SAN FRANCISCO AIRPORT COMMISSION MINUTES

Transcription

1 SAN FRANCISCO AIRPORT COMMISSION MINUTES September 19, :00 A.M. Room City Hall #1 Dr. Carlton B. Goodlett Place (400 Van Ness Avenue) City and County of San Francisco EDWIN M. LEE, MAYOR COMMISSIONERS LARRY MAZZOLA President LINDA S. CRAYTON Vice President ELEANOR JOHNS RICHARD J. GUGGENHIME PETER A. STERN IVAR C. SATERO Airport Director SAN FRANCISCO INTERNATIONAL AIRPORT SAN FRANCISCO, CALIFORNIA Minutes of the Airport Commission Meeting of

2 September 19, 2017 CALENDAR AGENDA RESOLUTION SECTION ITEM TITLE NUMBER PAGE A. CALL TO ORDER: 4 B. ROLL CALL: 4 C. ADOPTION OF MINUTES: Regular meeting of September 5, D. ITEMS INITIATED BY COMMISSIONERS: 4 E. POLICY: 1. Amendment to Airport Debt Policy, Including Related Interest Rate SWAP, Credit, Investment, and Disclosure Policies; and Approval of a New Post-Issuance Compliance Policy for Tax-Exempt Bonds F. ITEMS RELATING TO ADMINISTRATION, OPERATIONS & MAINTENANCE: 2. Award Contract Construction Services for the As-Needed Airport Pavement and Drainage Improvements Project - Azul Works, Inc Authorization to Issue a RFQ/P for Contract Design-Build Services for the Energy Management Control System Project Award Professional Services Contract Project Management Support Services for Energy Management Control System Project - Faith Group Approve Phase C4 of Contract 9350A.66 - Design- Build Services for REACH - Customer Hospitality, Boarding Areas A & G Project - Webcor Construction LP dba Webcor Builders Issue a RFQ/P for Contract Design-Build Services for the Courtyard 3 Connector Project G. CONSENT CALENDAR OF ROUTINE ADMINISTRATIVE MATTERS: 7. Modification No. 5 to Professional Services Contract 8427C.9 - CM Services for Mel Leong Treatment Plant, Industrial Wastewater and Recycled Water Upgrades Project - PMA/NBA Joint Venture Issue a RFQ/P for Professional Services Contract Minutes, September 19, 2017, Page 2

3 , Structural and Civil Engineering Design Services for the Bus Maintenance Facility Project Ground Lease with United States Postal Service at Plot 10F for its International Service Center and Public Post Office Consent to Assignment of Trillium USA, LLC Ground Lease Agreement L , for CNG Fueling Station Operations, to Trillium USA Company, LLC H. SPECIAL ITEM: 11. Airport Disclosure Policies and Procedures Training I. NEW BUSINESS 16 J. CORRESPONDENCE: 16 K. CLOSED SESSION: L. ADJOURNMENT: 17 Minutes, September 19, 2017, Page 3

4 AIRPORT COMMISSION MEETING MINUTES September 19, 2017 A. CALL TO ORDER: The regular meeting of the Airport Commission was called to order at 9:00 AM in Room 400, City Hall, San Francisco, CA. * * * B. ROLL CALL: Present: Absent: Hon. Linda S. Crayton, Vice President Hon. Eleanor Johns Hon. Richard J. Guggenhime Hon. Peter A. Stern Hon. Larry Mazzola, President * * * C. ADOPTION OF MINUTES: The minutes of the regular meeting of September 5, 2017 were approved unanimously. No * * * D. ITEMS INITIATED BY COMMISSIONERS: There were no items initiated by Commissioners> * * * E. POLICY: Item No. 1 was approved unanimously upon a motion by Commissioner Guggenhime and Commissioner Stern. 1. Amendment of the Commission s Debt Policy, Including the Related Interest Rate SWAP, Credit, Investment, and Disclosure Policies; and Approval of a New Post- Issuance Compliance Policy for Tax-Exempt Bonds No Resolution amending the Commission s Debt Policy, including the related Interest Rate SWAP, Credit, Investment, and Disclosure Policies; and approval of a New Post-Issuance Compliance Policy for Tax- Exempt Bonds. Mr. Kevin Kone, Managing Director, Finance... I am presenting for your approval amendments to the Commission s Debt Policy including related interest rate SWAP, credit, investment and disclosure policies, and approval of a new postissuance compliance policy for tax exempt bonds. The original debt policy was adopted in 2006 and has received updates every three years. We review the Minutes, September 19, 2017, Page 4

