MEETING OF THE
FINANCE SUB-COMMITTEE
OF THE BOARD OF TRUSTEES
HOUSTON COMMUNITY COLLEGE
November 14, 2012
Minutes
The Finance Sub-committee of the Board of Trustees of Houston Community College held
a meeting on Wednesday, November 14, 2012 at the HCC Administration Building, 3100
Main, 2nd Floor, Seminar Room A, Houston, Texas.
COMMITTEE MEMBERS PRESENT
Richard Schechter Committee Chair
Bruce A. Austin, Committee Member
Mary Ann Perez, Committee Member
Sandie Mullins
Christopher W. Oliver
ADMINISTRATION
Mary S. Spangler, Chancellor
Art Tyler, Deputy Chancellor/COO
Renee Byas, General Counsel
Shantay Grays, Chief Executive Officer
Margaret Ford Fisher, President, Northeast College
Fena Garza, President, Southwest College
William Harmon, President, Central College
Zachary Hodges, President Northwest College
Betty Young, President, Coleman College of Health Sciences
Willie Williams, Jr., Chief Human Resource Officer
Remmele Young, Executive Director Government Relations and Sustainability
OTHERS PRESENT
Jarvis Hollingsworth, System Counsel, Bracewell & Giuliani
Tom Sage, Andrews Kurth LLP
Brian Jacobowski, Financial Analyst, RBC Capital Markets
Tod Bisch, President, Faculty Senate
Other administrators, citizens and representatives from the news media
CALL TO ORDER
Mr. Schechter, Chair called the meeting to order at 9:26 a.m. and declared the Committee
convened to consider matters pertaining to Houston Community College as listed on the
duly posted Meeting Notice.
Mr. Schechter announced the outline for the meeting noting that the first discussion would
be regarding the procurement process followed by the financing option overview.
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Finance Sub-committee – November 14, 2012 - Page 2
Mr. Jarvis Hollingsworth provided a review of the procedures upon which all goods and
services will be procured regarding the bond proceeds. He noted the following:
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Construction will be best value by competitive bid
Services other than construction best value by competitive bid
Professional Services will be procured through RFQ process consistent with the
professional services code
General Counsel will review all contract prior to execution
Contracts will be procured consistent with the HCC Small Business Development
Program
Mr. Hollingsworth informed that services incurred prior to the passage of the bond are not
required to be rebidded.
Mr. Schechter asked Mr. Hollingsworth to provide an overview of the process in regards to
the best value review.
Mr. Hollingsworth noted that the Board would be bound to the evaluation rankings
presented by administration. He apprised that if a negotiation is not possible with the first
vendor on the ranking list, then negotiations would be conducted with the next vendor in the
ranking.
Mr. Austin recommended that extreme transparency is put in place. He recommended that
the procedures and correlating information relating to the bond are posted appropriately on
the college’s website.
Mr. Schechter reiterated the discussion held with the Greater Houston Partnership (GHP)
prior to the Board’s decision to go out for the bond. He informed that numerous discussions
were held with individuals around the community. He mentioned that each group had the
same concerns. Mr. Schechter noted that the following were presented to the GHP:
(1) The Board approved a resolution on the process regarding the procurement process
for bond proceeds.
(2) The Board is out of the process and the resolution will be followed. The job will be
awarded to the vendor recommended by administration.
(3) An explanation of the procurement process and the Procurement Department is
under the General Counsel
.
Mr. Schechter apprised that the purpose of the representations throughout the city was to
make certain there was assurance that administration as well as the Board would adhere to
the policy and procedures put in place and he noted that his word means a lot to him. Mr.
Schechter concluded that the key to not having negative articles about the college and its
procurement process was the promise of transparency. Mr. Schechter inquired if any of the
members at the table wanted to go back on that promise.
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Finance Sub-committee – November 14, 2012 - Page 3
Mr. Schechter outlined the procurement process as follows:
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Procurement will be done through the Procurement Department by posting on the
website and vendors will be allotted ample time to respond
Board and General Counsel will review each procurement
No procurement will be posted without review by Board and General Counsel
The Director of Procurement, General Counsel and the Deputy Chancellor/COO will
evaluate and sign-off on the procurement
Ms. Mullins inquired if there will be rotation of the evaluation committee. Mr. Rogelio
Anasagasti advised that the committee members are rotated and represent various subject
areas.
