• In its planning for the Water System Capital Improvement Program, the Public Utilities Commission has failed to make a timely determination of the need for a programmatic environmental impact report under the California Environmental Quality Act. This is in spite of the Public Utilities Commission's considerable investment in expert consultant support, most notably the $45 million, greater than four years Program Management Services Contract which has environmental services subconsultants, one of whom is now being separately contracted to develop a programmatic environmental impact report. The Program Management Services Contract did not identify the need for a programmatic environmental impact report.
  
  
• The Water System Capital Improvement Program's policy parameters are only now being determined, despite past representations to the Board of Supervisors and voters that such policy parameters had been determined and put in place. Nine critical projects, costing an estimated $1.2 billion or two thirds of the estimated total $1.9 billion cost for the regional water system capital improvement program projects, are currently being delayed because of the need for the programmatic environmental impact report. Project-specific environmental impact reviews and design work cannot be completed until after the programmatic environmental impact report is approved. Establishing a firm project-sequencing schedule is necessary to determine the optimal and least costly timing for new revenue bond issuance.
  
  
• As part of the Water System Capital Improvement Program budget, the Public Utilities Commission is currently proposing an additional $143 million for the programmatic environmental impact report, related environmental mitigation costs, and project-specific environmental mitigation costs. The Public Utilities Commission had previously only budgeted $10 million for environmental mitigation.
  
  
• The Public Utilities Commission needs to ensure that the planning processes for all future capital improvement programs which it undertakes explicitly include consideration of the need for a programmatic environmental impact report from the outset to avoid the costs associated with planning, design, and construction delays.
  
  
• The Public Utilities Commission and the Planning Department need a formal operating procedures memorandum of understanding, including a weekly reporting framework for all Planning Department staff funded by the Public Utilities Commission, to ensure that there is a full accounting of the City Planning Department's expenditures of Water System Capital Improvement Program funds.
  
  
• The City Planning Department's Major Environmental Analysis Division needs to identify proactively when capital improvement programs require programmatic environmental impact reports so that the necessary planning can happen in a timely fashion.

Background

The California Environmental Quality Act of 1972 requires that a programmatic environmental impact report be prepared on a series of proposed projects that can be characterized as one program and are related either: (a) geographically; (b) as larger parts in a chain of contemplated actions; (c) in connection with the issuance of rules and regulations; or (d) as individual activities carried out under the same statutory or regulatory authority and having similar environmental effects that can be mitigated in similar ways. For capital improvement programs that fit these criteria, the California Environmental Quality Act forces the capital improvement program's sponsor to:

• Describe the program and its impact on the environment.
• Suggest environmental mitigation options.
• Share program information with the public.
• Provide all decision-makers with a single document.

Although the Department's work on the Water System Capital Improvement Program commenced at least six years ago, the first conversations about the need for a programmatic environmental impact report were held only in 2002. These meetings were initiated by the Department and involved the City Planning Department and the City Attorney's Office. The Public Utilities Commission has since publicly committed itself to completing a programmatic environmental impact report for certain regional water system capital improvement projects. Departmental staff members are currently projecting programmatic environmental impact report completion in mid 2007.

Current Status

There are a number of organizations involved in the preparation of a programmatic environmental impact report for the Water System Capital Improvement Program:

• The Public Utilities Commission is the project sponsor. Public Utilities Commission staff members prepare the Water System Capital Improvement Program description, provide technical expertise and base environmental information, develop viable project alternatives, review feasible mitigation options, and review the draft documents required under the California Environmental Quality Act.
  
  
• The City Planning Department authors the California Environmental Quality Act documents, scopes the projects, directs the consultants (a joint venture of Environmental Science Associates and Orion Environmental Associates, known as ESA/Orion), manages the public consultation process, and issues the notifications to proceed with environmental impact reviews so that other agencies know when to provide input. The California Environmental Quality Act documents are ultimately under the City Planning Department's control.
  
  
• The consultant, ESA/Orion, provides technical support to the City Planning Department's Major Environmental Analysis Division. The consultant contract is funded by the Public Utilities Commission. The consultant will (a) fit the Water System Capital Improvement Program's overarching goals and objectives, and implementation strategy, into the required format for California Environmental Quality Act documents, (b) advise the City on how other Californian jurisdictions have managed the programmatic environmental impact report process, (c) advise the City on the available environmental mitigation and permitting options, and (d) work on public outreach.
  
