Meetings

February 24, 2005
(For Board: March 11, 2005)

REPORT OF THE FINANCE-AUDITING COMMITTEE

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

Honorable Members:

A meeting of the Finance-Auditing Committee was held in the Board Room, Administration Building, Toll Plaza, San Francisco, California, on Thursday, February 24, 2005, at 12:10 p.m., Acting Chair Pahre presiding.

Committee Members Present (6): Acting Chair Pahre; Directors Boro, Cochran, Eddie and Shahum; President Middlebrook (Ex Officio)

Committee Members Absent (3): Chair Stroeh; Directors Murray and Reilly

Other Directors Present (3): Directors Brown, Harrison and Smith

Staff Present: General Manager Celia G. Kupersmith; Auditor-Controller Joseph M. Wire; District Engineer Denis J. Mulligan; 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 General Manager/Administration and Development Teri W. Mantony; Public Affairs Director Mary C. Currie; Executive Assistant to the General Manager Amorette Ko; Assistant Clerk of the Board Karen B. Engbretson; Captain Michael J. Locati; Lieutenant John Fenstermaker

Visitors Present: Arthur A. Goepp, III and Scott H. Lamb, Marsh Risk and Insurance Services; Bob Cone, Larkspur School District; Michele Murphy, Ross Valley School District

 

1.

Approve Revised Approach to Charging for Local Bus Transit Services to Schools Within the Ross Valley and Larkspur School Districts for the 2004/2005 School Year

In a memorandum to Committee, Planning Director Alan Zahradnik, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided a report relative to taking a revised approach to charging the Ross Valley and Larkspur School Districts for local bus transit services. The report stated that the Board of Directors, by Resolution No. 2004-118 at its December 17, 2004 meeting, took two significant actions regarding transit services on Routes 117, 123 and 127, provided by the District under contract with the two school districts. The first action approved an increase in the cost rate charged to the school districts based upon the new cost rate charged to the Marin County Transit District (MCTD) for other local bus services provided in the 18-month Marin Local Service contract with MCTD. This action entailed a four-fold increase from $1.78 per mile of service to $113 per hour of service, to be effective March 1, 2005. The second action called for the District to decline to contract with local school districts to provide these local routes to Marin County schools beyond the end of the 2004/2005 school year, as this type of service is best handled through MCTD as the local transit service provider. In December 2004, staff sent letters to the two school districts informing them of the cost increase and the District’s intent to discontinue any future contracts for special school bus service.

The report also stated that in mid-February 2005, the District received letters from both school districts requesting that the District reconsider the matter, explaining the difficulty of absorbing such a significant and unexpected financial impact in the school districts’ budgets. In recognition of the fact that the school districts tried to locate the funds in their respective budgets but could not do so, and in recognition that revenue from the proposed cost increase was not anticipated in the District ’s Fiscal Year 2005 budget, staff recommends that the cost rate to be charged to the Ross Valley and Larkspur School Districts remain at its current level of $1.78 per mile of service for the final three months of the school year. The report further stated that if approved, the vital school transportation services can continue and the school districts can focus on building their next year’s budgets for transit services according to whatever cost rates MCTD might charge them in the future. A copy of the staff report, including attached letters from the Ross Valley and Larkspur School Districts, is available in the Office of the District Secretary.

Discussion ensued, including the following:

In response to an inquiry by Director Cochran to clarify the Board’s previous action on this matter, Ms. Kupersmith noted that in December 2004, the Board approved charging the school districts the higher rate of $113 per hour beginning March 1, 2005. She stated that staff understood the school districts ’ hardship and is now presenting a recommendation to allow the school districts to finish out the school year at the current rate.

President Middlebrook expressed her support for staff’s recommendation, noting that it is important that the school districts understand that the District will no longer be able to provide this special school transit service after June 2005.

