Legislature(2019 - 2020)ADAMS 519

03/18/2020 09:00 AM FINANCE

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Audio Topic
09:03:09 AM Start
09:03:09 AM Consideration of Governor's Appointee for the Alaska Mental Health Trust Authority: Anita Halterman
09:18:15 AM Consideration of Governor's Appointee for the Alaska Mental Health Trust Authority: Rhonda Boyles
09:23:55 AM HB268
09:40:47 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Consideration of Governor's Appointees: TELECONFERENCED
Alaska Mental Health Trust Authority -
Anita Halterman & Rhonda Boyles
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSHB 268(FIN) Out of Committee
HOUSE BILL NO. 268                                                                                                            
     "An Act relating to the Alaska Municipal Bond Bank                                                                         
9:23:55 AM                                                                                                                    
Co-Chair Johnston  asked for a  brief reintroduction  of the                                                                    
REPRESENTATIVE  BART LEBON,  SPONSOR, detailed  that HB  268                                                                    
would remove  the project scope limitation  on projects with                                                                    
the  University  of  Alaska and  gave  them  an  opportunity                                                                    
during  the   current  low  interest  rate   environment  to                                                                    
potentially  refinance some  of their  debt. The  bill would                                                                    
also  increase  the  [project participation]  cap  from  $87                                                                    
million to  $500 million [for  the university].  In relation                                                                    
to regional  health organizations,  HB 268 would  remove the                                                                    
49 percent  project participation  limitation on  the Alaska                                                                    
Municipal   Bond  Bank   and   increased  participation   to                                                                    
100 percent, which would  save regional health organizations                                                                    
money in refinancing or placing  money through the bond bank                                                                    
without having  to find  partners that  increased complexity                                                                    
and expense. The bill would  increase the project limit from                                                                    
$102.5 million to $250 million  for a single regional health                                                                    
organization  project. Additionally,  HB 268  would increase                                                                    
the  total  funding  for regional  health  organizations  to                                                                    
$500  million. He  listed  individuals  available online  to                                                                    
9:26:19 AM                                                                                                                    
Co-Chair Johnston requested a fiscal note review.                                                                               
MYRON DOSCH,  CHIEF FINANCIAL OFFICER, UNIVERSITY  OF ALASKA                                                                    
(via teleconference),  shared that the University  of Alaska                                                                    
supported the bill and had  previously submitted a letter of                                                                    
support.  He  spoke to  the  benefits  of  the bill  if  the                                                                    
university  were  to  use the  mechanism  to  obtain  credit                                                                    
through the bond bank. For  example, a $50 million bond over                                                                    
30 years  at interest rates  as of  March 5 would  provide a                                                                    
benefit of about  $50,000 per year or $1.5  million over the                                                                    
life of the bond.                                                                                                               
9:27:55 AM                                                                                                                    
DEVEN  MITCHELL, EXECUTIVE  DIRECTOR, ALASKA  MUNICIPAL BOND                                                                    
BANK AUTHORITY, DEPARTMENT  OF REVENUE (via teleconference),                                                                    
reviewed  the fiscal  note from  the Department  of Revenue,                                                                    
OMB Component  Number 121. The  fiscal note included  a "not                                                                    
to exceed" amount  for the activity that  could be generated                                                                    
by  the proposed  legislation. He  explained  that the  bond                                                                    
bank  had a  floor of  annual expenditures  and expenditures                                                                    
increased  as lending  activity  took  place. He  elaborated                                                                    
that there was  a not to exceed amount rather  than a budget                                                                    
the  bond bank  fully  expected to  expend  during a  fiscal                                                                    
cycle. The authorization  for up to $360,000  per year would                                                                    
be  directly  related  to any  additional  lending  activity                                                                    
undertaken  by  the   bond  bank  as  a   result  of  making                                                                    
additional  loans  to  the  university  or  regional  health                                                                    
organizations. He  furthered they would be  provided for out                                                                    
of  cost of  issuance  accounts that  were  funded from  the                                                                    
proceeds  of  the bond  issuance.  He  elaborated that  they                                                                    
would  be   incorporated  into  the  interest   expense  the                                                                    
borrower would  be repaying.  Program receipts,  not general                                                                    
fund  receipts,  would  provide  for  the  potential  annual                                                                    
9:29:43 AM                                                                                                                    
