BOARD ROSTER SOUTHERN CALIFORNIA REGIONAL RAIL AUTHORITY

Transcription

1 BOARD OF DIRECTORS JANUARY 12, 2018

2 BOARD ROSTER SOUTHERN CALIFORNIA REGIONAL RAIL AUTHORITY County Member Alternate Riverside: Andrew Kotyuk (Chair) Brian Berkson* 2 votes Council Member Mayor Pro Tem City of San Jacinto City of Jurupa Valley RCTC Board RCTC Board Debbie Franklin Council Member At Large City of Banning RCTC Board Adam Rush* Council Member City of Eastvale RCTC Board Ventura: Brian Humphrey (Vice-Chair) Ginger Gherardi 1 vote Citizen Representative Mayor VCTC Board City of Santa Paula VCTC Board Los Angeles: Ara Najarian (2 nd Vice-Chair) Walter Allen, III 4 votes Councilmember Mayor Pro Tem City of Glendale City of Covina Metro Board Metro Appointee Kathryn Barger Supervisor, 5 th District County of Los Angeles Metro Board Paul Krekorian Councilmember, 2 nd District City of Los Angeles Metro Board Hilda Solis Supervisor, 1st District County of Los Angeles Metro Board Roxana Martinez Metro Appointee Borja Leon Metro Appointee Vivian Romero Council Member City of Montebello Metro Appointee

3 SCRRA Board of Directors Roster Page 2 San Bernardino: Larry McCallon Jon Harrison* 2 votes Mayor Council Member City of Highland City of Redlands SBCTA Board SBCTA Board Paul Eaton Mayor City of Montclair SBCTA Board Alan D. Wapner* Mayor Pro Tem City of Ontario SBCTA Board Orange: Shawn Nelson Laurie Davies* 2 votes Supervisor, 4 th District Council Member County of Orange City of Laguna Niguel OCTA Board OCTA Board Gregory T. Winterbottom Public Member OCTA Board Richard D. Murphy* Council Member City of Los Alamitos OCTA Board EX-OFFICIO MEMBERS San Diego Association of Governments: [CURRENTLY AWAITING APPOINTMENT] Contact: Linda Culp Principal Planner Rail Southern California Association of Governments: State of California: Art Brown Council Member, City of Buena Park Ryan Chamberlain Director, Caltrans District 12 Alternate: [CURRENTLY AWAITING APPOINTMENT] *Alternates represent either member Revised

4 BOARD OF DIRECTORS MEETING FRIDAY, JANUARY 12, :00 A.M. LOS ANGELES COUNTY METROPOLITAN TRANSPORTATION AUTHORITY (METRO) BOARD ROOM ONE GATEWAY PLAZA, 3RD FLOOR LOS ANGELES, CALIFORNIA AGENDA DESCRIPTIONS The agenda descriptions are intended to give notice to members of the public of a brief general description of items of business to be transacted or discussed. The posting of the recommended actions does not indicate what action will be taken. The Authority may take any action that it deems to be appropriate on the agenda item and is not limited in any way by the notice of the recommended action. The Chair reserves the right to discuss the items listed on the agenda in any order. A person with a disability may contact the Board Secretary s office at (213) or via holmank@scrra.net at least 72-hours before the scheduled meeting to request receipt of an agenda in an alternative format or to request disability-related accommodations, including auxiliary aids or services, in order to participate in the public meeting. Later requests will be accommodated to the extent feasible. SUPPORTING DOCUMENTATION The agenda, staff reports and supporting documentation are available from the Board Secretary, located at One Gateway Plaza, 12 th Floor, Los Angeles, CA 90012, and on the Metrolink website at under the Meetings & Agendas link. PUBLIC COMMENTS ON AGENDA ITEMS AND ITEMS NOT ON THE AGENDA Members of the public wishing to address the Board of Directors regarding any item appearing on the agenda or any item not on the agenda, but within the subject matter jurisdiction of the Board, may do so by completing a Speaker s Form and submitting it to the Board Secretary. All speakers will be recognized by the Chairman and will be considered under Item 4 (Public Comment). When addressing the Board, please state your name for the record. Please address the Board as a whole through the Chair. Please note comments to individual Board members or staff are not permitted when addressing the Board. A speaker s comments shall be limited to three (3) minutes. 1. Call to Order

5 Board of Directors Meeting Agenda Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 2 2. Pledge of Allegiance 3. Roll Call 4. Public Comment 5. Employee and Board Member Recognition Years of Service REGULAR CALENDAR 6. Election of Officers Board elections for Chair, Vice-Chair, and 2 nd Vice-Chair are required. It is recommended that the Board hold elections for the positions of: 1) Chair 2) Vice-Chair 3) 2 nd Vice-Chair There is no budgetary impact as a result of this report. Page 1 7. Approval of Meeting Minutes December 8, 2017 Board of Directors Meeting It is recommended that the Board approve the Minutes of the December 8, 2017 Board of Directors Meeting. Page 3 8. Contract No. E743B-16 Engineering and Technical Support for Rolling Stock Acquisition, Maintenance, and Overhaul Increase Contract Funding Authorization STV Incorporated Additional funding authorization is needed to continue supporting a wide variety of rolling stock acquisition, maintenance, and overhaul for the Authority s Equipment Department. It is recommended that the Board authorize the Chief Executive Officer to amend Contract No. E743B-16 with STV Incorporated (STV) to increase the contract funding authorization by $1.4 million for a total not-to-exceed contract funding authorization of $4.4 million. The amounts for which contract authority is requested is included in the Adopted Capital Budget for FY ($1,100,000) and FY ($300,000). Page 18

6 Board of Directors Meeting Agenda Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 3 9. Contract No. JO121-18R Fencing, Gates and Signage Services Recommendation to Award GMZ Engineering, Inc. Procurement and installation of fencing, gates and signage are required to control access and increase safety measures on or adjacent to the active railroad rights-ofway or support facilities, for example the Central Maintenance Facility or the Dispatch Operations Center. It is recommended that the Board authorize the Chief Executive Officer to award Contract No. JO121-18R for Fencing, Gates and Signage to the lowest responsive and responsible bidder, GMZ Engineering, Inc., in an amount not to exceed $4 million. Award is subject to resolution of any protest timely filed. The amounts for which contract authority is requested are included in the Adopted Capital Budgets for FY ($2,023,000) and in third party recollectable projects ($175,000). Page Adoption of Board Investment Policy California Government Code Section provides investing authority to the governing body and may be delegated to the Authority s Treasurer for one-year periods. Under the Authority s executive management structure, the Chief Financial Officer effectively functions as a Treasurer with approval of the designation by the Board. It is recommended that the Board approve the FIN-3.1 Investment Policy and the designation of Chief Financial Officer as Treasurer for one additional year. There is no budgetary impact as a result of this report. Page Adoption of the 2018 Federal and State Legislative Program Each year the Board adopts a legislative program to establish the Authority s priorities and guide advocacy efforts in both Sacramento and Washington, D.C. The legislative program guides staff on advocacy efforts at all levels of governance, allowing for swift advocacy as issues emerge. This draft legislative program is based upon the Board s existing policy positions, previous advocacy efforts, and anticipated issues arising in It is recommended that the Board adopt the 2018 Federal and State Legislative Program. The legislative program will be the blueprint for advocacy efforts during the 2018 legislative session. There is no budgetary impact as a result of this report. Page 52

7 Board of Directors Meeting Agenda Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page State and Federal Legislative Update Staff will provide an update on current legislative issues in State and Federal Government Affairs. The Board may receive and file this report. There is no budgetary impact as a result of this report. Page Central Maintenance Facility Sound Study The Authority conducted a sound study at its Central Maintenance Facility (CMF) to identify the major source(s) of noise at the facility and identify likely and effective solutions, if necessary. The Board may receive and file this report. There is no budgetary impact as a result of this report. Page External Affairs Year End Update Staff will provide an overview of the External Affairs Group by discipline and their top achievements in 2017 and priorities for The Board may receive and file this report. There is no budgetary impact as a result of this report. Page Fiscal Year Comprehensive Annual Financial Report and Single Audit Report Timeline Moss Adams LLP is concluding their field work for the FY Comprehensive Annual Financial Report (CAFR) and Single Audit. The Board may receive and file this report. There is no budgetary impact as a result of this report. Page Mobile and Online (Web-Based) Ticketing Project Update Staff is providing an update on the progress to date and key milestones associated with the delivery of the Mobile and Online Ticketing Project.

8 Board of Directors Meeting Agenda Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 5 The Board may receive and file this report. There is no budgetary impact as a result of this report. Page Transit and Intercity Rail Capital Program Grant Application Status Update Staff is providing an update on the Authority s 2018 Transit and Intercity Rail Capital Program (TIRCP) grant program submittal. It is estimated that an initial amount of $2.4 billion in funding would be available statewide to support the first five-year program. This initial amount is anticipated to be supplemented by additional revenues in two-year cycles. The proposal submittal deadline is January 12, 2018 and it is expected that successful agencies would be notified by May 2018 on the details of the TIRCP agreement. The Board may receive and file this report. There is no budgetary impact as a result of this report. Page Headquarters Office Space Relocation Update Staff is providing an update on the progress of the relocation of the Authority s headquarters. The Board may receive and file this report. The majority of funding for construction, office furniture, information technology (IT), and audio/visual (AV) needs will be derived from the tenant improvement allowance of $3.2 million as provided by the landlord. Staff has identified additional funds from rent savings allocated for the current lease at the Gateway building and reprogrammed funds from FY18 IT projects to cover the cost of IT/AV needs. Additional budget savings in the FY18 Operating Budget have been identified to cover any additional expenses as necessary. Staff will work closely with the project managers to ensure the construction is managed on schedule and budget. Page Chief Executive Officer s Report Authority Update 20. Board Members Comments 21. Chair s Comments 22. ADJOURNMENT

9 Board of Directors Meeting Agenda Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 6 NEXT BOARD MEETING: Friday, January 26, 2018

10 TRANSMITTAL DATE: January 5, 2018 MEETING DATE: January 12, 2018 ITEM 6 TO: FROM: SUBJECT: Board of Directors Arthur T. Leahy Election of Officers Issue Board elections for Chair, Vice-Chair, and 2 nd Vice-Chair are required. Recommendation It is recommended that the Board hold elections for the positions of: 1) Chair 2) Vice-Chair 3) 2 nd Vice-Chair Strategic Goal Alignment This report aligns with the strategic goal to improve organizational efficiency. Background The Board requested that information from both the Joint Powers Agreement and the Authority s Bylaws be included when the election of officers occurs. The calendar year 2018 will serve as a re-election year for officers by county in the order indicated in the Bylaws: Chair representative from Riverside County Transportation Commission (RCTC) Vice-Chair representative from Ventura County Transportation Commission (VCTC) 2 nd Vice-Chair representative from Los Angeles County Metropolitan Transportation Authority (Metro) The following is provided as information. 1

11 Election of Officers Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 2 The Joint Powers Agreement section 5.9 states: The GOVERNING BOARD shall elect from its members a Chairman and Vice Chairman at its first meeting and thereafter at the first meeting held in each succeeding calendar year, the AUTHORITY shall elect or re-elect its Chairman and Vice Chairman. In the event that the Chairman or Vice Chairman so elected ceases to be a member of the AUTHORITY, the resulting vacancy shall be filled at the next meeting of the AUTHORITY held after each vacancy occurs. In the absence or inability of the Chairman to act, the Vice Chairman shall act as Chairman. The Chairman, or in his absence the Vice Chairman, shall preside at and conduct all meetings of the AUTHORITY. The Board-approved Bylaws section 2.4 states: Next Steps The Chair and Vice-Chair shall rotate between the member agencies county transportation commissions as follows: Year Chair Vice Chair 2 nd Vice Chair 2011 Los Angeles San Bernardino Orange 2013 San Bernardino Orange Riverside 2015 Orange Riverside Ventura 2017 Riverside Ventura Los Angeles 2019 Ventura Los Angeles San Bernardino In January 2019, the election will take place at which time the rotation will be as follows: Chair representative from VCTC Vice-Chair representative from Metro 2 nd Vice-Chair representative from San Bernardino County Transportation Authority (SBCTA) Budget Impact There is no budgetary impact as a result of this report. Prepared by: Kari Holman, Assistant to the CEO/Board Secretary Sherita K. Coffelt Acting Chief of External Affairs 2

12 MINUTES OF THE BOARD OF DIRECTORS REGULAR MEETING December 8, 2017 ITEM 7 BOARD MEMBERS/ALTERNATES IN ATTENDANCE: Votes RCTC: ANDREW KOTYUK (Chair) 1 (2 votes) DEBBIE FRANKLIN 1 Brian Berkson Adam Rush VCTC: BRIAN HUMPHREY (Vice-Chair) 1 (1 vote) Ginger Gherardi METRO: ARA NAJARIAN (2 nd Vice-Chair) 1 (4 votes) KATHRYN BARGER 1 1 Borja Leon 2 1 Roxana Martinez Vivian Romero 1 SBCTA: LARRY MCCALLON 1 (2 votes) Jon Harrison 1 OCTA: SHAWN NELSON 1 (2 votes) GREGORY WINTERBOTTOM 1 EX-OFFICIO MEMBERS SCAG State of California Art Brown Ryan Chamberlin STAFF/PRESENTERS: ARTHUR T. LEAHY, Chief Executive Officer ROD BAILEY, Deputy Chief Operating Officer (Operations) ANDREW CONRIQUEZ, Senior Contract and Compliance Administrator 1 Director Barger left the meeting during the discussion of Item No Director Leon left the meeting following the discussion of Item No

13 Board of Directors Meeting Minutes December 8, 2017 Transmittal Date: January 5, 2018 Page 2 DON DEL RIO, General Counsel GEOFFREY FORGIONE, Associate General Counsel FRED JACKSON, Director, System Safety and Security ELISSA K. KONOVE, Deputy Chief Executive Officer ANDY LY, Senior Manager, Fare Collections DARRELL MAXEY, Deputy Chief Operating Officer (PTC) SYLVIA NOVOA, Public Affairs Manager WHITNEY O NEILL, Senior Manager, Government and Regulatory Affairs ROXANNE RANDOLPH, Senior Human Resources Analyst ILLYA ROBERTSON, Supervisor, Customer Relations KIMBERLY YU, Deputy Chief Operating Officer, Planning and Project Delivery MARYLOU WILLIAMS, Assistant Director, Program Management Office CHERI SMITH, Assistant Board Secretary KARI HOLMAN, Assistant to the CEO/Board Secretary Meeting minutes are prepared in a format that corresponds with the Board Meeting Agenda, which is incorporated by reference with these minutes. Board Agendas are available online at under the Meetings and Agendas link or from the Board Secretary at (213) Call to Order The December 8, 2017 Board of Directors Meeting was called to order by Chair Kotyuk at 10:04 a.m. at the Metro Board Room, One Gateway Plaza, 3rd Floor, Los Angeles, CA Pledge of Allegiance Chair Kotyuk led the group in the pledge of allegiance. 3. Roll Call The Board Secretary called roll to confirm a quorum of the Board was present. Chair Kotyuk welcomed new Los Angeles County Metropolitan Transportation Authority (Metro) Alternate, Vivian Romero who serves as Mayor, City of Montebello to the Board. Director Gherardi announced that on Monday, December 4, 2017 she was elected Mayor, City of Santa Paula. She commented on the status of the Thomas Fire and stated that all evacuation orders for Santa Paula had been lifted and thanked all the fire departments who aided her City. She was happy to report that the City of Santa Paula had not lost any homes in the fire at that point. 4

14 Board of Directors Meeting Minutes December 8, 2017 Transmittal Date: January 5, 2018 Page 3 Chair Kotyuk announced that former Board Member Daryl Busch had passed away and that today s meeting would adjourn in his honor. 4. Public Comment At this time, Chair Kotyuk inquired if the Board Secretary had received any Request to Speak forms, and it was confirmed that no requests were received. The Public Comment period was then closed. REGULAR CALENDAR 5. Approval of Meeting Minutes November 17, 2017 Board of Directors Meeting Chair Kotyuk inquired if members of the Board had any questions regarding this item. No additional comments or questions were received. Upon a motion by Director Nelson and seconded by Director Franklin, the Board approved the recommendation. Abstention was received by Director Romero. The motion passed. ACTION: The Board approved the Minutes of the November 17, 2017 Board of Directors Meeting. 6. Contract No. SP Comprehensive Printing Services Recommendation to Award Eclipse Printing, IColor Printing and Media, Image Square, and PGI Pacific Graphics, Inc. Arthur T. Leahy noted a correction for the record, under Budget Impact section of the report, the Fiscal Year should read FY not FY Chair Kotyuk inquired if members of the Board had any questions regarding this item. No additional comments or questions were received. Upon a motion by Director Nelson and seconded by Director McCallon the Board approved the recommendation. There was no opposition and the motion passed unanimously. ACTION: The Board authorized the Chief Executive Officer to award Contract No. SP for Comprehensive Printing Service in a not-to-exceed amount of $800,000 to a bench of firms, for a base period of two-years with three one-year options to be exercised at the Authority s discretion to the following firms: 1) SP483A-18 Eclipse Printing 2) SP483B-18 IColor Printing and Media 5

