Legislature(2013 - 2014)BARNES 124
03/17/2014 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Adjourn | |
| Start | |
| HB316 | |
| HB282 | |
| SB159 | |
| HB288 | |
| HB281 |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 159 | TELECONFERENCED | |
| += | HB 288 | TELECONFERENCED | |
| + | HB 281 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 316 | TELECONFERENCED | |
| += | HB 282 | TELECONFERENCED | |
HB 288-AIDEA: ARCTIC DEVELOPMENT PROGRAM/FUND
4:01:42 PM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 288, "An Act creating the Arctic infrastructure
development program and fund in the Alaska Industrial
Development and Export Authority."
4:02:14 PM
REPRESENTATIVE REINBOLD moved to adopt the proposed committee
substitute (CS) for HB 288, labeled 28-LS1139\N, Martin,
3/14/14, as the working document [Version N].
CHAIR OLSON objected for the purpose of discussion.
4:02:36 PM
REPRESENTATIVE HERRON, speaking as prime sponsor of HB 288,
stated that the Arctic coastline runs from Canada across the
North Slope, down Western Alaska to Bristol Bay, to the end of
the Aleutian Chain. However, only one deep draft port exists,
Dutch Harbor, within that coastline in the middle of the
Aleutian Islands. He said that with the emerging Arctic, vessel
landings places are limited, whether vessels are being used for
oil response, search and rescue, or resource extraction. This
bill has proposed to develop a funding mechanism similar to the
sustainable energy transmission and supply development fund
(SETS) authored by Representative Millett. He explained that HB
288 would expand AIDEA's [Alaska Industrial Development and
Export Authority] "tool bag" by extending the same authority for
loans, loan guarantees, bonds, bond guarantees currently in
SETS, which allows the state to develop the infrastructure under
its own terms. It will extend AIDEA's ability to ensure project
obligations and loans, defer principal payments and capital
interest, offer financing terms up to 40 years, enter lease
agreements, enter into sales lease back agreements, transfer
agreements, and other agreements. He stated that making
financing available will empower communities and attract a
global pool of investment as an alternative to the traditional
grant model. Currently, an estimated $100 billion in global
capital is "looking for a home in the Arctic." Instead of the
Alaska Permanent Fund Corporation investing in projects in the
Lower 48, private investments want to invest in Alaska and are
recommended by the Arctic Policy Commission. In order to help
provide advancing economic development and a healthy environment
an infrastructure development fund is critical, he said.
4:05:57 PM
GRAHAM JUDSON, Staff, Representative Bob Herron, Alaska State
Legislature, referred to the sectional in members' packets. He
referred to page 1, line 5 through page 2, line 19, Section 1,
AS 44.88.088(a), which establishes that the Alaska Industrial
Development and Export Authority shall adopt a policy for
payment of a dividend from the Arctic Infrastructure Development
Fund (AIDF), AS 44.88.810, to the state each fiscal year. The
dividend may not be less than 25 percent or more than 50 percent
of the net income of the fund. This puts the AIDF in line with
AIDEA's revolving fund and sustainable energy transmission and
supply development fund (SETS).
4:07:00 PM
MR. JUDSON stated that Section 2 defines "net income" for the
purposes of this chapter and the definition now includes the
AIDF. Section 3 defines "unrestricted net income" for the
purposes of this chapter and the definition now includes the
AIDF. He said Sections 4-8, page 3, line 8 thru page 5, line 6,
will make conforming changes to include loans from the Arctic
Infrastructure Development fund (AIDF) to existing statues
regarding interest rates and other requirements for loans from
funds managed by AIDEA. These changes place the same
requirements on the AIDF that currently exist for the revolving
fund and the SETS fund. Section 9, AS 44.88.159(g), adds the
AIDF to the types of programs to pay borrowers of loan
participation the AIDEA may establish. This places the AIDF in
parallel with the existing revolving fund and SETS fund.
4:08:01 PM
MR. JUDSON referred to Section 10 which establishes the Arctic
Infrastructure Development Program and fund. The purpose of
this fund is to provide financing for Arctic infrastructure
development and defines the fund's structure, including direct
appropriations made by the legislature and money or assets
transferred to the fund by AIDEA from any other fund controlled
by AIDEA. These transfers would require a majority vote by the
members of AIDEA, which is essentially an action by its board of
directors on unrestricted loan repayments, interest, other
income earned by the fund, and investment or assets of the fund.
