Legislature(2019 - 2020)BARNES 124
04/02/2019 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HB56 | |
| HB32 | |
| HB70 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 56 | TELECONFERENCED | |
| *+ | HB 32 | TELECONFERENCED | |
| *+ | HB 70 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 32-AK ENERGY EFFICIENCY LOANS: ELIGIBILITY
8:05:01 AM
CO-CHAIR DRUMMOND announced that the next order of business
would be HOUSE BILL NO. 32, "An Act making certain entities that
are exempt from federal taxation under 26 U.S.C. 501(c)(3), (4),
(6), (12), or (19) (Internal Revenue Code), regional housing
authorities, and federally recognized tribes eligible for a loan
from the Alaska energy efficiency revolving loan fund; relating
to loans from the Alaska energy efficiency revolving loan fund;
and relating to the annual report published by the Alaska
Housing Finance Corporation."
8:07:54 AM
REPRESENTATIVE KREISS-TOMKINS, as prime sponsor of HB 32,
introduced the bill and related its history. He said this is
the third legislature in which this legislation has been
introduced. He said two legislatures ago the legislation passed
out of two committees of referral and "died" in the House Rules
Standing Committee. Last legislature, the legislation passed
all House committees and then "died" in its last committee of
referral in the Senate. He expressed his hope that HB 56 would
"get all the way through" this attempt.
REPRESENTATIVE KREISS-TOMKINS stated that HB 32 would expand the
Alaska Energy Efficiency Revolving Loan Fund (AEERLF) to include
nonprofits. Currently, those eligible for the fund are
municipalities and state government. Nonprofits would include,
for example, church councils, housing authorities, arts
councils, and soup kitchens that may have energy inefficient
buildings but insufficient capital to expend on energy
efficiency improvements.
8:10:40 AM
REPRESENTATIVE JACKSON asked why the legislation "died"
previously.
REPRESENTATIVE KREISS-TOMKINS answered that would be a good
question for the co-chair of the Senate Finance Committee, who
is no longer a legislator.
REPRESENTATIVE JACKSON asked, if a nonprofit was not able to
make the payments on the loan allowed under HB 32, who the
responsible party would be.
REPRESENTATIVE KREISS-TOMKINS offered his understanding that
currently a loan from AEERLF is given only when the entity
applying for the loan has demonstrated energy inefficiencies and
an audit has been done. The audit determines how much money is
being lost per month due to the energy inefficiency, and the
amount of the loan payment is set at that amount; therefore, the
amount of money the entity pays essentially stays the same. He
concluded that the risk of an entity being unable to pay on the
loan is low.
REPRESENTATIVE JACKSON asked why HB 32 would not include "small
and independent businesses."
REPRESENTATIVE KREISS-TOMKINS answered that nonprofit
organizations are generally cash poor in terms of being able to
make investments. He pointed out that when this legislation was
first introduced, Alaska was just beginning to experience its
budget deficit. Not too many years prior, he said, the state
had been "riding the gravy train," and any entity that wanted
cash to upgrade a building came to the legislature "with hand
outstretched" and requested a capital grant. He indicated that
the AEERLF would be a means to help nonprofit entities become
more self-sufficient. He said he thinks there is an assumption
that nonprofits do good, and "we want to help."
8:17:02 AM
CO-CHAIR HANNAN asked about the current number of loans and what
the success rate of the loans is.
CO-CHAIR DRUMMOND noted Stacy Barnes from the Alaska Housing
Finance Corporation (AHFC) was available to answer questions.
8:17:38 AM
JOHN SCANLON, Staff, Representative Jonathan Kreiss-Tomkins,
Alaska State Legislature, on behalf of Representative Kreiss-
Tomkins, prime sponsor of HB 32, replied that AEERLF was created
in 2010 and allowed AHFC to bond up to $250 million to finance
energy efficiency improvements. He offered his understanding
that since that time one loan of $2.5 million, to the City of
Galena, has been closed.
