agreement assuming they don't do as well for whatever reason. we'd be pulling those back and redistributing them to companies that do express an interest, the desire that want to service that community. >> thank you, that's all i had. >> thank you. any other directors? thank you very much. * we closed public comment. so, members, what is your pleasure? >> i do have -- >> [speaker not understood]. >> i think it is important for us to look at this as a starting point. there is a lot of work to be done on this program overall in terms of ensuring equal access for [speaker not understood] out there. i tried to get a ramp cab at night several times and was unsuccessful personally. i'm just saying there is a lot of work to be done. helping our drivers and the companies who provide excellent service, providing more of an incentive than what we're talking about here is an important consideration for the future. >> the whole point, basic point is providing excellent service for people that are in

wheelchairs. to get there, this is a step toward that and i think not only setting standards, but holding people accountable to those standards. i personally think 8 trips a month is not very much. i mean, you know, you look at the generation coming along, more and more people needing this. * baby boomer at a bare minimum. incentive to drivers for doing this. this is a beginning. we'll come back to this with a lot more information in the future. okay, on the question? >> i will give a motion to approve. >> is there a second? >> second. >> motion and second. any further suction? all in favor say aye. >> aye. >> opposed no? the ayes have it. okay. how about having a break. >> sure. >> thank you very much. * five-minute break >>please stand by; meeting in recess >> [speaker not understood] any member of the public wishes to address you on this matter.

>> [speaker not understood]. >> sorry, you saved the best for last. good afternoon, members of the board. [speaker not understood], cfo. so, this is just a presentation to let you know some of the financing vehicles, the structures we're thinking about for the next coming year. we're not asking for approval. it's just an informational presentation just so you get an idea of some of the things that we're discussing. so, we'll turn it over to peter from psm who is our financial advisor to walk through the presentation. i just want to conclude by saying the next time we'll be before you with two administrative changes. one is to the debt policy you approved a year and a half ago. there are some clean up rules, some of the rules have changed so we need to come back and change those. so, and the second thing is we'll be before you with the reimbursement resolution. the next several months so that we can reimburse ourselves the extent we spent some funds for our projects from the bond proceeds. you did that in the last bond

proceed as well. so, it's just a follow-up item. with that leat me turn it over to peter and he'll walk through the presentation. >> thank you. good afternoon, mr. shellenberger. >> good afternoon, directors. i'm going to walk you through a slide presentation. and as [speaker not understood] pointed out t' introductory, it's high level. typically at the end of a long board meeting t' challenging to get through one financing and here we're going to try three, so, by all means if you have questions, stop me as we go along, please. * on page 2, here is a quick overview of the three different financings. and we'll start in the first column, the left-hand column. the 2013 revenue bonds. if you'll recall in 2012 in july 2012, the agency went out to the market and sold bonds as a first-time revenue. it was a revenue bond issuing agency. you currently have $63 million bonds outstanding, that's your 2012 issuance.

2013 is the second sear i of your revenue bond program. in 2012 there was approximately 25 million issued for new money purposes, investment back into the system. the amount contemplated with the 2013 bonds is approximately 150 million for continued investment into facilities, structures, vehicles. the timing of this transaction, again, as pointed out, we will be back before you with a detailed presentation and documents for approval. * current timing for that would be summer this year. sunali * you are currently rated. we'll focus on ratings a little bit later, but you are a double a rated entity from standard & poor's and you have a single -- double a3 from mood ells and single a from standard & poor's. now we introduce two new concepts. the revenue bond is a continuation, if you will, of your existing program. the commercial paper program is

new to you, it is new to the mta, but it is very common within your, your, your partner agencies throughout the city. the puc has a commercial paper program. the airport, the city and county, the county transportation authority. and commercial paper just generally speaking is rather than a long-term 30-year bond commonly understood in the context of our home mortgage, rather than having a 30-year loan as your 2013 bonds will be, this is a very short term loan. this is a line of credit where you draw upon it as you need it and you only pay as you draw upon that. okay. so, the commercial paper program will initially be established in the amount of 100 million. and again, that will be used to fund projects on an as-needed basis and the central subway, including the central subway project. we will ask for authorization

for full 250 million. and that will allow staff to manage the program, the capital program through 2019, as an as-needed basis using the short-term cash management tool. let me pause for a moment and ask if you have any questions on the purpose or approach or use of a commercial paper program. commonly understood as a line of credit. >> and if i could just clarify, it won't fund the projects per se, it will help finance projects. the projects that we have funding for, but we don't have the cash in hand yet whether it's because we're waiting for a federal grant or next year appropriation, this is really rich, you know, gap funding or bridge funding financing that will allow us to keep a project moving in advance of the actual project funds to come in. as opposed to, say, the revenue bonds which we are borrowing money in order to put projects in the ground.

