June 22, 2012

 

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 Friday, June 22, 2012, at 9:30 a.m., Chair Stroeh presiding.

Committee Members Present (7): Chair Stroeh; Vice Chair Pahre; Directors Cochran, Eddie, Elsbernd, Moylan; President Reilly (Ex Officio)
Committee Members Absent (2): Director Grosboll and Sobel
Other Directors Present (5): Directors Fredericks, Rabbitt, Renée, Sears and Theriault

Committee of the Whole Members Present (12): Directors Cochran, Elsbernd, Fredericks, Moylan, Pahre, Rabbitt, Renée, Sears, Stroeh and Theriault; First Vice President Eddie; President Reilly (Ex Officio)
Committee of the Whole Members Absent (7): Directors Arnold, Campos, Chu, Mar, Snyder and Sobel; Second Vice President Grosboll

Staff Present: General Manager Denis Mulligan; Auditor-Controller Joseph Wire; District Engineer Ewa Bauer; Secretary of the District Janet Tarantino; Attorney David Miller; Deputy General Manager/Bridge Division Kary Witt; Deputy General Manager/Bus Transit Division Teri Mantony; Deputy General Manager/Administration and Development Kellee Hopper; Director of Risk Management and Safety William Stafford; Assistant Clerk of the Board Lona Franklin

Visitors Present: None

1. Ratification of Previous 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), and no verbal report was provided by 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.

Staff recommended and the Committee concurred by motion made and seconded by Directors EDDIE/ 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 ratifies commitments and/or expenditures totaling $12,870.00 for the period May 1, 2012, through May 31, 2012;
  b. Ratify investments made by the Auditor-Controller during the period May 15, 2012, through June 11, 2012, as follows:
 
Security
Purchase Date
Maturity Date
Original Cost
Percent Yield
Royal Bank of Canada NY CD
05/15/12
05/10/13
9,000,000.00
0.56
Nordea North America, Commercial Paper
05/23/12
08/17/12
7,344,908.08
0.29
McDonalds Corp Notes
05/29/12
05/29/15
807,772.50
0.84
Caterpillar Fin Corp Notes
05/30/12
05/29/15
414,867.20
1.10
  c. Authorize the Auditor-Controller to re-invest, within the established policy of the Board, investments maturing between June 12, 2012, and July 16, 2012, 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 May 2012, as prepared by PFM.
   
 
Action by the Board at its meeting of July 12, 2012 – Resolution
CONSENT CALENDAR

AYES (11): Directors Cochran, Elsbernd, Fredericks, Moylan, Pahre, Rabbitt, Renée, Stroeh and Theriault; First Vice President Eddie; President Reilly (Ex Officio)
NOES (0): None

   
2. Authorize Budget Adjustment(s) and/or Transfer(s)
   
  a. Budget Transfers Relative to the FY 11/12 Operating Budget

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Denis Mulligan reported on staff’s recommendation to authorize budget transfers relative to the FY 11/12 Operating Budget.

The staff report stated that, in accordance with policies of the Golden Gate Bridge, Highway and Transportation District (District), budget transfers greater than $50,000.00, which are made across different Divisions or across different line items within the same Division, are subject to the approval of the Board of Directors (Board).

The staff report further stated that six categories of increased expense in the Operating Budget must be addressed, namely: Salaries; Professional Services; Fuel and Taxes; Depreciation; Indirect Cost Allocation Plan (ICAP); and, Repair and Maintenance.

In addition, the staff report stated that funding is available in four expense categories including Debt Service, due to lower payment to the commercial paper indenture than budgeted, Workers’ Compensation due to a one-time reimbursement for prior year claims and lower than anticipated medical costs and lower Professional Fees. The budget transfers will not result in a net increase in the Operating Budget for the District.

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 proposed budget transfers will finalize the budget process pursuant to the Rules of the Board.

He reported that expenses had been higher for fuel that previously predicted. In addition, capital project spending was lower, and requirements for operating funds were higher than planned. The District expended more funds on services for the Ferry Transit Division and, because interest rates were lower, a smaller amount than expected was required for debt service. Finally, costs for Workers’ Compensation were lower than expected, primarily due to lower medical bills.

