San Francisco Public Utilities Commission
Special Hearing
FY 2024-25 and FY 2025-26 Proposed Budget
Budget priorities and overview of:
2-Year Operating Budget
2-Year Capital Budget
10-Year Capital Plan
10-Year Financial plan
January 22, 2024
Dennis Herrera, General Manager
Nancy Hom, Chief Financial Officer and Assistant General Manager, Business Services Laura Busch, Deputy Chief Financial Officer
Erin Corvinova, Financial Planning Director 1
Agenda
1. Welcome and Introduction
2. Budget Priorities
• Note: this is a Public Hearing (per Administrative Code Section
3.3(b)) and an opportunity for the public to hear about our proposed budget and weigh in on priorities
3. Budget Approach
4. Proposed Operating Budget Overview
5. Proposed Capital Budget and 10-Year Plan Overview
6. 10-Year Financial Plan Overview
7. Debt Outlook
8. Bureaus Budgets (separate presentations)
2 What we do
3 Water Power Sewer
Delivering high-quality
water
Generating clean
energy
Protecting public health
and the environment
A Diverse Workforce Serving Diverse Communities
4 2368
employees
As of December 2023
Creating a Utility of the Future: Priorities in
Developing this Budget
5 Affordability
Adopted affordability policy
for Water and Wastewater
Efficient capital planning
Responsible
Management
Addressing Regulatory
Requirements
Financial Sustainability
Workforce: Reducing
vacancies, increasing retention
Accountability: Racial Equity
and Transparency
Responsible management of
our system, maintenance
Investing
Where it
Matters
Contributing to economic
vitality: capital investment and
job creation
Replacing aging infrastructure
Meeting new customer
demands
Environmental stewardship
Resilience and climate change
Challenges Faced During this Budget Cycle
• Keeping rates affordable given large investment needs • Climate uncertainty
• Addressing regulatory challenges
• Economic uncertainty, wider context of City’s budget
• Inflation, cost increases for operating and capital budgets • Challenging bid environment for construction
• Large increases in power supply and delivery costs
• Need to build reserves in CleanPowerSF
• Managing SFPUC’s growing capital spending, and maintaining debt service coverage and ratings
6 Racial Equity in the budget process
• Now a formal part of the budget
process
• Budget proposals are shaped by staff
with racial equity in mind
• Gathered information as part of
proposals
• Chief Diversity, Equity and Inclusion
Officer on steering committee and
reviewed proposals
7 Budget Process Flow Chart
Staff level budget
Development
Operating budget
baseline review
New Capital Planning
Process
Steering Committee
Review by GM
Commission
review and
adoption
4 special hearings late
January
Adoption 2/13
Mayor and Board
Phase
Charter deadline 2/21
Mayor Phase
Labor negotiations
Board/BLA cut
process*
*An update on the final budget is
provided to the Commission in late
summer
8 May - December 2023 January-February 2024 March-June 2024 Commission Special Hearings: What to Expect
9 The goal is to answer all of
the Commission’s questions
and make any needed
changes before the Feb. 13
adoption meeting to ensure
we meet our Charter
Deadline of February 21st
Written responses to open
questions that arise during
the hearings will be provided
at subsequent hearings
When What
TODAY:Monday,
January 22nd 9am
Overview, Priorities,
Bureau Budgets
Friday, January 26th
9 am
Wastewater - Operating and Capital
Monday, January 29th
9 am
Water - Operating and Capital
Friday, February 2nd
9 am
Power - Operating and Capital
Numbers here represent our best estimates currently.
Many factors can change our cost estimates, especially
for labor, as we move through the budget process
What will the Commission Adopt?
