Legislature(2013 - 2014)BARNES 124

04/11/2013 09:00 AM RULES


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09:03:32 AM Start
09:04:12 AM HB23
08:00:59 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Continued at 7:10 p.m. Today --
+= HB 23 KNIK ARM BRIDGE AND TOLL AUTHORITY TELECONFERENCED
Moved 2d CSHB 23(RLS) Out of Committee
                                                                                                                              
                    ALASKA STATE LEGISLATURE                                                                                  
                 HOUSE RULES STANDING COMMITTEE                                                                               
                         April 11, 2013                                                                                         
                           9:03 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Craig Johnson, Chair                                                                                             
Representative Kurt Olson, Vice Chair                                                                                           
Representative Mike Chenault                                                                                                    
Representative Mike Hawker                                                                                                      
Representative Bob Herron                                                                                                       
Representative Wes Keller                                                                                                       
Representative Max Gruenberg                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Representative Shelley Hughes                                                                                                   
Representative Mark Neuman                                                                                                      
Representative Lance Pruitt                                                                                                     
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 23(RLS)                                                                                                          
"An Act creating  the Knik Crossing Development  Corporation as a                                                               
subsidiary corporation of the  Alaska Housing Finance Corporation                                                               
and  relating   to  bonds  of   the  Knik   Crossing  Development                                                               
Corporation."                                                                                                                   
                                                                                                                                
     - MOVED 2D CSHB 23(RLS) OUT OF COMMITTEE                                                                                   
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB  23                                                                                                                  
SHORT TITLE: KNIK ARM CROSSING; AHFC                                                                                            
SPONSOR(s): REPRESENTATIVE(s) NEUMAN, HUGHES                                                                                    
                                                                                                                                
01/16/13       (H)       PREFILE RELEASED 1/7/13                                                                                
01/16/13       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/16/13       (H)       TRA, FIN                                                                                               
02/28/13       (H)       TRA AT 2:00 PM BARNES 124                                                                              
02/28/13       (H)       Heard & Held                                                                                           
02/28/13       (H)       MINUTE(TRA)                                                                                            
03/12/13       (H)       TRA AT 1:00 PM BARNES 124                                                                              
03/12/13       (H)       Heard & Held                                                                                           
03/12/13       (H)       MINUTE(TRA)                                                                                            
03/21/13       (H)       TRA AT 1:00 PM BARNES 124                                                                              
03/21/13       (H)       Moved Out of Committee                                                                                 
03/21/13       (H)       MINUTE(TRA)                                                                                            
03/22/13       (H)       TRA RPT 5DP 2AM                                                                                        
03/22/13       (H)       DP: LYNN, JOHNSON, GATTIS, ISAACSON,                                                                   
                         P.WILSON                                                                                               
03/22/13       (H)       AM: FEIGE, KREISS-TOMKINS                                                                              
03/28/13       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
03/28/13       (H)       Heard & Held                                                                                           
03/28/13       (H)       MINUTE(FIN)                                                                                            
04/02/13       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
04/02/13       (H)       Moved CSHB  23(FIN) Out of Committee                                                                   
04/02/13       (H)       MINUTE(FIN)                                                                                            
04/03/13       (H)       FIN RPT CS(FIN) 3DP 1NR 6AM                                                                            
04/03/13       (H)       DP: NEUMAN, T.WILSON, STOLTZE                                                                          
04/03/13       (H)       NR: THOMPSON                                                                                           
04/03/13       (H)       AM: KAWASAKI, HOLMES, MUNOZ, EDGMON,                                                                   
                         GARA, COSTELLO                                                                                         
04/08/13       (H)       RETURNED TO RLS COMMITTEE                                                                              
04/09/13       (H)       RLS TO CALENDAR PENDING REPORT                                                                         
04/09/13       (H)       IN RULES                                                                                               
04/09/13       (H)       RLS AT 9:30 AM CAPITOL 120                                                                             
04/09/13       (H)       Heard & Held                                                                                           
04/09/13       (H)       MINUTE(RLS)                                                                                            
04/10/13       (H)       RLS TO CALENDAR PENDING REPORT                                                                         
04/10/13       (H)       IN RULES                                                                                               
04/10/13       (H)       RLS AT 9:00 AM CAPITOL 120                                                                             
04/10/13       (H)       - Cont' 3:05 p.m. Today from 4/9 Mtg. -                                                                
04/10/13       (H)       MINUTE(RLS)                                                                                            
04/11/13       (H)       RLS AT 9:00 AM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
ALEX VITERI, Senior Transportation Engineer; Major Projects                                                                     
Manager                                                                                                                         
Alaska Division                                                                                                                 
Federal Highway Administration                                                                                                  
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  During hearing of HB 23, answered                                                                        
questions.                                                                                                                      
                                                                                                                                
KRISTIN CURTIS, Legislative Auditor                                                                                             
Division of Legislative Audit                                                                                                   
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   During  hearing of  HB  23, discussed  the                                                             
KABATA audit.                                                                                                                   
                                                                                                                                
DAN FAUSKE, CEO/Executive Director                                                                                              
Alaska Housing Finance Corporation (AHFC)                                                                                       
Department of Revenue (DOR)                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   During hearing of HB  23, provided comments                                                             
and answered questions.                                                                                                         
                                                                                                                                
JOSHUA WALTON, Staff                                                                                                            
Representative Mia Costello                                                                                                     
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Reviewed the  provisions of Amendment  2 to                                                             
HB 23.                                                                                                                          
                                                                                                                                
JEFF STARK, Chief Assistant Attorney  General - Statewide Section                                                               
Supervisor                                                                                                                      
Transportation Section                                                                                                          
Department of Law;                                                                                                              
General Counsel, KABATA                                                                                                         
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  During hearing  of HB 23, expressed concerns                                                             
with Amendment 2.                                                                                                               
                                                                                                                                
KEN VASSAR, Of Counsel                                                                                                          
Birch Horton Bittner & Cherot;                                                                                                  
Bond Council                                                                                                                    
Alaska Housing Finance Corporation                                                                                              
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:     During   hearing  of  HB   23,  answered                                                             
questions.                                                                                                                      
                                                                                                                                
STACY SHUBERT, Director                                                                                                         
Governmental Affairs & Public Relation                                                                                          
Alaska Housing Finance Corporation                                                                                              
Department of Revenue                                                                                                           
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:     During   hearing  of  HB   23,  answered                                                             
questions.                                                                                                                      
                                                                                                                                
NOLA CEDERGREEN, Director                                                                                                       
Administrative Services                                                                                                         
Alaska Housing Finance Corporation                                                                                              
Department of Revenue                                                                                                           
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:     During   hearing  of  HB   23,  provided                                                             
information regarding AHFC's procurement process.                                                                               
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
9:03:32 AM                                                                                                                    
                                                                                                                                
CHAIR  CRAIG JOHNSON  called the  House Rules  Standing Committee                                                             
meeting to order at 9:03  a.m.  Representatives Chenault, Herron,                                                               
Keller, Olson,  and Johnson  were present at  the call  to order.                                                               
Representative Gruenberg arrived as  the meeting was in progress.                                                               
Also in attendance were Representatives Hughes and Neuman.                                                                      
                                                                                                                                
                 HB  23-KNIK ARM CROSSING; AHFC                                                                             
                                                                                                                                
9:04:12 AM                                                                                                                    
                                                                                                                                
CHAIR JOHNSON  announced that the  first order of  business would                                                               
be HOUSE BILL NO.  23, "An Act relating to bonds  of the Knik Arm                                                               
Bridge  and Toll  Authority;  relating to  reserve  funds of  the                                                               
authority; relating to taxes and  assessments on a person that is                                                               
a party to an agreement  with the authority; and establishing the                                                               
Knik  Arm  Crossing  fund."    [Before  the  committee  was  CSHB                                                               
23(FIN).]                                                                                                                       
                                                                                                                                
9:05:04 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   KELLER  withdrew   Amendment   1,  labeled   28-                                                               
LS0141\O.24,  Martin, 4/8/13,  which  was left  pending from  the                                                               
April 9, 2013, meeting.                                                                                                         
                                                                                                                                
9:05:15 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KELLER, noting his  understanding that there would                                                               
be  an objection  to the  motion and  discussion, moved  to adopt                                                               
Amendment 2, labeled 28-LS0141\O.30,  Martin, 4/10/13.  [The text                                                               
for Amendment 2 can be found at the end of these minutes.]                                                                      
                                                                                                                                
CHAIR  JOHNSON  announced  that  there  would  be  objection  and                                                               
discussion.                                                                                                                     
                                                                                                                                
9:06:21 AM                                                                                                                    
                                                                                                                                
CHAIR JOHNSON  inquired as  to what impact  on federal  funds, if                                                               
any, will moving the Knik  Arm Bridge and Toll Authority (KABATA)                                                               
under the Alaska Housing Finance Corporation (AHFC) cause.                                                                      
                                                                                                                                
9:06:36 AM                                                                                                                    
                                                                                                                                
ALEX  VITERI,  Senior  Transportation  Engineer;  Major  Projects                                                               
Manager, Alaska Division,  Federal Highway Administration, stated                                                               
that  the [Knik  Crossing Development  Corporation (KCDC)]  would                                                               
have  the same  standing  as any  other  applicant or  interested                                                               
party  at the  current  point.   Although  he  opined that  there                                                               
wouldn't be any  affected interest, the concern is  that there is                                                               
a credit  worthy financial plan  that is submitted with  a letter                                                               
of  interest.    The Transportation  Infrastructure  Finance  and                                                               
Innovation Act of  1998 (TIFIA) office would review  the plan and                                                               
if  selected, would  request  the applicant  submit  a letter  of                                                               
application.    Then  TIFIA  would  review  the  application  and                                                               
process it  normally.  The KABATA  is in the same  situation now,                                                               
he noted.                                                                                                                       
                                                                                                                                
9:07:25 AM                                                                                                                    
                                                                                                                                
CHAIR JOHNSON  surmised then that  Mr. Viteri is saying  that the                                                               
change proposed  in [Amendment 2]  wouldn't jeopardize  the TIFIA                                                               
funds or any other future highway funds.                                                                                        
                                                                                                                                
MR. VITERI replied yes.   However, he clarified that submitting a                                                               
letter of  interest/application doesn't  guarantee a  TIFIA loan.                                                               
There is fair competition with all  parties and if someone from a                                                               
different state  precedes either applicant, they  may receive the                                                               
funding.   Therefore, haste  is important, he  said.   In further                                                               
response  to  Chair Johnson,  Mr.  Viteri  confirmed that  [KCDC]                                                               
would be starting  at the same point as KABATA  and [the proposal                                                               
encompassed in Amendment 2] isn't jeopardizing anything.                                                                        
                                                                                                                                
9:08:25 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KELLER  inquired  as   to  when  the  closing  is                                                               
anticipated for  the loan  under KABATA  as it  currently exists.                                                               
He  related his  understanding that  funds will  be available  to                                                               
begin construction and  closing is anticipated, as  he has heard,                                                               
within nine months.                                                                                                             
                                                                                                                                
MR. VITERI  deferred to  KABATA.  As  the Major  Projects Manager                                                               
for  the  Alaska  Division, he  related  his  understanding  that                                                               
KABATA's intent is to secure a  reserve account through HB 23 and                                                               
submit a  letter of interest  to TIFIA.   If TIFIA  requested it,                                                               
then the process would begin.                                                                                                   
                                                                                                                                
9:10:18 AM                                                                                                                    
                                                                                                                                
KRISTIN  CURTIS,  Legislative  Auditor, Division  of  Legislative                                                               
Audit, Alaska State Legislature,  began by assuring the committee                                                               
that  the  audit  was  conducted  in  accordance  with  generally                                                               
accepted government auditing standards  and the formal procedures                                                               
adopted by the Legislative Budget  and Audit Committee.  "I stand                                                               
behind the  report 100  percent," she stated.   She  informed the                                                               
committee that  KABATA's response  to the  audit was  reviewed as                                                               
part of the formal audit  process.  However, nothing contained in                                                               
KABATA's  response  caused the  division  to  change the  audit's                                                               
recommendations or conclusions.   Ms. Curtis said  she is present                                                               
today to  reaffirm those recommendations  and conclusions  in the                                                               
audit.                                                                                                                          
                                                                                                                                
9:11:02 AM                                                                                                                    
                                                                                                                                
CHAIR JOHNSON surmised  then that Ms. Curtis  is comfortable with                                                               
the audit's outcome and stands by the findings.                                                                                 
                                                                                                                                
MS. CURTIS replied yes.                                                                                                         
                                                                                                                                
9:11:24 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KELLER inquired  as to  what adjectives,  such as                                                               
inaccurate  or  exaggerated, Ms.  Curtis  would  use to  describe                                                               
KABATA's response.                                                                                                              
                                                                                                                                
MS. CURTIS  explained that auditing  standards require  that when                                                               
an   agency   doesn't   agree   with   report   conclusions   and                                                               
recommendations, the auditor  is to respond and  it's included in                                                               
the  report.    She  reiterated  that  the  division  did  review                                                               
KABATA's response  and the division's conclusions,  including the                                                               
areas of disagreement, are included in  the last two pages of the                                                               
report.                                                                                                                         
                                                                                                                                
9:12:08 AM                                                                                                                    
                                                                                                                                
MS.  CURTIS, in  response to  Representative Keller,  stated that                                                               
the  division's  conclusion  regarding that  [Knik  Arm  Crossing                                                               
(KAC)  toll and  revenue projections are] "overly  optimistic" is                                                               
based on the number of  deficiencies found, which are outlined in                                                               
recommendation 1.   The conclusion is also based  on the evidence                                                               
obtained  through  the  contractor and  the  division's  research                                                               
based  on information  from the  Department  of Transportation  &                                                               
Public Facilities  (DOT&PF), the Department of  Labor & Workforce                                                               
Development  (DLWD),   the  Institute  of  Social   and  Economic                                                               
Research,   and   review   of  the   Matanuska-Susitna   planning                                                               
documents.   Therefore,  it's a  collective analysis  and summary                                                               
conclusion.                                                                                                                     
                                                                                                                                
9:12:53 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HERRON  inquired  as to  why  the  Public-Private                                                               
Partnership (P3) agreement isn't part of the audit findings.                                                                    
                                                                                                                                
MS. CURTIS informed the committee  that one of the original audit                                                               
objectives was to  outline the balance of risks  and rewards that                                                               
are embodied  in the P3 agreement.   The division did  begin that                                                               
process,  obtain  the P3  agreement,  and  began the  procurement                                                               
process to  obtain extra  assistance.   Through that  process and                                                               
interactions  with  KABATA,  the   division  found  that  the  P3                                                               
agreement wasn't final and subject  to change.  Therefore, the P3                                                               
agreement  isn't ripe  for audit  and  one can't  audit a  moving                                                               
target.  At  that point, the division discussed  with KABATA that                                                               
the  division  wouldn't  be  reviewing the  P3  agreement.    The                                                               
aforementioned  is considered  a  scope  limitation and  auditing                                                               
standards  require that  scope limitations  be  discussed in  the                                                               
audit  report,  which  was  done   in  the  objective  scope  and                                                               
methodology and on page 17 of the report conclusions.                                                                           
                                                                                                                                
9:15:11 AM                                                                                                                    
                                                                                                                                
DAN  FAUSKE,  CEO/Executive   Director,  Alaska  Housing  Finance                                                               
Corporation  (AHFC), Department  of  Revenue (DOR),  acknowledged                                                               
Representative  Gruenberg's   concern  yesterday   regarding  not                                                               
wanting to do anything to  harm AHFC, which is an entrepreneurial                                                               
entity.    He  informed  the  committee that  he  has  been  [the                                                               
CEO/Executive  Director of  AHFC]  under four  governors and  has                                                               
never been asked to kill legislation  rather he has been asked to                                                               
fix things or  make them better.  [To that  end,] Mr. Fauske said                                                               
that  AHFC  looks  forward  to  working  with  KABATA,  if  given                                                               
opportunity to  do so,  as well  as to accept  any work  that has                                                               
been done and keep the process  moving.  There has never been any                                                               
intention  of slowing  the process.   He  reminded the  committee                                                               
that prior  to the Alaska Gasline  Development Corporation (AGDC)                                                               
being brought  under AHFC,  AHFC was a  small organization.   Mr.                                                               
Fauske opined  that AHFC brings much  to the table in  support of                                                               
projects,  including  its own  internal  audit  and systems  that                                                               
would benefit  KABATA.   He expressed hope  that the  language in                                                               
[Amendment  2]  is   acceptable  as  it  ensures   that  AHFC  is                                                               
safeguarded and isn't onerous to  the mission of KABATA, which he                                                               
characterized as a good mission.                                                                                                
                                                                                                                                
