October 7, 2010

 

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, CA, on Thursday, October 7, 2010, at 10:15 a.m., Chair Stroeh presiding.

Committee Members Present (8): Chair Stroeh; Vice Chair Pahre; Directors Cochran, Eddie, Grosboll, Moylan and Sobel; President Boro (Ex Officio)
Committee Members Absent (1): Director Elsbernd
Other Directors Present (2): Director McGlashan; First Vice President Reilly

Committee of the Whole Members Present (10): Directors Cochran, Grosboll, McGlashan, Moylan, Pahre, Sobel and Stroeh; Second Vice President Eddie; First Vice President Reilly; President Boro (Ex Officio)
Committee of the Whole Members Absent (9): Directors Brown, Campos, Chu, Dufty, Elsbernd, Kerns, Newhouse Segal, Sanders and Snyder

Staff Present: General Manager Denis Mulligan; Acting District Engineer Ewa Bauer; Acting Auditor-Controller Gayle Prior; District Secretary Janet Tarantino; Attorney Madeline Chun; Deputy General Manager/Bridge Division Kary Witt; Deputy General Manager/Ferry Transit Division Jim Swindler; Deputy General Manager/Administration and Development Z. Wayne Johnson; Director of Risk Management and Safety Bill Stafford; Property Development and Management Specialist Norma Jellison; Financial Management and Business Process Manager Alice Ng; Public Affairs Director Mary Currie; Executive Assistant to the General Manager Amorette Ko; Assistant Clerk of the Board Lona Franklin

Visitors Present: None

     
1.

Authorize the Necessary Actions for Submittal and Execution of Federal Transit Administration Grant Funds

In a memorandum to Committee, Director of Capital and Grant Programs Gayle Prior, Auditor-Controller Joseph Wire and General Manager Denis Mulligan reported on staff’s recommendation to approve actions relative to submission of Federal Transit Administration (FTA) grant applications and execution of related agreements for federal transportation assistance.

The staff report stated that FTA funds are typically used for capital projects, including Bus and Ferry revenue vehicle replacements, engine overhauls and replacements, communications equipment, fixed guideway improvements and Bus and Ferry facility improvements. In January 2001, the Board authorized the General Manager to approve the annual FTA certifications and assurances and submit grant applications; and, authorized the President of the Board to execute the grant applications. The Capital and Grant Programs office has received approval from the General Manager and the President of the Board to submit and execute the grants on their behalf.

The staff report stated that FTA grantees are required to assign an authorizing agent to act on behalf of the grantee and its governing body to perform the required grant authorizations in order to secure FTA grant funds. A copy of the staff report is available in the Office of the District Secretary and on the District’s web site.

At the meeting, Mr. Mulligan stated that the purpose of this request is to delegate authority to pursue grant funding for approved projects and to streamline paperwork.

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 actions relative to the filing of Federal Transit Administration grant applications and the executing of related agreements for federal transportation assistance, as follows:

  a.
Authorize the Director of Capital and Grant Programs or her designee to execute and file applications for Federal assistance on behalf of the District with the FTA for Federal assistance authorized by 49 U.S.C. Chapter 53; Title 23, United States Code; or other Federal statutes authorizing a project administered by the FTA;
  b.
Authorize the General Manager or his or her designee to execute and file the annual certifications and assurances and other documents the FTA requires before awarding a federal assistance grant or cooperative agreement; and;
  c.

Authorize the General Manager execute the grant and cooperative agreements with the FTA on behalf of the District.

Action by the Board at its meeting of October 8, 2010 - Resolution
NON-CONSENT CALENDAR

     
  AYES (10): Directors Cochran, Grosboll, McGlashan, Moylan, Pahre, Sobel and Stroeh; Second Vice President Eddie; First Vice President Reilly; President Boro (Ex Officio)
NOES (0): None
     
2.

Authorize Extension of the Five-Year Option with Sonoma-Marin Area Rail Transit to Purchase District Property, Assessor’s Parcel No. 018-141-03 (Above Jacoby Street, San Rafael, CA)

In a memorandum to Committee, Property Development and Management Specialist Norma Jellison, Director of Planning Ron Downing, Auditor-Controller Joseph Wire and General Manager Denis Mulligan reported on staff’s recommendation to authorize the General Manager to execute a five-year extension of the option to purchase District property, Assessor’s Parcel No. (APN) 018-141-03, with Sonoma-Marin Area Rail Transit District (SMART).