• On February 13th, Adopt the following items:
• 2-Year Operating Budget
• 2-Year Capital Budget
• 10-Year Capital Plans
• 10-Year Financial Plans
10 These are subsequently proposed to
the Mayor’s office, then Board for
adoption on February 21
st
Includes debt issuance and
rate forecasts based on the
proposed budgets and capital
plan
First 2 years = Capital Budget
11 2-Year Operating Budget
SFPUC Operating Budget Overview
12 Revenue-
funded Capital
12%
Debt Service
24%
Personnel
14%
Power Purchase and
Distribution 26%
Non-Personnel
19%
General Reserve
1%
Programmatic Projects
4%
• Capital is SFPUC’s largest
cost driver at 36% (debt
service 24% + revenue
funded capital 12%)
• Power purchase and
distribution is next at 26%
• Followed by Personnel and
Non-Personnel costs that
support daily operations at
14% and 19% respectively
Capital funding
FY2024-25
$2 Billion
Operating
Budget
-
500.0
1,000.0
1,500.0
2,000.0
2,500.0
FY2024 FY2025 FY2026
SFPUC Estimated Budget
($millions)
Operating Uses Capital Uses Purchase of Power
Operating Budget Growth: New Proposals grow the
budget by just 1.8% over the 2 years
• Budget will grow by 18% or $323
Million over next 2 years
• Capital and power purchase
remain the large cost drivers,
growing by $306 Million, or 83% of
the growth
• Operating budget new proposals
(including proposed offsetting
savings) are not a significant driver
of the overall growth. Net new
requests are roughly $33 Million,
only 9% of the growth (in other
words, growing the budget by just
1.8%)
13 11.4%
5.9%
1,788
2,110
1,992
Operating Budget Growth Drivers
14 ($ Millions) Budget Change $ Change %
FY 2023-24 Adopted $ 1,787.8
Labor & Benefits COLA Adjustment 6.7
Operations & Maintenance Adjustment 10.6
Debt Service 38.1
Revenue Funded Capital 96.2
Purchase of Power 66.3
Offsetting increase in Salary Savings (13.1)
General Reserve (38.1)
Bureau New Proposals 15.1
Wastewater New Proposals 7.8
Water New Proposals 6.1
Hetchy Water New Proposals 5.9
Hetchy Power New Proposals 1.6
CleanPowerSF New Proposals 1.4
FY 2024-25 Proposed $ 1,992.4 $ 204.6 11%
Labor & Benefits COLA Adjustment 11.1
Operations & Maintenance Adjustment 2.8
Debt Service 50.9
Revenue Funded Capital 42.5
Purchase of Power 11.7
Offsetting increase in Salary Savings (1.1)
General Reserve (9.1)
Bureau New Proposals 0.2
Wastewater New Proposals 2.0
Hetchy Water New Proposals 4.3
Hetchy Power New Proposals 2.5
CleanPowerSF New Proposals 0.4
FY 2025-26 Proposed $ 2,110.6 $ 118.2 6%
Operating Budget Growth Drivers
15 (47)
(14)
13 18
47 78
89 139
(100) (50) - 50 100 150
$ million
Budget Growth Drivers
Revenue Funded Capital
Debt Service
Purchase of Power
New Proposals
Labor/COLA
Operations & Maintenance
Offsetting increase in Salary
Savings
General Reserve
Main 2-year budget changes, $M
New Proposals Summary
16 Water 12%
Wastewater 19%
CleanPowerSF
4%
Hetchy Power
8%
Hetchy Water
20%General
Manager 3%
HRS 6%
Business
Services 15%
Infrastructure
6%
External
Affairs 7%
Enterprise/
Bureau ($millions)
FY 2024-
25 FY 2025-
26 Total
Water $6.1 - 6.1
Wastewater 7.8 2.0 9.8
Hetchy Water 5.9 4.3 10.2
Hetchy Power 1.6 2.5 4.1
CleanPowerSF 1.4 0.4 1.8
General Manager 1.3 - 1.3
HRS 3.1 - 3.1
Business Svcs 7.4 0.2 7.6
External Affairs 3.3 - 3.3
Total New Operating $37.9 $9.4 $47.3
Salary Savings (13.1) (1.1) (14.2)
Net New Operating $24.8 $8.3 $33.1
Infrastructure (Capital funded) 2.9 - 2.9
Total SFPUC $27.7 $8.3 $36.0
New proposals, by division
Staffing Request Summary
17 Water 21 Wastewater 20
CleanPowerSF
12 Hetchy Power
26 Hetchy Water
13 General
Manager 4 HRS 20
Business
Services 33
Infrastructure
8 External
Affairs 14
Enterprise/
Bureau
New
Positions
Temp to
Perm
Substitutions
Water 9 12 42
Wastewater 16 4 28
Hetchy Water 2 11 13
Hetchy Power 17 9 12
CleanPowerSF 4 8 1
General Manager 4 - 4
HRS 12 8 10
Business Svcs 12 21 19
External Affairs - 14 17
Infrastructure 8 - 29
Total 84 87 175
171 New Permanent Positions, includes 87
Temp to Perm conversations
171 new permanent positions, most of which are temp
to perm and do not represent new headcount
Staffing Growth: Headcount Changes
18 FY 2023-24 Positions 2,748 FY 2024-25 Proposed 2,817 Operating Positions Operating Positions
New Requests 57 New Requests 8
Temporary to Permanent 67 Temporary to Permanent 5 Offsetting increase in Salary Savings (86) Offsetting increase in Salary Savings (12) Subtotal 38 Subtotal 1
Off Budget Project Positions 31 Off Budget Project Positions 3 Total 69 2.5% Total 4 0.1%
FY 2024-25 Proposed 2,817 FY 2025-26 Proposed 2,821
Note that these numbers will not tie directly to the AAO/ASO, because new FTE are added in the budget as partial (0.79) in year 1 to account for hiring delays. Headcount is represented here for clarity.
