Legislature(2009 - 2010)HOUSE FINANCE 519
04/11/2010 12:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB296 | |
| HB416 | |
| HB421 | |
| SB199 | |
| HB424 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 296 | TELECONFERENCED | |
| + | HB 416 | TELECONFERENCED | |
| *+ | HB 421 | TELECONFERENCED | |
| += | HB 424 | TELECONFERENCED | |
| + | SB 199 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 296
"An Act authorizing and relating to the issuance of
bonds by the Alaska Housing Finance Corporation;
establishing the Alaska energy efficiency revolving
loan fund and relating to the fund; authorizing
municipalities and the State of Alaska to borrow money
from the Alaska Housing Finance Corporation for the
purposes of the Alaska energy efficiency revolving
loan fund; and providing for an effective date."
1:15:27 PM
BRYAN BUTCHER, DIRECTOR, GOVERNMENT AFFAIRS AND PUBLIC
RELATIONS, ALASKA HOUSING FINANCE CORPORATION, DEPARTMENT
OF REVENUE, reported that HB 296 would allow Alaska Housing
Finance Corporation (AHFC) to establish an energy
efficiency revolving loan fund through bond sales of up to
$250 million. He stated that $28.3 million was appropriated
to the State Energy Program from the federal government
stimulus funds [American Recovery and Reinvestment Act].
The state would use $18 million of the funds to leverage
the program. The program was approved through the U.S.
Department of Energy. He explained that municipalities,
school districts, or state entities could take out a low
interest loans from AHFC to perform energy efficiency work
to public buildings, as prescribed by a mandatory energy
audit. The audit would be carried out by an energy
performance contractor. The loan would be repaid by the
energy costs savings achieved through the energy efficiency
improvements. He added that if the savings, as determined
by the audit were not achieved, the contractor would be
responsible for the loan payments. He pointed out that the
public entity would realize budget savings by increasing
energy efficiency in public buildings.
Representative Austerman asked who the contractor would be.
Mr. Butcher explained that established energy performance
contractors would perform the audit and hire subcontractors
to perform the work. The corporation estimated that
approximately 2,500 jobs will be created.
1:19:16 PM
Representative Gara wondered how long the loan period was.
He expressed concern that a long loan repayment period
i.e., twenty years could diminish any initial savings. Mr.
Butcher indicated that the loan tends to extend for shorter
periods since the amount of loan improvement money fronted
should compare with the energy savings realized over an
estimated number of years, with the possibility of early
repayment, if additional energy costs savings are realized.
Representative Gara asked why the bond program costs $18
million. Mr. Butcher explained that AHFC was required to
have a two percent minimum debt service reserve; five
million is the required minimum for $250 million. He added
that the additional leveraged funds of $18 million will
help reduce interest rates. He noted that the U.S.
Department of Energy complemented the program for being
self-sustaining ensuring the longevity of the program.
1:23:08 PM
DAN FAUSKE, CEO/EXECUTIVE DIRECTOR, ALASKA HOUSING FINANCE
CORPORATION, DEPARTMENT OF REVENUE (via teleconference),
supported Mr. Butcher's testimony.
Co-Chair Stoltze requested discussion on the fiscal note FN
1 (REV). Mr. Butcher relayed that the corporation submitted
a zero fiscal note; no additional expenditures are
anticipated.
Representative Fairclough wondered if the state will set
energy efficiency standards or goals. Mr. Butcher stated
that AHFC was developing regulations to achieve energy
efficiency standards statewide.
Vice-Chair Thomas felt that AHFC had good energy efficiency
standards for homes and hoped for similar standards for
public buildings. Mr. Butcher agreed. He added that $2
million was set aside to work with the Alaska Energy
Authority to make their energy efficiency software
applicable to public buildings as well as residences.
1:27:04 PM
Representative Doogan inquired further about interest
rates.
JOE DUBLER, DIRECTOR OF FINANCE, ALASKA HOUSING FINANCE
CORPORATION, DEPARTMENT OF REVENUE (via teleconference),
replied that the interest rate was dependent on the terms
of the loan, determined by the length of the payback period
and amount borrowed. He expected the rate to be low based
on tax exempt debt on municipal or state buildings.
Co-Chair Hawker opened and closed public testimony.
Representative Austerman inquired further on interest
rates. He wondered why the interest rates were variable.
Mr. Dubler responded that the longer length of the loan the
greater the risk. He exemplified a municipality that needs
a five year loan as opposed to a municipality that needs a
fifteen year loan and stated that a longer loan requires
paying a higher return.
1:31:15 PM
Co-Chair Hawker summarized that not all borrowers are
equal.
Mr. Dubler agreed and added that not all loans are equal as
well. He exemplified that interest on a mortgage loan for
fifteen years is half of a percent lower than a thirty year
loan. It is a standard risk component built in to fixed-
rate debt.
Representative Fairclough wondered if the operating costs
of new technologies such as, a high efficiency boiler are
imbedded into the formula to determine energy cost savings.
1:33:15 PM
Mr. Butcher answered that AHFC was still in the process of
deciding how the program will be administered.
Representative Kelly asked for more information about how
the $18 million would be leveraged and how AHFC would
establish interest rates for specific loans. Mr. Dubler
explained the process. He stated that AHFC would evaluate
each loan, use available funds from the initial $18 million
and set the borrower's interest rate at what the interest
rate would be if bonds had been sold. The corporation does
not intend to issue bonds until program demand increases
and more capital is needed. The corporation would not make
a profit off the program; the purpose is only to weatherize
buildings throughout the state. The interest rates would be
higher for long term debt because the bond purchasers
demand a higher interest rate for a longer term bond. He
surmised that in the bond market AHFC would borrow nine to
ten year debt to cover the eight to ten year loans they are
financing. He concluded that the $250 million is the
eventual estimated total to get the fund revolving and
continue for many years.
1:37:19 PM
Vice-Chair Thomas noted that the Regional Education
Attendance Areas (REAA) in his district was struggling
financially. He wondered what they would use for collateral
and how it could realistically help them with skyrocketing
energy costs in rural areas. Mr. Butcher acknowledged that
other states do not have the challenges rural Alaska has.
He pointed out that the school administrator would not have
to come up with any additional funds. The energy savings
would offset the loan repayments. Vice-Chair Thomas opined
that the school district would rather pass savings on to
their teachers or that energy prices would surge again and
use up the savings, requiring state assistance to repay the
loan.
Vice-Chair Thomas MOVED to report CSHB 296(ENE) out of
Committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CSHB 296(FIN) was REPORTED out of Committee with a "do
pass" recommendation and with attached previously published
fiscal notes: FN 1(REV), FN 2(DOT).