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KERR COUNTY COMMISSIONERS COURT
Special Session
Wednesday, January 26, 2005
4:00 p.m.
Commissioners' Courtroom
Kerr County Courthouse
Kerrville, Texas
Reconvened from Monday, January 24, 2005
PRESENT: PAT TINLEY, Kerr County Judge
H.A. "BUSTER" BALDWIN, Commissioner Pct. 1
WILLIAM "BILL" WILLIAMS, Commissioner Pct. 2
DAVE NICHOLSON, Commissioner Pct. 4
ABSENT: JONATHAN LETZ, Commissioner Pct. 3
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I N D E X
January 26, 2005
1.1 Consider and discuss approval of Consent and
Release Agreement with respect to Kerr County
Juvenile Detention Facility and outstanding
bonds on same and authorize County Judge to
sign agreement
1.2 Order authorizing the issuance, sale and
delivery of "Kerr County, Texas Certificates
of Obligation, Series 2005", securing the
payment thereof by authorizing the levy of an
annual ad valorem tax; and approving and
authorizing the execution of all instruments
and procedures related thereto, including a
Paying Agent/Registrar Agreement, a Purchase
Contract, and the form of an Official Statement
Recessed
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On Wednesday, January 26, 2005, at 4:00 p.m., a special
meeting of the Kerr County Commissioners Court was held in the
Commissioners' Courtroom, Kerr County Courthouse, Kerrville,
Texas, and the following proceedings were had in open court:
P R O C E E D I N G S
JUDGE TINLEY: Good afternoon, ladies and
gentlemen. Let me call to order the meeting posted for this
date and time, Wednesday, January 26th, 2005, at 4 p.m. And
also, it will be a reconvening of the regular Commissioners
Court meeting which was initially convened on Monday,
January the 24th, 2005, at 9 a.m., recessed and reconvened
yesterday afternoon, the 25th, and recessed at that time for
reconvening again today. The items that are being
considered today are those that were posted for the Monday,
January 24th meeting, and also posted by separate posting
for today's meeting. The first item that we have to
consider is the approval of the consent and release
agreement with respect to the Kerr County Juvenile Detention
Facility and outstanding bonds on the same, and authorize
the County Judge to sign the same. I am somewhat sad to
report that we just received the latest proposed draft of
that agreement within the last 15 minutes, which arrived by
e-mail, and we have furnished a copy to the County Attorney.
I think I can probably --
COMMISSIONER WILLIAMS: He says no.
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JUDGE TINLEY: He has not had an opportunity
to review it yet.
MR. EMERSON: I haven't received it, either.
Kathy called and said that she had e-mailed it down. As of
probably two minutes before court time, when I ran up here,
it had not hit my computer.
JUDGE TINLEY: So I think all I can do at
this point is report that there were three major issues that
were outstanding, two of which involved a matter more
particularly between the bondholders and the trustee and/or
the trustees' counsel, and did, at least by all accounts,
not have any direct effect on Kerr County or the so-called
Kerr County participants, or those on the Kerr County side
of the fence. And they have made some progress on those
issues; I think had actually resolved one of them and were
trying to get resolution of the second one. The third issue
involved one of the aspects of the release, which was the
indemnity aspect, and Mr. Spurgeon, bond counsel, who's been
assisting us in this matter, had indicated that -- that he
was going to provide the Court with a written opinion, as I
think he had possibly generally indicated when we last -- or
when we met on Monday. He's in the process of working on
that.
The only way that I -- I can see that we
could even possibly go forward on the Consent and Release
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Agreement at this point in time would be for the Court to
consider approving it under a number of conditions. One is
obviously the fact that it is executed by all the
bondholders, number one. Number two, that the County
Attorney and our bond counsel that's been assisting us in
this matter approve the final format of it, and number
three, that the outstanding issue as between the trustee
and/or the trustee's counsel with reference to the fees and
expenses allegedly due the trustee and trustee's counsel not
be a matter which impacts Kerr County; that it gets worked
out as between the bondholders and the trustee and trustee's
counsel. Whatever figure is acceptable to them coming out
of their portion of the proceeds would certainly be
something that we would have no dispute with, if they're
happy with it. But, other than that, I can't see how we'd
be able to go forward today.
