Legislature(2019 - 2020)SENATE FINANCE 532

03/19/2019 09:00 AM FINANCE

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09:01:29 AM Start
09:02:27 AM SB38
09:07:15 AM Aidea: Update on Projects, Investments and Cash Flow
10:28:24 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ AIDEA: Update on Projects, Investments & Cash TELECONFERENCED
+ Bills Previously Heard/Scheduled: TELECONFERENCED
Moved CSSB 38(FIN) Out of Committee
SENATE BILL NO. 38                                                                                                            
     "An  Act making  supplemental  appropriations for  fire                                                                    
     suppression   activities   and   restoration   projects                                                                    
     relating  to earthquake  disaster relief;  capitalizing                                                                    
     funds; and providing for an effective date."                                                                               
9:02:27 AM                                                                                                                    
Co-Chair Stedman  addressed the history  of the bill  in the                                                                    
committee. He discussed additional housekeeping.                                                                                
9:02:58 AM                                                                                                                    
Senator  Wilson  MOVED  to  REPORT SB  38,  Work  Draft  31-                                                                    
GS1037\U (Caouette, 3/13/19)  from committee with individual                                                                    
9:03:11 AM                                                                                                                    
Senator Olson OBJECTED.                                                                                                         
9:03:17 AM                                                                                                                    
Senator  Olson asked  about the  information  that had  been                                                                    
requested  at  a  previous meeting  concerning  sole  source                                                                    
contracts.  He wondered  whether  the  information had  been                                                                    
submitted to the committee.                                                                                                     
Co-Chair Stedman said he would check with his staff.                                                                            
9:03:50 AM                                                                                                                    
AT EASE                                                                                                                         
9:04:00 AM                                                                                                                    
9:04:05 AM                                                                                                                    
Co-Chair  Stedman  announced  that  the  committee  had  not                                                                    
received the  information. He requested  further information                                                                    
from  the  Department  of   Military  and  Veterans  Affairs                                                                    
9:04:28 AM                                                                                                                    
STEPHANIE  RICHARD,  DEPARTMENT  OF  MILITARY  AND  VETERANS                                                                    
AFFAIRS,  JUNEAU  (via   teleconference),  shared  that  the                                                                    
department was  working to gather the  information and would                                                                    
follow up with the committee.                                                                                                   
9:05:00 AM                                                                                                                    
Senator Olson was eager to receive the information.                                                                             
9:05:07 AM                                                                                                                    
Co-Chair Stedman  asked whether  the department  had awarded                                                                    
sole source contracts.                                                                                                          
9:05:13 AM                                                                                                                    
Ms. Richard  replied that  she did not  know if  sole source                                                                    
contracts  had  been awarded.  She  relayed  that there  are                                                                    
strict  criteria   for  sole   course  contracts   and  that                                                                    
communities would  need to pre-approve them  in advance. She                                                                    
said  she  needed to  get  the  list  from the  Division  of                                                                    
Homeland Security and Emergency Management.                                                                                     
9:05:48 AM                                                                                                                    
Co-Chair  Stedman  queried  the timeline  expected  for  the                                                                    
response. He noted the April 1, 2019 deadline for funding.                                                                      
9:05:58 AM                                                                                                                    
Ms.   Richard  agreed   to  reach   out   to  the   division                                                                    
9:06:17 AM                                                                                                                    
Senator  Olson  WITHDREW  his   OBJECTION.  There  being  NO                                                                    
further OBJECTION, it was so ordered.                                                                                           
CSSB 38(FIN)  was REPORTED  out of  committee with  four "do                                                                    
pass"   recommendations   and   four   "no   recommendation"                                                                    
^AIDEA: UPDATE ON PROJECTS, INVESTMENTS and CASH FLOW                                                                         
9:07:15 AM                                                                                                                    
TOM   BOUTIN,   EXECUTIVE    DIRECTOR,   ALASKA   INDUSTRIAL                                                                    
DEVELOPMENT  AND  EXPORT  AUTHORITY (AIDEA),  discussed  the                                                                    
presentation,   "Alaska's  Development   Finance  Authority"                                                                    
(copy on file).                                                                                                                 
9:09:17 AM                                                                                                                    
Mr. Boutin looked at Slide 2, "FY 2018 Highlights":                                                                             
      1501 permanent jobs                                                                                                    
      738 construction jobs                                                                                                  
      $1.33 Billion net position                                                                                             
      $161.98 million conduit bonds issued                                                                                   
      $12.88 million dividend paid                                                                                           
      $88.5 million total gross loan participations funded                                                                   
Mr. Boutin noted  that the $1.3 billion net  position was an                                                                    
audited  number.   He  invited  members  to   refer  to  the                                                                    
