June 10, 1998

The State Finance Committee met in special meeting after notice duly given to the press and radio of Thurston County.

Present:

Michael J. Murphy, State Treasurer Gary Locke, Governor

Also Present:

John Fricke, Office of Financial Management Elise Greef, Department of Transportation Dean Torkelson, Seattle Northwest Securities Darlene Cimino De-Rose, Montague De-Rose and Associates Cynthia Weed, Preston Gates & Ellis Nancy Adams, Office of the State Treasurer Jay Kirkevold, Office of the State Treasurer Rusty Fallis, Office of the Attorney General Tim Kerr, Office of the State Treasurer Martin Reynoso, Office of the State Treasurer Jamie Postma, Office of the State Treasurer

Chairman Murphy called the meeting to order.

Governor Locke moved the minutes for the April 1, 1998, meeting be approved.  Chairman Murphy seconded the motion.  The motion passed and the minutes were adopted.

Mr. Kerr introduced proposed Resolution No. 876 providing for the award of sale (competitive bid) for the adjusted par amount of $106,755,000 State of Washington General Obligation Refunding Bonds, Series R-98B, authorized by Chapters 39.42 and 39.53 RCW and Resolution No. 875.  Resolution No. 875 authorized the issuance and sale of general obligation refunding bonds, on either an advance or current basis as appropriate.  Bonds issued under date of October 1, 1988 with an average coupon rate of 7.23 percent are currently callable at par on September 1, 1998.  This rate compares to refunding bonds issued at an estimated rate of 4.13 percent.

Under State Finance Committee policies, the minimum acceptable ratio of present savings to new issue size for a 3- to 4-year current refunding bond issue is 2 percent.  The estimated savings ratio for the proposed R-98B refunding is 15 percent.  Nominal savings for the transaction are approximately $1.5 million/year for the next four years (FY99-02).  Proceeds of the R-98B bonds will be held in escrow until the September 1, 1998 call date, at which time they will be paid out to retire the October 1, 1988 bonds.  Mr. Kerr stated that he knows of no controversy relating to the issuance of these bonds.

Mr. Kerr stated that we had received six bids, and that they were all in conformance with the official notice of sale.  The apparent low bidder was BancAmerica ROBERTSON STEPHENS with a true interest cost of 4.0039028 percent.  Merrill Lynch submitted a true interest cost bid of 4.0414 percent, Morgan Stanley submitted a true interest cost bid of 4.0450 percent, Raymond James submitted a true interest cost bid of 4.059485 percent, Goldman Sachs submitted a true interest cost bid of 4.0604 percent, and Salomon Smith Barney submitted a true interest cost bid of 4.067 percent.  The revised amount of sale of refunding bonds would be $106,755,000, and the call date of the refunded bonds will be September 1, 1998.  Mr. Kerr stated that it was a very successful refunding sale.

Mr. Kerr then asked Mr. Torkelson, the state’s financial advisor, for his comments.  Mr. Torkelson said that the savings results of the sale looked very good, that we are essentially substituting 4 percent bonds for 7.25 percent bonds, and the savings gross for the State will be approximately $6.3 million.

Mr. Kerr presented proposed Resolution No. 876 to the committee.

Resolution No. 876 providing for the award of sale of $107,060,000, more or less, State of Washington Various Purpose General Obligation Refunding Bonds, Series R-98B, authorized by Chapters 39.42 and 39.53 RCW, and State Finance Committee Resolution No. 875.

Chairman Murphy moved to accept the bid from BancAmerica ROBERTSON STEPHENS and adoption of Resolution No. 876.  Governor Locke seconded the motion and the resolution was adopted.

Mr. Kerr introduced proposed Resolution No. 877 amending Resolution No. 873, authorizing the issuance and sale of $220,000,000 State of Washington General Obligation Bonds, Series 1998C.

Mr. Kerr stated that State laws allow for discount and premium bids to be submitted for bond issues.  Heretofore, the premium received for bids was a minimal amount and was deposited in the bond retirement fund to offset the next debt service payment on the bonds.  Such a provision was included in Resolution No. 873 of the State Finance Committee.

At the April 1 sale of $220,000,000 Series 1998C bonds, a premium of over $14 million was bid.  An overlooked OFM/Treasury accounting change requires that this money be deposited in the construction account to be spent on capital projects and reduce the need for future borrowing.  Proposed Resolution No. 877 was prepared by 1998C bond counsel and corrects the oversight.  Mr. Kerr stated that he knows of no controversy relating to this amendment.

Mr. Kerr presented proposed Resolution No. 877 to the committee.

Resolution No. 877 amending Section 18 of Resolution No. 873 to cause the net premium received from the sale of the Various Purpose General Obligation Bonds, Series 1998C, to be deposited into the state building construction account, and ratifying all actions taken consistent with the provisions of Resolution No. 873, as previously amended.

Governor Locke moved adoption of Resolution No. 877.  Chairman Murphy seconded the motion and the resolution was adopted.

There being nothing further to come before the committee, the meeting was adjourned at 9:09 AM.

	STATE FINANCE COMMITTEE STATE OF WASHINGTON   _______________________________________ Michael J. Murphy, State Treasurer & Chairman   ________________________________________ Gary Locke, Governor   ________________________________________ Brad Owen, Lieutenant Governor
________________________________________ Tim Kerr Deputy State Treasurer & Secretary