19 Position Changes: Highlights
• 175 substitutions to both repurpose vacant positions for changing o
perational needs, and align job duties with classifications • 171 new positions requested, examples:
• Temporary to permanent conversions to ensure permanent operating positions are filled with PCS staff, helping with retention and recruitment • Addressing staffing shortages in key areas such as water quality, natural resources, green infrastructure maintenance, risk management • Shoring up HRS team to increase hiring
• Support for the City’s Housing for All initiative
• Increasing lead inspection in schools
• Meeting regulatory requirements
Temp to Permanent Conversions: Key Operational
Priority for Retention
• Most of the requests (87 of 171) are budget and
headcount neutral TEX Cat 18 to PCS conversions for
staff in core long-term operational positions
• Turnover is major operational challenge and ratepayer cost. Retention of staff is a high priority
• These positions are all filled at the time of the budget proposal. No new headcount results
• Costs are offset with temp reductions or attrition
increases, as we are already paying for them within
existing budget
20 Vacancies were carefully considered before
requesting new FTE
Enterprise/Bureau Budgeted
attrition %
Full time
Vacancies
Water 12.1% 206 (23%)
Wastewater 12.2% 164 (30.5%)
Hetchy Water 8.7% 60 (25.1%)
Hetchy Power 15.3% 40 (27.4%)
CleanPowerSF 16.8% 6 (14.6%)
General Manager 4.1% 4 (11.1%)
Human Resources 4.0% 20 (23.3%)
Business Services 6.4% 53 (17.9%)
External Affairs 4.9% 11 (23.4%)
Infrastructure - 109 (30.6%)
21 • We went through vacancy report and
pushed hard for substitutions instead of new
positions. We are doing 175 substitutions.
• This significantly reduced the number
of new FTE asks (from 203 initially, to
171)
• We have a “story for every vacancy”
ensuring no FTE is sitting vacant with no
active recruitment plans
• We have made significant changes in
budgeted attrition to more appropriately
reflect salary savings
• We have bolstered our HRS team to help
increase hiring
Numbers updated as of December 2023
0 500
1000
1500
2000
2500
3000
3500
FY 23-24 FY 25-26
Budgeted Salary Savings (Attrition)
Off Budget Project Funded
Operating Funded Positions
What does increasing attrition/salary savings
mean?
• 171 new permanent FTE represents 6%
growth in total budgeted positions, but 87
(most) are temp to perms and do not
represent new headcount
• However, we increased our overall
budgeted salary savings from approx.
11% to 15% of the salary budget (an
amount equivalent to 98 FTE) to account
for temp to perms and rightsizing for
vacancies
• Therefore, net FTE only grows by 73
positions, of which 34 are “off budget”
funded via capital projects
• Bottom line, we are only asking for 39 net
new on-budget FTEs, or 2% increase
22 All new:
+171 = +6%
Net funded:
+39 = +2%
SFPUC Total FTE
AAO*: Operating FundedFTE growth is 4.3% in last
7 years
23 AAO total Change % change
FY2019-20 1,690
FY2020-21 1,667 -23 -1.4%
FY2021-22 1,708 41 2.5%
FY2022-23 1,718 10 0.6%
FY2023-24 1,724 5 0.3%
FY2024-25 1,762 38 2.2%
FY 2025-26 1,763 1 0.1%
73 4.3%0
200
400
600
800
1000
1200
1400
1600
1800
2000
AAO Total, budgeted and funded FTE,
excludes off budget positions and attrition
COVID
*AAO: Annual Appropriation Ordinance
…While the Operating Budget grew by 50% and our
work got more complex
24 Year
Operating Budget
$M
% Change form
prior year
FY2019-20 1,412
FY2020-21 1,434 1.6%
FY2021-22 1,504 4.9%
FY2022-23 1,652 9.8%
FY2023-24 1,788 8.3%
FY2024-25 1,992 11.4%
FY2025-26 2,110 8.4%
49.5%
-
500
1,000
1,500
2,000
2,500
Operating Budget $MCOVID
25 2-Year Capital Budget and 10-Year
Capital Improvement Plan (CIP)
What is the 10-Year Capital Improvement
Plan?