Director Shahum inquired as why MCTD was not responsible for providing this special school transit service. In response, Ms. Kupersmith explained the background of the contractual relationship between the District and the school districts. Director Shahum expressed her concerns that by not charging the school districts the break-even amount of $113 per hour, the District would be foregoing $121,000 in potential revenue.

In response to Director Shahum’s comment, Director Brown noted that the $121,000 should not be considered foregone revenue, since it had not been budgeted as anticipated income. He advised that the County of Marin Board of Supervisors and MCTD would pursue the possibility of getting these three special school bus routes included as part of the Measure A-funded Marin local bus routes.

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

RECOMMENDATION

The Finance-Auditing Committee recommends that the Board of Directors approve charging the Ross Valley and Larkspur School Districts the current cost rate of $1.78 per mile for Golden Gate Transit Routes 117, 123 and 127 bus services through the end of the current school year in June 2005.

Action by the Board - Resolution
NON-CONSENT CALENDAR

AYES (6): Acting Chair Pahre; Directors Boro, Cochran, Eddie and Shahum; President Middlebrook (Ex Officio)
NOES (0): None
ABSENT (3): Chair Stroeh; Directors Murray and Reilly

   
2.

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 District Secretary.

Nancy Jones, Public Financial Management, was not present at the meeting to provide a verbal report on the status of the District’s investment portfolio. Ms. Jones’ written report was included in the Committee packet.

Staff recommended and the Committee concurred by motion made and seconded by Directors EDDIE/COCHRAN 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 $82,287.66;

b. Ratify investments made during the period January 18, 2005 through February 14, 2005, as follows:

Security Purchase Date Maturity Date Original Cost Percent Yield
Goldman Sachs Comm. Paper 01/19/05 02/14/05 5974539.55 2.42
Kitty Hawk Funding Corp Comm Paper 02/14/05 03/21/05 5984244.13 2.53

 

c. Authorize the Auditor-Controller to re-invest, within the established policy of the Board, investments maturing between February 15, 2005 and March 14, 2005, 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 January 2005 prepared by Public Financial Management.

Action by the Board - Resolution
CONSENT CALENDAR

AYES (6): Acting Chair Pahre; Directors Boro, Cochran, Eddie and Shahum; President Middlebrook (Ex Officio)
NOES (0): None
ABSENT (3): Chair Stroeh; Directors Murray and Reilly

   
3.

Approve Renewal of the Marine Insurance Program

In a memorandum to Committee, Auditor-Controller Joseph Wire, Secretary of the District Janet Tarantino and General Manager Celia Kupersmith reported on the annual renewal of the District’s Marine Insurance Program for Hull and Machinery/Protection and Indemnity Liability Insurance (including Terminal Operator’s Legal Liability and Excess Protection and Indemnity Insurance) and Excess Marine Liability Insurance. This Program, which renews on February 28, 2005, was continued from the February 10, 2005, meeting of the Finance-Auditing Committee. This report provided an update of the report provided at its February 10th meeting.

Marsh presented the following updated charts to the Committee:

  • Exhibit 1 – Premium and Loss History for 1995 to the present
  • Exhibit II – Schedule of Insured Vessels and Values for 2005
  • Exhibit III – 2005 Renewal Options Comparison (as of February 3, 2005)

Staff recommends the following recommendation, after reviewing with Marsh the various options for the proposed Marine Insurance Program renewal as provided in Exhibit III:

  • Enter into an agreement with St. Paul Travelers for the Hull & Machinery and Protection & Indemnity portions of the Marine Insurance Program, excluding pollution and terrorism coverage, at the rate of $335,750, representing a reduction of almost $50,000 from last year ’s premium. Marsh feels this option is the most favorable, since St. Paul Travelers has offered very competitive premium terms for 100% of the Hull & Machinery and Protection & Indemnity coverage. 
  • Enter into an agreement with the Water Quality Insurance Syndicate for a separate Vessel Pollution Liability Policy, at a rate of $4,853.
  • Enter into an agreement with AIG and various existing insurers for the Marine Excess Liability portion of the Marine Insurance Program at the existing rate of $107,466.
  • Since TRIA coverage is excluded from both the Hull & Machinery and Protection & Indemnity policy and the Marine Excess Liability policy, it is recommended that separate TRIA coverage for each of these policies be renewed with St. Paul Travelers at a premium of $9,469, and with AIG and various insurers at a premium of $5,373.

