Dormitory Authority Meeting May 10, 2017

Transcription

1 Dormitory Authority of the State of New York met in a Regular Meeting at DASNY s New York City Office, One Penn Plaza, 52 nd Floor, New York, New York at 9:30 a.m. on Wednesday, May 10, The Meeting was called to order by the Chair. Roll call was taken and a quorum was present. Those Members present for and absent from the Meeting were as follows: Members Present Alfonso L. Carney, Jr., Chair, Member John B. Johnson, Jr., Vice Chair, Member Sandra M. Shapard, Secretary, Member Jonathan H. Gardner, Esq., Member Beryl L. Snyder, Esq., Member Gerard Romski, Esq., Member Paul S. Ellis, Esq., Member Charles Abel, Designated Representative of the Commissioner of Health, Member (ex officio) Adrian Swierczewski, Designated Representative of the Director of the Budget, Member (ex officio) Elizabeth Berlin, Designated Representative of the Commissioner of Education, Member (ex officio) Members Absent: None Also Present - Dormitory Authority Staff: Gerrard P. Bushell, President Michael T. Corrigan, Vice President Michael E. Cusack, Esq., General Counsel Kimberly J. Nadeau, Chief Financial Officer Portia Lee, Managing Director of Public Finance and Portfolio Monitoring Stephen D. Curro, Managing Director of Construction Caroline V. Griffin, Chief of Staff Larry N. Volk, Senior Director, Portfolio Monitoring Daniel W. Petroff, Chief of Strategic and Business Development Freeman M. Klopott, Director, Communications & Marketing Jack D. Homkow, Director, Office of Environmental Affairs Donna Rosen, Esq., Associate Counsel Stephen J. Kosier, Senior Financial Analyst Boby J. Manjila, Project Manager 1

2 Others Present Howard I. Berkman, Esq. Robert James, Esq. Charles Holley, Esq. Christopher J. Reitzel, Esq. Douglas Seaton, Esq. Hawkins Delafield & Wood, LLP Golden Holley James, LLP Squire Patton Boggs, LLP D. Seaton & Associates, P.A., P.C. PUBLIC SESSION The Chair called the Meeting to order. The Minutes of the April 12, 2017 Meeting were reviewed and approved with a correction by Mr. Ellis. Finance Committee Report Finance Committee Chair Romski reported that the Finance Committee met on May 9, 2017, and that after discussion, decided unanimously to recommend the following transactions to the full Board for approval: Personal Income Tax Revenue Bond Program/Sales Tax Revenue Bond Program and White Plans Hospital Medical Center TELP transaction. Mr. Romski noted that Thomas J. Wood, Director of Debt Management from the Division of the Budget ( DOB ) had provided the Finance Committee Members with a very detailed and thoughtful presentation on the Personal Income Tax ( PIT ) Revenue Bond Program, the Sales Tax Revenue Bond Program, and the State s efforts to consolidate its debt issuance programs and maximize the efficiency of the approval process. He asked Ms. Lee to provide an overview of the presentation and recognized Mr. Swierczewski for arranging this presentation for the Finance Committee. Ms. Lee provided the Members with a summary of Mr. Wood s comments from the Finance Committee Meeting. She noted that Mr. Wood discussed the factors that are driving larger bond authorizations and the consolidation of State-supported debt issuance. She further noted that under the State s PIT Revenue Bond Program, there are five authorized issuers, and that the DOB is currently using only three of these issuers -- DASNY, Empire State Development Corporation and the Thruway Authority with issuance occurring primarily through DASNY and Empire State Development Corporation ( ESD ) in the last two to three years. Ms. Lee stated that this utilization is reflected in the authorization for the issuers in the Sales Tax Revenue Bond Program, which when enacted in 2013, authorized three issuers - DASNY, ESD and the Thruway Authority. Ms. Lee further noted that Mr. Wood gave an overview of the State s current practice of moving away from issuing debt under different State-supported credits that were primarily set up around certain purposes, such as State University Educational Facilities and Mental Health Facilities Bonds. She reported that the State is now generally using three highly rated programs - the Personal Income Tax Revenue Bond Program, the Sales Tax Revenue Bond Program and General Obligation Bonds (through the Comptroller s Office) to finance the State s capital needs. 2

