1 2 3 4 5 6 KERR COUNTY COMMISSIONERS COURT 7 Special Session 8 Thursday, January 27, 2005 9 3:00 p.m. 10 Commissioners' Courtroom 11 Kerr County Courthouse 12 Kerrville, Texas 13 14 15 16 17 Reconvened from Wednesday, January 26, 2005 18 19 20 21 22 23 PRESENT: PAT TINLEY, Kerr County Judge H. A. "BUSTER" BALDWIN, Commissioner Pct. 1 24 WILLIAM "BILL" WILLIAMS, Commissioner Pct. 2 JONATHAN LETZ, Commissioner Pct. 3 25 DAVE NICHOLSON, Commissioner Pct. 4 2 1 I N D E X January 27, 2005 2 PAGE 3 1.1 Consider and discuss approval of Consent and Release Agreement with respect to Kerr County 4 Juvenile Detention Facility and outstanding bonds on same, and authorize County Judge to 5 sign agreement 3 6 1.2 Order authorizing the Issuance, Sale and Delivery of "Kerr County, Texas Certificates 7 of Obligation, Series 2005", securing the payment thereof by authorizing the levy of 8 an annual ad valorem tax; and approving and authorizing the execution of all instruments 9 and procedures related thereto, including a Paying Agent/Registrar Agreement, a Purchase 10 Contract, and the Form of an Official Statement -- 11 --- Adjourned 17 12 13 14 15 16 17 18 19 20 21 22 23 24 25 1-27-05 3 1 On Thursday, January 27, 2005, at approximately 3:20 2 p.m., the January 26, 2005 special session of the Kerr County 3 Commissioners Court was reconvened in the Commissioners' 4 Courtroom, Kerr County Courthouse, Kerrville, Texas, and the 5 following proceedings were had in open court: 6 P R O C E E D I N G S 7 JUDGE TINLEY: Let me reconvene and call to 8 order the meeting of the Kerr County Commissioners Court. 9 This meeting was originally convened for January the 26th, 10 2005, at 3 p.m. -- 4 p.m.? 4 p.m., and it was recessed to 11 be reconvened at 3 p.m. this date. I got tied up on some 12 matters, so we're late getting tied up -- or going forward. 13 I have -- I've got an update on the Consent and Release 14 Agreement, and have reported that to the County Attorney, 15 all except the one last portion of it -- 16 MS. MITCHELL: I told him. 17 JUDGE TINLEY: -- unless Ms. Mitchell has 18 reported to him. Number one, with respect to the indemnity 19 agreement -- aspect of that agreement, our counsel in this 20 matter, Mr. Spurgeon, has provided us with his opinion that 21 any indemnity obligation that we have under contract to our 22 financial adviser is unenforceable under Texas law, so he is 23 not concerned about that particular aspect being omitted 24 from the Consent and Release Agreement. The other two 25 issues were matters primarily as between the trustee and the 1-27-05 4 1 trustee's counsel and the bondholders, or between the 2 bondholders themselves, and didn't directly affect us. 3 Notwithstanding that, we needed the trustee to be a 4 signatory -- or desired the trustee to be a signatory to the 5 agreement, and there had been some negotiations back and 6 forth about the differences they have, and I was advised by 7 note from our counsel that they have resolved that issue as 8 between the trustee and the bondholders, and they've reached 9 an accommodation on the bondholders paying the trustee and 10 the trustee's counsel in this matter, and that all 11 11 bondholders had, in fact, agreed to the Consent and Release 12 Agreement on those terms that I've just mentioned. Kerr 13 County, the Juvenile Board, the Facilities Corporation, 14 members of those boards and officers and directors, past and 15 present, of course, would be fully released as a result of 16 the transaction upon the payment of the 1.9 and the release 17 of the reserve funds as indicated in the agreement and as 18 originally documented. 19 COMMISSIONER BALDWIN: What about the bond 20 attorney and -- and the financial adviser? Are they 21 involved in that in any way? Are they named in any of that? 22 JUDGE TINLEY: No. No. Insofar as being 23 released? 