Legislature(2013 - 2014)HOUSE FINANCE 519
04/16/2014 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB191 | |
| SB129 | |
| SB138 | |
| SB140 | |
| SB194 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 140 | TELECONFERENCED | |
| + | SB 129 | TELECONFERENCED | |
| += | SB 169 | TELECONFERENCED | |
| += | SB 138 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 194 | TELECONFERENCED | |
| += | SB 191 | TELECONFERENCED | |
CS FOR SENATE BILL NO. 140(FIN)
"An Act creating the Arctic infrastructure development
program and fund in the Alaska Industrial Development
and Export Authority; and relating to dividends from
the Alaska Industrial Development and Export
Authority."
3:04:54 PM
Co-Chair Stoltze noted the intent to hear an explanation of
the bill, brief questions, and public testimony.
JESSEE LOGAN, STAFF, SENATOR LESIL MCGUIRE, addressed the
legislation. The bill would create an Arctic Infrastructure
Development Fund within the Alaska Industrial Development
and Export Authority (AIDEA) and addressed one of the
principle elements in the Alaska Arctic Policy Commission's
(AAPC) legislative package. He detailed that the AAPC had
been created to prepare the Arctic policy and
implementation plan for the state for the legislature's
consideration. The bill would attract private investment to
pair with public investment in Alaska's infrastructure in
the Arctic. Although AIDEA currently had the authority to
invest in many of the areas, it had no specific programs
directed to attract private investment. There were specific
limitations to the package financing. He asked for the
committee's preference on how to proceed.
Co-Chair Stoltze asked for a brief description of the goals
and aspirations of the bill.
Mr. Logan addressed the sectional analysis. Sections 1
through 8 were boiler plate and put the Arctic
Infrastructure Development Fund in line with other funds
within AIDEA (e.g. the revolving fund and the Sustainable
Energy Transmission and Supply Development Fund (SETS)).
Additionally, the sections described net income, ways to
generate incentive packages within the funds, and what the
funds consist of. He spoke to the limitations on financing.
For land-based infrastructure AIDEA would be authorized to
give loans for one-third of the capital cost or loan
guarantees up to $20 million. There was a project life of
up to 40 years; AIDEA was also authorized to provide
securities for bond guarantees. Page 7, lines 9 through 15
included a fisheries provision, which was limited to loan
guarantees only (no direct loans) because the Alaska banks
were currently very active in the sector; the sponsor did
not want to create undo competition. The loan guarantees
had a floor of $7 million to ensure that it did not
conflict or create competition with other state or federal
programs. Additionally, the loan guarantee could not exceed
more than one-third of the project's capital costs. The
eligibility for the loan guarantees would be the purchase
or repair of vessels used in federally managed fisheries or
the purchase of quota shares or individual quota shares in
federally managed Arctic fisheries.
Co-Chair Stoltze asked for a description of the fisheries
in the Arctic. Mr. Logan replied that the fisheries were
primarily cod and pollock fisheries. The bill looked
primarily at Bering Sea fisheries that included mostly
large fisher/processor trolls. He relayed that most of the
fishing entities were located outside of Alaska. He
explained that because AIDEA was forbidden to operate
outside of Alaska, any fishing entity taking advantage of
the financing opportunity would be required to relocate to
Alaska. The purpose of the provision was to repatriate some
of the quotas and vessels to the state.
Co-Chair Stoltze asked how large the boats were. Mr. Logan
did not know.
3:09:30 PM
AT EASE
3:09:41 PM
RECONVENED
Mr. Logan replied that the fund did not specifically choose
winners or losers or look for specific projects; it would
wait for private entities to seek out the funding. He did
not know who would be seeking the funds.
Co-Chair Stoltze wondered about the vessel size and asked
if they would be trawlers or draggers. Mr. Logan believed
the vessels would be trawlers and processors. He relayed
that Sarah Lunkin with PT Capital was available to answer
detailed fishery provision questions.
Co-Chair Stoltze asked for verification that PT Capital was
a private entity. Mr. Logan replied in the affirmative.
