Legislature(1995 - 1996)
03/20/1996 08:20 AM House RES
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE RESOURCES STANDING COMMITTEE
March 20, 1996
8:20 a.m.
MEMBERS PRESENT
Representative Joe Green, Co-Chairman
Representative William K. "Bill" Williams, Co-Chairman
Representative Scott Ogan, Vice Chairman
Representative Alan Austerman
Representative Ramona Barnes
Representative John Davies
Representative Pete Kott
Representative Don Long
Representative Irene Nicholia
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL 388
"An Act revising laws relating to oil and gas leasing to authorize
a program of areawide leasing."
- PASSED CSHB 388(RES) OUT OF COMMITTEE
HOUSE BILL 401
"An Act authorizing the issuance and sale of revenue bonds to fund
public wastewater systems, nonpoint source water pollution control
projects, including solid waste management systems, and estuary
conservation and management projects; authorizing the use of the
Alaska clean water fund to pay and secure the bonds and to pay
costs related to issuance and administration of the bonds;
authorizing certain measures to secure payment of the bonds; and
amending Alaska Rule of Civil Procedure 3."
- PASSED CSHB 401(RES) OUT OF COMMITTEE
CS FOR SENATE JOINT RESOLUTION NO. 39(RES)
Relating to the U.S. Environmental Protection Agency draft National
Pollutant Discharge Elimination System general permit for placer
mining in Alaska.
- SCHEDULED BUT NOT HEARD
(* First Public Hearing)
PREVIOUS ACTION
BILL: HB 388
SHORT TITLE: AREAWIDE OIL & GAS LEASING
SPONSOR(S): REPRESENTATIVE(S) ROKEBERG,B.Davis
JRN-DATE JRN-PG ACTION
01/05/96 2368 (H) PREFILE RELEASED
01/08/96 2368 (H) READ THE FIRST TIME - REFERRAL(S)
01/08/96 2368 (H) O&G, RESOURCES, FINANCE
03/13/96 3110 (H) O&G RPT CS(O&G) NT 2DP 4NR
03/13/96 3111 (H) DP: ROKEBERG, OGAN
03/13/96 3111 (H) NR: BRICE, G.DAVIS, FINKELSTEIN
03/13/96 3111 (H) NR: WILLIAMS
03/13/96 3111 (H) FISCAL NOTE (DNR)
03/13/96 3111 (H) REFERRED TO RESOURCES
03/18/96 (H) RES AT 8:00 AM CAPITOL 124
03/18/96 (H) MINUTE(RES)
03/20/96 (H) RES AT 8:00 AM CAPITOL 124
BILL: HB 401
SHORT TITLE: REVENUE BONDS: WATER & WASTE PROJECTS
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
JRN-DATE JRN-PG ACTION
01/08/96 2378 (H) READ THE FIRST TIME - REFERRAL(S)
01/08/96 2378 (H) CRA, STATE AFFAIRS, RESOURCES, FINANCE
01/08/96 2379 (H) 2 ZERO FISCAL NOTES (REV, DEC)
01/08/96 2379 (H) GOVERNOR'S TRANSMITTAL LETTER
02/20/96 (H) CRA AT 1:00 PM CAPITOL 124
02/20/96 (H) MINUTE(CRA)
02/21/96 2829 (H) CRA RPT 4NR
02/21/96 2829 (H) NR: ELTON, AUSTERMAN, KOTT, IVAN
02/21/96 2829 (H) 2 ZERO FISCAL NOTES (DEC, REV) 1/8/96
03/09/96 (H) STA AT 10:00 AM CAPITOL 102
03/12/96 3088 (H) STA RPT CS(STA) NT 5DP
03/12/96 3089 (H) DP: JAMES, GREEN, IVAN, PORTER,
ROBINSON
03/12/96 3089 (H) 2 ZERO FISCAL NOTES (REV, DEC) 1/8/96
03/12/96 3089 (H) REFERRED TO RESOURCES
03/20/96 (H) RES AT 8:00 AM CAPITOL 124
WITNESS REGISTER
REPRESENTATIVE NORMAN ROKEBERG
Alaska State Legislature
Capitol Building, Room 110
Juneau, Alaska 99801
Telephone: (907) 465-4968
POSITION STATEMENT: Sponsor of HB 388.
KENNETH A BOYD, Director
Division of Oil and Gas
Department of Natural Resources
3601 C Street, Suite 1380
Anchorage, Alaska 99503-5948
Telephone: (907) 269-8800
POSITION STATEMENT: Testified on CSHB 388(RES).
