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Texas Public Finance Authority

Board of Directors: R. David Kelly, Chairman H.L. Bert Mijares, Jr., Vice-Chairman J. Vaughn Brock, Secretary Mark A. Ellis Helen Huey Ruth C. Schiermeyer Daniel T. Serna

Post Office Box 12906 Austin, Texas 78711-2047 Telephone: 512/463-5544

300 West 15t1i Street Suite 411

Austin, Texas 78701 Fax: 512/463-5501

www .tpfa.state.tx.us

Kimberly K. Edwards Executive Director

MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS OF THE

TEXAS PUBLIC FINANCE AUTHORITY July 20, 2004

The Board ofDirectors (the "Board") ofthe Texas Public Finance Authority(the "Authority") convened in open meeting, notice duly posted pursuant to law (a copy of which notice is attached hereto as Exhibit "A") at 2:04 P.M., Wednesday, July 20, 2004, Capitol Extension Hearing Room E2.026, Austin, Texas. Present were: Mr. Bert Mijares, Vice-Chairman, Mr. Vaughn Brock, Secretary, Mr. Mark A Ellis, Member, Ms. Ruth C. Schiermeyer, Member and Mr. Dan Serna, Member.

Representing the Authority's staff were: Ms. Knnberly Edwards, Executive Director, Mr. John Hernandez, Deputy Director, Ms. Judith Porras, General Counsel, Ms. Pan1ela Scivicque, Business Manager, Mr. Ricky Home, Ms. Gabriela Klein and Ms. Paula Hatfield.

Present in their designated capacities were the following persons: Jim Dong, Piper Jaffray; Desrye Morgan, UBS Financial Services; Andy Bynam, Citigroup; Keith Richard, Lehman Brothers, Tilghman Naylor, Bear Steams; Jim Buie, Banc ofAmerica Securities, LLC. Paul Braden, Delgado, Acosta, Braden & Jones; George Janning, John Barganski, First Southwest Co.; Nancy Hagquist, Winstead, Sechrest & Minick; and Chris Allen, Public Financial Management.

Item 1.

Call to order.

Mr. Mijares called the meeting to order at 2:04 P.M. He welcomed two new Board members, Mr. Mark Ellis from Honston and Ms. Ruth C. Schiermeyer of Lubbock.

Item 2.

Approval of minutes of the June 16, 2004 Board meeting.

Mr. Mijares asked if there were any corrections or additions to the minutes of the Board meeting ofJune 16, 2004. Mr. Mijares postponed action on this item until Mr. Serna arrived since the other members present had not attended the prior meeting.

At the conclusion of addressing Item 3, Mr. Mijares revisited consideration of the minutes. Mr. Serna moved to approve the minutes. Mr. Brock seconded. The motion passed unanimously.

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Item 3.

Consider, approve, and anthorize the distribution of a Preliminary Official Statement and Notice of Sale for the sale of the Authority's $5,460,000 Stephen F. Austin Revenue Financing System Revenue Bonds, Series 2004.

Ms. Edwards stated this financing was approved at the last Board meeting. It is for $5,460,000 ofrevenne bonds to finance a parking garage to be bnilt adjacent to the Student Center. Renovations to the Student Center are being financed with proceeds of the bonds the Auth01ity issued for the University in February. The revenue pledge for the new bonds is the same as for all University bonds; it is a gross revenue pledge ofall revenues generated by the University locally and excludes State appropriations. The University Board adopted fee increases for semester-long parking pem1its and will also charge hourly rates for the garage parking. These parking fees are not directly pledged to the bonds, but will contribute to the University's gross revenue.

The bonds are being rated byMoody's and Fitch. Conference calls were conducted with each of these agencies, on Monday and Tuesday, and the information provided was well received.

The Authority's Board authorized a competitive sale ofthe bonds atthe June meeting. Bids will be received electronicallythrongh an internet service called "Parity." The bids will be opened at 10:00 a.m. on August 17, 2004, and verified by staff and the Financial Advisor. The bids will be presented to the TPFA Board and University Board at their respective meetings that afternoon. Currently, staffis asking the Board to approve the distribution ofthe Preliminary Official Statement and the Notice of Sale, which will be distributed electronically a week prior to the sale. The Notice ofSale contains the Authority's standard requirements regarding making good faith efforts to include historically underutilized businesses and instructions for submitting bids.

