issuance of up to $1.53 billion of Water Revenue Bonds, Sub-Series D Bonds — CleanPowerSF Sfpuc Commission, May 27, 2025 (part 1 of 2)

1 Nikolai J. Sklaroff,
Capital Finance Director
May 27, 2025
Water Financing
Authorization
2025 Water Revenue Bonds

Agenda
• FY 2024-25 Capital Financing Plan
• Water Capital Financing Strategy
• Water Revenue Bonds, 2025 Series DEF
o Bond for New Borrowing
o Bonds for Refinancing Build America Bonds
• Proposed Commission Actions
2 FY 2024-25 Capital Financing Plan
3 
Dates and amounts are preliminary and subject to change. 
Commission Action Estimated
Transaction Size
($ Million)
Commission
Action
Closing

1.Water, Wastewater and Power - Authorize
expansion of interim funding program and
approve bank credit facilities agreements
$250 - Water Q1 FY24-25 Q2 FY24-25
$500 – Wastewater Q1 FY24-25 Q2 FY24-25
$200 - Power Q1 FY24-25 Q2 FY24-25

2.Water - Authorize Revenue Bonds
to refinance outstanding commercial
paper, deposit funds into project fund
accounts and allow new project
encumbrance.
Up to $762 Q2 FY24-25 Q3 FY24-25

3.Wastewater – Approve second loan under
the WIFIA Programmatic Master Agreement $145 Q2 FY24-25 Q3 FY24-25

4.Water - Approve renewal or replacement of
bank credit facilities for interim
funding programs
Up to $100 Q4 FY24-25 Q4 FY24-25

5.Water – Authorize Clean Water
State Revolving Fund (SRF) execution of
Loan Agreement
TBD TBD TBD

5.Debt Policy Update - Adopt an update to
the Debt Management Policy and Procedures -- Q4 FY24-25 -- Capital Financing Strategy
(Water Enterprise)
• Mitigate upward pressure on rates and charges
 10-Year Financial Plan* calls for issuance of
$2.9 billion of Water Revenue Bonds
 Focus on most efficient use of project funding; only
issue financing when needed
• Actively manage capital financing costs
 Low-cost alternative ways to issue bonds
 Refinance outstanding debt for savings and flexibility 4*10-Year Financial Plan (FY 2025-26), February 2025
-
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
400,000,000
2024
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
Water Debt Service Projections
Westsi de SRF Mnt T unnel SRF Outstanding Revenue Bond NDS Seri es 2025 AB&C Refunding Previous Revenue Bond NDS & SRFs Water Enterprise Debt Service
• Approximately $4.5 billion of outstanding debt with annual debt service averaging about $350 million per year from 2028 to 2037
5 _________________
Source: Refinitiv TM3 as of 5/14/2025 courtesy of Montague DeRose and Associates.  Tax exempt benchmark interest rates over time ("Yield Curve") published by Municipal Market Data (MMD) as of May 15, 2025.

Market Overview
(Tax-Exempt Interest Rates)
6 Transaction Description
Series 2025DEF Water Revenue Bonds
• The proposed bonds will: i) Finance and refinance (though the retirement of commercial paper) Water Enterprise capital improvements, ii) Mitigate risks associated with Build America Bonds • Authorizing Three* (or more) Series of Bonds:
7 Purpose Amount (Up to)*
Sub-Series D
(Regional and Local
Water)
Finance and refinance through the retirement of
outstanding commercial paper, capital projects
benefiting the Water Enterprises Regional and
Local capital improvements. $474M
Sub-Series E (Hetch
Hetchy Water)
Finance and refinance through the retirement of
outstanding commercial paper, capital projects
benefiting the Hetchy Water capital
improvements.

Sub-Series
F* (Refunding)
Refund outstanding Water Series 2010B, 2010E,
and 2010G. $1.056B
*Final Par to be determined at pricing. Bonds for the refunding of 2010B, E, G may occur in one or more sales during or after the sale of the 2025 Series DE Water Bonds, subject to market conditions.

Federal Risks to Capital Financing
8 • Threat to municipal bond tax exemption
• Loss translates into interest rates up 20-
30%, $100s millions annual costs.
• Massive nationwide advocacy effort
Potential Loss of
Tax-Exempt Bonds
• Loss of ~$23M annually – impacts all
three enterprises, especially Water
• Capital Finance working to mitigate this
risk through refinancing
Potential Loss of
Build America Bond
Subsidies
• Proposed roll back. Not factored into
projection but would have been great to
offset ratepayer costs (could have been
$100s of millions over 10 years)
Loss of IRA tax
credits
• Still monitoring, potential concerns for
current and future WIFIA and CWIFP
Loans
• Accelerated draws
Impacts on Federal
Loans and Grants
Build America Bonds Background
2025 Series F (Refunding)
9 • In 2009 and 2010, the SFPUC took advantage of a federal program made available in those years to issue taxable bonds called “Build America Bonds” (BABs)
• BABs were issued at higher taxable rates but came with the promise that the Federal Government would be obligated to pay the issuer a 35% subsidy in-lieu of granting investors tax exemption on bond interest • The 35% subsidy has been reduced below this obligated level every year since March 2013 as a result of “sequestration” - Budget Control Act of 2011 or “BCA”
• These cuts have been as high as 8.7% in 2013, but since 2021 the subsidy payments have been reduced by 5.7% and the 5.7% reduction is expected to continue through federal fiscal year 2031 (which translates into a subsidy of 33%
• Has cost the SFPUC more than $25 million in lost subsidies to date across its three Enterprises
BABs / Tax Credit Exposure
(Federal Payments)
10 Series Final Maturity Original Par Outstanding as of 4/1/2025
Average Annual
Subsidy FY26-
FY30 (assuming
no sequestration)
Average
Annual
Subsidy FY26-
FY30
(assuming 5.7%
Sequestration)
Water Series 2010B 11/1/2040 $417,720,000 $323,145,000 $(5,712,766) $(5,387,138) Water Series 2010E 11/1/2040 344,200,000 304,680,000 (5,606,591) (5,287,015) Water Series 2010G 11/1/2050 351,470,000 351,470,000 (8,549,508) (8,062,186) Wastewater Series 2010B 10/1/2040 192,515,000 169,985,000 (2,983,898) (2,813,816) 525 Golden Gate COPS
Series 2009D 11/12041 129,550,000 124,975,000 (2,426,684) (2,288,363) 2011 Qualified Energy
Cons. Bonds (QECBs) 12/15/2011 8,291,000 1,451,801 (25,814)* (24,343)* 2015 New Cl Renewable
Energy Bonds (NCEBs) 10/15/2015 4,100,000 1,334,881 (27,349) (25,790) Total $1,448,846,000 $1,276,031,682 $(25,322,284) ($23,878,914) *The 2011 Qualified Energy Conservation Bonds (QECBs) mature in FY 2028; average annual subsidy is from FYE 26 - 28.

How to Refinance BABs
11 • Outstanding BABs lack 10-year par
call of typical tax-exempt bonds
• BABs optionally callable only through
compensating investors for lost of
future lost earnings on remaining
average life of the bonds based on a
spread to US treasuries:
a) a make-whole call (“MWC”) designed to
make the investors whole for their lost
earnings, usually 25 basis points (or

0.25%)
b) an extraordinary optional redemption
provision (“ERP”), usually 100 basis
points (or 1.00%)
Extraordinary Redemption
12 • Different issuers have different redemption features • The SFPUC’s language provides flexibility
• The SFPUC is guided by advice of its Bond Counsel
Norton Rose Fulbright and Financial Advisors Montague
DeRose Associates and Backstrom McCarley & Berry
Using Extraordinary Redemption
13 • 2009 and 2010 - State and Local Government issued $181 billion of Build America Bonds (2,275 separate bond issues) • $19.3 billion have been refinanced with extraordinary optional redemption provisions January 2024 thru April 2025 Source: J.P. Morgan, Bloomberg, as of 4/30/2025. Note: Includes BAB ERP refundings from 1/1/2024 –4/30/2025
• ~$16.5 billion in
2024
• ~$2.7 billion
BABs refunded
this year thru April
2025
• $79.9 million
BABs outstanding
California Examples
14 $1,093 Million
for the Regents of the
University of California
General Bonds
2024 Series BV
$427 Million
for Los Angeles County
Metropolitan
Transportation Authority
$183 Million*
for East Bay Municipal
Utility District
*EBMUD rescinded the conditional call notice for their BABs on May 6, 2025.

Benefits of Refunding BABs
15 • Eliminates further risk of reduction or elimination of the Federal BABs subsidy which now relies on Congressional
action to waive sequestration
• Provides valuable ‘call optionality’ back into our debt portfolio by issuing tax-exempt refunding bonds with a
standard 10-year par call
• Proposed authorization enables SFPUC to be nimble in
implementing a tax-exempt refinancing prior to any
potential elimination of tax-exempt bonds making such
refinancing cost-prohibitive with taxable bonds
• Proceed with refunding of Series 2010B, 2010E and/or
2010G if they produce positive projected savings when
bonds are sold or if future subsidies are in jeopardy.

Potential Savings in Flux
16 Projected PV Savings, as of May 16, 2025
Refunding of:

If We Assume
Subsidy Payments
Continue
(33% with 5.7%
Sequestration)
If We Assume Future
Federal Subsidy
Payments Eliminated
(0% with full
Sequestration)
2010 Series B -1.12% 13.51%
2010 Series E -1.19% 13.41%
2010 Series G -7.50% 22.87%
Aggregate -3.46% 16.88%
2025 Series D
(Regional and
Local Water)
2025 Series E
(Hetch Hetchy
Water)
2025 Series F
(Refunding)
(Green)
Total†
SOURCES:

Par Amount 380,030,000 72,770,000 919,985,000 1,372,785,000 Premium 16,246,283 3,110,918 89,235,538 108,592,738
Debt Service Reserve
Fund (accrued to close) 47,295,272 47,295,272
Total Sources 396,276,283 75,880,918 1,056,515,810 1,528,673,010 USES:

Project Funds Deposits 359,263,191 68,793,470 428,056,661 Refunding Escrow 1,054,017,333 1,054,017,333
Capitalized Interest 35,891,722 6,872,722 42,764,444
Total Issuance Costs 1,121,370 214,725 2,498,477 3,834,572 Total Uses† 396,272,283 75,880,918 1,056,515,810 1,528,673,010 Sources & Uses of Funds
(Series 2025DEF Water Revenue Bonds)*
17 *Preliminary, subject to change. Current estimates based on rates as of May 1, 2025†Totals may not add due to independent rounding.

Enterprise Debt Ratings
(as of May 15, 2025)
18 • In February, senior management met with analysts from Moody’s and S&P to request ratings for the 2025 Water Revenue Bonds SFPUC Entity
Enterprise
Moody’s
Investors
Service
S&P
Global
Ratings
Fitch
Ratings
Water
Enterprise
Aa2
(Stable)
AA-
(Stable) --
Wastewater
Enterprise
Aa2
(Stable)
AA
(Negative) --
Power
Enterprise -- AA
(Negative)
AA-
(Stable)
CleanPowerSF
† A2
(Stable) -- --
^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
19 • SB 450 enacted in October 2017 requires local agencies to disclose estimates of certain debt financing-related information at authorization:
"Good Faith Estimate"
True
Interest
Cost
(TIC)
Finance
Charge
of the
Bonds
Amount of
Proceeds
Received
from Sale
Total
Payment
Amount
2025DEF 3.55% $3,823,806 $1,528,666,388 $2,488,829,806
Preliminary and subject to change based on market conditions at the time the bonds are sold. Current estimates based on rates as of May 1, 2025
Net Water Bond Debt Service
(Aggregate Projected)
20*Preliminary, subject to change.
($M) FYE
2026
FYE
2027
FYE
2028
FYE
2029
FYE
2030
FYE
2031
FYE
2032
FYE
2033
FYE
2034
FYE
2035 Total
Water - $1,083 - - $1,045 - - $771 - - $2,899
2026 Financial Plan – Projected Annual Par Amounts of Revenue Bond Issuance $ Millions
Rates adopted through FY 2026; grey debt service reflects bonds to be issued per 10 year financial plan assumptions Form of Transaction Documents
• Preliminary Official Statements (POS)
 Describes bond terms and conditions of the Water
Enterprise.
• Continuing Disclosure Certificates (Appendix in POS)
 Outlines disclosure reporting requirements during term of bonds.
• 50th, 51st, 52nd Supplemental Indenture
 Agreement between SFPUC and Trustee for the
issuance and security of bonds.
• Bond Purchase Contracts
 Agreements between SFPUC and underwriters,
outlining terms of each bond sale.
21 22
• Commission Training
Staff provided the Commission an overview of the
Bond issuance and related disclosure (the Official
Statement) at the February 25, 2025 meeting
Disclosure Counsel provided the Commission
refresher training on May 27, 2025
• Disclosure Standard:

Rule 10b-5 “unlawful for any person . . . to make any
untrue statement of a material fact or to omit to state a material fact necessary in order to make the
statements made, in the light of the circumstances
under which they were made, not misleading . . . .”
Commission Legal Obligations
Recommended Commission Action
• Authorize issuance of up to $474M of 2025D and 2025E
Water Revenue Bonds, and up to $1.056B of 2025F
Water BABs Refunding Bonds (to be sold in one or more
series and sale dates, subject to market conditions).
• Approve form of related bond sale documents
• Approve and authorize the General Manager to deem
the draft POS final
• Authorize General Manager to sell Bonds in one or more series on a negotiated basis and to enter into Bond
Purchase Contracts with the Bond Underwriters
23 Anticipated Financing Schedule
24 February 24th & 25th Rating presentations
March 11th Commission Approval of 2025 Series ABC
April 17th Closing of 2025 Series ABC
May 23rd Receive Moody’s and S&P rating
May 27th Commission Review for 2025 Series DEF
May 27/28th Post Preliminary Official Statement
June 4th and 5th New Money/BABs pricing
June 12th Closing (with BABs refunding)
February

S M T W T F S
1 2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28
March

S M T W T F S
1 2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30 31
May

S M T W T F S
1 2 3
4 5 6 7 8 9 10
11 12 13 14 15 16 17
18 19 20 21 22 23 24
25 26 27 28 29 30 31
June

S M T W T F S
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30
*Preliminary, subject to change
25 Questions
SFPUC Capital Finance Team
Nikolai J. Sklaroff, Capital Finance Director
Edward Kwong, Capital Finance Analyst
Daniel Fuchs, Capital Finance Analyst
Eric Kwak, Debt Analyst
Earl Dunivan, Debt Analyst
Gisele de Araujo, San Francisco Fellow

AGENDA ITEM
Public Utilities Commission
City and County of San Francisco

DEPARTMENT Financial Services Division AGENDA NO. 7
MEETING DATE May 27, 2025
Calendar: Regular Calendar
Project Manager: Nikolai J. Sklaroff
Authorize the Issuance of up to $1.53 Billion of 2025 Water Revenue Bonds Sub-Series D, and Sub-Series E New Money to Finance Water Enterprise Capital Projects and Sub-Series F to Refund Certain Outstanding Water Revenue Bonds Issued as Build America Bonds (BABs)

Summary of Proposed
Commission Action:

Authorize the issuance of up to $ 1.53 billion of Water Revenue Bonds, Sub - Series D Bonds (Regional Water & Local Water) and 2025 Sub- Series E Bonds (Hetch Hetchy Water) to fund the costs of water enterprise capital projects and to retire commercial paper up to $474 million; and 2025 Sub- Series F to refund certain outstanding Water Revenue Bonds originally issued as Build America Bonds (BABs) up to $1.056 billion (collectively, the 2025 Water Bonds ); delegate to the General Manager authorization to appoint underwriters and enter into one or more bond purchase contracts with underwriters selected from the City’s pool of pre -qualified underwriters through a competitive procurement process and in accordance with the City’s policies and procedures with respect thereto, subject to the limits on underwriters’ compensation set forth in the resolution. The Commission resolution will approve the issuance of: Water Revenue Bonds, 2025 Sub- Series D Bonds (Regional Water & Local Water) to fund and refund Regional and Local Water capital improvements; 2025 Sub- Series E Bonds (Hetch Hetchy Water) to fund Hetch Hetchy Water capital improvements; 2025 Sub- Series F) to refund all or a portion of outstanding 2010 Water Revenue Bonds Sub-Series B, Sub -Series E, and Sub- Series G; fund capitalized interest to mitigate short-term budget impact of borrowing; and cost of issuance; approve the form of and authorize the execution and delivery of, related documents; and authorize the General Manager to negotiate the sale of the 2025 Water Bonds in one or more series of bonds, as the General Manager determines is in the best financial interest of the San Francisco Public Utilities Commission, subject to the terms of the Commission resolution.

Agenda Title: Authorize the Issuance of up to $1.53 Billion of 2025 Water Revenue Bonds Sub-Series D, Sub-Series E Finance Water Enterprise Capital Projects, and Sub-Series F to Refund Certain Outstanding Build America Bonds Commission Meeting Date: May 27, 2025

Page 2 ends

Background: 2025 Water Bonds: The San Francisco Public Utilities Commission (SFPUC) 2025 New Money Water Bonds will be issued pursuant to Proposition E, approved by San Francisco voters on November 5, 2002, and which Proposition E has been incorporated into the San Francisco Charter as Section 8B.124, and by various resolutions and ordinances approved by the Commission and the Board of Supervisors. Proceeds of the 2025 Water Bonds will be used to fund Water Enterprise capital projects and refund
outstanding commercial paper issued for those projects as follows:
approximately $397 million for Sub- Series D will fund Regional and Local Water capital improvement projects and approximately $ 76 million for Sub- Series E will fund Hetch Hetchy Water capital improvement projects.

The 2025 New Money Water Bonds transaction was included as part of the FY 2024-25 Capital Financing Plan presented to the Commission on August 27, 2024, although the size of the borrowing is smaller due to slower than forecasted spending. The 2025 New Money Water Bonds are being issued in compliance with the “Debt Management Policies & Procedures,” most recently updated and approved by the Commission on November 26, 2019.

In addition to the 2025 New Money Water Bonds the Commission is also being asked to approve issuance of the 2025 Build America Bonds ( BABs) Refunding Bonds which, if executed, would mitigate risks associated with receiving further reductions or the elimination of federal subsidies currently paid on such bonds. While refunding bonds would normally be issued pursuant to San Francisco City Charter Section 9.109 and Board of Supervisors Ordinance 131-24 (which collectively authorizes the issuance of refunding bonds that are expected to result in debt service savings of at least 3% calculated on a present value basis )
and by various resolutions and
ordinances approved by the Commission and the Board of Supervisors , these refundings are not being proposed to produce interest rate savings but instead are proposed to mitigate risk of the federal government reducing or eliminating the subsidy payment, which it has done in the past . If at the time of sale, the refunding produces such expected savings , the bond would be issued pursuant to such Authority ; currently the bonds do not provide savings if the subsidies continue but would provide substantial savings if the subsidies are terminated. As such, t he 2025 BABs refunding bonds, may be issued pursuant to the authority of Ordinance 131-24 whereby this Commission may approve this transaction without satisfying the 3% net present value debt service savings test typically required for refunding bonds due to significant non-economic factors discussed below.

In 2009 and 2010, the SFPUC took advantage of a federal program authorized as part of the American Recovery and Reinvestment Act in the wake of the financial crisis to issue taxable bonds called “Build America Bonds” (“BABs”) instead of tax- exempt bonds. The idea was that with the loss of liquidity in the municipal bond market, local government s would benefit from selling bonds into the broader, more liquid taxable bond market.

As a result, these bonds were issued at higher taxable rates but came with the promise that the Federal Government would be obligated to pay the issuer Agenda Title: Authorize the Issuance of up to $1.53 Billion of 2025 Water Revenue Bonds Sub-Series D, Sub-Series E Finance Water Enterprise Capital Projects, and Sub-Series F to Refund Certain Outstanding Build America Bonds Commission Meeting Date: May 27, 2025

Page 3 ends

(in this case the SFPUC) directly a subsidy equal to 35% of the interest paid on the BABs in lieu of granting investors tax exemption on bond interest. In June, August and December of 2010, the Water Enterprise issued $1,113,390,000 of BABs in aggregate of which $965,570,000 remains outstanding. While not addressed as part of this financing, we note that Wastewater also issued $192,515,000 of BABs in June 2010 of which $169,985,000 remain outstanding. In addition, the SFPUC pays debt service on $120,210,000 of outstanding City and County of San Francisco Certificates of Participation BABs which funded the SFPUC’s 525 Golden Gate Building. As a result , all three SFPUC enterprises have at least some exposure to future elimination or reduction of the BABs subsidy, but due to the focus on WSIP borrowing in 2009 and 2010, the Water Enterprise has the largest exposure. While the current transaction, if executed, would reduce or eliminate only the Water Enterprise BABs exposure, SFPUC staff has been working with one of its Municipal Advisor s to assist in exploring opportunities to mitigate this exposure, if possible, by efficiently refunding other tax credit bonds.

The 35% BABs subsidy that was to be provided by the federal government has been reduced below this obligated level every year since March 2013 as a result of “sequestration” – mandatory spending cuts
required by federal
legislation designed to enforce budget neutrality. To date, sequestration has been due to the Budget Control Act of 2011, or “BCA”, which requires the

5.7% sequestration of BAB subsidy payments through federal fiscal year 2031. This 5.7% reduction of the 35% subsidy means that the promised subsidy of 35% of interest is now only paying 33% of interest. This has cost the SFPUC more than $25 million in lost subsidies to date across its three Enterprises. Separately, legislation implemented during the Pandemic – the American Rescue Plan Act of 2021 or “ARPA” – dramatically increased the federal budget deficit by $1.9 trillion. This required additional sequestration (this time under the Statutory Pay- As-You-
Go (“PAYGO”) Act of 2010,
rather than BCA) which may interrupt all BABs subsidy payments (i.e., 100% sequestration) through calendar year 2031 and at some additional reduced level through calendar year 2032. Congress can terminate, extend, or otherwise modify reductions in BABs subsidy payments due to sequestration at any time, and the sequestration reduction r
ate could be increased to as
much as 100% in future years depending on the impact of other legislation that may be enacted by Congress. Fortunately, the last Congress waived the sequestration before the new Congress was sworn in.

Now there is
considerable concern about whether (i) the new Congress, with a Republican majority, will continue to waive sequestration in the future , (ii) whether the new majority might use elimination of the subsidy as a tool to pay for tax
cuts the majority wants to adopt through the budget reconciliation process or (iii) whether Congress might eliminate or restrict the issuance of tax exempt debt which would prevent the SFPUC from ever refunding such bonds with tax-exempt bonds in the future. For each of the foregoing reasons, the SFPUC staff recommends authorizing potential refunding of such bonds to retain the flexibility to do so together with the new money bonds or separately if bond conditions make it more feasible this summer.

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When the SFPUC began the current financing process last summer and solicited analysis from underwriters, the 2010B and 2010E BABs could be refunded for modest net present value savings of 0.8% and 1.0% and the longer 2010G BABs could be refunded for dissavings of - 6.5%. Due to a significant deterioration in market conditions following the April 2, 2025 tariff announcement , these savings have been reduced to dissavings across the board of - 2.52%, -2.58% and - 9.94%. However, our investment bankers point out that if rates decline by 75 basis points (0.75%) or Muni/Treasury ratios get richer by 16% (i.e., there is a wider differential between the lower tax-exempt interest rates and the higher Treasury rates) the refunding could break even assuming the subsidy continues at the current level . More importantly, however, if the subsidy is eliminated, a refunding of each of these series of BABs would produce significant savings. Moreover, because there would be a debt service reserve fund release of nearly $47.3 million for these three series of BABs, while NPV savings may be negative, actual cash flow savings might remain positive depending on interest rates at the time of sale (currently about $140k annually through 2041 and $1.1 million thereafter through maturity). But more important than the cash flows savings is the fact that this would eliminate the risk of the subsidy going to zero.

Further, the near -
term impact of the elimination of the subsidy would be
significant – for example, elimination o f the subsidy would increase the SFPUC’s annual debt service by about $17.5 to $19.8 million in each of FYs 2026 through 2030 (a total increase of about $93 million).

Refunding Process
The Commission should understand that such a refunding of bonds would rely on bond provisions we do not usually employ. For most of our tax - exempt municipal bonds, the bonds are sold to investors with restrictions on how quickly we can “call” those bonds . Most of our bonds are issued with a 10-year par call provision. This means we can not call bonds maturity out through year 10, but bonds maturity beyond year 10 can be called without any payment penalty. When the SFPUC issued BABs in 2009 and 2010, the convention was that such bonds sold into the taxable market were subject to optional redemption only through (a) a make -whole call (“MWC”) designed to make the investors whole for their lost earnings based on then -prevailing interest rates , or (b) an extraordinary redemption provision (“ERP”), at a prepayment price equal to the present value of scheduled payments discounted based on applicable Treasury rates plus a defined spread ). The ERP may be exercised if, through no fault of the issuer, the BAB subsidy is materially reduced (an “Extraordinary Event”). These features generally eliminate the ability to refund BABs for meaningful debt service savings.

Thus, BAB refinancings via either normal MWC provision or the ERP have not historically met the minimum debt service savings in our debt policy.

However, the threat of increased sequestration or elimination of the subsidy payments completely has led many BABs issuers to exercise the ERP per their respective bond documents to mitigate the risk of loss of the subsidy.

Though there were early cases of investor push back
for BABs refunding
transactions with threats of litigation in early 2024, investors appear to have Agenda Title: Authorize the Issuance of up to $1.53 Billion of 2025 Water Revenue Bonds Sub-Series D, Sub-Series E Finance Water Enterprise Capital Projects, and Sub-Series F to Refund Certain Outstanding Build America Bonds Commission Meeting Date: May 27, 2025

Page 5 ends

now accepted the validit y of issuers using the ERP to call their BABs, and almost $1 9 billion of BABs have now been refunded since January 2024 without litigation. The SFPUC’s bond counsel has opined as to the validity of such a redemption.

Under the new federal administration and with a Republican majority in Congress, the heightened possibility of the loss of the BABs subsidy coupled with the possible loss of the ability to issue tax -exempt bonds have led to the recommendation to mitigate some of the risk by potentially refunding a portion or all of the SFPUC’s portfolio of Build America Bonds by exercising the ERP, though it may not meet the SFPUC’s typical 3% savings minimum (assuming the subsidies remain in place) . As of May 1, 2025 the refunding of outstanding Water Series 2010B and 2010E bonds by exercising the extraordinary redemption provision at treasuries plus 100 basis points are projected to result in - 2.72% and -2.32% savings , respectively as a percentage of refunded bonds assuming a continued subsidy at the current 5.7% sequestration rate and 12.14% and 13.62%, respectively if the subsidy is fully elimin ated; the estimated par of 2025 Series F would be approximately $561 million. Refunding of the Water Series 2010G would result in savings of -10.57% with continuation of the subsidy and 19.72% if the subsidy is eliminated. Staff would only proceed with r efunding of the Series 2010G bonds will only occur if the refunding Series 2010B, 2010E and 2010G is projected to result in positive aggregate savings at the time the new money bonds are issued or over the next 120 days based on market conditions. Additionally, staff will likely proceed with the full refunding of outstanding Series 2010B, 2010E and 2010G bonds if , prior to pricing of the refunding bonds, it becomes apparent that future subsidy payments will end or decline substantially or if tax -exemption of future bond issuances will cease or diminish substantially . Though the issuance of these bonds may result in savings below typical thresholds for refunding transactions, they will create added future refunding flexibility and the potential to realize material debt service savings in the future, since taxable bonds will be replaced with tax-exempt bonds with greater ability to redeem the bonds for further refunding flexibility. It should be noted that if the subsidy payments were to end, the calculations of savings would likely exceed our typical refunding thresholds , depending on prevailing interest rates at the time of sale.

Projected PV Savings, as of May 1, 2025
Refunding of:

Subsidy payments
continue
(with 5.7%
Sequestration)
Future subsidy
Payments Eliminated
2010 Series B -2.49% 12.15%
2010 Series E -2.13% 12.48%
2010 Series G -10.80% 19.72%
Aggregate -5.40% 15.01%

Plan of Finance: The SFPUC expects to issue up to $474 million 2025 New Agenda Title: Authorize the Issuance of up to $1.53 Billion of 2025 Water Revenue Bonds Sub-Series D, Sub-Series E Finance Water Enterprise Capital Projects, and Sub-Series F to Refund Certain Outstanding Build America Bonds Commission Meeting Date: May 27, 2025

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Money Water Bonds, sized to refinance prior expenditures for Regional Water, Local Water, and Hetch Hetchy Water capital improvement costs which were originally financed by commercial paper, as well as to fund spending for additional capital projects throughout the remainder of Fiscal Year 2025 including capitalized interest. By refinancing accumulated Commercial Paper, this transaction allows the Water Enterprise to fund additional capital project needs in reliance on the availability of commercial paper. The SFPUC also expects to issue up to $ 1.056 billion in Refunding bonds to refinance all or portions of outstanding Water Series 2010 Sub - Series B, E, and G.

Structure of the Bonds: The 2025 Water Bonds would be structured as tax- exempt fixed rate bonds with a final maturity not -to-exceed 40 years from the original issue date and include capitalized interest through May 1, 2027 with the first principal payment expected November 1, 2025 for refunding
bonds and November 1, 2051 for new money bonds. The interest rates will be determined on the transaction date and will remain fixed for the term of the bonds. All dates and amounts are preliminary subject to change pending the bond pricing.

Transaction Schedule: T he sale of the 2025 Water Bonds is expected to occur in June 2025 with closing before the end of June , subject to market conditions. If BABs refunding bonds are issued, these will require a short closing based on the redemption provisions in the original bonds. Due to the extraordinary market volatility since tariffs were implemented and as sweeping changes are made, th is schedule is preliminary and subject to change.

SB 450 Legislation Compliance: Pursuant to Senate Bill 450 (SB 450) enacted in 2017, California 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 represents a good faith reasonable estimate of certain costs of Agenda Title: Authorize the Issuance of up to $1.53 Billion of 2025 Water Revenue Bonds Sub-Series D, Sub-Series E Finance Water Enterprise Capital Projects, and Sub-Series F to Refund Certain Outstanding Build America Bonds Commission Meeting Date: May 27, 2025

Page 7 ends

the 2025 Water Bonds for purposes of compliance with SB 450 and based upon information as of May 1, 2025. Staff has consulted with its municipal advisor, Montague DeRose & Associates, and obtained estimates reflecting the expected closing date with regard to the 2025 New Money Water Bonds and BABs Refunding Bonds . Actual results may vary based on prevailing market conditions when the bonds are priced.

(1) True Interest Cost (TIC): 3.55%

(2) Finance Charge of the Bonds: $3,823,806.36 (reflects both costs of issuance and underwriter’s discount).

(3) Amount of Proceeds Received by the Public Body for Sale of the Bonds: $1,528,666,387.69

(4) Total Payment Amount: Total Net Debt Service of $2,488,829,805.55 (represents total estimated debt service, net of capitalized interest, if any).

Method of Sale: In consultation with the SFPUC’s Municipal Advisors on this transaction (Montague DeRose & Associates and Backstrom McCarley & Berry), SFPUC staff has recommended a negotiated sale for the 2025 Water Bonds. In a negotiated sale, the SFPUC hires underwriters for the bonds through a competitive Request f or Proposals process issued to firms that have been prequalified in the City’s underwriting pool. The underwriters are therefore able to work with the SFPUC on structuring the transaction (which includes both new money bonds and a relatively unusual refunding transaction) and preparing documents, including the disclosure document. In addition, they assist with the process of preparing materials for rating agencies and investors, and premarketing and marketing of the bonds. Staff has recommended this method of sale because:

(1) Expected (and now, realized) market volatility, due to Federal activities, possible Federal Reserve actions , and geopolitical events.

A negotiated sale process provides the SFPUC with more assistance during the preparation of the bond transaction and more market information throughout the transaction, the ability to premarket the bonds and timing flexibility which can improve the results of a bond sale;
(2) negotiated sales provide greater “real time” structuring flexibility than competitive sales;
(3) negotiated sales have allowed the SFPUC to select diverse underwriting teams which include smaller local, minority and/or women-owned firms and firms that have supported the SFPUC with credit and liquidity support, as part of the underwriting team. (4) Negotiated sales allow maximum flexibility for restructuring of complex refundings in light of prevailing and changing market conditions.

A Request for Proposals was sent to all firms in the Controller’s Office of Agenda Title: Authorize the Issuance of up to $1.53 Billion of 2025 Water Revenue Bonds Sub-Series D, Sub-Series E Finance Water Enterprise Capital Projects, and Sub-Series F to Refund Certain Outstanding Build America Bonds Commission Meeting Date: May 27, 2025

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Public Finance Underwriter Pool. A total of 14 proposals were received by July 26, 2024 and reviewed by the SFPUC’s Co- Municipal Advisors and staff, including 10 responses to serve as senior manager. After a formal evaluation and scoring process, J.P. Morgan Securities LLC was selected as Senior Manager and Goldman Sachs & Co. LLC was selected to serve as Co-Senior Manager. These firms were selected based on the firms’ experience, underwriting capabilities, technical expertise, financing ideas and competiti ve fees. Additionally, Barclays Capital Inc., Ramirez & Co., Inc., Siebert Williams Shank & Co., LLC and Stifel Nicolaus & Company, Inc., were selected as Co-Managers for the 2025 Water Bonds sale.

Bond Documents: The Commission is being asked to approve the form and authorize the execution of documents relating to the 2025 Water 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 official statement contains all material information about the Water Enterprise and is intended to be substantially final (except for certain pr icing 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.
(a) Continuing Disclosure Certificate – This document sets forth the SFPUC’s commitment to providing annual financial and operating data disclosure for the Water Enterprise, and the ongoing disclosure of certain enumerated material events as set forth by the Securities and Exchange Commission’s (SEC) Rule 15c2- 12. To facilitate the sale, the SFPUC is required to execute a continuing disclosure certificate (CDC) as a regulatory prerequisite to enable the underwriters to underwrite the bonds. The CDC is contained as an appendix within the Official Statement.
(2) Indenture (as amended by the Fiftieth, Fifty-First, and Fifty-Second 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) Bond Purchase Contract – The agreement between the SFPUC and the Underwriters setting forth conditions upon which the bonds will be offered and underwritten by the Underwriters, and the obligations of both parties, including provisions allowing the Underwriters to Agenda Title: Authorize the Issuance of up to $1.53 Billion of 2025 Water Revenue Bonds Sub-Series D, Sub-Series E Finance Water Enterprise Capital Projects, and Sub-Series F to Refund Certain Outstanding Build America Bonds Commission Meeting Date: May 27, 2025

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not underwrite the bonds in the event of certain circumstances.

Legal and Advisory Team: SFPUC Finance staff has worked collaboratively with outside municipal advisors, as well as the City Attorney’s Office and outside bond and disclosure counsel, to develop all aspects of the documents associated with the sale of the 2025 Water Bonds, including all attachments.

The parties working with the SFPUC on this financing are as follows:
(1) General Counsel: City Attorney’s Office of the City and County of San Francisco
(2) Disclosure Counsel: Orrick, Herrington & Sutcliffe LLP (3) Bond Counsel: Norton Rose Fulbright U.S. LLP
(4) Co-Municipal Advisors: Montague DeRose & Associates, LLC; (5) Senior Managing Underwriter: J.P. Morgan Securities LLC (6) Co-Senior Managing Underwriter and Designated Investment Banker for purposes of Redemption Calculations: Goldman Sachs & Co. LLC
(7) Co-Managers: Barclays Capital Inc., Ramirez & Co., Inc., Siebert Williams Shank & Co., LLC, and Stifel Nicolaus & Company, Inc. (8) Trustee: U.S. Bank National Association
(9) Independent Pricing Consultant: PFM Financial Advisors, LLC (10) Verification Agent: A. W. Smith, LLC

The pricing of the bonds will be determined in negotiations with the underwriters on the sale date. The fairness of the pricing will be evaluated by the SFPUC’s Municipal Advisors and staff will take the Municipal Advisor’s recommendation under advisement prior to accepting the offer of the underwriter.

As this transaction will be sold on a negotiated basis, per the SFPUC’s debt policies, an independent pricing verification agent —a municipal advisor not otherwise involved in the transaction— will be engaged to provide an independent pricing report and comparative sales details to reassure that the sale provided fair pricing for the rate payers.

Disclosure Considerations:

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 Bureau, 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 serving as the SFPUC’s disclosure counsel.

Prior to distribution to investors, the Preliminary Official Statement will be Agenda Title: Authorize the Issuance of up to $1.53 Billion of 2025 Water Revenue Bonds Sub-Series D, Sub-Series E Finance Water Enterprise Capital Projects, and Sub-Series F to Refund Certain Outstanding Build America Bonds Commission Meeting Date: May 27, 2025

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updated to reflect the most current information of the Water Enterprise. The final Official Statement will be distributed after the bonds are priced but prior to the closing of the bonds 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.
(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 $1.523 billion of the 2025 Water Bonds.

Q. Why are bonds being issued?
A. The 2025 Water Bonds are being issued to provide funding for approved Water Enterprise capital projects and to refund certain outstanding Water Enterprise Build America Bonds (BABs) to mitigate risk s associated with
the Federal subsidies paid on such bonds.

Q. What is the bond structure?
A. The 2025 Water Bonds will consist of three series (Series 2025D Series 2025E, and Series 2025F) of senior lien, fixed rate tax- exempt bonds. The 2025 Water Bonds will not fund a debt service reserve fund. The bonds will have a final maturity not-to-exceed 40 years from the original issue date and approximately two years of capitalized interest.

Q. How will the bonds be sold?
A. The 2025 Water Bonds will be sold through a negotiated sale, where the underwriters have been
selected through a competitive RFP issued to the
City’s prequalified underwriting pool and the pricing terms (i.e., interest rates) of the bonds are set after negotiating with the underwriters based on investor demand and market conditions, with advice from the SFPUC’s two transaction municipal advisors. An independent pricing consultant will verify the SFPUC received a fair price.

Q. How will debt service on the bonds be paid?

Page 11 ends

Environmental Review: This action does not constitute a “project” under the California Environmental Quality Act (CEQA) Guidelines section 15378(b)(4) because issuance of the 2025 Water Bonds is a government funding mechanism, which does not involve any commitment to a specific project that may result in a potentially significant physical change in the environment.

A. The 202 5 Water 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. Conservative assumptions for this debt service and debt service coverage requirements have been included in the current Water Enterprise 10- Year Financial Plan adopted by the Commission in February 2025 and therefore this debt is not expected to further increase rates. Projected annual retail rate increases are projected to average approximately 6.2% over 10 years ( 2026- 2035).

Q. Will issuance of the bonds have a negative impact on the SFPUC credit ratings?
A. The SFPUC senior leadership has made a formal credit presentation to the bond rating agencies, has applied for ratings for the 2025 Water Bonds and will have the
results of the rating review prior to the sale of the 2025 Water Bonds. Staff is requesting that the bond rating agencies affirm is current ratings. The rating agencies recently affirmed the Water Enterprise’s bond ratings in conjunction with refunding bonds that closed in April 2025.

Q. Has staff and management had the opportunity to review the preliminary official statement?
A. The preparation of the preliminary official statement is an intensive, iterative process. The preliminary official statement has been thoroughly reviewed by relevant staff of the Water Enterprise, and subject matter experts in other parts of the SFPUC, including Infrastructure, Finance and management has been briefed on key representations contained in the document. The information in the preliminary official statement has also been reviewed by the City Attorney’s office, the SFPUC’s Municipal Advisor, and outside disclosure counsel. In addition, the underwriters, together with their counsel, has had an opportunity to review the preliminary official statement and such other information as they have deemed necessary to perform their required due diligence.

