November 22, 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:

Daniel Gottlieb, Graham & James/Riddell Williams Cynthia Weed, Preston Gates & Ellis Dean Torkelson, Seattle Northwest Securities Robert Fallis, Attorney General’s Office Patricia Richards, State Treasurer’s Office Tim Kerr, State Treasurer’s Office John Bernhard, WA State Department of Transportation Peter Rex, State Treasurer’s Office Lynn Rodeheaver, State Treasurer’s Office Svein Braseth, State Treasurer’s Office Kay King, State Treasurer’s Office Martin Reynoso, State Treasurer’s Office John Fricke, Office of Financial Management Gina Terry, Office of Financial Management Scott Sheeran, State Treasurer’s Office Vicki Cox, State Treasurer’s Office

The Chairman called the Public Deposit Protection Commission to order first.  Then, following the Commission’s agenda, adjourned the meeting and called the State Finance Committee to order.  He stated the first order of business for the State Finance Committee was adoption of the minutes of the November 8, 1996, meeting.

Governor Lowry moved that the minutes for the meeting of November 8, 1996, be approved.  Chairman Grimm seconded the motion.  The motion passed and the minutes were adopted.

Mr. Sheeran spoke to proposed Resolution 850 and proposed Resolution 851.  He explained that Resolution 850 was the acceptance and execution of the bond purchase agreement for the General Obligation taxable Bonds, Series 1997T for the Housing Trust Fund.  The Committee was presented with a briefing regarding the Series 1997T Bonds at the August 29th meeting when the authorizing resolution was adopted (Resolution No. 844).  At that time, the reasons for requiring the issue to be taxable were explained as well as the process which would be followed to seek the lowest cost method of financing and selection of a lead underwriter.  Estimates at that time were that a ten-year taxable bond would have a yield of about 200 basis points higher than a tax exempt bond and that the expected yield would be around 7.25%.  Municipal taxable bonds are priced off U.S. Treasury rates and are typically 20 to 90 basis points higher than the treasury yields, depending on the bonds’ maturity.  An RFP for underwriting services resulted in the selection of Merrill Lynch as senior manager.  Other syndicate members included the firms assigned to both the senior and co-senior underwriting pools.  The taxable issue was brought to market Wednesday, November 20th in what turned out to be a very positive municipal market.  Merrill Lynch and other members of the underwriting syndicate were able to achieve very favorable outcomes for the state.  The Series 1997T bonds have a final maturity in 2007 (ten years) and were priced (after several positive re-pricings) to yield between 20 and 48 basis points over the Treasury yields.  The final TIC was 6.52% and well below the initial estimated yield of 7.25%.

Mr. Sheeran then moved on to Resolution 851 stating that during the November 8th Committee meeting, the possibility of refunding the R-87B Motor Vehicle Fuel Tax General Obligation Bonds (dated 12/1/86) was presented.  The Committee was informed that their prior adoption of Resolution 818 in 1995 included the authorization for refunding this series.  It was also proposed that the refunding bonds be combined with Series 1997T Bonds and sold at the same time.  Estimates for refunding savings were 3.87% or $1.2 million on a present value basis.  The refunding bonds, Series R-97B, were priced Wednesday, November 20th with better than expected results.  The bonds were sold at a TIC of 4.34% which produced a gross savings of $1,758,864 or $1,384,166 on a present value basis.  The percent savings were 4.5% with annual savings of approximately $292,000.  Favorable market conditions and strong performance by the underwriting syndicate lead by Merrill Lynch resulted in savings that were in excess of the Committee’s targets.

Mr. Torkelson then discussed his handout which reviewed recent interest rate trends, details of the pricing of the Series 1997T bonds, and refunding results of the Series R-97B.

Mr. Sheeran presented proposed Resolution No. 850 to the committee.

Resolution No. 850  accepts a negotiated offer to purchase $65,385,000 State of Washington General Obligation Bonds, Series 1997T, (Housing Trust Fund), authorized by Chapter 17, 1995 2nd Special Session, and Resolution No. 844 of the State Finance Committee, and authorizing the execution of a bond purchase agreement.

Lieutenant Governor Pritchard moved the adoption of Resolution No. 850.  Governor Lowry seconded the motion and the resolution was adopted.

Chairman Grimm thanked Merrill Lynch and the underwriting syndicate for their effort.  Mr. Sheeran stated a good faith check from Merrill Lynch would arrive that afternoon.

Mr. Sheeran presented proposed Resolution No. 851 to the committee.

Resolution No. 851  accepts a negotiated offer to purchase $30,805,000 more or less, State of Washington Motor Vehicle Fuel Tax General Obligation Refunding Bonds, Series R-97B, authorized by Chapters 39.42 and 39.53 RCW, and Resolution No. 818 of the State Finance Committee, and authorizing execution of a bond purchase contract.

Lieutenant Governor Pritchard moved the adoption of Resolution No. 851.  Governor Lowry seconded the motion and the resolution was adopted.

Mr. Sheeran summarized additional committee action necessary for the next few months.

There being nothing further to come before the committee, the meeting was adjourned at 9:09 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