Legislature(2015 - 2016)SENATE FINANCE 532
04/12/2016 01:30 PM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB128 | |
| HB188 | |
| HB83 | |
| HB289 | |
| HB231 | |
| HB268 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 128 | TELECONFERENCED | |
| + | HB 188 | TELECONFERENCED | |
| + | HB 83 | TELECONFERENCED | |
| + | HB 289 | TELECONFERENCED | |
| + | HB 231 | TELECONFERENCED | |
| + | HB 268 | 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."
Co-Chair MacKinnon OPENED public testimony.
3:26:47 PM
Co-Chair MacKinnon CLOSED public testimony.
3:27:07 PM
GENE THERRIAULT, STAFF, ALASKA INDUSTRIAL DEVELOPMENT AND
EXPORT AUTHORITY, (AIDEA) testified that the first problem
that the legislation aimed to address was the "market
value" adjustment entries. He said that in order for AIDEA
to get its audited financial statement, new accounting
rules required that different assets that were held by the
authority be evaluated and mark-to-market adjustments be
made during the fiscal year. Generally Accepted Accounting
Principles (G.A.A.P) kept evolving, which required
recording of market value adjusting entries; essentially,
act like something happened that did not happen, and book
it as though it did. He relayed that this would be
considered a "non-cash" adjustment to the accounts that was
bringing an unnecessary amount of volatility to the
calculation of the dividend to the state treasury. He
pointed to Page 1 of the bill, which offered a definition
of mark-to-market fair value":
(2) "mark-to-market fair value" means fixing the
value of an investment as its market value as of the
financial reporting date;
Mr. Therriault directed committee attention to Page 2,
which showed that the legislature had previously included
and exclusion mechanism in the calculation of the net
income for the purposes of AIDEA paying out a dividend. He
stated that the bill proposed adding the mark-to-market
evaluations to the exclusion so that the non-cash
adjustments would be backed out and the true-net income of
the authority would serve for calculating the dividend. He
continued that the second problem the bill would address
was the "dividend penalty". When the value of a project had
been determined to have been permanently reduced, for some
reason, G.A.A.P required booking/recording an adjusting
entry between the balance sheet and the income statement to
reduce or remove some or all of the value of an asset or a
project from AIDEA's balance. The resulting entry reduced
net income. The consequence (depending on the facts), could
possibly either reduce the state's dividend from a project
it had funded due to an adjusting entry reducing value, or
have AIDEA paying a dividend on top of a project it had
funded due to an adjusting entry reducing value. The result
could be up to a 25 percent to 50 percent dividend penalty
from an adjusting entry. He noted that on Page 2 of the
bill noncash adjustments and the write-off of assets that
were purchased with outside sources of money had been added
to the exclusion clause that had already been established
by the legislature. This would base the yearly dividend to
the state treasury on true net income and would remove
unnecessary volatility in the calculation of those
dividends.
3:31:49 PM
Co-Chair MacKinnon requested a Sectional Analysis for the
legislation.
Mr. Therriault noted that the Sectional Analysis reiterated
the 2 problems that the bill would correct.
3:32:31 PM
Mr. Therriault warned that swings in the volatility of the
dividend would become more pronounced without the passage
of the legislation.
3:33:10 PM
MICHAEL LAMB, CHIEF FINANCIAL OFFICER, AIDEA (via
teleconference), echoed Mr. Therriault's remarks.
3:33:40 PM
Co-Chair MacKinnon asked whether the legislation was in any
way related to the purchase of a gas utility.
Mr. Lamb replied in the negative.
HB 268 was HEARD and HELD in committee for further
consideration.