If there is any information Commissioners believe they need to understand 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.

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This bond sale and bond refunding is subject to Proposition E (of 2002) and related ordinances and resolutions adopted by the Board of Supervisors.

Section 8B.124 of the City Charter grants authority to the Board of Supervisors to approve the issuance of indebtedness, including revenue bonds, by ordinance upon two-thirds vote of its members and under certain conditions. One of the conditions to the Board of Supervisor’s authorization of such indebtedness is the delivery of a Certificate of the City and County from the Planning Department regarding the projects to be financed. These certificates detail the environmental review docu
ments that have been
certified (Environmental Impacts Reports) or adopted (Mitigated Negative Declarations) for certain projects and explains that some projects are still in the planning and design phases or are still under environmental review.

This proposed action does not constitute approval of projects that have not yet completed CEQA review and have not been approved by this Commission.

For all projects listed in Exhibit A of the CEQA Certificates that have not yet been approved, environmental review will be completed and considered by this Commission prior to the approval of expenditure of funds for construction.

The Environmental Review Officer issued a Certificate of the City and County of San Francisco Planning Department on August 2, 2022, related to Ordinance No. 112-22; August 15, 2023, related to Ordinance No. 180-23; and August 1, 2024, related to Ordinance No. 131-24. The list of projects to be funded by bond proceeds is included in the certificates. By these certifications, the Environmental Review Officer determined that the projects to be funded either already comply with the requirements of the CEQA or will undergo CEQA review when they are defined. The certificates and associated Ordinances can be found here:
https://sfpuc.sharefile.com/public/share/web-
sd0458ba629434edbb3b78532ef360c63

Attachments: 1) Form of Preliminary Official Statement (POS) including Form of Continuing Disclosure Certificate (POS Appendix)
2) Forms of Fiftieth, Fifty-First and Fifty-Second Supplemental Indentures 3) Form of Bond Purchase Contract

PUBLIC UTILITIES COMMISSION

City and County of San Francisco

RESOLUTION NO. __________
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 Area 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, of which authorization $1,499,230,000 aggregate principal amount has been utilized as of May 1, 2025; 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 $6,157,510,311 aggregate principal amount of water revenue bonds or other forms of indebtedness, including notes, commercial paper and other sh
ort-term i ndebtedness (not counting refunding bonds), of which authorization $4,628,503,982 aggregate principal amount has been utilized as of May 1, 2025; and

WHEREAS, Pursuant to Proposition A of 2002, Proposition E of 2002, and various ordinances enacted pursuant to Proposition E of 2002, including Ordinance No. 112 -22, finally passed by the Board on June 14, 2022, Ordinance No. 180- 23, finally passed by the Board on July 25, 2023 and Ordinance No. 131- 24, finally passed by the Board on June 18, 2024, as of

May 1, 2025, there is existing authorization to issue an aggregate principal amount of $1,529,006,329 of additional water revenue bonds or other forms of indebtedness, including notes, commercial paper and other short -term indebtedness, which authorization (i) assumes State revolving fund loan amounts are incurred for the full not to exceed amount of $429,213,982 and (ii) excludes refunding debt (such authorization is collectively referred to as the “Existing New Money Authorizing Legislation”); and

WHEREAS, Pursuant to the Proposition E of 2002, Article V of Chapter 43 of Part I of the San Francisco Administrative Code, and various other ordinances and resolutions adopted by the Board and the Commission, an interim funding program for the Commission’s municipal water supply, storage and distribution system (the “Water Enterprise”) has been established in an aggregate principal amount not to exceed $750,000,000 (the “Authorized Short -term Indebtedness”), consisting of a $550,000,000 authorization for commercial paper (“CP Notes”) and a $200,000,000 authorization for short-term, direct purchase revolving obligations, and as of May 1, 2025, approximately $310,851,000 aggregate principal amount of such Authorized Short- term Indebtedness has been issued or incurred; and

WHEREAS, The Commission finds that it would be financially advantageous to refinance certain CP Notes with bonds (“CP Refinancing Bonds”); and

WHEREAS, Under the authority granted or proposed to be granted under the Existing New Money Authorizing Legislation, it is proposed that the Commission issue one or more series or subseries of taxable or tax -exempt water revenue bonds in an aggregate principal amount not to exceed $474,000,000 (the “2025 New Money Bonds”) for the principal purpose of financing or refinancing (through the retirement of commercial paper) certain capital projects and improvements (hereinafter described) to or benefitting the Water Enterprise, all pursuant to the Amended and Restated Indenture, dated as of August 1, 2002 (as the same has been further amended and supplemented, the “Indenture”), by and between the Commission and 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, It is proposed that the 2025 New Money Bonds be sold in one or more series or subseries by a negotiated sale pursuant to one or more Bond Purchase Contracts (each, a “Bond Purchase Contract”); and

WHEREAS, The General Manager has deemed negotiated sales in the best interest of the Commission for a successful offering, given significant bond market volatility and the complex financing structure and the need for pre-marketing and timing flexibility afforded by a negotiated sale (as compared to a competitive sale) is an important determinant to the success of the offering; and

WHEREAS, It is proposed that one or more preliminary official statements for the 2025 New Money Bonds (each a “Preliminary Official Statement”) and one or more final official statements for the 2025 New Money Bonds (each an “Official Statement”) be used in connection with the offering and sale of the 2025 New Money Bonds from time to time; 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 2025 New Money 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 or subseries of 2025 New Money Bonds, and forms of Bond Purchase Contract, Preliminary Official Statement and Continuing Disclosure Certificate; and

WHEREAS, Subject to the requirements set fort
h in the Existing New Money Authorizing
Legislation 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 2025 New Money Bonds and to authorize the execution and delivery (as applicable) of one or more Bond Purchase Contracts, one or more Preliminary Official Statements, one or more final Official Statements, one or more Continuing Disclosure Certificates and related documents, each as appropriate for the issuance of the 2025 New Money Bonds, for the purposes, in the manner and upon the terms provided herein; and

WHEREAS, A consulting engineer has issued or will issue a certificate to the Board in satisfaction of the requirements of clause (a) of Section 8B.124 of Proposition E, all in furtherance of the sale of water revenue bonds and other forms of indebtedness; and

WHEREAS, An environmental review officer has issued or will issue a certificate to the Board in satisfaction of the requirements of clause (b) of Section 8B.124 of Proposition E, all in furtherance of the sale of water revenue bonds and other forms of indebtedness; and

WHEREAS, Prior to the issuance of the CP Refinancing Bonds, the General Manager will file with the Clerk of the Board any required updates to the certificates referenced in the two prior paragraphs, including a certificate of a consulting engineer in satisfaction of the requirements of cla
use (a)(2) of Section 8B.124 of Proposition E; 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 2025 New Money Bonds, good faith estimates of the following information: (a) the true interest cost of the 2025 New Money Bonds, (b) the sum of all fees and charges paid to third parties with respect to the 2025 New Money Bonds, (c) the amount of proceeds of the 2025 New Money 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 2025 New Money Bonds, and (d) the sum total of all debt service payments on the 2025 New Money Bonds calculated to the final maturity of the 2025 New Money Bonds plus the fees and charges paid to third parties not paid with the proceeds of the 2025 New Money Bonds, and such estimates are disclosed and set forth in the staff report provided to the Commission in connection with this resolution; and

WHEREAS, On August 2, 2022, August 15, 2023, and August 1, 2024, the Environmental Review Officer issued a Certificate of the City and County of San Francisco Planning Department (pursuant to Section 8B.124(b) of the City Charter) under Proposition E of November 2002, granting authority for the issuance of debt to the Board of Supervisors, for the Water Enterprise Capital Program and, by this certification, the Environmental Review Officer determined that the projects to be funded through the sale of Water Revenue Bonds and/or Other Forms of Indebtedness either already comply with the requirements of the CEQA or will undergo CEQA review when they are defined; and

WHEREAS, This action does not constitute a “project” under the CEQA Guidelines section 15378(b)(4) because issuance of the 2025 Water Bonds is a government funding mechanism, which does not involve any commitment to a specific project that may result in a potentially significant physical change in the environment; and

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 2025 New Money Bonds. The issuance of the 2025 New Money Bonds in one or more series or subseries, all or a portion of which may be designated as green bonds (if applicable) and issued on one or more dates, all 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 7 hereof) in an aggregate principal amount not exceeding $474,000,000, is hereby authorized and approved by the Commission, subject to the limitations and conditions provided herein.

The 2025 New Money Bonds may be issued for the purpose of providing funds (a) for the refinancing of all or a portion of the Outstanding CP Notes, (b) to pay for certain capital projects and improvements (i) under the Water Enterprise’s non- Water System Improvement Program (“non-WSIP”) capital program (which constitutes the Regional Water Program and the Local Water Program), (ii) to the Water Enterprise -related infrastructure of the Hetch Hetchy Water and Power System), and (iii) certain further improvements and other capital projects to or for the benefit of the Water Enterprise, (c) to pay capitalized interest on the 2025 New Money Bonds and (d) to pay the costs of issuance of the 2025 New Money Bonds. If determined to be beneficial to the Commission by the General Manager, with the advice of Montague DeRose and Associates, LLC and Backstrom McCarley Berry & Co., LLC, the municipal advisors to the Commission with respect to the 2025 New Money Bonds (together, the “Municipal Advisors”), the 2025 New Money Bonds may also be issued for the secondary purposes of providing funds to pay for (i) any credit enhancement of any 2025 New Money Bonds (including without limitation bond insurance policies and/or reserve fund surety bonds or insurance policies) and (ii) the funding of debt service reserves for the 2025 New Money Bonds or for other bonds issued under the Indenture.

The General Manager is hereby authorized and directed to determine the aggregate principal amount of 2025 New Money 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 (including the designation of any series of bonds as “notes”)

of the 2025 New Money Bonds. The 2025 New Money Bonds may be issued as obligations the interest on which is or is not subject to federal income tax. The forms of the 2025 New Money 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 2025 New Money 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 2025 New Money Bonds, subject to the limitations set forth in Section 5 hereof.

Section 2. 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 revenue bonds is hereby confirmed by the Commission and the Commission further confirms, pledges and covenants with the holders of the 2025 New Money 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 3. Supplemental Indentures. The proposed forms of Supplemental Indentures for each series and/or subseries of 2025 New Money 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 designee 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, maturity 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 2025 New Money Bonds shall be as provided in the Indenture.

General Manager is hereby authorized and directed, for and on behalf of the Commission, to execute one or more final Official Statements for such 2025 New Money 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 2025 New Money Bonds for distribution to purchasers of such 2025 New Money 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 2025 New Money Bonds that is to occur more than ninety (90) days following the date hereof. If deemed advantageous by the General Manager for the marketing of the bonds, the 2025 New Money Bonds’ Preliminary Official Statement may be combined with, or separated from, the Commission’s preliminary statement for other bonds of the Commission.

Section 5. Negotiated Sale; Bond Purchase Contract. The sale of the 2025 New Money 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.

Subject to the other limitations provided herein, the interest rate or rates on the 2025 New Money Bonds shall not exceed twelve percent (12%) and the final maturity of any 2025 New Money Bonds shall not exceed 40 years from their date of issuance. 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 2025 New Money 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, inclusive of all expense reimbursements, shall not exceed 0.4 percent (0.4%) of the par value of the 2025 New Money Bonds to be sold pursuant to any such Bond Purchase Contract. 2025 New Money 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. The Secretary of the Commission is directed to file a copy of said form of Bond Purchase Contract with the minutes of this meeting.

Section 6. Continuing Disclosure Certificate. The proposed form of Continuing Disclosure Certificate for the 2025 New Money 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 2025 New Money 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 7. General Authority. The General Manager, the Deputy General Manager and Chief Operating Officer, the Chief Financial Officer and Assistant General Manager, Business Services, 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 2025 New Money 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 2025 New Money 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 2025 New Money Bonds, the financing or refinancing of the projects, the retirement of the CP Notes, 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 Chief Financial Officer and Assistant General Manager, Business Services, 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 8. Good-Faith Estimates. The Commission acknowledges that the good faith estimates required by Section 5852.1 of the California Government Code are disclosed in the staff report and are available to the public at the meeting at which this Resolution is approved.

Section 9. Ratification. All actions heretofore taken by the officers, employees and agents of the Commission with respect to the authorization, sale and issuance of the 2025 New Money Bonds and the authorizations under this Resolution prior to the date hereof and in accordance with the provisions hereof are hereby approved, confirmed and ratified.

Section 10. Effective Date . This resolution shall take effect from and after its adoption.

I hereby certify that the foregoing resolution was adopted by the San Francisco Public Utilities Commission at its meeting May 27, 2025.

Director of Commission Affairs
San Francisco Public Utilities Commission

PUBLIC UTILITIES COMMISSION

City and County of San Francisco

RESOLUTION NO. __________

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 Area 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, of which authorization $1,499,230,000 aggregate principal amount has been utilized as of May 1, 2025; 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 $6,157,510,311 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 $4,627,565,982 aggregate principal amount has been utilized as of May 1, 2025; 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, Proposition E of 2002 and an Ordinance No. 131-24 (the “Refunding Ordinance”), the Commission is authorized to issue refunding water revenue bonds without limitation as to principal amount, so long as such refunding bonds comply with, among other conditions, the refunding results in at least 3% net present value debt service savings or the Commission makes certain findings that justify the waiver of such savings requirement and/or other conditions; and WHEREAS, It is proposed that the Commission issue, subject to the other limitations as provided in the Refunding Ordinance and the Indenture, one or more series of taxable or tax-exempt water revenue refunding bonds in an aggregate principal amount not to exceed $1,056,000,000 (“Refunding Bonds”), for the principal purpose of refunding for debt service savings outstanding water revenue bonds 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 the Commission’s outstanding water revenue bonds or portions thereof (the “Refunded Bonds”) is proposed is be effected through conditional redemption notices in accordance with the Indenture; and WHEREAS, It is proposed that the Refunding Bonds be sold in one or more series or subseries by negotiated sale pursuant to one or more Bond Purchase Contracts (each, a “Bond Purchase Contract”); and
WHEREAS, The General Manager has deemed negotiated sales in the best interest of the Commission for a successful offering, given significant bond market volatility and the complex financing structure and the need for pre -marketing and timing flexibility afforded by a negotiated sale (as compared to a competitive sale) is an important determinant to the success of the offering; and
WHEREAS, It is proposed that one or more preliminary official statements for the Refunding Bonds (each a “Preliminary Official Statement”) and one or more final official statements for the Refunding Bonds (each an “Official Statement”) be used in connection with the offering and sale of the Refunding Bonds from time to time; 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 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 Indenture for each series or subseries of Refunding Bonds, and

forms of Bond Purchase Contract, Preliminary Official Statement and Continuing Disclosure Certificate; and
WHEREAS, Subject to the requirements of Section 9.109 of the Charter or Proposition E of 2002 and other requirements set forth in applicable Board resolutions and ordinances (including the Refunding Ordinance) and the requirements of the Indenture, the Commission is duly authorized and empowered, pursuant to each and every requirement of law, to authorize the foregoing transactions and issue the Refunding Bonds and to authorize the execution and delivery (as applicable) of one or more Bond Purchase Contracts, one or more Preliminary Official Statements, one or more final Official Statements, one or more Continuing Disclosure Certificates, and related documents, each as appropriate for the issuance of the 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 Refunding Bonds, good faith estimates of the following information: (a) the true interest cost of the Refunding Bonds, (b) the sum of all fees and charges paid to third parties with respect to the Refunding Bonds, (c) the amount of proceeds of the 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 Refunding Bonds, and (d) the sum total of all debt service payments on the Refunding Bonds calculated to the final maturity of the Refunding Bonds plus the fees and charges paid to third parties not paid with the proceeds of the 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, This action does not constitute a project under California Environmental Quality Act (CEQA) Guidelines Section 15378 because there would be no physical change in the environment;
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 Refunding Bonds. The issuance of the Refunding Bonds, in one or more series or subseries, all or a portion of which may be designated as green bonds (if applicable) and issued on one or more dates, all 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 7 hereof) in an aggregate principal amount not exceeding $1,056,000,000 is hereby authorized and approved by the Commission, subject to the limitations and conditions provided herein.

The issuance of the Refunding Bonds is authorized and approved subject to the applicable limitations and conditions of Section 9.109 of the Charter, Proposition E of 2002 and the Refunding Ordinance 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 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 Refunding Bonds shall be applied (a) to retire (through defeasance or purchase, as described herein) the Refunded Bonds and (b) to pay the costs of issuance of the Refunding Bonds.

The General Manager is hereby authorized and directed to determine the aggregate principal amount of 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 (including the designation of any series of bonds as “notes”) of the Refunding Bonds. The Refunding Bonds may be issued as obligations the interest on which is or is not subject to federal income tax. The form of the Refunding Bonds, in substantially the forms set forth in the form of the Supplemental Indenture presented to this meeting, is hereby approved. The General Manager of the Commission is hereby authorized and directed to approve and to execute the 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 Refunding Bonds, subject to the limitations set forth in Section 6 hereof.

The Commission finds, in relation to each subseries of Refunded Bonds that are Build America Bonds under Section 54AA of the Internal Revenue Code (the “Commission’s Build America Bonds”), that the following significant non- economic factors do exist:

a) the federal subsidy rate originally provided to the Commission’s Build America Bonds have been reduced and such reduced subsidy rate has applied for many years and is at risk of being reduced further or eliminated through legislation or otherwise; and
b) the exclusion of interest from owner’s income subject to federal income taxation or other tax benefits available to the Commission’s bonds could be diminished or eliminated through legislation or otherwise.

The Commission hereby finds in respect of the refunding of the Commission’s Build America Bonds that the foregoing factors justify waiver of the conditions set forth in Section 3 of the Refunding Ordinance that require three percent (3%) net present value debt service savings apply, that limit extension of the final maturity of the Commission’s Build America Bonds, that limit adjustment of principal payments and term in relation to the useful life of the underlying capital asset funded through the Commission’s Build America Bonds and that require delivery of a bond refunding savings report. Such conditions are hereby waived.

Section 2. 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 municipal water supply, storage and distribution system enterprise revenue bonds is hereby confirmed by the Commission and the Commission further confirms, pledges and covenants with the holders of the 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 3. S
upplemental Indenture. The proposed form of Supplemental Indenture for each series and/or subseries of 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 designee is authorized to attest to one or more Supplemental Indentures in such form 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 Indenture. The Secretary of the Commission is directed to file a copy of the form of Supplemental Indenture with the minutes of this meeting. Subject to the further limitations hereof, the principal amount, date, maturity date or dates, 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 Refunding Bonds shall be as provided in the Indenture.

Section 4. P
reliminary 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 to 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 City 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 Refunding Bonds. In connection with the sale of all or a portion of the Refunding Bonds, the General Manager is hereby authorized and directed, for and on behalf of the Commission, to execute one or more final Official Statemen ts for such 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 Refunding Bonds for distribution to purchasers of such 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 Refunding Bonds that is to occur more than one hundred twenty (120) days following the date hereof. If deemed advantageous by the

General Manager for the marketing of the Refunding Bonds, the Refunding Bonds’ preliminary official statement may be combined with, or separated from, the Commission’s preliminary official statement for other bonds of the Commission.

Section 5. Negotiated Sale; Bond Purchase Contract. The sale of the 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.

Subject to the other limitations provided herein, the interest rate or rates on the Refunding Bonds shall not exceed twelve percent (12%) and the final maturity of any Refunding Bonds shall not exceed 40 years from their date of issuance. 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 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, inclusive of all expense reimbursements, shall not exceed 0.4 percent (0.4%) of the par value of the Refunding Bonds to be sold pursuant to any such Bond Purchase Contract.

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. The Secretary of the Commission is directed to file a copy of said form of Bond Purchase Contract with the minutes of this meeting.

Section 6. C
ontinuing Disclosure Certificate. The proposed form of Continuing Disclosure Certificate for the 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 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.

litigation certificates, tax certificates, letters of representation relating to book -entry registration, escrow agreements, 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 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 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 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 Chief Financial Officer and Assistant General Manager, Business Services, 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.

Pursuant to the Refunding Ordinance, the Commission shall within 30 days of sale and issuance of the Refunding Bonds provide a refunding savings report prepared by its Municipal Advisors (that reflects at least a 3% net present value debt service savings) to the Board, together with a copy of the final Official Statement with respect to such series of Refunding Bonds. The foregoing report requirement shall not apply to Refunding Bonds or portions thereof that refunded bonds for which a waiver applies under Section 1 hereof.

Section 9. R
atification. All actions heretofore taken by the officers, employees and agents of the Commission with respect to the authorization, sale and issuance of the Refunding Bonds and the authorizations under this Resolution prior to the date hereof and in accordance with the provisions hereof are hereby approved, confirmed and ratified.

Section 10. E
ffective Date. This resolution shall take effect from and after its adoption.

I hereby certify that the foregoing resolution was adopted by the San Francisco Public Utilities Commission at its meeting May 27, 2025.

Director of Commission Affairs
San Francisco Public Utilities Commission

OH&S DRAFT – Distributed 05/02/25
PRELIMINARY OFFICIAL STATEMENT DATED MAY __, 2025
NEW ISSUE – Book-Entry Only Ratings:

Moody’s: “___”
S&P: “___”
(See “RATINGS.”)
In the opinion of Norton Rose Fulbright US LLP , San Francisco, California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming compliance with certain covenants in the documents pertaining to the 2025DEF Bonds and requirements of the Internal Revenue Code of 1986, as described herein, interest on the 2025DEF Bonds is not included in the gross income of the owners thereof for federal income tax purposes. In the further opinion of Bond Counsel, interest on the 2025DEF Bonds is not treated as an item of tax preference for purposes of the federal alternative minimum tax on individuals. Bond Counsel is also of the opinion that, under existing law, interest on the 2025DEF Bonds is exempt from personal income taxes of the State of California. See “TAX MATTERS” herein.

$__________*

PUBLIC UTILITIES COMMISSION OF

THE CITY AND COUNTY OF SAN FRANCISCO
San Francisco Water Revenue Bonds, 2025 Series DEF
$__________*
2025 Sub-Series D
(Regional Water and
Local Water)
$__________*
2025 Sub-Series E
(Hetch Hetchy Water)
$__________*
2025 Sub-Series F
(Refunding)

Dated: Date of Delivery Due: November 1, as shown on inside cover pages

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.

General. This Official Statement provides information regarding the above-captioned bonds (collectively, the “2025DEF Bonds”) of the Public Utilities Commission of the City and County of San Francisco (the “SFPUC”). Capitalized terms not otherwise defined on this cover shall have the meanings ascribed to such terms herein.

Authority for Issuance . The SFPUC is issuing the 2025DEF Bonds pursuant to authority granted by the Charter of the City and County of San Francisco (the “City”). The 2025DEF Bonds will be issued under supplemental indentures that supplement the Amended and Restated Indenture, dated as of August 1, 2002 (as amended and supplemented, the “ Indenture”), by and between the SFPUC and U.S. Bank Trust Company, National Association, as successor to U.S. Bank National Association, as trustee ( the “Trustee”). See “SECURITY FOR THE BONDS.”
Plan of Finance. The 2025DEF Bonds are being issued to refund Commercial Paper Notes issued to finance and refinance a portion of the design, acquisition and construction of various capital projects of benefit to the SFPUC ’s Water Enterprise, to finance and refinance a portion of the design, acquisition and construction of various capital projects of benefit to the SFPUC’s Water Enterprise, to refund certain outstanding water revenue bonds of the SFPUC, to fund capitalized interest on the 2025D Bonds and 2025E Bonds through May 1, 2027
*, and to pay the costs of issuance of the 2025DEF Bonds. See “ PLAN OF FINANCE ” and “ESTIMATED SOURCES AND USES OF FUNDS.”
Denominations and Interest . The 2025DEF 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 2025DEF Bonds is payable semiannually on May 1 and November 1 of each year, commencing November 1, 2025. See “THE 2025DEF BONDS.”
Book-Entry Only. The 2025DEF 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 2025DEF Bonds. The principal of, premium, if any, and interest on the 2025DEF Bonds are payable to DTC by the Trustee, and, so long as DTC is a cting as securities depository for the 2025DEF 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 2025DEF BONDS.” Redemption. The 2025DEF Bonds are subject to redemption prior to their stated maturities as described herein. See “THE 2025DEF BONDS – Redemption.”
Security. 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

* Preliminary, subject to change.

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 by any sale of these securities, in my jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of such jurisdiction. any, and interest on the 2025DEF Bonds and all outstanding parity revenue bonds, notes or other evidences of indebtedness authorized under the Indenture, subject to the allocation of funds provided in the Indenture. The 2025DEF Bonds are payable on parity with certain Outstanding Bonds previously issued by the SFPUC under the Indenture and all outstanding parity revenue bonds, notes or other evidences of indebtedness authorized under the Indenture. See “ SECURITY FOR THE BONDS.” Limited Obligation. The SFPUC is not obligated to pay the principal of, premium, if any, or interest on the 2025DEF 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 2025DEF 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 2025DEF Bonds. The 2025DEF 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 2025DEF Bonds are not secured by the revenues of the SFPUC ’s Wastewater Enterprise or Power Enterprise or the revenues of CleanPowerSF. See “SECURITY FOR THE BONDS.”

MATURITY SCHEDULES
(See inside cover pages)
The 2025DEF 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, 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. Montague DeRose and Associates, LLC, Walnut Creek, Califor nia, and Backstrom McCarley Berry & Co., LLC, San Francisco, California, Co-Municipal Advisors to the SFPUC, assisted in the structuring of this financing. Certain matters will be passed upon for the Underwriters by Hawkins Delafield & Wood LLP , San Francisco, California . It is expected that the 2025DEF Bonds in fully registered form will be available for delivery in book-entry form through the facilities of DTC on or about June __, 2025*.

J.P. Morgan Goldman Sachs & Co. LLC
Barclays Ramirez & Co., Inc. Siebert Williams Shank & Co., LLC Stifel

The date of this Official Statement is __________, 2025.

MATURITY SCHEDULES*
2025 Sub-Series D
(Regional Water and Local Water)
$__________ Serial Bonds
Maturity
(November 1)
Principal
Amount Interest Rate Yield† Price†
CUSIP‡
Base Number
79771F

$_____ _____% Term Bonds due November 1, ____ Yield† _____ Price† _____ CUSIP‡ _____ $_____ _____% Term Bonds due November 1, ____ Yield† _____ Price† _____ CUSIP‡ _____ 2025 Sub-Series E
(Hetch Hetchy Water)
$__________ Serial Bonds
Maturity
(November 1)
Principal
Amount Interest Rate Yield† Price†
CUSIP‡
Base Number
79771F

$_____ _____% Term Bonds due November 1, ____ Yield† _____ Price† _____ CUSIP‡ _____ $_____ _____% Term Bonds due November 1, ____ Yield† _____ Price† _____ CUSIP‡ _____

* Preliminary, subject to change.
† Reoffering yields and prices have been provided by the Underwriters. See “UNDERWRITING.” ‡ CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, 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 CUSIP Global Services data base. Neither the SFPUC nor the Underwriters assume any responsibility for the accuracy of the CUSIP data.

MATURITY SCHEDULES (CONTINUED)*
2025 Sub-Series F
(Refunding)
$__________ Serial Bonds
Maturity
(November 1)
Principal
Amount Interest Rate Yield† Price†
CUSIP‡
Base Number
79771F

$_____ _____% Term Bonds due November 1, ____ Yield† _____ Price† _____ CUSIP‡ _____ $_____ _____% Term Bonds due November 1, ____ Yield† _____ Price† _____ CUSIP‡ _____

* Preliminary, subject to change.
† Reoffering yields and prices have been provided by the Underwriters. See “UNDERWRITING.” ‡ CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, which is managed on behalf of the American Bankers Association by FactSet Research Systems Inc. This data is not intended to crea te a database and does not serve in any way as a substitute for the CUSIP Global Services data base. Neither the SFPUC nor the Underwriters ass ume any responsibility for the accuracy of the CUSIP data.

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, 11 storage tanks, 25 pump stations, eight hydropneumatic stations and 1 8 chlorination stations located within the San Francisco city limits and further comprises over 389 miles of pipeline, over 74 miles of tunnels, 1 1 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 2025DEF 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.”

Map of Service Area and Locations of Wholesale Customers

1. Alameda County Water District

2. City of Brisbane

3. City of Burlingame
4a. California Water Service – Bear Gulch
4b. California Water Service – Mid-Peninsula
4c. California Water Service – 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 Municipal Improvement
District

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. City of San José

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 (as defined herein). The Water Enterprise serves water to approximately 2.7 million people 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.”
The 2025DEF Bonds are not secured by a legal or equitable pledge of, or charge, lien or encumbrance upon, any of the property of any of the Wholesale Customers or any of their respective revenue, income or receipts. The 2025DEF Bonds are secured solely by the Revenues of the Water Enterprise as described herein. See “ SECURITY FOR THE BONDS.”

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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 any sale of the 2025DEF 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 purchasers of the 2025DEF 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 fede ral 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 https://www.sf.gov/ and the SFPUC maintains a website at https://www.sfpuc.gov/.

The City and the SFPUC also maintain social media accounts. In addition, certain information and reports found on other websites and other information and reports are referred to in this Official Statement. The websites are provided for convenience only and information and reports available on such websites, social media accounts 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 2025DEF Bonds.

The issuance and sale of the 2025DEF 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 2025DEF BONDS, THE UNDERWRITERS MAY

OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 2025DEF BONDS AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREV AIL 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 PREV AILING MARKET PRICE.

This Official Statement is delivered for use in connection with the issuance, sale and delivery of the 2025DEF 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 “FORWA RD-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 E XPRESSIONS ARE INTENDED TO IDENTIFY FORWA RD-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 FORT H IN THIS OFFICIAL STATEMENT. GIVEN THEIR UNCERTAINTY , INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH STATEMENTS.
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TABLE OF CONTENTS
INTRODUCTION ..................................................... 1 General ............................................................... 1 Authority for Issuance ........................................ 1 Plan of Finance ................................................... 2 The SFPUC and the Water Enterprise ................ 2
SFPUC Water Supply ......................................... 2 Security for the Bonds ........................................ 3 Outstanding and Future Parity Bonds and
Other Indebtedness ............................................. 3 Amendments Effected by Forty-Third
Supplemental Indenture ...................................... 3 Risk Factors ........................................................ 4 Continuing Disclosure ........................................ 4 Other Matters ...................................................... 4 THE 2025DEF BONDS ............................................ 4 General ............................................................... 4 Securities Depository and Book-Entry Only
System ................................................................ 4 Redemption ........................................................ 5 Defeasance.......................................................... 8 PLAN OF FINANCE ................................................ 9 General ............................................................... 9 Refunded Bonds ............................................... 10

ESTIMATED SOURCES AND USES OF
FUNDS .................................................................... 11 SECURITY FOR THE BONDS .............................. 11 Pledge of Revenues .......................................... 11 Flow of Funds ................................................... 13 Rate Covenants ................................................. 15 No Bond Reserve Account for the 2025DEF
Bonds ................................................................ 16

Additional Series of Bonds ............................... 17 Refunding Bonds .............................................. 18 Other Parity Obligations; Subordinate
Obligations; Obligations Not Payable from
Revenues .......................................................... 18 Investments ....................................................... 18

PROPOSED AMENDMENTS TO THE
INDENTURE .......................................................... 19

OBLIGATIONS PAYABLE FROM
REVENUES ............................................................ 19 Authority for Issuance of Revenue Bonds
and Other Obligations Payable from
Revenues .......................................................... 19 Outstanding Parity Revenue Bonds .................. 21
Parity State Loans ............................................. 22 Corps Water Infrastructure Financing
Program ............................................................ 23 Contingent Payment Obligations ...................... 23 Subordinate Debt and Interim Funding
Program ............................................................ 23 Other Subordinate Obligations Payable from
Revenues .......................................................... 24 Revenue Bond Oversight Committee; Audit
of Bond Expenditures ....................................... 24 Debt Service Requirements .............................. 25

THE CITY AND COUNTY OF
SAN FRANCISCO .................................................. 26 THE PUBLIC UTILITIES COMMISSION ............ 27
General ............................................................. 27 Organization, Purposes and Powers ................. 28
Commission Members ...................................... 29 Management ..................................................... 29 Employee Relations .......................................... 31 Employee Benefit Plans ................................... 33 THE WATER ENTERPRISE................................... 37 General ............................................................. 37 Water Rights and Related Proceedings ............. 37
Current Water Supply Sources .......................... 38 Water Supply Storage ....................................... 39 Water Supply Reliability and Drought
Planning ............................................................ 39 Wholesale Deliveries ........................................ 40 Retail Deliveries ............................................... 48 Historical Water Sales and Top Customers ....... 49
Recent Factors Impacting Retail Water Sales ... 50
Current Water Conditions ................................. 51 Curtailment Actions by the State Water
Resources Control Board .................................. 52

Projected Demand ............................................ 53 Cybersecurity .................................................... 56 Climate Change ................................................ 57 Climate Action Plan .......................................... 61 WATER FACILITIES .............................................. 62 General ............................................................. 62 Water Conveyance and Distribution ................. 63
Water Treatment ............................................... 64 Water Storage ................................................... 65 Physical Condition of Certain Facilities ........... 67 Prior Heavy Storms .......................................... 68 Seismic Hazards ............................................... 68 Wildfire Considerations .................................... 70 Emergency Firefighting Water System ............. 70
Safety and Security ........................................... 71

CAPITAL IMPROVEMENT PROGRAM

AND OTHER WATER SUPPLY
INITIATIVES .......................................................... 71

Capital and Financial Planning Process ............ 71
Regional Water Program................................... 72 Local Water Program ........................................ 72 Hetch Hetchy Water .......................................... 73 Water System Improvement Program ............... 74
Water Supply Initiatives ................................... 75 Environmental Planning Considerations .......... 78

FINANCING OF CAPITAL
IMPROVEMENTS .................................................. 79

Long Term Financing of Capital Program ........ 79
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Interim Funding Program Facilities .................. 79 Sources of Funding the Capital
Improvement Program ...................................... 79 FINANCIAL OPERATIONS .................................. 80 General ............................................................. 80 Wholesale Water Sales Revenue....................... 81 Retail Water Sales Revenue .............................. 83 Capacity Charges .............................................. 89 Operating and Maintenance Expenses .............. 89
Financial Management Policies ........................ 90 Investment of SFPUC Funds ............................ 91 Risk Management and Insurance ...................... 92 HISTORICAL OPERATING RESULTS ................. 94
PROJECTED OPERATING RESULTS .................. 96
RISK FACTORS ..................................................... 98 General ............................................................. 99 Bond Payment Risks......................................... 99 Risks Related to Water Enterprise Facilities
and Operations ................................................ 100 Risks Relating to Financial Operations .......... 103
Bankruptcy Risk ............................................. 104 Other Risks ..................................................... 105 REGULATORY MATTERS .................................. 108 General ........................................................... 108 Drinking Water Requirements ........................ 108 Public Water System Discharges .................... 113 Bay Delta Water Quality Standards ................ 113
FERC Proceeding to Increase Flows in the
Lower Tuolumne River ................................... 114

Dam Licensing and Safety Issues ................... 116 Hazardous Material Management ................... 120
Endangered Species ........................................ 120 Required Instream Flow Schedules from
Regional Water System Dams ........................ 120

CONSTITUTIONAL, STATUTORY AND
CHARTER LIMITATIONS ................................... 121 State Law Limitations..................................... 121 Initiative and Referendum .............................. 123 Charter Limitations ......................................... 123 Future Charter Amendments ........................... 124 LITIGATION ......................................................... 124 TAX MATTERS .................................................... 124 CERTAIN LEGAL MATTERS ............................. 126 RATINGS .............................................................. 127 UNDERWRITING ................................................ 127 FINANCIAL STATEMENTS ................................ 128 CONTINUING DISCLOSURE ............................. 128 CO-MUNICIPAL ADVISORS .............................. 128

VERIFICATION OF MATHEMATICAL
ACCURACY ......................................................... 129 INDEPENDENT PRICING CONSULTANT ........ 129
MISCELLANEOUS .............................................. 129 APPROV AL AND DELIVERY ............................. 130

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 BOND COUNSEL

APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE

APPENDIX F SECURITIES DEPOSITORY AND THE BOOK-ENTRY SYSTEM

SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Kate H. Stacy, President
Joshua Arce, Vice President
Avni Jamdar, Commissioner
Stephen E. Leveroni, Commissioner

PUBLIC UTILITIES COMMISSION OFFICIALS
Dennis J. Herrera, General Manager
Ronald P. Flynn, Deputy General Manager and Chief Operating Officer Nancy L. Hom, Assistant General Manager, Business Services and Chief Financial Officer Steven R. Ritchie, Assistant General Manager, Water Enterprise Masood Ordikhani, Assistant General Manager, External Affairs Barbara Hale, Assistant General Manager, Power Enterprise Stephen Robinson, Assistant General Manager, Infrastructure Division Joel Prather, Assistant General Manager, Wastewater Enterprise

CITY AND COUNTY OF SAN FRANCISCO
MAYOR
Daniel Lurie

BOARD OF SUPERVISORS
Rafael Mandelman, District 8, President
Connie Chan, District 1 Bilal Mahmood, District 5
Chyanne Chen, District 11 Myrna Melgar, District 7
Matt Dorsey, District 6 Danny Sauter, District 3
Joel Engardio, District 4 Shamann Walton, District 10
Jackie Fielder, District 9 Stephen Sherrill, District 2

CITY ATTORNEY
David Chiu

CITY TREASURER
José Cisneros

OTHER CITY AND COUNTY OFFICIALS
Greg Wagner, Controller
Carmen Chu, City Administrator

SPECIAL SERVICES
Bond Counsel Co-Municipal Advisors
Norton Rose Fulbright US LLP Montague DeRose and Associates, LLC San Francisco, California Walnut Creek, California

Disclosure Counsel Backstrom McCarley Berry & Co., LLC
Orrick, Herrington & Sutcliffe LLP San Francisco, California San Francisco, California

Trustee Verification Agent
U.S. Bank Trust Company, National Association __________ San Francisco, California

OFFICIAL STATEMENT
$__________*

PUBLIC UTILITIES COMMISSION OF THE CITY AND COUNTY OF SAN FRANCISCO San Francisco Water Revenue Bonds, 2025 Series DEF
$__________*
2025 Sub-Series D
(Regional Water and Local Water)
$__________*
2025 Sub-Series E
(Hetch Hetchy Water)
$__________*
2025 Sub-Series F
(Refunding)

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 hereinafter defined 2025DEF Bonds to potential investors is made only by means of the entire Official Statement. Capitalized 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 Official 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 San Francisco Water Revenue Bonds, 2025 Series DEF, 2025 Sub- Series D (Regional Water and Local Water) (the “ 2025D Bonds”), San Francisco Water Revenue Bonds, 2025 Series DEF, 2025 Sub-Series E (Hetch Hetchy Water) (the “2025E Bonds”), and San Francisco Water Revenue Bonds, 2025 Series DEF, 2025 Sub-Series F (Refunding) (the “2025F Bonds” and, together with the 2025D Bonds and 2025E Bonds, the “2025DEF Bonds”).