9:18:06 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HERRON surmised  then that  KABATA has  done well                                                               
but  now it's  near the  end  of the  process and  AHFC is  being                                                               
brought in like a closer to finish the project.                                                                                 
                                                                                                                                
MR. FAUSKE  characterized Representative Herron's analogy  as one                                                               
way to  look at it.   However, Mr. Fauske opined  that AHFC could                                                               
benefit  from the  arrangement.   He highlighted  that AHFC  is a                                                               
large organization with  a large and diverse staff  that would be                                                               
at the  full disposal  of KABATA.   If AHFC is  going to  take on                                                               
this project, it would be AHFC's  stated mission and goal to make                                                               
it a success.   The work that  has been done has  to be reviewed,                                                               
and thus  AHFC will seek a  great deal of guidance  from those at                                                               
KABATA.  Therefore, it's a meld and  blend to reach the goal.  He                                                               
opined that time is money and  delays cost nothing but money.  In                                                               
closing,  Mr.  Fauske  related  his belief  that  AHFC  brings  a                                                               
benefit to KABATA in terms of helping to complete its mission.                                                                  
                                                                                                                                
9:20:07 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KELLER commented that  he didn't believe anyone is                                                               
questioning motives  and pointed out  that Mr. Fauske  is present                                                               
because he  was requested  to be  in attendance.   Representative                                                               
Keller then requested comment regarding  that Amendment 2 doesn't                                                               
accept the state procurement already included in KABATA.                                                                        
                                                                                                                                
MR. FAUSKE informed the committee  that since AHFC's inception it                                                               
has  been excluded  from the  Administrative  Procedures Act  and                                                               
procurement.   The AHFC  is a self-standing  entity owned  by the                                                               
state, although it  functions on its own.  The  debts of AHFC are                                                               
its own  not those  of the  state.  He  recalled 10-15  years ago                                                               
when a great deal of attention  was paid to the resources of AHFC                                                               
and AHFC cautioned folks not to  pierce the corporate veil.  That                                                               
is, when entities that operate  differently than AHFC are brought                                                               
into it, the result is the need  to explain it to investors.  The                                                               
aforementioned  is   no  small  task   for  AHFC,  which   is  an                                                               
organization with an  AA+ credit rating with  billions of dollars                                                               
on the  street.  Although AHFC's  record is good and  it operates                                                               
similarly to the state, it's  an independent entity of the state,                                                               
which  creates unwarranted  problems  in situations  in which  an                                                               
entity  is  brought on  as  a  subsidiary  to AHFC  but  operates                                                               
differently than AHFC.                                                                                                          
                                                                                                                                
9:22:21 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KELLER  inquired as  to whether that  decision not                                                               
to use  the state  procurement process will  cause delay  or will                                                               
cause  work  that  has  already  been  done  [by  KABATA]  to  be                                                               
repeated.                                                                                                                       
                                                                                                                                
MR.  FAUSKE answered  that he  didn't believe  so.   In fact,  he                                                               
related his belief that it might  expedite the process as AHFC is                                                               
quick.     The  AHFC  plans   to  review  everything   in  place,                                                               
particularly  since  the  statement  in [Amendment  2]  that  all                                                               
commitments, etcetera must  be honored is of concern.   In regard                                                               
to the work  going forward, Mr. Fauske opined that  AHFC isn't an                                                               
impediment at  all based on AHFC's  systems.  He noted  that AHFC                                                               
does a lot of work with  local contractors and is time driven due                                                               
to the seasons, and therefore AHFC  is quick and effective.  With                                                               
regard to  procurement, for new  request for proposals  (RFPs) or                                                               
bills AHFC  always forms a  committee with folks from  outside of                                                               
the corporation to  analyze it.  Again,  Mr. Fauske characterized                                                               
AHFC's process as an enhancement.                                                                                               
                                                                                                                                
9:24:27 AM                                                                                                                    
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
9:25:39 AM                                                                                                                    
                                                                                                                                
CHAIR JOHNSON  directed attention  to the highlighted  version of                                                               
Amendment 2, which was provided to the committee.                                                                               
                                                                                                                                
9:26:07 AM                                                                                                                    
                                                                                                                                
JOSHUA WALTON,  Staff, Representative Mia Costello,  Alaska State                                                               
Legislature, directed attention to  the highlighted and annotated                                                               
version of Amendment  2 and the key to the  highlights at the top                                                               
of the first page of Amendment 2.                                                                                               
                                                                                                                                
9:27:30 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   GRUENBERG   related   his   understanding   that                                                               
Amendment 2 is a substitute for the entire legislation.                                                                         
                                                                                                                                
MR. WALTON replied yes.                                                                                                         
                                                                                                                                
9:28:50 AM                                                                                                                    
                                                                                                                                
MR. WALTON  then began  his review of  Amendment 2,  which begins                                                               
with a  title change.  The  change to Section 1  adds language to                                                               
the  AHFC enabling  statutes that  establishes the  Knik Crossing                                                               
Development Corporation as a  subsidiary corporation and provides                                                               
that  the AHFC  Board  of Directors  will be  the  KCDC Board  of                                                               
Directors.   Section 2 embodies a  number of changes to  AS 18.56                                                               
that establish, enable,  and describe KCDC.  Section  2(a) is the                                                               
word-for-word purpose  of KABATA  from AS 19.75.011,  except that                                                               
all  references to  KABATA have  been changed  to KCDC.   Section                                                               
2(b)  is  also  a  provision   that  applies  to  KABATA  per  AS                                                               
19.75.021(b) that  in Amendment 2  now refers to KCDC.   Proposed                                                               
"Sec.  18.56.610. Powers  and  duties.",  paragraphs (1)-(5)  and                                                             
subsection (b) on page 2, lines  3-28, of Amendment 2,  specifies                                                               
additional powers, which  are verbatim from the  KABATA powers in                                                               
AS  19.75.111(a)  and  AS  19.75.111(b)  and  (b)(5).    He  then                                                               
directed attention  to proposed "Sec. 18.65.615.  Bonds." and the                                                             
language, "The  Knik Crossing  Development Corporation  may issue                                                               
bonds in an aggregate amount  not to exceed $600,000,000 plus the                                                               
cost  of  issuance,"  which  is [new  language]  as  proposed  in                                                               
CSHB 23(FIN).  Although there isn't  a direct corollary regarding                                                               
the language on page  2, line 31 to page 3,  line 3, referring to                                                               
the amount  of refunding  bonds that may  be issued,  he recalled                                                               
that there  was discussion and  that the powers are  very similar                                                               
to what KABATA would need as  well.  Section 2(b)-(d) are by-and-                                                               
large powers  that exist  in KABATA's  enabling legislation.   In                                                               
fact,  in  most  cases  the  language  is  taken  [from  KABATA's                                                               
enabling  legislation]  verbatim.    He  then  pointed  out  that                                                               
proposed  "Sec.  18.56.620.  Capital reserve  fund"  is  verbatim                                                             
language  from KABATA's  enabling  language  in AS  19.75.221(c),                                                               
(d), (e), and  (h) and can be  found on page 3,  line 29, through                                                               
page 5 line 7, of Amendment  2.  However, HB 23 adds restrictions                                                               
regarding  the deposits  into the  reserve fund,  which has  been                                                               
included verbatim  in Amendment 2  [on page  5, lines 9-14].   On                                                               
page 5,  lines 15-25,  the language  creates new  provisions that                                                               
establish   an  "availability   payment   reserve   fund."     He                                                               
highlighted  that  the  language establishing  the  "availability                                                               
payment reserve fund" is very similar  to the language on page 5,                                                               
lines 9-14,  of Amendment 2.   The  language in paragraph  (f) on                                                               
page 5,  line 26,  through page  6, line 2,  of Amendment  2 says                                                               
that  the  availability  payment  reserve  fund  is  to  be  used                                                               
specifically  for   the  purpose   of  making   the  availability                                                               
payments.    Furthermore,  once  the  availability  payments  are                                                               
complete  and the  bridge  is drawing  revenue,  that revenue  is                                                               
deposited  in a  different fund  to be  used for  other purposes.                                                               
Mr.  Walton  then  pointed  out that  the  capital  reserve  fund                                                               
provisions  on  pages  3  through  the beginning  of  page  5  of                                                               
Amendment 2 enable KCDC to  establish reserve funds as necessary.                                                               
He noted that  the language provides quite a bit  of latitude for                                                               
the  creation of  reserve  funds.   On  page  6  of Amendment  2,                                                               
paragraph (g)  includes reporting  requirement language  as found                                                               
in CSHB 23(FIN)  with a substantive change in  which the language                                                               
is adjusted such that KCDC has  to annually report not later than                                                               
January 30.                                                                                                                     
                                                                                                                                
MR.  WALTON then  pointed out  that the  moral obligation  cap of                                                               
$1.4 million that  was inserted into CSHB 23(FIN)  is retained in                                                               
paragraph (i)  of Amendment 2  on page 6,  lines 13-17.   Page 6,                                                               
lines 18-22, of Amendment 2  specifies the definition of "capital                                                               
reserve fund  requirement."  Proposed "Sec.  18.56.625. Exemption                                                             
from taxation."  incorporates the exemption of  real and personal                                                             
property of KCDC  from state and local taxation.   He highlighted                                                               
that part of the aforementioned  provision is in existing statute                                                               
and  part of  it is  language  added by  CSHB 23(FIN).   He  then                                                               
directed attention  to proposed  "Sec. 18.56.630.  Exemption from                                                             
local regulation." located  on page 7, lines  14-17, of Amendment                                                             
2,  which embodies  powers that  KABATA already  possesses in  AS                                                               
19.75.911.   The provision embodied in  proposed "Sec. 18.56.635.                                                             
Liability  for  payment  of  tolls."  is  something  that  KABATA                                                             
already has  in AS 19.75.915.   From this  point on, most  of the                                                               
changes encompassed  in Amendment  2 are conforming  changes that                                                               
remove  references to  KABATA and  replaces them  with KCDC.   He                                                               
specified  that from  page 7,  line 23,  through page  8, line  8                                                               
removes references  to KABATA,  which would cease  to exist.   On                                                               
page 8,  Section 4  of Amendment  2, KCDC would  be added  to the                                                               
state  procurement code  exemption.   As  the language  specifies                                                               
AHFC has  always been exempted  from the state  procurement code.                                                               
Section 5 repeals the KABATA  enabling statutes.  Section 6, page                                                               
8, line 21, through page 9,  line 3, of Amendment 2 is transition                                                               
language.   The transition language transfers  all KABATA assets,                                                               
intellectual property,  obligations, debts, etcetera to  KCDC and                                                               
provides  that  the  existing  KABATA board  would  serve  in  an                                                               
advisory capacity to the KCDC board  for one year and would do so                                                               
without  compensation but  would  receive per  diem and  expenses                                                               
related to their work.                                                                                                          
                                                                                                                                
9:42:29 AM                                                                                                                    
                                                                                                                                
CHAIR JOHNSON clarified that this  committee is only dealing with                                                               
areas  that aren't  highlighted as  they are  new provisions  not                                                               
powers  that KABATA  already  has nor  powers  granted to  KABATA                                                               
under [CSHB 23(FIN)].  He then  related the desire to ensure that                                                               
the  process  isn't slowed  down  and  AHFC isn't  burdened  with                                                               
something it doesn't want.                                                                                                      
                                                                                                                                
9:45:15 AM                                                                                                                    
                                                                                                                                
JEFF STARK,  Chief Assistant Attorney General  -Statewide Section                                                               
Supervisor,  Transportation Section,  Department of  Law; General                                                               
Counsel, KABATA,  began by  informing the  committee that  he has                                                               
worked as the  general counsel for KABATA for about  the last two                                                               
years, but  has worked  on the  Knik Arm  Bridge project  for the                                                               
last  five  to six  years.    Mr.  Stark expressed  concern  with                                                               
Amendment 2,  as currently drafted.   He pointed out  that KABATA                                                               
has  been attempting  to develop  this  bridge for  10 years  now                                                               
under a public-private partnership  such that a private developer                                                               
would design,  construct, finance  construction, and  operate and                                                               
maintain  the  bridge for  35  years.    In return,  the  private                                                               
developer would  receive a payment  from KABATA, which  would use                                                               
the toll revenues  to pay the developer.  The  KABATA has started                                                               
the process of selecting the developer.   In fact, in 2011 KABATA                                                               
went  through a  request  for qualifications  process and  short-                                                               
listed  three  developers  who are  interested  in  building  the                                                               
bridge.   For the last  two years,  KABATA has been  working with                                                               
those groups to put together  the agreement that would govern the                                                               
almost 40-year  relationship on which  the developers  would bid.                                                               
According to  KABATA's schedule, KABATA  would like to put  out a                                                               
formal  RFP to  these three  prospective developers  this summer,                                                               
select a  developer at  the end  of the year,  and close  about a                                                               
year from now, realizing any  number of variables could delay the                                                               
process.   The  missing  piece  to develop  the  project in  that                                                               
fashion is  the language  contained in  CSHB 23(FIN)  relating to                                                               
the moral  obligation.   He explained  that the  moral obligation                                                               
provision  in  CSHB  23(FIN)  creates a  reserve  account  and  a                                                               
commitment  from  KABATA  to  make  payments  from  that  reserve                                                               
account to the  developer and maintain that reserve  account at a                                                               
certain level.   When the reserve account is depleted  there is a                                                               
commitment from  KABATA to request  from the legislature  and the                                                               
governor to restore the account.   The aforementioned is referred                                                               
to  as a  moral  obligation because  the  legislature can't  bind                                                               
future legislatures,  and thus there  is no legal  obligation for                                                               
the legislature to  appropriate funds if KABATA  requests it from                                                               
the  legislature.   Creation of  the  moral obligation  structure                                                               
signals  to  the  developers  and   financial  markets  that  the                                                               
legislature  will   appropriate  additional  funds   that  KABATA                                                               
requests.      The   financial  markets   will   rely   on   that                                                               
representation from  the legislature.   Therefore,  the financial                                                               
markets will  react badly if the  legislature doesn't appropriate                                                               
the funds  requested from KABATA,  which will impact  the state's                                                               
credit rating.                                                                                                                  
                                                                                                                                
9:50:18 AM                                                                                                                    
                                                                                                                                
CHAIR  JOHNSON   questioned  whether  those  funds   are  already                                                               
[included] in the legislation.                                                                                                  
                                                                                                                                
MR. STARK replied yes the language  is in Amendment 2, but not in                                                               
a form  that works for  a P3 agreement.   In further  response to                                                               
Chair Johnson,  Mr. Stark stated  that it's a fixable  problem if                                                               
the original  HB 23 is  used.   The moral obligation  language in                                                               
HB 23  would work  for  a  P3 project,  whereas  the language  in                                                               
Amendment 2 won't work.   He directed attention to subsection (e)                                                               
on  page 5,  line  15,  of Amendment  2  and  specified that  the                                                               
"availability  payment"  is  the  problem.    The  name  and  the                                                               
substantive  language  in subsection  (f)  are  problematic.   He                                                               
clarified  that  the availability  payment  is  only one  of  the                                                               
payments that will  be owed to the developer  under the contract.                                                               
He then directed attention to subsection  (f) on page 5, line 26,                                                               
of Amendment 2, which read:   "All money held in the availability                                                               
payment  reserve fund  shall be  used solely  for the  payment of                                                               
annual  availability payments  ...."   As mentioned  earlier, the                                                               
developer  is  going to  design,  build,  operate, maintain,  and                                                               
finance the bridge.   The developer will put  in $80-$100 million                                                               
of its own funds into the  project and will borrow the remainder,                                                               
which he estimated  to be $600-$700 million, in  return for which                                                               
the developer  will receive the availability  payment monthly and                                                               
will only receive it if all goes  well.  There is the chance that                                                               
everything won't  go well  and two other  types of  payments that                                                               
could  arise under  this type  of agreement  with the  developer.                                                               
One  payment is  a relief  event, which  is an  event that  could                                                               
happen under the regular structure  of the agreement that is they                                                               
are cost risks  borne by the developer, but will  be shifted back                                                               
to KABATA because  it will be more  cost effective to do  so.  In                                                               
some cases, although the risk  is small/unlikely, it's simply too                                                               
large  for the  developer.   For example,  earthquakes and  other                                                               
force  majeure events  could  be a  risk  the developer  couldn't                                                               
handle but  the state  could because the  damage would  likely be                                                               
such that  there would be  federal aid  and damage to  the bridge                                                               
would be the least of the  problems.  Therefore, such risk should                                                               
be shifted back to KABATA.                                                                                                      
                                                                                                                                
