Legislature(2005 - 2006)BELTZ 211
02/15/2006 01:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB265 | |
| SB193 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 265 | TELECONFERENCED | |
| *+ | SB 248 | TELECONFERENCED | |
| += | SB 193 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
February 15, 2006
1:35 p.m.
MEMBERS PRESENT
Senator Bert Stedman, Chair
MEMBERS ABSENT
Senator Gary Stevens, Vice Chair
Senator Thomas Wagoner
Senator Johnny Ellis
Senator Albert Kookesh
COMMITTEE CALENDAR
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."
HEARD AND HELD
SENATE BILL NO. 248
"An Act relating to administrative boroughs; relating to
municipal school districts; relating to standards for
incorporation of boroughs and unified municipalities;
eliminating obsolete provisions relating to a third class
borough and making technical changes to statutes relating to
regional educational attendance areas; and relating to new
borough grants for certain newly incorporated boroughs and
unified municipalities."
SCHEDULED BUT NOT HEARD
SENATE BILL NO. 193
"An Act relating to an optional deferral of municipal property
taxes on certain primary residences owned and occupied by
individuals with incomes at or below federal poverty guidelines
for the state."
SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: SB 265
SHORT TITLE: BONDS OF BOND BANK AUTHORITY
SPONSOR(s): SENATOR(s) STEDMAN
02/03/06 (S) READ THE FIRST TIME - REFERRALS
02/03/06 (S) CRA, FIN
02/15/06 (S) CRA AT 1:30 PM BELTZ 211
WITNESS REGISTER
Miles Baker, Staff to Senator Stedman
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Introduced SB 265
Deven Mitchell, Executive Director
Municipal Bond Bank
Department of Revenue
PO Box 110400
Juneau, AK 99811-0400
POSITION STATEMENT: Discussed the Bond Bank Authority and
answered questions related to SB 265
Kathie Wasserman, Deputy Director
Alaska Municipal League
Juneau, AK 99801
POSITION STATEMENT: Testified in support of SB 265
ACTION NARRATIVE
CHAIR BERT STEDMAN called the Senate Community and Regional
Affairs Standing Committee meeting to order at 1:35:23 PM. Chair
Bert Stedman was present.
SB 265-BONDS OF BOND BANK AUTHORITY
1:36:17 PM
CHAIR BERT STEDMAN announced SB 265 to be up for consideration.
He invited Mr. Baker to come forward and introduce the bill.
1:37:09 PM
MILES BAKER, Staff to Senator Stedman, explained the bill seeks
to increase the bonding authority of the Alaska Municipal Bond
Bank from the current $500 million statutory cap to $750
million. This would be the first increase since 2003 when the
cap was raised from $300 million to $500 million.
The Alaska Municipal Bond Bank was designed to help communities
secure financing for public works projects and since its
inception in 1975 it has helped with financing for over $800
million in public works projects. In that time it returned $26.9
million in excess earnings to the state in the form of
dividends.
In FY05 the authority issued $123.0 million in bonds, which
funded $119 million in 20 loans to 16 communities across the
state. Based on the bond issuances in FY06, the bank should
return dividends of $652,000. Recent projects include:
· School construction in Kodiak, Petersburg, Sitka and
Ketchikan
· Harbor improvements in Adak
· Hospital in Juneau
· Street Improvements in North Pole
· Ice Rink in Palmer
· Roof repairs for the Anchorage Performing Arts Center
· Outstanding bonds for Fairbanks, Cordova, Unalaska and
the Northwest Arctic Borough were refinanced at lower
rates
In the event of a default, statute allows the bond bank to take
state agency funds that are payable to the defaulting
municipality.
As of February, the bond bank has $449 in outstanding bonds,
which leaves $50 million for additional loans. The pending
applications amount to $80 million.
