Call to Order and Roll Call
The Capital Projects and Bond Oversight Committee meeting was held on Tuesday, February 18, 2014, 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 Chris Girdler, Bob Leeper, and Christian McDaniel; Representatives Steven Rudy and Jim Wayne.
Guests Testifying Before the Committee: Mr. Mitchell Payne, Interim Vice President for Business Affairs, University of Louisville (UofL); Ms. Donna Gissen, Assistant Vice President for Health Affairs, UofL; Mr. Bob Wiseman, Vice President for Facilities Management, University of Kentucky; Mr. Scott Aubrey, Director of Real Properties, Finance and Administration Cabinet; Mr. John Hicks, Deputy State Budget Director; Mr. Jon Wilcoxson, Director of Division of Maintenance, Transportation Cabinet; Mr. John Covington, Executive Director, Kentucky Infrastructure Authority; Mr. Ryan Barrow, Executive Director, Office of Financial Management; and Mr. David Talley, Deputy Executive Director, Budget and Fiscal Management, Transportation Cabinet.
LRC Staff: Josh Nacey, Katherine Halloran, and Angela Offerman.
Approval of Minutes
Senator Leeper moved to approve the minutes of the December 17, 2014, meeting. The motion was seconded by Representative Rudy and approved by voice vote.
Correspondence Items
Josh Nacey, Committee Staff Administrator, presented two correspondence items. The first item included letters from the committee to the Secretary of the Finance and Administration Cabinet and the Vice President for Administration and Finance of Northern Kentucky University (NKU) advising them that no action had been taken on the projects submitted for January 2014, because the meeting was cancelled.
The second item included letters from the Finance and Administration Cabinet and NKU advising the committee that it would proceed with the projects as permitted in statute.
Information Items
Mr. Nacey said there were three information items for members to review. The first item was proposed legislation related to the jurisdiction of the committee.
The second item was a notice of advertisement for leased space for the Cabinet for Health and Family Services in Warren County. The third item included quarterly status reports on capital projects provided by the Administrative Office of the Courts; the Commonwealth Office of Technology; Finance and Administration Cabinet; and the universities that manage their own capital construction programs.
Project Report from the University of Louisville (UofL)
Mr. Mitchell Payne, Interim Vice President for Business Affairs, UofL, requested an unbudgeted capital project to renovate 2,000 square feet (sq. ft.) of existing research space in the Delia Baxter Building at the Health Science Center to construct a certified clean-room facility to support cardiac research activities. The project scope was $2,500,000, which will be supported by philanthropic funds from a private foundation.
Senator McDaniel made a motion to approve the unbudgeted capital project. The motion was seconded by Representative Rudy and approved by roll call vote.
Project Reports from the University of Kentucky (UK)
Mr. Bob Wiseman, Vice President for Facilities Management, UK, presented three items. First, UK requested an unbudgeted capital project to construct the new Football Training Facilities and Practice Field for the university’s football program. The project will include a new two-story structure and two practice fields with an adjoining drill area. The project had a $45,000,000 scope, which will be paid from private funds and will be in addition to the $110,000,000 stadium improvement project.
Senator McDaniel made a motion to approve the unbudgeted capital project. The motion was seconded by Senator Leeper and approved by roll call vote.
The second item was a request for an increase in the authorized scope of the Construct/Replace/Upgrade Student Housing Phase II project from $277,000,000 to $362,000,000, which will come from private funds.
Representative Rudy made a motion to approve the unbudgeted capital project. The motion was seconded by Senator Leeper and approved by roll call vote.
The third item was an update reporting a project scope increase to a new total of $613,100,000 to accommodate the fit-up of the Clinical Decision Unit of the Patient Care Facility project. The increase in scope was within the existing authorization. No action was required.
Lease Reports from the Finance and Administration Cabinet
Mr. Scott Aubrey, Director, Division of Real Properties, Finance and Administration Cabinet, presented two items. The first item was for a lease renewal for the Unified Prosecutorial System, Louisville Jefferson Metro Government, under the same terms and conditions, for a total annual rent cost of $313,838 through June 30, 2016.
Senator Leeper made a motion to approve the lease renewal. The motion was seconded by Representative Wayne and approved by roll call vote.
The second item was for a lease modification and amortization of leasehold improvements for the Department of Agriculture in Franklin County. The department requested the modification to allow for four extension periods and to provide renovations to convert 600 sq. ft. of office space and 4,846 sq. ft. of unfinished warehouse space to office use. The renovations are necessary to accommodate offices that were located at the Fair Oaks complex.
