Legislature(2009 - 2010)BARNES 124
03/26/2010 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB338 | |
| HB275 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 338 | TELECONFERENCED | |
| *+ | HB 275 | TELECONFERENCED | |
HB 338-ECON. STIMULUS BONDS: REALLOCATION/WAIVER
3:25:35 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 338, "An Act relating to the waiver of volume cap
of recovery zone economic development bonds authorized by 26
U.S.C. 1400U-2 and reallocation by the Alaska Municipal Bond
Bank Authority of the waived volume cap; relating to the waiver
of volume cap of recovery zone facility bonds authorized by 26
U.S.C. 1400U-3 and reallocation by the Alaska Industrial
Development and Export Authority of the waived volume cap;
increasing the total amount of bonds and notes that the Alaska
Municipal Bond Bank Authority may have outstanding; relating to
revenue bonds issued by the Alaska Municipal Bond Bank
Authority; and providing for an effective date."
3:25:43 PM
REPRESENTATIVE T. WILSON moved to adopt the proposed committee
substitute (CS) for HB 338 labeled 26-GH2880\R, Cook, 3/25/10,
as the work document. There being no objection, Version R was
before the committee.
3:27:16 PM
JERRY BURNETT, Deputy Commissioner, Office of the Commissioner,
Department of Revenue (DOR), explained that this bill was
introduced on behalf of the Governor. He paraphrased from the
transmittal statement, which read [original punctuation
provided]:
This bill provides for reallocation of volume cap
of recovery zone economic development bonds and
recovery zone facility bonds. When the Congress
passed the American Recovery and Reinvestment Act
of 2009, the bill authorized the issuance of
certain tax advantaged bonds for local government
projects called Recovery Zone Economic
Development Bonds and Recovery Zone Facility
Bonds.
3:28:14 PM
MR. BURNETT explained that Recovery Zone Economic Development
Bonds are bonds that can be used for public facilities by local
governments. Recovery Zone Facility Bonds are bonds that can be
used by private developers for economic development purposes.
The American Recovery and Reinvestment Act of 2009 authorized
the issuance of the tax-advantaged bonds and set a national
volume limitation for the Recovery Zone Economic Development
Bonds at $10 billion and for Recovery Zone Facility Bonds at $15
billion. The United States Secretary of the Treasury allocated
the national volume limitation for these bonds among the states
and the Internal Revenue Service (IRS) allocated each state's
volume among the counties and large municipalities in the state
in proportion to relative employment declines in 2008. The IRS
allows local governments to waive a portion of the volume cap
allocation and the state may reallocate the volume cap. This
bill provides that reasonable manner.
MR. BURNETT further explained that the bill authorizes the
Alaska Municipal Bond Bank Authority to reallocate the waived
recovery zone economic development bond volume cap and
authorizes the Alaska Industrial Development and Export
Authority (AIDEA) to reallocate the waived Recovery Zone
Facility Bond volume cap. It also authorizes the State Bond
Committee to reallocate tax credit and tax-exempt bond
limitations for other programs authorized by the U.S.
government.
MR. BURNETT highlighted that HB 338 is necessary because the
allocation methodology used by the IRS to allocate the volume
cap under this program used census areas rather than local
government organizations with bonding authority as the basis for
allocation. Much of the bond volume given to areas of the state
under the federal allocation could not be used without passage
of this bill.
3:30:40 PM
MR. BURNETT added that in addition to the reallocation of volume
cap under ARRA, HB 338 make two changes to the Municipal Bond
Bank statutes. It provides that the total loan volume
authorized for the Municipal Bond Bank is increased from $750
million to $1 billion. It also removes current restrictions on
making loans to municipalities for hydroelectric projects and
state leased buildings and equipment. These provisions are
especially important to the City and Borough of Sitka because it
owns its own hydroelectric project and it is more efficient for
a local government to use the Municipal Bond Bank to finance a
hydroelectric project than to go through AIDEA or the Alaska
Energy Authority (AEA).
3:32:02 PM
REPRESENTATIVE T. WILSON asked whether a private company would
be required to repay the bonds in instances when the bonds are
passed through a borough to the private company.
