04/13/2012 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB25 | |
| SB136 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 25 | TELECONFERENCED | |
| + | SB 136 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 13, 2012
3:44 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Craig Johnson, Vice Chair
Representative Dan Saddler
Representative Steve Thompson
Representative Lindsey Holmes
Representative Bob Miller
MEMBERS ABSENT
Representative Mike Chenault
COMMITTEE CALENDAR
CS FOR SS FOR SENATE BILL NO. 25(FIN)
"An Act establishing the sustainable energy transmission and
supply development program in the Alaska Industrial Development
and Export Authority; relating to the interest rates of the
Alaska Industrial Development and Export Authority; and relating
to taxes paid on interests in property owned by the Alaska
Industrial Development and Export Authority and to the local
contribution for public education funding related to that
property."
- HEARD & HELD
COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 136(FIN) AM
"An Act providing a tax credit for employing a veteran that may
be taken against a liability for the tax on corporation income;
and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 25
SHORT TITLE: AIDEA: SUSTAINABLE ENERGY/ INTEREST RATE
SPONSOR(s): SENATOR(s) MCGUIRE
01/19/11 (S) PREFILE RELEASED 1/7/11
01/19/11 (S) READ THE FIRST TIME - REFERRALS
01/19/11 (S) L&C, FIN
02/08/12 (S) SPONSOR SUBSTITUTE INTRODUCED-REFERRALS
02/08/12 (S) L&C, FIN
02/16/12 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
02/16/12 (S) Heard & Held
02/16/12 (S) MINUTE(L&C)
02/21/12 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
02/21/12 (S) -- MEETING CANCELED --
02/23/12 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
02/23/12 (S) Moved CSSB 25(L&C) Out of Committee
02/23/12 (S) MINUTE(L&C)
02/24/12 (S) L&C RPT CS 4DP 1NR NEW TITLE
02/24/12 (S) DP: EGAN, DAVIS, PASKVAN, MENARD
02/24/12 (S) NR: GIESSEL
03/29/12 (S) FIN AT 1:00 PM SENATE FINANCE 532
03/29/12 (S) Heard & Held
03/29/12 (S) MINUTE(FIN)
04/11/12 (S) FIN RPT CS 6DP 1NR NEW TITLE
04/11/12 (S) DP: HOFFMAN, STEDMAN, THOMAS, EGAN,
MCGUIRE, ELLIS
04/11/12 (S) NR: OLSON
04/11/12 (S) TRANSMITTED TO (H)
04/11/12 (S) VERSION: CSSSSB 25(FIN)
04/11/12 (S) FIN AT 9:00 AM SENATE FINANCE 532
04/11/12 (S) Scheduled But Not Heard
04/11/12 (S) FIN AT 1:00 PM SENATE FINANCE 532
04/11/12 (S) Moved CSSSSB 25(FIN) Out of Committee
04/11/12 (S) MINUTE(FIN)
04/12/12 (H) READ THE FIRST TIME - REFERRALS
04/12/12 (H) L&C, FIN
04/13/12 (H) FIN AT 9:00 AM HOUSE FINANCE 519
04/13/12 (H) L&C AT 3:15 PM BARNES 124
BILL: SB 136
SHORT TITLE: VETERANS DRIVERS LICENSE, TAX CREDIT
SPONSOR(s): SENATOR(s) WIELECHOWSKI
01/17/12 (S) PREFILE RELEASED 1/6/12
01/17/12 (S) READ THE FIRST TIME - REFERRALS
01/17/12 (S) STA, FIN
01/24/12 (S) STA AT 9:00 AM BUTROVICH 205
01/24/12 (S) Scheduled But Not Heard
01/26/12 (S) STA AT 9:00 AM BUTROVICH 205
01/26/12 (S) Heard & Held
01/26/12 (S) MINUTE(STA)
01/31/12 (S) STA AT 9:00 AM BUTROVICH 205
01/31/12 (S) Moved CSSB 136(STA) Out of Committee
01/31/12 (S) MINUTE(STA)
02/01/12 (S) STA RPT CS 5DP NEW TITLE
02/01/12 (S) DP: WIELECHOWSKI, KOOKESH, PASKVAN,
MEYER, GIESSEL
02/06/12 (S) FIN AT 9:00 AM SENATE FINANCE 532
02/06/12 (S) Heard & Held
02/06/12 (S) MINUTE(FIN)
02/24/12 (S) FIN RPT CS 6DP NEW TITLE
02/24/12 (S) DP: STEDMAN, THOMAS, EGAN, MCGUIRE,
OLSON, ELLIS
02/24/12 (S) FIN AT 9:00 AM SENATE FINANCE 532
02/24/12 (S) Moved CSSB 136(FIN) Out of Committee
02/24/12 (S) MINUTE(FIN)
03/05/12 (S) TRANSMITTED TO (H)
03/05/12 (S) VERSION: CSSB 136(FIN) AM
03/05/12 (H) READ THE FIRST TIME - REFERRALS
03/05/12 (H) L&C, FIN
04/13/12 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
MICHAEL PAWLOWSKI, Staff
Senator Lesil McGuire
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented a PowerPoint presentation and
answered questions on SB 25 on behalf of the sponsor, Senator
Lesil McGuire.
MARK DAVIS, Deputy Director
Investment Finance & Analysis
Alaska Industrial Development and Export Authority (AIDEA)
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of SB 25.
TED LEONARD, Executive Director
Alaska Industrial Development and Export Authority (AIDEA)
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of SB 25.
DAN BOCKHORST, General Manager
Ketchikan Gateway Borough (KGB)
Ketchikan, Alaska
POSITION STATEMENT: Testified in support of SB 25.
SENATOR BILL WIELECHOWSKI
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as sponsor of SB 136.
KENDRA KLOSTER, Staff
Senator Bill Wielechowski
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented SB 136 on behalf of the sponsor,
Senator Bill Wielechowski.
ALBERT HOWARD, Mayor
City of Angoon
Angoon, Alaska
POSITION STATEMENT: Testified in support of SB 136.
ACTION NARRATIVE
3:44:56 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:44 p.m. Representatives
Thompson, Holmes, Miller, Johnson, Saddler, and Olson were
present at the call to order.
SB 25-AIDEA: SUSTAINABLE ENERGY/ INTEREST RATE
3:45:15 PM
CHAIR OLSON announced that the first order of business would be
CS FOR SPONSOR SUBSTITUTE FOR SENATE BILL NO. 25(FIN), "An Act
establishing the sustainable energy transmission and supply
development program in the Alaska Industrial Development and
Export Authority; relating to the interest rates of the Alaska
Industrial Development and Export Authority; and relating to
taxes paid on interests in property owned by the Alaska
Industrial Development and Export Authority and to the local
contribution for public education funding related to that
property."
