Legislature(2013 - 2014)SENATE FINANCE 532

03/18/2014 09:00 AM FINANCE

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* first hearing in first committee of referral
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= bill was previously heard/scheduled
Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
Heard & Held
Moved CSSB 108(JUD) Out of Committee
2d CS FOR HOUSE BILL NO. 23(RLS)                                                                                              
     "An   Act  creating   the  Knik   Crossing  Development                                                                    
     Corporation as  a subsidiary corporation of  the Alaska                                                                    
     Housing Finance  Corporation and  relating to  bonds of                                                                    
     the Knik Crossing Development Corporation."                                                                                
10:25:32 AM                                                                                                                   
REPRESENTATIVE  MARK  NEUMAN,  outlined the  basics  of  the                                                                    
legislation.  He explained  that  House Bill  23 amends  the                                                                    
Knik  Arm Bridge  and Toll  Authority's enabling  statute to                                                                    
provide  for  a  successful  procurement for  the  Knik  Arm                                                                    
Crossing  project and  to generate  the best  value for  the                                                                    
state. Passing  this legislation  this session  is important                                                                    
to seeing  the Knik Arm  Crossing efficiently move  toward a                                                                    
successful and  low-cost procurement process  and facilitate                                                                    
being open for  traffic in 2015. The Knik  Arm Crossing will                                                                    
be a  significant addition  to Alaska's  infrastructure that                                                                    
will further facilitate the movement  of goods and people in                                                                    
the state.  This bill was  written in consultation  with the                                                                    
Knik  Arm  Bridge and  Toll  Authority  (KABATA), which  was                                                                    
established  in 2003  by the  Alaska  Legislature. The  bill                                                                    
accomplishes many items KABATA  has deemed necessary to have                                                                    
a successful  public-private partnership  procurement. Those                                                                    
items are:                                                                                                                      
   Increase in KABATA's Bonding Authority from $500 million                                                                     
   to $600 million                                                                                                              
     · The $600 million number represents the same amount                                                                       
        authorized under Private Activity Bond (PABs)                                                                           
        allocation from FHWA                                                                                                    
     · Lowers the cost of capital for the project and                                                                           
        ultimately lowers the cost to end users                                                                                 
     · Private partner is the borrower of any PABs issued.                                                                      
   Clarify that the bridge and associated facilities are                                                                        
   exempt from state and local property taxes                                                                                   
     · Like any other transportation project in our State,                                                                      
        the roads and bridges are not subject to property                                                                       
     ·  Any  private   facilities   developed  outside   the                                                                    
        crossing will be taxable                                                                                                
     ·  Property  tax  exemption  reduces  the  availability                                                                    
        payment and reduces the toll                                                                                            
   Contractual Monetary Obligations                                                                                             
     ·  Identifies the *obligations of the  State of Alaska*                                                                    
        under a P3 process                                                                                                      
     ·  The  legislative   language  applies   to  "monetary                                                                    
        liabilities" which may be incurred by KABATA under a                                                                    
        P3 process                                                                                                              
     ·  Any P3 agreement needs to be  approved by the KABATA                                                                    
        Board of Directors, State AG's office, and ADOT&PF                                                                      
     ·  Serves to  lower  the cost  of  debt  and equity  to                                                                    
        finance the project                                                                                                     
     · Keeps the tolls affordable to the traveling public                                                                       
   Project reserve                                                                                                              
     ·  Creation of a reserve fund is  to provide a backstop                                                                    
        for toll revenue fluctuations.                                                                                          
     ·  Serves to  enhance  the  credit  worthiness  of  the                                                                    
        project and reduce project costs                                                                                        
     · Will be repaid over the project life                                                                                     
Vice-Chair  Neuman   stated  that   A  the   above  language                                                                    
clarifications  and additions  serve  to lower  the cost  of                                                                    
capital  on  this  much needed  infrastructure  project  and                                                                    
deliver the benefits in a timely and efficient manner.                                                                          
10:33:06 AM                                                                                                                   
Co-Chair Kelly  MOVED to ADOPT the  committee substitute for                                                                    
