HomeMy WebLinkAbout2000-04-12 Utilities Advisory Commission Summary Minutes Page 1 of 32
Wednesday, April 12, 2000
City Council Chambers
MINUTES
Item Page Roll Call . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Oral Communications . . . . . . . . . . . . . . . . . . . . . 2 1. Water Rate Increase. . . . . . . . . . . . . . . . . . . 2. Operations and CIP Budget. . . . . . . . . . . . . . . .
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Vice Chairman Ferguson called to order the special meeting of the Utilities Advisory Commission on April 12, 2000 at 7:00 p.m. in the Council Conference Room, 250 Hamilton Avenue, Palo Alto, California. ROLL CALL PRESENT: Commissioners Bechtel, Carlson, Ferguson and Johnston ABSENT: Chairman Dawes COUNCIL MEMBER PRESENT: Bern Beecham
Vice Chairman Ferguson: Good evening. Lets start by noting that the minutes from March 15th in your packet are only Draft Minutes and should not come before us tonight for approval. Please correct typos and send the draft to Ruth. ORAL COMMUNICATIONS: Herb Borock, P.O. Box 632, Palo Alto: On Page 50 of the March 15 minutes, the first paragraph of my remarks, third line from the bottom should read "...amount of gravel was NOT increased..." Vice Chair Ferguson: Let us proceed with the agenda as scheduled. Are there any suggestions for how to handle the two items? Mr. Ulrich: I think it would be better to begin with an overview of the reserves and capital budget, address the water rate increases, then the operating budgets. First, I would like to take a moment to introduce our new city manager and give him a chance to say a few things. Frank Benest has just started with us, and is ready to go. Mr. Benest: Good evening. I started on Monday at 7 a.m., and went until 12 midnight, so today is an early evening for me. I am delighted to be here. I just rented a house in town, so I am one of your customers. As a former "outsider," I can tell you that your reputation out there, the Palo Alto utilities, are very well regarded. Everyone is very, very positive about your utilities. Obviously, you figure importantly in terms of our budget. You are critical to our financial health. It is a very exciting time with deregulation and restructuring of utilities, so there is a lot of opportunity, and also a lot of action. I am looking forward to working with you. I am glad to be here. Vice Chair Ferguson: Thank you for joining us. We welcome your fresh perspective. If there are no objections from any of the
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commissioners, I would like to switch items. Shall we fold the water rate discussion into the Water Operations and CIP budget topic, then treat every other utility budget in sequence? Any comments, John? Mr. Ulrich: We do have some comments. I would like to make a couple of brief overview comments to kind of tie it together, and then I will ask members of the staff to make some individual presentations. As you know, this is a critical juncture each year for us to come before you and make a presentation about our budget requests. We have spent a lot of time, as you can tell in going through the budget documents. Last week at our regular meeting, you finished up the review of our CIP portion of the budget, and you approved the expenditures of many millions of dollars for significant projects. The main reason that you will find that the budget is bigger this year than last year, primarily in the CIP area, is due to our attempt to improve and rebuild the critical infrastructure, our distribution systems, and in the electric area, primarily service reliability. It is time to rebuild and improve much of that system. The other critical area where we have spent a considerable amount of time on a number of occasions is the water infrastructure, primarily the emergency plan and facilities to allow us to have water during emergency situations. All of those items I believe are critical for us to look at. Our highest goals in the utility are to provide high quality service with superior reliability, and to be able to return a fair amount of revenue back to the city. So I think you will see as you go through the budget that we are attempting to spend an appropriate amount of money to keep our investments sound and keep our facilities the way they should be. We are going to spend some time referring to and correcting our ten-year forecast. We are going to make the linkages between our CIP and the rest of our operation budget. In particular, you will see that our request for labor resource additions are, for the most part, tied to directly to our CIP work. We will be back later in the year, at which time you will see our agenda for future needs. We will be discussing in more detail as we roll out our strategic planning direction to account for the competition that is coming. As you look through the 10-year financial forecast, you will see some attempts there to take into account where the competition is coming from. So it is an exciting time. I could not have been here at a better time to work on the changes in the way the utility should move. In the past, we have worked very closely together to make this work. So I will move on and ask Randy Baldschun to go through and provide a bit of the linkage and talk about our financial health and how we are going to spend our money this year.
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(Mr. Benest leaves the meeting.) Mr. Baldschun: The staff presentation this year will be a little different than it has been in the past. What we want to provide you with this year is a framework for approving a budget for each of the utilities for the fiscal year. So what we are going to present to you, first off, is some perspective, projecting revenue and spending levels for the utility over the next ten years. Again, it is based on your approved capital budget, ______________________. Secondly, we are going to talk a little bit about the water increase. We discussed it on an earlier agenda, but I have brought slides prepared for the Finance Committee meeting on April 25th. Finally, we have a number of staff here to address itemized changes in the budget compared to the budget adopted in concept. That budget concept was for 2000-2001 last year, and there have been a number of changes since that occurred. We will begin with the rate stabilization reserve. (First slide) Electric Distribution Rate Rate Stabilization Reserve: The upper line is our maximum guide line level, and the lower line is a minimum guide level. At the bottom you see our plan to be within the range, and plan to stay there for the next ten years. Electric Supply Rate Stabilization Reserve: On the supply side, we are currently above our rate stabilization reserve. We have increased our purchased power which affects the future of this reserve as shown. We will be within the range of 2001 __________________. As you know, our purchased-power forecast these days is extremely volatile. Forecasts have changed significantly since the beginning of the year. Commissioner Bechtel: I am curious about the changes in the minimum and maximum levels. I ___________________________ straight lines. What is going on here to make you adjust the minimum and maximum curve year by year, it looks like. [Answer inaudible] Commissioner Carlson: Does that mean you are anticipating a significant rate increase in 2002? Mr. Baldschun: In our 10-year financial forecast, we are forecasting a 15% rate increase in 2002-03.
