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Nov 14th Minutes of Special Audit Budget Finance Meeting

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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 ...

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Ajouté le 24 septembre 2011
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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
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.