  
• Final decision-makers include the Public Utilities Commission, the Planning Commission, the Board of Supervisors, and Federal and State permitting agencies, with input from the regional jurisdictions impacted by the Water System Capital Improvement Program.

Public Utilities Commission

As the culmination of a series of workshops and meetings held between October of 2004 and February of 2005, the Public Utilities Commission provided policy guidance to its staff as to water system requirements for (a) the level of service which should be achievable 24 hours after a major earthquake, (b) water delivery reliability, (c) water quality, (d) ability to meet customers' purchase requests, and (e) environmental stewardship. The Public Utilities Commission provided this policy guidance in order to:

• Establish the goals and objectives for the Water System Capital Improvement Program.
• Focus the California Environmental Quality Act review process on chosen program goals.
• Establish the program's definitive project list.
• Establish the program's cost parameters.
• Establish the program's criticality-based schedule.
• Provide the design basis for system engineering.
• Produce a comprehensive, long-term operations plan to show how the chosen water system would work.
• Prepare a California Environmental Quality Act program definition for transmission to the City Planning Department so that the City Planning Department can conduct an independent review of the program's environmental impacts, with assistance from its consultant, ESA/Orion.

During their deliberations, the Department and the Commission were able to draw upon technical reports prepared by consultants since late 2002 for the Department and the Bay Area Water Supply and Conservation Agency. These four reports make projections through 2030 on Retail Water Demands and Conservation Potential (November, 2004), Wholesale Customer Water Demand Projections (November, 2004), Wholesale Customer Water Conservation Potential (December, 2004), and Wholesale Customer Recycled Water Potential (December, 2004). These reports, which are summarized in the 2030 Purchase Estimate Technical Memorandum, a document that outlines what the 29 suburban wholesale customers would like to purchase, rather than just their total projected water demands, will be key data sources for the programmatic environmental impact report process.

At its February 8, 2005 meeting, the Public Utilities Commission held its first public discussion of proposals to increase the Water System Capital Improvement Program budget by $717 million. The majority of this additional expenditure would be on projects that would allow the Public Utilities Commission to achieve the policy parameters it has chosen for the water system. Of this additional $717 million, $143 million is being proposed for the programmatic environmental impact report, related environmental mitigation, and a seven year project-specific environmental mitigation program. The $143 million would cover consultant contracts, Public Utilities Commission and City Planning Department staff time, and environmental monitoring. Environmental mitigation had previously been budgeted at only $10 million. At the February 8, 2005 meeting, departmental staff members advised the Public Utilities Commission that environmental mitigation typically costs between 3 and 10 percent of project costs, depending on a site's environmental sensitivity and the duration of the environmental impact review process. Departmental staff members advised that they were budgeting on the basis of an average environmental mitigation cost of 4.4 percent of project costs.

City Planning Department, Major Environmental Analysis Division

The City Planning Department's Major Environmental Analysis Division is responsible for California Environmental Quality Act compliance for all City projects requiring discretionary approval before they can proceed. Under the California Environmental Quality Act, the Major Environmental Analysis Division is the author of categorical exemptions, negative declarations, and environmental impact reviews.¹

The Public Utilities Commission funds the following Major Environmental Analysis Division staff, and ancillary costs, to manage the Water System Capital Improvement Program's programmatic environmental impact report process:

• 0.10 FTE Classification 0932 Manager IV, Environmental Review Officer (i.e., 10 percent of the Major Environmental Analysis Division Manager's time).
• 1.00 FTE Classification 5298 Planner III - Environmental Review. This is a filled Major Environmental Analysis Division position for which the Public Utilities Commission is billed quarterly. This position provides no further time accounting information to the Public Utilities Commission. However, the Major Environmental Analysis Division's Environmental Review Officer advises that the Major Environmental Analysis Division has now agreed to provide weekly time accounting information to the Public Utilities Commission.
• 1.00 FTE Classification 5298 Planner III - Environmental Review. A requisition has been issued for this position which will be a Public Utilities Commission position, required to submit weekly reports to the Public Utilities Commission and subject to evaluation by the Public Utilities Commission.
• 1.00 FTE Classification 5299 Planner IV - Environmental Review. A requisition has been issued for this position which will also be a Public Utilities Commission position, required to submit weekly reports to the Public Utilities Commission and subject to evaluation by the Public Utilities Commission.
• Any time spent by Major Environmental Analysis Division staff on specialist work connected to the Water System Capital Improvement Program.
• Office equipment as determined necessary by the City Planning Department.
• A 10 percent administrative cost for project staffing and billing at the City Planning Department.

