Legislature(2015 - 2016)HOUSE FINANCE 519
04/07/2015 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB137 | |
| HB118 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 137 | TELECONFERENCED | |
| + | HB 118 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 118
"An Act adopting the Municipal Property Assessed Clean
Energy Act; authorizing municipalities to establish
programs to impose assessments for energy improvements
in regions designated by municipalities; imposing
fees; and providing for an effective date."
2:25:37 PM
GENE THERRIAULT, DEPUTY DIRECTOR, STATEWIDE ENERGY POLICY
DEVELOPMENT, ALASKA ENERGY AUTHORITY, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, introduced
the PowerPoint presentation: HB 118 Property Assessed Clean
Energy (PACE). He stated that the PowerPoint was a visual
way of going through a sectional analysis. He reported that
in 2010 the Alaska Legislature established a number of
energy goals for the state including an increase in energy
efficiency of 15 percent across the state by 2020. He
relayed that there were a number of energy programs in
operation. He elaborated that Alaska Energy Authority (AEA)
operated in conjunction with Alaska Housing Finance
Corporation (AHFC) on weatherization, energy efficiency
rebates, energy efficiency means to assist with public
buildings and municipal buildings. One of the areas the
state was lacking in was programs that assisted private
businesses in achieving energy efficiencies. Alaska Housing
Finance Corporation conducted a statewide survey that
showed that private businesses owned a tremendous amount of
square footage in Alaska and represented a huge portion of
yearly energy consumption. He relayed that the Alaska
Energy Authority operated a commercial energy audit program
through which AEA assisted businesses with the expense of
undertaking an assessment. An assessment provided
suggestions on how a business could improve the energy
efficiency of its operation. Alaska Energy Authority has
assisted approximately 170 businesses in Alaska with their
assessments. Businesses that followed through with and
implement recommendations were generally able to achieve a
30 percent reduction in yearly energy expenses. There were
tremendous savings resulting from the program. However, he
indicated that many of the businesses were not following
through with making the suggested improvements. He relayed
that AEA had conducted a survey of businesses that had gone
through an energy audit to find out why improvements had
not been made. The most significant hurdle for businesses
was finding financing for making improvements.
Mr. Therriault continued that through his membership with
the National Association of State Energy Officials, which
he was elected to the board, he engaged with individuals
from across the nation involved in doing innovative things
at the state level to help with energy costs. He became
aware of a growing number of states that were using PACE
financing; financing used to help businesses clear the
hurdle in making the investment in energy improvements. The
legislation before the committee was patterned after a
rewrite of the Texas PACE statute that was passed in the
previous year. He figured it was wise to follow a state
like Texas, a very pro-business state, in using the
financing as a tool to allow local governments, local
businesses, and local lenders to potentially take advantage
of and help encourage energy efficiency at the local level.
2:29:34 PM
Mr. Therriault understood that Senator Egan explored the
PACE mechanism several years prior. He also believed
Representative Edgmon and his staff had looked at the
mechanism when he was very involved with the energy policy
in Alaska. He relayed that AEA had not pushed forward with
the option. Currently, with the tightening of state
dollars, AEA wanted to look at mechanisms at the local
level that could be put into place to help achieve
suggested savings. As Ms. Ford went through the sectional
analysis he would highlight a number of protections placed
in the bill. He clarified that businesses could not be
coerced into using the tool. He furthered that any existing
bank that held a mortgage on a facility had to provide
permission prior to implementing the PACE financing. A
bank's mortgage would be bumped to a second tier lien with
the PACE financing becoming a superior lean. The
legislation before the committee contained a protection for
local lenders with current mortgages. They had to agree
that it was a smart thing to initiate PACE financing for a
property that collateralized its loan. He repeated that AEA
patterned Alaska's suggested legislation to that of Texas
in order to capture all of the protections. He would be
highlighting the protections as the presentation moved
along.
Representative Gara suggested using the acronym lower
energy savings (LES) rather than PACE.
2:31:55 PM
EMILY FORD, POLICY AND OUTREACH MANAGER, ALASKA ENERGY
AUTHORITY, turned to slide 2: "What is Commercial PACE?"
