Legislature(2013 - 2014)BARNES 124
04/11/2013 09:00 AM House RULES
| Audio | Topic |
|---|---|
| Start | |
| HB23 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 23 | TELECONFERENCED | |
HB 23-KNIK ARM CROSSING; AHFC
9:04:12 AM
CHAIR JOHNSON announced that the first order of business would
be HOUSE BILL NO. 23, "An Act relating to bonds of the Knik Arm
Bridge and Toll Authority; relating to reserve funds of the
authority; relating to taxes and assessments on a person that is
a party to an agreement with the authority; and establishing the
Knik Arm Crossing fund." [Before the committee was CSHB
23(FIN).]
9:05:04 AM
REPRESENTATIVE KELLER withdrew Amendment 1, labeled 28-
LS0141\O.24, Martin, 4/8/13, which was left pending from the
April 9, 2013, meeting.
9:05:15 AM
REPRESENTATIVE KELLER, noting his understanding that there would
be an objection to the motion and discussion, moved to adopt
Amendment 2, labeled 28-LS0141\O.30, Martin, 4/10/13. [The text
for Amendment 2 can be found at the end of these minutes.]
CHAIR JOHNSON announced that there would be objection and
discussion.
9:06:21 AM
CHAIR JOHNSON inquired as to what impact on federal funds, if
any, will moving the Knik Arm Bridge and Toll Authority (KABATA)
under the Alaska Housing Finance Corporation (AHFC) cause.
9:06:36 AM
ALEX VITERI, Senior Transportation Engineer; Major Projects
Manager, Alaska Division, Federal Highway Administration, stated
that the [Knik Crossing Development Corporation (KCDC)] would
have the same standing as any other applicant or interested
party at the current point. Although he opined that there
wouldn't be any affected interest, the concern is that there is
a credit worthy financial plan that is submitted with a letter
of interest. The Transportation Infrastructure Finance and
Innovation Act of 1998 (TIFIA) office would review the plan and
if selected, would request the applicant submit a letter of
application. Then TIFIA would review the application and
process it normally. The KABATA is in the same situation now,
he noted.
9:07:25 AM
CHAIR JOHNSON surmised then that Mr. Viteri is saying that the
change proposed in [Amendment 2] wouldn't jeopardize the TIFIA
funds or any other future highway funds.
MR. VITERI replied yes. However, he clarified that submitting a
letter of interest/application doesn't guarantee a TIFIA loan.
There is fair competition with all parties and if someone from a
different state precedes either applicant, they may receive the
funding. Therefore, haste is important, he said. In further
response to Chair Johnson, Mr. Viteri confirmed that [KCDC]
would be starting at the same point as KABATA and [the proposal
encompassed in Amendment 2] isn't jeopardizing anything.
9:08:25 AM
REPRESENTATIVE KELLER inquired as to when the closing is
anticipated for the loan under KABATA as it currently exists.
He related his understanding that funds will be available to
begin construction and closing is anticipated, as he has heard,
within nine months.
MR. VITERI deferred to KABATA. As the Major Projects Manager
for the Alaska Division, he related his understanding that
KABATA's intent is to secure a reserve account through HB 23 and
submit a letter of interest to TIFIA. If TIFIA requested it,
then the process would begin.
9:10:18 AM
KRISTIN CURTIS, Legislative Auditor, Division of Legislative
Audit, Alaska State Legislature, began by assuring the committee
that the audit was conducted in accordance with generally
accepted government auditing standards and the formal procedures
adopted by the Legislative Budget and Audit Committee. "I stand
behind the report 100 percent," she stated. She informed the
committee that KABATA's response to the audit was reviewed as
part of the formal audit process. However, nothing contained in
KABATA's response caused the division to change the audit's
recommendations or conclusions. Ms. Curtis said she is present
today to reaffirm those recommendations and conclusions in the
audit.
9:11:02 AM
CHAIR JOHNSON surmised then that Ms. Curtis is comfortable with
the audit's outcome and stands by the findings.
MS. CURTIS replied yes.
9:11:24 AM
REPRESENTATIVE KELLER inquired as to what adjectives, such as
inaccurate or exaggerated, Ms. Curtis would use to describe
KABATA's response.
MS. CURTIS explained that auditing standards require that when
an agency doesn't agree with report conclusions and
recommendations, the auditor is to respond and it's included in
the report. She reiterated that the division did review
KABATA's response and the division's conclusions, including the
areas of disagreement, are included in the last two pages of the
report.
9:12:08 AM
MS. CURTIS, in response to Representative Keller, stated that
the division's conclusion regarding that [Knik Arm Crossing
(KAC) toll and revenue projections are] "overly optimistic" is
based on the number of deficiencies found, which are outlined in
recommendation 1. The conclusion is also based on the evidence
obtained through the contractor and the division's research
based on information from the Department of Transportation &
Public Facilities (DOT&PF), the Department of Labor & Workforce
Development (DLWD), the Institute of Social and Economic
Research, and review of the Matanuska-Susitna planning
documents. Therefore, it's a collective analysis and summary
conclusion.
9:12:53 AM
REPRESENTATIVE HERRON inquired as to why the Public-Private
Partnership (P3) agreement isn't part of the audit findings.
MS. CURTIS informed the committee that one of the original audit
objectives was to outline the balance of risks and rewards that
are embodied in the P3 agreement. The division did begin that
process, obtain the P3 agreement, and began the procurement
process to obtain extra assistance. Through that process and
interactions with KABATA, the division found that the P3
agreement wasn't final and subject to change. Therefore, the P3
agreement isn't ripe for audit and one can't audit a moving
target. At that point, the division discussed with KABATA that
the division wouldn't be reviewing the P3 agreement. The
aforementioned is considered a scope limitation and auditing
standards require that scope limitations be discussed in the
audit report, which was done in the objective scope and
methodology and on page 17 of the report conclusions.
9:15:11 AM
DAN FAUSKE, CEO/Executive Director, Alaska Housing Finance
Corporation (AHFC), Department of Revenue (DOR), acknowledged
Representative Gruenberg's concern yesterday regarding not
wanting to do anything to harm AHFC, which is an entrepreneurial
entity. He informed the committee that he has been [the
CEO/Executive Director of AHFC] under four governors and has
never been asked to kill legislation rather he has been asked to
fix things or make them better. [To that end,] Mr. Fauske said
that AHFC looks forward to working with KABATA, if given
opportunity to do so, as well as to accept any work that has
been done and keep the process moving. There has never been any
intention of slowing the process. He reminded the committee
that prior to the Alaska Gasline Development Corporation (AGDC)
being brought under AHFC, AHFC was a small organization. Mr.
Fauske opined that AHFC brings much to the table in support of
projects, including its own internal audit and systems that
would benefit KABATA. He expressed hope that the language in
[Amendment 2] is acceptable as it ensures that AHFC is
safeguarded and isn't onerous to the mission of KABATA, which he
characterized as a good mission.
9:18:06 AM
REPRESENTATIVE HERRON surmised then that KABATA has done well
but now it's near the end of the process and AHFC is being
brought in like a closer to finish the project.
MR. FAUSKE characterized Representative Herron's analogy as one
way to look at it. However, Mr. Fauske opined that AHFC could
benefit from the arrangement. He highlighted that AHFC is a
large organization with a large and diverse staff that would be
at the full disposal of KABATA. If AHFC is going to take on
this project, it would be AHFC's stated mission and goal to make
it a success. The work that has been done has to be reviewed,
and thus AHFC will seek a great deal of guidance from those at
KABATA. Therefore, it's a meld and blend to reach the goal. He
opined that time is money and delays cost nothing but money. In
closing, Mr. Fauske related his belief that AHFC brings a
benefit to KABATA in terms of helping to complete its mission.
9:20:07 AM
REPRESENTATIVE KELLER commented that he didn't believe anyone is
questioning motives and pointed out that Mr. Fauske is present
because he was requested to be in attendance. Representative
Keller then requested comment regarding that Amendment 2 doesn't
accept the state procurement already included in KABATA.
MR. FAUSKE informed the committee that since AHFC's inception it
has been excluded from the Administrative Procedures Act and
procurement. The AHFC is a self-standing entity owned by the
state, although it functions on its own. The debts of AHFC are
its own not those of the state. He recalled 10-15 years ago
when a great deal of attention was paid to the resources of AHFC
and AHFC cautioned folks not to pierce the corporate veil. That
is, when entities that operate differently than AHFC are brought
into it, the result is the need to explain it to investors. The
aforementioned is no small task for AHFC, which is an
organization with an AA+ credit rating with billions of dollars
on the street. Although AHFC's record is good and it operates
similarly to the state, it's an independent entity of the state,
which creates unwarranted problems in situations in which an
entity is brought on as a subsidiary to AHFC but operates
differently than AHFC.
9:22:21 AM
REPRESENTATIVE KELLER inquired as to whether that decision not
to use the state procurement process will cause delay or will
cause work that has already been done [by KABATA] to be
repeated.
MR. FAUSKE answered that he didn't believe so. In fact, he
related his belief that it might expedite the process as AHFC is
quick. The AHFC plans to review everything in place,
particularly since the statement in [Amendment 2] that all
commitments, etcetera must be honored is of concern. In regard
to the work going forward, Mr. Fauske opined that AHFC isn't an
impediment at all based on AHFC's systems. He noted that AHFC
does a lot of work with local contractors and is time driven due
to the seasons, and therefore AHFC is quick and effective. With
regard to procurement, for new request for proposals (RFPs) or
bills AHFC always forms a committee with folks from outside of
the corporation to analyze it. Again, Mr. Fauske characterized
AHFC's process as an enhancement.
9:24:27 AM
The committee took a brief at-ease.
9:25:39 AM
CHAIR JOHNSON directed attention to the highlighted version of
Amendment 2, which was provided to the committee.
9:26:07 AM
JOSHUA WALTON, Staff, Representative Mia Costello, Alaska State
Legislature, directed attention to the highlighted and annotated
version of Amendment 2 and the key to the highlights at the top
of the first page of Amendment 2.
9:27:30 AM
REPRESENTATIVE GRUENBERG related his understanding that
Amendment 2 is a substitute for the entire legislation.
MR. WALTON replied yes.
