Accept the Investment Report for May 2009 prepared by PFM.

Action by the Board at its meeting of July 10, 2009 – Resolution
CONSENT CALENDAR

Approve Adoption of the FY 09/10 Operating and Capital Budgets

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith reported on staff’s recommendation to approve adoption of the FY 09/10 Operating and Capital Budgets (FY 09/10 Budget). The report contained the District goals and objectives, projects and accomplishments, changes to the reserve structure and a Table of Organization. The report included a general overview of the proposed FY 09/10 Budget that had been presented in detail at the May 21, 2009, meeting of the Committee, providing details on the Operating Budget, the Capital Budget and the use of reserves.

The report provided an overview of the proposed FY 09/10 Budget, which includes:

• Operating Budget revenues of $161.3 million;
• Operating Budget expenditures of $170.1 million;
• Capital Budget revenues of $37.7 million;
• Capital Budget expenditures of $43 million; and,
• District reserves to be used to fund the FY 09/10 Operating Budget shortfall of $8.8 million and District share of the Capital Budget of $5.3 million.

A copy of the report, including a copy of the FY 09/10 Budget, is available in the Office of the District Secretary.

At the meeting, Mr. Wire summarized the staff report and stated that the FY 09/10 Budget reflects no salary increases for non-represented employees, including Officers, as well as no salary increases for those employees represented by the Union Coalition. Ms. Kupersmith stated that the Board President has formed a Financial Planning Advisory Committee (Advisory Committee), and that the Advisory Committee’s responsibility is to generate ideas for revenue generation and cost-cutting measures, including the creation of a prioritized strategic plan to ensure financial stability for the District today and out into the future. Mr. Wire added that the FY 09/10 Budget will be amended if any of these initiatives are approved by the Board at a later date.

Discussion ensued, including the following:

• Director Cochran made the following comments and inquiries:

  • He compared the District’s contribution to medical expenses for current employees and retired employees.
  • He requested clarification as to how the $75 million expense for the Doyle Drive Project is shown in the FY 09/10 Budget. In response, Mr. Wire stated that the $75 million expense has been added to the District’s 10-Year Financial Projection and has been averaged out over a ten-year period.
  • He inquired as to whether the District’s obligation to pay $75 million for the Doyle Drive Project would be extinguished if the project was to receive American Recovery and Reinvestment Act (ARRA) stimulus funds. Ms. Kupersmith responded in the negative.

• Director Grosboll inquired as to what a 1% salary increase for those employees represented by the Union Coalition would cost the District. In response, Mr. Wire stated that a 1% salary increase would cost approximately $400,000.00.

• President Boro commented that it is hoped that the District will be allotted additional Federal grant funds for future capital projects to offset the cost for the Doyle Drive Reconstruction Project.

• Director Snyder made the following comments and inquiries:

  • He commented that fuel prices may go higher than the amount that was budgeted and inquired as to whether any changes would have a significant impact on the FY 09/10 Budget. In response, Mr. Wire stated that, due to the size of the FY 09/10 Budget in comparison to the amount budgeted for fuel, there will be enough flexibility to transfer line items should fuel prices rise. Mr. Wire noted that if fuel prices skyrocket, staff would recommend that an adjustment be made and that the additional expense be funded with District Reserves.
  • He expressed his concerns regarding the projected reduction in bus ridership and the projected increase in vehicle traffic through the Highway 101 Corridor, inquiring as to whether the District has examined changing the toll pricing and bus fare structures to affect an influence on transit ridership. In response, Mr. Wire stated that the budget is set up to reflect existing Board policy. Mr. Wire explained the basis for the projected figure, stating that vehicle traffic will probably experience a minor rebound after the recession and that the regional bus ridership could experience a decline, a trend the District has seen happen over the past 20 years. Mr. Wire provided the demographics as to why the regional bus ridership has decreased over the past several decades. Ms. Kupersmith further explained the various factors that affect Board policy regarding the toll pricing and bus fare pricing structures.

Staff recommended and the Committee concurred by motion made and seconded by Directors COCHRAN/SOBEL 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 09/10 Operating and Capital Budgets, including:

• Operating Budget revenues of $161.3 million;
• Operating Budget expenditures of $170.1 million;
• Capital Budget revenues of $37.7 million;
• Capital Budget expenditures of $43 million; and,
• District Reserves are budgeted to be used to fund the FY 09/10 Operating Budget shortfall of $8.8 million and District share of Capital Budget of $5.3 million;

as well as related actions, as follows:

• District goals, projects and accomplishments;
• Changes to the Reserve Structure; and,
• Table of Organization.

