transportation for anybody who's attending the game. director nolan. . is that monitored by someone there? director ford: yes. director heinicke: and we'll be out in time that we can inspect it. director nolan: yes. zoif do i have i think some of our folks have been there since the wee hours of the morning. director nolan: i look forward to seeing how that works. i also want to say a personal thank you to ms. beerm for rearranging this meeting. this is no easy task to get all the folks involved. thank you for doing that >> thank you. director nolan: anybody else? director oka? director oka: i have one issue that i've gotten many phone calls about and that is the fact that taxis are getting ticketed and they're not being allowed to drop off at at&t park. i don't know why that is. it's impossible to park.

i was explained they're being dropped off a block from the ballpark. i don't understand. don't understand why we have to ticket when we are dropping off or picking up people with disabilities, particularly the taxis which are a special thing for us. so i'd like somebody to look at that and see what we can do. director nolan: members? we can ask mr. ford. director ford: yes. we'll look at that immediately considering we have a ball game later today in terms of that situation. so i will direct the right staff person to start looking into that before we start getting our crowd out there. director nolan: thank you. ok. anything else before the board?

ms. boomer? >> you have one member of the public who has asked to address you. would you like to set a time limit for the day? director nolan: we'll go with two. >> two minutes? director nolan: yes. good morning. >> thank you, board members. united taxi cab workers. on the ballpark, it's a positive step to have spaces there. i don't see why you could not open up king street to taxi for ball game purposes. it's not only the ramp taxis. we take many people with limited moment to the ballpark. and having to drop them off on second street or third street and still have a long walk is, i think -- i think that situation needs to be looked at as well. the other item i wanted to address is the peak time taxis. and i'm a little concerned to hear that there may not be a need for a public convenience and necessity hearing regarding putting more cabs on the

street. it's very clearly in your rule section, 1115. if more permits are to be approved, there has to be a hearing around that. it doesn't matter -- it refers to the number or class of permits to be issued, indicating that any number or any class of permits to be issued need to have a hearing. so i hope you will proceed with that. in connection with that, i wanted to call your attention to a document that has recently come to any attention. it's a fully fledged program to put somewhere between 50 or 100 electric vehicles, nissan leaf vehicles -- [tone] on the streets of san francisco. there's also a component in san jose. that's why i'm not sure of the number in san francisco.

but this program apparently is completely decided in great detail. yellow cab is the only taxi company partnered in this program. i don't think there's been any public process around this. if you were going to put out a bunch of new -- [tone] you know, buses or other vehicles on the streets, i think you would have some public process around that. thank you. director nolan: thank you. anybody else? >> no. that's the only person. director nolan: next item, please. >> the executive director's report. director ford: good morning. members of the m.t.a. board, i like to begin with recognizing our staff who have done a outstanding job and the contribution that they have made to the agency. the first award will go to glenda levine. police step up to the podium. think some of you may be familiar with glenda because

she did serve as the union president for the transit inspectors for a few -- for the past few years. she's been a transit inspector for over 31 years. she's been with the agency for over 31 years. she played an instrumental role as it related to coordinating our service for the saint francis circle construction project, as well as a temporary relocation of muni services related to the new temporary terminal location. in addition, glenda joined me along with the mayor, secretary lahood, and house speaker nancy pelosi after the ground breaking of the temporary transbay terminal. she conducted a tour that traveled to the new navy shipyard. that tour was attended by quite a few distinguished guests. it went through with no hitches, very smoothly done, and very professionally handled. glenda, john haley, our

director of transit, here to present your award. congratulations. director nolan: mr. haley? >> just to show that glenda is a true team player, she even agreed to stabbed -- stand next to me after yesterday. congratulations. she's one of our most valued street inspectors, has done a little bit of everything over the years, and is the first person, as mr. ford said that we call on to handle situations that require not only knowledge of the service but great public communications skills as well. so congratulations again. [applause] >> i'd just like to say thank you very much for the recognition. ms. roberta and i go back aways. we do work as a team. we are part of the muni, the

m.t.a. family. so when we step out, we look good and you look good. thank you. >> thank you so much for your outstanding service. the bad news is ms. levine is retiring this december but going on to all kinds of interesting new things. do you care to tell us about those? >> yes. i have three daughters, three grandchildren. and i expect to spend most of the time with them. i have a business where i do fashion. so i'll be -- you might hear about me. i have what's called a baby rock, so i do baby things. and i also sew for ladies. so you'll get a chance to go to my website very soon. thank you. it's been wonderful. [applause]

