Legislature(2019 - 2020)ADAMS ROOM 519

04/01/2019 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 106 SCHOOL BOND DEBT REIMBURSEMENT TELECONFERENCED
Heard & Held
-- Public Testimony --
+ HB 87 LIQUEFIED NATURAL GAS STORAGE TAX CREDIT TELECONFERENCED
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                       April 1, 2019                                                                                            
                         1:30 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
1:30:01 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Wilson  called the House Finance  Committee meeting                                                                    
to order at 1:30 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Neal Foster, Co-Chair                                                                                            
Representative Tammie Wilson, Co-Chair                                                                                          
Representative Jennifer Johnston, Vice-Chair                                                                                    
Representative Dan Ortiz, Vice-Chair                                                                                            
Representative Ben Carpenter                                                                                                    
Representative Andy Josephson                                                                                                   
Representative Gary Knopp                                                                                                       
Representative Bart LeBon                                                                                                       
Representative Kelly Merrick                                                                                                    
Representative Colleen Sullivan-Leonard                                                                                         
Representative Cathy Tilton                                                                                                     
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Representative  Steve Thompson,  Bill Sponsor;  Dan Britton,                                                                    
General  Manager,  Interior  Gas  Utility;  Colleen  Glover,                                                                    
Director, Tax Division, Department  of Revenue; Lynn Gattis,                                                                    
Staff, Representative Tammie  Wilson; Tim Mearig, Facilities                                                                    
Manager,  Department  of  Education and  Early  Development;                                                                    
Nils  Andreassen,   Executive  Director,   Alaska  Municipal                                                                    
League;  Heidi  Teshner, Administrative  Services  Director,                                                                    
Department  of Education  and Early  Development, Office  of                                                                    
Management and Budget.                                                                                                          
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Bryce Ward, Mayor, Fairbanks  North Star Borough, Fairbanks;                                                                    
Michael  Meeks,   Chief  of  Staff,  Fairbanks   North  Star                                                                    
Borough,  Fairbanks;   John  Cook,  J  and   J  Development,                                                                    
Fairbanks;  Jomo  Stewart,  Fairbanks  Economic  Development                                                                    
Corporation,   Fairbanks;   Jim  Anderson,   Chief   Finance                                                                    
Officer,  Anchorage  School  District;  Bryce  Ward,  Mayor,                                                                    
Fairbanks North  Star Borough, Fairbanks;  Cheyenne Heindel,                                                                    
Mat-Su  Borough,  Palmer;   Lucy  Nelson,  Northwest  Arctic                                                                    
Borough,  Kotzebue;  Dr. Annmarie  O'Brien,  Superintendent,                                                                    
Northwest Arctic School District, Kotzebue.                                                                                     
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 87     LIQUEFIED NATURAL GAS STORAGE TAX CREDIT                                                                              
                                                                                                                                
          HB 87 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
HB 106    SCHOOL BOND DEBT REIMBURSEMENT                                                                                        
                                                                                                                                
          HB 106 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
                                                                                                                                
Co-Chair Wilson reviewed the agenda for the day.                                                                                
                                                                                                                                
HOUSE BILL NO. 87                                                                                                             
                                                                                                                                
     "An  Act extending  the liquefied  natural gas  storage                                                                    
     facility  tax credit;  and providing  for an  effective                                                                    
     date."                                                                                                                     
                                                                                                                                
1:30:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  STEVE  THOMPSON,  BILL  SPONSOR,  introduced                                                                    
himself and thanked  the committee for hearing  his bill. He                                                                    
read a prepared statement:                                                                                                      
                                                                                                                                
     This  bill   came  about  through   conversations  with                                                                    
     stakeholders  in the  Interior  about  our progress  on                                                                    
     efforts to  mitigate high energy costs  and improve our                                                                    
     air  quality. A  key theme  in these  conversations has                                                                    
     been  the  importance  of  ensuring  that  we're  doing                                                                    
     everything we  can to stay  on track with  the Interior                                                                    
     Energy Project. In 2015, the  Legislature passed HB 105                                                                    
     to  renew and  advance the  Interior Energy  Project, a                                                                    
     project designed  to bring low  cost energy to  as many                                                                    
     residents and businesses of  Interior Alaska as quickly                                                                    
     as possible.  It has  resulted in  the creation  of the                                                                    
     Interior  Gas Utility  a not-for-profit  public utility                                                                    
     serving the Interior.                                                                                                      
                                                                                                                                
     In   2012,  the   Legislature  passed   legislation  to                                                                    
     incentivize  the  development  of  liquid  natural  gas                                                                    
     storage, a  key component  in achieving the  economy of                                                                    
     scale that  will enable widespread  use of  natural gas                                                                    
     in Fairbanks and North  Pole. This legislation provided                                                                    
     credits  for  the  construction  of  above  ground  LNG                                                                    
     storage facilities  with a  capacity of  25,000 gallons                                                                    
     or  more. There  are currently  two projects  underway,                                                                    
     one  in Fairbanks  and  one in  North  Pole, that  will                                                                    
     benefit from these credits.                                                                                                
                                                                                                                                
     HB  87 will  extend  the sunset  date  of the  original                                                                    
     legislation by  18 months in  order to ensure  that the                                                                    
     projects  underway will  be able  to capitalize  on the                                                                    
     existing  credits. This  is  a bill  that  can help  to                                                                    
     lower energy costs  and improve air quality  in an area                                                                    
     of the State that desperately needs to do both.                                                                            
                                                                                                                                
Representative Thompson relayed that  the general manager of                                                                    
the Interior  Gas Utility,  Dan Britton,  would be  giving a                                                                    
slide  presentation.  He  noted there  were  several  people                                                                    
online who wanted to testify to the bill.                                                                                       
                                                                                                                                
1:33:38 PM                                                                                                                    
                                                                                                                                
DAN   BRITTON,  GENERAL   MANAGER,  INTERIOR   GAS  UTILITY,                                                                    
introduced   himself   and  the   PowerPoint   Presentation:                                                                    
"Fueling  the  Future." He  thanked  the  committee for  the                                                                    
opportunity  to speak  to them  about important  storage tax                                                                    
credits for the community of  Fairbanks. He began with slide                                                                    
2:  "Interior Energy  Project  Purpose  and Goals:  Interior                                                                    
Alaska." He relayed that the  purpose of the Interior Energy                                                                    
Project was  to bring low-cost  energy to as  many residents                                                                    
and businesses  of Interior Alaska  as possible in  a timely                                                                    
fashion. Other  goals of the  project were to  stabilize the                                                                    
economy and to help improve air quality.                                                                                        
                                                                                                                                
Mr. Britton discussed slide 3: "History":                                                                                       
                                                                                                                                
    Fairbanks Natural Gas, LLC(FNG) began operating in                                                                       
     Fairbanks in  Spring of 1998 giving  Interior residents                                                                    
     a  natural gas  heating option.  Over 1100  residential                                                                    
     and commercial  customers are  currently able  to enjoy                                                                    
     the benefits of natural gas.                                                                                               
                                                                                                                                
    In November   2012,    the   Fairbanks   North   Star                                                                    
     Borough(FNSB)  acquired its  natural gas  utility power                                                                    
     via transfers from  the City of Fairbanks  and the City                                                                    
     of  North  Pole  and established  the  Interior  Alaska                                                                    
     Natural Gas Utility(IGU).                                                                                                  
                                                                                                                                
