Legislature(2015 - 2016)BARNES 124
03/26/2015 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HB118 | |
| HB149 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 149 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | HB 118 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
March 26, 2015
8:01 a.m.
MEMBERS PRESENT
Representative Cathy Tilton, Chair
Representative Paul Seaton, Vice Chair
Representative Shelley Hughes
Representative Benjamin Nageak
Representative Lora Reinbold
Representative Harriet Drummond
MEMBERS ABSENT
Representative Dan Ortiz
COMMITTEE CALENDAR
HOUSE BILL NO. 118
"An Act adopting the Municipal Property Assessed Clean Energy
Act; authorizing municipalities to establish programs to impose
assessments for energy improvements in regions designated by
municipalities; imposing fees; and providing for an effective
date."
- HEARD & HELD
HOUSE BILL NO. 149
"An Act relating to an amendment of the articles of
incorporation of certain Native corporations to establish a
lower quorum requirement for shareholder meetings."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 118
SHORT TITLE: MUNI ENERGY IMPROVEMNT ASSESSMNTS/BONDS
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/18/15 (H) READ THE FIRST TIME - REFERRALS
02/18/15 (H) ENE, CRA, FIN
03/05/15 (H) ENE AT 10:15 AM CAPITOL 106
03/05/15 (H) Heard & Held
03/05/15 (H) MINUTE(ENE)
03/17/15 (H) ENE AT 10:15 AM CAPITOL 17
03/17/15 (H) Heard & Held
03/17/15 (H) MINUTE(ENE)
03/24/15 (H) CRA AT 8:00 AM BARNES 124
03/24/15 (H) <Pending Referral>
03/24/15 (H) ENE AT 10:15 AM CAPITOL 17
03/24/15 (H) Moved CSHB 118(ENE) Out of Committee
03/24/15 (H) MINUTE(ENE)
03/25/15 (H) ENE RPT CS(ENE) 7DP
03/25/15 (H) DP: CLAMAN, TALERICO, TILTON, NAGEAK,
WOOL, VAZQUEZ, COLVER
03/26/15 (H) CRA AT 8:00 AM BARNES 124
BILL: HB 149
SHORT TITLE: NATIVE CORP. ART. AMENDMENTS
SPONSOR(s): PRUITT
03/18/15 (H) READ THE FIRST TIME - REFERRALS
03/18/15 (H) CRA
03/26/15 (H) CRA AT 8:00 AM BARNES 124
WITNESS REGISTER
GENE THERRIAULT, Deputy Director
Energy Policy
Alaska Energy Authority (AEA)
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Presented HB 118, sponsor by the House
Rules Standing Committee by request of the governor.
EMILY FORD, Public Outreach Liaison
Alaska Energy Authority
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Reviewed a slide presentation entitled "HB
118 Property Assessed Clean Energy (PACE)."
CHRIS ROSE, Executive Director
Renewable Energy Alaska Project (REAP)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 118.
REPRESENTATIVE LANCE PRUITT
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as the sponsor of HB 149.
NICHOLA RUEDY, Director
Alaska Native Village Corporation Association (ANVCA)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 149.
KIM REITMEIER, President
ANCSA Regional Association
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 149.
AARON SCHUTT
Doyon, Limited
Anchorage, Alaska
POSITION STATEMENT: During hearing of HB 149, answered
questions.
ACTION NARRATIVE
8:01:58 AM
CHAIR CATHY TILTON called the House Community and Regional
Affairs Standing Committee meeting to order at 8:01 a.m.
Representatives Nageak, Hughes, Seaton, Drummond, and Tilton
were present at the call to order. Representative Reinbold
arrived as the meeting was in progress.
HB 118-MUNI ENERGY IMPROVEMNT ASSESSMNTS/BONDS
8:02:35 AM
CHAIR TILTON announced that the first order of business would be
HOUSE BILL NO. 118, "An Act adopting the Municipal Property
Assessed Clean Energy Act; authorizing municipalities to
establish programs to impose assessments for energy improvements
in regions designated by municipalities; imposing fees; and
providing for an effective date."
[Before the committee is CSHB 118(ENE).]
8:03:07 AM
GENE THERRIAULT, Deputy Director, Energy Policy, Alaska Energy
Authority (AEA), Department of Commerce, Community & Economic
Development (DCCED), explained that this legislation proposes an
entirely new section to allow municipalities with property tax
authority to implement a Property Assessed Clean Energy (PACE)
financing mechanism. This mechanism would help commercial
properties make energy improvements to their properties in order
to lower their overall energy costs. In 2010, the Alaska State
Legislature established a goal for the state to improve overall
energy efficiency by 15 percent by the year 2020. Although [the
state] is aggressively moving forward to achieve that goal, not
a lot of traction has been achieved in assisting/encouraging
commercial properties to make energy improvements. There are a
number of programs that do assist with energy efficiency
improvements for residential properties, state-owned buildings,
municipally-owned buildings, and nonprofits. He related that
about the only program for commercial properties is the
commercial facility energy audit program, which encourages
owners of commercial buildings to have energy audits on their
properties. Although about 150 properties throughout the state
have availed themselves of these energy audits, there has been
[little] follow through or action on those recommendations.
Therefore, there was review in terms of what can be done to
assist property owners to follow through [with the energy audit
recommendations]. For those commercial properties that have had
the energy audit and made the recommended changes to their
buildings generally achieve a 30 percent reduction in their
overall energy costs annually. The aforementioned, he opined,
means there is a lot of value to capture. Upon reviewing what
other states have done in this area, AEA has identified PACE
financing as a means to help commercial properties move forward
to achieve energy efficiency. Mr. Therriault explained that
PACE allows local governments and lenders to make loans to
commercial properties the repayment of which is collected
through a mechanism in which a voluntary assessment is added to
the annual property tax of the commercial property. Collecting
the loan payment with the property tax provides the full
collection powers of the property tax, and thus there is a low
default rate and low risk level. Mr. Therriault opined that low
risk loans one would expect low risk capital, which means a
lower interest rate. Another benefit of the use of the property
tax as a mechanism to collect the PACE loan is the ability to
stretch out the repayment period. With PACE, the repayment
period is generally 10-20 years. Mr. Therriault explained that
the goal is to incentivize commercial properties to make
improvements and experience immediate positive cash flow such
that the savings in energy is more than the cost of the loan
repayment.