24 COMMISSIONER BALDWIN: Yeah. 25 JUDGE TINLEY: No, they are not. They are 1-27-05 5 1 not. They are not classified as a, quote, county 2 participant. 3 COMMISSIONER BALDWIN: Okay. 4 JUDGE TINLEY: All of the county participants 5 were released. The -- the bondholders reserve rights that 6 they may have to pursue any third parties other than the 7 county participants. One other aspect that I might mention, 8 the bondholders' counsel asked that this be a mutual 9 release, which I don't have any reason -- and I don't know 10 that Mr. Emerson can come up with any reason that we 11 shouldn't do that. This would certainly put the matter to 12 rest from all directions. I would -- with respect to any 13 authority that the Court might desire to give me to execute 14 that agreement, I would not want to execute that agreement 15 until we had the hard copy signature of all 11 bondholders 16 and the trustee, but otherwise, our counsel, Mr. Spurgeon, 17 is recommending that we enter into the Consent and Release 18 Agreement in that -- in its current format. 19 COMMISSIONER WILLIAMS: Judge, if this Court 20 approves it and we do enter into it, also would require -- 21 required would be the Facilities Corp. and the existing 22 Juvenile Detention Board; is that correct? 23 JUDGE TINLEY: The Juvenile Board and the 24 Facilities Corp. would -- they are signatories to it. I had 25 a meeting of both of those bodies scheduled for Tuesday 1-27-05 6 1 morning of this week. Because of the hiatus on this 2 agreement -- it was for the purpose of executing this 3 agreement, thinking we were going to be able to do it 4 Monday, and because we were not able to, I canceled that 5 meeting, with the understanding with both of those 6 organizations that we'll have to convene another meeting. 7 COMMISSIONER WILLIAMS: Do we need to hear 8 from the County Attorney about that? 9 MR. EMERSON: I've reviewed the documents, 10 and I think the Judge has basically summed it up accurately. 11 The Court does need to be aware that without the 12 indemnification agreement in there, that there is a slight 13 chance that one of the parties could sue us through the back 14 door, through another party. The answer to that, of course, 15 is Mr. Spurgeon's written opinion, where he says that the -- 16 any indemnification agreement that we have is not 17 enforceable based on constitutional law. I would have to 18 defer to Mr. Spurgeon; he's the bond attorney. He's the 19 expert. He's the one that's been advising the Court on 20 this, and I have not personally researched that issue, but 21 we do have a written document from him to that effect. 22 COMMISSIONER WILLIAMS: Do we have a document 23 you're satisfied it's okay to approve and the Judge to sign 24 it? 25 MR. EMERSON: I think it meets all the 1-27-05 7 1 requirements of the agreement between the parties, yes, sir. 2 COMMISSIONER WILLIAMS: Okay. I would move 3 that we approve the consent and release agreement with 4 respect to Kerr County Juvenile Detention Facility 5 outstanding bonds, and authorize the County Judge to sign 6 the agreement upon knowledge that all of the bondholders 7 have likewise executed -- 8 JUDGE TINLEY: And the trustee. 9 COMMISSIONER WILLIAMS: Pardon? 10 MR. EMERSON: And the trustee. 11 COMMISSIONER WILLIAMS: And the bond trustee. 12 COMMISSIONER LETZ: Second. 13 JUDGE TINLEY: Motion made and seconded. Any 14 further discussion or questions concerning the motion? All 15 in favor of the motion, signify by raising your right hand. 16 (Commissioners Williams, Letz, and Nicholson voted in favor of the motion.) 17 JUDGE TINLEY: All opposed? 18 COMMISSIONER BALDWIN: No. 19 (Commissioner Baldwin voted against the 20 motion.) 