Representative Edgmon took exception to use of the word
Arctic because technically it was the Bering Sea. He noted
that the federal definition of the Arctic extended down
into the upper Bering Sea. He asserted that there were
currently no fisheries in the Arctic and may not be for the
next 50 years.
3:11:03 PM
Representative Costello asked for verification that outside
companies would be able to benefit from the bill's
fisheries provision. Mr. Logan replied in the affirmative.
He added that the asset taking advantage of the funds or
loaned against would be required to remain in Alaska.
Representative Costello asked if the asset could also be
repatriated. Mr. Logan answered in the affirmative.
Representative Costello noted that geographically Alaska
was an Arctic nation. However, the infrastructure fund
would only benefit projects in one region of the state. She
wondered why the fund should not apply to the entire state.
Mr. Logan pointed to page 8, lines 4 through 7 that defined
the state's geographical boundary of the Arctic. He pointed
to a map included in members' packets that had been taken
from the federal Arctic Region Policy Act of 1990 (copy on
file). The map included all areas north of the Arctic
Circle to the north and west of the Yukon boundary; it also
included the Bering Sea. He referred to the definition of
Arctic development on page 7 of the bill, which included
the construction, improvement, rehabilitation, or expansion
of a facility in the Arctic to aid in development or meet
emergency response or anywhere in the state if the
construction, improvement, rehabilitation, or expansion
supported the further development of a facility in the
Arctic.
Representative Costello asked for the location in the bill.
Mr. Logan pointed to page 8, lines 8 through 15 that
included the Arctic infrastructure development definition.
In response to Representative Edgmon's comment, he agreed
that the bill pertained mostly to the Bering Sea; however,
because the bill used the definition of the Arctic it also
used the language "federal fisheries in the Arctic." He
agreed that there were no fisheries located north of the
Arctic Circle; there was a moratorium on any fisheries in
the location for the foreseeable future.
Representative Costello surmised that there would be a
hurdle that would need to be overcome in lines 13 through
15. She wondered if it would be a substantial hurdle or one
that could easily be overcome.
Mr. Logan answered that it would depend on the individual
project. The purpose of the bill was to create incentives
for infrastructure in the state's least developed areas. He
elaborated that if development in other areas would further
the development in the state's least developed areas (i.e.
the Arctic) they would be eligible. He provided the deep-
water draft port in the Arctic as an example. The Army
Corps of Engineers had identified Port Clarence as a likely
target. He expounded that for the project to be built over
the course of several years, staging grounds in other ports
would be necessary due to the limited amount of shipping
available for the area. Other ports may include Dutch
Harbor, Seward, or Ketchikan. He stated that if storage
capacity was increased in the areas to provide for staging
they would be eligible for the funds.
Representative Costello asked how the dividend aspect
worked in the bill. Mr. Logan referred to page 2, lines 14
through 19. The dividends were the same as those set up
from the revolving and SETS funds. He explained that
between 25 and 50 percent of money the fund earned through
loan proceeds would be returned to the general fund
annually. For example, in the current year AIDEA's
dividends provided approximately $20.5 million to the
general fund.
3:15:30 PM
Co-Chair Stoltze asked if the SETS fund was a model for the
bill's fund. Mr. Logan answered in the affirmative.
Co-Chair Stoltze wondered if the fund would be drained in
two years. Mr. Logan replied that the bill did not seek
capitalization at present; therefore, there was nothing to
drain.
Co-Chair Austerman referenced the building of ports. He
stated that fisheries was only a portion of the bill. He
spoke to the original intent of the bill to develop areas
that were not developed in the Arctic.
Representative Wilson asked for verification that one of
the projects would not qualify under AIDEA's current
structure. Mr. Logan replied that AIDEA could invest in
infrastructure in most of the areas contained in the bill;
however, there was no existing provision to specifically
attract outside investment. The loan limitations in the
bill were a signal to outside investors that the state
would help provide capital at a slightly reduced rate if
investment was brought to Alaska.
Representative Wilson wondered how the commission was
connected and if AIDEA would look for private investors.
Mr. Logan replied that the commission was not connected to
AIDEA in any way. He assumed AIDEA could market the fund if
it chose to do so, but that was not the sponsor's
intention. The intention was to provide AIDEA with another
tool and to allow companies to submit proposals.
