Legislature(2009 - 2010)HOUSE FINANCE 519
03/17/2009 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB172 | |
| HB90 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 172 | TELECONFERENCED | |
| + | HB 90 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 90
"An Act relating to bonding limitations and Alaska
Industrial Development and Export Authority; and
providing for an effective date."
TED LEONARD, EXECUTIVE DIRECTOR, ALASKA INDUSTRIAL
DEVELOPMENT AND EXPORT AUTHORITY (AIDEA) introduced staff
members available to answer questions. He reported that
AIDEA requested changes to statutes that deal with bonding
and confidentiality. The Alaska Industrial Development and
Export Authority (AIDEA) mission is to provide various means
of financing to promote economic growth and diversification
in Alaska. It fulfills this mission by providing Alaska
businesses and non-profit agencies access to long term
capital at reasonable costs through two credit programs:
Conduit Revenue and Loan Participation programs. The Conduit
Revenue program has financed 309 projects with over $1.1
billion. The Loan Participation program has issued over $800
million in loans. House Bill 90 is part of a larger effort
to become more proactive and responsive to the financial
needs of Alaskans in this changing economy.
2:36:56 PM
Mr. Leonard noted that HB 90 amends AIDEA statutes to allow
the authority, flexibility and timing that it issues bonds
to ensure the most favorable terms and interest rates
possible in order to reduce the overall cost of financing
for both AIDEA and Alaska's businesses using this program.
House Bill 90 clarifies and assures borrowers and
development project applicants that certain records and
information provided to AIDEA will be kept confidential.
Section 1 amends AS 44.88.095(a) to exclude refunding and
Conduit Revenue bonds from the $400,000,000 maximum amount
of bonds, set in 1990, AIDEA may issue during any 12-month
period (AIDEA CSHB 90(L&C) Sectional Analysis, copy on
file). Mr. Leonard referred to the bond terms descriptions
paper (Alaska Industrial Development and Export Authority,
Description of Bond Terms, copy on file). Mr. Leonard listed
the four types of bonds. General Obligation Bonds that are
secured by the general assets and future revenues of the
Authority, Revenue Bonds that are payable out of revenues
derived from the projects financed or the businesses for
which the projects are financed, Conduit Revenue Bonds that
are payable out of revenues derived from the projects
financed or the businesses for which the projects are
financed, and Refunding Bonds that are issued to retire and
replace already outstanding bonds.
2:38:36 PM
Representative Fairclough asked if Mr. Leonard followed up
on her question regarding whether refinancing was specific
to the total accumulative savings or just individual time
specific savings.
2:39:10 PM
Mr. Leonard responded that AIDEA is doing both.
2:39:21 PM
VALORIE WALKER, DEPUTY DIRECTOR, FINANCE, AIDEA, testified
via teleconference, replied that AIDEA looks at refunding
savings as a net present value basis over the life of the
issue, comparing the old issue with the new issue being
refunded. If the savings are graded in the three to five
percent range, they would proceed with the refunding.
2:40:50 PM
Mr. Leonard declared this allows AIDEA to cover the issuance
costs. With the refunding bonds, the total amount of bonds
is self limiting due to the fact that the bonds are used
only to replace existing bond debt. The fourth type of bond,
the Conduit Revenue Bond, is used to finance businesses and
non-profits where AIDEA acts as a conduit or agent for the
issuance of these taxable bonds. Conduit Revenue bonds are
payable solely by the project developer primarily from the
revenues generated from the project. There is no financial
obligation for the bond debt; therefore they are not at
risk. Conduit Revenue bonds are one of the main means that
non-profits and some businesses can get tax exempt status
for their bonds.
2:42:18 PM
Mr. Leonard added that Refunding and Conduit Revenue bonds
help promote AIDEA's economic development mission without
substantially increasing the amount of outstanding debt. The
enactment of this amendment would ensure that the 12-month
bond limit would not limit the effectiveness of the Conduit
and Refunding bond programs or prevent AIDEA from issuing
debt that would provide Alaska businesses and non-profit
organizations with more favorable terms and lower capital
costs.