• Long range forecast of capital
investment, updated annually
as required by Charter
• Plan comprised of high-level
project categories and
projects
• Individual project data sheets
with scope, schedule and cost
• First 2 years = 2-Year capital
budget
• Includes a detailed Capital
Plan Report
26 Overview of Capital Planning Process
• Guidance
• Unifying approaches and deliverability
were central to the process due to the
Capital Planning & Delivery Program,
outputs included:
• 10-Year Capital Improvement Plan
Guidelines
• Budget Instructions
• Other workstream outputs
• Timeline
• Enterprise Budget Development – May to
September 2023
• Budget Steering Committee Deliberation –
September to November 2023
• General Manager approval for Commission
consideration – December 2023
27 • Goals
• Build a unified approach for capital program and project planning, prioritization and decision making across SFPUC (to the extent possible)
• Improve our ability to assess deliverability for program and project planning and budgeting
• Develop solutions to key deliverability issues to increase our capacity to execute on projects
• Initiative and Outputs
• More to come in Assistant General Manager Robinson's Infrastructure Bureau Presentation
Capital Planning and Delivery Program Overview
28 Overview of this Year's 10-Year Capital
Improvement Plan
• As the largest 10-Year Capital Plan ever proposed, this year’s $11.8 Billion plan represents a visionary investment in San Francisco's economy, infrastructure, and resiliency
• Key Points:
• A comprehensive plan spanning 10 years, ensuring reliable water, clean energy, and resilient infrastructure – delivering on the SFPUC's priorities • A catalyst for economic growth, creating and sustaining thousands of local union jobs
• Bolstering the City’s tax base, in turn supporting the City’s General Fund. • A local solution to the global climate crisis
• Aligned with the Mayor's priorities, building a safer, cleaner, and more prosperous San Francisco
29 • Recent successes funded by
current/previous 10-Year
Plans:
• Biosolids Digester Facility
• Calaveras Dam
Improvements
• Sunset Reservoir Upgrade
• Mountain Tunnel
• Bay Corridor Transmission
Distribution Project
30 Previous Capital Plans Responsible for Billions
in Investment in the Regional Economy
0 2
4 6
8 10
12 14Billions
SFPUC 10-Year Capital Improvement Plan
Growth
Water Wastewater Hetch Hetchy Water and Power CleanPowerSF Capital Plan grew by $3 Billion, to $11.8 Billion
31 0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
FY 24-
25 FY 25-
26 FY 26-
27 FY 27-
28 FY 28-
29 FY 29-
30 FY 30-
31 FY 31-
32 FY 32-
33 FY 33-
34 Millions
Water Wastewater Hetchy Water
Hetchy Power CleanPowerSF
$Billion FY 2024-33 FY 2025-34 Change
Change
%
Water 2.3 3.0 0.7 30%
Wastewater 4.9 6.0 1.2 24%
Hetchy Water 1.0 1.5 0.5 57%
Hetchy Power 0.6 1.2 0.6 107%
CleanPowerSF 0.1 0.0 (0.0) -34%
8.8 11.8 3.0 34%
10-Year Capital Plan Comparison to Prior Plan
Capital Plan Growth Drivers by Enterprise
Wastewater
Increase,
$Millions
Nutrients 1,185
Oceanside Plant improvements 108
Flood Resilience 73
Water
Pipeline Improvements 96
Alternative Water Supply 142
Pilarcitos Dam 33
Millbrae Campus Improvements 187
Main replacement 156
Hetchy Water
Moccasin Penstock 285
Moccasin Dam 70
SJPL Valves 33
Moccasin powerhouse 30
Transmission Lines clearance 23
Eleanor Dam 25
Moccasin Buildings 50
Hetchy Power
SFO Substation 94
Intervening Facilities 80
Steam Loop 217
Grid Connections 233 32
$3 Billion Growth in the Capital
Improvement Plan by Enterprise
Key projects contributing to growth
Water
23%
Wastewater
38%
Hetchy Water
18%
Hetchy Power
21%
Capital Plan Growth drivers by Project Category
33 Regulatory
and
Environmental
45%
Clean Energy
27%
Repair and
Replacement
of Critical
Infrastructure
26%
Other Misc.
2%
The growth in this year’s
Capital Plan is
overwhelmingly driven by
regulatory and
environmental obligations,
clean energy investments
and repair and
replacement of our aging
critical infrastructure
$3 Billion Growth in the Capital
Improvement Plan by type of project
The 10-Year Capital Improvement Plan:
Building a Sustainable Future
Major Projects in the Capital Plan:
System Reliability and Resilience: Water
Millbrae Yard Laboratory and Shop
Improvements, SFWD Headquarters, and
replacement of water mains throughout the
system
Protecting Public Health: Wastewater
Nutrient Reduction, Biosolids Digester Facility,
stormwater/treatment plant improvements, flood
resistance, and replacement of sewer mains
throughout the system
System Sustainability and Expansion: Power
Public Power Expansion, Clean Steam, Moccasin
Penstocks, expanding clean energy sources,
enhancing reliability
Breakdown of the 10-Year CIP by Enterprise
34 Water
25%
Wastewater
51%
Hetchy Water
13%
Hetchy
Power 10% CleanPowerSF <1%
2-Year Capital Budget: Minimal change since the last version of the plan
$Million
Prior Plan
FY2024-25
Proposed
Plan
FY2024-25 Change
Prior Plan
FY2025-26
Proposed
Plan
FY2025-26 Change
Water 894.5 892.5 (2.0) 818.4 822.9 4.5
Wastewater 437.3 456.1 (18.7) 443.7 477.2 33.5
Hetchy Water 155.6 152.8 (2.8) 152.6 180.8 28.2
Hetchy Power 77.7 52.0 (25.7) 92.7 85.5 (7.2)
CleanPowerSF 2.9 2.6 (2.3) 3.0 0.5 (2.5)
1,568.0 1,554.0 -14.1 1,510.3 1,566.9 56.5
35 Due to a renewed focus on deliverability and using up prior appropriations, the 2-Capital Plan shrunk by 0.9% in FY 2024-25 and only slightly grew by 3.6% in
FY2025-26 versus the prior 10-Year Plan.
