June 23, 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 (Committee) of the Golden Gate Bridge, Highway and Transportation District (District) was held in the Board Room, Administration Building, Toll Plaza, San Francisco, CA, on Thursday, June 23, 2011, at 10:35 a.m., Chair Stroeh presiding.

Committee Members Present (6): Chair Stroeh; Directors Boro, Cochran, Grosboll, Moylan and Sobel
Committee Members Absent (3): Director Elsbernd; Vice Chair Pahre; President Reilly (Ex Officio)
Other Directors Present (2): Directors Rabbitt and Renée

Staff Present: General Manager Denis Mulligan; District Engineer Ewa Bauer; Auditor-Controller Joseph Wire; District Secretary Janet Tarantino; Attorney David Miller; Deputy General Manager/Bridge Division Kary Witt; Deputy General Manager/Bus Transit Division Teri Mantony; Risk Management and Safety Director William Stafford; Electronic Revenue Collection Program Manager David Dick; Capital and Grants Programs Director Gayle Prior; Public Affairs Director Mary Currie; Executive Assistant to the General Manager Amorette Ko; Assistant Clerk of the Board Lona Franklin

Visitors Present: Nancy Jones, PFM Asset Management, LLC


 

     
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 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, of PFM, reported that the District’s portfolio is earning over 2%. This is exceptionally good, compared to one-month Treasury notes, which currently earn approximately 1%. She added that the trend for two-year Treasury yields is downward with the rate late last night or early this morning at .25%, which is a record low. She stated that the District’s portfolio has many long-term securities and is healthy for that reason.

She reported that there has been no indication that the United States economic slowdown is improving. Unemployment figures show that initial jobless claims have remained above 400,000 for the past eight weeks. Ben Bernanke, Chairman of the Board of Governors of the Federal Reserve System, recently increased the length of time interest rates are expected to remain very low. She stated that manufacturing is slow and the housing market has hit new lows. She indicated that, for the District’s portfolio, should PFM see investments that will produce a relatively high return, they will invest in those on the District’s behalf if appropriate.

Discussion ensued, including the following inquiries:

  • Director Cochran inquired as to how the civil unrest in Greece, due to its failing economy, will affect the United States market. In response, Ms. Jones stated that Greece must make severe cuts to their national budget in order to secure outside funding from the European Union to assist them. European banks will be affected. She concluded by stating that United States Treasury Notes are considered a relatively safe investment at this time.
  • Director Boro inquired as to recent news reports regarding the possibility that the United States will release oil from its strategic reserves. In response, Ms. Jones indicated that PFM will seek to confirm the Administration’s intentions in this regard and provide the information to the District.

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 authorize the following actions by the Auditor-Controller:

   


  a.
The Board of Directors has no commitments and/or expenditures to ratify for the period May 1, 2011 through May 31, 2011;
  b.
Ratify investments made by the Auditor-Controller during the period May 17, 2011, through June 13, 2011, as follows:
     
Security
Purchase Date
Maturity Date
Original Cost
Percent Yield
Caterpillar Financial SE Notes 05/20/11 05/20/14 3,698,039.00 1.39
Conoco Phillips Corp Notes 05/23/11 05/15/13 2,099,860.36 0.84
BNP Paribas Fin. Inc., Commercial Paper 05/23/11 08/23/11 5,509,900.47 0.22
Deutsche Bank Financial, Commercial Paper 05/24/11 08/23/11 2,327,822.56 0.20
Societe Generale NA, Commercial Paper 05/24/11 08/23/11 4,997,093.06 0.23
FNMA Notes 05/27/11 07/05/14 4,399,493.30 1.23
Societe Generale NA, Commercial Paper 06/01/11 08/03/11 880,660.82 0.22
JPMorgan Chase & Co. Global Notes 06/10/11 10/01/12 5,297,550.00 0.79
     
  c.
Authorize the Auditor-Controller to re-invest, within the established policy of the Board, investments maturing between June 14, 2011, and July 11, 2011, as well as the investment of all other funds not required to cover expenditures that may become available; and,
 

d.

Accept the Investment Reports for May 2011, as prepared by PFM.

Action by the Board at its meeting of July 8, 2011 – Resolution
CONSENT CALENDAR

     
 
AYES (8): Chair Stroeh; Directors Boro, Cochran, Grosboll, Moylan, Rabbitt, Renée and Sobel
NOES (0): None
ABSENT (3): Director Elsbernd; Vice Chair Pahre; President Reilly (Ex Officio)
     
2.

Authorize Budget Adjustment(s) and/or Transfer(s)

     
  a.