15 Board of Directors Meeting Minutes December 8, 2017 Transmittal Date: January 5, 2018 Page 4 3) SP483C-18 Image Square 4) SP483D-18 PGI Pacific Graphics, Inc. 7. Contract No. PO Less-Than Truckload and Specialty Freight Services Increase Contract Funding Authorization Logistics Plus, Inc. Chair Kotyuk inquired if members of the Board had any questions regarding this item. No additional comments or questions were received. Upon a motion by Director Nelson and seconded by Director McCallon the Board approved the recommendation. There was no opposition and the motion passed unanimously. ACTION: The Board authorized the Chief Executive Officer to amend Contract No. PO with Logistics Plus, Inc. to increase the contract funding authorization by an amount of $850,000, for a new total contract funding authorization not-to-exceed amount of $4,100,000. The current contract with Logistics Plus, Inc. expires on June 30, Contract No. MS Cash Collection Services Exercise Option and Increase Contract Funding Authorization Sectran Security, Inc. Chair Kotyuk inquired if members of the Board had any questions regarding this item. No additional comments or questions were received. Upon a motion by Director Nelson and seconded by Director McCallon the Board approved the recommendation. There was no opposition and the motion passed unanimously. ACTION: The Board authorized the Chief Executive Officer to exercise the one twoyear option to extend the period of performance from January 1, 2018 to December 31, 2019, and increase contract funding authorization by $533,000 for a new not-toexceed contract funding authorization of $2,033, Contract No. L Federal Legislative Representation Services Exercise Option and Increase Contract Funding Authorization Potomac Partners DC; Kadesh & Associates; and Chambers, Conlon & Hartwell, LLC. Andrew Conriquez, Senior Contract and Compliance Administrator, provided a brief background on this item as detailed in the staff report and requested approval of staff s recommendation. 6

16 Board of Directors Meeting Minutes December 8, 2017 Transmittal Date: January 5, 2018 Page 5 Director Nelson stated that there were two one-year extensions remaining on these contracts and introduced an alternate motion to approve the two remaining one-year extensions. 2 nd Vice-Chair Najarian indicated while on a recent trip to Washington D.C., he had the pleasure of observing the Federal Advocates performance and was very impressed with their knowledge of issues and their camaraderie with elected officials. He appreciated the motion for two one-year extensions but stated he felt more comfortable with awarding a one-year extension only. Chair Kotyuk seconded the alternate motion introduced by Director Nelson and called for a vote. Director Barger inquired as to the protocol on accountability and milestones of the advocacy team. Arthur T. Leahy replied that at a previous Board meeting, the Federal Advocacy team was to give a report on their 2017 accomplishments, but rather delivered a retrospective report from events that occurred in Therefore, he had requested written reports from the Federal Advocacy teams reporting on actions for 2017 and prospects for Staff had received the reports which were forwarded to the Board on Wednesday, December 6, 2017 as information 3. Director Barger stated for the record her frustration concerning communication with the Federal Advocacy team. She asserted that accountability was important and felt that when the team was asked questions, they were not forthcoming with their responses nor that they viewed communication from the Authority s staff as important. Director Barger noted that she was in favor of a one-year extension. Arthur T. Leahy replied that in the past there had been some issues with the team s availability and response to staff inquiries in a timely manner. Chair Kotyuk commented that he had been very active in both the state and federal level as it related to infrastructure, re-writing regulations and other opportunities to benefit the Authority. He noted that despite the political nature of 2017 with administrative changes, the federal advocacy team had done a good job and were very involved in Authority activities. Director Franklin asked if it was possible to write the contract as a two-year contract with a provision to terminate early if dissatisfied. Director Nelson responded that his alternative motion was to exercise both one-year extension options at this time. Should the Board wish to not exercise the last one-year option, then a new procurement could be issued. Upon a motion by Director Nelson and seconded by Chair Kotyuk the Board amended the recommendation as noted in bold italics below. A roll call vote was 3 A copy of the reports are available upon request from the Board Secretary. 7

17 Board of Directors Meeting Minutes December 8, 2017 Transmittal Date: January 5, 2018 Page 6 conducted. Aye votes were cast by Chair Kotyuk, Directors Franklin, McCallon, Harrison, Nelson and Winterbottom. No votes were cast by Vice-Chair Humphrey, 2 nd Vice-Chair Najarian, Directors Barger, Leon and Romero. The motion passed by a vote of 6 to 5. ACTION: The Board authorized the Chief Executive Officer to amend Contract No. L167A-17 with Potomac Partners DC, Contract No. L167B-17 with Kadesh & Associates, and Contract No. L167C-17 with Chambers, Conlon & Hartwell, LLC to: 1) Exercise both one-year options remaining on the contract to extend the period of performance to December 31, 2019; and 2) Increase contract funding authorization for the bench by $624,000 for a new cumulative not-to-exceed contract funding authorization amount of $1,248,000, as follows: L167A-17 with Potomac Partners DC Two-year time extension and increase contract funding authorization in the amount of $240,000; L167B-17 with Kadesh & Associates Two-year time extension and increase contract funding authorization in the amount of $240,000 L167C-17 with Chambers, Conlon & Hartwell, LLC Two-year time extension and increase contract funding authorization in the amount of $144, Request for Proposal No. SP Approval of Evaluation Criteria Passenger Services Call Center Andrew Conriquez, Senior Contract and Compliance Administrator, provided a brief background on this item as detailed in the staff report and requested approval of staff s recommendation. Upon a motion by Director Nelson and seconded by Vice-Chair Humphrey the Board approved the recommendation. There was no opposition and the motion passed unanimously. ACTION: The Board approved the proposed evaluation criteria, detailed in Attachment 1, specifying a weighting of eighty percent (80%) for technical qualifications and twenty percent (20%) for cost to retain a qualified firm to provide call center services. 8

18 Board of Directors Meeting Minutes December 8, 2017 Transmittal Date: January 5, 2018 Page Approval of the Resolution to Hire Retired Annuitant David Yale to Pursue Multi-Billion Dollar, Complex Grant Opportunities Roxanne Randolph, Senior Human Resources Analyst, provided a brief background on this item as detailed in the staff report and requested approval of staff s recommendation. Director Franklin inquired when the temporary assignment of David Yale would end. Kimberly Yu replied tentatively in a couple of months, explaining that there were three grants which were due in January and February which required his support. 4 2 nd Vice-Chair Najarian remarked that he knew Mr. Yale since 2005 and considered him to be a financial genius on the subject of transportation funding. Vice-Chair Humphrey stated that the health of the organization was to mentor people and hoped that Mr. Yale would pass his knowledge on to staff during his temporary employment. Director Leon noted that he had worked closely with Mr. Yale during the Metro Measure R and Measure M pursuits and that he would be a valuable resource to the Authority. Upon a motion by Director Leon and seconded by Director McCallon the Board approved the recommendation. There was no opposition and the motion passed unanimously. ACTION: The Board approved Resolution to hire David Yale as a retired annuitant to perform grants work for the Authority, prior to the end of his 180-day waiting period. 12. Approval of Updates to Finance Policies and Procedures FIN-6.2 Indirect Cost Allocation Plan Chair Kotyuk inquired if members of the Board had any questions regarding this item. No additional comments or questions were received. Upon a motion by Director Nelson and seconded by Vice-Chair Humphrey the Board approved the recommendation. There was no opposition and the motion passed unanimously. 4 Following the meeting, staff confirmed the requested information: Temporary assignment of David Yale would terminate as of February 28,

19 Board of Directors Meeting Minutes December 8, 2017 Transmittal Date: January 5, 2018 Page 8 ACTION: The Board approved updates to Finance Policies and Procedures FIN-6.2 Indirect Cost Allocation Plan (ICAP). 13. Approval of Updates to Finance Policies and Procedures FIN-8.2 Delegation of Approval Limits and FIN-8.4 Travel Authorization and Business Expense Reimbursement Chair Kotyuk inquired if members of the Board had any questions regarding this item. No additional comments or questions were received. Upon a motion by Director Nelson and seconded by Vice-Chair Humphrey the Board approved the recommendation. There was no opposition and the motion passed unanimously. ACTION: The Board approved updates to Finance Policies and Procedures: 1) FIN-8.2 Delegation of Approval Limits 2) FIN-8.4 Travel Authorization and Business Expense Reimbursement 14. Lease of Office Space for Train Operations Management and Train Crew Personnel at San Bernardino Transit Center Rod Bailey, Deputy Chief Operating Officer, (Operations), provided a brief background on this item as detailed in the staff report and requested approval of staff s recommendation. Upon a motion by Director McCallon and seconded by Director Nelson the Board approved the recommendation. There was no opposition and the motion passed unanimously. ACTION: The Board authorized the Chief Executive Officer to execute a ten-year lease agreement with SBCTA for 3,935 square feet of office space located at 124 South E Street, San Bernardino. 15. Construction and Maintenance Agreement with City of Los Angeles for the San Fernando Road Bike Path Phase 3 At the request of Chair Kotyuk, this item was deferred to a future Board meeting. 16. Public Outreach Process for Title VI Analysis for a Permanent Discount on the Perris Valley Line Sylvia Novoa, Public Affairs Manager, provided a brief background on this item as detailed in the staff report and requested approval of staff s recommendation. 10

20 Board of Directors Meeting Minutes December 8, 2017 Transmittal Date: January 5, 2018 Page 9 2 nd Vice-Chair Najarian remarked that Metro had enacted a similar discount for passengers on the Antelope Valley line. He requested staff provide updates of the program to the Board on the Perris Valley Line (PVL) should the discount become permanent. Upon a motion by Director Franklin and seconded by Director Nelson the Board approved the recommendation. There was no opposition and the motion passed unanimously. ACTION: The Board approved the initiation of the public comment period. This action is consistent with the Authority s Board-adopted Title VI policies and procedures. 17. Positive Train Control Program Update of Project Status Darrell Maxey, Deputy Chief Operating Officer, Positive Train Control and Engineering, provided a brief background on this item as detailed in the staff report. ACTION: The Board received and filed this report. 18. Capital Program Status Report Quarter Ended September 30, 2017 Marylou Williams, Assistant Director, Program Management Office, provided a brief background on this item as detailed in the staff report. Arthur T. Leahy noted that due to budget limitations, tie replacement on the San Bernardino Line (SB) was on every 3 rd to 4 th tie and not a full tie replacement and was due to deferred maintenance. However, he noted that progress was being made to complete State of Good Repair (SOGR) projects. Director Nelson suggested using grant funds for SOGR projects. 2nd Vice-Chair Najarian suggested that the Federal Advocacy Team seek out funding as well. Director Barger inquired as to how many On-Time Performance (OTP) delays were due to deferred maintenance. Arthur T. Leahy replied that the Authority had OTP issues in conjunction with locomotives that have not had a mid-life rehabilitation and other deferred maintenance issues. He stated that staff would generate a report that outlines examples of service delays that have occurred during the last 90 days. He stressed that tracks were maintained to a standard of safety, otherwise trains would not be permitted to operate. Director Barger stated that an area of focus was to grow 11

21 Board of Directors Meeting Minutes December 8, 2017 Transmittal Date: January 5, 2018 Page 10 and retain ridership and believed that these types of OTP delays did not aid in retaining riders. Chair Kotyuk indicated that the Authority had the ability to internally grow ridership and increase revenue and requested an update to the Marketing Program. Arthur T. Leahy replied that to date the Authority did not have approval from the member agencies to provide additional funding for the Marketing Program. He confirmed that staff would provide an update to the Board on the Marketing Program in January ACTION: The Board received and filed this report. 19. Assembly Bill 1234 Meetings Attended by Members of the Board of Directors Whitney O Neill, Senior Manager, Government and Regulatory Affairs, provided a brief background on this item as detailed in the staff report. 2 nd Vice-Chair Najarian commented that his recent trip to Washington D.C. was right in the middle of the tax plan push and that members of Congress had little room to accommodate the Authority s request regarding the commuter tax benefit. He also stated that Congressman Schiff (28 th District) was concerned with rail yard emissions and the Foothill Gold Line extension. ACTION: The Board received and filed this report. 20. State and Federal Legislative Update Whitney O Neill, Senior Manager, Government and Regulatory Affairs, provided a brief background on this item as detailed in the staff report. She highlighted a few key items: Federal: On December 7, 2017 Congress ordered a Stop-Gap measure (with a continuing resolution) to keep government funding through December 22, A showdown was expected between Republicans and Democrats regarding tax reform efforts which were in concurrence with the budget talks. Government funding could possibly be suspended if the budget was not approved before December 22, State: Due to efforts to repeal Senate Bill 1 (SB1), Governor Brown s administration had been accelerating the implementation of SB1 by adopting final guidelines and awarding projects. 12

22 Board of Directors Meeting Minutes December 8, 2017 Transmittal Date: January 5, 2018 Page 11 Chair Kotyuk stated that the Authority was the first agency to implement Positive Train Control (PTC) at its own expense, while other agencies had received PTC priority funding. He believed there should be a priority ranking for funding aimed at those agencies that had met the mandated requirements. Whitney O Neill replied that she wrote report language requesting the Office of the Secretary to develop supplemental grant making criteria for any grant program eligible for Federal Railroad Administration (FRA) funding a priority for commuter rail agencies that met those requirements. She noted that the Authority did use capital funding to help cover the costs for PTC. Arthur T. Leahy reiterated that Congress granted an extension for railroads to be PTC compliant by It still appears that a number of railroads will not be in compliance before the 2018 deadline. He noted that the issue for the Authority was on whether or not Amtrak would be allowed to run on tracks owned by the Authority should PTC not be available by the deadline. Chair Kotyuk emphasized the great work from staff and the advocacy team to change policies that would benefit the Authority. ACTION: The Board received and filed this report. 21. Federal Railroad Administration Audit Report Update Fred Jackson, Director, System Safety and Security, provided a brief background on this item as detailed in the staff report. ACTION: The Board received and filed this report. 22. Sentinel/Bombardier Passenger Railcar Midlife Overhaul Rod Bailey, Deputy Chief Operating Officer, (Operations), provided a brief background on this item as detailed in the staff report. Director Rush requested an explanation on Wi-Fi accommodations. Rod Bailey replied that the passenger cars would be pre-wired for Wi-Fi capability with the intent to acquire Wi-Fi service in the future. Director Nelson stated that Amtrak had Wi-Fi service and it would be practical to seek advice from them regarding their system. Director Franklin commented that with the fifteen-year overhaul of the passenger cars overdue recommended that these projects be added to the budget plan as a 13

23 Board of Directors Meeting Minutes December 8, 2017 Transmittal Date: January 5, 2018 Page 12 way to ensure that future overhauls would be performed on-time in an effort to minimize excess costs. Chair Kotyuk inquired as to the possibility of adding concessions on passenger cars as part of the mid-life overhaul. ACTION: The Board received and filed this report. 23. Tier 4 Locomotive Update and Delivery Status Rod Bailey, Deputy Chief Operating Officer (Operations), provided a brief background on this item as detailed in the staff report. He reported that on December 11, 2017 Tier 4 locomotive 908 experienced a malfunction with the Diesel Exhaust Fluid (DEF) system and the Tier 4 operation failed from El Monte to San Bernardino. He informed the Board that repairs had been made and that the train would be evaluated once it returned to the Central Maintenance Facility (CMF). He reiterated that the Authority had not and would not pay for acceptance of the Tier 4 units until reliability was confirmed. The evaluation period for the Tier 4 locomotives had been extended from 1,000 miles to 2,500 miles. Arthur T. Leahy commented that the manufacturer of the Tier 4 locomotives had asked the Authority to accept additional locomotives by the end of the year and that the Authority had denied the request. At this time, Chair Kotyuk called on members of the public who wished to speak. Grove Pashley, City of Los Angeles resident commented on the Tier 4 locomotives, noise level of locomotives at CMF, ongoing issues with noise and pollution in the neighborhood, modernization of the CMF to be compatible with the neighborhood, and load tests and decibel levels which he believed to be at too high a level. Steven Appleton, City of Los Angeles resident commented on the Tier 4 locomotives. He thanked the Board and staff for their service. He remarked on community meetings that were held previously and noted that it became frustrating when there were inconsistencies. He posed several questions regarding the Tier 4 locomotives and stated that the Board had a responsibility to ensure that the Tier 4 locomotives were operating correctly. Arthur T. Leahy reiterated that the Authority would not pay for nor accept locomotives until the vendor brought the locomotives up to the necessary standards. He stated that the locomotives were ordered before his tenure with the Authority. He noted that a sound study was performed (by an outside organization) at the CMF with two tests conducted: one with staff s knowledge; and the other one anonymously. The results of both tests were essentially the same and he mentioned that the Authority 14

