Legislature(2015 - 2016)SENATE FINANCE 532
04/15/2015 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB53 | |
| SB46 | |
| HB140 | |
| HB158 | |
| HB161 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 53 | TELECONFERENCED | |
| += | SB 46 | TELECONFERENCED | |
| += | HB 140 | TELECONFERENCED | |
| += | HB 158 | TELECONFERENCED | |
| += | HB 161 | TELECONFERENCED | |
SENATE BILL NO. 46
"An Act relating to the Alaska Municipal Bond Bank
Authority; authorizing the Alaska Municipal Bond Bank
Authority to issue bonds or notes for a regional
health organization; and providing for an effective
date."
9:06:57 AM
Vice-Chair Micciche MOVED to ADOPT the proposed committee
substitute for SB 46, Work Draft 29-LS0447\1 (Wallace,
4/14/15). Co-Chair MacKinnon OBJECTED for discussion.
ERIN SHINE, STAFF, SENATOR ANNA MACKINNON, explained the
committee substitute allowed for regional health
organizations to utilize the municipal bond bank to assist
to provide health care facilities by providing capital
funds through loans. She stated that the committee
substitute lowered the amount from $250 million to $205
million as the total the bond bank could finance for
regional health organizations. The committee substitute
also allowed for the bond bank to finance no more than 49
percent of any one project. In addition, the 49 percent
financing was contingent on the balance or 51 percent of
the total project costs being secured or delivered prior to
bonding. The last change in the committee substitute stated
that no single regional health organization borrower could
access more than 50 percent of the $205 million bonding
authority. The committee substitute also allowed for joint
action agencies to utilize the bond bank. She added there
were also some conforming and technical changes in the
committee substitute.
Co-Chair MacKinnon remarked that there was a requested
amendment from Trey Acteson during the public testimony
hearing to allow CEP out of Petersburg, Ketchikan, and Swan
Lake, therefore allowing the joint action agency declared a
political subdivision. There was not clear direction about
whether they qualified for the bonds.
9:09:46 AM
DEVEN MITCHELL, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL BOND
BANK AUTHORITY, DEPARTMENT OF REVENUE, explained that the
joint action agencies were similar to port authorities, in
as much as they were created by a conglomeration of
municipalities for delivering energy to the communities.
Therefore, the joint action agency was similar to a current
mandate within the bond bank.
Senator Dunleavy wondered if the bill was an appropriate
method, and queried any concerns that Alaskans may
experience related to the legislation. Mr. Mitchell asked
if Senator Dunleavy referred to the joint action agency or
the broader aspects of the bill.
Senator Dunleavy clarified that he was referring to the
committee substitute. Mr. Mitchell stated that the
suggested changes would alleviate some concerns that were
discussed in the committee. The addition of the joint
action agency did not cause any concern, because it was a
similar mission to the current mission. He stated that the
bank already lent money to the region for electric generate
cost, and was only a portion of the electrical generation
provided to the region. The regional health organization
lending was new to the bond bank. The committee substitute
provided some comfort, because 51 percent of the project
was a fund requirement from other sources, so there were
borrowing partners. There were also partners in evaluating
credit, with less exposure on a per loan and project basis.
9:12:24 AM
Senator Dunleavy asked if the bill would provide a low risk
high return outcome. Mr. Mitchell replied in the
affirmative. He stated that there would be significant
financial benefits to regional health organizations for any
portion of the project financing that was accomplished
through the bond bank.
Senator Dunleavy wondered if the bill would be a low risk
high return for the state itself. Mr. Mitchell deferred to
the Department of Health and Social Services (DHSS). The
discussed project would increase the level of health care
to the region, to the extent that the state paid for the
cost through matching federal programs, the costs would be
reduced.
Senator Dunleavy asked if the bill was low risk or medium
risk specifically for the state. Mr. Mitchell responded
that it must be low risk. There must be 100 percent
expectation of loan repayment.
Senator Dunleavy wondered if there were any issues
regarding the addition of the energy entities. Mr. Mitchell
replied in the negative.
