Call to Order and Roll Call
The Capital Projects and Bond Oversight Committee was held on Tuesday, October 21, 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. Cori Bibelhauser, Contract Administrator, University of Louisville (UofL); Ms. Donna Gissen, Assistant Vice President for Health Affairs, UofL; Ms. Elizabeth Baker, Director of Planning, 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; 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 September 16, 2014, meeting. The motion was seconded by Senator Leeper and approved by voice vote.
Information Items
Mr. Josh Nacey, Committee Staff Administrator, presented four information items. The first item was a notice of advertisement for leased space from the Finance and Administration Cabinet for the Cabinet for Health and Family Services in Clay County.
The second item was a report of Moody’s downgrade of the University of Louisville’s debt.
The third item was the Semi-Annual Report of the Kentucky Asset/Liability Commission.
The fourth item presented were quarterly reports on major capital projects from the Administrative Office of the Courts, Commonwealth Office of Technology, Finance and Administration Cabinet, Murray State University, Northern Kentucky University, University of Kentucky, University of Louisville, and Western Kentucky University.
Project Report from the University of Louisville (UofL)
Ms. Cori Bibelhauser, Contract Administrator, UofL, presented a lease modification for the Department of Medicine, Health Sciences Center, with MedCenter One, LLC increasing the space by 9,189 square feet (sq ft). The modified lease was for 53,867 sq ft at $12.65 per sq ft and $6 per sq ft for common area maintenance for an annual cost of $1,004,620. The lease will expire June 30, 2016.
In response to a question from Representative Wayne, Ms. Donna Gissen, Assistant Vice President for Health Affairs, UofL, said the university received new research grant funding. The grant will be used to hire new research staff, which requires additional space.
Representative Wayne made a motion to approve the lease modification. The motion was seconded by Representative Damron and approved by roll call vote.
Project Reports from the University of Kentucky (UK)
Ms. Elizabeth Baker, Director of Planning, UK, reported the purchase of two items of unbudgeted medical equipment. The first item purchased was a CT Scanner for the UK Healthcare Emergency Department, which will improve imaging and decrease radiation and scan time. The cost of the scanner was $1,017,200 and paid from restricted funds. No action was required.
The second item purchased was storage hardware to be used by the A.B. Chandler Hospital for the encryption of patient data. The cost of the hardware was $974,800 and paid from restricted funds. No action was required.
Lease Report from the Finance and Administration Cabinet
Mr. Scott Aubrey, Director of Real Properties, Finance and Administration Cabinet, presented a new lease for the Cabinet for Health and Family Services, Department for Community Based Services, in Henderson County to accommodate additional needed space. No feasible proposals were submitted for combining the current space leased. The new lease was for 7,530 sq ft at $15.45 per sq ft for an annual total of $116,339.
Senator Carroll made a motion to approve the new lease. 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 five items. The first item was a new unbudgeted capital project from the Department of Military Affairs for a roof replacement at the Wendell H. Ford Regional Training Center. The project will provide a new standing seam metal roof panel system over existing shingle roofs on seven buildings. The $696,200 capital project was 100 percent federally funded by a Department of Defense grant.
Senator Carroll made a motion to approve the project. The motion was seconded by Senator McDaniel and approved by roll call vote.
The second item was a new unbudgeted capital project from the Department of Military Affairs for the Construct Addition to Building 300 project at Wendell H. Ford Regional Training Center. The project will consist of the construction of approximately 4,500 sq ft of additional administrative space to accommodate 140 personnel. The $760,000 capital project was 100 percent federally funded by a Department of Defense grant.
Senator Carroll made a motion to approve the project. The motion was seconded by Senator McDaniel and approved by roll call vote.
The third item was a new unbudgeted capital project from the Department of Military Affairs for the Field Maintenance Shop No. 9 Interior Repairs project in Glasgow, Kentucky. The project will consist of the demolition of existing offices, storage space, and latrines and the construction of new latrines, offices, a training room, and storage areas for tools and parts. The $775,000 capital project was 100 percent federally funded by a Department of Defense grant.
Senator Carroll made a motion to approve the project. The motion was seconded by Senator Leeper and approved by roll call vote.
The fourth item was a new unbudgeted capital project from the Department of Military Affairs for the Construct Rappel Tower project at the Joint Support Operations Counter Drug Center in London, Kentucky. The project will consist of site, foundation, structural steel, electrical, and other work needed to construct a 50-foot rappel tower to be used in training qualification requirements in support of counter-drug operations. The $662,600 capital project was 100 percent federally funded by a Department of Defense grant.
Senator Carroll made a motion to approve the project. The motion was seconded by Senator McDaniel and approved by roll call vote.
The fifth item was a report of a $622,700 Emergency, Repair, Maintenance, or Replacement Project appropriation for the Department of Veterans Affairs North Cemetery Landslide Repair project in Williamstown, Kentucky. The project will repair the embankment supporting the cemetery road. No action was required.
