1 2 3 4 5 6 7 KERR COUNTY COMMISSIONERS COURT 8 Special Session 9 Wednesday, January 26, 2005 10 4:00 p.m. 11 Commissioners' Courtroom 12 Kerr County Courthouse 13 Kerrville, Texas 14 15 16 17 Reconvened from Monday, January 24, 2005 18 19 20 21 22 PRESENT: PAT TINLEY, Kerr County Judge H. A. "BUSTER" BALDWIN, Commissioner Pct. 1 23 WILLIAM "BILL" WILLIAMS, Commissioner Pct. 2 DAVE NICHOLSON, Commissioner Pct. 4 24 ABSENT: JONATHAN LETZ, Commissioner Pct. 3 25 2 1 I N D E X January 26, 2005 2 PAGE 3 1.1 Consider and discuss approval of Consent and 4 Release Agreement with respect to Kerr County Juvenile Detention Facility and outstanding 5 bonds on same and authorize County Judge to sign agreement 3 6 1.2 Order authorizing the issuance, sale and 7 delivery of "Kerr County, Texas Certificates of Obligation, Series 2005", securing the 8 payment thereof by authorizing the levy of an annual ad valorem tax; and approving and 9 authorizing the execution of all instruments and procedures related thereto, including a 10 Paying Agent/Registrar Agreement, a Purchase Contract, and the form of an Official Statement -- 11 --- Recessed 19 12 13 14 15 16 17 18 19 20 21 22 23 24 25 1-26-05 3 1 On Wednesday, January 26, 2005, at 4:00 p.m., a special 2 meeting of the Kerr County Commissioners Court was held in the 3 Commissioners' Courtroom, Kerr County Courthouse, Kerrville, 4 Texas, and the following proceedings were had in open court: 5 P R O C E E D I N G S 6 JUDGE TINLEY: Good afternoon, ladies and 7 gentlemen. Let me call to order the meeting posted for this 8 date and time, Wednesday, January 26th, 2005, at 4 p.m. And 9 also, it will be a reconvening of the regular Commissioners 10 Court meeting which was initially convened on Monday, 11 January the 24th, 2005, at 9 a.m., recessed and reconvened 12 yesterday afternoon, the 25th, and recessed at that time for 13 reconvening again today. The items that are being 14 considered today are those that were posted for the Monday, 15 January 24th meeting, and also posted by separate posting 16 for today's meeting. The first item that we have to 17 consider is the approval of the consent and release 18 agreement with respect to the Kerr County Juvenile Detention 19 Facility and outstanding bonds on the same, and authorize 20 the County Judge to sign the same. I am somewhat sad to 21 report that we just received the latest proposed draft of 22 that agreement within the last 15 minutes, which arrived by 23 e-mail, and we have furnished a copy to the County Attorney. 24 I think I can probably -- 25 COMMISSIONER WILLIAMS: He says no. 1-26-05 4 1 JUDGE TINLEY: He has not had an opportunity 2 to review it yet. 3 MR. EMERSON: I haven't received it, either. 4 Kathy called and said that she had e-mailed it down. As of 5 probably two minutes before court time, when I ran up here, 6 it had not hit my computer. 7 JUDGE TINLEY: So I think all I can do at 8 this point is report that there were three major issues that 9 were outstanding, two of which involved a matter more 10 particularly between the bondholders and the trustee and/or 11 the trustees' counsel, and did, at least by all accounts, 12 not have any direct effect on Kerr County or the so-called 13 Kerr County participants, or those on the Kerr County side 14 of the fence. And they have made some progress on those 15 issues; I think had actually resolved one of them and were 16 trying to get resolution of the second one. The third issue 17 involved one of the aspects of the release, which was the 18 indemnity aspect, and Mr. Spurgeon, bond counsel, who's been 19 assisting us in this matter, had indicated that -- that he 20 was going to provide the Court with a written opinion, as I 21 think he had possibly generally indicated when we last -- or 22 when we met on Monday. He's in the process of