Legislature(2009 - 2010)BARNES 124
03/26/2010 03:15 PM House LABOR & COMMERCE
Audio | Topic |
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Start | |
HB338 | |
HB275 | |
Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
*+ | HB 338 | TELECONFERENCED | |
*+ | HB 275 | TELECONFERENCED | |
HB 338-ECON. STIMULUS BONDS: REALLOCATION/WAIVER 3:25:35 PM CHAIR OLSON announced that the first order of business would be HOUSE BILL NO. 338, "An Act relating to the waiver of volume cap of recovery zone economic development bonds authorized by 26 U.S.C. 1400U-2 and reallocation by the Alaska Municipal Bond Bank Authority of the waived volume cap; relating to the waiver of volume cap of recovery zone facility bonds authorized by 26 U.S.C. 1400U-3 and reallocation by the Alaska Industrial Development and Export Authority of the waived volume cap; increasing the total amount of bonds and notes that the Alaska Municipal Bond Bank Authority may have outstanding; relating to revenue bonds issued by the Alaska Municipal Bond Bank Authority; and providing for an effective date." 3:25:43 PM REPRESENTATIVE T. WILSON moved to adopt the proposed committee substitute (CS) for HB 338 labeled 26-GH2880\R, Cook, 3/25/10, as the work document. There being no objection, Version R was before the committee. 3:27:16 PM JERRY BURNETT, Deputy Commissioner, Office of the Commissioner, Department of Revenue (DOR), explained that this bill was introduced on behalf of the Governor. He paraphrased from the transmittal statement, which read [original punctuation provided]: This bill provides for reallocation of volume cap of recovery zone economic development bonds and recovery zone facility bonds. When the Congress passed the American Recovery and Reinvestment Act of 2009, the bill authorized the issuance of certain tax advantaged bonds for local government projects called Recovery Zone Economic Development Bonds and Recovery Zone Facility Bonds. 3:28:14 PM MR. BURNETT explained that Recovery Zone Economic Development Bonds are bonds that can be used for public facilities by local governments. Recovery Zone Facility Bonds are bonds that can be used by private developers for economic development purposes. The American Recovery and Reinvestment Act of 2009 authorized the issuance of the tax-advantaged bonds and set a national volume limitation for the Recovery Zone Economic Development Bonds at $10 billion and for Recovery Zone Facility Bonds at $15 billion. The United States Secretary of the Treasury allocated the national volume limitation for these bonds among the states and the Internal Revenue Service (IRS) allocated each state's volume among the counties and large municipalities in the state in proportion to relative employment declines in 2008. The IRS allows local governments to waive a portion of the volume cap allocation and the state may reallocate the volume cap. This bill provides that reasonable manner. MR. BURNETT further explained that the bill authorizes the Alaska Municipal Bond Bank Authority to reallocate the waived recovery zone economic development bond volume cap and authorizes the Alaska Industrial Development and Export Authority (AIDEA) to reallocate the waived Recovery Zone Facility Bond volume cap. It also authorizes the State Bond Committee to reallocate tax credit and tax-exempt bond limitations for other programs authorized by the U.S. government. MR. BURNETT highlighted that HB 338 is necessary because the allocation methodology used by the IRS to allocate the volume cap under this program used census areas rather than local government organizations with bonding authority as the basis for allocation. Much of the bond volume given to areas of the state under the federal allocation could not be used without passage of this bill. 3:30:40 PM MR. BURNETT added that in addition to the reallocation of volume cap under ARRA, HB 338 make two changes to the Municipal Bond Bank statutes. It provides that the total loan volume authorized for the Municipal Bond Bank is increased from $750 million to $1 billion. It also removes current restrictions on making loans to municipalities for hydroelectric projects and state leased buildings and equipment. These provisions are especially important to the City and Borough of Sitka because it owns its own hydroelectric project and it is more efficient for a local government to use the Municipal Bond Bank to finance a hydroelectric project than to go through AIDEA or the Alaska Energy Authority (AEA). 