01/31/2017 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB39 | |
| SB9 | |
| SB39 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 9 | TELECONFERENCED | |
| *+ | SB 39 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
January 31, 2017
3:35 p.m.
MEMBERS PRESENT
Senator Click Bishop, Chair
Senator Anna MacKinnon
Senator Lyman Hoffman
Senator Bert Stedman
Senator Berta Gardner
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 39
"An Act adopting the Municipal Property Assessed Clean Energy
Act; authorizing municipalities to establish programs to impose
assessments for energy improvements in regions designated by
municipalities; imposing fees; and providing for an effective
date."
- HEARD & HELD
SENATE BILL NO. 9
"An Act relating to military facility zones."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 39
SHORT TITLE: MUNI ENERGY IMPROVEMNT ASSESSMNTS/BONDS
SPONSOR(s): SENATOR(s) COGHILL
01/25/17 (S) READ THE FIRST TIME - REFERRALS
01/25/17 (S) CRA
01/31/17 (S) CRA AT 3:30 PM BELTZ 105 (TSBldg)
BILL: SB 9
SHORT TITLE: MILITARY FACILITY ZONES
SPONSOR(s): SENATOR(s) COGHILL
01/09/17 (S) PREFILE RELEASED 1/9/17
01/18/17 (S) READ THE FIRST TIME - REFERRALS
01/18/17 (S) CRA, FIN
01/31/17 (S) CRA AT 3:30 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
SENATOR COGHILL
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 9 and SB 39.
CHAD HUTCHISON, staff
Senator John Coghill
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Commented on SB 9 for the sponsor.
JIM DODSON, President & CEO
Fairbanks Economic Development Corporation
Fairbanks, Alaska
POSITION STATEMENT: Supported SB 9.
JEFF STEPP, Special Assistant to the Mayor
Fairbanks North Star Borough
Fairbanks, Alaska
POSITION STATEMENT: Supported SB 9.
BOB DOLE, Deputy Commissioner
Department of Military & Veterans Affairs (DMVA)
Anchorage, Alaska
POSITION STATEMENT: Supported SB 9.
RYNNIEVA MOSS, staff
Senator John Coghill
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Commented on SB 9.
SEAN SKALING, Assistant Executive Director &
Energy Policy Director
Alaska Energy Authority (AEA)
Anchorage, Alaska
POSITION STATEMENT: Supported SB 39.
GENE THERRIAULT
Alaska Energy Authority (AEA)
Fairbanks, Alaska
POSITION STATEMENT: Supported SB 39.
BRITTANY SMART, Special Assistant to the Mayor
Fairbanks North Star Borough
Fairbanks, Alaska
POSITION STATEMENT: Supported SB 39.
ACTION NARRATIVE
3:35:23 PM
CHAIR CLICK BISHOP called the Senate Community and Regional
Affairs Standing Committee meeting to order at 3:35 p.m. Present
at the call to order were Senators Stedman, Gardner, Hoffman,
and Chair Bishop.
SB 39-MUNI ENERGY IMPROVEMNT ASSESSMNTS/BONDS
3:36:53 PM
CHAIR BISHOP announced SB 39 to be up for consideration.
SENATOR JOHN COGHILL, Alaska State Legislature, sponsor of SB
39, introduced the legislation speaking to the following sponsor
statement:
Senate Bill 39 would set up a system to allow
municipalities and commercial property owners to
participate in a Commercial Property Assessed
Clean Energy (C PACE) finance program. The Act
allows municipalities to assess a C-PACE fee to a
commercial property owner's annual property tax
bill to repay a PACE loan by a third party such as
a commercial bank or through a program
administered by the borough.
Using a successful program from Texas, this
legislation sets forth a boiler plate system for
creating PACE programs requiring a description of
qualified projects, description of the boundaries
of a region within the borough, a description of
third party programs or municipal funding of
qualified projects, description of fees for
municipal assessments for third party loaners, a
requirement for written contracts, and public
notice and public hearing to establish a PACE
program.