9:55:49 AM                                                                                                                    
                                                                                                                                
CHAIR JOHNSON  surmised then that  such language could  be placed                                                               
into Amendment 2 and still function.                                                                                            
                                                                                                                                
MR.  STARK  answered  yes,  and pointed  out  that  the  original                                                               
language  of  HB  23  includes such  language  that  works  well.                                                               
Returning to the situation in which  all doesn't go well with the                                                               
project,  Mr.  Stark  noted  that   there  are  also  termination                                                               
payments.                                                                                                                       
                                                                                                                                
9:56:17 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CHENAULT  inquired  as   to  whether  the  [moral                                                               
obligation]  language  has changed  in  the  various versions  of                                                               
HB 23.                                                                                                                          
                                                                                                                                
MR.  STARK  specified   that  the  only  change   in  the  [moral                                                               
obligation] language  from the original  HB 23 [to  CSHB 23(FIN)]                                                               
is the addition  of a cap in the amount  of the moral obligation.                                                               
There was  concern with the  original legislation in  which there                                                               
was an  unlimited moral obligation.   Therefore,  the legislation                                                               
was changed  to include a  $1.14 billion  cap in CSHB  23(FIN) in                                                               
order  to cover  the termination  payment.   If the  agreement is                                                               
terminated at  the worst moment,  the total amount that  might be                                                               
payable  to  the  developer  plus  the  amount  of  the  previous                                                               
availability payments could reach $1.14  billion.  If a developer                                                               
builds   the  bridge   and  the   agreement  is   terminated  for                                                               
convenience of the  state because of a state  default, default by                                                               
the developer, or  by order of the court, the  bridge will always                                                               
belong to the state.   Therefore, if the agreement is terminated,                                                               
the state  will have to  pay something  to the developer  and the                                                               
amount  paid   will  be  dependent   upon  the  reason   for  the                                                               
termination.   For instance,  in a situation  in which  the state                                                               
terminated  the  agreement   due  to  its  own   default  or  for                                                               
convenience,  the  state  will  pay  a  lot.    However,  if  the                                                               
agreement is terminated due to  developer default, the state will                                                               
pay much less.   When marketers/developers look  at this project,                                                               
one has  to cover all three  of those payments in  the P3 project                                                               
otherwise  no  developers  will  be interested  and  it  will  be                                                               
difficult to find anyone willing to finance the project.                                                                        
                                                                                                                                
CHAIR JOHNSON asked whether this  language could be addressed and                                                               
[KCDC] still housed under AHFC.                                                                                                 
                                                                                                                                
MR. STARK  replied yes, clarifying  that it's not a  problem with                                                               
AHFC but rather with the language of Amendment 2.                                                                               
                                                                                                                                
CHAIR JOHNSON  announced his intention  to take the input  of Mr.                                                               
Stark and develop  a committee substitute (CS) to  present to the                                                               
committee  this afternoon.   He  then expressed  the need  to fix                                                               
what  can  be  fixed  [in  Amendment  2]  and  determine  whether                                                               
Amendment 2 has [provisions] that can't be fixed or passed.                                                                     
                                                                                                                                
MR. STARK  opined that  inherent in  transferring the  project to                                                               
AHFC  the project  will be  slowed  down.   If the  desire is  to                                                               
proceed  in a  P3 process,  the  transfer will  cause a  slowdown                                                               
because  KABATA   is  in   the  midst   of  a   procurement  now.                                                               
Transferring   the  project   to   AHFC   will  effectively   end                                                               
procurement.   He noted that  he suggested to AHFC  language that                                                               
would  transfer  that procurement  to  AHFC,  but AHFC  expressed                                                               
extreme concern  about that.   Therefore,  he surmised  that AHFC                                                               
isn't interested in taking on the project under those terms.                                                                    
                                                                                                                                
10:01:29 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE OLSON inquired as to  how many attempts there have                                                               
been to obtain P3 funding.                                                                                                      
                                                                                                                                
MR. STARK related that although  KABATA began the process in 2008                                                               
when the project  wasn't as mature as it is  now, there were some                                                               
outstanding environmental permitting issues  that have since been                                                               
resolved.   Furthermore, the financial  collapse of  2008 changed                                                               
the  entire financial  world, including  the P3  agreement world.                                                               
Therefore, KABATA  has spent the  last several years  solving the                                                               
permitting issues  and revamping  the agreement.   The agreement,                                                               
he noted,  is substantially  different than  it would've  been in                                                               
2008.    He stated  that  the  project is  at  a  point of  being                                                               
virtually ready to go.                                                                                                          
                                                                                                                                
10:02:53 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE HERRON inquired as to  what happens to the process                                                               
if HB 23 isn't passed out of the House.                                                                                         
                                                                                                                                
MR. STARK  answered that if HB  23 falters and there  is no moral                                                               
obligation provision,  KABATA will  be delayed for  a year.   The                                                               
problem  with delay,  in  part, relates  to  interest rates  that                                                               
currently are extremely favorable.   Such a favorable environment                                                               
in terms  of interest rates would  have to last for  two years as                                                               
the  project  won't  close  for   a  year.    Furthermore,  delay                                                               
increases construction costs.   Mr. Stark emphasized  that one of                                                               
the biggest risks  relates to TIFIA as there is  a limited amount                                                               
of TIFIA  funds that are  given, upon qualification, on  a first-                                                               
come first-served basis.  There  are a lot of projects nationwide                                                               
that  are  lining  up  for  about $17  billion  in  TIFIA  funds.                                                               
Although it's possible  that more funds could  be appropriated to                                                               
TIFIA, there is no guarantee  and it's entirely possible that all                                                               
those  TIFIA funds  would be  allotted if  another year  goes by.                                                               
Moreover,  TIFIA funds  are a  great  deal for  this project  and                                                               
might be what  makes this project financially viable.   The TIFIA                                                               
funds certainly  are advantageous to  the state and  delaying the                                                               
project does place TIFIA funds at risk.                                                                                         
                                                                                                                                
10:05:28 AM                                                                                                                   
                                                                                                                                
CHAIR JOHNSON  recalled testimony  that [the KABATA  project] was                                                               
number four on the list for TIFIA.                                                                                              
                                                                                                                                
MR. STARK related his understanding  that really only one project                                                               
has been  invited to  submit a  TIFIA application,  everyone else                                                               
has  submitted  letters of  interest.    That one  project  isn't                                                               
KABATA, he stated.                                                                                                              
                                                                                                                                
10:06:17 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE HERRON asked  whether Amendment 2 would  be a good                                                               
option rather than taking the risk of HB 23 faltering.                                                                          
                                                                                                                                
MR. STARK  characterized it as  a policy  call and that  it's not                                                               
appropriate for him to answer.                                                                                                  
                                                                                                                                
REPRESENTATIVE HERRON stressed, however,  that many are depending                                                               
on DOL to help the legislature make that policy call.                                                                           
                                                                                                                                
MR. STARK related  his assumption that if Amendment  2 passed and                                                               
the moral  obligation language was  fixed, AHFC would  first have                                                               
to study  the project and  determine whether it's  appropriate to                                                               
proceed on the P3 process path  KABATA has begun or to change the                                                               
path.   Although he  couldn't predict how  much time  such [study                                                               
and determination] would require, he  opined that it would take a                                                               
considerable  amount of  time  as it's  a  large, expensive,  and                                                               
complicated  project.    On  the   other  hand,  if  the  project                                                               
proceeded   through  the   P3   process   and  KABATA's   current                                                               
procurement isn't  preserved, then  the project would  start over                                                               
at square  one for the procurement  that is the selection  of the                                                               
developer.    The  aforementioned  will  delay  the  project,  he                                                               
opined.   The first step  for a P3  procurement is a  request for                                                               
qualifications.  A project following  the P3 procurement can't be                                                               
opened to everyone  because it's so expensive to bid  that no one                                                               
would bid.  The cost to put  together a bid is about $10 million,                                                               
and therefore bidders  need to know that  with three short-listed                                                               
proposers they  have a reasonable  chance of winning the  bid and                                                               
will put  up the money to  bid.  The aforementioned  process will                                                               
be a delay of six months.                                                                                                       
                                                                                                                                
CHAIR  JOHNSON related  his understanding  that  the request  for                                                               
qualifications is already out.                                                                                                  
                                                                                                                                
MR.  STARK replied  yes, but  clarified  that if  Amendment 2  is                                                               
enacted  that already  done work  would be  lost and  the process                                                               
would have to start over.   In further response to Chair Johnson,                                                               
Mr. Stark explained that the work  that's already done is under a                                                               
KABATA procurement and KABATA will no longer exist.                                                                             
                                                                                                                                
CHAIR  JOHNSON inquired  as  to why  that's the  case  if all  of                                                               
KABATA's assets, obligations, etcetera are rolled into AHFC.                                                                    
                                                                                                                                
MR. STARK explained  that's because it's a process  not an asset.                                                               
As  mentioned  earlier, Mr.  Stark  said  that he  had  suggested                                                               
language to AHFC  that would make it clear  that the [procurement                                                               
work]  goes to  AHFC.  However, AHFC  wasn't  interested in  that                                                               
language  and as  he understood  it,  AHFC didn't  want to  adopt                                                               
KABATA's procurement.                                                                                                           
                                                                                                                                
CHAIR JOHNSON  surmised then that  if the procurement  matter was                                                               
addressed  in Amendment  2, then  the statements  regarding delay                                                               
wouldn't be accurate.                                                                                                           
                                                                                                                                
MR. STARK agreed  that part [of the delay]  wouldn't be accurate,                                                               
but there  will still be some  delay due to AHFC  taking over and                                                               
trying to get its arms around the project.                                                                                      
                                                                                                                                
10:12:18 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  OLSON  asked  whether KABATA  has  made  previous                                                               
attempts  to  obtain   TIFIA  funding  that  weren't   via  a  P3                                                               
[procurement] submission.                                                                                                       
                                                                                                                                
MR.  STARK  confirmed  that  in the  past  KABATA  has  submitted                                                               
applications for TIFIA  that were rejected.   However, when those                                                               
applications  were submitted  KABATA was  aware that  its project                                                               
wasn't as  mature as others,  there were limited funds  in TIFIA,                                                               
there were competing  projects, and the chances  of obtaining the                                                               
TIFIA funds  were remote.  The  KABATA felt it was  worthwhile to                                                               
submit the  applications because  the chances of  obtaining TIFIA                                                               
funds weren't  zero.  Furthermore,  the selection process  at the                                                               
time included subjective criteria and  KABATA felt it was best to                                                               
place  the project  in front  of TIFIA  to receive  feedback that                                                               
could be helpful so that they  would have a much better chance of                                                               
obtaining the  TIFIA funds  when the project  was mature.   Since                                                               
those  prior applications,  the TIFIA  process has  been amended,                                                               
the  selection  process is  much  different,  and more  money  is                                                               
available.   At this  point, KABATA has  good reasons  to believe                                                               
that  if the  moral  obligation language  can  be adopted,  TIFIA                                                               
financing will be available.   Although the TIFIA funding isn't a                                                               
given, it looks  very favorable.  In further  response, Mr. Stark                                                               
recalled that KABATA submitted applications to TIFIA four times.                                                                
                                                                                                                                
10:14:31 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  KELLER related  his  understanding  that AHFC  is                                                               
unwilling to  take on  the agreements of  KABATA under  the state                                                               
procurement code,  including the developer  short list.   He then                                                               
inquired as  to whether there  are other items besides  the short                                                               
list that would not be picked up by AHFC.                                                                                       
                                                                                                                                
MR. STARK said he didn't believe so.   He pointed out that one of                                                               
AHFC's options  is to simply  scrap the P3  [procurement] process                                                               
and build  the bridge  in another  manner.   At that  point, AHFC                                                               
would be starting  from scratch and he didn't know  how long that                                                               
would take.                                                                                                                     
                                                                                                                                
CHAIR  JOHNSON  interjected that  he  didn't  want to  conjecture                                                               
about what AHFC will do.                                                                                                        
                                                                                                                                
MR.  STARK  clarified  that  what  is being  discussed  is  a  P3                                                               
procurement, but  there are  other ways  to develop  this project                                                               
outside  of  a P3  procurement.    Without speculating  how  long                                                               
another process  would take, he  said that another  process would                                                               
mean AHFC  is starting over.   If AHFC were to  continue with the                                                               
P3 process and  kept the three short-listed  proposers, then AHFC                                                               
would simply be  stepping in where KABATA is now  and there isn't                                                               
a lot left to do.  If the  short list of proposers is lost, there                                                               
is a lot more work to be done, he opined.                                                                                       
                                                                                                                                
10:18:47 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE HERRON related his  understanding that the sponsor                                                               
of HB 23 holds  Mr. Stark in the highest regard  and has told him                                                               
that  if  Mr. Stark  can  make  [Amendment  2]  work, he  may  be                                                               
amenable to accepting  the amendment.  He then  asked whether Mr.                                                               
Stark and  others can  work with  AHFC so that  there "is  a huge                                                               
potential of this process acquisition."                                                                                         
                                                                                                                                
MR. STARK  surmised that Representative Herron  is asking whether                                                               
legislation  can  be  crafted  that  would  allow  AHFC  to  take                                                               
KABATA's project  as-is, including  the current  procurement, and                                                               
move forward.   Mr. Stark,  in response, related his  belief that                                                               
the answer is yes.  However,  he expressed concern that even with                                                               
language  in statute  specifying that  the procurement  passes to                                                               
AHFC,  there might  be  an attempt  to  challenge [the  transfer]                                                               
because  it's  a  KABATA procurement  proceeding  under  KABATA's                                                               
regulations that  were crafted  and adopted  to this  process and                                                               
AHFC is exempt from the  procurement code and has no regulations.                                                               
On the  other hand, there would  be an excellent argument  if the                                                               
statute was crafted properly to overcome that risk.                                                                             
                                                                                                                                
10:21:04 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  GRUENBERG inquired  as to  whether Mr.  Stark has                                                               
any other problems with this [proposal].                                                                                        
                                                                                                                                
10:22:22 AM                                                                                                                   
                                                                                                                                
CHAIR JOHNSON recessed the committee to the call of the chair.                                                                  
                                                                                                                                
1:34:48 PM                                                                                                                    
                                                                                                                                
CHAIR JOHNSON called  the House Rules Standing  Committee back to                                                               
order  at 1:34  p.m.   Upon reconvening,  Representatives Hawker,                                                               
Herron,    Keller,    Olson,    and   Johnson    were    present.                                                               
Representatives  Chenault and  Gruenberg arrived  as the  meeting                                                               
was in progress.  Also in attendance was Representative Pruitt.                                                                 
                                                                                                                                
