Legislature(1995 - 1996)
02/20/1995 01:34 PM House FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 183
"An Act extending the requirements of preliminary
evaluation, notice, and prior legislative approval of
certain lease-purchase agreements to include proposed
improvements to real property; and providing for an
effective date."
Co-Chair Hanley, sponsor of HB 183, gave a brief overview of
the legislation. He referred to problems past legislatures
have experienced with certificates of participation. He
emphasized that past legislatures have enacted laws to
restrict financing and require legislative approval for
acquisition by issuance of certificates of participation.
Co-Chair Hanley noted plans by the Alaska Psychiatric
Institute (API) to use certificates of participation to
finance a $63.0 million dollar facility. The Legislature
approved funding for the constriction of a $28.0 million
dollar facility in the FY 95 operating budget. He observed
that current statutes address "acquisition" of facilities
not "building" of facilities. The legal argument is that
certificates of participation do not represent general
obligation debt to the State. Debt on certificates of
participation is secured by the asset. He noted that if a
new API building is expanded, beyond the $28.0 million
dollars authorized by the legislature, an asset could be
claimed in which the State has invested. He emphasized that
there is no limit on spending if certificate of
participation financing is used.
Co-Chair Hanley explained that the legislation will address
the problem by adding "or improvement" to the property to
prevent improvement through lease-purchase of real property.
Representative Brown queried if the addition of
"improvement" would address the intent to prevent
construction of new facilities without legislative
authorization.
Representative Parnell agreed that the addition of
"construct" would further modify the legislation and
alleviate confusion. He concluded that the legislation as
written would address the problem. He explained that the
2
underlying land is real property. The legislation requires
legislative authorization for improvement of real property.
Any building on real property would constitute improvement
of the property.
Representative Martin provided members with Amendment 1
(Attachment 1). The amendment would limit the authority of
the Alaska Housing Finance Corporation (AHFC) to use money
or another asset of the corporation to acquire, construct,
improve, or repair a building for the corporation's use and
occupancy. Representative Martin observed that AHFC
approached the Legislative Budget and Audit Committee with
the concept of constructing a new building. He observed
that the Legislative Budget and Audit Committee does not
have the authority to approve total appropriations for long
range contracts. He pointed out that a majority of the
Legislature does not currently approve of this budget item.
He observed that AHFC has contracted out for an architecture
design of a new building. Land has not yet been purchased.
Representative Martin accentuated that all Requests For
Proposal's for lease or purchase of office space are subject
to annual appropriation by the legislature. He emphasized
that the amendment would close another loop hole and send a
message to AHFC.
Representative Brown agreed with Representative Martin's
concerns, but pointed out the broad nature of the amendment.
She questioned if AHFC's ability to repair existing
facilities should be restricted. She asked if an
appropriation through the budget process would be an
authorization.
Representative Martin argued in favor of retaining "repair".
He noted that a repair could be a major face lift.
Representative Therriault asked for further clarification of
the last sentence on line 11 of the amendment: "For
purposes of this subsection, an appropriation for the
proposed acquisition, construction, improvement, or repair
does not constitute approval of the project."
RANDY WELKER, LEGISLATIVE AUDITOR, LEGISLATIVE AUDIT
DIVISION
explained that the language was drafted by the Division of
Legal Services. He noted that the amendment was drafted
with the intention of implementing the strictest standard
requiring legislative approval. He observed that in the
leasing section of the procurement code, for the purpose of
a lease, an appropriation does constitute approval. In the
lease financing section of existing statute an appropriation
does not constitute approval. Separate legislative approval
3
is required by law.
MIKE GREANY, DIRECTOR, LEGISLATIVE FINANCE DIVISION pointed
out that language contained in the front section of the
operating budget provides that all funding received by AHFC
is appropriated to AHFC for whatever purpose their statutes
allow.
Mr. Greany clarified that any project exceeding $25.0
thousand dollars which continues beyond a year is considered
a capital project.
Mr. Welker noted that the amendment is very restrictive.