working on 23 that. 24 The only way that I -- I can see that we 25 could even possibly go forward on the Consent and Release 1-26-05 5 1 Agreement at this point in time would be for the Court to 2 consider approving it under a number of conditions. One is 3 obviously the fact that it is executed by all the 4 bondholders, number one. Number two, that the County 5 Attorney and our bond counsel that's been assisting us in 6 this matter approve the final format of it, and number 7 three, that the outstanding issue as between the trustee 8 and/or the trustee's counsel with reference to the fees and 9 expenses allegedly due the trustee and trustee's counsel not 10 be a matter which impacts Kerr County; that it gets worked 11 out as between the bondholders and the trustee and trustee's 12 counsel. Whatever figure is acceptable to them coming out 13 of their portion of the proceeds would certainly be 14 something that we would have no dispute with, if they're 15 happy with it. But, other than that, I can't see how we'd 16 be able to go forward today. 17 COMMISSIONER WILLIAMS: What is the -- 18 JUDGE TINLEY: The other possibility would be 19 to recess today and to reconvene later today or tomorrow, 20 depending upon the amount of time that County Attorney might 21 feel like he needs. 22 COMMISSIONER WILLIAMS: What is the time 23 imperative, Judge, on that particular issue? 24 JUDGE TINLEY: The -- in my view, and I 25 believe in Mr. Spurgeon's view and our financial adviser's 1-26-05 6 1 view, and I think they both communicated that to the Court, 2 unless and until we have this final agreement on the 3 resolution of the existing outstanding bonds and the 4 releases that are going to be executed in connection with 5 that, I do not feel, and I don't think they feel that we 6 should go forward to authorize the issuance of the C.O.'s 7 that are anticipated in order to acquire the facility under 8 the new proposal. Unless we have the Consent and Release 9 Agreement in-hand, I would not feel comfortable asking our 10 financial adviser to go into the marketplace and -- and try 11 and secure subscriptions to those bonds. 12 COMMISSIONER WILLIAMS: I would agree with 13 that, but I'm -- the question I'm asking is, is there -- is 14 there a time imperative for the Consent and Release 15 Agreement? Do we -- doesn't seem to me to be any reason why 16 we need to take an action with several contingencies 17 attached to it. Why can't we have the County Attorney 18 review it and get these other contingent matters out of the 19 way, and know that when we do take action on it, it's a 20 clear document, ready -- and ready to be acted upon. Or is 21 there some time imperative that requires us to do it today? 22 JUDGE TINLEY: I don't think that -- the 23 answer to that as to requiring us to do it today, no. 24 COMMISSIONER WILLIAMS: Okay. 25 JUDGE TINLEY: The other option, as I said, 1-26-05 7 1 would be to recess this meeting to allow time to do 2 additional work on these matters, allow the County Attorney 3 time to get up to speed and review the documents, and -- and 4 reconvene the meeting at a later time and date. 5 COMMISSIONER WILLIAMS: You had indicated 6 that they did resolve at least one of the issues. Which 7 one, and what's remaining to be resolved? 8 JUDGE TINLEY: The reserve fund issue as 9 between one of the bondholder claimants and the reserve 10 fund, it's my understanding that's been resolved. It really 11 has no direct effect on us. 12 COMMISSIONER WILLIAMS: No, it doesn't. 13 JUDGE TINLEY: The -- the one that they've 14 made some partial progress on is the -- the issue as between 15 the claims of the bondholders, trustee, and the trustee's 16 counsel, claims as against the bondholders for fees and 17 expenses, and they're negotiating that. That also does not 18 affect us, or at least so far it has not. The current 19 proposals that I've seen have any of those costs or expenses 20 coming out of the proceeds that would otherwise be due to 21 the bondholders themselves, so that doesn't affect us. 22 COMMISSIONER BALDWIN: Is that -- is that 23 different from what they had requested us to do in the 24 beginning? For us to pay the -- the attorney fees? 25 JUDGE TINLEY: We initially had a request -- 1-26-05 8 1 a demand, as it were, from the bondholder -- the trustee's 2 counsel. 