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Budget Committee Advances SFPUC Plan to Exit Shaky Federal Bond Subsidy

Budget Committee Advances SFPUC Plan to Exit Shaky Federal Bond Subsidy

Budget & Finance Committee • San FranciscoSeptember 30, 2026

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San Francisco's utility wants to refinance up to hundreds of millions in Obama-era debt before Congress cuts its federal subsidy further. The problem is that one of the deals currently loses money. The Budget & Finance Committee voted 3-0 on Sept. 30, 2026, to give the San Francisco Public Utilities Commission (SFPUC) that authority anyway, and it sent 11 other items to the full Board, including federal HIV dollars, a sole-bidder Deloitte contract and a security retrofit at SF General's abortion clinic.

  • SFPUC refinancing authority advances 3-0 despite a projected $27M loss on the water refunding at current rates
  • Federal HIV funding survives proposed elimination, bringing about $6.1M over two years as SF reports record-low diagnoses
  • Deloitte, the only bidder, lands a $30M, 10-year contract to manage SFPUC's $2.2B power capital plan
  • $475,000 state grant funds a secure entry at SF General's Women's Options Center amid reported rising threats

SFPUC Refinancing Clears Committee, Savings Still Uncertain

The basics: Build America Bonds (BABs) are taxable bonds from 2009 and 2010. Under that federal program, Washington pledged to cover 35% of the interest. SFPUC issued $1.4B of them and has already refunded about half, including water BABs last year and wastewater BABs in August.

Why it matters: The debt is paid by water, sewer and power ratepayers. The federal subsidy has already shrunk to 33% under sequestration, and SFPUC is trying to get out before it shrinks further.

"Last year, the Ways and Means Committee proposed eliminating the subsidy as part of the so-called One Big Beautiful Bill," said Nikolai Skarloff, SFPUC Capital Finance Director.

Where things stand: The ordinance authorizes revenue bonds and commercial paper for two purposes:

  • Headquarters debt: Prepay $115M in outstanding 2009 certificates of participation for SFPUC's 525 Golden Gate Ave. headquarters.
  • Water bonds: Refund a remaining $351M series of water BABs.

The authorization allows up to about $492.8M in water bonds and $12.6M in power bonds.

Skarloff warned that the numbers have already moved. "Now, I would caution that in just recent weeks, due to the Iran war, the bond market has experienced increased interest rates," he said. He added that the water series currently shows no savings and was included for flexibility.

The other side: The Budget and Legislative Analyst (BLA) found that the deal breaks the utility's own rules. "What's unusual about this transaction is that neither currently meets the PUC's debt policy requirement," said Christina Malemut, BLA analyst. That policy requires 3% net-present-value savings, and SFPUC's commission waived it to limit federal risk.

Malemut put the headquarters deal at about $11M in cash-flow savings. She put the water refunding at an estimated $27M loss under current market conditions.

Supervisor Matt Dorsey (District 6), who chairs the committee, pressed on affordability. "Water and sewer bills have continued to rise, and for many San Franciscans, there isn't a lot of relief in sight," he said. He asked how the refinancing fits a broader strategy to control debt costs. Skarloff pointed to ongoing refinancing work and an interim financing that deferred borrowing.

Decisions and stakeholder impacts: The committee adopted the BLA's amendment, which SFPUC accepted. It cuts wastewater authorization from $224,570,000 to $24,570,000 because the wastewater refunding already closed in August. The committee then recommended the ordinance as amended. For: 3 (Chan, Sauter, Dorsey), Against: 0, Absent: 0.

Ratepayers get less exposure to Washington's budget fights, but no guaranteed savings. The main safeguard is a staff pledge. "But it would be our intention to only refund these bonds to the extent we have savings," Skarloff said.

What's next: The ordinance is expected on the full Board's Oct. 6 agenda.

Federal HIV Dollars Survive as SF Hits Record Low

Why it matters: The federal Ending the HIV Epidemic (EHE) program was on the chopping block. It now funds 10 agencies delivering 19 low-barrier services to about 1,200 San Franciscans.

Where things stand: The Department of Public Health (DPH) receives EHE funds through the federal Health Resources and Services Administration (HRSA) as part of the Ryan White programs. San Francisco is one of 57 funded regions, and the national goal is a 90% reduction in new infections by 2030.

Figures cited for the increase differed:

  • Presenter's figure: Bill Blum, DPH Director of HIV Services, put the grant at $3,178,000, an increase of almost $750,000.
  • Clerk's figure: The clerk's reading cited about $2.4M for March 2026 through February 2027.
  • Two-year total: Both put the total at about $6.1M.

The item is retroactive because HRSA issued the award May 21, after the March 1 grant-year start.

Dorsey asked whether Ryan White still has broad support in Washington. Blum said it historically has, noting that states that did not expand Medicaid would otherwise bear the costs. "This EHE funding, we're really lucky. We did wonder if it would continue because it was slated for elimination, but a lot of advocacy and education, and so we're in a good place," Blum said.