She read directly from the slide:
PACE was named one of the top 20 "world-changing ideas
by Scientific American magazine.
Commercial Property Assessed Clean Energy programs
(PACE) allows commercial property owners to finance
qualifying energy efficiency improvements over time
through a voluntary assessment on the property tax
bill.
Voluntary participation by municipalities AND
commercial property owners
Mortgage holder consent is required before
applications are approved and assessments are placed
Improvements can include lighting upgrades, renewable
energy, conversion to natural gas, high-efficiency
boilers, and additional energy efficiency improvements
The repayment obligation transfers with the sale of
property
Ms. Ford advanced to slide 3: "Benefits":
Energy efficiency upgrades are financed with capital
secured by a primary lien on the property, lower-
interest capital and favorable repayment terms can be
raised from the private sector
Allows for longer repayment periods allowing the
building owner to recognize immediate operating
savings while repaying the debt
Can use traditional lending sources
In Alaska, provides consistency with state energy
policy, energy efficiency and renewable energy goals
Ms. Ford moved to slide 4: "Creating a PACE Program":
31 states have authorized PACE programs
State legislatures must provide authority for local
governments to establish and operate commercial PACE
programs
Municipalities to create the program and select
financing models
Resources: U.S. Department of Energy, PaceNow.org, C-
Pace.com
Ms. Ford continued to slide 5: "Potential PACE Models":
Local-government driven
Either property assessment office or a PACE
office used as interface with commercial property
owners and potential lenders
Bond financing
Private-sector driven
Third-party administrator under contract with
local government
Private financing
Hybrid model
Smaller local governments can contract with other
communities or regional organizations to
administer the program
Identify all potential funding sources (bonds,
revolving loan funds, private capital)
Ms. Ford referred to the private-sector PACE models as
"main street models." She said these models were developed
such that the local assessor's office absorbed the
additional workload and left it to the local lenders and
the commercial sector to market the program.
2:34:51 PM
Ms. Ford continued with slide 6: "House Bill 118":
HB 118: Muni Energy Improvement Assessments/Bonds
Authorizing legislation for local governments who
collect property taxes to choose to create a PACE
program and allow commercial property owners to opt-in
24 eligible local governments with a total population
of 639,314
Ms. Ford advanced to slide 7: "House Bill 118." She stated
that she would begin a brief sectional analysis of the
bill.
Section 1: Amends existing AS 29.10.200 to add PACE
financing to the list of items that Home Rule
Municipalities are allowed to engage in
Section 2: Amends AS 29.35.200 (b) to add PACE
financing to the list of items that first class
boroughs are allowed to engage in, on an area-wide
basis.
Section 3: Amends AS 29.35.210 (b) to add PACE
financing to the list of items that second class
boroughs are allowed to engage in, on an area-wide
basis.
Section 4 amends AS 29 by adding a new chapter: AS
29.49: Municipal Property Assessed Clean Energy Act
Ms. Ford summarized that Sections 1, 2, and 3 amended
existing statue to allow home rule municipalities, first
class boroughs, and second class boroughs to opt in or
engage in an area-wide PACE program.
Mr. Therriault stated that because the PACE repayment was
an additional voluntary assessment that went on the
property tax payment, although it was a state-wide statute,
it was really only available to those municipalities that
actually issued property tax. If there was an area or
municipality that did not currently issue a property tax,
that moved towards issuing a property tax they would become
eligible to utilize the PACE mechanism.
Ms. Ford presented slide 8: "House Bill 118":
AS 29.49.010 Exercise of Powers allows municipalities
to exercise powers under AS 29.40.060 (Judicial
Review)
AS 29.49.020 Authorized Assessments would allow for a
property tax assessment to be added for financing of
qualified projects on real property.
Improvements may not be made to vacant lots or
property undergoing development at the time of
assessment
Not to finance purchase of temporary products or
anything not permanently fixed to real property
AS 29.49.030 Written Contract for Assessment Required
would require a written contract between the local
government and record owner of the real property
Mr. Therriault added that AS 29.49.030 was one of the
protections. It was a voluntary contract that the property
owner entered into with the local government to place the
assessment on their tax bill. Later there was a provision
that prevented local government from doing anything to
coerce an owner into entering a contract. A government
could not withhold any license or permit.
