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5 BEFORE THE WYOMING STATE LEGISLATURE
6 SELECT COMMITTEE ON CAPITAL FINANCING AND INVESTMENTS
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9 SELECT COMMITTEE ON CAPITAL
FINANCING AND INVESTMENTS PROCEEDINGS
10 October 24, 2001
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1 P R O C E E D I N G S
2 (Meeting proceedings commenced
3 8:35 a.m., October 24, 2001.)
4 (Roll call taken.)
5 CHAIRMAN PARADY: That brings us to the
6 first order of business. Before I cut loose with Steve to
7 update us on CREG, what we hope to accomplish today,
8 Committee, is after we hear the CREG update we're going to
9 have an update from our state treasurer and consultant on
10 some capital financing and leasing options, and we have
11 three bills that we're going to go through today in some
12 fashion.
13 And as we work those bills, we're going to have
14 one more committee meeting to wrap the work, but we're
15 going to take the bills page by page and go through the
16 concepts and familiarize ourselves with them. One of them
17 you'll see for the first time today.
18 With that as a frame-up for the day's
19 activities, Steve, could you give us the update on the
20 CREG report?
21 (Report by LSO Sommers.)
22 CHAIRMAN PARADY: Next item on our agenda
23 is a discussion of the capital financing and leasing
24 options that would be led off by our state treasurer,
25 Cynthia, and our consultant, Mr. Curry.
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1 Please join us and welcome.
2 MR. CURRY: Thank you.
3 MS. LUMMIS: Thank you. Good morning,
4 Mr. Chairman, Committee. Let me remind you about why
5 Keith is here and why he will be making recommendations or
6 suggestions to you today.
7 On February 23rd when the Supreme Court's
8 decision came out about school capital construction near
9 the end of the last session, it became apparent to the
10 members of the State Loan and Investment Board that it
11 might be helpful for the State to have some outside advice
12 and expertise regarding capital financing proposals, not
13 only for schools but for other state capital construction
14 for the university and kind of take a comprehensive look
15 at where we are with regard to capital construction, how
16 we finance it and set up a mechanism to begin to consider
17 it.
18 So the State put out a RFP and Public Financial
19 Management was retained through the Newport Beach office
20 which Keith runs and Keith was retained to help advise us
21 in this regard.
22 So in July he met with the State, including the
23 State Building Commission, staff that we work with at A&I.
24 He met with the Game & Fish about their legacy trust
25 endowment concept. He met with the counties, cities, the
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1 university and with some folks regarding school capital
2 construction, including your own LSO staff and some staff
3 over at the Department of Education.
4 And then he began doing some independent
5 research. We began filtering him all kinds of
6 information, including the CREG estimates and other kinds
7 of information so he could come up with some
8 recommendations on kind of a comprehensive capital
9 construction package.
10 Now, the ideas that he's going to give you
11 today, I think, reflect a couple of things that are very
12 advantageous. One, it is very flexible for the
13 legislature.
14 Secondly, you're in complete control of how the
15 money is spent. If you decide you want to pay as you go
16 for schools or state buildings or the university, you make
17 that decision. If you decide you want to bond, you decide
18 to what extent and for what purpose and then you direct a
19 commission that is set up pursuant to this recommendation
20 on how to proceed. So the nice thing is the legislature
21 is totally in control.
22 Even though it creates essentially two
23 commissions, one under the work of the Select School
24 Capital Construction Committee yesterday and then a second
25 to deal with the issuance of bonds, there are some other
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1 options there. You can work with the WCDA or the Wyoming
2 Building Corporation in lieu of a new corporation --
3 rather, a new commission or you can use the new
4 commission. And if you choose the new commission, we also
5 recommend doing away with the State Building Commission
6 and having their duties subsumed by this new commission.
7 But that will become more apparent as we go on,
8 Mr. Chairman.
9 So with that, I'll turn it over to Keith, and he
10 can go through his presentation.
11 MR. CURRY: Thank you, Cynthia.
12 Mr. Chairman, members of the committee, it is a
13 pleasure to be back here with you today. We met in the
14 summer. We were just beginning this task and had a lot of
15 questions. We've had the opportunity now to spend a lot
16 of time with state officials, to talk with legislators, to
17 look at the numbers and to look at the decisions that's
18 come down on rehearing from the Court and we hope craft
19 some options for you to consider as you undertake the very
20 important task of trying to respond to the Campbell
21 decision.
22 If I could begin with the spiral book on page 1,
23 talk a little bit about our objectives, as you know, the
24 legislature must by July 1st of next year develop a school
25 finance structure to respond to the Court mandate.
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1 Fundamentally that means a school finance capital
2 structure based on statewide revenues and not based on
3 local effort or local taxes.
4 So also it is important for the legislature to
5 provide a funding strategy to address the Court-mandated
6 school capital needs. The Court was very specific, as
7 we'll talk about in a moment, in detailing what it thought
8 ought to be done and when it thought it ought to be done
9 in terms of meeting the school cap con requirement. And
10 so you need a strategy that responds to that schedule that
11 is set forth by the Court.
12 We also thought it was important for the state
13 to have an adequate financing vehicle for other statewide
14 capital needs. That was certainly a point driven home
15 during the course of our meetings throughout the summer.
16 We also saw the importance of having -- allowing
17 the State to initiate a major statewide widening program
18 and we'll talk about how that is important in the
19 presentation but certainly that stood out to me as one of
20 the most important capital needs of the state in the near
21 term. One of the other things was the need for
22 aeronautical-related expansion with your airports through
23 the state.
24 Just on page 2, sort of talk about the numbers
25 and how we get to where we need to begin for a solution.
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1 Mr. Chairman.
2 SENATOR GOODENOUGH: Mr. Chairman, may I
3 ask a question?
4 CHAIRMAN PARADY: Senator Goodenough.
5 SENATOR GOODENOUGH: How were the
6 objectives arrived at again? Who was involved in
7 formulating the objectives?
8 MR. CURRY: Mr. Chairman, the objectives
9 were derived in our discussions with the treasurer, with
10 the governor and various state officials as we went ahead
11 and had meetings during the course of the summer. Also
12 some of them reflect some of the feedback we got from some
13 of the various legislative hearings where we participated.
14 SENATOR GOODENOUGH: Mr. Chairman.
15 CHAIRMAN PARADY: Follow-up.
16 SENATOR GOODENOUGH: Was there -- this was
17 your opinion of the input you received from these
18 variation sources?
19 MR. CURRY: Mr. Chairman, yes, sir.
20 SENATOR GOODENOUGH: Thank you.
21 MR. CURRY: The Court directed the
22 legislature to develop a six-year plan. They developed
23 two-year projects totaling 264 million; four-year, 231
24 million; and a total program cost of 563 million, meaning
25 there were programs in years five and six they also wanted
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1 addressed.
2 State Department of Education escalated those
3 from the 1989 estimate to a current estimate of 610
4 million. Now when we project out through 2007, the actual
5 implementation of that schedule, and this is, if you will,
6 of a high water mark of the cap con requirement, it
7 reaches 708 million. That's if you spent the money on the
8 schedule in the amounts that the Court directed you to
9 spend.
10 Now we'll talk about why that may not be 708
11 million as we get on with the presentation, but it is
12 important to know that's sort of the maximum obligation
13 that the Court imposed upon the legislature and the
14 schedule that they imposed it on.
15 CHAIRMAN PARADY: Members of the
16 committee, I would like to clarify to you that the two
17 bills that we're going to work use that $708 million
18 number as an umbrella, as a high water mark, as was
19 stated, as a clear signal to the Court that we intend to
20 fulfill the full duty they've imposed on us. But it is
21 our expectation that the number is less than that. You
22 will see that number again and that is the basis for it.
23 Please proceed.
24 MR. CURRY: Thank you, Mr. Chairman. And
25 of course the State -- the Court said it must be a
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1 statewide equitable tax on all taxpayers and that the tax
2 is the prerogative of the legislature.
3 On the following page, page 3, you see how we
4 took the $610 million estimate of the State Department of
5 Education and projected it out given the Court's schedule.
6 And if you look at that line, that's called annual total,
7 what you see is the impact of the expenditures if you were
8 to attempt this on a pay-as-you-go basis, $98 million a
9 year the first two years, $144 million in the next two
10 years, and then $111 million.
11 To put that in perspective, the State is
12 currently spending about $65 million on school cap con, so
13 it is a sizable increase, a 50 percent increase in the
14 first two years and doubling -- more than doubling in the
15 next two years.
16 So when we sit back and ask the question can we
17 accomplish the Court mandate on a pay-as-you-go basis,
18 this is the implication of trying to do that on a
19 pay-as-you-go basis. It would require substantial
20 reallocation of funds from other programs.
21 Given that fact, we asked ourselves if we were
22 to finance the obligation placed by the Court, what would
23 the cost be. And I know we've come up with various
24 numbers and they always seem to get higher each time we
25 visit with you, but it is -- 43 and a half million would
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1 be the maximum debt service over 30 years.
2 And you see how we ramp up to that if we
3 financed that full amount using revenue bonds. We don't
4 reach that maximum debt service until 2007, but as you can
5 see, it makes that number more manageable in terms of the
6 overall state budget.
7 On the following page, just to give you some
8 background, you see the sources for -- page 5, the sources
9 of school cap con funding in the '01-'02 biennium
10 primarily driven by coal lease bonus payments, state
11 royalty, federal mineral royalties and a small amount of
12 loan payments which are scheduled to terminate after this
13 year, about $44 million annually. You've also transferred
14 in about $44.8 million over the biennium from the
15 legislative royalty impact account for these purposes.
16 On the following page, page 6, this shows you
17 how the financings would go. We've scheduled them in
18 two-year increments and you see debt service begins at 12
19 million, goes to 29 million and reaches 43 million, and
20 the last bond issue is implemented in the year ending
21 2007.
22 It is important to note you currently have a
23 mill levy subsidy requirement for local bond issues at 4.4
24 million. That's scheduled to drop rapidly and you'll see
25 that going forward.
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1 Page 7 shows you a cash flow of how the strategy
2 that we're going to recommend could be implemented. What
3 you see here if you look at the sources are the bond
4 proceeds. We've scheduled some interest earnings on those
5 bond proceeds because we issued them in increments and
6 half of that money is available to earn interest and
7 that's available to cover the debt service.
8 $8 million of state mineral royalty stays
9 constant, and what we've done is increased or proposed to
10 increase the federal mineral royalties going to education.
11 And we're proposing to divert those from federal royalty
12 payments currently going to transportation. We will talk
13 about that in a moment mechanically.
14 And you see in '03, '04 and '05 that that number
15 ramps up and that's because we're proposing a four-year
16 phase-in of the transfer of the federal mineral royalties
17 from transportation to education. And that number is $32
18 million, and so it goes 8 million the first year, 16 the
19 second year, 24 the third year.
20 The net effect of doing that is to provide an
21 additional $48 million of transportation funding during
22 those three years because they're going to have an
23 increase, as you see later, in the gasoline tax, so they
24 will -- and we're slowing the transfer away of the federal
25 mineral royalties, what happens is that transportation is
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1 the beneficiary of the $48 million.
2 CHAIRMAN PARADY: Follow up,
3 Senator Meier.
4 SENATOR MEIER: Mr. Chairman, let me back
5 up just a little bit. Maybe I missed something earlier.
6 Did you say in your previous testimony that we are
7 currently spending approximately 65 million a year on
8 school finance?
9 MR. CURRY: Yes, sir. If you look at page
10 5, 44 million and then over the biennium you put in an
11 additional 44 million in the legislative royalty impact
12 account. If you divide that, that's 22, and so 22 on to
13 the 44 is 66, and then a little bit less than that in '02.
14 SENATOR MEIER: Mr. Chairman.
15 CHAIRMAN PARADY: Senator Meier.
16 SENATOR MEIER: But even if you take that
17 66 million, your debt service is only 40-some million a
18 year. I'm wondering why we've got to raise gas taxes if
19 we only have a debt service of 40-some million a year and
20 we're already spending 60-some million a year. I would
21 just like to have that clarified.
22 CHAIRMAN PARADY: Mr. Curry.
23 MR. CURRY: Mr. Chairman, the senator had
24 a good question. I know when we were here last time you
25 raised the question about focusing on the coal bonus
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1 payment. This year they're a $30 million budget item.
2 They're proposed to drop to 27 million. CREG projection
3 puts them at 3.7 million for the next two years zeroing
4 out.
5 The change that we're proposing here is to take
6 the coal bonus payments and apply them as a source for
7 your consideration for statewide capital uses. And the
8 reason why we're proposing to do that is because coal
9 bonus payments, because of -- as you've heard the issues
10 with the revenue forecast are less suitable for
11 securetizing debt because you don't have a long-term
12 forecast for them.
13 So we believe a better use for those payments
14 would be to apply them on a pay-as-you-go basis to
15 statewide capital. You certainly have the prerogative to
16 apply them to school capital construction if you wish to.
17 But that is, if you will, the strategy that
18 we've proposed for dealing with the other capital needs of
19 the state, is to take that source which is increased over
20 what you currently provided on a pay-as-you-go basis and
21 use that in that way.
22 SENATOR MEIER: Thank you.
23 CHAIRMAN PARADY: Representative Osborne.
24 REPRESENTATIVE OSBORN: Mr. Chairman,
25 while we're interrupted here, what is in this plan for
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1 school capital construction after the six-year period?
2 MR. CURRY: After the six-year period is
3 ended you will have funded $708 million of school cap con
4 plus $42 million of pay-as-you-go major maintenance so you
5 will have had a program that has substantially changed the
6 physical nature of your school facilities to the tune of
7 three quarters of a billion dollars over this period. You
8 will have, I believe, excellent schools.
9 REPRESENTATIVE OSBORN: Mr. Chairman.
10 CHAIRMAN PARADY: Follow up.
11 REPRESENTATIVE OSBORN: You think we will
12 have no buildings that need to be replaced after that?
13 MR. CURRY: No, sir, what would happen is
14 as the bonds are paid off, as these revenue sources
15 grow -- and we've held them fairly constant here -- money
16 would continue to fall to the bottom line for major
17 maintenance for your use. You would also have the option
18 to use the coal bonus money if you wished to apply that
19 for school cap con or major maintenance going forward.
20 REPRESENTATIVE OSBORN: Thank you.
21 CHAIRMAN PARADY: Thank you.
22 MR. CURRY: So on page 8, the plan
23 recommends an increase in the gas and diesel tax by five
24 cents with those funds going to transportation and a
25 redirection of $38 million of the approximately 60 million
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1 of federal mineral royalty payments currently going to
2 transportation to go to school cap con.
3 And that would be phased in, as we discussed,
4 over four years, so that in the first four years
5 transportation would be a net gain to the tune of about
6 $48 million.
7 Now, why -- and I recognize that no tax increase
8 is popular. Why the gas tax? First of all, of the three
9 options that we primarily focused on -- half-cent increase
10 in the sales tax and a four-tenths or four-mill increase
11 in the property tax, the 5-cent increase in the gas tax
12 was the smallest of the tax increases.
13 If we tried to do a three mill, we wouldn't
14 raise enough money. If we tried to do a quarter cent
15 instead of a half cent, we wouldn't raise enough money.
16 So we thought that of those options, all fairly comparable
17 in terms of the money they raised, with the gas tax being
18 the smaller that this would be the better one.
19 We also take note of the fact that Wyoming is
20 one of the lowest gasoline taxes in America at 14 cents
21 and bringing it to 19 cents would still put you below the
22 national average.
23 We also thought, as we heard testimony across --
24 from folks that there was a need in the transportation to
25 make some serious capital improvements and by empowering
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1 DOT through increases the dedicated constitutionally
2 protected gasoline taxes they had available, that that was
3 a better strategy for addressing the transportation needs.
4 And by concentrating federal mineral royalties
5 along with some state mineral royalties on education, we
6 were, if you will, better rationalizing the allocation of
7 revenue sources that you've had by concentrating them more
8 on this purpose. We also thought that that would free up
9 the coal bonus payments for statewide capital needs.
10 Now, if you don't think transportation is an
11 important thing to fund now, or if you don't want to fund
12 statewide capital expenditures, we could mix those funds
13 up differently. But we had multiple objectives that we
14 were trying to accomplish, and we believe this strategy
15 takes those funding sources and, in the most rational way
16 that we could derive, addresses those needs.
17 And on page 9 we talk a little bit about how we
18 would go about implementing the strategy. First it would
19 require legislation, the Wyoming Capital Financing
20 Authority. We would authorize the issuance of revenue
21 bonds. We would stop the mill levy subsidy and local bond
22 guarantee programs for new financing. Ultimately that
23 will save the state about $4 and a half million that you
24 currently outlay in budget authority.
25 The State would provide either bond proceeds or
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1 cash grants for school construction. We've given you a
2 strategy here that meets the Court-mandated schedule. It
3 is very likely that schools may not be able to build on
4 that schedule, and if they don't, you're certainly not
5 obligated to issue those bonds. You may use pay-as-you-go
6 resources. So you have the option to meet those needs as
7 they actually present themselves.
8 Local school projects will be subject to a
9 school financing commission decision. That school
10 financing commission would review applications, review the
11 square footage costs, make sure that they're reasonable,
12 because there's now no longer any incentive for the local
13 districts to exercise cost containment, so that will fall
14 to the State and you will have the authority to do that on
15 the applications that come forward to you.
16 No local match or local taxes needed. That's
17 consistent with the Court decision.
18 Existing local school bond millage will roll off
19 as bonds mature. This is an important point because right
20 now that number is $24 and a half million. And as that
21 number -- those bonds are paid off, and we expect that
22 nearly all of them will be paid off between now and 2012,
23 $24 and a half million of property tax relief will be
24 provided as a result of the strategy.
25 Local districts can provide voter approved mill
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1 levy for local enhancements. Frankly, I would have
2 recommended that we not allow this after the initial court
3 decision, after the rehearing decision. It seemed to open
4 the door and provide for the ability of local districts to
5 finance. And so they can do that, but I would suggest
6 that the State no longer provide a mill levy subsidy or
7 other support for that process.
8 And again, construction costs review and state
9 project oversight is provided at the state level.
10 MS. LUMMIS: Keith, may I interrupt? When
11 he referred to the local school projects to be subject to
12 the school financing commission decisions, this is the
13 entity that the Select School Capital Construction
14 Committee is working on and it is called the School
15 Facilities Commission, but essentially it is -- it would
16 be the vehicle for implementing that provision of this
17 plan.
18 MR. CURRY: Mr. Chairman, on page 10,
19 we're proposing the Wyoming Capital Financing Authority as
20 bond issuer. They would issue revenue bonds secured by
21 state and federal mineral royalty revenues and would
22 allocate coal lease bonus revenues to school and state
23 capital projects in accordance and with your guidance and
24 direction.
25 Page 11, talked about this before. We believe
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1 that the gas tax is a better funding source for
2 transportation. Gas tax is partially paid by out-of-state
3 truckers and tourists. There will be property tax
4 reductions. While we're increasing taxes by 32 million,
5 we're gradually reducing them by 24 million through 2012
6 and gradual savings from elimination of mill levy subsidy.
7 We believe the reconfigured school capital
8 construction strategy will meet the Court mandate. School
9 funding scheme meets the Court criteria, and increased gas
10 tax funding substantially enhances the DOT project
11 capacity and provided $48 million of additional funds in
12 2003-2005. And of course that is at your discretion as
13 you make your own priorities in terms of legislation and
14 the implementation of this plan.
15 On page 12, back to the issue of coal lease
16 bonuses, because of the inability to make a long-term
17 forecast of coal lease bonuses, this is not a source
18 suitable to secure debt, so we're recommending you utilize
19 it as your funding mechanism for statewide capital
20 projects which can include school maintenance and can
21 include school cap con if the need arises.
22 SENATOR MOCKLER: Mr. Chairman.
23 CHAIRMAN PARADY: Senator Mockler.
24 SENATOR MOCKLER: On that you've estimated
25 it is $708 million for the schools. Do you have an
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1 estimate for what the State is looking at for state
2 capital construction, the University of Wyoming as a whole
3 bunch, the community colleges -- who else -- cities, towns
4 and counties do. Did you have an estimate of what that
5 other number is?
6 MR. CURRY: We don't have a complete
7 number. I know we've been talking about the university
8 about the Health Science Center that's in the near-term
9 objectives. Highways has a $600 million highway widening
10 program that we'll talk about shortly. Game & Fish has an
11 endowment program they want to put in place that part of
12 this money could be used for. We haven't really addressed
13 those priorities and certainly would leave that to the
14 legislature's discretion at this point.
15 SENATOR MOCKLER: To follow that up,
16 Mr. Chairman, I guess my concern is the school program
17 takes us to 2040 with the $708 million out there as bonded
18 indebtedness, assuming -- and you start adding up over the
19 next 30 years, 36 years because the school doesn't -- the
20 last one doesn't come in until 2030, so 30 years later,
21 whatever, my question is you're going to have a huge state
22 and university and everybody else's buildings capital
23 construction need out there that $30 million a year in
24 coal bonus payments, assuming it comes in for the 30
25 years, can't meet.
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1 So why would you even consider putting all of
2 your bonding authority and all of your debt into the
3 schools without knowing what that other half of the
4 universe looks like?
5 MR. CURRY: Well, as you know, and we'll
6 talk about leasing, it doesn't preclude any additional
7 bonding, Mr. Chairman, for other capital programs.
8 Certainly the university and other state programs who
9 receive their own share of federal mineral royalties may
10 bond against their share of funds as well. In addition to
11 that, the $30 million, as I recollect, about $8 million is
12 currently appropriated for statewide capital with bonds
13 going for the rest. This increases that number by almost
14 four times.
15 CHAIRMAN PARADY: Further discussion?
16 Senator Meier.
17 SENATOR MEIER: Mr. Chairman, the reason I
18 was looking at the coal lease bonus payments for this is
19 because once you know they're there, they're payable over
20 five years. That gives you a short-term five-year bond
21 and those payments are guaranteed over five years.
22 Of course you have to make the sale, as was
23 discussed earlier, but then you have that guarantee. The
24 short-term rate is a lot lower than the 30-year rate right
25 now for bonds, so the financing charge would be
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1 considerably less. We know that school construction, as
2 brought up earlier, is not a seven-year fix-all-problems-
3 and-no-problems-will-ever-occur-in-the-future.
4 And so I was hoping we could get a financing
5 mechanism, really, that would focus in on this particular
6 problem in the short term, spend the 65 million like we
7 currently are, use the five-year windows to augment that
8 and try to get everything moved up into a little bit more
9 of a realistic time frame as to when the monies are going
10 to be needed for future capital construction needs.
11 There's a lot in here I think we need to move
12 forward on, but there's a lot for this committee and the
13 legislature to digest. So I would be interested in
14 hearing the rest of the presentation, but I don't think it
15 is going to get rubber stamped today.
16 MS. LUMMIS: Mr. Chairman, you know, when
17 Keith is finished we can explain why this is the
18 worst-case scenario, the high-water mark, and then we're
19 going to show how it has been whittled down by virtue of
20 getting more information about which of the immediate
21 needs in the Supreme Court decisions have already been
22 met. That whittles it down considerably.
23 And then there's ways to structure the bond so
24 you can ask your bond council to draft all of the bonds so
25 they're payable anytime the State wants to pay them off.
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1 So then if you get gas prices back up to 9 bucks and you
2 want to pay off the bonds, you can pay them off anytime
3 you want.
4 There are so many variations on this that give
5 you the kind of flexibility to address problems as they
6 come on down the line over the years that we haven't
7 discussed yet because we're just giving you the worst-case
8 scenario framework, that maybe it would be a good idea to
9 let Keith finish the worst-case scenario framework and
10 then we can talk about all of the ways to soften the
11 impact of this and to give you tremendous flexibility in
12 the future.
13 CHAIRMAN PARADY: Senator, I just would
14 like to note, I'm not expecting any rubber stamp, but
15 we're going to work that bill page by page before we leave
16 today so that we have a common understanding coming into
17 our next meeting when we will reach our decisions.
18 Mr. Curry.
19 MR. CURRY: Thank you, Mr. Chairman. On
20 page 13, just to talk a little bit about transportation,
21 what we're also proposing is to authorize the
22 transportation commission to issue federal fuel tax-backed
23 GARVEE bonds, grant anticipation revenue vehicles now used
24 by between 12 and 15 states to leverage their federal
25 transportation funds.
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1 We're also, as we mentioned before, increasing
2 by $48 million over the next three years funds to
3 transportation from our pay-as-you-go basis. The
4 increased dependence on a user fee is consistent with the
5 transportation benefits received.
6 Now, as I understand it, the State has a program
7 to widen its two-lane highways and the cost is about $600
8 million. The current expectation is that that would be
9 implemented on a pay-as-you-go basis over 20 years. It is
10 possible for the State to finance that project and build
11 the projects as fast as they can possibly be built. They
12 would be nonrevenue constrained and those bonds would be
13 paid off in 15 years.
14 Now, why is this compelling to me? I was at a
15 meeting in Philadelphia two weeks ago with the ASHTO,
16 speaker from ASHTO, State Highway and Transportation
17 Officials, where he pointed out that 57 percent of the
18 fatalities occur on rural two-lane highways, and clearly
19 here in Wyoming we've had a tragedy in recent weeks that
20 simply points that out.
21 We believe that this allows the State to embark
22 upon a very ambitious, nonrevenue-constrained program to
23 make its highways substantially safer. You don't have big
24 problems with urban congestion, but you certainly do have
25 problems with traffic safety and there is a means for
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1 dealing with that.
2 Fifteen-year bonds would be about 4.25. I think
3 the Senator's point about low interest rates is very, very
4 right. Rates are very low. $28 million of remaining
5 mineral royalties would also be available to the State
6 should it wish to issue FMR-backed bonds for airport
7 enhancement. At DOT we've given the ability to do that,
8 should they have a program to move forward to do that, to
9 leverage federal aviation funds for that purpose.
10 On page 14 it simply gives you a chart of the
11 various options of what could be done on the
12 transportation front to finance the improvements that the
13 legislature and the transportation commission deem to be
14 important over the near term. But again, they're not
15 obligated to issue those bonds. It is a tool that we're
16 providing to the State to undertake a very important and
17 very extensive capital program should you choose.
18 Now, let me refer you to the nonspiralled
19 handout and talk a little bit about potential scenarios.
20 Saturday LSO was able to finally work through
21 the numbers of what has been spent so far and try and
22 apply those numbers against the LSO list that was the --
23 excuse me -- the MGT list that was the basis for the $610
24 million.
25 And we have two scenarios here that show you
26
1 that $710 million was indeed the high-water mark. The
2 first scenario doesn't include what you have spent over
3 the last three years on major maintenance. And, as you
4 can see, the $610 million is reduced to $542 million.
5 And if you project that out, you see spending
6 still increases substantially over current levels for a
7 total program of $632 million instead of $708 million.
8 So we're able to substantially -- and of course
9 whatever then falls through, back to the senator's
10 question of what is available for major maintenance, it is
11 the difference between what we put in place in the first
12 plan and what we actually have to do on the basis of
13 expenditures that we've already made, Mr. Chairman. And
14 you can see we've given you a new cash flow.
15 CHAIRMAN PARADY: Mr. Curry,
16 Representative Baker.
17 REPRESENTATIVE BAKER: I ask, does this
18 include the money that we have put into what we call
19 pipeline 2 projects, money that we've already set aside
20 and has not yet been spent?
