November 4, 1998 Minutes
Board of Regents
OFFICIAL MINUTES
University of Alaska Board of RegentsEmergency Meeting of the Full Board
November 4, 1998
Audioconference
OFFICIAL MINUTES
Regents Present:
Elsa Froehlich Demeksa, Vice President - Juneau
Annette M. Nelson-Wright, Secretary - Juneau
Mary Jane Fate - Anchorage
Sharon D. Gagnon - Anchorage
Joseph R. Henri - Anchorage
R. Danforth Ogg - Kodiak
Mark R. Hamilton, Executive Officer and President of the University of Alaska - Fairbanks
Regents Absent:
Michael J. Burns, President
Chancy Croft, Treasurer
Michael P. Kelly
Joe J. Thomas
Lew M. Williams, Jr.
In Attendance:
In Fairbanks:
Jim Lynch, Interim Vice President for Finance
Wendy Redman, Vice President for University Relations
James A. Parrish, General Counsel
J. Mark Neumayr, Senior Associate General Counsel
John Dickinson, Assistant to the Vice President for Finance
Frank Williams, Interim Vice Chancellor for Administrative Services, UAF
Ron Pierce, Project Director
Michael Ruckhaus, Project Manager
Greg Krier, Project Coordinator
Jeannie D. Phillips, Board of Regents' Officer
David Costello, Sun-Star
In Anchorage:
Ken Vasser, Wohlforth, Argetsinger, Johnson & Brecht
I. Call to Order
Vice President Demeksa called the meeting to order at 2:05 p.m.
II. Adoption of Agenda
Regent Henri moved, seconded by Regent Nelson-Wright, and passed unanimously that:
PASSED
"The Board of Regents adopts the agenda as presented.
I. Call to OrderII. Adoption of Agenda
III. Authorization of Bond Sale for UAF's Coal-Water Fuel Project
IV. Discussion Regarding Future Bond Sales
V. Adjourn
This motion is effective November 4, 1998."
III. Authorization of Bond Sale for UAF's Coal-Water Fuel Project (Reference Bound Separately)
For the record: Regents Burns and Kelly declared a conflict of interest regarding the topic of this meeting and did not participate in discussions regarding the meeting, and did not attend the meeting.
The following narrative from the agenda is included for information purposes.
The administration sought authorization from the Board of Regents on several occasions to finance the Coal-Water Fuel Project; however, due to uncertainties regarding the status and potential outcome of the project, it did not have the opportunity to sell revenue bonds or establish an interim financing alternative. The administration is now confident that the project has developed to a point that completion of the project and co-funding by its partners are reasonably assured. The project is now estimated to cost $52.214 million, $42.3 million of which will be expended by UAF. A more complete description of the project, contractual relationships, and funding associated with the project was provided in the separately bound materials on page 4 of the Preliminary Official Statement, entitled "THE USE OF BOND PROCEEDS."
The university is authorized to borrow money or enter into long-term obligations to complete this project; however, payments in any fiscal year cannot exceed $1.0 million dollars without specific approval of that debt and the project by the legislature. The proposed bond issues will not exceed the authorized limit, even if the annual payment to the Alaska Science and Technology Foundation of $150,000 required under the grant agreement is considered debt.
The bond market is now very attractive for "bank-qualified" tax-exempt bonds, offering potential interest rates \xbc of 1 percent lower than a normal non-bank-qualified issue. In order for the university's bonds to qualify, total tax-exempt debt issue for 1998 must be less than $10.0 million. The administration recommends that the university take advantage of this potential opportunity to lower the debt service on the coal-water project. Because the university has already entered into a tax-exempt equipment lease in the amount of $180,000, the regents are being asked to authorize a bond issue of $9.820 million (Series H).
While $9.820 million will be borrowed at attractive rates, it does not meet all of the cash needs of the project. A complete detail of the sources and uses of bond proceeds is provided in the separately bound materials. The regents are also being asked to authorize the sale of additional bonds shown in the reference tables as $2.705 million that will provide additional funds needed to cover cash requirements during the delays anticipated between the university's expenditures and reimbursement by the Department of Energy ("DOE"). These Series I bonds are sized to be attractive for the shorter term and contain call provisions for early repayment associated with the anticipated reimbursements from DOE but could be used to cover unexpected contingencies over an intermediate term. Any additional cash flow associated with delays in the reimbursement process will be covered with university working capital. The authorizing resolution for Series I will permit up to $3.255 million in bonds to be sold in the event that interest rates allow that amount of additional bond proceeds without exceeding the $1.0 million annual limit.
The administration expects to sell both Series H and Series I bonds on or about December 1. Series H will close before December 31. Series I will close in January in order to preserve the bank qualified status of Series H.
Appropriate resolutions for each series of bonds and related documents have been prepared by bond counsel and are presented in the separately bound reference. The reference includes tables showing "Estimated Debt Service" and "Sources and Uses of Bond Proceeds." An index to the reference is provided.
President Hamilton, Interim Vice President for Finance Jim Lynch, and Assistant Vice President John Dickinson, discussed the bond resolution and answered questions presented by the Board of Regents.
Regents Demeksa and Nelson-Wright expressed concerns regarding the risk of undertaking such a large project.
MOTION #1
"The Board of Regents approves the UAF Coal-Water Fuel Project at a total project cost not to exceed $52.214 million, $42.3 million of which will be expended by UAF. This motion is effective November 5, 1998."
Motion #1 failed on a tie vote with Regents Fate, Gagnon and Henri voting in favor, and Regents Demeksa, Nelson-Wright and Ogg voting in opposition.
Regent Ogg moved that Motion #1 be reconsidered and spread on the minutes to an emergency meeting that would have more members of the regents available, at President Hamilton's discretion. Regent Henri seconded the motion.
Regent Demeksa requested that additional information be provided to board members before such a meeting occur, the additional information would outline the ramifications of not taking action versus taking action on bonding this project. President Hamilton reported that he would distribute such information immediately.
At the conclusion of the meeting, President Hamilton assured the Board that he would take care of setting up the next meeting.
IV. Discussion Regarding Future Bond Sales
No discussion occurred regarding this topic.
V. Adjourn
Vice President Demeksa adjourned the meeting at 2:43 p.m.