DASNY Board Minutes – January 25, 2006

The Dormitory Authority of the State of New York met in a Regular Meeting at the Authority’s New York City Office at One Penn Plaza, 52 nd Floor, New York, at 9:30 a.m. on January 25, 2006.

The Meeting was called to order by the Chair. Roll call was taken and a quorum was present. Those Members present and absent were as follows:

Members Present:

Gail H. Gordon, Esq., Chair, Member
John B. Johnson, Jr., Vice Chair, Member
Dr. Jose A. Corvalan, Secretary, Member
Anthony B. Martino, Member
Sandra M. Shapard, Member
Dr. Roman B. Hedges, Member
Ron Rock, designated Representative of the Division of the Budget, Member (ex officio)
Thomas Hamel, designated Representative of the Commissioner of Education, Member (ex officio)
Russell Biggs, designated Representative of the Commissioner of Health, Member (ex officio)

Members Absent:

Brian Ruder, Member

Also Present:

Dormitory Authority Staff
Maryanne Gridley, Executive Director
Michael T. Corrigan, Deputy Executive Director
Douglas M. VanVleck, Managing Director of Construction
John G. Pasicznyk, Chief Financial Officer
Jeffrey M. Pohl, Esq., General Counsel
Cheryl Ishmael, Managing Director of Public Finance
Lora Lefebvre, Managing Director of Policy and Program Development
Mark M. Rufer, Senior Director, Public Finance
Debra Pulenskey Drescher, Esq., Managing General Counsel
George H. Weissman, Esq., Managing General Counsel
Paul J. Burgdorf, Director, Marketing and Communications
Jack D. Homkow, Director, Environmental Affairs
David L. Kvam, Director, Financing Coordination, Public Finance
Claudia Hutton, Press Officer
Charles Heritage, Manager, Public Finance
Karen Rieth, Assistant Director, Budget and Payroll

Others Present:

Karen Hunter NYS Department of Budget
Charles Abel NYS Department of Health
Howard I. Berkman, Esq. Hawkins Delafield & Wood
Michael Burke, Esq. Sidley Austin, LLP
John G. Bove, Esq. Nixon Peabody, LLP
Robert J. Rodriguez Alta Capitol Group

PUBLIC SESSION

The Chair called the Meeting to order. The Minutes of the November 30, 2005 Regular Meeting were reviewed and approved.

Teachers College

The Executive Director reported that the Authority had received correspondence over the last week from Carolyn Kent of the Morningside Heights Historic District Committee asking that staff distribute to the Members materials submitted by the Committee, as well as the Authority’s responses thereto. She directed the Members’ attention to those materials.

The Executive Director introduced John G. Bove, Esq. of Nixon & Peabody LLP, bond counsel on the transaction. Mr. Bove described the transaction and presented the financing documents. He stated that before the Members for their consideration is the Authority’s Series Resolution authorizing issuance of up to $50,000,000 of the Authority’s Teachers College Insured Revenue Bonds, Series 2006. He stated that the proceeds of the Bonds are expected to be used to finance various College-wide improvements and renovations to existing facilities and to refinance taxable bonds issued by the College to finance the construction of a new 252-unit student residence facility.

Mr. Bove stated that the Series 2006 Bonds are proposed to be sold in a negotiated sale to Morgan Stanley & Co. Incorporated. He reported that an insurer has not yet been selected for the Series 2006 Bonds, but that the authority to make certain changes to the financing documents consistent with requirements of the insurer has been delegated to an Authorized Officer of the Authority pursuant to the Series Resolution.

Mr. Bove stated that the College’s obligations under the Loan Agreement will be secured by a pledge of tuition and fees, subject only to the prior pledges made to secure loans from the Authority made pursuant to prior loan agreements. He indicated that the Loan Agreement does not require the College to mortgage any of its property to secure its obligations under the Loan Agreement.

The Executive Director reported that Public Authorities Control Board approval will be sought in the afternoon. She indicated that consideration of the transaction had been postponed a week to allow the College and the Assembly to have continued discussions concerning certain community opposition to the transaction. Dr. Hedges concurred.

Ms. Shapard asked for a summary of the issues at hand. Mr. Pohl referred the Members to the Minutes from the prior Regular Meeting, noting that nothing had really changed from what had already been discussed in depth at that Meeting. He noted, however, that there had been further indications that Members of the Morningside Heights Historic District Committee might pursue legal action to block the transaction.

Ms. Shapard questioned what redress the Committee wanted. She asked whether they wanted the building torn down or whether they were interested in denying the College the cost savings of tax-exempt financing. Ms. Shapard noted that if the Authority did not proceed with the transaction, the result would simply be a greater cost to the College.

Ms. Shapard stated that she would like to become more familiar with the geographic area in anticipation of future financings and stated that she would be willing to tour the site and the surrounding neighborhood as was offered by the neighborhood group. Ms. Ishmael noted that staff has undertaken such a tour. Ms. Shapard indicated that she felt that familiarity with the area is helpful and that she would like to have a tour.

Dr. Hedges noted that while he understands that the Authority is acting within the parameters of the law in undertaking the financing, the problem lies in the fact that by Teachers College’s withdrawing from financing with the Authority in the first instance, those opposing the project were precluded from their day in court to challenge environmental issues. Dr. Hedges opined that Teachers College has not been acting as a good neighbor, that the College has failed to communicate with the community, and that no adequate resolution has been reached. He reported that a potential resolution had been proposed last week, but that it had slipped away by this week. Dr. Hedges further reported that certain members of the Assembly believe that a resolution may finally be at hand. Dr. Hedges commented that the SEQRA process is odd in that while the Authority was originally involved, the community had an avenue of redress, but that once the Authority was removed from the process, the community was left with nothing. He stated that he understood why the community was annoyed with the Authority and the process.