8:09:00 AM
EMILY FORD, Public Outreach Liaison, Alaska Energy Authority,
Department of Commerce, Community & Economic Development,
referring to the slide presentation entitled "HB 118 Property
Assessed Clean Energy (PACE)," directed attention to slide 2
entitled "What is Commercial PACE?" and highlighted that PACE is
a voluntary program for municipalities, commercial property
owners, and lenders. She also highlighted that mortgage holder
consent is required prior to applications being approved and
assessments placed. The improvements, she noted, can include
lighting upgrades, renewable energy, conversion to natural gas,
high-efficiency boilers, and additional energy efficiency
improvements. The repayment obligation transfers with the sale
of the property, she related. Ms. Ford then moved on to slide 3
entitled "Benefits" and opined that the real benefit to PACE is
that the longer repayment period allows the building owner to
recognize immediate operating savings while repaying the debt.
She pointed out that under PACE traditional lending sources can
be used and in Alaska, PACE provides consistency with state
energy policy, energy efficiency, and renewable energy goals.
As noted on slide 4, 31 states have authorized PACE programs.
She pointed out that the PACE program proposed in HB 118 applies
to commercial properties and state legislatures must provide
authority for local governments to establish and operate
commercial PACE programs. Municipalities, however, have the
flexibility to create the program and select financing models.
As more states look to PACE financing mechanisms as a way to
incent energy efficiency, there's a wealth of information online
including sites such as PaceNow.org and C-Pace.com.
Furthermore, the U.S. Department of Energy has a packet of
information that includes sample contracts, potential marketing
materials, and a how-to manual for lenders, commercial building
owners, and local governments. Slide 5 provides examples of the
different types of PACE financing models, such as a local
government-driven model in which the program is run through a
government office, PACE office, or the property assessment
office. In the aforementioned model, the municipality would
interface with the commercial property owners and potential
lenders and bond financing could be used for the efficiency
projects. There is also the possibility of a private-sector
driven model in which a third party administrator is under
contract with the local government to administer the program.
Under this model, the PACE program would exclusively use private
financing and local lenders. However, the traditional PACE
model is a hybrid model in which all potential funding sources
are identified including bonds, revolving loan funds, or private
capital. Referring to slide 6, Ms. Ford echoed earlier
testimony that HB 118 authorizes local governments who collect
property taxes to choose to create a PACE program and allow
commercial property owners to opt-in.
8:12:29 AM
MS. FORD pointed out that the sectional analysis of HB 118 can
be found on slides 7-16, which she then proceeded to review.
The sectional analysis is included in the committee's packet.
8:21:34 AM
MR. THERRIAULT summarized that basically HB 118 allows local
governments with property tax powers the option to initiate a
PACE program if they so choose. The legislation simply provides
a tool for local governments to use to achieve lower energy
costs. The language includes a number of protections. For
instance, an owner of a commercial property with an existing
mortgage to Wells Fargo would have to ask Wells Fargo for
permission to initiate PACE financing. The aforementioned is
required because the PACE loan would become the superior lien on
the property while the Wells Fargo loan would become the
secondary lien. Across the nation, most often the property is
used as the collateral for the loan while the PACE financing
improves the efficiency and competitiveness of the commercial
property. Therefore, by and large many lenders are providing
that permission. Mr. Therriault related that because there was
concern there would be opposition from the lenders in the state,
he started a conversation with the Alaska Banking Association
early on in the process. The committee packet includes a letter
from the Alaska Banking Association that says it doesn't oppose
the legislation so long as it maintains the provision requiring
approval from the bank when there is an existing mortgage. He
then pointed out that a number of states learned that initiating
PACE without a certain number of requirements to provide
consistency across the state resulted in lenders being unable to
determine how PACE worked within the state, and thus lenders
weren't forthcoming with the loans. The aforementioned caused
Texas to modify its PACE program to achieve consistency across
the state. He noted that HB 118 is patterned after the Texas
statute.
8:25:09 AM
REPRESENTATIVE HUGHES related her understanding that state
funding pays for the energy audits of commercial buildings. She
then inquired as to how long the 150 audits of commercial
buildings that have already been done are valid and how much
such an audit costs. She further inquired as to how much
funding is available for the audit program now. She also asked
whether the state will be able to continue to offer the [energy
audit program].
MR. THERRIAULT said that he doesn't have that information and
deferred to Ms. Ford.
MS. FORD answered that through AEA's Energy Efficiency Program
there are funds available and another round of solicitation for
the commercial building energy audit is occurring. The funding
does come from AEA's Energy Efficiency Department. Ms. Ford
explained that the audits identify measures that would improve
the efficiency of the building. If no changes have been made to
the building since the audit, then the identified measures would
remain valid. Therefore, in such a situation Ms. Ford didn't
believe there would be an expiration date to the identified list
of projects that would improve the efficiency of the building.
She offered to provide the cost of the individual audits at a
later time.
REPRESENTATIVE HUGHES then requested the total amount in the
[Energy Efficiency Program] fund and the amount available.
8:28:53 AM
REPRESENTATIVE HUGHES directed attention to the language on page
3, line 7, of HB 118, which allows municipalities to designate
the boundaries of an area. The aforementioned ability could
result in municipalities providing an advantage to one portion
of the municipality over another. She inquired as to whether
there are any protections against the aforementioned and why the
aforementioned is even being allowed.