PAT FOLEY, Chairman
Land Exploration and Operations Committee
Alaska Oil and Gas Association
P. O. Box 100360
Anchorage, Alaska 99510
Telephone: (907) 265-6243
POSITION STATEMENT: Testified in support of CSHB 388(RES).
BRADLEY PENN
Marathon Oil Company
P. O. Box 196168
Anchorage, Alaska 99519
Telephone: (907) 564-6428
POSITION STATEMENT: Testified in support of CSHB 388(RES).
KEITH KELTON, Director
Division of Facility Construction and Operation
Department of Environmental Conservation
410 Willoughby Avenue, Suite 105
Juneau, Alaska 99801-1715
Telephone: (907) 465-5180
POSITION STATEMENT: Department presentation on CSHB 401.
MARIE SANSONE, Assistant Attorney General
Civil Division
Department of Law
P. O. Box 110300
Juneau, Alaska 99811-0300
Telephone: (907) 465-3600
POSITION STATEMENT: Available for questions on CS HB 401.
LEE SHARP, Bond Counsel
Department of Environmental Conservation
429 L Street, Suite 400
Anchorage, Alaska 99501
Telephone: (907) 276-1969
POSITION STATEMENT: Explained proposed amendments to CS HB 401.
BERDA WILLSON, Assistant Manager
Nome Joint Utilities
P. O. Box 70
Nome, Alaska 99762
Telephone: (907) 443-5288
POSITION STATEMENT: Testified in support of CS HB 401.
DIANA BENNETT, Finance Manager
Anchorage Water and Wastewater Utilities
Municipality of Anchorage
3000 Arctic Boulevard
Anchorage, Alaska 99503
Telephone: (907) 786-5623
POSITION STATEMENT: Testified in support of CS HB 401.
MIKE BURNS, Section Chief
Municipal Grants Section
Division of Construction & Facilities
Department of Environmental Conservation
410 Willoughby Avenue, Suite 105
Juneau, Alaska 99801-1795
Telephone: (907) 465-5136
POSITION STATEMENT: Answered questions on CS HB 401.
ACTION NARRATIVE
TAPE 96-38, SIDE A
Number 000
CO-CHAIRMAN JOE GREEN called the House Resources Committee meeting
to order at 8:20 a.m. Members present at the call to order were
Representatives Green, Williams, Austerman, Davies, and Nicholia.
Representatives Barnes, Kott, Long and Ogan arrived late.
HB 388 - OIL & GAS LEASING; BEST INT. FINDINGS
The first order of business was CSHB 388(O&G), "An Act revising
laws relating to oil and gas leasing as related to land previously
the subject of a written best interest finding; amending provisions
setting out exceptions to sales, leases, or other disposals for
which a revised written best interest finding is not required;
authorizing annual offer of land for oil and gas leases if the
land, or adjacent land, was the subject of a best interest finding
and if preparation of a supplement to the best interest finding for
that land is not justified; and modifying the statement of purpose
in the Alaska Land Act as it applies to oil and gas leasing."
Number 042
REPRESENTATIVE NORMAN ROKEBERG, sponsor of the measure, related
that he had reviewed the proposed amendments and is in full
accordance with the changes and duly noted a drafting change on
page 6. He urged committee's approval of the legislation
disclosing that it is caucus priority.
CO-CHAIRMAN GREEN recessed the committee due to lack of quorum.
REPRESENTATIVE ALAN AUSTERMAN asked for explanation of the drafting
change on page 6.
Number 141
CO-CHAIRMAN GREEN explained the change was a drafting preference by
the drafter which rearranged committee recommendations.
Number 212
REPRESENTATIVE ROKEBERG approved of the drafting change because he
felt that it made the language clearer.
CO-CHAIRMAN GREEN announced that the committee had a quorum and
entertained motion to adopt the committee substitute.
CO-CHAIRMAN BILL WILLIAMS moved for the adoption of the proposed
committee substitute for HB 388(RES), Version "M."
CO-CHAIRMAN GREEN asked if there was an objection. Hearing none,
CSHB 388(RES), Version "M" was adopted.
Number 281
REPRESENTATIVE JOHN DAVIES offered the following amendment to page
6, line 27:
Following: "may"
Insert: ", for state land north of the Umiat baseline."
REPRESENTATIVE DAVIES explained that the amendment would make the
bill applicable to the North Slope. The reason being he believes
the situation on the North Slope where the homogeneous
distributions of land there are suitable to the areawide proposals
in HB 388, and the heterogeneous nature of the Cook Inlet Basin
which are not so suitable to the bill, thus the reason for offering
the amendment.