COMMISSIONER WILLIAMS: What is the --
JUDGE TINLEY: The other possibility would be
to recess today and to reconvene later today or tomorrow,
depending upon the amount of time that County Attorney might
feel like he needs.
COMMISSIONER WILLIAMS: What is the time
imperative, Judge, on that particular issue?
JUDGE TINLEY: The -- in my view, and I
believe in Mr. Spurgeon's view and our financial adviser's
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view, and I think they both communicated that to the Court,
unless and until we have this final agreement on the
resolution of the existing outstanding bonds and the
releases that are going to be executed in connection with
that, I do not feel, and I don't think they feel that we
should go forward to authorize the issuance of the C.O.'s
that are anticipated in order to acquire the facility under
the new proposal. Unless we have the Consent and Release
Agreement in-hand, I would not feel comfortable asking our
financial adviser to go into the marketplace and -- and try
and secure subscriptions to those bonds.
COMMISSIONER WILLIAMS: I would agree with
that, but I'm -- the question I'm asking is, is there -- is
there a time imperative for the Consent and Release
Agreement? Do we -- doesn't seem to me to be any reason why
we need to take an action with several contingencies
attached to it. Why can't we have the County Attorney
review it and get these other contingent matters out of the
way, and know that when we do take action on it, it's a
clear document, ready -- and ready to be acted upon. Or is
there some time imperative that requires us to do it today?
JUDGE TINLEY: I don't think that -- the
answer to that as to requiring us to do it today, no.
COMMISSIONER WILLIAMS: Okay.
JUDGE TINLEY: The other option, as I said,
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would be to recess this meeting to allow time to do
additional work on these matters, allow the County Attorney
time to get up to speed and review the documents, and -- and
reconvene the meeting at a later time and date.
COMMISSIONER WILLIAMS: You had indicated
that they did resolve at least one of the issues. Which
one, and what's remaining to be resolved?
JUDGE TINLEY: The reserve fund issue as
between one of the bondholder claimants and the reserve
fund, it's my understanding that's been resolved. It really
has no direct effect on us.
COMMISSIONER WILLIAMS: No, it doesn't.
JUDGE TINLEY: The -- the one that they've
made some partial progress on is the -- the issue as between
the claims of the bondholders, trustee, and the trustee's
counsel, claims as against the bondholders for fees and
expenses, and they're negotiating that. That also does not
affect us, or at least so far it has not. The current
proposals that I've seen have any of those costs or expenses
coming out of the proceeds that would otherwise be due to
the bondholders themselves, so that doesn't affect us.
COMMISSIONER BALDWIN: Is that -- is that
different from what they had requested us to do in the
beginning? For us to pay the -- the attorney fees?
JUDGE TINLEY: We initially had a request --
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a demand, as it were, from the bondholder -- the trustee's
counsel.
COMMISSIONER BALDWIN: Mm-hmm.
JUDGE TINLEY: And, of course, we declined.
COMMISSIONER BALDWIN: Mm-hmm.
JUDGE TINLEY: And we have continued to
decline. And they are not making demands on us under this
current arrangement. Certainly, if they were, I think there
would be another issue involved --
COMMISSIONER WILLIAMS: Mm-hmm.
JUDGE TINLEY: -- over and above those that
I've already mentioned.
COMMISSIONER BALDWIN: But they are demanding
that the bondholders pay it now?
JUDGE TINLEY: Yes.
COMMISSIONER BALDWIN: That's the -- so it is
the same --
JUDGE TINLEY: Yeah, that's that same issue.
COMMISSIONER WILLIAMS: Or come out of the
proceeds of the amount of money.
COMMISSIONER BALDWIN: What proceeds?
JUDGE TINLEY: The 1.9.
COMMISSIONER WILLIAMS: The 1.9 million.
COMMISSIONER BALDWIN: That's not much
proceeds when you're talking about $5 million.
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COMMISSIONER WILLIAMS: Any way you slice it,
the bondholders pay.
