Published By: Financial Services
Public Utilities Revenue Bond Oversight Committee
MINUTES
Monday, January 30, 2006
9:30 a.m. – 12:00 p.m.
1155 Market Street (between 7 & 8th Streets) 4th Floor
1. Call To Order and Roll Call
Chair Lisbet Sunshine called the meeting to order at 9:45 a.m. and roll call was taken.
RBOC members present were Aimee Brown, Brian Browne, Severin Campbell, Lisbet
Sunshine, David Sutter, and Patrick Sweetland.
2. Public Comment – There were no members of the public present at this time.
3. Report from the Chair
Mr. Sutter questioned if a response was received from the Controller’s office with regard to filling Ms. Adams vacated position on the committee.
Mr. MacDonald stated that the Controller’s office was in the process of selecting a replacement and expects that a decision will be made soon.
There were no comments from the public.
4. Discussion and possible action regarding approval of the 2005 Annual Report
Mr. Sweetland stated that he forwarded to the committee the original Annual Report reviewed at the January 9, 2006 RBOC meeting, and the edited version of the Annual Report dated January 23. The January 23 version incorporated the various edits that were made at the January 9th meeting, as well subsequent edits that were to be submitted to Mr. Sweetland by January 18 for discussion and possible approval at today’s meeting.
Mr. Sutter made the motion to approve the 2005 Annual Report as currently submitted.
Ms. Brown suggested some technical edits, which were accepted.
Mr. Browne stated that he wanted to be on record that he felt the contracting proposal selection process represented a lack of independence on the part of the RBOC. He stated that the decision to pick the consultant should have been made an agenda item for full discussion with public comment. There was further discussion among committee members and it was agreed that this could be discussed when the committee discusses Item 5.
Public comments were taken. Steve Lawrence commented that he felt the report does not answer the primary question that he would have as a member of the public at this point, which is, has the $124 million been well spent? He stated that there are major changes in the new WSIP and there were many projects in the CIP that are not included the new WSIP, while the cost has escalated. He questioned whether the public is getting what they voted for three years ago, and felt that the committee should address this issue.
Mr. Sweetland seconded the motion to approve the Annual Report including the minor changes. Mr. Sweetland will draft a cover letter for the Annual Report, and will sign off as 2005 RBOC Chair. The motion passed by majority vote. The yes votes were Ms. Sunshine, Ms. Brown, Ms. Campbell, Mr. Sutter and Mr. Sweetland. Mr. Browne voted no.
5. Discussion and possible action regarding RBOC Financial Consulting Services contract.
Ms. Brown stated that four proposals were received from a list of eleven potential
consultants. The panel met on January 10, 2006 to review and score the proposals. The
following representatives were on the review panel:
Patrick Sweetland, Aimee Brown Revenue Bond Oversight Committee
Karol Ostberg, Maureen Gannon San Francisco Public Utilities Commission
Peg Stevenson Controller’s Office
Ms. Brown stated that of the four proposals the panel reviewed, the proposal submitted by Robert Kuo Consulting, LLC received the highest scores from all the members of the panel. The selection process was based first on merit, then fees, and Robert Kuo Consulting, LLC was among the lower half of the proposers in total contract cost. Ms. Brown stated that Mr. Kuo and Lawrence Doyle, sub-consultant, have extensive experience in working with the City and with the City’s accounting systems.
Mr. Sweetland also stated that there was a clear consensus among the panel members that the proposal from Robert Kuo Consulting, LLC, best met the deliverables prescribed in the scope of work.
Mr. Sutter questioned if the contract had already been issued. Ms. Ostberg responded that the contract is still subject to City Attorney review and subject to approval by the RBOC. He also questioned if the $55,000 total cost of services represented the guaranteed maximum total of the agreement. Ms. Ms. Ostberg confirmed that it did represent the guaranteed maximum cost. He also questioned Appendix B, page B-2, under Deliverable Description makes mention of subtasks 3a through 3e and 3f and stated that he could not find what they referenced. These subtasks should tie back to Appendix A, and will be included.
The consultant will provide a status report on project progress-to-date for the RBOC at its March 6, 2006 meeting. However, subsequent deliverables and reports should be submitted to the contracting working group members: Mr. Sweetland, Mr. Browne, and Chair, Ms. Brown. The group will finalize the information before submittal to the RBOC as a whole at subsequent RBOC meetings. Ms. Ostberg will act as project manager for the purposes of contract administration.
Public Comments were taken. Mr. Lawrence stated that he read in the contract that the consultants were to obtain a list of projects funded through July 1, 2003 and that elsewhere in the contract he got the idea they were to review expenditure that were spent after July 1, 2003 and hoped that review would include projects from the time of the election in November 2002 through June 30, 2003. He also referred to Item P of Deliverable Description, Page B-2, which reads, “Verify that no expenditures from Proposition A funds were incurred prior to November 2002.” He stated that if that were correct, the consultants would be looking at the expenditures before June 30, 2003, but was unclear on the issue. Mr. MacDonald, Asst. General Manager for Business Services, offered that from his recollection from the discussion of the committee that the dates were set from the November 2002 election date. The RBOC was established when the vote occurred, therefore the consultants will be reviewing expenditures from that day forward. At the time the RFP was written, expenditure reports were only current through September 2005. The consultants will now have access to updated expenditure reports through December 31, 2005 since this updated information is now available.
Mr. Lawrence stated that he hopes the committee will be able to gain the best value and insight from the consultant’s reports.