comprehensive  annual financial  report  (CAFR) for  further                                                                    
9:10:03 AM                                                                                                                    
Mr. Boutin addressed Slide 3, "Mission and Overview":                                                                           
     To advance economic growth and diversification in                                                                        
     Alaska by providing various means of financing and                                                                       
         Alaska  Industrial   Development    and   Export                                                                    
          Authority (AIDEA)                                                                                                     
             o Semi-independent public corporation                                                                              
             o 7 member board                                                                                                   
             o Self funded                                                                                                      
             o Pays an annual dividend to the State of                                                                          
               Alaska - $407 million declared since 1997                                                                        
         Revolving Fund = $1.32 billion in assets.                                                                           
         S and P Co-Chair AA+ credit rating (independent                                                                     
          of the State of Alaska Rating                                                                                         
Mr. Boutin highlighted Slide 4, "Guiding Principles":                                                                           
        AIDEA's primary goal is to encourage economic growth                                                                    
        and diversification, with a focus on encouraging                                                                        
        economic activity that is additive to the economy.                                                                      
        AIDEA is here to make good projects better, not bad                                                                     
        projects good.                                                                                                          
        AIDEA brings process and pragmatism to development                                                                      
        finance opportunities                                                                                                   
       AIDEA does NOT provide grants or incentives.                                                                             
        AIDEA does not undertake the Field of Dreams notion                                                                     
        of "build it and they will come."                                                                                       
9:11:41 AM                                                                                                                    
Senator Olson looked  at Slide 3. He asked  about the annual                                                                    
dividend  AIDEA  paid  to  the state.  He  asked  whether  a                                                                    
breakdown for payments  for the last several  years could be                                                                    
made available.                                                                                                                 
9:11:58 AM                                                                                                                    
Mr.  Boutin replied  that an  upcoming  slide would  address                                                                    
that question.                                                                                                                  
9:12:22 AM                                                                                                                    
Mr.  Boutin  addressed  Slide 5,  "Diverse  Portfolio."  The                                                                    
slide  depicted a  bar graph  illustrating the  diversity of                                                                    
AIDEAs combined capacity projects and loans.                                                                                    
9:13:17 AM                                                                                                                    
Mr.  Boutin  discussed  Slide 6,  "Responsible  Stewards  of                                                                    
Public Funds."  The slide  offered a  bar graph  that showed                                                                    
loans,  development  project  investments and  bonds  versus                                                                    
impairments since  July 1,  2000. He said  that there  was a                                                                    
low number of problem loans  after 2000. He said that before                                                                    
2000, the Healy  project would have skewed the  graph due to                                                                    
9:13:59 AM                                                                                                                    
Co-Chair Stedman  queried the Healy  project and  the write-                                                                    
9:14:03 AM                                                                                                                    
Mr. Boutin replied that it  was the Healy Clean Coal Project                                                                    
that  AIDEA had  sold;  a write-down  had  been required  to                                                                    
achieve an amenable price for the sale.                                                                                         
9:14:28 AM                                                                                                                    
Co-Chair Stedman  understood that  it was a  coal generation                                                                    
project in the  Fairbanks area that the  state had struggled                                                                    
with for decades.                                                                                                               
9:14:59 AM                                                                                                                    
Mr. Boutin agreed. He said  that copious federal dollars had                                                                    
been  spent  on the  project,  which  had been  aggressively                                                                    
advertised  for high-tech  qualities. He  believed that  the                                                                    
problem with  the project  had been  that the  trial period,                                                                    
required before the  state was to take  possession, had used                                                                    
a different quality  of coal than the plant  had intended to                                                                    
use going  forward. He  said that as  soon as  the different                                                                    
coal was used  the pollution controls failed.                                                                                   
9:16:12 AM                                                                                                                    
Co-Chair  von Imhof  look to  Slide 6.  She asked  about the                                                                    
definitions for projects and conduit bonds.                                                                                     
Mr. Boutin  responded that  the Conduit  Bond Program  was a                                                                    
financing program  in which  AIDEA did  not lend  any credit                                                                    
but facilitated the  sale of debt. He said  that the program                                                                    
had been  regularly used by  health care providers.  He told                                                                    
the story  of the  creation of  Wildflower Court  in Juneau,                                                                    
and how the program was used in that instance.                                                                                  
