2011-01-24                     House Journal                      Page 0105
HB 120                                                                                                                        
HOUSE BILL NO. 120 by the House Rules Committee by request of                                                                   
the Governor, entitled:                                                                                                         
                                                                                                                                
    "An Act creating a new markets tax credit assistance guarantee                                                              
    and loan program within the Alaska Industrial Development and                                                               
    Export Authority; and providing for an effective date."                                                                     
                                                                                                                                
was read the first time and referred to the House Special Committee on                                                          
Economic Development, Trade, & Tourism and the Finance                                                                          
Committee.                                                                                                                      
                                                                                                                                
The following fiscal note(s) apply:                                                                                             
                                                                                                                                
1.  Zero, Dept. of Commerce, Community, & Economic Development                                                                  
                                                                                                                                
The Governor's transmittal letter dated January 21, 2011, follows:                                                              

2011-01-24                     House Journal                      Page 0106
"Dear Speaker Chenault:                                                                                                         
                                                                                                                                
Under the authority of Article III, Section 18, of the Alaska                                                                   
Constitution, I am transmitting a bill creating a new markets tax credit                                                        
assistance guarantee and loan program within the Alaska Industrial                                                              
Development and Export Authority (AIDEA).                                                                                       
                                                                                                                                
This legislation will enable AIDEA to foster more economic                                                                      
development in Alaska, especially in areas with great need for new                                                              
investment. Under this legislation, AIDEA could issue guarantees and                                                            
make loans to help finance projects funded through a federal new                                                                
markets tax credit program. This federal program offers a competitive                                                           
process by which federal new markets tax credits are allocated to                                                               
support the nationwide financing of projects located in low income                                                              
areas or otherwise serving low income populations. The federal                                                                  
program arises under Section 45D of the Internal Revenue Code, and                                                              
provides for the allocation of new markets tax credits equal to 39                                                              
percent of total qualifying investments, payable over seven years. The                                                          
tax credits provide a present value investment return of approximately                                                          
30 percent of the amount of the qualifying investment, and can                                                                  
substantially reduce the financing costs for a project.                                                                         
                                                                                                                                
Investments made under the federal new markets tax credit program                                                               
generally would fund only a portion of total project costs. The balance                                                         
of the funding must come from other loans or financing. There is a                                                              
scarcity of capital available and this legislation would enable AIDEA                                                           
to issue guarantees and make loans to assist in funding amounts not                                                             
covered by investments made under the federal program.                                                                          
                                                                                                                                
The proposed legislation requires AIDEA to evaluate the commercial                                                              
reasonableness of the underlying loan AIDEA would guarantee to                                                                  
determine that the project will promote economic development and                                                                
requires the financial institution to service the guaranteed loan.                                                              
                                                                                                                                
I urge your prompt and favorable action on this measure.                                                                        
                                                                                                                                
Sincerely,                                                                                                                      
/s/                                                                                                                             
Sean Parnell                                                                                                                    
Governor"