24 Board of Directors Meeting Minutes December 8, 2017 Transmittal Date: January 5, 2018 Page 13 would be meeting with the community to provide the results of the sound study and the report would also be presented to the Board. Chair Kotyuk stated that with new equipment there were unavoidable issues. He asked were the failures being reviewed and would corrective action from the manufacturer be implemented on future locomotives. Rod Baily replied that corrective actions had been implemented and that criteria would be added to the Authority s final acceptance of the locomotives. Arthur T. Leahy noted that should the Authority elect to operate the Tier 4 locomotives not at Tier 4 standards, the Authority would not receive funding from the South Coast Air Quality Management District (SCAQMD) and that was not an acceptable option for the Authority the Tier 4 locomotives would run at the Tier 4 level. ACTION: The Board received and filed this report. 24. Mobile and Online (Web-Based) Ticketing Project Update Andy Ly, Senior Manager, Fare Collections, provided a brief background on this item as detailed in the staff report. He thanked 2 nd Vice-Chair Najarian, Director Leon and Chun Leung from Mayor of Los Angeles, Eric Garcetti s office for their support with Metro who aided on moving the project forward. ACTION: The Board received and filed this report. 25. Overview of the Metrolink Customer Comments and Social Media Feedback Programs Illya Robertson, Supervisor, Customer Relations, provided a brief background on this item as detailed in the staff report. Director Franklin thanked staff for the report and stated that trains need to be on time and safe. She believed there should be guidelines set to reduce the number of OTP complaints. Illya Robertson confirmed that the Authority did have a set of standards for OTP delays. ACTION: The Board received and filed this report. 26. Chief Executive Officer s Report - Arthur T. Leahy reported on the following: Claremont Station Public Meeting On December 11, 2017 the City of Claremont would be hosting a community meeting at the Alexander Hughes Community Center regarding the future of the Claremont Metrolink Station. Claremont s Mayor and City Manager were in support of keeping the station open. 15

25 Board of Directors Meeting Minutes December 8, 2017 Transmittal Date: January 5, 2018 Page 14 Placentia Station He would be meeting with Anne Mayer of Riverside County Transportation Commission (RCTC) and Darrell Johnson of Orange County Transportation Authority (OCTA) regarding negotiations with Burlington Northern Santa Fe (BNSF) for a new station in Placentia. Chief of External Affairs Update Sherita Coffelt, Director of Public Affairs would temporarily serve in the role of Chief of External Affairs while Patricia Bruno was on a long-term leave of absence. Headquarters Office Space update The move to the new headquarters office space located at 900 Wilshire was progressing, construction had begun and furniture was being procured. 27. Board Members Comments Director Romero remarked that she was excited to be a part of the Authority and looked forward to working with her fellow Board Members. She thanked Mayor Garcetti and Director Solis for the appointment. Director Franklin stated she agreed with an earlier comment from Vice-Chair Humphrey regarding succession planning and recommended that the Authority train and mentor staff and not rely on consultants. Chair Kotyuk requested and update on the intern program. Arthur T. Leahy replied that staff would be happy to brief the board on organizational development. Director McCallon wished everyone a Merry Christmas and prosperous New Year. 28. Chair s Comments Chair Kotyuk reported on the following: Executive Management and Audit Committee (EMAC) Schedule He commented that the EMAC meetings for 2018 would take place quarterly on the second meeting of the months January, April, July and October. Ramona Pageant, Hemet, CA runs every April and runs for three weeks. He stated that the Riverside Transit Agency (RTA) was willing to partner with bus companies to provide shuttles to and from the Metrolink Station and the Pageant. He directed staff to work with OCTA and RCTC to explore grant opportunities to fund a reverse commute from Orange County to Riverside for persons to attend this event. Wished everyone a happy holiday season. 16

26 Board of Directors Meeting Minutes December 8, 2017 Transmittal Date: January 5, 2018 Page 15 Called for a moment of silence in honor of former Board member, Daryl Busch. CLOSED SESSION The Board convened into Closed Session at 11:19 a.m. to discuss Item No 29 a. through c. and reconvened in Open Session at 11:54 a.m., at which time Counsel indicated there was nothing to report. 29. Closed Session a. CONFERENCE WITH LEGAL COUNSEL EXISTING LITIGATION Pursuant to Government Code Section (d)(1) Ransome v. Espinoza, SCRRA et al., Ventura County Superior Court, Case No CV-PO-VTA. b. CONFERENCE WITH LEGAL COUNSEL EXISTING LITIGATION Pursuant to Government Code Section (d)(1) Metrolink Train Accident Cases, Los Angeles County Superior Court, Judicial Council Coordination Proceeding No. 4889, Lead Los Angeles County Case No. BC (Bruce Shelburne and Kathy Shelburne, et al. v. Hyundai Rotem USA Corp, SCRRA et al.) c. CONFERENCE WITH LEGAL COUNSEL EXISTING LITIGATION Pursuant to Government Code Section (d)(1) SCRRA v. Hyundai Rotem Company, et al., United States District Court for the Central District of California, Case No. 2:16-cv JAK-JEM. 30. ADJOURNMENT The meeting was adjourned in the honor of Daryl Busch. There being no further business for consideration by the Board, the meeting was adjourned at 11:55 a.m. Respectfully Submitted, Kari Holman Assistant to the CEO/Board Secretary 17

27 TRANSMITTAL DATE: January 5, 2018 MEETING DATE: January 12, 2018 ITEM 8 TO: FROM: SUBJECT: Board of Directors Arthur T. Leahy Contract No. E743B-16 Engineering and Technical Support for Rolling Stock Acquisition, Maintenance, and Overhaul Increase Contract Funding Authorization STV Incorporated Issue Additional funding authorization is needed to continue supporting a wide variety of rolling stock acquisition, maintenance, and overhaul for the Authority s Equipment Department. Recommendation It is recommended that the Board authorize the Chief Executive Officer to amend Contract No. E743B-16 with STV Incorporated (STV) to increase the contract funding authorization by $1.4 million for a total not-to-exceed contract funding authorization of $4.4 million. Alternatives The Board may modify the amount of funding authorization. Strategic Goal Alignment This report aligns with the strategic goal to ensure a safe operating environment by providing the additional funding necessary for the engineering and project management support for rolling stock, including Tier 4 locomotive deployment. Background On January 15, 2016, the Board awarded Contract No. E743B-16 for Engineering and Technical Support for Rolling Stock Procurement, Maintenance and Overhaul activities to STV Incorporated, for a base term of five-years for a not-to-exceed contract funding authorization of $3 million. Un-anticipated complications with the design specifications, regulatory compliance, testing, and initial delivery, of the Tier 4 locomotives has required more technical support than originally anticipated, resulting in depletion of previously 18

28 Contract No. E743B-16 Engineering and Technical Support for Rolling Stock Acquisition, Maintenance, and Overhaul Increase Contract Funding Authorization Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 2 authorized funding. Work under this contract was issued under Contract Task Orders (CTOs) on an as-needed basis. The current contract will expire on January 14, Since its inception, the Authority has required engineering, technical and management support services for new rolling stock purchases and maintenance of existing fleet. With ridership growth, service expansion and plans to acquire additional passenger rail cars and locomotives, the requirement for such services continues. Also, as the Authority s rolling stock fleet ages, equipment overhauls and/or rebuilds are necessary, creating the need for continued engineering and technical expertise. This amendment to Contract No. E743B-16 with STV is needed in order to continue work already authorized under existing CTOs. For the Tier 4 Locomotive Project, the locomotive-build contractor has struggled with prototype design and the ability to comply with Federal Regulations, which has resulted in a delay of the overall project that is approaching one year. Additional support and assistance is needed for the next major phase of this project specifically, Tier 4 locomotives entering into revenue service, warranty support, and implementation of field modifications. Therefore, it is recommended the Board authorize the Chief Executive Officer to amend Contract No. E743B-16 with STV to increase the contract funding authorization by $1.4 million for a total not-to-exceed contract funding authorization of $4.4 million. Disadvantaged Business Enterprise (DBE)/Small Business Enterprise (SBE) Requirements This contract had no DBE goal commitment as it was issued under Race Neutral Participation. However, STV committed to use DBEs and has attained a percentage usage of 20.42%, as of November Budget Impact The amounts for which contract authority is requested is included in the Adopted Capital Budget for FY ($1,100,000) and FY ($300,000). Prepared by: Neil Brown, Manager, Program Fleet Gregory Harrington, Senior Manager, Facilities and Fleet Maintenance Marcus Gillette, Senior Contract and Compliance Administrator Gary Lettengarver Chief Operating Officer Elissa K. Konove Deputy Chief Executive Officer 19

29 TRANSMITTAL DATE: January 5, 2018 MEETING DATE: January 12, 2018 ITEM 9 TO: FROM: SUBJECT: Board of Directors Arthur T. Leahy Contract No. JO121-18R Fencing, Gates and Signage Services Recommendation to Award GMZ Engineering, Inc. Issue Procurement and installation of fencing, gates and signage are required to control access and increase safety measures on or adjacent to the active railroad rights-of-way or support facilities, for example the Central Maintenance Facility or the Dispatch Operations Center. Recommendation It is recommended that the Board authorize the Chief Executive Officer to award Contract No. JO121-18R for Fencing, Gates and Signage to the lowest responsive and responsible bidder, GMZ Engineering, Inc., in an amount not to exceed $4 million. Award is subject to resolution of any protest timely filed. Alternatives The Board may reject all bids and direct staff to issue a new Invitation for Bid (IFB). Strategic Goal Alignment This report aligns with the strategic goal to ensure a safe operating environment by reducing unauthorized access and increasing safety measures on active rights-of-way through fencing, gates and signage and other similar security measures. Background Public Contract Code Section permits the Authority to enter into individual job order contracts at a maximum value of $4 million. 20

30 Contract No. JO121-18R Fencing, Gates and Signage Services Recommendation to Award Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 2 The Authority has awarded several Job Order Contracts (JOCs) in accordance with Public Contract Code Section , which permits the Authority to enter into individual contracts for repair, remodeling and other repetitive work by JOCs. Job Orders must be executed in one year from a Notice to Proceed (NTP) and the work completed within the following year after the NTP each for a term of one year. Work under Contract No. JO121-18R will include installation of new fencing, gates and signage and similar security measures throughout the Metrolink system. These improvements will enhance the safety and security of trains, passengers, motorists, pedestrians, facilities and neighboring land uses within and along Metrolink s railroad corridors. Procurement Approach The Authority issued an Invitation for Bid (IFB) on October 17, The solicitation was posted on the Authority s website, advertised in publications in the five member counties and notices were sent directly to firms registered on the Authority s website. Twenty-six (26) firms downloaded the solicitation and five (5) bids were received and publicly opened on November 1, 2017 as follows: Bidder Bid Amount 1. GMZ Engineering, Inc. $4,105, Ferreira Coastal Construction $4,178, Crown Fence Company $4,578, Ace Fence Company $4,903, Red Hawk Services $30,407,400 Bids were submitted on the basis of typical work which is a hypothetical estimated work description for a list of representative tasks (bid items) established by the Authority. The unit prices submitted by a bidder establish the pricing that the bidder will be held to when performing work on individual job orders on an as-needed basis. Bids received represent the aggregate of the unit prices required as listed above. Work under this contract will be authorized by specific job orders. Actual funding commitments for those projects handled through the job order process are encumbered on a per project basis at the time the individual job order is approved and issued. The Engineer s estimate of $4,422, was prepared using the same hypothetical list of representative bid items included on the bid forms and was prepared prior to submittal of bids by the contractors. The Engineer s Estimate pricing was based on aggregate data from the previous Job Order Contracts that were issued by the Authority. 21

31 Contract No. JO121-18R Fencing, Gates and Signage Services Recommendation to Award Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 3 Red Hawk Services unusually high total bid price was due to an extremely high unit price for delivery and removal cost for Type-K temporary railing. A comparison of the bids indicated that the unit prices submitted by GMZ Engineering, Inc. s were fair and reasonable. As authorized by California Public Contract Code Section , under this JOC contract, the Authority will engage GMZ Engineering, Inc. for a one-year term to perform installation of new fencing, gates and signage or other repetitive work under individual job order tasks on an as-needed basis subject to the maximum contract authorization of $4 million. Compensation for the work will be based on the unit prices reflected in GMZ Engineering, Inc. s bid. References indicated that GMZ Engineering, Inc. has recently provided fencing relocation services for the Los Angeles Community College District. Additionally, GMZ Engineering, Inc. is currently performing fencing and gate installation for the Los Angeles Trade Technical College. Disadvantaged Business Enterprise (DBE)/Small Business Enterprise (SBE) Requirements This project is funded in part by grants from the Federal Transit Administration (FTA); therefore, bidders were required to meet a Disadvantaged Business Enterprise goal of five percent. GMZ Engineering, Inc. met all the requirements, including committing to the DBE contract goal. GMZ Engineering, Inc., the lowest responsive and responsible bidder, met all the requirements of this procurement, including certification to comply with the Buy America requirements in accordance with 49 USC Section 5323(i)(1) and 49 CFR Part 661.5, and is recommended for award. LIST OF SUBCONTRACTORS NAME MATERIALS/SERVICES SUPPLIED DBE? (%) Vista Steel Furnish Reinforcing Rebar Yes (1%) Golden Bay Fence & Ironwork Furnish Fence Material Yes (10%) CAT Tracking Inc. Furnish Signage No Budget Impact The amounts for which contract authority is requested are included in the Adopted Capital Budgets for FY ($2,023,000) and in third party recollectable projects ($175,000). 22

32 Contract No. JO121-18R Fencing, Gates and Signage Services Recommendation to Award Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 4 Prepared by: Llency Aquino, Project Engineer I Marcus Gillette, Senior Contract & Compliance Administrator Gary Lettengarver Chief Operating Officer Elissa K. Konove Deputy Chief Executive Officer 23

33 TRANSMITTAL DATE: January 5, 2018 MEETING DATE: January 12, 2018 ITEM 10 TO: FROM: SUBJECT: Board of Directors Arthur T. Leahy Adoption of Board Investment Policy Issue California Government Code Section provides investing authority to the governing body and may be delegated to the Authority s Treasurer for one-year periods. Under the Authority s executive management structure, the Chief Financial Officer effectively functions as a Treasurer with approval of the designation by the Board. Recommendation It is recommended that the Board approve the FIN-3.1 Investment Policy and the designation of Chief Financial Officer as Treasurer for one additional year. Alternatives The Board may choose not to approve the Policy or designation of Chief Financial Officer as Treasurer. A separate action would then be required to approve the Investment Policy to be in conformance with State Code. Such an action would cause the Board to directly assume responsibility for the investment function. Strategic Goal Alignment This report aligns with the strategic goal to maintain fiscal sustainability. Annual approval of the Authority s Investment Policy is in compliance with auditing requirements. Background The Joint Powers Authority Agreement between the Authority and its Member Agencies requires the Authority to provide for accountability and safekeeping of all funds provided to the Authority for the provision of commuter rail services. The State of California requires all public agencies to have an investment policy that is initially approved and reviewed annually by the governing boards. The Authority s Investment Policy 24

34 Adoption of Board Investment Policy Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 2 (Attachment A) is intended to conform to state requirements and provide assurance to Member Agencies that their funds are managed prudently in accordance with conservative guidelines. The suggested change to the current Board authorized Authority Investment Policy reflects the elimination of Equity Securities as a permitted instrument for funding a 457 (f) plan and to update of the appropriate dates of revision. Attachment A shows redlines to the policy and Attachment B shows the clean version of the proposed policy changes. The Board approved the designation of the Chief Financial Officer as the Treasurer on April 11, 2014 and has extended that designation annually for each year following. By approving this policy, the Board will be extending this designation for one additional year into January 2019 unless revoked. Pursuant to the requirements of this policy and as recommended by state law, staff will return to the Board quarterly with an investment report. The report provides ongoing assurance to the Board and Member Agencies concerning the security of the funds entrusted to the Authority. Budget Impact There is no budgetary impact as a result of this report. Prepared by: Ronnie Campbell, Chief Financial Officer Elissa K. Konove Deputy Chief Executive Officer 25