21 MR. CURRY: Mr. Chairman, I'm told the
22 answer is yes.
23 MS. LUMMIS: Do you want to expound on
24 that, Dave?
25 MR. NELSON: Let's let him go first.
27
1 MR. CURRY: Again, reading through the
2 scenario, you see debt service is substantially reduced.
3 Maximum debt service would be 39.3 million. So you then
4 ask the question, do we need a nickel on the gas tax? A
5 penny raises $6.4 million. Here we've reduced the maximum
6 debt service by $4 million, so if we were to have a 4-cent
7 increase in the gas tax, we would still have to short some
8 program or make up about $2 million someplace else. It
9 could be done, but so you know how the numbers would play
10 out.
11 One option for your consideration, Mr. Chairman,
12 might be a phasing of any kind of a gas tax increase over,
13 you know, if a 3 cent, 2 cent, or 2-2-1 or something along
14 those lines, given the reduction requirement.
15 On the following page, page 5, we have a
16 somewhat more aggressive approach that says let's include
17 what we spent for major maintenance and apply that also
18 against the MGT estimate. And what happens here is that
19 that $610 million estimate -- Mr. Chairman, a question --
20 I'm sorry -- drops down to $459 million, and the
21 equivalent number to compare with the 708 million becomes
22 536.
23 That's a substantial savings. This probably
24 would allow you to reduce a penny or so on the gasoline
25 tax, if that were your option to do, and of course
28
1 additional funds would fall through for major maintenance
2 on an ongoing basis if this were the scenario presented to
3 the Court.
4 And, Mr. Chairman, I would simply say the
5 legislature has the policy choice, I presume, of what you
6 represent to the Court has been spent in responding to the
7 list they've provided you. And LSO can give you guidance
8 on their thoughts in that regard.
9 Where will we actually be? I think it will be
10 somewhere looking more like one of these two scenarios. I
11 think we've given you tools to solve a lot of problems, a
12 few problems or to have different optionality in how you
13 choose to address those issues, but I think fundamentally
14 we've given you a new funding strategy for addressing cap
15 con and a funding projection that demonstrates that the
16 Court -- to the Court that the legislature has indeed the
17 capacity to meet the requirement laid down by the Court in
18 its decision. I think that's the fundamental test.
19 So with that, I'm, of course, happy to answer
20 any questions.
21 CHAIRMAN PARADY: Question, Senator Hawks.
22 SENATOR HAWKS: Mr. Chairman, if we took
23 the aggressive approach and kept the nickel number
24 increase, could then the difference be used for other --
25 assuming that we provided for it, could that then be used
29
1 for the other capital state -- statewide capital
2 construction needs?
3 MR. CURRY: Well, Mr. Chairman, it would
4 certainly free up the coal bonus payments of about $30
5 million for other statewide needs. As you can see on page
6 6, the pay-as-you-go major maintenance line for education
7 increases up to about $10 million a year in the out years
8 after, assuming all of those bonds are fully issued.
9 So, yes, sir, we would have a larger increase
10 for school cap con -- for school major maintenance and a
11 substantial amount of revenue available for statewide
12 capital construction as well.
13 SENATOR HAWKS: Thank you.
14 CHAIRMAN PARADY: Questions,
15 Representative Baker.
16 REPRESENTATIVE BAKER: Mr. Chairman,
17 Mr. Curry, what are the advantages and can we quantify the
18 advantages of the State having a single bonding entity
19 compared to 48 school districts plus DOT plus, plus, plus,
20 plus? Can we quantify -- can we beat those costs by 1
21 percent, 2 percent, 1 and a half? Can we quantify that?
22 MR. CURRY: Mr. Chairman, yes, you can.
23 We have 48 small bond issues, they all have to have a bond
24 council, pay an underwriting fee, print an official
25 statement, all have to have a separate trustee. All of
30
1 those costs are duplicative and could be consolidated in
2 one issue.
3 A larger size issue -- and there is substantial
4 data on this -- would have a lower underwriting takedown,
5 which is the largest component cost of any financing. A
6 larger financing from a statewide issuer would likely have
7 a higher bond rating, and therefore, lower interest costs
8 over the term of the bonds.
9 In addition to that, you have the added benefit
10 of the statewide review of the construction cost estimates
11 and that oversight that helps to drive the cost down to
12 begin with. I think there would be a substantial cost
13 savings in terms of the financing costs related to this
14 approach versus the status quo.
15 REPRESENTATIVE BAKER: Mr. Chairman.
16 CHAIRMAN PARADY: Follow up.
17 REPRESENTATIVE BAKER: I agree it is going
18 to be cheaper. It is going to save us money. Can we
19 quantify and can you give us a range where we can
20 determine whether and how much better it is for us to do
21 it this way?
22 MR. CURRY: Mr. Chairman, to do so we
23 would need to go back and look at the individual
24 characteristics and cost components of the current bonds.
25 We can certainly do a projection of the cost components of
31
1 state-issued bonds and on that basis we could make an
2 estimate. I can't do it off the top of my head, but I
3 believe it would be in the range of at least a half a
4 percent to a percent in terms of total cost.
5 REPRESENTATIVE BAKER: Mr. Chairman,
6 another follow-up, if I may.
7 CHAIRMAN PARADY: Follow up.
8 REPRESENTATIVE BAKER: The -- is there any
9 method that we can tie up today's interest rates for bond
10 issuance over the next six years?
11 MR. CURRY: Mr. Chairman, yes, there is.
12 You could issue what are called forward-start bonds and
13 you would pay a small premium over today's rate for that,
14 but if your expectations were that operations were going
15 to go up, that would protect you at a rate that's
16 comparable to today's market. You could issue variable
17 rate bonds which are in today's rate market about 2
18 percent and lock those bonds into remarketing the
19 fixed-rate bonds at any point in time in the future.
20 You could advance the bond issuance. We like
21 to -- it is good practice to do them for two-year
22 increments, but you could try and front load the
23 construction requirements if the schools show they could
24 do that and move some of those bonds we have in the out
25 years to the front years to lock in today's rates.
32
1 Those would be among the techniques that could
2 be applied, sir.
3 REPRESENTATIVE BAKER: More questions.
4 CHAIRMAN PARADY: Please, follow up.
5 REPRESENTATIVE BAKER: Your first option
6 which was -- and those terms aren't sticking as they fly
7 by, but the first option was to --
8 MR. CURRY: Mr. Chairman, it is a forward
9 start bond, an agreement with an underwriter to sell bonds
10 in the future at a given rate, and for that you would
11 negotiate with them and they may pay you -- if they have
12 the option to cancel, they would pay you a premium today.
13 And if you wanted to lock in and not give the option, you
14 might have to pay an additional premium on top of today's
15 rate to do that.
16 REPRESENTATIVE BAKER: And what kind of
17 premium are we talking about?
18 MR. CURRY: Well, six years is a long
19 time. Typically these are done in the less-than-24-month
20 range. 18 months is probably really the outside maximum.
21 Six years would be cost prohibitive, I think, to do that.
22 CHAIRMAN PARADY: Representative Osborn.
23 REPRESENTATIVE OSBORN: Mr. Chairman,
24 thank you.
25 Have you got any sort of handle on this or
33
1 projection of what the total capital construction
2 requirements are going to be across the state, not just
3 the school but the highways and the university and on and
4 on? Do we have any feel at all for what that is?
5 MR. CURRY: We do on the highway front.
6 In addition to what they're currently -- Mr. Chairman,
7 what they're currently funding, they have had a 20-year
8 $600 million highway widening program, so we have a good
9 handle on that number.
10 On the school number, I believe that if this
11 program is implemented schools will be substantially
12 caught up. You will need to provide for ongoing
13 maintenance, but the major capital needs will be
14 substantially addressed through this program.
15 At the university and talking with Mr. Miller, I
16 understand that there's a health science facility that's
17 in about the $14 million range. It is a top priority to
18 move forward with.
19 Beyond that, we haven't talked about ongoing
20 requirements after that.
21 In the case of Game & Fish, they would like to
22 create an endowment program, and I don't know that they
23 and the governor have reached a number as to what they
24 believe is the appropriate number for that endowment
25 program.
34
1 Those are sort of the areas that we have focused
2 on. We've also had discussions about general state
3 facilities and how those are currently done presently. We
4 don't have a good forecast for what those needs are, to be
5 direct to your question, sir.
6 That's why we thought providing a pay-as-you-go
7 resource allows you, the legislature, the prerogative to
8 add or subtract from that pay-as-you-go resource as those
9 needs arise. That gives you greater flexibility in that
10 vein, sir.
11 CHAIRMAN PARADY: Senator Goodenough.
12 SENATOR GOODENOUGH: Mr. Chairman, I had a
13 couple questions.
14 You said that our gas tax is the lowest in the
15 nation, I think, so that implies you compared them all.
16 Did you also compare property taxes with the rest of the
17 nation so that we have an idea of where we stand with
18 those, because that was one of the options that you
19 mentioned?
20 MR. CURRY: Mr. Chairman, it is certainly
21 the lowest in the mountain states, 14 states. There may
22 be one or two states where it is lower than 14 cents. You
23 may not be the lowest, but you are the lowest of the
24 region and among the lowest nationally.
25 As for property tax, property taxes, there's a
35
1 lot of variance among the states and the real issue here
2 is the taxation of mineral and mineral extraction,
3 application of property tax which skews substantially the
4 revenue received from your property taxes so it is more
5 difficult to make a comparison.
6 If you look at the rate applied per 100 of
7 assessed value, property taxes are relatively low for
8 homeowners here, particularly given the exemptions that
9 apply.
10 MS. LUMMIS: Mr. Chairman.
11 CHAIRMAN PARADY: Treasurer Lummis.
12 MS. LUMMIS: Could I talk a little bit
13 about structurally how this would function and then
14 help -- and that might help explain where the flexibility
15 lies in this?
16 CHAIRMAN PARADY: Please proceed. And
17 understand, after we take a short break, we're going to
18 come back and work those two bills so that everybody has
19 the shape of the bill in their mind as we continue forward
20 with our debate.
21 Senator Goodenough, do you --
22 SENATOR GOODENOUGH: Mr. Chairman, I had a
23 couple more questions.
24 MS. LUMMIS: Excuse me.
25 SENATOR GOODENOUGH: I can see a lot of
36
1 thought and work went into this. Did you keep track of
2 the meetings that you had as this plan came together and
3 who participated and who was contributing their ideas? Is
4 there a list of the different people so that they can get
5 due credit?
6 MR. CURRY: Mr. Chairman, I didn't keep a
7 roster and I'm not sure that I could remember all of them,
8 frankly, by name. I've been here, I don't know, I think
9 seven or eight times perhaps since we began this
10 engagement.
11 MS. LUMMIS: Mr. Chairman.
12 CHAIRMAN PARADY: Madam Treasurer.
13 MS. LUMMIS: May I also explain that
14 there's a Supreme Court decision called the Witzenberger
15 decision that was decided in about 1978 that says you
16 cannot use tax revenues to pledge for bonds without a vote
17 of the people.
18 So if the legislature decides that it wants to
19 bond or at least have the authority to bond, you can't
20 pledge either gas tax revenues or sales tax revenues or
21 property tax revenues directly pledged to the bonds.
22 But if you decided, for example, you don't like
23 the gas tax, you would rather have a property tax, you can
24 still do that, but the way to do that is you would maybe
25 assess the four mills, have it paid into the general fund,
37
1 for example, and then you would take a commensurate amount
2 of state return on investments income and pledge against
3 that.
4 So you do have to do a fund swap. It doesn't
5 mean you have to do gas tax for federal mineral royalties.
6 You could also do property tax for interest income or some
7 other combination, but you can't do a direct pledge of tax
8 revenue without a vote of the people.
9 So that's one answer to your question about can
10 you use other taxes. I think the answer is yes as long as
11 you have some fund swap mechanism.
12 REPRESENTATIVE HUCKFELDT: Mr. Chairman.
13 CHAIRMAN PARADY: Representative
14 Huckfeldt.
15 REPRESENTATIVE HUCKFELDT: To jump in
16 right here, why do we take the approach not to go to the
17 people for their vote to do this?
18 MS. LUMMIS: Mr. Chairman, you can. If
19 you decide, for example, that you would rather have voter
20 approval of some of this, you could put that on the ballot
21 and then pass some legislation that would take effect only
22 if the voters said no. Because you still have to comply
23 with the Supreme Court's decision, so you have to have
24 some mechanism in place to comply with it.
25 But if you want to go to a vote of the people on
38
1 a tax, you can. You can, but you better have a backup
2 plan in the event the voters say no. That would be my
3 suggestion.
4 CHAIRMAN PARADY: Further questions,
5 Senator Goodenough.
6 SENATOR GOODENOUGH: Mr. Chairman, back to
7 my point, I think it is strange that we have an extensive
8 program here and there's no ownership or sponsorship
9 listed. I think it would be nice to know who was brought
10 into the discussions as this whole thing progressed so, to
11 the best of your memory, perhaps you could list the groups
12 that you met with because some of this is very new. The
13 aeronautics part of it, I haven't heard that discussed at
14 any point before. So I think it would be nice to know
15 what great minds contributed to this document.
16 CHAIRMAN PARADY: Senator, my
17 understanding is we have the work product before us of six
18 months of intense activity coming out of the SLIB,
19 governor's office, treasurer's office, the highway
20 commission and we're about to launch it into the
21 legislative process where it will get full scrutiny.
22 Madam Treasurer.
23 MS. LUMMIS: Mr. Chairman, as far as the
24 process would go about how this would be implemented, if
25 you create the School Facilities Commission as is
39
1 recommended by the Select Committee that met yesterday, it
2 would have a mechanism whereby they would have project
3 oversight and cost control and they would make
4 recommendations to you, much in the way that the Water
5 Development Commission makes recommendations to the Select
6 Water Committee.
7 So they may come to you and say, "These projects
8 we recommend for major maintenance of schools. These
9 projects we recommend for new. And they may even, if you
10 wish, say, "And of the new projects, we recommend that
11 this portion be paid for with pay-as-you-go dollars and
12 this portion be paid for with bonds."
13 Then the legislature makes the determination
14 about what would be built, what would be repaired, with
15 what dollars, for what purpose, and whether you bond or
16 not.
17 Then that recommendation would go to the capital
18 financing entity that you will be considering momentarily.
19 Their function would be largely ministerial with regard to
20 taking direction from the legislature and spending either
21 full bonus payments the way that you direct them to or
22 spending federal mineral royalties the way you direct them
23 to or issuing bonds the way you direct them to.
24 So that's how the mechanism works with regard to
25 the funding.
40
1 Now, there's some provisions in there for --
2 because this entity would not be looking only at school
3 funding, it would also be set up to handle nonschool
4 capital construction funding. There's a provision in
5 there to do away with the State Building Commission and to
6 consolidate its duties under this new entity, so this new
7 entity would have project oversight over nonschool
8 building and could also be authorized by you to expend
9 pay-as-you-go dollars for nonschool building or bond
10 proceeds for nonschool building.
11 But the point here is it is all under your
12 direction, so if you were to, for example, say, "We really
13 believe the right number with regard to schools is the
14 $563 million number," you could give this new entity, this
15 capital financing entity the authority to bond up to $536
16 million.
17 But maybe you would never exercise the vast
18 majority of that bonding authority because maybe over the
19 years when the legislature meets you would see natural gas
20 prices go back up to $9. Maybe you would have $100
21 million that you could throw into school capital
22 construction on a one-time basis and that would defer the
23 need to bond further into the future.
24 So that's why I think this provides a lot of
25 flexibility for you. It gives you a number that you can
41
1 show the Supreme Court and you can show the plaintiffs
2 that say, "We met the Supreme Court requirement. We have
3 put in place a mechanism to pay for all of the school
4 capital construction that they require." But in addition,
5 you've provided enough flexibility for yourselves to bond
6 when you have to, but to pay as you go when you want to
7 and you're able to.
8 So that's what I think is the nice flexibility
9 that provides the legislature with this kind of structure.
10 Whether you pay for it with gases or mills or whatever,
11 that's entirely up to you.
12 CHAIRMAN PARADY: Senator Goodenough.
13 SENATOR GOODENOUGH: Mr. Chairman, the
14 State Building Commission is the five elected statewide
15 officials, correct?
16 MS. LUMMIS: Correct.
17 SENATOR GOODENOUGH: And the proposal is
18 to take them out of the picture altogether where you have
19 some accountability to the voters and replace that with an
20 appointed group from somewhere, is that the idea?
21 CHAIRMAN PARADY: The proposal and the
22 bill draft that we're going to review shortly is a
23 seven-member commission appointed by the governor, advice
24 and consent of the Senate.
25 SENATOR GOODENOUGH: Mr. Chairman, I
42
1 wanted to make the point you're taking out of it the five
2 elected officials and replacing it with a gubernatorial
3 appointment commission.
4 MS. LUMMIS: Mr. Chairman, yes, that's
5 what it will say in the draft that you will be looking at
6 this afternoon. And I thought that would be one of the
7 attractive parts of this, is to get the five elected
8 officials out of it. But you may disagree.
9 SENATOR GOODENOUGH: Mr. Chairman, from
10 your point of view I can see that.
11 CHAIRMAN PARADY: Somewhat similar to the
12 water commission.
13 Further questions at this point in time before
14 we move into the bills.
15 SENATOR KUNZ: Mr. Chairman.
16 CHAIRMAN PARADY: Senator Kunz.
17 SENATOR KUNZ: I have a quick question and
18 a statement, too. I kind of like the idea of voter
19 approval of tax increases and having an alternative plan.
20 But the question I would like to ask right now,
21 Mr. Chairman, and it is a minor point but a serious one to
22 me, is of Mr. Miller, if I could, please.
23 CHAIRMAN PARADY: Please.
24 SENATOR KUNZ: Mr. Miller, has the
25 university hit its ceiling on bonding for their current
43
1 FMR revenue stream?
2 MR. MILLER: Mr. Chairman, the
3 university's federal mineral royalties, the status of that
4 is as follows: We received 6 and three-quarters percent
5 of the stream, that's $13.4 million, a year. All of that
6 money is pledged to cover bonds.
7 However, just as is the case with state
8 revenues, just because it is pledged doesn't mean that's
9 where it is spent. Today $4.5 million per year is needed
10 to make the bond payments. That's not the total bond
11 payments that the university makes because some of our
12 bond payments are paid by student fees. Like for the
13 student union, for the food center, the renovation
14 starting there, that will be food service fees.
15 The balance of that money -- actually, since it
16 is tied up for facilities, the balance of that money is
17 actually in the university's operating budget for that
18 facilities, maintenance, utilities, part of our utilities.
19 That's where the rest of the money is.
20 So that money is committed to be spent, the
21 balance of it, but only today 4.5 million is actually used
22 to pay bonds in committee. That money will start being
23 freed up in about three years. That will begin to come on
24 line. So I would just say to make a distinction between
25 that which is pledgeable versus that which is available.
44
1 All of your federal mineral royalties are
2 pledgeable, but right now if you look at it, you're
3 spending those federal mineral royalties for the school
4 foundation program and other kinds of things. Keep that
5 distinction in mind. But that's the status on the
6 university's federal mineral royalties.
7 SENATOR KUNZ: Thank you.
8 CHAIRMAN PARADY: Further questions.
9 Members of the committee, I would like to take a
10 ten-minute break before we move to the bills.
11 (Recess taken 10:00 a.m. until 10:15 a.m.)
12 CHAIRMAN PARADY: The next item on the
13 agenda, I believe it was Senator Kunz's request at the
14 last meeting, we invited Senator Applegate to join us to
15 discuss some ramifications and considerations around
16 leasing. So I would like to ask Senator Applegate to take
17 the hot seat and we'll dig back in.
18 MR. APPLEGATE: Thank you, Mr. Chairman,
19 members of the committee. I'm Jim Applegate. I'm the
20 director and the chairman of the board of the Wyoming
21 Building Corporation. I've been invited this morning to
22 address you concerning the operation of the Wyoming
23 Building Corporation and what we have been able to do over
24 the few years that it has been in existence.
25 The Wyoming Building Corporation is a nonprofit
45
1 corporation organized under the Wyoming Nonprofit
2 Corporation Act. It is a public benefit corporation. We
3 were established by filing our articles of incorporation
4 with the Wyoming Secretary of State in April of 1998.
5 The Wyoming Building Corporation serves as an
6 issuer of bonds, and we have done this in connection with
7 the building of the new portions of the prison at Rawlins.
8 The first issue was started in 1998. We then
9 had another issue in 2000, and we had another issue this
10 year; 50 million the first time, 10 the second and about 9
11 the third. Roughly about 71, $72 million in bonds are now
12 outstanding for this project.
13 And it deals with the lease, as a form of
14 financing these public projects through a lease mechanism.
15 And I would like to describe to you that lease mechanism
16 that we use and have used successfully thus far with the
17 state prison.
18 The board of this corporation is composed of
19 five nonpaid members: Arthur Ellis from Cheyenne, a
20 former state employee and a former banker; Van Johnson, a
21 banker from Evanston; Carl Kilmer, an accountant in
22 Casper; and Michael Houston, a banker in Casper; and
23 myself.
24 The articles of incorporation provide that upon
25 the dissolution of the issuer, the board of directors
46
1 acting as trustee, would pay any remaining amounts, and
2 after paying of liabilities, the issuer would then
3 distribute all of the assets of the issuer to the State of
4 Wyoming.
5 The present directors serve staggered terms and
6 the successors to the directors are chosen by the existing
7 directors.
8 The articles of incorporation expressly prohibit
9 private remuneration to the directors. No salary can be
10 received by a director, but only reimbursement for actual
11 expenses.
12 The purpose for which we have been organized and
13 the project which we've accomplished has been for the
14 building of the high-security special needs facility at
15 Rawlins, the new administration building there, the
16 warehouse/maintenance building, a second inmate housing
17 pod and now the construction is going on on the
18 kitchen/laundry facility.
19 How that works is probably best described to you
20 as a series of leases. The State Building Commission and
21 the Department of Corrections already had a specific
22 project, expansion of the prison with new, modern
23 facilities. The plans had already been developed,
24 complete construction plans. They were ready to issue a
25 construction request, a request for construction bids.
47
1 And at that point, then, the State Building
2 Commission, through the Department of Corrections,
3 directed that a -- after approval by the legislature,
4 directed that a site lease be executed between the State
5 of Wyoming, Department of Corrections, which owned the
6 land, and the Wyoming Building Corporation. Bare ground.
7 We then entered into another agreement which
8 would have the Wyoming Building Commission agree to -- or
9 have the Wyoming Building Commission -- excuse me -- the
10 Wyoming Building Corporation employ on track with the
11 State Building Commission in order to develop a building,
12 an agreement to construct.
13 As part of that, once the construction was
14 completed by the State Building Commission and its
15 contractors that it employed, then the right to occupy was
16 then given back to the Wyoming Building Corporation.
17 The effect then is that the Wyoming Building
18 Corporation has entered into a state prison lease to
19 operate that prison, and that operation, of course, takes
20 place with the Department of Corrections.
21 The Department of Corrections receives each
22 biennium appropriation by the legislature and it pays rent
23 for this facility which it is leasing from the Wyoming
24 Building Corporation under the state prison lease.
25 When that rent is paid, it goes directly to the
48
1 trustee of this bonding procedure through an indenture, in
2 effect a mortgage that the Wyoming Building Corporation
3 has given to the Wyoming Bank and Trust Company here in
4 Cheyenne as trustee.
5 And that entity, the bank as the trustee, takes
6 that money and pays the expenses of principal and interest
7 on the bonds. Based on these various agreements, the site
8 lease, and the state prison lease and this indenture,
9 Wyoming Building Corporation has gone out and issued bonds
10 and sold them all over the country and have that money
11 available, then, to -- for the trustee who receives the
12 bond money to pay for the expenses which are incurred
13 during the agreement to construct.
14 It is a fairly simple procedure. It is one that
15 has been in place, as I say, for about four years now,
16 three years. And it is working well. It is a possibility
17 of a financing vehicle that you can use for other state
18 projects, either school or capital projects, construction
19 projects.
20 Basically it would require no further authority
21 from the legislature for this Wyoming Building Corporation
22 which is authorized specifically by statute in a similar
23 way to which you have earlier authorized the Wyoming
24 Community Development Authority.
25 But it can issue bonds for a particular project.
49
1 It is specific to a site, a particular project, because it
2 does depend on these leases, lease-back situation.
3 At the end of the lease or along the way in the
4 lease there is a purchase option which is available to the
5 State. As a further security -- well, there's one aspect
6 of the appropriation and the support for the lease payment
7 on the state prison lease. In this case the legislature
8 in any given biennium would not fund the Department of
9 Corrections, which is unlikely, but in case it did not,
10 the appropriation would not be made, there would be no
11 payment, of course, on the bonds to the trustee by the
12 Department of Corrections to be distributed to the
13 bondholders.
14 There is a security feature in there, a part of
15 the cost of issuance of the bond is AMBAC Assurance
16 Corporation which has guaranteed payment of those
17 bondholders in that event and in the event of default and
18 so that there is the security there for them.
19 The reason for that, of course, is that you
20 cannot pledge the revenues beyond the appropriation
21 period, so that every two years, why, that rent
22 appropriation does have to be authorized.
23 That's very general, very simple what we've
24 done. As I say, we're pleased with the way it has
25 operated and, as you know, portions of the prison are
50
1 actually now in use and some rent monies are flowing there
2 to the bondholders and others with more to come as they
3 finish the other portions that are still under
4 construction.
5 CHAIRMAN PARADY: Questions.
6 Representative Baker.
7 REPRESENTATIVE BAKER: Mr. Chairman,
8 Former Senator Applegate -- Senator Applegate,
9 Mr. Applegate --
10 MR. APPLEGATE: How about Jim?
11 REPRESENTATIVE BAKER: Jim? How could or
12 could something like that -- as you know, we're working on
13 trying to fix the school capital construction problem.
14 MR. APPLEGATE: Right.
15 REPRESENTATIVE BAKER: How could some of
16 this work as we look at schools? Could we use the same
17 kind of mechanism? Typically schools own their buildings,
18 school districts own the buildings and their lands,
19 everything. Could we lease it to them and then we're
20 obligated to pay it back to them -- pay it back?
21 MR. APPLEGATE: Mr. Chairman,
22 Representative Baker, it occurs to me that this vehicle
23 could be used in a school situation. It would take a
24 lease, site lease from the owner of the ground, the school
25 district, to the bond issuer, Wyoming Building
51
1 Corporation, whatever, if you were going to use this lease
2 option.
3 There would then be an agreement to construct,
4 probably instead of with the State Building Commission,
5 with this authority that was talked about in the proposed
6 bill yesterday before the school cap con committee.
7 REPRESENTATIVE BAKER: School Facilities
8 Commission.
9 MR. APPLEGATE: School Facilities
10 Authority, which like the Wyoming Water Development
11 Commission, as I understand it, would prioritize and
12 categorize their various projects and move them from one
13 level to another level to another level with legislative
14 approval along the various three or four years of
15 development of the project.