1:34:52 PM                                                                                                                    
                                                                                                                                
MR.  STARK, regarding  Representative Gruenberg's  question, said                                                               
that  his  major concerns  with  Amendment  2, as  written,  were                                                               
discussed this  morning.  However,  he noted the  following minor                                                               
points.   On page  2, line  27, of Amendment  2 the  reference to                                                               
"department" comes from Title 19  [of the KABATA statutes] and is                                                               
defined as  the Department of Transportation  & Public Facilities                                                               
whereas he wasn't sure whether the  term is even defined in Title                                                               
18 and if it is it refers to  the Department of Revenue.  On page                                                               
3, line 16,  subsection (d) of Amendment 2,  the language applies                                                               
to KCDC's bonding authority and  requires an agreement that would                                                               
be part of  bond issuance and contain a covenant  that KCDC "will                                                               
at  all  times  maintain  fees, rents,  tolls,  rates,  or  other                                                               
charges sufficient"  to pay all operation  and maintenance costs,                                                               
debt service  costs, and  various other  expenses of  the bridge.                                                               
If the project  is developed as a P3  [procurement] project, then                                                               
that language doesn't  come into play.  However,  if KCDC intends                                                               
to  finance  the project  more  conventionally  by issuing  bonds                                                               
itself, it may be difficult to  impossible to set tolls at a rate                                                               
that allows payment of all those  expenses, at least in the early                                                               
years.    He  related  that  KABATA had  intended  to  obtain  an                                                               
appropriation to  cover the early,  lean years and set  the tolls                                                               
not at  the revenue  maximizing rate  but rather  at a  rate that                                                               
makes  sense for  drivers and  would allow  for traffic  to build                                                               
over time.   Mr.  Stark opined that  perhaps AHFC  should provide                                                               
input  as  to  whether  they  believe  the  aforementioned  is  a                                                               
problem.  He then expressed concern  with page 5, line 29 through                                                               
page 6, line  2, of Amendment 2 because under  federal law if any                                                               
federal financing is used, including  TIFIA funds, those revenues                                                               
will have  to be used  for projects eligible for  Federal Highway                                                               
Administration  (FHWA)  funds, and  thus  can  only be  used  for                                                               
highway projects.   Although the aforementioned  language doesn't                                                               
preclude that, he said it's unclear  to him why one would want to                                                               
put the funds  in a reserve fund.  Furthermore,  Mr. Stark opined                                                               
that  it's important  for  people to  understand  that no  matter                                                               
where the  funds go, it will  have to have a  limited purpose for                                                               
its use.                                                                                                                        
                                                                                                                                
1:41:38 PM                                                                                                                    
                                                                                                                                
CHAIR JOHNSON suggested that the  language "designated for" could                                                               
address Mr. Stark's last concern.                                                                                               
                                                                                                                                
MR.  STARK agreed  that the  concern can  be addressed  by either                                                               
eliminating  the requirement  or by  indicating the  reserve fund                                                               
will be used only for appropriate purposes under federal law.                                                                   
                                                                                                                                
1:42:02 PM                                                                                                                    
                                                                                                                                
MR.  STARK,  adding  to  his   list  of  concerns,  informed  the                                                               
committee  that  he always  has  concerns  with legislation  like                                                               
HB 23, which is complex and has been introduced late.                                                                           
                                                                                                                                
1:43:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG inquired  as  to whether  Mr. Stark  is                                                               
prepared to  specify how  high the  tolls should  be to  meet the                                                               
requirements of subsection (d) on page 3 of Amendment 2.                                                                        
                                                                                                                                
MR.  STARK replied  no.   However, he  offered his  understanding                                                               
that KABATA is looking at  revenue shortfalls in the first couple                                                               
of years in  the range of $30 million.   Perhaps AHFC can arrange                                                               
financing  that  reduces the  debt  service  and the  amount  [of                                                               
revenue shortfalls].   Mr.  Stark opined that  it's not  clear to                                                               
him that AHFC could reduce it  enough to allow tolls to cover all                                                               
of their debt service and  operating expenses at the rates KABATA                                                               
was considering.   He reiterated  that he couldn't  speculate how                                                               
high the rates would have to be to do so.                                                                                       
                                                                                                                                
1:44:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG inquired  as to  whether KCDC  would be                                                               
eligible for bankruptcy protection.                                                                                             
                                                                                                                                
MR. STARK  surmised that  AHFC would create  KCDC as  a nonprofit                                                               
corporation, and thus  he doesn't see any reason  why it wouldn't                                                               
be eligible  for bankruptcy protection.   In further  response to                                                               
Representative  Gruenberg, Mr.  Stark  explained that  AHFC is  a                                                               
public  corporation  and  probably   would  file  for  bankruptcy                                                               
differently.   Moreover,  he  said he  wasn't  prepared to  offer                                                               
comments regarding  the impact bankruptcy  of KCDC would  have on                                                               
AHFC.    However,  since  KCDC would  be  a  separate  subsidiary                                                               
corporation,  presumably the  bankruptcy  of  KCDC wouldn't  drag                                                               
AHFC into bankruptcy.                                                                                                           
                                                                                                                                
1:46:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG,  referring to subsection (f)  on page 5                                                               
of Amendment  2, asked whether  the federal requirement  that the                                                               
project  must  be  eligible  for   FHWA  funds  would  limit  the                                                               
viability of KCDC and the  entire project.  If the aforementioned                                                               
is the case, he inquired as to how it would limit it.                                                                           
                                                                                                                                
MR.  STARK   answered  that  he   didn't  see  how   the  federal                                                               
requirement  would limit  KCDC.   The  toll  revenues, which  are                                                               
clearly  eligible for  FHWA funds,  would be  used on  the bridge                                                               
project.   Once  the  bridge is  fully  paid for  or  there is  a                                                               
surplus of  toll revenues, then  one would have to  determine for                                                               
what purpose one  would use that surplus and it  would be limited                                                               
to projects eligible  for FHWA funds.  He stated  that it doesn't                                                               
impact KCDC's ability to do or finance the project.                                                                             
                                                                                                                                
1:47:33 PM                                                                                                                    
                                                                                                                                
CHAIR JOHNSON  inquired as to whether  the aforementioned federal                                                               
requirement  is necessary  to be  in the  legislation since  it's                                                               
already law.                                                                                                                    
                                                                                                                                
MR. STARK responded  that it's probably not  necessary to include                                                               
it in  the legislation so  long as KCDC is  aware of the  law and                                                               
abides by it.                                                                                                                   
                                                                                                                                
1:48:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HERRON  observed that if  HB 23 isn't  amended, it                                                               
could  be difficult  to pass  the House,  although the  chair has                                                               
been working very hard to get around that hurdle.                                                                               
                                                                                                                                
1:49:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG  asked  whether the  transfer  to  AHFC                                                               
changes any of  the financial structures such as  using a public-                                                               
private partnership, P3, from the existing legislation.                                                                         
                                                                                                                                
MR. STARK pointed out that KABATA  is a public corporation of the                                                               
state and is able to procure  the Knik Arm Bridge project through                                                               
a  P3 process.    Therefore, he  said he  couldn't  think of  any                                                               
reason why KCDC,  as a subsidiary of a public  corporation of the                                                               
state [AHFC] couldn't do so as well.                                                                                            
                                                                                                                                
1:50:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KELLER  requested   further  explanation  of  the                                                               
letter  of  interest that  is  submitted  to TIFIA,  particularly                                                               
regarding  whether KABATA  has  submitted it  already.   He  then                                                               
inquired as to  the significance of the ranking  [of the project]                                                               
in terms of [testimony he  recalled indicating KABATA] "is fourth                                                               
on the list."   He also requested explanation  of the preliminary                                                               
investment grade  rating that KABATA has  received, including the                                                               
time and cost it took to obtain the rating.                                                                                     
                                                                                                                                
MR. STARK explained  that the first step in applying  for a TIFIA                                                               
loan is  a letter of interest,  which KABATA has submitted.   The                                                               
letter  of   interest  includes  an  indicative   rating  from  a                                                               
nationally  recognized bond-rating  firm.    The TIFIA  responded                                                               
that  before  KABATA  could  be   invited  to  submit  an  actual                                                               
application,  it   would  need  the  moral   obligation  language                                                               
contained  in [CSHB  23(FIN)] as  well as  an appropriation  that                                                               
would  fund  the  reserve  account  that's  part  of  that  moral                                                               
obligation.   With regard  to comments that  KABATA is  fourth in                                                               
line, he  guessed that KABATA  may have  been fourth to  submit a                                                               
letter of  intent.  He  informed the  committee that a  number of                                                               
entities have submitted letters of  intent and the total value of                                                               
those projects is  approaching the total amount  of TIFIA funding                                                               
available.   If  this project  shifts  to KCDC  under AHFC,  they                                                               
would have  to submit a  letter of intent and  indicative rating,                                                               
the process for  which takes a couple of months.   At that point,                                                               
as  Mr. Viteri  testified, unless  KABATA would've  been able  to                                                               
submit its  application because it obtained  the moral obligation                                                               
language, [KCDC]  would be at the  same point as KABATA.   To add                                                               
further clarity,  Mr. Stark explained  that once  KABATA receives                                                               
the moral obligation [language], it  would then resubmit to TIFIA                                                               
and  there is  a good  chance it  would be  invited to  apply for                                                               
TIFIA financing.   Assuming KABATA  qualifies, the  project would                                                               
be  eligible  for  TIFIA  financing.     If  KABATA  remains  the                                                               
developer  of the  project, the  moral  obligation [language]  is                                                               
included, and some  seed money is placed in  the reserve account,                                                               
there is  a good  chance that  KABATA could get  in line  in very                                                               
short order.  On  the other hand, KCDC would have  a few steps to                                                               
go through before reaching the aforementioned point.                                                                            
                                                                                                                                
1:55:03 PM                                                                                                                    
                                                                                                                                
CHAIR JOHNSON inquired as to  why the letter of interest wouldn't                                                               
be included in the transfer of assets and etcetera.                                                                             
                                                                                                                                
MR. STARK specified that it's  because KCDC is a different entity                                                               
and  from speaking  with  FHWA,  he understood  it  wanted a  new                                                               
letter of interest.                                                                                                             
                                                                                                                                
1:55:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER asked  if Mr. Stark, when  referring to the                                                               
first step in  qualifying for TIFIA funds,  meant [KABATA] having                                                               
the authority to avail itself of  a moral obligation of the state                                                               
or having it  funded to some degree.   If it's to  fund the moral                                                               
obligation, he inquired as to the  amount at which it needs to be                                                               
funded.                                                                                                                         
                                                                                                                                
MR. STARK  answered that the  authority for the  moral obligation                                                               
in [CSHB  23(FIN)] is  necessary, which  is the  first step.   He                                                               
related that  TIFIA has also indicated  the need for funds  [in a                                                               
reserve account]  as well.   The current capital  budget includes                                                               
$10  million,  which Mr.  Stark  characterized  as a  bit  small,                                                               
although KABATA  believes it's  a sufficient  amount.   Mr. Stark                                                               
opined that a larger amount would be better.                                                                                    
                                                                                                                                
1:56:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  OLSON inquired  as to  whether the  four previous                                                               
KABATA submissions included moral obligation clauses.                                                                           
                                                                                                                                
MR. STARK replied no, the  moral obligation clause wasn't part of                                                               
KABATA's  applications in  the past.   In  further response,  Mr.                                                               
Stark explained that the moral  obligation is important for TIFIA                                                               
and because the developers are insisting  on it if they are going                                                               
to put forth  $700-$800 million of their own funds.   That hasn't                                                               
changed and in the past KABATA  has attempted to obtain the moral                                                               
obligation  language.    In  terms  of  TIFIA,  the  process  has                                                               
changed.   The  letter of  intent from  KABATA was  submitted and                                                               
TIFIA specified that a moral  obligation is necessary in order to                                                               
be invited to submit an application.                                                                                            
                                                                                                                                
1:58:10 PM                                                                                                                    
                                                                                                                                
CHAIR  JOHNSON  asked  if  he   understood  Mr.  Stark's  earlier                                                               
testimony  correctly  that [KABATA]  would  have  to request  $30                                                               
million  annually  from  the  legislature  to  make  up  for  the                                                               
shortfall from the tolls.                                                                                                       
                                                                                                                                
MR. STARK explained that KABATA's  financial plan by the time the                                                               
bridge  opens includes  a total  appropriation in  the amount  of                                                               
$150  million, which  would go  into  the reserve  account.   All                                                               
future tolls  and revenues  of KABATA would  go into  the reserve                                                               
account  as well.   With  that $150  million, KABATA  believes it                                                               
might not ever  have to come back to the  legislature and ask for                                                               
funds.   If  KABATA did  have to  return to  the legislature  for                                                               
further funding, it  would be several years later  when it's time                                                               
to expand the  capacity of the bridge.   The aforementioned would                                                               
only occur  when the bridge  is a  success.  Mr.  Stark clarified                                                               
that KABATA isn't planning on  making $30 million requests to the                                                               
legislature  annually, but  rather planning  on getting  the seed                                                               
money upfront  and running  with it.   However, that  assumes the                                                               
toll revenues  are what KABATA  expects them  to be, and  thus if                                                               
toll  revenues fall  short, then  KABATA would  request from  the                                                               
legislature additional funds.                                                                                                   
                                                                                                                                
1:59:43 PM                                                                                                                    
                                                                                                                                
CHAIR  JOHNSON  asked  whether the  aforementioned  is  based  on                                                               
KABATA's projections, not including what the audit predicts.                                                                    
                                                                                                                                
MR. STARK explained  that KABATA normally discusses  a base case,                                                               
which is  considered the 50 percent  likely level of tolls.   The                                                               
KABATA has  also done  projections based on  a 95  percent likely                                                               
level  of  tolls,  which  means toll  [receipts]  are  very  low.                                                               
Although it  still would take a  few years for KABATA  to run out                                                               
of the $150  million under the 95 percent likely  level of tolls,                                                               
KABATA would still seek funds  from the legislature and likely do                                                               
so repeatedly.                                                                                                                  
                                                                                                                                
2:01:03 PM                                                                                                                    
                                                                                                                                
MR. FAUSKE  related that although  he is supportive  of Amendment                                                               
2, as  written, he would  like to  defer to Mr.  Vassar regarding                                                               
the moral obligation language.                                                                                                  
                                                                                                                                
2:01:38 PM                                                                                                                    
                                                                                                                                
KEN  VASSAR, Of  Counsel,  Birch Horton  Bittner  & Cherot;  Bond                                                               
Council,  Alaska   Housing  Finance  Corporation,   informed  the                                                               
committee that  he has  reviewed the two  types of  reserve funds                                                               
that  were in  the original  HB 23.   There  is the  more typical                                                               
bond-debt service  fund and a farther-reaching  reserve fund, the                                                               
second  of which  Mr.  Stark  mentioned earlier  today.   In  the                                                               
course  of  preparing the  amendment  that  would facilitate  the                                                               
transfer of  KABATA from  a state-owned  public corporation  to a                                                               
subsidiary  corporation owned  by AHFC  there was  some confusion                                                               
about the second reserve fund and  the best language for it.  Mr.                                                               
Vassar related that  [AHFC] has no objection to  using the second                                                               
reserve fund,  using the  language in HB  23, and  conforming the                                                               
amendment to reflect that language  with one small exception.  He                                                               
related  his  understanding  that  Mr. Stark  had  discussed  the                                                               
exception with  other assistant attorneys general  and has agreed                                                               
that  the one  change  won't  hurt KABATA.    Therefore, for  the                                                               
second  reserve fund,  he said  [AHFC] is  agreeable to  a change                                                               
that would  return the  language to the  original HB  23 language                                                               
for that reserve.                                                                                                               
                                                                                                                                
2:04:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HAWKER  inquired  as  to whether  Mr.  Vassar  is                                                               
referring  to  the  language  in  subsection (g)  on  page  6  of                                                               
Amendment 2.                                                                                                                    
                                                                                                                                
MR. VASSAR referred  to subsection (d) on page 5  of Amendment 2.                                                               
He  pointed out  that subsection  (e) on  page 5  of Amendment  2                                                               
refers  to an  annual availability  payment, which  he opined  is                                                               
where  HB 23  got off  track.   Therefore, the  [original] HB  23                                                               
language could be used for that fund.                                                                                           
                                                                                                                                
2:05:26 PM                                                                                                                    
                                                                                                                                
MR.  VASSAR,  in  further   response  to  Representative  Hawker,                                                               
proposed deleting  all of subsections  (e) and (f)  [of Amendment                                                               
2] and  in lieu of those  add the language from  page 3, starting                                                               
line 8 of  [CSHB 23(FIN)].  He then pointed  out that language on                                                               
page  3,  lines 10-21,  of  [CSHB  23(FIN)] specifies  the  three                                                               
things for  which the particular fund  can be used.   However, he                                                               
noted  his  understanding from  Mr.  Stark  and others  that  the                                                               
language on page  3, lines 14-16, of CSHB  23(FIN) wouldn't carry                                                               
over.    Furthermore,  subsection  (j)   will  also  need  to  be                                                               
incorporated into page 3, lines 27-30 of CSHB 23(FIN).                                                                          
                                                                                                                                
2:08:28 PM                                                                                                                    
                                                                                                                                
CHAIR  JOHNSON  surmised then  that  Mr.  Vassar is  prepared  to                                                               
remove the  language and return  to the original HB  23 language,                                                               
which he further surmised wouldn't be of concern for Mr. Stark.                                                                 
                                                                                                                                