3 COMMISSIONER BALDWIN: Mm-hmm. 4 JUDGE TINLEY: And, of course, we declined. 5 COMMISSIONER BALDWIN: Mm-hmm. 6 JUDGE TINLEY: And we have continued to 7 decline. And they are not making demands on us under this 8 current arrangement. Certainly, if they were, I think there 9 would be another issue involved -- 10 COMMISSIONER WILLIAMS: Mm-hmm. 11 JUDGE TINLEY: -- over and above those that 12 I've already mentioned. 13 COMMISSIONER BALDWIN: But they are demanding 14 that the bondholders pay it now? 15 JUDGE TINLEY: Yes. 16 COMMISSIONER BALDWIN: That's the -- so it is 17 the same -- 18 JUDGE TINLEY: Yeah, that's that same issue. 19 COMMISSIONER WILLIAMS: Or come out of the 20 proceeds of the amount of money. 21 COMMISSIONER BALDWIN: What proceeds? 22 JUDGE TINLEY: The 1.9. 23 COMMISSIONER WILLIAMS: The 1.9 million. 24 COMMISSIONER BALDWIN: That's not much 25 proceeds when you're talking about $5 million. 1-26-05 9 1 COMMISSIONER WILLIAMS: Any way you slice it, 2 the bondholders pay. 3 JUDGE TINLEY: Mm-hmm. And then, of course, 4 the third issue is -- relates to the indemnity aspect of the 5 release to be given to the County participants. And we've 6 heard various claims, assertions, opinions as to the 7 enforceability of that indemnity obligation. And my last 8 discussion with our bond counsel was that he had done some 9 research on the issue, and I think he had indicated 10 Wednesday to us that he had some fairly clear law with 11 respect to those issues, and he had indicated that he was 12 going to prepare an opinion and forward it to us. I had 13 thought it would be here at the same time this other came. 14 It may have just come in the door; I don't know. No, that 15 part of it hasn't arrived yet. But, certainly, like I say, 16 other than a conditional approval with all of these 17 various -- 18 COMMISSIONER BALDWIN: Yeah. 19 JUDGE TINLEY: -- conditions, number one, or 20 the other option would be to -- to just defer action, and 21 we'll recess and reconvene. 22 COMMISSIONER BALDWIN: Well, I'm not going to 23 vote for it anyway, but I would encourage you all to defer 24 it until you get everything in-hand and know exactly what 25 you're voting on. 1-26-05 10 1 COMMISSIONER WILLIAMS: That's the way I 2 feel. 3 JUDGE TINLEY: Okay. 4 COMMISSIONER WILLIAMS: All the T's crossed, 5 all the I's dotted. 6 COMMISSIONER NICHOLSON: Couple questions. 7 We're not a party to the issue of the reserve fund issues; 8 that's between the trustee and the bondholders. We think 9 we're not a party to the fees and expenses deal, some 10 $120,000 or so. And we have to -- the third one's the 11 indemnity aspect. We have to have that. What's the 12 deal-breaker? What -- what point -- what one of these 13 remaining two issues can cause us to say we don't have a 14 deal? 15 JUDGE TINLEY: I would have to say, insofar 16 as it affects Kerr County, it would be the indemnity issue, 17 because at this time, that's the only remaining issue that 18 affects Kerr County or the Kerr County participants. The 19 other two issues, at least at this juncture, do not affect 20 us. The only way they affect us is, the trustee is a party 21 to the agreement, and he's a party to the agreement because 22 of the obligation to release the financing documents at such 23 time as the sums are paid in full release of the 24 