Legislature(2009 - 2010)
04/13/2010 09:46 AM House FIN
| Audio | Topic |
|---|---|
| Start | |
| HCR21 | |
| SB217 | |
| SB300 | |
| SB247 | |
| SB248 | |
| SB301 | |
| HB426 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 426
"An Act providing for, relating to, and approving the
issuance of certificates of participation for the
construction, acquisition, and equipping of the Alaska
Scientific Crime Detection Laboratory in Anchorage;
providing notice of and authorizing the commissioner
of the Department of Administration to enter into a
lease-purchase agreement with the Department of Public
Safety for the Alaska Scientific Crime Detection
Laboratory; and providing for an effective date."
2:24:27 PM
JOSEPH MASTERS, COMMISSIONER, DEPARTMENT OF PUBLIC SAFETY,
explained what the crime lab does and urged passage of the
legislation. He elaborated that HB 426 provides $75,750,000
in funding for a new state crime lab. The existing crime
lab is outdated and inefficient. A crime lab replacement
would provide state of the art scientific analysis of the
evidence in a timelier manner that could result in swifter
arrests and convictions; enhancing protection for Alaskans.
He added that a new crime lab is a key component in the
Governor's sexual assault and domestic violence initiative.
Sexual assault and domestic violence cases contribute to
half of the workload of the crime lab. The new lab is vital
to the initiative's goals; to prosecute perpetrators and
prevention. He furthered that a new lab will protect the
innocent from false accusations with timely processing of
evidence and exonerates the wrongly convicted.
Commissioner Masters stated that the new crime lab has the
capacity and technology to meet the existing and future
crime analysis needs of the state. The current inadequate
crime lab is the main reason crime evidence analysis cannot
be processed in a timely manner or cannot be processed at
the facility at all which creates backlogs and delays. The
crime lab has become "reactive" to major crimes only. He
reported that a new crime lab would enable a "proactive"
and preventive approach to combating all types of crime. He
pointed out that an expected increase in the state
population of 140,000 by 2013 will significantly increase
demand for the crime lab services.
Commissioner Masters reported that previous legislative
approval for leasing a twelve acre site from the
municipality of Anchorage for one dollar per year for the
next fifty years with an additional twenty five year
extension, $8,000,000 for design work, and $8,800,000 for
site preparation demonstrates past legislative support for
the project. He added that the project team trimmed
$20,000,000 from the initial estimated cost. Construction
of the crime lab is expected to create 250 jobs and employ
fifteen subcontractors.
2:30:55 PM
Commissioner Masters emphasized the difficulty of putting a
price tag on the value of public safety and security for
Alaskans.
Representative Austerman asked if the total cost of the lab
is approximately $92.5 million. Commissioner Masters
affirmed. He clarified that HB 426 provides $75,750,000
along with the previous appropriations invested in the
replacement lab that totals $16.8 million.
Representative Foster asked whether future needs were
considered in the design. Commissioner Masters replied that
the lab design meets current and future needs up to 20
years.
Representative Kelly referred to the earlier proposed
project, high cost of the lab, and legislative directives
to scale back the project and costs. He noted that was
successful and wondered whether the facility would still be
adequate. Commissioner Masters noted that nineteen percent
of the footprint is shelved space to allow for future
expansion and with the flexibility to add new technology
and techniques as they are developed.
2:35:35 PM
Vice-Chair Thomas referred to the high crime statistics in
Alaska and queried why the new lab would make a difference.
Commissioner Masters responded that there would be an
immediate increase in efficiency of twenty percent,
directly related to adequate use of space and equipment for
all types work processes and analysis in the lab.
ORIN DYM, MANAGER, FORENSIC LABORATORY, DEPARTMENT OF
PUBLIC SAFETY, reported that sexual assault cases are
backed up to 2007 and often property crime evidence is not
submitted in consideration of the backlog. He emphasized
that the crime analysis situation in the state "is so bad".
He stated that, "we are the clog in the pipes of justice."
Vice-Chair Thomas asked if the lab would increase cold case
capabilities. Commissioner Masters informed that the cold
case homicide unit is an investigative unit in the
operations department. All of their work that requires
scientific analysis is sent to the state crime lab.
Representative Salmon asked if autopsies would be performed
at the crime lab.
2:39:29 PM
Commissioner Masters reported that autopsies are performed
at the Department of Health and Social Services lab, which
works closely with the Department of Public Safety lab as
needed on criminal cases.
Representative Foster asked if equipment is included in the
total cost of the lab.
Mr. Dym affirmed.
Co-Chair Hawker opened public testimony.
Co-Chair Hawker Closed public testimony.
Co-Chair Hawker requested discussion of the fiscal notes
and the proposed funding mechanism; the certificate of
participation concept.
