Call to Order and Roll Call
The Capital Projects and Bond Oversight Committee meeting was held on Tuesday, May 20, 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, Julian Carroll, Bob Leeper, and Christian McDaniel; Representatives Robert Damron, Steven Rudy, and Jim Wayne.
Guests Testifying Before the Committee: Ms. Terry Rutledge, Assistant 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. John Covington, Executive Director, Kentucky Infrastructure Authority; Ms. Katie Smith, Executive Director, Office of Financial Services, Kentucky Cabinet for Economic Development; and Mr. Ryan Barrow, Executive Director, Office of Financial Management.
LRC Staff: Josh Nacey, Katherine Halloran, and Angela Offerman.
Approval of Minutes
Senator Carroll moved to approve the minutes of the February 18, 2014, meeting. The motion was seconded by Representative Wayne and approved by voice vote.
Correspondence Items
Mr. Josh Nacey, Committee Staff Administrator, presented two correspondence items. The first item included letters between the committee and the Secretary of the Finance and Administration Cabinet advising that no action had been taken on the projects submitted for April 2014, because of a lack of quorum, and the cabinet’s response that it will proceed with the projects.
The second item was a letter from the Louisville Arena Authority (LAA) to the Kentucky State Fair Board (KSFB) stating the Authority’s intention to not pay the net-negative impact reimbursement.
In response to a question from Senator Leeper, Mr. Nacey said no additional information had been received from LAA or KSFB.
Representative Wayne requested committee staff to further investigate LAA’s statements regarding there being no obligation for LAA to make payment to KSFB for lost revenues and LAA’s ability to state a claim against KSFB.
Chairman Girdler said he is aware of other steps being taken to look into the matter and letters will be prepared to request a more thorough response.
Information Items
Mr. Nacey said there was a press release for members to review from the Finance and Administration Cabinet regarding a recent Request for Information for the Next Generation Kentucky Information Highway project.
Project Reports from the University of Louisville (UofL)
Ms. Terry Rutledge, Assistant Vice President for Business Affairs, UofL, presented two items. The first item was a report of the purchase of unbudgeted scientific equipment. The first purchased item reported was a Next Seq 500 Sequencing Instrument to be used to analyze DNA and RNA sequences from human and mouse samples in a research setting. The cost of the instrument was $252,500 and paid from restricted funds.
The second purchased item reported was two Becton Dickinson Flow Cytometers to be used to separate and collect specific immune cell populations and for multi-color analysis of rare subpopulations of immune cells. The cost of the Cytometers was $700,000 and paid from restricted funds. No action was required.
In response to a question from Senator McDaniel, Ms. Donna Gissen, Assistant Vice President for Health Affairs, UofL, said the lab performs contract work when there is time available on the equipment, and it may be possible to contract with the Kentucky State Police to address the substantial backlog in DNA analysis.
The second item was a lease renewal for the UofL Neuroscience Collaborative Center for 6,780 square feet (sq ft) of clinical facility and office space owned by Jewish Hospital and St. Mary’s Healthcare, Inc., f/k/a JH Properties, Inc. The lease was renewed under the same terms and conditions for an annual rental cost of $120,175 through June 30, 2015.
Representative Rudy made a motion to approve the lease renewal. The motion was seconded by Senator Carroll 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. The first item was a $200,000 request for an increase in the authorized scope for a budgeted capital project, Acquire Campus Security System. The increase was to fund remaining project management and installation costs. The increase will be paid from restricted funds.
Representative Wayne made a motion to approve the increase in authorized scope. The motion was seconded by Senator Carroll and approved by roll call vote.
The second item was a $10,000,000 request for an increase in the authorized scope for a budgeted capital project, Expand/Renovate Commonwealth Stadium and Nutter Training Center. The increase was to accommodate increased construction costs, unexpected infrastructure repairs, and additional program elements including ADA compliance. The increase will be paid from private funds.
Senator Carroll made a motion to approve the increase in authorized scope. The motion was seconded by Senator Leeper and approved by roll call vote.
The third item was a $12,000,000 request for an increase in the authorized scope for a budgeted capital project, Construct Academic Science Building. The increase was to accommodate the change in projects from 5,000 students per incoming class to 6,000 students. Two million dollars of the scope increase will be used for site preparation work. The increase will be paid from restricted funds.
Representative Rudy made a motion to approve the increase in authorized scope. The motion was seconded by Representative Wayne and approved by roll call vote.
