Meetings

 

November 18, 2004
(For Board: December 17, 2004)

REPORT OF THE FINANCE-AUDITING COMMITTEE/
COMMITTEE OF THE WHOLE

Honorable Board of Directors
Golden Gate Bridge, Highway
and Transportation District

Honorable Members:

A meeting of the Finance-Auditing Committee/Committee of the Whole was held in the Board Room, Administration Building, Toll Plaza, San Francisco, California, on Thursday, November 18, 2004, at 10:25 a.m., Chair Stroeh presiding.

Committee Members Present (6): Chair Stroeh; Vice Chair Pahre; Directors Boro, Eddie and Harrison; President Smith (Ex Officio).
Chair Stroeh appointed Director Harrison Committee Member Pro Tem for this meeting only.
Committee Members Absent (3): Directors Cochran, Murray and Shahum
Other Directors Present (4): Directors Ammiano, Martini, Middlebrook and Reilly

Committee of the Whole Members Present (10): Directors Ammiano, Boro, Eddie, Martini, Pahre, Reilly and Stroeh; Second Vice President Harrison; First Vice President Middlebrook; President Smith
Committee of the Whole Members Absent (8): Directors Brown, Cochran, Hernández, Kerns, McGoldrick, Murray, Sandoval and Shahum

Staff Present: General Manager Celia G. Kupersmith; District Engineer Denis J. Mulligan; Auditor-Controller Joseph M. Wire; Secretary of the District Janet S. Tarantino; Attorney David J. Miller; Deputy General Manager/Bridge Division Kary H. Witt; Deputy General Manager/Bus Division Susan C. Chiaroni; Deputy General Manager/Ferry Division James P. Swindler; Deputy District Engineer Ewa Z. Bauer; Public Affairs Director Mary C. Currie; Budget and Program Analysis Manager Jennifer Mennucci; Accounting Manager Bette Joe; Security and Emergency Management Specialist Lisa Locati; Executive Assistant to the General Manager Amorette Ko; Assistant Clerk of the Board Karen B. Engbretson

Visitors Present: Nancy Jones, Public Financial Management; Kevin J. O’Connell and Eugene Ma, Macias, Gini & Company
1. Ratify Actions by the Auditor-Controller

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith outlined commitments, disbursements and investments made on behalf of the District. A copy of the report is available in the Office of the Secretary of the District.

At the meeting, Nancy Jones reported on the latest economic news and described current interest rates for the District’s portfolio. Ms. Jones stated that interest rates continue to rise modestly and slowly. She noted that, as expected, the Federal Reserve Board of Governors increased the Federal Funds Rate to 2% following the November election, and will likely raise the rate to 2.25% in December. Ms. Jones also stated that the District’s portfolio has remained strong throughout this period, with strategic investments made in the 2-3 year maturity bracket taking advantage of higher yields in the 2.75% to 3% range. She described the recent purchase of a callable security that had a higher yield than usual, resulting in an advantageous investment for the District. She commended Joseph Wire for providing clear direction on target maturity brackets and cash needs projections to maintain enough liquidity in the District’s portfolio to allow the portfolio manager to take advantage of the rising interest rates.

Discussion ensued, including the following:

In response to an inquiry by Chair Stroeh regarding a possible inflationary spike in the economy, Ms. Jones replied that escalating oil prices are definitely having an effect on the economy, particularly in the manufacturing sectors. She noted that due to these inflationary pressures, it is expected that the Federal Reserve Bank will continue to raise rates in an attempt to stem inflation.

Staff recommended and the Committee concurred by motion made and seconded by Directors EDDIE/SMITH to forward the following recommendation to the Board of Directors for its consideration:

RECOMMENDATION

The Finance-Auditing Committee recommends that the Board of Directors authorize the following actions by the Auditor-Controller:

a. Ratify commitments and/or expenditures totaling $28,846.00;

b. Ratify investments made during the period October 12, 2004 through November 8, 2004, as follows:

 

Security Purchase Date Maturity Date Original Cost Percent Yield
Sheffield Rec. Corp Comm. Paper 10/19/04 11/09/04 7,659,375.59 1.79
GECC Comm. Paper 10/19/04 11/09/04 5,959,101.28 1.78
FHLMC Note 10/27/04 10/06/06 6,656,726.70 2.75
FHLB Note 11/05/04 02/15/06 4,279,132.10 2.75

c. Authorize the Auditor-Controller to re-invest, within the established policy of the Board, investments maturing between November 9, 2004 and December 6, 2004, as well as the investment of all other funds not required to cover expenditures that may become available; and,

d. Accept the Investment Report for October 2004 prepared by Public Financial Management.
Action by the Board - Resolution
CONSENT CALENDAR

