficient to make all deposits required to be made with respect to any principal payment date, such amounts will be applied on a Proportionate Basis and in such proportion as the Serial Bonds, the Minimum Sinking Fund Payments for Term Bonds, and the Letter of Credit Agreement obligations shall bear to each other. See “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE – REVENUES AND FUNDS – Establishment and Maintenance of Funds for Revenues; Use and Withdrawal of Revenues – Principal Fund; Sinking Fund Accounts.” Bond Reserve Fund . T
hird, in the event of any withdrawal from any Bond Reserve Account, the Treasurer is required to pay to the Trustee for deposit in such Bond Reserve Account, on a pari passu basis with transfers to any other Bond Reserve Account, on or before the fifth Business Day preceding each interest payment date following such withdrawal, an amount sufficient to replenish any prior withdrawal from such Bond Reserve Account, either in two semi-annual installments for Bond Reserve Accounts established with respect to fixed rate Bonds only or in equal installments over a 12-month period for Bond Reserve Accounts established with respect to any Variable Rate Bonds, so that the balance in such Bond Reserve Account is equal to the Required Reserve with respect to the applicable Series of Bonds (or such larger balance as may be required by any Supplemental Indenture) at the end of such 12-month period.

If a Bond Reserve F und
Policy satisfies all or a portion of the Required Reserve for any Series of Bonds and a drawing is made on the Bond Reserve Fund Policy, on or before the fifth Business Day prior to each interest payment date following such drawing, the Treasurer must pay, either in two semi- annual installments for Bond Reserve Accounts established with respect to fixed rate Bonds only or in equal installments over a 12 -month period for Bond Reserve Accounts established with respect to any Variable

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Rate Bonds, an amount sufficient to repay the aggregate amount of Policy Costs owing with respect to such drawing by the end of such 12 -month period to the Reserve Provider (as defined in the Indenture) or to the Trustee (who will remit the payment to the Reserve Provider). See “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.”
Funds or a Bond Reserve Fund Policy on deposit in a Bond Reserve Account will be applied solely to the payment of the Series of Bonds to which such Bond Reserve Account relates and will not be available for payment for any other Series of Bonds. No Bond Reserve Account has been established with respect to the 2022ABCD Bonds.

Rate Covenants
Sufficiency of Revenues. The SFPUC has covenanted in the Indenture that it will, at all times while any of the Bonds remain Outstanding, establish, fix, prescribe and collect rates, fees and charges in connection with the water, services and facilities furnished by the Water Enterprise so as to yield Revenues at least sufficient, after making reasonable allowances for contingencies and errors in the estimates, to pay the following amounts:
(1) the interest on and principal of the Bonds as they become due and payable (but not including any interest moneys for the payment of which have been deposited in the Interest Fund from the proceeds of any Series of Bonds or from any other source);
(2) all other payments required for compliance with the terms of the Indenture and of any Supplemental Indenture providing for the issuance of Additional Series of Bonds pursuant to the Indenture; (3) all other payments to meet any other obligations of the SFPUC which are charges, liens or encumbrances upon, or payable from, the Revenues; and
(4) all current Operation and Maintenance Costs of the Enterprise (but not including such Operation and Maintenance Costs of the Enterprise as are scheduled to be paid by the SFPUC from moneys other than Revenues, such money to be clearly available for such purpose).

Debt Service Coverage. In addition to the requirements set forth in “ – Sufficiency of Revenues” above, the Indenture provides that the SFPUC will, at all times while any of the Bonds remain Outstanding, establish, fix, prescribe and collect rates, fees and charges in connection with the water, services and facilities furnished by the Water Enterprise so as to yield Net Revenues for the twelve months following the date of calculation, which (together with any fund balances of the SFPUC or the Water Enterprise legally available for payment of Debt Service and not budgeted to be expended during such twelve months but excluding the Bond Reserve Fund and Rebate Fund) are equal to at least 1.25 times Annual Debt Service for such twelve -month period, but from such Annual Debt Service excluding any funded interest.

For the purpose of calculating Maximu m Annual Debt Service, Annual Debt Service, Debt Service, and Average Annual Debt Service, in determining the amount of interest coming due during any twelve -month period ending June 30 on any Series of Bonds that were issued as Build America Bonds, such amount will be reduced by an amount equal to the Refundable Credits the SFPUC is scheduled to receive during each such twelve -month period ending June 30. Under the Indenture, if the amount of Refundable Credits received by the SFPUC for any Series of Bonds that were issued as Build America Bonds is reduced or not received during any twelve -month period ending June 30, the SFPUC will calculate the amount of interest coming due for the subsequent twelve -month period ending June 30 without deducting an amount equal to the Refundable Credits for the purpose of calculating Maximum Annual Debt Service, Annual Debt Service, Debt Service and Average Annual Debt Service until the receipt of such Refundable Credits resumes and all prior deficiencies are cured.

Pursuant to Federal sequestration legislation passed by Congress in 2011 and 2013, Federal subsidy payments for direct pay bonds, including Build America Bonds, have been reduced (by formula) from the original funding subsidy level of 35% of interest costs on direct pay bonds, including Build America Bonds. The current sequestration reduction rate of the Federal subsidy payment for Build America Bonds is 5.7 %, which rate will remain in effect

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through September 30, 2030 unless changed by legislation ; refundable credits sought by the SFPUC for its Build America Bonds will be reduced by this percentage . This reduction will increase the SFPUC’s net interest cost. The SFPUC can give no assurance regarding the level of subsidy payments or changes in the sequestration ra te, if any, in the future. In Fiscal Year 2020 -21, the SFPUC received approximately $2 1.9 million in Refundable Credits for the Water Enterprise.

The Indenture did not originally contemplate the reduction of Federal subsidies in the manner established by Federal sequestration legislation; however, the SFPUC has amended the Indenture to clarify that Refundable Credits scheduled to be paid pursuant to Federal sequestration legislation (“ Partial BABs Subsidy Payments ”) will be permitted to be included as “Revenues” under the Indenture (although such Refundable Credits will not be permitted to be used as a credit against Debt Service for any purposes under the Indenture). The SFPUC has also amended the Indenture to permit Refundable Credits scheduled to be recei ved under Federal sequestration legislation (or under other Federal regulation, pronouncement or similar action) to be used as a credit against interest coming due on the Build America Bonds for the purpose of calculating Maximum Annual Debt Service, Annua l Debt Service, Debt Service and Average Annual Debt Service. To avoid double counting, Refundable Credits used as a credit against Debt Service are not included in the calculation of Revenues for any purpose under the Indenture. See “PROPOSED AMENDMENTS TO THE INDENTURE” and “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE – DEFINITIONS – Maximum Annual Debt Service, Annual Debt Service, Debt Service, Average Annual Debt Service.”
Net Revenues and Operation and Maintenance Costs. “Net Revenues” and “Operation and Maintenance Costs of the Enterprise” are defined as follows:

The term “Net Revenues” is defined in the Indenture as:
• all of the Revenues (but not including interest on investment of funds required to be deposited in said funds or investment earnings required to be deposited in the Improvement Fund) less • all Operation and Maintenance Costs of the Enterprise (but not including such Operation and Maintenance Costs of the Enterprise as are scheduled to be paid by the SFPUC from moneys other than Revenues, such moneys to be clearly available for such purpose).

The Indenture defines the term “ Operation and Maintenance Costs of the Enterprise ” as the reasonable and necessary costs of operating and maintaining the Water Enterprise, calculated on sound accounting principles, including (among other things) salaries and wages, fees for services, costs of materials, supplies and fuel, reasonable expenses of management, legal fees, accounting fees, repairs and other expenses necessary to maintain and preserve the Water Enterprise in good repair and working order, and reasonable amounts for administration, overhead, insurance, taxes (if any), other similar costs, and the payment of pension charges and proportionate payments to s uch compensation and other insurance or outside reserve funds as the SFPUC may establish or the Board of Supervisors may require with respect to employees of the SFPUC.
“Operation and Maintenance Costs of the Enterprise” exclude in all cases the following:
(1) depreciation and obsolescence charges or reserves therefor, (2) amortization of intangibles or other bookkeeping entries of a similar nature, (3) costs of capital additions, replacements, betterments, extensions or improvements to the Water Enterprise, which under generally accepted accounting principles are chargeable to a capital account or to a reserve for depreciation, and
(4) charges for the payment of principal and interest on any general obligation bonds, revenue bonds or other indebtedness heretofore or hereafter issued for Water Enterprise purposes.

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See “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE – DEFINITIONS.”
No Bond Reserve Account for the 2022ABCD Bonds
The Indenture establishes the Bond Reserve Fund and requires the establishment of a bond reserve account (each, a “Bond Reserve Account ”) within the Bond Reserve Fund for each Series of Bonds issued under the Indenture, if and to the extent required by a Supplemental Indenture pursuant to which that Series of Bonds is issued, and requires the deposit in each Bond Reserve Account of an amount equal to the Required Reserve for the related Series of Bonds. Each Bond Reserve Account is available only for the payment of debt service on the Series of Bonds for which such Bond Reserve Account was established.

Pursuant to the Forty -Third Supplemental Indenture, Forty -Fourth Supplemental Indenture, Forty- Fifth Supplemental Indenture and Forty-Sixth Supplemental Indenture, no Bond Reserve Account has been established for the 2022A Green Bonds, the 2022B Bonds, the 2022C Bonds and the 2022D Bonds, respectively.

The Bond Reserve Accounts established with respect to other Series of Bonds do not secure, and will not be available for, the 2022ABCD Bonds.

Additional Series of Bonds
Additional Series of Bo nds Test in the Indenture . The Indenture provides that Additional Series of Bonds secured by Revenues on parity with the Outstanding Bonds and the 2022ABCD Bonds may be issued if certain conditions are met, including the SFPUC’s delivery to the Trustee of the following documents (among others):
(1) A certificate of the SFPUC setting forth the following:
(a) Net Revenues for any period of twelve consecutive calendar months out of the eighteen calendar months next preceding the authentication and delivery of the Additional Series of Bonds, and
(b) the Debt Service for such 12 -month period, and demonstrating that for such 12- month period Net Revenues equaled at least 1.25 times the Debt Service. (2) If any portion of the proceeds of such Additional Series of Bonds is to be use d to finance construction, a certificate of the Consulting Engineers setting forth:
(a) the estimated date of completion for the portion of the Project for which such Additional Series of Bonds is being issued and for any other uncompleted portion of the Proje ct, and (b) an estimate of the cost of construction of such portion of the Project and of any other uncompleted portion of the Project.
(3) A written report of a Qualified Independent Consultant setting forth estimates for each of the next three Fiscal Years of:
(a) Revenues,
(b) Operation and Maintenance Costs of the Enterprise, and (c) Net Revenues,
if any portion of the proceeds of such Additional Series of Bonds is to be used to finance construction, the estimate will be made for the three Fiscal Years following the Fiscal Year in which the Consulting Engineers estimate such portion of the Project will be completed.

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(4) A certificate of the SFPUC setting forth the following:
(a) the estimates of Net Revenues provided by the Qualified Independent Consultant pursuant to paragraph (3) above for each of such three Fiscal Years, and (b) the Annual Debt Service for such three Fiscal Years (including estimated Annual Debt Service for future Additional Series of Bonds, if any), that will be required to complete payment of any uncompleted portion of the Project (based on the estimate of the Consulting Engineers), which certificate demonstrates that the estimated Net Revenues in each of such three Fiscal Years is at least equal to 1.25 times the Annual Debt Service for the corresponding Fiscal Year.

Such certificate may anticipate projected rates not yet enacted and such certificate and the certificate delivered pursuant to clause (1) may also include as an offset to Operation and Maintenance Costs of the Enterprise any such costs which are scheduled to be paid from moneys other than Revenues which are clearly available for such purpose, and include as Revenues any other moneys, proceeds and other amounts that the SFPUC determines should be “Revenues” under the Indenture.

All certificates and written reports will be based upon the actual interest rate or rates determined at the time the Additional Series of Bonds are sold.

See “PROPOSED AMENDMENTS TO THE INDENTURE.”
Issuance of Additional Series of Bonds with Consent of Bond Owners and Credit Provider. The Indenture also provides that Additional Series of Bonds may be issued without compliance with any of the requirements described above with the written consent of Owners of a majority of the aggregate Bond Obligations of Bonds Outstanding and any Credit Provider, if applicable. See “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.” Any Additional Series of Bonds issued under this provision would, however, be subject to the requirements for issuing revenue bonds under the Charter. See “OBLIGATIONS PAYABLE FROM REVENUES – Authority for Issuance of Revenue Bonds and Other Obligations Payable from Revenues.” Refunding Bonds
Indenture Requirements. The Indenture provides that Additional Series of Bonds may be issued to refund any Bonds, including the 2022ABCD Bonds, without meeting the test for the issuance of Additional Series of Bonds described above, if the SFPUC delivers to the Trustee (among other documents) a certificate of an Independent Certified Public Accountant to the effe ct that the Average Annual Debt Service for the Additional Series of Bonds will be equal to or less than the Average Annual Debt Service on the Bonds to be refunded.

See “PROPOSED AMENDMENTS TO THE INDENTURE.”
City Charter Requirements. The Charter allows refunding bonds to be issued without voter approval if such refunding results in net debt service savings on a present value basis, calculated as provided by ordinance.

Refunding Ordinance Requirements. The Refunding Ordinance authorizes refunding bonds to be issued by the Commission without limitation as to the principal amount, provided that such refunding bonds are permitted under the applicable policies and procedures of the City and authorized by Section 9.109 of the Charter. See “INTRODUCTION – Authority for Issuance” and “OBLIGATIONS PAYABLE FROM REVENUES – Authority for Issuance of Revenue Bonds and Other Obligations Payable from Revenues – Refunding Bonds.” Other Parity Obligations; Subordinate Obligations; Obligations Not Payable from Revenues The Indenture permits the SFPUC to incur obligations payable from Revenues and Refundable Credits on a parity with the payment of principal of and interest on the Bonds upon satisfaction of the requirements set forth in the Indenture. See “SECURITY FOR THE BONDS – Additional Series of Bonds.”

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The Indenture permits the SFPUC to authorize and issue bonds, notes, warrants, certificates or other obligations or evidences of indebtedness, the principal of or interest on which would be payable eithe r (i) from Revenues after and subordinate to the payment from Revenues of the principal of and interest on the Bonds, or (ii) from moneys which are not Revenues. See “OBLIGATIONS PAYABLE FROM REVENUES – Subordinate Debt and Interim Funding Program” and “– State and Federal Loans.” Investments
The Indenture provides that moneys in all funds and accounts held by the Trustee under the Indenture shall be invested upon receipt in time or demand deposits (including certificates of deposit) in any bank or trust company (including the Trustee) authorized to accept deposits of public funds, and may be invested in Permitted Investments (as defined in Appendix A) as directed by the SFPUC, and all accounts funds and accounts held by the Treasurer shall be invested in Le gal Investments. “Legal Investments” means any bonds, notes, certificates of indebtedness, bills, acceptances or other securities in which the Treasurer may legally invest the SFPUC’s funds. For information regarding the investment of moneys held in the various funds and accounts of the SFPUC, see “FINANCIAL OPERATIONS – Investment of SFPUC Funds.”

PROPOSED AMENDMENTS TO THE INDENTURE
The Forty-Third Supplemental Indenture amends and supplements certain provisions of the Indenture that will become effective when the written consents of the Owners of a majority in aggregate amount of the Bond Obligation of the Bonds then Outstanding and each Credit Provider, if any, have been filed with the Trustee and certain other requirements under the Indenture have been satisfied (such date, the “Effective Date”). By their purchase of the 2022ABCD Bonds, purchasers of the 2022ABCD Bonds irrevocably agree to, accept and consent to the provisions of such amendments for all purposes of the Indenture.

The proposed amendments in the Forty -Third Supplemental Indenture include, among others, include amendments to the Indenture provisions relat ing to the calculation of “Maximum Annual Debt Service,” “Annual Debt Service,” “Average Annual Debt Service,” the incurrence of Parity Loans, the conditions under which Additional Series of Bonds may be issued, the filing of annual audited financial infor mation with the Trustee and the rate covenants. For a description of the proposed amendments set forth in the Forty -Third Supplemental Indenture, see “APPENDIX A—SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE —FORTY-THIRD SUPPLEMENTAL INDENTURE—PROPOSED AMENDMENTS TO INDENTURE.”

OBLIGATIONS PAYABLE FROM REVENUES
Authority for Issuance of Revenue Bonds and Other Obligations Payable from Revenues City Charter. The Charter authorizes the SFPUC to issue revenue bonds and commercial paper notes and to incur other obligations payable from or secured by a pledge of Revenues. The Charter requires voter approval of revenue bonds issued by the SFPUC unless a specific exception to the voter approval requirement applies. See “– Reconstruction or Replacement of Existing Facilities” and “– Refunding Bonds.” Proposition A . On November 5, 2002, voters of the City approved Proposition A (“ Proposition A ”), specifically authorizing the issuance of up to $1.628 billion of revenue bonds for the purpose of funding the SFPUC’s Water Enterprise capital improvement program. The SFPUC has previously issued $1.499 billion aggregate principal amount of Bonds pursuant to such Proposition A authorization.

Proposition E. Section 8B.124 of the Charter, enacted by voters of the City on November 5, 2002 as part of Proposition E (“Proposition E”), authorizes the SFPUC to issue revenue bonds, including notes, commercial paper or other forms of indebtedness, when authorized by ordinance approved by two- thirds vote of the Board of Supervisors, for purposes of reconstructing, replacing, expanding, repairing or improving water facilities or clean water facilities or combinations of water and clean water facilities under the jurisdiction of the SFPUC.

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Proposition E also authorizes the Board of Supervisors to take any and all actions necessary to authorize, issue and repay such revenue bonds, including, but not limited to, modifying schedules of rates and charges to provide for the payment and retirement of such revenue bonds. Issuance of such revenue bonds is subject to the following additional conditions set forth in Proposition E:
(a) Certification by an independent engineer retained by the SFPUC that:
(1) the projects to be financed by the revenue bonds, including the prioritization, cost estimates and scheduling, meet utility standards; and
(2) estimated net revenue after payment of operating and maintenance expenses will be sufficient to meet debt service coverage and other indenture or resolution requirements, including debt service on the revenue bonds to be issued, and estimated repair and replacement costs.
(b) Certification by the San Francisco Planning Department that facilities under the jurisdiction of the SFPUC funded with such bonds will comply with applicable requirements of the California Environmental Quality Act (“CEQA”).

Any ordinance approving bonds adopted pursuant to Proposition E will become effective 30 days after its adoption unless it is opposed through the referendum process. Opposition may be made by filing with the Board of Supervisors a petition protesting the passage of that ordinance. Such petition must be signed by voters in a number equal to at least 10% of the votes cast for all candidates for Mayor in the last preceding general municipal election for Mayor. If a referendum passes, the ordinance is suspended from becoming effective. The Board of Supervisors may reconsider the ordinance. If it is not entirely repealed, the Board of Supervisors is required to submit the ordinance to voters at the next general municipal or statewide election or at a special municipal election and it will not become effective until approved by voters at such an election.

Reconstruction or Replacement of Existing Facilities. Section 9.107(6) of the Charter provides that no voter approval is required for bonds issued for the purpose of the reconstruction or replacement of existing water facilities or electric power facilities or combinations of water and electric power facilities under the jurisdiction of the SFPU C when authorized by resolution adopted by a three-fourths affirmative vote of all members of the Board of Supervisors.

Refunding Bonds . Section 9.109 of the Charter authorizes the Board of Supervisors to provide for the issuance of bonds for the purpose of refunding revenue bonds without voter approval if the issuance and sale of such refunding bonds are expected to result in net debt service savings on a present value basis, calculated as provided by ordinance.

The 2022ABCD Bonds will be issued by the SFP UC pursuant to authority granted by Section 9.109 of the Charter and an ordinance that was passed by the Board of Supervisors on September 29, 2020, and effective as of October 1, 2020.

The Refunding Ordinance authorizes and approves the issuance by the SFPUC of refunding bonds and other forms of indebtedness, without limitation as to principal amount, provided that each such refunding bond issue is permitted under the applicable policies and procedures of the City and authorized by S ection 9.109 of the Charter.

Such refunding bonds are also subject to the following conditions: (i) three percent (3%) net present value debt service savings or greater is achieved to ensure ratepayer savings; (ii) the maturity of the refunded bonds is not extended, provided that principal payments and term may be adjusted, where permitted under federal and state tax law, only if and when the underlying capital asset funded through said refunded bonds has a useful life not in excess of any limit permitted under federal and state tax law than the refunded term ; (iii) the authorization is subject to a six -year term through June 30, 2026, at which time the Board of Supervisors may consider an extension; and (i v) the SFPUC will within 30 days of any executed refunding transaction provide a savings report prepared by its municipal advisors to the Board of Supervisors, together with a copy of the final official statement with respect to such series of refunding bonds.

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Outstanding Parity Revenue Bonds
All Bonds in t he table below (the “Outstanding Bonds”) have been issued pursuant to the Indenture and secured by a pledge of Revenues on parity with the 2022ABCD Bonds.

Series of Bonds Purpose
Principal Amount
Outstanding
as of November 2, 2021
Water Revenue Bonds,
2010 Series ABC (1)(2)
Water system improvements under
Proposition E $ 349,170,000
Water Revenue Bonds,
2010 Series DE (1)(5)
Water system improvements under
Proposition E 344,200,000
Water Revenue Bonds,
2010 Series FG (1)(3)
Water system improvements under
Proposition E 351,470,000
Water Revenue Bonds,
2015 Series A (Refunding) (4)
Refund previously outstanding Bonds of the
SFPUC 382,420,000
Water Revenue Bonds,
2016 Series AB (Refunding) (4)
Refund previously outstanding Bonds of the
SFPUC 791,245,000
Water Revenue Bonds,
2016 Series C
Water system improvements under
Proposition E 231,230,000
Water Revenue Bonds,
2017 Series ABC(4)
Water system improvements under
Proposition E 75,680,000
Water Revenue Bonds,
2017 Series DEFG
(Refunding) (4)
Refund previously outstanding Bonds of the
SFPUC 436,350,000
Water Revenue Bonds,
2019 Series ABC (Refunding)
Refund previously outstanding Bonds of the
SFPUC 625,555,000
Water Revenue Bonds,
2020 Series ABCD(4)
Water system improvements under
Proposition A and Proposition E 346,760,000
Water Revenue Bonds,
2020 Series EFGH
(Refunding)
Refund previously outstanding Bonds of the
SFPUC 650,570,000
Total $4,584,650,000

____________________
(1) The 2010 Sub-Series B, Sub-Series E, and Sub-Series G Bonds were issued as Build America Bonds. (2) The 2010 Sub-Series A Bonds and 2010 Sub-Series C Bonds are no longer outstanding. (3) The 2010 Sub-Series F Bonds are no longer outstanding. (4) All or a portion of the outstanding 2015 Sub-Series A Bonds, 2016 Sub-Series A Bonds, 2017 Sub-Series A Bonds, 2017 Sub- Series B Bonds, 2017 Sub-Series C Bonds, 2017 Sub-Series D Bonds and 2020 Sub-Series B Bonds may be refunded by the 2022ABCD Bonds. See “PLAN OF REFUNDING.”

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State and Federal Loans
In September 2017, the SFPUC entered into an Installment Sale Agreement and Grant (the “ CWSRF Agreement”) with the State Water Resources Control Board (“SWRCB ”) to finance a portion of the cost of the SFPUC’s San Francisco Westside Recycled Water Project (the “Westside Recycled Water Project ”), a Water Enterprise recycled water project expected to satisfy the drought mitigation financing criteria and Proposition 1 grant guidelines of the SWRCB’s Water Recycling Funding Program. The CWSRF Agreement was entered into pursuant to the SWRCB’s Clean Water State Revolving Fund Loan Program.

The CWSRF Agreement provides for a $15 million grant and a $171.2 million loan (the “ CWSRF Loan”).

The CWSRF Loan has a 30-year, level amortizing fixed interest rate loan bearing interest at a rate of 1% per annum.

Repayment of the CWSRF Loan begins one year after completion of the Westside Recycled Water Project (which is expected to occur in May 2021). The SFPUC’s obligation to repay the CWSRF Loan will be payable from and secured by a pledge of the Revenues of the Water Enterprise on a parity with the pledge and lien of the Indenture securing payment of principal of and interest on the Bonds. As of December 23, 2019, the SFPUC had submitted requests for reimbursement for approximately $73.3 million. In connection with the execution and delivery of the CWSRF Agreement, the SFPUC adopted the Twenty- Fourth Supplemental Indenture which amends the Indenture to clarify the status of “Parity State Loans”, defined as “loan agreements or installment sale agreements entered into between the SFPUC and the State of California (or any board, department or agency thereof) to finance additions, betterments, extensions, repairs, renewals or replacements to the Water Enterprise which, by their terms, are payable from Revenues on a parity basis with debt service on the Bonds)”, as “evidences of indebtedness” within the meaning of the term “Bond” for certain purposes of the Indenture, and to make other technical amendments to facilitate the repayment of the CWSRF Loan on a parity with the payment of debt service on the Bonds.

In August 2019, the SFPUC applied to the SWRCB requesting a $240 million loan (the “DWSRF Loan”) to finance the cost of the SFPUC’s Mountain Tunnel Project pursuant to the SWRCB’s Drinking Water State Revolving Fund Program. If approved, the SFPUC expects that (i) the DWSRF Loan will have a 30-year, level amortizing fixed interest rate at a rat e of 50% of the average interest rate paid by the State on tax- exempt general obligation bonds issued in the prior calendar year, (ii) repayment of the DWSRF Loan will begin one year after completion of the Mountain Tunnel Project (which is expected to occur in 2026) and (iii) the obligation of the SFPUC to repay such DWSRF Loan will be payable from and secured by a pledge of Revenues of the Water Enterprise on a parity with the pledge and lien of the Indenture securing payment of principal of and interest on the Bonds, and the SFPUC’s obligation to repay the CWSRF Loan. See “CAPITAL IMPROVEMENT PROGRAM – Hetch Hetchy Water.” Although the SFPUC anticipates approval of the DWSRF Loan in spring 2022 and to close on the DWSRF Loan in spring 2022, the SFPUC can provide no assurance that the DWSRF Loan will be approved by the SWRCB.

The SFPUC has no outstanding loan obligations with respect to the Water Enterprise payable to the Federal government from Revenues.

Contingent Payment Obligations
The Water Enterprise has no interest rate swaps, caps or hedges or other contingent payment obligations payable from Revenues. The Water Enterprise may in the future, however, incur contingent payment obligations payable from Revenues. Such contingent payment obligations may be payable on parity with the 2022ABCD Bonds if the conditions for the issuance of parity debt under the Indenture are met. See “SECURITY FOR THE BONDS – Additional Series of Bonds.”
Subordinate Debt and Interim Funding Program
Interim Funding Program. The SFPUC has established an Interim Funding Program (the “Interim Funding Program”) (formerly known as the “Commercial Paper Program”) to fund construction costs relating to capital projects. See “FINANCING OF CAPITAL IMPROVEMENTS.”
The Interim Fun ding Program is authorized for the Water Enterprise in the aggregate principal amount of $500 million. Of this amount, $400 million is authorized for the SFPUC to issue tax -exempt and taxable commercial

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paper notes (“ Commercial Paper Notes ”) secured by three separate bank credit facilities, as set forth below. The remaining $100 million of the Interim Funding Program is in the form of a bank revolving credit agreement, as set forth below. The revolving credit agreement permits the SFPUC to make draws directly from the bank, with the SFPUC’s payment obligation evidenced by a tax-exempt revolving note and a taxable revolving note (the “Revolving Notes”).

The Commercial Paper Notes and the Revolving Notes are payable from Revenues, and are secured on a parity lien basis with each other. The Commercial Paper Notes and the Revolving Notes, collectively, are secured on a basis subordinate to the payment of debt service on the Bonds.

The Commercial Paper Notes are secured by (i) a $100 million letter of credit from Sumitomo Mitsui Banking Corporation, acting through its New York Branch, which expires on May 16, 2025, (ii) a $200 million letter of credit from Sumitomo Mitsui Banking Corporation, acting through its New York Branch, which expires on Ju ne 16, 2022, and (iii) a $100 million letter of credit from Barclay’s Bank PLC which expires on July 19, 2024. The Revolving Notes were issued pursuant to a $100 million revolving credit agreement with U.S. Bank Trust Company, National Association which expires on July 19, 2024.

As of April 1 , 2022, the SFPUC has approximately $76.1 million principal amount of Commercial Paper Notes outstanding and no amount under the Revolving Notes is outstanding.

Other Subordinate Obligations Payable from Revenues
The SFPUC complet ed the construction of a 13- story office building at 525 Golden Gate Avenue in San Francisco to house the administrative offices of the SFPUC’s three utility enterprises and moved into the building in July 2012. Total project costs were approximately $202 million and were financed with land and property sale proceeds, fund balances, grants and the proceeds of certificates of participation (the “2009 Golden Gate COPs ”), representing interests in a City General Fund lease, executed and delivered in two series (one of which constitutes Build America Bonds) on October 7, 2009 , in the aggregate principal amount of $167,670,000. The final maturity date of the 2009 Golden Gate COPs is November 1, 2041. As of October 2, 2021, the principal amount outstanding of the 2009 Golden Gate COPs was $1 38,085,000. Pursuant to a Memorandum of Understanding between the City and the SFPUC, the SFPUC will reimburse the City General Fund for all debt service in connection with this City financing (net of Refundable Credits received). The SFPUC allocates such payment obligations internally among its three utility enterprises based on percentage usage. The Water Enterprise has been allocated 71.4% of such obligations, payable from Revenues on a basis subordinate to the payment of principal of and interest on the Bonds and any parity State or federal loans.

Revenue Bond Oversight Committee
On November 5, 2002, the voters of the City adopted Proposition P, an ordinance that established the Public Utilities Revenue Bond Oversight Committee (“ RBOC”) to report publicly to the Mayor, the SFPUC and the Board of Supervisors regarding the expenditure of revenue bond proceeds on the repair, replacement, upgrading and expansion of the Water Enterprise, the Wastewater Enterprise and the Power Enterprise (each as defined herein).

The RBOC has se ven members appointed as follows: two by the Mayor, two by the Board of Supervisors, one by the City Controller, one by the Bay Area Water Users Association (“BAWUA”) under the auspices of the Bay Area Water Supply and Conservation Agency (“ BAWSCA”). The seventh member is the City’s Budget Analyst or his or her representative. The work of the RBOC is funded by 1/20th of 1% of the gross bond proceeds of new money revenue bond issuances or sales to the extent permitted by law. The RBOC’s current term expires on January 1, 2025.

The 2022ABCD Bonds are refunding bonds and will not provide RBOC funding.

The RBOC may, by majority vote of all its members, prohibit the issuance or sale of authorized SFPUC revenue bonds which have yet to be issued or sold if, after reviewing materials provided by the SFPUC and conducting its own independent audit, and after consultation with the City Attorney, the RBOC determines that revenue bond proceeds have been or are being spent on purposes not authorized by the authorizing bond resolution or otherwise in

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a manner amounting to an illegal expenditure or illegal waste of such revenue bond proceeds. The SFPUC may appeal such a decision to the Board of Supervisors within 30 days. The Board of Supervisors may overturn such a decision by the RBOC by a two- thirds vote of all members of the Board of Supervisors with evidence from the SFPUC of corrective measures satisfactory to the Board of Supervisors or may remand the decision to the RBOC for further consideration. To date, the RBOC has not prohibited the issuance or sale of any authorized SFPUC revenue bonds.

(Remainder of Page Intentionally Left Blank)

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Debt Service Requirements
Set forth in the following table are debt service requirements on the Outstanding Bonds, the 2022ABCD Bonds and Parity Obligations.

DEBT SERVICE REQUIREMENTS ON
OUTSTANDING BONDS, 2022ABCD BONDS AND PARITY OBLIGATIONS Fiscal Year
(ending
June 30)
Outstanding
Bonds
(1)(2)
2022A Green
Bonds
Principal
2022A Green
Bonds Interest
2022B Bonds
Principal
2022B Bonds
Interest
2022C Bonds
Principal
2022C Bonds
Interest
2022D Bonds
Principal
2022D Bonds
Interest
Other Parity
Obligations
(3)
Total Debt
Service
(1)(2)(4)
2022 $300,973,104 $6,632,026
2023 328,352,142 6,632,026
2024 332,575,608 6,632,026
2025 332,048,174 6,632,026
2026 337,015,314 6,632,026
2027 335,590,956 6,632,026
2028 333,534,949 6,632,026
2029 332,934,803 6,632,026
2030 333,088,421 6,632,026
2031 331,355,150 6,632,026
2032 331,957,208 6,632,026
2033 325,625,522 6,632,026
2034 325,713,935 6,632,026
2035 323,217,361 6,632,026
2036 328,319,829 6,632,026
2037 330,094,895 6,632,026
2038 299,613,929 6,632,026
2039 298,485,780 6,632,026
2040 296,961,219 6,632,026
2041 245,254,683 6,632,026
2042 192,668,325 6,632,026
2043 146,700,043 6,632,026
2044 146,263,034 6,632,026
2045 105,504,993 6,632,026
2046 105,507,806 6,632,026
2047 105,504,560 6,632,026
2048 105,502,049 6,632,026
2049 107,356,291 6,632,026
2050 107,355,964 6,632,026
2051 107,359,425 6,632,026
Total(4) $7,632,435,472 $198,960,775
____________________
(1) Net of capitalized interest payments.
(2) Calculation of interest due on Bonds shown without an offset for Refundable Credits. (3) Consists of Clean Water State Revolving Fund Loan. See “OBLIGATIONS PAYABLE FROM REVENUES – State and Federal Loans.” (4) Totals may not add due to independent rounding.

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THE CITY AND COUNTY OF SAN FRANCISCO
THE FOLLOWING INFORMATION IS PROVIDED FOR CONVENIENCE ONLY. THE GENERAL

FUND OF THE CITY IS NOT LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE 2022ABCD BONDS, AND NEITHER THE CREDIT NOR THE TAXING POWER OF THE

CITY IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE 2022ABCD BONDS. THE 2022ABCD BONDS ARE NOT SECURED BY A LEGAL OR EQUITABLE PLEDGE OF, OR CHARGE, LIEN, OR ENCUMBRANCE UPON, ANY OF THE PROPERTY OF THE CITY.

General. The City is the economic and cultural center of the San Francisco Bay Area and northern California.

The limits of the City encompass over 93 square miles, of which 49 square miles are land, with the balance consisting of tidelands and a portion of the San Francisco Bay (the “Bay”). The City is located at the northern tip of the San Francisco Peninsula, bounded by the Pacific Ocean to the west, the Bay and the San Francisco- Oakland Bay Bridge to the east, the entrance to the Bay and the Golden Gate Bridge to the north, and San Mateo County to the south.

Silicon Valley is about a 40-minute drive to the south, and the Napa-Sonoma wine country is about an hour’s drive to the north. The City estimates the City’s population in fiscal year 2020- 21 was 851,916.

The San Francisco Bay Area consists of the nine counties contiguous to the Bay: Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano and Sonoma Counties (collectively, the “Bay Area”).

The economy of the Bay Area includes a wide range of industries, supplying local needs as well as the needs of national and international markets. Major business sectors in the Bay Area include technology, retail, entertainment and the arts, conventions and tourism, service businesses, banking, professional and financial services, corporate headquarters, international and wholesale trade, multimedia and advertising, healthcare and higher education. The California State Supreme Court is also based in San Francisco.

The COVID-19 pandemic is a significant deve lopment that materially adversely affected the City’s population, finances and outlook. Many aspects of the City’s finances and operations and the local economy have been and may continue to be materially adversely impacted by the COVID -19 pandemic. To dat e, City economic and tax revenue losses associated with the COVID-19 pandemic have been significant. While COVID- 19 case rates have significantly declined, certain emergency orders have been lifted, and the national and local economy has been improving, th e situation is still developing and the resulting impact on the City’s local economy, finances and operations remains unknown. The projections and other forward-looking statements in this Official Statement are based on current expectations and are not int ended as representations of fact or guarantees of results. Any such forward -looking statements inherently are subject to a variety of risks and uncertainties that could cause actual results or performance to differ materially from those that have been forecast, estimated or projected.

The City has historically been a major convention and tourist destination. However, the COVID-19 pandemic has significantly adversely impacted, and may continue to adversely impact tourism and convention activities in the City. According to the San Francisco Travel Association, a nonprofit membership organization (“SFTA”), during the calendar year 2020, approximately 10.2 million tourists visited the City, with total spending estimated at $2.3 billion, including spending from meetings and conventions. In calendar year 2019, SFTA reports that approximately 26.2 million tourists visited the City, with total spending estimated at $10.2 billion, including spending from conventions, trade shows and group meetings.

The City is also a leading center for financial activity in the State. The headquarters of the Twelfth Federal Reserve District and the Eleventh District Federal Home Loan Bank are located in the City.

The City benefits from a highly skilled, educated and professional la bor force. The City estimates the per - capita personal income of the City for fiscal year 2020- 21 was $173,097. The San Francisco Unified School District (“SFUSD”), which is a separate legal entity from the City, operates 64 elementary schools serving grad es TK-5, 8 alternative configured schools serving grades TK -8, 13 middle schools serving grades 6 -8, 14 high schools serving grades 9 -12, 12 early education schools, 3 continuation/alternative schools, and 5 County and Court Schools in academic year 2021 -22. There are also 11 active charter schools authorized by SFUSD and operating within the boundaries of SFUSD. Higher education institutions located in the City include the University of San Francisco, California State University – San Francisco, University of California – San Francisco (a medical school and health

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science campus), UC Hastings Law, the University of the Pacific’s School of Dentistry, Golden Gate University, City College of San Francisco (a public community college), the San Francisco Art Ins titute, the San Francisco Conservatory of Music, and the Academy of Art University.

San Francisco International Airport (“SFO”), located 14 miles south of downtown San Francisco in an unincorporated area of San Mateo County, is owned by the City and is operated by the San Francisco Airport Commission (the “Airport Commission”), and is the principal commercial service airport for the Bay Area and one of the nation’s principal gateways for Pacific Rim traffic. In fiscal year 2020-21 SFO serviced approximately 13.7 million passengers (compared to approximately 40.5 million passengers in fiscal year 2019- 20 and 57 million passengers in fiscal year 2018-19) and handled 471,793 metric tons of cargo (compared to 490,073 metric tons in fiscal year 2019- 20 and 564,485 metric tons in fiscal year 2018 -19). The City is also served by the Bay Area Rapid Transit District (“BART,” an electric rail commuter service linking the City with the East Bay and the San Francisco Peninsula, including SFO), Caltrain (a conventional commuter rail line linking the City with the San Francisco Peninsula), and bus and ferry services between the City and residential areas to the north, east and south of the City. San Francisco Municipal Railway (“Muni”), operated by the San Francisco Municipal Transportation Agency (“SFMTA”), provides bus and streetcar service within the City. The Port of San Francisco (the “Port”), which administers 7.5 miles of Bay waterfront held in “public trust” by the Port on behalf of the people of the State, promotes a balance of maritime - related commerce, fishing, recreational, industrial and commercial activities, and natural resource protection.

Government. San Francisco is a city and county chartered pursuant to Article XI, Sections 3, 4, 5 and 6 of the Constitution of the State of California and is the only consolidated city and county in the State. Voters approved the City’s current Charter at the November 1995 election. The City is governed by a Board of Supervisors elected from 11 districts to serve four -year terms, and a Mayor who serves as chief executive officer, elected citywide to a four-year term. The City’s final adopted budget for fiscal years 2020 -21 and 2021-22 totals $13.6 billion and $12.4 billion, respectively. The General Fund portion of each year’s final adopted budget is $6.2 billion in fiscal year 2020- 21 and $5.8 billion in fiscal year 2021- 22, with the balance allocated to all other funds, including enterprise fund departments, such as the Airport Commission, SFMTA, the Port Commission and the SFPUC. According to the City’s Treasurer and Tax Collector, at the start of fiscal year 2021 -22, total net assessed valuation of taxable property in the City was approximately $312 billion, which represents an increase of 3.5% over fiscal year 2020- 21.

THE PUBLIC UTILITIES COMMISSION
General
The SFPUC is a department of the City responsible for the maintenance, operation and development of three utility enterprises: the Water Enterprise, the Wastewater Enterprise and the Power Enterprise (which is a co mponent of Hetch Hetchy Water and Power). The SFPUC’s enterprises are operated and managed as separate financial entities with separate enterprise funds.
• The Water Enterprise provides drinking water to Retail Customers in the City, to certain Retail Customers outside the City and to Wholesale Customers in three other Bay Area counties. • The Wastewater Enterprise provides wastewater and stormwater collection, treatment and disposal services for the City (the “Wastewater Enterprise”).
• Hetch Hetchy Water and Power operates dams (including O’Shaughnessy Dam), reservoirs (including Hetch Hetchy Reservoir), hydroelectric generation and transmission facilities and water transmission facilities from Hetch Hetchy Valley to the connection with the Water Enterprise (collectively, the “Hetch Hetchy Project”). In addition, Hetch Hetchy Water and Power provides hydroelectric, solar and other power for municipal and public infrastructure, services and facilities (the “Power Enterprise”).

CleanPowerSF, managed by the P ower Enterprise, is a Community Choice Aggregation program (“CleanPowerSF”).

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The revenues of the Wastewater Enterprise, the Power Enterprise and CleanPowerSF are not available for payment of the principal of, premium, if any, or interest on the Bonds. See “SECURITY FOR THE BONDS – Pledge of Revenues.”
Organization, Purposes and Powers
Water Enterprise. The SFPUC serves as the retail water supplier for the City and is responsible for water deliveries to residents and institutions within the City limits, as well as to a number of retail accounts outside of the City limits. In addition, the SFPUC sells water to 27 Wholesale Customer entities in San Mateo, Alameda and Santa Clara counties under the WSA and related individual contractual agreements. Approximately 67% of the SFPUC’s water supply is delivered to the Wholesale Customers and approximately 33% of the SFPUC’s remaining water supply is delivered to Retail Customers. See “THE WATER ENTERPRISE.” Wastewater Enterprise. The Wastewater Enterprise’s collection and treatment system consists of a combined sewer collection system conveying sewage and stormwater flows within the City to three water pollution control plants, also located within the City. Treated effluent flows are then discharged through deep-water outfalls into the San Francisco Bay and the Pacific Ocean. The Wastewater Enterprise also currently provides sewage treatment service on Treasure Island pursuant to contract, and operates an onsite sewage and stormwater reclamation and treatment facility at the SFPUC headquarters at 525 Golden Gate Avenue.

