Legislature(2005 - 2006)SENATE FINANCE 532
02/13/2006 09:00 AM Senate FINANCE
Audio | Topic |
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Start | |
SB188 | |
HB243 | |
SB207 | |
HB243 | |
Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
+= | SB 188 | TELECONFERENCED | |
+= | HB 243 | TELECONFERENCED | |
+ | SB 207 | TELECONFERENCED | |
+ | TELECONFERENCED |
CS FOR SENATE BILL NO. 188(CRA) "An Act increasing the maximum amount of loans from the bulk fuel revolving loan fund to one borrower." This was the first hearing for this bill in the Senate Finance Committee. Senator Donny Olson, the bill's sponsor, stated that the Governor's Rural Energy Action Council's (GREAC) recommendations regarding how to improve the Bulk Fuel Revolving Loan Fund (BFRLF) program prompted him to introduce this bill. The BFRLF was established in 1980 to aid communities experiencing financial difficulties due to expenses associated with annual or biannual shipments of petroleum products. Over time the original $50,000 loan limit was raised to $300,000 to address price "escalations" and increasing consumption. GREAC also developed incentives to encourage "larger cooperative organizations" to combine their purchases in order to earn price concessions. Senator Olson stated that in order to further the success of the BFRLF program, this bill would increase the loan limit from $300,000 to $400,000. It would also expand that limit were an entity developed to purchase fuel for more than one community. In that case, the loan limit would be the lesser of $1,500,000 or $400,000 multiplied by the number of communities participating in the cooperative effort. "This would encourage larger fuel purchases by those organizations to obtain the economy of scale." Senator Olson noted that two amendments, developed by GREAC, would be forthcoming. 9:09:53 AM Senator Olson moved to adopt committee substitute Version 24- LS0952\S as the working document. Co-Chair Green objected for discussion. In response to a question from Co-Chair Wilken, Senator Olson clarified that Version "S" contained two changes: one being to increase the individual loan limit from $300,000 to $400,000 and the other to allow a single entity to coordinate a cooperative loan amounting to the lesser of $400,000 multiplied by the number of communities involved in that cooperative effort or $1,500,000. 9:11:43 AM Co-Chair Wilken asked whether the language pertaining to "a cooperative corporation" as depicted in Section 1(e)(1) page 1 lines 7 and 8 was new. Senator Olson affirmed that while there "have been attempts to" organize cooperative organizations, no provisions in that regard have ever been incorporated into the Bulk Fuel program. 9:12:22 AM Co-Chair Wilken asked whether those were the lone changes being proposed. 9:12:46 AM Senator Olson confirmed those as being the only changes. Co-Chair Green informed the Committee that further information has been provided in the "Blue Book" titled "Bulk Fuel Revolving Loan Fund History, Status, Projections" [copy on file], dated August 25, 2005. To that point, she read the following section as depicted on page 3. Current law allows individual loans to finance bulk fuel acquisition for use in multiple communities, provided that the governing body of each community issues its written endorsement. For example, an electric cooperative with membership extending to more than one community can obtain a single BFRLF loan to finance its bulk fuel purchase as long as each participating community has less than 2,000 population and provides AEA [Alaska Energy Authority] with its written endorsement. Under current law, however, the cooperative in this example can borrow no more than $300,000 in a single fiscal year - the same as any other borrower. Co-Chair Green stated that the proposed language in the bill would allow the amount that could be borrowed in this manner to be $400,000 multiplied by the number of participants "not to exceed $1,500,000". "The pooling" allowed in this manner is "the most substantial" change. 9:13:31 AM Senator Dyson asked whether an estimate of the number of cooperative agreements that might be formed has been determined. Senator Olson deferred to the Alaska Energy Authority (AEA). His "general sense" was that the inclusion of this language would be important, as it would allow for such cooperative agreements to be explored. While the Yukon-Kuskokwim (YK) area had considered this approach, action was curtailed, as it was not authorized under Statute. Senator Dyson asked whether data on the history of loan defaults was available. Senator Olson affirmed that data was available. Senator Dyson stated that the information would be appreciated. 