9:28:50 AM
MR. WALTON then began his review of Amendment 2, which begins
with a title change. The change to Section 1 adds language to
the AHFC enabling statutes that establishes the Knik Crossing
Development Corporation as a subsidiary corporation and provides
that the AHFC Board of Directors will be the KCDC Board of
Directors. Section 2 embodies a number of changes to AS 18.56
that establish, enable, and describe KCDC. Section 2(a) is the
word-for-word purpose of KABATA from AS 19.75.011, except that
all references to KABATA have been changed to KCDC. Section
2(b) is also a provision that applies to KABATA per AS
19.75.021(b) that in Amendment 2 now refers to KCDC. Proposed
"Sec. 18.56.610. Powers and duties.", paragraphs (1)-(5) and
subsection (b) on page 2, lines 3-28, of Amendment 2, specifies
additional powers, which are verbatim from the KABATA powers in
AS 19.75.111(a) and AS 19.75.111(b) and (b)(5). He then
directed attention to proposed "Sec. 18.65.615. Bonds." and the
language, "The Knik Crossing Development Corporation may issue
bonds in an aggregate amount not to exceed $600,000,000 plus the
cost of issuance," which is [new language] as proposed in
CSHB 23(FIN). Although there isn't a direct corollary regarding
the language on page 2, line 31 to page 3, line 3, referring to
the amount of refunding bonds that may be issued, he recalled
that there was discussion and that the powers are very similar
to what KABATA would need as well. Section 2(b)-(d) are by-and-
large powers that exist in KABATA's enabling legislation. In
fact, in most cases the language is taken [from KABATA's
enabling legislation] verbatim. He then pointed out that
proposed "Sec. 18.56.620. Capital reserve fund" is verbatim
language from KABATA's enabling language in AS 19.75.221(c),
(d), (e), and (h) and can be found on page 3, line 29, through
page 5 line 7, of Amendment 2. However, HB 23 adds restrictions
regarding the deposits into the reserve fund, which has been
included verbatim in Amendment 2 [on page 5, lines 9-14]. On
page 5, lines 15-25, the language creates new provisions that
establish an "availability payment reserve fund." He
highlighted that the language establishing the "availability
payment reserve fund" is very similar to the language on page 5,
lines 9-14, of Amendment 2. The language in paragraph (f) on
page 5, line 26, through page 6, line 2, of Amendment 2 says
that the availability payment reserve fund is to be used
specifically for the purpose of making the availability
payments. Furthermore, once the availability payments are
complete and the bridge is drawing revenue, that revenue is
deposited in a different fund to be used for other purposes.
Mr. Walton then pointed out that the capital reserve fund
provisions on pages 3 through the beginning of page 5 of
Amendment 2 enable KCDC to establish reserve funds as necessary.
He noted that the language provides quite a bit of latitude for
the creation of reserve funds. On page 6 of Amendment 2,
paragraph (g) includes reporting requirement language as found
in CSHB 23(FIN) with a substantive change in which the language
is adjusted such that KCDC has to annually report not later than
January 30.
MR. WALTON then pointed out that the moral obligation cap of
$1.4 million that was inserted into CSHB 23(FIN) is retained in
paragraph (i) of Amendment 2 on page 6, lines 13-17. Page 6,
lines 18-22, of Amendment 2 specifies the definition of "capital
reserve fund requirement." Proposed "Sec. 18.56.625. Exemption
from taxation." incorporates the exemption of real and personal
property of KCDC from state and local taxation. He highlighted
that part of the aforementioned provision is in existing statute
and part of it is language added by CSHB 23(FIN). He then
directed attention to proposed "Sec. 18.56.630. Exemption from
local regulation." located on page 7, lines 14-17, of Amendment
2, which embodies powers that KABATA already possesses in AS
19.75.911. The provision embodied in proposed "Sec. 18.56.635.
Liability for payment of tolls." is something that KABATA
already has in AS 19.75.915. From this point on, most of the
changes encompassed in Amendment 2 are conforming changes that
remove references to KABATA and replaces them with KCDC. He
specified that from page 7, line 23, through page 8, line 8
removes references to KABATA, which would cease to exist. On
page 8, Section 4 of Amendment 2, KCDC would be added to the
state procurement code exemption. As the language specifies
AHFC has always been exempted from the state procurement code.
Section 5 repeals the KABATA enabling statutes. Section 6, page
8, line 21, through page 9, line 3, of Amendment 2 is transition
language. The transition language transfers all KABATA assets,
intellectual property, obligations, debts, etcetera to KCDC and
provides that the existing KABATA board would serve in an
advisory capacity to the KCDC board for one year and would do so
without compensation but would receive per diem and expenses
related to their work.
9:42:29 AM
CHAIR JOHNSON clarified that this committee is only dealing with
areas that aren't highlighted as they are new provisions not
powers that KABATA already has nor powers granted to KABATA
under [CSHB 23(FIN)]. He then related the desire to ensure that
the process isn't slowed down and AHFC isn't burdened with
something it doesn't want.
9:45:15 AM
JEFF STARK, Chief Assistant Attorney General -Statewide Section
Supervisor, Transportation Section, Department of Law; General
Counsel, KABATA, began by informing the committee that he has
worked as the general counsel for KABATA for about the last two
years, but has worked on the Knik Arm Bridge project for the
last five to six years. Mr. Stark expressed concern with
Amendment 2, as currently drafted. He pointed out that KABATA
has been attempting to develop this bridge for 10 years now
under a public-private partnership such that a private developer
would design, construct, finance construction, and operate and
maintain the bridge for 35 years. In return, the private
developer would receive a payment from KABATA, which would use
the toll revenues to pay the developer. The KABATA has started
the process of selecting the developer. In fact, in 2011 KABATA
went through a request for qualifications process and short-
listed three developers who are interested in building the
bridge. For the last two years, KABATA has been working with
those groups to put together the agreement that would govern the
almost 40-year relationship on which the developers would bid.
According to KABATA's schedule, KABATA would like to put out a
formal RFP to these three prospective developers this summer,
select a developer at the end of the year, and close about a
year from now, realizing any number of variables could delay the
process. The missing piece to develop the project in that
fashion is the language contained in CSHB 23(FIN) relating to
the moral obligation. He explained that the moral obligation
provision in CSHB 23(FIN) creates a reserve account and a
commitment from KABATA to make payments from that reserve
account to the developer and maintain that reserve account at a
certain level. When the reserve account is depleted there is a
commitment from KABATA to request from the legislature and the
governor to restore the account. The aforementioned is referred
to as a moral obligation because the legislature can't bind
future legislatures, and thus there is no legal obligation for
the legislature to appropriate funds if KABATA requests it from
the legislature. Creation of the moral obligation structure
signals to the developers and financial markets that the
legislature will appropriate additional funds that KABATA
requests. The financial markets will rely on that
representation from the legislature. Therefore, the financial
markets will react badly if the legislature doesn't appropriate
the funds requested from KABATA, which will impact the state's
credit rating.
9:50:18 AM
CHAIR JOHNSON questioned whether those funds are already
[included] in the legislation.
MR. STARK replied yes the language is in Amendment 2, but not in
a form that works for a P3 agreement. In further response to
Chair Johnson, Mr. Stark stated that it's a fixable problem if
the original HB 23 is used. The moral obligation language in
HB 23 would work for a P3 project, whereas the language in
Amendment 2 won't work. He directed attention to subsection (e)
on page 5, line 15, of Amendment 2 and specified that the
"availability payment" is the problem. The name and the
substantive language in subsection (f) are problematic. He
clarified that the availability payment is only one of the
payments that will be owed to the developer under the contract.
He then directed attention to subsection (f) on page 5, line 26,
of Amendment 2, which read: "All money held in the availability
payment reserve fund shall be used solely for the payment of
annual availability payments ...." As mentioned earlier, the
developer is going to design, build, operate, maintain, and
finance the bridge. The developer will put in $80-$100 million
of its own funds into the project and will borrow the remainder,
which he estimated to be $600-$700 million, in return for which
the developer will receive the availability payment monthly and
will only receive it if all goes well. There is the chance that
everything won't go well and two other types of payments that
could arise under this type of agreement with the developer.
One payment is a relief event, which is an event that could
happen under the regular structure of the agreement that is they
are cost risks borne by the developer, but will be shifted back
to KABATA because it will be more cost effective to do so. In
some cases, although the risk is small/unlikely, it's simply too
large for the developer. For example, earthquakes and other
force majeure events could be a risk the developer couldn't
handle but the state could because the damage would likely be
such that there would be federal aid and damage to the bridge
would be the least of the problems. Therefore, such risk should
be shifted back to KABATA.
9:55:49 AM
CHAIR JOHNSON surmised then that such language could be placed
into Amendment 2 and still function.
MR. STARK answered yes, and pointed out that the original
language of HB 23 includes such language that works well.
Returning to the situation in which all doesn't go well with the
project, Mr. Stark noted that there are also termination
payments.
9:56:17 AM
REPRESENTATIVE CHENAULT inquired as to whether the [moral
obligation] language has changed in the various versions of
HB 23.
MR. STARK specified that the only change in the [moral
obligation] language from the original HB 23 [to CSHB 23(FIN)]
is the addition of a cap in the amount of the moral obligation.
There was concern with the original legislation in which there
was an unlimited moral obligation. Therefore, the legislation
was changed to include a $1.14 billion cap in CSHB 23(FIN) in
order to cover the termination payment. If the agreement is
terminated at the worst moment, the total amount that might be
payable to the developer plus the amount of the previous
availability payments could reach $1.14 billion. If a developer
builds the bridge and the agreement is terminated for
convenience of the state because of a state default, default by
the developer, or by order of the court, the bridge will always
belong to the state. Therefore, if the agreement is terminated,
the state will have to pay something to the developer and the
amount paid will be dependent upon the reason for the
termination. For instance, in a situation in which the state
terminated the agreement due to its own default or for
convenience, the state will pay a lot. However, if the
agreement is terminated due to developer default, the state will
pay much less. When marketers/developers look at this project,
one has to cover all three of those payments in the P3 project
otherwise no developers will be interested and it will be
difficult to find anyone willing to finance the project.
CHAIR JOHNSON asked whether this language could be addressed and
[KCDC] still housed under AHFC.
MR. STARK replied yes, clarifying that it's not a problem with
AHFC but rather with the language of Amendment 2.
CHAIR JOHNSON announced his intention to take the input of Mr.
Stark and develop a committee substitute (CS) to present to the
committee this afternoon. He then expressed the need to fix
what can be fixed [in Amendment 2] and determine whether
Amendment 2 has [provisions] that can't be fixed or passed.
MR. STARK opined that inherent in transferring the project to
AHFC the project will be slowed down. If the desire is to
proceed in a P3 process, the transfer will cause a slowdown
because KABATA is in the midst of a procurement now.
Transferring the project to AHFC will effectively end
procurement. He noted that he suggested to AHFC language that
would transfer that procurement to AHFC, but AHFC expressed
extreme concern about that. Therefore, he surmised that AHFC
isn't interested in taking on the project under those terms.
10:01:29 AM
REPRESENTATIVE OLSON inquired as to how many attempts there have
been to obtain P3 funding.
