Legislature(2003 - 2004)
02/27/2003 09:03 AM Senate FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 51
"An Act relating to revenue bonds issued by the Alaska
Municipal Bond Bank Authority and the total amount of bonds
and notes outstanding of that authority; and providing for an
effective date."
Co-Chair Wilken gave a brief overview of the legislation, sponsored
by the Senate Rules Committee by request of the Governor, as
follows.
SB 51 increases the Alaska Municipal Bond Bank's total
borrowing limit from $300 million to $500 million. In
addition, the amount of revenue bonds may be issued in any one
fiscal year is increased from $50 million to $75 million. The
current limits have not been raised since 1983 and 1984.
LARRY PERSILY, Deputy Commissioner, Department of Revenue, gave a
history of the Alaska Municipal Bond Bank Authority (MBBA) created
in 1975 to assist municipalities in issuing debt for projects. By
working through the bond bank authority, he stated, municipalities
could obtain lower interest rates on debt and lower issuance costs.
He stressed that the debt is not the State's, but rather general
obligation bonds or revenue bonds issued by municipalities.
Mr. Persily listed the first statutory borrowing limit of the MBBA
as the $50 million annual limit on the amount of revenue bonds that
could be issued during any one year, which has not increased in 20
years. He furthered that the second statutory limit is the $300
million maximum total general obligation and revenue debt that
could be carried by the MBBA at any one time. This statute, he
reminded has been in place since 1984.
Mr. Persily assured that the MBBA has sufficient reserves to
continue financing at the proposed higher levels. He informed that
the MBBA reserves are utilized to pay the costs of the Authority as
well as pay annual dividends to the State treasury.
Mr. Persily reported that the Authority has issued $27 million in
revenue bonds in FY 03 to date with an additional $50 million
possible. He remarked this would be a record amount, although it
would be above the statutory annual limit of $50 million.
Mr. Persily furthered that the total debt amount of the MBBA was
$235 million in January 2003. He stated that the possible
additional issuances in the remainder of FY 03, plus issuances in
FY 04, would increase the total debt and the $300 limit would
almost be reached.
Mr. Persily listed the proposed projects for which revenue bonds
have been issued in FY 03 as follows.
Juneau hospital expansion $25 million
Juneau port improvements 5.6 million
Valdez hospital replacement 19 million
Lake Peninsula Borough dock project 1 million
City of Homer seawall 1 million
City of Homer dock improvements 1 million
Kenai Peninsula Borough solid waste project*
City of Fairbanks fire protection facility*
*amount not available
Mr. Persily then listed the proposed projects for which general
obligation bonds have been issued in FY 03 as follows.
Northwest Arctic Borough school projects*
City of Petersburg refinancing existing debt $1 million
Aleutians East Borough school project*
Kodiak Island Borough refinancing existing debt $3 million
*amount not provided
Co-Chair Green asked how additional revenue would be generated and
additional expense incurred yet no changes are reflected in the
fiscal note, which is zero.
Mr. Persily compared preparation of the annual budget for the MBBA
to that of projecting oil prices; it is difficult to accurately
estimate the future activity. He explained that in years of less
than anticipated issuance activity, the MBBA expends fewer funds,
and in years of higher activity, a supplemental budget request is
submitted to cover the additional expenses. Therefore, he stated,
the fiscal note does not reflect additional funds, as the intention
would be to request supplemental funds if activities in FY 04 are
higher than anticipated. He exampled that the FY 03 initial
appropriation was $522,700 and because of higher activity the
Department has requested $142,000 supplemental funding to cover
bond issuance expenses.
Co-Chair Green asked if the FY 03 supplemental request is for
reimbursement of funds already expended.
Mr. Persily corrected that the funds have not yet been expended
although they would be expended by the end of March 2003 if this
legislation were to pass, thus allowing additional bond issuances.
Co-Chair Green wanted to know the consequences if this bill did not
pass into law and the supplemental request was approved.
Co-Chair Wilken commented that this bill should pass.
Mr. Persily responded that once $50 million limit was reached those
remaining communities requesting bond issuance in FY 03 would be
instructed to reapply the following fiscal year.
Senator Hoffman asked the delinquency rates.
Mr. Persily assured that no community has every defaulted on a
Municipal Bond Bank loan.
Senator Hoffman clarified his request for the instances of overdue
payments.
Mr. Persily would provide this information.
Senator Olson pointed out that the increase from $300 million to
$500 million would almost double the amount of bonded indebtedness
of the MBBA. He asked the impact this would have on the bond
rating.
Mr. Persily responded that the MBBA currently has sufficient
reserves to cover a $500 million debt, and therefore the increase
would not jeopardize the bond rating. He furthered that each bond
issuance is rated individually based upon the specific project and
municipality involved.
Mr. Persily then elaborated on the decision to request the
authority for a limit that would be viable for several years to
avoid the need to make repeated requests over the same period of
time. He also noted that several municipalities are now funding
projects rather than obtaining funding from the State and federal
governments. Therefore, he expected more bonds would be issued.
Senator Taylor offered a motion to report SB 51 from Committee.
Without objection SB 51 moved from Committee with individual
recommendations and zero fiscal note #1 from the Department of
Community and Economic Development and zero fiscal note #2 from the
Department of Revenue.
CHANGE IN LONGEVITY POLICY
PAM VARNEY, Executive Director, Legislative Affairs Agency,
testified that the Senate and House of Representatives employment
policy has been in effect since 1988 "and has worked well for the
Legislature with the exception of longevity steps J through M." She
cited AS 39.27.022(d), which permits a committee of the Legislature
to determine whether longevity pay increments would be granted
under this statute to employees under the authority of that
committee. She requested the Senate Finance Committee not adopt
this portion of the statute, but rather adopt a separate policy.
Ms. Varney informed the Members of the other committees that voted
to not adopt this policy: Senate Rules Committee on February 3,
2003; House Rules Committee on February 4; Legislative Council on
February 20; Administrative Regulation Review Committee on February
19. She furthered that the House Finance Committee and the
Legislative Budget and Audit Committee have scheduled this matter
for consideration. She noted that if all committees take this
action, the Legislature would have a consistent policy throughout
the Legislative Branch.
Ms. Varney specified the difficulties with the term "continuous" as
contained in current statute. She explained that some staff work
for different legislators at various wage steps, or work at
different pay ranges during the legislative session and the
interim. These employees, she stated, would not qualify for
scheduled step increases because the salary steps are not
continuous.
Ms. Varney referenced proposed language, which does not include the
word "continuous." [Copy on file.]
Senator Olson asked the disadvantages of adopting the different
policy.
Ms. Varney was unaware of opposition and could not perceive any
disadvantages. She stressed that staff to both Majority and
Minority legislators are affected, as well as those in nonpolitical
positions.
Co-Chair Green offered a motion that the Senate Finance Committee
not adopt AS 39.27.022-Pay increments for longevity for State
service but instead adopt their own plan, which better applies to
legislative service. This new policy is before the Members and
would be effective January 16, 2003.
There was no objection and the motion PASSED.
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