Nov 14th Minutes of Special Audit Budget Finance Meeting

Jody

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AUDIT, BUDGET AND FINANCE COMMITTEE MEETING November 14, 2002 MINUTES OF THE SPECIAL MEETING ATTENDEES: Commissioners: Patricia Scates, Chair Frank Kiang John Protopappas Staff: John Betterton Patti Heilbron Dan Westerlin Oliviér Flewellen Fred Rickert Tay Yoshitani John Glover Doug Waring The meeting was called to order at 12:08 p.m. Visitors: Lance Bateman Darlene DeRose, Montague DeRose and Associates Jim Beamis, Montague DeRose and Associates Sara Lee, Goldman Sachs Sanjiv Handa, East Bay News Service Supplemental Agenda: 1. Discussion of Commercial Paper Letter of Credit Renewal 2. Discussion of Financial Planning Schedule Discussion of Commercial Paper Letter of Credit Renewal Jim Beamis and Darlene DeRose of Montague and DeRose presented a brief history and the current status of the Port’s Commercial Paper program. The principal challenge facing the Port with respect to the Commercial Paper program is the downgrading of the credit rating by Standard and Poor’s of two of the four banks providing Letter of Credit facilities backing the Commercial Paper. The Banks are Commerz Bank and J.P. Morgan Chase. Commerz Bank, partnered with the Bank of Nova Scotia, provided the first $150 million letter of credit of the $300 million program. Bank of America partnered with J.P. Morgan Chase provided the remaining $150 million. The effect of the rating downgrade on Commerz Bank resulted in a significant ...

Informations

• Publié par: Shoun
• Nombre de lectures: 25
• Langue: English

Extrait

AUDIT, BUDGET AND FINANCE COMMITTEE MEETING

November 14, 2002

MINUTES OF THE SPECIAL MEETING

ATTENDEES:

Commissioners:

Patricia Scates, Chair

Frank Kiang

John Protopappas

Staff:

John Betterton

Oliviér Flewellen

John Glover

Patti Heilbron

Fred Rickert

Doug Waring

Dan Westerlin

Tay Yoshitani

The meeting was called to order at 12:08 p.m.

Visitors:

Lance Bateman

Darlene DeRose, Montague DeRose and Associates

Jim Beamis, Montague DeRose and Associates

Sara Lee, Goldman Sachs

Sanjiv Handa, East Bay News Service

Supplemental Agenda:

1. Discussion of Commercial Paper Letter of Credit Renewal

2. Discussion of Financial Planning Schedule

Discussion of Commercial Paper Letter of Credit Renewal

Jim Beamis and Darlene DeRose of Montague and DeRose presented a brief history and

the current status of the Port’s Commercial Paper program. The principal challenge facing

the Port with respect to the Commercial Paper program is the downgrading of the credit

rating by Standard and Poor’s of two of the four banks providing Letter of Credit facilities

backing the Commercial Paper. The Banks are Commerz Bank and J.P. Morgan Chase.

Commerz Bank, partnered with the Bank of Nova Scotia, provided the first $150 million

letter of credit of the $300 million program. Bank of America partnered with J.P. Morgan

Chase provided the remaining $150 million. The effect of the rating downgrade on

Commerz Bank resulted in a significant increase of 80 basis points in the interest rate and

few buyers in the market place interested in buying Commerz Bank backed paper. The

corresponding increase in J.P. Morgan Chase interest rate was much less at only 7 to 8

basis points with minimal effect on the available market. Consequently, the Port is

essentially shut out of $150 million of Commercial Paper borrowing capacity. The options

presented were 1) Terminate the portion of the Commercial Paper program backed by

Commerz Bank, losing $150 million in capacity; 2) Substitute Commerz Bank with another

bank by an RFP process or negotiation with one of the existing banks; 3) Increase the

Bank of America and J.P. Morgan Chase facility by $50 million on a pro rata basis and

reduce the Commerz Bank facility by an equal or greater amount. An RFP for the entire

facility would then be done in early 2003. After some discussion as to the merits of the

Audit, Budget and Finance Committee Special Meeting

Page 2

November 14, 2002

options the Committee recommended option #3, as it provided the greatest flexibility with

the least cost to the Port. This recommendation was made with the condition and

assurances from staff that the transfer of $50 million was an interim short-term solution

and that an RFP would be carried out in the early months of calendar year 2003.

Discussion of Financial Planning Schedule

Fred Rickert, CFO, reported that Finance has begun to evaluate the Port’s overall debt

situation, particularly the role that both short and long term variable rate debt will play.

Plans include updating the Port’s base case debt feasibility analysis by November 30. He

projected that various scenario analyses and balance sheet optimization studies would be

completed by December 31, for presentation to the Committee in January 2003. The

Committee requested that Rickert include an explanation of how staff makes decisions

with respect to funding, particularly differentiating between the use of Port generated cash

and the use of commercial paper.

Board Letters for the Committee’s Review

There were no items presented for the Committees review.

Action Items

Request: Provide an explanation of funding decisions along with feasibility

analysis, financial scenarios and Balance Sheet optimization studies.

Due: January, 2003

Requestor:

Commissioner Protopappas

Responsible:

Fred Rickert

Request: Carry out an RFP for Letter of Credit Facility for the Commercial Paper

program to replace the facility currently provided by Commerz Bank.

Due: January/February 2003

Requestor:

Commissioner Scates

Responsible:

Fred Rickert

Audit, Budget and Finance Committee Special Meeting

Page 3

November 14, 2002

Action Items for Future Follow-up

Request: Present Board Agenda for new automobile policy

Due: November 5, 2002

Requestor:

Commissioner Scates

Responsible:

Joe Wong

Request: Establish ground rules for control over commitment of bond proceeds

Due: November 21, 2002

Requestor:

Commissioner Scates

Responsible:

Fred Rickert

Request: Present Portwide cash flow forecast

Due: November 21, 2002

Requestor:

Commissioner Scates

Responsible:

Fred Rickert

Request: Schedule cyclical review of financial procedures

Due: November 21, 2002

Requestor:

Commissioner Kiang

Responsible:

Fred Rickert

Action Items Completed

Request: Extend D Squared contract for financial services in connection with

ISO 9000 certification

Due: November 5, 2002

Requestor:

Commissioner Kiang

Responsible:

Fred Rickert

Request: Present Board Agenda item to award contract to Taylor and Associates

for search for Financial Planning Manager

Due: November 5, 2002

Requestor:

Commissioner Scates

Responsible:

Fred Rickert

Request: Present Board Agenda item to extend Lance Bateman’s contract for

Financial Services for 2 years

Due: November 19, 2002

Requestor:

Commissioner Scates

Responsible:

Fred Rickert

Meeting went into closed session at 12:47 p.m. (3 items)

Meeting returned to open session at 2:07 p.m.

Meeting was adjourned at 2:08 p.m.

Next meeting is scheduled for November 21, 2002 at 12:00 noon in the Board Room.