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Gas Distribution Rate Stabilization Reserve Mr. Baldschun: In the gas fund, we are going above the maximum guideline for the rate stabilization reserve. But we are anticipating that coming down. We are in a situation in the gas fund where we could justify a rate increase this year, but it is difficult to justify a rate increase when we are significantly above the gas maximum guidelines. Council Member Beecham: How did we get so much money? Mr. Baldschun: For lots of reasons, but the primary reason on the gas fund is that we had an unusually high level of gas sales and usage in 1998-99. That, of course, was not forecast, so all that additional revenue went into the reserve. Gas Supply Rate Stabilization Reserve On the supply side of the gas reserve, we are still within the maximum guideline level, and we are trying to keep that stable. Wastewater Collection Rate Stabilization Reserve: We are within the guidelines. We are not planning a rate increase this year. In the adopted-in-concept budget, we proposed a wastewater collection increase. What happened is that in 1998-99, we ended up with a surplus primarily because we had forecast the debt service in wastewater collection, and budgeted for an obligation running between $300,000 and $600,000, and we came in
around $150,000. So we dont need a rate increase in this upcoming fiscal year. Council Member Beecham: Is it coincidence that all of these funds minimize or bottom out around 2003 or 2004? You show quite a big difference in those two years. I know that the utilities are separate operations, but it seems they bottom out at the same time. Mr. Baldschun: It is a difficult question to answer without really studying each fund separately. Council Member Beecham: So there is no coincidence? Mr. Baldschun: The only coincidence I think you should be aware of is the CIP program spending pattern. As John mentioned, reliability of the utilities is a high priority for us, and to get to our target in five or ten years means talking about the CIP programs for most of the funds. Other than that, we do not see a lot of increases. Generally what we try to do in a forecast is to just figure out what kind of rates we need just to keep it funded realistically, but what we probably do is if we are aware of some
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significant changes in our revenue requirements, we are going to pump up the reserves higher. Commissioner Johnston: From my information generally, I think the budgeting is somewhat on the conservative side. The result is that at the end of the year, the reserves are a little higher than you expected them to be. So if you are really conservative and you build up the reserves at some point, and that is kind of where we sit. At the same time that we have built up our reserves, we had planned to increase our CIP programs essentially across the board, but we are not willing to pay for that right away, so we are paying for that by playing with the reserve fund. At some point, there is a crossover when you may not end up needing quite the same rate increases that you might project now. It is a ten-year forecast that is updated every year, as you would expect it to be. Mr. Baldschun: I agree. What we do not have in the financial forecast is unanticipated savings that get into the rate stabilization reserve. When we propose a budget, we intend to spend those dollars. Realistically, what happens is unanticipated events. Water Rate Stabilization Reserve: In the water fund, currently, we are slightly over maximum but will fall to the minimum over the proposed fiscal year. Through a series of rate increases, which you can see in the financial forecast, five or six successively, as in the water fund. We will keep that just above the minimum. This is a situation where we really want to minimize the impact on the ratepayers. Let me talk a little bit about our plans for the issuance of some bonds to finance the water fund CIP. Comparison of Water Wholesale and Retail Rates: We are projecting San Francisco Public Utilities Commission capital expenditures and also water increases for the next ten years. So we have to plan for a corresponding offset in retail rate increases over and above the increases needed for our own CIP and debt service. Council Member Beecham: Do you find that people are reducing their water usage? Mr. Baldschun: Yes, we do. What it tends to do is to draw down the water fund reserves very dramatically in recent droughts. It is good news and it is bad news. It is good for people to conserve, but it is bad on the financial side of the utility. Commissioner Johnston: I recall from a discussion along the lines that San Francisco was likely to double their wholesale rate over a
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period of about two years. What I see in here is closer to a tripling of the rates over that same time frame. Maybe my recollection is wrong, but I seem to remember a discussion of its doubling over ten years.
Vice Chair Ferguson: Does this include a component for Palo Altos share of the two billion capital improvement program by San Francisco? Mr. Balachandran: Yes. Commissioner Johnston: How does that chart compare with what we see in the ten-year forecast? In the ten-year forecast, we have numbers running from $2 million to $14.6 million. Ms. Hirmina: [inaudible] Vice Chair Ferguson: How do these numbers compare to the spreadsheet you gave us in January? Ms. Hirmina: [inaudible] Components of the $1.5 million Water Rate Increase: Mr. Baldschun: I will start with the proposal. What is driving the rate increase in the proposed fiscal year is primarily the CIP. What we have done is to take a portion of _____________________ purchase __________________________________ to try and give you a visual perspective of __________________________________________ rate increase this year. Commissioner Bechtel: Would it be instructive to have a chart or something that shows how much of the CIP is coming from reserves and how much is coming from the revenue stream? This is a little misleading. Mr. Baldschun: You can look at the ten-year financial forecast, Lines 78-79-80. There you see some negative numbers. There is no need for alarm, as there should be some negative numbers there. Commissioner Bechtel: [inaudible] Mr. Baldschun: The rates are based on $13,324,000. If you add up all of our financial obligations and the revenue, we actually have more than that. It is $13,702,000. So what we are doing is to take $2.4 million out of revenue income too. There are other fees, and there are other revenues. All of those things mitigate the need for collecting all of our cost through the retail rate. The difference
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between the rates and expenses is that $2.4 million. When I look for it in the water budget, I see that number going down every time. The electric fund has gone up due to stranded costs. They are continuing to show negative numbers, large numbers _____________________________ out in the future. The last line is the CIP. What I want to discuss briefly is our plan for financing the CIP. You can see that we have big swings between 2003 and 2004. So our plan is to consider bond financing, and perhaps beginning in 2001-2002, or the following year. It all depends, when you are getting ready to do it, whether other things are going on. If storm drains need some financing, we might or might not want to tend to tie into that. We do not need it this year. That is the last slide. The third part of the presentation is to go through each fund and highlight the changes. There are four items with significant changes. We have staff here to address you. Rosemary Ralston is going to address the allocated charges, and Girish Balachandran will talk about purchases. We have Larry Starr to talk about additional positions, and Rosemary will follow up.
Ms. Ralston: [first portion inaudible] The citys charges for assets used by the utility are based on an estimated return of
5.68%. This is the estimated average return on the citys investments. Based on that, pretty much the adjustments are done every year. On the rent, the adjustment is done every year. There are several components to the rents, including the Civic Center, the rent for our facilities, and the rent for the various substations, also the leases. Every year, an appraisal is done, and based on the appraisal of the market rate for the highest and best use of the property, the rent adjustment is made. Last year we had factored in a 3% rent increase, and actually it turned out to be closer to 12%. This year we increased _________________ Mr. Balachandran: [inaudible] Commissioner Carlson: So ____________ is a cost to us? Mr. Balachandran: Yes. We do not really have a choice, because this connection agreement is with PG&E is expiring in 2003. Prior to that, PG&E has the right to increase our rate. We had a rate agreement which actually expired last year. PG&E went a few weeks back for an increase in rates.