Creating a uniform process and requiring written
contracts between all parties will give credibility
to the program and, as experienced in Texas,
commercial banks are more willing to finance
qualified projects with low interest rates and
more assurance that the loans will be paid.
Municipalities will be allowed to issue bonds or
notes as a funding source for providing loans. A
second-class borough could establish this
program by regions either areawide or non-
areawide.
The bill prohibits a municipality from issuing a
permit, license or other authorization of
property based on a contingency that the person
enter into a PACE contract.
Liens for PACE loans are paramount to all other
liens except municipal tax liens and special
assessments.
SENATOR COGHILL said this is a voluntary program that is set up
primarily for change-out programs in the Fairbanks area, which
is also under a lot of pressure from the particulate matter (PM)
2.5 air quality issue. Getting natural gas into the Interior is
very important just for the air quality issue, let alone for the
quality of life on different fuels. Right now, fuel sources are
very close economically, but by adding the PM 2.5 penalties for
non-compliance, some of the change outs are going to have to
start being implemented.
SENATOR COGHILL said this issue was brought to him by the Alaska
Energy Authority (AEA). It is not a new idea; it went through
the legislature and ended up at the final gate last year.
CHAIR BISHOP set SB 39 aside until later in the meeting.
SB 9-MILITARY FACILITY ZONES
[CHAIR BISHOP announced the consideration of SB 9.]
3:39:34 PM
SENATOR JOHN COGHILL, Alaska State Legislature, sponsor of SB 9,
related that Fairbanks is host to two military bases that have
approved military facility zones. Setting up these facility
zones entailed the Department of Military & Veterans Affairs
(DMVA) approving a comprehensive plan that takes more time to go
through than a zoning ordinance. This makes it a less valuable
tool for this purpose. So, SB 9 proposes that the DMVA does not
have to approve this comprehensive plan. He said these two
issues in SB 9 and SB 39 have a huge impact on his district, but
they would be helpful anywhere else in the state that deals with
military issues.
3:43:21 PM
CHAD HUTCHISON, staff to Senator Coghill, said SB 9 deals with
military facility zones related to the decision to place 54 F-35
aircraft at Eielson Air Force Base. This bill is about
maximizing the benefits for the local community and the
surrounding areas next to a military installation - more is
going on than just the F-35s - particularly in the Interior.
He said some of the action points in the presentation came from
the Fairbanks Tiger Team made up of Senator Murkowski, Senator
Sullivan, and Congressman Young's office, Fairbanks North Star
Borough Mayor Karl Kassel, Fairbanks Mayor Jim Matherly, and the
North Pole Mayor, Bryce Ward. Other representatives include the
Chamber of Commerce and the Fairbanks Economic Development
Corporation headed by Jim Dawson.
3:45:19 PM
MR. HUTCHISON said the F-35 is a thirsty aircraft and a lot of
communities will benefit by having refueling facilities for it.
He added that the military industry is an important part of the
Fairbanks economy generally, but it also affects other areas of
the state. The ones getting the attention now are Eielson Air
Force Base and Fort Wainwright that just received the Apaches
and the Grey Eagle Squadron, which is the unmanned aerial
vehicle that houses the Long Range Discrimination Radar (LRDR).
Fort Greely also has 14 new missile interceptors. All these
facilities will be a potential benefit to Delta, to Anderson,
Fairbanks, North Pole, and a lot of communities around Joint
Base Elmendorf-Richardson (JBER).
He displayed slides of planned military construction projects
given to them by the Army Corps of Engineers (ACE) saying their
number illustrates the need to move quickly, because there is a
short window in 2017 in which to maximize the benefits.
