Discussion and Possible Action Relative to the Approval of a Financial Plan for Achieving Long-Term Financial Stability

President Boro stated that the District’s Board of Directors established a Financial Planning Advisory Committee in May 2009, to develop an action plan designed to eliminate the District’s projected five-year budget shortfall of $132 million. He stated that a set of guiding principles was prepared, with the purpose of supporting further investigation, as well as action by the Board of Directors, and with the ultimate goal of achieving long-term financial stability for the District. He reported that consensus was achieved among the Committee members on 33 long- and short-term elements of the proposed FY 2009/2010 Financial Plan for Achieving Long-Term Financial Stability (“Plan”), and that the purpose of this Special Meeting was discussion of those elements. He stated that each element would require additional development at the staff and committee levels and, ultimately, approval given by the full Board of Directors, in order for implementation to be recommended.

Staff Report

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, including a review of deficit reduction actions currently underway, as well as options for eliminating the remaining deficit. The staff report stated that approval of the proposed Plan would not constitute approval of any specific initiative within the Plan. Instead, additional staff work would be done, and a Committee recommendation required, in order to bring a given initiative before the full Board for approval. The staff report stated that, if implemented, monitoring and annual updating would be required.

The staff report listed the following six principles that guided the Advisory Committee:

The Committee will be guided by the Mission Statement of the District in reviewing options for expense reduction and revenue generation:

The mission of the Golden Gate Bridge, Highway & Transportation District is to provide safe and reliable operation, maintenance and enhancement of the Golden Gate Bridge and to provide transportation services, as resources allow, for customers within the U.S. Highway 101 Golden Gate Corridor.

General Manager Celia Kupersmith and Auditor-Controller Joseph Wire presented staff’s recommendation that the Board of Directors approve the Plan. Ms. Kupersmith stated the plan is strategic in nature. Action taken today would approve further study only, but would not implement any part of the Plan. Instead, implementation would require future action by the Board. She stated that the Committee created a strategic plan capable of addressing the financial shortfalls being faced by the District, and assuring financial viability. She stated that the District’s shortfall has come about because of several very significant recent changes to the District’s financial position. First, she noted that the current economic recession has led to a downturn in toll and transit revenues as fewer people are traveling to and from San Francisco. Furthermore, annual funding from the State of California has decreased significantly, while at the same time, the District is committed to partial funding of the Doyle Drive Reconstruction Project, in partnership with Caltrans.

[Directors Brown and Grosboll arrived at this time.]

She stated that each idea proposed in the Plan would need additional analysis and development prior to approval by the Board. The financial strategy should be one that maintains focus on core activities. She stated that the Bridge, as well as the bus and ferry transit systems, must continue while new projects must also be undertaken. Revenue enhancement alone will be insufficient to meet this challenge, so cost reduction also is part of the Plan.

She noted that a key guiding principle set early in the process was continuation of all services at a lower cost. In previous decades, reduction of services was the chosen solution, with over 20% of all bus service eliminated. By contrast, the current plan will seek to reduce costs by changing the way service is provided. Top priority would be completion of projects already under way. Next, the District should undertake necessary activities that are quick and easy to complete and which provide benefits quickly. Thereafter, initiatives that require a longer term could be undertaken to provide cost-savings. Last, those initiatives that cannot be implemented immediately because of practical or policy implications, such as a Bridge toll increase, would be considered.

Auditor-Controller Joseph Wire explained that the Table attached to the staff report provides estimates of the deficit reduction associated with each initiative and a year-by-year cumulative projection of the approximate savings through the next five years. The staff report also states the current projection of the amount of deficit faced by the District.

It should be noted that the Directors were encouraged to make comments or inquiries during the staff presentation; therefore, those remarks are intermingled within the staff presentation as set forth below.

Mr. Wire reported that 33 proposals are discussed in the staff report, with the objective of deciding which would be suitable for a work plan. For each proposal that impacts staffing, the report notes the number of full time equivalent (FTE) positions that could be impacted. The Board will be provided with progress reports on the financial plan in the years to come and changes can be made as necessary.

Discussion ensued, including the following inquiry:

• Director Chu inquired as to the potential for change in the deficit over time. In response, Mr. Wire stated that the single largest factor will be the requirements of the District’s capital plan, which can grow as need arises.

Mr. Wire stated that Phase I includes increasing efficiency through technology; many of these projects are already in progress. He specified the elements of Phase I as follows:

• Discussion ensued, including the following comments and inquiries:

• Director Grosboll inquired as to the number of toll collectors employed by the District. In response, Mr. Wire indicated there are 34 toll takers. He stated that, under the proposed Plan, this item not be implemented until FY 12/13.