The staff report stated that the subject parcel was purchased by the District in 1990 using District funds. When Northwestern Pacific Railroad (NPRR) discontinued operation of the railroad, the District acquired the right of way (ROW) in partnership with the County of Marin and the Marin County Transit District (MCTD). Title to the jointly owned segment of the former NPRR ROW was transferred to SMART in October 2005. The Memorandum of Understanding (MOU) agreed to by the parties included a Lease Management Agreement defining the responsibilities of the District and SMART as co-lessors, with the District as the property manager and fiscal agent. Access to the parcel is via non-exclusive private crossing easements across the ROW. The parcel is leased to a third party and the District manages the lease and shares revenues with SMART. The MOU with SMART, which expires on October 25, 2010, includes an option for SMART to purchase the parcel. SMART has requested the option be extended for five years. A copy of the staff report is available from 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/MOYLAN 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 execute a five-year extension of the option to purchase District property, Assessor’s Parcel No. (APN) 018-141-03, located above Jacoby Street, San Rafael, CA, with Sonoma-Marin Area Rail Transit District.

Action by the Board at its meeting of October 8, 2010 - Resolution
NON-CONSENT CALENDAR

AYES (10): Directors Cochran, Grosboll, McGlashan, Moylan, Pahre, Sobel and Stroeh; Second Vice President Eddie; First Vice President Reilly; President Boro (Ex Officio)
NOES (0): None

     
3.

Authorize Execution of the Second Amendment to the Professional Services Agreement with Booz Allen Hamilton, Inc., Relative to Request for Proposals No. 2007-BT-1, Consultant to Provide Design Services for Radio Replacement and Intelligent Transportation System, for Continued and Additional Services Regarding the Project Implementation Management Phase

In a memorandum to Committee, Deputy General Manager/Administration & Development Z. Wayne Johnson and General Manager Denis Mulligan reported on staff’s recommendation to authorize execution of the Second Amendment to the Professional Services Agreement with Booz Allen Hamilton, Inc., to provide continued and additional services regarding the Project Implementation Management Phase.

The staff report provided background information, and indicated that Phase 3 was identified as an option to be exercised upon completion of Phase 2 and at the District’s discretion. Phase 2, preparing specifications and bid documents, as well as assisting with vendor evaluation and selection, was completed in August 2010. The one remaining task has to do with obtaining the Federal Communications Commission (FCC) licenses, which is currently in progress. The staff report stated that staff has determined that it will be necessary for the District to exercise the Phase 3 option. Phase 3 will provide vendor implementation services to assist District staff in bringing the new radio and Intelligent Transportation System (ITS) on-line and insuring that it is performing in accordance with specifications. The staff report noted that the ITS is now known as the Advanced Communications and Information System (ACIS). The staff report also provided a list of consultant services to be performed. A copy of the staff report is available from the Office of the District Secretary and on the District’s web site.

At the meeting, Mr. Johnson briefly summarized the staff report, stating that the project has entered final design review and that this amendment will allow the District to move into Phase 3 of the project, followed by fabrication and installation. He reported that the District’s project manager had unexpectedly departed his position with the District.

Discussion ensued, including the following comments and inquiries:

  • Director Grosboll made the following inquiries:
    • He inquired as to whether the Board had provided its authorization to proceed with Phase 3 when the original contract was approved, and as to the length of time until project completion. In response, Mr. Johnson stated that, because it was unknown at the time the original contract was approved whether the District would exercise its option to move to Phase 3, the Board’s approval to do so at this time is required for project completion. Mr. Johnson stated that the design is complicated, but will assure adequate interface between systems such that dispatchers will be able to communicate with one another on different systems. Mr. Mulligan added that loss of the District’s Project Manager has impacted project implementation management as well.
  • Director Cochran made the following inquiries:
    • He inquired as to whether the system was intended for all buses. In response, Mr. Johnson answered affirmatively, stating that the current system is dilapidated, has been repaired as much as possible and has failed during the past several months. He added that the new system will replace radios on buses, as well as in other places.
    • He inquired as to whether the new system will include Dispatch. Mr. Johnson responded affirmatively.
  • Director Pahre inquired as to whether the system would be operable by 2012. Mr. Johnson answered affirmatively.
  • First Vice President Reilly made the following inquiries:
    • She inquired as to how the District’s existing system compares to others in the United States. In response, Mr. Johnson stated that the District is far behind, with its current system being considered a “dinosaur.” Mr. Mulligan added that, when the District requires spare parts, it must locate them from agencies whose communications systems have already been replaced.
    • She inquired as to the reason the District is behind. In response, Mr. Johnson stated that the system is costly, at approximately $19 million.