16 When it got to the specific time of ready for
17 construction and ready for financing, this, then, could
18 take place. You would have the agreement to construct
19 probably through that financing authority, and then -- or
20 construction authority -- return it back to the -- at the
21 end of construction the leaseholder, Wyoming Building
22 Corporation, would come back into play.
23 They would have then the school operation lease
24 which would come back to the district and the district, as
25 it developed its revenues, either from appropriations or
52
1 their -- it would come back then down through the
2 corporation through the indenture to the trustee.
3 The other aspect of it is I suppose you could
4 continue that financing authority, construction plan
5 group, but authority. The money could flow through there
6 from whatever dedicated revenue source the legislature
7 would put into place for this whole program when they
8 initiated the approval of a particular project.
9 I think that this would only work for a specific
10 project. I don't see it working, really, for a broad
11 omnibus of different projects as suggested by the previous
12 testimony. But I do think it would work for schools. It
13 would have to work, I think, on a specific site basis.
14 CHAIRMAN PARADY: Follow up.
15 REPRESENTATIVE BAKER: If I may, are you
16 saying -- I'm a little bit confused by your answer. You
17 said it would only work for a specific project, but then
18 you said schools. To me that's probably three or four
19 projects at a particular time maybe in construction.
20 Could you clarify that?
21 MR. APPLEGATE: Yes, it could work for
22 school projects. I think you should have a lease back for
23 this, a lease on the side and a lease back for the
24 operation. I think each particular school building or
25 school construction project would have to have a separate
53
1 set of leases.
2 Now, you could have those flow all into one bond
3 indenture, finance maybe three or four in a year as
4 authorized by the legislature as those projects would
5 mature to level 3 or level 4, whatever the construction
6 level would be.
7 REPRESENTATIVE BAKER: Mr. Chairman.
8 CHAIRMAN PARADY: Follow up.
9 REPRESENTATIVE BAKER: In your mind would
10 it -- it appears to me you seem to be saying with the
11 bonding authority over here for -- let's say, the four,
12 five school projects that are expected in one year would
13 be over here and the construction management or oversight
14 would be a separate entity and clearly delineated between
15 the two would work any agreements between the two? Am I
16 understanding you?
17 MR. APPLEGATE: Yes, I think you do.
18 CHAIRMAN PARADY: Senator Mockler.
19 MR. APPLEGATE: That's basically the
20 system we have with the state prison. We have the State
21 Building Commission which is directing the construction,
22 according to the agreement to construct with them -- that
23 we have with them. Of course the Department of
24 Corrections which will actually operate the facility, pay
25 the rent, pay off the bonds through its bond payments and
54
1 from whom we got the site lease, they're a player in that
2 situation because, you know, they have the input to the
3 type of construction they want and so on.
4 So basically I would substitute for the State of
5 Wyoming, Department of Corrections portion of it, the
6 ownership, a school district into the scenario, and then
7 for the State Building Commission, that would be the
8 authority which would decide this is the building to be
9 constructed or this is the district that needs some
10 construction in it, this particular project.
11 REPRESENTATIVE BAKER: Would you see --
12 Mr. Chairman, would you see a problem with the building
13 corporation -- I'm getting confused -- the entity that
14 you're in -- overseeing a significant number of bond
15 issuances with, as you said, just reimbursement for your
16 actual expenses? It appears to me that it could become
17 quite time consuming and maybe there might be a need
18 for -- if we were to proceed down this with basically a
19 volunteer group putting their time in.
20 MR. APPLEGATE: If a considerable --
21 Mr. Chairman, Representative Baker, if a considerable
22 number of lease projects were bonded through this lease
23 option, there could be a requirement for a more -- for
24 some more administration.
25 Basically right now what we have is this
55
1 volunteer group of directors. We hire on a time basis
2 Mr. Bachellor of the Kaiser Company to be our executive
3 director, executive secretary, I guess, is the title they
4 have given him and he draws some minutes for us.
5 Once we get the direction and agreement with the
6 State to go ahead with the bond issue, that, of course,
7 has been taken care of by bond counsel and their outside
8 third parties that have basically contracted with the WBC,
9 and they go through it. It is a short time, probably
10 about a two-to-three-month process from the time the
11 legislature, for instance, in the last session authorized
12 us additional bonding for building the kitchen and laundry
13 facility at Laramie -- at Rawlins, and then they started
14 working on the addendum, complete copy of all of the
15 documents and resulted in an operating circular.
16 And that then took place in May, so there was
17 about a two and a half month framework there. The first
18 one took us a little bit longer. The administration
19 really of the payout of the bond proceeds to pay for the
20 construction and the administration of the receipt of the
21 rent payments to pay the bondholders, principal and
22 interest, comes with the trustee, so the burden is there.
23 The best example that you have in the state
24 right now for a bond operation, I think, is the WCDA, and
25 longevity that it has had and the way that it handles
56
1 everything. They do have a good deal of in-house
2 administration with the various programs they have, but
3 those wouldn't really be required or likely to develop
4 with this type of lease option so far as schools are
5 concerned.
6 CHAIRMAN PARADY: Further questions from
7 the committee?
8 Representative Osborn.
9 REPRESENTATIVE OSBORN: Jim, I stepped out
10 for a minute. Did you discuss the arbitrage aspect of
11 this thing?
12 MR. APPLEGATE: There is arbitrage in it,
13 so that requires that any excess funds that would be
14 developed through interest gained on these bond issues is
15 used in the project within a certain period of time.
16 So we have met one deadline on the $50 million
17 one and have taken care of that so that there is no
18 additional expense or taxation because of that.
19 We're -- we have deadlines set as we go through
20 this process of -- for the other two, and the likelihood
21 that we will have to pay any excess tax on it -- tax on
22 that excess is not likely and we have plans to overcome
23 that.
24 CHAIRMAN PARADY: Follow-up.
25 REPRESENTATIVE OSBORN: I guess I was
57
1 really thinking about the difference in your -- the rate
2 on the bonds versus the rate of a general return on funds.
3 That was one of the reasons we went for this idea was that
4 there was a fairly substantial percentage difference there
5 at the time.
6 MR. APPLEGATE: Mr. Chairman, in August we
7 had a report that the state treasurer's office was
8 averaging about 7.8 percent on their investment portfolio,
9 and the cost of financing a series 2001 project bonds was
10 5.3 percent.
11 So in that one transaction alone just on those
12 comparisons we have saved the State probably 2 and a half
13 percent on $9 million in bonds.
14 CHAIRMAN PARADY: Further questions?
15 Senator Mockler.
16 SENATOR MOCKLER: Mr. Chairman and Senator
17 Applegate, I guess backing up to maybe where
18 Representative Baker was, it seems to me you would only be
19 able to do this if first the State gave the authority to
20 the building commission to also do school capital
21 construction, but then when any individual project came,
22 that individual school district has to come to you and we
23 have to sell the money to them, they have to come to you
24 and fund the projects because there are lots of school
25 districts out there that are richer, they will have more
58
1 money than the state, so you will end up with ownership
2 problems if the whole thing doesn't come from the school
3 district.
4 The state can't be part owner of the building,
5 and one wealthy school district decides they need six more
6 gyms added owning the other part. Is that how you
7 envision it? You couldn't come in and say fund the
8 Powell, Laramie, Riverton, Laramie schools from the
9 legislature's perspective because Powell may decide they
10 want a bigger gym and have to pay for it themselves. Is
11 that how it would work, you would have to deal directly
12 with each individual school project?
13 MR. APPLEGATE: Mr. Chairman, Senator
14 Mockler, I think in that situation you would have to have
15 the input of the school district with this construction
16 authorization program or authority that you would have to
17 develop the particular project. And I'm not sure, you
18 know, under the way the bill might be constructed,
19 whatever you looked at yesterday, how an additional
20 facility that the particular district thought they wanted
21 would fit into that.
22 I think that what you would be doing through
23 this authority would be prioritizing and developing how
24 you go about constructing and then financing what the
25 authority would consider as necessary for that particular
59
1 district.
2 The simple mechanics of how the site lease might
3 work or how the operation lease might work would have to
4 involve the school district, obviously, because they're
5 the ones that own the land and the building that's being
6 replaced, and they eventually will need to be able to
7 control and operate that building.
8 Exactly how that money gets funneled in to back
9 up and pay off the bonds under the lease program, I think
10 it probably is flexible. In my mind it could be operated
11 through that school district or it could be operated
12 through that authority that would -- the Wyoming Water
13 Development Commission type of authority.
14 CHAIRMAN PARADY: Thank you.
15 Follow up? Further questions from the
16 committee?
17 Representative Osborn.
18 REPRESENTATIVE OSBORN: I thought the
19 question was we will have a building that's jointly paid
20 for by the school -- by the school district and the State,
21 in that case, where the school district has added an
22 enhancement of, say, 10 percent of the value of the
23 school. Then if we were to bond that, who owns the
24 building, I guess is the --
25 MR. APPLEGATE: Well, Mr. Chairman,
60
1 Representative, if you have two parts to one building,
2 then obviously you would have to have something different
3 than I just described for Senator Mockler. If you have
4 two separate buildings, I don't see any problem there
5 between -- because the school district should own and does
6 own and would operate the thing.
7 If you have two separate -- I mean if you have
8 two parts of one building from a district enhancement
9 versus what the State considers is a necessary aspect of
10 the building, a necessary portion of the building, it is
11 possible that you could -- if they were in separate
12 sections, it is possible you could lease one side and not
13 the other.
14 There are things that work that way. You go out
15 to Little America, you walk in and out of the city a
16 couple times walking to and from the liquor-dispensing
17 facility. So there are ways to do something like that.
18 There are -- probably what you would do is have a -- you
19 would have to have a site lease which would give your
20 security and your form of payment for that indenture. It
21 wouldn't be impossible to have two separate entities or
22 items in one building that would have two different
23 financing sources if you used the lease option.
24 The other thing in a situation like that I
25 suppose is you're really not going to go in to the State
61
1 using a lease option bonding mechanism on a particular
2 project until you have it through this development -- the
3 various levels of development situation.
4 You're not going to get a project through there
5 until you have complete input from the project owner or
6 the project manager, that is, the school district. So if
7 it would come about then you would have a two-part entity
8 or building that you would need to pay for, it would seem
9 to me at that point the decision could be made it is not
10 appropriate to use the lease option on this one, on this
11 project, but maybe use it for some other project.
12 I'm not suggesting to you that in looking at
13 bonding as a source of financing for school construction
14 or any capital construction that you should restrict
15 yourself to the lease option. I'm just saying that's one
16 additional vehicle that you could use.
17 Pick and choose, you can use it on this project
18 and not on that one. That would be the decision of the
19 legislature at the time the authority came to it to fund a
20 particular construction on a particular project.
21 CHAIRMAN PARADY: Members of the
22 committee, I would like to wrap this up in the next five
23 minutes or so because we do -- not to deaden your appetite
24 for what's coming, but we have 80 pages of bills that
25 we're going to walk through.
62
1 There is time for some follow-up, and not on the
2 Little America thing which I had not heard before.
3 SENATOR MOCKLER: I guess that's
4 essentially what it comes down to, it is an option. If
5 you have the perfect school without any enhancements and
6 you took a cookie cutter of a state school, this is an
7 option. If you're working with a district that wants the
8 classrooms 110 square feet instead of 100 square feet and
9 they're willing to pay, maybe this makes it much more
10 complicated.
11 That's what I was trying to get at. If you use
12 this option you have to be very careful about who is
13 paying and who owns what and who thinks they own what. It
14 would only work in the perfect cookie cutter school
15 situation.
16 CHAIRMAN PARADY: Or it would work best.
17 Representative Baker.
18 REPRESENTATIVE BAKER: Mr. Chairman, I
19 was -- as we discussed yesterday, in the school capital
20 construction the issue was brought up by Senator Massie
21 that someone may very well or some districts may very well
22 want to enhance or use their enhancement dollars maybe to
23 add to the electronic capabilities within a building if
24 we're by law required to build for them to replace and
25 that's integral.
63
1 But typically most people are thinking
2 enhancements would be auditoriums, gymnasiums,
3 natatoriums, those kinds of things. That's what we
4 naturally presume.
5 But you can't presume that in every situation.
6 There may very well be some educational innovations that
7 may be integral to a building that may tie some of this
8 ability to lease or to build through a lease option kind
9 of situation -- it may tie that, which goes right to
10 Senator Mockler's point.
11 And so that's something we should keep in mind,
12 that these enhancements, specifically as laid out by this
13 latest Supreme Court ruling, complicates things to a very
14 large degree now that local enhancements are blessed and
15 actually required of us to allow in most situations.
16 CHAIRMAN PARADY: Mr. President.
17 SENATOR COE: Mr. Chairman, thank you, I
18 asked Cynthia yesterday and kind of put her on spot who
19 owns the building. But after thinking about it last
20 night, I think what the State is involved with based on
21 the Campbell III decision is we're making grants to
22 districts out there, okay, at the level that we determine
23 the adequacy standards dictate, period. Districts on top
24 of that have the ability to provide enhancements.
25 I don't think the issue is clouded at all. I
64
1 think the ownership of the school after we give a grant
2 stays with the school, period. If they want to do
3 something else over on top of that, that's their
4 prerogative.
5 The lease is with the school for the property,
6 whether or not it has a planetarium, two swimming pools or
7 not. So I think the issue is not clouded. I think it is
8 clear-cut. I think the State, for all intents and
9 purposes, based on Campbell III is giving a grant at the
10 level -- we used the term yesterday, Senator Devon,
11 adequate standards. That's all we're involved in funding,
12 period. We're just part of the funding. They still own
13 the building. If they want to enhance it, they can. We
14 give them $20 million. If they build a $30 million
15 school, our lease is on the entire structure, but our
16 obligation is only for 20 million. I don't think it is
17 clouded at all.
18 CHAIRMAN PARADY: I sense clouds, but
19 anyway. I want to know who owns the debts.
20 Senator Meier.
21 SENATOR MEIER: Mr. Chairman, I think the
22 way to get rid of some of the clouds and provide some
23 flexibility that's not really there that's beyond the
24 cookie cutter approach would be to have the leasing
25 corporation take ownership of the entire building and then
65
1 the lease payments are based on that and that way you can
2 make enhancements to any part of the campus rather than
3 just taking, as we did in the prison, a lease -- leasing
4 it from the State back to the corporation for the bare
5 ground. You could lease the whole campus back to the
6 corporation for what it includes.
7 But the question would really be -- and this
8 goes to the heart of the matter about how much financing
9 would be available for these other options, if we are
10 going to only allow financing for the 20 million, using
11 the president's suggested numbers, and there are some
12 enhancements that the school district wanted to put up to
13 30 million, whether or not they would be able to take
14 advantage of the economies of scale in this financing
15 arrangement or not, that's a question we have to look at;
16 or whether they would have to have a separate financing
17 mechanism which would, again, cost more, defeat the
18 purposes of the economy of scale and would limit their
19 taxing authority to their local mill levy restrictions,
20 so -- you know in the local book, the mill levy
21 restrictions.
22 There's a couple things we can make a little
23 easier to use this money for enhancements, and on
24 specifics, as Representative Baker said, it might not be
25 for gymnasiums. MGT told our district our gymnasiums had
66
1 to be replaced. The school district wanted to make
2 enhancements in square footage in some of the math rooms.
3 That bond issue went down in flames basically because of
4 the clouded issues around capital construction at this
5 point in time.
6 But, see, those were enhancements that dealt
7 more with education rather than recreation. So there's
8 some things that when we look at financing, whether it is
9 through the lease process or whether it is through bonded
10 indebtedness, whether or not the local districts, if they
11 can afford it, should we allow them the economies of scale
12 and use the same mechanism to have additive value to the
13 bond issue.
14 SENATOR COE: Mr. Chairman, I think we're
15 confusing the issue here. The Supreme Court said in
16 Campbell III that no more local bonding is required,
17 period, but they can if they want to on top of what we
18 give them.
19 Our interest here is just to bond and pay for
20 what the State decides they want to pay for. If they want
21 to do it locally, they have to pass their own bond issue,
22 get their own bond council, go through the whole thing
23 locally, I think. I don't see any other way to do it.
24 SENATOR MOCKLER: That's the cloud why we
25 can't use the building commission for that kind of
67
1 project. If there's enhancement in the project, we can't
2 go out and issue a bond for 20 million and ask the school
3 district to issue another bond for 20 million and put the
4 two together in one building.
5 That's where the problem is. It only works with
6 the perfect building to work -- and that's obviously a
7 problem, and we can talk more about this.
8 CHAIRMAN PARADY: I was going to -- I was
9 going to ask Senator Kunz, since she brought this into
10 play, if she can bring this train into the station.
11 But Mr. Applegate, we appreciate your
12 presentation very much.
13 MR. APPLEGATE: Members of the committee,
14 Mr. Chairman, thank you.
15 CHAIRMAN PARADY: Members of the
16 committee, there's two bills that we're going to walk
17 through page by page, LSO 199 and 200. We're now going to
18 take up LSO 199. I'm going to ask Dave to lead us through
19 his work product. The heart of this bill is that this
20 bill is schools only, school cap con only. It also
21 includes the GARVEE bonding capacity for the highway
22 commission, includes the FMR swap with the nickel gas tax,
23 which that is one vehicle, others can be considered and it
24 can be pulled from the bill and run as a separate revenue
25 bill, and it continues to work with the SLIB rather than
68
1 the capital financing authority that will be presented to
2 us in LSO 200.
3 So with that overview, Dave, if you start on
4 page 1 and walk us through it, my purpose in working the
5 bills in the next hour, two hours, is that we all have a
6 common understanding of what is framed up, and we'll come
7 back and sort out how we'll reach decisions this afternoon
8 or at the next committee meeting in December.
9 Dave.
10 MR. GRUVER: Mr. Chairman, you should have
11 in front of you 199 W-4 which was sent earlier. I also
12 put a packet in front of you which has three amendments to
13 199 W-4, and then the separate bill which you have not
14 seen before 200. We will start with 199 W-4.
15 CHAIRMAN PARADY: Senator Mockler.
16 SENATOR MOCKLER: At the last meeting we
17 asked that this be drafted and so we're moving forward --
18 did this come from you guys or Cynthia? How did I get
19 this bill in front of me complete with the GARVEE --
20 CHAIRMAN PARADY: I would like to think
21 about the answer to that while we keep working.
22 SENATOR COE: Might I answer that
23 question?
24 CHAIRMAN PARADY: Please, I could use the
25 help.
69
1 SENATOR COE: Obviously we have a
2 directive from the Court. We're going to spend some
3 serious money. So the state treasurer, and Cynthia helped
4 me, went to a financial advisor to come up with
5 suggestions on what we can do to deal with the Supreme
6 Court decision. Is that correct, Cynthia?
7 MS. LUMMIS: Mr. President, yes.
8 SENATOR COE: I think this individual has
9 done more of this, dealt with other states that have the
10 same problems, than anybody else.
11 I emphasize these are just suggestions. We
12 don't have to pass this thing. These are just suggestions
13 to look at. It is one of the alternatives we look at to
14 deal with the Supreme Court decision which is a big cloud
15 hanging over our heads. And believe me, it is still
16 there. It is not a thing we decided to draft something up
17 and run through this.
18 CHAIRMAN PARADY: Senator Mockler.
19 SENATOR MOCKLER: And my only question,
20 reason for asking this, I know also the transportation
21 committee -- and maybe somebody here is on that -- is
22 working an entirely separate agenda coming up with the
23 money for highways, and I just kind of wanted to know if
24 this bill worked with them to sort of meet their agenda as
25 well as our agenda.
70
1 Or if we pass this -- let's say in a perfect
2 world we took this bill and said everything is wonderful
3 and a transportation committee comes in with an entirely
4 different spin on what they're trying to do with
5 transportation and increasing the gas tax and if they do
6 or don't want to use GARVEE bonds -- that's all I'm really
7 asking, did this come in addition to not only working with
8 Cynthia but also the transportation committee so that all
9 of their bills -- I think they have four of them in the
10 draft process -- just disappear and this is the bill now?
11 CHAIRMAN PARADY: Senator, I don't believe
12 this is the bill now. I think there are ongoing
13 coordination between this committee, the committee that
14 met yesterday, transportation committee, the revenue
15 committee. I think we have framed up a bill that
16 addresses the court decision. It also has the GARVEE
17 component because of -- the FMR swap because of the nickel
18 gas tax, and we will continue to monitor the development
19 of each of these bills and make sure it dovetails before
20 the finish line.
21 SENATOR COE: Mr. Chairman, the Department
22 of Transportation has been involved in consideration of
23 this bill draft.
24 Is that fair?
25 MS. LUMMIS: Mr. Chairman, we did meet
71
1 with the transportation commission last week and explained
2 this to them, but at that time we got though feedback from
3 them about their views of this proposal except for some
4 individual members of the commission's comments, but we
5 have no -- that I'm aware of, no official position from
6 the commission.
7 CHAIRMAN PARADY: Senator Goodenough.
8 SENATOR GOODENOUGH: Mr. Chairman, I think
9 it is important to remember that the school finance part
10 of it is something that we're under a certain amount of
11 pressure to address, and it has been going on since -- for
12 six years, I guess, a '95 decision.
13 The part about the highways and the aeronautics
14 commission is just kind of an add-on or a wish list, it
15 seems to me, and we haven't really seen a lot of
16 documentation on how much does the transportation
17 commission need or the aeronautics commission.
18 So to me it is two separate issues, and I don't
19 know if the bill is drafted so that they can be separated
20 out easily or not. But I think we're under compulsion
21 with the school part of it but not the other.
22 CHAIRMAN PARADY: The bills are drafted so
23 those components can be separated and one of the ongoing
24 considerations for us between these two bills and the
25 general picture is going to be whether to tack -- this
72
1 bill is targeted much more closely to schools where the
2 second bill is a more comprehensive capital financing
3 authority which is in the purview of this committee and
4 whether we want to put that umbrella over the school issue
5 and move forward in its entirety or target the schools
6 more narrowly because of that compulsion is a decision we
7 still need to reach.
8 SENATOR COE: Not to belabor this point,
9 but my understanding of how those GARVEE bonds are, that's
10 a federal entitle -- that's a federal program, for lack of
11 a better word, that has statutory dictated areas that can
12 be addressed and it happens to be the Department of
13 Transportation and aeronautics, am I correct, so that's
14 part of the formula that comes to us for consideration
15 with GARVEE bonds.
16 CHAIRMAN PARADY: Mr. Curry.
17 MR. CURRY: Mr. Chairman, GARVEE bonds are
18 secured by your federal gas tax receipts. That's why you
19 don't need an election. You would need an election to
20 secure your state gas tax receipts.
21 They're sold as State of Wyoming bonds which you
22 use federal money to pay for. GARVEEs would not be an
23 appropriate vehicle for the aeronautics. You would need
24 FMRs for that because highway revenues are limited to
25 highway uses.
73
1 CHAIRMAN PARADY: Let's get into the bills
2 and hopefully at the end of 80 pages we will have some
3 clear picture of the range of choices that are in front of
4 us.
5 MR. GRUVER: Mr. Chairman, starting with
6 199 W-4, this is the one that contains two things,
7 basically, school capital construction bonding and highway
8 construction bonding. Then there's financing mechanisms
9 to put both of those in place.
10 On page 2 there's a staff comment about GARVEE
11 bonds, and GARVEE bonds as used in this draft will be
12 limited to federal highway receipts, monies from the
13 bills. Now, there are also bonds that can be supported by
14 the remaining 14 and one-eighth percent FMRs. Basically
15 highways get 30 and three-eighths percent of FMRs right
16 now. We take away 16 and a quarter, move those to the
17 school districts for school cap con, add the remaining
18 FMRs the highways have they can bond against for both
19 highway purposes and for aeronautics purposes.
20 Now we will get to specifics. Definitions on
21 page 3, lines 4 through 8, this is what ties it to federal
22 highway receipts. There's a grant agreement between the
23 transportation commission and the federal authorities to
24 receive monies for a project which the commission can use
25 the federal monies for.
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1 Grant anticipation bonds are bonds that are
2 authorized and supported by the grant revenues which is
3 the next definition. The grant revenues are basically
4 monies coming from the federal authorities and any
5 proceeds from the bonds themselves.
6 Page 3, line 19, we start with how the
7 anticipation bonds are issued, and they are issued by the
8 transportation commission under this draft.
9 Once they've entered into an agreement and we --
10 they know that the money is coming forward, they can issue
11 a bond, and that is, they can pledge and pay for the bonds
12 from the grant revenues and then other monies lawfully
13 available. Page 4, lines 9 through 15 state where those
14 monies come from. Line 10 is probably the key line,
15 601(a)(iii), (vi), (ix), (x) are federal mineral royalty
16 revenue streams that go to the highway fund.
17 (iii) is what is left over after the 26 and a
18 quarter is reduced under this bill. It is divided into
19 different segments basically because of -- for more than
20 anything, historical purposes. The PLT swap, things like
21 that, these are all little different revenue streams, but
22 they're all from FMRs going to the highway fund.
23 The exception there would be at the end of line
24 10, (b)(i)(B), those are coal lease bonus monies, actually
25 up to -- it is almost $2 million, $1.875 million of coal
75
1 lease bonus monies can go to the highway fund, too. Any
2 of those funds can be used to support the bonds.
3 SENATOR MEIER: Mr. Chairman.
4 CHAIRMAN PARADY: Senator Meier.
5 SENATOR MEIER: Are we running through the
6 bill and go back through amendments or work amendments
7 now?
8 CHAIRMAN PARADY: I don't believe we're
9 ready to work amendments. We're going to go through the
10 bill and take questions, but we're not working amendments.
11 We haven't officially taken the bill up yet.
12 Senator Mockler.
13 SENATOR MOCKLER: On line 10, page 4, as
14 you go through the FMRs that are pledgeable, is this just
15 the distribution stream or is this pledgeable back?
16 MR. GRUVER: This is the distribution
17 stream. When we get later in the bill, 601, we make all
18 of those distributions subject to bonds issued under this
19 act.
20 SENATOR MOCKLER: Mr. Chairman, and also
21 to previous bonds that are issued, it would apply to the
22 26 and a half percent that we've used of the highway funds
23 for the previous bonds that we've issued? There's a
24 built-in -- you can't use all of them because already some
25 of them are obligated.
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1 MR. GRUVER: Mr. Chairman, as we get later
2 on in the bill you will see that we do have about $60
3 million in bonds outstanding that the SLIB has issued
4 backed by FMRs to the school foundation program, also FMRs
5 to the highway fund; and we do make those first call, that
6 that money, that distribution stream goes first to pay off
7 those bonds before any bonds under this new act.
8 CHAIRMAN PARADY: Please continue.
9 MR. GRUVER: Mr. Chairman, page 4, line
10 20, these are terms of the bonds themselves and I can tell
11 you this came from the Arizona GARVEE bonding statutes. I
12 don't know what the numbers are, but probably between five
13 and six states that I looked at that had GARVEE bonding
14 authority, they all seemed pretty much similar. Arizona's
15 has been out for a number of years. They'd issued a
16 number of bonds under it so that was the one that I picked
17 to draft from.
18 I did speak to the consultant and let them know
19 that we were using Arizona GARVEE authority. I don't
20 think there's any real question as to whether one state
21 had better language than another, but I will tell you I'm
22 not a bond expert so a lot of this is crafted directly
23 from Arizona's.
24 Also, some of the restrictions are crafted from
25 current bonds, bonding authority in current Wyoming
77
1 statutes. And again, the consultant had a chance to
2 review these and make any recommendations for deletions
3 that were appropriate, and some were made and we have a
4 couple.