MR. THERRIAULT explained that a local governing body that
proposes PACE must first put forth a resolution regarding what
is being considered. An ordinance process with public
notification and input is then the next step prior to moving
forward with the program and identification of the region. He
reminded the committee that PACE is just for commercial
properties and thus the local governing body may want to
restrict the program to the portion of the region that contains
the commercial properties. Furthermore, there could be a
situation within the Fairbanks North Star Borough in which the
City of North Pole wants to move forward with the PACE program
while the City of Fairbanks does not. In the aforementioned
situation, the borough could work with the City of North Pole as
a designated area to allow PACE in that region while honoring
the decision of the City of Fairbanks to not offer the PACE
program. He reminded the committee that the debate would have
to take place at the local level, the assembly level, in terms
of why a particular designation is made.
8:31:28 AM
REPRESENTATIVE HUGHES inquired as to whether it would be
possible for a borough to decide that the entire borough would
be a PACE region, although a city within that borough chooses
not to participate.
MR. THERRIAULT confirmed that could be possible.
REPRESENTATIVE HUGHES maintained that she still doesn't see the
protection as the governing body could still choose to designate
one business district over another. She opined that it doesn't
seem problematic for an entire municipality to be the designated
region, particularly since it's an optional program.
MR. THERRIAULT remarked that he didn't know why a municipality
would want to favor one area over another as the program is a
mechanism to help all businesses. He related that the models he
has reviewed across the nation have left the [designation of the
region] to the local elected officials. However, he offered to
check with the national programs regarding whether the tendency
is the selection of one area or areawide.
8:33:54 AM
REPRESENTATIVE SEATON pointed out that [AS 29.10.200 is amended
to add PACE financing to the list of items in which] home rule
municipalities are allowed to engage. However, [AS 29.49.890]
of the legislation specifies that [the proposed PACE provisions]
apply to home rule or general law municipalities. He then
inquired as to why the first provision only applies to home rule
[municipalities].
MR. THERRIAULT clarified that the [proposed PACE program] is to
be available to any municipality that has any property powers.
He then noted that a Legislative Legal Services memorandum
addressing CSHB 118(ENE) indicates there might need to be
changes to the language to provide clarity in this matter. He
suggested that the committee is likely going to receive a
proposed committee substitute addressing the aforementioned.
8:35:15 AM
REPRESENTATIVE SEATON asked if the proposed PACE financing could
be used by only commercial properties to finance a distribution
system, while residences wouldn't have this mechanism available
to them. He then pointed out that the language refers to the
"useful life," which for a pipeline might be 30 years.
Therefore, a commercial building could have a much longer
timeframe.
MR. THERRIAULT stated that this mechanism wouldn't lend itself
to the financing of the actual distribution system, rather it's
only for loans to improve the property. [The improvements] have
to be fixed fixtures to the building, the envelope of the
building. Therefore, the PACE financing wouldn't lend itself to
the financing of an assessment by a local government on
distribution pipes going down the street. As Ms. Ford
explained, although PACE becomes a superior lien, the property
taxes and assessments placed on the properties by the local
government are ahead of the PACE financing. However, a local
improvement district in which all of the properties are being
assessed for the build-out of a distribution system would
actually be ahead of the special assessment for PACE in terms of
collection.
REPRESENTATIVE SEATON requested that the language be made
clearer as the language doesn't specify the improvements be on
the building envelope. He expressed the need to ensure that the
[PACE mechanism] is only used for what it is designed.
MR. THERRIAULT noted that the allowance of fees is to help the
property owner cover any expense they might have to put into the
energy audit engineering to do the improvements. Basically,
that expense is allowed to be capitalized as part of the
financing. He then directed attention to the definition on page
10, lines 8-11, which says:
"qualified improvement" means a permanent improvement
fixed to real property and intended to decrease energy
consumption or demand, including a product, device, or
interacting group of products or devices that uses
energy technology to generate electricity, provide
thermal energy, or regulate temperature;
MR. THERRIAULT stated that the aforementioned definition
wouldn't include the distribution system coming down the street.
8:39:47 AM
REPRESENTATIVE REINBOLD surmised that since there is no fiscal
note for HB 118, there will be no cost to the state at all. She
noted the lack of letters of support for HB 118. However, she
questioned who will pay for [the audits and financing]. She
then expressed concern with the use of the terms "impose" and
"imposing" in the title of the legislation and wanted assurance
that this isn't a situation in which big government is creating
more big government. She then inquired as to AEA's role in this
[program].
MR. THERRIAULT explained that AEA's role is to find mechanisms
to incent businesses to do the energy improvements in order to
achieve the 2010 energy efficiency goal. The term "impose" in
the title is used because the property owner, through a
contractual agreement with the local government, is agreeing to
have an assessment placed on their property tax bill. The
program, he reminded the committee, is completely voluntary for
the local government and local business. Furthermore, the banks
aren't required to provide the financing, rather the [program]
provides this optional tool. With regard to the fiscal note,
the local government has options [as to how to structure such a
program]. The legislation seeks to create a certain level of
uniformity to increase comfort of lenders with a statewide
program.
MS. FORD informed the committee that discussion with two other
states regarding the impacts on municipalities found that it
depends on the type of model the municipality choses to impose.
Minnesota chose to assess .5 percent interest on the financing
mechanism in order to cover the cost of the program. Minnesota
has been able to absorb the additional work through existing
staff. Minnesota has implemented the "Main Street Model," which
is designed very lean and has been very successful. On the
other side of the spectrum, Vermont has a statewide efficiency
utility. Therefore, a separate PACE staff and office were
established. As mentioned earlier, this is a voluntary
structure. She noted that application fees were purposefully
kept low while trying to pay for the cost of the program through
the application fees.
8:44:59 AM
REPRESENTATIVE REINBOLD restated her question regarding who will
pay for this, adding that she wants to be sure that isn't an
Environmental Protection Agency (EPA) at the local level.