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 authorize execution of the Second Amendment to the Professional Services Agreement with Booz Allen Hamilton, Inc., in the amount of $283,327.00, relative to Request for Proposals No. 2007-BT-1, Consultant to Provide Design Services for Radio Replacement and Intelligent Transportation System, to provide continued and additional services regarding the Project Implementation Management Phase; with the understanding that requisite funds are available in the FY 10/11 Bus Transit Division Capital Budget.

Action by the Board at its meeting of October 8, 2010 - Resolution

NON-CONSENT CALENDAR

AYES (10): Directors Cochran, Grosboll, McGlashan, Moylan, Pahre, Sobel and Stroeh; Second Vice President Eddie; First Vice President Reilly; President Boro (Ex Officio)
NOES (0): None

     
4.

Receive the Annual Report of the Other Post Employment Benefits Retirement Investment Trust Board

In a report to Committee, the Other Post Employment Benefits (OPEB) Retirement Investment Trust Board (Trust Board) reported on the recommendation to receive the Annual Report of its investment policy, service personnel and Charter.

The staff report presented a brief history of the establishment of the OPEB Trust in 2007, as well as the creation of the Trust Board and its duties and responsibilities, which are spelled out in the Trust Board’s Charter and Bylaws. As required in the Charter and Bylaws, the Trust Board must review, on at least an annual basis, the OPEB Trust investment policy, the performance of the Trust Board’s service providers and the adequacy of the Trust Board Charter. The results of this annual review must be reported to the District Board of Directors.

The staff report stated that the Trust Board monitors compliance with the Investment Policy for the OPEB Trust through review of periodic reports of the Trust as presented by the PFM Asset Management LLC (PFM) as the Trust’s Investment Advisor and Trust Administrator. The staff report indicated that the District’s investment portfolio is in compliance with the OPEB Investment Policy and Trust Agreement, with the exception that the large cap domestic equity’s asset class weight of 19.70% at June 30, 2010, is slightly below the Investment Policy’s range of 20% - 26%. The staff report further indicated that the Trust Board, at its meeting of September 22, 2010, discussed the Compliance Certificate and evaluated the asset allocation in the Investment Policy.

The Trust Board approved an amendment to the Investment Policy to modify asset weighting ranges as recommended by PFM, as follows:

  a. Increase the ranges within the domestic equity asset classes by +/- 3% in large cap and +/- 2% in small/mid cap;
  b. Decrease the lower range within the international equity from 18% to 13%; and,
  c. Decrease the lower range within the fixed income from 30% to 25% and increase the higher range from 50% to 60%.
  The staff report provided the following table, showing percentages before and after the amendment:
     
     

PRIOR TO AMENDMENT

Asset Weightings

AFTER AMENDMENT

Asset Weightings

   
    Asset Class
Range
Target
Range
Target
    Domestic Equity        
        -Large Cap
20% - 26%
23%
17% - 29%
23%
        -Small/Mid Cap
11% - 15%
13%
9% - 17%
13%
    Int’l Equity
18% - 28%
23%
13% - 28%
23%
    REITs
1% - 11%
6%
1% - 11%
6%
    Fixed Income
30% - 50%
35%
25% - 60%
35%
             
 

The amended asset weightings continue to target PFM’s expected 10-year target rate of return of 8.46% in order to achieve the performance objective in the Investment Policy of 7.75% (net of fees) as an average annual rate of return.

The staff report also stated that the Trust Board must review and assess the performance of service providers appointed by the Trust Board or the District to perform services related to the OPEB Trust. Two service providers, PFM, as Investment Advisor and Trust Administrator and U.S. Bank National Association (“U.S. Bank”), as Trustee and Custodian, are responsible for the administration of the OPEB Trust and implementation of the Trust Investment Policy. The staff report provided a brief description of the duties of each and stated that the Trust Board has continued to review the performance of both PFM and U.S. Bank and found that both have complied fully with their responsibilities as summarized in the staff report.

The staff report indicated that the Trust Board reviewed its Charter and recommended no changes at this time. A copy of the staff report is available from the Office of the District Secretary and on the District’s web site.