Vice-Chair Saddler commented that certainly no one wanted a
municipality to hold someone hostage. He wondered if
anything was in place to avoid such a circumstance. Mr.
Therriault replied that the language stated that permits
could not be withheld. If the property owner could make the
case that he was being singled out somehow he could take a
complaint to the local assembly. The state did not have a
sanction built in currently. However, there was clear
language that stated to the local communities that they
could not withhold permits.
2:38:04 PM
Ms. Ford referred to page 10, line 10 of the bill which
discussed coercion and prohibited acts. It also addressed
written approval and contracts from the building owner, the
mortgage holder, the local government, and the finance
source. She emphasized that it was a very public process
for all three parties in order to implement the program.
Ms. Ford turned to slide 9: "House Bill 118":
AS 29.49.040 Establishes the program
Authorizes local government to choose to
establish a commercial PACE program and enter
into a contract with a property owner to impose
an assessment. Financing can be provided by the
municipality or a third-party.
If third-party financing is used, the
municipality, third-party financer and real
property owner must all enter into a contract
The assessment imposed may cover some costs for
the commercial property owner, including permit
and lenders fees, administration, and project
development and engineering costs
AS 29.49.050 Applicability of Program
If they choose to participate in the program,
municipalities are required to implement PACE on
an area wide basis
Cities within a borough are allowed to opt out of
a borough program through passage of an
ordinance. If previously opted-out, they can opt
in at a later date through another ordinance.
A borough succeeds to all rights and obligations
of the city program.
Mr. Therriault commented that the "opt-in" provision was a
change made by the Community and Regional Affairs
Committee. The first change was that if the program was
going to be used, it would be used area-wide. There was
some concern that the local assembly would designate a
particular area of their jurisdiction that would receive
the benefit at the expense of another. He did not think
that would be how the local government would work. However,
it was more comfortable to define it such that if they
wanted to use the program it needed to be available to all.
However, using the example of the Fairbanks-North Star
Borough, if the borough decided it wanted to offer PACE but
the City of North Pole did not feel like it fit the program
it could opt-out. It would mean the PACE financing would
not be available within the city, but the option was
available preserving the power of local government. He
continued that if the City chose to opt-out presently but
wanted to opt-in years later there was a provision to do so
in the future.
Representative Guttenberg asked about preventing a business
owner from getting an energy audit and going to a bank with
estimated cost savings and applying for an improvement
loan. He wondered, under the circumstances, whether the
bill would be required. He asked if the language was
needed.
Mr. Therriault responded that once an energy audit was done
and the building owner believed they could get financing
directly from the bank, they could choose to do so.
However, if they wanted to follow through with PACE there
was a requirement that the audit be done, that a
calculation on the expected savings be done to show that if
the loan was secured through PACE that it could be repaid,
and that there was still a savings for the business. By
going through the appropriate steps a person lowered their
risk of any defaults. There was the collection power of the
property tax and the assessment could not be discharged by
the property going through bankruptcy. He suggested that if
a mortgage was stretched from 15 years to 30 years the
yearly cost would be much lower. Alaska Energy authority
really wanted to set up a mechanism for private businesses
to be able to make improvements and immediately see the
positive cash flow. The same provisions might not be
available by going directly to the bank.
Vice-Chair Saddler asked if there was any situation where a
municipality did not have the authority to impose property
taxes that would likely want to collect the assessments.
Mr. Therriault believed that the statutes would have to be
amended to actually give them the power to actually place
the assessments. Mr. Therriault believed the state law had
to be amended to actually give them the power to place the
assessment on the bill.
2:43:04 PM
Representative Kawasaki asked if the bill was limited to
commercial property. Mr. Therriault confirmed that it was
limited to commercial property. He explained that across
the nation when PACE was first started it was a blend of
commercial and residential property. Fanny May and Freddie
Mac sued a number of jurisdictions to stop the residential
portion due to the fact that they were a major buyer of
residential mortgages across the nation in the secondary
lending market. They were not interested in being placed in
a secondary position. Jurisdictions had stopped their
residential PACE programs for the most part across the
nation and focused on businesses. There were a couple of
jurisdictions that were trying to figure out a way to
continue with residential PACE financing. Many areas have
had to strip the residential PACE financing from having the
senior lien. They had to require that the PACE financing be
paid off at the time of a sale of a residence. The ability
to stretch out financing over a longer period of time was a
benefit that was removed. Alaska Energy Authority chose to
restrict PACE financing to businesses.
