Legislature(2013 - 2014)

04/09/2014 03:10 PM Senate FIN

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SENATE BILL NO. 218                                                                                                           
     "An Act relating to the Alaska Municipal Bond Bank                                                                         
     Authority; and providing for an effective date."                                                                           
3:52:49 PM                                                                                                                    
Co-Chair  Kelly  MOVED  to   ADOPT  the  proposed  committee                                                                    
substitute  for   CSSB  218(FIN),  Work   Draft  28-LS1567\N                                                                    
(Wallace, 4/9/14). Co-Chair Meyer OBJECTED for discussion.                                                                      
Ms. Armstrong stated that there  were two sections that were                                                                    
added to  the legislation.  She looked at  page 5,  lines 10                                                                    
through 24,  Section 8, which  was legislative  approval for                                                                    
bond authorization  for the  UAF heat  and power  plant. The                                                                    
section authorized  UA to issue  revenue bonds, and  use the                                                                    
proceeds of the  bonds to pay for  the design, construction,                                                                    
acquisition,  and equipping  for  the heat  and power  plant                                                                    
facility at UAF. The  legislative approval and authorization                                                                    
was required  by statute.  She pointed to  page 5,  lines 25                                                                    
through  31,  and page  6,  lines  1  through 7,  which  was                                                                    
Section 9. The section was  the loan authorization for UA to                                                                    
borrow  an amount  not  to exceed  $150  million by  issuing                                                                    
revenue bonds  or entering  into a  loan agreement  with the                                                                    
Alaska  Municipal Bond  Bank Authority.  She stated  that it                                                                    
provided    the   statutory    legislative   approval    and                                                                    
authorization  for the  bonds that  were discussed  under SB
Co-Chair  Meyer wondered  if the  municipal loan  bond would                                                                    
allow  for   bonding  of   additional  $87.5   million.  Ms.                                                                    
Armstrong replied in the affirmative.                                                                                           
Co-Chair Kelly wondered  if $70 million was  a revenue bond.                                                                    
Ms. Armstrong responded in the affirmative.                                                                                     
Vice-Chair Fairclough  looked at the fiscal  note, and noted                                                                    
the addition of  $7 million annually from  the general fund,                                                                    
and  wondered  if  that   should  be  considered  university                                                                    
receipts.  Co-Chair Kelly  replied that  it did  not include                                                                    
the  revenue bond,  but  rather was  sourced  from the  bond                                                                    
Vice-Chair Fairclough remarked that  the fiscal reflected $7                                                                    
million of  new general  fund money. Ms.  Armstrong deferred                                                                    
to Ms. Rizk to discuss the fiscal note.                                                                                         
Co-Chair Meyer  wondered if  there was  an amendment  to the                                                                    
bill. Ms.  Armstrong stated that  there would  be clarifying                                                                    
language to the bill.                                                                                                           
MICHELLE RIZK, ASSOCIATE  VICE PRESIDENT, STATEWIDE PLANNING                                                                    
AND  BUDGET,  UNIVERSITY OF  ALASKA,  looked  at the  fiscal                                                                    
impact  note   from  UA,  and  explained   that  the  amount                                                                    
represented the  debt service associated with  $87.5 million                                                                    
that UA  intended to borrow  from the Alaska  Municipal Bond                                                                    
Bank. In addition to the  amount, UA would issue $70 million                                                                    
of  UA revenue  bonds, so  UA would  be responsible  for the                                                                    
debt service with  the majority of the  funding sources from                                                                    
utility savings.                                                                                                                
Co-Chair  Kelly surmised  that the  savings would  not occur                                                                    
until 2018 or 2019. Ms. Rizk agreed with that summation.                                                                        
Vice-Chair Fairclough  wondered if  the state  was embarking                                                                    
on  its  own  debt  service  from its  own  loan.  Ms.  Rizk                                                                    
responded that the operating  budget reflected a significant                                                                    
reduction  to the  UA budget  of approximately  $16 million.                                                                    
The current fiscal  climate did not allow for UA  to find an                                                                    
additional  $7 million  in addition  to the  contribution of                                                                    
the UA revenue bonds.                                                                                                           
3:58:42 PM                                                                                                                    
AT EASE                                                                                                                         
4:03:09 PM                                                                                                                    
Vice-Chair Fairclough  remarked that she was  discussing the                                                                    
overall bond debt for Alaska,  and stressed that the Port of                                                                    
Anchorage would also be requesting money.                                                                                       
Co-Chair Meyer asked for a  summary of the financing for the                                                                    
heat and power  plant at UAF. Ms. Armstrong  replied that SB
119  had  a  reappropriation  of   $50  million;  an  FY  15                                                                    
appropriation  of   $37.5  million;  and  SB   218  had  two                                                                    
authorizations:  an authorization  for UA  to issue  revenue                                                                    
bonds in  the amount  of $70  million and  authorization for                                                                    
UAF to utilize  the Alaska Municipal Bond  Bank Authority in                                                                    
the  amount  of  $87.5  million. The  total  would  be  $245                                                                    
Co-Chair  Meyer stressed  that  the  different fund  sources                                                                    
were the reason for the higher summary sheets.                                                                                  
Co-Chair  Meyer  REMOVED  his   OBJECTION.  There  being  NO                                                                    
OBJECTION,  the  proposed   committee  substitute  for  CSSB
218(FIN) was adopted.                                                                                                           
Ms.  Armstrong  stated  that there  would  be  a  conceptual                                                                    
Co-Chair Kelly MOVED the conceptual amendment:                                                                                  
     Page 5, Line 29                                                                                                            
     After the word, "by",                                                                                                      
     insert the phrase, "issuing revenue bonds and"                                                                             
Co-Chair Meyer OBJECTED for discussion.                                                                                         
4:08:42 PM                                                                                                                    
DEVEN  MITCHELL, EXECUTIVE  DIRECTOR, ALASKA  MUNICIPAL BOND                                                                    
BANK AUTHORITY,  DEPARTMENT OF  REVENUE, explained  that the                                                                    
conceptual  amendment was  required  because  the bond  bank                                                                    
program  worked  by  purchasing   the  securities  of  local                                                                    
jurisdictions  on  a  private  placement  basis.  The  other                                                                    
amendment  provided   a  definition   that  allowed   UA  to                                                                    
participate in  the Alaska Municipal Bond  Bank program that                                                                    
uses  the  revenue  bonds.  He stated  that  the  conceptual                                                                    
amendment would provide two  separate terminologies to match                                                                    
to ensure  that the Alaska  Municipal Bond Bank  could carry                                                                    
out the legislative intent of the bill.                                                                                         
Co-Chair  Meyer  REMOVED  his   OBJECTION.  There  being  NO                                                                    
further OBJECTION, it was so ordered.                                                                                           
Co-Chair  Kelly  MOVED  to  REPORT   CSSB  218(FIN)  out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes.                                                                                                      
CSSB 218(FIN) was REPORTED out  of committee with individual                                                                    
recommendations and  with two new  fiscal impact  notes from                                                                    
Department of  Revenue and one  new fiscal impact  note from                                                                    
the University of Alaska.                                                                                                       

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