Meetings

March 10, 2005
(For Board: March 25, 2005)

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 was held in the Board Room, Administration Building, Toll Plaza, San Francisco, California, on Thursday, March 10, 2005, at 10:10 a.m., Chair Stroeh presiding.

Committee Members Present (8): Chair Stroeh: Vice Chair Pahre; Directors Boro Cochran, Eddie, Reilly and Shahum; President Middlebrook (Ex Officio)
Committee Members Absent (1): Director Murray
Other Directors Present (4): Directors Brown, Harrison, Hernández and Smith

Committee of the Whole Members Present (12): Directors Brown, Cochran, Eddie, Hern ández, Pahre, Reilly, Shahum, Smith and Stroeh; Second Vice President Boro; First Vice President Harrison; President Middlebrook
Committee of the Whole Members Absent (7): Directors Ammiano, Dufty, Kerns, Martini, McGoldrick, Murray and Sandoval

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 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; Director of Planning Alan R. Zahradnik; Public Affairs Director Mary C. Currie; Executive Assistant to the General Manager Amorette Ko; Assistant Clerk of the Board Patsy Whala

Visitors Present: Arthur A. Goepp, III and Frederick E. Robinson, Marsh Risk and Insurance Services; David Pilpel, San Francisco resident

 

1.

Approve Renewal of Property Insurance Program for the Bridge Physical Damage and Use and Occupancy Policy, the District Buildings and Facilities Policy and the Boiler and Machinery Policy

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith reported on staff ’s recommendation to approve renewal of the Property Insurance Program, which includes the following three elements: (1) Bridge Physical Damage and Use and Occupancy policy; (2) District Buildings and Facilities policy; and, (3) Boiler & Machinery policy. The report stated that two elements of the Property Insurance Program, the Bridge Physical Damage and Use and Occupancy policy and the District Buildings and Facilities policy are ready for renewal at this time, and the remaining one element of the Property Insurance Program, the Boiler and Machinery Policy, be continued for approval until March 25, 2005.

The report stated that staff and Marsh Risk & Insurance Services (Marsh), the District ’s insurance advisors, recommend that the District renew the: 1) the Bridge Physical Damage and Use and Occupancy policy with ACE, the incumbent lead carrier of the expiring policy, continuing the existing limit, deductibles, terms and conditions, at a cost of $1,078,701, reflecting a 5% decrease over the 2004 rate; 2) the District Buildings and Facilities policy with the incumbent carriers of the expiring policy, continuing the existing limit, deductibles, terms and conditions, at a cost of $509,869, reflecting a 4% decrease over the 2004 rate; and, 3) hold off on renewing the Boiler & Machinery policy with Hartford Steam Boiler, until the Board of Directors meeting of March 25, 2005, to allow for further negotiations. The report stated that Marsh marketed the Bridge Insurance and the District Buildings and Facilities Program to other underwriters and their responses are included in Marsh’s report.

The report further stated that the Fiscal Year 2005 impact of the three recommendations would reduce expected Fiscal Year 2005 expenses by approximately $18,000, with the understanding that in Fiscal Year 2006, the cost of the three programs will be budgeted in the Operating Budgets accordingly. These policies will reduce the District's costs by $78,098, over the 12-month life of the policies. The total cost of all three insurance programs for a 12-month period between April 8, 2005 and April 7, 2006 is $1,591,595, a 4.7% decrease from the previous year. A copy of the report, including exhibits providing details of the Property Insurance Program, is available in the Office of the District Secretary.

At the meeting, Mr. Wire introduced Art Goepp and Fred Robinson from Marsh Risk & Insurance Services (Marsh) and summarized the staff report, stating that for future renewals, Marsh is seeking a group of insurance carriers that will provide more competitive prices for the District.

Discussion ensued, including the following:

Director Harrison made inquired as to the reason why the Property Insurance Program had a 4.7% decrease from the previous year. In response, Mr. Robinson stated that property insurance costs are decreasing due to a softening market. In addition, through Marsh’s marketing efforts, the insurance carriers were able to provide a cost reduction in the 2005 renewal cycle. Mr. Wire stated that staff anticipates insurance rates to continue downward in this softening market.