AYES (5): Chair Stroeh; Directors Boro, Eddie and Harrison; President Smith (Ex Officio)
NOES (0): None
ABSENT (4): Vice Chair Pahre; Directors Cochran, Murray and Shahum

2. Receive the Independent Auditor’s Reports and the Financial Statements for the Year Ending June 30, 2004, as Submitted by Macias, Gini & Company, LLP

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith reported on the annual audit of the Golden Gate Bridge, Highway and Transportation District for the year ending June 30, 2004, prepared by Macias, Gini and Company, LLP. The Committee reviewed the following reports that had been provided by the Auditor-Controller:
Independent Auditor’s Report;
Management’s Discussion and Analysis;
Financial Statements;
Supplemental Schedule of Revenues and Expenses by Division; and,
Management Letter

The report further stated that staff recommends that the Committee receive the Financial Statements, Independent Auditor’s Reports and Memorandum on Internal Controls for the Year Ending June 30, 2004. A copy of the staff report, including attached Independent Auditor’s reports, is available in the Office of the District Secretary.

 

At the meeting, Joseph Wire introduced representatives of the independent auditor, Kevin O’ Connell and Eugene Ma, of Macias, Gini & Company (Macias). Mr. O’Connell then addressed the Committee, providing an overview of the Independent Auditor’s report. A written version of Mr. O’Donnell’s presentation was provided to the Board members at the Committee, a copy of which is available in the Office of the District Secretary. Mr. O’Connell summarized the scope of auditing services provided by Macias, as well as the results of the audit. He stated that although there were some challenges associated with the new Financial Management Information Systems implementation, the audit was relatively uneventful. He also stated that Macias provided an Unqualified or “Clean” Opinion, the highest level of assurance that the company can provide, and that the auditors had not found any significant deficiencies or any material noncompliance issues.

Mr. O’Connell further stated that in June 2004, the Government Accounting Standards Board (GASB) had adopted the new rules regarding post-employment retiree benefits which he had described last year to the Committee. In summary, he stated that according to GASB’s new rules, by 2006, government agencies must have actuarial evaluations performed on the agencies’ post-employment healthcare benefit liabilities, and have those liabilities reflected on their financial statements. Mr. O ’Connell also stated that it is recommended that the District solicit an actuarial study to determine the amount required to pay for post-employment healthcare benefit liabilities. He noted that the District has already set aside $2 million for the purpose of financing this future obligation and further described the technical aspects of reporting that set-aside amount. Mr. O’Connell suggested that during the transition period towards compliance with GASB’s new rules, the District may want to consider establishing a separate fund or dedicated Trust to maintain separate accountability for resources earmarked for post-employment healthcare benefits.

Discussion ensued, including the following:

Director Ammiano inquired regarding the status of the actuarial study relative to the post-employment healthcare benefit liabilities. In response, Mr. Wire stated that staff is preparing Requests for Proposals for both short-term and long-term actuarial studies to determine the financial impact of the new GASB standards to the District. He explained that in the short-term, staff would request proposals for a simple actuarial estimate of future obligations, to be followed in 2006 by a more detailed, formal actuarial study.

Staff recommended and the Committee concurred by motion made and seconded by Directors BORO/EDDIE to forward the following recommendation to the Board of Directors for its consideration:

 

RECOMMENDATION

The Finance-Auditing Committee recommends that the Board of Directors receive the Independent Auditor’s Reports, Financial Statements and Memorandum on Internal Controls for the Year ending June 30, 2004, as submitted by Macias, Gini & Company, LLP.
Action by the Board - Resolution
NON-CONSENT CALENDAR

AYES (10): Directors Ammiano, Boro, Eddie, Martini, Pahre, Reilly and Stroeh; Second Vice President Harrison; First Vice President Middlebrook; President Smith
NOES (0): None

3. Authorize Execution of a Second Amendment to the Professional Services Agreement with John Glenn Adjusters and Administrators, Inc., for a One-Year Extension to Provide Public Liability Claims Investigation and Adjustment Services for the Bridge and Bus Divisions

