December 18, 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 Brad Owen, Lieutenant Governor

Also Present:

John Fricke, Office of Financial Management Susan Musselman, Susan D. Musselman, Inc. Dean Torkelson, Seattle Northwest Securities Dan Gottlieb, Gottlieb Fisher & Andrews PLLC Allan J. Martin, Office of the State Treasurer Rusty Fallis, Office of the Attorney General Tim Kerr, Office of the State Treasurer Cynthia Weed, Preston Gates & Ellis LLP Kay L. King, Office of the State Treasurer Tom Jensen, First & Goal, Inc. Mike Clarey, Office of the State Treasurer Doug Vaughn, Office of Financial Management Nancy Adams, Office of the State Treasurer Nick Cockrell, Office of General Administration Dick Saunders, Public Stadium Authority Martin Reynoso, Office of the State Treasurer Suanne Pelley, Public Stadium Authority Buster Brown, First & Goal, Inc. Svein Braseth, Office of the State Treasurer Lorraine Hine, Public Stadium Authority Jim Kelley, First & Goal, Inc. Ann Kawasaki, Public Stadium Authority Robin Appleford, First & Goal, Inc. Dick Thompson, Office of Financial Management Thomas Oliva, State Parks & Recreation Commission Jay Kirkevold, Office of the State Treasurer

Chairman Murphy called the meeting to order.

Lieutenant Governor Owen moved the minutes for the September 9, 1998, meeting be approved.  Governor Locke seconded the motion.  The motion passed and the minutes were adopted.

Mr. Kerr introduced proposed Resolution No. 881 which authorizes the issuance and sale of up to $70,295,000 State of Washington General Obligation Bonds, Series 1999S-1, up to $24,000,000 State of Washington General Obligation Bonds, Series 1999S-2, and up to $7,800,000 State of Washington General Obligation Bonds, Series 1999S-3, for the purpose of financing public stadium and exhibition center construction.

Mr. Kerr stated that the $70,295,000 and $24,000,000 General Obligation Bonds would be offered for sale on January 20, 1999, and the $7,800,000 General Obligation Bonds would be offered for sale on February 10, 1999, and that both sales would be offered on a competitive bid basis.

Mr. Kerr noted that the state has received a certification under date of November 30, 1998, from the Public Stadium Authority pursuant to Section 210(2) of Chapter 220, Laws of 1997, to the effect that all conditions precedent to the issuance of bonds have been satisfied.

Mr. Kerr stated the 1997 Legislature enacted Chapter 220, Laws of 1997, “An Act relating to a mechanism for financing stadium and exhibition centers…,” subject to a vote of the people.  Referendum No. 48 (Chapter 220’s ballot number) was approved by the voters at an election held June 17, 1997.  In brief, Referendum 48 authorized a public/private partnership between the state and a professional football team (currently, the Seattle Seahawks) to construct a stadium, exhibition center, and parking facilities.  A Public Stadium Authority (PSA) was created to oversee the construction and continuing operation of the facilities.  PSA was empowered to enter into a development agreement and long-term lease with the team affiliate for the construction, operation, and management of these facilities.

Referendum 48 placed a $300 million cap on the amount of public funds that could be expended on the project.  To finance the public share of the project, the issuance and sale of $300 million in state general obligation bonds was authorized.  Although the bonds are general obligation bonds of the state, it was the intent of the Legislature that the debt service on these bonds be derived from designated lottery revenue, sales tax credits, stadium and exhibition center admissions taxes (when facilities are operational), parking taxes (when facilities are operational), hotel/motel taxes (beginning in 2016), and some interest earnings.

Mr. Kerr explained that private contributions from the team affiliate are central to financing the facilities.  The team affiliate deposited $50 million in an escrow account in the custody of the State Treasurer in July 1997.  Another $50 million will be contributed during construction, and the team affiliate will assume the risk of project cost overruns.  In the latter part of November, the team affiliate deposited $10 million into the Youth Athletic Facility Grant Account (YAFGA) as provided in Referendum 48.  YAFGA will also receive an estimated $42.9 million after debt service and some reserve amounts are paid during the life of the financing.

Mr. Kerr then outlined the development of the financing plan.  The proposed plan was structured to provide construction funding for the exhibition hall and parking facilities, planned to be operational by November 1999, and for the stadium, planned to be operational during summer 2002.  Demolition of the Kingdome is anticipated in March 2000.