Two estimates were obtained for the improvements and the department recommended accepting the lowest bid of $241,478 from Warnick Construction. The cost will be amortized through the term of the lease, which will expire June 30, 2019.
Senator McDaniel made a motion to approve the lease modification. The motion was seconded by Representative Wayne and approved by roll call vote.
Project Reports from the Finance and Administration Cabinet
Mr. John Hicks, Deputy State Budget Director, presented two requests for scope increases in federal funds for the Transportation Cabinet. The capital projects were authorized in 2012 Extraordinary Session House Bill 2.
The first request was for a Laser Crack Measurement System. The project scope included $480,000 in federal funds and $120,000 in Road Funds for a total project scope of $600,000. The Transportation Cabinet received an increase of $120,000 in federal funds from the Federal Highway Administration. The increase in federal funds will allow the $120,000 appropriation from the Road Fund be transferred back to the fund.
Senator Leeper made a motion to approve the Laser Crack Measurement System capital project. The motion was seconded by Representative Rudy and approved by roll call vote.
The second request was for a Video-Logging Roadway Feature System. The project scope included $480,000 in federal funds and $120,000 in Road Funds for a total project scope of $600,000. The Transportation Cabinet received an increase of $120,000 in federal funds from the Federal Highway Administration. The increase in federal funds will allow the $120,000 appropriation from the Road Fund be transferred back to the fund.
In response to questions from Chairman Girdler, Mr. Jon Wilcoxson, Director of Division of Maintenance, Transportation Cabinet, said the Video-Logging Roadway Feature System was a large commercial van and the Laser Crack Measurement System was a component of the van. The Laser Crack Measurement System will be used to capture roadway images and gather pavement-related data for condition assessments. The current fleet consists of three vehicles.
Senator McDaniel made a motion to approve the Video-Logging Roadway Feature System capital project. The motion was seconded by Representative Rudy and approved by roll call vote.
Kentucky Infrastructure Authority (KIA) Loans
Mr. John Covington, Executive Director, KIA, presented a Fund A loan increase for the Sanitation District No. 1 of Perry County. The request was for an $800,000 increase to the previously approved $875,000 Chavies Wastewater Treatment Plant project. The new Fund A loan amount was $1,675,000. Mr. Covington said the loan will have a 20-year term, an interest rate of one percent, and an estimated annual debt service payment of $86,366.
Representative Wayne made a motion to approve the Fund A Loan increase. The motion was seconded by Senator McDaniel and approved by roll call vote.
Reports from the Office of Financial Management (OFM)
Mr. Ryan Barrow, Executive Director, OFM, presented one status update and two new bond issues. The first report was a status update on the financing plan for the Louisville-Southern Indiana Ohio River Bridges Project (LSIORB).
The Kentucky Public Transportation Infrastructure Authority (KPTIA) First Tier Toll Revenue Bonds, Series 2013, (Downtown Crossing Segment) and the Subordinate Toll Revenue Bonds Anticipation Notes (BANs), Series 2013, (Downtown Crossing Segment) will fund the remaining costs to complete the Downtown Crossing segment of the LSIORB project. The Downtown Crossing Project includes reconstructing the Kennedy Interchange in downtown Louisville at the convergence of I-64, I-65, and I-71; constructing a new bridge over the Ohio River adjacent to and east of the existing I-65 Kennedy Bridge; and reconfiguring I-65 and associated ramps north of the new Downtown Bridge.
The KPTIA First Tier Toll Revenue Bonds, Series 2013 A, B, & C, transaction closed on December 20, 2013 with a final maturity of July 1, 2053. The par amount is estimated at $275,670,369 and a true interest cost of 6.291 percent. It was a negotiated transaction with Citigroup Global Markets Inc.
The Subordinate Toll Revenue BANs, Series 2013 A & B, transaction closed on December 20, 2013 with a final maturity of July 1, 2017. The par amount is estimated at $452,200,000 and a true interest cost of 2.301 percent. It was a negotiated transaction with Citigroup Global Markets Inc.
In response to questions from Representative Wayne, Mr. Barrow said the bonds were rated investment grade, which is in the category for a start-up non-recourse toll facility. Rating agencies perform annual reviews on all credits brought before the committee.
Mr. David Talley, Deputy Executive Director, Budget and Fiscal Management, Transportation Cabinet, said information, including recommendations, were received from environmental justice populations in the project area.
