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~ ~ : V a l e r i e. Smith, Principal CounselMaryland Transportation AuthorityKimberly Millender, Deputy CounselMaryland Transportation A~tthoritSherita D. Harrison, Assistant Attorney GeneralMaryland Transportation Authority

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Finance Committee MeetingNotes of April 12,2007

Attendees:Louise H oblitzellCarol RiegCarolyn PeoplesBeverley Swaim-Staley -Deputy SecretaryFred Rappe - Special Assistant to the SecretaryKurt Krauss -PBMelinda Peters - SH ABetty Connors - SHAJoe Mason -DavenportRon M arino - CitigroupPaul Shelton-McKennon, Shelton & HennPeter Kessenich - PFMRonald FreclandSteven WelltosJay AydDeborah DonohueDavid ChapinAlison WilliamsJoyce DiepoldKathleen MorkCindy TaylorGeoff Kolberg

Finance Comm ittee NotesThe minutes of the March 8,2007 Finance Com mittee Meeting were recommended forapproval by Carol Rieg and seconded by Carolyn Peoples.

Intercounty ConnectorKurt Krauss gav e a presentation 011 cash flows. Current cash flows reflect contract A bid an drevised estimates on B and E. Cash flows seem to be on schedule. Memb ers would like to bekept aware of and know ahead o f time of when cash flows will be getting tight. A report will begiven out on a quarterly basis and reviews will be conducted ona monthly basis. The $2 9million in FY 2008 an d the $1 52 million in FY 2009 need to tie to bond issues.

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A question was raised as to whether the Authority h s a toll policy. To date, theAuthority does not have anything specific, but development 's in progress. Discussion followedas to the timing of toll increases and suggested different sce!i rios be developed by Vollmer. TheAuthority will have to closely monitor its financial position and consider the timing of future tollincreases as the debt c overage ratio and total cash to toll revenues ratio approach minimumpolicy standards over the next several years.

Ron Marino discussed the GARVEE Bond program, and specifically, the documents thatwere presented. He also explained what to expect when visiting the bond rating agencies. Thegoal is to achieve AA ratings from a ll the agencies.Resolution 07-02

Carolyn Peoples recommended approval of Resolution 07-02 (approval of draftFinancing Agreement, draft Project Implementation Agreement, Term Sheet, draft TrustAgreement, and Preliminary Official Statement for GARVE E Bonds) with Carol Rieg secondingthe motion. Resolution to be brought before Authority on April 25,2 007 .Resolution 07-03

Carol Rieg recomm ended approval of Resolution 07-03 (Intent to reimburse eligibleexpenditures regarding toll revenue bonds) with Carolyn Peoples seconding the motion.Resolution to be brought before the Authority on April 25,200 7.IT Project Approvals

Jay Ayd presented for approval the Asset M anagement S ystem - BM/MRO. This is asole source contract and requires BPW approval. This added hours to the MAXIM0implementation effort. Carol Rieg recommend ed approval and was seconded by CarolynPeoples.

Jay also presented for approval the Towson/RES I contract for services for staffaugmentation. Th e Authority is delegated approval of inter-agency agreements. Carol Riegrecommended approval and was seconded by Carolyn Peoples.Jay presented a task orde r for consulting services for 5 Business Analysts. The Authorityreceived 15 proposals from approved contractors under the DBM state-wide contract. Becausethis task order is under the DBM contract, it does not require BPW approval. Carolyn Peoples

recommended approval and was seconded by Carol Rieg.Lastly, Jay presented a contract for consulting services for 2 Project Managers. TheAuthority received 16 proposals from approved contractors under the DBM state-wide contract.Because this task order is under the DB M contract, it does not require BPW approval. CarolRieg recommended approval and was seconded by Carolyn Peoples.