Despite the above funding commitments, the Budget Analyst notes with concern that (a) there is no signed, formal memorandum of understanding between the Public Utilities Commission and the Major Environmental Analysis Division which sets forth the operating procedures, and (b) the Planner III - Environmental Planner position funded by the Public Utilities Commission and managed by the City Planning Department has not been providing a weekly report to the Public Utilities Commission. Both management deficiencies could result in incomplete explanation of the Major Environmental Analysis Division's expenditures of Water System Capital Improvement Program funds.

At its February 8, 2005 meeting, the Public Utilities Commission forwarded its Water System Capital Improvement Program description to the City Planning Department to begin the California Environmental Quality Act review process.

ESA/Orion Contract

On March 24, 2005, the City entered into a contract with ESA/Orion for environmental analysis services effective March 31, 2004 through September 30, 2006, at a not-to-exceed cost of $2,500,000 paid by the Public Utilities Commission. The consultant was selected through a Request for Proposals/Qualifications process administered by the Public Utilities Commission in early 2004. The consultant has previously undertaken programmatic environmental impact report projects.

Specifically, this consultant will assist staff in the City Planning Department's Major Environmental Analysis Division to develop a programmatic environmental impact report for the Water System Capital Improvement Project in compliance with the California Environmental Quality Act in four phases:

1. Conduct programmatic environmental impact report start-up and alternatives development.

2. Prepare administrative draft no. 1.

3. Prepare administrative draft no. 2.

4. Prepare responses to comments and final programmatic environmental impact report.

While the Public Utilities Commission funds the ESA/Orion contract, the Major Environmental Analysis Division must direct the consultant on California Environmental Quality Act work, in preparation for the Planning Commission to certify the programmatic environmental impact report. The Public Utilities Commission can only direct the consultant for non-California Environmental Quality Act work. To date, one task order has been issued under this contract for Phase 1 at a not-to-exceed cost of $507,548. ESA/Orion Joint Venture invoices to date of $88,179 have resulted in a working draft of the Regional Water System Improvements Program Environmental Impact Report Project Work Plan (November, 2004), a catalog of supporting studies, a catalog and review of wholesale customer general plans, and a detailed work plan for near-term public outreach activities. While waiting for a written program definition from the Department, the consultant has been working on (a) existing conditions, (b) the validity of wholesale customers' population growth projections, (c) schedule updates, (d) project library maintenance, and (e) pre-organization of public outreach.

Reasons for Delay

During the course of the Public Utilities Commission's program definition process, members of both the Commission and the Department noted that the process should have been conducted earlier to ensure that the program is fully defensible in terms of both its concept and any potential legal challenges. The Deputy General Manager, Infrastructure and Operations stated at the January 13, 2005 meeting that the previously unanticipated programmatic environmental impact report will have "a significant impact" on the program, potentially in terms of the program's scope, component projects, schedule, financing, escalation numbers,² and potential environmental mitigation.

There are a number of reasons for the Department's delay in determining the need for a programmatic environmental impact report:

• The initial development of the Water System Capital Improvement Program was led by a former Assistant General Manager, Business Services (from a financial planning perspective) and the former Planning Bureau Manager (from a water system planning perspective), neither of whom had previously undertaken a capital improvement program of this magnitude. They were responding to repeatedly identified infrastructural deficiencies in the water system. No comprehensive initial master planning and public consultation process equivalent to that currently being undertaken for the Clean Water Master Planning process was conducted. Therefore, by California Environmental Quality Act programmatic environmental impact report standards, the proposed Water System Capital Improvement Program lacked overarching program goals and objectives and preferred implementation processes within policy parameters set by the Commission. Instead, the Department compiled its list of preferred projects largely in-house and concentrated its outreach efforts on selling the resulting set of 77 projects to the public after they had been approved by the Commission.
  
