02/03/2004 03:40 PM Senate STA
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ALASKA STATE LEGISLATURE
SENATE STATE AFFAIRS STANDING COMMITTEE
February 3, 2004
3:40 p.m.
TAPE (S) 04-2
MEMBERS PRESENT
Senator Gary Stevens, Chair
Senator Bert Stedman
Senator Gretchen Guess
MEMBERS ABSENT
Senator John Cowdery, Vice Chair
Senator Lyman Hoffman
COMMITTEE CALENDAR
2d CS FOR HOUSE BILL NO. 288(RLS)
"An Act changing the name of the Department of Community and
Economic Development to the Department of Commerce and Community
and Economic Development."
MOVED SCS 2d CSHB 288(STA) OUT OF COMMITTEE
SENATE BILL NO. 270
"An Act establishing November as Avalanche Awareness Month."
MOVED SB 270 OUT OF COMMITTEE
SENATE BILL NO. 279
"An Act authorizing and relating to the issuance of bonds by the
Alaska Housing Finance Corporation for safe and clean water and
hygienic sewage disposal facility capital projects and other
capital projects; providing for the repayment of the bonds and
bond costs; relating to the dividend paid to the state by the
Alaska Housing Finance Corporation; and providing for an
effective date."
HEARD AND HELD
PREVIOUS ACTION
BILL: HB 288
SHORT TITLE: CHANGING NAME OF DEPT OF COMM & ECON DEV.
SPONSOR(s): REPRESENTATIVE(s) KOHRING
04/28/03 (H) READ THE FIRST TIME - REFERRALS
04/28/03 (H) STA, L&C
05/06/03 (H) STA AT 8:00 AM CAPITOL 102
05/06/03 (H) Moved CSHB 288(STA) Out of Committee
05/06/03 (H) MINUTE(STA)
05/08/03 (H) STA RPT CS(STA) NT 3DP 1DNP 3NR
05/08/03 (H) DP: DAHLSTROM, LYNN, HOLM;
05/08/03 (H) DNP: BERKOWITZ; NR: SEATON, GRUENBERG,
05/08/03 (H) WEYHRAUCH
05/08/03 (H) CRA REFERRAL ADDED AFTER L&C
05/09/03 (H) L&C AT 3:15 PM CAPITOL 17
05/09/03 (H) Moved CSHB 288(STA) Out of Committee
05/09/03 (H) MINUTE(L&C)
05/10/03 (H) L&C RPT CS(STA) NT 3DP 1NR 2AM
05/10/03 (H) DP: GATTO, DAHLSTROM, LYNN;
05/10/03 (H) NR: ROKEBERG; AM: CRAWFORD, GUTTENBERG
05/13/03 (H) CRA RPT CS(STA) NT 2DP 3NR
05/13/03 (H) DP: WOLF, KOTT; NR: SAMUELS, CISSNA,
05/13/03 (H) MORGAN
05/13/03 (H) CRA AT 8:00 AM CAPITOL 124
05/13/03 (H) Moved CSHB 288(STA) Out of Committee
05/13/03 (H) MINUTE(CRA)
05/16/03 (H) RETURNED TO RLS COMMITTEE
05/19/03 (S) L&C AT 8:00 AM BELTZ 211
05/19/03 (S) <Above Item Removed from Agenda>
05/19/03 (S) MINUTE(L&C)
01/20/04 (H) RLS AT 9:30 AM BELTZ 211
01/20/04 (H) Moved 2d CSHB 288(RLS) Out of Committee
01/20/04 (H) MINUTE(RLS)
01/21/04 (H) RLS RPT 2D CS(RLS) NT 2DP 1DNP 2NR
01/21/04 (H) DP: COGHILL, ROKEBERG; DNP: KERTTULA;
01/21/04 (H) NR: MCGUIRE, KOTT
01/21/04 (H) TRANSMITTED TO (S)
01/21/04 (H) VERSION: 2D CSHB 288(RLS)
01/23/04 (S) READ THE FIRST TIME - REFERRALS
01/23/04 (S) STA, L&C
02/03/04 (S) STA AT 3:30 PM BELTZ 211
BILL: SB 270
SHORT TITLE: AVALANCHE AWARENESS MONTH
SPONSOR(s): SENATOR(s) GREEN
01/16/04 (S) READ THE FIRST TIME - REFERRALS
01/16/04 (S) STA
02/03/04 (S) STA AT 3:30 PM BELTZ 211
BILL: SB 279
SHORT TITLE: AHFC WATER & SEWER BONDS/DIVIDEND
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/23/04 (S) READ THE FIRST TIME - REFERRALS
01/23/04 (S) STA, FIN
02/03/04 (S) STA AT 3:30 PM BELTZ 211
WITNESS REGISTER
Representative Vic Kohring
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Sponsor HB 288
Commissioner Edgar Blatchford
Department of Community & Economic Development
PO Box 110800
Juneau, AK 99811-0800
POSITION STATEMENT: Supported HB 288
Jacquilin Tupou
Aide to Senator Lyda Green
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Introduced SB 270 for sponsor