9:15:04 AM Senator Olson clarified that the data focused on loans that were delinquent rather that loans that were in default. JIM MCMILLAN, Deputy Director, Credit, Alaska Industrial Development & Export Authority and Alaska Energy Authority, testified via teleconference from Anchorage and informed the Committee that "over the past few years, the delinquency rate on the Bulk Fuel Revolving Loan Fund has been averaging between five and ten percent. Delinquency is defined as any loan where a payment is 90 days or more past due." Senator Dyson asked the total amount in delinquency status. Mr. McMillan stated that as of December 31, 2005, $297,000 out of a total $4.3 million loan balance was delinquent. This would equate to 6.91 percent of the outstanding loan balance total. 9:16:53 AM Co-Chair Wilken asked whether a cooperative or a community with a delinquent standing would be able to acquire another loan. Senator Olson understood that delinquent entities could not re- apply for another loan. However, other programs would be available through which an entity could address its outstanding balance. 9:17:31 AM Mr. McMillan stated that in order for a loan to be approved, an applicant must meet "certain credit standards" which would include their credit history. Thus, delinquency on an existing loan "would be adverse issue". In addition, State Statutes also limit an entity to receive one loan per fiscal year. Therefore, an entity with an outstanding loan would not qualify to receive another loan. Co-Chair Wilken asked whether the $200,000 depicted in the "Write- Downs and Recoveries" column of Table 1, Section 1 "History and Status of the Bulk Fuel Revolving Loan Fund" on page 4 of the Blue Book was the delinquent amount Mr. McMillan had referred to. Mr. McMillan responded that it was not. While AEA does track delinquencies, the information in the Blue Book does not reference that. There is a difference between delinquencies and Write-Downs. Co-Chair Wilken asked for further information about the effect of incorporating the language "cooperative corporation" as specified in Section 1(e)(1) page 1 lines 7 and 8. 9:19:46 AM Mr. McMillan explained that under current Statutes, a cooperative of five communities, for example, that endeavored to combine fuel purchases to maximize price breaks could borrow a maximum of $300,000. This proposed language would expand the cooperative loan capacity to the lesser of $1.5 million or $400,000 multiplied by the number of communities in the cooperative. The $1.5 million amount was specified in order to prevent the BFRLF from being depleted. Co-Chair Wilken acknowledged. Co-Chair Green desired that representatives of AEA provide their testimony prior to Senator Olson offering the aforementioned amendments. 9:21:19 AM Mr. McMillan stated that the BFRLF was established to provide funds to communities with populations smaller that 2,000 that annually or semiannually purchased bulk fuel. "Typical borrowers are communities, utilities that provide power in the community, and fuel retailers in the community. The fund would provide money up to 90 percent of the wholesale price landed of bulk fuel purchased". The current loan limit is $300,000. Mr. McMillan stated that the changes proposed in this bill would increase the individual loan limit from $300,000 to $400,000. In addition, it would allow a cooperative organization or an electric cooperative "to borrow the lesser of $400,000 multiplied by the number of communities or $1,500,000." Mr. McMillan stated that the Middle Kuskokwim Electric Cooperative is a cooperative of five communities that currently borrows money in this fashion. Mr. McMillan stated that the legislation would also expand "the definition of eligible borrower to a person maintaining community facilities for infrastructure". In addition, AEA could "adopt regulations to establish standards for the allocation of loan funds to eligible borrowers." Co-Chair Green as whether Mr. McMillan's remarks included references to language in the forthcoming amendments. Mr. McMillan affirmed. Continuing, he informed the Committee that the changes being proposed to current regulations were the result of the fact that, in recent years, AEA has experienced an increase in the number of borrowers as well as an increase in the loan amounts being requested. The increases are the result of "higher prices for delivered bulk fuel, a decline in vendors wanting to finance the purchase of bulk fuel, and to a certain extent, increased volumes of bulk fuel as a result of AEA's efforts to upgrade bulk fuel tank farms in Rural Alaska." Mr. McMillan shared that increased fuel prices have forced communities once able to finance their purchases to seek assistance. In FY 2003, 39 loans totaling $3.4 million were requested. Six of those requested the maximum loan limit at that time, which was $200,000. In FY 04, 53 borrowers requested a total of $4.9 million. The maximum loan limit that year was $300,000. In FY 05, 54 borrowers requested loans amounting to a total of $6.7 million. 