February 24, 2011

 

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, CA, on Thursday, February 24, 2011, at 10:15 a.m., Chair Stroeh presiding.

Committee Members Present (5): Chair Stroeh; Vice Chair Pahre; Directors Boro, Cochran and Moylan
Committee Members Absent (4): Directors Elsbernd, Grosboll and Sobel; President Reilly
Other Directors Present (3): Directors Eddie, Rabbitt and Snyder

[Note: On this date, there was one vacancy on the Board of Directors.]

Staff Present: General Manager Denis Mulligan; District Engineer Ewa Bauer; Auditor-Controller Joseph Wire; District Secretary Janet Tarantino; Attorney David Miller; Attorney Madeline Chun; Deputy General Manager/Bridge Division Kary Witt; Deputy General Manager/Bus Transit Division Teri Mantony; Deputy General Manager/Ferry Transit Division Jim Swindler; Planning Director Ron Downing; Director of Risk Management and Safety Bill Stafford; Public Affairs Director Mary Currie; Assistant Clerk of the Board Lona Franklin

Visitors Present: None


 

     
1.

Ratify Actions by the Auditor-Controller

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Denis Mulligan outlined commitments, disbursements and investments made on behalf of the Golden Gate Bridge, Highway and Transportation District (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 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 PAHRE/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.
The Board of Directors has no commitments and/or expenditures to ratify for the period January 1, 2011, through January 31, 2011;
  b.
Ratify investments made by the Auditor-Controller during the period January 18, 2011, through February 14, 2011, as follows:
     
Security
Purchase Date
Maturity Date
Original Cost
Percent Yield
Deutsche Bank Sec Commercial Paper
02/01/11
04/01/11
2,231,972.07
0.27
Societe Generale NA Commercial Paper
02/01/11
04/01/11
4,997,050.00
0.36
General Elec Cap Corporate Note
02/01/11
01/07/14
4,995,450.00
2.13
JPMorgan Chase & Co Corporate Notes
02/01/11
10/01/14
1,410,855.60
1.19
Wachovia Corp Global Notes
02/04/11
08/01/13
3,285,990.00
1.77
Credit Agricole NA Commercial Paper
02/11/11
02/22/11
500,967.85
0.35
     
  c.
Authorize the Auditor-Controller to re-invest, within the established policy of the Board, investments maturing between February 15, 2011, and March 14, 2011, 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 January 2011, as prepared by PFM.

Action by the Board at its meeting of March 11, 2011 – Resolution
CONSENT CALENDAR

     
 
AYES (5): Chair Stroeh; Vice Chair Pahre; Directors Boro, Cochran and Moylan
NOES (0): None
ABSENT (4): Directors Elsbernd, Grosboll and Sobel; President Reilly
     
2.

Approve Renewal of the Marine Insurance Program

In a memorandum to Committee, Director of Risk Management/Safety William Stafford, Deputy General Manager/Administration and Development Z. Wayne Johnson, Auditor-Controller Joseph Wire and General Manager Denis Mulligan reported on staff’s recommendation to approve renewal of the District’s Marine Insurance Program.

The staff report stated that the Marine Insurance Program, which renews on February 28, 2011, is comprised of Hull and Machinery/Protection and Indemnity Insurance, Vessel Pollution Insurance and Excess Marine Liability Insurance (including Terminal Operator’s Legal Liability and Excess Protection and Indemnity insurance), as well as the Terrorism Risk Insurance Act (TRIA) endorsements for the five layers of Excess Marine Liability insurance. The Hull and Machinery/Protection and Indemnity Insurance provides coverage in amounts equal to the approximate replacement costs of the ferryboats, with primary Protection & Indemnity limits of $1 million. The current limits of liability for the Excess Protection and Indemnity Insurance and the Marine Liability Insurance is $100 million. The staff report stated that there were no changes to the limits or the terms and conditions for the 2011 renewal of the Marine Insurance Program.

The staff report further stated that the District obtained competitive quotes from AGCS Marine Insurance Company (Fireman’s Fund), National Union, Starr Indemnity and Navigators Insurance Company. The renewal premiums for one year, for the Hull and Machinery/Protection and Indemnity Insurance, the Excess Marine Liability Program and the Vessel Pollution Insurance with Great American, are the same as the premiums for the one-year term ending February 27, 2011.