The revenues of the Wastewater Enterprise are not “Revenues” under the Indenture and do not secure the payment of the principal of, premium, if any, or interest on the Bonds. See “SECURITY FOR THE BONDS – Pledge of Revenues.”
Hetch Hetchy – Water and Power Operation s. Hetch Hetchy Water and Power operates the dams (among them O’Shaughnessy Dam being the largest), reservoirs (among them Hetch Hetchy Reservoir being the largest), hydroelectric generation and transmission facilities and water transmission facilities from Hetch Hetchy Valley to the connection with the Water Enterprise (collectively, the “ Hetch Hetchy Project ”), which provides water for distribution through the Water Enterprise and hydroelectric, solar and other power for municipal and public infrastructure, services and facilities of the City (the “ Power Enterprise”). The Power Enterprise, which is a component of the Hetch Hetchy Project, was created in February 2005 as a separate sys tem within Hetch Hetchy Water and Power. The Power Enterprise provides electric power to meet the municipal requirements of the City, including power to operate municipal streetcars and electric buses, street and traffic lights, municipal buildings and other City facilities, including SFO. Additionally, the Power Enterprise provides power to the Modesto Irrigation District and Turlock Irrigation District (collectively, the “ Irrigation Districts ”), located in the central valley of California, to certain commercial customers consistent with prescribed contractual obligations and federal law and to certain retail customers in the City . CleanPowerSF, managed by the Power Enterprise, is a Community Choice Aggregation program, pursuant to which the SFPUC pools the electricity demands of CleanPowerSF customers, including certain of the City’s residents and businesses, for the purpose of buying electricity on behalf of such customers. CleanPowerSF provides San Francisco with new clean energy alternatives at competitive rates.

In connection with the bankruptcy of Pacific Gas & Electric Company (“PG&E ”), the City submitted an indication of interest to purchase substantially all of PG&E’s electric distributio n and transmission assets needed to provide retail electric service to all electricity customers within the geographic boundaries of the City. PG&E emerged from bankruptcy on July 1, 202 0, and to date a transaction has not been consummated. The City rema ins interested in acquiring these assets from PG&E, and expects to continue its pursuit with the newly reorganized entity. The City and the SFPUC are unable to predict whether a transaction will be consummated or the final terms thereof if consummated.

The revenues of the Power Enterprise and the revenues of CleanPowerSF are not “Revenues” under the Indenture and do not secure the payment of the principal of, premium, if any, or interest on the Bonds. See “SECURITY FOR THE BONDS – Pledge of Revenues.”

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Commission Members
Under the Charter, the SFPUC is given exclusive charge of the operation and management of all water, wastewater and municipal customers’ energy supplies and utilities of the City, as well as the real, personal and financial assets under the SFPUC’s jurisdiction. The SFPUC is governed by the Commission.

In June 2008, an initiative measure amended the Charter, changing the process for Commission appointments, and establishing qualifications for commissioners, as follows:
• The Commission consists of five members appointed by the Mayor, subject to confirmation by a majority of the Board of Supervisors.
• Seat 1 is designated for a member with experience in environmental policy and an understanding of environmental justice issues.
• Seat 2 is designated for a member with experience in ratepayer or consumer advocacy. • Seat 3 is designated for a member with experience in project finance. • Seat 4 is designated for a member with expertise in water systems, power systems, or public utility management.
• Seat 5 is designated for an at-large member.
• Members are appointed for four-year terms and are eligible for reappointment. • Members may be suspended by the Mayor and may be removed by a three -fourths vote of the Board of Supervisors for official misconduct.

The current members of the Commission and the appointment and expiration dates of their terms are:

Name and Title Seat Originally Appointed Term Expires
Anson Moran, President 4 July 15, 2009 August 1, 2022
Newsha Ajami, Vice President 5 February 4, 2021 August 1, 2024 Tim Paulson 3 April 29, 2019 August 1, 2024
Sophie Maxwell 2 April 29, 2019 August 1, 2022

Seat 1 is currently vacant.

Management
Management of the SFPUC is led by the General Manager. The General Manager is appointed by the Mayor from candidates submitted by the Commission. Once appointed by the Mayor, the General Manager serves at the pleasure of the Commission; however, the Commission also has Charter authority to employ the General Manager under an individual contract.

Brief biographies of the General Manager and principal members of the senior management of the SFPUC are set forth below.

Dennis J. Herrera . Dennis J. Herrera commenced serving as the General Manager of the SFPUC on November 1, 2021. Prior to his appointment, Mr. Herrera had been re -elected in November 2019 to a four-year term as City Attorney for the City and County of San Francisco. Mr. Herrera was first elected City Attorney in December 2001. Before becoming City Attorney, Mr. Herrera had been a partner in a private law firm and had served in the Clinton Administration as Chief of Staff of the U.S. Maritime Administration. He also served as president of the San

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Francisco Police Commission and was a member of the San F rancisco Public Transportation Commission. Mr.

Herrera earned a B.A. from Villanova University and a J.D. from George Washington School of Law .

Michael Carlin . Michael Carlin is the SFPUC Deputy General Manager and Chief Operating Officer, reporting directly to the General Manager. He was appointed in 2009. As the Deputy General Manager and Chief Operating Officer, Mr. Carlin supervises the SFPUC ’s efforts in capital planning, emergency response, asset management, and other functions across the three business lines – water, power and wastewater. Prior to this position, Mr. Carlin served as the Assistant General Manager for the Water Enterprise where he led the effort to diversify the water supply portfolio. He continues in that role leading many of the environmental initiatives including addressing the impact of climate change on the organization. Mr. Carlin joined the SFPUC in 1996 as the Water Resources Planning Manager where he led the effort to develop comprehensive capital plans. That effort led to the establishment and execution of the Water System Improvement Program. Prior to joining the City, Mr. Carlin worked for more than a decade at the San Francisco Regional Water Board where he was the Planning Chief. Mr. Carlin holds a B.A. in Biology from San Francisco State University and an M.P.A. with an emphasis in Environmental Management from Golden Gate University.

Steven R. Ritchie. Steven Ritchie is the Assistant General Manager of the Water Enterprise, responsible for overseeing water system operations and planning from the Hetch Hetchy Project through the Regional Water System to the City Distribution Division. He is also responsible for the management of the SFPUC’s lands and natural resources. Mr. Ritchie was the Manager of Planning at the SFPUC from 1995 to 1998. Prior to his current assignment, he managed the South Bay Salt Pond Restoration Project, a multi -agency effort to restore 15,100 acres of valuable habitat in South San Francisco Bay, while providing for flood risk management and public access. In addition, Mr.

Ritchie has worked at management positions at the San Francisco Bay Regional Water Quality Control Board (1987- 1995), the CalFed Bay Delta Program (1998- 2000), and URS consultants (2000- 2004). He has a B.S. and M.S. in Civil Engineering from Stanford University.

Masood Ordikhani. Masood Ordikhani serves as the Assistant General Manager, External Affairs and Chief Strategy Officer for the SFPUC. Previously, he served as the SFPUC’s first Chief Equity and Innovation Offi cer, leading the agency’s racial equity work. Prior to that role, he was the Director of Workforce and Economic Program Services within the SFPUC’s Infrastructure Division. During his tenure in that role, Mr. Ordikhani and his team have developed and delivered several nationally-recognized programs. Prior to joining the SFPUC, Mr. Ordikhani was the Deputy Director of the City’s Human Rights Commission. In addition, prior to his more than 14 years of public service, he was an attorney in private practice. He is a graduate of the University of California, Berkeley and the University of California, Hastings College of the Law.

Barbara Hale. Barbara Hale is Assistant General Manager of the Power Enterprise. Ms. Hale oversees the Power Enterprise, including Power Retail Services, Utilities Services, Regulatory Affairs, Infrastructure Development and Power Purchasing and Scheduling. She is responsible for the development of a strategic business plan for the organization, setting out priorities, objectives, schedules and policy issues. Ms. Hale oversees all power-related inter- governmental relations, works directly with the Commission on policy and capital matters, and provides direction and leadership to a multi-discipline staff at remote and downtown locations. Ms. Hale provides strategic advice on energy policy matters to the General Manager and manages a staff responsible for developing specific energy efficiency projects and renewable and other advanced sources of electrical generation. Ms. Hale also acts as liaison between the SFPUC and State and federal agencies responsible for energy policy, such as the California Public Utilities Commission, the California Energy Commission, the California Power Authority, the Federal Energy Regulatory Commission, and the United States Department of Energy. Ms. Hale graduated cum laude from San Francisco State University with a B.A. in Economics, receiving special recognition for high achievement with the Department Honors Award. Ms. Hale has pursued extensive graduate coursework in Applied Economics.

Alan Johanson. Alan Johanson is the Acting Assistant General Manager for Infrastructure, responsible for overseeing the administration, planning, design, and construction of the SFPUC water, wastewater, and power capital programs and projects, including the Water System Improvement Program, the Sewer System Improvement Program, the Hetch Hetchy Improvement Program, and the annual Water and Wastewater Renewal and Replacement Programs.

He is a licensed general building contractor and a licensed professional engineer with a B.A. in Anthropology from the University of Chicago and an M.S. in Civil Engineering from San Jose State University.

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Gregory J. Norby. Gregory J. Norby was appointed in April 2018 to serve as Assistant General Manager of the Wastewater Enterprise, effective July 2, 2018. Mr. Norby has over 20 years of experience in private sector water infrastructure engineering and public utility management, most recently as General Manager of the Ross Valley Sanitary District. He also previously served as General Manager of the Mammoth Community Water District. He is a licensed professional engineer with a B.S. in Civil Engineering California State University, Chico, and an M.S. in Civil Engineering from Utah State University.

The position of Assistant General Manager, Business Services and Chief Financial Officer is presently vacant.

Ongoing Investigation
On January 28, 2020, the City’s former Director of Public Works, Mohammad Nuru, was indicted on federal criminal charges of public corruption, including honest services wire fraud and lying to Federal Bureau of Investigation officials. Mr. Nuru resigned from employment with the City two weeks after his arrest.

On February 4, 2020, then- City Attorney Dennis Herrera and Controller Ben Rosenfield announced a joint investigation that was underway, stemming from federal criminal charges filed against Mr. Nuru. The City Attorney’s Office, in conjunction with the Controller’s Office, is seeking to identify officials, employees and contractors involved in schemes relating to Mr. Nuru or other related conduct, and to identify contracts, grants, gifts, and other government decisions possibly tainted by conflicts of interest and other legal or policy violations. On June 29, 2020, the Controller released its preliminary assessment of Citywide procurement practices, focused on City laws, practices and policies.

The preliminary assessment also included recommendations to make improvements on such City laws and policies to improve transparency and reduce the risk of loss and abuse in City contracting in the future. To date, the City Attorney’s investigation has led to the release of four City employees (including the Director of Public Works and the Director of Building Inspection) from their City positions. There can be no assurance regarding when the City’s investigation will be completed or what the outcome will be of such investigation.

In connection with the federal criminal charges, the U.S. Attorney’s Office issued a subpoena on June 15, 2020, for the SFPUC to produce certain documents, communications, contracts and records, including the complete personnel file of the SFPUC’s former General Manager, Harlan L. Kelly, Jr.

On November 30, 2020, Mr. Kelly was charged in a federal criminal complaint with one count of honest services wire fraud. The complaint alleges that Mr. Kelly engaged in a long -running bribery scheme and corrupt partnership with Walter Wong, a San Francisco construction company executive and permit expediting consultant, who ran or controlled multiple entities doing business with the City. The complaint further alleges that as part of the scheme, Mr. Wong provided items of value to Mr. Kelly in exchange for official acts by Mr. Kelly that benefited or attempted to benefit Mr. Wong’s business ventures. Earlier criminal charges filed against Mr. Wong alleged that Mr.

Wong conspired with multiple City officials, including Mr. Nuru, in a conspiracy and money laundering scheme. Mr.

Wong pled guilty in July 2020 and is cooperating with the ongoing federal investigation. Mr. Kelly resigned from employment with the City, effective November 30, 2020. The original federal criminal complaint was amended on October 19, 2021 to include additional charges of bank fraud and bank fraud conspiracy against Mr. Kelly and Victor Makras, a San Francisco real estate broker and property developer.

From November 30, 2020 through October 31, 2021, Michael Carlin, Deputy General Manager of the SFPUC, served as the Acting General Manager. In April 2021, Mayor London Breed nominated City Attorney Dennis Herrera to serve as the next General Manager of the SFPUC. On September 28, 2021, the Commission approved the appointment of City Attorney Herrera to serve as the SFPUC’s next General Manager. Mr. Herrera began serving on November 1, 2021.

The criminal investigation by the Federal Bureau of Investigation and the U.S. Attorney’s office is ongoing.

The City Attorney’s Office, together with the Controller’s Office, continues to pursue an internal investigation of City contracting policies and procedures originally initiated when federal charges filed against Mr. Nuru were announced in January 2020.

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COVID-19 Pandemic
The outbreak of a highly transmissible strain of coronavirus (“COVID -19”) in 2020 spread to numerous countries across the globe, including the United States. The World Health Organization characterized the spread of COVID-19 as a pandemic, and states of em ergency were declared in the United States, California and the City. The State and the City have, from time to time since March 2020, issued and revised directives for all people to stay at home except to meet essential needs or to work to provide essentia l services (“stay -at-home orders”). The Water Enterprise continued to operate during the stay- at-home orders as an essential service and the City’s stay -at-home orders did not impair the SFPUC’s ability to deliver water to its customers. On June 15, 2021, all businesses and activities within the City were permitted to be reopened, as the State removed capacity limits and physical distancing requirements. Certain safety related requirements have subsequently been reintroduced and remain in effect . The SFPUC remains committed to ensuring safe operations while continuing to follow local, state and federal health guidelines as they evolve.

Operations. The SFPUC established and implemented programs, policies and protocols to help ensure the health and safety of its employees and to maintain its operations, including but not limited to: establishing enhanced cleaning and disinfecting procedures and social distancing protocols for all occupied SFPUC buildings, facilities and vehicles; mandating health screenings for, and providing personal protective equipment to, essential on- site staff; providing training and support to telecommuting staff to work remotely; and requiring public works construction contractors to submit health and safety plans addressing COVID -19 safety and protective work practices and inspecting worksites to ensure compliance with such plans. Operations continued and the SFPUC continued to deliver water to customers.

Financial Impact
Decline in Water Usage. The COVID-19 pa
ndemic and various City and State stay-at-home orders impacted retail demand in Fiscal Years 2019 -20 and 2020- 21, continuing into Fiscal Year 2021 -22. Retail water usage for Fiscal Year 2019-20 was 1% lower and retail water usage for Fiscal Year 2020 -21 was 11% lower, than water usage for Fiscal Year 2018 -2019. The impact on the water usage of particular Water Enterprise customers varied considerably. Water usage by residential customers was only modestly affected, for example, while monthly usage by commercial users were as much as 37% below pre -pandemic levels. Water usage has also varied and been influenced by other factors such as weather and seasonality. Retail water usage has not yet returned to pre -pandemic levels, with aggregate retail water usage in June 2021 13% lower than pre -pandemic levels. The SFPUC does not anticipate that water usage will return to pre-pandemic levels. The SFPUC expects, however, that water volume usage reductions related to pandemic impacts will have largely passed by Fiscal Year 2023-24.

Collections and Delinquencies. Since March 2020, the number of delinquent SFPUC accounts, among residential customers in particular, has grown significantly. As of June 2021, Water Enterprise customers with delinquent amounts for more than 90 days totaled approximately $5.8 million. In anticipation that an increased number of its customers would face financial challenges in paying their utility bills, the SFPUC developed a series of emergency response measures to provide relief to customers, including suspending water shutoffs due to late payments through June 2022 for non-residential customers and July 2022 for certain residential customers, postponing liens and collections, waiving late fees and providing rental payment deferments for tenants of its facilities. In addition, the SFPUC established its Temporary Emergency Customer Assistance for COVID -19 Relief Program (the “Customer Relief Program”) for account holders whose income has been impacted by COVID- 19 or the City’s stay- at-home orders. The Customer Relief Program provides eligible residential and small business customers a 1 5% utility bill credit for the Water Enterprise. The Customer Relief Program is time -limited. Approximately $ ___ million in COVID-19 emergency discounts were provided to Water Enterprise customers for Fiscal Year 2020 -21. These discounts were funded from various sources, including a transfer from the City’s General Fund and a variety of small sources of revenue, including customer donations and close -outs of unclaimed customer balances, to support more customers enrolled in the Customer Relief Program.

Operations and Maintenance Costs. C
OVID-19 has had a negative, although modest, impact on the operation and maintenance costs of the Water Enterprise. The direct impacts of COVID-19 on the operations and maintenance costs of the Water Enterprise in Fiscal Year 2020-21 were approximately $1.39 million of additional salary and fringe benefit expenses and approximately $828,000 for PPE supplies and other expenses. As of February 2022, the Water

41 4163-6481-6438.1

Enterprise has incurred approximately $240,000 of salary and fringe benefit expenses in Fiscal Year 2021- 22 due to COVID-19 and such costs are expected to be lower than Fiscal Year 2020- 21.

Financial Response. Immediately after a State of Emergency was declared in San Francisco in March 2020, it was clear that significant changes to the budget would be needed to rebalance the budget based on reduced revenue projections and to respond to the crisis. The SPFUC formed a Financial Resiliency Team to respond to the financial impacts of the COVID-19 pandemic. This team worked quickly to rebalance the Fiscal Year 2019- 20 budget as well as the Fiscal Year 2020-21 and Fiscal Year 2021-22 budgets in light of reduced revenue projections. While reserves were used as a s trategy to rebalance the budget in response to COVID- 19 related revenue shortfalls in Fiscal Year 2020-21 and Fiscal Year 2021-22, the vast majority of the deficit was met through agency-wide expenditure reductions in order to protect reserves and maintain financial strength and sustainability in the face of continued uncertainty. The SFPUC has submitted several applications with the State for grant funds to fund a portion of customer arrearages, which will require customers to enter into payment plans with the SFPUC for balances due in order to use the grant funds. The SFPUC has secured $7.3 million in federal and S tate grant funds to be allocated to SFPUC Water Enterprise customers.

Impact on Net Revenues. T
he Net Revenues of the Water Enterprise have b een influenced by a variety of factors, only some of which have been attributable to COVID-19. The overall Net Revenues of the Water Enterprise, however, have not declined significantly since March 2020. Net Revenues in Fiscal Year 2018-19, for example, were $312 million, Net Revenues in Fiscal Year 2019 -20 were $ 340 million and Net Revenues for Fiscal Year 2020 -21 were $339 million. See “HISTORICAL OPERATING RESULTS.” On February 8, 2022, the SFPUC updated the 10-year financial plan projections and Fiscal Year 2022-23 and Fiscal Year 2023-24 budgets for the Water Enterprise, which incorporated macro economic recovery projections consistent with the City economist’s view. See “PROJECTED OPERATING RESULTS.”
Other I mpacts . Although COVID-19 and the City’s stay-at-home orders have not had a materially adverse effect on the Water Enterprise’s operations and finances in Fiscal Years 2019 -20 and 2020-21, the full impact of the pandemic is difficult to predict due to the evolving nature of COVID-19 and uncertainties relating thereto. In addition to certain direct impacts on the operations and finances of the Water Enterprise, COVID -19 has had significant and varied impacts on general economic activity at the local, national and g lobal levels, including supply chain and labor market disruptions. Such disruptions have, among other effects, resulted in increases in materials, labor, transportation and other costs across a wide number of sectors, as well as delays in delivery of projects and equipment. For example, the Water Enterprise has experienced, and may in the future experience, increases in certain costs , such as for bulk chemical supplies, and delays in the delivery of equipment as a result of COVID -19’s disruption of supply chains.

Additionally, such disruptions may result in schedule delays for the Water Enterprise’s capital projects or increased costs for such projects.

The full extent of the fiscal impacts of COVID- 19 on the Water Enterprise may depend on, among other things, (i) the extent of the disruption to or decline in the local and global economies and financial markets; (ii) the ramifications of future actions that may be taken or required by governmental authorities to contain and respond to the pandemic; and (iii) the speed of the recovery from the economic effects of the epidemic. If the COVID -19 pandemic and/or the economic recovery is prolonged, the likelihood or magnitude of potential adverse impacts to the Water Enterprise’s finances or operations from the factors discussed herein or from other factors, could be increased.

No assurances can be given that the Water Enterprise’s financial results or operations will not be materially and adversely affected by the COVID-19 pandemic and its consequences in the future.

Employee Relations
San Francisco. The City’s budget for fiscal years 2020- 21 and 2021-22 included 38,267 and 38,308 full - time and part -time budgeted and funded City positions, respectively. City workers are represented by 37 different labor unions. The largest unions in the City include the International Federation of Professional and Technical Engineers, Local 21 (“IFPTE”), which represent Water Enterprise employees.

Wages, hours and working conditions of City employees, including employees of the SFPUC, are determined by collective bargaining pursuant to State law (the Meyers-Milias-Brown Act, California Government Code Sections

42 4163-6481-6438.1

3500-3511) and the City Charter. San Francisco is unusual among California’s cities and counties in that nearly all of its employees, including managerial and executive-level employees, are represented by labor organizations.

Further, the City Charter requires binding arbitration to resolve negotiations in the event of impasse. If impasse occurs, the parties are requ ired to convene a tripartite arbitration panel, chaired by an impartial third -party arbitrator, which sets the disputed terms of the new agreement. The award of the arbitration panel is final and binding.

This process applies to almost all City employees. Since 1976, no City employees have participated in a union- authorized strike, which is prohibited by the City Charter. See “RISK FACTORS – Risks Related to Water Enterprise Facilities and Operation – Labor Actions.”
The City’s employee selection procedure s are established and maintained through a civil service system. In general, selection procedures and other merit system issues, with the exception of discipline, are not subject to arbitration. Disciplinary actions are generally subject to grievance arbit ration, with the exception of sworn police officers and fire fighters.

In May 2019, the City negotiated three -year agreements (for fiscal years 2019-20 through 2021-22) with 27 labor unions, including IFPTE, Laborers Internationals, Local 261, which represents Water Enterprise employees. For fiscal year 2019-20, the parties agreed to wage increases of 3% on July 1, 2019 and 1% on December 28, 2019. For fiscal year 2020-21, the parties agreed to a wage increase schedule of 3% on July 1, 2020 and 0.5% on December 26, 2020, with a provision to delay the fiscal year 2020- 21 adjustment by six months if the City’s deficit for fiscal year 2020-21, as projected in the March 2020 update to the five -year financial plan, exceeds $200 million. Because the March 2020 update to the five-year financial plan projected a deficit for fiscal year 2020-21 in excess of $200 million, the scheduled wage increases as described above were delayed by approximately six months. For fiscal year 2021-22, the parties agreed to a wage increase schedule of 3% on July 1, 2021 and 0.5% on January 8, 2022, with a provision to delay the fiscal year 2021-22 increase by six months if the City’s deficit for fiscal year 2021-22, as projected in the March 2021 update to the five-year financial plan, exceeds $200 million. Because the March 2021 update to the five- year financial plan d id not project a $200 million deficit, the 3% and 0.5% wage increases for Fiscal Year 2021 -22 occurred on schedule. Such higher labor costs were included in the budget for Fiscal Year 2021-22 .

SFPUC. The SFPUC currently employs approximately 2, 300 of the City’s workers. The Charter governs the SFPUC’s employment policies and authorizes the San Francisco Civil Service Commission to establish rules and procedures to implement those policies. Of the 37 labor unions representing City workers more broadly, 1 3 presently represent SFPUC employees.

Over the next five years, approximately 40.9% of the SFPUC workforce agency -wide will be eligible for retirement. A new generation of jobs will require workers with specialized training, skills and experience, while local hiring requirements will need to be observed. The SFPUC’s 2020 Strategic Sustainability Plan includes an “effective workforce” goal, which focuses on a number of workf orce development and sustainability initiatives. The SFPUC also provides ethics training, diversity training, management training, environmental management system training, as well as fraud prevention and awareness training.

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The following table summarizes the number of SFPUC and Water Enterprise employees covered by a memorandum of understanding (similar to a collective bargaining agreement), each of which expire on June 30, 2022.

TABLE 1

SFPUC AND WATER ENTERPRISE

EMPLOYEES COVERED BY

MEMORANDA OF UNDERSTANDING
Employee Bargaining Unit
SFPUC
Full-Time
Equivalent
Employment(1)
Water
Enterprise
Full-Time
Equivalent
Employment(1)
International Association of Machinists, Lodge 1414 55 37 Carpenters, Local 22 21 13
International Brotherhood of Electrical Workers, Local 6 134 32 Laborers International, Local 261 163 96
Municipal Executives Association 190 36
Operating Engineers, Local 3 25 19
Plumbers, Local 38 239 172
International Federation of Professional and Technical Engineers, Local 21 1,069 229
Service Employees International Union, Local 1021 349 87 San Francisco City Workers United 14 5
Stationary Engineers, Local 39 306 94
Teamsters, Local 853 36 19
Transport Workers Union Local 250-A, Automotive Service Workers 6 5 Unrepresented Employees(2) 1 0
Total 2,608 844

____________________
(1) Represents budgeted numbers as of July 1, 2021, which remained in effect until the City’s fiscal year 2020-21 and fiscal year 2021-22 budget was adopted on October 1, 2020. Actual full-time equivalent employment totals will differ from the number of positions budgeted by the SFPUC for a variety of reasons, including certain requirements in the respective memoranda of understanding (similar to collective bargaining agreements). See “– COVID-19 Pandemic” and “FINANCIAL OPERATIONS – General – City Budget Process.
(2) Not covered by a memorandum of understanding (similar to a collective bargaining agreement).

Source: SFPUC Human Resource Services.

The SFPUC is in the process of negotiating new Memoranda of Understanding. Successor Memoranda of Understanding are required to be filed with the Board of Supervisors by May 15, 2022 for approval by June 30, 2022.

Employee Benefit Plans
Retirement System Plan Description. The San Francisco City and County Employees’ Retirement System (the “Retirement System ” or “ SFERS”) is charged with administering a defined- benefit pension plan that covers substantially all City employees, including SFPUC employees, and certain other employees. The Retirement System was initially established by approval of City voters on November 2, 1920 and the State Legislature on January 12, 1921, and is currently codified in the Charter. The Charter provisions governing the Retirement System may be revised only by a Charter amendment, which requires an affirmative public vote at a duly called election. The Retirement System is administered by the Retirement Board. The Plan provides basic service retirement, disability and death benefits based on specified percentages of final average salary and provides cost -of-living adjustments after retirement. The Plan also provides pension continuation benefits to qualified survivors.

Funding Practices. Employer and employee (member) contributions are mandated by the Charter.

Sponsoring employers, including the SFPUC, are required to contribute 100% of the actuarially determined

44 4163-6481-6438.1

contribution approved by the Retirement Board. The Charter specifies that employer contributions consist of the normal cost (the present value of the benefits that SFERS expects to become payable in the future attributable to a current year’s employment) plus an amortization of the unfunded liability over a period not to exceed 20 years. The Retirement Board sets the funding policy subject to the Charter requirements.

The Retirement Board adopts the economic and demographic assumptions used in the annual valuations.

Demographic assumptions such as retirement, termination and disability rates are based upon periodic demographic studies performed by the consulting actuarial firm approximately every five years. Economic assumptions are reviewed each year by the Retirement Board after receiving an eco nomic experience analysis from the consulting actuarial firm.

At the December 9, 2020 Retirement Board meeting, the Retirement Board adopted all recommended demographic assumptions from the experience study dated August 12, 2020, including, among others, updates to public plan mortality tables, lower price and wage inflation rates, from 2.75% to 2.50% and from 3.50% to 3.25%, respectively, effective for the July 1, 2020 actuarial valuation. The Retirement Board had previously voted to lower the assumed long-term investment earnings assumption from 7.50% to 7.40% at its November 2018 meeting, effective for the July 1, 2018 actuarial valuation.

While employee contribution rates are mandated by the Charter, sources of payment of employee contributions may be the subject of collective bargaining agreements with each union or bargaining unit. Since July 1, 2011, substantially all employee groups have agreed through collective bargaining for employees to contribute all employee contributions through pre-tax payroll deductions.

The following table shows total Retirement System liabilities, assets and percent funded for the last four actuarial valuations with respect to all City employees , as well as contributions for the fiscal years 2016-17 through 2020-21.

TABLE 2

CITY AND COUNTY OF SAN FRANCISCO
EMPLOYEES’ RETIREMENT SYSTEM
FISCAL YEARS 2017-18 THROUGH 2020-21
(IN THOUSANDS)
As of
Ju
ly
1st
Actuarial
Liability
Market
Value of
Assets
Actuarial
Value of
Assets
Market
Percent
Funded
Actuarial
Percent
Funded
Employee
and
Employer
Contribution
in Prior
Fiscal Year
Employer
Contribution
Rates in
Prior Fiscal
Year(1)
2017 $25,706,090 $22,410,350 $22,185,244 87.2% 86.3% $ 868,653 21.40% 2018 27,335,417 24,557,966 23,866,028 89.8 87.3 983,763 23.46 2019 28,798,581 26,078,649 25,247,549 90.6 87.7 1,026,036 23.31 2020 29,499,918 26,620,218 26,695,844 90.2 90.5 1,143,634 25.19 2021 31,905,275 35,673,834 30,043,222 111.8 94.2 1,245,957 26.90 ____________________
(1) Employer contribution rates are shown before required employer/employee cost-sharing provisions. Employer contribution rates for fiscal years 2020-21 and 2021-22 are 26.90% and 24.41%, respectively.

Source: SFERS Actuarial Valuation reports as of July 1, 2017, July 1, 2018, July 1, 2019, July 1, 2020 and July 1, 2021.

Note: Information above reflects entire Retirement System, not just the City and County of San Francisco.

The City’s net pension liability was approximately $5.3 billion for Fiscal Year 2020-21. The amount allocable to the Water Enterprise, as of June 30, 2021, was approximately $215 million.

The SFPUC is required to contribute at an actuarially determined rate and allocates the applicable portions of such contribution to the separate enterprises, including the Water Enterprise. For Fiscal Years 2015- 16 through

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2020-21, the SFPUC’s employee contribution rates varied from 7.5% to 13.0% as a percentage of gross covered salary.

For Fiscal Years 2015 -16 through 2019- 20, the Water Enterprise has paid 100% of its required contributions. The contributions by the Water Enterprise required for Fiscal Years 201 6-17 through 20 20-21 are summarized in the following table:

TABLE 3

WATER ENTERPRISE RETIREMENT SYSTEM CONTRIBUTION
FISCAL YEARS 2016-17 THROUGH 2020-21
(IN THOUSANDS)
Fiscal Year
Employer
Contribution
Rates
Water Enterprise
Contribution
2016-17 21.4% $24,368
2017-18 23.5 25,922
2018-19 23.3 26,400
2019-20 25.2 29,647
2020-21 26.9 33,367
_______________
Source: SFERS Actuarial Valuation reports as of July 1, 2017, July 1, 2018, July 1, 2019 , July 1, 2020, and July 1, 2021 and SFPUC audited financial statements.

Plan Financial Reports and Funded Status. The Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for the Plan. That report may be obtained by writing to the San Francisco City and County Employees’ Retirement System, 1145 Market Street, 5th Floor, San Francisco, CA 94103, or by calling (415) 487-7000.

Health Care Benefits. The SFPUC participates in the City’s agent multiple employer defined benefit plan, which operates as a cost -sharing multiple employer defined benefit plan for the SFPUC (the “OPEB Plan ”). The OPEB Plan is maintained by the City and is administered through the City’s Health Service System and provides postemployment medical, dental and vision insurance benefits to eligible employees, retired employees, and surviving spouses. Health benefit provisions are established and may be amended through negotiations between the City and the respective bargaining units. The City does not issue a separate report on its other post -employment benefit plan.

As prescribed under GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions, net OPEB liability, deferred outflows/inflows of resources related to OPEB, and OPEB expense are actuarially determined on a cityw ide basis. Net OPEB liability is measured as the portion of the present value of projected benefit payments to be provided to current active and inactive employees attributed to those employees’ past service, less the amount of the Retiree Healthcare Trust Fund investments measured at fair value.

The provisions of GASB Statement No. 75 are effective for the Water Enterprise beginning in Fiscal Year 2017-18. The following table shows the components of the City’s annual OPEB allocations for the Water Enterprise for Fiscal Years 2018-19 through 2020-21, for the amount contributed to the plan, and changes in the City’s net OPEB obligation:

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TABLE 4

ANNUAL OPEB OBLIGATION
FOR FISCAL YEARS 2018-19 TO 2020-21
(IN THOUSANDS)
2018-19 2019-20 2020-21
City’s reported net OPEB liabilities $3,600,967 $3,915,815 $3,823,336 Water Enterprise’s proportionate share of City’s
contribution 9,154 9,863

9,572
Water Enterprise’s proportionate share of City’s
OPEB liability 166,366 163,684

148,771
_______________
Source: SFPUC
The City’s OPEB net position liability was approximately $3.8 billion for Fiscal Year 2020-21. The amount allocable to the Water Enterprise, as of June 30, 2021, was approximately $148.8 million.

The City issues a publicly available financial report on a City -wide level that includes the complete note disclosures and required supplementary information related to the City’s post-retirement health care obligations. The report may be obtained by writing to the City and County of San Francisco, Office of the Controller, 1 Dr. Carlton B.

Goodlett Place, Room 316, San Francisco, CA 94102, or by calling (415) 554-7500.

Pension and Health Care Cost Re forms. Voters implemented City employee pension and health care cost reforms to help mitigate future cost increases. These include the following propositions:

Proposition B. Proposition B was a Charter amendment approved by voters in June 2008 that increased the years of service required to qualify for employer- funded retiree health benefits for City employees who retire under SFERS and were hired on or after January 10, 2009. Previously, employees became eligible to participate in the retirement health care system after five years of service and the employer paid 100% of the contribution. Beginning with employees hired on or after January 10, 2009, employees remain eligibl e to participate in the retirement health care system after five years of service, however, no employer contributions are required until 10 years of service.

From 10 to 15 years of service, employers pay 50% of the contribution, from 15 to 20 years of service 75%, and for employees with 20 years or more of service, 100%.

Proposition B also established a health care trust fund to pay for future costs related to retiree health care.

E
mployees hired on or after January 10, 2009, contribute up to 2% of their pre- tax pay, with employers contributing an additional 1%, to the health care trust fund. Proposition B also increased maximum pension benefits for employees retiring at and after age 60 and enhances cost of living increases for pensions.

Proposition C.

Proposition C was a Charter amendment approved by voters in November 2011 that changed the way the City and current and future employees share in funding SFERS pension and health benefits.

With regard to pension benefits, the base employee contribution rate remains at 7.5% for most employees w
hen the City contribution rate is between 11% and 12% of City payroll. Employees making at least $50,000 will pay an additional amount up to 6% of compensation when the City contribution rate is over 12% of City payroll. When the City contribution rate falls below 11%, employee contributions will be decreased proportionately.

Proposition C creates new retirement plans for employees hired on or after January 7, 2012 that: (1) for miscellaneous employees, increased t he minimum retirement age to 53 with 20 years of service or 60 with 10 years; (2) for safety employees, kept the minimum retirement age at 50 with five years of service, but increased the age for maximum benefits to 58; (3) for all employees, limited covered compensation, calculated final compensation from a three year average, and changed the multipliers used to calculate pension benefits; and (4) for miscellaneous employees, raised the age of eligibility to receive vesting allowance to 53 and reduced by half the City’s contribution to vesting allowances.

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With regard to health benefits, elected officials and employees hired on or before January 9, 2009, contribute up to 1% of compensation toward their retiree health care, with matching contribution by the City. For employees or elected officials who left the City workforce before June 30, 2001, and retire after January 6, 2012, Proposition C requires that the City contributions toward retiree health benefits remain at the same levels they were when the employee left the City workforce.

Proposition C also limits cost of living adjustments for SFERS retirees; however, in 2015, the Court of Appeals held in a suit against the City brought by a retiree organization, Protect Our Benefits v. City and County of San Francisco, 235 Cal. App. 4th 619 (2015) that certain changes to payment of supplemental cost of living allowances imposed by Proposition C could not be applied to current City employees and those who retired after November 1996 when the supplemental cost of living allowance provisions were originally adopted, but could be applied to SFERS members who retired before November 1996. This decision is now final and its implementation increased the July 1, 2016 unfunded actuarial liability by $429.3 million for Supplemental COLAs granted retroactive to July 1, 2013 and July 1, 2014.

On July 13, 2016, the Retirement Board adopted a resolution to exempt members who retired before November 6, 1996, from the “fully funded” provision related to payment of Supplemental COLAs under Proposition C. The resolution directed that retroactive payments for Supplemental COLAs be made to these retirees. After the Retirement Board adopted said resolution, the Retirement System published an actuarial study on the cost to the fund of payments to the pre ‐1996 retirees. The study reports that the two retroactive supplemental payments will trigger immediate payments of $34 million, create additional liability for continuing payments of $114 million, and cause a new unfunded liability of $148 million. This liability does not include the Supplemental COLA payments that may be triggered in the future. Under the cost sharing formulas in Proposition C, the City and its employees will pay for these costs in the form of higher yearly contribution rates. The City Controller has projected the future cost to the City and its employees to be $260 million, with over $200 million to be paid in the next five fiscal years. The City obtained a permanent injunction to prevent SFERS from making Supplemental COLA payments to these members who retired before November 6, 1996. The Superior Court’s injunction was affirmed by the Court of Appeal.

THE WATER ENTERPRISE
General
The SFPUC operates the facilities of its Water Enterprise to optimize the reliability and quality of its water deliveries. The SFPUC has made and will continue to make significant capital investments in the facilities of the Water Enterprise, designed to maximize the Water Enterprise’s ability to deliver water sufficient to meet the needs of its customers following the occurrence of a major seismic event or during an extended period of drought.

The SFPUC serves as the retail water supplier for the City and is responsible for water deliveries to residents and institutions within the City limits, as well as to several retail accounts outside of the City limits. In addition, the SFPUC sells water to 27 Wholesale Customer entities in San Mateo, Alameda and Santa Clara counties under the WSA and related individual contractual agreements. Collectively, except for the Cordilleras Mutual Water Company, the Wholesale Customers are members of BAWSCA, which is a public agency separate and apart from the 27 Wholesale Customers. Altogether, nearly 2.7 million people rely on water supplied by the Water Enterprise.

The Water Enterprise consists of over 389 miles of pipeline, over 74 miles of tunnels, 11 reservoirs, 13 groundwater wells, five pump stations, and three water treatment plants located outside of the City, and over 1,235 miles of pipeline, 11 reservoirs, six groundwater wells, eight storage tanks, 24 pump stations, eight hydropneumatic stations and 17 chlorination stations located within the City limit.

The Regional Water System draws approximately 85% of its water from the Upper Tuolumne River Watershed feeding a single aqueduct system, delivering water 120 miles by gravity to Bay Area reservoirs and users.

The remaining water supply is drawn from local surface waters in the Alameda and Peninsula watersheds.

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Water Rights and Related Proceedings
Prior to the Gold Rush in 1849, local water supplies were largely adequate to meet the needs of what is now San Francisco. The Spring Valley Water Company, purchased by the City in 1930, developed much of the local water supplies now available to the Water Ent erprise. The City’s population grew rapidly after the Gold Rush to nearly 400,000 by the time of the Great Earthquake of 1906.

As early as the 1880s, the City began looking to the Sierra Nevada and the Tuolumne River in what is now Yosemite National Park a s a possible source of abundant, clean water for the City and the Bay Area. Hetch Hetchy Valley, which is located on the Tuolumne River in Yosemite National Park, was first recommended as a reservoir site at the turn of the 20th century in a United States Geological Survey Study. Then-Mayor James D. Phelan made the first filings for water rights and reservoir rights-of-way in the Tuolumne River watershed as a private citizen and transferred those filings to the City in 1903.

Following the Great Earthquake of 1906, the City again sought water rights and reservoir rights -of-way in the Tuolumne River watershed and began to develop a preliminary design for the Hetch Hetchy System (as defined herein). It also entered into negotiations with the Irrigation Districts to protect the Irrigation Districts’ existing water rights and to provide them a share of the hydroelectric power to be produced by Hetch Hetchy facilities, at cost-based rates.

The federal Raker Act, enacted on December 19, 1913 (the “Raker Act”), grant s to the City rights -of-way and public land use on United States government property in the Sierra Nevada to construct, operate and maintain reservoirs, dams, conduits and other structures necessary or incidental to developing and using water and power. It also imposes restrictions on the City’s use of Hetch Hetchy Reservoir, including (among others) the requirement that the City recognize the prior rights of the Irrigation Districts to receive water, up to specified amounts of natural daily flow, for direct use and storage. After 20 years of construction of dams and aqueducts, the City first delivered water from the Hetch Hetchy System to the Bay Area on October 24, 1934.

The City holds rights of way under the Raker Act and releases water from its facilities under stipulations with the United States Department of the Interior, which administers the Raker Act. The SFPUC diverts water under its water rights acquired under State water law, which entitles the SFPUC to appropriate more than 400 million g allons per day (“mgd”) from the Tuolumne River and its tributaries.

The City holds “pre -1914” appropriative water rights for the storage and diversion of water for the Hetch Hetchy and local water systems, except with respect to San Antonio Reservoir. San Antonio Reservoir has a post - 1914 appropriative water right license from the SWRCB. Pre-1914 water rights are not subject to the water right permitting authority of the SWRCB but remain subject to jurisdiction concerning adequacy of the right and reasonableness of water use.

See “– Current Water Supply Sources” and “– Proposals to Restore Hetch Hetchy Valley.” Current Water Supply Sources
The Regional Water System . The Regional Water System is a complex system which supplies water from two primary sources: the Tuolumne River through Hetch Hetchy Reservoir and local runoff into Bay Area reservoirs in the Alameda and Peninsula watersheds. Water developed via Hetch Hetchy Reservoir through Hetch Hetchy facilities represents the majority of the water supply available to the SFPUC. On average, Hetch Hetchy Reservoir provides approximately 85% of the water delivered, and Bay Area reservoirs provide approximately 15% of the water delivered. The local watershed facilities are operated to capture local runoff for delivery. Local area water production is dependent on precipitation and the ability of the SFPUC to regulate watershed runoff.

Local Groundwater. The City overlies all or part of seven groundwater basins: the Westside, Lobos, Marina, Downtown, Islais Valley, South and Visitacion Valley basins. The Lobos, Marina, Downtown and South basins are located wholly within the City limits, while the remaining three extend south into San Mateo County. The portion of the Westside Basin aquifer located within the City is c ommonly referred to as the North Westside Basin. Except for

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the Westside and Lobos basins, all of the basins are generally inadequate to supply a significant amount of groundwater for municipal supply due to low yield.

Early in its history, the City made significant use of local groundwater, springs, and spring fed surface water.

However, after the development of surface water supplies in the Peninsula and Alameda watersheds by Spring Valley Water Company and the subsequent completion of Hetch Hetchy Reservoir and aqueduct in the 1930’s, the municipal water supply system has relied almost exclusively on surface water from the Alameda and Peninsula watersheds, and the Tuolumne River watershed. Local groundwater use, however, has continued in the City primaril y for irrigation purposes. The San Francisco Zoo and Golden Gate Park use groundwater for non-potable purposes. In April 2017, the SFPUC began pumping groundwater from the North Westside Basin aquifer. The groundwater is treated and blended with the SFPUC’ s regional drinking water supplies before it is delivered to the SFPUC’s customers. Currently, groundwater represents approximately 0.4 mgd in the drinking water supply . See also “– Water Supply Initiatives – Local Groundwater and Recycled Water Projects.”
Approximately 0.4 mgd of groundwater is delivered to Castlewood Country Club from well fields operated by the SFPUC in Pleasanton and drawn from the Central Groundwater Sub Basin in the Livermore/Amador Valley.

