Legislature(2001 - 2002)
03/28/2001 01:37 PM CRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 156-MUNICIPAL DEBT FOR DEVELOPMENT PROJECTS REPRESENTATIVE LESIL MCGUIRE, bill sponsor, introduced the bill as a straightforward measure that would allow municipalities to create development and redevelopment projects. An assembly would identify an area as blighted and qualified for either development or redevelopment. They would identify the boundaries and then issue bonds for either development or redevelopment purposes. As part of the bond issuance, a pledge would be made that monies accrued from the increased property value would then be used to pay down the debt on the bonds. This legislation was enacted in 1988 to give municipalities another tool for community development and redevelopment. Because there are several lines in the original statute that create difficulties, it is virtually dormant. She is unaware of any municipality that has used the funding tool. Page 1, lines 9 and 10 of the amendment removes the additional security required in the form of a letter. Bond underwriters are already making a financial analysis prior to underwriting bonds and each bond project is viewed differently. The language is redundant and appears to require 100 percent collateralization. This has been confusing and therefore not used. HB 156 removes the redundant and confusing language and streamlines the process so municipalities have the ability to use this as a tool to aid development and redevelopment in their municipality. For the record, Tom Klinkner, a municipal attorney with Birch Horton and Bittner in Anchorage, is on line to answer questions. In addition, Dan Sullivan, Anna Fairclough and Mike Scott were present to answer questions and lend support. SENATOR PHILLIPS asked what triggered the bill. REPRESENTATIVE MCGUIRE said that the Municipality of Anchorage was the first group to bring this to her attention. They are interested in a series of downtown Anchorage developments and areas that haven't attracted developers due to their blighted nature. Municipalities have looked at this statute for a number of years but it's proven difficult to use due to the confusing language. She wanted to make certain that the issue isn't politicized because it is a redevelopment tool and a local control issue. It's not a financial burden that's being undertaken. TOM KLINKNER, an attorney with the Anchorage office of Birch Horton and Bittner, said that statute 29.47.460 was enacted in 1988 to provide a basis in State law for municipalities to issue bonds that are exempt from federal taxation. These are called qualified redevelopment bonds and federal law imposes requirements for these bonds to qualify for tax exemption. One requirement is that there must be State-enabling legislation and this statute was supposed to supply that qualification. The language that will be deleted is not required by federal law and is not necessary for tax exemption so it won't affect the original purpose of the statute, it will make it more flexible. SENATOR PHILLIPS asked how the decision is made and would downtown Chugiak be as eligible as downtown Anchorage. MR. KLINKNER said that the local legislative body must initiate the process by identifying a blighted area. CHAIRMAN TORGERSON asked whether any area within a municipality is eligible. MR. KLINKNER said it was. REPRESENTATIVE MCGUIRE said that the meaning of municipality is the standard definition. FRED BURROW, representative of Downtown Anchorage Civic Ventures, a new 501(C)3 non-profit community development corporation funded by the municipality and private sector to promote community oriented projects in underdeveloped or blighted areas, testified via teleconference in support of the change. They feel that they are at a competitive disadvantage without it. ROD PFLEIGER, representative of the Anchorage Downtown Partnership testified via teleconference that this amendment would allow Alaska to be competitive with 48 other states that are using this tool. ANNA FAIRCLOUGH, Anchorage assembly member, testified in support of HB 156. The municipality would have an additional tool to help promote infrastructure development in the private sector. The eliminated criteria is above and beyond normal requirements. MIKE SCOTT, an employee for the Municipality of Anchorage and chair of the legislative committee for the Alaska Municipal League, testified in support of the legislation. He said it's a piece of legislation that can apply anywhere in the State that has property taxes. They were pleased to hear that the House passed the legislation on a 34 to 0 vote. SENATOR PHILLIPS asked about the letter in the bill packet written by Mr. Scott on a Municipal Light and Power (ML&P) letterhead. MR. SCOTT said that downtown Anchorage is in the ML&P service area and so they have a great interest in seeing more development in this area so there is more need for their service. SENATOR LINCOLN asked whether there was a down side for the State of Alaska. MR. SCOTT said he did not see any down side for the State but at the local level people should pay particular attention in deciding which projects to select for development or redevelopment. SENATOR PHILLIPS moved HB 156 and zero fiscal note from committee with individual recommendations. There were no objections. CHAIRMAN TORGERSON adjourned the meeting at 2:00 p.m.