>> director bridges? >> i'll interrupt you for a second. i was going to echo director reiskin's comments in that commercial paper is very commonly used throughout the industry, not just in government, but also in the private sector as short-term financing. right now it is apt cheapest form of financing you can get. so, it's actually a great recommendation in this market to use commercial paper. many municipalities throughout the country use it. new york city, chicago. i would say for even the city and county much larger than san francisco, it's the best form of short term marketing you can use. >> i don't know if this is around any more, certificates of participation, would that be under this category, is that something all together different? >> that is another long-term financing vehicle. commercial paper extends from a maximum maturity of 270 days. so, it's very short. so, rather than issuing long, say 4, 5%, you'll stay very short in the 270 day window,

you'll borrow at 1, 1-1/2%. to your point, lowest cost of borrowing. >> lowest cost. >> are these still used, certificates of participation? >> they are. the city actually uses them. so, a lot of the general fund finance debt that is in the capital plan, there's two different ways they do it. one is general obligation bonds. there's also a smaller subset of projects that are funded using certificates of participation where they're basically pledging city assets such as real estate to secure, to secure the vehicle and then they're paying the debt service over time out of the general fund. >> there is a really big thing about cities and things just sort of -- putting buildings up, right? stuff like that? can they do it at one point like that? >> it is another form of financing for capital market street proceeds invested in infrastructure. >> the city just approved, i think, more than 500 million

dollars worth of cops for the moscone center expansion. so, that's an example of where they're using it. there is a stream of revenues that they are anticipating from the tourism industry taxing itself that will help service the debt. but i believe they're using the cop is the structure they're using for that debt. >> thanks. >> thanks. >> ex he lent conversation. thank you. * excellent the third financing contemplated by the agency this year is a grant and anticipation note. it says grant application note. my apologies. grant anticipation note. and the purpose of this is to better align the timing of federal dollars directly applied to the central subway. so, this is project specific and it doesn't involve the agency's revenue. this is a mechanism for accelerating the timing of the federal dollars to better match the construction schedule of the central subway. ask to flesh that a little bit,

you currently have a full funding grant agreement with the federal transit administration in the amount of about 9 40 million. the annual amounts you're expected to receive through 2017 is approximately 150 million. your construction needs exceed that in certain years. so, this is a way to bring those dollars forward. >> what about the category, protected rating category bbd? >> yes, yes. now, as noted, this will not involve or pledge your agency revenues. this will -- investors will be repaid with federal dollars as they come in pursuant to the full funding grant agreement. now, as it turns out, your credit is stronger than the federal government's funding [speaker not understood]. [laughter] >> would you repeat that, please? >> what would other categories be, bbb and -- >> bb is still investment grade, still investment grade. it's below the av category,

below the a category, within three notches of each category. you have triple b plus, triple b minus. this will be somewhere in the triple b category. the benefit here is it won't be a long-term maturity here. so, you're going to have a fairly low credit on the full funding grant agreement, grant anticipation note. you're going to stay somewhat short 6 or 7 years. so, if you will think a two-year u.s. treasury is .37%, incredibly low. investors receive .37% for investing two years out. they go out 10 years it's 2%. three years it's 3%. you're going to stay within that, say, 7-year window. even though the credit will be a little weaker, you'll pay a little more, you'll be so short along that yield curve that you will still have a fairly low cost of borrowing, say 2-1/2, 3-1/2%, somewhere in there. >> thanks. >> okay. that is the introduction and that's the overview. the follow-up slides are drill down into a little bit of detail.

i'm going to pull up some salient features from these not to be repetitive [speaker not understood]. page 3 is on the 2013 revenue bonds as noted the amount is approximately 150 million. it's a continuation of your existing program, follow-up to the 2012 revenue bonds. the maturity will be 30 years just as your 2012 were. it will be fixed rate. you'll have the ability to call these bonds in 10 years if conditions improve or if you need to restructure. * 2012 bonds the all-in borrowing costs are very low. borrowing and borrowing environment, we expect you to issue bonds in july for an approximate cost of 4% or thereabouts. and if you'll recall in july 2012, you issued your 2012 bonds for borrowing cost of 3.82%. so, your [speaker not understood] market is a very opportune time. we expect that to hang in there for you in 2013.

i will show you cost and debt service in a few pages. and it's worth noting on that final bullet that the debt service for this contemplated issuance has already been included and approved as part of your 2013-14 budget. the commercial paper program, there's a lot going on on this page. and i'm not going to try to cover all of this. the take away is what we've already noted. the short term maturity, that first bullet category in that right hand table, has a maximum maturity of 270 days. and upon maturity it's up to a commercial paper dealer and investment bank, bank of america, a morgan stanley, that type of institution to roll that over to new investors. and they can do that for years. and typically they do. but staying so short with each maturity is what gives you the benefit of the low rate. so, you're going to have -- really here's the two take aways for the commercial paper program.