35 Attachment A Southern California Regional Rail Authority Finance Policies and Procedures Manual TITLE: Investment Policy NO. FIN-3.1 ORIGINATING UNIT: Finance Department EFFECTIVE DATE: 01/1312/178 REVISION: 12 PURPOSE This Investment Policy sets forth the investment guidelines for all funds (except retirement funds) of the Southern California Regional Rail Authority (SCRRA) invested on and after January 23, The objective of this Investment Policy is to ensure SCRRA's funds are prudently invested to preserve capital, provide necessary liquidity and achieve a market-average rate of return through economic cycles. Investments may only be made as authorized by this Investment Policy. The SCRRA Investment Policy conforms to the California Government Code (the Code), as well as customary standards of prudent investment management. Irrespective of these policy provisions, should the provisions of the Code be or become more restrictive than those contained herein, such provisions will be considered immediately incorporated into the Investment Policy and adhered to. OBJECTIVES Safety of Principal: Safety of principal is the foremost objective of SCRRA. Each investment transaction shall seek to ensure capital losses are avoided, whether from institutional default, broker-dealer default, or erosion of market value of securities. Liquidity: Liquidity is the second most important objective of SCRRA. It is important the portfolio contain investments for which there is an active secondary market and which offer the flexibility to be easily sold at any time with minimal risk of loss of either the principal or interest based upon then prevailing rates. Total Return: SCRRA's portfolio shall be designed to attain a market-average rate of return through economic cycles. In order to maximize return on investments, the SCRRA seeks an active rather than passive management of portfolio assets. The SCRRA may from time to time sell securities that it owns in order to better reposition its portfolio assets in accordance with updated cash flow schedules, yield opportunities existing between market sectors, or simply market timing. 26

36 Investment Policy Page PROCEDURES 1.1 Compliance If SCRRA utilizes a portfolio manager, the Treasurer will provide a copy of its Investment Policy as part of any portfolio manager contract, and will expect its portfolio managers to invest each portfolio, managed for SCRRA, in accordance with the provisions of the Investment Policy. SCRRA Treasurer is responsible for verifying each portfolio manager's compliance as well as SCRRA's entire portfolio's compliance with the provisions of the Investment Policy. If SCRRA's Treasurer determines a portfolio manager has made an investment that does not comply with the provisions of the Investment Policy, the Treasurer shall immediately notify the portfolio manager of the compliance violation. At that point, the portfolio manager is on probation for a period of one year. The second time a violation occurs while the portfolio manager is on probation, the Treasurer shall request the portfolio manager responsible for the compliance violation meet with the Chief Executive Officer, and the Treasurer as soon as practicable, at which time it will be decided whether the Board of Directors will be notified of the violation. If SCRRA's Treasurer finds the portfolio manager has made a third investment while on probation that does not comply with the provisions of the Investment Policy, the Treasurer shall notify the Board of Directors of the compliance violations, and shall recommend termination of the contract with the portfolio manager. The Board of Directors may terminate the contract if it feels such action is in the best interest of the agency. 1.2 Prudence SCRRA's Board of Directors or persons authorized to make investment decisions on behalf of SCRRA are trustees and fiduciaries subject to the prudent investor standard. The standard of prudence to be used by investment officials shall be the "prudent person" standard as defined below and shall be applied in the context of managing an overall portfolio. SCRRA's investment professionals acting in accordance with written procedures and the Investment Policy and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control developments. The Prudent Person Standard: When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, 27

37 Investment Policy Page 3 and diligence under the circumstances then prevailing, including but not limited to, the general economic conditions and the anticipated needs of SCRRA, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. 1.3 Delegation of Authority Pursuant to Government Code Section 53607, SCRRA Board of Directors may delegate the authority to manage SCRRA's investment program to SCRRA's Treasurer for a oneyear period. Under SCRRA's executive management structure, SCRRA's Chief Financial Officer effectively functions as a Treasurer, with approval of the designation by the Board required each year. 1.4 Ethics and Conflicts of Interest SCRRA's officers and employees involved in the investment process shall not participate in any personal business activity that conflicts with the proper execution of SCRRA's investment program, or which impairs their ability to make impartial investment decisions. SCRRA's investment professionals and the Finance Department employees are not permitted to have any material financial interests in financial institutions that conduct business with SCRRA, and they are not permitted to have any personal financial or investment holdings that have a material effect on the performance of SCRRA's investments. Furthermore, all aspects of SCRRA's Ethics Policy shall be followed. 1.5 Financial Benchmarks In order to establish a basis for evaluating portfolio manager investment results, SCRRA uses nationally recognized fixed income security performance benchmark to evaluate the investment income on its investments. The Merrill Lynch 1-3 year Government Corporate Index is used for intermediate duration portfolio and the three-month Treasury Bill is used for the SCRRA's short-term portfolios. 1.6 Permitted Investments Maturity and Term All investments, unless otherwise specified, are subject to a maximum stated term of 5 years. Maturity shall mean the stated final maturity of the security, or the unconditional put option date, if the security contains such a provision. Term or tenure shall mean the remaining time to maturity when purchased. 28

38 Investment Policy Page4 Eligible Instruments and Quality SCRRA policy is to invest only in high quality instruments as permitted by the Code, subject to the limitations of this Investment Policy. Within the investments permitted by the Code, SCRRA seeks to further restrict eligible investments to the investments listed below. Percentage limitations, where indicated, apply at time of purchase. Ratings requirements where indicated, apply at the time of purchase: 1. U.S. Treasuries: Direct obligations of the United States of America and securities that are fully and unconditionally guaranteed as to the timely payment of principal and interest by the full faith and credit of the United States of America. U.S. Treasury coupon and principal STRIPS (Separate Trading of Registered Interest and Principal of Securities) are permitted investments pursuant to the Investment Policy. 2. Federal Agencies and U.S. Government Sponsored Enterprises: Senior debt obligations, participation certificates, or other instruments of, or issued by or guaranteed by, the following federal agencies and United States government sponsored enterprises: Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) Federal Home Loan Bank (FHLB) Federal National Mortgage Association (FNMA or Fannie Mae) Federal Farm Credit Bank (FFCB) Student Loan Marketing Association (SLMA or Sallie Mae) Government National Mortgage Association (GNMA or Ginnie Mae) Small Business Administration (SBA) Export-Import Bank of the United States U.S. Department of Housing and Urban Development Any Federal Agency or U.S. Government Sponsored Enterprise security not specifically mentioned above is not a permitted investment. 3. State of California and Local Agency Obligations: Registered state warrants, treasury notes or bonds of the State of California and bonds, notes, warrants or other evidences of indebtedness of any local agency of the state, including bonds payable solely out of revenues from a revenue producing property owned, controlled, or operated by the state or local agency or by a department, board, agency or authority of the state or local agency. Such obligations must be issued by an entity whose general obligation debt is rated P-1 by Moody's and A-1 by Standard & Poor's equivalent or better for short-term obligations, or A by Moody's or A by Standard & Poor's or better for long-term debt. Public agency bonds issued for private purposes (industrial development bonds) are specifically excluded as allowable investments. 4. Bankers Acceptances: Bankers acceptances with a maximum term of 180 days 29

39 Investment Policy Page 5 which: a) are eligible for purchase by the Federal Reserve System; b) are drawn on and accepted by a bank rated B or better by Thomson BankWatch or International Bank Credit Analysis, or are rated A-1 for short-term deposits by Standard & Poor s or P-1 for short-term deposits by Moody's, or are comparably rated by a nationally-recognized rating agency; c) may not exceed the 5 percent limit on any one commercial bank. 5. Commercial Paper: Commercial paper with a maximum term of 180 days must: a) be issued by corporations rated A-2 by Moody's and A or better by Standard & Poor's for issuer's debt, other than commercial paper; and b) be issued by corporations organized and operating within the United States and having total assets in excess of five hundred million dollars ($500,000,000); and c) be rated P-1 by Moody's and A-1 or better by Standard & Poor's; and d) not represent more than 10 percent of the outstanding paper of the issuing corporation. 6. Negotiable Certificates of Deposit: Negotiable Certificates of Deposit with a maximum term of 270 days issued by a nationally or state-chartered bank or state or federal association or by a state licensed branch of a foreign bank, which have been rated as A-1 for short-term deposits by Standard & Poor s or P-1 for short- term deposits by Moody's, or are comparably rated by a nationally-recognized rating agency. 7. Repurchase Agreements: Repurchase agreements with a maximum term of one year collateralized by U.S. Treasuries, Government National Mortgage Association securities, Federal National Mortgage Association securities or Federal Home Loan Mortgage Association securities with any registered broker-dealer subject to the Securities Investors Protection Act or any commercial banks insured by the FDIC so long as at the time of the investment such dealer (or its parent) has an uninsured, unsecured and unguaranteed obligation rated P- 1 short-term or A-2 long-term or better by Moody's, anda-1 short-term or A long-term or better by Standard & Poor s, provided: a) a Public Securities Association (PSA) master repurchase agreement and a triparty agreement, if applicable, representing a custodial undertaking in connection with a master repurchase agreement governs the transaction and has been signed by the SCRRA; and b) the securities are held free and clear of any lien by the SCRRA's custodian or agent for SCRRA's custodian or trustee; and c) a perfected first security interest under the Uniform Commercial Code, or book entry procedures prescribed at 31 C.F.R et seq. in such securities is 30

40 Investment Policy Page 6 created for the benefit of the SCRRA's custodian or trustee and SCRRA; and d) t h e agent provides SCRRA's custodian or trustee and the SCRRA with a valuation of the collateral securities no less frequently than weekly and will liquidate the collateral securities if any deficiency in the required 102 percent collateral percentage is not restored within two business days of such valuation. Reverse Repurchase Agreements are not permitted. 8. Medium-term Maturity Corporate Securities: Corporate securities with a maximum term of 5 years which: a) are rated AA or better by a nationally-recognized rating service; b) are issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state operating within the United States; c) may not represent more than 10 percent of the issue in the case of a specific public offering. This limitation does not apply to debt that is "continuously offered" in a mode similar to commercial paper (i.e., medium-term notes). Under no circumstances can anyone corporate issuer represent more than 5 percent of the portfolio. 9. Money Market Funds: Shares of beneficial interest issued by diversified management companies (commonly called money market funds) which: a) are rated AAA (or equivalent highest ranking) by two of the three largest nationally-recognized rating services; or b) retained with an investment adviser registered or exempt from registration with the Securities and Exchange Commission with not less than 5 years' experience managing money market funds with assets under management in excess of five hundred million dollars ($500,000,000); and c) may not represent more than 10 percent of the money market fund's assets. 10. Other M u t u a l Funds: Shares o f b e n e f i c i a l i n t e r e s t issued by diversified management companies (commonly called mutual funds) which: a) are rated AAA (or equivalent highest ranking) by two of the three largest nationally-recognized rating services; or b) retained with an investment adviser registered or exempt from registration with the Securities and Exchange Commission with not less than 5 years' experience investing in the securities and obligations authorized by subdivisions (a) to (G), inclusive, or subdivisions (m) or (n) in Section of the California Government Code and with assets under management in excess of five hundred million dollars ($500,000,000); and 31

41 Investment Policy Page 7 c) may not represent more than 10 percent of the fund's or pool's assets. 11. Mortgage or Asset-backed Securities: Any mortgage pass-through security, collateralized mortgage obligation, mortgage-backed or other pay-through bond, equipment lease-backed certificate, consumer receivable pass-through certificate, or consumer receivable-backed bond with a maximum of 5 years stated final maturity which: a) is rated AAA (Code AA) by a nationally-recognized rating service; and b) is issued by an issuer having an A or better rating by a nationally recognized rating service for its long-term debt. 12. Investment Agreements: Investment agreements must be approved and signed by the Treasurer. Investment agreements are permitted with any bank, insurance company or broker-dealer, or any corporation if: a) At the time of such investment, such bank has an unsecured, uninsured and unguaranteed obligation rated longterm Aa2 or better by Moody's and AA or better by Standard & Poor's, or such insurance company or corporation has an unsecured, uninsured and unguaranteed claims paying ability rated long-term Aaa by Moody's and AAA by Standard & Poor's, or such bank or broker-dealer has an unsecured, uninsured and unguaranteed obligation rated long-term A2 or better by Moody's and A or better by Standard & Poor's (and with respect to such broker-dealer rated short-term P-1 by Moody's and A-1 by Standard & Poor's); provided, that such broker-dealer or A2/A rated bank also collateralize the obligation under the investing agreement with U.S. Treasuries, Government National Mortgage Association securities, Federal National Mortgage Association securities or Federal Home Loan Mortgage Association securities meeting the following requirements: 1) the securities are held free and clear of any lien by the SCRRA's custodian or trustee or an independent third party acting solely as "agent" for the custodian or trustee, and such third party is (a) a Federal Reserve Bank, or (b) a bank which is a member of the Federal Deposit Insurance Corporation and which has combined capital, surplus and undivided profits of not less than $50 million and the custodian or trustee shall have received written confirmation from such third party that it holds such securities, free and clear of any lien, as agent for SCRRA's custodian or trustee; and 2) the securities are held free and clear of any lien by the SCRRA's custodian or trustee or an independent third party acting solely as "agent" for the custodian 32

42 Investment Policy Page 8 or trustee, and such third party is (a) a Federal Reserve Bank, or (b) a bank which is a member of the Federal Deposit Insurance Corporation and which has combined capital, surplus and undivided profits of not less than $50 million and the custodian or trustee shall have received written confirmation from such third party that it holds such securities, free and clear of any lien, as agent for SCRRA's custodian or trustee; and 2) a perfected first security interest under the Uniform Commercial Code, or book entry procedures prescribed at 31 C.P.R et seq. or 31 C.P.R et seq. in such securities is created for the benefit of SCRRA's custodian or trustee and SCRRA; and 4) the agent provides SCRRA's custodian or trustee and SCRRA with valuation of the collateral securities no less frequently than weekly and will liquidate the collateral securities if any deficiency in the required 102 percent collateral percentage is not restored within two business days of such valuation. b) The agreement shall include a provision to the effect that if any rating of any such bank, insurance, broker-dealer or corporation is downgraded below a minimum rating of A2 by Moody's and A by Standard & Poor's, the SCRRA shall have the right to terminate such agreement. 13. State of California Local Agency Investment Fund (LAIF): LAIF is a pooled fund managed by the State Treasurer referred to in Section of the Code. 14. Variable and Floating Rate Securities: Variable and floating rate securities, which are restricted to investments in permitted Federal Agencies and U.S. Government Sponsored Enterprises securities, with a final maturity of not to exceed 3 years as described above, must utilize traditional money market reset indices such as U.S. Treasury bills, Federal Funds, commercial paper or LIBOR (London Interbank Offered Rate). Investments in floating rate securities whose reset is calculated using more than one of the above indices are not permitted (i.e., dual index notes). 15. Derivatives: Derivatives are to be used as a tool for bonafide hedging investments only where deemed appropriate. Derivatives shall not be used for the pu1pose purpose of interest rate speculation. Derivative products in any of the eligible investment categories listed above may be permitted. The Treasurer has the sole responsibility for determining which prospective investments are derivatives. Each prospective investment in a derivative product must be documented by the Treasurer as to the purpose and specific financial risk being hedged. Each such investment must be approved by the Chief Executive Officer prior to entering into such investment. No investments shall be permitted that have the possibility of returning a zero or negative yield if held to maturity. In addition, the investment in inverse floaters, range 33

43 Investment Policy Page 9 notes, strips derived from mortgage obligations, step-up notes and dual index notes are not permitted investments. 16. Equity Securities: Equity securities are to be used for the sole purpose of funding the Supplemental Executive Retirement Plan, specifically the provisions contained in the 457(f) plan. Pursuant to section of the Government Code, Notwithstanding the provisions of this chapter or any other provisions of this code, funds held by a local agency pursuant to a written agreement between the agency and employees of the agency to defer a portion of the compensation otherwise receivable by the agency's employees and pursuant to a plan for such deferral as adopted by the governing body of the agency, may be invested in the types of investments set forth in Sections and of this code, and may additionally be invested in corporate stocks, bonds, securities, mutual funds, savings and loan accounts, credit union accounts, life insurance policies, annuities, mortgages, deeds of trust, or other security interests in real or personal property. Nothing herein shall be construed to permit any type of investment prohibited by the Constitution Ineligible Instruments: As p r o v i d e d i n California Government Code S e c t i o n , SCRRA shall not invest any funds in inverse floaters, range notes, mortgage derived interest-only strips or in any security that could result in zero interest accrual if held to maturity. Rating Downgrades SCRRA may from time-to-time be invested in a security whose rating is downgraded below the quality criteria permitted by this Investment Policy. Any security held as an investment whose rating falls below the investment guidelines or whose rating is put on notice for possible downgrade shall be immediately reviewed by the Treasurer for action. The decision to retain the security until maturity, sell (or put) the security or other action shall be approved by the Chief Executive Officer and the Treasurer. 1.7 Diversification Guidelines Diversification limits ensure the portfolio is not unduly concentrated on the securities of one type, industry, or entity, thereby assuring adequate portfolio liquidity should one sector or company experience difficulties. The chart on the following page lists the allowable investments and their maximum investment. 34