director nolan: thank you. director ford: our next award will go to james flores. james, can you please step up podium? james is also an transit inspector and has been with the agency for 12 years. he played an instrumental free-throw line coordinating service for the circle construction project. i used to see james every other morning when i was heading to work. and he was out there doing a fine job not just only looking at the transit operations but looking at the overall transportation operations while we did that work. as you imagine, we had parking control officers out there, fair inspectors, a host and myriad of different employees. he really took it upon his shoulders to not just supervise the transit operations but to look at the m.t.a. global operation at that location. during the saint francis circle project, james served as the commander for the k & l line shuttle service. and he assured that the transition from our l.r.v. to coaches went as smooth as possible for our customers. james, it's good to see you

here. congratulations. well deserved. >> thank you. director ford, director haley, distinguished board members. just want to say that i'm very grateful to receive this honor. i really believe in our agency. and i really believe in what we're doing. thank you. director nolan: thank you on behalf of the board of directors. [applause] i want to thank you for your outstanding work. through all of these 12 years. appreciate your support. >> come on up and tell us your website. director nolan: do you have a website? >> he's shy. as someone who used that station all the time, i saw him every day he was working. not only did he do his job, but he went out of his way. if he'd see someone confused, coming through the turn style. if he saw someone across the street, he would go out of his way to make sure people got where they were going. my children and i noticed that.

thank you very much for your service. director nolan: thank you mr. flores. we'll come back for the report. we'll go to item 11 since our controller is here. >> i will call the item. item 11, presentation and discussion regarding debt financing, a continuation of the proposition a mandated training. director nolan: welcome. >> good morning, mr. chair, directors. thank you for having me here today. as we all know, proposition a adopted by the voters just a couple of years ago now included a number of important changes to rules and policy and governance for the m.t.a. specifically two of those provisions that bring me here today. first being a requirement that the m.t.a. board complete a certain amount of training each year on a host of governance and financial issues. and it's in that vain that i'm here today.

and secondly and perhaps more significantly, the extension in proposition a for the authority for the m.t.a. to issue long-term debt. this is something that has been scarcely allow indicated to the department by the voters in san francisco so only a handful of city agencies are extended right by the voters to secure long-term operating revenues in many cases to facilitate short-term, one-time improvements. either for infrastructure or other certain costs which you'll hear about today. it's a powerful tool that the voters reserved the right to very scarcely extend. and you now have that authority with approval from the board of supervisors to enter into those long-term commitments. i'm happy that you're taking the time to understand how these relationships work and how these financings work. again, it's an incredibly powerful tool that you can meet -- or you can use to meet many of the pressing needs that the agency has.

but it comes with long-term implications for both the m.t.a. and the city that all of us need to take seriously. there are very few things whether it be the m.t.a. board or the board of supervisors, very few things that -- decisions you can enter into that have implications that last more profoundly after we leave or you will leave your offices or your role on this board. in many cases here you'll be making decisions to fund upfront improvement that will be repaid over at times 25, 30, or even 35 years. it's with that in mind that i think we need to enter into these decisions. the team today can walk you through how these debt financings are structured, how the relationships work. again, a very powerful tool to

meet needs you have that i know are very real and that the city has that are very real but with real long-term implications for both the future operating budgets of the agency and in a larger scale, the m.t.a., the p.u.c., the airport, the port, and the general fund of the city are all players in these markets. and we all need to be cognizant of action that each of us are taking, because they require us to maintain relationships in many cases with the same banks, underwriters, the same institutions where an action of one agency reflects on the city and county as a whole not just in this case on the m.t.a. so i'm happy you're taking the time to understand how this process will work. and to begin to weigh how you, as a board, intend to bring this incredible power to bare. so with that i'll turn it over to staff to walk you through the presentation. director nolan: thank you.