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Commissioner Carlson: So they are passing along their ISO costs? Mr. Balachandran: Exactly. Commissioner Bechtel: [inaudible] Mr. Starr: We are facing some difficult staffing needs. I used to
think $1.2 million was a lot, but today, it doesnt buy a decent house in Palo Alto. The utility is asking for eight new people in electric operations this year, and a lot of that has to do with the CIP work and a lot of it has to do with our reliability, as you can see over here. We are asking for two new assistants so that we will have two people on the service track now instead of hiring temporary people to get somebody in the stores room. We want somebody in there who understands utility materials so they can be more efficient in planning for and responding to requests. We are looking at a specialist to help out in the traffic signal shop. Right now we are using a $30-an-hour professional person to do that. This is something that can be done by a less qualified person, so that is what that position is. We are looking for a new utilities locator to handle locating all of the requests that come in from contractors . We are looking for a compliance technician to perform the mandated inspections we have to do on the system so
that we can prove we are in compliance with the states safety regulations. We are looking for a number of people who will work in the fiber optics shop. Business is so good in fiber optics that we just cannot keep up with old work and still do the work of installing new connections and new customers. That makes us perpetually shorthanded, so we need to start getting ahead of that curve. We are going to take one supervisor and split that so that one supervisor has two crews, because they have a lot of work to do, and there is a lot of office work that goes along with it in addition to being out in the field to watch what they are doing to see that they are doing the right work and are following all of the safety rules. We need to avoid scheduling too much for one person. Basically, those are the positions we are asking for. Vice Chair Ferguson: I have a question on the utilities locator. How is that connected to the capital item we talked about for the GPS system? Is this a job that gets even more efficient when we start using the GPS? Mr. Starr: The intent of the GPS system is to make our maps more accurate so that when we go out to locate something, we have some confidence in the map. We want to be able to start out close to
where the items are. Some of those things dont have something
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metallic with them. Plastic pipes you cannot locate very accurately. So it is things like that. We do put tracer wires in there now, but still __________ uncovered in a ditch Vice Chair Ferguson: What fraction of these people would you characterize as reliability-enhancing?
Mr. Starr: I would say its probably closer to 25 or 30 percent. We have done a lot of CIP work. A lot of these items are intended to improve reliability. Commissioner Bechtel: I am encouraged by the fact that we are adding people in support of the fiber optics portion of it. There is nothing more frustrating and nothing that will kill new business more than being slow to install or slow to react to something, so I am encouraged by that. The thing that surprises me a little bit is that I see things that are mostly on the operational side. In this day of deregulation and competition, I am surprised that I do not see many marketing people or somebody on the soft side. Is that maybe just because administrative staff is not in here, or this total of all utility funds, is it not? Mr. Starr: This is the electric utility fund. These are the positions that have been asked for. Actually all of our positions, all of the funds are on here. I am simply talking about the ones in the electric fund. Commissioner Bechtel: Sure. Mr. Starr: We are not asking for any marketing people this year, so we do not show that. Mr. Baldschun: Let me respond to the marketing question. When we open the doors to small commercial accounts (we have about 2,000 accounts), we are going to need some staff, not only marketing but in customer service as well. Deregulation has not really hit Palo Alto yet. We talk a lot about it and we are trying to prepare ourselves for it and be ahead of it, but it has not really affected us yet. Mr. Ulrich: Let me add something in general. I am looking forward to making organizational changes and looking at the big picture until we finish up looking at our strategic plan. These jobs are needed right now because of the magnitude of the other work we are doing, but we may be back with additional staff changes later. Commissioner Johnston: About a couple of years ago, when it was not so much a question of additional staff but that we might
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consider reassignment of staff, a number of the staff could be moved from demand-side management, for example, toward marketing. An effort was put in place at that time to refocus, not necessarily marketing, per se, but certainly to cover key customer contacts. Mr. Baldschun: [Inaudible] Commissioner Johnston: One comment I would make just in general is that it seems like a lot of the utilities are shedding accounts. Maybe they have competitive pressure from a price standpoint, but they certainly have to do that. Our situation is a little different. Can you comment on that? Mr. Starr: We have the same situation in the city. One of the problems we face here is that we need some in-house staff to do these things, but we have quite a bit of turnover. I think that within the next five years, we will have quite a few of our people who will take advantage of the 2% 55 retirement that we have now, which some people have done. That always gives us a chance to re-evaluate the job. If we were over-staffed, we simply would not fill some of these positions. Every time somebody leaves a position, we take a look at it and see if it needs to be redefined. Some of them we have downgraded, and other positions have been upgraded. I would simply assure you that we are always looking at the problem. Commissioner Bechtel: How many openings do we have now? Mr. Ulrich: Probably about six or eight.
Commissioner Bechtel: So thats really fifteen people plus new hires?
Mr. Ulrich: I wouldnt say there would be fifteen. These are positions that were vacant and were approved and authorized. They just do not have somebody yet. Commissioner Bechtel: Who hires them? Mr. Ulrich: I think of new hires in the sense of head count absolutely increasing, or more people. Some of these jobs are very difficult to fill, and are becoming more difficult every day. Citywide, I think it is somewhere around 40 positions that are currently vacant. For key positions such as the telecom manager, Larry is in the process of interviewing for that position. We have to look at what the marketplace requires to hire those people. Mr. Starr: In fact, the city has even gone so far as to try and
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bribe the employees to get people to come in and apply. Mr. Ulrich: There is a $1,500 bounty on your job, Larry! Mr. Starr: This shows about $832,000 worth of increase in salaries. We are asking for an additional $700,000 in operating funds to contract out the work to help us correct some of our shorthanded situations and to help operate the infrastructure for reliability. Vice Chair Ferguson: Is there any particular pattern to these seventeen infractions? Is that kind of a miscellaneous collection of -- Mr. Starr: It is a mixture of a lot of things -- a lot that are underground and a lot of stuff that has not been fixed for the last 20 years. Now that we have these three compliance technicians out there supervising everything, what it tells us is, not only do you have to go out and inspect it, but you have to write down what you find, identify all infractions, and come up with a plan to get them
resolved. So you cant just say they are out there. You have to be able to take care of them. This was not such a big issue in the past, but they have come out with what they call Rule #165, which is the general order that says you have to do [Rules] 95 and 128. That is what has brought this to a head. Commissioner Carlson: Is this an OSHA rule? Mr. Starr: It is the California Public Utility Commission. We do not usually fall under them, but we do on these two things on safety. So that is what this is. Mr. Ulrich: This is not a minor issue. It is one that many other places are now moving towards compliance. I would say we are one of the few municipalities that has stepped up promptly to address it. Vice Chair Ferguson: The purpose of that rule was to keep competitors from getting an advantage at the expense of safety. Mr. Starr: That is correct, and they were also concerned that with deregulation in place, safety premiums would make customers say no.
The customers dont separate safety items when they are comparing prices. Commissioner Bechtel: Are tree branches in this particular line item, or are they covered somewhere else?