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. Stafford briefly summarized the staff report, stating that, while the coverage and costs of the upcoming insurance one-year term are the same as the one-year term ending February 27, 2011, an increase in insurance costs can be expected for the future, as carriers are beginning to report they are showing signs of consistent underwriting losses. He stated that premiums in general have declined over the recent past, with the District having experienced a 46% decline, principally due to its favorable loss history. He stated that staff expects the District’s favorable loss history to continue and that the District has filed very few claims over the past six to seven years. He concluded by stating that competitive quotes were received and that the total cost of renewal for the one-year term beginning February 28, 2011, is the same as for the term ending February 27, 2011.

Staff recommended and the Committee concurred by motion made and seconded by Directors COCHRAN/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 approve actions relative to the renewal of the Marine Insurance Program, as follows:

  a. Renew the Hull & Machinery/Protection and Indemnity Insurance policy with AGCS Marine Insurance Company (40%), National Union (25%), Starr Indemnity (25%) and Navigators Insurance Company (10%), with an annual aggregate deductible of $350,000.00 and a limit of liability of $1 million, including Terrorism Risk Insurance Act (TRIA) endorsements for the 2011 Policy Year, at an annual premium of $219,008.00, for a one-year term, effective February 28, 2011;
  b.

Renew the Excess Marine Liability Insurance policy (including Terminal Operator’s Legal Liability and Excess Protection and Indemnity Insurance) with Starr Indemnity, National Union, AGCS Marine Insurance Company, Continental, Great American and Navigators Insurance Company, with a limit of liability of $100 million, including TRIA endorsements for the 2011 Policy Year, at an annual premium of $132,425.00, for a one-year term, effective February 28, 2011; and,

  c. Renew the Vessel Pollution Liability Insurance policy with Great American at an annual premium of $5,368.00, for a one-year term, effective February 28, 2011;
 

with the understanding that requisite funds are available in the FY 10/11 Ferry Transit Division Operating Budget and that requisite funds will be included in the FY 11/12 Ferry Transit Division Operating Budget.

Action by the Board at its meeting of February 25, 2011 – Resolution
NON-CONSENT CALENDAR

AYES (5): Chair Stroeh; Vice Chair Pahre; Directors Boro, Cochran and Moylan
NOES (0): None
ABSENT (4): Directors Elsbernd, Grosboll and Sobel; President Reilly

     
3.

Authorize the Setting of Public Hearings Relative to a Proposed FY 2012-2016 Five-Year Fare Program

In a memorandum to Committee, Director of Planning Ron Downing, Deputy General Manager/Administration and Development Z. Wayne Johnson, Auditor-Controller Joseph Wire and General Manager Denis Mulligan reported on staff’s recommendation that the Board of Directors authorize the setting of public hearings relative to a proposed FY 2012-2016 Five-Year Fare Program.

The staff report stated that, at its Special Meeting of October 30, 2009, the Board approved the FY 09/10 Financial Plan for Achieving Long-Term Financial Stability (Plan) that incorporates thirty-three initiatives to reduce costs or generate new revenues. Among these are Initiatives No. 12, “Fare Increase on Regional Buses for Local Trips,” and No. 25, “Renew Transit Fare Increase Plan: Annual 5% Fare Increases for Bus and Ferry Transit Fares,” that will help address the District’s projected $89 million five-year deficit.

The staff report stated that an annual five percent fare increase is proposed for Golden Gate Transit (GGT) regional inter-county bus services, local rides on GGT regional bus routes within Marin County, Larkspur Ferry “single ride” fares and complementary Americans with Disabilities (ADA) paratransit service, over a five-year period, beginning July 1, 2011. An increase of $1.00, effective July 1, 2011, is proposed on the Sausalito Ferry for “single ride” adult fares, with a five percent increase each subsequent year beginning July 1, 2012. An increase, effective July 1, 2011, is also proposed for “special event” ferry fares, effective July 1, 2011, to equal the proposed “single ride” adult ferry fares.