These wells are metered and have been in operation for several decades. There is no physical connection between the Castlewood Country Club wells and the Regional Water System. For purposes of water accounting and billing, these deliveries to Castlewood Country Club are accounted for as part of the SFPUC’s Retail Customer base.

Local Recycled Water. Current use of recycled water for these purposes in the City is less than one mgd and does not materially contribute to overall retail demands. The Sharp Park Recycled Water Project (0.1 mgd) and the Harding Park Recycled Water Project (0.2 mgd) provide recycled water for irrigating golf courses. The City also uses disinfected secondary-treated recycled water from the SFPUC’s Southeast Water Pollution Control Plant on a limited basis for wash -down operations and provides it to construction contractors, City departments, and other interested parties for use within the City via a truck -fill station. Permitted uses include soil compaction, dust control, landscape irrigation, street cleaning, and sewer flushing.

Local Water Conservation. The SFPUC is committed to demand-side management programs; the City’s per capita water use has dropped by almost 50 percent since 1977 in part due to these programs. The first substantial decrease came following the 197 6-77 drought in which gross per capita water use dropped from 160 to 130 gallons per capita per day (“gpcd”). Despite nearly continuous growth in the City since then, water demand levels have remained lower than water demand levels prior to the 1976 -77 drought due to building code requirements and improved technology.

A second substantial decrease in water use within the City occurred because of the 1987-92 drought, when a new level of conservation activities resulted in further water use savings and per capita use dropped sharply again in the 2012-2015 drought. Gross per capita water use within the City decreased to 65.4 gpcd in Fiscal Year 20 20-21, with residential per capita water use calculated to be 42.6 gpcd, one of the lowest per capita rates of any urban area in the State, and approximately one- half of the statewide average. It is anticipated that through the continuation and expansion of these programs, per capita water use will remain low.

The SFPUC’s wate r conservation program offers financial incentives, services and educational assistance, all aimed at promoting efficient water use. The conservation program implemented by the SFPUC is based on, among other things, State and local indoor and outdoor efficiency requirements, the WSIP, and analysis of local efficient plumbing fixture saturation rates and water-saving opportunities in the SFPUC retail service area.

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Water Supply Storage
The amount of water available to the SFPUC’s Retail Customers and Wholesale Customers is constrained by hydrology, physical facilities, and the institutional parameters that allocate the water supply of the Tuolumne River.

While in most years the SFPUC receives adequate water supply to meet its demands during dry years, the SFPUC has only a small share of Tuolumne River runoff available and the local Bay Area watersheds produce limited volume of water. Due to these constraints, the SFPUC is dependent on reservoir storage to firm up its water supplies. More importantly, reservoir storage provides the Regional Water System with year -to-year water supply carry -over capability. Reservoir storage is critical to the SFPUC during drought cycles since it enables the SFPUC to carry- over water supply from wet years to dry years. See “WATER FACILITIES – Water Storage.” Projected Demand
Retail Demand. Beginning in 2015, the SFPUC transitioned away from an end use -based model to an econometric model for demand forecasts. Econometric models incorporate socioeconomic factors to project demands and are able to capture a more complete demand picture. This demand forecasting methodology is becoming more prevalent among urban water utilities and managers. A key new aspect of the retail demand projections in this 2020 UWMP update is that the econometric models were calibrated using 10 years (2010-2020) of historical San Francisco account-level water usage data. This data was combined with property characteristics, demographic characteristics, and historical climate data to create an econometric model t hat evaluates the impact of several factors on household- level demands. Demands are then projected based on the growth assumptions discussed below, along with expected future changes in rates and climate.

The new set of models relies on household and employment forecasts provided by the San Francisco Planning Department. The housing projections are based on the Housing Element 2022 Update objective of producing an average of 5,000 housing units per year with adjustments for certain large development plans. The employment forecasts are from the Planning Department’s Land Use Allocation (LUA) 2017, which is a City- specific refinement of ABAG’s growth forecasts, ABAG Projections 2017, which reflect the growth that is assumed in ABAG’s Plan Bay Area and Sustainable Communities Strategy Jobs-Housing Connections Scenario.

Demand is forecasted to increase steadily through 2045, with more rapid growth happening in the later years of the projection period. After accounting for the projected conservation savings, the t otal retail demand (excluding water loss) is projected to increase by about 21%, from 61.6 mgd in 2020 to 74.6 mgd in 2045. Although population and total retail water demand are projected to increase, residential per capita water usage is forecasted to decrease.

The water demand projections show that single family residential use is expected to decrease by 7% and multi-family residential water use throughout the retail service area is projected to increase by 44%, respectively, between 2020 and 2045. Non -residential water use is projected to increase by 13% between 2020 and 2045. These projections will be updated in fall of 2024 as the SFPUC compiles the 2025 Urban Water Management Plan.

The COVID- 19 pandemic has impacted retail water demand. S ee “THE PUBLIC UTILITIES COMMISSION – COVID-19 Pandemic.”

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TABLE 6

PROJECTED RETAIL WATER DEMAND
(IN MGD)

2025 2030 2035 2040 2045
In City Residential Demand
(Single and Multiple Family)

37.4 39.1 41.3 43.8 46.5
In City Non-residential
(Business/Industrial/Municipal
Demands)(1)

20.9 22.9 22.8 23.1 23.6
Subtotal – In City Retail 60.3 62.0 64.0 66.9 70.2

In City Water Loss(2) 6.0 6.0 6.0 6.0 6.0
Subtotal – In City Losses 6.0 6.0 6.0 6.0 6.0

Suburban Residential 0.1 0.1 0.1 0.1 0.1
Suburban Non residential(3) 4.0 4.0 4.0 4.0 4.0
Groveland CSD 0.3 0.3 0.3 0.3 0.3
Subtotal – Suburban Retail(4) 4.4 4.4 4.4 4.4 4.4

Total – Retail Demand 70.7 72.4 74.5 77.4 80.6

Local Water Supplies 3.5 4.9 5.9 6.9 6.9

Net Retail Demand from
Regional Water System

67.2 67.5 68.6 70.5 73.7

____________________
(1) Includes Builders & Contractors, Docks & Shipping, and all dedicated irrigation. (2) Water losses include both apparent and real losses. (3) Includes the San Francisco County Jail, San Francisco International Airport, Lawrence Livermore National Laboratory, Castlewood Country Club, Sunol Valley Golf Course, and other non-residential suburban or municipal accounts. (4) Suburban retail water losses are considered to be negligible.

Note: Amounts set forth in this table are projections. Actual results may differ materially from these projections. See “FORWARD-LOOKING STATEMENTS” above.

Source: 2020 Urban Water Management Plan, released July 2021.

Wholesale Demand. In 2020, BAWSCA updated the demand projections of its member agencies (26 of the SFPUC’s 28 wholesale customers) using a combination of two different models: (1) an econometric (or statistical) model developed for each member agency and (2) the Demand Side Management Least Cost Planning Decision Support System (a.k.a., DSS Model). BAWSCA’s population projections for its member agencies are based on each member agency’s population projections, ABAG Plan Bay Area 2040 data, California Department of Finance, the U.S. Census, and agency planning documents. The forecast methodology and resulting projections are documented in BAWSCA’s 2020 report titled “Regional Water Demand and Conservation Projections,” and they support BAWSCA’s Long-Term Reliable Water Supply Strategy (Strategy). The Strategy’s projections indicate that demands by the Wholesale Customers for RWS supplies through 2045 will be significantly less than anticipated at the time the Phased WSIP was adopted in 2008.

Water supplied by the SFPUC to the Wholesale Customers is metered. The total projected water demands of the Wholesale Customers, as compiled in the BAWSCA Annual Survey for Fiscal Year 2019-20, are shown in Table 7.

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In Fiscal Year 20 20-21, Wholesale Customers collectively received approximately 6 7.4% of their water supply from the Regional Water System. By 2046 this figure is projected to be 61. 1%. For the year 2046, water demands of the Wholesale Customers (regardless of water source) are projected to increase to approximately 172.8 mgd and other water supplies available and developed by the Wholesale Customers, which include increased water conservation and recycling, are projected to increase to approximately 110.2 mgd.

TABLE 7

PROJECTED WHOLESALE CUSTOMER WATER DEMAND AND SUPPLIE S (IN MGD)

2026 2031 2036 2041 2046
Wholesale Customer Purchases
from the Regional Water
System(1)

153.91

153.54

157.53

161.95

172.81
Other Supplies(2) 93.48 93.48 98.05 106.22 110.16
Total Wholesale Customer Demand 247.39 247.02 255.58 268.17 282.97 ____________________
(1) This projected demand includes increased deliveries to interruptible customers, the cities of San Jose and Santa Clara, as well as to other permanent customers such as East Palo Alto. (2) Estimated as the difference between the Total Wholesale Customer Demand and the Wholesale Customer Purchases from the Regional Water System.

Note: Amounts set forth in the table are projections. Actual results may differ materially from these projections. See “FORWARD-LOOKING STATEMENTS” above.

Source: BAWSCA Annual Survey Fiscal Year 2020-21.

The SFPUC plans to meet its contractual obligation of serving the Wholesale Customers Supply Assurance (as defined herein) of 184 mgd. In addition to the Supply Assurance, the SFPUC provides 9 mgd to the City of San Jose (“San Jose”) and the City of Santa Clara (“Santa Clara ”) as interruptible customers. However, San Jose and Santa Clara are requesting up to a total of 1 5.5 mgd in future years. East Palo Alto was previously projecting a 1.5 mgd supply shortfall. In 2017, the City of Mountain View (“ Mountain View ”) agreed to a permanent one mgd transfer of its Individual Supply Guarantee (defined below) to East Palo Alto. Subsequently the C ity of Palo Alto agreed to a permanent 0.5 mgd transfer of Individual Supply Guarantee to East Palo Alto. See “– Wholesale Deliveries – Creation of Transfer Market” and “– 2028 Water Supply Decisions.” Water Supply Reliability and Drought Planning
The SFPUC water supply system reliability is expressed in terms of its ability to deliver water during droughts. Reliability is defined by the amount and frequency of water delivery reductions required to balance customer demands with available supplies in droughts. The total amount of water the SFPUC has available to deliver to its Retail and Wholesale Customers during a defined period is dependent on several factors that include the amount of water that is available to SFPUC from natural runoff, the amount of water in reservoir storage, groundwater and the amount of water that must be released from the SFPUC’s system for commitments for purposes other than customer deliveries (such as releases below Hetch Hetchy Reservoir to meet Raker Act and fishery purposes).

The SFPUC operates its system to optimize the reliability and quality of its water deliveries. Hetch Hetchy Reservoir operations are guided by two principal objectives: collection of Tuolumne River water runoff for diversion to the Bay Area; and fulfillmen t of the SFPUC’s downstream release obligations. To ensure water supply, Hetch Hetchy Project reservoirs remain high through the early winter, until sufficient snowmelt runoff is forecasted at 90% certainty to fill all Tuolumne reservoirs. When the forecas ted snowmelt is certain to be in excess of the fill volume, the reservoirs may be drawn down through power operations to increase revenue without risking water supply.

Similarly, the Regional Water System Bay Area reservoirs are operated to conserve waters hed runoff. As such, reservoirs are drawn down early in the winter period to capture storms and reduce the potential for spilling water out of the reservoirs. In the spring, Hetch Hetchy water (snowmelt) is often transferred to three of the Bay Area reservoirs that are capable of receiving the water so that any unused local reservoir storage is filled prior to July 1.

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Prior to 1976, droughts had not seriously affected the ability of the SFPUC to sustain full deliveries to its customers. During a subsequent drought in 1987-92, as reservoir storage continued to decline it became apparent that continued full deliveries could not be sustained without the risk of running out of water before the drought ended. As a result of these experiences, to provide some level of assurance that water could be delivered continuously throughout a drought (although at reduced levels), the SFPUC adopted a drought planning sequence, incorporating an 8.5 year drought scenario for planning purposes (based on combined number of actual drought years from 1976- 1977 and 1987-92), and associated operating procedures that trigger different levels of water delivery reduction rationing relative to the volume of water actually stored in SFPUC reservoirs. Each year, during the snowmelt period, the SFPUC evaluates the amount of total water storage expected to occur throughout the Regional Water System. If this evaluation finds the projected total water storage to be less than an identified level sufficient to provide sustained deliveries during the drought scenario, the SFPUC may impose delivery reductions or rationing.

Rationing. At current contractual obligations to deliver 184 mgd to the SFPUC’s Wholesale Customers and 81 mgd to its Retail Customers combined with current water supplies and reservoir storages, the Regional Water System can be expected to experience up to a 25% shortage from 15% to 20% of the time, over multiple-year drought sequences. During a drought, Retail and Wholesale Customers could experience a reduction in the amount of w ater received from the Regional Water System. The amount of the reduction would be dictated by existing contractual agreements between the SFPUC and the Wholesale Customers, as detailed in the existing Water Shortage Allocation Plan (“ WSAP”). The WSAP prov ides specific allocations of available water between the Retail and Wholesale Customers collectively associated with different levels of systemwide shortage. Under the WSAP, specific rationing amounts applied to the Retail and Wholesale Customers will be d etermined by their subsequent shortage plans as required to remain with their share of the systemwide allocation.

The WSAP has been carried forward in the WSA for systemwide shortages of up to 20%. For shortages in excess of this amount, the WSA provides that the SFPUC may allocate water at its discretion, subject to legal challenge by Wholesale Customers, if agreement cannot be reached regarding treatment of shortages in excess of 20%. The WSA also includes provisions for drought and emergency pricing. See “FINANCIAL OPERATIONS.” System Delivery Capability. System delivery capability is defined as the water delivery the Regional Water System is able to sustain over historical hydrologic conditions including multiple -year drought sequences. Under existing SFPUC operations policies and procedures, the SFPUC has a system delivery capability of 258 mgd. That is, the Regional Water System is capable of sustaining a 258 mgd annual average delivery over a hydrologic period equivalent to that experienced from 1921 to 2002 with shortages due to drought. After completion of the WSIP and development of dry- year supplies, the system delivery capability is anticipated to increase to 262 mgd. During non-drought years, the Regional Water System is capable of sustainably del ivering 265 mgd. See “CAPITAL IMPROVEMENT PROGRAM - Water System Improvement Program (WSIP).” Water Supply Initiatives
With WSIP nearing completion, there are two main drivers for future infrastructure water needs: 1) environmental flow requirements on the Tuolumne River that could result in a reduction of available water supplies by approximately 93 mgd during dry years at the current contract levels of demand if the Bay Delta Water Quality Control Plan (Bay-Delta Plan) is implemented; and 2) a policy decision before the SFPUC on whether to provide a permanent supply guarantee of 9 mgd to the Cities of San Jose and Santa Clara, who are currently interruptible customers. To ensure that the future water needs of Retail and Wholesale Customers will continue to be met under future conditions, the SFPUC has undertaken planning for a suite of projects in the Alternative Water Supply Program (the “AWS Program”) to improve dry year supply reliability, and is looking to diversify the SFPUC’s water supply portfolio. The AWS Program includes projects such as expanding reservoir storage, groundwater banking, transfers, purified water (potable reuse), desalination, and technological innovations. Nine regional projects in the AWS Program that are currently being analyzed are described briefly below. Each of the projects described below remains in the planning and feasibility study stage. Decisions to move forward with key project milestones are anticipated in 2023.

Daly C
ity Recycled Water Expansion : This is a recycled water project that will produce approximately 1.25 mgd of recycled water on an average annual basis, resulting in approximately 0.7mgd of additional supply availability in the South Westside Groundwater Basin. The primary purpose of the project is to provide recycled water to 13

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cemeteries and other smaller irrigation customers, offsetting existing groundwater pumping from the South Westside Groundwater Basin (Basin); this will enhance the reliability of the Basin. The project is a regional partnership between the SFPUC and Daly City, and the irrigation customers are located largely within the service area of the California Water Service Company ( “Cal Water”). SFPUC Regional Water System customers will benefit from the increased reliability of the South Westside Groundwater Basin for additional drinking water supply during droughts. In this way, this project supports the Regional Groundwater Storage and Recovery Project, which is under construction through WSIP.

Crystal Springs Purified Water: This purified water project could provide 6- 8 mgd of water supply through
reservoir water augmentation at Crystal Springs Reservoir and an additional 4- 6 mgd through direct potable reuse to other partner agencies. Treated wastewater from Silicon Valley Clean Water and/or the City of San Mateo would go through a water purification process that uses multi -barrier treatment technology to meet state and federal drinking water quality standards. The purified water would then be transmitted 10 -20 miles (depending on the alignment) to Crystal Springs Reservoir and/or other neighboring water service areas. Water conveyed to Crystal Springs Reservoir would be blended with regional surface water supplies and treated again at Harry Tracy Treatment Plant. In addition to the SFPUC and the wastewater agencies, Cal Water, the City of Redwood City and BAWSCA are also participating in the project.

Alameda County Water District -Un
ion Sanitary District Purified Water Partnership : This proj ect can provide a new purified water supply utilizing Union Sanitary District (“USD”) treated wastewater and further treating it through a multi -barrier advanced treatment process to meet or exceed drinking water standards. Purified water produced at USD w ill be transmitted to the Quarry Lakes Groundwater Recharge Area to supplement recharge into the Niles Cone Groundwater Basin or for other uses in the service area of Alameda County Water District (“ACWD”).

With the additional water supply to ACWD, an in lieu exchange with the SFPUC would result in more water left in the SFPUC's RWS. Additional water supply could also be directly transmitted to the SFPUC through a new intertie between ACWD and SFPUC.

Los Vaqueros Reservoir Expansion: T
he Los Vaqueros Reservoir Expansion Project is a storage project that will enlarge the existing reservoir located in northeastern Contra Costa County from 160,000 acre -feet to 275,000 acre-feet. The main objectives of the expansion include increasing water supply reliability for municipal, industrial and agricultural customers as well as ecosystem benefits to south-of-Delta wildlife refuges and Delta fisheries. While the existing reservoir is owned and operated by Contra Costa Water District ( “CCWD”), the expansion will have regional benefits and will be managed by a Joint Powers Authority that has been set up. Storage in L as Vaqueros Reservoir Expansion Project can provide a dry year water supply benefit to SFPUC's customers. Currently, the SFPUC is evaluating the feasibility of storing up to 40,000 acre-feet and delivering that supply over two drought years to the SFPUC service area either directly or by exchange through the South Bay Aqueduct.

Bay Area Brackish Water Desalination (Regional Desalination) : T he Bay Area B rackish Water Desalination (Regional Desalination) Project is a partnership between CCWD, SFPUC, the Santa Clara Valley Water District, and Alameda County Flood Control and Water Conservation District, Zone 7. The East Bay Municipal Utility District may also be involved. The project could provide a new drinking water supply to the region by treating brackish water from CCWD's existing Mallard Slough intake in Contra Costa County. The project relies primarily on available capacity in an extensive network of existing pipelines and interties that already connect the agencies, as well as existing wastewater outfalls and pump stations. The SFPUC would not directly receive desalinated water but would take delivery of water through a series of exchanges. If developed in conjunction with the Los Vaqueros Reservoir Expansion Project, it can provide a dry year benefit.

Calaveras Reservoir Expansion: T
his storage project envisions the expansion of Calaveras Reservoir to store excess Regional Water System supplies or other source water in wet and normal years. No expansion of water rights from the local watershed is anticipated. With the Calaveras Dam Replacement project in place, Calaveras Dam holds a capacity of 96,850 acre-feet, or 31 billion gallons of water. Through an expansion, up to an additional 289,000 acre- feet, or 94 billion gallons of storage could be realized. The expansion of Calaveras Reservoir would provide storage for additional water that can be available in all water year types. The proposed project would include raising the dam, increasing the capacity of the outlet structures and the spillway, and the addition of any transmission and pumping needed to bring water to Calaveras Reservoir.

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Groundwater Banking: Groundwater banking in the Modesto Irrigation District and Turlock Irrigation District (the Districts) service areas could be used to provide some additional water supply to meet instream releases in dry years reducing water supply impacts to the SFPUC s ervice area. For example, additional surface water could be provided to irrigators in wet years, which would off-set the use of groundwater, thereby allowing the groundwater to remain in the basin rather than be consumptively used. The groundwater that remains in the basin can then be used in a subsequent dry year for irrigation, subsequently freeing up surface water that would have otherwise been delivered to irrigators to meet instream flow requirements.

Inter-Basin Collaborations: I
nter-Basin Collaborations could provide net water supply benefits in dry years by sharing responsibility for in-stream flows in the San Joaquin River and Delta more broadly among several tributary reservoir systems. One mechanism by which this could be accomplished would be to establish a partnership between interests on the Tuolumne River and those on the Stanislaus River, which would allow responsibility for streamflow to be assigned variably based on the annual hydrology. The Tuolumne system tends to spill more excess flow in wetter years than the Stanislaus, and this excess flow could be shaped and credited to meet Stanislaus system requirements, while New Melones Reservoir in the Stanislaus system is refilling. Then the stored water could be partially used to provide required streamflow to meet Stanislaus and Tuolumne requirements in future dry years.

Dry Year Water Transfer: In 2012, a dry year transfer was proposed between the Modesto Irrigation District and the SFPUC. Negotiations were terminated because an agreement cou ld not be reached. Subsequently, SFPUC began discussions with the Oakdale Irrigation District for a one -year transfer agreement with the SFPUC for 2 mgd (2,240 acre-feet). Transfer opportunities continue to be pursued.

In addition to the regional AWS projects described above, the SFPUC is also pursuing local projects in San F
rancisco aimed at increasing water supply and reliability. These are described below.

San Francisco Purified Water : The San Francisco Purified Water Project is a concept that envisions providing a new, local drinking water supply in San Francisco. In 2020, the SFPUC successfully completed PureWaterSF, a small-scale research and demonstration purified water (potable reuse) project at its headquarters. With the absence of large remaining n on-potable applications and the lack of infrastructure in San Francisco to support other types of potable reuse, San Francisco is evaluating conceptual alternatives to augment its water supply with purified water.

San Francisco Satellite Recycled Water : T her
e are a limited number of dual -plumbed buildings in San Francisco that do not have access to a non- potable water supply source. This project is evaluating the potential to provide recycled water for non-potable irrigation and commercial and industrial uses.

Innovations Program : This program supports development of new technologies and initiatives to demonstrate the feasibility of atmospheric water generation technology, heat recovery in non -potable systems, expanded leak detection, and breweries treati ng process water for reuse. Included in the Innovations Program are demonstration of new technologies and grant funds to support partnership opportunities. Examples of projects within the Innovations Program include a grant program to treat process water in breweries and grants to support onsite reuse projects with heat recovery systems. San Francisco’s Onsite Water Reuse Program allows for the collection, treatment, and use of alternate water sources for non -potable applications in individual buildings and at the district- scale. The onsite water reuse systems under the NPO apply to new, large development projects in San Francisco. The SFPUC is also pursuing a prospective project to expand leak detection and a project to test atmospheric water generation technology.

In addition to the AWS Projects, the SFPUC is also continuing its efforts to advance conservation, onsite w
ater reuse, and other projects that reuse or recapture graywater and stormwater in the City through ongoing local efforts. These local programs are described below.

Local Groundwater and Recycled Water Projects . The water supply projects being funded as a part of the WSIP include groundwater and recycled water projects that will result in new water supply for the Retail Customers.

In April 2017, the SFPUC began pumping groundwater from the Westside Groundwater Basin aquifer that extends from approximately 270 feet to 460 feet below the surface. The groundwater is treated and blended with the SFPUC’s regional drinking water supplies before it is delivered to the SFPUC’s customers. Over the next few years the SFPUC

56 4163-6481-6438.1

anticipates continuing to add groundwater in order to reach its goal of blending 4 mgd of treated groundwater with regional water supplies. The construction of all six well stations ha s been completed. The last two well stations to be completed are now undergoing final testing. The three wells in Golden Gate Park will continue to be used for irrigation until recycled water from the Westside Recycled Water Project is available. The groundwater is treated with chlorine and then delivered to the Sunset and Sutro reservoirs where it is blended with the regional water supplies. The blended water is served to more than half of the Retail Customers. The Westside Recycled Water Project will prov ide approximately 1.6 mgd of recycled water for major irrigation users on the west side of the City, including Golden Gate Park, Lincoln Park Golf Course and the Presidio of San Francisco. Recycled water deliveries are expected to commence in 2022.

Local Water Conservation. The SFPUC maintains a robust water conservation program and has one of the lowest rates of per capita water use in the State. New conservation programs include high efficiency toilet replacement in low income communities and water efficient irrigation installation in municipal parks.

Onsite Water Reuse . In 2012, San Francisco established the Onsite Water Reuse for Commercial, Multi - Family and Mixed -Use Development Ordinance (the “Non -Potable Water Ordinance”). The Non -Potable Water Ordinance added Article 12C to the City’s Health Code (“Article 12C”), which allows the collection, treatment, and use of alternate water sources for non -potable applications. In October 2013, Article 12C was amended to allow district-scale water systems consisting of two or more buildings sharing non-potable water. In July 2015, Article 12C was further amended to require that, beginning November 1, 2015, all new development projects of 250,000 square feet or more of gross floor area located within the boundaries of the City’s designated recycled water use areas install onsite water systems to treat and reuse available alternate water sources for toilet flushing and irrigation. This requirement expanded to the entire City on November 1, 2016. In October 2021, Arti cle 12C was amended to further increase potable water savings from new developments and change the required alternate water sources and non - potable end uses based on development project type. The recent ordinance amendments lowered the gross square footage (gsf) threshold for compliance, requiring new development projects of 100,000 gsf or more that apply for a site permit after January 1, 2022 to install and operate an onsite water system. The SFPUC implements the Onsite Water Reuse Program in collaboration with the San Francisco Department of Public Health – Environmental Health, San Francisco Department of Building Inspection – Plumbing Inspection Division, and San Francisco Public Works.

Wholesale Deliveries
Wholesale Service Area and Customer Base. The Water Enterprise provides wholesale water service to 27 Wholesale Customers, which consist of 25 public agencies, one private utility and one private, not -for-profit educational institution. All of the Wholesale Customers are located within Alameda County, Santa Clara County or San Mateo County.
• Alameda County is located to the east of San Francisco Bay and extends from the cities of Berkeley and Albany in the north to the City of Fremont in the south. Alameda County contains 14 incorporated cities.

The California Department of Finance Demographic Research Unit estimated Alameda County’s population at 1,670,834 as of January 1, 202 0. Most of its population is concentrated in a highly urbanized area between the San Francisco Bay and the East Bay Hills. • Santa Clara County lies immediately south of San Mateo County and encompasses an area of approximately 1,316 square miles. Santa Clara County contains 15 incorporated cities, including San Jose, the third largest city in the State. The California Department of Finance Demographic Research Unit estimated Santa Clara County’s population at 1,961,969 as of January 1, 202 0. Most of its population is concentrated in the extensively urbanized and heavily industrialized northern portion of Santa Clara County.
• San Mateo County is located on the San Francisco Peninsula, west of the San Francisco Bay. San Mateo County covers 446 square miles and contains 20 incorporated cities. Coastal mountains run north and south, dividing the lightly populated western part of the county from the heavily populated eastern corridor between San Francisco and Santa Clara/Silicon Valley. The California Department of Finance Demographic Research Unit estimated San Mateo County’s population at 773,244 as of January 1, 2020.

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• Alameda County, Santa Clara County and San Mateo County all have diversified economies and median household incomes higher than State and national averages.

Collectively, the Wholesale Customers provide retail water service to over 1.8 million people in their respective service areas, with the balance of the respective population being serviced by other providers. All Wholesale Customers are billed monthly on the basis of metered water use and in accordance with the WSA.

The following is a list of the 27 Wholesale Customers:

Wholesale Customers
Municipalities Water Purveying Districts Private Entities City of Brisbane
City of Burlingame
City of Daly City
City of East Palo Alto
City of Hayward
City of Menlo Park
City of Millbrae
City of Milpitas
City of Mountain View
City of Palo Alto
City of Redwood City
City of San Bruno
City of San Jose(2)
City of Santa Clara(2)
City of Sunnyvale
Town of Hillsborough

Alameda County Water District
Coastside County Water District
Cordilleras Mutual Water
Company
(3)
Estero Municipal Improvement
District
Guadalupe Valley Municipal
Improvement District
Mid-Peninsula Water District
North Coast County Water District
Purissima Hills Water District
Westborough County Water
District

California Water Service
Company(1)
Stanford University
____________________
(1) California Water Service Company, an investor -owned utility, provides water service to three separate districts: Bear Gulch (Atherton/Woodside vicinity and including the former Skyline County Water District), Mid-Peninsula (San Carlos/San Mateo vicinity), and South San Francisco. California Water Service Company purchases approximately 15% of the water delivered annually by the SFPUC. Such purchases account for approximately 10% of the SFPUC’s yearly revenues. (2) The SFPUC provides water on an interruptible basis to fixed service areas in the northern portions of the cities of San Jose and Santa Clara. See “– Status of San Jose and Santa Clara” below. (3) Cordilleras Mutual Water Company is the only Wholesale Customer that is not a member of BAWSCA.

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The following table shows the percentage of water purchased from the Regional Water System by Wholesale Customers (not including Cordilleras Mutual Water Company) in Fiscal Year 2020 -21. Of the 27 Wholesale Customers listed, 16 derived over 90% of their water from the SFPUC.

TABLE 8

PERCENTAGE OF WATER PURCHASED FROM THE REGIONAL WATER SYSTEM BY WHOLESALE CUSTOMERS IN FISCAL YEAR 2020-21

Water Purchased
(mgd)
Population SFPUC Total % SFPUC

Alameda County Water District 358,246

9.40 39.90 23.6%
California Water Service Company 261,620

29.50 30.87 95.6%
City of Hayward 160,311

14.55 14.55 100.0%
City of Sunnyvale 153,827

9.60 18.15 52.9%
City of Santa Clara 130,746

3.23 19.37 16.7%
City of Daly City 106,638

5.66 5.90 95.9%
City of Redwood City 89,037

8.48 9.22 92.0%
City of Mountain View 82,814

7.90 9.34 84.6%
City of Milpitas 77,961

5.43 9.41 57.7%
City of Palo Alto 66,573

10.15 11.17 90.9%
City of San Bruno 44,409

2.72 3.09 88.0%
North Coast County Water District 38,331

2.40 2.45 98.0%
San Jose Municipal Water District 37,991

4.18 5.19 80.5%
Estero Municipal Improvement District 37,687 4.31 4.31 100.0% City of Burlingame 32,407

3.29 3.39 97.1%
Mid-Peninsula Water District 27,560

2.61 2.61 100.0%
City of East Palo Alto 25,935

1.52 1.53 99.3%
City of Millbrae 22,848

1.86 1.86 100.0%
City of Menlo Park 19,297

2.83 2.83 100.0%
Coastside County Water District 18,789

1.45 1.82 79.7%
Stanford University 13,629

1.35 2.46 54.9%
Westborough Water District 13,466 0.77 0.77 100.0%
Town of Hillsborough 11,397 2.69 2.69 100.0%
Purissima Hills Water District 6,150

1.90 1.90 100.0%
City of Brisbane / Guadalupe Valley Municipal
Improvement District
4,598

0.62 0.62 100.0%
Total All Agencies 1,842,267 138.4 205.4 67.4%

(1) Purchases from the Regional Water System. Includes supplemental deliveries.

Source: Bay Area Water Supply and Conservation Agency FY 2020-21 Annual Survey Data.

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The table below summarizes the sources of supply for Wholesale Customers collectively during fiscal year 2020-21.

TABLE 9

WATER DELIVERIES TO WHOLESALE CUSTOMERS BY SOURCE
Source Acre-Feet Percent of Total
San Francisco PUC (1) 156,659 68.0%
Other Sources (Includes State/Federal) 44,612 19.4%
Groundwater 19,381 8.4%
Surface Water 919 0.4%
Recycled Water 8,642 3.8%
Total 230,213 100.0%
________________________
(1) Purchases from the Regional Water System. Includes supplemental deliveries.

Source: Bay Area Water Supply and Conservation Agency FY 2020-21 Annual Survey Data.

The Bay Area Water Supply and Conservation Agency. BAWSCA is the successor agency to the Bay Area Water Users Association (“BAWUA”). BAWUA was originally formed as a non-profit mutual benefit corporation to represent the Wh olesale Customers’ collective interests in their interactions with the SFPUC. Concerned that their needs and interests were not properly represented by the SFPUC, BAWUA lobbied for the creation of an entity with authority to plan for and acquire supplemental water supplies, encourage water conservation and use of recycled water on a regional basis, and assist in the financing of essential repairs and improvements to the Regional Water System.

State legislation AB 2058, passed in 2002, allowed the formal creation of BAWSCA.

BAWSCA is governed by a 26- member Board of Directors which is composed of community leaders representing its 26 members. BAWSCA has the authority to coordinate water conservation, supply and recycling activities for its agencies; acquire water and make it available to other agencies on a wholesale basis; finance projects, including improvements to the Regional Water System; and build facilities jointly with other local public agencies or on its own to carry out its purposes. BAWSCA has not, to date, acquired water or built facilities.

Regional Water System Financing Authority. The Wholesale Customers, together with the SFPUC, formed the San Francisco Bay Area Regional Water System Financing Authority (“RFA”) in 2002. While BAWSCA focuses on planning and water management and may engage in public works projects, the RFA exists solely to help fund capital improvements to the Regional Water System. The RFA has the power to issue revenue bonds to fund projects to improve the reliability of the Regional Water System; provide proceeds of revenue bonds to the City under specified conditions to improve reliability of the system; and apply for and receive State and federal grants, loans and other financial assistance.

Debt service on any bon ds issued by RFA in the future would be secured by, and paid from, a surcharge imposed by the SFPUC upon Wholesale Customers and, under specific conditions, upon Retail Customers. This surcharge would be imposed in an amount sufficient to pay debt service on the RFA’s bonds and its operating expenses. Proceeds of the surcharge would not constitute Revenues under the Indenture, and debt service on these bonds, if issued, would not be a debt or liability of the SFPUC or the City.

The RFA has not, to date, issued any revenue bonds, and the SFPUC is not now aware of any current plans by the RFA to do so. The ability of the RFA to issue bonds expires in December 20 30.

Prior Master Water Sales Contract . Between 1984 and 2009, Wholesale Customer rates were set purs uant to a Settlement Agreement and Master Water Sales Contract (the “Prior Master Water Sales Contract ”). The Prior Master Water Sales Contract put in place a comprehensive method for allocating the costs of the water system between the SFPUC’s Retail Cust omers and the Wholesale Customers. Capital costs and most operations and maintenance

60 4163-6481-6438.1

expenses of the Regional Water System were distributed between the SFPUC and its Retail Customers and the Wholesale Customers on proportional water usage: approximately one- third to the City and two- thirds to the Wholesale Customers.

The Prior Master Water Sales Contract resolved litigation over certain rate- setting practices. Both sides dismissed, with prejudice, the claims related to water sales overcharges and undercharges with the signing of the Prior Master Water Sales Contract. However, the litigation left open certain questions, such as whether the Wholesale Customers are “Co-Grantees” under the Raker Act and, if so, what rights, benefits and privileges accrue to them by reason of such status, including the right to receive water at cost, and the extent to which the City may be legally obligated to provide water to meet growth demands in Wholesale Customer service areas.

Water Supply Agreement. In 2009, the SFPUC and the Wholesale Customers entered into the Water Supply Agreement, with an effective date of July 1, 2009, which replaced the Prior Master Water Sales Contract. The WSA has a 25 -year term (through June 30, 2034), with provisions for two conditional five -year extensions. It was most recently amended and restated in 2018 with the approval of the SFPUC and the Wholesale Customers.

The WSA separates Water Enterprise assets and expenses into three categories: “wholesale only,” “regional,” and “retail only.” Annual operations and maintenance expenses are recovered based on proportional annual use of the Regional Water System in most cases. Costs and revenues of the Hetch Hetchy Project are also separated – the Wholesale Customers do not pay for power -related costs, which are borne by the Power Enterprise, and do not share in power revenues.

The WSA includes the SFPUC’s “Supply Assurance” of 184 mgd (measured on an annual average basis) to 23 of the Wholesale Customers (the “Supply Assurance”). The SFPUC has agreed to deliver water to such Wholesale Customers up to the amount of the Supply Assurance, and this agreement is perpetual and survives the expiration of the WSA. The Supply Assurance is, however, subject to reduction due to water shortage, drought, scheduled WSA maintenance activities, and emergencies.

The Supply Assurance is shared among 24 of the 27 Wholesale Customers, 23 of whom have an “Individual Supply Guarantee” (each an “Individual Supply Guarantee”), which represents their dedicated individual share of the 184 mgd Supply Assurance. The two Wholesale Customers that do not share in the Supply Assurance, the C ities of San Jose and Santa Clara are served wholesale water on an interruptible basis and are n ot part of the Supply Assurance. The City of Hayward (“Hayward”) does not have an Individual Supply Guarantee but rather an individual contract that did not limit its water use. Hayward continues to receive water under a contract entered into in 1962 with no expiration or supply limitation. If the demand of the 23 Wholesale Customers with Individual Supply Guarantee s exceeds the 184 mgd Supply Assurance, the 23 Wholesale Customers with Individual Supply Guarantee s would be required to reduce their allocatio n to meet the needs of Hayward. For Fiscal Year 20 20-21, total water purchases by the Wholesale Customers with Individual Supply Guarantee s (including Hayward’s us e but excluding San Jose and Santa Clara) were approximately 69.3% of the combined Supply Assurance.

(Remainder of Page Intentionally Left Blank)

61 4163-6481-6438.1

The following table shows the Individual Supply Guarantee s and actual Fiscal Year 20 20-21 purchases for the Wholesale Customers.

TABLE 10

WHOLESALE CONTRACTUAL OBLIGATIONS
(IN MGD)

Individual
Supply
Guarantee(1)
Actual 2020-21
Purchases
Alameda County Water District 13.76 9.51
City of Brisbane / Guadalupe Valley Municipal Improvement District(2) 0.46 0.62
City of Burlingame 5.23 3.31
California Water Service Company(3) 35.50 29.56
Coastside County Water District 2.18 1.46
City of Daly City 4.29 3.61
City of East Palo Alto 3.46 1.52
Estero Municipal Improvement District 5.90 4.31
City of Hayward 22.80 14.55
Town of Hillsborough 4.09 2.72
City of Menlo Park 4.46 2.95
Mid-Peninsula Water District 3.89 2.61
City of Millbrae 3.15 1.86
City of Milpitas 9.23 5.37
City of Mountain View 12.46 7.91
North Coast County Water District 3.84 2.60
City of Palo Alto 16.57 9.81
Purissima Hills Water District 1.62 1.91
City of Redwood City 10.93 8.57
City of San Bruno 3.25 0.96
City of San Jose(4) 0.00 4.21
City of Santa Clara(4) 0.00 3.19
Stanford University 3.03 1.35
City of Sunnyvale 12.58 9.72
Westborough County Water District 1.32 0.78
Subtotal BAWSCA Demand 184.00 134.95
Cordilleras Mutual Water Company(5) -- 0.01
Total Wholesale Demand(6) -- 134.96
____________________
(1) “Individual Supply Guarantee” refers to each Wholesale Customer’s share of the Supply Assurance as defined in the Prior Master Water Sales Contract. The Supply Assurance is the 184 mgd maximum annual average metered supply of water dedicated by SFPUC to public use in the wholesale service area (excluding the cities of San Jose and Santa Clara). Hayward’s allocation is calculated as 184 mgd less the total of permanent customer Individual Supply Guarantees (161.9 mgd). (2) Brisbane and Guadalupe Valley Municipal Improvement District are two Wholesale Customers that are jointly operated. (3) Includes individual Supply Guarantee of Skyline County Water District, which was purchased by California Water Service Company-Bear Gulch in 2009.
(4) San Jose and Santa Clara do not have an allocated share of Supply Assurance due to their temporary, interruptible status under the WSA.
(5) Cordilleras Mutual Water Company does not have an Individual Supply Guarantee. (6) Totals may not add due to rounding.

Sources: Water Supply Agreement; SFPUC.

62 4163-6481-6438.1

The basic framework of the Prior Master Water Sales Contract regarding coordination of wholesale rates with the annual SFPUC budget process, annual compliance audits, resolution of disputes concerning the SFPUC’s determination of the annual Wholesale Revenue Requirement (as defined herein) via binding arbitration and the annual true up of costs using a balancing account continue, but the WSA effected significant changes in the arrangement between the SFPUC and the Wholesale Customers. The WSA included the following significant changes:

Allocation of Capital Costs . Instead of continuing with the utility method, the WSA more timely recovers capital costs as follows:
• The costs of existing assets placed in service prior to June 30, 2009, approximately $367 million in 2009 dollars, were to be repaid based on audited actual costs in monthly installments by Wholesale Customers at an annual interest rate of 5.13% over a 25 -year period, in lieu of depreciation and a weighted return on these assets. In February 2013, the Wholesale Customers, through BAWSCA, made an early repayment of the entire cost recovery payment balance. • The costs of new regional assets placed in service after June 30, 2009 are to be paid for using the cash method. Annual wholesale rates are set to recover the Wholesale Customers’ share of regional asset costs from current revenues for cash-funded assets. Wholesale contributions for debt-financed assets include appropriate contributions towards debt service and coverage based on the Wholes ale Customers’ proportionate annual use of the Regional Water System. • For the portion of capital projects costs that were appropriated but not expended as of June 30, 2009, a 10-year repayment schedule including 4.00% interest has been calculated, based on audited actual costs. Repayment began in Fiscal Year 2014-15 and is scheduled to end in Fiscal Year 2023-24.

For more information regarding the wholesale rate setting mechanism, see “FINANCIAL OPERATIONS – Wholesale Water Sales Revenue,” and “APPENDIX B – SUMMARY OF CERTAIN PROVISIONS OF THE WATER SUPPLY AGREEMENT – Wholesale Revenue Requirement,” “– Capital Cost Contribution – New Regional Assets” and “– Hetch Hetchy Enterprise Expenses.”
Treatment of Water Supply Issues. The 184 mgd Supply Assurance continues in existence in the WSA. The WSA includes an “Interim Supply Limitation” which limits the amount of water delivered to the Retail Customers and Wholesale Customers from the SFPUC watersheds to 265 mgd through 202 8. Under the Interim Supply Limitation, Retail Customers will receive up to 81 mgd and the Wholesale Customers will receive up to 184 mgd from the Regional Water System.

Status of San Jose and Santa Clara. The cities of San Jose and Santa Clara retain their temporary, interruptible status. The SFPUC agrees to supply a combined annual average of 9 mgd to the two cities through 2028.

The 9 mgd allocated to San Jose and Santa Clara is not a part of the Supply Assurance but is included within the wholesale portion of the Interim Supply Limitation of 184 mgd.

To establish a water supply planning framework for the planning period of 2019 through 2040, the SFPUC developed the WaterMAP. The WaterMAP provides necessary information to address key water supply decisions, including the options the SFPUC should consider in making San Jose and Santa Clara permanent customers of the Regional Water System. See “– 2028 Water Supply Decisions” below.