5 This amendment page in front of you, the
6 two-page amendments are a couple suggestions from the
7 consultant that were too late to incorporate into the
8 bill, and I'll discuss those as we go through.
9 The highlights for the bond terms, Mr. Chairman,
10 I would note on page 5, lines 14 and 15, they can go up to
11 30 years. My understanding from the consultant is that
12 basically they wouldn't be that long generally. I can't
13 remember, I think it was 15 to 20. 15 to 20 years
14 generally would be the standards.
15 On page 6, lines 4 and 5, I would highlight that
16 the bonds can be additionally secured as determined by the
17 transportation commission. That's from current Wyoming
18 law. I take that to mean as it is used currently. It
19 doesn't mean you can get any additional revenue streams
20 that aren't authorized by law to secure the bonds. You
21 can use the revenue streams authorized, but you can secure
22 them in different manners, which would be to create a
23 reserve fund which is spoken about specifically, or
24 perhaps by, as Senator Applegate talked about, insurance
25 for the bond, for whatever reason, perhaps to get a better
78
1 bond rating.
2 Page 6, line 13, we talked about refunding.
3 This is from the Arizona statutes, on page 7, lines 8
4 through 14, Wyoming specific provision. And basically it
5 requires the transportation commission to refund the bonds
6 to take advantage of rates, whatever out there, to refund
7 the bonds. But it can do that.
8 The refund is done in a manner consistent with
9 line 10 on page 7, 16-5-101 through 119, those are 18
10 different statutes that deal with refunding for political
11 subdivision general obligation bonds.
12 When I read those statutes I had a question
13 about why are we referencing that provision for a revenue
14 bond of the state. I can tell you that we sent that off
15 to some counsel, and they gave us a little free legal
16 advice, that is what we use for WCDA now and it has worked
17 before and they didn't see any problems with referencing
18 that. And, in fact, they suggested that we reference that
19 refunding authority versus the general state refunding
20 authority that we'll talk about in the next bill.
21 On page 7, lines 16 through 22 and on to page 8,
22 line 2, basically the limitations on the bonds. And here
23 we have an amendment, amendment number 1. Basically as it
24 was drafted, the transportation commission would have been
25 limited to all of the uncollected grant revenues.
79
1 Now, you have to remember the grant revenues are
2 those that you're going to get under a grant agreement. A
3 grant agreement is something that's actually executed.
4 The state consultant informed me that that is probably too
5 restrictive because oftentimes they will bond against
6 revenues that are anticipated to be received but for which
7 an agreement actually isn't in place. That's my
8 understanding.
9 So the amendment would remove lines 21 to 22 and
10 the only limitation then you would have statutorily would
11 be $600 million.
12 Now, you have to remember you also have the
13 limitation you're not going to sell bonds for 600 million
14 if you don't have the revenue streams backing them up
15 coming in. So you also have that practical limitation on
16 the transportation commission in the amount that they
17 would issue.
18 Page 8, line 4, we deal with how we use the
19 revenues received.
20 Basically lines 14 through 16 places them into a
21 special account.
22 Lines 18 through 19, you're actually using them
23 to pay for the projects to which they relate.
24 Then lines 21 and 22, the commission can use
25 them for expenses for monies that they've already spent on
80
1 that particular project to get repaid.
2 Page 9, lines 1 through 9, the bond monies, once
3 they're put into the bonding payment account, once they're
4 bonds outstanding they stay there. While they're there,
5 the state treasurer invests the bonds in a manner which
6 complies with the IRS requirements and bond indenture
7 requirements to make sure they're tax free investment for
8 the bond totals.
9 Lines 11 through 15, just authorize the
10 transportation commission to redeem the bonds and pay any
11 premiums for early redemption.
12 Page 9, lines 17 through 24, now that we have
13 the bond monies, what do you use the monies for, the
14 projects, legal and financial -- I'm sorry, page 10, lines
15 2 through 3, additional expenses incurred related to the
16 bonds. Obviously payment of the interest, payment of
17 principal of the bonds.
18 Line 10, extends to line 17, this is the --
19 there's a key provision here which is that these are bonds
20 that are limited to the revenues authorized and none of
21 those revenues -- the commission can't obligate the State
22 to pay the bonds in case those revenues don't come
23 through. They're not general obligations of the State.
24 The State's full faith and credit is not on pledge for the
25 bonds. That's why we don't have to have an election under
81
1 the Wyoming Constitution.
2 Mr. Chairman, in connection with that, I should
3 have mentioned this because it is a very important point,
4 going back to page 4, lines 14 and 15, when we talk about
5 what revenues do support it, specifically placed in there
6 is that no state tax revenues shall be pledged for these
7 bonds.
8 The state treasurer talked to you a little bit
9 earlier today about the decision in Witzenberger, and I
10 would like to take just about two minutes and talk about
11 three cases that are relevant along those lines.
12 Basically you had a case called Banner in which
13 a local entity, City of Laramie, issued bonds that were
14 supported in part by gas and cigarette taxes. One of the
15 taxpayers challenged that as creating debt in excess of
16 the City's authority. The Supreme Court held no, it did
17 not create debt, okay, even though it was supported by
18 state gas tax and the city gas tax and the cigarette tax.
19 You have that on the boards.
20 Few years later, I think about 15, 20 years
21 later, the legislature decides to create the Wyoming
22 Community Development Authority. And part of the
23 Community Development Authority, an independent authority,
24 it was to issue its bonds and those bonds through about a
25 four-step process were ultimately secured by severance tax
82
1 receipts.
2 The legislature, I'm sure, looked back at Banner
3 and some language in Banner that talks about only property
4 taxes created debt in the constitutional sense, and in
5 fact, the Attorney General made that argument in the
6 Witzenberger case; there were severance taxes, no debts
7 were created, no property taxes were pledged.
8 The Supreme Court said Banner only dealt with
9 local bonding authority, it wasn't dealing with a separate
10 constitutional provision by the creation of a state debt
11 and some language in -- while the language in Witzenberger
12 says any tax that supports debt under the state
13 constitutional provision is a debt in the constitutional
14 sense and requires a vote of the people.
15 Then the third decision is Herschler versus
16 State Farm Loan Board, I think, and in that case the Farm
17 Loan Board was issuing bonds and they were supported by
18 FMRs, federal mineral royalties, and the issue is now is
19 that a debt.
20 The Supreme Court held no, that's not a debt,
21 not a tax. It is a revenue stream that's coming from the
22 federal government. The state is not imposing -- using
23 its sovereign power to impose its acts, so therefore a
24 debt is not created in the constitutional sense.
25 And the reason I bring those three up and this
83
1 statement here is that there is some language in
2 Witzenberger and Banner that talks about another reason to
3 distinguish Banner is that Banner was tying gas taxes to
4 improvements on the streets.
5 So there is an opportunity, I think, to argue
6 that if it is a tax directly related to the thing you're
7 bonding for, then maybe that's not the creation of a debt.
8 I would take the more conservative approach which was --
9 the state treasurer talked to you about today and said
10 that based on the language later, any tax that supports a
11 bond obligation is a debt, and therefore, requires -- and
12 so that's why this statement that you can't use any state
13 tax to support these bonds is incorrect.
14 CHAIRMAN PARADY: Senator Kunz.
15 SENATOR KUNZ: Mr. Chairman, just a really
16 brief question.
17 Dave, strictly on a legal basis, how do you
18 square that, then, with the dicta language that's in the
19 Campbell decision talking about a statewide tax being the
20 option for school capital construction?
21 MR. GRUVER: Mr. Chairman, I don't think
22 that they talk about, for one thing -- let me back up just
23 a step.
24 That language is kind of peculiar. I always
25 thought when we had a four-mill tax for general purposes
84
1 other than educational, charitable institutions -- and we
2 have a separate constitutional provision that talks about
3 the tax for educational, 12 mills, statewide tax for
4 educational purposes, that's what you were limited to.
5 Campbell, to my surprise anyway, maybe not to
6 anyone else's, said that there's state capital
7 construction, there's no limit on the mill levies that the
8 state can place, state capital construction for
9 educational purposes.
10 I don't know that the Supreme Court said just
11 because we can impose whatever mill levy we want to means
12 we can bond against it without a vote of the people.
13 SENATOR KUNZ: Mr. Chairman.
14 CHAIRMAN PARADY: Follow-up, Senator Kunz.
15 SENATOR KUNZ: There were a lot of things
16 that were puzzling to me in that area on the statewide tax
17 but also the enhancement issue. Those were the two things
18 that troubled me the most just legally.
19 But my question to you is -- and I tend to be
20 conservative and don't disagree with where you're going,
21 but do you not think that the dicta somewhat supports a
22 statewide tax, maybe not even a property tax, with the
23 revenues being dedicated specifically for school capital
24 construction so we could get beyond the issues that you've
25 talked about earlier?
85
1 MR. GRUVER: Mr. Chairman, I think there's
2 no doubt that you can use any type of a tax that's imposed
3 equally throughout the state to fund school capital
4 construction directly.
5 Now, I would have to look at the opinion more
6 carefully to see if you can use those same taxes to bond
7 against.
8 SENATOR KUNZ: Well, Mr. Chairman, that
9 becomes the question. Do you think that that dicta leaves
10 it open on whether or not a vote of the people is still
11 required under that scenario?
12 MR. GRUVER: Mr. Chairman, for the
13 imposition of the tax directly, no.
14 CHAIRMAN PARADY: Senator Mockler? No?
15 Please proceed.
16 Thank you for that discussion.
17 MR. GRUVER: Again, Mr. Chairman, actually
18 that stops highway GARVEE, the bonding. On page 11 --
19 CHAIRMAN PARADY: Senator Mockler.
20 SENATOR MOCKLER: Before we get into
21 airports, can I ask one quick question simplifying all of
22 this?
23 CHAIRMAN PARADY: Sure.
24 SENATOR MOCKLER: Essentially what GARVEE
25 bonds are is up-front funding for highways. It is not new
86
1 monies because you're going to be using federal gas taxes
2 probably to pay it off. It is an up front so you can do a
3 bond for a whole big road. It is not new money, just
4 up-front money, right?
5 MR. GRUVER: Mr. Chairman, the GARVEE
6 bonding authority, that's correct. Of course later in
7 this bill there is additional up-front money coming in,
8 additional revenue stream.
9 CHAIRMAN PARADY: Mr. Curry, would you
10 care to comment on that?
11 MR. CURRY: Mr. Chairman, that's exactly
12 correct. You're basically taking your federal tax stream
13 and advancing it to get project efficiencies, projects
14 built faster, some inflation savings. That would be the
15 purpose of doing the GARVEE bonds, Mr. Chairman.
16 CHAIRMAN PARADY: What is GARVEE's acronym
17 precisely, Grant Anticipation Revenue --
18 MR. CURRY: Vehicle.
19 CHAIRMAN PARADY: What's the E E? That's
20 just for fun?
21 MR. CURRY: Mr. Chairman, it was named in
22 honor of Jane Garvey, who does not spell her name with an
23 E but a Y, who was the federal highway administrator, now
24 the federal aviation administrator, who was instrumental
25 in getting the bill passed and worked tirelessly to find
87
1 an acronym that so honored her.
2 I would note that now that the states are doing
3 these without a backstop, people are calling those bonds
4 naked GARVEEs, much to Jane's consternation.
5 CHAIRMAN PARADY: I don't think I'm going
6 to ask again.
7 Please proceed, Mr. Gruver.
8 MR. GRUVER: Mr. Chairman, page 11, line
9 13 we get into airport construction. Basically you see on
10 line 17, the same revenue streams, FMRs headed for the
11 highway fund and coal lease bonuses headed for the highway
12 fund. They can be in accordance with the transportation
13 commission's determination to issue bonds sent to a bond
14 repayment account.
15 On page 12, line 2, you will see there's an X
16 hundred million dollars, and I don't know -- maybe the
17 consultants know -- at this point at the time of drafting
18 this last Wednesday anyway I didn't have an exact number
19 to put in there to cap the amount of bonds which can be
20 issued for aeronautics purchases.
21 CHAIRMAN PARADY: What does X 10 mean?
22 MR. GRUVER: X dollars probably would be
23 better but I guess I was thinking big.
24 Now, these bonds, it is a little different than
25 the GARVEE bonds. Under current law you have the
88
1 aeronautics commission that makes grants and loans to the
2 local airports for development and construction purposes,
3 so these bonds would be issued to support grants and loans
4 as determined appropriate by the aeronautics commission.
5 So you really have a two-step process.
6 Aeronautics commission decides yeah, we should issue these
7 loans and grants to whatever, Riverton airport. They
8 would make that recommendation to the transportation
9 commission, transportation commission, if it deemed fit,
10 could issue bonds supported by these revenue streams to
11 make those grant loan payments.
12 CHAIRMAN PARADY: Dave, can I take you
13 back to page 11? Line 17, those are the same revenue
14 streams as previous, FMRs and coal bonus?
15 MR. GRUVER: That's correct.
16 CHAIRMAN PARADY: But what's the -- I'm
17 not sure I know the question I want to ask. What's the
18 approximate dollar value in this context for airports of
19 those streams?
20 MR. GRUVER: Mr. Chairman, airports and
21 highways would be GARVEE highways, state amounts would be
22 the same, and that would be the remaining 14 and an eighth
23 percent FMRs plus about 2 million in coal lease bonus, so
24 14 times about 200 million, assuming you hit the caps --
25 these are always assuming you hit the caps you put in the
89
1 de-earmarking bills -- 14 and an eighth percent times 800
2 million, so about 29, 30 million.
3 CHAIRMAN PARADY: We're currently forecast
4 that we're not going to hit those caps.
5 MR. GRUVER: Mr. Chairman, I think you're
6 real close, but just short.
7 Mr. Chairman --
8 CHAIRMAN PARADY: One more just to
9 clarify. So the dollar amount is the same in both places
10 and the allocation between the two activities is by the
11 commission decision?
12 MR. GRUVER: Exactly.
13 CHAIRMAN PARADY: Thank you.
14 MR. GRUVER: Mr. Chairman, actually on
15 page 13, lines 1 through 5, we have a little staff
16 comment. That's the amount to support the bonds. It is
17 14 and an eighth of FMRs, 198 million, plus 1.875.
18 Mr. Chairman, really on page 12, once you get
19 past the dollar amount for the limitation all the way
20 through page 14 and really page 16 -- pretty much the same
21 exact provisions as for the highway GARVEE authority. The
22 difference is that this bonding authority was placed where
23 we placed other bonding authorities before which is right
24 behind the public funds streams in Title 9. The GARVEE
25 bonding authority seemed appropriately placed in Title 24
90
1 in the highway funds, so therefore we have some repetition
2 of some of the same exact bond terms, those kinds of
3 things.
4 You couldn't exactly reference one versus the
5 other because you do have the two entities here versus
6 just the transportation commission for highway GARVEEs.
7 Mr. Chairman, page 17 we start getting -- we get
8 into the revenue flows, and on these revenue flows we have
9 an amendment. This is amendment number 2 on the page that
10 was handed out to you. Basically the staff comment on the
11 top of page 17 explains how the bill is drafted. 16 and a
12 quarter percent of the FMRs go into the highway, take and
13 redirect them to the school cap con.
14 The next sentence answers Senator Mockler's
15 question. Before they're deposited into the school cap
16 con account, the amounts necessary for bonding are removed
17 and that would include bonds issued for state obligations
18 previously. The remaining amounts, that 14 and an eighth
19 percent, when totaled all up are used for the GARVEE
20 amount.
21 The first change on page 18 --
22 CHAIRMAN PARADY: Before you move to that,
23 Madam Treasurer, I have a question for you. When we were
24 in a discussion with the governor somewhere in the last
25 week he indicated a concern that the highway department
91
1 not be stripped of all FMRs because they had nonhighway-
2 related duties that -- so they shouldn't be made solely
3 dependent on fuel taxes.
4 And my question is does this distribution
5 address that concern?
6 MS. LUMMIS: Yes, Mr. Chairman, it would
7 take about 32 million of the federal mineral royalties
8 away from them, leaving roughly 28 million for them to use
9 on highway- or nonhighway-related projects.
10 In addition, it would stagger -- according to an
11 amendment you'll be looking at, stagger the transfer of
12 that 32 million a year over four years. So the first year
13 we would only take 8, the second year 16, then 24, so the
14 net effect is that they would get an increase of funding
15 of $48 million. It would occur over a four-year period
16 and then not occur again under these proposals.
17 In addition, under the new federal highway bill
18 that's going through Congress right now, which I
19 understand has a high -- the chance of its passing is
20 very, very good, the State would get another 64 million
21 for highway projects that they would want issued in a very
22 short time, something like six to nine months the projects
23 would have to go out because it is part of the economic
24 stimulus package that Congress is putting together this
25 year. And this is in advance of the five-year highway
92
1 bill.
2 CHAIRMAN PARADY: Thank you.
3 Members of the committee, some of those concerns
4 I think were the capitol police, the entry stations, those
5 kinds of activities that aren't directly -- that's what
6 the governor was speaking to.
7 Okay. Mr. Gruver.
8 MR. GRUVER: Mr. Chairman, just a footnote
9 on that last comment, when I talk about the 33 FMRs to
10 highways, that doesn't include some FMRs which go to the
11 highway funds but which the highway transportation
12 commission must use for county road projects under a
13 statutory formula. So there are actually some additional
14 FMR flowing to the highway fund that aren't addressed in
15 this bill and those aren't affected by this bill at all.
16 Page 18, lines 7 through 12, this is the
17 mainstream of FMRs to the highway fund. You see it is
18 taking 26 and a quarter down to 10 percent. Amendment
19 number two stairsteps that, and basically we start with 22
20 percent the first year, then decrease that by 4 percent
21 until we get down to the 10 percent level annually each
22 year.
23 You will see that the FMRs are subject to the
24 allocations, Senator Mockler, on line 7, except as
25 provided in Item 4605-A. That's the provision for current
93
1 bonding authority which is about the 58, 60 million that
2 has been bonded so it would be subject to that first.
3 And then it would also be subject to the
4 24-8-202(a)(ii) is the highway bonds, and 9-4-608 would be
5 the aeronautics bonds.
6 SENATOR MOCKLER: Mr. Chairman.
7 CHAIRMAN PARADY: Senator Mockler.
8 SENATOR MOCKLER: Could I clarify? In
9 essence what happens with a preexisting bond indebtedness
10 that is guaranteed by the highway fund, those FMRs stay in
11 the highway department and they get to use them however
12 they want in addition because those other bonds are being
13 paid for by their revenue stream anyway, so that's just an
14 additional cover for what Representative Parady was
15 talking about in the highway department that's available
16 for the FMRs to actually use. They're guaranteeing
17 another bond but they're available for the highway
18 department to use, is that how that would work?
19 MR. GRUVER: Mr. Chairman, that's correct.
20 Under that statute you have historically appropriated
21 funds. The bond gets deposited. The bond proceeds made
22 money on the difference between the two.
23 CHAIRMAN PARADY: Mr. Gruver, I apologize
24 for backing the committee up. Where is the stairstep?
25 MR. GRUVER: Mr. Chairman, in amendment
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1 number 2.
2 CHAIRMAN PARADY: Thank you. Got it.
3 MR. GRUVER: Mr. Chairman, you will see on
4 the staff comment on page 18, lines 13 through 20, that
5 was a little bit of a tip-off to the committee to let you
6 know that right now you've funded the transportation
7 enterprise fund from FMRs and that that ended or it is
8 scheduled to end January 1st, 2002. Whether the
9 legislature intends to continue to fund the transportation
10 enterprise fund from FMRs or not, I don't know, but just
11 to let you know you do have that issue in front of you.
12 Mr. Chairman, on page 18, lines 22 through 28,
13 that's just one of the revenue streams headed for the
14 highway fund which is now subject to the bonding
15 authority. Same thing for page 19 -- I'm sorry -- page
16 19, lines 2 through 4 is actually FMRs going to the school
17 cap con account. Currently they're not used to bond
18 against.
19 The consultant's recommendation is that they be
20 used along with these additional streams that are flowing
21 to the school cap con account to bond against. That's why
22 the reference to 108 has been inserted.
23 Page 19, lines 6 and 8, again revenue streams of
24 the highway funds subject to the bonds.
25 Same thing for lines 10 through 12. Page 19,
95
1 lines 19 through -- 14 through 17, this is the 16 and a
2 quarter percent to the school cap con account subject to
3 first the outstanding bonds issued by the SLIB and the
4 second to school cap con bonds under 21-15-108.
5 Amendment number 2 affects this too since
6 highways is decreased by the stairstepped amount for
7 increasing to the school cap con account as inserted by
8 the second part of that second amendment.
9 Page 19, line 19, we start with the coal lease
10 bonus funds. The bill only has the coal lease bonus funds
11 in there for the purpose of making them substitute the
12 highway bonds and the aeronautic bonds.
13 The third amendment on your sheet redirects coal
14 lease bonus funds from the school cap con account to a
15 state cap con account. This was in accordance with the
16 state consultant's recommendations that you heard earlier
17 today but did not make it into this bill.
18 The bill itself would keep the coal lease bonus
19 funds flowing to the school cap con continually flowing.
20 And those funds, to refresh your recollection, I think
21 were 30 million last year, projected 27 and a half and
22 then I think 3.7 million. But you heard the discussion
23 about what they might actually be versus what the
24 projections are.
25 SENATOR MOCKLER: Mr. Chairman.
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1 CHAIRMAN PARADY: Senator Mockler.
2 SENATOR MOCKLER: I need to clarify this.
3 If you look at the CREG report on page 8 and it tells you
4 where we're putting the money now, we're putting 30
5 million into school capital construction now, what is this
6 changing? The highway funds 1.9 million going into there,
7 is that what it is doing.
8 MR. GRUVER: Mr. Chairman, the bill does
9 not affect the distribution of the coal lease bonus at
10 all, to make the highway coal lease bonus funds subject to
11 the bonding authorities granted earlier in the bill. The
12 amendment would take all of those school cap con coal
13 lease bonus monies, 30 million, redirect those to a state
14 capital construction account.
15 CHAIRMAN PARADY: Because we've met our
16 school cap con obligations with the rest of the structure.
17 MR. GRUVER: Mr. Chairman, I think the
18 consultant's recommendations are that with the excess bond
19 proceeds you can do that.
20 CHAIRMAN PARADY: A decision for us to
21 make.
22 Thank you.
23 MR. GRUVER: Mr. Chairman, page 20, line
24 12 starts with the current capital construction bonding
25 authority under the State Loan and Investment Board, and
97
1 basically what it says is that since you have these monies
2 already pledged for bonds that are outstanding, we keep
3 those in place. That's what you find on page 21, lines 1
4 through 10.
5 Of consideration -- and it is not in this bill
6 but it will be in the next bill that you see -- is to cap
7 the ability of the State Loan and Investment Board to
8 issue any more bonds under this section, the thinking
9 being that if you're going to change these revenue streams
10 that are headed for the highway fund, maybe we don't want
11 to pledge them first for state capital construction
12 bonding authority.
13 On page 21, line 12, we deal with the school
14 capital construction bonding. The change occurs on page
15 22. Staff comment really tells you where the new funds
16 are. 305(b), $8 million from state mineral royalties,
17 that's current law. That's already going there.
18 601(a)(vii), 2.7 percent FMRs, that's current law but it
19 is not used for bonding.
20 Romanette (xi) is the 16 and a quarter new FMRs.
21 Of course that comment is wrong if you go with the
22 stairstep amendment. It would be whatever, 4 and a
23 quarter, 8 and a quarter, et cetera over the next four
24 years. Total amount once you get to the 16 and a quarter
25 FMRs, assuming the caps are reached, assuming the state
98
1 mineral royalties stay at $8 million, that 45 and a half
2 million.
3 There's a reference there, 21-13-301, earnings
4 from the common school account, that's used as a backdrop.
5 It is approximately 60 million. That's current law.
6 And the question is should that stay? Does that
7 give you a better bonding rating? I don't know. I'm not
8 a bond expert, but we did run that by the state treasurer
9 and the current recommendation is that it would stay.
10 Page 22, lines 18 through 28, you will see that
11 currently the State Loan and Investment Board is
12 authorized to issue bonds for the school cap con, 100
13 million. This increases it to 708. That's a number which
14 I'm told is maybe a worst-case scenario. I would say that
15 that number -- rather than worst-case scenario, I would
16 say that number is a worst-case scenario based on a
17 snapshot in 1997 which the Supreme Court has said is
18 outdated and inaccurate, and I don't think you really know
19 ever what the number is until you do a needs assessment
20 each time and then you have a new number.
21 CHAIRMAN PARADY: Senator Mockler.
22 SENATOR MOCKLER: Mr. Chairman, when you
23 increase that from 100 to $708 million, there's no way we
24 could cover $708 million of bonds issued today, you know,
25 doing it all in one lump sum because we couldn't do the
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1 coverage and all of that.
2 Anyway, is by having it in the law, something we
3 know we couldn't cover -- does that endanger at all bond
4 ratings when people look at what it is we're trying to do?
5 If you're an attorney and go back and look at our whole
6 state law in all of the bond lettings that we do and you
7 add in there $708 million authority to try to issue $100
8 million bond, do you panic they're going to go out into
9 the universe, do $708 million and not be able to cover
10 them? Or are we better off limiting this amount down and
11 coming in as we know what the universe looks like?
12 Making a statement to the Supreme Court at the
13 risk of the insurance and things like that, it seems kind
14 of risky. Maybe we would be better off making the number
15 350 or 500 million, something we knew we could cover.
16 CHAIRMAN PARADY: Mr. Curry.
17 MR. CURRY: Mr. Chairman, my
18 recommendation would be that you should make the number
19 appropriate for being able to respond to the Supreme
20 Court's direction and 700 million is the upper limit of
21 that. I think the points are well taken about concerns
22 about the rating agencies and the investors, but they're
23 going to look at the whole story of what the state is
24 doing.
25 It is not uncommon for agencies either to have
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1 unlimited bonding authority or large numbers such as this,
2 but expectation that they're going to be issuing
3 substantially less debt.
4 I believe that whatever goes in the law ought to
5 be what you in consultation with the Attorney General want
6 to represent to the Court as being the appropriate number
7 to be responsive to the Supreme Court decision.
8 CHAIRMAN PARADY: Senator Mockler, follow
9 up.
10 SENATOR MOCKLER: To follow up that, that
11 number, this is probably the most fluid number in the
12 thing because at the end of this we could decide to just
13 pay for our past mistakes, which is, you know, the
14 up-front kind of catch-up thing and then bond for the
15 future which might only be based on the 700 million or
16 whatever snapshot you have there, probably 350 or $400
17 million -- it is at that time you have a better idea, you
18 would come back in and make this number more reflective.
19 Or would you always leave it as the ultimate universe on
20 the assumption we will bond for every single mistake we
21 ever made?
22 MR. CURRY: Mr. Chairman, the Court gave
23 you a schedule, so you need to be sure your response to
24 the Court is one that can be accomplished within the
25 schedule that they provided. Of course I will defer to
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1 your legal advisors as the best way to meet that
2 requirement. I think 3 or 400 million, the second handout
3 we provided those options. That's likely to be where the
4 numbers will be.