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/Committee of the Whole recommends that the Board of Directors authorize Operating Budget transfers in the amount of $4,195,000.00, or 2.4% of the total FY 11/12 Operating Budget Expenses, as follows:

    a. Salaries: Transfer $630,000.00 from Ferry Worker’s Compensation to Ferry Salaries;  
    b. Professional Services: Transfer $213,000.00 from Bridge Facility Maintenance to District Division Professional Services;  
    c. Fuel & Taxes: Transfer $1,250,000.00 from Bridge Debt Service and $160,000.00 from Bridge Workers’ Compensation to Bus Transit ($605,000.00) and Ferry Transit ($805,000.00) Fuel and Taxes;  
    d. District Indirect Cost Allocation Plan: Transfer $1,362,000.00 from Bridge, Bus and Ferry Medical Expense to District Division Indirect Cost Allocation Plan (ICAP);  
    e. Repair & Maintenance: Transfer $90,000.00 from Bus Repair Maintenance and $210,000.00 from Bridge Professional fees to Ferry Facility Maintenance & Repair; and,  
    f. Depreciation: Transfer $280,000.00 from Bridge Worker’s Compensation to Bus and Ferry Depreciation.  
         
   
Action by the Board at its meeting of June 22, 2012 – Resolution
NON-CONSENT CALENDAR

AYES (11): Directors Cochran, Elsbernd, Fredericks, Moylan, Pahre, Rabbitt, Renée, Stroeh and Theriault; First Vice President Eddie; President Reilly (Ex Officio)
NOES (0): None

     
3. Approve Actions Relative to the Annual Review of Rule XI, Investment Policy of the Rules of the Board
     
  In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Denis Mulligan reported on staff’s recommendation to approve actions relative to the Annual Review of Rule XI, Investment Policy of the Rules of the Board.
   
  a. Background

The District’s investments are guided by the District’s Investment Policy, which Policy is published in the Rules of the Board (Rules) to govern its proceedings pursuant to the Streets and Highways Code and the District’s Resolution No. 20, dated April 10, 1929, as amended.

     
  b. Staff Report

The staff report stated that the District was advised by its Investment Advisor, Public Financial Management, Inc. (PFM), that specific language contained in Rule XI, Investment Policy, of the Rules, under the following Sections, should be amended to reflect current California law on public investments, as summarized below:

Section A. Introduction
Revise reference to the applicable provisions of the Government Code from “Article 2” of Chapter 4 of the California Government Code to “Articles 1 and 2” of Chapter 4 of the California Government Code.

Section I. Permitted Investment Instruments
Add “federally-licensed” branch of a foreign bank to Paragraph 3, Negotiable Certificates of Deposit. This revised language reflects the 2012 change in the Government Code 53601(i) which now allows investments in negotiable certificates of deposit issued by federally-licensed branches of foreign banks. Previously, the statute provided for investments only in state-licensed branches of foreign banks.

Section Q. Investment Sub-Committee
This section provides for the establishment of an Investment Sub-Committee (Sub-Committee), comprised of the Chair of the Finance-Auditing Committee, plus two other Directors and the Auditor-Controller, to review the District's investment strategy and policy on at least a quarterly basis. To conform to actual practice, it is recommended that the Sub-Committee review the District's investment strategy and policy on an as-needed basis, rather than quarterly.

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 District reviews the Rules of the Board annually, and proposes amendments pursuant to new changes in the California Government Code. He added that new language also clarifies that a meeting of the Investment Sub-Committee can be called as needed. He concluded by stating that such a need has not arisen in the past eight to nine years.