Bryan Butcher
Alaska Housing Finance Corporation
PO Box 101020
Anchorage, Alaska 99510
POSITION STATEMENT: Testified in support of SB 279
Joe Dubler
Alaska Housing Finance Corporation
PO Box 101020
Anchorage, Alaska 99510
POSITION STATEMENT: Testified in support of SB 279
ACTION NARRATIVE
TAPE 04-2, SIDE A
CHAIR GARY STEVENS called the Senate State Affairs Standing
Committee meeting to order at 3:40 p.m. Present were Senators
Stedman, Guess and Chair Gary Stevens.
2d CSHB 288(RLS)-CHANGING NAME OF DEPT OF COMM & ECON DEV.
CHAIR GARY STEVENS announced 2d CSHB 288(RLS) to be up for
consideration and invited Representative Kohring to introduce
the bill.
REPRESENTATIVE VIC KOHRING, sponsor, explained that this
legislation changes the name of the Department of Community and
Economic Development to the Department of Commerce, Community
and Economic Development. He said adding the word "commerce"
more completely describes the mission of the department because
it is not only engaged in promoting strong communities and
developing the economy, it is also involved in things that are
commerce related. Changing the name lets other areas know that
the State of Alaska is open for business and has commerce.
CHAIR GARY STEVENS asked if the latest bill version is \H.
REPRESENTATIVE KOHRING said that is correct.
CHAIR GARY STEVENS commented that it makes sense to be the
Department of Commerce, Community and Economic Development, but
in the title and throughout the bill there is an "and" rather
than a comma between Commerce and Community. He noted the
sponsor omitted the first "and" and asked him which title he
preferred.
REPRESENTATIVE KOHRING replied he preferred the comma, but the
House Rules Committee didn't agree. He said it reads more
clearly with a comma instead of the first "and."
CHAIR GARY STEVENS agreed and asked for other comments.
SENATOR GRETCHEN GUESS agreed there was no reason for the first
"and."
CHAIR GARY STEVENS asked for a motion.
SENATOR GUESS made a motion to delete the word "and" following
"Commerce" and replace it with a comma on page 1, lines 2, 8 and
11 and on page 2 lines 4 and 5.
There was no objection and the motion passed.
COMMISSIONER EDGAR BLATCHFORD, Department of Community &
Economic Development thanked the committee and said he
appreciates the effort to change the name of the department
because it is more in keeping with how Alaskans think of the
department. There are two major responsibilities with the new
name change. Those are commerce and community development.
SENATOR GUESS made a motion to move SCS 2d CSHB 288(STA) from
committee with individual recommendations and the attached
fiscal note. There being no objection, it was so ordered.
SB 270-AVALANCHE AWARENESS MONTH
CHAIR GARY STEVENS announced SB 270 to be up for consideration.
JACQUILIN TUPOU, staff to Senator Lyda Green, sponsor of SB 270,
informed members that this issue was before the committee last
year in resolution form and this year it is a bill. The
legislation would establish each November as Avalanche Awareness
Month.
Every year more people are lost to avalanches in Alaska than in
any other state. In fact, 28 Alaskans have died in avalanches
during the previous four winters. She reported that there were
many people who have worked hard on this issue and were willing
to testify in support of the legislation. However, in the
interest of simplicity, they ask the committee to pass the bill
quickly.