The Chair noted that Teachers College had withdrawn its application for financing with the Authority. She further noted that the College could build the project as of right. She stated that the Authority in no way acted inappropriately. Dr. Hedges responded that he agreed. He stated that the Authority did nothing wrong from a legal perspective. He noted that it is not the responsibility of the Authority to fix the situation at Teachers College or the SEQRA statute. He indicated that he would vote against the transaction on principle.

Ms. Shapard stated that if she was part of the community opposition group, she, too, would be unhappy. She noted, however, that the building has already been erected and that the Authority acted appropriately.

Mr. Pohl stated that the Authority could confront similar situations in the future where a client encounters community opposition, works with the community to a certain degree, and then decides it can make no further concessions and builds the project as of right. He noted this is what occurred with Teachers College, and the College has now returned to the Authority for a refinancing. He indicated that the Authority must consider both the interest of its clients and the community in these circumstances.

Mr. Homkow noted that when the Authority had issued its Negative Declaration three years ago, it was after five to eight community meetings had been held by Teachers College and a public hearing had also been conducted by the Authority. He stated that, specifically because of the historic preservation issues, the Dormitory Authority felt it would be beneficial to conduct a joint public hearing with the New York State Office of Parks, Recreation, and Historic Preservation (“OPRHP”) to maximize public participation in the review process. He stated that the OPRHP agreed to participate in the hearing. Mr. Homkow noted the purpose of the joint public hearing was to allow representatives of local and State government and interested citizens an opportunity to express their views on the undertaking or on any alternatives which might avoid or mitigate potential impacts to nearby National Register-eligible resources, as well as any SEQR issues. He indicated that OPRHP had provided comments and that everything was done in conformity with Section 14.09 of the State Historic Preservation Act and its implementing regulations. Mr. Homkow reported that at the joint public hearing conducted with OPRHP, each and every member of the community that wished to comment on the proposed project had been provided with ample opportunity to speak at the public hearings. He further reported that possible alternatives were discussed. He noted, however, that all discussions ended when the College withdrew from the financing. Mr. Homkow stressed that the current project is a refinancing requiring no environmental review.

Mr. Johnson moved the adoption of the following entitled resolution:

DORMITORY AUTHORITY OF THE STATE OF NEW YORK SERIES 2006 RESOLUTION AUTHORIZING UP TO $50,000,000 TEACHERS COLLEGE INSURED REVENUE BONDS SERIES 2006

Mr. Martino seconded the motion and the resolution was adopted, with Dr. Hedges voting, “No.”

The Chair thanked the Members for engaging in such a full and frank discussion.

University of Rochester

The Executive Director introduced Howard I. Berkman, Esq. of Hawkins, Delafield & Wood LLP, bond counsel on the transaction. Mr. Berkman described the transaction and presented the financing documents. He stated that at the November 30, 2005 Regular Meeting, the Board had adopted two series resolutions for the University of Rochester, one to refund certain bonds issued to finance projects of the University, and one to refund certain bonds issued to finance projects for Strong Memorial Hospital, as well as the First Supplemental Resolution amending and supplementing the General Resolution to conform certain provisions of the General Resolution to current Authority standards. Mr. Berkman stated that the Prior Series 2006A Resolution and the Prior Series 2006B Resolution each authorized the issuance of the applicable Series of Bonds hereunder in a principal amount not to exceed $130,000,000 and further provided that the aggregate principal amount of the Series 2006A Bonds and the Series 2006B Bonds may not exceed $130,000,000. The Prior Series 2006 Resolutions provided that the maturity dates of the Series 2006A Bonds shall not exceed the maturity dates of the Prior University Bonds being refunded.

Mr. Berkman explained that at the time the Prior Series 2006 Resolutions were adopted, it was contemplated and reported to the Members, that the Series 2006 Bonds would likely be issued as fixed rate serial and term tax-exempt bonds. He further explained that it was indicated that, based on market conditions at or prior to the time the Series 2006 Bonds were to be sold, all or a portion of such Series 2006 Bonds might be issued as variable interest rate bonds.

Mr. Berkman informed the Members that subsequent to the adoption of the Prior Series 2006 Resolutions, the contemplated bond structure has been significantly modified. He stated that instead of the two fixed or variable rate Series of Bonds originally contemplated to refund the Prior University Bonds and the Prior Medical Center Bonds, respectively, the underwriters and the University have advised the Authority and bond counsel that a structure combining fixed, variable interest rate and deferred income bonds is now preferable for the Bonds issued to refund the Prior University Bonds, and a structure combining fixed and variable interest rate bonds is now desired for the bonds issued to refund the Prior Medical Center Bonds. He explained that the variable interest rate bonds will be supported by one or more liquidity facilities and MBIA Insurance Corporation will insure all or a portion of the Series 2006 Bonds. Mr. Berkman noted, however, that while this is the structure currently contemplated, the final bond structure will be determined at the time of sale of the Series 2006 Bonds.

Mr. Berkman stated that in addition, the University has requested a revision to one of the material provisions of the Prior Series 2006A Resolution, which currently limits the maturity dates of the Series 2006A Bonds to those of the Prior University Bonds being refunded. He stated that the University has requested that the maturity dates of the Series 2006A Bonds applicable to the Series 1999A Bonds to be refunded be extended to 2020. Mr. Berkman stated that the underwriters and the University have advised the Authority that by extending such maturity, the University expects to achieve more level debt service payments on the Series 2006A Bonds.

