Legislature(2007 - 2008)HOUSE FINANCE 519
03/19/2008 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB418 | |
| HB396 | |
| HB419 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 396 | TELECONFERENCED | |
| *+ | HB 419 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 418 | TELECONFERENCED | |
3:43:22 PM HOUSE BILL NO. 419 An Act prohibiting certain state leases and lease- purchase agreements for equipment and other personal property; and providing for an effective date. TOM WRIGHT, STAFF, REPRESENTATIVE MIKE CHENAULT, said that HB 419 was introduced to eliminate the use of the master lease line of credit that some departments are utilizing as a means to purchase equipment or other non-real property items. The State's master lease line of credit was established in 2001 in response to inefficient leasing of equipment by the agencies. The State Bond Committee selected Key Municipal Financial as the provider of a $25 million master lease line of credit in June 2001. Lease obligations can be increased above the $50 million dollar threshold through the use of the master lease program or through independent lease purchase agreements, including vendor lease purchase agreements or a third party lease purchase. He noted that many questions could be addressed through passage of HB 419. Generally, the limitations on departments' ability to enter operating lease purchases for non-real property purchases are broad. AS 36.30.085 provides the ability for departments to enter into lease purchase agreements to perform duties and statutory functions of the departments. The statute limits the term of the lease to 40-years, requiring that the lease be subject to annual appropriation and otherwise non-limiting. He pointed out AS 36.30.085 pertains to real property and is silent on the use of equipment and other non real property issues. He noted that there are definitions of real and non real property found in AS 01.10.060. Mr. Wright directed comments to the policy questions that arise from the master lease line of credit program: · Is it a circumvention of the legislative appropriation process. · Where do the payments for the participating agencies show up in the agencies budgets. · Why do we pay interest at a time when General Fund dollars are available to purchase equipment. · Who controls the dollar amounts available within the master lease program. He recommended that departmental purchasing of big items such as equipment or other items may be better sought through the Capital budget process. Mr. Wright referenced the Master Lease Summary attachment, indicating the twenty-nine transactions, some of which have been paid. (Copy on File). He pointed out that there are about $40 million dollars of projects that have gone through the Master Lease line of credit with approximately $26 million dollars owed on those transactions. 3:49:50 PM JENNIFER KLEIN, FACILITIES MANAGER, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, offered to answer questions of the Committee. DEVEN MITCHELL, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL BOND BANK AUTHORITY, DEPARTMENT OF REVENUE, commented that the Administration is indifferent on the bill. He stated that HB 419 would severely restrict the flexibility of the State to respond to interim needs. The master lease of credit is a program, which he manages. It was formulated in the early 2000's when there had been a series of private placements made with banks for structuring, stand-alone transactions. He realized that some agencies were using vender financing, some of whom are creative people and have financing associates. The financing can end up being a cost center with high interest. The formulation of the program was not an attempt to do something new but rather, it was an attempt to do something better. It was a matter of accessing a tax exempt rate of interest, recognizing that it was the State of Alaska. Alaska should obtain a rate and have terms and conditions for that type issue. The program has received some notoriety with the purchase of the jet. 3:53:01 PM Co-Chair Chenault pointed out that when the master lease line of credit was put into effect, the State did not have the amount available that it currently has. The line did provide the Administration flexibility. He worried about the Legislature giving away their appropriation authority and if some of the issues were "sliding" around. He believed that if any of the issues were really needed or if it was a timing issue, then the master lease would be the way to go. He wanted to be assured that concerns are "tightened" up & not abused. 3:55:09 PM VERN JONES, CHIEF PROCUREMENT OFFICER, DEPARTMENT OF ADMINISTRATION, acknowledged the concerns voiced by Co-Chair Chenault creating an attempt to zero in on the master lease line of credit. The bill as written, would eliminate all leases and will create departmental difficulty. There are some things that by law, the State can not own and must lease; there are other times where smaller dollar leases do make sense. He reiterated concerns with the way the bill was written. 3:56:22 PM Co-Chair Chenault advised that HB 419 was not intended to eliminate all leases but rather to bring the Administration to the Legislature for discussions on certain issues. Representative Thomas asked what was the spending limit. Mr. Jones was not aware of a limit. PUBLIC TESTIMONY CLOSED. HB 419 was HELD in Committee for further consideration.
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