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September 29, 2010, 2:30 p.m.

220 Montgomery Street, Suite 2100
San Francisco, California


Mr. Nothenberg stated that a quorum was present and the meeting was called to order.


  • Mr. Rudy Nothenberg, President
  • Mr. James Ludwig, Vice President
  • Ms. Nancy Lenvin, Secretary
  • Mr. Thomas Escher, Treasurer


Also Present:        

  • Ms. Sonali Bose, Director of Finance and Information
  • Technology/CFO, SFMTA
  • Mr. Steven Lee, Finance and Information Technology, SFMTA
  • Ms. Gail Stein, Finance and Information Technology, SFMTA
  • Ms. Eloida Leonardo, Finance and Information Technology, SFMTA
  • Ms. Kerstin Magary,  Finance and Information Technology, SFMTA
  • Mr. Peter Gabancho, Capital Programs and Construction, SFMTA
  • Mr. Ken Ngan, Capital Programs and Construction, SFMTA
  • Ms. Lisa Chow, Capital Programs and Construction, SFMTA
  • Mr. Louis Maffei, Capital Programs and Construction, SFMTA
  • Mr. Jonathan Rewers, Finance and Information Technology, SFMTA
  • Ms. Aida Corpuz, Finance and Information Technology, SFMTA
  • Mr. Scott Emblidge, Partner, Moscone Emblidge & Sater
  • Ms. Sylvia Sokol, Attorney, Moscone Emblidge & Sater
  • Ms. Stephanie Stuart, Deputy City Attorney
  • Mr. Mark Blake, Deputy City Attorney
  • Ms. Michelle Sexton, Partner, Rosales Law Partnership
  • Mr. Vincent McCarley, Backstrom McCarley Berry & Co.
  • Mr. Erwin Tam, Backstrom McCarley Berry & Co.


  1. Public comment – none.
  2. Approval of the minutes of the Board meeting of March 11, 2010 – adopted as submitted, without comment.
  3. Discussion of SFMRIC account balances, grant commitments and available cash – Eloida Leonardo made a brief presentation, based on Attachment A to the meeting agenda.  In response to questions by Rudy Nothenberg, Ms. Leonardo said that the money now held by the Treasurer is easily available and that balances are available any time online.  She added that the financial statements for fiscal year 2009-2010 have been completed and submitted to the auditors and will be available for distribution to the Board as soon as finalized.
  4. Rudy Nothenberg then called the agenda item for update on budget, schedule and scope of SFMRIC-funded projects:
    1. Hotel Vitale Loan Status—Mr. Nothenberg cited Attachment B which, he noted, is complete and asked the Attachment to be filed.  There were no questions.
    2. Review of status of funded projects, based on Attachment D:
      1. Van Ness Motor Generator Replacement Project—Ken Ngan gave an update on the status of the project, including the fact that the project had now been vetted through the CER process and, as a result, changes had been made to it, particularly relating to the amount of space needed for the project and project cost.  Ms. Ngan provided additional information in response to Thomas Escher’s request for more background and clarification about the project.  Nancy Lenvin suggested that, in the future, the SFMTA probably should not bring projects to the SFMRIC Board until after the CER process so that the project is fully vetted and the numbers more firm.  Rudy Nothenberg stated that SFMTA staff should prepare a summary of the process for how project estimates were derived and how they change over the life of the project and when is the appropriate time in the process/funding estimate to request funding from SFMRIC.
      2. Geneva Canopy Project—Lisa Chow gave an overview, including the fact that the Project is mostly completed and within budget and that this would be the last report to the SFMRIC Board on this project.  Ms. Chow will provide photos of the Project to Ms. Bose to forward to the Board members.
      3. Islais Creek Bus and Maintenance Facility—Peter Gabancho gave an update regarding the requirement to re-bid the project.  Mr. Nothenberg commented that the $6,227,618 number for SFMRIC participation seemed high.  Ms. Bose promised to follow-up regarding this number, which differs from other numbers presented to the SFMRIC Board.
      4. Historic Streetcar Rehabilitation and Overhaul Program—Louis Maffei presented (for Elson Hao) and stated that the rehabilitation for Car #1 is nearing completion and that Project staff would provide photos soon.  The remaining part of the Project involves 11 former New Jersey PCCs and four double-ended PCCs.
    3. Loan for Commercial Tenants for Central Subway (Attachment C)—Mr. Nothenberg noted that this is the only current funding request.  After a brief presentation by Kerstin Magary about the Central Subway Relocation Plan and proposed property acquisitions, Nancy Lenvin asked about the leases and the relative share of condemnation proceeds and a brief discussion followed.  Mr. Nothenberg disclosed that his wife now owns property at 2nd and King which might potentially cause a conflict for him, but stated that Scott Emblidge and others had advised him that he did not have a conflict because SFMRIC Board members are not considered “public officials” under conflict-of-interest laws.  Mr. Nothenberg then stated that his response to this proposal was based on the following three reasons, (i) it is not clear to whom the loan would be given, (ii) it contradicts what SFMRIC is supposed to do, which is provide capital funding for Muni, and (iii) he believes that this would be a gift of public funds to a private entity and he would want an opinion from the City Attorney’s office that this would not be such a gift and not illegal before he would support it.  Mr. Nothenberg then moved to table the item.  James Ludwig seconded the motion.  The Board then voted and unanimously agreed to table this request.
  5. Bond Issuance
    1. Mark Blake made a presentation on the selection of bond counsel by the City Attorney’s Office and an overview of the legal process.  Hawkins, Delafield & Wood and the Rosales Law Partnership have been selected.  The City Attorney’s Office is still considering whether separate disclosure counsel will be needed.  In response to a question from Rudy Nothenberg, Mr. Blake stated that the City Attorney’s Office will contract with bond counsel and their fees will be paid from the bond proceeds.  Bond counsel will mainly work with the City Attorney’s Office and with Scott Emblidge.  Mr. Blake agreed to Mr. Nothenberg’s request to circulate the RFP responses from the various law firms to the Board members.  Nancy Lenvin asked who would be SFMRIC’s attorney. 