Number 350
REPRESENTATIVE ROKEBERG indicated objection to the adoption of the
amendment, saying that the amendment does a very specific thing.
The bill before the committee, Version M, is non-specific to area,
it is also discretionary in a large degree. The Oil and Gas and
Resources Committees spent a substantial time, during the interim,
having major discussions and hearings. This is a topic that was
discussed in the Governor's Oil and Gas Policy Council and there
was concern expressed by the Administration about the Cook Inlet
area. That is why major accommodations were made and revisions in
the original bill to remove specific geographic areas from the
statutory changes to give the commissioner the ability to
incrementally implement this process as he sees fit. As the we
have heard from the director of the Division of Oil and Gas, he is
in support of this.
CO-CHAIRMAN GREEN addressed Ken Boyd for his position on the
amendment.
Number 490
KENNETH A. BOYD, Director, Division of Oil and Gas, Department of
Natural Resources, testified via teleconference from Anchorage. He
stated he understands the amendment. He said, "Once you build a
foundation finding, I think that's the key. As long as you have a
complete finding, the annual offer of sales, no matter where they
are, is somewhat perfunctory. The sale isn't the issue, it is the
finding and once you can do the finding, you can have the sale.
So, I don't think you absolutely need sale area specificity, but I
do know that the first sale that will take place under this new
system, if you like - it isn't really new - it's new and (indisc.),
will take place on the North Slope and it will take place between
the Colville and the (indisc.) as it is currently under schedule,
as the letter I wrote to the committee on the sixteenth of
January."
Number 568
MR. BOYD felt that it would be harder in Cook Inlet because the
title is less clear, there are more people living there and the
land ownership is somewhat uncertain.
MR. BOYD said he believes that the process, as described in the new
legislation, is universally applicable. He said, "Only time will
tell, as to whether we can create a finding that will satisfy all
the people that will be subjected to that finding, but once you do
that - once you have that foundation finding and give people the
opportunity to comment on a yearly basis, and create a supplement
to the finding based on that new information, I do not believe that
you would need area specificity."
Number 621
CO-CHAIRMAN GREEN said that he would object to Representative
Davies amendment. He then asked for a roll call vote.
Representatives Davies and Nicholia voted in favor of the
amendment. Representatives Austerman, Ogan, Williams and Green
voted against the amendment. So, the amendment failed.
Number 671
PAT FOLEY, Chairman, Lands Exploration and Operations Committee,
Alaska Oil and Gas Association, testified via teleconference from
Anchorage. He stated that he had nothing to add to the testimony
except his support for committee substitute, Version M.
Number 699
BRADLEY PENN, Marathon Oil Company, was next to testify via
teleconference from Anchorage. He testified that the committee
substitute, Version M, streamlines the existing process and helps
the Division of Oil and Gas prepare best interest findings on an
areawide basis. Marathon Oil Company supports CSHB 388(RES),
Version (M).
CO-CHAIRMAN GREEN asked if there was anyone else wishing to
testify. There being none, he closed the public hearing on HB 388.
Number 783
REPRESENTATIVE AUSTERMAN made a motion to pass CSHB 388(RES),
Version M, out of committee with individual recommendations and a
zero fiscal note.
CO-CHAIRMAN GREEN called for a brief at ease.
Number 829
CO-CHAIRMAN GREEN acknowledged the motion to move CSHB 388(RES),
Version M.
Number 840
REPRESENTATIVE AUSTERMAN then withdrew his motion.
CO-CHAIRMAN GREEN announced the committee will probably be recessed
until later in the day at which time a vote will be taken.
HB 401 - REVENUE BONDS: WATER & WASTE PROJECTS
Number 866
C0-CHAIRMAN GREEN announced that the committee would hear HB 401,
the Administration's bill on revenue bonds for water and waste
water projects.
Number 900
KEITH KELTON, Director, Division of Facility Construction and
Operation, Department of Environmental Conservation (DEC), said he
would explain HB 401 and the Senate companion bill SB 207. First,
he explained what the department is trying to do and where they
came from with this program. Prior to 1987, the DEC administered
a construction grants program assisting communities in financially
constructing waste water treatment facilities. He emphasized,
"grants." In 1987, the Federal Clean Water Act was amended and
reauthorized to eliminate the grants provision. In its place, they
put in a loan program.