    May 2018, the IGU consolidated with FNG and now                                                                          
     operates  as   an  integrated,   not-for-profit  public                                                                    
     utility.                                                                                                                   
                                                                                                                                
Mr.  Britton continued  to slide  4: "Energy  Costs and  Air                                                                    
Quality." He indicated that some  of the reasons the project                                                                    
was so important to the  community were listed on the slide.                                                                    
He read the slide contents:                                                                                                     
                                                                                                                                
    According to the Council for Community and Economic                                                                      
     Research, the  FNSB typically  has the  highest utility                                                                    
     costs  in  the  nation  for the  300-plus  urban  areas                                                                    
     regularly surveyed.                                                                                                        
                                                                                                                                
    In September 2006, the EPA lowered the National                                                                          
     Ambient  Air  Quality  Standards for  fine  particulate                                                                    
     matter less than 2.5 micrometer  in diameter (PM 2.5) a                                                                    
     human health hazard.                                                                                                       
                                                                                                                                
    In 2009, the EPA designated the more populated                                                                           
     portions of the FNSB  as a non-attainment area relating                                                                    
     to  PM2.5. The  eastern portion  of the  non-attainment                                                                    
     area (North  Pole) has the  worst air pollution  in the                                                                    
     nation,  three and  a half  times the  legal limit  and                                                                    
     almost two times worse than  the next worse area in the                                                                    
     U.S.                                                                                                                       
                                                                                                                                
    The FNSB's long-term efforts for clean air are focused                                                                   
     on  bringing  clean,  affordable  natural  gas  to  the                                                                    
     Fairbanks area for space heating.                                                                                          
                                                                                                                                
Mr. Britton  moved to  the chart on  slide 5:  "Heating Cost                                                                    
Comparison: U.S.  Natural Gas vs. Anchorage  Natural Gas vs.                                                                    
Fairbanks Heating  Fuel Equivalent."  He explained  that the                                                                    
slide showed  a comparison of  the price of heating  fuel in                                                                    
Fairbanks to  the price of  natural gas in Anchorage  and in                                                                    
the United States.  He pointed out that the  cost of heating                                                                    
in  Fairbanks was  higher than  most places  in Alaska  with                                                                    
natural gas service.                                                                                                            
                                                                                                                                
Mr. Britton  reviewed the  chart on  slide 6:  "Heating Cost                                                                    
Comparison:  Fairbanks Heating  Fuel  vs. Fairbanks  Natural                                                                    
Gas Equivalent."  He noted the  slide showed  the historical                                                                    
heating costs in Fairbanks to  heating oil. He indicated the                                                                    
green line  represented stably priced energy.  The blue line                                                                    
represented the cost of heating  oil. For the most part, the                                                                    
price of natural  gas was less costly than  heating oil, but                                                                    
at times  of low  oil costs, heating  oil could  be slightly                                                                    
less.                                                                                                                           
                                                                                                                                
Mr.  Britton  continued to  slide  7:  "Fairbanks Large  LNG                                                                    
Storage Tank." There  were 2 projects he  would discuss with                                                                    
the  committee. The  first project  was the  Fairbanks large                                                                    
liquified natural  gas (LNG)  storage tank.  The tank  had a                                                                    
capacity    of   5.25    million   gallons    and   was    a                                                                    
full-containment,   double-wall   design    -   the   safest                                                                    
available.  He noted  that construction  started in  January                                                                    
2018   and  was   advancing  on   schedule.  The   estimated                                                                    
completion date  was Fall 2019,  and the  total construction                                                                    
cost of  the project  was $58.4 million.  The tank  had been                                                                    
termed,  "The  heart  of the  interior  project."  The  tank                                                                    
allowed for new customers and  would begin to alleviate poor                                                                    
air quality.                                                                                                                    
                                                                                                                                
Mr. Britton  turned to the  picture on slide 8:  "9th (Last)                                                                    
Row  Welding." The  picture  showed the  inside  of the  LNG                                                                    
tank. He  pointed out  the suspended  deck and  the aluminum                                                                    
ceiling. He reported that the  steel inside tank was made of                                                                    
9 percent nickel.  Liquified natural gas was  stored at -260                                                                    
degrees Fahrenheit.  The specialty  alloys could  handle the                                                                    
cold temperatures.                                                                                                              
                                                                                                                                
Mr. Britton discussed  the picture of the  outer tank stairs                                                                    
on slide 9.  He reported that the tank  was almost complete,                                                                    
and  stairs were  being added  to the  tank. The  piping and                                                                    
venting were  also being worked on  currently. Good progress                                                                    
was being made on the facility.                                                                                                 
                                                                                                                                
1:38:51 PM                                                                                                                    
                                                                                                                                
Mr. Britton advanced  to slide 10: "North  Pole Storage." He                                                                    
reported  that   in  addition   to  the   Fairbanks  storage                                                                    
facility,  there was  a storage  facility  under design  for                                                                    
North  Pole.  Distribution  systems had  been  installed  in                                                                    
Fairbanks and  North Pole. The  North Pole  storage facility                                                                    
was designed to serve  the previously installed distribution                                                                    
system. He read the slide:                                                                                                      
                                                                                                                                
    Design of the $12.1 Million LNG storage facility in                                                                      
     North Pole is complete and  a Request for Proposals was                                                                    
     issued February  14, 2019. Proposals are  due March 21,                                                                    
     2019.                                                                                                                      
                                                                                                                                
    The targeted completion of construction is November                                                                      
     15, 2019 with operational  startup and commissioning by                                                                    
     December 31, 2019.                                                                                                         
                                                                                                                                
    The storage facility will have two 75,000 Gallon                                                                         
     storage tanks and a multi-purpose  building and will be                                                                    
     connected  to the  previously constructed  73 miles  of                                                                    
     pipe infrastructure in the North Pole area.                                                                                
                                                                                                                                
Mr. Britton expounded  that the two tanks that  were part of                                                                    
the facility  would be relocated  from the  existing storage                                                                    
facility,  currently providing  service  in Fairbanks,  once                                                                    
the new 5.25 million gallon tank came online.                                                                                   
                                                                                                                                
Mr. Britton  continued to the  North Pole Storage  site plan                                                                    
on slide 11.  He pointed to the two 75,000  tanks. There was                                                                    
an  area  where  the  trucks could  offload.  He  noted  the                                                                    
vaporization equipment  that would  bring the gas  from -260                                                                    
degrees Fahrenheit  to 50 degrees Fahrenheit  to be injected                                                                    
into the distribution pipe. The  facility was located across                                                                    
from  what was  historically  the Flint  Hills Refinery  and                                                                    
from one  of Golden  Valley Electric's power  plants. Golden                                                                    
Valley  Electric would  be a  potential consumer  of natural                                                                    
gas in the future.                                                                                                              
                                                                                                                                
Mr. Britton  reviewed the benefits  of storage on  slide 12.                                                                    
He read from the slide:                                                                                                         
                                                                                                                                
    The development of expanded LNG storage facilities in                                                                    
     the  Fairbanks  and  North Pole  areas  is  a  critical                                                                    
     component  of  the  IEP  as   they  will  increase  the                                                                    
     security  of supply  and provide  capacity  to serve  a                                                                    
     greater number of new customers.                                                                                           
                                                                                                                                