CHAIR GARY STEVENS thanked Ms. Tupou and said he was pleased to
see that this was in bill form and that every November would be
Avalanche Awareness Month. He noted that the chart in member's
packets indicate that 27 percent of the avalanche fatalities
between 1998 and 2002 have been from Alaska and that 62 percent
were snowmachiners, which shows the importance of safety
education.
He asked for a motion.
SENATOR GRETCHEN GUESS made a motion to pass SB 270 from
committee with individual recommendations and attached fiscal
note. There being no objection, it was so ordered.
SB 279-AHFC WATER & SEWER BONDS
CHAIR GARY STEVENS announced SB 279 to be up for consideration.
He invited Brian Butcher and Joe Dubler to come forward.
BRIAN BUTCHER, legislative liaison Alaska Housing Finance
Corporation (AHFC), explained that SB 279 authorizes $25 million
in bonds to be sold by AHFC primarily to fund village safe water
projects in the FY 05 Capital Budget. He noted that the bill
would authorize other capital projects as well.
MR. BUTCHER made three points. First, based on current interest
rates, the estimated debt service on the bonds would be about $3
million per year for a 10 year period. Second, the debt service
payments would come from AHFC's annual dividend to the state and
SB 279 would amend the statute to include the bonds. Finally,
rating analysts indicate that the AHFC's ratings would not be
negatively impacted by this bond sale.
CHAIR GARY STEVENS referred to pages 3 through 5 of the bill
where dividend calculations in FY04 through FY08 are addressed
and noted that SB 279 calls for a 10 year payoff. He asked for
clarification.
MR. BUTCHER explained that HB 256, which placed AHFC dividend
payments into statute, was signed into law in 2003. The current
AHFC bond debt service payments were listed in that legislation
and those payments are subtracted from the dividend, which gives
some idea of how much the state would actually receive. SB 279
adds the proposed 10 year bonds to that.
JOE DUBLER, chief financial officer, Alaska Housing Finance
Corporation, further clarified:
Section 4 that you're referring to there is the phase
in of the dividend plan. Section 2 begins with 75
percent after the phase in period, and I believe it's
FY09. It would kick in to 75 percent of the
corporation's net income and that would go on
indefinitely. So, Section 2 would carry forward after
FY09 for the remainder term of the bonds.
CHAIR GARY STEVENS asked if it is correct that the bonds would
be paid off in 10 years.
MR. BUTCHER and MR. DUBLER both agreed that is correct.
SENATOR GRETCHEN GUESS asked if AHFC bonds now and if so, what
they bond for.
MR. DUBLER replied they bond for mortgage loans primarily, but
AHFC has a number of programs: single family and first time home
buyer program; veteran's mortgage program; multi family purchase
program for both low and moderate income projects as well as
regular taxable projects; and beginning in 1992, tax exempt
bonds for state capital projects similar to the current
proposal.
SENATOR GUESS asked how the proposed bonding might impact the
ability to bond in the future.
MR. DUBLER pointed to Mr. Butcher's third point and replied they
don't believe that there would be any impact. Three rating
agencies rate the bonds and Standard and Poor's and Moody's
weren't too concerned with the additional bond issue of $25
million. Fitch, which has the highest of the three ratings at
AA+, was moderately concerned, but he and Mr. Butcher convinced
them it wouldn't be a problem for the corporation.
SENATOR GUESS acknowledged that the ratings might not be
impacted, but questioned whether AHFC might not have a quantity
cap. Would SB 279 affect the corporation's future ability to
bond for more typical AHFC projects?
MR. DUBLER replied he didn't believe so because there is a
difference in what the bond proceeds are used for. For the
mortgage program, if AHFC sells $100 million in bonds, they
typically buy $100 million worth of mortgage loans. That is a
structured financing and is a self-paying bond transaction. The
current proposal is a different type of structure. It is
referred to as a general obligation bond issue and it is based
on the corporation's working capital in the corporation's
general account. This structure includes the state capital bonds
and there are no assets, such as a mortgage pool, pledged to pay
the bonds off. The corporation's ability to issue bonds for
state capital projects as in SB 279 would be affected, but it
wouldn't affect the corporation's ability to bond for mortgage
programs.
SENATOR GUESS asked what asset basis is for the proposed bonds.
