SFMTA Archives | not current | SFMRIC May 29, 2002 minutes

SAN FRANCISCO MUNICIPAL RAILWAY
IMPROVEMENT CORPORATION

MINUTES OF THE MEETING

BOARD OF DIRECTORS
May 29, 2002

A meeting of the Board of Directors of the San Francisco Municipal Railway Improvement Corporation was held on May 29, 2002, at 1:30 p.m. The meeting was held at 401 Van Ness Avenue, Suite 334, San Francisco, California.

The following Directors were present at the meeting:

Mr. James L. Ludwig, President of the Board
Mrs. Lily Cuneo
Mr. Rudy Nothenberg
Mr. Joseph Ozan

Director Michael J. Moylan was not present.

Also present at the meeting were the following individuals:

Jose Cisneros, Deputy General Manager, Capital Planning and Legislative Affairs, San Francisco Municipal Railway (Muni)
Laura Spanjian, Special Assistant to the General Manager, Muni
Ann Carey, Financial Manager, Muni
Christine Butler, Executive Secretary, Muni
Michael Cohen, City Attorney's Office
Douglas Wright, Principal, Douglas Wright Consulting
Scott Emblidge, Partner, Moscone, Emblidge & Quadra
Andrew K. Fung, Assistant Vice President, US Bank
David Pilpel and Norman Rolfe, members of the public

1. Call to Order

Board President James J. Ludwig, having determined that a quorum was present, called the meeting to order at approximately 1:40 p.m.

2. Introductions

Other attendees of the meeting identified themselves and their affiliation. Mr. Ludwig then opened the meeting to public comment. Mr. Nothenberg noted that public comment was not a time for dialogue, but is intended to provide an opportunity for the public to comment on items not on the meeting agenda. Mr. Ludwig agreed that future agendas would include an explicit item for public comment.

PUBLIC COMMENT:

David Pilpel asked what SFMRIC information is subject to public review. He indicated that he had a number of specific questions and that he would submit them to the Board in writing.

Norman Rolfe introduced himself and thanked the Board for the opportunity to address the Board, and noted that he had no specific comments at this time.

3. Approval of the Minutes of the Board Meeting of June 29, 2001

The minutes were approved unanimously by the Board.

4. Approval of the Minutes of the Board Meeting of March 19, 2002

The minutes were approved unanimously by the Board.

5. SFMRIC By-Laws and Articles of Incorporation

Michael Cohen, Deputy City Attorney for the City and County of San Francisco, presented a draft of the revised Articles of Incorporation and By-Laws for the San Francisco Municipal Railway Improvement Corporation. He noted that the documents were structured in the form of an amendment and restatement for convenience and ease of drafting. Mr. Cohen then guided the Board through the documents and noted specific changes to the Articles and By-Laws, which were also enumerated in a memorandum from the City Attorney's Office.

Scott Emblidge, SFMRIC general counsel, advised the members that the changes were, for the most part, of a housekeeping nature and were consistent with the past practices of the Board. He noted that even the relatively substantive changes were not particularly significant.

The members of the Board then discussed the proposed changes. Mr. Ludwig indicated that he was uncomfortable with what could be perceived as an expansion of SFMRIC's functions ("and to otherwise assist the Municipal Transportation Agency in fulfilling its lawful goals and objectives"). Other members indicated they shared his concern.

Mr. Ludwig stated that he would like to bring new and younger members onto the Board, and questioned whether the change in the number of Board members would preclude that. Mr. Cohen pointed out that the Articles of Incorporation still allow for up to seven (7) directors, whereas the By-Laws authorize five (5) directors. He suggested that as potential new members are identified, the By-Laws could be amended to expand the authorized number, up to seven (7). He noted that non-profit corporation law requires a majority of all directors, not just a majority of those present at a board meeting, to approve taking any action. With two vacancies (as currently exist), it may be difficult to achieve a majority necessary to take an action. As such, he advised leaving the By-Laws set at five (5) directors for now, and amending them at a future date as additional members are identified.

The Board discussed the matter of reducing the number of Board members from seven (7) to five (5). Mr. Nothenberg questioned the importance of reducing the number, and other Board members expressed satisfaction with the current number of seven (7) members. Mr. Ludwig also suggested that nominations for new Board members should be able to come from current Board members, but that the Director of Transportation would be welcome to provide recommendations and advice.

Mr. Nothenberg questioned whether all expenditures greater than $10,000 should be subject to the approval of the Director of Transportation. Mr. Cohen pointed out that SFMRIC funds are, essentially, the Municipal Railway's money and that the proposed approval would merely bring funds more clearly under the purview of the Municipal Railway. Mr. Nothenberg suggested that perhaps there could be some carve-outs for those expenditures that are strictly for the Corporation's business, such as expenditures for corporate counsel. Mr. Ludwig indicated that he did not think any expenditure limit was needed, as SFMRIC has not in the past, and will not in the future, expend any funds without the request and recommendation of the Municipal Railway.

Mr. Nothenberg questioned who was in the best position to review contracts for services provided to the Board. He suggested that the Controller could perform this function.

Mr. Ludwig summarized the discussion by suggesting that the following items should be explored in more detail:

(a) The mission of the Corporation
(b) Approval of the Corporation's expenditures
(c) Nomination of new members

He instructed Mr. Emblidge, as Corporation counsel, to work with the City Attorney's Office to revise the draft Articles and By-Laws to reflect the Board's concerns.

Mr. Cohen then clarified the validation process for the use of the remaining SFMRIC bond authorization. He indicated that if the City filed a validation action, it would do so prior to the sale of the bonds, but all of the work that needs to be undertaken leading up to issuance would be conducted prior to filing a validation action.