This section allows separate accounts to be established within
the fund and managed by AIDEA and ii establishes the AIDF and
clarifies that it is not part of the revolving fund, he said.
4:08:54 PM
MR. JUDSON referred to page 6, lines 17-19, of Section 10, which
clarifies that the fund will be used for Arctic infrastructure
development. He referred to page 6, lines 20 thru page 7, line
14 of section 10, which establishes the powers and duties of the
AIDEA regarding the AIDF. This section mirrors the powers and
duties of the revolving fund and the SETS fund. It also allows
AIDEA to use the AIDF to finance Arctic infrastructure
development, ensure project obligations, guarantee loans or
bonds, establish reserves, and acquire real or personal property
by purchase, transfer, or foreclosure. He said it allows AIDEA
to defer principal payments or capitalize interest on Arctic
infrastructure development, enter into lease agreements, sales-
lease-back agreements, build-operate-transfer and operate-
transfer agreements or similar financing agreements and to enter
into agreements with government entities for the transfer and
control of infrastructure, rights-of-way, facilities, and
studies, allows contract services, allows the fund to borrow
money or issue bonds, and directs AIDEA to establish regulations
to implement the fund.
4:10:07 PM
REPRESENTATIVE HERRON explained that this section is "a must
have" for the other body, since it's important for AIDEA to have
the authority, but if it goes beyond the limitations outlined,
it must come back to the legislature for approval.
4:10:34 PM
MR. JUDSON continued with Section 10, page 7, lines 15 thru page
8, line 1, which establishes the limitations on financing in the
AIDF. It provides that legislative authority would be needed to
go beyond the limitations set forth in this section. The AIDEA
may not use the AIDF to make a loan for more than one-third of
the capital cost of the development; a loan guarantee if the
amount of the guarantee exceeds $20 million, or financing for
more than 40 years. Notwithstanding (a) of this Section 10,
legislative approval, AIDEA can use the fund as security for a
bond guarantee and AIDEA may provide financing, loans, or bond
guarantees for the development and support of fisheries in the
Arctic provided the amount of any financing, loan, or bond
guarantee is no less than $7 million.
MR. JUDSON said it limits financing, loans, or bond guarantees
for fishing vessels, quota shares or individual fishing quotas
to those used within a federally managed fishery.
4:12:12 PM
REPRESENTATIVE MILLETT asked why add the fishing vessels, quota
shares, or individual fishing quotas to those used within a
federally managed fishery since a revolving loan fund for vessel
enhancement exists, although she did not recall anything that
would help fishermen purchase individual quotas or shares of
individual fishing units.
REPRESENTATIVE HERRON responded that this language was suggested
by a legislator in the ther body. He suggested that
conversations were held with AIDEA. He said that Mr. Judson was
"shadowing" the Senate version of the bill.
4:13:23 PM
MR. JUDSON said this language would allow AIDEA to finance loans
with the goal to increase ownership of fishing vessels and quota
shares in Alaska.
REPRESENTATIVE REINBOLD expressed her concern. She said she has
a bit of a "hardship" with that provision.
REPRESENTATIVE MILLETT clarified her concern. She said she was
a commercial fisherman for 25 years and has used every fishing
opportunity, grant, and low interest loan for fisheries. She
questioned the need for another program and was uncomfortable
with the potential amount of the loan. She said that she has
never seen one for the purchase of quota shares or individual
quotas and characterized it as being able to stack the deck.
CHAIR OLSON pointed out that concerns can be brought to the
sponsor since he planned to hold the bill over.
4:15:30 PM
MR. JUDSON referred to page 8, to Section 11, which defines
"Arctic" in a geographical boundary similar to the boundary set
forth in the Arctic Region Policy Act (ARPA), north of the
Arctic Circle, north and west of the boundary formed by the
Porcupine, Yukon, and Kuskokwim rivers, and all contiguous seas
including the Arctic Ocean, the Beaufort, Bering and Chukchi
Seas, and the Aleutian chain. Finally, the language on page 8,
lines 7-19, defines "Arctic Infrastructure development."
REPRESENTATIVE HERRON suggested that it may be helpful to hear
others testify.
4:16:49 PM
REPRESENTATIVE JOSEPHSON referred to Section 11, paragraph (19),
and asked how expansive "Arctic Infrastructure development" is.
He asked if the Anchorage port could be seen as something that
furthers or supports the development of an Arctic facility.
MR. JUDSON answered yes; he did not believe there were any
limitations to what supports the Arctic.
