ROLL CALL

Directors Present (15): Directors Ammiano, Brown, Cochran, Eddie, Grosboll, Kerns, Murray, Newhouse Segal, Pahre, Reilly, Sandoval and Stroeh; Second Vice President Boro; First Vice President Moylan; President Middlebrook

Directors Absent (4): Directors Dufty, Hernández, Martini and McGoldrick

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 General Manager/Administration and Development Teri W. Mantony; Public Affairs Director Mary C. Currie; Director of Planning Alan R. Zahradnik; Deputy District Engineer Ewa Z. Bauer; Budget and Program Analysis Manager Jennifer Mennucci; Assistant Clerk of the Board Karen B. Engbretson; Executive Assistant to the General Manager Amorette Ko

Visitors Present: Rodney Pimentel, Deputy Director, San Francisco County Transportation Authority; Molly Graham, Public Involvement Director, Doyle Drive Environmental and Design Study Project; John Diamante, Threshold Center for Environmental Renewal; Jerry Grace, Oakland resident

Subrogation Claim of Permanent General Assurance Corporation
(Insured: Jeffrey Douglas Washington)

Carried

Claim of James Donald Rush

Carried

Carried

PURCHAWE

DATE

MATURITY

DATE

ORIGINAL

COST

PERCENT

YIELD

Dexia Delaware Commercial

Paper

UBS Finance Delaware

Commercial Paper

Morgan Stanley Commercial

Paper

Bank of America NA

Certificate of Deposit

Credit Suisse New York

Certificate of Deposit

General Electric Co.,

Commercial Paper

DEPFA Bank PLC NY,

Certificate of Deposit

Citigroup Funding, Inc.,

Commercial Paper

Deutsche Bank Financial, LLC,

Commercial Paper

Accept the Investment Report for July 2006 prepared by Public Financial Management.

Adopted

Directors EDDIE/STROEH

Directors BROWN/GROSBOLL

In a memorandum to the Board of Directors, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided a report regarding the District’s financial situation, with a review of deficit reduction actions currently underway, as well as options for eliminating the remaining portion of the deficit.  The report summarized the strategic planning process and the work of the Strategic Plan for Long-Term Financial Stability Advisory Committee (Strategic Plan Advisory Committee), which was formed to help develop an updated Strategic Plan for Achieving Long-Term Financial Stability (Strategic Plan).  The report noted that the goal of this Workshop is to develop a list of actions to be included in a final Strategic Plan, which will be presented to the Board for approval at a future Board meeting. 

The report outlined the current financial deficit, which is based upon a recently updated five-year financial projection.  The report stated that the current five-year deficit is projected to be $87 million, which amount includes setting aside reserve funding for post-employment retirement benefits, as well as continued funding of the District’s capital project reserve.  The report noted that in June 2002, the five-year deficit had been estimated at $454 million.  Since that time, the District undertook several specific programs to address the deficit, including the following:  1)  staff reductions; 2)  wage freezes; 3)  employee benefit reductions; 4)  bus and ferry service reductions; 5)  fare increases; and, 6)  a toll increase in September 2002.  In addition, several other revenue enhancement programs were implemented, including the following:  1)  changes to parking fees at the Bridge; 2)  changes in the District’s property management strategies; 3)  implementation of special sales programs at the Bridge Gift Center, such as the annual Golden Gate Bridge holiday ornament; and, 4)  negotiation of a new local bus service contract with the Marin County Transit District that more accurately reflected the true cost of providing bus service.  All of the above-listed deficit reduction strategies effectively reduced the projected deficit from $454 million to $87 million.  These deficit reduction strategies were described in further detail in Appendix A to the staff report.

• Option 1.  A 50-cent increase in FasTrak® tolls starting in July 2007, a 50-cent increase in FasTrak® tolls in July 2008, plus a $1.00 increase in the cash toll in July 2008.  This option would raise an estimated $76 million over five years.

• Option 2.  A 75-cent increase in FasTrak® tolls starting in July 2007, a 25-cent increase in FasTrak® tolls in July 2008, plus a $1.00 increase in the cash toll in July 2008.  This option would raise an estimated $78 million over five years.

• Option 3.  A $1.00 increase in FasTrak® tolls starting in January 2008, plus a $1.00 increase in the cash toll in January 2008.  This option would raise an estimated $80 million over five years.

