Authorize Entering into a Pass-Through Agreement with Marin County Transit District for Federal Transit Administration Funds Available to Acquire Paratransit Vans

In a memorandum to Committee, Capital and Grant Programs Manager Gayle Prior, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith reported on staff’s recommendation to authorize entering into a Pass-Through Agreement with the Marin County Transit District (MCTD) for Federal Transit Administration (FTA) grant funds to acquire up to 18 paratransit vans.

The report stated that the Americans with Disabilities Act (ADA) requires that operators of regular fixed-route transit service provide complementary paratransit service to persons whose disabilities preclude them from using fixed-route service. Since its inception in November 1993, District inter-county paratransit service has been provided under an annual agreement with the MCTD. The MCTD administers the service through its contractor for local Marin paratransit service, Whistlestop Wheels (WSW). The report also stated that District staff has consulted with MCTD and WSW staff and has determined that up to 18 vans currently operated by WSW meet the Metropolitan Transportation Commission’s eligibility requirements for receipt of available federal grant funds. As the only eligible recipient of FTA Federal Urbanized Area Formula Program grant funds in Marin County, it is necessary for the District to act as a conduit for the available paratransit capital funds.

The report further stated that it is recommended that a Pass-Through Agreement be executed with the MCTD for the acquisition of these paratransit vans. Once the grant funds are secured, the MCTD will accept full responsibility for meeting all federal requirements related to procurement, use, maintenance and disposition of the acquired vans. A copy of the staff report is available in the Office of the District Secretary and on the District’s web site.

Staff recommended and the Committee concurred by motion made and seconded by Directors MIDDLEBROOK/REILLY 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 development and execution of a Pass-Through Agreement with the Marin County Transit District, in accordance with related grant requirements, for Federal Transit Administration Federal Urbanized Area Formula Program grant funds for the acquisition of up to 18 paratransit vans for use in the provision of District inter-county and Marin County local paratransit services.

Action by the Board – Resolution
NON-CONSENT CALENDAR

AYES (7): Acting Chair Pahre; Directors Boro, Cochran, Eddie, Middlebrook and Reilly and President Moylan (Ex Officio)
NOES (0): None
ABSENT (2): Chair Stroeh: Director Grosboll

Authorize an Amendment to the Pass-Through Agreement with the Metropolitan Transportation Commission for Federal Transit Administration Funds for the TransLink® Project

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith reported on staff’s recommendation to authorize the General Manager to execute an amendment to the Pass-Through Agreement with the Metropolitan Transportation Commission (MTC) for the TransLink® project.

The report stated that since 1992, District staff has worked with the MTC, the lead agency for TransLink®, as well as several other San Francisco Bay Area transit operators, in developing and implementing the TransLink® regional fare collection project. In November 1996, the Board of Directors authorized the District to act as the pass-through agency for federal funds programmed to support the TransLink® project, which entailed entering into a Pass-Through Agreement with the MTC. As the lead federal grant recipient for TransLink®, the District is responsible for federal grant activities, such as submitting necessary application materials to the Federal Transit Administration (FTA), executing a contract for federal funds, drawing down federal funds to pass through to the MTC and providing quarterly project progress report information to the FTA.

The report further stated that it is recommended that the Board authorize an amendment to the Pass-Through Agreement with the MTC to include additional federal funds to be secured through the District’s FY 06/07 FTA Federal Urbanized Area Formula Program grant application for the TransLink® project. A copy of the staff report is available in the Office of the District Secretary and on the District’s web site.

Staff recommended and the Committee concurred by motion made and seconded by Directors EDDIE/REILLY 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 General Manager to execute an amendment to the Pass-Through Agreement with the Metropolitan Transportation Commission for the TransLink® project.