MR. STARK related that although KABATA began the process in 2008
when the project wasn't as mature as it is now, there were some
outstanding environmental permitting issues that have since been
resolved. Furthermore, the financial collapse of 2008 changed
the entire financial world, including the P3 agreement world.
Therefore, KABATA has spent the last several years solving the
permitting issues and revamping the agreement. The agreement,
he noted, is substantially different than it would've been in
2008. He stated that the project is at a point of being
virtually ready to go.
10:02:53 AM
REPRESENTATIVE HERRON inquired as to what happens to the process
if HB 23 isn't passed out of the House.
MR. STARK answered that if HB 23 falters and there is no moral
obligation provision, KABATA will be delayed for a year. The
problem with delay, in part, relates to interest rates that
currently are extremely favorable. Such a favorable environment
in terms of interest rates would have to last for two years as
the project won't close for a year. Furthermore, delay
increases construction costs. Mr. Stark emphasized that one of
the biggest risks relates to TIFIA as there is a limited amount
of TIFIA funds that are given, upon qualification, on a first-
come first-served basis. There are a lot of projects nationwide
that are lining up for about $17 billion in TIFIA funds.
Although it's possible that more funds could be appropriated to
TIFIA, there is no guarantee and it's entirely possible that all
those TIFIA funds would be allotted if another year goes by.
Moreover, TIFIA funds are a great deal for this project and
might be what makes this project financially viable. The TIFIA
funds certainly are advantageous to the state and delaying the
project does place TIFIA funds at risk.
10:05:28 AM
CHAIR JOHNSON recalled testimony that [the KABATA project] was
number four on the list for TIFIA.
MR. STARK related his understanding that really only one project
has been invited to submit a TIFIA application, everyone else
has submitted letters of interest. That one project isn't
KABATA, he stated.
10:06:17 AM
REPRESENTATIVE HERRON asked whether Amendment 2 would be a good
option rather than taking the risk of HB 23 faltering.
MR. STARK characterized it as a policy call and that it's not
appropriate for him to answer.
REPRESENTATIVE HERRON stressed, however, that many are depending
on DOL to help the legislature make that policy call.
MR. STARK related his assumption that if Amendment 2 passed and
the moral obligation language was fixed, AHFC would first have
to study the project and determine whether it's appropriate to
proceed on the P3 process path KABATA has begun or to change the
path. Although he couldn't predict how much time such [study
and determination] would require, he opined that it would take a
considerable amount of time as it's a large, expensive, and
complicated project. On the other hand, if the project
proceeded through the P3 process and KABATA's current
procurement isn't preserved, then the project would start over
at square one for the procurement that is the selection of the
developer. The aforementioned will delay the project, he
opined. The first step for a P3 procurement is a request for
qualifications. A project following the P3 procurement can't be
opened to everyone because it's so expensive to bid that no one
would bid. The cost to put together a bid is about $10 million,
and therefore bidders need to know that with three short-listed
proposers they have a reasonable chance of winning the bid and
will put up the money to bid. The aforementioned process will
be a delay of six months.
CHAIR JOHNSON related his understanding that the request for
qualifications is already out.
MR. STARK replied yes, but clarified that if Amendment 2 is
enacted that already done work would be lost and the process
would have to start over. In further response to Chair Johnson,
Mr. Stark explained that the work that's already done is under a
KABATA procurement and KABATA will no longer exist.
CHAIR JOHNSON inquired as to why that's the case if all of
KABATA's assets, obligations, etcetera are rolled into AHFC.
MR. STARK explained that's because it's a process not an asset.
As mentioned earlier, Mr. Stark said that he had suggested
language to AHFC that would make it clear that the [procurement
work] goes to AHFC. However, AHFC wasn't interested in that
language and as he understood it, AHFC didn't want to adopt
KABATA's procurement.
CHAIR JOHNSON surmised then that if the procurement matter was
addressed in Amendment 2, then the statements regarding delay
wouldn't be accurate.
MR. STARK agreed that part [of the delay] wouldn't be accurate,
but there will still be some delay due to AHFC taking over and
trying to get its arms around the project.
10:12:18 AM
REPRESENTATIVE OLSON asked whether KABATA has made previous
attempts to obtain TIFIA funding that weren't via a P3
[procurement] submission.
MR. STARK confirmed that in the past KABATA has submitted
applications for TIFIA that were rejected. However, when those
applications were submitted KABATA was aware that its project
wasn't as mature as others, there were limited funds in TIFIA,
there were competing projects, and the chances of obtaining the
TIFIA funds were remote. The KABATA felt it was worthwhile to
submit the applications because the chances of obtaining TIFIA
funds weren't zero. Furthermore, the selection process at the
time included subjective criteria and KABATA felt it was best to
place the project in front of TIFIA to receive feedback that
could be helpful so that they would have a much better chance of
obtaining the TIFIA funds when the project was mature. Since
those prior applications, the TIFIA process has been amended,
the selection process is much different, and more money is
available. At this point, KABATA has good reasons to believe
that if the moral obligation language can be adopted, TIFIA
financing will be available. Although the TIFIA funding isn't a
given, it looks very favorable. In further response, Mr. Stark
recalled that KABATA submitted applications to TIFIA four times.
10:14:31 AM
REPRESENTATIVE KELLER related his understanding that AHFC is
unwilling to take on the agreements of KABATA under the state
procurement code, including the developer short list. He then
inquired as to whether there are other items besides the short
list that would not be picked up by AHFC.
MR. STARK said he didn't believe so. He pointed out that one of
AHFC's options is to simply scrap the P3 [procurement] process
and build the bridge in another manner. At that point, AHFC
would be starting from scratch and he didn't know how long that
would take.
CHAIR JOHNSON interjected that he didn't want to conjecture
about what AHFC will do.
MR. STARK clarified that what is being discussed is a P3
procurement, but there are other ways to develop this project
outside of a P3 procurement. Without speculating how long
another process would take, he said that another process would
mean AHFC is starting over. If AHFC were to continue with the
P3 process and kept the three short-listed proposers, then AHFC
would simply be stepping in where KABATA is now and there isn't
a lot left to do. If the short list of proposers is lost, there
is a lot more work to be done, he opined.
10:18:47 AM
REPRESENTATIVE HERRON related his understanding that the sponsor
of HB 23 holds Mr. Stark in the highest regard and has told him
that if Mr. Stark can make [Amendment 2] work, he may be
amenable to accepting the amendment. He then asked whether Mr.
Stark and others can work with AHFC so that there "is a huge
potential of this process acquisition."
MR. STARK surmised that Representative Herron is asking whether
legislation can be crafted that would allow AHFC to take
KABATA's project as-is, including the current procurement, and
move forward. Mr. Stark, in response, related his belief that
the answer is yes. However, he expressed concern that even with
language in statute specifying that the procurement passes to
AHFC, there might be an attempt to challenge [the transfer]
because it's a KABATA procurement proceeding under KABATA's
regulations that were crafted and adopted to this process and
AHFC is exempt from the procurement code and has no regulations.
On the other hand, there would be an excellent argument if the
statute was crafted properly to overcome that risk.
10:21:04 AM
REPRESENTATIVE GRUENBERG inquired as to whether Mr. Stark has
any other problems with this [proposal].
10:22:22 AM
CHAIR JOHNSON recessed the committee to the call of the chair.
1:34:48 PM
CHAIR JOHNSON called the House Rules Standing Committee back to
order at 1:34 p.m. Upon reconvening, Representatives Hawker,
Herron, Keller, Olson, and Johnson were present.
Representatives Chenault and Gruenberg arrived as the meeting
was in progress. Also in attendance was Representative Pruitt.
1:34:52 PM
MR. STARK, regarding Representative Gruenberg's question, said
that his major concerns with Amendment 2, as written, were
discussed this morning. However, he noted the following minor
points. On page 2, line 27, of Amendment 2 the reference to
"department" comes from Title 19 [of the KABATA statutes] and is
defined as the Department of Transportation & Public Facilities
whereas he wasn't sure whether the term is even defined in Title
18 and if it is it refers to the Department of Revenue. On page
3, line 16, subsection (d) of Amendment 2, the language applies
to KCDC's bonding authority and requires an agreement that would
be part of bond issuance and contain a covenant that KCDC "will
at all times maintain fees, rents, tolls, rates, or other
charges sufficient" to pay all operation and maintenance costs,
debt service costs, and various other expenses of the bridge.
If the project is developed as a P3 [procurement] project, then
that language doesn't come into play. However, if KCDC intends
to finance the project more conventionally by issuing bonds
itself, it may be difficult to impossible to set tolls at a rate
that allows payment of all those expenses, at least in the early
years. He related that KABATA had intended to obtain an
appropriation to cover the early, lean years and set the tolls
not at the revenue maximizing rate but rather at a rate that
makes sense for drivers and would allow for traffic to build
over time. Mr. Stark opined that perhaps AHFC should provide
input as to whether they believe the aforementioned is a
problem. He then expressed concern with page 5, line 29 through
page 6, line 2, of Amendment 2 because under federal law if any
federal financing is used, including TIFIA funds, those revenues
will have to be used for projects eligible for Federal Highway
Administration (FHWA) funds, and thus can only be used for
highway projects. Although the aforementioned language doesn't
preclude that, he said it's unclear to him why one would want to
put the funds in a reserve fund. Furthermore, Mr. Stark opined
that it's important for people to understand that no matter
where the funds go, it will have to have a limited purpose for
its use.
1:41:38 PM
CHAIR JOHNSON suggested that the language "designated for" could
address Mr. Stark's last concern.
MR. STARK agreed that the concern can be addressed by either
eliminating the requirement or by indicating the reserve fund
will be used only for appropriate purposes under federal law.
1:42:02 PM
MR. STARK, adding to his list of concerns, informed the
committee that he always has concerns with legislation like
HB 23, which is complex and has been introduced late.
1:43:08 PM
REPRESENTATIVE GRUENBERG inquired as to whether Mr. Stark is
prepared to specify how high the tolls should be to meet the
requirements of subsection (d) on page 3 of Amendment 2.
MR. STARK replied no. However, he offered his understanding
that KABATA is looking at revenue shortfalls in the first couple
of years in the range of $30 million. Perhaps AHFC can arrange
financing that reduces the debt service and the amount [of
revenue shortfalls]. Mr. Stark opined that it's not clear to
him that AHFC could reduce it enough to allow tolls to cover all
of their debt service and operating expenses at the rates KABATA
was considering. He reiterated that he couldn't speculate how
high the rates would have to be to do so.
1:44:24 PM
REPRESENTATIVE GRUENBERG inquired as to whether KCDC would be
eligible for bankruptcy protection.