Authority for Issuance
The 2025DEF Bonds will be issued by the SFPUC pursuant to authority granted by the Charter (the “Charter”) of the City and County of San Francisco (the “City”) through Proposition A, approved by San Francisco voters on November 5, 2002 ( “Proposition A”), Proposition E, approved by San Francisco voters on November 5, 2002 (“Proposition E”), and by Section 9.109 of the Charter and an ordinance that was finally passed by the Board of Supervisors of the City (the “Board of Supervisors”) on June 18, 2024 (the “Refunding Ordinance”). In addition, the 2025DEF Bonds will be issued under a resolution adopted by the SFPUC governing body (the “Commission”) on __________, 2025.

The 2025D Bonds will be issued under a Fiftieth Supplemental Indenture (the “Fiftieth Supplemental Indenture”), dated as of June 1, 2025, by and between the SFPUC and U.S. Bank Trust Company, National Association, as successor to U.S. Bank National Association, as trustee (the “ Trustee”). The 2025E Bonds will be issued under a Fifty-First Supplemental Indenture (the “Fifty-First Supplemental Indenture”), dated as of June 1, 2025, by and between the SFPUC and the Trustee. The 2025F Bonds will be issued under a Fifty-Second Supplemental Indenture (the “Fifty-Second Supplemental Indenture”), dated as of June 1, 2025, by and between the SFPUC and the Trustee. The Fiftieth Supplemental Indenture , the Fifty -First Supplemental Indenture and the Fifty- Second Supplemental Indenture each supplement the Amended and Restated Indenture, dated as of August 1, 2002 (as amended and supplemented, the “Indenture”), by and between the SFPUC and the Trustee.

See also “OBLIGATIONS PAYABLE FROM REVENUES – Authority for Issuance of Revenue Bonds and Other Obligations Payable from Revenues.”

* Preliminary, subject to change.
2 Plan of Finance
The 2025DEF Bonds are being issued to refund Commercial Paper Notes (as defined herein) issued to finance and refinance a portion of the design, acquisition and construction of various capital projects of benefit to the SFPUC’s Water Enterprise, to finance and refinance a portion of the design, acquisition and construction of various capital projects of benefit to the SFPUC’s Water Enterprise, to refund certain outstanding water revenue bonds of the SFPUC, to fund capitalized interest on the 2025D Bonds and 2025E Bonds through May 1, 2027*, and to pay the costs of issuance of the 2025DEF Bonds. See “PLAN OF FINANCE,” “ESTIMATED SOURCES AND USES OF FUNDS.” 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 (i) retail customers in San Francisco and certain retail customers outside of San Francisco (collectively, the “Retail Customers”), (ii) 26 wholesale customer entities in San Mateo, Alameda and Santa Clara counties that are members of the Bay Area Water Supply and Conservation Agency (“ BAWSCA”) pursuant to the hereinafter defined Water Supply Agreement and individual contractual agreements (collectively, the “Wholesale Customers ”), and (iii) one additional wholesale customer, Cordilleras Mutual Water Company in San Mateo County (which is not a BAWSCA member or a party to the Water Supply Agreement), pursuant to an individual contractual agreement. The Water Enterprise consists of water treatment, storage and transmission facilities located outside of San Francisco (the “Regional Water System ”) and water treatment, storage and distribution facilities located inside San Francisco (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. Retail water sales typically account for approximately 30% of total water sales, and revenues from such retail water sales generally acco unt for approximately 50% of total water sales revenues. Water rates for Wholesale Customers are set pursuant to the Water Supply Agreement between the City and the Wholesale Customers, which became effective in 2009 and was most recently amended and restated in 2021 (the “ Water Supply Agreement” or “WSA”). Wholesale water sales typically account for approximately 70% of total water sales and revenues from such wholesale water sales generally account for approximately 50% of total water sales revenues.

For more information regarding water sales, water sales revenues, and the WSA, see “THE WATER ENTERPRISE,” “FINANCIAL OPERATIONS” and “APPENDIX B – SUMMARY OF CERTAIN PROVISIONS OF THE WATER SUPPLY AGREEMENT.”
The SFPUC also provides wastewater services to customers in San Francisco and to several wholesale customers outside of San Francisco (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 here in), including the 2025DEF 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.”

* Preliminary, subject to change.
3 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 2025DEF Bonds and all outstanding parity revenue bonds, notes or other evidences of indebtedness authorized by the Indenture (collectively, the “Bonds”), subject to the allocation of funds provided in the Indenture. The 2025DEF Bonds are pa yable 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 2025DEF 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 2025DEF 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 2025DEF Bonds. The 2025DEF 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 2025DEF 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 2025DEF Bonds. Bond Reserve Accounts have been established with respect to certain other series of Bonds, but such Bond Reserve Accounts do not secure the 2025DEF 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 2025DEF 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 2025DEF 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 Forty-Third Supplemental Indenture (the “Forty-Third Supplemental Indenture”), dated as of July 1, 2023, by and between the SFPUC and the Trustee, 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. Approximately

32.8% of the aggregate amount of the Bond Obligation of the Bonds currently Outstanding have been obtained. By their purchase of 2025DEF Bonds, the purchasers of 2025DEF Bonds irrevocably agree to, accept and consent to the provisions of such amendments . Upon the issuance of the 2025DEF Bonds, approximately __% of the aggregate amount of the Bond Obligation of the Bonds then Outstanding will have been obtained. See “PROPOSED AMENDMENTS TO INDENTURE” and “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE – FORTY-THIRD SUPPLEMENT AL INDENTURE – PROPOSED AMENDMENTS TO 4 INDENTURE” for a more detailed explanation of the amendments effected by the Forty -Third Supplemental Indenture.

Risk Factors
Investment in the 2025DEF Bonds is subject to certain risks that should be considered, in addition to other matters set forth in this Official Statement, in evaluating an investment in the 2025DEF Bonds. For a general overview of certain risk factors, see “RISK FACTORS.”
Continuing Disclosure
The SFPUC will covenant for the benefit of the Owners and Beneficial Owners of the 2025DEF Bonds to provide certain financial information and operating data regarding the Water Enterprise not later than March 31 following the end of its Fiscal Year (presently June 30), beginning on March 31, 2026, with respect to the report for Fiscal Year 2024-25, and to provide notices of the occurrence of certain enumerated events. These covenants will be made 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 2025DEF Bonds, the security and sources of payment for the 2025DEF 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 2025DEF BONDS
General
The 2025DEF 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 2025DEF Bonds will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Interest on the 2025DEF Bonds is payable on May 1 and November 1 of each year, beginning November 1, 2025.

The 2025DEF Bonds will mature on the dates and in the principal amounts set forth on the inside cover pages of this Official Statement. The 2025DEF 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 2025DEF 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 2025DEF 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 2025DEF Bonds. So long as DTC, or its nominee, 5 Cede & Co., is the Owner of the 2025DEF Bonds, all payments on the 2025DEF 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 2025DEF Bonds will be the responsibility of the DTC Participants. See “APPENDIX F – SECURITIES DEPOSITORY AND THE BOOK-ENTRY SYSTEM.” Redemption*
Optional Redemption of 2025D Bonds. The 2025D 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 __________ 1, 20__ 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 2025D Bonds) by lot within any one maturity, at a redemption price equal to 100% of the principal amount of the 2025D Bonds to be redeemed, plus accrued interest thereon to the date fixed for redemption, without premium.

Mandatory Sinking Fund Redemption of 2025D Bonds. The 2025D Bonds maturing on November 1, ____ (the “2025D Term Bonds (____)”), are further subject to redemption prior to their stated maturity, and payable from the 2025D Sinking Fund Account, on each November 1 on and after November 1, ____, (except as otherwise provided under the procedures of Securities Depository for the 2025D Bonds) by lot within any such maturity if less than all of the 2025D 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 2025D 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 2025D Term Bonds (____) prior to maturity as described above):

Redemption Date
(November 1) Principal Amount

†

† Maturity.

The 2025D Bonds maturing on November 1, ____ (the “2025D Term Bonds (____)”), are further subject to redemption prior to their stated maturity, and payable from the 2025D Sinking Fund Account, on each November 1 on and after November 1, ____, (except as otherwise provided under the procedures of Securities Depository for the 2025D Bonds) by lot within any such maturity if less than all of the 2025D 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.

* Preliminary, subject to change.
6 Optional Redemption of 2025E Bonds. The 2025E 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 __________ 1, 20__ 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 2025E Bonds) by lot within any one maturity, at a redemption price equal to 100% of the principal amount of the 2025E Bonds to be redeemed, plus accrued interest thereon to the date fixed for redemption, without premium.

Mandatory Sinking Fund Redemption of 2025E Bonds. The 2025E Bonds maturing on November 1, ____ (the “2025E Term Bonds (____)”), are further subject to redemption prior to their stated maturity, and payable from the 2025E Sinking Fund Account, on each November 1 on and after November 1, ____, (except as otherwise provided under the procedures of Securities Depository for the 2025E Bonds) by lot within any such maturity if less than all of the 2025E 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 2025E 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 2025E Term Bonds (____) prior to maturity as described above):

Redemption Date
(November 1) Principal Amount

†

† Maturity.

The 2025E Bonds maturing on November 1, ____ (the “2025E Term Bonds (____)”), are further subject to redemption prior to their stated maturity, and payable from the 2025E Sinking Fund Account, on each November 1 on and after November 1, ____, (except as otherwise provided under the procedures of Securities Depository for the 2025E Bonds) by lot within any such maturity if less than all of the 2025E 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.

Optional Redemption of 2025F Bonds. The 2025F 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 __________ 1, 20__ 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 2025F Bonds) by lot within any one maturity, at a redemption price equal to 100% of the principal amount of the 2025F Bonds to be redeemed, plus accrued interest thereon to the date fixed for redemption, without premium. 7 Mandatory Sinking Fund Redemption of 2025F Bonds . The 2025F Bonds maturing on November 1, ____ (the “2025F Term Bonds (____)”), are further subject to redemption prior to their stated maturity, and payable from the 2025F Sinking Fund Account, on each November 1 on and after November 1, ____, (except as otherwise provided under the procedures of Securities Depository for the 2025F Bonds) by lot within any such maturity if less than all of the 2025F 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 2025F 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 2025F Term Bonds (____) prior to maturity as described above):

Redemption Date
(November 1) Principal Amount

†

† Maturity.

The 2025F Bonds maturing on November 1, ____ (the “2025F Term Bonds (____)”), are further subject to redemption prior to their stated maturity, and payable from the 2025F Sinking Fund Account, on each November 1 on and after November 1, ____, (except as otherwise provided under the procedures of Securities Depository for the 2025F Bonds) by lot within any such maturity if less than all of the 2025F 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.

Purchase In Lieu of Mandatory Sinking Fund Redemption . In lieu of mandatory sinking fund redemption of the 2025DEF Bonds as described above, the SFPUC may satisfy, in whole or in part, the related minimum Sinking Fund Account payment amounts and redemption of 2025DEF Term Bonds of the respective Sub-Series by depositing with the Trustee 2025DEF Term Bonds of the respective Sub-Series for cancellation prior to the Trustee’s selection of the 2025DEF Term Bonds of such Sub-Series for redemption, or may request the Trustee to purchase 2025DEF 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 2025DEF 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 2025DEF Bonds required to be redeemed as described above on the next succeeding November 1. 8 Selection of 2025DEF Bonds for Redemption. Subject to DTC’s procedures relating to the selection of bonds for redemption described above, whenever less than all of the 2025DEF Bonds, of any one tenor and maturity are called for redemption and those 2025DEF Bonds are redeemable by lot, the Trustee will select the 2025DEF Bonds of the tenor and maturity to be redeemed from the Outstanding 2025DEF Bonds of that tenor and maturity, by lot or by any other manner the Trustee deems fair and equitable. For purposes of such selection, 2025DEF 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 2025DEF 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 2025DEF Bond or the cessation of the accrual of interest on the date fixed for such redemption.

See “APPENDIX F – SECURITIES DEPOSITORY AND THE BOOK-ENTRY SYSTEM.” Rescission of Notice of Redemption. The SFPUC may, at its option, prior to the date fixed for redemption 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 2025DEF Bonds called for redemption will, on the redemption date designated in such notice, become due and payable at the redemption price specified in such notice; and from and after the date so designated interest on such 2025DEF Bonds called for redemption will cease to accrue, and such 2025DEF Bonds will cease to be entitled to any benefit or security under the Indenture, and the Owners of said 2025DEF 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 2025DEF Bonds will pay such 2025DEF Bonds at the applicable redemption price, together with accrued interest thereon. All 2025DEF Bonds redeemed will be cancelled upon surrender and no 2025DEF 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 2025DEF Bond and 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.”

(Remainder of Page Intentionally Left Blank)

9 PLAN OF FINANCE*
General
Proceeds of the 2025D Bonds will be applied to (i) refund approximately $___* million principal amount of and interest on Commercial Paper Notes issued to finance and refinance a portion of the design, acquisition and construction of various capital projects in furtherance of the SFPUC ’s Regional Water Program and Local Water Program, (ii) finance and refinance a portion of the design, acquisition and construction of various capital projects in furtherance of the SFPUC ’s Regional Water Program and Local Water Program, (iii ) fund capitalized interest on the 2025D Bonds through May 1, 2027*, and (iv) pay the costs of issuance of the 2025D Bonds. The Commercial Paper Notes to be refunded with the proceeds of the 2025D Bonds will be paid within 90 days of the issuance of the 2025D Bonds. See “ESTIMATED SOURCES AND USES OF FUNDS” and “CAPITAL IMPROVEMENT PLAN – Regional Water Program” and “– Local Water Program.”
Proceeds of the 2025E Bonds will be applied to (i) refund approximately $___* million principal amount of and interest on Commercial Paper Notes issued to finance and refinance a portion of the design, acquisition and construction of various capital projects in furtherance of the SFPUC ’s Hetch Hetchy Water Program, (ii) finance and refinance a portion of the design, acquisition and construction of various capital projects in furtherance of the SFPUC’s Hetch Hetchy Water Program, (iii) fund capitalized interest on the 2025E Bonds through May 1, 2027 *, and (iv) pay
the costs of issuance of the 2025E Bonds. The Commercial Paper Notes to be refunded with the proceeds of the 2025E Bonds will be paid within 90 days of the issuance of the 2025E Bonds. See “ESTIMATED SOURCES AND USES OF FUNDS” and “CAPITAL IMPROVEMENT PLAN – Hetch Hetchy Water Program.” Proceeds of the 2025F Bonds, together with other available funds, will be applied to (i) refund all or a portion of the SFPUC’s outstanding San Francisco Water Revenue Bonds, 2010 Series ABC, 2010 Sub- Series B (Federally Taxable – Build America Bonds – Direct Payment) (the “2010B Bonds”), San Francisco Water Revenue Bonds, 2010 Series DE, 2010 Sub- Series E (Federally Taxable – Build America Bonds – Direct Payment) (the “2010E Bonds ”) and San Francisco Water Revenue Bonds, 2010 Series FG, 2010 Sub- Series G ( Federally Taxable – Build America Bonds – Direct Payment) (the “2010G Bonds ”) and (ii) pay the costs of issuance of the 2025F Bonds. The 2010B Bonds, 2010E Bonds, and 2010G Bonds to be refunded with proceeds of the 2025F Bonds (collectively, the “Refunded Bonds ”) are being redeemed pursuant to the Extraordinary Optional Redemption provisions of the Seventh Supplemental Indenture, dated as of June 1, 2010, the Ninth Supplemental Indenture, dated as of August 1, 2010, and the Eleventh Supplemental Indenture, dated as of December 1, 2010, respectively, each by and between the SFPUC and the Trustee. The SFPUC anticipates that the Refunded Bonds will be redeemed on June 11, 2025. *

(Remainder of Page Intentionally Left Blank)

* Preliminary, subject to change.
10 Refunded Bonds*
The following tables detail the Refunded Bonds to be refunded with proceeds of the 2025F Bonds as described above under “– General.” The Refunded Bonds will only be determined by the SFPUC at the time that the SFPUC and the Underwriters execute a bond purchase contract for the 2025DEFF Bonds. Until such time, the series, maturity dates and principal amounts of the Refunded Bonds remain subject to change by the SFPUC in its sole discretion.

Public Utilities Commission of the City and County of San Francisco San Francisco Water Revenue Bonds
2010 Series ABC, 2010 Sub-Series B (Federally Taxable – Build America Bonds – Direct Payment) Maturity
(November 1)
Outstanding
Principal
Amount Interest Rate
CUSIP†
(Base
No.79765R)
Principal
Amount to be
Refunded*
Redemption
Date*
2025** $14,225,000 5.500% SU4 $14,225,000 06/11/2025
2040** 295,195,000 6.000 SV2 295,185,000 06/11/2025
Total: $309,420,000 $309,410,000

** Term Bond.

Public Utilities Commission of the City and County of San Francisco San Francisco Water Revenue Bonds
2010 Series DE, 2010 Sub-Series E (Federally Taxable – Build America Bonds – Direct Payment) Maturity
(November 1)
Outstanding
Principal
Amount Interest Rate
CUSIP†
(Base
No.79765R)
Principal
Amount to be
Refunded*
Redemption
Date*
2025 $14,080,000 5.300% TG4 $14,080,000 06/11/2025
2026 14,585,000 5.500 TH2 14,585,000 06/11/2025
2027** 15,125,000 5.700 TJ8 15,125,000 06/11/2025
2047** 260,890,000 6.000 TK5 260,890,000 06/11/2025
Total: $304,680,000 $304,680,000

** Term Bond.

Public Utilities Commission of the City and County of San Francisco San Francisco Water Revenue Bonds
2010 Series FG, 2010 Sub-Series G (Federally Taxable – Build America Bonds – Direct Payment) Maturity
(November 1)
Outstanding
Principal
Amount Interest Rate
CUSIP†
(Base
No.79765R)
Principal
Amount to be
Refunded*
Redemption
Date*
2050** $351,470,000 4.660% TL3 $351,470,000 06/11/2025
Total: $351,470,000 $351,470,000

** Term Bond.

* Preliminary, subject to change.
† CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, 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 CUSIP Global Services data base. Neither the SFPUC nor the Underwriters assume any responsibility for the accuracy of the CUSIP data. 11 ESTIMATED SOURCES AND USES OF FUNDS
The proceeds of the 2025DEF Bonds are expected to be applied as follows:

2025D
Bonds
2025E
Bonds
2025F
Bonds
Total
2025DEFF
Bonds
Sources of Funds
Par Amount $ $ $ $
[Plus/Less] [Net] Original Issue
[Premium/Discount]
Bond Reserve Account Releases
Revenue Fund Releases
Total Sources $ $ $ $

Uses of Funds
Deposit to Project Fund(1) $ $ $ $
Refunding of Commercial Paper Notes
Redemption of Refunded Bonds
Deposit to Capitalized Interest Accounts(2)
Costs of Issuance(3)
Total Uses $ $ $ $

(1) Represents deposits to the respective Project Funds established under the Fiftieth Supplemental Indenture and Fifty -First Supplemental Indenture. See “PLAN OF FINANCE” and “CAPITAL IMPROVEMENT PROGRAM AND OTHER WA TER SUPPLY INITIATIVES.” (2) Represents deposits to respective Capitalized Interest Accounts established under the Fiftieth Supplemental Indenture and Fifty-First Supplemental Indenture.
(3) The costs of issuance include underwriters ’ discount and amounts for legal fees, Trustee and Escrow Agent fees, municipal advisor fees, Independent Pricing Consultant fees, Verification Agent fees, rating agency fees, printing costs, and other costs relating to the issuance of the 2025DEF 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 2025DEF Bonds and the Outstanding Bonds described below (see “OBLIGATIONS PAYABLE FROM REVENUES – Outstanding Parity Revenue Bonds”), and any Additional Series of Bonds. This pledge is subject to the allocatio n 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 2025DEF 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 f unds 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. 12 Limited Obligation . THE SFPUC IS NOT OBLIGATED TO PAY THE PRINCIPAL OF, PREMIUM, IF ANY , OR INTEREST ON THE 2025DEF 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 2025DEF 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 2025DEF BONDS. THE 2025DEF 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 2025DEF BONDS ARE NOT SECURED BY THE

REVENUES OF THE WASTEWATER ENTERPRISE OR THE POWER ENTERPRISE OR THE REVENUES 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 San Francisco, 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 connecti on 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 SFPUC; (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 agenc y of the City, for the purpose of financing improvements to the facilities comprising the Water Enterprise. 13 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 ac count 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, taking into account 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. First, 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) The 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 interest 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 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 interest to pay interest on any interest payment dates following said next interest payment date). 14 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. Second, 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) the 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 Mini mum 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. Third, 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 tw o 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 re spect 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 Fund 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 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 Re serve 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 2025DEF Bonds. 15 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 Ent erprise 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 Enterpris e 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 Maximum 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, taking into account the federal sequestration legislation described below. 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 “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE – DEFINITIONS – Maximum Annual Debt Service, Annual Debt Service, Debt Service, Average Annual Debt Service.”
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% (or a net subsidy level of 33.005% of interest costs on Build America Bonds), which rate will remain in effect through September 30, 2031, unless changed by legislation. Refundable credits sought by the SFPUC for its Build America Bonds have been and are expected to be reduced by this percentage. This reduction has and will increase the SF PUC’s net interest cost. In Fiscal Years 2022-23 and 2023 -24, the SFPUC received approximately $21.2 million and $20.1 million, respectively, in Refundable Credits for the Water Enterprise, approximately 3.0% and 2.9%, respectively, of total revenues in such years. Congress can terminate, extend, or otherwise modify reductions in federal subsidy payments due to sequestration at any time. The SFPUC can give no assurance regarding the level of federal subsidy payments or changes in the sequestration rate, if any, in the future.

All or a portion of the SFPUC’s Build America Bonds may be refunded by the 2025F Bonds , which may eliminate all or a portion of the Refundable Credits received by the SFPUC. See “PLAN OF FINANCE.” 16 Proposed Amendments to Indenture. The Forty-Third Supplemental Indenture includes amendments to the Indenture impacting the SFPUC ’s rate covenant. See “ PROPOSED AMENDMENTS TO THE INDENTURE ” and “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE – FORTY-THIRD SUPPLEMENTAL INDENTURE – PROPOSED AMENDMENTS TO INDENTURE.” 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 rea sonable amounts for administration, overhead, insurance, taxes (if any), other similar costs, and the payment of pension charges and proportionate payments to such 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.

See “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE – DEFINITIONS.” No Bond Reserve Account for the 2025DEF 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 pa yment of debt service on the Series of Bonds for which such Bond Reserve Account was established.

Pursuant to the Fiftieth Supplemental Indenture, the Fifty-First Supplemental Indenture and the Fifty- Second Supplemental Indenture, no Bond Reserve Account has been established for the 2025D Bonds, the 2025E Bonds or the 2025F Bonds, respectively. The Bond Reserve Accounts established with respect to other Series of Bonds do not secure, and will not be available for, the 2025DEF Bonds. 17 Additional Series of Bonds
Additional Series of Bonds Test in the Indenture . The Indenture provides that Additional Series of Bonds secured by Revenues on parity with the Outstanding Bonds and the 2025DEF 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 used 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 Project, 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.
(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. 18 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.

Proposed Amendments to Indenture. The Forty-Third Supplemental Indenture includes amendments to the Indenture impacting the requirements for the issuance of an Additional Series of Bonds for refunding purposes. See “PROPOSED AMENDMENTS TO THE INDENTURE ” and “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE – FORTY-THIRD SUPPLEMENTAL INDENTURE – PROPOSED AMENDMENTS TO INDENTURE.”
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 “OBLIGATIONS PAYABLE FROM REVENUES – Parity State Loans” and “SECURITY FOR THE BONDS – Additional Series of Bonds.”
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 either (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 “– Corps Water Infrastructure Financing Program.” 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 I nvestments (as defined in Appendix A) as directed by the SFPUC, and all accounts funds and accounts held by the Treasurer shall be invested in Legal 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.”
19 PROPOSED AMENDMENTS TO THE INDENTURE
The Forty-Third Supplemental Indenture amends and supplement s certain provisions of the Indenture, 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 ot her requirements under the Indenture have been satisfied. Approximately 32.8% of the aggregate amount of the Bond Obligation of the Bonds currently Outstanding have been obtained. By their purcha se of the 2025DEF Bonds, purchasers of the 2025DEF Bonds irrevocably agree to, accept and consent to the provisions of such amendments for all purposes of the Indenture . Upon the issuance of the 2025DEF Bonds, approximately __% of the aggregate amount of the Bond Obligation of the Bonds then Outstanding will have been obtained.

The proposed amendments in the Forty -Third Supplemental Indenture include, among others, amendments to the Indenture 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. 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, 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 approximately $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, re pairing or improving water facilities or clean water facilities or combinations of water and clean water facilities under the jurisdiction of the SFPUC.

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 revenues 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.
20 (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 muni cipal 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 facili ties under the jurisdiction of the SFPUC 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 se rvice savings on a present value basis, calculated as provided by ordinance.

The 2025F Bonds will be issued by the SFPUC pursuant to authority granted by Section 9.109 of the Charter and the Refunding Ordinance. 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 Section

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 authoriza tion is subject to a five -year term through June 30, 2029, at which time the Board of Supervisors may consider an extension; (iv) 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; and (v) the SFPUC will within 30 days of any executed refunding transaction provide a savings re port 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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21 Outstanding Parity Revenue Bonds
All Bonds in the table below (the “ Outstanding Bonds”) have been issued pursuant to the Indenture and secured by a pledge of Revenues on parity with the 2025DEF Bonds.

Series of Bonds Purpose
Principal Amount
Outstanding as of
May 1, 2025
Water Revenue Bonds,
2010 Series ABC (1)(2)
Water system improvements under
Proposition E $309,420,000
Water Revenue Bonds,
2010 Series DE (2)(3)
Water system improvements under
Proposition E 304,680,000
Water Revenue Bonds,
2010 Series FG (2)(4)
Water system improvements under
Proposition E 351,470,000
Water Revenue Bonds,
2016 Series AB (Refunding)
Refund previously outstanding Bonds of
the SFPUC 492,110,000
Water Revenue Bonds,
2016 Series C
Water system improvements under
Proposition E 212,895,000
Water Revenue Bonds,
2017 Series DEFG (Refunding)
Refund previously outstanding Bonds of
the SFPUC 236,370,000
Water Revenue Bonds,
2019 Series ABC (Refunding)
Refund previously outstanding Bonds of
the SFPUC 347,365,000
Water Revenue Bonds,
2020 Series ABCD
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 373,825,000
Water Revenue Bonds,
2023 Series AB
Water system improvements under
Proposition A and Proposition E 414,035,000
Water Revenue Bonds,
2023 Series CD (Refunding)
Refund previously outstanding Bonds of
the SFPUC 514,855,000
Water Revenue Bonds,
2025 Series ABC (Refunding)
Refund previously outstanding Bonds of
the SFPUC 523,435,000
Total $4,427,220,000

(1) The San Francisco Water Revenue Bonds, 2010 Sub-Series A and 2010 Sub-Series C are no longer outstanding. (2) The 2010B Bonds, 2010E Bonds and 2010G Bonds were issued as Build America Bonds. All or a portion of the outstanding 2010B Bonds, 2010E Bonds and 2010G Bonds may be refunded by the 2025F Bonds. This list of potential refunding candidates is preliminary and subject to change. See “PLAN OF FINANCE – Refunded Bonds.”
(3) The San Francisco Water Revenue Bonds, 2010 Sub-Series D are no longer outstanding. (4) The San Francisco Water Revenue Bonds, 2010 Sub-Series F are no longer outstanding.

22 Parity State Loans
The SFPUC has 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, most recently amended in April 2023, provides for a $15,000,000 grant and a $176,094,031 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 will begin in October 2025, one year after the estimated construction completion date of the Westside Recycl ed Water Project set forth in the loan agreement.

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 March 31 , 2025, the SFPUC had submitted requests for reimbursement for approximately $174.3 million. In connection with the execution and delivery of the CWSRF Agreement, the SFPUC adopted the Twenty-Fourth Supplemental Indenture which amended 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.

The SFPUC has entered into a loan agreement (the “ DWSRF Loan”) with the SWRCB to finance the cost of the SFPUC’s Mountain Tunnel Project pursuant to the SWRCB’s Drinking Water State Revolving Fund Program.

The DWSRF Loan provides for up to $238.219 million in borrowing and has a 30-year, level amortizing fixed interest rate at a rate of 1.10% per annum. Repayment of the DWSRF Loan will begin one year after the estimated construction completion date of the Mountain Tunnel Project, which is expected to occur in 2026. The SFPUC’s obligation to repay the 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. As of March 31, 2025, the SFPUC had submitted requests for reimbursements for approximately $117.2 million. See “CAPITAL IMPROVEMENT PROGRAM AND OTHER WATER SUPPLY INITIATIVES – Hetch Hetchy Water.”
In September 2023, the SFPUC completed submission of an application for an additional State Revolving Fund loan to finance the Sunol Valley Water Treatment Plant Ozone Project, estimated to cost $214 million. This project includes the construction of new ozone facilities (liquid oxyge n and nitrogen facility, ozone generation building, ozone contactor structure, open loop cooling water pump station and calcium thiosulfate facility) and other supportive improvements such as yard piping, a new access road, and electrical work. This projec t is currently in the pre-construction phase. The SWRCB approved the list of new projects selected for State Fiscal Year 2024-25 in August 2024, which included $50 million in SRF loan financing for the Sunol Valley Water Treatment Plant Ozone Project.

Inclusion on such list does not, however, constitute a financing commitment, a guarantee that sufficient funds from the anticipated sources of funds will be available, or a determination of eligibility. Any such funding would take the form of a loan from the SWRCB to the SFPUC, constituting a Parity State Loan.

In September 2024, the SFPUC completed submission of an application for an additional State Revolving Fund loan to finance the As -Needed Water Service Line Replacement Project (also known as the Lead Component Services Program), estimated to cost $38.5 million. This project includes the replacement of approximately 1,400 existing 2 -inch and smaller galvanized water service lines and lead whips with new copper pipes. This project is currently in the construction phase. The SWRCB included this project in thei r list of priority projects for State Fiscal Year 2022-23 and for State fiscal year 2023-24. The SFPUC is seeking approval to complete and submit the remaining portions of the application. Inclusion on such lists does not, however, constitute a financing commitment, a guarantee that sufficient funds from the anticipated sources of funds will be available, or a determination of eligibility. Any such funding would take the form of a loan from the SWRCB to the SFPUC, constituting a Parity State Loan. 23 Proposed Amendments to Indenture. The Forty-Third Supplemental Indenture includes amendments to the Indenture impacting the requirements for additional Parity State Loans and includes amendments to the Indenture allowing loans from the federal government (or any board, department or agency thereof), upon satisfaction of certain conditions, to be payable from Revenues on a parity with the Bonds. See “PROPOSED AMENDMENTS TO THE INDENTURE” and “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE – FORTY- THIRD SUPPLEMENTAL INDENTURE – PROPOSED AMENDMENTS TO INDENTURE.” Corps Water Infrastructure Financing Program
In December 2023, the SFPUC submitted a pre-application to the U.S. Army Corps of Engineers for a Corps Water Infrastructure Financing Program (“CWIFP ”) loan to finance a collection of eight Water Enterprise projects supporting dam safety and resilience. These projects are designed to assess the condition of critical dams in the SFPUC’s Regional Water System and to repair, rehabilitate, or replace relat ed facilities if needed. Project objectives include upgrading dams to ensure structural safety, allowing f or safe passage of flood events, providing water and hydropower reliability, and safeguarding the environment and economic opportunity. All projects are currently in varying stages of planning and design.

In September 2024, the U.S. Army Corps of Engineers notified the SFPUC that its pre -application was selected to submit a full application for CWIFP financing consideration for a loan up to $614,811,376. Invitation to submit a full application for CWIFP fin ancing assistance does not guarantee the program will proceed to financial close. The SFPUC plans to submit the full application prior to the deadline of September 9, 2025.

The SFPUC anticipates that any CWIFP loan would be payable from Revenues on a basis subordinate to the payment of debt service on the Bonds.

The SFPUC has no current 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 paym ent obligations may be payable on parity with the 2025DEF 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 Funding Program is authorized for the Water Enterprise in the aggregate principal amount of $750 million. Of this amount, $550 million is authorized for the SFPUC to issue tax -exempt and taxable commercial paper notes (“Commercial Paper Notes”) secured by separate bank credit facilities, as set forth below. The remaining $200 million of the Interim Funding Program is in the form of separate bank revolving credit agreements, as set forth below. Each revolving credit agreement permits the SFPUC to make draws directly from the respective 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. 24 The Commercial Paper Notes are secured by (i) a $200 million letter of credit from Sumitomo Mitsui Banking Corporation, acting through its New York Branch, which expires on June 14, 2027, (ii) a $100 million letter of credit from Barclays Bank PLC which expires on July 15, 2027, (iii) a $150 million letter of credit from PNC Bank National Association which expires on February 17, 2028, and (iv) a $100 million letter of credit from Sumitomo Mitsui Banking Corporation, acting through its New York Branch, whic h expires on February 15, 2030. BofA Securities, Inc., J.P. Morgan Securities LLC and Wells Fargo Bank, National Association, serve as dealers for the Commercial Paper Notes.

The Revolving Notes were issued pursuant to (i) a $100 million revolving credit agreement with U.S. Bank National Association which expires on July 16, 2027, and (ii) a combined revolving credit agreement with Wells Fargo Bank, National Association, $100 m illion of which is allocated to the Water Enterprise’s Revolving Notes, which expires on March 3, 2028.

As of May 28, 2025, the SFPUC had Commercial Paper Notes outstanding in the aggregate principal amount of $310.9 million and no amount outstanding under the Revolving Notes. Approximately $___ * million principal amount of and interest on Commercial Paper Notes will be refunded with proceeds of the 2025D Bonds and 2025E Bonds. See “PLAN OF FINANCE.”
Other Subordinate Obligations Payable from Revenues
The SFPUC completed 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 May 1, 2025, the principal amount outstanding of the 2009 Golden Gate COPs was $120.2 million. 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 facility 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; Audit of Bond Expenditures In November 2002, San Francisco voters adopted Proposition P, an ordinance that established the Public Utilities Revenue Bond Oversight Committee (“RBOC”) to report to the Mayor, the SFPUC and the Board of Supervisors regarding the expenditure of revenue bond proceeds issued by the SFPUC’s Water Enterprise, Wastewater Enterprise and Power Enterprise (each as defined herein). Together with the City Services Auditor and outside auditors, RBOC initiated a three -phase performance audit of select revenue bonds i ssued by the SFPUC. The audit report for the first phase, completed in February 2022, found that revenue bond expenditures were spent appropriately and made recommendations that the SFPUC subsequently implemented. The audit report for the second phase, completed in August 2023, also found that revenue bond expenditures were spent appropriately, with minor exceptions totaling less than 1.5% of audited expenditures, and made several recommendations regarding procurement practices and oversight. The third phas e is currently ongoing. The provisions of the ordinance establishing RBOC expired on January 1, 2025, and RBOC no longer exists. The SFPUC anticipates that the audit report for the third phase will be completed by the City Services Auditor later in 2025. The SFPUC is evaluating options for conducting annual audits of the SFPUC’s revenue bond proceeds moving forward.

* Preliminary, subject to change.

25 Debt Service Requirements
Set forth in the following table are debt service requirements on the Outstanding Bonds, the 2025DEF Bonds and Parity Obligations.

DEBT SERVICE REQUIREMENTS ON
OUTSTANDING BONDS, 2025DEF BONDS AND PARITY OBLIGATIONS Fiscal Year
(ending
June 30)
Outstanding
Bonds(1)(2)(3)
2025D Bonds
Principal
2025D Bonds
Interest(2)
2025E Bonds
Principal
2025E Bonds
Interest(2)
2025F Bonds
Principal
2025F Bonds
Interest
Other Parity
Obligations(4)
Total Debt
Service(5)
2025 $331,133,814 $ $ $ $ $ $ $2,246,093 $ 2026 356,782,300 9,369,000
2027 354,583,985 9,418,900
2028 351,542,607 9,452,785
2029 357,437,804 16,198,462
2030 356,801,845 16,198,462
2031 356,137,537 16,198,462
2032 355,317,322 16,198,462
2033 348,214,478 16,198,462
2034 345,578,628 16,198,462
2035 344,512,423 16,198,462
2036 343,406,250 16,198,462
2037 342,253,662 16,198,462
2038 324,489,027 16,198,462
2039 319,040,930 16,198,462
2040 317,501,976 16,198,462
2041 265,915,384 16,198,462
2042 213,331,822 16,198,462
2043 171,777,468 16,198,462
2044 171,341,630 16,198,462
2045 134,633,145 16,198,462
2046 134,634,946 16,198,462
2047 134,637,699 16,198,462
2048 134,634,907 16,198,462
2049 136,844,441 16,198,462
2050 136,843,445 16,198,462
2051 136,848,513 16,198,462
2052 29,489,294 16,198,462
2053 29,489,294 16,198,462
2054 -- 16,198,462
2055 -- 16,198,462
2056 -- 9,366,086
2057 -- 9,366,086
2058 -- 9,366,086
Total(5) $7,335,156,572 $ $ $ $ $ $ $495,943,503 $

(1) Comprised of debt service relating to the Outstanding Bonds. See “– Outstanding Parity Revenue Bonds” and “PLAN OF FINANCE.” (2) Net of capitalized interest payments.
(3) Calculation of interest due on Outstanding Bonds shown without an offset for Refundable Credits. See “SECURITY FOR THE BONDS – Pledge of Revenues – Refundable Credits” and “ – Rate Covenants.”
(4) Consists of debt service on the full principal amount of the CWSRF Loan and DWSRF Loan. See “OBLIGATIONS PAYABLE FROM REVENUES – Parity State Loans.” (5) Totals may not add due to rounding.

26 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 2025DEF 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 2025DEF BONDS. THE 2025DEF 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. San Francisco is the economic and cultural center of the San Francisco Bay Area and northern California. The limits of San Francisco 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. San Francisco is located at the northern tip of the San Francisco Peninsula, bounded by the Pacific Ocean to the west, the San Francisco Bay and the San Francisco- Oakland Bay Bridge to the east, the entrance to the San Fra ncisco Bay and the Golden Gate Bridge to the north, and San Mateo County to the south. Silicon Valley is about an hour’s drive to the south, and the Napa -Sonoma wine country is about an hour’s drive to the north. The California Department of Finance estima tes San Francisco’s population as of January 1, 2024 was 843,071 (a decrease of 3.5% from 873,965 as of April 1, 2020).

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, pr ofessional and financial services, corporate headquarters, international and wholesale trade, multimedia and advertising, healthcare, higher education and agriculture. The California State Supreme Court is also based in San Francisco.