5 At that point in time, once you've fulfilled the
6 court mandate, if you wanted to scale that back, it would
7 be appropriate, but again I don't think there will be a
8 substantial or significant credit penalty for having
9 additional authorization. I think the trade-off should be
10 to comply with the Court decision and sort of remove that
11 current obstacle from your fiscal planning process.
12 CHAIRMAN PARADY: Senator Kunz.
13 SENATOR KUNZ: Mr. Chairman, just a brief
14 question in a different vein but topical to what was just
15 discussed.
16 Mr. Curry, is there any impact on the bond
17 rating knowing that throughout this bill, regardless of
18 what the purpose is for the bonds, whether it is school
19 cap con or state cap con or whatever, that the State of
20 Wyoming has made it very clear there are no state revenues
21 pledged to it?
22 MR. CURRY: Mr. Chairman, the credit
23 analysis will focus on the stability and reliability of
24 your federal mineral royalties. Keep in mind we're
25 attempting -- and the statement of royalties. We're
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1 trying to get to a $43 million number. That's the maximum
2 debt service. Likely to be 39, could be 33. That's the
3 analysis people will go into.
4 Do we have a sufficient track record with FMRs
5 and statement of royalties to have a reasonable
6 expectation that we will continue to have at least 33, 39,
7 44, $45 million of revenue from those sources going
8 forward? My sense is that that's an insurable credit
9 stream, so whatever number it is, these will be rated
10 triple A, the premium up and down a little bit based on
11 how much risk is assessed by the bond insurance providers.
12 To the extent that there are threats in the
13 future to the federal mineral royalties stream like we're
14 seeing now in resort communities, threats to the sales tax
15 and sales streams, that will have a negative impact. And
16 you probably know better than I and you were fortunate to
17 have the CREG reports that routinely update you on the
18 forecasts for those streams so that you can keep in mind
19 how they're performing over time.
20 CHAIRMAN PARADY: Dave.
21 MR. GRUVER: Page 23, lines 16 through 26,
22 this is Senator Devin's and Representative Shivler's
23 committee, reference to that bill. Basically they would
24 create a School Facilities Commission, I think is what it
25 is called, School Facilities Commission, which is to be
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1 like the Water Development Commission to oversee state
2 obligations for school capital construction.
3 Within that bill, in addition to the oversight
4 of the construction, that commission is given the
5 authority to issue these bonds rather than the State Loan
6 and Investment Board.
7 At some point the legislature -- committees and
8 ultimately the legislature is going to have to make a
9 decision who the issuing authority will be. That doesn't
10 change at all. These are with the State Loan and
11 Investment Board. As we get into 200 we will have more
12 discussion about that.
13 Page 24, just insertion of additional revenue
14 streams to support the bond.
15 That's all the way through down to page 25 on
16 state capital construction assistance. Staff comment,
17 again, if you note the amendment, 16.25 percent is
18 inaccurate, but at the end of four years, that's where you
19 will be, again assuming all the caps are met and that also
20 discusses the coal lease bonus payments.
21 Page 25, starting on line 12, really the change
22 here is that on page 26, new language on lines 15 through
23 23 which provides that the GARVEE bonds will be deposited
24 in accordance with those provisions and not directly into
25 the highway fund.
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1 On page 26, right above that you will see that
2 there's a discussion of a bonds issue. The only thing I
3 can see is that currently we have provision for highway
4 general obligation bonds and it appears there was an
5 election held in 1930. The amount was fairly small in
6 today's terms, and I think that those bonding provisions
7 are basically obsolete, probably could be repealed. They
8 don't do it here. When we get into the second bill, the
9 bigger bonding bill, it is done.
10 On page 27, lines 1 through 6, there is a
11 repealer of a $35 million Lovell prison bonding authority
12 supported by FMRs as to highways. So we're taking those
13 FMRs and doing other things. If it doesn't look like
14 you're going to use those for the Lovell prison, that's
15 the exception.
16 Page 27, line 8 really through the rest of the
17 bill -- we will take it piece by piece, but it really
18 deals with a gas tax increase. It is five cents with
19 exemptions on, full amount flows to the highway fund, no
20 distribution to local governments. We can go through each
21 section and point out how that is done.
22 Page 27, lines 24 through 29, suggest in
23 addition to the current taxes -- this is for fuel taxes --
24 5 cents. Exemption on line 29, that would be all
25 exemptions and transfers, suppliers, et cetera.
105
1 On page 28 it is just the exemptions that are
2 granted. It is just reference changes, exempt from the
3 additional nickel tax here.
4 Page 29, distribution, lines 6 through 12, all
5 the money goes to the state highway fund. Provisions of
6 subsections (c) and (d), those are distributions to the
7 locals. They don't apply. The whole nickel goes to the
8 highway fund.
9 Page 29 --
10 CHAIRMAN PARADY: Dave, how significant
11 are those? What's that cost share or distribution share
12 under (c) and (d)?
13 MR. SOMMERS: Mr. Chairman, on gasoline,
14 distributions like 52 percent, 47 percent, 52 and a half,
15 47 and a half percent, diesel is 75/25, with the State
16 getting 75 percent and the local getting 25.
17 MR. GRUVER: Without that distribution,
18 Mr. Chairman, the nickel raising 6.4 million -- of course
19 that changes. I'm sorry. Each penny is $2 million. The
20 consultant just had a heart attack.
21 Page 29, lines 14 through 21, diesel tax, same
22 thing, nickel with exemptions on which would include
23 exemptions for dyed fuels which are anything not used on
24 the roads.
25 Page 31, distribution, same thing, going to the
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1 highway fund.
2 Page 31, lines 12, those are just repeals of an
3 old swap that is still on the books. 20 million was
4 reached. It now goes away.
5 Talk about the second gas swap set to expire on
6 June 30th, 2002. That's the two cents. Now it is going
7 to schools with no exemptions. July 1st, 2002, goes to
8 the highway fund with exemptions. General gas tax goes up
9 from 11 to 13 cents and we have one penny less tax, too.
10 I guess I should address -- Senator Mockler
11 raised the point of other bills. There are a number of
12 bills out there raising gas taxes for the revenue
13 committee and I don't know what their final decisions were
14 as to where they're going, but it dealt with the 2 cents,
15 dealt with additional taxes. And I can certainly find
16 out. I know the transportation committee also has gas
17 taxes. Transportation committee is no longer meeting, so
18 whatever they've done is final. Revenue committee is
19 still meeting, so I don't know what they're going to do.
20 Mr. Chairman, on page 32, these are two
21 programs --
22 CHAIRMAN PARADY: Dave, Representative
23 Osborn wants to back up.
24 REPRESENTATIVE OSBORN: On 31, Dave, line
25 21, I guess the question is why are we eliminating state
107
1 support to district bonding?
2 MR. GRUVER: Mr. Chairman, this is done at
3 the recommendation of the consultant. You have about $4
4 million now in mill levy supplements which would roll off
5 as -- if we stop that. And I think --
6 REPRESENTATIVE OSBORN: That's not a cost
7 to the State, is it?
8 MR. GRUVER: The mill levy supplement is
9 about $4 million right now in cost to the State. The
10 thinking is if they're going to do local enhancements,
11 then they'll do local enhancements without state subsidies
12 for the mill levies.
13 REPRESENTATIVE OSBORN: I see.
14 MR. GRUVER: And the same thing for state
15 subsidy as far as the school district bond guarantee
16 program. It is a big step that we pledge, I think it is,
17 300 million and maybe can't use those monies as
18 effectively for the state treasurer investments. It does
19 cost the State something. The school districts make that
20 up in better bond ratings.
21 On page 32, you will see both of those programs
22 are ended. The date put in there is the date of the
23 Campbell II decision. That was based on the rehearing
24 when they talked about bonds issued -- I'm sorry -- the
25 rehearing actually talked about bonds in place as of the
108
1 date of Campbell II. That's why we used that date.
2 Mary Keaton Scott talked to me yesterday and
3 there's an issue here for bonds that have been refunded or
4 bonds that have been issued based upon what happened
5 between Campbell II and the rehearing. The Attorney
6 General said all we have to go by, since the court has
7 accepted our petition for rehearing, is the law that's in
8 place now. We don't know what will be changed in
9 Campbell II.
10 Based on that Attorney General's opinion, Lander
11 bonded. Refunding bonds have been issued in that interim
12 period, and I think that February 23rd, 2001 date is
13 probably not the appropriate date to have in here to stop
14 the mill levy supplement in the bond guarantee programs
15 because those folks relied on what we were doing in the
16 interim period.
17 Now, whether the date should be January 1st,
18 2002 or maybe the effective date of this, July 1st, 2002,
19 I don't know. I haven't had enough time to think through
20 and meet with bond people and figure out the appropriate
21 date.
22 CHAIRMAN PARADY: Follow up,
23 Representative Osborn.
24 REPRESENTATIVE OSBORN: Johnson County
25 also has that situation. It is on the ballot, but we
109
1 haven't voted on that yet so we're in that same situation.
2 So I think, if I understand this right, from our viewpoint
3 the July 2002 date would be better for our --
4 MR. GRUVER: Mr. Chairman, that may well
5 be a policy consideration, too, in addition to a legal
6 consideration as to what folks were relying on when they
7 got these things on the ballot, when voters had it before
8 them.
9 REPRESENTATIVE OSBORN: I'm still not
10 clear --
11 CHAIRMAN PARADY: Representative Osborn.
12 REPRESENTATIVE OSBORN: It is still not
13 clear to me what the obligation of the State is on those
14 bonds.
15 MR. GRUVER: Mr. Chairman, it is a complex
16 formula that brings you up to a state average. To be
17 honest with you, I don't think I could sit here and tell
18 you exactly how the formula works, but that's -- unless
19 you want to tell them, exactly.
20 MR. NELSON: To elaborate on that, when we
21 were using local bonding as a requirement to obtain state
22 assistance, part of that package was that we would provide
23 a guarantee to that district that each levy that they
24 imposed for bonding purposes would produce enough revenue
25 equal to 150 percent of the statewide average or assessed
110
1 valuation for ADM and average statewide figures.
2 So we subsidized those districts with below
3 average assessed valuation to at least go 150 percent
4 above the statewide average. And that was applicable to
5 those bond issues in place under the old timeline.
6 And what this proposal does is cut that off,
7 make sure that state subsidy only applies to those bond
8 issues and anything that's issued in the future which
9 would be necessarily for local enhancement purposes and
10 not to provide adequate buildings, we would not, then,
11 either subsidize through the mill levy supplement or use
12 state monies to back and guarantee those bond issues.
13 Does that help?
14 REPRESENTATIVE OSBORN: Well, I guess what
15 we had said previously was that we were going to require
16 all the districts to bond 90 percent and that's where we
17 were in the process when -- we were in the process of
18 doing that when the latest decision came from the Supreme
19 Court. I'm not quite sure where that leaves us.
20 MR. NELSON: Buffalo, Johnson County?
21 We're seeking some guidance from the Attorney General who
22 will speak to us on that as to what the timelines are and
23 what -- how that would be handled, because Buffalo and
24 some of these projects would include some local
25 enhancements, so we're hoping to get some guidance on that
111
1 that maybe will clear the air a little bit.
2 REPRESENTATIVE OSBORN: Could you find out
3 for me also where Johnson County or that school district
4 falls in this whatever you call it, supplement that the
5 state provides.
6 MR. NELSON: Sure.
7 REPRESENTATIVE OSBORN: Because it could
8 be average or above, as a matter of fact.
9 CHAIRMAN PARADY: Representative Reese.
10 REPRESENTATIVE REESE: Mr. Chairman, I
11 wanted to make sure I understood your earlier question and
12 the answer. Did I hear of the gas taxes that are
13 collected 52 percent stays with the state highway fund and
14 48 percent goes to local governments, 75/25 on diesel
15 fuel?
16 MR. SOMMERS: Yes. To clarify that trying
17 to figure out the split, total amount of revenue raised by
18 a penny is both gas and diesel. It is easier to compute
19 for me 65/35 split overall. When you combine the revenue
20 from the gas and the diesel, the split is 65 percent to
21 the state, 35 percent to the locals.
22 CHAIRMAN PARADY: Senator Meier.
23 SENATOR MEIER: Mr. Chairman, I would hope
24 that we would resist taking away the mill levy supplement
25 for a couple reasons. First, I come from two poor
112
1 counties and I'm sure we're always going to be under that
2 assessed valuation.
3 But the other thing is that when you have a --
4 the State comes in to build the required school building
5 or do whatever they have to, a lot of times if you can use
6 the same contractor at the same time, you can get a better
7 deal. And if we can have some mechanism there to help out
8 some of the poorer districts so we could probably get
9 better school buildings in their totality.
10 CHAIRMAN PARADY: That $700 million
11 mechanism.
12 Senator Kunz.
13 SENATOR KUNZ: Mr. Chairman, two really
14 quick things. One, Steve, I'm a little confused and after
15 lunch if you could straighten me out, I know it is easily
16 done to confuse me, but it seemed to me that in this
17 discussion -- which I would like to publicly commend
18 Mr. Curry for his work. He has done a tremendous job and
19 the state treasurer on all of this -- it seemed to me that
20 the figures we were hearing is that 4 cents might very
21 easily cover what we were dealing with.
22 The additional penny, and I'm talking just about
23 dollar amounts and not about mechanisms that we would have
24 to use, does that equal roughly what people were unhappy
25 about, cities, towns and counties specifically, when we
113
1 talked about de-earmarking?
2 You commented earlier about how changes might
3 come in terms of de-earmarking and excess revenues that
4 were diverted and there was a lot of unhappiness and how
5 that might come back into play, and I'm sure we'll have a
6 discussion in this budget session about that.
7 Are we anywhere in the same ballpark with that
8 extra penny of being able to return some of those
9 perceived revenues? I don't know if I'm very clear in my
10 question.
11 MR. SOMMERS: Mr. Chairman, is what --
12 April, what you're saying that out of a nickel if the
13 locals got to keep 35 percent, would that replace what
14 they lost?
15 SENATOR KUNZ: Mr. Chairman, I'm referring
16 to the extra penny. If four cents would cover the
17 concepts that are discussed in terms of school capital
18 construction and possibly some extra going into
19 aeronautics and state cap con through the coal bonus,
20 would that extra penny be sufficient funding to try and
21 bring counties, in particular, and cities also back into
22 play with revenues that they have perceived to have lost?
23 CHAIRMAN PARADY: Madam Treasurer.
24 MS. LUMMIS: Mr. Chairman, we had this
25 very discussion at the Wyoming Association of County
114
1 Officers meeting in Rock Springs in September, and one of
2 the things that came out of that was the possibility of if
3 it only took four pennies to do the schools, would it be
4 possible to give that fifth penny to highways, take away a
5 commensurate amount of federal mineral royalties and
6 divide it equally among the 23 counties?
7 So you take 6.4 million times 23 and just give
8 them a check every year, that way the counties would have
9 money that they could spend on roads, if that was their
10 priority, or elections in some counties are not
11 reimbursed. In Niobrara County their employees don't get
12 any benefits, most of them make about a thousand a month
13 with no benefits.
14 So it would be a way to distribute money among
15 the counties for roads, if that were the important factor,
16 or for any other use that the county commissioners deemed
17 a priority. So there's a way to get money to the
18 counties in lieu of having a gas tax share of this money
19 with the counties.
20 Now, it doesn't address the cities, but it does
21 address the counties.
22 MR. SOMMERS: Mr. Chairman, one penny will
23 more than cover the counties. It won't cover the total to
24 the locals, but it will cover -- more than cover the loss
25 to the counties from de-earmarking.
115
1 SENATOR KUNZ: Thank you. Mr. Chairman, I
2 just think there's some angles that we need to look at.
3 The other thing that I had very briefly -- and
4 I'm truly not trying to be smart here. I really am not.
5 But there have been some discussions among two of our
6 senators, Senator Mockler and Senator Goodenough, about
7 concerns about what is before us for various reasons, and
8 in particular in Senator Goodenough's case about where
9 this came from and who had input and all of that.
10 As we look at this very, very serious issue, and
11 several other committees are, too, I would like their
12 input on what their plans are so that we can incorporate
13 it in this discussion and try and come out with the best
14 possible package for the people of the state of Wyoming.
15 CHAIRMAN PARADY: On that note, members of
16 the committee, I think I would like to break for lunch.
17 This has brought us to the conclusion of Bill 199. Again,
18 on page 32 we need to consider those dates and the
19 appropriateness of that date relative to the subsidy,
20 including leaving it open-ended, leaving it in effect.
21 This was the easier of the two bills that we
22 have to deal with today. We will begin after lunch with
23 LSO 200. And we will come back into session at 1:15.
24 (Hearing proceedings recessed
25 12:10 p.m. and reconvened
116
1 1:30 p.m., October 24, 2001.)
2 CHAIRMAN PARADY: Members of the
3 committee, we're continuing with our discussion of capital
4 financing and leasing options. The next bill draft for
5 our discussion is LSO 200. It is a larger capital
6 construction financing alternative that addresses
7 statewide needs as well as school capital construction. I
8 think it is an opportunity to modernize our capital
9 management for the state, the management of our assets.
10 It includes provisions to fully implement needs
11 assessments that we have put into statute before but
12 heretofore have not actually accomplished.
13 It does move away from the State Loan and
14 Investment Board to a seven-member commission, and it is
15 essentially creating a fairly major structure to address
16 capital construction across state government.
17 I think it has synergy with a lot of activities
18 that we have going on, but let's dig into the details and
19 get us all up to the same level so that we can proceed
20 with the discussions that we need to have.
21 And so with that, Representative Osborn has a
22 question.
23 REPRESENTATIVE OSBORN: Mr. Chairman, is
24 this an either/or thing here that we're going to do?
25 CHAIRMAN PARADY: My anticipation, this
117
1 bill before us, this is the first time that it has been
2 before the committee and I'm thinking that we will just
3 walk our way through all three bills, leave them to our
4 next meeting and then come in and do our voting and
5 decide.
6 But the short answer to your question is yes.
7 You could take the bills apart in the sum of their
8 component pieces and have separate bills. The first bill
9 is focused more specifically on school capital
10 construction. This bill is more general. And we're just
11 going to have to reach some decisions about which way we
12 want to proceed.
13 Mr. Gruver, would you begin?
14 MR. GRUVER: Mr. Chairman, first thing I
15 would call your attention to is page 1, line 16. This is
16 truly a concept discussion draft. It was finished last
17 night. I apologize for not getting it to you beforehand,
18 but changes were being made and there are a lot of things
19 in this bill, to be quite frank, were decisions made by me
20 as I'm sitting at the computer. So this committee has to
21 make a lot of decisions in this bill and I'll try to point
22 those out as we go through.
23 CHAIRMAN PARADY: Probably you at the
24 computer is a better basis for decision-making than some
25 of the alternatives that might come up.
118
1 SENATOR GOODENOUGH: Objection.
2 CHAIRMAN PARADY: Noted.
3 MR. GRUVER: Mr. Chairman, it does build
4 on the general concepts of the consultant and places a lot
5 of those in there, but when you do that there are a lot of
6 minor decisions to be made and just wasn't enough time to
7 go back and forth and try to figure out what should be
8 done.
9 After all, the bottom line is going to be a
10 decision for the legislature anyway, so with that in mind
11 when creating a new commission, eliminate the State
12 Building Commission, the five elected officials. Transfer
13 parts of the State Building Commission's duties to the
14 State Loan and Investment Board and part to the new
15 Capital Financing Commission.
16 The basic breakdown is the -- if the issue deals
17 with building a new building, constructing a new building,
18 leasing a new building, replacing a facility, that was
19 placed with the Capital Financing Commission.
20 If it dealt with the day-to-day use of a
21 building, it was left with the State Loan and Investment
22 Board. And whether that's a good decision or not, that's
23 for the committee to make. Maybe you want to take them
24 completely out of it and give the day-to-day use to A&I or
25 this new commission. That's your choice.
119
1 One other thing for background, this bill does
2 establish a commission. Some of the consultant's
3 recommendations were discussed in terms of an authority,
4 an independent authority. And I had actually drafted one
5 along those lines, but it became difficult to have
6 day-to-day functions of state government and revenue
7 streams being dedicated and implemented and appropriated
8 to an independent authority.
9 There's some constitutional issues and some
10 other issues and just really was difficult to draft it
11 along those lines, so I went back to using the Water
12 Development Commission and then the bonding authority from
13 the WCDA to create this new commission.
14 Following on page 2, staff comments kind of
15 outline the entire bill. The GARVEE bonds are not under
16 this authority, they're just as they were in 1999 as we
17 discussed, including the aeronautics bonds. Bonding
18 authority is currently granted to the SLIB board, is --
19 for a local government program is repealed and when we get
20 to that we'll talk about that.
21 Basically you have some coal lease bonus and
22 FMRs going to the SLIB board in which they have a loan
23 program to counties and cities. Those revenue streams are
24 maintained, but there's also bonding authority within that
25 program. That bonding authority is repealed.
120
1 The authority of the SLIB to issue nonnegotiable
2 debenture bonds, that's not affected. Those are different
3 bonds than I think what you're talking about here. Really
4 those deal with Farm Loan Board bonds and some water
5 development bonds.
6 What happens is they issue bonds for the amount
7 of the Farm Loan mortgages that they take. All of that
8 stuff stays the same. None of that is affected here.
9 There is some unused bonding authority out there that's
10 repealed. I will talk about that when we get to the
11 specifics.
12 This bill actually has the coal lease bonus
13 monies going to the school cap con redirected. It already
14 has that going to a state construction program. That was
15 one of the amendments to the earlier bill we talked about
16 this morning.
17 Just like the other bill, it is really drafted
18 into a concept provision and if you go with this, we draft
19 it further, have to meld it together into correct bill
20 drafting format.
21 On page 3, the first issue is Capital Financing
22 Commission. Those are all definitions. The important
23 definitions, whenever we talk about projects, we're
24 talking about both state projects, which would be state
25 capital construction projects, and also school projects.
121
1 Now, when we deal -- we also separate those
2 definitions on lines 40 and 44, school projects are those
3 that come under the school cap con program. The state
4 projects are any projects other than the school projects.
5 Page 4, we establish the commission, seven
6 members appointed by the governor, consent of the Senate,
7 removal by the governor, staggered terms, no more than
8 four from a political party, receive a salary of $50 a
9 day. That's all over the place as far as the statutes go.
10 It can go higher, can go lower. I actually think that one
11 came from the Water Development Commission.
12 Duties of the commission: Page 4, line 34, they
13 review the plans for state projects. The plans for school
14 projects would be reviewed by the commission being created
15 under the other bill by the school cap con committee, the
16 actual design, construction of school buildings.
17 Page 4, line 42, submit annual report to the
18 legislature. We will get into the details of that report.
19 That will deal basically with building assessments and
20 recommendations for construction needs and financing of
21 those needs.
22 Page 4, lines 46 through 47, I pointed out
23 because it is kind of unusual, we say they shall adopt the
24 rules pursuant to 9-5-107 and 109. That's the assessment
25 provisions. When we get further into the bill you will
122
1 see that we exempted some of those rulemaking authorities
2 from the APA, and the thinking is if this commission
3 recommends replacement of the capital building or
4 whatever, that's really not an administrative decision
5 that should be appealable to the courts. That's a
6 political decision for the legislature to make and so
7 they're out of the APA for those rules. And when we get
8 to the specifics, I'll point those out.
9 Of course on page 5, lines 7 through 10, they
10 can mortgage and pledge revenues authorized by law, and we
11 will get into what we authorize.
12 Lines 18 through 21, the interplay between this
13 commission and the state transportation commission is that
14 the transportation commission could ask for and rely upon
15 the expertise of this super bonding authority if they want
16 to. The transportation commission does not have to, but
17 if they want to, they can ask for advice and this
18 commission will provide it.
19 I skipped lines 12 through 16 which are kind of
20 important. The state treasurer would like this commission
21 to report to the treasurer the amount of revenues
22 outstanding, pledgeable revenues -- I'm sorry -- amount of
23 bonds outstanding, the pledgeable revenues for those bonds
24 so that we have an idea, the state treasurer has an idea
25 of what's been bonded for by this commission and every
123
1 time they have a new bond issue they have to report to the
2 treasurer.
3 Page 5, lines --
4 CHAIRMAN PARADY: Quick question,
5 Senator Mockler.
6 SENATOR MOCKLER: Mr. Chairman, because we
7 have the state treasurer here, when you go back and look
8 at the membership of the commission, wouldn't it be maybe
9 to have an ex officio either of -- the state treasurer or
10 her designee so they're actually there watching instead of
11 waiting for a report after the fact?
12 MS. LUMMIS: Mr. Chairman.
13 CHAIRMAN PARADY: Madam Treasurer.
14 MS. LUMMIS: That sure is a possibility.
15 I came up with this idea after I was at the National
16 Association of State Treasurers meeting in September. And
17 when we had a roundtable of all of the state treasurers in
18 the country, I bet four or five of them at that meeting
19 said, "We have too many bonding authorities in our state.
20 We don't know when they're issuing bonds, when they've
21 pledged revenues, which revenues they've pledged." And so
22 the state treasurer said, "If there's any way that you can
23 get all of the bonding authority under one entity in your
24 state, do it."
25 So one advantage of having the treasurer on is
124
1 because they're sitting there and knowing exactly what is
2 going on. In lieu of that, you could do a report. Either
3 way it would work. I can tell you the state treasurer is
4 on an awful lot of boards and the designee language would
5 help that out because I just spend a tremendous amount of
6 time on boards that are not directly related to my primary
7 goal which is to make money that you can spend.
8 But the designee part would alleviate that
9 problem.
10 CHAIRMAN PARADY: Mr. Gruver.
11 MR. GRUVER: Mr. Chairman, follow-up. The
12 WCDA actually does have the treasurer, I believe, and the
13 governor on the board. I didn't put those on there.
14 Those are one of the decisions based on just what was
15 indicated here, that they are on all kinds of boards
16 already.
17 Page 5, line 25, they hire a director, director
18 hires necessary staff. That's taken pretty much right
19 from the Water Development Commission.
20 No conflicts of interest on lines 36.
21 Line 41, this is that provision I was just
22 talking about earlier, the criteria for prioritizing
23 projects are exempt from the APA, not all rulemaking but
24 those criteria and the prioritization of that under the
25 APA, specifically exempt from judicial review.
125
1 Page 6, getting into the bonding authority,
2 subject to 405, 405 sets the amounts, the limitations.
3 They can bond for any project cost. Projects were defined
4 here earlier. Both state and school projects that would
5 include.
6 The bonds -- the payments and the terms, these
7 are pretty much from 199 as for the GARVEE bond and also
8 from current law for the state capital building
9 commission -- I'm sorry -- the State Loan and Investment
10 Board.
11 Bonding authority, there is one difference here.
12 There is a 45-year maximum maturity. That's taken from
13 WCDA. Because of projects that the WCDA does, I think
14 that those are unusually longer bonds. I don't know if
15 that would be necessary for this commission. I think it
16 was -- you don't know exactly what projects would be
17 included, so they could have that flexibility, that 45
18 years. Again, completely at the determination of the
19 committee.
20 All the way through subsection (h) deals with
21 the terms of the bonds, same things we talked about
22 earlier. Subsection (h) deals with refunding, same
23 issues.