SCS  2d  CS HB  23  (FIN),  work draft  28-LS014\R  (Martin,                                                                    
2/13/14). There being NO OBJECTION, it was so ordered.                                                                          
SUZANNE  ARMSTRONG, STAFF,  SENATOR  KEVIN MEYER,  explained                                                                    
the  changes in  the  CS. She  referred  the explanation  of                                                                    
changes (copy on file):                                                                                                         
     Section  1: Amends  AS 19.75.021  Establishment of  the                                                                    
     Authority (KABATA)                                                                                                         
     Amends  existing  law  to prevent  the  dissolution  of                                                                    
     KABATA until bonds issued by the State are satisfied.                                                                      
     Section  2: Amends  AS 19.75.111  Powers and  Duties of                                                                    
     Authority (KABATA)                                                                                                         
     Amends existing  law to allow  KABATA to enter  into an                                                                    
     agreement  with  the  State  to  pledge  residual  toll                                                                    
    revenues to pay debt service incurred by the State.                                                                         
     Section 3:  Amends AS 19.75.211 Bonds  of the Authority                                                                    
     Amends  existing   law  to   require  the   State  Bond                                                                    
     Committee  to   evaluate  whether  toll   revenues  are                                                                    
     adequate for  payment of the principal  and interest on                                                                    
     bonds  issued  by the  State  before  KABATA may  issue                                                                    
     additional toll revenue bonds.                                                                                             
     Section  4: Amends  AS 19.75.221  Trust Indentures  and                                                                    
     Trust Agreements; Funds and Reserves (KABATA)                                                                              
     Amends existing  law to require  that if  KABATA issues                                                                    
     bonds in addition  to the toll revenue  bonds issued by                                                                    
     the State,  KABATA's trust agreement would  require the                                                                    
     authority to agree to keep  tolls at a level sufficient                                                                    
     to  cover  any  prior  toll  revenue  pledges  made  to                                                                    
    support previously issued State toll revenue bonds.                                                                         
     Section 5: Amends AS 19.75.231 Validity of Pledge                                                                          
     Amends  existing  law   to  express  the  Legislature's                                                                    
     intent that  a toll  revenue pledge  made by  KABATA to                                                                    
     support bonds  issued by the  State is valid  and shall                                                                    
     give rise to a lien against toll revenues.                                                                                 
     Section 6:  Establishes the  Framework for  Issuance of                                                                    
     Toll Revenue Bonds for a Toll Bridge                                                                                       
     AS 37.15.225 - Bond Authorization                                                                                          
     Net  proceeds  of the  sale  of  bonds remaining  after                                                                    
     payment of costs  of issuance and after  deposit to the                                                                    
     Bond  Reserve Fund,  shall be  transferred to  the Knik                                                                    
     Arm Bridge  & Toll Authority.  The net proceeds  may be                                                                    
     held by a  trustee to be disbursed to pay  the costs of                                                                    
     a toll bridge, as set out in a trust agreement.                                                                            
     Accrued interest  paid on the bonds  shall be deposited                                                                    
     into the Bond Redemption Fund.                                                                                             
     Prior  to  the  issuance   of  bonds,  the  State  Bond                                                                    
     Committee will notify the Legislature.                                                                                     
     AS 37.15.230 - Provides for  a Toll Bridge Revenue Bond                                                                    
     The total unpaid principal amount  of revenue bonds may                                                                    
     not exceed $300,000,000.                                                                                                   
    AS 37.15.235 Establishes a Toll Bridge Revenue Fund                                                                         
     Revenue  received by  the State,  by contract  with the                                                                    
     authority, from the ownership or  operation of the toll                                                                    
     bridge  and  facilities,  shall be  deposited  in  this                                                                    
     Contracts or  other agreements  with the  authority may                                                                    
     establish priorities for the  payment of operations and                                                                    
     maintenance  costs   and  for  the  payment   of  other                                                                    
     obligations   (including   debt  obligations   of   the                                                                    
     authority),  prior  to  payments  to  be  made  by  the                                                                    
    authority to the State for deposit into this fund.                                                                          
     Revenue in the fund may be used only for:                                                                                  
          1. Pay or secure payment of the principal of and                                                                      
          interest on bonds;                                                                                                    
          2. Redeem bonds before the fixed maturity date;                                                                       
          3.  Subject to  appropriation by  the Legislature,                                                                    
          for any other purpose  for which federal funds may                                                                    