The above-listed recommended renewals would be effective February 28, 2005, with the understanding that sufficient funds totaling $462,911 are available in the Fiscal Year 2005 Ferry Division budget to cover the increased premium payments in Fiscal Year 2005 and funds for Fiscal Year 2006 will be included in the Fiscal Year 2006 budget. A copy of the report, including attachments, is available in Office the District Secretary.

At the meeting, Mr. Wire summarized the staff report, noting that in the two weeks since the Committee last met, Marsh found another renewal option more favorable to the District, with an 8% decrease in the amount of premium, for a savings to the District of approximately $40,000 for the Marine Insurance Program. He noted that the recommended renewal will include TRIA coverage through separate policies at a total cost of approximately $14,000. Mr. Wire introduced Scott Lamb and Art Goepp of Marsh, who were available to answer questions from the Committee.

Staff recommended and the Committee concurred by motion made and seconded by Directors SHAHUM/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 approve the following actions relative to the renewal of the District’s Marine Insurance Program:

a. Approve the Hull & Machinery/Protection & Indemnity Insurance with St. Paul Travelers at a premium of $335,750;
b. Approve the Excess Marine Liability Program with AIG and various underwriters at a premium of $107,466;
c. Approve the Vessel Pollution Liability Policy with Water Quality Insurance Syndicate at a premium of $4,853;
d. Approve the terrorism coverage (TRIA) for the Hull & Machinery/Protection & Indemnity Insurance Program with St. Paul Travelers at a premium of $9,469; and,
e. Approve the terrorism coverage (TRIA) for the Excess Marine Liability Program with AIG and various underwriters at a premium of $5,373;
with the understanding that requisite funds are available in the Fiscal Year 2005 Ferry Division budget to cover the premium payments in Fiscal Year 2005 and funds for Fiscal Year 2006 will be included in the Fiscal Year 2006 budget.

Action by the Board - Resolution
NON-CONSENT CALENDAR

AYES (6): Acting Chair Pahre; Directors Boro, Cochran, Eddie and Shahum; President Middlebrook (Ex Officio)
NOES (0): None
ABSENT (3): Chair Stroeh; Directors Murray and Reilly

   
4.

Approve an Increase in the Special Event Ferry Fares to SBC Park for 2005

In a memorandum to Committee, Director of Planning Alan Zahradnik and General Manager Celia Kupersmith provided a staff recommendation regarding implementation of a special event ferry fare increase, effective March 1, 2005, in response to the need to raise operating revenues to meet operating expenses. The report stated that to date, the District has priced special event services to recover direct operating expenses on a “breakeven” basis. The report noted that staff estimates that it will cost at least $506,000 to operate special event Golden Gate Transit Larkspur Ferry service to SBC Park in 2005. Therefore, with an estimated average ridership per ferry trip of 450 passengers, a fare of $7.00 would be required to meet the goal to “breakeven.” This fare would represent a 7.7% increase over last year’s fare of $6.50.

The Board of Directors, by Resolution No. 2005-004 at its meeting of January 14, 2005, set a public hearing on Thursday, February 10, 2005, to receive public comment on a proposal to consider increasing special event Golden Gate Transit Larkspur Ferry fares to SBC Park for 2005. During the public comment period that began January 13, 2005, the District received six public comments on the special event fare increase program. A summary of public comments, including staff responses was provided in Attachments 1 and 2, attached to the report.

The report further stated that staff recommends approval of a 7.7% increase to $7.00 in the fare for Special Event Golden Gate Transit Larkspur ferry service to SBC Park in 2005. A copy of the report, with attachments, is available in the Office of the District Secretary.