    These storage facilities, with current liquefaction                                                                      
     infrastructure,  enable   IGU  the  ability   to  serve                                                                    
     approximately 3000 new  residential customers beginning                                                                    
     the summer 2020.                                                                                                           
                                                                                                                                
    The state's LNG storage tax credits are vital in                                                                         
     helping to bring down the cost of providing natural                                                                        
     gas to Interior residents.                                                                                                 
                                                                                                                                
    All money from tax credits for tanked storage will be                                                                    
     under the oversight of the Regulatory Commission of                                                                        
     Alaska, the IGU Board and the FNSB Assembly to ensure                                                                      
    these savings are passed along to the rate payers.                                                                          
                                                                                                                                
Mr.  Britton  reviewed  the estimated  impact  on  rates  on                                                                    
slide 13.  The  Fairbanks  facility would  qualify  for  the                                                                    
maximum  available credit  of $15  million. The  alternative                                                                    
was 50  percent of the  total capital costs. The  North Pole                                                                    
facility,  with  a  $12 million  capital  investment,  would                                                                    
qualify  for an  approximate  $6 million  credit. The  total                                                                    
credits for the two facilities  would equal $21 million. The                                                                    
range of the rate benefit  to consumers based on the current                                                                    
demand was  almost $2 per  1,000 cubic feet. Under  the best                                                                    
case  demand, the  amount was  about $0.72  per 1,000  cubic                                                                    
feet. As  demand grew,  the cost would  be spread  over more                                                                    
volume. If  the Interior  Gas Utility was  unsuccessful with                                                                    
storage tax  credits, it would  need to  incur approximately                                                                    
$21 million  in additional debt directly  impacting customer                                                                    
costs.                                                                                                                          
                                                                                                                                
Mr.  Britton advanced  to  the map  of  installed piping  in                                                                    
Fairbanks  on  slide  14 which  included  approximately  140                                                                    
miles of  distribution pipe  network. A  significant portion                                                                    
of Fairbanks  had access to  Natural Gas. On the  South side                                                                    
of  the  map  there  was  a small  red  square  showing  the                                                                    
location of the storage facilities  from which the gas would                                                                    
be sent out into the distribution system.                                                                                       
                                                                                                                                
1:43:28 PM                                                                                                                    
                                                                                                                                
Mr. Britton  turned to slide 15  showing the map of  the 72-                                                                    
mile installed  piping network in  North Pole. It  was South                                                                    
of Hurst Road  in one of the higher  areas of non-attainment                                                                    
for poor  air quality.  He offered  that expanding  gas into                                                                    
the area was extremely important.                                                                                               
                                                                                                                                
Co-Chair Wilson commented  that she did not  have a conflict                                                                    
of interest because the pipe did not run to her house.                                                                          
                                                                                                                                
Vice-Chair Ortiz clarified that  without granting credits to                                                                    
North  Pole  and Fairbanks  the  borough  would take  on  an                                                                    
additional $21 million in debt. He asked if he was correct.                                                                     
                                                                                                                                
Mr. Britton replied that it would  be the rate payers of the                                                                    
Interior  Gas  Utility  who  would take  on  the  debt.  The                                                                    
borough would not  take on the debt, rather it  would be the                                                                    
utility.                                                                                                                        
                                                                                                                                
Vice-Chair Ortiz  suggested that if  the state were  to take                                                                    
up the  credits, it  would be obligated  in the  initial $21                                                                    
million. He wondered if he was accurate.                                                                                        
                                                                                                                                
Mr. Britton  responded in the  affirmative. The  state would                                                                    
pay the tax credits.                                                                                                            
                                                                                                                                
Representative LeBon  informed the  committee that  the pipe                                                                    
ran in front of his home  in House District 1. He noted that                                                                    
his district contained the  heaviest concentration of piping                                                                    
extending  to  residential  and  commercial  properties.  He                                                                    
noted  that  the community  of  Fairbanks  had been  waiting                                                                    
about  50 years  for the  project to  come online.  Although                                                                    
service was  already available to 1,100  Fairbanks customers                                                                    
since  1998,  the  concentration  for  the  home  owner  was                                                                    
significantly greater  than under Fairbanks Natural  Gas. He                                                                    
was excited  about the project  and asked  committee members                                                                    
to support  the extension of  the timeline for  the credits.                                                                    
They were critical  to the energy needs of  Fairbanks and to                                                                    
breathing clean air which provided multiple benefits.                                                                           
                                                                                                                                
Representative Josephson  commented on the  slide reflecting                                                                    
3,000 customers. He was trying  to determine if more storage                                                                    
facilities  would  be  needed with  a  population  of  about                                                                    
90,000 in the Fairbanks area.                                                                                                   
                                                                                                                                
Mr. Britton responded that  the facilities under development                                                                    
represented the first step for  the Interior Energy Project.                                                                    
The  storage  facilities  allowed  the utility  to  add  new                                                                    
customers. The  next step  would be  additional liquefaction                                                                    
capacity.  The utility  was  currently  designing to  expand                                                                    
liquefaction from 50,000 gallons  per day to 100,000 gallons                                                                    
per  day with  an additional  100,000 gallons  per day.  The                                                                    
board of directors approved the  utility moving forward with                                                                    
the front end  engineering and design work  for the project.                                                                    
The  Storage  facility  allowed   the  utility  to  use  its                                                                    
existing production  assets running them 365  days per year.                                                                    
The utility  would fill the  storage in the summer  and draw                                                                    
it down  during the winter to  meet peak needs of  the first                                                                    
group of  3,000 new  customers. The  additional liquefaction                                                                    
capacity allowed  the utility to  go beyond  3,000 customers                                                                    
and  to begin  adding  the following  several thousand.  The                                                                    
storage  facilities  were  meant  to  satisfy  the  Interior                                                                    
Energy Project's storage needs well into the future.                                                                            
                                                                                                                                
1:47:55 PM                                                                                                                    
                                                                                                                                
Co-Chair Wilson  directed Ms. Glover from  the Department of                                                                    
Revenue to review the fiscal note.                                                                                              
                                                                                                                                
COLLEEN  GLOVER,  DIRECTOR,   TAX  DIVISION,  DEPARTMENT  OF                                                                    
REVENUE,  indicated  she had  visited  the  storage tank  in                                                                    
Fairbanks and was very impressed  by it. The fiscal note had                                                                    
a  zero  fiscal  impact  to  the Tax  Division.  It  was  an                                                                    
extension of  an existing credit that  was already programed                                                                    
into   the   division's   system.  The   fiscal   note   was                                                                    
indeterminate  because  of  the   division  not  wanting  to                                                                    
forecast  tax payer  confidential information.  The taxpayer                                                                    
had provided new information required  for the credit. Also,                                                                    
she relayed that  if the credit was extended,  it could open                                                                    
up to  new entities  that the  state was  not aware  of. She                                                                    
reported that no  one had received the  credits to-date. The                                                                    
period of the  extension was 18 months and  would only apply                                                                    
to  LNG storage  facilities with  a certain  capacity. There                                                                    
were provisions  in current statute  that if  the facilities                                                                    
were to  cease operation  within a  certain amount  of time,                                                                    
after 9 years  they would have to pay back  a portion of the                                                                    
credits. These provisions did not  change with the bill. The                                                                    
bill had an immediate effective date.                                                                                           
                                                                                                                                