1:41:52 PM
DEVIN MITCHELL, Executive Director of the Alaska Municipal Bond
Bank Authority and Debt Manager for the Department of Revenue,
opened his remarks with the statement that the authority has a
shortfall looming, which will result in a loss of ability to
finance capital projects at the community level. In the last
five years the bond bank has issued close to $400 million in
bonds and as a result of participating in those transactions, it
has saved an estimated $6 million.
MR. MITCHELL described the authority as an extremely efficient
program that provides a critical government service. Its budget
is based on $250,000 in ongoing operating expenses to maintain
the outstanding portfolio and about $500,000 for the purpose of
issuing bonds. If no bond issues were to occur in a particular
year, the operating budget would be reduced by two thirds.
1:44:58 PM
CHAIR STEDMAN asked that the record reflect that the following
communities from across the state have benefited from the bond
bank program: Wasilla, Aleutian East Borough, Homer, Cordova,
Fairbanks, Lake Pen Port, Nome school, Northwest Arctic Borough,
Lake and Peninsula Borough, Seward, Valdez, and Adak.
He asked Mr. Mitchell to discuss refinancing [refunding] in
terms of what has occurred in the last several years and what
might be expected in the near future.
MR. MITCHELL responded there has been considerable refunding in
the last several years due to the low interest rate environment,
but they don't impact the debt cap because refunding is simply
replacing one outstanding obligation with another at a lower
interest rate.
He advised that the bond bank serves not only small communities
that have little or a poor credit history it also serves large
communities with very good ratings. For example when the
Municipality of Anchorage wanted to use a ticket surcharge to
pay for replacing the roof on the performing arts center, it
found that from a rating agency perspective it was a weak credit
and would be viewed negatively. Going through the bond bank
provided an efficient means of undertaking the project without
having to provide either a property tax or general obligation
back.
CHAIR STEDMAN asked for verification that the state's borrowing
or credit rating would not be impacted if the cap were increased
from $500 million to $750 million.
MR. MITCHELL said that's correct. It's a moral obligation of the
State of Alaska, which means that by statute a reserve fund is
created to secure the bonds. The reserve is about equal to the
debt service for one year. In the event of a default the reserve
would be drawn upon to pay the debt service in the short term
and according to statute the Legislature would be asked to
replenish the reserve. That's what creates the moral obligation.
Certainly there is the potential for credit implications, but
the bond bank has the communities committing to pay the projects
so the funding source is actually separate and distinct from the
State of Alaska. Because of the provisions in the program there
hasn't been any correlation from this program to the State of
Alaska, which isn't the case with all moral obligation debt.
CHAIR STEDMAN asked if the statutory reserve account as of June
30, 2005 amounted to $11 million.
MR. MITCHELL replied yes and further clarified that $9.7 million
is the reserve that's in the general obligation program and $1.5
is specific to one revenue bond issue.
The 1976 General Obligation Bond Resolution requires that two
thirds of the reserve must be comprised of bond bank cash so
instead of just $9.7 million there's actually about $30 million
in the reserve. That creates strength from a credit perspective,
he said. For instance, if you're a $5 million borrower, you have
$30 million pledged toward your obligation on a parity basis
with all the other obligations so the reserve could pay off that
$5 million.
CHAIR STEDMAN observed that general obligation bonds amount to
just over $300 million and the revenue bond total is about $95
million.
MR. MITCHELL replied that was correct when it was written, but
there have been additional issues since the report was prepared.
CHAIR STEDMAN opened public testimony.
1:52:25 PM
KATHIE WASSERMAN, Deputy Director, Alaska Municipal League (AML)
announced that AML would like to go on record as being totally
in support of SB 265. She described the bill as a win-win
situation for the state and communities.
CHAIR STEDMAN closed public testimony and announced he would
hold SB 265 in committee.
CHAIR STEDMAN called a brief at ease at 1:53:49 PM.
CHAIR STEDMAN announced that a committee substitute (CS) for SB
193 had been prepared, but he didn't have a quorum to adopt it
for discussion.
There being no further business to come before the committee,
Chair Stedman adjourned the meeting at 1:54:57 PM.
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