MR. KELTON stated, "We have been administering this loan program
which was capitalized with state and federal dollars for the last
seven years. We've had, up to this time, enough money to meet the
demand for this program. In the last two years, demand has started
to exceed the available resources for these loans. So, we started
looking around to see what the other states are doing. We found
that there is 20 other states, nationwide, which have put in a
program to leverage the amount of money that is available for loans
by selling revenue bonds and using the corpus of the account as
collateral. So working with the Departments of Law and Revenue and
financial advisors, through bond counsel, we've developed a bill
that we think has the ability to provide an alternative funding
source for local governments. As general funds diminish and grants
become less available, we will have another tool in the box which
would enable communities, as long as they are incorporated and have
a dedicated revenue base to repay the loans, they could come in to
us to get financial assistance for funding wastewater treatment
facilities, non-point source, pollution control problems.
Number 1039
MR. KELTON left the table to explain departmental chart. "Looking
at this chart, the top half is what is currently in place. The
Clean Water Fund was created by statute in 1989 I believe. It
capitalizes federal grants. For each dollar that comes in from the
federal government, the state puts in 20 percent, so it comes out
about 83 to 17 percent ratio. It goes into this fund, the money is
loaned out to eligible municipal projects and repayment principal
and interest comes back. These are 20 year loans and right now the
interest rate is slightly under 4 percent. It fluctuates based on
the municipal bond index, so whatever the national economy does, it
changes slightly. It has never been above 5 and it has been as low
as 3.5. So, it's a very attractive interest rate. It's better
than anything else, I am aware of, on the market. The top half of
this is in place, has been in place, we have been administering
this program for six or seven years."
Number 1099
MR. KELTON said, "The money that is coming into this program, so
far, has been a total of $80 million. Of that $80 million, $50
million has gone out to current projects. Of that, a good share of
it has started to come back as repayments now, but there is still
is a $30 million unobligated balance, and that's what we propose to
use as a corpus for the revenue bonds - the collateral to issue
these bonds. So this legislation sets up a bond redemption fund,
taking money from the clean water fund to pay for the issuance
costs of revenue bonds. These bonds, through the State Bond
Committee, which are the Commissioners of Revenue, Administration
and Commerce, and their financial trustees, when they issue the
bonds to investors, the bond proceeds come back up through the
clean water fund and the process is completed with going out for
projects, coming back as repayments. The repayment stream then
comes back and pays off the investors."
Number 1192
MR. KELTON set up a new chart to explain how the money actually
balances over a period of time. "This chart, I won't say
hypothetical, but it represents a period of time, based on
assumptions, that may not be quite verifiable as you go along. To
try level it out, we took a nine year average. Representing the
clean water fund in the denter, ideally, what you want to do is
have the cash coming in equal the cash going out on bond sales
versus loans."
MR. KELTON said, "In the Senate, originally, and in the House State
Affairs, this bill was amended to limit the amount of revenue
bonds, that we sold in any one year, to $15 million. So, that
forms the basis for a couple of the assumptions on here. So
assuming that we have a point in time representing a nine-year
average, the loans that are out there, the repayment of principal
and interest represents $6.5 million coming back into the clean
water fund. The $15 million annual revenue bond sales amount to
$14.7 by the time you take out the cost of the bond sales. There
is an unknown amount that we are showing as zero right now. The
Clean Water Act is up for reauthorization again currently and we do
expect that there will be a reauthorization which will, along with
the state match, continue to put some funding into here, but we're
showing that as zero for the moment."
Number 1273
MR. KELTON continued, "Also, there is some interest earned on that
$30 million corpus that's out there, that represents about $3
million a year. So, going out, we have the debt service to pay off
the bonds $3.8 million. We have a loan disbursement which can be
$15.8 million a year of new loans. And, as we sell the $15 million
each year, the figures work out that we have to set aside a corpus
allocation of $3.85 million. So, that's withdrawn from the money
available, but it goes back in and earns interest. And, we have
capitalized interests on the bonds of $750,000. In a balancing
equation, using this set of assumptions, we are showing about $24
million a year going in and out, which would represent $16 million,
roughly, of available loans, per year, for eligible projects. And
as I said, these are available to any incorporated community that
has a revenue base, revenue stream, generally for revenue bonds it
would be the user fees that would be derived from the utility
operations to pay back the loan."