Action by the Board – Resolution
NON-CONSENT CALENDAR

AYES (7): Acting Chair Pahre; Directors Boro, Cochran, Eddie, Middlebrook and Reilly and President Moylan (Ex Officio)
NOES (0): None
ABSENT (2): Chair Stroeh: Director Grosboll

Discussion Relative to the Draft FY 07/08 Operating and Capital Budgets

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided a summary of the development process and a general overview of the proposed draft FY 07/08 Operating and Capital Budget (FY 07/08 Budget), which contains District workplans, goals and objectives, a negotiated 3% pay increase for the Coalition represented employees and a 3% pay increase for non-represented employees, changes to the Reserve Structure and changes to the Table of Organization. The report stated that the proposed FY 07/08 Budget is a policy document that serves as an implementation tool for the Board’s policy directions that were developed in its long-term Strategic Financial Plan.

The report provided an overview of the proposed FY 07/08 Budget, which includes:

• Operating Budget revenues of $151.1 million;
• Operating Budget expenditures of $156.9 million;
• Capital Budget revenues of $27.5 million;
• Capital Budget expenditures of $37.4 million; and,
• District reserves are budgeted to be used to fund the FY 07/08 Operating Budget shortfall of $5.8 million and District share of the Capital Budget of $9.9 million.

The report also included background summary information regarding the proposed FY 07/08 Budget, providing details on the Operating Budget, the Capital Budget and the use of reserves. A copy of the report, including a copy of the proposed FY 07/08 Budget, is available in the Office of the District Secretary.

At the meeting, Joseph Wire provided an overview of the proposed FY 07/08 Budget, noting that this meeting will provide an opportunity for the first of several discussions of the proposed FY 07/08 Budget, which will continue at meetings of the Finance-Auditing Committee in May and June, culminating with final adoption of the FY 07/08 Budget scheduled at the June 8, 2007 meeting of the Board of Directors. Mr. Wire acknowledged the following Auditor-Controller staff members who are primarily responsible for preparing the budget document: Budget Program Analyst Joanne Leone; Business Process Analyst Alice Ng; Budget Program Analyst Rick Driscoll; Capital and Grant Programs Manager Gayle Prior; Capital and Grant Programs Analyst Lynne Yu; Capital and Grant Programs Analyst Aida S. Caputo; and, Administrative Assistant Jeff Dion.

Mr. Wire then proceeded to guide the Committee members through the FY 07/08 Budget document, focusing on an overview of the District’s current financial situation, Operating Budget revenues and expenses, as well as the Capital Budget.

Mr. Wire described the revenue sources and expense allocation in the proposed FY 07/08 Budget as shown on pie charts on page 12 of the budget document presented to the Committee. He noted that the list of revenue sources now includes a separate entry for revenue derived from the Marin Local Service Contract with the Marin County Transit District (MCTD), which represents 8 percent of total District revenues.

He stated that the total District reserves available for capital and operating expenses have increased to the highest point in the past twenty years, due to a variety of factors, including: 1) direction by the Board to make annual capital contributions to the reserves; 2) higher investment income; 3) higher toll and transit revenues; 4) workers compensation program savings; 4) lower medical benefit costs; 5) repair and supply expense savings; and, 6) slower than expected spending on capital projects. He described the changes to reserves as shown in a chart on page 13 of the budget document, noting that the net impact on the reserves for the proposed FY 07/08 Budget will be $6.5 million.

Mr. Wire also stated that the District continues to make interest-only payments on the outstanding Commercial Paper debt of $61 million until the Seismic Retrofit Project is completed, as directed by the Board. He noted that each year, staff reviews whether or not it would be prudent to start making payments on the principal ahead of the scheduled plan, and that it was determined to continue interest-only payments in the FY 07/08 Budget.

Mr. Wire then explained how the projected budget compares to the proposed budget and how the FY 07/08 Budget plays into the overall deficit picture. He noted that the proposed FY 07/08 Operating Budget of $156.9 million is in deficit by approximately $5.8 million, which is $3.1 million less of a deficit than the deficit for FY 07/08 of $8.9 million, which had been projected in the August 2006 Five- and Ten-Year Projections.

[With the arrival of Director Brown, the Committee became a Committee of the Whole.]