>> good morning, chairman nolan, directors, mr. ford. my name is terry williams. today we wanted to bring to you the topic of our bond financing advisory team. i wanted to -- as you can see as we go through --

we don't need to go through today's presentation topic -- director nolan: the microphone. >> oh. i am kind of short. sore bring that. we'll go through the sfmta's financial advisory team. the way that we came up with our financial advisory team, we went through a selective competitive process proposed -- through the request for proposal process. we decided that we were going to go with three members of the team. to begin with, our lead is the

public financial management team with two sub consultants, robert kue and the pineapple group. secondly we have the backstrom mccarley berry team also with robert kuo consulting, and scott balice strategies. and ross financial also with robert cuo consulting and capital partnerships. i wanted to briefly go over what each team will be concentrating on. for the lead, public finance management, we're going to be concentrating on the financial planning and the debt management function yament. -- functionality. with backstrom mccarley berry & company we're going to be concentrating on the city garages and the central projects. and with ross financial, we're concentrating on alternative revenue analysis, fleet management plan and leverage,

lease transactions. i'd like to introduce the engagement partners for each group. first standing up, the partner with public financial management, peter shellenberger. director nolan: good morning. >> next to him would be with backstrom mccarley berry & company would be vincent mc carly and last but not least, for ross financial, would be peter ross. this is our financial advisory team. as you know, we're moving to bond financing because it gives us more flexibility over what we need to be able to do as far as our capital projects right now. we have funding coming in, but sometimes it's only utilized in accordance with whatever the grantor states. we need to have more flexibility to fill some of the needs that we need right now. that's why we're moving on to this endeavor. without further ado, i would like to bring up mr. peter

shellen did burger so he can explain to you about the bnd financing. director nolan: good morning. >> good morning. i'm going to pick up on page 7 of the presentation. it looks like we've lost if -- it from the screen. we will serve as team lead. we will work closely with ross financial and backstrom mccarley to make sure that we first hear your direction and implement a program that allows you to access the market and deliver projects that are important to you in a timely and cost effective fashion. on page 7 -- let me step back here for a moment. really, the purpose of today is to be fairly high level. this is very introductory. it is to introduce you to the process, what we're going to be doing over the next six to eight months with the objectives here before you.

the end goal here is to establish the m.t.a. as a new and credit worthy municipal bond issuer. and that means first determining what makes sense for you, how much you could manage in terms of an amount of debt while still allowing you to operate your primary service, do what your primary mission is. now, there are certain steps we have to go through. we will come back to you with a debt policy. we will have an interactive process. talking about what should be included in the debt policy what the debt policy will determine. typically determines what projects move forward. certain quantitative parameters to limit the amount of debt that would you undertake to make sure that you're not taking on too much debt so in will be a debt policy. we'll go into more detail in these presentations. we'll also have to reach out for the credit agencies. there are three credit agencies. they provide for the benefit of investors credit ratings. and we'll talk a little bit more in detail about that later

in this presentation. we're working aecom, developing a plan of finance for the central subway. we will be working with that long-term plan of finance to identify annual revenues available for debt service. within that concept, how much annual revenue over a long term, 20, 30-year period, do we anticipate having available for debt service. then we can determine how much debt or how much boroughing that would support, your bonding capacity. again, he'll go over more as we go through the presentation. the ultimate goal is to access the market in 2011 and issue bonds for some specified amount that we all deem responsible and support of high credit ratings. on page 9, i'm going to start very high level and introduce some concepts that we're going to be speaking about today. the first is a bond. what is a bond?

a bond is a loan and a promise to repay the loan. it's very similar to a home mortgage. with a home mortgage you will work with a specific bank. bank of america, for instance. you will enter into specific terms of agreements, often for 30 years. within those terms you'll determine how often you'll repay, under what structure, etc. very similar concept here. except rather than working with a specific institutioning, you're going to access the financial markets. and who are the financial markets in this case? it is investors that purchase tax exempt municipal bonds. this year there will be over $400 billion of tax exempt municipal bonds sold. the folks who typically buy those are insurance companies, bond funds managed by large financial institutions like goldman sachs, etc., as well as individual investors, usually high net worth investors who gain a benefit from the tax exemption. there are several key

components to a bond. the first is a par or a principal amount. par and principal amount is the amount of the loan, the base of the amount of the loan. so you go out and borrow -- this example of age 9, $50 million the par amount or principal amount is $50 million. that's how much you have to repay. in addition to repaying the par/principal amount, there will be an interest rate very similar to our home mort. in today's environment it's about 5%. so over time you will be repaying the face element, $50 million plus interest in annual installments at a rate of, say, today's environment, 5%. i'll show you an example in a couple of pages on that and finally, the term or maturity date of the loan. that is simply when is the final payment due when are these bonds repaid. feel free to stop me if questions come up. so on page 10, again a very fundamental concept. why bond finance at all? and the two options open and