9:19:01 AM                                                                                                                    
Mr. Boutin  said that  projects   was a subjective.  He said                                                                    
that AIDEA  owned many  projects around  the state.  He said                                                                    
that   AIDEA  occasionally   financed   projects  and   then                                                                    
eventually took  ownership of them  or was sometimes  such a                                                                    
large part of  the project as a lender that  the loans would                                                                    
be categorized as projects.                                                                                                     
9:20:26 AM                                                                                                                    
Mr. Boutin discussed Slide 7, "What Does AIDEA Do?"                                                                             
     Secures and deploys capital for economic growth and                                                                      
     job opportunities across all commercial, industrial                                                                      
     and infrastructure sectors                                                                                               
           Loan Participations                                                                                               
           Energy Loans                                                                                                      
           Project Finance Loans                                                                                             
           Conduit Revenue Bonds                                                                                             
           100 percent Ownership of project                                                                                  
           Partner in LLC or Subsidiary Corporation                                                                          
           Secured and Collateralized                                                                                        
           Equity Equivalent Investments                                                                                     
           Loan Guarantees                                                                                                   
           Bond Guarantees                                                                                                   
9:22:27 AM                                                                                                                    
Co-Chair Stedman  asked Mr. Boutin  to define   duration  as                                                                    
it pertained to AIDEA loans.                                                                                                    
9:22:29 AM                                                                                                                    
Mr.  Boutin   replied  that  a   loan  was   a  fixed-income                                                                    
investment  and  that a  duration  was  a way  to  expressed                                                                    
average maturity of a loan.                                                                                                     
9:23:09 AM                                                                                                                    
Senator  Wielechowski  queried  how  AIDEA  made  investment                                                                    
Mr.  Boutin  shared  that   over  past  decades.  Investment                                                                    
requests had been made by  the executive branch. He detailed                                                                    
several  of those  investments. He  said that  all decisions                                                                    
went through  the loan committee  and then had to  be vetted                                                                    
by the board.                                                                                                                   
9:25:09 AM                                                                                                                    
Senator Wielechowski  asked whether  the board had  made the                                                                    
decision to  pay oil tax  credits, and  if so, what  was the                                                                    
expected rate of return.                                                                                                        
9:25:24 AM                                                                                                                    
Mr. Boutin replied that the issue  had not been taken to the                                                                    
board. Alternative  methods for  paying oil tax  credits had                                                                    
been under  discussion and he  believed that AIDEA  was near                                                                    
resolution on how  to make the payments. He  thought that it                                                                    
would  take  several  more weeks  to  reach  resolution  but                                                                    
stressed that he believed that the credits were due.                                                                            
9:27:31 AM                                                                                                                    
Co-Chair Stedman admitted that  the credits were a liability                                                                    
for  the state.  He noted  preliminary discussions  that had                                                                    
occurred on the  concept of having AIDEA step  in and devise                                                                    
a  mechanism  to  pay  the  credits. He  said  that  when  a                                                                    
proposal was ready it would be presented to the committee.                                                                      
9:28:53 AM                                                                                                                    
Senator  Olson  wondered  about  cash  on  hand  versus  the                                                                    
governors   proposed  payment of  the  oil  tax credits.  He                                                                    
worried  that  paying  the credits  would  drain  the  funds                                                                    
available for other projects.                                                                                                   
9:29:20 AM                                                                                                                    
Mr.  Boutin responded  that  AIDEA  was seeking  alternative                                                                    
ways to  pay the  credits, while accommodating  the projects                                                                    
that were already underway.                                                                                                     
9:30:01 AM                                                                                                                    
Senator  Olson  asked  whether the  stretching  of  finances                                                                    
should be cause for concern.                                                                                                    
9:30:21 AM                                                                                                                    
Co-Chair  Stedman  interjected  that there  is  a  statutory                                                                    
requirement to pay a certain  amount in oil tax credits each                                                                    
year,  which  would be  reflected,  in-full,  in the  FY  20                                                                    
budget. He  said that  if an  alternative solution  could be                                                                    
agreed  upon before  the budget  was  released, that  option                                                                    
could be  exercised. Otherwise, the statutory  minimum would                                                                    
be  paid. He  hoped that  further discussions  on the  issue                                                                    
