HB 81-AK ENERGY EFFICIENCY LOANS: ELIGIBILITY  9:12:10 AM CHAIR COSTELLO announced the consideration of HB 81. She stated that the intention is to hear the introduction, take questions, open public testimony, and hold the bill for further consideration. [CSHB 81(ENE) was before the committee.] 9:12:38 AM JOHNATHON KREIS-THOMPSON, Alaska State Legislature, sponsor of HB 81, introduced the legislation speaking to the following sponsor statement: This bill gives nonprofit organizations and federally- recognized tribes the power to apply for loans from the Alaska Energy Efficiency Revolving Loan Fund. Because AEERLF is such a god-awful acronym, we call this bill the More Energy Efficient Buildings Act ("MEEBA"). The AEERLF was created by the Alaska Sustainable Energy Act in 2010. It authorized the Alaska Housing Finance Corporation to make $250 million in low interest loans for energy efficiency improvements to public entities, namely municipalities and school districts. Only one loan has been closed since the program's creation in 2010, to the City of Galena for $2.6 million. Especially given our new and more austere fiscal climate in which legislative grants are going to be rare to nonexistent, many nonprofits are interested in becoming more self-sufficient, and accessing loans from the program to invest in energy efficiency. These projects allow them to save money on energy costs, make the state money in interest, create jobs, and stimulates the economy. Recognizing these clear benefits, the MEEBA authorizes Alaska Housing to accept applications from non-profits, regional housing authorities, and federally recognized tribes to invest in energy efficiency. The More Energy Efficient Buildings Act improves energy efficiency in Alaska. It's an economic stimulator, makes the state money, and helps create a public benefit for a state program that's presently underused. 9:14:55 AM REPRESENTATIVE KREISS-TOMKINS noted that HB 81 passed the other body by a 35:1 vote. CHAIR COSTELLO asked Ms. Wilber to walk through a sectional analysis for HB 81. BERETT WILBER, Staff, Representative Kreiss-Tomkins, Alaska State Legislature, delivered the following sectional analysis for HB 81. Section 1 requests the Alaska Housing Finance Corporation to include a report of activities under the Alaska Energy Efficiency Revolving Loan Fund in their annual report. Section 2 adds federally recognized tribes, regional housing authorities, and non-profits to the list of entities that can be offered loans through the Alaska Energy Efficiency Revolving Loan Fund. Section 3 is a conforming change to existing law which adds tribes to the current loan enforcement terms. Under this section, tribes would join the list of entities which agree to waive a sovereign immunity defense as such a defense could be applied to an energy efficiency loan. Section 4 adds tribes and nonprofits to the list of those authorized to borrow from the loan program. Section 5 is a conforming change which adds the newly eligible entities to existing laws, which lay out the financial responsibilities of loan recipients to the State of Alaska if they default on a loan. Section 6 includes definitions for the bill, including definitions for federally recognized tribes, regional housing authorities, and nonprofits. Under this bill, nonprofits that are designated as 501(c)(3), (c)(4), (c)(6), (c)(12) and (c)(19) can apply for loans under the Alaska Energy Efficiency Revolving Loan Fund. Section 7 adds a provision to the bill that requires the loan program to preference originally eligible entities, which are municipalities, schools, and state buildings, or the newly eligible entities. It also expressly forbids for-profit entities from receiving loans from the fund. 9:17:28 AM CHAIR COSTELLO asked where the language is broadened to include schools. MS. BARRETT advised that schools are already eligible to apply for these energy loan funds. She directed attention to the language on page 2, line 17, and said that while the language doesn't specifically mention schools, Legislative Legal agrees that they are included. CHAIR COSTELLO listed the individuals available to answer questions. SENATOR MEYER asked if just one entity had taken advantage of the loan program. REPRESENTATIVE KREISS-TOMKINS said that's correct. "It's dramatically underused." SENATOR MEYER asked why that the case. REPRESENTATIVE KREISS-TOMKINS said his anecdotal assessment is that entities have been accustomed to looking for grants or getting money through capital projects. Why would you assume a loan when there's free money? He opined that thought processes are changing as people look to be more self-sufficient in this more austere environment. 