San Francisco benefits from a highly skilled, educated and professional labor force. The City estimates the per-capita personal income of San Francisco for fiscal year 2023-24 was $167,542. The San Francisco Unified School District (“SFUSD”), which is a separate legal entity from the City, operates approximately 64 elementary schools, 13 middle schools, 14 high schools, 11 early education schools, six County and Court schools, three continuation schools, and 11 charter schools as of the 2024-25 academic year. Higher education institutions located in San Francisco include the University of San Francisco, California State University – San Francisco, University of California – San Francisco (a medical school and health science campus), the UC College of the Law , San Francisco (formerly University of California Hastings College of the Law), the University of the Pacific’s School of Dentistry, Golden Gate University, City College of San Francisco (a public community college), the California College of the Arts, 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 a principal commercial service airport for the Bay Area and one of the nation’s principal gateways for Pacific Rim traffic. San Francisco is also served by the Bay Area Rapid Transit District (“BART”) (an electric rail commuter service linking San Francisco w ith the East Bay and the San Francisco Peninsula, including SFO), Caltrain (a conventional commuter rail line linking San Francisco with the San Francisco Peninsula), and bus and ferry services between San Francisco and residential areas to the north, east and south of San Francisco. San Francisco Municipal Railway (“Muni ”), operated by the San Francisco Municipal Transportation Agency (“SFMTA”), provides bus and streetcar service within San Francisco. 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 California, 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 California. V oters approved the City’s current Charter at the Novem ber 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. At the November 5, 2024 election, San F rancisco voters elected Daniel Lurie as Mayor of the City.

The City’s original budget for fiscal years 2024-25 and 2025-26 totals approximately $15.9 billion and $15.6 billion,

27 respectively. The General Fund portion of each year’s budget is $6.9 billion in fiscal year 2024-25 and $7.1 billion in fiscal year 2025-26, with the balance allocated to all other funds, including enterprise fund departments, such as the Airport Commissio n, SFMTA, the Port Commission and the SFPUC. According to the Controller of the City (the “Controller”), at the start of fiscal year 2024-25, total net assessed valuation of taxable property in San Francisco was approximately $351.3 billion.

City Financial Challenges. The City continues to face financial challenges resulting from a variety of factors, including continuing remote work by a significant portion of the regional workforce (which has led to declining property taxes for certain office buildings, lower real e state property transfer taxes, and reductions in taxes based on employees physically located in San Francisco), continuing weakness in the local hospitality and convention industries (resulting in declines in hotel and sales taxes) , and general economic conditions. These conditions have resulted in projected budget deficits (absent corrective actions) in the hundreds of millions of dollars in future fiscal years, rising to approximately $1.47 billion in fiscal year 2029 -30. In Decem ber 2024, the Mayor’s Office issued budget instructions which, among other things, directs certain ongoing, permanent spending reductions to the General Fund, a re-examination of all contractual services and non -personnel expenditures, the elimination of vacant positions and the consideration of future hiring freezes. On January 9, 2025, Mayor Lurie announced a Citywide hiring freeze through the end of the fiscal year. Certain exemptions are permitted including new hires to support public health, public safety, and other core City priorities.

On April 2, 2025, the Controller’s Office issued its most recent report on the status of the San Francisco economy through March 2025. The Controller’s Office report noted that continuing good news in San Francisco’s downtown recovery is somewhat offset by continuing troubles in the job market. N early all of the indicators of downtown economic activity – Muni and BART ridership, office attendance, and employee foot traffic – have trended up in the past several months. The unemployment rate in the San Franci sco Metro Division (which includes San Francisco and San Mateo counties) was 3.7% in March 2025, down from 3.9% in January 2025; however, job losses are continuing and the San Francisco Metro Division has lost more than 5% of its total employment, since peaking in mid-2022. Federal employment in the San Francisco Metro Division decreased by 100 jobs from December 2024 to February 2025, a 0.7% loss.

The City’s financial challenges described above have not significantly impacted the Water Enterprise’s operations or financial condition, although reduced demand for service resulting from some of the factors has required increased rate increases by the Water Enterprise. See “THE WATER ENTERPRISE – Recent Factors Impacting Retail Water Sales.”

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 component 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 San Francisco, to certain Retail Customers outside San Francisco and to wholesale customers in three other Bay Area counties. • The Wastewater Enterprise provides wastewater and stormwater collection, treatment and disposal services for San Francisco (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”).

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

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 San Francisco and is responsible for water deliveries to residents and institutions within San Francisco city limits, as well as to a number of retail accounts outside of San Francisco city limits. In add ition, the SFPUC sells water to 27 wholesale customer entities in San Mateo, Alameda and Santa Clara counties under the WSA and/or related individual contractual agreements, as applicable. On average, approximately 70% of the SFPUC’s water supply is delivered to the wholesale customers and approximately 30% of the SFPUC’s 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 San Francisco to two water pollution control plants and one wet weather treatment facility located within San Francisco. Treated effluent flows are then discharged through mostly deep-water outfalls into the San Francisco Bay and the Pacific Ocean. The Wastewater Enterprise also currently provides sewage treatment service on Treasure I sland pursuant to contract, and operates an onsite sewage and stormwater reclamation and treatment facility at the SFPUC headquarters at 525 Golden Gate Avenue, San Francisco, California.

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 Operations . 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, which provides water for distribution through the Water Enterprise and hydroelectric, solar and other power for municipal and public infrastructure, services and facilities of San Francisco.

The Power Enterprise was created in 2005 as a separate system within Hetch Hetchy Water and Power. The Power Enterprise provides electric power to meet the municipal requirements of the City, including power to ope rate municipal streetcars and electric buses, street and traffic lights, municipal buildings and other City facilities, including SFO. Additionally, the Power Enterprise may provide 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 San Francisco. 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 San Francisco’s residents and businesses, for the purpose of buying electricity on behalf of such customers.

CleanPowerSF provides San Francisco with clean energy alternatives at competitive rates.

In September 2019, in connection with the bankruptcy of Pacific Gas & Electric Company (“ PG&E”) and PG&E Corporation, the City submitted a non -binding indication of interest to purchase substantially all of PG&E’s electric distribution and transmission assets needed to provide retail electric service to all electricity customers within the geographic boundaries of San Francisco. The City subsequently submitted an additional non-binding indication of interest to PG&E in September 2020. PG&E has not indicated a willingness to sell any such assets. In July 2021, the City submitted a petition to the California Public Utilities Commission (“ CPUC”) for a formal determination of the fair market value of PG&E’s assets the City is interested in acquiring. In April 2023, the City filed direct testimony of four expert witnesses with the CPUC regarding the specific assets under consideration for acquisi tion and the value of such assets. The City remains interested in acquiring these assets from PG&E; however, a transaction has not been consummated, and neither the SFPUC nor the City are able to predict whether a transaction will be consummated or what the terms of any such transaction would be, if consummated.

29 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.”
Commission Members
Under the Charter, the SFPUC is given exclusive charge of the operation and management of all water, wastewater and energy supplies and utilities owned or maintained by the City, as well as the real, personal and financial assets under the SFPUC’s jurisdiction. The SFPUC is governed by the Commission.

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 offici al misconduct.

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

Name and Title Seat Appointment Date Term Expires
Kate H. Stacy, President 4 October 18, 2022 August 1, 2026 Joshua Arce, Vice President 2 October 16, 2024 August 1, 2026 Avni Jamdar 1 October 22, 2024 August 1, 2028
Stephen E. Leveroni 3 October 20, 2024 August 1, 2028
Seat 5 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 and does 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 United States Maritime Administration. He also served as president of the San Francisco Police Commission and was a member of the San Francisco Public Transportation Commission.

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

Ronald P . Flynn. Ronald P. Flynn is the Deputy General Manager and Chief Operating Officer of the SFPUC.

Appointed to this role in 2022, Mr. Flynn works with the General Manager on all policy and strategic initiatives, oversees the SFPUC’s daily operations, including business services (finance, accounting, audits, customer services, information technology), external affairs (communications, legislative, community benefits, equity), and human resources. Prior to this position, Mr. Flynn served for almost 16 years in the San Francisco City Attorney’s Office under Dennis Herrera. For the last seven years he was the Chief Deputy City Attorney, where he oversaw the City’s litigation teams, as well as worked closely with departments and agencies, including the SFP UC, on procurement,

30 financial, and litigation matters. He worked on Hetch Hetchy litigation, PG&E’s bankruptcy, and other SFPUC-related issues. Mr. Flynn previously served as Team Leader of the Construction and Public Contracting Team in the City Attorney’s Office, working on many SFPUC projects, including the Water System Improvement Program. Mr. Flynn earned a B.Sc. from California Polytechnic State University, San Luis Obispo, an Ed.M. from Harvard University, and a J.D. from University of California, Berkeley School of Law.

Nancy L. Hom. Nancy L. Hom is the Chief Financial Officer and Assistant General Manager for Business Services, providing direction and oversight for the Financial Services, Audit, Loans and Grants, Information Technology Services, Customer Services, and Strategy Innovation and Change bureaus. She has led several important bureaus of Business Services, including serving as the Assurance and Internal Control Director for 10 years; and more recently as the SFPUC’s Co -Deputy Chief Financial Officer. Ms. Hom has nearly 20 years of experience leading financial and governance teams in public agencies and has extensive knowledge of the City’s financial and accounting guidelines and systems, capital improvement projects and regulatory affairs. Prior to joining the SF PUC, she served as the Chief Financial Officer for the Department of Child Support Services and as a leader in the Office of the Controller’s Budget and Analysis division. Ms. Hom earned a B.S. in Business Administration from San Francisco State University , concentrating in Finance, Internal Audit, and Project Management. She also maintains two professional certifications from the Institute of Internal Auditors as a Certified Internal Auditor and Certified Risk Management Assurance professional.

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 responsib le 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 for the SFPUC. Previously, he served as the SFPUC’s first Chief Equity and Innovation Officer, 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 UC College o f the Law, San Francisco (formerly 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, where she is responsible for all commercial arrangements associated with the purchase and sale of power, whether wholesale or retail, and operations of retail electric service programs. Prior to this role, Ms. Hale served as Analyst, Advisor to the President, Administrative Law Judge, and Division Director at the California Public Utilities Commission. Ms. Hale graduated cum laude from San Francisco State University with a B.A. in Economics, receiving special recognition for high achievement wit h the Department Honors Award, and pursued extensive graduate coursework in Applied Economics.

Stephen Robinson. Stephen Robinson is the Assistant General Manager for Infrastructure, where he is responsible for capital programs and project implementation for SFPUC facilities, including the Water Capital Improvement Plan, the Wastewater Capital Improvement Plan (whi ch includes the Sewer System Improvement Program), and the Hetchy Capital Improvement Program. Previously, he was the Director of the Wastewater Enterprise Capital Program for SFPUC’s Infrastructure Division. He is a Professional Civil Engi neer and a UK Chartered Civil Engineer with over two decades of planning, design, construction, and management experience in the water/wastewater sector. Prior to joining SFPUC, Mr. Robinson worked with MWH/Stantec as a consultant and served in the British Army as a Royal Engineer Captain. Mr. Robinson has a master’s degree in Civil Engineering and Management from the Queens University of Belfast, Northern Ireland.

31 Joel Prather. Joel Prather is the Assistant General Manager of the Wastewater Enterprise. His professional background includes more than a decade at the SFPUC Wastewater Enterprise, and over 20 years with the City. He started with San Francisco Public Works in the Bureau of Street and Sewer Repair and came to the SFPUC in 2011 as a Maintenance Planner. Prior to his appointment in his current role, he held the position of Maintenance Manager, where he managed the day to day maintenance systems and practices for the wastewater treatment facilities. He earned a B.A. in urban studies from San Francisco State University.

Employee Relations
San Francisco
The City’s original budget for Fiscal Years 2024- 25 and 2025- 26 included approximately 40,569 full -time and part-time budgeted City positions. City workers are represented by 36 different labor unions. The largest unions in the City include the International Federation of Professional and Technical Engineers (“IFPTE”), Local 21, which represents 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 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 an impasse. If an impasse occurs, the parties are required 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 Ci ty Charter. On July 24, 2023, the California Public Employment Relations Board (“ PERB”) ruled in favor of the Service Employees International Union (“ SEIU”), Local 1021 and IFPTE, Local 21, concluding that City Charter sections A8.346 and certain portions of section A8.409 prohibiting strikes by City employees are invalid, affirming a proposed decision of an administrative law judge that such City Charter provisions violate the Meyers-Milias-Brown Act. The City has filed a notice of appeal to the California Court of Appeal with respect to the PERB decision. The City can give no assurance whether the appeal will be successful.

See “RISK FACTORS – Risks Related to Water Enterprise Facilities and Operation – Labor Actions.” The City’s employee selection procedures 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 a re generally subject to grievance arbitration, with the exception of sworn police officers and fire fighters.

In 2024, the City negotiated three-year agreements (for Fiscal Years 2024-25 through 2026-27) with 27 labor unions, including various labor unions that represent Water Enterprise employees. The parties agreed to the following:
a 1.5% wage increase effectiv e July 1, 2024; a 1.5% wage increase effective January 4, 2025; a 1% wage increase effective June 30, 2025, at close of business, and a 1% wage increase effective July 1, 2025, for a total compounded increase of 2.01% effective July 1, 2025; a 1.5% wage increase effective January 3, 2026; a 2% wage increase effective June 30, 2026, at close of business; a 2% wage increase effective January 2, 2027; and a 2.5% wage increase effective June 30, 2027, at close of business. These increases have no off ramps (pot ential deferrals triggered by the budget).

The total compounded increase over three years is 13.753%. All City employees shall earn no less than $25 per hour as of July 1, 2024 (which affects SEIU, Local 1021, and Laborers, Local 261).

32 SFPUC
The SFPUC currently employs approximately 2,400 of the City’s workers, of which approximately 43.9% work for the Water Enterprise. 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 36 labor unions representing City workers more broadly, 14 presently represent SFPUC employees, as set forth in “Table 1 – SFPUC and Water Enterprise Employees Covered by Memoranda of Understanding.” Over the next five years, approximately 35.8% of the SFPUC workforce agency- wide, including approximately 26% of the Water Enterprise workforce, will be eligible for retirement. A new generation of jobs will require workers with specialized training, skills and experience. The SFPUC’s 2020 Strategic Sustainability Plan includes an “effective workforce” goal, which focuses on a number of workforce development and sustainability initiatives. The SFPUC provides career opportunities and training to San Francisco residents and partners with unions, the City and other stakeholders to support apprenticeships and pre -apprentice training programs in the skilled trades to help maintain a skilled and reliable workforce for the SFPUC’s operations and infrastructure deve lopment. In addition, the SFPUC provides high school, college and graduate student internship programs that span a variety of fields including engineering, water and wastewater management, finance, communications, human resources and information technology . The SFPUC also provides ethics training, diversity training, management training, environmental management system training, as well as fraud prevention and awareness training.

(Remainder of Page Intentionally Left Blank)

33 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 will expire on June 30, 2027.

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
Hod Carriers, Local 36 2 0
International Brotherhood of Electrical Workers, Local 6 142 31 Laborers, Local 261 171 93
Municipal Executives Association 229 46
Operating Engineers, Local 3 24 17
Plumbers, Local 38 240 174
International Federation of Professional and Technical Engineers, Local 21 1,179 239 Service Employees International Union, Local 1021 368 86 San Francisco City Workers United 14 5
Stationary Engineers, Local 39 294 89
Teamsters, Local 853 36 19
Transport Workers Union Local 250-A, Automotive Service Workers 6 5 Unrepresented Employees(2) 1 0
Total 2,782 854

(1) Represents budgeted numbers as of July 1, 2024. 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 understandi ng (similar to collective bargaining agreements). See “FINANCIAL OPERA TIONS – General – City Budget Process.” (2) Not covered by a memorandum of understanding (similar to a collective bargaining agreement).

Source: SFPUC.

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 (the “ Plan”) that covers substantially all City employees, including SFPUC employees, and certain other employees. The Retirement System was initially established by approval of San Francisco 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 “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 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.

34 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 a consulting actuarial firm approximately every five years. Economic assumptions are reviewed each year by the Retirement Board after receiving an economic experience analysis from the consulting actuarial firm.

The Retirement Board adopted the current demographic assumptions at its December 9, 2020 Retirement Board meeting based on the experience study dated August 12, 2020. The current discount rate of 7.20% was adopted at the November 10, 2021 Retirement Board meeting, effective for the July 1, 2021 actuarial valuation. The Retirement Board most recently voted to maintain these assumptions (for the July 1, 2024 actuarial valuation) at its November 13, 2024 meeting.

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 five actuarial valuations, as well as total contributions for the last five Fiscal Years ending June 30, 2024.

TABLE 2

CITY AND COUNTY OF SAN FRANCISCO
EMPLOYEES’ RETIREMENT SYSTEM
FISCAL YEARS 2020-21 THROUGH 2024-25
(IN THOUSANDS)
As of
July 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)
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 2022 33,591,565 32,798,524 32,275,474 97.6 96.1 1,191,934 24.41 2023 35,351,967 33,688,428 34,137,005 95.3 96.6 1,086,567 21.35 2024 37,314,504 35,417,666 36,038,298 94.9 96.6 1,100,130 18.24

(1) Employer contribution rates are shown prior to employer/employee cost- sharing provisions of 2011 Proposition C. Employer contribution rates for fiscal years 2024-25 and 2025-26 are 16.91% and 16.53%, respectively.

Source: SFERS’ audited year-end financial statements and required supplemental information. SFERS’ annual Actuarial Valuation Report dated July 1st.

Note: Information above reflects entire Retirement System, which covers substantially all City employees, including SFPUC employees, and certain other employees.

The City’s net pension assets for its proportionate share of the net pension asset of the Plan and net pension liability of the Replacement Benefits Plan, a qualified excess benefit plan that covers some Water Enterprise employees were approximately $3.6 billion for Fiscal Year 2023-24. The amount allocable to the Water Enterprise, as of June 30, 2024, was approximately $150.1 million.

35 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 2019 -20 through 2023-24, the SFPUC’s employee contribution rates varied from 7.5% to 12.0% as a percentage of gross covered salary.

For Fiscal Years 2019 -20 through 2023- 24, the Water Enterprise has paid 100% of its required contributions. The contributions by the Water Enterprise required for Fiscal Years 2019 -20 through 2023- 24 are summarized in the following table:

TABLE 3

WATER ENTERPRISE RETIREMENT SYSTEM CONTRIBUTION
FISCAL YEARS 2019-20 THROUGH 2023-24
(IN THOUSANDS)
Fiscal Year
(Measurement Period)
Employer Contribution
Rates
Water Enterprise
Contribution
2019-20 25.2% $29,647
2020-21 26.9 33,367
2021-22 24.4 31,151
2022-23 21.3 27,925
2023-24 18.2 26,653

Sources: Compiled from SFERS Actuarial V aluation report as of July 1, 2023, and SFPUC’ s audited financial statements for Fiscal Years 2023-24 and 2022-23, and for Fiscal Years 2022-23 and 2021-22.

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 on their website at https://mysfers.org/about-sfers/publications/. The website is provided for convenience only and the report is not incorporated by reference into this Official Statement and should not be relied upon in making an investment in the 2025DEF Bonds.

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 (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 betwee n 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 Governmental Accounting Standards Board (“ 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 citywide basis.

Net OPEB liability is measured as the portion of the present value of projected benefit payments to be provided t o current active and inactive employees attributed to those employees’ past service, le ss the amount of the Retiree Healthcare Trust Fund investments measured at fair value.

The following table shows the City’s reported net OPEB liabilities and the Water Enterprise’s proportionate share of such net OPEB liabilities for Fiscal Years 2021-22 through 2023-24:

36 TABLE 4

ANNUAL OPEB OBLIGATION
FOR FISCAL YEARS 2021-22 TO 2023-24
(IN THOUSANDS)
Fiscal Year
City’s Reported
Net OPEB
Liabilities
Water Enterprise’s
Proportionate
Share of City’s Net
OPEB liabilities
City’s
Contribution
Amount
Water Enterprise’s
Proportionate
Share of City’s
Contribution
Amount
2021-22 $3,691,122 $144,115 $252,866 $ 9,873
2022-23 3,746,270 148,601 260,649 10,339
2023-24 3,924,832 158,301 278,701 11,241

Source: SFPUC.

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 on the Controller’s website at https://www.sf.gov/departments/controllers-office. The website is provided for convenience only and the report is not incorporated by reference into this Official Statement and should not be relied upon in making an investment in the 2025DEF Bonds.

V oter Approved Changes to the Retirement Plan. SFERS plan benefits are established under the Charter and approved directly by the voters, rather than through the collective bargaining process. Changes to retirement benefits require a voter-approved Charter amendment. In 2011, voters approved Proposition C which aimed to reduce future pension costs. Proposition C introduced new lower -cost benefit tiers for all members hired on and after January 7, 2012 and also restricted the payment of any new supplemental COLAs to when SFERS is fully funded.

Since 2011, the fully funded requirement for Supplemental COLAs has been removed from all members hired before January 7, 2012. First, the October 2015 Superior Court judgement removed the fully funded requirement for pre - Proposition C members retired on and after November 6, 1996. Then in November 2022, voters approved Proposition A which removed the fully funded requirement for retirees who commenced benefits prior to November 6, 1996.

However, for this older group of retirees only, the amount of supplemental COLA is capped at $200 per month for retirees with annual pensions exceeding $50,000 when SFERS is not fully funded. The Proposition C fully funded restriction remains in effect for retirees hired on and after Jan uary 7, 2012. In addition, for these post -2011 hires, the supplemental COLA is temporary and reverts to zero in any year in which no supplemental COLA is paid.

(Remainder of Page Intentionally Left Blank)

37 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 m aximize 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 San Francisco and is responsible for water deliveries to residents and institutions within San Francisco city limits, as well as to several retail accounts outside of San Francisco city limits. In addition, the SFPUC sells water to 26 Wholesale Customers in San Mateo, Alameda and Santa Clara counties under the WSA and related individual contractual agreements. The Wholesale Customers are members of BAWSCA, which is a public agency separate and apart from the Wholesale Customers. The SFPUC also sells water to wholesale customer Cordilleras Mutual Water Company in San Mateo County, which is not a party to the WSA or a member of BAWSCA. Altogether, approximately 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 San Francisco, and over 1,235 miles of pipeline, 11 reservoirs, six groundwater wells, 11 storage tanks, 25 pump stations, eight hydropneumatic stations and 18 chlorination stations located within the San Francisco city limits.

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.

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 Enterprise. San Francisco’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 as a possible source of abundant, clean water for San Francisco and the Bay Area. Hetch Hetchy Valley, which is located on the Tuolumne River in Yosemite National Park, was first recommended in 1891 as a reservoir site 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 wate rshed 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). The City also entered into negotiations with the Irrigation Districts to protect their existing water rights and to provide them with 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 ”), grants 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 o f dams and aqueducts, the City first delivered water from the Hetch Hetchy System to the Bay Area on October 24, 1934.

The City voluntarily releases water into the Tuolumne River and tributaries from its facilities under stipulations with the United States Department of the Interior, which controls a portion of the public lands that contain

38 Raker Act rights of way. The SFPUC diverts water under its water rights acquired under State water law, which entitles the SFPUC to appropriate more than 400 million gallons per day (“mgd”) from the Tuolumne River and its tributaries.

The City holds “pre-1914” appropriative water rights for the City’s beneficial use, including the storage and diversion of water for the Hetch Hetchy and local water systems. The City also holds a post-1914 appropriative water right license from the SWRCB for the San Antonio Reservoir. 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 “– RISK FACTORS – Risks Related to Water Enterprise Facilities and Operations – Proposals to Restore Hetch Hetchy Valley.” Current Water Supply Sources
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. 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. On average, Hetch Hetchy Reservoir provides approximately 85% of the water delivered, and Bay Area reservoirs provide approximately 15% of the water delivered.

Local Groundwater. San Francisco 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 San Francisco city limits, wh ile the remaining three extend south into San Mateo County.

The portion of the Westside Basin aquifer located within San Francisco is commonly referred to as the North Westside Basin. Except for the Westside and Lobos basins, all of the ba sins 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 1930s, 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 San Francisco primarily for irrigation purposes. The San Francisco Zoo and Golden Gate Park use approximately 1.2 mgd of 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.

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 non -potable purposes in San Francisco is less than one mgd, which is reflective of the limited non -potable demands in San Francisco’s dense urban environment. The Sharp Park Recycled Water Project and the Harding Park Recycled Water Project collectively used 0.03 mgd of recycled water for irrigating City-owned golf courses in Fiscal Year 2023-24.

Local Water Conservation . The SFPUC is committed to demand- side management programs; San Francisco’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 1976- 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 San Francisco since then, water

39 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 San Francisco 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. While per capita water use increased very slightly after the 2012 -2015 drought and before the 2020-2022 drought, it has remained well below 2013 levels. Gross per capita water use within San Francisco was 68.0 gpcd in Fiscal Year 2023 -24, with residential p er capita water use calculated to be 41.8 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 water 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 Water System Improvement Program (“WSIP”), and analysis of local efficient plumbing fixture saturation rates and water -saving opportunities in the SFPUC retail service area.

Limitations on Use of Potable Water. The City also restricts the use of potable water for soil compaction and dust control (activities associated with construction) when recycled water is available. In addition, the City requires new developments of 100,000 gross square -feet or more to install and operate onsite water reuse projects.

This program currently results in a potable water offset of 0.12 mgd.

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, dur ing 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.” Water Supply Reliability and Drought Planning
The SFPUC water supply system’s 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 Customers and its wholesale customers during a defined period depends on several factors, including the amount of water that is available to the SFPUC from natural runo ff; the amount of water in reservoir storage; groundwater supply; 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. Two principal objectives guide Hetch Hetchy Reservoir operations: collection of Tuolumne River water runoff for diversion to the Bay Area; and fulfillment 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 forecasted 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 SFPUC operates the Regional Water System’s Bay Area reservoirs to conserve watershed runoff, drawing down reservoirs 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.

40 Prior to 1976, droughts had not seriously affected the SFPUC’s ability 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 the combined number of actual drought years from 1976 -1977 and 1987-92), and associated operating procedures that trigger different levels of wa ter 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 mandatory delivery reductions or rationing.

Rationing. With current contractual obligations to deliver up to 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 water 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 that is an attachment to the WSA (the “ Water Shortage Allocation Plan ”). The Water Shortage Allocation Plan allocates available water between the Retail Customers and the Wholesale Customers collectively, with specific allocations for each established for different levels of systemwide shortage. Under the Water Shortage Allocation Plan, specific rationing amounts applied to Retail Customers and Wholesale Customers will be determined by their subsequent shortage plans as required to remain with their share of the systemwide allocation.

The Water Shortage Allocation Plan applies to 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 257 mgd. That is, the Regional Water System is capable of sustaining a 257 mgd annual average delivery over a hydrologic period equivalent to that experienced from 1921 to 2002 with shortages due to drought. This delivery capability is based on the SFPUC’s substantial completion of the WSIP program. During non- drought years, the Regional Water System is capable of sustainably delivering 265 mgd.

Water Supply Initiatives. In 2019, with the goal of ensuring that the water needs of Retail and Wholesale Customers will continue to be met under future conditions in the event of dry- year shortages, the SFPUC established an alternative water supply program (the “AWS Program ”) to evaluate new and diverse alternative water supply options, such as expanding storage, groundwater banking, transfers, purified water (potable reuse), desalination and technological innovations. For more information regarding the AW S Program, see “CAPITAL IMPROVEMENT PROGRAM AND OTHER WATER SUPPLY INITIATIVES – Water Supply Initiatives.” 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

41 population at 1,641,869 as of January 1, 2024. 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 José, the third largest city in the State. The California Department of Finance Demographic Research Unit estimated Santa Clara County’s population at 1,903,198 as of January 1, 2024. 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, immediately south of San Francisco and 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 741,565 as of January 1, 2024.
• 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 and 40,000
commercial, industrial and institutional accounts 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 and their individual water sales contracts.

The following is a list of the 27 wholesale customers:

Wholesale Customers
Municipalities Water Purveying Districts Private Entities City of Brisbane(1) Alameda County Water District California Water Service Company(2) City of Burlingame Coastside County Water District Stanford University City of Daly City Cordilleras Mutual Water Company(4)
City of East Palo Alto Estero Municipal Improvement District City of Hayward Guadalupe Valley Municipal
Improvement District(1)

City of Menlo Park Mid-Peninsula Water District
City of Millbrae North Coast County Water District
City of Milpitas Purissima Hills Water District
City of Mountain View Westborough County Water District City of Palo Alto
City of Redwood City
City of San Bruno
City of San José(3)
City of Santa Clara(3)
City of Sunnyvale
Town of Hillsborough

(1) Brisbane and Guadalupe V alley Municipal Improvement District are jointly operated. (2) 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. Over the past five Fiscal Years, California Water Service Company has purchased, on average, approximately 14.4% of the total water delivered annually by the SFPUC. Such purchases accounted, on average, for approximately 12.7% of the SFPUC’s total annual revenues.
(3) The SFPUC provides water on an interruptible basis to fixed service areas in the northern portions of the cities of San José and Santa Clara.

See “– Status of San José and Santa Clara” below.
(4) Cordilleras Mutual Water Company is the only wholesale customer that is not a member of BAWSCA and not a party to the WSA.

42 The following table shows the percentage of water purchased from the Regional Water System by each of the Wholesale Customers in Fiscal Year 202 3-24, the most recent fiscal year for which data is available. Sixteen of the Wholesale Customers derived over 90% of their water from the SFPUC.

TABLE 5

PERCENTAGE OF WATER PURCHASED FROM THE REGIONAL WATER SYSTEM BY WHOLESALE CUSTOMERS IN FISCAL YEAR 2023-24(1)
Water Purchased (mgd)
Population SFPUC Total % SFPUC
Alameda County Water District 344,000 10.23 34.34 29.79% California Water Service Company 262,924 27.31 27.46 99.45 City of Hayward 162,954 13.18 13.34 98.80
City of Sunnyvale 157,566 9.40 16.65 56.46
City of Santa Clara 130,746 2.74 18.75 14.61
City of Daly City 98,000 3.13 5.24 59.73
City of Redwood City 91,874 7.71 8.23 93.68
City of Mountain View 81,501 7.36 8.76 84.02
City of Milpitas 81,773 5.32 8.30 64.10
City of Palo Alto 67,901 9.07 10.02 90.52
City of San Bruno 44,745 2.62 2.77 94.58
North Coast County Water District 36,426 2.16 2.20 98.18 City of San José 45,559 3.89 4.67 83.30
Estero Municipal Improvement District 35,556 3.98 3.98 100.00 City of Burlingame 31,457 3.16 3.16 100.00
Mid-Peninsula Water District 30,609 2.27 2.27 100.00
City of East Palo Alto 27,638 1.53 1.53 100.00
City of Millbrae 22,087 1.73 1.73 100.00
City of Menlo Park 21,340 2.56 2.56 100.00
Coastside County Water District 18,940 0.87 1.42 61.27
Stanford University 37,329 1.49 2.54 58.66
Westborough Water District 13,486 0.68 0.68 100.00
Town of Hillsborough 11,766 2.17 2.17 100.00
Purissima Hills Water District 6,245 1.39 1.39 100.00
City of Brisbane / Guadalupe Valley
Municipal Improvement District 4,862 0.61 0.61 100.00
Total All Agencies 1,867,284 126.56 184.77 68.50%

(1) Does not include wholesale customer Cordilleras Mutual Water Company, which is not a BAWSCA member agency and not a party to the WSA.

Source: SFPUC; compiled from BAWSCA Annual Survey Fiscal Year 2023-24, dated April 2025.

(Remainder of Page Intentionally Left Blank)

43 The following table summarizes the sources of supply for the Wholesale Customers collectively during Fiscal Year 2023-24 (most recent data available).

TABLE 6
WATER DELIVERIES TO WHOLESALE CUSTOMERS BY SOURCE(1)
FISCAL YEAR 2023-24
Source Acre-Feet Percent of Total
SFPUC(2) 143,442 69.3%
Groundwater 20,657 8.2
Surface Water 7,802 3.8
Recycled Water 8,072 3.9
Other Sources (Includes State/Federal) 30,684 14.8
Total 206,936 100.0%

(1) Does not include wholesale customer Cordilleras Mutual Water Company, which is not a BAWSCA member agency and not a party to the WSA.
(2) Purchases from the Regional Water System. Includes supplemental deliveries.

Source: SFPUC; compiled from BAWSCA Annual Survey Fiscal Year 2023-24, dated April 2025.

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 Wholesale 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 that 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 bonds issued by the 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 2030.

Prior Master Water Sales Contract. Between 1984 and 2009, Wholesale Customer rates were set pursuant 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 Regional Water System between the SFPUC’s Retail Customers and the Wholesale Customers. Capital costs and most operations and maintenance expenses of the Regional Water System were distributed between the SFPUC and its Retail Customers

44 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. H owever, 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 in excess of the 184 mgd “Supply Assurance” discussed below.

Water Supply Agreement. In 2009, the SFPUC and the Wholesale Customers entered into the WSA, 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 2021 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 ca ses. 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 24 of the 26 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 shor tage, drought, scheduled WSA maintenance activities, and emergencies.

The Supply Assurance is shared among 24 of the 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 City of San José (“San José”) and the City of Santa Clara (“Santa Clara”), are served wholesale water on an interruptible basis and are not part of the Supply Assurance. The City of Hayward (“Hayward”) does not have an Individual Supply Guarantee but rather an individual contract that does not limit its water use. Hayward continues to receive water under a contract entered into in 1962 with no expiration or supply limitation. If Hayward’s demand excee ds 22.1 mgd for three consecutive fiscal years, the 23 Wholesale Customers with Individual Supply Guarantees totaling 161.9 mgd would be required to reduce their allocation to meet the needs of Hayward in accordance with the WSA. For Fiscal Year 2023-24, total water purchases by the 23 Wholesale Customers with Individual Supply Guarantees (including Hayward’s use but excluding San José and Santa Clara) were approximately 63.02% of the combined Supply Assurance.

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45 The following table shows the Individual Supply Guarantees and actual Fiscal Year 2023- 24 purchases for the Wholesale Customers and also includes Cordilleras Mutual Water Company, which is not a “Wholesale Customer” party to the WSA.

TABLE 7

WHOLESALE CONTRACTUAL OBLIGATIONS
(IN MGD)
Individual Supply
Guarantee(1)
Actual 2023-24
Purchases
Alameda County Water District 13.76 9.94
City of Brisbane / Guadalupe Valley Municipal Improvement District(2) 0.46 0.61
City of Burlingame 5.23 3.16
California Water Service Company(3) 35.50 25.87
Coastside County Water District 2.18 0.82
City of Daly City 4.29 2.73
City of East Palo Alto 3.46 1.59
Estero Municipal Improvement District 5.90 3.72
City of Hayward 22.80 13.14
Town of Hillsborough 4.09 2.16
City of Menlo Park 4.46 2.55
Mid-Peninsula Water District 3.89 2.27
City of Millbrae 3.15 1.74
City of Milpitas 9.23 5.29
City of Mountain View 12.46 7.36
North Coast County Water District 3.84 2.42
City of Palo Alto 16.57 8.92
Purissima Hills Water District 1.62 1.39
City of Redwood City 10.93 7.66
City of San Bruno 3.25 0.92
City of San José(4) 0.00 3.90
City of Santa Clara(4) 0.00 2.73
Stanford University 3.03 1.53
City of Sunnyvale 12.58 9.50
Westborough County Water District 1.32 0.68
Subtotal BAWSCA Demand 184.00 122.60
Cordilleras Mutual Water Company(5) -- 0.01
Total Wholesale Demand(6) -- 122.61

(1) “Individual Supply Guarantee” refers to each Wholesale Customer’s share of the Supply Assurance as defined in the WSA. The Su pply 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 José and Santa Clara). Hayward has no fixed allocation of the Supply Assurance but its share is calculated as 22.1 mgd (184 mgd less the 161.9 mgd total of permanent customer Individual Supply Guarantees). (2) Brisbane and Guadalupe V alley 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 District in 2009.
(4) San José and Santa Clara do not have an Individual Supply Guarantee or a share in the Supply Assurance due to their temporary, interruptible status under the WSA.
(5) Cordilleras Mutual Water Company is not a party to the WSA, does not have an Individual Supply Guarantee and does not share in the Supply Assurance.
(6) Totals may not add due to rounding.

Sources: SFPUC; Water Supply Agreement.

46 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 (as defined herein) 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 Wholesale Customers’ proportionate annual use of the Regional Water System.
• For the portion of capital project 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 was scheduled to end in Fiscal Year 2023-24. In September 2020, the Wholesale Customers prepaid the remaining $4,030,664 balance.

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 from the Prior Master Water Sales Contract continues in the WSA. The WSA sets forth how the SFPUC and the Wholesale Customers will implement the “Interim Supply Limitation” imposed by the SFPUC in its approval of the WSIP in 2008, which limits to 265 mgd the amount of water annually delivered to the Retail Customers and Wholesale Customers from Regional Water System watersheds. Under the Interim Supply Limitation, Retail Cu stomers receive up to 81 mgd and the Wholesale Customers receive up to 184 mgd from the Regional Water System.

Status of San José and Santa Clara. The cities of San José and Santa Clara retain their temporary, interruptible status. The SFPUC has agreed to supply a combined annual average of 9 mgd to the two cities through 2028, in accordance with the terms of the WSA. The 9 mgd allocated to San José 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.

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). In addition, the Wholesale Customers may agree to the permanent transfer of portions of their Individual Supply Guarantees (including portions of their Minimum Annual Purchase Quantities, as defined in the WSA, where applicable). All such transfers are subject to SF PUC approval regarding operational and Raker Act concerns. In 2017, the City of Mountain View (“ Mountain View”) agreed to a permanent transfer of 1.0 mgd of its Individual Supply Guarantee to the City of East Palo Alto (“East Palo Alto”). Subsequently in 2018, the City of Palo Alto (“Palo Alto”) agreed to a permanent transfer of 0.5 mgd of its Individual Supply Guarantee to East Palo Alto.

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

47 Enhancement Surcharge would apply only if combined retail and wholesale water deliveries from the Regional Water System watersheds exceed 265 mgd. Proceeds of the Environmental Enhancement Surcharge will be placed in a restricted reserve fund to be used on ly 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.

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 hydroelectric 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 currently requires the SFPUC to make decisions by December 31, 2028 as follows:
• Whether to make San José 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 José and Santa Clara to permanent, non-interruptible customers would require the SFPUC to secure 9.0 mgd of additional water supply, reflecting historical deliveries. As noted above, San José and Santa Clara are currently temporary customers with interruptible status. The SFPUC is having ongoing discussions with San José and Santa Clara regarding a possible extension of the December 31, 2028 deadline. See “CAPITAL IMPROVEMENT PROGRAM AND OTHER WATER SUPPLY INITIATIVES – Water Supply Initiatives.” 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 the Wholesale Customers, each wholesale customer (including Cordilleras Mutual Water Company) 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, four Wholesale Customers – 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 (“Minimum Annual Purchase Quantity”). Due to the most recent drought in Water Years 2020, 2021 and 2022, and the corresponding call for voluntary rationing from the wholesale and retail customers, the SFPUC waived the minimum purchase requirements for these agencies for Fiscal Years 2021- 22 and 2022- 23, but reinstated the requirements in Fiscal Year 2023 -24 once the SWRCB no longer required the SFPUC to implement the Shortage Level 1 or Shortage Level 2 drought response actions of its Water Shortage Contingency Plan. In Fiscal Year 2023- 24, the City of Mountain View and the City of Milpitas did not meet their minimum purchase requirements and were assessed charges for imputed water sales of $3,951,456 and $10,378, respectively. The 2021 Amended and Restated WSA includes a new mechanism that allows a Wholesale Customer with a Minimum Annual Purchase Quantity to transfer a portion of that quantity to another Wholesale Customer at the same time that it tran sfers a portion of its

48 Individual Supply Guarantee to that other Wholesale Customer. The SFPUC and the Wholesale Customers are also considering other ways to relieve the City of Mountain View of the burden arising from its consistent inability to meet minimum purchase requirements. See “APPENDIX B – SUMMARY 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 Customers include the residents, businesses and industries located within the corporate boundaries of San Francisco. In addition to these customers, retail water service is also provided to other customers located outside of San Francisco, such as the Town of Sunol, SFO, Lawrence Livermore National Laboratory, Castlewood Country Club and Groveland Community Services District.