JUDGE TINLEY: Mm-hmm. And then, of course,
the third issue is -- relates to the indemnity aspect of the
release to be given to the County participants. And we've
heard various claims, assertions, opinions as to the
enforceability of that indemnity obligation. And my last
discussion with our bond counsel was that he had done some
research on the issue, and I think he had indicated
Wednesday to us that he had some fairly clear law with
respect to those issues, and he had indicated that he was
going to prepare an opinion and forward it to us. I had
thought it would be here at the same time this other came.
It may have just come in the door; I don't know. No, that
part of it hasn't arrived yet. But, certainly, like I say,
other than a conditional approval with all of these
various --
COMMISSIONER BALDWIN: Yeah.
JUDGE TINLEY: -- conditions, number one, or
the other option would be to -- to just defer action, and
we'll recess and reconvene.
COMMISSIONER BALDWIN: Well, I'm not going to
vote for it anyway, but I would encourage you all to defer
it until you get everything in-hand and know exactly what
you're voting on.
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COMMISSIONER WILLIAMS: That's the way I
feel.
JUDGE TINLEY: Okay.
COMMISSIONER WILLIAMS: All the T's crossed,
all the I's dotted.
COMMISSIONER NICHOLSON: Couple questions.
We're not a party to the issue of the reserve fund issues;
that's between the trustee and the bondholders. We think
we're not a party to the fees and expenses deal, some
$120,000 or so. And we have to -- the third one's the
indemnity aspect. We have to have that. What's the
deal-breaker? What -- what point -- what one of these
remaining two issues can cause us to say we don't have a
deal?
JUDGE TINLEY: I would have to say, insofar
as it affects Kerr County, it would be the indemnity issue,
because at this time, that's the only remaining issue that
affects Kerr County or the Kerr County participants. The
other two issues, at least at this juncture, do not affect
us. The only way they affect us is, the trustee is a party
to the agreement, and he's a party to the agreement because
of the obligation to release the financing documents at such
time as the sums are paid in full release of the
obligations, and that creates an obligation on behalf of the
trustee to take certain steps to execute documents to -- to
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effectuate releases. But I would say, vis-a-vis Kerr
County, the only deal-breaker would be the indemnity aspect,
and that's the one in which the -- the attorney is preparing
the written opinion for us.
COMMISSIONER BALDWIN: In the beginning, I
think before any of you three folks showed up in here --
maybe not the lady -- the New York bank demanded that the
taxpayers of Kerr County pay their legal fees, and it was up
-- I don't remember. It was $120,000 or $130,000 or so.
Get your -- see if you can get your brain wrapped around
that one. I can't. I think we've -- I think we've got that
shut down. I think.
COMMISSIONER WILLIAMS: Well, we've let them
know from the very beginning that's not going to happen.
COMMISSIONER BALDWIN: Well, it's not going
to happen. But, I mean, I'm not real convinced that they
understand that, though.
COMMISSIONER WILLIAMS: I think the
bondholders understand it. I'm not so sure that the --
whoever's acting on behalf of the trustee, Bank of New York,
clearly understands it. But enough people do understand it,
particularly the lawyer representing the bondholders out of
Waco; he understands it.
JUDGE TINLEY: The -- our bond counsel in San
Antonio, neither he nor I are even listening to any demands
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of the trustee for fees and expenses, so yes, we're out of
it, and I think they clearly understand that we're not going
to get back in it. So, just leave us out of it.
COMMISSIONER NICHOLSON: It seems to me like
our negotiating position is -- is not very strong. The
trustee -- tell me if I'm wrong. Can't the trustee choose
to drag this out forever? The -- the bondholders want their
money; they got a reason to want to conclude the deal. We
made a decision we want to own a juvenile facility, and
we're here in a period of several months of uncertainty and
spending some money. We want to close the deal, but we
can't close the deal without the -- without action by the
trustee, and the trustee's got no incentive to take action.
COMMISSIONER WILLIAMS: Frankly, I think our
position's pretty good, Commissioner, because the pressure
is on the bondholders to put the -- the heat on the Bank of
New York to get the deal done. We've said we'll do a deal,
but here are the conditions. So I -- frankly, I think
we're -- we're sort of in the catbird seat in that regard.