Representative Reinbold stressed that the program doesn't sound
voluntary as it uses terms such as "impose." She also restated
the need to be sure the proposal in HB 118 isn't a growth in
government, particularly since there is a need to attract
businesses to the state.
MR. THERRIAULT responded that each local government will
determine whether it has funds for the program or whether the
program would be established as self-funding. As Ms. Ford
related, the language of HB 118 allows that when loans are made,
a percentage can be added to the interest of the loan to cover
the cost of the program. Therefore, the cost can be borne by
those who choose to apply for the loan to make the improvements.
In a situation in which there are no applications, there is no
income and no expense. The legislation, he reiterated, has been
structured to provide flexibility at the local government level.
The zero fiscal note reflects the intent that the state won't
contribute any funds to the operation of the local programs.
The legislation merely creates the mechanism by which the local
governments can decide how to cover the expense of the program.
8:47:53 AM
REPRESENTATIVE DRUMMOND related her appreciation with regard to
how the PACE program and financing works, particularly with the
use of the property tax mechanism that's already in place. She
related her understanding that HB 118 intends to encourage
commercial properties to participate in the energy efficiency
program. She then expressed concern with mixed-use properties
that have offices and private residences. For example, in her
neighborhood there is a 30-year old building that has several
stories of offices; office condominiums on the ground floor and
the second and third floors while the upper floors are
individually owned condominiums. She questioned whether the
PACE program has the flexibility to be adaptive to a joint
energy efficiency project such as the aforementioned building.
MR. THERRIAULT opined yes, and pointed out that the legislation
includes a language specifying that a multi-family dwelling with
four or more [units] does qualify as a commercial property and
for PACE financing. For instance, a building with mixed light
industrial or retail on the ground floor and more than four
residential units in the upper floors would qualify.
REPRESENTATIVE DRUMMOND surmised that the homeowners'
association would have to agree to the group financing
additions.
MR. THERRIAULT said he hadn't thought of the condominium
example, and thus he offered to obtain information on such a
situation from the national resources.
8:50:38 AM
REPRESENTATIVE NAGEAK remarked that fees are ubiquitous in an
individual's everyday life, and they are passed on from
businesses to customers.
MR. THERRIAULT explained that the fee language in HB 118 is
present to clarify that the local government has the option to
cover the cost of operating the program by charging fees. Local
governments that utilize the PACE mechanism will do so because
they want to help local businesses make energy efficiency
improvements. If fees are high and the PACE program is used as
a profit center, the expense to the businesses will be increased
to the point that they won't take out the loans. Since no
business can be forced to take out the loans, the aforementioned
would be self-defeating, he opined. Mr. Therriault related his
belief that the fees wouldn't get out of hand.
8:52:18 AM
REPRESENTATIVE SEATON directed attention the language "including
through lease" on page 7, line 23. He then asked how there
could be long-term financing for something acquired through a
lease.
MR. THERRIAULT related his understanding that the language
allows for improvements that can utilize equipment that is
leased. For instance, solar panels could be leased from a
provider that performs the maintenance on the panels while the
energy is provided to the building. He opined that the language
to which Representative Seaton's referring is to allow the
expense of adding such equipment to a commercial property in the
financing.
8:53:50 AM
REPRESENTATIVE SEATON inquired as to how that lease would relate
to PACE financing with regard to the potential indeterminate
term on the lease. He requested information regarding how a
lease would interact with PACE financing.
MR. THERRIAULT agreed to provide some specific examples
illustrating why the language was included in the legislation.
8:54:34 AM
REPRESENTATIVE HUGHES related her understanding that the
legislation doesn't require any state or local dollars and
allows private lenders and businesses to be in agreement. She
asked whether this program is viewed as an incentive and
business friendly. She then asked whether businesses have
specifically requested this program or shown interest in it.
MR. THERRIAULT confirmed that the legislation is trying to
create an incentive and be business friendly. He informed the
committee that he recommended the legislation be modeled after
the Texas program as many of the sensitives and pro-business
attitude in Texas are similar to those in Alaska. Furthermore,
through his participation as a board member of a national
organization of energy officials, he interacted with the
representative from Texas and determined that the Texas program
would be a good fit for Alaska and would be viewed as business
friendly. He noted that although he hasn't yet promoted this to
businesses, the head of the Alaska Municipal League (AML) has
previously related supported for this. He then noted that he
was sensitive to local lenders, and thus he worked with the
banking industry early on and received the letter of non-
objection so long as the protection provision is included. Mr.
Therriault directed attention to the language on page 9, line
28, that prohibits making "the issuance of a permit" contingent
on a business using PACE financing. The local government is
specifically not allowed to coerce businesses or lenders into
participating in the PACE financing. Again, the program
proposed in HB 118 is voluntary for local governments,
businesses, and lenders.
REPRESENTATIVE HUGHES requested information regarding what
businesses are thinking about HB 118.
8:58:42 AM
REPRESENTATIVE HUGHES emphasized that the state funding being
used for the audits may dry up. If the state funding is
eliminated, she asked whether PACE would allow the initial
audits to be covered through this program.
MR. THERRIAULT replied yes, and explained that the audits
required by the program can be rolled into the financing.
Therefore, the cost of the audit can be spread over a number of
years. The goal, he said, is to assure the annual energy
savings are larger than the costs to improve the building such
that the business sees immediate positive cash flow.
9:00:06 AM
REPRESENTATIVE DRUMMOND directed attention to the definition of
"real property" on page 10, lines 14-15, which says it "means
privately owned commercial or industrial real property". She
then pointed out that real property applies to residential
property as well. Therefore, the "real property" definition
would have to be expanded in order for the PACE program to apply
to the mixed use building example she referenced earlier.
Although multi-unit apartment buildings that are owned by a
single entity would qualify as commercial property, the
definition of "real property" would have to be expanded in order
for a group of individually owned condominiums that are located
in a building that has commercial property to qualify for the
PACE program.
