Legislature(2009 - 2010)
04/13/2010 09:46 AM House FIN
| Audio | Topic |
|---|---|
| Start | |
| HCR21 | |
| SB217 | |
| SB300 | |
| SB247 | |
| SB248 | |
| SB301 | |
| HB426 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
April 13, 2010
9:46 a.m.
9:46:05 AM
CALL TO ORDER
Co-Chair Stoltze called the House Finance Committee meeting
to order at 9:46 a.m.
MEMBERS PRESENT
Representative Mike Hawker, Co-Chair
Representative Bill Stoltze, Co-Chair
Representative Bill Thomas Jr., Vice-Chair
Representative Allan Austerman
Representative Mike Doogan
Representative Anna Fairclough
Representative Neal Foster
Representative Les Gara
Representative Reggie Joule
Representative Mike Kelly
Representative Woodie Salmon
MEMBERS ABSENT
None
ALSO PRESENT
Rob Rule, Staff, Representative Herron; Erin Harrington,
Staff, Representative Austerman; Dan Fauske, CEO/Executive
Director, Alaska Housing Finance Corporation, Department of
Revenue); Bryan Butcher, Director, Government Affairs and
Public Relations, Alaska Housing Finance Corporation,
Department Of Revenue, AHFC; Ted Leonard, Executive
Director, AIDEA; Greg Winegar, Director, Alaska Division of
Investments, Department of Commerce, Community and Economic
Development, Division Director,; Jim Benintendi, Staff,
Senator Olson; Pat Davidson, Legislative Audit; Jennifer
Strickler, Division Operations Manager, Division of
Corporations, Business, and Professional Licensing,
Department of Commerce, Community and Economic Development;
Sarah Fisher-Goad, Deputy Director of Operations, Alaska
Energy Authority, Department of Commerce, Community and
Economic Development; Steven Haagenson, Executive Director,
Alaska Energy Authority, Department of Commerce, Community
and Economic Development; Ted Leonard, Executive Director,
Alaska Industrial Development and Export Authority,
Department of Commerce, Community and Economic Development;
Joseph Masters, Commissioner, Department of Public Safety;
Orin Dym, Manager, Forensic Laboratory, Department of
Public Safety; Deven Mitchell, Executive Director, Alaska
Municipal Bond Bank Authority, Department of Revenue; Matt
Tanaka, Crime Lab Project Manager, Department of
Transportation and Public Facilities
PRESENT VIA TELECONFERENCE
John Torgerson, Senator, Kenai Peninsula Economic
Development District; Kathryn Dodge, Fairbanks North Star
Borough; Laurie Holte, Office Of Residential Lending,
Alaska Housing Finance Corporation, Department Of Revenue
SUMMARY
HB 426 CRIME LAB
HB 426 was REPORTED out of Committee with a
"do pass" recommendation and with a new
fiscal note from the Department of Revenue.
HCR 21 ECONOMIC DEVELOPMENT PLANNING COMMISSION
CS HCR 21(FIN) was REPORTED out of
Committee with a "do pass" recommendation
and with
SB 217 AHFC: VET. BONDS/BLDG; SUBPORT BLDG BOND
CS SB 217(FIN) was REPORTED out of Committee
with a "do pass" recommendation and with
previously published fiscal note: FN3 (REV)
SB 300 AIDEA LOANS
CS SB 300(FIN) was REPORTED out of Committee
with a "do pass" recommendation and with
previously published zero fiscal notes: FN1
(DCED), FN2 (REV), FN3 (DOT)
SB 301 POWER PROJECT FUND
SB 301 was REPORTED out of Committee with a
"do pass" recommendation with previously
published fiscal notes: FN1 (DOT), FN2
(REV), FN3 (CED), FN4 (CED)
SB 247 EXTENDING BOARD OF PHARMACY
CS SB 247(L&G) was REPORTED out of Committee
with a "do pass" recommendation and with
previously published fiscal note: FN2 (DCED)
SB 248 EXTEND BD OF MARITAL & FAMILY THERAPY
CS SB 248(L&G) was REPORTED out of Committee
with a "do pass' recommendation and with
previously published fiscal note: FN2 (DCED)
HOUSE CONCURRENT RESOLUTION NO. 21
Creating and relating to the Economic Development
Planning Commission.
9:46:48 AM
ROB RULE, STAFF, REPRESENTATIVE HERRON, stated that HCR 21
is sponsored by the House Community and Regional Affairs
Committee. He explained that the legislation would create
an eleven member task force from the public and private
sectors to make recommendations to the state in its efforts
to support economic development. The commission would serve
as a filter and a bridge to assist the state through
economic development processes. He referred to the handout
"HCR 21 - Creating an Economic Development Planning
Commission"(copy on file). He noted that page two
summarizes the current statewide economic development
processes as the Alaska Forward Project led by the Alaska
Partnership for Economic Development (APED). He reported
that APED completed phase 1 of the project; a situational
analysis of the economic development in Alaska. In
addition, the governor's Legacy Plan created by
administrative order under Governor Palin is also part of
the economic development process. The Legacy Plan created
working groups to study Alaska industries, e.g. tourism,
mining, etc. He indicated the Alaska Forward and Legacy
projects will merge in the future.
He referred to page 3 that defines the Economic Development
Planning Commission eleven member structure and appointment
authority.