Vice-Chair Micciche stressed that the state was not issuing
bonds, rather the state was issuing the authorization for
the bank to issue a bond. He requested a short discussion
regarding due diligence and risk evaluation, in order to
assure the public that the committee was not authorizing
the issuance of a specific bond. He queried the process for
issuing bonds. Mr. Mitchell replied that the bond bank
program was a loan program. The bank had a long history of
loans that had 100 percent repayment. The process required
an entity to provide an application; the application was
reviewed by the bank staff; then reviewed by a third party
financial advisor; resulting in a loan recommendation. He
explained that there were often scenarios that outlined
credit enhancements through the loan structure, to ensure
loan repayment. The bank would then provide a positive
recommendation to the board, and the board must approve the
loan. He stated that the board approved more than 90
percent of the loan recommendations, but only after
significant discussion. He shared that there was occasion
where the board suggested additional work prior to an
entered loan. The bank often refined the structure, and
returned to the board at a later date. He stated that the
bank tried not to deny an application, but rather suggest
appropriate alternatives.
Vice-Chair Micciche queried the state's input in the
decision making process. Mr. Mitchell replied that the
state's involvement depended on the specific partners. He
remarked that the bank did not have a title interest, but
rather a pledge of revenue generation related to the
actions of an enterprise.
9:23:06 AM
Co-Chair MacKinnon REMOVED her objection. There being NO
further OBJECTION, Work Draft 29-LS0447\1 was ADOPTED.
Co-Chair MacKinnon wondered if the committee substitute
provided an acceptable solution to provide Bethel an
opportunity to follow through on a process while still
protecting the state. Senator Hoffman replied that the
committee substitute accomplished the proposed goals, and
would broaden the liability, and reduces the exposure by
the state. He remarked that the corporation felt that they
could accomplish their original goal. He stated that Bethel
had some of the highest cost of living with the lowest
health care in the state, which encompassed an area nearly
the size of the state of Washington. The loan would provide
funds for a major health care facility in the region;
provide increased health care services, which would
eventually improve the health care in the region; provide
an additional 200 jobs; the jobs would then spur additional
housing to the region. He felt that the legislation was
beneficial to both the state and the Yukon-Kuskokwim Delta.
Senator Dunleavy wondered if there would be a fiscal note
discussion. Co-Chair MacKinnon replied in the affirmative.
9:26:40 AM
Co-Chair MacKinnon looked at the original version of the
legislation and noted that there were some anticipated GF
dollars. She wondered if the bank needed an additional $20
million of GF for the reserve accounts to balance the
bonds. Mr. Mitchell responded that the discussion related
to the previous size, and the reserve requirement would
diminish. He remarked that the bank had a reserve account
to buy an assuredy policy for the purpose of purchasing the
increased reserve requirement. The cost would then pass
through to the Regional Health Organization.
Co-Chair MacKinnon wondered what the bond bank would need
from the state, if the request was moved forward. Mr.
Mitchell responded that the reserve requirement would be
diminished by the downsizing of the authority.
Senator Dunleavy asked why access to the municipal bond
bank to joint action agencies was in the best interest of
the state, when they already have the power of a public
facilities. Mr. Mitchell responded that there were often
many different alternatives to entities. He stated that the
organization had an alternative, but the bond bank provided
a lower cost alternative. He stated that there was a time
when the bank could not fund municipal requests for power
generation. Those statutes were amended first to allow the
bond bank the authority for diesel power generation, and
subsequently hydroelectric power generation.
9:31:38 AM
Senator Dunleavy he wondered if the state's credit would
back the project to a level where revenue bonds could be
used. Mr. Mitchell replied that the full faith in credit
would not be pledged, rather the state would pledge a moral
obligation.
Senator Dunleavy wondered if the ceiling for the bond bank
was aggregate or single project. Mr. Mitchell replied that
the limit was $1.5 billion for municipal loans, and an
additional $87.5 million for power/heating projects. He
stated that the bill would provide an additional $205
million authority. The $1.5 billion for the general program
had approximately $40 million paid off bonds per year,
which resulted in a $40 million cap retirement per year.
