1 San Francisco Public Utilities Revenue Bond Oversight Committee Annual Report Fiscal Year 2023
2 Background
In November 2003, the Public Utilities Revenue Bond Oversight Committee (RBOC) was formed after passage of Proposition P in November 2002, adding Sections 5A.30 through 5A.36 to the San Francisco Administrative Code. The RBOC facilitates transparency and accountability in the expenditure of revenue bond proceeds. The public is invited and welcome to attend RBOC meetings and provide input.
Pursuant to Administrative Code, Section 5A.36, the RBOC is charged with providing independent oversight of the expenditure of public utility revenue bond proceeds for capital improvements. The committee helps ensure an uninterrupted supply of water, power, and wastewater treatment services to the City and County and San Francisco Public Utilities Commission (SFPUC) customers. Further, it helps ensure public dollars are spent in accordance with the authorizing bond resolutions and applicable laws.
After conducting an independent audit, and consulting with the City Attorney, the RBOC may determine that proceeds of a revenue bond program were not utilized for purposes authorized in accordance with the associated bond resolution or applicable law. It may be further determined that this surmounts to an illegal expenditure or waste of such revenue bonds. By majority vote, the RBOC may prohibit the issuance or sale of authorized revenue bonds that have yet to be issued or sold.
Any RBOC decision to prohibit the sale of authorized but unsold revenue bonds may be appealed to the Board of Supervisors. The SFPUC can provide evidence of corrective measures to the Board, and the Board may decide to overturn the decision by the RBOC, upon a two-thirds vote of all of its members. To date, the RBOC has not prevented any issuance of SFPUC revenue bonds.
The SFPUC continues to incur bonded indebtedness to finance capital improvements related to the Water, Power and Sewer systems. Each of these enterprises have embarked on major system improvement programs.
The provisions of Proposition P were set to expire on January 1, 2013, unless extended by an ordinance of the Board of Supervisors. In 2012, the Board extended the sunset date to January 1, 2016, (see Ordinance No. 236-12, BOS File No. 120221). In 2015, the SFPUC submitted, and the Board of Supervisors approved, a resolution supporting the extension of the RBOC until January 1, 2019. On December 11, 2018, the Board of Supervisors approved Ordinance No. 309-18, BOS File No. 180123, extending the RBOC through its current sunset date of January 1, 2025.
Mission Statement
The RBOC monitors the expenditure of revenue bond proceeds related to the repair, replacement, upgrade and expansion of the SFPUC’s water, wastewater, and power infrastructure. The RBOC provides independent oversight to ensure transparency and accountability. The goal of the RBOC is to ensure that SFPUC revenue bond proceeds are spent for their intended purposes in accordance with legislative authorization and other applicable laws.
3 Committee Membership
The RBOC is comprised of seven members:
• Two seats appointed by the Mayor 1
• Two seats appointed by the Board of Supervisors
• One seat appointed by the City Controller 2
• One seat appointed by the Bay Area Water User's Association (BAWUA), under the auspices of the Bay Area Water Supply and Conservation Agency (BAWSCA) • One seat shall be the Budget and Legislative Analyst or his/her representative
At a minimum, the members appointed by the Mayor and by the Board of Supervisors shall, individually or collectively, have expertise, skills and experience in economics, the environment, construction, and project management. The member appointed by the Controller shall have background and experience in auditing, accounting, and project finance. Appendix I includes the biographies of RBOC members serving as of June 30, 2023.
Introduction
The purpose of this report is to detail the activities of the RBOC for fiscal year 2022-2023 covering the period July 2022 to June 2023 (“the period”). In the past the RBOC published annual reports on a calendar year basis, however beginning in 2020 the issuance of the RBOC report was aligned with the fiscal year adopted by the City and County of San Francisco.
Initiatives
During the period, the RBOC focused on the following initiatives:
• Reviewed progress on the performance audit of six bond series from the 40 bond series subject to RBOC oversight as of June 30, 2023, three from the Wastewater, two from Water, and one from the Power enterprises for a total of $2 billion in expenditures. The audit report was published after the period on August 30, 2023.
• Reviewed progress of Water System Improvement Program (WSIP) and Sewer System Improvement Program (SSIP) with particular focus on the accuracy of budgeting and scheduling forecasts and continued attention to ensuring that lessons learned from the WSIP are applied during implementation of the SSIP.