9:01:33 AM
REPRESENTATIVE HUGHES recalled that mortgage lenders' have to
consent to the PACE financing since it would become the primary
lien. Therefore, she inquired as to whether lenders have not
given consent in other states.
MR. THERRIAULT acknowledged that lenders not giving consent to
PACE financing is a possibility. However, the experience
nationwide is that as the private lending institutions become
more comfortable with PACE financing, more approval is
occurring. Most often the property itself is the collateral for
the commercial loan on the business and through the PACE
financing that collateral is being improved. He opined that the
lenders understand that both the physical asset and financial
viability of the business using that asset is being improved.
The aforementioned, he opined, is why PACE is gaining traction
across the nation. Still, there are no guarantees that
individual banks will approve this financing mechanism.
9:03:14 AM
REPRESENTATIVE SEATON questioned whether designating an entire
municipality [as eligible for PACE financing] would expand the
necessary funds such that the municipality's reserves might not
be sufficient to provide financing. He agreed with
Representative Hughes that the picking of winners and losers
shouldn't occur, but requested analysis regarding whether the
financing would be limited [by designating an entire
municipality as eligible for PACE financing].
9:04:33 AM
CHAIR TILTON announced that she was passing the gavel to
Representative Seaton and intended to hold HB 118.
9:05:00 AM
VICE CHAIR SEATON opened public testimony.
9:05:18 AM
CHRIS ROSE, Executive Director, Renewable Energy Alaska Project
(REAP), began by informing the committee that REAP is a
nonprofit coalition of over 80 organizations around the state
that all support renewable energy and energy efficiency. Mr.
Rose said REAP has been promoting the idea [embodied in HB 118]
for several years and is in full support of HB 118. He stressed
that the state is in a fiscal crisis and a lot of money is
needlessly being wasted on energy costs. Collectively, those in
the state are spending $5-6 billion on energy, including
transportation, heat, and electricity. The State of Alaska's
utility bill is about one-tenth of the collective costs, an
estimated $642 million for heat and electricity. From the
existing [energy efficiency] programs, such as the residential
weatherization program that has saved over 30 percent in energy
costs, a conservative estimate for saving energy for buildings
is 20 percent. A savings of 20 percent of $5-6 billion per year
on energy efficiency keeps $1 billion a year circulating in the
state. Commercial buildings are a big portion [of energy costs
in the state]. The commercial sector has been left out of
energy efficiency programs, which is why this makes sense, he
said. With the banks' involvement, the financing is almost
unlimited and the goal is for the [commercial buildings that
avail themselves of the PACE financing] to obtain positive cash
flow from the beginning. He noted that over 30 states [offer
PACE financing]. In fact, the idea of property assessed clean
energy was originally conceived for residential consumers.
However, the Federal National Mortgage Association (FNMA) known
as Fannie Mae and the Federal Home Loan Mortgage Corporation
(FHLMC) known as Freddie Mac didn't like that the local property
tax assessment district has the superior lien because they buy
most of the mortgages in the country. The aforementioned is why
the program isn't designed for residences. Still, the [PACE
program] makes a lot of sense, he opined, particularly in terms
of the jobs that would be created through the retrofits of these
[commercial] buildings. He informed the committee that 4,000
jobs have been created through the residential weatherization,
but now those folks are concerned with the declining funding for
the residential program. This legislation would be one way in
which those folks could keep their jobs because the same skills
they are using in the residential sector can be used in the
commercial sector. Mr. Rose then highlighted that under this
proposed financing the loan goes with the building, and thus one
doesn't have to worry whether the return on investment occurs
during ownership because the next owner of the building will see
a building that is more attractive since it's worth more and
more energy efficient. In conclusion, Mr. Rose encouraged the
committee's support for HB 118.
9:09:44 AM
REPRESENTATIVE DRUMMOND inquired as to how this legislation
could benefit mixed use properties.
MR. ROSE said he couldn't speak to whether Fannie Mae or Freddie
Mac have any involvement in mixed use loans, but he didn't
believe they do. He opined that a mixed use building likely has
a commercial loan and wouldn't be involved with Fannie Mae or
Freddie Mac, and thus this financing would be available.
REPRESENTATIVE DRUMMOND asked if that would be the case even
with a collection of separate owners. For example, a building
in her district has 16 residential condominiums and 4-5 office
condominiums all of which are owned by different entities and
are financed separately.
MR. ROSE opined that a lot of the physical plan of the building
is operated by one entity. The building likely has one large
heating and cooling system and whoever owns and pays for that
would take the PACE loan. He related his assumption that the
energy costs are passed on to those in the building, but said he
would have to see how the building is set up to answer.
REPRESENTATIVE DRUMMOND related her understanding from the
online property tax assessments that this building is all
electric, and therefore it's ripe for this kind of improvement.
Still, Representative Drummond said she didn't see how the
program proposed in HB 118 would cover this building unless the
definitions in the legislation are changed to include multi-
owner and multi-use facilities.
MR. ROSE stated his agreement that it's important to expand the
definition because the only limitation on using the PACE
financing in residential areas has been at the federal level
with Fannie Mae and Freddie Mac.
9:13:04 AM
VICE CHAIR SEATON questioned why one would assume that all
Alaskans that could benefit from the PACE program are financing
through Fannie Mae or Freddie Mac. He further questioned why a
definition would be used that precludes all residential
properties as if all of them were financed through Fannie Mae
and Freddie Mac because there could be situations in which
people have paid off their loans or utilize different financing.
Therefore, Representative Seaton requested that Mr. Rose and the
group that's working on this consider the aforementioned and
whether the definition is constructed for reasons other than the
program.
MR. ROSE related his belief that has been considered because
even if one doesn't initially finance through Fannie Mae and
Freddie Mac, most residential mortgages are ultimately held by
Fannie Mae and Freddie Mac. He opined that the desire is to
support a discreet program now and hopefully work with Congress
and the president to tell Fannie Mae and Freddie Mac to allow
this as it improves the collateral, whether it's a commercial or
residential property.