44 Investment Policy Page 10 Instruments U.S. Treasuries (including U.S. Treasury coupon and principal STRIPS) Federal Agency and U.S. Government Sponsored Enterprises State of California and Local Agencies Bankers Acceptances Commercial Paper Negotiable CDs Repurchase Agreements Medium-term Maturity Corporate Securities Money Market Funds and Other Mutual Funds (in total) Mortgage and Asset-backed Securities Investment Agreements (Non-bond Proceeds) LAIF Variable and Floating Rate Securities Investment Agreements Pursuant to Indenture Derivatives (hedging transactions only) and subject to prior approval At All Times Maximum % Portfolio 100% 100% 25% 30% (Code 40%) 25% 30% (Code) 50% 30% (Code) 20% (Code) 20% (Code) 25% $40 million maximum per policy (LAIF deposit limit increased to $50 million 30% 100% 5% If outside portfolio managers are used by SCRRA, they must review the portfolios they manage (including bond proceeds portfolios) to ensure compliance with SCRRA's diversification guidelines on an ongoing basis. a) Issuer/Counter-party Diversification Guidelines for all Securities except Federal Agencies, Government Sponsored Enterprises, Investment Agreements and Repurchase Agreements No more than 5 percent of any one corporation, bank, local agency, or other corporate name for one or more series of securities. 1. Issuer/Counter-party Diversification Guidelines for Federal Agencies, Government Sponsored Enterprises and Repurchase Agreements No more than 30 percent of any one Federal Agency or Government Sponsored Enterprise. 35

45 Investment Policy Page 11 No more than 50 percent of any one repurchase agreement counter-party name if maturity/term is 7 days, and no more than 35 percent of any one repurchase agreement counter-party name if maturity/term is > 7 days. 1.8 Securities Safe Keeping All security transactions, including collateral for repurchase agreements, entered into by SCRRA, shall be conducted on a delivery-versus-payment b a s i s. Securities shall be held by a third party custodian designated by the Treasurer, evidenced by safe keeping receipts and in compliance with Code Section Broker - Dealers The Treasurer, and investment professionals authorized by the Treasurer may buy securities either from the issuer or from a list of broker-dealers and financial institutions that will be periodically reviewed consisting of the following: broker-dealers licensed by the state, as defined in Section of the Corporations Code, a member of a federallyregulated securities exchange, a national or state-chartered bank, a federal or state association, or a brokerage firm designated as a primary government dealer by the Federal Reserve Bank. If outside portfolio managers are used they must certify that they will purchase securities from broker-dealers (other than themselves) or financial institutions in compliance with this Investment Policy. 2.0 DEFINITION OF TERMS Bankers Acceptances (BAs) - Time drafts that a bank "accepts" as its financial responsibility as part of a trade finance process. These short-term notes arc sold at a discount, and are obligations of the drawer (the bank s trade finance client), as well as the bank. Once accepted, the bank is irrevocably obligated to pay the BA upon maturity, if the drawer does not. Commercial Paper (CP) - Unsecured promissory notes issued by companies and government entities usually at a discount. Commercial p a p e r is negotiable, although it is typically held to maturity. The maximum maturity is 270 days, with most CP issued for terms of less than 30 days. Federal Agencies and U.S. Government Sponsored Enterprises - U.S. Government related organizations, the largest of which are government financial intermediaries assisting specific credit markets (housing, agriculture). Often simply referred to as "Agencies," they include: 36

46 Investment Policy Page 12 Federal Home Loan Bank (FHLB) Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) Federal National Mortgage Association (FNMA or Fannie Mae) Federal Farm Credit Bank (FFCB) Student Loan Marketing Association (SLMA or Sallie Mae) Government National Mortgage Association (GNMA or Ginnie Mae) Small Business Administration (SBA) Export-Import Bank of the United States U.S. Department of Housing and Urban Development Any F e d e r a l A g e n c y or U. S. Government Sponsored Enterprise security not specifically mentioned above is not a permitted investment. Investment Agreements - An agreement acknowledging the receipt of funds for deposit, specifying terms for withdrawal, and guaranteeing a rate for interest to be paid. Medium-term Maturity Corporate Securities - Notes issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States. Mortgage or Asset-backed Securities - Pass-through securities are instruments by which the cash flow from the mortgages, receivables or other assets underlying the security are passed-through as principal and interest payments to the investor. Though these securities may contain a third-party guarantee, they are a package of assets being sold by a trust, not a debt obligation of the sponsor. Other types of backed" debt instruments have assets (such as auto leases or consumer receivables) pledged to support the debt service. Negotiable Certificates of Deposit (Negotiable CDs) - A negotiable (marketable or transferable) receipt for a time deposit at a bank or other financial institution for a fixed time and interest rate. Repurchase Agreements (Repos)- A purchase of securities under a simultaneous agreement to sell these securities bank at a fixed price on some future date. This is in essence a collateralized investment, with the difference between the purchase price and sales price determining the earnings. Variable and Floating Rate Securities - Variable and floating rate securities are appropriate investments when used to enhance yield and reduce risk. They should have the same stability, liquidity and quality as traditional money market securities. A variable rate security provides for the automatic establishment of a new interest rate on set dates. A floating rate security provides for the automatic adjustment of its interest rate whenever a specified interest rate changes. Generally, changes in interest rates will have a smaller effect on variable and floating rate securities than on the market value of comparable fixed income securities. 37

47 Investment Policy Page 13 U.S. Treasuries- Permitted obligations of the U.S. Government including: a.) Treasury Bills: 3 month, 6 month and 1 year securities issued and traded at a discount. b.) Treasury Notes and Bonds: coupon bearing instruments. c.) Treasury STRIPS: U.S. Treasury securities that have been separated into their component parts of principal and interest payments and recorded as such in the Federal Reserve book entry record-keeping system. 3.0 RESPONSIBILITIES The Treasurer, subject to the approval of SCRRA Board of Directors, is responsible for establishing the Investment Policy and ensuring investments are made in compliance with the Investment Policy. The Investment Policy shall be reviewed annually by the SCRRA Board of Directors, at a public meeting pursuant to Section 53646(a) of the Code. I The Treasurer is responsible for making investments and for compliance with this policy pursuant to the delegation of authority to invest funds or to sell or exchange securities and shall make a quarterly report to the Board of Directors. 4.0 REFERENCES California Government Code, Section Ethics Policy 5.0 ATTACHMENTS Not Applicable. The Treasurer is responsible for establishing policies and procedures for the SCRRA s investment program that ensure compliance with the Investment Policy and for having an annual independent audit performed on the SCRRA s investments. 1 Section 53646(a) states that "... the treasurer may annually render to the board of supervisors and any oversight committee a statement of investment policy, which the board shall review and approve at a public meeting. Any change in the policy shall also be reviewed and approved by the board at a public meeting." 6.0 PROCEDURE HISTORY February 10, 2012 Policy and Procedures document approved February 8, 2013 Policy and Procedures document approved February 14, 2014 Policy and Procedures document approved January 23, 2015 Policy and Procedures document approved January 15, 2016 Policy and Procedures document approved January 12, 2017 Policy and Procedures document approved The Treasurer is responsible for establishing policies and procedures for the SCRRA s investment program that ensure compliance with the Investment Policy and for having an annual independent audit performed on the SCRRA s investments. 1 Section 53646(a) states that "... the treasurer may annually render to the board of supervisors and any oversight committee a statement of investment policy, which the board shall review and approve at a public meeting. Any change in the policy shall also be reviewed and approved by the board at a public meeting." 38

48 Attachment B Southern California Regional Rail Authority Finance Policies and Procedures Manual TITLE: Investment Policy NO. FIN-3.1 ORIGINATING UNIT: Finance Department EFFECTIVE DATE: 01/12/18 REVISION: 2 PURPOSE This Investment Policy sets forth the investment guidelines for all funds (except retirement funds) of the Southern California Regional Rail Authority (SCRRA) invested on and after January 23, The objective of this Investment Policy is to ensure SCRRA's funds are prudently invested to preserve capital, provide necessary liquidity and achieve a market-average rate of return through economic cycles. Investments may only be made as authorized by this Investment Policy. The SCRRA Investment Policy conforms to the California Government Code (the Code), as well as customary standards of prudent investment management. Irrespective of these policy provisions, should the provisions of the Code be or become more restrictive than those contained herein, such provisions will be considered immediately incorporated into the Investment Policy and adhered to. OBJECTIVES Safety of Principal: Safety of principal is the foremost objective of SCRRA. Each investment transaction shall seek to ensure capital losses are avoided, whether from institutional default, broker-dealer default, or erosion of market value of securities. Liquidity: Liquidity is the second most important objective of SCRRA. It is important the portfolio contain investments for which there is an active secondary market and which offer the flexibility to be easily sold at any time with minimal risk of loss of either the principal or interest based upon then prevailing rates. Total Return: SCRRA's portfolio shall be designed to attain a market-average rate of return through economic cycles. In order to maximize return on investments, the SCRRA seeks an active rather than passive management of portfolio assets. The SCRRA may from time to time sell securities that it owns in order to better reposition its portfolio assets in accordance with updated cash flow schedules, yield opportunities existing between market sectors, or simply market timing. 39

49 FIN 3.1 Investment Policy Page PROCEDURES 1.1 Compliance If SCRRA utilizes a portfolio manager, the Treasurer will provide a copy of its Investment Policy as part of any portfolio manager contract, and will expect its portfolio managers to invest each portfolio, managed for SCRRA, in accordance with the provisions of the Investment Policy. SCRRA Treasurer is responsible for verifying each portfolio manager's compliance as well as SCRRA's entire portfolio's compliance with the provisions of the Investment Policy. If SCRRA's Treasurer determines a portfolio manager has made an investment that does not comply with the provisions of the Investment Policy, the Treasurer shall immediately notify the portfolio manager of the compliance violation. At that point, the portfolio manager is on probation for a period of one year. The second time a violation occurs while the portfolio manager is on probation, the Treasurer shall request the portfolio manager responsible for the compliance violation meet with the Chief Executive Officer, and the Treasurer as soon as practicable, at which time it will be decided whether the Board of Directors will be notified of the violation. If SCRRA's Treasurer finds the portfolio manager has made a third investment while on probation that does not comply with the provisions of the Investment Policy, the Treasurer shall notify the Board of Directors of the compliance violations, and shall recommend termination of the contract with the portfolio manager. The Board of Directors may terminate the contract if it feels such action is in the best interest of the agency. 1.2 Prudence SCRRA's Board of Directors or persons authorized to make investment decisions on behalf of SCRRA are trustees and fiduciaries subject to the prudent investor standard. The standard of prudence to be used by investment officials shall be the "prudent person" standard as defined below and shall be applied in the context of managing an overall portfolio. SCRRA's investment professionals acting in accordance with written procedures and the Investment Policy and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control developments. The Prudent Person Standard: When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, 40

50 FIN 3.1 Investment Policy Page 3 and diligence under the circumstances then prevailing, including but not limited to, the general economic conditions and the anticipated needs of SCRRA, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. 1.3 Delegation of Authority Pursuant to Government Code Section 53607, SCRRA Board of Directors may delegate the authority to manage SCRRA's investment program to SCRRA's Treasurer for a oneyear period. Under SCRRA's executive management structure, SCRRA's Chief Financial Officer effectively functions as a Treasurer, with approval of the designation by the Board required each year. 1.4 Ethics and Conflicts of Interest SCRRA's officers and employees involved in the investment process shall not participate in any personal business activity that conflicts with the proper execution of SCRRA's investment program, or which impairs their ability to make impartial investment decisions. SCRRA's investment professionals and the Finance Department employees are not permitted to have any material financial interests in financial institutions that conduct business with SCRRA, and they are not permitted to have any personal financial or investment holdings that have a material effect on the performance of SCRRA's investments. Furthermore, all aspects of SCRRA's Ethics Policy shall be followed. 1.5 Financial Benchmarks In order to establish a basis for evaluating portfolio manager investment results, SCRRA uses nationally recognized fixed income security performance benchmark to evaluate the investment income on its investments. The Merrill Lynch 1-3 year Government Corporate Index is used for intermediate duration portfolio and the three-month Treasury Bill is used for the SCRRA's short-term portfolios. 1.6 Permitted Investments Maturity and Term All investments, unless otherwise specified, are subject to a maximum stated term of 5 years. Maturity shall mean the stated final maturity of the security, or the unconditional put option date, if the security contains such a provision. Term or tenure shall mean the remaining time to maturity when purchased. 41

51 FIN 3.1 Investment Policy Page 4 Eligible Instruments and Quality SCRRA policy is to invest only in high quality instruments as permitted by the Code, subject to the limitations of this Investment Policy. Within the investments permitted by the Code, SCRRA seeks to further restrict eligible investments to the investments listed below. Percentage limitations, where indicated, apply at time of purchase. Ratings requirements where indicated, apply at the time of purchase: 1. U.S. Treasuries: Direct obligations of the United States of America and securities that are fully and unconditionally guaranteed as to the timely payment of principal and interest by the full faith and credit of the United States of America. U.S. Treasury coupon and principal STRIPS (Separate Trading of Registered Interest and Principal of Securities) are permitted investments pursuant to the Investment Policy. 2. Federal Agencies and U.S. Government Sponsored Enterprises: Senior debt obligations, participation certificates, or other instruments of, or issued by or guaranteed by, the following federal agencies and United States government sponsored enterprises: Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) Federal Home Loan Bank (FHLB) Federal National Mortgage Association (FNMA or Fannie Mae) Federal Farm Credit Bank (FFCB) Student Loan Marketing Association (SLMA or Sallie Mae) Government National Mortgage Association (GNMA or Ginnie Mae) Small Business Administration (SBA) Export-Import Bank of the United States U.S. Department of Housing and Urban Development Any Federal Agency or U.S. Government Sponsored Enterprise security not specifically mentioned above is not a permitted investment. 3. State of California and Local Agency Obligations: Registered state warrants, treasury notes or bonds of the State of California and bonds, notes, warrants or other evidences of indebtedness of any local agency of the state, including bonds payable solely out of revenues from a revenue producing property owned, controlled, or operated by the state or local agency or by a department, board, agency or authority of the state or local agency. Such obligations must be issued by an entity whose general obligation debt is rated P-1 by Moody's and A-1 by Standard & Poor's equivalent or better for short-term obligations, or A by Moody's or A by Standard & Poor's or better for long-term debt. Public agency bonds issued for private purposes (industrial development bonds) are specifically excluded as allowable investments. 42

52 FIN 3.1 Investment Policy Page 5 4. Bankers Acceptances: Bankers acceptances with a maximum term of 180 days which: a) are eligible for purchase by the Federal Reserve System; b) are drawn on and accepted by a bank rated B or better by Thomson BankWatch or International Bank Credit Analysis, or are rated A-1 for short-term deposits by Standard & Poor s or P-1 for short-term deposits by Moody's, or are comparably rated by a nationally-recognized rating agency; c) may not exceed the 5 percent limit on any one commercial bank. 5. Commercial Paper: Commercial paper with a maximum term of 180 days must: a) be issued by corporations rated A-2 by Moody's and A or better by Standard & Poor's for issuer's debt, other than commercial paper; and b) be issued by corporations organized and operating within the United States and having total assets in excess of five hundred million dollars ($500,000,000); and c) be rated P-1 by Moody's and A-1 or better by Standard & Poor's; and d) not represent more than 10 percent of the outstanding paper of the issuing corporation. 6. Negotiable Certificates of Deposit: Negotiable Certificates of Deposit with a maximum term of 270 days issued by a nationally or state-chartered bank or state or federal association or by a state licensed branch of a foreign bank, which have been rated as A-1 for short-term deposits by Standard & Poor s or P-1 for short-term deposits by Moody's, or are comparably rated by a nationally-recognized rating agency. 7. Repurchase Agreements: Repurchase agreements with a maximum term of one year collateralized by U.S. Treasuries, Government National Mortgage Association securities, Federal National Mortgage Association securities or Federal Home Loan Mortgage Association securities with any registered broker-dealer subject to the Securities Investors Protection Act or any commercial banks insured by the FDIC so long as at the time of the investment such dealer (or its parent) has an uninsured, unsecured and unguaranteed obligation rated P-1 short-term or A-2 long-term or better by Moody s, and A-1 short-term or A long-term or better by Standard & Poor s, povided: a) a Public Securities Association (PSA) master repurchase agreement and a triparty agreement, if applicable, representing a custodial undertaking in connection with a master repurchase agreement governs the transaction and has been signed by the SCRRA; and b) the securities are held free and clear of any lien by the SCRRA's custodian or agent for SCRRA's custodian or trustee; and 43