5 Debt Policy every three years to ensure that we are accounting for developments in the financial markets and to ensure that the Commission continues to follow sound debt issuance, and management practices. In December 2016 we came to you for a minor interim update. Today we are requesting approval for the full review performed every three years. Changes to the Debt Policy include updates to comply with applicable laws and rules and regulations that apply to the Commission s revenue bonds and overall debt program. The amendments clarify why and how the Commission issues, structures, and decides upon the final sale terms of the bonds. Other miscellaneous updates were done to align the Debt Policy with current best practices with procedures already in place with the Commission. The new policy being added is the post issuance compliance policy. This subject was previously addressed in the body of the Debt Policy but was moved into a separate appendix and updated to be clearer on how we address what is required to preserve the tax exempt status on bonds. We have clarified steps necessary to correct any tax compliance errors and clarification of record keeping requirements for the IRS. The updates presented to the Commission today have been developed in consultation with the Deputy City Attorney, the Commission s Bond Disclosure Counsel, and the Commission s Independent Financial Advisors. These amendments have been reviewed and approved by the Airport s Financial Advisory Committee. Commissioner Guggenhime... your bond counsel has reviewed this? Mr. Kone... yes. Commissioner Crayton... other than the information that you have given to us, are there any things that we need to pay particular attention to? Mr. Kone... all the items that I have mentioned were highlighted in the body of the memo that were best practices, things that we are already doing, and things to comply with current law. So nothing of major significance. Commissioner Crayton... I saw the training that we are going to go through so I want to be clear that I ask the right questions. * * * F. ACTION ITEMS RELATING TO ADMINISTRATION, OPERATIONS & MAINTENANCE: Item No. 2 was approved unanimously upon a motion by Commissioner Stern and a second by Commissioner Guggenhime. 2. Award of Contract Construction Services for the As-Needed Airport Pavement and Drainage Improvements Project - Azul Works, Inc. - $3,146,271 No Resolution awarding Contract No , Construction Services for the Airport Pavement and Drainage Improvements Project, to Azul Works, Inc. in the amount of $3,146,271 with a contract duration Minutes, September 19, 2017, Page 5

6 of 1,095 consecutive calendar days, and with a corresponding amount in contingency authorization. Mr. Geoff Neumayr, Chief Development Officer... the proposed resolution awards the construction services contract for the As-Needed Airport Pavement and Drainage Improvements Project in an amount of $3.1 million with a contract duration of 1,095 calendar days to Azul Works, Inc. This contract will provide asneeded construction services for urgent repair and maintenance work beyond the capabilities of Airport maintenance staff. This work specifically includes rubble removal from runways, storm drainage improvements, airfield lighting repairs, and pavement reconstruction of both the airfield and landside roadways. Three proposals were received in response to the advertisement for bids. The lowest bid was rejected because Staff determined that the lowest bidder s qualifications did not meet the minimum qualifications required in the bid documents and therefore that bidder was declared non-responsive. The Engineer s estimate was $3 million. The accepted bid by Azul Works was $3.1 million, slightly over the Engineer s estimate. Staff recommends awarding this contract to Azul Works, Inc. The City s Contract Monitoring Division has established a 16% LBE subcontracting goal and CMD has determined that Azul Works, Inc. was responsive in their proposal. Item Nos. 3 and 4 were called together. They were approved unanimously upon a motion by Commissioner Guggenhime and a second by Commissioner Stern. 3. Authorization to Issue a Request for Qualifications/Proposals for Contract No Design-Build Services for the Energy Management Control System Project No Resolution authorizing the Director to issue a RFQ/P for Contract No , Design-Build Services for the Energy Management Control System Project. 4. Award of Professional Services Contract No Project Management Support Services for the Energy Management Control System Project - Faith Group, LLC - $1,530,000 No Resolution awarding Professional Services Contract , Project Management Support Services for the Energy Management Control System Project, to Faith Group, LLC in an amount not to exceed $1,530,000 for the initial 12 months of services. Mr. Neumayr... Item No. 3 authorizes the Director to issue a RFQ/P for Design Build Services and Item No. 4 awards a Professional Services Project Management Support Services contract for the Energy Management Control System (EMCS). The Energy Management Control System Project will upgrade the Airport s Stand Alone Building Management, Energy, and Water Systems into a single inter-connected Airport-wide system. The EMCS will meter usage of Minutes, September 19, 2017, Page 6

