March 12, 1998

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

Also Present:

Kay L. King, Office of the State Treasurer Svein Braseth, Office of the State Treasurer Mike Clarey, Office of the State Treasurer John Fricke, Office of Financial Management Colleen Malkmus, Office of the State Treasurer Dean Torkelson, Seattle Northwest Securities Vicki Cox, Office of the State Treasurer Donna Lawrence, Office of the State Treasurer Nancy Adams, Office of the State Treasurer Dan Gottlieb, Gottlieb, Fisher & Andrews Jay Kirkevold, Office of the State Treasurer Rusty Fallis, Office of the Attorney General Tim Kerr, Office of the State Treasurer

Chairman Murphy called the meeting to order.

Governor Locke moved the minutes for the December 9, 1997, meeting be approved.  Chairman Murphy seconded the motion.  The motion passed and the minutes were adopted.

Mr. Kerr introduced proposed Resolution No. 873 which authorizes the issuance and sale of $220,000,000 State of Washington General Obligation Bonds, Series 1998C.  The proposed sale of these bonds is part of the state’s seasonal capital construction financing.  The proceeds of the bonds will be used to finance numerous capital projects currently underway or to reimburse construction accounts for work already completed.  Mr. Kerr noted that a list of omnibus capital budget projects was located under Tab 2 of the briefing book.  Issue size has been developed through an agency cash flow survey conducted by Treasury staff.  Among the Treasury accounts affected are the state building construction account, the outdoor recreation account, the habitat conservation account, the public safety reimbursable bond account, and the higher education construction account.  The bonds are to be sold competitively on April 1.

As is customary, proposed Resolution No. 873 provides for a ten-year optional call.  This call protection continues to afford the state the ability to respond to falling interest rates by refunding the 1998C bonds.  At the same time, the market does not extract a penalty for retaining the call.  The proposed resolution also provides for making the bonds non-callable based on an economic finding by the Deputy State Treasurer prior to sale.  Mr. Kerr stated that in the current market, he does not expect to have a basis for exercising this feature.

A chart showing long-term interest rate levels in the market is included under Tab 2 of the briefing book.  In the current market environment, a 25-year level debt bond issue would have an estimated interest cost of 5.15 percent.  At this level, the annual debt service for the $220 million Series 1998C would be approximately $15.8 million to $16.0 million.

Mr. Kerr presented proposed Resolution No. 873 to the committee.

Resolution No. 873 authorizing the issuance and sale of $220,000,000 State of Washington General Obligation Bonds, Series 1998C, authorized by Chapter 17, Laws of 1995, 2nd Special Session, Chapter 456, Laws of 1997, and Chapter 39.42 RCW.

Chairman Murphy moved adoption of Resolution No. 873.  Governor Locke seconded the motion and the resolution was adopted.

Mr. Kerr stated that at the April 1 bond sale there will be an omnibus refunding resolution, because interest rates are so favorable that, under the guidelines set forth in Committee policies, it gives the staff an opportunity to monitor the market and bring refunding proposals before the Committee for consideration.  The Attorney General has appointed counsel for these two financings.  Also, there is a working group working on the stadium financing bill.  There are representatives from OFM, and Mr. Gottlieb is the state’s bond counsel.  The state’s financial advisors are working on it as well, trying to unpeel this onion that is the stadium financing bill.  Staff will be making future reports on the group’s progress.  Finally, the state’s financial advisory contracts expire at the end of April.  Requests for proposals have been circulated for those positions, and evaluations are being made and recommendations will be given to the Treasurer.

Chairman Murphy mentioned that Bill No. 6175 was winding its way to the Governor’s desk.  The bill will allow the State Finance Committee to conduct lease/purchase transactions with local governments.  Subsequent to that, the Treasurer organized a state stakeholder committee consisting of local government officials to discuss and implement plans so that the program can start in September.  Chairman Murphy mentioned various operational requirements of the expanded program as well as what involvement the Governor and Lieutenant Governor may want to have in the planning process.  This will potentially involve some 1400 local government entities.  The Treasurer wanted to anticipate issues and make sure the financing process will flow smoothly.

There being nothing further to come before the committee, the meeting was adjourned at 9:24 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