COMMISSIONER BALDWIN: Well, there's another
side to it too, though, another way to see all that. And I
thought about it this morning, that there's a possibility --
if you remember when we first started dealing with the
bondholders, and there was five or six of them -- or two or
three come in here, and then there was five or six, and then
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the time we had the big meeting with them and cut the deal,
they didn't even know -- at that point, they didn't even
know who all the bondholders were. Couldn't -- didn't know
their damn telephone numbers, didn't know how to call
anybody. So, there's a possibility that they are putting it
off as well, to -- you know, until -- give them plenty of
time to get all their ducks in a row, to figure out who they
are and what they really want. So, here we are, the
taxpayers of Kerr County, rocking along, and to the tune of
close to 250 grand now since September, just propping the
place up. That's a possibility. I'm not saying that that's
what it is, but there's that possibility.
COMMISSIONER WILLIAMS: I think
what's-his-name, the attorney out of Waco, Herb --
JUDGE TINLEY: Mr. Bristow.
COMMISSIONER WILLIAMS: -- Bristow. I think,
by now, if he hasn't gotten all the names and addresses and
their mother-in-law's name, --
COMMISSIONER BALDWIN: They got it down now.
COMMISSIONER WILLIAMS: -- there's something
wrong, you know.
JUDGE TINLEY: Let me, if I might, mention
one -- or I'm sure you recall that when Mr. Spurgeon, the
bond counsel, was here with us Monday, mention was made that
in the event the trustee tries to hold this deal hostage,
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there may very well be a manner in which we can close around
the trustee without the need for the trustee. As of late
yesterday afternoon, I was advised by our bond counsel that
the Bank of New York was put on notice that we were
considering that as an option, as a means to attempt to give
them some incentive to get their business with the
bondholders resolved. And --
COMMISSIONER WILLIAMS: That can happen.
JUDGE TINLEY: Yeah, I think it can. And I
-- I suggested it to Mr. Spurgeon; there are a couple of
different ways it can happen. It -- it may require some
additional documentation from a title standpoint, but I
think it can be resolved without the participation of the
trustee. And I certainly -- if the trustee wants to be
unreasonable and to hold this thing hostage and extort, as
it were, certainly from us, I'm not going to stand for that.
And if the bondholders just will not cave into unreasonable
demands, I'd be willing to cooperate to get the deal done by
closing around, and I think it can be done.
COMMISSIONER WILLIAMS: Okay.
JUDGE TINLEY: So, at this point, I guess now
we can't move forward on the issuance and sale of the
C.O.'s. That's not something that we can do, because that
would come secondary, only after the Consent and Release
Agreement.
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COMMISSIONER BALDWIN: I can see -- I can see
the Kerr County Attorney spending the afternoon getting his
chops up on this document that came in today, but I don't
see any kind of an agreement coming out from the -- from the
bondholders or any kind of agreement from anybody just
showing up here today for us to make a decision today.
JUDGE TINLEY: No. No, I don't -- I don't
think it can be done today.
COMMISSIONER BALDWIN: Or maybe not even
tomorrow. What -- what do you -- what kind of timeline are
we talking about now?
JUDGE TINLEY: Well, we have a meeting
scheduled for Friday at 9 a.m., and we could recess this
particular meeting to take up that item also at that
particular time -- both of these items. I'm thinking that
you got lawyers involved, and you got a lot of different --
COMMISSIONER BALDWIN: There's the problem.
There's your problem right there.
JUDGE TINLEY: And, you know, Murphy's law
strikes, and -- but all we can do is keep working on it.
COMMISSIONER BALDWIN: Counselor, can -- can
we recess this meeting for more than one day? Come on, Rex,
you're supposed to know that stuff.
COMMISSIONER NICHOLSON: He asked the wrong
person.
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going to say.
COMMISSIONER BALDWIN: I know what she's
MR. EMERSON: I think you're in a gray area,
which is the problem. It was originally recessed from
Monday.
COMMISSIONER BALDWIN: Mm-hmm.
MR. EMERSON: Which, although you didn't have
to convene Tuesday, you did, because today's was posted.
And the A.G. opinion's clear; they state that you can recess
more than one day as long as it's pre-posted. But I think
if you turn around and you keep reconvening, then at some
point, you're circumventing the intent of the notice.