7 energy and water, it will analyze operations, and we will begin to learn and implement corrective actions to increase energy efficiencies across all facilities, saving the Airport nearly $4.5 million annually. The system also supports the Airport s goals to become a zero energy Airport. The design build services contract will provide design of the systems and implement required software as well as procure and install all required computer hardware and infrastructure needed to provide a complete functional system. The contract is forecasted to be $50 million with a duration of 50 months. The City s Contract Monitoring Division has approved a 20% LBE sub-consultant goal for design services and a 20% LBE sub-contracting goal for construction services. Staff received two proposals for this contract. A four-person selection panel was convened to score both the technical and oral interviews and the Faith Group was the highest rated firm. Staff has successfully negotiated all the terms and conditions of this contract. Staff is recommending awarding this contract for project management support services to the Faith Group in an initial amount of $1.5 million for the first year of services. The estimated value of this contract is $5 million with an estimated contract duration of 60 months. This contract will be renewed on an annual basis based on the consultant s performance. The City s Contract Monitoring Division has approved a 21% LBE sub-contracting goal for this contract and the Faith Group is committed to meeting it. Commissioner Crayton... a couple of months back or so we awarded another contract to the Faith Group. Is this in alignment with what they previously had or is this a whole new contract that they re receiving? Mr. Neumayr... this is a separate project management support services. The other was for the Security Enhancement Program for the Airport Commissioner Crayton... They re not physically located in the Bay Area? Mr. Neumayr... their offices are headquartered in St. Louis but they do have a presence in the Bay Area. Commissioner Johns... only two entities applied for this project management? Is that unusual? Mr. Neumayr... it s because we re getting into areas where these are building systems that require technical expertise in terms of software development and managing that process, and then hardware and implementation. It does narrow that field of firms that we have out there. When we did the Airport s Security Infrastructure Program we had a very limited pool of people, too. Most of these PMSS firms are used to the standard construction for a terminal building, office building, or parking garage. This is a little different so. Commissioner Johns... you would think in this area where we have all this technology there would be more of this, not less. I m just surprised. Mr. Neumayr... over time we begin to see more of this. It s nuances and what s happening. We ll see this for example with baggage handling systems where we Minutes, September 19, 2017, Page 7