• President Boro commented that reduction of manual toll collection is presently under way, but that pursuit of an all electronic system has not yet begun.

• Director Cochran made the following inquiries:
  • He inquired as to whether the costs for equipment had been considered in computing possible savings. In response, Mr. Wire stated that equipment costs were projected and included, so that the figure shown could be considered a net savings. Ms. Kupersmith acknowledged the costs associated with an all electronic system, confirming that the figures shown in the staff report represent net savings.
  • He inquired as to whether auto glass regulations would affect transponders. In response, Mr. Wire stated that regulations are to be promulgated by the State. He noted that a State-wide group of toll facility operators is working to address this issue.

At this point, Ms. Kupersmith stated that personnel impacts could be seen throughout the staff report. Reductions in force will be part of achieving success in meeting the projected budget shortfall. She stated that employees have received a communication from her explaining that implementation of the Plan will not be immediate but, instead, will take place over time. She stated that the requirements of all Memoranda of Understanding will be adhered to. She acknowledged that some individuals may be impacted more than others.

Discussion ensued, including the following comments:

• Director Sanders commented that positions that become available as others are eliminated should be identified so that employees will be able to move into a new position. In response, Ms. Kupersmith stated that such will be the case. The District will be able to draw on past experience to effect the changes as smoothly as possible.

• President Boro commented that the District has a responsibility as an organization to remain viable, and a responsibility to serve not only today but in the future.

Discussion ensued, including the following inquiry:

• Director Snyder inquired as to whether the calculations included in the staff report take into account a projected drop in bus ridership that might occur. In response, Mr. Wire stated that revenue loss due to lower ridership had been accounted for in the report.

Discussion ensued, including the following inquiries:

• Director McGlashan inquired as to whether this would give Red and White the ability to go to the Public Utilities Commission about diminished service. In response, Attorney Miller stated that the private sector could seek authority to provide service in such a case, but it is not possible to predict based on the information presently available.

• Director Grosboll inquired as to whether a vote on the entire Plan would be taken at the end of the meeting. In response, President Boro stated that the Board has the option of voting on the Plan today, or can direct staff to bring the Plan back to the Board in November for a vote at that time. He stated that Board members should ask questions today so these can be addressed. He noted that this Plan is strategic, and staff will develop actual plans at a future time for Board approval.

Discussion ensued, including the following inquiries:

• Director Snyder inquired as to whether this action might change ferry ridership, as many people object to paying a fee for parking. In response, Mr. Wire stated that detailed research has not yet taken place. Potential impact figures for ridership will be provided at such time as this initiative is scheduled to come before the Board for approval.

• Director Chu inquired as to possible staff impacts associated with a fee for parking. In response, Mr. Wire stated that the initial study did not plan for additional staff.

• Director Newhouse Segal inquired as to whether the District anticipates an increased demand for shuttle service if parking fees were instituted. In response, Ms. Kupersmith stated that a parking fee would have to generate revenue. If costs increased instead, due to running shuttles, then the financial issue would not be addressed. This question will be analyzed in greater detail and presented to the Board for its decision.

Discussion ensued, including the following comments and inquiries:

• Director Stroeh inquired as to whether any projects currently “on the books” will be eliminated, or whether the 15% reduction is seen as simply representing a more realistic schedule. In response, Ms. Kupersmith confirmed that the reduction is simply seen as more realistic.

• Director Kerns made the following inquiries:
  • He inquired as to whether increasing the level of grant funds, such as federal stimulus funds, could lead to less lengthening of timeframes to do projects. In response, Mr. Wire confirmed that additional funds would offset the longer timeframes.
  • He inquired as to how the Plan would be affected if such stimulus funds were only a percentage of actual cost. In response, Mr. Wire stated that even if grant funds covered only a percentage of actual costs, the effect would be the same as reducing costs, since newly acquired grant funds would not have been available to the District before.

• Director Reilly commented that the longer capital projects are delayed, the more expensive they become. In response, Ms. Kupersmith stated that there is a strong focus on the issue of timing, to be sure the District is prioritizing projects correctly.

• President Boro inquired as to the capital contribution amount. In response, Mr. Wire stated that $11 million is the correct figure.