Number 1331
MR. KELTON said, "In your packet there is a summary of the loans
that are currently in place. You will notice that it has
benefitted communities from the size of Craig all the way to
Anchorage. In fact some of the smaller places are Homer, Kachemak,
Seward, Cordova, Craig, Nome is on the rural fringe of the
applicants, but to be quite honest the majority of these funds have
been taken by Anchorage. Of the $50 million, $30 million has gone
to Anchorage, to date. It generally will be a more popular program
with the communities that have more of a revenue stream to repay,
but it certainly does provide an alternative funding source for all
communities. By taking some of the pressure off the general fund,
through loans, it should be in a position to benefit all
communities."
Number 1392
MR. KELTON responded to question from Representative Austerman that
the $30,000,000 just acts as collateral. If you get a house loan,
or a personal loan, you use some of your property as collateral.
That is all this is doing, it is ensuring that we can get a higher
bond rating.
Number 1453
REPRESENTATIVE AUSTERMAN referred to the $50 million that is
already out there and then said this authorizes up to another $15
million, each year, of new bonds which is a part of the revolving
loan program. He asked how much money would be accumulated over a
ten year period and how much money would be accumulated into the
revolving loan program.
MR. KELTON said, "There would be $150 million of new funds going
into it if you upped the maximum each year. There is no
requirement that we sell the maximum and there might not be the
demand each year. Also, I can't quite answer that question because
I don't know at what rate some communities may wish to pay it back.
There will be a return stream coming back for the loans maybe for
up to any time - up to 20 years. We have had some instances where
they have been paid back within a three year period, already. So
there is no guarantee what the revenue stream will be, but when we
sell the revenue bonds, that is what the bond counsel and the state
bond committee will look at, is what the stream is on an individual
basis each year to determine what the maximum that the market will
bear, up to $15 million. It may be less than $15 million in some
years. I don't anticipate that."
Number 1508
REPRESENTATIVE AUSTERMAN wanted further clarification as to how
much money is needed in this revolving loan fund. He said he keeps
going back to the word "revolving" because this money comes back in
to be loaned out again. He asked how far out and how much money do
they need to borrow so that there is enough money in this revolving
loan program to put it out there.
Number 1538
MR. KELTON referred to a chart and said, "This is a point in time
after nine years, the year 2005. At that point in time, we would
be able to have, in essence, $24 million coming back into it which
is only going to allow us to loan out $15 or $16 million. That is
the end of your ten year period in essence of $150 million, so
that's really going to be your cap right there. We can't go over
$150 million total of revenue bonds at any one time. This should
be close to representing the maximum amount of money that will be
available in this program unless there is a change in the
statutes."
Number 1609
MR. KELTON responding to further questions from Representative
Austerman confirmed that the interest rate being paid on the bonds
will probably be slightly higher than the interest rate that the
communities are paying to keep their loans viable. The reason they
are able to do that is because we do have the $30 million in there
as well as the original $50 million that is already loaned out as
additional money that is drawing interest.
Number 1634
MR. KELTON said, "The faster this process can be put in place, the
more money we'll have available to use as collateral to leverage
additional funds. At the current rate, we're making loans at $12
million a year. So, the $30 million collateral, next year, will be
down to $17 or $18 range, and we would not have nearly as effective
a program if we had to wait for a year or two to get this
legislation through."
CO-CHAIRMAN GREEN, Representative Austerman and Mr. Kelton
continued the discussion to clarify the arithmetic.
Number 1727
MR. KELTON said, "The mathematics do work out, we have spent a lot
of time with financial advisors in New York to come up with this
and pattern it after the history of the other 20 states that are
doing this. I don't think we're off too far. I apologize because
I can't explain it any better than I am but..."
Number 1780
MR. KELTON responded to questions from Co-Chairman Green that as
long as the program was sound, which the bond market would dictate,
we would still be able to sell the $15 million each year up to the
cap imposed by the statute without any difficulty.
Number 1822
MR. KELTON responded to a question from Representative Davies that
they are interest free bonds and the department expects a AA bond
rating. He said the state bears no liability.
REPRESENTATIVE DAVIES wondered if the state is paying a percent or
two more than what the revolving loan fund is doing, then are we
making that up with the interest on the corpus.
An unidentified departmental representative in the audience agreed
that was correct.
Number 1892
CO-CHAIRMAN GREEN asked Mr. Kelton to address the proposed
amendments.
MR. KELTON deferred to the Department of Law.
Number 1911
MARIE SANSONE, Assistant Attorney General, Civil Division
Department of Law, stated that the proposed amendments are
primarily to clarify the language in the bill and to correct a few
errors that came up in the course of drafting the committee
substitute. She said the first amendment is the clarification in
the bond cap language. She suggested that bond counsel might
better explain the amendment.