Senator Dunleavy queried the number allowed in the
legislation. Mr. Mitchell replied that the committee
substitute provided $205 million for the Regional Health
Organization lending.
Co-Chair MacKinnon furthered that the maximum for the
legislation was approximately $100 million. She explained
that the $205 million was set to allow other regional
corporations to have funding available under the same
circumstances. She shared that it was better to have more
than one candidate in the pool. Mr. Mitchell agreed.
Senator Dunleavy looked at page 7, lines 23 through 25. Co-
Chair MacKinnon shared that no one single project can
maximize the use of over 50 percent of the funds. Mr.
Mitchell agreed
9:36:11 AM
Vice-Chair Micciche looked at page 7, lines 23 through 25,
and noted that the paragraph on the limitation did not
apply to bonds or notes issued to fund or refund. He
wondered if that section meant that the bond bank could
refinance debt in addition to the $205 million, which was
not originally issued by the bond bank. Mr. Mitchell
replied that the language mirrored language in Section C
for the main program of the bond bank. The inclusion of the
language was not intended for an extra limit for
refinancing opportunities. It was intended to allow for the
mismatch between a potential refinancing, and the paying
off of outstanding bonds. There could be a multi-year
differential between when a bond was refinanced, and when
it was ultimately paid off.
Vice-Chair Micciche remarked that the corporation had some
substantial funds in a permanent fund, and wondered if that
was a consideration in the due diligence in evaluation. Mr.
Mitchell responded that the balance sheet of the entity was
involved in the consideration of the loan, but those assets
were only pledged as a revenue source. The corporation
could choose to not offer the assets as collateral. The
bank was more interested in the ongoing viability of the
organization, and its ability to cover the debt in addition
to its current operation.
Vice-Chair Micciche surmised that a health care facility in
Anchorage would remain marketable. He felt that a large
health care facility may not have a large revenue stream in
a smaller community like Bethel. He wondered if location
was considered when determining the loan. Mr. Mitchell
replied that the value of assets did not typically go into
the analysis, as much as the title interest in the building
as security for the loan.
Co-Chair MacKinnon remarked that the funding was available
for only regional health corporations or any private health
corporations. Mr. Mitchell replied that the funds would be
intended for regional health corporations as defined in
statute.
9:41:12 AM
Senator Bishop assumed that the utility would pass the
savings as lower rates to the consumers because of the
lower cost of borrowing. Mr. Mitchell agreed.
Vice-Chair Micciche addressed the fiscal notes.
9:44:00 AM
AT EASE
9:45:29 AM
RECONVENED
9:45:33 AM
Vice-Chair Micciche commented that the fiscal note needed
to be updated.
Vice-Chair Micciche looked at the indeterminate fiscal note
from Department of Health and Social Services.
Co-Chair MacKinnon queried the expected changes in the
forthcoming fiscal note. Mr. Mitchell replied that the
fiscal note services line would be diminished similar to
the size of the issuance authority.
Co-Chair MacKinnon queried costs related to adding the
joint agencies. Mr. Mitchell did not anticipate any added
costs.
9:48:58 AM
AT EASE
9:50:52 AM
RECONVENED
9:51:00 AM
Senator Hoffman commented that the legislation was a unique
opportunity to finance and improve health care in rural
areas of the state.
Senator Bishop echoed Senator Hoffman's comments. He
supported the committee substitute, and felt that it was a
reasonable compromise.
Senator Olson remarked that he had practiced medicine in
the rural offices, and shared that there was a great lack
of facilities in some villages.
Vice-Chair Micciche MOVED to REPORT CSSB 46(FIN) out of
committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CSSB 46(FIN) was REPORTED out of committee with a "do pass"
recommendation and with one new zero fiscal note from the
Department of Revenue; and one new indeterminate fiscal
note from the Department of Health and Social Services.
9:54:52 AM
AT EASE
9:56:49 AM
RECONVENED
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 158 - Alper to MacKinnon re HB158-SB86 4-09-15.pdf |
SFIN 4/15/2015 9:00:00 AM |
HB 158 SB 86 |