There were no budget adjustment(s) or transfer(s) to discuss.

       
3. Authorize Actions Related to Grant Programs
       
  a.

Authorize Filing an Application with the Metropolitan Transportation Commission for FY 11/12 Transportation Development Act, State Transit Assistance and Regional Measure 2 Operating Funds to Support Bus, Ferry and Paratransit Services

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Denis Mulligan reported on staff’s recommendation to authorize filing an application with the Metropolitan Transportation Commission (MTC) for FY 11/12 Transportation Development Act, State Transit Assistance and Regional Measure 2 Operating Funds to Support Bus, Ferry and Paratransit Services.

The staff report stated that the District is an eligible claimant for Transportation Development Act and State Transit Assistance (STA) funds. The staff report further stated that the Metropolitan Transportation Commission (MTC) is responsible for funding projects eligible for Regional Measure 2 (RM2) funds. MTC has established a process whereby eligible transportation project sponsors may submit allocation requests for RM2 funding. Allocation requests to MTC must be submitted consistent with procedures and conditions as outlined in Regional Measure 2 Policy and Procedures.

The staff report also stated that the District is an eligible sponsor of transportation project(s) in RM2. Specifically, Golden Gate Transit (GGT) Bus Route Nos. 40/42 service is eligible for consideration in the Regional Traffic Relief Plan of RM2, as are GGT Bus Route No. 72X Express Bus Service and Route No. 101 Limited Express Bus Service. 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 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 authorize the General Manager to file an application with the Metropolitan Transportation Commission (MTC) in the amount of $21,752,037.00 for FY 11/12 Transportation Development Act, State Transit Assistance and Regional Measure 2 funds to support bus, ferry and paratransit services; and, direct staff to transmit a copy of Resolution No. 2011-063 to the MTC in conjunction with the filing of the application referenced herein.

Action by the Board at its meeting of June 24, 2011 – Resolution
NON-CONSENT CALENDAR

AYES (8): Chair Stroeh; Directors Boro, Cochran, Grosboll, Moylan, Rabbitt, Renée and Sobel
NOES (0): None
ABSENT (3): Director Elsbernd; Vice Chair Pahre; President Reilly (Ex Officio)

 

     
4.

Approve Renewal of the Liability Insurance Program

In a memorandum to Committee, Risk Management and Safety Director William L. Stafford, Auditor-Controller Joseph Wire and General Manager Denis Mulligan reported on staff’s recommendation to approve renewal of the District’s Liability Insurance Program.

The staff report stated that the Liability Insurance Program covers the excess liability policy and specific policies limiting liability in connection with Workers’ Compensation claims, pollution and actions of public officials and employees. Current policies expire on June 30, 2011, with each of the recommended renewals being for one year. The staff report stated that, in addition, the District purchased a Pollution Liability Insurance policy in 2009, for a three-year term.

The staff report provided information on the renewal recommendations, the condition of the insurance market, specifics of premium cost and coverage limits. The staff report also detailed the work performed by Wells Fargo Insurance Services (WFIS), the District’s insurance broker, on the renewals for the Liability Insurance Program. In addition, the staff report stated that the premium for the recommended renewal package for the District’s Liability Insurance Program is $1,422,539.00, a 5% decrease from the premium for the expiring package. 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 excess liability insurance is the largest portion of the District’s Liability Insurance Program. He stated that premiums for excess liability have decreased by approximately 8%. Premiums for excess Workers’ Compensation have increased slightly.

Mr. Stafford briefly described each of the components of the Liability Insurance Program as outlined in the staff report. 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 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 approve renewal of the Liability Insurance Program, including the policies stated below:

  a.
Renew the Excess General and Automobile Liability Insurance Program, including Public Officials and Employment Practices Liability with TRIEA, Starr Indemnity, AWAC, Lexington, Swiss Re, Axis Insurance and Cat Excess, with a liability limit of $110 million each occurrence/annual aggregate in excess of a self-insured retention of $2 million each occurrence, including legal defense costs within the self-insured retention, at a total annual premium of $1,071,358.00, for a one-year term, effective July 1, 2011;
  b.
Renew the Excess Workers’ Compensation and Employers’ Liability Insurance Program with Safety National, in excess of a self-insured retention of $1 million each accident, with $25 million limits, for an estimated annual premium of $294,312.00, at a one-year term, effective July 1, 2011;
  c.
Renew the Public Officials’ Liability Insurance Program with Chartis, with a liability limit of $2 million each occurrence/annual aggregate and a self-insured retention of $100,000.00 each claim, including full Employment Practices Liability Coverage, at an annual premium of $42,741.00, for a one-year term, effective July 1, 2011;
  d.
Renew the Fiduciary Liability Insurance Program, for the Other Public Employee Benefits Trust Board, with Chubb Insurance Company, with a liability of $2 million each occurrence and no deductible, at an annual premium of $4,080.00, for a one-year term, effective July 1, 2011; and,
  e.
Renew the Public Employees’ Faithful Performance Bond and Comprehensive Dishonesty, Destruction and Disappearance Bond, with Fidelity and Deposit Company of Maryland, with a liability limit of $1 million for employee dishonesty and computer fraud, subject to a $25,000.00 deductible and $5,000.00 deductible, respectively, and a liability limit of $500,000.00 for loss of money and securities at the Golden Gate Bridge Toll Plaza, subject to a $5,000.00 deductible and $15,000.00 limit at all other locations, with a deductible of $5,000.00, at an annual premium of $10,048.00, for a one-year term, effective July 1, 2011;
 