MR. DUBLER replied there is just the corporation's general
account; there would be no assets, such as a mortgage pool,
pledged to pay off the proposed bonds. He reiterated, the
corporation's bonding ability for capital projects would be
impacted, but not their ability to bond for mortgage programs.
SENATOR GUESS asked what assets the proposed bonds are based on
and whether it is property the corporation owns.
MR. DUBLER said AHFC is bonding against the corporation's
general account. He said:
If you look at our financial statements, the revolving
fund that the corporation - our unrestricted assets is
what it is. Basically, what this does is, we're
forward funding the dividend for 10 years. We're
taking..."
SENATOR GUESS finished his sentence saying, "taking future
general fund money to bond, which is how it's going to come out
at $3 million."
MR. DUBLER agreed.
SENATOR GUESS asked if there is a reason why the fiscal note is
zero and doesn't show the $3 million.
MR. BUTCHER replied the fiscal note shouldn't say zero. AHFC
submitted a fiscal note to the Department of Revenue and the
Office of Management and Budget and they were informed that a
zero fiscal note had already been submitted. AHFC was
subsequently informed that a corrected fiscal note had been
submitted and he wasn't aware that the committee didn't have the
new information.
CHAIR GARY STEVENS confirmed he had not received a corrected
fiscal note.
SENATOR GUESS asked how water and sewer projects are paid for at
this time.
MR. BUTCHER said the AHFC dividend has been used for the last 5
or 6 years.
SENATOR GUESS questioned whether that was through the general
fund process in the capital budget.
MR. BUTCHER said yes, using AHFC dividends.
SENATOR GUESS then asked whether there is a list of projects
that would be funded with the proposed bonds.
MR. BUTCHER explained that nearly $20 million of the total $25
million is dedicated to village safe water projects and the rest
is dedicated to other capital projects.
SENATOR GUESS read from page 1, line 31 to page 2, line 2 of the
bill and noted that "other capital projects" were included.
[Committee members were provided with a list of the $25 million
in proposed projects.]
SENATOR GUESS reviewed the list and asked how deferred
maintenance and the purchase of sonar equipment fits in.
MR. BUTCHER replied those items come under "other capital
projects" as stated on page 1, line 31 and page 2, line 1.
SENATOR GUESS questioned why the administration included village
safe water in the bill language if "other capital projects" is
included as well. There is no guarantee for any particular
project if "other capital projects" is included.
MR. BUTCHER explained that when AHFC began working with the
governor's office, the corporation discussed bonding for the
same village water projects that they had been funding with AHFC
dividends. At that point, the administration made the decision
where the funds would go and then the Department of Law changed
the legislation to include "other capital projects."
CHAIR GARY STEVENS noted that the list shows that some $19
million of the $25 million would go for village safe water.
SENATOR GUESS agreed that's what the list shows, and that was
her point. How could they know for certain that this is how the
money would be used? She recalled that, "All the schools that
were on the general obligation (GO) bond last year - some of
them, the administration decided to take off the GO package
after the voters approved it."
MR. BUTCHER explained that this is how it is coded into the
capital budget and "if the project is funded under AHFC bond
proceeds in the capital budget, they would have to come up with
a new funding source to fill that hole."
MR. DUBLER continued to say that they have done close to $500
million dollars in state capital projects and they have yet to
have a project that was approved in a bill similar to SB 279
that wasn't funded with AHFC bonds.
SENATOR GUESS said the capital projects aren't listed in the
bill and she is extremely concerned about the broad language in
the bill because there is no assurance that any money would, in
fact, go to village safe water. The bill opens use of the $25
million to any capital project.
MR. BUTCHER agreed that she is correct, but it is his
understanding that, "and the whole genesis of the bill was that
it would be used for village safe water projects. But you're
right, an appropriation bill ultimately decides how it is spent
and regardless of what we put in this bill, it wouldn't tie the
appropriation bill to it."
SENATOR GUESS asked if removing, "and other capital projects"
would ensure that the money would go to village safe water.
MR. BUTCHER replied he believes that is correct.
SENATOR GUESS stated that she appreciates creative financing,
but this bill is about safe water and everyone has agreed that
this is something that needs to be done as a state and this
legislation invites hijacking in years to come. She concluded,
"If we're going to take care of village safe water, I think we
should do that."