obligations, and that creates an obligation on behalf of the 25 trustee to take certain steps to execute documents to -- to 1-26-05 11 1 effectuate releases. But I would say, vis-a-vis Kerr 2 County, the only deal-breaker would be the indemnity aspect, 3 and that's the one in which the -- the attorney is preparing 4 the written opinion for us. 5 COMMISSIONER BALDWIN: In the beginning, I 6 think before any of you three folks showed up in here -- 7 maybe not the lady -- the New York bank demanded that the 8 taxpayers of Kerr County pay their legal fees, and it was up 9 -- I don't remember. It was $120,000 or $130,000 or so. 10 Get your -- see if you can get your brain wrapped around 11 that one. I can't. I think we've -- I think we've got that 12 shut down. I think. 13 COMMISSIONER WILLIAMS: Well, we've let them 14 know from the very beginning that's not going to happen. 15 COMMISSIONER BALDWIN: Well, it's not going 16 to happen. But, I mean, I'm not real convinced that they 17 understand that, though. 18 COMMISSIONER WILLIAMS: I think the 19 bondholders understand it. I'm not so sure that the -- 20 whoever's acting on behalf of the trustee, Bank of New York, 21 clearly understands it. But enough people do understand it, 22 particularly the lawyer representing the bondholders out of 23 Waco; he understands it. 24 JUDGE TINLEY: The -- our bond counsel in San 25 Antonio, neither he nor I are even listening to any demands 1-26-05 12 1 of the trustee for fees and expenses, so yes, we're out of 2 it, and I think they clearly understand that we're not going 3 to get back in it. So, just leave us out of it. 4 COMMISSIONER NICHOLSON: It seems to me like 5 our negotiating position is -- is not very strong. The 6 trustee -- tell me if I'm wrong. Can't the trustee choose 7 to drag this out forever? The -- the bondholders want their 8 money; they got a reason to want to conclude the deal. We 9 made a decision we want to own a juvenile facility, and 10 we're here in a period of several months of uncertainty and 11 spending some money. We want to close the deal, but we 12 can't close the deal without the -- without action by the 13 trustee, and the trustee's got no incentive to take action. 14 COMMISSIONER WILLIAMS: Frankly, I think our 15 position's pretty good, Commissioner, because the pressure 16 is on the bondholders to put the -- the heat on the Bank of 17 New York to get the deal done. We've said we'll do a deal, 18 but here are the conditions. So I -- frankly, I think 19 we're -- we're sort of in the catbird seat in that regard. 20 COMMISSIONER BALDWIN: Well, there's another 21 side to it too, though, another way to see all that. And I 22 thought about it this morning, that there's a possibility -- 23 if you remember when we first started dealing with the 24 bondholders, and there was five or six of them -- or two or 25 three come in here, and then there was five or six, and then 1-26-05 13 1 the time we had the big meeting with them and cut the deal, 2 they didn't even know -- at that point, they didn't even 3 know who all the bondholders were. Couldn't -- didn't know 4 their damn telephone numbers, didn't know how to call 5 anybody. So, there's a possibility that they are putting it 6 off as well, to -- you know, until -- give them plenty of 7 time to get all their ducks in a row, to figure out who they 8 are and what they really want. So, here we are, the 9 taxpayers of Kerr County, rocking along, and to the tune of 10 close to 250 grand now since September, just propping the 11 place up. That's a possibility. I'm not saying that that's 12 what it is, but there's that possibility. 13 COMMISSIONER WILLIAMS: I think 14 what's-his-name, the attorney out of Waco, Herb -- 15 JUDGE TINLEY: Mr. Bristow. 