The staff report also stated that public involvement activities to inform bus and ferry riders of the proposed Five-Year Fare Program are planned to be conducted during March 2011. A series of open houses to explain the various elements of the fare increase program to customers are proposed to be held in Santa Rosa, Petaluma, San Rafael and San Francisco. Comments and feedback will be collected at these outreach sessions, and through general correspondence, by means of letters, phone calls, email and online comment forms. Public hearings will provide a formal opportunity for additional input from the public on the proposed changes.

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

Mr. Downing briefly summarized the staff report, describing fare increases that are proposed for the various transit services, as follows:

  • An annual five percent fare increase on GGT regional intercounty bus services, on local rides within Marin County on GGT regional bus routes, on Larkspur Ferry “single ride” fares and on complementary ADA paratransit service, over a five-year period, beginning July 1, 2011;
  • An increase of Sausalito Ferry “single ride” adult fares of $1.00, effective July 1, 2011, then 5 percent each subsequent year beginning July 1, 2012;
  • An increase in “special event” ferry fares, effective July 1, 2011, to equal the proposed “single ride” adult ferry fares; and,
  • Annual review, concurrent with the District budget development process, to determine if adjustment to the Five-Year Fare Program or “special event” fares is needed.

Mr. Downing noted that Ferry Clipper® discount fares were adjusted effective January 1, 2011, based on a November 19, 2010, Board action. Therefore, staff proposes that action to modify Ferry Clipper® discount fares be taken up in a separate proposal later in 2011, to be developed in concert with an evaluation of parking fees at the Larkspur Ferry Terminal.

He stated that the Port of San Francisco (Port) now charges a $.25 surcharge for each ferry passenger alighting or boarding, a total of $.50 per passenger round trip. The proposed fare increase will help the District to recoup that cost.

He explained that three elements of this proposal are different from past Five-Year Fare Programs: 1) the incremental rounding of fares to be collected from bus passengers; 2) an increase of $1.00 in the “single ride” adult cash fare for the Sausalito Ferry; and, 3) a change in the ferry “special event” fare, to equal the Larkspur adult “single ride” fare. He provided several examples of the proposed incremental rounding of fares, which is covered in detail within the staff report. He concluded by stating that public hearings are proposed for April 6, 2011 and April 7, 2011, and that open houses are proposed for March 1, 10, 15, 16, 22 and 24, 2011, throughout the service area.

Discussion ensued, including the following comments and inquiries:

  • Director Boro made the following inquiries and comment:
    • He inquired as to the proposed amount of the ferry fare to AT&T Park. In response, Mr. Downing stated that the current fare of $8.00 will increase to $8.65.
    • He inquired as to whether charter buses must also pay a surcharge at the Port. In response, Mr. Swindler stated that he did not believe so.
    • He commented that, in his opinion, since San Francisco promotes itself as a car-free city, it is questionable to add a $.25 surcharge for persons arriving at or departing from the stadium by ferryboat. In response, Mr. Swindler stated that he had attended a San Francisco Board of Supervisors meeting approximately two to three months ago, where he expressed the District’s concerns. He noted that only some of the Supervisors were sympathetic.
  • Director Snyder made the following comments:
    • He commented that increases in the costs of parking in San Francisco exceed the amount of the surcharge being imposed by the Port.
    • He commented that the District should devise a monthly pass program for all transit users, and inquired as to whether such a program could be incorporated into the next scheduled fare change. In response, Mr. Mulligan stated that such a program is technically feasible, but has not been proposed in the past due to the nature of travel by many of the District’s customers who do not regularly use public transportation five days per week. This type of passenger pattern does not lend itself to the monthly pass. He concluded by stating that, once Clipper® is more prominent in the area covered by Golden Gate Transit and Golden Gate Ferry, a monthly pass may be appropriate. Mr. Downing added that ferry passengers who ride during the week are likely not the same passengers who ride the ferries on weekends.
    • He commented that people may ride ferries on weekends, if they are incentivized. In response, Mr. Mulligan stated that ferry demographics are different from those for buses. He stated that, in the case of local bus service, reduced cost is an incentive to purchase a monthly pass. However, ferry passengers are typically high earners, and would be less likely to be attracted by discounted fares.
  • Director Rabbitt inquired as to whether the surcharge at the Port is meant to fund improvements or whether it is a budget matter. In response, Mr. Swindler stated that it is a budget matter for the Port.
  • Director Pahre inquired as to whether the surcharge is imposed upon each passenger or upon the ferryboat. Inresponse, Mr. Swindler stated that the surcharge is imposed upon each passenger and paid by the District, which provides the passenger count, based on logs it is required to keep.

