Legislature(1995 - 1996)
03/09/1996 10:03 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 401 - REVENUE BONDS: WATER & WASTE PROJECTS The next order of business to come before the House State Affairs Committee was HB 401. CHAIR JAMES called on Keith Kelton, Department of Environmental Conservation, to present the bill. Number 1900 KEITH KELTON, Director, Division of Facility Construction and Operation, Department of Environmental Conservation (DEC), explained HB 401 was by the request of the Governor. It was a bill that would benefit all the communities in Alaska. He asked the committee members to look at the bill and not at who introduced the piece of legislation. Number 1910 CHAIR JAMES replied the assumption that the bill would not be looked favorably upon because it was introduced by the Governor was not true. Number 1919 MR. KELTON replied, "I stand corrected, Madame Chairman. I apologize." MR. KELTON said the DEC had been operating a loan program for building wastewater facilities throughout the state for the last seven to eight years. Prior to that the federal government financed a grant program under the Clean Water Act. In 1987 the federal government eliminated the grant program and substituted it with a loan program. The demand for the loans had been steadily increasing while the state general funds had decreased. Therefore, the grants were less available. The DEC was interested in developing an alternative funding source for communities that had the ability to borrow money and had a dedicated revenue stream to repay the loans. The problem currently was that the loan fund was demanded in excess of the supply of money available. Therefore, the DEC introduced legislation to allow the Department to leverage the remaining corpus of the loan fund and allow for increased dollars to be available for the loans. To date, Alaska had a good track record for repayments, not one late payment. MR. KELTON referred the committee members to a chart prepared by DEC. He explained the Alaska Clean Water Fund (ACWF) was capitalized by federal grants representing about $80 million. Of that $80 million, $50 million had gone out as low interest loans to the various Alaskan municipal projects. One year after completion, payments were made back including the principal and interest to the ACWF. The interest rate fluctuated with the municipal bond index, currently at 3.55 percent. REPRESENTATIVE GREEN asked if the bond was tax free? MR. KELTON replied it was tax exempt. Furthermore, HB 401 created a bond redemption fund to pay for the bond issuance cost administered through the State Bond Committee including the Department of Revenue, Department of Administration, and Department of Commerce and Economic Development. The Senate amended the bill to include a $15 million limit of bonds sold each year, and a total cap of $150 million. He reiterated the bill was to provide a revolving fund mechanism for the incorporated communities that had a dedicated revenue source for repayments. Anchorage was the big participant, but communities such as Craig and Homer, for example, had applied for a loan. The program included wastewater and solid waste, but not drinking water. There was legislation at the federal level to address a drinking water program, however. Number 2378 REPRESENTATIVE GREEN wondered if the investor was investing in the program and not in the individual location. Number 2394 MR. KELTON replied the investor was putting his money into the pot. The Department had to follow an intended use plan on an annual basis. The plan used a criteria rank system to determine which projects would rank at the top, if it exceeded the amount of money available. Number 2440 REPRESENTATIVE GREEN asked if the criteria ranking system was based on need, the ability to repay, or a combination of the two? Number 2447 MR. KELTON replied the first concern was based on need. Environment and health were also considered, for example. The ability to repay was looked at after everything else was considered. Number 2475 REPRESENTATIVE GREEN wondered if energy was a concern in the rural areas. TAPE 96-33, SIDE B Number 0000 MR. KELTON said the rural areas were eligible to apply. The additional cost would make it more difficult for it to come up with a revenue matching source, however. He did not expect it to be widely used in the rural areas of the state. Number 0022 CHAIR JAMES asked if it was a 50 percent match? MR. KELTON replied it was strictly a loan. CHAIR JAMES asked if a community could get a loan for an entire project? MR. KELTON replied, "that's correct." CHAIR JAMES further wondered if a community could get a grant and apply it towards the loan. Number 0035 MR. KELTON replied, "that's exactly right, Madame Chairman." The Department could mix and match with the loan program in any ratio. Number 0129 REPRESENTATIVE IVAN moved to adopt Amendment 1 (9-GH2014/A.1). Number 0135 REPRESENTATIVE GREEN objected for discussion purposes. Number 0144 MR. KELTON explained Amendment 1 was a technical amendment. It was based on a suggestion by the Department of Revenue. The bill was written in conjunction with the Department of Revenue and the Department of Law. The bill would impact the Department of Revenue due to the bond. Number 0184 REPRESENTATIVE GREEN removed his objection. CHAIR JAMES stated hearing no further objection, Amendment 1 was so adopted. Number 0186 REPRESENTATIVE IVAN moved to adopt Amendment 2 (9-GH2014/A.2). REPRESENTATIVE GREEN objected for discussion purposes. MR. KELTON explained Amendment 2 was based on a suggestion by Senator John Torgerson for greater legislative control. The Department of Environmental Conservation agreed with the amendment. Number 0238 REPRESENTATIVE GREEN removed his objection. CHAIR JAMES stated hearing no further objection, Amendment 2 was so adopted. Number 0246 REPRESENTATIVE IVAN moved to adopt Amendment 3 (9-GH2014/A.3). REPRESENTATIVE GREEN objected for discussion purposes. Number 0255 MR. KELTON explained Amendment 3 modified eligibility. The Senate believed a state agency should not be part of the eligibility process. Therefore, the amendment deleted "state agency" and inserted "other qualified entity." The amendment was based on the recommendation of Senators Fred Zharoff and Lyman Hoffman. The amendment also defined "other qualified entity" to include a municipality and those terms used in 33 U.S.C. 1383. The Department of Law, the Department of Revenue, and the Department of Environmental Conservation supported the amendment. Number 0328 REPRESENTATIVE GREEN removed his objection. CHAIR JAMES stated hearing no further objection, Amendment 3 was so adopted. Number 0337 REPRESENTATIVE PORTER wondered if the suggestions by the Anchorage Water and Wastewater Utility (AWWU) were considered. Number 0348 MR. KELTON replied the Anchorage Water and Wastewater Utility had removed their amendments. The amendments were considered earlier when it appeared the bill would not receive a hearing. The amendments were to simplify the bill for further support. Number 0379 REPRESENTATIVE PORTER wondered if the Anchorage Water and Wastewater Utility supported the bill. MR. KELTON replied the AWWU definitely supported the bill. CHAIR JAMES replied the people in her district were interested in the bill, but were concerned about the payback. Number 0398 MR. KELTON explained two out of the three concerns that Anchorage had were addressed in the amendments adopted today. Number 0420 REPRESENTATIVE GREEN mentioned the problems associated with wastewater treatment such as hepatitis. He was still concerned about the lack of energy to support the projects in the rural areas. Otherwise, he was in full support of HB 401. Number 0442 REPRESENTATIVE GREEN moved that CSHB 401(STA) move from the committee with individual recommendations and attached fiscal notes. Hearing no objection, it was so moved from the House State Affairs Committee. MR. KELTON thanked the committee members.
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