Call to Order and Roll Call
The Capital Projects and Bond Oversight Committee meeting was held on Tuesday, May 19, 2015, 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: Senator Chris Girdler, Co-Chair; Representative Kevin Sinnette, Co-Chair; Senator Julian M. Carroll; Representatives Steven Rudy, and Jim Wayne.
Guests: Mr. Larry Blake, Assistant Vice President for Facilities, NKU; Ms. Elizabeth Baker, Director of Planning, UK; Mr. Scott Aubrey, Director of Real Properties, Finance and Administration Cabinet; Mr. John Hicks, Deputy State Budget Director; Ms. Brandi Norton, Financial Analyst, Kentucky Infrastructure Authority; Ms. Sandy Williams, Deputy Executive Director, Office of Financial Management; Ms. Kristi Culpepper, Executive Director, School Facilities Construction Commission.
LRC Staff: Josh Nacey, Katherine Halloran, and Maurya Allen.
Approval of Minutes
Senator Carroll moved to approve the minutes of the April 21, 2015 meeting. The motion was seconded by Representative Rudy and approved by voice vote.
Correspondence Items
Mr. Nacey said there were two correspondence items for review by the committee members. First, a memo to the Legislative Research Commission from the committee seeking authorization to expend funds to evaluate the funding process of the Louisville Arena Authority (LAA). Representative Wayne asked if there had been a response to the request. Ms. Halloran explained that the memo had been forwarded to leadership members and the committee is currently awaiting a response.
The second item of correspondence was a memo from Kristi Culpepper, Executive Director, School Facilities Construction Commission (SFCC) regarding high school construction costs per the request of the committee at the April 21, 2015 meeting. Mr. Nacey highlighted several points from the memo including the range of construction costs over the last ten years, the fact that SFCC does not manage construction costs and has no legal authority to limit construction costs, that the Kentucky Department of Education (KDE) has the legal authority to limit the scope of school construction projects, and that SFCC is not the only source of state funding for new school facilities. Mr. Nacey also directed members’ attention to the table included with the memo that provides the costs associated with high schools constructed over the last ten years. This list does not include major renovation projects, but does include expenditures from capital outlay and equalization, which are the other methods for funding school construction outside of SFCC involvement.
Information Items
Mr. Nacey said there was one information item to report to the committee, the environmental justice assessment on the Louisville-Southern Indiana Ohio River Bridges (LSIORB) project. The committee sent a request in January to the Kentucky Transportation Cabinet (KYTC) seeking the assessment and KYTC responded that the assessment was under review by the Federal Highway Administration (FHWA) and was not available for distribution at the time. The review has now been completed and the assessment was included for the members in their folders.
The assessment provides a review of the efforts currently underway and those that will be undertaken to mitigate the effects of bridge tolls on low-income and minority citizens who comprise the environmental justice populations. Among those measures currently underway are plans to enhance the TARC services through construction and/or expansion of facilities, the purchase of buses and vans for use during bridge construction, and the creation of new bus stops. Additionally, there will be a free-flow connection between the non-tolled US-31 Clark Memorial Bridge and I-65. Future efforts include the distribution of transponders at no cost to the environmental justice populations, creation of two local offices for the toll operator (one in southern Indiana and one in Louisville), establishment of user accounts with a wide-range of replenishment options and the exemption of TARC vehicles from tolls.
Representative Wayne commented that the addition of TARC buses in the mitigation efforts was an encouraging sign, but that he was still critical of the manner in which the Cabinet released the documents. He also stated that the assessment seemed to criticize his recent legislation to mitigate the effects of tolls on low-income and minority citizens as posing an undue administrative burden. Representative Wayne stated that, in his opinion, this was an indication that the Cabinet did not fully understand the legislation which included mitigation measures, such as a toll rebate, that would have been much more effective and less burdensome than the issuance of transponders and the establishment of two entirely new offices. He indicated that there were serious problems with this assessment plan, aside from the very positive approaches taken regarding TARC buses, and he wished to look more closely at aligning the plan with legislation. Chairman Girdler made a note to the members and the public that the assessment plan was available online for anyone who wished to view it.
Project Reports from Universities
Mr. Larry Blake, Assistant Vice President for Facilities, Northern Kentucky University reported the university’s intent to use the Construction Manager-at-Risk delivery method for the Renovate Old Science/Construct Health Innovation Center project authorized by the General Assembly in House Bill 235 of the 2014 Regular Session. No action was required for this report.
Mr. Blake then presented a scope increase for the Renovate Residence Halls project (Callahan Hall dining facility) also authorized in House Bill 235 of the 2014 Regular Session. The university is requesting a 15 percent scope increase from restricted funds to accommodate increased bid prices. Representative Wayne commented that he served with former Representative James Callahan, for whom the hall is named, and that the hall and plans for its renovation are an honor to his memory. Senator Carroll moved to approve the project, seconded by Representative Rudy. The motion passed by a roll call vote of 5 yeas, 0 nays.
