Meeting Minutes
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State Finance Committee Meeting Minutes |
           
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May 11, 1999The State Finance Committee met in special meeting after notice duly given to the press and radio of Thurston County.
Chairman Murphy called the meeting to order. Lieutenant Governor Owen moved the minutes for the May 4, 1999, meeting be approved. Chairman Murphy seconded the motion. The motion passed and the minutes were adopted. Mr. Kerr introduced proposed Resolution No. 890 providing for award of sale of up to $68,285,000 State of Washington General Obligation Bonds, Series 1999S-1. Mr. Kerr stated there were four bids for the Committee’s consideration today. The TIC bids for the record were: J. P. Morgan Securities, Inc., 4.8685945 percent; Goldman, Sachs & Co., 4.8468572 percent; Merrill Lynch & Co., 4.8650511 percent; and Salomon Smith Barney, Inc., the apparent winning bidder, at 4.8352745 percent. Mr. Kerr noted that all of the bidders provided SureBid surety as a good faith deposit, and that Bond Counsel had reviewed all bids to ensure compliance with bidding rules. Mr. Kerr presented proposed Resolution No. 890 to the committee. Resolution No. 890 providing for award of sale of up to $68,285,000 State of Washington General Obligation Bonds, Series 1999S-1, authorized by Chapter 220, Laws of 1997, and Chapter 39.42 RCW. Mr. Gottlieb noted that proposed Resolution No. 890 amended certain provisions of Resolution No. 881, the original 1999S-1 and 1999S-2 bond resolution to conform the dates of the bonds to the delayed sale schedule. Lieutenant Governor Owen moved to accept the TIC bid of 4.8352745 percent from Salomon Smith Barney, Inc., and to adopt Resolution No. 890. Chairman Murphy seconded the motion and the resolution was adopted. Chairman Murphy asked Mr. Kerr to introduce proposed Resolution No. 891 providing for award of sale of up to $51,910,000 State of Washington General Obligation Bonds, Series 1999S-2. Chairman Murphy stated that these bonds are, depending upon which school of thought is used, either zero coupon bonds or compound interest bonds. The structure of Series 1999S-1 and 1999S-2 coincides with the debt service requirements over time with the expected tax cash flows from the various tax sources that will support the debt. For some portions of the compound interest bonds there was insufficient cash flow to support the entirety of the debt on a current basis from the years 2000 to 2016. In the compound interest bonds, interest is accreting over time and not paid until maturity. So there are two separate concepts, one being a serialized coupon bond that we normally see, and the other to fit the cash needs and the cash flows. It is interesting to note that during the last year of the current interest bonds, the debt service for that year is approximately $9 million. The first year of the compound interest bonds is approximately $16.5 million. That is consistent with the expectations of the cash flows that have been identified by the Public Stadium Authority, the team affiliate, the Office of Financial Management, and the Office of the State Treasurer. Chairman Murphy pointed out that the chapter that authorized this issuance of debt has a cap of $300 million, but for the current interest bonds it is only the principal amount that is counted toward the $300 million number. This is similar to the serialized bonds where there is $68 million of principal and approximately $38 million of interest. Likewise, with the compound interest bonds the amount of principal actually borrowed is $19.6 million, and the amount of interest is approximately $32 million. Bond counsel Dan Gottlieb commented that it is the principal component of debt that is counted against both statutory limitations on debt as well as constitutional and statutory limitations on debt that the state can have. It is the $19.6 million portion of the compound interest bonds that will be counted against the various debt limits and the statutory $300 million for this series of bonds and the 7 percent statutory debt limit and the 9 percent constitutional debt limit. Mr. Kerr introduced proposed Resolution No. 891 providing for award of sale of up to $51,910,000 State of Washington General Obligation Bonds, Series 1999S-2. Mr. Kerr stated there were five bids for the Committee’s consideration today. The TIC bids for the record were: Merrill Lynch & Co., 5.5294355 percent; NationsBanc Montgomery Securities, 5.4072968 percent; Salomon Smith Barney, Inc., 5.4048226 percent; J. P. Morgan Securities, Inc., 5.3669181 percent; and Goldman, Sachs & Co., 5.3616643. Mr. Kerr mentioned that four of the bids for the 1999S-2 series and all of the bids for the 1999S-1 series were received electronically. He also mentioned that Mr. Svein Braseth of the Debt Management Team was responsible for setting up and testing the electronic bidding procedures and ensuring a smooth operation. He commended Mr. Braseth for his excellent work. Chairman Murphy echoed Mr. Kerr’s comments. Mr. Kerr noted that all of the bidders had provided SureBid surety as a good faith deposit and that Bond Counsel had reviewed all bids to ensure compliance with bidding rules. Mr. Kerr noted amendments to Resolution No. 881 to revise the issue date of the bonds. Mr. Kerr presented proposed Resolution No. 891 to the committee. Resolution No. 891 providing for award of sale of up to $51,910,000 (aggregate accreted value at maturity) State of Washington General Obligation Bonds, Series 1999S-2, authorized by Chapter 220, Laws of 1997, and Chapter 39.42 RCW. Lieutenant Governor Owen moved to accept the TIC bid of 5.3616643 percent from Goldman Sachs & Co., and to adopt Resolution No. 891. Chairman Murphy seconded the motion and the resolution was adopted. There being nothing further to come before the committee, the meeting was adjourned at 9:20 AM.
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