The following is Amendment 1 relating to clarification in the bond
cap language:
Page 2, lines 14-15:
Following: "revenue bonds"
Insert: "under AS 37.15.560 - 37.15.605"
Page 2, line 15:
Following: "total"
Insert: "unpaid principal"
Page 2, line 16:
Following: "bonds"
Delete: "outstanding at any one time"
Insert: ", including refunding bonds, but excluding refunded
bonds, issues under the provisions of AS 37.15.560 -
37.15.605,"
Page 2, lines 16-17:
Following: "$150,000"
Delete: "including principal and interest owed on the bonds"
Number 1953
LEE SHARP, Bond Counsel, Department of Environmental Conservation,
testified via teleconference from Anchorage. He stated that they
are suggesting the amendments in order to clarify some of the
language so that when it comes time to compute exactly what the
limit is, there won't ben any doubt about how you treat various
items. The original language included interest in the computation
of the total - $150 million cap. It wasn't clear whether that's
the interest that is due this year or the interest that is due over
the life of a bond. It also raised a question on how you would
compute interest if you have a floating rate bond. You wouldn't
know exactly what the interest is going to be.
MR. SHARP said the suggested language looks solely at the principal
amount that is unpaid. This is a very clear computation. He said
they are also suggesting that the language be added to ensure that
there is no confusion about the limitation on the Bond Committee
because the Bond Committee does issue other bonds, other revenue
bonds. Mr. Sharp said they are suggesting that language be added
to make sure that when we look at this cap we are looking only at
bonds that have been issued under this program.
Number 2057
REPRESENTATIVE DAVIES moved Amendment 1.
CO-CHAIRMAN GREEN asked if there was an objection. Hearing none,
it was so ordered.
Number 2070
REPRESENTATIVE DAVIES moved Amendment 2.
The following is Amendment 2 relating to grammatical clarification
(limit scope of term `money and revenue'):
Page 4, lines 8-9:
Following: "pledge of"
Insert: "such"
CO-CHAIRMAN GREEN asked if there was an objection to adopting
Amendment 2. Hearing none, Amendment 2 was adopted.
Number 2083
REPRESENTATIVE DAVIES moved Amendment 3.
The following is Amendment 3 relating to a grammatical
clarification (singular to plural):
Page 5, line 12:
Following: "default to"
Insert: "any"
CO-CHAIRMAN GREEN asked if there was an objection. Hearing none,
Amendment 3 was adopted.
Number 2095
REPRESENTATIVE DAVIES moved Amendment 4.
The following is Amendment 4 which corrects a typographical
omission.
Page 6, line 28
Following: "refunding"
Insert: "bonds"
CO-CHAIRMAN GREEN asked if there was an objection to adopting
Amendment 4. Hearing none, Amendment 4 was adopted.
Number 2104
REPRESENTATIVE DAVIES moved Amendment 5.
The following is Amendment 5 which allows municipalities and state
agencies to access the Alaska Clean Water Fund for bond insurance
and other collateral security for local obligations. "Other
qualified entities" should also have access to the Fund for this
purpose.
Page 9, line 26:
Following: "municipal"
Delete: "or"
Insert: ","
Following: "state agency"
Insert: ", or other qualified entity"
CO- CHAIRMAN GREEN asked if there was an objection to the adoption
of Amendment 5. Hearing no objection, Amendment 5 was adopted.
CO-CHAIRMAN GREEN announced he would take teleconference testimony
on CSHB 401(RES).
Number 2140
BERDA WILLSON, Assistant Manager, Nome Joint Utilities, testified
via teleconference from Nome in support of HB 401 and related her
30 year residency in Nome and the many years with rudimentary
sanitation and water facilities. She said, "I want to make sure
that clean water loans continue. Communities need access to low
interest loans and (indisc.) grants are becoming more scarce and
communities must have an alternative source of funds provided the
(indisc.) public (indisc.) for solid waste facilities. Nome Joint
Utilities has taken advantage of two clean water loans, one for a
new sewage treatment and a lagoon and another for extending the
sewage and water rights to a new subdivision. (Indisc.) gave about
60 plus (indisc.) access to pipe water and sewer. The City of Nome
(indisc,) has also participated in a clean water loan. I would
like to speak in favor and ask that the clean water fund - loan
program continue.
CO-CHAIRMAN GREEN asked if there were favorable results on the
reduction of hepatitis with these kinds of loans and clean up of
sewage facilities.
MS. WILLSON responded, "Absolutely!" She noted there is a
reduction in other diseases that are caused by poor sanitation.