3 With respect to the State s desire to make changes to the authorization process, Ms. Lee noted that in the past, authorization for transactions was sought by the DOB on a just in time basis. Ms. Lee further noted that at this point, given the number of approvals involved, and the fact that the State s capital issuance plan is established based on the Budget after it is passed, that in order to ensure a smoother process in getting to market in a timely manner, DOB is now seeking larger authorizations earlier in the fiscal year. Ms. Lee reported that Mr. Wood addressed debt affordability and suggested sharing with the Board the charts and graphs DOB prepared. She noted that Mr. Wood discussed the metrics that rating agencies use for analyzing debt outstanding and debt service costs, as well as the trends in those metrics over time. She stated that these factors inform the State s thinking and process as DOB looks to issue bonds that are part of the State s financial plan. Ms. Lee stated that Mr. Wood then discussed the State s ratings, including the PIT and Sales Tax Programs, which are currently rated AAA (S&P), AA1 (Moody s) and AA+ (Fitch), and the State s own rating, which at this point in time is AA1 (Moody s) and AA+ (S&P and Fitch). Ms. Lee noted that the State s rating is one notch below the highest rating possible. Ms. Lee further noted that this is the highest rating that the State of New York has had since Ms. Lee concluded by stating that Mr. Wood provided an overview of the authorization process DOB is looking to achieve, the measures DOB undertakes to keep debt service affordable and within the State s debt limit, as well as the metrics used by the rating agencies to measure the State s debt affordability. Mr. Romski noted that the presentation was very informative and helpful, and noted in particular, the decline in State-related debt outstanding as a percentage of personal income from 2011 to The Chair indicated that he was interested in having DOB give a similar presentation to the entire Board at a future Board Meeting, and Ms. Shapard indicated that she, too, would be interested in hearing such a presentation. Mr. Gardner emphasized that one of the big takeaways from the presentation is that there has been a decision to consolidate some of the debt issuances through DASNY, as evidenced by the transportation and environmental-related debt in DASNY s issuances, and remarked that this shows faith and confidence in DASNY. Cerebral Palsy Affiliates The President introduced Christopher J. Reitzel, Esq. of Squire Patton Boggs, LLP and Douglas Seaton M., Esq. of D. Seaton and Associates, P.A., P.C., co-bond counsel on the transaction, and Mr. Kosier. Mr. Kosier provided a brief update with respect to the transaction. He reminded the Members that the Board adopted a Resolution to Proceed with the issuance of Series 2017 Bonds on behalf of Cerebral Palsy Affiliates in the amount of $37,000,000 to be sold through a private placement transaction at its March Board Meeting. Mr. Kosier stated that the proposed financing is expected to fund the acquisition and renovation of a condominium unit in Manhattan which will be United Cerebral Palsy Associations of New York State s new headquarters and to fund the acquisition of a four-story building in Brooklyn which provides residential services. 3

4 Mr. Kosier provided the Members with the details of recent developments as described in the Credit Summary Update provided to the Members. He noted that when staff presented the transaction at the March 8, 2017 Board Meeting and to PACB on March 15, 2017, the Borrower had not yet selected a purchaser. He further noted that the assumption at the time was that the bonds would have a 30-year final maturity. Mr. Kosier stated that the Borrower has since selected Oppenheimer Funds to be the purchaser and that Oppenheimer offered the Borrower a fixed rate of interest with a final maturity in Mr. Kosier noted, therefore, that staff plans to request an amendment to the PACB resolution allowing a 33-year bond issue at the next PACB Meeting. Mr. Kosier also noted that in addition to the security described to the Board in March, there will also be a Debt Service Reserve Fund in an amount acceptable to the purchaser. Mr. Reitzel noted that before the Members for their consideration is the adoption of four Series Resolutions authorizing, individually and in the aggregate, the issuance of up to $37,000,000 Cerebral Palsy Affiliates Program (United Cerebral Palsy Associations of New York State, Inc.) Revenue Bonds, Series He stated that the Series 2017 Bonds will be issued under DASNY s Cerebral Palsy Affiliates Program Revenue Bond Resolution adopted October 9, Mr. Reitzel stated that as permitted by the DASNY Act, the General Resolution authorizes the issuance of revenue bonds in one or more series to finance or refinance projects for United Cerebral Palsy Associations of New York State, Inc. and its not-for-profit member Affiliates. He noted that the Series 2017 Bonds are proposed to be issued for the benefit of United Cerebral Palsy Association of New York State, which is the only Affiliate involved in the proposed transaction. Mr. Reitzel stated that the Series 2017 Bonds are proposed to be issued to: (i) finance a condominium unit to contain administrative facilities and a building containing residential facilities; (ii) fund the Debt Service Reserve Fund at its requirement; and (iii) pay costs of issuance. He further stated that in order to provide flexibility for the Institution with respect to structure and timing, the Members are being asked to authorize the issuance of tax-exempt and taxable bonds or a combination thereof in one or more series, at one or more times. Mr. Reitzel stated that it is currently expected that the Series 2017 Bonds will be privately placed by Gates Capital Corporation pursuant to a Bond Placement Agreement, with Oppenheimer Funds, which is expected to be the private purchaser. He noted that the Institution s current expectation is that the Series 2017 Bonds will be issued as unenhanced, fixed rate bonds. He stated, however, that the Series 2017 Resolutions permit the Series 2017 Bonds to be issued in other configurations than are currently contemplated. Mr. Reitzel stated that the Series Resolutions authorize various officers to make all of the determinations described in the Bond Counsel Letter, to execute all documents, and to do all other things necessary to complete the transaction. He further stated that the Series Resolutions also establish a Debt Service Reserve Fund to secure the Series 2017 Bonds. Mr. Reitzel noted that the Debt Service Reserve Fund Requirement for the Series 2017 Bonds is expected to be consistent with the requirements of the purchaser. He stated that in accordance with DASNY s Financing Guidelines for Independent Institutions, the Series Resolutions also contain restrictions on the ownership and transfer of the Bonds to Qualified Institutional Buyers. 4