• Heard presentations from SFPUC staff on results of bond sales and updates on the Water Infrastructure Finance and Innovation Act (WIFIA) loan transaction. • Monitored the outcome of bond sales and ongoing debt plans. • Visited the Hetch Hetchy Regional Water System.
See Meeting Summaries in Appendix II for specific topics covered in RBOC meetings.
1 One seat remained vacant as of June 30, 2023.
2 Vacant
4 Future Initiatives
The RBOC plans to cover the following initiatives in the next fiscal year:
• Hold hearings to ensure follow-up on action items identified by the audits. • Initiate and complete new performance audits of revenue bond expenditures. • Monitor completion of the WSIP and other major Water Enterprise capital projects. • Review planned and completed projects of the SSIP.
• Visit project sites funded by SFPUC revenue bond expenditures. • Explore engaging consultants to examine the performance of completed projects. • Ensure the continuity of oversight through member succession planning. • Improve outreach to ensure greater public awareness and input related to the SFPUC’s expenditure of revenue bond proceeds.
Outstanding Revenue Bonds
As of June 30, 2023 the SFPUC had $7,363,410,000 in outstanding Revenue Bonds. See Appendix III for details.
5 Debt Issuance
During the period July 1, 2022 to June 30, 2023, the SFPUC issued $1,111,460,000 in new revenue bonds this amount includes new debt and refinancing of old debt. See Appendix IV for details.
Bond Expenditure Certification
As part of its mission, the RBOC asks SFPUC staff to affirm that all bond proceeds are spent “appropriately and according to authorization and applicable laws.” Please see Appendix V for the “Bond Expenditure Certification”.
RBOC Account Summary
Pursuant to Proposition P, the RBOC receives 1/20th of 1% of gross revenue bond proceeds to fund the cost of retaining the services of “outside auditors, inspectors and necessary experts to perform independent reviews”. As of June 30, 2023, RBOC had an available account balance of $ 1,848,865. A complete accounting of RBOC funds can be found in Appendix V.
Acknowledgements
The RBOC would like to express its appreciation to the SFPUC staff and others for facilitating the tasks of the committee. Specifically, the committee would like to acknowledge the following staff:
San Francisco Public Utilities Commission - General Manager Dennis Herrera, and his team.
City Attorney’s Office - Deputy City Attorney Mark Blake, and Katherine Ortega Thornsby.
Controller’s Office – Winnie Woo, Massanda Djohns, Hunter Wang, and former Audit Director Tonia Lediju.
From the Board of Supervisors, the RBOC wishes to thank Assistant Clerks John Carroll and Victor Young for their technical and administrative support.
6 Appendix I – Biographies of RBOC Members
Ettore Leale (Chair)
Appointed by the Board of Supervisors (Seat 1)
Appointed on 1/28/2020 (Term expires on 11/12/2023)
Ettore Leale is an executive and investor in the internet and software industries. Currently he leads mergers and acquisitions, and ESG engagement with institutional investors at Udemy, an online learning and teaching marketplace. His board of directors experience includes serving on audit, risk, and compensation committees of companies in the United States, Europe, and India. At present he serves on the board of directors of Expert.ai, a provider of natural language processing solutions, and the San Francisco Fire Credit Union, a community financial institution. He earned an MBA from Harvard Business School, and a BA from the School International Service at American University in Washington DC.
Lars Kamp
Appointed by the Board of Supervisors (Seat 2)
Appointed on March 15, 2021 (Term expires on 11/12/2024)
Lars Kamp is a co-founder and CEO of Some Engineering Inc., a San Francisco-based software start-up. He’s been a start-up operator and founder for the past ten years. As a founder, he’s raised both debt and equity financing, and managed global P&Ls.
He began his career at Accenture in 2001, where he worked out of Accenture’s offices in Vienna, Rome and Seoul. He joined Accenture’s San Francisco office in 2006. Lars’ work with Accenture clients comprised the planning, financing and roll-out of global communication and cloud computing infrastructure, with multi-$B capital budgets. The operation of data center infrastructure dealt with the sustainable use of water for cooling systems, as well as developing strategies for long-term water resilience. Lars has a Master’s Degree in Economics and Business Administration from Passau University, Germany. He’s fluent in German, Italian and French. Lars lives with his family in the Presidio (District 2).
7 Claire Veuthey
Appointed by the Mayor (Seat 4)
Appointed on 6/23/2022 (Term expires on November 12, 2024)
As Founder at Rizoma Ventures, Claire Veuthey works with asset managers on integrating ESG and impact into their investment work. She served as Head of ESG at OpenInvest (acquired by JPMorgan), Head of ESG on the Social Impact Investing team at Wells Fargo, and held other positions at Sustainalytics and MSCI.
