Meeting Minutes
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State Finance Committee Meeting Minutes |
           
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January 7, 1997The State Finance Committee met in special meeting after notice duly given to the press and radio of Thurston County.
Lieutenant Governor Pritchard moved that the minutes for the meeting of December 19, 1996, be approved. Governor Lowry seconded the motion. The motion passed and the minutes were adopted. Chairman Grimm stated proposed Resolution No. 852 was withdrawn from the agenda. Mr. Sheeran spoke to proposed Resolution No. 855 which provides for the award of sale of $150,000,000 State of Washington Various Purpose General Obligation Bonds, Series 1997C and proposed Resolution No. 856 which provides for the award of sale of $95,820,000 Motor Vehicle Fuel Tax General Obligation Bonds, Series 1997D. Resolution No. 853 authorized the competitive sale of $245,820,000 General Obligation Bonds (Series 1997C and Series 1997D). Information soliciting competitive bids for this financing have been circulated through publication of a preliminary official statement and advertising in the local and national financial press. Notice has also been given to the market electronically through the Bloomberg Financial Information network and the State Treasurer’s WebPage on the Internet. Mr. Sheeran stated the apparent low bidder was JP Morgan with a true interest cost of 5.5349. Merrill Lynch submitted a true interest cost bid of 5.543 and Lehman Brothers submitted a true interest cost bid of 5.55773. Mr. Sheeran also stated that all bids conformed to the official notice of sale. Mr. Sheeran presented proposed Resolution No. 855 to the committee.
Resolution No. 855, the Committee has authorized the competitive sale of $245,820,000 General Obligation Bonds (Series 1997C and Series 1997D). Information soliciting competitive bids for this financing have been circulated through publication of a preliminary official statement and advertising in the local and national financial press. Notice has also been given to the market electronically through the Bloomberg Financial Information network and the State Treasurer’s WebPage on the Internet. Governor Lowry moved the adoption of Resolution No. 855. Lt. Governor Pritchard seconded the motion and the resolution was adopted. Mr. Sheeran spoke to proposed Resolution No. 856 which provides for the award of sale of $95,820,000 Motor Vehicle Fuel Tax General Obligation Bonds, Series 1997D. He stated the Prudential Securities had withdrawn their bid and Merrill Lynch had a non-conforming bid so the bid from Lehman Brothers with a true interest cost of 5.56577 was the only conforming bid. Mr. Torkelson stated that the published notice of sale stipulated a 1998 price. The error was caught and a wire was put out by Seattle Northwest Securities to inform underwriters that the proper bid was par. Chairman Grimm asked Mr. Torkelson if anything inappropriate was done by the committee. Mr. Torkelson responded “No, it is a common practice to amend the notice of sale by wire.” Ms. Weed agreed that the bid process was prudent. Governor Lowry questioned if any legal comeback was expected. Mr. Torkelson replied in the negative. Mr. Sheeran said that bond counsel advised to not accept the bid of Merrill Lynch, and either accept Lehman Brothers or put it back up for competitive bid. Lt. Governor Pritchard recommended to go ahead with the process. Mr. Sheeran presented proposed Resolution No. 856 to the committee.
Resolution No. 856 providing for the award of sale of $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. Governor Lowry moved the adoption of Resolution No. 856. Lt. Governor Pritchard seconded the motion and the resolution was adopted. Mr. Sheeran explained that proposed Resolution No. 857 extended the Master Financing Contract for one year (from June 30, 1996, to June 30, 1997) and increased the credit line of the agreement from $50 million to $75 million. The increase permitted the continuation of equipment financing for state agencies. Use of the equipment financing program has been larger than expected. The current amount outstanding against the $75 million line is $74 million. The outstanding amount will be reduced when the next scheduled lease/purchase payments are made in April, however an increase in the credit line is necessary to relieve the soon to be appointed new members of the Committee from having to take action relative to the Master Financing Agreement before February. Mr. Sheeran presented proposed Resolution No. 857 to the committee.