Mr. Oliver advised that the outline is appreciated as it alleviates a sense of favoritism. He
apprised that local firms should be given consideration. Mr. Oliver noted that he is cautious
regarding rubber stamping an item; however, if checks and balances are in place, he will be
in agreement with the process. He noted that he is favorable to local firms.
Mr. Hollingsworth noted that the statute prohibits giving any weight to local firms beyond
those within the state.
Mr. Austin requested that counsel elaborate on undue influence.
(Ms. Perez stepped out at 9:48 a.m.)
Ms. Byas noted that undue influence by statute is attempting to influence the outcome of a
vote by a public official or employee. She informed that it would be attempting to influence
the outcome of an evaluation process.
(Ms. Perez returned at 9:49 a.m.)
Mr. Austin inquired if intended and unintended has the same reasoning. Ms. Byas apprised
that whether it is intended or unintended, it is subject to statutory jurisdiction of the court,
which includes civil and criminal.
Mr. Austin inquired if the Board Counsel confers. Mr. Hollingsworth informed that he
concurs.
Mr. Oliver inquired if the committee members would be identified regarding the evaluation.
Mr. Anasagasti noted that the committee members will be determined according to the size
as well as the expertise regarding the project. He informed that the process is intended to
insulate the committee.
Mr. Oliver inquired if the committee is formulated to the comfort of General Counsel. Ms.
Byas apprised that if a committee member is approached, there will be strict enforcement
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Finance Sub-committee – November 14, 2012 - Page 4
of the procurement procedures as well as criminal and civil penalties under state and
federal laws.
Mr. Oliver noted that the process needs to be explained to the evaluation committee
members as well as the vendors. Mr. Schechter apprised that the goal of the process is to
give everyone a fair opportunity.
Mr. Schechter inquired if the evaluation committee members review the proposals
individually. Mr. Anasagasti informed that they review independently and then a group
review is held to discuss from an expertise standpoint.
Mr. Austin noted that his reasoning regarding the publishing of notices is that the
government has an obligation to publish notices of the process. Ms. Byas informed that the
rules regarding the RFQ process and review process will be published. She apprised that
individuals serving on the evaluation committee are required to complete training.
Ms. Perez noted that it was anticipated to put cameras in place during the process. Mr.
Anasagasti informed that the purpose of the cameras will be to ensure the integrity of the
process to make certain there is no improper transactions. Mrs. Byas apprised that the
scoring and evaluation will be computerized to ensure integrity.
Ms. Perez noted that the department will have the necessary funds regarding the
implementation of the security cameras and computerized system for evaluation.
Mr. Oliver informed that if the evaluations are strictly merit based, then there should not be
any problems.
Ms. Perez inquired of the process regarding the timeline to make certain the projects are
not delayed because of the review process. Mrs. Byas noted that Executive Director for
Procurement is required to make certain the process and procedures have been followed
and no improprieties have taken place.
Ms. Perez apprised that her concern is to make certain there is not a delay regarding the
contracts.
Mr. Schechter noted that General Counsel has put out an RFQ to make certain there are
law firms available to assist with the contract review process to prohibit delays in the review
process.
Mr. Austin apprised that the easiest way is to include the statement of work. Mr. Anasagasti
noted that there is a general instrument presented at the onset to make certain the
subsequent is expedited more efficiently.
Mr. Austin informed that there should also be standardization in regards to the facilities. He
informed that the object is to educate the students; therefore, there should not be vast
variations.
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Finance Sub-committee – November 14, 2012 - Page 5
Ms. Mullins apprised that efficiency is her preference and also inquired if the evaluators are
notified of co-evaluators. Mr. Anasagasti noted that the evaluators are informed of the
committee members.
Mr. Oliver inquired if there is a process in place to inform when the process has been
completed and a status of the project.
Mr. Schechter noted that the website is vital in providing information to the public regarding
the status. He apprised that it should be user friendly and accessible from the first page.
