June 7, 2007
(For Board: June 22, 2007)

 

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, June 7, 2007, at 10:40 a.m., Chair Stroeh presiding.

Committee Members Present (7): Chair Stroeh; Vice Chair Pahre; Directors Cochran, Eddie, Grosboll and Reilly; President Moylan (Ex Officio)
Committee Members Absent (2): Directors Boro and Middlebrook
Other Directors Present (3): Directors Kerns, McGlashan and Newhouse Segal

Committee of the Whole Members Present (10): Directors Cochran, Eddie, Grosboll, Kerns, McGlashan, Newhouse Segal, Pahre, Reilly and Stroeh; President Moylan
Committee of the Whole Members Absent (9): Directors Brown, Dufty, Hernández, Martini, McGoldrick, Middlebrook and Sandoval; Second Vice President Ammiano; First Vice President Boro

Staff Present: General Manager Celia G. Kupersmith; District Engineer Denis J. Mulligan; Auditor-Controller Joseph M. Wire; Attorney Madeline Chun; Deputy General Manager/Bus Division Susan C. Chiaroni; Deputy General Manager/Administration and Development Teri W. Mantony; Information Systems Director Robert Haar; Marketing and Communications Director Kellee Hopper; Director of Risk Management and Safety William Stafford; Planning Director Alan R. Zahradnik; Capital and Grant Programs Manager Gayle Prior; Assistant Clerk of the Board Karen B. Engbretson; Executive Assistant to the General Manager Amorette Ko

Visitors Present: None

 

     
1.a.

Authorize a Budget Transfer from the FY 06/07 Bus Transit Division Operating Budget to the FY 06/07 Ferry Transit Division Operating Budget for Unbudgeted Changes to Prior Year Workers’ Compensation Reserves

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith reported on staff’s recommendation to authorize a budget transfer from the FY 06/07 Bus Transit Division Operating Budget to the FY 06/07 Ferry Transit Division Operating Budget relative to the Workers’ Compensation reserves. The report stated that funds are available in the FY 06/07 Bus Transit Division Operating Budget due to prior year Workers’ Compensation claim costs having been budgeted but not realized. The report also stated that it is necessary to place additional Workers’ Compensation funds in the FY 06/07 Ferry Transit Division Operating Budget due to an unplanned, one-time-only, prior year claim adjustment.

The report further stated that it is recommended that a budget transfer in the amount of $343,000 be authorized, in order to cover these unbudgeted changes to prior year Workers’ Compensation reserves. A copy of the 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 a budget transfer in the amount of $343,000 from the FY 06/07 Bus Transit Division Operating Budget to the FY 06/07 Ferry Transit Division Operating Budget for unbudgeted changes to prior year Workers’ Compensation reserves.


Action by the Board – Resolution
NON-CONSENT CALENDAR

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

     
1.b.

Authorize a Budget Transfer from the FY 06/07 District Division Operating Budget to the FY 06/07 District Division Capital Budget for a Large-Format Printer

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith reported on staff’s recommendation to authorize a budget transfer from the FY 06/07 District Division Operating Budget to the FY 06/07 District Division Capital Budget for the purchase of a large-format printer.

The report stated that in the Marketing and Communications Department, a large-format printer has become necessary due to expanding outreach efforts and rising specialty printing costs for large-format printed items, such as system maps, posters and sandwich board-size signs. Currently, the Marketing and Communications Department spends nearly $10,000 per year for outside vendors to print these large-format items. The report also stated that based on comprehensive research, it was determined that an economical large-format printer is available and that the purchase of a large-format printer would save the District money. In addition, the accessibility to an in-house printer would streamline the process of developing large-format printed items for use at public open houses, public hearings, special events and press conferences.

The report further stated that it is recommended that a budget transfer in the amount of $12,000 be authorized, in order to purchase this large-format printer. A copy of the 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 a budget transfer in the amount of $12,000 from the FY 06/07 District Division Operating Budget to FY 06/07 District Division Capital Budget for the purchase of a large-format printer.

Action by the Board – Resolution
NON-CONSENT CALENDAR

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

     
2.a.