The SFPUC’s Retail Customers have been metered since 1916.

Residential Water Use. Due to the moderate climate and the high-density housing in San Francisco, much of the water use within San Francisco is indoors. For San Francisco’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 a little under 42 gallons per person per day. By comparison, the statewide averag e residential per capita water use in calendar year 2023 was 78 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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49 Historical Water Sales and Top Customers
Water Sales. The following table shows water sales to Retail Customers and wholesale customers for Fiscal Years 2019-20 through 2023-24.

TABLE 8

HISTORICAL WHOLESALE AND RETAIL WATER SALES
FISCAL YEARS 2019-20 THROUGH 2023-24
(IN MGD)
2019-20 2020-21 2021-22 2022-23 2023-24
2023-24%
of Total
Retail Customers
Multi-Family Residential 23.3 22.7 21.9 21.8 21.7 12.4% Single-Family Residential 14.4 14.6 13.1 12.5 12.2 7.0
Commercial(1) 15.1 10.6 11.8 12.4 12.2 7.0
Industrial 0.2 0.1 0.1 0.1 0.1 0.0
Municipal(2) 3.4 2.8 2.8 2.5 2.7 1.6
Suburban Retail(3) 3.0 2.8 2.7 2.7 2.9 1.7
Retail water sales 59.4 53.6 52.4 52.0 51.8 29.7%

Wholesale Customers
California Water Service(4) 29.0 29.6 29.0 26.4 25.9 14.9% City of Hayward 14.2 14.5 14.0 12.9 13.1 7.5
Alameda County Water
District 7.7 9.5 9.4 9.7 9.9 5.7
City of Sunnyvale 9.4 9.7 8.9 8.1 9.5 5.4
City of Palo Alto 9.7 9.8 9.6 8.6 8.9 5.1
City of Redwood City 8.8 8.6 7.9 7.2 7.7 4.4
City of Mountain View 7.6 7.9 7.4 6.7 7.4 4.2
City of Milpitas 6.1 5.4 4.8 4.5 5.3 3.0
City of San José 4.2 4.2 4.1 3.8 3.9 2.2
Estero Municipal
Improvement District 4.3 4.3 3.9 3.5 3.7 2.1
All Other Wholesale
Customers 31.0 31.5 29.5 26.4 27.3 15.8
Wholesale water sales(5) 132.0 135.0 128.5 117.8 122.6 70.3%

Total water sales(5) 191.4 188.6 180.9 169.8 174.4

% Change from prior year(5) 3.9% -1.6% -4.1% -6.1% 3.0%

(1) Includes docks and ships under Commercial.
(2) The Municipal category includes the San Bruno Jail, a City department located outside San Francisco, and master metered Treasure Island water sales. 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 open individual accounts under the appropriate commercial or residential line items, and the master-metered amount is reduced accordingly. (3) SFO is included as a Suburban Retail Customer because SFO receives water directly from the Water Enterprise. (4) California Water Service Company, Daly City, and San Bruno participate in the conjunctive use groundwater program, and receive a bill credit for regional water system usage in- lieu of groundwater pumping. Totals reported in this table exclude water credite d to the SFPUC storage account under such conjunctive use program.
(5) Totals may not add due to rounding.

Source: SFPUC; compiled from Annual Comprehensive Financial Report for Fiscal Years Ended June 30, 2024 and 2023.

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). Over the last three Fiscal Years, nonrevenue water has averaged approximately 7.7% of retail water sales per year. For more information regarding factors that impact water sales, see “– Recent Factors Impacting Retail Water Sales.”

50 Top Ten Retail and Top Ten Wholesale Customers . The following table sets forth the top ten Retail Customers and top ten wholesale customers based on water sales revenues for Fiscal Year 2023-24.

TABLE 9

TOP TEN RETAIL CUSTOMERS

AND TOP TEN WHOLESALE CUSTOMERS
FISCAL YEAR 2023-2024

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) $ 6,048 0.9% N/A 1.9% Lawrence Livermore National Laboratory 2,935 0.5 N/A 0.9 Recreation and Parks Department 1,697 0.3 N/A 0.5
Parkmerced Investors Properties, LLC 2,472 0.4 N/A 0.8
University of California, San Francisco 2,279 0.4 N/A 0.7 NASA Shared Services Center, LLC 2,765 0.4 N/A 0.9
Golden Gate National Cemetery 1,731 0.3 N/A 0.5
Public Health Department 1,415 0.2 N/A 0.4
San Francisco State University 997 0.2 N/A 0.3
1169 Market Street 812 0.1 N/A 0.3
Total: $23,151 3.6% N/A 7.3%

Wholesale Customers
California Water Service Company $ 74,681 11.5% 22.3% N/A City of Hayward 35,828 5.5 10.7 N/A
City of Palo Alto 24,600 3.8 7.4 N/A
Alameda County Water District 27,606 4.2 8.3 N/A
City of Sunnyvale 25,779 4.0 7.7 N/A
City of Redwood City 20,941 3.2 6.3 N/A
City of Mountain View 20,068 3.1 6.0 N/A
City of Daly City 11,866 1.8 3.6 N/A
City of Milpitas 14,168 2.2 4.2 N/A
City of San José 10,674 1.6 3.2 N/A
Total: $266,211 40.9% 79.7% N/A

(1) Percentages based on total wholesale revenues of $334.2 million and total retail revenues of $316.0 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.

Recent Factors Impacting Retail Water Sales
Several factors have contributed to the SFPUC’s reduced retail water sales in recent years, including, but not limited to, certain developments in the local San Francisco economy and weather conditions. For example, there has been a general decline in San Francisco’s population in recent years due to, among other factors, widespread business closures, worker migration out of San Francisco due in part to remote work policies, and a general decline in tourism, all of which can be attributed in some part to the enduring impacts of the COVID-19 pandemic. Specifically, according to the California Department of Finance, the population in San Francisco decreased by 3.5% between April 1, 2020 and January 1, 2024. In addition, office attendance stayed between 40-45% of pre-pandemic levels in fiscal year 2023- 24, and office vacancy rates were approximately 33% in fiscal year 2023-24.

In addition, weather conditions and actions taken in response thereto over the past several years have resulted in reduced water usage. Water Years 2020, 2021 and 2022 represent the driest three -year period on record for California. During that time, in re sponse to calls for voluntary statewide water use reductions and emergency regulations adopted by the SWRCB, the SFPUC declared a local water shortage emergency, called for voluntary systemwide water use reductions of up to 11% compared to baseline water use during Fiscal Year 2019 -20 in

51 accordance with the SFPUC’s Water Shortage Contingency Plan, adopted by the Commission in June 2021, and the Water Shortage Allocation Plan, and implemented a drought surcharge of up to 5% on all retail water and wastewater volumetric rates. As shown in Table 8, water sales declined during this period. Following California’s remarkably wet winter in Water Year 2023, the SFPUC ended the local water shortage emergency declaration and the drought surcharge in May 2023 and ended the call for voluntary systemwide water use reductions in June 2023. While removal of drought restrictions generally increases water usage, years with greater -than-normal rainfall may see declines in water sales as customers typically reduce water use for outdoor irrigation. In the San F rancisco retail service area, with its low outdoor irrigation usage and high levels of water conservation, there has been limited change in total water sales from the ending of drought restrictions, with Fiscal Year 2023 -24 retail water sales showing very little change from the prior fiscal year.

Current Water Conditions
Water Year 2025 has been normal for both precipitation and snowpack. As of April 28, 2025, Water Year 2025 precipitation for upcountry area totals approximately 28.56 inches, which is 92.40% of normal annual total, and Water Year 2025 precipitation for local area totals approximately 22. 38 inches, which is 95.85% of normal annual total.

The following graph shows precipitation levels at Hetch Hetchy as of April 28, 2025 for Water Year 2025, as compared to Water Year 2024 (most recent full Water Year), Water Year 1983 (wettest year on record), Water Year 2015 (driest year on record), and the median between Water Years 1991-2020.

GRAPH 1

PRECIPITATION AT HETCH HETCHY
(AS OF APRIL 28, 2025)

Source: SFPUC.

52 The following graph shows snowpack conditions at Hetch Hetchy as of April 28, 2025 for Water Year 2025, as compared to Water Year 2024 (most recent full Water Year), Water Year 2023 (most amount of snowpack on record), Water Year 2015 (least amount of snowpack on record), and the median between Water Years 1991-2020.

GRAPH 2

UPCOUNTRY SNOWPACK
(AS OF APRIL 28, 2025)

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 primarily 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 n otices 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 then comprised of five member agencies, including the City by and through the SFPUC, filed suit seeking writ relief from the SWRCB’s order. The SJTA argued that the SWRCB’s order in the BBID enforcement proceeding

53 is inconsistent with established appellate case law and exceeded SWRCB’s authority under the applicable 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, on September 12, 2022, the Sixth District Court of Appeal upheld this decision.

In August 2021, the SWRCB again adopted emergency regulations to curtail water rights throughout the Bay- Delta, which the SWRCB then readopted in August 2022. The SWRCB issued orders notifying the City that it may periodically curtail all of the City’s water rights on the Tuolumne River subject to water unavailability, beginning August 2021. In response to high precipitation levels in late 2022 and early 2023, the SWRCB began lifting all curtailments, and, on March 24, 2023, Governor Newsom issued an execut ive order lifting the majority of the provisions of his earlier drought -related executive orders. By June 2023, the SWRCB’s emergency curtailment regulations terminated by their own one -year term. On August 19, 2022, SJTA, again, filed a lawsuit challenging the legality of the emergency regulations. Separately, on September 20, 2021, the City filed a petition for reconsideration with the SWRCB on the curtailment orders for SFPUC’s water right diversions on the Tuolumne River, which among other issues, informed the SWRCB that it was using incorrect place of use and priority date information for the City’s water rights. On October 17, 2022, the SWRCB favorably resolved these place of use and priority date issues. The SFPUC is unable to predict whether future S WRCB 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.” Projected Demand
Wholesale Demand . In 2022, BAWSCA updated its 2020 Regional Water Demand and Conservation Projections Study, which provided demand projections of its member agencies (the 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 (also known as the DSS Model).

In its 2022 update titled “Regional Water Demand and Conservation Projections Update,” BAW SCA sought to meet two objectives: (1) to reflect new data that became available since the 2020 study’s completion and (2) to better understand and quantify uncertainty associated with demand estimates and the variables that influence water demands, such a s population, employment, climate change, housing densification, landscape transformation, conservation adoption, and rate increases. BAWSCA’s population projections for its member agencies are based on each member agency’s population projections as provided in their individual 2020 Urban Water Management Plans, the Association of Bay Area Governments (“ ABAG”) Plan Bay Area 2040 data, and Draft ABAG Plan Bay Area 2050 data. The forecast methodology and resulting projections are documented in the Regional Water Demand and Conservation Projections Update and support implementation of BAWSCA’s Long- Term Reliable Water Supply Strategy (the “BAWSCA Strategy”). The BAWSCA Strategy’s projections indicate that demands by the Wholesale Customers for Regional Water System supplies through 2045 will be significantly less than anticipated at the time the 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 2023 -24, are shown in Table 10.

In Fiscal Year 2023-24, the Wholesale Customers collectively received approximately 126.56 mgd, or 68.5% of their water supply, from the Regional Water System. By Fiscal Year 2045- 46, the Wholesale Customers are projected to receive approximately 170.49 mgd, or 64.5% of their water supply, from the Regional Water System. The remaining sources, including ground water, recycled water, surface water, additional active conservation and other sources are projected to total approximately 93.89 mgd.

54 TABLE 10
PROJECTED WHOLESALE CUSTOMER WATER DEMAND AND SUPPLIES(1) (IN MGD)
2025-26 2030-31 2035-36 2040-41 2045-46
Wholesale Customer Purchases
from the Regional Water
System(2) 149.53 155.59 160.26 165.01 170.49
Other Supplies(3) 72.97 71.93 77.35 83.60 93.89
Total Wholesale Customer
Demand 222.50 227.52 237.61 248.61 264.38

(1) Does not include wholesale customer Cordilleras Mutual Water Company, which is not a BAWSCA member agency and not a party to the WSA.
(2) This projected demand includes increased deliveries to interruptible customers, the cities of San José and Santa Clara, as well as to other permanent customers such as East Palo Alto.
(3) Estimated as the difference between the “Total Wholesale Customer Demand” and the “Wholesale Customer Purchases from the Regi onal Water System.”
Note: Amounts set forth in the table are projections. Actual results may differ materially from these projections. See “FORWARD- LOOKING STATEMENTS.”
Source: SFPUC; compiled from BAWSCA Annual Survey Fiscal Year 2023-24, dated April 2025.

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 San José and Santa Clara as interruptible customers, which is the level of demand that is reflected through 2046 in the table above.

East Palo Alto was previously projecting a 1.5 mgd supply shortfall. In 2017, Mountain View agreed to a permanent transfer of 1.0 mgd of its Individual Supply Guarantee (defined below) to East Palo Alto. Subsequently, in 2018, Palo Alto agreed to a permanent transfer of 0.5 mgd of its Individual Supply Guarantee to East Palo Alto. See “– Wholesale Deliveries – Creation of Transfer Market” and “– 2028 Water Supply Decisions.” Retail Demand. Municipal retail water service providers are required to prepare an Urban Water Management Plan every five years. The purpose of the Urban Water Management Plan process is to project future retail water demand with a view to facilitating the planning ne cessary to assure that future water supply will be adequate to meet future demand. By reason of the periodic nature of the Urban Water Management Plan process, the SFPUC’s current Urban Water Management Plan may not reflect the most current information. Further, for financial planning and rate -setting purposes, the SFPUC projects water sales conservatively. As a consequence, demand projections derived from the SFPUC’s Urban Water Management Plans will not match the water sales projections used for financial planning purposes.

The SFPUC’s current retail demand projections are based on the 2023 Interim Water Demand Projections, prepared in September 2023 (the “2023 Interim Water Demand Projections”), which reflect slightly higher housing projections than those used in the 2020 Urban Water Management Plan, adopted by the SFPUC in June 2021 (the “2020 Urban Water Management Plan ”). Both the 2020 Urban Water Management Plan and 2023 Interim Water Demand Projections used an econometric model that incorporates socioeconomic factors to forecast demand, which has become a more prevalent methodology for forecasting demand among urban water utilities and managers. The econometric model combined 10 years (2010-2020) of historical San Francisco account-level water usage data with property cha racteristics, demographic characteristics and historical climate data. For the 2020 Urban Water Management Plan, demand was projected based on housing and employment forecasts available at that time from the San Francisco Planning Department. Housing projections were based on the City’s housing plan objective of producing an average of 5,000 housing units per year with adjustments for certain large development plans.

Employment projections were based on the Planning Department’s Land Use Allocation 2017, a City -specific refinement of the ABAG’s growth forecasts, and ABAG Projections 2017, which reflect assumed growth from ABAG’s Plan Bay Area and Sustainable Communities Strategy Jobs -Housing Connections Scenario. The resulting employment projections anticipate approximately 16% of growth in the number of jobs between 2020 and 2045. After, and unrelated to, adoption of the 2020 Urban Water Management Plan, the San Francisco Planning Commission certified the Housing Element 2022 Update (the “Housing Element 2022 Update”) Environmental Impact Report in November 2022. The Housing Element 2022 Update Environmental Impact Report, which supported the City’s adoption of the Housing Element 2022 Update in January 2023, assumed slightly higher housing unit projections than

55 those used in the 2020 Urban Water Management Plan, but still in line with the objective to produce an average of 5,000 housing units per year. However, the SFPUC determined that its 2020 Urban Water Management Plan, which was completed prior to recent developments that have affected San Francisco’s population and the local economy, no longer accounted for all projected retail water demands and subsequently prepared the 2023 Interim Water Demand Projections in September 2023 to reflect housing growth consistent with the Housing Element 2022 Update. The resulting demand projections increased by about 0.6 to 0.8% compared to those in the 2020 Urban Water Management Plan.

Demand is forecasted to increase steadily through Fiscal Year 2044 -45, with more rapid growth happening in the later years of the projection period. After accounting for the projected conservation savings, the total retail demand (excluding water loss) is projected to increase by about 22% between Fiscal Years 2019 -20 and 2044- 45.

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, throughout the retail service area, single family residential water use is expected to decrease by 7% and multi -family residential water use is projected to increase by 46% between Fiscal Years 2019-20 and 2044- 45. Non-residential water use is projected to increase by 13% between Fiscal Years 2019-20 and 2044-45. These projections will be updated in summer 2025 as the SFPUC compiles information for the next Urban Water Management Plan, which will take into consideration the City’s housing plan objectives available at that time.

The following table sets forth retail water demand projections, which are based on the 2023 Interim Water Demand Projections.

TABLE 11

PROJECTED RETAIL WATER DEMAND
(IN MGD)
2025 2030 2035 2040 2045
In City Residential Demand
(Single and Multiple Family) 38.0 39.7 41.8 44.4 47.1
In City Non-residential
(Business/Industrial/Municipal Demands)(1) 22.9 22.9 22.8 23.1 23.6 Subtotal – In City Retail 60.9 62.6 64.6 67.5 70.6

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 71.3 73.0 75.0 77.9 81.1

Local Water Supplies 3.5 4.9 5.9 6.9 6.9

Net Retail Demand from Regional Water
System 67.8 68.1 69.1 71.0 74.1

(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 V alley 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.”
Sources: 2020 Urban Water Management Plan, released July 2021; 2023 Interim Water Demand Projections, released September 2023.

56 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. 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 fo rms of cybersecurity and operational safeguards. In 2016, the City adopted a City- wide Cybersecurity Policy (the “ City Cyber Policy ”) to support, maintain, and secure critical infrastructure and data systems. The objectives of the City Cyber Policy include protecting critical infrastructure and information, managing risk, improving cyber security event detection and remediation, and facilitating cyber awareness across all City departments. The City’s Department of Technology has established a cybersecurity 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 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.

SFPUC Measures. Federal agencies have recently reported that critical infrastructure sectors, such as water and wastewater, may be specific targets of cybersecurity threat actors. The occurrence of military conflicts or terrorist activities, including cyber terrorism, c ould adversely impact the Water Enterprise’s operations and finances. For example, cyberattacks directed at water sector operations could damage water transmission, treatment, distribution or storage assets, causing operational malfunctions and outages, and resulting in costly recovery and remediation efforts.

In January 2024, the SFPUC’s system was targeted by a suspected foreign state-sponsored threat actor. The SFPUC’s prompt execution of its cybersecurity incident response plan, as further described below, successfully contained the incident without any significant impact.

The SFPUC abides by the City Cyber Policy and maintains its own cybersecurity and disaster recovery program (the “SFPUC Cybersecurity Program”) that is based on the National Institute of Standards and Technology cybersecurity guidance. In addition, control networks for the Water Enterprise and the Wastewater Enterprise adhere to the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency’s (“CISA”) Cross-Sector Cybersecurity Performance Goals, as recommended by the United States E nvironmental Protection Agency (the “USEPA”). Control networks for the Power Enterprise adhere to the North American Electric Reliability Corporation critical infrastructure protection controls. In anticipation of future USEPA regulatory requirements, the SFPUC has completed operational cybersecurity assessments in alignment with CISA’s cross-sector performance objectives.

The SFPUC has also appointed a Chief Information Security Officer (the “CISO ”), who reports to the SFPUC’s Chief Information Officer. The SFPUC’s cybersecurity team also includes dedicated information technology (IT) and operational technology (OT) staff, as well as third -party specialists who perform a variety of cybersecurity functions. Technology vendors undergo thorough security assessments during procurement, and any procured technology is continuously monitored through the SFPUC Cybersecurity Program.

The SFPUC Cybersecurity Program employs industry- standard cybersecurity solutions and multiple technical controls, including: network segmentation of control environments, secure remote access and domain name system (DNS) protocols, modern authentication m ethods, secure asset disposal procedures, end user controls, and timely removal of system and facility access for departing SFPUC employees. In addition, the SFPUC has implemented industry-leading technology that provides real -time threat monitoring and re sponse capabilities across all corporate and operational environments. These response capabilities include a cybersecurity incident response plan, incident response services, incident responders, and a cybersecurity insurance policy. The SFPUC’s cybersecur ity incident response plan is part of the SFPUC’s continuity of operation plan, which describes the SFPUC’s strategy for ensuring continued delivery of essential services during a disruption in normal operations, and part of the City’s Department of Emerge ncy Management Emergency Support Function 18 program, which details the City’s operational response in the event of a cybersecurity incident.

57 The SFPUC Cybersecurity Program is periodically and independently reviewed for effectiveness, most recently in June 2022. The next review is scheduled for September 2025. Pursuant to the SFPUC’s policies, the City Services Auditor and independent cybersecurity auditors perform extensive penetration and vulnerability assessment on the SFPUC’s business and control networks. In addition, the City Services Auditor conducts annual cybersecurity maturity assessments. Like many other large public and private entit ies, the SFPUC is continually identifying aging infrastructure and managing infrastructure lifecycle.

See also “RISK FACTORS – Risks Related to Water Enterprise Facilities and Operation – Cybersecurity.” Climate Change
Impact on City of San Francisco. Numerous scientific studies on global climate change show that, among other effects on the global ecosystem, sea levels will rise, extreme temperatures will become more common, and extreme weather events will become more frequent as a result of increasing global temperatures attributable to atmospheric pollution.

The 2018 Fourth National Climate Assessment and the 2023 Fifth National Climate Assessment, each published by the United States Global Change Research Program, find that more frequent and intense extreme weather and climate -related events, as well as chang es in average climate conditions, are expected to continue to damage infrastructure, ecosystems and social systems. Both reports state that rising temperatures, sea level rise, and changes in extreme events are expected to increasingly disrupt and damage c ritical 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. B oth reports state that the continued increase in the frequency and extent of high- tide flooding due to sea level rise threatens coastal public infrastructure. Both reports also state that expected increases in the severity and frequency of heavy precipitat ion events will affect inland infrastructure, including access to roads, the viability of bridges and the safety of pipelines.

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, the 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 San Fr ancisco 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 resi dents, businesses, and governmental operations along the waterfront could be displaced. The City may elect to mitigate these effects to maintain its current shoreline and protect critical infrastructure at a potentially significant 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 Office of Resilience and Capital Planning, joined the Port, the SFPUC and other public agencies in moving several initiatives forward. This included a Citywide Sea Level Rise Vulnerability and Consequences Assessment to identify and evaluate sea level rise impacts across the City and in various neighborhoods that was released in February 2020.

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 le vel rise. The Sea Level Rise Report provides the basis for State guidance to State and local agencies, entitled “State of California Sea- Level Rise Guidance: 2018 Update” (the “2018 Update ”). The 2018 Update provides guidance for incorporating sea level rise into design, planning, permitting, construction, investment and other decisions. Among many findings, the Sea Level Rise Report indicates

58 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 report notes that the rate of ice sheet loss from Greenland and Antarctic ice sheets poses a particular risk of sea level rise for the California coastline. An update of both the Sea Level Rise Report and the 2018 Update was adopted by the State of California in 2024. This update, contained in a single document entitled “State of California Sea Level Rise Guidance: 2024 Science & Policy Update,” revised findings regarding best available science and updated guidance to State and local agencies, superseding the 2018 Update. Though high- end projections of sea level rise were reduced based on new science, the fundamental findings of the more recent reports as well as the specifics cited above agreed with those of the previous reports.

In March 2020, a consortium of State and local agencies, led by the Bay Conservation and Development Commission, released a detailed study entitled, “Adapting to Rising Tides Bay Area: Regional Sea Level Rise Vulnerability and Adaptation Study,” on how sea level rise could alter the Bay Area. The study states that a 48 -inch increase in the bay’s water level in coming decades could cause more than 100,000 Bay Area jobs to be relocated, nearly 30,000 lower-income residents to be displaced, and 68,000 acres of ecologically valuable shoreline habitat to be lost. The study further argues that without a far -sighted, nine -county response, the region’s economic and transportation systems could be undermined along with the environment. For example, runways at SFO could largely be under water.

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 partnered with the U.S. Army Corps of Engineers to develop a plan to fortify the Port’s seawall from sea level rise. A draft plan estimates the total cost of that project at $13.5 billion; and, subject to U.S. Army Corps of Engineers and Congressional approval, 65% of the cost would be eligible for federal funding.

The City is developing a financing strategy to provide the remaining funds, including using funding from the November 2018 approved Proposition A, authorizing the issuance of up to $425 mi llion in general obligation bonds for repair and improvement projects on the seawall.

Portions of the San Francisco Bay Area, including San Francisco, are built on fill that was placed over saturated silty clay known as “Bay Mud.” 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 the University of California, Berkeley (“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 sin king or settling of the ground surface, known as subsidence. The study claims that the risk of subsidence is more significant for certain parts of San Francisco built on fill.

Projections of the effects of global climate change on San Francisco 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 a nd 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 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 2025DEF Bonds. While the effects of climate change may be mitigated by the City’s past and future investment i n adaptation strategies, the City can give no assurance about the net effects of those strategies and whether the City will take additional adaptive mitigation measures. If necessary, such additional measures could require significant capital resources.

In September 2017, the San Francisco City Attorney filed a lawsuit on behalf of the People of the State of California in San Francisco Superior Court against the five largest investor -owned oil companies seeking to have the companies pay into an abatement fund to help fund infrastructure for climate change adaptation. Following litigation regarding defendants’ removal of the case to federal court, the City’s case was remanded to and coordinated with similar municipal lawsuits and the State of California’s lawsuit in San Francisco Superior Court in 2024. In June 2024, the San Francisco City Attorney filed the current amended complaint seeking abatement funds, damages, and other remedies. The Superior Court has since held that personal jurisdiction is appropri ate over non- resident defendants sued in the City’s case and denied an “anti-SLAPP” motion to strike by one of the defendants. While the City believes

59 that the claims in this lawsuit are meritorious, it can give no assurance regarding whether the lawsuit will be successful and 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. The preponderance of evidence indicates 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 changes in climate patterns. Moreover, there is strong 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’s Regional Water System to uncertain future conditions, the SFPUC partnered with the Water Research Foundation to develop a long- term vulnerability assessment of the Regional Water System, which was published in 2021 with an errata published in 2025 pertaining to a specific study finding. The study was conducted by the University of Massachusetts Hydrosystems Research Group with input from the National Center for Atmospheric Research, other climate scientists, and Deltares. The goal of the long -term vulnerability assessment was to help quantitatively and qualitatively assess to what extent climate change will be a threat to the Regional Water System in comparison to or in combination with other external drivers of change over the next 50 years (2020 -2070). More specifically, the assessment aimed to answer the following questions: (1) Under what conditions and when will the Regional Water System no longer meet system performance criteria? (2) Is climate change the most important driver of vulnerability for the Regional Water System and if not, what is? While climate change is the driver of change that triggered this study, the intent was to understand the effects of climate change in the context of effects from other drivers of change on the Regional Water System. Overall, the study found that:
• Climate change exacerbates impacts from other external drivers of change and is not the single most important driver of vulnerability for the Regional Water System. • The Regional Water System at a baseline demand of 227 mgd is resilient to changes in climate and most external drivers.

60 • The Regional Water System water supply performance declines with reductions in mean precipitation but is mostly insensitive to increases in temperature.
• The Regional Water System is more vulnerable to changes in demand and instream flow requirements than changes in mean annual temperature and precipitation. • The Regional Water System is vulnerable to changes in mean climate when demand or instream flow requirements increase.

These findings are based on the following results:
• According to climate 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 Representative Concentration Pathway 8.5 (which represents unmitigated global greenhouse gas emissions during the 21 st century), respectively, with no
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 Representative Concentration Pathway 8.5). • Changes in hydrology due to climate change affect the Regional Water System’s ability to meet water supply targets. At 227 mgd demand, the Regional Water System 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 Regional Water System is resilient to all median climate projections for the planning horizon 2020 -2070. Due to the limitations of the models, t hese 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. • Precipitation change is an important driver for Regional Water System performance. A decrease of 10% or more will cause Regional Water System 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 Regional Water System 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 Regional Water System 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 increases by 40%, which is believed plausible but unlikely over the planning horizon.
• The Regional Water System is particularly vulnerable to the SWRCB’s “Phase 1” Amendment to the Water Quality Control Plan (see “REGULATORY MATTERS – Bay-Delta Water Quality Standards”), which represents a significant reduction in water available. Under all demand (including baseline demand of 227 mgd) and climate scenarios, the system reliability, defined as frequency of years without rationing, remains below 5%.

SFPUC hydrologists are involved in ongoing monitoring and research regarding climate change trends and will continue to monitor the changes and predictions, particularly as these changes relate to water system operations and management of the Water Enterprise.

61 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 10-year capital plan be evaluated for inundation under a variety of sea level rise scenarios plus a 100-year storm. The SFPUC has assets that are part of the Emergency Firefighting Water System (the “Emergency Firefighting Water System” or “EFWS”), also known as the Auxiliary W ater Supply System, the supplementary and emergency water supply managed by the SFPUC. See “WATER FACILITIES – Emergency Firefighting Water System.” These assets have projected functional lifespans of between 90 and 100 years. Several of these assets such as buried pipelines, fireboat manifolds, hydrants, and pump stations are in the potential inundation zone toward the end of the 21st century.

The City, through its Sea Level Rise Action Plan, will be evaluating the best approaches and potential adaptive management plans for protecting EFWS 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 collectively 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.

Climate Action Plan
In September 2021, the City adopted a set of emissions reduction targets: achieve net -zero greenhouse gas emissions generated by the City by 2040 and reduce emissions associated with consumption of all goods and services in the City (regardless of where emissions originate) 80% by 2050. In December 2021, former Mayor Breed released the City’s Climate Action Plan (the “Climate Action Plan”) detailing the actions needed to accomplish these targets, developed through a multi -agency and stakeholder process led by the San Francisco Environment Department (the “Environment Department ”). The Climate Action Plan is a roadmap of goals, strategies and actions to achieve emission reductions across six sectors: energy supply, building operations, transportation and land use, housing, responsible production and consumption, and healthy ecosystems. Key strategies include, but are not limited to, provision of 100% carbon- free energy, decarbonization of buildings, and increases in the public transit, active transportation, and vehicle electrification networks. In addition to reducing emissions to zero over the next 20 years, the Climate Action Plan strives to ensure all San Franciscans have the skills, knowledge, and resources to meet future interconnected challenges, includi ng climate change. To do so, the proposed strategies aim to leverage community strengths, advance racial and social equity, and provide critical benefits to the entire community. The Climate Action Plan includes sections on funding and investment, monitori ng and reporting. The City also maintains a public -facing reporting mechanism to keep stakeholders and residents informed on progress made against performance metrics laid out in the Climate Action Plan. The Environment Department contracted with the Unive rsity of California, Berkeley, Center for Law, Energy & the Environment (the “CLEE”) to assess options for funding the equitable implementation of the Climate Action Plan. CLEE released its report entitled “Funding San Francisco Climate Action” in November 2022.

In 2023, together with the Environment Department, the SFPUC released the San Francisco’s Climate Action Plan 2021 – Water Supply Addendum 2023, which adds “water supply” as a seventh sector to the Climate Action Plan.

The addendum focuses on how the City plans to address and secure water supplies that are impacted by multiple climate challenges, including climate change, by continuing to implement effective water conservation programs; deploying innovative ways to conserve, recover, and reuse water; and au gmenting the SFPUC’s Regional Water System by investing in alternative water supply projects.

62 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 system and the Hetch Hetchy Project. • The predecessor to 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 20 years of construction, including the 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 transm ission 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 SFPU C 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 (1935- 38), and the development of Lake Lloyd (Cherry) 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 the majority of WSIP projects 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.

63 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 .

The “Alameda System” includes two reservoirs, San Antonio Reservoir and Calaveras Reservoir, which collect water from the upper Alameda and San Antonio Creek watersheds in 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 Bay Tunnel on opposite sides of the San Francisco Bay near the Dumbarton Bridge. The Bay Tunnel itself runs beneath the floor of San Francisco Bay. Bay Division Pipelines 3 and 4 traverse the southerly edge of 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”) could be refurbished and utilized to 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 Andr eas 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-City Distribution System . The City’s retail water supply is delivered to San Francisco 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 San Francisco is comprised of 1,235 miles of pipeline.

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

TABLE 12

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 25
Reservoirs and/or Water Tanks 11 reservoirs 11 reservoirs/8 water tanks Groundwater Wells 13 6
Treatment Plants 3 None

Source: SFPUC.

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.

This water source is located in the well protected Yosemite National Park and the High 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 control pipeline corrosion and disinfection for bacteria control. Based on the SFPUC’s disinfection treatment practice, extensive bacteriological quality monitoring, and high operational standards, the USEPA 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 t o 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 2011, following two years of construction.

The facility uses UV light to disinfect Hetch Hetchy water to meet 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 chlorine disinfection station was constructed to meet current fire and earthquake safety standards and replace the old station built in 1937. See “CAPITAL IMPROVEMENT PROGRAM AND OTHER WATER SUPPLY INITIATIVES – Water System Improvement Program.”
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: the Sunol Valley Water Treatment Plant (“Sunol Valley WTP”) and the Harry Tracy Water Treatment Plant (“Harry Tracy WTP ”). Major upgrades of these two facilities have been completed as part of the WSIP. See “CAPITAL IMPROVEMENT PROGRAM AND OTHER WATER SUPPLY INITIATIVES – Water System Improvement Program.” 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 at 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 supply does not meet required drinking water standards.

65 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-million-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 reliab ility and can now achieve 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 (Cherry) Reservoir and Lake Eleanor Reservoir.

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 (Cherry) 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 Don Pedro Project, owned and operated by the Irrigation Districts. The 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 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, the San Andreas, San Antonio and Crystal Springs Reservoirs also provide storage for Hetch Hetchy Project diversions, and, along with Calavera s 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 2019. See “REGULATORY MATTERS – Dam Licensing and Safety Issues.”

66 System Storage Capacity . The following table summarizes the storage and capacity of the Regional Water System reservoirs within the Water Enterprise as of April 28, 2025.

TABLE 13

REGIONAL WATER SYSTEM STORAGE AND CAPACITY
(AS OF APRIL 28, 2025)
Current
Storage(1)(2)(3)
(Acre-Feet)
Maximum
Storage(4)
(Acre-Feet)
Available
Capacity
(Acre-Feet)
Percent of
Maximum
Storage(5)
Tuolumne Storage
Hetch Hetchy Reservoir 295,300 360,360 65,060 81.9%
Cherry Reservoir 256,000 273,345 17,345 93.7
Lake Eleanor Reservoir 23,190 27,100 3,910 85.6
Water Bank 570,000 570,000 0 100.0
Total Tuolumne Storage: 1,144,490 1,230,805 86,315 93.0% Local Storage
Calaveras Reservoir 77,739 96,670 18,931 80.4%
San Antonio Reservoir 45,266 53,266 8,000 85.0
Crystal Springs Reservoir 44,986 68,953 23,967 65.2
San Andreas Reservoir 15,707 18,675 2,968 84.1
Pilarcitos Reservoir 1,952 3,125 1,173 62.5
Total Local Storage: 185,650 240,689 55,039 77.1%

Total Regional Water System 1,330,140 1,471,494 141,354 90.4%

(1) Upcountry storage is the date’s 8:00 a.m. storage value taken from United States Geological Survey data. (2) Water Bank storage reported by Hetch Hetchy Water and Power for April 27, 2025. (3) Local storage is the date’s 8:00 a.m. storage value taken from United States Geological Survey data. (4) Hetch Hetchy maximum storage is with drum gates activated. Cherry and Eleanor maximum storage is with flashboards in. All max imum storages taken from rating curve.
(5) The ratio of median storage for this day over maximum storage capacity. Median storage for this day is based on historical storage data from years 1991-2020.

Source: SFPUC.

Table 13 shows storage levels as of April 28 , 2025. Total Regional Water System storage levels would normally be at approximately 81.3% of Total Regional Water System storage capacity as of this date. The level as of April 28, 2025, is higher than that at approximately 90.4% of Total Regional Water System storage capacity. The Water Bank is at 100.0% of total capacity as of April 27, 2025. Tuolumne storage is operated to receive snowmelt runoff, which has been at around normal level for Water Year 2025, while local storage relies primarily on Bay Area rainfall, which has been at around normal level for Water Year 2025. Both Tuolumne storage and local storage are close to full at 93.0% and 77.1%, respectively. See “WATER FACILITIES – Water Storage – System Storage Capacity.” Maximum storage is subject to regulation by the DSOD.

In-City Storage . The Water Enterprise’s in -City reservoirs and storage tanks have the capacity to hold approximately 421.9 million gallons, or 1,295 acre -feet. The SFPUC estimates this capacity to be an approximate five-day supply at the current average rate of consumption for San Francisco. 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.

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

TABLE 14

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 6.2
Potrero 1.3
Hunters Point 1.1
Treasure Island/Yerba Buena Tanks 4.2
Storage Tanks 10.2
Total 421.9

(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 San Francisco at Lake Merced. Lake Merced currently holds approximately 1.5 billion gallons or approximately 4,603 acre-feet.

Physical Condition of Certain Facilities
Certain of the Water Enterprise’s facilities have been in service for considerable amounts of time. Long lived facilities may experience 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 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, left unaddressed, 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. The SFPUC is taking action to address the risk of Mountain Tunnel failure (see “CAPITAL IMPROVEMENT PROGRAM AND OTHER WATER SUPPLY INITIATIVES – 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 most recently inspected in January 2015 after having been last inspected in 1995. The most recent inspection revealed that the Coast Range Tunnel is still in good condition, with little change noted since the 1995 inspection. The next condition assessment of the Coast Range Tunnel is expected in 2033 -2035. 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 seismic reliability and redundancy needed to accommodate planned outages for maintenance and unplanned outages resulting from facility failure. The WSIP was not designed to replace

68 or upgrade the entire water system. Repair of Mountain Tunnel and other Hetch Hetchy water transmission facilities, as well as the replacement, rehabilitation and repair of water transmission and distribution pipelines and other Regional Water System and in-City facilities are included in the SFPUC’s 2026 Capital Plan (as defined herein). See “CAPITAL IMPROVEMENT PROGRAM AND OTHER WATER SUPPLY INITIATIVES.” Prior Heavy Storms
Storms can damage the facilities of the Water Enterprise. Early winter storms at the end of 2022 and beginning of 2023, for example, caused damage to several Water Enterprise facilities. These storms did not, however, significantly impact the operation of the Regional Water System. The SFPUC continued to deliver high -quality drinking water to its retail and wholesale customers throughout the storm events. Watershed roads in Alameda and San Mateo Counties experienced erosion, sinkholes and slides and repairs are needed to restore access. At the Alameda Creek Diversion Dam, fast -rising creek flows damaged fish screens and gates, and debris washed into the concrete diversion structure. There was also superficial erosion on the downstream face of Calaveras Dam that required repair.

The Hetch Hetchy Water and Power upcountry facilities faced complete and partial road failures; however, Hetch Hetchy crews managed to maintain access to critical facilities during the storms. Additional reported damages include erosion near the headgate structure of the Early Intake Dam.

