Legislature(2005 - 2006)HOUSE FINANCE 519
04/26/2005 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB13 | |
| HB53 | |
| HB275 | |
| SB67 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 13 | TELECONFERENCED | |
| += | HB 53 | TELECONFERENCED | |
| + | SB 67 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | HB 275 | ||
HOUSE BILL NO. 275
An Act authorizing financing for certain public
transportation projects; giving notice of and approving
the entry into, and the issuance of revenue obligations
that provide participation in, lease-financing
agreements for those transportation projects; and
providing for an effective date.
3:53:19 PM
*Co-Chair Chenault MOVED to ADOPT work draft #24-LS0902\G,
Utermohle, 4/26/05, as the version of the bill before the
Committee. There being NO OBJECTION, it was adopted.
PETE ECKLUND, STAFF, REPRESENTATIVE KEVIN MEYER, explained
the changes. The original version of the bill allocated
$115 million dollars for statewide projects. Version G
allocates $183 million dollars for projects. He referenced
the handout: "Grant Anticipation Revenue Vehicles (GARVEE)
Project List". (Copy on File). He pointed out that many of
the projects relate to the gas pipeline. The bond package
could be paid back over 16 years, totaling $16.1 million
dollars per year, for a total of $257 million dollars.
3:55:56 PM
Co-Chair Meyer related the bill's history and concern with
using the bonds. He observed that the Department of
Transportation & Public Facilities and the Alaska General
Contractors would rather use a different funding source.
3:57:38 PM
JOHN MACKINNON, DEPUTY DIRECTOR, DEPARTMENT OF
TRANSPORTATION AND PUBLIC FACILITIES, testified that GARVEE
bonds "do not grow the program". He pointed out that
federal funding for the past 18 months has been a roller
coaster ride and the Department is anxiously awaiting
reauthorization. GARVEE's are a great mechanism when there
is a growing program. Paying out interest earnings shrinks
the program, ending up with a bulge in construction
activity. He maintained that using the GARVEE bonds
concerns the Department.
Co-Chair Meyer pointed out that some of the proposed roads
were ones supported by the Governor, noting that passage of
the bill would allow acceleration for those projects. Mr.
MacKinnon agreed.
3:59:58 PM
Representative Hawker recognized the reticence of using the
proposed vehicle. He asked if the bill were passed, would
that be a single placement or would it be placed into
components. He asked the schedule of the bond placements.
Mr. MacKinnon did not know, indicating it would be the call
of the Governor.
4:01:24 PM
Mr. Ecklund countered in support of the GARVEE's pointing
out that in the last two years, heavy construction inflation
has been growing at the rate of 50% per year. By moving
some projects up and doing them now, there could be an
inflationary cost savings. The interest earnings on the
bonds could be used to offset the State match.
4:02:19 PM
Co-Chair Chenault asked what would happen with left over
money from the allocations. Mr. MacKinnon replied that
rarely is there money left over on a project and the bill
provides the ability to allocate for other projects.
Co-Chair Chenault commented on "old" money still waiting for
the General Obligation (GO) allocation. Mr. MacKinnon
understood that the policy was for those monies to stay on
the project list. That money could be reallocated. If a
GARVEE package results, the Department will have to use
"discipline". If projects grow and exceed the available
number, it is important that the Department remains within
budget, otherwise it could drain other projects.
4:04:49 PM
Representative Holm was concerned that projects would be
built with no maintenance funding placed in. He requested
an analysis for the projects and asked to what extent the
State studies programs. Mr. MacKinnon acknowledged that the
Department is aware of the increased maintenance costs,
however, those are not considerations when the project is
being built. Representative Holm reiterated his concern
that when projects are placed on the STIP, they come without
a maintenance factor built in. He maintained that it is
important to look at planning and if there would be a
significant impact.
4:07:41 PM
Mr. MacKinnon pointed out that it would be good to have
information regarding the increase in annual maintenance
costs. Representative Holm agreed.
Representative Hawker asked if there could be a penalty for
early financing or payoff if another preferred mechanism was
chosen instead of the GARVEE. Mr. McKinnon did not know but
indicated that the State could substitute the federal screen
for other sources.
4:09:40 PM
DICK CATTANACH, EXECUTIVE DIRECTOR, ASSOCIATED GENERAL
CONTRACTORS OF ALASKA, ANCHORAGE, clarified that his board
concurred with the Department's position against using the
GARVEE bonds. The use of the bonds would not add to the
highway program but rather would move projects from the
future to the present. The bonds will not add project
money, with the exception that building now might be cheaper
than building in four years because of inflation. Issuing
GARVEE bonds means paying interest and that interest must
come from the $6 billion dollar allocation. The interest
costs might offset the inflation and the State will end up
with a program no bigger. He emphasized that using the
GARVEE bonds creates an artificial period of time.
4:12:07 PM
Mr. Cattanach thought that the $200 billion dollar number
was exorbitant. The projects would total $500 million
dollars for two years and contractors would ramp up for
that. Paying off the bonds, it would be decreased. With
the bonds issued last year and the current ones, would
result in a reduced program of $25-$30 million dollars.