with the understanding that requisite funds are available in the FY 11/12 Bridge, Bus Transit, Ferry Transit and District Divisions’ Operating Budgets.

Action by the Board at its meeting of June 24, 2011 – Resolution
NON-CONSENT CALENDAR

AYES (8): Chair Stroeh; Directors Boro, Cochran, Grosboll, Moylan, Rabbitt, Renée and Sobel
NOES (0): None
ABSENT (3): Director Elsbernd; Vice Chair Pahre; President Reilly (Ex Officio)

       
5.

Approve Renewal of the Property Insurance Program

In a memorandum to Committee, Risk Management and Safety Director William L. Stafford, Auditor-Controller Joseph Wire and General Manager Denis Mulligan reported on staff’s recommendation to approve renewal of the District’s Property Insurance Program.

The staff report provided a summary of the District’s Buildings & Facilities Insurance Program (Program), as well as recommended renewal of this Program for twelve months, effective July 1, 2011. This Program includes coverage for the District’s facilities, including coverage against losses from fire, flood, wind and earthquake.

In addition, the staff report stated that, effective April 8, 2006, in lieu of purchasing Bridge Physical Damage and Use & Occupancy insurance policy, the District established a restricted Golden Gate Bridge Self-Insurance Loss Reserve. Currently, the Self-Insurance Loss Reserve represents approximately $6.8 million in District reserves. The FY 11/12 contribution would raise the Self-Insurance Loss Reserve to approximately $8.1 million. Continued funding of the Restricted Bridge Self-Insurance Reserve Fund, with an investment of $1,300,000.00, will not have a net fiscal impact to the District in FY 11/12. The $1,300,000.00 will be transferred to the Restricted Bridge Self-Insurance Reserve Fund.

The staff report further stated that the cost of the District’s Building and Facilities Program and Boiler and Machinery Program for FY 11/12, is $639,826.00, a 12.1 percent increase from the FY 10/11 policy term. The staff report added that this is the first year that the District’s Building and Facilities Program will renew on July 1; in previous years, the Program renewed annually on April 8. Coverage limits currently are $125 million for All Risks of Physical Loss or Damage (All Risk) coverage, excluding earthquake and flood, and $20 million for earthquake and flood limits. Staff recommends that current coverage limits be maintained. 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 worldwide property claims due to disasters such as forest fires in New Zealand, and the earthquake in Japan, have caused premiums to increase overall.

Discussion ensued, including the following inquiry:

  • Director Grosboll inquired as to the reason that the limit for All Risk coverage is set at $125 million. In response, Mr. Stafford stated that staff has investigated the levels of All Risk coverage being purchased by the District’s peers, as well as reviewing the District’s past experience in this area, to determine the proper level of coverage.

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 renewal of the District’s Property Insurance Program, including the policies stated below:

  a.
Renew the District’s Building & Facilities Insurance Program, with $125 million of All Risk coverage, which includes earthquake and flood coverage for $20 million subject to deductibles, with Lexington, Arch and Endurance Insurance Cos., at a total annual renewal premium of $639,826.00, for a one-year term, effective July 1, 2011; with the understanding that requisite funds are available in the FY 11/12 Bridge, Bus Transit, Ferry Transit and District Divisions’ Operating Budgets; and,
 

b.

Approve continued allocation of monies to the Restricted Contingency Reserve for FY 11/12 in the amount of $1,300,000.00, for a one-year term, effective July 1, 2011; with the understanding that requisite funds are available in the FY 11/12 approved budget, and that the Restricted Contingency Reserve will be funded in conjunction with the Building & Facilities Insurance Program.