3:47:40 PM
He explained that military facility zones are designated areas
established by the Department of Military and Veteran's Affairs
(DMVA), usually close to a military installation, with the key
purpose of ensuring that the industrial and economic development
capacities in the surrounding area are maximized to the greatest
extent possible. If the project is deemed to be helping the
greater military mission, it can open up public and private
financing, credit guarantee programs, and grants in those zones.
MR. HUTCHISON explained that the DMVA considers a number of
different factors in the applications from the local
communities; one of them has to do with the comprehensive plan.
The last time the Fairbanks North Star Borough did a
comprehensive plan was in 2005, which was before military
facility zones were analyzed. The problem with comprehensive
plans is that they are resource-intensive and take a lot of time
and the window of opportunity now is very limited. The suggested
change adds the four words: "or local zoning ordinance" because
they are quicker than comprehensive plans and will be a better
fit for the window of time needed to maximize this benefit for
the $561 million allocated military construction spending in
September 2016.
3:50:43 PM
CHAIR BISHOP said he would hold SB 9 for a future hearing.
3:51:58 PM
JIM DODSON, Fairbanks Economic Development Corporation,
Fairbanks, Alaska, said he supported SB 9. Not only does the
current statutory authority cause undue time constraints, he
said, but it also causes money constraints that no one has to
take. In an effort to be more efficient and diversify the
economy, they support the bill.
3:52:54 PM
SENATOR GARDNER asked if there is any opposition to this bill.
MR. HUTCHISON said he wasn't aware of any.
3:53:22 PM
JEFF STEPP, staff to Karl Kassel, Mayor of the Fairbanks North
Star Borough, Fairbanks, Alaska, supported SB 9. He said the
statutory authority for municipalities and the DMVA to create
military facility zones was established in HB 316 by the 27th
Legislature in 2012. By design these zones are designated areas
in close proximity to a military installation where increased
industrial activity, economic development, workforce
development, or training and educational activities will
directly enhance the base's ability to fulfill its mission. That
is what makes them so appealing to a community.
Promoting expansion of infrastructure, such as Civil Defense and
Homeland Security, can encourage increased private sector
activity near these installations opens the door to state and
federal business development tax credits, loans, and other
funds. So, military facility zones can help facilitate economic
growth and development in communities, regions, and the entire
State of Alaska. The synergy created by shared knowledge and
leveraged resources focused on these common concepts and goals
can yield greater benefits for both the community and the
military.
MR. STEPP said the reason adding the language about planning and
zoning to this particular legislation is so important is that
currently a military facility zone must be determined to be
consistent with the comprehensive plan for the area and those
have broad land use designations and a wide variety of goals and
policies. Military facility zone designation proposals are site-
specific locations, which are generally smaller in scale than
the broad generalized categories of different types of future
land use listed in comprehensive plans. Site selection for a
military facility zone is intended to be optimized for
civilian/military interface and public/private partnerships.
He explained that comprehensive plans address a wide range of
land use elements, and many Alaska communities including the
Fairbanks North Star Borough have plans that are outdated and
did not anticipate a land-use type such as military facility
zone designation and/or do not address military facilities, and
sometimes not even economic development at all. Unfortunately,
the process to amend a comprehensive plan is lengthy and can be
expensive and often difficult.
MR. STEPP said that zoning, however, is a regulatory tool that
identifies the appropriate use of each specific parcel of land
and the applicable process for obtaining a land use permit.
Zoning regulations are required to be adopted in accordance with
local comprehensive plans. Zoning is a better, quicker, more
specific method for a community to evaluate a specific
development proposal, a building site plan, or a military
facility zone by applying the detailed standards that are found
in both local zoning regulations and the military facility zone
legislation. Greater flexibility in how to qualify for the
military facilities zone designation provides communities around
the state and the Fairbanks North Star Borough with more local
control to decide the best location and process for determining
compatibility. That is why this legislation is important to
them.
