June 25, 1996

The State Finance Committee met in special meeting after notice duly given to the press and radio of Thurston County.

Present:

Daniel K Grimm, State Treasurer Mike Lowry, Governor Joel Pritchard, Lieutenant Governor

Also Present:

John Fricke, Office of Financial Management Svein Braseth, Office of the State Treasurer Steve Beacon, Office of the State Treasurer Gail Covington, Goldman, Sachs & Company E. R. Herschel, Merrill Lynch Ann Daley, Office of the State Treasurer Martin Reynoso, Office of the State Treasurer Kay Lampert King, Office of the State Treasurer Peter Rex, Office of the State Treasurer Tim Kerr, Office of the State Treasurer Scott Sheeran, Office of the State Treasurer Dean Torkelson, Seattle Northwest Securities Cynthia Weed, Preston Gates & Ellis Rusty Fallis, Attorney Generals Office JJ McCament, Weyerhaeuser Real Estate Company Gary Demich, Department of Transportation, Olympic Region Vicki Cox, Office of the State Treasurer

The Chairman called the State Finance Committee to order.  He stated the first order of business was adoption of the minutes of the May 24, 1996 meeting.

Lt. Governor Pritchard moved that the minutes for the meeting of May 24, 1996, be approved.  Governor Lowry seconded the motion.  The motion passed and the minutes were adopted.

Mr. Sheeran spoke to proposed Resolution No. 839.  The resolution provided for award of sale of $200,000,000 State of Washington General Obligation Bonds, Series 1997A, authorized by the committee under Resolution No. 838, adopted at the May 24, 1996, meeting.  He stated that the State received three bids from the following firms with the following true interest cost (TIC):

Mr. Sheeran stated that the low bidder was the syndicate headed by Goldman Sachs with a TIC of 5.803%.  Chairman Grimm asked if all bids were submitted in conformance with all State Finance Committee requirements.  Mr. Sheeran answered in the affirmative.  He mentioned the bond issues had been qualified for bond insurance and arrangements were made for use of a surety in lieu of a cash good faith deposit.  Governor Lowry asked how these bids compared with the last competitive sale.  Mr. Sheeran stated that the prior sale was in August of 1995 for $150 million and the TIC was 5.796%.

Mr. Sheeran presented proposed Resolution No. 839 to the committee.

Resolution No. 836  providing for the award of sale of $200,000,000 State of Washington General Obligation Bonds, Series 1997A, authorized by RCW chapters 43.99H, as amended, 43.99I, as amended, 43.99J, as amended and Chapter 17, Laws of 1995, 2nd Special Session.

Lieutenant Governor Pritchard moved the adoption of Resolution No. 839.  Governor Lowry seconded the motion and the resolution was adopted awarding the sale to Goldman, Sachs & Company.

Mr. Sheeran spoke to proposed Resolution No. 840.  The resolution provided for award of sale of $101,225,000 State of Washington Motor Vehicle Fuel Tax General Obligation Bonds, Series 1997B, authorized by the committee under Resolution No. 838, adopted at the May 24, 1996, meeting.  He stated that the State received three bids from the following firms with the following true interest cost (TIC):

Mr. Sheeran stated that the low bidder was Goldman Sachs with a TIC of 5.815%.  Again, surety was used in lieu of a cash good faith deposit.  Governor Lowry questioned the difference in TIC rates between the two bonds.  Mr. Torkelson stated there were minor differences in the structuring with the Motor Vehicles General Obligation Bonds requiring a par bid, other differences were in the amounts for each maturity.

Mr. Sheeran presented proposed Resolution No. 840 to the committee.

Resolution No. 840  providing for the award of sale of $101,225,000 State of Washington Motor Vehicle Fuel Tax General Obligation Bonds, Series 1997B, authorized by RCW chapters 47.10.761, 812, 819(I), 834 and 47.60.800.

Lieutenant Governor Pritchard moved the adoption of Resolution No. 840.  Governor Lowry seconded the motion and the resolution was adopted awarding the sale to Goldman, Sachs & Company.

Chairman Grimm asked for the next agenda item.  Mr. Kerr stated the Attorney General’s Office advised that Resolution No. 840 be in the form of a motion instead of a resolution.  The motion acknowledges the Interstate 5 Improvement Association, a Washington non-profit corporation, and the issuance by the Association of special revenue bonds in an amount not to exceed $30,000,000 for the purpose of financing interchange improvements on Interstate 5 near DuPont, Washington, in cooperation with the State Department of Transportation (DOT).  The Intel Corporation is locating a semiconductor plant near DuPont in a Weyerhaeuser Real Estate Company (WRECO) development necessitating a freeway interchange to be built nearby.  The interchange was not in DOT’s plans or funded in their budget so WRECO proposed to finance the project using “63-20” financing on behalf of the state.