5 Mr. Seaton stated that DASNY and the Institution are expected to execute a Loan Agreement in connection with each issuance of the Series 2017 Bonds. He noted that the Institution s obligation to make payments under each Loan Agreement will be a general obligation. Mr. Seaton stated that each Loan Agreement will obligate the Institution to make payments in amounts and at times sufficient to pay debt service on the Series 2017 Bonds. He noted that as security for the Institution s obligations under each Loan Agreement, the Institution will grant to DASNY a security interest in certain of its revenues, including its public funds, payable to it in an amount equal to maximum annual debt service on the Bonds, subject to any Prior Pledges. Mr. Seaton noted that in order to provide additional security, DASNY expects to enter into standby intercept agreements so that upon an event of default under a Loan Agreement, DASNY to facilitate DASNY s right to intercept funds payable by any participating State or local agency or social services district otherwise payable to the Institution. Mr. Seaton stated that the Institution will enter into a Bond Purchase and Continuing Covenants Agreement or similar agreement with the purchaser, a default under which will constitute a default under each Loan Agreement. He further stated that the Institution is also expected to grant a mortgage to DASNY on certain real property acceptable to the purchaser, currently expected to consist of the properties being financed by the issuance of the Series 2017 Bonds, which will secure its obligations under the Loan Agreement. Mr. Seaton noted that it is expected that DASNY s rights under any Loan Agreement and the Mortgage (with the exception of certain reserved rights) will be assigned to the Trustee, which will exercise remedies under each Loan Agreement and the Mortgage at the discretion of the purchaser. He stated that in addition, the transaction documents will also contain certain financial covenants required by the Purchaser. Mr. Abel moved the adoption of the following entitled Resolutions: DORMITORY AUTHORITY OF THE STATE OF NEW YORK SERIES 2017A RESOLUTION AUTHORIZING UP TO $37,000,000 CEREBRAL PALSY AFFILIATES PROGRAM (UNITED CEREBRAL PALSY ASSOCIATIONS OF NEW YORK STATE, INC.) REVENUE BONDS, SERIES 2017A; and DORMITORY AUTHORITY OF THE STATE OF NEW YORK SERIES 2017B RESOLUTION AUTHORIZING UP TO $37,000,000 CEREBRAL PALSY AFFILIATES PROGRAM (UNITED CEREBRAL PALSY ASSOCIATIONS OF NEW YORK STATE, INC.) REVENUE BONDS, SERIES 2017B; and DORMITORY AUTHORITY OF THE STATE OF NEW YORK SERIES 2017C RESOLUTION AUTHORIZING UP TO $37,000,000 CEREBRAL PALSY AFFILIATES PROGRAM (UNITED CEREBRAL PALSY ASSOCIATIONS OF NEW YORK STATE, INC.) REVENUE BONDS, SERIES 2017C; and DORMITORY AUTHORITY OF THE STATE OF NEW YORK SERIES 2017D RESOLUTION AUTHORIZING UP TO $37,000,000 CEREBRAL PALSY AFFILIATES PROGRAM (UNITED CEREBRAL PALSY ASSOCIATIONS OF NEW YORK STATE, INC.) REVENUE BONDS, SERIES 2017D 5