• Director Brown made the following comments:
  • He commented that the longer implementation is delayed, the more is stood to be lost, for example, parking fees at Larkspur.
  • He requested preparation of a matrix grouped by the intensity of the impact, stating it would be very helpful in determining the best order in which to proceed with the proposals. In response, Mr. Wire stated that an intensity matrix would be prepared.
  • He commented that inflation should be taken into account when making estimates. Mr. Wire stated that the estimates are inflated.

[Director Dufty arrived at this time.]

Reduce Administrative Expense (Overhead). Mr. Wire stated that management is always working to reduce overhead expenses. Work will be undertaken over the next couple of years to change processes and reduce expenses associated with personnel services and non-personnel services. This initiative could impact 4 FTE’s.

Freeze Non-Represented and Officers an Additional 6 Months to Match Coalition. This initiative proposes an additional six-month salary freeze for non-represented employees/Officers.

Freeze ATU Employee Salaries for 18 Months. This initiative proposes to reach a negotiated settlement with ATU, which represents Bus drivers, who are not part of the Coalition. A similar negotiated salary freeze to that of the Coalition could be sought. Mr. Wire stated that ATU was due to receive a previously negotiated increase in approximately five months.

Winter Holiday Furloughs for Administrative and Operational Staff, as Possible. A potential winter furlough for administrative staff, such as, during the holiday season, must be researched prior to estimating the possible savings that could result. Functions could be reduced between Christmas and the New Year. Mr. Wire noted that this type of leave would not be feasible in all types of operations.

Negotiate Increased Cost Sharing for Health Benefit Plans for All Covered Individuals. The staff report stated that the savings goal through negotiated changes to health benefits plans for covered employees is $800,000.00 per year.

Reduce Paratransit Services to More Stringently Comply with ADA Requirements. Under this proposal, the District would consider reducing the scale of paratransit to match ADA requirements only. Staff would research whether it would be most advantageous to limit paratransit to only what law requires, or whether the service should be retained as it is today. No estimate has been made yet.

Discussion ensued, including the following inquiry:

• Director Grosboll inquired as to the benefits compared to possible savings associated with changing the level of paratransit service, and whether very much time and effort should be expended researching this option. In response, Mr. Wire stated that the benefits are not known at this time, but the yearly budget is presently about $1.8 to $1.9 million annually. In further response, Ms. Kupersmith stated that a determination can be made on a trip by trip basis. She stated that investigating whether the correct cost is associated with a service is important, citing the experience of MT, which changed its fare for paratransit service. She acknowledged that the result might not be a significant amount.

Discussion ensued, including the following comments and inquiries:

• Director Sanders made the following comments and inquiry:

  • She commented that exempt employees are paid for the whole day even if they only spend an hour on the job. In response, Ms. Kupersmith stated that years ago the District Board made a decision to create two tiers of exempt employees. Tier 1 employees are purely exempt and are paid by the day. Tier 2 employees were identified as mid-range salaried employees, who are docked by the hour for absences and would be allowed to earn compensatory time off but not overtime. It has created interesting administrative issues. It has sometimes been a disincentive to pursue promotions.
  • She inquired as to the amount of comp time given to these tier II employees. In response, Ms. Kupersmith stated that these figures will be provided to the Board members when this issue is brought to the Board.
  • She commented that Sonoma County provides Administrative Leave for its exempt employees in place of comp time. In response, Ms. Kupersmith stated that because there is a cap on the amount of compensatory time that can be earned, the District is in control of the costs. She stated that an employee cannot build up more than 80 hours compensatory time. Nonetheless, research will be done to determine whether this policy is advantageous to the District.

Toll Increase to Occur 5 Years After Last Increase. Mr. Wire stated that the Bridge toll was increased only 14 months ago. The Plan assumes a $1.00 toll increase in 2013.

Annual Small Increment Toll Increase Program. Mr. Wire stated that a program of incremental toll increases acknowledges that an all-electronic toll program would have to be in place. The Plan would study annual indexing of tolls in FY 14/15 to match proposed 5% transit fare percentage increases.

Discussion ensued, including the following inquiry:

• Director Cochran inquired as to whether research had been done on having an increase in FasTrak® tolls only, because these could be increased in partial dollars. In response, Mr. Wire stated that making the discounts for FasTrak® different from the discounts for cash can be investigated.

Implement Some Form of Partnership Program. The staff report stated that the Partnership Program would involve all District operations. Mr. Wire stated that such a Partnership Program has been investigated in the past, and is proposed to be investigated again.

Discussion ensued, including the following comment:

Mr. Wire stated that records will be kept of projects undertaken and, over time, staff will be able to provide the Board with a report of completions and the impact of each.