She also served as a Technical Advisor to the Sustainable Accounting Standards Board (SASB). Claire holds an MBA from Berkeley-Haas, an MA from King’s College London, and a License from the Graduate Institute of International and Development Studies in Geneva.
Christina Tang
Appointed by BAWSCA (Seat 6)
Appointed on 7/1/2014, Reappointed on 2/06/2019 (Term
expires on 11/12/2023)
Finance Manager for the Bay Area Water Supply and
Conservation Agency (BAWSCA) representing its 26 members’ collective interests in their relationship with the SFPUC on matters related to water supply, facility reliability, operations, water quality and wholesale water rates. Christina has over 15 years of experience in public finance, including direct experience in debt management. Christina received her Master of Science degree in Finance from the University of Houston, and her Master of Public Administration from the University of Illinois at Springfield. Christina is a certified Public Finance Officer designated by GFOA.
8 Reuben Holober
Appointed by the Budget and Legislative Analyst's Office (Seat 7) Appointed on 11/19/ 2019
As an Analyst for the San Francisco Board of Supervisors Budget and Legislative Analyst's Office, Reuben conducts legislative and policy analysis, budget review, and performance audits. Reuben holds a Bachelor's Degree in Political Science and
Communication from the University of Washington and a
Master's Degree in Public Policy from the Goldman School of Public Policy at UC Berkeley.
9 Appendix II – Meeting Summaries
The RBOC held ten meetings and completed one site visit during the period. Below is a summary of agenda topics. Full agendas and minutes for each meeting are available at: https://sfpuc.org/about- us/boards-commissions-committees/revenue-bond-oversight-committee
• July 19, 2022
o Audit Updates
o Planning for future audits
• August 16, 2022
o Audit Updates
o Overview of SFPUC Organization Chart and Fund Structure o Planning for site visits to SFPUC projects funded by revenue bond proceeds
• September 13, 2022
o Audit Updates
o Hearing on Finding #1 of the RBOC Performance Audit – Visibility of Bond Expenditures o Hearing on Finding #2 of the RBOC Performance Audit – Quality Assurance Program o Water Infrastructure Update
• November 15, 2022
o Audit Updates
o Planning for next requests for proposal for contracts to acquire a consultant to examine project performance and other related audit services
o Planning for site visits to SFPUC projects funded by revenue bond proceeds
• December 13, 2022
o Audit Updates
o Planning for site visits to SFPUC projects funded by revenue bond proceeds o Planning for next requests for proposal for contracts to acquire a consultant to examine project performance and other related audit services
• January 17, 2023
o Audit Updates
o Planning for next requests for proposal for contracts to acquire a consultant to examine project performance and other related audit services
• March 14, 2023
o Office Election
o Audit Updates
o Approval of the 2022 Annual Report
o Planning for site visits to SFPUC projects funded by revenue bond proceeds o Planning for next requests for proposal for contracts to acquire a consultant to examine project performance and other related audit services
10 • April 11, 2023
o Audit Updates
o Planning for future audits
o Planning for site visits to SFPUC projects funded by revenue bond proceeds
• May 9, 2023
o Audit Updates
o Planning for future audits
o Discussion of Finding #2 of the SFPUC Performance Audit of Select Revenue o Update on the Results of the Sale of the 2023 Wastewater Revenue Bonds o Planning for site visits to SFPUC projects funded by revenue bond proceeds
• June 6, 2023
o Audit Updates
o Planning for future audits, including approval of the preliminary bond selections as presented by the City Service Auditor and HKA Associates o Site Visit Report and discussion from the May 30-31 site visit to Hetch Hetchy facilities
Appendix III – SFPUC Outstanding Debt Summary
Summary of Enterprise Debt Programs
(as of June 30, 2023)
Water Wastewater Power
Outstanding Debt
Revenue Bonds and Notes $4.5B $2.7B $159M
SRF/WIFIA Loans
• Executed
• Outstanding*
$429M
$185M
$2.0B
$338M
----
Tax Credit Bonds ---- ---- $4.1M
Commercial Paper:
• Authorized
• Outstanding
$500M
$371M
$750M
--
$250M
$116M
Credit Ratings
Long-Term Aa2/AA- Aa2/AA AA/AA-
Short-Term P-1/A-1 P-1/A-1+ F1+/A-1
*May include amounts requested but not yet received. Net of grants, if applicable.