  
• The Commission's and the Department's historic focus on operations, rather than on strategic policy and planning, shaped where they concentrated their attentions. The Commission and Department were more focused on addressing long-standing infrastructural deficiencies and gathering public support for funding the necessary capital improvements, which required voters to approve lifting a water rate freeze, than they were in funding the planning processes necessary to determine policy parameters for a capital improvement program. Consequently, the 77 selected capital improvement projects were memorialized without a systematic analysis of their interrelationships and their cumulative impact. When the Public Utilities Commission started to work through the California Environmental Quality Act process, however, the Commission realized that it had to develop a systematic rationale for its list of 77 projects, and its planning assumptions about water system reliability and capacity. To avoid such late realizations in the future, the Budget Analyst recommends that (a) the managers responsible for the Clean Water Master Plan make a presentation to the Public Utilities Commission on how the Clean Water Master Planning process will determine whether or not a programmatic environmental impact report is necessary, and (b) the City Planning Department's Director, or representative(s), participate in that presentation.
  
  
• The Department lacks an overarching strategic plan and a Water Enterprise business plan which would have provided important planning contexts for the Water System Capital Improvement Program. Both these planning deficiencies are addressed in Sections 13 and 15 of this Phase III management audit report.
  
  
• The City Planning Department's Major Environmental Analysis Division does not proactively work with departments to determine if a programmatic environmental impact report is necessary. The Major Environmental Analysis Section only responds to California Environmental Quality Act proposals submitted by departments for consideration once they are ready to meet the mandatory California Environmental Quality Act requirements. Therefore, in spite of the high public profile of the largest revenue bond ever approved by San Francisco voters, the Major Environmental Analysis Section did not initiate a dialogue with the Public Utilities Commission over the possibility of the two departments having to undertake a programmatic environmental impact report. Going forward, the Budget Analyst recommends that (a) the City Planning Department's Director submit a proposal to the Planning Commission about how the City Planning Department could adopt a more proactive role at the outset of major capital improvement programs to ensure that due consideration is given to the need for a programmatic environmental impact report, and (b) the Planning Commission report to the Board of Supervisors on its decisions with regard to the City Planning Department's role.
  
  
• At the time that the Water System Capital Improvement Program was being developed, the Public Utilities Commission's Planning Bureau lacked the environmental review staff capacity it now has.
  
  
• The work scope throughout the 2000 - 2005 Program Management Services Contract with, initially, the San Francisco Water Alliance Joint Venture and, subsequently, with the Water Infrastructure Partners Joint Venture never charged the consultant with the task of considering the need for a programmatic environmental impact report. The Budget Analyst questions why such a fundamental component of a large-scale capital improvement program was neither included in the contractor's scope of work from the outset, nor identified during the course of the contractor's work by the contractor itself, given that the contractor's prime responsibility was to provide program management and coordination services. The Budget Analyst notes that environmental regulatory issues were part of the contractor's mandate from the outset, as evidenced by the following:

1. The original contract's Appendix A, "Description of Services," indicated that the contractor would be required to "Develop near-term and long-term master capital program and project schedules," "Provide regulatory/environmental services," "Develop procedures and strategies involving coordination with outside regulatory agencies," and "Provide regulatory/environmental monitoring services." In Contract Year 1, the last function involved the "Collection of data in support of environmental mitigation plan," "Environmental compliance inspections," and "Monitoring as necessary to comply with environmental mitigation plans." The combination of these tasks indicate that the Department anticipated that the contractor would be an active participant in handling environmental impact review matters within the context of planning for the Water System Capital Improvement Program as a whole.

2. One of the original subcontractors was Orion Environmental Associates, an environmental consulting firm focused on regulatory compliance, audits, and design codes. This firm is now part of the ESA/Orion joint venture hired by the Department to provide programmatic environmental impact report services to the City Planning Department. The Budget Analyst questions why this firm, which is now responsible for preparing the programmatic environmental impact report, did not identify the need for such a report when it was working under the Program Management Services Contract.

