Legislature(2021 - 2022)BELTZ 105 (TSBldg)

02/24/2021 01:30 PM LABOR & COMMERCE

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**Streamed live on AKL.tv**
         SB  54-AHFC WATER & SEWER BONDS/TRANSPORTATION                                                                     
1:32:28 PM                                                                                                                    
CHAIR  COSTELLO announced  the consideration  of SENATE  BILL NO.                                                               
54, "An Act authorizing and relating  to the issuance of bonds by                                                               
the Alaska Housing  Finance Corporation for safe  and clean water                                                               
and  hygienic  sewage  disposal  facility  capital  projects  and                                                               
transportation  projects;  providing  for the  repayment  of  the                                                               
bonds and bond costs; relating to  the dividend paid to the state                                                               
by the Alaska  Housing Finance Corporation; and  providing for an                                                               
effective date."                                                                                                                
1:32:54 PM                                                                                                                    
BRYAN  BUTCHER, CEO/Executive  Director,  Alaska Housing  Finance                                                               
Corporation  (AHFC), Anchorage,  Alaska,  introduced himself  and                                                               
advised that  he had  a short  PowerPoint to  introduce SB  54 if                                                               
someone in the room could change the slides.                                                                                    
1:33:27 PM                                                                                                                    
At ease                                                                                                                         
1:34:37 PM                                                                                                                    
CHAIR COSTELLO  reconvened the meeting  and asked Mr.  Butcher to                                                               
begin the presentation.                                                                                                         
MR. BUTCHER  explained that  SB 54 would  authorize AHFC  to sell                                                               
$101.63  million  of tax-exempt  capital  project  bonds to  fund                                                               
projects in  the capital budget.  The debt service would  be paid                                                               
through AHFC's dividend to the state.                                                                                           
MR. BUTCHER  began the presentation  stating that  AHFC's mission                                                               
is  "To  provide Alaskans  access  to  safe, quality,  affordable                                                               
MR. BUTCHER reported that AHFC  holds approximately 20 percent of                                                               
the  home  mortgages  in  the  state,  primarily  for  first-time                                                               
homebuyers, veterans,  and rural residents. The  corporation also                                                               
runs the state's  approximately 1,600 public housing  units in 15                                                               
communities as  well as  5,000 to  6,000 housing  choice vouchers                                                               
for  apartment  rentals.  He  noted that  AHFC  runs  all  public                                                               
housing for the U.S. Department  of Housing and Urban Development                                                               
(HUD). AHFC also oversees energy  efficiency and energy codes for                                                               
the state  and administers  grants and  federal tax  credits that                                                               
help in  building affordable housing  for the  homeless, seniors,                                                               
and  other programs  that benefit  the state.  He clarified  that                                                               
AHFC  is legally  separate from  the state  so the  corporation's                                                               
debt is not state debt. AHFC  has its own credit rating, which is                                                               
currently A+, and issues its own bonds.                                                                                         
1:37:17 PM                                                                                                                    
SENATOR   STEVENS  asked   if  the   1,600  housing   units  were                                                               
MR. BUTCHER replied  those are apartments primarily  built in the                                                               
1970s  and  1980s when  HUD  addressed  public housing  needs  by                                                               
building large  multi-story buildings.  AHFC still runs  and owns                                                               
those units as well as  the housing choice vouchers. He explained                                                               
that  HUD   changed  the  way  it   administered  public  housing                                                               
nationwide about 30 years ago to  put people in apartments run by                                                               
private landlords as a way of  addressing the stigma of living in                                                               
public housing.                                                                                                                 
SENATOR STEVENS  asked if assisting  private enterprise  to build                                                               
low-cost housing was also under AHFC's purview.                                                                                 
MR. BUTCHER answered  yes; most of those funds  come from federal                                                               
low-income housing  tax credits that the  corporation administers                                                               
for the state.                                                                                                                  
1:39:02 PM                                                                                                                    