Mr. Robinson joined via phone conference. Mr. Hollingsworth noted that Trustee Robinson
could not participate as part of the quorum.
Mr. Schechter inquired of the black-out period. Mrs. Byas informed that the blackout period
begins at the time the RFQ goes out and ends when the contract is signed. She noted that
the black-out prohibits discussion regarding the procurement. She apprised that if it is
discovered that a discussion has taken place regarding the procurement, there will be an
investigation. Mrs. Byas noted that the vendor will be subject to debarment from doing
business with HCC for up to five years and that any employee who violates the black-out
period will be subject to termination. She informed that a notification will be sent to
announce that the black-out period has ended.
Mr. Hollingsworth noted that the Board bylaws were amended to include extending the
blackout period to 30 days after the contract is signed and also prohibits contributions.
REVIEW FINANCING OPTIONS FOR HCC TO INCLUDE COMMERCIAL PAPER AND
LINE OF CREDIT
Dr. Tyler introduced Brian Jacobowski with RBC Capital and Tom Sage with Andrews
Kurth. He noted that the purpose of the presentation is to review the mechanisms available
for the college. He informed that the efforts are to employ techniques to assist with
reducing the tax burden of the college.
(Mr. Oliver stepped out at 10:20 a.m.)
Mr. Schechter apprised that a discussion regarding different types of financing was held at
the Finance Sub-committee meeting on October 1, 2012.
Mr. Jacobowski provided an overview of the current rates and noted that interest rates have
fallen by 20 basis points in two weeks.
Mr. Austin inquired if there are causations that signal fluctuation in the interest rate. Mr.
Jacobowski apprised that there are multiple situations such as inflation; however, the
reason for current rates is economic conditions globally.
Dr. Tyler noted that the next discussion would entail the interim financing and long term
financing.
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Finance Sub-committee – November 14, 2012 - Page 6
Mr. Jacobowski provided an overview of interim financial models to include commercial
paper and line of credit. He noted that interim financing allows for larger sale at the end of
the year. He noted that better interest rates are available with interim financing.
Mr. Jacobowski informed that interim financing has variable rates and that the break-even
point between interim and long term is 65 basis points.
Mr. Austin requested a rationale plan. Dr. Tyler apprised that the financial advisors are
thinking that the better option is to utilize the commercial paper and line of credit for a short
term financing scenario and payoff as needed.
Mr. Sage noted that there is no rule against taking advantage of the low interest rates. He
informed that there is a need to discuss how the Board will desire to capture the market. He
apprised that RBC envisions capitalizing interest for a year to limit tax impact.
(Mr. Oliver returned at 10:38 a.m.)
(Ms. Perez stepped out at 10:41 a.m.)
Mr. Schechter inquired of the tax implication. Mr. Sage informed that estimation would be
approximately one cent immediately; however, if the interest is capitalized, there would not
be a tax implication until next year.
(Ms. Perez returned at 10:44 a.m.)
Mr. Schechter noted that he wants to make certain the decision does not impact the
taxpayers beyond what was presented. Mr. Sage apprised that the best option is a
combination of the scenarios to minimize the tax implication.
(Ms. Mullins stepped out at 10:45 a.m.)
Mr. Oliver informed that his suggestion would be to do a $250 million and $175 million split.
Mr. Austin noted that his concern was to make certain that the projects are driving the
funding.
(Ms. Mullins returned at 10:47 a.m.)
Dr. Tyler referenced the project listing handout. Mr. Schechter informed that the project
listing can be reviewed; however, the committee is not ready to discuss the implementation.
Dr. Tyler apprised that the recommendation is to complete the projects in two phases to
allow for the most effective route for the projects and funding. Dr. Tyler noted that the
timeline is to complete all the projects within four and half years.
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Finance Sub-committee – November 14, 2012 - Page 7
Ms. Mullins apprised that there was a review of the project timeline and informed that the
handout presented is different. Dr. Tyler apprised that there were items that that were not
taken into consideration such as project complexity and pre-work necessities.
Mr. Schechter noted that for future reference, Alief should be listed in Phase I. Dr. Tyler
informed that the Alief project is already under way.
Mr. Sage apprised that interim financing could be built around which projects will be online.