Creation of Transfer Market. The WSA contemplates the creation of a water transfer market that enhances the Wholesale Customers’ ability to keep purchases within the amounts of their respective Interim Supply Allocations (as defined in the WSA ). These transfers would remain in effect until rescinded by the transferring parties, and otherwise continue in force until December 31, 2028. In addition, Wholesale Customers may agree to the permanent transfer of portions of their Individual Supply Guarantees. All such transfers are subject to SFPUC approval regarding operational and Raker Act concerns. In 2017, Mountain View agreed to a permanent one mgd transfer of its Individual Supply Guarantee to East Palo Alto. Subsequently the City of Palo Alto agreed to a permanent 0.5 mgd transfer of Individual Supply Guarantee to East Palo Alto. See “– 2028 Water Supply Decisions.”

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Enforcement of Interim Supply Limitation. Commencing in Fiscal Year 2011-12, the SFPUC established a volume-based “Environmental Enhancement Surcharge” to enforce the Interim Supply Limitation. The Environmental Enhancement Surcharge would apply only if combined retail and wholesale water deliveries from the Regional Water System watersheds exceed 265 mgd. Environmental Enhancement Surcharge proceeds will be placed in a restricted reserve fund to be used only for specific environmental restoration and enhancement measures in the SFPUC’s Sierra and local watersheds, such as those identified in the Watershed Environmental Improvement Program. Specific restoration and enhancement projects would be selected by the SFPUC and BAWSCA, following input from environmental stakeholders and other interested members of the public. No surcharges have been imposed, and as discussed above, it appears unlikely that any surcharges will be imposed through 2028, when the Interim Supply Limitation is scheduled to expire.

Other Significant Provisions. The WSA also contains the following provisions:
• The SFPUC agrees to operate system reservoirs in a manner that assigns higher priority to the delivery of water to the Bay Area and the environment than to generation of hydroele ctric power. • The “Shortage Allocation Plan,” which establishes an allocation of water between the Retail Customers and Wholesale Customers to be applied during droughts, and governs drought shortages of up to 20%.
• Drought pricing and emergency rate increases are allowed. 2028 Water Supply Decisions. Subject to completion of necessary CEQA review and the exercise of retained discretion by the SFPUC to reject or modify proposed projects, the WSA requires the SFPUC to make several decisions by December 31, 2028 as follows:
• Whether to make San Jose and Santa Clara permanent customers to the extent that the SFPUC determines that long-term Regional Water System supplies are available. • Whether to provide water in excess of the Supply Assurance to meet the Wholesale Customers’ projected future water demands until the year 2040, and whether to offer a corresponding increase in the Supply Assurance.

Converting San Jose and Santa Clara to permanent, non-interruptible customers would require the SFPUC to secure nine to 1 4.5 mgd of additional water supply, reflecting historic and projected demand estimates. As noted above, San Jose and Santa Clara are currently temporary customers with an interruptible status. Through updated demand forecasts prepared in tandem with the development of the WaterMAP and other planning efforts, the SFPUC anticipates that there is sufficient supply availability to continue to serve the needs of San Jose and Santa Clara past 2030. Therefore, the 2028 Water Supply Decisions, which were originally assumed to be necessary by 2018, are no longer imminently required. The SFPUC is continuing to evaluate several water supply alternatives that can meet the long-term needs of San Jose and Santa Clara. In the meantime, the SFPUC will continue to meet the t wo cities’ demands. While it is not anticipated, if water use by the Wholesale Customers is projected to exceed 184 mgd before new supplies are identified, the SFPUC may issue a conditional five-year notice of termination or reduction in supply to San Jose and Santa Clara. As noted above, San Jose and Santa Clara anticipate an additional demand of 5.5 mgd by 2040, over their prior purchases of 9 mgd from the Regional Water System. Inclusive of these anticipated demands, on a cumulative basis, the Wholesale Customer purchase requests through 2040 are expected to be 177.2 mgd by 2040, lower than the 184 mgd Supply Assurance.

The SFPUC is currently evaluating several purified water project alternatives as well as regional water supply options such as desalination to provide up to 15 mgd of water supply for San Jose and Santa Clara. It remains unclear if, and how much, water supply could be available through these alternatives. The SFPUC plans to develop a water supply program by 2023 that will enable it to continue to meet its commitments and responsibilities to the Wholesale Customers and Retail Customers, consistent with the WSA and SFPUC’s priorities .

64 4163-6481-6438.1

For a more detailed summary of the WSA, see “APPENDIX B – SUMMARY OF CERTAIN PROVISIONS OF THE WATER SUPPLY AGREEMENT.”
Individual Water Supply Contracts. While the WSA establishes the rate -setting mechanism and the overall supply assurance level for Wholesale Customers, each Wholesale Customer has an individual water supply contract with the City that defines the terms and conditions (including, among others, the point of delivery and service area) by which water is supplied to each such Wholesale Customer.

Minimum Annual Purchases. Pursuant to the WSA, Alameda County Water District and the cities of Milpitas, Mountain View and Sunnyvale may purchase water from sources other than the SFPUC, provided that each agency purchases a specified minimum annual quantity of water from the SFPUC. Due to continued dry years from Fiscal Year 2012 -2015, and the call for voluntary rationing from the wholesale and retail customers, the SFPUC waived the minimum purchase requirements from these agencies from Fiscal Year 2013-14 through Fiscal Year 2016- 17 and is currently suspended for Fiscal Year 2021 -22. See “APPENDIX B – S UMMARY OF CERTAIN PROVISIONS OF THE WATER SUPPLY AGREEMENT – Restrictions on Purchases of Water from Others; Minimum Annual Purchases.”
Retail Deliveries
Retail Service Area and Customer Base . The SFPUC’s retail water customers include the residents, businesses and industries located within the corporate boundaries of the City. In addition to these customers, retail water service is also provided to other customers located outside of the City, such as the Town of Sunol, San Francisco International Airport, Lawrence Livermore National Laboratory, Castlewood Country Club and Groveland Community Services District. All of the SFPUC’s Retail Customers have been metered since 1916.

Residential Water Use. Due to the moderate climate and the high -density housing in the City, much of the water use within the City is indoors. For the City’s many multi- family units, the average outdoor water use is considerably lower than the statewide residential outdoor average water use. Residential per capita water usage has been less than 50 gallons per person per day since 2011, and is currently averaging about 42 gallons per person per day. By comparison, the State statewide average water use in calendar year 2021 was 91 gallons per person per day.

Non-Residential Water Use. Non-residential water use includes all sectors of water users not designated as residential, such as manufacturing, transportation, trade, finance, and government employment sectors, and the large services sector.

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Historic Water Sales and Top Customers
Water Sales. The following table shows water sales to Retail Customers and Wholesale Customers for the seven Fiscal Years 2014-15 through 2020-21.

TABLE 11

HISTORIC WHOLESALE AND RETAIL WATER SALES
FISCAL YEARS 2014-15 THROUGH 2020-21
(IN MGD)
2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2020-21 %
of Total
Retail Customers
Multi-Family Residential 22.4 21.5 22.0 22.7 22.5 23.3 22.7 12.1% Single-Family Residential 14.5 13.6 13.9 14.3 13.9 14.4 14.6 7.7% Commercial(1) 18.2 17.3 17.0 17.5 16.7 15.1 10.6 5.6%
Industrial 0.2 0.2 0.2 0.2 0.2 0.2 0.1 0.00%
Municipal(2) 2.8 2.6 3.1 3.2 3.3 3.4 2.8 1.5%
Suburban Retail(2),(3) 3.8 3.2 2.9 3.1 2.9 3.0 2.8 1.5% Retail water sales(4) 61.9 58.4(5) 59.1 61.0 59.5 59.3(6) 53.6(6) 28.4%

Wholesale Customers
California Water Service(7) 29.1 23.4 24.3 27.5 26.3 29.0 29.6 15.7% Hayward Municipal Water 13.6 12.2 12.9 14.6 14.0 14.2 14.5 7.7% City of Palo Alto 9.6 8.2 9.0 10.0 9.4 9.7 9.8 5.2%
City of Sunnyvale 7.8 7.8 8.1 9.5 8.8 9.4 9.7 5.2%
City of Redwood City 8.0 7.1 7.7 8.4 8.1 7.7 9.5 5.0%
Alameda County Water District 8.0 6.0 6.2 7.9 7.7 8.8 8.6 4.5% City of Mountain View 7.6 6.7 6.9 7.5 7.3 7.6 7.9 4.2%
City of Milpitas 5.2 4.5 4.8 5.2 5.1 6.1 5.4 2.8%
City of San Jose 4.5 4.1 4.1 4.5 4.3 4.3 4.3 2.3%
Estero Municipal Improvement
District 4.0 3.6 3.8 4.2 4.0 4.2 4.2 2.2%
All Other Wholesale Customers(7) 30.7 27.2 27.6 29.6 30.0 31.0 31.5 16.7% Wholesale water sales(4) 128.0 110.8(5) 115.5 129.3 125.0 131.6 135.0 71.6%

Total water sales(4) 189.9 169.2 174.6 190.3 184.6 190.9 188.6 100%

% Change from prior year -12.8%(5) -10.9%(5) 3.2% 9.0% -3.1% 3.9% -1.6% ____________________
(1) Includes Docks and Ships under Commercial.
(2) The Municipal category includes the San Bruno Jail, a City department located outside the City. Beginning in Fiscal Year 2016-17, recycled water sales to Harding Park are included under Municipal. Master metered Treasure Island water sales were included under Suburban Retail in Fiscal Years 2014-15 and 2015-16. Beginning in Fiscal Year 2016-17, they have been classified under Municipal. Current Treasure Island usage represents purchases by the Treasure Island Development Authority and various commercial, residential, and governmental lessees. As new Development is completed on Treasure Island, customers will open individual accounts under the appropriate commercial or residential line items, and the master-metered amount will be reduced accordingly.
(3) SFO is included as a Suburban Retail Customer because SFO re-sells the water to its tenants. (4) Totals may not add due to rounding.
(5) Decline in water sales due to declaration of emergency by California Governor in January 2014. (6) Decline in water sales mostly due to C ity COVID-19 stay -at-home orders. See “THE PUBLIC UTILITIES COMMISSION – COVID-19 Pandemic.”
(7) From Fiscal Year 2016 onward, California Water Service Company, Daly City, and San Bruno are participating in the conjunctive use groundwater program. These customers receive a bill credit for regional water system usage in -lieu of groundwater pumping. Totals reported in this table exclude water credited under the conjunctive use program.

Source: SFPUC.

Wholesale and retail sales figures do not include “ nonrevenue water.” Nonrevenue water includes system leaks and unbilled water (i.e., water used for firefighting, flushing system pipes, or a small volume of unbilled metered municipal use). Nonrevenue water has averaged approximately 10% of retail water sales per year over the last five Fiscal Years.

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Following a drought declaration by the Governor in January 2014, water sales dropped more than 12% from Fiscal Year 2013 -14 through Fiscal Year 2014- 15, and by approximately 10% from Fiscal Year 2014- 15 through Fiscal Year 2015 -16. Fiscal Year 2016 -17 sales increased by 3% following a wet winter and the easing of drought restrictions. Overall, water sales increased in Fiscal Year 2017 -18 by 9% over Fiscal Year 2016 -17, but dropped by 3% in Fiscal Year 2018-19. See “THE WATER ENTERPRISE – Recent Drought; Current Water Conditions.” California is currently its third year of drought year and the Governor issued four proclamations during 2021 (on April 12, May 10, July 8, and October 19) , and Executive Order N -10-21 on July 8, 2021, declaring a drought emergency in all 58 counties of the stat e and asking all Californians to voluntarily reduce water usage by 15%. On August 19, 2021, the SWRCB adopted an emergency regulation authorizing the curtailment of diversions when water is unavailable at a water right holder’s or claimant’s priority of right for up to one year. On August 20, 2021, the SWRCB issued a curtailment order to the SFPUC for its diversions in the Tuolumne River watershed.

Retail water sales have declined during the past three drought years as customers have conserved water. The COVID-19 pandemic also decreased retail water sales. See “THE PUBLIC UTILITIES COMMISSIONS – COVID- 19 Pandemic.”.

Top Five Retail and Top Ten Wholesale Customers . The following table sets forth the top five Retail Customers and top ten Wholesale Customers based on water sales revenues for Fiscal Year 2020-21.

TABLE 12

TOP FIVE RETAIL CUSTOMERS

AND TOP TEN WHOLESALE CUSTOMERS
FISCAL YEAR 2020-21

Water Sales
Revenue
(In Thousands)
Percent of all
Water
Revenues
Percent of
Wholesale
Customer
Revenues(1)
Percent of
Retail
Customer
Revenues(1)
Retail Customers
San Francisco International Airport(2) $ 3,685 0.7% N/A 1.4% NASA Shared Services Center, LLC 2,924 0.5% N/A 1.1%
Lawrence Livermore National
Laboratory
2,636 0.5% N/A 1.0%
Recreation and Parks Department 2,481 0.5% N/A 0.9%
University of California San Francisco 2,304 0.4% N/A 0.9% Total: $14,030 2.6% N/A 5.2%

Wholesale Customers
California Water Service Company $ 67,781 12.3% 21.6% N/A Hayward Muni Water System 32,130 5.8% 10.7% N/A
City of Palo Alto 21,705 3.9% 7.2% N/A
City of Sunnyvale 21,460 3.9% 7.1% N/A
Alameda County Water District 21,089 3.8% 7.0% N/A
City of Redwood City 18,948 3.4% 6.6% N/A
City of Mountain View 17,415 3.2% 6.3% N/A
City of Daly City 12,288 2.2% 3.9% N/A
City of Milpitas 11,897 2.2% 3.1% N/A
Estero Municipal Improvement District 9,470 1.7% 3.1% N/A Total: $234,183 42.6% 76.7% N/A
____________________
(1) Percentages based on total Wholesale Revenues of $279.0 million and total Retail Revenues of $270.5 million. (2) Represents water sales to customers through the City enterprise fund for San Francisco International Airport, which is paid through the City’s inter-departmental billing system.

Source: SFPUC Customer Care and Billing System.

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Recent Drought; Current Water Conditions
The drought of 2012 -2015 represented the driest four-year sequence in the region’s hydrologic record. The SFPUC and its customers responded well to calls for conservation during the drought.

On January 17, 2014, California Governor Jerry Brown issued a State of Declaration of Emergency for California due to drought and severe water supply conditions in various parts of the State. On January 31, 2014, the SFPUC issued a press release asking all customers of its Hetch Hetchy Regional Water System, including its residential, commercial, industrial and municipal Retail Customers, as well as the Wholesale Customers, to voluntarily reduce water consumption by at least 10%. In June 2015, the SWRCB imposed restrictions to achieve a statewide reduction of 25% from 2013 water demand. All water utilities within the SFPUC service area were assigned a water use reduction requirement ranging from 8% to 36%. In June 2016, the SWRCB replaced the water use reduction requirement with a self -certification process that allows for water utilities to implement water use restrictions based on their ability to meet average annual 2013- 14 demand with a repeat of Water Year 2014 -15 hydrology. A Water Year is th e period of October 1 of the prior year through September 30 of the year in question. In June 2016, the SFPUC certified that it had the requisite supplies to serve all of its Retail and Wholesale Customers without any additional reductions. The SFPUC continued to ask for a voluntary 10% reduction from average annual 2013 water demand in its retail and wholesale service area in Water Year 2016 to ensure its reservoirs were able to rebound from the prolonged drought.

A combination of Water Bank (as defined herein) drawdowns in New Don Pedro Reservoir, managing storage and reduced customer demand contributed towards the SFPUC effectively managing Water Year 2016. Hetch Hetchy Reservoir was filled to up to 100% of capacity toward the end of the Water Year 2016 snowmelt runoff period (the end of the runoff occurred in mid -June 2016). H ydrologic conditions were favorable in Water Year 2017 with well above average precipitation. In Water Year 2017, precipitation totals were over 150% of average values. In Water Year 2018 and Water Year 2019, hydrologic conditions continued to favor water supply with precipitation totals at nearly average and slightly above average for those two years, respectively. Water Year 2020 and Water 2021 both resulted in dry precipitation conditions. In April 2021, the SFPUC asked its retail customers to reduce outdoor irrigation demand by 10 percent and asked its wholesale customers to request the same of their customers. Due to lower than expected inflows from snowmelt into State and Federal Water Project reservoirs, Governor Newsom called for voluntary statewide water use reductions of 15% from 2020 use. In August 2021, the State Water Resources Control Board adopted emergency regulations for curtailing water diversions in t he Bay -Delta tributaries. The SFPUC’s diversions on the Tuolumne River were curtailed in August 2021. Since curtailment of diversions limits the amount of water the SFPUC can store in its reservoirs by having to bypass all inflows and to respond to the curtailment regulations, the SFPUC declared a water shortage emergency in November 2021, requiring a 10% system wide reduction of water use from F iscal Year 2019-20 use. Water Year 2022 has been a mix of wet and dry conditions.

However, January saw only .06 inches of precipitation at Hetch Hetchy making it the driest January on record.

Snowpack is slightly below median conditions for this time of year. As of [________], precipitation at Hetch Hetchy was approximately ___% of average for that time of year. See “WATER FACILITIES – Water Storage.”

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GRAPH 1
PRECIPITATION AT HETCH HETCHY – WATER YEAR 2022

____________________
Source: SFPUC.

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GRAPH 2
PERCENTAGE OF MEDIAN APRIL 1 SNOWPACK CONDITIONS

____________________
Source: SFPUC.

Curtailment Actions by the State Water Resources Control Board The SWRCB sought to curtail the exercise of water rights in 2014 and 2015 in response to the 2011- 2017 drought. In 2014, the SWRCB enacted emergency regulations for the purpose of curtailing the exercise of junior, post- 1914 water rights. The City was not impacted by these 2014 regulations as the City relies on senior, pre -1914 water rights to divert water from the Tuolumne River. In 2015, the SWRCB again sought to curtail the exercise of water rights, but this time, the SWRCB issued curtailment notices to thousands of water rights holders across the State, including to senior, pre-1914 water rights holders, and subsequently prosecuted several enforcement proceedings. The City’s water rights were never curtailed. The City did, however, participate in one of the enforcement proceedings before the SWRCB – the Administrative Civil Liability complaint against Byron Bethany Irrigation District (“BBID”) – in order to challenge the SWRCB’s assertion that it has jurisdiction to curtail pre -1914 water rights. The SWRCB ultimately concluded the prosecution team had failed to carry its burden, and thus, dismissed the enforcement proceeding against BBID on the merits (the SWRCB also dismissed its enforcement proceeding against the West Side Irrigation District in the same order). However, in its order, the SWRCB concluded that it may exercise its enforcement authority to issue curtailment orders against pre-1914 water rights holders if water is unavailable under the diverter’s priority of right. On September 2, 2015, the San Joaquin Tributaries Authority (“SJTA ”), a joint powers authority comprised of five member agencies, including the City, filed suit seeking writ relief from the SWRCB’s order. The SJTA argued that the SWRCB’s order in the BBID enforcement proceeding is inconsistent with established appellate case law. Two other challenges to the SWRCB’s order were filed and these three challenges, along with other pending challenges to the SWRCB’s 2014 and 2015 curtailment actions, were assigned to a coordination judge in Santa Clara Superior Court. Judgment was entered in favor of SJTA and other plaintiffs on June 6, 2019, and the State Water Board appealed the Superior Court’s ruling on the jurisdictional issues on September 13, 2019.

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In August 2021, the SWRCB again adopted emergency regulations to curtail water rights throughout the Bay-Delta. All SFPUC water rights on the Tuolumne River were curtailed in August 2021. However, in October 2021, the SWRCB suspended curtailments of water rights on the Tuolumne River including SFPUC’s. These suspensions have remained in place since then. Increasing dry conditions however, may cause the SWRCB to reinstate curtailments of water rights on the Tuolumne River at any time. The SJTA, again, filed a lawsuit on the emergency regulations for the purpose of curtailing junior water right holders. The SFPUC filed a petition for reconsideration with the SWRCB on the curtailment orders for SFPUC’s water right diversions on the Tuolumne River in Sept ember 2021. The SWRCB has yet to respond to the petition. The SFPUC is unable to predict whether future SWRCB initiatives to curtail the exercise of pre -1914 water rights might affect water supplies available to the SFPUC. See “REGULATORY MATTERS – Bay-Delta Water Quality Standards” and “FERC Proceeding to Increase Flows in the Lower Tuolumne River.”
Proposals to Restore Hetch Hetchy Valley
Some environmental organizations advocate for the removal of Hetch Hetchy Reservoir and the restoration of Hetch Hetchy Valley. For example, an initiative ordinance entitled the “Water Sustainability and Environmental Restoration Planning Act of 2012” qualified for the November 2012 City ballot with support from an organization called “Restore Hetch Hetchy” and would hav e required the City to identify alternative sources of water and, subject to certain additional conditions, end its use of Hetch Hetchy Reservoir. This initiative was rejected by the City’s voters.

There have been previous studies that examined prior proposals to remove Hetch Hetchy Reservoir. For example, the California Department of Water Resources and the California Department of Parks and Recreation issued a comprehensive report in 2006 and concluded that it does appear technically feasible to restore Hetch Hetchy Valley, but expressed caution about the financial feasibility. The study estimated that the total cost for such a project would range from nearly $3 billion to $10 billion in 2006 (approximately $4 billion to $13 billion in 202 0, adjusted for inflation). The state agencies concluded the initial planning effort , alone, would take up to 10 years to complete and would cost an additional $65 million dollars.

On April 21, 2015, Restore Hetch Hetchy filed a complaint against the City in Tuolumne County Superior Court alleging that the SFPUC’s operation of Hetch Hetchy Reservoir is an “unreasonable method of diversion of water” in violation of California Constitution Article X, Section 2 because of the O’Shaughnessy Dam’s location within a national park. The City prevailed in a motion to dismiss the complaint at the trial court level. Restore Hetch Hetchy appealed the trial court’s decision at the Fifth District Court of Appeal in Fresno, California. After full briefing and a hearing, the Court of Appeal ruled in favor of the City (i.e., affirming the trial court). The Court of Appeal published its opinion on August 1, 2018. Restore Hetch Hetchy filed a petition for review of the Court of Appeal’s decision with the California Supreme Court. The City opposed this petition, and on October 17, 2018, the California Supreme Court denied Restore Hetch Hetchy’s petition. The case is now fully and finally resolved in the City’s favor.

In 2019, Restore Hetch Hetchy commissioned a report produced by ECONorthwest, which was publicly released in July 2019. This report concluded that restoring Hetch Hetchy Valley and opening it to greatly intensified public use had an economic use value between $2 billion to $5 billion and an intrinsic “passive -use” value of over $100 billion over a 50-year period. Restore Hetch Hetchy attempted to promote this report to federal, state, and local policymakers, but this advocacy appeared to gain little to no traction.

The SFPUC is unable to predict whether any similar initiatives, or similar federal or state legislation, might be approved by the voters or adopted by legislative bodies in the future, or the potential impact of such efforts on the SFPUC or the Water Enterprise.

WATER FACILITIES
General
The facilities of the Water Enterprise consist of Regional Water System facilities and In -City Distribution System facilities. The Regional Water System evolved through the development of two separate water systems: the Spring Valley Water Company and the Hetch Hetchy Project.

71 4163-6481-6438.1

• The Spring Valley Water Company was established in 1858, developing a spring and several creeks into a local water system. It expanded over the years with the construction of Pilarcitos Reservoir, followed by San Andreas Reservoir, Upper Crystal Springs Reservoir and Lower Crystal Springs Dam, all on the Peninsula in San Mateo County. Later the company extended its system to additional sources on Alameda Creek in Alameda County and expanded its service area to include additional Peninsula and South Bay customers. The City acquired the local supplies and retail distribution system of the Spring Valley Water Company in 1930.
• Following enactment of the Raker Act in 1913, the City was able to proceed with plans to develop its own water supply system. The construction of the Hetch Hetchy Project began in earnest in 1914, and after almost 2 0 years of construction, including building of O’Shaughnessy Dam and a required transmission system, Sierra Nevada water began flowing into the local distribution system in 1934. The Hetch Hetchy Project is operated as a combined water storage and conveyance and electric generation and transmission system. The Water Enterprise and the Power Enterprise coordinate operation of the Hetch Hetchy Project to ensure reliable utility services are provided by the combined system. Pursuant to State statute, the Charter and the terms of the WSA, the SFPUC operates the Hetch Hetchy Project pursuant to a “water first” policy to optimize the reliability and quality of its water deliveries and ensure that hydroelectric generation does not cause any reasonably anticipated adverse impact on water service.

Power is generated when water is delivered to meet water system operational requirements.

See “THE WATER ENTERPRISE – Water Rights and Related Proceedings.” Since the 1930s, the major additions to the SFPUC’s water system have included the raising of O’Shaughnessy Dam at Hetch Hetchy Reservoir and the development of Lake Lloyd Reservoir, the construction of additional pipelines across the San Joaquin Valley, and the local construction of San Antonio Reservoir in Alameda County and the Bay Division Pipelines 2, 3 and 4. Other local projects included Crystal Springs Pipeline No. 3, Sunol Valley and San Andreas Filtration Plants, and the Crystal Springs Bypass Tunnel and Balancing Reservoir. The SFPUC has completed several WSIP p rojects including the Irvington Tunnels 1 and 2, Bay Division Pipeline 5, and a new tunnel under San Francisco Bay between Newark in Alameda County and East Palo Alto in San Mateo County that replaced the transbay portion of Bay Division Pipelines 1 and 2.

The Regional Water System is geographically delineated between the Hetch Hetchy Project and the Bay Area water system facilities.
• The Hetch Hetchy Project is generally comprised of the reservoirs, hydroelectric generation and transmission facilities, and water transmission facilities from Hetch Hetchy Reservoir west to the Alameda East Portal of the Coast Range Tunnel in Sunol Valley. • The Bay Area water system is generally comprised of the facilities west of Alameda East Portal and includes the Alameda and Peninsula watershed reservoirs, two water treatment plants and the conveyance system that delivers water to the SFPUC’s Retail Customers and Wholesale Customers.

Water Conveyance and Distribution
Regional Water System. The Regional Water System comprises three regional water supply and conveyance systems: the Hetch Hetchy System; the Alameda System; and the Peninsula System (as herein defined).

Hetch Hetchy System.

In the Hetch Hetchy System, water is diverted from Hetch Hetchy Reservoir into a series of tunnels and aqueducts from the Sierra Nevada to the San Joaquin Pipelines that cross the San Joaquin Valley to the Coast Range Tunnel (collectively, the “Hetch Hetchy System”) which connects to the Alameda system at the Alameda East Portal. The Tesla Treatment Facility disinfects Hetch Hetchy Water.

See “– Water Treatment – Hetch Hetchy Water.”
Alameda System . T
he “Alameda System” includes two reservoirs, San Antonio Reservoir and Calaveras Reservoir, which collect water from the upper Alameda and San Antonio Creek watersheds in

72 4163-6481-6438.1

Alameda County plus conveyance facilities connecting the Hetch Hetchy System and Alameda water sources to the Peninsula System. These conveyance facilities include pipelines known as the Alameda Siphons that connect the Coast Range Tunnel to Irvington Tunnels 1 and 2.

Irvington Tunnels 1 and 2 supply the five Bay Division Pipelines that cross the South Bay Area to the Peninsula System. Bay Division Pipelines 1, 2 and 5 connect with the recently completed Bay Tunnel on opposite sides of the San Francisco Bay near the Dumbarton Bridge. The Bay Tunnel itself runs beneath the floor of the San Francisco Bay. Bay Division Pipelines 3 and 4 traverse the southerly edge of the San Francisco Bay delivering water to SFPUC customers along the way. All five pipelines reconnect near the inlet to the Pulgas Tunnel on the Peninsula.

The Sunol Valley Water Treatment Plant filters and disinfects water supplied from San Antonio and Calaveras Reservoirs, and, when necessary, water from the Sierra Nevada.

A turnout from the South Bay Aqueduct of the California State Water Project (the “ State Water Project”) can supply limited supplemental water to San Antonio Reservoir. However, the SFPUC currently possesses no entitlements to water from the State Water Project.

Peninsula System.

Two reservoirs, Crystal Springs and San Andreas, collect runoff from the San Mateo Creek watershed. Water from Pilarcitos Reservoir, on Pilarcitos Creek, directly serves one of the Wholesale Customers, the Coastside County Water District (which includes the City of Half Moon Bay), and can also deliver water to Crystal Springs and San Andreas Reservoirs. Water delivered from the Bay Division Pipelines in excess of Peninsula System and in -City demands spills into Crystal Springs and San Andreas Reservoirs. The Harry Tracy Water Treatment Plant filters and disinfects water supplied from Crystal Springs and San Andreas Reservoirs before it is delivered to Peninsula customers and the In-City Distribution System.

The “Peninsula System” includes conveyance facilities connecting the Bay Division Pipelines to the In-City Distribution System and to other SFPUC customers on the Peninsula.

In-C
ity Distribution System . The City’s retail water supply is delivered to the City in several major pipelines.

Water to the east side of the In -City Distribution System is fed by two pipelines that terminate at University Mound.

Water to the west side of the In -City Distribution System is fed by two pipelines that terminate at Sunset Reservoir and one that terminates at Merced Manor Reservoir. The In -City Distribution System to homes and businesses in the City is comprised of 1,235 miles of pipeline.

Summary of System Facilities . The Regional Water System and the In -City Distribution System facilities are summarized below.

TABLE 13

SUMMARY OF SYSTEM FACILITIES
Regional Water System In-City Distribution System
Pipelines 389 miles 1,235 miles
Tunnels 74.5 miles None
Pump Stations 5 24
Reservoirs and/or Water Tanks 11 reservoirs 11 reservoirs/8 water tanks Treatment Plants 3 None
____________________
Source: SFPUC, Water Enterprise.

Water Treatment
Hetch Hetchy Water. Hetch Hetchy Reservoir is the largest unfiltered water supply on the West Coast and one of only a few large unfiltered municipal water supplies in the nation. The water originates from spring snowmelt flowing down the Tuolumne River to Hetch Hetchy Reservoir, where it is stored.

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This water source is located in the well -protected Yosemite National Park and the Hi gh Sierra region. This area meets or exceeds all federal and State criteria for watershed protection. The water originating from Hetch Hetchy Reservoir is protected in pipes and tunnels as it is conveyed to the Bay Area, and requires pH adjustment to contr ol pipeline corrosion and disinfection for bacteria control. Based on the SFPUC’s disinfection treatment practice, extensive bacteriological -quality monitoring, and high- operational standards, the United States Environmental Protection Agency (the “ EPA”) and the State of California Department of Health Services have determined that the Hetch Hetchy water source meets federal and State drinking water quality requirements without filtration, and thus the SFPUC is not required to filter water from Hetch Hetchy Reservoir. For further discussion of the State and federal regulatory requirements affecting the Water Enterprise, see “REGULATORY MATTERS.” The Tesla Treatment Facility, a key component of the WSIP, enhances high water quality through ultraviolet (“UV”) treatment. The Tesla Treatment Facility was officially dedicated in July 2011, following two years of construction. The facility uses UV light to disinfect Hetch Hetchy water to meet new federal requirements to control the waterborne parasite Cryptosporidium, and is among the largest drinking-water UV disinfection facilities in North America. In the same location, a new chlorine disinfection station constructed to meet current fire and earthquake safety standards replaced the old station, which was built in 1937. See “CAPITAL IMPROVEMENT PROGRAM – Water System Improvement Program (WSIP).”
Local Water . All water derived from surface water sources other than Hetch Hetchy Reservoir requires filtration and is currently treated at one of two treatment plants: th e Sunol Valley Water Treatment Plant (“Sunol Valley WTP”) and the Harry Tracy Water Treatment Plant (“H arry Tracy WTP ”). Major upgrades of these two facilities have been completed as part of the WSIP. See “CAPITAL IMPROVEMENT PROGRAM – Water System Improvement Program (WSIP).” New groundwater supply from the San Francisco Groundwater Supply Project does not require filtration. Treatment of groundwater for hexavalent chromium (Chrome -6), nitrate, manganese and other constituents to meet federal and state drinking water regulations will be achieved through blending. Blending treatment is currently taking place within distribution pipelines and Sunset Reservoir.

Sunol Valley Water Treatment Plant. The Sunol Valley Water Treatment Plant treats all water from the two reservoirs in the Alameda System, Calaveras and San Antonio. Sunol Valley WTP has a capacity of 160 mgd.

Treatment processes at Sunol Valley WTP include coagulation, flocculation, sedimentation, filtration, and disinfection. Fluoridation, chloramination and corrosion control treatment are provided for the combined Hetch Hetchy Project and Sunol Valley WTP water at the chloramination and fluoridation facilities in Sunol. Sunol Valley WTP also filters Hetch Hetchy water on the occasions when the Sierra s upply does not meet required drinking water standards.

The Sunol Valley Water Treatment Plant Expansion and Treated Water Reservoir Project added a fifth sedimentation basin to increase reliable capacity, retrofitted existing filters, and created a 17.5 m illion gallon circular treated water reservoir as it leaves the plant. The project included other new connections and facilities that enable the plant to treat enough water to meet basic customer demands alone for up to 60 days after a major earthquake in conjunction with other facilities. These improvements help increase delivery reliability and water quality.

Harry Tracy Water Treatment Plant . The Harry Tracy WTP primarily treats water from the Peninsula System reservoirs and has a peak capacity of 140 mgd and a sustainable capacity of 120 mgd. Treatment processes at the Harry Tracy WTP include ozonation, coagulation, flocculation, filtration, disinfection, fluoridation, corrosion control treatment and chloramination.

Updates to the Harry Tracy WTP included the addition of filters, upgrades to various systems, construction of a new treated water reservoir, and seismic retrofits of critical process units. As a result of the upgrades, the Harry Tracy WTP has improved its delivery reliability and can now achie ve a sustained capacity of 140 mgd for at least 60 days and provide 140 mgd within 24 hours following a seismic event on the San Andreas Fault.

Water Storage
Up-Country Storage. The majority of the water delivered by the SFPUC is supplied by runoff from the upper Tuolumne River watershed on the western slope of the central Sierra Nevada. Three major reservoirs collect runoff:

Hetch Hetchy Reservoir, Lake Lloyd Reservoir and Lake Eleanor Reservoir.

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Water stored in Hetch Hetchy Reservoir is also used for hydroelectric generation and released downstream to satisfy instream flow requirements. Normally, only Hetch Hetchy Reservoir supplies water exported to the Bay Area for municipal and industrial uses. Releases from Lake Eleanor Reservoir and Lake Lloyd Reservoir are used to satisfy instream flow requirements, satisfy the Irrigation Districts’ Raker Act entitlements and produce hydroelectric power.

Downstream of the Hetch Hetchy System on the Tuolumne River is the New Don Pedro Project, owned and operated by the Irrigation Districts. The New Don Pedro Project includes a dam that impounds the Tuolumne River, creating the New Don Pedro Reservoir, also owned by the Irrigation Districts. The City helped fund the original construction of the New Don Pedro Project in exchange for eliminating the City’s flood control responsibility and establishing a water bank account (the “ Water Bank”) allowing the SFPUC to receive water credits for advanced releases from the Hetch Hetchy Project to the New Don Pedro Reservoir to meet the Irrigation Districts’ downstream requirements. Water Bank storage space in New Don Pedro Reservoir is integrated into the Water System’s operations.

Certain water stored in New Don Pedro Reservoir is credited to the City’s Water Bank, which allows the City to meet its Raker Act water obligations to the Irrigation Districts and divert water supply from Hetch Hetchy Reservoir to the Bay Area.

Local Storage. On the San Francisco Peninsula, the SFPUC uses Crystal Springs Reservoir, San Andreas Reservoir and Pilarcitos Reservoir located in San Mateo County to capture local watershed runoff. In the Alameda Creek watershed (Alameda County), the SFPUC manages Calaveras Reservoir and San Antonio Reservoir. In addition to using these facilities to capture runoff , San Andreas, San Antonio and Crystal Springs reservoirs also provide storage for Hetch Hetchy Project diversions, and, along with Calaveras Reservoir and Pilarcitos Reservoir, serve as water supply delivery facilities in the event of an interruption to Hetch Hetchy Project deliveries.

Dam Supervision. Eighteen dams under the jurisdiction of the SFPUC are presently licensed and regulated by the California Department of Water Resources’ Division of Safety of Dams (“ DSOD”). The SFPUC’s Calaveras Dam Replacement Project was completed in September 2018. See “REGULATORY MATTERS – Dam Licensing and Safety Issues.”

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System Storage Capacity . The following table summarizes the regional water system reservoirs within the Water Enterprise.

TABLE 14

REGIONAL WATER SYSTEM STORAGE CAPACITY
(AS OF MARCH 14, 2022)

Current
Storage
(Acre-Feet)
Maximum
Storage
(Acre-Feet)
Available
Capacity
(Acre-Feet)
Percent of
Maximum
Storage
Tuolumne Storage
Hetch Hetchy Reservoir(1) 296,300 360,360 64,060 82.2%
Cherry Reservoir(2) 228,300 268,800 40,500 84.9
Lake Eleanor Reservoir(3) 19,220 21,495 2,275 89.4
Water Bank 346,903 570,000 223,097 60.9
Total Tuolumne Storage: 890,723 1,220,655 315,502 73.0% Local Storage
Calaveras Reservoir 64,843 96,670 31,827 67.1%
San Antonio Reservoir 36,377 53,266 16,889 68.3
Crystal Springs Reservoir 43,132 58,309 15,177 74.0
San Andreas Reservoir 16,338 19,027 2,689 85.9
Pilarcitos Reservoir 2,708 3,030 230 89.4
Total Local Storage: 163,398 230,302 66,904 70.9%

Total Regional Water System 1,054,121 1,450,957 396,836 72.7% ____________________
(1) Maximum Hetch Hetchy Reservoir storage with drum gates activated. (2) Maximum Cherry Reservoir storage without flash-boards in. (3) Maximum Lake Eleanor storage without flash-boards in.

Source: SFPUC.

Table 14 shows storage levels as of March 14 , 2022. Total Regional Water System storage levels would normally be at approximately 81.0% of Total Regional Water System storage capacity as of this date. The level as of March 14, 2022 is lower than that at approximately 72.7 % of Total Regional Water System storage capacity. Water Year 2022 has been a mix of wet and dry conditions. In addition to drier than average conditions so far in Water Year 2022, the two p revious dry years caused the SFPUC to rely on water bank to refill Hetch Hetchy reservoir. T otal Regional Water System storage levels are lower than normal in large part because the Water Bank is below its normal storage levels for March 14. The current storage level of Calaveras Reservoir, the largest of the local storage facilities, is more than two-thirds of its capacity as of March 14 , 2022. See “WATER FACILITIES – Water Storage – System Storage Capacity” and “CAPITAL IMPROVEMENT PROGRAM – Water System Improvement Program (WSIP).” [Update again prior to posting]
In-City Storage . The Water Enterprise’s in -City reservoirs and storage tanks have the capacity to hold approximately 412.8 million gallons, or 1,267 acre -feet. The SFPUC estimates this capacity to be an approximate five-day supply at the current average rate of consumption for the City. In- City reservoirs that are also terminal reservoirs for the Regional Water System moderate flow peaking for the Regional Water System, and water stored in them can be conveyed back to the San Francisco Peninsula.

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The following table summarizes the in-City reservoirs and storage tanks maintained by the Water Enterprise.

TABLE 15

IN-CITY DISTRIBUTION SYSTEM POTABLE WATER STORAGE CAPACITY Reservoir Millions of Gallons
Sunset(1) 176.7
University Mound(1) 140.9
Sutro 31.4
Summit 14.0
College Hill 13.5
Stanford Heights 12.9
Merced Manor(1) 9.5
Lombard 2.7
Potrero 1.0
Storage Tanks 10.2
Total 412.8
____________________
(1) Terminal reservoirs for the Regional Water System.

Source: SFPUC.

In addition, there is an emergency supply of existing non-potable water immediately available within the City at Lake Merced. Lake Merced currently holds approximately 1.5 billion gallons or approximately 4,603.3 acre -feet.

Physical Condition of Certain Facilities
Certain of the Water Enterprise’s facilities are near the end of their useful life. Long- lived facilities result in decreased reliability due to unplanned outages and place a greater maintenance burden on SFPUC operations. In addition, the vulnerabilities of the Regional Water System are increased by its linear nature and limited redundancy.

Outages at critical points could disrupt delivery to large portions of the Regional Water System. See “RISK FACTORS – Risks Related to Water Enterprise Facilities and Operations.” Built between 1917 and 1925, Mountain Tunnel extends 18.9 miles from the Early Intake Dam to Priest Reservoir. The upper 7.4 miles are not lined, and the lower 11.5 miles are lined. Inspections in 1989, 2006, 2008 and 2017 identified signs of deterioration in the lining which were projected to increase over time. The risk of failure of Mountain Tunnel, defined as a loss of 25% carrying capacity, is currently low but will increase over time. Failure of Mountain Tunnel would have a significant impact on the Hetch Hetchy water system (“ Hetch Hetchy Water”) operations and could cause up to six or more months of water supply disruption. See “CAPITAL IMPROVEMENT PROGRAM – Hetch Hetchy Water – Mountain Tunnel.”
The Coast Range Tunnel is a 26- mile long tunnel running from Tesla Portal to the Alameda East Portal and was put into operation in 1934. The Coast Range Tunnel was inspected in January 2015 after having been last inspected in 1995. The recent inspection revealed that the Coast Range Tunnel is still in good condition, with little change noted since the 1995 inspection. Irvington Tunnel 1 was also inspected in winter 2015 and was also found to be in good condition.

The WSIP was designed in part to reduce vulnerability of the Regional Water System and increase reliability of the system to deliver water by improving redundancy needed to accommodate planned outages for m aintenance and unplanned outages resulting from facility failure. The WSIP was not designed to replace or upgrade the entire water system. Repair of Mountain Tunnel as well as the replacement, rehabilitation and repair of water transmission pipelines and other Regional Water System and in-City facilities are included in the SFPUC’s Ten-Year Capital Plan (as defined herein). See “CAPITAL IMPROVEMENT PROGRAM.”

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Seismic Hazards
The Hetch Hetchy Project is located largely in Yosemite National Park, one of the most stable seismic zones in the State, and there are no known major faults in the area. The Water Enterprise’s distribution and transmission systems and its customers are, however, located in seismically active regions of the State. The San Andreas Fault lies immediately west of the City, and the Hayward Fault is approximately 15 miles to the east. A third major fault, the Calaveras Fault, is a branch of the Hayward Fault and lies east of the Hayward Fault.

During the past 150 years, the San Francisco Bay Area has experienced several major and numerous minor earthquakes. The largest was the 1906 San Francisco earthquake along the San Andreas Fault with an estimated magnitude of 8.2 on the Richter scale. The 1868 Hayward earthquake along the Hayward Fault had an estimated magnitude of between 6.8 and 7.0 on the Richter scale. The 1989 Loma Prieta earthquake along the San Andreas Fault had an estimated magnitude of 6.9 on the Richter scale. The most recent significant earthquake was the August 2014 South Napa earthquake on the West Napa Fault, the northern extension of the Calaveras Fault, which had a magnitude of 6.0 on the Richter scale and an epicenter near the city of Napa, approximately 50 miles north of San Francisco.

According to United States Geological Survey findings, a significant earthquake along these or other faults is probable during the period the 2022ABCD Bonds will be outstanding.