Representative Gara outlined some of the energy efficiency
programs for low income housing, for housing, for public
housing units, but there was nothing available for private
businesses. He wanted to know if the private business gap
was what was being filled. Mr. Therriault responded
affirmatively.
Representative Wilson asked why the state would want to
compete with the banks. Mr. Therriault surmised that the
surety of repayment, a very low default rate due to the
collection mechanism, and the ability to stretch the
payments out beyond what a commercial loan would allow made
it more attractive. The allowance for local government to
either, through revenue bonding, collect a pool of money
that could be lent they could partner with local lenders to
service the loans, or the local government could partner
with local lenders to provide the capital to be loaned out.
A local government did not have to come up with the money.
They were simply providing the mechanism for collection. He
pointed out that the banks were a part of the process. He
explained that if a bank currently had a mortgage on a
business it had to give permission to become a lesser lien
holder. Most banks and the Alaska Banking Associations felt
comfortable and have indicated they did not oppose the
legislation as long as the protection mechanism remained in
the bill.
2:47:09 PM
Representative Wilson understood that the Department of
Commerce, Community and Economic Development (DCCED) also
had some type of loan available for private businesses. Mr.
Therriault responded that DCCED had a loan program. Since
the program was established the hurdles for accessing the
loans were such that there has not been any uptake of the
program. He added that with state dollars being tight he
was not sure if DCCED's program would continue. The current
mechanism being proposed in the legislation was controlled
by local governments. It was the mechanism itself that
really provided the benefit.
Representative Wilson wanted to prove she was right about
another option being available.
Representative Munoz wanted to better understand whether
the local government made, covered, or guaranteed the tax
assessment. She wanted to better understand the benefits of
the tax assessment and if it would help the development of
a property.
Mr. Therriault responded that it was an extra assessment
put on the tax bill which would provide collection ability.
It did not become part of the property tax. It was an
additional line added of a volunteer assessment that the
property owner had agreed to have done and placed on their
yearly tax bill. The local government then collected the
money and used it to pay back the money to a bond or to the
local lender who provided the money (whoever funded the
original loan).
Representative Munoz asked if it was the municipality that
dealt with the lender rather than the property owner. Mr.
Therriault responded that the municipality, under a
contractual arrangement, had an obligation to collect the
monies and hand it back to the lender.
Vice-Chair Saddler asked about what would happened if the
property owner defaulted on his payments for his PACE
improvements. Mr. Therriault replied that if the property
owner defaulted on paying the tax bill at all there was the
whole collection [Mr. Therriault was interrupted by
Representative Saddler].
Vice-Chair Saddler clarified that he was not asking about
the tax bill. He wanted to know what would happen if the
owner did not pay off his PACE assessment. Mr. Therriault
replied that the local government had the same collection
power to collect the assessment as they did the local
property tax. He stressed that the defaults were very low
and the bank was assured repayment, whether the bank or the
local government provided the payout funds.
Vice-Chair Saddler remarked that he had never not paid his
property taxes so he did not know what power local
government had to enforce the collection.
2:50:30 PM
Vice-Chair Saddler asked if the financing came primarily
through private lenders or through the issuance of
municipal bonds. He wanted to know the source of PACE
funding in Alaska.
Ms. Ford responded that it depended on the type of value
system that the state had already created. There were many
states on the East coast including Vermont and Connecticut
that had established very aggressive energy efficiency
programs. Those programs had set it as part of their state
energy policy. They had very low application fees and they
used green or bond banks to finance the program. There were
many states, such as Minnesota, that had taken the "main
street" model, a very private sector driven model. They had
absorbed the additional workload through their existing
assessor staff and were relying on the private sector to
market the program. She furthered that the most popular
approach was the hybrid approach of both. She anticipated a
hybrid approach becoming available in Alaska. If a
municipality chose to bond the ability was there and could
be used as the payment mechanism for many potential funding
sources.