He noted that the effort is to only draw down the necessary funding.
(Mr. Austin stepped out at 10:55 a.m.)
Dr. Tyler noted that once the programmatic planning with a project manager and the
presidents is completed, a more definitive plan will be developed. He informed that the
recommended amount to draw currently is $250 million. He apprised that as the plan is
developed, then it will provide a better picture of the needs. He noted that at least 90 to 120
days are needed to bring the project manager on board and apprised that land purchase
could be done prior to building project teams.
Dr. Tyler requested the opportunity to develop a plan for presentation before drawing any of
the remaining funds.
AUTHORIZE THE CHANCELLOR/DEPUTY CHANCELLOR TO NEGOTIATE INTERIM
FINANCINGS WITH BANKS
Motion – Mr. Austin moved and Mr. Schechter seconded to approve the Chancellor /Deputy
Chancellor to negotiate interim financings with banks in the amount up to $250 million.
Mr. Robinson noted that there has not been a discussion regarding a financial team to sale
the bond. Mr. Schechter informed that there is a bond counsel. Dr. Tyler apprised that the
team will be put together by administration.
Ms. Perez informed that historically the team is not organized according to the RFQ. Mr.
Brian Malone noted that previously the selection of the underwriters has been made by the
administration under the advisement of the financial advisors.
Mrs. Byas apprised that previously underwriters were selected out of the red book. She
informed that there will be a recommendation for disclosure counsel and noted that cobond counsel will be discussed with bond counsel.
Mr. Schechter noted that the financial team is assembled based on expertise and
administration recommendation not by the Board.
(Ms. Perez stepped out at 11:07 a.m.)
Mr. Austin informed that previously there was a concern to make certain there is fair
representation. He apprised that the Board implemented a process to make certain a
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Finance Sub-committee – November 14, 2012 - Page 8
rotation process is in place. Mr. Malone noted that a rotation process is currently in place
and that the mix has changed from bond to bond through co-managing.
(Ms. Perez returned at 11:08 a.m.)
Vote – The motion passed with vote of 3-0.
REVIEW FINANCING OPTIONS FOR HCC TO INCLUDE COMMERCIAL PAPER AND
LINE OF CREDIT
Dr. Tyler apprised that administration is also requesting that the Board authorize an interim
financing mechanism of $75 million.
Motion – Mr. Austin moved to approve interim financing in the amount of $75 million and
Ms. Perez seconded.
Mr. Sage noted that the discussion is a line of credit with a specific bank and not
necessarily with the market. Mr. Jacobowski informed that the procedure is similar to a
credit card. He apprised that the other scenario is to have commercial paper where the
dealer solicits to investors to purchase the college’s commercial paper. He apprised that
the revolving line of credit has a higher rate but there are less players and complexity.
(Mr. Schechter stepped out at 11:13 a.m.)
Mr. Sage noted that commercial paper has been around longer; however, it is more
complicated and better suited for a long-term program. He informed that the bank line of
credit is with a single party and for a limited time frame.
Mr. Sage reiterated a review of the commercial paper. He noted that when needed the
bank would go to market and the existing 30 day rate is charged; paying for only what is
drawn.
(Mr. Schechter returned at 11:15 a.m.)
Dr. Tyler informed that with the line of credit, there will be a new series of financial and
legal costs each time there is a need to utilize.
Mr. Sage apprised that the request is to be able to utilize both methods; however, the item
would be brought back to the Board for approval as needed.
Mr. Austin noted that the request is to bring back both propositions with a presentation of
the best scenarios for the Board to decide on the best option.
Mr. Sage informed that the request is to authorize administration to negotiate with the
banks.
Mr. Schechter apprised that the item is only to negotiate with the banks.
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Finance Sub-committee – November 14, 2012 - Page 9
Vote – The motion passed with a vote of 3-0.
Mr. Schechter inquired if an RFQ will be implemented for underwriter and disclosure
counsel. Mrs. Byas noted that timeframe would be 30 days. Mr. Anasagasti apprised that it
would be presented in January 2013. He noted that the proposed schedule is to get the
RFQ out next week; however, the evaluation process would be completed in December
2012.