Instead of $4 million future dollars, the end result will be
$375 million dollars for the next 14 years. He stressed
that if using GARVEE bonds, the projects must be selected
carefully. He reiterated his opposition to using the bonds.
4:14:37 PM
Co-Chair Meyer commented that finding roads for the gas
pipeline is important. He pointed out that some of those
roads are on that list and there is a need to find
geographical balance.
4:15:16 PM
Mr. Cattenaugh argued against using the GARVEE bonds. Co-
Chair Meyer acknowledged that his first choice was to use
the surplus Amerada Hess general fund money.
4:16:05 PM
Representative Hawker asked how Mr. Cattenaugh would counsel
the Committee for road maintenance funding for sustainable
planning. Mr. Cattenaugh responded that the Statewide
Transportation Improvement Projects (STIP) process works,
acknowledged, it is flawed. The STIP is currently the best
process that the State has. He did not know how to
otherwise respond to Representative Hawker, reiterating
concern that GARVEE bonds are not a good option; the
projects would be on top of a highway program already
costing $400 million dollars.
4:18:16 PM
Representative Hawker commented that he really did not
understand the STIP process and asked what would happen if
the State did have an alternative funding source and if the
STIP money was lost or available for rescheduling. Mr.
Cattenaugh believed it would be available as it was
authorized for Alaska.
4:19:52 PM
TOM BOUTIN, (TESTIFIED VIA TELECONFERENCE), DEPUTY
COMMISSIONER, DEPARTMENT OF REVENUE, ANCHORAGE, responded to
Representative Hawker's query, a question for the Department
of Transportation & Public Facilities. He noted that in
2003, the State did issue GARVEE bonds. He understood that
for each GARVEE qualified project, the State goes to the
federal government to obtain an okay for that project.
Therefore, a project that qualifies for GARVEE, reduces what
otherwise would be federal receipts. If a project were
funded through some alternative funding, the State would not
be giving up federal money.
4:22:12 PM
Mr. MacKinnon agreed and that it could free up that much
money. Representative Hawker was hopeful to find an
alternative mechanism to the GARVEE process that would not
compromise funding down stream.
4:23:15 PM
Mr. Boutin added that typically the bonds could be issued so
that there could be an early call provision. With the call
premium, there would be an issuance cost and the bond
proceeds would not be invested with high rates on the bonds.
There would be costs in issuing that debt and not spending
the money. Using the GARVEE bonds, there will be a credit
rating concern.
4:24:24 PM
Representative Holm asked if the money would be lost if the
projects were not completed and wondered how many of the
projects would be "time trapped" under the STIP process.
Mr. MacKinnon did not know. He pointed out that the list
provided by Co-Chair Meyer's staff included a number of
those projects.
Representative Holm commented on the problems associated
with the STIP process in those areas of the State that are
adversely affected by projects not funded. He was concerned
with supporting the GARVEE bonding.
4:26:52 PM
Representative Kelly requested clarification if the STIP
list would use GARVEE bond funding. Mr. MacKinnon said
there would be a $100 million dollars total in that list.
4:28:28 PM
Representative Weyhrauch noted in his area, there is a
backlog of projects and continues to be a stagnant decline.
He thought the State should foster more private development.
He applauded the Chairman for "looking for every dime he
can", reiterating that his area is "hurting". There is high
unemployment with access needs for resources and roads.
Representative Weyhrauch referenced the list, requesting it
to be amended to include a road extension on Glacier
Highway. He emphasized that SE Alaska supports the gas
pipeline. He acknowledged that S.E. Alaska is a different
world and urged that member's support addressing the needs
in S.E. Alaska, too.
Mr. Cattenaugh stated that the general contractors are not
opposed to any projects; however, warned about moving the
proposed dollars forward. He warned that the State would
not gain anything that way. The Alaska General Contractors
(AGC) will support another source of funding. Alaska is the
only State in the nation that does not have a State highway
program. In most states that program equals or exceeds the
amount received by the federal government. There are over
$10 billion dollars worth of needed projects. He encouraged
the Legislature re-think outside federal highway dollars.
4:32:52 PM
Co-Chair Meyer indicated that he would like to find another
source of money for these roads; however, it is not
available. He agreed that there are other sources but to
date, they have not been explored. In order to address the
priority roads, GARVEE bonds are the only thing available.
Representative Weyhrauch maintained the real need is for
fiscal planning.
Representative Hawker interjected that last year, if the
House had been successful with the Senate in adopting the
Percent of Market Value (POMV), a constitutional spending
limit, and HB 298, then the State would be enjoying the
beginning of fiscal planning.
4:35:04 PM
Representative Weyhrauch MOVED to AMEND on Page 3, Line 3,
inserting, "Glacier Highway road extension - $10 million
dollars - Section (23)".
Co-Chair Meyer asked if that was on the Department of
Transportation & Public Facilities' list. Mr. MacKinnon
replied that project could fit into the list. There being
NO OBJECTION, it was added.
Representative Foster MOVED to report CSHB 275 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CS HB 275 (FIN) was reported out of Committee with a "no
recommendation" and with a new fiscal note by the Department
of Revenue.
4:38:12 PM
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