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Mr. Starr: Trimming trees is in the budget, and it is a big ticket item. Ms. Ralston: That is actually a direct charge that is allocated across the city budget. They have a major activity for that utility line item. They direct the charges by the contractor. At the end of every month, we do a journal entry in the operations operating budget to fund the contract and there are certain positions that are also charged to that major activity, such as the arborist, the contractor, and so on. Vice Chair Ferguson: What is the allocated amount? Ms. Ralston: $513,000. Commissioner Bechtel: So it totals a million dollars that we spend annually on tree trimming? Ms. Ralston: Correct. Vice Chair Ferguson: Let me follow up with a general question. Do all of those allocated charges show up somewhere on these pages, or is there a category of indirect charges that do not show up in this utility budget overall? Mr. Baldschun: They appear, but not as a separate line item. Ms. Ralston: They are not a separate line item, but the way the budget is organized, components of the cost planning, administration, and also charges appear in what we call the functional area of administration, which does not show separately in the document. Mr. Baldschun: The next slide is the wastewater collection fund. Mr. Starr: This has not been done for quite some time, as we have focused on the smaller things. Now we have a good program in place on those, and we need to go out and see what is the condition of the large mains. So that is what this funding is. If it turns out that we need all of this and more, then we will see additional funds in funding years to keep this program going. Commissioner Carlson: I have a question on this and the previous
one. I see no significant change from last years estimates in both wastewater and electricity. Mr. Baldschun: In the wastewater collection, we have a $1.192 million decrease. What that is that we adopted the concept of a
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rate increase for 2000-2001, so that $10,778,000 figure includes the wastewater rate increase which we are now not going to have. So we reduced the revenues to reflect the fact that we are not going to increase the rates. We are back at the base rate. In the electric fund, there is a slight decrease in sales revenue. Commissioner Carlson: In percentage terms, it is much smaller. This is, what, ten percent? Mr. Baldschun: Rosie, do you want to talk about the other income? Ms. Ralston: There are several items. This is a _________________ budget. It is just to give you a background. This is also where we budget the connection fees and the charges that we get for the design and connection services. So there are several components. There is ____________________, and there is also where we put the operating transfers in. Some of the CIP projects are jointly shared by several funds, so we may budget a project in the gas fund but see related transactions in another fund. Commissioner Bechtel: More like last year? Mr. Baldschun: [portion inaudible] Yes, more like last year. That concludes the presentation. If you have any questions, staff is ready to respond. Vice Chair Ferguson: Are there questions from commissioners? Commissioner Johnston: Getting back to the electric fund, I want to make sure I understand some things. You talked about the head count increase. A significant portion of that was to perform the CIP, as I recall. When I look at Page 28, the summary for 2000-2001 versus $1.9 million, I see the CIP has actually gone down, not up. So I am kind of wondering how that is explained. The number I am looking at in particular is on Page 28 where you see the currently adjusted budget in the distribution system CIP for system improvements $1.4 million. Mr. Marshall: It is for the underground district, about four million dollars in the current year. Commissioner Johnston: I understand that explanation with regard to the dollars. Now how does that relate to the head count? Mr. Starr: The underground project is a high dollar item, but it is not a high manpower item for us. However, the other projects we have taken on are not of that magnitude in cost, but they are
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labor-intensive, both in the construction and the inspection, as well as in the design phase. So we have a number of projects that we are working on, and that is why the cost does not match the people. Commissioner Johnston: Okay, so if you take the three million you had in --- [inaudible] Mr. Marshall: The explanation is that three parties were working on reliability, and those were much more labor-intensive than the projects we are currently are doing. Most of the work in the current fiscal year is substructure work, which is a contract item. We do not have city workers doing these projects. In future years, we are working on projects where we will have city workers doing a lot more of the work. That is needed to support this CIP. Vice Chair Ferguson: Let me try to go systematically on this so that we do not shuffle through it too much. Do commissioners have any questions or comments on the electric budget? Commissioner Bechtel: [inaudible] I think you have done a good job of clarifying all of those issues in answering our specific questions. Vice Chair Ferguson: I have one comment on Pages 68-72, talking about fiber optic telecommunications. I know we had the fiber-to-the-home trial approved by the City Council, but where are we going with our spending on telecom staff and contractors? Mr. Starr: Part of that spending was for review of the Universal Services Telecommunications RFP. We are in the second step of that program. The first step was to install a fiber optic back bone to try to expand and enhance telecommunications here in Palo Alto, with the hope that other providers would come into town and provide additional services. So far, that has only worked for the big companies and some of the smaller commercials. The fiber-to-the-home trial is a demonstration project to show how you can use fiber to the individual residences and connect broadband to other services and to the Internet. You should be aware of the time we have spent haggling over price and how much we would offer to pay. So the second stage was to try and put together a proposal to come in and buy additional services in place of what is already here. That is the Universal Telecommunications Services RFP. We have that proposal in hand right now, and we are evaluating it. Basically what we asked was, Okay vendors, if you will come to Palo Alto and provide universal service, Internet services and other telecommunication services or other kinds of data businesses, we
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will give you a dedicated number of fibers on our backbone at a discount, and we can help you with shared use of our facilities. For that, we would like you to build that system out in five years. It has to go to every customer in town, both residential and commercial. So that was the second stage, and that does not show in here because that is cost not chargeable to the city. The vendor will pay the cost of the system. That is where we are. So that is sort of the second phase of the fiber backbone which cost over two million dollars, and that was subject to a cost recovery program, and that is what is in here. So if you see extra money before you, it is already spoken for. Vice Chair Ferguson: So it was not a surplus, and although it does not appear in the budget, per se, we say it is work in process, and it is being funded by business? Mr. Starr: That is correct. Actually we do not say just business, either. Anyone who wants to pay the cost of connecting to the fiber backbone can do so. So far, it has only been cost-effective for large businesses to do that. Vice Chair Ferguson: When it comes to residential users, in the absence of an aggregator, in the absence of a program on the part of the city to help aggregate the residential demand, it is hard for customers to get the full attention of the utility. When you made the sales pitch for the fiber ring back in 1996, you promised to serve residential users. But you did not provide for that kind of aggregation. It certainly took a lot of time for residents to organize and lobby for the fiber-to-the-home trial. Next time it should not be so hard for the next group of residents to win attention as an aggregate customer. Commissioner Carlson: What is the status of the proposals? You have how many proposals for the Universal RFP? Mr. Starr: I have them in hand. Commissioner Carlson: How many did you get? Mr. Starr: We have five proposals, so that is what we have. We sent out about 165, and we had a total of sixteen responses. Of those, eleven were not responsive, and five were in the range, so we have those. Our time line is that by the end of June, we would like to have selected one vendor to whom we would like to propose terms and get council approval. Our target is to have that recommendation to the council for approval before they go on vacation in August.