· One State Representative appointed by House Speaker
· One State Senator appointed by Senate President
· Two Public Members appointed by House Finance Chairs
· Two Public Members appointed by Senate Finance
Chairs
· One Public Member appointed by House Minority Leader
· One Public Member appointed by Senate Minority
Leader
· DCCED Commissioner appointed by Resolution
· DLWD Commissioner appointed by Resolution
· President of APED appointed by Resolution
Mr. Rule cited page 4; possible recommendations to the
legislature by the commission. He noted that the commission
could identify financial tools such as loan programs, tax
incentives and other policies to nurture industry in
Alaska.
He relayed the commissions Timelines listed on page 5.
· April 30,2010: Commission Begins Work
· Spring 2010: Alaska Forward Phase II Launches
· January 30, 2011: First Legislative Report Deadline
· December 15, 2011: Second Report Deadline
· June 30, 2012: Sunset
He concluded that page 6 identifies the need for cohesion
for economic planning and development in Alaska.
9:51:39 AM
Co-Chair Hawker wondered if the commission is it too large
to be efficient.
ERIN HARRINGTON, STAFF, REPRESENTATIVE AUSTERMAN, stated
that the size of the commission represents an attempt to
draw members from all sectors of industry.
Co-Chair Hawker opined that it is a well balanced
commission.
Co-Chair Stoltze asked what would happen with a minority
appointment if one legislative body did not have a
recognized minority.
Mr. Rule did not know the answer. He stated that scenario
was not anticipated.
9:53:10 AM
Ms. Harrington offered that the minority appointments were
added by the Labor and Commerce Committee.
Co-Chair Stoltze stated that he asked the question because
the uniform rule describes what a minority is.
9:53:58 AM
Vice-Chair Thomas asked where the commission's efforts
would be concentrated. He expressed concern that rural
Alaska might be overlooked. Ms. Harrington related that in
reviewing the work done previously by Alaska Forward
considerable attention was paid to the needs of rural
Alaska. She expected continued attention to rural Alaska's
needs because APEC is comprised of Alaska Regional
Development Organizations (ARDOR). ARDOR's membership is
regionally distributed throughout the state that includes
representation in rural Alaska.
Vice-Chair Thomas reiterated his concerns.
9:56:18 AM
Representative Foster wondered what efforts the commission
would make to ensure that rural Alaska is included in the
commission's process. Ms. Harrington reported that the
actual workings of the commission would be determined when
it convenes for the first time to make those types of
decisions. The fiscal note provides for travel and
teleconferences.
9:57:51 AM
Representative Austerman stated that "nowhere in the
resolution does it talk about rural versus urban". He noted
that on Page 3, line 1, the resolution speaks to the entire
state. He reiterated that Alaska Forward is made up of
ARDORS based all over the state. He felt that if HCR 21 is
given a chance it should work for the entire state and not
only urban areas.
9:59:02 AM
Vice-Chair Thomas related concerns about the timber
industry in Southeast Alaska. He worried that the
commission could recommend policies that do not support
economic activity in rural communities. Representative
Austerman pointed out that the purpose of the commission is
only to make recommendations to the legislature and not
create policy statements. He also suggested that
Representative Thomas try to get appointed to the
commission by the Speaker of the House. Vice-Chair Thomas
reiterated his concerns about lost jobs, economic
hardships, and crime in his district due to lack of
economic opportunity.
10:02:46 AM
Co-Chair Stoltze opened public testimony.
JOHN TORGERSON, SENATOR, KENAI PENINSULA ECONOMIC
DEVELOPMENT DISTRICT, ALASKA PARTNERSHIP FOR ECONOMIC
DEVELOPMENT EXECUTIVE COMMITTEE (via teleconference),
supported the legislation. He believed that an effort to
focus all of the different economic development strategies
in the state is a good idea. The presence of legislators on
the commission would be especially helpful to move the task
force's recommendations forward.
KATHRYN DODGE, FAIRBANKS NORTH STAR BOROUGH ARDOR, ALASKA
PARTNERSHIP FOR ECONOMIC DEVELOPMENT, VICE PRESIDENT (via
teleconference), supported the bill. She welcomed the
heightened level of engagement between the private sector
and the legislature. She believed it would strengthen the
strategic planning development effort and spur
implementation of the plans and policies resulting from the
effort.
10:05:48 AM
Representative Foster wondered how active the ARDOR's are
in the state. Ms. Dodge answered that the Borough's ARDOR
board meets ten times a year. The ARDOR regularly meets
with other economic development organizations at least once
a month.
Co-Chair Stoltze closed public testimony.
Co-Chair Hawker referenced the new fiscal note that creates
one full time position for the Legislature, appropriated
from the Legislative Council budget, to implement and
manage the commission. He felt that the increase was
unnecessary if the legislation passed and the commission is
established. He suggested that there is adequate fiscal and
human resources existing within the legislature's budget.
He requested that the committee prepare a zero fiscal note
with the caveat that the funds for the position are
appropriated out of the Legislature's existing budget and
not limit that the funds are allocated from a specific
committee.
Representative Austerman raised the question whether page
1; line 16 of the resolution must be corrected.
Co-Chair Hawker offered conceptual Amendment 1. He
requested that on page 1, line 16, delete "Legislative
Council" from "(Alaska Legislative Council)" and replace it
with "Alaska legislature". The change would read; "Further
Resolved that the (Alaska Legislature) shall provide
adequate…"
There being no objection conceptual Amendment 1 was
adopted.
Representative Kelly commented that there are too many
organizations in the state working on economic development.
He suggested that the commission's first task should be to
eliminate half of them. Representative Austerman stated
that the commission's main task would be to coordinate all
of the economic development efforts in the state.
Representative Kelly felt that economic development was
important but recommended to determine the most effective
entities and eliminate the rest.
