Legislature(2003 - 2004)
05/19/2003 08:46 AM Senate FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
CS FOR HOUSE BILL NO. 216(FIN) "An Act relating to and limiting municipal taxation of refined fuel and wholesale sales of fuel, and to the bulk fuel revolving loan fund." This was the second hearing for this bill in the Senate Finance Committee. Co-Chair Wilken explained that this legislation "clarifies local municipality's taxing authority for refined fuel sold within and outside of the local jurisdiction." In addition, he noted that the maximum amount that could be loaned, on an annual basis, from the Bulk Fuel Revolving Loan Fund would be increased from $200,000 to $300,000. He informed the Committee that, in response to a question from Senator Hoffman during the first hearing on this bill, he has provided a handout [copy on file] titled "HB216: Municipal Taxation of Refined Fuel Products." Senator Hoffman and Senator B. Stevens acknowledged the information provided in the handout. Senator B. Stevens inquired whether the Revolving Loan Fund's entire $6.3 million balance would be available for loans or whether the loan level would be limited to the earnings on the balance. SARA FISHER GOAD, Financial Analyst, Alaska Industrial Development & Export Authority, Department of Community and Economic Development, responded that the cash balance of the Bulk Fuel Revolving Loan fund as of March 31, 2003 was $6.04 million. She specified that of that amount, the uncommitted cash balance of $5.6 million would be available for loans. Senator B. Stevens observed that only five of the twenty-four FY 03 loan applicants requested loans at the $200,000 maximum loan level. Therefore, he concluded that, that five loans might be expected at the proposed $300,000 level. Ms. Goad responded that because the maximum loan amount was raised to $200,000 as recently as FY 03, she is unsure how many requests would be at the $300,000 level. Senator B. Stevens stated, for the record, "that the rapid rate of increase" in the maximum loan level in an eighteen-month period is significant. Co-Chair Wilken reminded that a rapid increase in fuel costs parallels the increase in the loan limit amounts. However, he noted that fuel rates are currently "rapidly decreasing." Senator Hoffman pointed out "that while fuel costs might be rapidly decreasing in Fairbanks," they are not decreasing in rural areas. Senator B. Stevens voiced concern that increasing the maximum loan level might jeopardize the integrity of the Fund. In addition, he worried that it might have the potential to reduce the number of loans that could be awarded. He noted that, while he would not be opposing this legislation, the Fund should be monitored to ensure that its integrity is maintained. Co-Chair Wilken agreed that the fund should be monitored, as the maximum loan award levels have, in a short period of time, increased from $100,000 in FY 02 to $200,000 in FY 03, and would, were this legislation adopted, increase to $300,000 in FY 04. Senator Hoffman informed that many communities have been able to increase their bulk fuel storage capabilities and, in addition, are considering regionalizing storage capabilities in order to purchase larger quantities of fuel. He noted that being able to purchase larger quantities of fuel could enable communities to negotiate lower fuel prices. Co-Chair Wilken reiterated that the Fund's integrity must be considered. Senator Taylor suggested that in order to monitor the integrity of the Fund, the Committee Co-Chairs could send a letter requesting that a Bulk Fuel Revolving Loan Fund financial report be provided to the Committee the following year. There being no spoken opposition to this suggestion, Co-Chair Wilken stated that a letter would be drafted. Co-Chair Green agreed with Senator Hoffman's assessment that increasing storage capacities could allow communities to negotiate lower fuel prices. She asked whether different groups could consolidate into one loan request. Senator Hoffman reiterated that larger fuel volume purchases could provide the communities with lower fuel prices. Furthermore, he stated that a larger loan limit would be required to enable this situation to occur. Co-Chair Wilken commented that the point was valid. He stated that the aforementioned letter would result in a report being supplied to the Committee. Senator Olson asked whether there are any delinquent loans or defaults. Ms. Goad responded that one FY 03 loan is more than 90 days delinquent and four FY 02 loans are delinquent. She assured the Committee that large loan requests are not automatically granted, and she stressed that were an applicant's ability to repay the loan a concern, collateral would be required. Senator Taylor offered a motion to report the bill from Committee with individual recommendations and accompanying fiscal note. Without objection, CS HB 216 (FIN) was REPORTED from Committee with zero fiscal note #2 from the Department of Revenue, zero fiscal note #3 from the Division of Community and Business Development, Department of Community and Economic Development, and zero fiscal note #4 from the Alaska Energy Authority, Department of Community and Economic Development.