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Commissioner Bechtel: That seems like such a long time compared to a process. What can we do to move that up? Mr. Starr: Hire a telecommunications director so that we do not have to do all of it ourselves. It just goes back to inadequate staff. We are splitting our time between large projects. Fiber-to-the-home is a real time sink. It does not seem like it, but it has taken all our spare time. Our telecommunications manager bailed on us last month. Commissioner Bechtel: I am very sympathetic to that. I know that you are doing double duty, dealing with electrons and photons all at the same time. But it would be nice to do something a little bit earlier than August. Council Member Beecham: I know that they are working hard on pulling the schedule in, and part of that time frame is going to other actors here, and, I presume, the bidders, etc. So there are other steps happening before that, in addition to our staff work. So there are several things happening in there. It is not as though
it is all in staffs hands to turn over to the council. Vice Chair Ferguson: If there are no further questions on the
electric fund, lets turn to comments on the gas fund. (No comments) Then next is the wastewater collection fund. Commissioner Johnston: I would like a clarification on the wastewater collection with regard to Proposition 218. Mr. Baldschun: There is no Proposition 218 issue on wastewater collection. Vice Chair Ferguson: On storm water perhaps? Mr. Baldschun: Storm water is another department. I do not mean to be flippant, but that is a question for public works. Proposition 218 is their problem. Water Rate Increase
Vice Chair Ferguson: Lets talk a little bit about managing our discussion of water rates and water budgets. What would you like to do, just collect our comments on the budget first and then focus on the specifics? Mr. Ulrich: We can do it either way, whatever is easiest.
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Vice Chair Ferguson: Does staff have any further comments in their presentation on the rate increase? Mr. Baldschun: We do not have anything further, but we are here to answer any questions that you have. Mr. Ulrich: I do have one request. For the members of staff that are here, if there are some questions on fundamentals or technical specifications, if you would like, you could ask some of those questions.
Vice Chair Ferguson: Then lets do that. Any technical questions on water rates? Commissioner Johnston: One question I have is, do you actually have information tonight on what the water utility pays for rents for specific property? Ms. Ralston: For how many years ago? Commissioner Johnston: No, just in terms of the current year. Ms. Ralston: I have the data here. Commissioner Johnston: Could you tell me what the rent is on the Mayfield Reservoir? Ms. Ralston: I believe that is about $300,000 per year. Commissioner Johnston: The question I have about that is how do you determine the proper rent?
Mr. Ulrich: Rosemary, you have that analysis. Why dont you try to answer that. Ms. Ralston: The analysis is based on highest and best use. Commissioner Johnston: My understanding is that we do not own that site. What does the city pay Stanford for that? Ms. Ralston: I am checking. Commissioner Johnston: Is it $10,000 a year? Ms. Ralston: Yes, it is about $10,000. Commissioner Johnston: My understanding is that normally when you
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get an agreement with Stanford for a ground lease, you cannot use the property for more than Stanford permits. My understanding was that this was all very specific, and that you have a lease for that particular activity. If they ever decided they wanted to take it back for a shopping center or something else, we would not have any rights. So my question is, how can we have this process of highest and best use for land, when the only use for that land is to have that reservoir sitting on it? How are we paying top dollar for a site with limited use? Ms. Ralston: I believe the policy was made on rent several years ago. Five years ago. It was a decision that was made by council on that. But I may have to get back to you on that answer. Commissioner Carlson: It sounds like we are basically charging market value, or semi-market value, but we are paying something like twice the money. Ms. Ralston: It is handled by Real Estate, and I said, I get the figure, and then I put it in the budget, and I allocate it. It is really a different issue.
Commissioner Johnston: Lets think through the highest and best use concept. The reservoir sits right next to the Stanford Industrial Park. If we wanted to use that or somebody wanted to use that for an investment in that park, then that is the proper market
rent. That is the concept of the highest and best use. But I dont think it applies here, because that is not at all the allowable use. We have the idea of highest and best use, but if the city owns something, it has the right to find the highest and best use, but I am wondering why we think we could use that resource for anything higher than a reservoir. So I do not understand the highest and best use. It defies logic for the city to be charging rent as if it were a fully developed parcel when we are actually paying only $10,000. Mr. Yeats: It is city policy. It was a policy that was brought forth from the city council. Commissioner Johnston: Okay. So it does not have any accounting economic background. It is just a decision that the city council made. Commissioner Carlson: I have a broader question. It may be in here somewhere, but I did not quite see it. That is, what is the long-range strategy? Basically, you have a series of tradeoffs. How many increased rates now versus increased rates in the future? What is
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the long-range strategic plan here? We know rates are going to have to go up quite a bit. Are we front-end loading, or back-end loading? Mr. Baldschun: It gets down to the timing of when we issue the bonds. Our goal is to keep the reserve at a minimum. To do that, we are going to do as much debt financing as we legally can get away with. That is a change from our past practices. We have always had a pay-as-you-go policy with the CIP. The financial forecast shows you the impact of doing that, which is issuing some debt and spreading the costs over the next 30 years. But for today, it means rate increases to the customer. Commissioner Carlson: Why are you waiting to borrow for a couple of years? Mr. Baldschun: We could issue them this year, but the reason we are not is that they promise to spend the money within a three-year period. We would miss that [inaudible] It is timing. Mr. Ulrich: You mentioned strategy, and it is clear to me that what we should be doing is financing the build-out of this substructure and infrastructure in a way that incorporates the use of longer-term financing with the objective of minimizing and stabilizing the annual cost to the consumer. The consumers who are further out in the life of the facilities will pay for a share, rather than putting it all into rates right now. This is a big enough cost, but it is better first to raise rates than to proceed directly to debt financing. That would be a strategy we would look at in determining the best way of working with the city finance organization. We would look at the best timing in the bond market for us to do it. Vice Chair Ferguson: Are there any other water questions? Okay,
thats the end of technical questions. (The technical staff depart.) Commissioner Johnston: I would like to make some comments, and then I will make a motion. I am going to support the proposed water rate increase. I think we should start the rate increases and go ahead and do it now. So I support that, and I propose a motion to approve the rate increase. But I do want to point out a difference between my supporting that, and supporting the proposed budget for the water fund. The water fund is the one area where there is no competitive environment with surrounding communities, as the transfer study indicates. It also happens to be the one utility that has a number of other aspects to it which have been very much
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out of balance in the past. We have covered these before, but I think it is important to put them together here and now. The first is the issue of the equity transfer to the general fund. We had a separate meeting on this earlier, and we are clear on that and had a vote on that. I propose recommendations with regard to the transfer policy for the Water Fund. Basically, what that talks about is the way we transfer $2 million from the water fund to the general fund. All of the data regarding that transfer, in terms of comparisons to other municipal utilities, indicated that the amount should be somewhere between $500,000 and $1 million. It clearly is more than double what anyone else in a similar situation would have transferred. So I think we need critical change in terms of the transfer. That is the first item. The second item is this issue of rents. I think the rents really need to be looked at not from the concept that the council has approved, but what is the highest and best use. I do not necessarily have a problem with that concept, but it is how that concept is implemented, particularly in the case of the water fund and the outrageous rent the utility pays the city for the Mayfield Reservoir, which again is basically about a third of a million, but the city is only paying one dollar a year for the use of that reservoir. That is the highest and best use of that facility for that amount under the terms of the Stanford lease. So that would save a very significant amount of money there. The third item is the CIP. The CIP is a little more difficult because of the fact we are in need of having to build an emergency water retention system, a reliability system. So clearly we are going to need to spend some significant dollars on that, and I support doing that. However, I do not believe we are at a point where we know how best to balance that between reservoirs and wells. We have not yet figured out what we are going to do long-term with wells, and we have not really figured out what land we could get or should get, and whether we have the required dollars to purchase or not. I think that the money in the budget is where we are at, and I think we are somewhere close to two million for that project, so comparing those numbers, and seeing, as we close the budget, that we are spending about two million more than we should, which happens to balance pretty equally with what we have taken from the reserves, I would say we have about the right water rate increase. MOTION: Commissioner Johnston: So I move the staff recommendation for the proposed water rate increase. SECOND: By Commissioner Carlson.