Mr. Berkman stated that in order to accommodate the changes to the contemplated bond structure and the structure as finally determined at the time of the sale of the Series 2006 Bonds, and to accommodate the University’s request to revise one of the material terms and conditions of the Prior Series 2006A Resolution, it is now proposed that the Board rescind each of the Prior Series 2006 Resolutions and adopt five new Series 2006 Resolutions, authorizing a total of five series of bonds rather than just two series. He indicated that the five new Series Resolutions authorize the same aggregate principal amount not to exceed $130,000,000 and that except for the extension of the maturity date and rescission of the previous resolutions, the series resolutions are identical to those being rescinded. He stated that the Bonds are expected to be sold in a negotiated sale with Lehman Brothers acting as lead manager.

Ms. Shapard inquired about the leveling of debt service on the Series 2006A Bonds. Mr. Rufer explained that the University is looking to level out all of its debt, not just debt on the Series 2006A Bonds. Ms. Shapard noted that, as was discussed at the previous Meeting, the current transaction is structured such that there is dissavings in the first five years. Mr. Rufer stated that the structure remains similar in that manner. Ms. Shapard further noted that in 2026 and 2027, losses will be greater. Mr. Rufer replied that originally, the schedule was break even, but that it is now back loaded with more principal, so there are more losses in the later years. He indicated, however, that overall, there is basically the same savings as before. Mr. Berkman commented that the savings will not be entirely clear until the transaction is brought to market. Ms. Shapard stated that it was an unusual savings schedule, and that without seeing the overall University debt, the benefit was difficult to see.

Mr. Biggs moved the adoption of the following entitled resolutions:

DORMITORY AUTHORITY OF THE STATE OF NEW YORK UNIVERSITY OF ROCHESTER SERIES 2006A-1 RESOLUTION AUTHORIZING UP TO $130,000,000 SERIES 2006A-1 BONDS

DORMITORY AUTHORITY OF THE STATE OF NEW YORK UNIVERSITY OF ROCHESTER SERIES 2006A-2 RESOLUTION AUTHORIZING UP TO $130,000,000 SERIES 2006A-2 BONDS

DORMITORY AUTHORITY OF THE STATE OF NEW YORK UNIVERSITY OF ROCHESTER SERIES 2006A-3 RESOLUTION AUTHORIZING UP TO $130,000,000 SERIES 2006A-3 BONDS

DORMITORY AUTHORITY OF THE STATE OF NEW YORK UNIVERSITY OF ROCHESTER SERIES 2006B-1 RESOLUTION AUTHORIZING UP TO $130,000,000 SERIES 2006B-1 BONDS

DORMITORY AUTHORITY OF THE STATE OF NEW YORK UNIVERSITY OF ROCHESTER SERIES 2006B-2 RESOLUTION AUTHORIZING UP TO $130,000,000 SERIES 2006B-2 BONDS

Mr. Martino seconded the motion and the resolutions were unanimously adopted.

Personal Income Tax Revenue Bonds (“PIT”) Education Program, Economic Development and Housing Program and State Facilities and Equipment Program

The Executive Director apologized for the late mailing to the Members with respect to the information for the PIT transaction. She explained that given the recent activity with respect to the State Budget, it had been difficult to meet with representatives of the Division of the Budget to discuss the transaction.

The Executive Director introduced Michael Burke, Esq. of Sidley Austin, LLP, bond counsel on the transaction and Mr. Heritage. Mr. Heritage was also apologetic with respect to the late mailing. He noted that while the Personal Income Tax Revenue Bond Program has simplified the debt issuance process for the State, it has not simplified the process for the issuers.

Mr. Heritage presented the Single Approval Credit Summary and Staff Report recommending the issuance of multiple series of tax-exempt and/or taxable fixed and/or variable rate bonds issued at one of more times under the Authority’s Personal Income Tax Revenue Bonds Program (“PIT”). Mr. Heritage stated that the proposed March bond sale would be comprised of two components – new authorization for Education facilities of approximately $68,000,000 that is being sought today, and existing authorization of Education facilities bonds of approximately $152,000,000 and State Facilities and Equipment bonds of $25,000,000, for a total PIT issuance of approximately $245,000,000. Mr. Heritage informed the Members that currently, the issuance is not expected to include bonds issued under the Economic Development and Housing Program, but that there is existing authorization in place should the need arise to issue bonds to finance projects under this program. Mr. Heritage further informed the Members that the transaction may include a fixed to variable rate swap.

Mr. Burke then further described the transaction and presented the financing documents. He stated that before the Members for their consideration are three Supplemental Resolutions, one under each of the PIT General Resolutions for the Education Program, the Economic Development and Housing Program, and the State Facilities and Equipment Program. Mr. Burke informed the Members that only one of those Supplemental Resolutions, the Education Supplemental Resolution 2006-1, provided for additional authorization for the aggregate principal amount of bonds to be issued and also authorizes the Authority to enter into certain swaps and to sell the bonds at either a negotiated or competitive sale. He stated that the amount of additional authorization being requested under the Education Program is $75,000,000.

Mr. Burke stated that the State Facilities and Equipment Supplemental Resolution 2006-1 and the Economic Development and Housing Supplemental Resolution 2006-1 do not increase the remaining issuance authorization for their respective programs, but merely amend and restate the prior authorization to conform the authorization for additional interest rate exchange agreements in accordance with certain parameters and to permit the public or private sale of bonds on a negotiated or competitive basis.

The Chair noted that the Education Program includes the financing of certain SUNY hospitals. She asked whether the Department of Health (“DOH”) wished to comment. Mr. Abel stated that the hospital side of the transaction still involved some unresolved issues. He explained that the Medical Center has a Certificate of Need (“CON”) for $120,000,000, but that there was only one bidder on the project and that bid came in 14% above budget. Mr. Abel reported that the Medical Center expects to rebid the project and move forward with construction in September. He indicated that it is important for the project to be included in this PIT issuance so funds are available. He noted that if costs increase by greater than 20%, they may have to go through the State Planning and Review Council approval again. Mr. Abel further reported that SUNY staff has indicated to DOH that they believe that they can get back within budget.