Co-Chair Wilson  asked if the  credit was a  cashable credit                                                                    
or one that could be taken off of their tax liability.                                                                          
                                                                                                                                
Ms.  Glover  responded  that the  credit  could  be  handled                                                                    
either way. The tax credit could  be paid with cash from the                                                                    
Oil  and Gas  Tax Credit  Fund  or it  could be  taken as  a                                                                    
credit against a facility's state corporate income tax.                                                                         
                                                                                                                                
1:50:05 PM                                                                                                                    
                                                                                                                                
Co-Chair Wilson OPENED Public Testimony.                                                                                        
                                                                                                                                
BRYCE WARD,  MAYOR, FAIRBANKS NORTH STAR  BOROUGH, FAIRBANKS                                                                    
(via  teleconference),  spoke in  support  of  the bill.  He                                                                    
indicated that  the Fairbanks North Star  Borough (FNSB) had                                                                    
approximately  100,000 residents  with  about 25,000  homes.                                                                    
The additional  3,000 new customers, made  possible with the                                                                    
expansion  of the  storage tanks,  was 3,000  of the  25,000                                                                    
homes. The  project was also  a key component  in addressing                                                                    
the  air  quality  issues  in the  Interior  by  allowing  a                                                                    
cleaner source  of energy  to be used  for wood,  solid fuel                                                                    
burning  heating  mechanisms,  and  for  oil  fired  heating                                                                    
devices  within  a home.  Natural  gas  was a  much  cleaner                                                                    
source of  fuel than  fuel oil  or some  of the  other solid                                                                    
burning  appliances  currently  being used.  Currently,  the                                                                    
majority of  the FNSB was  in a non-attainment area.  It was                                                                    
critical for the borough to  address the current air quality                                                                    
problem.                                                                                                                        
                                                                                                                                
1:52:07 PM                                                                                                                    
                                                                                                                                
MICHAEL  MEEKS,   CHIEF  OF  STAFF,  FAIRBANKS   NORTH  STAR                                                                    
BOROUGH, FAIRBANKS  (via teleconference), spoke in  favor of                                                                    
the  bill. He  had been  an  original board  member for  the                                                                    
Interior Gas Utility.  As chairman and vice  chairman of the                                                                    
board,  he attested  that the  Interior needed  the gas  tax                                                                    
extension  for LNG  storage facilities.  The last  financial                                                                    
model he  had seen incorporated  the tax credits  into IGU's                                                                    
calculation  for the  estimated cost  at the  meter for  the                                                                    
customer.  He  suggested  that without  the  extension,  the                                                                    
price of the meter would  increase for the customer, and the                                                                    
number  of customers  that would  convert from  fuel oil  to                                                                    
natural  gas would  decrease. The  loss of  the tax  credits                                                                    
would mean that IGU would have  to make up the money somehow                                                                    
- most  likely through bonds  incurring more debt.  The loss                                                                    
of the tax credits would  incur an additional $21 million in                                                                    
debt and would  add an additional $1.93/MCF  to the customer                                                                    
using the  current demand forecast  models. The cost  at the                                                                    
meter  had  to  be  low enough  to  attract  customers.  The                                                                    
project was already challenged  with customer density issues                                                                    
and costs. He did not want  to make things harder by loosing                                                                    
the credits.  The increased costs  would do nothing  to help                                                                    
the  air  quality issues  and  energy  security concerns  in                                                                    
Fairbanks. He asked members to support the legislation.                                                                         
                                                                                                                                
1:53:23 PM                                                                                                                    
                                                                                                                                
JOHN   COOK,   J   AND   J   DEVELOPMENT,   FAIRBANKS   (via                                                                    
teleconference),  spoke in  support  of HB  87. His  company                                                                    
owned  and had  developed much  of  the retail  land in  the                                                                    
Bentley Trust  area since about  2006 or 2007.  He explained                                                                    
that most  of the box stores  that came in built  off of the                                                                    
same footprint  nationwide. They used gas-fired  heaters and                                                                    
air conditioners to  heat their stores and were  not able to                                                                    
heat with  other sources. His  company had not been  able to                                                                    
add  uninterruptable  supply.  For   several  years  it  had                                                                    
hampered  his  company  from  developing  its  property  and                                                                    
providing  jobs  and   economic  development  to  Fairbanks.                                                                    
Previous   legislatures   and   administrations   had   been                                                                    
supportive of  the legislation to-date. He  urged members to                                                                    
support the bill.                                                                                                               
                                                                                                                                
1:55:42 PM                                                                                                                    
                                                                                                                                
JOMO  STEWART, FAIRBANKS  ECONOMIC DEVELOPMENT  CORPORATION,                                                                    
FAIRBANKS  (via teleconference),  spoke  in  support of  the                                                                    
bill  and the  project.  He indicated  that  the tax  credit                                                                    
extension  would  help  with   the  last  portion  of  state                                                                    
investment.  He hoped  the state  would follow  through. The                                                                    
LNG  storage project  was  a  follow on  to  the Cook  Inlet                                                                    
Recovery Act of  2010. The bill represented  a similar state                                                                    
investment  in  above-ground  natural   gas  storage  for  a                                                                    
community in the heart of Alaska  that could use the cost of                                                                    
energy assistance as  well as help with  air quality issues.                                                                    
He  hoped   the  committee  would   support  and   help  the                                                                    
legislation move forward.                                                                                                       
                                                                                                                                
1:57:05 PM                                                                                                                    
                                                                                                                                
Co-Chair Wilson CLOSED public testimony.                                                                                        
                                                                                                                                
Co-Chair Wilson indicated the bill would be set aside.                                                                          
                                                                                                                                
HB  87  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
HOUSE BILL NO. 106                                                                                                            
                                                                                                                                
     "An Act relating to school bond debt reimbursement."                                                                       
                                                                                                                                
1:57:18 PM                                                                                                                    
                                                                                                                                
LYNN  GATTIS, STAFF,  REPRESENTATIVE TAMMIE  WILSON, relayed                                                                    
that the bill  would simply extend the  termination date for                                                                    
the  school  bond  debt reimbursement  program  with  an  an                                                                    
effective  date of  July  1,  2025. The  bill  was a  5-year                                                                    
extension request.                                                                                                              
                                                                                                                                
1:58:27 PM                                                                                                                    
                                                                                                                                
HEIDI TESHNER, ADMINISTRATIVE  SERVICES DIRECTOR, DEPARTMENT                                                                    
OF  EDUCATION AND  EARLY DEVELOPMENT,  OFFICE OF  MANAGEMENT                                                                    
AND BUDGET, reviewed  the zero fiscal note.  She referred to                                                                    
the OMB  component number 153.  She explained that  the note                                                                    
was  zero because  the bill  was simply  extending the  debt                                                                    
moratorium. The current costs of  the program would continue                                                                    
and there  would be  no additional costs  because of  no new                                                                    
debts coming online until 2026.                                                                                                 
                                                                                                                                
Co-Chair Wilson asked if the  bill would affect the debt the                                                                    
state currently had.                                                                                                            
                                                                                                                                
Ms. Teshner replied that the  bill would extend the payments                                                                    
of  the  debt the  state  currently  had.  For FY  20,  $100                                                                    
million  would be  paid out.  Going forward,  each year  the                                                                    
amount  would decrease  depending on  when current  projects                                                                    
and associated bonds in the system were closed out.                                                                             
                                                                                                                                