Authorize Filing an Application with the Metropolitan Transportation Commission for FY 07/08 Transportation Development Act, State Transit Assistance and Regional Measure 2 Operating Funds to Support Bus, Ferry and Paratransit Services

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith reported on the availability of Transportation Development Act (TDA) statewide sales tax revenues, State Transit Assistance Act (STA) gasoline and diesel fuel sales tax revenues and Regional Measure 2 (RM2) funds. The report stated that TDA, STA and RM2 funds are made available annually to the District for operating assistance through the Metropolitan Transportation Commission (MTC). The report also stated that the District is eligible to claim $15,340,798 of TDA funds, $3,877,211 of STA funds and $2,492,528 of RM2 funds in FY 07/08 for various operating purposes.

The report further stated that consistent with past years, the District is eligible to receive 100 percent of the Marin County TDA apportionment, or $10,333,685, of which 36.2%, or $3,740,794, will be credited back to Marin County to support local transit services consistent with Marin Local Transit Services Agreement between this District and the Marin County Transit District. The report also stated that the District is eligible to receive 25% of the Sonoma County apportionment, or $5,007,113. The report also provided details regarding the disbursement of STA funds, including the amounts to be credited back to Marin County for local transit services. Also, the report described how RM2 transit operating funds are disbursed, which funds are derived from the extra $1.00 toll collected on all seven state-owned toll bridges in the San Francisco Bay Area. Golden Gate Transit Route Nos. 40/42, 72x and 75 are eligible services for the receipt of RM2 funds. A copy of the 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/PAHRE 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 file an application with the Metropolitan Transportation Commission for FY 07/08 Transportation Development Act, State Transit Assistance and Regional Measure 2 funds to support bus, ferry and paratransit services.

Action by Board – Resolution
NON-CONSENT CALENDAR

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

     
2.b.

Authorize Filing Grant Applications with the Bay Area Air Quality Management District for Transportation Fund for Clean Air Grant Funds to Support a Demonstration Project for Two Peak-Period Ferry Feeder Bus Routes Serving the Larkspur Ferry Terminal

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith reported on the availability of Transportation Fund for Clean Air (TFCA) funds from the Bay Area Air Quality Management District (BAAQMD) to support a demonstration project for two peak-period ferry feeder bus routes serving the Larkspur Ferry Terminal (LFT).

The report stated that the BAAQMD, in conjunction with the State of California, Department of Motor Vehicles, collects a $4 annual surcharge on motor vehicle registrations paid in the nine Bay Area counties to provide funding for the BAAQMD’s TFCA grant program. The report also stated that this grant program provides funds to public agencies to implement cost-effective projects that reduce motor vehicle emissions, including shuttle/feeder bus service.


The report also stated that since 2003, Larkspur ferry ridership has been growing at approximately 5 percent per year. As a result of that growth, parking is now constrained at the LFT, and future ridership growth potential could be adversely affected. Staff has determined that providing demonstration ferry feeder service would address the current parking situation at the LFT. The report stated that additional trips would be added to two existing bus routes to provide ferry feeder service between Fairfax/Sir Francis Drake Boulevard and the LFT and between Novato/San Rafael Transit Center (SRTC) and the LFT. It is proposed that ferry feeder service would be provided during weekday peak periods and would be provided free to ferry patrons. As shuttle/feeder bus projects are eligible for TFCA funding for up to two years, funding is being requested for a two-year demonstration project. The estimated cost to operate the Fairfax ferry feeder service is $266,802 per year, and the estimated cost to operate the Novato ferry feeder service is $357,058 per year, for a total of $623,860 per year. The report noted that TFCA Grant Program requires at least a 10 percent non-BAAQMD match for requests over $150,000. Therefore, TFCA grant funds totaling $561,475 will be requested for the maximum 90 percent allowable amount for each of the two routes being proposed, with the District providing the 10 percent matching funds in the amount of $62,385. A copy of the 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/PAHRE 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 file applications and to execute funding agreements with the Bay Area Air Quality Management District for Transportation Fund for Clean Air (TFCA) Grant Program funds, as follows:

  a.
Authorize the filing of an application for TFCA grant funds to support a two-year demonstration project to provide peak-period ferry feeder service between Fairfax/Sir Francis Drake Boulevard and the Larkspur Ferry Terminal (LFT) at an estimated operating cost of $266,802 per year; and,
  b.

Authorize the filing of an application for TFCA grant funds to support a two-year demonstration project to provide peak-period ferry feeder service between Novato/San Rafael Transit Center and the LFT at an estimated operating cost of $357,058 per year.