8 bridge that gap between technology and actual installation of a physical product and running it. Item No. 5 was approved unanimously upon a motion by Commissioner Stern and a second by Commissioner Johns. 5. Approval of Phase C4 of Contract No. 9350A.66 - Design-Build Services for the REACH - Customer Hospitality, Boarding Areas A & G Project - Webcor Construction LP dba Webcor Builders - $1,263,046 No Resolution approving Phase C4 of Contract No. 9350A.66, Design-Build Services for the REACH - Customer Hospitality, Boarding Areas A & G Project, with Webcor Construction LP dba Webcor Builders in the amount of $1,263,046 for a new contract capacity amount of $27,425,473, with a corresponding contingency amount, with no change to the contract duration. Ms. Judi Mosqueda, Director of Project Management... this requests your approval of Phase C4 Trade Package Set, not scope revisions or changes, to Webcor s Design Build contract for the REACH Customer Hospitality Boarding Areas A & G Project to increase the contract amount by $1.3 million to establish a new contract capacity amount of $27.4 million with a corresponding amount of contingency, and no change to the contract duration. This contract provides for design and construction of the REACH Project in the International Terminal and Boarding Areas A & G consisting of renovation to the pre-security north and south food courts, coordination of tenant construction of 18 food and beverage locations, concourse improvements, development of a publicly accessible outdoor terrace at the end of Boarding Area G, and replacement of LED monitors at ticketing and customs. This Phase C4 approval provides for adding Trade Package Set (TPS) No. 2 to the contract. TPS 2 includes directly negotiated work for elevators. The approved budget is $41.5 million and is within the current contract forecast amount. Staff will return to the Commission for approval of all remaining TPSs. The City s CMD has approved a 25% LBE sub-contracting goal for design services, and 20% for construction services. Webcor Builders has committed to meeting these goals. Item No. 6 was approved unanimously upon a motion by Commissioner Stern and a second by Commissioner Johns. 6. Authorization to Issue a Request for Qualifications/Proposals for Contract No Design-Build Services for the Courtyard 3 Connector Project No Resolution authorizing the Director to issue a Request for Qualifications/Proposals for Contract No , Design-Build Services for the Courtyard 3 Connector Project. Ms. Mosqueda... this resolution authorizes the Director to issue an RFQ/P for design build services for a Courtyard 3 Connector Project. The Project will include design and construction of a new pre-security and post-security connector between Minutes, September 19, 2017, Page 8

9 Terminals 2 and 3, as well as an adjacent four-story office building for office space, tenant lease space, and passenger amenities and lounges. The connector will provide greater flexibility for airline gate use, improve overall passenger experience, and create additional areas to meet airline and airport operational needs. If you would like to know more about the project, I brought the Project Board, and I d be happy to discuss any of the specifics with you after the meeting. The RFQ will contain minimum qualification requirements to assure appropriate technical skills given the size and complexity of the project. Upon successful negotiations, Staff will return to the Commission for award of the contract estimated at $173 million and with a contract duration of 36 months. The City s CMD has approved a 15% LBE sub-contracting requirement for design services and a 20% requirement for construction services. Commissioner Stern... what s the make up of the office space and what type of tenants are you looking for? Ms. Mosqueda... currently it s fairly un-programmed but the idea is to move Airport staff out of the International Terminal wing buildings where Ivar s office is on the 4 th and 5 th floor, as well as some uses on the A side which include our Airline Liaison Office. I believe there are some FBI offices and TSA offices as well. What we would like to do is move those uses out of the International Terminal into this new facility because the new facility is located in a lower rent district. We could get more money for the spaces above the International Terminal. We have a shortage of space serving the airlines in the International Terminal and this would allow them to create club spaces and office spaces for their use. Commissioner Guggenhime... many more airline lounges. That s a lot of money. Ms. Mosqueda... yes. Commissioner Crayton... as I understand it, the office space that the Airport currently utilizes where Ivar and other people are, you re talking about moving them out of that space to another location? Ms. Mosqueda... that s right. Sill within the Terminal Complex but between Terminals 2 and 3. Currently there is an empty courtyard and an asphalt paved parking lot that we would like to build office space above. Mr. Ivar Satero, Airport Director... the concept is to have two consolidated campuses. One where we re doing the Phase 1 of our campus project that consolidates all of the outlying Airport offices and then have an in-terminal building for consolidating all Airport Staff that need to be close to the operation, including the executive team as well as the folks who interface with all the tenants and airlines. This would be that opportunity. Commissioner Crayton... I can understand that. I was wondering because where the offices are now he can basically see what s going on. That same thing will happen there? I don t see it but I m assuming that s been taken into consideration. Ms. Mosqueda... we ve given a fair amount of study to this, additionally we looked Minutes, September 19, 2017, Page 9