          be  obligated   by  the  State  under   23  U.S.C.                                                                    
     AS 37.15.240  Establishes the Toll Bridge  Revenue Bond                                                                    
     Redemption Fund                                                                                                            
     A trust  fund for  paying and  securing the  payment of                                                                    
     the  principal and  interest  on  the bonds  authorized                                                                    
     under AS 37.15.225 - 37.15.285  is created. There is no                                                                    
     limitation  on   the  source  of  funds   that  may  be                                                                    
     deposited  into  the  fund, only  that  funds  in  this                                                                    
     account are  to be used  to pay principal  and interest                                                                    
     on bonds issued under AS 37.15.225 - 37.15.285.                                                                            
     AS 37.15.245 Establishes Bond Terms                                                                                        
     Provides  discretion for  the state  bond committee  to                                                                    
     determine  the  manner,  amount, timing,  and  maturity                                                                    
     date for  the issuance  of bonds  under AS  37.15.225 -                                                                    
    37.15.285. Interest rates may be fixed or variable.                                                                         
     Requires the state bond committee  to consider the best                                                                    
     interests of the  State when setting the  terms of bond                                                                    
     issuance  and   requires  the   final  bond   terms  be                                                                    
     expressed through a resolution of the bond committee.                                                                      
     AS 37.15.250 Bond Resolution                                                                                               
     Provides that  the bond  committee shall  authorize the                                                                    
     issuance  of the  bonds by  adopting a  resolution. The                                                                    
     resolution    may    fix    the    principal    amount,                                                                    
     denominations, date, maturities,  manner of sale, place                                                                    
     or  places  of  payment, terms,  form,  conditions  and                                                                    
     covenants of the bonds.                                                                                                    
     AS 37.15.255 Bond Reserve Fund                                                                                             
     The resolution  authorizing the issuance of  bonds, may                                                                    
     provide  for the  establishment  and  maintenance of  a                                                                    
     special  fund -  The Toll  Bridge Revenue  Bond Reserve                                                                    
     The fund will consist of:                                                                                                  
          1.  All  proceeds  of the  bonds  required  to  be                                                                    
          deposited  into  the fund  by  terms  of the  bond                                                                    
          resolution or a trust agreement;                                                                                      
          2. An  amount equal  to the required  debt service                                                                    
          reserve,  as  determined  by the  Commissioner  of                                                                    
          Revenue; and                                                                                                          
          3. Appropriations approved by the Legislature.                                                                        
          Money in  the fund will  be applied solely  to the                                                                    
          payment  of the  interest and  principal on  bonds                                                                    
          authorized  and   issued  under  AS   37.15.225  -                                                                    
     Money in the  reserve fund, excess of  what is required                                                                    
     for the debt  service reserve, may be  withdrawn or may                                                                    
     be transferred to the bond redemption fund.                                                                                
     Bonds  may  not  be  issued under  a  trust  agreement,                                                                    
     indenture, or bond resolution  unless the required debt                                                                    
     service reserve for the bonds is in the reserve fund.                                                                      
     If the funds  in the fund fall below  the required debt                                                                    
     service   reserve  amount,   as   determined  by   bond                                                                    
     committee, the Commissioner of  Revenue will notify the                                                                    
     Governor  and the  Legislature of  the amount  of funds                                                                    
     necessary  to   restore  the   account  to   an  amount                                                                    
     sufficient  to  meet  the required  debt  service.  The                                                                    
     Legislature  then has  the discretion  of appropriating                                                                    
     funds to replenish  the fund to an amount  equal to the                                                                    
     required debt service reserve.                                                                                             
     AS 37.15.260 Enforcement by Bond Owner                                                                                     
     Provides  that  bondholders,  or  their  trustees,  may                                                                    
     enforce their  rights (transfer, set aside,  payment of                                                                    
     money, and  the enforcement  of all  terms, conditions,                                                                    
     and covenants) in superior court.                                                                                          
     AS 37.15.265 Amounts Required for Payments                                                                                 
     Starting with the  year in which bonds  are issued, the                                                                    
     bond  committee will  certify to  the Commissioners  of                                                                    