The Alaska Housing Finance Corporation's ability to make
repairs on their existing facility would be limited. He
observed that elimination of "repair" would allow an
appropriation to constitute approval for a repair.
Representative Navarre spoke in support of allowing repairs
without legislative approval. He acknowledged that AHFC
should be required to obtain legislative approval for new
construction.
Representative Therriault questioned if two pieces of
legislation would be needed to allow new construction by
AHFC if HB 183 is enacted.
Mr. Welker stated that appropriation legislation would not
be enough. Authorizing legislation would be needed.
Representative Therriault queried if authorizing legislation
would suffice without a separate appropriation.
Representative Brown did not think that appropriation
legislation would be needed separate from authorizing
legislation. She pointed out that the legislation will not
be adopted in time to prevent construction of the project
currently being proposed by AHFC.
Representative Martin asserted that two bills would be
necessary. Co-Chair Hanley pointed out that lease-purchases
are handled differently than actual construction. New
building construction does not require authorization other
than in an appropriation bill. Representative Navarre
agreed that absent specific statutory prohibition against
construction an appropriation is sufficient.
Co-Chair Hanley asked if an appropriation from the
legislature is necessary for any of the AHFC's functions.
He concluded that if statutes require an appropriation from
the legislature for any of AHFC's functions then an
authorization law and appropriation would be required.
4
Mr. Welker pointed out that AHFC can use its general bonding
authority to generate bond proceeds which are not subject to
an appropriation in order to raise capital. The amendment
clarifies that AHFC cannot use their general bonding
authority to acquire facilities.
Representative Navarre observed that another housing market
down-turn could result in AHFC's control of houses needing
repair before resale.
Representative Martin referred to the purchase of the
Department of Environmental Conservation building. Co-Chair
Hanley reiterated the need to close loop holes in the
statutes.
Representative Therriault concluded that AHFC would not need
a separate line item appropriation in addition to
authorizing legislation. Co-Chair Hanley agreed with his
conclusion.
Representative Parnell pointed out that an improvement to
property is a repair. He asked if there are other public
agencies or quasi public corporations like AHFC that have
similar bonding authority which should be addressed.
Mr. Welker noted that the legal definition of "improve"
includes "to increase the value or good qualities of, mend,
repair".
Representative Brown suggested that the Alaska Industrial
Development and Export Authority (AIDEA) and the Alaska
Railroad Corporation may be in similar situations. Mr.
Welker added that certain aspects of the University of
Alaska's operations are not subject to the Executive Budget
Act.
Representative Brown observed AHFC's duties and powers are
the subject of HB 189: "An Act requiring that, in addition
to its operating budget, all activities of the Alaska
Housing Finance Corporation are subject to the Executive
Budget Act." She suggested that the amendment be addressed
in HB 189.
Representative Martin acknowledged that HB 189 is more
inclusive and resolves the long range problem. He noted
that if AHFC pursues the construction project an increase in
the FY 96 or FY 97 AHFC budget will be needed.
Representative Brown observed that the amendment is not
retroactive. Representative Martin emphasized that the
amendment would send a message to AHFC. Co-Chair Hanley
suggested that the Legislative Budget and Audit Committee
made the Legislature's position clear.
5
Representative Kohring pointed out that AHFC has received
the message that there is concern about proceeding with the
construction. He assured members that AHFC will look hard
at putting the breaks on the project if the Legislature
disapproves. He noted that AHFC is currently determining
the ramifications of cancelling the contracts.
Representative Martin asserted that AHFC did not provide the
legislature with all the available facts. He reiterated the
need to close a loop hole regarding lease-purchases.
Representative Kohring asked for a list of other state
agencies which are not subject to the Executive Budget Act
in regards to bonding authority.
(Tape Change, HFC 95-24, Side 1)
Representative Kohring stressed that AHFC felt that they
could save the State money. He emphasized that AHFC's
intent was good.
Representative Navarre referred to the 5 percent housing
loan program initiated by AHFC.
Amendment 1 was held.
HB 183 was HELD in Committee for further discussion.
| Document Name | Date/Time | Subjects |
|---|