Ms. Elizabeth Baker, Planning Director of the University of Kentucky, reported on four items. The first was an emergency capital project to replace central heating plant boilers damaged by fire in March 2015. No action was required for this report.
Second, Ms. Baker presented a change in funding source for the Renovate Academic/Administrative Space 3 (Combs Cancer Research Building) project authorized in House Bill 235 of the 2014 Regular Session. The university is requesting to use $484,000 of federal funds in lieu of restricted funds for this project. The total cost of the project would remain well within the authorized budget for the project. Senator Carroll made a motion to approve the project, which was seconded by Representative Rudy. The motion passed by a roll call vote of 5 yeas, 0 nays.
Ms. Baker next reported the purchase of medical equipment, a CT Scanner Fluoroscopy, for use within the Radiology Department of UK HealthCare’s Good Samaritan Hospital. No action was required for this report.
Finally, Ms. Baker presented a lease renewal for the University of Kentucky College of Social Work Center for Children and Trauma. The annual rent is proposed to increase from $198,782 to $201,358 and includes utilities and common area maintenance charges. Representative Rudy made a motion to approve the project. Senator Carroll seconded and the motion passed by roll call vote of 5 yeas, 0 nays.
Lease Reports from Finance and Administration Cabinet
Mr. Scott Aubrey, Director of Real Properties, Finance and Administration Cabinet, presented four lease items. The first was a lease modification for the Cabinet for Health and Family Services in Harlan County. The lease will be modified to increase the area by 7,111 square feet at an added annual cost of $56,888. Senator Carroll made a motion to approve, which was seconded by Representative Wayne. The motion passed by a roll call vote of 5 yeas, 0 nays.
Second, Mr. Aubrey presented a lease modification for the Department of Corrections in Estill County. This lease will include an increase of area of 1,585 square feet as well as renovations to the facility to include security/access control features, copy area, evidence storage, drug testing restroom, and male/female restrooms. The new annual cost for the lease will be $15,282 exclusive of the cost of renovation. No action was required for this report.
Mr. Aubrey next presented a lease modification for the Cabinet for Health and Family Services in Daviess County. New external light fixtures will be installed to enhance employee security at a cost of $29,200. The improvements will be amortized through the lease expiration date, making the annual rent on the property $530,979. No action was required for this report.
Finally, Mr. Aubrey presented a foreign jurisdiction lease agreement for the Department of Fish and Wildlife Resources in Scioto County, Ohio. The lease is for a covered boat slip on the Ohio River and has an annual cost of $2,037. Senator Carroll made a motion to approve, seconded by Representative Wayne. The motion passed by a roll call vote of 5 yeas, 0 nays.
Project Reports from the Finance and Administration Cabinet
Mr. John Hicks, Deputy State Budget Director, reported on two information items. The first was a pool project for the Department of Fish and Wildlife Resources Fee-In-Lieu-Of project on Old Trace Creek in Lewis County. This was a $2,689,642 appropriation for mitigation and monitoring of stream bank erosion as required by the U.S. Army Corps of Engineers and the Kentucky Division of Water.
Mr. Hicks then presented another pool project for the Department of Fish and Wildlife Resources Fee-In-Lieu-Of project on the East Fork of Indian River in Menifee County. This was a $1,192,910 appropriation for the improvement of habitat, stabilization of eroding stream banks, and the removal of old non-functioning concrete low-water stream crossing structures. No action was required on these items.
Kentucky Infrastructure Authority (KIA)
Ms. Brandi Norton, Financial Analyst for Kentucky Infrastructure Authority, presented ten items. Chairman Girdler stated that the committee would hear all ten items and vote upon them by roll call vote as one motion. Hearing no objection, Ms. Norton proceeded with her presentation. The first item was for a Fund A loan for the City of Corbin for the benefit of Corbin Utilities Commission in Laurel County. The request was for an $8,684,115 loan for the Corbin Wastewater Treatment Plant Upgrade project. The loan will have a 20-year term, an interest rate of 0.75 percent, and a debt service payment of $485,765.
The second item was for a Fund A loan for the City of Frankfort in Franklin County. The request was for a $747,041 loan for the Benson Creek Combined Sewer Overflow (CSO) project. The loan will have a 20-year term, an interest rate of 1.75 percent, and a debt service payment of $45,925.
The third item was for a Fund A loan for the City of Glasgow for the benefit of Glasgow Water Company in Barren County. The request was for a $3,500,000 loan for the Southside Interceptor project. The loan will have a 20-year term, an interest rate of 0.75 percent, and a debt service payment of $195,780.