3:45:18 PM
MICHAEL PAWLOWSKI, Staff, Senator Lesil McGuire, Alaska State
Legislature, on behalf of Senator Lesil McGuire, presented a
PowerPoint presentation on Alaska's Sustainable Strategy for
Energy Transmission and Supply (ASSETS). He stated that this
bill has a companion bill, HB 327, and some members may have
previously heard the companion bill at a House Energy Committee
meeting. He referred to the disclaimer on slide 1 of the
PowerPoint, which reflects that the bill is not designed for
specific projects since the bill is designed to address the
breadth of energy projects in Alaska.
3:46:17 PM
MR. PAWLOWSKI explained the agenda. He stated that his
PowerPoint presentation on ASSETS will focus on highlights from
selected reports on capital financing, the sectional analysis of
the bill, powers and limitations of the fund the bill purports
to establish, and the decision and policy decisions necessary to
select AIDEA as the vehicle [slide 1].
MR. PAWLOWSKI identified the problem, which is that significant
capital investment will be required to develop the energy
infrastructure Alaska needs [slide 3].
MR. PAWLOWSKI reviewed the Alaska energy pathway toward energy
independence [slide 4]. He stated that Alaska Energy Authority
(AEA) prepared a report in July 2010 that broke out capital
needs statewide based on Alaska Native Regional Corporation
areas. He pointed out the immediate needs for the first zero to
10 years totaled approximately $2 billion.
MR. PAWLOWSKI referred to the Railbelt integrated resource plan
(RIRP), prepared by the AEA in February 2010, which projected
capital spending estimates will range from $13.625 to $21.109
billion [slide 5].
3:47:33 PM
MR. PAWLOWSKI referred to the Southeast integrated resource plan
(SEIRP), which has generated substantial controversy, but
identifies the needs for infrastructure projects in Southeast
Alaska [slide 6].
MR. PAWLOWSKI provided a summary of capital estimates noting
there are billions of dollars of infrastructure that needs to be
built within Alaska in the next zero to 10 years [slide 7].
3:48:10 PM
MR. PAWLOWSKI explained that last year the energy section of the
capital budget included legislative intent [slide 8]. The intent
language read, "It is the intent of the legislature that the
state's capital investment into energy generation projects not
exceed 50 % of the total investment required to fully complete
those projects." He highlighted that this language isn't
binding, but it is an attempt to recognize that the legislature
would like to see some private sector funds involved when
building projects so the funding for 100 percent of the cost of
the project is not entirely the legislature's responsibility to
fund. Senator McGuire has heard from many utilities throughout
the state that the problem facing many utilities is the access
to capital.
MR. PAWLOWSKI related that financing Alaska Energy Pathway: AEA
July 2010 shows the dilemma the utilities and the Railbelt face.
He pointed out the projected capital expenditures as compared to
the high debt capacity that cannot meet the capital expenditures
[slide 9].
MR. PAWLOWSKI referred to the right hand of the slide that
illustrates the importance of financing debt service as a
percent of Revenue [slide 10]. The project illustrated is for a
stylized hydroelectric project from the SEIRP. He indicated
that a significant portion of the rates that Alaskans pay are
paid through the utility to pay for debt service to the
bondholders or investors in the power project.
MR. PAWLOWSKI stated that the challenge that SB 25 is intended
to address is the state's large capital needs and the limited
budgets as oil production continues to decline, The state needs
something sustainable where investments in projects are repaid
and return money to the treasury. He explained that SB 25 is
designed to create a new sustainable and supply program within
the AIDEA [slide 11].
3:50:00 PM
MR. PAWLOWSKI provided a sectional analysis of SB 25 by
addressing the significant sections first. He stated that
Sections 16-17 would create a new sustainable energy
transmission and Supply (SETS) development program and fund
within the Alaska Industrial Development and Export Authority
(AIDEA [slide 12]. He related that he uses this reverse
sectional approach since the material portions of the bill are
near the end of the bill. He referred to page 11, line 5, which
adds new sections defining a program within AIDEA, creating a
fund, and specifying how AIDEA can use the fund balances. The
purpose of the fund is specifically limited to energy projects
to give focus and clarity to the program. He referred to page
12, line 3, to the powers and duties of the proposed authority.
He then referred to page 12, lines 13-14, which would provide a
new power to AIDEA to defer principal payments or capitalize
interest on qualified energy developments.
3:51:35 PM
MR. PAWLOWSKI referred again to page 12, line 3, to the powers
and duties of the authority for funding qualified energy
development. He stated that the purpose of this section is to
delineate the powers that AIDEA has as it relates to the new
fund. He pointed out that the fund has powers in addition to
what AIDEA currently has due to the specific economics as they
relate to energy projects. He explained that the additional
powers are found on page 12, lines 13-14, which provides AIDEA
with the power to defer principal payments. He further
explained that an energy project may not have revenues during
the construction phase, so this would allow AIDEA to make
interest-only payments, while AIDEA earns the interest on the
investment it has made, but that is passed on to the ratepayers.
This would allow the drawing out of that initial phase during
the construction to try to lower the cost of power ultimately to
consumers.
3:52:33 PM
MR. PAWLOWSKI explained that under existing statutes AS
44.88.090, AIDEA has the power to borrow money and issue bonds.
He explained that a revolving loan fund is one in which the
legislature appropriates to a fund and the money is loaned out,
but once the money is loaned out more money is not available to
fund projects until the fund is repaid. He pointed out that
under the bill, AIDEA has an ability to go to the capital
markets and leverage the proceeds it has from loans to raise
additional capital to refresh the fund. He emphasized that the
reason this program is sustainable is partly related to the
existing power AIDEA has to borrow money. He explained that
specific language is included in this section to make it clear
that AIDEA has the ability to use proceeds and returns on its
investments to borrow money against those proceeds, governed by
credit rating limits and leverage limits, and accrue funds to
invest in infrastructure. The capitalization that goes into
AIDEA is not necessarily the limit for the capitalization of the
money that can go out on the street.
3:53:56 PM
MR. PAWLOWSKI referred to page 12, lines 6-9, to paragraph (1),
which allows AIDEA to use the fund to finance qualified energy
development projects, insure project obligations, guarantee
loans or bond, and establish reserves. He explained that this
language gives AIDEA a suite of powers to work with the private
sector to create financing environments that will facilitate the
development of a project. He pointed out that often private
capital might come in looking for a credit backstop from the
state. He related that previous bills that attempted to
transfer power created the situation in which the credit
backstop came back to the state; however, AIEDA is not an
obligation of the state since it is a distinct and separate
entity. He reiterated the reason to establish a separate fund
and to allow AIDEA loan guarantee power is to allow AIDEA to
support the economics of projects and work with the private
sector. He related this is another way in which this program
differs from a revolving loan fund.