MR. VASSAR replied yes.                                                                                                         
                                                                                                                                
2:09:57 PM                                                                                                                    
                                                                                                                                
MR.  FAUSKE,  regarding  the  potential  for  delay  due  to  the                                                               
proposed  transition  to  AHFC,  acknowledged  that  he  couldn't                                                               
ensure the committee  that there won't be delays.   He noted that                                                               
he has been  advised by some who  say there is time  and no sense                                                               
of  urgency, rather  there is  a desire  to move  the project  as                                                               
quickly as  possible.  With regard  to the sense of  urgency, Mr.                                                               
Fauske said he would have to  decline an offer that would require                                                               
AHFC to  accept all contracts,  obligations, etcetera  of another                                                               
entity without time  to review them.  However,  Mr. Fauske opined                                                               
that  there  is a  way  to  do  this  with language  included  in                                                               
[Amendment  2] that  works with  the transition  and keeps  those                                                               
matters  alive that  are  possible  to do  so.    He related  his                                                               
understanding  that the  most  urgent matter  is  to address  the                                                               
audit and moving  beyond that, which can  occur concurrently with                                                               
going forward.                                                                                                                  
                                                                                                                                
2:11:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER  recalled that  during his tenure  with the                                                               
legislature, it has spent much  time studying mega projects as is                                                               
the case with  KABATA.  From that [study/review],  he opined that                                                               
the legislature  has accepted  and respected  the counsel  it has                                                               
received on  mega projects by  the Institute of  Project Analysis                                                               
(IPA).  The  IPA has offered that successful  mega projects can't                                                               
be  schedule  driven.    Therefore,  he  expressed  concern  with                                                               
driving to  meet a schedule as  that often results in  failure as                                                               
demonstrated by schedule-driven projects throughout the world.                                                                  
                                                                                                                                
2:13:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KELLER  pointed out  that  the  reference to  the                                                               
urgency  of the  project is  different  than the  urgency of  the                                                               
issue, which is  related to the timing of the  session.  Although                                                               
the TIFIA funds  alone may not be enough [to  drive the project],                                                               
the significant amount of possible  TIFIA funds create a sense of                                                               
urgency in terms of taking advantage of an opportunity.                                                                         
                                                                                                                                
2:14:26 PM                                                                                                                    
                                                                                                                                
CHAIR JOHNSON remarked  that the urgency he observes  is having a                                                               
letter before TIFIA in order to keep the project in the mix.                                                                    
                                                                                                                                
MR. FAUSKE highlighted that AHFC  has recently completed a fairly                                                               
significant  phase  and  project  under AGDC,  which  is  a  $7.5                                                               
billion  project.   He noted  his  agreement with  Representative                                                               
Hawker  that there  is  a way  to do  and  progress these  [mega]                                                               
projects that he  has observed firsthand.  He  stressed that it's                                                               
proven that  when projects  go south  it's because  people didn't                                                               
adhere to strict  policies.  He acknowledged that  some fear that                                                               
AHFC is a bureaucratic monstrosity,  but he urged folks to review                                                               
what AHFC did  with AGDC, which is a far  larger project than the                                                               
bridge.    Mr. Fauske  emphasized  that  he  won't be  driven  by                                                               
schedules  to  the  point  of  losing sight  of  the  main  goal.                                                               
Furthermore, until the audit has  been answered in a satisfactory                                                               
manner, he challenged anyone to  secure financing; financing that                                                               
isn't costly.   He informed the committee that  anytime bonds are                                                               
issued  in the  front  of  the OS  there  is  a section  entitled                                                               
"Significant Events."   He indicated  that [the  audit] certainly                                                               
qualifies as a significant event  and investors, rating agencies,                                                               
and  others  will  want  the  facts.    He  then  indicated  that                                                               
[addressing  the issues  and maintaining  sight  of the  original                                                               
goal] can occur at the same time.                                                                                               
                                                                                                                                
2:17:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KELLER pointed  out that  the committee  has been                                                               
discussing whether  there will be  a delay due to  the transition                                                               
from  KABATA   to  AHFC,  which   presumes  urgency.     However,                                                               
discussing whether the delay is appropriate is different.                                                                       
                                                                                                                                
CHAIR  JOHNSON  surmised  that  the committee  is  asking  for  a                                                               
guarantee that there  will be no delays,  although everyone knows                                                               
there are  no guarantees.  However,  he expressed the need  to do                                                               
what's possible  to avoid creating  delays.  He then  related his                                                               
understanding that  Mr. Fauske  isn't discussing  creating delays                                                               
but rather not being held to  a [schedule] if issues arise in the                                                               
future.                                                                                                                         
                                                                                                                                
2:19:17 PM                                                                                                                    
                                                                                                                                
STACY SHUBERT, Director, Governmental  Affairs & Public Relation,                                                               
Alaska  Housing  Finance   Corporation,  Department  of  Revenue,                                                               
regarding the  public-private partnership  and the short  list of                                                               
potential partners that  KABATA has been working  with, said that                                                               
AHFC sees  no reason why there  would be any challenges  with its                                                               
procurement  process.   However, she  deferred to  Ms. Cedergreen                                                               
for further comment.                                                                                                            
                                                                                                                                
2:19:26 PM                                                                                                                    
                                                                                                                                
NOLA  CEDERGREEN,   Director,  Administrative   Services,  Alaska                                                               
Housing  Finance Corporation,  Department  of  Revenue, began  by                                                               
noting that she's  also the chief procurement  officers for AHFC.                                                               
She  informed  the  committee  that  there  is  nothing  in  AHFC                                                               
regulations  that  would  prohibit   AHFC  from  recognizing  the                                                               
process  described earlier  as a  request  for qualification  and                                                               
creating a  short list  of potential  offerors.   However, AHFC's                                                               
regulations do allow it to follow  the RFQ process and then issue                                                               
an  RFP   process,  which  under  AHFC's   regulations  would  be                                                               
referenced as a limited procurement  to those qualified offerors.                                                               
Therefore,  Ms. Cedergreen  didn't expect  any problems  with the                                                               
procurement process itself.                                                                                                     
                                                                                                                                
2:20:17 PM                                                                                                                    
                                                                                                                                
CHAIR  JOHNSON related  his understanding  that  when KABATA  was                                                               
building its  procurement plans it  came to AHFC for  guidance as                                                               
to how to put such plans together.                                                                                              
                                                                                                                                
MS.  CEDERGREEN confirmed  that  was the  case,  adding that  she                                                               
shared AHFC's  procurement regulations with KABATA  several years                                                               
ago.    Upon  review  of KABATA's  procurement  regulations,  Ms.                                                               
Cedergreen said  she found the  vast majority to be  very similar                                                               
if not identical to AHFC's procurement regulations.                                                                             
                                                                                                                                
2:20:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KELLER surmised  then  that the  fact that  under                                                               
Amendment  2,  AHFC isn't  under  the  state procurement  program                                                               
won't   jeopardize   the    situation   with   the   short-listed                                                               
contractors.    He related  his  understanding  that [the  state]                                                               
spent  $6  million and  the  three  short-listed contractors  are                                                               
poised to spend  millions.  He reiterated  his understanding that                                                               
AHFC not following the state  procurement code won't prevent AHFC                                                               
from picking up [the short list] and continuing.                                                                                
                                                                                                                                
MR.  CEDERGREEN  replied  yes, AHFC  routinely  issues  RFQs  and                                                               
identifies firms  that are qualified for  performing professional                                                               
and other  services for the  corporation and  subsequently issues                                                               
an  RFP  with specifications  and  awards  [the contract]  to  an                                                               
offeror.  Under the provisions  of AHFC's procurement regulations                                                               
it's referenced as limited procurement.                                                                                         
                                                                                                                                
REPRESENTATIVE  KELLER surmised  then  that  although AHFC  isn't                                                               
under the  procurement of  the state AHFC  is allowed  to fulfill                                                               
the  obligations  incurred  by   KABATA,  which  were  under  the                                                               
procurement standards of the state.                                                                                             
                                                                                                                                
MR. FAUSKE added that Ms.  Cedergreen, her staff, and others were                                                               
instrumental when AGDC was incorporated  into AHFC, and thus AHFC                                                               
is very familiar with how it works.                                                                                             
                                                                                                                                
2:23:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG  directed attention to page  3, line 12,                                                               
of Amendment  2, which specifies a  rate of 11 percent  rate.  He                                                               
inquired as to  why that rate was chosen as  he recalled that the                                                               
state could borrow at about 4 percent.                                                                                          
                                                                                                                                
MS.   SCHUBERT   pointed  out   that   the   language  to   which                                                               
Representative Gruenberg referred  is [existing statute] relating                                                               
the powers of KABATA that were provided some time ago.                                                                          
                                                                                                                                
2:23:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG inquired as to why it remains.                                                                         
                                                                                                                                
MS. FAUSKE related  his understanding that it's a  "not to exceed                                                               
amount" provision.                                                                                                              
                                                                                                                                
2:24:14 PM                                                                                                                    
                                                                                                                                
MR. VASSAR said he was tasked  with bringing to the AHFC statutes                                                               
those statutes  that were unique to  KABATA and allowed it  to do                                                               
its  work.   The referenced  statute was  identified as  such and                                                               
brought over to  AHFC statute; that was the only  intent with it.                                                               
He noted agreement  with Mr. Fauske that the  language tells KCDC                                                               
it wouldn't be able to issue  bonds if the interest rate exceeded                                                               
11 percent.   The expectation is  that any bonds issued  would be                                                               
at  or near  the current  market rate  at the  time of  issuance.                                                               
Therefore, today that would fall far below 11 percent.                                                                          
                                                                                                                                
2:25:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG  suggested  that  the  rate  should  be                                                               
reviewed again as it seems very high.                                                                                           
                                                                                                                                
CHAIR JOHNSON  agreed that it's a  high number, but said  that he                                                               
is comfortable with the rate as it's a ceiling not a floor.                                                                     
                                                                                                                                
2:26:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KELLER  inquired  as  to  Mr.  Fauske's  thoughts                                                               
regarding KABATA's letter  of interest to TIFIA  and whether AHFC                                                               
would have  to redo  that letter  and how  that would  impact the                                                               
TIFIA qualification.                                                                                                            
                                                                                                                                
MR. FAUSKE related his understanding  that the TIFIA process is a                                                               
competitive process that is competitively  awarded by the federal                                                               
government.   Applicants  obtain  a  place in  line  as they  put                                                               
forward projects.  He told the  committee that it would be AHFC's                                                               
goal to stick to that schedule  in order to adhere to the current                                                               
schedules and  that he  hadn't heard that  this creates  an undue                                                               
problem.  He  offered his further understanding  that although an                                                               
applicant  may  not  receive  the  award  at  first,  it  doesn't                                                               
preclude the applicant from submitting [an application] again.                                                                  
                                                                                                                                
REPRESENTATIVE KELLER  agreed, but he  raised the question  as to                                                               
the impact  of the change in  name and the response  to that from                                                               
TIFIA.                                                                                                                          
                                                                                                                                
MR. FAUSKE  said that  the audit  has to  be corrected/completed,                                                               
but he didn't know whether it  impacts the TIFIA grant.  If there                                                               
has  been a  question  in  the audit  with  regard to  overstated                                                               
revenue from  tariffs, he felt it  would have an impact.   Still,                                                               
he  expressed AHFC's  goal  to  work with  the  KABATA staff  and                                                               
proceed  with the  grants  in order  to avoid  undue  delay.   He                                                               
stated  that  AHFC doesn't  desire  to  disrupt the  schedule  of                                                               
anything  and   AHFC  will  certainly  seek   guidance  from  the                                                               
expertise of KABATA in order to forward the project.                                                                            
                                                                                                                                
2:29:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KELLER  asked  whether Mr.  Fauske  foresees  any                                                               
problem with the involvement of DOT&PF.                                                                                         
                                                                                                                                
MR. FAUSKE replied no.                                                                                                          
                                                                                                                                
2:30:36 PM                                                                                                                    
                                                                                                                                
CHAIR  JOHNSON requested  that  his staff,  Mr.  Fauske, and  Mr.                                                               
Stark work  together to address  the necessary changes to  HB 23,                                                               
which he saw as minor differences.                                                                                              
                                                                                                                                
MR. FAUSKE agreed that they are  very close and should be able to                                                               
address the differences in short order.                                                                                         
                                                                                                                                
2:31:39 PM                                                                                                                    
                                                                                                                                
CHAIR JOHNSON,  upon determining no  one else wanted  to testify,                                                               
closed public testimony.                                                                                                        
                                                                                                                                
2:32:13 PM                                                                                                                    
                                                                                                                                
CHAIR JOHNSON then recessed to the call of the chair.                                                                           
                                                                                                                                
7:12:06 PM                                                                                                                    
                                                                                                                                
CHAIR  JOHNSON called  the meeting  back  to order  at 7:12  p.m.                                                               
Upon  reconvening,  Representatives   Chenault,  Hawker,  Herron,                                                               
Keller, Olson,  and Johnson  were present at  the call  to order.                                                               
Representative Gruenberg arrived as  the meeting was in progress.                                                               
Also in attendance was Representative Hughes.                                                                                   
                                                                                                                                
7:12:18 PM                                                                                                                    
                                                                                                                                
CHAIR JOHNSON removed  his objection to Amendment  2. There being                                                               
no further objection, Amendment 2 was adopted.                                                                                  
                                                                                                                                
7:12:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE OLSON moved  to adopt Amendment 1  to Amendment 2,                                                               
labeled 28-LS0141\O.40, Martin, 4/11/13, which read:                                                                            
                                                                                                                                
     Page 1, line 11, of the amendment:                                                                                         
          Delete "board shall be the"                                                                                           
                                                                                                                                
          Page 1, line 12, of the amendment, following                                                                          
     "Corporation":                                                                                                             
          Insert "shall consist of the members of the board                                                                     
     of the corporation"                                                                                                        
                                                                                                                                
     Page 2, line 1, of the amendment:                                                                                          
          Delete "to"                                                                                                           
                                                                                                                                
     Page 2, line 27, of the amendment:                                                                                         
          Delete "department,"                                                                                                  
          Insert "Department of Transportation and Public                                                                       
     Facilities"                                                                                                                
                                                                                                                                
     Page 5, lines 6 - 7, of the amendment:                                                                                     
          Delete "the property of"                                                                                              
          Insert "accounted for separately and may be                                                                           
     appropriated to"                                                                                                           
                                                                                                                                
     Page  5,  line 15,  through  page  6,  line 2,  of  the                                                                    
     amendment:                                                                                                                 
          Delete all material and insert:                                                                                       
          "(e)  Money in a reserve fund established under                                                                       
     (d) of this section                                                                                                        
               (1)  shall be used only for                                                                                      
               (A)  the payment of monetary obligations,                                                                        
     liabilities,  and  indebtedness  of the  Knik  Crossing                                                                    
     Development Corporation,  including termination payment                                                                    
     obligations,  under   agreements  for   the  financing,                                                                    
     design,  construction,   maintenance,  improvement,  or                                                                    
     operation  of facilities,  properties,  or projects  of                                                                    
     the Knik Crossing Development Corporation; and                                                                             
               (B)        planning,   permitting,    design,                                                                    
     acquisition,  construction,  maintenance,  improvement,                                                                    
     or   operation   of  transportation-related   projects,                                                                    
     facilities,  properties, systems,  or equipment  of the                                                                    
     Knik Crossing  Development Corporation or  other public                                                                    
     entities,   including   expansions,   extensions,   and                                                                    
     capacity   improvements,   eligible  under   applicable                                                                    
     federal and state law to be funded from toll revenue;                                                                      
               (2)  may not be used for the purpose of                                                                          
     planning,     permitting,      design,     acquisition,                                                                    
     construction,  maintenance,  improvement, or  operation                                                                    
     of  projects,   facilities,  properties,   systems,  or                                                                    
     equipment  under  (1)(B)  of  this  subsection  if  the                                                                    
     withdrawal would reduce the amount  in the reserve fund                                                                    
     to less than the reserve fund requirement.                                                                                 
          (f)  In computing the amount of a reserve fund                                                                        
     established under  (d) of  this section,  securities in                                                                    
     which all  or a portion  of the fund is  invested shall                                                                    
     be  valued by  a reasonable  method established  by the                                                                    
     Knik Crossing Development  Corporation by resolution or                                                                    
     established  by the  terms of  the agreement  for which                                                                    
     the  fund serves  as security.  Valuation must  include                                                                    
     the  amount of  interest earned  or accrued  as of  the                                                                    
     date of the valuation."                                                                                                    
                                                                                                                                