The development of the financing plan was the product of a four-party working group—representatives of the Office of State Treasurer, the state Office of Financial Management, the Public Stadium Authority, and the team affiliate.  The working group had four goals:  1) to develop a financing plan that limited the public share to $300 million; 2) to develop a financing plan to protect the state General Fund; 3) to develop a financing plan that produced a reasonable funding for youth athletic fields; and 4) to develop a financing plan that maximized the use of tax exempt bonds.  All these goals had been achieved and were reflected in the materials provided to the Committee members in their briefing book for the December 18, 1998, meeting.

Mr. Kerr stressed to the Committee that a tax exempt bond goal would require the state to maintain a rigorous compliance monitoring system to ensure that bond proceeds were expended according to tax regulations.  In addition, yields on investments purchased to fund the PSA’s deferred sales tax payments between 2008 and 2017 will have to be restricted to the bond yield.  Most importantly, the stadium and exhibition center admissions tax and parking tax will have to be monitored to ensure that they, together with facility lease payments, do not exceed 10 percent of the bonds.  This last compliance issue is referred to as the “private payment” test.  Since the admissions and parking taxes are levied by King County, the State Treasurer will develop the necessary arrangements and relationships required to adjust the taxes if trends appear to be breaking through the regulatory thresholds during the life of the stadium bond issues.

Mr. Kerr stated the financing proposal developed by the working group provides for the sale of $196.3 million in bonds for the project in January 2001.  Between now and then, more work will be done on the proposal.  The sensitivity of this larger bond issue to private payment compliance concerns may make it desirable to issue some portion as a tax-exempt variable rate bond which can be converted to a taxable variable or fixed-rate mode during its term as a remedial measure.  This will only be known as the project progresses and more up-to-date recommendations can be made.

Chairman Murphy congratulated the working group for their efforts in these financings and stated he was confident that the first tranche of financings had gone well.  He also cautioned, however, that the financing plans for the second tranche still needed a lot of work before we could be sure that they would be sold as tax-exempt bonds.  Chairman Murphy also noted the historical significance of the stadium financing stating that this public-private partnership was a “first.”

Mr. Kerr presented proposed Resolution No. 881 to the committee.

Resolution No. 881 authorizing the issuance and sale of up to $70,295,000 state of Washington General Obligation Bonds, Series 1999S-1, up to $24,000,000 state of Washington General Obligation Bonds, Series 1999S-2, and up to $7,800,000 state of Washington General Obligation Bonds, Series 1999S-3, for the purpose of financing public stadium and exhibition center construction, authorized by Chapter 220, Laws of 1997, and Chapter 39.42 RCW.

Governor Locke moved adoption of Resolution No. 881.  Lieutenant Governor Owen seconded the motion and the resolution was adopted.

Mr. Allan J. Martin, Lease/Purchase Manager, introduced proposed Resolution No. 882 which authorizes the issuance and sale of up to $9,864,100 state of Washington Certificates of Participation.

Mr. Martin stated that the proposed sale of these COPs is part of the state’s planned capital acquisition of two landmark buildings in Olympia.  Proceeds of the sale will be used for acquisition of Capitol Court, the former Thurston County Courthouse, and will provide for the consolidation of divisions of the Office of the Attorney General.  Renovation of the recently acquired Historic Olympia Federal Building will allow usage by Information Services personnel of the Office of the Secretary of State.

Mr. Martin stated both projects will be purchased by the Department of General Administration (GA), therefore the COPs will be an obligation of GA.  The COPs are scheduled to be sold by competitive bid in early 1999.

Authorization of a COP by the State Finance Committee is pursuant to an internal policy whereby no projects in the over $4 million category will be financed without approval of the State Finance Committee by resolution.

Mr. Martin presented proposed Resolution No. 882 to the committee.

Resolution No. 882 authorizing the issuance and sale of up to $9,864,100 state of Washington Certificates of Participation (Department of General Administration - Olympia Projects) plus financing costs and required reserves pursuant to Sections 53(b) and 53(c), Chapter 235, Laws of 1997, and Chapter 39.94 RCW, as amended.

Lieutenant Governor Owen moved adoption of Resolution No. 882.  Governor Locke seconded the motion and the resolution was adopted.

There being nothing further to come before the committee, the meeting was adjourned at 3:53 PM.

	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