3:55:16 PM
MR. PAWLOWSKI said that it was important to the sponsor to place
limits on AIDEA. He referred to Section 16, to page 13, line 5,
of proposed AS 44.88.740. This requires AIDEA to come back to
the legislature for approval if the project financing exceeds
more than one-third of the capital cost of a qualified energy
development or loan guarantee that exceeds $20 million. He
referred to page 13, lines 13-14, to subsection (b) (1) & (2),
which would allow AIDEA to extend financing to 30 years for a
general project and 50 years for a transmission line or
hydroelectric project. He emphasized that hydroelectric
projects are long life investments so the longer financing can
be extended the lower the cost to ratepayers. The bill
originally envisioned a much broader range of qualified energy
developments. He referred to page 13, lines 16-25, of proposed
Section 17, which provides a definition for "development fund"
and also a definition for "qualified energy development" in
proposed AS 44.88.900 (16) as follows:
(A) transmission, generation, conservation, storage,
or distribution of heat or electricity;
(B) liquefaction, regasification, distribution,
storage, or use of natural gas;
(C) distribution or storage of refined petroleum
products.
MR. PAWLOWSKI stated the sponsor's intent is to provide basic
energy infrastructure, such as local gas distribution, bulk tank
farm for generation, power line, or hydroelectric project, and
energy efficiency projects. He highlighted that this authority
is granted to AIDEA specifically within this section of the bill
as a new and distinct mission for AIDEA. He concluded that
these are the substantive sections of the bill. He related he
would now like to point out several conforming sections of the
bill.
3:57:32 PM
REPRESENTATIVE HOLMES asked whether "qualified energy
development" could be owned by anyone, such as a nonprofit, a
for profit business, a utility, or local government without any
ownership limitations.
MR. PAWLOWSKI answered yes. He elaborated that the point of
AIDEA is to work with the private sector and to bring the state
as the support for the private sector, but put the community or
cooperative in the leadership role and provide access to capital
to make their projects feasible. In further response to
Representative Holmes, he explained that the purpose of AIDEA is
to assist with statewide regional projects. Thus the bill is
not limited to specific areas of the state and is intended to
provide financing to any communities that can make it work.
3:58:46 PM
MR. PAWLOWSKI referred to Section 6, on page 4, beginning on
line 21. He explained that this statute defines AIDEA's mission
by the addition of the word "energy" to the legislative
determination. The bill contains conforming language and
technical changes, such as on page 5, line 11 to reflect the
name change to Export-Import Bank of the United States. He
recapped that the mission is changed to add "energy" to match
the fund created in Sections 16-17 for energy projects.
3:59:51 PM
MR. PAWLOWSKI referred to Sections 10-14 beginning on page 8,
line 22. He related that under SB 25, the state will invest
some of its capital through AIDEA in infrastructure. The
principal and interest payments will come back through AIDEA to
the state in the form a dividend. He emphasized that
fundamental to this concept is that AIDEA must earn a rate of
return on the loans or investments that it makes. He referred
again to Section 10, beginning on line 22, through Section 14,
on page 10 to line 15, which represents conforming changes to
allow the Sustainable Energy Transmission Supply (SETS) Fund to
comport to the same interest requirements. He characterized
this as the cost of capital and not free or low interest loans,
but loans. Currently, utilities in Alaska are borrowing money
outside Alaska so the interest and principal payments leave the
state. He emphasized that these changes will circulate the
interest and principal payments in the state by allowing AIDEA
to work with the local entity to obtain financing.
4:01:28 PM
REPRESENTATIVE HOLMES wondered about the interplay between this
and the 30 to 50-year rate. She inquired as to the amount of
the interest rates.
MR. PAWLOWSKI deferred to AIDEA since it would be tied to the
cost of funds in the market rate. He referred to page 9, line
18, to the definition of the "cost of funds" which read, "means
the earnings, expressed as an annual interest rate, the
authority would receive on a comparable financial security, and,
for a loan participation..." He continued,"... with a fixed
interest rate, the cost of funds must equal or exceed the
minimum interest rate." Thus a floor on the interest rate AIDEA
can offer; however, there is an exception under which AIDEA is
able to offer a lower interest rate. He referred to page 10,
lines 16-31, of Section 15, which allows AIDEA to reduce the
rate of interest to up to one percent under current statutes to
meet sufficient job creation, rural development, or other
economic development incentive criteria. This bill adds [on
page 10, line 20] "renewable energy development" to express the
state's policy to move towards renewable energy and
hydroelectric by allowing a lower interest rate - of up to one
percent - to finance those projects. He concluded this comports
with the policy the legislature has put into place.
4:03:30 PM
REPRESENTATIVE HOLMES asked to clarify that "renewable energy"
refers to the Alaska definition, which includes hydroelectric.
MR. PAWLOWSKI answered yes.
4:03:47 PM
MR. PAWLOWSKI stated that the purpose of the bill is to
establish a new program within AIDEA. He related that AIDEA
works very closely with commercial lending institutions in the
state. He referred to proposed Section 8 on page 6, beginning
on line 23, which makes conforming changes to AIDEA's current
loan participation program. He explained that commercial
lending institutions, such as Wells Fargo or First National
Bank, make loans and AIDEA provides the credit backstop and buys
loans up to 90 percent. He referred to page 7, lines 4-6, in
proposed Section 6, which requires AIDEA to retain at least 10
percent of the principal amount of the loan retained by the loan
originator. He further explained that inserting "qualified
energy development and energy efficiency allows the private
sector to continue to make loans and work with AIDEA through the
normal system so AIDEA does not crowd out the private sector in
its work to provide credit backstops, loan guarantees, or direct
loans. This provision was added to the bill to keep this
consistent, he stated. He recapped that the state agency would
have increased finance powers to finance energy infrastructure,
but it is important for the private sector to be able to compete
and work with AIDEA yet not have AIDEA push them out of the
market.
4:05:33 PM
MR. PAWLOWSKI referred to page 2, lines 3-31 through page 4, line
20, to proposed Sections 3-5, which were added in the Senate
Finance Committee. He referred to proposed Section 3, which
would allow AIDEA, when building a facility or when there is an
interest in an AIDEA facility in a community - that is exempt
from state or borough taxes - to deduct the value from the full
determined taxable value as it relates to the base student
allocation and funding in the education program. He referred to
page 3, lines 22-26 for the specific language. He pointed out
that the education statutes have a local mill requirement and
required local match for the state contribution. He clarified
that this bill would exempt property owned by the AIDEA from the
city or borough tax rate upon which the 4 mills is calculated.