could occur  but felt that  it was  not the crux  of todays                                                                     
9:31:56 AM                                                                                                                    
Senator Olson spoke of the  Mark Air hangers purchased years                                                                    
ago by a previous administration, through AIDEA.                                                                                
9:32:42 AM                                                                                                                    
Co-Chair  Stedman thought  that many  legislators had  hopes                                                                    
that viable, profitable projects  would provide dividends to                                                                    
the state to fund robust, job creating, Capital Budgets.                                                                        
9:33:14 AM                                                                                                                    
Mr. Boutin addressed Slide 8, "AIDEA Programs":                                                                                 
     AIDEA injects money into the economy utilizing a                                                                           
     number of financial tools                                                                                                  
     Commercial Finance                                                                                                       
           AIDEA partners with the state's lending                                                                           
             institutions to provide long-term, fixed-rate                                                                      
             financing in support of the commercial real                                                                        
             estate sector                                                                                                      
           Since 1992 AIDEA has loaned $1.08 billion                                                                         
           Created and Retained 8.800 construction jobs                                                                      
             and 9,260 permanent jobs                                                                                           
     Conduit Revenue Bonds                                                                                                    
          square4 Issued 319 bonds for a total of $1.54 billion                                                                 
          square4 Provides access to external capital markets for                                                               
             non-profits and businesses                                                                                         
     Project Finance and Infrastructure Development (Sec.                                                                     
           AIDEA works with industrial and commercial                                                                        
             partners   to    build    out    much    needed                                                                    
             infrastructure    that     supports    economic                                                                    
     Energy and Arctic Infrastructure Development                                                                             
9:33:59 AM                                                                                                                    
Co-Chair  von  Imhof  wondered  whether  programs  in  other                                                                    
states  had been  investigated to  determine best  practices                                                                    
when deploying state lending programs.                                                                                          
9:35:07 AM                                                                                                                    
Mr. Boutin replied not yet.  He said that talks with AIDEAs                                                                     
counterparts in  other states were frequent  and continuous.                                                                    
He said that he had not  read the report from the consulting                                                                    
group in Boston.  He felt that this was an  area that should                                                                    
be enhanced.                                                                                                                    
9:37:40 AM                                                                                                                    
Senator Wielechowski  expressed concern  that, in  the past,                                                                    
AIDEA had  acted at the  direction of the  Executive Branch.                                                                    
He  said that  under statute,  AIDEA  was supposed  to be  a                                                                    
sperate and independent  entity. He requested a  list of all                                                                    
actions AIDEA  had taken at  the direction of  the Executive                                                                    
Mr. Boutin agreed to provide the information.                                                                                   
9:38:12 AM                                                                                                                    
Senator Shower  asked about  the criteria  used by  AIDEA to                                                                    
determine the 9,260 permit jobs.                                                                                                
9:39:00 AM                                                                                                                    
Mr.  Boutin replied  that the  number  represented the  jobs                                                                    
employed  in a  project. He  felt that  the numbers  were an                                                                    
accurate representation.  He shared that AIDEA  was directed                                                                    
by  law to  provide  jobs, which  was  an important  metric,                                                                    
along with return on investment.                                                                                                
9:40:15 AM                                                                                                                    
Mr.  Boutin addressed  Slide 9,  "AIDEA Sec.  172 Projects."                                                                    
The  slide where  the various  projects were  located on  in                                                                    
Alaska  for both  unincorporated and  incorporated boroughs.                                                                    
He noted  that several  projects were  carried on  the books                                                                    
for significant cost  but would not reap the  same return on                                                                    
investment once those projects were sold.                                                                                       
9:42:04 AM                                                                                                                    
Co-Chair von  Imhof asked whether  AIDEA was  still involved                                                                    
in the Interior Energy Project in Fairbanks.                                                                                    
9:42:13 AM                                                                                                                    
Mr. Boutin replied  yes. He said that AIDEA was  set to meet                                                                    
with members  of that project to  discuss bond participation                                                                    
notes. He  said that  he did  not know  very much  about the                                                                    
project. He  thought that  the current  status was  that $15                                                                    
million in  bond anticipation notes  were going to  be sold,                                                                    
which would be taken out by selling bonds.                                                                                      
Mr. Boutin  highlighted Slide 10, "Process  and Pragmatism."                                                                    