     Page 6, lines 6 - 11, of the amendment:                                                                                    
          Delete "the availability payment reserve fund                                                                         
     established  under (e)  of this  section  to an  amount                                                                    
     sufficient  to   pay  the  Knik   Crossing  Development                                                                    
     Corporation's    next    availability   payment.    The                                                                    
     legislature  may  appropriate   to  the  Knik  Crossing                                                                    
     Development  Corporation the  amount  certified by  the                                                                    
     chair  of  the board  that  is  needed to  restore  the                                                                    
     reserve  fund  to  the  amount   needed  for  the  next                                                                    
     availability payment."                                                                                                     
          Insert "a reserve fund established under (d) of                                                                       
     this section to the  reserve fund requirement. The duty                                                                    
     of the  chair of  the board to  report annually  to the                                                                    
     governor  and  the   legislature  terminates  upon  the                                                                    
     cumulative   appropriation   to   the   Knik   Crossing                                                                    
     Development  Corporation,  after  January 1,  2013,  of                                                                    
     $1,140,000,000."                                                                                                           
                                                                                                                                
     Page 6, lines 13 - 17, of the amendment:                                                                                   
          Delete all material.                                                                                                  
                                                                                                                                
     Reletter the following subsection accordingly.                                                                             
                                                                                                                                
     Page   6,  line   18   of   the  amendment,   following                                                                    
     "section,":                                                                                                                
          Insert "(1)"                                                                                                          
                                                                                                                                
     Page   6,  line   22   of   the  amendment,   following                                                                    
     "security":                                                                                                                
          Insert "; and                                                                                                         
               (2)  "reserve fund requirement" means the                                                                        
     amount  required to  be on  deposit in  a reserve  fund                                                                    
     established under  (d) of this  section on the  date of                                                                    
     the  computation, as  determined by  resolution of  the                                                                    
     Knik Crossing  Development Corporation or by  the terms                                                                    
     of  the   agreement  for  which  the   fund  serves  as                                                                    
     security"                                                                                                                  
                                                                                                                                
     Page   8,  line   24,  of   the  amendment,   following                                                                    
     "indebtedness,":                                                                                                           
          Insert "obligations, liabilities, commitments,"                                                                       
                                                                                                                                
     Page   8,  line   26,  of   the  amendment,   following                                                                    
     "transferred to":                                                                                                          
          Insert "and may be assumed by"                                                                                        
                                                                                                                                
     Page   8,  line   27,  of   the  amendment,   following                                                                    
     "Corporation.":                                                                                                            
          Insert "Nothing in this section creates a                                                                             
     liability or  obligation of the Alaska  Housing Finance                                                                    
     Corporation."                                                                                                              
                                                                                                                                
     Page 8, following line 27, of the amendment:                                                                               
     Insert a new subsection to read:                                                                                           
          "(b)  All procurements of the Knik Arm Bridge and                                                                     
     Toll Authority that  have not resulted in  the award of                                                                    
     a contract as of the effective  date of this Act may be                                                                    
     adopted and  may continue as  procurements of  the Knik                                                                    
     Crossing Development Corporation."                                                                                         
                                                                                                                                
     Reletter the following subsection accordingly.                                                                             
                                                                                                                                
CHAIR JOHNSON objected for purposes of discussion.                                                                              
                                                                                                                                
7:13:07 PM                                                                                                                    
                                                                                                                                
CHAIR  JOHNSON inquired  as  to  the comfort  Mr.  Stark and  Mr.                                                               
Vassar  have  with  Amendment  1  to  Amendment  2  in  terms  of                                                               
addressing the problems he has discussed.                                                                                       
                                                                                                                                
MR. STARK responded  that he is as comfortable as  he is going to                                                               
be,  while   maintaining  concern   that  changing   entities  in                                                               
midstream will inevitably  slow the process.  At  this point, the                                                               
language is  as good as it  will get, particularly in  this short                                                               
time.                                                                                                                           
                                                                                                                                
MR.  VASSAR  related  that  he  is  completely  comfortable  with                                                               
Amendment 1 [to Amendment 2].                                                                                                   
                                                                                                                                
7:14:34 PM                                                                                                                    
                                                                                                                                
MR. WALTON  reviewed the  changes encompassed  in Amendment  1 to                                                               
Amendment  2.    The changes  to  page  1,  lines  11 and  12  of                                                               
Amendment 2  specify the membership  of the  board of KCDC.   The                                                               
change on  page 2, line  27, from "department" to  "Department of                                                               
Transportation  &   Public  Facilities"  is  necessary   [to  add                                                               
clarity]  because  KCDC  is housed  for  administrative  purposes                                                               
under  DOR.   The change  on page  5, lines  6-7, of  Amendment 2                                                               
addresses concerns  regarding the prohibition of  dedicated funds                                                               
and  thus specifies  that the  legislature  will appropriate  any                                                               
additional  funds   rather  than  it  going   directly  into  the                                                               
development funds.   The change on page 5, line  15, through page                                                               
6, line 2,  of Amendment 2 replaces  availability payment reserve                                                               
fund language with original language from  HB 23.  The purpose of                                                               
the  aforementioned change  is to  specify for  what the  reserve                                                               
funds shall be  used, which is specifically  for the obligations,                                                               
liabilities,  and  indebtedness  of  KCDC and  costs  related  to                                                               
transportation-related  projects.   The  new language  stipulates                                                               
that funds in the reserve fund  may not be used if the withdrawal                                                               
would reduce  the amount  in the  reserve fund  to less  than the                                                               
requirement.   The  language also  specifies  that the  valuation                                                               
should  be determined  using a  reasonable  method determined  by                                                               
KCDC.  The  change to page 6, lines 6-11,  of Amendment 2 deletes                                                               
language  related to  the availability  payment reserve  fund and                                                               
replaces  it  with  language restoring  the  reserve  fund  moral                                                               
obligation cap  to the language as  it was in CSHB  23(FIN).  The                                                               
reserve  fund  moral  obligation  language and  cap  language  in                                                               
Amendment  2 was  split into  two  parts, and  thus the  deletion                                                               
proposed to  page 6, lines  13-17, of  Amendment 2 deletes  a now                                                               
redundant section.   The change on page 6, line  22, of Amendment                                                               
2  adds a  definition for  "reserve fund  requirement".   Page 8,                                                               
line 24,  of Amendment 2, is  transition language and is  part of                                                               
the comprehensive  list of components  that would  be transferred                                                               
from  KABATA to  KCDC.   There  is new  language  that adds  that                                                               
obligations,  liabilities, and  commitments  of  KABATA would  be                                                               
transferred to  and assumed by  KCDC, as specified in  the change                                                               
to page 8, line  26, of Amendment 2.  The change  on page 8, line                                                               
27, of  Amendment 2  adds an explicit  statement that  holds AHFC                                                               
harmless for  liabilities and obligations  taken on by KCDC.   In                                                               
response  to discussion  regarding  pending  procurements, a  new                                                               
subsection  is  inserted  on  page   8,  following  line  27,  of                                                               
Amendment   2   that   clarifies  what   happens   with   pending                                                               
procurements.                                                                                                                   
                                                                                                                                
7:21:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG  asked  whether there  is  any  bonding                                                               
committee oversight in Amendment 1 to Amendment 2.                                                                              
                                                                                                                                
MR.  VASSAR  answered  that  there is  no  state  bond  committee                                                               
oversight  of bond  issuance in  Amendment  1 to  Amendment 2  or                                                               
Amendment 2  itself.  In  further response, Mr. Vassar  said that                                                               
whether  there should  be or  not  is a  policy call.   With  the                                                               
establishment of the  new KCDC as a subsidiary of  AHFC, there is                                                               
competent oversight provided through  AHFC.  Furthermore, AHFC is                                                               
very aware of the implications  of issuing moral obligation bonds                                                               
and the  impact of that on  the state from which  he would derive                                                               
comfort.  Again, this is a  policy call.  He highlighted that the                                                               
moral obligation  when large principle  amounts are  involved can                                                               
have  an impact  on  the state's  credit rating.    If the  state                                                               
determines state  bond committee  review is appropriate  in those                                                               
circumstances, that's a reasonable  policy determination.  If the                                                               
aforementioned determination  is made  it would require  one more                                                               
step to  be completed prior  to the  issuance of bonds,  and thus                                                               
becomes a timing issue.                                                                                                         
                                                                                                                                
7:25:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG questioned whether  [review of the state                                                               
bond committee]  would avoid  the appearance  of the  conflict of                                                               
interest in the overall issuance of certain bonds.                                                                              
                                                                                                                                
REPRESENTATIVE  HAWKER,  noting  that   he  isn't  supporting  or                                                               
opposing the  legislation or the amendment  before the committee,                                                               
stated  that   the  point   of  this   legislation,  particularly                                                               
[proposed]  AS 18.56.615,  is that  the legislature  is making  a                                                               
policy  call that  KCDC may  issue bonds.   He  pointed out  that                                                               
through the  governance provisions  within these  amendments KCDC                                                               
is  placed under  AHFC,  which has  issued  billions of  dollars'                                                               
worth of  bonds, is incredibly  competent, and has  an obligation                                                               
to  the  state  for  a fiduciary  duty  and  proper  performance.                                                               
Therefore, Representative  Hawker said  he felt  very comfortable                                                               
that  the  concern  expressed   by  Representative  Gruenberg  is                                                               
addressed in the legislation that the committee would forward.                                                                  
                                                                                                                                
MR. VASSAR  noted his agreement  with Representative Hawker.   In                                                               
response  to   Representative  Gruenberg,  Mr.  Vassar   said  he                                                               
couldn't identify a conflict of interest.                                                                                       
                                                                                                                                
7:28:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG surmised that the  "may" on page 2, line                                                               
2, of Amendment 2 designates which  agency has the power to do it                                                               
rather than require it.                                                                                                         
                                                                                                                                
MR. VASSAR stated that Representative Gruenberg is correct.                                                                     
                                                                                                                                
7:29:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG asked if the  purpose of the deletion of                                                               
the  language  "the  property  of"  on  page  5,  lines  6-7,  of                                                               
Amendment 2 means that the  [interest earned on or profit derived                                                               
from these funds and reserves]  aren't automatically the property                                                               
of  KCDC,   must  be  accounted   for  separately,  and   may  be                                                               
appropriated.                                                                                                                   
                                                                                                                                
MR. VASSAR  confirmed that is the  purpose:  to ensure  [KCDC] is                                                               
in  compliance with  both  the  state constitutional  requirement                                                               
that  money  can  only  be   removed  from  the  treasury  by  an                                                               
appropriation  of  the  legislature   and  to  avoid  creating  a                                                               
question as to whether there is a dedicated fund.                                                                               
                                                                                                                                
7:31:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG   inquired  as  to  why   the  language                                                               
"termination payment  obligations" page  1, line  23 and  page 2,                                                               
line  1, of  Amendment 1  to Amendment  2 was  added since  there                                                               
could be substantial termination payment obligations.                                                                           
                                                                                                                                
MR.  VASSAR   answered  that   the  aforementioned   language  in                                                               
Amendment 1  to Amendment 2 returns  the language to what  was in                                                               
CSHB 23(FIN) on page 3, line 11.                                                                                                
                                                                                                                                
REPRESENTATIVE GRUENBERG then  inquired as to why  the phrase was                                                               
eliminated.                                                                                                                     
                                                                                                                                
MR. VASSAR explained  that it wasn't so much that  the phrase was                                                               
eliminated,  but  rather  that  Amendment 2  changed  the  entire                                                               
reserve fund language based on advice  of an attorney in DOL.  He                                                               
related that  AHFC had no  preference for the language,  and thus                                                               
it was added  in order to address KABATA's  concerns as specified                                                               
by Mr. Stark and return the language to that in CSHB 23(FIN).                                                                   
                                                                                                                                
7:34:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG then directed  attention to the language                                                               
"or other public  entities" on page 2, line 7,  of Amendment 1 to                                                               
Amendment  2.   He  asked if  the  aforementioned language  gives                                                               
additional ability  to use the money  in the fund for  some other                                                               
public entity besides KCDC without any further definition.                                                                      
                                                                                                                                
MR.  VASSAR pointed  out  that  the language  in  Amendment 1  to                                                               
Amendment 2 returns  the language to that in  CSHB 23(FIN), which                                                               
is  what KABATA  requested.   The particular  clause in  question                                                               
describes for  what the money  in the  reserve fund can  be used.                                                               
The  money  in  the  reserve  fund  may  be  used  for  planning,                                                               
permitting, etcetera for  transportation-related projects of KCDC                                                               
or  other   public  entities.    Therefore,   theoretically,  the                                                               
language could  authorize another  transportation-related project                                                               
by an  entity other than KCDC  and within the general  purpose of                                                               
KCDC  to  help  finance  the planning,  permitting,  design,  and                                                               
etcetera of that transportation-related project.                                                                                
                                                                                                                                
REPRESENTATIVE GRUENBERG surmised then that  so long as the funds                                                               
were to  be used for  the planning,  permitting, and design  of a                                                               
transportation project,  it could [be  used] even in  a different                                                               
part of the state.                                                                                                              
                                                                                                                                
MR.    VASSAR   disagreed    with   Representative    Gruenberg's                                                               
understanding and  opined that any  power given to KCDC  needs to                                                               
be read in light of KCDC's  purposes in AS 18.56.605.  He related                                                               
that KCDC's  purpose is  to develop,  stimulate, and  advance the                                                               
economic welfare  of the state and  further public transportation                                                               
systems  in   the  vicinity   of  the   Upper  Cook   Inlet  with                                                               
construction of  a bridge to  span Knik Arm to  connect Anchorage                                                               
and the  Matanuska-Susitna Valley.  Therefore,  Mr. Vassar didn't                                                               
believe it would  be within KCDC's power to choose  a random city                                                               
to finance  a project.   He highlighted that KCDC's  only purpose                                                               
is  to further  this  transportation system  that  consists of  a                                                               
bridge spanning the Knik Arm.                                                                                                   
                                                                                                                                
CHAIR  JOHNSON interjected  his understanding  that this  portion                                                               
[of  financing] has  to be  [for a  project] that's  eligible for                                                               
federal funds.                                                                                                                  
                                                                                                                                
7:38:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG  asked  whether  the  addition  of  the                                                               
language  "or  other public  entities"  on  page  2, line  7,  of                                                               
Amendment  1 to  Amendment 2  might cause  bondholders/council to                                                               
have concern  if they  viewed it  as a way  in which  to diminish                                                               
their security interests.                                                                                                       
                                                                                                                                
MR. VASSAR  answered that he  didn't believe so.   The purchasers                                                               
of any  bonds from KCDC  would review KCDC's  authorizing statute                                                               
and  upon  entering  into any  contracts,  will  tailor  whatever                                                               
covenants they need  KCDC to make to ensure  KCDC's assets aren't                                                               
diluted or diverted in a manner that jeopardizes their security.                                                                
                                                                                                                                
7:40:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG  asked  whether the  insertion  of  the                                                               
language  "obligations, liabilities,  commitments," as  specified                                                               
on  page 3,  lines 17-18,  of Amendment  1 to  Amendment 2  would                                                               
include any contract KCDC might sign.                                                                                           
                                                                                                                                
MR.  VASSAR opined  that the  language is  an attempt  to have  a                                                               
complete and all-encompassing transfer  to KCDC every conceivable                                                               
thing KABATA  has done  or to  which it has  been exposed.   With                                                               
respect to  existing agreements and  contracts, that  language is                                                               
already included in  [Amendment 2].  Therefore,  in a substantive                                                               
sense  KABATA isn't  going  away, rather  it's  just shifting  in                                                               
total to AHFC.                                                                                                                  
                                                                                                                                
7:43:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG highlighted  the  use of  "may" in  the                                                               
language on page 3, lines 20-21,  and lines 29-31, of Amendment 1                                                               
to Amendment  2 and inquired  as to  what happens to  claims that                                                               
aren't  either  adopted,  continued,  or  assumed.    He  further                                                               
inquired  as to  whether  that language  would  leave any  orphan                                                               
debts or assets.                                                                                                                
                                                                                                                                