4:06:51 PM
REPRESENTATIVE JOHNSON asked whether this relates to new
properties or is retroactive.
MR. PAWLOWSKI answered that the bill is retroactive in that it
does not ask for additional monies; however moving forward if
infrastructure is in the community - and the community has
decided to exempt from taxes - the state will not deduct
education funding by requiring a higher local match. He
explained that if the bill works as intended and energy
infrastructure is built in communities and the community decides
to exempt the project from city or borough taxes, that the
community could potentially lose education funding.
CHAIR OLSON asked whether there is a formal opinion on the
effect on education funding.
MR. PAWLOWSKI offered to provide it. He explained that he has
not asked for a specific legal opinion, but it has been defined
within the fiscal note just received. He elaborated that
initially an earlier exemption in SB 25 created problems for the
Municipality of Anchorage since it was not an elective. This
new language was drafted in consultation with the municipalities
that were affected.
4:08:42 PM
REPRESENTATIVE JOHNSON asked whether this provision is voluntary
so if communities do not want to exempt the projects they don't
have to do so.
MR. PAWLOWSKI answered yes. He related that the MOA has the
FedEx terminal owned by AIDEA and the tax value to the MOA is
substantial so they would not necessarily choose to exempt it.
4:09:09 PM
REPRESENTATIVE JOHNSON asked whether the MOA could pick and
choose if a municipality only wants to exempt a project, such as
the FedEx terminal or if it is all or nothing.
MR. PAWLOWSKI answered that it would be up to the municipality
to pick and choose, which is the reason for the phrasing,
"excluding property owned by the Alaska Industrial Development
and Export Authority that is exempt from city or borough tax,"
so the exemption of city and borough tax is up to them. He
pointed out that the AIDEA property is not exempt in the regular
tax statute and the original language created problems. He
offered to provide the information that led to the changes.
CHAIR OLSON asked him to provide it to the committee and Mr.
Pawlowski offered to do so.
MR. PAWLOWSKI related that AIDEA returns a dividend, must
collect interest, and is the commercial lending institution,
which is why AIDEA was chosen.
4:09:58 PM
MR. PAWLOWSKI referred to a flowchart that outlines how the
money would move through the proposed capitalization [slide 19].
He explained that the state of Alaska establishes the
Sustainable Energy Transmission and Supply (SETS) fund,
capitalizes the fund through $125 million as per the fiscal
note. He explained the AIDEA would use the proceeds through
financing mechanisms to support energy projects. The return
from the investments would come back to the fund. He
highlighted that AIDEA has the ability to the borrow money, can
use the capital markets to refresh the capital fund, and return
a dividend back to the state. He pointed out that last fiscal
year that return was $29 million. He referred members to the
most recent credit report from Standard and Poor's for details,
although he deferred to AIDEA to explain the due diligence
processes and the mechanics of AIDEA.
4:12:37 PM
MARK DAVIS, Deputy Director, Investment Finance & Analysis,
Alaska Industrial Development and Export Authority (AIDEA),
Department of Commerce, Community & Economic Development
(DCCED), explained that SB 25 will provide AIDEA with several
tools to finance qualified energy projects. First, it would
create a direct loan program. Currently, the banks or credit
union bring a package to AIDEA - the loan arm - and AIDEA can
take up to 90 percent, but AIDEA works with the banks and does
not directly deal with the customer. Under the bill, AIDEA
would provide loan participations or direct loans for energy.
Thus if a utility needed a loan, AIDEA could conceivably make
that loan. He responded to an earlier question from
Representative Holmes, noting it could be any type of utility,
including a rural electrical cooperative, a nonprofit or a for
profit company.
4:13:37 PM
CHAIR OLSON asked how this would affect existing loans an entity
may have with AIDEA.
MR. DAVIS answered that SB 25 limits the capital from AIDEA to
one-third of the capital. In further response to Chair Olson,
he interpreted that to mean the aggregate.
4:14:00 PM
REPRESENTATIVE HOLMES recalled he mentioned any utility and
asked for further clarification.
MR. DAVIS clarified that he meant other projects, not just
limited to utilities.
4:14:10 PM
MR. DAVIS said the next thing would be to establish reserves and
ensure loan or bond guarantees. Currently, AIDEA does not have
power to create a backstop or loan guarantee. He related a
scenario in which Golden Valley Electric Association (GVEA)
could borrow via the capital markets, which can be expensive.
The GVEA could issue bonds, but may have limitations on its
bonding capabilities. This bill would allow the GVEA to issue a
bond and seek a bond guarantee from AIDEA. He related that
AIDEA would use its AA rating bond issue as a backstop, which
could substantially reduce the cost of the bonding to the
utility. He pointed out this is ultimately beneficial to
ratepayers. Additionally, SB 25 would allow AIDEA to work with
outside capital. Currently, given the economy, pension funds or
insurance funds want to invest and used to invest in real
estate, the stock market, or bonds and Treasury bills. He
pointed out that Treasury bills are at two percent so no one is
currently investing in them. He predicted that if this bill
were to pass, that several of these firms could put up 100
percent of the funds for energy projects so long as the firms
had AIDEA's credit backstop. Thus SB 25 could provide the risk
adversity these firms need. Again, the reserve fund could be
used to leverage other funds to attract outside capital to
Alaska for energy projects.
4:16:08 PM
REPRESENTATIVE SADDLER asked whether the tools proposed to be
given to the SETS fund for loan participation be useful tools
for other AIDEA business units.
MR. DAVIS answered that AIDEA already has the capacity of loan
participation with limitations on debt to equity ratios for
various projects, including commercial real estate and other
projects; however, AIDEA currently does not have any guarantee
or credit backstop for any of AIDEA's programs.
REPRESENTATIVE SADDLER asked whether those tools would be
helpful.
MR. DAVIS responded that it could be useful, hypothetically,
speaking, given the current market.
4:17:10 PM
MR. DAVIS pointed out another tool is that SB 25 would allow
AIDEA to defer payments to capitalize interest, which
essentially is the term of patient capital. He related that
sometimes taking interest only on a loan can lower the up-front
costs and capitalize interest on the back end of the loan. He
explained that can be useful with large energy projects that
tend to have high initial costs which flatten out over time. He
characterized this as very typical of these types of project so
it makes sense for an energy fund to have that ability.
Additionally, another tool, which hasn't been discussed thus
far, is that the bill will allow AIDEA to work with public-
private partnerships (PPP). He referred to page 12, lines 15-
17, to paragraph (4), which allows AIDEA to enter into operate-
transfer agreements. He suggested that a utility could use
outside capital to finance a project, obtain a construction loan
with other financing, provide a credit backstop using AIDEA,
then transfer the ownership of the project by lease to the
utility for operation, while retaining security interest in the
project as security for financing. He characterized these types
of agreements as very typical in commercial financing, but not
usually done by a state entity. He summarized that these types
of tools are useful, particularly given the current market,
since lots of investment money exists - lighter financing - but
no one want to take that much risk.