The Executive Director noted that, as she and Mr. Van Vleck had discussed a few months ago, certain commodity and material costs had skyrocketed right after the Hurricane Katrina disaster and there was uncertainty in the contractor community regarding the beginning of rebuilding in the South and associated labor costs, but now those costs have stabilized, which might help alleviate some of the cost estimate issues of this project. Mr. Van Vleck concurred.

Mr. Rock stated that the Executive Director and Mr. Heritage had been quite gracious in their apology with respect to the late mailing in that he believed that the tardiness was caused by DOB’s inability to focus on the PIT transaction while it was dealing with the State Budget.

Ms. Shapard asked why it had been necessary to consider the PIT transaction at this Board Meeting. Mr. Rufer replied that DOB would like to have the issue sold in March, and that considering the transaction at the March 1, 2006 Regular Meeting would not allow enough time to achieve that schedule.

Mr. Rock moved the adoption of the following entitled resolutions:

DORMITORY AUTHORITY OF THE STATE OF NEW YORK SUPPLEMENTAL RESOLUTION 2006-1 AUTHORIZING STATE PERSONAL INCOME TAX REVENUE BONDS (ECONOMIC DEVELOPMENT AND HOUSING)

DORMITORY AUTHORITY OF THE STATE OF NEW YORK SUPPLEMENTAL RESOLUTION 2006-1 AUTHORIZING STATE PERSONAL INCOME TAX REVENUE BONDS (STATE FACILITIES AND EQUIPMENT)

DORMITORY AUTHORITY OF THE STATE OF NEW YORK SUPPLEMENTAL RESOLUTION 2006-1 AUTHORIZING STATE PERSONAL INCOME TAX REVENUE BONDS (EDUCATION)

Mr. Hamel seconded the motion and the resolutions were unanimously adopted.

Siena College

The Executive Director directed the Members’ attention to the Revised Staff Report that had been forwarded to them. Mr. Kvam presented the Revised Staff Report recommending the issuance of 20-year fixed rate tax-exempt bonds in an amount not to exceed $30,000,000 on behalf of Siena College. He stated that the proceeds of the bonds are expected to be used to refund certain maturities of the College’s Series 1997 Bonds issued by the Authority, to renovate Serra Dining Hall, and to install an artificial turf athletic field on the campus. He explained that when the Staff Report was first drafted, it was anticipated that all of the Series 1997 Bonds would be refunded, but that upon subsequent review, the underwriter informed the Authority that only a portion would be refunded because of tax reasons.

Mr. Kvam stated that the bonds are expected to be secured by a policy of municipal bond insurance. He stated that the College currently carries an A3 underlying rating, and that it is expected that insurance will be procured without a requirement for a Debt Service Reserve Fund. Mr. Kvam informed the Members that a mortgage may be included as additional security, but only if required by the insurer. He noted that MBIA insured both the College’s Series 1997 Bonds and the Series 2001 Bonds, and a mortgage was required in both instances. Mr. Kvam indicated that the bonds will also be secured by a pledge of tuition and fees of the College.

Mr. Kvam stated that the College has experienced level FTE enrollments averaging 3,100 for the last five years. He stated that the College continues to attract a growing number of applicants. He informed the Members that a viability ratio of 1.5:1 is projected with the proposed bond issue. He noted that a primary reserve ratio of 1.3:1 indicates the College could operate for over a year using expendable reserves only. Mr. Kvam reported that a debt service coverage ratio in excess of 2:1 is projected based on past performance. He further reported that a new present value savings of just over $1.7 million is anticipated from the refunding.

Mr. Kvam stated that he wished to disclose that his brother is in charge of food service at the College, but that he has had no dealings with him with respect to this transaction.

Mr. Hamel moved the adoption of the following entitled resolution:

A RESOLUTION OF THE DORMITORY AUTHORITY AUTHORIZING STAFF AND BOND COUNSEL TO PROCEED TO TAKE THE NECESSARY ACTION TO PREPARE THE APPROPRIATE DOCUMENTS TO PROVIDE FOR THE FINANCING OF FACILITIES FOR SIENA COLLEGE

Mr. Biggs seconded the motion and the resolution was unanimously adopted.

Communications and Report of the Executive Director

The Executive Director began her Report by directing the Members’ attention to the schedule that had been distributed to them outlining available Board Member training. She indicated that training sessions are available from February 24, 2006 through June 23, 2006 at various locations. The Executive Director asked the Members to return training registration forms to her.

Ms. Shapard stated that while the training is mandatory under the Public Authorities Accountability Act of 2005, she would encourage her fellow Members to attend even if it was not required. She stated that she had attended a session along with board members from the Thruway Authority, the Metropolitan Transportation Authority, the Housing Finance Agency, and the New York State Power Authority. She indicated that she thought it was extremely helpful to have such a homogenous audience, in that they had issues in common and could share experiences.

Ms. Shapard further stated that she felt that it was an interesting concept to have boards review themselves. She indicated that she had never been through such self-evaluation with any of the many boards on which she has served. Ms. Shapard stated that she was happy to see such self-evaluation as part of the governance committee charter.

Dr. Hedges stated that he had attended a couple of training sessions, but that he had not found them that helpful. He stated that he believed that they were not especially relevant because there were many board members from small, regional authorities who were somewhat uninformed regarding many standard auditing and internal control practices.

The Executive Director introduced Mr. Corrigan to present the proposed 2006-2007 Authority Operating Budget. She indicated that the Budget is expected to be considered at the Regular Meeting at the end of March.

