January 25, 2008

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 Friday, January 25, 2008, at 9:00 a.m., Chair Stroeh presiding.

Committee Members Present (8): Chair Stroeh; Vice Chair Pahre; Directors Boro, Cochran, Eddie, Middlebrook and Reilly; President Moylan (Ex Officio)
Committee Members Absent (1): Director Grosboll
Other Directors Present (3): Directors McGlashan, McGoldrick and Newhouse Segal

Committee of the Whole Members Present (11): Directors Cochran, Eddie, McGlashan, McGoldrick, Middlebrook, Newhouse Segal, Pahre, Reilly and Stroeh; First Vice President Boro; President Moylan
Committee of the Whole Members Absent (8): Directors Brown, Dufty, Grosboll, Hernández Kerns, Sanders and Sandoval; Second Vice President Ammiano

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; Marketing and Communications Director Kellee Hopper; Assistant Clerk of the Board Karen B. Engbretson; Executive Assistant to the General Manager Amorette Ko

Visitors Present: Nancy Jones, PFM Asset Management LLC; Gene Eplett, San Francisco Resident

 

     
1.

Ratify Actions by the Auditor-Controller

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith outlined commitments, disbursements and investments made on behalf of the District. The report also included a copy of the District’s Investment Report from PFM Asset Management LLC (PFM). A copy of the staff report, with attachments, is available in the Office of the District Secretary and on the District’s web site.

At the meeting, Nancy Jones described the latest economic news and current interest rates for the District’s portfolio. Ms. Jones stated that in the midst of the current market volatility, the yields for Two-Year U.S. Treasury Notes have fallen dramatically to a current low of 1.80%. She stated that due to the diligence of Auditor-Controller Joseph Wire by providing the District’s the most current cash flow analysis, PFM was able to lock in long-term investments before the current financial crisis hit the markets. She noted that the District’s portfolio is in full compliance with the law, and that the District does not own any of the “problem” securities, such as Structured Investment Vehicles, Asset-Backed Commercial Paper or any securities related to sub-prime mortgages. She further noted that all of the corporate securities in the District’s portfolio, including those from financial institutions, have been reviewed by PFM’s Credit Committee, and the Portfolio Manager is confident that all the securities in the District’s portfolio are safe.

Staff recommended and the Committee concurred by motion made and seconded by Directors EDDIE/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 the following actions by the Auditor-Controller:

     
  a.
Ratify commitments and/or expenditures for the period December 1, 2007, through December 31, 2007, totaling $67,859.00;
   
  b.
Ratify investments made by the Auditor-Controller during the period December 6, 2007, through January 14, 2008, as follows;
     
Security

Purchase

Date

Maturity

Date

Original

Cost

Percent

Yield

Royal Bank of Scotland (NY) Certificate of Deposit
12/06/07
03/13/08
7,004,221.28
5.15
Calyon NY Certificate of Deposit
12/26/07
03/26/08
2,132,000.00
4.76
BNP Paribas Finance, Inc. Commercial Paper
01/04/08
05/05/08
7,143,491.46
4.40
UBS Fin Delaware, LLC Commercial Paper
01/04/08
05/05/08
1,092,651.49
4.42
UBS Fin Delaware, LLC Commercial Paper
01/07/08
04/04/08
6,146,704.98
4.42
Barclay US Funding, LLC Commercial Paper
01/08/08
05/07/08
5,198,474.94
4.30
Calyon North America, Inc. Commercial Paper
01/08/08
05/07/08
4,929,000.00
4.32
Citigroup Funding, Inc.
Commercial Paper
01/08/08
06/04/08
2,209,762.50
4.43
       
  c.
c. Authorize the Auditor-Controller to re-invest, within the established policy of the Board, investments maturing between January 15, 2008, and February 11, 2008, as well as the investment of all other funds not required to cover expenditures that may become available; and,
       
  d.

Accept the Investment Report for December 2007 prepared by PFM.

Action by the Board - Resolution
CONSENT CALENDAR

 

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

Approve Actions Relative to a Proposed Toll Increase

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided staff’s recommendation to undertake a public outreach process relative to a proposed toll increase by conducting three informational Open Houses for the purpose of providing information, answering questions and receiving input from the public about the proposed toll increases under consideration, as well as the required public hearing.

The report included the following sections:

  1. Problem Statement and Summary of Strategic Planning Efforts to Date;
  2. Proposed Toll Rates to be Discussed in the Public Involvement Process; and,
  3. Public Involvement Process for the Proposed Toll Increase.

The report also included several attachments, including the following:
Attachment A:  Actions Taken to Reduce the Financial Shortfall Since 2002
Attachment B:  August 23, 2007 Staff Report: Discussion Regarding Updates for the Five and Ten-Year Financial Projection
Attachment C:  November 9, 2007 Staff Report and Associated Materials: Development of Updated Strategic Plan for Achieving Long-Term Financial Stability
Attachment D:  Draft Open House Materials

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


At the meeting, Celia Kupersmith summarized the staff report, providing a brief description of the discussion regarding the proposed toll increase held at the November 9, 2007, Board Retreat. She described the District’s strategic efforts since 2002 to solve its financial crisis, noting that the deficit was dramatically reduced from a five-year estimate of $454 million in 2002 to a current five-year estimate of $91 million. She acknowledged the contributions of all District Board members, staff and employees in improving the financial health of the District over the past several years. She stated that the District still faces a challenging financial situation as traffic levels on the Bridge remain steady, yet costs continue to rise due to inflation and the growing need for capital investment in the aging Bridge, and the Bus and Ferry systems. She noted that the only way to address the remaining shortfall and keep the District’s three operating divisions viable, is to move forward with the proposed toll increase. She clarified, for the record, that the recommendation before the Committee is to initiate the public outreach process, including the conducting of open houses and a public hearing, and that the Committee and Board would consider action on a proposed toll increase at a later date.