8:18:21 AM
STACY BARNES, Director, Governmental Relations and Public
Affairs, Alaska Housing Finance Corporation, confirmed that
there has been one loan closed. In response to Co-Chair Hannan,
she reported that AHFC has had some interest in the loan program
over the years. She offered information regarding the loan
program in the context of a current Anchorage Municipal
election, in which voters are being asked to decide upon a
proposal for an Anchorage School District bond. She indicated
that the includes just over $59 million in projects, a number of
which might be eligible for the [AEERLF], which would total
approximately $30 million. She said there are several reasons
that the Anchorage School District would not approach AHFC for a
loan. She continued:
With this bill, we see it as being one more tool in
the toolbox. A Community Reinvestment Act made
pricing competitive for nonprofit and public entities
to go elsewhere, whether it's through a bond proposal,
like Anchorage voters are being asked to vote on
today, or if it's other sources of financing across
the state and in the private sector.
MS. BARNES responded to follow-up questions from Co-Chair
Hannan. She confirmed that the loan to Galena is the only one
that has been closed since 2010. She confirmed that "closed"
means "open"; therefore, only one entity is carrying the loan
under AEERLF currently. She said financing may be available up
to 15 years for any given project; therefore, "the Galena loan
is still active and open on our books."
CO-CHAIR HANNAN expressed surprise that more entities have not
applied.
MS. BARNES responded that AHFC has a couple departments that are
involved in the loans: the Research and Rural Development, also
known as the Energy Department; and the Mortgage and Financing
Department. She said the Energy Department has been aggressive
in talking with leaders across the state, including the Alaska
Municipal League (AML), so there has been interest in the
program. However, in many cases, communities may choose "to
bond on their own or have found cheaper financing elsewhere."
She AHFC views itself as "one tool in the toolbox." She
referred to the letters of support in the committee packet and
offered one misconception is that "this loan would be a ...
subsidized rate - low-cost financing - and that is not
necessarily true." She said there may be other options that are
in the best interest of the nonprofit or local government for
accessing financing outside of AHFC.
8:23:03 AM
REPRESENTATIVE THOMPSON recollected that at the time the loan
was initialized and from about 2010-2014, many entities had the
energy efficiency of their buildings tested, but because of the
availability of capital at the time, a lot of these entities
preferred to apply for grants rather than apply for a loan. He
said there are a lot of places that could still benefit from
this loan.
MS. BARNES said Representative Thompson was correct. She said
AHFC received federal money through the American Recovery and
Reinvestment Act and was able to benchmark 1,300 public
facilities and conduct investment-grade audits on 327 public
buildings, and "the potential was great at the time." She
added, "But you'll also recall that the price of oil was at over
$100 per barrel, and so, the energy efficiency savings at that
time was also greater than it is in this current environment."
8:25:06 AM
REPRESENTATIVE REVAK asked what the total cost of the loan was
in relation to the estimate of the work that needed to be done.
MS. BARNES answered that the loan itself was consistent with the
estimate that was provided through the investment-grade audit
that had been performed prior to closing of the loan.
REPRESENTATIVE REVAK said the customer gets a loan and a more
efficient building but his/her costs remain the same - there are
no savings. He said he assumes that is under the estimate for
the work that is to be done. He questioned what happens when
the work done exceeds the estimate.
MS. BARNES answered that AHFC would close the loan after
completion of the work, so it would know what the costs were
prior to closing of the loan.
8:27:17 AM
REPRESENTATIVE KREISS-TOMKINS added that as soon as the loan is
paid back, the nonprofit entity would begin to save money,
because the building would be more energy efficient.
8:28:12 AM
REPRESENTATIVE JACKSON asked about variants to interest rates on
the loans.
MS. BARNES answered that the rate is determined at the time the
loan is closed and is based on several factors, including the
duration of the loan and the risk associated with that
particular loan.
8:29:07 AM
CO-CHAIR HANNAN asked about the duration and rate of the Galena
loan.
8:29:53 AM
ERIC HAVELOCK, Lending Officer, Alaska Housing Finance
Corporation, recollected that the term for the Galena loan was
15 years, at an interest rate just under 4 percent.
8:30:44 AM
CHRIS ROSE, Executive Director, Renewable Energy Alaska Project
(REAP), spoke. [Due to technical difficulties, the first minute
of Mr. Rose's testimony was inaudible.]
8:31:30 AM
The committee took a brief at-ease at 8:31 a.m.
8:31:35 AM
[Partially inaudible testimony.]