21 JUDGE TINLEY: Motion does carry. The matter 22 of the issuance and sale and delivery of the certificates of 23 obligation, that is a matter that we will post separately, 24 and I think the intention is to post it for next week. Our 25 financial adviser has asked, if at all possible, that that 1-27-05 8 1 matter be scheduled for next Thursday, a week from today, 2 noonish, whatever that means. Late morning or early 3 afternoon. 4 COMMISSIONER WILLIAMS: It means lunchtime, 5 Buster. 6 COMMISSIONER BALDWIN: So not Wednesday? 7 COMMISSIONER WILLIAMS: Thursday, he said. 8 JUDGE TINLEY: He's -- I think Mr. Henderson 9 indicated something to me a few days ago, when there was 10 some -- some suggestion that this was going to take place on 11 Wednesday, that he had a commitment, and that he wanted to 12 be here when the Court approved the issuance of the C.O.'s, 13 and that he would hope that it could be done at some other 14 time, but if that was the only day the Court could do it, he 15 would try and get Mr. Traylor up here, but he really prefers 16 to be here. 17 COMMISSIONER WILLIAMS: So, what time are we 18 talking about? 19 COMMISSIONER BALDWIN: Noonish. 20 MS. MITCHELL: Judge? Bob Henderson will not 21 be here next week. 22 JUDGE TINLEY: Okay. He's going to have 23 Traylor here? 24 MS. MITCHELL: Mm-hmm. 25 JUDGE TINLEY: Okay. Traylor's taking over 1-27-05 9 1 his commitments, then. Okay. 2 COMMISSIONER LETZ: Is that -- 3 JUDGE TINLEY: That's right. He had 4 originally -- 5 MS. MITCHELL: He's going to be out of town 6 all week. 7 JUDGE TINLEY: He had originally planned on 8 taking his outing with his boys last week, and stayed 9 because of that, and now he's -- okay. 10 (Discussion off the record.) 11 COMMISSIONER LETZ: The 3rd is Thursday? 12 JUDGE TINLEY: Yes, mm-hmm. 11 o'clock? 13 COMMISSIONER WILLIAMS: Let me go check 14 something real quick. 15 JUDGE TINLEY: Okay. 16 COMMISSIONER WILLIAMS: Thursday, February -- 17 COMMISSIONER LETZ: 3rd. 18 COMMISSIONER WILLIAMS: -- 3rd. What time? 19 JUDGE TINLEY: 11:00. 20 COMMISSIONER WILLIAMS: Fine with me. 21 JUDGE TINLEY: Okay. 22 COMMISSIONER BALDWIN: We went through all 23 that just to hear you say, "Fine with me"? God. 24 JUDGE TINLEY: We will -- we will post a -- a 25 separate agenda on that item, but for those members of the 1-27-05 10 1 audience, it will be posted for February the 3rd -- that's 2 Thursday -- 2005, at 11 a.m. 3 (Discussion off the record.) 4 COMMISSIONER BALDWIN: Judge, I've got a 5 comment -- or a couple of comments I want to make in regards 6 to Item 1.2. 7 JUDGE TINLEY: All right, sir. 8 COMMISSIONER BALDWIN: I have in my hand a 9 document that was handed to me a little earlier today from 10 Moody's Investors Service. 11 JUDGE TINLEY: Mm-hmm. 12 COMMISSIONER BALDWIN: Which I assume that is 13 the company that's going to handle the bonds. And it 14 outlines our rating, by the way, and the amount of the sale, 15 expected sale date, rating descriptions, some opinions, and 16 an area that is called, "Nonappropriation for 2002, lease 17 revenue bonds." And I want to read a little bit out of this 18 thing, of what they say here. One of the sentences is, 19 "Financial performance of the facility fell short of 20 expectations during Fiscal Year 2004 as a result of 21 decreasing funding from the State." Now, Commissioner 22 Williams and myself were in Austin a couple weeks ago with 23 T.J.P.C., and they say that that is a false statement; that 24 that is not true, that the State did not decrease any 25 funding anywhere. So it appears to me that that's a false 1-27-05 11 1 statement. 