The SFPUC anticipates that both short- and long-term capital projects will be necessary to rebuild roads and repair damaged facilities. The total estimated cost of damages is expected to be at approximately $70 million; however, final costs will not be kno wn until at least fall 2025. The SFPUC expects to cover these costs through reserves, revenues from the Water Enterprise and Power Enterprise, and proceeds from existing Water and Power Enterprise bonds. The City has applied for federal and State disaster relief funding, and the SFPUC plans to seek reimbursement for qualified expenses.

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 San Francisco, 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 2014 South Napa earthquake on the West Napa Fault, the northern extension of the Calaveras Fault, 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. The most recent significant earthquake was t he 7.0- magnitude 2024 Offshore Cape Mendocino California earthquake, which erupted approximately 40 miles offshore from Petrolia in Humbolt County, along the Mendocino Fault, which sits in an area where three tectonic plates coverage (the Mendocino Triple Junction), one of the most seismically active parts of California.

The Regional Water System crosses several active and potentially active faults, including major strike -slip faults within the San Francisco Bay region. Major fault crossings along the pipeline delivery system include the Orestimba fault at Tesla Portal, th e 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 wate r 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 Sunse t 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 before 2043 (during the period the 2025DEF Bonds will be outstanding). A large earthquake on these faults has the

69 potential for generating surface fault rupture that is hazardous to specific SFPUC facilities. A major goal of the nearly- completed WSIP is to rehabilitate and strengthen the tunnels, pipelines and other Water Enterprise facilities that cross or are situated near known active faults. The WSIP included 27 projects that had seismic reliability as a primary or secondary goal; all of these projects have been completed with the most recent completion of the Calaveras Dam Replacement project in 2019.

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 next 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 any damage as quickly as possible, and the amount of time required to return the facilities to service would de pend 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.

With the completion of the WSIP’s seismic improvement projects, the performance objective for the system is to deliver basic service (average winter month demand) to at least 70 percent of customer turnouts within each of three regions within 24 hours of a major seismic event. For additional reliability, the SFPUC has established intertie connections with the 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 that 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 raw water reservoirs in San Mateo County (the Crys tal Springs, San Andreas and Pilarcitos Reservoirs); treated water in transmission storage reservoirs, tunnels, and pipelines; and three terminal reservoirs located in San Francisco. Additional supply may be available from existing intertie connections and Regional and San Francisco groundwater wells. The combined capacity of the three San Mateo County raw water reservoirs is approximately 29.8 billion gallons. The SFPUC has historically kept these reservoirs filled to a combined capacity of approximately 1 8 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 of 229 mgd (projected February 2030 demand) within 24 hours a fter 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 winter day demand 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.

70 • 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
Facilities of the Water Enterprise include 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. The Peninsula watershed is located within the California Department of Forestry and Fire Protection’s (CALFIRE) “High” Fire Hazard Severity Zone, primarily because of its proximity to residential areas.

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 M itigation Plan meets or exceeds the requirements of Section 8387 of the California Public Utilities Code for publicly owned electric utilities. As required, the Mitigation Plan is reviewed by an independent eva luator, 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. In August 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 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 the Calaveras Reservoir watershed burned. The SFPUC is working to repair watershed fences damaged in the SCU Lightning Complex Fires.

See also “RISK FACTORS – Risks Relating to Financial Operations – Inverse Condemnation.” Emergency Firefighting Water System
In response to the 1906 earthquake and fire that ravaged San Francisco, the City constructed multiple systems to fight fires in the event of an emergency. These multiple systems and sources of water supply provide layers of fire protection to residences and businesses across San Francisco.

71 The first system is a standard -pressure municipal drinking water system connected to approximately 8,552 standard white fire hydrants, which are located on every block throughout the city and regularly used by the San Francisco Fire Department to fight fir es. These fire hydrants are fed by 12 reservoirs and six tanks in San Francisco, which are ultimately supplied by the SFPUC reservoirs on the Peninsula, East Bay, and Sierra Nevada.

The second system is the high -pressure Emergency Firefighting Water System connected to approximately 1,335 larger hydrants. The Emergency Firefighting Water System, also known as the Auxiliary Water Supply System, has been constructed over the decades following the 1906 earthquake. The EFWS is an entirely separate water supply and pipeline network for fighting large fires, particularly after emergency events such as earthquakes. The system consists of a resilient 135 -mile pipeline network, a high elevation reservoir, two large capacity tanks, two seawater pumping stations, and numerous other bay water intakes (suction connections). The system has unique capabilities, including the ability to deliver water at the high pressures needed by the San Francisco Fire Department to fight large fires, and the ability to use water from the San Francisco Bay as an unlimited source for firefighting.

In 2010, the SFPUC assumed management of the EFWS and began working with the San Francisco Fire Department and San Francisco Public Works to upgrade the system. Since then, the SFPUC has installed 30 new stand- alone cisterns (buried 70,000 gallon tanks), 1 5 of which are located in westside neighborhoods in San Francisco, to provide additional sources of water for firefighting. San Francisco has approximately 200 cisterns across the city. The SFPUC has also made upgrades and repairs to existing pump stations and reservoirs and constructed new pipelines, including one in the Candlestick Point/Carroll Avenue area.

The EFWS is now being expanded to the Richmond and Sunset Districts in the west side of San Francisco with a new version of piping called the Potable Emergency Firefighting Water System, which will be used for transmission of potable water in normal times but will be isolated for firefighting uses after large earthquakes. The Potable Emergency Firefighting Water System project, estimated to cost approximately $145 million, $54.2 million of which is included in the SFPUC’s 2026 Capital Plan. The pipelines w ill be financed with a combination of the SFPUC’s water revenue bonds and City general obligation bond funds. The initial segment of the Potable Emergency Firefighting Water System was constructed in 2023 and the next major construction contracts is expec ted to begin in 2026. Future construction of this system will continue in segments pending additional funding from the SFPUC’s water revenue bonds and City general obligation bond funds.

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 SFP UC 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 inte rnal 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 “THE WATER ENTERPRISE – Cybersecurity” and “RISK FACTORS – Risks Related to Water Enterprise Facilities and Operation – Cybersecurity.”

CAPITAL IMPROVEMENT PROGRAM AND OTHER WATER SUPPLY INITIATIVES Capital and Financial Planning Process
The SFPUC’s long-term capital and financial planning is performed on an annual rolling 10- year forward looking basis. The SFPUC prepares a 10- year capital plan for each of its enterprises, as required by the Charter. The 10-year capital plan serves as the basis for the development of the annual 10 -year financial plan. Proposed long-term capital programs, projects and investments, and related costs are included in the 10- year financial plan. Consistent

72 with the Charter, updates to the 10-year capital plan and 10-year financial plan are generally reviewed at least annually and adopted by the Commission each February. The 10-year financial plan provides estimated rate impacts of projected capital and operating spending and assures compliance with the SFPUC’s adopted financial policies, including its debt service coverage and fund balance reserve policy requirements.

The 10-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 10-year capital plan, they may occasionally differ from it.

The Water Enterprise’s 10-year capital plan for Fiscal Years 2025 -26 to 2034-35, which includes the Water Enterprise-related components of the Hetch Hetchy Water and Power 10-year capital plan, adopted by the Commission on February 11, 2025 (the “2026 Capital Plan”), totals approximately $3.044 billion. The 2026 Capital Plan includes projects in three major Water Enterprise categories: (i) Regional Water; (ii) Local Water; and (iii) Hetch Hetchy Water.

The Regional Water, Local Water and Hetch Hetchy Water categories of the Water Enterprise’s 2026 Capital Plan are expected to be financed by a combination of revenue bonds, commercial paper, revolving notes, Parity State Loans, revenues (pay-as-you-go) and capacity charges. For more information regarding the 2026 Capital Plan programs, see “– Regional Water Program,” “– Local Water Program,” and “– Hetch Hetchy Water” below. See also “FINANCING OF CAPITAL IMPROVEMENTS.”
The following table sets forth the first five years of the Water Enterprise’s capital improvement program as set forth in the 2026 Capital Plan.

TABLE 15

WATER ENTERPRISE CAPITAL IMPROVEMENT PROGRAM
FOR FISCAL YEARS ENDED JUNE 30
(1)
(IN THOUSANDS)
2026 2027 2028 2029 2030 Total
Regional Water $139,808 $292,595 $248,638 $199,537 $115,035 $ 995,613 Local Water 337,375 251,731 90,810 70,985 64,811 815,712 Hetch Hetchy Water 85,222 72,477 79,514 41,089 76,292 354,594 Total Appropriations(2) $562,405 $616,803 $418,962 $311,611 $256,138 $2,165,919

(1) Amounts are based on anticipated appropriations and are projections from the Water Enterprise 2026 Capital Plan. Actual results may differ materially from these projections. See “FORWARD-LOOKING STATEMENTS.” (2) Totals may not add due to rounding.

Source: SFPUC.

Regional Water Program
The Regional Water Program, projected to comprise approximately $1.260 billion of the 2026 Capital Plan, finances capital improvements to the Regional Water System. Regional Water Program capital investments include, but are not limited to, water treatment, wa ter transmission, water supply and storage, watersheds and land management, communication and monitoring, and building and grounds management.

The Regional Water category of the 2026 Capital Plan also includes approximately $60.2 million in funding for project planning related to certain regional projects in the AWS Program, as well as for additional planning efforts for other alternative water s upply options. For more information regarding the AWS Program, see “ – Water Supply Initiatives – AWS Program.”
Local Water Program
The Local Water Program, projected to comprise approximately $1.158 billion of the 2026 Capital Plan, finances capital improvements to the In -City Distribution System. The primary component of the Local Water Program, projected to comprise approximately $755 million, is the local Water Conveyance and Distribution program,

73 which consists of pipeline installation, repair and replacement. For pipeline replacement, the SFPUC has replaced an average of 7.8 miles of pipe annually over the past five years compared to a previous rate of four to six miles per year.

The SFPUC has increased its planned investment in the 2026 Capital Plan in order to increase the pipeline replacement rate to approximately 12 miles per year.

The Local Water category of the 2026 Capital Plan also includes planning efforts to advance conservation and develop local water supply sources. For more information about these local water supply initiatives, see “– Water Supply Initiatives – Local Water Supply Initiatives.”
Hetch Hetchy Water
General. Upgrades to the aging facilities of Hetch Hetchy Water and Power are being constructed to ensure reliability and preparedness for the future. The Hetch Hetchy Water category of the 2026 Capital Plan is projected to cost approximately $625.8 million. Upco untry 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 $187.8 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 $438.0 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 the 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 7.9 miles are unlined (natural rock) and the lower 11.0 miles are lined with concrete.

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 four parallel tracks to investigate and provide repairs to Mountain Tunnel: (1) the Mountain Tunnel Inspection and Interim Repairs Project, completed in 2017, (2) the Mountain Tunnel Adits and Access Improvement Project, also completed in 2017, (3) 2018 Mountain Tunnel Interim Repairs Project, which was completed in 2019, and (4) the Mountain Tunnel Improvements Project, currently in construction. A complete shutdown and draining of Mountain Tunnel was performed during 2017 to accomplish t he 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 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 c onstruction contract was awarded in October 2020, with Notice to Proceed in January 2021. Significant project work has been completed to date including construction of an access shaft for a new flow control facility near Priest Reservoir, construction of new access adit tunnel near Priest Reservoir, partial repair of tunnel interior lining, access road improvements, and various improvements along the tunnel alignment. The current construction contract is forecast to achieve substantial completion at the en d of 2026. However, some scope of work related to the tunnel and roadway improvements at the South Fork site are planned to be removed from the current contract and moved to a future contract due to differences of opinion about constructability with the current contractor. The City is evaluating alternative delivery procurement methods to complete the remaining work. While the majority of the tunnel improvements will be completed, delaying this work will delay the full use of the flow control facility until these repairs can be performed.

Improvements to Mountain Tunnel are projected to cost a total of approximately $268.7 million; $210.1 million has been appropriated to the project to date, and an additional $21.4 million will be appropriated for

74 the 2026 Capital Plan. The portion of the project that performs repairs and improvements to the Mountain Tunnel is projected to cost $134.3 million; the tunnel has been classified as a Water asset and thus these costs will be funded 100% by Water Enterpris e. The remaining portion of the project that constructs the new flow control facility is projected to cost $134.3 million; because this flow control facility will benefit both water delivery and power production, it has been classified as a joint asset, an d thus will be funded by Water Enterprise and Power Enterprise, pursuant to existing cost-sharing agreements with wholesale customers. The current cost sharing agreement allocates 45% of the cost for joint assets to the Water Enterprise and 55% of the cost to the Power Enterprise. See “FINANCIAL OPERATIONS – General – Allocation of Hetch Hetchy Project Costs.” The SFPUC has entered into the DWSRF Loan for up to $239.219 million with the SWRCB to finance a portion of the cost of the Mountain Tunnel Project pursuant to the SWRCB’s Drinking Water State Revolving Fund Program. For more information regarding the loan, see “OBLIGATIONS PAYABLE FROM REVENUES – Parity State Loans.”
Water System Improvement Program
General. The Water System Improvement Program is a $4.793 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 obj ectives for seismic reliability, delivery reliability, water quality and water supply in an environmentally sustainable and cost-effective manner. Objectives for WSIP include (i) furnishing system improvements to provide high quality water that reli ably meets current and foreseeable local, State and federal requirements; (ii) reducing vulnerability 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. As of December 2024, only two WSIP projects remain to be completed: (i) the Regional Groundwater Storage and Recovery Project, and (ii) the Alameda Creek Recapture Project. Both projects are currently in the construction phase and are further described below.

Schedule and Budget . In 2005, the SFPUC approved the original scope, schedule and a budget of $4.342 billion for WSIP (the “2005 Baseline Budget”). Since then, the SFPUC has approved several revisions to the schedule and budget for WSIP, most recently in April 2024 (the “ 2024 Budget ”). The variance between the 2005 Baseline Budget and the 2024 Budget of $4.793 billion is an increase of approximately $446 million, or a 10.3% increase and is due mainly to construction cost increases to the WSIP’s largest proj ect, the Calaveras Dam Replacement Project (which increased by approximately $308 million, or 118% of total project cost). All appropriations for the WSIP have been made and WSIP is consequently not included in the 2026 Capital Plan (as defined herein). Pursuant to the 2024 Budget, the SFPUC anticipates overall program completion in June 2032.

Regional Groundwater Storage and Recovery Project . The Regional Groundwater Storage and Recovery Project 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 sy stems and pipelines, and other associated facilities, was completed in September 2022 and closed out in January 2023. Phase 2 has been divided into two construction contracts (Phases 2A and 2B); Phase 2 will provide improvements to the wells installed under Phase 1 to provide corrosion protection and other operational improvements, as well as to complete installation and connection of the South San Francisco Main Well. The Phase 2A contract to install cathodic protection and other improvements to some of the wells started construction in June 2022 and is anticipated to be completed later in 2025.

The Phase 2B contract for installation of the South San Francisco Main Well facility and pipeline started construction in 2024 and is anticipated to be completed in 2026.

Alameda Creek Recapture Project. The Alameda Creek Recapture Project 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 Alameda Creek Diversion Dam during f uture operations of Calaveras Reservoir.

Construction of the facility started in June 2021. In April 2023, the SFPUC terminated the project’s construction contract due to concerns regarding worsening pond slope erosion, antic ipated facility operating and maintenance

75 complexity, and excessive change orders to redesign the facility to accommodate the erosive slope conditions. The project is being re -evaluated for short-term and long-term slope stability remediation and to consider improvements for operation and maintena nce sustainability. The SFPUC will work with the quarry operator to stabilize the pond banks and re-evaluate the facility design to simplify operation and maintenance requirements. It is anticipated that a new construction contract will be issued using a design/build project delivery method and explore the possibility of adding initial operation and maintenance scope as part of the contract. The project is anticipated to be completed in 2032.

Water Supply Initiatives
AWS Program
General. With WSIP nearing completion, there are two main drivers for the SFPUC’s future infrastructure water needs: (i) environmental flow requirements on the Tuolumne River that could result in a reduction of available water supplies by approximately 105 mgd during dry years at the current contract levels of demand if the 2018 Plan Amendment (as defined herein) requiring the release of 40% of unimpaired flow in the Tuolumne River is implemented (see “REGULATORY MATTERS – Bay Delta Water Quality Standards”); and (ii) a policy decision before the SFPUC on whether to provide a permanent supply guarantee of 9 mgd to the cities of San José and Santa Clara, who are currently interruptible customers (see “ – Wholesale Deliveries – Status of San José and Santa Clara” and “– 2028 Water Supply Decisions”). Both drivers may cause additional dry- year shortages. In 2019, with the goal of ensuring that the water needs of Retail and Wholesale Customers will continue to be met under future conditions, the SFPUC established the AWS Program to evaluate new and diverse alternative water supply options, such as expanding storage, groundwater banking, transfers, purified water (potable reuse), desalination and technological innovations.

Planning for alternative water supplies requires a comprehensive and detailed evaluation effort that considers several interrelated challenges, many of which are different than those faced through traditional water supply planning at the SFPUC. These plann ing challenges include complex multi -party partnerships and approaches for integrating new supply sources into an expansive and largely homogenous water system. Additionally, as with any long- term water supply planning effort, the SFPUC must also contend w ith uncertainties such as new and prospective regulations, climate change and extreme weather events and long- term demand projections. To minimize the risk of overbuilding, the SFPUC’s approach involves planning for existing and potential obligations and a dvancing projects toward implementation based on projected demands on the Regional Water System. The approach is necessarily dynamic as both supply-side and demand-side drivers continue to change over time. As planning continues, whether individual projects proceed to construction will depend on their technical, financial, and institutional feasibility, as well as changes that could affect the drivers of the projected shortages.

AWS Program Planning Priorities and Level of Service Goals and Objectives . The planning priorities of the AWS Program include (i) meeting regulatory requirements including instream flow releases, (ii) meeting existing obligations to existing permanent customers, (iii) determining whether the SFPUC will have long-term water supplies available to make current interruptible customers permanent, and (iv) meeting increased demands of existing and interruptible customers. In conjunction with these planning priori ties, the SFPUC considers the level of service goals and objections related to water supply and sustainability when planning for new water supply opportunities. The key level of service goals and objectives relevant to AWS Program planning include (a) meeting dry-year delivery needs while limiting rationing to a maximum 20% system -wide reduction in water service during extended droughts; (b) diversifying water supply options during non-drought and drought periods; (c) improving use of new water sources and drought management, including groundwater, recycled water, conservation, and transfers; (d) meeting, at a minimum, all current and anticipated legal requirements for protection of fish and wildlife habitat; and (e) providing operational flexibility.

AWS Projects.

In 2019, the SFPUC identified six regional alternative water supply options under the AWS Program. The SFPUC has been studying the feasibility of these projects. To date, two regional projects remain active, three projects have been deferred, and one project has been cancelled, each as further described below. Because of the inherent technical, institutional and operational complexities, AWS projects are anticipated to be more expensive than traditional SFPUC capital projects. The 2026 Capital Plan includes approximately $60.2 million for project planning

76 related to the active projects described below, as well as for additional planning efforts for other alternative water supply options.

PureWater Peninsula (formerly Crystal Springs Purified Water)(Active): This project could provide 6-8 mgd of water supply through reservoir water augmentation at Crystal Springs Reservoir and an additional 4- 6 mgd (for a total of up to 12 mgd) through direct potable reuse to other partner agencies. Treated wastewater from S ilicon Valley Clean Water and 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 be transmitted over 12 miles 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 a gain at Harry Tracy Water Treatment Plant. An alternative that delivers up to 12 mgd directly into the SFPUC’s treated water delivery system was also evaluated and the two project alternatives are currently being reviewed by the SFPUC. In addition to the S FPUC and the wastewater agencies, Cal Water, the City of Redwood City, Mid-Peninsula Water District and BAWSCA are also participating in this project.

South Bay Purified Water (Active):

As described above under “ – General,” one of the main drivers for the SFPUC’s future infrastructure water needs is a policy decision before the SFPUC regarding whether to change the status of the cities of San José and Santa Clara from interruptible to permanent customers (see “THE WATER ENTERPRISE – Wholesale Deliveries – Status of San José and Santa Clara” and “ – 2028 Water Supply”). To help offset the potential incremental dry year impact of adding new obligations and support their request for permanent status, San José and Santa Clara are partnering with the SFPUC to evaluate a new water supply project that could provide 3.5 mgd of dry year supply to the SFPUC. Additionally, this project would produce 6.5 mgd of supply in all years for use by San José and Santa Clara. Initial feasibility of the project was completed in July 2023. Discussions regarding agreements are ongoing and additional technical analysis will be needed before project planning is concluded.

Daly City Recycled Water Expansion (Deferred) :

This project was intended to produce approximately 1.0
mgd of recycled water on an average annual basis, resulting in approximately 0.7 mgd of additional dry- year potable supply availability in the South Westside Groundwater Basin. The primary purpose of this project was to provide recycled water for certain cemetery and irrigation use, offsetting existing groundwater pumping from the South Westside Groundwater Basin, and thereby increasing the reliability of the basin for additional drinking water supply during droughts for SFPUC customers. This project has been deferred due to, among other reasons, high capital cost requirements and reduced water supply benefits to the SFPUC, and may be reevaluated in the futu re.

Alameda County Water District – U
nion Sanitary District Purified Water Partnership (Deferred): This project was intended to provide Alameda County Water District (“ ACWD”) with a new purified water supply by treating wastewater from Union Sanitary District (“ USD”) to meet drinking water standards and transmitting such purified water to the Quarry Lakes Groundwater Recharge Area to supplement recharge into the Niles Cone Groundwater Basin or for other uses in the ACWD service area. The first phase of the project was intended to provide ACWD with up to 5.4 mgd of additional water supply, enabling an in- lieu exchange with the SFPUC that would preserve more water in SFPUC’s Regional Water System. This project has been deferred due to, among other reasons, relatively high capital cost requirements and USD and ACWD pursuing other, higher -priority planning efforts, and may be reevaluated in the future.

Calaveras Reservoir Expansion (Deferred):

This project was intended to add up to an additional 289,000 acre-feet, or 94 billion gallons, of water storage to the Calaveras Dam (which currently has a water storage capacity of 96,850 acre-feet, or 31 billion gallons) that could be available in all water year types. This project included raising the dam, expanding the capacity of the outlet structures and spillway, and adding necessary transmission and pumping infrastructure to convey water to the Calaveras Reservoir. This project has been deferred due to, among other reasons, high capital cost requirements, and may be reevaluated in the future.

Los Vaqueros Reservoir Expansion (Cancelled): This project was a storage project proposed by Contra Costa Water District (“ CCWD”), which owns and operates the existing Los Vaqueros Reservoir located in northeastern Contra Costa County. CCWD invited other water agencies in the region, including the SFPUC, to participate in the project, which would have enlarged the reservoir for use by the other agencies, to increase water supply reliability for customers and to provide ecosystem benefits to south- of-Delta wildlife refuges and Delta fisheries. The SFPUC

77 contemplated storage space in the project to provide a dry- year water supply benefit to the SFPUC’s customers; however, CCWD cancelled the project in fall 2024 due to, among other reasons, high capital cost requirements, reduced water supply benefits, and other project risks.

San Joaquin V alley Projects
In addition to the AWS Program described above, the SFPUC is also exploring opportunities for collaboration in the San Joaquin Valley that could reduce potential future water supply shortfalls in the SFPUC service area. These three concepts are described below.

Groundwater Banking. Groundwater banking in the Modesto Irrigation District and Turlock Irrigation District 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 service 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-B
asin Collaborations . Inter-Basin collaborations could include establishing 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 system, and this excess flow could be shaped and credited to meet Stanislaus system requirements, while New Melones Reservoir in the Stanislaus system is refilling. Stored water could then be partially used to provide required streamflow to meet Stanislaus and Tuolumne requirements in future dry years.

Dry Year Water Transfer. T
he SFPUC has initiated discussions with Oakdale Irrigation District to transfer 2 mgd (2,240 acre-feet) from Oakdale Irrigation District in dry years only. While no transfer has been secured to date, the SFPUC continues to explore potential transfer opportunities on the Tuolumne River and throughout the San Joaquin Valley.

Local Water Supply Initiatives
The SFPUC is also continually expanding efforts to advance conservation and develop local supply sources.

These ongoing local programs are described below.

Local Water Conservation. The SFPUC maintains a robust water conservation program and has one of the lowest rates of per capita water use in California. Conservation programs include rebates and incentives for replacement of inefficient plumbing fixtures, appliances and equipment ; water-wise evaluations; free water -saving devices; tools to help customers understand and manage their water use; education; and outreach.

Onsite Water Reuse .

The 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 SFPUC also administers the Non-Potable Water Ordinance that requires onsite water reuse systems for new development projects of 100,000 gross square feet or greater in San Francisco, and the Stormwater Management Ordinance that outlines the mandatory requirements for managing post -construction stormwater runoff and provides guidance on how to incorporate green infrastructure into site design.

Ideation to Implementation (I2I) Program : This program helps the SFPUC better align and overcome challenges that can affect successful implementation of new water supply and conservation projects. These challenges may be related to regulations, resource availability, climate uncertainty, or affordability. The I2I Program encourages creativity, collaboration, and opportunities for partnership in addressing implementation challenges. Examples of the I2I Program’s work that have been executed are demonstration s of new technologies and grant funds to support partnership opportunities for applications such as piloting atmospheric water generation technology, supporting heat recovery in non-potable systems, testing leak detection, and developing guidance for breweries treating process water for reuse.

78 PureWaterSF: This program aims to plan for the phased development of a new local drinking water supply in San Francisco of approximately 2- 8 mgd through the treatment of recycled water from the Oceanside Water Pollution Control Plant (PureWaterSF – West) and the Southeast Water Pollution Control Plant (PureWaterSF – East).

From 2018-2020, the SFPUC completed a temporary small -scale research and demonstration purified water (potable reuse) project at its headquarters. In 2022, the SFPUC completed an evaluation of four alternative scenarios for purified water development. The SFPUC is currently reviewing treatability and developing preliminary design for an initial phase of the PureWaterSF – East project. The initial phase includes the planning and construction of a purified water public engagement and operator training facility. While the total cost of this program has not been determined and requires further analysis, the SFPUC anticipates significant capital expenditures will be necessary for full implementation.

Environmental Planning Considerations
Projects undertaken by the SFPUC are 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 (“NEPA”). The San Francisco Planning Department (the “Planning Department”), acting as the CEQA lead agency under Chapter 31 of the City’s Administrative Code (“Chapter 31”), generally coordinates CEQA review of SFPUC projects. The SFPUC also coordinates with federal NEPA lead agencies to prepa re NEPA documentation for SFPUC projects.

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 environmental 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 short -term and long -term impacts; 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 and reporting program on how the mitigation is carried out during project implementation. If a project’s significant effects can be mitigated, the SFPUC can adopt a written statement (called a mitigated negative declaration) or if the project will not have a significant effect on the environment, the SFPUC may adopt a written statement (called a negative declaration) to that effect and in both cases need not prepare an EIR. After deci ding to approve or carry out a project, either following the EIR process or after adopting a mitigated negative declaration or a negative declaration, the Planning Department must file a notice of such determination with the Office of the County Clerk. CEQA also contains several exemptions, which the SFPUC uses for its projects when appropriate.

Any action or proceeding challenging the Planning Department determination must be brought within 30 days following the filing of such notice. Actions have been, and in the future may be, filed 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.

As part of its regular planning and budgetary process, the SFPUC gives careful attention to environmental considerations. All projects are evaluated under the SFPUC’s environmental evaluation procedures (Infrastructure Procedures 7.01 and 7.02), developed in compliance with federal and State laws and regulations, City ordinances and the City’s Administrative Code procedures, including Chapter 31.

Prior to the sale of new money bonds, the Planning Department 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

79 construction contract to implement any project to be funded by the proposed bond sale. The Planning Certificate for the projects to be financed by the 2025D Bonds and the 2025E Bonds was issued in August 2024.

FINANCING OF CAPITAL IMPROVEMENTS
Long Term Financing of Capital Program
The Water Enterprise’s 10 -year financial plan for Fiscal Years 2025 -26 to 2034- 35 (the “ 2026 Financial Plan”) was adopted by the Commission on February 11, 2025. The 2026 Financial Plan is based on the 2026 Capital Plan. Pursuant to the 2026 Financial Plan, long- term debt financing, comprised of additional Bonds and State Revolving Fund loans, is projected to fund approximately $1.908 billion of the 2026 Capital Plan, and revenue (pay - as-you-go) funding is projected to fund approximately $1.134 billion of the 2026 Capital Plan. See “OBLIGATIONS PAYABLE FROM REVENUES – Parity State Loans.”
The SFPUC’s long-term capital and financial planning is performed on an annual rolling 10- year forward looking basis. Although the 2026 Financial Plan currently contemplates the issuance of additional Bonds and State Revolving Fund loans to finance the capital program, the SFPUC may also consider additional financing options in the future, including but not limited to other parity or subordinate federal and State loans.

Interim Funding Program Facilities
The SFPUC’s Interim Funding Program is a short -term financing program consisting of a combination of lines of credit and credit facilities, liquidity facilities and letters of credit supporting the SFPUC’s ability to issue short- term indebtedness, including the issuance of Commercial Paper Notes. 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 $750 million. Of this amount, $550 million is authorized for the SFPUC to issue Commercial Paper Notes and the remaining $200 million is in the form of separate bank revolving credit agreements, each of which permits the SFPUC to make draws directly from respective bank, with the SFPUC’s payment obligation evidenced by the Revolving Notes. See “OBLIGATIONS PAYABLE FROM REVENUES – Subordinate Debt and Interim Funding Program.”
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 approac h allows the SFPUC to take advantage of historically lower short -term interest rates, and to size and closely time long-term financings with projected need.

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 2026 Capital Plan.

* Preliminary, subject to change.

80 TABLE 16

WATER ENTERPRISE CAPITAL IMPROVEMENT PROGRAM
FUNDING SOURCES(1)
FOR FISCAL YEARS ENDED JUNE 30
(IN THOUSANDS)
Appropriations 2026 2027 2028 2029 2030 Total
Revenue Bonds / Parity State Loan $458,266 $524,965 $308,595 $205,080 $144,827 $1,641,733 Water Revenues 102,726 90,369 108,840 104,943 109,660 516,538 Capacity Charge Revenues 1,412 1,469 1,528 1,589 1,652 7,650 Total Sources(2) $562,404 $616,803 $418,963 $311,612 $256,139 $2,165,921

Source: SFPUC.

The repayment of projected principal and interest on future debt issues has been incorporated into the development of the SFPUC’s approved retail water rates through Fiscal Year 2025- 26, and has also been reflected in the remaining projection period set forth in the 2026 Financial Plan. Pursuant to the WSA, a share of debt service associated with improvements to the Regional Water System is the responsibility of the Wholesale Customers.

Pursuant to the 2026 Financial Plan, the SFPUC projects that retail water rates will increase annually by an average of approximately 6.2% from Fiscal Year 2025-26 to Fiscal Year 2034-35. On May 23, 2023, the Commission approved retail water rates and char ges for the three -year period effective July 1, 2023 through June 30, 2026.

However, no retail rate increases beyond June 30, 2026, have been proposed to, or adopted by, the Commission or submitted to the Board of Supervisors, and any future retail water r ate increases are subject to future approval by the Commission, subject to the Board of Supervisors’ ability to reject rate increases. See “FINANCIAL OPERATIONS – Retail Water Sales Revenue.”

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 Annual Comprehensive Financial Report of the City and shown as enterprise funds. The City’ s Annual Comprehensive Financial Report is not incorporated by reference herein.

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 based on a proprietary fund type, specifically an enterprise fund. The financial activities of the Water Enterprise are accounted for on a flow of 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 position; revenues are recorded when earned, and expenses are recorded when liabilities are incurred.

The SFPUC applies all applicable GASB pronouncements.

81 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 prepares biennial budgets. The Commission reviews and approves the SFPUC’s two- year budget, which is then submitted to the Mayor’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. The City Services Auditor (“CSA”) is an audit function within the Office of the City Controller. 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 source of revenue is the sale of water to its Retail Customers and wholesale customers. The setting of water rates by the SFPUC is not subject to any State or federal regulatory approval. The SFPUC’s ability to generate r evenue 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 the Wholesale Customers reflected in the terms of the WSA, 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 Ent erprise 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.” 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, capital expenses, administrative and general expenses, property taxes, and the “Suburban Hetch Hetchy Assessment,” being the costs of operating the Hetch He tchy Project allocated exclusively to the Water Enterprise or jointly to the Water Enterprise and the Power Enterprise. Payments made by Wholesale Customers can as a general matter be considered by Wholesale Customers to be costs of purchased water, an operation and maintenance expense under applicable accounting rules.

The cost of service for the 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 S ystem 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 the Water Enterprise’s share of joint costs are reflected in the Wholesale Revenue Requirement.

Finally, the WSA contains a rate device known as the balancing account (the “ Balancing Account”). If the amount of the revenues received in any Fiscal Year is greater than the actual expenses associated with the allocated cost of wholesale service, the amount of the excess is added to the Balancing Account. If the amount of the revenues received in any Fiscal Year is less than the actual expenses associated with the allocated cost of wholesale service, the

82 amount of the deficit is subtracted from the Balancing Account. As of the end of any Fiscal Year, the Balancing Account may have a positive balance (reflecting amounts “owed” by the SFPUC to the Wholesale Customers) or a negative balance (reflecting amount s “owed” by the Wholesale Customers to the SFPUC). The Balancing Account balance is 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. For Fiscal Year 2022- 23, the Bal ancing Account balance was approximately $10.1 million due from the Wholesale Customers, and for Fiscal Year 2023- 24, the Balancing Account balance was approximately $26.1 million due from the Wholesale Customers ( i.e., such amounts were “owed” by the Wholesale Customers to the SFPUC). 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, 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 . Under 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 intends to increase Wholesale Customer ra tes, 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 of 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 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 under 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.

(Remainder of Page Intentionally Left Blank)

83 Historical and Adopted Wholesale Water Rate Adjustments. The following table lists wholesale water rate adjustments since Fiscal Year 2014-15 for the Wholesale Customers.

TABLE 17

HISTORICAL AND ADOPTED PERCENTAGE INCREASES (DECREASES)

IN WHOLESALE WATER RATES
Effective Date
Change in
Wholesale Rates(1)
July 1, 2014 19.6%
July 1, 2015 28.0
July 1, 2016 9.3
July 1, 2017 0.0
July 1, 2018 0.0
July 1, 2019 0.0
July 1, 2020 0.0
July 1, 2021 0.0
July 1, 2022 15.9
July 1, 2023 9.7
July 1, 2024 8.8

(1) Pursuant to the 25-year Water Supply Agreement, wholesale rates are adopted annually based on an estimate of the Wholesale Revenue Requirement.

Source: SFPUC.

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 Cont ract. The WSA continues the practice of binding arbitration, and the SFPUC and its Wholesale Customers have resolved 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. V olumetric 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 si ngle- and multi- family residential customers.

V olumetric charges for non-residential customers are based on a uniform rate. The tables below detail retail water rates for Fiscal Years 2023-24 and 2024-25.

(Remainder of Page Intentionally Left Blank)

84 TABLE 18

RATES FOR RETAIL WATER SERVICE IN SAN FRANCISCO
Fiscal Year 2023-24(1) Fiscal Year 2024-25(1)
Single-Family
Residential
($/CCF)(2)
Multi-Family
Residential
($/CCF)
Non-Residential
($/CCF)
Single-Family
Residential
($/CCF)(2)
Multi-Family
Residential
($/CCF)
Non-Residential
($/CCF)
Tier 1(3) (0-4 or 0-3 CCF) 10.33 10.19 -- 10.85 10.70 -- Tier 2 (All other usage) 11.47 10.94 -- 12.05 11.49 --
Uniform -- -- 11.12 -- -- 11.68

(1) Rates adopted May 23, 2023.
(2) One “CCF” equals 100 cubic feet of water (equal to 748 gallons). (3) Tier 1 for single-family residential is from 0-4 CCF; tier 1 for multi-family residential is from 0-3 CCF.

Source: SFPUC.

The retail water rates in the previous table do not reflect any drought surcharges. See “– Retail Water Rate Adjustments.”
The following tables compare the typical monthly charges for representative Retail Customer classes based on average use for Fiscal Years 2023-24 and 2024-25.

TABLE 19A

TYPICAL MONTHLY CHARGES FOR RETAIL WATER SERVICE IN SAN FRANCISCO FISCAL YEAR 2023-24
Customer Type
Average Use
(CCF) Meter Size Fixed Charge
Volume
Charge
Total
Monthly
Charges
(Volume +
Fixed)
Average Single-Family Residence 4.4 5/8” $16.64 $46.37 $63.01 Larger Single-Family Residence 12.0 5/8” 16.64 133.08 149.72 Large Apartment Building 101.0 3” 151.35 1,005.94 1,157.27 Large Office 351.0 3” 151.35 3,903.12 4,054.47
Department Store 340.0 4” 232.18 3,780.80 4,012.98
Hotel 3,314.0 6” 456.70 36,851.68 37,308.38

Source: SFPUC.

TABLE 19B

TYPICAL MONTHLY CHARGES FOR RETAIL WATER SERVICE IN SAN FRANCISCO FISCAL YEAR 2024-25
Customer Type
Average Use
(CCF) Meter Size Fixed Charge
Volume
Charge
Total
Monthly
Charges
(Volume +
Fixed)
Average Single-Family Residence 4.8 5/8” $17.48 $49.43 $66.91 Larger Single-Family Residence 12.0 5/8” 17.48 139.80 157.28 Large Apartment Building 101.0 3” 158.92 1,056.21 1,215.13 Large Office 351.0 3” 158.92 4,099.68 4,258.60
Department Store 340.0 4” 243.79 3,971.20 4,214.99
Hotel 3,314.0 6” 479.54 38,707.52 39,187.06

Source: SFPUC.

85 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. If the Board of Supervisors rejects proposed rates, the prior rates remain in effect.

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. (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 their designee; the Controller or their designee; the Director of the Mayor’s Office of Public Finance or their 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 policies 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.”

86 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 regularly rev iews and has often increased its retail water rates to fund operating and capital costs. Furthermore, the SFPUC may adjust and re -classify rates, fees, and charges, but will not decrease them unless, following such reduction, t he 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.” In 2022, pursuant to the Charter, the SFPUC retained an independent rate consultant to conduct a water and wastewater cost of service study to establish a proposed three-year water and wastewater retail rate schedule for Fiscal Years 2023-24 through 2025-26 (the “2023 Rate Study”). The SFPUC took several measures to mitigate the risk of over-projecting volumes, which could potentially lead to revenue shortfalls. First, projections in the 2023 Rate Study were based on actual water usage for Fiscal Year 2022-23, which reflected decreased water usage due to the COVID- 19 pandemic, conservation related to the recent drought, and observed population declines in San Francisco. Second, the projections in the 2023 Rate Study assumed that San Francisco never fully recovers from the decline in water usage caused by the pandemic and the resulting shift to remote work and declining daytime population. See “THE WATER ENTERPRISE – Recent Factors Impacting Retail Water Sales.” Finally, instead of approving rates for four years, as was done following the two prior rate studies, the SFPUC approved a three-year rate schedule to allow for a realignment of rates to observed sales volumes on a more frequent basis should further declines materialize. Following completion of the 2023 Rate Study in April 2023, the Commission approved a three-year water and wastewater retail rate schedule for Fiscal Years 2023 -24 through 2025- 26 on May 23, 2023. In accordance with the Charter, the next rate study will be conducted by Fiscal Year 2026-27.