24 Really, you go to page 7, line 29 which deals
25 with limitations, and here we split them out. For
126
1 projects generally, $105 million. That's taken directly
2 from current law 9-4-605 for the SLIB board now. And in
3 fact, in this bill it says that any amounts of unpaid
4 bonds out there which are between 58, $60 million now have
5 to be deducted from that 105 million. So there's no extra
6 authority under this bill from current law for that
7 provision.
8 (b) is school bonds, $708 million, same
9 discussion you had earlier today.
10 Page 8, subsection (c), it is kind of a
11 different provision of current law. There is a provision
12 the SLIB can issue revenue bonds for workers' compensation
13 funds tied directly to the workers' compensation trust
14 funds. I think what happened was a few years ago when the
15 trust fund was in trouble, they thought maybe the bonding
16 against future revenues would be a way to help and so the
17 legislature enacted that authority. I don't think it has
18 ever been used.
19 And it is segregated and all of these bonding
20 authorities are segregated.
21 D --
22 CHAIRMAN PARADY: Representative Osborn,
23 question?
24 REPRESENTATIVE OSBORN: Dave, I guess I
25 don't know that. This is $200 million used for claims for
127
1 workers' compensation.
2 MR. GRUVER: Mr. Chairman, that's correct.
3 What's pledged against that are future income streams owed
4 by employers to the trust fund. And the specifics of that
5 are actually later on in the bill when we amend 27-14-704.
6 REPRESENTATIVE OSBORN: This is called
7 capital construction and it doesn't seem like that fits.
8 CHAIRMAN PARADY: Mr. Chairman -- that's
9 me -- this is an existing authority that's just been
10 rolled under this umbrella, but it has never been
11 exercised; is that correct?
12 MR. GRUVER: Yes, Mr. Chairman. The
13 thinking is that this is one of those bonding authorities
14 out there that the state treasurer has referred to that
15 are all over the place in the statutes trying to
16 consolidate them. It is already under the State Loan and
17 Investment Board and so instead of them having that
18 authority, this new commission has that authority.
19 CHAIRMAN PARADY: For example, we could
20 consider repealing it.
21 Senator Goodenough.
22 SENATOR GOODENOUGH: Mr. Chairman, that
23 was my point considering the health of the workers' comp
24 fund these days, it might be a good thing to do away with.
25 CHAIRMAN PARADY: Senator Meier.
128
1 SENATOR MEIER: Mr. Chairman, thank you.
2 Dave, could we have bonding authority if like
3 our retirement system got in trouble, too? Is that an
4 option? You don't have to answer now, but think about it.
5 MR. GRUVER: Mr. Chairman.
6 CHAIRMAN PARADY: Further questions?
7 I'm missing a signal here, a verbal cue.
8 MR. GRUVER: No, Mr. Chairman, I was just
9 thinking about it. I'm going to think a little longer.
10 Off the top of my head I don't know why not, depending on
11 the revenue stream.
12 Mr. Chairman, page 8, lines 10 through 14, this
13 is bonding authority, again, one of those out there now.
14 I can't honestly say, I don't think it was under the SLIB,
15 it was just under the state. The state will issue revenue
16 bonds. I don't know who the state is, but it was for the
17 coal slurry project which is still out there in existence
18 in the statutes.
19 So we moved that to the commission and if the
20 legislature ever decides to get that up and running, they
21 would have that bonding authority, depending on whatever
22 you operate. It is from revenue streams from the project.
23 Lines 16 through 22, basically what that says is
24 we didn't go in and remove and repeal all of the existing
25 bonding authorities. You're going to be subject to the
129
1 restrictions in those specific statutes if you issue any
2 bonds under this section. And the reference is one just
3 what we walked through, school cap con, workers' comp and
4 coal slurry.
5 Mr. Chairman, line 21 through 25, this is taken
6 largely from existing law and what it says is that these
7 bonds, all of these bonds are revenue bonds. They're not
8 general obligation bonds. They can't be pledged to such,
9 can't be held out as such by the commission, and they're
10 going to be limited to the exact revenue streams that the
11 legislature authorizes for each one of the different
12 categories of bonds.
13 On page 8, line 40 --
14 CHAIRMAN PARADY: Mr. Gruver, if I could
15 just summarize and make sure the committee is all tracking
16 with you, in this section on pages 7 and 8, we're picking
17 up under this financing umbrella our 105 million in
18 general bonding authority, 708 million for schools, the
19 existing workers' comp, existing coal slurry, those remain
20 under their existing statutory controls or provisions, and
21 we've excluded other bonding authorities that are
22 specific, which is WCDA, the natural gas pipeline and a
23 couple others.
24 MR. GRUVER: Exactly, Mr. Chairman.
25 CHAIRMAN PARADY: Thank you.
130
1 MR. GRUVER: The demarcation really
2 involves those things which are an independent authority,
3 completely revenue-based bonding like WCDA and pipeline
4 authority. If it is a separate entity, not the State Land
5 and Investment Board, they weren't dealt with in this
6 bill.
7 Mr. Chairman, page 8, line 40 through page 9,
8 line 2, it is just from WCDA language and it is general
9 bonding language saying that once the pledge is made, you
10 don't have to have actual physical delivery to make the
11 bond good.
12 Mr. Chairman, lines 9 -- I'm sorry -- page 9,
13 lines 4 through 16, same thing. This was pulled straight
14 from the WCDA language. It is the same bonding language
15 that I think we already talked about this morning.
16 Lines 22 through 34 deal with what is pledgeable
17 and what can be used to pay the bonds. Proceeds from the
18 bonds, other revenues, monies available to the commission,
19 those would be the things that are specifically stated in
20 statute and we'll get down to the revenue streams later in
21 the bill.
22 Subsection (b) is again general bond language.
23 (c) is different. Subsection (c) on page 10
24 deals with the FMR stream. Under current law, State Loan
25 and Investment Board has the $105 million bonding
131
1 authority. What's pledgeable for those bonds are the 44.8
2 percent of FMRs headed to the school foundation program
3 and also 26 and a quarter headed to the highway fund.
4 Because we changed the highway fund as talked
5 about earlier this morning, the only thing pledgeable for
6 that $105 million -- that's what 405(a) references -- is
7 the FMRs headed for the school foundation program account,
8 the 44.8 percent. The highway funds would no longer back
9 those bonds up.
10 Page 10, lines 17 through 21, you will see that
11 the revenues have to first meet the obligations of the
12 current outstanding bonds. That's 9-4-605. And then
13 that's provided in the subsection after all revenues
14 needed to meet the bond obligations are deducted, the
15 balance goes to the school foundation program.
16 408 deals with the use of the monies. You can
17 use them for the projects for which they're authorized.
18 Before you spend them, state treasurer will invest them.
19 Same provisions as you looked at earlier.
20 409, again for WCDA, it says that these bonds
21 are legal investments for political subdivisions,
22 insurance companies, whoever can invest in obligations of
23 the state.
24 Page 11, 410, just stating the bondholder's
25 right not to impair the remedies.
132
1 Deals with state agency, upon request of the
2 commission, any state agency may lend technical
3 assistance.
4 412 is a new provision. This deals with the
5 coal lease bonus monies. We create an earmarked revenue
6 fund, call it the state capital construction account. We
7 put the monies that were going to be school cap con
8 account from coal lease bonus into this new account. The
9 commission gets to recommend expenditures by the
10 legislature from this account for purposes of a bonding
11 and for purposes of the school construction and state
12 capital construction, so it could be used for pay as you
13 go.
14 SENATOR MOCKLER: Mr. Chairman.
15 CHAIRMAN PARADY: Senator Mockler.
16 SENATOR MOCKLER: That's what I was going
17 to ask, this is the pay-as-you-go part, right, and can be
18 either for schools or building a new parking lot.
19 MR. GRUVER: Mr. Chairman, that would be
20 subject to the legislature's determination. But the way
21 it is drafted, it is drafted broadly enough to be used for
22 this article which is bonding but also later for direct
23 pay as you go.
24 SENATOR MOCKLER: Mr. Chairman. That's my
25 question, but it is used as a payment source for the
133
1 bonding against the FMR because we can't bond against the
2 coal bonus money? Or we can bond against the coal bonus
3 money?
4 MR. GRUVER: Mr. Chairman, it is my
5 understanding the coal bonus money is not a bonding
6 source, but it allows the flexibility to be in there and
7 maybe in the future you will have a guaranteed stream for
8 the next five years of X amount of money and maybe that is
9 something to bond against.
10 CHAIRMAN PARADY: Mr. Curry.
11 MR. CURRY: Mr. Chairman, by themselves
12 the coal lease bonus payments are not a suitable bonding
13 source because of the nature of how they're calculated.
14 They would backstop, however, provided you go to your own
15 credit enhancement for the FMR debt which would help
16 secure and reduce the cost of that.
17 Without the expectation you necessarily spend
18 the coal bonus money for debt service, it would remain a
19 pay-as-you-go source.
20 MR. GRUVER: Mr. Chairman, the next
21 section -- and this calls for some committee direction --
22 the splitting of the authority between the State Loan and
23 Investment Board and the State Building Commission -- the
24 new commission. The State Building Commission is done
25 away with.
134
1 I don't know how much detail you want to get
2 into. At some point the committee has to read these
3 different duties of the State Building Commission and
4 decide where each of these duties should lie.
5 SENATOR MEIER: Mr. Chairman.
6 CHAIRMAN PARADY: Senator Meier.
7 SENATOR MEIER: I think in practice
8 doesn't A&I just report to the State Building Commission
9 about the day-to-day operations.
10 MR. GRUVER: Mr. Chairman, A&I undertakes
11 the administrative duties under the direction of the State
12 Building Commission and the rules and regulations of the
13 State Building Commission for the day-to-day operations
14 and also for the assessment and reporting to the
15 legislature on capital construction needs. But right now
16 it is within A&I as the actual agency to accomplish the
17 building commission.
18 And the question would be, do you want
19 oversight? Do you want to put that directive with A&I?
20 Do you want this commission to oversee it? Do you want
21 the State Land and Investment Board to oversee it? All of
22 those things -- all of these duties are set forth starting
23 on page 12. I told you what the general idea was,
24 day-to-day state under the SLIB; major changes,
25 construction, replacement was placed under the commission.
135
1 Mr. Chairman, I'm not sure how specific you want
2 me to go through on each of these. That's the general
3 gist of the thing.
4 I guess what I could do is point things out that
5 I think might be controversial or might warrant discussion
6 by the committee at some point.
7 CHAIRMAN PARADY: Please.
8 MR. GRUVER: First one, page 13, 9-5-101
9 does away with the building commission. State Loan and
10 Investment Board would promulgate rules for control and
11 occupancy and use of the state buildings. That's their
12 first issue. Would that stay with the SLIB, go to A&I, go
13 to the new commission?
14 Takes you down to 9-5-102; same discussion.
15 Lease and sale, purchase of property. You can see for
16 purchase, for state agencies, that would be the general
17 services division which is A&I with approval of the
18 Capital Financing Commission, so the new commission
19 because it is a purchase.
20 9-5-103, governor's residence, that was left
21 with the State Land and Investment Board.
22 CHAIRMAN PARADY: That needs to be under
23 the supervision of the president of the Senate.
24 MR. GRUVER: Well, since the governor sat
25 on it I couldn't bring myself to put financing commission
136
1 for that, but maybe that's who should have it.
2 State office buildings, maintenance and use,
3 loan and investment board, lease, rules of the Capital
4 Financing Commission.
5 That would take me to page 15. Again, purchase,
6 9-5-105, financing commission, follow the rules generally
7 of the Loan and Investment Board for the use.
8 Page 15, subsection (b), this is the
9 administrator of A&I actually implementing, as Senator
10 Meier pointed out, what the State Loan and Investment
11 Board decides for use of state buildings.
12 Page 16, lines 9 and 10 --
13 REPRESENTATIVE BAKER: Mr. Chairman.
14 CHAIRMAN PARADY: Representative Baker.
15 REPRESENTATIVE BAKER: If we could, let's
16 back up to the middle of page 15 and talk about the
17 purchase or lease of state lands, buildings. You're
18 talking exclusively of the taking over of current state
19 lands by this new authority, by this new commission --
20 excuse me -- financing commission is the way I read this.
21 Is there any other way that they would be able
22 to purchase land? They literally -- it says purchase
23 here. I presume that they're going out -- let's say they
24 could go out and buy -- let's say the Department of Health
25 has the facility at Lander that's underutilized. If they
137
1 could see a use for that -- I'm trying to make this
2 practical in my mind. Is that a legitimate point of this
3 section here, 105?
4 MR. GRUVER: Mr. Chairman, it doesn't
5 confer any greater authority than what they already have,
6 but I would think the State Loan and Investment Board and
7 the Department of A&I does have authority to purchase
8 lands for state use and buildings for state use. That's
9 correct. So they would do it under rules of the
10 commission.
11 CHAIRMAN PARADY: Follow up.
12 REPRESENTATIVE BAKER: Yes, Mr. Chairman.
13 This kind of gives me a little bit of concern. It is a
14 little bit different when the State Land and Investment
15 Board purchases land or a commission purchases land. I
16 think that's a point we may want to assign a little more
17 oversight to than just presuming that a commission can
18 purchase or hold land.
19 SENATOR MOCKLER: Mr. Chairman.
20 CHAIRMAN PARADY: Senator Mockler.
21 SENATOR MOCKLER: Maybe this is in the
22 bill and I just haven't read this whole thing yet. Is
23 there someplace in this that there is oversight? I know
24 in water development there's a Select Committee on water
25 development that sits out there and looks at everything
138
1 that comes in piece by piece and has oversight every year.
2 Is there a corresponding piece where this
3 committee because it is our job would also act in that
4 same way, that we would have quarterly meetings with this
5 board or commission to go through where they are and what
6 they're doing? Is there that oversight for us which would
7 maybe give some comfort to who is buying what buildings
8 this week, we would maybe see that as it is happening a
9 little closer?
10 MR. GRUVER: Mr. Chairman, when we get to
11 page 23, there is -- actually, may as well turn to that.
12 The Select Committee, that's this Select Committee that
13 he's talking about, will monitor the establishment of
14 finance and policy by the SLIB and by the Wyoming Capital
15 Financing Commission.
16 Now, but that's all you have. You don't have --
17 and it is not in this bill -- the same kind of reporting
18 to a Select Water Committee that you do for the Water
19 Development Commission.
20 CHAIRMAN PARADY: Senator Mockler, I had a
21 note for myself, if we're going to establish a parallel
22 commission, it might behoove us to parallel it in a number
23 of respects, so we might want to beef that section up.
24 MR. GRUVER: Mr. Chairman, page 16 is
25 where I left off, lines 9 and 10.
139
1 What you don't see there under (b) is an
2 exemption for the legislature and for the judiciary. And
3 the change there is that, okay, rules dealing with
4 day-to-day use and things like that under 101 through 106
5 won't apply, but rules under 9-5-109 and 108, which is the
6 assessment and construction needs and prioritization of
7 construction needs, will apply.
8 The thinking is if you're going to have a
9 construction authority overseeing all state building
10 needs, why would you have different time frame for
11 different branches of government. Whether that's a wise
12 choice or not, I don't know, but that's something you can
13 talk about and think about.
14 Mr. Chairman, page 16 we deal with the staff
15 comment. I would highlight number (1) which is that in
16 current law for the assessment and construction authority
17 and prioritization, when you put it together I think it
18 was about five years ago, you exempted certain state
19 agencies that have building maintenance underneath their
20 authority. One is Game & Fish. One is transportation.
21 And you allowed them to adopt separate rules for capital
22 construction needs assessment.
23 This bill requires them to use the same rules of
24 the commission. Again, the thinking is that if we're
25 going to do capital construction needs assessment, why
140
1 would Game & Fish be on a different time frame than
2 transportation and Department of Health and anyone else?
3 That might be too much, I don't know, but it does that.
4 Number (2), funding recommendations for the cap
5 con account to the legislature, the legislature gets to
6 decide for each project, direct appropriation, bonding,
7 capital leasing.
8 Number (3), UW and community college projects
9 are not required to be included, so they do have their
10 exemption. They can ask to be included, and if the
11 commission agrees, they could be included. But UW bonding
12 authority, community college bonding authority is not
13 affected. They don't have to get on the same schedule for
14 assessment and review prioritization as the rest of state
15 government.
16 CHAIRMAN PARADY: Mr. Miller, could I ask
17 you for any additional commentary from the university
18 about that provision?
19 MR. MILLER: Mr. Chairman, the university
20 is completing the third leg of the three-part planning
21 process of facilities planning and it is longer range than
22 just five years. It is the intention of the university to
23 have a planning capital facilities planning document and
24 then, you know, where appropriate plug into this group to
25 the extent that we'll come into the legislature asking for
141
1 you all to consider funding assistance with respect to
2 capital facilities.
3 So planning and meeting those requirements are
4 going to be part of what we do, that's for sure.
5 CHAIRMAN PARADY: Thank you.
6 MR. GRUVER: Mr. Chairman, page 17 we
7 start putting those provisions on paper. This is the
8 listing for the assessment. This is, as you can see,
9 current law, but it is transferred from the A&I under the
10 direction of the building commission to this Capital
11 Financing Commission to do this assessment.
12 And we specifically add on line 31 that the
13 listing -- and this is the listing that's provided
14 annually to the legislature or is by law required to do,
15 anyway, would include information on the university
16 buildings and community college buildings.
17 So the point would be, yes, they're on a
18 different schedule but they're still going to let this
19 Capital Financing Commission know so they can put it in
20 the report to the legislature so you will have at least
21 one report that will have all capital construction needs
22 in front of you.
23 Line 45, this is the recommendations for how do
24 we pay for what we're recommending needs to be done:
25 Direct appropriations, bonding, capital leasing.
142
1 Page 18, subsection (e), this is where we take
2 away the authority of Game & Fish and transportation or
3 other agencies where you can see on lines 28 to 30 to do
4 their own thing. They would be under the new commission
5 rules and we specifically exclude UW and community
6 colleges.
7 Page 19, lines 14 through 19, that's
8 implementing what I just told you about the university.
9 They will have to be in, but if the university requests
10 and the commission agrees, they can be included in the
11 priority list.
12 Something you don't always see, in current law
13 and it doesn't have to be changed because it referenced
14 the building commission. This is the new commission. It
15 sets up just like the water development levels -- level 1,
16 level 2, level 3 -- and as you progress through the
17 scoping stage, then yes, go further, maybe we will build
18 this stage to a building stage.
19 All of those recommendations would come back
20 through from this commission to the legislature. And like
21 I said, I don't have a provision to put that through a
22 select committee.
23 9-5-100, financing recommendations, specifically
24 say how much it is going to cost and if they need
25 additional bonding authority, they will recommend that.
143
1 If capital leasing is recommended, the lease is
2 going to be subject to statutorily defined terms. Page 20
3 all the way through page 2, line 21, all of those are
4 lease terms and basically they're just pulled from the
5 current provisions for the prison leases.
6 By the way, these same provisions appear for
7 school capital construction leasing. You have statutory
8 authority now to enter into capital leasing for schools
9 should the legislature appropriate money to do that.
10 And actually, the state superintendent has that
11 authority, local school districts have that authority, and
12 what they're subject to is a legislative appropriation to
13 make the lease payments. So as a practical matter it
14 won't happen until you give your okay.
15 Mr. Chairman, page 21, starting at line 24, this
16 is, I think, a pretty critical part of this bill. The
17 state budget has to include the governor's recommendations
18 for total appropriations for capital construction. You
19 know, now that just seems to come through the budget as
20 needed, but this would be looking at it as a capital
21 construction bill, basically, and the legislature would
22 then have a cap con bill in front of it based on this
23 commission's recommendations and what the governor
24 recommends from those recommendations.
25 Just a little aside. We've talked about you've
144
1 had the provisions in place for four, five, six years,
2 whatever the amount is. I don't know a whole lot has been
3 done as far as assessing goes and reports to the
4 legislature. I can't remember ever seeing one. Maybe you
5 folks have. I think a part of that is a lack of funding
6 and lack of putting it into the budget and lack of having
7 it in front of you knowing that you have this problem to
8 deal with.
9 CHAIRMAN PARADY: Representative Baker,
10 did you have any comments, thoughts in this area?
11 REPRESENTATIVE BAKER: Mr. Gruver has got
12 it figured out.
13 REPRESENTATIVE HUCKFELDT: Mr. Chairman.
14 CHAIRMAN PARADY: Representative
15 Huckfeldt.
16 REPRESENTATIVE HUCKFELDT: Mr. Chairman,
17 if we could, I would like to go back to page 20, 34
18 through 43, that section there. Is that an attempt to get
19 around Article 16, Section 1 of the constitution,
20 indebtedness?
21 MR. GRUVER: Mr. Chairman, it clearly is.
22 All of these are revenue, not general obligation bonds.
23 If the revenue stream is pledged and doesn't consist of
24 taxes, then you don't have that under the constitution,
25 that's correct.
145
1 CHAIRMAN PARADY: That's utilizing the
2 language from --
3 MR. GRUVER: Mr. Chairman, this is for
4 leases. It is for the lease payment if you're only
5 subject to appropriations for that year, and that's all
6 the bondholders can look to is the lease payment, you're
7 right, same thing. You don't have a debt in excess of the
8 current year's taxes because you're not obligated to make
9 next year's lease payments. And the bonds say that right
10 on there and that's why you have bond insurance.
11 You would always make a lease payment for a
12 prison. You have to do something with the prisoners and
13 you probably would. Probably the most efficient thing to
14 do. Same thing for leasing, say, the capitol building.
15 You would make the lease payments to have a capitol
16 building, I would suspect so, but legally you're not
17 obligated to do so. And the bonds are supported by these.
18 Page 22, only thing I point out there,
19 21-15-112, I mentioned you have the ability to lease under
20 the school provisions and there it is. You can lease --
21 that has references to 1997, when you form your -- or
22 authorize the formation of the nonprofit corporation and
23 to enter into a lease with them.
24 I added the language for the Capital Financing
25 Commission. There might be a time where you want to form
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1 a different corporation, different requirements. I don't
2 know.
3 Page 23, line 8, this is Senator Mockler's, this
4 Select Committee monitors the implementation of financing
5 policy by the Capital Financing Commission.
6 Page 23, we deal with the revenue streams and a
7 lot of this can go a little quicker because -- I'm
8 sorry -- not yet.
9 9-4-601, all of these pages through page 27,
10 line 12, currently I talked about the city and county loan
11 and grant program funded by FMR coal lease bonus. There's
12 provisions in there where the SLIB can bond, instead of
13 issuing -- instead of using the revenue streams directly,
14 they could bond against it.
15 My understanding is they've never done it. They
16 could bond 40 million for cities, 20 million for counties
17 and special districts. That bonding authority is repealed
18 here. The thinking is it has never been used. I suppose
19 if you wanted to, you could have the Capital Financing
20 Commission issue bonds for it, but I'm not sure the State
21 Loan and Investment Board would be crazy about taking away
22 the loan and grant program and putting that under the
23 Capital Financing Commission.
24 So if you have bond authority, to be logically
25 consistent with everything else you've got going, you
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1 would put the bonding under the commission, but yet you
2 have the direct payment program under the SLIB. Anyway,
3 the bonding authority is repealed. That's all those
4 provisions do.
5 CHAIRMAN PARADY: Mr. Gruver, Madam
6 Treasurer, in this section it looks to me like we may be
7 foregoing an opportunity to help our communities and towns
8 by using bonding authority to support their ability to
9 make investments in their communities so that they're
10 investment ready, in the economic development language of
11 the day.
12 That authority has existed but hasn't been used,
13 and I believe Mr. Gruver just accurately described our
14 dilemma if we pulled that authority here and separate it
15 from the grant program.
16 I just wonder if that's not a tool that might be
17 of interest to our municipality, and if you've had any
18 discussion in that direction, I would love to hear it.
19 MS. LUMMIS: Mr. Chairman, the only
20 discussion that the board members have had about this is
21 that it might be good to retain some authority to bond for
22 local projects, and off the top of my head I don't really
23 have an opinion right at the moment about whether that
24 should be retained with the State Loan and Investment
25 Board or transferred to the Capital Facilities.
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1 May I ask a question of Dave in that regard?
2 Dave, what secures those bonds, what source of revenue is
3 pledged, if we were to bond?
4 MR. GRUVER: Mr. Chairman, it is the same
5 as the money used for the direct payments, FMRs and coal
6 lease bonus.
7 MS. LUMMIS: Okay. Well, Mr. Chairman,
8 because of that, if you separate the bonding authority and
9 the grant authority, yeah, the revenue is over here and
10 the authority to bond is over there. So that may be one
11 that needs to stay with the State Loan and Investment
12 Board.
13 CHAIRMAN PARADY: Members of the
14 committee, I think for purposes of our discussion today
15 we're going to leave that for further reflection to our
16 next meeting. I at least have some preliminary interest
17 in sustaining that ability to bond in that area.
18 MR. GRUVER: Mr. Chairman, page 27, line
19 14, 9-4-605, that's the current authority of SLIB to bond.
20 (k) adds a new provision, can't issue any bonds after
21 June 30th, 2002, so cut off that ability that would then
22 be transferred then to the new commission.
23 9-4-901 through 903 deals with state refunding
24 bonds. I think this is for general obligation bonds. I
25 don't know that it is ever used now. It would be if you
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1 ever issued obligation bonds. Changes or transfers the
2 authority from the governor and treasurer to the
3 commission with approval of the governor and treasurer and
4 Attorney General.
5 So basically the commission would know what kind
6 of bonds are outstanding, treasurer would know what kinds
7 of bonds are outstanding, what's been pledged against
8 them.
9 Mr. Chairman, on page 29 this is the workers'
10 compensation revenue bond provision that we talked about.
11 All it does is change the State Loan and Investment Board
12 to the Capital Financing Commission. The amounts are the
13 same. The reasons for issuing the same. The restrictions
14 are all the same as in current law.
15 Basically it says if you can make money and if
16 it would help the account and the Department of Employment
17 asks for it, the State Loan and Investment Board could
18 issue those bonds up to $200 million.
19 CHAIRMAN PARADY: Mr. Gruver, are you
20 aware of any reason we should sustain that authority in
21 the absence of its use?
22 MR. GRUVER: Mr. Chairman, I don't have
23 any idea where the workers' compensation account is.
24 CHAIRMAN PARADY: Before we meet again
25 could you make an inquiry of Director Nelson as to her
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1 opinion on that subject?
2 MR. GRUVER: I certainly can. Page 30,
3 you have Yellowstone Park Commission.
4 REPRESENTATIVE BAKER: 50,000.
5 MR. GRUVER: You can tell how long ago
6 this came into being. But anyway, the commission had
7 authority to bond and to use revenue. It is just
8 repealed. It has not been used. State treasurer did
9 think the commission should still be on the books in case
10 it is needed one day.
11 Mr. Chairman, page 31, you're going to love to
12 hear this, this is pretty much what we did in 199 W-4, so
13 I don't see any great reason to go through it again. If
14 you have specific questions, I would try to answer them.
15 SENATOR MEIER: Mr. Chairman.
16 CHAIRMAN PARADY: Senator Meier.
17 SENATOR MEIER: Specific question on that,
18 Dave, is when we get back there into the area where we're
19 doing the stairstepping on the different percentages, why
20 can't we just say that the federal mineral royalty funds
21 are going to be transferred in an amount equal to the tax
22 generated after it is disbursed to the Department of
23 Transportation rather than going through a stairstep
24 process?