Staff recommended and the Committee concurred by motion made and seconded by Directors COCHRAN/BORO 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 public review process associated with a proposal to consider establishment of a FY 2012-2016 Five-Year Fare Program to increase bus, paratransit, “special event” ferry and “single ride” (formerly referred to as “cash”) ferry fares, beginning July 1, 2011, and annually thereafter, until July 1, 2016, in line with Initiative No. 12, “Fare Increase on Regional Buses for Local Trips”; and, Initiative No. 25, “Renew Transit Fare Increase Plan: Annual 5% Fare Increases for Bus and Ferry Transit Fares,” of the FY 09/10 Financial Plan for Achieving Long-Term Financial Stability, as follows:

  a. Authorize the setting of a public hearing on Wednesday, April 6, 2011, at 6:00 p.m., at Jackson Café, Whistlestop, 930 Tamalpais Avenue, San Rafael, CA;
  b. Authorize the setting of a public hearing on Thursday, April 7, 2011, at 9:30 a.m., in the Board Room, Administration Building, Golden Gate Bridge Toll Plaza, San Francisco, CA; and,
  c. Authorize staff to present for public review at the Open Houses listed below, and at the Public Hearings listed above in Item Nos. a. and b., a proposal to consider establishment of a FY 2012-2016 Five-Year Fare Program, as described above;
 

with the understanding that a recommendation with the final set of changes will be presented to the Finance-Auditing Committee on Thursday, April 21, 2011, for its recommendation, and to the Board of Directors on Friday, April 22, 2011, for approval:

Tuesday, March 1, 2011, 4:00 p.m. to 6:00 p.m.
San Francisco Ferry Terminal
One Ferry Plaza
San Francisco, CA

Thursday, March 10, 2011, 3:30 p.m. to 6:00 p.m.
San Francisco Ferry Terminal
One Ferry Plaza
San Francisco, CA

Tuesday, March 15, 2011, 5:00 p.m. to 7:00 p.m.
Beverly C. Wilson Hall – Petaluma Fairgrounds
175 Fairgrounds Drive
Petaluma, CA

Wednesday, March 16, 2011, 6:00 to 8:00 p.m.
Santa Rosa City Council Chambers
100 Santa Rosa Avenue
Santa Rosa, CA

Tuesday, March 22, 2011, 4:30 p.m. to 7:00 p.m.
Jackson Café, Whistlestop
930 Tamalpais Avenue
San Rafael, CA

Thursday, March 24, 2011, 4:00 p.m. to 6:00 p.m.
Directors’ Annex, First Floor,
Administration Building
Golden Gate Bridge Toll Plaza
San Francisco, CA

Action by the Board at its meeting of February 25, 2011 – Resolution
NON-CONSENT CALENDAR

AYES (5): Chair Stroeh; Vice Chair Pahre; Directors Boro, Cochran and Moylan
NOES (0): None
ABSENT (4): Directors Elsbernd, Grosboll and Sobel; President Reilly

   
4.

Receive the Golden Gate Bridge, Highway, and Transportation District's Other Post-Employment Benefit Trust's Audited Financial Statements for the Year Ending June 30, 2010

In a memorandum to Committee, the Other Post Employment Benefits (OPEB) Retirement Investment Trust Board (Trust Board) reported on its recommendation that the Board receive the OPEB Trust Board’s Financial Statement for the Year Ending June 30, 2010, as submitted by Vavrinek, Trine, Day & Co., LLP, to the OPEB Trust Board at its meeting of February 23, 2011. The staff report included the Independent Auditor’s Report, a report on Management’s Discussion and Analysis, and Basic Financial Statements.