COMMISSIONER WILLIAMS: This is a new
14 posting.
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MR. EMERSON: If that's a new posting for
COMMISSIONER WILLIAMS: No, it's a new
posting for today.
we would recess
What you're saying
sretically, you're
edge.
from the notice
JUDGE TINLEY: For today.
COMMISSIONER BALDWIN: So
this one today and meet again on Friday.
is, that's stretching it? I agree.
MR. EMERSON: I mean, the
posting, but I think you're right on the
JUDGE TINLEY: Well, I --
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standpoint, we've tried to give every single -- we've really
posted when we weren't obliged to post, and we've even
posted when we weren't going to consider it and given notice
it was going to be considered at a later date. You know, if
you want to follow the 24-hour rule, we can certainly
convene -- reconvene. We can recess and reconvene tomorrow,
and then if we're not in a position to do anything then, we
can follow that up Friday.
MR. EMERSON: I'm -- I think you're safer
doing that.
JUDGE TINLEY: Yeah. Be happy to follow
counsel's advice. That being the case, unless anybody in
the Court has anything further --
COMMISSIONER NICHOLSON: Well, I'll just ask
one more question. When we finally get around to
authorizing the issuance, sale, and delivery of the
certificates of obligation, that just simply takes a court
order?
JUDGE TINLEY: Mm-hmm.
COMMISSIONER NICHOLSON: Nothing more?
JUDGE TINLEY: Mm-hmm.
COMMISSIONER WILLIAMS: Mm-hmm.
JUDGE TINLEY: But I was -- I was not
completely clear on that. When we authorize the issuance of
those certificates of obligation, that is not the beginning
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of the issuance process; that is the end of the process. By
that, I mean that prior to us issuing that order, we need to
know that we're ready to issue; our financial adviser has
gone into the securities marketplace and they had those
bonds subscribed, and when we then authorize the issuance of
the C.O.'s, that merely confirms the subscription that has
already been received.
COMMISSIONER NICHOLSON: So this Court can
authorize that, and then those things go into motion, and
when they get them priced and subscribed to, then they'll be
signed off on?
JUDGE TINLEY: Well, the issuance of the
C.O.'s occurs at the end.
COMMISSIONER NICHOLSON: Yeah.
COMMISSIONER WILLIAMS: Of all of that
process.
JUDGE TINLEY: Right. Right.
COMMISSIONER WILLIAMS: And --
JUDGE TINLEY: But -- excuse me. I'm sorry.
COMMISSIONER WILLIAMS: I'm sorry.
JUDGE TINLEY: But until we get this released
and finalize the existing transaction, it is not appropriate
to authorize our financial adviser to go into the
marketplace to get the bonds priced and -- and subscribed,
after which we come in and authorize the issuance of those
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certificates of obligation.
COMMISSIONER NICHOLSON: Okay.
JUDGE TINLEY: So that's what I mean. I was
confused. I thought that initiated a process rather than
ended it. In fact, it ends it; it doesn't initiate it. I'm
going to suggest that -- that we reconvene tomorrow at
3 p.m. Does anybody have any objection to that?
COMMISSIONER BALDWIN: Of course not.
COMMISSIONER WILLIAMS: No.
COMMISSIONER NICHOLSON: Okay.
COMMISSIONER BALDWIN: What is tomorrow?
JUDGE TINLEY: Thursday.
COMMISSIONER BALDWIN: Thursday?
JUDGE TINLEY: We will stand in recess
subject to reconvening at 3 p.m. on January the 27th, 2005.
(Commissioners Court recessed at 4:22 p.m.)
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STATE OF TEXAS I
COUNTY OF KERR I
The above and foregoing is a true and complete
transcription of my stenotype notes taken in my capacity as
County Clerk of the Commissioners Court of Kerr County,
Texas, at the time and place heretofore set forth.
DATED at Kerrville, Texas, this 27th day of January,
2005.
JANNETT PIEPER, Kerr County Clerk
sY : ---- ~ ~-~G ------
Kathy B ik, Deputy County Clerk
Certified Shorthand Reporter
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