Representative Josephson  asked if the  Regional Educational                                                                    
Attendance  Area (REAA)  programs would  be impacted  with a                                                                    
reduction in  the outlay  for programs they  had in  the que                                                                    
based on priority.                                                                                                              
                                                                                                                                
Ms.  Teshner  replied  that currently  the  REAA  and  Small                                                                    
Municipal School District Fund  calculation was based on the                                                                    
annual   debt  service   for  the   program.  Representative                                                                    
Josephson was  correct that the  amount would  decrease over                                                                    
the following 5 years, as it  had over the previous 5 years,                                                                    
if the moratorium  were to be continued.  The district REAAs                                                                    
could  still apply  for the  school  construction and  major                                                                    
maintenance  CIP list  every year.  They would  be competing                                                                    
with other projects and would  be funded through the non-REA                                                                    
fund.                                                                                                                           
                                                                                                                                
Representative  Josephson commented  that there  was another                                                                    
avenue for REAAs to receive  state revenue that would not be                                                                    
impacted by the legislation.                                                                                                    
                                                                                                                                
Ms.  Teshner clarified  that REAAs  would still  be able  to                                                                    
apply  for the  major  maintenance  and school  construction                                                                    
funds. Currently  they could be  funded, depending  on their                                                                    
ranking, through  the REAA fund.  If they were to  rank high                                                                    
enough  and  the  appropriations for  major  maintenance  or                                                                    
school construction  projects, they  could receive  a direct                                                                    
appropriation  outside of  the REAA  fund. Funding  would be                                                                    
contingent on  the amount  of appropriations  the Department                                                                    
of Education and Early Development (DEED) received.                                                                             
                                                                                                                                
Vice-Chair  Ortiz  asked  about  the  potential  impacts  of                                                                    
extending the sunset. He was  particularly curious about the                                                                    
impacts to borough areas and non-REAA areas.                                                                                    
                                                                                                                                
Co-Chair  Wilson  answered  that the  Fairbanks  North  Star                                                                    
Borough  had gone  out for  bonds. Currently,  the community                                                                    
had paid 100 percent for the  bonds. It was the same for all                                                                    
municipalities in the previous 5 years.                                                                                         
                                                                                                                                
Vice-Chair Ortiz  wondered if any  assessment had  been done                                                                    
on  whether other  boroughs would  be crippled  in advancing                                                                    
other projects with an extension of the sunset.                                                                                 
                                                                                                                                
Co-Chair  Wilson commented  that there  were several  people                                                                    
waiting in  the que  to testify.  She thought  his questions                                                                    
would be answered.                                                                                                              
                                                                                                                                
Co-Chair  Foster  commented   that  regarding  the  ordering                                                                    
question for the  REAAs, the first school on  the new school                                                                    
construction  list  was  for $37  million,  and  the  second                                                                    
school was  for $10 million.  If the state fully  funded the                                                                    
debt reimbursement, the REAAs  would receive $39 million. He                                                                    
asked if the  second school with a cost of  only $10 million                                                                    
would  move  into  first  place  if  only  $20  million  was                                                                    
available. He  was trying  to determine  the order  in which                                                                    
the funding was appropriated.                                                                                                   
                                                                                                                                
Ms.  Teshner answered  that if  the initial  project on  the                                                                    
list was  $20 million  and only  $10 million  was available,                                                                    
the  division might  only  fund the  design  portion of  the                                                                    
project  saving the  remainder for  the following  year. She                                                                    
thought Tim  Merrick could provide further  detail about how                                                                    
the division had applied it in  the past. She noted that the                                                                    
division would  attempt to  keep the REAA  Fund to  fund the                                                                    
REAAs and not to comingle funds.                                                                                                
                                                                                                                                
2:05:07 PM                                                                                                                    
                                                                                                                                
TIM MEARIG, FACILITIES MANAGER,  DEPARTMENT OF EDUCATION AND                                                                    
EARLY  DEVELOPMENT,  explained  there  was  a  provision  in                                                                    
regulation that allowed the department  to fund a phase of a                                                                    
project  (if  it   could  be  phased)  if   there  were  not                                                                    
sufficient  funds for  the  entire  project. Otherwise,  the                                                                    
department was permitted to fund further down the list.                                                                         
                                                                                                                                
Co-Chair  Foster clarified  that a  school project  could be                                                                    
phased or  skipped. He asked  at what point the  state would                                                                    
move to the major maintenance list.                                                                                             
                                                                                                                                
Mr. Mearig  replied that the  language in statute  for using                                                                    
the  funding on  the  major maintenance  list required  that                                                                    
priority would be given to  school construction projects. He                                                                    
surmised there  was not a  simple answer without  looking at                                                                    
the  detail  of the  scenario.  The  division would  develop                                                                    
scenarios in conjunction with the  districts being served at                                                                    
the  priority points  on the  list and  at the  department's                                                                    
leadership.                                                                                                                     
                                                                                                                                
Representative Josephson mentioned he  had taught in an REAA                                                                    
for  3  years. Shortly  after  he  left, the  George  Morgan                                                                    
Senior High School burned to  the ground and was rebuilt. In                                                                    
such a circumstance,  he asked what priority  would be given                                                                    
to the  community. He  wondered how  the situation  would be                                                                    
handled.                                                                                                                        
                                                                                                                                
Mr. Mearig responded that the  priority list was established                                                                    
through a regular statutory process  annually. If there were                                                                    
emergencies  that  arose, such  as  the  earthquake for  the                                                                    
previous year,  they would likely  be reflected on  the list                                                                    
if the districts  chose to submit a project  for funding. He                                                                    
continued that  a school that was  completely unhoused would                                                                    
receive a  significant amount of  points in the  matrix. The                                                                    
project would likely rise to the top of the priority list.                                                                      
                                                                                                                                
2:08:12 PM                                                                                                                    
                                                                                                                                
Co-Chair Wilson OPENED Public Testimony.                                                                                        
                                                                                                                                
2:08:23 PM                                                                                                                    
                                                                                                                                
JIM  ANDERSON,  CHIEF   FINANCE  OFFICER,  ANCHORAGE  SCHOOL                                                                    
DISTRICT (via  teleconference), was in support  of continued                                                                    
school bond  debt reimbursement for districts  to the state.                                                                    
In  the past,  municipalities  and  borough incurred  school                                                                    
bond  debt  in  accordance   with  the  state's  contractual                                                                    
agreement in place at the  time the bonds were approved. The                                                                    
agreements   allowed  the   state   to  maintain   education                                                                    
facilities   across   the   cities,  boroughs,   and   local                                                                    
communities.  He spoke  of the  struggles  of recession.  He                                                                    
urged  the  committee  to   continue  supporting  bond  debt                                                                    
reimbursement.                                                                                                                  
                                                                                                                                
2:10:26 PM                                                                                                                    
                                                                                                                                
BRYCE WARD,  MAYOR, FAIRBANKS NORTH STAR  BOROUGH, FAIRBANKS                                                                    
(via  teleconference),  spoke  in  support of  HB  106.  The                                                                    
ramification   of  not   funding   the   school  bond   debt                                                                    
reimbursement  to the  Fairbanks  North  Star Borough  would                                                                    
equal about $9 million, roughly  a 1.1 mill increase for the                                                                    
local tax  base. He was  speaking in favor of  the extension                                                                    
of the program to pay for  current debt that was approved by                                                                    
the  borough's voting  base with  the  assumption the  state                                                                    
would be contributing as part  of the requirement for school                                                                    
construction.  The borough  currently operated  under a  tax                                                                    
cap.  However, debt  was exempt  from the  cap and  the bill                                                                    
would result  in an  increase to the  tax base.  The borough                                                                    
was proposing  a tax increase  in its budget in  the current                                                                    
year.                                                                                                                           
                                                                                                                                