27 borrowers have requested $4.2 million though the first half of FY 06. The average loan amount increased 53 percent from FY 03 through FY 05. Mr. McMillan informed the Committee that GREAC has endeavored to further the creation of fuel cooperatives in hopes that such volume ordering might generate "price breaks" for Rural Alaska. The existing single loan limit "might defeat" that effort. The proposal to base a cooperative's loan limit on the lesser of $400,000 multiplied by the number of entities in the cooperative or $1,500,0000 "to preclude depleting the fund" would assist this endeavor. 9:26:55 AM Mr. McMillan stated that AEA recently received a request "to lend bulk fuel money to the Rural Utilities Services (RUS), an arm of the Yukon-Kuskokwim Health Corporation who had entered into a written agreement with the City of Chevak to manage and operate their sewer and water system which included purchasing fuel to operate the system". Current Statutes designate eligible borrowers to include the community, the utility providing power in a community, and fuel retailers in the community. Thus lending funds to a third party, such as RUS, that a community had contracted with to oversee the operation of its utilities is prohibited. Mr. McMillan specified that one of the forthcoming amendments would allow AEA to adopt regulations pertaining to the program and to set standards for the allocation of the Fund money "to eligible borrowers when the demand on the fund exceeds the amount of money available to lend". While this has not been an issue since FY 2002 when additional capitalization of five million dollars was received in the form of a United States Department of Agriculture Rural Utilities Service (USDA RUS) grant, the action being requested would allow AEA to take action in the future were there increasing demand on the Fund and an absence of additional capitalization. Co-Chair Green reminded the Committee that Mr. McMillan's testimony included explanations of both the bill and the two forthcoming amendments. 9:28:54 AM Senator Stedman asked regarding the proposal to increase the amount of money that could be lent to cooperatives, specifically in regards to the language on page "v" of the Blue Book that reads as follows. For these organizations, the current language of the bill would raise the annual limit to "$300,000 multiplied by the number of communities on whose behalf the bulk fuel is to be purchased, or $1,000,000 whichever is greater." This language means that, for an electric cooperative such as AVED that serves 50 communities, the annual borrowing limit would be $15 million. However, if the intent was to set the annual borrowing limit at "whichever is less" of the two alternative, then AVEC's borrowing limit under an amended bill would $1.0 million rather than $15 million. Only 5 existing organizations were identified that would be directly affected by the proposed legislation. None of these are currently BFRLF borrowers and none expect to become BFRLF borrowers in the foreseeable future whether or not the legislation is enacted. However, it is possible that one or more may access the BFRLF regardless of current expectations. Naknek Electric Association reported that it needed supplemental financing this past year from the Cooperative Finance Corporation (CFC) in an amount exceeding $300,000 to help finance its bulk fuel acquisition because the utility's cash reserves were inadequate to pay the entire bill. Should this happen again and if the BFRLF borrower limit were raised, Naknek Electric could find it preferable to obtain supplemental financing from the BFRLF rather than CFC. Senator Stedman noted that the maximum cooperative loan limit in this language differs from the $1.5 million specified in Version "S". In addition, the statement on page "v" that none of the five identified organizations would utilize the funds differs from the argument in support of cooperative borrowing. 9:30:10 AM Mr. McMillan responded that the amendment regarding cooperatives and the amount that they could borrow from the Fund could be characterized as a "proactive measure." The desire of REAC is "to encourage the formation of bulk fuel cooperatives". Electric cooperatives such as the Alaska Village Electric Cooperative (AVEC) that is comprised of approximately 50 communities currently exist. Due to its size, AVEC has been able to negotiate reasonable fuel prices with vendors, without the assistance of the BFRLF. Furthermore, were AVEC to require BFRLF assistance, it could "bust the fund." Mr. McMillan reiterated that the purpose of the proposal would be to encourage the formation of additional bulk fuel cooperatives. 