16 COMMISSIONER WILLIAMS: -- Bristow. I think, 17 by now, if he hasn't gotten all the names and addresses and 18 their mother-in-law's name, -- 19 COMMISSIONER BALDWIN: They got it down now. 20 COMMISSIONER WILLIAMS: -- there's something 21 wrong, you know. 22 JUDGE TINLEY: Let me, if I might, mention 23 one -- or I'm sure you recall that when Mr. Spurgeon, the 24 bond counsel, was here with us Monday, mention was made that 25 in the event the trustee tries to hold this deal hostage, 1-26-05 14 1 there may very well be a manner in which we can close around 2 the trustee without the need for the trustee. As of late 3 yesterday afternoon, I was advised by our bond counsel that 4 the Bank of New York was put on notice that we were 5 considering that as an option, as a means to attempt to give 6 them some incentive to get their business with the 7 bondholders resolved. And -- 8 COMMISSIONER WILLIAMS: That can happen. 9 JUDGE TINLEY: Yeah, I think it can. And I 10 -- I suggested it to Mr. Spurgeon; there are a couple of 11 different ways it can happen. It -- it may require some 12 additional documentation from a title standpoint, but I 13 think it can be resolved without the participation of the 14 trustee. And I certainly -- if the trustee wants to be 15 unreasonable and to hold this thing hostage and extort, as 16 it were, certainly from us, I'm not going to stand for that. 17 And if the bondholders just will not cave into unreasonable 18 demands, I'd be willing to cooperate to get the deal done by 19 closing around, and I think it can be done. 20 COMMISSIONER WILLIAMS: Okay. 21 JUDGE TINLEY: So, at this point, I guess now 22 we can't move forward on the issuance and sale of the 23 C.O.'s. That's not something that we can do, because that 24 would come secondary, only after the Consent and Release 25 Agreement. 1-26-05 15 1 COMMISSIONER BALDWIN: I can see -- I can see 2 the Kerr County Attorney spending the afternoon getting his 3 chops up on this document that came in today, but I don't 4 see any kind of an agreement coming out from the -- from the 5 bondholders or any kind of agreement from anybody just 6 showing up here today for us to make a decision today. 7 JUDGE TINLEY: No. No, I don't -- I don't 8 think it can be done today. 9 COMMISSIONER BALDWIN: Or maybe not even 10 tomorrow. What -- what do you -- what kind of timeline are 11 we talking about now? 12 JUDGE TINLEY: Well, we have a meeting 13 scheduled for Friday at 9 a.m., and we could recess this 14 particular meeting to take up that item also at that 15 particular time -- both of these items. I'm thinking that 16 you got lawyers involved, and you got a lot of different -- 17 COMMISSIONER BALDWIN: There's the problem. 18 There's your problem right there. 19 JUDGE TINLEY: And, you know, Murphy's law 20 strikes, and -- but all we can do is keep working on it. 21 COMMISSIONER BALDWIN: Counselor, can -- can 22 we recess this meeting for more than one day? Come on, Rex, 23 you're supposed to know that stuff. 24 COMMISSIONER NICHOLSON: He asked the wrong 25 person. 1-26-05 16 1 COMMISSIONER BALDWIN: I know what she's 2 going to say. 3 MR. EMERSON: I think you're in a gray area, 4 which is the problem. It was originally recessed from 5 Monday. 6 COMMISSIONER BALDWIN: Mm-hmm. 7 MR. EMERSON: Which, although you didn't have 8 to convene Tuesday, you did, because today's was posted. 9 And the A.G. opinion's clear; they state that you can recess 10 more than one day as long as it's pre-posted. But I think 11 if you turn around and you keep reconvening, then at some 12 point, you're circumventing the intent of the notice. 13 COMMISSIONER WILLIAMS: This is a new 14 posting. 15 MR. EMERSON: If that's a new posting for 16 Friday, then -- 17 COMMISSIONER WILLIAMS: No, it's a new 18 posting for today. 19 JUDGE TINLEY: For today. 20 COMMISSIONER BALDWIN: So we would recess 21 this one today and meet again on Friday. What you're saying 22 is, that's stretching it? I agree. 