Mr. Wire described the categories of operating revenues contained in the proposed FY 07/08 Budget, and as shown on page 25 of the budget document, noting that the overall revenue base is expected to remain flat in FY 07/08. Mr. Wire also noted the following revenue budget assumptions:

• Approximately 1% increase in Bridge traffic based on previous year trend, but toll revenues will remain flat due to growth in FasTrak™ use;
• Transit fares will increase 5% on July 1, 2007, the second year of the Five-Year Fare Program;
• Bus patronage will decrease, while ferry patronage is expected to increase by 3.5%;
• State Operating Income will decrease due to a regional shortfall of such funding in the Bay Area;
• Federal Operating Income will decrease due to the discontinuation of a multi-year program in which public agencies were allowed to spend some of their capital moneys on preventative maintenance;
• Other Operating Income attributed to the Marin County Local Service contract with MCTD will increase by 5% under the terms of the contract; and,
• Investment Income will decrease due to not projecting changes to market valuations.

Mr. Wire stated that overall operating expenses are expected to increase by 8.3% in FY 07/08. He highlighted the changes to operating expenses, and explained the expected increases in various categories of expenses, as shown on page 30 of the budget document.

Mr. Wire further described in detail the most significant change in operating expenses, Other Post-Employment Benefits (OPEB), as noted on page 28 of the budget document. He stated that in response to Government Accounting Standards Board Statement 45 (GASB 45), the District obtained an Actuarial Valuation as of July 1, 2005, in order to estimate the District’s liability for retiree health benefits. He also stated that the Board recently awarded a Professional Services Agreement to PFM Asset Management LLC, relative to Request for Proposals (RFP) No. 2007 D-7, Trust and Investment Management Services for GASB 45 (OPEB) Trust, to begin the process of establishing and funding an OPEB Trust if the Board takes the action to fund the trust in the coming months. He further stated that the Actuarial Valuation determined that the District’s Annual Required Contribution for FY 07/08 is estimated at $11.6 million. He noted that moneys expected to be contributed to the OPEB Trust in the amount of $11.3 million are included in the FY 07/08 Operating Budget. Due to the fact that certain positions are included the capital budget, the remaining $0.3 million will be charged to certain capital projects as they are incurred.

Celia Kupersmith described in detail the changes to the Table of Organization in the proposed FY 07/08 Budget, as outlined on pages 31-35 of the budget document. She noted that the net impact of the proposed changes equals $352,000.

Mr. Wire briefly summarized the proposed FY 07/08 Capital Budget, which contains 35 continuing projects and 13 new projects, to be funded with $9.9 million in District funds and $27.5 million in federal, state and local grant funds. The District’s 10-Year Capital Program was described in further detail in the appendices to the budget document.

In conclusion, Mr. Wire summarized capital goals and activities for each of the operating divisions, as outlined on pages 39 and 40 of the budget document. He noted that as the approval process for the FY 07/08 Budget continues, each Deputy General Manager will be presenting a detailed report of each division at upcoming meetings of the Finance-Auditing Committee.

Ms. Kupersmith elaborated on the inclusion of the Golden Gate Bridge Moveable Median Barrier design and engineering study in the Bridge Division’s list of capital project goals, noting that in 1998, the Board of Directors approved conceptual approval of a Moveable Median Barrier, and that it would be appropriate to begin feasibility studies for a Moveable Median Barrier in FY 07/08. Ms. Kupersmith further noted that the District recently took delivery of its first new articulated bus for Marin Local Service, paid for by funds from Measure A, the transportation quarter-cent tax passed by Marin County voters in 2004.

Discussion ensued, including the following:

• Director Brown made the following inquiries:

  • He inquired as to why investment income is not expected to increase in FY 07/08. In response, Mr. Wire explained that the level of investment income is directly related to two factors: 1) the percentage of interest that the District’s investments earn in the market at any given time, currently at approximately 5% per year; and, 2) the amount of reserves expected to be invested in order to earn investment income. He noted that in FY 07/08, both interest rates and the amount of funds available to invest are expected to remain flat.
  • He inquired as to whether the GASB 45 statement constitutes a reporting requirement only, and Mr. Wire answered in the affirmative.

