Legislature(2017 - 2018)SENATE FINANCE 532
02/12/2018 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Credit Rating and Debt Analysis | |
| SB125 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | SB 125 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
February 12, 2018
9:02 a.m.
9:02:36 AM
CALL TO ORDER
Co-Chair MacKinnon called the Senate Finance Committee
meeting to order at 9:02 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Anna MacKinnon, Co-Chair
Senator Click Bishop, Vice-Chair
Senator Peter Micciche
Senator Donny Olson
Senator Gary Stevens
Senator Natasha von Imhof
MEMBERS ABSENT
None
ALSO PRESENT
Deven Mitchell, Executive Director, Alaska Municipal Bond
Bank Authority, Department of Revenue; Senator Pete Kelly,
Sponsor; Joe Burns, Staff, Senator Pete Kelly; Gene
Therriault, Deputy Director, Statewide Energy Policy
Development, Alaska Energy Authority, Department of
Commerce, Community and Economic Development.
PRESENT VIA TELECONFERENCE
Jomo Stewart, Interior Gas Utility, Fairbanks; Jim Dodson,
President, Fairbanks Economic Development Corporation, San
Diego; Jim Matherly, Mayor of Fairbanks, Fairbanks; Jon
Cook, Chief Financial Officer, Airport Equipment Rentals,
Fairbanks.
SUMMARY
SB 125 EXTEND BOND AUTH FOR INTERIOR ENERGY PROJ
SB 125 was HEARD and HELD in committee for
further consideration.
^PRESENTATION: CREDIT RATING and DEBT ANALYSIS
9:03:09 AM
DEVEN MITCHELL, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL BOND
BANK AUTHORITY, DEPARTMENT OF REVENUE, continued to discuss
the presentation, "2018 Credit Review and State Debt
Summary" (copy on file) from the committee meeting on
February 7, 2018.
Mr. Mitchell read slide 13, "State Debt Rating Overview."
Mr. Mitchell reviewed slide 14, "Evolution of State of
Alaska Credit Story":
• FY 2010-2014 high levels of unrestricted general
fund revenue greatly exceed budgetary needs, growing
reserve positions, pre-funding of budget items,
large capital budgets, highest credit ratings with
stable outlook.
• FY 2015-2017 significantly diminished unrestricted
general fund, use of pre-fundings, Statutory Budget
Reserve and Constitutional Budget Reserve to balance
budget, reductions to capital and operating budgets,
discontinuation of following statutory formula for
determining Permanent Fund Dividends, consideration
of various tax proposals, consideration of use of
earnings of the Permanent Fund to pay for
government, State downgraded four times followed by
three additional downgrades in FY 2018.
• FY 2018 advocating shifting the state's credit
analysis towards an endowment model rather than the
state models that rely almost exclusively on annual
tax and fee collection.
9:07:36 AM
Senator von Imhof recalled a question regarding the bond
debt analysis, and whether it took into account a potential
Percent of Market Value (POMV) from the Permanent Fund that
would raise the state's bond capacity. The reply was that
the POMV was not factored into the bond capacity analysis.
She stated that there was an indication that passing a POMV
would change the calculation and open opportunities. She
stated that the conversation occurred six months prior.
Mr. Mitchell agreed with his previous remarks. He stated
that the rating and strength of credit would be affected.
There was an active push to have a shift in how the rating
agency would examine the state.
Senator von Imhof asked about bond capacity, and thought it
had not been incorporated yet.
Mr. Mitchell answered in the affirmative.
Senator Stevens referred to Mr. Mitchell's comparison of
the state to a large endowed university in the United
States. He wondered whether there should be a worry in that
respect.
Mr. Mitchell replied that the changes that would impact
universities than those that would impact a state. He
remarked that tax changes that would affect the tax status
of the Permanent Fund should be concerned, because it was a
tax exempt investor.
9:12:37 AM
Mr. Mitchell turned to slide 15, "Good News and Bad News
Rating Agency Views State of Alaska":
Moody's Aa3 (Stable)
Standard and Poor's Rating Services AA (Negative)
Fitch Ratings AA (Stable)
POSITIVES
?Recognition of the efforts of the Legislature and
Governor to diminish spending
ecognition of the new revenue options available to
fund government expenditures (Permanent Fund and
untapped taxes)
?Recognition that from a credit perspective Alaska is
more like an endowed university than it is like most
other states.