it gives you flexibility to draw down on it as needed and only pay as you draw. and you could repay it a soon and as often as you'd like. here are some details of how sort of going beyond how it's yesctionv used, how it's expected to be used here in your case. * generally again, the program requests the authorization -- the request will be the full 250 million. with commercial paper programs you typically don't initiate the full authorization on day 1. so, on day 1 the idea is of that 250 million, 100 million will be established. so, you'll be paying on the full 100 from day one, not the 250. so, that's a mechanism of to put authorization in place but reduce costs. the estimated cost for the 100

million, assuming it were all drawn for an entire year is about 2.2 million dollars in interest costs. and i'm going to show you the full work up of costs for these three transactions. the commercial paper program currently is expected to stay outstanding until 2019, okay, at which point approximately 100 million will be converted to long-term debt. and, so, much of this would be repaid through to the director's point with cash on hand. if federal dollars come in, you'd pay a draw on cp. if [speaker not understood] you'd pay your draw on cp, et cetera. and then back to the third grant anticipation notes. the sole purpose is to better align your federal dollar receipts with your construction expenditures. and as noted, the credit quality is a little weaker, but the final maturity is only 5 to 7 years. so, your all-in interest costs will still be fairly

competitive at 2-1/2, 3% rate. i'm going to reemphasize that last bullet on page 6. this will not currently as contemplated involve the agency's revenues. investors will simply look to the federal government for repayment. and you're not alone in doing this. here's a list of other grant anticipation note issuers. i'll note that with math 21 being limited to a two-year horizon and we're in the midst of sequestration discussions and the federal government is in the midst of challenges, securitization of federal dollars is a challenge these days. that said, many agencies have the need similar to you. bart has done it. portland tri met continues to do it to this date. los angeles county mta. there's a list. new jersey, chicago, you're not alone in the transportation space accelerating federal dollars.

summary comparison on page 8 gives you a sense across the three issuances of expected costs, and that's the first line that comes across. the revenue bonds, your 2013 revenue bonds will have an expected cost of somewhere between 4 and 4-1/2%, which is excellent historically speaking. you'll look back over the last 30 years, we have rarely been at rates lower than we are today. you're going to act a the market at a very low rate. that said, of the three it's the highest cost simply because it's the longest maturity. here you're going out 30 years for that [speaker not understood]. commercial paper he is within one year. and once we factor in all the costs of the commercial paper program, the costs will be somewhere approximately today about 1-1/2%. okay. stand alone, your grant anticipation notes as noted some where in that 2-1/2, 3-1/2% range depending on the market at the time.

okay. i'm going to focus on mode as well. revenue bonds will be traditional, simple fixed rate bonds. nothing fancy about the primary vehicle which you used to access the capital market street, cap rate fixed rate bonds. the commercial paper is variable because it resets every 270 days. and the garvey, the gan structure will also be fixed rate for a very short period of time. so, not only points outrightly she will need to focus on the commercial paper program and her staff a little bit more than the other two programs. it's a continual ongoing sort of needs management tool. * so, that will require senior staff following and drawing as needed and tracking. talking to the remarketing agencies, telling them when to reissue, when to market. page 9, here's the good news. you are an established issuer.

as of 2012 you went out to the market and had great response from investors. and frankly, you had a very good response from the rating agencies. so, we just pull out a couple of points. when we go back to standard & poor's and moody's in two or three months, we're going to pick up on the positive themes that they themselves have put forward. and this is in the rating agency report. i'm just going to read moody's. the double a3 long term rating, this is the quote from moody's, reflects the agency's diversified revenue base, sound financial management, with strong revenue raising flexibility, strong demand for central services and provides to san francisco. again, i'm going to pick up on that standard & poor's. even though we read a lot in the press, the revenues from a broad range of sources, that last sentence from standard & poor's and management strong track record of maintaining fiscally prudent operations while investing in a system. and that's sort of the theme. you're managing your operations and you're investing right back into the system.

so, we're going to pair back some positives to the rating agencies and take that to the investor community. here's the the cost. currently you pay a peak of about $6.2 million in annual debt service with the 2013 bonds outstanding. that will increase to 13.3 million. so, about double. with the issuance of the 2013 bonds. and assuming with the commercial paper program, we eventually or you eventually refund 100 million and convert that to long-term debt. you will end up with total debt service of 19.5 million. by 2019. so, that's -- to put that in perspective, that is 2.3% of your current o & m budget. * so, debt service of 19.5 million without building in any increase would be 2.3% of your

current o & m budget. you adopted a policy last year that restricts that to 5%. so, we'll row it in your policy. and that's the expected increase from debt service. page 11 and 12 just put that out in table form and i'll conclude on page 13 with respect to timing. the 2013 revenue bonds are the first -- we're going to come back. let me take a step back. there is a lot of information, thanks again, for absorbing this in the dialogue. we will be back to you for approval and detailed discussion for each individual issuance. so, this is purely introductory. this is just to give you a sense of how this hangs together. we will be back first with the 2013 bonds to you in april. with the eventual issuance in june, according to the schedule. the commercial paper program back to you in july.