4:19:00 PM
MR. DAVIS explained that SB 25 would allow AIDEA to go out to
the market to raise money or lend at the current rates. He
stated the current fixed interest rate is 6.10 percent - whether
it is for a five or 25 year loan - and the variable interest
rate is currently 5.07 percent, regardless of the term. He said
these are market indexes to the Federal Home Loan Bank Board
(FHLBB) of Seattle, which is the entity that tends to lend money
to banks in Alaska. Thus, the AIDEA tracks its interest with
the Federal Home Loan Bank of Seattle. He concluded that these
rates would be competitive and AIDEA would not undercut local
institutions.
4:19:54 PM
REPRESENTATIVE THOMPSON related his understanding that Golden
Valley Electric Association (GVEA) is not interested in working
with AIDEA since they would pay 6 percent interest since GVEA
can still currently borrow at 3 to 3.5 percent. He inquired as
to whether SB 25 would make AIDEA more competitive or if it will
still be the standard.
MR. DAVIS answered that if AIDEA went into the bond market to
raise funds it would be below market index from FHLBB; however,
if the capital energy fund or the RUS funds, which both are
available to GVEA and could range between 2-3.3 percent, which
would be below market rates. He acknowledged that AIDEA does
not compete with those rates, which he characterized as good
rates; however one might see a utility attempt to use those
rates for the maximum amount, but fall short. Thus this bill
would provide a means to finance the rest of the project. He
said that as cost of projects increase financing tends to become
tighter, for example, he pointed out that the RUS currently has
a lot of demand. He characterized the bill as another way to
finalize a project.
4:21:27 PM
REPRESENTATIVE THOMPSON related his understanding that AIDEA
would offer a 6 percent interest rate, but GVEA is likely
looking at approximately 2.8-3.2 percent interest rate. He
stated he had hoped this might be more competitive to allow
utilities like GVEA to use Alaska funds for Alaska energy
projects.
MR. DAVIS responded that it would depend on how the financing
was structured. He suggested that one local utility filing to
build a plant is in excess of 7 percent interest. He predicted
that if this utility had used a bond with an AIDEA guarantee
that AIDEA's AA rate would have made it considerably below that
for financing. He concluded that it also depends on whether the
utility building the structure has access to the federal rates.
He said that some do and some don't. He offered his belief that
GVEA does have ability to use the two funds previously
mentioned.
4:22:34 PM
REPRESENTATIVE HOLMES asked for the type of risk exposure the
state would have.
MR. DAVIS answered that AIDEA would need to maintain good
underwriting standards, which AIDEA has done. The current loan
participation has a default rate of less than one percent and
AIDEA's rating is over AA. He offered his belief that the debt-
coverage ratio is in the range of 1.25 to 1.34 on the loans and
the net present value would be in the range of 1.1 to 1.3.
4:23:22 PM
REPRESENTATIVE JOHNSON related his understanding that the
program would guarantee up to 25 percent of the loan. He asked
whether AIDEA could backstop the whole loan or just the 25
percent. He further asked how this would affect the state's
bond rating.
MR. DAVIS responded that SB 25 establishes a brand new fund
within AIDEA, which is totally separate from AIDEA's Development
Enterprise Fund, which is the basis for the loan participation
and development project funds. He related his understanding
that one of AIDEA's first tasks will be to seek a rating from
the rating agencies after explaining the limitations on
financing - listed on page 13 of the bill under proposed AS
44.88.740. He offered his belief that the bill was designed to
not affect AIDEA's current rating for its Development Enterprise
Fund.
4:24:51 PM
REPRESENTATIVE JOHNSON remarked that AIDEA does not know whether
the SETS fund would be rated AA based on the $125 million in
initial funding.
MR. DAVIS answered that is correct; but AIDEA also relies on the
underwriting and the internal controls for projects and project
approval. He elaborated that the AIDEA has a project review
commission and credit commission so those processes will be
considered as well as past performance of AIDEA's portfolio
during the rating process. He concluded that AIDEA will ask
Standard & Poor's (S&P), Fitch Ratings, and Moody's Investor
Service for a rating.
4:25:36 PM
REPRESENTATIVE JOHNSON asked whether anyone else has done this
previously. He noted lots of people have good standards and
practices, but it doesn't mean they don't make bad loans.
MR. DAVIS said he aware of similar programs, including that
Michigan has one in process and AIDEA has been observing them.
He commented that Michigan's program is broader and is not
limited to energy projects, but the concept is the same. He
added that a program is also being developed in New York. He
offered his belief that AIDEA's overall rating would probably
apply to the new fund if the same underwriting standards apply.
This bill will help develop energy projects, but he cautioned it
is not a lockdown system. He predicted the rates will be
competitive and the underwriting will be very tight, but it
should provide a good rating.
4:26:51 PM
REPRESENTATIVE JOHNSON asked for the difference in the interest
rating between the AA and A bond rating.
MR. DAVIS answered that currently there is not much difference
and the spread is less than several hundred basis points since
there are not currently many entities with a A or AA rating. He
advised that many states have been denigrated to junk bond
status or quadruple fees such as have California and Washington.
REPRESENTATIVE JOHNSON asked whether California has a B rating.
MR. DAVIS answered that California has a BBBB rating, which he
characterized as a "polite rating." In response to a further
question, he said AIDEA would contact the rating agencies and
have arranged to hire several consultants to work with if the
bill passes. He said he has held some conversations to lay out
a program to get a rating.
4:28:06 PM
REPRESENTATIVE JOHNSON asked whether AIDEA could obtain pre-
approval.
MR. DAVIS answered that SB 25 will need to be in place. He
related the consultants' views are that the bonds should be at
least A-rated bonds.
REPRESENTATIVE JOHNSON related his understanding the bond rating
would be at least A.
MR. DAVIS commented that relatively few states in the market
have that rating, but Alaska does. He advised that the raters
look to management and the underwriting standards of the entity.
He pointed out that AIDEA already has that in place and the
raters will be advised that the new money will be handled in the
same fashion.
4:29:04 PM
REPRESENTATIVE MILLER asked who does the rating for bonds.
MR. DAVIS answered that rating for bonds for general obligation
(GO) bonds of the agency are derived from the agency rating or
the funds rating within the agency. He explained it would be a
matter of agencies performing the review and rating. A revenue
bond or conduit bond is rated by the credit snapshot of the
project which is funded by the revenue bond rather than the
issuing agency. He provided an example, such that AIDEA
recently issued revenue bonds for Providence [Alaska Medical
Center] (Providence Hospital). Those bonds were based on the
ability of Providence Hospital to repay the bonds at that rate.