?November 2, 2017 Fitch Ratings "upgrades" the state's
outlook from negative to stable
?December 1, 2017 Moody's Investor Service "upgrades"
the state's outlook from negative to stable
Negatives
?Downgraded by Moody's on July 13, 2017, by S and P on
July 18, 2017, and Fitch on November 1, 2017 (7th
downgrade since AAA in 2015)
?Historic concerns related to narrow economy that is
in recession, actuarially assumed pension liabilities,
and over reliance on oil production.
Senator Micciche wondered how important of a POMV would be
to a rating agency.
Mr. Mitchell thought passage of a POMV would constitute an
important shift. He thought progress had been made, but
considered that there had not been a lot of positive fiscal
news of the state.
Mr. Mitchell read slide 16, "Excerpts from Last Rating
Agency Presentation."
9:17:58 AM
Mr. Mitchell displayed slide 17, " Executive Summary":
The State has been migrating towards a fiscal plan
Budget Reductions
FY 2018 Budget passed with $145.6 million of
additional reductions in operating appropriation
Unrestricted General Fund operating expense
reductions from FY 2015: $1.3 billion
Permanent Fund Dividend: 50 percent of statutory
formula -$760 million (down from $1,373 million in FY
2015)
Cut 50 percent by Veto in FY 2017 and no legislative
over ride
Cut 50 percent by Legislature in FY 2018 with support
of Governor
No appropriation from Earnings Reserve to Principal in
2017 or 2018 as required by State statute for
inflation proofing
Substantial Existing Revenues and Evolving but Stable
Reserve Position
?Significant liquidity in the General Fund with an
asset value as of August 31, 20171of $3.6 billion
?State has maintained the practice of labelling
available current year revenues as restricted for
savings
?Includes Permanent Fund and CBRF revenues
?Oil, gas and resource-based industries continue to
provide substantial revenue that is available for
appropriation
?Currently no broad based tax on Alaska's economy
?Governor has called for a special session starting
Oct. 23 to discuss wage tax and crime bill
?Stable available reserves projected at $17.6 billion
for 6/30/20172compared to $17.3 billion at 6/30/2015
?Permanent Fund Earnings Reserve increased $4.2
billion from FY 2016 to FY 2017
Progressively Closer to Long Term Solution
FY 2015 Initial budget reductions
FY 2016 Significant budget reductions
FY 2017 Additional budget reductions, diminished
PFD by Governor's veto
FY 2018 Additional budget reductions, diminished
PFD by legislative action with Governor's support
Both House and Senate passed versions of the budget
using PF Earnings Reserve
2. Reserve balances shown here include the CBRF and
the PFER. FY2017 CBRF balance subject to year-end
closeout, audit adjustments, and finalized results of
the FY2017 CAFR, and uses a projection for FY2017 with
best available information at this time. PFER based on
APFC's June 30, 2017 fund financial history monthly
report
9:22:31 AM
Mr. Mitchell spoke to slide 18, "Revenue Forecast and
Budget Outlook," which showed a table entitled,
'Compilation of Available Revenue and Recent Budgeting
Practice Shows Surplus and Reserve Growth.' He clarified
that the slide represented a point in time with some
assumptions that could be viewed as pessimistic or
optimistic, depending upon one's point of view. There was a
projected $2.5 billion deficit for FY 18. He looked at the
CBRF investment earnings projection, the CBRF oil and gas
dispute resolutions. the optimistic GF expense line, which
had held static at $4.3 billion. He acknowledged that there
was older revenue source information that needed updating.
Additionally, the table did not reflect potential draw on
the Permanent Fund.
9:26:55 AM
Senator Micciche thought slide 18 was helpful. He asked if
it would be a great amount of work to update the slide with
the new forecast.
Mr. Mitchell clarified that the table did not depict an
official forecast. He specified that the slide did not
reflect a plan.
Co-Chair MacKinnon wondered if the slide was an optimistic
view of the state's finances.