MR. ROSE stated that Alaskans are spending $5 billion on energy
annually; that includes transportation fuel, electricity, and
heat. He said in 2008, the legislature made a large
appropriation to the Weatherization Rebate Program. Over 50,000
homes have been energy retrofitted, and AHFC estimates the
average savings to be 30 percent. He stated that REAP knows
there is money to be saved and it is important to "push energy
efficiency." He said REAP thinks there are nonprofit
organizations that would like to take advantage of the loan
program that would be available to them under HB 32.
MR. ROSE related that for various reasons, some of the original
targets for the loan program have decided not to take the loans.
He surmised some nonprofit buildings have been bonded or
nonprofit groups may have hoped the state would have money to
give. He said those are not options for nonprofits, but those
nonprofits would be able to borrow money through AEERLF under HB
32.
MR. ROSE said payback periods vary, but nationwide, it is easy
to estimate what an improvement will cost and what its payback
period will be, then to structure the loan accordingly. He
said, "There is an awareness of how much the loan is going to
have to be serviced given the interest rate and the terms."
8:34:55 AM
CO-CHAIR DRUMMOND connected with Mr. Rose to let him know the
first portion of his testimony had not been heard. She asked
him to repeat the information.
8:35:40 AM
MR. ROSE stated that there is a huge amount of savings to be had
through AHFC loans, and part of the reason this is apparent is
because AHFC has had success with the grants it gave in its
residential programs. He said public and nonprofit buildings
"will probably have the same opportunity to save 30-40 percent
on their energy bills, depending on the shape of the building."
He echoed Representative Thompson's remark that one of the
possible reasons [owners of] public buildings did not seek out a
loan back in 2010 was that they hoped to get a grant from the
state. Further, many public entities have the ability to bond
on their own. He indicated those choices are "definitely lesser
opportunities for nonprofits today." He reiterated that REAP
believes that there are some decision makers at the nonprofits,
who would take the opportunity to take a loan from AHFC through
AEERLF.
8:37:27 AM
REPRESENTATIVE THOMPSON recalled that in the past, after the
energy efficiency evaluations were done, there had been
variances in loan rates. He questioned how many who realized
they could have "a savings on energy efficiency" might have
approached other commercial entities because of lower interest
rates there than with AHFC. He recalled some banks reacted back
then by claiming they could meet or beat the offered interest
rates. He asked how many places completed the energy efficiency
upgrades but not with AHFC loans.
MR. ROSE replied he does not have that data but anecdotally has
heard the same thing: entities could either find a lower
interest rate somewhere else or bond themselves. He said he
knows for a fact that many building [owners] did "go ahead and
do energy efficiency anyway, not using this fund." He
concluded, "That is true that the interest rate may or may not
have been competitive for some entities."
8:39:18 AM
CO-CHAIR DRUMMOND opened public testimony on HB 32. After
ascertaining that there was no one who wished to testify, she
closed public testimony.
8:39:43 AM
REPRESENTATIVE CLAMAN opined that this was good legislation in
the last legislative session, and he thanked the bill sponsor
for keeping it going.
8:39:54 AM
CO-CHAIR DRUMMOND, in response to Co-Chair Hannan, clarified
that the bill would be accompanied by a zero fiscal note.
8:40:23 AM
REPRESENTATIVE KREISS-TOMKINS said for four to five years now,
he has maintained dialogue with the Division of Public
Facilities within the Department of Transportation & Public
Facilities (DOT&PF) regarding energy efficiencies in state
buildings. He noted that the State of Alaska is one of the
eligible entities and has many facilities, not all of which are
energy efficient. He said there have been investment-grade
audits demonstrating that "there are some improvements that have
pretty competitive paybacks." He said DOT&PF has proceeded with
some of the energy efficiency improvements. He said he had been
curious as to whether the agency would take advantage of the
AEERLF or seek other capital. He said the agency put together a
substantial energy efficiency investment package a couple years
ago and found a more competitive interest rate elsewhere. He
said he is "cautiously optimistic" that [the provision under HB
32] and "the specialized nature of this" will fill the void for
smaller nonprofit organizations that are less sophisticated and
do not have access to more institutional capital.
8:44:04 AM
CO-CHAIR DRUMMOND said the recent renovation of the Capitol,
which included upgrading exterior walls, doors, and windows,
showed good results. She said she is interested in finding out
from the Legislative Affairs Agency how much savings in energy
costs is being seen now as a result.
8:45:11 AM
CO-CHAIR DRUMMOND announced that HB 32 was held over.