Legislature(1999 - 2000)
04/19/2000 02:00 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
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 provided members with a proposed committee
substitute 1-LS1201\T, 4/19/00 (copy on file).
Vice Chair Bunde MOVED to ADOPT 1-LS1201\T, 4/19/00. There
being NO OBJECTION, it was so ordered.
Co-Chair Mulder noted that there was a questioned concerning
dedicated revenue in relation to the securitization of the
tobacco bonds.
JOHN BITNEY, LEGISLATIVE LIAISON, ALASKA HOUSING FINANCE
CORPORATION, DEPARTMENT OF REVENUE provided members with a
letter from the AHFC's bond counsel (copy on file). He
concluded that the bond counsel had no concerns regarding
the dedication of the revenue. The bill is an authorization
of the tobacco settlement, as a sale of an asset of the
state to the Alaska Housing Finance Corporation (AHFC) or a
subsidiary.
Co-Chair Mulder observed that the bond counsel stated that
they do not believe that the legislation would create a
dedicated fund problem under Article IX, section 7 of the
Alaska Constitution.
Co-Chair Mulder reviewed the committee substitute. He noted
that the first change was in title, lines 5 and 6. The new
language clarifies that the legislation relates "to the
deposit of certain anticipated revenue from a certain
tobacco litigation settlement".
Page 2, lines 6 - 9 and clarifies what happens if there is
excess revenues:
It is also the intent of the legislature that tobacco
settlement revenues that are determined by the
commissioner of revenue to be in excess of those needed
to pay planned debt service on tobacco bonds be
deposited into the general fund.
"Annually" and a definition of "investment grade rates" were
added in section 3: In this subsection, "investment grade
rates" means a Moody's Investor Service rating of Baa3 or
better or a Standard and Poors and Fitch IBCA rating of BBB-
or better.
Deferred maintenance, renewal and replacement, and code
compliance projects for the University of Alaska were added
on page 5.
Co-Chair Mulder observed that exemptions from certain school
construction requirements were deleted (sections 5, 6 and
7).
Co-Chair Mulder explained that language was included on page
7, stipulating that funds be received by the Department of
Transportation and Public Facilities.
(1) the port or harbor facility is located in a
municipality in which the port or harbor facility is
owned and operated by the municipality;
(2) ownership of the port or harbor facility that is
being funded has been transferred from the state to the
municipality by a transfer agreement under AS
35.10.120; and
(3) the state completes a bill of sale transferring the
port or harbor facility from the state to the
municipality.
In response to a question by Representative Williams, Co-
Chair Mulder noted that the Department of Transportation and
Public Facilities desired flexibility. Allocations for each
project were based on estimates by the department.
Representative Grussendorf noted that the proposal runs on
the Department of Education and Early Development priority
list. The first five projects are included. He questioned
the process of including projects that were not in sequence
on the list.
Co-Chair Mulder responded that the top five schools were
taken first. Other projects were included in an attempt to
provide a balance of statewide projects.
Representative Grussendorf suggested that the top ten
schools on the Department of Education and Early
Development's list be included with deferred maintenance
projects. Other funding sources could be considered for
ports, harbors, and university capital projects. He added
that if the legislation were to be the vehicle to fund
harbors and the money was to be given to the Department of
Transportation and Public Facilities that Sitka should be on
the list.
Co-Chair Mulder explained that the reason that they did not
go straight down the list was due to the question of some
district's ability to participate on the list. He noted that
Anchorage only participates on the school construction list
in a minor fashion. There are a number of school districts
in the railbelt that do not participate on the department's
list.
(TAPE CHANGE, HFC 00 - 128, SIDE 2)
Representative Grussendorf questioned why the Sitka harbor
was not on the list. Co-Chair Mulder responded that the
scarcity of dollars did not allow the inclusion of Sitka
harbor project. Representative Grussendorf stated his intent
to included Sitka to be worked within the money that is
allocated for harbors.
ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND
BUDGET, OFFICE OF THE GOVERNOR provided information. She
observed that the changes made in section 3 are agreeable to
the Administration. She hoped to have intent language
clarifying that if the revenue stream exceeds projections
that at least 1.6 percent of the excess would be considered
for increasing tobacco cessation efforts. She observed that
the suspension of the Department of Education and Early
Development priority list needs to be removed since it is
not a three-year plan. The Administration still has concerns
about the projects. There are more school construction and
major maintenance projects that should be funded now.
Co-Chair Mulder questioned what would happen if the money
were not received as projected. Ms. McConnell responded that
the debt service would be longer than projected.
DEVON MITCHELL, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL BOND
BANK AUTHORITY, DEPARTMENT OF REVENUE provided information
on the legislation. He explained that the debt service would
be a percentage of the expected revenue projected for the
tobacco settlement monies overtime that would allow investor
confidence. A threshold would be established to reach a
revenue stream projection. There would be a residual above
this line, which would be available for other purposes if
the revenue stream were beyond the projection.