Ms. Kupersmith stated that the strategic nature of the Plan should be kept in mind. She noted that the estimates in the staff report were made in good faith, although some could be considered “guesstimates.” She stated that conditions may change from those existing presently, and the Plan had been prepared with that knowledge. She stated that this plan addresses the shortfall over time, with interesting ideas that can be very successful.

Discussion ensued, including the following comments and inquiries:

• Director Stroeh commented that he had been involved with this Plan for over a year and considers it an excellent roadmap for the District. Each item will come before the Board individually, and will be debated.

• Director Kerns commented that both staff and the Committee deserve “kudos.” The Plan is comprehensive. All plans need to be flexible, and each item will be debated.

• Director Newhouse-Segal made the following comment and inquiry:

  • She commented that a great amount of work was done by staff and the Committee. She stated that a matrix such as that suggested by Director Brown would be helpful because some items that were not estimated could represent significant amounts and an approximation would be welcomed. Referring to Items 23 and 31, she requested that staff provide a distinction between recreational use and transportation use; e.g., for pedestrians and bicyclists. She stated that the District may be able to capture tourist revenue, and charge tourist vehicles a higher toll and this option should be researched and presented to the Board. In response, Ms. Kupersmith stated that recreational use vs. transportation use will be researched, both for sidewalk access and carpools.
  • She inquired as to the use of reserves. In response, Mr. Wire stated that the largest portion of current reserves is set aside for capital projects and that these current reserves would be spent out completely over the ten-year period covered by the Plan.

• Director Grosboll made the following comment and inquiry:

  • He commented that President Boro’s creation of the Strategic Financial Planning Committee was excellent. He cautioned that cuts in bus and ferry service would require more research.
  • He inquired as to whether a “yes” vote would only allow additional research to be done by staff and would not implement any of the initiatives. In response, Ms. Kupersmith confirmed that the action requested of the Board today was only to allow staff to investigate each option more thoroughly.

• Director Eddie commented that this Plan not only provides staff and the Board an opportunity to make reductions, but provides understanding of what the reductions will mean to all. The services will continue, though with some changes over a period of time, and with some increases in cost. He stated that the traffic generated by the closure of the Bay Bridge is illustrative of the need for bridges and transit services. He stated that the Plan was a good one.

• Director Chu thanked staff and commented that many items give pause and raise questions, but it is important to support the Plan so staff can move forward. She stated that she encouraged the Board to vote “Yes.”

• Director Brown commented that the Plan is conceptual in nature and that future iterations should also highlight what will happen if these things are not done. He stated his agreement with Director Grosboll that some items will require close scrutiny in the coming months. He requested staff provide the Board with a detailed account of the expected outcome if the proposed steps are not taken.

• Director Snyder commented that the Plan was strategic in nature and directs staff to focus on the long-term deficit, and that the best interests of the Board would be served by leaving as many options on the list as possible. He encouraged Directors to leave all items on the list.

• Director Stroeh inquired as to whether reserves would zero out at the end of five years. In response, Mr. Wire stated that projections are for ten years on capital project reserves; however, this does not include reserves to meet emergencies.

• President Boro thanked Mr. Wire, staff and the Committee. He commented that decisions as to how to prioritize plans would be made at future Board meetings, and that the Plan is a start at reducing long-term liabilities.

• Director Pahre acknowledged the quick response and obvious crisis-ready stance of the Board and staff. She stated that they were clearly ready and they have acted as partners.

Ms. Kupersmith stated that traffic increased tremendously on the Golden Gate Bridge with the present temporary closure of the Bay Bridge due to the unfortunate accident, and revenues have increased. The District has been challenged in balancing traffic demands between northbound and southbound drivers. An extra ferry has been running and has filled up more each day. Bus drivers did an excellent job of keeping calm and getting through traffic snarls. Extra staff reported for work to assist with meeting the additional demand.

Action by Board of Directors

Directors STROEH/KERNS

Resolution No. 2009-090 approves the FY 2009/2010 Financial Plan for Achieving Long-Term Financial Stability, as outlined in the staff report, attached hereto.

AYES (16): Directors Brown, Chu, Cochran, Dufty, Grosboll, Kerns, McGlashan, Moylan, Newhouse Segal, Pahre, Sanders, Snyder and Stroeh; Second Vice President Eddie; First Vice President Reilly; President Boro
NOES (0): None
ABSENT (3): Directors Campos, Elsbernd and Sobel

ADJOURNMENT

All business having been concluded, the meeting was adjourned at 11:00 a.m.