Vice-Chair Saddler asked that if municipalities decided to
go to bonding would they be appealing to the bond bank
authority and in essence relying on the state's positive
credit rating to keep low-interest bonds. Mr. Therriault
answered that municipalities could use revenue bonds rather
than general obligation bonds which were specifically
prohibited in the legislation. Accompanying an issuance of
revenue bonds was a municipal pledge to pay back the bonds
upon loan repayment along with interest. The legislation
also stipulated that municipalities could assess an
application fee and increase the interest rate slightly to
cover administrative costs.
Vice-Chair Saddler asked if backing for the bonds would be
revenue rather than general obligations bonds. Mr.
Therriault restated that the issuance of general obligation
bonds were specifically prohibited by the bank.
Ms. Ford advanced to slide 10: "House Bill 118":
AS 29.49.060 Defines the Procedure to Create the
Program
If the municipality chooses to create a PACE
program the governing body of a municipality must
(in order):
1) Adopt a resolution of intent that
shows that providing the PACE program serves
a valid public purpose
includes a statement the municipality
intents to make PACE available to property
owners
includes a description of qualified projects
describes the boundaries of the region
describes the available financing for
qualified projects (i.e. bonds, local
lenders, etc.)
describes the municipal debt servicing
procedures if third-party financing is used
describes how the public can access the
program report required by AS 29.49.070
Identifying the time and place for a public
hearing
identifies public contacts regarding the
collection of the proposed contractual
assessments
2:55:10 PM
Mr. Therriault commented that regarding AS 29.49.060 there
was a requirement that a municipality file a resolution
notifying the public that they intended to implement PACE
and explain the PACE program prior to introducing an
ordinance. There was a requirement for a substantial public
discussion before moving forward with a mechanism.
Ms. Ford turned to slide 11: "House Bill 118":
AS 29.49.060 Defines the Procedure to Create the
Program
The governing body of a municipality must:
1) hold a public hearing with opportunity
for public comment
2) adopt an ordinance establishing the terms
of the program, including each item included
in the publicly-available program report
required by AS 29.49.070
Each aspect of the program can only be amended
after another public hearing
A municipality may hire and set compensation for
a program administrator, staff or contract for
professional services
A municipality may impose fees to offset the
costs of administering the program, to include an
application fee and/or a component of the
interest rate
Ms. Ford advanced to slide 12: "House Bill":
AS 29.49.070 Requires a Publicly-Available Program
Report (as required by AS 29.49.060)
The report must include:
a map of the program region boundaries
a form contract between the municipality and
the property owner that specifies the terms
of the assessment and any financing,
including third-party and municipal
if appropriate a form contract between the
municipalities and the third-party financer
regarding the servicing of the debt through
assessments
a description of qualified projects
a plan for ensuring sufficient capital
if bonds are used the report must include:
a maximum aggregate annual dollar
amount for financing
a method for ranking requests from
property owners
a method for determining the interest
rate and maximum amount of an
assessment
a method for ensuring the repayment period
does not exceed the useful life of the
qualified project
Ms. Ford discussed slide 13: "House Bill 118":
AS 29.49.070 Requires a Publicly-Available Program
Report (continued)
The report must include:
a description of the application process and
eligibility requirements
a method for ensuring qualified applicants
can demonstrate financial ability to fulfill
financial obligations and verify the
applicant is the legal owner of the
property, is current on mortgage and
property taxes and is not insolvent or in
bankruptcy
an explanation of the assessment and
collection process
an explanation of the lender notice
requirement provided by AS 29.40.080
an explanation of the review requirement
provided by AS 29.49.090
a description of the marketing and education
services to be provided
a description of quality assurance and
antifraud measures
collection procedures
a requirement for an appropriate ratio
between the assessment and property value
The report must be available online and at the
municipal offices
Ms. Ford continued to slide 14: "House Bill 118":
AS 29.49.080 Notice to Mortgage Holder Required
The holder of any mortgage lien on the property
must be given written notice within 30 days
before the contract is executed
Written consent from the mortgage lien holder
must be obtained
AS 29.49.090 Review Required
A third-party baseline energy audit and projected
energy savings are required
