Legislature(2003 - 2004)
04/27/2004 01:40 PM House TRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 556-AIDEA BONDS FOR LYNN CANAL PORT CHAIR HOLM announced that the final order of business would be HOUSE BILL NO. 556, "An Act relating to a port development project at Lynn Canal, providing legislative approval for the Alaska Industrial Development and Export Authority to issue bonds or otherwise provide financing for the project; and providing for an effective date." Number 1510 REPRESENTATIVE BRUCE WEYHRAUCH, Alaska State Legislature, sponsor, explained that the area where the dock would be constructed is in the northern edge of the district he represents. The legislation is required because the Alaska Industrial Development and Export Authority (AIDEA) requires legislative approval of a bond issue of this size. The bond funds would be used to construct docks to assist in the development of the Kensington Mine project. Representative Weyhrauch informed the committee that it's critically important to [Southeast] that it diversify its economy and develop mining opportunities where they exist. Furthermore, the Kensington Mine has shown itself to be an active and responsible developer. The dock will go far in helping bring the resource to market and employ many people in the area. REPRESENTATIVE WEYHRAUCH indicated his support for those representing the Interior who are dealing with the Pogo mine project. He said that there needs to be a united front statewide to help develop these type of resources. Number 1429 JIM McMILLAN, Deputy Director, Credit, Alaska Industrial Development & Export Authority (AIDEA) and Alaska Energy Association (AEA), Department of Community & Economic Development (DCED), explained that if AIDEA is going to finance a project under AS 44.88.172, "own and operate," and the proceeds of the bond issue exceed $10 million, legislative authorization is required. Mr. McMillan further explained that this project would include two dock facilities, which would be used in support of the Kensington gold project. In order to issue tax-exempt bonds for financing of this project, the project must be owned by a government entity and be likely that the [facilities] will be available for public use. Therefore, HB 556 is necessary because of the proposed ownership by AIDEA under the development finance program in order to provide lower cost financing through the issuance of tax-exempt bonds. With regard to the public use requirement, that determination has yet to be made. Because of the somewhat remote location of these facilities, AIDEA will, through bond counsel, seek an Internal Revenue Service (IRS) letter ruling in order to make the public use determination. The aforementioned will be part of the due diligence that will begin shortly. MR. McMILLAN highlighted that while AIDEA will own these facilities, in order to qualify for tax-exempt bonds conduit revenue bonds will be issued. With conduit revenue bonds, he explained, neither the credits nor assets of AIDEA will be at risk. He reiterated that AIDEA's ownership will allow, if other requirements can be met, for the issuance of tax-exempt bonds. Number 1273 REPRESENTATIVE MASEK inquired as to the cost AIDEA will face in performing the feasibility, market, and risk analysis for the project. Would AIDEA pay for the aforementioned study, she asked. MR. McMILLAN said that there is extensive due diligence and the total cost of it is estimated to be $150,000. At AIDEA's next board meeting, a resolution will be presented [requesting] authorization to execute a cost reimbursement agreement with the project developer. The agreement will state that if the project and the financing goes forward, costs [for the study] could be included in the financing. However, if the project doesn't go forward, AIDEA must be repaid any sums that it has expended. REPRESENTATIVE MASEK highlighted that the language in HB 556 refers to "port and related facilities" and inquired as to what "related facilities" would be. MR. McMILLAN explained that the earlier mentioned IRS code would also apply to any related or ancillary facilities that might be pertinent to the use of the dock. Because the project is in the early stages of due diligence, there is the potential that a storage facility for fuel, for example, could be considered related to the dock use and thus could be included in the financing. The $20 million authorization does allow for the potential for financing upland improvements if they meet IRS requirements. At this point there is only a conceptual design and rough estimates on project costs. As the design and costs are finalized, there is a real likelihood that "that will go up and that's the real reason for the $20 million authorization." MR. McMILLAN, in further response to Representative Masek, opined that the state would benefit from this project in a number of different areas. There is the potential for jobs, 250-300 jobs during the construction period as well as another 110-225 jobs throughout the expected life of the mine. There is also the benefit of the development of the state's natural resources. Another benefit is that both docks will likely be available for public use. Number 1060 REPRESENTATIVE MASEK inquired as to the location of this project. REPRESENTATIVE WEYHRAUCH explained that this project would require a road extension, which would be [performed] in conjunction with the Goldbelt Native Corporation. He noted that the road would be available for public use. Number 0931 TIM ARNOLD, Vice President/General Manager, Coeur