Mr. Mitchell explained that AHFC is confident that they
could reach the proceeds as being structured.
JOE DUBLER, SENIOR FINANCE OFFICER, ALASKA HOUSING FINANCE
CORPORATION (AHFC), DEPARTMENT OF REVENUE provided
information on the issuance. He observed that if there were
not $269 million dollars at issuance that the rest of the
state's GO could be utilized to make up the deficit. Other
financing methods could be employed. The residual after the
planned debt service could impact the amount of bonds
issued. He noted that some underwriters feel that
bondholders are getting skittish.
Co-Chair Mulder questioned if lines 7 - 9 should be deleted
from the legislation
Mr. Mitchell clarified that the sale will do what is
required to achieve the target. The language provides
flexibility. Mr. Dubler added that the language is needed
in the case of a windfall.
Co-Chair Mulder noted that the anticipated yield is $269
million dollars. The legislation allocates $269,795,987
dollars.
Mr. Dubler stated that the allocation amount is not a
concern. Mr. McConnell suggested the numbers should be the
same.
In response to a question by Representative G. Davis, Mr.
Bitney explained that they would set up an administrative
process for the projects. The appropriation would be the
mechanism to receive funds. Funds would be available as the
projects come on line.
Representative G. Davis questioned if the project was
delayed and not ready in 5 years, would the money be
available.
Mr. Bitney explained that the appropriation is the mechanism
that transfers the funds and that the same rules apply as
for other state capital projects. They would have to receive
a reappropriation or lapse extension if the money is not
spent. Co-Chair Therriault observed that the structure
doesn't allow as much flexibility as before.
Co-Chair Mulder asked how much elasticity is in the amount.
Mr. Mitchell stated that he would not know how much
elasticity would be in the bond amount until they go out
into the market.
HB 281 was heard and HELD in Committee for further
consideration.
RECESSED
The meeting was recessed at 5:25 p.m.
RECONVENED
The meeting reconvened at 7:40 p.m.
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."
Representative J. Davies MOVED to ADOPT Amendment 1.
Amendment 1 would authorize the first 10 projects on the
Department of Education and Early Development list for
$153,914.5 million dollars and major maintenance of
$64,881.3 million dollars. This would cover the entire major
maintenance list except for projects covered under school
debt reimbursement for a 70/30 bond authorization. The
amendment would also fund $50.9 million dollars for the
University of Alaska.
Co-Chair Mulder OBJECTED. He pointed out that it is
necessary to balance the capital program. He maintained that
Amendment 1 would shift the balance in favor of rural
Alaska.
Representative J. Davies acknowledged that the amendment
would not provide a balance in relation to legislative
districts but argued that it would be fair. The amendment
would take the top priorities as determined by the
department and major maintenance projects. He pointed out
that major maintenance would become construction projects if
it were not addressed.
Representative J. Davies suggested that there are other
vehicles to achieve balance and fund ports, harbors and
school debt reimbursement. He stressed that important
projects fall by the wayside.
Co-Chair Mulder noted his appreciation for the amendment,
but stressed that he is bound by constraints of balance. He
pointed out that Fairbanks would only receive $8 million
dollars under the amendment.
Representative Grussendorf stated that he would prefer that
the money be in one category: education. He spoke in support
of the amendment and the importance of funding the top 10
schools for construction on the department's list and as
much maintenance as possible.
Co-Chair Therriault spoke in opposition to the amendment.
Fairbanks has projects that are not on the list because they
discontinued submitting the paper work for inclusion.
Vice Chair Bunde spoke in opposition.
Representative J. Davies agreed that Fairbanks has a need
for new schools and school maintenance projects.
(TAPE CHANGE, HFC 00 - 129, SIDE 1)
Representative J. Davies noted that there are a huge number
of urban schools that are on the list that have to go for
voter approval. He suggested that these projects stick with
the 70/30 plan.
Representative Grussendorf noted that he has statewide
concerns. He pointed out that the courts have recognized
that there is problem with how money is being spent.
Representative G. Davis opposed the amendment. He stressed
that it is better to have something instead of nothing.
Representative Williams spoke against the amendment.
Representative J. Davies observed that this was the first
chance for amendments.
A roll call vote was taken on the motion to adopt Amendment
1.
IN FAVOR: Davies, Grussendorf, Moses
OPPOSED: Austerman, Bunde, Davis, Foster, Kohring,
Williams, Therriault, Mulder
The MOTION FAILED (4-8).
Representative Foster MOVED to report CSHB 281 (FIN) out of
Committee with the accompanying fiscal note. There being NO
OBJECTION, it was so ordered.
CSHB 281 (FIN) was REPORTED out of Committee with a "do
pass" recommendation and with a "do pass" recommendation and
with a new fiscal impact note by the Department of Revenue.
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