11 SFPUC Outstanding Revenue Bonds
Outstanding SFPUC Bonds
(as of June 30, 2023) RBOC Issue Date Maturity Date Original Par ($000s) Outstanding
Principal
($000s)
Notes
(All dollars in 000s)
W ATER
2010 Revenue Bonds, Series B Yes 06/17/10 11/01/40 $417, 720 $336,390 Build America Bonds (BABs); TIC is net of subsidy (WSIP) 2010 Revenue Bonds, Series E Yes 08/04/10 11/01/40 $344,200 $331,455 Build America Bonds (BABs); TIC is net of subsidy. (WSIP) 2010 Revenue Bonds, Series G Yes 12/22/10 11/01/50 $351,470 $351,470 Build America Bonds (BABs); TIC is net of subsidy (WSIP) 2015 Revenue Bonds, Series A No 04/16/15 11/01/36 $429,600 $366,375 Refunded all outstanding 2006A bonds and a portion of 2009A Bonds (WSIP) 2016 Revenue Bonds, Series A No 10/20/16 11/01/39 $763,005 $686,945 Partially refunded 2009A, 2009B, and 2010F Bonds (WSIP) 2016 Revenue Bonds, Series B No 10/20/16 11/01/30 $130,815 $58,980 Fully refunded 2006B, 2006C, and partially refunded 2010A Bonds 2016 Revenue Bonds, Series C (Green) Yes 12/14/16 11/01/46 $259,350 $225,275 Taxable refunding of $237M outstanding CP and $20 million new money proceeds (WSIP) 2017 Revenue Bonds, Series A (Green) Yes 12/13/17 11/01/47 $121,140 $24,675 Fund WSIP 2017 Revenue Bonds, Series B Yes 12/13/17 11/01/47 $147,725 $30,095 Fund Water Enterprise Capital 2017 Revenue Bonds, Series C Yes 12/13/17 11/01/47 $70,675 $14,395 Improvements to water-related infrastructure of the Hetch Hetchy Water and Power system 2017 Revenue Bonds, Series D (Green) No 12/28/17 11/01/35 $350,305 $345,340 Partially refunded 2011A, and 2012A (WSIP) 2017 Revenue Bonds, Series E No 12/28/17 11/01/31 $48,890 $48,125 Partially refunded 2011C, 2011D and 2012C 2017 Revenue Bonds, Series F No 12/28/17 11/01/31 $8,705 $8,005 Partially refunded 2011B 2017 Revenue Bonds, Series G (Green) No 12/28/17 11/01/24 $34,280 $18,890 Partially refunded 2011A (WSIP) 2019 Revenue Bonds, Series A (Green) No 01/09/20 11/01/43 $622,580 $587,825 Taxable Advance Refunding 2019 Revenue Bonds, Series B No 01/09/20 11/01/41 $16,450 $16,315 Taxable Advance Refunding 2019 Revenue Bonds, Series C No 01/09/20 11/01/41 $17,925 $17,775 Taxable Advance Refunding 2020 Revenue Bonds, Series A (Green) Yes 09/23/20 11/01/50 $150,895 $150,895 Retired $180M in outstanding TE Water CP for WSIP Projects. 2020 Revenue Bonds, Series B Yes 09/23/20 11/01/50 $61,330 $61,330 For Non-WSIP Regional CIP 2020 Revenue Bonds, Series C Yes 09/23/20 11/01/50 $85,335 $85,335 For Non-WSIP Local CIP 2020 Revenue Bonds, Series D Yes 09/23/20 11/01/50 $49,200 $49,200 Retired approx. $49M in outstading HHW CP. 2020 Revenue Bonds, Series E (Green) No 10/21/20 11/01/43 $341,435 $335,035 Refunded and partially refunded 2010D, 2012A, 2017A 2020 Revenue Bonds, Series F No 10/21/20 11/01/47 $136,880 $135,455 Partially Refunded 2017B 2020 Revenue Bonds, Series G No 10/21/20 11/01/43 $120,585 $108,970 Refunded and partially refunded 2010D, 2011D, 2012B, 2012C 2020 Revenue Bonds, Series H No 10/21/20 11/01/47 $65,495 $64,815 Partially Refunded 2017C Total Bonds - Water $5,145,990 $4,459,365
W ASTEW ATER
