OUR MISSION: To provide our customers with high-quality, efficient and reliable water, power and sewer services in a manner that values environmental and community interests and sustains the resources entrusted to our care.
525 Golden Gate Avenue, 13th Floor
San Francisco, CA 94102
T 415.934.5707
F 415.554.1877
Date: September 26, 2023
To: Commissioner Newsha Ajami, President
Commissioner Sophie Maxwell, Vice President
Commissioner Tim Paulson
Commissioner Tony Rivera
Commissioner Kate Stacy
Through: Dennis J. Herrera, General Manager
From: Ron Flynn, Deputy General Manager
Stephen Robinson, AGM Infrastructure
Nancy L. Hom, AGM Business Services, CFO
Laura Busch, Acting Deputy CFO
Tricia Yang, Director, Strategy, Innovation & Change
Subject: Capital P
lanning Improvement Initiative Update
During the capital budget discussions in January 2022, SFPUC committed to balancing the FY2023-2024 Capital Budget and 10-Year Capital Improvement Plan (CIP) by February 2023 with deeper consideration of project deliverability and affordability factors. This work examined capital project budgeting, planning and deliverability to align the capital planning process more closely with the SFPUC’s capacity to deliver projects.
While the FY2023-2024 Capital Budget and 10-year CIP were ultimately balanced and approved, the assessment of systems, policies and processes governing capital delivery and budgeting revealed opportunities to improve the SFPUC’s approach to capital planning. The SFPUC in turn established an internal Capital Planning Improvement Initiative in Fall 2022 to improve capital planning over the next five years with the following goals:
• Build a unified approach for capital project planning, prioritization and decision making across SFPUC (to the extent possible)
• Improve our ability to assess deliverability for project planning and budgeting
• Develop solutions to key deliverability issues to increase our capacity to execute on projects
The program is focused on improving, modernizing, and unifying the SFPUC’s capital planning approach, one of the agency’s most fundamental strategic activities and its biggest cost driver. The goal to unify includes some nuance – to integrate as much as possible our capital planning systems, governance and processes across the Water, Power and Wastewater enterprises to enable more for Ron Flynn
informed decision making, while allowing for variation in prioritization to account for the different demands on each enterprise.
Given the broad scope and our commitment to continuous improvement, this program is anticipated to span five (5) years to include at least two full budget development cycles which occur every other year.
Progress to date
The Strategy, Innovation & Change (SIC) bureau within Business Services is leading this program and coordinates a steering committee from across the agency to ensure a high level of engagement. Progress includes:
• November 2022 – Completed program charter formalizing teams of SFPUC staff to seek improvements to capital planning and delivery processes and policies
• December 2022 – Convened teams to develop specific recommendations for capital planning process improvements by April 2023 • April 2023 – Produced first drafts of recommendations for review and feedback
• May 2023 to Present – Initiated the FY2024-2026 budget and 10-Year CIP process. Rolled out a new intranet site to streamline document management, staff collaboration and provide updated guidance for developing the 10-year capital plan. The updated guidance includes standardized roles and responsibilities, templates for submitting existing and new project details, guidelines for tracking project deliverability reviews and prioritization, and an approach for CIP optimization and balancing. • Present through January 2024 – Work will continue to refine and improve our processes through the remainder of the budget process. This includes integrating more thorough deliverability reviews and prioritization, combined with the ability to run scenarios for financial affordability.
A cross-functional project team has since led the FY2024-25 to FY2033-34 Capital Planning cycle to facilitate use and comprehension of the new intranet site and process changes, and to address issues and opportunities for improvements in real time. The team is also tracking issues that require a longer runway for inclusion in the next budget cycle.
Outcomes
Some of the most significant benefits of the Capital Planning Improvement Initiative have been the impact on organizational culture. SFPUC staff involved in this effort have become increasingly accustomed to drawing best practices from across teams, test driving them for use more broadly and providing constructive feedback to refine our planning processes. This orientation will serve the SFPUC well as we endeavor to meet the increasing demands of aging infrastructure, new customer needs, and climate change resilience on our agency.
Last year’s balanced FY2023-24 to FY2032-33 Capital Plan represented a significant reduction from the prior version, reflecting an over $1 Billion decrease, largely in the Wastewater plan. A portion of this movement in the budget can be attributed to the early stages of the Capital Planning Improvement Initiative which emphasized the need to both spend down unspent balances and exercise greater prudence when determining long term project budgets to reflect deliverability.
As noted above, we anticipate process improvements to continue over several capital planning cycles. We look forward to providing further updates on this initiative as a part of the FY2024-25 budget discussions.
Please contact us if you have any questions.