Call to Order and Roll Call
The Capital Projects and Bond Oversight Committee met on Tuesday, April 18, 2017, at 1:30 PM, in Room 129 of the Capitol Annex. Senator Stan Humphries, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Stan Humphries, Co-Chair; Representative Phil Moffett, Co-Chair; Senators Julian M. Carroll, Rick Girdler, and Christian McDaniel; and Representatives Larry Brown, Will Coursey, and Steven Rudy.
Guests: Mr. Michael Mardis, Dean of Students and Vice President for Student Affairs, University of Louisville; Mr. Mark Watkins, Associate Vice President for Business Services, University of Louisville; Ms. Elizabeth Baker, Planning Director, University of Kentucky; Ms. Beth Patrick, Chief Financial Officer and Vice President for Administration, Morehead State University; Mr. Scott Aubrey, Director, Division of Real Properties, Finance and Administration Cabinet; Ms. Janice Tomes, Deputy State Budget Director, Office of State Budget Director; Ms. Ashley Adams, Financial Analyst, Kentucky Infrastructure Authority; Mr. Darren Sammons, Staff Attorney, Kentucky Infrastructure Authority; and Mr. Ryan Barrow, Executive Director, Office of Financial Management.
LRC Staff: Shawn Bowen, Committee Staff Administrator; Julia Wang, Legislative Analyst; and Jenny Wells, Committee Assistant.
Election of Senate co-chair and House co-chair
Ms. Bowen said the current co-chairs, Senator Stan Humphries and Representative Phil Moffett, were elected to fill the unexpired terms of the previous committee co-chairs, and those terms have now expired. She said the first order of business was the election of Senate and House co-chairs.
Senator McDaniel nominated Senator Humphries for the position of Senate co-chair. The motion was seconded by Senator Girdler. A motion was made that nominations cease and that Senator Humphries be elected Senate co-chair by acclamation. The motion was seconded by Senator McDaniel and approved by voice vote.
Representative Brown nominated Representative Moffett for the position of House co-chair. The motion was seconded by Representative Rudy. A motion was made that nominations cease and that Representative Moffett be elected House co-chair. The motion was seconded by Representative Moffett and approved by voice vote.
Approval of Minutes
A motion was made by Representative Rudy to approve the minutes of the March 15, 2017 meeting. The motion was seconded by Senator Carroll and approved by voice vote.
Information Items
Ms. Bowen said there were five information items on the agenda this month: a follow-up response from the School Facilities Construction Commission regarding the McCracken County school bond issue; news articles regarding allocations from the Workforce Development Construction Pool and future plans for the Capital Plaza Tower Building in Frankfort; legislation relating to the jurisdiction of the committee; and quarterly capital construction status reports. The information items did not require committee action.
Project Reports from the Universities
Mr. Mardis reported a new lease for the University of Louisville (U of L). The university plans to enter into a $7.8 million lease with American Campus Communities for university student housing. A housing market and demand assessment conducted by Brailsford and Dunlavey in June 2015 showed that the university will have a deficit of 1,500 beds if the need for additional housing is not addressed. The two buildings, located in close proximity to campus, will free up on-campus housing space by 1,072 beds, help alleviate potential housing shortages, and provide time for the university to study future housing options. The additional beds will also allow for expansion of the university’s Themed and Living Learning Communities, which allows students with similar majors to be housed together. Individual student rents will serve as the source of restricted funds, and there are no state general funds involved in the lease. The lease contains the option to renew for four one-year periods.
In response to a question from Representative Moffett, Mr. Mardis said that there is no on-going debt to the university arising from this new lease and that the facilities’ infrastructure is the responsibility of American Campus Communities.
A motion to approve the lease was made by Representative Rudy, seconded by Senator Carroll, and approved by unanimous roll call vote.
Ms. Baker reported two items for the University of Kentucky (UK): the purchase medical and research equipment with restricted fund sources, and a lease renewal for the UK Human Development Institute. The lease is being renewed at an annual cost of $147,373, effective July 1, 2017, for a one-year period.
A motion was made by Representative Rudy to approve the lease renewal. The motion was seconded by Senator Carroll, and approved by unanimous roll call vote.
Ms. Patrick reported an emergency project for Morehead State University (MoSU). In accordance with KRS 164.600, the university’s president declared an emergency project to replace the failed chiller in Lappin Hall. The project has a scope of $1,641,038, and restricted funds derived from the institution’s fund balance reserve account will fund the project. Lappin Hall is one of the university’s largest instructional facilities with over 150,000 square feet, and serves the university’s science and math academic program needs. In July 2016, Lappin Hall’s chiller failed and, through mid-October, MoSU rented a temporary chiller to maintain cooling in the building. Lappin Hall will be closed in late May in order to proceed with the replacement of the cooling system. Due to the emergency project designation, no action was required.