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MOTION PASSES: Vice Chair Ferguson: All in favor of the motion, say aye? That passes unanimously with all four commissioners voting aye. Water Fund Budget Vice Chair Ferguson: I would like now to proceed with discussion of the water fund budget overall. Commissioner Johnston: I want to make it very clear that there is a need for the water rate increase, but I believe there are serious problems with the budget. Vice Chair Ferguson: Any comments on the water budget in general. Commissioner Carlson: Nothing specific on the water budget, but what exactly are you proposing? Commissioner Johnston: I would like to see the finance committee reject the budget and ask staff to reconsider it. There are several aspects of that among the three different areas that I have already addressed having to do with the CIP, having to do with rents and having to do with the equity transfer. At least the equity transfer and the rents are clearly a policy decision, so I am not sure staff can do anything about them, but I think that the policy is not supported by what the other utilities do, based on what we have been presented with in prior meetings. So all I can say is that think the finance committee ought to look at those issues, and if they agree with these legitimate concerns, then have staff take the
appropriate action. If they dont, then they dont. Vice Chair Ferguson: One of the things that occurred to me while I
looked over the water budget and looked over last years minutes as we had some of this discussion a year ago, I discovered that in 1989, we had a water utility plan. So I checked out what our decisions were on emergency preparedness eleven years ago. The four-paragraph plan was that in the event that supply from the San Francisco was disregarded, we could supply a population of 60,000 with ten gallons per capita per day, but that said, staff said we would have to revise it upwards anyway to meet American Water Works Association standards. So eleven years later, we are here with the 800-pound gorilla standing in front of us. In light of the principled objections that Paul has, we should try to find some constructive approach rather than saying that we disapprove of the budget. I am wondering if this might not be the time to say to the finance committee and to the city council that
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since we are overpaying the transfer fund from the water utility, compared to the other utilities, the thing to do this time is to forgive some of the water fund transfer in the current year budget. Give up a million or a half million, something of that sort, share and share alike. Convey the principled objections that Paul is making here, without saying the budget is wholly unacceptable. I think the budget is largely acceptable, and if push came to shove, I would support the budget, but I think Paul is correct. By marketplace standards, there is an imbalance in the way we are approaching it. On the other hand, the council is saying the three utilities are separate funds. Yet we have an unsupportable draw from the water operation to make the total transfer hit the target. We need to make that point. And it is accompanied by outside transfers in the form of inflated rent. That strikes me as wrong, as well. So I am just looking for a way to make a motion to support the budget with this critical message attached, rather than simply rejecting it and
sending it back to staff. I invite other commissioners comments. Commissioner Carlson: I would say that asking Council not to make transfers is a recommendation to the fox to stop eating so many chickens. I think the question is that we should be representing customers in this case, and the customers have given notice that the utility is paying the city too much. Commissioner Bechtel: My concern is that when you talk about the fox eating too many chickens, you miss an important risk. The question is that the fox is decimating one particular color more than the others, and it produces an imbalance in the future in our stock. I think the message I would like to send to the city council might
be something along the lines of lets at least balance the transfer from each of the funds somewhat more equitably. I am not sure what the right numbers are, but having lived here for many years, I know that the city is looking for every source of revenue that it can. If the issue is really that there is an imbalance in the funds, that is one thing to discuss, and I think that can be done. If the other is that we are transferring too much from the utilities to the city, that is a whole separate issue, and that comes in, in the forthcoming budget discussion on looking at some way to reduce the overall city expenditures. So I think there are two approaches. I would prefer to take the approach of looking at how we are transferring from each of them,
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and then do a balancing act there, as opposed to looking at the issue of reducing transfers in total. So I can support any measure or any motion maybe it is in the recommendation that it be something that we look at next year to balance the transfer, and we would at least have the time for the new city manager to get on board. We have John who is now in about his fifth or sixth month, and I think we will have time to put something together here. Mr. Ulrich: I have been here eight-and-a-half years. (laughter) No, it will soon be twelve months. Commissioner Bechtel: So I would support something short of just reducing the water budget by $1 million. I could not support that. That is a message, but that is not the message I want to send. I want to see a more constructive approach. Vice Chair Ferguson: Does someone wish to make a motion that conveys the message?