   
 

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

RECOMMENDATION

The Finance-Auditing Committee/Committee of the Whole recommends that the Board of Directors approve the following actions relative to the Investment Policy as contained in the Rules of the Board (Rules):

   
  1. Approve amendments to RULE XI., INVESTMENT POLICY, of the Rules, under Section A. Introduction; Section I. Permitted Investment Instruments; and, Section Q. Investment Sub-Committee of the Rules, as set forth below:
    a. Section A. Introduction
(Replace the second paragraph in its entirety with the following.)
“The investment policies and practices of the Golden Gate Bridge, Highway & Transportation District are based on state law and prudent money management. All general funds will be invested in accordance with the District's Investment Policy and shall be consistent with the provisions of Articles 1 and 2 of Chapter 4 of the California Government Code (commencing with Section 53600). The investment of bond or note proceeds will be governed by the provisions of the relevant bond documents. (Res. 01-148, 9/14/01).”
Section I. Permitted Investment Instruments
(Replace Sub-Paragraph 3, Negotiable Certificates of Deposit” in its entirety with the following.)
“The District may invest in negotiable certificates of deposit or deposit notes issued by a nationally or state chartered bank or a state or federal savings and loan association or by a federally-licensed or state-licensed branch of a foreign bank; provided that the senior debt obligations of the issuing institution are rated in one of the two highest categories by a NRSRO.”
Section Q. Investment Sub-Committee
(Replace Section Q in its entirety with the following.)
“An Investment Sub-Committee shall be established that will include the Chair of the Finance-Auditing Committee, plus two other Directors and the Auditor-Controller, to periodically review the District's investment strategy and investment policy as needed. (Res. 81-197, 5/29/81.).”
 
     
  2. Renew the annual delegation of investment management authority to the Auditor-Controller for Fiscal Year 12/13; and,
     
  3. Amend the Rules accordingly.
     
 
Action by the Board at its meeting of June 22, 2012 – Resolution
NON-CONSENT CALENDAR

AYES (11): Directors Cochran, Elsbernd, Fredericks, Moylan, Pahre, Rabbitt, Renée, Stroeh and Theriault; First Vice President Eddie; President Reilly (Ex Officio)
NOES (0): None

     
4.   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 Denis Mulligan reported on staff’s recommendation to approve renewal of the 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, actions of public officials and employees, as well as pollution. All of the recommended renewals are for one year, with the exception of the Pollution Liability Policy which has a three-year term. All the policies, except for the pollution policy, expire on June 30, 2012.

The staff report provided details regarding the market for insurance products, as well as details regarding the District’s insurance policies, as follows: Excess Liability; Excess Workers’ Compensation; Public Officials Liability/Employment Practices; Fiduciary Liability; Crime/Fidelity Bond; and, Environmental Pollution Liability.

The staff report concluded by stating that the premium for the recommended renewal package for the District’s Liability Insurance Program has decreased slightly less than 1% for FY 12/13.

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 the District’s insurance broker, Wells Fargo Insurance Services, marketed the District’s insurance package to twenty carriers and, due primarily to its favorable loss record, the District received three quotations with more advantageous conditions than has been offered in the past.

Discussion ensued, including the following inquiry:

  • Director Pahre inquired as to how often the District makes a claim against its Excess Workers’ Compensation insurance. In response, Mr. Stafford stated that the District has had no claims greater than the $1 million retention since 2003.

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

RECOMMENDATION

The Finance-Auditing Committee/Committee of the Whole recommends that the Board of Directors approve renewal of the Liability Insurance Program, including the policies stated below:

    a. Approve renewal of the Excess General and Automobile Liability Insurance Program, including Public Officials and Employment Practices Liability with TRIA, with Starr Indemnity, AWAC, Lexington, Swiss Re and Axis, for a one-year term, 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, for a total annual premium of $1,052,962.00, effective July 1, 2012;  
    b. Approve renewal of the Excess Workers’ Compensation and Employers’ Liability Insurance Program with Safety National, for a one-year term, in excess of a self-insured retention of $1 million each accident, with $25 million limits, for an estimated annual premium of $316,031.00, effective July 1, 2012;  
    c. Approve renewal of the Public Officials’ Liability Insurance Program with Chartis, for a one-year term, with a liability of $2 million each occurrence/annual aggregate and a self-insured retention of $100,000.00 each claim, including full Employment Practices Liability Coverage, for an annual premium of $46,294.00;  
    d. Approve renewal of the Fiduciary Liability Insurance Program, for the Other Public Employee Benefits (OPEB) Trust Board, with Chubb Insurance Company, for a one-year term, with a liability of $2 million each occurrence and no deductible, for an annual premium of $4,080.00, effective July 1, 2012;  
    e. Approve renewal of the Public Employees’ Faithful Performance Bond and Comprehensive Dishonesty, Destruction and Disappearance Bond, with Fidelity and Deposit Company of Maryland, for a one-year term, 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, for an annual premium of $10,048.00, effective July 1, 2012; and,  
    f. Approve renewal of the Environmental Pollution Liability Program including TRIA, for a three-year term, with a $5,000,000.00 limit subject to a $250,000.00 deductible, for a three-year premium of $88,456.00, effective July 1, 2012 through June 30, 2015;  
    with the understanding that requisite funds are available in the FY 12/13 Bridge, Bus Transit, Ferry Transit and District Divisions’ Operating Budgets.

Action by the Board at its meeting of June 22, 2012 – Resolution
NON-CONSENT CALENDAR

AYES (11): Directors Cochran, Elsbernd, Fredericks, Moylan, Pahre, Rabbitt, Renée, Stroeh and Theriault; First Vice President Eddie; President Reilly (Ex Officio)
NOES (0): None

 
         
5. Approve Renewal of the Property Insurance Program

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

The staff report provided details regarding the District’s Bridge and Facilities policy, the premium for which has increased only 0.84% from the FY 11/12 policy term; and, for its Bridge Property Damage/Loss of Revenue policy.

The staff report also stated that the Restricted Golden Gate Bridge Self-Insurance Loss Reserve Fund (Reserve Fund) currently represents approximately $8.2 million in District reserves, and will increase to approximately $9.4 with approval of the $1,300,000.00 allocation for FY 12/13. The allocation will not have a net fiscal impact to the District in FY 12/13, and funds will be transferred to the Reserve Fund.

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 it had been expected that there would be a modest premium increase for FY 12/13, and that the District has been fortunate in receiving a favorable renewal rate.

[Director Sears arrived at this time.]

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

RECOMMENDATION

The Finance-Auditing Committee/Committee of the Whole recommends that the Board of Directors approve the renewal of the District’s Property Insurance Program, including the policies stated below:

  a. Approve renewal of the District’s Building & Facilities Insurance Policy, 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., for a renewal premium of $645,218.00, for a one-year term, effective July 1, 2012; with the understanding that requisite funds are available in the FY 12/13 Bridge, Bus Transit, Ferry Transit and District Divisions’ Operating Budgets; and,
  b. Approve continued allocation of monies to the Restricted Contingency Reserve, for FY 12/13, in the amount of $1,300,000.00, as self-insurance for costs associated with Bridge Physical Damage and Loss of Revenue; with the understanding that requisite funds are available in the FY 12/13 approved budget, and that the Restricted Contingency Reserve will be funded in conjunction with the Building & Facilities Insurance policy renewal date of July 1, 2012.
     
 
Action by the Board at its meeting of June 22, 2012 – Resolution
NON-CONSENT CALENDAR

AYES (12): Directors Cochran, Elsbernd, Fredericks, Moylan, Pahre, Rabbitt, Renée, Sears, Stroeh and Theriault; First Vice President Eddie; President Reilly (Ex Officio)
NOES (0): None

     
6. Monthly Review of Golden Gate Bridge Traffic/Tolls and Bus and Ferry Transit Patronage/Fares (for Eleven Months Ending May 2012)

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 eleven months ending May 2012. 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. Monthly Review of Financial Statements (for Eleven Months Ending May 2012)
     
  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 for Eleven Months Ending May 2012. 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 for Eleven Months Ending May 2012. 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.

Public Comment

There was no public comment.

       
9.

Adjournment

All business having been concluded, the meeting was adjourned at 9:43 a.m.

       

 

Respectfully submitted,

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