Mr. Corrigan stated that the new schedule to present the proposed 2006-2007 Operating Budget was developed based on the Public Authorities Accountability Act of 2005. He indicated that the slightly updated format was also developed to include requirements of the Act. Mr. Corrigan noted that the fee information and analysis, which is usually presented in a separate document, is included in the budget presentation this year. He stated that the budget process schedule presented is also a requirement of the Act. Mr. Corrigan noted that, generally, the format is similar to that used in previous years.

Mr. Corrigan stated that the total internal Operating Budget proposal represents an overall increase of 2.2%, absent any pass through expenses. He further stated that with pass through expense estimates included, the total projected budget increases by only 1.0%. Mr. Corrigan reported that the proposed 2006-2007 Salaries budget increases only by 3.5% due to vacancy control, despite contractual obligations under the CSEA and UAW collective bargaining agreements amounting to almost 6%. He stated that the number of approved positions remains flat at 680. He briefly reviewed health insurance costs and the overall proposed M&O budget.

Mr. Corrigan next directed the Members' attention to a graph depicting operating results from 2001 to present, noting that the Authority's projected surplus for Fiscal Year Ending 2005-06 of approximately $4.8 million is greater than the $3.6 million surplus that was originally projected. He noted, however, that the Authority's annual surplus has decreased in recent years due to substantial fee losses. Mr. Corrigan reported that staff has taken a long, hard look at the Authority's costing methods and has developed a new costing method designed to spread the costs across the Authority's three major business areas - construction, financing, and bond administration. Mr. Corrigan indicated that the new costing method is the result of several years of analysis.

Mr. Corrigan introduced Karen Rieth, Assistant Director, Budget and Payroll to discuss the 2005-2006 Projected Results of Operations. Ms. Rieth stated that formerly, this information was presented to the Members in a high level summary form, but that this year, the information had been expanded to include all the various categories of expenses, to allow for better comparison among years and between actual expenses and projected expenses.

Ms. Rieth discussed the changes between the 2004-2005 actual expenses and the 2005-2006 projected expenses, highlighting some of the costs related to Personal Service and Employee Benefits, noting that while Salaries had increased due to collective bargaining agreement obligations, the number had been minimized through vacancy control. She stated that there had been a decrease in Retirement Expenses as there had been a decrease in the plan rates. She reported that there is an increase of approximately 9.5% in health insurance costs. She noted that the non-capital equipment costs in the M&O budget had increased, in large part due to the fact that during 2005-2006, the Authority expensed its purchase of automobiles. She noted that since the Authority turns over its vehicles in three years or less, a decision has been made not to capitalize this expense. Ms. Rieth noted that the budget for Legal Fees has increased due to outside consultants for matters such as St. Vincent's, the DNA lab, the Westchester County Courts project, and the School District financings. She indicated that some of these costs may ultimately be offset with reimbursements.

Ms. Rieth highlighted the fact Audit & Financial Services had increased this past year. She noted that the Authority had paid approximately $100,000 for a forensic audit. She reported that Custody Fees had also been moved to this line item, accounting for a $45,000 to $50,000 change. She stated that Depreciation Expense had been reduced since certain computer equipment and autos were not being capitalized. She noted that Depreciation Expense has declined overall over the years. Mr. Corrigan noted that the only assets that the Authority currently depreciates are its corporate headquarters at 515 Broadway and its leasehold interest at One Penn Plaza.

Ms. Rieth then summarized the results, noting that a large savings can be seen in vacancy control, decreased retirement costs and health insurance premiums and in the miscellaneous M&O, such as copiers, service contracts, supplies, field site office expenses. She stated that the Authority is continually trying to control such miscellaneous M&O costs, which have decreased in recent years.

Ms. Rieth noted that there had been a large savings on Directors & Officers liability insurance in that the premium had been overestimated last year. She reported that there had also been savings with respect to computer costs in that large projects had been delayed or done using in-house personnel. She stated that Appendix C contains a list of such projects that are on hold or have been underspent.

Ms. Rieth next focused on the Salaries line of the 2006-2007 Proposed Budget Compared to Prior Year Budget. She noted that only a 3.5% increase is predicted in spite of a 6% collective bargaining contractual requirement. She stated that this increase has been lessened by increasing the vacancy control. She reported, however, that the 2006-2007 proposed salaries budget represents an 8% increase over the 2005-2006 projected salaries expense to allow for the filling of vacancies currently in recruitment. She noted that of the 72 currently vacant positions, 21 are in active recruitment. Ms. Rieth then reviewed with the Members various expense categories, including Retirement Contributions, Health Insurance, Rent & Utilities, Business Travel, Corporate Insurance, and Training.

Mr. Corrigan next explained the difference between the Authority's Internal Operating Budget and certain pass through expenses that the Authority has on behalf of its clients. He noted that the other pass through expense line had been increased to include various expenses not previously portrayed in the budget presentation. He noted that the Authority has approximately 40 operating accounts for its various clients and that it receives funds and has program specific costs associated with these clients. He indicated that the budget for these pass through accounts is approximately $3.5 million.

Mr. Martino asked about the increase in the Salaries category. Mr. Corrigan explained that the CSEA and UAW collective bargaining agreements each require the payment of certain longevity payments in the upcoming year. He indicated that over time, the cost will disperse, but that the implementation of the new step system resulted in a concentrated increase for the upcoming fiscal year.

The Executive Director reminded the Members that under the new collective bargaining agreements, the merit increases had been separated from the step system. She indicated that she expects the merit pool created by the agreements to be disbursed in the upcoming year.

Mr. Corrigan explained that pursuant to the collective bargaining agreements, after the 10th year of employment in a particular classification, the employee receives a longevity payment. He noted that after the 10-year milestone, an additional longevity is paid every three years. He indicated that this provision comprises a big part of increased costs.

