Legislature(2003 - 2004)

05/19/2003 08:46 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                                                            
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                                                            
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                                                            
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                                                            
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.                                                                                                       

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