Representative Wilson thought most of the items in the bill
(with the exception of fisheries provisions) could
currently occur through AIDEA. She wondered about the
purpose of the bill. She remarked that it made sense for
AIDEA to look for businesses to bring back to Alaska.
Mr. Logan could not speak to AIDEA's marketing ability. He
explained that the bill created an incentive. Currently,
AIDEA's funds were not designed to be limited to certain
portions of the capital investment or the overall costs
(with the exception of the SETS fund). Without legislative
approval AIDEA could not issue a loan for more than one-
third of the capital cost; however, the loan for one-third
of the capital cost could be significantly below market
value, which would be a trigger to investors. He did not
know whether AIDEA would actively seek the investors.
3:19:43 PM
Representative Costello remarked on Mr. Logan's testimony
that there was no connection between AIDEA and the Arctic
Policy Commission. She wondered whether the commissioner of
the Department of Commerce, Community and Economic
Development (DCCED) sat on both boards.
Mr. Logan replied that AIDEA had its own board; in statute
the participants were referred to as members, but in
practice it was a board of directors.
Representative Costello asked whether the commissioner of
DCCED sat on the board. Mr. Logan believed so.
Co-Chair Stoltze replied in the affirmative.
3:20:52 PM
RON LONG, MANAGER, CITY OF SEWARD (via teleconference),
spoke in support of the legislation. He highlighted his top
five reasons for supporting the bill. First, the
legislation did not ask for capitalization and used AIDEA's
authority to guarantee loans and transfer between funds. He
stated that the Alaska Arctic Policy Commission identified
that needs and opportunities in the Arctic would generate
billions in private capital that would go to the region.
Second, the bill would allow AIDEA to give Alaska
businesses better-than-market rates to move the money
through the state's resources (e.g. oil and gas, response,
search and rescue, tourism, fisheries, and economic
sectors). He believed the definition of Arctic
infrastructure recognized that ports outside the geographic
arctic would play a critical logistics and support role in
developing the Arctic. Third, the bill made Alaskan ports
more competitive than outside ports; it would take several
Alaska ports to get everything accomplished. Fourth, the
fisheries component created an economic reason for the 90
percent of the federally managed Bering Sea fisheries
currently monetized out-of-state to home port in Alaska,
adding to the 10 percent currently allocated to the CDQ
[Community Development Quota] programs. Fifth, he believed
the federal government had done little to advance Alaska's
goals in the Arctic; however, the bill would enable Alaska
to make the U.S. a participant rather than an observer.
Co-Chair Stoltze referred to a resolution on by-catch. He
spoke to concern about bringing in by-catch with a
conflicting goal of bringing more by-catch in for
subsidizing. Mr. Long replied that the bill did not add a
new quota to fully allocated fisheries. He surmised that
the bill may change some of the quota ownership from non-
Alaskans to Alaskans.
Co-Chair Stoltze asked if it was okay for Alaskans to by-
catch Chinooks. Mr. Long answered in the negative.
3:23:24 PM
SARAH LUNKIN, CEO, PT PUBLIC POLICY, LLC, shared
information about the company. She explained that the
company was the only private equity firm headquartered in
Alaska that was focused exclusively on deploying capital in
the Arctic. The company expected to deploy approximately 80
percent of the total money raised in Alaska; the other 20
percent would be deployed in Iceland, Greenland, and
Canada.
Co-Chair Stoltze appreciated the information.
Ms. Lunkin thanked the sponsors for their work on the bill.
She shared that PT was currently in the midst of speaking
with global investors about deploying significant capital
in Arctic Alaska. She planned to speak primarily on the
bill's fisheries provision.
Co-Chair Stoltze asked for information about other
provisions as well.