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. Wire briefly summarized the staff report, stating that the independent auditor’s opinion was unqualified.

Staff recommended and the Committee concurred by motion made and seconded by Directors COCHRAN/PAHRE 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 Other Post-Employment Benefits (OPEB) Retirement Investment Trust Board’s Financial Statements for the Year Ending June 30, 2010, as submitted by Vavrinek, Trine, Day & Co., LLP, to the OPEB Retirement Investment Trust Board at its meeting of February 23, 2011.

Action by the Board at its meeting of February 25, 2011 – Resolution
NON-CONSENT CALENDAR

AYES (5): Chair Stroeh; Vice Chair Pahre; Directors Boro, Cochran and Moylan
NOES (0): None
ABSENT (4): Directors Elsbernd, Grosboll and Sobel; President Reilly

   
5.

Monthly Review of Golden Gate Bridge Traffic/Tolls and Bus and Ferry Transit Patronage/Fares (for Seven Months Ending January 2011)

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Denis Mulligan provided a schedule comparing categories of Golden Gate Bridge (Bridge) traffic, as well as a monthly review of Bridge traffic, tolls, transit patronage and fares, for seven months ending January 2011. Copies of the reports are available in the Office of the District Secretary and on the District’s web site.

Discussion ensued, including the following inquiries:

  • Director Cochran made the following inquiry and comment:
    • He inquired as to the events that may affect traffic, tolls, transit patronage and fares. In response, Mr. Mulligan stated that many things affect traffic, tolls and ridership. For example, the low rainfall and warm temperatures of January 2011, may have contributed to lower transit ridership as people may have chosen to drive or vacation as a result of the good weather.
    • He commented that ridership may increase in the upcoming month, as the price of gasoline is estimated to increase to approximately $4.00 per gallon within that time period. In response, Mr. Wire stated that, the last time gas prices rose, transit ridership increased. However, there was little drop in Bridge traffic at that time. This year, transit patronage has not increased as much alongside increases in the price of gasoline, and Bridge traffic has actually decreased.
  • Director Stroeh inquired as to how trends are reflected in the District’s budget. In response, Mr. Wire stated that, while the District has been able to control expenses, toll revenues have been lower than predicted. He cautioned that a drop in Bridge traffic cannot be expected to produce an equivalent increase in transit ridership.
  • Director Snyder made the following inquiries:
    • He inquired as to the reason for the increase in revenues as a result of the District’s contract with the Marin County Transit District (MCTD). In response, Mr. Wire stated that the Agreement has a set price escalator of 5% annually, effective on July 1st each year.

Action by the Board – None Required

     
6. Monthly Review of Financial Statements for Seven Months Ending January 2011
     
  a.

Statement of Revenue and Expenses

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Denis Mulligan provided financial statements entitled, Statement of Operating Revenues and Expenses. Copies of the reports are 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, Director of Capital and Grant Programs Gayle Prior, Auditor-Controller Joseph Wire and General Manager Denis Mulligan provided financial statements entitled, Statement of Capital Programs and Expenditures. Copies of the reports are available in the Office of the District Secretary and on the District’s web site.

Action by the Board – None Required

       
7.

Closed Session

Attorney David Miller, 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 matter, listed on the Agenda as Item No. 9:

     
  "9. Conference with Legal Counsel – Pending Litigation
Pursuant to Government Code Section 54956.9(a)
Report of Sterling & Clack
Danny Olivera vs. Golden Gate Bridge, Highway and Transportation District
     
  After Closed Session, Chair Stroeh called the meeting to order in Open Session with a quorum present. Attorney Miller reported that the Committee had met in Closed Session, as permitted by the Brown Act, to discuss the matter listed above. He further reported that this matter will be referred to the Board of Directors for disposition at the regularly scheduled meeting of February 25, 2011.
       
8.

Public Comment

There was no public comment on items not on the agenda.

 


9.

Adjournment

All business having been concluded, the meeting was adjourned at 11:05 a.m.

   
   

 

Respectfully submitted,

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