Asked how San Francisco compares nationally, Blum said, "We're about at the top." He said contracted agencies and DPH clinics have closed disparities in outcomes except among people experiencing homelessness or housing instability, a gap that long-acting treatments aim to close.

Decisions and stakeholder impacts: Dorsey framed the vote personally. "As a gay man myself living openly with HIV, this is a priority for me," he said. He noted 136 new diagnoses in 2025, the lowest on record and a 75% decline over 20 years. He also said Black and Latino San Franciscans and transgender women remain disproportionately represented among new cases.

The committee forwarded the item with a positive recommendation. For: 3 (Chan, Sauter, Dorsey), Against: 0, Absent: 0.

What's next: Blum said the program is slated for reductions that he expects to be backfilled by a separate Ryan White stream running through the state. He also announced that this was his final presentation to the committee before retiring after 20 years.

Deloitte, the Lone Bidder, Lands $30M Power Contract

Why it matters: This is SFPUC's first program management contract for its Power Enterprise, which includes Hetch Hetchy Power and CleanPowerSF. The contract will steer a 10-year capital plan of about $2.2B for fiscal years 2027 through 2036.

Where things stand: The contract with Deloitte Transactions and Business Analytics LLP is capped at $30M. It runs from Nov. 16, 2026, to Nov. 15, 2036. The work covers:

  • Program administration and strategic capital planning
  • Safety, risk and performance tracking
  • Power modeling, grid connection studies and decarbonization support

The contract carries a 20% local business enterprise (LBE) subcontracting requirement.

"The contract was awarded following a competitive solicitation process in which Deloitte was the only proposer," said Nick Menard, BLA analyst. Jimmy Leong, SFPUC Principal Project Manager, said the single proposal arrived June 1, 2026, and was found responsive. SFPUC's commission approved the award July 28, 2026.

Leong said the stated goal is "to transfer the expertise and improve the processes to city staff over time."

The other side: Dorsey did not question the single bid. He focused on Deloitte's pledge of 4,000 volunteer hours through the Social Impact Partnership Program. Leong said the program mainly supports workforce training and apprenticeships. Dorsey suggested neighborhood needs such as cleanups: "We've got plenty of work to do in the city."

Decisions and stakeholder impacts: The committee amended the resolution to disclose a five-year extension option, as the BLA recommended, and forwarded it. For: 3 (Chan, Sauter, Dorsey), Against: 0, Absent: 0.

Deloitte gains a decade-long foothold in the city's clean-power buildout. Power ratepayers are relying on a stated promise that expertise will move in-house over time.

$475K Grant Hardens Entry at SF General Abortion Clinic

Why it matters: The Women's Options Center, known as the "6G" clinic in Building 5 at SF General, has what DPH described as a history of security risks.

Where things stand: A $475,000 grant from the Governor's Office of Emergency Services, awarded through the San Francisco General Hospital Foundation, will fund a sally port. That is a secure entry with badge access on both doors, and building it requires demolishing some existing offices.

Jason Zook of DPH Capital Planning and Programs put the total project cost at about $850,000. City funds will cover the balance, pending bids. "We have completed design and we are awaiting permit, and this funding will focus on getting construction started, and we intend to expend this by December 31st of this year," Zook said. The grant period runs Sept. 1, 2024, through Dec. 31, 2026, and the approval is retroactive.

Decisions and stakeholder impacts: Dorsey cited a "heightened and increasingly challenging political insecurity environment." He noted that "the National Abortion Federation reported increases nationwide in assaults, stalking, threats of violence targeting abortion providers and patients in 2025." He added, "No one seeking lawful healthcare should have to fear for their safety when they walk through the door."

The committee forwarded the item with a positive recommendation. For: 3 (Chan, Sauter, Dorsey), Against: 0, Absent: 0.

Minor Items

  • United Airlines rent break: Up to $7.175M in SFO rent credits for a rooftop terrace, credentialing lobby and public stairwell at United's Terminal 2 lounge. The BLA projects the 4,568 new leasable square feet will yield about $19.7M. Recommended 3-0.
  • 555 Polk Street lease: DPH's Community Justice Service Center rent drops to $22.50 per square foot, saving $81,450 in year one. The city exits its joint lease of state court space and may terminate after December 2029. Recommended 3-0.
  • Hetch Hetchy contracts: Four $20M as-needed contracts went to Stantec, AECOM Technical Services, Jacobs Engineering Group and Lee Inc. They support a system whose assets average 140% beyond useful life. Amended per the BLA and recommended 3-0.
  • Polydyne contract: The ceiling on the wastewater treatment polymer contract rises from $9.9M to $12.06M, reflecting demand at the Southeast and Oceanside plants. Recommended 3-0.
  • Caltrans agreement: A no-cost maintenance agreement with Caltrans unlocks the permit needed for security fixes at two SFPUC pump stations along Route 80. Recommended 3-0.

Looking Ahead

All items acted on are expected on the full Board of Supervisors agenda Oct. 6, unless otherwise stated.

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