Once a qualified project is complete, the
municipality shall obtain third-party
verification that the project was properly
completed and operating as intended
AS 29.49.100 Direct Acquisition by Owner
The property owner may be authorized to purchase
directly the related equipment and materials or
contract directly, including through lease, power
purchase agreement or other service contract for
the installation or modification of a qualified
improvement
Ms. Ford reviewed slide 15: "House Bill 118":
AS 29.49.110 Contractual Assessment must be Noticed
Written notice of each contractual assessment
shall be filed by the municipality in the real
property records, including the assessment
amount, legal description of the property, name
of each property owner and the reference to the
statutory assessment lien provided under this
chapter
AS 29.49.120 Contractual Assessments and any Interest
or Penalties are Primary Liens on the Property
exceptions are municipal tax liens and special
assessments
enforcement provided in AS 29.45.320-470
contractual assessment liens stay with the land
and not eliminated by foreclosure
penalties and interest may be added to delinquent
installments, as provided in AS. 29.45.250
municipalities may recover cost and expenses,
including attorney fees to collect a delinquent
installment
AS 29.49.130 Collection of Assessments
The governing body of a municipality may contract
with the governing body of another taxing unit to
collect assessments as outlined under this
chapter
Ms. Ford explained with the example of Fairbanks that the
City of North Pole and the City of Fairbanks could contract
together or with the borough in order to collect and
disperse the assessments.
Ms. Ford relayed slide 16: "House Bill 118":
AS 29.49.140 Municipalities may Issue Bonds or Notes
to Finance Qualified Projects
These may not be general obligations bonds and
must be secured by one or more of the following:
payments of the contractual assessments
municipal reserves from grants, bonds, or
net proceeds and other lawfully available
funds
municipal bond insurance, lines of credit,
public or private guarantees, standby bond
purchase agreements, collateral assignments,
mortgages, or available means of providing
credit support or liquidity
any other funds lawfully available for
purposes consistent with this chapter
A municipal pledge of assessments, funds, or
contractual rights in connection with the
issuance of bonds is a first lien valid and
binding against any other person, with or without
notice
Bonds or notes issued must further an essential
public and governmental purpose, including
reducing energy costs, improving electrical
reliability, reduction of energy demand on
utilities, economic development, employment and
enhancement of property values
Ms. Ford advanced to slide 17: "House Bill 118":
AS 29.49.150 Joint Implementation
Any combination of municipalities may agree to
jointly implement or administer a program or
contract with a third party. A public hearing as
outlined in AS 29.49.060 is required.
AS 29.49.160 Prohibited Acts states that the program
must be voluntary
A municipality that establishes a PACE region may
not compel a property owner to use PACE or, make
any permit, license, or authorization contingent
on a property owner using PACE.
AS 29.49.890 Allows the proposed PACE provisions to be
available to Home Rule and General Law Municipalities
AS 29.49.900 Adds Definitions of Program, Qualified
Improvement, Qualified Project, Real Property and
Region.
AS 29.49.995 Adds the Short Title "Municipal Property
Assessed Clean Energy Act."
Section 5 Establishes an Immediate Effective Date
3:00:31 PM
Mr. Therriault concluded the presentation. He appreciated
the committee wanting to give the bill some thought. He
reiterated the importance of utilizing the lessons other
states learned. He highlighted the necessity of having some
level of uniformity across the state for local lenders.
Texas had advised him that when the terms varied from
county-to-county the local banks chose not to engage.
Uniformity helped banks to bring their in-house expertise
to engage with local governments. The PACE program was a
mechanism that could be put to good use to bridge the gap
for businesses to move forward with energy efficiency
improvements. He explained that AEA audits or audits AEA
had helped to fund indicated that there were potentially
substantial savings in efficiency improvements. He opined
that through the mechanism individual businesses could see
that even in taking on the debt and an obligation to repay
they would likely be cash positive on a yearly basis
because of energy savings.
Co-Chair Thompson reviewed the list of testifiers available
online.
Representative Guttenberg asked about the definition of
real property which in the bill included privately owned
commercial or industrial real property. He wondered if that
included a non-profit business, a charter school, a church,
or Alyeska Pipeline trying to redo pump 6. He wanted to
better understand the parameters of the bill. He wanted to
know about sideboards.