At the meeting, Financial Management and Business Process Manager Alice Ng briefly summarized the staff report.

Discussion ensued, including the following comments:

  • Director Sobel, a member of the OPEB Trust Board, informed the Committee that the OPEB Trust Board members were thoroughly engaged during the September 22, 2010 meeting, and were satisfied with the reports that were presented by staff and the consultant.
  • Director Pahre, a member of the OPEB Trust Board, reiterated that the OPEB Trust Board approved an amendment to the Investment Policy modifying asset weighting ranges, to bring the investment portfolio into compliance.

Staff recommended and the Committee concurred by motion made and seconded by Directors SOBEL/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 receive the Annual Report of the OPEB Retirement Investment Trust Board.

Action by the Board at its meeting of October 8, 2010 - Motion
NON-CONSENT CALENDAR

AYES (10): Directors Cochran, Grosboll, McGlashan, Moylan, Pahre, Sobel and Stroeh; Second Vice President Eddie; First Vice President Reilly; President Boro (Ex Officio)
NOES (0): None

     
5.

Staff Presentation on the District’s Workers’ Compensation Program

In a memorandum to Committee, Risk Management & Safety Director William Stafford, Deputy General Manager/Administration and Development Z. Wayne Johnson, Auditor-Controller Joseph Wire and General Manager Denis Mulligan provided an informational report on the District’s Workers’ Compensation Program.

The staff report stated that the District has continued to see controlled Workers’ Compensation experience, except in FY 08/09, when there was a rise in medical costs. The District continues to experience decreases in the frequency of reported indemnity (lost time) injuries, unlike other self-insured public entities in California that have experienced rising claim severity. The staff report attributes some of the District’s success to changes in Workers’ Compensation legislation. However, the report states that the District’s success is based mainly on aggressive claims management by Athens Administrators, the District’s Third Party Administrator; the installation of the District’s Claims Administrator in 2009; and, the commitment of District employees to working safely.

The staff report stated that the District’s Ferry Transit Division is subject to the Jones Act regarding work-related injuries for employees who work “at sea.” It should be noted that, because of the small number of employees who work “at sea,” opening or closing a single claim can change the percentages considerably.

The report provided a summary of facts for FY 09/10, a synopsis of funded Workers’ Compensation Liability Reserves, and a list of current and future Workers’ Compensation opportunities to further reduce and protect cost savings that the District has achieved during the last two years. In conclusion, the report states that the District’s Risk Management and Safety staff will proactively research and identify opportunities, and aggressively implement strategies to reduce injury frequency and severity of both Workers’ Compensation and Jones Act claims. A copy of the staff report is available from the Office of the District Secretary and on the District’s web site.

At the meeting, Risk Management and Safety Director Bill Stafford gave a PowerPoint presentation entitled “Self-Insured Workers’ Compensation Program 2009-2010.” The report provided comparative data on Workers’ Compensation claims against the District as of 6/30/10, as well as frequency analyses concerning affected body parts, nature of injury, cause of loss, length of service, and job code. Mr. Stafford displayed an open claims inventory, and a chart showing an annual payout comparison of amounts paid on all years’ claims as of June 30 each year, beginning in FY 05/06 and ending in FY 09/10. He reported on incurred costs for the same time period, as well as outstanding liabilities. He compared new claims between FY 08/09 and FY 09/10, for the Bridge Division, Bus Transit Division, and Ferry Transit Division. He displayed charts showing Jones Act claims entered as of 6/30/10, Jones Act open claims as of each fiscal year end, Jones Act claims paid in each fiscal year from FY 03/04 through FY 09/10 and, finally, outstanding Jones Act claims liabilities at each fiscal year end. A copy of the PowerPoint presentation is available from the Office of the District Secretary and on the District’s web site.