He suggested that the raters looked more at Providence Hospital
and not at AIDEA since AIDEA is not involved. He highlighted
that AIDEA can issue revenue bonds for energy projects if the
project has a strong revenue stream. Thus AIDEA will use that
tool.
4:30:18 PM
REPRESENTATIVE SADDLER referred to page 12 to the proposed AS
44.88.730, which lists the powers and duties of the authority.
He prefaced that he is not an expert in financial matters. He
asked whether the financing capabilities offered through this
fund will be sufficient or appropriate for development projects
such as the proposed Susitna-Watana Hydroelectric project. He
inquired as to which of these funds might be applicable. He
further asked whether the proposed capitalization would be
sufficient for a huge project and how much leverage the fund
would provide.
MR. DAVIS answered that the SETS fund could be used, not to fund
the whole project, but perhaps to build a transmission line to
the dam. He pointed out that AIDEA's bond rating would be used
to build the transmission line, which might be a lower cost than
AEA's ability to finance that same transmission line. Further,
an access road might be needed and since AIDEA is authorized to
build industrial roads in AIDEA's energy projects, a PPP could
be formed to build the access road. In response to the question
on leverage, he related that he contacted two of AIDEA's
consultants, who indicated the ratio should be about 5 to 1.
4:32:16 PM
REPRESENTATIVE SADDLER asked whether there is a "sweet spot" for
the project or if it would depend on the tool used.
MR. DAVIS answered that the larger the amount of capitalization,
the more leverage and the better the ability to perform
projects, but the purpose of this is to have $125 million this
year. He anticipated the legislature would fund the SETS with
another $125 million next year. He suggested that would provide
a conservative estimate of three to one ratio. He offered his
belief that amount of capital could finance quite a few
significant projects. He further anticipated the fund would be
used for segments of projects, especially for parts of projects
that are difficult to finance. He reiterated that the fund
would not cover the whole project, but perhaps the transmission
line.
4:33:04 PM
REPRESENTATIVE JOHNSON related that the project would be limited
to using 25 percent of the funding from the AIDEA SETS fund. He
asked, with respect to the Susitna-Watana dam project, whether
the dam and infrastructure would be considered one project or if
the transmission lines would be a separate project. He
clarified that he is interested in how AIDEA would determine
what would encompass the 25 percent.
MR. DAVIS offered his belief that the transmission line project
would be a stand-alone project, and would fall under the one-
third limitation of the bill. He suggested that each portion of
the develop project would be discrete. He related his
understanding that the fund could be used for the overall
project. He offered his belief that the market would determine
this since investors would be willing to invest and define and
determine the investment. He concluded that working with the
private sector will overcome the pressure to attempt to do more
than what is feasible to do.
4:34:16 PM
REPRESENTATIVE JOHNSON asked where the roads would fall in,
noting that he is not jumping to the conclusion that
transmission lines would be state-owned since it could be a
private project. He asked whether a road project would be
considered part of the overall project since the transmission
line project can't be built without a road. Further, a dam
could not be built without a road. He asked whether roads would
be separate from this and or if it could be rolled into the 25
percent limitation.
MR. DAVIS agreed that an access road for a utility project and
the transmission lines could be financed through the structure
of SB 25, but the state would not build it. The way SB 25 is
worded, AIDEA would have one-third of the project and would look
for private sector partners, such as utilities or consortiums or
banking institutions to invest. He said he did not envision
these projects would involve direct state funding.
4:35:23 PM
REPRESENTATIVE JOHNSON related a scenario in which the steam
generation project across Cook Inlet needed funding for a road.
He inquired as to whether this project would be eligible.
MR. DAVIS answered it would depend on whether it met this
definition to qualify as energy development. He offered his
belief that the Department of Law (DOL) would determine this and
AIDEA routinely confers with the DOL to ensure the financing
proposal fits within AIDEA's statutory definition.
4:36:20 PM
CHAIR OLSON predicted it probably would be a good project since
the project would need 30 miles of road or transmission lines.
REPRESENTAIVE JOHNSON related his understanding that the
proposed dam would have about 60 miles of road, but not much
transmission line. He stated he is interested in understanding
how this would work since it would be problematic to have a
project financed and then fall short on funding for a road.
4:36:42 PM
MR. DAVIS characterized this bill as providing the bits and
pieces of a project once the larger portion of the project
funding is underway. He envisioned that the PPP is directed at
those parts of a project. He referred to the Red Dog Mine,
which could generate a revenue stream and pay off bonds.
4:37:17 PM
REPRESENTATIVE JOHNSON inquired as to whether the tidal
generators in the footing for the proposed Knik Arm Bridge and
Toll Authority (KABATA) could be funded.
MR. DAVIS again suggested that the project would definitely need
to go to the DOL for legal determination.
4:37:40 PM
TED LEONARD, Executive Director, Alaska Industrial Development
and Export Authority (AIDEA), Department of Commerce, Community
& Economic Development (DCCED), stated that AIDEA's management
has looked at these types of tools previously as it has
considered other infrastructure projects and their consultants
have indicated these tools would be very valuable for AIDEA. He
offered his belief that these tools provided in SB 25 would be
helpful to state in filling gap to finance energy projects.
4:38:51 PM
MR. LEONARD explained the interest rate process, such that if
AIDEA funds a project or a loan out of its internal funds it
would go to the rates Mr. Davis discussed as 5 percent for
variable rates and 6.1 percent for fixed interest. Currently,
the fixed rates are based on AIDEA's floor or the interest
earnings over a five-year period. He related that during the
past 10-15 years, AIDEA has not gone out to the market to fund
loan participations. He elaborated that for very big projects
AIDEA would go out to market and issue a bond, and in that
instance it would be the bond rate less about 25 basis points
for cost of funds management. He related a scenario in which in
a tax exempt bond for utilities for 30 years would be
approximately 3.3 percent which would add 150 basis points and
result in about the 4.5 percent range.
4:40:12 PM
MR. LEONARD explained that tools can help a utility obtain very
cheap money is to add the credit backstop that would allow the
Rural Utilities Service (RUS) to look at them more favorably.
He offered his belief that most of the Independent Power
Producers (IPPs) could not get those types of ratings for their
projects, only the cooperatives and municipalities could tie
into that type of very less expensive type of capital.
4:40:48 PM
REPRESENTATIVE SADDLER asked him to elaborate on the term
"credit backstop."