Joan Girardot, from the Coalition for San Francisco Neighborhoods questioned how the RBOC could issue a contract and how they would be paying for the consultant if the bonds have not been issued yet? Mr. MacDonald explained that the contract will be issued through the Controller’s office and that PUC does have funds that are work-ordered to the Controller’s office every year for audits, and once the revenue bonds are issued the monies will be reimbursed.
Ms. Girardot also commented that she hopes in the future the committee will be more independent in their choices of consultant services.
Mr. Sweetland motioned to approve the selection of Robert Kuo Consulting, LLC for the Financial Consulting Services contract. The motion to approve was seconded by Ms. Brown. A vote was taken and passed by majority vote with Mr. Browne abstaining.
Mr. Sweetland suggested that a letter be drafted from the committee to the Controller’s office, commending Ester Reyes for all her assistance with the RFP. A motion was made by Mr. Sweetland, and seconded by Ms. Brown. The motioned passed unanimously.
There were no comments from the public.
6. Discussion and possible action on proposed 2006 Series A Bonds.
Ms. Ostberg stated that the sale of the bonds was currently scheduled for February 28.
Mr. Browne asked what the annualized cost factor in the amortization of debt was. Ms. Ostberg responded that for projection purposes they have used 5%, but the actual rate will be determined competitively when bids are taken on February 28.
Mr. Sweetland questioned the status of the WSIP quarterly report. Ms Ostberg responded that the first quarterly report for the quarter ending in December 31, 2005 for both WSIP and Wastewater is due next month. This information also applies to Item 8 “Update on Wastewater Enterprise Interim CIP”.
After some discussion, the Committee concluded that a general statement reaffirming the committee’s responsibility as the Revenue Bond Oversight Committee would be included in the RBOC Annual Report transmittal letter. Mr. Sweetland volunteered to draft the transmittal letter.
7. Discussion of the meaning of the phrase “illegal expenditure or illegal waste” as contained in Proposition P.
Kenneth Roux, City Attorney, discussed the phrase with committee members. He stated that unfortunately, there is not much history on the subject that he could share with the committee. He said after consulting both internal and external counsel, almost no cases are on record of bond funds being used in an illegal way, which is different, he noted, than inappropriate, wasteful, or impolitic use. He stated the committee has a powerful tool and that it takes more than a simple majority vote by the Board of Supervisors to overturn an action by the RBOC under section 5.34 of Proposition P; it takes a super majority of at least 2/3 votes.
Mr. Sweetland asked if there is anything that Mr. Roux could offer from his review of the subject that could help the committee do their job better or understand their role with respect to this language. Mr. Roux responded that he was specifically looking for language that would help guide his office as well as the committee, but there was none. He stated that the absence of language, or case law could benefit both, in that it could be open to interpretation.
Mr. Sweetland stated that perhaps Mr. Browne could offer some insight since he was one of the co-authors of Prop P. Mr. Browne stated that it was then City attorneys, Sean Elsbernd and Phil Ward that wrote the language and perhaps they could be invited to a subsequent meeting to discuss this issue. He proceeded to give the committee a brief history of the background of Prop P.
Public Comment was invited. Mr. Kalman wanted to give his interpretation as an example of illegal waste and illegal expenditure that happened at the PUC. He mentioned that a high-ranking executive had purchased a new City vehicle and then had it repainted. He stated that he is familiar with the subject, as in the past he worked directly with monitoring illegal spending and waste for an investment bank. He said that he would like to review the template and may have some suggestions. Mr. Roux answered that a template does not exist, and the case law that does exist, does not provide a template. Mr. Roux stated that expenditures will need to be examined on a case-by-case basis, and will be a very fact driven analysis.
Ms. Girardot requested clarification from the City Attorney. She asked what the City Attorney’s office had in mind when they wrote “illegal expenditure and illegal waste.” Mr. Roux responded that he could not answer that question because was not present when it was drafted, and also stated that there are ballot measures that are submitted to the voters that do not involve the City Attorney’s participation. Ms. Girardot suggested that the RBOC work to define the phrase in order that can readily recognize “illegal expenditure and illegal waste.”
8. Update on Wastewater Enterprise Interim CIP.
Ms. Ostberg reiterated that the WSIP quarterly report is expected early February and from the conclusions of that report, will follow the financing plan. Mr. Sutter suggested that a tentative working group meeting be scheduled in the next couple of months to review the draft funding plan and quarterly report update. Ms. Ostberg stated when she receives the quarterly report she will contact him to schedule a subcommittee meeting in April.
There were no comments from the public.
9. Discussion and possible action to approve the minutes of the January 9, 2006 meeting
Ms. Brown made the motion to approve the minutes of the January 9, 2006 meeting, and Mr. Sweetland seconded the motion.
Public comments were taken. Mr. Kalman asked if the records of the RBOC meetings were available to the public. Ms. Sunshine responded that all RBOC information is available to the public.
10. Discussion and possible action regarding proposed agenda(s) for next meeting(s).
- Review existing committee policies on requesting information including discussion regarding a standing agenda item for consideration of questions and requests for information for the committee
- Discussion of the quarterly reports
- Report on the bond sale
- Presentation of new WSIP
- Update on OCIP status
- Discussion to consider a special RBOC Public Hearing
- There were no comments from the public.
11. Adjournment
Before adjournment item #2, Public Comment, was revisited because members of the public were not present when item 2 was heard. Ms. Girardot urged the committee to hold a Public Hearing at a more convenient time for the public to attend. She suggested holding it in the late afternoon at the Board of Supervisors hearing room.
Mr. Sweetland motioned to adjourn the meeting. Mr. Sutter seconded the motion. Ms. Sunshine adjourned the meeting at 11:50 a.m.