The following table lists historical retail water rate adjustments since Fiscal Year 2014-15 through Fiscal Year 2024-25, and the adopted retail water rate adjustment for Fiscal Year 2025-26. There was no water rate adjustment for Fiscal Year 2022-23.

TABLE 20

HISTORICAL AND ADOPTED PERCENTAGE INCREASES (DECREASES)

IN RETAIL WATER RATES
Effective Date Change in Retail Rates
July 1, 2014(1) --
July 1, 2015(1) 12.0%
July 1, 2016(1) 10.0
July 1, 2017(1) 7.0
July 1, 2018(2) 7.8
July 1, 2019(2) 8.3
July 1, 2020(2) 7.8
July 1, 2021(2) 7.9
July 1, 2022(3) 0.0
July 1, 2023(4) 5.0
July 1, 2024(4) 5.0
July 1, 2025(4) 5.0

(1) Four-year retail rates effective July 1, 2014.
(2) Four-year retail rates effective July 1, 2018.
(3) No water rate adjustment for Fiscal Year 2022-23.
(4) Three-year retail rates effective July 1, 2023.

Source: SFPUC.

As part of the three-year water and wastewater retail rate schedule for Fiscal Years 2023-24 through 2025-26, the Commission approved the implementation of a temporary drought surcharge that is levied only when the Commission puts the SFPUC’s Water Shortage Contingency Plan into effect, requesting that customers reduce water usage. When implemented, the drought surcharge increases the volumetric water and wastewater rates for all customer types up to the percentages shown in the following table. These perce ntages are calculated to recover costs based on reduced billed volumes. The SFPUC may set the percentage surcharge lower than shown on the following table to ensure that rates do not exceed the costs of providing water and wastewater services to customers.

87 TABLE 21
TEMPORARY DROUGHT SURCHARGE(1)
Water Shortage
Contingency Plan Stage Target Water Usage Reduction
Drought Surcharge on
Volumetric Water & Wastewater
Rates
Stages 1-3 5% Up to 5%
Stage 4 5-18% Up to 18%
Stage 5-6 18-32% Up to 32%

(1) Effective July 1, 2023.

Source: SFPUC.

Discount Programs . Effective in 2023, the SFPUC’s Customer Assistance Program offers a two- tiered discount off water charges for individually metered single -family residential customers. Customers with incomes below 50% of the area median income receive a 25% discount and customers with incomes below 30% of the area median income receive a 40% discount. In addition, the SFPUC’s Low-Income Non-Profit Housing Program offers a 15% discount off water charges for residential customers in properties owned and operated by certain nonprofits.

Finally, the SFPUC’s Community Housing Program offers a 15% discount off water charges for certain single-room- occupancy hotels providing transitional housing to the homeless and general assistance recipients.

Billing and Collection Procedures . Generally, 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.

Delayed Billing. The SFPUC relies on Advanced Metering Infrastructure (“AMI”) for the collection of its customer usage information for almost all of its customers. The AMI system uses a transmitter to relay water meter readings to the SFPUC billing system. The AMI system in use is at the mid-point of its useful life and is beginning to experience an acceleration of transmitter malfunction with unit components requiring replacement. In summer 2023, the SFPUC experienced a procurement delay for transmitter replacement parts due to supply chain challenges with the vendor, resulting in a growing backlog of unbilled accounts across the SFPUC’s San Francisco service area. In winter 2023-24, the SFPUC’s Customer Services Bureau experienced significant turnover of staff, affecting its ability to address the backlog of malfunctioning meter transmission units. Though still recording water usage, the billing system defaulted to estimated monthly billings for three months when a malfunction was detected, and ceased bil ling if the malfunctioning meter was not addressed. The number of affected unbilled accounts dated back to fall 2023, resulting in approximately $6.6 million in unbilled revenues that were accrued as a receivable in Fiscal Year 2023-24.

The SFPUC immediately implemented an action plan to bill and collect the unbilled revenues that included prioritizing and accelerating field service visits to address malfunctioning meter transmission units; reassigning plumbers from other divisions to accelerate the replacement of the malfunctioning AMI components for usage data to be transmitted from affected meters; expediting the hiring of new staff and retaining contractors to accelerate processing of delayed bills for affected accounts; enhancing the billing system to allow for extended bill estimates, increasing the threshold from three months to 36 months; and developing an automated workflow to expedite the processing of affected accounts with delayed bills and payment plans.

As part of the action plan, the SFPUC also initiated an extensive and proactive customer outreach campaign to provide advance notice to all affected customers of their delayed billing and when it would resume. To assist customers unable to pay the entire amount due, the SFPUC is offering payment plans of up to nine months. The SFPUC anticipates collecting the majority of delayed revenues by June 30, 2025.

Delinquencies. The SFPUC reviews water accounts routinely to determine whether they have a past due balance that is delinquent. Typically, 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

88 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.

The number of water accounts that are delinquent and the amount of accounts receivable from delinquent bills have grown significantly since the beginning of the COVID -19 pandemic. As of July 1, 2019, the number of delinquent water accounts more than 90 days past due was 3,968 and the amount of accounts receivable from such delinquent water accounts totaled approximately $520.1 thousand. By contrast, as of July 1, 2024, the number of delinquent water accounts more than 90 days past due was 22,433 and the amount of accounts receivable from such delinquent water accounts totaled approximately $10.5 million. The table below shows the amount of accounts receivable from delinquent water accounts for Retail Customers as of July 1, 2022, July 1, 2023 and July 1, 202 4.

TABLE 22

ACCOUNTS RECEIV ABLES AGING REPORT

As of
July 1, 2022
As of
July 1, 2023
As of
July 1, 2024
Period Amount
Percent of
Total Amount
Percent of
Total Amount
Percent of
Total
0 - 30 Days $27,985,674 73.5% $27,656,269 65.1% $34,810,384 67.9% 31 - 60 Days 2,453,115 6.4 2,774,744 6.5 4,462,966 8.7 61 - 90 Days 3,425,923 9.0 1,427,331 3.4 1,497,506 2.9 Over 90 Days 4,218,790 11.1 10,644,314 25.0 10,475,447 20.4 Total(1) $38,083,502 100.0% $42,502,658 100.0% $51,246,303 100.0%

Credit Balances ($903,834) ($855,799) ($1,632,263)

Total Aged Receivables $37,179,668 $41,646,859 $49,614,040

Less Receivables from Municipal
Customers ($1,095,247) ($3,416,076) ($3,548,023)
Less Allowance for Doubtful
Accounts ($4,571,491) ($9,270,191) ($10,296,945)
Accounts Receivable, Net of
Allowance $31,512,930 $28,960,592 $35,769,072

(1) Totals may not add due to rounding.

Source: SFPUC.

In March 2020, in response to the COVID -19 pandemic, the SFPUC first suspended shutoffs of water and sewer service and prohibited the imposition of late payment penalties, fees, and charges (the “COVID- 19 Moratorium”). In addition, in May 2020, the SFPUC first authorized a temporary Emergency Customer Assistance Program (“ E-CAP”), offering a discount off water charges for qualifying residential and commercial ratepayers.

Between 2020 and 2023, the SFPUC periodically extended and modified the COVID -19 Moratorium and E-CAP. In 2023, the SFPUC changed the Customer Assistance Program to incorporate practices from E -CAP (for current program details, see “FINANCIAL OPERATIONS – Retail Water Sales Revenue – Discount Programs”), and further approved exemptions from disconnections of water and sewer service and liens due to unpaid bills for households enrolled in the Customer Assistance Program and for customers who fall between 51% to 80% of area median income who experience extenuating circumstances. In November 2024, the Commission approved sunsetting the COVID -19 pandemic procedures for water and sewer customer bill collection and delinquency actions; resuming normal business practices for shutoffs, liens, and fines; amending water and wastewater shutoff and lien policies to provide exemptions, subject to limitations, to (i) customers with an outstanding bill balance of $100 or less, (ii) customers enrolled in the Customer Assistance Program, and (iii) customers within defined area mean income limits who qualify for extenuating circumstances. Such changes went into effect January 1, 2025. The SFPUC anticipates that utilizing all collection tools available will result in a significant reduction of delinquent water accounts.

89 Comparative Retail Water Rates. The following table compares monthly charges by selected California water providers for a typical single-family residential usage account with a 5/8-inch meter.

TABLE 23
COMPARATIVE TYPICAL MONTHLY RESIDENTIAL WATER CHARGES(1) Water Provider
Typical
Monthly Charge
San Francisco Public Utilities Commission(2) $ 68.83
City of Oakland (East Bay Municipal Utility District) 80.79 City of San José 99.05
Los Angeles (Los Angeles Department of Water and Power & Los Angeles Sanitation and Environment) 99.35
City of San Diego 104.53
City of Santa Clara 130.22

(1) Typical monthly charge has been compiled by the SFPUC based on rates that have been obtained from publicly available sources and have not been independently verified by the SFPUC.
(2) Based on water charges as of July 1, 2024.

Source: SFPUC.

Affordability. Nearly all Retail Customers are also served by the Wastewater Enterprise and such Retail Customers receive a single monthly bill reflecting both charges for water service and charges for sewer service. The SFPUC’s affordability efforts are therefore focused on the cost of water service and sewer service viewed as a whole.

The SFPUC is engaged in a major capital program for the Wastewater Enterprise and anticipates that significant increases in sewer charges will be required in addition to the anticipated retail rate increases for water service described herein. The average residential combined water and sewer bill is projected to increase 8%, 9.7%, and 11.5%, in Fiscal Year 2024 -25, Fiscal Year 2025-26, and Fiscal Year 2026 -27, respectively. Affordability concerns may impact discussions with respect to retail rates for water service and may, among other things, require the SFPUC to prioritize and defer capital projects for the Water Enterprise.

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, 2024, the capacity charge is $2,266 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.

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. Various common costs incurred by the SFPUC are allocated among the Water Enterprise, the Wastewater Enterprise and the Power Enterprise. Allocations are based on methodology established by an independent indirect cost study, and SFPUC management’s best e stimates and may change from year to year depending on activities undertaken by each enterprise and information available. The SFPUC allocated $66.1 million in administrative costs to the Water Enterprise for Fiscal Year 2023-24, which are included in the financial statements under various expense categories, and has budgeted $65.0 million and $67.3 million for such costs for Fiscal Years 2024-25 and 2025-26, respectively.

90 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 annual transfer amount was $46.3 million for Fiscal Year 2023-24, and the SFPUC has budgeted $49.2 million and $52.2 million for such transfers for Fiscal Years 2024-25 and 2025- 26, respectively. 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, telecommunications and human resources to the Water Enterprise, and charge amounts designed to recover those costs. These charges totaled approximately $27.6 million f or Fiscal Year 2023-24, and the SFPUC has budgeted $32.0 million and $34.1 million for such charges for Fiscal Years 2024-25 and 2025-26, respectively.

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 SFPU C, the SFPUC agreed to reimburse the City General Fund for all costs in connection 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. The Water Enterprise charges all City departments for water (with the exception of itself and the San Francisco Fire Department for water dispensed from fire hydrants). The SFPUC collected approximately $12.5 million in payments for Fiscal Year 2023-24, and has budgeted to collect $11.9 million and $12.8 million in payments for Fiscal Year s 2024-25 and 2025-26, respectively.

Financial Management Policies
The SFPUC makes no representation that the following policies and targets 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 or that targets will be met.

Debt Management Policies and Procedures . The SFPUC has established “Debt Management Policies and Procedures” (the “Debt Policies”) for debt financing under its jurisdiction. The SFPUC has also established separate “SFPUC Municipal Securities Disclosure Policies and 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 t o 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 in 2019. This included revisions to three key areas:
(1) Disclosure – The Disclosure Policies were revised to 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 developed a Disclosure Practices Working Group (the “ DPWG”). The DPWG meets 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 Chief Financial Officer and Assistant General Manager, Business Services, 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.

91 (2) Variable Rate Obligations – The Debt Policies, which set forth and describe various types of debt obligations that the SFPUC may issue, were revised to cover new amendments made to the Wastewater bond indenture that will allow the SFPUC to issue variab le 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 – 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.

Debt Service Coverage Policy. The Commission adopted a debt service coverage policy (the “ Debt Service Coverage Policy”) in 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 w ill aim to adopt budgets, rates and financial plans that generate revenues such that debt service coverage calculated on an Indenture basis (including certain available fund balances) will be at least 1.35 times and debt service coverage calculated on a current basis (Net Revenues divided by debt service on Bonds and Parity Loans) will be at least 1.10 times.

Separate from the Debt Service Coverage Policy, the Indenture includes a rate covenant that debt service coverage calculated on an Indenture basis (including certain available fund balances) will be at least 1.25 times. See “SECURITY FOR THE BONDS – Rate Covenants – Debt Service Coverage” and “HISTORICAL OPERATING RESULTS.”
Capital Financing Policy . The Commission adopted a capital financing policy (the “ Capital Financing Policy”) in 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 c urrent revenues versus debt financing depends, in part, on the capital investment lifecycle of the Water Enterprise. Accordingly, the SFPUC has determ ined 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”) in 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 progra mmatic 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.

Affordability Policy . The Commission adopted its most recent affordability policy (the “ Affordability Policy”) in 2023, which applies to the Water Enterprise and the Wastewater Enterprise. Pursuant to the Affordability Policy, the SFPUC will, when adopting rates and approving budgets and financial plans, review the average residential combined water and sewer bi ll over the next 20 years, and aim to set rates that will result in the average residential combined bill not exceeding 3% of income for a “typical” customer (defined as the 40th percentile San Francisco household income), 7% of income for a “low -income” customer (defined as the 20th percentile San Francisco household income), and 5% of income for a “low -income” customer after accounting for enrollmen t in applicable low-income discount programs. If such average residential combined bills are projected to exceed the targets within the 20-year period, the SFPUC must provide a rationale and develop strategies to reduce costs, including providing progress reports to the Commission in subsequent budget and financial plan adoptions.

Investment of SFPUC Funds
The SFPUC’s pooled deposits and investments are invested pursuant to State 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

92 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 March 31, 2025, to be 470 days (most recent data available).

The following table sets forth the approximate book values of the investments held in the City Pool reported by the City Treasurer as of March 31 , 2025. The Water Enterprise’s pooled deposits and investments accounted for approximately $490.4 million, or approximately 2. 70% 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.

TABLE 24

CITY POOLED INVESTMENT FUND
(AS OF MARCH 31, 2025)
Investments
Book Value
(millions)
U.S. Treasuries $ 3,933.6
Federal Agencies 6,698.7
Public Time Deposits 60.0
Negotiable CDs 2,988.0
Commercial Paper 1,283.1
Medium Term Notes 164.0
Money Market Funds 2,415.6
Supranationals 286.9
Secured Bank Deposit 354.6
Total(1) $18,184.5

(1) Total may not add due to rounding.

Source: Office of the Treasurer and 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 to 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 Risk Manager through the Office of the City Administrator, Risk Management Division. 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, with certain minor exceptions, such as a sub-limit for fire-sprinkler leakage due to earthquake under the Property Insurance program.

The following is a summary of the SFPUC’s coverage approach to risk:

93 Primary Risks Typical Coverage Approach
General Liability Purchased Insurance & 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 Builder’s Risk Purchased Insurance & Contractual Risk Transfer Public Officials Liability Purchased Insurance
Employment Practices Liability Purchased Insurance
Crime Purchased Insurance
Cyber Liability Purchased Insurance
Tenants’ and Users’ Liability
Insurance Policy
Purchased Insurance
Active Assailant Policy 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, d ebt-financed facilities and mandated coverage to meet statutory or contractual requirements. The SFPUC’s insured coverage is through an insurance policy purchased by the City specifically for the SFPUC, which provides up to $500 million of coverage against certain losses with respect to scheduled property, including wildfire coverage for certain scheduled assets for Hetch Hetchy Water and Power. The schedule includes properties for the SFPUC’s enterprises which have a total value of approximately $3.0 bill ion. See also “RISK FACTORS – Risks Related to Water Enterprise Facilities and Operations – Insurance Coverage.” Additionally, the SFPUC acknowledges the importance of aligning strategic planning to the risk management process and has implemented an Enterprise Risk Management program to meet this need. The framework provides a strategic approach to managing operational risks. The Enterprise Risk Management program has been implemented thus far for Information Technology Services, 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, similar to the City’s practice, 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 construct ion 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.

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.

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. See also “RIS K FACTORS – Risks Related to Water Enterprise Facilities and Operations – Casualty Losses.”

94 HISTORICAL OPERATING RESULTS
The historical results of operations reflected in the following table are based on the tables contained in the SFPUC’s audited financial statements entitled “Statements of Revenues, Expenses and Changes in Net Position” and “Statements of Cash Flows” for the Fiscal Years listed. This table excludes certain non-operating revenue and expenses included in the “Statements of Revenues, Expenses and Changes in Net Position” table in the audited financial statements. Consequently, “ Operating and Investment Income” presented in this table differs from “Change in net position” in the “Statements of Revenues, Expenses and Changes in Net Position” table in the audited financial statements. 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 2023 -24 and 2022 -23, prepared by the SFPUC, are attached as Appendix C to this Official Statement. The audited financial statements were audited by Macias Gini & O’Connell LLP, independent certified public accountants. The following table should be read in conjunction with such financial statements. Macias Gini & O’Connell LLP has not reviewed the following table. See “APPENDIX C – SFPUC WATER ENTERPRISE FINANCIAL STATEMENTS.”
In the following discussion, all $’s are in thousands.

The Water Enterprise’s total revenues of $704,041 in Fiscal Year 2023 -24 represented a decrease of $1,402 or 0.2% from prior year. Increases included $13,941 from interest and investment income, $1,926 in other operating revenues, and $134 in other non- operating revenues. These increases were offset by decreases of $12,284 in charges for services, and $4,726 in rents and concessions. Since Fiscal Year 2019- 20, revenues have increased $27,543 or

4.6% per year mainly due to rate increases of 15.9% in Fiscal Y ear 2022-23 and 9.7% in Fiscal Year 2023 -24 for wholesale customers, offset by volume declines in the periods during the COVID -19 pandemic and conservation efforts from recent droughts.

In Fiscal Year 2023-24, charges for services were $647,622, a decrease of $12,284 or 1.9% from the prior year mainly due to a higher Balancing Account adjustment for Wholesale Customers in the prior year, offset by adopted rate increases of 9.7% for wholesale customers and 5% for retail customers beginning July 1, 2023.

The Water Enterprise’s total operating expenses were $502,318, an increase of $63,481 or 14.5%, resulting from increases of $35,867 in general administrative and other expenses mainly from increased judgement and claims expenses and capital projects spendi ng, $24,070 in personnel services mainly due to pensions based on actuarial estimates. Since Fiscal Year 2019 -20, operating expenditures have increased by an average of 6.5% per year.

Operating expense increases throughout the period have mainly been due to increases to supply costs, general and administrative costs including judgement claims and litigation expense, and offsetting changes in personnel costs related to cost of living adjustments, and pensions and OPEB.

The Water Enterprise has maintained a “current basis” debt service coverage ratio exceeding the 1.00x level required by the Indenture, and meeting or exceeding the higher policy target of 1.10x set by the Commission. The Water Enterprise has also maintained a debt service coverage ratio including “Other Available Funds” exceeding 1.25x required by the Indenture as well as the higher policy target of 1.35x set by the Commission.

95 TABLE 25

HISTORICAL REVENUES, OPERATING & MAINTENANCE EXPENSES

AND DEBT SERVICE COVERAGE
FOR FISCAL YEARS ENDED JUNE 30
(IN THOUSANDS)(1)
2020 2021 2022 2023 2024

OPERATING & INVESTMENT

REVENUE

Charges for Services(2)
Retail Water Sales $280,609 $270,514 $297,226 $298,156 $313,408 Wholesale Water Sales(3) 270,144 278,981 240,925 361,750 334,214 Subtotal – Water Sales $550,753 $549,495 $538,151 $659,906 $647,622 Rental Income(4) 12,124 12,911 13,765 13,282 8,556
Other Revenues(5) 18,305 17,069 22,134 19,843 21,903
Capacity Fees(6) 2,169 1,326 2,163 1,256 863
Investing Activities(7) 10,517 340 (10,896) 11,156 25,097 Total Revenues $593,868 $581,141 $565,317 $705,443 $704,041

OPERATING & MAINTENANCE

EXPENSE

Personnel Services(8) $119,943 $132,528 $83,385 $135,709 $159,779 Contractual Services(9) 14,523 15,501 13,457 16,919 20,128 Materials and Supplies(10) 14,050 13,175 15,719 20,046 23,195 Depreciation(11) 142,228 144,033 147,904 155,714 155,172 Services of Other Departments(12) 61,128 70,235 73,307 79,910 77,638 General/Administrative & Other(13) 46,245 73,218 67,862 30,539 66,406 Total Operating Expenses $398,117 $448,690 $401,634 $438,837 $502,318

OPERATING AND INVESTMENT
INCOME $195,751 $132,451 $163,683 $266,606 $201,723

COVERAGE CALCULATION
Operating and Investment Income $195,751 $132,451 $163,683 $266,606 $201,723 +Adjustment to Investing Activities(14) (516) 3,846 13,050 (2,015) (7,956) +Depreciation & Non-Cash Expenses 148,294 150,257 151,114 164,817 157,335 +Changes in Working Capital(15) (20,763) 24,707 (42,906) (124,668) (22,917) +Appropriated Fund Balance(16) 17,181 27,785 21,977 67,949 9,800 = “Net Revenue” (17) $339,947 $339,046 $306,918 $372,689 $337,985 +Other Available Funds(18) 241,931 128,692 103,506 194,075 217,600 Funds Available for Debt Service $581,878 $467,738 $410,424 $566,764 $555,585 Bond Debt Service(17) $269,210 $248,427 $279,352 $307,062 $306,369 Debt Service Coverage(19)
Including “Other Available Funds”(18) 2.16x 1.88x 1.47x 1.85x 1.81x Current Basis(17) (20) 1.26x 1.36x 1.10x 1.21x 1.10x

(1) Operating and Investment Income presented in this table differs from the Change in Net Assets presented in the Statement of R evenues, Expenses and Changes in Net Assets in the audited 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 between Fiscal Years 2022-23 and 2023-24 mainly due to a decrease in Balancing Account adjustment for Wholesale Customers in prior year, offset by adopted rates increases of 9.7% for wholesale customers and 5% for retail customers beginning July 1, 2023. (3) Decrease between Fiscal Years 2022-23 and 2023- 24 mainly due to Balancing Account adjustment for Wholesale Customers and in -lieu groundwater credits given, offset by an adopted rate increase of 9.7% of wholesale customers beginning July 1, 2023. (4) Decrease between Fiscal Years 2022-23 and 2023-24 due to transfer to operating fund for Customer Assistance Program discount program expansion.
(5) Increase between Fiscal Years 2022-23 and 2023-24 mainly due to increased consumption for certain City departments and a 5% rate increase in Fiscal Year 2023-24. Also, non-operating revenues were added in Fiscal Year 2021-22 per indenture. (6) Decrease between Fiscal Years 2022-23 and 2023-24 due to additional allowance for doubtful accounts adjustments and decrease in number of permits issued.

(Footnotes continue on the following page.)

96 (Footnotes continued from prior page.)

(7) Increase between Fiscal Years 2022-23 and 2023-24 due to increased interest rates for earnings for cash with Fiscal Agent and City Treasury, and accrual reversal of prior year unrealized loss for investments in City Treasury. (8) Increase between Fiscal Years 2022-23 and 2023-24 due to increase in full-time equivalent and average pay, and pension expenses based on actuarial reports.
(9) Increase between Fiscal Years 2022-23 and 2023-24 due to increased construction contracts. (10) Increase between Fiscal Years 2022-23 and 2023-24 mainly due to water treatment supplies. (11) Decrease between Fiscal Years 2022-23 and 2023-24 due to pending depreciation schedules. (12) Decrease between Fiscal Years 2022-23 and 2023-24 mainly due to decreased water assessment fees paid to Hetchy Water. (13) Increase between Fiscal Years 2022-23 and 2023-24 due to accrual reversal of prior year claim, increase in legal fees and litigation expenses. (14) Represents adjustment to show investing activities annualized on a cash basis. (15) Changes in working capital represents adjustments to reconcile operating income to net cash provided by operating activities from the Statements of Cash Flows in the audited financial statements. Fiscal Year 2022-23 and Fiscal Year 2023-24 adjustments primarily driven by adjustments relating to receivables, accounts payable pension obligations, OPEB, the Balancing Account for Wholesale Customers, damage claims liability and other liabilities.
(16) Net revenues for the year ended June 30, 2024 include appropriated available funds. Such amount offsets Operating and Maintenance Expenses in Current Basis calculations.
(17) “Net Revenue” is presented on a cash basis. Refundable Credits actually received by the SFPUC are reflected as reductions in Bond Debt Service and are excluded from Net Revenue. Prior to January 9, 2020, due to federal sequestration, the Indenture required tha t Refundable Credits not be reflected as reductions in Bond Debt Service but rather permitted an adjustment to Net Revenue; however, an amendment to the Indenture that allows for Refundable Credits actually received by the SFPUC to be reflected as reductions in Bond Debt Se rvice and excluded from Net Revenue went into effect on January 9, 2020. (18) Per Indenture, in addition to current year cash flow, coverage calculation includes certain “Other Available Funds,” which ar e not budgeted to be spent in such twelve months and legally available to pay debt service. (19) 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. (20) Unaudited. Calculated as ratio between Net Revenues over debt service on all senior lien obligations; excludes “Other Available Funds.” Source: SFPUC; compiled from the SFPUC’ s audited financial statements for Fiscal Years 2023-24 and 2022-23.

Note: Totals may not add due to rounding,

PROJECTED OPERATING RESULTS
The following table presents projected operating results for the Water Enterprise. These projections are based on an analysis of historical trends, adjusted where appropriate for known or anticipated changes in operations. The projections are also based on the assumption that all retail water rate increases necessary to finance the Water Enterprise’s capital improvement program will be approved and implemented. The projections in the following Table 26 are budget based. Therefore, line items in Table 26 will not correspond to similar line items in Table 25, 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 WATER ENTERPRISE 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 THIS OFFICIAL STATEMENT. THEREFORE, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE PROJECTIONS SHOWN.

(Remainder of Page Intentionally Left Blank)

97 TABLE 26

PROJECTED REVENUES, OPERATING & MAINTENANCE EXPENSES

AND DEBT SERVICE COVERAGE
FOR FISCAL YEAR ENDING JUNE 30*
(IN THOUSANDS)
2025 2026 2027 2028 2029

CURRENT REVENUE
Retail Revenues(1) $341,183 $360,702 $383,417 $409,336 $441,518 Wholesale Revenues(2) 357,854 376,865 397,626 412,668 430,606 Other Miscellaneous Income(3) 41,267 37,175 35,567 36,214 39,118 Total Current Revenues $740,303 $774,743 $816,610 $858,218 $911,242

OPERATING AND MAINTENANCE
EXPENSE(4) $359,092 $356,606 $365,013 $376,659 $389,099

less FUND BALANCES BUDGETED &
APPROPRIATED(5) (24,011) (39,137) 0 0 0
NET OPERATING REVENUE(6) $405,222 $457,273 $451,597 $481,558 $522,143 plus A V AILABLE FUND BALANCE(7) 154,244 119,259 123,073 128,544 135,657 FUNDS A V AILABLE FOR DEBT SERVICE $559,467 $576,532 $574,670 $610,102 $657,800

DEBT SERVICE(8) $340,367 $366,856 $373,288 $382,492 $424,664 less BABs Interest Subsidy Payments(6) (20,370) (19,876) (19,345) (18,772) (18,164) NET DEBT SERVICE $319,998 $346,980 $353,943 $363,719 $406,500

DEBT SERVICE COVERAGE(9)
Indenture Basis(6)(10) 1.75x 1.66x 1.62x 1.68x 1.62x
Sufficiency of Revenues(6)(11) 1.27x 1.32x 1.28x 1.32x 1.28x

* Projections are based on the SFPUC’s most recent two-year operating budget for Fiscal Years 2024-25 and 2025-26, adopted by Commission in February 2024 and subsequent changes approved by the Commission in February 2025. (1) Assumes projected average daily billed retail consumption of 53.6 mgd, 53.9 mgd, 53.5 mgd, 53.2 mgd, and 53.2 mgd for Fiscal Years 2024-25, 2025-26, 2026-27, 2027-28 and 2028 -29, respectively. Assumes an average annual retail rate increase of 5.0% for Fisc al Years 2024-25 and 2025-26 and an average rate increase of 7.3% in Fiscal Years 2026 -27 through 2028-29. See “FINANCIAL OPERATIONS – Retail Water Sales Revenue.”
(2) Assumes projected average daily billed wholesale consumption of 128.2 mgd, 132.3 mgd, 137.2 mgd, 137.6 mgd and 138.7 mgd for Fiscal Years 2024-25, 2025-26, 2026-27, 2027-28 and 2028-29, respectively. Assumes an 8.8% wholesale rate increase for Fiscal Year 2024-25, a wholesale rate increase of 1.9% in Fiscal Year 2025-26, and an average annual rate increase of 2.9% in Fiscal Years 2026-27 through 2028-29.

See “FINANCIAL OPERATIONS – Wholesale Water Sales Revenue.” (3) Includes, among other amounts, projected interest 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: $24.011 million in Fiscal Year 2024-25, and $39.137 million in Fiscal Year 2025 -26. Such amounts offset Operating and Maintenance Expenses in sufficienc y of Revenues calculations.
(6) Refundable Credits received by the SFPUC pursuant to its Build America Bonds are treated as a reduction in projected Debt Service and are not included in projected Net Revenues. Refundable Credits expected to be received assume a sequestration rate of 5.7%. Sequestration rates are subject to change and may be increased by federal legislation. All or a portion of the Build America Bonds may be refunded by the 2025F Bonds, which may eliminate all or a portion of the Refundable Credits received by the SFPUC. See “PLAN OF FINANCE.” (7) Amounts are treated as Revenues under the Indenture. See “SECURITY FOR THE BONDS.” (8) Consists of debt service on Outstanding Bonds (net of capitalized interest), projected debt service for two existing Parity S tate Loans, and projected debt service for the 2025D Bonds and 2025E Bonds and anticipated Additional Series of Bonds. See “ – Projected Debt Service Assumptions.”
(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. (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.” Source: SFPUC.

Notes: Amounts set forth in the table are projections. Actual results may differ materially from these projections. See “FORW ARD-LOOKING STATEMENTS.” Totals may not add due to rounding,

98 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 believes 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 auditors.

The assumptions used in the table above include the following:

Projected Revenue Assumptions. Projections reflect approved retail rate increases of 5.0% in Fiscal Years 2024-25 and 2025-26, as approved by the Commission on May 23, 2023 (see “FINANCIAL OPERATIONS – Retail Water Sales Revenue – Retail Water Rate Adjustments”), and assume an average annual retail rate increase of 7.3% in Fiscal Years 2026-27 through 2028-29.

Revenues from sales of water to the Wholesale Customers are calculated in accordance with the WSA. The projections assume a wholesale rate increase of 8.8% in Fiscal Year 2024 -25 and an average annual wholesale rate increase of 2.7% in Fiscal Years 2025 -26 through 2028-29. See “FINANCIAL OPERATIONS – Wholesale Water Sales Revenue – Wholesale Water Rate Adjustments.”
In addition, interest earnings assume average annual yields of 2.0% throughout the projected period. “Available Fund Balance” amounts are treated as “Revenues” for purposes of “Debt Service Coverage – Indenture Basis.”
“BABs Subsidy Payments” are treated as a reduction in projected Debt Service and are not included in projected Net Revenues. See also “SECURITY FOR THE BONDS – Rate Covenants – Debt Service Coverage.” Projected Operating Expense Assumptions . Operating and Maintenance Expenses of the Water Enterprise are projected to increase at an average annual rate of 2.0% per year from Fiscal Year 2024 -25 through Fiscal Year 2028-29.

Projected Debt Service Assumptions. Projected debt service consists of projected, not actual, debt service on the 2010B Bonds, the 2010E Bonds and the 2010G Bonds (net of anticipated Refundable Credits), the San Francisco Water Revenue Bonds, 2016 Series AB, the San Francisco Water Revenue Bonds, 2016 Series C, the San Francisco Water Revenue Bonds, 2017 Series DEFG, the San Francisco Water Revenue Bonds, 2019 Series ABC, the San Francisco Water Revenue Bonds, 2020 Series ABCD, the San Francisco Water Reven ue Bonds, 2020 Series EFGH, the San Francisco Water Revenue Bonds, 2023 Series ABCD Bonds, the San Francisco Water Revenue Bonds, 2025 Series ABC, the 2025D Bonds and the 2025E Bonds (net of capitalized interest), two existing Parity State Loans (see “OBLIGATIONS PAYABLE FROM REVENUES – Parity State Loans”), and anticipated Additional Series of Bonds (net of capitalized interest and debt service reserve fund earnings).

Following the issuance of the 2025DEF Bonds, the SFPUC anticipates that it will issue approximately $1.10 billion of Additional Series of Bonds in Fiscal Year 2026-27 to fund Water Enterprise capital projects.

The projected debt service for the 2025D Bonds and 2025 E Bonds and each Additional Series of Bonds assumes a borrowing rate of 6.0%, no Bond Reserve Account and up to two years of capitalized interest.

The actual issuance dates, borrowing rates and capitalized interest periods may vary from these assumptions.

The SFPUC may also issue 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 addition to the other matters set forth in this Official Statement, in evaluating an investment in the 2025DEF Bonds. This section

99 is not meant to be a comprehensive or definitive discussion of all of the risks associated with an investment in the 2025DEF 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 2025DEF 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 ot hers, could lead to a decrease in the market price and/or in the marketability of the 2025DEF Bonds or adversely affect the ability of the SFPUC to make timely payments of principal of or interest on the 2025DEF Bonds. There can be no assurance that other risk factors not discussed herein will not become material in the future 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 adver sely 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.” Bond Payment Risks
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 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 2025DEF 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, or premium, if any, or interest on the 2025DEF 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 2025DEF Bonds. The 2025DEF 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 income or receipts, except Revenues.

No Bond Reserve Account. No Bond Reserve Account has been established for the 2025DEF Bonds. The Bond Reserve Accounts established with respect to other Series of Bonds do not secure the 2025DEF Bonds.

Therefore, the only security pledged to the holders of the 2025DEF 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 2025DEF Bonds.

Limitations on Remedies. The remedies available to the Owners of the 2025DEF 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 2025DEF Bonds and the Indenture may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of

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judicial discretion in appropriate cases and to limitations on legal remedies against charter cities and counties in California.

The opinion to be delivered by Bond Counsel, concurrently with the issuance of the 2025DEF Bonds, that the 2025DEF 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. The various other legal opinions to be delivered concurrently with the issuance of the 2025DEF Bonds will be similarly qualified. See “APPENDIX D – PROPOSED FORM OF OPINION OF BOND COUNSEL.”
If the SFPUC fails to comply with its covenants under the Indenture or to pay principal of or interest on the 2025DEF Bonds, there can be no assurance that the available legal remedies will be adequate to protect the interests of the holders of the 2025DEF 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 be near or have reached the end of their useful lives. See “WATER FACILITIES – Physical Condition of Certain Facilities” and “CAPITAL IMPROVEMENT PROGRAM AND OTHER WATER SUPPLY INITIATIVES.”
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 California, and cross three major known active fault zones (the San Andreas Fault, the Hayward Fault and the Calaveras Fault). See “WATER FACILITIES – Seismic Hazards.”
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 t he 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. With respect to wildfires specifically, 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. Damage attributable to seismic events and environmental pollution, for example, are e xcluded. 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 als o “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.

See “FINANCIAL OPERATIONS – Wholesale Water Sales Revenue – Wholesale Water Rate Adjustments.”

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Insurance Coverage. The SFPUC believes it maintains a comprehensive risk management program. See “FINANCIAL OPERATIONS – Risk Management and Insurance.” However, like other utilities, the SFPUC is susceptible to fluctuations in the insurance market. Any adverse impacts to the insurance market relating to wildfires or other natural disasters could lead to higher costs or prohibitively expensive coverage, or limited or unavailable coverage for certain types of risk, which may have an adverse effect on the SFPUC’s financial condition.

Drought. California 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 l ess 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 S FPUC 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 three-year period effective July 1, 2023, include a drought surcharge. See “FINANCIAL OPERATIONS – Retail Water Sales Revenue – Retail Water Rate Adjustments.” See also “THE WATER ENTERPRISE – Water Supply Reliability and Drought Planning.” Wet Years. Precipitation within the Water Enterprise service area varies from year to year. High levels of precipitation generally result 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 delive ries. See “THE WATER ENTERPRISE – Current Water Conditions.”
Climate Change . Climate change could have a significant impact on State water supplies and on the operations of the Regional Water System and the Water Enterprise. See “THE WATER ENTERPRISE – Climate Change.”
Safety and Security . The occurrence of military conflicts and terrorist activities may adversely impact the operations of the SFPUC, including the Water Enterprise, and/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 th e assets of the Water Enterprise or that costs of security measures will not be greater than presently anticipated.

Cybersecurity. Unauthorized access to the SFPUC’s technology or infrastructure networks could expose information assets and cause significant damage and disruption to the SFPUC’s operations and the provision of SFPUC services. Although the SFPUC has several cybersecurity measures and safeguards in place, there can be no assurance that any existing or additional safety and security measures will prove adequate if military conflicts or terrorist activities, including cyber terrorism, or acts of malfeasance are directed against the assets of the Water Enterprise or the SFPUC’s technology systems. The costs of remedying any such damage or protecting against future attacks could be substantial. Further, cybersecurity breaches could expose the SFPUC to litigation and other legal risks, which could cause the SFPUC to incur significant costs related to such legal claims or proceedings. For more information regarding the SFPUC’s cybersecurity measures, see “THE WATER ENTERPRISE – Cybersecurity.” 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 wi th 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

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water supplies available to the Water Enterprise and/or increase costs due to mitigation requirements. See “REGULATORY MATTERS – Endangered Species.”
Labor Actions. A work stoppage or other labor action could limit the SFPUC’s ability to operate the Water facilities and adversely impact Revenues. See “THE PUBLIC UTILITIES COMMISSION – Employee Relations – San Francisco.”
Construction Related Risks. Construction projects in the Water Enterprise’s capital program 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 timelines s 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, pandemic, or other natural or man- made disaster; 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 and facility shutdowns to avoid impacting water deliveries and many shutdown windows are inflexible or need to be modified to meet changing conditions. Increased construction costs or delays for any reason in connection with the Water Enterprise’s capital program could impact the Water Enterprise’s financial condition in general and the implementation of its capital programs in particular.

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 qualified for the November 2012 City ballot with support from an organization called “Res tore Hetch Hetchy” and would have 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 San Francisco voters.

Previous studies have examined proposals to remove Hetch Hetchy Reservoir. For example, a 2006 report by the California Department of Water Resources and the California Department of Parks and Recreation concluded that it is technically feasible to restore Hetch Hetchy Valley but cautioned financial feasibility. The study estimated that the total cost of such a project would range from $3 billion to $10 billion in 2006 (approximately $4 billion to $13 billion in 2020, adjusted for inflation). The State agencies also concluded that the initial planning effort would take up to 10 years to complete and cost an additional $65 million.

