Legislature(2015 - 2016)HOUSE FINANCE 519
03/22/2016 09:30 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB53 | |
| HB268 | |
| HB351 | |
| SB53 | |
| HB351 | |
| HB268 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 268 | TELECONFERENCED | |
| += | HB 143 | TELECONFERENCED | |
| += | SB 53 | TELECONFERENCED | |
| + | HB 351 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 268
"An Act relating to the dividends from the Alaska
Industrial Development and Export Authority; relating
to the meaning of 'mark-to-market fair value,' 'net
income,' 'project or development,' and 'unrestricted
net income' for purposes of the Alaska Industrial
Development and Export Authority; and providing for an
effective date."
9:41:38 AM
GENE THERRIAULT, DEPUTY DIRECTOR, STATEWIDE ENERGY POLICY
DEVELOPMENT, ALASKA ENERGY AUTHORITY, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, briefly
addressed the bill. He recounted that the legislation would
remove market value adjustments and various losses or
write-offs on projects that utilized sources of money from
outside Alaska Industrial Development and Export
Authority's (AIDEA) income stream from the calculation for
the AIDEA dividend. He elaborated that the procedure would
result in a more predictable dividend. The dividend
normally fluctuated because the authority shared 25 to 50
percent of the annual net earnings with the state treasury.
The removal of the accounting adjustments would reduce the
amount of uncertainty and fluctuations on a yearly basis.
He mentioned that AIDEA historically attempted to share as
much net income with the state treasury as possible, with
the average at 46 or 47 percent of the net earnings while
keeping in mind the bond rating agencies concerns over the
authority's solvency.
Co-Chair Neuman pointed to page 2, lines 9 through 15 of
the legislation relating to project development. He asked
what was not included in the bill. Mr. Therriault explained
that the accounting items were being added to the existing
statutory exclusions and would be backed out from all of
the accounting adjustments for all of AIDEA's funds and
investment tools that produced the income that the dividend
was based on.
Representative Gara thought that the losses from the
project were not counted when calculating the dividend. He
asked for clarity. Mr. Therriault clarified that only the
losses on projects utilizing an outside source of money. He
explained that if the project was not developed or had
limited or no value AIDEA had to account for the project as
a loss to "get it off the books." He restated that only the
losses that were funded from outside of the AIDEA income
stream would be eliminated. Representative Gara did not see
where the specific language relating to outside sources was
referenced in the legislation. Mr. Therriault pointed to
[page 2], line 6, the words, "state and federal grants or
appropriations" that were the sources of revenue outside of
the AIDEA income stream. Representative Gara understood
that AIDEA would not count losses of state money when
calculating the dividend and asked for verification. Mr.
Therriault answered that only losses for project work that
was funded through revenue outside of AIDEA's income
stream.
Vice-Chair Saddler asked for the balances for the Revolving
Fund, Sustainable Energy Transmission and Supply
Development Fund (SETS), and the Arctic Infrastructure
Fund. Mr. Therriault replied that the question was asked
during the previous bill hearing; AIDEA was working on a
letter in response to the committee that clearly defined
the balances. The accounts net amount included loans and he
wanted to avoid confusion.
9:47:17 AM
Representative Gattis determined that the question about
the balances of the funds had two parts; what were the
current amount balances and what amount did AIDEA
anticipate being repaid on a yearly basis and the life of
the loans.
Co-Chair Neuman asked if AIDEA had ever issued any loans
that had defaulted. Mr. Therriault responded that he would
follow up but acknowledged that the number was very low.
Co-Chair Thompson OPENED public testimony.
Co-Chair Thompson CLOSED public testimony.
9:50:07 AM
AT EASE
9:52:47 AM
RECONVENED
HB 268 was HEARD and HELD in committee for further
consideration.
[Note: HB 268 was taken up later in the meeting and
reported out of committee. See 10:51 a.m.]
HOUSE BILL NO. 268
"An Act relating to the dividends from the Alaska
Industrial Development and Export Authority; relating
to the meaning of 'mark-to-market fair value,' 'net
income,' 'project or development,' and 'unrestricted
net income' for purposes of the Alaska Industrial
Development and Export Authority; and providing for an
effective date."
10:51:12 AM
GENE THERRIAULT, DEPUTY DIRECTOR, STATEWIDE ENERGY POLICY
DEVELOPMENT, ALASKA ENERGY AUTHORITY, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, responded to
a question asked earlier during the meeting regarding the
default rate on AIDEA's loan portfolio. He had obtained
answers from Mr. Springsteen, John Springsteen,
CEO/Executive Director, AIDEA, and AIDEA accountants. He
informed the committee that the default rate on AIDEA's
loan portfolio was .49 percent as of September 30, 2015 and
as of February 2016 it was .41 percent. He reported that
the cumulative default rate for all of Alaska's banks was
0.7 percent.
Co-Chair Thompson CLOSED public testimony.
Vice-Chair Saddler addressed the fiscal note. He reported
that the Department of Commerce, Community and Economic
Development (DCCED) fiscal note (FN 1 (CED)) was
indeterminate.
Representative Wilson referred to the analysis on page 2 of
the fiscal note that contained a chart and asked for an
explanation. Mr. Therriault replied that the chart
portrayed the historic effect that the Implementation of
the Governmental Accounting Standards Board (GASB)
Statement 31, mark-to-market rule had overtime. The impact
on the dividend was depicted in the second column which
showed a reduction of almost $7 million [in 2006] and $11
million in 2013. He detailed that the mark-to-market
adjustments had created volatility in AIDEA's dividend to
the state and that the authority believed it should be
backed out before the dividend was calculated.
Representative Wilson wanted a better understanding of the
fiscal note. She requested a comparison between the present
accounting impacts and the accounting impacts with the GASB
rule 31 items excluded. Mr. Therriault replied that the
chart showed the total impact that the GASB rule 31 had on
AIDEA's net income in the first column and half of that
amount was the effect the rule had on the dividend depicted
in the second column. He reiterated that AIDEA shared up to
50 percent of its net income with the dividend. He
explained that the charts demonstrated the volatility that
the GASB rule 31 accounting had on the dividend. He
delineated that the rule either artificially inflated or
reduced the dividend and overtime would cancel the up or
down effect out. However, the rule intensified the
uncertainty of the dividend each year. He furthered that
new rules were coming that would add to the volatility of
the dividend and deepen the seesaw effect. The provision
eliminated the uncertainty in the dividend.
10:56:43 AM
Co-Chair Neuman MOVED to REPORT HB 268 out of committee
with individual recommendations and the accompanying fiscal
note. There being NO OBJECTION, it was so ordered.
HB 268 was REPORTED out of committee with a "do pass"
recommendation and with one previously published
indeterminate fiscal note: FN 1 (CED).