 

 

• Director Boro made the following comments and inquires:

• He inquired as to the impact on the FY 07/08 Budget if Board chooses not to fund OPEB Trust. In response, Mr. Wire explained that the total OPEB liability of $11.6 million is made up of two major components: 1) the “pay-as-you-go” portion, approximately 70% of the total, which includes funds that the District is already paying to providers for retirees’ medical expenses; and, 2) the remaining 30% of the total, which would go into the OPEB Trust to pay for unfunded liabilities. He noted that if the Board chooses not to fund the Trust, then the 30% portion would not be spent in the FY 07/08 Budget, and the District would only be obligated to pay the 70% “pay-as-you-go” portion, which amount is included in the operating budget line item, “Fringe Benefits.”
• He inquired regarding paying off the principal on the Commercial Paper debt. In response, Mr. Wire explained that after the Seismic Retrofit Project is completed, the District will begin to pay down the entire Commercial Paper debt, a process which is expected to take up to 20 years.
• He inquired regarding the need for dedicated personnel to monitor security cameras placed throughout the District’s facilities, and Ms. Kupersmith stated that such a discussion would be appropriate for a closed session at an upcoming meeting of the Building and Operating Committee.
• He commented that the District is committed to building a Moveable Median Barrier on the Golden Gate Bridge and has an obligation to make the Bridge as safe as possible for its users. Attorney Miller elaborated that from a risk management perspective, it would be advisable for the District to begin design and engineering studies for a Moveable Median Barrier, in addition to any other due diligence that the District may undertake regarding safety on the Golden Gate Bridge.
• He commented on the fact that when the District does not spend all capital monies allocated in any given fiscal year, it inflates the overall budget for the subsequent fiscal year. He emphasized the need to be realistic when determining the amount of each year’s capital budget, and to spend the entire capital budget that is included in the FY 07/08 Budget.

• Acting Chair Pahre inquired as to whether GASB would impose sanctions if a public agency did not set up an OPEB Trust. In response, Mr. Wire stated that GASB would not impose sanctions; rather, the agency’s bond rating would be affected. He noted that the Rating Agencies have said that they will give public agencies a grace period of up to two years to begin complying with GASB 45, and if a particular agency shows no progress in dealing with its unfunded OPEB liabilities, its bond rating would likely drop.

• Director Middlebrook made the following inquiries:
  • She inquired regarding the decision to move forward with studies for a Moveable Median Barrier. In response, Ms. Kupersmith stated that staff has determined that it would be prudent to move forward with Moveable Median Barrier studies concurrently with the Physical Suicide Deterrent System studies.
  • She inquired regarding the potential costs for a Moveable Median Barrier. In response, Ms. Kupersmith stated that in FY 07/08, staff will issue an RFP for a consultant to begin a Moveable Median Barrier design and engineering study, at this point to be paid for by the District. The District would seek grant funds for the design and construction of the Moveable Median Barrier.
  • She inquired regarding capital projects that were held over from FY 06/07. In response, Mr. Wire explained that the list on pages 39 and 40 of the budget documents includes continuing projects that span multiple fiscal years, rather than projects that should have been completed in FY 06/07.

Action by the Board – None Required

Closed Session

Attorney David Miller, at the request of Chair Stroeh, stated that the Committee would convene in closed session to discuss one matter of pending litigation listed on the Agenda as Item No. 4.a.1., Judy O’Connor vs. the Golden Gate Bridge, Highway and Transportation District (District), et al.

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 hear a report from John Glenn Adjusters & Administrators, Inc., regarding a pending matter of litigation, Judy O’Connor vs. the District, et al. He stated that the Committee recommended that this matter be referred to the May 11, 2007 meeting of the Board of Directors for necessary action.

Public Comment

There was no public comment.

Adjournment

All business having been concluded, the meeting was adjourned at 11:35 a.m.