Directors Harrison and Smith inquired as to the District’s responsibility regarding the 30-day deductible for the Use and Occupancy component of the Bridge insurance policy, and as to the type of scenario in which the Bridge could not be repaired within 30 days. In response, Mr. Wire stated that a catastrophic incident could keep the Bridge out of commission for a number of months, and that the Use and Occupancy insurance would cover the loss of toll revenue during that time, within the limits of the insurance coverage.

Director Smith inquired as to whether the premium for the Use and Occupancy portion of the policy could be calculated separately. In response, Mr. Wire stated that the two components of Bridge insurance, the Physical Damage and the Use and Occupancy, referred to as business interruption insurance, are interconnected and are uneconomical as separate policies by insurance carriers.

Staff recommended and the Committee concurred by motion made and seconded by Directors EDDIE/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 the following actions relative to the Property Insurance Program:

a. Renew the Bridge Physical Damage policy with ACE, providing “all risk” coverage for the Golden Gate Bridge structure, excluding the peril of earthquake, with a limit of $25 million per occurrence/annual aggregate and a deductible of $15 million per occurrence and Use & Occupancy policy with ACE, providing “all risk ” coverage for loss of toll revenue to the District from physical damage to the Golden Gate Bridge, including the peril of earthquake, with a limit of $25 million per occurrence/annual aggregate and a 30-day deductible, at a premium of $1,078,701, for a one-year term, effective April 8, 2005; and,


b. Renew the District Buildings and Facilities policy with ACE/Westchester, as well as the incumbent panel of carriers, providing “all risk” coverage for all land-based District facilities, except the Bridge itself, in case of fire, flood and earthquake, with a limit of $45 million per occurrence and a deductible of $250,000 each loss for fire, including 5% of value for flood and earthquake, at a premium of $509,869, for a one-year term, effective April 8, 2004;


with the understanding that requisite funds are available in the Fiscal Year 2005 Operating Budgets for the Bridge, Bus, Ferry and District divisions and that requisite funds will be budgeted in the appropriate division operating budgets for Fiscal Year 2006; and, with the further understanding that renewal of the Boiler and Machinery Policy will be presented to the Board of Directors for its consideration at its meeting of March 25, 2005.

Action by the Board - Resolution
CONSENT CALENDAR

AYES (10): Directors Cochran, Eddie, Herná ndez, Reilly, Shahum, Smith and Stroeh; Second Vice President Boro; First Vice President Harrison; President Middlebrook (Ex Officio)
NOES (0): None

   
2.

Discussion and Possible Action Relative to a Restructured Transit Fare Program

General Manager Celia Kupersmith introduced the topic of discussion relative to a restructured Golden Gate Transit (GGT) Regional Bus and Ferry Fare program. Ms. Kupersmith stated that staff prepared a PowerPoint presentation in response to questions relative to the development of the Strategic Plan for Achieving Long-Term Financial Stability. She stated that the present fare structure is complex and any change can significantly impact ridership. The presentation provided details regarding all categories of transit to better understand the current fare structure.

Planning Director Alan Zahradnik presented to the Committee a PowerPoint presentation outlining the current status of transit service and fares and presenting possible new directions for a restructured GGT Regional Bus and Ferry Fare program. He showed graphs and charts depicting ridership, patronage and the costs of taking transit compared to costs of driving an automobile. Mr. Zahradnik stated that over four million transit riders are projected for the next Fiscal Year, with the majority of bus rides to and from San Francisco, including over one million Marin County local riders on regional bus routes. In addition, he summarized the history of transit fares from 1975 to present, delineating fare increases and inflation. Mr. Zahradnik also provided a historical peer comparison of the transit fares. He stated that Golden Gate Transit was acknowledged as the “BART of the North Bay.” A copy of the presentation is available in the Office of the District Secretary.

Discussion ensued, including the following salient points:

President Middlebrook made the following comments and inquiries:

  • She stated that convenience is a factor in regards to fares and inquired regarding the possibility of the District creating a higher fare for direct bus routes.
  • She requested clarification in regards to transit costs compared to automobile costs for carpoolers. In response, Mr. Zahradnik stated that cost for carpooling is one-third of the total cost of operating a single-occupancy vehicle. In addition, he noted that people choose to carpool either because of convenience or because of cost-effectiveness.
  • She asked for clarification about the staff suggestion that instituting bigger fare discounts at off-peak periods would reduce bus and ferry service at more expensive peak periods.
  • She inquired as to how the restructured GGT Regional Bus and Ferry Fare program would integrate with the development of the fiscal budget. In response, Mr. Zahradnik stated once the Fiscal Year 2006 budget is developed, staff can then determine what specific increases in a restructured fare program would achieve farebox recovery goals.