2 It comes on down a little ways, and it says, 3 "Moody's recognizes that the County was within its legal 4 rights when it did not appropriate for its annual lease 5 payments. Nevertheless, we are of the opinion that when the 6 lease was securitized and offered publicly in the capital 7 markets, the County effectively indicated a greater 8 willingness to make continued lease payments than was 9 required by the minimum legal obligations spelled out in the 10 document." I don't recall this Commissioners Court ever 11 showing a willingness to make continued lease payments on 12 this issue. So, to me, again, there's another false 13 statement. And my point is, if the vote to issue bonds are 14 based on this document right here, then this Commissioner is 15 definitely not going to have anything to do with it, and 16 that's all I have to say. And I can't imagine the other 17 guys voting for something like that, too, with that kind of 18 information in here. 19 COMMISSIONER WILLIAMS: Is this not something 20 that our financial adviser should readily be dealing with? 21 JUDGE TINLEY: I -- I think he was dealing 22 with it and -- and interacting with the people at Moody's 23 about that. I've not seen the report. I was of the 24 understanding that -- that they were working on a rating, 25 and that it would -- it would be published soon, but I -- 1-27-05 12 1 I've not seen the documentation by which that occurred. 2 COMMISSIONER WILLIAMS: What's the date on 3 it? 4 COMMISSIONER BALDWIN: January 26. 5 JUDGE TINLEY: Yesterday? 6 COMMISSIONER BALDWIN: Mm-hmm. 7 COMMISSIONER WILLIAMS: What is it entitled? 8 A3? You're going to have to tell us what A3 rating is all 9 about. 10 JUDGE TINLEY: The A3 rating -- their rating 11 system is -- my understanding, the rating system is 12 different from that of Standard and Poor's, which had 13 previously rated Kerr County, and the A3 rating is 14 approximately, I'm told, 4 to 8 basis points, which would -- 15 below an A2, which is the equivalent of S & P's rating which 16 the County had in '02, 4 to 8 basis points being the 17 difference between 5.00 and 5.04 to -.08. 18 COMMISSIONER WILLIAMS: One hundredth of a 19 percent. 20 JUDGE TINLEY: Pardon? 21 COMMISSIONER WILLIAMS: One hundredth of a 22 percent. 23 JUDGE TINLEY: Mm-hmm, yeah. A basis point 24 is 1/100th of a percent. Very small amount. 25 COMMISSIONER LETZ: Are you going to forward 1-27-05 13 1 that to Mr. Henderson and ask him to -- 2 COMMISSIONER BALDWIN: I'm sure that's where 3 it came from. Where else would Moody get it? 4 COMMISSIONER LETZ: Well, but, I mean, how -- 5 if you follow what I'm saying, forward to it Mr. Henderson 6 and tell him that this needs to be corrected, 'cause it's 7 not a true statement. 8 COMMISSIONER BALDWIN: I'm just telling you 9 what I'm -- the reason I'm not going to vote for it is 10 because there are some -- there's false information here. 11 Someone has given Moody false information -- in my opinion, 12 false information. I don't -- tell me if I'm wrong. Did we 13 -- did this Court show a willingness to make continuing 14 lease payments? 15 COMMISSIONER WILLIAMS: This Court never had 16 the issue before last September. 17 JUDGE TINLEY: Commissioner, the second 18 statement that you mentioned, a willingness to -- to pay 19 which was greater than that as specified in -- in the 20 document, that is a conclusion, I think, that Moody's has 21 reached on their own. 22 COMMISSIONER BALDWIN: That may be. 23 JUDGE TINLEY: And they reached that 24 conclusion as a justification for this 4 to 8 basis points 25 hickey. They're saying, notwithstanding the fact that we 1-27-05 14 1 had no legal obligation, they think we had a stronger 2 obligation than the legal obligation that -- that we 3 knowingly went into the transaction with and intended to 4 have. 5 COMMISSIONER WILLIAMS: That's an opinion. 