53 FIN 3.1 Investment Policy Page 6 c) a perfected first security interest under the Uniform Commercial Code, or book entry procedures prescribed at 31 C.F.R et seq. in such securities is created for the benefit of the SCRRA's custodian or trustee and SCRRA; and d) the agent provides SCRRA's custodian or trustee and the SCRRA with a valuation of the collateral securities no less frequently than weekly and will liquidate the collateral securities if any deficiency in the required 102 percent collateral percentage is not restored within two business days of such valuation. Reverse Repurchase Agreements are not permitted. 8. Medium-term Maturity Corporate Securities: Corporate securities with a maximum term of 5 years which: a) are rated AA or better by a nationally-recognized rating service; b) are issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state operating within the United States; c) may not represent more than 10 percent of the issue in the case of a specific public offering. This limitation does not apply to debt that is "continuously offered" in a mode similar to commercial paper (i.e. medium-term notes). Under no circumstances can any one corporate issuer represent more than 5 percent of the portfolio. 9. Money Market Funds: Shares of beneficial interest issued by diversified management companies (commonly called money market funds) which: a) are rated AAA (or equivalent highest ranking) by two of the three largest nationally-recognized rating services; or b) retained with an investment adviser registered or exempt from registration with the Securities and Exchange Commission with not less than 5 years' experience managing money market funds with assets under management in excess of five hundred million dollars ($500,000,000); and c) may not represent more than 10 percent of the money market fund's assets. 10. Other Mutual Funds: Shares of beneficial interest issued by diversified management companies (commonly called mutual funds) which: a) are rated AAA (or equivalent highest ranking) by two of the three largest nationally-recognized rating services; or b) retained with an investment adviser registered or exempt from registration with the Securities and Exchange Commission with not less than 5 years' experience investing in the securities and obligations authorized by subdivisions (a) to (g), inclusive, or subdivisions (m) or (n) in Section of the California Government Code and with assets under management in excess of five hundred million dollars ($500,000,000); and 44

54 FIN 3.1 Investment Policy Page 7 c) may not represent more than 10 percent of the fund's or pool's assets. 11. Mortgage or Asset-backed Securities: Any mortgage pass-through security, collateralized mortgage obligation, mortgage-backed or other pay-through bond, equipment lease-backed certificate, consumer receivable pass-through certificate, or consumer receivable-backed bond with a maximum of 5 years stated final maturity which: a) is rated AAA (Code AA) by a nationally-recognized rating service; and b) is issued by an issuer having an A or better rating by a nationally recognized rating service for its long-term debt. 12. Investment Agreements: Investment agreements must be approved and signed by the Treasurer. Investment agreements are permitted with any bank, insurance company or broker-dealer, or any corporation if: a) At the time of such investment, such bank has an unsecured, uninsured and unguaranteed obligation rated longterm Aa2 or better by Moody's and AA or better by Standard & Poor's, or such insurance company or corporation has an unsecured, uninsured and unguaranteed claims paying ability rated long-term Aaa by Moody's and AAA by Standard & Poor's, or such bank or broker-dealer has an unsecured, uninsured and unguaranteed obligation rated long-term A2 or better by Moody's, and A or better by Standard & Poor's (and with respect to such broker-dealer rated short-term P-1 by Moody's and A-1 by Standard & Poor's); provided, that such broker-dealer or A2/A rated bank also collateralize the obligation under the investing agreement with U.S. Treasuries, Government National Mortgage Association securities, Federal National Mortgage Association securities or Federal Home Loan Mortgage Association securities meeting the following requirements: 1) the securities are held free and clear of any lien by the SCRRA's custodian or trustee or an independent third party acting solely as "agent" for the custodian or trustee, and such third party is (a) a Federal Reserve Bank, or (b) a bank which is a member of the Federal Deposit Insurance Corporation and which has combined capital, surplus and undivided profits of not less than $50 million and the custodian or trustee shall have received written confirmation from such third party that it holds such securities, free and clear of any lien, as agent for SCRRA's custodian or trustee; and 2) the securities are held free and clear of any lien by the SCRRA's custodian or trustee or an independent third party acting solely as "agent" for the custodian 45

55 FIN 3.1 Investment Policy Page 8 or trustee, and such third party is (a) a Federal Reserve Bank, or (b) a bank which is a member of the Federal Deposit Insurance Corporation and which has combined capital, surplus and undivided profits of not less than $50 million and the custodian or trustee shall have received written confirmation from such third party that it holds such securities, free and clear of any lien, as agent for SCRRA's custodian or trustee; and 3) a perfected first security interest under the Uniform Commercial Code, or book entry procedures prescribed at 31 C.P.R et seq. or 31 C.P.R et seq. in such securities is created for the benefit of SCRRA's custodian or trustee and SCRRA; and 4) the agent provides SCRRA's custodian or trustee and SCRRA with valuation of the collateral securities no less frequently than weekly and will liquidate the collateral securities if any deficiency in the required 102 percent collateral percentage is not restored within two business days of such valuation. b) The agreement shall include a provision to the effect that if any rating of any such bank, insurance, broker-dealer or corporation is downgraded below a minimum rating of A2 by Moody's and A by Standard & Poor's, the SCRRA shall have the right to terminate such agreement. 13. State of California Local Agency Investment Fund (LAIF): LAIF is a pooled fund managed by the State Treasurer referred to in Section of the Code. 14. Variable and Floating Rate Securities: Variable and floating rate securities, which are restricted to investments in permitted Federal Agencies and U.S. Government Sponsored Enterprises securities, with a final maturity of not to exceed 3 years as described above, must utilize traditional money market reset indices such as U.S. Treasury bills, Federal Funds, commercial paper or LIBOR (London Interbank Offered Rate). Investments in floating rate securities whose reset is calculated using more than one of the above indices are not permitted (i.e. dual index notes). 15. Derivatives: Derivatives are to be used as a tool for bonafide hedging investments only where deemed appropriate. Derivatives shall not be used for the purpose of interest rate speculation. Derivative products in any of the eligible investment categories listed above may be permitted. The Treasurer has the sole responsibility for determining which prospective investments are derivatives. Each prospective investment in a derivative product must be documented by the Treasurer as to the purpose and specific financial risk being hedged. Each such investment must be approved by the Chief Executive Officer prior to entering into such investment. No investments shall be permitted that have the possibility of returning a zero or negative yield if held to maturity. In addition, the investment in inverse floaters, range 46

56 FIN 3.1 Investment Policy Page 9 notes, strips derived from mortgage obligations, step-up notes and dual index notes are not permitted investments. 16. Ineligible Instruments: As provided in California Government Code Section , SCRRA shall not invest any funds in inverse floaters, range notes, mortgage derived interest-only strips or in any security that could result in zero interest accrual if held to maturity. Rating Downgrades SCRRA may from time-to-time be invested in a security whose rating is downgraded below the quality criteria permitted by this Investment Policy. Any security held as an investment whose rating falls below the investment guidelines or whose rating is put on notice for possible downgrade shall be immediately reviewed by the Treasurer for action. The decision to retain the security until maturity, sell (or put) the security or other action shall be approved by the Chief Executive Officer and the Treasurer. 1.7 Diversification Guidelines Diversification limits ensure the portfolio is not unduly concentrated on the securities of one type, industry, or entity, thereby assuring adequate portfolio liquidity should one sector or company experience difficulties. The chart on the following page lists the allowable investments and their maximum investment. 47

57 FIN 3.1 Investment Policy Page 10 Instruments U.S. Treasuries (including U.S. Treasury coupon and principal STRIPS) Federal Agency and U.S. Government Sponsored Enterprises State of California and Local Agencies Bankers Acceptances Commercial Paper Negotiable CDs Repurchase Agreements Medium-term Maturity Corporate Securities Money Market Funds and Other Mutual Funds (in total) Mortgage and Asset-backed Securities Investment Agreements (Non-bond Proceeds) LAIF Variable and Floating Rate Securities Investment Agreements Pursuant to Indenture Derivatives (hedging transactions only) and subject to prior approval At All Times Maximum % Portfolio 100% 100% 25% 30% (Code 40%) 25% 30% (Code) 50% 30% (Code) 20% (Code) 20% (Code) 25% $40 million maximum per policy (LAIF deposit limit increased to $50 million) 30% 100% 5% If outside portfolio managers are used by SCRRA, they must review the portfolios they manage (including bond proceeds portfolios) to ensure compliance with SCRRA's diversification guidelines on an ongoing basis. a) Issuer/Counter-party Diversification Guidelines for all Securities except Federal Agencies, Government Sponsored Enterprises, Investment Agreements and Repurchase Agreements. No more than 5 percent of any one corporation, bank, local agency, or other corporate name for one or more series of securities. b) Issuer/Counter-party Diversification Guidelines for Federal Agencies, Government Sponsored Enterprises and Repurchase Agreements. No more than 30 percent of any one Federal Agency or Government Sponsored Enterprise. 48

58 FIN 3.1 Investment Policy Page 11 No more than 50 percent of any one repurchase agreement counter-party name if maturity/term is 7 days, and no more than 35 percent of any one repurchase agreement counter-party name if maturity/term is > 7 days. 1.8 Securities Safe Keeping All security transactions, including collateral for repurchase agreements, entered into by SCRRA, shall be conducted on a delivery-versus-payment basis. Securities shall be held by a third party custodian designated by the Treasurer, evidenced by safe keeping receipts and in compliance with Code Section Broker - Dealers The Treasurer, and investment professionals authorized by the Treasurer may buy securities either from the issuer or from a list of broker-dealers and financial institutions that will be periodically reviewed consisting of the following: broker-dealers licensed by the state, as defined in Section of the Corporations Code, a member of a federally- regulated securities exchange, a national or state-chartered bank, a federal or state association, or a brokerage firm designated as a primary government dealer by the Federal Reserve Bank. If outside portfolio managers are used they must certify that they will purchase securities from broker-dealers (other than themselves) or financial institutions in compliance with this Investment Policy. 2.0 DEFINITION OF TERMS Bankers Acceptances (BAs) - Time drafts that a bank "accepts" as its financial responsibility as part of a trade finance process. These short-term notes arc sold at a discount, and are obligations of the drawer (the bank s trade finance client), as well as the bank. Once accepted, the bank is irrevocably obligated to pay the BA upon maturity, if the drawer does not. Commercial Paper (CP) - Unsecured promissory notes issued by companies and government entities usually at a discount. Commercial p a p e r is negotiable, although it is typically held to maturity. The maximum maturity is 270 days, with most CP issued for terms of less than 30 days. Federal Agencies and U.S. Government Sponsored Enterprises - U.S. Government related organizations, the largest of which are government financial intermediaries assisting specific credit markets (housing, agriculture). Often simply referred to as "Agencies," they include: 49

59 FIN 3.1 Investment Policy Page 12 Federal Home Loan Bank (FHLB) Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) Federal National Mortgage Association (FNMA or Fannie Mae) Federal Farm Credit Bank (FFCB) Student Loan Marketing Association (SLMA or Sallie Mae) Government National Mortgage Association (GNMA or Ginnie Mae) Small Business Administration (SBA) Export-Import Bank of the United States U.S. Department of Housing and Urban Development Any Federal Agency or U.S. Government Sponsored Enterprise security not specifically mentioned above is not a permitted investment. Investment Agreements - An agreement acknowledging the receipt of funds for deposit, specifying terms for withdrawal, and guaranteeing a rate for interest to be paid. Medium-term Maturity Corporate Securities - Notes issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States. Mortgage or Asset-backed Securities - Pass-through securities are instruments by which the cash flow from the mortgages, receivables or other assets underlying the security are passed-through as principal and interest payments to the investor. Though these securities may contain a thirdparty guarantee, they are a package of assets being sold by a trust, not a debt obligation of the sponsor. Other types of backed" debt instruments have assets (such as auto leases or consumer receivables) pledged to support the debt service. Negotiable Certificates of Deposit (Negotiable CDs) - A negotiable (marketable or transferable) receipt for a time deposit at a bank or other financial institution for a fixed time and interest rate. Repurchase Agreements (Repos)- A purchase of securities under a simultaneous agreement to sell these securities bank at a fixed price on some future date. This is in essence a collateralized investment, with the difference between the purchase price and sales price determining the earnings. Variable and Floating Rate Securities - Variable and floating rate securities are appropriate investments when used to enhance yield and reduce risk. They should have the same stability, liquidity and quality as traditional money market securities. A variable rate security provides for the automatic establishment of a new interest rate on set dates. A floating rate security provides for the automatic adjustment of its interest rate whenever a specified interest rate changes. Generally, changes in interest rates will have a smaller effect on variable and floating rate securities than on the market value of comparable fixed income securities. 50

60 FIN 3.1 Investment Policy Page 13 U.S. Treasuries - Permitted obligations of the U.S. Government including: a) Treasury Bills: 3 month, 6 month and 1 year securities issued and traded at a discount. b) Treasury Notes and Bonds: coupon bearing instruments. c) Treasury STRIPS: U.S. Treasury securities that have been separated into their component parts of principal and interest payments and recorded as such in the Federal Reserve book entry record-keeping system. 3.0 RESPONSIBILITIES The Treasurer, subject to the approval of SCRRA Board of Directors, is responsible for establishing the Investment Policy and ensuring investments are made in compliance with the Investment Policy. The Investment Policy shall be reviewed annually by the SCRRA Board of Directors, at a public meeting pursuant to Section 53646(a) of the Code. The Treasurer is responsible for making investments and for compliance with this policy pursuant to the delegation of authority to invest funds or to sell or exchange securities and shall make a quarterly report to the Board of Directors. 4.0 REFERENCES California Government Code, Section Ethics Policy 5.0 ATTACHMENTS Not Applicable. 6.0 PROCEDURE HISTORY February 10, 2012 Policy and Procedures document approved February 8, 2013 Policy and Procedures document approved February 14, 2014 Policy and Procedures document approved January 23, 2015 Policy and Procedures document approved January 15, 2016 Policy and Procedures document approved January 12, 2017 Policy and Procedures document approved The Treasurer is responsible for establishing policies and procedures for the SCRRA s investment program that ensure compliance with the Investment Policy and for having an annual independent audit performed on the SCRRA s investments. 1 Section 53646(a) states that "... the treasurer may annually render to the board of supervisors and any oversight committee a statement of investment policy, which the board shall review and approve at a public meeting. Any change in the policy shall also be reviewed and approved by the board at a public meeting." 51

61 TRANSMITTAL DATE: January 5, 2018 MEETING DATE: January 12, 2018 ITEM 11 TO: FROM: SUBJECT: Board of Directors Arthur T. Leahy Adoption of the 2018 Federal and State Legislative Program Issue Each year the Board adopts a legislative program to establish the Authority s priorities and guide advocacy efforts in both Sacramento and Washington, D.C. Recommendation It is recommended that the Board adopt the 2018 Federal and State Legislative Program. The legislative program will be the blueprint for advocacy efforts during the 2018 legislative session. Alternatives The Board may modify the position or adopt an alternative position. Strategic Goal Alignment This report aligns with the strategic goal to maintain fiscal sustainability by taking a position to ensure stable funding for the Authority s priorities. It also aligns with the goal to improve communications to customers and stakeholders by sharing news, information and the Authority s legislative priorities with elected officials. Background The Board annually adopts a federal and state legislative program that reflects the legislative and strategic goals of the Authority. The legislative program guides staff on advocacy efforts at all levels of governance, allowing for swift advocacy as issues emerge. This draft legislative program is based upon the Board s existing policy positions, previous advocacy efforts, and anticipated issues arising in The 2018 Legislative Program was developed with input from Authority staff, legislative advocates in Sacramento and Washington, D.C., and member agency s legislative staff. 52

62 Adoption of the 2018 Federal and State Legislative Program Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 2 Staff will continue to bring to the Board policy, legislative, and regulatory recommendations as they emerge in the 2018 legislative session. The federal and state legislative program covers a wide range of potential issues that may be considered by legislative bodies or regulatory agencies in Staff recommends the top priorities for the Authority to include: Federal Legislative and Funding Priorities Seek Funding Opportunities in Authorization and Appropriations Bills New funding efforts should focus on state of good repair, operations, capacity, and safety with the goal of increasing access to existing funding, establishing new funding avenues as opportunities arise, and protecting against adverse legislation or regulations that would limit or eliminate access to federal funds. Ensure broad project eligibility, maximize flexibility, protect and increase funding for mandatory, discretionary and financing programs. Support sustainable, dedicated source of funding for commuter rail. Seek support for rehabilitation and renovation of aging infrastructure and increase current SGR federal formula funding. Address funding needs for emerging issues such as Quiet Zones and increased capacity. Monitor FAST Act implementation policies and regulations to ensure Metrolink is protected and funding obligations from previous federal programs are met. Enhance the Role of Transit in Southern California Educate Congress and relevant Executive Agencies on the roles of commuter rail in Southern California commuter experience and its cost advantages over building more highway capacity, especially in Southern California. Build the case for additional funding for systems in densely populated regions of the country. Support commuter transit benefits that will provide incentives and promote the use of public transit for commuting. Support efforts to create operational efficiencies within the LOSSAN Corridor and through the State Rail Plan. Protect Metrolink and its member agencies from proposals that could negatively impact track rights, slots, stations, rail projects that impact the provision of safe, efficient services. 53

