Legislature(2011 - 2012)HOUSE FINANCE 519
04/09/2012 09:00 AM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB286 | |
| SB92 | |
| SB130 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 286 | TELECONFERENCED | |
| + | SB 92 | TELECONFERENCED | |
| + | SB 130 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 286
"An Act providing for and relating to the issuance of
general obligation bonds for the purpose of paying the
cost of municipal port projects; and providing for an
effective date."
9:06:30 AM
Vice-chair Fairclough MOVED to ADOPT proposed committee
substitute (CS) for HB 286, Work Draft 27-GH2769\B (Kirsch,
4/6/12).
Co-Chair Stoltze OBJECTED for discussion.
JAMES ARMSTRONG, STAFF, REPRESENTATIVE BILL STOLTZE,
discussed that the CS would issue $453,499,200 in
transportation general obligation (G.O.) bonds across the
state. He remarked that the House and Senate had worked
together to develop a balanced package. Projects included
in the bill were shown in the capital budget for
appropriation authority. He recommended a technical
amendment that would replace the word "reconstruction" with
the word "construction" in relation to a Katlian Bay Road
item (page 3, line 16).
Co-Chair Stoltze noted that the change would be substantive
and not technical and that the issue would be addressed in
the amendment process. Mr. Armstrong remarked that
committee members had been in possession of the CS for a
couple of days and he was not aware of any other changes
that needed to occur.
Co-Chair Stoltze clarified that there had been suggestions
made regarding the appropriate titles and project
descriptions in the CS. He asked for a description of the
bill and the Department of Revenue's (DOR) role in the bond
process.
ANGELA RODELL, DEPUTY COMMISSIONER, TREASURY DIVISION,
DEPARTMENT OF REVENUE, explained that the bill provided for
the issuance of $453,499,200 in G.O. bonds. The state's
debt was managed by DOR and the issuance would be conducted
out of its office. The debt would be issued piecemeal as
the projects were ready to be funded to ensure that items
were not prefunded prior to being "shovel" ready. The
department believed it was appropriate to issue debt for
the projects that were long-term; the current market
conditions made it very affordable to issue debt and the
issuance would allow the state to use its cash for other
purposes and to pay down its higher cost debt. She relayed
that the projects in the CS were significantly different
than the ones proposed by the governor, but all of the
projects included were appropriate for debt issuance.
9:10:22 AM
Representative Doogan wondered whether all of the projects
proposed by the governor were incorporated into the CS. Mr.
Armstrong replied that the Senate Transportation Committee
had added two projects.
Representative Doogan clarified that he wanted to know
whether all of the governor's original items were included
in the bill. Mr. Armstrong responded that all of the items
were included albeit in smaller amounts.
Co-Chair Stoltze commented on the size of the bond package.
Mr. Armstrong added that funding for a Ward Cove project
was removed from HB 286 and had been included in the
proposed capital budget.
Representative Gara queried what the public's annual
payment cost would be and how long it would last when the
full bond was issued. Co-Chair Stoltze answered that the
amount was listed in the fiscal note.
Mr. Armstrong referred to the Office of Management and
Budget fiscal note. The total cost would be $36,392,000
beginning in FY 17 for a period of 20 years.
Representative Gara asked for an estimate of annual
payments made resulting from a bond that had passed two
years earlier. He was interested to know how much the bill
would add on to existing future debt. Co-Chair Stoltze was
interested in the amount that had been paid down on debt as
well.
Mr. Armstrong replied that the education bond was
$29,772,000 for a $397,300,000 package that had been
developed two years earlier.
Ms. Rodell added that there was $197 million of the past
authorization that DOR had not issued because the need for
the funds had not surfaced as of yet; the department
expected to issue the amount during FY 13. She relayed that
a refunding had been done in January 2012 that provided
approximately $27 million in all-in savings, which equaled
about $3 million per year.
9:14:00 AM
Vice-chair Fairclough pointed to the fiscal note and asked
for an explanation of the difference between the terms
"tax-exempt" and "tax exempt" listed in the bill. Ms.
Rodell replied that tax-exempt meant completely tax exempt.