Mr. Therriault answered that it would likely depend on how
individual properties were assessed at the local level. As
the bill was written it would be available for any
businesses deemed to be commercial. In terms of residential
properties, an apartment complex that had four or more
units would likely be deemed a commercial property.
Co-Chair Thompson commented that it came back to a
commercial property and also a public facility. He wondered
if a private school would be considered a public facility.
He relayed that the state had an Alaska Housing Finance
Corporation (AHFC) program that provided low-interest loans
paid back by savings resulting from the loan.
3:04:37 PM
Representative Wilson asked about the consequences of a
commercial property owner that was bonded not being able to
make payment. Mr. Therriault answered that the property
could go into foreclosure to guarantee payment. It had all
the power of the repayment of a property tax.
Representative Wilson presented the hypothetical scenario
of a property being foreclosed upon yet the sale of the
property did not cover the cost of the loan. She wondered
who would be responsible for the balance. Mr. Therriault
responded that the loan obligation would stay with the
property. He elaborated that whomever eventually purchased
the property out of foreclosure would take on the
obligation.
Representative Wilson asked about a situation in which
nobody was willing take on the obligation. She wondered if
the burden would fall to the tax payer. Mr. Therriault
suggested that the financial burden would not fall on the
tax payer. If the financing was done through bonds, the
municipality would likely have insurance on the bonds. He
also mentioned a default pool generated by collecting a
slight fee captured on all loans to guarantee any defaults
made. The benefit of doing audits to ensure positive cash
flow lowered the chance of a default.
Representative Wilson wanted to verify that there was no
chance that the financial burden would fall on the tax
payer or the state if a business defaulted on its bond
payment. Mr. Therriault did not believe so. It was
specifically not a general obligation to the tax payers.
Revenue bonds were priced taking into consideration the
risk of non-payment. The default rate was low and was taken
into consideration at the time a bond was sold.
Representative Wilson clarified that if she purchased
revenue bonds she would know the risks of not getting money
back with a payment default. Mr. Therriault responded in
the affirmative. He added that prior to entering an
agreement a fee requirement could be charged to set up a
pool of funds to guarantee repayment or something else in
place that backstops any potential default.
Representative Wilson just wanted to ensure that property
owners would not be responsible.
3:08:24 PM
Representative Kawasaki asked about commercial and
industrial property. He pointed out a light commercial
property zoned in his neighborhood that housed a taxidermy
shop. He wondered if that specific business would qualify.
Mr. Therriault commented that it would require looking at
the specific property to see how the particular assessor in
the municipality evaluated it.
Representative Kawasaki asked why the bill as not as broad
as possible. He believed that if it was a benefit to one
property owner it would probably be a benefit to the
property owner next door. The state had current legislation
on local improvement districts for the downtown corridor.
The concept was that if all of the property owners within a
square agreed, then the city would invest money to improve
the downtown corridor. Representative Kawasaki reported
that the legislation never went anywhere. He restated his
question about making HB 118 as broad as possible.
Mr. Therriault believed the bill was as broad as possible
especially with the changes made in the House Community and
Regional Affairs Committee. It was available to all
businesses within a municipality's jurisdiction. However,
it was not mandatory. It was voluntary for the government
to make it available and voluntary for the individual
businesses to take advantage of it.
Representative Kawasaki wondered why AEA would not create a
local improvement district specifically for the purposes of
energy improvements to decrease energy consumption demand.
Mr. Therriault stated that the mechanism Representative
Kawasaki suggested was already on the books. It was
available for the local improvements districts (LID)
program. He furthered that there could be a blend of PACE
and LID programs in the Fairbanks North Star Borough.
Representative Munoz commented that LID's were for public
improvements to a local area. The bill was addressing
private improvements made to private businesses. She did
not believe the LID process could be used to make a private
improvement. Therriault agreed. Typically examples of LID
projects were street lights, sidewalks, and water and sewer
projects versus improvements made to someone's private
property.
3:12:19 PM
HB 118 was HEARD and HELD in committee for further
consideration.
Co-Chair Thompson reviewed the schedule for the following
day.