August 9, 2007
(For Board: August 24, 2007)


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, August 9, 2007, at 10:00 a.m., Acting Chair Pahre presiding.

Committee Members Present (7): Acting Chair Pahre; Directors Boro, Cochran, Grosboll, Middlebrook and Reilly; President Moylan (Ex Officio)

Committee Members Absent (2): Chair Stroeh; Director Eddie

Other Directors Present (0): None

Staff Present: District Engineer Denis J. Mulligan; Auditor-Controller Joseph M. Wire; Secretary of the District Janet S. Tarantino; Attorney Madeline Chun; Deputy General Manager/Bridge Division and Acting General Manager 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; Executive Assistant to the General Manager Amorette Ko; Assistant Clerk of the Board Karen B. Engbretson

Visitors Present: V. James Link, Jr., PFM Advisors; Jessica Mackey, Athens Administrators

     
1.

Authorize Actions Relative to the Award of Grant Funds by the U.S. Department of Homeland Security

In a memorandum to Committee, Capital and Grant Programs Manager Gayle S. Prior, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided staff’s recommendation to approve the addition of three projects to the FY 07/08 Capital and Operating Budgets relative to the award of grant funds by the U.S. Department of Homeland Security (DHS).

The report stated that in December 2006, the District received verbal notification from the California Governor’s Office of Homeland Security (OHS) of the award of FY 05/06 Transit Security Grant Program (TSGP) funds to support implementation of three District projects. However, since this was not an official notification, staff could not yet add the projects to the Capital and Operating Budgets. The District was required to wait until it received official notification from the DHS.

The report also stated that in late June 2007, the District received official written notification from the DHS in regard to the award of the FY 05/06 TSGP funds in the amount of $728,000 to support implementation of the following three transit security projects:

  1. Bus Transit Perimeter Security and Surveillance Equipment project in the amount of $253,000;.
  2. Security Shelter and Additional Surveillance Equipment for the Golden Gate Ferry System project in the amount of $325,000; and,.
  3. Golden Gate Ferry Joint Security Training Exercise project in the amount of $150,000.

The report noted that the training exercise is a collaborative effort among San Francisco Bay Area public and private ferry operators, with participation from the U.S. Coast Guard as well as from other federal, state and local law enforcement agencies. It is anticipated that the training exercise will be completed by May 2008. However, due to the uncertainty when dealing with a multitude of agencies, if this project is not completed in FY 07/08, operating funds will be requested again during the FY 08/09 budget process. 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 COCHRAN/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 the addition of the following projects to the FY 07/08 Capital and Operating Budgets, relative to the award of FY 05/06 Transit Security Grant Program funds by the U.S. Department of Homeland Security:

  1. Add the Bus Transit Perimeter Security and Surveillance Equipment project to the FY 07/08 Bus Division Capital Budget in the amount of $253,000;
  2. Add the Security Shelter and Additional Surveillance Equipment for the Golden Gate Ferry System project to the FY 07/08 Ferry Division Capital Budget in the amount of $325,000; and,
  3. Add the Golden Gate Ferry Joint Security Training Exercise project to the FY 07/08 Ferry Division Capital Budget in the amount of $150,000.

Action by the Board – Resolution
NON-CONSENT CALENDAR

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

     
2.

Approve Actions Relative to the Execution of a GASB 43 Qualifying IRS Section 115 Trust for Purposes of Funding Future GASB 45 Retiree Healthcare and Other Post-Employment Liabilities

In a memorandum to Committee, Business Process Analyst Alice Ng, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided staff’s recommendation to approve actions relative to the establishment of a Governmental Accounting Standards Board Statement 43 (GASB 43) Qualifying IRS Section 115 Trust (Trust) for the purposes of funding Governmental Accounting Standards Board Statement 45 (GASB 45) retiree healthcare and other post-employment (OPEB) liabilities.

The report summarized actions previously taken by the Board of Directors relative to the Trust: 1) Resolution No. 2006-066, dated August 11, 2006, to investigate options for creating a trust to fund retiree health care and other post-employment liabilities; and, 2) Resolution No. 2007-030, dated April 13, 2007, to execute a Professional Services Agreement with PFM Asset Management LLC (PFM) to serve as Trust Administrator and Investment Advisor. The report noted that the District is required to comply with GASB 43 and GASB 45 by June 30, 2008.