Action by the Board at its meeting of June 26, 2009 - Resolution
NON-CONSENT CALENDAR

AYES (12): Chair Stroeh; Vice Chair Pahre; Directors Cochran, Eddie, Elsbernd, Grosboll, McGlashan, Moylan, Newhouse Segal, Reilly, Segal and Sobel; President Boro (Ex Officio)
NOES (0): None

Approve Renewal of the Liability Insurance Program

In a memorandum to Committee, Director of Risk Management and Safety William Stafford, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided information on the annual renewal of the District’s Liability Insurance Program, which renews on July 1, 2009. The report included recommended options for the following elements of the Liability Insurance Program:

Excess General and Automobile Liability Insurance policy;

In the past, the District purchased a General Liability Insurance policy for the remaining Northwestern Pacific Railroad Right-of-Way under District control, and staff has recommended covering that insurance under the Excess General and Automobile Liability Insurance policy.

The report, and its attachments, provided by the District’s Insurance Advisor, Wells Fargo Insurance Services (WFIS), included detailed information relative to the renewal recommendations, alternative options, overall insurance market condition and specifics on the premium cost and coverage limits, as well as a description of the work provided by WFIS with respect to the renewal of the Liability Insurance Program. The report noted that this year’s Program renewal resulted in a nine percent increase in the total premium over the expiring premium, primarily due to substantially increased insurance coverage. The report stated that all of the recommended renewals are for one-year term, with the exception of the Pollution Liability, and the Public Employees’ Faithful Performance Bond and Comprehensive Dishonesty, Destruction and Disappearance Bond, which are for a three-year term. 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 introduced Sandra Osgood, Senior Vice President, Wells Fargo Insurance Services, and briefly summarized the staff report, noting that there are substantial changes to the Liability Insurance Program. Mr. Stafford described the District’s approach at transferring its risk, as well as obtaining better risk management tools. Mr. Stafford stated that the market has been very competitive due to insurance carriers attempting to capture fallout business from AIG. He highlighted the changes in the Excess Umbrella Liability Policy describing how the insurance broker was able to obtain coverage for legal defense expenses to be included in the $2 million self-insured retention. He stated that staff is recommending to blend insurance coverage for the eight miles of railroad track into the Excess Umbrella Liability Policy. He also stated that, although the District maintains excellent control on the fuel infrastructures, it would be in the District’s best interest to obtain environmental and pollution coverage.

Discussion ensued, including the following:

• Director Grosboll made the following comments and inquiries:
  • He inquired as to how staff and the insurance broker determined the $5 million limit for the Environmental Pollution Liability policy. In response, Mr. Stafford stated that the amount was based on the projected loss amount.
  • He inquired as to what types of losses the District experienced in this area. In response, Mr. Stafford stated that there was an incident at the Novato site and there have been some minor spills at the Larkspur Ferry Terminal.

• In response to questions from Director Newhouse Segal, Mr. Stafford described the types and locations of fuel storage facilities at the San Rafael, Novato and Santa Rosa Bus sites.

• Director Cochran inquired if it would be more prudent for the District to renew all of the policies in the Liability Insurance Program for three-year terms. In response, Ms. Osgood stated that with the uncertainty of the current market, carriers are unwilling to extend policies for three-year terms. Ms. Osgood noted that the reason for the reduced costs for the Environmental Pollution Policy is that the carrier is providing coverage for one limit only.

• In response to a question from President Boro regarding the status of the property insurance policy on the Golden Gate Bridge, Mr. Stafford stated that due to the excessive costs of the limits, the District changed the coverage to a self-insured policy to be funded by District Reserves.

Staff recommended and the Committee concurred by motion made and seconded by Directors MOYLAN/COCHRAN to forward the following recommendations to the Board of Directors for its consideration:

RECOMMENDATION

The Finance-Auditing Committee recommends that the Board of Directors approved renewal of the Liability Insurance Program, as follows:

with the understanding that requisite funds are available in the FY 09/10 Bridge, Bus, Ferry and District Divisions’ Operating Budgets.

Action by the Board at its meeting of June 26, 2009 – Resolution
NON-CONSENT CALENDAR

AYES (12): Chair Stroeh; Vice Chair Pahre; Directors Cochran, Eddie, Elsbernd, Grosboll, McGlashan, Moylan, Newhouse Segal, Reilly, Segal and Sobel; President Boro (Ex Officio)
NOES (0): None

Monthly Review of Golden Gate Bridge Traffic/Tolls and Bus and Ferry Transit Patronage/Fares (for Eleven Months Ending May 2009)

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 eleven months ending May 2009. 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 at its meeting of June 26, 2009 – None Required

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided a financial statement entitled, Statement of Operating Revenues and Expenses. 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 stated that, due to last year’s budget projection process, it will be necessary to clean up certain line items in the FY 08/09 Budget and that staff will be recommending those changes in a report that will be presented to the Finance-Auditing Committee on July 23, 2009, for approval by the Board of Directors at its meeting of July 24, 2009. He noted that the changes will not increase the overall expenditures for the year, but simply will be reflected differently in the Operating Budget.

Action by the Board at its meeting of June 26, 2009 – None Required

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. 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 at its meeting of June 26, 2009 – None Required

Public Comment

There was no public comment.

Adjournment

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