Call to Order and Roll Call
The 4th meeting of the Capital Planning Advisory Board was held on Tuesday, September 15, 2015, at 9:00 AM, in Room 171 of the Capitol Annex. Senator Stan Humphries, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Stan Humphries, Co-Chair, Representative Terry Mills, Co-Chair, Senator Whitney Westerfield, Representative Tom Riner, Charles Byers, Jane Driskell, Laurie Dudgeon, Carole Henderson, John Hicks, Sherron Jackson, James Link, and Katie Shepherd.
Guests: Steve Byers, Assistant Vice President for Government Relations, and Elizabeth Baker, Planning Director, University of Kentucky; John Steffen, Executive Director, and Tom Messinger, Systems Engineer, Kentucky Registry of Election Finance; and Laurie Dudgeon, Director, Administrative Office of the Courts.
LRC Staff: Shawn Bowen, Katherine Halloran, and Jennifer Luttrell.
Senator Humphries and Representative Mills requested that the board observe a moment of silence in honor of fallen Kentucky State Trooper Joseph Ponder. Trooper Ponder was shot and killed following a traffic stop on Interstate 24 in southwestern Kentucky on September 13.
Approval of Minutes
Senator Humphries said the minutes of the August 19, 2015 meeting were not ready for approval and would be held over until the October meeting.
Information Items
At the Capital Planning Advisory Board’s August 19 meeting, the University of Kentucky (UK) presented its capital plan for the 2016-2022 planning period. The university was asked to provide a list of the projects and allocations for the Facilities Renewal and Modernization project. Steve Byers, Assistant Vice President for Government Relations, provided additional information and further discussed the need for the project. A list of the projects and the allocations was not provided.
Senator Humphries and Representative Mills stated that before the board could support the project, the university would have to provide a list of the projects, and the allocations planned for this pool of funds. Representative Mills further stated that if the board were to recommend a project of this magnitude without additional information it may send a message to the other universities that sufficient details regarding project pools would not be needed. He encouraged the university to provide additional information that addressed the planned projects and the allocations.
Staff Report on Kentucky’s Bonded Indebtedness
Katherine Halloran, Legislative Analyst, Capital Projects and Bond Oversight Committee, discussed an in-depth analysis of the historic, current, and projected debt position of the Commonwealth, and addressed factors that influence the cost of issuing debt.
Mr. Hicks complimented Ms. Halloran on the report, and commented on the Budget Reserve Trust Fund. The fund provides added protection to help ensure that a state is able to meet its obligations. Contributions to the fund may be made through direct appropriation, from surplus revenue receipts in the General Fund, and from certain unexpended appropriations. Mr. Hicks noted that when the Commonwealth was not having a difficult fiscal year, deposits were made to the Budget Reserve Trust Fund.
Consideration of Agency Plans
The Capital Planning Advisory Board received testimony regarding state agency capital plans for the Kentucky Registry of Election Finance (KREF) and the Kentucky Court of Justice. The testimony included discussion of capital construction and information technology needs for the period 2016-2022.
Kentucky Registry of Election Finance
John Steffen, Executive Director, and Tom Messinger, Systems Engineer, presented the capital needs for KREF. The agency’s capital plan contained one capital information technology project request for a new operating system ($1,836,000 GF) to replace the current electronic filing system and online database.
In response to a question from Mr. Hicks regarding software for the new operating system, Mr. Steffen said software will be purchased off the shelf and the Commonwealth Office of Technology will write a portion of the new program.
Representative Mills noted that the project will cost about $139,000 annually to maintain, and asked if additional operating funds will be needed. Mr. Steffen said additional funds would not be requested, the operating costs would be included in the agency’s current budget.
In response to a question from Senator Humphries, Mr. Steffen said a modernized system would enable KREF staff to change their focus from being data entry keyers of campaign finance information to reviewers of it. No employees will be displaced by the new system.
Kentucky Court of Justice
Laurie Dudgeon, Director, Administrative Office of the Courts (AOC), presented the capital needs for the Kentucky Court of Justice. The agency’s capital plan contained requests for two new court facility projects in the first biennium ($10,415,000 and $10,740,000). Ms. Dudgeon said the names of the counties have not been released since the Memorandums of Understanding have not been executed and the details of the projects have not been finalized.