9:31:33 AM Senator Stedman interpreted this answer to indicate that there "is there is no current demand" from cooperatives. While AEA appears to anticipate that there could be demand in the future, the report would appear to indicate that there would not be. Senator Stedman also asked about Section V as depicted on page "iv" of the Blue Book, specifically as he understood it to "insinuate" that there might be other avenues through which to achieve lower fuel prices. V. There is an extensive history of efforts to consolidate bulk fuel purchasing in rural Alaska with the goal of achieving price savings. Attempts to create and maintain formal bulk fuel purchasing cooperatives have been unsuccessful although some efforts at informal consolidation have worked out and have been sustained over a period of years. Interviews suggest that, while volume discounts might be achieved for consolidated purchasers within a certain size range, more significant savings are likely to be achieved through strategies that assure fuel distributors of full and timely payment. 9:32:30 AM Mr. McMillan communicated that the review of previous attempts to establish bulk fuel cooperatives would indicate that the cooperatives have failed to achieve the primary goal of reducing fuel costs "through large volume purchases". Numerous factors may have contributed to that failure including the member's obligation to fund the cooperative's overhead and the issue of the fuel being delivered to multiple locations. Vendors have stated that delivering fuel to multiple locations is a primary driver of costs. This issue could be diminished were there one central delivery location. Senator Stedman is correct that history would indicate that there has been little success with bulk fuel cooperatives. 9:34:07 AM Senator Olson referred the Committee to the chart on page 20 of the Blue Book. He asked for verification that the community of Aniak with a population of 539 paid $1.80 per gallon of fuel whereas the community of Tuluksak with a population of 461 paid $3.27 per gallon. 9:34:39 AM Mr. McMillan stated that AEA contracted with a third party to conduct the study and gather the information presented in the Blue Book. Therefore, he could only accept the information as stated. 9:35:02 AM Senator Olson asked how the loan defaults being experienced by BFRLF would compare to other commercial default/delinquency percentages. Mr. McMillan, drawing on his 25 years as a commercial banker in Alaska, stated that bankers would view a delinquency rate exceeding two percent of their portfolio, as being excessive. Continuing however, he characterized these loans as "higher risk loans" due to the nature of the borrowers. In 2001 and 2002, AEA was experiencing delinquency rates as high as 25 to 30 percent. "Prudent underwriting and strong follow-up on collections" have been successful in reducing the delinquency rates. 9:36:24 AM Senator Stedman declared that as this discussion has continued, the issue has become more confusing. While the financing component of the program might have been successful, the "report infers" that the effort to reduce fuel prices has been unsuccessful. The report also indicates that many communities have opted not to use the program. To that point, he pondered whether that might be because there are State energy assistance programs. The programs should be reviewed; some might not be required and perhaps others could either be consolidated or changed. 9:37:26 AM Senator Stedman reiterated the fact that five existing organizations would not be anticipated to use the BFRLF. Thus the question is to how this program would mesh with other energy assistance programs that are available. 9:38:06 AM Mr. McMillan clarified that rather than "to lower the price of fuel", the BFRLF was established to enable communities to finance large annual or semi-annual purchases of fuel. There are a limited number of lenders that would allow communities to pay for such "purchases up front and pay back the loan over a seasonal period". Mr. McMillan continued that the experience is that as the price of fuel has increased, more communities have been borrowing from the Fund. It should be noted that there is a movement to create bulk fuel cooperatives. He communicated that the Northwest Arctic Borough has been experimenting with a semi-cooperative model for approximately one year. However, he was unaware of the results of that endeavor. Nonetheless, the high price of fuel has prompted more people to further efforts to achieve lower fuel prices. Cooperatives might be one of numerous efforts in that respect. 9:40:14 AM Senator Stedman understood that a first time BFRLF borrower would be issued a zero interest rate. A second time borrower would be issued a five percent interest rate, and a third time borrower would be issued a rate tied to long-term municipal revenue bonds. He asked that the interest rate determinations be elaborated to include how the BFRLF interest rates compared to those of a commercial lender. 