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MINUTES OF THE MARCH 9, 2005 – 3:00 p.m. 1. Call to Order Mr. Nothenberg announced that a quorum was present and called the meeting to order at 3:08 p.m. Present:
Absent: Ms. Lily J. Cuneo, Director Also Present:
Mr. Nothenberg stated that the purpose of this meeting was to have the Board collectively instruct the trustee as to what to do with Board investments, to review SFMRIC commitments, and to consider additional funding requests. 2. Public Comment No public comment was received. 3. Approval of minutes of the Board meeting of December 1, 2004 It was moved by Ms. Lenvin, seconded by Mr. Ludwig that the minutes of December 1, 2004 be adopted. The motion was unanimously approved. 4. Update by Trustee and Legal Counsel on Board finances, and possible action item to provide direction to Trustee regarding investments Mr. Nothenberg stated that he had asked Muni to provide the Board with a draw-down schedule for the Board’s commitments. He directed attention to a list of existing funding commitments:
Mr. Nothenberg stated that some of the commitments are quite old but, according to Muni, are still active. He noted that he has received some payment requests for these projects that he has not yet approved. In addition to these project commitments, the Board has on-going expenses, including legal, accounting and auditing expenses, as well as an on-going contract with Doug Wright on the redevelopment of the Kirkland yard. Other than spending the committed funds, the Board’s activities will be limited for awhile until additional debt is issued. Ms. Carey then provided a draw-down schedule for projects with approved SFMRIC funding, including the Central Control project (SFMRIC #51 for $150,000).
Ms. Carey reviewed the projected dates funding would be needed; the draw-down schedule is broken down into six-month increments. She noted several natural break-points in the schedule. The first would be December 2005. Assuming the projects progress as planned, Muni would request approximately $2.1 million in reimbursements by the end of the year. The single biggest draw-down request would be for the rail replacement program (SFMRIC #55), for which Muni has already submitted a reimbursement request for $1.1 million. According to the draw-down schedule, Muni would request another $1.1 million each in 2006 and 2007 respectively. There is some flexibility in those dates if the Board would like to defer some commitments to match their investment maturity schedule. For example, SFMRIC #54 is for site preparation work at the Islais Creek facility. Other funding sources could be used to support site preparation work, delaying the draw-down of SFMRIC funds until a later stage of the project. Ms. Monique DeJong of Capital Planning then distributed a project funding update identifying the status of each SFMRIC project and the anticipated project schedule and completion date. Mr. Nothenberg asked, with the exception of the three items approved in December 2004, whether any of the projects are waiting for additional funding from other sources that have not yet been committed. Ms. DeJong stated that three projects do have matching funds that are still coming in. For example, the trolley coach project is awaiting federal grant funds of $4.3 million, which will complete funding for the project. She said, however, this will not hold up the project. The SFMRIC portion of funding for this project is a much older part of the project and will be expended first. Ms. DeJong stated Muni operates projects on a reimbursement basis, and SFMRIC funds would only be requested when Muni incurs costs against a project. Mr. Nothenberg inquired after the status of Proposition K funds. Ms. DeJong stated that Prop. K sales tax funds were renewed approximately two years ago. A detailed expenditure plan is being adopted which will show what projects will receive funding. Islais Creek is one of the projects expected to receive funds from this source. Mr. Nothenberg advised the Board that it appeared all requests for SFMRIC funds were for projects that are being implemented. Therefore, SFMRIC would need to have on hand approximately $2.1 million by the end of this calendar year. He then asked for an update from the Board’s trustee on its finances. Mr. Ume-Ukeje of Piper Jaffray, Inc., provided the following list of investments, by fund and investment type, as of March 9, 2005: Construction Fund:
Equipment Fund:
Corporate Operating Fund:
Interest Fund:
Revenue Fund:
Total $4,541,782.97 In addition to these investments, Mr. Nothenberg noted that the Board has an agreement with Muni that once Muni begins to collect rent from Hotel Vitale, it will repay the Board for funds expended on site preparation at the Mission-Steuart location. Now that the hotel has opened, the first scheduled repayment of $197,000 is due in the third quarter of FY06, which would be January-March 2006. Four additional payments of an equal amount are payable in the third quarter of each year through FY10. These payments will provide additional funds for allocation by the SFMRIC Board. Mr. Ume-Ukeje reviewed the Board’s most recent investment statement. Of the $4.5 million in the SFMRIC portfolio, $270,000 is in money market accounts, $1.7 million in investments will mature in November 2005, and $2.5 million will mature in May 2007. The investment assets could be made available prior to their maturities if need be, without substantial penalty. Mr. Nothenberg noted that most of the SFMRIC obligations between now and December 2005 could be covered with existing liquid assets, except for the rail replacement program. He asked if Muni had other sources of funds that could be substituted for SFMRIC funds for the rail replacement project, or if funding could be delayed until December, or whether it is critical that Muni receive the SFMRIC funds prior to their maturity date. Ms. Carey replied that the rail replacement program is the one project where funding is needed before the end of Muni’s fiscal year in June 2005 because there is a shortage of local matching funds. The expenditure of federal grant funds has already been made and SFMRIC funds are needed to satisfy the local matching fund requirement; otherwise, Muni would have to cover the match requirement with operating funds. Given Muni’s projected shortfall in operating funds, SFMRIC funds are the only source of local matching funds for the federal grant this fiscal year. Mr. Nothenberg asked for a motion to liquidate $1.3 million in SFMRIC funds. Ms. Lenvin asked for clarification regarding the money market funds in the various accounts. Mr. Fong of Union Bank stated the money market funds have daily yield, but could be liquidated at any time. He stated that these account balances were left over when the bonds were paid off. Ms. Carey clarified that the bond indentures required that SFMRIC establish a series of accounts for each bond series, and that proceeds were deposited into those accounts according to the indenture. Now that the bonds have been retired, the remaining accounts could probably be consolidated at this point. She recommended, however, that the Corporate Operating Fund be kept for on-going expenses. In response to Mr. Nothenberg’s inquiry about the Board’s on-going expenses, Mr. Scott Emblidge stated that SFMRIC annual operating expenses have not exceeded $20,000 in the past several years. In public comment on this item, Mr. David Pilpel asked if funds remaining in the construction fund and equipment fund could be consolidated if they were based on two separate bond indentures. Mr. Nothenberg replied that once the original bond indenture is satisfied the remaining funds can be consolidated.