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided a report presenting staff’s recommendation for a one-year extension of the contract with the District’s third-party claims administrators, John Glenn Adjusters and Administrators, Inc. (JGAA), under the same terms and conditions as the current agreement. The report stated that JGAA provides public liability claims investigation and adjustment services for the Bridge and Bus Divisions. The report also stated that the current agreement with JGAA is based on a five-year term, from July 1, 1999, through June 30, 2004. The agreement was first amended in March 2001, with the addition of new protocols for litigation matters and settlement authority approval limits. This second amendment will provide for a one-year extension at the same hourly rates, as follows:
• Hourly rate of $63.00 for John Glenn’s adjusting and investigating services and a vehicle mileage compensation rate of $.50 per mile; and,
• Legal Counsel rates no greater than $130.00 per hour, plus costs.

Staff recommends that execution of the second amendment be authorized to provide continuity of JGAA ’s services through the first half of 2005, during which time the District will advertise a Request for Proposals (RFP) for third-party claims administrator. It is anticipated that a new such contract will be awarded and implemented by June 30, 2005. A copy of the report is available in the Office of the Secretary of the District.

At the meeting, Joseph Wire summarized the staff report and pointed out that JGAA has been the District’s third-party claims administrator since Golden Gate Transit began operation in 1972. He noted that the proposed extension represents an interim contract until the RFP process is completed.
Staff recommended and the Committee concurred by motion made and seconded by Directors EDDIE/BORO to forward the following recommendation to the Board of Directors for its consideration:

RECOMMENDATION

The Finance-Auditing Committee recommends that the Board of Directors authorize execution of a second amendment to the Agreement for Professional Services with John Glenn Adjusters and Administrators, Inc., for a one-year extension from July 1, 2004, through June 30, 2005, under the same terms and conditions as the current agreement, to provide public liability claims investigation and adjustment services for the Bridge and Bus Divisions; with the understanding that requisite funds are available in the Fiscal Year 2005 Operating Budget.

Action by the Board – Resolution
NON-CONSENT CALENDAR

AYES (10): Directors Ammiano, Boro, Eddie, Martini, Pahre, Reilly and Stroeh; Second Vice President Harrison; First Vice President Middlebrook; President Smith
NOES (0): None

4. Authorize Execution of a Professional Services Agreement with Redman Ventures, Inc., to Build and Test an Interface between the District’s FasTrak™ Software and the Regional Customer Service Center Software

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith reported on staff’s recommendation relative to software support service for the FasTrak™ Regional Customer Service Center (CSC). The Board of Directors, by Resolution No. 2002-100 at its July 26, 2002 meeting, authorized staff to coordinate with the Bay Area Toll Authority (BATA) and the California Department of Transportation (Caltrans) to develop a FasTrak™ Regional CSC project. In January 2004, BATA awarded the regional CSC contract to ACS State and Local Solutions (ACS). The regional CSC consolidation project is being implemented in two phases. During Phase I, which began April 1, 2004, ACS performs front-office FasTrak ™ operations for both the District and Caltrans at each agency’s current CSC facility, while back-office operations remain separate. During Phase II, beginning June 1, 2005, ACS will operate a consolidated regional CSC, combining both front-office and back-office CSC operations.

The Board of Directors, by Resolution No. 2003-079 at its July 11, 2003 meeting, authorized award of a professional service agreement with Redman Ventures, Inc., to provide back-office maintenance and software support services for the CSC and Golden Gate Bridge Plaza/Host computer systems during the consolidation period. The Plaza/Host computer takes the FasTrak™ transaction data from the Golden Gate Bridge Toll Plaza lanes, manipulates it and then relays it to the District’s existing CSC in Mill Valley. Redman Ventures, Inc. was uniquely qualified to perform these services, due to their detailed familiarity with the databases and extensive experience supporting and modifying the software programming for the FasTrak™ computer systems.

The report also stated that during the past six months, BATA, ACS and the District have developed a detailed Interface Control Document that defines file formats and protocols for the exchange of data between the Plaza/Host computer and regional CSC computer once Phase II is implemented. In order to ensure a smooth transition of data files, all existing file formats need to be modified and some new ones created.

Finally, the report stated that staff recommends that a sole-source professional services agreement be authorized with Redman Ventures, Inc., to build and test an interface between the District ’s Plaza/Host FasTrak™ software and the regional CSC software. Since time is of the essence and Paul Redman has been familiar with all of the FasTrak™ operations, software, interfaces and source code since FasTrak’s inception, the company is uniquely positioned to build and test the interface. Redman Ventures, Inc., has submitted a proposal to the District to provide these services at a cost of $100 per hour, for a not to exceed cost of $176,245, including a contingency reserve for change orders of $17,625. A copy of the report is available from the Office of the District Secretary.