Resolution No. 857, increasing the authorized amount of the Master Financing Contract between the State of Washington and U.S. Bank of Washington, N.A., from $75,000,000 to $100,000,000 pursuant to RCW 39.94. Governor Lowry moved the adoption of Resolution No. 857. Lt. Governor Pritchard seconded the motion and the resolution was adopted. Mr. Sheeran updated the members on the financing the expansion of the State Convention and Trade Center. As background, the Corporation was authorized by the Legislature in Laws of 1995, 2nd Sp. Sess., Chapter 16, Section 802(10)(b), to enter into a financing contract in the amount of $111,700,000, plus financing expenses and reserves, for the acquisition and construction of (i) a minimum of 100,000 square feet of new contiguous heavy load exhibit space with support structures, including loading facilities, storage, access and exit ways, and mechanical and electrical spaces, and all fixtures, furnishings and improvements associated therewith, and (ii) certain improvements to be made to the existing Convention Center, including the portion of the Center known as the “McKay parcel.” At the direction of the Committee, the Treasurer’s Office has solicited and received proposals to provide interim financing from Bank of America NW, N.A., doing business as Seafirst Bank and U.S. Bank of Washington. The interim financing will be done under a Master Financing Contract with the Office of State Treasurer which will also include an offering of certificates of participation to be negotiated with Smith Barney Inc. The certificates will be sold at a later date and used to retire the interim bank financing. The Master Financing Contract and related Agency Sublease Agreement provide for the payment of the certificates when issued and make up the term financing of the Center Expansion. Mr. Sheeran continued by explaining Resolution No. 858 approves the form of the (i) Master Financing Contract, (ii) Agency Sublease Agreement, (iii) Convention Center Lease, and (iv) Security and Disbursement Agreement. Authority is also granted to the State Treasurer, the Corporation, and the Banks to enter into the agreements (listed above) substantially in the form presented to the Committee and permits changes to those documents that may be necessary, appropriate or convenient to effectuate the financing for the Center Expansion, to be approved by the State Treasurer or the designated representative. The resolution also approves as to the form of the Trust Agreement, authorizes the Certificates of Participation in the Master Financing Contract, and the Execution of a Certificate Purchase Contract to be entered into or executed when the certificates are sold to provide the term financing. As with prior delegation to the State Treasurer’s Office, certain conditions for the certificate issuances must be met (final maturity no later than April 1, 2022, a true interest cost not to exceed 8.00%, and an issuance amount not to exceed $111,700,000 plus cost of issuance and required reserves) while other actions (final pricing, selecting a trustee, and changes to the documents) are permitted when necessary to complete the financing. Ms. Musselman explained the financing contract was a two-step process, providing interim financing first, then term financing. Interim financing is to be jointly provided by Seafirst Bank and U.S. Bank. Term financing is to be a COP issue negotiated with Smith Barney. The full amount of $135,000,000 is to be drawn immediately and approximately $79,800,000 will be expended prior to the take-out. The balance of the interim disbursement is expected to be 18 months, but 3 years is provided. Interim rates are expected to be a fixed rate of 5.7 to 5.8% during the first 18 months, and after 18 months, there is flexibility to select either fixed or variable rates until take-out. Chairman Grimm asked if the committee would have any further opportunity to interact in the process once the resolution was adopted. Mr. Sheeran stated that the Finance Committee can take any action at any time. Mr. Sheeran stated that this resolution meets all the objectives of the State Finance Committee and the Convention Center staff and James Ellis are in full support of it. Susan Musselman, Rusty Fallis, Bill Tonkin, George Mack, Cynthia Weed, Seafirst Bank, U.S. Bank, Ron Olsen, Mark Dean, Smith Barney, and staff have all worked very hard on coming to an agreement contained within the resolution. Mr. Sheeran presented proposed Resolution No. 858 to the committee.
Resolution No. 858 approving and authorizing the execution of a master financing contract for $111,700,000 plus financing expenses and reserves pursuant to Section 802(10)(b), Chapter 16, Laws of 1995, 2nd Special Session, and an agency sub-lease agreement between and among the Washington State Convention and Trade Center, State Treasurer, and financing banks in connection with the interim financing of the expansion of the State Convention and Trade Center; authorizing the State Treasurer to approve the terms of certificates of participation in the master financing contract to be executed and delivered by a trustee pursuant to a trust agreement in connection with the term financing of the expansion of said project; and authorizing the State Treasurer to execute a certificate of participation purchase contract; all pursuant to Chapter 39.94 RCW. Governor Lowry moved adoption of Resolution No. 858. Lt. Governor Pritchard seconded the motion and the resolution was adopted. Chairman Grimm thanked everyone that was involved. Governor Lowry expressed his concern that the incoming Legislature would make extensive tax cuts because of the current budget excess and the long-term effect it would have on the state’s economy. Chairman Grimm expressed his concern that anticipated rating improvements not be jeopardized. Governor Lowry thanked Chairman Grimm for his tremendous job as chair of the committee and State Treasurer. Chairman Grimm thanked the members for their commitment to the committee and the state’s economic growth. There being nothing further to come before the committee, the meeting was adjourned at 10:04 AM.
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