10 at the amount of revenue that could be generated out of leasing the space in the International Terminal and felt that it was a positive offset for the construction cost within the courtyard location. Commissioner Crayton... clearly Staff knows if they re going to be inconvenienced. I was curious because he can see everything where he is now. And not only him but the rest of the folks, so that would be okay. Ms. Mosqueda... we ll make sure he has good visibility. Commissioner Crayton... everyone that needs to have good visibility.. Commissioner Stern... there was a discussion a few years ago about them off campus. Commissioner Crayton... we don t like that. Ms. Mosqueda... and I heard that. Commissioner Johns... what s the completion date? Ms. Mosqueda... it s three years from start of their contract, so with the RFP going out shortly we would expect to have a firm on board by the end of the year. So that s 2018, by 2021 it would be complete. We do have an intention of delivering the secure connector early with offices following. The connector is needed for airline flexibility within Terminals 2 and 3, so we want to get that constructed early. Commissioner Johns... does this remove Courtyard 3? Ms. Mosqueda... it stays. We re building above it. There would be a passage way underneath for vehicles, for trash companies that use that Courtyard, and, on occasion, emergency vehicles. We would retain that ground level use as a driveway. Commissioner Johns... where there s that dog walk area? Ms. Mosqueda... yes, it s the Pet Relief area. Commissioner Crayton... who are the key Airport personnel that will be there? Is it the same people who are there now or are you going to add somebody else to that building that are key Airport personnel, Senior leadership team? Ms. Mosqueda... what we know is that preliminarily there is a request to have Aviation Management and Revenue Development come back to the Terminal Complex. Commissioner Crayton... will all of the Senior Leadership team be there? Ms. Mosqueda... that s the intention. Minutes, September 19, 2017, Page 10

11 Commissioner Crayton... Okay very good. Thanks. Commissioner Johns... that s the intention...? Ms. Mosqueda... I m sorry, the answer is yes. Commissioner Crayton... okay, that s what I needed to know. * * * G. CONSENT CALENDAR OF ROUTINE ADMINISTRATIVE MATTERS: The Consent Calendar, Item Nos.7 through 10, were approved unanimously upon a motion by Commissioner Stern and a second by Commissioner Guggenhime. 7. Modification No. 5 to Professional Services Contract No. 8427C.9 - Construction Management Services for the Mel Leong Treatment Plant, Industrial Wastewater and Recycled Water Upgrades Project - PMA/NBA Joint Venture - $1,267,000 No Resolution approving Modification No. 5 to Professional Services Contract No. 8427C.9, Construction Management Services for the Mel Leong Treatment Plant, Industrial Wastewater and Recycled Water Upgrades Project, with PMA/NBA Joint Venture, in the amount of $1,267,000 with a new contract amount of $4,495,756 for services through October 3, Authorization to Issue a Request for Qualifications/Proposals for Professional Services Contract No , Structural and Civil Engineering Design Services for the Bus Maintenance Facility Project No Resolution authorizing the Director to issue a Request for Qualifications/Proposals for Professional Services Contract No , Structural and Civil Engineering Design Services for the Bus Maintenance Facility Project. 9. Ground Lease with the United States Postal Service at Plot 10F for its International Service Center and Public Post Office No Resolution approving a ground lease with the U. S. Postal Service for approximately 8.61 acres of land on Plot 10F, and directing the Commission Secretary to forward the Lease to the Board of Supervisors for approval. 10 Consent to Assignment of Trillium USA, LLC Ground Lease Agreement L , for CNG Fueling Station Operations, to Trillium USA Company, LLC Minutes, September 19, 2017, Page 11