3. The Department's July of 2001 annual report on Contract Year 1 stated that the contractor had prepared unit schedules showing the duration of the environmental review phase for each project.

4. An independent Peer Review Panel which reviewed the contractor's performance in Contract Year 1 determined that "Conceptual project development work should be accelerated in the second year of the contract and priority should be given to the largest projects." The Peer Review Panel argued that this effort would "lead to valuable refinements in project cost estimates, schedules, and sequencing; and identification of public, environmental, and permit issues" (emphasis added).

5. The Department's August and December of 2002 reports on Contract Year 2 stated that one of that year's "major accomplishments" was the development of "strategies and processes for the implementation of the Program EIR [Environmental Impact Report] process."

6. The Department's December of 2003 report on Contract Year 3 stated that two of the contractor's "major accomplishments" were (a) developing "strategies and processes for the implementation of the regional system Program EIR [Environmental Impact Report] process," and (b) coordinating "technical and program management activities for EIR [environmental impact review] documentation."

Given that environmental regulatory issues were part of the contractor's mandate from the outset, the Budget Analyst concludes that the late identification of the need for a programmatic environmental impact report was due, in part, to the contractor's inadequate appraisal of the regulatory framework governing the Water System Capital Improvement Program.

• The Water System Capital Improvement Program review undertaken by R. W. Beck (May 21, 2002) to recommend program improvements or enhancements and demonstrate the interrelationships between the 77 projects was not asked to examine the question of whether or not a programmatic environmental impact report would be required.

These reasons delayed consideration of the need for a programmatic environmental impact report despite a number of factors:

• There is long-established case law about programmatic environmental impact reports associated with the California Environmental Quality Act which was originally passed in 1972. California Environmental Quality Act Sections 15165 and 15168, and the implementing guidelines, set forth the criteria for when programmatic environmental impact reports are required, for example when there are geographical interrelationships, or when like projects have a cumulative impact. Case law prohibits breaking a program down into pieces to avoid the need for a programmatic environmental impact report. In aiming to upgrade a regional water system, there are significant interrelationships between key Water System Capital Improvement Program's projects which the Department now realizes necessitate a programmatic analysis.
  
  
• The environmental community has a high level of interest in California water resource management and water system operations and planning, and it has significant expectations for extensive public involvement in the environmental impact review process.
  
  
• The advantages of programmatic environmental impact reports include: (a) systematically scoping a program from the outset; (b) developing an overall program mitigation strategy and dealing with cumulative environmental impacts in an integrated fashion; and (c) streamlining the process because project-specific environmental impact reviews can "piggy-back" off the programmatic environmental impact report, avoiding the need to replicate the same information for each project.
  
  
• It is likely that the environmental impact review for the first major project which has the potential to increase the water system's capacity would have to address population growth and urban sprawl issues for the whole system anyway. This is because the California Environmental Quality Act requires an examination of the cumulative impacts of like projects.
  
  
• The City Planning Department allocates resources to a division specifically charged with responsibility for major environmental analyses. As noted above, the Major Environmental Analysis Division does not proactively work with departments on whether or not their programs will need programmatic environmental impact reports.
  
  
• The Public Utilities Commission appropriated up to $45 million for a Program Management Services Contract between 2000 and 2005 to provide expert consulting support to the Water System Capital Improvement Program. As noted above, this failed to identify the need for a programmatic environmental impact report.
  
  
• The May 23, 2002 Blue Ribbon Panel review of the May 21, 2002 R. W. Beck analysis recommended that the Public Utilities Commission develop "a larger policy context to guide implementation and define priorities." The Blue Ribbon Panel stated that the Department "must become more policy-driven, setting goals regarding topics such as: Environmental stewardship; Environmental justice; Stakeholder involvement; The role of the [Public Utilities Commission]; Regional service commitments; Integrated resource planning of all components of the system including demand management, conservation, and recycling; Regional crisis planning." The Blue Ribbon Panel further stated that the Department "should be fully prepared to engage the public in a meaningful way in the environmental review process ... [in order to] bring public support for the [capital improvement program] and result in the best possible environmental outcomes." The Public Utilities Commission's current program definition process is finally addressing these policy concerns.