6 Ms. Snyder seconded the motion and the Resolutions were adopted unanimously. Personal Income Tax Revenue Bonds / State Sales Tax Revenue Bonds The President introduced co-bond counsel Howard I. Berkman, Esq. of Hawkins Delafield and Wood, LLP and Robert James, Esq. of Golden Holley James, LLP, and Ms. Lee. Ms. Lee presented the Single Approval Credit Summary and Staff Report to the Members recommending the issuance of multiple series of tax-exempt and taxable fixed and/or variable rate bonds issued at one or more times in an amount not to exceed $3 billion for terms not to exceed 30- years to be sold on either a competitive or negotiated basis or a combination of both. Ms. Lee stated that the Members were being asked to authorize the use of two alternate State supported debt programs for a refunding and to fund various new money needs. She noted that the two programs are the Sales Tax Revenue Bond Program and the Personal Income Tax Revenue Bond Program. Ms. Lee further stated that the mechanics of the two programs are very similar, noting that the major difference is the stream of revenues that secures the bonds State sales tax revenue versus State personal income tax revenue. Ms. Lee indicated that the proposed bonds can be issued under either program or through both programs with the combined issuance not to exceed $3 billion. She stated that the term of the refunding bonds will not exceed the term of the bonds being refunded considered in the aggregate. Ms. Lee mentioned that, as was noted last month, DASNY previously has asked for flexibility to issue under one program or the other. Ms. Lee added that, as was also discussed last month, staff is now also asking for the flexibility to issue portions of the bonds authorized under both programs. She stated that under any circumstances, the amount to be issued will not exceed $3 billion. She further stated that under this $3 billion refunding and new money authorization, together with the $2 billion April new money authorization, it is expected that DASNY will undertake an approximately $2 billion refunding under the PIT Program and that the $3 billion in new money bonds will be issued in one PIT and one Sales Tax transaction. Ms. Lee stated that three State-supported debt transactions one PIT refunding, one PIT new money and one Sales Tax new money is generally consistent with DASNY s issuance history over the last past few years. She further stated that last year DASNY issued approximately $3 billion in debt on behalf of the State under these two programs and that in 2015 DASNY issued approximately $4.7 billion in bonds under these two programs, which included a large transportation refunding. Ms. Lee reported that the State s enacted budget calls for new money debt issuance totaling approximately $7.1 billion, $6.2 billion of which would be funded through the PIT or Sales Tax Programs. She stated that this authorization qualifies as a single approval because it covers Statesupported debt financings Ms. Lee stated that the refunding plan includes the refunding of various fixed rate bonds, including but not limited to Personal Income Tax Revenue Bonds, State Service Contract Bonds, the Mental Health Bonds, and other State-supported debt. She noted that the majority of the refunding candidates are bonds issued by DASNY (approximately $1.5 billion) and the remaining refunding candidates (approximately $326 million) were issued by either the Environmental Facilities Corporation ( EFC ) or the Thruway Authority ( Thruway ). 6

7 Ms. Lee noted that all the refunding candidates meet DOB s refunding criteria. She stated that the final maturity of the refunding bonds will not exceed the maturity of the bonds being refunded considered in the aggregate. She stated that based on current market conditions, the proposed refunding provides gross debt service savings of approximately $172.8 million and net present value savings of $165.8 million, as well as and net present value benefit of approximately $179.5 million which is approximately 10.2% of the bonds being refunded. Ms. Lee reported that with regard to the new money portion of the transactions, the bonds issued for new money purposes are to fund a variety of capital projects including: capital projects for the Office of Mental Health ( OMH ), the Office for Persons with Developmental Disabilities ( OPWDD ) and the Office of Alcoholism and Substance Abuse Services ( OASAS ) -- State and Voluntary Facilities; capital projects for OMH voluntary agency facilities that have the benefit of low income housing tax credits; various capital projects under the Consolidated Local Street and Highway Improvement Program ( CHIPS ); a number of transportation initiatives under the NY Works Transportation Infrastructure Program; and other education programs including Expanding Our Children s Education and Learning ( EXCEL ). Ms. Lee then spoke about the security provisions of the transactions. She noted that if the bonds are issued under the Sales Tax Revenue Bond Program, the bonds will be paid by the semiannual payments made pursuant to a Financing Agreement between DASNY and the State. She stated that the bonds are secured by a set aside of one cent, or approximately 25% of the State s four percent sales tax collected pursuant to statute and deposited in the Sales Tax Revenue Bond Fund. Ms. Lee stated that the current debt service coverage for all Sales Tax debt is 5.0 times. Ms. Lee stated that if the bonds are issued under the Personal Income Tax Revenue Bond Program, the bonds will be paid by the semi-annual payments made pursuant to the Financing Agreement between DASNY and the State. She stated that the bonds are secured by a set aside of 25% of personal income tax revenues collected pursuant to statute and deposited in the Revenue Bond Tax Fund. Ms. Lee noted that the current debt service coverage for all outstanding PIT debt across all issuers is 3.5 times. She further stated that bonds issued under both programs are expected to be rated Aa1 (Moody s), AAA (S&P) and AA+ (Fitch). In response to a question from Ms. Shapard on the Longitudinal Data System, Ms. Lee responded that this is a Statewide data system to compile data for use by many different education stakeholders. The Chair requested clarification regarding the statement that the term of the refunding bonds will not exceed the term of the bonds being refunded, when considered in the aggregate. Ms. Lee responded that to the extent DASNY is issuing bonds to refund bonds with different maturities, that when viewed from the perspective of the entire pool of refunded bonds, the new refunding bonds will not exceed the latest maturity of any of the bonds to be refunded. Ms. Snyder inquired whether Sales Tax Revenue Bonds are still trading slightly better than PIT Revenue Bonds, and if so, whether that influences the decision as to which bonds are issued by the State. Ms. Lee responded that in general, Sales Tax Revenue Bonds priced slightly better than PIT Revenue Bonds due to scarcity value and the large amount of PIT Bonds that are in the market. She added that the differential likely changes at different times in the market. She further stated that 7