The slide offered  a chart that illustrated  the four phases                                                                    
in AIDEAs project analysis and decision-making process.                                                                         
9:44:24 AM                                                                                                                    
Co-Chair Stedman  asked how much  AIDEA had invested  in the                                                                    
Fairbanks project.                                                                                                              
9:44:34 AM                                                                                                                    
Mr. Boutin replied  that he would get back  to the committee                                                                    
with information on the project.                                                                                                
9:44:49 AM                                                                                                                    
Co-Chair von Imhof requested the dollar figure.                                                                                 
9:44:58 AM                                                                                                                    
Co-Chair  Stedman  requested  a  full write  up  on  AIDEAs                                                                     
involvement in the project                                                                                                      
9:45:05 AM                                                                                                                    
Mr. Boutin understood  that it had been  an Executive Branch                                                                    
dire4cted  project.  He  said  he  would  get  back  to  the                                                                    
committee with the information.                                                                                                 
9:45:17 AM                                                                                                                    
Senator Wielechowski  queried the May 2018  request from Co-                                                                    
Chair  Stedman  for an  audit  of  the  loan given  for  the                                                                    
Mustang Operations  Center 1. He  wondered whether  the loan                                                                    
had been  compliant with state  statute and if the  loan had                                                                    
been offered to other companies.                                                                                                
9:45:41 AM                                                                                                                    
Co-Chair  Stedman  thought  that   the  question  should  be                                                                    
answered in the requested audit.                                                                                                
9:45:56 AM                                                                                                                    
Mr. Boutin agreed  to provide a response to  the question in                                                                    
9:46:21 AM                                                                                                                    
Senator Wilson asked  whether the cuts to  the Alaska Marine                                                                    
Highway System (AHMS) would  negatively affect the Ketchikan                                                                    
9:46:53 AM                                                                                                                    
Mr. Boutin  replied that the  two ferries were  complete. He                                                                    
said that AMHS was a prospective customer.                                                                                      
Co-Chair  Stedman   argued  that   AMHS  was  more   than  a                                                                    
prospective customer.                                                                                                           
9:46:59 AM                                                                                                                    
Mr. Boutin said  he was unaware of the effects  of the FY 20                                                                    
budget on the AMHS related  to the shipyard in Ketchikan. He                                                                    
said  that the  shipyard had  several projects  planned, but                                                                    
that the shipyard needed  to ensure confidentiality, because                                                                    
of possible competitors. He remarked  that the viability for                                                                    
the shipyard  would have more specific  written explanations                                                                    
in  June  2019.  He  stated that  various  industries  would                                                                    
utilize that shipyard.                                                                                                          
9:49:53 AM                                                                                                                    
Co-Chair Stedman clarified that  the shipyard was called the                                                                    
Alaska  Ship and  Drydock  and that  the  shipyard had  been                                                                    
constructed to  facilitate the maintenance of  AMHS vessels.                                                                    
The  marine   highway  vessels   were  the   shipyards  base                                                                    
customer. He  requested information on the  financial impact                                                                    
to the shipyard  from the proposed elimination  of the AMHS.                                                                    
He  specified  that he  wanted  information  related to  the                                                                    
amount invested in  the shipyard by AIDEA,  the amount AIDEA                                                                    
currently  carried on  the books,  and the  estimate of  the                                                                    
final  buildout. He  believed  that losing  its base  tenant                                                                    
would  have a  significant effect  on the  viability of  the                                                                    
Mr. Boutin was glad to provide the information.                                                                                 
Co-Chair Stedman  reiterated that  the committee  would find                                                                    
the information  useful. He stressed that  the committee was                                                                    
working  to  craft a  budget  that  provided for  year-round                                                                    
ferry service, at  a reduced schedule, and that  part of the                                                                    
collateral damage  of the elimination of  the marine highway                                                                    
would be the shipyard.                                                                                                          
Mr. Boutin was happy to provide the information.                                                                                
9:52:39 AM                                                                                                                    
Mr.  Boutin addressed  Slide 10,  "Process and  Pragmatism,"                                                                    
which showed  the process that AIDEA  undertook for projects                                                                    
and  loan applications.  There was  a table  entitled 'AIDEA                                                                    
Project  Analysis and  Decision-Making  Process.' The  slide                                                                    
showed that  4 Phase  process used  prior to  funding, final                                                                    
design, construction, and operation.                                                                                            