It was moved by Mr. Ludwig, seconded by Ms. Lenvin that the trustees be instructed to liquidate $1.3 million of the Federal Home Loan Bank (FHLB) notes and to place it in a cash equivalent fund. The motion was unanimously approved. Mr. Nothenberg directed Mr. Emblidge to provide an update on Board finances and a draw-down schedule at the next Board meeting later this year. 5. Consideration of Municipal Railway request to reprogram Central Control facility funds Mr. Nothenberg stated this item was postponed at the December 1, 2004, meeting in order to give the Board time to study the request. Ms. Carey introduced Roger Nguyen, Construction Project Manager, who was available to provide additional information the Board might need to consider this request. The project will provide digital voice data recorder hardware and software. The current system is old and does not provide reliable backup. A consultant will provide the hardware and software, installation and training for the new system. The city’s Department of Telecommunications and Information Services will help update the telephone system at Central Control during this upgrade. Patty DeVlieg then provided details of Advanced Train Control System (ATCS) and how this new system will help it work more efficiently. Track areas are divided up into eight zones, commonly known as waysides. The waysides handle train movement through axle counters in the eight zones so that train movement is monitored within the subway. The department only has two backup systems to use within these eight zones and would like to purchase enough units so that there will be one available in each zone for backup. Mr. Nothenberg asked if these funds are to replace Muni funds. Ms. DeVlieg stated these funds are needed to obtain engineering expertise that may be needed to reprogram the ATCS system to a single, rather than dual, system. Mr. Nothenberg noted that if this request is approved, it would virtually deplete the remaining uncommitted SFMRIC funds. He asked if there are plans by Muni to authorize the issuance of additional debt. Ms. Carey stated that the department is aware of the remaining balance of uncommitted SFMRIC funds, but has no plans to request SFMRIC to issue additional debt until there is capacity in the operating budget to cover payment of debt service. In public comment, Mr. Pilpel asked if any failures had occurred in the past. Ms. DeVlieg said yes and that it can cause significant delays. She also stated that these units must be made site-specific and are not interchangeable. It was moved by Ms. Lenvin, seconded by Mr. Ludwig to approve reprogramming of Central Control facility funds. The motion was unanimously approved.
6. Update from Municipal Railway staff on Mission-Steuart Hotel development Ms. Kerstin Magary, Muni Project Manager, distributed an updated report on the Mission-Steuart hotel development. The project began in 1996, nine years ago, and has now been completed. She congratulated the Board on being the first to allocate funds for the project. Hotel Vitale opened today and hotel management has invited the Board to a reception on March 10 at 7 p.m. She thanked the Board for its support of the project. Ms. Carey distributed to Board members letters of commendation and gift bags sent over by Hotel Vitale as a thank-you for their support. On another note, Mr. Nothenberg inquired when the Board would receive an updated financial statement from their accountant. Mr. Emblidge explained that SFMRIC’s accountant completes the financial statement and turns it over to SFMRIC’s auditor who in turn gives the audit to KPMG, Muni’s auditor. KPMG has just completed their audit and has released the audited financial statement for distribution. Copies were provided to each Board member. 7. Update from Municipal Railway staff on the status of the proposed development at Kirkland Yard Ms. Magary distributed and reviewed an update on the project. Kirkland and Islais Creek are joint projects. The economic development is done; both the consultant and MTA staff are revising the RFP and RFQ. The Islais Creek project will be fully funded by fiscal year 2007. Construction at Kirkland is expected in 2010. Mr. Nothenberg inquired when the RFP would be released for Kirkland. Ms. Magary stated that monthly meetings are held with the Mayor’s Office of Housing and MTA staff in order to get the RFP completed by Fall 2005. 8. Update from Municipal Railway on recently approved projects (Geneva canopy, New Orleans streetcar purchase, PCC rehabilitation) Ms. Magary distributed an updated report. A letter from Executive Director Michael Burns is being sent to New Orleans this week regarding purchase of the streetcar. 9. Such other business as may come before the Board of Directors The Board requested information on the following two items at its next meeting:
10. Setting Date and time for the next Board meeting The next meeting will be held in December 2005, unless another meeting is called earlier. 11. Adjournment The meeting adjourned at 4:28 p.m. |
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