Action by Board – Resolution
NON-CONSENT CALENDAR

     
 
AYES (7): Chair Stroeh; Vice Chair Pahre; Directors Cochran, Eddie, Grosboll and Reilly; President Moylan (Ex Officio)
NOES (0): None
ABSENT (2): Directors Boro and Middlebrook
     
3.

Approve Adoption of the FY 07/08 Operating and Capital Budgets

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided staff’s recommendation for approval of the FY 07/08 Operating and Capital Budgets (FY 07/08 Budget). The report included a general overview of the proposed FY 07/08 Budget that had been presented in detail at the May 10, 2007 meeting of the Committee. A copy of the report is available from the Office of the District Secretary and on the District’s web site.

At the meeting, Mr. Wire stated that no changes have been made to the FY 07/08 Operating Budget since it was presented at the May 10th meeting, but that a slight change has been made to the FY 07/08 Capital Budget. He explained that there had been a change in scope to the Toll Plaza Employee Parking Lot and Underpass Paving project, resulting in an increase in the project budget of $370,000, which is reflected in the revised FY 07/08 Capital Budget expenditures of $37.4 million, as noted in the staff report.

Discussion ensued, including the following:

  • Director Grosboll made the following comments and inquires:
    • He inquired as to whether or not substantive changes to District policy are reflected in the FY 07/08 Budget expenditures. In response, Mr. Wire noted that the FY 07/08 Budget document implements policy changes for which the Board provided direction during development of the Strategic Financial Plan. He stated that the most substantive changes in the FY 07/08 Budget are those made to the Table of Organization, in which 13 positions have been added, 5 positions have been eliminated, 3 positions have been transferred and 7 have been positions reclassified. Celia Kupersmith elaborated that the FY 07/08 Budget also includes capital funding to move forward with engineering and environmental studies relative to the Moveable Median Barrier, for which the Board of Directors provided conceptual approval in 1998.
    • He inquired regarding the impact on the capital budget if the District decides to pursue the purchase of a new high-speed passenger ferry with cleaner emissions. In response, Ms. Kupersmith stated that if such a decision is made, the District would seek additional grant funding that would cover the additional cost of building a new high-speed ferry that meets newer cleaner emission standards. She noted that the FY 07/08 Budget includes funds for a new high-speed ferry, but does not include capital funds for any significant costs that may be associated with technology for cleaner emissions.
    • He inquired as to whether the capital funding for Moveable Median Barrier studies would span more than one fiscal year. In response, Ms. Kupersmith stated that the capital funding would span several fiscal years, and that the District will continue to seek federal funding to support Moveable Median Barrier project.
  • Chair Stroeh commended staff for the excellent presentation of the FY 07/08 Budget, which has significantly improved over the years into a very readable, easy-to-understand document.

Staff recommended and the Committee concurred by motion made and seconded by Directors PAHRE/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 approve adoption of the FY 07/08 Operating and Capital Budgets, including the following related actions:

  a.
District workplans, goals and objectives, as contained in the Budget document;
  b.
Negotiated 3% pay increase for the Coalition represented employees and 3% pay increase for non-represented employees, effective July 1, 2007;
  c. Changes to the Reserve Structure; and,
  d.

Changes to the Table of Organization.

Action by the Board – Resolution
NON-CONSENT CALENDAR

     
 
AYES (5): Chair Stroeh; Directors Boro, Cochran, Eddie and Reilly
NOES (0): None
ABSENT (3): Vice Chair Pahre; Director Murray; President Middlebrook (Ex Officio)
     
4.

Approve an Amendment to Rule X of the Rules of the Board Relative to Capital Budget Transfers

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided a report presenting staff’s recommendation to amend Rule X of the Rules of the Board, relative to the policy on capital budget transfers. The report stated that as presently written, Rule X, “Budget Policies,” Subsection C, “Policy on Capital and Operating Budget Transfers,” of the Rules of the Board, only allows budgeted funds up to $5,000 be transferred within the capital budget. Any transfer of funds over $5,000 requires Board action. It is recommended that Rule X, Subsection C, of the Rules of the Board be amended to allow budgeted funds for capital projects to be transferred between fiscal years when such transfer has been approved by the General Manager. A copy of the report is available in the Office of the District Secretary and on the District’s web site.