Mr. Mijares asked about problems that had occurred on prior competitive sales. Ms. Edwards explained that the requirements for accepting the bids require a blank signed bid forn1 to be submitted to the Authority's office the day before bidders submit their bids electronically. The manually signed fonn and the electronic bid together constitute a valid bid. On a prior sale, a bidder did not submit a manually signed bid form and its bid had to be rejected. However, there were no technology problems with the sale.

Ms. Schiern1eyer asked the financial advisor to confirm that the financial data in the Preliminary Official Statement had been reviewed and was in order. Mr. Chris Allen, Public Financial Management, confirnied that he had reviewed and approved the financial infom1ation. Ms. Edwards explained that on a competitive sale the financial advisor actually prepares the official statement. The financial inforn1ation in this official statement is primarilythe University's financials as ofAugust 31, 2003, the date ofits most recent Arnmal Financial Report. State agencies, including state universities, are all required to produce annual financial reports as of August 31, the state's fiscal year end.

Mr. Brock moved to approve the Preliminary Official Statement and the Notice ofSale. Mr. Ellis seconded. The motion passed unanimously.

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Item 4.

Provide update ou escrow accounts on outstanding TPFA refunding bonds.

Ms. Edwards explained that under current Treasury Regulations, an issuser can redeem the SLGS (State and Local Goverrm1ent Securities) it holds in refunding escrows on one day, knowing what the purchase price for new SLGS will be the following day. This pern1its increasing the yield and lowe1ing the cost of refunding escrows.

At the June meeting, the Board approved using the SLGS (State a11d Local Govenunent Securities) program to restructure escrows for three different refundings that had been execnted in 2002 a11d 2003, ifthe Authority's fixed costs could be recovered. First Southwest Co, was engaged as the Authority's restructuring agent a11d monitored the transactions. They initiated two on June 28'1\ for $36,000 net benefit to the Authority. There are another five or six weeks until the tra11saction closes, on August 28, 2004, a11d the Authority's savings could improve.

Mr. Serna asked for a sm11111ary of the Board's last action on this topic. Ms. Edwards stated the Board's action gave the staff flexibility to act between Board meetings. The update provided today is just infonnational. Mr. Mijares questioned whether the Authority's fixed costs remained the same on all transactions. Ms. Edwards said that First Southwest Co. had agreed that their fixed cost would cover the day-to-day monitoring. The other costs will be the bond counsel fee for issuing a new tax opinion a11d the verification agent's fee for verifying the 11U111bers; these fees were also agreed upon as flat fees per escrow fund a11d will only be incurred one time, when the tra11saction is closed at the end of the sixty day period.

Item 5..

Consider and approve the Legislative Appropriation Request for Fiscal Year 2006-2007.

Ms. Edwards explained the Legislative Appropriation Request ("LAR") process to the new Board members and reviewed historical data from fiscal years 2001-2005, including the current budget This year's LAR instructions a11d policy letter from the Legislative Budget Board a11d Governor's Budget Office instructed agencies to submit a request that limits the amount of general revenue to 95% of their 04-05 budget Agencies can also submit exceptional items above this baseline request in the LAR.

Ms. Edwards presented tl11ee proposed scenarios for Board consideration: (1) the 95% funding request, (2) restoration to 100% ofthe FY04-05 budget, and (3) full funding for the biemuum (includes an approximate 4.9% increase). The General Revenue portion is the same for all three scenarios. For the exceptional items identified in scenarios 2 and 3, the Authority would increase the level of appropriated receipts that the agency generates from the Master Lease Program Administrative Fees.

Discussion ensued. Mr. Mijares stated his preference wm1lcl be to request scenario 3 given the Authority's value to the State ofTexas and the savings the Authority's refundings generated over the past years. Mr. Serna concurred and recommended that the savings produced over the prior

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biennium be included in the presentation to the Legislature. He also recommended using a multistep presentation of the three proposed scenarios described above.