MR. STARK surmised that AHFC would create KCDC as a nonprofit
corporation, and thus he doesn't see any reason why it wouldn't
be eligible for bankruptcy protection. In further response to
Representative Gruenberg, Mr. Stark explained that AHFC is a
public corporation and probably would file for bankruptcy
differently. Moreover, he said he wasn't prepared to offer
comments regarding the impact bankruptcy of KCDC would have on
AHFC. However, since KCDC would be a separate subsidiary
corporation, presumably the bankruptcy of KCDC wouldn't drag
AHFC into bankruptcy.
1:46:08 PM
REPRESENTATIVE GRUENBERG, referring to subsection (f) on page 5
of Amendment 2, asked whether the federal requirement that the
project must be eligible for FHWA funds would limit the
viability of KCDC and the entire project. If the aforementioned
is the case, he inquired as to how it would limit it.
MR. STARK answered that he didn't see how the federal
requirement would limit KCDC. The toll revenues, which are
clearly eligible for FHWA funds, would be used on the bridge
project. Once the bridge is fully paid for or there is a
surplus of toll revenues, then one would have to determine for
what purpose one would use that surplus and it would be limited
to projects eligible for FHWA funds. He stated that it doesn't
impact KCDC's ability to do or finance the project.
1:47:33 PM
CHAIR JOHNSON inquired as to whether the aforementioned federal
requirement is necessary to be in the legislation since it's
already law.
MR. STARK responded that it's probably not necessary to include
it in the legislation so long as KCDC is aware of the law and
abides by it.
1:48:03 PM
REPRESENTATIVE HERRON observed that if HB 23 isn't amended, it
could be difficult to pass the House, although the chair has
been working very hard to get around that hurdle.
1:49:24 PM
REPRESENTATIVE GRUENBERG asked whether the transfer to AHFC
changes any of the financial structures such as using a public-
private partnership, P3, from the existing legislation.
MR. STARK pointed out that KABATA is a public corporation of the
state and is able to procure the Knik Arm Bridge project through
a P3 process. Therefore, he said he couldn't think of any
reason why KCDC, as a subsidiary of a public corporation of the
state [AHFC] couldn't do so as well.
1:50:39 PM
REPRESENTATIVE KELLER requested further explanation of the
letter of interest that is submitted to TIFIA, particularly
regarding whether KABATA has submitted it already. He then
inquired as to the significance of the ranking [of the project]
in terms of [testimony he recalled indicating KABATA] "is fourth
on the list." He also requested explanation of the preliminary
investment grade rating that KABATA has received, including the
time and cost it took to obtain the rating.
MR. STARK explained that the first step in applying for a TIFIA
loan is a letter of interest, which KABATA has submitted. The
letter of interest includes an indicative rating from a
nationally recognized bond-rating firm. The TIFIA responded
that before KABATA could be invited to submit an actual
application, it would need the moral obligation language
contained in [CSHB 23(FIN)] as well as an appropriation that
would fund the reserve account that's part of that moral
obligation. With regard to comments that KABATA is fourth in
line, he guessed that KABATA may have been fourth to submit a
letter of intent. He informed the committee that a number of
entities have submitted letters of intent and the total value of
those projects is approaching the total amount of TIFIA funding
available. If this project shifts to KCDC under AHFC, they
would have to submit a letter of intent and indicative rating,
the process for which takes a couple of months. At that point,
as Mr. Viteri testified, unless KABATA would've been able to
submit its application because it obtained the moral obligation
language, [KCDC] would be at the same point as KABATA. To add
further clarity, Mr. Stark explained that once KABATA receives
the moral obligation [language], it would then resubmit to TIFIA
and there is a good chance it would be invited to apply for
TIFIA financing. Assuming KABATA qualifies, the project would
be eligible for TIFIA financing. If KABATA remains the
developer of the project, the moral obligation [language] is
included, and some seed money is placed in the reserve account,
there is a good chance that KABATA could get in line in very
short order. On the other hand, KCDC would have a few steps to
go through before reaching the aforementioned point.
1:55:03 PM
CHAIR JOHNSON inquired as to why the letter of interest wouldn't
be included in the transfer of assets and etcetera.
MR. STARK specified that it's because KCDC is a different entity
and from speaking with FHWA, he understood it wanted a new
letter of interest.
1:55:30 PM
REPRESENTATIVE HAWKER asked if Mr. Stark, when referring to the
first step in qualifying for TIFIA funds, meant [KABATA] having
the authority to avail itself of a moral obligation of the state
or having it funded to some degree. If it's to fund the moral
obligation, he inquired as to the amount at which it needs to be
funded.
MR. STARK answered that the authority for the moral obligation
in [CSHB 23(FIN)] is necessary, which is the first step. He
related that TIFIA has also indicated the need for funds [in a
reserve account] as well. The current capital budget includes
$10 million, which Mr. Stark characterized as a bit small,
although KABATA believes it's a sufficient amount. Mr. Stark
opined that a larger amount would be better.
1:56:50 PM
REPRESENTATIVE OLSON inquired as to whether the four previous
KABATA submissions included moral obligation clauses.
MR. STARK replied no, the moral obligation clause wasn't part of
KABATA's applications in the past. In further response, Mr.
Stark explained that the moral obligation is important for TIFIA
and because the developers are insisting on it if they are going
to put forth $700-$800 million of their own funds. That hasn't
changed and in the past KABATA has attempted to obtain the moral
obligation language. In terms of TIFIA, the process has
changed. The letter of intent from KABATA was submitted and
TIFIA specified that a moral obligation is necessary in order to
be invited to submit an application.
1:58:10 PM
CHAIR JOHNSON asked if he understood Mr. Stark's earlier
testimony correctly that [KABATA] would have to request $30
million annually from the legislature to make up for the
shortfall from the tolls.
MR. STARK explained that KABATA's financial plan by the time the
bridge opens includes a total appropriation in the amount of
$150 million, which would go into the reserve account. All
future tolls and revenues of KABATA would go into the reserve
account as well. With that $150 million, KABATA believes it
might not ever have to come back to the legislature and ask for
funds. If KABATA did have to return to the legislature for
further funding, it would be several years later when it's time
to expand the capacity of the bridge. The aforementioned would
only occur when the bridge is a success. Mr. Stark clarified
that KABATA isn't planning on making $30 million requests to the
legislature annually, but rather planning on getting the seed
money upfront and running with it. However, that assumes the
toll revenues are what KABATA expects them to be, and thus if
toll revenues fall short, then KABATA would request from the
legislature additional funds.
1:59:43 PM
CHAIR JOHNSON asked whether the aforementioned is based on
KABATA's projections, not including what the audit predicts.
MR. STARK explained that KABATA normally discusses a base case,
which is considered the 50 percent likely level of tolls. The
KABATA has also done projections based on a 95 percent likely
level of tolls, which means toll [receipts] are very low.
Although it still would take a few years for KABATA to run out
of the $150 million under the 95 percent likely level of tolls,
KABATA would still seek funds from the legislature and likely do
so repeatedly.
2:01:03 PM
MR. FAUSKE related that although he is supportive of Amendment
2, as written, he would like to defer to Mr. Vassar regarding
the moral obligation language.
2:01:38 PM
KEN VASSAR, Of Counsel, Birch Horton Bittner & Cherot; Bond
Council, Alaska Housing Finance Corporation, informed the
committee that he has reviewed the two types of reserve funds
that were in the original HB 23. There is the more typical
bond-debt service fund and a farther-reaching reserve fund, the
second of which Mr. Stark mentioned earlier today. In the
course of preparing the amendment that would facilitate the
transfer of KABATA from a state-owned public corporation to a
subsidiary corporation owned by AHFC there was some confusion
about the second reserve fund and the best language for it. Mr.
Vassar related that [AHFC] has no objection to using the second
reserve fund, using the language in HB 23, and conforming the
amendment to reflect that language with one small exception. He
related his understanding that Mr. Stark had discussed the
exception with other assistant attorneys general and has agreed
that the one change won't hurt KABATA. Therefore, for the
second reserve fund, he said [AHFC] is agreeable to a change
that would return the language to the original HB 23 language
for that reserve.
2:04:17 PM
REPRESENTATIVE HAWKER inquired as to whether Mr. Vassar is
referring to the language in subsection (g) on page 6 of
Amendment 2.
MR. VASSAR referred to subsection (d) on page 5 of Amendment 2.
He pointed out that subsection (e) on page 5 of Amendment 2
refers to an annual availability payment, which he opined is
where HB 23 got off track. Therefore, the [original] HB 23
language could be used for that fund.
2:05:26 PM
MR. VASSAR, in further response to Representative Hawker,
proposed deleting all of subsections (e) and (f) [of Amendment
2] and in lieu of those add the language from page 3, starting
line 8 of [CSHB 23(FIN)]. He then pointed out that language on
page 3, lines 10-21, of [CSHB 23(FIN)] specifies the three
things for which the particular fund can be used. However, he
noted his understanding from Mr. Stark and others that the
language on page 3, lines 14-16, of CSHB 23(FIN) wouldn't carry
over. Furthermore, subsection (j) will also need to be
incorporated into page 3, lines 27-30 of CSHB 23(FIN).
2:08:28 PM
CHAIR JOHNSON surmised then that Mr. Vassar is prepared to
remove the language and return to the original HB 23 language,
which he further surmised wouldn't be of concern for Mr. Stark.
MR. VASSAR replied yes.
2:09:57 PM
MR. FAUSKE, regarding the potential for delay due to the
proposed transition to AHFC, acknowledged that he couldn't
ensure the committee that there won't be delays. He noted that
he has been advised by some who say there is time and no sense
of urgency, rather there is a desire to move the project as
quickly as possible. With regard to the sense of urgency, Mr.
Fauske said he would have to decline an offer that would require
AHFC to accept all contracts, obligations, etcetera of another
entity without time to review them. However, Mr. Fauske opined
that there is a way to do this with language included in
[Amendment 2] that works with the transition and keeps those
matters alive that are possible to do so. He related his
understanding that the most urgent matter is to address the
audit and moving beyond that, which can occur concurrently with
going forward.
2:11:45 PM
REPRESENTATIVE HAWKER recalled that during his tenure with the
legislature, it has spent much time studying mega projects as is
the case with KABATA. From that [study/review], he opined that
the legislature has accepted and respected the counsel it has
received on mega projects by the Institute of Project Analysis
(IPA). The IPA has offered that successful mega projects can't
be schedule driven. Therefore, he expressed concern with
driving to meet a schedule as that often results in failure as
demonstrated by schedule-driven projects throughout the world.
2:13:26 PM
REPRESENTATIVE KELLER pointed out that the reference to the
urgency of the project is different than the urgency of the
issue, which is related to the timing of the session. Although
the TIFIA funds alone may not be enough [to drive the project],
the significant amount of possible TIFIA funds create a sense of
urgency in terms of taking advantage of an opportunity.
