Legislature(2005 - 2006)HOUSE FINANCE 519
05/01/2006 08:30 AM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB265 |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 291 | TELECONFERENCED | |
| += | HB 381 | TELECONFERENCED | |
| + | SB 265 | TELECONFERENCED | |
| *+ | HB 504 | TELECONFERENCED | |
| + | SB 291 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
May 1, 2006
8:44 a.m.
CALL TO ORDER
Co-Chair Meyer called the House Finance Committee meeting to
order at 8:44:25 AM.
MEMBERS PRESENT
Representative Mike Chenault, Co-Chair
Representative Kevin Meyer, Co-Chair
Representative Bill Stoltze, Vice-Chair
Representative Richard Foster
Representative Mike Hawker
Representative Jim Holm
Representative Reggie Joule
Representative Mike Kelly
Representative Beth Kerttula
Representative Carl Moses
Representative Bruce Weyhrauch
MEMBERS ABSENT
None
ALSO PRESENT
Kimberly Carnot, Staff, Senator Steadman; Deven Mitchell,
Executive Director, Alaska Municipal Bond Bank Authority,
Department of Revenue; Victor Winters, State Harbors
Engineer; John Stone, Alaska Association of Harbor Masters;
Kathie Wasserman, Alaska Municipal League; John Walsh,
Bristol Bay Borough; Peter Ecklund, Staff, Representative
Kevin Meyer; Joe Dubler, Director of Finance, Alaska Housing
Finance Corporation
PRESENT VIA TELECONFERENCE
There were no teleconference participants.
SUMMARY
SB 265 An Act increasing the total amount of bonds and
notes that the Alaska Municipal Bond Bank
Authority may have outstanding; and providing for
an effective date.
SB 265 was REPORTED out of Committee with a "do
pass" recommendation and with previously published
fiscal impact note by the Department of Revenue:
#1.
CS SB 291(CRA)
An Act relating to the municipal harbor facility
grant program; and providing for an effective
date.
CS SB 291 (CRA) was REPORTED out of Committee with
a "do pass" recommendation and with previously
published fiscal impact note by the Department of
Transportation and Public Facilities: #1.
HB 381 "An Act relating to the financing of construction,
major maintenance, and renovation of facilities
for the University of Alaska; relating to the
financing of construction of a correctional
facility; authorizing the commissioner of revenue
to sell the right to receive a portion of the
anticipated revenue from a tobacco litigation
settlement to the Northern Tobacco Securitization
Corporation, with the proceeds of that sale to
finance construction, major maintenance, and
renovation of facilities for the University of
Alaska and to finance the construction of a
correctional facility; providing for the
establishment of funds for deposit of those
proceeds; authorizing the issuance of bonds by the
Northern Tobacco Securitization Corporation for
the purpose of acquiring the right to receive a
portion of anticipated revenue from a tobacco
litigation settlement; and providing for an
effective date."
HB 381 was heard and HELD in Committee.
SENATE BILL NO. 265
An Act increasing the total amount of bonds and notes
that the Alaska Municipal Bond Bank Authority may have
outstanding; and providing for an effective date.
KIMBERLY CARNOT, STAFF, SENATOR STEADMAN (SPONSOR), provided
testimony on SB 265. She observed that SB 265 seeks to
increase the bond authority of the Municipal Bond Bank from
$500,000,000 to $750,000,000. In 2003, the limit was
increased from $300 million to $500 million. The Alaska
Municipal Bond Bank helps municipalities by lowering the
borrowing cost for participants through bond issuances,
creating economies of scale, and leveraging the borrowing
power and credit worthiness of the state of Alaska. Since
1975, the Bank has helped Alaskan communities secure over
$800 million in financing for public work projects. At the
same time the Municipal Bond Bank has returned $26.9 million
in excess earnings to the state. This year the Bank will
return a $652 thousand dividend to the citizens of Alaska.
Last year, $23 million in bonds were issued to Alaskan
communities, which saved those communities $16.7 million in
issuance and interest costs. She gave examples of municipal
bond projects. The Bank has approximately $80 million in
pending applications and only $50 million in borrowing
capacity.