Kentucky Infrastructure Authority (KIA) Loans
Mr. John Covington, Executive Director, Kentucky Infrastructure Authority, presented seven items. The first item was a report in a change in KIA’s project submittal process for certain loans. Mr. Covington said some borrowers would benefit more from a planning and design loan instead of a full construction loan because their project may be in early stages. This process change will allow resources to be allocated to projects that are ready for the construction process and will result in a more efficient use of resources to fund more projects.
In response to questions from Representative Wayne, Mr. Covington said the planning and design loans will receive a 12-month commitment and will be reviewed on a case-by-case basis to address individual borrower needs.
In response to questions from Representative Damron, Mr. Covington said the intent of implementing the planning and design loan process was to allow KIA to more efficiently use the funds available.
Senator McDaniel asked Mr. Covington to provide information on the different types of KIA loans to new committee members during orientation and to provide the committee with a list of existing loans, including activity over the last 60-months.
The second item presented was a Fund A loan for the City of Owensboro in Daviess County. The request was for a $3,975,000 loan for the fourth phase of the Sherm Ditch Rehabilitation project. The loan will have a 20-year term, an interest rate of 1.75 percent, and a debt service payment of $244,366.
Senator Carroll made a motion to approve the new loan. The motion was seconded by Representative Rudy and approved by roll call vote.
The third item presented was a Fund C loan for the Northern Madison County Sanitation District in Madison County. The request was for a $1,200,000 loan for the Muddy Creek Wastewater Sanitation District project. The loan will have a 20-year term, an interest rate of three percent, and a debt service payment of $82,625.
Senator Carroll made a motion to approve the new loan. The motion was seconded by Representative Damron and approved by roll call vote.
The fourth item presented was a Fund F loan increase for the City of Mount Vernon in Rockcastle County. The request was for a $423,310 increase to a previously approved loan for the Phase 2 Potable Water Storage Tanks and Lines project. The $3,023,310 loan will have a 20-year term, an interest rate of one percent, and a debt service payment of $113,568.
In response to a question from Senator Carroll, Mr. Covington said the increase was necessary to address essential changes made during the design phase of the project.
Senator Carroll made a motion to approve the loan increase. The motion was seconded by Representative Damron and approved by roll call vote.
The fifth item presented was a Fund F loan for the Cumberland County Water District in Cumberland County. The request was for a $1,268,000 loan for the Water System Improvement project. The loan will have a 20-year term, an interest rate of 0.75 percent, and a debt service payment of $50,094.
Senator Carroll made a motion to approve the new loan. The motion was seconded by Representative Wayne and approved by roll call vote.
The sixth item presented was a Fund F loan for the Western Lewis-Rectorville Water and Gas District in Mason County. The request was for a $1,266,500 loan for the Water Systems Improvement project. The loan will have a 20-year term, an interest rate of 0.75 percent, and a debt service payment of $50,034.
In response to questions from Senator McDaniel, Mr. Covington said the purpose of the Fund F loan program is to ensure compliance with the Federally Assisted Drinking Water Program, enacted as part of the Safe Drinking Water Act, by funding projects to address public health issues in existing systems. The Fund F loan program is funded by a an annual capitalization grant from the U.S. Environmental Protection Agency, a 20 percent match from the General Fund, issuance of leverage bonds, and proceeds from loan repayments and interest earned.
In response to questions from Representative Wayne, Mr. Covington said ongoing maintenance is performed on the systems; however, older systems with failing water lines are considered a capital expenditure. KIA does not fund operating expenses or short-term system improvements.
In response to a question from Representative Damron, Mr. Covington said any rate increases to customers must first go through the Public Service Commission’s process, which includes public meetings and notices.
Senator Carroll made a motion to approve the new loan. The motion was seconded by Senator Leeper and approved by roll call vote.
The seventh item presented was a Fund F loan for the Henry County Water District #2 in Henry County. The request was for a $2,800,000 loan for the U.S. Highway 42 Storage Tank project. The loan will have a 20-year term, an interest rate of 1.75 percent, and a debt service payment of $173,500.
Senator Carroll made a motion to approve the new loan. The motion was seconded by Representative Rudy and approved by roll call vote with one member “passing.”
New School Bond Issues with School Facilities Construction Commission (SFCC) Debt Service Participation
Mr. Ryan Barrow, Executive Director, Office of Financial Management, reported 14 school bond issues with SFCC debt service participation with a total par amount of $112,145,000. The state portion of the annual debt service payment was $2,050,300 and the local contribution was $7,487,400. The bond issues did not involve tax increases.
Senator Carroll made a motion to approve the school bonds. The motion was seconded by Senator Leeper and approved by roll call vote.
New School Bond Issues with 100 Percent Locally Funded Debt Service Participation
Mr. Nacey said six local bond issues were reported to the committee. The bond issues were 100 percent locally funded and did not involved tax increases. No action was required.
With there being no further business, the meeting was adjourned at 1:59 p.m.