Based on the information collected, potential environmental justice mitigation measures, including recommendations, were made to the Federal Highway Administration. The results of the process will be consolidated into an environmental justice mitigation plan, which will become a part of an overall toll policy that will be adopted by the tolling body and joint board overseeing the project.
The second item presented was a new bond issue for Kentucky Asset/Liability Commission (ALCo) Project Notes, 2014 Federal Highway Trust Fund Grant Anticipation Revenue Vehicles (GARVEEs) First Series A and 2014 Federal Highway Trust Fund First Refunding Series B.
The bond issues will provide permanent financing for approximately $150,000,000 of the $330,000,000 authorized, but unissued bonds authorized by 2010 Extraordinary Session House Bill 3. The purpose of the bond issues are to finance expenditures for the US-68/KY-80 Lake Barkley and Kentucky Lake Bridges Project, to advance refunding of outstanding 2005 Federal Highway Trust Fund Project Notes, and to pay for costs of issuance.
The proposed date of sale is March 5, 2014, with a closing
of March 19, 2014.
The estimated par amount of the Series A bond issue is $131,530,000 and
$39,860,000 for Series B. The true interest cost is estimated to be 3.31
percent and an average annual debt service of $20,152,572. The present value
savings for Series B is 5.1 percent.
It will be a negotiated transaction with Goldman Sachs; Kutak Rock LLP, bond counsel; Peck, Shaffer & Williams LLP, underwriter’s counsel; The Bank of New York Mellon, trustee; and OFM, financial advisor.
Representative Rudy made a motion to approve the new bond issues. The motion was seconded by Senator Leeper and approved by roll call vote.
The second bond issue presented was University of Kentucky General Receipts Bonds, 2014 Series A, B, & C. Series A will finance a portion of the authorization of the Expansion and Renovation of Commonwealth Stadium and Nutter Training Center, finance the authorization of the Construction of the Academic Science Building, and pay associated costs of issuance. Both projects were authorized in 2013 Regular Session House Bill 7.
The estimated par amount of the bonds is $195,415,000 and they were approved by the university’s Board of Trustees on December 17, 2014. The proposed date of sale will be March 4, 2014, with a closing of March 18, 2014. The expected ratings are Moody’s Aa2 and S&P AA-. The estimated true interest cost is 4.77 percent, with a 30-year term, and the total estimated debt service is $12,637,648. This will be a competitive transaction and Peck, Shaffer and Williams will serve as bond counsel; Hilliard Lyons as financial advisor; and US Bank as trustee.
Bond proceeds from Series B will be used to finance the authorization of the Expansion of the Gatton College of Business and Economics project, authorized in 2013 Regular Session House Bill 7, and to pay associated costs of issuance.
The par amount of the bonds is $38,350,000 and they were approved by the university’s Board of Trustees on December 17, 2014. The proposed date of sale will be March 4, 2014, with a closing on March 18, 2014. The expected ratings are Moody’s Aa2 and S&P AA-. The estimate true interest cost is 4.45 percent, with a 20-year term, and the total estimated debt service is $3,094,596. This will be a competitive transaction and Peck, Shaffer and Williams will serve as bond counsel; Hilliard Lyons as financial advisor; and US Bank as trustee.
Bond proceeds from taxable Series C will be used to finance the remaining private use component of the authorization of the Expansion and Renovation of Commonwealth Stadium, authorized in 2013 Regular Session House Bill 7, and to pay associated costs of issuance.
The par amount of the bonds is $10,125,000. They were approved by the university’s Board of Trustees on December 17, 2013. The proposed date of sale will be March 4, 2014, with a closing on March 18, 2014. The expected ratings are Moody’s Aa2 and S&P AA-. The estimate true interest cost is 2.24 percent, with a 6-year term, and the total estimated debt service is $1,806,072. This will be a competitive transaction and Peck, Shaffer and Williams will serve as bond counsel; Hilliard Lyons as financial advisor; and US Bank as trustee.
Senator McDaniel made a motion to approve the new bond issues. The motion was seconded by Representative Wayne and approved by roll call vote.
New School Bond Issues with School Facilities Construction Commission (SFCC) Debt Service Participation
Mr. Barrow reported one school bond issue with SFCC debt service participation with a total par amount of $480,000. The state portion of the annual debt service payment was $35,050. The bond issues did not involve tax increases.
Senator Leeper made a motion to approve the new bond issue. The motion was seconded by Representative Wayne and approved by roll call vote.
With there being no further business, the meeting adjourned at 1:56 p.m.