10:11:50 AM
Representative Austerman MOVED to Report CS HCR 21(FIN) out
of Committee with individual recommendations and the
accompanying revised fiscal note. There being NO OBJECTION,
it was so ordered.
CS HCR 21 (FIN) was REPORTED out of Committee with a "do
pass" recommendation and with the revised fiscal note.
SENATE BILL NO. 217
"An Act relating to the issuance of state-guaranteed
revenue bonds by the Alaska Housing Finance
Corporation to finance mortgages for qualifying
veterans; and providing for an effective date."
10:14:08 AM
BRYAN BUTCHER, DIRECTOR, GOVERNMENT AFFAIRS AND PUBLIC
RELATIONS, ALASKA HOUSING FINANCE CORPORATION, DEPARTMENT
OF REVENUE, stated that the house version of the bill (HB
291) was heard before the committee earlier this session.
He explained that SB 217 would request the voters approve
$600,000,000 in state guaranteed bonds in the 2010 general
election, to be issued by the Alaska Housing Finance
Corporation for the purchase of mortgage loans made to
qualifying veterans. He added that federal law requires
that general obligation bonds must be issued by the state
for this loan program. The veteran's loan program is the
highest performing loan program in the state. Alaska is one
of five states that qualify for the program.
Mr. Butcher furthered that the Senate added two provisions
to SB 217 that were not included in HB 291. The Senate
authorized the purchase of the building that the AHFC
currently inhabits at 4300 Boniface parkway in Anchorage.
The corporation would realize long-term savings to purchase
instead of leasing the building. In addition, the Senate
authorized the corporation to purchase or construct a
Public Housing Intake Center. The current center located on
International Boulevard in Anchorage is an aging, ill-
equipped building with insufficient parking. The building
is not located on a bus route which makes it a difficult
location for public housing clients. The cost to bring the
building up to code far exceeds the value of the building.
Mr. Butcher reported that AHFC currently has $3.5 million
in federal and corporate funds to pay for the building; no
additional funding is required from the state. The
corporation would relocate the center to the centrally
located neighborhood of Mountain View.
DAN FAUSKE, CEO/EXECUTIVE DIRECTOR, ALASKA HOUSING FINANCE
CORPORATION, DEPARTMENT OF REVENUE), interjected that AHFC
had been fully authorized to proceed with the $3.5 million
funding for the project for several years. He believed that
it was the right project to expend the funds.
Co-Chair Hawker reported that the same project was proposed
last year. He asked for assurance that there was no
increase in costs that occurred over a year. Mr. Fauske
replied that no increase has occurred. He added that the
project represents an economic gain for the corporation.
10:17:16 AM
Representative Doogan inquired about the fiscal note, FN 3
(REV), analysis that estimates the 4300 Boniface Parkway
purchase in the amount of $14.5 million. Mr. Fauske
elaborated that AHFC presently owns land at 34th Ave. and
Denali St.; the previous home to the AHFC. The Tatitlek
Corporation owns the building at 4300 Boniface Parkway and
wants to acquire the land at 34th Ave. and Denali St.
Therefore, $5 million will represent a land exchange with
the Tatitlek Corporation and the remaining $9.5 million
will be from the sale of AHFC 25 year bonds to complete the
purchase and rehabilitate the building.
10:18:45 AM
Representative Joule referred to the sponsor statement
(copy on file) that explained that a veteran must apply for
the loan within 25 years of discharge from active duty to
qualify for the program. He wondered what impact that had
on the exclusion of veterans from the program. Mr. Butcher
explained that the program was established in the early
1980's by congress. The initial requirements were that
veterans had to have served prior to 1977 and discharged
from service for no longer than 30 years. As the years
passed the requirements reduced the number of veterans
eligible for the program and did not include Gulf War
veterans. AHFC lobbied to change the requirements over a 15
year period. The effort met with some resistance in
Congress but resulted in the removal of the service prior
to 1977 requirement and replaced that with the 25 year
provision. Congress also limited the corporation or state
to issue only $10 million in bonds which was subsequently
increased to $100 million. He noted that AHFC was still
working to get the 25 year qualification removed.
Co-Chair Stoltze closed public testimony.
10:23:14 AM
Representative Foster cited the definition of active duty
from the sponsor statement, that service in a military
academy may meet the qualifications to participate in the
program. He asked what the military academy requirements
were.
LAURIE HOLTE, OFFICE OF RESIDENTIAL LENDING, ALASKA HOUSING
FINANCE CORPORATION, DEPARTMENT OF REVENUE,(via
teleconference), explained that AHFC requests a copy of the
veterans DD214 release document as evidence for
qualification for the veterans mortgage program. The
document indicates whether the veteran has been honorably
discharged. She did not know if a cadet that leaves an
academy before they graduate receives a DD214.
10:25:50 AM
Vice-Chair Thomas MOVED to report CS SB 217(FIN) out of
Committee with individual recommendations and the
accompanying fiscal note.
CS SB 217(FIN) was REPORTED out of Committee with a "do
pass" recommendation and with previously published fiscal
note: FN3 (REV)
10:26:41 AM RECESSED
10:29:57 AM RECONVENED
SENATE BILL NO. 300
"An Act relating to loan participations and
development finance projects of the Alaska Industrial
Development and Export Authority; and relating to
loans from the rural development initiative fund."
10:30:35 AM
TED LEONARD, EXECUTIVE DIRECTOR, ALASKA INDUSTRIAL
DEVELOPMENT AND EXPORT AUTHORITY, explained the difference
between SB 300 and the companion bill HB 410. He stated
that an amendment was added to SB 300 in the Senate Finance
Committee that adds a new power under AS 44.0880 to the
Alaska Industrial Development and Export Authority (AIDEA).