At the meeting, Mr. Wire summarized the staff report, noting that this item will allow staff to manage the capital budget more efficiently by providing the General Manager the ability to transfer funds between fiscal years within the approved project budget amount. He further noted that the proposed change to the Rules of the Board would not increase or decrease any approved capital project budget. He further explained that an inadvertent edit had been included in the staff report in the paragraph showing the proposed amendments to Subsection C, and clarified that the phrase, “and within the capital budget” should not be deleted from the paragraph.


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

Discussion ensued, including the following:

  • Director Pahre requested clarification as to how the proposed amendment would affect the budget. In response, both Ms. Kupersmith and Mr. Wire provided a detailed explanation of the proposed capital budget transfer policy, noting that the amended policy would provide the flexibility needed in case the budget has been under-estimated or over-estimated in any given fiscal year. The authority would not expand the overall project budget.

Staff recommended and the Committee concurred by motion made and seconded by Directors KERNS/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 approve an amendment to Rule X, Subsection C, of the Rules of the Board, relative to capital budget transfers, by replacing Subsection C in its entirety, as follows:

     
   

C.   Policy on Capital and Operating Budget Transfers

Budgeted funds may be transferred between different operating Division budget line items, and may also be transferred between Divisions, up to an amount of $50,000 per transfer for expenditures or activities that have been previously authorized by the Board, when such transfer has been approved by the General Manager. Any single transfer that is greater than $50,000 shall be subject to the review and approval by the Finance-Auditing Committee and Board. The General Manager has the authority to approve like line item transfers of any amount between departments within an approved operating Division budget. Budgeted funds may be transferred between the capital and operating budget and within the capital budget up to the amount of $5,000 with the General Manager’s approval. For a multi-year capital project already in the approved capital budget, funds may be transferred between fiscal years provided there is no increase in the total project budget when such a transfer has been approved by the General Manager. The Auditor-Controller shall concur with all transfers and provide the Board with a written report summarizing all such transfers on no less than a quarterly basis.

Action by the Board – Resolution
NON-CONSENT CALENDAR

     
 
AYES (10): Directors Cochran, Eddie, Grosboll, Kerns, McGlashan, Newhouse Segal, Pahre, Reilly and Stroeh; President Moylan
NOES (0): None
     
5.

Discussion Relative to the Renewal of the Liability Insurance Program

In a memorandum to Committee, Risk Management and Safety Director William Stafford, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided an informational report on the annual renewal of the District’s Liability Insurance Program. The report included the status of the recommended options for the following elements of the Liability Insurance Program:

  a.
Excess General and Automobile Liability Insurance Program (Excess Liability);
  b.
Excess Workers’ Compensation and Employers’ Liability Insurance Program (Excess Workers’ Comp);
  c.
General Liability Insurance Program for the remaining Northwestern Pacific Railroad Right-of-Way under District control (Railroad Liability);
  d.
Public Officials’ and Employment Practices Liability Insurance Program (Public Officials’ Liability); and,
  e.
Public Employees’ Faithful Performance Bond and Comprehensive Dishonesty, Destruction and Disappearance Bond (Crime/Fidelity).
 

The report contained information regarding the overall insurance market condition, as well as a description of the work provided by the District’s Insurance Advisor, Marsh Risk and Insurance Services (Marsh). The report noted that premiums for the District’s Liability Insurance Program have decreased by approximately 30% during the past two years, due to increased competition in the insurance market, the District’s risk management practices, lower loss trends and reduced bus fleet exposure.

The report described in detail some major changes in the Excess Liability policy that the District is exploring with Marsh, to reduce the District’s self-insured retention from $5 million to $3 million, and to increase the limits from $75 million to $100 million. The report stated that these changes will provide the District with more financial security and will bring the District’s liability coverage more in line with peer bus fleets. The report noted that two insurance carriers, AIG and ACE, are competitively bidding on both the Excess Liability policy and the Excess Workers’ Comp policy, the first time in many years that the District has had competitive bidding for these two policies. The report further described the status of the renewal of the Railroad Liability, Public Officials’ Liability and Crime/Fidelity policies, all of which are being renewed at the same terms and conditions as the expiring policies. A formal recommendation for the renewal of all of the elements of the Liability Insurance Program will be provided at the June 21, 2007, meeting of the Finance-Auditing Committee. A copy of the report is available in the Office of the District Secretary and on the District’s web site.