The Regional Water System crosses several active and potentially active faults, including major strike -slip faults w ithin the San Francisco Bay region. Major fault crossings along the pipeline delivery system include the Orestimba fault at Tesla Portal, the Greenville fault in the Coast Range Tunnel, the Calaveras fault at the Alameda Siphons, and the southern Hayward fault at the Bay Division Pipelines numbers 1, 2, 3, 4 and 5. In addition, other lower slip rate but potentially active faults cross the water system. These faults potentially move by secondary or triggered slip during large earthquakes on the San Andreas fault. Furthermore, three main transmission pipelines from Harry Tracy WTP – San Andreas Pipeline No. 2, San Andreas Pipeline No. 3 and Sunset Supply Branch Pipeline – cross the Serra fault, a secondary fault located along the peninsula in San Mateo County.

According to the United States Geological Survey , the Greenville, Calaveras, Hayward and San Andreas faults have a high likelihood of producing a major (magnitude ≥ 6.7) earthquake in the San Francisco Bay region in the next 30 years. A large earthquake o n these faults has the potential for generating surface- fault rupture that is hazardous to specific SFPUC facilities. A major goal of the WSIP is to rehabilitate and strengthen the tunnels, pipelines and other Water Enterprise facilities that cross or are situated near known active faults.

If a major seismic event or other emergency occurs, the SFPUC is authorized under the WSA to adopt emergency rate surcharges outside of the normal budget development process. Such rate surcharges will be applicable to both Retail Customers and Wholesale Customers and incorporate the same percentage increase for all customers.

See “FINANCIAL OPERATIONS – Wholesale Water Sales Revenue.” Any emergency rate surcharge adopted by the SFPUC will remain in effect only until the ne xt budget-coordinated rate-setting cycle, at which time it can be reviewed for continuance and modification.

If a significant earthquake occurs that affects the Water Enterprise’s tunnels, pipelines or other facilities, the SFPUC would attempt to repair a ny damage as quickly as possible, and the amount of time required to return the facilities to service would depend on the nature and extent of damage incurred. A prolonged reduction in the Water Enterprise’s water supply resulting from a major earthquake could have a material adverse effect on Revenues.

A major seismic event affecting critical locations prior to completion of WSIP improvements could result in service interruptions of 60 days or longer. The SFPUC has established intertie connections with th e East Bay Municipal Utility District and the Santa Clara Valley Water District to diversify water supply options in case of a major seismic event. Should the Irvington Tunnels or the five major pipelines branching from the Irvington Tunnels become inoperable, the SFPUC would attempt to negotiate additional water sharing agreements with these and other regional water utilities which interconnect with Water Enterprise facilities, but there is no assurance that such negotiations would be successful.

If damage to the Irvington Tunnels or the pipelines that connect to the tunnels resulted in the loss of water transported through the tunnel, the remaining water supply would be limited to storage in three reservoirs in San Mateo County (the Crystal Springs, San Andreas and Pilarcitos Reservoirs) and three terminal reservoirs located in San

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Francisco as well as existing intertie connections. The combined capacity of the three San Mateo County reservoirs is approximately 29.8 billion gallons. The SFPUC has historically kept these reservoirs filled to a combined capacity of approximately 18 billion gallons, or an estimated two and one -half month water supply based on historical average daily water demand of both the Retail Customers and Wholesale Customers. It is anticipated that in-City storage alone would last approximately four to seven days.

Separate from the SFPUC system, individual Wholesale Customers have storage ranging from zero to seven days.

System Level of Service Criteria after Seismic Events. The SFPUC has established basic “Level of Service” criteria for the design of new facilities and upgrade of existing facilities, including projects within the WSIP: to deliver winter day demand (“WDD”) of 229 mgd (projected February 2030 demand) within 24 hours after a major earthquake.

This embodies the following primary criteria and assumptions to be used in examining system reliability with system retrofit projects in place:
• Deliver WDD to at least 70% of the Wholesale Customers’ turnouts within each of the three customer groups (Santa Clara/Alameda/South San Mateo County, Northern San Mateo County, and City of San Francisco).
• Achieve a 90% confidence level of meeting the above goal, given the occurrence of a major earthquake.

The earthquakes considered are treated independently and with equal weighting, without regard to their return period.
• To achieve the basic level of service, the SFPUC will rely on the Wholesale Customers’ own water systems and other regional water purveyors’ systems. The SFPUC will work with the Wholesale Customers to assess their ability to contribute to their own system reliability. • The SFPUC will consider a facility to have failed if it cannot be brought back to its intended purpose within twenty-four hours without secondary damage resulting. • To achieve the basic level of service, the SFPUC will assume that power supplies are available, whether from the grid or from standby sources.

No particular item in the Regional Water System is required to be seismically upgraded or retrofitted as long as the system -wide performance goals established by the SFPUC can be satisfied. Earthquake damage to selected components and systems is acceptable, as long as the system-wide performance remains acceptable.

Wildfire Considerations
The SFPUC’s Water Enterprise owns and operates about 107 miles of overhead electrical lines that are located within the California Public Utilities Commission’s designated High Fire Threat District. The lines are primarily located in the Sierra Nevada, surrounding foothills, and on the Peninsula.

Wildfires can disrupt the operation of, or cause damage to, facilities used to convey the SFPUC’s water supply, e.g., hydro- generation, power and water transmission, and other operational buildings. Wildfires can also significantly impact vegetation and soils which can adversely impact water quality within the SFPUC’s water supply and regulating reservoirs. The Rim Fire, a wildfire in 2013, substantially burned the forest around the Holm and Kirkwood Powerhouses and reached the edges of all three Sierra Nevada reservoirs. Though the Rim Fire, by consuming potential fuel, has reduced some near -term risk of wildfire in the region, the SFPUC’s Water Enterprise still owns many miles of overhead electrical lines through highly forested areas.

The SFPUC maintains a Wildfire Mitigation Plan (the “ Mitigation Plan”) which describes the numerous programs that the SFPUC has in place to construct, maintain and operate its electrical facilities in order to minimize the risk that its equipment could be the origin or contributing source for a catastrophic wildfire. The Mitigation Plan meets or exceeds the requirements of Section 8387 of the California Public Utilities Code for publicly owned electric

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utilities. As required, the Mitigation Plan is reviewed by an i ndependent evaluator, approved by the SFPUC Commission, and submitted to the California Wildfire Safety Advisory Board on or before July 1, of each year.

In addition, the SFPUC owns and manages approximately 61,000 acres of watershed lands in the Bay Area that are managed in part to prevent and minimize wildfire risks. On August 16, 2020, rare, major thunderstorm activity in the Bay Area caused numerous fires around the Bay Area and in the SFPUC’s watersheds. The Peninsula lightning strikes started approximately 12 small fires which were quickly extinguished. Major wildfires also erupted in in the East Bay watersheds, referred to as the SCU Lightning Complex Fires. The SCU Lightning Complex Fires burned roughly 10,000 acres out of 38,000 acres of land that the SFPUC owns in the East Bay. The SFPUC does not own all of the land in the Calaveras Reservoir watershed ; however, approximately two -thirds of Calaveras Reservoir watershed has burned. The SFPUC is currently working with CalFire’s Watershed Emergency Response Team on recovery related to damage caused by the fire and by firefighting efforts.

See also “RISK FACTORS – Inverse Condemnation.”
Safety and Security
The safety of the facilities of the Water Enterprise is maintained via a combination of regular inspections by SFPUC employees, electronic monitoring, and analysis of unusual incident reports. Most above -ground facilities operated and maintained by the SFPUC are controlled -access facilities with fencing, gates, closed circuit television systems and security officers at certain points. Smaller, above- ground and subterranean pumping stations operated and maintained by the SFPUC are locked with padlock or internal locking mechanisms, and most are monitored via access/intrusion alarms. Security improvements are evaluated on an ongoing basis. The electronic operations and controls have been evaluated and designed to reduce exposure using a series of technology systems enhancements and integration.

The operation of Water Enterprise facilities is also subject to the risk of cyberattack. The SFPUC abides by the City’s Citywide Cyber Security Policy and also maintains its own cybersecurity program. See “RISK FACTORS – Cybersecurity.”

CAPITAL IMPROVEMENT PROGRAM
Capital and Financial Planning Process
The SFPUC’s long -term capital and financial planning is performed on an annual rolling ten- year forward looking basis. The SFPUC prepares a ten-year capital plan for each of its enterprises, as required by the Charter. The ten-year capital plan serves as the basis for the development of the annual ten-year financial plan. Proposed long-term capital programs, projects and investments, and related costs are included in the ten- year financial plan. Consistent with the Charter, updates to the ten- year capital plan and ten -year financial plan are annually reviewed and adopted by the Commission each February. The ten- year financial plan provides estimated rate impacts of projected capital and operating spending and assures compliance with debt service coverage and other financial policy requirements.

The ten-year capital plan is not a budget and is not “appropriated” like a budget. The annual capital programs can be revised during the development of the budget and final projects, costs and totals for specific capital improvements to be financed can change. Consequently, even though the annual budgets passed are based on the ten- year capital plan, they may occasionally differ from it.

The Water Enterprise Ten-Year Capital Plan (“Ten-Year Capital Plan”) for Fiscal Year 2022-23 to Fiscal Year 2031-32, which includes the Water Enterprise -related components of the Hetch Hetchy Water and Power Ten - Year Capital Plan, most recently adopted by the Commission in February 2022, totals approximately $2.6 billion. The Ten-Year Capital Plan includes projects in four major Water Enterprise categories: (i) Regional Water; (ii) Local Water; (iii) Hetch Hetchy Water; and (iv) the Emergency Firefighting Water System . The Regional Water, Local Water and Hetch Hetchy Water categories of the Water Enterprise’s CIP are expected to be financed by a combination of revenue bonds, commercial paper, revolving notes, a Parity State Loan, revenues (pay- as-you-go) and capacity charges. Approximately $210 million of the Ten -Year Capital Plan, from Fiscal Year 2023 -24 through Fiscal Year

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2031-32, is unfunded. T he SFPUC plans to review project scopes, schedules, and costs to tie the capital plan to the resources to execute it prior to the February 2023 adoption of an updated 10-year Capital Plan. For more information regarding the Ten-Year Capital Plan programs, see “– Regional Water Program,” “– Local Water Program,” an d “– Hetch Hetchy Water” below. See also “FINANCING OF CAPITAL IMPROVEMENTS.” The Emergency Firefighting Water System ( the “EFWS”), formerly referred to as the Auxiliary Water Supply System) is a water distribution system within San Francisco originally built after the 1906 earthquake to improve fire, earthquake and emergency response , and ensure firefighters a reliable water supply for fires and disasters. Improvement projects for the EFWS are administered through the Ten -Year Capital Plan and include replacement, expansion and upgrades to pipes, hydrants, reservoirs, pumping systems, tunnels, water cisterns and related facilities in San Francisco. Projects for the EFWS have historically been funded with general obligation bonds issued by the City pursuant to voter authorization; h owever, the Ten -Year Capital Plan inclu des planned EFWS projects that will also benefit the potable water system . Such portion of the future EFWS piping that is planned to be shared with the potable distribution system is called the “Potable EFWS.” The ratepayers of the Water Enterprise will be responsible for partially funding the Potable EFWS projects. The general obligation bond funding for the EFWS comprises approximately $153 million of the Ten- Year Capital Plan and an additional $55 million from Water Enterprise capital program funding is designated for the Potable EFWS ($12 million previously allocated and $23.6 million in new funding) in Fiscal Years 2022-23 through 2031-32 and $19.4 million to be funded after ten years.

The following table sets forth the first five years of the Water Enterprise’s capital improvement program (excluding the general obligation bond funding for the EFWS ) as set forth in the Ten -Year Capital Plan for Fiscal Year 2022-23 to Fiscal Year 2031-32.

TABLE 16

WATER ENTERPRISE CAPITAL IMPROVEMENT PROGRAM
FOR FISCAL YEARS ENDED JUNE 30
(1)
2023 2024 2025 2026 2027 Total
Regional Water $ 47,578,471 $247,416,459 $255,736,580 $187,302,473 $ 92,996,622 $ 831,030,605 Local Water 53,740,826 142,235,511 233,922,053 176,942,583 126,305,583 733,146,556 Hetch Hetchy Water 57,009,331 90,049,237 112,535,807 67,301,096 41,389,853 386,282,324 Total
Appropriations(2)
$168,328,628 $479,698,207 $602,194,440 $431,546,152 $260,692,058 $1,942,459,485 ____________________
(1) Amounts are based on anticipated appropriations and are projections from the Water Enterprise Ten-Year Capital Plan. Actual results may differ materially from these projections. See “FORWARD-LOOKING STATEMENTS” above. (2) Totals may not add due to rounding.

Source: SFPUC.

Regional Water Program
The Regional Water Program, projected to comprise approximately $1.055 billion of the Ten -Year Capital Plan, finances capital improvements to the Regional Water System. Regional Water Program capital investments include, but are not limited to, water treatment, water transmission, water supply and storage, watersheds and land management, communication and monitoring, and building and grounds management.

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Local Water Program
The Local Water Program, projected to comprise approximately $1.063 billion of the Ten-Year Capital Plan, finances capital improvements to the In- City Distribution System. The primary component of the Local Water Program, projected to comprise approximately $6 42 million is for t he local Water Conveyance and Distribution program, performing pipeline installation, repair and replacement. To address its capital funding for pipeline replacement and has replaced an average of 10.3 miles of pipe annually over the past five years compared to a previous rate of 4 to 6 miles per year.

Hetch Hetchy Water
General. Upgrades to the aging facilities of Hetch Hetchy Water and Power are being planned to ensure reliability and preparedness for the future. The Hetch Hetchy Water category of the Ten-Year Capital Plan is projected to cost approximately $ 974 million. Upcountry water and power facilities being assessed and rehabilitated, where needed, include three impounding reservoirs, three regulating reservoirs, three large powerhouses, one small powerhouse, two switchyards, three substations, 170 miles of pipeline and tunnels, almost 100 miles of paved road, over 160 miles of transmission lines, as well as watershed land and rights-of-way property. The Water Enterprise will fund all assets relating to Hetch Hetchy Water (consisting of approximately $ 233 million of Hetch Hetchy Water costs) and the Hetch Hetchy Water portion of jointly- owned assets of Hetch Hetchy Water and the Power Enterprise in the Hetch Hetchy Water and Power System (consisting of approximately $ 549 million of Hetch Hetchy Water costs). See “THE PUBLIC UTILITIES COMMISSION – Organization, Purposes and Powers – Hetch Hetchy – Water and Power Operations.” A significant project among t he Hetch Hetchy Water category is the repair of the existing Mountain Tunnel which conveys all Tuolumne River supplies through a single conduit. See “– Mountain Tunnel.” Mountain Tunnel. As part of the Hetch Hetchy Regional Water System, Mountain Tunnel is a critical water conveyance facility. Built between 1917 and 1925, Mountain Tunnel extends 18.9 miles from the Early Intake Dam to Priest Reservoir. The upper 7.4 miles are not lined and the lower 11.5 miles are lined. Inspections in 1989, 2006, 2008 and 2017 identified signs of deterioration in the lining which were projected to increase over time. The risk of failure of Mountain Tunnel, defined as a loss of 25% carrying capacity, is currently low but will increase over time.

Failure of Mountain Tunnel would have a significant impact on Hetch Hetchy Water operations and could cause up to six months of water supply disruption.

The SFPUC created three parallel tracks to investigate and provide repairs to Mountain Tunnel: (1) the Mountain Tunnel Inspection a nd Interim Repairs Project, (2) the Mountain Tunnel Adits and Access Improvement Project, and (3) the Mountain Tunnel Improvements Project; the first two of the three projects were completed in 2017. A complete shutdown and draining of Mountain Tunnel was performed during January and February 2017 to accomplish the Inspection and Interim Repairs Project and the Adits and Access Improvement Project, as well as to develop information and knowledge for the design and construction of the Long- Term Improvements Project.

Additional interim repairs were performed in January and February 2019 to complete the most significant repairs needed to reduce the risk of failures in the concrete lining. The Mountain Tunnel Improvements Project, currently in construction, provides long term rehabilitation and repairs to the tunnel as well as the addition of flow controls (valving) on the downstream end of the tunnel near Priest Reservoir. The flow controls will allow the tunnel to be operated in a full state at different flow rates which will reduce lining deterioration. The Mountain Tunnel Improvements construction contract was awarded in October 2020, with Notice to Proceed in January 2021. Forecast substantial completion is at the end of 2026.

Improvements to Mountain Tunnel are projected to cost approximately $238 million over the Ten- Year Capital Plan period, not including the costs of the interim repairs performed in 2017 and 2019. The revised cost of the Mountain Tunnel improvements is reflected in the Ten-Year Capital Plan for Fiscal Year 2022-23 to Fiscal Year 2031- 32, which was adopted by the Commission in February 2022. The portion of the project that performs repairs and improvements to the Mountain Tunnel is projected to cost $119M; the tunnel has been classified as a Water asset and thus these costs will be funded 100% by Water Enterprise. The remaining portion of the project that constructs the new flow control facility is projected to cost $119M; because this flow control facility will benefit both water delivery and power production, it has been classified as a j oint asset, and thus will be funded by Water Enterprise and Power Enterprise, pursuant to existing cost -sharing agreements with Wholesale Customers. The current cost sharing

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agreement allo cates 45% of the cost for j oint assets to the Water Enterprise and 55% of the cost to the Power Enterprise. See “FINANCIAL OPERATIONS” – General – Allocation of Hetch Hetchy Project Costs.” Water System Improvement Program (WSIP)
General. The Water System Improvement Program is a $4.788 billion program that consists of 87 capital projects to repair, replace and upgrade critical portions of the Regional Water System and the Local Water System to meet specific level of service goals and objectives for seismi c reliability, delivery reliability, water quality and water supply in an environmentally sustainable and cost effective manner. As of June 30, 2021, the WSIP was approximately 99% complete. Pursuant to the March 2020 Approved Scopes, Schedules and Budget (the “March 2020 Approved Budget”), the most recent revision, adopted in April 2020, the overall approved program completion date is May 2023.

Because two of the projects are currently forecasted to be completed later than the approved completion date, it is anticipated that a revised program will be submitted to the Commission for approval in April 2022 including a proposed revised completion date of February 2027.

Background. The SFPUC began development of a capital improvement program (the “CIP”) in the late 1990s and approved the original framework of the CIP in May 2002. In 2004, the SFPUC reviewed the program, developed program-specific goals and objectives, refined the project scope of the program and renamed the program from the CIP to the WSIP. In 2005, the SFPUC identified specific levels of service goals and objectives, and further refined the scopes, schedules and budget of the WSIP in a December 2005 report that is considered the “Original or Baseline Scopes, Schedules and Budget” for the WSIP (the “Baseline Budget”). The SFPUC subsequently approved major schedule and budget revisions to the Baseline Budget in 2008 (the December 2007 Approved Budget), 2009 (the June 2009 Approved Budget), 2011 (the July 2011 Approved Budget), 2013 (the March 2013 Approved Budget), 2014 (the March 2014 Approved Budget), 2016 (the March 2016 Approved Budget), 2018 (the March 2018 Approved Budget) and most recently, pursuant to the March 2020 Approved Budget.

Program Objectives. The WSIP is based on two principles – a clean, unfiltered water source and a gravity - driven system. Objectives for WSIP include (i) furnishing system improvements to provide high quality water that reliably meets current and foreseeable local, State and federal requirements; (ii) reducing vu lnerability of the water system to damage from earthquakes; (iii) increasing reliability of the system to deliver water by improving redundancy needed to accommodate planned outages for maintenance and unplanned outages resulting from facility failure; (iv) providing near-term improvement of water supply/drought protection; (v) setting forth long-term water supply/drought management options for technical evaluation, cost analysis and environmental review; (vi) enhancing sustainability through improvements that optimize protection of the natural and human environment; and (vii) providing improvements resulting in a cost-effective, fully-operational water system.

Levels of Service Goals. In 2005, the SFPUC developed levels of service goals and objectives to provide a quantifiable means of setting project specific design criteria and project scopes for addressing the program objectives described above. The levels of service goals address:
• Water Quality (maintain high water quality) – design improvements to meet current and foreseeable future federal and State water quality requirements ; provide clean, unfiltered water originating from Hetch Hetchy Reservoir and filtered water from local watersheds; and continue to implement watershed protection measures.
• Seismic Reliability (reduce vulnerability to earthquakes) – design improvements to meet current seismic standards ; deliver basic service to the three regions in the service area (East/South Bay, Peninsula, and San Francisco) within 24 hours after a major earthquake; the performance objective is to provide delivery to at least 70 percent of the turnouts in each region; and r estore facilities to meet average-day demand of up to 300 mgd within 30 days after a major earthquake. • Delivery Reliability (increase delivery reliability and improve ability to maintain the system) – provide operational flexibility to allow planned maintenance shutdown of individual facilities without interrupting customer service and to minimize the risk of service interruption due to unplanned facility upsets or outages ; provide operational flexibility and system capacity to replenish local reservoirs as

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needed; and meet the estimated average annual demand of up to 300 mgd under the conditions of one planned shutdown of a major facility for maintenance concurrent with one unplanned facility outage due to a natural disaster, emergency or facility failure/upset. • Water Supply (meet customer water needs in non -drought and drought periods) – meet average annual water demand of 265 mgd from the SFPUC watersheds for retail and wholesale customers during non-drought years for system demands ; meet dry year delivery needs while limiting rationing to a maximum 20 percent system-wide reduction in water service during extended droughts; diversify water supply options during non- drought and drought periods ; and improve use of new water sources and drought management, including groundwater, recycled water, conservation and transfers. • Sustainability (enhance sustainability in all system activi ties) – Manage natural resources and physical systems to protect watershed ecosystems ; meet all current and anticipated legal requirements for protection of fish and wildlife habitat; and manage natural resources and physical systems to protect public health and safety.
• Cost effectiveness (achieve a cost effective, fully operational system) – Ensure cost effective use of funds; maintain a gravity driven system; and implement regular inspection and maintenance program for all facilities.

The first four goals, Water Quality, Seismic Reliability, Delivery Reliability, and Water Supply are used to determine project design criteria. The last two goals, Sustainability and Cost Effectiveness, are overarching program goals that are not applied to specific criteria at the project level and thus are only infrequently described in project and program documents.

Project Scope. WSIP projects are divided into two sub- programs – the Local Program and the Regional Program. The Local Program consists of 35 projects that are located within the city limits of San Francisco and benefit only San Francisco residents. Local Program projects are typically smaller in size than Regional Program projects and include improvements to existing in -City distribution pipelines, storage reservoirs/tanks, pump stations and miscellaneous facilities. The cost of Local Program projects is absorbed into the retail rates of San Francisco customers. The Regional Program consists of 52 projects that are located mostly outside of the city limits of San Francisco and benefit both San Francisco residents and the 27 Wholesale Customers. Regional Program projects are typically much larger than Local Program projects and include improvements such as upgrades to and the addition of new treatment, transmission (pipelines, tunnels and pump stations) and storage (dams and reservoirs) facilities spread over seven counties (Tuolumne, Stanislaus, San Joaquin, Alameda, Santa Clara, San Mateo and San Francisco). The cost of Regional Program projects is incorporated into rates paid by both Retail Customers and Wholesale Customers.

The list of WSIP projects has not changed significantly since the program was initiated in 2002. Descriptions of the WSIP projects can be found in annual and quarterly reports at www.sfwater.org under “Construction/Contracts – Water System Infrastructure Improvements – Resources and Reports.” The information and reports available on such website are not incorporated by reference into this Official Statement and should not be relied upon in making an investment in the 2022ABCD Bonds.

As part of the Baseline Budget, the SFPUC approved a $4.342 billion program. As part of the March 202 0 Approved Budget, the SFPUC approved a $4.788 billion program ( the same total program budget as the March 2018 Approved Budget). For the proposed revised program to be submitted for approval in April 2022 there is cost change anticipated from the March 2020 approved budget. The variance between the Baseline Budget and the March 2020 Approved Budget that has been incurred over the 15-year program is an increase of $446 million, or a 10.3% increase, and due mainly to cost increases to the following projects: (i) the Calaveras Dam Replacement Project, which includes a sub-project known as the Fish Passage Facilities at Alameda Creek Diversion Dam Project, (ii) the Harry Tracy Water Treatment Plant Long -Term Improvements Project, (iii) the New Irvington Tunnel Project, (iv) the Regional Groundwater Storage and Recovery Project, (v) the Crystal Springs/San Andreas Transmission Upgrade Project, and (vi) the Alameda Creek Recapture Project. All appropriations for the WSIP have been made and WSIP is consequently not included in the Ten-Year Capital Plan for Fiscal Year 2022-23 to Fiscal Year 2031-32.

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Current Status of WSIP. As of June 30, 2021, WSIP was approximately 99% complete. The overall status of WSIP can be assessed by examining the number of projects and the value of such projects in each of the major implementation phases of the program. The Local Program was completed on June 3, 2020. The Regional Program is approximately 99% complete as of June 2021, with five projects remaining in the construction phase.

The largest WSIP project, the Calaveras Dam Replacement Project, achieved substantial construction completion in June 2019 and the new dam is fully operational. A sub-project to this project, the Fish Passage Facilities at Alameda Creek Diversion Dam (“ACDD”) project, was in the end of its construction phase as of June 2021. Only two projects within the Regional Program with specific level of service goals remain to be completed – the Regional Groundwater Storage and Recovery Project (the “RGSRP”) and the Alameda Creek Recapture Project (the “ACRP”).

In addition, as of June 2021, there were two WSIP close -out projects for the Sunol Valley and Peninsula Regions remaining to be completed.

The RGSRP has been divided into two phases. The Phase 1 construction contract, which includes the construction of up to 16 new groundwater recovery wells and test wells, chemical treatment equipment, pumping systems and pipelines, and other associated facilities, was 98% complete as of June 30, 2021, and construction is anticipated to be completed in 2022. Phase 2 has been divided into two construction cont racts; the Phase 2A contract is anticipated to start construction in 2022 and complete in 2024, and the Phase 2B contract, delayed due to extensive time required to obtain permits and easements, is anticipated to start construction in 2024 and be completed in 2026.

Phase 2 will provide needed improvements to the wells installed under Phase 1 to meet water quality and other requirements, as well as complete installation and connection of the final well.

The ACRP includes construction of facilities in and around an existing quarry pit in Sunol Valley to recapture water that will be released from Calaveras Reservoir and/or bypassed around the ACDD during future operations of Calaveras Reservoir. Construction of the facility started in June 2021 and is anticipated to be completed in 2023.

The WSIP included four close-out projects to complete remaining tasks in each of the five sub-regions of the Regional Water System. T wo of these projects were completed by June 2021, with the two remaining projects forecasted to be completed by June 2022. In addition, the Watershed and Environmental Improvement Program that funded several environmental stewardship sub-projects is forecasted to be completed by March 2022.

Environmental Considerations
Projects undertaken by the SFPUC are generally subject to CEQA and certain projects involving the participation of federal agencies, including projects on federal land, are also subject to the National Environmental Policy Act of 1969, as amended (42 U.S.C. Section 4321) (“NEPA”). The San Francisco Planning Department, acting as lead agency under Chapter 31 of the City’s Administrative Code, generally coordinates environmental review of SFPUC projects. Federal agencies which issued permits for WSIP projects completed the necessary reviews under NEPA prior to issuance of the requested permits or other regulatory approvals.

Under CEQA, a project that may have a significant effect on the environment and is to be carried out or approved by a public agency must comply with a comprehensive environmental review process, including the preparation of an Environmental Impact Report (“EIR”). The EIR reflects not only an independent technical analysis of the project’s potential impacts, but also the comments of other agencies with some form of jurisdiction over the project and the comments of interested members of the public. Contents of the EIR include a detailed statement of the project’s significant environmental effects; any such effects that cannot be avoided if the project is implemented; mitigation measures proposed to minimize such effects; alternatives to the proposed project; the relationship between local and short-term uses and long- term productivity; any significant irreversible environmental changes that would result from the project; the project’s growth-inducing impacts; and a brief statement setting forth the agency’s reasons for determining that certain effects are not significant and hence do not require discussion in the EIR. Before approving a project, the SFPUC must make findings on whether or how it can mitigate the significant environmental effects of the project. If the project requires mitigation, the SFPUC must adopt a mitigation monitoring plan to determine whether the mitigation is carried out during project implementation. If the SFPUC determines that the project itself will not have a significant effect on the environment, it may adopt a written statement (called a negative declaration) to that effect and need not prepare an EIR. After deciding to approve or carry out a project, either following the EIR process or after adopting a negative declaration, the SFPUC must file notice of such determination.

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Prior to the sale of bonds, the San Francisco Planning Department Environmental Review Officer will issue a “Planning Certificate” required under Proposition E. The Planning Certificate will identify the status of environmental review for each capital project to be funded under the proposed bond sale and the type of CEQA document either completed or to be completed for each project. CEQA compliance must be completed for each project prior to project approval or approval to award a construction contract to implement any project to be funded by the proposed bond sale.

Any action or proceeding challenging the SFPUC’s determination must be brought within 30 days following the filing of such notice. Actions have been, and in the future may be, filed against the SFPUC challenging a project’s compliance with CEQA, including the adequacy of the EIR and other environmental documents, for particular projects. If an action challenging the SFPUC’s compliance with CEQA is successful , the particular project could be delayed, revised, suspended or canceled. CEQA also contains a number of exemptions, which the SFPUC uses for its projects when appropriate.

As part of its regular planning and budgetary process, the San Francisco Planning Department gives careful attention to environmental considerations. All projects are evaluated under the SFPUC’s environmental evaluation procedures, developed in compliance with federal and State laws and regulations, and City Ordinances and Administrative Code procedures.

FINANCING OF CAPITAL IMPROVEMENTS
Long Term Financing of Capital Program
Pursuant to the Water Enterprise’s Ten-Year Financial Plan for Fiscal Year 2022-23 to Fiscal Year 2031-32, adopted by the Commission in February 2022, long-term debt financing is projected to fund approximately $1.8 billion of the Ten-Year Capital Plan. Revenue (pay-as-you-go) funding is expected to provide approximately $624.0 million of funds for a portion of the remaining funding of the Ten-Year Capital Plan. Approximately $210 million of the Ten- Year Capital Plan, from Fiscal Year 2023-24 through Fiscal Year 2031-32, is unfunded. The SFPUC plans to review and adjust project scopes, schedules, and costs to tie the capital plan to the resources to execute it prior to adopting an updated 10-year Capital Plan in 2024. Long-term debt financing is expected to be comprised primarily of Additional Series of Bonds and the CWSRF Loan for the Westside Recycled Water Project. See “OBLIGATIONS PAYABLE FROM REVENUES – State and Federal Loans.”
Interim Funding Program Facilities
The SFPUC utilizes the Interim Funding Program to meet the expenditure and encumbrance needs of capital projects on an interim basis through design and into the early project construction phase. The Interim Funding Program is authorized for the Water Enterprise in the aggregate principal amount of $500 million. Of this amount, $400 million is authorized for the SFPUC to issue Commercial Paper Notes and the remaining $100 million is in the form of a bank revolving credit agreement, which permits the SFPUC to make draws directly from the bank, with the SFPUC’s payment obligation evidenced by the Revolving Notes.

Interim funding program obligations are then refunded and consolidated into either long- term revenue bond issues or a Parity State Loan when the outstanding and encumbered amount of the interim funding obligations approaches authorized limits. This approach allows the SFPUC to take advantage of lower short -term interest rates, and to size and closely time long-term financings with projected need.

As of July 1, 2021, the SFPUC had approximately $106 million principal amount of Commercial Paper Notes outstanding and no amount under the Revolving Notes is outstanding. The SFPUC anticipates issuing additional Commercial Paper Notes and making draws directly on the U.S. Bank Trust Company, National Association facility to provide interim financing for Water Enterprise capital projects. See “OBLIGATIONS PAYABLE FROM REVENUES – Subordinate Debt and Interim Funding Program.”

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Sources of Funding the Capital Improvement Program
The following table sets forth the projected sources of funds for the first five years of the Water Enterprise’s capital improvement program as set forth in the Ten- Year Capital Plan for Fiscal Year 2022-23 to Fiscal Year 2031-32. The repayment of projected principal and interest on these future debt issues was incorporated into the development of the SFPUC’s approved retail water rates through Fiscal Year 2021 -22, and has also been reflected in the remaining projection period set forth in the Ten- Year Fin ancial Plan for Fiscal Year 2022-23 to Fiscal Year 2031- 32. Pursuant to the WSA, a share of debt service associated with improvements to the Regional Water System, including debt service associated with WSIP financing, is the responsibility of the Wholesa le Customers.

Pursuant to the Ten-Year Financial Plan for Fiscal Year 2022-23 to Fiscal Year 2031-32, the SFPUC projects that retail water rates will increase annually by an average of approximately 4 % from Fiscal Year 2022-23 to Fiscal Year 2031-32. However, no retail rate increases beyond June 30, 20 22 have been proposed to, or adopted by, the Commission or submitted to the Board of Supervisors, and any future retail water rate increases are subject to future approval by the Commission, subject to the Board of Supervisors’ ability to reject rate increas es. See “FINANCIAL OPERATIONS.”
The following table reflects the SFPUC’s proposed capital budget for Fiscal Year 2022-23.

TABLE 17

WATER ENTERPRISE CAPITAL IMPROVEMENT PROGRAM
FUNDING SOURCES(1)
FOR FISCAL YEARS ENDED JUNE 30
Appropriations 2023(2) 2024 2025 2026 2027 Total
Revenue Bonds /
Parity State Loan $120,205,702 $379,790,998 $463,567,214 $306,957,908 $173,058,842 $1,443,580,664 Water Revenues 45,965,926 48,165,658 77,100,000 82,100,000 63,545,000 316,876,584 Capacity Charge
Revenues 2,157,000 2,211,000 1,520,000 1,520,000 1,520,000 8,988,000 Total Sources(3) $168,328,628 $430,167,656 $542,187,241 $390,577,908 $238,183,882 $1,769,445,248 ____________________
(1) Amounts are based on anticipated appropriations and are projections from the Water Enterprise Ten -Year Capital Plan. Actual results may differ materially from these projections. See “FORWARD-LOOKING STATEMENTS” above. (2) Budgeted. The City’s Fiscal Year 2022-23 and Fiscal Year 2023-24 budget was adopted by the Commission on February 8, 2022 and is currently under review by the Board of Supervisors. Only the budget for Fiscal Year 2022-23 of the Ten-Year Capital Plan has been proposed.

See “FINANCIAL OPERATIONS – General – City Budget Process. (3) A portion of the Ten-Year Capital Plan is “unfunded.” The SFPUC plans to review project scopes, schedules, and costs to tie the capital plan to the resources to execute it prior to the February 2023 adoption of an updated Ten-Year Capital Plan. The unfunded amount for Fiscal Years 2023 through 2027 is approximately $173 million.

Source: SFPUC.

FINANCIAL OPERATIONS
General
The SFPUC is a department of the City and, as such, the financial operations of the SFPUC’s three enterprises are included in the Comprehensive Annual Financial Report of the City and shown as enterprise funds.

The following information is provided with respect to the Water Enterprise only and does not purport to reflect the financial position of the SFPUC or the City as a whole.

Basis of Accounting. The accounts of the Water Enterprise are organized on the basis of a propriet ary fund type, specifically an enterprise fund. The financial activities of the Water Enterprise are accounted for on a flow of

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economic resources measurement focus, using the accrual basis of accounting. Under this method, all assets and liabilities associated with its operations are included on the statement of net assets; revenues are recorded when earned, and expenses are recorded when liabilities are incurred.

The SFPUC applies all applicable GASB pronouncements.

City Budget Process . The SFPUC’s operating and capital budget preparation and approval is a part of a City-wide process. The SFPUC is one of several departments that prepare biannual budgets. The Commission reviews and approves the SFPUC’s two- year budget, which is then submitted to the M ayor’s Office for review. The Mayor then incorporates the proposed budget, with amendments, into the City- wide budget that is submitted to the Board of Supervisors for approval. Under the Charter, the Board of Supervisors may increase or decrease any proposed expenditure in the Mayor’s budget so long as the aggregate changes do not cause the expenditures to exceed the total amount of expenditures proposed by the Mayor. The Charter further provides that the Mayor may reduce or reject any expenditure authorized by the Board of Supervisors except appropriations for bond interest, redemption or other fixed charges, subject to reinstatement of any such expenditure by a two-thirds vote of the Board of Supervisors.

City Services Auditor . On November 4, 2003, voters in the City adopted Proposition C, an ordinance that established the City Services Auditor (“CSA”), an audit function within the Office of the City Controller. Pursuant to the provisions of this ordinance, which have been incorporated into the Charter, the CSA has broad oversight authority and responsibilities including, but not limited to, (i) reporting upon level of effectiveness for City public services, (ii) auditing financial and management performance of City departments and functions, (iii) ensuring the financial integrity and improving the overall performance and efficiency of City government, and (iv) maintaining a whistleblower hotline to investigate upon reports of fraud, waste and abuse.

Sources of Revenue. The Water Enterprise’s principal sourc e of revenue is the sale of water to its Retail Customers and Wholesale Customers.

The setting of water rates by the City is not subject to any State or federal regulatory approval. The SFPUC’s ability to generate revenue may be limited by certain provisions of the State Constitution and the Charter of the City.

See “CONSTITUTIONAL, STATUTORY AND CHARTER LIMITATIONS.” Allocation of Hetch Hetchy Project Costs . A number of the facilities of the Hetch Hetchy Project are joint assets and are used for both water transmission and power generation and transmission, benefitting both Hetch Hetchy Water and the Power Enterprise. All power sales revenues are allocated to the Power Enterprise. Per negotiation with Wholesale Customers, operating and capital costs benefitting the Power Enterprise and 55% of operating and capital costs that jointly benefit both Hetch Hetchy Water and the Power Enterprise are allocated to the Power Enterprise.

Operating and capital costs benefitting Hetch Hetchy Water and 45% of operating and capital costs jointly benefitting both Hetch Hetchy Water and the Power Enterprise are allocated to the Water Enterprise. Costs allocated to the Water Enterprise are paid through an inter-enterprise transfer from the Water Enterprise to Hetch Hetchy Water and Power.

Such transfers constitute “Operation and Maintenance Costs of the Enterprise.” See “– Operating and Maintenance Expenses – Inter-Enterprise Transfers.”
Financial Management Policies . To support sound financial management practices during periods of instability and to ensure organizational accountability and disciplined decision making, and to maintain the highest practical credit ratings, the SFPUC conducted an extensive peer review study to compare the financial policies of other United States municipal utilities, analyze rating agency evaluations of financial policies and recommend changes to the SFPUC’s existing financial policies. Based on this study, the Commission adopted in February and March 2017 a Debt Service Coverage Policy, a Capital Financing Policy and a Fund Balance Reserve Policy. Such new policies replaced the SFPUC’s existing Fund Balance Reserve Policy. The SFPUC subsequently revised its Debt Management Policies & Procedures, which the Commission adopted on November 26, 2019. See “– Financial Management Policies.” In addition, the Commission adopted a Ratepayer Assurance Policy to address the prudent use of ratepayer funds and the establishment of rates and charges and to ensure process transparency.

Financial Reporting System. The City implemented a new financial and procurement system in July 2017.

Trained City staff have been using the system to report accounting, procurement and financial information, starting with the information for Fiscal Year 2017-18.

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Wholesale Water Sales Revenue
Wholesale Rate -Setting Process . Wholesale Customer rates are determined annually based upon the Wholesale Customers’ collective share of the Water Enterprise’s total revenue requirements, known as the “Wholesale Revenue Requirement” in the WSA. The Wholesale Revenue Requirement under the WSA consists of the sum of the Wholesale Customers’ allocated shares of the following costs of the Water Enterprise in providing water to the Wholesale Customers: operating and maintenance expenses, administrative and general expenses, property taxes, and the “Suburban Hetch Hetchy Assessment,” the costs of operating the Hetch Hetchy Project allocated exclusively to the Water Enterprise or jointly to the Water Enterprise and the Power Enterprise.

The cost of service for Wholesale Customers includes a pro- rata share of Operation and Maintenance Costs of the Enterprise. Capital costs are recovered under the cash method as needed to cover revenue -funded capital improvements of the Regional Water System and debt service associated with bond -funded capital projects. The operating costs and plant investment for Hetch Hetchy Water and Power are first classified as power -specific, water-specific or joint. The water related costs and water’s share of joint costs are reflected in the Wholesale Revenue Requirement.

In addition to a pro-rata share of Operation and Maintenance Costs of the Enterprise, debt service and revenue funded capital, the Wholesale Customers agreed to pay a fixed annual charge to reimburse the Water Ent erprise for a pro rata share of undepreciated investment in facilities capitalized prior to July 1, 2009. The WSA allowed the Wholesale Customers to repay the undepreciated value of existing assets as well as construction work in progress as of June 30, 2009, in equal annual payments over the 25 years of the WSA at an annual interest rate of 5.13%. On January 1, 2013, State legislation authorizing BAWSCA to prepay the remaining value on existing regional assets to achieve cost savings became effective. On February 27, 2013, the Wholesale Customers through BAWSCA made an early repayment of $356 million to the outstanding balance owed to the Water Enterprise.

The WSA allowed the Wholesale Customers to reimburse the Water Enterprise for any revenue funded project expenditures made in Fiscal Year 2009-10 through Fiscal Year 2011-12 using funds appropriated, but unspent, prior to July 1, 2009 over 10 years with repayment beginning in Fiscal Year 2014-15 and ending in Fiscal Year 2023- 24 at an annual interest rate of 4.00%. The annual payment of $1.2 million has been incorporated into wholesale rates.

Finally, the WSA contains a rate device known as the balancing account. Any difference between the revenues received and the actual earned revenues associated with the allocated cost of wholesale service is placed in the balancing account and used to adjust the following year’s rate recovery up or down depending on whether there is a shortfall or surplus in the balancing account. The projected year-end amount in the balancing account for Fiscal Year 2021-22 is approximately $ 87.1 million owed by the SFPUC to the Wholesale Customers. See “APPENDIX B – SUMMARY OF CERTAIN PROVISIONS OF THE WATER SUPPLY AGREEMENT – Balancing Account.” Statutory and Contractual Limits on Wholesale Water Rates . The sale and delivery of water to the Wholesale Customers under the WSA are subject to the “Rules and Regulations Governing Water Service to Customers” of the Water Enterprise adopted by the Commission, and as they may from time to time be amended, that are (1) applicable to the sale and delivery of water by the SFPUC to the Wholesale Customers, (2) reasonable, and (3) not inconsistent with either the WSA or with an individual contract.

Wholesale Water Rate Adjustments . Unde r the WSA, adjustments to the Wholesale Customers’ rate schedules, other than emergency rate adjustments and drought pricing, discussed below, are coordinated with the budget development process. If the SFPUC desires to increase Wholesale Customer rates, it is required to provide certain yearly budget information to the Wholesale Customers prior to adoption of any such rate increases. Failure to do so will not prohibit the SFPUC from adoption of such rates, but, in the event of such failure, the Wholesale Customers may either invoke arbitration, or seek injunctive relief to compel the SFPUC to remedy the failure as soon as reasonably practical.

The SFPUC may increase the water rates applicable to the Wholesale Customers without compliance with the above described procedures in the event a drought, earthquake, other act of God, malfunctioning of the Regional Water System or other emergency which requires an increase in rates. Rates may be increased on an emergency basis

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to cover operating expenses and capital costs. Any such emergency rate increase must be accompanied by a rate increase for Retail Customers of an equal percentage.