      In response to questions regarding personal liability by Board members, Mr. Blake replied that the SFMTA is the obligated party, so the City is the client and SFMRIC is not directly represented by bond counsel.  Mr. Nothenberg then stated that the SFMRIC Board has access to the City Attorney’s Office, but that the Board members must rely on Mr. Emblidge to ensure proper representation.  Mr. Blake then stated that, as a matter of securities law, there is no liability for an issuer such as SFMRIC; there is no divergence of interest between the City and SFMRIC.  Mr. Blake stated that Board members are indemnified as a matter of law and Mr. Emblidge noted that it is his job to make sure that SFMRIC and its Board members are protected. 

      Thomas Escher then asked if bond counsel fees were fixed.  Mr. Blake stated that the law firms had provided a proposal and that the City Attorney’s Office would work off of that proposal and would hold the firms to those proposed fees unless the scope of the transaction changed dramatically (for example, took a lot longer) in which case they would consider paying more.  It was further noted that bond counsel would only get paid if the transaction closed.  Bond counsel does take some risk because they do not get paid if the transaction is not completed.  Mr. Nothenberg then requested that Sonali Bose provide resumes of the selected bond counsel and financial advisors as well as bond counsel’s response to the request for information.
    2. Representatives from Backstrom McCarley Berry & Co., LLC the financial advisors, Vincent McCarley and Erwin Tam, discussed their role, reviewing the information provided in Attachment E.  Mr. McCarley described his firm’s role as the “quarterback” in the work to structure the bonds and bring them to market.  Mr. Nothenberg stated a desire to avoid using capitalized interest so that the SFMTA would receive the greatest possible return.  Ms. Bose and Mr. McCarley noted that they were working to put together a list of potential properties to lease for this transaction. 

      In response to other questions:

      (1) The financial advisors stated that SFMRIC would be a conduit issuer and that the SFMTA would be the party backing the bonds,

      (2) That the 9 to 12 month window for bond issuance looks stable as to interest rates and that, while they would need to confer with bond counsel, it looks as though the equipment and construction funds could be combined for this offering. 

      (3) The underwriter’s discount  would be approximately $5.00 per $1,000 bond amount, or 0.5%, and that the SFMTA would likely receive approximately $36 million, which is about the remainder of SFMRIC’s remaining bond capacity. 

      Mr. Nothenberg noted that, in the event that SFMRIC was able to use Build America Bonds, then the attorneys would need to research the question of whether SFMRIC was an “instrumentality of a public entity” and, if so, determine the implication.  

      The SFMRIC Board members and staff then reviewed the potential timeline for an offering, starting with a planned October 19 presentation to the SFMTA Board of Directors by the financial advisors and a follow-up meeting of the SFMRIC Board in November to discuss possible projects to fund. 

      SFMTA staff will bring a list of current projects from the Capital Improvement Plan for consideration in November, as well as a list of facilities that could be leased.  Nancy Lenvin stated that the SFMRIC Board would want to fund projects that are important to the system’s development and growth and Mr. Nothenberg added that the members want to leverage this money and help with the core needs of the Municipal Railway.  Ms. Bose noted that there were also projects to keep the system in a state of good repair. 

      Mr. Nothenberg asked that the SFMRIC Board be kept informed about the work of the financial advisors and the attorneys.  A discussion ensued about why the SFMRIC process should be used, which included Mr. McCarley’s opinion that this relatively smaller offering might be simpler to bring to market than a larger, SFMTA-wide offering, Ms. Bose adding that the financing needs of the entire SFMTA must be considered and Mark Blake noting that if the SFMTA pursues a lease financing a conduit issuer must be in place and that SFMRIC is the natural approach for Muni rather than the City’s financing corporation which serves as the conduit for City lease transactions. 

      Mark Blake raised the issue of whether the approved capacity allocated to SFMRIC might be “stale” and that new authority may need to be obtained as part of the upcoming bond issuance.  City Attorney and Bond Counsel will research.
  6. Discuss appointment of new SFMRIC Board members – Rudy Nothenberg stated that Jamie Slaughter had resigned, leaving three vacancies on the Board.  After discussion of suggested names, the SFMRIC Board members agreed to forward the names of three individuals—Wil Din, the Rev. Dr. James McCray Jr. and Robert P. Morrow III—to the Executive Director/CEO of the SFMTA for appointment with notification to the Mayor’s Office.  Nancy Lenvin moved the item, Thomas Escher seconded it and it was unanimously approved.
  7. Such other business as may come before the Board of Directors: no other business.
  8. Setting a date and time for the next Board of Directors meeting: November 9, 2010, 12:30-2:30 p.m., same location.
  9. Adjournment


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