8 the decision to issue under one program or the other has a great deal to do with timing. She explained that the benefit of having two vehicles to alternate between is to be able to issue at various times so that there are not too many of one type of bond in the market, either PIT or Sales Tax. The Chair asked if forward going revenue projections for the State had been discussed at the Finance Committee presentation, to which Ms. Lee responded in the negative. After discussion, the Chair noted that it would be beneficial if this could be included as a potential topic in any future presentation by DOB to the Board. Ms. Lee noted that the State undertakes a quarterly process of updating its Annual Information Statement to provide investors with this type of information in real time. Mr. Johnson mentioned that there had been a recent article in the Albany Times Union regarding concern over the local share of sales tax revenues, and expressed an interest in exploring sales tax expectations. Mr. Berkman stated that before the Members for their consideration are two Supplemental Resolutions - one under the Personal Income Tax ( PIT ) Revenue Bond Program and one under the Sales Tax Revenue Bond Program, authorizing the issuance of bonds in an amount not-to-exceed $3 billion. Mr. Berkman further noted that each Supplemental Resolution provides that if any of the bonds authorized under the other Supplemental Resolution are issued, that amount shall be deducted from the not-to-exceed amount available under the first Supplemental Resolution. He noted, therefore, that the total authorization for both programs is $3 billion. Mr. Berkman stated that the Sales Tax General Resolution was patterned upon the PIT Resolution some years ago, with the principal difference being the security. Mr. Berkman stated that in the PIT Program, deposits of a 25% portion of personal income tax are the source of payment for all PIT Bonds, subject to appropriation, and that in the Sales Tax Program, deposits of a portion of sales and compensating use tax are the source of payment of all Sales Tax Bonds, subject to appropriation. He explained that the contract between the State and DASNY to pay these funds over to DASNY for the benefit of the bondholders is a Financing Agreement between DOB and DASNY. Mr. James stated that the Supplemental Resolutions are mirror images of each other and are similar in many ways. He noted, for example, that each Supplemental Resolution allows for the issuance of an aggregate principal amount not to exceed $3 billion, but that the Supplemental Resolutions work in concert to limit the overall PIT and Sales Tax issuance to $3 billion in total. He stated that each Supplemental Resolution further provides that all or a portion of a respective series of PIT or Sales Tax Bonds authorized may be sold at a public or private sale, on a negotiated basis or through competitive bidding, and may be consolidated in a single series with other PIT or Sales Tax Bonds that are authorized under that respective resolution. Mr. James further stated that the Supplemental Resolutions each delegate certain powers to Authorized Officers of DASNY, including the authority to designate the series and subseries, to determine the principal amount to be issued as taxable or tax-exempt debt, to determine the dates of final maturity (provided that refunding bonds will not exceed the maturity of refunded bonds considered in the aggregate), to determine interest rates and whether interest rates will be fixed or variable (subject to the stated interest rate cap), to determine the purchase price if the bonds are sold on a negotiated basis (provided that the price is not less than 90% of the principal amount of any bonds issued) and various other powers that are necessary and proper for the issuance of the bonds. 8

9 Mr. Romski moved the adoption of the following entitled Resolutions: DORMITORY AUTHORITY OF THE STATE OF NEW YORK SUPPLEMENTAL RESOLUTION AUTHORIZING STATE PERSONAL INCOME TAX REVENUE BONDS (GENERAL PURPOSE); and DORMITORY AUTHORITY OF THE STATE OF NEW YORK SUPPLEMENTAL RESOLUTION AUTHORIZING STATE SALES TAX REVENUE BONDS Mr. Ellis seconded the motion and the Resolutions were adopted unanimously. White Plains Hospital Medical Center - TELP Ms. Lee presented a Memorandum recommending a lease of equipment pursuant to DASNY s Tax Exempt Leasing Program I ( TELP I ) in a total amount not to exceed of $18,200,000 for White Plains Hospital Medical Center. She reminded the Members that the current policy of the Public Authorities Control Board ( PACB ) requires that TELP I leases which exceed $10 million in a calendar year be presented to both the DASNY Board and the PACB for approval. Ms. Lee stated that the lease proceeds will be used for various types of equipment including radiology, oncology, surgical services and other equipment. Mr. Abel moved the adoption of the following Resolution: A RESOLUTION OF THE DORMITORY AUTHORITY OF THE STATE OF NEW YORK (DASNY) AUTHORIZING STAFF AND BOND COUNSEL TO PROCEED TO TAKE THE NECESSARY ACTION TO PREPARE, AND THE DORMITORY AUTHORITY TO EXECUTE ONE OR MORE MASTER LEASE AND SUBLEASE AGREEMENTS AND ANY OTHER APPROPRIATE DOCUMENTS TO MAKE EQUIPMENT HAVING A VALUE IN EXCESS OF $10,000,000 AVAILABLE TO WHITE PLAINS HOSPITAL MEDICAL CENTER UNDER THE TAX-EXEMPT LEASING PROGRAM Ms. Shapard seconded the motion and the Resolution was adopted unanimously. President s Report The President began his report by noting that there were a few items to discuss today, including the great work DASNY is doing at CUNY campuses to provide more than a quarter billion dollars in energy efficiency upgrades. He indicated that before he addressed the CUNY projects, he would like to highlight for the Members DASNY s effort to identify opportunities for DASNY. The President reported that on April 18, 2017, a team consisting of Ms. Lee, Paul Koopman, Dan Petroff, Tim McGrath, Sandy Daigler and he met with senior members of Syracuse University s leadership team to talk about DASNY s capabilities, and discuss how DASNY could help the University realize the vision of its campus framework plan. The President stated that DASNY has not had a recent relationship with Syracuse University, and recognized the University as one of the most important educational institutions in the State and a very critical part of the Central New York State s economy. 9

