Legislature(2001 - 2002)
05/10/2002 05:38 PM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR HOUSE BILL NO. 471(L&C)
"An Act increasing the maximum amount of loans from the bulk
fuel revolving loan fund operated by the Alaska Energy
Authority; precluding certain legal action concerning certain
technical assistance to rural utilities; relating to powers of
the Alaska Energy Authority; relating to the definitions of
'net income' and 'unrestricted net income' for purposes of
determining the amount of the Alaska Industrial Development
and Export Authority's dividend to the state; relating to
communities within which rural development loans may be made
by the Alaska Industrial Development and Export Authority; and
providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
JESSICA MENENDEZ, Staff to Representative Green, testified this
legislation amends three "important" programs of the Alaska
Industrial Development and Export Authority (AIEDA): AIDEA dividend
calculations, the Bulk Fuel Revolving Fund and the Rural
Development Initiative Fund. She reminded the Committee that AIDEA
is a self-supporting State agency that contributes an annual
dividend to the State general fund. She furthered that since its
inception, AIDEA has contributed or authorized $129 million,
including $29,149,500 for the FY 03 fiscal year.
Ms. Menendez explained that under current statute, AIDEA pays an
annual dividend based on the agency's net income and fund-
restricted net income. She informed that statute defines these two
incomes as "the net income and unrestricted income included in the
audited financial statements." However, she stated that new
guidelines imposed by the Governmental Accounting Standards Board
(GASB) no longer include these terms and that without these amounts
reported, the AIDEA Board of Directors has no clear instruction of
how to determine the annual dividend to the State.
Ms. Menendez added that GASB standards also stipulate that any
governmental transfers, capital contributions or grants must be
listed as an expense or revenue. She explained this method would
reduce the agency's net income for the base fiscal year and
subsequently reduce the amount of the dividend calculated from the
audited financial statements.
Ms. Menendez stated that Sections 2 and 3 of the bill address these
issues by defining unrestricted net income using the new GASB
terminology.
Ms. Menendez continued that this legislation also increases the
maximum amount of the Bulk Fuel Revolving Fund. She described the
purpose of the fund to assist rural communities in purchasing bulk
fuel supplies. She spoke of the advantage for participating
communities to purchase bulk fuel in more frequent, smaller
shipments; also, shipments to some communities could only be made
during certain timeframes. To accommodate this, she pointed out
this legislation increases the maximum amount of the fund from
$100,000 to $200,000.
Ms. Menendez next addressed Section 4 of the bill, which contains
the eligibility requirements for the Rural Development Initiative
Fund. She explained this program provides funding opportunities for
those rural communities that have no other funding options
available. She noted the intent of this provision is to ensure that
the loans are awarded to the communities for which the program is
intended. She detailed that eligible communities would have a
population less of than 5,000 residents, and not connected by road
or railroad to Anchorage or Fairbanks, or have a population of less
than 2,000 if connected to Anchorage or Fairbanks.
Ms. Menendez concluded by stressing the importance of this
legislation, not only because AIDEA provides the State with an
annual dividend, but also because it provides programs and
financing options to allow the establishment and expansion of
businesses statewide, which subsequently provides jobs for Alaska
and helps diversify the economy.
BOB POE, Executive Director, Alaska Industrial Development and
Export Authority (AIDEA) testified the intent is to maintain the
annual dividend in the current manner and that this legislation
would allow that to occur. He explained the changes to the Bulk
Fuel Revolving Fund are requested because the capacity of many
updated fuel storage systems is increased and also because the
amount of fuel that could be purchased for $100,000 has decreased
due to higher fuel prices. He added that US Senator Ted Stevens was
successful in securing a $5 million grant for the fund.
Mr. Poe stated that the provisions of this bill governing the Rural
Development Initiative Fund would "make…wording that was a little
problematic, much clearer." He gave examples of businesses located
outside of city limits arguing for rural status, when lending
institutions were nearby that were willing to lend money under the
AIDEA loan participation program.
Senator Ward asked which communities would be affected by the
changes to population eligibility for the Rural Development
Initiative Fund program.
Mr. Poe surmised no communities would be excluded. He spoke of
Settlers Bay located near Wasilla would be eligible for
conventional financing. He noted the City of Bethel would not be
impacted, although the population of Bethel has increased beyond
5,000 residents, because businesses in this area would qualify for
AHFC-sponsored conventional financing.
Senator Wilken asked if passage of this bill would change the
amount of the annual dividends.
Mr. Poe answered the provisions in this bill would not affect the
amount of dividends.
Senator Wilken next asked the status of federal funding for an
unrelated project.
Mr. Poe replied the pending congressional legislation contains an
amendment that authorizes the Secretary of the Department of Energy
to negotiate with AIDEA for a loan of up to $125 million. He
emphasized this is an authorization rather than an appropriation
and therefore subject to negotiation. He predicted the chances of
the amendment and the legislation passing into law was good.
Senator Austerman "moved House Bill 471 out of Committee."
Without objection CS HB 471 (CRA) with accompanying zero fiscal
note #1, dated 3/22/02, from the Department of Community and
Economic Development.
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