Lease Reports from the Finance and Administration Cabinet
Mr. Aubrey reported on leasehold improvements at the 300 Building in Franklin County. The agencies requesting the modifications include the Energy and Environment Cabinet, the Education and Workforce Development Cabinet, and the Department of Education. The modifications consists of the installation of a sink and additional electrical outlets, and have a total cost of $7,072. The total cost of improvements to date in the 300 Building is $190,702. Mr. Aubrey said that the building was originally proposed to accommodate approximately 1,500 staff from various state offices. The actual staff and offices that were moved into the building were not identified until after the design was complete. Since those agencies have moved, they have identified improvements that are needed to meet their programmatic needs. While trying to address these improvements, the Finance Cabinet was unable to modify the lease agreement due to the Certificates of Participation (bonds) that were issued by the developer. A condition of the trust indenture prohibits any modifications which would change the amount of the lease payments absent the consent of the majority of the owners, in aggregate principal amount, of the Certificates of Participation. These lease documents created a Tenant Improvement Fund to address this predicament.
A motion to approve the modifications was made by Senator Carroll, seconded by Representative Coursey, and approved by unanimous roll call vote.
Project Reports from the Finance and Administration Cabinet
Ms. Tomes presented project reports on behalf of the Transportation Cabinet and the Tourism, Arts and Heritage Cabinet, Department of Fish and Wildlife Resources. The Transportation Cabinet has modified the Hart County Rest Area Emergency Repair, Maintenance, or Replacement Project to cover the cost of additional change orders and to provide contingency funds. This project was initially submitted to the committee in January 2017 as an emergency project. As reported, the project scope was $1,513,400, and the work included demolition and reconstruction of the existing rest area, which burned in early January 2016. Further investigation revealed that damage to the structure was worse than the original estimate, and additional funding in the amount of $90,000 is needed. The approved scope is $1,603,400, and the emergency project is funded 100 percent with proceeds from the Fire and Tornado Insurance Fund. The project was declared an emergency, and no action was required.
The Department of Fish and Wildlife Resources has established the Goose Creek, Casey County, Fees-in-Lieu of (FILO) Stream Mitigation Pool project in the amount of $3,290,200. This stream mitigation project will stabilize approximately 15,842 linear feet of the creek and its tributaries, and 10 acres of wetlands within the Green River basin. Projects established from the FILO pool are required to be reported to the committee, however, no action is required.
Report from the Office of Financial Management
Ms. Adams reported four KIA loans: Fund A loan, Mountain Water District, Pike County, $300,000; Fund B loan, City of Lawrenceburg, $1,200,000; Fund F loan, City of Irvine, $5,732,000; and Fund F loan, City of Olive Hill, $883,000.
Representative Rudy made a motion to roll the KIA loans into one vote. The motion was seconded by Senator Carroll, and approved by voice vote.
A motion was made by Representative Moffett to approve the KIA loans, seconded by Senator Carroll, and approved by unanimous roll call vote.
Mr. Barrow reported a new bond issue for the Kentucky Economic Development Finance Authority (KEDFA). The bonds, Hospital Revenue Refunding Bonds Series 2017A ($437,360,000) and Series 2017B ($37,415,000), will advance refund outstanding bonds for Owensboro Health, Inc.
A motion was made by Senator McDaniel to approve the bond issue, seconded by Representative Rudy, and approved by unanimous roll call vote.
New School Bond Issues with School Facilities Construction Commission (SFCC) Debt Service Participation
Mr. Barrow reported 14 new SFCC school district bond issues for a total amount of $1,516,578. All issues will finance school renovations, improvements, or new school construction. With the exception of the Breckinridge County bond issue, no tax increase was necessary to finance the projects. [In regard to the Breckinridge County school bond issue, the district levied a Recallable Nickel in September 2014 to finance the project. The Recallable Nickel was equalized at 25 percent beginning in FY 2017.]
In response to a request from Senator McDaniel, Mr. Barrow said he would compile more information to clarify the specific details of the Owsley County school construction project, as well as the money aspects of this project brought up in the past two budget sessions.
A motion was made by Representative Rudy to approve the school bond issues, seconded by Senator McDaniel, and approved by unanimous roll call vote.
New Local School Bond Issues with 100 Percent Locally-Funded Debt Service Participation
Ms. Bowen reported two 100 percent locally-funded school bond issues for Jessamine and Adair Counties. The bond issues total $4,390,000, and the scope of work includes improvements and renovations to district schools. The bond issues did not involve a tax increase, and no action was required.
Senator McDaniel commented that a representative from the Louisville Arena Authority should attend the committee meetings each month to provide updates as to the transactions of the Arena Authority. The Arena Authority has appeared before the committee in the past, and updates are required statutorily to keep abreast of any ongoing issues. Senator Humphries said that he and Chairman Moffett would discuss the LAA and make a decision in regard to the request.
With there being no further business, the meeting adjourned at 2:06 p.m.