Ms. Edwards stated the final LAR would be submitted for the Board's approval at the August meeting.

Item 6..

Consider the adoption of a proposed plan to review the Authority's rules in Title 34, Texas Administrative Code, Chapters 221 and 225.

Ms. Edwards explained that there is a statutory requirement for agencies to review their rules periodically. The Board is requested to adopt the proposed rule review plan. The Authority has only two chapters of administrative rules: Chapter 221, addresses general requirements for agencies to obtain financing from the Authority; and Chapter 225, addresses requirements for participation in the Master Lease Program. Staff anticipates that necessary amendments to the rules will be presented to the Board for adoption as proposed rule an1end111ents in September.

Mr. Brock moved to adopt the plan. Ms. Schiermeyer seconded. The motion passed unanimously.

Item 7..

Other Business/Staff Report Property Insurance

Ms. Edwards updated the Board regarding the $1.4 billion revenue bonds for the Texas Workforce Commission to fund the unemployment insurance trust fund. Over half of the debt was issued on a taxable basis. A portion of the taxable bonds were issued as Variable Rate Demand Bonds (VRDBs) in a commercial paper mode, with the provision that $400 million ofthe VRDBs. could be converted to tax-exempt bonds, if the Authority received a favorable IRS private letter ruling. The IRS ruling was received on Friday afternoon, allowing conversion of $400 million of variable rate debt to tax-exempt rates as the bonds mature over the next few weeks. Ms. Edwards commended Vinson & Elkins for their work and the other members of the financing team for their assistance.

Mr. Serna thanked staff and counsel involved in the process of obtaining the IRS private letter ruling.

Ms. Edwards provided an update regarding insurance carried on property financed with the Authority's appropriation backed, lease revenue bonds. The renewal premium is basically flat, and FM Global has offered a membership credit that would reduce the premium by approximately 12 percent.

Mr. Serna moved to accept staffs recommendation to renew the policy. Mr. Ellis seconded. The motion passed unanimously.

A brief discussion occurred regarding policy guidelines and an orientation work session for Board members. It was suggested that the orientation be held on the afternoon prior to the next

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Board meeting. Since the competitive bond sale will occur at 10 a.111. on August 17, the Board meeting could begin at 11 a.111.

Item 8.

Adjourn.

The meeting adjourned at 3:07 P.M.

The foregoing minutes were approved and passed by the Board of Directors on August 17, 2004.

Va?.ghn Brock Secretary, Board of Directors

ATTACHMENT: Posting Notice - Exhibit "A"

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Page 1 of2

Open Meeting Submission

Success!

Row inserted

TRD:

2004006211

Date Posted: 07/12/2004

Status:

Accepted

Agency Id:

0113

Date of Submission:

07/12/2004

Agency Name: Texas Public Finance Authority

Board:

Texas Public Finance Authority

Liaison Id:

3

Date of Meeting: 07/20/2004

Time of Meeting: 02:00 PM (##:##AM Local Time)

Street Location: Capitol Extension Hearing Room E2.026

City Location: Austin

State Location: TX

Liaison Name: Paula Hatfield

AIndfdoritmioantaiol n

If you need any additional information contact Paula Hatfield, 512/463-5544, 300

Obtained From: W. 15th Street, Suite 411, Austin, Texas 78701.

TEXAS PUBLIC FINANCE AUTHORITY TUESDAY, JULY 20, 2004 2:00 PM CAPITOL EXTENSION HEARING ROOM E2.026 AUSTIN, TEXAS 78701

1. Call to order.

2. Approval of minutes of the June 16, 2004 Board meeting.

3. Consider, approve, and authorize the distribution of a Preliminary Official Statement and Notice of Sale for the sale of the AuthoritylS $5,460,000 Stephen F. Austin Revenue Financing System Revenue Bonds, Series 2004.

4. Provide update on escrow accounts on outstanding TPFA refunding bonds.

5. Consider and approve the Legislative Appropriation Request for Fiscal Year 2006-2007.

6. Consider the adoption of a proposed plan to review the Authority1,s rules in Title 34, Texas Administrative Code, Chapters 221 and 225.

$omsubmit. actioninsert

7/12/2004

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