available to agencies are, you can either pay on a pay as you go basis with available cash and grant funds as they become available, or you can accelerate some of those expected cash flows and borrow against them and issue a bond. typically agencies borrow simply because the cash available at any point in time is not sufficient to pay for the projects that they want to build today. so it's a mechanism to accelerate projects. now, as you do begin to shift away from a cash funded or pay as you go punded program towards a bond funded program, it has benefits in terms of flexibility for budget management so if you're not using all of your cash to pay for projects today but you're spreading out the repayment over 30 years, you're freeing up that cash for other purposes. and in this case it's operations. so there will be certain operating budget benefits as we think in introducing bonding concepts to your long-term program. the second bullet gets asked,

sort of an equity consideration. typically projects that you fill prince if you build a large infrastructure project with a beneficial life of 30 years, meaning that constituencies, residents, will benefit from that project over that 30-year life of that project. and the argument goes that it makes sense to spread the repayment or the cost of that project over the similar beneficial life of that project. and so not only does it help advance from a cash perspective, it helps intergenerational equity in allowing those who benefit over 30 years to pay over 30 years. and lastly and very importantly , sem, the agency, will be a tax-exempt issuer so under federal tax law, i.r.s. tax law, there are benefits that allow you to issue bonds on a tax exempt basis, meaning investors do not have to pay the income tax on those bonds.

with that you can borrow the a lower rate. on page 11, going to try to tie a few ever these together and biff give you a picture to look at. we have a sample of $75 million borrowing. in this case, the par amount is $75 million. the first bullet you'll note in today's market, the agency can go out and issue it at a rate of approximately 5%. this is for a 30-year borrowing. so today we would ender into a loan agreement or issue bonds for 30 years. we would agree or you would agree to repay investors that $75 million plus an annual interest rate. historically, that's very low.

it's never been lower over the last 50 years. you've seen that in home mortgages. home mortgages are incredibly low. tax exempt bond rates are equally low. we would structure it very similar to a conventional home mortgage. you'll notice on the blue and red bars on page 11, the blue bars are the time in which and the amounts of principle of the $725 million you would repay over time. and -- 75 million you would repay over time. the early years you're paying back mainly interest. and principle is a fairly small amount of that repayment. as time goes on, you're finishing up. there's less principal outstanding, therefore less interest due. it's mainly principle towards the back end. a couple takeaways here. one, we structure this level payment. so you know once we issue fixed rate bonds, you know what you're paying for the next 30 years. in this example, for a $75 million transaction or a $75 million bond issued, you would be paying $25 million a year --

$5 million a year for the next 30 years. we go back to that earlier concept of cash funded versus bond funded, here is the takeaway. you could either from a budget perspective build a $75 million project and repay sort of scheduled $5 million of repayments over 30 years. or, for instance, pay $25 million for the next three years. one has significant budget implications in the short term. and the other is a bit more manageable. we're going to have to find a mix of which projects are ready to go, which make sense to accelerate, and which fit into this sort of broader budget context for you. we're not there, but that's a process that we're going to continue to discuss. that's the end of my section. if there are no questions, i'll turn it over to peter ross to carry it through. director nolan: thank you. appreciate it. good morning mr. ross. >> good morning. peter ross with ross financial. happy to be here today.

i apologize in advance for my voice. i'm recovering from a cold and hopefully past the incubation period. i'm going to be discussing the process of the establishing the m.t.a. as a credit worthy issuer. and in today's times, this is more important than ever. you want to establish yourself to investors that you're fully capable of paying your debt on time and in the amount that you say you would. you read all sorts of hysterical articles these days in the "new york times," "wall street journal". you know, warren buff eliminate, as an example, was saying municipal debt will be the next bubble akin to the mortgage crisis that we just experienced. that's really not going to be the case. the one way of proving it is to demonstrate that you are a credit-worthy issuer. so the first step is to velt a debt policy -- develop a debt policy. a debt policy is really a very

basic form of best practices. it is something that just about every major issuer adopts. what it does is it tells the bond market and the rating agencies that you really have thought about the process of issuing debt. you establish guidelines as to when you want to borrow, for what kind of projects do you want to borrow. things as basic as saying you won't issue long-term debt for short-lived assets. things of that nature. you'd be surprised how often that happens. and that basically reafirms that you've given thought to the process of issuing debt. there are a whole lot of instruments that will be available to you long-term, extradecisional, fixed rate financing will probably be the one you will most likely use. then there is also opportunity to issue short-term debt, bond anticipation notes. if you have federal grants as far as your processes, there are opportunities to leverage off that. your debt policy will provide those guidelines to determine