Representative Josephson  asked the bill sponsor  to provide                                                                    
a  hypothetical  scenario  relative  to  a  regional  health                                                                    
organization's use of the bill.                                                                                                 
Representative LeBon  complied. He relayed that  a number of                                                                    
projects were in the design  or developmental stage. He used                                                                    
a  hypothetical   small  regional  health   organization  in                                                                    
Cordova (one  of the locations  for a potential  project) as                                                                    
an example. The organization would  go through its period of                                                                    
underwriting and  showing justification for the  project and                                                                    
would seek  assistance from the Alaska  Municipal Bond Bank.                                                                    
The bond bank  would help in showing  the repayment ability,                                                                    
the  capacity to  perform.  The bond  bank  would work  with                                                                    
stakeholders,  potential  clients,  and potential  users  in                                                                    
surrounding   communities  that   would  benefit   from  the                                                                    
regional health organization. He  detailed that it would all                                                                    
need to  come together in  a way that justified  the project                                                                    
to  a  level  where   bond  purchasers  were  interested  in                                                                    
supporting  the  project.  It would  be  necessary  to  show                                                                    
capacity  to  repay and  establish  the  need and  clientele                                                                    
base.  The  idea  would  be  to  enable  a  regional  health                                                                    
organization  to have  a one-stop  shop with  the bond  bank                                                                    
instead of going out to find two or three other partners.                                                                       
Co-Chair  Johnston noted  that Luke  Welles from  the Alaska                                                                    
Native Tribal Health Consortium was available online.                                                                           
Representative LeBon  replied that  Mr. Welles  could answer                                                                    
Representative Josephson's question.                                                                                            
Co-Chair Johnston asked if Mr. Welles had anything to add.                                                                      
LUKE   WELLES,  CHAIRMAN,   ALASKA   NATIVE  TRIBAL   HEALTH                                                                    
CONSORTIUM,     (via    teleconference),     replied    that                                                                    
Representative  LeBon   had  provided  a  good   answer.  He                                                                    
explained  that the  bill offered  another financing  option                                                                    
for  the projects.  He elaborated  there were  five upcoming                                                                    
joint venture  projects that represented about  $700 million                                                                    
in  potential  construction over  the  next  few years.  The                                                                    
Indian  Health Service  would cover  the cost  of operating,                                                                    
maintenance, and staffing after  the projects were built. It                                                                    
was incumbent  on the regional health  organizations to fund                                                                    
the  capital   infrastructure,  which  would  open   up  new                                                                    
incoming  revenues  along  with opening  up  new  healthcare                                                                    
facilities in rural Alaska.                                                                                                     
Co-Chair Johnston  asked Mr. Welles  to put his name  on the                                                                    
Mr. Welles complied.                                                                                                            
9:32:38 AM                                                                                                                    
AT EASE                                                                                                                         
9:34:29 AM                                                                                                                    
Co-Chair  Foster  MOVED  to  REPORT  CSHB  268(FIN)  out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes.                                                                                                      
Representative  Carpenter   OBJECTED.  He   understood  that                                                                    
adding tools  to the toolbox  is a  good thing and  that the                                                                    
bond bank staff would make  good decisions on how to finance                                                                    
things.  However,  the  bill was  asking  the  committee  to                                                                    
accept an  increased risk  to the  state. Under  the current                                                                    
circumstances,  where the  future  was unknown,  he did  not                                                                    
believe it  would be prudent  to increase the  state's risk.                                                                    
He  highlighted  that  no  one knew  how  long  the  current                                                                    
financial  crisis  would  last.  He  reasoned  that  if  the                                                                    
discussion had taken place ten  years earlier when the state                                                                    
was flush with oil money it  may have been a wiser decision.                                                                    
He did  not support increasing  risk to the state  under the                                                                    
current circumstances.                                                                                                          
Representative   LeBon   understood  and   appreciated   the                                                                    
