Board Minutes | Texas Water Development Board

Minutes of the Texas Water Resources Finance Authority May 19, 1999

Chairman Charles Geren called to order the meeting of the Texas Water Resources Finance Authority in Room 118 of the Stephen F. Austin Building, Austin, Texas. The following Board members were present, constituting a quorum:

Charles Geren, Chairman Noe Fernandez, Vice Chairman Wales H. Madden, Jr., Secretary/Treasurer William B. Madden, Member Elaine Barron, Member Jack Hunt, Member .

Persons attending were among those present at the Texas Water Development Board meeting of the same date. The Authority then considered items on the formal agenda in the following order.

1. CONSIDER APPROVAL OF THE Minutes of the APRIL 8, 1999 MEETING. Mr. Fernandez moved to approve the minutes as submitted; Mr. Hunt seconded the motion; it passed unanimously 6-0.

2. CONSIDER AUTHORIZING THE SELECTION OF AN AUCTION AGENT, EXECUTION AND DELIVERY OF AN INTEREST RATE CAP AGREEMENT, AND OTHER MATTERS RELATED TO THE TEXAS WATER RESOURCES FINANCE AUTHORITY REFUNDING BONDS, SERIES 1999. Ms. Nancy Marstiller, Director of Debt Management, recommended the selection of IBJ Whitehall Bank & Trust Company to serve as the Auction Agent as long as the $68,425,000 variable rate (PARS) bonds are outstanding. The selection was based on qualifications, experience and price of three bids received. She further recommended approval of an interest rate cap agreement which will serve as an insurance policy in that the Authority will never pay more than a set maximum rate over the life of the cap. The interest will be capped at five percent for two years at a cost of 11 basis points.

Mr. William Madden questioned whether this was considered a derivative product, as the Board has heretofore determined not to be involved with derivative products. Mr. Vincent Matrone with Goldman Sachs & Company explained that it could be considered a derivative product in that all interest in excess of five percent will be paid by Goldman Sachs and not from the TWRFA loan portfolio itself for a period of two years. While it could be considered a derivative product, it was more like an insurance policy and anticipated to be very short lived.

Executive Administrator Craig Pedersen and Development Fund Manager Kevin Ward explained that the cap agreement arrangement was similar to the risk management tool provided by a letter of credit arrangement and that the Board had received approval for such agreements under the credit enhancement provisions established for the new Dfund II program during the prior legislative session for other Board loan programs. Mr. Ward said the arrangement protects the Board and appeared to not be the type of derivative product that the Board has been concerned about in the past.

Mr. Hunt moved to approve the staff recommendation; Dr. Barron seconded the motion; it passed unanimously 6-0.

3. CONSIDER WAIVING THE REQUIREMENT FOR PUBLICATION NOTICE OF OPTIONAL REDEMPTION FOR POLITICAL SUBDIVISION BONDS WHERE THE AUTHORITY IS THE SOLE BONDHOLDER AND HAS RECEIVED TIMELY WRITTEN NOTICE OF REDEMPTION, AND AUTHORIZING THE DEVELOPMENT FUND MANAGER OF THE BOARD TO EXECUTE ALL NECESSARY DOCUMENTS. Ms. Rosia Ervin, Assistant Funds Manager of the Audit and Funds Management Division, recommended approval of the item to avoid unnecessary expense for political subdivisions and ensure efficient administration by the Development Fund Manager.

Mr. Hunt moved to approve the staff recommendation; Mr. William Madden seconded the motion; it passed unanimously 6-0. The meeting was adjourned. APPROVED and ordered of record this the 16th day of June, 1999. Texas Water Resources Finance Authority Charles L. Geren, Chairman

ATTEST: Wales H. Madden, Jr., Secretary/Treasurer

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