Any emergency rate surcharge adopted by the SFPUC could go into effect within 30 days of such adoption (subject to any action by the Board of Supervisors) and would remain in effect only until the next budget coordinated rate-setting cycle, at which time it can be reviewed for continuance and modification.

Drought pricing for Wholesale Customers, if required, could also be changed unde r similar terms and conditions set forth for emergency rate increases. Any drought -related pricing or surcharge adopted by the Commission would also remain in effect only until the next budget coordinated rate -setting cycle. [Any under consideration?]
Historical Wholesale Water Rate Adjustments . The following table lists wholesale water rate adjustments since Fiscal Year 2012-2013 for the Wholesale Customers. No wholesale rate increases are expected until Fiscal Year 2023-24.

TABLE 18

HISTORICAL PERCENTAGE INCREASES (DECREASES)

IN WHOLESALE WATER RATES
Date Change in Wholesale Rates (1)
July 2012 11.4
July 2013 (16.4)
July 2014 19.6
July 2015 28.0
July 2016 9.3
July 2017 0.0
July 2018 0.0
July 2019 0.0
July 2020 0.0
July 2021 0.0
____________________
(1) Wholesale rates are set prospectively based on an estimate of the Wholesale Revenue Requirement and reflect annual true ups. As such, rates may vary significantly from year to year.

Source: SFPUC Audited Financial Statements.

Arbitration for Disputes . The Prior Master Water Sales Contract had a binding arbitration provision for disputes related to wholesale rate setting by the SFPUC. The SFPUC and its Wholesale Customers arbitrated one dispute over the 25- year term of the Prior Master Water Sales Contract. The WSA continues the practice of binding arbitration and the SFPUC and its Wholesale Customers have settled other disputes, without invoking arbitration, as part of the true up process for determining the actual Wholesale Revenue Requirement following the close of each fiscal year.

Retail Water Sales Revenue
Retail Rate Structure . Retail Customers pay a flat monthly service charge based on meter size plus a volumetric charge for water usage based on one -month meter readings. Volumetric charges for single- and multi-family residential customers are based on a two-tiered rate structure, where the first tier is applicable to the first 4 CCF (400 cubic feet) of use per month (single -family) or 3 CCF (300 cubic feet) of use per month (multi -family), and the second tier is applicable to all additional use for both single - and multi- family residential customers .

Volumetric charges for non- residential customers are based on a uniform rate. The table below details retail water rates for Fiscal Year 2021-22.

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TABLE 19

RATES FOR RETAIL WATER SERVICE IN SAN FRANCISCO
AS OF JULY 1, 2021
Single-Family
Residential
($/CCF)(1)
Multi-Family
Residential
($/CCF)
Non-Residential
($/CCF)
Tier 1(2) (0-4 or 0-3 CCF) 9.60 9.60 -
Tier 2 (All other usage) 10.71 10.76 -
Uniform(3) - - 10.55
____________________
(1) One “CCF” equals 100 cubic feet of water (equal to 748 gallons). (2) Tier 1 for single-family residential is from 0-4 CCF; tier 1 for multi-family residential is from 0-3 CCF. (3) Different rates apply to builders and contractors, fire service, interruptible irrigation, docks, and ships, and to a small percentage of Non-Residential customers.

Source: SFPUC, Fiscal Year 2021-22 Rates Schedules and Fees for Water, Power & Sewer Service.

The rates in Table 19 do not reflect any drought surcharge. See “ – Retail Water Rate Adjustments.” The following table compar es the typical monthly charges for representative Retail Customer classes based on average use.

TABLE 20

TYPICAL MONTHLY CHARGES FOR RETAIL WATER SERVICE IN SAN FRANCISCO FISCAL YEAR 2021-22
Customer Type
Average
Use (CCF)
Meter
Size
Fixed
Charge
Volume
Charge
Total
Monthly
Charges
(Volume +
Fixed)
Average Single Family Residence 5.3 5/8” $ 15.17 $ 47.92 $ 63.09 Larger Single Family Residence 12.0 5/8” 15.17 115.92 131.09 Large Apartment Building 101.0 3” 142.97 835.23 978.20
Large Office 351.0 3” 142.97 3,443.31 3,586.28
Department Store 340.0 4” 219.65 3,335.40 3,555.05
Hotel 3,314.0 6" 432.65 32,510.34 32,942.99
____________________
Source: SFPUC Fiscal Year 2021-22 Rates Schedules and Fees for Water, Power & Sewer Service.

Retail Rate-Setting Process. The SFPUC is authorized and required under the Charter and Proposition E to set rates, fees , and other charges in connection with providing the utility services under its jurisdiction, subject to rejection – within 30 days of submission – by resolution of the Board of Supervisors. If the Board of Supervisors fails to act within 30 days, the rates will become effective without further action.

Under the Charter, in setting retail rates, fees, and charges (for water, wastewater and power utility services) the SFPUC is required to do the following:
(1) Establish rates, fees, and charges at levels sufficient to improve or maintain financial condition and bond ratings at or above levels equivalent to highly rated utilities of each enterprise under its jurisdiction, meet requirements and covenants under all bond resolutions and indentures (including, without limitation, increases necessary to pay for the retail customers’ share of the debt service on bonds and operating expenses of any State financing authority), and provide sufficient resources for the continued financial health (including appropriate reserves), operation, maintenance and repair of each enterprise, consistent with good utility practice.

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(2) Retain an independent rate consultant to conduct rate and cost of service studies for each utility at least once every five years.
(3) Set retail rates, fees, and charges based on the cost of service. (4) Conduct all studies mandated by applicable State and federal law to consider implementing connection fees for water and clean water facilities servicing new development. (5) Conduct studies of rate-based conservation incentives and rate structures to help low-income users, and to use the results of such studies to establish rates, fees , and charges, in accordance with applicable State and federal laws.
(6) Adopt annually a rolling five-year forecast of rates, fees and other charges. (7) Establish a Rate Fairness Board consisting of seven members: the City Administrator or his or her designee; the Controller or his or her designee; the Director of the Mayor’s Office of Public Finance or his or her designee; two residential retail customers, one appointed by the Mayor and one by the Board of Supervisors; and two business retail customers, one a large business customer appointed by the Mayor and one a small business customer appointed by the Board of Supervisors. Duties for the Rate Fairness Board include:
(a) an annual review of a five-year rate forecast;
(b) hold one or more public hearings on annual rate recommendations before the SFPUC adopts rates;
(c) provide a report and recommendations to the SFPUC on any rate proposal; and, (d) in connection with periodic rate studies, recommend rate polic ies and cost allocations among retail utility customer classifications, subject to any outstanding bond requirements.

The Rate Fairness Board is not authorized to reject proposed rates approved by the Commission.

Retail rates and the rate -setting process must also comply with the requirements of the State Constitution, including notice, protest and public hearing requirements. See “CONSTITUTIONAL, STATUTORY AND CHARTER LIMITATIONS – State Law Limitations.”
Retail Water Rate Adjustments. The SFPUC’s retail rates and charges for delivered water are set to [ equal] the cost of operation, maintenance, replacement, debt service and other costs incurred in gathering, treating, and delivering water to its retail customers . The SFPUC has regularly reviewed and often increased its retail water rates to fund operating and capital costs. Pursuant to the Charter, the SFPUC retained an independent consultant to who completed a cost of service study in 2018.

In April 2018, the SFPUC approved retail water rates and charges for the four -year period effective July 1, 2018 through June 30, 2022. Significantly, in the rates adopted in April 2018, the SFPUC also approved a new drought surcharge. The drought surcharge allow s the SFPUC to implement a temporary drought surcharge which appl ies to the volumetric portions of both water and wastewater rates and is triggered when the SFPUC imposes delivery reduction in accordance with the Retail Water Shortage Allocation Plan and calls for either voluntary or mandatory water reduction. In November 2021, the Commission declared a Water Shortage Emergency and, among other actions, adopted a systemwide 10% water use reduction target from Fiscal Year 2019-20 baselines (consisting of a 5% retail customer water use reduction and 13.7% wholesale water use reduction, for a collective systemwide water -use reduction of 10%), and confirmed an effective date of April 1, 2022 for a mandatory Temporary Drought Surcharge of a not -to-exceed 5% increase in current volumetric water and wastewater rates for retail water and wastewater customers. The Water Shortage Emergency will remain in effect until rescinded by the Commission, based on drought conditions, State actions related to curtailments, and customer response to calls for water use reductions .

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The SFPUC anticipates that r ates for Fiscal Year 2022-23 will remain unchanged from rates in Fiscal Year 2021-22, except for rates which are:
• Changed by the Consumer Price Index released by the City Controller’s Office; • Adjusted by the 20- City Average Construction Index (CCI) published by Engineering News-Record (“ENR”) Magazine.

The SFPUC expects to retain a consultant again to perform a cost -of-service analysis prior to adopting rates beginning with Fiscal Year 2023-24.

The following table lists retail water rate adjustments since Fiscal Year 2012-13 through Fiscal Year 2021-22.

TABLE 21

HISTORICAL PERCENTAGE INCREASES (DECREASES)

IN RETAIL WATER RATES
Date Retail Rates
July 2012(1) 12.5%
July 2013(1) 6.5
July 2014(2) 12.0
July 2015(2) 12.0
July 2016(2) 10.0
July 2017(2) 7.0
July 2018(3) 9.0
July 2019(3) 8.3
July 2020(3) 7.8
July 2021(3) 7.9
____________________
(1) Five-year retail rates effective July 1, 2009
(2) Five-year retail rates effective July 1, 2014
(3) Five-year retail rates effective July 1, 2018.

Source: SFPUC, Financial Services.

The SFPUC may adjust and re-classify rates, fees, and charges, but will not decrease them unless, following such reduction, the rates, fees , and charges will continue to be sufficient to meet the rate covenants set forth in the Indenture. See “SECURITY FOR THE BONDS – Rate Covenants.” There is no rate increase planned for Fiscal Year 2022-23. A cost of service study is expected to be completed to inform future rate proposals.

Billing and Collection Procedures. All Retail Customers are billed monthly for their respective metered water use. In the event of non- payment, the SFPUC has the authority and power to discontinue service and, in owner-occupied buildings and master metered apartment buildings, to record liens on property.

The SFPUC has developed a series of emergency measures to respond to COVID -19 to provide relief to its customers. See “THE PUBLIC UTILITIES COMMISSION – COVID-19 Pandemic.” Delinquencies. The table below shows the delinquency in collection of water charges from Retail Customers as of July 1, 2019, and July 1, 202 0. The SFPUC considers its rates of payment delinquency, service discontinuance for non-payment, and write-offs for uncollectible accounts to be low by water industry standards for urban areas.

The COVID- 19 pandemic has resulted in increased rates of payment delinquencies and write- offs for uncollectible accounts. See “THE PUBLIC UTILITIES COMMISSION – COVID-19 Pandemic.”

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TABLE 22

ACCOUNTS RECEIVABLES AGING REPORT

____________________
Source: SFPUC, Financial Services.

Once an account is delinquent, a series of notices are sent to the customer and if payment is still not made, action to shut -off the water supply is initiated. However, if the delinquent account is in the name of the property owner and payment is still not made despite such notices, the customer will receive a lien warning notice. After a lien notice is delivered, a lien hearing is held and, if the bill still remains outstanding, the lien is recorded and can only be removed upon full payment of all unpaid charges, plus administrative fees and interest. Liens not paid during the Fiscal Year in which they are recorded are transferred to the City Tax Collector’s Office, Bureau of Delinquent Revenues for collection as a lien against the property. Accounts for which property transfers occurred prior to recording the lien and closed accounts with amounts less than $25 are normally written off as uncollectible.

Because of these collections processes, the SFPUC’s annual write- offs for water accounts remain relatively low. There is, however, currently a moratorium on water disconnections and collection activities, set to expire in June 2022 for non-residential customers and July 2022 for certain residential customers, due to the COVID-19 Emergency.

See “THE PUBLIC UTILITIES COMMISSION – COVID-19 Pandemic.” The following table shows a five-year history of write-offs for uncollectible accounts.

As of July 1, 2019 As of July 1, 2020 As of July 1, 2021 Period Amount
Percent of
Total Amount
Percent of
Total Amount
Percent of
Total
0 - 30 Days $25,118,017 91.13% $27,085,011 83.90% $25,978,069 72.88% 31 - 60 Days 1,535,588 5.57 2,352,327 7.29 2,604,032 7.31 61 - 90 Days 389,752 1.41 1,097,424 3.40 1,288,580 3.62 Over 90 Days 520,117 1.89 1,746,125 5.41 5,772,265 16.19 Total $27,563,475 100.00% $32,280,887 100.00% $35,642,946 100.00%

Credit Balances ($1,898,527) ($1,602,196) ($2,392,635) Total Aged
Receivables $25,664,948 $30,678,691

$33,250,310

Less Receivables from
Municipal Customers ($944,653) ($798,976)

($916,948)

Less Allowance for
Doubtful Accounts (369,294) ($1,133,302)

(4,912,131)

Accounts Receivable,
Net of Allowance $24,351,001 $28,746,413

$27,421,232

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TABLE 23

WRITE-OFFS FOR UNCOLLECTIBLE ACCOUNTS
Fiscal Year Amount
2016-17 73,315
2017-18(1) 145,863
2018-19 3,873
2019-20 3,244
2020-21 1,828
____________________
(1) Amounts deemed uncollectible by the Bureau of Delinquent Revenue written off in Fiscal Year 2017-18.

Source: SFPUC, Financial Services.

Comparative Retail Water Rates . The following table compares monthly charges by selected local water providers for a typical single-family residential usage account with a 5/8-inch meter.

TABLE 24

COMPARATIVE TYPICAL MONTHLY RESIDENTIAL WATER CHARGES

Water Provider
Typical
Monthly Charge
San Francisco Public Utilities Commission(1) $69.21
City of Palo Alto 60.21
Alameda County Water District 55.88
East Bay Municipal Utility District 53.37
Contra Costa County Water District 52.48
City of Hayward 50.80
City of Santa Clara 35.42
____________________
(1) Based on water charges as of July 1, 2021.

Source: SFPUC, Financial Services.

Impact of Weather on Revenues
Weather conditions impact water sales. If retail water sales are less than forecasted, retail water sales revenues will be less than forecast without increases in retail water rates. For example, actual water sales were less than water sales forecasted at the time water rates were adopted for Retail Customers for the four -year period from Fiscal Year 2014-15 through Fiscal Year 2017 -18 and retail water sales revenues for such period were significantly less than forecasted water sales revenues. However, the SFPUC was able to offset lower revenues to some extent with reductions to expenditures and retail rates were thereafter increased to better reflect the likely long-term reduction in water usage.

Rainfall in the State has been below normal during the past three years. On November 23, 2021, the SFPUC declared a local water shortage emergency and called for a voluntary systemwide 10% water reduction to align with service area needs and water use levels consistent with the WSA’s Water Shortage Allocation Plan. The 10% overall reduction will consist of 5% for retail and 13.7% for wholesale. The SFPUC will impose a drought surcharge of up to 5% effective April 1, 2022. See “THE WATER ENTERPRISE – Water Supply Reliability and Drought Planning,” and “—Recent Drought; Current Water Conditions.”

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Capacity Charges
The SFPUC imposes a capacity charge on any Retail Customer requesting a new connection, added collection or treatment capacity, or a change to an existing connection to the water distribution system. Beginning July 1, 2021, the capacity charge is $1,931 per equivalent 5/8 inch meter. The capacity charge is adjusted on July 1 of each year by the annual change in the 20-City Average Construction Cost Index published by ENR Magazine. The SFPUC takes a conservative approach to budgeting for capacity charge revenues; new account growth is projected at less than 0.1% annual growth, despite greater than budget capacity charges revenue.

Operating and Maintenance Expenses
“Operating and Maintenance Expenses ” cover the general operations expenses of the Water Enterprise.

These expenses include labor and fringe benefits, contractual services, materials and supplies, depreciation, general and administrative, services from other departments and other miscellaneous costs. See “HISTORICAL OPERATING RESULTS.” Services from other departments include payment for services from other City departments, such as the City Attorney’s Office and the General Services Agency. Operating and Maintenance Expenses include payments to Hetch Hetchy Water and Power for services related to water storage and delivery. See “– Inter-Enterprise Transfers” and “SECURITY FOR THE BONDS – Rate Covenants.”
Allocation of Costs. The SFPUC allocates various common costs it incurs among the Water Enterprise, Hetch Hetchy Water and Power and the Wastewater Enterprise. Allocations are based on the SFPUC management’s best estimate and may change from year to year depending on activities undertaken by each enterprise and information available. The most recent cost allocation review was done in 2018. For Fiscal Years 2020-21 and 2019-20, the SFPUC has allocated $48.4 million and $45.5 million, respectively, in administrative costs to the Water Enterprise, which are included in the financial statements under various expense categories.

Inter-Enterprise Transfers. An annual transfer occurs from the Water Enterprise to Hetch Hetchy Water and Power to pay for services related to water storage and delivery. The projected budget transfer amount is $49.6 million for Fiscal Year 2022-23 and was $45.8 million for Fiscal Year 2021-22. Should Hetch Hetchy Water and Power incur higher capital costs or higher operating costs in the future, the amount of these transfers could increase.

Payments to/from the City.

Payments to City for Interdepartmental Services . A variety of City departments provide services such as engineering, purchasing, legal, data processing, telecommunications and human resources to the Water Enterprise and charge amounts designed to recover those costs. The projected budget amount is $25.2 million for Fiscal Year 2022-23 and was $25.1 million for Fiscal Year 2021-22.

Lease Certificate of Participation Financing. On October 7, 2009, the City issued $167.67 million in fixed-rate Certificates of Participation, Series 2009 C and D, to fund the headquarters of the SFPUC at 525 Golden Gate Avenue. Pursuant to a Memorandum of Understanding between the City and the SFPUC, the SFPUC agreed to reimburse the City General Fund for all costs in conne ction with this City financing. This obligation is subordinate to debt service on the Bonds and payments related thereto are allocated among the three SFPUC Enterprises. See “OBLIGATIONS PAYABLE FROM REVENUES – Other Subordinate Obligations Payable from Revenues.”
Water Payments from Other Agencies . The SFPUC receives payments from other agencies of the City for their share of the proportionate cost of the service provided to them. T he Water Enterprise charg es all City departments for water (with the exception of itself and the Fire Department for water dispensed from fire hydrants). The SFPUC projected budget is to collect payments from other City agencies totaling approximately $16.0 million in Fiscal Year 20 22-23 and the SFPUC collected $17.6 million in Fiscal Year 2021-22.

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Financial Management Policies
Debt Management Policies & Procedures . The SFPUC has established “Debt Management Policies & Procedures” (the “Debt Policies”) for debt financing under its jurisdiction. The SFPUC has also established separate “SFPUC Bond Disclosure Policies & Procedures” (the “ Disclosure Policies ”) which are appended to the Debt Policies. The Debt Policies, including the appended Disclosure Policies, apply to all SFPUC enterprises, including the Water Enterprise, and are intended to enable the SFPUC to effectively manage its debt issuance and administration practices and comply with all debt issuance and administration rules and regulations. The Debt Policies are reviewed bi-annually and revised, as necessary, with Commission approval.

Revisions to the Debt Policies were most recently adopted by the Commission on November 26, 2019. This included revisions to three key areas:
(1) Disclosure – The Disclosure Policies now cover two amendments that were made to Rule 15c2- 12, effective February 27, 2019 (the “Rule 15c2- 12 Amendments”). See the Listed Events 15 and 16 in “APPENDIX E – FORM OF CONTINUING DISCLOSURE CERTIFICATE.” In addition, pursuant to the Disclosure Policies, the SFPUC will develop a Disclosure Practices Working Group (the “ DPWG”). The DPWG will meet at least semiannually to better and more effectively administer the SFPUC’s continuing disclosure requirements, particularly to monitor the SFPUC’s financial obligations and financial difficulties, if any, in light of the Rule 15c2- 12 Amendments.

The DPWG is comprised of the Assistant General Manager, Business Services and Chief Financial Officer, two Deputy Chief Financial Officers and the Debt Manager of the SFPUC, with legal consultation from the City Attorney’s Office and the SFPUC’s outside disclosure counsel. (2) Variable Rate Obligations – The Debt Policies, which set forth and describe various types of debt obligations that the SFPUC may issue, now cover new amendments made to the Wastewater bond indenture that will allow the SFPUC to issue variable rate obligations of the Wastewater Enterprise with more market -standard provisions. These amendments do not apply to any variable rate obligations issued by the Water Enterprise.
(3) WIFIA Loans – In July 2018, the SFPUC executed a loan in an approximate amount of $699 million with the United States Environmental Protection Agency pursuant to the federal Water Infrastructure Finance and Innovation Act (the “WIFIA Loan”). The WIFIA Loan provides partial funding of the Biosolids Digester Facility Project, a project of the Wastewater Enterprise’s Sewer System Improvement Program. This was the first WIFIA loan executed by the SFPUC. The Debt Policies were revised to add WIFIA loans as a permitted form of low-cost debt financing instrument, comparable to the low -cost State Revolving Fund loans that the SFPUC has, from time -to-time, executed with the SWRCB. No WIFIA loans have been executed for the Water Enterprise.

The SFPUC makes no representation that these policies will not be revised or amended and, except to the extent required for compliance with the terms of the Indenture, makes no representation that these policies will be followed by the SFPUC.

Debt Service Coverage Policy. The Commission adopted a debt service coverage policy (the “Debt Service Coverage Policy”) on March 28, 2017, which applies to all SFPUC enterprises, including the Water Enterprise.

Pursuant to the Debt Service Coverage Policy, to ensure that the SFPUC maintains access to low -cost capital and retains financial flexibility for contingencies, the SFPUC will aim to adopt budgets, rates and financial plans that generate revenues such that debt service coverage on an Indenture basis (including certain available fund balances) will be at least 1.35 times and debt service coverage on a current basis will be at least 1.10 times.

The Indenture includes a rate covenant of 1.25 times coverage (including certain available fund balances).

See “SECURITY FOR THE BONDS – Rate Covenants – Debt Service Coverage” and “HISTORICAL OPERATING RESULTS.”

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The SFPUC makes no representation that this policy will not be revised or amended and, except to the extent required for compliance with the terms of the Indenture, makes no representation that this policy w ill be followed by the SFPUC.

Capital Financing Policy . The Commission adopted a capital financing policy (the “ Capital Financing Policy”) on March 28, 2017, which applies to all SFPUC enterprises, including the Water Enterprise. The SFPUC relies mainly on current revenue and debt financing to pay for capital assets or improvements. According to the Capital Financing Policy, the appropriate mix of current revenues versus debt financing depends, in part, on the capital investment lifecycle of the Water Enterprise. Accordingly, the SFPUC has determined that over the 10-year financial planning horizon, the SFPUC will aim to pay for a minimum ranging between 15% and 30% of the Water Enterprise’s capital budget from current revenues.

Fund Balance Reserve Policy. The Commission adopted a fund balance reserve policy (the “Fund Balance Reserve Policy ”) on February 28, 2017, which applies to all SFPUC enterprises, including the Water Enterprise.

Pursuant to the Fund Balance Reserve Policy, for the time period covered in the 10- Year Financial Plan, the SFPUC will aim to propose operating and capital budgets and rates for adoption such that the Fund Balance Reserve totals a minimum of 90 days or 25% of operations and maintenance expenses (including programmatic projects and excluding debt service and revenue-funded capital) throughout the forecast period. Amounts in excess of such minimum will be considered for contingencies and rate stabilization.

Investment of SFPUC Funds
The SFPUC’s pooled deposits and investments are invested pursuant to St ate law and the investment policy established from time to time by the City Treasurer and overseen by the Treasury Oversight Committee. The current policy seeks the preservation of capital, liquidity and yield, in that order of priority. Under the City Treasurer’s current investment procedures, the SFPUC’s pooled deposits and investments are invested in the City’s larger pooled investment fund (the “City Pool”). Among other purposes, the City Pool serves in effect as a disbursement account for expenditures from the City’s various segregated and pooled funds. Investments are generally made so that securities can be held to maturity. The City Treasurer calculated the weighted average maturity of these investments as of January 31, 2022, to be 631 days.

The following table sets forth the approximate book values of the investments held in the City Pool reported by the City Treasurer as of January 31, 2022. The Water Enterprise’s pooled deposits and investments accounted for approximately $[____] million, or approximately [___]%, of such amounts. The Wastewater Enterprise and the Power Enterprise each have their own pooled deposits and investments that are separate from the Water Enterprise.

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TABLE 25

CITY POOLED INVESTMENT FUND
(AS OF JANUARY 31, 2022)
Investments
Book Value
(millions)
U.S. Treasuries $4,747.8
Federal Agencies 4,874.1
Public Time Deposits 40.0
Negotiable CDs 2,195.0
Commercial Paper 533.2
Money Market Funds 814.1
Supranationals 496.7
Total $13,701.9
____________________
Source: Office of the Treasurer & Tax Collector of the City and County of San Francisco.

The SFPUC’s non -pooled deposits and investments consist primarily of funds related to the SFPUC’s Outstanding Bonds, which are invested pursuant t o policy established by the SFPUC, subject to the restrictions contained in the applicable bond documentation.

Risk Management and Insurance
The SFPUC’s risk management program encompasses both self- insured and insured coverage. Risk assessments and coverage are coordinated by the SFPUC Enterprise Risk Manager through the City Office of Risk Management. With certain exceptions, the City and SFPUC’s general approach is to first evaluate self -insurance for the risk of loss to which it is exposed. Based on this analysis, the SFPUC has determined that mitigating risk through a “self -retention” mechanism is more economical as it manages risks internally and administers, adjusts, settles, defends and pays claims from budgeted resources (i.e., pay- as-you-go). When economically more viable or when required by debt financing covenants, the SFPUC obtains commercial insurance.

At least annually, the City reviews and actuarially determines general liability and workers’ compensation liabilities, which are recorded as “Damages and Claims” and “Accrued Worker’s Compensation” in the financial statements.

The SFPUC does not maintain commercial earthquake coverage for the Water Enterprise, with certain minor exceptions, such as a sub-limit for fire-sprinkler leakage due to earthquake under the Property Insurance program.

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The following is a summary of the SFPUC’s coverage approach to risk:

Primary Risks Typical Coverage Approach
General Liability Self-Insured
Property Purchased Insurance & Self-Insured
Electronic Data Processing Purchased Insurance & Self-Insured Workers’ Compensation Self-Insured through City-Wide Pool Other Risks Typical Coverage Approach
Surety Bonds Purchased and Contractually Transferred
Professional Liability Combination of Self-Insured, Purchased Insurance and Contractual Risk Transfer Errors & Omissions Combination of Self-Insured, Purchased Insurance and Contractual Risk Transfer Builders Risk Purchased Insurance & Contractual Risk Transfer Public Officials Liability Purchased Insurance
Employment Practices Liability Purchased Insurance
Crime Purchased Insurance
Cyber Liability Purchased Insurance

The SFPUC’s property risk management approach varies depending on whether the facility is currently under construction, or if the property is part of revenue -generating operations. The majority of purchased insurance is for revenue-generating facilities, debt- financed facilities and mandated coverage to meet statutory or contractual requirements.

Additionally, the SFPUC acknowledges the importance of aligning strategic planning to the risk management process and has implemented an Enterprise Risk Management (“ERM”) program to meet this need. The framework provides a strategic approach to managing operational risks. The ERM program has been implemented thus far for the Power Enterprise and CleanPowerSF and plans are in place to continue implementation across the remainder of the SFPUC as needed.

Capital Project Risk Management . For capital construction projects, the SFPUC has utilized traditional contractual risk transfer, contractor-controlled insurance programs or other alternative insurance programs. Under the latter two approaches, the insurance program usually provides coverage for the entire construction project, along with multiple risk coverages, such as general liability and workers compensation. When a contractual risk transfer is used for capital construction risks, the SFPUC requires each contractor to provide its own insurance, while ensuring that the full scope of work be covered with satisfactory levels to limit the SFPUC’s risk exposure balanced by that which is commercially available.

Performance bonds are required, and Builder’s Risk insurance must be purchased, in most phases of the construction contracting process for such phases, as bid, performance, and payment or maintenance. Additionally, bonds may be required in other contracts where goods or services are provided to ensure compliance with applicable terms and conditions such as warranty.

Professional liability policies are either directly purchased insurance on behalf of the SFPUC, transferred through contract to the contracted professional, or retained through self- insurance on a case by case basis depending on the size, complexity or scope of construction or professional service contracts. Professional liability policies are typically purchased for services provided by engineers, architects, design professionals and other licensed or certified professional service providers.

Builder’s Risk policies of insurance are required to be provided either through an owner-controlled insurance program or the contractor on all construction projects for the full value of the construction .

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HISTORICAL OPERATING RESULTS
The historical results of operations reflected in the following table are based on the tables contained in the Financial Statements entitled “Statements of Revenues, Expenses and Changes in Net Position” and “Statements of Cash Flows” for the Fiscal Years listed. This table ex cludes certain non-operating revenue and expenses included in the “Statements of Revenues, Expenses and Changes in Net Position” table. Consequently, “Operating and Investment Income” presented in this table differs from “Change in net position” in the “St atements of Revenues, Expenses and Changes in Net Position” table. The calculation of debt service coverage includes net operating income and funds not budgeted to be spent in the next twelve months and legally available to pay debt service, as permitted under the Indenture. The audited financial statements of the Water Enterprise for Fiscal Years 2019- 20 and 2020-21, prepared by the SFPUC and audited by KPMG LLP, independent certified public accountants, are attached as APPENDIX C to this Official Statemen t. The following table should be read in conjunction with such financial statements. KPMG LLP has not reviewed the following table. See “APPENDIX C – SFPUC WATER ENTERPRISE FINANCIAL STATEMENTS.”

(Remainder of Page Intentionally Left Blank)

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TABLE 26

HISTORICAL REVENUES, OPERATING & MAINTENANCE EXPENSES

AND DEBT SERVICE COVERAGE
FOR FISCAL YEARS ENDED JUNE 30
(IN THOUSANDS)(1)
2017 2018 2019 2020 2021

OPERATING & INVESTMENT

REVENUE

Charges for Services
Retail Water Sales(2) $225,705 $248,136 $261,913 $280,609 $270,514 Wholesale Water Sales 212,502 247,002 247,790 270,144 278,981 Subtotal – Water Sales $438,207 $495,138 $509,703 $550,753 $549,495 Rental Income(3) 8,813 12,906 13,010 12,124 12,911
Other Revenues(4) 11,879 15,875 17,310 18,305 17,069
Capacity Fees(5) 1,432 1,720 2,368 2,169 1,326
Investing Activities(6) 4,331 6,448 15,650 10,517 340
Total Revenues $464,662 $532,087 $558,041 $593,868 $581,141

OPERATING & MAINTENANCE

EXPENSE

Personnel Services(7) $182,034 $128,295 $111,594 $119,943 $132,528 Contractual Services(8) 10,664 14,131 13,715 14,523 15,501 Materials and Supplies(9) 12,564 15,936 13,421 14,050 13,175 Depreciation(10) 118,826 118,751 120,815 142,228 144,033 Services of Other Departments(11) 59,173 56,860 59,751 61,128 70,235 General/Administrative & Other(12) 38,566 36,174 37,798 46,245 73,218 Total Operating Expenses $421,827 $370,147 $357,094 $398,117 $448,690

OPERATING AND INVESTMENT
INCOME
$42,835 $161,940 $200,947 $195,751 $132,451

COVERAGE CALCULATION
Operating and Investment Income $42,835 $161,940 $200,947 $195,751 $132,451 +Adjustment to Investing Activities(13) 111 (1,245) (4,821) (516) 3,846 +Depreciation & Non-Cash Expenses 121,375 119,624 122,248 148,294 150,257 +Changes in Working Capital 63,520 31,060 (11,073) (20,763) 24,707 +Appropriated Fund Balance 10,747 1,452 4,318 17,181 27,785 = “Net Revenue” (14) $238,588 $312,831 $311,619 $339,947 $339,046 +Other Available Funds(15) 155,852 186,752 221,362 241,931 128,692 Funds Available for Debt Service $394,440 $499,583 $532,981 $581,878 $467,738 Bond Debt Service(16) $207,812 $233,959 $261,638 $269,210 $248,427 Debt Service Coverage(17)
Including “Other Available Funds”(14) 1.90x 2.14x 2.04x 2.16x 1.88x Current Basis(18) 1.15x 1.34x 1.19x 1.26x 1.36x
____________________
(1) Operating and Investment Income presented in this table differs from the Change in Net Assets presented in the Statement of Revenues, Expenses and Changes in Net Assets in the Audited Financial Statements. See “APPENDIX C – SFPUC WATER ENTERPRISE FINANCIAL STATEMENTS.” This table excludes certain elements of non -operating revenue and expenses included in the Statements of Revenues, Expenses and Changes in Net Position. Examples of excluded elements are Grant Revenue, Interest Expense and Gains from Sale of Assets. (2) Decrease in Fiscal Year 2020 -21 mainly due to a decrease in consumption for retail customers, offset by an adopted rate increase for retail customers beginning July 1, 2020.
(3) In crease in Fiscal Year 2020-21 mainly due to rent increases. (4) Decrease in Fiscal Year 2020-21 mainly due to decrease in sale of water to other City departments mainly due to COVID-19 shelter in place order, offset by adopted rate increase.

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(5) Decrease in Fiscal Year 2020-21 mainly due to COVID-19 San Francisco Health Order resulting in fewer permits issued. (6) Decrease in Fiscal Year 2020-21 due to lower interest rates on cash balances and unrealized losses. (7) Increase in pension expenses in Fiscal Year 2020-21 based on actuarial reports. (8) In crease in contractual services in Fiscal Year 2020-21 mainly for equipment maintenance. (9) Decrease in materials and supplies in Fiscal Year 2020-21 mainly for building and construction supplies. (10) Increase in depreciation in Fiscal Year 2020-21 due to additional capital assets placed in service in the prior year. (11) Increase in Fiscal Year 2020-21 in services provided by other departments mainly from higher water assessment fees paid to Hetch Hetchy Water.
(12) Increase in Fiscal Year 2020-21 mainly due to estimated damage claims based on actuarial reports. (13) Represents adjustment to show investing activities on a cash basis. (14) “Net Revenue” is presented on a cash basis
(15) Per Indenture, in addition to current year cash flow, coverage calculation includes certain “Other Available Funds,” which are not budgeted to be spent in such twelve months and legally available to pay debt service. See “SECURITY FOR THE BONDS” and “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.” (16) Bond Debt Service for Fiscal Year 2020 -21 shown net of approximately $32 million of available funds used to defease a portion of debt service due in Fiscal Year 2020-21.
(17) Coverage does not include debt service on subordinate obligations, including the Water Enterprise’s share of lease payments associated with the 2009 Golden Gate COPs and debt service on Commercial Paper Notes. (18) Unaudited. Calculated as ratio between Net Revenues over debt service on all senior lien obligations; excludes “Oth er Available Funds.”
Source: SFPUC, Financial Services.

PROJECTED OPERATING RESULTS
The following table presents projected operating results for the Water Enterprise. These projections are based on an analysis of historic trends, adjusted where appropriate for known or anticipated changes in operations, as well as impacts of the COVID -19 pandemic. The projections are also based on the assumption that all retail water rate increases necessary to finance the WSIP and the Water Enterprise’s non -WSIP capital improvement program will be approved and implemented. The projections in the following Table 27 are budget based. Therefore, line items in Table 27 will not correspond to similar line items in Table 26, which is based upon the SFPUC’s GAAP financial statements for the Water Enterprise.

THESE PROJECTIONS, ALL OR SOME OF WHICH MAY OR MAY NOT BE REALIZED, ARE BASED

ON THE ISSUANCE OF ADDITIONAL SERIES OF BONDS FOR THE REMAINDER OF WSIP, AS WELL AS NON-WSIP CAPITAL PROJECTS AND HETCH HETCHY PROJECTS AS CURRENTLY PROPOSED.

CHANGES IN THE CIRCUMSTANCES THAT FORM THE BASES FOR THE ASSUMPTIONS USED IN

DEVELOPING THESE PROJECTIONS, AS WELL AS UNANTICIPATED EVENTS, MAY OCCUR SUBSEQUENT TO THE DATE OF THE OFFICIAL STATEMENT. THEREFORE, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE PROJECTIONS SHOWN.

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TABLE 27

PROJECTED REVENUES, OPERATING & MAINTENANCE EXPENSES

AND DEBT SERVICE COVERAGE
FOR FISCAL YEAR ENDING JUNE 30
(IN THOUSANDS)
2022* 2023† 2024† 2025 2026

CURRENT REVENUE
Retail Revenues(1) $315,833 $324,987 $355,224 $360,242 $381,688 Wholesale Revenues(2) 262,420 267,317 295,187 319,014 343,074 Other Miscellaneous Income(3) 37,256 33,934 34,425 35,235 35,947 Total Current Revenues‡ $599,631 $626,237 $684,836 $ 714,491 $760,709

OPERATING AND MAINTENANCE EXPENSE(4) $307,041 $314,065 $321,325 $335,281 $345,647 less FUND BALANCES BUDGETED
& APPROPRIATED(5) (21,983) (50,000) 0 0 0
NET OPERATING REVENUE(6) $314,573 $362,172 $363,511 $379,210 $415,062 plus AVAILABLE FUND BALANCE (7) 181,377 181,346 155,530 169,122 145,743 FUNDS AVAILABLE FOR DEBT SERVICE† $495,950 $543,518 $553,708 $548,332 $560,805

DEBT SERVICE(8) $307,605 $334,984 $339,208 $339,949 $367,076 BABs Interest Subsidy Payments(6) (21,575) (21,290) (20,841) (20,370) (19,876) NET DEBT SERVICE $286,030 $313,694 $318,367 $319,580 $347,200

DEBT SERVICE COVERAGE(9)
Indenture Basis(6)(10) 1.73x 1.73x 1.70x 1.72x 1.62x
Sufficiency of Revenues(6)(11) 1.10x 1.15x 1.14x 1.19x 1.20x ____________________
* Based on budget for Fiscal Year 2021-22.
† Based on budget for Fiscal Years 2022-23 and 2023-24 adopted on February 8, 2022. ‡ Totals may not add due to independent rounding.
(1) Assumes projected average daily billed retail consumption of 53.8 mgd and 55.7 mgd for Fiscal Years 2022-23 and 2023-24, respectively. Assumes projected average annual daily billed retail consumption of 61.6 mgd for Fiscal Year 2024-25 through Fiscal Year 2025-26. See “THE WATER ENTERPRISE – Historic Water Sales and Top Customers.” Assumes no retail rate change in Fiscal Year 2022-23, and a projected average retail rate increase of 6% in Fiscal Year 2023-24. Assumes an average annual retail rate increase of 4% for Fiscal Years 2024-25 through 2025-26. See “FINANCIAL OPERATIONS – Retail Water Sales Revenue.”
(2) Assumes projected average daily billed wholesale consumption of 113.3 mgd and 113.1 mgd from for Fiscal Years 2022- 23 and 2023-24, respectively. Assumes average annual daily billed wholesale consumption of 128 mgd for Fiscal Years 2024-25 through 2025-26. See “THE WATER ENTERPRISE – Historic Water Sales and Top Customers.” Assumes a 17.1% wholesale rate increase for Fiscal Year 2022-23, and a projected rate increase of 10% in Fiscal Year 2023-24, and an average annual rate increase of 1% in Fiscal Years 2024- 25 through 2025-26 . See “FINANCIAL OPERATIONS – Wholesale Water Sales Revenue.”
(3) Includes, among other amounts, projected inte rest income, property rentals, fees, cost recoveries, and service installation charges.
(4) Represents Operating and Maintenance Expense net of depreciation and other non-cash items per Indenture. See “SECURITY FOR THE BONDS” and “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.” (5) The SFPUC budgeted and appropriated available fund balances to be used as a source of funds as follows: $21.983 million in Fiscal Year 2021-22 and $50 million in Fiscal Year 202 2-23. Such amounts offset Operating and Maintenance Expenses in sufficiency of Revenues calculations.
(6) BABs Subsidy Payments are treated as a reduction in projected Debt Service and are not included in projected Net Revenues.

BABs Subsidy Payments expected to be received assume a sequestration rate of 5.7% effective October 1, 2020 and thereafter.

Sequestration rates are subject to change and may be increased by federal legislation. (7) Amounts are treated as Revenues under the Indenture. See “SECURITY FOR THE BONDS.” (8) Reflects Debt Service on Outstanding Bonds, net of capitalized interest. Does not reflect the issuance of the 2022ABCD Bonds or the refunding of the Refunded Bonds. Assumes the future issuance of Additional Series of Bonds of approximately $406 million in Fiscal Year 2022-23 and $352 million in Fiscal Year 2023-24. (9) Coverage does not include debt service on subordinate obligations, including the Water Enterprise’s share of lease payments associated with the 2009 Golden Gate COPs and debt service on Commercial Paper Notes or Revolving Notes.

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(10) Calculated as the sum of Net Operating Revenue and certain available fund balances of the Water Enterprise, divided by Annual Debt Service. The Indenture includes a rate covenant of 1.25 times coverage. See “SECURITY FOR THE BONDS – Rate Covenants – Debt Service Coverage.”
(11) Calculated as ratio between Net Operating Revenue over debt service on all senior lien obligations; excludes “Available Fund Balance.”
Note: Amounts set forth in the table are projections. Actual results may differ materially from these projections. See “FORWARD LOOKING STATEMENTS” above.

Source: SFPUC, Financial Services.

In the preparation of the projections set forth in the table above, the SFPUC has made certain assumptions with respect to conditions that may occur in the future. While the SFPUC believ es these assumptions are reasonable for the purpose of the projections, they are dependent on future events, and actual conditions are likely to differ, perhaps materially, from those assumed. To the extent actual future conditions differ from those assumed by the SFPUC or provided to the SFPUC by others, actual results will vary from those projected. This projected information has not been compiled, reviewed or examined by the SFPUC’s independent accountants.

The assumptions used in the table above are as follows:

Projected Revenue Assumptions.

The projected revenues are based on projected water sales and the schedules of rates to be effective in each year, and incorporates the City Economists view of COVID -19 pandemic recovery and related impact on sales volumes recovering to approximately 98% of the pre-COVID-19 levels by Fiscal Year 2023-24.

In April 2018, the SFPUC adopted schedules of water rates for Retail Customers to be effective in each of the Fiscal Years 2018-19 through 2021-22. The adopted schedules provided for a 7.9% rate increase for Fiscal Year 2021-22. The projections include a mandatory Temporary Drought Surcharge of a not -to-exceed 5% increase in current volumetric water and wastewater rates for retail water and wastewater customers effect ive April 1, 2022 through Fiscal Year 2023-24 See “FINANCIAL OPERATIONS – Retail Water Sales Revenue and Retail Water Rate Adjustments.” The projections assume no retail rate increase in Fiscal Year 2022 -23, and a projected retail rate increase of 6% in Fiscal Year 2023-24 and increase of 4% for Fiscal Years 2024-25 and 2025-26. Projected retail rate increases are based on an interim version of the Water Enterprise’s Ten -Year Financial Plan. Consequently, actual retail rate increases for Fiscal Years 2023-24 and beyond may be lower or higher. The SFPUC will complete a cost of service rate study in Fiscal Year 2022-23 to inform future rate change proposals.

