04/15/2000 09:20 AM House FIN

HOUSE BILL NO. 281                                                                                                            
                                                                                                                                
     "An   Act  providing   for  the   issuance  of   general                                                                   
     obligation bonds  in the amount of $665,000,000  for the                                                                   
     purposes  of paying  the cost  of design,  construction,                                                                   
     and  renovation  of  public   elementary  and  secondary                                                                   
     schools,   renovation   of  state   buildings,   capital                                                                   
     improvements  at the University  of Alaska,  and capital                                                                   
     improvements  to  state harbors;  and  providing for  an                                                                   
     effective date."                                                                                                           
                                                                                                                                
Co-Chair Mulder  explained that  HB 281 contains  the school-                                                                   
construction package.  Members were provided with  a proposed                                                                   
committee substitute,  work draft  1-LS1201\V, 4/15/00  and a                                                                   
spreadsheet listing  schools that  would be included  (copies                                                                   
on  file). Schools,  the  university  and ports  and  harbors                                                                   
would receive  funding. The total  cost of the  package would                                                                   
be  $269,595.8  million  dollars and  tobacco  bond  revenues                                                                   
would  fund the  legislation. He  observed that:  "It is  the                                                                   
intent of the legislature  that the sale of a  portion of the                                                                   
revenue derived from tobacco settlement  litigation described                                                                   
under sec. 3(a)  of this Act result in funding  of $1,400,000                                                                   
annually  for   smoking  education  and   cessation  programs                                                                   
administered by the state."                                                                                                     
                                                                                                                                
In response  to a question  by Co-Chair Therriault,  Co-Chair                                                                   
Mulder clarified  that the student housing identified  in the                                                                   
legislation  would  be  at the  Alaska  Vocational  Technical                                                                   
Center  in Seward.  There  is  a piece  of  property that  is                                                                   
across  the street  that would  be used  to build  additional                                                                   
housing.                                                                                                                        
                                                                                                                                
Co-Chair Therriault asked for  more information regarding the                                                                   
University of Alaska, Mat-Su Ortner building replacement.                                                                       
                                                                                                                                
WENDY REDMAN, VICE PRESIDENT,  STATEWIDE PROGRAMS, UNIVERSITY                                                                   
OF  ALASKA   explained  that   the  Mat-Su  Ortner   building                                                                   
replacement has  been on the  University of Alaska's  capital                                                                   
list for many years. She observed  that the facility would be                                                                   
for  the  maintenance  shop.   They  are  currently  using  a                                                                   
classroom.  It is  high  on the  Board  of Regent's  priority                                                                   
list.                                                                                                                           
                                                                                                                                
Ms.  Redman noted  that  the  definition under  the  projects                                                                   
should be broader  than "deferred maintenance".  She observed                                                                   
that  "deferred  maintenance/renewal  and  replacement/  code                                                                   
compliance"  has been used  in the  past. She suggested  that                                                                   
the legislation  be amended on page  5, lines 16, 21,  and 24                                                                   
to include the broader definition.                                                                                              
                                                                                                                                
Vice Chair Bunde noted that "construction  and renovation" is                                                                   
used on  line 12. Ms.  Redman noted that  the terms  were not                                                                   
used in the budgeting process.                                                                                                  
                                                                                                                                
Vice Chair Bunde  referred to page 2, section  1. He observed                                                                   
that  funding  would  not  be   reduced  below  $1.4  million                                                                   
dollars.  He  questioned  if  the  language  should  be  more                                                                   
flexible  to allow  additional  money to  be appropriated  if                                                                   
there is  a surplus.  Co-Chair Therriault  stressed  that the                                                                   
legislature  could appropriate  additional  money and  agreed                                                                   
that the language could be clarified.                                                                                           
                                                                                                                                
Representative  Phillips recommended  that  "GO" be  replaced                                                                   
with "revenue" bonds.                                                                                                           
                                                                                                                                
Representative  Williams  asked how  many  projects could  be                                                                   
completed   with   the   tobacco   securitization.   Co-Chair                                                                   
Therriault responded  that $269 million dollars  is the total                                                                   
amount. Co-Chair Mulder explained  that a higher amount could                                                                   
increase  the cost  of the  bonds from  6.5 to  7 percent  or                                                                   
higher. Representative  Williams  recommended that  the state                                                                   
use as  much as possible.  Co-Chair Mulder stressed  that the                                                                   
settlement  would  continue  in   perpetuity,  if  the  bonds                                                                   
proceeds are realized  in the level that is  anticipated that                                                                   
they  would be  retired  in 20  years and  the  MSA could  be                                                                   
leveraged  again.  If there  are  problems in  realizing  the                                                                   
income stream as established in  the MSA then risk is born by                                                                   
the  holders  of  the  bonds.  There is  a  potential  to  be                                                                   
extended to 40 years.                                                                                                           
                                                                                                                                
Co-Chair Therriault reviewed questions  that arose during the                                                                   
meeting.                                                                                                                        
                                                                                                                                
(TAPE CHANGE, HFC 00 - 122, SIDE 1)                                                                                           
                                                                                                                                
Co-Chair  Mulder requested  that the legislation  be  held to                                                                   
further review the suggestions.                                                                                                 
                                                                                                                                
HB  281  was   heard  and  HELD  in  Committee   for  further                                                                   
consideration.