9:53:59 AM                                                                                                                    
Senator Wielechowski requested details  for the process used                                                                    
for the issuance of payment for oil tax credits.                                                                                
9:54:04 AM                                                                                                                    
Mr. Boutin replied in the affirmative.                                                                                          
9:54:07 AM                                                                                                                    
Co-Chair  Stedman thought  that the  conversation should  be                                                                    
held  once an  oil tax  policy was  under discussion  at the                                                                    
9:54:56 AM                                                                                                                    
Mr. Boutin agreed.                                                                                                              
9:55:02 AM                                                                                                                    
Co-Chair von  Imhof asked whether  an operator of  a project                                                                    
was expected  to share its financial  information with AIDEA                                                                    
on a periodic basis.                                                                                                            
9:55:27 AM                                                                                                                    
Mr.  Boutin  replied no.  He  said  that project  financings                                                                    
included thorough information. He said  AIDEA did not have a                                                                    
way  to access  financial  information  for large  companies                                                                    
that operated nationally.                                                                                                       
9:56:41 AM                                                                                                                    
Co-Chair von Imhof understood that  AIDEA had the ability to                                                                    
monitor  the  books  for AIDEA  specific  projects  and  the                                                                    
operators of those projects.                                                                                                    
9:56:56 AM                                                                                                                    
Mr. Boutin agreed. He stated  that he had reviewed financial                                                                    
information  for  most of  the  large  AIDEA operations.  He                                                                    
lamented that the information was often incomplete.                                                                             
9:57:34 AM                                                                                                                    
Mr. Boutin  discussed Slide 11, "AIDEA  Dividend." The slide                                                                    
showed the  dividend history  from 2007.  He noted  that the                                                                    
aggregate dividend amount was $407 million since 1997.                                                                          
9:58:04 AM                                                                                                                    
Co-Chair Stedman  asked about the  decrease in  the dividend                                                                    
numbers in 2010 and 2019.                                                                                                       
Mr. Boutin replied that the  calculation was set in statute.                                                                    
He cited a letter from January 10, 2019 that stated:                                                                            
      The  authority determines  that the  amount of  excess                                                                    
     unrestricted assets  that may be available  for FY 2020                                                                    
     is  $10,285,000  under  A.S.   44.88.088.  This  is  31                                                                    
     percent of the FY 2018 statutory net income.                                                                               
Mr. Boutin  relayed that the letter  contained a substantial                                                                    
amount of background on the AIDEA dividend calculation.                                                                         
9:58:07 AM                                                                                                                    
Co-Chair  Stedman wondered  about the  decline in  statutory                                                                    
net  income, and  why the  dividend  portion for  the FY  20                                                                    
budget was 31, not 50 percent.                                                                                                  
9:58:28 AM                                                                                                                    
Mr.  Boutin  said  that  he  would  submit  a  comprehensive                                                                    
written response to the committee.                                                                                              
9:59:58 AM                                                                                                                  
Co-Chair Stedman  hoped that the  response could  include an                                                                    
explanation for the downward trend  over the past decade. He                                                                    
expressed concern with the decreasing  numbers and hoped for                                                                    
a reversal in the numbers.                                                                                                      
10:02:36 AM                                                                                                                   
Senator  Micciche  asked   whether  AIDEA  was  diversifying                                                                    
Alaskas   economy  with  solid,  sustainable  projects  that                                                                    
might not  have occurred without the  organization. He asked                                                                    
whether Mr.  Boutin had  a different  vision for  AIDEA than                                                                    
the  current   lackluster    performance  reflected  in  the                                                                    
return to the state on investments in recent years.                                                                             
10:03:36 AM                                                                                                                   
Mr. Boutin  disagreed that AIDEAs   performance in  the past                                                                    
had been  lackluster.   He cited the creation  of the Delong                                                                    
Mountain  Transportation Revenue  Bond Financing  Documents,                                                                    
which was a  project that returned at 6.5  percent. He noted                                                                    
that  the  project  had  allowed  for  the  formation  of  a                                                                    
borough, which  relied on the  financial support of  The Red                                                                    
Dog  Mine.  He  spoke  of  AIDEA  having  objectives  beyond                                                                    
maximizing return  for risk. He  explained that AIDEA  has a                                                                    
patient  capital objective;  it was  private equity  without                                                                    
the clear  objective to simply  maximize return  in dollars.                                                                    
He provided the example of  the Constantine Mine, outside of                                                                  