REPRESENTATIVE HERRON commented that the City of Seward has
provided a letter of support since they have been and continue
to place themselves as a service port for all vessels in Alaska.
He said that all items that support development of the Arctic
should be included.
4:18:05 PM
REPRESENTATIVE JOSEPHSON asked for the definition of facility in
that same paragraph.
MR. JUDSON answered that was a change from the original bill,
and the use of facility was to reduce the list. He said it is
somewhat open.
4:18:57 PM
REPRESENTATIVE JOSEPHSON asked what type of project or facility
that might be "spawned." He asked if it would it be a harbor in
Point Hope or Point Lay or something in the Interior.
REPRESENTATIVE HERRON answered that is the key and what will be
needed first, whether that would be a safe refuge or harbor, or
harbors and ports to support oil response. He said obviously,
most of the funds will be private sector so identifying which
port or resource makes the most sense. He said it is not a
race, but what makes sense and what is important to Alaska. He
likened it as being similar to the port authority legislation,
elsewhere in the legislature, that is a holistic plan. And this
language tries to balance this for the good of Alaska rather
than it being the community who has the strongest leverage.
REPRESENTATIVE SADDLER referred to page 8, line 19, to the
language "used in support of a fishery in the Arctic" which
could be Port of Anchorage as broad as possible or if it will be
at least 50 percent aimed at a fishery in the Arctic.
REPRESENTATIVE HERRON deferred to Mr. Mark Davis, Alaska
Industrial Development and Export Authority.
4:21:23 PM
REPRESENTATIVE JOSEPHSON referred to a map in members' packets
and asked how the feature was achieved.
REPRESENTATIVE HERRON related that Congress defined the Arctic
region, but the Bering Sea is the key to the Arctic since warm
water goes in and cold water goes out. He characterized the
Bering Sea as Western Alaska and the Aleutian's garden, just
like the Beaufort and Chukchi Sea is their garden. The reason
for the boundaries is that in the 1950s, President Eisenhower
had the idea that the northern part of Alaska couldn't pay for
itself but the southern part of the Railbelt and the Tongass
forest could. Thus the PYK line, named after the Porcupine,
Yukon, and Kuskokwim rivers was a result of Senator Butrovich
and Mr. Atwood objecting to a territory above the PYK line.
Ultimately, the Congress defined the Arctic within those
boundaries, which [was the basis for Section 10 of the Alaska
Statehood Act, which U.S. Senator Ted Stevens wrote].
4:24:17 PM
MYRON NANENG, Sr., President, Association Village Council
Presidents, stated that the association represents 56 villages
on the Yukon Kuskokwim Delta. He said he is testifying in
support of HB 288 because it is considered an economic
opportunity for the region, which is economically depressed. He
thanked Representative Herron for the bill. He hoped the
committee would support it since it will make a difference for
the youth in the region.
4:25:26 PM
REPRESENTATIVE MILLETT referred to page 8, lines 15-17, and the
reason for the language. She wondered why they would be giving
loans for fishing vessels and fishing quotas. She said she
didn't object to the construction or rehabilitation or expansion
of a plant or facility; however, she expressed concern about
financing a fishing vessel that would fish in the Bering Sea or
the Arctic. She noted other loan programs exist and the reason
for such a "high mark" for the Arctic.
4:26:58 PM
MARK R. DAVIS, Deputy Director, Infrastructure Development,
Alaska Industrial Development and Export Authority (AIDEA),
Department of Commerce, Community & Economic Development
(DCCED), referred to page 7, which contains the concept that
none of the loans can be less than $7 million. He said that
AIDEA did not want to interfere with the existing programs, but
in particular, for quotas, there isn't any program to provide
for financing. He hoped that AIDEA would be poised to work with
the banking community to provide for a quota and repatriate, if
possible, back to the State of Alaska.
4:27:31 PM
REPRESENTATIVE MILLETT asked if Alaskan companies could benefit.
MR. DAVIS answered yes; He thought the private public
partnerships (P3) realm that AIDEA works in represents a lot of
capital. He envisioned a concerted business plan that may
involve the restructuring of a fishing company, but he did not
think it would happen very often.
4:28:11 PM
CHAIR OLSON asked whether this would apply to vessels documented
outside Alaska but fishing in northern waters.
MR. DAVIS answered that it would, which is why AIDEA would
likely want to have the collateral for the loan now plus the
quota shares restricted to uses in the Alaska fisheries; thus,
it would tie the two together.
