May 12, 1997

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

Present:

Michael J. Murphy, State Treasurer Gary Locke, Governor Brad Owen, Lieutenant Governor

Also Present:

Tim Kerr, Office of the State Treasurer Cynthia Weed, Preston, Gates & Ellis Rob Shelley, Seattle Northwest Securities Nancy Adams, Public Deposit Protection Commission Lynn Rodeheaver, Office of the State Treasurer Kay King, Office of the State Treasurer Svein Braseth, Office of the State Treasurer Martin Reynoso, Office of the State Treasurer John Fricke, Office of Financial Management Doug Vaughn, Department of Transportation Doug Brodin, Department of Transportation Dick Thompson, Office of Financial Management Donna Lawrence, Office of the State Treasurer Vicki Cox, Office of the State Treasurer Greg Rosen, Office of the State Treasurer Jay Kirkevold, Office of the State Treasurer Joe Dear, Office of the Governor Maureen Morris, Office of Financial Management

Lieutenant Governor Owen moved that the minutes for the March 10, 1997, meeting be approved.  Chairman Murphy seconded the motion.  The motion passed and the minutes were adopted.

Mr. Kerr spoke to proposed Resolution No. 861 which authorizes the issuance and sale of $265,000,000 State of Washington Various Purpose General Obligation Bonds, Series 1997E, and $28,000,000 State of Washington Motor Vehicle Fuel Tax General Obligation Bonds, Series 1997F.  Mr. Kerr stated such bond issues are sold from time to time to fund construction cash flow of omnibus and transportation capital projects and to replenish state Treasury construction accounts.  Some of the transportation projects include work on the north Spokane corridor, SR 18 near Auburn, First Avenue South bridge and environmental studies.  The proposed resolution sets in motion the legal countdown and administrative processes required for the state to issue debt.  This includes the appointment of bond counsel, preparing and circulating an offering circular (preliminary official statement) to potential bidders and investors, seeking bond ratings, and otherwise preparing for the reception of bids.  Bids are proposed to be received during the month of June, subject to Finance Committee members availability.  The bonds will be sold through competitive bid process.  The bond structure is the customary one-to-25 year serial level debt which fits with the debt limit concerns and long life of the projects.  The state retains the right, or option to call the bonds after ten years.  In the current market, such an option can be included without a price or interest rate penalty to the state.  In the current market conditions, the estimated interest cost is 5.625%.  This interest rate would generate an annual debt service requirement of approximately $20 million for Series 1997E and $2.1 million annually for Series 1997F.  Governor Locke asked for clarification of the administrative process.

Mr. Kerr presented proposed Resolution No. 861 to the committee.

Resolution No. 861 authorizes the issuance and sale of (a) $265,000,000 State of Washington Various Purpose General Obligation Bonds, Series 1997E, authorized by Chapter 14, Laws of 1989, 1st Ex. Sess., as amended, Chapter 31, Laws of 1991, Special Session, as amended, and Chapter 17, Laws of 1995, 2nd Special Session, and (b) $28,000,000 State of Washington Motor Vehicle Fuel Tax General Obligation Bonds, Series 1997F, authorized by Chapters 47.10.812, 47.10.761, and 47.10.834 RCW.

Governor Locke moved adoption of Resolution No. 861.  Lt. Governor Owen seconded the motion and the resolution was adopted.

Mr. Kerr spoke to proposed Resolution No. 862 which authorizes defeasance of certain general obligation bonds of the state from time to time.  The state’s debt portfolio consists primarily of fixed rate debt with a limited portion of variable rate debt.  The principal value of fixed rate debt currently outstanding is $6.196 billion, and the principal value of variable rate demand obligations currently outstanding is $196,200,000.  The resolution authorizing the variable rate bonds provided for retirement of other (high cost) fixed rate bonds instead of a like amount of lower cost variable rate bonds scheduled for redemption.  The proposed principal amount of fixed rate debt to be defeased in 1997 in lieu of variable rate demand obligations is almost $4.5 million.  The defeasance had the same practical effect as redemption of bonds.  These fixed rate bonds proposed to be retired bear interest rates of 6.0% or higher and the variable rate debt is currently averaging 3.40% interest rates.  Chairman Murphy explained this would let staff have the flexibility to take advantage of current market conditions and not have to call a Finance Committee meeting each time the interest rates dropped down.

Mr. Kerr presented proposed Resolution No. 862 to the committee.

Resolution No. 862 authorizes the defeasance of certain general obligation bonds of the state from time to time.

Lt. Governor Owen moved adoption of Resolution No. 862.  Governor Locke seconded the motion and the resolution was adopted.

Chairman Murphy spoke to proposed Resolution No. 863.  He explained that RCW 43.33A.100 required the committee to confirm the appointment of the Executive Director of the State Investment Board.  Mr. Masten stated that on April 17, 1997, the State Investment Board voted unanimously to reappoint Mr. James F. Parker as Executive Director for another three year term.  His present term is scheduled to run out December 4, 1997, and the second term begins December 5, 1997.  He continued by stating that the Board has had positive experiences with Mr. Parker.  Chairman Murphy stated he had asked that Mr. Parker attend the meeting in case there were any questions directed to him.  He stated the committee appreciated the work that Mr. Parker has done for the six new, transitioning board members and it was a pleasure working with him.

Mr. Kerr presented proposed Resolution No. 863 to the committee.

Resolution No. 863 confirms the appointment of Mr. James F. Parker as Executive Director of the State Investment Board pursuant to Chapter 3 (10), Laws of 1981 (RCW 43.33A.100).

Lt. Governor Owen moved adoption of Resolution No. 863.  Governor Locke seconded the motion and the resolution was adopted.

Chairman Murphy directed attention to tab five of the briefing books which was a summary of the master installment agreement transactions to date.  These transactions involved real estate and equipment financing.  Chairman Murphy stated that this is important that we make financing as cost effective as possible for state agencies and higher education institutions.  Prior to the establishment of the lease/purchase program, agencies would contract directly with the vendor and were not able to get as low of an interest rate as we are, thus incurring more expense.

At 11:25 AM, Chairman Murphy started to discuss Public Deposit Protection Commission agenda matters.  At 11:32 AM, Chairman Murphy presented a gift to Governor Locke for his baby daughter from himself and his wife, Terry.  Governor Locke opened the present and thanked Chairman and Mrs. Murphy for the sailboat puzzle.

There being nothing further to come before the committee, the meeting was adjourned at 11:34 AM.

	STATE FINANCE COMMITTEE STATE OF WASHINGTON   _______________________________________ Michael J. Murphy, State Treasurer & Chairman   ________________________________________ Gary Locke, Governor   ________________________________________ Brad Owen, Lieutenant Governor
________________________________________ Tim Kerr Deputy State Treasurer & Secretary