2:14:26 PM
CHAIR JOHNSON remarked that the urgency he observes is having a
letter before TIFIA in order to keep the project in the mix.
MR. FAUSKE highlighted that AHFC has recently completed a fairly
significant phase and project under AGDC, which is a $7.5
billion project. He noted his agreement with Representative
Hawker that there is a way to do and progress these [mega]
projects that he has observed firsthand. He stressed that it's
proven that when projects go south it's because people didn't
adhere to strict policies. He acknowledged that some fear that
AHFC is a bureaucratic monstrosity, but he urged folks to review
what AHFC did with AGDC, which is a far larger project than the
bridge. Mr. Fauske emphasized that he won't be driven by
schedules to the point of losing sight of the main goal.
Furthermore, until the audit has been answered in a satisfactory
manner, he challenged anyone to secure financing; financing that
isn't costly. He informed the committee that anytime bonds are
issued in the front of the OS there is a section entitled
"Significant Events." He indicated that [the audit] certainly
qualifies as a significant event and investors, rating agencies,
and others will want the facts. He then indicated that
[addressing the issues and maintaining sight of the original
goal] can occur at the same time.
2:17:37 PM
REPRESENTATIVE KELLER pointed out that the committee has been
discussing whether there will be a delay due to the transition
from KABATA to AHFC, which presumes urgency. However,
discussing whether the delay is appropriate is different.
CHAIR JOHNSON surmised that the committee is asking for a
guarantee that there will be no delays, although everyone knows
there are no guarantees. However, he expressed the need to do
what's possible to avoid creating delays. He then related his
understanding that Mr. Fauske isn't discussing creating delays
but rather not being held to a [schedule] if issues arise in the
future.
2:19:17 PM
STACY SHUBERT, Director, Governmental Affairs & Public Relation,
Alaska Housing Finance Corporation, Department of Revenue,
regarding the public-private partnership and the short list of
potential partners that KABATA has been working with, said that
AHFC sees no reason why there would be any challenges with its
procurement process. However, she deferred to Ms. Cedergreen
for further comment.
2:19:26 PM
NOLA CEDERGREEN, Director, Administrative Services, Alaska
Housing Finance Corporation, Department of Revenue, began by
noting that she's also the chief procurement officers for AHFC.
She informed the committee that there is nothing in AHFC
regulations that would prohibit AHFC from recognizing the
process described earlier as a request for qualification and
creating a short list of potential offerors. However, AHFC's
regulations do allow it to follow the RFQ process and then issue
an RFP process, which under AHFC's regulations would be
referenced as a limited procurement to those qualified offerors.
Therefore, Ms. Cedergreen didn't expect any problems with the
procurement process itself.
2:20:17 PM
CHAIR JOHNSON related his understanding that when KABATA was
building its procurement plans it came to AHFC for guidance as
to how to put such plans together.
MS. CEDERGREEN confirmed that was the case, adding that she
shared AHFC's procurement regulations with KABATA several years
ago. Upon review of KABATA's procurement regulations, Ms.
Cedergreen said she found the vast majority to be very similar
if not identical to AHFC's procurement regulations.
2:20:52 PM
REPRESENTATIVE KELLER surmised then that the fact that under
Amendment 2, AHFC isn't under the state procurement program
won't jeopardize the situation with the short-listed
contractors. He related his understanding that [the state]
spent $6 million and the three short-listed contractors are
poised to spend millions. He reiterated his understanding that
AHFC not following the state procurement code won't prevent AHFC
from picking up [the short list] and continuing.
MR. CEDERGREEN replied yes, AHFC routinely issues RFQs and
identifies firms that are qualified for performing professional
and other services for the corporation and subsequently issues
an RFP with specifications and awards [the contract] to an
offeror. Under the provisions of AHFC's procurement regulations
it's referenced as limited procurement.
REPRESENTATIVE KELLER surmised then that although AHFC isn't
under the procurement of the state AHFC is allowed to fulfill
the obligations incurred by KABATA, which were under the
procurement standards of the state.
MR. FAUSKE added that Ms. Cedergreen, her staff, and others were
instrumental when AGDC was incorporated into AHFC, and thus AHFC
is very familiar with how it works.
2:23:03 PM
REPRESENTATIVE GRUENBERG directed attention to page 3, line 12,
of Amendment 2, which specifies a rate of 11 percent rate. He
inquired as to why that rate was chosen as he recalled that the
state could borrow at about 4 percent.
MS. SCHUBERT pointed out that the language to which
Representative Gruenberg referred is [existing statute] relating
the powers of KABATA that were provided some time ago.
2:23:51 PM
REPRESENTATIVE GRUENBERG inquired as to why it remains.
MS. FAUSKE related his understanding that it's a "not to exceed
amount" provision.
2:24:14 PM
MR. VASSAR said he was tasked with bringing to the AHFC statutes
those statutes that were unique to KABATA and allowed it to do
its work. The referenced statute was identified as such and
brought over to AHFC statute; that was the only intent with it.
He noted agreement with Mr. Fauske that the language tells KCDC
it wouldn't be able to issue bonds if the interest rate exceeded
11 percent. The expectation is that any bonds issued would be
at or near the current market rate at the time of issuance.
Therefore, today that would fall far below 11 percent.
2:25:25 PM
REPRESENTATIVE GRUENBERG suggested that the rate should be
reviewed again as it seems very high.
CHAIR JOHNSON agreed that it's a high number, but said that he
is comfortable with the rate as it's a ceiling not a floor.
2:26:15 PM
REPRESENTATIVE KELLER inquired as to Mr. Fauske's thoughts
regarding KABATA's letter of interest to TIFIA and whether AHFC
would have to redo that letter and how that would impact the
TIFIA qualification.
MR. FAUSKE related his understanding that the TIFIA process is a
competitive process that is competitively awarded by the federal
government. Applicants obtain a place in line as they put
forward projects. He told the committee that it would be AHFC's
goal to stick to that schedule in order to adhere to the current
schedules and that he hadn't heard that this creates an undue
problem. He offered his further understanding that although an
applicant may not receive the award at first, it doesn't
preclude the applicant from submitting [an application] again.
REPRESENTATIVE KELLER agreed, but he raised the question as to
the impact of the change in name and the response to that from
TIFIA.
MR. FAUSKE said that the audit has to be corrected/completed,
but he didn't know whether it impacts the TIFIA grant. If there
has been a question in the audit with regard to overstated
revenue from tariffs, he felt it would have an impact. Still,
he expressed AHFC's goal to work with the KABATA staff and
proceed with the grants in order to avoid undue delay. He
stated that AHFC doesn't desire to disrupt the schedule of
anything and AHFC will certainly seek guidance from the
expertise of KABATA in order to forward the project.
2:29:54 PM
REPRESENTATIVE KELLER asked whether Mr. Fauske foresees any
problem with the involvement of DOT&PF.
MR. FAUSKE replied no.
2:30:36 PM
CHAIR JOHNSON requested that his staff, Mr. Fauske, and Mr.
Stark work together to address the necessary changes to HB 23,
which he saw as minor differences.
MR. FAUSKE agreed that they are very close and should be able to
address the differences in short order.
2:31:39 PM
CHAIR JOHNSON, upon determining no one else wanted to testify,
closed public testimony.
2:32:13 PM
CHAIR JOHNSON then recessed to the call of the chair.
7:12:06 PM
CHAIR JOHNSON called the meeting back to order at 7:12 p.m.
Upon reconvening, Representatives Chenault, Hawker, Herron,
Keller, Olson, and Johnson were present at the call to order.
Representative Gruenberg arrived as the meeting was in progress.
Also in attendance was Representative Hughes.
7:12:18 PM
CHAIR JOHNSON removed his objection to Amendment 2. There being
no further objection, Amendment 2 was adopted.
7:12:29 PM
REPRESENTATIVE OLSON moved to adopt Amendment 1 to Amendment 2,
labeled 28-LS0141\O.40, Martin, 4/11/13, which read:
Page 1, line 11, of the amendment:
Delete "board shall be the"
Page 1, line 12, of the amendment, following
"Corporation":
Insert "shall consist of the members of the board
of the corporation"
Page 2, line 1, of the amendment:
Delete "to"
Page 2, line 27, of the amendment:
Delete "department,"
Insert "Department of Transportation and Public
Facilities"
Page 5, lines 6 - 7, of the amendment:
Delete "the property of"
Insert "accounted for separately and may be
appropriated to"
Page 5, line 15, through page 6, line 2, of the
amendment:
Delete all material and insert:
"(e) Money in a reserve fund established under
(d) of this section
(1) shall be used only for
(A) the payment of monetary obligations,
liabilities, and indebtedness of the Knik Crossing
Development Corporation, including termination payment
obligations, under agreements for the financing,
design, construction, maintenance, improvement, or
operation of facilities, properties, or projects of
the Knik Crossing Development Corporation; and
(B) planning, permitting, design,
acquisition, construction, maintenance, improvement,
or operation of transportation-related projects,
facilities, properties, systems, or equipment of the
Knik Crossing Development Corporation or other public
entities, including expansions, extensions, and
capacity improvements, eligible under applicable
federal and state law to be funded from toll revenue;
(2) may not be used for the purpose of
planning, permitting, design, acquisition,
construction, maintenance, improvement, or operation
of projects, facilities, properties, systems, or
equipment under (1)(B) of this subsection if the
withdrawal would reduce the amount in the reserve fund
to less than the reserve fund requirement.
(f) In computing the amount of a reserve fund
established under (d) of this section, securities in
which all or a portion of the fund is invested shall
be valued by a reasonable method established by the
Knik Crossing Development Corporation by resolution or
established by the terms of the agreement for which
the fund serves as security. Valuation must include
the amount of interest earned or accrued as of the
date of the valuation."
Page 6, lines 6 - 11, of the amendment:
Delete "the availability payment reserve fund
established under (e) of this section to an amount
sufficient to pay the Knik Crossing Development
Corporation's next availability payment. The
legislature may appropriate to the Knik Crossing
Development Corporation the amount certified by the
chair of the board that is needed to restore the
reserve fund to the amount needed for the next
availability payment."
Insert "a reserve fund established under (d) of
this section to the reserve fund requirement. The duty
of the chair of the board to report annually to the
governor and the legislature terminates upon the
cumulative appropriation to the Knik Crossing
Development Corporation, after January 1, 2013, of
$1,140,000,000."
Page 6, lines 13 - 17, of the amendment:
Delete all material.
Reletter the following subsection accordingly.
