recreation and park commission tomorrow to talk about it. director nolan: that you very much. >> seeing the members of the public who wish to address you, moving on to item 12, presentation and discussion regarding directors and officers liability coverage. >> we wanted to bring this in front of you because directors and officers have this coverage to protect them from liability in bond issuance is paired with us this afternoon is the deputy director of risk management. she will walk through a presentation with you and hopefully, at the end of the presentation, you will give us some guidance on the procurement of coverage, if you are so inclined. director nolan: ok, thank you. good afternoon. >> good afternoon. congratulations on your position. i guess it is a program that we are near halloween. that was kind of a scary presentation, at least from my perspective. i went to law school, it almost became like a business law class for me over here. that potential exposure is really why i am here, to discuss potential hedge against that kind of personal exposure. so, i am going to go through this. ok. first, i think the first question is basically answered -- why consider the insurance? it is a projection for board members and officials acting in the scope of their duties. issuing debt is one of those course and scope of their duties. i know that mark and sean talk about the sec not initiating actions against individual board members, but i think i heard a dot-dot-dot yet in that. going to go over a couple of things really briefly, so if you have any questions, please feel free to ask. what does directors' and officers' insurance covers? it is a liability type of insurance. it covers defense cost in the event that you suffer losses. it will be as a result of alleged wrongful acts committed acting in your capacity as a director but also for officials acting in their official capacity with the organization. there is a note about public officials liability insurance. this covers debt that will be packaged together that would include both directors of the board as well as officers of the organization. appropriately director reiskin's point about other agencies in the city working on this particular issue, and i know they are very much in close contact with their counterparts in other organizations, these are other departments that have public official policy liability coverage, and you can see what those limits are, and i think retention was dropped off with a couple of those. this is just a note for you to notice this. these would be notable enhancements we would make to the policy to make sure. for example, the first point is that dno policies do not typically cover standard claims that are the result of bond issuance, basically. we would make sure that that would be included. there is also -- allows the choice of counsel so that the policy would include choice of counsel as well as reimbursement by the carrier for defense costs. it would also include punitive exemplary multiple damages, so kind of extensive damages against the organizations. those are things that are typically excluded, so those are things we would recommend to be included in a potential package for coverage. the notable exclusions part -- this kind of makes sense. if you have done anything really bad like insider trading or if you have done some sort of criminal malicious act, if there was an action of muni against a director, that would not include defense costs, obviously. breach of contract exclusions' also would apply in this kind of policy. i just give you those as kind of a summary so if you want to go into more detail, feel free. you can ask us. and we have so far put out to the marketplace a couple of different package options. one would be with a $15 million limit with $150,000 retention, and for your edification, you probably know this, but a deductible is a little bit different from a retention. you do not get any resistance from the retention peer you burn through that $150,000, and then you get that insurance company. the premium range for $15 million limit policy would be $140,000 to $180,000. ok. i told you this was short and sweet. i think at this point, we're going to do -- >> just to give you a sense of what the coverage is, they all have coverage in the $10 million of $15 million range, and that is what we are proposing for you. if i were to make my recommendation, i would probably suggest a $10 million range for us because our bonsais is not as large as some of the other agencies, and that would result in about a $100,000 premium annually, but i do think it is important for us to place this coverage for the board and the agency's protection. director nolan: members of the board? director heinicke: couple of questions. were the folks in san diego and new jersey covered by -- >> that is a good question. i will try to find that out. i was going to ask mark, and he kind of slipped out. director heinicke: i want to make sure that the recommendation we have for our policy here for $10 million -- when it says dno and public official, i assume that would cover our staff were anything that might be included there? >> that is correct. director heinicke: that raises a question -- i mean, part of this is -- you know, you have insurance policies to protect your staff and make sure you are able to get qualified financial people in the markets and someone might want to come in and work for us, sees we do not have this insurance and might be less likely to work for us. this is not just about protecting current employees. it is about keeping us competitive. my question is -- $150,000 retention, i assume, would be something that would not be put on the individual employee. it would be a situation with the agency would essentially cover the -- cover that. >> i have that written down. we should build this into the cost of our bonding when we look at final approval, we know the $100 million we are getting costs a lot more than $100 million. at the end of the day, this will probably be a relatively small number, so i will just say that. i do not think we can do this sort of bonding wisely without getting the sort of insurance for the reasons i just mentioned, so i hope that when we crossed out this capital we are getting, we would include this premium with it. with that, mr. chairman, i will moved to adopt sonali's recommendation that we purchase the -- oh, we are not actioning today? i will look in advance -- >> [laughter] than at any criminally militiamen, fraudulent act -- does that, if there is one of those things by one person, does that kind of boy the whole