3:58:04 PM
BOB DOLE, Deputy Commissioner, Department of Military & Veterans
Affairs (DMVA), said he supported SB 9 and that since the
passage of the original bill they have had "exactly zero
applicants for these sorts of zones." They believe the time and
expense it takes to get one authorized is why Alaska doesn't
have military facility zones. This measure provides a way to
make it happen faster, is an opportunity to diversify the
economy, and makes Alaska's bases more cost-effective and
viable.
3:58:53 PM
SENATOR MACKINNON joined the committee.
CHAIR BISHOP closed public testimony on SB 9 and held it in
committee for future consideration.
SB 39-MUNI ENERGY IMPROVEMNT ASSESSMNTS/BONDS
CHAIR BISHOP returned attention to SB 39 and invited Ms. Moss to
review it for the committee.
RYNNIEVA MOSS, staff to Senator Coghill, Alaska State
Legislature, said this bill adds extra powers to home rule
municipalities and first and second class boroughs. It allows
them to establish commercial properties as clean energy
programs. It is completely voluntary. It creates a system that
was modeled after Texas that makes each Commercial Property
Assessed Clean Energy (C-PACE) uniform in the state, making it
more attractive to bonding, federal grants, commercial banks,
and commercial loans.
4:01:01 PM
It allows a commercial facility to borrow money with more
attractive terms to make it more energy efficient. The loan
payments are collected through the tax assessor's office and are
paid to the loan provider whether it be the municipality or the
commercial bank.
She explained that there are written contracts between all
parties and the holder of the mortgage is required to sign off
on approval of the C-PACE loan, because it bumps the mortgage
holder's lien below it, which makes it paramount to all liens
except for municipal tax liens and other special assessments.
MS. MOSS said the encumbrance follows the real estate and not
the owner. When the property is sold the remaining assessments
for the loan go with the property.
4:03:21 PM
At ease
4:04:20 PM
CHAIR BISHOP opened public testimony on SB 39.
4:04:41 PM
SEAN SKALING, Assistant Executive Director and Energy Policy
Director, Alaska Energy Authority (AEA), supported SB 39. He
said that Ms. Moss gave a great introduction and that C-PACE
knocks down barriers that currently exist for commercial
buildings to become more energy efficient. It has voluntary
payment back through the tax assessment.
He said it would be helpful to go through a scenario of how this
would work, and asked them to picture a commercial building in
their community that got a commercial energy audit through the
Alaska Energy Authority some years ago and had hit the wall he
is talking about. This legislation may help them break through.
Using fictitious average numbers, he supposed that some
commercial property owners were uncomfortable with the amount of
money they were putting into their electric and heating bills
and hired an energy auditor to come back with a list of things
to do, what each different measure might cost, and the energy
saved - so, a line-by-line savings and payoff on each energy
measure. This example will save 30 percent on energy bills,
which is a fairly typical number. If this property owner had
cash, he would probably pay for the improvements, because it is
a great return on investment with an average payback period of
six years.
But if they want to get a loan, they go to the bank and get a
four-year term. Once the efficiency measures are conducted the
building is saving 30 percent on energy every day, but the
payback time of four years adds up to more than what he was
paying originally. So, there is a benefit to stretching out the
loan payback time in that the measure could make the cash flow
positive immediately.
Following the scenario through, the owners of the building also
think they might be growing out of their space within three
years, and for that and a couple of other reasons they aren't
comfortable making the energy efficiency improvements. So they
continue paying the higher energy bills for three years, sell
the building, and the new owner comes in; and he is still paying
the higher bills. That money is going out of that building and
essentially out of the community to pay for the fuel and energy
costs.
MR. SKALING explained that C-PACE will allow banks to be more
comfortable in making loans because they go through a set
process and they can be comfortable enough with the energy
savings that can be used to pay back the loan. So, they can
offer more attractive loan terms that will stretch out the loan
period and make the cash flow positive on day-one after the
energy efficiency improvements are completed.