Page 6, line 18 of the amendment, following
"section,":
Insert "(1)"
Page 6, line 22 of the amendment, following
"security":
Insert "; and
(2) "reserve fund requirement" means the
amount required to be on deposit in a reserve fund
established under (d) of this section on the date of
the computation, as determined by resolution of the
Knik Crossing Development Corporation or by the terms
of the agreement for which the fund serves as
security"
Page 8, line 24, of the amendment, following
"indebtedness,":
Insert "obligations, liabilities, commitments,"
Page 8, line 26, of the amendment, following
"transferred to":
Insert "and may be assumed by"
Page 8, line 27, of the amendment, following
"Corporation.":
Insert "Nothing in this section creates a
liability or obligation of the Alaska Housing Finance
Corporation."
Page 8, following line 27, of the amendment:
Insert a new subsection to read:
"(b) All procurements of the Knik Arm Bridge and
Toll Authority that have not resulted in the award of
a contract as of the effective date of this Act may be
adopted and may continue as procurements of the Knik
Crossing Development Corporation."
Reletter the following subsection accordingly.
CHAIR JOHNSON objected for purposes of discussion.
7:13:07 PM
CHAIR JOHNSON inquired as to the comfort Mr. Stark and Mr.
Vassar have with Amendment 1 to Amendment 2 in terms of
addressing the problems he has discussed.
MR. STARK responded that he is as comfortable as he is going to
be, while maintaining concern that changing entities in
midstream will inevitably slow the process. At this point, the
language is as good as it will get, particularly in this short
time.
MR. VASSAR related that he is completely comfortable with
Amendment 1 [to Amendment 2].
7:14:34 PM
MR. WALTON reviewed the changes encompassed in Amendment 1 to
Amendment 2. The changes to page 1, lines 11 and 12 of
Amendment 2 specify the membership of the board of KCDC. The
change on page 2, line 27, from "department" to "Department of
Transportation & Public Facilities" is necessary [to add
clarity] because KCDC is housed for administrative purposes
under DOR. The change on page 5, lines 6-7, of Amendment 2
addresses concerns regarding the prohibition of dedicated funds
and thus specifies that the legislature will appropriate any
additional funds rather than it going directly into the
development funds. The change on page 5, line 15, through page
6, line 2, of Amendment 2 replaces availability payment reserve
fund language with original language from HB 23. The purpose of
the aforementioned change is to specify for what the reserve
funds shall be used, which is specifically for the obligations,
liabilities, and indebtedness of KCDC and costs related to
transportation-related projects. The new language stipulates
that funds in the reserve fund may not be used if the withdrawal
would reduce the amount in the reserve fund to less than the
requirement. The language also specifies that the valuation
should be determined using a reasonable method determined by
KCDC. The change to page 6, lines 6-11, of Amendment 2 deletes
language related to the availability payment reserve fund and
replaces it with language restoring the reserve fund moral
obligation cap to the language as it was in CSHB 23(FIN). The
reserve fund moral obligation language and cap language in
Amendment 2 was split into two parts, and thus the deletion
proposed to page 6, lines 13-17, of Amendment 2 deletes a now
redundant section. The change on page 6, line 22, of Amendment
2 adds a definition for "reserve fund requirement". Page 8,
line 24, of Amendment 2, is transition language and is part of
the comprehensive list of components that would be transferred
from KABATA to KCDC. There is new language that adds that
obligations, liabilities, and commitments of KABATA would be
transferred to and assumed by KCDC, as specified in the change
to page 8, line 26, of Amendment 2. The change on page 8, line
27, of Amendment 2 adds an explicit statement that holds AHFC
harmless for liabilities and obligations taken on by KCDC. In
response to discussion regarding pending procurements, a new
subsection is inserted on page 8, following line 27, of
Amendment 2 that clarifies what happens with pending
procurements.
7:21:34 PM
REPRESENTATIVE GRUENBERG asked whether there is any bonding
committee oversight in Amendment 1 to Amendment 2.
MR. VASSAR answered that there is no state bond committee
oversight of bond issuance in Amendment 1 to Amendment 2 or
Amendment 2 itself. In further response, Mr. Vassar said that
whether there should be or not is a policy call. With the
establishment of the new KCDC as a subsidiary of AHFC, there is
competent oversight provided through AHFC. Furthermore, AHFC is
very aware of the implications of issuing moral obligation bonds
and the impact of that on the state from which he would derive
comfort. Again, this is a policy call. He highlighted that the
moral obligation when large principle amounts are involved can
have an impact on the state's credit rating. If the state
determines state bond committee review is appropriate in those
circumstances, that's a reasonable policy determination. If the
aforementioned determination is made it would require one more
step to be completed prior to the issuance of bonds, and thus
becomes a timing issue.
7:25:16 PM
REPRESENTATIVE GRUENBERG questioned whether [review of the state
bond committee] would avoid the appearance of the conflict of
interest in the overall issuance of certain bonds.
REPRESENTATIVE HAWKER, noting that he isn't supporting or
opposing the legislation or the amendment before the committee,
stated that the point of this legislation, particularly
[proposed] AS 18.56.615, is that the legislature is making a
policy call that KCDC may issue bonds. He pointed out that
through the governance provisions within these amendments KCDC
is placed under AHFC, which has issued billions of dollars'
worth of bonds, is incredibly competent, and has an obligation
to the state for a fiduciary duty and proper performance.
Therefore, Representative Hawker said he felt very comfortable
that the concern expressed by Representative Gruenberg is
addressed in the legislation that the committee would forward.
MR. VASSAR noted his agreement with Representative Hawker. In
response to Representative Gruenberg, Mr. Vassar said he
couldn't identify a conflict of interest.
7:28:11 PM
REPRESENTATIVE GRUENBERG surmised that the "may" on page 2, line
2, of Amendment 2 designates which agency has the power to do it
rather than require it.
MR. VASSAR stated that Representative Gruenberg is correct.
7:29:30 PM
REPRESENTATIVE GRUENBERG asked if the purpose of the deletion of
the language "the property of" on page 5, lines 6-7, of
Amendment 2 means that the [interest earned on or profit derived
from these funds and reserves] aren't automatically the property
of KCDC, must be accounted for separately, and may be
appropriated.
MR. VASSAR confirmed that is the purpose: to ensure [KCDC] is
in compliance with both the state constitutional requirement
that money can only be removed from the treasury by an
appropriation of the legislature and to avoid creating a
question as to whether there is a dedicated fund.
7:31:00 PM
REPRESENTATIVE GRUENBERG inquired as to why the language
"termination payment obligations" page 1, line 23 and page 2,
line 1, of Amendment 1 to Amendment 2 was added since there
could be substantial termination payment obligations.
MR. VASSAR answered that the aforementioned language in
Amendment 1 to Amendment 2 returns the language to what was in
CSHB 23(FIN) on page 3, line 11.
REPRESENTATIVE GRUENBERG then inquired as to why the phrase was
eliminated.
MR. VASSAR explained that it wasn't so much that the phrase was
eliminated, but rather that Amendment 2 changed the entire
reserve fund language based on advice of an attorney in DOL. He
related that AHFC had no preference for the language, and thus
it was added in order to address KABATA's concerns as specified
by Mr. Stark and return the language to that in CSHB 23(FIN).
7:34:32 PM
REPRESENTATIVE GRUENBERG then directed attention to the language
"or other public entities" on page 2, line 7, of Amendment 1 to
Amendment 2. He asked if the aforementioned language gives
additional ability to use the money in the fund for some other
public entity besides KCDC without any further definition.
MR. VASSAR pointed out that the language in Amendment 1 to
Amendment 2 returns the language to that in CSHB 23(FIN), which
is what KABATA requested. The particular clause in question
describes for what the money in the reserve fund can be used.
The money in the reserve fund may be used for planning,
permitting, etcetera for transportation-related projects of KCDC
or other public entities. Therefore, theoretically, the
language could authorize another transportation-related project
by an entity other than KCDC and within the general purpose of
KCDC to help finance the planning, permitting, design, and
etcetera of that transportation-related project.
REPRESENTATIVE GRUENBERG surmised then that so long as the funds
were to be used for the planning, permitting, and design of a
transportation project, it could [be used] even in a different
part of the state.
MR. VASSAR disagreed with Representative Gruenberg's
understanding and opined that any power given to KCDC needs to
be read in light of KCDC's purposes in AS 18.56.605. He related
that KCDC's purpose is to develop, stimulate, and advance the
economic welfare of the state and further public transportation
systems in the vicinity of the Upper Cook Inlet with
construction of a bridge to span Knik Arm to connect Anchorage
and the Matanuska-Susitna Valley. Therefore, Mr. Vassar didn't
believe it would be within KCDC's power to choose a random city
to finance a project. He highlighted that KCDC's only purpose
is to further this transportation system that consists of a
bridge spanning the Knik Arm.
CHAIR JOHNSON interjected his understanding that this portion
[of financing] has to be [for a project] that's eligible for
federal funds.
7:38:48 PM
REPRESENTATIVE GRUENBERG asked whether the addition of the
language "or other public entities" on page 2, line 7, of
Amendment 1 to Amendment 2 might cause bondholders/council to
have concern if they viewed it as a way in which to diminish
their security interests.
MR. VASSAR answered that he didn't believe so. The purchasers
of any bonds from KCDC would review KCDC's authorizing statute
and upon entering into any contracts, will tailor whatever
covenants they need KCDC to make to ensure KCDC's assets aren't
diluted or diverted in a manner that jeopardizes their security.
7:40:19 PM
REPRESENTATIVE GRUENBERG asked whether the insertion of the
language "obligations, liabilities, commitments," as specified
on page 3, lines 17-18, of Amendment 1 to Amendment 2 would
include any contract KCDC might sign.
MR. VASSAR opined that the language is an attempt to have a
complete and all-encompassing transfer to KCDC every conceivable
thing KABATA has done or to which it has been exposed. With
respect to existing agreements and contracts, that language is
already included in [Amendment 2]. Therefore, in a substantive
sense KABATA isn't going away, rather it's just shifting in
total to AHFC.
7:43:25 PM
REPRESENTATIVE GRUENBERG highlighted the use of "may" in the
language on page 3, lines 20-21, and lines 29-31, of Amendment 1
to Amendment 2 and inquired as to what happens to claims that
aren't either adopted, continued, or assumed. He further
inquired as to whether that language would leave any orphan
debts or assets.
MR. VASSAR answered that it's possible something would be left.
He related that "may" is used in these instances as it provides
KCDC an option to understand what is being transferred to it
prior to assuming it. In the absence of anything egregious, he
anticipated that KCDC would assume and adopt all of them.
However, from AHFC's point of view, it's sort of a mystery bag
and the language provides an option for review prior to being
firmly and finally committed to them.