Mr.  Ward continued  that the  ability for  the state  to be                                                                    
able  to partner  with communities  at the  local level  was                                                                    
significant. The 30  percent match that the  local level was                                                                    
paying  contributed to  the state's  ability to  continue to                                                                    
provide school  services. He reiterated his  support for the                                                                    
bill.                                                                                                                           
                                                                                                                                
2:12:10 PM                                                                                                                    
                                                                                                                                
CHEYENNE    HEINDEL,    MAT-SU    BOROUGH,    PALMER    (via                                                                    
teleconference), spoke  in support of HB  106. She explained                                                                    
that without the passage of  the bill the borough would have                                                                    
to impose  an additional  2 mills on  its tax  payers. Also,                                                                    
she mentioned  that the  borough was  in need  of additional                                                                    
school   facilities.   She   thanked   members   for   their                                                                    
consideration.                                                                                                                  
                                                                                                                                
2:12:51 PM                                                                                                                    
                                                                                                                                
LUCY  NELSON,   NORTHWEST  ARCTIC  BOROUGH,   KOTZEBUE  (via                                                                    
teleconference),  spoke  in  opposition  of  the  bill.  She                                                                    
relayed that  for FY  20 the  Northwest Arctic  Borough bond                                                                    
debt  balance   was  $40.9  million,   none  of   which  was                                                                    
reimbursable by  the State of  Alaska if the FY  20 proposed                                                                    
governor's  budget  was  approved  due  to  the  moratorium.                                                                    
Adding  years would  devastate the  borough's finances.  The                                                                    
borough   would  be   required  to   supplant  the   funding                                                                    
previously  committed to  be paid  by  the state.  Essential                                                                    
borough  services  that  protected  the  life,  health,  and                                                                    
safety  of  its  residents  would  have  to  be  reduced  or                                                                    
eliminated. The State of Alaska  was responsible for funding                                                                    
schools  having  made  a prior  commitment  to  reimburse  a                                                                    
portion of  school bond debt.  Local governments  had relied                                                                    
on the state's  commitment in good faith. Any  change in the                                                                    
state's commitment  on school bond debt  reimbursement posed                                                                    
a significant financial burden on local communities.                                                                            
                                                                                                                                
Ms.  Nelson  continued  that   the  borough  understood  the                                                                    
state's fiscal shortfall  and the need to  balance the state                                                                    
budget by placing the moratorium  on bond debt. However, the                                                                    
Northwest  Arctic Borough  was currently  operating under  a                                                                    
PILT [Payments in lieu of  taxes] agreement. At the time the                                                                    
borough  negotiated   the  PILT   agreement  there   was  no                                                                    
discussion  on the  elimination of  bond debt  reimbursement                                                                    
payments from  the state. She  clarified that  any reduction                                                                    
to the bond  debt payment would devastate  the borough which                                                                    
was already suffering from high  crime and the lack of basic                                                                    
infrastructure.                                                                                                                 
                                                                                                                                
Mr. Nelson  reported that,  unlike other  rural communities,                                                                    
the Northwest  Arctic School District  was not an  REAA. The                                                                    
borough  contributed over  $2 million  per year  towards the                                                                    
bond  repayments.  Although  the payments  were  large,  the                                                                    
borough  was   committed  to  education  and   its  schools.                                                                    
Eliminating the  state reimbursement would cost  the borough                                                                    
$4 million in  FY 20. She asked legislators  to consider the                                                                    
bill carefully as  it moved forward. The borough  had no new                                                                    
revenue source  to make up  the huge reduction.  The borough                                                                    
had $14.3  million of bond  debt reimburse  payments pledged                                                                    
by  the  state for  its  school  construction projects.  The                                                                    
amount did not  include the Kivalina school  bond debt which                                                                    
was  $12.7  million. She  asked  the  committee to  pay  the                                                                    
authorized  bond  debt  reimbursement for  the  agreed  upon                                                                    
timeline.  The borough  had no  other  choices available  to                                                                    
absorb such a huge reduction.                                                                                                   
                                                                                                                                
Co-Chair Wilson  asked whether she understood  that the bill                                                                    
had nothing to do with  bond reimbursement for the borough's                                                                    
current bonds taken out prior to 2015.                                                                                          
                                                                                                                                
Ms. Nelson responded in the affirmative.                                                                                        
                                                                                                                                
Representative Josephson  thought there was a  good argument                                                                    
that the  world continued to  advance and that  the district                                                                    
had increasing needs since 2015.  His understanding was that                                                                    
when the moratorium began the  world was on notice that they                                                                    
would be subject to taking care  of their own bonds in full.                                                                    
He asked if Ms. Nelson shared the same understanding.                                                                           
                                                                                                                                
Ms.  Nelson asked  Representative Josephson  to restate  his                                                                    
question.                                                                                                                       
                                                                                                                                
Representative Josephson thought there  might be two sets of                                                                    
arguments.   First,   prior   to   2015   and   subject   to                                                                    
appropriation there  was an expectation that  if things went                                                                    
well,  the  state  would help.  However,  after  2015  there                                                                    
should  not  have been  any  expectation  of help  from  the                                                                    
state. He asked if he was correct.                                                                                              
                                                                                                                                
Ms. Nelson offered that the  borough felt that the state was                                                                    
responsible for funding schools.                                                                                                
                                                                                                                                
2:17:31 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:18:00 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Wilson reiterated that  the bond debt reimbursement                                                                    
in the  operating budget that  was under discussion  was not                                                                    
part of  the bill. They were  bonds taken out prior  to 2015                                                                    
and  had a  70  percent state  contribution  and 30  percent                                                                    
local contribution or a 60  percent state contribution and a                                                                    
40  percent  local  contribution.  All  of  the  bonds  were                                                                    
contingent  on  an  appropriation by  the  legislature.  The                                                                    
bonds  prior to  2013  were not  a part  of  the bill  under                                                                    
consideration. There had been confusion in the testimony.                                                                       
                                                                                                                                
Co-Chair Wilson clarified  the purpose of the  bill. For the                                                                    
previous 5 years  no municipality had been able  to take out                                                                    
a  bond with  the understanding  that the  state would  pay.                                                                    
They  could put  out  bonds, but  communities  would be  100                                                                    
percent  responsible.   The  bill  would  extend   the  same                                                                    
moratorium for  5 years from FY  20 to FY 25.  It would have                                                                    
no  effect on  the  appropriation that  might  or might  not                                                                    
happen   with  the   current  debt   from  Alaska's   school                                                                    
districts.                                                                                                                      
                                                                                                                                