At the meeting, Ms. Kupersmith summarized the staff report, noting that following the public hearing on this matter held on February 10, 2005, staff recommended increasing the special event fares for Golden Gate Ferry service to SBC Park to $7.00. She further noted that by taking action today, the fare will be in place for the start of the Giants baseball season on March 31, 2005.

Staff recommended and the Committee concurred by motion made and seconded by Directors MIDDLEBROOK/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 approve implementation of an increase in the fare for special event Golden Gate Transit Larkspur Ferry service to SBC Park from $6.50 to $7.00, effective March 1, 2005.

Action by the Board - Ordinance
NON-CONSENT CALENDAR

AYES (6): Acting Chair Pahre; Directors Boro, Cochran, Eddie and Shahum; President Middlebrook (Ex Officio)
NOES (0): None
ABSENT (3): Chair Stroeh; Directors Murray and Reilly

   
5.

Approve Revisions to the Investment Policy and Amend RULE XI of the Rules of the Board

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided a staff recommendation regarding revisions to the District ’s Investment Policy, Rule XI of the Rules of the Board. The report stated that as required by Government Code Section 53646(a)(2), the Board of Directors annually reviews, updates if necessary, and approves the District’s Investment Policy. The report also stated that effective January 1, 2004, the State of California has made one change to the applicable section of the Government Code, pertaining to commercial paper. Section 53601(g) was revised to clarify references to the generic term for specific rating agencies, “nationally recognized statistical-rating organization,” and by clarifying concentration limits for the purchase of commercial paper.


The report further stated that staff recommends that Section I, Permitted Investment Instruments, of Rule XI, Investment Policy, of the Rules of the Board , be revised to incorporate the updated Government Code requirements. The report compared the existing text of Section I.6. with the proposed revisions to that section. The existing text appears as follows in the Rules of the Board:

“Commercial paper rated in the highest short-term rating category, as provided by a nationally recognized statistical-rating organization (NRSRO). The entity that issues the commercial paper shall meet all of the following conditions in either paragraph (A) or paragraph (B):

(A) The entity meets the following criteria: (i) is organized and operating in the United States as a general corporation. (ii) has total assets in excess of five hundred million dollars ($500,000,000). (iii) has debt other than commercial paper, if any, that is rated "A" or higher by a NRSRO.

(B) The entity meets the following criteria: (i) is organized within the United States as a special purpose corporation, trust, or limited liability company; (ii) has program-wide credit enhancements including, but not limited to, over-collateralization, letters of credit, or surety bond; (iii) has commercial paper that is rated "A-1" or higher, or the equivalent, by a NRSRO.” (Res. 02-027, 2/8/02; Res. 04-023, 3/12/04.)

Purchases of eligible commercial paper may not exceed 270 days maturity nor represent more than 10 percent of the outstanding paper of an issuing corporation. (Res. 02-027, 2/8/02.)

Purchases of commercial paper may not exceed 25 percent of the District’s surplus money which may be invested.

The report outlined staff’s proposed revisions to the above section, as follows (revisions in bold):

“Commercial paper of “prime” quality of the highest ranking or of the highest letter and number rating, as provided for by a nationally recognized statistical-rating organization (NRSRO). The entity that issues the commercial paper shall meet all of the following conditions in either paragraph (A) or paragraph (B):

(A) The entity meets the following criteria: (i) is organized and operating in the United States as a general corporation. (ii) has total assets in excess of five hundred million dollars ($500,000,000). (iii) has debt other than commercial paper, if any, that is rated "A" or higher by a nationally recognized statistical-rating organization (NRSRO).

(B) The entity meets the following criteria: (i) is organized within the United States as a special purpose corporation, trust, or limited liability company; (ii) has program-wide credit enhancements including, but not limited to, over-collateralization, letters of credit, or surety bond; (iii) has commercial paper that is rated "A-1" or higher, or the equivalent, by a nationally recognized statistical-rating organization (NRSRO).”

