05/03/2002 01:40 PM Senate CRA

                                                                                                                                
                 HB 471-AIDEA LOANS AND DIVIDEND                                                                            
                                                                                                                                
                                                                                                                              
JESSICA MENENDEZ,  staff to  Representative Joe Green,  introduced                                                              
HB 471. It  amends three important programs for  Alaska Industrial                                                              
Development    &  Export Authority  (AIDEA),  the  AIDEA  dividend                                                              
calculation, the  vote for the Bulk  Fuel Revolving Loan  Fund and                                                              
the Rural Development Initiative Fund (RDIF).                                                                                   
                                                                                                                                
AIDEA is  a self-supporting  state authority  that contributes  an                                                              
annual dividend.  To date  and including  this year's dividend  of                                                              
over  $20 million,  they  have  contributed  $129 million  to  the                                                              
state's general fund. The competition  for the dividend is between                                                              
25 and 50 percent  of net income for that base  fiscal year but it                                                              
may not exceed AIDEA's unrestricted net income.                                                                                 
                                                                                                                                
Two  changes  by  the  Governmental  Accounting  Standards  Boards                                                              
(GASB) could change  how AIDEA would calculate  their dividend. In                                                              
their  audited financial  statements  they no  longer include  the                                                              
term for  net income so  without that  amount it doesn't  give the                                                              
Board a clear  directive how to compute the annual  dividend. They                                                              
have  also  said that  any  intergovernmental  transfers,  capital                                                              
contributions or grants would need  to be listed as an expense. If                                                              
listed as an expense, this would further reduce the dividend.                                                                   
                                                                                                                                
The bill  also increases  the maximum  amount  from the Bulk  Fuel                                                              
Revolving Fund from  $100,000.00 to $200,000.00. It  is cheaper to                                                              
buy fuel  in larger  amounts in rural  communities in  particular.                                                              
They have the tank storage capacity  for that and some communities                                                              
can only  get one  barge load  of fuel  per year  so doubling  the                                                              
maximum fills a demonstrated need.                                                                                              
                                                                                                                                
Finally,   the  bill   more   clearly  defines   the   eligibility                                                              
requirements for  AIDEA's rural development initiative  fund. This                                                              
program  was developed  for rural  communities that  had no  other                                                              
funding  options available  to them. It  defines those  qualifying                                                              
participants  to be  living  in a  community  of  less than  5,000                                                              
people, not  connected by  road or  rail or  2,000 people  who are                                                              
connected by road and rail from Anchorage to Fairbanks.                                                                         
                                                                                                                                
BOB   POE,   Executive   Director    of   AEDIA,   testified   via                                                              
teleconference. He said AIDEA has  issued dividends since 1995 for                                                              
a total  of $129  million. The  new GASB  changes mean AIDEA  must                                                              
make   sure  that   the   dividend   continues   to  work.   [Tape                                                              
indiscernible]  The increased  amount in  the Bulk Fuel  Revolving                                                              
Loan  Fund is  to  allow  communities to  buy  in bulk.  The  USDA                                                              
recently gave  them a grant  of $5 million  to the  revolving loan                                                              
fund. [Tape  indiscernible] Finally,  the changes with  respect to                                                              
the Rural  Development Initiative Fund  are to make sure  that the                                                              
loan program works as intended.                                                                                                 
                                                                                                                                
CHAIRMAN TORGERSON  asked for the  reasoning behind  the exemption                                                              
on road connected or not road connected and why he cared.                                                                       
                                                                                                                                
MR. POE said  he didn't care  whether they were road  connected or                                                              
not,   but  they   do   care  about   the   rural  aspect.   [Tape                                                              
indiscernible] It  was really intended  for communities  that have                                                              
lodges in the wilderness or in truly  rural communities. The group                                                              
that came  up with the definition  did their best to  define rural                                                              
based on other definitions of rural.                                                                                            
                                                                                                                                
CHAIRMAN TORGERSON  remarked that's Alaska Housing  definition. He                                                              
then asked what program they have for non-rural residents.                                                                      
                                                                                                                                
MR. POE  said they have the  Loan Participation Program  in AEDEA,                                                              
which is  an active program with  a distribution that  matches the                                                              
population  distribution  of the  state. This  year  they will  do                                                              
about $55  million in loan  participation in conjunction  with the                                                              
commercial  banking industry.  Amounts range  from $15,000  to $10                                                              
million with up to a 25 year term.                                                                                              
                                                                                                                                
CHAIRMAN  TORGERSON  then  said  he didn't  see  a  definition  of                                                              
community in 29.71.800 even though it was cited.                                                                                
                                                                                                                                
MR. POE asked whether there was anyone  from the Department of Law                                                              
available to answer the question, but there was no one.                                                                         
                                                                                                                                
CHAIRMAN TORGERSON said  he wouldn't hold the bill,  but asked Mr.                                                              
Poe to look at the issue between  then and the hearing in the next                                                              
committee  of  referral  because  he  didn't  think  there  was  a                                                              
definition of community in the statute.                                                                                         
                                                                                                                                
MR. POE agreed.                                                                                                                 
                                                                                                                                
There was no further testimony.                                                                                                 
                                                                                                                                
SENATOR  AUSTERMAN made  a  motion  to move  HB  471 and  attached                                                              
fiscal note from committee with individual recommendations.                                                                     
                                                                                                                                
There being no objection, it was so ordered.