The law allows AIDEA to consider the interest of local
governments and the impact of financed projects on local
governments and to ensure local governments share in the
benefits of AIDEA's activities when exercising AIDEA's
financial authority. The interest of AIDEA to preserve a
healthy financial position and bond rating and the
project's economic benefits as well as impact on the
community will all be considered.
Mr. Leonard furthered that the new authority is consistent
with existing legislative directives embedded in AIDEA's
development program. He explained that any development
projects AIDEA engages in and issues over $6 million in
bonds requires scrutiny by a regional committee to
determine local impact. The same statute also requires a
consultation with local communities affected by existing
development projects. He summarized that the statute
directs AIDEA's board to consider the impacts of
development projects on the local community when engaged in
any of AIDEA's broad range of economic activities and
programs.
10:33:51 AM
Co-Chair Stoltze questioned the language in the bill on
page 4, line 6, that reads;
"Connected by road" does not include a connection by
the Alaska marine highway system.
He presumed that the marine highway is not part of the road
system and wondered why the language was necessary.
GREG WINEGAR, DIRECTOR, ALASKA DIVISION OF INVESTMENTS,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT,
DIVISION DIRECTOR, stated that the language been in place
since the inception of the Rural Development loan program
in FY 2000.
Representative Doogan asked if the Senate changes to the
legislation are found in Section 1 of the bill. Mr. Winegar
affirmed.
Representative Gara noted that the [Rural Development loan]
program does include communities of fewer than 2000 people
connected by road systems to Anchorage or Fairbanks.
10:36:34 AM
Co-Chair Stoltze closed public testimony.
Co-Chair Stoltze noted that there are three zero fiscal
notes [FN1 (EED), FN2 (REV), FN3 (DOT)], accompanying the
legislation.
Mr. Leonard made final comments in support of moving
forward with the legislation.
Vice-Chair Thomas MOVED to report CS SB 300(FIN) out of
Committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CS SB 300(FIN) was REPORTED out of Committee with a "do
pass" recommendation and with previously published zero
fiscal notes: FN1 (CED), FN2 (REV), FN3 (DOT)
10:38:46 AM RECESSED
10:52:28 AM RECONVENED
SENATE BILL NO. 247
"An Act extending the termination date of the Board of
Pharmacy; and providing for an effective date."
10:52:56 AM
JIM BENINTENDI, STAFF, SENATOR OLSON, explained that SB 247
extends the Board of Pharmacy until June, 2018. He reported
that the original version of the bill extended the board
through June, 2015. The 2018 extension was the date
recommended by legislative audit. The change was made in
the Senate Labor and Commerce Committee. He furthered that
the board is composed of 7 members. The accompanying fiscal
note (FN2 (CED) accommodates travel for members and two
staff for three meetings per year.
Mr. Benintendi noted that the legislative audit expressed
concern that the department was not sufficiently supportive
of the board and that the Governor place more emphasis on
board recruitment.
PAT DAVIDSON, LEGISLATIVE AUDIT, reiterated that the board
needs increased administrative support from the division
and more timely appointments to the board by the Governor's
office. She noted that the board had an issue with
collaborative protocols. She explained that collaborative
protocols are agreements between a physician and a
pharmacist that allow a pharmacist to take on activities
not usually allowed by the pharmacist, i.e., a flu shot.
The board was allowing the activity to continue for longer
than stipulated in the agreement. The board agreed to
correct the problem. She added that the board is running a
surplus and suggested to reduce the board's fees.
10:57:46 AM
Co-Chair Stoltze asked if the department is committed to
improving their support to professional boards.
JENNIFER STRICKLER, DIVISION OPERATIONS MANAGER, DIVISION
OF CORPORATIONS, BUSINESS, AND PROFESSIONAL LICENSING,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT,
stated that the division has begun to make major
improvements to all of their licensing programs.
Co-Chair Stoltze stressed his concern for continued
sufficient support for the important work of professional
boards.
Representative Doogan also expressed his concern for
increased support of professional boards by the executive
branch.
10:59:00 AM
Representative Foster asked what kind of major improvements
are being made by the department. Ms. Strickler explained
that the division's cost accounting system for all
licensing boards was controlled by one individual who was
not qualified. That individual left state government and a
qualified employee was hired. The problems are being
resolved and board support has increased.
11:00:33 AM
11:00:59 AM
Co-Chair Stoltze closed public testimony.
Vice-Chair Thomas MOVED to report CS SB 247 (L&G) out of
Committee with individual recommendations and the
accompanying fiscal note.
CS SB 247(L&G) was REPORTED out of Committee with a "do
pass" recommendation and with previously published fiscal
note: FN2 (DCED)
11:02:19 AM
SENATE BILL NO. 248
"An Act extending the termination date of the Board of
Marital and Family Therapy; and providing for an
effective date."
JIM BENINTENDI, STAFF, SENATOR OLSON explained that the
bill would extend the Board of Marital and Family
Therapists until June 30, 2014. The board is composed of
three therapists and two public members. The cost of the
license is $775.00 and there are 84 licensees. The
legislative audit found that regulations were not kept
current and that the board was running a deficit. He noted
the board has made significant progress in reducing their
deficit down to $2000 from $75,000 in FY 2005.
He added that the audit pointed out that the department did
not provide enough administrative support and that the
governor needed to improve candidate recruitment for the
board.