2:43:27 PM
Mr. Leonard remarked that Section 2 is for AIDEA to regain
the bonding authority before the sunset on July 1, 2007.
Before that time, the Authority could issue bonds for $10
million and under; anything over $10 million would have to
come back the legislature. Another part of Section 2
attempts to change the wording that allows the refunding
bonds to include the issuance costs to be covered by the
proceeds of the refunding bonds.
Co-Chair Hawker responded that this just clarifies what is
standard operating procedure in the refunding world. Mr.
Leonard agreed. Mr. Leonard proceeded with Section 3,
dealing with confidentiality. He explained concerns from
participants of the loan programs and development program on
the level of confidentiality. Under Section 3 and Section 4
it clarifies what would be kept confidential and the process
of how it would be kept confidential. There would also be a
definition inserted of what is meant by trade secrets.
2:46:24 PM
Co-Chair Hawker referred to Section 4 that makes it clear
the Executive Director has authority to determine
confidentiality of specific records and information. Mr.
Leonard agreed. Co-Chair Hawker remarked that the cost of
refunding makes sense. He asked for clarification if AIDEA
could issue refunding and conduit bonds at a limit of $10
million each. Mr. Leonard responded that the $400 million
limit is for all bonds issued by AIDEA. Under the sunset
section AIDEA was allowed to issue conduit revenue and
refunding bonds at any limit, except for the limit of $400
million.
2:48:40 PM
BRIAN BJORKQUIST, SENIOR ASSISTANT ATTORNEY GENERAL,
DEPARTMENT OF LAW testified via teleconference, that under
the current statute the $10 million limitation applies to
bonds issued to finance development projects. The Alaska
Industrial Development and Export Authority has had
authority to issue refunding bonds and conduit bonds in any
amount; there is no dollar amount limitation, except for the
aggregate under Section 1.
Co-Chair Hawker reiterated that the change would be to
eliminate legislative approval for any of the Refunding and
Conduit bonds; the Alaska Industrial Development and Export
Authority would be allowed to issue any amount during any
given year. Mr. Bjorkquist agreed. Co-Chair Hawker
questioned why this was necessary. Mr. Leonard responded the
belief that in today's economy timing differences could run
up against this limit. He reported that AIDEA has not run up
to that limit at this time, but there have been management
concerns that the limit would be reached. He noted that with
the bond market as it is today, there may be more
refinancing.
2:52:23 PM
Representative Austerman explained that when the Conduit and
Revenue bonds push the $400 million limit it becomes a
problem. The Conduit and Refunding bonds should not
necessarily be impacted because there is no cost factor
downside to the Conduit and Refunding bonds.
2:53:15 PM
Mr. Leonard responded they would not affect financing
capability to finance General Obligation or Conduit Revenue
bonds. Representative Austerman emphasized that it would not
be a problem unless pushing the $400 million. Mr. Leonard
said those two bonds do not affect the capacity to issue
bonds. The Alaska Industrial Development and Export
Authority is concerned that if they issued about $200-$300
Conduit or Refunding bonds, then it would affect the
capacity to issue General Obligation or Revenue bonds for
projects.
2:54:16 PM
Representative Fairclough interjected that there is an
administrative fee that is taken on the Conduit and other
bonds that provide a revenue stream with a financial impact.
She wondered why the legislature would allow unlimited
authority of an agency to pass this credit. She expressed
her concern that someone could overextend themselves and the
state would be left on the hook. Mr. Bjorkquist replied that
neither the state nor AIDEA would be financially liable for
Conduit bonds. Co-Chair Hawker expressed his concern for the
extension of credit to the Conduit Revenue bonds. He asked
when the $400 million was established.