Number 2260
DIANA BENNETT, Finance Manager, Anchorage Water and Wastewater
Utilities, Municipality of Anchorage, testified via teleconference
in support HB 401 and SB 207. She said these bills authorize the
state of Alaska to issue revenue bonds for the purposes of
wastewater and other water quality assistance projects. Ms.
Bennett said their six year capital improvement budget forecasts a
program of capital construction ranging from $5 million to $10
million annually. The current rate payers cannot and should not
support the entire long-term capital program. Ms. Bennett said
their plan is to finance $4 million to $6 million each year with
loans from the Alaska Clean Water Loan Program. She said she hopes
the money will be available to do so. Without this bill and the
opportunity to leverage capitalization grants, they are concerned
that their utility and other incorporated municipalities
throughout the state, will be forced to turn to higher cost
financing sources with a subsequent negative impact toward rate
payers. These revenue bonds provide a practical, prudent and
sound financial option. Ms. Bennett continued to give testimony in
support of the legislation and urged it be passed out of committee
and on to the floor.
CO-CHAIRMAN GREEN said there was a question earlier about the
adequacy of the amount if there was a run on the number of the
requests made that there might be a period of time when there
wouldn't be a sufficient number of dollars available. He asked Mr.
Sharp if he had anything to add to that discussion.
Number 2444
MR. SHARP responded to Co-Chairman Green's question about there
possibly being a period of time when there was not a sufficient
number of dollars available. That was one caveat, you cannot go
out and issue $15 million. You have to be assured you are going to
be able to make those kinds of loans. In other words, you cannot
just go out and borrow the money and put it in the bank. [END OF
TAPE]
TAPE 96-38, SIDE B
Number 000
CO-CHAIRMAN GREEN asked, "Would there still be availability for
borrowing money?"
Number 010
MR. SHARP replied, "As long as you have money coming in from the
municipalities repaying their loans, you would have that that you
could loan back out again. If you do not have the sufficient
amount of that money coming back in to meet the loan demand, taking
into account the $15 million of new funds (indisc.--paper
shuffling) then you would simply tell the municipalities you're
gonna come back next year or they're on the list. One solution to
that would be, of course, to remove the cap or to raise it to give
the state more flexibility."
Number 032
CO-CHAIRMAN GREEN clarified that Mr. Sharp meant that it is not
likely but it would be mathematically possible. The probability is
that there will be funding available since it won't always be a $15
million hit and it will not be a full 20 year payback. He said the
probability is there will be funding available.
MR. SHARP deferred to Mr. Kelton.
Number 057
CO-CHAIRMAN GREEN wondered how the department prioritizes multiple
requests from communities that exceeded the $15 million amount.
Number 067
MR. KELTON stated, "There is a process for that. Since this is a
federal program, it comes with its own rules and regulations that
we have to adhere to. One of those is the requirement that we
develop an annual intended use plan. That intended use plan does
rank and prioritize projects base of environmental concerns, health
concerns and a variety of other factors which generates a list, and
it would be out intention to try to handle as many projects as
possible in a year. We would never want to give all $15 million to
one or two projects. We'd try to use our list to benefit as many
different places as possible."
Number 093
REPRESENTATIVE AUSTERMAN asked if the department anticipates
receiving additional federal dollars into the program.
MR. KELTON anticipated it, but could not guarantee it. The Clean
Water Act is up for reauthorization this year. It has passed the
House, but he doesn't think it is going to pass the Senate. It may
be a year or two before they know that for sure. There is
appropriation language even though there is no authorization out at
this point in time which would continue authorization at about $1.2
billion, nationwide. He said our share of that would be somewhere
around $6 million, if it happens. There is also amendments in the
House side of Congress which would say, "unless there is
authorization, there will be no appropriation until that
authorization is achieved." He said he thinks it going to happen,
but it probably is not going to happen for federal fiscal year 97.
He noted that is not factored into the equation on the chart.
Number 139
MR. KELTON informed the committee, "The federal law does allow the
state match to be paid for by the proceeds of the revenue bond
sales. Currently, we are providing the state match from GF
(general funds) at 20 cents on the federal dollar. That is a
expense the state will be able to pass off onto the sale of the
revenue bonds as well."
Number 156
REPRESENTATIVE AUSTERMAN expressed his support of the concept of
the bill and clarified that he is just trying to understand it.
Number 165
REPRESENTATIVE DAVIES wanted definition of the $3 million interest
earned, and asked if that is anticipated on the $30 million or is
it earning interest on other funds that are flowing in and out.