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
FY2024-25 FY 2025-26
Proposed Budget (in millions)
Fiscal Year
2-Year Budget Comparison to Prior
Plan
Prior Plan Proposed Plan
Continued Deliverability of this Year's Growing Plan
• Wastewater - Navigated deliverability of new projects (nutrients, outfall) by staggering project phases; ongoing projects utilize existing resources.
• Water - Prioritized long-term capital needs and
focused resources on delivery of most critical projects, particularly projects in construction. Special attention was given this budget cycle to spending down existing
appropriations.
• Hetchy Water - Existing projects have dedicated
resources, while the overall CIP has been evenly
distributed by year to accommodate resource loading.
• Hetchy Power - Many projects (Downtown Ferry,
Carbon Free Steam Loop, SFO Substation) are being
substantially delivered by other entities.
36 Economic Impact:
Sustaining Jobs, Strengthening San Francisco
• Every $1 million expended on
construction creates and sustains
roughly 5.93 jobs.
1. • The SFBOS assumes over 80% of
the capital plan is dedicated to
construction. That’s over 50,000 jobs.
• 2/3 of which are good paying
construction jobs, either created or
sustained by SFPUC's 10-Year CIP.
2. • Multiplier Effect: Capital investment
stimulates local businesses, generating
additional jobs and economic
activity/vitality.
37 1. https://onesanfrancisco.org/the-plan-2020/appendices- methodology-and-assumptions
2. https://sfbos.org/6-capital-project-design-costs
Commitment to Labor:
A Partnership for a Stronger San Francisco
• The multiplier effect of the $11.8 billion
investment in San Francisco infrastructure will
especially benefit union jobs, ensuring:
• Access to locally sourced skilled labor and
expertise in project completion
• Investment in local communities and workforce
development
• Jobs that are safe, and provide fair wages and
benefits for our community
•
Recent capital investments have yielded:
• Local residents performing a minimum of 30% of all
work hours on projects >$400,000
• 44% of workers assigned to SFPUC capital projects
were San Francisco residents (2022)
• 1,400 internships per year
38 10-Year CIP: Community Benefits and a Plan that
Addresses the Climate Change Crisis
39 Capital Improvement Plan Summary
SFPUC's largest 10-Year CIP to date:
• Reliable water, clean energy, and resilient infrastructure for generations to come
• Developed with a focus on affordability, deliverability, and a proactive response to cost pressures (e.g., federal regulations and a carbon free future)
• Tens of thousands of local jobs created, boosting the economy, and supporting San Francisco
• Bolstering the local tax base which supports the City’s General Fund • Alignment with the Mayor's priorities, building a safer, cleaner, and more prosperous San Francisco
• Capital planning process more rigorous than ever
40 Circling back: How have our Priorities to Create a
Utility of the Future Been Addressed?
41 Affordability
Adopted affordability policy
for Water and Wastewater
Efficient capital planning
Responsible
Management
Addressing Regulatory
Requirements
Financial Sustainability
Workforce: Reducing
vacancies, increasing retention
Accountability: Racial Equity
and Transparency
Responsible management of
our system, maintenance
Investing
Where it
Matters
Contributing to economic
vitality; capital investment and,
job creation
Replacing aging infrastructure
Meeting new customer
demands
Environmental stewardship
Resilience and climate change
42 10-Year Financial Plan
Financial Plan –Water Enterprise
43 • Water sales still below pre-COVID and pre-drought levels • Continued investment and capital and escalating operating expenses • 4.0% compound annual growth in expenses
Water Sales Volumes Total Expenses
Financial Plan – Wastewater Enterprise
44 • Massive capital investment, driven by replacement of aging infrastructure and regulatory requirements
• 9.6% average annual growth in expenses over next 10 years • Debt service grows from 24.0% to 57.8% of total expenses in 10 years • Issuing $13.0 billion in revenue bonds over next 20 years Projected Capital Appropriations Total Expenses
Water & Sewer Affordability
45 FYE
2025*
FYE
2026*
FYE
2027
FYE
2028
FYE
2029
FYE
2030
FYE
2031
FYE
3032
FYE
2033
FYE
2034
10 Year
Avg.