Senator Micciche thought it would be helpful to see the
slide updated with Fall Revenue Forecast numbers.
Co-Chair MacKinnon thought Mr. Mitchell had fairly reported
to credit rating agencies.
9:31:00 AM
Senator Micciche pointed out that the numbers on the slide
did include projections for oil price, and thought that it
might not be optimistic.
Co-Chair MacKinnon thought it was difficult for the public
to follow along when the committee put out different sets
of bottom line numbers. She explained that members saw
numbers differently. She thought the committee's job was to
come together to consider one set of numbers. She hoped the
media understood that the fiscal numbers. The legislature
was working hard to find a common set of data points.
Co-Chair Hoffman looked at FY 19 on slide 18; and noted
that the legislature had not agreed upon a split for a
POMV.
9:35:44 AM
Mr. Mitchell reviewed slide 19, "Revenue Forecast and
Budget Outlook":
Unlike other State's, the State of Alaska's Revenue
Generation is Not Limited to Alaska's Economy
The Alaska Permanent Fund Provides Alaska Unparalleled
Revenue Source Diversification
As of August 31, 2017 Alaska's Permanent Fund
endowment had an unaudited total fund balance of $61.5
billion.
o The State's Permanent Fund Revenue is generated from
the national and world economies
o The Permanent Fund does not rely on Alaska's economy
for revenue generation prohibited investment
o The APFC Board independently directs investments and
has established a 10-year total return projection of
6.50 percent
o The Permanent Fund owns shares in more than 3,000
corporations around the world
o Fixed Income holdings include both US and
International securities
o The Real Estate allocation provides inflation
protection and enhanced diversification worldwide
Investment income has tended to be countercyclical to
oil, the source of the State's other largest revenue
stream
Mr. Mitchell looked at slide 20, "Alaska's Economy Has Been
More Stable than U.S.," which showed four graphs. qualified
that he was not an economist, but acknowledged that he
looked at the work of economists.
9:40:17 AM
Vice-Chair Bishop thought the slide was helpful, and showed
that Alaska was a resource state. He felt that the chart
would be different and show diversity, if the chart had
been outlined based on the rest of the U.S.
Co-Chair MacKinnon pointed out the graph of unemployment
rates in the state as compared to the rate in the entire
U.S
Senator Micciche had recently looked at a chart of
unemployment rate over a 30-year timeline.
Mr. Mitchell read slide 21, "Alaska Tax Credit Certificate
Bond Corporation."
Mr. Mitchell displayed slide 22, "Alaska Tax Credit
Purchase Proposal
Existing liability included in the State's
Comprehensive Annual Financial Report
Payable through an offset to state tax liability or by
appropriation
Historical practice of annually appropriating all
accrued credits until FY 2016
Appropriation of annual payment based on formulaic
statutory framework
Governor has proposed paying for accrued credits based
on discounted value from the statutory framework's
payment projection
Payment would be provided by issuing bonds to
refinance the existing liability
The combination of discounting and borrowing at lower
rates than existing fund balance will earn is
anticipated to result in a financial benefit to the
State
9:46:19 AM
Mr. Mitchell spoke to slide 23, "Alaska Tax Credit Purchase
Proposal," which showed four graphs. He noted that the
purple on the graphs represented the current payment
schedule. The purple cash flow could be refinanced, but the
initial benefit was how the proposal differed from the
pension obligation bond. He noted that the various shades
of blue and green represented the replacement cash flows
that would occur in the place of the purple cash flow as
expenditures were being deferred for a number of years.
9:50:12 AM
Senator von Imhof thought slide 23 was very helpful, and
helped to illustrate the scale and timing of the payments.
She understood that the state would initially negotiate
with the receivers of the tax credits for either a 5 or 10
percent discount rate, and the state would fix into the
rate. She noted the rising inflationary environment. She
wondered whether the state had the capacity without a POMV.
She furthered queried whether there would be an impact on a
rate, with the passage of a POMV.
Mr. Mitchell replied that the there was nuance regarding
whether the state could participate with debt. He remarked
that it was an existing liability. He recalled that the
state had previously desired a pension obligation bond, and
that transaction had been properly structured.