9:41:09 AM Mr. McMillan responded that Senator Stedman is correct: the interest rate for the first loan is zero; the second loan rate is five percent; and the third loan would be "an average of some index of municipal bonds". Mr. McMillan expressed that commercial lenders' rates would vary as they would be based on the lender's cost of funds as well as the risk associated with the loan. Based on the fact that the current prime rate is 7.25 percent and Treasury Bonds are at five percent, he would anticipate the rate being charged by a commercial lender to be 8.5 percent. Therefore there would be "a savings to borrowers who utilize the BFRLF". 9:42:33 AM Co-Chair Wilken asked whether the BFRLF program was similar to the Denali Commission's bulk fuel program. 9:42:54 AM Mr. McMillan stated that the BFRLF would refer applicants that might not qualify for its program to the Denali Commissions' Bridge Bulk Fuel Loan Fund. The intent of that program could be characterized as "a temporary measure until such time that the community would qualify for the BFRLF". 9:43:45 AM SARA FISHER-GOUD, Alaska Industrial Development & Export Authority and Alaska Energy Authority and RON MILLER, Executive Director, Alaska Industrial Development & Export Authority and Alaska Energy Authority testified via teleconference from Anchorage and informed the Committee that they were available to answer questions. 9:44:00 AM Co-Chair Green removed her objection to adopting Version "S". There being no other objection, the Version "S" committee substitute was ADOPTED as the working document. Amendment #1: This amendment inserts "; and authorizing regulations to establish standards for the allocation of money in that fund to eligible borrowers." into the bill's title following the word "year" on page 1 line 2. In addition, the amendment inserts a new section into the bill on page two, following line one as follows. Sec. 2. AS 42.45.250(j) is amended to read: (j) The authority may adopt regulations necessary to carry out the provisions of this section, including regulations to establish (1) reasonable fees for services provided and charges for collecting the fees; and (2) standards for the allocation of bulk fuel revolving loan fund money to eligible borrowers." New Text Underlined Senator Olson moved for the adoption of Amendment #1. Co-Chair Green objected. 9:44:48 AM Senator Olson explained that the State's Attorney General recommended this amendment. The purpose of the Amendment would be to provide a process through which the BFRLF could limit its allocations to eligible borrowers to prevent the money that is in the Fund from being depleted. He noted that Mr. McMillan's testimony had addressed this amendment. Co-Chair Green asked whether the amendment is being offered because no language currently exists through which to protect the Fund. Senator Olson deferred to Mr. McMillan. It was his understanding that the language would be required in order to prevent the funds from being depleted. 9:46:08 AM Mr. McMillan stated that prior to a five million dollar USDA RUS grant received in 2002, the BFRLF experienced cycles, typically at the times of Fall or Spring fuel delivery, during which the Fund received more applications for dollar amounts than there was money in the Fund. While no process is specified in regulations, the BFRLF established a system that awarded funds on "a first come first serve basis". Due to the fact that "the payback period on the loans is nine months", there is "a constant cycle of cash running through" the Fund, and, as payments were made, funds were provided to the applicants waitlisted. While there has not been a cash flow issue since the USDA RUS grant was received, this past year at the peak of the application request period, the Fund had a balance of approximately $1.5 million. This amendment would allow the BFRLF to adopt the first come first serve system or another standard. The amendment would provide the Fund the ability "to adopt regulations to set standards". Co-Chair Green asked for confirmation that the Fund could not establish such standards without this language. 9:47:49 AM Mr. McMillan deferred to the Department of Law. 9:48:46 AM BRIAN BJORKQUIST, Senior Assistant Attorney General, Labor and State Affairs Section, Civil Division (Anchorage), Department of Law testified via teleconference from Anchorage and stated that while the adoption of this amendment "might not be absolutely necessary, having this type of language authorizing the adoption of regulations is useful and recommended because it will avoid the risk of litigation" were a system other than the first come first serve process adopted in the future. 9:48:57 AM Co-Chair Green asked therefore, whether the language in the amendment would be sufficient or whether more detailed language would be required. 