Water Rate Increase 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 4.0% 4.0% 3.0% 3.0% 4.2% Sewer Rate Increase 9.0% 9.0% 12.0% 12.0% 11.0% 10.0% 10.0% 10.0% 7.0% 7.0% 9.6% Combined Bill Impact 8.8% 9.6% 9.6% 9.1% 9.4% 8.6% 7.7% 7.4% 4.9% 5.6% 8.1% * Adopted rates
Financial Plan –Hetch Hetchy Power
46 • Planning for significant customer expansion, with conservative timing assumptions • New customers in redevelopment areas, electrification projects for existing customers
• Capital plan includes projects to serve increased load • Major increases in power supply and delivery expenses over last few years Power Sales Volumes Total Expenses
Rate Increases – Hetch Hetchy Power
47 FYE
2025
FYE
2026
FYE
2027
FYE
2028
FYE
2029
FYE
2030
FYE
2031
FYE
3032
FYE
2033
FYE
2034
10 Year
Avg.
Retail Rate Increase 14.0% 10.0% 9.0% 9.0% 5.0% 4.0% 4.0% 3.0% 3.0% 3.0% 6.3% General Use Rate
Increase 18.9% 15.9% 13.7% 12.1% 10.8% 9.7% 8.9% 8.1% 7.5% 7.0% 11.2% Average Residential Bill – 10 Years Average Residential Bill – PG&E Comparison
Financial Plan –CleanPowerSF
48 • Increased sales FYE 2024-25 due to new commercial customer signups • Moderate growth from electrification, population growth projected • Large increase in supply costs in recent years expected to level off but not drop Total ExpensesPower Sales Volumes
Rate Increases – CleanPowerSF
49 Average Residential Bill – 10 Years Average Residential Bill – PG&E Comparison FYE
2025
FYE
2026
FYE
2027
FYE
2028
FYE
2029
FYE
2030
FYE
2031
FYE
3032
FYE
2033
FYE
2034
10 Year
Avg.
Generation Rate Increase
(CleanPowerSF) 12% 1% 0% 0% 0% 0% 0% 0% 0% 0% 1.2%
Total Bill Increase
(PG&E + CleanPowerSF) 5% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3%
50 Debt Outlook
Outstanding Borrowing Obligations
(Including Undrawn Facilities)
SFPUC has $8.5
billion of outstanding
debt which together
with undrawn facilities
represents $12.1
billion of outstanding
borrowing and
undrawn capacity on
Commercial Paper,
WIFIA and SRF
borrowing
*Includes Power Bonds closing 10/12/23; approximately $800 million of WIFIA borrowing to be drawn in January 2024 51 Debt proceeds will support 77.8% of our $11.8B capital plan • The SFPUC accesses ‘advantaged financing’
• Tax Exempt Bonds
• Taxable Municipal Bonds
• State Revolving Fund Loans
• Federal Loans (like WIFIA) and Tax Credit / Direct Pay Loans • Borrowing accelerates construction and the SFPUC Repays the O
bligations in Future Dollars
• Bay Area Consumer Price Index Annual Average of 3.4% in 2021 and 5.6% in 2022 • Borrowing costs have recently been lower than capital inflation costs • Intergenerational Equity
• Today’ users don’t bear the full brunt of paying for assets to be used over several dec
ades
• Manage Rate Impacts of Large Capital Acquisitions
Why Does SFPUC Issue Debt?
