05/05/2006 09:00 AM Senate FINANCE

9:23:24 AM                                                                                                                    
                                                                                                                                
                                                                                                                                
     CS FOR HOUSE BILL NO. 381(FIN)                                                                                             
     "An  Act relating  to the  financing of  construction, major                                                               
     maintenance,  and renovation  of  certain capital  projects;                                                               
     authorizing the  commissioner of  revenue to sell  the right                                                               
     to  receive a  portion  of the  anticipated  revenue from  a                                                               
     tobacco  litigation  settlement   to  the  Northern  Tobacco                                                               
     Securitization Corporation,  and relating  to that  sale and                                                               
     the  use of  the revenue;  authorizing the  Northern Tobacco                                                               
     Securitization  Corporation  to  issue  bonds  and  use  the                                                               
     proceeds  to  acquire the  right  to  receive a  portion  of                                                               
     anticipated  revenue from  a  tobacco litigation  settlement                                                               
     and for  other purposes,  and relating  to those  bonds; and                                                               
     providing for an effective date."                                                                                          
                                                                                                                                
                                                                                                                                
This was  the first hearing for  this bill in the  Senate Finance                                                               
Committee.                                                                                                                      
                                                                                                                                
9:23:58 AM                                                                                                                    
                                                                                                                                
BRYAN   BUTCHER,  Director,   Governmental  Affairs   and  Public                                                               
Relations,  Alaska  Housing  Finance Corporation,  Department  of                                                               
Revenue, introduced Mr. Fauske and Mr. Dubler.                                                                                  
                                                                                                                                
9:24:19 AM                                                                                                                    
                                                                                                                                
DAN  FAUSKE, Chief  Executive Officer/Executive  Director, Alaska                                                               
Housing  Finance Corporation,  Department  of Revenue,  testified                                                               
via  teleconference from  an  offnet location  that  he would  be                                                               
available for questions following presentation of the bill.                                                                     
                                                                                                                                
9:24:58 AM                                                                                                                    
                                                                                                                                
Mr.  Butcher pointed  out that  the Senate  companion legislation                                                               
had been  heard in this  Committee. He would therefore  focus his                                                               
testimony to  changes made to the  original bill by the  House of                                                               
Representatives.  The  amount of $140 million  was established in                                                               
conjunction  with   the  House   Finance  Committee   and  deemed                                                               
"attainable and conservative". In  subsequent discussion with the                                                               
Corporation's financial advisor the  amount would be increased to                                                               
$145  million  to  reflect  a  "slight up  tick  in  the  tobacco                                                               
market." This market is very  volatile and therefore difficult to                                                               
determine an  exact amount.  A final  amount should  be available                                                               
the following day.                                                                                                              
                                                                                                                                
Mr. Butcher spoke  to previous testimony in  which larger amounts                                                               
were announced. However,  repayment of $14 million  over the term                                                               
of  the bonds  could actually  cost  $200 to  $300 million.  This                                                               
represents  "diminishing returns"  in which  each dollar  was not                                                               
maximized.                                                                                                                      
                                                                                                                                
9:26:03 AM                                                                                                                    
                                                                                                                                
Mr. Fauske  reiterated Mr. Butcher's  testimony, noting  that $14                                                               
million  on  "the   unrated  side"  plus  "a   section  of  below                                                               
investment  grade"  estimated  amount  of  between  $21  and  $22                                                               
million.                                                                                                                        
                                                                                                                                
9:26:29 AM                                                                                                                    
                                                                                                                                
Co-Chair  Green  requested  an  explanation  of  the  process  of                                                               
implementing the provisions of this legislation.                                                                                
                                                                                                                                
9:26:34 AM                                                                                                                    
                                                                                                                                
JOE   DUBLER,   Director,   Finance,   Alaska   Housing   Finance                                                               
Corporation,  Department of  Revenue,  testified  that this  bill                                                               
would allow  the Northern  Tobacco Securitization  Corporation to                                                               
restructure the existing  two transactions; one sold  in the year                                                               
2000 and the second in 2001.  The tobacco market at that time was                                                               
"young" and Alaska was the first  state to undertake this type of                                                               
transaction.  The process  has matured  and more  structures have                                                               
been implemented to  allow for additional proceeds  from the same                                                               
amount of revenues.                                                                                                             
                                                                                                                                
Mr.  Dubler explained  this bill  would allow  the payoff  of the                                                               
existing bonds  and utilize  the new  structures to  realize more                                                               
from the same  revenue stream. Additionally the  maturity date of                                                               
the bonds would be extended.                                                                                                    
                                                                                                                                
Mr.   Dubler   reminded   that  the   first   transactions   were                                                               
specifically  shorter terms  with  the goal  being  receipt of  a                                                               
specific  dollar  amount. The  first  issuance  garnered $93  net                                                               
proceeds.    He  understood  that   Governor  Murkowski  and  the                                                               
legislature had decided  to maximize the amount  of proceeds from                                                               
the transactions  through the proposed  restructuring. Therefore,                                                               
the Corporation  has proposed a  more aggressive  bond structure,                                                               
which this bill would allow.                                                                                                    
                                                                                                                                
Mr. Dubler  stated this  proposal would  "free up"  the surpluses                                                               
available after the bonds  currently outstanding were "defeased".                                                               
Those surpluses would be expended  on the capital projects listed                                                               
in this legislation.                                                                                                            
                                                                                                                                
9:28:23 AM                                                                                                                    
                                                                                                                                
Co-Chair Green ordered the bill HELD in Committee.