Legislature(2021 - 2022)ADAMS 519
01/28/2022 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB283 | |
| Overview: Hb 282, Hb 283, Hb 284 Capital Budget by Office of Management and Budget | |
| HB285 | |
| Overview: Hb 285 G.o. Bonds for Infrastructure by Office of Management and Budget | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 283 | TELECONFERENCED | |
| *+ | HB 285 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HOUSE BILL NO. 285
"An Act providing for and relating to the issuance of
general obligation bonds for the purpose of paying the
cost of state infrastructure projects, including
construction, major maintenance, and port and
transportation projects; and providing for an
effective date."
2:54:57 PM
^OVERVIEW: HB 285 G.O. BONDS FOR INFRASTRUCTURE BY OFFICE
OF MANAGEMENT AND BUDGET
2:55:09 PM
NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, introduced the PowerPoint
Presentation: "HB 285 G.O. Bonds for Infrastructure." He
began on Slide 2 titled HB 285 GO bond Issuance:
$325.2m for 14 projects spread with statewide impact
Current 20-year interest rate is 2.5% for tax-exempt
bonds
Debt service costs estimated at $20.7 million
The State's debt capacity is $1.3 billion
Mr. Steininger commented that the bond package represented
a responsible level of debt compared to the capacity of
debt the state was able to accrue. He noted that the state
earned more than the 2.5 percent interest rate.
Representative LeBon asked how the state's debt capacity
was calculated.
2:57:22 PM
DEVEN MITCHELL, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL BOND
BANK AUTHORITY, DEPARTMENT OF REVENUE (via teleconference),
indicated that there was a publication published annually
by DOR called The Debt Affordability Analysis, which
fully described the process to determine the states debt
capacity. He characterized the analysis as simple relative
to the states revenues versus its modest population. He
explained how the debt capacity was calculated, which
determined the percentage of UGF revenue the debt payments
represented. The difference between those percentages and
the percentages for debt service determined the capacity on
a 10-year horizon. The state had a bonding capacity of
approximately $1.3 billion.
2:59:39 PM
Representative Edgmon calculated that 64 percent of the
debt capacity went towards Mat-Susitna (Mat-Su) projects.
He did not see the Anchorage Port. He asked for an
explanation. Mr. Steininger thought he had a
misinterpretation of the project. He offered that the Knik
Arm Port Infrastructure $175,000.0 project was for Port
McKenzie and the Port of Alaska. The project was intended
to serve the region. Representative Edgmon asked whether
some of the $175 million for the Knik Arm Port was intended
for the Port of Alaska. Mr. Steininger responded in the
affirmative. The funding would go towards the two ports,
and it would be up to the ports to determine the percentage
distribution.
3:01:17 PM
Representative Edgmon observed that there was nothing for
his district in the bill. He maintained that the GO Bond
was directed to South Central and there was nothing for
Southwest Alaska. He was determined to include statewide
projects if the bill moves forward.
3:02:22 PM
Representative Josephson had never heard of a Knik Arm
Port. He asked why the administration did not want to
engage in the discussion between the two ports. Mr.
Steininger clarified that the administration wanted to
engage but wanted both ports to look at the project as a
statewide project and view the project through a regional
scope. He indicated that was why it was called the Knik Arm
Port Infrastructure. Representative Josephson pointed to
Slide 3 titled HB285 GO Bond Projects items 9 and 11 of
the presentation:
9.Palmer Municipal Airport Taxiway $6,500.0
10.Wasilla Airport Runway and Terminal $14,100.0
Representative Josephson asked if the Palmer or Wasilla
Airports received any Coronavirus Aid, Relief, and Economic
Security (CARES) Act funding. Mr. Steininger was unsure of
the amount. He could get back to the committee as to how
much each airport received.
3:04:19 PM
Representative Rasmussen noted that the Port of Alaska
supported 90 percent of Alaska providing critical
infrastructure for the entire state. She would appreciate
any additional information from the administration. Mr.
Steininger agreed with her assessment of the port.
3:05:46 PM
Representative Josephson indicated that the project summary
referred to the project as being managed by a shared
regional authority. He asked if it was one that existed
currently. Mr. Steininger replied that the intention was
there would be cooperative between the two entities whether
or not that was borne out of a formal organization not yet
established. Representative Josephson thought the situation
seemed combustible.
Representative Thompson cited Slide 3, item 2 that listed
bond projects for DOT:
2.Northern Access to University Medical District
$22,000.0
Mr. Steininger answered that the project installed an
intersection to connect two main roads.
Representative LeBon asked about the status of the Juneau
Access Road listed as item 1 under DOT projects:
Juneau Access $25,000.0
Mr. Steininger replied that it was for Northern Lynn Canal
access. Representative LeBon asked if the project related
to extending the road system to Skagway and Haines. Mr.
Steininger reported that it was funding to restart the
project. However, additional funding would be needed to
complete the project. Representative LeBon asked for
clarification. Mr. Steininger answered that the project was
put on hold at the federal level and the appropriation
would reactivate the project. He deferred to DOT for
details.
3:09:31 PM
Representative LeBon referred to item 1 on slide 3:
UAF -Bartlett Hall and Moore Hall Modernization and
Renewal $18,650.0
Representative LeBon asked why the project for the
University was not a GF request. He wondered why it was
being included in the bond package. Mr. Steininger replied
that it was included in an attempt to address the backlog
and the project was eligible for bonding. Representative
LeBon asked if the bond package did not pass, would the
administration come forward with a capital request for GF
dollars. He inquired if the bond package would be voted on
in November 2022. Mr. Steininger responded in the
affirmative. The administration was supportive of including
the project in the bond package. Representative LeBon
reminded Mr. Steininger of the importance of the University
project even without bonding.
