SPECIAL MEETING
OF THE BOARD OF TRUSTEES
HOUSTON COMMUNITY COLLEGE
November 19, 2012
Minutes
The Board of Trustees of Houston Community College held a Special Meeting on
Monday, November 19, 2012 at the HCC Administration Building, 3100 Main, 2nd Floor,
Seminar Room A, Houston, Texas.
MEMBERS PRESENT
Mary Ann Perez, Chair
Bruce A. Austin, Vice Chair
Neeta Sane, Secretary
Yolanda Navarro Flores
Eva Loredo
Sandie Mullins
Christopher W. Oliver
Carroll G. Robinson
Richard Schechter
ADMINISTRATION
Mary S. Spangler, Chancellor
Art Tyler, Deputy Chancellor/COO
Renee Byas, General Counsel
Margaret Ford Fisher, President, Northeast College
Fena Garza, President, Southwest College
William Harmon, President, Central College
Zachary Hodges, President Northwest College
Remmele Young, Executive Director, Government Relations & Sustainability
Willie Williams, Chief Human Resource Officer
OTHERS PRESENT
Jarvis Hollingsworth, System Counsel, Bracewell & Giuliani
Gene Locke, Bond Counsel, Andrews Kurth
Clarence Grier, RBC Capital
Tod Bisch, President, Faculty Senate
James Walker, President, COPA
Other administrators, citizens and representatives from the news media
CALL TO ORDER
Ms. Perez, Chair, called the meeting to order at 1:07 p.m. and declared the Board
convened to consider matters pertaining to Houston Community College as listed on the
duly posted Meeting Notice.
(Mr. Robinson joined the meeting at 1:08 p.m.)
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Special Meeting – November 19, 2012 - Page 2
CANVASSING ORDER ACKNOWLEDGING ELECTION RETURNS REGARDING
THE SPECIAL ELECTION HELD ON TUESDAY, NOVEMBER 6, 2012 FOR THE
PURPOSE OF SUBMITTING TO QUALIFIED ELECTORS OF THE TERRITORY
WITHIN HOUSTON COMMUNITY COLLEGE SYSTEM, A PROPOSITION FOR OR
AGAINST THE ISSUANCE OF $425,000,000 BONDS FOR THE CONSTRUCTION
AND IMPROVEMENT OF FACILITIES FOR THE HOUSTON COMMUNITY COLLEGE
SYSTEM
Motion – Ms. Mullins moved and Mr. Schechter seconded.
Mr. Gene Locke congratulated the Board on the passage of the bond measure. He
noted that the result was resounding and a great testament to the Board and the
institution. He informed that the official result was 254,353 in favor and 123,870 in
opposition. Mr. Locke apprised that the law requires the canvass of the vote, which
would go into record. He noted that the college is now legally required to go forth as
deemed necessary regarding the bond measure.
Mr. Locke informed that precinct breakdown is available should anyone desire to review
the report.
Vote – The motion passed with a vote of 7-0.
ALIEF HAYES – UT TYLER BUILD-OUT (PROJECT NO. 13-05)
Motion – Mr. Schechter moved and Mrs. Sane seconded.
Mr. Hollingsworth apprised that administration requested that the item be reconsidered
at the next meeting of the Board. He noted that an issue has been raised regarding the
procurement process. He informed that per the procurement process, any issues should
be discussed with the Executive Director of Procurement. He apprised that the vendors
scheduled to speak before the Board confer with the decision.
Mr. Hollingsworth noted that the Executive Director of Procurement has a
recommendation that should be acceptable.
Mr. Rogelio Anasagasti apprised that the recommendation is to allow Procurement to
request the information to clarify financials and bonding capacity so that staff could
properly review and evaluate the score. He noted that the vendors would be provided
sufficient time to provide the information.
Mr. Schechter moved that the recommendation by administration is adopted.
Ms. Mullins inquired if the funding was prior to the bond measure. Dr. Tyler informed
that the funding was a part of the Maintenance Tax Notes (MTN) approved by the
Board.
Ms. Loredo inquired if the requested information is additional. Mr. Anasagasti noted that
procurement has the option to request additional information. He apprised that the
proposal is to allow all eight of the respondents to provide the information.
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Mr. Austin inquired if the motion needs to be cleared. Mr. Hollingsworth noted that the
motion could be withdrawn once the discussion has ended.
Mr. Robinson informed that he supports the request; however, his concern is that the
item got to the Board and apprised that his request is that administration clarifies prior to
bringing future items to the Board. He noted that the evaluation is a concern with him
and informed that these kinds of procurement issues must be cleared at the
administration level because issues such as these should not get to the Board.
Withdrawn Motion - Mr. Schechter withdrew the motion and Mrs. Sane withdrew the
seconded.
CONSIDER BOND TIMELINE, METHOD OF PROCUREMENT, FINANCE, PROGRAM
MANAGEMENT ORGANIZATION, AND ANY OTHER NECESSARY ACTION
RELATING TO HCC BOND
Motion – Mr. Austin moved and Ms. Loredo seconded.
FINANCING OPTIONS
Mr. Robinson inquired if the discussion is to sale the $425 million all at once. He noted
that there is a timeline issue in that once General Obligation (GO) Bonds are sold; there
is a requirement to spend 85 percent within 36 months.
(Mrs. Flores joined the meeting at 1:26 p.m.)
Dr. Tyler apprised that the recommendation included two offerings, the first for $250
million. He noted that RBC Capital reviewed the maximum and recommended the
maximum is $300 million. He informed that the short-term interim financing would allow
for some of the other projects to begin. He apprised that the goal would be to initiate the
Coleman College project.
(Mrs. Flores stepped out at 1:28 p.m.)
Ms. Mullins inquired if all the land has been identified as it relates to Coleman College.
Dr. Tyler apprised that some land options have been identified.
Ms. Mullins noted that it was discussed that the projects in Phase I were ready to go
without the need for land purchase.
(Mrs. Flores returned at 1:29 p.m.)
Dr. Tyler informed that beyond the land purchase, there would be other concerns. He
apprised that an amount over $300 million goes above the one-cent increase to the
taxpayers.
(Mr. Oliver arrived at 1:30 p.m.)
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Special Meeting – November 19, 2012 - Page 4
Mr. Robinson inquired of the long-term damage to the taxpayers. Dr. Tyler apprised of
two issues (1) a significant risk of not being able to spend funds within 36 months and
(2) the funds becoming taxable under the Internal Revenue Service (IRS) rules.
Mr. Schechter inquired if encumbering is the same as spending. Mr. Ron Defalco noted
that if the money is received it must be spent, not just encumbered.
(Mr. Oliver stepped out at 1:43 p.m.)
Mr. Clarence Grier informed that if the $300 million is sold at 25-30 basis points, it would
cost the taxpayers approximately $21 million. He apprised that the college is one
percentage point lower than a year ago today. He noted that the maximum of $300
million is most prudent for the college.
Mr. Austin inquired of the total of land acquisitions. Dr. Tyler apprised that the land
acquisition cost is approximately $35 million dollars. He noted that a larger track in the
medical center would double the land acquisition cost.
Mr. Robinson inquired of the term of the bond program. Dr. Tyler informed that it is 4
and half years. Mr. Grier apprised that the benefit of splitting the funding gives the
opportunity to sale at a lower rate in the event they continue to decline.
Mr. Schechter inquired of the comfort level of spending the $300 million. Dr. Tyler noted
that the $300 million could be spent within 36 months.
Mr. Austin inquired if there will be standardization on the workforce buildings. Dr. Tyler
noted that to the degree possible, yes; however, the building structure would depend on
the workforce program.
Ms. Perez inquired if there is a timeline listing the projects that are anticipated to be
initiated in year 1, year 2, year 3, etc... Dr. Tyler informed that such a timeline has not
been developed; however, administration could develop a timeline. He apprised that the
timeline would have some projects listed but could possibly be moved as needed.
Ms. Mullins inquired if funding would be taken from other projects. Dr. Tyler apprised
that taken from other projects is not the anticipation.
Mr. Robinson noted that his concern is the increased interest rate and noted that it
could be feasible to bring all the project managers on at the same time. He suggested
going out for all the professional services simultaneously.
Mr. Schechter apprised that the request would be to authorize funding. He informed that
this would require having a team in place to allow for the selling of the bonds. Dr. Tyler
apprised that once the underwriter and disclosure counsel are place, it would take
approximately three weeks.
(Mr. Oliver returned at 1:46 p.m.)
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Mr. Schechter recommended the procurement be put out for underwriter and disclosure
counsel. He informed that the bottom line is that the team needs to be in place so that
the bonds could be sold, when the Board approves.
Mr. Robinson inquired if a RFQ is ready to go for the legal and finance team. Mr.
Anasagasti apprised that the scope is being finalized and informed that the final
document needs to be reviewed by Board Counsel. He noted that the goal is to
advertise before Thanksgiving; however, the document is not available at the time and
needs to be reviewed before being posted.
Ms. Sane inquired if there would be only one underwriter. Mr. Grier apprised that the
Board has the authority to add underwriters as needed.
Mr. Schechter informed that the effort should be to have the team in place to be able to
proceed expeditiously as needed.
Mr. Austin noted that the best practices should be reviewed to provide a better outcome.
Mrs. Flores inquired of the lead way before it is determined if the interest rate will
increase. Mr. Grier apprised that currently it is favorable that the rates will drop and
noted that there is a slate to sale the second or third week of January 2013.
Mrs. Flores informed that standards and best practices were established among all the
Trustees, which included the role of the individuals. She noted that it is not imperative to
act immediately, so that the Board has time to understand what is involved with the
bond.
Mr. Austin apprised that Mrs. Flores is on point and apprised that it is the Board who
makes the decision.
Mr. Schechter noted that procurement for the disclosure counsel and underwriter will
not be acted on by the Board until January 2013, which provides ample time to review
the best practices. He informed that the effort is to have the team in position to save the
taxpayers money.
Motion - Mr. Schechter moved to authorize up to $300 million in the first tranche with the
final figure to be determined when underwriter is engaged. Mrs. Sane seconded.
Mr. Robinson requested a matrix from the Financial Advisor for the Board to consider
regarding the recommendation for funding. He apprised that his effort is to save the
taxpayers money.
Mr. Oliver noted that the discussion last week was $250 million and now the discussion
is $300 million. He inquired of the change in the market. Mr. Grier informed that there
are tax equities and apprised that the public has spoken and many funds are moving
into municipals.
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Mr. Grier informed that there has been an unprecedented drop. He apprised that the
representation in terms of the first sale of $300 million would only increase the cost for
the taxes within the one cent as presented to the taxpayers.
Ms. Mullins noted that the recommendation is $300 million because that is the max able
handle. Dr. Tyler informed that to go out for the full amount, would require additional
staff and apprised that his recommendation is the $300 million.
Dr. Tyler noted that as the parameters are changed, the models also change. He
informed that if the college goes out for the $300 million, it would be better to go with the
recommendation by Trustee Robinson to engage all the teams at once.
Ms. Mullins inquired if the same counsel would be used for both. Dr. Tyler informed that
if short-term financing is in place, the same team would be utilized unless there is a
significant change in the banking relationships.
Mr. Austin apprised that the Board Counsel should elaborate on the differences
between the two counsels.
Mr. Hollingsworth noted that most entities do not conduct a separate RFQ for each
issuance. He informed that the bond counsel and disclosure counsel is usually the
same.
Ms. Loredo inquired if going for the $300 million means a change in Phases I and II as
identified. Dr. Tyler apprised that the plan would be to do more projects and similar
projects at the same time.
Mr. Austin suggested that administration and professionals engaged be allowed to
provide a matrix that includes the proposal and the dependent variables. He noted that
most of the issues presented could be addressed and reviewed in a matrix.
Mr. Oliver suggested that the term “best practice” is clearly defined.
Mr. Robinson clarified that in January if interest rates drop, the matrix should be able to
tell whether to go forth or not.
Motion - Mr. Schechter moved to authorize up to $300 million in the first tranche with the
final figure to be determined when underwriter is engaged at a meeting in the future.
Mrs. Sane seconded. The motion passed with a vote of 8-1 with Mrs. Flores opposing.
PROGRAM MANAGEMENT ORGANIZATION
Motion – Mr. Schechter moved to adopt the organization provided by administration. Mr.
Oliver seconded.
Mr. Schechter requested that Dr. Tyler be allowed to present the reasoning for
presenting the Program Management Organization.
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Dr. Tyler noted that the premises was to go out for $250 million and noted that he held
discussions with others who have done similar projects. He informed that Houston
Independent School District (HISD) has teams whereas the college has individuals. He
apprised that the college does not have such an organizational structure internally. He
noted that over the four-year period, it would cost approximately $40 million to build the
team internally. He noted that consideration of the hiring process was also an issue
because it is actually a longer than the procurement process. He informed that the other
concern would be identifying that number of people in a doable timeframe.
Dr. Tyler apprised that the other option was to review what other institutions had done
with their bond. He noted that he reviewed Lone Star College and apprised that they
have some of the same challenges.
Dr. Tyler informed that the organization model presented was based on $250 million
and anticipated projects. He defined that the role of the levels with the program
management team is to support facilities at the district level; the project management
teams will support the presidents.
Mr. Austin apprised that the college previously established that a brand was imperative
and noted that it is time to have a brand that is consistent in the city.
Mr. Robinson observed that there has not been discussion of faculty, staff and students
from the end users perspective. He informed that the chart presented has been revised.
He noted that the first chart had a dotted line to construction and underneath the project
management. He noted that second chart has the same problem and apprised that the
industry has suggested that the model does not allow the program manager to be
responsible for projects or does not have projects under them. Mr. Robinson noted that
the RFQ or RFP could specify that multiple project/program managers would be hired
and noted that they should be procured simultaneously.
(Mr. Robinson stepped out at 2:35 p.m.)
Mr. Austin recommended receiving collective input from the Board and externally to
determine the best method for selecting the process. He informed that the best decision
needs to be made for the district. He apprised that the Board and administration should
be working as a team and the decisions should be based on rational approaches.
Mr. Oliver associated with Mr. Austin to work together as a team and to review the
previous measure. He noted that what did not work previously was the perception of
unfairness.
Mrs. Sane conferred with Mr. Oliver but informed that the decision must be based on
the data. She apprised that she would like additional time for consideration.
Ms. Loredo inquired of the cost for the program manager and the project manager. Dr.
Tyler noted that the idea is to negotiate a fixed price. He informed that the cost should
be less than eight percent of the total bond but did not want to quote an exact amount.
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Mr. Schechter apprised that the cost is imperative. He noted that there are discussions
that the cost is going to be as high as sixteen percent and noted that those statements
are untrue. Mr. Schechter inquired of the additional data that could be used for making a
decision.
(Mr. Robinson returned at 2:37 p.m.)
Mrs. Sane informed that her reference was to Dr. Tyler’s information regarding HISD
and Lone Star. Dr. Tyler clarified that the project management team is a staff function
within the organization. He apprised that it does not have authority. He noted that the
program management team would assist the Chief Administration Officer.
Mr. Robinson clarified that the industry was concern that the program manager could
not make any rules because they do not have any projects. He recommended having
three to four program managers. He informed that his primary issue is that everyone be
procured at the same time.
Mr. Robinson noted that the program manager on Dr. Tyler’s model is not able to
compete for any of the projects. He informed that the project managers would not be
able to compete as well. He apprised that his suggestion would be that once you are
overseeing a project, you will not be able to compete for the project in regards to
construction, design, and engineering.
Dr. Tyler noted that this would be his recommendation as well. He informed that when a
firm is doing business as a program or project manager, it creates a challenge if they
are also doing the construction on another site.
Mrs. Flores inquired if Information Technology (IT) is a part of the program management
team. Dr. Tyler apprised that IT is included. She noted that she likes the idea of having
several program managers because it provides a level of checks and balances.
Mr. Oliver inquired if there would be an amendment to the motion.
Mr. Austin recommended a third party independent construction auditor. He informed
that it should be a truly independent auditor who is reviewing the issues. Mr. Austin
recommended that the internal staff be augmented should the cost be too extensive for
an external construction auditor.
Mrs. Sane referenced the project management models employed by the city of Houston
and recommended administration to review.
Mrs. Flores inquired of the total cost for program and project managers. Dr. Tyler
informed that it would be approximately eight percent of the total bond measure.
Mrs. Flores inquired as to who would develop the scope of services. Mr. Anasagasti
apprised that the scope of services is included in the general boilerplate documents and
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noted that procurement would finalize the document. Mr. Rogelio apprised that the
specification is provided by a team effort of Facilities and the Deputy Chancellor.
Mr. Dahse noted that the internal team will need assistance in monitoring daily activities.
Mr. Schechter inquired if there is a need for someone to assist with the projects such as
auditing and monitoring. Mr. Dahse informed that it is a case-by-case issue because
there are moving targets.
Mr. Schechter recommended administration provide a recommendation taking into
consideration the Board’s comments. He recommended providing at least three options.
Motion – Mr. Schechter recommended revisiting the program management organization
with three options presented to the Board. Mr. Oliver seconded. The motion passed with
a vote of 9-0.
AUTHORIZE THE CHANCELLOR/DEPUTY CHANCELLOR TO NEGOTIATE
FINANCING WITH BANKS
Motion – Mr. Oliver moved and Mrs. Sane seconded.
Ms. Perez recessed the meeting at 3:08 p.m. and reconvened at 3:16 p.m.
(Present: Trustees Austin, Loredo, Mullins, Oliver, Perez and Robinson)
Dr. Tyler apprised that the list presented is the banks who responded to the solicitation
for interim financing.
Mr. Grier noted that three scenarios were reviewed. Dr. Tyler apprised that better rates
could be secured given various amounts. Mr. Grier noted that the request is for
permission to negotiate.
Mr. Oliver inquired if the request is for interim financing for $125 million. Mr. Oliver
inquired of which projects would be included. Dr. Tyler informed that the cost of
financing is at an all-time low and will give the system the flexibility to get a project
started immediately without having to go to the market.
(Mrs. Sane and Mr. Schechter joined the meeting at 3:20 p.m.)
Mr. Oliver requested that administration provide a list of projects and the due dates so
that the Board is able to see what projects are in the pipeline.
(Mrs. Flores joined the meeting at 3:23 p.m.)
Mr. Grier apprised that the interim financing negates having to go to market multiple
times.
(Mrs. Flores left at 3:24 p.m.)
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Dr. Tyler noted that the interim financing allows the system to keep more of the funds in
the bank. He informed that the interim financing would allow going to market only when
there is a large piece.
(Mr. Oliver stepped out at 3:25 p.m.)
Mr. Robinson inquired of the amount remaining to borrow and pay off if there is $425
million. Mr. Grier apprised that there would be the capacity to keep coverage at a
respective level.
Mr. Robinson clarified that his inquiry is how much additional cash. Mr. Austin
referenced the retreat discussion regarding the $190 million.
Dr. Tyler informed that there should be flexibility for the system to weather the storm of
uncertainties.
Dr. Tyler clarified that item C was fixed financing for $250 million and noted the approval
was done under item E with the approval of the item up to $300 million. Dr. Tyler
informed that the interim financing piece is actually item D.
Mr. Austin clarified that the Board is inquiring of the need for the interim financing piece.
Ms. Perez clarified that the vote under item E for up to $300 million was actually item C.
Ms. Mullins asked for clarification if item C is needed. Mr. Grier informed that the
approval of up to $300 million in fixed financing eliminated the need for interim
financing; therefore, no additional items are needed.
Mr. Hollingsworth apprised that the Board could vote to reconsider the item for
clarification.
Mr. Robinson inquired if his vote was to authorize administration to finance up to $300
million in fixed rate bonds. Dr. Tyler and Mr. Grier apprised that is correct.
Mr. Schechter informed that he understands the periodic need for funds to finance
maintenance and inquired if the commercial paper or line of credit are options for interim
financing. He apprised that he is not opposed to considering a line of credit.
Mr. Grier noted that interim financing provides an option to address issues as needed.
Mr. Oliver inquired of other mechanisms in place other than line of credit or commercial
paper. Dr. Tyler informed that there are no other mechanisms in place.
Ms. Loredo inquired if the interim financing is needed to begin the bond projects. Mr.
Grier apprised that the interim financing is not needed for the $300 million approved.
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Mr. Robinson noted that his desire is to cast a policy vote that remains beyond his term.
He informed that his attempt is to keep tools in place to use as needed.
Amendment Motion – Mr. Schechter motion to amend to authorize the
Chancellor/Deputy Chancellor with advising of Financial Advisors to enter discussion
and negotiations with any of the seven banks identified for up to $75 million.
Mr. Schechter withdrew the amendment.
Vote – the motion failed with a vote of 0-7-1 with Trustee Robinson abstaining.
FINANCING OPTIONS FOR HCC TO INCLUDE COMMERICAL PAPER AND LINE
OF CREDIT
Motion – Mr. Austin moved and Ms. Loredo seconded.
Mr. Austin informed that his request is regarding the restructure of the current debt. Dr.
Tyler apprised that there were two other pieces discussed by the Board regarding MTN
of approximately $160 million and the restructuring of $90 million of current debt. Dr.
Tyler informed that a schedule of the debt restructure could be provided later.
(Mr. Oliver stepped out at 3:55 p.m.)
Mr. Robinson inquired of the cash flow to pay down the monthly debt payments and
apprised there must be a match against cash flow and debt obligations. He inquired as
to how much more can be added to debt.
(Mr. Oliver returned in at 3:56 p.m.)
Mr. Grier noted that the computations will be presented to the Board.
Mr. Austin requested more discussion on how companies are investing in community
colleges as well as a schedule for debt reduction.
Ms. Perez clarified if additional $75 million in debt is being requested. Dr. Tyler apprised
that the request is to authorize the ability to negotiate regarding interim financing.
Mr. Schechter inquired if the request is to get authorization to negotiate. Dr. Tyler
confirmed that the request is to negotiate and bring it back to the Board.
Mr. Robinson inquired if the seven banks have been eliminated. Dr. Tyler noted that the
RFQ would allow for the utilization the seven banks.
Mr. Defalco informed that there are three depository banks in place.
Mr. Robinson apprised that there needs to be consensus with administration. He noted
that there needs to be clarification before entering discussions and informed that the
procurement process needs to be tightened.
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Mr. Hollingsworth noted that the solicitation is not tied to a particular item. He informed
that if the depository banks RFP included interim financing and line of credits, they
could be utilized for the process. He apprised that the engagement of the banks was for
services.
Mr. Austin noted that his concern is how to correct the situation. He informed that the
depository banks were a particular part of the agreement as well as the financial
advisors.
Mr. Schechter recommended the item be deferred until December meeting.
Mr. Hollingsworth apprised that the procurement needs to be reviewed regarding the
seven banks.
Motion withdrawn – Mr. Austin withdrew the motion and Ms. Loredo withdrew the
second.
ADJOURNMENT
With no further business coming before the Board, the meeting adjourned at 4:14 p.m.
Minutes recorded, transcribed & submitted by:
Sharon Wright, Manager, Board Services
Minutes Approved as Submitted:
December 13, 2012_____