The report noted that in general, the process to undertake consideration of a toll increase requires approximately six months, including a full public examination of the toll increase options through a formal public hearing process.  Once a decision is made by the Board on a proposed toll increase, there is a six- to ten-week period needed by staff to carry out the steps necessary for implementation.

The report included a composite Strategic Plan, combining the three toll increase options described above, as well as other critical strategies to achieve long-term financial stability.  The report stated that following today’s Workshop, staff will incorporate the deficit reduction options selected by the Board into a new Strategic Plan for Achieving Long-Term Financial Stability, and present to the Finance-Auditing Committee and/or the Board of Directors a new Strategic Plan for consideration and adoption in fall 2006.  A copy of the report, including Appendix A, is available in the Office of the District Secretary.

Public Comment

Jerry Grace inquired as to whether Golden Gate Transit bus and ferry fares would increase at the same time that tolls are increased.  In response, Ms. Kupersmith stated that, the Board adopted a Five-Year Transit Fare Program of annual 5% bus and ferry fare increases, beginning July 1, 2006.

• Director Ammiano made the following comments and inquiries:
  • He inquired as to whether the District was contemplating restoring bus service that had been eliminated in November 2003.  In response, Ms. Kupersmith replied that the District is not considering any significant changes to regional bus service, and that any changes to Marin local bus service would have to be undertaken by the Marin County Transit District (MCTD).
  • He stated that the Board should remain mindful of the public’s perception of the District and should maintain as much good will as possible throughout any public process for a toll increase.  Specifically, he expressed his support for maintaining the FasTrak® discount when the Board studies the various options for a potential toll increase.
  • He expressed his support for beginning the review of the various toll options in January 2007.
  • He expressed his support for congestion pricing of tolls for weekend users of the Golden Gate Bridge.

• Director Brown made the following comments and inquiries:
  • He inquired as to whether the five-year deficit estimate of $87 million assumes the continuation of a long-term contractual relationship with the MCTD for the provision of Marin local bus service. In response, Ms. Kupersmith answered that the estimate assumes that the District continues its five-year contract with the MCTD.
  • He inquired as to how much of the deficit would be eliminated if the FasTrak® discount was reduced incrementally each year for four years. In response, Joseph Wire provided calculations for three options for the FasTrak® discount: 1) if the FasTrak® discount was reduced by 25 cents each year for four years, it would reduce the deficit by $32 million; 2) if the FasTrak® discount was reduced by 50 cents each year for two years, it would reduce the deficit by $41 million; and, 3) if the FasTrak® discount was reduced by $1.00 during the first year, it would reduce the deficit by $46 million.
  • He inquired as to whether the District can continue to operate with a yearly deficit of $5-6 million. In response, Mr. Wire answered that the District can operate at a deficit in the short term, as long as the deficit is addressed in the long term, and that the District will need to plan ahead for large capital projects, such as those that the District will undertake in the next few years.
    

• Director Pahre made the following inquiries:
  • She inquired as to whether the five-year deficit estimate of $87 million recognizes the fact that certain union memoranda of understanding will be expiring and renegotiated in three years’ time. In response, Ms. Kupersmith stated that such an assumption is generally included in the projections.
  • She inquired as to whether operating with a deficit would affect the District’s bond rating for its commercial paper. In response, Mr. Wire stated that if the District can show the bond rating agencies that the District is making concerted efforts to eliminate its budget deficit, the bond rating would not necessarily be affected.
  • She expressed her concerns regarding staff’s workload, considering the time-intensive commitment required for the toll increase public outreach process. In response, Ms. Kupersmith stated that staff is prepared to undertake the process during whatever timeframe is selected by the Board to implement a potential toll increase, and that staff would re-schedule other projects accordingly.
  • She commended the members of the Strategic Plan Advisory Committee for their hard work over the past year on seeking solutions to the District’s deficit.
    