63 Adoption of the 2018 Federal and State Legislative Program Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 3 Support efforts to preserve Rail-2-Rail privileges and enhance coordination among transportation providers. Support legislation that enhances the Authority s ability to prevent trespassing and quickly resolve incidents on the right-of-way. Seek support of Class I Western freight carriers that would benefit from improvement in Metrolink operating area. Increase Opportunities for Coalition Building Support policies that promote greater coordination with freight, Amtrak and intercity rail, high speed rail, and local transit providers. Work with goods movement advocates to increase funding available for grade crossings and safety enhancements on shared rights of way. Establish working relationships with other commuter rail dependent cities to maximize leverage for commuter rail as new authorization and appropriations bills are considered. Maintain our Commitment to Positive Train Control Support legislative policies that facilitate the implementation of PTC as mandated by the Rail Safety Improvement Act of 2008 (RSIA), and the Surface Transportation Extension Act of 2015, coordination with the FRA on the approvals process, and funding for operations and training. Support efforts to maintain the highest standards of safety and interoperability for PTC systems across the nation; including with BNSF, Union Pacific, and Amtrak that are operating on Authority maintained right-of-way. Seek all available federal resources for Metrolink and its Southern California partners to operate PTC. Identify opportunities for early adopters to be rewarded or reimbursed for investments and compliance with the RSIA requirements and prioritize funding for early compliers. Seek to clarify and improve the FRA process for reviewing PTC safety plans, including more feedback from FRA, clearly defined benchmarks and better recognition of cost impacts. Safety and Security Support for critical rail safety programs, including PTC, grade crossing improvements, security technology including cameras and video surveillance, public address and communication systems and safety improvements to rolling stock. 54

64 Adoption of the 2018 Federal and State Legislative Program Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 4 Support legislative policies that promote balanced national system safety, and address terrorism and hazard management programs. Continue to monitor and build relationships with federal oversight agencies such as the Federal Railroad Administration (FRA), Federal Transit Administration (FTA) and the National Transportation Safety Board (NTSB). Seek support for increased security on public transit. Seek support for industry-wide safety culture. Environmental Sustainability Support legislation and policies that promote and sustain funding for investment in cleaner technology and to enable cleaner and more efficient operations. Support efforts by our member agencies to build on the Breaking Down Barriers program that seek to streamline the federal approvals process and project delivery timelines while maintaining high environmental standards. Support funding for commuter rail from federal agencies to improve the fuel efficiency of and reduce emissions from our fleet, equipment and operations, and for clean fuel technology locomotives and other alternative technologies such as CNG. Work with SCAQMD and other stakeholders to identify federal funding opportunities for clean fuel technology including natural gas and alternative energy. Support fiscal incentives for clean-air technologies Rail Modernization and Capacity Expansion Work with FRA and FTA to seek grants for passenger rail modernization projects, including a possible core capacity grant. Protect Metrolink from efforts to narrow the use of high speed rail funds on a shared use corridor. Support use of rail funds for rail modernization projects to increase capacity on Metrolink. Support balanced proposals promoting new methods and structures for streamlining and improving project delivery, increasing flexibility in contracting methods and enhancing opportunities for public-private partnerships. Seek expanded opportunities to fund State of Good Repair projects including fleet maintenance, replacement, rehabilitation and renovation of equipment 55

65 Adoption of the 2018 Federal and State Legislative Program Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 5 Seek opportunities to improve ease of access to transit including Transit Oriented Development (TOD), mobile ticketing, coordinated schedules and fare media. Federal Legislation Implementation Support legislation to fulfill obligations of previous and current federal transportation programs State Legislative and Funding Priorities Budget and Funding Ensure commuter rail eligibility in all transit and rail funding opportunities and seek to increase the share for commuter rail. Protect and maintain existing transportation revenue sources. Protect transportation funding from initiatives or budget proposals that seek to reduce resources or create unfunded mandates. Support legislative efforts to assist member agencies to become, or continue as, self-help entities. Support balanced proposals promoting new methods and structures for streamlining and improving project delivery, increasing flexibility in contracting methods and enhancing opportunities for public-private partnerships. Seek opportunities to fund fleet maintenance, replacement, rehabilitation and renovation of equipment. Support the timely allocation of funds and increase funding capacity in budget appropriations for enhanced project delivery. Support statewide effort to establish additional ongoing stable source of funds for transit, with focus on commuter rail and seamless interconnections. Rail Modernization Position Metrolink to benefit from state high speed rail investments. Seek opportunities to improve ease of access to transit including transit oriented development, mobile ticketing, coordinated schedules and fare media. Advocate for support of SCRRA s remaining funds from the High-Speed Rail Readiness program for passenger car rehabilitation. Support timely investments in book-end projects. Seek opportunities for capacity and reliability enhancements. 56

66 Adoption of the 2018 Federal and State Legislative Program Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 6 Cap and Trade Support continued use of cap and trade program as an important source of funding for commuter rail in California. Support policies and legislation that identify public transit, and specifically commuter rail, as an eligible funding recipient for all cap and trade revenues. Support efforts to dedicate unallocated cap and trade dollars toward public transit needs. Support funding formulas for cap and trade dollars that benefit transit in Southern California, including the existing prioritization for disadvantaged communities. Coordinate with other agencies and entities to maximize investments in commuter rail. Environmental Sustainability Support legislative policies and programs that incorporate commuter rail and other public transit as a solution to achieve air quality and climate change goals. Support legislation that streamlines CEQA processes for implementing transit projects while maintaining the environmental quality standards of CEQA. Seek resources for projects that will enhance Metrolink s ability to reduce emissions, increase fuel efficiency and make operations more environmentally friendly. Monitor environmental legislation and the implementation of AB 32 and AB 398, specifically allocations from the Greenhouse Gas Reduction Fund. Identify funding opportunities for clean fuel technology locomotives including alternative technologies such as CNG, including tax incentives. Enhance the Role of Transit in Southern California Support commuter transit benefits that will provide incentives and promote the use of public transit for commuting. Protect Metrolink and its member agencies from proposals that could negatively impact track rights, slots, stations, rail projects that impact the provision of safe, efficient services. Support efforts to preserve Rail-2-Rail privileges and enhance coordination among transportation providers. Support legislation that enhances the Authority s ability to prevent trespassing and quickly resolve incidents on the right-of-way. Positive Train Control (PTC) Support ongoing funding for PTC maintenance, operations and enhancements. 57

67 Adoption of the 2018 Federal and State Legislative Program Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 7 Support efforts of other Class 1 railroads to implement PTC. Safety and Security Seek and support funding for critical rail safety programs, including PTC, grade crossing improvements, security technology including cameras and video surveillance, public address and communication systems and safety improvements to rolling stock. Support legislation and regulatory policies that protect the agency s right-of-way and prohibit unsafe access and trespassing to ensure the highest levels of safety. Seek opportunities to collaborate on enhancing railroad safety and security. Support enhanced safety and security for commuter rail and public transit employees. Monitor legislation that impacts the Authority. Next Steps Upon approval of the 2018 federal and state legislative plan, staff will work with consultants in Washington, D.C., and Sacramento, trade associations, and coalition groups to advocate for the priorities in the plan. Staff will also engage in extensive outreach to federal and state elected officials in the Authority s region to highlight its priorities. Budget Impact There is no budgetary impact as a result of this report. Prepared by: Whitney O Neill, Senior Manager, Government and Regulatory Affairs Sherita K. Coffelt Acting Chief of External Affairs 58

68 TRANSMITTAL DATE: January 5, 2018 MEETING DATE: January 12, 2018 ITEM 12 TO: FROM: SUBJECT: Board of Directors Arthur T. Leahy State and Federal Legislative Update Issue Staff will provide an update on current legislative issues in State and Federal Government Affairs. Recommendation The Board may receive and file this report. Alternatives The Board may choose to act upon the information provided. Strategic Goal Alignment This report aligns with the strategic goal to maintain fiscal sustainability by encouraging federal, state and local funding for Authority priorities. This report also supports improve communications to customers and stakeholders by sharing news, information and the Authority s legislative priorities with elected officials. Background State Update The California Transportation Commission (CTC) met on December 6-7 in Riverside to discuss a number of priorities, including adopting final guidelines for Senate Bill 1 the Road Repair and Accountability Act of The Commission adopted guidelines for the 2018 Solutions for Congested Corridors Program; and other discretionary and formulabased funding opportunities. 59

69 State and Federal Legislative Update Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page Congested Corridor Program o $250 million appropriated annually, with the intent of programming four years of funding in the initial program (2018 Program) for fiscal years through fiscal year Following the initial program, the Commission intends to program three years of funding in subsequent cycles o Nominated projects must be included in a Comprehensive Corridor Plan, designed to reduce congestion in highly traveled corridors by providing more transportation choices while preserving the character of the local community and creating opportunities for neighborhood enhancement projects o There is no funding match, though funding leverage is desirable and will be considered in the evaluation of projects o Projects will be rated on extent of congestion, efficiency in reducing congestion, safety, accessibility, economic development, air quality and the efficiency of land use Staff continues to coordinate with delegation members on various priorities; including the implementation of an Automatic External Defibrillator (AED) Program and discussing the Authority s Transit and Intercity Rail Capital Program application. The Legislature reconvened from recess on January 3 for the second year of the Legislative Session. Members will have until January 31, 2018 to pass bills introduced in that house in the odd-numbered year. New bills may be introduced until February 16, The Senate announced its intent to nominate Senator Toni G. Atkins (D-San Diego) as Senate President pro Tempore. Senator Atkins will succeed Senator Kevin de León. Authority staff met with the offices of Assemblymember Chris Holden, Assemblymember Freddie Rodriguez, Senator Connie Leyva, Senator Anthony Portantino and Senator Hannah-Beth Jackson to discuss Metrolink service and projects in their districts. Federal Update Consideration of the Administration s tax package dominated activity in Congress in November and December. With all attention being paid to taxes, Congressional leadership was unable to reach a long-term deal on Fiscal Year 2018 (FY18) discretionary spending levels. On December 15, 2017, the President signed both the Tax deal (H.R. 1) and a Continuing Resolution (CR) to fund the government through January 19, The passage of the CR simply punts decisions on spending levels until after the holiday recess. 60

70 State and Federal Legislative Update Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 3 Positive Train Control (PTC) Implementation After the recent Amtrak train derailment in Washington State, Congress has ratcheted up PTC implementation discussions again. The initial deadline for freight and passenger railroads to have Positive Train Control installed on their locomotives and tracks is just a year away, and many commuter railroads are far behind. Some Congressional Members are concerned many railroads may not comply in time due to multiple reasons that include funding scarcities, the inherent complexity of the technology (and the small number of firms that can help agencies install it) as well as some railroads' failure to prioritize its installation. Staff is hearing that Congress will likely conduct oversight of the PTC implementation process early next year, and the Senate Commerce Committee is already planning a hearing in January. The Senate has yet to confirm a new FRA administrator, which many on Capitol Hill expect to happen sometime in January to help address the ongoing PTC implementation issues. Taxes In December, the conferees on the tax package announced they reached a deal on reconciling the remaining differences between the House and Senate tax bills. Congressional leadership achieved their goal of presenting a bill for the President s signature by December 22, The final package includes a new corporate tax rate of 21 percent down from 35 percent and the State and Local Tax (SALT) deduction will be capped at $10,000. The mortgage interest deduction will be capped at $750,000 for new mortgages. Staff had been working to preserve the Commuter Benefit Tax Credit, an incentive that is vitally important to the Authority s Corporate Partner Program. While the employee deduction was maintained in the final package, unfortunately, the employer deduction was removed. Staff will continue to work with legislators to restore the incentive in future legislative opportunities. It should be noted that the deduction for Private Activity Bonds was preserved in the final package following significant advocacy conducted by the industry and the Authority s member agencies. In addition, the bill eliminates the advanced refundability of municipal bonds, a measure that was important to Authority member agencies. As a reminder, Congress invoked the budgetary tool Reconciliation in order to pass the tax plan with a simple majority in the Senate. Thus, the plan could not be passed under Senate tax rules if it adds more than $1.5 trillion to the deficit over ten years. The tax proposal was passed on traditional party lines, with the House vote count at , and Senate vote count at

71 State and Federal Legislative Update Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 4 Appropriations On December 21, 2017, Congress passed another Continuing Resolution to extend current spending levels and temporarily avert a government shutdown. In addition to the stopgap funding at Fiscal Year 2017 levels, the bill also includes some extra funding for disaster aid, missile defense programs, and other critical defense money. The extra emergency defense spending which totals just over $4.6 billion was needed to attract the support of defense hawks after House Republican leaders abandoned plans to include a full-year Pentagon funding bill in a previous CR draft. The measure also would delay mandatory across-the-board cuts to defense and domestic spending slated to take place in January, which benefits key transportation programs like the Capital Investment Grants (CIG) program. Action on Fiscal Year 2018 (FY18) appropriations bills has ground to a halt pending a new budget deal to reset FY18 discretionary spending caps. Current year spending was covered under the Bipartisan Budget Act of 2015, which capped discretionary spending for FY16 and FY17. Unless a new deal is reached, the overall spending level will revert to the 2011 Budget Control Act levels. The spending caps for FY18 include severe and indiscriminate cuts known as a mandatory sequester. The sequester cuts impact both defense and non-defense discretionary spending. House Republicans are seeking additional defense spending and Senate Democrats are seeking a commensurate increase for non-defense discretionary. Negotiations have been on again/off again, but have not yet yielded results. Until an agreement is reached on a two year budget deal, no meaningful work on the FY18 appropriations bills will occur and temporary stopgap measures will continue to be necessary. In addition, should a Continuing Resolution be extended to cover the remainder of FY18, it could still be subject to an Across the Board Cut to satisfy the mandatory sequester. Staff has been working with its Congressional delegation to secure language recognizing our efforts on PTC and to obtain State of Good Repair funding. These efforts are ongoing and require the passage of appropriations bills. Staff met with the offices of Representatives Linda Sanchez, Julia Brownley, Darrell Issa, and Luis Correa to discuss Metrolink service. Next Steps The Board may direct staff to act on the provided information. Budget Impact There is no budgetary impact as a result of this report. 62

72 State and Federal Legislative Update Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 5 Prepared by: Whitney O Neill, Senior Manager, Government and Regulatory Affairs Sherita K. Coffelt Acting Chief of External Affairs 63

73 TRANSMITTAL DATE: January 5, 2018 MEETING DATE: January 12, 2018 ITEM 13 TO: FROM: SUBJECT: Board of Directors Arthur T. Leahy Central Maintenance Facility Sound Study Issue The Authority conducted a sound study at its Central Maintenance Facility (CMF) to identify the major source(s) of noise at the facility and identify likely and effective solutions, if necessary. Recommendation The Board may receive and file this report. Strategic Goal Alignment This report aligns with the strategic goal to improve communications to customers and stakeholders. Background The Authority held a community meeting with the neighbors of the Central Maintenance Facility (CMF) on April 17, At the meeting, community members expressed concerns about differing sources of noise and sound levels. Requests had been made by some community members to build a sound wall along the perimeter of the facility, but others did not support the idea of a sound wall. There were concerns that the sound wall would be vandalized with graffiti, or that noise would bounce off the wall and impact other parts of the community. Regarding the concerns raised by the community, staff concluded that adequate field data collection of the facility had not been done. Moreover, there was no solid analytical data as to what the problem really was or how to best solve it. Therefore, the Authority proposed a sound study with the goal of determining appropriate and effective solutions if there were noise issues justified by analysis at the CMF. 64

74 Central Maintenance Facility Sound Study Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 2 As the CMF is directly adjacent to San Fernando Road, the I-5 and the Glendale Freeway, the study needed to ensure that the impacts that occur as a result of outside noise factors could be isolated. The study calculated the difference in noise level between two measurements (broken down by frequency and time) and compared it to the expected attenuation (reduction over distance) from different noise sources. The study then excluded data that didn t fit the attenuation model for noise from the CMF. The main limitations of this approach are that it is difficult to exclude noise sources that are off to the sides and that it may be possible (but very unlikely) that multiple noise sources could add up to a difference that looks like it s coming from somewhere else. The Authority conducted two studies, one to determine the noise impacts and levels which lasted seven days, and the second one, which lasted four days to affirm the findings of the first study. The second study was conducted as a blind study because several residents stated that the noise may have been deliberately reduced because the facility knew that the study was taking place. Follow-up measurements showed negligible difference from the original measurements. One location increased by 0.7 db and the other decreased by 1.1 db. The studies were guided by FTA guidelines and findings were as follows: Overall noise levels do not exceed the moderate levels as defined by FTA for new projects. (If this were a new project, mitigations would not be required.) The data, based on the placement of the equipment, demonstrates that the loudest sources of noise in the yard were horns and load tests, occurring principally in the daytime hours. A sound wall along the perimeter would likely not be effective because the placement is too far from both the source of the noise and the community. The proposed wall would not effectively buffer anything. A wall to contain noise at the load testing area would be the most effective method of reducing noise. Funding would need to be identified. As such, the Authority would like to continue a dialogue with the community and concerned offices regarding building a localized wall to contain noise from load tests. Additionally, a funding source needs to be identified to build a fence, covered with vegetation similar to the existing one would create an aesthetic barrier for the community. Next Steps Staff will present these results to the community and work to build consensus for recommended yard improvements. Staff will also work with partners to identify funding opportunities. 65