PUBLIC COMMENT:

Mr. Pilpel questioned what degree of control the MTA Board has over SFMRIC. He also asked whether the MTA Board had approved the appointment of Mr. Nothenberg as a director.

Mr. Rolfe indicated that he thought that the Director of Transportation should not be involved in the appointment of directors.

6. Approval of Contract with Mr. Douglas Wright as Interim Assistant Secretary

Mr. Ozan stated that he had reviewed the proposed contract with Douglas Wright and had found no problems with the contract. Mr. Ludwig asked how the rate of compensation under this contract compares to previous contract rates for Mr. Wright, and was informed that the rate is the same.

IT WAS MOVED TO ADOPT THE CONTRACT WITH MR. DOUGLAS WRIGHT TO SERVE AS COPORATION INTERIM ASSISTANT SECRETARY.

PUBLIC COMMENT:

Mr. Rolfe asked whether it presented a conflict of interest to have Mr. Wright serve as both an employee of the Corporation and as a consultant on specific projects.

Mr. Pilpel asked how the Corporation's consultants are paid, what the source of funds for those payments is, and whether this is an appropriate use of those funds.

The motion was adopted.

7. Approval of Contract with Mr. Scott Emblidge as Interim Legal Counsel

IT WAS MOVED TO ADOPT THE CONTRACT WITH MR. SCOTT EMBLIDGE TO SERVE AS CORPORATION INTERIM LEGAL COUNSEL.

The motion was adopted.

8. Reports

Outstanding invoices - Mr. Wright reported that he had spent time going through the files. He has discovered five missing requisitions that have now been paid and three others that will be paid within the next three weeks. He explained that some invoices could not be paid within 30 days because of the number of steps involved in the approval process. He suggested he could propose how to streamline the approval process at a future meeting. He could also examine how to direct the investment of funds. Mr. Nothenberg would like to make sure that requests for reimbursement are legitimate, and can be tied back to a resolution of the Board. He suggested that the existing process may be necessary to achieve that objective. Mr. Ludwig indicated that the Board should rely on corporate counsel to ensure charges are appropriate and are processed expeditiously.
Insurance coverage - Mr. Emblidge advised that there is no evidence of Directors' insurance for covering claims of breach of fiduciary duties. He discovered policies to cover assets, and general liability coverage that lapsed in 1997. He also noted that the new bylaws include a provision indemnifying directors and officers, which the Board might consider an adequate substitute for insurance. Mr. Ozan indicated that he had seen a recent invoice regarding the general liability policy so that policy may not have lapsed. Mr. Ludwig advised Mr. Emblidge to look further into whether insurance coverage for directors exists.
Corporation files and records - Mr. Emblidge advised that there are 35 boxes of files, of which some are organized and some are not. He has not disposed of any paperwork, other than duplicate documents. He asked for guidance from the Board regarding what should be disposed. It was suggested that the boxes be put in storage and that duplicate documents could be disposed. Mr. Emblidge will maintain critical files in his office for easy access and will store remaining files in space provided by the Municipal Railway. He was directed to discard duplicate documents. Mr. Pilpel inquired whether he could have any duplicates, but Mr. Ludwig indicated that he did not want to have partial SFMRIC files in dispersed places.
Accountancy contract - Mr. Wright and Mr. Emblidge explained to the Board that there is no contract at this time. Mr. Desmond has served as the accountant for the Board since the Board was started. Mr. Desmond would like to continue as the accountant. Mr. Emblidge suggested keeping him for some time, as he has considerable institutional knowledge about the SFMRIC finances. Mr. Ludwig suggested continuing to use Mr. Desmond for the next three months on a "trial basis." Mr. Desmond is paid $55 an hour. It was also suggested that Mr. Desmond be informed of what is required at each meeting. Mr. Nothenberg would like Mr. Desmond to prepare a financial statement for the Board. The following motion was passed:

MR. DESMOND WILL CONTINUE AS ACCOUNTANT FOR THE BOARD AT $55/HR ON A TRIAL BASIS FOR THE NEXT SIX MONTHS.

Mr. Emblidge advised the Board that SFMRIC may need to engage an independent accountant or auditor to prepare the financial statements for the Corporation. The Board authorized Mr. Emblidge to retain an accountant or auditor to prepare SFMRIC's financial statements, if necessary.

9. Kirkland Yard Study

Mr. Wright gave a presentation on the current study, undertaken by Douglas Wright Consulting, of the possible reuse of the Kirkland Yard property. Mr. Wright indicated that a housing re-use has been identified as the most promising opportunity given the market analysis completed, and in light of the City's planning guidelines for the area. He also suggested that the study is examining a possible continued use by the Municipal Railway for a portion of the site, in the form of a storage facility for the E-Line trolley vehicles. The final report will be completed soon and may be available for presentation to the Board at the next meeting.

Mr. Nothenberg asked a number of questions about the study, including whether the study was considering an outright sale of property. Mr. Wright replied that the study is looking at a number of disposition strategies, including outright sale. Mr. Nothenberg suggested that if the proposed E-Line does not occur, the property might still be used for vehicle storage of the F-Line. Mr. Nothenberg also suggested that there might be cheaper land available elsewhere for a vehicle storage facility, and that the Municipal Railway might realize greater value if the entire Kirkland property is re-used for housing development, the property sold, and property for vehicle storage acquired at a lesser cost elsewhere. Mr. Wright responded by saying that he understood the question and that the study would examine that option.

10. Other Business

Mr. Ludwig would like to have a short financial statement for the Board. Mr. Emblidge will distribute the monthly trustee report to the Board

11. Next Board Meeting

The next meeting is scheduled for July 10, 2002 at 1:30 p.m. Mr. Desmond will be invited to the next meeting.

12. Adjournment

The meeting was adjourned at 3:56 p.m.

Christine Butler
Executive Secretary