PAT DAVIDSON, LEGISLATIVE AUDIT explained that the division
made a four year extension for the board because they
discovered that the board was delaying regulation projects
and that the board was carrying a deficit. She explained
that the reason for a professional board is to assist in
keeping the regulations and statutes of the profession up
to professional standards. The shorter four year extension
was recommended by the division to see if regulations and
fiscal improvements can be made by the board in a timely
manner.
Co-Chair Stoltze closed testimony.
Vice-Chair Thomas MOVED to report CS SB 248 (L&G) out of
Committee with individual recommendations and the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CS SB 248(L&G) was REPORTED out of Committee with a "do
pass' recommendation and with previously published fiscal
note: FN2 (DCED)
11:07:46 AM RECESSED
1:41:29 PM RECONVENED
SENATE BILL NO. 301
"An Act relating to the power project fund;
authorizing the Alaska Energy Authority to charge and
collect fees relating to the power project fund;
authorizing the Alaska Energy Authority to sell and
authorizing the Alaska Industrial Development and
Export Authority to purchase loans of the power
project fund; providing legislative approval for the
sale and purchase of loans of the power project fund
under the memorandum of understanding dated February
17, 2010; and providing for an effective date."
1:42:41 PM
SARAH FISHER-GOAD, DEPUTY DIRECTOR OF OPERATIONS, ALASKA
ENERGY AUTHORITY, DEPARTMENT OF COMMERCE, COMMUNITY AND
ECONOMIC DEVELOPMENT, introduced the legislation. She
explained that SB 201 is an act related to the power
project fund that allows the Alaska Energy Authority (AEA)
to sell loans from the power project fund to the Alaska
Industrial Development and Export Authority, (AIDEA).It also
authorizes AEA to charge and collect fees relating to the
power project fund. Currently, AEA does not charge
application or origination fees. AEA would like to
establish an appropriate fee schedule through regulations
and a public process.
Ms. Fisher-Goad expounded that the power project fund is an
AEA revolving fund that is primarily used by smaller
utilities for energy projects. The fund has diminished
recently because of increased demand to fund alternative
energy projects. The AIDEA purchase of the power project
fund loan portfolio would re-capitalize the power project
fund with additional funds of approximately $21.6 million.
Ms. Fisher-Goad concluded that the loan purchase is a way
to re-capitalize the power project fund without the use of
general funds.
1:45:53 PM
Representative Doogan queried what the interest rate was on
the loans. Ms. Fisher-Goad replied that the statutory rate
was the municipal tax exempt rate that varies based on
revenue bonds that are currently 5.23 percent. She noted
that AEA has the statutory authority to make adjustments to
the rate and decrease the interest rate lower that the
revenue bond rate.
Representative Austerman asked how much money is currently
in the revolving loan fund. Ms. Fisher-Goad answered that
the cash value was slightly above $5 million on February
28, 2010.
Co-Chair Stoltze opened public testimony.
Co-Chair Stoltze closed public testimony.
Vice-Chair Thomas MOVED to ADOPT Amendment 1, (26-
GS2974\A.1, Kane, 4/12/10):
Page 1, line 6, following "2010;":
Insert "providing legislative approval for a loan
from the power project fund for the Reynolds Creek
hydroelectric project;"
Page 3, following line 11:
Insert a new bill section to read:
"*Sec. 6. The uncodified law of the State of
Alaska is amended by adding a new section to read:
LESISLATIVE APPROVAL OF LOAN FROM THE POWER
PROJECT FUND. Provided the Alaska Energy Authority
approves a loan for the Reynolds Creek hydroelectric
project, the legislature authorizes the Alaska Energy
Authority to loan $9,000,000 from the power project
fund (AS 42.45.010) for the Reynolds Creek
hydroelectric project. This section constitutes
legislative approval under AS 42.45.010(j) for a loan
from the fund that exceeds $5,000,000."
Renumber the following bill sections accordingly.
Co-Chair Stoltze OBJECTED.
Ms. Fisher-Goad explained that amendment number one
provides for project approval for the Reynolds Creek
hydroelectric project. A loan exceeding $5,000,000 from the
fund requires legislative approval.
Representative Doogan asked if the $5 million approval was
exclusively for loan funds or a combination of loan and
grant funds. Ms. Fisher-Goad answered that whether the
funding is comprised of all loans or a combination of loans
and grants legislative approval is needed for a project if
the funds exceed $5 million.
1:50:56 PM
Representative Kelly asked if the approval for the Reynolds
Creek Hydroelectric project interferes in any way with the
credit approval process for the loan. Ms. Fisher-Goad
replied that it does not. The project is pending AEA
approval.
Representative Kelly asked where the project is located.
Vice-Chair Thomas answered that the project is located in
Hydaburg on Prince of Wales Island. He noted that Alaska
Power and Telephone and Haida Corporation has been working
on the project together for several years.
Representative Kelly wondered how close the project was to
being ready or were other projects being displaced by this
approval. Ms. Fisher-Goad replied that there is one other
pending application located in St George. She believed that
there will be enough money in the fund for these and other
potential projects.
Co-Chair Stoltze WITHDREW his OBJECTION. There being NO
further OBJECTION, Amendment 1 was ADOPTED.
1:54:00 PM
Representative Austerman asked for clarification of the
approximately $20.6 million loan purchase by AIDEA for
AEA's [outstanding] power project fund loans as described
in the fiscal notes [FN3 CED, FN3 CED]. Ms. Fisher-Goad
responded that the estimated $20.6 million represents a
discounted amount based upon the future cash flow of the
loan payments. The discount rate was established based upon
AIDEA's investment rate [return on investments for a three
year period ending September 30, 2009]. She noted that the
list of loans is included with the "Memorandum of
Understanding" ["Exhibit A"] (copies on file).