The non-hyphenated term "tax exempt" referred to tax exempt
subject to the alternative minimum tax, which was a federal
tax code related to the nature of projects. She elaborated
that in the case of private activity projects (most port
projects fell into the category because they were leased to
private industry) tax exempt income on a bond was subject
to the alternative minimum tax if the taxpayer had to pay
an alternative minimum tax.
Co-Chair Thomas discussed that G.O. bond money had been
appropriated for a Cordova bridge a couple of years
earlier; however, the bridge had been washed out and was
closed indefinitely. He would talk with the Department of
Transportation and Public Facilities (DOT) to determine the
appropriate course of action, given that G.O. bonds could
not be reappropriated. He reported that his office would
research the issue and follow up with DOR.
Representative Guttenberg wondered whether there were
restrictions on conducting project work before the bond
issuance in February 2013. He assumed that projects
included on the list would be shovel-ready at the time the
bonds were issued.
Mr. Armstrong replied that DOT planned to add some money to
its accelerated capital fund account in order for
preliminary work on some of the projects to begin. He
relayed that the capital budget included $4 million to $5
million and that there was a request to increase it by $3
million.
Representative Guttenberg wondered whether the amount would
be included in the capital budget. Mr. Armstrong replied
that funding was in the governor's proposed capital budget
and that he would provide the detailed information to the
committee.
Representative Guttenberg queried the state's total
outstanding bond obligation and its overall maximum bond
issuance level. Ms. Rodell replied that the state's current
debt obligation was approximately $650 million to $660
million. Markets and rating agencies would look to the
state's overall debt including the unfunded pension
liability, and any moral and lease obligation debt. The
amount was well within the limits of the state's ability to
withstand debt; Alaska currently had tremendous financial
reserves, which created flexibility around financing
infrastructure projects.
Representative Doogan asked about the location of
Mertarvik, Alaska (page 2, line 26 of the legislation).
Representative Joule replied that Mertarvik was the new
site chosen for the move from Newtok.
9:18:37 AM
Co-Chair Thomas noted that the bill would come before the
committee again following public testimony.
Co-Chair Stoltze WITHDREW his OBJECTION to the adoption of
the CS. There being NO further OBJECTION, Work Draft 27-
GH2769\B was ADOPTED.
9:19:29 AM
DENISE MICHELS, MAYOR, CITY OF NOME, thanked the committee
for considering Nome's initial request. She requested the
inclusion of an additional $40 million for a total of $50
million. She communicated that the city had been working on
becoming the deep-draft Arctic port for the nation. There
was a 35 percent design showing that the port could get to
minus 35 percent to support all vessels going up for Outer
Continental Shelf (OCS) leases; the city's data showed that
Port of Nome numbers had gone up with increased drilling.
She furthered that annual dockings had increased from 30 in
1988 to 304 at present. The city was looking at a
partnership with the state to support the industry, job and
economic development creation, and to ensure that
enforcement existed. She noted the funding tied in with the
Northern Waters Task Force Report, the 2009 Arctic Marine
Shipping Report, and other state planning documents (Road
to Resources and road to Nome).
Representative Gara wondered how people would feel about
dredging in an area where people mined for gold. Ms.
Michels replied that Nome was working with all users to
prevent any user conflict. She relayed that dredging had
increased significantly since 1990; there were 51 permits
in the current year. The state had received $9 million in
revenue on increased lease sales.
CHRISTINE KLEIN, CHIEF OPERATING OFFICER, CALISTA
CORPORATION (via teleconference), thanked the committee for
its time. She pointed out that funding for the Port of
Emmonak had been dropped from the legislation. She shared
that the $16.5 million project was shovel ready. Currently
there was no existing port on the lower Yukon River; there
was a fishery that was very important to the region. She
requested that the project be reinserted into the bond
package.
Co-Chair Stoltze CLOSED public testimony.
Mr. Armstrong referenced an earlier question from
Representative Guttenberg and pointed to information on a
Project Acceleration Account on page 84 of the CS.
Representative Gara asked whether the Port of Emmonak was
included in the capital budget. Co-Chair Stoltze did not
know. He would relay the concern to Senator Lyman Hoffman.
Representative Edgmon clarified that the district was
Senator Olson's.
HB 286 was HEARD and HELD in Committee for further
consideration.
9:25:22 AM
AT EASE
9:31:00 AM
RECONVENED