Legislature(1997 - 1998)
04/14/1997 01:37 PM Senate CRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 161 PERM. FUND CORP TO MANAGE MUNI ASSETS
CHAIRMAN MACKIE brought SB 161 before the committee as the first
order of business and noted there was a draft committee substitute
for its consideration.
SENATOR BERT SHARP , prime sponsor of SB 161, explained the
legislation authorizes the Alaska Permanent Fund Corporation to
manage the assets of a municipal savings or investment account. He
noted the parameter of a management agreement starts on page 1,
line 9 through the remainder of the bill. These parameters were
set by the corporation as conditions they could accommodate without
compromising their mission. The legislation offers municipalities
the option of investment management services within Alaska and one
in which the average citizen has confidence.
Senator Sharp noted that the bill carries a break-even fiscal note
because the management costs are totally reimbursable to the Alaska
Permanent Fund Corporation by the municipalities based on the
billings rendered by the corporation and the agreements as set out
by the parameters of the bill. He said the original bill put the
payments into the general fund, however, the proposed committee
substitute puts the payments into the earnings reserve account.
Senator Sharp related that the legislation was introduced at the
request of the City of Fairbanks, however, it would give any
municipality the option of engaging the Alaska Permanent Fund
Corporation to manage its assets.
Number 075
SENATOR WILKEN moved the adoption of CSSB 161(CRA). Hearing no
objection, it was so ordered.
Number 095
SENATOR HOFFMAN referred to page 1, line 14, and asked how the
asset value of $50 million was established. SENATOR SHARP replied
that all of the terms that are in the bill were put in at the
suggestion of the Alaska Permanent Fund Corporation.
Number 106
CHAIRMAN MACKIE stated the committee would take testimony via the
teleconference network.
JIM HAYES , Mayor of the City of Fairbanks, said the ownership of
the utilities by the city was an issue that had been around for
some 20 years. The Fairbanks City Council decided the city should
get out of the utility business and that a permanent fund should be
established with the proceeds of the sale. In October 1996, the
voters approved the sale of the utilities as well as a change to
the city's charter to establish a permanent fund. Approval of the
sale of the utilities by the Alaska Public Utilities Commission is
expected sometime this summer. Once the sale has been approved and
the funds have been transferred, the City of Fairbanks would like
to be able to deposit those funds into the permanent fund by the
end of this year.
Number 175
SENATOR PHILLIPS asked who the city utilities are being sold to.
MAYOR HAYES related that PTI is purchasing the telephone utility;
a group of Fairbanks investors have formed a corporation to
purchase the water and sewer utility; and the electric utility is
being purchased by Golden Valley.
HARRY PORTER of Fairbanks advised that he and Cindy Shelling were
members of the City of Fairbanks' permanent fund committee and were
available to respond to questions from the committee.
Number 210
JIM KELLY , Research & Liaison Officer for the Alaska Permanent Fund
Corporation, testifying in Juneau, stated the corporation has not
taken a position on the legislation, but he pointed out that they
have provided a fiscal note showing that it will cost money.
Number 245
SENATOR WILKEN informed the committee that he has a conflict in
that he is one of the 10 investors in Fairbanks Sewer & Water. He
then moved to be excused from voting on SB 161. SENATOR DONLEY
objected. CHAIRMAN MACKIE stated he didn't think there was a
conflict in that this is money that the city has and wants to
invest in the permanent fund. It doesn't have anything to do with
the sale of the utility.
Number 250
SENATOR WILKEN asked how the City of Fairbanks will be able to
access this money once it is deposited with the permanent fund.
MAYOR HAYES said it is his understanding that it will not be a
problem for the city to receive a certain amount every year that it
may need for its operations.
Number 295
SENATOR HOFFMAN asked if the state would have any liability for the
investment of a municipality's funds. MR. KELLY replied that he
didn't know if there was any liability there, but if they don't
make income, they are not paying out any income. It is the
trustees main function is to keep the money safe and to then
produce income with it. There is no guarantee that the fund is
going to produce income. However, he noted the corporation has a
record where they have earned 11.6 percent over the last 13 years.
He added that he would ask the corporation's attorney if there is
any liability and what protection the state would have.
Number 330
KEVIN RITCHIE , Executive Director, Alaska Municipal League, stated
the League sees this as a one municipality issue, and that they do
not have a position on the legislation.
Number 334
SENATOR DONLEY moved CSSB 161(CRA) and the accompanying fiscal note
be passed out of committee with individual recommendations.
Hearing no objection, it was so ordered.
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