DEVEN MITCHELL, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL BOND
BANK AUTHORITY, DEPARTMENT OF REVENUE, stated that the bill
authorizes issuance of $750,000,000 in certificates of
participation to fund the crime lab. The amount of $750,000
is associated with costs to sell the certificates. He
explained how the certificates of participation are
secured. The state enters into a subject to appropriation
lease with a trustee. The trustee is granted a title
position in the facility. The lease is fractionalized into
$5,000 certificates that are similar to bonds but legally
distinct from them. The certificates are sold in the same
way as any bond issue; by a combination of serial bonds or
term bonds that would follow a yield curve from year one to
twenty years with various interest rates for the different
maturities. The various rates would blend into an
aggregated rate estimated at 4.2%. He added that the
project would participate in the federal stimulus program
[The American Recovery and Reinvestment Act](ARRA) via the
Build America Bond Program that would provide direct
subsidies by reduction in the annual debt service in the
amount of $300,000 - $400,000 per annum. The program would
allow for the sale of a combination of tax exempt bonds at
the short end of the yield curve and taxable bonds at the
long end of the yield curve and receive a direct subsidy
from the federal government of thirty five percent of the
interest expense.
2:45:58 PM
Co-Chair Hawker asked if market conditions are appropriate
for the state to enter into this type of transaction. Mr.
Mitchell affirmed. He believed that the financial markets
have stabilized and the conditions are favorable for long
term debt.
Vice-Chair Thomas if there is a cap on how much stimulus
money can be used. Mr. Mitchell replied that there is no
limit on the ability to use the bond program.
Representative Fairclough queried if the building is
designed to energy efficient standards.
MATT TANAKA, CRIME LAB PROJECT MANAGER, DEPARTMENT OF
TRANSPORTATION AND PUBLIC FACILITIES, offered that the
building design is complex but energy efficient as
possible. Representative Fairclough stated that she heard
the answer as no. Mr. Tanaka countered that the answer was
yes. Many design elements employed energy efficient systems
but due to the complex nature of the design, it does not
meet a specific energy efficiency standard. Energy costs
were modeled in during the development of the project.
Representative Fairclough asked if heated sidewalks were
part of the design. Mr. Tanaka negated.
2:51:19 PM
Representative Doogan asked for clarification of the term
of the certificate.
Mr. Mitchell explained that the term is for 20 years with a
level debt service and interest payment due in FY 2011. He
furthered that interest would be paid within six months of
issuance with subsequent interest paid on a semi-annual
basis. A principle payment would be paid in August, 2012.
Representative Doogan cited the legislation on page 2,
lines 21-24,
"The estimated annual amount of rental obligations
under the lease-purchase agreement is $5,600,000. The
estimated total of lease payments for the full term of
the lease-purchase agreement is $112,000,000."
Representative Doogan asked if $112,000,000 was the
repayment amount over twenty years. Mr. Mitchell affirmed.
He clarified that amount is an estimate. He restated that
with participation in The Build America Bond Program
reduction in the annual debt service in the amount of
$300,000 - $400,000 per year below the $5.600, 000.
Representative Doogan asked if there is a substantial
market for the certificates and if it is a safe course for
the state to take. Mr. Mitchell remarked that this is an
extremely common form of financing and is called a "subject
to appropriation concept" in financial markets. The state
has used the mechanism successfully in the past. An
investor is compelled to purchase the certificates because
non-payment by a state has legal negative credit
ramifications and prohibitions to access capital for future
projects. Representative Doogan wondered what the advantage
is of certificates of participation over general obligation
bonds. Mr. Mitchell reiterated that certificates of
participation are a very common means for public financing
for a single project. All of the other labs in the state
were financed by this mechanism. He stated that the state
gets a lower interest rate with general obligation bonds.
However, general obligation bonds are usually used for
funding multiple projects and the project cannot move
forward until an election is held. He added that ARRA
expires at the end of 2010. AARA is expected to extend but
at a lower reimbursement rate of 33% so the risk in waiting
is that you would give up nearly half of your advantage
with general obligation bonds. Also, the state would take
on interest rate risk because of waiting longer to sell at
the end of the year instead of now in favorable market
conditions.
2:58:11 PM
Representative Doogan asked if there is a premium being
paid to use certificates of participation instead of
general obligation bonds. Mr. Mitchell replied that it
would be an estimated $45,000 per year or $900,000 over the
life of the loan.
Representative Foster wondered what the rationale was to
use certificates of participation instead of general
obligation bonds. Mr. Mitchell stated he would not
characterize increased interest payments as a premium. He
felt that the rationale to use certificates of
participation was the time sensitive nature of the ARRA
expiration. Also, if GEO bonds are used and time is lost
waiting for voter approval the risk is that the financial
markets can become supply heavy at the end of the calendar
year with the result of paying higher yields. In using
certificates the state might be giving up the potential to
have their best credit and lower interest rate with geo
bonds but somewhat offset by selling into a more favorable
market now with certificates and the ability for the
project to move forward as soon as the bill becomes law.
3:02:19 PM
Vice-Chair Thomas MOVED to report HB 426 out of Committee
with individual recommendations and the accompanying fiscal
note. There being NO OBJECTION, it was so ordered.
HB 426 was REPORTED out of Committee with a "do pass"
recommendation and with a new fiscal note from the
Department of Revenue.
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