MR.  BUTCHER advised  that slide  4  provides a  snapshot of  the                                                               
dividend  payments  over  the  last decade.  He  noted  that  the                                                               
dividend plan is  set in statute and the  annual dividend payment                                                               
to  the state  represents  75 percent  of  the corporation's  net                                                               
income. He related that the  large dividends 20 years ago dropped                                                               
after  the 2008-2009  recession  when  artificially low  interest                                                               
rates  reduced AHFC's  portfolio.  The $7.4  million dividend  in                                                               
FY2015  was the  record low,  but  it has  built up  to over  $40                                                               
million  the   last  two  fiscal   years.  He   highlighted  that                                                               
cumulative dividends  paid to  the state over  the last  25 years                                                               
exceed $2 billion.                                                                                                              
1:40:04 PM                                                                                                                    
MR.  BUTCHER  directed  attention  to  the list  on  slide  5  of                                                               
previous  legislation  that  authorized  AHFC to  sell  bonds  to                                                               
support  state capital  projects. He  pointed out  that the  bond                                                               
authorizations in  the late  '90s and early  2000 are  similar to                                                               
the  current request  in SB  54  for capital  project bonds.  The                                                               
funds  would  be for  such  things  as roads,  buildings,  ports,                                                               
harbors,  and  village safe  water  projects  that the  IRS  says                                                               
qualify for tax-exempt debt.                                                                                                    
Slide 6 lists four proposed  capital projects that the Department                                                               
of  Environmental  Conservation  (DEC)   and  the  Department  of                                                               
Transportation  and Public  Facilities (DOTPF)  would administer.                                                               
He  highlighted that  these  projects are  in  the state  capital                                                               
budget and  as the bill moves  through the process, the  names of                                                               
the projects and  each total must match to ensure  that what AHFC                                                               
sells in bonds  and finances is authorized and  spent through the                                                               
capital budget.                                                                                                                 
MR.  BUTCHER turned  to slide  7 that  emphasizes that  the bonds                                                               
that AHFC sells  will not affect the state's credit  and will not                                                               
be a financial  obligation on the state. AHFC  would be obligated                                                               
to pay once  it sells the bonds and repayment  would be offset by                                                               
future  AHVC  dividends  as required  by  AS  18.56.089(c).  AHFC                                                               
currently estimates that  the interest rates for  the bonds would                                                               
be  between 2  and 3  percent and  the term  is likely  to be  20                                                               
He  directed attention  to  the fiscal  note  that estimates  the                                                               
payback of  $6-7 million.  While interest  rates are  expected to                                                               
remain  low, the  rate will  not  be established  until the  bill                                                               
passes and  the bonds are  sold sometime  in the summer.  At that                                                               
time, AHFC  would be  able to  report the  structure of  the bond                                                               
deal, the  interest rate,  and the  annual debt  service payments                                                               
that will come out of the dividend.                                                                                             
1:43:07 PM                                                                                                                    
SENATOR GRAY-JACKSON  asked if he  said the debt service  will be                                                               
$6 million for 20 years.                                                                                                        
MR. BUTCHER answered that the estimate is $6-7 million a year.                                                                  
VICE-CHAIR  HOLLAND found  no further  questions and  thanked Mr.                                                               
Butcher for the presentation.                                                                                                   
1:43:50 PM                                                                                                                    
At ease                                                                                                                         
1:45:14 PM                                                                                                                    
CHAIR  COSTELLO reconvened  the meeting.  She referenced  slide 6                                                               
and  asked for  a  breakdown if  there  were individual  projects                                                               
associated  with each  of the  four listings.  She also  asked if                                                               
other capital projects could be included in the list.                                                                           
MR. BUTCHER said the governor's  office decided on the particular                                                               