12 No Resolution consenting to the assignment of Ground Lease Agreement L from Trillium USA, LLC to Trillium USA Company, LLC. * * * H. SPECIAL ITEM: 11. Airport Disclosure Policies and Procedures Training The Commission s Disclosure Policies and Procedures provides for training for Commissioners once every two years to assist them in understanding their responsibilities with respect to official statements and other disclosure documents. Ms. Brooke Abola. City, Deputy City Attorney Airport Team... I m here this morning to introduce Dan Deaton. Dan is a Partner in the Public Finance Group at Nixon Peabody, LLP. Nixon Peabody s is the outside disclosure counsel to the Airport. Dan is going to lead you through the Disclosure Training today. In 2014 the Commission first adopted Disclosure Policies and Procedures. These are a part of the debt policy which you approved earlier today in an update. The Disclosure Policy requires that all the people who play a role in preparing or authorizing the disclosure documents that the Airport sends to its bond investors, all those people who are involved in that disclosure document receive training every two years to remind them how best to carry out their responsibilities. Airport Staff and Commissioners were both trained in the Summer of Airport Staff received a training earlier this year. Now I just want to say a little bit about Dan Deaton. He has extensive experience advising on disclosure related issues in public finance and he works with numerous governmental bond issuers like the Airport. Nixon Peabody has been the Airport s Disclosure Counsel since 2010 and Dan has been directly involved on the team the entire time. I want to mention that Airport Finance Staff, supported by Dan s team, were recognized for excellence in their disclosure by the National Federation of Municipal Analysts, which is a national investor industry group, back in That was before my time so I brag on Dan a little bit and mention that award. Dan is here today to review with you your obligations as Commissioners under the Federal Security s laws when you authorize Airport s bonds or when you review the Airport s Disclosure documents. And he will present for about 15 minutes and then take questions, if there are any questions. So now I would like to welcome Dan to present the training and I think it s going to be recorded in case anyone would like to listen to it again, or if any Commissioners would like a hard copy of the PowerPoint. Mr. Dan Deaton... we re going to do only two things today. First we re going to talk about the larger context of what s happening within the Security s laws and disclosure within the Municipal Security s market. We re going to do that real briefly simply to just set the stage in a context of what is actually happening. The second thing we re going to do is really talk specifically of what the FCC expects for Board members such as the Commissioners to be doing as a result of disclosure. And you know the context for this is also is the fact that there s always an offering that s being done, a preliminary statement is being sent to Commissioners and Commissioners are Minutes, September 19, 2017, Page 12

13 receiving a large document. Part of what we re trying to do is be very specific about what the FCC actually expects for Commissioners to be doing as a result of that. Commissioner Crayton... you said we re receiving a large document? I just want to be sure. Mr. Deaton... yes, in connection with every offering, the Commissioners receive a Preliminary Official Statement and part of that is we want to be sure that we get context on why we re sending that and what prep you should be doing, if anything about that. So the FCC is responsible for enforcing the Federal fraud laws which just generally mean that issuers are responsible to provide investors the total story about their bonds in an accurate and not misleading fashion. Very well known within our industry, the FCC has become much more active and much more involved and actually pursuing all participants within the municipal security s market, but their activity against issuers, has increased significantly. And the reason why the FCC enforcement activities have increased significantly is because they perceive there to be very different problems within the marketplace. I ve sort of summarized those on the PowerPoint. One is that many issuers have become so bureaucratically apart from each other that information doesn t flow well. What the result of that is, is investors don t receive the full story of what s being done. Another problem is just a lack of being systematic and careful about what is being done. And then the final is through the inappropriate political influence which has become a much more significant problem. So, as a result of these problems, the FCC has become much, much more active. Just to give you an example of a most recent action that has happened was the City of Miami. The City of Miami is a good example of what the FCC has targeted. The City of Miami inflated... moved monies from capital reserve funds into their general fund for the purpose of inflating their credit ratings. And this apparently was pretty well documented in meetings and minutes and so on. And the FCC came in and sued them because it was the second time that Miami had done this, had violated the Federal fraud laws, and won and won big, and actually won a million dollar settlement from the City of Miami as a result of it. Went very heavily after the former Budget Director and ultimately they were able to secure a $15,000 fine even though they re trying to pursue a $450,000 fine. And actually made the effort of making sure the Budget Director would not be compensated for that or reimbursed under the laws the State of Florida. And the big lesson that we as an industry learn about this is that the FCC is really very much taking this seriously. They re willing to go all the way to court to trial which doesn t happen very often in our world. But also the other interesting lesson that we learned as the result of it, is that the City of Miami tried to argue that they relied on their auditors because the auditors had delivered an opinion. And these transfers and these reserves were actually set forth on their audited financial statements and because they had not clearly explained the situation to the auditors, and because the auditor had not given clear advice about that, the jury actually very specifically rejected that as part of the litigation. I present this simply to provide an example of what actually is going on within our marketplace today with respect to the FCC. So this activity has caused the Airport Staff to react very heavily to what the FCC is trying to do and make sure that the Airport is staying abreast to these developments and making sure the Airport is staying on top of it. And this comes down to really two basic things: 1) making sure that we maintain and comply Minutes, September 19, 2017, Page 13