hopefully establishing that program by the end of the year. and the federal structure a similar timeline, back to you by july and hopefully closing by the end of the year and with a caveat that that may take a little more time. i'll stop there, see if you have any further questions and turn it back over to sonali. >> thank you. >> i just have a couple comments. on the commercial paper we're doing, we're going to be partnering with the city because they also have to have a commercial paper at the same time. we're talking about issuing one rfp along with the city so we get the benefit of the two credits together. we're talking with the office of public financing and controller's office. that's the plan to issue jointly. and we'll go to the board of supervisors together on that deal. so, the commercial paper program, that's what we're envisioning. >> thank you very much. >> when we talked about

originally issuing the bonds, the ones we issued last year in 2012, was that through what our anticipated spending was? have we started spending that money already, are we already working on projects from the bond issuance? >> we have. and when we bring this back first to the capital planning committee and to you in the next few months, and i would consider those timelines to be tentative. but we'll have a full accounting of where we are so far. the first issuance that was $50 million that was refinancing old garage debt, so, that's been done. it was i think $5 million in planning money for the new garage projects -- not new garage, new projects in the garages. and then the balance was mostly design money or some gap money for a series of projects that we walked through. so, when we come back to you, we'll take you project by project through where we are for each of those and maybe one or two things that we're adding

or proposing to be added to the 2013 issuance that we didn't propose in 2012 that we can afford in part because of the good low interest rate that we achieved. >> good, that's good. i just want to -- director lee pointed out to me while we were going through this, remind everybody our diversified revenue stream really is important to us [speaker not understood]. we are unique in a lot of agencies and i think the fact that we do have that diverse revenue stream, we're able to get these revenue bonds and we're able to go ahead and start spending that money to better our whole system is really important to us. that's all. >> thank you. >> quick question. >> [speaker not understood]. >> ms. bose, you mentioned the city will be issuing, looking at commercial paper as well. that's why i was going to ask is it going to any port or any other office? i know the port was going to issue some cp at some point. i was president sure if that was part of the plan. >> actually, the city already has a commercial paper with a letter of credit is expiring going back to market to look at

the letter of credit extension. the airport currently has a cp, rfp out there right now. i haven't heard anything about the port. have you? >> [inaudible]. >> oh, the city is doing the financing for the port. all of the agencies on a regular basis talk about our financing programs. and, so, we're collaborating on timing and seeing the benefit of all of us doing something together or separately or whatever. but we met last friday, all of the city agencies issued debt to talk about the commercial paper program in particular. so, we're working collaboratively. >> i would like to say on this recommendation it's a great recommendation based on what you've come forward with the bonds first, which i think -- and to get a great credit rating in this environment when so many agencies are being downgraded throughout the country is great. this is probably one of the strongest ratings i've seen in a long time as you and i talked about. and secondly, draw for commercial paper and the san mateo financing, i think they're great tools and i think

we should embrace the recommendation and wait for you to come back with more details. the other thing i was going to ask, i know with commercial paper, it takes a lot of reporting and day to day reporting working with credit agencies. are you staffed appropriately for that type of reporting? >> director reiskin, i need two more staff members. [laughter] >> what i would say is that the city has a reasonably mature program at this time. the puc has a very robust program. so, we're going to -- we don't have to develop our program from scratch. we can take a lot of the practices that they've developed ways of automating or streamlining the process so that we'll be able to do so in the existing budget that we have. [laughter] >> but, i mean, it was important to raise the point as we did in the presentation that the cp in particular does require more resources. but through the efficiencies that ms. bose has achieved and

will continue to, we have every confidence that we'll be able to manage [speaker not understood]. >> well done. >> thank you, director, for your support. >> okay. anybody else? any member of the public wish to address the board on this? >> nobody is rushing forward, mr. chairman. >> thank you very much. appreciate your support. >> thank you. >> thank you. >> ms. miller? >> aye tim 14, discussion and vote pursuant to administrative code section 67.10(d) as to whether to conduct a closed session. >> is there a motion? second? all in favor say aye. >> aye. >> opposed? we are going into closed session. thank you all. >>please stand b >> $30,000. there was no discussion of anticipated litigation in closed session. directors, it would be appropriate for either motion

to disclose or not disclose the information discussed. >> is there such a motion? no motion, i guess. >> second. >> any further discussion? all in favor say aye. >> aye. >> opposed? that's it. >> that concludes the buzzness before you today. >> thank you. * business [adjourned]