Mr. Martino stated that, overall, he would like to see a comparison between the actual expenses incurred and those projected, rather than a comparison between the adopted budget and the projected budget. He questioned why certain items appeared to be overbudgeted. Ms. Shapard replied that usually items are overbudgeted so that staff would not have to return to the Board for authorization for additional changes to the budget. Mr. Corrigan concurred. He indicated that he would provide the Members with the comparison requested by Mr. Martino.

Mr. Corrigan reviewed with the Members the 2006-2007 budgeted payroll. He discussed the general salary increases resulting from collective bargaining contractual obligations and the step movement. He noted that a 3% general salary increase had been included in the budget for Management/Confidential employees, as well as funding for longevity, merit, and equity adjustments.

Mr. Martino asked about vacant positions. Mr. Corrigan responded that while there are 72 vacant positions proposed in the budget, 21 are currently being actively recruited. He noted that in some instances current employees are promoted and are not immediately replaced. Ms. Shapard asked about the part-time employees referenced in the budget. Mr. Corrigan stated that they include the hourly staff, which is primarily cleaners.

Mr. Corrigan next discussed the proposed changes in allocations of the Authority's costs. He stated that generally, there will be less costs allocated to financing and bond administration and greater costs allocated to construction. He noted that there are many more FTEs allocated to construction related activities. He reviewed with the Members the chart depicting Revenue and Expense by Program.

Mr. Corrigan then discussed the Proposed Changes in Fee Schedule. He stated that the language in the proposed fee schedule associated with health care refundings has been changed to clarify the fee structure for refunding bond issues which include an extension of the term of the original bond issue. He explained that the change will institutionalize the current practice of treating the stretch period as a new money transaction for administrative fee purposes.

Mr. Corrigan next stated that school district financings have been added to the administrative fee schedule at an amount equal to the fees collected for private institutions and public libraries. He explained that this action is necessary to ensure the Authority will cover the future cost of administering the bond issues for the school districts program. He further explained that initially, the Authority estimated that a low flat fee collected at closing from each institution in the pool would be sufficient to cover the cost of administration for the term of the bonds. He noted, however, that the current flat fee, although increased, has proven insufficient due to the low participation of districts in most of the pools. Mr. Corrigan stated that staff may suggest a school district reserve fund be established to address anticipated losses in the out years.

Mr. Corrigan noted that overall, fees are being reduced and the Authority's surpluses are being depleted. He noted that there may not always be surpluses to make up for shortfalls and that the Authority's clients need to pay the costs associated with their programs. He indicated that this is why the school districts need to be treated like private clients for fee purposes.

Mr. Corrigan next discussed the proposed fee schedule and some of the differences between the financing fees and the administrative fees. He then reviewed the administrative fees projected for the next seven years. He noted that the projected decrease in fee revenue is due to nursing homes leaving the Authority's portfolio en mass, defeasances and bankruptcies, and refundings of old MCFFA transactions with higher fees, many of which result in reduction of fees in the 50% range.

Mr. Corrigan stated that there is a large reduction in projected fees for the upcoming year. He directed the Members' attention to the chart setting forth the ten largest administrative fees for private institutions and health care and he and Mr. Pasicznyk discussed some of the clients.

Mr. Corrigan then reviewed with the Members the Authority's projected construction workload. He noted that there appears to be a very robust pipeline. He stated that as of November 2005, the Authority had a design pipeline and active construction total of 604 projects valued at $5.5 billion, and as of November 2005, the Authority had 236 projects in active construction with a value of $2.6 billion. He noted that three new projects for the Office of Court Administration with an estimated value of $132 million are in the pipeline. He stated that the number for dollars in the ground has stayed relatively consistent in the last four years.

Mr. Corrigan next reviewed the financing workload, noting that it had decreased both in dollar value and in number of issues sold. He noted that the Members had been provided with a Salary Schedule as part of their budget materials.

The Executive Director encouraged the Members to call or email if they had any questions or needed further information. Mr. Corrigan noted that the Board will be asked to consider the Operating Budget at the March 29 Regular Meeting. Mr. Corrigan stated that he wished to recognize Ms. Rieth for her efforts in developing the proposed budget.

The Executive Director directed the Members’ attention to a draft Governance Committee Charter and proposed amendments to the Authority’s By-Laws. Mr. Pohl stated that certain of the proposed amendments to the By-Laws are necessary to comply with the Public Authorities Accountability Act of 2005 and others are merely of a housekeeping nature. He highlighted a section that had been added to the By-Laws regarding the responsibility of the Members to monitor and oversee the activities of Senior Staff.

Mr. Biggs moved the adoption of the following entitled resolution:

A RESOLUTION OF THE MEMBERS OF THE DORMITORY AUTHORITY AMENDING THE BY-LAWS OF THE DORMITORY AUTHORITY OF THE STATE OF NEW YORK

Mr. Martino seconded the motion and the resolution was unanimously adopted.

The Chair asked Mr. Pohl to review with the Members the draft Governance Committee Charter. Mr. Pohl stated that the Public Authorities Accountability Act of 2005 requires the Authority to establish a Governance Committee. Mr. Pohl stated that the draft Charter that was developed was based on the authority reform statute and on a variety of charter models that he had reviewed.

Mr. Johnson inquired about providing advice as to the nature of who should be on the Board. The Executive Director stated that the Millstein Commission had suggested that a Board consider what expertise it requires, and then make recommendations regarding that expertise to the appointing authority charged with making such appointments. Mr. Johnson replied that such action may insure the status quo. He explained that if a Board is in control of its successors, then it can become self-perpetuating. He noted, however, that it would appear to be a bigger problem with small boards than with the Authority. The Chair noted that the discussion had been very insightful.