Further, the Budget Analyst notes that since the Department's first discussions in 2002 with the Major Environmental Analysis Division and the City Attorney's Office, it has taken two years to reach the point where the Public Utilities Commission set the program's policy parameters.

Impacts of Current Delay

There are a number of significant impacts arising from the late specification of the Water System Capital Improvement Program:

• The program's policy parameters have been decided at least six years after the Department began work on the program, despite past representations to the voters and the wholesale customers that the water system's capital improvement needs would be addressed by the Water System Capital Improvement Program, and that the 77 selected projects are definitive. Instead, the Public Utilities Commission is now considering a $717 million increase to the total cost of the Water System Capital Improvement Program, the deletion of eight capital improvement projects, the addition of six capital improvement projects (including the programmatic environmental impact report, related environmental mitigation, and project-specific environmental mitigation), and significant rescoping of many of the ongoing projects.
  
  
• Key reports, such as a system operations plan and wholesale customer water demand projections, have only been recently finished or are still underway.
  
  
• Nine critical regional water system projects are being delayed because their scope is dependent on definition of the Water System Capital Improvement Program. These projects are:

1. Irvington Tunnel alternatives ($185,835,008).

2. Bay Division Pipelines hydraulic capacity upgrade ($334,603,000).

3. Calaveras Dam replacement ($162,355,697).

4. Crystal Springs Pump Station and Harry Tracy Water Treatment Plan long-term improvements ($37,103,502).

5. San Joaquin Pipeline hydraulic capacity ($391,776,872).

6. Sunol Quarry Reservoirs ($9,809,685).

7. Enlarge Sunol Water Treatment Plant ($82,334,044).

8. San Andreas Pipeline No. 3 installation ($25,328,100).

9. Bay Division Pipeline Nos. 1 and 2 Caisson and Bridge ($20,743,810).³

The Budget Analyst notes that the above nine projects total $1,249,889,718 and therefore represent approximately 69.5 percent of the total budget for the 38 regional water system projects of $1,797,145,926. This means that when the 38 projects are considered by total estimated cost, approximately two thirds of the regional water system capital improvement program is currently being delayed.

• While project-specific environmental impact reviews can start simultaneously with the programmatic environmental impact report, draft project-specific environmental impact review reports cannot be released before the draft programmatic environmental impact report is released. Although the project-specific environmental impact reports will be developed as stand-alone documents to avoid being held up by any complications associated with the programmatic environmental impact report, they will also have to tier off the programmatic environmental impact report. This is because the programmatic environmental impact report and resulting environmental mitigation measures could change specific projects. Further, permits could impose operational constraints which would require new monitoring and reporting mechanisms.
  
  
• While project-specific design work can begin during the programmatic environmental impact report process, the resulting designs cannot presuppose the programmatic environmental impact report's analysis and selection of environmentally preferable alternatives.
  
  
• Delays could be minimized by incorporating entire project-specific environmental impact reviews for certain key projects into the programmatic environmental impact report. However, there is a risk of causing delay to the certification of the programmatic environmental impact report as a result of controversy over any one specific project.
  
  
• Delays could also be minimized by bringing key milestone completion dates forward for unaffected projects wherever possible, depending on the Planning Department making a determination that it is permissible for these projects to move ahead of the programmatic environmental impact report. This approach assumes that the Public Utilities Commission has sufficiently experienced project managers able to bring key milestone completion dates forward. The Budget Analyst will be considering the Department's capacity to complete the Water System Capital Improvement Program in his Phase IV management audit report.
  
  
• The financial schedule is being impacted. Establishing a firm project-sequencing schedule is necessary to determine the optimal timing for revenue bond issuance.
  
  
• The current renegotiation of the Settlement Agreement and Master Water Sales Contract which is due by 2009 could be impacted. The negotiators will need to know the definitive project costings well beforehand in order to ensure there is a mutually agreed, guaranteed revenue stream for the facilities being built.