Revenues from sales of water to the Wholesale Customers are calculated in accordance with the WSA. There is no wholesale rate increase for Fiscal Year 2022 -22, the projections assume a wholesale rate increase of 17.1% in Fiscal Year 2022-23, and projected rate increases of 10% in Fiscal Year 2023 -24, and no rate increase in Fiscal Year 2024-25 and 2025-26.

Interest earnings assume average annual yields of 0.5% throughout the projected period. “Available Fund Balance” is assumed to be available and treated as “Revenues” for purposes of “Debt Service Coverage – Indenture Basis.”
BABs Subsidy Payments are reflected as reductions in projected Debt Service and are not included in projected Net Operating Revenues. See also “SECURITY FOR THE BONDS – Rate Covenants – Debt Service Coverage.”
For more information regarding the impact of the COVID -19 pandemic and the City Health Order on the SFPUC’s Water Enterprise, see “THE PUBLIC UTILITIES COMMISSION – COVID-19 Pandemic.” Projected Operating Expense Assumptions.

The SFPUC’s proposed budget for Fiscal Years 2020- 21 and 2021- 22, which reflects the impacts of the COVID-19 pandemic, was adopted on October 1, 2020. The SFPUC projects Operating and Maintenance Expenses

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to increase at approximately 3% per year from Fiscal Year 2022 -23 through Fiscal Year 202 5-26. Operating and Maintenance Expenses are expected to include expenses to ensure continued responsiveness to health and safety concerns as well as required modifications to the workplace in connection with the COVID -19 pandemic. For more information regarding the impact of the COVID -19 pandemic and the City Health Order on the SFPUC’s Water Enterprise, see “THE PUBLIC UTILITIES COMMISSION – COVID-19 Pandemic.” Projected Debt Service Assumptions.

Projected debt service reflects projected Annual Debt Service on Outstanding Bonds and anticipated Additional Series of Bonds (net of capitalized interest and debt service reserve fund earnings). Assumptions include no reserve account and up to 2.5 years of capitalized interest for all future issuances of Additional Se ries of Bonds.

Issuances of Additional Series of Bonds are at an assumed 3.75% to 4.00% borrowing rate. Actual issuance dates, borrowing rates and capitalized interest periods for Additional Series of Bonds may vary. The SFPUC may issue additional refunding bonds from time to time in response to market conditions in order to achieve debt service savings.

See “FINANCING OF CAPITAL IMPROVEMENTS.”

RISK FACTORS
This section provides a general overview of certain risk factors which should be considered, in addi tion to the other matters set forth in this Official Statement, in evaluating an investment in the 2022ABCD Bonds . This section is provided for convenience and is not meant to be a comprehensive or definitive discussion of all of the risks associated with an investment in the 2022ABCD Bonds. The order in which this information is presented does not necessarily reflect the relative importance of various risks or the probability of their occurrence.

Potential investors in the 2022ABCD Bonds are advised to consider the following factors, among others, and to review this entire Official Statement to obtain information essential to the making of an informed investment decision. Any one or more of the risk factors discussed below, among others, could lead to a dec rease in the market price and/or in the marketability of the 2022ABCD Bonds or adversely affect the ability of the SFPUC to make timely payments of principal of or interest on the 2022ABCD Bonds. There can be no assurance that other risk factors not discussed herein will not become material and the SFPUC has not undertaken to update investors about the emergence of the risk factors in the future.

General
The ability of the SFPUC to comply with its covenants under the Indenture and to generate Revenues sufficient to pay principal of and interest on the Bonds may be adversely affected by actions and events outside of the control of the SFPUC and may be adversely affected by actions taken (or not taken) by voters, property owners, taxpayers or persons obligated to pay fees and charges. Among other matters, drought, general and local economic conditions and changes in law and government regulations could adversely affect the amount of Revenues realized by the SFPUC or significantly raise the cost of operating the Water Enterprise.

In addition, the realization of future Revenues is subject to, among other things, the capabilities of management of the SFPUC, the ability of the SFPUC to provide service to its Retail Customers and the Wholesale Customers, the ability of the SFPUC to establish, maintain and collect charges from its Retail Customers and the Wholesale Customers and the ability of the SFPUC to establish, maintain and collect rates and charges sufficient to pay for Operation and Maintenance Costs of the Enterprise, the Bonds and other obligations payable from Revenues.

See “FINANCIAL OPERATIONS” and “OBLIGATIONS PAYABLE FROM REVENUES.” Limited Obligation
If the SFPUC defaults on its obligations to make debt service payments on the Bonds, the Trustee has the right under the Indenture to accelerate the total unpaid principal amount of the Bonds. However, in the event of a

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default and such acceleration, there can be no assurance that the SFPUC, and correspondingly the Trustee, will have sufficient moneys available for payment of the Bonds.

The SFPUC is not obligated to pay the principal of, or premium, if any, or interest on the 2022ABCD Bonds except from Revenues. The SFPUC has no taxing power. The General Fund of the City is not liable for the payment of the principal of, or premium, if any, or interest on the 2022ABCD Bonds, and neither the credit nor the taxing power of the City is pledged to the payment of the principal of, or premium, if any, or interest on the 2022ABCD Bonds . The 2022ABCD Bonds are not secured by a legal or equitable pledge of, or charge, lien or encumbrance upon, any property of the City or of the SFPUC or any of its inc ome or receipts, except Revenues.

No Bond Reserve Account
No Bond Reserve Account has been established for the 2022ABCD Bonds. The Bond Reserve Accounts established with respect to other Series of Bonds do not secure the 2022ABCD Bonds . Therefore, the only security pledged to the holders of the 2022ABCD Bonds are the Revenues pledged under the Indenture and the covenant of the SFPUC to impose rates and charges necessary to pay debt service on the 2022ABCD Bonds .

Risks Related to Water Enterprise Facilities and Operations The operation of the Water Enterprise, and the physical condition of the Water Enterprise facilities, are subject to a number of risk factors that could adversely affect the reliability of the SFPUC’s water supply, or increase the operating expenses of the Water Enterprise. Prolonged damage to the Water Enterprise facilities could interrupt the ability of the SFPUC to realize Revenues sufficient to pay principal of and interest on the Bonds, or require the SFPUC to increase expenditures for repairs significantly enough to adversely impact the SFPUC’s ability to pay the principal of or interest on the Bonds. These factors could include, among others, the following.

Failure of Water Facilities. Many of the Water Enterprise’s facilities have been in service for an extended period and may have reached the end of their useful lives. See “WATER FACILITIES – Physical Condition of Facilities” and “CAPITAL IMPROVEMENT PROGRAM.”
Seismic Hazards. The Water Enterprise’s distribution, treatment and transmission systems and some of the facilities of the Hetch Hetchy Project are located in seismically active regions of the State, and cross three major known active fault zones (the San Andreas Fault, the Hayward fault and the Calaveras Fault). See “WATER FACILITIES – Seismic Hazards.”
Other Natural and Man -Made Disasters . Other natural disasters, including without limitation, wildfires, flooding, landslides, or man-made disasters or accidents, including without limitation water pipeline failures, natural gas pipeline failures or explosions, could interrupt operation of the Hetch Hetchy Project or the Regional Water System, result in liability claims against the Water Enterprise, or otherwise adversely impact the Water Enterprise’s ability to provide services or collect Revenues. See “WATER FACILITIES – Wildfire Considerations.” Casualty Losses. The SFPUC’s risk management program includes both self-insured and insured coverages; however, the program does not provide coverage for every conceivable risk of loss. Da mage attributable to seismic events and environmental pollution are excluded. In situations where the SFPUC has not purchased commercial coverage, the Water Enterprise has a ‘self -retention’ program that it administers and retains budgeted resources internally to provide coverage for loss liabilities. See also “FINANCIAL OPERATIONS – Risk Management and Insurance.” The SFPUC is not required to either insure against or self -insure against every potential risk of loss, and there is a risk that damage or destruction of property and equipment comprising the Water Enterprise could occur for which no insurance or self-insurance funds will be available. There can be no assurance that insurance providers will pay claims under any policies promptly, or at all, should a claim be made under such policies in connection with property loss or damage. It is possible that an insurance provider will refuse to pay a claim, especially if it is substantial, and force the SFPUC to sue to collect on or settle the insurance claim. Further, there can be no assurances that any insurance proceeds will be sufficient to rebuild or replace any damaged property. The SFPUC is authorized under the WSA to adopt emergency rate increases which helps to mitigate this risk.

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Drought. The State is located in a semi-arid region and is subject to periodic drought. An extended drought could adversely affect the ability of the SFPUC to deliver water sufficient to satisfy all of the demands of its customers.

If the SFPUC were to deliver less water to its customers, the SFPUC would need to increase the rates payable by customers or Revenues would decline. The SFPUC may also seek to acquire, and would be obligated to pay the cost of, additional water to deliver to its customers. The SFPUC has adopted a drought planning sequence and associated operating procedures respecting the delivery of water during a drought. The SFPUC is authorized under the WSA to adopt drought surcharges if needed. In addition, retail water rates and charges for the four -year period effective July 1, 2018, include a new drought surcharge. See “FINANCIAL OPERATIONS – Retail Water Sales Revenue – Retail Water Rate Adjustments.” See also “THE WATER ENTERPRISE – Water Supply Reliability and Drought Planning.” For a discussion of the 2012-2015 California drought, and current water conditions, see “THE WATER ENTERPRISE – Recent Drought; Current Water Conditions.”
Wet Years. Precipitation within the Water Enterprise service area varies from year to year. High levels of precipitation generally results in reduced water usage for irrigation, reducing the amount of water delivered by the SFPUC. If the SFPUC were to deliver less water to its customers, the SFPUC would need to increase the rates payable by customers or Revenues would decline. High levels of precipitation may also increase the supply of water available to Wholesale Customers, also reducing SFPUC water deliveries.

Safety and Security. The occurrence of military conflicts and terrorist activities could adversely impact the operations of the Water System or the finances of the SFPUC. The SFPUC continually plans and prepares for emergency situations. See “WATER FACILITIES – Safety and Security.” However, there can be no assurance that any existing or additional safety and security measures will prove adequate in the event that military conflicts or terrorist activities are directed against the assets of the Water Enterprise or that costs of security measures will not be greater than presently anticipated.

Statutory and Regulatory Compliance. The operation of the Water Enterprise is subject to a variety of federal and State statutory and regulatory requirements concerning matters such as water quality, dam safety, instream fishery flows and endangered species. The SFPUC’s failure to comply with applicable laws and regulations could result in significant fines and penalties. In addition to claims by private parties, changes in the scope and standards for public agency water systems such as the Water Enterprise may also lead to administrative orders issued by federal or State regulators. Future compliance with such orders could also impose substantial additional operating expenses on the Water Enterprise. See “REGULATORY MATTERS.”
Endangered Species. Various aquatic species (including native fish) present in the Tuolumne River and Bay Area streams (e.g., Alameda, San Mateo and Pilarcitos Creeks) are either listed or candidates for listing under the State or federal endangered species acts. New listings and future enforcement actions under the acts, or conditions placed in permits to undertake construction for certain projects, could potentially directly affect water flow and/or water suppli es available to the Water Enterprise and/or increase costs due to mitigation requirements. See “REGULATORY MATTERS – Endangered Species.”
Labor Actions . The Charter prohibits SFPUC and other City employees from engaging in certain labor actions (e.g. strikes). Nonetheless, a labor action could limit the SFPUC’s ability to operate the Water Facilities and adversely impact Revenues.

Proposals to Dismantle Hetch Hetchy Reservoir . Various environmental advocates have from time to time proposed the dismantling of O’Shaughnessy Dam with the aim of draining Hetch Hetchy reservoir and restoring the Hetch Hetchy Valley, most recently through a lawsuit filed in April 2015 in Tuolumne County Superior Court. Any such litigation, if successful, could impose substantial additional operating and capital expenses on the Water Enterprise. See “THE WATER ENTERPRISE – Proposals to Restore Hetch Hetchy Valley.” Cybersecurity
City Measures. The City, like many other large public and private entities, relies on a large and complex technology environment to conduct its operations, and faces multiple cybersecurity threats including, but not limited to, hacking, viruses, malware and other attacks on its computing and other digital networks and systems (collectively, “Systems Technology”). As a recipient and provider of personal, private, or sensitive information, the City has been

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the subject of cybersecurity incidents that have resulted in or could have resulted in adverse consequences to the City’s Systems Technology and that required a response action to mitigate the consequences.

Cybersecurity incidents could result from unintentional events, or from deliberate attacks by unauthorized entities or individuals attempting to gain access to the City’s Systems Technology for the purposes of misappropriating assets or information or causing operational disruption and damage. To mitigate the risk of business operations impact and/or damage from cybersecurity incidents or cyber -attacks, the City invests in multiple forms of cybersecurity a nd operational safeguards. In November 2016, the City adopted a City- wide Cyber Security Policy (the “ City Cyber Policy”) to support, maintain, and secure critical infrastructure and data systems. The objectives of the City Cyber Policy include the protection of critical infrastructure and information, manage risk, improve cyber security event detection and remediation, an d facilitate cyber awareness across all City departments. The City’s Department of Technology has established a United Cyber Defense Team to work across all City departments, including the SFPUC, to implement the City Cyber Policy. The City Cyber Policy is reviewed periodically.

The City has also appointed a City Chief Information Security Officer (the “ CCISO”), who is directly responsible for understanding the business and related cybersecurity needs of the City’s 54 departments, including the SFPUC. The CCISO is responsible for identifying, evaluating, responding, and reporting on information security risks in a manner that meets compliance and regulatory requirements, and aligns with and supports the risk posture of the City. Mayor Breed addressed this issue on June 4, 2021 in Executive Directive 21-02, Ensuring Strong and Organized City Defense Against Cybersecurity Attacks (“ Executive Directive 21-02”), which sets forth requirements for City departments to strengthen and improve the City’s cyber functions and programs.

SFPUC Measures. The SFPUC also relies on a large and complex technology environment to conduct its operations. Although the SFPUC maintains its own business and control networks that are separate from the City’s network, the SFPUC faces similar cybersecurity threats as the City, including hacking, viruses, malware and other attacks on its computing and other digital networks and systems. To mitigate the risk of and damage from cybersecurity incidences or cyberattacks, the SFPUC abides by the City Cyber Policy and also maintains its own cybersecurity program (the “SFPUC Cybersecurity Program”). The SFPUC Cybersecurity Program is based on National Institute of Standards and Technology cybersecurity guidance and employs industry standard Center for Internet Security critical security controls. In addition, control networks for the Water Enterprise and the Wastewater Enterprise adhere to the American Water Works Association Cyber Security guidance and the control networks for the Power Enterprise adhere to the North American Electric Reliability Corporation critical infrastructure protection controls. The SFPUC Cybersecurity Program includes state of the art information security systems and 14 cybersecurity policies. The information security systems are continuously tested with internal vulnerability assessments that include daily updates on malware threats. The SFPUC’s cybersecurity policies are prescriptive for hardening servers, network devices and databases, and for addressing system adminis trator controls, mobile device management, incident response, security patching, antivirus, email, passwords, remote access, secure asset disposal, end user controls, and timely removal of access to systems and facilities for staff that leave employment at the SFPUC. In addition to the SFPUC’s controls and in alignment with Executive Directive 21-02, the SFPUC has deployed the city-wide-real-time threat monitoring and alerting solution. The SFPUC C ybersecurity Program is periodically reviewed for effectiveness by independent consultants, most recently in July 2019 with a schedule independent audit in June 2022. In addition, pursuant to the SFPUC’s policies, the City Services Auditor, independent cybersecurity auditors and the Department of Homeland Security perform extensive penetration and vulnerability testing on the SFPUC’s business and control networks every other year.

The SFPUC has also appointed a Chief Information Security Officer (the “ CISO”). In addition to working with the CCISO on cybersecurity policy development and solution sharing, the CISO is responsible for annual updates to the SFPUC’s policies, is charged with identifying and monitoring threats which are typically addressed by the SFPUC’s information technology services team, educating staff concerning vulnerabilities and constantly improving the SFPUC Cybersecurity Program.

While the SFPUC Cybersecurity Program is periodically reviewed, no assurances can be given by the SFPUC that such measures will ensure against other cybersecurity thre ats and attacks. Cybersecurity breaches could damage the SFPUC’s information security systems and cause material disruption to the SFPUC’s operations and the provision of SFPUC services. The costs of remedying any such damage or protecting against future attacks could be substantial.

Further, cybersecurity breaches could expose the SFPUC to material litigation and other legal risks, which could cause

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the SFPUC to incur material costs related to such legal claims or proceedings. The SFPUC currently purchases liability insurance covering cyber -losses and requires its technology vendors to purchase technology errors and omissions insurance coverage.

Construction Related Risks
Construction projects for the Water Enterprise are subject to ordinary construction risks and delays applicable to projects of their kind, including but not limited to (i) inclement weather affecting contractor performance and timeliness of completion, which could affect the costs and availability of, or delivery schedule for, equipment, components, materials, labor or subcontractors; (ii) contractor claims or nonperformance; (iii) failure of contractors to execute within contract price; (iv) work stoppages or slowdowns; (v) failure of contractors to meet schedule terms; (vi) supply chain issues; (vii) errors or omissions in contract documents requiring change orders; (viii) the occurrence of a major seismic event; or (ix) unanticipated project site conditions, including the discovery of hazardous materials on the site or other issues regarding compliance with applicable environmental standards, and other natural hazards or seismic events encountered during construction. In addition, Water Enterprise construction projects may require scheduling system shutdowns to avoid impacting water deliveries and many shutdown windows are inflexible.

Increased construction costs or delays could impact the Water Enterprise’s financial condition in general and the implementation of its capital programs in particular. Construction bids may also be higher than anticipated for budgeting purposes.

Limitations on Rate-Setting
The generation of Revenues sufficient to satisfy the requirements of the Indenture and to pay the principal of and interest on the Bonds will require the SFPUC to raise the water rates payable by its customers. The increase or maintenance of retail water rates is subject to various substantive and procedural requirements and limitations. See “FINANCIAL OPERATIONS – Retail Water Sales Revenue” and “CONSTITUTIONAL, STATUTORY AND CHARTER LIMITATIONS.”
Water rates payable by the Wholesale Customers are established under the WSA, which will help reduce the risk that Revenues will be insufficient for the purposes described in this section. Rates established pursuant to the WSA are subject to the substantive requirements and the procedures, including procedures for resolving disputes, of applicable law and as set forth in the WSA. The WSA also provides for rate adjustments for drought and non-drought emergencies if needed. See “FINANCIAL OPERATIONS – Wholesale Water Sales Revenue” and “APPENDIX B – SUMMARY OF CERTAIN PROVISIONS OF THE WATER SUPPLY AGREEMENT.” Initiative, Referendum, Charter Amendments and Future Legislation Under the State Constitution, the voters of the State have the ability to initiate legislation and require a public vote on legislation passed by the State Legislature through the powers of initiative and referendum, respectively. The SFPUC is unable to predict whether any such initiatives might be submitted to or approved by the voters, the nature of such initiatives, or their potential impact on the SFPUC or the Water Enterprise. See “CONSTITUTIONAL, STATUTORY AND CHARTER LIMITATIONS.”
Under the Charter, the voters of the City can restrict or revise the powers of the SFPUC through the approval of a Charter amendment or other initiative. For example, in June 1998, the electorate of the City approved Proposition H which, subject to certain exceptions, including a limited exception to raise rates to pay debt service o n voter-approved debt, froze the SFPUC’s water and sewer rates through July 1, 2006. The SFPUC can give no assurance that the electorate will not seek in the future to freeze or limit rate increases. See “CONSTITUTIONAL, STATUTORY AND CHARTER LIMITATIONS – Charter Limitations.” In addition, the SFPUC is subject to various laws, rules and regulations adopted by the local, State and federal governments and their agencies. The SFPUC is unable to predict the adoption or amendment of any such laws, rules or regulations, or their effect on the operations or financial condition of the SFPUC.

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Increased Operating and Maintenance Expenses
There can be no assurance that the Operating and Maintenance expenses of the SFPUC, such as wages and salaries, pension and other benefits, and purchased power costs, will not increase, perhaps substantially.

See “FINANCIAL OPERATIONS – Operating and Maintenance Expenses.” Interim Funding Program Facilities
Commercial Paper Notes. The bank credit facilities supporting the Commercial Paper Notes are subject to early termination upon the occurrence of certain events, including the failure of the SFPUC to make certain payments, the occurrence of certain bankruptcy or insolvency- related events, the reduction below specified levels or the withdrawal or suspension of ratings on certain obligations of the SFPUC payable from Revenues or certain other specified events of default. Upon the occurrence of such termination, one or more of the following would likely occur:
(a) the SFPUC would be prohibited from issuing additional notes supported by such credit facilities; (b) any outstanding reimbursement obligation of the SFPUC to the bank providing such facility for draws made for the payment of principal of or interest on Commercial Paper Notes could bear interest at rates higher than the rates borne by the Commercial Paper Notes; and (c) any such outstanding reimbursement obligation of the SFPUC could be accelerated and become immediately due and payable. The Commercial Paper Notes and any reimbur sement obligations are payable from Revenues on a basis subordinate to the Bonds.

Revolving Notes. The commitment of the bank to make advances under the revolving credit agreement for interim funding (the repayment obligation of the SFPUC for which are evidenced by the Revolving Notes) may be terminated by the bank upon the occurrence of certain events, including the failure of the SFPUC to make certain payments, the occurrence of certain bankruptcy or insolvency- related events, the reduction below specifi ed levels or the withdrawal or suspension of ratings on certain obligations of the SFPUC payable from Revenue s or certain other specified events of defaults. Upon such an event of default, (a) the outstanding repayment obligation of the SFPUC evidenced by the Revolving Notes would bear interest at substantially increased interest rates and (b) the bank could declare all amounts outstanding under the Revolving Notes to be immediately due and payable.

See “OBLIGATIONS PAYABLE FROM REVENUES – Subordinate Debt and Interim Funding Program.” Pandemics; COVID-19 Pandemic
A pandemic, epidemic or outbreak of an infectious disease can have significant adverse health and financial impacts on global and local economies. For example, the COVID- 19 pandemic has significantly impacted the City and resulted in a prolonged City Health Order that has impacted each of the SFPUC’s enterprises, including the Water Enterprise. See “THE PUBLIC UTILITIES COMMISSION – COVID-19 Pandemic.” Climate Change
Impact on San Francisco. Numerous scientific studies on global climate change show that, among other effects on the global ecosystem, sea levels will rise, extreme temperatures, and extreme weather events will become more frequent as a result of increasing global temperatures attributable to greenhouse gas emissions leading to rising concentrations of greenhouse gases in the atmosphere.

The Fourth National Climate Assessment, published by the U.S. Global Change Research Program in November 2018 (“NCA4”), finds that more frequent and intense extreme weather and climate-related events, as well as changes in average climate conditions, are expected to continue to damage infrastructure, ecosystems and social systems over the next 25 to 100 years. NCA4 states that rising temperatures, sea level rise, and changes in extreme events are expected to increasingly disrupt and damage critical infrastructure and property and regional economies and industries that depend on natural resources and favorable climate conditions. Disruptions could include more frequent and longer -lasting power outages, fuel shortages and service disruptions. NCA4 states that the continued increase in the frequency and extent of flooding due to sea level rise threatens coastal public infrastructure. NCA4 also states that expected increases in the severity and frequency of heavy precipitation events will affect inland infrastructure, including access to roads, the viability of bridges and the safety of pipelines.

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Sea levels will continue to rise in the future due to the increasing temperature of the oceans causing thermal expansion and growing ocean volume from glaciers and ice caps melting into the ocean. Between 1854 and 2016, sea level rose about nine inches according to the tidal gauge at Fort Point, a location underneath the Golden Gate Bridge.

Weather and tidal patterns, including 100- year or more storms and king tides, may exacerbate the effects of climate related sea level rise. Coastal areas like the City and the Bay Area are at risk of substantial flood damage over time, affecting private development and public infrastructure, including roads, utilities, emergency services, schools, and parks. As a result, the City could lose considerable tax revenues and many residents, businesses, and governmental operations along the waterfront could be displaced, and the City could be required to mitigate these effects at a potentially material cost.

Adapting to sea level rise is a key component of the City’s policies. The City and its enterprise departments have been preparing for future sea level rise for many years and have issued a number of public reports. For example, in March 2016, the City released a report entitled “Sea Level Rise Action Plan,” identifying geographic zones at risk of sea level rise and providing a framework for adaptation strategies to confront these risks. That study shows an upper range of end-of-century projections for permanent sea level rise, including the effects of temporary flooding due to a 100-year storm, of up to 108 inches above the 2015 average high tide. To implement this Plan, the Mayor’s Sea Level Rise Coordinating Committee, co-chaired by the Planning Department and the Port of San Francisco worked together to develop and finalize the City’s Sea Level Rise Vulnerability and Risk Assessment, February 2020. The City is now transitioning toward ef forts that would consolidate and coordinate sea level rise adaptation and overall resilience planning so that the City departments can maximize efficiency and the co-benefits of our investment dollars. The City has developed and enacted the governance structure through the Climate Resilience Integration Program Charter. For the City, climate resilience refers to a range of coordinated actions that eliminate greenhouse gas emissions and adapt our built and natural environment, while achieving a more equitable and sustainable city.

In April 2017, the Working Group of the California Ocean Protection Council Science Advisory Team (in collaboration with several state agencies, including the California Natural Resource Agency, the Governor's Office of Planning and Research, and the California Energy Commission) published a report, that was formally adopted in March 2018, entitled “Rising Seas in California: An Update on Sea Level Rise Science” (the “Sea Level Rise Report”) to provide a new synthesis of the state of science regarding sea level rise. The Sea Level Rise Report provides the basis for State guidance to state and local agencies for incorporating sea level rise into design, planning, permitting, construction, investment and other decisions. Among many findings, the Sea Level Rise Report indicates that the effects of sea level rise are already being felt in coastal California with more extensive coastal flooding during storms, exacerbated tidal flooding, and increased coastal erosion. In addition, the repor t notes that the rate of ice sheet loss from Greenland and Antarctic ice sheets, while highly uncertain as to timing, could pose a particular risk of sea level rise for the California coastline.

The City has already incorporated site-specific adaption plans in the conditions of approval for certain large waterfront development projects, such as the Candlestick/Hunters Point Shipyard, Treasure Island, Pier 70 and Mission Rock projects. Also, the City has started the process of planning to fortify the Port’s seawall from sea level rise, including an initial investment of about $8 million during fiscal year 2017- 18 and consideration of financing options. In November 2018, San Francisco voters approved a bond measure providing $425 million toward study and repair of the City’s sea wall against seismic threats and sea level rise. This Phase 1 funding provides early investment in long-term upgrades expected to cost more than $5 billion.

Portions of the San Francisco Bay Area, including the City, are built on fill t hat was placed over saturated silty clay known as “Bay Mud.” This Bay Mud is soft and compressible, and the consolidation of the Bay Mud under the weight of the existing fill is ongoing. A report issued in March 2018 by researchers at UC Berkeley and the University of Arizona suggests that flooding risk from climate change could be exacerbated in the San Francisco Bay Area due to the sinking or settling of the ground surface, known as subsidence. The study claims that the risk of subsidence is more significant for certain parts of the City built on fill.

Projections of the effects of global climate change on the City are complex and depend on many factors that are outside the City's control. The various scientific studies that forecast climate change and its adverse effects, including sea level rise and flooding risk, are based on assumptions contained in such studies, but actual events may vary materially. Also, the scientific understanding of climate change and its effects continues to evolve. Accordingly, the City is unable to forecast when sea level rise or other adverse effects of climate change (e.g., the occurrence and

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frequency of 100 -year storm events and king tides) will occur. In particular, the City cannot predict the timing or precise magnitude of adverse economic effects, including, without limitation, material adverse effects on the business operations or financial condition of the City and the local economy during the term of the 2022ABCD Bonds . While the effects of climate change may be mitigat ed by the City's past and future investment in adaptation strategies, the City can give no assurance about the net effects of those strategies and whether the City will be required to take additional adaptive mitigation measures. If necessary, such additional measures could require significant capital resources.

In September 2017, the City filed a lawsuit against the five largest investor -owned oil companies seeking to have the companies pay into an equitable abatement fund to help fund investment in sea le vel rise adaptation infrastructure. In July 2018, the United States District Court, Northern District of California denied the plaintiffs' motion for remand to state court, and then dismissed the lawsuit. The City appealed these decisions to the United States Court of Appeals for the Ninth Circuit, which vacated the dismissal and remanded the case to the District Court.

While the City believes that its claims are meritorious and will prevail, the City can give no assurance regarding whether it will ultimately obtain the requested relief from the courts, or contributions to the abatement fund from the defendant oil companies.

Impact on SFPUC Water Enterprise. The issue of climate change has become an important factor in water resources planning in the State, and is being considered during planning for the Water Enterprise. There is evidence that increasing concentrations of greenhouse gases have caused and will continue to cause a rise in temperatures around the world, which will result in a wide range of cha nges in climate patterns. Moreover, there is evidence that a warming trend occurred during the latter part of the 20th century and will likely continue through the 21st century.

These changes will have a direct effect on water resources in the State, and numerous studies on climate and water in the State have been conducted to determine the potential impacts. Based on these studies, climate change could result in the following types of water resources impacts in the State, including impacts on the Water Enterprise and associated watersheds:
• Reductions in the average annual snowpack due to a rise in the snowline and a shallower snowpack in the low - and medium -elevation zones, such as in the Tuolumne River basin, and a shift in snowmelt runoff to earlier in the year;
• Changes in the timing, intensity and annual variability of precipitation, and an increased amount of precipitation falling as rain instead of as snow;
• Long-term changes in watershed vegetation and increased incidence of wildfires that could degrade water quality;
• Sea level rise, which could cause inundation of Water Enterprise assets and/or an increase in saltwater intrusion into groundwater basins;
• Increased water temperatures with accompanying adverse effects on some fisheries and water quality; and
• Changes in urban water demand.

However, other than the general trends listed above, there is no clear scientific consensus on exactly how climate change will quantitatively affect SFPUC or State water supplies.

To help better understand the potential vulnerability of the SFPUC Regional Water System ( “RWS”) to uncertain future conditions, SFPUC partnered with the Water Research Foundation to develop a long- term vulnerability assessment ( “LTVA”) of the RWS. The assessment was published in 2021 (https://www.sfpuc.org/about-us/reports/long-term-vulnerability-assessment). The study was conducted by University of Massachusetts Hydrosystems Research Group (HRG) with input from National Center for Atmospheric Research ( “NCAR”), other climate scientists, and Deltares. The goal of the LTVA is to help quantitatively and qualitatively assess to what extent climate change will be a threat to the RWS in comparison to or in combination with

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other external drivers of change over the next 50 years (2020-2070). More specifically, the assessment aims to answer the following questions: 1) Under what conditions and when will the RWS no longer meet system performance criteria? 2) Is climate change the most important driver of vulnerability for the RWS and if not, what is? While climate change is the driver of change that triggered this study, the intent is to understand the effects of climate change in the context of effects from other drivers of change on the RWS. Overall, the study finds that:
• Climate change exacerbates impacts from other external drivers of change and is not the single most important driver of vulnerability for the San Francisco Public Utilities Commission’s (SFPUC) Regional Water System (RWS).
• The RWS at a baseline demand of 227 mgd is resilient to changes in climate and other external drivers.
• The RWS water supply performance declines with reductions in mean precipitation but is mostly insensitive to increases in temperature.
• The RWS is more vulnerable to changes in demand and instream flow requirement than changes in mean annual temperature and precipitation.
• The RWS is vulnerable to changes to mean climate when demand or instream flow requirements increase.

These findings are based on the following results:
• According to cli mate projections and expert elicitations of climate scientists, there is a central tendency of warming of +2°C and +4°C by 2040 and 2070 for RCP8.5 (which represents unmitigated global greenhouse gas emissions during the 21
st century), respectively, with n o clear direction of change in mean annual precipitation over the planning horizon.
• In the Hetch Hetchy watershed, by 2040, most projections and elicitations of warming estimate between +1°C and +4°C and for precipitation change between -5% and +5% compared to historical baseline; and by 2070 estimates of warming range between +3°C and +6°C and for precipitation between - 15% and +15% (assuming RCP 8.5).
• Changes in hydrology due to climate change affect the RWS’s ability to meet water supply targets *. At 227 mgd demand, the RWS can sustain up to +4°C and -5% precipitation change before failing to meet targets for delivery reliability, frequency of 20% rationing, storage reliability and duration of rationing. At 227 mgd demand, the RWS is resilient to all median climate projections for the planning horizon 2020-2070. • Precipitation change is an important driver for RWS performance. A decrease by 10% or more will cause RWS targets to be missed. The climate projections and expert elicitations show that such a change in precipitation is possible by 2040, although unlikely. The likelihood of this change increases toward 2070. • The RWS shows minor sensitivity to temperature change for the metrics evaluated in this study. Most metrics stay above target under warming conditions. However, warming conditions often magnify the loss in system performance if precipitation or demand change.
• Demand change appears to be a major driver of future RWS performance. An increase in demand of approximately 16.7% (265 mgd) will lead to failure to meet rationing frequency targets under current climate conditions. At 265 mgd demand, the rationing frequency targets would be met if there is an increase in precipitation of 10%. If demand increases by 30%, the rationing target cannot be met even when precipitation

* Due to the limitations of the models, these results are likely understating the impact of climate change . Next steps will include improvements on these models to address the bias in the current versions.

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increases by 40%, which is believed plausible but unlikely over the planning horizon. • The RWS is particularly vulnerable to the State Water Resources Control Board adopted “Phase 1” Amendment to the Water Quality Control Plan (“ WQCP”) (See REGULATORY MATTERS ) which represents a significant reduction in water available. At a demand of 227 mgd, the effect of the WQCP amendment under current conditions is equivalent to a reduction in mean annual precipitation of about 15% in terms of the water delivery reliability (reliability around 85%, rationing in 1 out of 6.5 years on average).

SFPUC hydrologists are involved in ongoing monitoring and research regarding climate change trends and will continue to monitor the changes and predicti ons, particularly as these changes relate to water system operations and management of the Water Enterprise.

Regarding sea level rise, the City has developed policies for considering the potential impact of sea level rise on City assets, “Guidance for Incorporating Sea Level Rise into Capital Planning” that requires all assets in the City’s Ten-Year Capital Plan be evaluated for inundation under a variety of sea level rise scenarios plus a 1% storm. The SPFUC identified three facilities that are part of th e Auxiliary Water Supply System (“ AWSS”), the supplementary and emergency water supply for firefighting managed by the SFPUC. These assets have projected functional lifespans of between 90 and 100 years and were found to be in the potential inundation zone toward the end of the 21st century.

The City, through its Sea Level Rise Action Plan, is currently evaluating the best approaches for protecting these assets, along with all other public and private assets potentially subject to inundation caused by sea level rise and large storms.

The SFPUC is a founding member of the Water Utility Climate Alliance (the “WUCA”), a group of 12 large water utilities delivering drinking water to over 50 million people in the United States that is focused on collaboratively advancing water utility climate change adaptation. WUCA meets monthly by phone, maintains active projects and committees exploring adaptation best practices on a variety of subjects and features active participation of SFPUC staff.

Green Bonds
The purpose of labeling the 2022A Green Bonds as “Green Bonds” is to allow owners of such bonds to invest in bonds that have financed environmentally beneficial projects and the 2022A Green Bonds have been certified by CBI as “Climate Bonds”. The SFPUC does not make any representation, however, as to the suitability of the 2022A Green Bonds to fulfill the environmental and sustainability criteria of particular investors. The 2022A Green Bonds may not be a suitable investment for all investors seeking exposure to green or sustainable assets. There is currently no market consensus on what precise attributes are required for a particular project to be defined as “ green” or “sustainable,” and therefore no assurance can be provided to investors that the projects refinanced by proceeds of the 2022A Green Bonds will continue to meet investor expectations.

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Inverse Condemnation
Under the doctrine of inverse condemnation (a legal concept that entitles property owners to just compensation if their private property is damaged by a public use), California courts have imposed liability on public agencies in legal actions brought by private property holders for damages caused by such public agencies’ infrastructure. In City of Oroville v. Superior Court of Butte County , 7 Cal. 5th 1091 (2019), however, the California Supreme Court held that damage to private property must be substantially caused by an inherent risk presented by the deliberate design, construction or maintenance of the public improvement. Thus, if the inherent risks associated with the SFPUC’s facilities, including water storage or transportation facilities or electrical distribution and transmission lines, as deliberately designed, constructed or maintained, are determined to be the substantial cause of damage to private property from flooding, fire or otherwise, and the doctrine of inverse condemnation applies, the SFPUC could be liable for direct and indirect property damage to private parties and such liability, in the aggregate, could be substantial. In addition to such claims for property damage, the SFPUC could also be liable for punitive damages and other damages under other theories of liability, including if the SFPUC were found to have been negligent, which liability, in the aggregate, could be substantial. See “WATER FACILITIES – Wildfire Considerations.” Economic, Political, Social and Environmental Conditions Changes in economic political, social, or environmental conditions on a local, State, federal, and/or international level may adversely affect investment risk generally. Such conditional changes may include (but are not limited to) fluctuations in business production, consumer prices, or financial markets, unemployment rates, availability of skilled labor, technological advancements, shortages or surpluses in natural resources or energy supplies, changes in law, social unrest, fluctuations in the crime rate, political conflict, acts of war or terrorism, environmental damage, and natural disasters.

Bankruptcy or Financial Failure of Wholesale Customers
The financial failure or bankruptcy of a Wholesale Customer could adversely affect the ability of such Wholesale Customer to honor its obligation under the WSA (including its obligation to pay the purchase price of water delivered by the SFPUC to such Wholesale Customer).

The SFPUC is not aware of the existing or impending financial failure or bankruptcy of any W holesale Customer, but there can be no assurance that a financial failure or bankruptcy of a Wholesale Customer will not occur.

If a Wholesale Customer were to become bankrupt, the SFPUC may be unable to enforce the terms of the WSA against such Wholesale Customer and the SFPUC’s right to receive payment for water delivered prior to bankruptcy but not invoiced or invoiced but not paid may be limited to the rights of an unsecured creditor of the bankrupt entity. Further, there can be no assurance that the SF PUC will be physically able or legally permitted to cease or interrupt deliveries of water to a non-paying Wholesale Customer.

Although no assurance can be provided, the SFPUC believes that any reduction in Revenues as a result of the inability to collect payment for water delivered to a bankrupt Wholesale Customer or as a result of any temporary interruption or reduction of water deliveries will not be material. The SFPUC further believes that, following such bankruptcy, the amount of water delivered for the service area currently served by such Wholesale Customer will not be reduced and that the SFPUC will be able to obtain payment for such water on terms comparable to the terms of the WSA.

Bankruptcy of the City
The SFPUC, being an enterprise department of the City, likely cannot itself file for bankruptcy. While an involuntary bankruptcy petition cannot be filed against the City, the City is only authorized to file for bankruptcy under certain circumstances. Should the City file for bankruptcy, there could be adverse effects on the holders of the 2022ABCD Bonds.

To the extent that the Revenues are “special revenues” under the United States Bankruptcy Code (the “Bankruptcy Code”), then Revenues collected after the date of the bankruptcy filing should be subject to the lien of

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the Indenture. If any or all of the Revenues are determined not to be “special revenues,” then any such amounts collected after the commencement of the bankruptcy case will likely not be subject to the lien of the Indenture. The holders of the 2022ABCD Bonds may not be able to assert a claim against any property of the City other than the Revenues, and if any or all of the Revenues are no longer subject to the lien of the Indenture, then there may be limited, if any, funds from which the holders of the 2022ABCD Bonds are entitled to be paid.

The Bankruptcy Code provides that “special revenues” can be applied to necessary operating expenses of the project or system, before they are applied to other obligations. This rule applies regardless of the provisions of the transaction documents. It is not clear precisely which expenses would constitute necessary operating expenses and any definition in the transaction documents may not be applicable.

If the City is in bankruptcy, the parties (including the Trustee and the holders of the 2022ABCD Bonds) may be prohibited from taking any action to collect any amount from the City or to enforce any obligation of the City, unless the permission of the bankruptcy court is obtained. These restrictions may also prevent the Trustee from making payments to the holders of the 2022ABCD Bonds from funds in the Trustee’s possession. The rate covenants (see “SECURITY FOR THE BONDS – Rate Covenants”) may not be enforceable in bankruptcy by the Trustee or the holders of the 2022ABCD Bonds.

Revenues are deposited with and held by the Treasurer and may be commingled with other City funds.

See “SECURITY FOR THE BONDS – Flow of Funds.” If the City goes into bankruptcy, the City may not be required to turn over to the Trustee any Revenues that are in its possession at the time of the bankruptcy filing. In addition, if the City has possession of Revenues (whether collected before or after commencement of the bankruptcy) and if the City does not voluntarily turn over such Revenues to the Trustee, it is not entirely clear what procedures the Trustee and the holders of the 2022ABCD Bonds would have to follow to attempt to obtain possession of such Revenues, how much time it would take f or such procedures to be completed, or whether such procedures would ultimately be successful.

The City may be able to borrow additional money that is secured by a lien on any of its property (including the Revenues), which lien could have priority over the lien of the Indenture, or to cause some of the Revenues to be released to it, free and clear of the lien of the Indenture, in each case as long as the bankruptcy court determines that the rights of the Trustee and the holders of the 2022ABCD Bonds will be adequately protected.

If the City is in bankruptcy it may be able, without the consent and over the objection of the Trustee and the holders of the 2022ABCD Bonds , to alter the priority, interest rate, principal amount, payment terms, collateral, maturity dates, payment sources, covenants (including tax- related covenants), and other terms or provisions of the Indenture and the 2022ABCD Bonds, as long as the bankruptcy court determines that the alterations are fair and equitable.

There may be delays in payments on the 2022ABCD Bonds while the court considers any of these issues.

There may be other possible effects of a bankruptcy of the City that could result in delays or reductions in payments on the 2022ABCD Bonds, or result in losses to the holders of the 2022ABCD Bonds . Regardless of any specific adverse determinations in a City bankruptcy proceeding, the fact of a City bankruptcy proceeding could have an adverse effect on the liquidity and value of the 2022ABCD Bonds.

The City may invest the Revenues in the City’s Pooled Investment Fund. See “FINANCIAL OPERATIONS – Investment of SFPUC Funds.” Should those investments suffer any losses, Revenues may be lower than expected, and there may be delays or reductions in payments on the 2022ABCD Bonds.

Limitations on Remedies
The remedies available to the Owners of the 2022ABCD Bonds upon the occurrence of an event of default under the Indenture in many respects depend upon judicial actions which are themselves often subject to discretion and delay and could prove both expensive and time consuming to obtain. In addition to the limitations on remedies contained in the Indenture, the rights and obligations under the 2022ABCD Bonds and the Indenture may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating

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to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against charter cities and counties in the State.