MR. BURNETT agreed. He clarified that the type of bond would be
a conduit bond. The local government or AIDEA is the
facilitator. In those instances the private company is
responsible for the bond. However, the federal government
reimburses 45 percent of the interest cost, whether it is
reimbursed to a private issuer in the case of Recovery Zone
Facility Bonds or is reimbursed to a public issuer, in the case
Recovery Zone Economic Development Bonds. The Municipal Bond
Bank has issued small amounts of bonds under this program. He
recalled an instance in Ketchikan, that after the reimbursed
interest, the true interest cost for the issuer was
approximately 2.9 percent for a 20-plus year bond issue under
this program. Thus, it is very cost effective for local
governments or private developers to use these bonds.
3:33:45 PM
REPRESENTATIVE CHENAULT referred to Section 4 of the sectional
analysis, which read: "Removes limitations on the Alaska
Municipal Bond Bank related to financing certain power projects
and equipment and building that are leased to the state." He
asked for clarification.
MR. BURNETT replied that this statute allows for the Municipal
Bond Bank to finance power projects for diesel-fired projects.
This would allow the City and Borough of Sitka to refinance its
hydroelectric project with local government financing instead of
using AIDEA or AEA. This will work better for the City and
Borough of Sitka since it is a locally-owned government utility.
Additionally, Section 4 contains a provision to remove a
limitation that does not allow local governments to use
Municipal Bond Bank financing if the state is leasing a portion
of it. Some local governments own buildings with a portion of
the building leased by the state. This would remove the
limitation. He commented that he was not sure of the historical
reason for the restriction.
REPRESENTATIVE CHENAULT asked whether the restriction was due to
a percentage of the state leased space in the building.
MR. BURNETT answered no. He related that if the state leased a
500 square-foot office in a 10,000 square foot building, the
local government would be prohibited from using Municipal Bond
Bank financing.
3:36:05 PM
TED LEONARD, Executive Director, Alaska Industrial Development &
Export Authority (AIDEA) and Alaska Energy Authority (AEA),
Department of Commerce, Community, & Economic Development
(DCCED), introduced himself.
3:36:36 PM
REPRESENTATIVE BUCH asked how this bill would impact AIDEA.
MR. LEONARD offered AIDEA's support for the bill. He related
that in Version R the Recovery Zone Facility Bonds are not
issued through a 45 percent payback provision. These bonds are
taxable bonds and become tax exempt so they are a little
different than the Recovery Zone Economic Development Bonds, he
stated. Still, the bonds are at least 150 to 250 basis points
cheaper than taxable bonds. They are definitely not quite as
good as the Recovery Zone Economic Development Bonds, but for
private enterprises, they probably represent the best financing
available.
3:38:04 PM
MR. LEONARD pointed out that the Recovery Zone Facility Bonds
are mainly defined by their restrictions. They cannot be used
to build rental housing, airplanes, health clubs, liquor stores,
massage parlors, and gambling facilities. Otherwise, it can be
used for almost anything else. He characterized them as
"Industrial Development Bonds on steroids." These bonds were
allocated by the IRS with census areas. Thus, AIDEA quickly
estimates that this type of tax exempt financing would lose 50
percent without the ability to reallocate. Thus, AIDEA believes
this is very important. He reported that AIDEA can find
projects in the state that would definitely benefit from this
type of financing.
3:39:33 PM
CHAIR OLSON held open public testimony on HB 338.
[HB 338 was held over.]
The committee took an at-ease from 3:40 p.m. to 3:40 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB338 ver A.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 |
| CS HB338 Draft ver R.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 |
| CS HB338 Sponsor Statement.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 |
| HB338 Fiscal Note-1-2-021010-CED-N.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 |
| HB338 Sponsor Statement ver A.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 |
| CSHB 275 Draft ver T.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 275 |
| HB275 ver P.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 275 |
| HB338 Fiscal Note-2-1-021010-REV-Y.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 |
| Mar 26 Packet Info.pdf |
HL&C 3/26/2010 3:15:00 PM |
|
| HB338 Supporting Documents Letter-City of Kenai 2-10-10.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 |
| HB275 Sponsor Statement ver T.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 275 |
| HB275 Sectional Analysis ver T.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 275 |
| HB275 Fiscal Note-LAW-CIV-03-19-10.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 275 |
| HB338_SB269 Supporting Documents - AIDEA (2) (2).pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 SB 269 |