Ms. Lunkin clarified that the fisheries provision was
focused on AIDEA financing federally managed industrial
fisheries in the Bering Sea. The Alaska fishing industry
was the largest employer in Alaska and was the third
largest industry in the state; nearly 60,000 Alaskans were
employed in commercial fishing and seafood processing. She
stated that an additional 11,000 jobs in the state were
created by support services industries. She relayed that
most additional jobs created by Alaska's fisheries were
located outside of Alaska. She stated that the company saw
the provision as bringing some of the outside fisheries
jobs back to Alaska. She detailed that jobs would be
brought back in-state if AIDEA had the ability to guarantee
bank loans for quota and or vessels used in the Bering Sea
for fisheries including pollock, crab, and cod. The
fisheries provision also provided AIDEA loans for shore-
based plants, facilities, and equipment within the State of
Alaska that were used in support of the Bering Sea fishery.
The company believed the bill would increase economic
development, infrastructure, opportunities, and keep jobs
and profits in-state.
3:27:56 PM
Representative Wilson asked what new authority the bill
would provide to AIDEA.
TED LEONARD, EXECUTIVE DIRECTOR, ALASKA INDUSTRIAL
DEVELOPMENT AND EXPORT AUTHORITY (via teleconference),
answered that the bill would establish a new fund that
would allow AIDEA to move forward on Arctic projects
assisted by the legislature. He communicated that AIDEA had
the ability to finance the projects through its revolving
fund, but there were side bars for a sample of loan
participation that allowed the agency to provide investment
at its cost of capital. He noted that development projects
through the agency's development program were based on its
cost of capital. The different fund would allow the agency
to assist the legislature with projects that it wanted to
fund and allowed the legislature to set the type of cost of
capital for the project; it also set limits on investment.
Additionally, the bill would allow the legislature to
increase the investment amount through legislation. He
provided the Interior energy project funded by the SETS
program as an example. Under the SETS program the
legislature had instructed AIDEA to invest up to $125
million in low-cost loans at a rate of no more than 3
percent and had provided a capital appropriation to use in
combination with the loans. He elaborated that the fund
would allow the same type of flexibility for the
legislature to use AIDEA as a tool in financing projects
that it wanted to move forward. Finally, the bill set up a
different fund; therefore, it would not impact the bond
rating of the AIDEA revolving fund and funding of other
projects.
3:31:40 PM
Representative Edgmon spoke in support of the bill that he
believed was forward looking. He believed the bill dealt
with an issue that was not presently on the radar of the
mainstream public. He stated that things were happening
quickly associated to the potential opening of the Arctic
and issues pertaining to the Arctic Policy Commission. He
viewed the bill as providing similar building blocks as
those that had led the legislature to the current gas
legislation. He opined that the opening of the Arctic would
mean bigger things for Alaska. He noted that the fund
focused on fisheries.
Co-Chair Stoltze made a remark about the state's commercial
fisheries.
CSSB 140(FIN) was HEARD and HELD in committee for further
consideration.
3:33:45 PM
AT EASE
3:43:27 PM
RECONVENED
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 191 CS WORKDRAFT FIN C VERSION.pdf |
HFIN 4/16/2014 1:30:00 PM |
SB 191 |
| CSSB 140 (FIN) Letters of Support.pdf |
HFIN 4/16/2014 1:30:00 PM |
SB 140 |
| CSSB 140 (FIN) Sectional Analysis.pdf |
HFIN 4/16/2014 1:30:00 PM |
SB 140 |
| CSSB 140 (FIN) Summary of Changes ver U to ver E.pdf |
HFIN 4/16/2014 1:30:00 PM |
SB 140 |
| CSSB 140 (FIN) Supporting Document-Planning and Infrastructure Section of AAPC Preliminary Report.pdf |
HFIN 4/16/2014 1:30:00 PM |
SB 140 |
| CSSB 140 (FIN) Sponsor Statement.pdf |
HFIN 4/16/2014 1:30:00 PM |
SB 140 |
| CSSB 140 (FIN) Supporting Document-ARPAPolar map.pdf |
HFIN 4/16/2014 1:30:00 PM |
SB 140 |
| SB 138 4.16.14 HFIN Response to Rep Gara Questions.pdf |
HFIN 4/16/2014 1:30:00 PM |
SB 138 |
| SB 138 4.15.14 House Finance 830 AM DOR Notes.pdf |
HFIN 4/16/2014 1:30:00 PM |
SB 138 |