It will take an estimated $3.6 billion to underground the remaining 470 miles of overhead utility lines in San Francisco. And at the current rate of funding for the initiative, or lack thereof, it could take 600 years to complete, according to the latest numbers from the City Controller’s Office.
Keeping on top of utility bills is often a challenge for both small and large businesses. If you would like support and guidance reducing overhead business costs, take a look at the Utility Bidder website.
And in fact, three strategies have already been identified by the Controller’s office which could complete San Francisco’s undergrounding program in as few as 25 years, but with rather big bills attached:
1. General Funds
Annual General Fund cash investments of approximately $140 million would be required to complete approximately 18 miles of undergrounding annually and the overall program over a 25 year program horizon. To provide some relative scale, this value exceeds the current year General Fund capital budget for all City assets by more than 40%. Implementation over a 50 year horizon and approximately 9 miles per year would require approximately $71 million annually, and $35 million annually would be required to complete 4.5 miles annually and to meet a 100 year project schedule.
2. General Obligation Bonds
General obligation bonds (or G.O. bonds) are often used to fund large scale capital programs and projects, and require a 2/3rds vote of the electorate to approve. G.O. bonds are paid back over time through a property tax charge established to service the annual debt service on the bonds.
To finance $3.6 billion in G.O. bonds in order to complete the program in 25 years, with the bonds amortized over a comparable period, would result in an incremental 0.16% property tax override rate, or an increase of approximately $786 (13%) in annual property tax payments for a typical $500,000 home.
Structuring this program to be completed over 50 or 100 years through two sales would result in approximate property tax rate increases of $393 (7%) and $197 (3%) respectively for the same $500,000 home. These figures reflect planning estimates; the actual timing and staging of bond issuances would affect ultimate property tax rates.
3. Utility User Taxes
The City’s current utility user tax (or UUT) for gas and electric services is 7.5% and only applies to commercial customers. Broadening the tax to residential customers would generate approximately $30 million annually that could be applied to fund an undergrounding program.
For the average residential customer this would result in an approximately $9.30 increase to their monthly gas and electric bills. These revenues would be sufficient to underground approximately four miles annually, resulting in an overall program schedule of approximately 118 years. In addition to expansion of the utility user tax to residential customers, the commercial utility tax could be raised from 7.5% to 10%, generating an additional $28 million annually.
Combined, these combined utility user tax increases would generate approximately $58 million annually, sufficient to underground approximately 7.6 miles per year and to complete the overall program in approximately 62 years. These increases would require adoption by the electorate by a 2/3rds vote, assuming the increase was dedicated to this purpose.
Of course, State law allows property owners to simply fund the undergrounding themselves, but at a cost of roughly $7.5 million per mile it’s a rather big ask and there’s no mechanism for forcing a neighbor to pay their fair share or exclude holdouts from benefiting.