14 with good disclosure policies and procedures and; 2) making sure that we re doing a good job of consistently telling the whole credit story about the Airport. Maintaining and complying with disclosure policies and procedures has been something the Airport has been doing for a quite a while. The first addendum item that was addressed this morning was actually doing a refresh on those disclosure policies and procedures among a number of other policies. And that a lot of it comes down to just re-looking at those on a periodic basis and making sure it s a careful process. Disclosure policies and procedures is not a magical or mystical concept, it s really very basic. And I ve laid out sort of the four key things that we try to focus on when we talk about them, making sure that it s clear who is responsible for what. Making sure that the right people are involved. Making sure the people who are involved are trained, and making sure that the issuer documents comply with the policy. The policies and procedures at the Airport all encompass that and just working with the Airport Staff, the Airport and Disclosure Counsel in our capacity, we take that very seriously. Commissioner Crayton... you re saying the right people are involved, can you state who the right people are? Mr. Deaton... going back to the issues, the problems that we dealt with before. We get worried about two levels of things, one is called the silo effect. We get worried in making sure that information isn t vulcanized. So, one of the things that we try to do is take the disclosure document and make sure that every area of information that is being presented, that the right person who has expertise over that area is involved in the process. So that s one category that we call subject matter review. We also want to make sure that people high enough within the organization are reviewing and commenting on the disclosure, and that s part of the disclosure policies and procedures making sure that the appropriate senior executives are involved in that process. And finally, we have something called the disclosure working group which basically makes sure that the right people that are involved on the transaction are getting together and having good conversations about what actually is happening. So that s the kind of way that we breakdown the right people and, and so on. So, the Airport s Staff and, and we as Disclosure Counsel take these disclosure policies and procedures very, very seriously, and that was actually approved by you all this morning as the first Item. The second thing that we do is we talk about telling the whole credit story and this is the terminology what we mean by telling the whole credit story is that in any sort of governmental agency like the City and County of San Francisco, the Airport, there s a lot of stakeholders who care about a lot of different things about that governmental agency and part of telling about the credit story is reminding ourselves who is the audience to this information that we re preparing, and it s the investor. And investor s actually care about a fairly narrow set of things. As I have said a reasonable investor is a pretty greedy person right, if all the person cares about is getting their money back. And that s sort of the audience of what we re telling and so what we try to do is make sure that the information that is presented in the Preliminary Official Statement does a good job of telling the big picture of what really is going on. And that and making sure that the major financial and operating trends and challenges that are facing the Airport come out through the disclosure. Okay. So what this comes down to is that s the larger context of what s happening in our marketplace and what it is Minutes, September 19, 2017, Page 14