10 The President noted that Syracuse University s campus framework plan is a very ambitious and forward-thinking agenda, and stated that DASNY seeks opportunities to be a point of intersection for the University s capital and deferred maintenance needs, and act as an extension of the University s facilities management for project management, procurement and other purposes. He stated that DASNY had the opportunity to discuss how DASNY and the University might work together, noting the residence hall work DASNY does on SUNY campuses and the work DASNY has undertaken at SUNY Upstate Medical Center. The President reported that the trip was the beginning of the discussion with Syracuse University, and the beginning of many discussions he and staff are starting to have with others, recognizing some of the challenges private universities are also having and how central they are to New York State s economy, particularly in Upstate New York. He noted that discussions with the University will be continuing, and that he will keep the Members up-to-date regarding this exciting opportunity for DASNY. Mr. Ellis inquired as to whether DASNY staff has undertaken any internal analysis of the Excelsior Program, and the potential impact of the program on DASNY s borrowers. The President responded that while DASNY has not done an analysis, a great deal of analysis is being done on the program across the State. He indicated that private universities are expressing their concerns about the program. Ms. Shapard mentioned that the Commission on Independent Colleges and Universities ( CICU ) in New York has been fairly outspoken about this issue. Mr. Johnson noted that Clarkson University announced last week that enrollment for Fall of 2017 is 10% lower than anticipated, and that this has been attributed to competition from the Excelsior Program. He noted his concern that this will have an impact on the Region as well as his concern at the possibility of approximately 30 layoffs at the Potsdam campus. Ms. Shapard noted that Utica College has made similar statements, and inquired as to whether the Excelsior Program was discussed in the meeting with Syracuse University. The President responded in the negative. In response to a question from Mr. Romski, Mr. Cusack stated that he did not believe that construction projects undertaken by private institutions were subject to Wicks Law as the projects are not typically public work. Ms. Snyder noted that DASNY should be factoring in potential changes at the federal and State level into its evaluation of private institutions who may seek to issue bonds through DASNY. The President concurred, and noted that enrollment is one of the metrics DASNY evaluates. The President further noted that the impact of the Excelsior Program would be one of many factors reviewed in evaluating credit. Ms. Shapard observed that enrollment will be affected at some schools, but that this is outside of DASNY s control. The President noted that DASNY recognizes that there is enormous pressure for every dollar to go to the core mission of an institution, and for the institution to have best in class facilities. He stated that there is an opportunity for DASNY to position itself to work with these institutions with respect to their financing and construction needs. Mr. Johnson noted that there is likely a large deferred maintenance issue at the university level. The President indicated that DASNY is evaluating all opportunities to do additional work. He further stated that DASNY seeks to broaden relationships across the State, and in some cases, deepen existing ones. He stated that DASNY recognizes that some institutions have their own 10