2010 Revenue Bonds, Series B Yes 06/08/10 10/01/40 $192,515 $185,235 Build America Bonds (BABs); TIC is net of subsidy. 2013 Revenue Bonds, Series A (Refunding) No 01/30/13 10/01/25 $193,400 $575 Refunded 2003A Bonds and SRF loans 2013 Revenue Bonds, Series B (New Money) Yes 02/27/13 10/01/42 $331,585 $93,095 Funded FY2010-11, FY2011-12 and a portion of FY2012-13 projects 2016 Revenue Bonds, Series A (Green) Yes 05/24/16 10/01/46 $240,580 $240,580 Fund a portion of SSIP "Green" infrastructure projects and refund ~ $53.4M of outstanding CP 2016 Revenue Bonds, Series B Yes 05/24/16 10/01/46 $67,820 $67,820 Fund a portion of SSIP projects and refund ~$20.6M of outstanding CP (spent primarily on R&R) 2018 Revenue Bonds, Series A (Green) Yes 08/09/18 10/01/43 $229,050 $221,335 Fund SSIP 2018 Revenue Bonds, Series B Yes 08/09/18 10/01/43 $185,950 $179, 690 Fund Wastewater Enterprise capital 2021 Revenue Bonds, Series A (Green) Yes 11/29/21 10/01/51 $260,835 $260,835 Refund a portion of outstanding CP 2021 Revenue Bonds, Series B Yes 11/29/21 10/01/51 $37,045 $37, 045 Refund a portion of outstanding CP 2021 Revenue Notes, Series A (Green) No 11/29/21 10/01/25 $218,355 $218, 355 Fund a portion of BDFP (Biosolids); to be remarketed or retired by WIFIA Loan. 2021 Revenue Notes, Series B (Green) No 11/29/21 10/01/26 $129,110 $129, 110 Fund a portion of SEP Improvements (Headworks and/or Biosolids); to be remarketed or retired by WIFIA Loan. 2022 Revenue Bonds, Series B No 07/06/22 10/01/34 $137,080 $137,080 Refund a portion of outstanding 2013A and 2013B Bonds. Settlement on 07/06/2022. 2023 Revenue Bonds, Series A (Green) Yes 04/19/23 10/01/42 $530,565 $530, 565 Refund a portion of outstanding CP and found SSIP 2023 Revenue Bonds, Series B Yes 04/19/23 10/01/42 $278,155 $278, 155 Refund a portion of outstanding CP and Refund a portion of 2013B Bonds 2023 Revenue Bonds, Series C (Green) Yes 04/19/23 10/01/48 $165,660 $165, 660 Refund the 2018C Bonds Total Bonds - Wastewater $3,197,705 $2,745,135
POW ER
2015 Revenue Bonds, Series A (Green) Ye s 05/20/15 11/01/45 $32,025 $32,025 Power Revenue Bonds ("Green") 2015 Revenue Bonds, Series B Yes 05/20/15 11/01/26 $7,530 $2,885 Power Revenue Bonds 2021 Revenue Bonds, Series A (Green) Yes 12/21/21 11/01/51 $74,280 $74,280 Power Revenue Bonds ("Green") 2021 Revenue Bonds, Series B Yes 12/21/21 11/01/51 $49,720 $49,720 Power Revenue Bonds Total Bonds - Power (Senior) $163,555 $158,910
Tax Credit Bonds Investors receive a tax credit in lieu of interest payment 2011 Qualified Energy Cons. Bonds Yes 12/15/11 12/15/27 $8,291 $2,582 Components of 525 Golden Gate that promote energy conservation (12/15 & 6/15 payment dates) 2015 New Cl. Renewable Energy Bonds Yes 10/15/15 10/25/32 $4,100 $1,491 Two qualified solar equipment projects (10/25 & 4/25 payment dates- *first principal payment 10/25/16 )
12 SFPUC Revenue Bonds Expenditure Reports as presented to the RBOC on September 13, 2022
13 14
15 16
17 18
19 20
21 22
23 24
25 Appendix IV – Debt Issuance FY2023
*The 2023ABC Bonds included new debt and refinancing old debt.
Enterprise Debt Issuance Amount (par)
Wastewater 2023 ABC Wastewater
Revenue Bonds*
2022B Wastewater
Revenue Bonds
(Refunding)
$974 million
$137 million
Total $1.1 Billion
26 Appendix V - Bond Expenditure Certification
27 Appendix VI – RBOC Account Summary