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Senior Financial AdvisorRon discussed the upcom ing procurement for financial advisor sivices to the A utllority,which is for 2 times the amo unt of the current contract held by Co. LLC. The ideais to have 2 advisors on board. Qualificatio~~stipulate that the as a Senior FA toa goveinmental unit with outstanding debt of at least $500 m i l l i o w dfnimum of 5 yearsexperience with the m unicipal bond market, specifically revenue bonds be r a k e d am on g thetop ten financial advisors as ranked by the Bond B uyer.

t .Financial Auditing Services 6(9Ron presented the Invitation for Bids for the financial auditing services contract. Periods

to be audited are FY 2007 through FY 2009 and with 2 one-year renewal options. The IFB is ona fast pace timeline with formal presentation of contract recomm endation to Authority o n May30 with a BPW award recommendation date of June 20,2 007 . The provision of a managementletter is pai-t of the required serv ices. The IFB has already been sent to DBM for review.Investment Management -Outsourcing Analysis

Steve Welkos explained that the Autho rity mem bers wo uld like to evaluate whether weshould manage the Au thority's investment portfolio in-house with our employe es, or usingoutside experts. The Senior Financial Advisors to the Authority and to MDOT, Davenport andPFM, respectively, are to review current investment practices and make recommendations.Davenport will review the option of keeping investment management in-house and PFM willreview the option of outsourcing the investment manageinent to a professional firm. Both firmswill complete this work by June 1, 2007.Informational Iterns

Steve Welko s stated that Finance is moving right along with filling the vacancies. ChrisThompson has come back to the div isio~ l s the budget manager; the cash & debt manag er is justabout co~nplete.Steve introduced Kathy Mork, the Manager of Financial Reporting.The meeting adjourned at noon. Next meeting is scheduled for Ma y 10 at 9:30 am.

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Finance Committee MeetingNotes ofMay 10,2007

-- ---. - - - - ..Attendees:

Louise Hoblitzell ChairCarol RiegRonald FreelandBeverley Swaim-StaleyJohn M agness, CRRValerie K oh an , CRRSteve W elltosAlison WilliamsJoyce DiepoldDeborah DonohuePeter Kessenich, PFMJoe M ason, DavenportKurt ICrauss, PBBetty Connors, SHADavid ChapinChristina ThompsonJoe WaggonerGreg DerwartJay AydCindy TaylorCarolyn Peoples - AbsentCanton Railroad

Mr. Freeland presented to the comm ittee a briefing on the Canton Railroad. Mr.Magness is interested in obtaining short-term assistance from the A uthority,approximately $1 million, to fund upcoming and some current projects. As it stands now,a recent cash flow analysis indicates that cu rre i~t ash reserves will not be sufficient for' Canton Railroad to continue to fund projects such as new track for switching services inCecil County and expanded storage tracks for Seagirt and Dundalk Port services.The-~ ~ g ~ ~ ' e z s b ~ l ~ l e n t - bd Z e Y & p i a e n + = ~ y m k d - b e - . Ms. Hoblitzell suggested that the Authorityget a group together to review the matter, and to have Mr. Woodford chair the group.Ms. Rieg recoinmended approval to have the matter go before the Authority.

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Finance Committee Meeting NotesThe notes of the April 12 meeting were approved by Ms. Hoblitzell with minorcorrections.

- - . - - .- -Bond R ating Agency Visits - GARVEE Bond Issue

Joe Mason stated that the rating agency visits went well and that they will berevisiting the agencies again in July for an update on the toll revenue bonds. Ratings onthe GARVEE Bonds are due to come out today and Ms. Hoblitzell asked for the FinanceComm ittee to lmow the outcome via e-mail,Intercounty Connector Monthly Cash Plow

1b- tKrauss explained that the ICC cash flows have remained the same since lastmonth with no significant changes. Ms. Hoblitzell requested a comparison between thebudgeted numbers and the approved expenditures.IT Project Approvals

Jay Ayd presented 2 consulting service contracts for approval: Microso ftDatabase Administrator and an Oracle Database Adininisba tor. Both contracts willprovide consulting services Authority-wide, are for 3-year terms and shall not exceed $2million and $800,000, respectively. These procurements were processed under task orderrequests for proposals under a State-wide contract under the Department of Bu dget andManagement and do not require the Board of Public W orks approval.Discussion of Toll Policy

