Meeting Minutes
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State Finance Committee Meeting Minutes |
           
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December 5, 1996The State Finance Committee met in special meeting after notice duly given to the press and radio of Thurston County.
The Chairman called the State Finance Committee to order. He stated the first order of business was adoption of the minutes of the November 22, 1996, meeting. Lt. Governor Pritchard moved that the minutes for the meeting of November 22, 1996, be approved. Chairman Grimm seconded the motion. The motion passed and the minutes were adopted. Mr. Sheeran spoke to proposed Resolution No. 853. He explained that Resolution No. 853 was a combined offering of $150,000,000 Various Purpose General Obligation Bonds, Series 1997C and $95,820,000 Motor Vehicle Fuel Tax General Obligation Bonds, Series 1997D for a total of $245,820,000. This proposed new money bond issue will provide new money financing for a variety of projects for which appropriations and reappropriations have been made in the 1995-97 capital budget. Ongoing omnibus construction projects include, but are not limited to, Plaza Garage rehabilitation ($9.3 million), Green Hill Redevelopment by DSHS ($34.3 million), a Department of Corrections multicustody facility ($19.2 million), and construction of the UW Electrical Engineering ($80 million). Mr. Sheeran continued by stating transportation projects for which bond proceeds will be raised from the sale of the Series 1997D bonds include, but are not limited to, portions of the North Spokane Corridor project (total project cost $36 million), addition of lanes, interchanges, and safety improvements to State Route 18 between Auburn and I-90 (total project cost $237 million), and safety and mobility improvements to the First Avenue South Bridge project (total project cost $158.2 million). The Department of Transportation has requested the sale of this current offering of bonds. In addition, the Transportation Improvement Board has requested the sale of $10 million in bonds which is proposed to be included in the Series 1997D financing package. Among the projects for which cash is being raised from the sale of the bonds are improvements to the south Boeing access road (State share $666,181), a multimodal facility in Pasco (State share $509,000), and improvements to 196th Street SW, 28th Avenue, 198th Street SW in Lynnwood (State share $9.6 million). Mr. Sheeran stated the bonds are intended to be sold by competitive bid at public sale. Ms. Cynthia Weed of Preston Gates & Ellis has been appointed as bond counsel by the Attorney General. Chairman Grimm asked if the proceeds from the current sales would meet the cash demand until the end of the legislative session. Mr. Sheeran responded by saying the capital and cash flow needs of the state would be covered through May of 1997. Chairman Grimm stated his concern that the three new members not have to get up to speed during the legislative session. Mr. Sheeran presented proposed Resolution No. 853 to the committee.
Resolution No. 853 authorizing the issuance and sale of a) $150,000,000 State of Washington Various Purpose General Obligation Bonds, Series 1997C, authorized by Chapter 14, Laws of 1989, 1st Ex. Sess., as amended, and Chapter 17, Laws of 1995, 2nd Special Session, and (b) $95,820,000 State of Washington Motor Vehicle Fuel Tax General Obligation Bonds, Series 1997D, authorized by Chapters 47.10.812, 47.60.800, 47.10.761, 47.10.819(1), 47.10.834 RCW, and Chapter 440, Laws of 1993. Lieutenant Governor Pritchard moved the adoption of Resolution No. 853. Chairman Grimm seconded the motion and the resolution was adopted. Chairman Grimm request an update on the status of the Washington State Convention and Trade Center. He reminded the members that the Legislature had authorized the use of a financing contract and the issuance of certificates of participation (COPs) to finance the Center’s expansion. Mr. Sheeran reviewed the legislative authorization for the financing and gave a general outline of the planned expansion project which included the addition of between 100,000 and 125,000 square feet of heavy load exhibition space. The status of site selection, filing of an environmental impact statement, agreements with the City of Seattle, provisions for low income housing replacement, and land acquisition were discussed. Mr. Sheeran continued by stating that the authorization for the project was based on $111.7 million of COP proceeds which when combined with required debt service reserves and capitalized interest would require total financing of approximately $175 million. It was also anticipated that an early sale of the COPs would generate investment earnings which would be used as part of the expansion project budget. In total, the project financing is the largest, most complex COP financing undertaken by the state and the Committee. Mr. Sheeran stated that as proposed, the financing was unlike any previously authorized COP real estate financing in the state. He continued by stating the staff was working with the Convention Center staff, legal and financial advisors, the Attorney General’s Office, the selected underwriter to develop the specifics necessary for the legal documents and resolution for the Committee’s consideration. Mr. Sheeran then described the extent of the efforts, number of meetings and problems which were currently being worked on. A summary of the differences between this financing and others authorized by the Committee was discussed. Major