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July 10, 2002

A meeting of the Board of Directors of the San Francisco Municipal Railway Improvement Corporation was held on July 10, 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:

Laura Spanjian, Special Assistant to the General Manager, Muni
Ann Carey, Financial Manager, Muni
Christine Butler, Executive Secretary, Muni
Douglas Wright, Principal, Douglas Wright Consulting
Scott Emblidge, Partner, Moscone, Emblidge & Quadra
Matthew Desmond, Accountant
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

Attendees of the meeting identified themselves and their affiliation. Mr. Ludwig then opened the meeting to public comment.

3. Public Comment

David Pilpel informed the Board that he had submitted a list of questions concerning SFMRIC to Scott Emblidge, legal counsel, with a request that the letter be distributed to Board members. Mr. Pilpel hoped that the letter could be discussed in the meeting. Mr. Emblidge acknowledged receipt of the letter and had copies available for Board members. He indicated that he would provide the documents that Mr. Pilpel asked to review, but that some of Mr. Pilpel’s questions would require extensive research on his part. Mr. Ludwig directed Mr. Emblidge to respond to the best of his ability to inqueries that would not require substantial research, and to request the assistance of Municipal Railway staff, as appropriate.

Norman Rolfe asked whether back-up documents for SFMRIC meetings could be posted on the web site along with the agenda. He also requested that his name be added to the distribution list for Board meeting materials. He sought clarification of who would be responsible for responding to questions from members of the public. Mr. Ludwig replied that it was SFMRIC’s intention to respond to public inquiries to the extend required by law.

4. Approval of the Minutes of the Board Meeting of May 29, 2002

The minutes were approved with one amendment under Item 8, Accountancy Contract, as follows: “Mr. Nothenberg would like Mr. Desmond to prepare a financial statement for the Board.”

5. Presentation by the Legal Counsel of New Articles of Incorporation and By-Laws

Mr. Emblidge referred Board members to the proposed changes in the Corporation’s articles of incorporation and by-laws and his memorandum summarizing the changes that had been made since the last meeting. With respect to the articles of incorporation, Mr. Nothenberg asked whether there are any significant changes from the original articles. Mr. Emblidge indicated that the changes were not significant. Mr. Ozan requested to see a copy of the original articles so that they could be compared to the revised articles.

With respect to the by-laws, Mr. Nothenberg indicated that he was not prepared to vote on them at this meeting, and asked Mr. Emblidge to pursue several outstanding issues with the City Attorney’s office. Mr. Nothenberg suggested that he would like to see a copy of the old articles of incorporation side-by-side with a copy of the proposed articles, with changes highlighted. Mr. Emblidge indicated that he would prepare a memorandum describing the changes. Mr. Nothenberg also noted that he was not aware of any sentiment on the Board to have the number of board members reduced from the current total of seven. Action on the articles of incorporation and by-laws was deferred to the next meeting.

Mr. Ludwig shared his sense that the Board does not want to see significant changes in its purpose and how it operates. He emphasized that the Board’s primary function is to support capital projects of the Municipal Railway. The Board requested from Mr. Emblidge a memorandum summarizing major changes (if any) in how SFMRIC would operate under the new articles of incorporation and by-laws.

Mr. Ludwig also reiterated his interest in bringing new members onto the Board and suggested that others bring names of potential candidates to the next meeting.

Public Comment:

Mr. Pilpel asked for clarification of whether requests to SFMRIC would come from the MTA Board, or from the Director. Mr. Emblidge replied that the articles of incorporation and by-laws should make reference to the Director of the MTA, and noted that this would be clarified in the next draft.

6. Presentation by Municipal Railway Regarding Potential Uses of Remaining Bond Authorization

Ann Carey gave an overview of the potential uses of SFMRIC’s remaining bond authorization. There is $30.5 million of unused bond authorization in the Transit Equipment Program (primarily for vehicles), and $7.8 million in the Transit Improvement Program (primarily for facilities). Ms. Carey indicated that the Municipal Railway is reviewing a list of capital projects and funding needs to identify projects that may be eligible for SFMRIC financing. She described some of the selection criteria that the Municipal Railway will use to screen projects, such as size of project relative to available bond funds, priority within the Municipal Railway’s capital program, project life, and legal restrictions on the use of SFMRIC bond funds.

Ms. Carey listed a number of projects as possibilities for SFMRIC funding assistance, including: acquisition of vintage PCC vehicles; improvements at the Geneva Yard to house the vintage fleet; and improvements along the proposed E-Line, including a vehicle turn-around. Ms. Carey noted that constraints on the department’s operating budget may affect the timing of a future bond issue. She indicated that the Municipal Railway will continue to review the list of possible projects and that they will prepare a specific funding request to present to SFMRIC in the future.

Mr. Nothenberg offered several additional selection criteria that should be applied to projects under consideration. Specifically, he suggested that projects must already be included in the Municipal Railway’s five-year plan (either a capital improvement plan or short-range transit plan). He also indicated that the Municipal Railway should not seek funding from SFMRIC for cost overruns on existing projects. Finally, he noted that an effective use of SFMRIC funds would be as matching funds to leverage other funding sources.

Public Comment:

Mr. Pilpel asked whether the Municipal Railway had conducted a cost-benefit analysis comparing the use of SFMRIC bonds with an extension of the sales tax. Mr. Ludwig and Mr. Nothenberg indicated that the Municipal Railway would use the most cost-effective financing available.

7. Election of Officers

It was moved to keep the current officers until the next annual meeting of the Board, at which time elections would take place according to the terms of the new by-laws. The motion was approved unanimously.

8. Other Business

Mr. Emblidge informed the Board that he had found an auditor to prepare the fiscal year 2002 financial statements. He indicated that the auditor, Chris Millius from the firm Odenberg, Omako, was familiar with GASB 34 and the preparation of public financial statements.

Mr. Ozan questioned why SFMRIC’s accountant cannot prepare the statements. Mr. Emblidge advised that Mr. Desmond did not have the experience necessary to prepare financial statements pursuant to GASB 34 as requested by the City’s auditors. He also clarified that the City had advised him that the financial statements should be prepared by a firm other than the one conducting the audit of the Municipal Railway’s financial statements, which are consolidated with the SFMRIC financial statements. Mr. Ludwig suggested that SFMRIC’s fiscal year should be the same as for the Municipal Railway and was advised that it is. Mr. Emblidge was authorized to select a firm to prepare the financial statements.

9. Next Meeting

The next meeting of the SFMRIC Board is scheduled for September 25, 2002, at 1:30 p.m. Ms. Cuneo indicated that she would like to have a report on the Mission and Steuart joint development project at the next meeting. Mr. Ludwig directed that this be put on the agenda.

Public Comment:

Mr. Pilpel noted that the contracts for interim assistant secretary (with Douglas Wright) and legal counsel (with Scott Emblidge) expire before the next Board meeting. Mr. Ludwig indicated, without objection, that the contracts would be extended until the next meeting of the Board, and that the Board will take up those contracts at that time.

10. Adjournment

There being no further business before the Board, the meeting was adjourned at 3:52 p.m.

Christine Butler
Executive Secretary

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