Call to Order and Roll Call
The Capital Projects and Bond Oversight Committee meeting was held on Tuesday, December 17, 2013, at 1:00 p.m., in Room 169 of the Capitol Annex. Senator Chris Girdler, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senators Julian Carroll, Chris Girdler, Bob Leeper, and Christian McDaniel; Representatives Robert Damron, Steven Rudy, and Kevin Sinnette.
Guests Testifying Before the Committee: Mr. Mitchell Payne, Interim Vice President for Business Affairs, University of Louisville; Ms. Donna Gissen, Assistant Vice President for Health Affairs, University of Louisville; Mr. John Hicks, Deputy State Budget Director; Mr. John Covington, Executive Director, Kentucky Infrastructure Authority; and Mr. Ryan Barrow, Executive Director, Office of Financial Management.
LRC Staff: Josh Nacey, Katherine Halloran, and Angela Offerman.
Approval of Minutes
Representative Rudy moved to approve the minutes of the November 19, 2013, meeting. The motion was seconded by Senator Leeper and approved by voice vote.
Information Items
Mr. Nacey presented two information items for review. The first item was correspondence from the Kentucky Infrastructure Authority (KIA) in response to the committee’s request for additional information regarding KIA’s authority to adjust loan amounts up to ten percent without a vote by the KIA board of directors.
The second item was the Capital Projects and Bond Oversight Committee activity report to the 2014 General Assembly.
Project Report from the University of Louisville (UofL)
Mr. Mitchell Payne, Interim Vice President for Business Affairs, UofL, presented a new lease for office space with Nucleus Real Properties, Inc. The space was used for a new research institute for the study of optimal aging and in close proximity to health science center offices for the university. The annual rental cost was $129,533.
In response to a question from Senator Leeper, Ms. Donna Gissen, Assistant Vice President for Health Affairs, UofL, said she would provide contact information for the Institute for Optimal Aging to Senator Leeper.
Senator Carroll made a motion to approve the new lease. The motion was seconded by Senator Leeper and approved by roll call vote.
Project Reports from the Finance and Administration Cabinet
Mr. John Hicks, Deputy State Budget Director, presented four items. The first item was for an unbudgeted capital information technology project request from the Office of Employment and Training for the approval of the Unemployment Insurance State Identified Prevention Strategy Upgrade project, which allows the detection of claimants who are earning unreported wages more quickly and the automation of investigation processes. The project appropriation was $990,000 and was 100 percent federally funded.
Senator Carroll made a motion to approve the capital project. The motion was seconded by Senator Leeper and approved by roll call vote.
The second item presented was a request for an unbudgeted capital information technology project from the Office of Employment and Training, for the approval of the Unemployment Insurance Systems Improvements project. The project appropriation was $750,000 and was 100 percent federally funded.
Senator Carroll made a motion to approve the capital project. The motion was seconded by Representative Rudy and approved by roll call vote.
The third item presented was a request from the Kentucky Department of Veterans’ Affairs (KDVA) for a $43,900 (6.6 percent) scope increase for the HVAC Humidity project at the Eastern Kentucky Veterans’ Center. The scope increase was needed because the makeup air units required service platforms to safely facilitate future maintenance and repairs and will be funded from KDVA restricted funds.
Senator Carroll made a motion to approve the scope increase. The motion was seconded by Representative Damron and approved by roll call vote.
The fourth item presented was an emergency repair, maintenance, or replacement project from the Kentucky State Fair Board for the Kentucky Fair and Exposition Center – Hail Damage project. On April 28, 2012, the Kentucky Fair and Exposition Center experienced severe damage as a result of a hailstorm. The intensity of the hail resulted in facility-wide HVAC equipment damage and extensive damage to rooftop mechanical unit coils, sides of buildings, lighting, metal fascia, and signage. The $2,360,000 project will be funded from insurance proceeds through the Fire and Tornado Fund. No action was required.