At the meeting, Mr. Wire stated that this particular contract is a smaller piece of the larger effort to consolidate a regional FasTrak™ CSC. He noted that the modifications to the Plaza/Host computer system were anticipated since project inception and that the costs have been included in the project budget.

Discussion ensued, including the following:

Director Boro inquired as to whether the District could begin to phase out the laborious counting of cash from the Toll Plaza lanes as the amount of electronic FasTrak™ transactions increases in relation to cash transactions. In response, Celia Kupersmith stated that technological advances will eventually diminish the need for hand-counting of cash, and that some positions in the vault have been eliminated through attrition as a result of increased FasTrak™ transactions. She noted that a significant amount of cash counted by District personnel originates from Golden Gate Transit fareboxes, an amount that will likely diminish after the full implementation of the Translink® automatic fare collection system. Ms. Kupersmith further noted that the District will begin a grant-funded project, included in the Fiscal Year 2005 Budget, to systematically replace all outmoded fareboxes in the District’s bus fleet with new, state-of-the-art fareboxes that will electronically record passenger and fare data at the source. Ms. Kupersmith stated that staff looked into outsourcing the counting of cash in the past few years and found that it was more cost effective to do such work in-house.

Staff recommended and the Committee concurred by motion made and seconded by Directors BORO/HARRISON to forward the following recommendation to the Board of Directors for its consideration:

RECOMMENDATION

The Finance-Auditing Committee recommends that the Board of Directors authorize execution of a sole source Professional Services Agreement with Redman Ventures, Inc., in an amount not to exceed $176,245, to build and test an interface between the District’s FasTrak™ Plaza/Host computer system and the FasTrak™ Regional Customer Service Center computer system, effective November 19, 2004 through June 30, 2005; and, establish a contingency reserve for change orders in the amount of $17,625; with the understanding that requisite funds are available in the Fiscal Year 2005 Bridge Division Operating Budget.
Action by the Board - Resolution
NON-CONSENT CALENDAR

AYES (10): Directors Ammiano, Boro, Eddie, Martini, Pahre, Reilly and Stroeh; Second Vice President Harrison; First Vice President Middlebrook; President Smith
NOES (0): None

5. Review of Golden Gate Bridge Traffic/Tolls and Bus and Ferry Transit Patronage/Fares for Three Months Ending September 30, 2004

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided a schedule comparing categories of Bridge traffic for three months ending September 30, 2004. A copy of the report is available in the Office of the Secretary of the District.

Discussion ensued, including the following:

In response to an inquiry by Director Middlebrook regarding budgeted Bridge toll revenue, Mr. Wire noted that with respect to Bridge tolls, the District is doing slightly better than budgeted for Fiscal Year 2005, but that toll revenue is slightly less than in Fiscal Year 2004.

Director Boro noted that despite some passenger dissatisfaction regarding the July 1, 2004 ferry schedule changes, Fiscal Year 2005 ferry patronage is steadily increasing over Fiscal Year 2004 patronage.

Action by the Board – None Required

 

6. Review of Financial Statements for Three Months Ending September 2004

a. Statement of Revenue and Expenses

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided a financial statement entitled, Statement of Revenues and Expenses for Three Months Ending September 2004. A copy of the report is available in the Office of the Secretary of the District.

At the meeting, Mr. Wire described an issue with depreciation expense that manifested during the transition to the new Financial Management Information System. He explained how depreciation is calculated and stated that in reviewing the depreciation for each of thousands of District assets, it was found that some depreciation amounts had to be recalculated, resulting in a higher than normal depreciation expense on the current financial statement.

b. Statement of Capital Programs and Expenditures

In a memorandum to Committee, Capital and Grants Manager Nina Rannells, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided a financial statement entitled, Statement of Capital Programs and Expenditures for Three Months Ending September 2004. A copy of the report is available in the Office of the Secretary of the District.

Action by the Board – None Required

7. Public Comment

There was no public comment.

8. Adjournment

All business having been concluded, the meeting was adjourned at 10:55 a.m.

Respectfully submitted,

 

J. Dietrich Stroeh, Chair
Finance-Auditing Committee
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