Lease Reports from the Finance and Administration Cabinet
Mr. Scott Aubrey, Director of Real Properties, Finance and Administration Cabinet, presented three items. The first item was for a new lease, PR-5300, for the Cabinet for Health and Family Services in Kenton County. The new lease was procured through the competitive bidding process and was awarded to Bill and Deborah Fowler for 54,722 sq ft of office space at $15.45 per sq ft for an annual cost of $848,455. The lease will expire June 30, 2021.
Senator Carroll made a motion to approve the new lease. The motion was seconded by Senator Leeper and approved by roll call vote.
The second item was for a lease modification and amortization of leasehold improvements for the Department of Agriculture Offices of Agriculture Marketing and Product Promotion and State Veterinarian in Franklin County. The leases were modified to allow for the conversion of a storage room in the Hay and Grain Lab (PR-4505) to a network room to support a campus-wide network in the renovated buildings and the modification of new space for the Commissioner of Agriculture (PR-5363).
Two estimates were obtained and the department recommended the acceptance of the lowest bid for each of the modifications: $15,400 from Warnick Construction to be amortized through June 30, 2015 for PR-4505 and $19,140 from Sorg Heating and Cooling and $29,500 from American Drywall for PR-5363 to be amortized through June 30, 2017.
In response to a question from Representative Wayne, Mr. Aubrey said renovations were required for the move of the Commissioner of Agriculture offices. The fit-up costs were capped and a market average rental rate was maintained. No action was required.
The third item was for a lease modification and amortization of leasehold improvements, PR-3590, for the Cabinet for Health and Family Services in Franklin County. The lease was modified to convert open space into two training rooms. Two estimates were obtained and the cabinet recommended the acceptance of the lowest bid of $64,115 from Warnick Construction and will be amortized through June 30, 2017.
Senator Leeper made a motion to approve the lease modification. The motion was seconded by Senator McDaniel and approved by roll call vote.
Project Reports from the Finance and Administration Cabinet
Mr. John Hicks, Deputy State Budget Director, presented a report for a pool project in excess of $600,000 from the Department of Fish and Wildlife Resources, FILO – Sinking Valley project, in Pulaski County. The $1,730,000 project involved the acquisition of 804 acres and was funded from the 2012-2014 Fees-in-Lieu of Stream Mitigation Pool.
In response to a question from Senator McDaniel, Mr. Hicks said the account balance would be provided to committee staff. No action was required.
Kentucky Infrastructure Authority (KIA) Loans
Mr. John Covington, Executive Director, KIA, presented six new loans and five grant requests. The first request was for a Fund A loan for the City of Vanceburg in Lewis County. The request was for a $665,000 loan for the Wastewater Treatment Plant Rehabilitation project. The project involves the replacement of various components, a new sludge drying bed, and the repair or replacement of 660 linear feet of twelve-inch sewer lines. The loan will have a 20-year term, an interest rate of 0.75 percent, and a debt service payment of $18,599.
Senator McDaniel made a motion to approve the Fund A loan. The motion was seconded by Senator Carroll and approved by roll call vote.
The second request was for a Fund B loan for the City of Lebanon Junction in Bullitt County. The request was for a $200,000 loan for the Truck Stop Lift Station Replacement project. The project involves the installation of a new lift station. The loan will have a 20-year term, an interest rate of 1.75 percent, and a debt service payment of $12,295.
Senator Carroll made a motion to approve the Fund B loan. The motion was seconded by Senator McDaniel and approved by roll call vote.
The third request was for a Fund B loan for the City of Grand Rivers in Livingston County. The request was for a $263,000 loan for the Lake City Waterline Replacement project. The project involves the replacement of 5,220 linear feet of old waterlines and valves to reduce water loss and improve water quality. The loan will have a 20-year term, an interest rate of 0.75 percent, and a debt service payment of $14,711.
Senator McDaniel made a motion to approve the Fund B loan. The motion was seconded by Senator Carroll and approved by roll call vote.
The fourth request was for a Fund B loan for the City of London for benefit of the London Utility Commission in Laurel County. The request was for a $1,100,300 loan for the Sampson Branch Storm Water project. The project involves the replacement of a failed 48-inch corrugated vinyl storm water line with a 60-inch diameter reinforced concrete line. The loan will have a 20-year term, an interest rate of 0.75 percent, and a debt service payment of $61,548.