The report outlined details regarding the following three recommended actions:

  1. Authorize the execution of the OPEB Trust Agreement (Trust Agreement) between the District, PFM (as Trust Administrator) and U.S. Bank National Association (as Trustee and Custodian);
  2. Approve the Charter for the creation of the OPEB Retirement Investment Trust Board (Trust Board) to oversee the investment of trust assets; and,
  3. Authorize the transfer of $3.5 million to the Trust from reserves as the first step in partially pre-funding the Trust.

The report further described the next steps after the Board of Directors approves the above three recommended actions, as follows:

  1. Convene a meeting of the Trust Board and at that meeting to recommend adoption of: 1) the Bylaws of the Trust Board; and, 2) the Trust Agreement's Investment Policy Statement;
  2. Obtain a new OPEB actuarial valuation in the fall of 2007;
  3. Fully fund the remaining amounts needed for the Annual Required Contribution for FY 07/08.

The report included the following attachments:


Attachment 1:  Agenda Item No. 4 from the Finance-Auditing Committee Meeting of July 27, 2006;
Attachment 2:  Golden Gate Bridge, Highway and Transportation District OPEB Trust Agreement
Attachment 3:  Charter of the OPEB Retirement Investment Board of the Golden Gate Bridge, Highway and Transportation District OPEB Trust


A copy of the report, with attachments, is available in the Office of the District Secretary and on the District’s web site.

The report included the following staff recommendation:

The Finance-Auditing Committee recommends that the Board of Directors approve the following actions relative to the execution of the GASB 43 Qualifying IRS Section 115 Trust (Trust) for purposes of funding GASB 45 retiree healthcare and other post-employment (OPEB) liabilities:

  1. Authorize the execution of the Golden Gate Bridge, Highway, and Transportation District OPEB Trust Agreement (Trust Agreement) between the District, PFM Asset Management LLC, as Trust Administrator, and U.S. Bank National Association as Trustee and Custodian.
  2. Approve the Charter for the creation of the OPEB Retirement Investment Trust Board (Trust Board) to oversee the investment of trust assets, comprised of the membership of the Finance-Auditing Committee, with the Auditor-Controller as an ex officio member, in a non-voting capacity, serving as the liaison with the Trust Board’s consultant; with the understanding that the Trust Board will meet, at a minimum, semi-annually following a regular meeting of the Finance-Auditing Committee; and,
  3. Authorize the transfer of $3.5 million to the OPEB Trust from reserves that the Board previously designated for funding retiree benefit costs, as the first step in partially pre-funding the Trust.

At the meeting, Joseph Wire summarized the staff report and acknowledged the contributions of the OPEB Trust team: Business Process Analyst Alice Ng, the project manager for the GASB 43 trust, V. James Link, Jr., of PFM Advisors, the Trust Administrator for the GASB 43 trust and Attorney Madeline Chun.

Discussion ensued, including the following:

  • Director Cochran made the following inquiries:
    • He inquired as to how the ongoing costs to maintain the Trust would be funded. In response, Mr. Wire explained how the actuarial valuations conducted every two years would determine the District’s annual required contribution to the Trust. He further explained that over time, as more benefits are paid out and the trust assets grow through investment gains, the District’s annual required contribution could be reduced. He noted that the Trust Board would continually monitor the amount of the District contribution to ensure that the Trust is not over-funded.
    • He inquired regarding the anticipated rate of return for Trust investments. In response, Mr. Wire stated that the Actuarial Report uses the assumption of an investment return of 7.75%, based upon the rate of return used in pension valuations by the California Public Employees Retirement System (CalPERS).
    • He inquired as to whether the Trust would be spending the $3.5 million as soon as it is transferred from reserves. In response, Mr. Wire answered in the affirmative. He further explained that one portion of the District’s required annual payment to the Trust will be the larger “pay-as-you-go” portion, which covers the yearly benefit payments for present retirees, and that the other smaller portion will be the amount that will accrue for the future. He further stated that it is recommended that the Trust Board segregate these two portions of the annual payment to the Trust in its Investment Policy, to have one portion for the monies needed for paying monthly and weekly bills, and another for the monies available for long-term investment.
  • Director Grosboll made the following comments and inquiries:
    • He inquired as to the composition of the Trust Board. In response, Mr. Wire explained that the Trust Board is proposed to be comprised of the membership of the Finance-Auditing Committee, with the Auditor-Controller as an ex officio member, in a non-voting capacity.
    • He inquired as to whether the proposed Trust has been vetted to the Union Coalition, and whether or not the Union Coalition has approved the establishment of the Trust Board. In response, Mr. Wire explained that the Union Coalition is aware of the District’s unfunded OPEB liabilities and that the District is solely responsible for finding a solution to funding those liabilities. He further stated that the proposed Trust is the vehicle with which the District will fund its OPEB liabilities in the future, rather than the current “pay-as-you-go” practice.
    • He noted that the Golden Gate Transit Amalgamated Retirement Board (ATU Retirement Board) is comprised of an equal number of District Board members and Amalgamated Transit Union, Local No. 1575 (ATU) representatives. He inquired as to whether the Trust Board would also include union representation. In response, Attorney Chun explained the distinction between the Boards, noting that the ATU Retirement Board makes decisions regarding all retirement benefits for ATU members, while the Trust Board’s role will be to oversee the investment of trust assets in the best interest of the Trust. The Trust Board will have no duty for setting OPEB benefits which will continue to be the exclusive responsibility of the District.
    • He requested that the Committee consider postponing action on the Trust in order to allow Committee members more time to review the voluminous documents regarding the establishment of the Trust.
  • Director Reilly made the following comments and inquiries:
    • She inquired as to whether other public agencies in the United States are setting up similar types of Trusts. In response, Mr. Wire stated that public agencies of the District’s size are required to comply with GASB 43 and GASB 45 by June 30, 2008. He noted that there are two possible paths that public agencies can follow in order to comply with these regulations: 1) continue to pay OPEB liabilities under the current practice of “pay-as-you-go,” and report its unfunded OPEB liabilities on the agency’s balance sheet, but do not set aside any money to pay these liabilities; or, 2) set aside funds in a Trust to pay for OPEB liabilities reducing or eliminating its unfunded OPEB liability on the agency’s balance sheet. He stated that the District was one of the first public agencies in the United States to set up an OPEB Trust, and that other agencies are using the District’s model to set up a Trust.
    • She inquired as to whether this is the first time public agencies are required to disclose the amount of its unfunded OPEB liabilities. In response, Mr. Wire answered in the affirmative.
    • She inquired regarding the potential investment risks. In response, Mr. Wire explained that the risks will be the same as with any investment, and that one of the duties of the Trust Board will be to oversee the investment of the trust assets in the best interests of the Trust, taking into consideration the inherent risk of investing in equities.
    • She suggested that the Finance-Auditing Committee take action on the Trust at its meeting of August 23, 2007, and that the Committee’s recommendation be referred to the Board of Directors for action the following day at its August 24, 2007 meeting.
  • Director Boro inquired as to whether the Trust Board would be responsible to oversee the performance of the PFM, as Trust Administrator, and U.S. Bank National Association, as Trustee and Custodian. In response, Attorney Chun answered in the affirmative, noting that the Trust Agreement provides for the District to delegate its responsibilities under the Trust to the Trust Board and that the Trust Agreement outlines the various roles pertaining to governance of the Trust.

Following discussion, the Committee concurred by motion made and seconded by Directors REILLY/COCHRAN to continue the matter of, Approve Actions Relative to the Execution of a GASB 43 Qualifying IRS Section 115 Trust for Purposes of Funding Future GASB 45 Retiree Healthcare and Other Post-Employment Liabilities, to the August 23, 2007 meeting of the Finance-Auditing Committee for further discussion and recommendation, and that the recommendation be forwarded to the meeting of the Board of Directors for action on August 24, 2007, with the understanding that staff prepare an Executive Summary to be sent out to members of the Board some time in the early part of the week of August 13, 2007, prior to the regular mailing of the Board packet which would be mailed out on the Friday of that week.

Carried

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

     
3.

Authorize Execution of an Amendment to the Professional Services Agreement with Bartram Sponsorship Strategies, LLC, Relative to RFP No. 2007 D-2, Consultant to Provide Development and Implementation of a Partnership Program, to Complete Phase I Services

In a memorandum to Committee, Marketing and Communications Director Kellee Hopper and General Manager Celia Kupersmith reported on staff’s recommendation to approve an amendment to the professional services agreement with Bartram Sponsorship Strategies, LLC (BSS), relative to RFP No. 2007 D-2, Consultant to Provide Development and Implementation of a Partnership Program, to complete Phase I services associated with the exploration and development of a potential partnership program.