11 construction management operations, and enough assets to handle the work themselves, whereas others in the higher education sector will experience significant pressure. Mr. Ellis stated there are both forward-looking aspects and backward-looking aspects to this issue, and inquired as to how this would impact monitoring of the potential impact of the Excelsior Program on DASNY s existing portfolio. Ms. Lee responded that the impacts will be reflected in the financial statements of the institution and other operational information that DASNY receives during the portfolio monitoring process. Mr. Volk added that with respect to those institutions DASNY is most closely monitoring, staff also contacts the institution in the Fall each year when enrollment becomes more certain. The President stated that unless there is a significant change in enrollment, it may not be immediately clear from balance sheet data that there is a problem, but that DASNY will certainly be sensitive to the issue. In response to a question from Ms. Shapard, Mr. Volk confirmed that updates would be provided to the Board if that is warranted. The President reported that April also presented him with several opportunities to discuss the role DASNY plays in expanding the economy across New York State. The President stated that on May 5, 2017, he took part in a panel at the Commercial Observer s Development University Conference on Higher Education. He noted that at the conference he discussed the role DASNY plays in expanding the economy across New York State, DASNY s procurement practices, DASNY s expansion of alternative project delivery methods and the importance of preserving the full federal tax-exemption of interest paid on municipal bonds. He further noted that he has been emphasizing that tax-exempt municipal bonds are the primary financing tool for infrastructure projects across the country. The President stated that this is true not only for governments but also for not-for-profit higher education and health care providers. He stated that he made the point at the conference and elsewhere that reducing or eliminating the tax exemption would raise borrowing costs and reduce opportunities for work for construction firms and others associated with the development industry. The President reported that on April 28, 2017, he served as a panelist for the Privatizing Public Real Estate Infrastructure panel at the Real Estate Executive Council Spring Meeting where he outlined how DASNY is central to Governor Andrew M. Cuomo s efforts in this area and how the work is executed in conjunction with the private sector. The President explained how the lowcost, tax-exempt financing DASNY provides to private colleges and universities is central to DASNY s business and the college s and university s ability to achieve their capital needs. The President reported that on April 24, 2017, Governor Cuomo s office announced that DASNY is partnering with CUNY on approximately $380 million in energy efficiency upgrades spread across 12 campuses. He noted that the work is part of the Sustainable CUNY Conserves Program which helps fulfill the Governor s Executive Order 88 to reduce energy use in State buildings by 20 percent. The President stated that the operational savings produced by the upgrades is being reinvested into campus initiatives that benefit students while reducing environmental impact. He reported that the projects range from high-efficiency lighting to the replacement of outdated heating and cooling equipment. The President further stated that he was delighted to inform the Members that two DASNY projects will be recognized this month at the New York City Design Commission s Annual Awards for Excellence in Design. He reported that the New Academic Building at the Fashion Institute of Technology, a project undertaken in conjunction with the New York City Department of Education 11

12 and SUNY, will receive an award for excellence. He further stated that the Tottenville Shoreline Protection, a project done in partnership with the Governor s Office of Storm Recovery, Department of Transportation and Parks and Recreation, will also receive a special recognition. Ms. Snyder noted the recent federal efforts to consider the elimination of the federal taxexemption on municipal bonds and inquired as to whether DASNY has assessed the potential impact. The President indicated that efforts are focused on coordinating with State and municipal officials on preservation of the exemption. Ms. Snyder also expressed an interest in learning if DASNY is seeing any change in terms of borrowers financing taxably versus tax-exempt. Ms. Lee stated that borrowers continue to consider a number of factors, including the spreads between tax-exempt and taxable rates, the potential benefit of reducing tax-exempt private business use monitoring, and structural issues such as serial bonds and call provisions. She further stated that borrowers can issue bonds taxably alongside tax-exempt bonds, or directly in the corporate market without going through DASNY. She also noted that if DASNY issues bonds that are taxable on the federal level, they are tax-exempt on the state and local level, which may offer some marginal benefit to the borrower. Ms. Lee noted that borrowers are looking at all of these issues in the current environment. Ms. Snyder agreed. Construction Report Mr. Curro directed the Members attention to the photograph on the cover of this month s Construction Projects Report. He stated that the picture depicts the New York City College of Technology Voorhees Hall Elevator Replacement. Mr. Curro further stated that the scope of the project covers the replacement of two passenger and one freight elevator in Voorhees Hall. He indicated that the budget for the project was $3.2 million, that design began April 2013 and that design was completed in December Mr. Curro informed the Members that the design consultant is Van Deusen Associates (VDA). Mr. Curro further reported that construction began in May 2015 and that construction was completed in March He indicated that the general contractor was Knightsbridge and the construction manager was STV. Mr. Curro discussed the project challenges. He stated that the project was undertaken while the facility was fully occupied. He further stated that the project included hoisting machinery to the roof top elevator machine room. Mr. Curro provided a brief update with respect to several new construction projects. He stated that there is over $75 million of new projects that were added in March including: Queensborough Community College: Cafeteria and Kitchen with a $11.3 million budget; Queensborough Community College Performing Arts ADA Reconstruction with a $9.5 million budget; Creedmoor Psychiatric Center: Building 73 window replacement with a budget of $6 million; and Creedmoor Psychiatric Center: Renovation of Building 70 with a $50 million budget. Mr. Curro reported that the construction expenditures for fiscal year ending March 2016 was $611 million compared to the construction expenditures for fiscal year ending March 2017 which were $634 million an increase of $23 million. Mr. Curro reported that DASNY continues to advance the three New York City Housing Authority ( NYCHA ) program initiatives. Mr. Curro stated that with regard to security there are 12