Haines.  He  said  that  AIDEA  would  likely  provide  seed                                                                    
capital for the  project and the return  on investment would                                                                    
result in a  different result than if they  were an investor                                                                    
in minerals  or equities of  mining companies. He  felt that                                                                    
the completion of the returns  received by AIDEA showed that                                                                    
the sate was earning in  its liquidity 1.7 percent in short-                                                                    
duration  treasuries.  The  Commercial Lending  Program  had                                                                    
$439  million  in  outstanding   commercial  loans  and  was                                                                    
showing a  return of  4.5 percent.  He noted  other projects                                                                    
and their respective rates of return.                                                                                           
10:07:33 AM                                                                                                                   
Co-Chair Stedman  said that details on  the financial trends                                                                    
could be submitted to the committee in writing.                                                                                 
10:08:11 AM                                                                                                                   
Senator Wielechowski  asked about  ADIEAs  $1.32  billion in                                                                    
assets and  the dividend percentages  for 2018 and  2019. He                                                                    
surmised that the  dividend was less than  half a percentage                                                                    
in 2018, and 1 percent in 2019.                                                                                                 
10:08:55 AM                                                                                                                   
Co-Chair  Stedman   interjected  that  a  return   on  asset                                                                    
analysis could be submitted to  the committee that clarified                                                                    
the dividend percentage.                                                                                                        
10:09:31 AM                                                                                                                   
Mr. Boutin looked  at Slide 12, "FY  2020 Operating Budget."                                                                    
He shared that the travel  amounts had been submitted before                                                                    
the administration had cut travel  by 50 percent. He related                                                                    
that  AIDEA had  recently had  82 positions,  33 which  were                                                                    
shared between ADIEA and the Alaska Energy Authority (AEA).                                                                     
10:10:41 AM                                                                                                                   
Co-Chair  Stedman  requested  a historic  lookback  for  the                                                                    
travel expenses line item.                                                                                                      
10:11:01 AM                                                                                                                   
Senator  Wielechowski   understood  that  AIDEA   funded  18                                                                    
positions with the $11,982.6 in personal services.                                                                              
10:11:14 AM                                                                                                                   
Mr. Boutin  said no.  He said that  the line  item reflected                                                                    
the 82 positions, half of  which were shared between AEA and                                                                    
10:11:51 AM                                                                                                                   
Mr.  Boutin displayed  Slide  13,  "AIDEA FY19  Highlights":                                                                    
     Commercial Loans Funded:                                                                                                   
     Commercial Loan Commitments and Pending Applications                                                                       
     Commercial Loan Cash Inflows (P and I, net of fees):                                                                       
     Project Finance Fundings (projected):                                                                                      
10:13:05 AM                                                                                                                   
Senator Wielechowski  asked how much of  AIDEAs  assets were                                                                    
not currently loaned or invested for statutory purposes.                                                                        
10:13:21 AM                                                                                                                   
Mr.  Boutin  said that  the  response  to the  question  was                                                                    
10:13:30 AM                                                                                                                   
Co-Chair  Stedman   stated  that   the  response   could  be                                                                    
submitted to the  committee later. He assumed  that the four                                                                    
categories listed on Slide 13  included the majority AIDEAs                                                                     
revenue stream.                                                                                                                 
10:13:49 AM                                                                                                                   
Mr.  Boutin replied  no. He  said  that he  could provide  a                                                                    
10:13:53 AM                                                                                                                   
Co-Chair Stedman requested that he roll the breakdown into                                                                      
the response to the earlier question on the decline of the                                                                      
10:14:01 AM                                                                                                                   
Mr. Boutin agreed to provide that information.                                                                                  
10:14:12 AM                                                                                                                   
Mr. Boutin addressed Slide 14,  "Revolving Fund Cash Flows -                                                                    
5  years back  and 5  Years Forward  ($ in  thousands)." The                                                                    
slide charted,  in thousands, the  inflows and out  flows of                                                                    
the following:                                                                                                                  
           Other Outflows                                                                                                    
           Capital Projects                                                                                                  
           Loans & Capital Projects                                                                                          
           Debt Service                                                                                                      
           Other Inflows                                                                                                     
Mr. Boutin shared that Slide 15 included footnotes to Slide                                                                     
     (1) Inflows from loans are net of all fees and                                                                             
          expenses.    Projections    include   all    loans                                                                    
