Legislature(2001 - 2002)

03/28/2001 01:37 PM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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.                                                                           

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