Kentucky Infrastructure Authority (KIA) Loans
Mr. John Covington, Executive Director, KIA, presented one loan assumption and two new loan requests. The first request was for a Fund F loan assumption for the Adair County Water District, doing business as Columbia/Adair Utilities District, to assume $5,382,822 in outstanding Fund F loan debt in anticipation of the merger of the commission’s assets into the district. The assumption involved two separate Fund F loans, F06-01 ($3,688,822) and F10-02 ($1,694,000). No action was required.
The second request was for a Fund F loan for the City of Carrollton, for the benefit of Carrollton Utilities (CU) in Carroll County, for a $963,931 loan for the Infrastructure Updates project. The project will focus on preventive measures and the replacement of obsolete equipment for CU and the Henry County, Carroll County, and West Carroll Water Districts. The loan will have a 30-year term, an interest rate of 0.75 percent, and a debt service payment of $19,175.
In response to questions from Senator McDaniel, Mr. Covington said the project qualified for an additional subsidization (principle forgiveness) of $481,966. As a hardship community, the median household income for the city was lower than the median household income for the state and qualified for the additional subsidization.
Senator Carroll made a motion to approve the new loan. The motion was seconded by Senator McDaniel and approved by roll call vote.
The third request was for a Fund F loan for Northern Kentucky Water District in Kenton County. The request was for a $4,000,000 loan for the Campbell County Water Main Rehabilitation and Treatment Plant project, which will replace approximately 12,000 linear feet of six- to eight-inch lines with eight- to twelve-inch lines and approximately 5,700 linear feet of 24-inch water main with a 36-inch line for the Memorial Parkway Treatment Plant. The project also involves the replacement of the existing process equipment and the repair of concrete basins at the Fort Thomas Treatment Plant. The loan will have a 20-year term, an interest rate of 1.75 percent, and a debt service payment of $247,902.
In response to a question from Representative Damron, Mr. Covington said the balance of the fund was committed to projects on the priority list. Representative Damron said Fund F loans should be reserved for entities that are less able to borrow in the open market.
In response to a question from Senator McDaniel, Mr. Covington said the rates are established annually. The 2.75 percent rate was for communities that do not qualify for additional subsidization; the 1.75 percent rate was for communities that the median household income range is below the statewide median, regional projects, or communities facing a consent decree or enforcement action; and the 0.75 percent rate was for hardship communities where the median household income is below a benchmark level.
Senator Leeper made a motion to approve the new loan. The motion was seconded by Senator Carroll and approved by roll call vote.
Reports from the Office of Financial Management (OFM)
Mr. Ryan Barrow, Executive Director, OFM, presented two follow-up reports on previously approved bond issues. The first report was on the Kentucky Economic Development Finance Authority (KEDFA) Revenue Bonds (Catholic Health Initiatives), Series 2013A, which refinanced certain outstanding taxable commercial paper that was used for interim financing. The par amount of the bonds was $78,535,000 with a 32-year term. It was a negotiated transaction and a general obligation of Catholic Health Initiatives. No action was required.
The second report was on the Kentucky Higher Education Student Loan Corporation Student Loan Asset-Backed Notes, Series 2013-2, which was issued to payoff obligations that originated under the Federal Family Education Loan Program (FFEL), to acquire other student loans during the acquisition period, and to pay costs of issuance. The par amount of the bonds was $384,000,000 with an interest cost of one-month LIBOR plus 1.60 percent. No action was required.
New School Bond Issues with School Facilities Construction Commission (SFCC) Debt Service Participation
Mr. Barrow reported four school bond issues with SFCC debt service participation with a total par amount of $4,618,000. The state portion of the annual debt service payment was $203,825 and the local contribution was $97,218. The bond issues did not involve tax increases.
Representative Rudy made a motion to approve the bond issues. The motion was seconded by Senator Carroll and approved by roll call vote.
With there being no further business, the meeting adjourned at 1:29 p.m.