The opinions to be delivered by Co-Bond Counsel, concurrently with the issuance of the 2022ABCD Bonds, that the 2022ABCD Bonds constitute valid and binding limited obligations of the SFPUC and the Indenture constitutes a valid and binding obligation of the SFPUC will also be subject to such limitations and the various other legal opinions to be delivered concurrently with the issuance of the 2022ABCD Bonds will be similarly qualified. See “APPENDIX D – PROPOSED FORM OF OPINION OF CO-BOND COUNSEL.”
If the SFPUC fails to comply with its covenants under the Indenture or to pay principal of or interest on the 2022ABCD Bonds, there can be no assurance that the available legal remedies will be adequate to protect the interests of the holders of the 2022ABCD Bonds.

Failure to Maintain Credit Ratings
Certain rating agencies have assigned ratings to the 2022ABCD Bonds . The ratings issued reflect only the views of such rating agencies. Any explanation of the significance of these ratings should be obtained from the respective rating agencies. See “RATINGS.” There is no assurance current ratings will continue for any given period or that such ratings will not be revised downward or withdrawn entirely by the rating agencies if, in the respect ive judgment of such rating agencies, circumstances so warrant. Any such downward revision or withdrawal of such ratings could be expected to have an adverse effect on the market price or the marketing of the 2022ABCD Bonds .

The SFPUC undertakes no obligation to maintain its current credit ratings on the 2022ABCD Bonds or to oppose any such downward revision, suspension or withdrawal.

Secondary Market
There can be no guarantee that there will be a secondary market for the 2022ABCD Bonds or, if a secondary market exists, that the 2022ABCD Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price.

Uncertainties of Projections, Forecasts and Assumptions Certain information contained in this Official Statement is based upon assumptions and projections.

Projections and assumptions are inherently subject to significant uncertainties. Inevitably, some assumptions will not be realized and unanticipated events and circumstances may occur and actual results are likely to differ, perhaps materially, from those projected. Accordingly, such projections are not necessarily indicative of future performance, and the SFPUC assumes no responsibility for the accuracy of such projections. See “FORWARD-LOOKING STATEMENTS.”
Other Risks
The discussion in this section, “RISK FACTORS”, is not meant to be a comprehensive or definitive list of the risks associated with an investment in the 2022ABCD Bonds. There may be other risks inherent in ownership of the 2022ABCD Bonds in addition to thos e described in this section. Investors are advised to read the entire Official Statement in order to obtain information necessary to make an investment in the 2022ABCD Bonds .

REGULATORY MATTERS
General
Public water supply systems in the State, such as the Regional Water System and In-City Distribution System operated by the Water Enterprise, are primarily regulated by the SWRCB Division of Drinking Water (“ DDW”),

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formerly under the California Department of Public Health (“CDPH”) and, in some limited instances, by the EPA and California Regional Water Quality Control Boards (“RWQCBs”).

Drinking water delivered to customers must comply with statutory and regulatory water quality standards designed to protect public health and safety that are now administered by DDW. The CDPH reissued a drinking water supply permit in 2004 prescribing conditions and requirements for the Water Enterprise to operate the Regional Water System. The CDPH also issued drinking water supply permits to the In-City Distribution System, several small water systems owned and operated by the Water Enterprise, and the Wholesale Customer public water supply systems. The CDPH and the DDW issued several amendments to the Regional Water System and In -City Distribution System permits for various ch anges over the last 17 years. In accordance with the drinking water standards and permit requirements, the Water Enterprise operates and maintains water storage, treatment and conveyance facilities, implements watershed management and protection activities , performs inspections, monitors drinking water quality, conducts applied research, maintains and implements a comprehensive and effective cross -connection control program, and submits monthly and annual compliance reports. The Water Enterprise is currently operating in compliance with all State and federal drinking water regulations and permit requirements. The Regional Water System and the City of San Francisco drinking water supply permits will be updated around 2025 to reflect new facilities and operations.

In addition, public water system discharges to State and federal waters are regulated under general National Pollutant Discharge Elimination System (“ NPDES”) permits. The SWRCB issued general permits, whereas the two RWQCBs (San Francisco Bay and Cent ral Valley) issued individual region- specific NPDES permits to the SFPUC which contain numerical effluent limitations, monitoring, reporting, and notification requirements for water discharges from the facilities and pipelines of the Regional Water System. The SFPUC is generally operating and maintaining the water treatment and transmission facilities in compliance with the NPDES permit requirements.

A number of water resource management and regulatory initiatives may affect the availability of water to the Regional Water System in the future. Also, alternate water supplies currently used by Wholesale Customers of the Water Enterprise may be reduced in the future, increasing the customers’ reliance on the Regional Water System. In addition to those raised be low, these initiatives include the Sacramento -San Joaquin Delta Reform Act of 2009, the federal or California Endangered Species Acts, the SWRCB Bay Delta Proceedings, the Federal Energy Regulatory Commission (“ FERC”) proceeding to relicense the Irrigation Districts’ New Don Pedro Dam and Reservoir and others. The effects of any of these activities, or of these activities cumulatively, are unknown.

Drinking Water Requirements
Division of Drinking Water. After decades of very limited regulatory developments, the DDW has picked up its pace updating existing and adopting new drinking water regulations. These new developments will impact the current operations of the SFPUC’s drinking water operations, with new resources needed to comply with these updated regulatory requirements. The regulatory development in the last five years includes the adoptions of: a new maximum contaminant level (MCL) standard for 1,2,3- trichloropropane; surface water augmentation regulations; a lower detection limit for reporting of perchlorate in drinking water from 4 ppb to 2 ppb; the Total Coliform Rule Revision; a notification level and a response level for perfluorobutane sulfonic acid (one of the per- and poly-fluorinated alkyl substances, or known as PFAS); and a new definition of microplastics. See “New Drinking Water Standards”.

Currently there are several areas of regulatory development at the State level. These regulations are expected to be adopted by the DDW in the foreseeable future. These include, but are not limited to, lowering the detection limit for reporting perchlorate to 1 ppb by 1/2024; revision of existing Lead and Copper Rule in line with the corresponding federal Lead and Copper Rule Revision; and adoption of: a policy handbook for monitoring of microplastics in drinking water in 2022; a new MCL for chromium -6 in drinking water by 2023, and a Cross -Connection Control Policy Handbook.

Surface Water Treatment . The EPA Surface Water Treatment Rule (“SWTR ”) requires filtration of all surface water supplies unless the water supply can meet stringent requirements. As discussed under “WATER FACILITIES – Water Treatment,” the high quality of water provided from Hetch Hetchy Reservoir has been sufficient to meet SWTR drinking water requirements without installation and operation of filtration facilities. In 1998, the CDPH adopted its own version of the SWTR and determined that Hetch Hetchy Reservoir complies with all state

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drinking water criteria, without installation and operation of filtration facilities. New treatment (disinfection or filtration) facilities could be required in the future if SWTR criteria are not consistently met or regulations change .

See “– Six Year Review.”
Local water from the Alameda and Peninsula watersheds and upcountry non- Hetch Hetchy sources requires filtration to meet applicable drinking water quality requirements. The filtered and treated water from these non-Hetch Hetchy sources may be blended with disinfected Hetch Hetchy water. Most customers receive water from blended sources. System wa ter quality, including both raw water and treated water, is continuously monitored and tested to assure that water delivered to customers meets or exceeds federal and State drinking water/public health requirements.

Long Term 2 Enhanced Surface Water Treat ment Rule. The EPA and State’s Long Term 2 Enhanced Surface Water Treatment Rule (“LT2ESWTR”) specifies Cryptosporidium inactivation requirements for filtered and unfiltered water systems to improve public health protection through the control of this microbial contaminant. The CDPH adopted its version of LT2ESWTR by reference to the EPA’s version of LT2ESWTR on April 15, 2013, effective July 1, 2013. In response to this rule and consistent with the overall goals of the WSIP, the SFPUC installed an advanced disinfection facility at Tesla that uses ultraviolet light technology to inactivate target organisms in the Hetch Hetchy water supply. See “WATER FACILITIES – Water Treatment.” The UV treatment has been performing well and providing the required microbial inactivation.

LT2ESWTR sets treatment levels based on the source water quality, with poorer source water quality requiring a higher degree of inactivation. Monitoring data collected from the Hetch Hetchy and local water supplies confirm the SFPUC’s sources to be in the best water quality “bin.” Stage 2 Disinfectants and Disinfection Byproduct Rule . The EPA promulgated the Stage 2 Disinfectants and Disinfection Byproducts Rule (“Stage 2 DBPR”) in 2006 to reduce public health risk associated with disinfection byproducts (“ DBPs”). In June 2012, the CDPH adopted its version of the Stage 2 DBPR with similar regulatory requirements to the EPA. Since then, the SFPUC has demonstrated compliance with the Stage 2 DBPR by the continued use of the chloramination treatment process, albeit the fact that there are times of elevated DBP levels due to the increase in total organic carbon concentrations, which is the precursor for DBP formation, associated with the intensity of runoff in the Sierra region.

Six-Year Review. Under the Safe Drinking Water Act (the “SDWA ”), the EPA must review all existing regulations every six years and determine which regulations may need to be revised. In December 2016, the EPA announced completion of its Third Six -Year Review. The EPA determined that eight regulations are candidates for regulatory revisions, including the rules noted above. The EPA is expected to propose revised regulations by July 31, 2024, with a final regulation published in the Federal Register by September 30, 2027. In 2018, the EPA began its Fourth Six-Year Review by initiating an Information Collection Request (“ICR”). The ICR was sent o ut to primacy agencies nationwide in early 202 0 to gather contaminant occurrence data and treatment technique information collected during period between 2012 and 2019. The review may result in new capital and operational expenditures to the Water Enterprise, but any regulatory revisions would not go into effect for several years.

Groundwater Rule. The EPA promulgated the Groundwater Rule (“ GWR”) to address waterborne disease and microbial contamination related to groundwater. The CDPH adopted its own version of the GWR in August 2011 by reference to the EPA’s regulations. The GWR requires that a system putting new groundwater sources in service after November 30, 2009, should conduct assessment source water monitoring if directed by the State. The GWR also requires a groundwater system to conduct triggered source water monitoring if it does not provide 4 log virus treatment and the results of bacteriological monitoring are fecal coliform positive. The SFPUC presently has a groundwater program consisting of two projects: San Francisco Groundwater Supply for the In-City Distribution, and Groundwater Storage and Recovery for the Regional Water System. Altogether the groundwater wells of these two projects will serve as the additional and emergency water supplies to the City and Regional systems. This rule may affect the treatment and operation of these groundwater projects, depending on the operational management and water quality of these new alternate water sources. Additional treatment facilities may be requ ired to meet the disinfection requirements and to reduce certain mineral content of the groundwater to comply with the corresponding drinking water standards, if water quality monitoring results indicated such a need and the proposed blending with the surface water sources does not allow the water quality goals to be met.

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Total Coliform Rule . The EPA has revised the Total Coliform Rule (“TCR ”), and may also consider the adoption of a new Distribution System Rule in the future to more closely regulate distribution system operations and related facilities. The Revised Total Coliform Rule (“RTCR”) went into effect in April 2016, with minimal operational impact to the Water Enterprise. It is too early at this time to identify what new treatment facilities or ope rational changes will be required to meet the future distribution system rule.

The DDW adopt ed its own version of the RTCR , which has been effective since July 1, 2021. Both the Regional Water System and the In -City Distribution System are in compliance with these new regulatory requirements.

Lead and Copper Rule. The SFPUC has proactively addressed lead concerns for several decades, well before the EPA published the Lead and Copper Rule (“ LCR”) in June 1991. In the 1980’s, the SFPUC removed all known lead service lines from the In -City Distribution System. In the late 1990’s, the SFPUC started distributing non- lead faucets to daycare centers and schools. The distribution program for non-lead faucets was then expanded to the general public served by the In- City Distribution System. In the 2000’s, the SFPUC initiated a program to replace service meters with a non-leaded type in the In-City Distribution System and eliminated large, leaded, compound meters. As of July 2017, approximately 97% of the service meters have been replaced.

In 2006, the SFPUC submitted a report to the CDPH documenting that its existing corrosion control treatment using pH adjustment was optimized. The SFPUC also piloted use of other non -leaded plumbing components and sponsored the lead-free law known as Assembly Bill 1953 (“AB 1953”) that was enacted by the California Legislature in 2006. AB 1953, which requires new lead free plumbing components containing no more than 0.25% lead, has been in effect since January 1, 2010. In January 2014, EPA began enforcing its lead- free mandate known as the Reduction of Lead in Drinking Water Act, which was enacted by Congress on January 4, 2011. The EPA’s definiti on of “lead free” is the same as AB 1953’s definition of “lead-free.” In 2018, the SFPUC completed its latest triennial LCR monitoring for the In- City Distribution and the Regional Water System. The monitoring results demonstrate continued compliance with the existing LCR.

Nevertheless, the SFPUC may have to conduct a new optimized corrosion control treatment study with the addition of new groundwater sources to the Regional Water System and the In- City Distribution System.

In February 2016, in response to the event of lead problem associated with the drinking water supply in Flint, Michigan, as well as in some other parts of the United States, the EPA issued a memo clarifying the recommended LCR tap sampling procedures and, in March 2016, published new guidelines for the states and public water systems to assist in complying with the existing LCR monitoring, corrosion treatment optimization, and notification requirements.

In September 2016, Section 116885 of the California Health and Safety C ode was amended by Senate Bill 1398 and Senate Bill 427 requiring a community water system, such as those overseen by the SFPUC, to complete the following:
• Compile an inventory of known Lead User Service Lines (“ LUSLs”), which are service lines that have components made of lead material, by July 1, 2018;
• Identify areas that may have LUSLs, including service lines made of unknown materials, by July 1, 2018;
• Identify unknown user service line material by July 1, 2020; and • Develop a replacement timeline for LUSLs and still unknown material user service lines by July 1, 2020. • The approved SFPUC replacement timeline is 10 years. The Capital Improvement Program includes a project and funding to complete this work.

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In January 2021, the USEPA Lead and Copper Rule Revision ( “LCRR”) went into effect. As part of the Biden administration’s review of all new regulations, the USEPA reviewed the LCRR and decided on December 17, 2021 to keep the LCRR in place to ensure the customer water line material inventory was completed by October 2024.

The water systems owned and operated by the SFPUC will begin preparation and planning for actions to meet the new regulatory requirements of the LCRR. These include, among others, compiling a LUSL inventory consisting not only the system-side pipeline material information but also for the customer-side; identification of new monitoring sites to comply with the new tier-criteria for tap monitoring; and removal of identified LUSLs.

USEPA indicated that it would make changes to the LCRR via a new Lead and Copper Rule Improvement (“LCRI”) regulation and intends to finalize it by October 2024. The LCRI or potential new California regulations could require utilities to replace the customer side of the service line if the line was galvanized steel that was historically or is currently downstream of a leaded component.

Fluoridation. Assembly Bill 733, signed into law in October 1995, authorizes the DDW to require large water systems to fluoridate their public water supply. It also directs the DDW to seek funding for fluoridation.

The CDPH adopted its fluoridation regulations in April 1998. These regulations, as codified in Section 64433 through 64434 of Title 22, California Code of Regulations, apply to large water systems with at least 10,000 service connections. The regulations require that:
• Large systems with existing fluoridation practices continue fluoridating under more stringent regulatory requirements (i.e., concentration, control, monitoring, reporting and notification requirements) • Large non-fluoridated systems start fluoridating when funding is made available.

The SFPUC has been fluoridating the Water Enterprise’s water supply since the early 1950s, and meets all the requirements of these regulations. The optimal levels and associated control ranges specified in the fluoridation regulations were historically based on the annual average of maximum daily air temperatures recorded during the previous five years. However, in April 2015, the United States Department of Health and Human Services Agency recommended that water systems practicing fluoridation adjust their fluoride content to 0.7 mg/L, as opposed to the previous temperature-dependent optimal levels ranging from 0.7 mg/L to 1.2 mg/L. The Center for Disease Control and Prevention (the “ CDC”) also pr ovided detailed information on the basis for this change. To reflect the CDC’s recommendation, DDW consulted with public water systems practicing fluoridation regarding amendments to their individual public water supply permits to reference the CDC’s recommended optimal level of 0.7 mg/L. The recommended optimal level of 0.7 mg/L currently corresponds with the existing California Water Fluoridation Standards control range of 0.6 mg/L to 1.2 mg/L. In May 2016, the DDW confirmed that the fluoride control rang e for the Regional Water System is 0.6 mg/L to 1.2 mg/L. The SFPUC is in compliance with the operational and monitoring requirements of the State fluoridation regulations.

Environmental Laboratory Accreditation Program Regulations. The SWRCB adopted new Environmental Laboratory Accreditation Program (“ELAP”) regulations on May 5, 2020. The new regulations are applicable to the laboratories of the Water Quality Division under Water Enterprise, and started to be effective on January 1, 2021 with a few provis ions that have later effective dates. Per the SWRCB, these comprehensive regulations were developed with the goals to modernize the ELAP program and elevate data quality of California communities. The water quality laboratories owned by the SFPUC in supports of its drinking water and wastewater operations already have a high standard of data quality assurance and new resources (such as staff consultant and records management application) have and will be added to ensure compliance with these new regulations . The S FPUC will continue evaluating the laboratory operations to determine the ultimate financial and resource impacts for the compliance with the new regulations.

New Drinking Water Standards . The SWRCB adopted a new maximum contaminant level (“ MCL”) of 5 nanogram/liter (“ng/L”) for 1,2,3-Trichloropropane in July 2017. This MCL is set at a very low level that the SFPUC has to implement a dedicated, routine monitoring program to assess if its sources of water supply need treatment for compliance. Bas ed on the ongoing monitoring effort, 1,2,3- TCP is not a contaminant of concern to the SFPUC’s approved drinking water sources; thereby no treatment for compliance is anticipated in the foreseeable future.

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The DDW vacated the previously adopted MCL for chr omium-6 in response to an order issued by the Superior Court of Sacramento County on May 31, 2017. A new chromium-6 MCL is currently under development by the DDW. Impacts of the new MCL to the SFPUC’s groundwater sources are yet to be known, and will be evaluated when the new standard is proposed. If treatment is required, blending with high quality surface water supplies will be the likely treatment alternative.

The DDW adopted its version of RTCR, which was effective starting on 7/1/2021. The State’s ver sion follows the corresponding federal counterpart with additional requirements. The State of California has increasingly legislated new regulatory requirements over the past few years, and is expected to continue augmenting these laws and regulations wit h the ultimate goal of establishing applicable drinking water standards, either new or more stringent, to enhance public health protection. In the current pipe of rulemaking, the DDW has been working on new regulatory requirements to further reduce lead ex posure in drinking water (SB 1398, 2016 and SB 427, 2017) via adopting additional requirements along with the EPA’s LCRR, developing a policy handbook to regulate cross connection control (AB 1671, 2017), human right to water (AB 685, 2012; SWRCB Resolution, 2016), a policy handbook for monitoring of microplastics in drinking water in compliance with SB 1422, 2018, and issuance of general order requiring water systems to perform PFAS monitoring (AB 756, 2019). The SWRCB adopted a definition of microplastics in drinking water in June 2020, and proposed a draft policy handbook for microplastic monitoring in drinking water in November 2021.

In August 2019, the SWRCB lowered the notification levels (“ NLs”) for two PFAS contaminants:
perfluorooctanoic acid (“PFOA”) and perfluorooctanesulfonic acid (“PFOS”). These two PFAS are most commonly found in the environment, especially in groundwater sources that are close and potentially affected by municipal landfills, military bases, and facilities at which fire-fighting practices were/are conducted regularly. The NL for PFOA was reduced from 14 part per trillion (“ppt”) to 5.1 ppt and the NL for PFOS was lowered from 13 ppt to 6.5 ppt.

Although the NLs are not enforceable as with the other MCLs, a water system with detections of one or both of these two PFAS exceeding these NLs will have to notify its governing board and public. On February 6, 2020, the SWRCB also reduced the response levels of PFOA to 10 ppt and PFOS to 40 ppt. Previously, the response level was 70 ppt for the total concentration of the two PFAS combined. Similar to the NLs that the response levels are not enforceable, but a water system’s water source containing these contaminants exceeding the response levels will not be allowed to use that wat er source. Additional PFAS legislation, regulations, and SWRCB’s expanded monitoring efforts are anticipated. In preparation for these future regulatory efforts from the State and the EPA, the SFPUC has been proactive in performing voluntary PFAS monitoring in its surface and groundwater sources. Two rounds of voluntary PFAS monitoring were completed by the SFPUC for all its surface water and groundwater sources between 2019 and 2021; all results were below the State’s detection limits.

Public Water System Discharges
As part of routine operations and maintenance activities, the SFPUC transfers treated water between storage facilities and discharges water to the environment. These transfers and discharges are regulated under the federal Clean Water Act through general NPDES permits issued by the SWRCB or appropriate RWQCB.

The SFPUC currently has several NPDES permits that cover discharges from the Regional Water System and SFPUC drinking water facilities. These permits generally impose discharge limitations , monitoring, reporting, and notification requirements. These permits require the SFPUC to control various water quality parameters (such as pH, chlorine residual, turbidity, etc.) and implement best management practices to minimize any adverse environmental effects caused by the discharges from the Regional Water System. The SFPUC is implementing improvements, as well as operational controls, to more reliably meet permit requirements under Section 402 of the Clean Water Act. See “CAPITAL IMPROVEMENT PLAN – Water System Improvement Program (WSIP).” Bay-Delta Water Quality Standards
The Water Enterprise obtains the majority of its water supply from Hetch Hetchy Reservoir, located on the main branch of the Tuolumne River, which is an upstream tributary to the San Joaquin River and the San Francisco Bay/Sacramento San Joaquin Delta Estuary (the “Bay Delta”). In 1995, the SWRCB, which oversees the allocation of water for consumptive and environmental needs, adopted a Water Quality Control Plan (t he “1995 WQCP ”) for

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the Bay Delta pursuant to State and federal obligations to protect water quality in the Bay Delta ecosystem. The 1995 WQCP called for certain flow objectives on the San Joaquin River where it enters the Delta and certain Delta outflows.

In 2000, the SWRCB issued an order implementing the 1995 WQCP. The order did not in any way condition the City’s rights to divert water from the Tuolumne River, nor did it require the City to release water to implement the 1995 WQCP. In 2006, the SWRCB amended the 1995 WQCP (the “2006 WQCP”) and identified San Joaquin River flows as an issue of emerging concern because various fish species in the Delta and San Joaquin River basin had not shown significant signs of recovery under the 1995 WQCP. In 2008, in light of continued decline in the populations of anadromous and pelagic (open water) fish species, the SWRCB adopted a Strategic Workplan for Activities in the San Francisco Bay/Sacramento San Joaquin Delta Estuary calling for review and implementation of the 2006 WQCP’s San Joaquin River flow objectives.

In February 2009, the SWRCB noticed its intent to update water quality objectives of the 2006 WQCP and the program of implementation, which had the potential to result in impacts to water rights and the i ssuance of water quality regulations consistent with the program of implementation. Following a several years -long process, on December 12, 2018, by Resolution No. 2018- 0059, the SWRCB adopted the “Phase 1” Amendment to the WQCP (“2018 Plan Amendment ”) and the accompanying final Substitute Environmental Document. The adopted Plan Amendment was developed with the stated goal of increasing salmonid populations in three San Joaquin River tributaries (the Stanislaus, Merced, and Tuolumne Rivers) and the Bay- Delta. The Plan Amendment requires the release of 40% of the “unimpaired flow” on the three tributaries from February through June in every water year type, whether wet, normal, dry, or critically dry. If the Plan Amendment were to be implemented, it would re sult in significant water supply shortages for the Hetch Hetchy Regional Water System during single dry and multiple dry years.

The SWRCB has three primary means of implementing the forty- percent unimpaired flow requirement: (1) in a separate water rights proceeding that would consider any necessary changes to upstream water rights; (2) by adopting a regulation and issuing orders on targeted water rights; or (3 ) through Clean Water Act section 401 certification actions in Federal Energy Regulatory Commission (“ FERC”) hydroelectric licensing processes, such as the FERC relicensing proceeding underway for the Don Pedro Project on the Tuolumne River (discussed below).

On January 10, 2019, the City joined in filing a lawsuit with the San Joaquin Tributaries Authority challenging the SWRCB’s adoption of the Plan Amendment on multiple legal grounds including the California Environmental Quality Act and the Porter Cologne Act. Over a dozen other lawsuits have been filed in state and federal court challenging the Plan Amendment. In 2021, the State submitted what it concluded constituted the administrative record for the proceedings, which petitioners asserted was underinclusive. Through 2021 and into 2022, the court has issued a series of rulings in favor of the Sta te against a number of petitioners, which has led to the dismissal without leave to amend of several causes of action, and upholding other causes of action.

In its Resolution No. 2018 -0059 approving the 2018 Plan Amendment, the SWRCB directed staff to help complete a “Delta watershed-wide agreement, including potential flow measures for the Tuolumne River” by March 1, 2019, and to incorporate such agreements as an “alternative” for a future amendment to the Bay- Delta Plan to be presented to the SWRCB “as early as possible after December 1, 2019.” On March 1, 2019, in accordance with the SWRCB’s instruction, SFPUC, along with other key stakeholders, submitted to the State a proposed voluntary agreement (“March 1st Proposed Voluntary Agreement”) and participated in numerous voluntary agreement negotiation meetings throughout 2019. In October 2021, the State Secretaries for Environment and Natural Resources sent a letter to all Lower San Joaquin River water users taking part in voluntary agreement negotiations . The letter informed these water users of the Secretaries’ intent to end negotiations with these water users and, instead, to move forward with full enforcement of the unimpaired flow requirements of the Bay Delta Plan. SFPUC, however, has been continuing voluntary agreement conversations with the State, and continues to seek to enter into an agreement, In late 2019 and early 2020, the State and other parties filed multiple lawsuits against the federal government for its adoption of Biological Opinions that altered how the U.S. Bureau of Reclamation would operate the Central Valley Project. In 2020, several other lawsuits were filed against the State for its issuance and adoption of an Incidental Take Permit governing how the California Departm ent of Water Resources would operate the State Water Project.

While the City is not participating in these lawsuits, this litigation may continue to impact negotiations for a Delta watershed-wide agreement.

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The SFPUC, in partnership with the Modesto Irrigation District and Turlock Irrigation District, has continued its negotiations with the State to consider a stand -alone Tuolumne River Voluntary Agreement. If the State decides to submit the Tuolumne River Voluntary Agreement to the SWRCB for review, then (1) scientific peer review of the Voluntary Agreement may be completed as early as the end of 2020, and (2) a draft CEQA document would be released for public comment and a finalized CEQA document would be completed and issued thereafter. After a final CEQA document is issued, the SWRCB would then be able to consider adoption of the Tuolumne River Voluntary Agreement.

If successful, this voluntary agreement process may allow the SFPUC to offset some or all the flow requirement of the 2018 Plan Amendments by agreeing to instead implement certain “non -flow” measures designed to improve the viability of targeted fish species. These negotiations remain ongoing.

FERC Proceeding to Increase Flows in the Lower Tuolumne River FERC licenses the New Don Pedro and La Grange Diversion Dam Projects, owned and operated by the Irrigation Districts. The City helped fund the original construction of New Don Pedro Project in exchange for a 570,000-acre-foot “water bank” account allowing the SFPUC to receive water credits for advanced releases from the Hetch Hetchy Project to the New Don Pedro Reservoir.

The current FERC license for the New Don Pedro Project expired in 2016, and the Irrigation Districts are now operating under an annual license that incorporates the conditions of their prior license. The Irrigation Districts initiated the process to relicense the New Don Pedro Project using FERC’s Integrated Licensing Process in 2010.

Relicensing is a lengthy process, stretching over several years and open to public participation. It is estimated the process may cost up to $50 million to complete, which costs are split for certain studies between the Irrigation Districts and the SFPUC pursuant to an existing agreement.

The Irrigation Districts submitted an Amended Final License Application (“AFLA”) for the New Don Pedro Project on October 11, 2017. The Irrigation Districts are also working through a licensing proceeding for the La Grange Diversion Dam (the “La Grange Project”), which is located on the Tuolumne River, two miles dow nstream of the New Don Pedro Project. The Irrigation Districts also submitted their Final License Application (“FLA”) for La Grange on October 11, 2017.

NEPA and CEQA environmental review must be completed before licenses can be issued. On July 7, 202 0, FERC released the Final Environmental Impact Statement (“FEIS ”) for the AFLA for the New Don Pedro Project and the FLA for the La Grange Project. The FEIS presents a “staff recommendation” that is mostly aligned with the Irrigation Districts’ AFLA.

As mentioned in the “Bay -Delta Water Quality Standards” section above, under section 401 of the federal Clean Water Act, FERC cannot issue a new license for a hydroelectric project until a state’s water quality agency issues a 401 certification stating that the new license will comply with the applicable water quality requirements or, alternatively, FERC determines that the State has waived its Section 401 certification authority. The ongoing WQCP voluntary agreement process is designed, in part, to draft the section 401 certification terms that would be included as part of the FERC license in lieu of the forty -percent unimpaired flow requirement set forth in the 2018 WQCP.

However, in January 2021, the State Board issued a final 401 water quality certification that sets a flow schedule more onerous than the Phase 1 Amendment to the WQCP. The SFPUC and Modesto and Turlock Irrigation Districts field a petition for reconsideration at the State Board in February 2021. The State Board did not respond to the Petition and thus, the City and the Irrigation Districts filed a lawsuit challenging the 401 water quality certification. On a parallel track the Irrigation Districts have challenged FERC to find that the State Board has waived its authority under the Clean Water Act in issuing a 401 water quality certification. Both the administrative and judicial proceedings are ongoing.

A 1995 Don Pedro Project Settlement Agreement (“ Settlement Agreement”) and a 1996 Order by FERC (“1996 Order”) established increased water flows on the Tuolumne River to protect fisheries and riparian resources.

A restoration plan (“ Restoration Plan”) adopted in 2000 guides planning, funding and implementation efforts. The Restoration Plan calls for a series of projects with a combined estimated cost of $25 million to improve river channel, riparian, and fisheries conditions within a 27- mile stretch of the Tuolumne River corridor below the La Grange

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Diversion Dam. Four of the ten priority projects have been completed. However, no additional projects ar e in the planning or construction phases due to the limited availability of federal and State grant funds.

Pursuant to a then-existing agreement between the City and the Irrigation Districts, the City might have been liable to provide a portion of the incr eased flows mandated under the 1995 Settlement Agreement. Instead, the City and the Irrigation Districts entered into a new agreement (the “Side Agreement ”) whereby the Irrigation Districts agreed to provide all flows ordered by FERC to implement the Settlement Agreement until FERC issues a new license for the New Don Pedro Project in exchange for which the City pays the Irrigation Districts $3.5 million per year, subject to an escalation clause applied to keep pace with inflation. Pursuant to the terms of its agreement with the Irrigation Districts, the City may withdraw from the agreement upon one year’s notice.

The term of the Settlement Agreement runs until FERC issues a new license for the New Don Pedro Project.

License conditions, such as water -release requirements, could change under a new license. Changed release requirements could adversely affect the availability of Tuolumne River water to the SFPUC and incidental hydroelectric generation. To prevent these potentially adverse effects to its operations on the Tuolumne River, the SFPUC is seeking to extend the existing Side Agreement so that it would remain in effect after the New Don Pedro Project FERC license is renewed.

FERC has not yet provided a schedule for relicensing.

Dam Licensing and Safety Issues
In 1929, the California Legislature enacted legislation providing for supervision over non- federal dams in the State. The statutes place the supervision of the safety of non- federal dams and reservoirs under the jurisdiction of the DSOD. Dams under jurisdiction are artificial barriers, together with appurtenant work, including outlet towers, which are 25 feet or more in height or have an impounding capacity of 50 acre-feet or more. Any artificial barrier not in excess of six feet in height, re gardless of storage, or that has a capacity not in excess of 15 acre- feet, regardless of height, is not considered jurisdictional.

The DSOD reviews plans and specifications for the construction of new dams or for the enlargement, alteration, repair or remo val of existing dams, under applications, and must grant written approval before the owner can proceed with construction. The DSOD routinely inspects operating dams to assure that they are adequately maintained. The DSOD also conducts investigations of selected dams and directs the owners to additional investigations and detailed safety evaluations when necessary. In early 2017, Oroville Dam, which is owned and operated by the State, suffered significant spillway structural problems and a major downstream area was temporarily evacuated. As a result of the Oroville Dam experience, the State Legislature enacted legislation to enhance the DSOD’s authority, and DSOD has requested additional evaluations of certain spillways, including four spillways at the following dams: Cherry Valley, O’Shaughnessy, Turner, and San Andreas.

The SFPUC has 18 dams under the jurisdiction of the DSOD. In 2019, the SFPUC performed a comprehensive overview of evaluations and potential capital improvements that may be needed for these dams in the next 15 years. The SFPUC created a proposed schedule for improvement projects and submitted the schedule to the DSOD. In most cases, additional evaluations may be necessary to further determine capital needs . Such evaluations are expected to be performed at the start of the project during the planning phase. Thus, while estimated funding has been committed in the Ten -Year Capital Program for these facilities, the scopes, budgets and schedules may be adjusted in future years as more informati on becomes available. T he projects that have already occurred under the WSIP and future potential projects under the Ten-Year Capital Program are described below.

The following descriptions highlight capital improvements to dams under DSOD’s jurisdiction t hat have been constructed under WSIP in the past 15 years.

Crystal Springs Reservoir System . An order imposed by the DSOD prohibited use of stop logs in the reservoir spillway due to seismic concerns and resulted in a loss of historic storage capacity at Lower Crystal Springs Reservoir. As part of the WSIP, the SFPUC restored the historical maximum capacity of 69,400 acre feet through capital improvements. The DSOD then rescinded the storage restriction. However, the land that will be inundated by

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the restored capacity has been populated with fountain thistle, an endangered plant species. The recovered storage will be available to the Regional Water System over time as the impacts to fountain thistle are mitigated for under the terms of federal and State endangered species act permits.

Calaveras Dam. Due to seismic stability concerns regarding Calaveras Dam, the DSOD had restricted the amount of water stored in Calaveras Reservoir to a target maximum of 38,000 acre-feet, a reduction in storage capacity of approximately 60%. In 2011, under DSOD review, the SFPUC began a project to replace the Calaveras Dam to alleviate seismic safety concerns. Substantial completion of the new Calaveras Dam, directly downstream from the older dam, was reached in 2018 and final completion was reached in 2019. The replacement dam and reservoir now store up to 96,800 acre feet of water, the historical maximum capacity.

University Mound Reservoir – North Basin. The two basins of the University Mound potable water storage reservoir in San Francisco are both considered dams under DSOD jurisdiction. Under WSIP, the North Basin received seismic improvements and other upgrades that were completed in 2011. University Mound Reservoir is considered a regional Water Enterprise asset because it is a terminal reservoir to the regional transmission system.

Sunset Reservoir – North Basin. The two basins of the Sunset potable water storage reservoir in San Francisco are both considered dams under DSOD jurisdiction. Under WSIP, the Nor th Basin received seismic improvements and other upgrades that were completed in 2008. Sunset Reservoir is considered a regional Water Enterprise asset because it is a terminal reservoir to the regional transmission system.

Stanford Heights Reservoir. Stanford Heights Reservoir is a potable water storage reservoir in San Francisco that is under the jurisdiction of DSOD. Under the WSIP, construction of seismic improvements and a new inlet pipe was completed in 2011.

Sutro Reservoir. Sutro Reservoir is a potable water storage reservoir in San Francisco that is under the jurisdiction of DSOD. Under WSIP, construction of seismic improvements and a new inlet pipe was completed in 2016.

Summit Reservoir. Summit Reservoir is a potable water storage reservoir in San Francisco that that came under the jurisdiction of DSOD after geotechnical and seismic improvements and the addition of an inlet pipe under WSIP were completed in 2012.

The following descriptions highlight capital improvement projects that are currently being implemented or planned under the Ten-Year Capital Plan.

Moccasin Dam. On March 22, 2018, the town of Moccasin experienced more than 5.0 inches of precipitation over a 24-hour period, of which 3.1 inches fell within a four -hour period. The torrent of rain caused Moccasin Creek to overtop the Moccasin Creek Diversion Dam. The overtopping creek water brought with it a large volume of debris including downed trees and logs. Flooding reached the Administration Building basement, Moccasin Powerhouse, the Line Shop, and Gardeners’ Shop. Both Moccasin Dam Spillways (Main and Auxiliary Spillways) were inundated and the reservoir came within approximately 1 foot of overtopping the dam. Furthermore, seepage was observed exiting the downstream face of the dam. Following an evacuation order for areas downstream of the dam, the SFPUC issued emergency contracts to remove debris, perform damage assessments, and perform emergency interim repairs to the Moccasin Reservoir Dam, Main and Auxiliary Spillways, the Moccasin Creek Diversion Dam and appurtenant facilities. Based on substantial completion of the emergency repairs, DSOD allowed partial re -filling of the reservoir at the end of calendar year 2018, and the SFPUC returned the reservoir to service at a restricted reservoir level in June 2019. All of the emergency repairs were completed in 2020 . The Ten-Year Capital Plan includes the Moccasin Dam Long-Term Improvements Project that evaluates and funds necessary upgrades to the dam, spillways and outlet works.

Potential work elements include the enlargement of the primary and auxiliary spillways, modification of the adit tower and outlet, enlargement of the existing dam, modification of the existing catwalk, modification of access roads, dam security and maintenance. Pre -construction planning and engineering design are scheduled for 202 0 to 2024 with construction anticipated from 2025 to 2027.

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O’Shaughnessy Dam . O ’Shaughnessy Dam was completed in 1923 and raise d in 1938. A rehabilitation project is planned to address deficiencies of the existing outlet works system at O ’Shaughnessy Dam, including the drum gates and release system through O ’Shaughnessy Dam to Canyon Tunnel and the Tuolumne River. A recent condition assessment identified deficiencies in the O ’Shaughnessy Dam release system. Improvement projects were identified and have been prioritized. The Access and Drainage Improvements Project, which is necessary to provide safety and access improvements to facilitate future construction projects, finished design documents in 202 0 and is anticipated for construction in 2021. Phase 1 of the O’Shaughnessy Dam Outlet Works Improvements Project includes three sub-projects: drum gate rehabilitation, installation of a new bulkhead system, and rehabilitation of slide gates plus installation of a diversion pipe butterfly valve. Phase 1 sub- projects are currently in planning and engineering design phase, with construction anticipated from 2023 to 2024. Phase 2 is planned to rehabilitate or replace large valves such as the 60- inch and 72-inch needle valves and their associated control systems. Phase 2 pre-construction is planned for 2024 to 2027, with construction anticipated from 2028 to 2031.

Cherry Valley Dam. Cherry Valley Dam was built in 1955. The spillway includes a 334-feet wide ogee-type concrete weir that discharges into an unlined adjacent channel. The original design documents indicate that the spillway is rated for 52,000 cubic feet per second ( “cfs”). However, significant erosion damage has occurred below the dam when corresponding spillway releases were less than 1,800 cfs. This has included large scale erosion outside the lower portion of the spillway channel, as well as flooding of the Cherry Power Tunnel Adit and a campground downstream, creating a potentially hazardous condition for the dam, personnel and the public. The SFPUC performed a recent condition assessment of the spillway, and a re -assessment of the Probable Maximum Flood (“ PMF”) event shows a significant increase compared to the previous PMF estimate. The objective of the proposed capital project is to improve the capacity of the existing spillway to provide safe passage of the new PMF. The project may also involve structural/seismic stability analysis of the outlet tower and other possible safety improvements and appurtenant facilities. The Ten -Year Capital Plan includes the Cherry Dam Spillway Short -Term Improvements Project with planning and engineering design from 2020 to 2022 and construction of improvements from 2023 to 2024. This will be followed by the Cherry Dam Spillway and Intake Tower Rehabilitation Project with pre-construction planning and design from 2026 to 2030, and construction from 2031 to 2034 (project is funded through 2030).

Early Intake Dam. Early Intake Dam is a single-curvature concrete arch structure. It was constructed between 1923 and 1924 to divert Hatch Hetchy water from the Tuolumne River into the Mountain Tunnel. Within a few years of the dam’ s completion, significant cracking was observed at several locations, most likely due to the absence of contraction joints in the structure. In addition, widely distributed and progressively worsening distributed cracking has been observed throughout the dam and spillway structure over the years. The dam is reaching the end of its design life. The SFPUC has identified an interim mitigation alternative to install a liner on the upstream face of the dam to reduce the rate of expansion and deterioration caused by the alkali aggregate reaction. This interim measure may extend the useful life of the dam by 20- 25 years. The liner will be installed under the Early Intake Dam Interim Improvements Project anticipated for construction in 2022. The Early Intake Dam Long-Term Improvements Project will follow with planning and engineering design scheduled from 2028 to 2032 and construction from 2033 to 2035 (project is funded through 2030).

Eleanor Dam. Eleanor Dam is a multiple arch reinforced concrete dam that was constructed in 1918. The 2015-2016 Needs Assessment Report identified deterioration and aging of the structure, as well as performance concerns. Specifically, the SFPUC has identified structural/seismic concerns regarding the Eleanor Bridge, which is an integral part of the arch dam, including cracking and spalling of concrete, exposed rebar, multiple significant leakage through the arch barrels, and cracks and erosion of the spillway concrete. The Lake Eleanor Dam Bridge Rehabilitation Project will address bridge deficiencies through repair and/or replacement; pre -construction is scheduled for 2020 through 2023, with construction from 2024 to 2025. The Lake Eleanor Dam Rehabilitation Project will proceed in parallel to address dam concrete deficiencies, increase capacity for releases, and increase downstream erosion protection. This project will undergo planning and engineering design from 2023 to 2024 with construction from 2025 to 2028.

Priest Dam. Priest Dam is an earth and rock filled dam located just east of Moccasin located on Rattlesnake Creek in Tuolumne County. The dam was built between 1921 and 1923, and is approximately 160 feet tall and 1,000 feet wide, with a crest width of 20 f eet. Priest Dam has a long history of iss ues related to settlement and deflection, and needs a condition assessment and stability analysis using current standards and analysis techniques. The project will include installation of new instrumentation to monitor and document the movement of the dam under different

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storage conditions. The SFPUC will use the results to determine whether a future capital improvement project is required. The condition assessment and monitoring will be performed from 202 0 to 2022. If a longer term project is deemed necessary, it would be considered a candidate project for future funding, and construction would be planned for completion by 2035.

Pilarcitos Dam . Pilarcitos Dam has a capacity of approximately 3,100 acre- feet and was originally constructed in 186 6 by the Spring Valley Water Company. In 2013, DSOD requested the SFPUC to perform a geotechnical characterization of the Pilarcitos Dam foundation and a seismic stability evaluation of the Pilarcitos Outlet Tower. The SFPUC is currently conducting a condition and needs assessment of the dam and forebay outlet structure, outlet tunnel, outlet pipeline and spillway as requested by DSOD. The condition assessment of the emergency outlet structure and the spillway was completed in 2019, and the geotechnical exploration of the embankment was underway as of June 202 0. Hydrologic and hydraulic studies show that the current spillway does not have sufficient capacity to pass the probable maximum flood, and seismic improvements ar e needed for the emergency outlet structure. A capital project is being planned to develop alternatives for consideration to mitigate the facilities seismic and hydraulic deficiencies. Pre-construction including planning and engineering design is scheduled for 2020 to 2024 with construction from 2025 to 2027.

CleanPowerSF Sfpuc CommissionApril 12, 2022

CleanPowerSF Sfpuc Commission
April 12, 2022