2:19:15 PM                                                                                                                    
                                                                                                                                
DR.  ANNMARIE  O'BRIEN,   SUPERINTENDENT,  NORTHWEST  ARCTIC                                                                    
SCHOOL  DISTRICT, KOTZEBUE  (via teleconference),  called in                                                                    
opposition  to the  bill. She  reported  that the  Northwest                                                                    
Arctic  Borough was  under a  PILT  agreement negotiated  in                                                                    
good faith with the Red  Dog Mine with an understanding that                                                                    
the moratorium would end in 2020.  It would come in time for                                                                    
the borough to  support the Kivalina School and  to bond for                                                                    
the  borough match  for the  school. She  stressed that  the                                                                    
borough  had no  other place  to  turn to  raise funds.  The                                                                    
borough  felt very  strongly  about putting  an  end to  the                                                                    
moratorium.  She  added  that   the  committee  should  make                                                                    
considerations  for boroughs  receiving funding  under PILT.                                                                    
The Kivalina  School was part  of the Moore  Settlement. The                                                                    
borough  had begun  the  process of  working  on the  school                                                                    
access.  The  development of  the  road  to the  school  was                                                                    
currently in  process. The opening  of the school  was long-                                                                    
overdue and had  an expected opening date  of 2021. However,                                                                    
it was necessary to have  the school bond debt reimbursement                                                                    
in  place  to  move  forward with  the  project.  She  urged                                                                    
members to reject the extension of the moratorium.                                                                              
                                                                                                                                
2:21:38 PM                                                                                                                    
                                                                                                                                
NILS  ANDREASSEN,   EXECUTIVE  DIRECTOR,   ALASKA  MUNICIPAL                                                                    
LEAGUE, thanked  the chair for clarification  on the purpose                                                                    
of the bill. He spoke of  the importance of school bond debt                                                                    
reimbursement  to local  governments  around  the state.  In                                                                    
order for the Alaska Municipal  League (AML) to approach the                                                                    
bill  effectively   it  was   still  working   to  determine                                                                    
municipal  impacts.  He  thought   agreement  needed  to  be                                                                    
reached as  to whether the  state had an obligation  to fund                                                                    
the  construction and/or  maintenance of  school facilities.                                                                    
If the  answer was yes,  then the next question  that needed                                                                    
to  be answered  was to  what extent.  The Alaska  Municipal                                                                    
League believed that the constitution  was clear that it was                                                                    
the  state's  responsibility  to establish  and  maintain  a                                                                    
system of public schools, which  AML thought extended to the                                                                    
construction of  schools. Once his questions  were answered,                                                                    
better certainty for school  districts and local governments                                                                    
could be provided.                                                                                                              
                                                                                                                                
Mr. Andreassen continued that AML's  fear was that extending                                                                    
the moratorium  would result in minimal  investment in major                                                                    
construction   and  maintenance   as  districts   waited  an                                                                    
additional  5 years  before being  able  to address  current                                                                    
concerns.  The league  was aware  that deferred  maintenance                                                                    
was  currently  a  challenge and  extending  the  moratorium                                                                    
might compound  the challenge. It  was not to say  that some                                                                    
municipalities  might  make  different  decisions.  Clearly,                                                                    
Fairbanks and others had worked  to address current concerns                                                                    
as  best  as  they  could.  It  did  not  mean  that  school                                                                    
districts  would not  work with  local  governments to  make                                                                    
necessary investments. However, the  questions about who was                                                                    
responsible and to what extend needed to be answered.                                                                           
                                                                                                                                
Mr. Andreassen  continued that  it would  fall to  local tax                                                                    
payers  to  determine whether  tax  increases  at the  local                                                                    
level could  and should  be borne  or sustained  and whether                                                                    
they  could occur  presently or  whether  local tax  dollars                                                                    
would be  better leveraged against  state investment  in the                                                                    
future.  He asserted  that  it was  clearly  in the  state's                                                                    
interest to put some  stronger guidelines around the program                                                                    
including  better control  over  its debt  structure and  to                                                                    
ensure   that  the   funding  of   school  construction   or                                                                    
maintenance  was  consistent  with available  revenues.  The                                                                    
Alaska  Municipal  League  would  look  forward  to  such  a                                                                    
conversation. He  offered that where there  might be changes                                                                    
to  the program,  AML would  like to  be involved  and would                                                                    
like to see  all parties at the table.  He suggested working                                                                    
next on  an assessment  of needs that  had been  delayed for                                                                    
the previous  5 years,  where there  had been  progress, and                                                                    
what  the potential  impact of  5 more  years might  mean to                                                                    
communities, school districts, and students.                                                                                    
                                                                                                                                
2:25:06 PM                                                                                                                    
                                                                                                                                
Representative  Knopp noted  Mr. Andreassen's  comment about                                                                    
the state aligning its debt with  the ability to pay for it.                                                                    
He  thought it  was  exactly  what the  state  was doing  by                                                                    
extending  the  moratorium.  He   asked  Mr.  Andreassen  to                                                                    
comment.                                                                                                                        
                                                                                                                                
Mr. Andreassen responded that he  thought 5 years was a long                                                                    
period without  knowing what the  current needs  looked like                                                                    
at  the local  level in  terms of  school districts  needing                                                                    
construction  funding  or  major maintenance  conducted.  He                                                                    
suggested that it was not  possible to match need to current                                                                    
revenue without  knowing what the needs  were. Additionally,                                                                    
he thought  it would be  wise to consider caps  or different                                                                    
matching amounts  to shape the  requests which  would better                                                                    
enable  the  state  to structure  the  program  relative  to                                                                    
current revenues.                                                                                                               
                                                                                                                                
Representative Knopp  asked whether  he thought it  had been                                                                    
made clear  to voters that  the bond reimbursement  would be                                                                    
subject to appropriations.                                                                                                      
                                                                                                                                
Mr. Andreassen replied that for  prior committed school bond                                                                    
debt reimbursement  it varied by  community in terms  of the                                                                    
public's  understanding. He  believed  the  public made  the                                                                    
commitments  based  on  a  17-year   history  of  the  state                                                                    
reimbursing school bond debt.                                                                                                   
                                                                                                                                
Co-Chair Wilson asked Mr. Andreassen's  if he thought it was                                                                    
fairer  for  the  legislature to  allow  districts  to  bond                                                                    
without looking at their ability to pay.                                                                                        
                                                                                                                                
Mr.  Andreassen replied  that  he would  be  better able  to                                                                    
evaluate  the  bill  if a  needs  assessment  was  available                                                                    
showing which districts  currently needed major construction                                                                    
or  maintenance.  He  would  then be  able  to  evaluate  it                                                                    
against the  local tax  base ability to  pay for  or provide                                                                    
match funding. He noted the  Northwest Arctic Borough's PILT                                                                    
agreement  which was  very  different  than other  boroughs.                                                                    
There were  different tax bases  and tax formats  that local                                                                    
governments applied  to their ability  to bond.  He believed                                                                    
that having  a more nuanced view  of what it looked  like at                                                                    
the   local   level   would  help   everyone   involved   in                                                                    
understanding what  a moratorium  might look like  for local                                                                    
residents.                                                                                                                      
                                                                                                                                
Co-Chair Wilson  thought the first question  should be about                                                                    
a municipality's ability to pay.                                                                                                
                                                                                                                                
Mr. Andreassen  responded in the affirmative.  He thought it                                                                    
went  back  to  the   earlier  confusion  about  whether  it                                                                    
extended and paid  the reimbursement or whether  it was only                                                                    
focused on the  moratorium. If it extended  the repayment of                                                                    
current  bond obligations,  AML would  support the  bill. It                                                                    
was  whether the  moratorium was  extended  and whether  the                                                                    
analysis was done.                                                                                                              
                                                                                                                                