Mr. Mitchell replied that one rating agency would have a
one-notch downgrade; the other two would recognize it as a
refinancing of an existing liability. He remarked that he
said that there was potential to impact the debt capacity,
but it was not a one-for-one basis.
9:54:47 AM
Mr. Mitchell referred back to slide 23, and qualified that
the chart was very generalist. The legislation did not
allow for the state to borrow for the current year's
payment.
Co-Chair MacKinnon referred to a policy from the debt
affordability analysis. She wondered whether the state's
debt was still between 5 and 8 percent.
Mr. Mitchell answered in the affirmative.
Co-Chair MacKinnon remarked that the determinations were
subjective. She stressed that there should be a policy, and
target to stay within those parameters. She wanted to
reassure Alaskans that the state was within that realm.
Mr. Mitchell replied that the state was above the metrics.
He stated that the projections were that the state would be
within the metrics in two years on debt into the 5 percent
level.
Co-Chair MacKinnon asked if the projection included current
projections for revenue.
Mr. Mitchell answered in the affirmative.
9:58:16 AM
Senator Micciche remarked that the cash flow would help to
reduce UGF. He stated that the revenue would match the call
for the extended cash payments out when the state expected
to be at a better financial position. He wondered whether
the credit rating determination examined at that level of
detail. He wondered whether it would be considered a
positive step, stable, or negative impact on the state's
rating.
Mr. Mitchell replied that there was a discussion about
pension obligation bonds about a "soft liability." He
stated that making the actuarily determined contributions
to pension trusts was an annual appropriation that could
occur or not occur. He remarked that there may be a
constitutional protection for those benefits to be paid to
the beneficiaries, but the actual funding of the trust
could occur or not occur. He stressed that one debt was
issued, it became a hard liability. The hard liability
concept was that there was a bond that must be paid on, and
choosing not to pay would result in a credit default with
all the negative ramifications.
Senator Micciche wondered whether it balanced to a positive
or not.
Mr. Mitchell thought it was a difficult question to answer,
since there was positive and negative aspects. He stated
that oil and gas credits were not used on the credit rating
scorecards, as most states did not have them.
10:02:32 AM
Vice-Chair Bishop thought the conversation was largely
hypothetical.
Co-Chair MacKinnon thought Vice-Chair Bishop's comments
were related to the discount proposed by the governor.
Senator von Imhof looked at the graphs on slide 23, and
asked if the figures represented real or nominal dollars.
Mr. Mitchell confirmed that the figures were accurate.
Mr. Mitchell addressed Vice-Chair Bishop's comments. The
firms had considered that any proposal was better than the
status quo.
Co-Chair MacKinnon asked if the slide was available
electronically, so it could be reproduced. She stated that
the governor's proposed budget contained no tax credit
payments. She thought it was disheartening that the budget
did not have the statutorily required minimum payment
included.
10:07:02 AM
AT EASE
10:12:29 AM
RECONVENED
SENATE BILL NO. 125
"An Act relating to the financing and issuance of
bonds for a liquefied natural gas production system
and natural gas distribution system; and providing for
an effective date."
10:12:36 AM
SENATOR PETE KELLY, SPONSOR, discussed SB 125. He read from
a prepared statement:
For the record, I am Senator Pete Kelly, district A
covering the City of Fairbanks and Fort Wainwright.
Madam Chair, members of the Senate Finance Committee,
thank you for hearing SB 125.
Senate Bill 125 extends the time for AIDEA to issue
bonds for the Interior Energy Project (IEP) by five
years to June 30, 2023.
The Interior suffers from the most volatile energy
costs of any community on the Railbelt.
As a result of the cold winters and high prices
residents also burn a lot of wood and coal,
exacerbating the high prices with air quality issues.
It is due to these issues:
We, Governor Sean Parnell and the legislature put a
package together in the form of SB 23 creating the
Interior Energy Project. SB 23 was a funded(ING?)
package
The funding package for the IEP included:
1. $57.5 million dollars in a capital grant, all of
which has been spent or
obligated
2. $125 million dollars in Sustainable Energy
Transition and Supply (SETS) Loans of which $52.8
million dollars has been spent and $45.5 million had
been obligated
3. And $150 million dollars in AIDEA Bonding
Authority, the subject of the bill before you, none of
which has been used to date
The distribution system we have in place due to
limited liquefaction and storage infrastructure, has
never exceeded 70 miles of pipe.