MR. VASSAR answered  that it's possible something  would be left.                                                               
He related that  "may" is used in these instances  as it provides                                                               
KCDC  an option  to understand  what is  being transferred  to it                                                               
prior to assuming  it.  In the absence of  anything egregious, he                                                               
anticipated  that  KCDC  would  assume and  adopt  all  of  them.                                                               
However, from  AHFC's point of view,  it's sort of a  mystery bag                                                               
and the  language provides  an option for  review prior  to being                                                               
firmly and finally committed to them.                                                                                           
                                                                                                                                
REPRESENTATIVE  GRUENBERG inquired  as  to what  happens if  KCDC                                                               
decides not to adopt, continue, or  assume one or more items.  In                                                               
such a case, who is on the hook for those, he asked.                                                                            
                                                                                                                                
MR.  VASSAR responded  that  it would  depend  upon the  specific                                                               
items.   For example,  some of  the commitments  are expectations                                                               
not contract rights at this point.   If such items go away, there                                                               
are   really   no   repercussions   other   than   possibly   the                                                               
disappointment  of the  involved parties.   He  pointed out  that                                                               
AHFC  has   a  great  deal   of  experience  working   with  such                                                               
transactions and  agreements with  parties, and therefore  it may                                                               
be there is a determination that  it's best not to follow through                                                               
with some  of those commitments.   The "may" language  leaves the                                                               
aforementioned  option open.    In terms  of  the more  difficult                                                               
situation in which there is  an actual contract right that KABATA                                                               
has entered into  that is a vested contract and  there is a party                                                               
that has rights that are protected  by the contract clause of the                                                               
U.S. Constitution,  Mr. Vassar  didn't think  KCDC has  any other                                                               
option than to assume those.                                                                                                    
                                                                                                                                
7:49:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG  pointed  out   that  normally  if  one                                                               
purchases property without knowing whether  there is some type of                                                               
recorded claim  one would have  title insurance in order  to know                                                               
what  one is  getting or  exempted from  the policy.   Since  the                                                               
aforementioned isn't available in  this situation, he inquired as                                                               
to  what  protection  the  state   would  have  against  a  rogue                                                               
contractual obligation.                                                                                                         
                                                                                                                                
MR.  VASSAR explained  that the  contracts already  in place  and                                                               
validly entered into  under the authority given to  KABATA are in                                                               
the nature of  fait accompli.  He reminded the  committee that as                                                               
a general rule  validly entered into contracts  are protected and                                                               
the  legislature can't  change the  law  later in  a manner  that                                                               
would  impair those  contracts.   With regard  to those  items in                                                               
place  that aren't  contract rights,  he opined  that one  of the                                                               
purposes  of this  legislation  is to  help  protect the  state's                                                               
interest by transferring  this to an entity like  AHFC, which has                                                               
experience  in large  financing efforts  over a  great number  of                                                               
years.                                                                                                                          
                                                                                                                                
REPRESENTATIVE  GRUENBERG  expressed  the hope  that  AHFC  would                                                               
consider  the aforementioned  so  that people  know what  they're                                                               
entering into.                                                                                                                  
                                                                                                                                
7:52:20 PM                                                                                                                    
                                                                                                                                
MS. SCHUBERT read the following statement from Mr. Fauske:                                                                      
                                                                                                                                
     Mr.  Chairman, members  of the  committee, I'd  like to                                                                    
     compliment and  thank you and  your staff.  When  I was                                                                    
     asked to consider  taking this project on,  I said that                                                                    
     the  assets  of   Alaska  Housing  Finance  Corporation                                                                    
     absolutely must  be protected.   Our legal  counsel has                                                                    
     worked  with those  who represent  KABATA, your  staff,                                                                    
     legislative    drafting,    and    members    of    the                                                                    
     administration.   I know  it demanded  a great  deal of                                                                    
     time for all those involved  in the details, but it was                                                                    
     important to get  it right.  My legal  counsel tells me                                                                    
     that we've reached that right  point with HB 23 and the                                                                    
     amendment  and  the  amendment to  the  amendment  that                                                                    
     you're  considering.    On  behalf  of  Alaska  Housing                                                                    
     Finance  Corporation and  my team,  I'd  like to  thank                                                                    
     your  members   for  the   confidence  that   you  have                                                                    
     expressed in our  ability to help KABATA  and the State                                                                    
     of  Alaska  to  resolve  this  issue  and  advance  the                                                                    
     project.    I assure  you  if  given direction  by  the                                                                    
     legislature, I  will give the  Knik Arm  Bridge Project                                                                    
     our upmost attention and we will move expeditiously.                                                                       
                                                                                                                                
7:53:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG asked  whether  AHFC sees  any risk  in                                                               
this,  possibly   in  terms  of  unknown/undisclosed   claims  or                                                               
contracts.  If  so, he then inquired as to  how AHFC would handle                                                               
it.                                                                                                                             
                                                                                                                                
MS.  SCHUBERT  opined  that  the  audit  is  what  lead  to  this                                                               
situation.   At  this point,  AHFC doesn't  know what  it doesn't                                                               
know.  If HB  23 moves forward and AHFC is asked  to take on this                                                               
project,  AHFC will  investigate.   She  reiterated Mr.  Fauske's                                                               
comfort  with   the  legislation,   Amendment  2,   and  proposed                                                               
Amendment 1 to Amendment 2.                                                                                                     
                                                                                                                                
MR.  VASSAR emphasized  that all  activities  discussed with  the                                                               
project are going to be done  by a subsidiary corporation of AHFC                                                               
not AHFC itself.   Therefore, care was taken  with the transition                                                               
language in Amendment 1 to Amendment  2 so that nothing creates a                                                               
liability  or obligation  for AHFC.   He  reminded the  committee                                                               
that  AHFC has  created many  subsidiaries  in the  past and  the                                                               
subsidiary corporation's liability  is its own so long  as all of                                                               
the  procedures  and requirements  are  observed  and the  parent                                                               
corporation is  protected from the  liability of  the subsidiary.                                                               
Mr. Vassar  said he is  confident that  AHFC is protected  by the                                                               
subsidiary corporation process, with which AHFC has experience.                                                                 
                                                                                                                                
7:57:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG highlighted  the  language  on page  6,                                                               
line 12, subsection (h) of Amendment  2, which read:  "Nothing in                                                               
this section  creates a debt  or liability of the  state.", which                                                               
refers to the state not AHFC.   He then related his understanding                                                               
that great pains have been taken  to divorce AHFC from the state.                                                               
He  opined that  the  aforementioned language  doesn't appear  to                                                               
insulate AHFC.                                                                                                                  
                                                                                                                                
MR. VASSAR  explained that the  subsection (h) language  is there                                                               
because  of the  moral  obligation being  created directly  above                                                               
that subsection.  He further  explained that when statutes create                                                               
moral  obligation debt  it's moral  obligation of  the state  not                                                               
AHFC.   However, great  care has  to be taken  in order  to avoid                                                               
creating  a  general obligation  of  the  state, which  would  be                                                               
invalid under  the state constitution.   The language  is present                                                               
to ensure  everyone knows that  there is  no attempt to  create a                                                               
general obligation  of the  state and in  fact, is  denying such.                                                               
Therefore, it  isn't necessary to  reference AHFC at  that point,                                                               
he said.                                                                                                                        
                                                                                                                                
REPRESENTATIVE HAWKER  pointed out that Amendment  1 to Amendment                                                               
2 would  insert the language  "Nothing in this section  creates a                                                               
liability   or  obligation   of   the   Alaska  Housing   Finance                                                               
Corporation."  to page  8,  line 27,  of  Amendment 2,  following                                                               
"Corporation."                                                                                                                  
                                                                                                                                
8:00:01 PM                                                                                                                    
                                                                                                                                
CHAIR JOHNSON withdrew his objection to Amendment 1 to Amendment                                                                
2.  [There being no further objection, Amendment 1 to Amendment                                                                 
2 was adopted.]                                                                                                                 
                                                                                                                                
8:00:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE OLSON  moved to report  CSHB 23(FIN),  as amended,                                                               
out  of   committee  with  individual  recommendations   and  the                                                               
forthcoming  fiscal notes.   There  being no  objection, 2d  CSHB                                                               
23(RLS) was reported from the House Rules Standing Committee.                                                                   
                                                                                                                                
8:00:41 PM                                                                                                                    
                                                                                                                                
CHAIR JOHNSON announced that Representative Olson is the vice                                                                   
chair of the House Rules Standing Committee.                                                                                    
                                                                                                                                
                  Amendment 2 to CSHB 23(FIN)                                                                               
                                                                                                                                
     Page 1, lines 1 - 4:                                                                                                       
          Delete all material and insert:                                                                                       
          ""An Act creating the Knik Crossing Development                                                                     
     Corporation as  a subsidiary corporation of  the Alaska                                                                  
     Housing Finance  Corporation and  relating to  bonds of                                                                  
     the Knik Crossing Development Corporation.""                                                                             
                                                                                                                                