VICE CHAIR SEATON reminded the committee that one of the reasons
Alaska wasn't so caught up in the sub-prime mortgage crisis was
because the Alaska Housing Finance Corporation (AHFC) holds the
paper in the state rather than being sold to others. Therefore,
he requested the aforementioned be considered in order to ensure
Alaskans aren't being denied a possibility with AHFC.
9:16:02 AM
VICE CHAIR SEATON, upon determining no one else wished to
testify, closed public testimony and announced that HB 118 would
be held over.
HB 149-NATIVE CORP. ART. AMENDMENTS
9:16:32 AM
VICE CHAIR SEATON announced that the final order of business
would be HOUSE BILL NO. 149, "An Act relating to an amendment of
the articles of incorporation of certain Native corporations to
establish a lower quorum requirement for shareholder meetings."
9:16:48 AM
REPRESENTATIVE LANCE PRUITT, Alaska State Legislature, speaking
as the sponsor of HB 149, informed the committee that HB 149 was
introduced at the request of the Native corporations in Alaska.
He explained that a two-thirds vote of the corporation members
in the affirmative is required to change the articles of
incorporation for corporations formed prior to 1989, which is
the case for most of the Alaska Native corporations. However, a
vote of 50 percent in the affirmative is required to change the
articles of incorporation for those corporations formed after
1989. Further, current statute includes a provision that allows
a quorum requirement to be as low as one-third. Over the course
of the last 40 years, Alaska Native corporations have
experienced an increase in the number shareholders as newer and
younger shareholders have joined while at the same time there
has been a demographic shift of individuals leaving the villages
and even Alaska such that they aren't able to attend annual
corporation meetings. Therefore, there has been a decrease in
the numbers of a quorum. He clarified that currently the Alaska
Native corporations are meeting quorum requirements, but they
recognize the aforementioned trends and want to address it
before it becomes a problem. However, the Alaska Native
corporations feel that there's virtually no way they can meet
the two-thirds requirement to amend the articles of
incorporation. The aforementioned is why the Alaska Native
corporations have requested changing the articles of
incorporation vote requirement to 50 percent so that they can
reduce the quorum requirement for a meeting to one-third [of the
shareholders entitled to vote at a meeting].
9:20:35 AM
REPRESENTATIVE NAGEAK, speaking as a shareholder of an Alaska
Native corporation, related that he has observed the
difficulties of obtaining a quorum first hand. Therefore, he
viewed HB 149 as an opportunity to adjust the quorum
requirements.
9:21:29 AM
VICE CHAIR SEATON opened public testimony.
9:21:56 AM
NICHOLA RUEDY, Director, Alaska Native Village Corporation
Association (ANVCA), began by informing the committee that ANVCA
is a nonprofit organization with a mission to provide services
that will improve the efficiency, profitability, and stability
of its member village corporations to provide a network of
support and technical assistance. Currently, 60 village
corporations belong to ANVCA. The ANVCA membership is comprised
of representatives from the village corporations, which work
collaboratively on issues they have in common to contribute to
the future health of these groups by sharing knowledge and
resources. Ms. Ruedy then related support for HB 149 as it
could be used as a tool to change the quorum requirements for
village corporations, which also face similar challenges as
regional corporations in terms of voter turnout. In response to
Vice Chair Seaton, Ms. Ruedy explained that the village CEOs
didn't pass a resolution on this matter, but the board voted to
support this issue. The board, which is comprised of nine board
members all of which are CEOs of village corporations, voted
unanimously to support HB 149.
9:23:53 AM
VICE CHAIR SEATON mentioned that it would be helpful to have a
written statement from ANVCA to include in the bill packet.
9:24:27 AM
KIM REITMEIER, President, ANCSA Regional Association, informed
the committee that the mission of the ANCSA Regional Association
is to promote and foster the continued growth and economic
strength of the Alaska Native Regional Corporations on behalf of
the shareholders. She explained that the ANCSA Regional
Association represents the chief executive officer of the 12
land-based regional Alaska Native corporations as well as the
president of the Alaska Federation of Natives (AFN). Alaska
Native corporations are owned by 116,000 Alaska Native people
and when measured against the top 49 Alaska-owned companies,
they account for 73 percent of the revenue earned, 66 percent of
Alaskan jobs, 84 percent of the worldwide employment, and make
up 22 of the top 49 Alaskan-owned companies. The ANCSA Regional
Corporations have grown into an economic engine of Alaska. Ms.
Reitmeier then related support for HB 149. As mentioned
earlier, there has been a marked trend amongst shareholders in
which there has been a decline in voter turnout. She noted that
while shares in Alaska Native corporations are limited in
nature, the shareholder base of these corporations are growing
through inheritance of shares and broadening eligibility
requirements. Trend analysis relate that respected elders are
always willing to turn out and vote, particularly those living
within the region. However, younger shareholders and those
living outside the state, the demographics for which are
growing, are less likely to turnout to vote. In response to the
aforementioned, Alaska Native Regional Corporations have
initiated voter turnout initiatives including shareholder
surveys and implemented incentives for voting. However,
increases in prizes have only resulted in incremental
improvements in voter turnout. This legislation provides the
opportunity to address what could become a problem before it
arises. The State of Alaska Corporation Code Section 10.06.415
sets the quorum requirements to hold an annual meeting for
Alaska Native corporations at 50 percent plus one of shares
eligible to vote. If an Alaska Native corporation fails to meet
the aforementioned quorum, business at an annual meeting can't
be conducted and directors can't be elected. Therefore, the
current directors would remain in place until an election can be
held. Under current law, a corporation's articles of
incorporation can be amended to lower quorum requirements.
