Call to Order and Roll Call
The Capital Projects and Bond Oversight Committee meeting was held on Tuesday, November 21, 2017, at 1:00 PM, in Room 169 of the Capitol Annex. Representative Phil Moffett, 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 and Rick Girdler; Representatives Larry Brown, Will Coursey, and Steven Rudy.
Guests: Mr. Scott Aubrey, Director, Real Properties; Mr. Ryan Barrow, Executive Director, Office of Financial Management; Ms. Ashley Adams, Financial Analyst, Kentucky Infrastructure Authority; and Mr. Jeremy Ratliff, Deputy Director, Legal Services, Kentucky Housing Corporation.
LRC Staff: Katherine Halloran, Committee Staff Administrator; Julia Wang, Legislative Analyst; and Jenny Wells Lathrem, Committee Assistant.
Approval of Minutes (October 17, 2017)
A motion was made by Representative Brown to approve the minutes of the October 17, 2017 meeting. The motion was seconded by Senator Carroll and approved by voice vote.
Correspondence and Information Items
Ms. Halloran reported two items: the University of Kentucky’s intent to use the Construction Management at-Risk project delivery method for the partial renovation of its Chemistry-Physics building and the Cabinet for Economic Development’s annual Economic Development Bond (EDB) report, showing projects approved over the prior fiscal year as well as the compliance status of projects approved over the past five fiscal years.
Project Report from the University of Kentucky
Ms. Halloran reported two medical equipment purchases for UK Healthcare: a $233,000 surgical case cart washer and disinfector for Good Samaritan Hospital and a $237,300 surgical microscope for A.B. Chandler Hospital.
Lease Report from the Finance and Administration Cabinet
Mr. Aubrey reported two renewals for privately leased office space under the same terms and conditions through June 30, 2019: Unified Prosecutorial System, Jefferson County, $16.55 per square foot for 24,233 square feet and the Cabinet for Health and Family Services (CHFS), Clark County, $10.00 per square foot for 10,946 square feet.
Mr. Aubrey reported one lease modification under $50,000; amortization of improvements through June 30, 2020 for the Department of Corrections in Barren County. Of the two estimates for renovations and security upgrades; low bids were accepted from J.A. Contracting, Barren County Glass, and Chris’s Window Tinting. No action was required.
Mr. Aubrey submitted a lease modification over $50,000; increase in square footage to accommodate additional staff and a two year extension through June 30, 2025 for the Cabinet for Health and Family Services in Kenton County. The modification will increase the total square footage to 57,773 sq. ft., at $15.45 per sq. ft., resulting in a total annual cost of $892,582.84.
Mr. Aubrey submitted a tenant improvement request for the 300 Building in Franklin County. The Energy and Environment Cabinet (EEC) asked for power outlets as well as coaxial cables at eye level for wall monitors in seven executive offices. Of the two estimates obtained; one for $3,575 from inTECHgrated Systems and one $2,940 from Fayette Electrical Service, EEC recommended acceptance of the lower one. With the management fee, the cost will be $3,145.80, bringing the total cost of the improvements to date to $204,259.90.
A motion was made by Representative Rudy to roll the two lease renewals, the lease modification for CHFS (Kenton County), and the tenant improvement request into one roll call vote. The motion was seconded by Senator Carroll and approved by voice vote.
In response to a question from Representative Moffett, Mr. Aubrey confirmed that the term of the CHFS lease in Kenton County is being extended two periods with each period being one year.
A motion was made by Representative Rudy to approve the two lease renewals, the lease modification for CHFS (Kenton County), and the tenant improvement request, seconded by Representative Brown, and approved by unanimous roll call vote.
Report from the Office of Financial Management
Ms. Adams submitted a loan increase and a new loan request. Due to higher than estimated bids, the Regional Water Resource Agency (RWRA) in Daviess County requested a $725,000 increase, which was approved by the Kentucky Infrastructure Authority’s Executive Director, to a previously approved Fund A (Clean Water State Revolving Fund – CWSRF) loan; increasing the total amount borrowed to $8,007,500. The loan is for 20 years with a 1.75 percent interest rate.
The Elkhorn Water District in Franklin County, requested a $850,000 Fund B (Infrastructure Revolving Loan Fund) loan for its Capital Improvements Project, which includes repairs and upgrades for the system. The loan is for 20 years with a 2.75 percent interest rate.
In response to questions from Representative Moffett, Ms. Adams said that Elkhorn Water District went through the Public Service Commission (PSC) for a pass-through rate increase to accommodate wholesale rate increases from its supplier, the Frankfort Plant Board, and will request PSC approval for another rate increase to cover the debt service for the Fund B loan. She confirmed that execution of the assistance agreement would be after PSC approval of the rate increase.