The report stated that the Board of Directors, by Resolution No. 2006-092 at its November 17, 2006 meeting, authorized execution of a professional services agreement with BSS to undertake Phase I of a potential partnership program. In conjunction with this action by the Board, the Partnership Advisory Committee was formed to provide staff with guidance and oversight during Phase I. During the past several months, the Partnership Advisory Committee has held several meetings, working with staff and BSS, to investigate and develop a potential partnership program for recommendation and approval by the Governmental Affairs and Public Information Committee and the Board of Directors respectively.

The report also stated that during this period of investigation and development, the scope of work has expanded to include substantially more meetings than originally envisioned and to require more work with both District staff and outside agencies, such as the National Park Service and the Golden Gate National Parks Conservancy. In order to accommodate this expanded scope of work, it is recommended that an amendment to BSS’ professional services agreement be executed to include up to four additional months of service, from July 1, 2007, through October 31, 2007, at a monthly cost of $12,000. The report noted that in the month the Board of Directors takes action to either proceed with Phase II of the partnership program, or to stop all work on this initiative, the monthly $12,000 amount will be pro-rated to the date of the Board’s decision.

The report further stated that it is currently planned that the Partnership Advisory Committee’s work will be presented to the Governmental Affairs and Public Information Committee at its August 24, 2007, meeting, for possible action, with the understanding if the GAPI recommends an action on this matter that any such action will be presented to the Board for its consideration at the September 14, 2007 meeting. A copy of the report is available in the Office of the District Secretary and on the District’s web site.

Acting General Manager Kary Witt gave a brief summary of the staff report, including the recommendation.

Discussion ensued, including the following:

  • Director Boro, Chair of the Partnership Advisory Committee, briefly described how the advisory committee has been working closely with the consultant, BSS, to develop the final Phase I report on the potential partnership program.
  • Director Grosboll inquired regarding the $12,000 monthly payment contemplated in the contract extension, and Mr. Wire stated that the amount of $12,000 was approximately the same as the monthly payment under the original contract amount.
  • Director Middlebrook inquired regarding the proposed length of the contract extension. In response, Kary Witt stated that while the contract extension is proposed for up to four additional months of service, the contract extension would cease and BSS’s Phase I work would be completed as of the anticipated date of Board approval on September 14, 2007.
  • Acting Chair Pahre noted that if the Board approves the partnership program, BSS would then proceed with Phase II, for which the District would enter into a separate professional services agreement with BSS to perform the work associated with that phase.

Staff recommended and the Committee concurred by motion made and seconded by Directors BORO/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 execution of an amendment to the Professional Services Agreement with Bartram Sponsorship Strategies, LLC, relative to Contract No. 2007-D-2, Consultant to Provide Development and Implementation of a Partnership Program, at a monthly cost of $12,000, to extend Phase I services for up to an additional four months, to be prorated to the date of the Board’s decision, for completion of additional work associated with exploration and development of a potential partnership program, effective August 10, 2007; with the understanding that requisite funds are available in the FY 07/08 District Division Operating Budget.

Action by Board – Resolution
NON-CONSENT CALENDAR

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

     
4.

Report by the Deputy General Manager/Ferry Division Relative to the Ferry Transit Division FY 07/08 Goals and Workplans

Acting General Manager Kary Witt advised that this item would be postponed to a future meeting of the Committee.

     
5.

Closed Session

Attorney Madeline Chun, at the request of Acting Chair Pahre, stated that the Committee would convene in closed session to discuss a matter of pending litigation listed on the agenda as Item No. 6.a.1., Billy Johnson vs. Golden Gate Bridge, Highway and Transportation District (District).

After closed session, Acting Chair Pahre called the meeting to order in open session with a quorum present. Attorney Chun reported that the Committee met in closed session, as permitted by the Brown Act, to discuss one item of pending litigation, as listed above. Ms. Chun stated that the Committee recommended that this matter be referred to the August 10, 2007 meeting of the Board of Directors for necessary action.

Action by the Board – None Required

     
6.

Public Comment

There was no public comment.

     
7.

Adjournment

 

All business having been concluded, the meeting was adjourned at 10:58 a.m.

     

 

Respectfully submitted,

/s/ Barbara L. Pahre, Acting Chair
Finance-Auditing Committee