Mr. Schechter recommended that best effort is put forward regarding evaluations of the
RFQ. Dr. Tyler noted that his team is prepared to work through the holidays.
Mr. Schechter informed that the goal is to get the evaluation completed as soon as and
inquired if a recommendation could be presented at the Special Board Meeting on January
4, 2013 or at the Committee of the Whole meeting on January 10, 2013.
Mrs. Byas noted that to be able to accurately evaluate each proposal, a recommendation
would not be feasible until January 15, 2013.
Dr. Tyler apprised that he recognizes what procurement is attempting to do; however, he
also has an obligation to do what is best for the taxpayers.
REPORT ON HCC BOND INCLUDING TIMELINE, METHOD OF PROCUREMENT,
FINANCE, AND ANY OTHER NECESSARY RELATED ACTION
Dr. Tyler provided an overview of the timeline and project outline. He noted that the
recommendation is to engage a program manager and three project managers. Dr. Tyler
informed that the program manager would be an outside vendor to work in conjunction with
the in-house program managers.
Ms. Perez apprised that this is in conjunction with what was conferred to the Greater
Houston Partnership.
Ms. Mullins inquired if the program management team will be required to follow the
procurement procedures outlined. Mrs. Byas noted that the selected vendor would be no
different as it related to statutory and legal requirements as well as the black-out period.
Mr. Robinson inquired as to why is the program manager and project managers RFQs will
not be sent out at the same time. Mr. Anasagasti acknowledged that the program manager
is an extension of the client department. He apprised that the purpose is to minimize the
level of operations at the college level. He noted that there is not a defined scope for the
project managers.
(Mr. Oliver stepped out 11:46 a.m.)
Mr. Austin informed that stage one is to get the program manager on board and then move
to the next stage to engage the project managers.
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Finance Sub-committee – November 14, 2012 - Page 10
Ms. Perez inquired as to how the projects were determined. Dr. Tyler informed that there
was a review of the complexity of the projects, locations and sufficiency to justify having the
cost of a project manager. He apprised that the intent is to have multiple projects engaged
simultaneously.
Mr. Schechter asked the committee to review the recommendation presented by
administration regarding engaging one program management team and three project
management teams.
Mr. Schechter apprised that the item should be placed on the agenda for the Special
Meeting scheduled for Monday, November 19, 2012.
Mr. Schechter recommended that administration proceed with drafting the procurement
process.
Mr. Anasagasti informed that it is a finite group who would need to evaluate the proposals.
He apprised that the recommendation is to present to the Board on January 10, 2013 or
January 17, 2013.
Mr. Schechter recommended that administration review the options to implement enough
staff to evaluate the RFQs to make certain the items are moved forwarded. He informed
that the Board should be apprised if there is a need for additional funding to equip the
department with the necessary staff.
Dr. Tyler noted that there will be one team for the program management team evaluation.
Ms. Mullins requested that any revisions to the schedule be presented to the Board. Dr.
Tyler noted that there will be changes and apprised that the specific details will be
provided within a reasonable time.
Mr. Schechter noted that the agreement is to retain the program management team fist and
then the project management team. He noted that the program management team’s role
will be to work with the presidents. Dr. Tyler clarified that the program manager will assist in
defining the projects.
Mr. Hollingsworth apprised that the scope of work should include the role. He informed that
this will allow for the evaluation team to determine if the skills are available.
Mr. Schechter noted that the program manager will assist in outlining the project managers’
roles. Dr. Tyler noted that the internal facilities team will determine what recommendation
will come before the Board.
Motion – Ms. Perez moved to approve the structure as set forth by administration. Mr.
Austin seconded with the caveat that the Chancellor is given the authority to procure
additional resources as needed. The motioned passed with a vote of 3-0.
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Finance Sub-committee – November 14, 2012 - Page 11
Mr. Schechter informed that the item will be placed on the Special Meeting scheduled for
Monday, November 19, 2012.
ADJOURNMENT
With no further business, the meeting adjourned at 12:13 p.m.
Recorded, transcribed and submitted by:
Sharon R. Wright, Manager, Board Services
Minutes Approved:
December 13, 2012