Legislature(2001 - 2002)

05/10/2002 05:38 PM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
     CS FOR HOUSE BILL NO. 471(L&C)                                                                                             
     "An Act  increasing the maximum  amount of loans from  the bulk                                                            
     fuel  revolving  loan   fund  operated  by  the  Alaska  Energy                                                            
     Authority;  precluding certain legal action concerning  certain                                                            
     technical assistance  to rural utilities; relating to powers of                                                            
     the  Alaska Energy Authority;  relating  to the definitions  of                                                            
     'net  income' and  'unrestricted  net income'  for purposes  of                                                            
     determining  the amount  of the Alaska  Industrial Development                                                             
     and  Export  Authority's dividend  to  the state;  relating  to                                                            
     communities  within which rural  development loans may  be made                                                            
     by the Alaska Industrial  Development and Export Authority; and                                                            
     providing for an effective date."                                                                                          
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
JESSICA  MENENDEZ, Staff  to Representative  Green,  testified  this                                                            
legislation  amends   three  "important"  programs   of  the  Alaska                                                            
Industrial Development  and Export Authority (AIEDA): AIDEA dividend                                                            
calculations,   the  Bulk   Fuel  Revolving   Fund  and  the   Rural                                                            
Development Initiative  Fund. She reminded the Committee  that AIDEA                                                            
is  a  self-supporting  State  agency  that  contributes  an  annual                                                            
dividend  to the State general  fund. She  furthered that since  its                                                            
inception,  AIDEA  has  contributed   or authorized   $129  million,                                                            
including $29,149,500 for the FY 03 fiscal year.                                                                                
                                                                                                                                
Ms. Menendez  explained that  under current  statute, AIDEA  pays an                                                            
annual  dividend  based  on  the  agency's   net  income  and  fund-                                                            
restricted net  income. She informed that statute  defines these two                                                            
incomes as "the  net income and unrestricted income  included in the                                                            
audited  financial   statements."  However,  she   stated  that  new                                                            
guidelines  imposed by the Governmental  Accounting Standards  Board                                                            
(GASB) no longer include  these terms and that without these amounts                                                            
reported, the  AIDEA Board of Directors has no clear  instruction of                                                            
how to determine the annual dividend to the State.                                                                              
                                                                                                                                
Ms.  Menendez added  that  GASB standards  also stipulate  that  any                                                            
governmental  transfers,  capital contributions  or  grants must  be                                                            
listed as  an expense or  revenue. She explained  this method  would                                                            
reduce  the  agency's  net  income  for the  base  fiscal  year  and                                                            
subsequently reduce  the amount of the dividend calculated  from the                                                            
audited financial statements.                                                                                                   
                                                                                                                                
Ms. Menendez stated that  Sections 2 and 3 of the bill address these                                                            
issues  by defining  unrestricted  net  income  using  the new  GASB                                                            
terminology.                                                                                                                    
                                                                                                                                
Ms. Menendez  continued  that this  legislation  also increases  the                                                            
maximum amount  of the Bulk Fuel Revolving  Fund. She described  the                                                            
purpose of the  fund to assist rural communities in  purchasing bulk                                                            
fuel  supplies.  She  spoke  of  the  advantage  for  participating                                                             
communities  to  purchase  bulk  fuel  in  more  frequent,   smaller                                                            
shipments;  also, shipments to some  communities could only  be made                                                            
during  certain timeframes.  To accommodate  this,  she pointed  out                                                            
this  legislation increases  the  maximum  amount of  the fund  from                                                            
$100,000 to $200,000.                                                                                                           
                                                                                                                                
Ms. Menendez  next addressed Section  4 of the bill, which  contains                                                            
the eligibility  requirements for  the Rural Development  Initiative                                                            
Fund. She explained this  program provides funding opportunities for                                                            
those  rural  communities   that  have  no  other  funding   options                                                            
available. She noted the  intent of this provision is to ensure that                                                            
the loans are  awarded to the communities  for which the  program is                                                            
intended.  She  detailed  that eligible  communities  would  have  a                                                            
population less  of than 5,000 residents, and not  connected by road                                                            
or railroad to Anchorage  or Fairbanks, or have a population of less                                                            
than 2,000 if connected to Anchorage or Fairbanks.                                                                              
                                                                                                                                
Ms.  Menendez  concluded   by  stressing  the  importance   of  this                                                            
legislation,  not only  because  AIDEA provides  the  State with  an                                                            
annual  dividend,   but  also  because  it  provides   programs  and                                                            
financing  options  to  allow the  establishment  and  expansion  of                                                            
businesses  statewide, which subsequently  provides jobs  for Alaska                                                            
and helps diversify the economy.                                                                                                
                                                                                                                                
BOB  POE, Executive  Director,  Alaska  Industrial  Development  and                                                            
Export Authority  (AIDEA)  testified the intent  is to maintain  the                                                            
annual  dividend in  the current  manner and  that this legislation                                                             
would allow  that to  occur. He  explained the  changes to the  Bulk                                                            
Fuel  Revolving Fund  are  requested because  the  capacity of  many                                                            
updated  fuel storage  systems  is increased  and  also because  the                                                            
amount of fuel  that could be purchased  for $100,000 has  decreased                                                            
due to higher fuel prices.  He added that US Senator Ted Stevens was                                                            
successful in securing a $5 million grant for the fund.                                                                         
                                                                                                                                
Mr. Poe stated that the  provisions of this bill governing the Rural                                                            
Development  Initiative Fund would  "make…wording that was  a little                                                            
problematic, much  clearer." He gave examples of businesses  located                                                            
outside  of city  limits  arguing  for rural  status,  when  lending                                                            
institutions were  nearby that were willing to lend  money under the                                                            
AIDEA loan participation program.                                                                                               
                                                                                                                                
Senator  Ward  asked which  communities  would  be affected  by  the                                                            
changes  to  population   eligibility  for  the  Rural  Development                                                             
Initiative Fund program.                                                                                                        
                                                                                                                                
Mr. Poe  surmised  no communities  would  be excluded.  He spoke  of                                                            
Settlers   Bay  located   near  Wasilla   would   be  eligible   for                                                            
conventional  financing. He  noted the City  of Bethel would  not be                                                            
impacted,  although the population  of Bethel  has increased  beyond                                                            
5,000 residents,  because businesses in this area  would qualify for                                                            
AHFC-sponsored conventional financing.                                                                                          
                                                                                                                                
Senator  Wilken  asked if  passage  of this  bill would  change  the                                                            
amount of the annual dividends.                                                                                                 
                                                                                                                                
Mr. Poe answered  the provisions in  this bill would not  affect the                                                            
amount of dividends.                                                                                                            
                                                                                                                                
Senator  Wilken next  asked the  status  of federal  funding for  an                                                            
unrelated project.                                                                                                              
                                                                                                                                
Mr. Poe replied  the pending congressional  legislation contains  an                                                            
amendment that authorizes  the Secretary of the Department of Energy                                                            
to  negotiate with  AIDEA  for a  loan  of up  to $125  million.  He                                                            
emphasized  this is an  authorization rather  than an appropriation                                                             
and therefore  subject to negotiation.  He predicted the  chances of                                                            
the amendment and the legislation passing into law was good.                                                                    
                                                                                                                                
Senator Austerman "moved House Bill 471 out of Committee."                                                                      
                                                                                                                                
Without  objection CS  HB 471 (CRA)  with accompanying  zero  fiscal                                                            
note  #1,  dated 3/22/02,  from  the  Department  of  Community  and                                                            
Economic Development.                                                                                                           
                                                                                                                                

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