REPRESENTATIVE GRUENBERG inquired as to what happens if KCDC
decides not to adopt, continue, or assume one or more items. In
such a case, who is on the hook for those, he asked.
MR. VASSAR responded that it would depend upon the specific
items. For example, some of the commitments are expectations
not contract rights at this point. If such items go away, there
are really no repercussions other than possibly the
disappointment of the involved parties. He pointed out that
AHFC has a great deal of experience working with such
transactions and agreements with parties, and therefore it may
be there is a determination that it's best not to follow through
with some of those commitments. The "may" language leaves the
aforementioned option open. In terms of the more difficult
situation in which there is an actual contract right that KABATA
has entered into that is a vested contract and there is a party
that has rights that are protected by the contract clause of the
U.S. Constitution, Mr. Vassar didn't think KCDC has any other
option than to assume those.
7:49:14 PM
REPRESENTATIVE GRUENBERG pointed out that normally if one
purchases property without knowing whether there is some type of
recorded claim one would have title insurance in order to know
what one is getting or exempted from the policy. Since the
aforementioned isn't available in this situation, he inquired as
to what protection the state would have against a rogue
contractual obligation.
MR. VASSAR explained that the contracts already in place and
validly entered into under the authority given to KABATA are in
the nature of fait accompli. He reminded the committee that as
a general rule validly entered into contracts are protected and
the legislature can't change the law later in a manner that
would impair those contracts. With regard to those items in
place that aren't contract rights, he opined that one of the
purposes of this legislation is to help protect the state's
interest by transferring this to an entity like AHFC, which has
experience in large financing efforts over a great number of
years.
REPRESENTATIVE GRUENBERG expressed the hope that AHFC would
consider the aforementioned so that people know what they're
entering into.
7:52:20 PM
MS. SCHUBERT read the following statement from Mr. Fauske:
Mr. Chairman, members of the committee, I'd like to
compliment and thank you and your staff. When I was
asked to consider taking this project on, I said that
the assets of Alaska Housing Finance Corporation
absolutely must be protected. Our legal counsel has
worked with those who represent KABATA, your staff,
legislative drafting, and members of the
administration. I know it demanded a great deal of
time for all those involved in the details, but it was
important to get it right. My legal counsel tells me
that we've reached that right point with HB 23 and the
amendment and the amendment to the amendment that
you're considering. On behalf of Alaska Housing
Finance Corporation and my team, I'd like to thank
your members for the confidence that you have
expressed in our ability to help KABATA and the State
of Alaska to resolve this issue and advance the
project. I assure you if given direction by the
legislature, I will give the Knik Arm Bridge Project
our upmost attention and we will move expeditiously.
7:53:52 PM
REPRESENTATIVE GRUENBERG asked whether AHFC sees any risk in
this, possibly in terms of unknown/undisclosed claims or
contracts. If so, he then inquired as to how AHFC would handle
it.
MS. SCHUBERT opined that the audit is what lead to this
situation. At this point, AHFC doesn't know what it doesn't
know. If HB 23 moves forward and AHFC is asked to take on this
project, AHFC will investigate. She reiterated Mr. Fauske's
comfort with the legislation, Amendment 2, and proposed
Amendment 1 to Amendment 2.
MR. VASSAR emphasized that all activities discussed with the
project are going to be done by a subsidiary corporation of AHFC
not AHFC itself. Therefore, care was taken with the transition
language in Amendment 1 to Amendment 2 so that nothing creates a
liability or obligation for AHFC. He reminded the committee
that AHFC has created many subsidiaries in the past and the
subsidiary corporation's liability is its own so long as all of
the procedures and requirements are observed and the parent
corporation is protected from the liability of the subsidiary.
Mr. Vassar said he is confident that AHFC is protected by the
subsidiary corporation process, with which AHFC has experience.
7:57:25 PM
REPRESENTATIVE GRUENBERG highlighted the language on page 6,
line 12, subsection (h) of Amendment 2, which read: "Nothing in
this section creates a debt or liability of the state.", which
refers to the state not AHFC. He then related his understanding
that great pains have been taken to divorce AHFC from the state.
He opined that the aforementioned language doesn't appear to
insulate AHFC.
MR. VASSAR explained that the subsection (h) language is there
because of the moral obligation being created directly above
that subsection. He further explained that when statutes create
moral obligation debt it's moral obligation of the state not
AHFC. However, great care has to be taken in order to avoid
creating a general obligation of the state, which would be
invalid under the state constitution. The language is present
to ensure everyone knows that there is no attempt to create a
general obligation of the state and in fact, is denying such.
Therefore, it isn't necessary to reference AHFC at that point,
he said.
REPRESENTATIVE HAWKER pointed out that Amendment 1 to Amendment
2 would insert the language "Nothing in this section creates a
liability or obligation of the Alaska Housing Finance
Corporation." to page 8, line 27, of Amendment 2, following
"Corporation."
8:00:01 PM
CHAIR JOHNSON withdrew his objection to Amendment 1 to Amendment
2. [There being no further objection, Amendment 1 to Amendment
2 was adopted.]
8:00:21 PM
REPRESENTATIVE OLSON moved to report CSHB 23(FIN), as amended,
out of committee with individual recommendations and the
forthcoming fiscal notes. There being no objection, 2d CSHB
23(RLS) was reported from the House Rules Standing Committee.
8:00:41 PM
CHAIR JOHNSON announced that Representative Olson is the vice
chair of the House Rules Standing Committee.
Amendment 2 to CSHB 23(FIN)
Page 1, lines 1 - 4:
Delete all material and insert:
""An Act creating the Knik Crossing Development
Corporation as a subsidiary corporation of the Alaska
Housing Finance Corporation and relating to bonds of
the Knik Crossing Development Corporation.""
Page 1, line 6, through page through 5, line 30:
Delete all material and insert:
"* Section 1. AS 18.56.086 is amended by adding a
new subsection to read:
(b) The corporation shall create the Knik
Crossing Development Corporation as a subsidiary
corporation. The board shall be the board of directors
of the Knik Crossing Development Corporation.
* Sec. 2. AS 18.56 is amended by adding new
sections to read:
Article 2A. Knik Crossing Development Corporation.
Sec. 18.56.605. Purpose. (a) The purpose of the
Knik Crossing Development Corporation is to develop,
stimulate, and advance the economic welfare of the
state and further the development of public
transportation systems in the vicinity of the Upper
Cook Inlet with construction of a bridge to span Knik
Arm and connect the Municipality of Anchorage and the
Matanuska-Susitna Borough.
(b) The Knik Crossing Development Corporation
may not be terminated as long as it has bonds, notes,
or other obligations outstanding. Upon termination of
the Knik Crossing Development Corporation, its rights
and property pass to the state.
Sec. 18.56.610. Powers and duties. (a) In
addition to powers granted to the Knik Crossing
Development Corporation by the corporation under to
AS 18.56.086(a), the Knik Crossing Development
Corporation may
(1) fix and collect fees, rents, tolls,
rates, or other charges for the use of the Knik Arm
bridge and appurtenant facilities, or for a service
developed, operated, or provided by the Knik Crossing
Development Corporation; notwithstanding
AS 37.10.050(a), fees, rents, tolls, rates, and other
charges fixed and collected under this paragraph may
exceed the actual operating cost of the use of the
bridge, facility, or service;
(2) pledge, encumber, transfer, or
otherwise obligate revenue derived by the Knik
Crossing Development Corporation from the ownership,
use, or operation of toll facilities, including fees,
rents, tolls, rates, charges, or other revenue of the
Knik Crossing Development Corporation or money that
the legislature may appropriate, except a state tax or
license, as security for bonds or other indebtedness
or agreements of the Knik Crossing Development
Corporation;
(3) perform reconnaissance studies and
engineering, survey, and design studies with respect
to the Knik Arm bridge and its appurtenant facilities;
(4) exercise powers of eminent domain or
file a declaration of taking as necessary for the Knik
Arm bridge and appurtenant facilities under
AS 09.55.240 - 09.55.460 to acquire land or an
interest in land; the Knik Crossing Development
Corporation's exercise of powers under this paragraph
may not exceed the permissible exercise of those
powers by the state;
(5) confer with municipal and other
governments, metropolitan planning organizations, and
the Department of Transportation and Public
Facilities, concerning the Knik Arm bridge.
(b) The Knik Crossing Development Corporation
shall coordinate the exercise of its powers to plan,
design, construct, operate, and maintain the Knik Arm
bridge with the department, and with the mayors of the
Municipality of Anchorage and the Matanuska-Susitna
Borough.
Sec. 18.56.615. Bonds. (a) The Knik Crossing
Development Corporation may issue bonds in an
aggregate amount not to exceed $600,000,000, plus the
cost of issuance, in accordance with this chapter in
order to build the Knik Arm bridge and its appurtenant
facilities. The amount of refunding bonds that may be
issued by the Knik Crossing Development Corporation
and bond premiums may not be included in the aggregate
amount, but may be in addition to the amount
authorized under this section.
(b) In addition to the security that may be
provided to bonds of the Knik Crossing Development
Corporation under the powers granted to the Knik
Crossing Development Corporation under
AS 18.56.086(a), the Knik Crossing Development
Corporation may pledge revenue derived by the Knik
Crossing Development Corporation from the ownership,
use, and operation of its toll facilities, including
money derived from the fees, rents, tolls, rates,
charges, and other revenue of the Knik Crossing
Development Corporation.
(c) The Knik Crossing Development Corporation
may not issues bonds, or a series of bonds, if the
effective interest rate over the life of the bonds
exceeds 11 percent a year or a rate of interest that
is 125 percent of the rate of the Bond Buyer Index of
20 Municipal Bond Average Yields for the week previous
to the date of the sale of the bonds, whichever is
higher.
(d) Notwithstanding any other provisions of this
chapter, the trust agreement, or other similar
document under which the Knik Crossing Development
Corporation issues bonds, must contain an agreement by
the Knik Crossing Development Corporation that the
Knik Crossing Development Corporation will at all
times maintain fees, rents, tolls, rates, or other
charges sufficient to
(1) pay the costs of operation and
maintenance of the Knik Arm bridge and its appurtenant
facilities and the principal of and interest on bonds
issued under the trust agreement as the bonds
severally become due and payable;
(2) provide for debt service coverage as
considered necessary by the Knik Crossing Development
Corporation for the marketing of its bonds; and
(3) provide for renewals, replacements, and
improvements of the Knik Arm bridge, and to maintain
reserves required by the terms of the trust agreement
or other similar document.