Representative Austerman reiterated that the proceeds from
the loan sale will replenish the power project revolving
loan fund. Ms. Fisher-Goad affirmed. She added that AEA
anticipates increased demand for the power project fund and
might need additional loan funds in the future.
Representative Austerman wondered what the value of the
revolving loan is. Ms. Fisher-Goad responded that the value
of the loan fund is approximately $34 million comprised of
available cash and outstanding loans. Representative
Austerman asked what the amount of the initial
capitalization of the loan fund was. Ms. Fisher-Goad
replied that she did not know.
1:57:07 PM
Vice-Chair Thomas asked if there is a pre-payment penalty
if the borrower has the ability to pay the loan off early.
Ms. Fisher-Goad answered that no, there is not a pre-
payment penalty.
Representative Austerman asked if AIDEA previously bought
down the loan to revitalize the revolving loan. Ms. Fisher-
Goad negated. Representative Austerman wondered if the
revolving loan fund would be able to continue to provide
loans if AIDEA did not buy the loans. Ms. Fisher-Goad
reported that there is a capital budget appropriation in
the Senate version of SB 230 that provides for $10 million
capitalization of the program that would provide funds if
appropriated. That would allow the Reynolds Creek project
and the project in St. George to proceed but would limit
future requests.
Representative Austerman questioned re-capitalizing a
revolving loan fund.
2:00:42 PM
Representative Salmon queried the size of the [Reynolds
Creek] project and how many people would be served.
STEVEN HAAGENSON, EXECUTIVE DIRECTOR, ALASKA ENERGY
AUTHORITY, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT, explained that the Haida Energy Company will
sell the power to the local utility, AP&T and will generate
approximately 25 million kilowatt hours of energy and is a
10 megawatt project. It will provide power for the people of
Hydaburg.
Vice-Chair Thomas added that the project will intertie with
two existing hydropower projects and provide power for the
entire Prince of Wales Island population of approximately
3,000 and several mines.
Representative Doogan asked what the effect of the
legislation will have on AIDEA's finances.
TED LEONARD, EXECUTIVE DIRECTOR, ALASKA INDUSTRIAL
DEVELOPMENT AND EXPORT AUTHORITY, DEPARTMENT OF COMMERCE,
COMMUNITY AND ECONOMIC DEVELOPMENT, explained that the $20.6
million purchase price represents $24.7 million worth of the
actual value of the loans at the discounted interest rate of
6.02 percent which is equivalent to the rate of return on
AIDEA's investments for the last three years. He felt that
this was a risk free investment. He believed it was
consistent with AIDEA's mission and increases the
opportunity to develop more alternative energy projects in
the rural areas.
Representative Doogan asked if AIDEA performed and
independent assessment of the loan portfolio. Mr. Leonard
replied that AIDEA assed the loans and the risks.
2:07:33 PM
Representative Austerman asked what the default rate on the
revolving loan was.
Mr. Haagenson answered that only one loan was possibly in
default.
Representative Austerman queried the need for additional
funding for a revolving loan fund. Mr. Haagenson responded
that the funds are fully deployed because the program has
been popular. AEA anticipates increased use of the program
in the future. He stated that HB 306 [page 1, lines 12-
13],["An Act declaring a state energy policy."] [(4) The
power project fund (AS 42.45.010) serve as the main source
of state assistance for energy projects;] stipulates use of
the energy fund as a vehicle to move energy projects
forward. He stated that SB 301 is an effort to re-
capitalize the fund in order to have more funds available.
Representative Kelly asked whether construction of Reynolds
Creek would affect the Power Cost Equalization (PCE) rate.
Ms. Fisher-Goad responded that she was not sure if the PCE
rate will be impacted.
Vice-Chair Thomas interjected that Gustavus, a community in
his district, lowered their energy costs when hydropower
became available which lowered their PCE needs.
Representative Kelly requested annual reports to track if
hydropower is less expensive that diesel.
2:11:41 PM
Representative Fairclough asked if AEA has other revolving
loan funds. Ms. Fisher-Goad reported that the only other
revolving loan fund is the bulk fuel revolving loan
program. The program offers nine month loans for
communities that must purchase their annual supply of fuel
in bulk.
Representative Fairclough asked if AEA adopted regulations,
standards and procedures to make the loans. Ms. Fisher-Goad
replied that yes, there are underwriting procedures for
both loan programs.
Representative Fairclough reiterated Representative
Austerman's concerns about why a revolving loan fund
requires more capitalization. She wondered if the loan and
investment procedures were properly paced in order to
recharge the fund.
Mr. Haagenson restated that the requests for loans are
outstripping the amount of revenue returning to the fund.
Ms. Fisher-Goad added there are two types of assets in the
power project fund; loans receivable and cash. There are
presently more assets in loans receivable than cash. The
plan is to sell the loans receivable to AIDEA to increase
the cash assets to meet increased loan demand.
Representative Fairclough questioned the management intent
of the revolving loan funds. Ms. Fisher-Goad pointed out
that the bulk fuel revolving loan fund was re-capitalized
by the legislature during the special session in 2008.
Representative Fairclough reiterated that she does not
understand how a revolving loan fund can be spent down. She
asked if AIDEA had regulations that would manage the fund
so that the cash assets would not be depleted.
2:16:16 PM
Mr. Haagenson replied the bulk fuel loan funds are based on
short-term loans and easier to manage. The power project
fund has much longer loan periods, up to 20 years.
Representative Kelly asked if AEA is meeting the reserve
requirements for the revolving loan funds. Ms. Fisher-Goad
answered that currently there are no delinquencies.