With I think no more than about 1200 customers,
Many of the current customers are commercial in
nature, and many of them have interruptible service
due to the lack of sufficient local backup LNG storage
capacity.
This structure made it challenging to create an
expanded distribution network for other interior
residents and businesses.
For a community that supports two major military
installations and many commercial entities, the
volatility of energy prices has presented a
significant economic impediment.
Madame Chair, the AIDEA team overseeing the IEP has
been advancing the original financing package,
But just as they were ready to deploy the $150
million-dollar bond component, we have essentially run
out of time on the legislative authorization.
This bonding is absolutely necessary for the project
as it will be used to Increase the production capacity
of the LNG plant at Point MacKenzie and further the
expansion of the distribution network.
I want to emphasize that this bonding authorization
can only be used for the purposes of the Interior
Energy Project due to amendments to the financing
package created in 2015 through the passage of HB 105.
The bonding can also only be used to finance
investment-grade grade utility infrastructure due to
covenants included in the agreements signed between
AIDEA and the IGU.
TO DATE:
1. The 2014 and 2015 build-out of a natural gas
distribution system covering nearly all of Fairbanks
and core-North Pole
2. The 2015 AIDEA purchase of the Pentex assets
including the LNG production facilities at Pt.
MacKenzie, LNG trailers, and local distribution
infrastructure
3. The passage last spring of PACE legislation to
assist in commercial conversions to natural gas
4. Last September, AIDEA secured a gas supply
agreement with Hilcorp.
5. This was followed in December, with the signing of
agreements to consolidate the Fairbanks Natural Gas
(FNG) and the Interior Gas Utility (IGU) systems into
a single, investment-grade gas utility through the
sale of the Pentex assets to IGU.
6. And, this month, construction is now underway on a
large-scale 5.2 million gallon LNG storage facility in
south Fairbanks that will support the future customer
growth of the combined utility system.
Even with the recent fall in the price of heating oil
in the past few years, the need for a long-term,
clean, and affordable energy alternative for the
Interior remains a
high priority.
On its present schedule, first expanded gas
availability with the potential to move interruptible
customers to full service is expected in the winter of
2019.
And ... 2020 will see the first full scale efforts to
convert properties with access to the existing
distribution system to gas.
Madame Chair, Extending the sunset for AIDEA's bonding
authority for this project will ensure continued
success of the IEP and will help the interior realize
the vision of clean and affordable natural gas in the
Fairbanks/North Pole area.
Vice-Chair Bishop commented that the fuel that was
delivered to his Fairbanks home the week prior was $2.86
per gallon. He felt that the prices were increasing.
Senator von Imhof wondered whether there was a long-term
contract with the gas supplier in Southcentral Alaska.
Senator Kelly deferred to Mr. Therriault.
10:19:57 AM
JOE BURNS, STAFF, SENATOR PETE KELLY, noted that there was
the most recent bill version in the members' packets. He
stated that the only change from the original version was a
title change, which cleared up some ambiguity in the
original title.
Co-Chair MacKinnon remarked that she may have had an impact
on that change, because she wondered which entity was
financing the bonds.
Co-Chair MacKinnon OPENED public testimony.
10:21:07 AM
GENE THERRIAULT, DEPUTY DIRECTOR, STATEWIDE ENERGY POLICY
DEVELOPMENT, ALASKA ENERGY AUTHORITY, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, referenced
Senator von Imhof's question. He stated that the current
gas supply that was secured from Hilcorp was for a three-
year period of time. He remarked that there was offered a
longer term contract, but the entity that was purchasing
and consolidating the utilities asked not to lock in a
longer period of time. He stated that the AIDEA board
decided that three years, with potential extensions, was
acceptable. He shared that it allowed for the ability to
look for other potential sources outside of Cook Inlet that
may lower the price of gas. He remarked that in 2015, HB
2015 was passed, and the legislature put a number of
requirements on the AIDEA board. He stated that one of
those requirements that the board needed to see a supply of
gas, understand all the components of the infrastructure,
and have an estimation of the delivered price. She stated
that the supply contract allowed for no take or pay
obligation to accommodate the anticipated growth, because
Hilcorp had provided flexibility to the enterprise.
