Legislature(2017 - 2018)HOUSE FINANCE 519
03/06/2017 01:30 PM FINANCE
Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
Download Mp3. <- Right click and save file as
Download Video part 1. <- Right click and save file as
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE BILL NO. 81 "An Act making an entity that is exempt from federal taxation under 26 U.S.C. 501(c)(3), (4), (6), (12), or (19) (Internal Revenue Code) and a federally recognized tribe eligible for a loan from the Alaska energy efficiency revolving loan fund; relating to loans from the Alaska energy efficiency revolving loan fund; and relating to the annual report published by the Alaska Housing Finance Corporation." 2:24:21 PM REPRESENTATIVE JONATHAN KREISS-TOMKINS, SPONSOR, introduced himself and provided information about the legislation. He believed that most members of the committee had seen previous iterations of the legislation over the years. He offered a history of the topic of the bill: This bill gives nonprofit organizations and federally- recognized tribes the power to apply for loans from the Alaska Energy Efficiency Revolving Loan Fund. Because AEERLF is such a god awful acronym, we call this bill the More Energy Efficient Buildings Act ("MEEBA"). The AEERLF was created by the Alaska Sustainable Energy Act in 2010. It authorized the Alaska Housing Finance Corporation to make $250 million in low interest loans for energy efficiency improvements to public entities, namely municipalities and school districts. One loan has been closed since the program's creation in 2010. Especially given our new and more austere fiscal climate in which legislative grants are going to be rare to nonexistent, many nonprofits are interested in becoming more self-sufficient and accessing loans from the revolving loan fund to invest in energy efficiency. Right now, nonprofits such as soup kitchens, arts organizations, American Legion posts, and churches are not eligible to apply to the revolving loan fund. The More Energy Efficient Buildings Act authorizes Alaska Housing to accept applications from non-profits and federally recognized tribes for energy efficiency improvements to their buildings. The More Energy Efficient Buildings Act improves energy efficiency in Alaska. It helps Alaska nonprofits, churches, and veteran's organizations become more self-sufficient. And it helps create a public benefit for a State program that's presently under-used. Representative Kreiss-Tompkins lamented that his previous attempts to pass similar legislation had been met with apathy and disinterest. He felt that the apathy had been nurtured by the legislature, which had offered school districts and municipalities' legislative grants to finance their energy expenses. 2:29:26 PM Representative Kreiss-Tompkins continued to address the reasoning for the development of the legislation. He felt that the bonding authority had been underused, and suggested that expanding the eligibility to the revolving loan fund to non-profits and organizations that needed access to capital in order to deliver services to Alaskans. Co-Chair Foster relayed there were individuals available for questions. 2:31:13 PM Representative Grenn queried they type of non-profit entities that would be eligible under the bill. Representative Kreiss-Tompkins replied that the eligibility would be expanded to the suite of Internal Revenue Service (IRS) designated non-profit organizations. He thought that the bottom line was that energy efficiency was good no matter who was benefiting from it; the more people who were able to make energy efficiency improvements, the better. 2:33:42 PM Representative Kawasaki requested further description of the IRS designated non-profit entities. Representative Kreiss-Tompkins answered that 501c 4 related to civic leagues, social welfare or local employee associations, and 501c 6 related to business leagues, chambers of commerce, and industry umbrella organizations. He furthered that 501c 12 related to mutual and cooperative associations, and 501c 19 related to post-organizations of past and present members of the armed forces. He deferred to staff for any further clarification. Representative Kawasaki asked whether a political organization such as the Alaska Democratic or Republican Party Headquarters would qualify. Representative Kreiss-Tompkins replied that he did not know and relayed that he would follow up with an answer. Representative Kawasaki expressed concern for fairness in the decision making process of who would qualify for the loans. He asked about the constitutionality of the inclusion of churches and religious organizations. BERETT WILBER, STAFF, REPRESENTATIVE JONATHAN KREISS- TOMKINS, directed committee attention to the memo from the Division Legislative Legal provided in member's packets and dated January 23, 2017(copy on file). She explained that legislative legal had determined that allowing churches to apply for loan funding under the energy efficiency program was constitutional. Representative Kawasaki asked if it was because everyone that applied had an equal chance of receiving the loan. 2:37:37 PM Ms. Wilber replied she would need to reread the memo, but she believed he was correct. Representative Wilson asked about prioritizing schools first as recipients. Ms. Wilber cited Section 7 of the legislation: * Sec. 7. AS 18.56.855 is amended by adding new subsections to read: (k) In considering applications and making loans from the Alaska energy efficiency revolving loan fund, the corporation shall give priority to energy efficiency improvements to buildings owned by a regional educational attendance area, the University of Alaska, a municipality, or the state over other applications and loans. (l) Notwithstanding any provision of this section, the recipient of a loan under 28 this section may not be a for-profit business enterprise. Representative Wilson thought some loans required audits first. Ms. Wilber answered that the loan required a federal-grade audit that would specify the areas a building would save money with energy efficiency improvements. Representative Wilson asked whether a non-profits monetary holding would be taken into account when determining interest and eligibility of the loans. 2:40:08 PM Ms. Wilber answered that there would be no limit to which non-profits could apply for the loans. She said that AHFC would set the interest rate. She deferred further explanation to AHFC. STACEY SCHUBERT, DIRECTOR, GOVERNMENTAL AFFAIRS AND PUBLIC RELATIONS, ALASKA HOUSING FINANCE CORPORATION, ANCHORAGE (via teleconference), explained that the current interest rate for a 15 year loan was 4.25 percent. Representative Wilson asked whether the interest rate would be the same for a bank loan to the same applicant. Ms. Schubert replied that she did not know the current interest rate for other institutions. Representative Wilson asserted that she did not want to compete with banks or to loan money at a lower interest rate than financial institutions. She asked who paid the bill if an organization defaulted on the loan. Ms. Schubert deferred the question to a colleague. MICHAEL STRAND, CFO, ALASKA HOUSING FINANCE CORPORATION, ANCHORAGE (via teleconference), informed the committee that the money would come from the AHFC internal resources. He said that if the total loan amounts reached over $50 million then AHFC would have to go to bond, the costs of which would be absorbed by the program cost. He relayed that AHFC would be responsible for any defaults; there would be no risk to the state in the event of a default on the loan. 2:44:07 PM Representative Guttenberg referred to the previously mentioned legal memo. He believed that the memo succinctly explained the entities that were eligible for the loan. He believed that the memo addressed the issues raised Representative Wilson. He believed that non-profits would take advantage of bank loans if they could qualify for one, regardless of interest rates. Representative Kreiss-Tompkins responded to Representative Wilson's questions. He understood that because of the way the program was structured, savings had to be demonstrated through an audit before an entity could qualify. He added that the energy savings essentially financed the debt, which was a unique approach that was not used by banks and traditional lending institutions. 2:47:15 PM Co-Chair Foster OPENED and CLOSED public testimony. HB 81 was HEARD and HELD in committee for further consideration.