Mr. Martino moved the adoption of the following entitled resolution:

A RESOLUTION OF THE MEMBERS OF THE DORMITORY AUTHORITY ADOPTING GOVERNANCE COMMITTEE CHARTER

Mr. Shapard seconded the motion and the resolution was unanimously adopted.

The Chair noted that the Authority now had a second committee charter in place.

The Executive Director directed the Members’ attention to the Authority’s comments to the Office of the State Comptroller proposed regulations related to accounting, reporting, and budgeting for public authorities. She indicated that the comments had been sent to the Comptroller on the due date. She further indicated that the submission contained a chart which sets forth a comparison of the current law and reports generated and the proposed regulations. The Executive Director informed the Members that the letter to the Comptroller had requested that the Comptroller withdraw the proposed regulations and work with the newly created Authority Budget Office and public authorities to develop more standardized, non-duplicative reporting. She stated that the letter also questions the Comptroller’s authority to unilaterally impose his own ongoing reporting requirements.

Ms. Shapard asked whether the deadline for commenting had passed, to which the Executive Director responded affirmatively. Ms. Shapard then asked whether the Authority Budget Office had yet been established. She stated that it was her understanding that it would be a separate unit in DOB like there used to be a number of years ago.

The Chair stated that she wished to compliment staff for doing such a thoughtful job on the OSC regulation review. She asked Mr. Rock to comment on the Authority Budget Office.

Mr. Rock stated that the Office will begin functioning on April 1. He stated that a potential candidate has been identified to head up the Office. Mr. Rock indicated that DOB expects to confer with the Millstein Commission, the Legislature, and the Comptroller with respect to its staffing and operation of the Office. Mr. Rock noted that the Assembly and the Comptroller want to insure that it is truly an “independent” office. He indicated that the Office will probably have two major focuses – an audit focus and analytical focus in which trends and data will be studied. Mr. Rock stated that DOB currently has expertise on the audit side, but that it will need to recruit analytical types. He reported that the Director of the Budget has been in discussion concerning the formation of the Office with the Executive Chamber. Mr. Rock noted that the Millstein Commission will cease to exist once the Budget Office is up and running. He noted that the plan is a good one, but that there are issues to resolve.

Ms. Shapard asked who will do Board member training once the Millstein Commission is gone. Mr. Rock replied that CUNY will continue to do the training as it had on behalf of the Commission.

Mr. Rock moved that the Members go into Executive Session to discuss matters regarding proposed, pending or current litigation. Mr. Hamel seconded the motion, and the Meeting went into Executive Session.

EXECUTIVE SESSION

While in Executive Session, no action was taken other than to return to Public Session.

Mr. Rock moved that the Members return to Public Session, Mr. Martino seconded the motion, and the Meeting returned to Public Session.

PUBLIC SESSION

Mr. Johnson moved the adoption of the following entitled resolution:

RESOLUTION AUTHORIZING THE AUTHORITY TO TRANSFER MONEYS FROM THE FIDUCIARY FUND FOR THE PURPOSES OF THE WESTCHESTER COUNTY COURT FACILITIES

Mr. Biggs seconded the motion, and the resolution was unanimously adopted.

Mr. Martino and Dr. Corvalan departed the Meeting.

Public Finance Report

Ms. Ishmael reported that a recent article in The Bond Buyer listed the Authority as the top issuer in 2005 with respect to the number of bond issues sold. She noted that the Authority ranked No. 3 behind The City of New York and California, with respect to dollar volume issued. Ms. Ishmael stated that the Authority has consistently ranked in the top two issuers with respect to number of issues sold in the last ten years.

Ms. Ishmael reported that bond issues had been sold for Columbia University, the Mental Health Services Facilities Improvement Program, the School District Revenue Bond Financing Program, and the Personal Income Tax Revenue Bond Program since the last Regular Meeting. Ms. Ishmael reviewed the swaps reports, noting that interest rates had decreased since the previous month.

Ms. Ishmael directed the Members’ attention to the Status Report on Active Inquiries, noting that one of the possible future financings had moved beyond the inquiry stage. She reported that authorization for the Authority to finance a hospital project in Israel for the Hadassah Women’s Zionist Organization of America, Inc. had been included in legislation proposed by the Governor.

Mr. Corrigan stated that he wished to advise the Members of one additional item that he had failed to discuss in his earlier presentation. He reported to the Members that as the result of certain Management/Confidential (M/C) employee litigation against the State, State M/C employees will be paid a retroactive performance award for the 2003-04 fiscal year. He further stated that this payment will be made in accordance with DOB’s Budget Bulletin D-1117. Mr. Corrigan reported that the Authority had previously made retroactive performance award payments back to fiscal year 2004-2005. He stated that the Authority will comply with the spirit of the Budget Bulletin and make the retroactive payments before the end of the fiscal year. He indicated that payments would range from approximately $1,500 to $3,000. Mr. Corrigan noted that Board action to approve the payments is not required.

General Counsel’s Report

Mr. Pohl directed the Members’ attention to the Authority’s letter to the Counsel to the Governor setting forth the Authority’s legislative agenda for the 2006 Legislative Session. He highlighted certain proposals contained in the letter. He discussed DA 4-06 which would authorize the Authority to form a subsidiary for the purpose of acquiring the facilities of hospitals and nursing homes that have ceased their operations at that facility. He noted that there might be circumstances in which the Authority might be in a better position to protect the interests of its bondholders and those of the State or its political subdivisions by acquiring the property through a subsidiary as opposed to having the property sold at foreclosure or otherwise. Mr. Pohl indicated that, in accordance with the Public Authorities Accountability Act of 2005, the Authority will be required to implement new procedures for disposition of real estate and that these procedures would also pertain to the Authority. The Executive Director noted that the bill is not that different from the language suggested with respect to the proposed subsidiary legislation to deal with the St. Agnes hospital failure.