Representative Kelly acknowledged that the fund "has been
overtaken by success". He questioned the overall health of
the fund. Ms. Fisher-Goad believed the fund was healthy.
Representative Fairclough believed that the fund was not
healthy or managed properly since the fund is not
revolving. She felt the management authority should have
acted more proactively and requested more funding before
the cash assets were drawn down. She asked if AIDEA will
keep the loan fund revolving.
Mr. Leonard answered that AIDEA is strictly buying the loan
portfolio as an investment, and not taking over any role in
management of the fund.
2:20:33 PM
Representative Austerman wondered why AEA is willing to
give up $4 million worth of loan portfolio instead of
recapitalizing through the direct appropriation via the
capital budget (SB 230). Mr. Haagenson shared that the
current route seemed more available than obtaining that
amount of general fund money.
Co-Chair Hawker noted that all of the fiscal notes (FN1
(DOT), FN2 (REV), FN3 (CED), and FN4 (CED)) were zero.
Vice-Chair Thomas MOVED to report SB 301 out of Committee
with individual recommendations and the accompanying fiscal
notes. There being NO OBJECTION, it was so ordered.
SB 301 was REPORTED out of Committee with a "do pass"
recommendation with previously published fiscal notes: FN1
(DOT), FN2 (REV), FN3 (CED), FN4 (CED)
HOUSE BILL NO. 426
"An Act providing for, relating to, and approving the
issuance of certificates of participation for the
construction, acquisition, and equipping of the Alaska
Scientific Crime Detection Laboratory in Anchorage;
providing notice of and authorizing the commissioner
of the Department of Administration to enter into a
lease-purchase agreement with the Department of Public
Safety for the Alaska Scientific Crime Detection
Laboratory; and providing for an effective date."
2:24:27 PM
JOSEPH MASTERS, COMMISSIONER, DEPARTMENT OF PUBLIC SAFETY,
explained what the crime lab does and urged passage of the
legislation. He elaborated that HB 426 provides $75,750,000
in funding for a new state crime lab. The existing crime
lab is outdated and inefficient. A crime lab replacement
would provide state of the art scientific analysis of the
evidence in a timelier manner that could result in swifter
arrests and convictions; enhancing protection for Alaskans.
He added that a new crime lab is a key component in the
Governor's sexual assault and domestic violence initiative.
Sexual assault and domestic violence cases contribute to
half of the workload of the crime lab. The new lab is vital
to the initiative's goals; to prosecute perpetrators and
prevention. He furthered that a new lab will protect the
innocent from false accusations with timely processing of
evidence and exonerates the wrongly convicted.
Commissioner Masters stated that the new crime lab has the
capacity and technology to meet the existing and future
crime analysis needs of the state. The current inadequate
crime lab is the main reason crime evidence analysis cannot
be processed in a timely manner or cannot be processed at
the facility at all which creates backlogs and delays. The
crime lab has become "reactive" to major crimes only. He
reported that a new crime lab would enable a "proactive"
and preventive approach to combating all types of crime. He
pointed out that an expected increase in the state
population of 140,000 by 2013 will significantly increase
demand for the crime lab services.
Commissioner Masters reported that previous legislative
approval for leasing a twelve acre site from the
municipality of Anchorage for one dollar per year for the
next fifty years with an additional twenty five year
extension, $8,000,000 for design work, and $8,800,000 for
site preparation demonstrates past legislative support for
the project. He added that the project team trimmed
$20,000,000 from the initial estimated cost. Construction
of the crime lab is expected to create 250 jobs and employ
fifteen subcontractors.
2:30:55 PM
Commissioner Masters emphasized the difficulty of putting a
price tag on the value of public safety and security for
Alaskans.
Representative Austerman asked if the total cost of the lab
is approximately $92.5 million. Commissioner Masters
affirmed. He clarified that HB 426 provides $75,750,000
along with the previous appropriations invested in the
replacement lab that totals $16.8 million.
Representative Foster asked whether future needs were
considered in the design. Commissioner Masters replied that
the lab design meets current and future needs up to 20
years.
Representative Kelly referred to the earlier proposed
project, high cost of the lab, and legislative directives
to scale back the project and costs. He noted that was
successful and wondered whether the facility would still be
adequate. Commissioner Masters noted that nineteen percent
of the footprint is shelved space to allow for future
expansion and with the flexibility to add new technology
and techniques as they are developed.
2:35:35 PM
Vice-Chair Thomas referred to the high crime statistics in
Alaska and queried why the new lab would make a difference.
Commissioner Masters responded that there would be an
immediate increase in efficiency of twenty percent,
directly related to adequate use of space and equipment for
all types work processes and analysis in the lab.
ORIN DYM, MANAGER, FORENSIC LABORATORY, DEPARTMENT OF
PUBLIC SAFETY, reported that sexual assault cases are
backed up to 2007 and often property crime evidence is not
submitted in consideration of the backlog. He emphasized
that the crime analysis situation in the state "is so bad".
He stated that, "we are the clog in the pipes of justice."
Vice-Chair Thomas asked if the lab would increase cold case
capabilities. Commissioner Masters informed that the cold
case homicide unit is an investigative unit in the
operations department. All of their work that requires
scientific analysis is sent to the state crime lab.
Representative Salmon asked if autopsies would be performed
at the crime lab.
2:39:29 PM
Commissioner Masters reported that autopsies are performed
at the Department of Health and Social Services lab, which
works closely with the Department of Public Safety lab as
needed on criminal cases.
Representative Foster asked if equipment is included in the
total cost of the lab.
Mr. Dym affirmed.