25 MR. GRUVER: Mr. Chairman, the tax
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1 generated does not stairstep. The five cents comes on all
2 at once. What we would have to do -- and we've done that
3 before -- is say that the amount equal to the gas tax
4 raised for this year, but only a quarter of that amount.
5 The next time it would be half of that amount, then
6 three-quarters of that amount and then the full amount.
7 If you're going to stairstep, you would still
8 have to do that. The language I used is from the FMRs,
9 the gas tax generated. Basically the point is you don't
10 know that it is going to be equal and gas tax might go up,
11 FMRs might go down, who knows. But the point is then you
12 don't have to have the Department of Revenue making those
13 calculations, figuring out how much gas tax was raised
14 with the exemptions on and then calculating an equal
15 amount of federal mineral royalties and telling the state
16 treasurer what to transfer here and there. You could do
17 it the other way, but you still need to stairstep because
18 the gas tax comes on all at once, five cents.
19 SENATOR MEIER: Mr. Chairman, maybe a
20 little education for me. We're going to get $30 million
21 worth of gas tax in one shot. Federal mineral royalties,
22 they don't come in one shot, is that what you're saying,
23 so that's why you can't pay the capital financing -- that
24 the Department of Transportation couldn't pay the new
25 capital construction commission, whatever, that money at
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1 one time or what is the problem?
2 MR. GRUVER: Mr. Chairman, the point of
3 the stairstepping is just that federal mineral royalties
4 do come in at one time and you have more than your $30
5 million. But the point is that you want the Department of
6 Transportation to get some extra money the first four
7 years when those bond proceed monies -- when that full
8 amount of money is not needed for the school capital
9 construction program. That's the point of the
10 stairstepping, basically, to give DOT, I think it is, $48
11 million extra money.
12 SENATOR MEIER: Mr. Chairman, I guess that
13 was the point. I thought we needed to meet the Supreme
14 Court guideline in a set amount of time, if 48 million
15 would be better spent in that area than it would be spent
16 in the construction of highways. But I guess right now we
17 have a preference towards the Department of Transportation
18 versus building the schools.
19 MR. GRUVER: Mr. Chairman, I don't have
20 any preference.
21 SENATOR MEIER: But the bill does. I
22 wanted to make sure that's where it was going. I thought
23 it was.
24 MR. GRUVER: Mr. Chairman, really the only
25 difference between the GARVEE bonding authority here and
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1 109 is that the transportation commission can go to this
2 new commission and ask for help, and that appears on page
3 33, line 21.
4 On page 34, lines 7 through 11, you will see
5 that the amendment suggested this morning is already in
6 there. The limitation is just a straight $600 million.
7 That would take you all the way through page 38,
8 line 34. I would point out -- not that you need to know
9 now -- this is single-spaced and it is 50-some pages, so
10 it is a huge bill, and it will get bigger if we make all
11 the technical changes along the way.
12 Page 38, line 36, start dealing with the
13 diversions of funds, and this bill, as Senator Meier
14 points out, on page 40 has the stairstepping already built
15 into it. I guess I'll go back to page 39, line 40.
16 Here's the school foundation program FMRs, 44.8 percent,
17 subject first to outstanding bonds, then to allocations
18 under 407(c). That's the new bonding authority.
19 Line 3 is a stairstepping of the FMR highways, 4
20 percent a year until we get down to the 10 percent.
21 All of those on page 40 are just references to
22 the new bonding authority either under GARVEE or under the
23 new commission.
24 Page 40, line 47 through page 41, line 15 is the
25 stairstepping the other way. School cap con gets FMRs, 4
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1 percent a year for the next 40 years, an increase.
2 Page 41, line 17 is the coal lease bonus and
3 this has the amendment built into it, too, which is that
4 instead of going to the school capital construction
5 account it goes to the state capital construction account.
6 You will find that on lines 27 through 29.
7 Same change is made on page 42, lines 7 through
8 9.
9 9-4-605 is just an amendment to the current
10 authority of the SLIB, make sure that the outstanding
11 bonds are paid first.
12 21-15-108 is the change to the school cap con
13 that we talked about under 199. The revenues that will
14 flow to the school cap con are under the staff comment on
15 page 43. Bonding authority is increased to $708 million
16 just as in the bill earlier today.
17 One change that this bill has --
18 CHAIRMAN PARADY: Just to clarify,
19 Mr. Curry, Mr. Gruver, the way in which we cover the
20 potential debt service to 708 million is the diversion of
21 the FMRs resulting from the nickel gas tax which is
22 roughly equivalent to 32 million plus the commitment of
23 these existing FMR streams which is the 38 million that's
24 in 9-4-305(b) and I don't know what that 2.7 percent --
25 the total is the 45.5.
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1 MR. CURRY: Mr. Chairman, that's exactly
2 right. You're currently using about 5 and a half million
3 dollars of FMRs for school cap con. It is 5 and a half, 8
4 plus 32.
5 CHAIRMAN PARADY: Thank you.
6 MR. GRUVER: Mr. Chairman, page 44, staff
7 comment, this bill bases the school financing authority
8 with the new commission. 199 left it with the SLIB. The
9 school cap con committee bill puts it with the new School
10 Facilities Commission.
11 So that basically lays out your three choices.
12 At some point the legislature is going to have to decide
13 which of the three is going to be the bonding authority.
14 CHAIRMAN PARADY: Does the committee wish
15 to engage in some discussion at this point or do you want
16 to leave that to later?
17 Senator Mockler.
18 SENATOR MOCKLER: Mr. Chairman, the way
19 their bill works right now is they have both had the
20 bonding authority and the recommendation for the building,
21 whether they want to go forward at all, what kind of
22 building, that is all in one commission?
23 I mean, one of our options is to say let there
24 be a committee that actually does the groundwork of how
25 many square feet and who is doing all of that and the
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1 second component to go to this commission and say, Here is
2 our list and how we want to do it." That's the option,
3 right, how to mix the two?
4 CHAIRMAN PARADY: My understanding of the
5 option, Senator Mockler, is that the bill that's in the
6 other committee is both the construction oversight and the
7 financing authority. The bill that's before us here is
8 really an attempt to build a larger financing authority
9 that covers as many of our financing needs as possible in
10 one financing shot, leaves that construction oversight
11 with that other group.
12 SENATOR MOCKLER: That's what I meant.
13 This bill is sort of a hybrid of what they're trying to
14 do. It takes a little bit of what they're trying to do
15 out of their bill and puts it in here.
16 CHAIRMAN PARADY: Yes. Madam Treasurer,
17 would you care to speak to your thoughts relative to what
18 it is worth to get this financing authority all in one
19 place?
20 MS. LUMMIS: Mr. Chairman, the thought
21 behind the financing authority is that if you compile all
22 of the financial resources that Keith Curry just laid out
23 for you, school capital construction alone would be
24 overfunded.
25 So by having a large authority that the
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1 legislature directed to fund capital construction out of,
2 be it school capital construction or other state capital
3 construction, having that all in the big pool gives the
4 legislature more flexibility to say, "Okay, we've got
5 enough money to do the school capital construction for the
6 next biennium. We can also afford to go into that pot of
7 funds and do the University of Wyoming's Health Sciences
8 College," or some other capital construction project. So
9 it just provides the legislature with a lot more
10 flexibility.
11 In addition, it would provide that kind of
12 one-stop shopping for bonding that the other state
13 treasurers advised was so important so you don't have all
14 kinds of creep-along state agencies to bond that is not
15 coordinated and not well understood by legislators and
16 other members of the executive branch.
17 CHAIRMAN PARADY: Thank you.
18 Representative Baker, follow-up.
19 REPRESENTATIVE BAKER: Mr. Chairman, I
20 don't mean to disagree with too many people here, but I
21 have the bill that was under discussion yesterday and it
22 was not bonding authority in that bill at all, and so I
23 want to be clear that the bill that capital construction
24 had is construction -- actually planning and management
25 and major maintenance and construction oversight, and it
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1 was left to this committee to come up with a method
2 whether they would pay for it or bond it or lease it or
3 whatever.
4 Am I -- I'm not sure that was made clear.
5 MR. NELSON: Mr. Chairman, you're missing
6 one component in that bill. There was in that bill an
7 amendment to 21-15-108 which transferred the bonding
8 authority from the state superintendent to the new School
9 Facilities Commission.
10 The thing that that bill did not do was increase
11 the bonding authority from $100 million to the
12 704-million-dollar level. But the bill required them to
13 not only report their remediation recommendation and
14 project recommendation, but also to put together that
15 financing based upon bonding or leasing or whatever.
16 CHAIRMAN PARADY: Do we have a common
17 understanding?
18 REPRESENTATIVE BAKER: Yes, we do.
19 CHAIRMAN PARADY: And I appreciate your
20 calling that out because I didn't realize the previous
21 bill then has a limited bonding authority. The other
22 committee bill is at the $105 million level.
23 REPRESENTATIVE BAKER: Yes.
24 MR. GRUVER: Mr. Chairman, that's correct.
25 Currently there's $100 million for schools under the SLIB,
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1 and that amount is the same but the authority is changed
2 to the commission. I'm sorry if I was unclear on that.
3 CHAIRMAN PARADY: Representative Osborn.
4 REPRESENTATIVE OSBORN: Mr. Chairman, page
5 33, Dave, it says the commission, and it is the
6 transportation commission, may request advice. And I'm
7 wondering why we didn't just assign that responsibility
8 for bonding to this new commission rather than leave that
9 split there.
10 MR. GRUVER: Mr. Chairman, I defer to the
11 state treasurer and the consultant because that was one of
12 the questions in drafting this.
13 CHAIRMAN PARADY: Madam Treasurer.
14 MS. LUMMIS: I'm not sure about the
15 question. Are we talking about --
16 MR. GRUVER: GARVEE bonds.
17 MS. LUMMIS: Oh, okay. The GARVEEs. The
18 state treasurer's office never receives federal highway
19 gas tax dollars and then passes them through to the DOT.
20 The DOT receives that money directly from the federal
21 government, and that money can only be used by the DOT.
22 So one option is to have the DOT, the
23 transportation commissioners, issue the GARVEE bonds.
24 Another option would be to have the GARVEE bond
25 authority in the -- this big financing commission, but
160
1 know that we never receive that money. Since their money
2 is so separate from other money, and it would never be
3 pledged for other -- anything other than GARVEE bonds, the
4 GARVEE bond is such a unique type of financing that it
5 could be separate without ever affecting other bonds,
6 other pledges, the state's bond rating or anything else.
7 REPRESENTATIVE OSBORN: Similar to things
8 you have to keep track of.
9 MS. LUMMIS: Correct. So Mr. Chairman, it
10 is a judgment call. It is a choice for the committee. I
11 can tell you that from listening to the transportation
12 commissioners, I'm not entirely sure that they're
13 comfortable with the idea of bonding for highway
14 construction, so it should seem that they should have the
15 authority -- the authority should be given to them to use
16 or not use as they see fit.
17 It is purely discretionary on their part and
18 would only come into play if they got to the point where
19 they had done all of their planning for highway
20 construction and the money had not yet come in from the
21 federal government to do it, but they were ready to do it
22 in any other scenario. At that point they could bond if
23 they wanted to against a portion of their federal highway
24 gas tax dollars that are put out on a five-year period.
25 If they wanted to, they could bond for maybe
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1 even as little as seven years. That would put it out into
2 the very next five-year highway bill, but since other
3 states are doing this successfully, it would give them an
4 option that they don't currently have but it is by no
5 means a requirement.
6 Keith represents a large number of DOTs around
7 the country and does RTDs in Denver's bonding work. Do
8 you have anything to add, Keith?
9 MR. CURRY: Mr. Chairman, members of the
10 committee, the convention -- and there's about 12 states
11 now doing GARVEE financings -- is that they're issued by
12 the Department of Transportation. Some states have, as
13 we're talking about here, issuing entities who would act
14 on behalf of the Department of Transportation, but
15 generally responsibility is vested either with the state
16 transportation commission or the Department of
17 Transportation.
18 CHAIRMAN PARADY: Senator Meier.
19 SENATOR MEIER: Couple of questions. Is
20 there a limitation that the federal government has on the
21 amount of revenue that can be bonded against that's going
22 to the states? Do they allow 50 percent of it or can they
23 bond 100 percent of it?
24 And I'm not sure in this bill, but I thought in
25 the other bill that we allowed the Department of
162
1 Transportation federal mineral royalty bonding authority
2 also. It might be prudent to make sure that they don't
3 have FMR authority if we give them this other authority.
4 Could you answer those questions?
5 MR. CURRY: Yes, Mr. Chairman, the
6 scenario under which $600 million was calculated was based
7 on 3-to-1 debt service coverage ratio. In other words,
8 that's about $58 million of debt service to support that,
9 and that's on the assumption of 160 some million dolllars
10 of revenue coming from the DOT. So you're only
11 obligating, if you will, one-third of your federal cash
12 flow stream under this most, if you will, extreme
13 scenario.
14 There are certain smaller categories. Federal
15 monies, you know, is fairly categorical, but some
16 categories are not appropriate to issue debt against, but
17 they're relatively small and are not included in the
18 calculations here.
19 The thinking on the FMRs is that you would use
20 that or the department would use that for nonhighway
21 purposes, if the need arose, or they would use that as a
22 credit enhancement to reduce the cost of their borrowing
23 for highway-related GARVEE enhancements but would not
24 necessarily issue a huge amount of new bonds in addition
25 to the GARVEE capacity.
163
1 CHAIRMAN PARADY: Follow up,
2 Senator Meier.
3 SENATOR MEIER: Thank you, Mr. Chairman.
4 The question I have then is I see no limitation,
5 corresponding limitation that we have with our revenue
6 streams of only using a third of our FMR money, whether it
7 is for highway financing or for capital construction on
8 schools any other way.
9 I think at some point in time it would be
10 prudent for us to have some measure to make sure we don't
11 borrow ourself into the poorhouse. Ways that we could do
12 that is, one, no more than one-third of the revenue come
13 in or we could tie it to a benchmark and say you don't
14 issue any bonds if they fall below a double A rating
15 without insurance.
16 I think those are a couple protocols or
17 protections we should build into this so we don't
18 overextend ourselves.
19 CHAIRMAN PARADY: Thank you, Senator.
20 Please proceed, Mr. Gruver.
21 MR. GRUVER: Mr. Chairman, you'll like to
22 hear this again. On page 34, this is all really GARVEE.
23 We're already further back. 43 -- this is okay, I went
24 through this, too. This has already been gone over in
25 connection with 199. The only changes are name changes.
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1 Instead of the SLIB, it is the Capital Finance Commission.
2 All of this deals with school bonds.
3 Page 46, same changes in 199 earlier today as
4 far as highway bonds.
5 Page 47, all the way through page 49, line 31,
6 same thing. It is the gas tax that was in 199. 5 cents
7 exemptions on --
8 Page 49, the same except the date is changed to
9 July 1st, 2002 to end the mill levy and bond supplement.
10 Two big issues -- one big issue, really,
11 remaining is page 51, section 4, appropriation, X
12 dollars -- I didn't put hundreds of millions this time --
13 is appropriated and also some kind of staffing, if you're
14 going to have a new commission, and a director who can
15 hire the staff, how you want to handle it, how much,
16 completely your committee's decision and can come up with
17 different scenarios depending how large a staff you think
18 you should have. That's it.
19 CHAIRMAN PARADY: Representative
20 Huckfeldt.
21 REPRESENTATIVE HUCKFELDT: Mr. Chairman,
22 after going through the bill I would kind of like to
23 follow up on Senator Meier's concern over borrowing and
24 possibly overextending ourselves and go back to that
25 section on page 20 that you referred to as a way to create
165
1 a loophole or whatever for Article 16, Section 1.
2 Are there any -- is there case law out there
3 that allows us to do this or an AG's opinion that says we
4 can do this portion here? You know, I share the same
5 concerns as Senator Meier about continuing borrowing to
6 the point where we get an excess, and I think that's what
7 Article 16, Section 1 addresses and directs out to us, is
8 that we should do that.
9 MR. GRUVER: Mr. Chairman, there is case
10 law that says that the lease is properly constructed and
11 you're limited to not pledging any tax revenues, then it
12 is not a debt as that term is used in the constitution.
13 Plaintiffs who bring those cases say, "Look, obviously it
14 is not a wise policy choice," and the Court says, "The
15 policy choice is for the legislature."
16 CHAIRMAN PARADY: Further questions from
17 the committee?
18 Senator Mockler.
19 SENATOR MOCKLER: Procedural again. So if
20 I wanted to beef up the finance committee, capital finance
21 committee role, even though it is not really an amendment,
22 can we ask him to go in and do some other parts of this
23 for the next time we see the bill?
24 CHAIRMAN PARADY: Yes, I think that's
25 perfectly in order, that we should give some direction for
166
1 drafting on what we would actually like to work next time.
2 SENATOR MOCKLER: There's parts I hate so
3 there's more parts I would like to see, so you don't want
4 to take the hate out, you would like to add more?
5 CHAIRMAN PARADY: Store up your hate.
6 Members of the committee, do you want to do that
7 now or do you want to take a break and come back to it
8 immediately after the break?
9 SENATOR MOCKLER: Mr. Chairman.
10 CHAIRMAN PARADY: Senator Mockler.
11 SENATOR MOCKLER: Could I make my request?
12 I have another committee meeting at 3:00.
13 CHAIRMAN PARADY: Please.
14 SENATOR MOCKLER: I don't have that, but I
15 assume that when you look at how the Select Water
16 Committee reports -- the select -- whatever it is
17 called -- Water Development Commission reports to the
18 Select Water Committee, can you put that same kind of
19 language together so that that reporting is in here for
20 us, at least to look at and see if that would work for how
21 we want to do this?
22 MR. GRUVER: Sure can.
23 SENATOR MEIER: Mr. Chairman.
24 CHAIRMAN PARADY: Senator Meier.
25 SENATOR MEIER: I guess, Senator Mockler,
167
1 what you're thinking is that we'll have an omnibus capital
2 construction bill, just like the omnibus water bill, go
3 through, the select finance committee would be able to
4 vote on that or amend it, wouldn't go to a standing
5 committee.
6 Now normally the standing committee is -- would
7 it go to education or other standing committees or go
8 directly from here to the House floor? Is that something
9 that we need to look at?
10 CHAIRMAN PARADY: I think we're asking for
11 a process to be drawn up and look at it.
12 SENATOR MEIER: The question I would
13 have -- and I guess this is to leadership -- should it go
14 to revenue, should it go to education, should it go to
15 appropriations? What standing committee would have
16 oversight after the select committee looks at it and makes
17 recommendations?
18 SENATOR MOCKLER: Mr. Chairman.
19 CHAIRMAN PARADY: Senator Mockler, since
20 this is your concept, please feel free to amplify.
21 SENATOR MOCKLER: This looming out there
22 it is going to end up being a standing committee at some
23 point -- and maybe we need to talk about that -- this is a
24 lot of work that will start coming through this committee.
25 It can't go through education because we will have parking
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1 lots for state employees and tearing down Saint Mary's and
2 things like that in it.
3 REPRESENTATIVE BAKER: Tearing down Saint
4 Mary's.
5 SENATOR MOCKLER: First let them draw that
6 up and talk about the procedural part, do we want it to go
7 directly to revenue or appropriations.
8 CHAIRMAN PARADY: Further discussion.
9 Senator Goodenough.
10 SENATOR GOODENOUGH: Mr. Chairman, I don't
11 know if the good senator wants to get some guidance about
12 where the committee members will come from, if there's
13 going to be appointments by the Senate president and the
14 House speaker as the Select Water Committee is by region.
15 SENATOR MOCKLER: My assumption was it
16 would be to this committee, because that's what this
17 committee's job is, capital finance and investment. So it
18 wouldn't be reconstituting this committee by regions,
19 simply come to the Select Committee on Capital Finance --
20 CHAIRMAN PARADY: Were you going to the
21 commission itself by regions?
22 SENATOR GOODENOUGH: No, I was referring
23 to this committee.
24 CHAIRMAN PARADY: This committee? Okay.
25 Is there any other -- Dave, is there things you
169
1 want from us in terms of clarification before we proceed?
2 MR. GRUVER: Mr. Chairman, yeah.
3 CHAIRMAN PARADY: I suspected as much.
4 MR. GRUVER: One of the big ones, the
5 divvying out of the duties between the State Loan and
6 Investment Board and the new commission as far as
7 day-to-day functions, purchasing, leasing.
8 CHAIRMAN PARADY: Senator Mockler.
9 SENATOR MOCKLER: Mr. Chairman, I was sort
10 of trying to figure that out as well. It seems to me that
11 has to come in the next step, but it would be nice to get
12 a chart -- I love charts. Steve can make this -- that
13 says here is the current authority, here is the SLIB, here
14 is the commission, so we see where everything is currently
15 and where we moved it down the road out of all the
16 commissions, school cap con review committee, that kind of
17 thing.
18 Maybe if we have that chart when we come to the
19 next meeting, we can say we don't want it to go there, but
20 we want it to go there. I don't think we could make that
21 recommendation today without really digging in. Most of
22 us don't have the background.
23 CHAIRMAN PARADY: I did feel as an initial
24 starting point that your divisions of authority were
25 consistent and were a good starting place, so I don't have
170
1 any dramatic departure, other than I would like to see the
2 chart as well.
3 Senator Meier.
4 SENATOR MEIER: Thank you, Mr. Chairman.
5 I would like to, I guess, get back to the
6 thought of making sure that we don't overborrow. I don't
7 know if there's any other states out there that have
8 limitations on revenue bonds as a percentage of revenue or
9 limitations on borrowing as it affects their
10 creditworthiness of the state, but I think if there is, we
11 probably should maybe get an idea, if that's possible, to
12 get that information.
13 I guess in the absence of it, myself as a
14 jumping-off point, I wouldn't want to fall below a double
15 A rating for the revenue bonds without insurance. Maybe
16 that's too high. Maybe an A rating is what we want to
17 look at. But I think at one certain point in time I don't
18 think we want the credit of the State to be impaired or
19 impacted to the point where it costs us more to finance
20 than what should be expected.
21 CHAIRMAN PARADY: I would like to ask
22 Mr. Curry to comment on that, but my understanding is our
23 limitation comes from the revenue pledge itself.
24 MR. CURRY: That's right, Mr. Chairman.
25 Your debt will always be limited to the amount of money
171
1 that you make available for debt service payments.
2 To your question, Senator, several states
3 have -- and the rating agency has published medians about
4 debts. An appropriate standard may be an A standard.
5 Double A standard is very high.
6 And just like we have times like today,
7 economies that are dependent upon tourism are seeing the
8 ratings sort of arbitrarily flat and so that could put a
9 limitation on you that would be disadvantageous to the
10 state.
11 I think the primary objective you want to have
12 is a debt program that allows you to fulfill your
13 obligations under the court decision, and once you've done
14 that it is appropriate to put whatever limitations on debt
15 that you think are appropriate.
16 The first mission is to accomplish the mission,
17 and everything else, debt policy, sort of flows from that,
18 would be the way I would look at it, because you have to
19 get done what you need to get done, then you want to do
20 that in the most cost-effective way possible.
21 CHAIRMAN PARADY: Senator Meier.
22 SENATOR MEIER: Well, Mr. Chairman,
23 follow-up. Could you in your expert opinion tell us what
24 the ratings of these bonds would be? Would they fall
25 below the A rating if we had the whole 708 million, we
172
1 bonded another 100 million for correctional facilities or
2 other areas out there we're not aware of, or capital
3 building needs in other areas?
4 I could see the need on top of this bonding
5 authority just for school cap construction possibly
6 another 2 or $300 million of what would be determined
7 needs within the next five years. So if we borrowed a
8 billion dollars on revenue bonds, what would be the
9 ballpark credit rating of the State? Would it be an A or
10 lower?
11 MR. CURRY: Well --
12 CHAIRMAN PARADY: Mr. Curry.
13 MR. CURRY: Mr. Chairman, just looking
14 briefly at the list here, it appears that your federal
15 mineral royalties are approximately $448 million for 2001,
16 so the issue of credit -- and in the context of schools
17 we're proposing maximum debt service of 43 million.
18 That's 10 to 1 coverage.
19 So you would be well within probably a double A,
20 double A minus credit range, if that's all you're going to
21 do. If you're going to do bonds for other things, then
22 you would have more FMRs on the table than what we've
23 talked about in terms of schools.
24 One of the ways that you can lower borrowing
25 costs is by using the coal bonus payment as a backstop;
173
1 the expectation it is available but will not be used.
2 That provides additional coverage to your bonds, enables
3 you to get lower ratings and reduce the borrowing costs.
4 Another way is cross-collateralization across
5 the pools of FMRs. In other words, if the whole 448 were
6 pledged but you by policy limited the debt to 43 million
7 based on what's allocated to school cap con, that's the
8 way you could enhance your own credit and ensure lower
9 rates.
10 Now, the issue there is what happens if it
11 falls? Does that mean other state entities would have to
12 sustain the cut? Those are the policy trade-offs you
13 would want to make as you think about that.
14 CHAIRMAN PARADY: Senator Goodenough.
15 SENATOR GOODENOUGH: Never mind,
16 Mr. Chairman.
17 CHAIRMAN PARADY: Representative
18 Huckfeldt.
19 REPRESENTATIVE HUCKFELDT: Mr. Chairman,
20 quickly for Dave, when we see this again on taxation rate,
21 last year we amended the statutes so that it reflected at
22 the beginning of the statute what the actual tax rate was
23 and then we broke it down.
24 Can we do the same thing with this here so that
25 somebody from another state doesn't read and think we have
174
1 a 14-cent fuel tax rate and then they read on and find out
2 it is different.
3 MR. GRUVER: Mr. Chairman, we can do that.
4 In fact, the revenue committee has a bill doing that. I
5 had it in the other bill at some point and that adds seven
6 or eight pages just to clean up the fuel tax provision.
7 But if you want to do it, we can certainly do it that way.
8 CHAIRMAN PARADY: Members of the
9 committee, two of our members have a 3:00 committee
10 meeting independent of this meeting, so I'm going to
11 suggest we take a break and allow them to go to those
12 other duties and that we come back at 3:20.
13 (Hearing proceedings recessed
14 2:55 p.m. and reconvened
15 3:30 p.m., October 24, 2001.)
16 CHAIRMAN PARADY: We are on LSO draft 200.
17 I think we had given some partial thoughts to Mr. Gruver.
18 Is there anything else somebody wants to see
19 drafted for discussion in the context of this bill before
20 our next meeting? Our next meeting, by the by, is likely
21 to fall either December 10th, 12th with Management Council
22 or maybe the second week in January, something like that.
23 We'll sort that out at the end of the meeting, but those
24 are my thoughts.
25 SENATOR MEIER: Mr. Chairman.
175
1 CHAIRMAN PARADY: Senator Meier.
2 SENATOR MEIER: On 200, a couple of
3 things -- I guess our former presenter, Mr. Curry -- was
4 that it --
5 CHAIRMAN PARADY: Mr. Curry?
6 SENATOR MEIER: Yes, he talked about
7 aggregating the FMRs to reduce the borrowing.
8 CHAIRMAN PARADY: Cross-collateralizing
9 them.