75 Central Maintenance Facility Sound Study Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 3 Budget Impact There is no budgetary impact as a result of this report. Prepared by: Sylvia Novoa, Community Relations Manager Sherita K. Coffelt Acting Chief of External Affairs 66

76 TRANSMITTAL DATE: January 5, 2018 MEETING DATE: January 12, 2018 ITEM 14 TO: FROM: SUBJECT: Board of Directors Arthur T. Leahy External Affairs Year End Update Issue Staff will provide an overview of the External Affairs Group by discipline and their top achievements in 2017 and priorities for Recommendation The Board may receive and file this report. Strategic Goal Alignment This report aligns with the strategic goals to improve communications to customers and stakeholders, retain and grow ridership, increase revenue, and improve the safety and security of our riders. Background During 2017, the External Affairs Group seized many opportunities to support the Authority s goals outlined in the board-adopted 10-year Strategic Plan. The External Affairs Group consists of the Corporate Partnership Program (CPP), Customer Relations, Government Relations, Marketing, Public Affairs, and Social Media. While each department targets different audiences, housing them in the same group provides an opportunity to leverage the Authority s impact by coordinating messaging and all outreach activities. This group works closely with the Board of Directors, Member Agencies, Technical Advisory Committee (TAC) members, local cities, elected officials at all levels, community groups and citizens, Metrolink riders, news media, etc. In terms of staffing in External Affairs, overall headcount was reduced in Recently, the Authority hired Sabrina Davis to fill the role of Senior Marketing Manager. Three fulltime employees are out on extended leave with internal resources covering their workloads. 67

77 External Affairs Year End Update Transmittal Date: January Meeting Date: January 12, 2017 Page 2 Corporate Accounts is responsible for managing the Authority s Corporate Partner Program. CPP is a pre-tax benefit program that allows companies and organizations to offer transit benefits to their employees. Currently, Corporate Accounts provides customer service to 175 companies, and actively recruits new members. As information, 44 percent of Metrolink s Corporate Partners are based in Los Angeles County, almost half of those are located in Downtown Los Angeles. Strategic Goals Supported: Retain and grow ridership Improve communications to customers and stakeholders 2017 Top accomplishments: 1. Signed 15 new corporate accounts in Accounts generate approximately 17.2% of the Authority s annual revenues (Only lost 1). 2. Provided a discount of 25% to new corporate partners (six-month promotion), for the first time to help in recruiting new companies, increasing the number of accounts signed by almost 50 % during the first half of the fiscal year. 3. Reduced client wait time for trial-ride tickets by automating the process using a fillable form and digital promotional codes. Customer Relations provides customer support to all Metrolink riders. This group is responsible for assisting passengers at Los Angeles Union Station (LAUS) with train arrival and departures, ticket sales at Ticket Vending Machines (TVMs) and ticket windows, Lost and Found, as well as provides support in the field during planned service outages. Additionally, this department is responsible for responding to all customer feedback, refund and quality service pledge requests, coordinating group trips, and managing the Metrolink call center. Strategic Goals supported: Retain and grow ridership Improve communications to customers and stakeholders Ensure a safe operating environment 2017 Top accomplishments: 1. Streamlined customer service programs to reduce response time to customers. 2. Implemented promo codes to reduce wait time for customer compensation. 3. Revised incident response plan to focus on Union Station. 68

78 External Affairs Year End Update Transmittal Date: January Meeting Date: January 12, 2017 Page 3 Marketing develops and implements all aspects of the Authority s marketing, advertising and promotional strategies and tactics in an effort to increase ridership and revenue. This includes the development of the annual strategic marketing program and budget with the major department components including: commuter marketing addressing turn-over rate recreational/off peak/non-commuter marketing marketing partnerships/seamless travel charters/special events/special revenue programs Strategic Goals Supported: Maintain fiscal sustainability Retain and grow ridership Improve communications to customers and stakeholders 2017 Top accomplishments: 1. Launched a new website, improving customer experience. The improved site structure eased accessibility to train schedules, pricing, and train status. 2. Implemented numerous mobile app enhancements including improved user interface which provides direct access to scheduling, pricing, and train status. Increased system-wide mobile adoption rate from January 2017 at 19% to 24% month-ending October Assisted Public Affairs in the execution of the 25 th Anniversary Event and Tier 4 Clean Power Tour including the development of all brand collateral and coordination of respective parties for events. 4. Received a $2 million contract extension from CalTrans for the I-5 South campaign which targets single occupancy vehicle (SOV) drivers on the Interstate 5 freeway along a 6.7-mile corridor impacted by the I-5 South Corridor Improvement Projects. The campaign will continue to build awareness of the ongoing freeway construction and promote commuter incentives and driving alternatives such as Metrolink during the duration of the construction period /Perris Valley Line Marketing Campaign (including Billboards, Direct Mail, and Pandora Advertising). Efforts resulted in a 36% increase in boardings and 63% increase in monthly average boardings from February 2017 to June Public Affairs coordinates Authority messaging and incident response. Additionally, this department is responsible for outreach to news media, local communities and customers 69

79 External Affairs Year End Update Transmittal Date: January Meeting Date: January 12, 2017 Page 4 through the Metrolink Matters newsletter and other on-train notices. The Public Affairs department also coordinates executive responses to high-level complaints and coordinates speaking engagements including pre-briefings with attendees, development of presentations and talking points. Strategic Goals Supported: Increase ridership and revenue Improve communication to stakeholders Improve safety and security 2017 Top accomplishments: 1. Developed a well-received 25 th Anniversary Event and Annual Report. 2. Trained staff in Crisis Response Preparation (Media trained the Executive Leadership team (ELT) and key staff; Conducted incident response training for External Affairs staff). 3. Reduced escalated complaints from cities after meeting with all station cities and implementing a new complaint-reporting process with accountability. 4. Completed all tasks while training staff to cover one full-time employee on extended leave, absorbing Senior Marketing Manager responsibilities and then taking on Chief of External Affairs Responsibilities. 5. Worked with stakeholders across the region to build support for key projects such as Lonehill to White. Staff efforts, in coordination with GR, resulted in various letters of support. Social Media is responsible for supporting communication, content strategy, branding and marketing to Metrolink s digital audiences. As smart phones have become more prevalent, social media serves as a key platform for the Authority to provide service updates, solve customer service issues and to inform the general public of other matters such as community events or legislative action needed. Riders, community members, past and present board members as well as media all interact with the Authority's various social media accounts on the various platforms including Facebook, Twitter, Instagram and LinkedIn. Social media provides the Authority with a timely and cost -efficient way of engaging with various audiences around the clock. The department also manages the social media comments program, as well as the Authority s photography, videography and content library programs. Strategic Goals Supported: Retain and growing ridership 70

80 External Affairs Year End Update Transmittal Date: January Meeting Date: January 12, 2017 Page 5 Improve communications to customers and stakeholders Improve organizational efficiency 2017 Top accomplishments: 1. Surpassed 50,000 followers across all Twitter accounts, and hit 8 million impressions on main Twitter account for Quarter 1(Q1) July through September Reduced social media communication complaints by 9% from Q to current quarter (month over month average). 3. Reached 1 million video views on Metrolink s YouTube channel. 4. Created over 20 in-house videos for eight different departments across the Authority, providing a cost savings of approximately $80,000. (assuming $4,000 per video cost). 5. Surpassed 150,000 followers on Metrolink s Facebook page, maintaining its position as the largest Facebook community among all public transit agencies in the United States Look Ahead For 2018, the External Affairs Group will continue to support the Authority s strategic goals, while ensuring a timely and coordinated response to unplanned service issues that may arise. There is a renewed focus on effective messaging. The Authority is committed to communicating in a way that is understandable and relatable. Last year, the Authority began focusing on Metrolink's ridership in number of vehicle miles traveled verses number of riders as well as focused on the Authority in terms of freeway relief, in addition to the value to Metrolink riders. Messaging will continue to be a focus in 2018 as the Authority will have an issue engaging stakeholders and riders if the language is not compelling and contextual. The Marketing Group is working on a $3.9 million marketing plan to increase ridership up to 10% over the next five years. The plan will introduce a new marketing approach that takes a more refined and localized approach by each line. Traditionally, the marketing group targeted a broad section of riders across the system. For instance, the San Bernardino Line is almost at capacity during the peak hours. However, it has very consistent service throughout the day and on nights and weekends. Focusing on students who attend schools along the line and would ride in more off-peak time slots would have more potential than continuing the sole focus on peak commuter riders who make up our historic target audience of year-old, white collar workers earning over $50,

81 External Affairs Year End Update Transmittal Date: January Meeting Date: January 12, 2017 Page 6 Another key initiative is establishing a working group to focus on the Ventura County Line. This line has been identified as a high potential by marketing consultant s due to its available capacity and high number of people who meet the Authority s traditional target marketing strategy. Staff has received feedback that the service is simply just unknown in Ventura County. Even without the additional marketing investment, the group anticipates working to increase retention numbers and ridership in 2018 by refocusing existing resources. As the Planning Group embarks on major endeavors to secure funding for Metrolink through grants proposals, External Affairs will play a major support role. The External Affairs group will help brand and message the applications, create supporting collateral materials and Government and Community Relations will work to get support from elected leadership, as well as communities and riders who will benefit from improvements made to the Metrolink system if this funding is received. As the Authority s State of Good Repair efforts continue, outreach is required to notify the community when work impacts their lives whether it is noise, lights, horns, etc., the Authority works to give ample notice so there are no surprises. Outreach is also required to notify customers when there are impacts to service. Additionally, the Authority will be communicating more openly about causes of delays and how they are related to funding available to the Authority. The opening of the new Burbank North Station on the Antelope Valley Line presents an opportunity to attract new riders in a busy area with residential and commercial opportunities in the vicinity. The External Affairs group will be partnering with Los Angeles County Metropolitan Transportation Authority (Metro), The Hollywood Burbank Airport as well as The City of Burbank to promote the new stop. Initial meetings with the Airport and City have identified various opportunities for the CPP. The Authority will also continue training on incident response which requires refreshers and practice in case there is a major incident. It is important to keep focus on this activity as a priority. The technology transformation will continue as Metrolink works to promote mobile app conversions. The mobile app provides our riders with time savings because they do not have to wait in line at TVMs to get their tickets as well as convenience and flexibility. The Authority benefits when more customers get their tickets on their mobile app, as well. When 45% of riders use the mobile app to buy their tickets, all costs for the maintenance of the technology that enables the mobile app will be paid. The Authority could see other cost savings, like TVM maintenance, as a result. Additionally, the group is working to expedite the integration of the Corporate Partners Program passes into the mobile app which will provide an additional 17% of our riders with the opportunity to save time and add more convenience and flexibility to their lives. 72

82 External Affairs Year End Update Transmittal Date: January Meeting Date: January 12, 2017 Page 7 There will be at least two schedule changes, both which will have more drastic changes than usual with the introduction of a new station and some potential new approaches to schedules. The External Affairs group will consult with the Planning Department on the schedule prior to its finalization, then will work to communicate all changes to the riders. Additionally, the group may survey riders before implementing drastic changes to schedules. Community and Government Relations will be holding joint summits to engage stakeholders throughout the region and educate them on the value that Metrolink can provide to the region, as well as ways they can support initiatives that impact their constituents, such as Quiet Zones and grant applications. In continuing with the 25 th Anniversary of Metrolink, Public Affairs is in talks with Cal State LA to host student forums to engage the student population and build support with current and future public transportation riders. The External Affairs group will also continue to support the roll-out of the Tier 4 locomotives, updating key stakeholders of the service timeline and any issues that arise. Additionally, any special event trains with Tier 4 locomotives will be supplemented with an additional locomotive to avoid the incident that transpired at the Newhall Tier 4 event when the locomotive experienced mechanical issues leading to other issues such as a crossing being blocked in advance of the city's tree-lighting event. Budget Impact There is no budgetary impact as a result of this report. Prepared by: Rachel Chaires, Senior Manager, Customer Relations Sabrina Davis, Senior Manager, Marketing Yena Jeon, Social Media Manager Sherita K. Coffelt Acting Chief of External Affairs 73

83 TRANSMITTAL DATE: January 5, 2018 MEETING DATE: January 12, 2018 ITEM 15 TO: FROM: SUBJECT: Board of Directors Arthur T. Leahy Fiscal Year Comprehensive Annual Financial Report and Single Audit Report Update Issue Moss Adams LLP is concluding their field work for the FY Comprehensive Annual Financial Report (CAFR) and Single Audit. Recommendation The Board may receive and file this report. Strategic Goal Alignment This report aligns with the strategic plan to maintain fiscal sustainability and improve organizational efficiency. Background Moss Adams LLP (Moss Adams) is an independent public accounting firm engaged by the Authority under Contract No. QM to perform external audit services. Their contract expires October 15, The Comprehensive Annual Financial Report (CAFR) presents the audited basic financial statements of the Authority, management discussion and analysis, supporting footnotes, required supplementary information and statistical information. The Single Audit is an audit of the Authority s compliance with the requirements of law, regulations, contracts, and grants applicable to its federal programs. Staff from Moss Adams LLP will present a summary of their services at the January 26, 2018 board meeting. 74

84 Fiscal Year Comprehensive Annual Financial Report and Single Audit Report Update Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 2 Budget Impact There is no budgetary impact as a result of this report. Prepared by: Ronnie Campbell, Chief Financial Officer Elissa K. Konove Deputy Chief Executive Officer 75

85 TRANSMITTAL DATE: January 5, 2018 MEETING DATE: January 12, 2018 ITEM 16 TO: FROM: SUBJECT: Board of Directors Arthur T. Leahy Mobile and Online (Web-Based) Ticketing Project Update Issue Staff is providing an update on the progress to date and key milestones associated with the delivery of the Mobile and Online Ticketing Project. Recommendation The Board may receive and file this report. Strategic Goal Alignment This report aligns primarily with the strategic goal to improve communications to customers and stakeholders. Background At the request of the Board, staff has presented monthly updates of the mobile and online ticketing deployment along with the marketing plan for the project beginning October The following details include an update of the three key phases of this project since the last status update to the Board on December 8, Phase 1: Application for Ticket Scanning In July 2015, the Authority initiated fare inspection scanning across all service lines. Currently, Metrolink fare enforcement personnel inspect approximately 36% of all riders in order to enforce the Authority s fare policy and deter fare evasion. Weekly fare inspection reports are distributed to staff, detailing scanning by individual conductors. Phase 2: Metrolink App The Metrolink App continues to exhibit strong usage. System-wide, the current adoption rate is at 26%. The adoption rate is particularly robust on the Inland Empire Orange 76

86 Mobile and Online (Web-Based) Ticketing Project Update Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 2 County (IEOC) line which stands at 50%. The high adoption rate on the IEOC line is attributable to the fact that the IEOC line does not connect to the Los Angeles County Metropolitan Transportation Authority (Metro) light rail and subway system. Staff anticipates further growth in the mobile ticket adoption rate across all lines following the launch of the Optic Gate Scanner Project on December 30, After December 30, Metrolink mobile ticket holders will be granted electronic access through Metro s gates. The Transit Access Pass (TAP) chip-enabled ticket will be gradually phased out in 2018, as the printed QR barcode on paper tickets will also enable electronic access through Metro rail gates. The chart below reflects the system-wide percent of ticket sales through the Metrolink App month over month since August 1, The data is current as of January 4, Adoption Rate Based on Ticket Revenue from August 1, 2016 January 4, 2018 Mobile Adoption System-wide Month over Month Staff continues to review customer comments and explore future enhancements. Corporate Quick Card users should continue to use paper tickets until this function can be supported in the mobile ticket platform. Mobile ticket users can transfer to all bus operators that currently accept Metrolink paper tickets, including the Metro Bus system. Mobile ticket users simply show the bus operator an activated mobile ticket for visual inspection. Phase 3: Metro Gate Integration (Optical Reader Installation) Phase 3 of the mobile ticketing project was completed on December 30, The optical readers installed in the Metro rail gates enables compatibility between Metrolink s mobile ticket app and Metro s regional Transit Access Pass (TAP) program. Cubic, Metro, Masabi and the Authority will continue to work in close collaboration to support the current system and ensure a high level of customer satisfaction. 77

87 Mobile and Online (Web-Based) Ticketing Project Update Transmittal Date: January 5, 2018 Meeting Date: January 12, 2018 Page 3 Cubic will be responsible for providing maintenance services under a full-service warrantee agreement through June 30, Staff is drafting an ongoing maintenance agreement to cover maintenance services beginning July 1, 2018 onwards. Funding for the maintenance agreement is reflected in the FY Operating budget request. Attachment A reflects the project schedule timeline. Budget Impact There is no budgetary impact as a result of this report. Prepared by: Andy Ly, Senior Manager, Fare Collections Ronnie Campbell Chief Financial Officer 78