13 81 projects and that all projects have started with 12 developments/projects having been completed; 21 projects are in construction and 16 lighting projects are in the design/scoping priority phase. He further noted that with regard to the 29 appliance development projects, there are seven developments completed with 13 projects/development in progress. Mr. Curro stated that with regard to the 74 quality of life projects, scoping meetings are underway with some design progressing. Mr. Curro then reported on the Governor s Office of Storm Recovery ( GOSR ) projects. He noted that projects continue to move through the design phase and that DASNY continues to manage and adjust DASNY resources in collaboration with GOSR. Mr. Curro noted that with regard to SUNY, there are 35 summer projects that begin next week, totaling $30 million, and an additional seven capital projects that continue to progress toward a July/August completion date, and in one case, December completion. Mr. Curro reported that over the past two to three weeks he had visited the projects sites of SUNY Albany, Oswego, Plattsburgh and New Paltz. He stated that it is anticipated that the capital projects will complete on time. Mr. Curro then gave an update on the Javits and Moynihan projects. He noted that as the permitting authority, DASNY continues with the related activities, including design/code compliance review, issuing building permits and associated field work. He noted that, at this time, the three story transformer structure is underway at Javits, and from a code compliance standpoint, DASNY is overseeing permitting for this work. He reported that, at Moynihan, DASNY also permitted early phase development work at the train hall. Mr. Curro reported on the South Beach Psychiatric Center project. He noted that this is DASNY s largest construction project currently and that it continues to move forward in accordance with the project s baseline schedule. He reported that the BP1 (site) and BP2 (foundation/shear towers) package are complete and substantially complete, respectively, and that BP3 (steel erection) is well underway. Mr. Curro then reported on the Court Officers Training Academy project. He noted that the project continues to make positive progress with finishes advancing in Building 1, MEP/window installation/sheetrocking activities progressing in Building 2, and window installation progressing in Building 3. He stated that the general contractor continues to work toward a June substantial completion date, although the management team anticipates the project will not meet the published June date. Mr. Curro stated that the SUNY Brockport project is progressing and that the100% early package documents are with DASNY s Upstate PDQA Department for design review activities. He stated that DASNY anticipates a building permit will be issued later this month for the early package, with construction commencing immediately thereafter. Mr. Curro provided an update of other activities in the Construction Division noting that they continue to recruit construction industry talent across all departments within the Division. He further stated that there continues to be a push for technology including tablet applications, dashboard, inhouse development process applications and replacement of the construction management software application activities. 13

14 In response to a question from Mr. Johnson, Mr. Curro clarified that the recent press on issues with Amtrak should not have an impact on DASNY s permitting work. Mr. Cusack added that the permitting work DASNY is performing excludes the track work, which is permitted federally by the US Department of Transportation. Additional discussion ensued concerning the scheduling and priority of track work and other train shed work at the site and Mr. Curro emphasized that DASNY s permitting role is in the early stages, and that a significant amount of track work is already underway. Mr. Petroff noted that a significant portion of the train shed work was front-loaded, as this was the most difficult work and required outages from Amtrak. He stated that regardless of what happens at Penn Station with Amtrak, Moynihan Station will be critical to provide swing capacity for the project. In response to a question from Ms. Shapard, Mr. Curro reviewed the dropped projects at SUNY Purchase (inability of design to meet $36 million budget), SUNY Alfred (original residence project changed to student laboratory within academic jurisdiction of SUNY), CUNY Medgar Evers Ventilation Project and OMH Sagamore PC (funding issues). Public Finance and Portfolio Monitoring Report Ms. Lee reported that since her last written report, DASNY priced one transaction for SUNY Dorms. Ms. Lee stated that DASNY is in the market today with the School District Financing Program bonds. Ms. Lee reported on the market, noting that headlines last week were focused on the Fed meeting, health care reform and the French Presidential election. She stated that while the Fed left rates unchanged, the focus is now on the overall positive trends and the June Fed meeting. She reported that the Federal Funds futures are showing the probability of a June 13 rate hike at 90%. Ms. Lee further reported that the municipal supply this week is expected to total approximately $9.8 billion and that municipal bond funds reported net inflows of approximately $128 million last week - the fourth consecutive week of inflows. She stated that since the April Board Meeting, the 10 and 30 year MMD rates have increased approximately five and ten basis points, respectively. Ms. Lee directed the Members attention to the Bond Sale Summaries, including performance metrics which were included in the Member s handouts. Mr. Cusack reminded the Members that annual disclosure statements are due at JCOPE on May 15, 2017, and that Debbie Drescher, Esq., Monica Norris, Esq. and he are available to answer any questions. Ms. Shapard moved that the Members go into Executive Session to discuss the financial and credit history of a particular corporation; proposed, pending or current litigation; and the employment history of particular persons or matters leading to the appointment, employment, promotion, demotion, discipline, suspension, dismissal or removal of a particular person. Ms. Snyder seconded the motion and the Members went into Executive Session. 14

15 EXECUTIVE SESSION During Executive Session, no action was taken other than a motion to return to Public Session. PUBLIC SESSION Ms. Shapard moved that the Meeting adjourn, Ms. Snyder seconded the motion and the Meeting was adjourned at approximately 12:18 p.m. Respectfully submitted, Michael E. Cusack Assistant Secretary 15