52 ^Updated ratings available from Moody’s Investors Service (www.moody’s.com), S&P Global Ratings (www.spglobal.com) and Fitch Ratings (www.fitchratings.com) †CleanPowerSF received an A2 issuer rating from Moody’s Investors Service in December 2020, however the CleanPowerSF Program currently does not have any debt outstanding High Ratings Allow SFPUC to Borrow at Low Rates
(And Stable Outlooks)
Long Term Credit Ratings
(Credit Outlook)
Moody's Investors
Service
S&P Global Fitch Ratings
Water Enterprise Aa2
(Stable)
AA-
(Stable)
*
Wastewater Enterprise Aa2
(Stable)
AA
(Stable)
*
Power Enterprise * AA
(Stable)
AA-
(Stable)
CleanPowerSF† A2
(Stable)
* *
53 Higher Interest Rate Assumptions
A higher interest rate assumption (6% instead of 5%) reflects higher rate environment and contributes to the higher projected debt service costs
• Interest rates in prior planning cycles have ranged from 3.75% to 5% • Rate assumption changed due to Federal Reserve actions to raise rates to confront inflationary pressures, and to better align with assumptions used by other City agencies and other peer public utilities
• Our projections now assume 6% future rates for 10 years, 5% thereafter
• Capitalized Interest assumption reduced from 30-months to 24- months
54 New 10-Year Debt Issuance Plan
Source: 10-Year Financial Plan
FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030 FYE 2031 FYE 2032 FYE 2033 FYE 2034 Total Water $762 $439 - $713 - $494 - $554 - $477 $3,439
WW 1,108 774 699 - 1,373 - 990 - 1,274 - 6,218
HHP - 276 - 301 - 280 - 327 - 272 1,456
$11,113
• Last year’s 10-Year Debt Plan for FY 2024-2033 included $6.3 billion of planned debt
• The Debt Plan for FY 2025-2034 calls for $11.1 billion of planned debt over t
he new 10-year horizon
55 56
-
100,000,000
200,000,000
300,000,000
400,000,000
500,000,000
600,000,000
700,000,000
800,000,000
2025 2030 2035 2040 2045 2050 2054
Outstanding Bond NDS Planned SRF Loans Capital Plan NDS (post 2023) 10yr Plan Net Revenues Capital Plan Debt
Existing Debt Service
Water Existing and Projected Debt Service
(10-Year Plan Assumptions)
$0
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
$1,200,000,000
$1,400,000,000
$1,600,000,000
2025 2030 2035 2040 2045 2050 2055 2060 2065
Outstanding Rev Bond NDS SRF Loans WIFIA 1&2 WIFIA 3a&b Capital Plan NDS (post 2023) Net Revenues Wastewater Existing & Projected Debt Service
(10-Year Plan Assumptions)
Capital Plan Debt
57 Power Existing & Projected Debt Service
(10-Year Plan Assumptions)
*Net revenue figures include fund balance budgeted as revenue -
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
400,000,000
450,000,000
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
2063
2064
Power Net Debt Service Projections (FY)
Outstanding Bonds NDS 2023A Bonds NDS DS on Proposed Bonds Net Revenue Capital Plan Debt
58 Q & A
59 Financial Strategy Team
Retreat December 2023
Thank you, Finance Team!
Back up information slides
60 Appendix A: Water 10-YFP
61 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030 FYE 2031 FYE 2032 FYE 2033 FYE 2034 Beginning Fund Balance ($M) 166.0$ 148.4$ 128.5$ 110.8$ 112.7$ 121.3$ 122.6$ 123.0$ 129.5$ 136.2$ 140.3$ Sources ($M)
Retail Water Sales 323.8 345.3 367.9 385.8 404.9 424.9 442.0 460.0 474.4 489.8 505.7 Wholesale Water Sales 315.6 342.3 360.8 394.1 425.1 441.7 452.4 459.8 467.2 486.4 505.0 Other Miscellaneous Income 63.8 68.4 68.3 68.2 68.2 67.6 67.5 67.4 67.1 66.7 66.3 Total Sources 703.2$ 755.9$ 797.1$ 848.2$ 898.2$ 934.2$ 961.8$ 987.2$ 1,008.8$ 1,042.9$ 1,077.0$ Use s ($M)