Peter Kessenich distributed a Toll Policy handout. The Authority is unique in thatnot only does it operate and maintain bridges and tunnels, but that it also is responsiblefor highways. Questions were raised such as can there be a toll increase that would last acertain amount of years, can the A uthority remove the various discounts. It wassuggested that the main reason for a toll increase could be due to the 1-95 sections 200,300 and 400. Ron stated that discounts should be phased out and a cost analysis of ACSand staff should be undertaken. Carol pointed out that maybe the Authority shouldsurvey customers. Ms. Hoblitzell would like Joe Waggoner's toll policy study g roup toget together with Vollmer and Peter. Peter also stated that he will work with the modelcreated by Davenport. Members decided that the toll policy should be on the agenda eachmonth and that it should be brought to the attention of the full Autl~o rity.

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FY 008 Preliminary Operating BudgetSteve Welltos presented the proposed preliminary operating budget in the amountof $212,042,114, an increase of 11.6% over the adjusted FY 2007 budget. The increase

is due to an increase in costs of existing personnel] additional 2% COLA foremployees, additional EZ Pass contract and fee costs and equipment. Discussionfollowed as to the past budgets, and the average 8% budget growth over the past 5 years.. . . . - . --- - ~e-to-up-~m~ngp~~j-e~~;-Ron-exp-~a.ine~-~at-th-eA~~th-~rity-~am-ot-~onto-gru W-asssit----. - -- "has. Much discuss ion followed in regards to the police pension system- LEOPS. It wassuggested that staff look into other pension plans for the police. Ron stated that at this

time next year that there w ill be a joint Capital and Finance Committee Meeting toreview the Operating and Capital budgets. Ms. Reig made a motion, and the Committeerecommended approval to the Authority members of the FY 2008 Preliminary OperatingBudget.,Update- Senior Financial Advisor RFP & Auditing Services IPB

Alison reported that staff is working to ensure that the financial advisor RFPprocess will be completed by September and that the last option year of the Reznickauditing service s contract is approved.Investment Report

Joyce stated that investments are doing well and there are no significant changesfrom last month.

The meeting adjourned at 12:30 pm . Next m eeting is scheduled for June 14 at9:30 an,

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Finance Committee MeetingNotes of June 14,2007

Louise P. Hoblitzell - Chair (via conference call)Carol RiegCarolyn PeoplesBeverley Swaim-StaleyPeter Kessenich, PFMJamie Traudt, DavenportKurt ICrauss, .PBPaul Shelton,McKennon Shelton& Henn LLPMary Sheppard, McKennon Shelton& Henn LLPRonald L, FreelandDeborah DonohueSteven E. WelkosAlison WilliamsAllen GarmanChristina ThompsonJoyce DiepoldAllen GormanGeoffrey IcolbergShnela TriandosDennis SimpsonMelissa WilliamsRichard JmnilloSuhairAllchatibW alid S affouriBruce GartnerGreg JonesJody McCurley 'George FishCindy Taylor

The meeting was called to order at 10:OO a.m.Notes of May 10.2007

Member H oblitzell suggested one change to the notes. The sentence . "The recoupmentof the stock investinnent by the Authority via dividends paid by the Canton DevelopmentFinance Committee NotesJune 14,2007Page 1

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Company would be expected." was deleted by consensus. No other changes were made to thenotes of May 10,2007.

IC C Cash Flow - Status ReportKurt Krauss presented the monthly ICC budget and cash flow report for the month ending- - April 30y.2007;$4-,7million h as been spent-for the mon th o f A pril-which is-$7-million. below-the . . .forecast due to RO W acquisition timing. Environmen tal mitigation cash flows accelerated withminor increases to th e overall cash flow over the next year. A total of $1 87 million has beenexpended on the project to date. The required regular update to the annual financial plan will bedone in August, for review in September.