Eligible commercial paper shall have a maximum maturity of 270 days or less. Local agencies, other than counties or a city and county, may invest no more than 25 percent of their money in eligible commercial paper. Local agencies, other than counties or a city and county, may purchase no more than 10 percent of the outstanding commercial paper of any single issuer. Counties or a city and county may invest in commercial paper pursuant to the concentration limits in subdivision (a) of Section 53635.

A copy of the report is available in the Office of the District Secretary.

At the meeting, Joseph Wire summarized the staff report, noting that the proposed action is a housekeeping measure to codify changes in the District’s Investment Policy in line with changes in the State Government Code.

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

RECOMMENDATION

The Finance-Auditing Committee recommends that the Board of Directors approve adoption of the Investment Policy, as amended, and amend Rule XI, Section I., Permitted Investment Instruments, Subsection 6, of the Rules of the Board, in order to conform the District’s Investment Policy with Section 53601(g) of the California Government Code, by replacing Subsection 6 in its entirety with the revised text as outlined below:

“Commercial paper of “prime” quality of the highest ranking or of the highest letter and number rating, as provided for by a nationally recognized statistical-rating organization (NRSRO). The entity that issues the commercial paper shall meet all of the following conditions in either paragraph (A) or paragraph (B):

(A) The entity meets the following criteria: (i) is organized and operating in the United States as a general corporation. (ii) has total assets in excess of five hundred million dollars ($500,000,000). (iii) has debt other than commercial paper, if any, that is rated "A" or higher by a nationally recognized statistical-rating organization (NRSRO).

(B) The entity meets the following criteria: (i) is organized within the United States as a special purpose corporation, trust, or limited liability company; (ii) has program-wide credit enhancements including, but not limited to, over-collateralization, letters of credit, or surety bond; (iii) has commercial paper that is rated "A-1" or higher, or the equivalent, by a nationally recognized statistical-rating organization (NRSRO).”

Eligible commercial paper shall have a maximum maturity of 270 days or less. Local agencies, other than counties or a city and county, may invest no more than 25 percent of their money in eligible commercial paper. Local agencies, other than counties or a city and county, may purchase no more than 10 percent of the outstanding commercial paper of any single issuer. Counties or a city and county may invest in commercial paper pursuant to the concentration limits in subdivision (a) of Section 53635.

Action by the Board – Resolution
NON-CONSENT CALENDAR

AYES (6): Acting Chair Pahre; Directors Boro, Cochran, Eddie and Shahum; President Middlebrook (Ex Officio)
NOES (0): None
ABSENT (3): Chair Stroeh; Directors Murray and Reilly

   
6.

Review of Golden Gate Bridge Traffic/Tolls and Bus and Ferry Transit Patronage/Fares for Seven Months Ending January 2005

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided schedules comparing categories of Bridge traffic, Bridge tolls, Golden Gate Ferry patronage and fares, as well as Golden Gate Transit patronage and fares for seven months ending January 31, 2005. Copies of the reports are available in the Office of the District Secretary.

Action by the Board – None Required

   
7.

Review of Financial Statements for Seven Months Ending January 2005

a. Statements of Revenue and Expenses

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided financial statements entitled, Statement of Revenues and Expenses, for seven months ending January 2005. Copies of the reports are available in the Office of the District Secretary.

b. Statements of Capital Programs and Expenditures

In a memorandum to Committee, Capital and Grant Programs Manager Nina Rannells, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided financial statements entitled, Statement of Capital Programs and Expenditures, for seven months ending January 31, 2005. Copies of the reports are available in the Office of the District Secretary.

Action by the Board – None Required

   
8.

Public Comment

There was no public comment.

   
9.

Adjournment

All business having been concluded, the meeting was adjourned at 12:20 p.m.

Respectfully submitted,

 

Barbara L. Pahre, Acting Chair
Finance-Auditing Committee

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