In 2015, Restore Hetch Hetchy filed a complaint against the City alleging that the SFPUC’s operation of Hetch Hetchy Reservoir is an unreasonable method of diversion of water in violation of the State Constitution because of the O’Shaughnessy Dam’s location within a national park. The case has been fully and finally resolved in the City’s favor. In addition, in 2019, Restore Hetch Hetchy commissioned a report that concluded that restoring Hetch Hetchy Valley and opening it to greater 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. No formal federal, State or local policy proposals have been made in response to the report.

In addition to proposals for the removal of Hetch Hetchy Reservoir and the restoration of Hetch Hetchy Valley, there is a proposal to expand access to Hetch Hetchy Reservoir for recreational purposes, which could possibly lead to filtration requirements of water derived from Hetch Hetchy Reservoir.

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. Any such legislation or litigation, if successful, could impose substantial additional operating and capital expenses on the Water Enterprise.

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Risks Relating to Financial Operations
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 may 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.” 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. 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 facili ty 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 reimbursement obligations are payable from Revenues on a basis subordinate to the Bonds.

The commitment of the banks to make advances under the revolving credit agreements for interim funding (the repayment obligation of the SFPUC for which are evidenced by the Revolving Notes) may be terminated by the banks 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 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 ban ks could declare all amounts outstanding under the Revolving Notes to be immediately due and payable. The Revolving Notes are secured on a basis subordinate to the payment of debt service on the Bonds.

See “OBLIGATIONS PAYABLE FROM REVENUES – Subordinate Debt and Interim Funding Program.” 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 proper ty 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 condemnat ion 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 under other

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theories of liability, including if the SFPUC were found to have acted unreasonably or to have been negligent, which liability, in the aggregate, could be substantial. See “WATER FACILITIES – Wildfire Considerations.” Bankruptcy Risk
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 Wholesale 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 SFPUC 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 2025DEF Bonds.

To the extent that Revenues are “special revenues” under the United States Bankruptcy Code (the “Bankruptcy Code”), the Revenues collected after the date of the bankruptcy filing should be subject to the lien of 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. “Special revenues” are defined to include revenues derived from the ownership or operation of projects or systems that are primarily used to provide utility services. No assurance can be given that a court would hold that any or all Revenues are special revenues. In a case arising from the insolvency proceedings of Puerto Rico, t he United States Court of Appeals for the First Circuit concluded that while a debtor has the right to voluntarily apply special revenues to the payment of debt service during the pendency of a bankruptcy case, the debtor is not obligated to do so, even though the special revenues are subject to the lien of the bond documents. The holders of the 2025DEF Bonds may not be able to assert a claim against any property of the City other than the Net 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 2025DEF 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 n ot 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 2025DEF 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 t o the holders of the 2025DEF Bonds from funds in the Trustee’s possession. The rate covenants (see “SECURITY FOR THE BONDS – Rate Covenants”) may not be enforcea ble in bankruptcy by the Trustee or the holders of the 2025DEF Bonds.

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Revenues are deposited with and held by the City Treasurer and may be commingled with other City funds.

See “SECURITY FOR THE BONDS – Flow of Funds.” If the City is in bankruptcy, the City may not be required to turn over to the Trustee any Revenues that a re in its possession at the time of the bankruptcy filing or come into its possession after 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 2025DEF Bonds would have to follow to attempt to obtain possession of such Revenues, how much time it would take for such procedures to be completed, or whether such procedures would ultimately be successful. The United States Court of Appeals for the First Circuit, in another case involving the insolvency proceedings of Puerto Rico, concluded that a bankruptcy court does not have the power to order a debtor such as the City to comply with state law.

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 2025DEF 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 2025DEF Bonds, to alter the priority, interest rate, principal amount, payment terms, collateral, maturity dates, payment sources, covenants (including tax- related covenants and the rate covenant), and other terms or provisions of the Indenture and the 2025DEF Bonds, as long as the bankruptcy court determines that the alterations are fair and equitable.

There may be delays in payments on the 2025DEF 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 2025DEF Bonds, or result in losses to the holders of the 2025DEF 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 2025DEF Bonds.

Other Risks
Federal Policy Risks . Federal policies involving taxation, appropriations, borrowing (including the debt ceiling), trade (including tariffs), immigration, climate change, clean energy and other topics can shift, sometimes dramatically, from one presidential administration or Congress to another. From time to time, such shifts can result in reductions to the level of federal funding for a variety of policy priorities, including transportation, housing, healthcare, social services and other federally funded programs. Recently, several such policy shifts, including delays in grants and other appropriations, have been proposed or promulgated through presidential executive orders and other official and unofficial actions at the federal level. The SFPUC cannot predict the outcome of such proposals and other actions, nor the potential impacts of any future such changes in federal policy. However, such changes could in the future have adverse effects on revenues, operation and maintenance costs or capital funding requirements.

The SFPUC depends on the work of various federal agencies to conduct its operations. For example, the SFPUC relies, in part, on the National Oceanic and Atmospheric Administration (“ NOAA”), which includes the National Weather Service, for information regarding daily weather forecasts, severe storm warnings, climate monitoring, and long- term climate projections. The SFPUC also relies on the USEPA for regulatory compliance guidance, water q uality standards and testing protocols, infrastructure funding through various federal funding programs, and support during environmental emergencies. In addition, the SFPUC relies on the National Park Service to manage Yosemite National Park, where the Hetch Hetchy Reservoir and substantial portions of the SFPUC’s Regional Water System infrastructure are located, including watershed protection, facility maintenance access, and security. Recently, the federal government has begun conducting large-scale layoffs across federal agencies, including but not limited to layoffs at NOAA, the USEPA and the National Park Service. The SFPUC cannot predict the potential impacts of such layoffs; however, such actions could have adverse effects on the SFPUC’s operations.

Federal Legislation. Legislation is periodically introduced in the U.S. Congress that could affect the finances or operations of the SFPUC. Examples of federal legislative proposals that could have an adverse effect on the SFPUC if they were to be introduced and become law include, but are not limited to limitations on the amount or availability of tax-exempt financing under Section 103 of the Code or elimination of the exclusion of interest on tax-exempt bonds

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from gross income for all or some taxpayers. Legislative proposals to eliminate or limit the benefit of tax -exempt interest on bonds such as the 2025DEF Bonds have been made in the past, may currently be under consideration, and may be made again in the future. If adopted, any such proposal could alter the federal tax treatment described under the heading “TAX MATTERS” or could adversely affect the market value or marketability of the 2025DEF Bonds.

The SFPUC cannot predict whether any such legislation will be introduced or enacted in the current or future sessions of the U.S. Congress.

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 busine ss productivity, consumer prices, or financial markets, unemployment rates, availability of skilled labor, technological advancements, shortages or surpluses in natural resources or energy supplies, c hanges in law, social unrest, fluctuations in the crime rate, political conflict, acts of war or terrorism, environmental damage, and natural disasters.

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 significantly impacted the City and resulted in prolonged stay- at-home orders that impacted each of the SFPUC’s enterprises, including the Water Enterprise. In addition to certain direct impacts on the Water Enterprise. COVID -19 had significant and varied impacts on general economic activity at the local, national and global levels, including supply chain and labor market disruptions that resulted in increases in costs across a wide number of sectors, as well as delays in delivery of projects and equipment. The Water Enterprise experienced, and may in the future experience, increases in certain costs and delays and disruptions to the delivery of capital projects. See also “ – Risks Related to Water Enterprise Facilities and Operations – Construction Related Risks.” Initiative, Referendum, Charter Amendments and Future Legislation . Under the State Constitution, California voters 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 predi ct 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 “CONSTITUT IONAL, STATUTORY AND CHARTER LIMITATIONS.”
Under the Charter, the San Francisco voters can restrict or revise the powers of the SFPUC through the approval of a Charter amendment or other initiative. For example, in June 1998, San Francisco voters approved Proposition H which included a limited exception to raise rates to pay debt service on 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 “CONSTITUT IONAL, 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.

Loss of Tax Exemption/Risk of Tax Audit of Municipal Issuers . As discussed under “TAX MATTERS,” interest on the 2025DEF Bonds could fail to be excluded from the gross income of the owners thereof for purposes of federal income taxation retroactive to the date of the issuance of the 2025DEF Bonds as a result of future acts or omissions of the SFPUC in violation of its covenants to comply with requirements of the Code. Should such an event of taxability occur, the 2025DEF Bonds are not subject to redemption or any increase in interest rate and could remain outstanding until maturity.

The Internal Revenue Service (the “IRS ”) has an expanded program for the auditing of tax- exempt obligations, including both random and targeted audits. It is possible that the 2025DEF Bonds could be selected for audit by the IRS. It is also possible that the market value of the 2025DEF Bonds might be affected as a result of such an audit of the 2025DEF Bonds (or by an audit of similar securities).

Failure to Maintain Credit Ratings . Certain rating agencies have assigned ratings to the 2025DEF Bonds.

The ratings issued reflect only the views of such rating agencies. Any explanation of the significance of these ratings

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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 respective 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 2025DEF Bonds. The SFPUC undertakes no obligat ion to maintain its current credit ratings on the 2025DEF 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 2025DEF Bonds or, if a secondary market exists, that the 2025DEF 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 s uspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevaili ng 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.”

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REGULATORY MATTERS
General
Public water supply systems in California, 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”), formerly under the California Department of Public Health (“ CDPH”) and, in some limited instances, by the USEPA 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 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 specifically 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 changes over the last 20 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 rese arch, 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 regulation s and permit requirements. The drinking water supply permits for both Regional Water System and In-City Distribution System are scheduled to be updated around 2030 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 issues general permits, whereas the two RWQCBs (San Francisco Bay and Central Valley) issue 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 S FPUC is generally operating and maintaining the water treatment and transmission facilities in compliance with the NPDES permit requirements. Coverage under existing NPDES permits will remain since the permits issued by the SWRCB or RWQCBs are either reiss ued on a specific timeline or administratively extended. The SFPUC will ensure continuous coverage and re -enroll under NPDES permits as necessary.

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 below, these initiatives include the Sacramento -San Joaquin Delta Reform Act of 2009, the federal or California Endangered Species Acts, the SWRCB Bay -Delta Water Quality Control Plan amendment proceedings, the Federal Energy Regulatory Commission (“ FERC”) proceeding to relicense the Irrigation Districts’ Don Pedro Hydropower Project sited on its 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
Regulatory Agency. The USEPA and the DDW have picked up their pace updating existing and adopting new drinking water regulations. These new developments will impact the current operations of the SFPUC’s drinking water systems as new resources may be needed to comply with these new and/or updated regulatory requirements.

Recent Adoption of Drinking Water Regulations . The DDW has adopted many new drinking water regulations at the State level in the last five years. These include a primary maximum contaminant level (“MCL”) for hexavalent chromium; direct potable reuse regulations; cross-connection control policy; a much lower detection limit, from 6 to 1 microgram per liter (“µg/L”), for reporting of perchlorate level in drinking water; the Total Coliform Rule Revision; a policy handbook for monitoring of microplastics in drinking water; and notification and response level for per- and poly-fluorinated alkyl substances (“ PFAS”). In the last five years, the USEPA adopted two drinking water regulations consisting of MCLs and Hazard Index for six PFAS contaminants (including PFOS, PFOA, PFBS, PFHxS

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and two others), the Lead and Copper Rule Revision (“ LCRR”) and the Lead and Copper Rule Improvements (“LCRI”), and Consumer Confidence Report Revision regulations. The USEPA also anticipates proposing revisions to microbial and disinfection byproduct rules in summer 2025.

Near-Term Regulatory Development. Several regulatory developments at the State level are anticipated in the near future, including but not limited to the following: revision of the existing Lead and Copper Rule (“ LCR”) in line with the corresponding federal LCRR and LCRI; increase in publication frequency of a Consumer Confidence Report from annual to semiannual to conform to the recently adopted federal Consumer Confidence Report Revision regulations; adoption of new MCLs for PFOS and PFAS; adoption of notification levels and response levels related to harmful algal bloom, PFAS, and manganese, and lowering detection limits for reporting purposes for eight metals including lead, nickel and arsenic. At the federal level, the USEPA has committed to issuing a drinking water regulation for setting perchlorate MCL by May 2027, and is in the process of developing the stage 3 microbial/disinfection byproduct regulation.

Regulatory Review by USEPA and DDW. Under the Safe Drinking Water Act (“SDWA”), the USEPA must review all existing regulations every six years and determine which regulations may need to be revised. The fourth Six-Year Review of existing National Primary Drinking Water Regulations was completed in July 2024, and the USEPA determined that there are no additional candida tes identified for regulatory revision. However, the Six- Year Review is not a final regulatory decision to revise or not revise a drinking water regulation; rather, it is part of a pre - planning process to determine if a rulemaking effort to revise the regulation should be considered.

Similarly, California Health and Safety Code §116365(g) requires the DDW to review its MCLs at least once every five years. These quinquennial MCL reviews are to ensure that the drinking water standards cannot be less stringent than the corresponding federal values and must be as close as is technically and economically feasible to the public health goals established by the California Environmental Protection Agency’s Office of Environmental Health and Hazard Assessment (“OEHHA”). The latest review was conducted between 2015 and 2017 and concluded by the SWRCB in 2018 that no MCL revisions were needed. Nevertheless, regulatory changes resulting in the need for new infrastructure and operations may incur in future MCL reviews by USEPA and DDW with respect to the following existing drinking water regulations:

Surface Water Treatment. Several related regulations addressing surface water treatment requirements for drinking water were adopted by the USEPA and the DDW between 1990 and 2010. These regulations, including the Surface Water Treatment Rule, Interim Enhanced Surface Water Treatment, Filter Backwash Recycling Rule, Long - Term 1 and Long- Term 2 Enhanced Surface Water Treatment Rules, require filtration of all surface water supplies unless the water supply can meet certain stringent requirements. These regul ations also impose microbial disinfection/inactivation performance with which community water systems including those operated by the SFPUC have to comply.

As discussed under “WATER FACILITIES – Water Treatment,” the high quality of water stored at Hetch Hetchy Reservoir has been determined to be sufficient to meet filtration avoidance requirements without installation and operation of filtration facilities. However, new treatment (disinfection or filtration) facilities could be required in the future if the filtration avoidance criteria are not consistently met or due to changes in these regulations. See “– Regulatory Review by USEP A and DDW.”
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 are typically blende d with the disinfected Hetch Hetchy water. Most customers receive water from blended sources. The SFPUC’s Tesla Treatment Facility uses ultraviolet light technology to inactivate target organisms (Giardia and Cryptosporidium) in the Hetch Hetchy water supp ly; it has been performing well since its operations began in 2012. See “WATER FACILITIES – Water Treatment.” System water quality, including both raw water and treated water, is continuously monitored and tested year- round to assure that water delivered to customers meets or exceeds federal and State drinking water/public health requirements. Nevertheless, more r igorous water quality monitoring efforts may be required as a result of new or updated drinking water regulations that are adopted by USEPA and/or DDW.

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Stage 2 Disinfectants and Disinfection Byproduct Rule. The USEPA promulgated the Stage 2 Disinfectants and Disinfection Byproducts Rule (“ Stage 2 DBPR ”) in 2006 and the State adopted its version of the same rule in 2012. This rule is to reduce public health risk associated with disinfection byproducts (“ DBPs”) in drinking water.

Since then, the SFPUC has demonstrated compliance with the Stage 2 DBPR by the continued use of the chloramination treatment process.

Under the SDWA Six-Year Review Rule, USEPA decided to review existing disinfectant and disinfection byproduct rules. The USEPA anticipates proposing revisions to microbial and disinfection byproduct rules in summer 2025.

Groundwater Rule. The USEPA promulgated the Groundwater Rule (“GWR”) to address waterborne disease and microbial contamination related to groundwater. The DDW adopted its own version of the GWR in 2011 by reference to the USEPA’s regulations. The GWR requires that a system putting new groundwater sources in service must 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. The groundwater wells of these two projects will serve as the additional and emergency water supplies to the In-City Distribution System and the Regional Water System. The requirements of this rule are applicable to thes e two groundwater systems, and the extent of impacts depends on the operational management and water quality of these new alternate groundwater sources. Additional treatment facilities may be required to meet the disinfection requirements and to reduce cer tain mineral content of the groundwater to comply with the corresponding drinking water standards, if water quality monitoring results indicated such a need and the approved blending treatment with the surface water sources is insufficient to meet the exis ting and/or future drinking water standards.

Revised Total Coliform Rule. The USEPA adopted the Revised Total Coliform Rule (“RTCR”) in 2013 and the DDW adopted its own version of the RTCR that has been effective since July 1, 2021. Both the Regional Water System and the In- City Distribution System are in compliance with these regulatory requirements. The USEPA is in the process of developing a new rule regulating the operations of distribution systems and storage facilities of all community water system in the nearest future. It is too early at this time to identify what new treatment facilities or operational changes will be required to meet this future rule.

Lead and Copper Rule. The SFPUC proactively addressed the issue of lead in water well before the USEPA published its Lead and Copper Rule in 1991 and the State’s adoption of similar regulations in the 1990s. The federal LCR was subsequently updated with several regulatory actions that resulted in the promulgation of 2000 LCR Minor Revisions, 2007 LCR Short-Term Revisions, 2021 LCRR, and 2024 LCRI.

In the 1980s, the SFPUC removed all known lead service lines and fittings from the In- City Distribution System. In the late 1990s, 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 2000s, 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 meter s. At the present time, approximately 99% of the service meters have been replaced.

In 2006, the SFPUC submitted a report to the State 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, the USEPA began enfo rcing its lead -free mandate known as the Reduction of Lead in Drinking Water Act, which was enacted by Congress on January 4, 2011. The USEPA’s definition of “lead free” is the same as that in AB 1953.

In 2024, the SFPUC completed its last triennial LCR monitoring for the In -City Distribution and the Regional Water System in accordance with the 1991 LCR. The monitoring results demonstrate continued compliance with the existing LCR. Nevertheless, the SFP UC may have to conduct a new optimized corrosion control treatment

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study if, in the future, the SFPUC decides to blend new groundwater sources into the Regional Water System and the In-City Distribution System. The next round of LCR monitoring must be performed in accordance with the new LCRI requirements. Two rounds of full monitoring must be completed in 2028 before reduced triennial monitoring can be requested with the DDW and USEPA. If lead levels exceed the new lower threshold, the SFPUC must notify the public and may need to modify its corrosion control treatment.

In 2016, Section 116885 of the California Health and Safety Code 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:
(i) compile an inventory of known Lead User Service Lines (“LUSLs”), which are utility -owned service lines that have components made of lead material, by July 1, 2018; (ii) identify areas that may have LUSLs, including service lines made of unknown materials, by July 1, 2018; (iii) identify unknown user service line material by July 1, 2020; and (iv) 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 2026 Capital Plan includes the As-Needed Water Service Line Replacement Project (also known as the Lead Component Services Program), estimated to cost $38.5 million, and funding to complete this work. The SFPUC has also applied for an additional State Revolving Fund loan to finance the project. See “OBLIGATIONS PAYABLE FROM REVENUES – Parity State Loans.” This project is 73% complete and expected to be completed by June 2026, years ahead of the compliance deadline.

In January 2021, the LCRR went into effect. As part of the Biden administration’s review of all new regulations, the USEPA reviewed the LCRR and decided in 2021 to keep the lead service line inventory requirements of the LCRR in place to ensure the initial customer water service line material inventory was completed by October 2024. The LCRI revised several facets of the LCRR, including lowering the 90th percentile lead action level from 15 μg/L to 10 μ g/L, revising tap sampling procedures, deferring free l ead sampling at schools and licensed childcare centers to 2027, and imposing a 10 -year deadline for water systems to conduct replacements for all lead -containing service lines within the SFPUC’s control. The DDW is also in the process of updating its own version of the LCR so that its regulatory requirements will be at least consistent with the LCRR. The SFPUC has performed inspections and used statistical methods to prepare the initial lead service line inventory, identifying 653 customer -owned galvanized service lines that were previously downstream of a utility-owned lead service line, and 407 service lines with unknown lead status. No lead service lines were found. The SFPUC expects to be able to identify the material composition of service lines with un known lead status before 2027; otherwise, these customer -owned services lines will need to be replaced within a 10-year period. The replacement cost is currently unknown.

PFAS. The USEPA adopted primary MCLs for six PFAS on April 10, 2024. On April 5, 2024, the OEHHA adopted public health goals for PFOA and PFOS at 0.007 ng/L and 1 ng/L, respectively, for California. The State law requires a MCL established by the DDW to be as close to its public health goals as is technologically and economically feasible.

The In-City Distribution System and the Regional Water System also completed four rounds of quarterly sampling of 29 PFAS components and lithium in early 2024. This monitoring was required under USEPA’s fifth Unregulated Contaminant Monitoring Rule (“UCMR5”). The sampling results gathered throughout the United States under UCMR5 will be used by USEPA in its future determination of rulemaking needs regarding these 30 contaminants. The SFPUC’s PFAS and lithium monitoring results confirmed no detection of these 30 contaminants in the drinking water. The only SFPUC location with detection below regulatory limits has been the small Pleasanton Well Field Water System, which is a standalone water system independent of the Regional Water System and the In- City Distribution System.

The City Attorney’s Office has repeatedly opted out of settlement agreements to preserve its rights to seek better compensation if an issue related to PFAS contamination in the SFPUC water sources were to develop in the future. In addition, on March 3, 202 5, the San Francisco City Attorney filed a lawsuit on behalf of the People of the State of California in San Francisco Superior Court against certain PFAS manufacturers seeking to recover abatement and damages for contamination of San Francisco’s resources. The lawsuit alleges that at least two drinking water wells operated by the SFPUC as part of the Pleasanton Well Field Water System have detectable levels of PFAS. The lawsuit also alleges PFAS contamination in the City’s other resources, including the City’s combined sewer collection system.

While the City believes that the claims in this lawsuit are meritorious, it can give no assurance regarding whether the lawsuit will be successful and obtain the requested relief from the courts, or contributions to the abatement fund from the defendant PFAS manufacturers.

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Fluoridation. The 1995 State Assembly Bill 733 requires large water systems to fluoridate their public water supply and directs the appropriate State agency to seek funding for fluoridation. The State adopted its fluoridation regulation in 1998. The requirements of this regulation, 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 SFPUC has been fluoridating its water supply since the early 1950s, and meets all the requirements of fluoridation regulation. In 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 Centers for Disease Control and Prevention (the “ CDC”) also provided detailed information on the basis for this change. To reflect the CDC’s recommendation, the 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 DD W confirmed in 2016 that the fluoride control range for the Regional Water System is 0.6 mg/L to 1.2 mg/L in addition to the recommended optimal level. The SFPUC is in compliance with the prescribed levels and the operational and monitoring requirements of the State fluoridation regulation.

Cross-Connection Control. On December 19, 2023, the DDW adopted a policy handbook that replaces the regulations in Title 17 of California Code of Regulations for cross -connection control. Effective starting on July 1, 2024, the policy handbook establishes enforceable standards and provides guiding principles to California public water systems for public health protection through backflow prevention and control of cross-connection. On December 10, 2024, the SFPUC amended Section G, Cross -Connection Control, of its Rules and Regulations Governing Water Service to Customers, to be consistent with the handbook’s new standards. While the handbook has established requirements with which the SFPUC is in compliance through its cross -connection control program, its financial impacts to the Water Enterprise’s operations are uncertain since these requirements were recently put into effect.

Ongoing review of the program implementation will need to be conducted. The SFPUC will submit a Cross Connection Control Plan to DDW by July 1, 2025, as required by the handbook.

Direct Potable Reuse. On August 6, 2024, the Office of Administrative Law approved the DDW’s regulations on direct potable reuse, which establishes enforceable requirements of water recycling through raw water augmentation for drinking water supply. The SFPUC will not develop new direct potable reuse supplies for some time. Operational costs and impacts will be identified during project design.

Hexavalent Chromium MCL. The DDW adopted an updated hexavalent chromium MCL of 10 µg/L with a much lower detection limit for reporting purposes at 0.1 µg/L. The new MCL regulation was approved by Office of Administrative Law in July 2024 and went into effect on October 1, 2024. With the State’s new reporting limit, there were occasions in 2024 when the treated water from the two local treatment plants had low detections of this contaminant. While treatment of the SFPUC’s surface water is not anticipated as the detections are far below the MCL, the groundwater sources, which have substantially higher hexavalent chromium levels, will continue to be treated using the DDW-approved blending method to meet the MCL.

Regulations/Other Contaminants. The DDW has also initiated the rulemaking process for the following MCLs on its priority agenda: N -nitroso-dimethylamine (“ NDMA”), perfluorooctanoic acid (“PFOA ”), and perfluorooctane sulfonic acid. (“PFOS”), as well as the review process for possible revisions to a suite of contaminants that have existing primary MCLs. Among these contaminants, arsenic is a primary candidate to be reviewed. DDW is expected to continue increasing its efforts with the ultimate goal of establishing applicable drinking water standards, either new or more stringent, to enhance public health protection. These DDW regulations may have unknown impacts to the SFPUC’s water operations, dependent on the values of these future MCLs and the improvements in water quality analytical technology.

The DDW is also considering the following: acute and short -term notification and response levels for four cyanotoxins (microcystins, cylindrospermopsin, anatoxin-α, and saxitoxin) recommended by the OEHHA; and lower notification and response levels for manganese at 20 µg/L and 200 µg/L, respectively (existing levels are 500 µg/L and 5,000 µg/L, respectively).

Environmental Laboratory Accreditation Program Regulations . In 2020, the SWRCB adopted new Environmental Laboratory Accreditation Program (“ ELAP”) regulations, which are applicable to five laboratories

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within the Water Enterprise’s Water Quality Division. While most regulations took effect January 1, 2021, full compliance was required by January 1, 2024. All ELAP -accredited laboratories have successfully completed third - party assessments and demonstrated compliance with the new regulations, which incorporate TNI Standards based on ISO 17025. The SFPUC is currently designing a new laboratory facility in Millbrae to replace the existing 50- year- old facility. The SFPUC continues to maintain and operate its laboratories in accordance with all regulatory standards and plans for future laboratory improvements as needed.

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 RWQCB, as appropriate.

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.

On March 4, 2025, the City prevailed in its action against the USEPA regarding an NPDES discharge permit issued under the Clean Water Act for the Wastewater Enterprise’s Oceanside Water Pollution Control Plant. The dispute centered on “end- result” provisions – permit terms that made the City responsible for water quality in the Pacific Ocean – well beyond the quality of the City’s discharges. In City and County of San Francisco v. Environmental Protection Agency, 604 U.S. __ (2025), the Supreme Court of the United States held that the Clean Water Act does not authorize the USEPA to impose “end- result” provisions in its discharge permits. The Supreme Court’s decision requires the USEPA to follow the Clean Water Act by establishing clear permit requirements that prevent pollution by restricting discharges before those discharges reach receiving waters. The decision does not relieve the SFPUC of its Clean Water Act responsibilities, but the USEPA’s “end-result” requirements could have resulted in the SFPUC having to incur significant, unknowable capital costs, adversely impacting the SFPUC’s ability to achieve its affordability goals. See also “FINANCIAL OPERATIONS – Retail Water Sales Revenue – Affordability.” Bay Delta Water Quality Standards
The Water Enterprise obtains the majority of its Bay Area water supply from Hetch Hetchy Reservoir, located on the main branch of the Tuolumne River, which is an upstream tributary to the Lower San Joaquin River and the San Francisco Bay/Sacramento San Joaquin Delta Estuary (the “Bay Delta”).

In 2009, the SWRCB noticed its intent to update water quality objectives of the 2006 Water Quality Control Plan for the San Francisco Bay/Sacramento-San Joaquin Delta Estuary and the program of implementation, which had the potential to result in impacts to water rights and the issuance of water quality regulations consistent with the program of implementation. Following a several years -long process, in 2018, the SWRCB adopted the “Phase 1” Amendment to the Water Quality Control Plan (“2018 Plan Amendment”) and the accompanying final Substitute Environmental Document. The adopted 2018 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 2018 Plan Amendment requires the release of 40% (by default, but may be variable between 30% and 50%) of the “unimpaired flow” on the three San Joaquin River tributaries from February through June in every water year type, whether wet, above normal, dry, or critically dry. If the 2018 Plan Amendment were to be implemented, it would result 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 40% 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 FERC hydroelectric licensing processes, such as the FERC relicensing proceeding underway for the Don Pedro Project on the Tuolumne River (see “ – FERC Proceeding to Increase Flows in the Lower Tuolumne River” below).

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In 2019, the City joined in filing a lawsuit with the San Joaquin Tributaries Authority challenging the SWRCB’s adoption of the 2018 Plan Amendment on multiple legal grounds including the California Environmental Quality Act and the Porter Cologne Act. Ove r a dozen other lawsuits have been filed in State and federal court challenging the 2018 Plan Amendment. Through 2021 and 2022, the Sacramento County Superior Court has issued a series of rulings in favor of the State 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. On March 15, 2024, the Superior Court issued a final order on the merits, denying all claims raised by all petitioners and ruling in favor of the SWRCB on all issues raised. On May 15, 2024, the San Joaquin Tributaries Authority and nine other petitioners appealed the decision of the Superior Court; these appeals were consolidated. These consolidated appeals remain pending and have not yet reached the briefing stage.

The 2018 Plan Amendment further directed the SWRCB to develop biological goals, or targets, to explain the expected outcomes of the implementation of the 2018 Plan Amendment and to inform the SWRCB’s exercise of the adaptive management provisions of the 2018 Plan Amendment. In July 2023, the SWRCB issued a draft Biological Goals document. Commenters, including the San Joaquin Tributaries Authority, raised concerns that the biological goals the SWRCB developed were unrelated to, and would not be attainable through, the implementation of the 2018 Plan Amendments. In September 6, 2023, the SWRCB adopted the Biological Goals without resolving many of the concerns that the San Joaquin Tributaries Authority and other parties raised. On February 6, 2024, the SWRCB re- adopted the Biological Goals without substantive change but with the addition of new CEQA findings. On October 6, 2023 and March 5, 2024, respectively, the San Joaquin Tributaries Authority filed suit challenging the SWRCB’s two actions adopting the B iological Goals, alleging violations of the California Environmental Quality Act and the California Administrative Procedure Act, among others. These lawsuits remain pending and have not reached the merits stage.

When the SWRCB approved the 2018 Plan Amendment, it also directed staff to compile a Delta watershed- wide agreement, including potential flow measures for the Tuolumne River, and to incorporate such agreements as an alternative for a future amendment to th e Bay-Delta Water Quality Control 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, the SFPUC, in partnership with the Modesto Irrigation District and Turlock Irriga tion District (collectively, the “ Tuolumne Parties”), submitted to the State a proposed voluntary agreement (“ Tuolumne Voluntary Agreement ”). A memorandum of understanding to advance the Tuolumne V oluntary Agreement was signed by the Tuolumne Parties in November 2022. In spring 2023, the Tuolumne Parties and other public water agencies completed necessary draft terms and agreements and submi tted them to the SWRCB for review. The public water agencies also renamed the “V oluntary Agreements” to the “Healthy R ivers and Landscapes” (“HR&L ”) program. The SWRCB conducted a series of workshops in 2023 and 2024 to publicly review the Sacramento portion of the HRL&L program. The SWRCB expects to consider the Tuolumne portion of the HR&L program for adoption in 2026. The SWRCB process will include (1) scientific peer review of the Tuolumne HR&L program, and (2) release of a draft CEQA document for public comment and a final CEQA document. After a final CEQA document is issued, the SWRCB would then be able to consider adoption of the Tuolumne HR&L program. If successful, this process may allow the SFPUC to offset some of 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.

In addition, in 2019 and 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 December 2024, the Bureau of Reclamation issued a record of decision reversing the record of decision issued in 2020. In 2020, several other lawsuits were filed against the State for its issuance and adoption of an incidental take permit governing how the Califor nia Department 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.

FERC Proceeding to Increase Flows in the Lower Tuolumne River FERC licenses the Don Pedro Hydropower Project (“ Don Pedro Project ”), owned and operated by the Irrigation Districts. The City helped fund the original construction of 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

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Hetchy Project to the New Don Pedro Reservoir, and to debit from this water bank by diverting water otherwise allocated to the Irrigation Districts.

The current FERC license for the 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 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 Don Pedro Project on October 11, 2017.

The Irrigation Districts are also working through an initial licensing proceeding for the La Grange Diversion Dam (the “La Grange Project ”), which is located on the Tuolumne River, two miles downstream of the Don Pedro Project. The Irrigation Districts also submitted their Final License Application (“FLA”) for the La Grange Project on October 11, 2017. The City has no legal or contractual responsibilities regarding the ownership or operation of the La Grange Project and is not subject to the licensing conditions for the La Grange Project.

NEPA and CEQA environmental review must be completed before licenses can be issued. On July 7, 2020, FERC released the Final Environmental Impact Statement (“FEIS”) for both the AFLA for the Don Pedro Project and the FLA for the La Grange Project. The Irrigation Districts are in the process of conducting CEQA review. The FEIS presents a “staff recommendation” that is mostly aligned with the Irrigation Districts’ AFLA.

As described 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 certification stating that the new license will comply with the applicable water quality requirements (the “401 Certification”) or, alternatively, FERC determines that the state has waived its authority to issue a 401 Certification.

The ongoing WQCP voluntary agreement process is desi gned, in part, to draft the terms of the 401 Certification that would be included as part of the FERC license in lieu of the 40% unimpaired flow requirement set forth in the 2018 Plan Amendment. However, in January 2021, the SWRCB issued a final 401 Certif ication that sets a flow schedule more onerous than the 2018 Plan Amendment. The SFPUC and the Irrigation Districts filed petitions for reconsideration at the SWRCB in February 2021. The SWRCB did not timely respond to these petitions and the City and the Irrigation Districts consequently filed related lawsuits challenging the 401 Certification. On May 7, 2024, the SWRCB unilaterally set aside the 401 Certification, and, on August 13, 2024, the court entered the stipulated dismissal-without-prejudice of the City’s and the Irrigation Districts’ lawsuits. In addition, the Irrigation Districts challenged FERC to find that the SWRCB has waived its authority to issue a 401 Certification. The United States Court of Appeals for the District of Columbia Circuit deci ded the Irrigation Districts’ waiver lawsuit unfavorably to the Irrigation Districts, and, in April 2023, the United States Supreme Court denied the Irrigation Districts’ petition for certiorari, fully resolving this case. On December 15, 2024, the Irrigat ion Districts re -applied for a section 401 Certification, and that process remains 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 Diversion Dam. Four of the ten priority projects were completed wit h available State and federal funding. More recently, the City and the Irrigation Districts as well as other non -governmental organizations have been working on implementing additional habitat restoration projects related to the Restoration Plan.

Pursuant to a 1966 agreement between the City and the Irrigation Districts, the City might have been liable to provide a portion of the increased 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 Don Pedro Project in exchange for which the City pays the Ir rigation 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.

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The term of the Side Agreement runs until FERC issues a new license for the 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 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 Don Pedro Project FERC license is renewed.

FERC has not yet provided a schedule for relicensing. However, it is expected that the National Marine Fisheries Service will first exercise its Endangered Species Act section 7 consultation authority before FERC moves forward with license approval. The National Marine Fisheries Service has not indicated when it will commence this consultation process.

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 DSOD ju risdiction 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, regardless of storage, or that has a capacity not in excess of 15 acre-feet, regardless of height, is not considered within DSOD’s jurisdiction.

The DSOD reviews plans and specifications for the construction of new dams or for the enlargement, alteration, repair or removal of existing dams, under applications, and must grant written approval before the owner can proceed with construction. The DSOD routinely inspects operating dams to ensure 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 2017, Oroville Da m, 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 spillway problems, the State Legislature enacted legislation to enhance the DSOD’s authority; pursuant to such authority, the DSOD has requested additional evaluations of certain spillways, including spillways at the following four dams: Cherry Valley, O’Shaughnessy, Turner, and San Andreas.

SFPUC Dam and Safety Resiliency Program. 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 following 15 years. The SFPUC created a proposed schedule for improvement projects for 15 of the dams and submitted the schedule to the DSOD in 2020. Several new projects were added to the Capital Plan over time to address these needs. In 2024, an updated letter was sent to DSOD sharing progress on the evaluations and capital projects for 15 of the dams. In most cases, additional evaluations are being conducted to further determine capital needs as part of each project’s planning phase. Thus, while estimated funding has been included in the 2026 Capital Plan for these facility improvements, the scopes, budgets and schedules may be adjusted in future years as more information becomes available.

In December 2023, the SFPUC submitted a pre-application to the U.S. Army Corps of Engineers for a CWIFP loan to finance a collection of eight Water Enterprise projects supporting dam safety and resilience. In September 2024, the U.S. Army Corps of Engineers notified the SFPUC that its pre -application was selected to submit a full application for CWIFP financing consideration for a loan up to $614,811,376 . The SFPUC plans to submit the full application prior to the deadline of September 9, 2025. For more i nformation regarding the CWIFP loan, see “OBLIGATIONS PAYABLE FROM REVENUES – Corps Water Infrastructure Financing Program.” Capital improvement projects for SFPUC’s dams that are currently funded under the 2026 Capital Plan are described below:

O’Shaughnessy Dam. O’Shaughnessy Dam was completed in 1923 and raised in 1938. Most of the outlet facilities were installed when the dam was first built in 1923. These outlet facilities have exceeded their design life and need rehabilitation or replacement to maintain their reliability and functionality. The O’Shaughnessy Dam Outlet Works Project will extend the service life and reliable operation of the 100- year-old outlet system. The rehabilitation work is divided into two phases. The scope of Phase 1 includes replacing the access platforms in ladder wells, clearing critical drainage systems within the dam, building a new bulkhead system as a safe isolation for upcoming

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rehabilitation of gates and valves, replacing the instream flow release valves, and pre- construction planning of drum gates and slide gates replacement. The value of construction work for Phase 1 is estimated to be over $30 million dollars. Phase 1 construction has started with anticipated construction completion in 2026. The objective of Phase 2 is to rehabilitate slide gates, drum gates, large valves such as the 60-inch and 72-inch diameter needle valves, diversion tunnel and diversion pipeline, and associated control systems. The value of construction work for Phase 2 is estimated to be over $90 million dollars. The planning of Phase 2 will start in 2025, with staggered construction starting in 2030 and anticipated construction completion in 2041. The cur rent estimated total project cost (which includes planning, bid and award, and close out costs, as well as construction costs) is $44 million for Phase 1 and $184 million for Phase 2.

Lake Eleanor Dam. Lake Eleanor Dam is a multiple arch reinforced concrete dam with roadway bridge at the crest that was constructed in 1918. Due to the age of the dam, some of the structural elements including the bridge and concrete barrels exhibit various degrees of deterioration including cracking and spalling of concrete, exposed rebar, leakage through the arch barrels, and cracks and erosion of the spillway concrete. The bridge is at the top of the dam and is an integral structure of the dam, providing the only vehicle and personnel access to the spillway structure and the other side of the dam for maintenance purposes. In addition, the dam’s spillway is inadequate to pass the updated inflow design flood. The Lake Eleanor Dam Rehabilitation Project will address concerns with concrete deterioration and spill capacity of the existing dam concrete structure, and first, rehabilitate the bridge, then subsequently replace the bridge deck when overall dam improvements are constructed. The project’ s first phase, the bridge rehabilitation project, is in the final design phase with anticipated construction completion in 2027 and an estimated construction cost of about $4 million. The second phase of the project will address dam improvements including concrete deficiencies, increased capacity for releases, and increased downstream erosion protection.

CleanPowerSF Sfpuc CommissionMay 27, 2025

CleanPowerSF Sfpuc Commission
May 27, 2025