A motion was made by Representative Brown to approve the Fund A Loan increase, seconded by Representative Rudy, and approved by unanimous roll call vote.
Representative Moffett recommended that approval of Fund B Loan be contingent upon the PSC’s approval of the rate increase. A motion was made by Senator Carroll to approve the Fund B Loan, contingent upon the PSC’s approval of the rate increase, seconded by Representative Rudy, and approved by unanimous roll call vote.
Mr. Barrow submitted two new Kentucky Housing Corporation (KHC) tax-exempt conduit transactions for approval. As conduit transactions, neither the commonwealth’s nor KHC’s credit or balance sheet will be extended. The first bond issue is the Kentucky Housing Corporation (KHC) Tax-Exempt Conduit Multifamily Housing Revenue Bonds (Winterwood HPW Portfolio), Series 2018 for properties in Harlan, Lexington, and Manchester. Net proceeds will be about $9.3 million with a total project cost of just over $19 million. All debt service is paid by the developer and information about the developer and financing teams were included in the meeting materials.
The second is the KHC Tax-Exempt Conduit Multifamily Housing Revenue Notes (SOCAYR Portfolio), Series 2017 for properties in Adairville, Frankfort, and Louisville. Net proceeds will be about $13 million with a total project cost of just over $25.4 million. All debt service is paid by the developer and information about the developer and financing teams were included in the meeting materials.
Mr. Barrow presented two university financings, which will be sold competitively. The first was the $27.2 million Eastern Kentucky University General Receipts Bonds, 2018 Series A and General Receipts Refunding Bonds, 2018 Series B. Series A will finance the Construct Student Life Facilities project authorized in the most recent budget bill. Series B is an advance refunding with an annual savings of around $35,000 and a net present savings of $360,000 (6.32 percent). Mr. Barrow said that the advance refunding portion may be terminated if federal changes to tax law, eliminating tax-exempt advance refundings after December 31, 2017, goes into effect. The refunding would then have to be delayed until it is a current refunding, in which the refunded bonds are called/redeemed within 90 days from the date the refunding bonds are issued.
The second was the $4.2 million Murray State University General Receipts Refunding Bonds, 2017 Series A, which is also an advance refunding with an annual savings of around $20,000 and a net present value savings of $219,000 (5.65 percent).
A motion was made by Senator Humphries to roll the new bond issues into one vote, seconded by Representative Brown, and approved by voice vote.
A motion was made by Representative Coursey to approve the new bond issues, seconded by Senator Humphries, and approved by unanimous roll call vote.
Mr. Barrow reported a previously approved issue for KHC Tax-Exempt Conduit Multifamily Housing Revenue Notes, Guardian Court Apartments Project, Series 2017. The net proceeds were approximately $13.3 million. The statutorily required information on the fees associated with the transaction and additional documentation was included in the meeting materials. No action was required.
Mr. Barrow reported five school district bond issues submitted with SFCC debt service participation. Three of those were to finance improvements in the following school districts: Corbin Independent (Knox and Whitley Counties), Monroe County, and West Point Independent (Hardin County). The transactions had an estimated amount to be borrowed totaling $6.24 million with SFCC participation of approximately 31 percent. No tax increase was necessary to fund the projects. The remaining two bond issues were advance refundings in the following school districts: Fayette County and Owen County. The transactions are estimated to have a net present value savings of $2.2 million (provided that they are sold before the potential prohibition of tax-exempt advance refundings after December 31, 2017), with SFCC participation of approximately 15 percent.
In response to questions from Senator Humphries, Mr. Ratliff said that the Allied Paducah Portfolio project, the first conduit KHC transaction in which proceeds were used by a 501(c)(3) organization and a payment in lieu of taxes (PILOT) was negotiated with localities as the properties to be acquired will be exempt from property taxes, is expected to close soon and that no similar transactions are expected to be presented to the committee in the near future.
A motion was made by Senator Carroll to roll the school bond issues into one vote, seconded by Senator Humphries, and approved by voice vote.
A motion was made by Representative Rudy to approve the school bond issues, seconded by Senator Carroll, and approved by unanimous roll call vote.
New School Bond Issues with 100 Percent Locally-Funded Debt Service
Ms. Halloran reported that the Martin County School District was issuing $4 million in bonds for an Area Technology Center. Supplemental funding was awarded from the Workforce Development Construction Pool and a tax increase was not necessary to finance the project. No action was required.
Updated Debt Issuance Calendar
Also included in the members’ folders was the debt issuance calendar. No action was required.
With there being no further business the meeting adjourned at 1:17 p.m.