     Page 1, line 6, through page through 5, line 30:                                                                           
          Delete all material and insert:                                                                                       
        "* Section  1. AS 18.56.086 is  amended by  adding a                                                                
     new subsection to read:                                                                                                    
          (b)  The corporation shall create the Knik                                                                            
     Crossing  Development   Corporation  as   a  subsidiary                                                                    
     corporation. The board shall  be the board of directors                                                                    
     of the Knik Crossing Development Corporation.                                                                              
        *  Sec.  2.  AS 18.56   is  amended  by  adding  new                                                                  
     sections to read:                                                                                                          
      Article 2A.  Knik Crossing Development Corporation.                                                                     
          Sec. 18.56.605. Purpose. (a) The purpose of the                                                                     
     Knik  Crossing Development  Corporation is  to develop,                                                                    
     stimulate,  and advance  the  economic  welfare of  the                                                                    
     state   and   further   the   development   of   public                                                                    
     transportation  systems in  the vicinity  of the  Upper                                                                    
     Cook Inlet with  construction of a bridge  to span Knik                                                                    
     Arm and  connect the Municipality of  Anchorage and the                                                                    
     Matanuska-Susitna Borough.                                                                                                 
          (b)  The Knik Crossing Development Corporation                                                                        
     may not be  terminated as long as it  has bonds, notes,                                                                    
     or other  obligations outstanding. Upon  termination of                                                                    
     the Knik  Crossing Development Corporation,  its rights                                                                    
     and property pass to the state.                                                                                            
          Sec. 18.56.610. Powers and duties. (a) In                                                                           
     addition  to  powers  granted   to  the  Knik  Crossing                                                                    
     Development  Corporation by  the  corporation under  to                                                                    
     AS 18.56.086(a),   the    Knik   Crossing   Development                                                                    
     Corporation may                                                                                                            
               (1)  fix and collect fees, rents, tolls,                                                                         
     rates, or  other charges  for the use  of the  Knik Arm                                                                    
     bridge  and appurtenant  facilities, or  for a  service                                                                    
     developed, operated,  or provided by the  Knik Crossing                                                                    
     Development         Corporation;        notwithstanding                                                                    
     AS 37.10.050(a), fees,  rents, tolls, rates,  and other                                                                    
     charges fixed  and collected  under this  paragraph may                                                                    
     exceed  the actual  operating cost  of the  use of  the                                                                    
     bridge, facility, or service;                                                                                              
               (2)      pledge,   encumber,   transfer,   or                                                                    
     otherwise   obligate  revenue   derived  by   the  Knik                                                                    
     Crossing  Development Corporation  from the  ownership,                                                                    
     use, or  operation of toll facilities,  including fees,                                                                    
     rents, tolls,  rates, charges, or other  revenue of the                                                                    
     Knik  Crossing Development  Corporation  or money  that                                                                    
     the legislature may appropriate,  except a state tax or                                                                    
     license, as  security for  bonds or  other indebtedness                                                                    
     or   agreements  of   the  Knik   Crossing  Development                                                                    
     Corporation;                                                                                                               
               (3)  perform reconnaissance studies and                                                                          
     engineering,  survey, and  design studies  with respect                                                                    
     to the Knik Arm bridge and its appurtenant facilities;                                                                     
               (4)  exercise powers of eminent domain or                                                                        
     file a declaration of taking  as necessary for the Knik                                                                    
     Arm   bridge    and   appurtenant    facilities   under                                                                    
     AS 09.55.240  -   09.55.460  to  acquire  land   or  an                                                                    
     interest  in   land;  the  Knik   Crossing  Development                                                                    
     Corporation's exercise  of powers under  this paragraph                                                                    
     may  not  exceed  the  permissible  exercise  of  those                                                                    
     powers by the state;                                                                                                       
               (5)  confer with municipal and other                                                                             
     governments,  metropolitan planning  organizations, and                                                                    
     the   Department    of   Transportation    and   Public                                                                    
     Facilities, concerning the Knik Arm bridge.                                                                                
          (b)  The Knik Crossing Development Corporation                                                                        
     shall coordinate  the exercise  of its powers  to plan,                                                                    
     design, construct,  operate, and maintain the  Knik Arm                                                                    
     bridge with the department, and  with the mayors of the                                                                    
     Municipality  of  Anchorage and  the  Matanuska-Susitna                                                                    
     Borough.                                                                                                                   
          Sec. 18.56.615. Bonds. (a) The Knik Crossing                                                                        
     Development   Corporation  may   issue   bonds  in   an                                                                    
     aggregate amount  not to exceed $600,000,000,  plus the                                                                    
     cost of  issuance, in accordance  with this  chapter in                                                                    
     order to build the Knik  Arm bridge and its appurtenant                                                                    
     facilities. The  amount of refunding bonds  that may be                                                                    
     issued  by the  Knik  Crossing Development  Corporation                                                                    
     and bond premiums may not  be included in the aggregate                                                                    
     amount,  but   may  be  in   addition  to   the  amount                                                                    
     authorized under this section.                                                                                             
          (b)  In addition to the security that may be                                                                          
     provided  to bonds  of  the  Knik Crossing  Development                                                                    
     Corporation  under  the  powers  granted  to  the  Knik                                                                    
     Crossing       Development      Corporation       under                                                                    
     AS 18.56.086(a),   the    Knik   Crossing   Development                                                                    
     Corporation  may pledge  revenue  derived  by the  Knik                                                                    
     Crossing  Development Corporation  from the  ownership,                                                                    
     use, and  operation of  its toll  facilities, including                                                                    
     money  derived  from  the fees,  rents,  tolls,  rates,                                                                    
     charges,  and  other  revenue   of  the  Knik  Crossing                                                                    
     Development Corporation.                                                                                                   
          (c)  The Knik Crossing Development Corporation                                                                        
     may  not issues  bonds, or  a series  of bonds,  if the                                                                    
     effective  interest rate  over  the life  of the  bonds                                                                    
     exceeds 11  percent a year  or a rate of  interest that                                                                    
     is 125 percent  of the rate of the Bond  Buyer Index of                                                                    
     20 Municipal Bond Average Yields  for the week previous                                                                    
     to  the date  of the  sale of  the bonds,  whichever is                                                                    
     higher.                                                                                                                    
          (d)  Notwithstanding any other provisions of this                                                                     
     chapter,   the  trust   agreement,  or   other  similar                                                                    
     document  under  which  the Knik  Crossing  Development                                                                    
     Corporation issues bonds, must  contain an agreement by                                                                    
     the  Knik  Crossing  Development Corporation  that  the                                                                    
     Knik  Crossing  Development  Corporation  will  at  all                                                                    
     times  maintain fees,  rents,  tolls,  rates, or  other                                                                    
     charges sufficient to                                                                                                      
               (1)  pay the costs of operation and                                                                              
     maintenance of the Knik Arm  bridge and its appurtenant                                                                    
     facilities and  the principal of and  interest on bonds                                                                    
     issued  under   the  trust   agreement  as   the  bonds                                                                    
     severally become due and payable;                                                                                          
               (2)  provide for debt service coverage as                                                                        
     considered necessary  by the Knik  Crossing Development                                                                    
     Corporation for the marketing of its bonds; and                                                                            
               (3)  provide for renewals, replacements, and                                                                     
     improvements of  the Knik Arm  bridge, and  to maintain                                                                    
     reserves required  by the terms of  the trust agreement                                                                    
     or other similar document.                                                                                                 
          Sec. 18.56.620. Capital reserve fund. (a) For the                                                                   
     purpose of  securing one or  more issues of  its bonds,                                                                    
     the   Knik   Crossing   Development   Corporation   may                                                                    
     establish one  or more  special funds,  called "capital                                                                    
     reserve  funds,"  and  shall  pay  into  those  capital                                                                    
     reserve funds  the proceeds  of the  sale of  its bonds                                                                    
     and  any other  money  that is  available  to the  Knik                                                                    
     Crossing  Development Corporation  for the  purposes of                                                                    
     those  funds. The  funds shall  be established  only if                                                                    
     the  Knik Crossing  Development Corporation  determines                                                                    
     that the establishment  would enhance the marketability                                                                    
     of  the bonds.  All  money held  in  a capital  reserve                                                                    
     fund,  except as  provided in  this  section, shall  be                                                                    
     used  as  required  solely  for   the  payment  of  the                                                                    
     principal of  and interest on  bonds or of  the sinking                                                                    
     fund  payments   with  respect  to  those   bonds,  the                                                                    
     purchase or  redemption of bonds,  or the payment  of a                                                                    
     redemption  premium  required  to be  paid  when  those                                                                    
     bonds are  redeemed before maturity. However,  money in                                                                    
     a fund may  not be withdrawn from the fund  at any time                                                                    
     in an amount  that would reduce the amount  of the fund                                                                    
     to less  than the  capital reserve requirement  set out                                                                    
     in  (b) of  this  section, except  for  the purpose  of                                                                    
     making,  with respect  to  those  bonds, payment,  when                                                                    
     due, of  principal, interest, redemption  premiums, and                                                                    
     the  sinking fund  payments for  the  payment of  which                                                                    
     other   money   of   the  Knik   Crossing   Development                                                                    
     Corporation  is  not   available.  Income  or  interest                                                                    
     earned by  or increment to  a capital reserve  fund due                                                                    
     to the investment  of the fund or any  other amounts in                                                                    
     the  fund  may  be  transferred by  the  Knik  Crossing                                                                    
     Development Corporation  to other funds or  accounts of                                                                    
     the  Knik  Crossing   Development  Corporation  to  the                                                                    
     extent that the transfer does  not reduce the amount of                                                                    
     the  capital reserve  fund  below  the capital  reserve                                                                    
     fund requirement.                                                                                                          
          (b)  If the Knik Crossing Development Corporation                                                                     
     decides  to issue  bonds secured  by a  capital reserve                                                                    
     fund, the bonds may not be  issued if the amount in the                                                                    
     capital reserve  fund is  less than  the amount  of the                                                                    
     capital reserve  fund requirement, if  any, established                                                                    
     by   resolution  of   the  Knik   Crossing  Development                                                                    
     Corporation,  unless  the   Knik  Crossing  Development                                                                    
     Corporation,   at  the   time   of   issuance  of   the                                                                    
     obligations, deposits in the  capital reserve fund from                                                                    
     the proceeds  of the obligations  to be issued  or from                                                                    
     other sources an amount that,  together with the amount                                                                    
     then in  the fund,  will not be  less than  the capital                                                                    
     reserve fund requirement.                                                                                                  
          (c)  In computing the amount of a capital reserve                                                                     
     fund  for the  purpose of  this section,  securities in                                                                    
     which all  or a portion  of the fund is  invested shall                                                                    
     be valued by some  reasonable method established by the                                                                    
     Knik  Crossing Development  Corporation by  resolution.                                                                    
     Valuation  on  a  particular  date  shall  include  the                                                                    
     amount of any interest earned or accrued to that date.                                                                     
          (d)  Notwithstanding any other provision of law,                                                                      
     the   Knik   Crossing   Development   Corporation   may                                                                    
     establish  other funds  and reserves  as  the board  of                                                                    
     directors may determine reasonable  and prudent for the                                                                    
     issuance of  bonds or for  the conduct of  the business                                                                    
     and   affairs   of   the  Knik   Crossing   Development                                                                    
     Corporation. The  interest earned on or  profit derived                                                                    
     from these funds and reserves  shall be the property of                                                                    
     the  Knik  Crossing Development  Corporation.  Deposits                                                                    
     made  into  the  reserve fund  established  under  this                                                                    
     section must include                                                                                                       
               (1)  revenue derived by the Knik Crossing                                                                        
     Development  Corporation from  the  ownership, use,  or                                                                    
     operation  of toll  facilities, including  fees, rents,                                                                    
     tolls,  rates, charges,  or other  revenue of  the Knik                                                                    
     Crossing Development Corporation;                                                                                          
               (2)  money that the legislature has                                                                              
     appropriated for that purpose; and                                                                                         
               (3)  other money that may be made available                                                                      
     to  the  Knik  Crossing  Development  Corporation  from                                                                    
     other sources.                                                                                                             
          (e)  If the Knik Crossing Development Corporation                                                                     
     executes  a public-private  partnership agreement  that                                                                    
     includes  financing  by  the private  partner  for  the                                                                    
     purpose  of  securing  the  Knik  Crossing  Development                                                                    
     Corporation's  annual  availability payment,  the  Knik                                                                    
     Crossing  Development   Corporation  may   establish  a                                                                    
     reserve fund, called  the "availability payment reserve                                                                    
     fund," and shall pay into that reserve fund                                                                                
               (1)  revenue derived by the Knik Crossing                                                                        
     Development  Corporation from  the  ownership, use,  or                                                                    
     operation  of toll  facilities, including  fees, rents,                                                                    
     tolls,  rates, charges,  or other  revenue of  the Knik                                                                    
     Crossing Development Corporation;                                                                                          
               (2)  money that the legislature has                                                                              
     appropriated for that purpose; and                                                                                         
               (3)  other money that may be made available                                                                      
     to  the  Knik  Crossing  Development  Corporation  from                                                                    
     other sources.                                                                                                             
          (f)  All money held in the availability payment                                                                       
     reserve fund  shall be used  solely for the  payment of                                                                    
     annual   availability   payments  the   Knik   Crossing                                                                    
     Development Corporation  is obligated  to make  under a                                                                    
     public-private  partnership agreement  executed by  the                                                                    
     Knik Crossing  Development Corporation. When  the terms                                                                    
     of the Knik  Crossing Development Corporation's public-                                                                    
     private  partnership  agreement   expires,  all  future                                                                    
     revenue  derived  by   the  Knik  Crossing  Development                                                                    
     Corporation shall be  deposited into a new  fund, to be                                                                    
     established   by   the    Knik   Crossing   Development                                                                    
     Corporation under (d) of this section.                                                                                     
          (g)  The chair of the Knik Crossing Development                                                                       
     Corporation shall annually,  not later than January 30,                                                                    
     certify in writing to the  governor and the legislature                                                                    
     the  amount, if  any, required  to restore  the capital                                                                    
     reserve fund  established under (a) of  this section to                                                                    
     the   capital   reserve   fund  requirement,   or   the                                                                    
     availability  payment  reserve fund  established  under                                                                    
     (e) of this section to  an amount sufficient to pay the                                                                    
     Knik    Crossing    Development   Corporation's    next                                                                    
     availability payment.  The legislature  may appropriate                                                                    
     to  the  Knik   Crossing  Development  Corporation  the                                                                    
     amount  certified by  the chair  of the  board that  is                                                                    
     needed  to  restore  the reserve  fund  to  the  amount                                                                    
     needed for the next availability payment.                                                                                  
          (h)  Nothing in this section creates a debt or                                                                        
     liability of the state.                                                                                                    
          (i)  The Knik Crossing Development Corporation                                                                        
     shall maintain  a record  of the  annual certifications                                                                    
     made by the  chair under (g) of this  section. When the                                                                    
     total  amount  certified  by  the  chair  of  the  Knik                                                                    
     Crossing  Development   Corporation  as   necessary  to                                                                    
     restore  the availability  payment reserve  fund totals                                                                    
     $1,140,000,000,  the  duty of  the  chair  of the  Knik                                                                    
     Crossing Development Corporation to report terminates.                                                                     
          (j)  In this section, "capital reserve fund                                                                           
     requirement"  means  the  amount   required  to  be  on                                                                    
     deposit  in a  reserve  fund established  under (a)  of                                                                    
     this  section  as  of  the   date  of  computation,  as                                                                    
     determined   by  resolution   of   the  Knik   Crossing                                                                    
     Development  Corporation   or  by  the  terms   of  the                                                                    
     agreement for which the fund serves as security.                                                                           
          Sec. 18.56.625. Exemption from taxation. The real                                                                   
     and personal property of  the Knik Crossing Development                                                                    
     Corporation and  its assets,  income, and  receipts are                                                                    
     declared to be the  property of a political subdivision                                                                    
     of the state and are  exempt from all taxes and special                                                                    
     assessments of the state or  a political subdivision of                                                                    
     the  state. Notwithstanding  any law  to the  contrary,                                                                    
     rights  and interests  in real  and personal  property,                                                                    
     assets,  income,  and receipts,  including  concession,                                                                    
     franchise,  leasehold,   or  other  real   or  personal                                                                    
     property  rights  and  interests,  held  by  a  private                                                                    
     person   or    enterprise   under    a   public-private                                                                    
     partnership agreement entered  into under this chapter,                                                                    
     except any  rights and interests of  the private person                                                                    
     in property  serving a  business, commercial,  or other                                                                    
     purpose  not  necessary   to  operate  the  facilities,                                                                    
     properties,   or   projects   of  the   Knik   Crossing                                                                    
     Development Corporation,  shall be  exempt from  all ad                                                                    
     valorem taxes on real or  personal property and special                                                                    
     property tax  assessments of the  state or  a political                                                                    
     subdivision  of  the  state.  All  bonds  of  the  Knik                                                                    
     Crossing  Development Corporation  are  declared to  be                                                                    
     issued by a political subdivision  of the state and for                                                                    
     an  essential  public  and  governmental  purpose.  The                                                                    
     bonds, the interest  on the bonds, the  income from the                                                                    
     bonds and  the transfer of  the bonds, and  all assets,                                                                    
     income,  and  receipts pledged  to  pay  or secure  the                                                                    
     payment of the  bonds or interest on the  bonds are, at                                                                    
     all  times,  exempt  from  taxation  by  or  under  the                                                                    
     authority  of the  state,  except  for inheritance  and                                                                    
     estate  taxes   and  taxes  on   transfers  by   or  in                                                                    
     contemplation  of   death.  Nothing  in   this  section                                                                    
     affects  or  limits  an exemption  from  license  fees,                                                                    
     property  taxes,  or  excise, income,  or  other  taxes                                                                    
     provided under any other law.                                                                                            
          Sec. 18.56.630. Exemption from local regulation.                                                                    
     Notwithstanding  any  contrary  provision of  law,  the                                                                    
     activities   of    the   Knik    Crossing   Development                                                                    
     Corporation are exempt from  land use planning, zoning,                                                                    
     permitting,  or other  similar  governmental powers  of                                                                    
     political subdivisions of the state.                                                                                       
          Sec. 18.56.635. Liability for payment of tolls.                                                                     
     The  owner  of  a   vehicle  using  a  facility  owned,                                                                    
     controlled,   or   managed   by   the   Knik   Crossing                                                                    
     Development  Corporation for  which  a toll  or fee  is                                                                    
     imposed is  liable for the  payment of the toll  or fee                                                                    
     solely  because of  the vehicle  ownership, unless  the                                                                    
     vehicle, except  a rental vehicle, is  used without the                                                                    
     owner's  knowledge and  incurs the  toll or  fee during                                                                    
     operation.                                                                                                                 
        * Sec. 3. AS 36.30.015(f) is amended to read:                                                                         
          (f)  The board of directors of the Alaska Housing                                                                     
     Finance Corporation,  notwithstanding AS 18.56.088, and                                                                
     the  membership of  the  Alaska Industrial  Development                                                                    
     and  Export  Authority,  notwithstanding  AS 44.88.085,                                                                    
     [AND THE BOARD OF DIRECTORS  OF THE KNIK ARM BRIDGE AND                                                                    
     TOLL   AUTHORITY  UNDER   AS 19.75.111,]  shall   adopt                                                                    
     regulations  under  AS 44.62 (Administrative  Procedure                                                                    
     Act),  and   the  board  of  trustees   of  the  Alaska                                                                    
     Retirement  Management  Board shall  adopt  regulations                                                                    
     under  AS 37.10.240,  to   govern  the  procurement  of                                                                    
     supplies,   services,    professional   services,   and                                                                    
     construction for the  respective public corporation and                                                                    
     board.   The  regulations   must  reflect   competitive                                                                    
     bidding principles  and provide vendors  reasonable and                                                                    
     equitable   opportunities   to   participate   in   the                                                                    
     procurement  process   and  must   include  procurement                                                                    
     methods   to    meet   emergency    and   extraordinary                                                                    
     circumstances. Notwithstanding the  other provisions of                                                                    
     this   subsection,    the   Alaska    Housing   Finance                                                                    
     Corporation,  the  Alaska  Industrial  Development  and                                                                    
     Export  Authority,  [THE  KNIK   ARM  BRIDGE  AND  TOLL                                                                    
     AUTHORITY,] and the  Alaska Retirement Management Board                                                                    
     shall comply with AS 36.30.170(b).                                                                                         
        * Sec. 4. AS 36.30.850(b)(45) is amended to read:                                                                     
               (45)  a subsidiary of the Alaska Housing                                                                         
     Finance Corporation created  under AS 18.56.086 for the                                                                    
     purpose  of planning,  financing,  or constructing  in-                                                                    
     state natural gas pipeline projects  or for the purpose                                                                    
     of aiding  in the planning, financing,  or constructing                                                                    
     of  in-state  natural  gas   pipeline  projects;  or  a                                                                
     subsidiary  of the  Alaska Housing  Finance Corporation                                                                
     created   under  AS 18.56.086   for   the  purpose   of                                                                
     constructing a bridge to span Knik Arm.                                                                                
        *  Sec.  5.    AS 19.75.011,  19.75.021,  19.75.031,                                                                  
     19.75.041, 19.75.051,  19.75.061, 19.75.071, 19.75.081,                                                                    
     19.75.111, 19.75.113,  19.75.211, 19.75.221, 19.75.231,                                                                    
     19.75.241, 19.75.251,  19.75.261, 19.75.271, 19.75.281,                                                                    
     19.75.291, 19.75.301,  19.75.311, 19.75.321, 19.75.330,                                                                    
     19.75.332, 19.75.334,  19.75.336, 19.75.338, 19.75.340,                                                                    
     19.75.911, 19.75.915,  19.75.920, 19.75.980, 19.75.990;                                                                    
     AS 39.25.110(39);    and     AS 39.50.200(b)(60)    are                                                                    
     repealed.                                                                                                                  
        * Sec. 6. The uncodified  law of the State of Alaska                                                                  
     is amended by adding a new section to read:                                                                                
          TRANSITION. (a) All rights, titles, interests,                                                                        
     agreements,   contracts,   instruments,   indebtedness,                                                                    
     investments, leases, real  and personal property, lines                                                                    
     of credit,  gifts, grants,  loans, fees,  rents, tolls,                                                                    
     civil  actions,  revenue,  funds,  insurance,  permits,                                                                    
     licenses,  studies, and  intellectual  property of  the                                                                    
     Knik Arm  Bridge and Toll Authority  are transferred to                                                                    
     the Knik Crossing Development Corporation.                                                                                 
     (b)  For one year  following the effective date of this                                                                    
     Act,  the members  of the  board of  directors for  the                                                                    
     Knik Arm  Bridge and Toll  Authority on the  day before                                                                    
     the  effective  date  of  this Act  shall  serve  as  a                                                                    
     nonvoting advisory  board to the board  of directors of                                                                    
     the  Knik   Crossing  Development   Corporation.  While                                                                    
     serving  as  a  nonvoting  advisory  board  under  this                                                                    
     subsection, the  members of the  board of  directors of                                                                    
     the  Knik Arm  Bridge  and Toll  Authority shall  serve                                                                    
     without compensation  but are entitled to  per diem and                                                                    
     travel  expenses  as  provided by  the  Alaska  Housing                                                                    
     Finance Corporation."                                                                                                      
                                                                                                                                
8:00:59 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Rules Standing Committee meeting was adjourned at 8:00 p.m.                                                                     

Document Name Date/Time Subjects
HB 23 Amendment 2.pdf HRLS 4/11/2013 9:00:00 AM
HB 23
HB 23 Amendment 2 Annotated.pdf HRLS 4/11/2013 9:00:00 AM
HB 23
HB 23 Amendment 1 to Amendment 2.pdf HRLS 4/11/2013 9:00:00 AM
HB 23