The financing plan negotiated between WRECO and the DOT provides for the State to construct the improvements while WRECO will provide the funding through the sale of special revenue bonds by the Interstate 5 Association.  Mr. Kerr further stated although these bonds are tax exempt, they will not be paid from any state funds or the City of DuPont.  The ownership of the interchange improvements will at all times remain with the state.

Lt. Governor Pritchard stated it sounded good to him.  Chairman Grimm asked if there were any public policy implications that we should be aware of, e.g., unanticipated congressional action on municipal tax exemption.  Ms. Weed stated it is possible but not likely, that staff had reviewed the structure of credits and liabilities behind the financing to be sure there were no risks.  She further stated that “63-20s” were mostly financings of health care facilities and would be an unlikely risk on state-owned property.

Mr. Kerr presented the proposed motion:

“WHEREAS, the State of Washington, Department of Transportation, acting by and through the Secretary of Transportation (the “State”), proposes to enter into a Master Finance and Development Agreement (the “Proposed Agreement”) with Weyerhaeuser Real Estate Company (“WRECO”) in substantially the form attached to this motion and incorporated herein by this reference; and

WHEREAS, Section 12 of the Proposed Agreement permits WRECO to assign certain of its payment obligations under the Proposed Agreement to a Washington nonprofit corporation, subject to the approval of the State; and

WHEREAS, financing such obligations to promote the improvement of Interstate 5 within the State of Washington is within the purpose and intent of the Interstate 5 Improvement Association, which has agreed to accept such assignment and to issue its special revenue bonds in the principal amount of not to exceed $30,000,000 for the purpose of financing the improvements described in the Proposed Agreement;

Section 1.  For the purpose of complying with the requirements of Revenue Procedure 82-26 of the United States Department of Treasury, the State Finance Committee hereby acknowledges (I) the undertaking of certain improvements to Interstate 5 near DuPont, Washington (the “Project”), (ii) by the Interstate 5 Improvement Association (the “Association”), and (iii) that the Association will issue not to exceed $30,000,000 of its special revenue bonds to provide funds to pay for all or a portion of the costs of the Project.  The Project shall continue to be the property of the State of Washington, as set forth in Section 10 of the Proposed Agreement.”

Lt. Governor Pritchard moved adoption of the motion.  Governor Lowry seconded the motion, and the motion was adopted.

Mr. Sheeran introduced new staff members, Martin Reynoso and Kay King, to the committee.  Mr. Sheeran then directed the committee’s attention to the attachment the committee memo referring to lease/purchase transactions.  During the past 12 months, seven real estate financings totaling $18.5 million were completed.  Equipment financings were undertaken eight times and totaled $22.4 million.  In addition, there was one lease/purchase refinancing for $12.3 million which saved state agencies approximately $400,000 on a present value basis.

Mr. Sheeran pointed out the rating agency analysis in the committee materials.  He stated the agencies had all reaffirmed the state’s rating at AA.  However, the Standard & Poor’s rating had been upgraded by putting the state on a positive outlook with the possibility for an upgrade next year.  He quoted from Standard & Poor’s analysis: “Continued growth and diversification in the economic base and strong financial performance within the spending constraints of Initiative 601 would lead to a rating upgrade.” Chairman Grimm stated the rating agencies were looking at Washington State in a more favorable light due to the budgeting infrastructure and practices currently being followed and he thanked the Governor and Lt. Governor for their support of good financial and debt management practices.  Chairman Grimm continued by stating that he believed the rating agencies want to observe our financial status for another biennium under the provisions of Initiative 601.  He also felt if the state continues to chose good fiscal practices, the state’s rating would be restored to pre-WPPSS and 1983 Legislative down-grades, consequently saving taxpayers money with a higher rating.  Chairman Grimm further stated that a press release with this information would be published.  Governor Lowry expressed his appreciation for the conscientious effort of all involved.

There being nothing further to come before the committee, the meeting was adjourned at 9:25 AM.

	STATE FINANCE COMMITTEE STATE OF WASHINGTON   _______________________________________ Daniel K Grimm, State Treasurer & Chairman   ________________________________________ Mike Lowry, Governor   ________________________________________ Joel Pritchard, Lieutenant Governor
________________________________________ N. Scott Sheeran Deputy State Treasurer & Recording Officer