Director Shahum made the following comments and inquiries:

  • She inquired as to the anticipated date that the Translink will be fully implemented for GGT. In response, Mr. Zahradnik stated that the District anticipates implementation by the end of the year.
  • She inquired as to whether the District would discontinue the Ride Value discount ticket book program once Translink is fully implemented. In response, Ms. Kupersmith stated that staff will review the issue of phasing out the Ride Value discount ticket book program during development of the restructured fare program.

Director Stroeh made the following comments and inquiries:

  • He inquired as to whether the restructured GGT Regional Bus and Ferry Fare program would be brought to the Board of Directors for action. In response, Ms. Kupersmith stated that today ’s presentation is intended to provide a snapshot to the Board of the District’ s current transit fare policies and that a proposed action would be presented to the Board at a future meeting.
  • He thanked staff for providing ideas to the Board to evaluate whether or not the restructured GGT Regional Bus and Ferry Fare program would meet the District’s goals.

Director Smith made the following comments and inquiries:

  • He inquired as to whether ferry service ridership decreased in the winter months. In response, Ms. Kupersmith stated that ferry service experiences decreased ridership during the winter months due to inclement weather, with an increase in ridership during the summer months due to the tourist season.
  • He expressed his concerns regarding the accuracy of comparing transit costs to automobile costs without accounting for automobile insurance costs.

Director Boro made the following comments and inquiries:

  • He stated that transit fares should be cost effective to encourage ridership.
  • He stated that, in regards to transit costs compared to automobile costs, most people would drive and contend with the traffic congestion and other costs if parking was subsidized.
  • He stated that in the event that Marin County Transit District and the District do not negotiate a contract beyond the term of the existing contract, which provides Marin County local service, that separation would become a critical issue to the fare restructuring program. Ms. Kupersmith stated that staff will address the issue in future reports to the Board.

Director Harrison made the following comments and inquiries:

  • She inquired if ridership increased in relation to the cost of gasoline. In response, Mr. Zahradnik stated there appears to be no direct correlation between ridership and the price of gasoline.
  • She stated that the proposal to charge the same fare per trip for Sausalito ferry passengers as Larkspur ferry passengers could be problematic. In response, Mr. Zahradnik stated that most passengers are already paying the same price and this change will only affect one significant group of approximately 200 people.

Action by the Board – None Required

   
3.

Public Comment

David Pilpel expressed the following concerns regarding the restructured Golden Gate Transit Regional Bus and Ferry Fare program:

  • He stated that the staff report did not delineate the number of ticket books sold by type.
  • He inquired regarding the status of the District implementing a parking fee at the Larkspur Ferry Terminal.
  • He requested that GGT fares for local San Francisco be set at the same rate as the local bus service operated by San Francisco Municipal Railway.
  • He suggested to set the fare recovery goal at 33% to include both ferry and bus operations.
  • He stated that GGT fares are already high-priced and suggested that the District take action to decrease operating costs and increase operating efficiency to minimize costs to passengers.
   
4.

Closed Session

Attorney David Miller, at the request of Chair Stroeh, stated that the Committee would convene in closed session for the purposes of reviewing both existing and anticipated claims as reflected in the annual litigation audit report. The report entitled, Litigation Overview Report March 2005.

After closed session, Chair Stroeh called the meeting to order in open session with a quorum present. Attorney Miller reported that the Committee met in closed session, as permitted by the Brown Act, to discuss existing and anticipated claims as reflected in the Litigation Overview Report, March 2005. He concluded by stating that no recommendation is necessary, and that the matter would be presented to the Board of Directors at its meeting of March 11, 2005.

   
5.

Adjournment

All business having been concluded, the meeting was adjourned at 12:35 p.m.

Respectfully submitted,

 

J. Dietrich Stroeh, Acting Chair
Finance-Auditing Committee
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