HOUSE BILL NO. 184 "An Act relating to the debt authorization of the University of Alaska." Representative Mike Kelly, the bill sponsor, proclaimed HB 184 as an administrative bill that his staff member would explain. DEREK MILLER, STAFF, REPRESENTATIVE KELLY, announced that the HB 184 adjusts the current bond debt cap for the University of Alaska to reflect today's construction prices. Current Alaska Statute allows the University of Alaska to borrow money, issue debt, or enter into long-term obligations for the purchase of facilities, goods or services without having to provide notice to the legislature as long as the annual debt service payment doesn't exceed $1 million set in 1990. HB 184 bumps up the threshold to $2.5 million to reflect today's construction prices. In 1990, $1 million in annual debt service was the cost of financing a $15 million capital project. Taking into consideration construction inflation in Alaska, a $15 million capital project build in 1990 would cost about $40 million today. Annual debt service on $40 million is $2.5 million assuming a 4.5% interest rate and a 25-year straight line amortization. Mr. Miller signified that the University has had a history of being excellent stewards of debt and possess a Moody's Investor Service Aa3 rating. This indicates a safe risk with low risk for failure. The University's current amount of outstanding debt is less than half of the board of regency's policy limit. This bill is an administrative action that eases the burden of compliance with the statute for smaller bond issues. Mr. Miller noted a concern on how this would affect the university's ability to bond a new facility without legislative approval. He referred to an email that expressed this is not a receipt authority, but a separate secondary authority as it relates to bonding of receipt authority that the legislature gives the university. (Email-Myron J. Dosch, March 23, 2009, copy on file). Mr. Miller pointed out the zero fiscal note attached to the bill and the letter of support from the university. Co-Chair Hawker clarified that the legislature was increasing the cap on the annual payment the university may enter into a debt agreement from $1 million to $2.5 million. He referred to line 11, that any project that is so debt financed must have "…been approved by the legislature by law." This is not a cap where the University can go bond without coming to the legislature's approval. This simply gives the university latitude to deal with smaller projects without having to confirm specific bonding authority with the legislature. Representative Kelly replied that was correct. Co-Chair Hawker gave his complete support and endorsement of this proposal. Representative Fairclough interjected that this bill would allow the university to enter into lease agreements. The university red book indicated that leasing capacity had exceeded the dollar amount for several different pieces of property. 2:29:31 PM Representative Fairclough noted that the university has exceeded that leasing capacity in Fairbanks so this would take it off the radar screen. MYRON DOSCH, CONTROLLER, UNIVERSITY OF ALASKA testified via teleconference that he was available for questions. Vice-Chair Thomas asked if it was true that with added buildings there would be added overhead and maintenance costs. Representative Kelly responded that was true. Once the project is approved, this bill would allow, for smaller issues, bonding that would take care of it, but it would not change the permission nor does it change the board of regents debt cap for the total system. Vice-Chair Thomas wondered if that would be smaller buildings or maintenance on buildings or would all the money be spent on one building. Representative Kelly replied that the original $1 million covered construction which would be $15 million in todays non-adjusted for inflation dollars. 2:32:03 PM Vice-Chair Thomas responded that this would add to the overhead and the university must be cautious. Representative Fairclough asked Mr. Dosch what buildings are exceeding the obligation capacity at the university. Mr. Dosch replied that the two facilities in the university red book are the UAF Life Sciences Innovation and Learning Facility and the UAF Energy Technology Building. Each building has receipt authority that is over $15 million based on how it was requested. If this was debt financed, this statute would apply and would require the university to do the specific things notified in this statute, which is the notice and specific approval. Co-Chair Stoltze reported that the zero fiscal note reports that HB 184 increases the debt authorization level for the University of Alaska and is not anticipated to have a measurable fiscal impact on the university. Representative Hawker MOVED to report HB 184 out of Committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. HB 184 was REPORTED out of committee with a "no recommendation" and with a previously published fiscal note: FN1 (UA)