Legislature(2013 - 2014)SENATE FINANCE 532
03/18/2014 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB108 | |
| SB80 | |
| SCR16 | |
| HB23 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SCR 16 | TELECONFERENCED | |
| += | HB 23 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | SB 80 | ||
| = | SB 108 | ||
2d CS FOR HOUSE BILL NO. 23(RLS)
"An Act creating the Knik Crossing Development
Corporation as a subsidiary corporation of the Alaska
Housing Finance Corporation and relating to bonds of
the Knik Crossing Development Corporation."
10:25:32 AM
REPRESENTATIVE MARK NEUMAN, outlined the basics of the
legislation. He explained that House Bill 23 amends the
Knik Arm Bridge and Toll Authority's enabling statute to
provide for a successful procurement for the Knik Arm
Crossing project and to generate the best value for the
state. Passing this legislation this session is important
to seeing the Knik Arm Crossing efficiently move toward a
successful and low-cost procurement process and facilitate
being open for traffic in 2015. The Knik Arm Crossing will
be a significant addition to Alaska's infrastructure that
will further facilitate the movement of goods and people in
the state. This bill was written in consultation with the
Knik Arm Bridge and Toll Authority (KABATA), which was
established in 2003 by the Alaska Legislature. The bill
accomplishes many items KABATA has deemed necessary to have
a successful public-private partnership procurement. Those
items are:
Increase in KABATA's Bonding Authority from $500 million
to $600 million
· The $600 million number represents the same amount
authorized under Private Activity Bond (PABs)
allocation from FHWA
· Lowers the cost of capital for the project and
ultimately lowers the cost to end users
· Private partner is the borrower of any PABs issued.
Clarify that the bridge and associated facilities are
exempt from state and local property taxes
· Like any other transportation project in our State,
the roads and bridges are not subject to property
taxation.
· Any private facilities developed outside the
crossing will be taxable
· Property tax exemption reduces the availability
payment and reduces the toll
Contractual Monetary Obligations
· Identifies the *obligations of the State of Alaska*
under a P3 process
· The legislative language applies to "monetary
liabilities" which may be incurred by KABATA under a
P3 process
· Any P3 agreement needs to be approved by the KABATA
Board of Directors, State AG's office, and ADOT&PF
· Serves to lower the cost of debt and equity to
finance the project
· Keeps the tolls affordable to the traveling public
Project reserve
· Creation of a reserve fund is to provide a backstop
for toll revenue fluctuations.
· Serves to enhance the credit worthiness of the
project and reduce project costs
· Will be repaid over the project life
Vice-Chair Neuman stated that A the above language
clarifications and additions serve to lower the cost of
capital on this much needed infrastructure project and
deliver the benefits in a timely and efficient manner.
10:33:06 AM
Co-Chair Kelly MOVED to ADOPT the committee substitute for
SCS 2d CS HB 23 (FIN), work draft 28-LS014\R (Martin,
2/13/14). There being NO OBJECTION, it was so ordered.
SUZANNE ARMSTRONG, STAFF, SENATOR KEVIN MEYER, explained
the changes in the CS. She referred the explanation of
changes (copy on file):
Section 1: Amends AS 19.75.021 Establishment of the
Authority (KABATA)
Amends existing law to prevent the dissolution of
KABATA until bonds issued by the State are satisfied.
Section 2: Amends AS 19.75.111 Powers and Duties of
Authority (KABATA)
Amends existing law to allow KABATA to enter into an
agreement with the State to pledge residual toll
revenues to pay debt service incurred by the State.
Section 3: Amends AS 19.75.211 Bonds of the Authority
(KABATA)
Amends existing law to require the State Bond
Committee to evaluate whether toll revenues are
adequate for payment of the principal and interest on
bonds issued by the State before KABATA may issue
additional toll revenue bonds.
Section 4: Amends AS 19.75.221 Trust Indentures and
Trust Agreements; Funds and Reserves (KABATA)
Amends existing law to require that if KABATA issues
bonds in addition to the toll revenue bonds issued by
the State, KABATA's trust agreement would require the
authority to agree to keep tolls at a level sufficient
to cover any prior toll revenue pledges made to
support previously issued State toll revenue bonds.
Section 5: Amends AS 19.75.231 Validity of Pledge
Amends existing law to express the Legislature's
intent that a toll revenue pledge made by KABATA to
support bonds issued by the State is valid and shall
give rise to a lien against toll revenues.
Section 6: Establishes the Framework for Issuance of
Toll Revenue Bonds for a Toll Bridge
AS 37.15.225 - Bond Authorization
Net proceeds of the sale of bonds remaining after
payment of costs of issuance and after deposit to the
Bond Reserve Fund, shall be transferred to the Knik
Arm Bridge & Toll Authority. The net proceeds may be
held by a trustee to be disbursed to pay the costs of
a toll bridge, as set out in a trust agreement.
Accrued interest paid on the bonds shall be deposited
into the Bond Redemption Fund.
Prior to the issuance of bonds, the State Bond
Committee will notify the Legislature.
AS 37.15.230 - Provides for a Toll Bridge Revenue Bond
Limit
The total unpaid principal amount of revenue bonds may
not exceed $300,000,000.
AS 37.15.235 Establishes a Toll Bridge Revenue Fund
Revenue received by the State, by contract with the
authority, from the ownership or operation of the toll
bridge and facilities, shall be deposited in this
fund.
