September 8, 2011

 

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 (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, September 8, 2011, at 10:15 a.m., Acting and Vice Chair Pahre presiding.

Committee Members Present (7): Acting and Vice Chair Pahre; Directors Boro, Cochran, Elsbernd, Grosboll and Sobel; President Reilly (Ex Officio)
Committee Members Absent (2): Chair Stroeh; Director Moylan
Other Directors Present (3): Directors Arnold, Eddie and Renée

Committee of the Whole Members Present (10): Directors Arnold, Boro, Cochran, Elsbernd, Pahre, Renée and Sobel; Second Vice President Grosboll; First Vice President Eddie; President Reilly (Ex Officio)
Committee of the Whole Members Absent (9): Directors Brown, Campos, Chu, Mar, Moylan Rabbitt, Snyder, Stroeh and Theriault

Staff Present: General Manager Denis Mulligan; District Engineer Ewa Bauer; Auditor-Controller Joseph Wire; Secretary of the District Janet Tarantino; Attorney David Miller; Deputy General Manager/Bus Transit Division Teri Mantony; Deputy General Manager/Administration and Development Kellee Hopper; Public Affairs Director Mary Currie; Senior Board Analyst Elizabeth Eells

Visitors Present: None

 

 

1. Authorize Budget Adjustment(s) and/or Transfer(s)
     
  a.

Budget Transfer from District Reserves to the FY 10/11 Operating Budget

In a report to Committee, Auditor-Controller Joseph Wire and General Manager Denis Mulligan reported on staff’s recommendation to authorize a transfer in the amount of $656,000.00 from District Reserves to the FY 10/11 Operating Budget, as a result of unanticipated costs associated with the Workers’ Compensation Program.

The staff report stated that in accordance with policies of the District, budget transfers greater than $50,000.000, which are made across different Divisions or across different line items within the same Division, are subject to the approval of the Board. The Workers’ Compensation program is regulated by the State Labor Code, and requires employers to compensate employees for work related injuries and illnesses. The District ensures compliance with all applicable laws related to its self-insurance Workers’ Compensation program and monitors the third party administrator for workers’ compensation claims.

The staff report also stated that the Fiscal Year (FY) 10/11 Adopted Operating Budget had a total expense allocation of $170.4 million and the Actual Expenses were $171.1 million, which caused the District to exceed its operating expense allocation in the amount of $656,000.00 due to the unanticipated cost of prior-year Reserve Workers’ Compensation adjustments. These FY 10/11 increases are not anticipated to continue. 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 the requested transfer is for the FY 10/11 Operating Budget. He indicated that these increased expenses occurred in a prior year.

Staff recommended and the Committee concurred by motion made and seconded by Directors COCHRAN/REILLY 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 transfer in the amount of $656,000.00from District Reserves to the FY 10/11 Operating Budget, as a result of unanticipated costs associated with the Workers’ Compensation Program.

Action by the Board at its meeting of September 9, 2011 – Resolution
NON-CONSENT CALENDAR

     
  AYES (10): Directors Arnold, Boro, Cochran, Elsbernd, Pahre, Renée and Sobel; Second Vice President Grosboll; First Vice President Eddie; President Reilly (Ex Officio)
NOES (0): None
     
2. Authorize Actions Related to Grant Programs
     
  a. There were no “Actions Related to Grant Programs” to be acted upon at this meeting.
   
3.

Receive the Updated Five- and Ten-Year Financial Projection

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Denis Mulligan reported on staff’s recommendation to receive the updated Five- and Ten-Year Financial Projection (Projection).

The staff report provided the Projection for the ten-year period from FY 12/13 through FY 21/22, which report included the following sections: (1) Introduction; (2) Fiscal Strength of the District; (3) Projection Findings; (4) Assumptions; and, (5) Next Steps; as well as the following Appendices: Appendix A, Projection; Appendix B, Assumptions; Appendix C, Ten-Year Capital Plan Projection; Appendix D, Capital Contribution Calculation; and, Appendix E, Reserve Structure.

The staff report also stated the Projection reflects the maintenance of all current policy decisions over the period of the Projection, including current operating service levels, current capital project schedule and current revenue assumptions, and assumes that the cost will change over time with inflation and that revenues will change according to projections of traffic and transit patronage. The Projection presents the long-term financial impact of the present baseline level of operations; however, the Projection is not a policy document and does not represent the direction that will be set by policy decisions made by the Board of Directors in future years, including decisions to change tolls, fares, and/or service levels. 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 deficit remains, but a positive change from last year is evident. He noted that a financial projection allows managers, the Board and the public to see the challenges being faced by the District and provides a baseline by which to measure outcomes.