6 But the first -- first comment's really extraneous; doesn't 7 need to be in there. It's extraneous material. It's 8 rehashing something that's gone. It's dead, it's gone. 9 COMMISSIONER NICHOLSON: I'm surprised that 10 Moody's can have any information about a small rural county 11 in Texas. I don't know -- I don't know how their research 12 works like that. 13 COMMISSIONER BALDWIN: When I read this, I 14 just -- my first thought was, and my thought is today, is 15 that Mr. Henderson gave them this information. 16 COMMISSIONER NICHOLSON: You may be right. 17 COMMISSIONER BALDWIN: I just can't imagine 18 where else they would come up with this type of thing. 19 COMMISSIONER NICHOLSON: That's kind of what 20 I'm saying. They didn't -- somebody had to give it to them, 21 'cause their research wouldn't produce that. 22 COMMISSIONER BALDWIN: Yeah, absolutely not. 23 COMMISSIONER LETZ: What I'm saying is -- I 24 mean, if you're not going to call Mr. Henderson, I'll be 25 glad to call him. 1-27-05 15 1 COMMISSIONER WILLIAMS: I will. I'll call 2 him. 3 COMMISSIONER LETZ: Someone else needs to 4 tell -- 5 COMMISSIONER BALDWIN: You're welcome to 6 this. 7 COMMISSIONER WILLIAMS: I'll call him. 8 COMMISSIONER BALDWIN: I've got a copy. 9 COMMISSIONER WILLIAMS: Okay, thank you. 10 I'll call him. 11 COMMISSIONER LETZ: 'Cause, I mean, it's a 12 false statement the other way. 13 JUDGE TINLEY: Bring to it his attention that 14 your -- the information that you received is -- is contrary 15 to that. 16 COMMISSIONER WILLIAMS: Yeah. 17 COMMISSIONER BALDWIN: You know, and you can 18 slice it any -- you know, you can slice it any way you want 19 to, but this county has never shown a willingness to make 20 continued payments. 21 JUDGE TINLEY: Over and above that which we 22 legally -- 23 COMMISSIONER BALDWIN: Anywhere. 24 JUDGE TINLEY: -- incurred. 25 COMMISSIONER BALDWIN: That's correct. 1-27-05 16 1 COMMISSIONER WILLIAMS: Over and above that 2 which was in that document. 3 COMMISSIONER BALDWIN: Yeah, absolutely. 4 COMMISSIONER LETZ: That's an opinion. And 5 they can -- I mean, and we -- I mean, I knew that there was 6 going to be a hit from us doing that. 7 COMMISSIONER WILLIAMS: Sure. Four basis 8 points is not much. 9 COMMISSIONER LETZ: We were told that we were 10 going to be -- that was going to happen. 11 COMMISSIONER NICHOLSON: That's not much of a 12 hit. Could lose that in a round of golf. 13 COMMISSIONER WILLIAMS: 4/100ths of a percent 14 is like a tap on the wrist. 15 JUDGE TINLEY: By way of further information, 16 the -- the transaction is being structured such that there 17 will not be any bond insurance in connection with this 18 transaction. Not -- not because it's not available; it's 19 certainly available, but because Mr. Henderson says it's not 20 necessary. It would be an additional cost that's not 21 justified. So -- 22 COMMISSIONER WILLIAMS: That's a thought. 23 JUDGE TINLEY: -- the amount that we're 24 saving on the bond insurance premium is more than these 4 to 25 8 basis points over the life of -- life of these bonds, 1-27-05 17 1 according to what Mr. Henderson tells me. 2 COMMISSIONER WILLIAMS: That's good news. 3 JUDGE TINLEY: So, anything further, 4 gentlemen? I think we can adjourn -- actually adjourn. 5 COMMISSIONER BALDWIN: Adjourn. 6 JUDGE TINLEY: We'll adjourn this meeting. 7 (Commissioners Court adjourned at 3:39 p.m.) 8 - - - - - - - - - - 9 10 11 STATE OF TEXAS | 12 COUNTY OF KERR | 13 The above and foregoing is a true and complete 14 transcription of my stenotype notes taken in my capacity as 15 County Clerk of the Commissioners Court of Kerr County, 16 Texas, at the time and place heretofore set forth. 17 DATED at Kerrville, Texas, this 1st day of February, 18 2005. 19 20 21 JANNETT PIEPER, Kerr County Clerk 22 BY: _________________________________ Kathy Banik, Deputy County Clerk 23 Certified Shorthand Reporter 24 25 1-27-05