The Court of Justice’ capital plan also included the Kentucky Human Resources Information System (KHRIS) project ($600,000 GF), and two court facility repair projects for Mason county ($830,000 long-term bonds) and Simpson county ($2,298,000 long-term bonds).
In response to questions from Representative Mills, Ms. Dudgeon said the new courthouses/judicial centers are designed to last 100 years. The Mason County Judicial Center, completed in 2000, is experiencing roof leaks along with moisture penetration around the foundation of the entire building. The front facade is crumbling and the columns are rotten due to the moisture penetration. On the interior of the building, most ceiling tiles are water stained, drywall buckled and the ballistic glazing on every window on the back of the Judicial Center has failed. The Simpson County Judicial Center, completed in 2004, is experiencing roof leak issues and water infiltration. It has been determined that a combination of issues (materials used and poor design) have contributed to the leaks and the failure of fiber reinforced plastic, caulking, and flashing used as materials for the roof and gutter system. Ms. Dudgeon said the agency is discussing the issues with the contractors and architects of these projects. Insurance would be available for the roof repair projects only if there are problems with the materials.
In response to a question from Representative Mills, Ms. Dudgeon said that the Court of Justice will utilize the KHRIS system to handle payroll for 403 elected officials and about 3,500 employees.
Senator Humphries asked how the construction of new court facilities is managed for smaller counties that have historic courthouses. Ms. Dudgeon said the new Administrative Procedures of the Court of Justice would allow the architect to do a feasibility study and determine if the facility could be renovated, rather than building a new facility.
In response to a question from Senator Humphries, Ms. Dudgeon said maintenance, janitorial, and lease payments to the county are based upon the square footage occupied. In recent years, AOC has worked to standardize these payments to the counties.
In response to another question from Senator Humphries, Ms. Dudgeon said the bonds issued to fund court facility construction projects are 20-year bonds. Ms. Henderson added that prior to 2000, some of the bonds issued for court facility projects were 30-year bonds.
Statewide Plan Policy and Project Recommendations
Senator Humphries said it is the practice of the board to include both policy and project recommendations in the statewide capital plan. Relative to the recommendation to support the COT Enterprise Document Management project, Mr. Hicks suggested that the recommendation be revised to support the enterprise-wide approach COT has undertaken to meet the information technology needs of executive branch agencies. A motion to approve the revised recommendation was made by Mr. Hicks, seconded by Representative Mills, and approved by roll call vote.
Relative to the recommendation that the board support legislation to increase capital project and lease thresholds in next legislative session, Mr. Jackson said the research information provided by staff indicated that an increase to the capital project and lease thresholds was not warranted at this time. He said the regular review of capital project and lease thresholds should be done on a regular basis. Agencies, including postsecondary education agencies, should have the opportunity to implement capital projects in a reasonable manner. Mr. Hicks agreed that capital project thresholds should be reviewed again in the future. He noted that only six states have higher capital project thresholds than Kentucky. The recommendation was withdrawn, and no further action was required.
Relative to the recommendation to endorse of the Council on Postsecondary’s multi-biennia approach for financing capital needs of the postsecondary institutions, a motion to approve the recommendation was made by Mr. Jackson, seconded by Mr. Hicks, and approved by roll call vote. Representative Mills explained his vote of yes. He said he agreed with recommendation, and suggested that universities, when submitting request for pool projects, provide details of the potential projects.
Relative to the recommendation that the Governor and the General Assembly place a high priority on fully funding the Budget Reserve Trust Fund at a level that represents five percent of General Fund revenues, a motion was made by Mr. Hicks, seconded by Ms. Driskell, and approved by roll call vote.
Relative to the recommendation that adequate funding be appropriated for state agency miscellaneous maintenance pools, a motion was made by Mr. Hicks, seconded by Mr. Jackson, and approved by roll call vote.
As part of the capital planning process, board members recommend individual projects they think should be funded by the General Assembly in the upcoming biennial budget. Senator Humphries said three spreadsheets, containing projects in the categories of new construction, construction to protect investment in plant (maintenance and renovation), and information technology, will be e-mailed to members after the meeting. Members are to identify up to 15 projects in each category, and return to the board’s staff no later than September 29.
Adjournment
The next meeting is scheduled for Tuesday, October 20, 2015, in Room 171 Capitol Annex at 10:00 AM. There being no further business, the meeting adjourned at 10:32 AM.