23 MR. EMERSON: I mean, theoretically, you're 24 posting, but I think you're right on the edge. 25 JUDGE TINLEY: Well, I -- from the notice 1-26-05 17 1 standpoint, we've tried to give every single -- we've really 2 posted when we weren't obliged to post, and we've even 3 posted when we weren't going to consider it and given notice 4 it was going to be considered at a later date. You know, if 5 you want to follow the 24-hour rule, we can certainly 6 convene -- reconvene. We can recess and reconvene tomorrow, 7 and then if we're not in a position to do anything then, we 8 can follow that up Friday. 9 MR. EMERSON: I'm -- I think you're safer 10 doing that. 11 JUDGE TINLEY: Yeah. Be happy to follow 12 counsel's advice. That being the case, unless anybody in 13 the Court has anything further -- 14 COMMISSIONER NICHOLSON: Well, I'll just ask 15 one more question. When we finally get around to 16 authorizing the issuance, sale, and delivery of the 17 certificates of obligation, that just simply takes a court 18 order? 19 JUDGE TINLEY: Mm-hmm. 20 COMMISSIONER NICHOLSON: Nothing more? 21 JUDGE TINLEY: Mm-hmm. 22 COMMISSIONER WILLIAMS: Mm-hmm. 23 JUDGE TINLEY: But I was -- I was not 24 completely clear on that. When we authorize the issuance of 25 those certificates of obligation, that is not the beginning 1-26-05 18 1 of the issuance process; that is the end of the process. By 2 that, I mean that prior to us issuing that order, we need to 3 know that we're ready to issue; our financial adviser has 4 gone into the securities marketplace and they had those 5 bonds subscribed, and when we then authorize the issuance of 6 the C.O.'s, that merely confirms the subscription that has 7 already been received. 8 COMMISSIONER NICHOLSON: So this Court can 9 authorize that, and then those things go into motion, and 10 when they get them priced and subscribed to, then they'll be 11 signed off on? 12 JUDGE TINLEY: Well, the issuance of the 13 C.O.'s occurs at the end. 14 COMMISSIONER NICHOLSON: Yeah. 15 COMMISSIONER WILLIAMS: Of all of that 16 process. 17 JUDGE TINLEY: Right. Right. 18 COMMISSIONER WILLIAMS: And -- 19 JUDGE TINLEY: But -- excuse me. I'm sorry. 20 COMMISSIONER WILLIAMS: I'm sorry. 21 JUDGE TINLEY: But until we get this released 22 and finalize the existing transaction, it is not appropriate 23 to authorize our financial adviser to go into the 24 marketplace to get the bonds priced and -- and subscribed, 25 after which we come in and authorize the issuance of those 1-26-05 19 1 certificates of obligation. 2 COMMISSIONER NICHOLSON: Okay. 3 JUDGE TINLEY: So that's what I mean. I was 4 confused. I thought that initiated a process rather than 5 ended it. In fact, it ends it; it doesn't initiate it. I'm 6 going to suggest that -- that we reconvene tomorrow at 7 3 p.m. Does anybody have any objection to that? 8 COMMISSIONER BALDWIN: Of course not. 9 COMMISSIONER WILLIAMS: No. 10 COMMISSIONER NICHOLSON: Okay. 11 COMMISSIONER BALDWIN: What is tomorrow? 12 JUDGE TINLEY: Thursday. 13 COMMISSIONER BALDWIN: Thursday? 14 JUDGE TINLEY: We will stand in recess 15 subject to reconvening at 3 p.m. on January the 27th, 2005. 16 (Commissioners Court recessed at 4:22 p.m.) 17 - - - - - - - - - - 18 19 20 21 22 23 24 25 1-26-05 20 1 STATE OF TEXAS | 2 COUNTY OF KERR | 3 The above and foregoing is a true and complete 4 transcription of my stenotype notes taken in my capacity as 5 County Clerk of the Commissioners Court of Kerr County, 6 Texas, at the time and place heretofore set forth. 7 DATED at Kerrville, Texas, this 27th day of January, 8 2005. 9 10 11 JANNETT PIEPER, Kerr County Clerk 12 BY: _________________________________ Kathy Banik, Deputy County Clerk 13 Certified Shorthand Reporter 14 15 16 17 18 19 20 21 22 23 24 25 1-26-05