Budget Development
Update
December 9, 2025
1 2
Agenda
1. Financial Planning, Budget Instructions, and the Capital Planning Process
2. Budget Priorities & Challenges
3. Initial Budget Submissions and Considerations
4. Next Steps
3 SFPUC's Financial Policies
Debt Coverage – can we reliably meet our outstanding debt obligations?
Capital Finance – are we optimizing the balance of revenue and debt?
Fund Balance and Reserves – do we have adequate funding to smooth out rate volatility and respond to unforeseen events? Affordability – are we planning around what ratepayers can afford? 4 Financial Forecasting & Budget Instructions
Forecasting: The Financial Strategy Team analyzes the ten-year forecast based on operating costs, the current capital
improvement plan, and revenue estimates to evaluate whether we're in alignment with our financial policies.
Budget Instructions: Based on forecasts, we set agency-wide Budget Instructions that were issued in July: all teams must minimize ongoing new operating costs and reduce the Water & Wastewater CIPs by over $1 billionfrom the prior plan.
5 Capital Planning & Capital Planning Improvement Initiative Capital Plan: Full 10-year update every two years with the budget Capital Planning Improvement Initiative (CPII): Multi-year (award-winning) program to improve and unify capital project planning, prioritization, and decision-making across the SFPUC CPII Impacts to this
year’s capital
planning process
Shifted planning activities to earlier in the year
Validated assumptions about resource
availability to deliver projects
Mostly pushed project costs up: teams more
realistic about project needs and cost
escalation
SFPUC Priorities for this Budget
Financial
Sustainability
Keeping rates
affordable
Sustaining strong
credit ratings
Long-term strategic
planning
Operational
Excellence
Providing responsive
and efficient
services
Meeting complex
regulatory
requirements
Maintaining high
operational and
safety standards
Climate
Leadership
Environmental
stewardship and
sustainability
Advancing the clean
energy transition
Planning for
resilience and
adaptation
People and
Community
Supporting our
workforce
Building on equity
and inclusion
Strengthening the
local economy
7 Challenges for this Budget Process
Maintaining adequate revenue levels to cover our existing debt obligations from past WSIP investments and newer generational projects like Biosolids Keeping up with new and emerging regulatory requirements from the State Water Board, the EPA, and other regulators
Decades of declining federal investment and new uncertainties The cost of getting things done, especially construction, in San Francisco 8 Initial New Operating Budget Proposals
Figures are based on initial estimates – additional validation still needed to determine where costs being offset
Enterprise/Bureau # of New
Proposals
# of New
FTE
Estimated New
Costs (FY 26-27)
Estimated New
Costs (FY 27-28)
Water 11 17 $4.1M $5.4M
Hetchy Water 3 9 $4.0 $7.1
Wastewater 10 5 $4.8 $11.0
Power 8 15 $9.7 $10.2
CleanPowerSF 5 3 $6.8 $8.7
General Manager - - - -
Human Resource Services 4 5 $4.5 $6.4
Business Services 4 8 - -
External Affairs 1 2 $0.2 $0.2
Infrastructure - - $0.8 $0.8
Total 46 64 $34.9M $49.9M
9 Initial New Operating Budget Proposals
Enterprise/Bureau Examples of Proposed New Costs Above the Baseline Water Staff to operate new Ozone Facility in Sunol, Hazard Assessment Program team to address new state regulations, permit fees, fleet modernization resources
Hetchy Water Increased permit and regulatory costs
Wastewater Costs to operate new Biosolids Digester Facility (Power, O&M contracts, furnishings), replacements for lab equipment Power Electrical distribution and streetlight maintenance equipment CleanPowerSF Customer program expansion, battery optimization software Human Resource
Services
IT investments to modernize failing HR systems
Business Services AMI Team in the Customer Service Bureau 10 Evaluating Operating Budget Proposals
Did the team first re-align
existing budgets to find
savings and efficiencies?
Is the cost
discretionary?
Was a lower cost
alternative
considered?
What are the
consequences or risks
of not funding the
request?
How does the request
reflect the agency's
priorities and the
enterprise’s level of
service goals?
Is the cost one-time or
an ongoing operating
commitment?
Initial Capital Budget Proposals
11 Capital Budget –
Example of
Prioritization
Framework
12 Wastewater Prioritization System
13 Reducing the Size of the CIP
Cancelling projects not
integral to level-of-service
goals
Deferring major, but
lower risk projects by
10, 15 or even 20 years
Consolidating
construction
schedules for projects
that are co-located
Increasing the use of
Progressive Design-
Build contracts for
larger projects
De-scoping projects to
only address critical
needs
Considering alternative
financing options
14 Internal Budget Process
# Date Budget Steering Committee Topic Lead Presenter
1 Sept. 8 Introduction & Financial Models Budget &
Financial Planning
2 Sept. 16 CIP Update and Preview of Capital Proposals Budget & SIC 3 Sept. 24 Operating Budget Overview and Preview of Proposals Budget 4 Oct. 1 Bureau Operating Budgets: Business
Services, General Manager & External Affairs
Nancy and Ron
5 Oct. 6 Bureau Operating Budgets: HRS and Infrastructure Wendy and Stephen 6 Oct. 16 Power Operating and Capital Budget Barbara Hale 7 Oct. 29 Water and HHW Operating and Capital Budget Steve Ritchie 8 Nov. 3 Wastewater Operating and Capital Budget Joel Prather 9 Nov. 13 IT Project Overview, Finance
Recommendations, Capital Updates
Jennifer
Hopkins, Finance &
Others
10 Nov. 17 Capital Budget Follow-ups and Budget Status Summary Budget 15 What Now?
Modeling scenarios to understand rate requirements of differently sized, scaled, and timed capital plans
Considering tradeoffs between financial pressures and operational needs Incorporating Mayor's Budget Instructions and stakeholder feedback Preparing for upcoming meetings and hearings
16 Budget Outreach & Calendar
Date Budget Action Key Stakeholders
January Commission Hearings Commission
January – March Rates Fairness Board Meeting(s) Rates Fairness Board January - March Citizens’ Advisory Committee Meeting(s) Citizens’ Advisory Committee January - March Public Outreach about rates Community groups, neighborhood organizations, local businesses
February Budgets due to Mayor and Controller Mayor's and Controller's Offices March Capital Plan presented at Capital Planning
Committee
City departments and the public
April Rates Proposal at Commission Commission
May Board of Supervisor Hearings Board of Supervisors
Questions?
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