05/13/2002 08:37 PM Senate RLS

CHAIRMAN PHILLIPS  announced the committee would recess  to a call                                                              
of the  chair at  8:55 p.m.  He then  called the  meeting back  to                                                              
order at  8:56 p.m. and  announced that CSHB 471(CRA)-AIDEA  LOANS                                                          
AND DIVIDEND/AEA LOANS was before the committee.                                                                            
                                                                                                                                
REPRESENTATIVE   JOE  GREEN,   sponsor  of   HB  471,  said   this                                                              
legislation  addresses a  concern of  the Governmental  Accounting                                                              
Standards  Board  (GASB). GASB  has  changed  the way  the  Alaska                                                              
Industrial  Development and  Export  Authority (AIDEA)  calculates                                                              
net income. Alaska's current statute  uses the common practice for                                                              
determining net income  to determine how much can  be deposited in                                                              
the  general  fund.  Unless  Alaska's  accounting  procedures  are                                                              
altered  to follow  the  GASB rules,  AIDEA  will not  be able  to                                                              
calculate its  net income and allow  money to be deposited  in the                                                              
general  fund. The  issues surround  AIDEA's  rules for  financing                                                              
loans to small communities that cannot  secure financing in common                                                              
ways and on the amount of money that is loaned for bulk fuel.                                                                   
                                                                                                                                
SENATOR  HALFORD asked  if Section  4 will  exclude any  community                                                              
connected by  road or rail to  Anchorage or Fairbanks  from having                                                              
access to the fund.                                                                                                             
                                                                                                                                
REPRESENTATIVE  GREEN   clarified  that  if  a   community  has  a                                                              
population  of 5,000 or  less and  is not connected  to a  road or                                                              
rail  system,  or  has  a  population  of 2,000  or  less  and  is                                                              
connected by  a road or rail  to Anchorage or Fairbanks,  there is                                                              
no change.                                                                                                                      
                                                                                                                                
SENATOR HALFORD  asked if the previous  rule was that  a community                                                              
could be connected  by road or rail and have a  population of less                                                              
than 5,000 but now the population must be less than 2,000.                                                                      
                                                                                                                                
MR. BOB POE, Executive Director of  AIDEA, explained the intent of                                                              
that change is to "dial in" the Rural  Development Initiative Fund                                                              
(RDIF) to  those communities that  cannot get participation  loans                                                              
through AIDEA. This is an attempt  to segment out the RDIF program                                                              
for communities that cannot get alternative financing.                                                                          
                                                                                                                                
SENATOR  HALFORD  asked  if  Houston would  qualify  for  the  new                                                              
program.                                                                                                                        
                                                                                                                                
MR. POE said that  Houston is on the road system  and could easily                                                              
get loan financing because it has banks nearby.                                                                                 
                                                                                                                                
SENATOR  HALFORD asked  how  a community  of  10,000 in  Southeast                                                              
Alaska would be classified.                                                                                                     
                                                                                                                                
MR. POE  said it  would have  to have  a population  of less  than                                                              
5,000 as the Marine Highway System does not qualify as a road.                                                                  
                                                                                                                                
SENATOR HALFORD  noted that some  of those communities  have banks                                                              
and that he is not sure that definition is equitable.                                                                           
                                                                                                                                
MR. POE  indicated the  definition  has been a  challenge but  the                                                              
intent is  to make the program  work as originally  intended, that                                                              
being to  target lodges  and other kinds  of truly rural  business                                                              
enterprises  that might  find it  hard to  get any  other kind  of                                                              
financing.                                                                                                                      
                                                                                                                                
SENATOR HALFORD asked about the interest rate.                                                                                  
                                                                                                                                
MR. POE  said the  loan rate is  between 7  and 9.5 percent  right                                                              
now. The RDIF loans are in the 7 percent range.                                                                                 
                                                                                                                                
SENATOR HALFORD  asked if  the interest rate  exceeds the  cost of                                                              
funds.                                                                                                                          
                                                                                                                                
MR. POE said it does.                                                                                                           
                                                                                                                                
SENATOR  HALFORD   moved  to  calendar   CSHB  471(CRA)   and  its                                                              
accompanying fiscal notes at the Chairman's discretion.                                                                         
                                                                                                                                
CHAIRMAN  PHILLIPS announced  that without  objection, the  motion                                                              
carried.