Action by the Board at its meeting of June 24, 2011 – Resolution
NON-CONSENT CALENDAR

     
  AYES (8): Chair Stroeh; Directors Boro, Cochran, Grosboll, Moylan, Rabbitt, Renée and Sobel
NOES (0): None
ABSENT (3): Director Elsbernd; Vice Chair Pahre; President Reilly (Ex Officio)
     
6.

Consideration of the Establishment of a Toll Classification for California Public Utilities Commission Certificated Providers of Regularly Scheduled Bus Transportation Services from Marin and Sonoma Counties to the San Francisco International Airport

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Denis Mulligan reported on the results of the public hearing held to receive public comment on the proposal to establish a new toll classification for California Public Utilities Commission (CPUC) certificated providers of regularly scheduled bus transportation services from Sonoma and Marin Counties to the San Francisco International Airport (SFO). The report also recapped staff's prior analysis regarding the proposal's feasibility and financial impact.

The staff report provided a chart showing the financial impact to the District that will result if the Board approves the new toll classification. The staff report stated that, if the new toll classification is implemented, estimated toll revenues would be reduced by $42,000.00 in FY 11/12 and $104,000.00 annually thereafter. This reduction represents 9% of the $1.2 million in anticipated additional revenue that would otherwise be generated by the multi-axle vehicle toll increase. 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. Wire briefly summarized the staff report, stating that a public hearing on this subject was held in May 2011. Additional information regarding the service provided by regularly scheduled CPUC certificated providers of regularly scheduled bus transportation services from Marin and Sonoma Counties to the SFO appears on pages 4 and 5 of the staff report. He concluded that, if approved by the Board, the new toll classification will take effect on July 1, 2011.

Discussion ensued, including the following comments and inquiries:

  • Director Cochran commented that information within the staff report indicates that the Sonoma County Airport Express (Sonoma Express) raised their rates by $2.00 per passenger, to $34.00, as of April 18, 2011. He stated that the Marin Airporter (Airporter) will have the ability to raise its fares by 5% with a 10-day notice to the CPUC. Were they to do so, the increase could be expected to provide them with an additional $219,000.00 in revenue annually. He concluded that he is not in favor of the proposed new toll classification.
  • Director Grosboll inquired as to whether consideration has been given to the District providing bus service to the SFO. Attorney David Miller stated that the District would be legally able to consider such service but has not done so in his recollection.
  • Director Boro commented that the proposed new toll classification is a compromise. He stated that the number of passengers transported annually by the Sonoma Express and the Airporter is shown on page 12 of the staff report, and also represents vehicles that are not travelling on the freeway. He stated that subsidies are necessary in order to encourage use of public transportation. He added that the service provided by these two carriers runs 18 hours per day, and is reliable. He concluded by stating that other Bay Area bridges allow them to cross without charge.
  • Director Renée commented that, given that these two carriers have the leeway to increase their fares, she would recommend that opposition comments should be proactively sought when they seek a fare increase.
  • Director Moylan inquired as to whether carriers other than the Sonoma Express and the Airporter would also be charged at the new toll classification rate. In response, Attorney Miller stated that the reduced toll will be provided only for CPUC certificated providers of regularly scheduled, fixed route bus transportation services from Marin and Sonoma Counties to the SFO. He stated that the service replicates a transit service and that, by contrast, tour buses are not operating on a fixed schedule.

Staff recommended and the Committee concurred by motion made and seconded by Directors BORO/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 establish a 24-hour toll rate of $7.50 for a three-axle vehicle with FasTrak®, representing a reduced per axle rate equivalent to 50% of the otherwise applicable two-axle toll, for California Public Utilities Commission certificated providers of regularly scheduled bus transportation services from Marin and Sonoma Counties to the San Francisco International Airport, effective July 1, 2011; and, amend the Master Ordinance accordingly.

Action by the Board at its meeting of June 24, 2011 – Resolution
NON-CONSENT CALENDAR

AYES (7): Chair Stroeh; Directors Boro, Grosboll, Moylan, Rabbitt, Renée and Sobel
NOES (1): Director Cochran
ABSENT (3): Director Elsbernd; Vice Chair Pahre; President Reilly (Ex Officio)

     
7.

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

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Denis Mulligan provided a schedule comparing categories of Bridge traffic, as well as a monthly review of Bridge traffic, tolls, transit patronage and fares, for eleven months ending May 2011. 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

     
8. Monthly Review of Financial Statements for Eleven Months Ending May 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

       
9.

Public Comment

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

 


10.

Adjournment

All business having been concluded, the meeting was adjourned at 11:55 a.m.

   
   

 

Respectfully submitted,

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