Discussion ensued, including the following comments and inquiries:

  • Director Sobel made the following comments and inquiries:
    • He inquired as to whether work groups had been correlated with frequency analyses by length of service. He commented that, with a frequency analysis by injury and department, the District will be able to identify trends. Such information will be valuable to the District during labor negotiations. In response, Mr. Stafford stated that data on claims by work group is not correlated with the frequency analysis by length of service.
    • He commented that a large proportion of claims appear to happen between one and ten years on the job. In response, Mr. Stafford stated that he had found that data to be informative.
    • He inquired as to whether the District compares its Workers’ Compensation experience statistics with those of other transit agencies and how District statistics compare. In response, Mr. Stafford stated that District statistics are compared against those of the Municipal Transportation Agency (MTA). He stated that the District compares favorably with MTA. He added that the District seeks to improve safety because when there is no injury, there is no Workers’ Compensation claim.
  • Director Cochran inquired as to whether the individuals who had filed claims were still employed by the District. In response, Mr. Stafford stated that, of 242 claims filed, 108 are medical claims that remain open. Fifty-two of the individuals who filed medical claims are employed at the District at the present time.
  • Director Grosboll made the following inquiries:
    • He inquired as to the number of claims outstanding from 2005 or earlier and the average timeframe required to close a given claim. In response, Mr. Stafford stated that he estimated that, of the 108 medical claims that remain open, approximately 30 to 50 that were filed in 2005 or earlier are still open. Mr. Mulligan added that staff will provide the Board with specific data about open medical claims filed in previous years, at a future meeting.
    • He inquired as to whether any claims had reached the $1 million stop loss coverage carried by the District. In response, Mr. Stafford stated that, five years ago, the District’s stop loss level was $350,000.00, and that some claims have reached that level. He stated that the District’s stop loss coverage is now at $1 million, and none of the currently open claims is likely to reach that level.
    • He inquired as to whether $1 million remains sufficient coverage. Mr. Stafford answered affirmatively.
    • He inquired as to whether back problems are common among bus operators. In response, Mr. Stafford stated that bus operators commonly experience a combination of injuries, including shoulders, elbows, wrists, back, and knees.
    • He inquired as to whether a written comparison of District statistics to those of MTA and other transit agencies could be provided to the Board. Mr. Stafford answered affirmatively.
  • Director Pahre made the following comments and inquiries:
    • She commented that the information about Workers’ Compensation claims, such as overall percentages from the various categories analyzed, should be shared with the Union Coalition at the time negotiations are in progress. She inquired as to whether claim amounts and the District’s cost of claims are shared with the District’s collective bargaining units. In response, Mr. Stafford stated that he will work with staff to provide this information to the Union Coalition. He added that this information was presented to the Labor Management Safety Committee about three weeks ago.
    • She inquired as to whether the Labor Management Safety Committee includes representatives from the Amalgamated Transit Union, Local No. 1575. In response, Mr. Stafford stated that the Labor Management Safety Committee includes Bridge Service Officers and Bridge workers.
    • She commented that employees with legitimate injuries should receive necessary care. In response, Mr. Johnson stated that the Bus Transit Division has been working with Risk Management and Safety staff to analyze causes of absenteeism. All causes of absenteeism were analyzed, including absences where Workers’ Compensation claims were filed. He added that monitoring would continue indefinitely.
  • Director Eddie commented that, when discussions take place regarding methods for increasing revenue, future liabilities should be considered as well. He stated that lowering future liabilities improves the budget picture. It is important to pay off and to settle claims, as that is a saving on future obligations.
     
6.

Closed Session

Attorney Madeline Chun, at the request of Chair Stroeh, stated that the Finance-Auditing Committee would convene in closed session, as permitted by the Brown Act, to discuss the following items, listed on the Agenda as Items No. 7.b.1., and 7.b.2.:

     
  "7.b.

Conference with Legal Counsel – Pending Litigation
Pursuant to Government Code Section 54956.9(a)
Report of Athens Administrators, Inc.

“1.     William Hayes vs. Golden Gate Bridge, Highway and Transportation District
“2.     Syd McGuire vs. Golden Gate Bridge, Highway and Transportation District.

     
 

Attorney Chun added that Agenda Item No. 7.a., “Conference with Real Property Negotiators Pursuant to Government Code Section 54956.8” was discussed in an Open Session at today’s meeting of the Finance-Auditing Committee/Committee of the Whole. At that time, it was determined that a Closed Session on this matter was not necessary.

After closed session, Chair Stroeh called the meeting to order in open session with a quorum present. Attorney Chun reported that, as noted on the agenda, the Committee had met in closed session, as permitted by the Brown Act, to discuss the matters listed above. She further reported that these two matters will be referred to the Board of Directors for disposition at the regularly scheduled meeting of October 8, 2010.

     
7.

Public Comment

There was no public comment.

     
8.

Adjournment

All business having been concluded, the meeting was adjourned at 11:25 a.m.

     

Respectfully submitted,

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