Senator von Imhof wondered when the current contract
expired. She asked whether the terms would remain the same
or require re-negotiation if there was a renewal in the
contract.
Mr. Therriault replied that the old contract was supposed
to end at the end of march. The new contract started at
that time, but there was an avoidance of a 3 percent
increase in the old contract on January 1. He stated that
it was three years from the end of March. He furthered that
in order to get increased capacity, the producer must be
given 18 months advance notice. He stated that for the
five-year extensions, the terms could be renegotiated. He
noted that there was no current discussion about reopening
those terms, but he believed the producer would be amenable
to consider a possible request.
Senator von Imhof observed that the current contract would
expire in 2021. She surmised that, at that time, both
parties would meet to discuss, terms, and other topics.
Mr. Therriault replied in the affirmative. He furthered
that, with existing customers, the utility must start the
discussions well before the end of the contract in order to
show the Regulatory Commission of Alaska.
Co-Chair MacKinnon wondered whether Mr. Therriault had
prepared testimony to provide to the committee.
Mr. Therriault replied that he was available to primarily
answer questions.
10:25:21 AM
Senator Stevens wondered whether the bill provided for all
of the energy needs of the two bases. He felt that it would
be crucial to the security of the bases.
Mr. Therriault replied that there was currently no
anticipated use on the bases. He shared that Ft. Wainwright
had some of the facility across the river, which was not
heated, but had a distributed heat loop off their power
plant. That power plant ran on coal, and remarked that it
was difficult to compete with the price of oil. He remarked
that there was some infrastructure that could avail itself
of a pipe distribution. He stated that Eielson was
approximately 7 miles from North Pole, and there was some
estimation of the cost of what it would take to pipe
energy. He stated that most facilities on Eielson were
heated with a distributed heat loop. He remarked that until
they decided to use a different source of generation for
the bases, there was no anticipated use. He hoped to pick
up some use for some of the facilities. He remarked that
there had been responses to a request from the Department
of Energy to examine the interest of changing the energy
source for Fort Greely. He remarked that there was an RFP
to examine who may have that capability. He understood that
there would be no capability of pushing gas via pipe
distribution, the Fort Greely area could source LNG out of
the plant expansion. He remarked that it was all a volume
enterprise: the higher the volume, the lower the per unit
cost.
Co-Chair MacKinnon remarked that she had asked in another
committee whether there were any anchor tenants. She shared
that there were people who were interested in gas, but no
anchor tenants like the ones thought of for industry. She
wondered whether that had changed since that committee
question. She shared that there was a possibility that a
retailer or small box store may be interested, but no
anchor tenants like the mine or military bases.
Mr. Therriault replied that there were no current anchor
tenants. He shared that mining operations up the Dalton
Highway had been watching the program to see the delivered
price in the community at bulk LNG. He stated that once
that price was seen, those operations could run the
economics for continuing to drive a further distance for
delivery.
10:28:40 AM
Co-Chair MacKinnon queried the anticipated cost to
consumers.
Mr. Therriault replied that there was a document that
showed that the delivered price was over $20 per NCF of
gas, which was equivalent to $2.77 fuel oil. He believed
that once there was service to residential and
uninterrupted customers, the price would reduce in 2020 to
$17.31 per NCF of gas. He stated that it would be down to
$15.48 in 2022, which would be approximately $2.00 in fuel
oil.
Senator von Imhof felt that the transportation costs could
increase the costs, because of liability, insurance, and
labor costs. She wondered whether there was ability to
revisit a fixed pipeline, which was a fixed asset that
could depreciate over time.
Mr. Therriault stated that AIDEA was focused on LNG
delivery. Part of the difficulty was the seasonal swing in
energy demand in Fairbanks. It was necessary to have pipe
capacity for triple the volume in winter.
10:33:12 AM
JOMO STEWART, INTERIOR GAS UTILITY, FAIRBANKS (via
teleconference), testified in support of the bill.