concerns expressed  by Representative Carpenter. He  saw two                                                                    
immediate benefits of the bill  including the opportunity to                                                                    
potentially  refinance university  debt  at a  significantly                                                                    
lower rate.  He pointed out  that the debt  already existed.                                                                    
He elaborated that it would be  up to the university to seek                                                                    
out  the opportunity  on a  case-by-case basis.  He informed                                                                    
the committee  that the university held  nearly $300 million                                                                    
in debt.  He explained that  the bill provided  an important                                                                    
potential  savings  on  existing   debt.  He  addressed  the                                                                    
regional  health organization  component and  highlighted it                                                                    
was  in  the  state  constitution  "that  we  take  care  of                                                                    
Representative   LeBon  believed   they  should   take  full                                                                    
advantage if the regional  health organization concept could                                                                    
be  used to  deliver  primary healthcare  services in  rural                                                                    
Alaska  at  a  cost  savings while  providing  for  improved                                                                    
services. The  bill would allow the  organizations to access                                                                    
the  bond bank  for 100  percent of  the project  instead of                                                                    
seeking out a  partner that could ask for  a higher interest                                                                    
rate   on  debt.   He  explained   that   when  forcing   an                                                                    
organization to split the  financing among several entities,                                                                    
there  was  not  always  parity  in  the  debt  pricing.  He                                                                    
expounded that  the bond  bank may  be cheaper  than another                                                                    
financial   institution.  He   did   not   want  to   hamper                                                                    
organizations.  He noted  that  an organization  may find  a                                                                    
partner  that   matched  the  rate,  which   was  great.  He                                                                    
concluded that the bill provided an option.                                                                                     
9:37:46 AM                                                                                                                    
Co-Chair  Johnston  shared  that  she  may  have  been  less                                                                    
interested  in   the  bill  ten   years  earlier.   She  was                                                                    
interested in the bill under  the existing circumstances and                                                                    
wanted to see  it move forward from  committee. She believed                                                                    
all of the  tools were needed in the coming  year. She would                                                                    
prefer  to  have  the  tools  with  a  fiscally  responsible                                                                    
organization that  would assess  risk and take  advantage of                                                                    
any  forthcoming financing  and  any  stimulus package.  She                                                                    
noted that  currently "our"  federal rate  was cut  to zero.                                                                    
She considered that she may have  been a "no" vote ten years                                                                    
earlier, but she supported the legislation at present.                                                                          
9:38:48 AM                                                                                                                    
A roll call vote was taken  on the motion to report the bill                                                                    
from committee.                                                                                                                 
IN FAVOR: Josephson,   LeBon,   Merrick,  Ortiz,   Johnston,                                                                    
OPPOSED: Carpenter, Tilton                                                                                                      
Representative  Sullivan-Leonard,  Representative Wool,  and                                                                    
Representative Knopp were absent from the vote.                                                                                 
The MOTION PASSED (6/2).                                                                                                        
There  being   NO  further  OBJECTION,  CSHB   268(FIN)  was                                                                    
REPORTED   out   of   committee    with   four   "do   pass"                                                                    
recommendations     and     four     "no     recommendation"                                                                    
recommendations  and with  one new  indeterminate note  from                                                                    
the  University of  Alaska and  one new  fiscal impact  note                                                                    
from the Department of Revenue.                                                                                                 
9:39:29 AM                                                                                                                    
Co-Chair   Johnston  shared   that   everything  [with   the                                                                    
schedule] would  be very fluid.  She asked for  patience and                                                                    
relayed  that the  agenda would  be changed  as needed.  She                                                                    
felt it was  incumbent upon the committee to  continue to do                                                                    
its  work.  She  reviewed  the schedule  for  the  following                                                                    

Document Name Date/Time Subjects
Anita Halterman Resume_Redacted.pdf HFIN 3/18/2020 9:00:00 AM
AMHTA Appointee
Anita Halterman Board Application_Redacted.pdf HFIN 3/18/2020 9:00:00 AM
AMHTA Appointee
Rhonda Boyles Board Application_Redacted.pdf HFIN 3/18/2020 9:00:00 AM
AMHTA Appointee
Rhonda Boyles Resume_Redacted.pdf HFIN 3/18/2020 9:00:00 AM
AMHTA Appointee