Sec. 18.56.620. Capital reserve fund. (a) For the
purpose of securing one or more issues of its bonds,
the Knik Crossing Development Corporation may
establish one or more special funds, called "capital
reserve funds," and shall pay into those capital
reserve funds the proceeds of the sale of its bonds
and any other money that is available to the Knik
Crossing Development Corporation for the purposes of
those funds. The funds shall be established only if
the Knik Crossing Development Corporation determines
that the establishment would enhance the marketability
of the bonds. All money held in a capital reserve
fund, except as provided in this section, shall be
used as required solely for the payment of the
principal of and interest on bonds or of the sinking
fund payments with respect to those bonds, the
purchase or redemption of bonds, or the payment of a
redemption premium required to be paid when those
bonds are redeemed before maturity. However, money in
a fund may not be withdrawn from the fund at any time
in an amount that would reduce the amount of the fund
to less than the capital reserve requirement set out
in (b) of this section, except for the purpose of
making, with respect to those bonds, payment, when
due, of principal, interest, redemption premiums, and
the sinking fund payments for the payment of which
other money of the Knik Crossing Development
Corporation is not available. Income or interest
earned by or increment to a capital reserve fund due
to the investment of the fund or any other amounts in
the fund may be transferred by the Knik Crossing
Development Corporation to other funds or accounts of
the Knik Crossing Development Corporation to the
extent that the transfer does not reduce the amount of
the capital reserve fund below the capital reserve
fund requirement.
(b) If the Knik Crossing Development Corporation
decides to issue bonds secured by a capital reserve
fund, the bonds may not be issued if the amount in the
capital reserve fund is less than the amount of the
capital reserve fund requirement, if any, established
by resolution of the Knik Crossing Development
Corporation, unless the Knik Crossing Development
Corporation, at the time of issuance of the
obligations, deposits in the capital reserve fund from
the proceeds of the obligations to be issued or from
other sources an amount that, together with the amount
then in the fund, will not be less than the capital
reserve fund requirement.
(c) In computing the amount of a capital reserve
fund for the purpose of this section, securities in
which all or a portion of the fund is invested shall
be valued by some reasonable method established by the
Knik Crossing Development Corporation by resolution.
Valuation on a particular date shall include the
amount of any interest earned or accrued to that date.
(d) Notwithstanding any other provision of law,
the Knik Crossing Development Corporation may
establish other funds and reserves as the board of
directors may determine reasonable and prudent for the
issuance of bonds or for the conduct of the business
and affairs of the Knik Crossing Development
Corporation. The interest earned on or profit derived
from these funds and reserves shall be the property of
the Knik Crossing Development Corporation. Deposits
made into the reserve fund established under this
section must include
(1) revenue derived by the Knik Crossing
Development Corporation from the ownership, use, or
operation of toll facilities, including fees, rents,
tolls, rates, charges, or other revenue of the Knik
Crossing Development Corporation;
(2) money that the legislature has
appropriated for that purpose; and
(3) other money that may be made available
to the Knik Crossing Development Corporation from
other sources.
(e) If the Knik Crossing Development Corporation
executes a public-private partnership agreement that
includes financing by the private partner for the
purpose of securing the Knik Crossing Development
Corporation's annual availability payment, the Knik
Crossing Development Corporation may establish a
reserve fund, called the "availability payment reserve
fund," and shall pay into that reserve fund
(1) revenue derived by the Knik Crossing
Development Corporation from the ownership, use, or
operation of toll facilities, including fees, rents,
tolls, rates, charges, or other revenue of the Knik
Crossing Development Corporation;
(2) money that the legislature has
appropriated for that purpose; and
(3) other money that may be made available
to the Knik Crossing Development Corporation from
other sources.
(f) All money held in the availability payment
reserve fund shall be used solely for the payment of
annual availability payments the Knik Crossing
Development Corporation is obligated to make under a
public-private partnership agreement executed by the
Knik Crossing Development Corporation. When the terms
of the Knik Crossing Development Corporation's public-
private partnership agreement expires, all future
revenue derived by the Knik Crossing Development
Corporation shall be deposited into a new fund, to be
established by the Knik Crossing Development
Corporation under (d) of this section.
(g) The chair of the Knik Crossing Development
Corporation shall annually, not later than January 30,
certify in writing to the governor and the legislature
the amount, if any, required to restore the capital
reserve fund established under (a) of this section to
the capital reserve fund requirement, or the
availability payment reserve fund established under
(e) of this section to an amount sufficient to pay the
Knik Crossing Development Corporation's next
availability payment. The legislature may appropriate
to the Knik Crossing Development Corporation the
amount certified by the chair of the board that is
needed to restore the reserve fund to the amount
needed for the next availability payment.
(h) Nothing in this section creates a debt or
liability of the state.
(i) The Knik Crossing Development Corporation
shall maintain a record of the annual certifications
made by the chair under (g) of this section. When the
total amount certified by the chair of the Knik
Crossing Development Corporation as necessary to
restore the availability payment reserve fund totals
$1,140,000,000, the duty of the chair of the Knik
Crossing Development Corporation to report terminates.
(j) In this section, "capital reserve fund
requirement" means the amount required to be on
deposit in a reserve fund established under (a) of
this section as of the date of computation, as
determined by resolution of the Knik Crossing
Development Corporation or by the terms of the
agreement for which the fund serves as security.
Sec. 18.56.625. Exemption from taxation. The real
and personal property of the Knik Crossing Development
Corporation and its assets, income, and receipts are
declared to be the property of a political subdivision
of the state and are exempt from all taxes and special
assessments of the state or a political subdivision of
the state. Notwithstanding any law to the contrary,
rights and interests in real and personal property,
assets, income, and receipts, including concession,
franchise, leasehold, or other real or personal
property rights and interests, held by a private
person or enterprise under a public-private
partnership agreement entered into under this chapter,
except any rights and interests of the private person
in property serving a business, commercial, or other
purpose not necessary to operate the facilities,
properties, or projects of the Knik Crossing
Development Corporation, shall be exempt from all ad
valorem taxes on real or personal property and special
property tax assessments of the state or a political
subdivision of the state. All bonds of the Knik
Crossing Development Corporation are declared to be
issued by a political subdivision of the state and for
an essential public and governmental purpose. The
bonds, the interest on the bonds, the income from the
bonds and the transfer of the bonds, and all assets,
income, and receipts pledged to pay or secure the
payment of the bonds or interest on the bonds are, at
all times, exempt from taxation by or under the
authority of the state, except for inheritance and
estate taxes and taxes on transfers by or in
contemplation of death. Nothing in this section
affects or limits an exemption from license fees,
property taxes, or excise, income, or other taxes
provided under any other law.
Sec. 18.56.630. Exemption from local regulation.
Notwithstanding any contrary provision of law, the
activities of the Knik Crossing Development
Corporation are exempt from land use planning, zoning,
permitting, or other similar governmental powers of
political subdivisions of the state.
Sec. 18.56.635. Liability for payment of tolls.
The owner of a vehicle using a facility owned,
controlled, or managed by the Knik Crossing
Development Corporation for which a toll or fee is
imposed is liable for the payment of the toll or fee
solely because of the vehicle ownership, unless the
vehicle, except a rental vehicle, is used without the
owner's knowledge and incurs the toll or fee during
operation.
* Sec. 3. AS 36.30.015(f) is amended to read:
(f) The board of directors of the Alaska Housing
Finance Corporation, notwithstanding AS 18.56.088, and
the membership of the Alaska Industrial Development
and Export Authority, notwithstanding AS 44.88.085,
[AND THE BOARD OF DIRECTORS OF THE KNIK ARM BRIDGE AND
TOLL AUTHORITY UNDER AS 19.75.111,] shall adopt
regulations under AS 44.62 (Administrative Procedure
Act), and the board of trustees of the Alaska
Retirement Management Board shall adopt regulations
under AS 37.10.240, to govern the procurement of
supplies, services, professional services, and
construction for the respective public corporation and
board. The regulations must reflect competitive
bidding principles and provide vendors reasonable and
equitable opportunities to participate in the
procurement process and must include procurement
methods to meet emergency and extraordinary
circumstances. Notwithstanding the other provisions of
this subsection, the Alaska Housing Finance
Corporation, the Alaska Industrial Development and
Export Authority, [THE KNIK ARM BRIDGE AND TOLL
AUTHORITY,] and the Alaska Retirement Management Board
shall comply with AS 36.30.170(b).
* Sec. 4. AS 36.30.850(b)(45) is amended to read:
(45) a subsidiary of the Alaska Housing
Finance Corporation created under AS 18.56.086 for the
purpose of planning, financing, or constructing in-
state natural gas pipeline projects or for the purpose
of aiding in the planning, financing, or constructing
of in-state natural gas pipeline projects; or a
subsidiary of the Alaska Housing Finance Corporation
created under AS 18.56.086 for the purpose of
constructing a bridge to span Knik Arm.
* Sec. 5. AS 19.75.011, 19.75.021, 19.75.031,
19.75.041, 19.75.051, 19.75.061, 19.75.071, 19.75.081,
19.75.111, 19.75.113, 19.75.211, 19.75.221, 19.75.231,
19.75.241, 19.75.251, 19.75.261, 19.75.271, 19.75.281,
19.75.291, 19.75.301, 19.75.311, 19.75.321, 19.75.330,
19.75.332, 19.75.334, 19.75.336, 19.75.338, 19.75.340,
19.75.911, 19.75.915, 19.75.920, 19.75.980, 19.75.990;
AS 39.25.110(39); and AS 39.50.200(b)(60) are
repealed.
* Sec. 6. The uncodified law of the State of Alaska
is amended by adding a new section to read:
TRANSITION. (a) All rights, titles, interests,
agreements, contracts, instruments, indebtedness,
investments, leases, real and personal property, lines
of credit, gifts, grants, loans, fees, rents, tolls,
civil actions, revenue, funds, insurance, permits,
licenses, studies, and intellectual property of the
Knik Arm Bridge and Toll Authority are transferred to
the Knik Crossing Development Corporation.
(b) For one year following the effective date of this
Act, the members of the board of directors for the
Knik Arm Bridge and Toll Authority on the day before
the effective date of this Act shall serve as a
nonvoting advisory board to the board of directors of
the Knik Crossing Development Corporation. While
serving as a nonvoting advisory board under this
subsection, the members of the board of directors of
the Knik Arm Bridge and Toll Authority shall serve
without compensation but are entitled to per diem and
travel expenses as provided by the Alaska Housing
Finance Corporation."
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 23 Amendment 2.pdf |
HRLS 4/11/2013 9:00:00 AM |
HB 23 |
| HB 23 Amendment 2 Annotated.pdf |
HRLS 4/11/2013 9:00:00 AM |
HB 23 |
| HB 23 Amendment 1 to Amendment 2.pdf |
HRLS 4/11/2013 9:00:00 AM |
HB 23 |