Operations & Maintenance 301.3 293.2 294.7 303.1 312.0 321.3 330.7 340.4 350.5 360.5 371.4 Hetchy Transfer 46.3 39.5 40.8 41.9 43.1 44.5 45.9 47.5 49.0 50.7 52.4 Debt Service 328.3 339.7 366.2 383.2 430.3 464.8 485.2 516.7 531.4 556.0 579.6 Revenue-Funded Projects 44.9 103.4 113.1 117.9 104.3 102.3 99.6 76.1 71.2 71.5 64.7 Total Uses 720.7$ 775.9$ 814.8$ 846.2$ 889.6$ 932.9$ 961.4$ 980.6$ 1,002.1$ 1,038.8$ 1,068.1$ Net Revenues ($M) (17.6)$ (20.0)$ (17.7)$ 2.0$ 8.6$ 1.2$ 0.4$ 6.6$ 6.6$ 4.1$ 9.0$ Ending Fund Balance ($M) 148.4$ 128.5$ 110.8$ 112.7$ 121.3$ 122.6$ 123.0$ 129.5$ 136.2$ 140.3$ 149.3$ Rate Increas e - Retail 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 4.0% 4.0% 3.0% 3.0% 3.0% Rate Increas e - Wholes ale 9.7% 5.0% 2.0% 5.7% 7.6% 3.6% 1.8% 1.0% 1.0% 3.5% 3.2% Debt Service Coverage (Current) 1.11 1.25 1.27 1.32 1.27 1.23 1.21 1.16 1.15 1.14 1.13 Debt Service Coverage (Indenture) 1.59 1.65 1.59 1.63 1.56 1.50 1.47 1.42 1.41 1.39 1.39 Revenue-Funded % of Capital 27%
Single Family Res. Monthly Average (CCF) 4.60 4.60 4.70 4.70 4.60 4.60 4.60 4.60 4.60 4.50 4.50 Single Family Res. Monthly Combined Bill 141.98$ 154.48$ 169.38$ 185.72$ 202.60$ 221.69$ 240.66$ 259.11$ 278.29 $ 292.03 $ 308.34$ Appendix B: Wastewater 10-YFP
62 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030 FYE 2031 FYE 2032 FYE 2033 FYE 2034 Beginning Fund Balance ($M) 166.0$ 168.5$ 159.1$ 147.1$ 132.4$ 117.8$ 95.9$ 88.8$ 89.8$ 86.4$ 89.1$ Sources ($M)
Sewer Charges 391.9 434.0 478.8 535.3 598.9 664.3 730.4 803.8 885.0 948.6 1016.7 Non-Rate Revenue 18.3 19.9 20.1 19.9 20.7 20.8 20.7 20.9 21.3 21.7 22.2 Federal Bond Interest Subsidy 3.4 3.2 3.1 3.0 2.8 2.7 2.5 2.3 2.2 2.0 1.8 Total Sources 413.6$ 457.2$ 501.9$ 558.2$ 622.5$ 687.8$ 753.6$ 827.1$ 908.4$ 972.2$ 1040.6$ Use s ($M)
Operations & Maintenance 219.9 231.7 231.9 238.6 245.8 253.2 260.7 268.4 276.5 284.6 293.2 Debt Service 98.5 122.5 148.2 237.6 312.3 390.5 421.2 462.2 531.7 552.7 596.3 Revenue-Funded Projects 92.6 112.4 133.9 96.7 79.0 66.0 78.9 95.4 103.7 132.2 140.6 Total Uses 411.0$ 466.6$ 513.9$ 572.9$ 637.1$ 709.7$ 760.8$ 826.0$ 911.8$ 969.5$ 1030.1$ Net Revenues ($M) 2.6$ (9.4)$ (12.0)$ (14.7)$ (14.6)$ (21.9)$ (7.2)$ 1.1$ (3.4)$ 2.7$ 10.5$ Ending Fund Balance ($M) 168.5$ 159.1$ 147.1$ 132.4$ 117.8$ 95.9$ 88.8$ 89.8$ 86.4$ 89.1$ 99.7$ Retail Rate Increas e 9.0% 9.0% 9.0% 12.0% 12.0% 11.0% 10.0% 10.0% 10.0% 7.0% 7.0% Debt Service Coverage (Current) 2.00 1.88 1.85 1.36 1.21 1.12 1.18 1.21 1.19 1.25 1.26 Debt Service Coverage (Indenture) 3.77 3.21 2.87 1.92 1.60 1.37 1.39 1.41 1.36 1.41 1.43 Average Single Family Res idential Sewer Bill $77 $86 $97 $109 $124 $139 $155 $170 $186 $199 $212 Average Single Family Residential Combined Bill $142 $154 $169 $186 $203 $222 $241 $259 $278 $292 $308 Appendix C: Hetch Hetchy Power 10-YFP
63 Appendix D: CleanPowerSF10-YFP
64 Debt Service as % of Expenditures
Water Enterprise
• Debt service growing from 44% of FY 2025
t
o 54% of FY 2034
Wastewater Enterprise
• With SSIP, debt service grows from 26% in
FY
2025 to 58% in FY 2034
Hetch Hetchy Power
• As principal on 2021 and 2023 bonds
begin
s, debt service grows from 4% in FY
2025 to 16% in FY2034
$122
$596
$-
$500
$1,000
$1,500
2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
Millions
Operations & Maintenance Debt Service Revenue-Funded Capital $10
$91
$-
$500
$1,000
2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
Millions
Power Supply and Delivery Other Operations & Maintenance $340
$580
$-
$500
$1,000
$1,500
2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
Millions
Operations & Maintenance Debt Service Revenue-Funded Capital 65 Debt Coverage Requirements
Bond Indenture Requirements SFPUC Policy Requirement
Indenture Coverage Ratio 1.25x 1.35x
Current Coverage Ratio 1.00x 1.10x
Result if fail to meet ratios • Event of Default declared and a cure is legally required
• Cure may trigger payment
acceleration, credit
downgrades, increased
borrowing costs and
reputational damage
• Potential decrease in credit
leading to higher cost to
borrow
• Violation of SRF coverage
requirement
66