coverage? >> i do not think it avoids the whole coverage. i think it would be considered a claim against that, and that individual would be priced out and be liable. they would not be covered under it and a longer period that is not the current climate, at least. >> [inaudible] >> ok, great. director nolan: maybe along the same lines, what if we get down to this and we have a 4-3 vote, and something is wrong, those four people withheld something? does it matter? >> i do not think it does. >> [inaudible] regardless of your vote. director nolan: does anybody ever -- to any of these other agencies have to file any responses? >> there has been no clear response against this. santiago did have it, but the exclusions applied for san diego. director nolan: these organizations have had these for years? nobody has ever -- >> not that i am aware of. >> it is a good business to be in. director nolan: i guess it is the risk of being consistent here. i am willing to go with the integrity of the members of this body. >> we have two opinions so far. bamut is the lack of this insurance and have a our ability to attract and hire good people like you? >> i would say that almost every public agency i know the issues that has this coverage, and it is cost of issuance debt, so we would have that in our operating budget, so i do recommend we pursue this spirit we would be the only public and to do that i know of that issues debt that would not have this coverage. >> i think director brinkman's question is to the reason, and it is not just a short sided coverage so we can go ahead and commit negligent acts and be covered by it. that is not the reason. the reason is that we ask our cfo and director and importance that people to make difficult decisions on a daily basis, and to then say to them that we are not going to spend the extra money to cover in case there is a mistake -- i have a concern that that sends the wrong message and has them acting out of whack with every other agency in the city, let alone the country, that is issuing debt that does this, and it exposes our employees to something that no one else is exposed to, which i think has a two-part detriment. it sends the wrong message to current employees, and i do think it would have a negative impact. let's just say that tomorrow, sonali has to move out of the country for personal reasons and we have to hire a new cfo. we're on the verge of issuing debt, and we're going to tell the we're the only entity in the ã9qj? arçqd with an insurance policy? i think that would hurt us in the employee markets. we just hired director reiskin. he took less money than his predecessor. he has come on and shown a willingness to do this out of the goodness of his heart at a lot of levels, and to be a very active person right at the beginning, but we're going to tell him, just as he comes on, we will start issuing debt, and he will not be insured for it? i think that is why i disagree. i think this is more about just hedging bets. i think this is about protecting and value -- protecting and valuing our staff. director nolan: any other members have thought at this point? >> i would echo director heinicke's comments. i think it is only fair to ask staff and directors to have this insurance, and i think protecting them for the job they do for us every day that we should appreciate them and for the insurance to cover them as well as the commission. director nolan: anything else? >> i would also echo director heinicke and director bridges' suggestions. but as we are giving to our staff to do extraordinary things, and it will take some time, and i want to encourage that kind of thinking because i do want to continue to be out in front of everything that we do, and it would be nice to have a little insurance to back us up on this kind of insurance processes and distaff the faith they need to be able to go forth. if it helps -- i think that it does help us move in the direction of more progressive action. playboy director nolan: -- director nolan: it has to be directors and officers all is one thing? >> yes, that part protect you. >> trying to exclude us? director heinicke: go back to the insurance market and see what sort of discount we can get. that could save us 10 box -- bucks. >> what is going to be really scary is that really impacts the premium. director nolan: anything else? sounds like there is support for going ahead. >> look forward to working with you. them and no members of the public have indicated their interest in addressing you on this item and seeing no one seems to be moving forward at this time -- director nolan: how long is the next item likely to be? >> 30 minutes. director nolan: do we want a little break before then? eight minutes? seven minutes? secretary boomer: 8-a. director nolan: good afternoon. >> this is a short presentation to help make the requirements. the charter requires that the sf m.t.a. board members receive four hours of training annually about their legal and financial obligations as the board, so this training is not designed to satisfy this. the code requirement that all board and commission members receive sunshine training annually, and it is not designed to set aside a state law requirement that board and commission members received ethics and other training by annually. -- biannualy. we're going to talk about the powers and the duties of the board and its members and also just a little bit about open meeting laws. if you have any questions, please feel free to stop me. if you have any questions, i can answer them. let me know if you have questions. i am sorry. the mta as an agency has unique powers, not held by other agencies within the city. the mta has exclusive authority over acquisitions of property, construction, use of this property. it has exclusive authority to contract, to purchase, and to lease. the sf mta can accept and spend grant funds without the board of supervisors approval, unlike other agencies. the sf mta also set rates and fares without board approval, in addition to other matters and control over the streets. you have the ability to regulate parking, stopping, and the flow and direction of traffic. the role of the board in the performance of the agency functions is, first of all, to set policy directions for the agency, first and foremost. you also a point and remove the director of transportation and the secretary, your own secretary, the secretary to the board. the sf mta board approved settlements recommended by our office, and you approve the rates and fees and fares that are relative. you also approve the sf mta budget, and the board also has