DEVEN MITCHELL, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL BOND
BANK AUTHORITY, DEPARTMENT OF REVENUE, testified regarding
the bill. The Department supports the increased cap. He
pointed out that increased demand reflects greater capital
infrastructure development at the local level, to replace
historical expenditures by the state of Alaska.
Representative Weyhrauch asked regarding the state's credit
rating. Mr. Mitchell explained that the Bond Bank has an A1
rating from Moody's, and an A rating from Standard and
Poor's. The state is lobbying Standard and Poor's to
considered an A+ rating. The ratings are a combination of
various methods. The Bond Bank has an AAA rating, due to the
diversity of entities that borrow in their pool; the state
of Alaska has an AA rating, and has a more limited and less
diverse pool of borrowers. The credit rating is based on
that pool and the moral obligations of the State. The value
of the pool analysis is diminished by the largest borrower
in the program: Northwest Artic Borough, which has the
ability to deplete the reserve. There is a pool of $30
million for the main Bond Bank program. The Bank would not
have the ability to pay off a default by the Northwest Artic
Borough, which has $70 million outstanding; this creates a
negative consideration.
In response to a question by Representative Weyhrauch, Mr.
Mitchell explained that the bill would allow the Bond Bank
to facilitate transactions issued through a subsidiary of
the Bond Bank, whether or not they would be backed by the
moral obligation of the State. There are no negative rating
actions for the main Bond Bank programs or issuances.
Representative Weyhrauch observed that the authority had
been increased in 1984 and 2003; and that the increase curve
of $250 million was quite steep. He wondered whether the
bond requests could be financed with $750 million, given the
current state financial climate. He questioned if the limit
would have to be raised further to reflect pension
obligations.
Mr. Mitchell noted that there would not be an impact from
[pension] obligations. He acknowledged that there might be a
need to raise the cap at another date, but felt that it
would be appropriate to return to the legislature for a
further increase. He thought $750 million would be
sufficient.
8:55:33 AM
Representative Hawker expressed full support of the bill. He
observed that the Governor's office had previously stated it
would be inappropriate to expand the authority and asked
what had changed in the past ninety days. Mr. Mitchell could
not respond to the question.
Representative Foster MOVED to REPORT SB 265 out of
Committee with the previously published fiscal note and
individual recommendations. There being NO OBJECTION, it was
so ordered.
SB 265 was REPORTED out of Committee with a "do pass"
recommendation and with previously published fiscal impact
note by the Department of Revenue: #1.
CS FOR SENATE BILL NO. 291(CRA)
An Act relating to the municipal harbor facility grant
program; and providing for an effective date.
KIMBERLY CARNOT, STAFF, SENATOR STEADMAN testified, on
behalf of the sponsor, in support of the bill. She observed
that SB 291 creates a Municipal Harbor Facility Grant
program to address statewide deferred maintenance and
capital upgrades to harbor facilities; it creates a 50/50
matching program. The Water Craft Fuel Tax and Fisheries
Business tax would be used for the state share. She
maintained that the fund sources are appropriate because
coastal communities, which benefit, would also generate the
grant funds. Municipalities must show their ability to take
full financial ownership of the harbors in order to qualify.
It would be a one-time infusion of funds to bring deferred
maintenance up to date. Municipalities are eligible for only
one grant [for each harbor], per year. Each grant is capped
at $5 million in a fiscal year. Individual harbors are only
eligible for one grant under the program.
8:59:47 AM
In response to a question by Representative Weyhrauch, Ms.
Carnot reiterated that individual harbors are eligible for
one grant under the program; municipalities may have more
than one harbor and could qualify for up to $5 million for
each harbor. She clarified that funding from one grant could
not be transferred to another harbor grant.
Representative Weyhrauch asked who would be the granting
agency. Ms. Carnot observed grants are matching. The state
portion would not require the obligation to be repaid.