differences involved the lack of site control (none of the land is currently under the ownership of the Center), permitting was not complete, side agreements with co-developer(s) and housing replacement agencies were “in-progress,” detailed design had not been completed, firm construction schedules are not in place and the “project” would not be put to bid for approximately 18 months. Prior COP financing resolutions approved by the Committee contained few, if any, of the above “unknowns”. Each of the incomplete issues present in the CTC financing represent possible future problems and therefore risks to the final project completion. Under the current proposal, a request to sell COPs would occur before resolution of the above issues. Chairman Grimm then stated that such timing of a COP sale would deviate from the Committee’s standard practice and introduce risk(s) to potential COP investors. Mr. Sheeran agreed and indicated that significant time and effort was being devoted to the “risk” issues to address each potential and the impacts which could result. Risks for the Center’s project completion, risks to investors, and risks to the state’s past and future financing projects were all attempting to be addressed in the legal documents. This was making the financing documents very complicated and taking a lot to time. General discussion about potential impacts on investors then followed. Mr. Sheeran stated that a financing alternative had been presented to the CTC staff recently. The alternative would involve Committee adoption of a resolution that authorized a financing contract with two pieces. The first step would involve securing a bank(s) lending of the full financing authorization followed by a later sale of COPs to replace the bank loan with the COP process. While the bank loan was in effect, the CTC would draw down funds required for site acquisition, design costs, low income housing replacement, and other soft costs as would normally be incurred with a project of this type. Once site control has been achieved and some of the other “unknowns” resolved the COPs would be sold. The advantage of this approach was primarily that investors would not be put at risk should a problem with the project develop prior to the award of the construction bid. The alternative would also make funds available to the CTC in a more timely fashion. Also, if a problem did develop, it would be much easier dealing with a financial institution than dealing with investors to implement changes to the financing agreements. Mr. Sheeran then stated that the original plan of an early sale of COPs and the complicated legal documentation and the new plan involving a bank loan followed by the sale of COPs would both be pursued. This could cause some delay in bringing a resolution to the Committee because work on both alternatives would be required at the same time. Mr. Sheeran then stated that any plan would need to meet the Center’s concerns that sufficient financing be obtained, as authorized for the project and that any plan not subject the Center to reauthorization risk. Reauthorization risk means the risk that additional Committee or legislative approval would be required before their funding could be secured. The CTC also wants the authorization to be made by the current Committee because of their familiarity with the project. Mr. Sheeran then explained that the new financing option would only require one resolution to the Committee, even if the COP sale occurred after June 30th. Chairman Grimm then asked if the staff of the Governor’s office, House and Senate had been informed about the financing issues present with either option. He requested that appropriate updates be supplied to each group and that he wanted the new option to be presented to the Committee unless it was shown to be unworkable. He continued by stating that if the CTC wanted to present its option as well, they were welcome to do so. The Chairman then indicated that because of this project’s complexity should any financing option deviated from the standards previously followed by the Committee (by design or practice), they would need to be fully explained. The explanation would need to cover a description of any additional risks and how those would be addressed. He expressed the need to keep legislative persons informed about the financing so that if a problem in the future arose, it would not be a total surprise and would not adversely affect future financing for other projects. The Chairman wanted to be sure that other stakeholders in the financing program who might be affect by an adverse occurrence have an opportunity to comment and make their concerns known if they so choose. He continued stating that it was his hope that a workable solution could be presented to the current Finance Committee before January 15. He then asked for comments. Lt. Governor Pritchard acknowledge the financing complexity and stated that the project was central part of the redevelopment of downtown Seattle and hoped that all of the financing details could be worked out. Cynthia Weed discussed the importance of the method of financing to be used and the impact that decision would have on the viability of the lease/purchase program for future financing options. Mr. Sheeran indicated that the Committee would be kept informed of the financing progress. Chairman Grimm thanked everyone for their considerable efforts in working on the financing details. There being nothing further to come before the committee, the meeting was adjourned at 9:37 AM.
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