3:32:02 PM REPRESENTATIVE T. WILSON asked whether a private company would be required to repay the bonds in instances when the bonds are passed through a borough to the private company. MR. BURNETT agreed. He clarified that the type of bond would be a conduit bond. The local government or AIDEA is the facilitator. In those instances the private company is responsible for the bond. However, the federal government reimburses 45 percent of the interest cost, whether it is reimbursed to a private issuer in the case of Recovery Zone Facility Bonds or is reimbursed to a public issuer, in the case Recovery Zone Economic Development Bonds. The Municipal Bond Bank has issued small amounts of bonds under this program. He recalled an instance in Ketchikan, that after the reimbursed interest, the true interest cost for the issuer was approximately 2.9 percent for a 20-plus year bond issue under this program. Thus, it is very cost effective for local governments or private developers to use these bonds. 3:33:45 PM REPRESENTATIVE CHENAULT referred to Section 4 of the sectional analysis, which read: "Removes limitations on the Alaska Municipal Bond Bank related to financing certain power projects and equipment and building that are leased to the state." He asked for clarification. MR. BURNETT replied that this statute allows for the Municipal Bond Bank to finance power projects for diesel-fired projects. This would allow the City and Borough of Sitka to refinance its hydroelectric project with local government financing instead of using AIDEA or AEA. This will work better for the City and Borough of Sitka since it is a locally-owned government utility. Additionally, Section 4 contains a provision to remove a limitation that does not allow local governments to use Municipal Bond Bank financing if the state is leasing a portion of it. Some local governments own buildings with a portion of the building leased by the state. This would remove the limitation. He commented that he was not sure of the historical reason for the restriction. REPRESENTATIVE CHENAULT asked whether the restriction was due to a percentage of the state leased space in the building. MR. BURNETT answered no. He related that if the state leased a 500 square-foot office in a 10,000 square foot building, the local government would be prohibited from using Municipal Bond Bank financing. 3:36:05 PM TED LEONARD, Executive Director, Alaska Industrial Development & Export Authority (AIDEA) and Alaska Energy Authority (AEA), Department of Commerce, Community, & Economic Development (DCCED), introduced himself. 3:36:36 PM REPRESENTATIVE BUCH asked how this bill would impact AIDEA. MR. LEONARD offered AIDEA's support for the bill. He related that in Version R the Recovery Zone Facility Bonds are not issued through a 45 percent payback provision. These bonds are taxable bonds and become tax exempt so they are a little different than the Recovery Zone Economic Development Bonds, he stated. Still, the bonds are at least 150 to 250 basis points cheaper than taxable bonds. They are definitely not quite as good as the Recovery Zone Economic Development Bonds, but for private enterprises, they probably represent the best financing available. 3:38:04 PM MR. LEONARD pointed out that the Recovery Zone Facility Bonds are mainly defined by their restrictions. They cannot be used to build rental housing, airplanes, health clubs, liquor stores, massage parlors, and gambling facilities. Otherwise, it can be used for almost anything else. He characterized them as "Industrial Development Bonds on steroids." These bonds were allocated by the IRS with census areas. Thus, AIDEA quickly estimates that this type of tax exempt financing would lose 50 percent without the ability to reallocate. Thus, AIDEA believes this is very important. He reported that AIDEA can find projects in the state that would definitely benefit from this type of financing. 3:39:33 PM CHAIR OLSON held open public testimony on HB 338. [HB 338 was held over.] The committee took an at-ease from 3:40 p.m. to 3:40 p.m.
Document Name | Date/Time | Subjects |
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HB338 ver A.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 |
CS HB338 Draft ver R.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 |
CS HB338 Sponsor Statement.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 |
HB338 Fiscal Note-1-2-021010-CED-N.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 |
HB338 Sponsor Statement ver A.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 |
CSHB 275 Draft ver T.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 275 |
HB275 ver P.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 275 |
HB338 Fiscal Note-2-1-021010-REV-Y.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 |
Mar 26 Packet Info.pdf |
HL&C 3/26/2010 3:15:00 PM |
|
HB338 Supporting Documents Letter-City of Kenai 2-10-10.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 |
HB275 Sponsor Statement ver T.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 275 |
HB275 Sectional Analysis ver T.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 275 |
HB275 Fiscal Note-LAW-CIV-03-19-10.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 275 |
HB338_SB269 Supporting Documents - AIDEA (2) (2).pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 SB 269 |