• Director Grosboll made the following comments and inquiries:

  • He inquired as to whether the budget was balanced for FY 05/06. In response, Mr. Wire stated that the fiscal year that ended on June 30, 2006 was a positive year, and that revenues were $6 million higher than expenses.
  • He inquired as to how much of the total five-year deficit estimate of $87 million is attributed to FY 07/08. In response, Mr. Wire explained that the net loss for FY 07/08 is estimated at $4 million, and that the remainder of the $87 million is spread out over the following four fiscal years, with the amount of the yearly deficit growing exponentially each year.
  • He inquired as to whether there had been discussion of the timing of future toll increases at the time of the last toll increase in 2002. In response, Ms. Kupersmith answered in the affirmative, noting that one of the reasons for the significant 67% increase in tolls from $3.00 to $5.00 was that the tolls had not been increased in 11 years. She stated that at that time, some members of the Board, as well as some members of the public, had suggested that future toll increases be made incrementally in the future.
  • He inquired as to whether there would be any advantage to waiting until late in 2008 to increase tolls because of the potentially positive public perception of having the percentage of increase spread over a longer time period. In response, Mr. Wire presented a handout entitled, “Price Increase Comparisons,” which depicted the difference between the yearly rates of a potential toll increase implemented in 2007 versus a toll increase implemented in 2008.
  • He inquired as to whether certain projects in the Ten-Year Capital Program could be postponed in order to reduce the shortfall that the potential toll increase is expected to address. In response, Ms. Kupersmith explained that the Capital Program includes no discretionary projects that could possibly be postponed, but only includes vital capital projects such as the Golden Gate Bridge Floor Beam and Bracing Replacement/ Rehabilitation project. She further stated that the Capital Program also assumes that the District will receive 80% federal funding for major Bridge rehabilitation projects.
    

• Director Moylan inquired as to whether the District might expect to lose toll customers if the FasTrak® discount were eliminated. In response, Ms. Kupersmith stated that while there might be some decrease in Bridge traffic due to elimination of the FasTrak® discount, the decrease might not necessarily be significant.

• Director Murray made the following inquiries and comments:
  • She commented that keeping the FasTrak® discount would serve as an incentive to increase the market share of FasTrak® users on the Golden Gate Bridge.
  • She noted that the District should maintain its commitment to the environment by increasing tolls to encourage more transit use.
  • She suggested that the District pursue using congestion pricing for weekend users of the Golden Gate Bridge.
  • She inquired as to when tolls for the state-owned bridges will be increased. In response, Ms. Kupersmith stated that state bridge tolls are set to be increased to $4.00 on January 1, 2007. She also presented a handout entitled, “Golden Gate Bridge and State Bridge Toll History,” which depicted the levels of Golden Gate Bridge cash tolls, Golden Gate Bridge FasTrak® tolls and state bridge tolls, over the period from 2001 to 2007.
  • She expressed her opposition to increasing Golden Gate Bridge tolls incrementally.
  • She noted that the earlier the District begins to address its long-term financial stability, the greater the impact on reducing the deficit. She further stated that she supports beginning the toll increase process as soon as possible.
  • She stated that the toll should be increased as high as practicable in order to have the greatest impact on eliminating the deficit.
  • She commented that when calculating future revenue projections, the District should consider worst-case scenarios of future events, such as future recessions or pandemic illnesses, that could impact the workforce and consequently impact the amount of toll revenue.
    

• Director Boro made the following comments:
  • He stated that the total five-year deficit estimate of $87 million is relatively higher than it would have been because the Board has directed staff to set aside reserve funding for post-employment retirement benefits.
  • He expressed his support for postponing the toll increase until January 2008, and noted that it may not be prudent to time the Golden Gate Bridge toll increase to coincide with the state bridge toll increase in January 2007.
  • He stated his preference for another toll increase option: A 50-cent increase in FasTrak® tolls starting in January 2008, a $1.00 increase in the cash toll in January 2008, and then a 50-cent increase in FasTrak® tolls in January 2009. He requested that staff calculate the total five-year revenue impact of his suggested increase option.
  • He expressed his support for investigating congestion pricing for weekend users of the Golden Gate Bridge.
  • He suggested that the District wait to consider a potential toll increase until after November 2006, when the outcome of the votes will be known regarding the distribution of funding, if any, on Proposition 1A – Transportation funding Protection, Legislative Constitutional Amendment and on Proposition 1B – Highway Safety, Traffic Reduction, Air Quality and Port Security Bond Act of 2006.
    

• Director Cochran commented that the anticipated state bridge toll increase of $4.00 will not provide enough revenue to pay for the Bay Bridge seismic retrofit construction.  He inquired as to whether staff was aware of any future plans by the State of California to further increase state bridge tolls.  In response, Denis Mulligan stated that it is his understanding that the Bay Area Toll Authority desires to postpone any future toll increases as long as possible.

After discussion at the Workshop by the Board of Directors, the following motion was made and seconded by Directors MOYLAN/KERNS: