Legislature(1999 - 2000)
04/18/2000 02:45 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 248(FIN) am
An Act relating to the financing authority, payment in
lieu of tax agreements, and tax exemption for assets
and projects of the Alaska Industrial Development and
Export Authority; relating to renaming and contingently
repealing the rural development initiative fund within
the Department of Community and Economic Development,
and establishing the rural development initiative fund
within the Alaska Industrial Development and Export
Authority; and providing for an effective date.
KEITH LAUFER, FINANCIAL AND LEGAL AFFAIRS MANAGER, ALASKA
INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY (AIDEA),
DEPARTMENT OF COMMUNITY & ECONOMIC DEVELOPMENT, ANCHORAGE,
explained the intent of the legislation. He summarized each
section:
? Section 1 would clarify changes to property tax
exemption provisions. Together with Sections 6, 7
and 8, it would make clarifying changes in tax
exemption and payment in lieu of tax provisions
relating to AIDEA owned projects.
? Sections 2-4 would transfer the Rural Development
Initiative Fund Program (RDIF) to AIDEA.
? Section 5 would extend AIDEA's general bonding
authority which would otherwise sunset on July 1,
2000. Bonds for development finance projects in
excess of $10 million dollars would continue to
require legislative authorization.
? Section 6 would amend AS 44.88.140(a) to recognize
the permissive property tax exemption that local
governments may grant for AIDEA's own projects.
? Section 7 would amend AS 44.88.140(b) to clarify
the mechanism to be used by local governments and
users of AIDEA projects for entering into payment
in lieu of tax agreements. The bill would make
clarify that these agreements are to be made
directly between the local governments and the
project users.
? Section 8 would amend AS 44.88.140 to add a
clarifying definition section for "local political
subdivision". The provision provides that the
political subdivision in which the AIDEA project
is located is the "local political subdivision"
for purposes of the statute.
? Sections 9-11 references the transfer of the Rural
Development Initiative Fund Program (RDIF).
? Sections 12-15 provides for an effective date.
Co-Chair Therriault referenced Page 4, Line 22, the "$2
million dollar" issue. He pointed out that he had submitted
Amendment #1 to address that concern. [Copy on File]. Mr.
Laufer replied that the amendment would present no problem.
Representative J. Davies asked if there was a limit to the
amount of a conduit bond. Mr. Laufer replied that there was
no limit on the size of a conduit bond, but that AIDEA does
limit bonds that can be issued in a one-year period.
Conduit bonds would be subject to that limit. There is a
limit under the federal Internal Revenue Service (IRS) laws
as to the amount that the entire State can issue for private
activity bonds. The current limit is $150 million dollars.
The State Bond Committee makes the allocations for those
bonds. Mr. Laufer noted that most conduit revenue bonds
would fall within that cap and that certain bonds for non-
profit do not fall within the cap.
Co-Chair Therriault MOVED to ADOPT Amendment #1.
MIKE TIBBLES, STAFF, REPRESENTATIVE GENE THERRIAULT,
explained that he had worked with AIDEA and Tam Cook, Alaska
Legal Services, on the amendment.
Representative J. Davies asked the purpose of the amendment.
Mr. Tibbles stated that the language had been adopted in the
Senate Finance Committee and then passed to the House
Finance Committee. The language clarifies that the assets
transferred to the fund by that authority may not exceed $2
million dollars. He noted that there had been a question
regarding what "asset" meant in this circumstance. He
pointed out that the amendment would clarify that language.
Representative J. Davies asked if the amendment would
provide for a total or one time limit. Co-Chair Therriault
replied that it would be a total limit. Mr. Laufer
interjected that AIDEA supports the $2 million dollars being
sufficient to turn this into a "true" revolving loan
program.
Representative J. Davies voiced concern with "other assets"
becoming available. He inquired if they would have to be
addressed through statute. Mr. Tibbles explained that the
intent was to reflect "other" funds outside the previous
sentence. Beyond that, then there would be a $2 million
dollar limit.
Representative J. Davies pointed out that those are items
transferred to AIDEA and thought the language should be
modified by AIDEA. Mr. Laufer advised that the new language
begins with "in addition" after listing the assets that
could be put into the account. That language reflects the
fact that it would be other than those that had been
appropriated to AIDEA. Mr. Laufer added that he did not
think adding that language would change the meaning; the new
language was designed to recognize assets that had been
transferred to AIDEA for that purpose.
Co-Chair Therriault agreed, pointing out the comment "in
addition" to those funds. Mr. Laufer stated that it could
be clarified by adding "in addition to the assets described
in the previous sentence". Representative J. Davies agreed
that would make him more comfortable. Co-Chair Therriault
recommended moving a conceptual amendment, "in addition to
these assets" in order that the drafters could make it work
grammatically.
Co-Chair Therriault modified the original MOTION to include
language as discussed above. There being NO OBJECTION, it
was adopted.
Representative G. Davis MOVED to ADOPT Amendment #2, 1-
GS2009\DA.1, Cook, 4/17/00. [Copy on File]. Co-Chair
Therriault OBJECTED for the purpose of discussion.
Mr. Laufer explained that this was a status quo amendment.
The way it is written, it only applies to facilities that
AIDEA would own that are open to the public. That type of
asset is typical of government infrastructure assets. AIDEA
has been used as a unique financing mechanism in the State
for these purposes.
Representative G. Davis questioned the contract between
COMINCO and AIDEA. He pointed out that it had been agreed
upon that it could be used by other entities. It could be
treated as a public facility for roads and ports.
Co-Chair Therriault noted that local government agrees that
it should be a tax-exempt infrastructure. He asked why the
company would be paying a payment in lieu of tax. Mr.
Laufer replied that COMINCO and Nannana have not only the
interest in the use rights of the road and the port, but
also have the mine itself, which is not owned by AIDEA and
which is not subject to these provisions. They entered into
a payment in lieu of tax provision that they thought had
encompassed cooperation. Co-Chair Therriault asked if they
were getting tax proceeds under another name.
Co-Chair Therriault WITHDREW his OBJECTION to Amendment #2.
Representative Phillips noted that there would be a
conceptual amendment submitted that would put a January 1,
1999 retroactive date into it.
Representative Phillips MOVED an amendment to Amendment #2,
which would place in the retroactive effective date.
Representative Bunde OBJECETED and asked if the taxes had
already been collected. Mr. Laufer replied that they were
not yet subject to payment and that they would "kick in" in
July 1999. Representative Bunde WITHDREW his OBJECTION.
Representative J. Davies noted that the amendment would
preserve the status quo. He asked if the tax assessor had
made a statement regarding the policy. Co-Chair Therriault
replied that the effect was that there was only one user of
the facility. Representative J. Davies asked if there had
been an event that triggered the decision. Mr. Laufer
explained that there currently is a new tax assessor; he
came to a different conclusion than the original one.
There being NO OBJECTION to Amendment #2 as amended, it was
adopted.
Representative J. Davies asked which other properties would
the amendment apply to. Mr. Laufer replied that it would
apply to the AIDEA port in Unalaska. Another potential spot
could be the AIDEA facility in Skagway. That facility is
not being used at this time and there would be no tax
ramifications.
Representative J. Davies questioned the distinction between
the road and the load-out facility. Mr. Laufer replied that
there was a possibility of using it as a coal facility.
Representative J. Davies inquired if the company using it
would pay a fee. Mr. Laufer replied they would and that
under the agreement with COMINCO, it provides including a
toll structure for other users. In the event that there are
other users, COMINCO would have a smaller burden.
Representative J. Davies asked if the local municipality was
able to tax COMINCO's leasehold interests in that facility.
Mr. Laufer responded that under the provisions adopted, they
would not be able to do so.
Representative J. Davies commented that this is not really a
public facility. Mr. Laufer pointed out that it would be
AIDEA charging the other user. COMINCO's right is not
exclusive now so the extent of other users would be making a
toll payment. COMINCO would be receiving a credit against
its toll payments.
There being NO OBJECTION to the amended Amendment #2, it was
adopted.
Co-Chair Therriault referenced Section #6 of the bill
questioning if that language should be included. Mr.
Tibbles suggested that the language does not make sense and
that it would not create a tax exemption. Mr. Laufer agreed
that the section was not needed. Representative J. Davies
asked the inference to AS 29.45.050(P). Mr. Laufer
explained that section is the provision that deals with
municipality's ability to grant exemptions for facilities.
It is a stand-alone exemption that exists in law and that
nothing in that section creates a tax exemption.
Co-Chair Therriault MOVED to delete Section #6. There being
NO OBJECTION, it was adopted.
Representative J. Davies asked if a new sunset had been
inserted. Mr. Laufer explained that the new sunset was
July, 2003, as indicated in Section #5.
Representative Foster MOVED to report HCS CS SB 248 (FIN)
out of Committee with individual recommendations and with
the accompanying fiscal note.
HCS CS SB 248 (FIN) was reported out of Committee with a "do
pass" recommendation and with a fiscal note by Department of
Community & Economic Development dated 2/8/00.
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