Representative Edgmon was concerned about hearing that the
administration had reached out to Representative Rasmussen
about the bond package but possibly not all members of the
committee, like himself who represented significant
commercial fishing districts. He asked if he was correct.
Mr. Steininger responded that he was unsure of the
question. He indicated that the administration had reached
out to legislators regarding capital projects.
Representative Edgmon was disappointed that no one from the
administration had contacted him. He offered that he
represented Bristol Bay and the fishery contributed
significantly to the salmon industry. He wondered why the
area was not considered for port and harbor improvements.
He understood Anchorage was seeking more funding for its
port than the amount included in the capital requests, and
he would support additional funding for the Alaska Port in
Anchorage. The term that was used derisively was "Christmas
Treeing" in bond packages. However, he liked the concept of
bond packages and wanted it to be more inclusive. He would
like the opportunity to discuss the possibility to add to
the bond package and would advocate strenuously for his
district. He asked Mr. Steininger for further remarks.
3:15:03 PM
Mr. Steininger offered that the bond package was a starting
point. The administration was willing to discuss the bond
package and would be open to additional conversations.
Representative Rasmussen clarified that she had approached
the administration to discuss the budget and the bond
package. She appreciated that they took the time to meet
with her to answer questions. She hoped the bond package
would encompass the entirety of the state.
3:15:45 PM
Vice-Chair Ortiz asked about the timing of putting together
the G.O. Bond proposal. He asked if it occurred prior to
the passage of the federal infrastructure bill. Mr.
Steininger responded in the affirmative and added that the
administration had prepared a package in the prior year and
the work had continued. He explained that there was synergy
between the infrastructure package and the GO bond package.
However, the prioritizations on infrastructure spending in
IIJA happened on the federal level. The IIJA bill did not
negate the need for some Alaska specific priorities because
of IIJAs project specificity, it lacked flexibility. They
worked together in tandem, but one was not dependent on the
other. Vice-Chair Ortiz discussed the avoidance of debt and
possibility of a direct appropriation of $300 million on
capital projects instead of issuing a GO bond package since
recent reporting suggested that market conditions would
likely not be favorable for a bonding package by the fall
of 2022. Mr. Steininger would defer to Mr. Mitchell
regarding speculation on interest rates. He answered that
in terms of issuing debt through bonds versus using UGF,
the state's money would earn more than the interest paid on
a bond debt. Surplus funds could be saved at a higher
interest rate than the interest rate on debt.
3:20:43 PM
Mr. Mitchell responded that it was difficult to predict the
future. However, the consensus view of various banks he
worked with was that interest rates would likely rise. He
discussed the use of arbitrage and the yield curve. He
explained that when the Federal Reserve increased the
overnight interest rate it did not impact the long end of
the yield curve. The short end of the yield curve was
expected to increase one percent, but the long end was
expected to remain in a low end environment. He concluded
that it appeared that it was reasonable to consider
borrowing that was carefully considered in recognition of
the financial strengths of having a debt program.
3:25:41 PM
Representative Carpenter returned to the Port
infrastructure of $175 million. He wondered who had the
authority of divvying up the money. Mr. Steininger
responded that the authority would be managed by DCCED
through named recipient grants. Representative Carpenter
suggested that the easiest way to get the G.O. Bond was to
divvy up the funding 40 ways. He suggested developing a
prioritization list based on objective criteria. He could
not see that from the current list. He asked whether that
was possible. Mr. Steininger responded that as the list was
developed, regionality and the statewide impact was
considered. The administration was open to discuss with
communities how the prioritization worked and the reasons
for the need for certain projects.
3:29:27 PM
Representative Carpenter suggested that if there was a
priority list, he had not received one. He thought a
deliberate priority process should be done in conjunction
with the legislature; lacking one, the legislature would
establish its own priorities and it would be political. Mr.
Steininger responded that the list in the legislation was
the output of the prioritization that the administration
engaged in.
3:31:08 PM
Co-Chair Merrick thought Representative Carpenter had
brought up a good point about the port projects. She
referenced a letter from Legislative Legal (copy on file)
regarding constitutional issues with the port
appropriations since there was no guarantee how the money
would be spent. Mr. Steininger requested a copy of the
memo to pass on to the Department of Law.
Representative Rasmussen suggested a presentation regarding
the deep ports in the state. She was aware of the Port of
Alaska being in poor condition. She wanted a presentation
in which each project was discussed for 15 minutes. She
discussed issues with the Kodiak Fire Hall.
3:33:51 PM
Representative LeBon cited the discussion about arbitrage
and earning more in savings than paying on debt. He pointed
to the Constitutional Budget Reserve (CBR) and Statutory
Budget Reserve (SBR) and did not view robust investment. He
noted the high earnings of the Permanent Fund and wondered
if the administration intended to use the percent of market
value (POMV) earnings to repay the bond debts. Mr.
Steininger reported the repayment would come from UGF which
was significantly filled by the POMV earnings of the PF.
Representative Josephson agreed that he would like to see
the objective basis for the projects. He commented on the
poor condition of the Port of Anchorage and questioned the
proposal to dividing the funding between two ports.
Vice-Chair Ortiz reviewed the agenda for the following
meeting.