Commissioner Johnston: Im probably the wrong person to make this motion, because when we considered the CIP before, it was clear that other commissioners have concerns about the CIP that are a little different from mine. I actually think that in the case of the rents and the water, it sounds to me like there is more consensus there. I think the issue of how to deal with it is not
clear. My feeling is that I dont think we should try to make that decision. I think if we recommend that it be looked at next year or something like that, if we do, we should say that we think it is not right, and we think the finance committee ought to do whatever they deem they want to do. I am very reluctant to say that we recommend you look at it in another year. The transfer policy is something that has been a four-to-five year process, probably pretty close to five years now, because I know it started in the first year that I was a commissioner, which is almost six years by now. One of the things that other commissioners really need to hear, and what reminded me, is that staff has been around a lot longer than council members or commissioners. If you agree to continue to delay things until next
year or the next budget cycle or whatever, you dont get things done. I think it really is a problem to approve something with lots of provisos, rather than to simply reject it and let the finance
committee or the council decide how they want to address it. Lets ask them to go back to the basics. I think they will be able to
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deal with it if the UAC were to make the recommendation. They can choose. They can deal with it next year. I think that is their responsibility. We are an advisory group, and we can advise them that we think there is an issue here, and that is what I would propose. Vice Chair Ferguson: John or Randy, what happens if we do not approve a budget in our decisions here? We can say black or blue or red to the finance committee. The finance committee has to put a budget together, and the city has to have a water budget approved, effective in a year, so there is not much additional study or crafting they can do as a practical matter, is there? Mr. Ulrich: From my perspective in the relatively short time, and maybe Randy can answer more fully, but first off, I think I heard it loud and clear at the CIP meeting last week that you were in favor of, and voted in favor of, with the exception of the water, unanimously to move ahead with the CIP, and I heard very positive feedback on all of the areas of our budget and our expenses and our __________________________ with the exception of this area in the water. So I think the focus is there. At the last meeting, as you recall, I made a commitment to your concerns that we would go back and look at the Carollo Report and try to add additional information for you that has already been collected by Carollo engineers on reservoir alternatives mixed with the pumps, giving you a more comprehensive look at the alternatives, or go out and study it some more, and then look at it in relationship to our concept about water. So I think there is some headway made there. My feeling is that regarding the transfer, we have spent a lot of time in very recent months, contrary to the four or five years that Paul talked about. In relation to his good feedback on the transfer study, with the exception of the percentage in the water, what I am driving at is that I think we have identified and can work on those areas where you have concerns, and also move forward on the rent. Carl and I had discussed the allocations of many of the costs between utilities and other departments. We are also looking at the strategic plan and how our relationship is to get things done and how that may affect our relationship with other departments and costs. So I think that everything is moving along
My recommendation has to be from the staff role -- lets get on with it so we can get moving ________________________________ reliably the need to do this budget, with those exceptions, and then give you the commitment that we will focus on those and not wait a long period of time, and you give us direction in an
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advisory role as to how fast you want to move on it. So I think we can do all of the things that you have noted. I think Commissioner Johnston, in particular, has been doing this for a long time, and we probably have not moved as fast. This is an attempt to get on with it. So rather than being able to say we will do that, based on your recommendations, I would ask you to go ahead. The other part, however, is that I liked very much, your comments based on your conclusions tonight, to recommend to the finance committee, both these items and to speak on behalf of the support and advisory role for the budget. I think it will help immensely that you guys have reviewed it and have given your critical comments to it. It will allow the council members on the finance committee to know where you stand on it and give us that support. So my recommendation would be to prepare to come with us on the 25th and speak your mind. Mr. Baldschun: I would like to add that the council agreement is not about the transfer methodology. However, you have yet to go to the finance committee on this subject, and we assume that it will be on the 25th, they will address that report. I think that
tonights action should really look more to the budget itself. I appreciate the comments that you made about the water rate increase and approving the water rate increase. But deal with the transfer issues in a separate proceeding in front of the finance committee. Vice Chair Ferguson: Does that mean that the meeting on the 25th is dedicated to the utility budget, or -- Mr. Ulrich: Yes, it is dedicated to the utility budget, but it has the transfer study on the water and the CIP and the entire budget. Council Member Beecham: One thing you might do is have separate motions on the rent, on the transfer, and whatever else, and give your vote on those, and then a final vote on the overall budget. Mr. Ulrich: We also want action on the storm drain memo, analysis and procedures. Vice Chair Ferguson: As a practical matter, at council meetings, how many commissioners does it take to turn that light bulb and get the comment across? Commissioner Johnston: Typically, in the past, the Chair or somebody designated by the Chair is not able to make the meeting, joins the finance committee for those activities and joins them at the table here. Any commissioners that want to be present are more than welcome to sit in the audience and make a comment at the time.
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That is the way it has sort of worked in the past. So if a lot of people want to go, that is just fine. MOTION: Commissioner Carlson: I would like to try and craft a motion. I move that the UAC (1) finds that the transfer and rent policies as currently reflected in the proposed budget are disproportionate across the three utilities with no principled policy to justify the differences -- this will lead to an adverse impact on the water utility; and (2) recommends that the council reexamine the basis and adjust both the transfer from the Water Utility and the rent charged to the Water Utility to be consistent with the other utilities and the principle of highest and best use. Vice Chair Ferguson: In what time frame? Commissioner Carlson: As soon as possible. Vice Chair Ferguson: As part of this budget cycle? Commissioner Carlson: Yes. Mr. Yeats: But you already approved the CIP and the transfer policy at your last meetings. Vice Chair Ferguson: We did it on the express assumption that the problems with water transfer and rent would get addressed as a bundle when we got to the water rate increase proposal. Commissioner Johnston: Let me take this as an opportunity to illustrate for the newer commissioners how a motion to approve the staff recommendation with all sorts of provisos will come back to you or to council as having been a motion simply to approve the staff proposal. That is why the better approach is to reject the staff proposal outright, and then make recommendations on where and how to begin again. Commissioner Carlson: The rent issue is a completely new one. That general concept sounds good, but but I think the council needs to find out what it can adjust for what reasons in the water area, basically a fast, focused briefing to avoid any unanticipated effect, and I would rather that we start now. SECOND: By Commissioner Johnston. Vice Chair Ferguson: Any further discussion? This is not a motion that is up or down on the budget. This is a motion objecting to those two features in the budget, asking for a remedy as soon as possible.