9:49:07 AM Mr. McMillan responded that, other than the first come first serve process that has been utilized, no standards have of yet been established. This language would be required in the event where the Fund to determine that standards should be implemented. It would provide a process through which public hearings could be conducted and regulations could be established to the benefit of eligible borrowers. This amendment would provide for that process. Mr. Bjorkquist added that, "this language is broad enough" to allow the agency the "discretion to adopt the allocation system that it would believe to be best suited for the program under the circumstances as they would arise in the future." 9:50:15 AM Senator Stedman, observing that the BFRLF received $9,000,000 in loan requests and disbursed $5,300,000 in FY 2005, asked the reason that only 60 percent of the requests were granted. This information is depicted on page "i" of the Blue Book. 9:50:47 AM Mr. McMillan responded that there is some confusion in regards to the figures presented in the report. He explained that the commitment date is the date that the BFRLF actually approved the loan. While requests are oftentimes submitted up to two or three months before a barge order is due, the funds might not be disbursed until up to four months after that commitment. "It is a timing issue" … and the funds "might cross fiscal years." This could be confusing. There being no further discussion, Co-Chair Green noted that she would maintain her objection to the adoption of Amendment #1. Continuing, she stated that the bill would be held in Committee and, were the amendment to fail, "more acceptable" language could be developed for reconsideration. Senator Olson asked whether the failure of such an amendment would affect the Fund. 9:52:10 AM Mr. McMillan responded that based on recent experience, the non- adoption of the amendment would not pose a problem in the near future. He reiterated that at the most recent "peak" the fund maintained a level of approximately $1.5 million. However, were both the price of fuel to continue to increase and the loan limit to increase, further pressure might be experienced. "It is hard to look in a crystal ball" and determine "at what point this might become an issue". A roll call was taken on the motion. IN FAVOR: Senator Hoffman, Senator Olson, and Senator Dyson OPPOSED: Senator Stedman, Co-Chair Wilken, and Co-Chair Green ABSENT: Senator Bunde The motion FAILED (3-3-1) Amendment #1 FAILED to be ADOPTED. Senator Stedman requested that additional information regarding the loan request and loan disbursement table depicted in the Executive Summary on page "i" be provided, as the information presented is "distorted". Co-Chair Green suggested that Senator Stedman confer with AEA in this regard. Amendment #2: This Amendment inserts "relating to the purposes of and eligibility for loans from the bulk fuel revolving loan fund; and" following "An Act" in the bill's title on page 1 line 1. In addition, a new bill section is inserted on page 1 following line 3 as follows. Section 1. AS 42.45.250(a) is amended to read: (a) The bulk fuel revolving loan fund is established in the authority to assist communities, utilities providing power in communities, and fuel retailers in communities in purchasing bulk fuel to maintain community facilities or to generate power or supply the public with fuel for use in communities. A community, or a person generating power or selling fuel in a community or maintaining a community facility who has written endorsement from the governing body of each community for which a loan from the fund is sought, is eligible for a loan from the bulk fuel revolving loan fund for a purchase of an emergency supply or a semiannual or annual supply of bulk fuel to be used in the community." New Text Underlined. This amendment also inserts a new bill section on page 2, following line 1 as follows. Sec. 3. AS 42.45.250(l) is amended by adding a new paragraph to read: (3) "community facility" means a public building or public work open to, or used by or for the benefit of, the public and owned by a community, a governmental entity, or a nonprofit organization; in this paragraph, "public building or public work" includes educational and health facilities, water and sewer facilities, roads, and docks. Senator Olson moved to adopt Amendment #2. Co-Chair Green objected. 9:54:25 AM Senator Olson explained that this amendment would expand the entities to which BFRLF loans could be provided. Currently BFRLF loans are limited to communities, utility operators and fuel retailers. He noted that due to the current restriction, RUS, which is a subsidiary of the YK Health Corporation, has been unable to acquire BFRLF loans. This amendment was requested by the GREAC. Co-Chair Green stated that the language is very broad. 