Conclusion

In its planning for the Water System Capital Improvement Program, the Department failed to make a timely determination of the need for a programmatic environmental impact report under the California Environmental Quality Act. This is in spite of the Department's considerable investment in expert consultant support, most notably the $45 million, four year plus Program Management Services Contract which has environmental services subconsultants, one of whom is now being separately contracted to develop a programmatic environmental impact report. The Program Management Services Contract did not identify the need for a programmatic environmental impact report.

The Water System Capital Improvement Program's policy parameters are only now being determined, despite past representations to the voters that such policy parameters had been determined and put in place. Nine critical projects, costing an estimated $1.2 billion or two thirds of the estimated total cost of the regional water system capital improvement program projects, are currently being delayed because of the need for the programmatic environmental impact report. Project-specific environmental impact reviews and design work cannot be completed until after the programmatic environmental impact report is approved. Establishing a firm project-sequencing schedule is necessary to determine the optimal and least costly timing for new revenue bond issuance.

As part of the Water System Capital Improvement Program budget, the Department is currently proposing an additional $143 million for the programmatic environmental impact report, related environmental mitigation costs, and project-specific environmental mitigation costs. The Department had previously only budgeted $10 million for environmental mitigation.

The Department needs to ensure that the planning processes for all future capital improvement programs undertaken by the Public Utilities Commission explicitly include consideration of the need for a programmatic environmental impact report from the outset to avoid the costs associated with planning, design, and construction delays.

The Department and the City Planning Department need a formal operating procedures memorandum of understanding, including a weekly reporting framework for all City Planning Department staff funded by the Public Utilities Commission, to ensure that there is a full accounting of the City Planning Department's expenditures of Water System Capital Improvement Program funds.

The City Planning Department's Major Environmental Analysis Division needs to identify proactively when capital improvement programs require programmatic environmental impact reports so that the necessary planning can happen in a timely fashion.

Recommendations

The Public Utilities Commission General Manager should:

14.1 Ensure that the planning processes for all future capital improvement programs undertaken by the Public Utilities Commission explicitly include consideration of the need for a programmatic environmental impact report from the outset.

14.2 Direct the managers responsible for the Clean Water Master Plan to make a presentation to the Public Utilities Commission on how the Clean Water Master Planning process will determine whether or not a programmatic environmental impact report is necessary.

14.3 Request the Director of the City Planning Department, or representative(s), to participate in the above presentation to the Public Utilities Commission.

14.4 Finalize a memorandum of understanding with the City Planning Department on the operating procedures to be used between the Public Utilities Commission and the Major Environmental Analysis Division.

14.5 Determine, in conjunction with the Director of the City Planning Department, the specific performance measures for a weekly reporting framework for all Major Environmental Analysis Division positions funded by the Public Utilities Commission.

The Board of Supervisors should:

14.6 Request the Planning Commission to direct the City Planning Department's Director to submit a proposal for the Planning Commission's consideration about how the City Planning Department could adopt a more proactive role at the outset of major capital improvement programs to ensure that due consideration is given to the need for a programmatic environmental impact report.

14.7 Request the Planning Commission to report back to the Board of Supervisors on its decisions with regard to the City Planning Department's role at the outset of major capital improvement programs to ensure that due consideration is given to the need for a programmatic environmental impact report.

Costs and Benefits

None of the above recommendations should pose additional costs because they should be part of the responsibilities of positions and programs already funded.

The benefits of undertaking mandated programmatic environmental impact reports in a timely fashion include: (a) systematically scoping a program from the outset; (b) developing an overall program mitigation strategy and dealing with cumulative environmental impacts in an integrated fashion; and (c) streamlining the process because project-specific environmental impacts reviews can "piggy-back" off the programmatic environmental impact report, avoiding the need to replicate the same information for each project.

¹ Of the 77 projects currently in the Water System Capital Improvement Program (some of which are expected to be deleted, with other projects added), Major Environmental Analysis Division staff are anticipating that that there will be approximately 40 categorical exemptions, 24 negative declarations, and 13 environmental impact reviews.

² The "escalation number" is a construction inflation cost, usually determined on a per year basis. However, for order of magnitude numbers, one can use the construction midpoint which provides a reasonable number. The Department's annual report on the Water System Capital Improvement Program uses escalation numbers calculated on a per year basis.

³ This list was presented by departmental staff members to the Public Utilities Commission on September 9, 2004.