MR. LEONARD responded that the AIDEA would provide the fund as
the credit backstop, which in essence is that AIDEA would
guarantee a certain portion of the payment if the entity fell
through. He pointed out that if everything goes well the credit
backstop is not used. He said that typically a portion of fund
would be reserved to guarantee the credit backstop and charge a
certain amount of basis points to give that assurance. He
characterized it as insurance.
REPRESENTATIVE JOHNSON compared it to cosigning a car loan.
4:41:51 PM
REPRESENTATIVE SADDLER asked whether the backstop would be
considered collateral or if the loan would be considered as
collateral. He asked for clarification on whether it is
directly the fund or would be one step removed from the fund.
MR. LEONARD answered that it would be one step through. He
related a scenario in which AIDEA had to step in, that in
essence, the AIDEA would pay and would have the project as
collateral for AIDEA's backstop. He recapped that having the
credit backstop would remove the worry away from the creditor.
He reiterated what Mr. Davis stated, that as AIDEA has
considered infrastructure projects - such as roads or major port
infrastructure - that many consortiums are willing to provide
very low rates - in the five to seven percent range - so long as
they have some type of backstop such as insurance or pension
funds. He said lenders are willing to receive a low rate over a
period of time as long as it is safe bet and AIDEA would provide
that backstop for assurance.
4:43:17 PM
REPRESENTATIVE SADDLER inquired as to any risk to AIDEA with
respect to the SETS fund.
MR. LEONARD answered that the risk to the SETS fund projects
would be the risk AIDEA takes in essence for every project that
AIDEA invests in since AIDEA provides the credit backstop. He
stated that instead of investing all the money, which is at
risk, AIDEA would back money being paid so the risk is the same
as if AIDEA invested the money directly. He characterized it as
the ability to leverage monies, which is managed through
reserves and through the investments.
4:44:18 PM
REPRESENTATIVE SADDLER asked whether SB 25 would help AIDEA to
diversify.
MR. LEONARD answered that he was unsure this bill would help
AIDEA in its current mission since SB 25 does not affect AIDEA's
current mission. He explained that by putting the funds into a
separate fund that if something did go wrong it would not affect
the rating for the AIDEA Development Project Fund since there is
a firewall between the two funds. He reiterated that AIDEA
would go out and obtain new bond covenants for the new SETS fund
that would be different from the covenants in its development
fund. He pointed out that is the reason for the separate fund
so the ratings in the one would not affect the other. He said
that AIDEA's underwriting and general assets would be examined,
but raters will concentrate on the new SET fund and the
capitalization for it.
4:45:42 PM
CHAIR OLSON, with respect to underwriting asked for
clarification on whether the project is underwritten for the
amount of AIDEA participation and then adds in the backstop.
MR. LEONARD answered yes; depending on the type of layered
financing. He related as Representative Johnson discussed, one
thing AIDEA's development fund could provide is to consider an
industrial road as a separate project from the transmission
lines project, if it made financial sense to invest using the
development fund. He related his understanding if AIDEA
considered a project to be very good for the state, AIDEA could
come to the legislature to request authorization to invest more
than 30 percent; however, this would be at the will of the
legislature.
4:46:58 PM
CHAIR OLSON asked whether AIDEA has an idea of which projects
would be more likely to come in on budget. He surmised that
docks do not have a good history, but roads or dams might have a
different likelihood of success.
MR. LEONARD offered his belief that the SETS fund would be a
safer fund than AIDEA's development fund. He pointed out that a
utility, such as GVEA, who is initiating a project, would be
given a rate by the RCA at the same time. Thus the GVEA would
have AIDEA backstop, but the rate payers are also backing AIDEA.
He stated that most of the projects would have the RCA involved
so it will help them obtain better rates with AIDEA's
involvement.
CHAIR OLSON related his understanding that AIDEA would be
working with regulated utilities since they would be able to
pay.
MR. LEONARD answered yes, in the event the utilities would need
the capital. He pointed out, with respect to the Prince of
Wales Island, that several mining interests would be considered
viable if hydroelectric power was available.
4:49:07 PM
DAN BOCKHORST, General Manager, Ketchikan Gateway Borough, on
behalf of the Ketchikan Gateway Borough (KGB) stated that SB 25
provides a common sense solution to a glaring public policy
concern of the KGB. He reminded members that the state owns the
Ketchikan shipyard since it is an AIDEA owned facility. The
state has a multi-million dollar investment in the shipyard. In
order to help secure the financial viability of the state's
investment, the KGB has exempted shipyard operations from the
KGB's property tax; however, under current law, the KGB's
required contribution to its school district is not adjusted to
reflect this investment. In other words, the KGB helps ensure
the state's investment in the shipyard, but the state fails to
recognize that effort and penalizes the borough by reducing
education funding to the Ketchikan Borough School District
(KBSD). He suggested it was ironic that the more money the
state and federal government invests in the shipyard the greater
the penalty imposed on the KGB, in fact, if SB 25 is not enacted
over the next three years the penalty the borough will receive
is triple the current penalty amount. He stated that proposed
Sections 3, 4, and 5 of the bill correct this problem. He
stated that the KGB urges support for SB 25.
4:50:59 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on SB 25.
[SB 25 was held over.
SB 136-VETERANS DRIVERS LICENSE, TAX CREDIT
4:51:24 PM
CHAIR OLSON announced that the final order of business would be
CS FOR SENATE BILL NO. 136(FIN) am, "An Act providing a tax
credit for employing a veteran that may be taken against a
liability for the tax on corporation income; and providing for
an effective date."
4:51:40 PM
SENATOR BILL WIELECHOWSKI, Alaska State Legislature, introduced
himself. He thanked members for taking time to hear SB 136. He
introduced his staff.
4:52:10 PM
KENDRA KLOSTER, Staff, Senator Bill Wielechowski, Alaska State
Legislature, on behalf of the sponsor, Senator Bill
Wielechowski, stated that as of June 2011, one million veterans
were unemployed and the jobless rate for post 9/11 veterans was
at 13.3 percent. She reported that young male veterans ages 18-
24 have an unemployment rate of 21.9 percent. She pointed out
that some Google searches are showing unemployment figures
closer to 30 percent unemployment for veterans. She offered to
confirm the figures with the U.S. Department of Defense.
4:53:30 PM
MS. KLOSTER related that the sponsor held a town hall meeting
and veterans expressed concern about finding jobs. This bill
would create $2,000 corporate income tax credit for a business
who hires a veteran and a $3,000 credit for hiring a disabled
veteran. The veteran must be employed for 12 months, or 1,560
hours, which is about 30-hours a week. This bill would also set
up a $1,000 tax credit for seasonal employment, which was a
provision requested by the hotel industry. She reported a
number of organizations support this bill, including Vets
Helping Vets, Vietnam Veterans of America, and numerous
businesses.