     Revenue  and Administration,  the amount,  required for                                                                    
     the  next  two  fiscal  years, to  be  paid  from  toll                                                                    
     revenues or other state appropriations to:                                                                                 
          1. The Bond Redemption Fund - to pay the                                                                              
          principal and interest                                                                                                
          2. The Bond Reserve Fund - to maintain the                                                                            
          required debt service reserve                                                                                         
     AS 37.15.270 Refunding                                                                                                     
     Provides  the  bond  committee with  the  authority  to                                                                    
     refund  parts or  all of  the  bonds at  or before  the                                                                    
     maturity   or   redemption   date,  if   refunding   is                                                                    
     advantageous to or  in the best interest  of the State.                                                                    
     All of  the provisions that  relate to the  issuance of                                                                    
     bonds under AS 37.15.225  - 37.15.285 are applicable to                                                                    
     the refunding bonds.                                                                                                       
     AS 37.15.275 Bonds as Legal Investments                                                                                    
     Provides  that   the  bonds  are   legally  enforceable                                                                    
     securities  that can  be  purchased  by individual  and                                                                    
     institutional investors.                                                                                                   
     AS 37.15.285 Definitions                                                                                                   
     Section 7: Effective Date Clause                                                                                           
     Provides for a July 1, 2014 effective date.                                                                                
10:41:52 AM                                                                                                                   
Senator Hoffman  looked at Section  3, and noticed  that the                                                                    
bond committee  was assigned to  evaluate whether  the total                                                                    
revenues  were  adequate  to  pay   for  the  principal  and                                                                    
interest on  the bonds,  and if  not would  issue additional                                                                    
toll revenues. He  then looked at page 2  regarding the bond                                                                    
reserve fund,  and there was  a provision  for appropriation                                                                    
by   the   legislature.    He   wondered   why   legislation                                                                    
appropriation was necessary, if  in fact Section 3 addressed                                                                    
that  issue with  a toll  adjustment. Ms.  Armstrong replied                                                                    
that  there  were   discussions  regarding  maintaining  the                                                                    
authority's  ability to  issue bonds  itself, especially  if                                                                    
the  legislature  decided  that  it  was  the  appropriating                                                                    
direction,  so the  obligations of  the authority  needed to                                                                    
address the operations, maintenance,  and the state's issued                                                                    
debt  that   the  bill  proposed.  She   stressed  that  the                                                                    
legislature should seriously examine that provision.                                                                            
Senator Hoffman felt  that it was the  main concern, because                                                                    
the state  would maintain the  obligation. He felt  that the                                                                    
toll  would adequately  fund the  construction.  He did  not                                                                    
thing  that there  would be  support,  if the  state had  to                                                                    
cover the cost of construction.                                                                                                 
Senator  Olson stressed  that  there  were very  substantial                                                                    
financial  requirements  and  burdens  that  the  state  was                                                                    
currently addressing.  He asked for an  update regarding the                                                                    
Transportation  Infrastructure  Finance and  Innovation  Act                                                                    
(TIFIA)  loans. Co-Chair  Meyer replied  that Ms.  Armstrong                                                                    
was not  capable of answering  that question.  Senator Olson                                                                    
agreed to receive a response at a later date.                                                                                   
Co-Chair Meyer remarked that the  funding of the project had                                                                    
three  components: 1)  one-third  was TIVIA  bonds; 2)  one-                                                                    
third  in revenue  bonds; 3)  and one-third  federal highway                                                                    
receipts.  The funding  would have  very little  anticipated                                                                    
general  fund   money.  Ms.   Armstrong  agreed   with  that                                                                    
2d CSHB 23(RLS) was HEARD  and HELD in committee for further                                                                    

Document Name Date/Time Subjects
HB23 KABATA-Summary-12 13-1st-SW-Annotated.pdf SFIN 3/18/2014 9:00:00 AM
HB 23
HB23 Kenworthy-CritiqueResponse-from-Dept-Revenue.pdf SFIN 3/18/2014 9:00:00 AM
HB 23
HB23 Socio-economicrevenue-forecasts-still-missing.pdf SFIN 3/18/2014 9:00:00 AM
HB 23
SCR16 GanguliTablesHg.docx SFIN 3/18/2014 9:00:00 AM
SCR 16
SCR16 Sponsor Statement.docx SFIN 3/18/2014 9:00:00 AM
SCR 16
SCR16 The Case for Coal.docx SFIN 3/18/2014 9:00:00 AM
SCR 16
HB23 First Southwest Financing Plan for Knik Arm Bridge Memorandum.pdf SFIN 3/18/2014 9:00:00 AM
HB 23
HB23 June-12-2013-RFP-Intent-to-Award.pdf SFIN 3/18/2014 9:00:00 AM
HB 23
HB23 summary of changes HB 23 LS0141_R.pdf SFIN 3/18/2014 9:00:00 AM
HB 23
HB23 workdraft 28_LS0141 R.pdf SFIN 3/18/2014 9:00:00 AM
HB 23
KABATA HB23 DOT Joint Proposal v 03-01-14 revised 3-7-14.pdf SFIN 3/18/2014 9:00:00 AM
HB 23
SB080CSSS(L&C)-DCCED-CBPL-03-14-14.pdf SFIN 3/18/2014 9:00:00 AM
SB 80
SCR 16 Coal 3-18-14 Testimony Miller.pdf SFIN 3/18/2014 9:00:00 AM
SCR 16