However, current statute for corporations created prior to 1989,
which includes nearly all Alaska Native corporations, requires a
two-thirds vote of eligible shares in favor of the change. The
legislation, HB 149, before the committee amends the statute to
reduce the percentage of votes required to amend the articles of
incorporation of corporations established prior to 1989 to
change the quorum requirement. The articles of incorporation
change would be limited to a change in the quorum requirements
and no other change would be allowed under this statute change.
Ms. Reitmeier explained that HB 149 would allow a change in a
corporation's articles of incorporation, for those corporations
established prior to 1989, such that a majority of the quorum is
at least 50 percent plus one of the shares eligible to vote. In
closing, Ms. Reitmeier summarized that HB 149 changes the
standard for the number of votes required to consider changes to
a corporation's articles of incorporation, which would allow for
changes in quorum requirements. If the proposed HB 149 passes,
shareholders must still vote to amend the articles of
incorporation and shareholders must still vote to change the
quorum requirements. The ANCSA Regional Association membership
has reviewed the proposed change embodied in HB 149 and all 12
regional CEOs unanimously support HB 149 and letters in support
of HB 149 have been submitted to the sponsor.
9:29:43 AM
REPRESENTATIVE REINBOLD emphasized the importance of getting
younger people involved, but opined that she wasn't sure
lowering the quorum requirement is the answer. Representative
Reinbold clarified that she wouldn't oppose HB 149, but
maintained concern with the direction of HB 149 and reiterated
the need to involve young people. She then inquired as to
whether all other options, such as voting by proxy, have been
exhausted in an attempt to attract younger voters.
MS. REITMEIER assured Representative Reinbold that there have
been discussions regarding strategies of voter engagement at
various levels. In fact, the [ANCSA Regional Association] runs
the Get Out the Native Vote campaign. The proposal in HB 149 is
merely one avenue to address the issue.
9:31:17 AM
REPRESENTATIVE REINBOLD indicated the possibility of tying
corporate dividends to voting in order to increase youth
involvement.
REPRESENTATIVE PRUITT noted that he has examples of how Doyon,
Limited, has specifically tried to address the issue.
REPRESENTATIVE REINBOLD said she has that information and opined
that what Doyon, Limited, is doing isn't working.
9:32:38 AM
REPRESENTATIVE NAGEAK emphasized the need to understand the
population dynamics of rural Alaska villages and cities where
the population is very young. In fact, in some rural Alaska
villages and cities over 60 percent of the population is "young"
in comparison to his generation. Furthermore, the original
shareholders are dying off and their shares are being passed on
to others.
9:34:25 AM
VICE CHAIR SEATON referred to flow charts in the committee
packet. The flow chart for quorum requirements says that under
HB 149 the vote to change the quorum requirements for ANCSA
corporations would change from the existing majority of eligible
shareholders in person or by proxy to one-third of eligible
shareholders in person or by proxy. The flow chart for amending
articles of corporation, on the other hand, shows that under
HB 149 ANCSA corporations would move from the existing
requirement of two-thirds of eligible shareholders in person or
by proxy to the majority of eligible shareholders present.
MS. REITMEIER deferred to Mr. Schutt.
9:35:27 AM
AARON SCHUTT, Doyon, Limited, noting that he doesn't have the
flow charts, related that the intent [with HB 149] is to change
to a vote requirement of 50 percent plus one [of eligible
shareholders] in person or by proxy. He related that for the
last 20 years Doyon, Limited, has regularly experienced well
over 90 percent of the votes cast in corporate elections being
cast by proxy.
9:35:57 AM
VICE CHAIR SEATON requested that prior to the next meeting on
HB 149, the sponsor work out the differences between the flow
charts for the default provisions for quorum requirements versus
for the default provisions for amending the articles of
corporation.
9:36:40 AM
REPRESENTATIVE HUGHES questioned whether the flow chart entitled
"Default Provisions for Amending Articles of Corporation" would
be better if it reflected that the legislation is specifically
for amending the quorum of the articles of corporation. She
related her understanding that the legislation refers to the
majority of eligible shareholders present is only for making the
one change, [the quorum change].
REPRESENTATIVE PRUITT replied yes, and clarified that HB 149
specifically relates to changing the quorum requirements not
other aspects of the articles of corporation [for ANCSA
corporations]. An affirmative two-thirds vote would still be
required to change other pieces of the articles of corporation.
9:38:35 AM
REPRESENTATIVE HUGHES, referring to the flow chart entitled
"Default Provisions for Quorum Requirements," related her
understanding that HB 149 merely makes ANCSA corporations have
the same quorum requirements as other corporations, including
non-Native corporations, formed after 1989.
REPRESENTATIVE PRUITT answered yes.
9:39:19 AM
REPRESENTATIVE HUGHES surmised that there will continue to be
challenges going forward as the younger generation becomes more
mobile, regardless of whether he/she is from a village or an
urban area. Therefore, she opined that the [changing
demographics] may apply outside of Alaska Native corporations as
well.
REPRESENTATIVE PRUITT noted his agreement, pointing out that
voting trends illustrate the lack of engagement by youth or the
utilization of other means to vote. He highlighted that Alaska
Native youth have a unique opportunity/responsibility to be a
part of a corporation, which is an extra burden that most youth
don't have. Therefore, one can understand why a corporation
isn't the first thing on the mind of an Alaska Native youth.
However, as [the shareholders] age, they are likely to become
more engaged.
9:41:34 AM
REPRESENTATIVE HUGHES characterized the movement and travel of
her own children since high school as incredible compared to
herself.
9:41:59 AM
REPRESENTATIVE DRUMMOND inquired as to whether HB 149 applies
only to the Alaska Native Regional corporations or does it also
apply to the Alaska Native Village corporations as well.
REPRESENTATIVE PRUITT clarified that AS 10.06.960 specifically
relates to Alaska Native corporations, which includes both the
regional and village corporations.