the ability to acquire intuit any matter in the jurisdiction. so i want to talk about a few of your roles and duties in a little more detail. regarding policy direction, the board sets policy for the agency consistent with the city's legislation, most importantly including the city charter, and the board gives direction to the staff of the agency through the director of transportation. as part of your policy-making function, the board can require the director of transportation to get board approval for specific action. that is where the balance of power is not really set out in the charter in any great degree. approving the budget. as you all know, the sf m.t.a. has a degree of control over their budget. this is unique among city budgets. the sf mta segments a balanced two-year budget to the mayor and the board of supervisors for an even number year. odd numbered years such as this one, the sf m.t.a. was required to submit a budget amendment only if it was seeking an increase in appropriations or fare increases, or things that were not included in the two- year budget that you submitted. the sf mta budget is approved by operational law. this is different than any other agency. their budgets are approved by the board. this is unless it is rejected by a supermajority by the board of supervisors. if the sf mta wants an increase in general fund spending that is over the guaranteed base amount, then you would have to receive the normal, but you would go through the normal budgetary review process and get approval from the mayor and the board of supervisors for increases over your general fund spending. and of course, as you have heard today, the sf mta board with the board of supervisors approval can issue debt without voter reproval. i want to talk about the concept that has two parts that are commonly referred to as interference in administrative affairs, and the first part of that is a chain of command. so the board and its members may seek information from the director of transportation about the sf mta operations, and with the directors'approval, can seek information from staff, so an individual board member with approval can seek information from staff. in sum, the board must work for the director of transportation. that is how the chain of command those. this last bullets is interference with administrative affairs. an individual member of the board in administrative affairs other than through the director is official misconduct. i want to make sure that you understand that chain of command does not mean that the board as a body cannot talk to individual staff. the chain of command limitation does not affect the full board powers of inquiry. you can call any mta officer or employee to speak to the board as alan colmes about any matter. that is within your jurisdiction at any time. the other part of what is commonly called interference with administrative affairs is the distinction between action by an individual member of the board and the board's action, so board members make a decision only as a body. an individual board member does not have any policy-making authority. individual members cannot exercise the powers of the mta board. and, of course, when the the board asks and exercises its power at a notice meeting, by means of a vote. any questions about any of that? president nolan: this year, we are looking at like a $22 million deficit in the budget. how does that fit in in terms of the board of supervisors? what are our options? >> director, as you know, the past five years, we have always had a budget deficits, and the way we have addressed it is by either not hiring or enhancing our revenues. as long as we do not go to the board to ask for more money, we are ok, and we usually have to do that. president nolan: thank you. ms? >> i know you did this ever you through -- every year through our online training. so the basic rules about open meetings is that all policy bodies operate in public meetings. those meetings must be publicly noticed, and the policy body must fix public comment at those meetings. what is a meeting? it seems painfully obvious, but people in my office spend a lot of time talking about this and thinking about this because we want to avoid the situation in which there is a gathering of a quorum of a policy body, and the members do not realize that this is a meeting, and therefore the meeting has not been noticed, and then it is an unlawful meeting. a basic definition of a meeting occurs when the majority of the members of a policy body come together at the same time and place. it is important to note that both the board and any of your committee is our policy bodies, so a gathering of two or three would be a meeting. that retreats, workshops, site tores, gatherings, which are now not as common, but when i came into this office, it was very common to have a new gathering before or after a board meeting. those are meetings, and they have to be noticed. of course, there is nothing wrong with having a retreat. no you're having one next week, in two weeks, but a retreat is just a meeting that has to be noticed just like any other, and the public has the right to attend and participate. there are some important exceptions to the basic definition of a meeting. meetings can occur even though the majority of a policy body is not in the same place at the same time, so the most obvious example is a telephone conference among the majority of the members of the policy body. you are not in the same physical place, but a telephone conference is a meeting, and you would not be allowed to have a delicate bone conference. -- to have a telephone conference. that also be an illegal meeting. a more subtle situation our meetings that occur when members of a policy body and of discussing an issue that is within their jurisdiction, even though those discussions occur may be between one member and another member. they do not occur at the same time, they do not occur in the same place. the simplest is when they occur by telephone, when member calls member b, and them member b decides she wants to hear what member c has to say about that, and then member c calls member d. those are unlawful, and they do occur mostly through technology, telephones, facts, email, text messaging. they also can occur through human intermediaries, a member of your staff talking to one board member, find out what one board member things about a particular issue and goes to another board member and says, "well, board member a tells me this. what do you think?" and that process goes on until it includes a majority of the members, and then you have an