Ms. Kupersmith distributed to the Committee a revised first page of the staff report, explaining that the recommendation was revised to not include a specific date for the public hearing, but to seek approval to hold a public hearing, as the proposed date for the public hearing listed in the original staff report was a date that conflicted with the schedules of many of the Board members. She stated that staff would inform the Board of Directors when a new, more convenient date for the public hearing was determined.

Ms. Kupersmith further described the proposed toll rates to be discussed during the public outreach process, as follows:

  • $6.00 per vehicle for cash customers, with additional axles beyond the normal two on passenger cars to be $3.00;
  • $5.00 per vehicle for FasTrak customers, with additional axles beyond the normal two on passenger cars to be $2.50;
  • $3.00 per vehicle for the Qualified Persons with Disabilities Toll Program, with a policy of a 50% discount to the cash toll per axle for the Qualified Persons with Disabilities Toll Program; and,
  • No changes to carpool guidelines, with the understanding that these customers would remain free during the District’s carpool hours.

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

Discussion ensued, including the following:

  • Chair Stroeh inquired as to whether the proposed toll increase program would allow the District to maintain its reserves without having to pull funds from the reserves to pay for operating expenses. In response, Mr. Wire answered in the affirmative.
  • Director McGoldrick made the following inquiries:
    • He inquired as to whether the District provides a transit subsidy that allows school children in Marin County to ride free on local transit service. In response, Ms. Kupersmith explained that in the past, Marin Transit provided such a program, but that it was discontinued two years ago because of the cost.
    • He inquired as to whether the District could implement such a program for the school children in Marin County. In response, Attorney Miller stated that the District’s enabling legislation prohibits the District from providing free local transit.
    • He inquired as to the amount of toll revenue used to subsidize the District’s transit operations. In response, Mr. Wire stated that currently about 45% of the toll revenue subsidizes transit, as this percentage changes slightly each year.

Public Comment

Gene Eplett expressed his concerns that the toll on the Golden Gate Bridge is a regressive tax, and as such, does not take into account the income of the toll payer. He shared his idea for instituting a toll increase in which the amount of toll paid would vary among the different toll booths.

Staff recommended and the Committee concurred by motion made and seconded by Directors EDDIE/MIDDLEBROOK 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 undertaking a public outreach process relative to a proposed toll increase by conducting three informational Open Houses, as follows; with the understanding that the date of the formal public hearing will be set at a later date:

City and County of San Francisco
Thursday, February 28, 2008
5:30 p.m. to 7:30 p.m.
Fort Mason Conference Center, Landmark Building A, Golden Gate Room
San Francisco, CA

Sonoma County
Thursday, March 13, 2008
5:30 p.m. to 7:30 p.m.
Petaluma Community Center, Assembly and Activity Rooms
320 North McDowell Boulevard
Petaluma, CA

Marin County
Wednesday, March 19, 2008
5:30 p.m. to 7:30 p.m.
Pickleweed Park Community Center, Multi-Purpose Room
50 Canal Street
San Rafael, CA

Action by the Board at its meeting of January 11, 2008 – Resolution
NON-CONSENT CALENDAR

AYES (10): Directors Cochran, Eddie, McGlashan, McGoldrick, Middlebrook, Newhouse Segal, Pahre, Reilly and Stroeh; President Moylan
NOES (0): None

       
3.

Review of Golden Gate Bridge Traffic/Tolls and Bus and Ferry Transit Patronage/Fares for Six Months Ending December 31, 2007

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided a schedule comparing categories of Bridge traffic, as well as a monthly review of Bridge traffic and tolls and transit patronage and fares, for six months ending December 31, 2007. A copy of the report is available in the Office of the District Secretary and on the District’s web site.

Action by the Board – None Required

       
4. Review of Financial Statements for Six Months Ending December 31, 2007
       
  a.

Statement of Revenue and Expenses

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided a financial statement entitled, Statement of Revenues and Expenses for Six Months Ending December 31, 2007. A copy of the report is available in the Office of the District Secretary and on the District’s web site.

Action by the Board – None Required

       
  b.

Statement of Capital Programs and Expenditures

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided a financial statement entitled, Statement of Capital Programs and Expenditures for Six Months Ending December 31, 2007. A copy of the report is available in the Office of the District Secretary and on the District’s web site.

Action by the Board – None Required

       
5.

Review of Auditor-Controller’s Quarterly Report on Authorized Budget Adjustments and Budget Transfers

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided a report summarizing budget adjustments and budget transfers authorized by the Board of Directors during the three-month period from October 1, 2007, through December 31, 2007. A copy of the report, including attached charts outlining applicable budget adjustments and transfers, is available in the Office of the District Secretary.

Action by the Board – None Required

       
6.

Review of Auditor-Controller’s Quarterly Report on Contracts and Change Orders/Contract Amendments Executed Under the General Manager’s Authority

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided a report summarizing all contracts and change orders executed under the General Manager’s procurement authority, as set forth in the Rules of the Board, during the three-month period from October 1, 2007, through December 31, 2007. A copy of the report, including attached charts outlining applicable contracts and change orders, is available in the Office of the District Secretary.

Action by the Board – None Required

       
7.

Public Comment

Public comment was received relative to Item No. 2, above.

       
8.

Adjournment

All business having been concluded, the meeting was adjourned at 9:30 a.m.

       

 

Respectfully submitted,

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