10 SENATOR MEIER: Right,
11 cross-collateralization. And I also talked with him about
12 limiting the amount borrowed to a percentage, and he
13 thought a 4 to 1 would be sufficient, with 3 to 1 on the
14 GARVEE bonds.
15 So I think if we could get with Dave and come up
16 with some language that would limit it to 4 to 1 of our
17 anticipated revenue and put the cross-collateralization in
18 there, probably be a direction we need to look at.
19 CHAIRMAN PARADY: Senator Meier, would you
20 like to follow up on that with Mr. Gruver for our next
21 meeting?
22 SENATOR MEIER: Yes.
23 CHAIRMAN PARADY: Representative Osborn.
24 REPRESENTATIVE OSBORN: I think to clean
25 up the bill, I would like to see us take out the workers'
176
1 comp stuff as it has never been used. And that's in two
2 places, I think, in here, Dave.
3 MR. GRUVER: Mr. Chairman.
4 REPRESENTATIVE OSBORN: I would like to
5 see those repealed, Dave.
6 MR. GRUVER: It is -- in fact, during the
7 break I was told that they actually went out for an RFP
8 four or five years ago for the bonds but never did issue
9 them, so -- and you had asked earlier to talk to Director
10 Nelson about that and I can certainly take it out and let
11 you know the results of that conversation.
12 CHAIRMAN PARADY: Representative Boswell.
13 REPRESENTATIVE BOSWELL: Are you asking
14 that this repeal that authority or you want to leave it
15 aside? You want us to repeal it?
16 REPRESENTATIVE OSBORN: If it is not
17 something we use, why not repeal it?
18 CHAIRMAN PARADY: Members of the
19 committee, do you want to leave the draft as is and deal
20 with it after we talk to Director Nelson, or do you want
21 to direct it out of the draft and we can change our mind
22 after we talk to her? What's your pleasure?
23 SENATOR MEIER: Mr. Chairman, let's take
24 it out because workers' comp is in pretty good shape,
25 comparatively speaking.
177
1 CHAIRMAN PARADY: Senator Goodenough.
2 SENATOR GOODENOUGH: Mr. Chairman, what I
3 was going to say is take the language out of the bill but
4 not repeal the existing language in this bill and so
5 pending more information from the director, we could put
6 the repealer part in later if it turned out --
7 REPRESENTATIVE OSBORN: Or have a separate
8 bill for repeal.
9 SENATOR HAWKS: Mr. Chairman, that would
10 be if we had a real problem with workers' comp. There's
11 no sense of doing away with that backup.
12 CHAIRMAN PARADY: So I'm sensing a
13 consensus to delete the language from this bill but not to
14 add an explicit repealer. Is that such for today's stage
15 of debate of the bill, discussion of the bill?
16 Representative Baker, you look quizzical.
17 REPRESENTATIVE BAKER: I'm thinking,
18 Mr. Chairman. Mr. Chairman, I think -- is there a motion
19 on the floor?
20 CHAIRMAN PARADY: There's not, and I don't
21 really prefer to go that way simply because we haven't
22 officially taken the bill up. We're just operating
23 informally here at the pleasure of the committee.
24 SENATOR HAWKS: Mr. Chairman.
25 CHAIRMAN PARADY: Senator Hawks.
178
1 SENATOR HAWKS: I think it would be
2 appropriate to bring an amendment to change the acronym
3 GARVEE to groovy.
4 SENATOR GOODENOUGH: I second that.
5 SENATOR KUNZ: Don't date yourself.
6 SENATOR GOODENOUGH: Nobody else will date
7 me.
8 CHAIRMAN PARADY: I had the grant revenue
9 utilizing vehicle expenditures.
10 I don't want to back away. I think the
11 direction we're giving, Dave, is to delete the workers'
12 comp out.
13 That issue is closed.
14 Representative Osborn.
15 REPRESENTATIVE OSBORN: The other thing, I
16 don't think I could point to it in here, but as we were
17 going through this, the things that were moved from the
18 building commission to the SLIB I thought in a lot of
19 cases were really maintenance types of items, probably
20 could be handled by A&I and don't really warrant going to
21 the five elected officials for review and decision. And I
22 did talk with the treasurer -- Madam Treasurer over break
23 time and I think she agrees.
24 SENATOR MEIER: Mr. Chairman.
25 CHAIRMAN PARADY: Senator Meier.
179
1 SENATOR MEIER: I would echo that
2 statement. Having sat on the Capital Building Commission,
3 I think there's a lot of areas where A&I is directly
4 responsible to the governor and that's the accountability
5 process, and day-to-day housekeeping things and a lot of
6 other areas, really the governor has the final say and the
7 accountability on it.
8 CHAIRMAN PARADY: So for purposes of this
9 draft, Senator Mockler had asked for a chart listing what
10 authority was where and where it was moving, and I had
11 indicated I thought we had a good start here in asking
12 Dave to refine this draft.
13 We would just note that routine maintenance
14 things are left with A&I, and as you think further through
15 it, please keep that in mind.
16 Any other discussion on draft 200?
17 REPRESENTATIVE BAKER: Yes, Mr. Chairman.
18 CHAIRMAN PARADY: Representative Baker.
19 REPRESENTATIVE BAKER: Mr. Chairman, I
20 want to bring up the subject at least on pages 47 and 48
21 and part of 49 where we as a Select Committee on Capital
22 Finance and Investments get into what I consider to be
23 revenue committee work, which is the 5-cent fuel tax.
24 And, you know, I know that that's part of the
25 recommendation, but is that part of our purview? And I
180
1 question that.
2 CHAIRMAN PARADY: Representative Baker, I
3 would take a shot at it this way, and it is certainly open
4 for discussion.
5 I don't believe it is two subjects in one bill
6 in that we're dealing with fulfilling our duty to fund
7 capital construction and we're doing so by a swap of FMRs
8 and the 5 cents.
9 I think it could be -- and it is arguable. I
10 definitely see the validity of your position. I think we
11 could leave it intact as a complete package that financing
12 the bonding that we're thinking of and then when we hit
13 the floor with the bill, the bill absolutely would have to
14 be rereferred to revenue, or we could delete the nickel
15 tax out of here and ask revenue to sponsor it separately.
16 But I think if in fact the underpinning of your
17 FMR swap to finance the bonding necessary to meet the
18 school decision needs a revenue source that comes behind
19 it, that we need to pony up to that obligation and this
20 bill uses that mechanism. The previous bill does and the
21 next one uses four mills.
22 So I'm at a pleasure of the committee. And I
23 don't know that we have to settle that today, but we will
24 definitely have to settle it here shortly.
25 Representative Osborn.
181
1 REPRESENTATIVE OSBORN: Revenue committee
2 meets Monday and Tuesday next week. Maybe it would be
3 possible to have Dave or someone present that part of this
4 bill that may be helpful to that committee.
5 CHAIRMAN PARADY: I think at a minimum
6 that would be useful.
7 Representative Boswell.
8 REPRESENTATIVE BOSWELL: Mr. Chairman, I
9 guess from the start I was very, very uncomfortable with
10 the gas tax provision and the mill increase. I think the
11 charge to the revenue committee was to come up with money,
12 should we need it.
13 And this committee has taken on that
14 responsibility with these bills. And I'm not comfortable
15 with that. And if we were doing motions, I would move to
16 strike that from whatever bill we wind up moving forward
17 with. I think we're sending an unclear signal to the
18 revenue committee.
19 Right now the revenue committee on Monday is
20 going to look at something like eight or ten revenue
21 possibilities. Hopefully we will delay final votes on
22 those possibilities, but I think we're scheduled to vote
23 on those eight or ten revenue bills, tax bills, and that's
24 five days away, or whatever.
25 To have these things hanging over that committee
182
1 at the same time, to coin a phrase -- I don't think so --
2 muddies the water for the committee. We have a situation
3 already where that committee is uncomfortable with raising
4 taxes historically anyway. Now we're going to have tax
5 bills floating around out there from this committee, and
6 next Monday and Tuesday we're going to ask those people,
7 myself included, to vote on eight or ten revenue
8 possibilities which at their core are based on a question
9 of how do we pay for schools, whether it be running them
10 or fixing them.
11 And I think this confuses them, frankly, and I
12 think it is appropriate to ask the revenue committee to
13 make a decision on things like this.
14 CHAIRMAN PARADY: Representative Boswell,
15 one thought I would have is we could certainly take into
16 account their action as we come back to these bills. And
17 I know that Chairman Nagel is here, I'm not sure about
18 Chairman Peck, but I could visit with her today.
19 Senator Kunz, do you have any thoughts you might
20 offer?
21 SENATOR KUNZ: Mr. Chairman, in the first
22 place, the bills aren't really before us. We haven't
23 voted on them and we don't know yet what revenue is going
24 to do. But I assume that this is going to be an ongoing
25 discussion.
183
1 I understand the concerns about committee turf,
2 but I think it is really important that we have a lot of
3 ideas in the mix when we come to the session to talk about
4 because this is a major thing for the state of Wyoming, as
5 we all know, dealing with school capital construction.
6 And having vehicles out there doesn't concern me at all,
7 as long as this bill starts in the House, because it is a
8 revenue-raising measure, or anything that has the 5-cent
9 gas tax on it should be.
10 And visiting with Mr. Chairman who also happens
11 to be the floor leader, I guarantee you that we will
12 coordinate this. And we're not trying to shut anybody
13 out. We will be visiting with the revenue chairman, too,
14 and committee members.
15 But it is not a foregone conclusion that it has
16 to be a gas tax. I'm not wild about gas tax either. I've
17 been on the record many times against it. But this makes
18 a lot of sense from a bonding perspective. And this
19 committee is charged with coming up with a bonding
20 methodology to pay for capital construction. That's what
21 the charge is from Management Council to this particular
22 committee: Come up with a bonding strategy, if we're
23 going to bond. That's not a foregone conclusion either.
24 But if we're going to bond, come up with what you think is
25 the best perspective on how to do it.
184
1 And the only thing that I've seen on the table
2 is the proposal from the state treasurer's guidance and
3 from Mr. Curry who is the consultant who was brought in to
4 help us try to solve this problem, is to go that
5 direction.
6 So yes, it is a revenue measure, but it is also
7 a bonding stream that is viable by substituting gas tax
8 for FMRs.
9 Now, there may be other FMRs that we can look
10 at, but you're going to be looking at other revenue
11 methods to trade off.
12 So I don't think it is within the purview of
13 revenue only just to deal with this particular topic. I'm
14 not uncomfortable with it.
15 CHAIRMAN PARADY: Further discussion.
16 Representative Baker, does that at least
17 initiate the discussion we need to have?
18 REPRESENTATIVE BAKER: We at least need to
19 have the subject on the table.
20 CHAIRMAN PARADY: And I think we'll have
21 to come back to it. I will be anxious to see what revenue
22 does Monday and Tuesday. I would like to know that the
23 bill is constructed where deleting it is fairly
24 straightforward.
25 SENATOR MEIER: Mr. Chairman.
185
1 CHAIRMAN PARADY: Senator Meier.
2 SENATOR MEIER: When we come back, too, I
3 think it would be helpful for the Department of
4 Transportation to say why we need to front load them
5 rather than going into the state building -- you know,
6 that I guess they have some reasons for front loading them
7 on the gas taxes and incrementally funding the
8 construction phase. I would like to know why we need to
9 front load.
10 CHAIRMAN PARADY: So we would like
11 Mr. Duvall before us at the next -- I would like to be
12 clear, one of the areas of the bill that I'm not
13 completely comfortable with is if this is duplicative of
14 transportation's efforts in the GARVEE bonds and
15 particularly -- they're not commission stuff. I think
16 Wyoming's problems is airplanes, not airports, as near as
17 I can tell.
18 There's substantial work, I hope, that's being
19 done elsewhere that will clear that up because that's not
20 the central charge of this committee.
21 Senator Goodenough.
22 SENATOR GOODENOUGH: Mr. Chairman, I would
23 hope we would concentrate on the school capital
24 construction angle, and the transportation stuff I think
25 is kind of just a secondary thing and there's been no
186
1 documentation that's needed or anything as far as I know.
2 CHAIRMAN PARADY: I think that that work
3 is ongoing but not in front of us.
4 Further discussion on 200 before we move to 190?
5 REPRESENTATIVE BOSWELL: My concern is
6 that the revenue committee will be discouraged from
7 passing along any of the bills coming before us Monday and
8 Tuesday because this is out there. That's my concern. It
9 is not a turf battle. It is just that when it comes time
10 to "Gee, we need to maybe vote for taxes," the revenue
11 committee's history is clear. It tends to not do that.
12 And if we're going to vote -- and I hope we
13 don't Monday and Tuesday -- I think this will make it more
14 difficult for that committee to move taxes forward. Of
15 course, Representative Huckfeldt is always ready to vote
16 for taxes, but I don't know.
17 REPRESENTATIVE HUCKFELDT: Mr. Chairman, I
18 don't think there was a tax bill that didn't quite make it
19 out of the revenue committee last year. I think almost
20 every bill that went in went out.
21 CHAIRMAN PARADY: Okay, members of the
22 committee -- Senator Kunz, briefly.
23 SENATOR KUNZ: Mr. Chairman, my only
24 observation would be that maybe if that's the scenario we
25 need an alternative bill out there in another committee to
187
1 maybe bring forward so that everybody can vote on it and
2 not just the revenue committee.
3 CHAIRMAN PARADY: Representative Reese.
4 REPRESENTATIVE REESE: Mr. Chairman, to me
5 if comes down to a question of which is more important to
6 you, do you want to use the federal mineral royalty money
7 to bid and maintain highways for some out-of-state trucker
8 or do you want to use it for building schools and keep our
9 taxes in other areas lower?
10 If we go this route -- well, I agree that this
11 gas tax shouldn't be in the bill. I think we need to go
12 ahead and concentrate on the FMR, redirecting the FMRs and
13 force the revenue committee or the transportation
14 committee to come up with a fuel tax side of it to put the
15 money back into the DOT.
16 CHAIRMAN PARADY: That was a committee
17 where we haven't even taken the bill up officially. It is
18 before us. I suggest we walk away from it and come back
19 and finalize our decision at the next meeting.
20 Appreciate the perspective.
21 Any further discussion?
22 Representative Osborn.
23 REPRESENTATIVE OSBORN: Mr. Chairman, I
24 would like to have somebody Monday and Tuesday -- you've
25 talked to Mr. Gruver about it, whether it would be a good
188
1 idea to have somebody there to explain it.
2 CHAIRMAN PARADY: Madam Treasurer.
3 MS. LUMMIS: Mr. Chairman, Keith Curry
4 will be there and I will be there on Tuesday.
5 CHAIRMAN PARADY: Thank you, Madam
6 Treasurer.
7 Members of the committee, the next subject for
8 our consideration is LSO 190, and we're going to follow
9 the same procedure and hopefully briefly move through the
10 bill.
11 Mr. Gruver, LSO 190.
12 MR. GRUVER: Mr. Chairman, this bill
13 imposes a statewide property tax under the authority of
14 the State to impose a tax of up to four mills which is
15 different than what the Supreme Court said you could also
16 do for state capital construction purposes that you don't
17 have any mill limit.
18 In addition to imposing that tax, it has an FMR
19 swap, and the reason for that is, again, so you could bond
20 against the federal mineral royalties, and you can't
21 bond -- at least I don't think you can bond against the
22 property taxes, notwithstanding the rehearing decision and
23 statements in that.
24 If you would like, we can go through it line by
25 line or page by page, Mr. Chairman.
189
1 SENATOR KUNZ: Mr. Chairman, one quick
2 question.
3 CHAIRMAN PARADY: Senator Kunz.
4 SENATOR KUNZ: Mr. Gruver, when you say
5 you can't bond against it, you mean without a vote of the
6 people?
7 MR. GRUVER: I'm sorry, yes, Mr. Chairman.
8 CHAIRMAN PARADY: Please proceed.
9 MR. GRUVER: Mr. Chairman, start on page
10 2, line 1, would be imposed next year pursuant to Article
11 15, Section 4, four mills.
12 Staff comments shows that those four mills,
13 current valuation one mill raising 10.5 million, so 42
14 million, CREG numbers over the next three to four years,
15 that number goes down to between 38 and $40 million for
16 four mills. So those are the numbers you're dealing with.
17 SENATOR GOODENOUGH: Mr. Chairman.
18 CHAIRMAN PARADY: Senator Goodenough.
19 SENATOR GOODENOUGH: Is that possible to
20 break that out into agricultural, residential and
21 industrial, I mean, to know what portion of that comes
22 from each of the tiers?
23 MR. SOMMERS: Mr. Chairman --
24 SENATOR GOODENOUGH: I just think that
25 would be interesting to see.
190
1 MR. GRUVER: The monies raised are
2 deposited in the public schools foundation account. Then
3 under the next section, Section 2, we get into the swap of
4 FMRs, the reduction of FMRs.
5 Page 3, line 16, we decrease from 44.8 to 23.8
6 percent, take that 21 percent reduction from the school
7 foundation program account and put that into the cap con
8 account. That's an approximately equal amount. For 42
9 million -- it is a little less than that -- because 198
10 times 21 percent so between 41 and 43 million dollars.
11 The reason for doing that is explained in the staff
12 comment.
13 We do note that we reduce the FMRs which are
14 supporting current state bonding under 9-4-605, so instead
15 of 71 basically percent it is down to 50 percent of FMRs
16 for that bonding.
17 Now, you have to remember, if you take this in
18 conjunction with the last bill, and I don't know of any
19 reason why you would take them both together, but if you
20 did, that you're also taking away highway FMRs from that
21 bonding too, from 26 and a quarter down to 10 percent. So
22 now you're down to 33 percent of FMRs to support state
23 capital construction bonding.
24 On page 4, that's just the current bonding
25 authority now for state capital construction, just the
191
1 reference in there that before you distribute under
2 highways or schools, how because of the additional money
3 the bonds currently outstanding have to be paid and money
4 has to be directed there first.
5 Page 5 is just a reference change, just through
6 line 10. On page 5, line 15, this is for distributions to
7 the school cap con account at 305(b) is state FMRs,
8 $8 million and you have also now the 21 percent FMRs to
9 bond against.
10 Page 6, the bonding authority is increased 100
11 million to 708. We've already talked about that. The
12 authority would stay with the SLIB under this and doesn't
13 change anything.
14 On page 7, the four mills credited to the public
15 school foundation program account rather than the general
16 fund.
17 That's it, Mr. Chairman.
18 CHAIRMAN PARADY: Any questions on the
19 bill draft?
20 We will have our work cut out for us as we sort
21 these out at the next meeting.
22 SENATOR KUNZ: Mr. Chairman, on the same
23 topic I would like to see a bill drafted -- and I don't
24 think it would be terribly complicated. If it is, you can
25 talk to me in sweet terms later, Mr. Gruver.
192
1 But I would like to see a bill draft for four
2 mills for school capital construction to be submitted to a
3 vote of the people of the state of Wyoming, the purpose
4 being for bond service, debt service for bonding for
5 school capital construction.
6 Mr. Chairman, the same argument would apply to
7 this that would to the gas tax, that this is a purview of
8 the revenue committee and not this committee, but we are
9 charged by Management Council to come up with suggested
10 way of bonding, if that's the way the legislature decides
11 to deal with capital construction, rather than just
12 putting pay as you go every year for six years.
13 And one way to do it is general obligation bonds
14 based on property tax. If we can raise four mills and
15 substitute FMRs, we can raise four mills, and generally
16 obligation bonds, by constitution, require a vote of the
17 people of the state of Wyoming. And frankly, I'm not
18 afraid to face that, but I would like to at least have it
19 as an option on the table.
20 CHAIRMAN PARADY: Discussion, Senator
21 Mockler.
22 SENATOR MOCKLER: Mr. Chairman, Senator
23 Kunz, is there some fallback for that? I mean, I guess my
24 concern is we go out and ask the people, "This is how we
25 want to pay for school capital construction," we need
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1 their vote and they vote no and then we have to go back
2 and say, "We really didn't care what you voted. We wanted
3 to see what you thought," is what it makes it look like,
4 instead of a serious, "We have to solve this problem with
5 or without your vote. Your vote would be nice."
6 CHAIRMAN PARADY: Senator Kunz.
7 SENATOR KUNZ: Mr. Chairman, I have more
8 faith in the people than that. I think we have to put tax
9 options before them in the discussion before the
10 committee, and we have no bills to do that, to have this
11 discussion.
12 If that argument is inherently true, and it is
13 certainly one that goes to taxation in general because
14 there's always been the discussion about the vote of
15 people versus their representatives, meaning the
16 legislature, being able to impose taxes.
17 But the state of Wyoming has the constitutional
18 provision for a reason. And I don't disagree that you
19 need to have a fallback, that property tax may be
20 something that's an enhancement to people. Maybe you go
21 out ultimately with a ballot and let the majority say
22 whether they're going to have a sales tax, property tax,
23 gas tax or what and do a menu ballot. I don't know. But
24 all I know is that if we don't have a bill drafted to even
25 talk about the concept, I think we're remiss.
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1 CHAIRMAN PARADY: Senator Meier.
2 SENATOR MEIER: Mr. Chairman, I'm not sure
3 where I read it, but I thought we had a provision in the
4 constitution that said we're limited to 1 percent of the
5 total assessed valuation for general obligation bonds
6 which would mean a total limit would be $105 million. If
7 we have four mills, we pay off these bonds in a relatively
8 short order and then we have to go back in for another
9 vote of the people.
10 I'm not so sure if we want to put it to a vote
11 of the people that we just don't say four mills goes
12 toward direct payment of school capital construction and
13 then we figure out how to come up with the rest of it.
14 CHAIRMAN PARADY: Senator Mockler.
15 SENATOR MOCKLER: Mr. Chairman, I'm not
16 necessarily disagreeing it isn't an option. I think you
17 do have to draft the bill. I think you have to live with
18 there might be repercussions.
19 The other thing I think we need to think about
20 is when you look at where we were in the process, I mean,
21 obviously to do that, we have to pass it this session, get
22 it on 2002 ballot, it wouldn't be effective until 2003. I
23 mean, there's a delay there.
24 So I guess my hope would be that we have maybe
25 another mechanism behind it and that the obligation bonds
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1 go for the two- to four-year period, not so much for the
2 one to two immediate needs, which as I looked at today has
3 dropped a lot, which is only 11 million which we could
4 probably pay for -- I don't disagree with you it is
5 certainly something we have to have, I think we need to be
6 prepared to say for the immediate needs, the things we
7 have to get taken care of, we are going to do it this way,
8 pay for some and bond for a little.
9 But for the next, you know -- the next set of
10 needs, which might be 200 million, actually, only 105
11 million, we're going to do it through the general
12 obligation bond. I need to think we need to make sure we
13 know we have to have some other sources to cover the
14 entire debt.
15 CHAIRMAN PARADY: Senator Kunz.
16 SENATOR KUNZ: Mr. Chairman, I don't
17 disagree with any of your analysis. It is just we have to
18 have something in the mix and my preference is when we're
19 talking about options like this that we have as many of
20 them on the table as we can think of that might be viable.
21 CHAIRMAN PARADY: Representative
22 Huckfeldt.
23 REPRESENTATIVE HUCKFELDT: Mr. Chairman, I
24 kind of like the idea of having us go to the vote of the
25 people. I've had concerns as we went through LSO 200 that
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1 we're going to take a back-door approach to avoid
2 provisions in our constitution and that concerns me, that
3 we do that.
4 And listening to the comments from Senator
5 Mockler, have to go to the vote of the people and that we
6 need a backup provision, if it went to a vote of people
7 and they didn't approve it in 2002, we come in the session
8 right again in 2003 and we can fix that.
9 So I don't know that there's that impetus that
10 we need to have an immediate backup because you yourself
11 said we've got the money to pay for the immediate needs
12 right now. Whether we've got the will to spend that money
13 in that direction I think is the biggest question.
14 CHAIRMAN PARADY: Senator Mockler.
15 SENATOR MOCKLER: I guess my point is you
16 have to be able to explain to the people of Wyoming if
17 they vote against it why you did it anyway, and that's --
18 I mean, it is a credibility thing at that point. If we go
19 out and say, "We would like to see what you think and this
20 is our way of doing it, and it is a legitimate way and if
21 you vote for it and you believe property taxes are
22 legitimate, then you vote for it. If you don't believe
23 that, then we will have to look at another tax option or
24 we'll have to look at another funding option." Otherwise
25 our credibility is kind of shot. It is like, "Well, we
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1 asked you what you wanted but we really didn't care."
2 And I think that's the inherent problem. So I
3 just think that needs to be known by everybody going into
4 this that there's a chance in 2003 we would walk into that
5 session having to act in response to the people having
6 killed the option that we first close.
7 CHAIRMAN PARADY: Members of the
8 committee, just seeking to perhaps foreshorten this
9 conversation, I believe we should have a bill draft that
10 provides for four mills and a vote of people. Senator
11 Kunz, as to whether it has a backstop built into the bill
12 or we come back to that question when we work the bill, I
13 think we can come back to that question.
14 Senator Mockler.
15 SENATOR MOCKLER: One other clarification.
16 The four mills is the vote of the people, but don't they
17 also have to vote for the general obligation bonds
18 themselves to issue them? There's two parts to that. The
19 people have to actually vote to issue a general obligation
20 bond and separately they have to vote to pay for it with
21 mill levies.
22 SENATOR KUNZ: Mr. Chairman, the mechanics
23 of it I would leave to Mr. Gruver, if that's necessary.
24 And tongue in cheek, maybe, Senator Mockler, maybe we
25 could get four judicial signatures under the ballot
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1 question and that might resolve the issue of where it is
2 coming from.
3 SENATOR MEIER: Aren't we obligated to
4 general obligation bonds?
5 MR. GRUVER: 1 percent of the assessed
6 valuation which is --
7 CHAIRMAN PARADY: Assessed valuation from
8 its current peak.
9 SENATOR MEIER: I guess, Mr. Chairman,
10 what I would say, the third option would be to have a
11 four-mill vote of the people to go for capital
12 construction and not go to the bonding process.
13 CHAIRMAN PARADY: Senator Mockler.
14 SENATOR MOCKLER: Mr. Chairman, now I
15 think you really are in the revenue committee because
16 that's what we're going to do on Monday and Tuesday is go
17 through the whole list of options that we've taken public
18 testimony on, that we've worked on through the entire
19 summer. So...
20 SENATOR MEIER: Great, I withdraw my
21 recommendation. You just go ahead and go for it.
22 MR. GRUVER: Mr. Chairman, just so I'm
23 clear, we have a four-mill bill not under our general
24 authority to levy four mills, but just under the authority
25 for school cap con, and then no FMR swap, so we bond
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1 against directly the four mills which I think will
2 probably require an additional question in front of the
3 people. Okay.
4 CHAIRMAN PARADY: Okay. We will have an
5 interesting meeting when next we meet.
6 (Reported portion of proceedings
7 concluded 4:15 p.m., October 24, 2001.)
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1 C E R T I F I C A T E
2
3 I, JANET DEW-HARRIS, a Registered Professional
4 Reporter, and Federal Certified Realtime Reporter, do
5 hereby certify that I reported by machine shorthand the
6 meeting proceedings contained herein, and that the
7 foregoing 199 pages constitute a full, true and correct
8 transcript.
9 Dated this 9th day of November, 2001.
10
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12 JANET DEW-HARRIS
Registered Professional Reporter
13 Federal Certified Realtime Reporter
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