9:02:46 AM
Ms. Carnot observed that the program is discretionary with
an unspecified beginning and ending date.
9:03:20 AM
Representative Hawker referred to a similar bill about which
he held reservations. He expressed support for the current
bill, but stated his belief that the State would be better
off with a statewide transportation bond.
9:04:21 AM
Representative Weyhrauch asked if the sponsor intended to
exclude areas not known as harbors, but as boat launchings
or docks. Ms. Carnot noted that the initial intent was to
deal with harbors transferred from the State to local
communities. Although these harbors would not be excluded,
they would have to meet the requirements of the program to
qualify.
9:05:36 AM
Ms. Carnot explained that a municipality that owns a harbor
facility may submit an application. The grant may be used
for construction, maintenance or repair.
Representative Weyhrauch observed that in some areas what
would normally be called a boat launch may serve as a harbor
and questioned if it were the intent to exclude such
projects. Ms. Carnot confirmed that there was no intent to
exclude boat launches, although it was not part of the
initial impetus of the bill. Ms. Carnot confirmed that
interaction between the municipality and Department of
Transportation and Public Facilities would determine what
would qualify.
9:09:08 AM
VICTOR WINTERS, STATE HARBORS ENGINEER, testified. He noted
that several boat launches had been transferred from the
state to local communities and that these would be eligible.
Representative Weyhrauch summarized that the legislation
would provide money for facilities transferred from the
State to municipalities. Mr. Winters responded that harbors
would have the first priority; other programs could be
considered subsequently. Representative Weyhrauch questioned
if facilities would have to have been transferred by the
State. Mr. Winters affirmed that other projects could be
considered as a lower priority.
9:11:15 AM
JOHN STONE, ALASKA ASSOCIATION OF HARBOR MASTERS, commented
on the bill. He noted that all 27 communities in the
Association are supportive of the bill, as an effort to
restore the harbor infrastructure. He stated that small
businesses are impacted by the harbor system.
Responding to a reference to Representative Weyhrauch's
question, Mr. Stone commented that all the boat launches
would be eligible, with the first priority going to
supporting the transferred infrastructure, and then to any
new construction. He referred to qualifications, for example
providing 50 percent of the funding, as well as adequate
property loss insurance and a preventive maintenance plan.
9:13:47 AM
KATHIE WASSERMAN, ALASKA MUNICIPAL LEAGUE, spoke in support
of the legislation and noted that the harbors are the
lifeblood of any community. She commented that safe and
improved harbors encouraged sport, tourism and commercial
boats to enter communities. She expressed their support of
the bill, and commended the idea of the fifty percent match
requirement.
9:15:00 AM
Representative Kelly referred to the earlier question, and
asserted that the bill pertained to facilities transferred
to the municipality from the State. Ms. Wasserman thought
that the Title must be transferred.
9:15:39 AM
Representative Weyhrauch questioned the need for title.
9:16:55 AM
Representative Kelly referred to language on page 3, line 5:
(b) The Department of Transportation and Public
Facilities shall award a grant for every proposed
project eligible under AS 29.60.810 that is for repair
and major maintenance of a harbor facility that was
transferred by the state to a municipality before
grants may be made for other proposed harbor facility
projects during a fiscal year. [Underline emphasized by
Representative Kelly]
9:18:48 AM
Ms. Carnot clarified that the sentence referred to by
Representative Kelly, went on to state "before grants can be
made for other proposed harbor facility projects". She
confirmed that the Department of Transportation and Public
Facilities would prioritize the projects yearly.
9:19:52 AM
JOHN WALSH, BRISTOL BAY BOROUGH, testified regarding the
bill. There are two tiers established under the bill,
addressing the needs of the harbors that have been
transferred and require more funds to bring them to code.
The Bristol Bay Borough funded their dock. He noted that the
facility needed to be rebuilt, but that it was uncertain
whether they would apply for this fund. He stressed that the
program may assist communities in their development. He
acknowledged that a tier system exists in the bill, but
stressed that future development is a need and priority. He
pointed out that the program includes a local match. He
emphasized that the program represents a hope for these
communities.