9:55:45 AM Co-Chair Wilken agreed with Co-Chair Green. He recalled that when community facilities were added to the Power Cost Equalization program, the community facilities line item increased more than five times the rate depicted on the personal facilities line. The community facilities portion might surpass the residential portion. The purpose of the BFLRF is to purchase fuel at a lower rate in order to assist residents. "This may squeeze out the residential benefit to the benefit of community facilities." Community facilities have the option to borrow at the eight percent level instead of the seven percent level. 9:56:42 AM Senator Olson suggested that rather than community facilities surpassing the residential usage, the perspective should be that community facilities are finally catching up the community needs. In other words, "what started out as a deficit is now catching up with the community's needs". Senator Olson asked Mr. McMillan to speak to the amendment. 9:57:13 AM Mr. McMillan noted that it would be important for the Committee to understand that this amendment would pertain to a third party that, by agreement, "would be taking over … the affairs of community." Currently a community could borrow from the BFRLF. That bulk fuel could be used for multiple purposes including heating community owned facilities. That usage would not be new. This amendment would expand who could borrow the funds rather than how the fuel purchased by the funds could be used. Mr. McMillan continued that a third party on contract with the community might, as part of the contract, be authorized to purchase fuel, to receive revenues, or to bill and collect on the behalf of the community. This amendment would allow that third party, with consent of the community, "to be the borrower under the Statutes". 9:59:09 AM Senator Hoffman stated that an example of this situation would the YK Health Corporation, which is an organization with sound financial management. That corporation could assist a small community experiencing financial difficulty, such as the small community of Chevak. This amendment would allow an entity such as the YK Health Corporation to "accept the BFRLF bulk fuel loan and be more responsible to make sure that it will pay back the loan." Chevak for instance, has had a very bad track record in the regard. The program would be more solvent in this case, were the YK Health Corporation to be responsible for the loan. 10:00:20 AM Senator Dyson appreciated Co-Chair Green's comment. While its been several years since he had visited Western Alaska, he recalled one community that had three separate government entity buildings, each having "contempt" for both of the other buildings and the people working there. The three levels of government "bothered" him; therefore, he would be more comfortable with this amendment were it to discourage overlapping governments. Continuing, he recalled that, in a separate situation, one village split into two villages with separate power plants because of an internal disagreement. To that point, he would discourage the imposition of any incentive that might promote further inefficiencies. Senator Stedman supported Senator Hoffman's comments that having well-managed entities involved in this program would assist in lowering default rates. "That would better serve all the participants in the BFRLF" and the State, in general. However, he voiced being uncomfortable with the language as presented. He suggested that the language be reworked. 10:04:09 AM Mr. McMillan stated "this amendment is really a tool to assist communities in maintaining their infrastructure." A tremendous amount of capital has been invested in the infrastructure in these communities. Unfortunately, some communities are "dysfunctional". This amendment would allow for an entity, "other than those parties already in the community that are not functioning," to be responsible for that infrastructure. "It is not a case of overlapping government; this comes about when there is a lack of government." Co-Chair Green, noting that she would maintain her objection to Amendment #2, communicated that she might be able to suggest alternate language through which to address the concern. Senator Olson responded to Senator Dyson's "contempt" of the overlapping governments by stating that governmental agencies have different functions in communities. To that point, however, he noted that efforts to consolidate such entities have occurred in order to improve efficiency. Senator Olson offered to withdraw Amendment #2 in order to develop more acceptable language. There being no objection, Amendment #2 was WITHDRAWN. Senator Dyson clarified that rather than himself feeling contempt for the overlapping governmental situation, he was simply sharing an observation of the community's feelings in that regard. To that point, he voiced appreciation for the fact that consolidation efforts have been undertaken in order to promote more cooperation and efficiency. Senator Olson acknowledged. Co-Chair Green ordered the bill HELD in Committee for further work.
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