Contracts or other agreements with the authority may
establish priorities for the payment of operations and
maintenance costs and for the payment of other
obligations (including debt obligations of the
authority), prior to payments to be made by the
authority to the State for deposit into this fund.
Revenue in the fund may be used only for:
1. Pay or secure payment of the principal of and
interest on bonds;
2. Redeem bonds before the fixed maturity date;
and
3. Subject to appropriation by the Legislature,
for any other purpose for which federal funds may
be obligated by the State under 23 U.S.C.
129(a)(3).
AS 37.15.240 Establishes the Toll Bridge Revenue Bond
Redemption Fund
A trust fund for paying and securing the payment of
the principal and interest on the bonds authorized
under AS 37.15.225 - 37.15.285 is created. There is no
limitation on the source of funds that may be
deposited into the fund, only that funds in this
account are to be used to pay principal and interest
on bonds issued under AS 37.15.225 - 37.15.285.
AS 37.15.245 Establishes Bond Terms
Provides discretion for the state bond committee to
determine the manner, amount, timing, and maturity
date for the issuance of bonds under AS 37.15.225 -
37.15.285. Interest rates may be fixed or variable.
Requires the state bond committee to consider the best
interests of the State when setting the terms of bond
issuance and requires the final bond terms be
expressed through a resolution of the bond committee.
AS 37.15.250 Bond Resolution
Provides that the bond committee shall authorize the
issuance of the bonds by adopting a resolution. The
resolution may fix the principal amount,
denominations, date, maturities, manner of sale, place
or places of payment, terms, form, conditions and
covenants of the bonds.
AS 37.15.255 Bond Reserve Fund
The resolution authorizing the issuance of bonds, may
provide for the establishment and maintenance of a
special fund - The Toll Bridge Revenue Bond Reserve
Fund.
The fund will consist of:
1. All proceeds of the bonds required to be
deposited into the fund by terms of the bond
resolution or a trust agreement;
2. An amount equal to the required debt service
reserve, as determined by the Commissioner of
Revenue; and
3. Appropriations approved by the Legislature.
Money in the fund will be applied solely to the
payment of the interest and principal on bonds
authorized and issued under AS 37.15.225 -
37.15.285.
Money in the reserve fund, excess of what is required
for the debt service reserve, may be withdrawn or may
be transferred to the bond redemption fund.
Bonds may not be issued under a trust agreement,
indenture, or bond resolution unless the required debt
service reserve for the bonds is in the reserve fund.
If the funds in the fund fall below the required debt
service reserve amount, as determined by bond
committee, the Commissioner of Revenue will notify the
Governor and the Legislature of the amount of funds
necessary to restore the account to an amount
sufficient to meet the required debt service. The
Legislature then has the discretion of appropriating
funds to replenish the fund to an amount equal to the
required debt service reserve.
AS 37.15.260 Enforcement by Bond Owner
Provides that bondholders, or their trustees, may
enforce their rights (transfer, set aside, payment of
money, and the enforcement of all terms, conditions,
and covenants) in superior court.
AS 37.15.265 Amounts Required for Payments
Starting with the year in which bonds are issued, the
bond committee will certify to the Commissioners of
Revenue and Administration, the amount, required for
the next two fiscal years, to be paid from toll
revenues or other state appropriations to:
1. The Bond Redemption Fund - to pay the
principal and interest
2. The Bond Reserve Fund - to maintain the
required debt service reserve
AS 37.15.270 Refunding
Provides the bond committee with the authority to
refund parts or all of the bonds at or before the
maturity or redemption date, if refunding is
advantageous to or in the best interest of the State.
All of the provisions that relate to the issuance of
bonds under AS 37.15.225 - 37.15.285 are applicable to
the refunding bonds.
AS 37.15.275 Bonds as Legal Investments
Provides that the bonds are legally enforceable
securities that can be purchased by individual and
institutional investors.
AS 37.15.285 Definitions
Section 7: Effective Date Clause
Provides for a July 1, 2014 effective date.
10:41:52 AM
Senator Hoffman looked at Section 3, and noticed that the
bond committee was assigned to evaluate whether the total
revenues were adequate to pay for the principal and
interest on the bonds, and if not would issue additional
toll revenues. He then looked at page 2 regarding the bond
reserve fund, and there was a provision for appropriation
by the legislature. He wondered why legislation
appropriation was necessary, if in fact Section 3 addressed
that issue with a toll adjustment. Ms. Armstrong replied
that there were discussions regarding maintaining the
authority's ability to issue bonds itself, especially if
the legislature decided that it was the appropriating
direction, so the obligations of the authority needed to
address the operations, maintenance, and the state's issued
debt that the bill proposed. She stressed that the
legislature should seriously examine that provision.
Senator Hoffman felt that it was the main concern, because
the state would maintain the obligation. He felt that the
toll would adequately fund the construction. He did not
thing that there would be support, if the state had to
cover the cost of construction.
Senator Olson stressed that there were very substantial
financial requirements and burdens that the state was
currently addressing. He asked for an update regarding the
Transportation Infrastructure Finance and Innovation Act
(TIFIA) loans. Co-Chair Meyer replied that Ms. Armstrong
was not capable of answering that question. Senator Olson
agreed to receive a response at a later date.
Co-Chair Meyer remarked that the funding of the project had
three components: 1) one-third was TIVIA bonds; 2) one-
third in revenue bonds; 3) and one-third federal highway
receipts. The funding would have very little anticipated
general fund money. Ms. Armstrong agreed with that
summation.
2d CSHB 23(RLS) was HEARD and HELD in committee for further
consideration.