CHAIR OLSON asked whether those fishermen have access to other
programs and may compete against Alaskans.
MR. DAVIS said he doesn't think so, but the loan is set at a $7
million minimum since AIDEA did not want to interfere with
existing programs the state has for fisheries.
4:29:12 PM
REPRESENTATIVE MILLETT related her understanding this could help
out-of-state large companies purchase quotas.
MR. DAVIS pointed out that the loans would have to be consistent
with AIDEA's other statutes, which require AIDEA to alleviate
unemployment in the state and be concerned with programs in the
state. Thus, AIDEA would need a nexus to Alaska in order to
make loan.
4:29:49 PM
REPRESENTATIVE MILLETT asked whether AIDEA follows the loan and
tracks the number of Alaskans employed by the vessel during the
course of the loan.
MR. DAVIS answered yes; that with the current loan participation
program, which lends to real estate, AIDEA does precisely that,
as well as tracking in the SETS fund.
4:30:19 PM
REPRESENTATIVE MILLETT related a scenario in which a company
purchases a quota and shares. She asked whether they could in
turn the loan to someone else.
MR. DAVIS answered that AIDEA usually does not permit the
transfer of any AIDEA loan without written permission with
termination consistent with their statutes. He said that
typically AIDEA includes a clause that any transfer without
permission would accelerate the loan and it would immediately be
due in full with interest.
4:31:08 PM
REPRESENTATIVE CHENAULT related a scenario in which funds could
be used for port expansion at Seward. It would allow Seward to
expand its port and bring back fishing vessels that currently
are docked in Seattle and Washington areas. It would bring
boats back to Alaska and Alaskans would work on the boats. He
asked whether that is correct.
MR. DAVIS answered yes; AIDEA has been in contact with various
ports, including the Port of Seward. He said that AIDEA is very
interested in wanting to create more jobs in the local port and
the fishing fleet is very labor intensive.
4:32:18 PM
REPRESENTATIVE SADDLER wondered if a company from the Lower 48
could obtain an AIDEA loan from the AIDF and generate work for
Alaskans, but not necessarily owned by Alaskans.
MR. DAVIS answered yes; AIDEA can make loans to companies
domiciled outside Alaska, but the economic impact would need to
be in the state in order for them to make the loan, which is
also under AIDEA's current statutes.
4:33:01 PM
REPRESENTATIVE SADDLER asked how he anticipated the loan funds
to be used and whether it is for large infrastructure, likely to
be more for quotas.
MR. DAVIS offered his view, which is that this would be used for
large infrastructure. He reminded members he is the director of
infrastructure for AIDEA. He has been working on large projects
for roads to resources (R2R). He thought this would primarily
be used for ports. It does have the quota portion, but he
envisioned this would be used for infrastructure for ports, such
as the Port of Seward to try to keep vessels in our waters and
jobs in Alaska.
4:33:53 PM
REPRESENTATIVE REINBOLD expressed her concern on page 7, lines
27-31; and on page 8, lines 15-19. She offered her support for
infrastructure in the Arctic, but not for fishing vessels given
the tight budget.
MR. DAVIS answered that traditionally how the industries work in
the Arctic for the Bering Sea fleet is that the lending goes to
the ship which serves as collateral for the quota. He said the
AIDEA tries to track the current commercial practice in the
fleet. He related the goal is to tie the vessel to the Alaska
based loan and the vessel would be kept in Alaska waters in the
off season, but would fish in Alaska's waters during the season.
REPRESENTATIVE REINBOLD reiterated she supports large
infrastructure, but she found this to be "a real stretch."
4:35:30 PM
REPRESENTATIVE HERRON responded that he wants this
infrastructure to be solid assets and not apply to fishing. He
related his understanding that Seward plans to expand, and other
ports typically used by the fishing fleet will provide the
nexus. He asked if this is the nexus Mr. Davis envisions.
MR. DAVIS answered that is correct. For example, he related
that AIDEA is an owner of the Ketchikan Alaska Shipyard and
recently that shipyard built the only vessel in the fleet that
is kept in Alaska. He stated that AIDEA would like more vessels
to be built, maintained, and kept in Alaska in the off season,
which would generate more income for the state from the fishing
fleet. He offered his belief that most of the fleet exits the
state at the end of the season.
4:36:49 PM
REPRESENTATIVE SADDLER said in the last couple of years that
AIDEA's mission, funding levels, and loan capacity has expanded.
He asked whether there are any limits to AIDEA's growth,
mission, and magnitude.