10:33:48 AM
JIM DODSON, PRESIDENT, FAIRBANKS ECONOMIC DEVELOPMENT
CORPORTATION, SAN DIEGO (via teleconference), spoke in
support of the bill.
10:34:30 AM
JIM MATHERLY, MAYOR, FAIRBANKS (via teleconference),
testified in support of the bill.
10:35:16 AM
JON COOK, CHIEF FINANCIAL OFFICER, AIRPORT EQUIPMENT
RENTALS, FAIRBANKS (via teleconference), spoke in support
of the bill. He thought the bill was critical to his
company.
Co-Chair MacKinnon CLOSED public testimony.
Vice-Chair Bishop discussed the fiscal note.
Co-Chair MacKinnon noted on page 2 of the fiscal note,
which said that the principal amount of the bonds
authorized may not exceed $150 million plus the cost of
capitalized interest, bond counsel fees, trustee fees,
rating fees, financial investor fees, and other costs that
the authority considered reasonable and appropriate.
Senator Olson asked if there were private investors.
Mr. Therriault stated there were not private investors
involved. He detailed that AIDEA had put out an RFP, There
was a request for the company to step away from the
project, and it had agreed.
Senator Olson considered the price of oil hovering for an
extended length of time, and wondered whether there was a
concern that the economy of Fairbanks would take stress to
payback the bonds.
Mr. Therriault replied that the numbers in HB 105 were
based on only 50 percent of the potential customers. He
furthered that originally there was anticipation that the
price of fuel presented enough of a delta to get upwards of
70 to 75 percent of the customers. He remarked that because
of the smaller delta, the expectation was reduced to 50
percent. He felt confidant that they could reach the target
numbers.
10:41:26 AM
Senator Olson considered the purchase in 2013 when the bill
was passed. He wondered whether inflation was a concern.
Mr. Therriault stated that when the consolidation of the
utilities was negotiated, the contractual documents had a
number of covenants.
Co-Chair MacKinnon asked Mr. Therriault to explain how much
money the state had invested in the Interior Energy
Project.
Mr. Therriault replied that the original financing plan was
$57.5 million of capital grants, with allowance for $125
million of SETS financing. He stated that there was a
specific appropriation for the SETS fund for that purpose.
The potential for the $150 million of bonds, but the bonds
had not yet been accessed. He stated that under the
contractual agreements from December 2017, all of the
capital money would have been deployed with $70 million to
$80 million of the SETS funds.
Co-Chair MacKinnon recalled that the total was $337.5
million of state support for the project. She queried the
state's investment for storage.
Mr. Therriault replied that storage was the "bottleneck."
He stated that more customers could be served with the
current small plant in MatSu, except that there was a
requirement for five days of product in the community in
order to serve customers in case of an interruption.
10:45:28 AM
Co-Chair MacKinnon asked if the state had granted bonds for
support of storage facilities in the Interior.
Mr. Therriault stated that the financing for the storage
was utilization of some of the SETS authorization.
SB 125 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
10:46:17 AM
The meeting was adjourned at 10:46 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB125 Supporting Document - House Bill 105 Plan Memorandum - Copy.pdf |
SFIN 2/12/2018 9:00:00 AM |
SB 125 |
| SB125 Letters of Support (January 30, 2018) - Copy.pdf |
SFIN 2/12/2018 9:00:00 AM |
SB 125 |
| SB125 Supporting Document - AIDEA IEP Quarterly Report January 2018 - Copy.pdf |
SFIN 2/12/2018 9:00:00 AM |
SB 125 |
| SB125 Sponsor Statement ver. U.pdf |
SFIN 2/12/2018 9:00:00 AM |
SB 125 |
| SB125 Summary of Changes Versions A to U - Copy.pdf |
SFIN 2/12/2018 9:00:00 AM |
SB 125 |
| SB125 Supporting Documents - News Articles.pdf |
SFIN 2/12/2018 9:00:00 AM |
SB 125 |
| SB 125 Support Letter.pdf |
SFIN 2/12/2018 9:00:00 AM |
SB 125 |
| SB 125 Support Resolution.pdf |
SFIN 2/12/2018 9:00:00 AM |
SB 125 |