FY 008 Operating Budget - FINALSteve Welkos explained that the proposed FY 2008 Final Operating Budget of$212,041,883 is slightly less than the preliminary budget approved in May 2007. The slightdecrease is due to offset of the police and operations budget increase for reclassifications ofsome positions and additional find s in the Internal Audits Office to procure professional auditingservices for invoices by the 2 positions being deleted in the Division of Comm unications and adownw ard salary calculation adjustment in the BWI Police budget.Mem ber Peoples suggested that before the preliminary budget is approved next year thatthe Finance C omm ittee meet to go over the justification in personnel increases, division bydivision. After discussing the matter, Mr. Freeland recommended that the HR Comm ittee meetto review the preliminary budget next year. Mi. Freeland also recommended joint meetingsbetween the Finance and C apital Com mittees two to three times per fiscal year. Dates for these

joint meetings are to be set.Mr. Welkos gave an overviewof the Authority's financial forecast. Capital programprojections based on the FY 2008- - FY 2013 Draft CTP have been incorporated in the forecastthat accompanies the proposed final FY 2008 Operating Budget. The Authority does meet andor exceed the standards of debt service coverage, but a toll increase will be necessary no later

thanFY 2011,Mem ber Hoblitzell moved that the proposed FY 2008 Operating Budget berecommended by the C ommittee for approval by the Authority members in the am otu~ t f$212,04 1,883 and was seconded by Mem ber Rieg.

Operational Costs of Proposed New 1-95 Maintenance FacilitvGeorge Fish presented this item for informational purposes to give the Cormnittee insightas to what operational costs and needs would be for the addition of a new maintenance facility inthe White Marsh area, With the opening of 1-95 Section 100 in 2010, a new facility will beneeded to service the additional 10-mile stretch of highway. The Capital Pl m i~ in g ivision will

Finance Coinrnittee NotesJune 14,2007Page 2

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be working on the acquisition of the land, design and construction of the new facility.Anticipated operating expenses of personnel, equipment, etc, is expected to be 40 to 49 newpositions, eventually having additional MSP for patrol, an E-ZPass top-in center, courtesypatrol, etc. Estimated operating expenses for FY 2009 would be $1.2 million; FY 2010 - $2.6million; FY 201 1 - $6.1 million; and FY 2012 - $6.7 million. Mr. Freeland explained that theMaintenance 1 facility eventually will need to be relocated and renovations will be needed to theMaintenance 2 facility to correspond with the open ings of 1-95Sections 200 ,300 and 400.. .. -. - - . - . -- -. . . . ..._.. _. .. _ _ _ _ __ .. ..._ . - . . . -Toll Policy/7'oll Increase

Pete r ICessenich presented the C omm ittee with a joint study which evaluated the issuesand steps that he and Jamie Traudt will be undertaking to create a matrix of the impacts ofvarious types of cash, debt, and toll policies. Discussion followed about the proposed tollincrease schedule and reinforced the Committee's desire to have preliminary decisions madeprior to September 2007, when it is conceivable that there will be discussions inAnnapolis. Ms.Swaim-Staley indicated that the Chairman has not heard officially from Annapolis on timing ofproposals for revenue enhancements, but they would like to be ready as early as September. TheComm ittee stated that these issues should be on the A uthority agenda by August.FY 2008 to FY 2013 Draft CTP & Long-Range Capital Needs Study

Sam Triandos provided a briefing on two items. The first item was the Draft FY 2008 toFY 2013 CTP which must be submitted to MDOT by the end of the month for inclusion in theMDOT CTP that will be presented to the public during the Secretary's Fall CT P tours around theState. The second item was the Draft Long-Range Cap ital Needs R eport.