At the meeting, William Stafford summarized the staff report, noting that while the changes to the Excess Liability policy will likely increase the overall premium for this year’s renewal of the Liability Insurance Program, it is anticipated that such changes will also reduce the District’s financial risk in future years.

Discussion ensued, including the following:

  • Chair Stroeh inquired as to whether the remaining Northwestern Pacific Railroad right-of-way under District control, for which the Railroad Liability policy provides insurance coverage, includes the California Park Hill tunnel. In response, Attorney Madeline Chun stated that the insured portions of the right-of-way do not include the California Park Hill tunnel.

Action by the Board – None Required


6.

Status Report on the Renewal of the Health and Benefit Insurance Plans

In a memorandum to Committee, Deputy General Manager/Administration & Development Teri W. Mantony, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided an informational report on the renewal of the District’s Health and Benefit Insurance Plans for FY 07/08. The Health and Benefit Insurance Plans renew on July 1, 2007, and include the following policies:

  a. Group Life, Accidental Death & Dismemberment and Dependent Life Plan;
  b. Medical Stop-Loss Coverage;
  c. Kaiser Foundation Health Plan;
  d. Blue Shield of California PPO Plan;
  e. Blue Shield of California HMO Plan;
  f. Caremark Prescription Drug Plan
  g. U.S. Behavioral Health Services
  h. Vision Service Plan of California; and,
  i. Delta Dental Plan of California.
     
 

The report stated that additional structural changes to the health and benefit plans were negotiated with the Union Coalition during the 2006 bargaining cycle, including slightly higher deductibles and creation of a fourth prescription tier for extremely expensive biotech drugs, with said changes resulting in modest savings to the District. The report described various wellness activities that have been expanded during FY 06/07.

The report also stated that Towers Perrin, the District’s Health and Employee Benefits Broker, successfully negotiated new contracts with several of the District health and benefit insurance providers. The report described some of these changes, including the following:

  • Blue Shield PPO Plan – negotiated an administrative fee, increase of 3 percent instead of the proposed 5 percent;
  • Caremark Prescription Drug Plan – negotiated a three-year contract, instead of a one-year contract, which is expected to save the District $589,811 over the life of the contract.
  • Delta Dental Plan – Delta Dental agreed not to increase in administrative fees this year, which is expected to save the District $7,000 in FY 07/08.

The report noted that the Medical Stop-Loss Coverage has not been finalized yet, and that Towers Perrin is currently negotiating with Blue Shield, as well as performing a market survey with other potential stop-loss providers to see if more favorable pricing can be found. The report also included a chart that compared the percentage of increase in costs of the various plans from FY 06/07 to FY 07/08. The report further stated that a formal recommendation for the renewal of the Health and Benefit Insurance Plans will be provided at the June 21, 2007, meeting of the Finance-Auditing Committee. A copy of the report is available in the Office of the District Secretary and on the District’s web site.

At the meeting, Teri Mantony summarized the staff report, and introduced Knita Bailes from Towers Perrin. Ms. Mantony noted that Towers Perrin is in the final year of a five-year contract, and that the District will be issuing a Request for Proposals for a consultant to provide Health and Welfare Insurance Broker Services later in 2007.

Discussion ensued, including the following:

  • Director Reilly inquired as to how the overall increase in health and benefit costs for FY 07/08 compares to past fiscal years. In response, Ms. Mantony stated that she would provide that cost comparison at the June 21, 2007, meeting of the Finance-Auditing Committee.
  • Director Grosboll inquired as to the level of satisfaction with the Caremark Prescription Drug Plan experienced by District employees. In response, Ms. Mantony stated that there have been a few complaints about the service, but that most employees who use the service routinely are satisfied with Caremark. She further stated that staff did a market survey of other prescription drug plans and found that the Caremark plan provides the most cost savings for the District.
  • Director Pahre inquired as to whether it is a common industry practice for pharmacy benefit plans to provide rebates to employers. In response, both Ms. Mantony and Knita Bailes answered in the affirmative, providing a detailed explanation of the two types of rebates routinely provided by pharmacy benefit plans.

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 11:15 a.m.

     

Respectfully submitted,

/s/ J. Dietrich Stroeh, Acting Chair
Finance-Auditing Committee