CHAIR GARY STEVENS said he understands her concerns. To clarify
the issue further, he asked for confirmation that these bonds
would affect the dividend to the state. [He received a nod.] He
asked if there were other bonds that already affect the
dividend.
MR. DUBLER replied he is not aware of any other AHFC bond
proposal in this session.
CHAIR GARY STEVENS asked about bond sales in previous years.
MR. DUBLER said there have been others and those are the ones
referred to earlier in Section 2.
SENATOR GUESS added, "But not for projects outside of AHFC."
MR. DUBLER disagreed and said those were all capital projects.
He repeated that AHFC has bonded for nearly $500 million in
capital projects including rural schools, ports and harbors, the
Atwood Building in Anchorage, and others.
SENATOR BERT STEDMAN agreed that Senator Guess brought up good
points. He then noted that the fiscal note is inaccurate because
the cost would be $3 million and this would be a 10 year GO
bond. He asked what the estimated yield might be.
MR. DUBLER replied AHFC understandably uses conservative
assumptions, but the projected interest rate is a 3.95 yield on
the entire issue. He noted that is higher than the current rate.
SENATOR STEDMAN agreed that village safe water is well
worthwhile and it's a good idea to issue bonds when rates are
low.
He referred to the broad language in the bill then reviewed the
list of capital projects including the purchase of sonar
equipment and said he assumes the life of the equipment would be
at least 10 years.
MR. BUTCHER said this legislation limits the bonds to $25
million and the governor's office decided how the funds would be
used. However, AHFC made it clear that the bonds needed to be
used for capital projects and they needed to extend beyond the
life of the bonds. The governor's office understands the
parameters.
SENATOR STEDMAN noted that it is clear that there are deferred
maintenance issues in the state. However, when the state is
making a concerted effort to address sanitation issues in the
rural communities, it would be more clear-cut if the two issues
weren't mixed. This is particularly important when trying to
communicate with the public. He concluded that perhaps projects
were mixed in the past, but he senses that there are
reservations now.
MR. BUTCHER said that projects have been mixed and they range
from ports and harbors to schools. "Whatever was needed in a
bond bill when it was put together."
SENATOR STEDMAN remarked that everyone could come up with a list
of capital projects that are needed, so it is important that the
intent of this legislation isn't substantially modified or
derailed.
SENATOR GUESS asked how much more money is needed to finish safe
water.
MR. BUTCHER admitted that they don't have a list. AHFC spoke to
Department of Environmental Conservation (DEC), but they didn't
produce a list, if in fact they have one. SB 279 would cover the
village safe water projects needed to match the federal funding
for FY05.
SENATOR GUESS asked if sewage falls under safe water.
MR. BUTCHER replied he thought it did.
SENATOR GUESS asked if the $500 million in bonding he referred
to earlier was through the bill process.
MR. DUBLER said it was and it is referred to in SB 279. He
remembered SB 360, HB 281, and HB 287 were related.
SENATOR GUESS said she would like to amend the bill to delete
reference to "and other capital projects."
CHAIR GARY STEVENS said he could sense the discomfort with the
bill, but he wasn't prepared to accept an amendment at that
time. He said he would prefer to hold the bill for further
consideration and additional information. Certainly, a corrected
fiscal note was in order and the question about other safe water
projects is important information to get from DEC. He asked her
to withdraw her motion to amend.
SENATOR GUESS said she would withdraw her motion, but she wasn't
confident that the issues would be solved. If the administration
wants additional projects included then she would like them
listed specifically because including "other capital projects"
is irresponsible. She admitted she isn't enthused to bond
outside of AHFC in any case, but leaving the language open
indicates, "We're not doing our jobs."
SENATOR GUESS withdrew her motion as a favor to the Chair.
CHAIR GARY STEVENS said he could see her point.
SENATOR STEDMAN noted that much in this bill is finance related
and he assumes that the Finance Committee would be apprised of
the concerns raised here.
CHAIR GARY STEVENS said he understands and he was sure the
Finance Committee would scrutinize the issue carefully.
He announced he would hold SB 279 in committee.
CHAIR GARY STEVENS adjourned the meeting at 4:15 pm.
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