4:54:32 PM
REPRESENTATIVE JOHNSON asked whether this is per employee.
MS. KLOSTER answered yes, the tax credit is per veteran hired.
She explained that for seasonal employment it is limited to the
first season.
4:55:07 PM
REPRESENTATIVE JOHNSON asked whether the credit for fulltime is
per year or one time.
MS. KLOSTER agreed it is a one-time tax credit.
4:55:41 PM
REPRESENTATIVE SADDLER referred to page 2, line 29, to the
requirement that the veteran be honorably discharged. He asked
whether the sponsor has considered extending this to general
discharge.
MS. KLOSTER answered that the sponsor is specific that the
discharge should be an honorable discharge. She indicated the
sponsor has worked with other senators in the body who have
served in the military before deciding on the honorable
discharge.
REPRESENTATIVE SADDLER related some state benefits are extended
to those honorably discharged and those who received general
discharge, as well. He characterized this bill as having a high
threshold.
4:56:32 PM
CHAIR OLSON inquired as to whether there is a mechanism that
prevents stacking of veterans, such as hiring a veteran then
firing him/her and hiring another veteran.
MS. KLOSTER pointed out the bill requires hiring the veteran for
at least 12 months prior to tax credit, per veteran, and the
veteran must work a minimum of 1,560 hours.
4:57:15 PM
REPRESENTATIVE SADDLER commented that hiring veterans can be
good business sense. He strongly suspected that the business
will not only obtain the credit, but will double their money due
to productivity. He offered his belief that these men and women
work hard and have a good work ethic.
4:57:47 PM
ALBERT HOWARD, Mayor, City of Angoon, stated that he is a
veteran and approximately 20 percent of the 480 people in Angoon
are veterans. He expressed appreciation for the work the men
and women have given. He said that in many ways the state says
welcome home and SB 136 does just that since it ensures that
community, state, and nation shows appreciation for the military
personnel who have protected our country. Most veterans do not
want handouts, but giving them a better than equal opportunity
will allow them to continue the American dream that men and
women joining the armed forces believe will be there when they
come home. He offered his belief that a person joining the
military gives up some rights while serving in the armed forces.
He offered his belief that SB 136 is positive on their behalf.
He offered his support for SB 136. He encouraged members to
keep in mind that our men and women are in harm's way and trust
that the legislature is doing what is right for all. He
suggested that supporting SB 136 will protect and maintain the
same or better quality of life for veterans that have given
time, sweat, blood, and at times, tears with their "get it done
attitude" so everyone can continue the day-to-day business.
CHAIR OLSON remarked that a third of the committee qualify as
veterans.
5:02:02 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on SB 136.
5:02:28 PM
REPRESENTATIVE JOHNSON asked whether anything in the bill limits
a corporation in Alaska from employing a veteran outside the
state.
MS. KLOSTER referred to page 1, line 6, which specifies veterans
must be hired and working in the state.
REPRESENTATIVE JOHNSON pointed out that being hired in Alaska
does not necessarily mean they are working in Alaska.
5:03:00 PM
CHAIR OLSON suggested they might be hired in Alaska, but are
working in North Dakota.
MS. KLOSTER explained she held a conversation with the bill
drafter to ensure the language meant the veteran would be hired
and working in the state. She offered to confirm this with the
bill drafter and get back to the committee.
5:03:58 PM
REPRESENTATIVE JOHNSON related his understanding that a person
would be hired in Alaska, but he was unsure that the veteran
would need to work in Alaska. He further asked whether the
business would be eligible for credit if the business hired a
person who is not an Alaska resident who comes to Alaska and is
hired.
MS. KLOSTER responded that the distinction does not require the
veteran to be an Alaska veteran due to some constitutional
issues. Some of the language was revised to reflect "in the
state" with the intention that the veteran would be in Alaska
and would be working in Alaska; however, constitutional issues
arose with language that specified the person had to be an
Alaska veteran or to use that type of terminology.
5:05:11 PM
REPRESENTATIVE JOHNSON asserted that he would love to go to
court defending Alaskans hiring Alaskans to fight for the rights
of Alaskans. He welcomed the challenge.
MS. KLOSTER, in response to Chair Olson, stated that she did not
have any legal documents, but offered to address it. She
remarked that Senator Wielechowski is very dedicated and his
intention is also to ensure Alaska veterans are hired. He is
committed to Alaskans getting the jobs.
5:06:44 PM
REPRESENTATIVE SADDLER related his understanding the Alaska
Office of Veterans Affairs wants to be sure veterans in Alaska
are signed up to obtain the U.S. Department of Veterans Affairs
(VA) benefits. He recalled that veterans have been offered the
opportunity to register. He asked whether the sponsor would be
amenable to an amendment to require employers who receive this
credit must have their employees who are veterans apply for VA
benefits. He suggested such an amendment would help the
employer by possibly reducing medical costs and help the
veterans maintain closer contact with the VA to obtain
information.
MS. KLOSTER offered to discuss this with Senator Wielechowski.
5:07:54 PM
MS. KLOSTER reported that Mr. Bullock, the bill drafter,
indicates that the employer receives the credit when the
employer hires a military veteran in Alaska.
REPRESENTATIVE HOLMES referred to page 1, lines 5-6, which
reads, "a taxpayer that hires a veteran and employs the veteran
in the state..."; which she interpreted to mean the veteran must
be hired in the state and working in the state. She interpreted
that to mean the bill drafter wanted it to be as clear as
possible that the military veteran must be working in Alaska.
5:09:12 PM
REPRESENTATIVE THOMPSON referred to page 1, line 10, which
requires the veteran be unemployed in Alaska for more than four
weeks. He suggested that if the veteran has been unemployed in
Alaska for more than four weeks implies residency since Alaska
has a residency requirement of 30 days.
REPRESENTATIVE MILLER was unsure whether the language fixes the
problem.
REPRESENTATIVE SADDLER suggested one solution to address
residency. He referred to page 2, line 5 to insert, "for a
veteran employed in Alaska for 1,560 hours ... and on line 9, to
add, "for a veteran employed in Alaska for 600 hours ... which
would ensure the veteran would be hired and working in Alaska.
5:10:52 PM
MS. KLOSTER concluded by sharing a soldier's statement that
conveyed a conversation he had held with a governor. She read,
"He didn't say he was the most worried about facing the enemy in
the night. He looked at me in the eyes and said, 'Governor, I'm
worried about whether there will be a job for me when I get
home.'" She said she thought that was really telling and the
reason the legislature is doing a variety of things to support
Alaska's veterans when they are coming home. She appreciated
the committee hearing the bill today.
[SB 136 was held over.]
5:11:56 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:11 p.m.