In response to questions from Senator McDaniel, Mr. Covington said representatives from the City of London were present at the KIA Board meeting to discuss the loan request and it was unknown why the Court ruled the City of London was responsible for correcting the failed line and assuming liability the project. Mr. Covington said residents affected by flooding sued the City, and the City of London felt it had no recourse in the matter.
In response to concerns and questions from committee members, committee staff will contact the City of London to request representatives from the City of London appear before the committee.
Senator Carroll made a motion to approve the Fund B Loan on the condition the representatives appear before the committee to address members questions and concerns. The motion was seconded by Representative Damron and approved by roll call vote with two “no” votes.
The fifth request was for a Fund B loan for the City of Hickman in Fulton County. The request was for a $55,000 loan for the Water Filter Tank Rehabilitation project. The project involves the rehabilitation of two holding tanks and related pipes and fixtures. The loan will have a 10-year term, an interest rate of 0.75 percent, and a debt service payment of $5,829.
Senator McDaniel made a motion to approve the Fund B Loan. The motion was seconded by Representative Rudy and approved by roll call vote.
The sixth request was for a Fund F loan for the City of Midway in Woodford County. The request was for a $215,000 loan for the Higgins Street Waterline Replacement project. The project involves the replacement of 2,100 linear feet of four- and six-inch aging cast iron water lines with PVC lines. The loan will have a 20-year term, an interest rate of 2.75 percent, and a debt service payment of $14,585.
Senator Leeper made a motion to approve the Fund F Loan. The motion was seconded by Representative Rudy and approved by roll call vote.
Mr. Covington reported five Infrastructure for Economic Development Grants. These grants were for Greenup County Fiscal Court (Coal) in Greenup County for the Water and Sewer Improvements project; City of Covington (Non-Coal) in Kenton County for the Covington Flood Protection Storm Center project; City of Covington (Non-Coal) in Kenton County for the Pointe Benton Storm Water Sewer Improvement Project; City of Owenton (Non-Coal) in Owen County for the Owen County unserved areas; and City of Owenton (Non-Coal) in Owen County for the Construction of Main from New Kentucky American Water Treatment Plant to City of Owen project. No action was required.
Reports from the Office of Financial Management (OFM)
Ms. Katie Smith, Executive Director, Office of Financial Services, Kentucky Cabinet for Economic Development, presented one Economic Development Bond project. The $300,000 grant was made to McCracken County Fiscal Court for the benefit of SRS Industries LLC dba Whitehall Industries to establish a new facility in Paducah to produce aluminum extrusions and machine fabricated components for the automotive industry. The company agreed to create 140 new full-time jobs for Kentucky residents with an average hourly wage of $19.50, including benefits, within three years of the date of KEDFA approval and to maintain those jobs for three additional years.
Representative Damron made a motion to approve the grant. The motion was seconded by Representative Rudy and passed by roll call vote.
Mr. Ryan Barrow, Executive Director, OFM, presented one new bond issue for the Turnpike Authority of Kentucky (TAK) Economic Development Road Revenue Refunding Bonds (Revitalization Projects), 2014 Series A. Proceeds from the issue will finance the advance refunding of up to $132,410,000 of TAK’s Economic Development Road Revenue Bonds (Revitalization Projects), 2005 Series B, for economic savings and associated costs of issuance. The bond issue will not exceed $150,000,000 with a proposed date of sale on June 11, 2014. It will be a negotiated sale with Peck, Shaffer and Williams LLP serving as bond counsel; Stites & Harbison, underwriter’s counsel; Office of Financial Management, financial advisor; and Bank of New Your Mellon, trustee. No action was required.
New School Bond Issues with School Facilities Construction Commission (SFCC) Debt Service Participation
Mr. Barrow reported eight school bond issues with SFCC debt service participation with a total par amount of $101,395,000. The state portion of the annual debt service payment was $1,352,352 and the local contribution was $6,451,597. The bond issues did not involve tax increases.
Senator Leeper made a motion to approve the school bonds. The motion was seconded by Representative Rudy and approved by roll call vote.
New School Bond Issues with 100 Percent Locally Funded Debt Service Participation
Mr. Nacey said eight local bond issues have been reported to the committee. The bond issues are 100 percent locally funded and do not involve tax increases. No action was required.
With there being no further business, the meeting adjourned at 2:02 p.m.