Co-Chair Hawker opened public testimony.
Co-Chair Hawker Closed public testimony.
Co-Chair Hawker requested discussion of the fiscal notes
and the proposed funding mechanism; the certificate of
participation concept.
DEVEN MITCHELL, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL BOND
BANK AUTHORITY, DEPARTMENT OF REVENUE, stated that the bill
authorizes issuance of $750,000,000 in certificates of
participation to fund the crime lab. The amount of $750,000
is associated with costs to sell the certificates. He
explained how the certificates of participation are
secured. The state enters into a subject to appropriation
lease with a trustee. The trustee is granted a title
position in the facility. The lease is fractionalized into
$5,000 certificates that are similar to bonds but legally
distinct from them. The certificates are sold in the same
way as any bond issue; by a combination of serial bonds or
term bonds that would follow a yield curve from year one to
twenty years with various interest rates for the different
maturities. The various rates would blend into an
aggregated rate estimated at 4.2%. He added that the
project would participate in the federal stimulus program
[The American Recovery and Reinvestment Act](ARRA) via the
Build America Bond Program that would provide direct
subsidies by reduction in the annual debt service in the
amount of $300,000 - $400,000 per annum. The program would
allow for the sale of a combination of tax exempt bonds at
the short end of the yield curve and taxable bonds at the
long end of the yield curve and receive a direct subsidy
from the federal government of thirty five percent of the
interest expense.
2:45:58 PM
Co-Chair Hawker asked if market conditions are appropriate
for the state to enter into this type of transaction. Mr.
Mitchell affirmed. He believed that the financial markets
have stabilized and the conditions are favorable for long
term debt.
Vice-Chair Thomas if there is a cap on how much stimulus
money can be used. Mr. Mitchell replied that there is no
limit on the ability to use the bond program.
Representative Fairclough queried if the building is
designed to energy efficient standards.
MATT TANAKA, CRIME LAB PROJECT MANAGER, DEPARTMENT OF
TRANSPORTATION AND PUBLIC FACILITIES, offered that the
building design is complex but energy efficient as
possible. Representative Fairclough stated that she heard
the answer as no. Mr. Tanaka countered that the answer was
yes. Many design elements employed energy efficient systems
but due to the complex nature of the design, it does not
meet a specific energy efficiency standard. Energy costs
were modeled in during the development of the project.
Representative Fairclough asked if heated sidewalks were
part of the design. Mr. Tanaka negated.
2:51:19 PM
Representative Doogan asked for clarification of the term
of the certificate.
Mr. Mitchell explained that the term is for 20 years with a
level debt service and interest payment due in FY 2011. He
furthered that interest would be paid within six months of
issuance with subsequent interest paid on a semi-annual
basis. A principle payment would be paid in August, 2012.
Representative Doogan cited the legislation on page 2,
lines 21-24,
"The estimated annual amount of rental obligations
under the lease-purchase agreement is $5,600,000. The
estimated total of lease payments for the full term of
the lease-purchase agreement is $112,000,000."
Representative Doogan asked if $112,000,000 was the
repayment amount over twenty years. Mr. Mitchell affirmed.
He clarified that amount is an estimate. He restated that
with participation in The Build America Bond Program
reduction in the annual debt service in the amount of
$300,000 - $400,000 per year below the $5.600, 000.
Representative Doogan asked if there is a substantial
market for the certificates and if it is a safe course for
the state to take. Mr. Mitchell remarked that this is an
extremely common form of financing and is called a "subject
to appropriation concept" in financial markets. The state
has used the mechanism successfully in the past. An
investor is compelled to purchase the certificates because
non-payment by a state has legal negative credit
ramifications and prohibitions to access capital for future
projects. Representative Doogan wondered what the advantage
is of certificates of participation over general obligation
bonds. Mr. Mitchell reiterated that certificates of
participation are a very common means for public financing
for a single project. All of the other labs in the state
were financed by this mechanism. He stated that the state
gets a lower interest rate with general obligation bonds.
However, general obligation bonds are usually used for
funding multiple projects and the project cannot move
forward until an election is held. He added that ARRA
expires at the end of 2010. AARA is expected to extend but
at a lower reimbursement rate of 33% so the risk in waiting
is that you would give up nearly half of your advantage
with general obligation bonds. Also, the state would take
on interest rate risk because of waiting longer to sell at
the end of the year instead of now in favorable market
conditions.
2:58:11 PM
Representative Doogan asked if there is a premium being
paid to use certificates of participation instead of
general obligation bonds. Mr. Mitchell replied that it
would be an estimated $45,000 per year or $900,000 over the
life of the loan.
Representative Foster wondered what the rationale was to
use certificates of participation instead of general
obligation bonds. Mr. Mitchell stated he would not
characterize increased interest payments as a premium. He
felt that the rationale to use certificates of
participation was the time sensitive nature of the ARRA
expiration. Also, if GEO bonds are used and time is lost
waiting for voter approval the risk is that the financial
markets can become supply heavy at the end of the calendar
year with the result of paying higher yields. In using
certificates the state might be giving up the potential to
have their best credit and lower interest rate with geo
bonds but somewhat offset by selling into a more favorable
market now with certificates and the ability for the
project to move forward as soon as the bill becomes law.
3:02:19 PM
Vice-Chair Thomas MOVED to report HB 426 out of Committee
with individual recommendations and the accompanying fiscal
note. There being NO OBJECTION, it was so ordered.
HB 426 was REPORTED out of Committee with a "do pass"
recommendation and with a new fiscal note from the
Department of Revenue.
ADJOURNMENT
The meeting was adjourned at 3:03 PM
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