MR. DAVIS pointed out that he worked with the legislature on the
SETS fund and this bill tracks the SET funds. Thus, the idea
for expansion is that AIDEA would have specialized funds and as
with the Interior Energy project, the legislature could provide
AIDEA with additional bonding or funds to be used for those
purposes. In fact, that's the reason there isn't any funding
associated with it. He said he considers it a joint venture
between AIDEA and the legislature to decide how to deploy the
state's resources.
4:38:00 PM
REPRESENTATIVE SADDLER asked whether AIDEA supports the bill.
MR. DAVIS answered that AIDEA supports the bill so long as it
contains the provision in subsection (d) that AIDEA can't make
the loans for less than $7 million. He referred to page 7,
lines 16-17, which states that AIDEA "may not" use the
infrastructure fund, but on line 27, it reads, "may not provide"
which creates a double negative. Thus, AIDEA would propose a
slight change in the language, but he supports AIDEA not making
loans in the federally-managed fishery below $7 million. He
stated that AIDEA would like to preserve other programs already
in existence.
4:38:57 PM
REPRESENTATIVE JOSEPHSON referred to page 7, lines 24-26, to
subsection (c) and asked for the intent of this language.
MR. DAVIS answered that subsection (c) only becomes effective if
there were funds in the fund; however, until it is funded then
nothing in the Arctic infrastructure development fund could be
used for security as a bond. Again, as with the Interior Energy
project, this new fund would be used in conjunction with a
decision by the legislature to fund it.
4:39:51 PM
REPRESENTATIVE JOSEPHSON asked who AIDEA envisions would be an
investor. He related a scenario in which Alaska developed a
port at the deepest water location in the Arctic, in which loans
are made not to exceed one-third for that project. He asked
whether the entity would be a company like Crowley Maritime.
MR. DAVIS answered that AIDEA would be looking at large
infrastructure funds, perhaps pension funds that invest in
infrastructure. For example, a potential partner in the
Interior energy project is a pension fund that invests in
infrastructure. He believed that other infrastructure funds
would also be interested assuming the port would generate the
revenue to pay off the debt.
4:41:02 PM
REPRESENTATIVE JOSEPHSON asked for further clarification. He
asked whether investors would use their pension dollars.
MR. DAVIS answered that in the Interior energy project, which is
a proposed trucking operation with an LNG plant on the North
Slope to truck to Fairbanks. The potential partner approved by
AIDEA on January 14 is a pension fund that invests in
infrastructure.
REPRESENTATIVE JOSEPHSON was unsure that is how he would spend
his pension dollars.
4:41:32 PM
RON LONG, Assistant City Manager, City of Seward, testified in
support of HB 288, Version N. He heard Seward mentioned several
times today, but in all fairness, this bill could apply equally
to several other ports around the state and represents an effort
to build the infrastructure to support development in the
Arctic. He indicated that this effort will take place in terms
of staging from somewhere outside the region described in
Section 11 until sufficient infrastructure can support it. He
said he did not want to see the entry level position be located
in Tacoma or Bellingham, but to be in Alaska. He said he
supports the language in the last part of Section 11. He
referred to the fisheries and offered his belief that AIDEA has
sufficient expertise to ensure that the economic impacts accrue
to Alaska, whether it is through a tiered entry system that
makes eligibility to Alaskan Corporations first, then to outside
entities if sufficient funds exist. He emphasized his hope that
the economic impact will accrue to Alaskans whether it is to the
local economy or the state treasury. Although those approaches
may be different ways of measuring success, "we're all Alaskans
and we can all benefit from it.
4:43:36 PM
STEVE TRIMBLE, President, Trimble Strategies, stated he is
testifying today in support of HB 288, a bill that would create
an Arctic infrastructure development fund within AIDEA. He read
from a prepared statement, as follows [original punctuation
provided]:
The Arctic is the future of Alaska, and we must invest
in infrastructure now if we are to have a place of
meaning in the future of the global arctic frontier.
Industry has responded to the call of public
investment through the SETS fund and the time is now
to further additional public-private investments
within Alaska. The era of "easy money" is approaching
its end in our state and the age of "smart money" is
now upon us.
Enabling AIDEA through the creation of the Arctic
Infrastructure Program/ Fund and the additional tools
that CS Version N for HB 288 provides is an investment
in "smart money" for the future of Alaska. I
appreciate your consideration in hearing my testimony
today in support of HB 288.
[HB 288 was held over.]