15 that Airport Staff is doing as a result of that. The question becomes what should Commissioners do as a result of that, and when it comes down to the FCC and their discussion and their guidance to governing board members they have not really asked governing body members to do a whole lot in truth. There s not a lot of responsibility and the FCC appears to accept the limitations of the roles that is inherent in any sort of a governing body member. But the FCC has, in two instances, been clear about two different things it does expect for governing body members such as the Commissioners to be doing. And the first of those things is what we call the Elephant in the Room analysis. And this comes from Orange County. And it s real simple fact pattern. The County Board of Supervisors, according to the FCC, had come into the possession of facts and information that called into question to solvency of the County. The County was heading towards bankruptcy and the FCC believed that the Supervisors knew this. Notwithstanding that, they approved several bond issue, after bond issue, after bond issue. And the FCC s position is that the Supervisors should have known that if the investors actually knew what they knew, no one would buy the bonds. So how could you approve the bonds? It s a great example of sort of an elephant in the room sort of an analysis. You know things are going sideways but yet you re approving bonds. And the FCC was pretty clear that they had expected governing body members to actually ask the question... do investors know they re not getting their money back kind of a question type of a deal, because if they do that s great. But they had expected the Supervisors just speak up in that regard. The second major thing is what we call reasonable delegations, and this came up in the context of New Jersey. And really the purpose of this discussion we re having right now in the disclosure policies and procedures is to make sure that Commissioners actually have the ability to reasonably take the position that the delegation that they have made to Airport Staff is a reasonable delegation. And the issue with reasonable delegation goes kind of like this... is in connection with the action against the State of New Jersey. The FCC asked the State Treasurer whether or not he was aware of how the Airport Staff, I mean the Treasury Staff prepared disclosure, how they had been involved in the process, what training that they had, what they were involved, and a series of other questions. And the truth of the matter is the State Treasurer wasn t capable of asking that question. And the expectation coming from the FCC is that the State Treasurer who sits in sort of a position in that kind of a government as a governing body member or other governing body members are taking that step to say what is the process, what are the procedures, what is the training, what is the level of expertise. And so one of the purposes today is to make sure that you all are given an opportunity to understand what it is the Airport Staff is doing, why it s doing it, and be able to review and analyze the policies and procedures. So these are really the two things that the FCC expects of governing body members which is making sure that there s sort of an elephant in the room analysis. That when there s major financial and operating concerns, that is disclosed, that there is a sort of an affirmative action to basically understand what s happening as a result of that and also a reasonable delegation. So that s really what I had prepared for this morning. I don t know if folks have any questions. Commissioner Guggenhime... so the real answer to this is we ve got to have well thought out policies and procedures, if you have those reviewed by the right Airport Minutes, September 19, 2017, Page 15

16 personnel and staff in place, we should not have a problem because what comes to us as Commissioners will be accurate. Mr. Deaton... exactly. Commissioner Guggenhime... obviously I presume we would know if we issue Airport bonds and the City issues other bonds that the City retirement plan, the pension funds were draining the City funds, we would know, somebody would know that so we inform potential investors in Airport bonds, is that correct? Mr. Deaton... that s right. As a general rule, with one sort of minor exception which wouldn t have anything to do with the governing body members. I ve never really looked at actions as sort of a gotcha. In other words I think that when the FCC has sort of come in and laid out their concerns, they re kind of intuitive and they kind of made sense. Commissioner Crayton... so, the City and County, in terms of it s Budget Director, don t they also review our documents particularly as it relates to a bond offering? Are there checks and balances within the City. Ms. Abola... the Office of Public Finance is included in the working group for the bond issues and also has representation on the Airport s Financial Advisory Committee, so they re involved. * * * I. NEW BUSINESS: Discussion only. This is the Public Comment section of the calendar. Individuals may address the Commission on any topic within the jurisdiction of the Airport Commission for a period of up to two (2) minutes. Please fill out a Request to Speak form located on the table next to the speaker s microphone and submit it to the Commission Secretary. There were no requests to speak. * * * J. CORRESPONDENCE: There was no discussion by the Commission. * * * K. CLOSED SESSION: There are no planned agenda items for a Closed Session for the current meeting. In the event of any urgent matter requiring immediate action which has come to the attention of the Airport Commission after the agenda was issued and which is an item appropriately addressed in Closed Session, the Airport Commission may discuss and vote whether to conduct a Closed Session under Brown Act (California Government Code Sections (b)(2) and ) and Sunshine Ordinance (San Francisco Administrative Code Section 67.11). Minutes, September 19, 2017, Page 16

17 If the Airport Commission enters Closed Session under such circumstances, the Airport Commission will discuss and vote whether to disclose action taken or discussions held in Closed Session under the Brown Act (California Government Code Section ) and Sunshine Ordinance (San Francisco Administrative Code Section 67.12). * * * L. ADJOURNMENT: There being no further calendared business before the Commission, the meeting adjourned at 9:47 AM. (Original signed by: Jean Caramatti) Jean Caramatti Commission Secretary Minutes, September 19, 2017, Page 17

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