Mr. Wire indicated that the District presently has strong financial reserves, but also has a significant capital plan. He noted that the effects of projected future spending on reserves are discussed on pages three and four of the staff report. He stated that the projected deficit is approximately $87 million for the next five years, or $2 million less than that projected last year. He noted the importance of understanding that the assumptions used for the District’s financial projection come from a number of sources, such as the Association of Bay Area Governments. Key components are inflation, salaries and medical costs and the Consumer Price Index.

Mr. Wire referred to page six of the staff report, noting that capital projects are listed with the assumption that grant funding (80%) will be received. He stated that the deficit would increase concomitantly without receipt of grant funds. He concluded by stating that the FY 10/11 Financial Plan for Achieving Long-Term Financial Stability will come before the Board for review before December 31, 2011.

Discussion ensued, including the following comments and inquiries:

  • Director Grosboll made the following inquiries:
    • He inquired as to the difference in the two charts for the Golden Gate Bridge Reserve on page seven of the staff report. In response, Mr. Wire stated that the deficit would be $87 Million with the assumption of 80% grant funding as shown in the top chart. If grant funding is 50%, the District’s cost would increase.
    • He inquired as to assumptions used for the District’s contribution to Caltrans’ Doyle Drive Reconstruction Project (Doyle Drive Project). In response, Mr. Wire stated that the District’s contribution is currently expected to be made in 2014 but Caltrans has stated the payment date may move to 2015.
  • Director Boro made the following inquiries:
    • He inquired as to whether the District has set aside funds to pay for its contribution to the Doyle Drive Project. In response, Mr. Wire stated that the District started setting aside funds for this purpose a few years ago and will set aside funds for a ten-year period. He added that the District’s contribution is considered an operating expense and not a capital expense.
    • He inquired as to whether the District would hold a Special Board Meeting in October 2011, to review and update the District’s Financial Plan for Achieving Long-Term Financial Stability (Plan). In response, Mr. Wire stated that it would be the Board of Director’s (Board) decision to hold a special meeting. The District has used a variety of approaches to review and update the Plan. Staff plans to discuss the Plan with the Board at one of its meetings in October 2011.
    • He inquired as to whether the District’s progress in decreasing its deficit with the use of the Plan can be included for discussion at that meeting in October 2011. Mr. Wire responded affirmatively.
  • Director Pahre made the following inquiries:
  • She inquired as to whether staff could do a comparison further back than 2009. Mr. Wire responded affirmatively. He stated that the District has figures back to 2003, which show how the District has been able to reduce the deficit.
  • She inquired as to whether the District could provide a discussion of the District’s financial position since 2003. Mr. Wire responded affirmatively.
  • Director Cochran made the following inquiries:
    • He inquired as to the wide range in the District Reserves from $68 million to a negative $134 Million in FY 13/14 on page four of the Projections. In response, Mr. Wire stated that the projected District Reserves are negative $134 million in FY 13/14, due to the $75 million payment for the District’s contribution to the Doyle Drive Project, as well as start-up of several major capital projects.
    • He inquired as to the amount of the District’s interest income. In response, Mr. Wire stated that the Projection includes interest income in investment income.

Staff recommended and the Committee concurred by motion made and seconded by Directors SOBEL/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 receive the Updated Five- and Ten-Year Financial Projection for the ten-year period from FY 12/13 through FY 21/22 (Projection), including the following Sections and Appendices of the Projection, to be attached to the official Resolution:

  a. SECTIONS
    I. Introduction;
    II. Fiscal Strength of the District;
    III. Projection Findings;
    IV. Assumptions; and,
    V. Next Steps.
  b. APPENDICES
    A. Projection;
    B. Assumptions;
    C. Ten-Year Capital Plan Projection;
    D. Capital Contribution Calculation; and,
    E. Reserve Structure.
       
 

Action by the Board at its meeting of September 9, 2011 - Resolution
NON-CONSENT CALENDAR

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

       
4.

Public Comment

There was no public comment.

     
5.

Adjournment

All business having been concluded, the meeting was adjourned at 10:45 a.m.

     

 

Respectfully submitted,

s/ Barbara L. Pahre, Acting and Vice Chair
Finance-Auditing Committee