MR. KELTON responded that the interest earned is primarily on the
$30 million corpus. There are a few other small interest bearing
accounts. The bond sale process generates some interest, but it is
primarily on the corpus.
REPRESENTATIVE DAVIES questioned whether that is a 10 percent rate
of return.
Number 194
MIKE BURNS, Section Chief, Municipal Grants Section, Division of
Facility Construction and Operation, Department of Environmental
Conservation, elucidated that this is a nine year average. He said
the $3 million is averaged over 9 years. It would be much smaller
than that in the first years and in the year 2005, it would be much
larger. The $30 million will grow slightly over the years.
REPRESENTATIVE DAVIES conjectured that another way to look at this
is, "a snap shot in time, about five years out." He said assuming
that the $30 million is going to grow, what is the source of the
growth?
MR. BURNS replied that this will be invested by the Department of
Revenue much like the permanent fund earnings are. These numbers
were generated, actually, at about 6.7 percent rate of return which
was the recommendation of the financial advisors.
Number 258
REPRESENTATIVE DAVIES asked, "Where does the money come from to
increase the size of the $30 million collateral?"
MR. BURNS answered, "The corpus allocation. As repayments come in,
the state bond committee recommends a certain size of the corpus
that must be attained to secure the fund to keep market ratings up.
So, that much is set aside to make sure that we have a conservative
secure program which is exactly what we want to achieve."
MR. BURNS wanted to address earlier concern of Representative
Austerman and said, "We were mixing up a little bit of apples and
oranges here, you said loan disbursement is approximately $15.8
million, that does not really compute with the $200 million in
portfolio, out there. We would only have the $200 million, in
portfolio, out there, in repayment status after the year 2005. It
would be probably closer to the year 2009 when you had all the
money lent out and in repayment status. So, at that point, of
course we'd have -- we would be able to do much more than $15.8
million, but this $15.8 is just an average of the year 96 through
ought 5, so we don't want to mix the things up there. Certainly in
the year 97 and 98, we'd have much less ability than $15.8."
CO-CHAIRMAN GREEN interpolated, "That cap, it floats."
MR. BURNS agreed, "We expect the fund to grow. He is right, it is
a revolving loan program. We expect to achieve an equilibrium and,
hopefully, that equilibrium would be somewhat close to demand.
Right now, it is not anywhere close to communities demand as you
can tell."
Number 334
REPRESENTATIVE DAVIES rephrased for clarity, "It seems to me, in
really simplistic and basic terms, what we've got - right now we've
got about $30 million in the bank, and if we loan that out at $15
million a year, we'd be done in two years. So, we would have a
total of $30 million revolving out there."
MR. BURNS agreed.
REPRESENTATIVE DAVIES continued, "But, what we are proposing to do
instead is to loan out -- to issue $15 million worth of bonds, per
year, for about ten years and to use the interest income on the $30
million that we are keeping in the bank, both as collateral, but as
a generator of income, to pay the debt service on these bonds. So,
by doing this we can go out somewhere around ten years, I don't
know where we actually achieve equilibrium, but on the order of ten
years. And so instead of having $30 million out there revolving,
by leveraging it this way, we have $150 million out there
revolving. It's supported by the interest coming off the $30
million and the (indisc.). Is that right?"
Number 383
MR. BURNS said that is correct. He said the primary payback or
income from the program will be loan repayments from the
communities and the people who use the projects. He said the
differential that has to be made up - this is a low interest
program and that is why it is attractive - the differential between
that and market value of the bonds would be made up by the interest
that they would have invested. It is actually quite simple when
you think of it that way.
Number 440
REPRESENTATIVE AUSTERMAN made a motion to move CSHB 401(RES),
Version C, as amended, out of the committee with individual
recommendations and the attached zero fiscal notes. Hearing no
objection, it was so ordered.
HB 388 - OIL & GAS LEASING/ BEST INT. FINDINGS
Number 454
REPRESENTATIVE RAMONA BARNES moved and asked unanimous consent to
move CSHB 388(RES) from committee with individual recommendations.
Number 474
REPRESENTATIVE DAVIES objected.
CO-CHAIRMAN GREEN asked for a roll call vote. Representatives
Austerman, Barnes, Kott, Long, Nicholia, Williams and Green voted
in favor of moving the bill. Representative Davies voted against
moving the bill. So, CSHB 388(RES) moved out of the House
Resources Committee.
ADJOURNMENT
There being no further business to come before the House Resources
Committee, Co-Chairman Green adjourned the meeting at 9:20 a.m.
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