Legislature(1997 - 1998)
05/10/1998 01:45 PM Senate TRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CSHB 386(FIN) - RE AK INDUS. DEVELOP & EXPORT AUTHORITY
SENATOR HALFORD moved to adopt SCSCSHB 386(TRA), version R, as the
working document of the committee.
SENATOR WILKEN objected.
CHAIRMAN WARD explained the Anchorage International Airport project
was removed from Version R because that project was contained in
another piece of legislation that has already been signed by the
Governor. Also, Version R increases the bonding amount by $5.5
million for the City of Whittier access project.
SENATOR WILKEN noted on page 13, line 18, the word "may" was
changed to "shall" which will have to be corrected.
SENATOR GREEN questioned whether the word "may" should be changed
throughout the bill.
SENATOR WILKEN replied the word "may" should be used throughout the
bill.
CHAIRMAN WARD clarified that a motion to adopt Version R as the
working document was before the committee.
SENATOR WILKEN asked what version, other than Version R, was before
the committee.
CHAIRMAN WARD answered version P is the active document.
SENATOR WILKEN noted version P also contains the word "shall". He
removed his objection to adopting version R.
CHAIRMAN WARD indicated the amount on line 9, page 13, needs to be
changed from $70,000,000 to $28,000,000 for the railroad right-of-
way at Denali.
SENATOR GREEN moved to change the amount on line 9, page 13 from
$70,000,000 to $28,000,000.
Number 418
MR. JOE FIELDS, testifying via teleconference from Fairbanks,
stated the version of the bill he was reading from contained
$70,000,000 for the Point MacKenzie Project on page 13, line 9.
CHAIRMAN WARD explained he and the Co-Chair of the Senate Finance
Committee determined that $28,000,000 will accomplish the work that
needs to be completed, and he clarified that the section the motion
referred to pertains to the Denali railroad project. He announced
the motion to reduce the amount to $28 million was adopted with no
objection.
SENATOR WILKEN asked Mr. Fields if he is comfortable with the $28
million for the Stampede Trail project.
MR. FIELDS said he thought it was a good starting point and that
the number is accurate.
CHAIRMAN WARD clarified the Finance Co-Chair calculated that
amount.
CHAIRMAN WARD announced the public participation portion of the
hearing on HB 386 was completed.
SENATOR WILKEN asked to hear from a representative of AIDEA on the
"shall" clause.
MR. KEITH LAUFER, AIDEA, responded it has been typical for bond
authorizations for the Development Finance Program to contain the
word "may" because a number of statutory requirements apply to the
program and must be fulfilled before bonds can be issued. The word
"shall" in this context could negate the other statutory
requirements and leaves the committee's intent unclear. He pointed
out the word "shall" is also included in the section that pertains
to the interest rate as it must be offered. As it appears, the
project would be a taxable project as opposed to tax exempt, and
the bill suggests there is to be an interest rate subsidy for the
project, which is contrary to the normal parameters of the program.
CHAIRMAN WARD asked if any of the concerns Mr. Laufer mentioned are
against the law.
MR. LAUFER replied the Legislature makes the law.
SENATOR HALFORD asked if the difference between taxable financing
and exempt financing is 1.5 percent.
MR. LAUFER said it is about 2 percent.
SENATOR HALFORD said in all cases, the projects are public use
facilities, but the projects to be owned by AIDEA will be financed
at the tax exempt rate.
MR. LAUFER replied the tax rules vary as to which projects can be
tax exempt. All projects under AIDEA's Development Finance Program
are to be owned by the Authority, whether or not specifically
stated in the bill. The approval under Section 172 requires that
the Authority own it. Ownership in and of itself does not make a
project tax exempt, however.
Number 486
SENATOR HALFORD asked what the expected interest rate is for the
DeLong Mountain project, the City of Nome project, and the Point
MacKenzie project. He stated he is curious about how the interest
rate computation works.
MR. LAUFER answered the Authority typically looks at the rate at
which it issues bonds for a project and charges a spread above that
to cover the Authority's cost of operations in order to pay the
dividend to the state. Under the Internal Revenue Code, ports
owned by governmental entities can qualify for tax exempt
financing, so for those projects, the tax exempt rate plus the
appropriate spread would be applied.
SENATOR HALFORD asked about the DeLong Mountain project.
MR. LAUFER stated that is also a port project.
SENATOR HALFORD asked if the interest rate on the other portion of
the DeLong Mountain project was subsidized.
MR. LAUFER said not that he was aware of, although he believed that
was the first project under the program and the State gave a direct
equity contribution to that project.
SENATOR HALFORD said essentially, that project was financed with a
subsidy.
MR. LAUFER said the subsidy was not from the Authority, it was from
the State.
Number 482
SENATOR GREEN questioned whether project labor agreements are part
of AIDEA's overall plan.
MR. LAUFER stated AIDEA has never used a project labor agreement.
The project proponents of the Alaska Seafood Center have elected to
use a project labor agreement. They are doing the construction
themselves; AIDEA has not controlled that process. AIDEA has
agreed to take out their interim financing in the event that they
meet a number of conditions in the building's construction,
otherwise AIDEA has taken no position as to whether project labor
agreements are a good idea or not.
SENATOR GREEN asked whether AIDEA has the ability to impact whether
companies use project labor agreements.
MR. LAUFER said at this stage it does not. The only thing AIDEA
has done in regard to controlling procurement was to require that
the Alaska Seafood Center group use a competitive process and an
Alaska bidders and products preference. With that exception, the
Alaska Seafood Center group took the entire construction financing
risk. If the project is not completed within budget and on time,
and there is not enough money in the bank at the end of the
process, AIDEA is not required to take out any financing or to
purchase the building.
Number 511
SENATOR GREEN asked if there is any way the Legislature could
prevent that from happening in the future or whether there is a
necessity to do that.
MR. LAUFER said he was not aware of any necessity, and that there
are always ways the Legislature can control any contracting process
AIDEA goes through. He noted he understood bills pertaining to
project labor agreements were going through the Legislature at one
time but he was unsure of the status of those bills.
SENATOR GREEN said she does not believe the Legislature should be
putting money into projects that are restricted by project labor
agreements.
MR. LAUFER indicated AIDEA follows the state procurement process
unless a project is specifically exempted, therefore any
legislative changes could be directed toward that process.
SENATOR HALFORD questioned whether AIDEA gives no preference for or
against any stage of the approval, based on the existence or
absence of a project labor agreement.
MR. LAUFER said that is correct.
CSHB 386(FIN) - RE AK INDUS. DEVELOP & EXPORT AUTHORITY
SENATOR HALFORD moved SCSCSHB 386(TRA), Version R, out of committee
with individual recommendations. There being no objection, the
motion carried.
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