July 9, 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 Brad Owen, Lieutenant Governor

Also Present:

Gina Terry, Office of Financial Management Dick Thompson, Office of Financial Management Doug Extine, Office of the State Treasurer Gary Robertson, Department of Health Kris Van Gorkom, Department of Health Pat DeMarco, Attorney General’s Office - Dept. of Health Susan Musselman, Susan D. Musselman Inc. Lynn Rodeheaver, Office of the State Treasurer Doug Vaughn, Department of Transportation Svein Braseth, Office of the State Treasurer Vicki Cox, Office of the State Treasurer Craig Bartlett, Office of Financial Management Lawrence Seale, U.S. Department of the Treasury Sturga Mittai, Romania Oprea Sheopghita, Romania Pendinc Tudor, Romania Mitch Oprea, New York Colleen Malkmus, Office of the State Treasurer Martin Reynoso, Office of the State Treasurer Tim Kerr, Office of the State Treasurer Kay L. King, Office of the State Treasurer Nancy Adams, Office of the State Treasurer Dean Torkelson, Seattle Northwest Securities Robert Fallis, Attorney General’s Office Cynthia Weed, Preston Gates & Ellis

Lieutenant Governor Owen moved the minutes for the June 24, 1997, meeting be approved.  Chairman Murphy seconded the motion.  The motion passed and the minutes were adopted.

Chairman Murphy told Lieutenant Governor Owen of the potential refunding of $120 million bonds.  He stated the Office of the Attorney General would be assigning bond counsel to the refunding.  Mr. Kerr stated that the market has been rising in the State’s favor recently.  Chairman Murphy introduced Larry Seale, U.S. Department of the Treasury, who introduced the three Romanian officials and the translator accompanying him.

Mr. Kerr spoke to proposed Resolution No. 865 which awards the sale of $265,000,000 State of Washington Various Purpose General Obligation Bonds, Series 1997E.  Mr. Kerr stated there were three bids submitted.  All were submitted in compliance with the committee’s bidding rules and each bidder submitted a good faith check or surety bond through Surebid in the amount of $2,650,000.  The apparent winning bid was submitted by Bear, Stearns & Co., Inc., with a true interest rate of 5.2190%.  Goldman Sachs submitted a bid of 5.227980% and Merrill Lynch submitted a bid of 5.270768%.  Mr. Kerr stated that Standard & Poor’s Corporation had raised the state’s bond rating to AA+ which was beneficial to the state.

Mr. Kerr presented proposed Resolution No. 865 to the committee.

Resolution No. 865 provides for the award of sale of $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.

Lt. Governor Owen moved adoption of Resolution No. 864.  Chairman Murphy seconded the motion and the resolution was adopted.

Chairman Murphy said that the Department of Health requested the State Finance Committee to approve United States Fidelity & Guaranty Company (USFGC) as surety bond provider for the Dawn Mining Company.  Mr. Kerr stated that this was a rare event required by statute.  He introduced Pat DeMarco, the Attorney General assigned to the Department of Health.  Also present to represent the Department of Health were Kris Van Gorkom and Gary Robertson.  RCW 70.121.110 requires that the surety company providing such bond be deemed by the State Finance Committee to be “financially secure.”  The Department of Health via a letter dated July 2, 1997, has asked the committee to make a determination regarding USFGC.  Ms. King explained that the Department of Health regulates uranium mills in the state.  Dawn Mining Company (DMC) owns a uranium mill located in Ford, Washington, (Stevens County) which ceased commercial mining operations in 1982.  As a condition of the Department of Health’s 1995 license renewal grant to DMC, which included a plan to decommission and reclaim the site, DMC is required to post a cash bond, provide sufficient collateral, or obtain a surety bond in an amount sufficient to cover anticipated liabilities.  The Department of Health determined that DMC’s remaining liability was $14.4 million.  DMC has obtained a surety bond in the amount of $14.4 million for the benefit of the State of Washington Department of Health from United States Fidelity and Guaranty Company.  The surety bond is in effect from June 2, 1997, until such date as the Department of Health issues a written finding that all requirements and conditions of DMC’s license relating to decommissioning and reclamation have been complied with, and that a Radiation Materials License is no longer required by law (currently anticipated to be 2019 or later).

Ms. King continued by stating Standard & Poor’s and Best’s have both rated USFGC as “A.”  Standard & Poor’s defines its “A” claims-paying ability rating as follows:  “Good financial security, but capacity to meet policyholder obligations is somewhat susceptible to adverse economic and underwriting conditions.”  The Treasurer’s Office staff recommends the approval of USFGC as surety bond provided based on the following considerations:  The bond provided amounts to $14.4 million.  Concurrent with DMC’s next licensing renewal, the State Finance Committee will be required in 1999 to re-evaluate and approve or disapprove USFGC’s financial health (or that of an alternate surety provider).  USFGC’s “A” rating by industry rating agencies (Standard & Poor’s and Best’s) are within the “Secure Range” as determined by these commonly recognized industry experts.

Lieutenant Governor Owen moved the motion to acknowledge that United States Fidelity & Guaranty Company is financially secure within the meaning of RCW 70.121.110 to issue a $14.4 million bond pursuant to a request from the Secretary of the Department of Health regarding Dawn Mining Company.  Chairman Murphy seconded the motion and the motion was approved.

Chairman Murphy said the Local Government Investment Pool (LGIP) was created in 1986 and is overseen by the Treasurer’s Office.  Additionally the State Finance Committee is the administrator of the chapter that created the LGIP and adopts appropriate rules (RCW 43.250.090).  On June 16, 1997, the LGIP Advisory Committee, by a majority vote, recommended approval of the by-laws and the investment policy.  Mr. Extine and Ms. Wilson of the Treasurer’s staff were present to answer any questions.

Lieutenant Governor Owen moved the motion the Local Government Investment Pool investment policy be adopted.  Chairman Murphy seconded the motion and the motion was approved.

Lieutenant Governor Owen moved the motion the Local Government Investment Pool Advisory Committee by-laws be adopted.  Chairman Murphy seconded the motion and the motion was approved.

Mr. Kerr focused the committee’s attention on the lease/purchase real estate projects schedule included in the hand-out.  The schedule listed lease/purchase projects that have been authorized by the Legislature to be financed with certificates of participation during the current (1997-1999) biennium.  Mr. Kerr stated the largest project was the State Convention and Trade Center expansion which the committee had approved interim financing to cover one year to 18 months.  All real estate projects that exceed the par value of $4 million will be brought before the committee in a formal proposal to be approved by resolution.  If the projects are not completed and financed before the end of the biennium, they will be returned to the Office of Financial Management for reauthorization or the project authorization will lapse.

There being nothing further to come before the committee, the meeting was adjourned at 8:22 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