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SAN FRANCISCO MUNICIPAL RAILWAY IMPROVEMENT CORPORATION BOARD OF DIRECTORS MEETING November 17, 2010, 10:30 a.m. One South Van Ness Avenue, Twin Peaks Conference Room, Room 8203 APPROVED MINUTES Mr. Nothenberg stated that a quorum was present and the meeting was called to order. Present: Mr. Rudy Nothenberg, President Mr. James Ludwig, Vice President Ms. Nancy Lenvin, Secretary Mr. Wil Din Rev. Dr. James McCray Jr. Mr. Robert P. Morrow III
Also Present: Ms. Sonali Bose, Director of Finance and Information Technology/CFO, SFMTA Ms. Gail Stein, Finance and Information Technology, SFMTA Ms. Joanne Carr, Finance and Information Technology, SFMTA Ms. Fariba Mahmoudi, Capital Programs and Construction, SFMTA Ms. Ha Nguyen, Capital Programs and Construction, SFMTA Mr. Scott Emblidge, Partner, Moscone Emblidge & Sater Ms. Sylvia Sokol, Attorney, Moscone Emblidge & Sater 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. Absent: Mr. Thomas Escher, Treasurer 1. Introductions of new Board members and all others present. 2. Public comment – none. 3. Approval of the minutes of the Board meeting of September 29, 2010 – Nancy Lenvin moved to adopt the minutes as submitted, Rudy Nothenberg stated that hearing no objection the minutes would be adopted as submitted, 4. Discussion about insurance for directors and officers. The Board does not currently have this insurance. Mr. Nothenberg stated that he understood that the Board was represented by the City Attorney’s Office and that, therefore, there was no liability to the directors. Mark Blake noted that the Government Code explicitly states that boards such as the SFMRIC Board would be protected. Scott Emblidge will draft a letter to the Board explaining the protections that it now has and providing a quote for directors and officers this insurance. Mr. Blake will find out if any other City boards or commissions have this insurance. 5. Bond Issuance a) Mr. Blake made a presentation on the selection of bond counsel by the City Attorney’s Office and referred to the information provided to the Board in Attachment D (resumes submitted by law firms). Hawkins, Delafield & Wood and the Rosales Law Partnership have been selected as co-bond counsel and Orrick as disclosure counsel. Ms. Lenvin asked whether the City and County of San Francisco would be the client, not SFMRIC. Mr. Blake noted that the SFMTA is the party obligated to repay the bonds; SFMRIC serves as the conduit. He further stated that he does not believe that there is any divergence of interest between the SFMTA and SFMRIC and that separate counsel is not warranted. However, the Board members can retain counsel if they so desire. Mr. Blake said that the City Attorney’s Office will provide this advice in writing b) Representatives from Backstrom McCarley Berry & Co., LLC, the financial advisors, Vincent McCarley and Erwin Tam, reviewed their role and the background information provided to the Board in Attachment E (financial advisor resumes). He then led a discussion, as outlined on the attached handout ”Overview on Pledged Assets” including a discussion of the differences between a project lease structure and an asset transit lease structure, the two approaches available for the financing. There are potential tax and abatement issues with each approach; the abatement issues are often mitigated with insurance coverage in the case of interruption, but this would not include earthquake insurance. In response to a question from Mr. Nothenberg, Mr. McCarley stated that SFMRIC could do some of each approach and that his firm would be exploring the different possibilities and making a recommendation about the pros and cons of each. In response to further questions, Mr. McCarley noted that the prior SFMRIC financings had used the project lease approach (with the Woods facility) and that the market did not have a clear preference for one approach or the other, but looked at individual transactions. Sonali Bose stated that SFMTA staff will bring a list of current projects from the Capital Improvement Plan for consideration by the SMFRIC Board for inclusion into the bond issue and that the general amount of the offering would be approximately $35-40 million. Mr. Blake suggested the disclosure counsel give the Board a primer about its obligations under securities law and it was agreed to have this briefing after the January meeting. 6. Discussion of new funding requests – Ms. Bose discussed the cash balances, which as of 11/15/2010 equal approximately $1.5 million. Mr. Emblidge is working on a Board resolution to inform the Internal Revenue Service about the payment of expenses from the bond offering, including the Board members’ intention to reimburse themselves. Discussion of payments to advisors: Co-counsel and financial advisors will be paid from the proceeds of the bond offering and only if it closes. Additionally, the City Attorney’s office bills directly to the SFMTA on an hourly basis and SFMRIC pays Mr. Emblidge. Request for Funding: Ha Nguyen then gave a presentation to the Board about the Carl/Cole Rail Replacement Project, following the information provided to the Board in Attachment B (Funding request memo and power point presentation). This project would use SFMRIC funds in the Fall of 2011, when construction is slated to begin. Following discussion, Mr Nothenberg stated that he did not want to use all of the remaining funds for this project. The Board agreed that it would be a good leverage of $1 million in SFMRIC funds for this $22+ million project, leaving $500,000 for administrative expenses. Upon motion by Mr. Nothenberg, seconded by James Ludwig, the Board unanimously agreed to fund this project for an amount not to exceed $1 million. Mr. Nothenberg then requested that SFMTA staff provide a financial report about outstanding projects at all future meetings. 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: Wednesday, January 19, 2011, 10:30 a.m., at 1 South Van Ness, 8th Floor. 9. Adjournment
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