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Commissioner Carlson: Correct. Mr. Ulrich: You may recall that as part of our discussion on the transfer study, one key recommendation is that we are able to revisit the transfer methodology much more frequently. That can be done as often as you want. That is clear in the recommendations. In the past, it sat around for a long period of time. So based on that, you always have the option of asking us and ASD to go back and look at a portion of that again, so we can do it as a living document, as opposed to one that sits there statically. Commissioner Johnston: I absolutely agree, because the best time to make a policy change that sticks is precisely when a specific budget motion is attached to it, that is when a motion is very clean in terms of its authorizing language. Now is a good time to do that, because now is the context in which you see the effect of that in light of the budget, so it is really the right time to do it, and the right time to send a message. So I support the motion. Commissioner Bechtel: It seems to me that just from a practical point of view, if we were to approve the budget for the water utility with the comment added to that approval that we feel the rent and the transfer policy have to be reviewed, that is going to surface at the finance committee meeting. I am not sure, but I would guess that it certainly is not going to be passed over, and they are going to ask, what are the issues, and these issues are going to be talked about. Dexter will be there to make a presentation or one of us will do that. I think there will be a message at that point. Certainly we can review it the following year and it would come up before the finance committee again, so I would think that we could make some moves, and say, it might not be in this budget cycle, and might not prove to be possible, but I think it is likely to take some review this year. I believe in the sincerity of the staff, and I believe in our own sincerity in trying to make some change. So I would like to see Commissioner
Carlsons motion passed, and I will support it. Lets vote on his motion, then pass the budget, and the result of those two actions will be the effect of having a more complicated set of two motions to communicate our message to the finance committee. Vice Chair Ferguson: I am partly concerned that the CIP and the short-term emergency preparedness items go forward and not get dragged down by this, as a practical matter. Addressing these points is important for all of the reasons that Paul has outlined.
As a practical matter, they wont show up as real changes until the next budget cycle, but we might as well start delivering the
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message to the finance committee now. So for those reasons, the motion as worded is acceptable to me. MOTION PASSES: Vice Chair Ferguson: All in favor of the motion, say aye? That passes unanimously, 4-0. Can we have a motion on the balance of the budget? MOTION: Commissioner Carlson: I move that we approve the balance of the water budget, subject to the previous motion. SECOND: By Commissioner Ferguson. Any discussion? I think we have covered the logic of it. Commissioner Johnston: I will oppose it for the reason that it does not cover the other item. I would point out again that the target designation for land acquisition is that piece of land that we cannot possibly buy. We can only lease it, so including money in the budget for it seems to be just another way of putting more money into the Capital Improvement Program, which is not something that I want to do. Vice Chair Ferguson: I understand your point. I think that we have already voted to put those items involving site choices and land acquisition up front into year zero and year one, that is, the $2 million item and the item labeled "El Camino Park or other." All of them have front-end planning money, outreach money, so I think there is plenty of time for those issues to surface. So I am inclined to rely on the word of staff on this one to get it sorted out. Time is a-wasting. MOTION PASSES: Vice Chair Ferguson: All in favor of Commissioner
Carlsons motion, say aye? That passes 3-1, with Commissioner Johnston opposed. Let us proceed with the electric fund budget. MOTION: Commissioner Bechtel: I move that we recommend to the finance committee that they adopt the staff recommendation for the electric fund budget. SECOND: By Commissioner Carlson. Commissioner Carlson: Any discussion on the electric fund? Commissioner Johnston: I will support the motion, but I am concerned that we are adding staff when the trend in the industry is entirely in the opposite direction. There was no justification given for the particular conditions. My question is not so much about those conditions, but is a broader question. The utility has
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112 positions. I am just concerned that we make sure that in looking ahead to next year, we might get an earlier meeting on which way the head count might go. In the past, there have been some competitive studies that have benchmarked reasonable headcount for principle utilities and the like. I am a little concerned with having about an 8 percent increase in head count without any advance support by any such study. I know there is now no time to do that, and I will support the budget. But I would be very distressed if we had excess staff a year from now, or similar story, without laying some groundwork for making a cutback, because we seem to be going again the tide here. As I say, I will support it, but that is my concern that I want noted. Vice Chair Ferguson: I would like to make some comments about the additional head count. I did speak with Chairman Dawes about this
topic, and I have his questions. I was satisfied with Larrys conversation that these jobs are not being invented. They are already being done, albeit by $30-an-hour people who are all that were quickly available to work on the plan in front of us. Because the work is there, there is good reason to add in-house hires less expensively than an outside contractor or over-qualified people. So I can support that. There were a couple of things that we asked for last year, some of which we got, but none of which turned up in this budget. At last
years focus on R&D spending, the city manager warned us that it is difficult for these things to be architected into the larger city budget template. Also, we now do have a better look at supply versus distribution. Chairman Dawes asked us in the budget to please lay out some kind of benchmarking numbers. One of the things he asked for was a comparison between our performance along key dimensions and industry averages, including comparable departments in other municipal utilities, and putting it on a single page so we could see how we are doing in a benchmark fashion, for better or worse. We did not see that this year. Some of us talked last year about our reserve funds, developing a measure of our ability to invest in our system and in growth. We've talked about R&D spending several times now, usually in connection with the public benefit program. But this budget still offers no display of an R&D program or portfolio, nor how part of
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the program gets funded by the PBP money. It is okay in the valley to budget specifically for R&D throughout the program, and see meaningful dollars allocated instead of the empty space shown for the gas program. We need to budget and think about R&D as a business. We want to be thinking competitively, and try to stay ahead of the curve in these tumultuous next four or five years. Another thing missing this year. Last year as part of the budget, staff characterized in a one-page memo the various capital expenditures as "replacement" versus "improvement," broken out across the different utility CIPs. Finally, a summary characterization of how we are investing our capital would be helpful, perhaps arrayed against key objectives. For example, new council members just received a nicely packaged introduction to the utility department. [shows document] These two budget summaries could be arrayed across the bullets used to educate the new council members. These bullets show the projects and priorities of the utilities department. Why not use that list for these budget summaries, too, a punch list with spending attached to it? Some of these are incompatible with the project descriptions in our big fat budget document. Some of these things do not appear at all as projects listed in our budget, so it makes it difficult at budget time to say, this is like the utilities agenda that is being blessed by the council. Being able to compare that to the spending agenda would be helpful to the UAC, as well. MOTION PASSES: Vice Chair Ferguson: All in favor of the electric fund motion, say aye? That passes unanimously, 4-0. Let us proceed with the gas fund budget. Is there a motion to approve the staff recommendation? MOTION: Commissioner Carlson: So moved. SECOND: By Commissioner Bechtel. MOTION PASSES: Vice Chair Ferguson: All in favor of the motion, say aye? That passes unanimously, 4-0. Is there a motion on the wastewater collection staff recommendation? MOTION: Commissioner Bechtel: I move that we approve the staff recommended budget. SECOND: By Commissioner Carlson. MOTION PASSES: Vice Chair Ferguson: All in favor of the motion, say aye? That passes unanimously, 4-0. Any further comments? Mr. Ulrich: Our next meeting is on May 3rd. I will probably not be
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at the finance committee meeting. If you have any comments or agenda items you would like to address in the package for the May meeting, let me know. The gas quarterly report methodology and issues related to risk premium, San Francisco PUC water supply master plan update, and discussion of the strategic planning workshops -- are scheduled for the 17th and the 31st. ADJOURNMENT: The meeting was adjourned at 9:20 p.m