9:22:25 AM
Representative Stoltze observed that there was a zero fiscal
note from the Department of Transportation and Public
Facilities.
Representative Foster asked how the fiscal note could be
zero. Ms. Carnot explained that the grant was subject to
appropriation; no funds were included for the legislation.
Representative Foster MOVED to report SB 291 out of
Committee with the accompanying fiscal note. There being NO
OBJECTION, it was so ordered.
CS SB 291 (CRA) was REPORTED out of Committee with a "do
pass" recommendation and with previously published fiscal
impact note by the Department of Transportation and Public
Facilities: #1.
9:25:31 AM
HOUSE BILL NO. 381
"An Act relating to the financing of construction,
major maintenance, and renovation of facilities for the
University of Alaska; relating to the financing of
construction of a correctional facility; authorizing
the commissioner of revenue to sell the right to
receive a portion of the anticipated revenue from a
tobacco litigation settlement to the Northern Tobacco
Securitization Corporation, with the proceeds of that
sale to finance construction, major maintenance, and
renovation of facilities for the University of Alaska
and to finance the construction of a correctional
facility; providing for the establishment of funds for
deposit of those proceeds; authorizing the issuance of
bonds by the Northern Tobacco Securitization
Corporation for the purpose of acquiring the right to
receive a portion of anticipated revenue from a tobacco
litigation settlement; and providing for an effective
date."
PETER ECKLUND, STAFF, REPRESENTATIVE KEVIN MEYER, noted that
a proposed committee substitute would be available in the
afternoon.
JOE DUBLER, DIRECTOR OF FINANCE, ALASKA HOUSING FINANCE
CORPORATION, testified regarding the bill. He noted their
affiliation with Northern Tobacco Securitization Corporation
(NTSC), which is the issuer of the tobacco bonds. The
original bill only allowed sale of residual interests of the
tobacco receipts that the state of Alaska receives under the
settlement agreement. The residual interest starts in 2015
or 20016. This would require NTSC to sell capital
appreciation or zero coupon bonds, which are commonly
referred to as CAB. He noted problems in the "CAB" market
recently, which have caused problems in a
Fresno transaction. He stated that they became uncomfortable
with CAB as the vehicle for bond sales since the market is
drying up quickly. The anticipated committee substitute
would allow for a full restructure of the existing debt and
a securitization of the residual interest that would revert
to the State once the bonds pay off. It would include
refunding to maximize bond proceeds that the state has
pledged. He explained that the initial two transactions
limited the amount to assure [a return of]: $93 million and
$113 on the transactions. To receive these proceeds the debt
service was shortened.
9:28:44 AM
In response to a question by Representative Weyhrauch, Mr.
Dubler provided more information on the Fresno transaction,
which pertained to the Oppenhemier Fund. The Fund became too
aggressive and they tried to lower their over
collateralization, which caused an investor to cash in.
9:30:20 AM
Representative Weyhrauch referred to earlier testimony and
discussion about transactions timing to maximize benefit.
Mr. Dubler proposed that the timing was not as beneficial at
this time as it was in October 2005, due to rates and the
behavior of CAB vehicles. He noted that as far as interest
spreads, the situation was the same. Responding to a follow
up question, Mr. Dubler commented that rising interest rates
would cost the transaction somewhat.
9:32:06 AM
Representative Weyhrauch asked when the State would proceed.
Mr. Dubler observed that NTSC would begin moving immediately
once it is effective and would generally take 90 days to
complete the transactions.
9:32:37 AM
Representative Foster asked whether there was a companion
Senate Bill. Mr. Ecklund believed that the intent was to
move HB 381, but acknowledged that SB 243 was a companion.
He clarified that Board approval was not needed.
9:33:11 AM
Representative Stoltze HELD the bill in Committee for
further public discussion.
HB 381 was heard and HELD in Committee.
ADJOURNMENT
The meeting was adjourned at 9:34 AM
| Document Name | Date/Time | Subjects |
|---|