Another concern was moving out of the building in three years,
but now both the benefits of the efficiency and the payment is
connected to the building. So, the next property owner will own
the building and continue paying the loan through his property
tax bill. But they will also be getting the benefits and
probably have only a couple more years of payments before being
able to get all of the energy savings benefits.
MR. SKALING said energy efficiency and alternative energy are
available and it must be affixed to the building and therefore
be sold with the building. HVAC heating and cooling systems are
one of the more common and more expensive measures that offers a
lot of savings along with lighting controls and more efficient
motors.
The most common alternative energy systems are air or ground
source heat pumps, solar, and fuel switching. Those industries
employ a lot of local folks in the energy supply community. The
debt gets paid through the local city assessor's office, which
then pays the investor or bank back.
4:10:20 PM
C-PACE programs have been enabled in 33 states; Alaska's is
modeled after Texas', which has been very successful with about
a dozen municipalities exercising PACE. It is a win-win all the
way around. Property owners will pay lower utility bills; the
property is improved with a better work environment; there is
less risk, and lenders will issue new loans that they may have
not issued otherwise; and the process is consistent statewide
once this is enabled. Contractors and vendors do more local
hiring and are "schooled-up" on best practices and new
technologies.
4:11:25 PM
GENE THERRIAULT, Alaska Energy Authority (AEA), Fairbanks,
Alaska, said he looked into programs that allowed states to help
their constituents with energy improvements and financing
options for them. He identified a couple of funding sources at
the Rural Utilities Services (RUS), a division at the U.S.
Department of Agriculture. He said a lot of utilities in Alaska
have been in the past or are currently RUS-eligible. One is
called the Energy Efficiency and Conservation Loan Program
(EECLP). The source of money available through this program has
an interest rate of 2.5 percent for 10-years. Lending that money
out to commercial property makes the interest rate go up to 2.8
percent. This is relatively low interest money that can be made
available to businesses in Alaska to make these improvements.
4:13:06 PM
One thing the EECLP Program is looking for in their regulations
is a mechanism that helps assure that default rates are low, and
the C-PACE Program is one such mechanism. Last year when AEA was
working this piece of legislation they corresponded with the RUS
and told them about the specifics of the proposed legislation
and got a letter from them basically saying that they understood
the PACE mechanism and it would be attractive to them as far as
someone making application to get access to the EECLP source of
money. The EECLP program is part of RUS's ongoing yearly budget,
so if the federal budget gets refreshed it gets about $250
million per year. From discussions with RUS personnel he has
found that the fund is under-utilized, and they are interested
in working with states to help constituent groups tap into it as
a funding source.
4:14:24 PM
MR. THERRIAULT said he became aware of a second program that was
just funded in CY16, although it had been on the RUS books for
several years and that is the Rural Energy Savings Program
(RESP). Unlike EECLP it requires a congressional appropriation.
An appropriation was passed in December 2015, ultimately about
$50 million was made available nationwide. The interest rate on
that source of funding is very attractive. For qualifying state
entities and utilities, the interest rate is zero. When it gets
lent out to the commercial property owner through the local
government a little bit can be added to cover the local
expenses. The regulations for that specific program talk about
any additional repayment mechanisms that demonstrate or have
demonstrated appropriate risk mitigation features. Because the
local government uses its full collection power that it applies
to its property taxes and general government assessments to
collect the PACE obligation, default rates nationwide are under
1 percent.
4:17:10 PM
At ease
4:17:34 PM
BRITTANY SMART, Special Assistant to Fairbanks North Star
Borough Mayor, Fairbanks, Alaska, said Fairbanks continues its
support for SB 39 and is very eager to use it as a tool to help
with their natural gas conversions to help mitigate its air
quality issues.
CHAIR BISHOP closed public comment on SB 39 and held the bill
for a future hearing.
4:18:32 PM
CHAIR BISHOP adjourned the Senate Community and Regional Affairs
Standing Committee meeting at 4:18 p.m.