2:57:39 PM
Mr. Leonard replied in 1990. Co-Chair Hawker questioned if
this proposal had been discussed with the state's debt
manager. Mr. Leonard replied that it had not been discussed
with the state's debt manager. Co-Chair Hawker strongly
suggested that be done before the next meeting.
2:58:35 PM
Co-Chair Hawker opened public testimony on HB 90. As there
was none, public testimony was closed. Co-Chair Hawker
expressed that the committee planned to hold the bill today.
2:59:26 PM
Representative Joule disclosed his desire to enter an
amendment for discussion, although it would not be
introduced today. His amendment would take the sunset date
from 2009 to 2012. This would relate to the valuation and
the Red Dog property. The borough and the Red Dog Mine have
a payment in lieu of taxes agreement as opposed to the
borough actually taxing. The current agreement is going to
last until 2011. The borough and operators of the mine
could have their negotiations on what the tax rate or
payment would be. Without this, the borough would have no
other choice in these low commodity rate times to go and
open an agreement that is still a few years out. Co-Chair
Hawker noted that the governor's office is also evaluating
the same points brought forth by Representative Joule.
3:01:48 PM
Representative Kelly commented that AIDEA has performed a
very valuable service and believed there has never been a
default in Conduit financing. Mr. Leonard did not believe
so. Representative Kelly asked for verification before the
next meeting. He suggested a compromise; the $400 million
limit could be raised to keep Conduit and Revenue bonds
under this limit. Co-Chair Hawker agreed he was open to that
conversation. He added that even under the existing AIDEA
parameters, it has come close to hitting these limits, but
never actually been blocked by the existing limits. Mr.
Leonard responded that was correct; they were only looking
into the future. Co-Chair Hawker responded that if
refinancing was taken out of the overall cap, but left some
of the conduit for new debt under the existing cap, this
could create more margin.
3:04:14 PM
HB 90 was HEARD and HELD in Committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 07 HB90 AIDEA Description of Bonds Terms.pdf |
HFIN 3/17/2009 1:30:00 PM |
HB 90 |
| 03 HB90 0043-CED-AIDEA-12-12-08.pdf |
HFIN 3/17/2009 1:30:00 PM |
HB 90 |
| CSHB 90 - LC Sectional Analysis.pdf |
HFIN 3/17/2009 1:30:00 PM |
HB 90 |
| Gov Transmittal Letter HB90.pdf |
HFIN 3/17/2009 1:30:00 PM |
HB 90 |
| HB172-DOR-TRE-3-11-09 revised.pdf |
HFIN 3/17/2009 1:30:00 PM |
HB 172 |
| HB172 Testimony 31309.pdf |
HFIN 3/17/2009 1:30:00 PM |
HB 172 |
| HB172 Sponsor Statement.pdf |
HFIN 3/17/2009 1:30:00 PM |
HB 172 |
| HB172 Sec Analysis.pdf |
HFIN 3/17/2009 1:30:00 PM |
HB 172 |
| HB172 Loan Funding Articles.pdf |
HFIN 3/17/2009 1:30:00 PM |
HB 172 |
| HB172 ASLC Background 31309.pdf |
HFIN 3/17/2009 1:30:00 PM |
HB 172 |
| ASLC gov memo.pdf |
HFIN 3/17/2009 1:30:00 PM |
HB 172 |
| Charter Ltr of Support.pdf |
HFIN 3/17/2009 1:30:00 PM |
HB 172 |
| HB172-DOR-TRE-3-13-09 revised.pdf |
HFIN 3/17/2009 1:30:00 PM |
HB 172 |
| HB172-EED-ACPE-03-13-09.pdf |
HFIN 3/17/2009 1:30:00 PM |
HB 172 |
| Ltr. to Reps. Hawker and Stoltze 02.26.09.pdf |
HFIN 3/17/2009 1:30:00 PM |
HB 90 |
| Stoltze 031309.pdf |
HFIN 3/17/2009 1:30:00 PM |
HB 172 |