9:43:23 AM
REPRESENTATIVE DRUMMOND related her understanding that Alaska
Native Village corporations are much smaller in terms of the
numbers of shareholders.
REPRESENTATIVE PRUITT responded yes, adding that some of the
smaller village corporations wouldn't be able to perform
marketing campaigns, such as that by Doyon, Limited, to
encourage attendance and participation.
9:44:12 AM
REPRESENTATIVE DRUMMOND asked if all 12 corporations of the
ANCSA Regional Association and AFN agree with the need for the
proposed change in the quorum requirements.
MS. REITMEIER replied yes, reiterating that the vote was
unanimously in support.
9:44:47 AM
REPRESENTATIVE HUGHES, referring to the flow chart entitled
"Default Provision for Quorum Requirements," asked whether any
non-Native corporations formed prior to 1989 would benefit from
this proposed quorum change in HB 149. If so, she asked whether
the proposed quorum change in HB 149 should be allowed for all
corporations formed prior to 1989.
REPRESENTATIVE PRUITT characterized extending the change
embodied in HB 149 to non-Native corporations as a policy
question. He noted that although he hasn't heard from such
corporations, he hasn't sought responses from non-Native
corporations formed prior to 1989. Therefore, he said he
couldn't speak to the ramifications of extending this to all
corporations formed prior to 1989 since he didn't know if they
face the same challenges as Alaska Native corporations formed
prior to 1989.
9:47:20 AM
REPRESENTATIVE HUGHES offered that she would be open to
expanding the legislation to non-Native corporations formed
prior to 1989, if they were interested in the option. She
inquired as to whether the sponsor would consider the
aforementioned.
REPRESENTATIVE PRUITT answered that he doesn't have an issue
with offering the same for non-Native corporations formed prior
to 1989. However, the legislation would need to be changed as
currently it amends statute that specifically relates to Alaska
Native corporations. Although Representative Pruitt felt it
would be acceptable to apply the proposed change to non-Native
corporations formed prior to 1989, he emphasized that Alaska
Native corporations have a unique challenge in which youth
automatically become shareholders, which is unlikely to be the
case in non-Native corporations formed prior to 1989.
9:49:08 AM
REPRESENTATIVE NAGEAK pointed out that there is a difference
between publicly owned corporations and regional corporations.
For instance, shares of publicly traded corporations are
different in that they are purchased rather than transferred as
is the case in regional Native corporations. He informed the
committee that in regional corporations those born after 1974
have 100 shares, but the original shareholders can transfer
their shares to others.
9:50:45 AM
REPRESENTATIVE HUGHES commented that she is of the mindset that
if the quorum requirements for non-Native corporations isn't
problematic, then it's not necessary to address it. She also
said she understood the unique situation of Alaska Native
corporations.
9:51:22 AM
VICE CHAIR SEATON remarked that expanding the proposal in HB 149
to corporations beyond Alaska Native corporations without input
would be difficult. Furthermore, including non-Native
corporations in HB 149 would require more time in terms of
obtaining agreement from all corporations throughout Alaska
whereas all Alaska Native corporation heads have unanimously
supported HB 149.
9:52:44 AM
REPRESENTATIVE DRUMMOND related her personal experience as the
president of a board of a homeowners' association that runs the
water delivery system in her neighborhood. That association has
the ability to change its own bylaws and articles of
corporation, as she was sure most corporations in Alaska have.
In fact, the association had to change its quorum requirements
last year because it was unable to obtain enough homeowners to
conduct business. Representative Drummond said she was fairly
confident that most non-Native corporations have the ability to
alter their own articles of incorporation and bylaws.
Therefore, she noted her agreement with Vice Chair Seaton that
the committee should just address HB 149 as it relates to Alaska
Native corporations.
9:54:14 AM
REPRESENTATIVE PRUITT offered to perform due diligence in terms
of reaching out to non-Native corporations established prior to
1989, although he surmised that they are totally different.
9:54:53 AM
VICE CHAIR SEATON reiterated his request for revised flow charts
for the next meeting on HB 149.
9:55:21 AM
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 9:55 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HCS HB 118 (ENE) Sectional Analysis.pdf |
HCRA 3/26/2015 8:00:00 AM |
HB 118 |
| HCS HB 118 (ENE) Hearing Request Letter.pdf |
HCRA 3/26/2015 8:00:00 AM |
HB 118 |
| HB0118B.PDF |
HCRA 3/26/2015 8:00:00 AM |
HB 118 |
| HB0118-1-2-021815-CED-N.PDF |
HCRA 3/26/2015 8:00:00 AM |
HB 118 |
| 15 3 4_IGU Supports PACE Act.pdf |
HCRA 3/26/2015 8:00:00 AM |
HB 118 |
| HB 118, PACE HCRA 03 26 15.pdf |
HCRA 3/26/2015 8:00:00 AM |
HB 118 |
| HB 118, Supporting Document - Alaska Bankers Association.pdf |
HCRA 3/26/2015 8:00:00 AM |
HB 118 |
| Mayor Eberhart CIty of Fairbanks.pdf |
HCRA 3/26/2015 8:00:00 AM |
HB 118 |
| REAP Support PACE Financing, HB 118.pdf |
HCRA 3/26/2015 8:00:00 AM |
HB 118 |
| Mayor Hopkins FNSB.pdf |
HCRA 3/26/2015 8:00:00 AM |
HB 118 |
| HB 149, Supporting Document - Flow Chart, Quorum Requirements.pdf |
HCRA 3/26/2015 8:00:00 AM |
HB 149 |
| HB 149 Sponsor Statement.pdf |
HCRA 3/26/2015 8:00:00 AM |
HB 149 |
| HB 149 Sectional Analysis.pdf |
HCRA 3/26/2015 8:00:00 AM |
HB 149 |
| HB149-DCCED-CBPL-03-20-15.pdf |
HCRA 3/26/2015 8:00:00 AM |
HB 149 |