Alaska, informed the committee that he will be the general manager of the mine once it's in production. He specified that the southern port facility being discussed would be located two miles past the end of the road. Mr. Arnold turned the committee's attention to a document entitled "Update," which was performed in November 2001, and noted that most of the information remains accurate today. He offered to answer any questions. REPRESENTATIVE STEPOVICH turned attention to the graph in the committee packet that specifies that in 1989 over 70 percent of the jobs in Juneau were state and federal government jobs and in 1999 about 70 percent of the jobs in Juneau were with the state and federal government. He asked if those percentages remain the same. MR. ARNOLD said that the numbers were accurate when the material was printed, but he said he didn't have an update for 2004. REPRESENTATIVE KOHRING commented that he would like to help Representative Weyhrauch decrease the percentage [of those working for government] and increase the percentage of those working in mining. Number 0800 CHAIR HOLM related his assumption that once the two miles of road to the southern terminus of the port and the proposed road extension are built, those would revert to state ownership at some point in time and be left for use in the future [when the mining activities have ceased]. MR. ARNOLD clarified that the two-mile road to Echo Cove will be owned by Goldbelt. The port facilities are the focus of the legislation. Once there [is access] to the other side of Berners Bay, the road up to the property already exists and will merely be upgraded. REPRESENTATIVE MASEK asked if Goldbelt would own the road, and therefore could decide to charge the public a fee for use of the road. She noted that such a situation exists in Chitna. MR. ARNOLD said that although he couldn't speak for Goldbelt, discussions with them have brought forth their intent to open the area up and bring people to the facilities. Number 0632 REPRESENTATIVE KOOKESH pointed out that if Goldbelt didn't want to open the area and bring people to the facilities, the project would be dead. Representative Kookesh emphasized that the state isn't investing money, it's loaning money; AIDEA is a loaning agency not a granting agency, and therefore will be paid back everything it puts out, including interest. REPRESENTATIVE STEPOVICH asked if the general public would be able to travel to the dock on that two-mile extension. REPRESENTATIVE WEYHRAUCH answered that it should be open to the public. He related that US Senator Lisa Murkowski's office has been working on a swap. He noted his opposition to any toll roads and added that nothing in the proposal has indicated any [desire] to block public use of the road. Number 0505 REPRESENTATIVE KOHRING surmised that if an entity is pursuing the state for a loan, perhaps the entity can't obtain conventional, private sector financing. He further surmised that it must be a relatively high-risk proposition. Therefore, he inquired as to any assurances that could be provided that the aforementioned isn't the case. He also inquired as to the reasons the financing is being sought from the state. MR. ARNOLD said that this project is a win-win situation for Coeur d'Alene Mines Corporation and the state. Coeur d'Alene Mines Corporation, he said, could do this project on its own if it desired to do so. The advantage of the option embodied in HB 556 is that Coeur d'Alene Mines Corporation would receive low cost financing. If Coeur d'Alene Mines Corporation did the project on its own, the dock would be paid for upfront and at the end of the mining operation the company would have to take out the dock as part of remediation. Therefore, the company views HB 556 as a way to obtain low cost financing while providing the state with a great facility that will last 30-40 years. REPRESENTATIVE WEYHRAUCH noted that AIDEA is an institution of the state that is present to help with these sorts of projects as it did with the FedEx terminal in Anchorage and the dock facility for the Healy coal project. Number 0320 REPRESENTATIVE MASEK moved to adopt CSHB 556, Version 23- LS1938\H, Cook, 4/23/04, as the working document. There being no objection, Version H was before the committee. CHAIR HOLM noticed that the title of Version H was different than that of the original legislation, and inquired as to why. MR. McMILLAN explained that in the initial discussions with Coeur Alaska, AIDEA provided Coeur some sample language that mirrored language included in authorizations for other development finance projects. In the past, AIDEA has allowed for the issuance of bonds as well as the utilization of other funding, such as AIDEA's cash. The aforementioned was included in the sample language provided to Coeur. Subsequent discussions between the Attorney General's Office and the assistant attorney general that represents AIDEA and staff from Legislative Legal and Research Services determined that it would be limited to bond proceeds. Therefore, if other funds besides bond proceeds were going to be used, it wouldn't be covered under this authorization. REPRESENTATIVE MASEK reiterated her hope that this road over Goldbelt's land doesn't become an access issue as it did in Chitna. Number 0122 REPRESENTATIVE MASEK moved to report CSHB 556, Version 23- LS1938\H, Cook, 4/23/04, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 556(TRA) was reported out of the House Transportation Standing Committee.
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