Mr. Pohl next directed the Members’ attention to DA-6-06 which would revise requirements relative to the private sale of certain bonds and notes. He explained that the proposal would amend the New York State Medical Care Facilities Finance Agency Act to eliminate the requirement that bonds or notes sold by the Agency at private sale be subject to approval by either the State Comptroller or the Director of the Budget in certain instances, so long as the bonds or notes are being issued for the benefit of a private not-for-profit corporation and do not constitute State supported debt or a contingent contractual obligation of the State. Mr. Pohl indicated that he felt that passage of this bill is very important to the manner in which the Authority does business in that it is very difficult to justify or explain to a private hospital client why the Comptroller or the Director of the Budget is involved in its transaction.

Mr. Pohl next highlighted DA 9-06 which would authorize the Authority to provide its financing and construction services to certain SUNY and CUNY affiliates. He indicated that it would allow the Authority to be more competitive with respect to this business sector, as well as permit certain projects that benefit SUNY and CUNY without having to finance them with State supported debt.

The Executive Director reminded the Members how cumbersome the Educational Housing Services, Inc. transaction the Authority had undertaken had become. She noted that passage of DA 9-06 would standardize such transactions. Ms. Shapard asked what types of projects were contemplated. Mr. Pohl said that graduate housing would be a good example of the type of project envisioned. The Executive Director stated that the College of Staten Island would like to have such a project. Mr. Pohl stated that these types of projects are viable because the student rentals provide a revenue stream for repayment of debt service.

Mr. Pohl next discussed DA11-06 which would add a new section 2807 to the Public Authorities Law to provide that the Authority Budget Office established by the Public Authorities Accountability Act of 2005 and the State Comptroller shall, for each report required to be filed by a public authority, coordinate with each other and where practicable, agree on a format for such report. He indicated that there needs to be constructive dialogue among the new DOB Budget Office, the Comptroller and the public authorities.

Mr. Pohl asked Mr. Corrigan or Mr. Weissman to discuss DA 12-06, which would provide that a public benefit corporation that enters into a construction contract on behalf of a municipality shall not be required to make any transfers to the Public Work Enforcement Fund on account of such contract and that in the case of contracts for State entities where a payment is required, that it be made only once when the contract is executed. Mr. Corrigan explained that continued tracking is extremely time consuming and that payment at the time of execution would save a great deal of work.

Mr. Pohl also discussed DA10-06 which provides technical amendments relative to Lobbying and Procurement Reform. He indicated that this proposal would amend the Dormitory Authority Act to include the Authority’s Director of Internal Affairs among the individuals to which persons may make complaints of alleged improper conduct relating to Authority procurements. He noted that it will also provide that the Authority’s Director of Internal Affairs shall also function as a Deputy Inspector General if so designated by the Inspector General. The Executive Director reported that there does not appear to be much sentiment for opening up this issue, since none of the other authorities have Internal Affairs units.

Financial Report

Mr. Pasicznyk reported that as of December 31, 2005, the balance in the Fiduciary Fund was approximately $20 million. He noted, however, that the Members have just approved the payment of $7.6 million from the Fiduciary Fund into the Authority’s general operating funds to implement the Westchester County Court agreement. Mr. Pasicznyk reported that the 2005-2006 State Budget directs the Authority to provide $6.5 million in support of SUNY hospitals. He further reported that this payment is expected to be made on January 31, 2006.

Ms. Shapard questioned whether the payment of the $7.6 million is expected to cause a problem in the future. Mr. Pasicznyk responded that the Authority’s surplus has decreased significantly. Ms. Shapard asked whether other payments are expected to be made from the Fiduciary Fund in the upcoming year. Mr. Rock responded that there are no requirements in the proposed State budget that the Authority provide funds to the State. He noted that other sources would be needed to fund the SUNY hospital support.

Mr. Pasicznyk next reported that as of December 31, 2005, the available balance in the NYS Health Care Restructuring Pool –HCRA was approximately $45 million. He stated that during November and December, an additional commitment was issued to Our Lady of Mercy Healthcare Systems for $4 million and the remaining balance of the existing commitment for St. Vincent’s Catholic Medical Center in the amount of $2.2 million was funded. Mr. Pasicznyk stated that various repayment terms have either been renegotiated or are under negotiation. He further reported that as of December 31, 2005, the loan repayments for this pool totaled approximately $40 million.

Mr. Pasicznyk noted as part of his Report on Information Systems Consultants for the Quarter Ended December 31, 2005 that the change in total encumbrance from the prior quarter primarily related to the upgrade to the new version of Primavera Expedition Project Management software.

Construction Report

Mr. Van Vleck reported that his standard Reports for November 2005 and December 2005 reflect minor changes to construction schedules and budgets, but nothing significant.

Policy and Program Development Report

Mr. Biggs moved that the Members go into Executive Session to discuss the financial history of particular corporations. Mr. Rock seconded the motion, and the Meeting went into Executive Session.

EXECUTIVE SESSION

While in Executive Session, no action was taken other than to return to Public Session.

Mr. Rock moved that the Members return to Public Session, Mr. Biggs seconded the motion, and the Meeting returned to Public Session.

PUBLIC SESSION

The Chair stated that she wished to publicly thank Mr. Pasicznyk, Ms. Lefebvre, Mr. Volk and their staff, and Mr. Pohl and his staff for their hard work on the St. Vincent’s matter. She noted that the next Regular Meeting would be on March 1, 2006 in the Authority’s offices in Albany.

Mr. Rock moved that the Meeting adjourn, Mr. Hamel seconded the motion, and the Meeting adjourned at approximately 12:45 p.m.

Respectfully,

Jeffrey M. Pohl
Assistant Secretary