9:21:21 AM SENATOR MEYER commented that the last sizeable capital budget was in 2013 so it's surprising that the loan fund is so underused. He asked if he sees this program as competition to banks. REPRESENTATIVE KREISS-TOMKINS said him thinks there will be increased interest in the program going forward. The fact that the first loan was taken out just last December supports the notion that entities are realizing that free money is a thing of the past and that the more austere fiscal environment is likely here to stay. He explained that the loan program does not compete with banks because the financing for the Alaska Energy Efficiency Revolving Loan Fund is highly unique and banks don't have an analog. The way the program works is that the structure first needs an energy audit that identifies specific energy efficiency improvements and the amount that the improvements will save. The loan is based on the cost of the improvements. SENATOR MEYER asked if he has an estimate of the number of nonprofits and tribes that might apply for a loan. REPRESENTATIVE KREISS-TOMKINS said he's speculating but a few facts might inform what would happen if this becomes law. A partnership in Fairbanks between the Denali Commission, Foraker Group, Cold Climate Housing Research Center and others is looking at energy efficiency improvements for nonprofits. That pilot program was designed to look at the payback and cost benefits of making these sorts of improvements. He said he knows that those entities are interested in scaling this in the future and have been involved in drafting and supporting the bill. He pointed out that many of the nonprofits in Alaska have relatively small budgets compared to a school district or municipality and their loans would conceivably be just $20,000 to $50,000, but that size energy efficiency improvement would proportionally make a big difference. 9:27:04 AM SENATOR GARDNER asked if this applies to all nonprofits such as churches and the Girl Scouts. MS. WILBER clarified that the bill only applies to a specific subsection of nonprofits. It specifically opens eligibility to 501(c)(3)s that include churches, religious, educational, charitable, literary, and scientific groups; 501(c)(4)s that include civic and social welfare organizations such as Lions and Rotary Clubs; 501(c)(6)s that tend to be business leagues, chambers of commerce, and industry umbrella organizations such as the Alaska Pharmacist Association and the Alaska Truckers Association; 501(c)(12)s that are mutuals and cooperative associations like telephone and electrical cooperatives; and 501(c)(19)s that are organizations that have to do with past or present members of the armed forces such as VFWs or American Foreign Legions. CHAIR COSTELLO asked Stacey Schubert to address the question why schools and other nonprofits haven't taken advantage of the loan fund. 9:29:29 AM STACEY SCHUBERT, Director, Government Relations and Public Affairs, Alaska Housing Finance Corporation (AHFC), Anchorage, said she agrees with the sponsor's explanation. When the legislation passed in 2010, authorizing AHFC to go to the market and bond up to $250 million for the program, schools and other public facilities had grant money available so they didn't need to go to AHFC for a loan. As the fiscal climate has changed there has been more interest in the program. For example, AHFC worked with the Department of Transportation and Public Facilities on projects they identified for public facilities, but the department found less expensive funds from another source. AHFC is participating with the Alaska Municipal League and others to make sure they are aware of the program, she said. 9:30:36 AM CHAIR COSTELLO opened public testimony on HB 81. 9:30:48 AM CHRIS ROSE, Executive Director, Renewable Energy Alaska Project (REAP), stated that REAP supports HB 81. He said we are a statewide nonprofit education advocacy group that has focused on promoting renewable energy and energy efficiency for the last 13 years. HB 81 offers nonprofits and tribes an opportunity to take advantage of this loan program. He said REAP estimates that Alaskans collectively spend about $5 billion on heat, transportation, and electricity each year. He estimated that about 20 percent of the energy consumption could be saved through energy efficiency. Keeping close to $1 billion in the economy is a worthy goal. The nonprofits and tribes around the state often reside in energy inefficient buildings. The structure of the loans that AHFC is offering is something that tribes and nonprofits could take advantage of. He urged the committee to consider and move the bill forward. 9:32:42 AM CHAIR COSTELLO closed public testimony on HB 81 and held the bill in committee for further review.