Co-Chair Wilson reiterated  that the bill had  nothing to do                                                                    
with paying  what was currently  owed. She brought  the bill                                                                    
forward because  the state was having  difficulty being able                                                                    
to pay  what the  state presently owed.  She opined  that it                                                                    
would be  unfair to Alaskans  to issue more bonds  while the                                                                    
state  was currently  not paying  it. She  was proud  of her                                                                    
school district and community that stepped up to the plate.                                                                     
                                                                                                                                
Representative  Josephson was  likely to  support the  bill.                                                                    
However, he  was sad that there  had been a lack  of resolve                                                                    
since 2015 to  put together a comprehensive  fiscal plan. It                                                                    
was something  he had  fought for. He  noted voting  for new                                                                    
revenue.  He  thought  the  bill  was  warranted  given  the                                                                    
circumstance in context.                                                                                                        
                                                                                                                                
2:30:25 PM                                                                                                                    
                                                                                                                                
Co-Chair Wilson CLOSED Public Testimony.                                                                                        
                                                                                                                                
Vice-Chair Ortiz agreed with  the previous speaker regarding                                                                    
supporting  the  bill.  He  wanted   to  be  clear  that  by                                                                    
extending the moratorium, the  legislature was not extending                                                                    
deferred maintenance  needs or deferred  construction needs.                                                                    
He did  not think  the extension would  help in  the state's                                                                    
ability  to provide  adequate education  and facilities  for                                                                    
Alaska's children.  He wanted to  hear more from  Mr. Mearig                                                                    
about  future deferred  maintenance and  school construction                                                                    
projects that might  not go forward if  the legislature were                                                                    
to extend the moratorium.                                                                                                       
                                                                                                                                
Co-Chair Wilson  asked Mr. Mearig  to respond  to Vice-Chair                                                                    
Ortiz's question.                                                                                                               
                                                                                                                                
Mr. Mearig asked for clarification.                                                                                             
                                                                                                                                
Vice-Chair Ortiz  asked Mr.  Mearig if he  was aware  of any                                                                    
deferred  maintenance  issues  or  new  school  construction                                                                    
plans that might  get put on hold if the  state was to adopt                                                                    
the moratorium.                                                                                                                 
                                                                                                                                
Mr.  Mearig  reported  that  the state  had  a  program  for                                                                    
identifying  and   collecting  school  capital   needs.  The                                                                    
program  was  an annual  opportunity  for  all districts  to                                                                    
submit their requirements to the  state. A list for possible                                                                    
FY 20  funding had  been compiled and  was available  to the                                                                    
public. Based on  the list, there were plenty  of needs from                                                                    
districts around  the state. There were  many districts that                                                                    
had  not participated  as  well as  they  could have.  There                                                                    
might be  other needs  not expressed on  the list.  The only                                                                    
district  he had  had active  conversations  with about  the                                                                    
reopening  of  debt  had  been  the  Mat-Su  Borough  School                                                                    
District. They spoke  about the timeline to  introduce a $20                                                                    
million to $25 million bond  package. His advise to them was                                                                    
to get  on the  list so  that the  division could  see their                                                                    
need.  If  there was  an  opportunity  for  the debt  to  be                                                                    
reopened, the division  would have a chance  to work through                                                                    
the eligibility review.                                                                                                         
                                                                                                                                
Representative  LeBon asked  whether  the  department had  a                                                                    
chance  to weigh  in on  language presented  to voters  on a                                                                    
bond  issue  when  a  community  bonded  for  a  new  school                                                                    
building.                                                                                                                       
                                                                                                                                
Mr. Mearig responded that there  was no longer a requirement                                                                    
in statute  to pre-approve  voter language for  debt service                                                                    
for schools.                                                                                                                    
                                                                                                                                
Representative  LeBon  mentioned that  in  his  days on  the                                                                    
school  board,  members went  to  great  lengths to  educate                                                                    
voters. Although  the intention  was for  a 70/40  split, it                                                                    
was  not a  guarantee. The  board educated  voters that  the                                                                    
possibility existed  that the district  might not  receive a                                                                    
70  percent state  reimbursement. There  was a  risk in  any                                                                    
school bond  debt program  that the  community might  end up                                                                    
having to service the debt.                                                                                                     
                                                                                                                                
2:36:42 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Ortiz  directed  a  question  to  Representative                                                                    
LeBon.  He suggested  that if  the state  appeared to  be an                                                                    
unlikely participant in the bonding  program, the bond rates                                                                    
offered  to  communities  might  increase.  He  wondered  if                                                                    
communities would have to pay a higher rate for the bonds.                                                                      
                                                                                                                                
Representative  LeBon thought  there was  a chance  that the                                                                    
rate of  the bond  would be  slightly higher.  However, they                                                                    
were  general obligation  bonds which  the community  had to                                                                    
stand behind, as the bonds  carried the highest priority for                                                                    
repayment.                                                                                                                      
                                                                                                                                
Co-Chair Wilson  added that when  communities signed  on the                                                                    
bottom  line, it  was  for 100  percent  of the  obligation,                                                                    
whether or not the state contributed.                                                                                           
                                                                                                                                
Representative  Carpenter was  struck that  the state  had a                                                                    
$1.6 billion deficit and Alaska's  economy was in recession.                                                                    
He thought  it was obvious  the state could not  support its                                                                    
current  spending level.  The  extension  of the  moratorium                                                                    
would  require entities  to look  elsewhere  other than  the                                                                    
state which was  not a bad thing while  Alaska's economy was                                                                    
struggling and could not afford its current spending.                                                                           
                                                                                                                                
HB  106  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Co-Chair Wilson reviewed the agenda for the following day.                                                                      
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
2:39:12 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 2:39 p.m.                                                                                          

Document Name Date/Time Subjects
HB87 Sponsor Statement 3.25.19.pdf HFIN 4/1/2019 1:30:00 PM
HB 87
HB87 Supporting Document-FEDC Letter of Support 3.25.19.pdf HFIN 4/1/2019 1:30:00 PM
HB 87
HB87 Supporting Document-FNSB Letter of Support 3.25.19.pdf HFIN 4/1/2019 1:30:00 PM
HB 87
HB87 Supporting Document-City of Fairbanks Resolution 4869 3.25.19.pdf HFIN 4/1/2019 1:30:00 PM
HB 87
HB87 Supporting Document-GFCC Letter of Support 3.25.19.pdf HFIN 4/1/2019 1:30:00 PM
HB 87
HB87 Supporting Document-IGU Letter of Support 3.25.19.pdf HFIN 4/1/2019 1:30:00 PM
HB 87
H-FIN_HB87 Presentation_3.28.19.pdf HFIN 4/1/2019 1:30:00 PM
HB 87
HB106 ver A Sponsor Statement 3.26 (1).pdf HFIN 4/1/2019 1:30:00 PM
SFIN 5/6/2019 9:00:00 AM
HB 106
HB106 ver A Back up info 3.26.19.pdf HFIN 4/1/2019 1:30:00 PM
HB 106
HB106 Fiscal Note 3.31.19.pdf HFIN 4/1/2019 1:30:00 PM
HB 106
HB 106 Unalaska FIA School Debt Reimbursement 4-1-2019.pdf HFIN 4/1/2019 1:30:00 PM
HB 106