The fourth item was for a Fund A loan for the City of Frankfort in Franklin County. The request was for a $1,570,000 loan for the Old Lawrenceburg Road Pump Station Replacement project. The loan will have a 20-year term, an interest rate of 1.75 percent, and a debt service payment of $96,517.
The fifth item was for a Fund A loan for the City of Frankfort in Franklin County. The request was for a $1,500,000 loan for the Rolling Acres Inflow and Infiltration (I&I) Phase 1 project. The loan will have a 20-year term, an interest rate of 1.75 percent, and a debt service payment of $92,213.
The sixth item was for a Fund A loan for the City of Frankfort in Franklin County. The request was for a $1,320,000 loan for the Wastewater Treatment Plant Emergency Generator and System Control and Data Acquisition (SCADA) system project. The loan will have a 20-year term, an interest rate of 1.75 percent, and a debt service payment of $81,148.
The seventh item was for a Fund B loan for the City of Catlettsburg in Boyd County. The request was for a $270,000 loan for the US-23 to I-64 Sewer Extension project. The loan will have a 20-year term, an interest rate of 0.75 percent, and a debt service payment of $15,103.
The eighth item was for a Fund F loan for the Monroe County Water District in Monroe County. The request was for an $8,000,000 loan for the Regional Water Treatment Plant and System Improvements project. The loan will have a 30-year term, an interest rate of 0.75 percent, and a debt service payment of $250,652.
The ninth item was for a Fund F1 Planning and Design loan for the City of Fleming-Neon in Letcher County. The request was for a $143,616 loan for the planning and design of the Water Treatment Plant Upgrade project. The loan will have a 5-year term, an interest rate of 2.75 percent, and a debt service payment of $31,299.
The tenth item was for a Fund F loan for the City of Paducah for the benefit of Paducah Water Works in McCracken County. The request was for a $4,493,000 loan for the 24 Inch Transmission Main project. The loan will have a 20-year term, an interest rate of 1.75 percent, and a debt service payment of $278,456. Having heard all the projects, Senator Carroll made a motion to approve the loans. The motion was seconded by Representative Wayne and approved by a roll call vote of 5 yeas, 0 nays.
Office of Financial Management
Ms. Sandy Williams, Deputy Executive Director, Office of Financial Management, presented five items. The first was a follow-up report for Eastern Kentucky University General Receipts Revenue Bonds to finance the Renovate/Improve Athletics Facilities project. The second was a follow-up report for Murray State University General Receipts Revenue Bonds to finance the Replace Franklin Hall project. The third item was also a follow-up report for University of Kentucky General Receipts Revenue and Refunding Revenue Bonds. The revenue bonds financed the Renovate/Upgrade Healthcare Facilities project.
The fourth item was a new bond issue for the Turnpike Authority of Kentucky (TAK) Economic Development Road Revenue and Revenue Refunding Bonds (Revitalization Projects). This bond issue will provide permanent, tax-exempt, Road Fund supported financing for approximately $125 million of projects authorized by the 2010 Extraordinary Session of the General Assembly in House Bill 3. Representative Wayne asked why it had taken five years to establish the funding for projects authorized in 2010. Ms. Williams deferred to Mr. John Hicks who answered, that it is policy to not issued bonds until necessary. Cash on hand is used to defer taking on new debt until necessary, so although the bonds were only being issued now, that did not mean there had necessarily been a delay in getting the road projects underway.
The final item was a follow-up report for the Kentucky Economic Development Finance Authority (KEDFA) Healthcare Facilities Revenue Bonds to fund the acquisition, construction, renovation, relocation, and equipping of long term care, memory care, and rehabilitation units on the campus of Carmel Manor in Fort Thomas, Kentucky. No action was required on these reports.
New School Bond Issues with School Facilities Construction Commission (SFCC) Debt Service Participation
Ms. Kristi Culpepper, Executive Director, School Facilities Construction Commission, reported eight school bond issues with SFCC debt service participation with a total par amount of $143,675,000. The state portion of the annual debt service payment was $1,025,288 and the local contribution was $13,520,984. Four bond issues will refund outstanding debt and the other four will finance new construction and improvements at existing school facilities. The bond issues did not involve tax increases. Representative Rudy made a motion to approve the school bond issues, seconded by Representative Wayne. The motion passed by a roll call vote of 5 yeas, 0 nays.
New School Bond Issues with 100 Percent Locally Funded Debt Service Participation
Mr. Nacey said there were five local school bond issues reported to the committee. Each bond issue has 100 percent local debt service participation. No tax increases were required for these issues. These bonds will support the remodeling of and addition to a high school technology center, refinancing prior bond issues, district-wide energy savings measures, and the installation of turf field at two high schools. No action was required.
Mr. Nacey also said that included in members’ folders was the updated debt issuance calendar.
With there being no further business, the meeting was adjourned at 1:51 p.m.