A summary sheet of the changes to the CTP Draft since last year's final was distributedfor discussion. This summary indicated a $0 change in the p reservation portion and a $1 57million increase in the enhancement portion of the six-year program. It was reported that to staywithin the affordability level, three projects would be removed from theproposed Draft, i.e.,Authority Office Capacity Improvements, Travel Plaza Redevelopment and a Tem porary TravelPlaza. This action was also discussed at the Capital Coininittee and recommended for A uthorityapproval. The action reduced the increase in the Draft from the Final to a more manageable levelof $16 million. Bruce Gartner and Greg Jones discussed with the Committee the possibility ofhaving the travel plazas considered as a P3 project candidate. After much discussion, Mem berHoblitzell agreed with the concept, provided that additional financial inforination is given. TheDraft as presented, removing the three projects, was recom mended for approval by the A uthorityby a motion by Carolyn Peoples and seconded by Carol Rieg.

The briefing on the Draft Long-Range C apital Needs Study was presented with a bottom-line amount of $24 billion froin FY 2008 to FY 2026. A summary sheet provided a breakdownfor the amount in the financially-constrained six-year Draft, the ainount in th e six-year programperiod that the A uthority would need to fund the pro jects that are curreirtly not affordable, andthe amount needed to fund the projects fioin FY 2014 to FY 2026 . The detailed report of theentire period to PY 2026 was also distributed to the Committee for their review and comment.Finance Corninittee NotesJune 14,2007Page 3

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Annual Audit -ReznickAlison Williams presented the Com mittee with an update on the Reznick auditing

contract. The Authority.approvedexercising the one final renewal option with Reznick in orderfor them to perform aud iting services for FY 2007. An extra work authorization in the amount of$sQ000 has been approved which brings the total contract to an amount not to exceed $92.892- - ' f o ~Y2007;--$35;0007~fthe~a'ddItiona:111$50,00~-ha~s-e-enrequested-by-Rezni-ck o-p-erform-a -. . ,SAS 70 type audit of ACS, w hich will require significant, additional audit test work on theelectronic toll collection process. Reznick provided a copy of the time budget fo r the testingwork,

Review Schedule for August Toll Revenue Bond IssuanceAlison Williams provided a schedule of the upcoming schedule for the August toll

revenue bond issuance. In the fall, approximately $300 million Transportation Revenue Bondsare to be issued in a competitive bond sale. More details and an update will be provided at theJuly meeting.Investment Report

Joyce Diepold summ,arized the repo rt stating that as of May 3 I", the market value ofinvestments was $262million, compared to $432 million at the same time last year. The CapitalFund continues to decrease with a balance of $25 million on May 31,200 7. The final $43million transfer to MDOT has been completed. There.is a $143 million balance in the G eneralAccount.Inform ation Items

Bruce Garh er and Geoff IColberg gave a short summary of the toll cost allocation studybeing conducted by the University of Maryland.Bruce Gartner discussed the Draft Business Plan for FY 2007 - FY 2008, Ms, Hoblitzellwas concerned about the change in the strateg ic goal of Safety and Security. Bruce explainedthat theAuthority has a performance measurement team consisting of employees from variousdivisions who is responsible for the development of the plan. After some discussion, theCoininittee decided that it would like to have time devoted to each of the focus areas on aperiodic basis (quarterly) to discuss progress toward meeting various performance m easures.Also, the Committee would like to have a portion of each meeting devoted to some type of reporton one ltey focus area.Alison Williams explained that as of May 31Authority spending is under budget andapproxiinately 77 percent of the total budget for FY 2007 has been spent.

Finance Com mittee NotesJune 14,2007Page 4

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Ms. Williams also gave an update on the current status of staffing in the FinanceDivision. Finance is hiring 5 temporary employees to handle accounting and special projects;there were 4 new recent hires; 2 vacancies are pending for accountant positions; 3 vacanciesneed to be filled in FY 2007; and 3 vacancies need to be filled in FY 2008,Meeting adjourned at 1:00 pm . The next meeting is scheduled for Thursday, July 12,

2007 at 9:30 a.m,. . - .. . . . - - . . . . . . . . .. . . . . . - . . . , .. . . . . . , - . . . . - . . . . . . . .

Finance Comm ittee NotesJune 14,2007Page 5