projects based on  their definition of what  qualifies as capital                                                               
projects. AHFC's role is to check  with its tax counsel to ensure                                                               
that  what the  state identifies  does qualify  so AHFC  can sell                                                               
tax-exempt debt according  to IRS guidelines. He  deferred to the                                                               
representatives  from DOTPF  and DEC  to provide  more detail  on                                                               
specific projects.                                                                                                              
1:47:26 PM                                                                                                                    
ROB CARPENTER, Deputy  Commissioner, Department of Transportation                                                               
and  Public Facilities  (DOTPF), Juneau,  Alaska, explained  that                                                               
the projects  listed in SB  54 are  the match components  for the                                                               
Federal    Highway    Administration   and    Federal    Aviation                                                               
Administration  programs that  are in  the capital  budget. DOTPF                                                               
receives  approximately $600  million annually  from the  Federal                                                               
Highway  Administration and  approximately $200  million annually                                                               
from  the  Federal Aviation  Administration.  The  match for  the                                                               
federal highway program is approximately  9 percent and the match                                                               
for  the federal  aviation  program is  about  6.25 percent.  The                                                               
projects  themselves  in  those  programs are  supported  by  the                                                               
planning documents  that are required by  the federal government.                                                               
The federally required  Statewide Transportation Improvement Plan                                                               
(STIP) maps out  the projects that are planned for  the next four                                                               
years  and  the  phases  of each  highway  construction  project.                                                               
Similarly, the Airport Improvement  Plan (AIP) lists the projects                                                               
and timelines. He  agreed to provide the details  of the projects                                                               
for both but  cautioned that they were extensive and  not easy to                                                               
CHAIR COSTELLO  said she has  constituents who are  familiar with                                                               
rural airports in  Alaska and there is  concern about maintenance                                                               
and safety at some of these  airports. She asked if he or another                                                               
DOTPF representative could meet with  her to provide an update on                                                               
the airport  contracts in local  communities and the  measures to                                                               
ensure that those airports are safe.                                                                                            
1:50:08 PM                                                                                                                    
SENATOR GRAY-JACKSON asked  for more detail on  what projects are                                                               
included in the match for both the STIP and the AIP.                                                                            
MR. CARPENTER  agreed to provide  the documents that  support the                                                               
projects in the bill.                                                                                                           
CHAIR COSTELLO noted  that $101.63 million would come  out of the                                                               
capital budget if SB 54 were to  pass. She asked if it matters if                                                               
the capital budget passes before the bill.                                                                                      
1:52:07 PM                                                                                                                    
RUTH  KOSTIK,  Director,  Division  of  Administrative  Services,                                                               
Office of Management and Budget,  Office of the Governor, Juneau,                                                               
Alaska, offered her understanding that  the funds do not come out                                                               
of the capital budget until the bond bill passes.                                                                               
SENATOR GRAY-JACKSON  asked if  any of  the projects  were shovel                                                               
ready and when they were anticipated to go out to bid.                                                                          
MR.  CARPENTER  responded that  the  STIP  has projects  in  many                                                               
phases many  of which  are shovel  ready and will  go out  to bid                                                               
this summer. He reiterated that more details were forthcoming.                                                                  
SENATOR  GRAY-JACKSON said  she  particularly wanted  to see  the                                                               
projects that are shovel ready                                                                                                  
1:54:47 PM                                                                                                                    
CHAIR COSTELLO held SB 54 for future consideration.                                                                             

Document Name Date/Time Subjects
SB 54 v. A.PDF SL&C 2/24/2021 1:30:00 PM
SB 54
SB 54 Transmittal Letter.pdf SL&C 2/24/2021 1:30:00 PM
SB 54
SB 54 Sponsor Statement.pdf SL&C 2/24/2021 1:30:00 PM
SB 54
SB 54 Fiscal Note 1.PDF SL&C 2/24/2021 1:30:00 PM
SB 54
SB 54 AHFC Presentation 2.24.21.pdf SL&C 2/24/2021 1:30:00 PM
SB 54
SB 86 v. A.PDF SL&C 2/24/2021 1:30:00 PM
SB 86
SB 86 Sponsor Statement.pdf SL&C 2/24/2021 1:30:00 PM
SB 86
SB 86 Sectional Analysis.pdf SL&C 2/24/2021 1:30:00 PM
SB 86
SB 86 Fiscal Note DCCED.pdf SL&C 2/24/2021 1:30:00 PM
SB 86