          outstanding as of June 30, 2018.                                                                                      
     (2) Project     inflows    from   existing    Authority                                                                    
          development projects and those under agreement,                                                                       
          including two projects accounted for as loans.                                                                        
     (3) Historical capital projects cash flows include                                                                         
          federal and state funding. Projected cash flows                                                                       
         do not include federal and state funding.                                                                              
     (4) Other projected outflows include operating costs                                                                       
          per the enacted FY2019 budget, and the proposed                                                                       
          FY2020 budget with a 3 percent increase                                                                               
     (5) Debt service outflows represents requirement for                                                                       
          bonds outstanding at June 30, 2018.                                                                                   
     (6) Assumes $10 million annual dividend is within                                                                          
          statutory requirements and is used for projection                                                                     
          purposes only.                                                                                                        
     (7) Cash flow exclude Snettisham activity and cash                                                                         
          flows from Pentex Alaska Natural Gas Company,                                                                         
     (8) Projected cash flows do not include impact of AEA                                                                      
          personnel services provided by AIDEA.                                                                                 
Mr.   Boutin   said   that  more   comprehensive   cash-flow                                                                    
projections had been done for  purposes of examining oil tax                                                                    
10:16:08 AM                                                                                                                   
Co-Chair  Stedman expected  that all  the data  generated by                                                                    
todays   questions would  be  brought  forward as  cash-flow                                                                    
analysis for future oil tax credit policy discussions.                                                                          
10:16:28 AM                                                                                                                   
Senator Wielechowski  looked at  Slide 14  and noted  in the                                                                    
five years ahead, reduced activity was expected.                                                                                
10:16:41 AM                                                                                                                   
Mr. Boutin  replied that there  would be projects,  but none                                                                    
were reflected,  because they had  not yet been  approved by                                                                    
the board.  He remarked  that in  many cases,  projects were                                                                    
quite far from  being approved by the  board. He categorized                                                                    
the projection on the slide  as a  shutter down  projection,                                                                    
as opposed to a going concern projection.                                                                                       
10:17:45 AM                                                                                                                   
Senator  Wilson  asked  about   proposed  projects  not  yet                                                                    
considered by the board, namely, the South Denali Project.                                                                      
10:17:54 AM                                                                                                                   
Mr.  Boutin  replied  that there  were  discussions  ongoing                                                                    
about the project.                                                                                                              
10:18:11 AM                                                                                                                   
Senator Bishop requested clarification  on the term  shutter                                                                    
10:18:22 AM                                                                                                                   
Mr. Boutin replied that projects  that had not been approved                                                                    
by the board had not been included in the budget cash-flow.                                                                     
10:18:40 AM                                                                                                                   
Senator  Bishop  asked what  AIDEAs   vision  was under  the                                                                    
current  administration,  and  a   list  of  AIDEAs   top  3                                                                    
priority projects.                                                                                                              
10:18:54 AM                                                                                                                   
Mr. Boutin  replied that  the first  likely project  was the                                                                    
Constantine Palmer Project, outside  of Haines. He said that                                                                    
a draft Environmental Impact Statement  would be released in                                                                    
August  2019 for  a project  in Ambler.  He said  that AIDEA                                                                    
will  have  put  $17  million, cash,  into  the  project  by                                                                    
December;  the project  would either  require  more cash  or                                                                    
would become a  revenue bond funded project.  He shared that                                                                    
the project was  large enough to attract  litigation but was                                                                    
on  schedule.  He  admitted  that  the  project  could  take                                                                    
several  years.  He stated  that  a  smaller project  was  a                                                                    
possible second dock at Icy Strait Point.                                                                                       
10:21:16 AM                                                                                                                   
Senator  Olson  asked  about the  Ambler  district  and  the                                                                    
graphite deposit between Nome and Teller.                                                                                       
10:21:41 AM                                                                                                                   
Mr.  Boutin did  not  believe that  an  application for  the                                                                    
project had been received by AIDEA.                                                                                             
10:21:49 AM                                                                                                                   
Co-Chair  von Imhof  said that  the  passage of  HB 119,  in                                                                    
2018, had  changed the way AIDEAs   dividend was calculated,                                                                    
the intent being that the  dividend would better reflect the                                                                    
cash based, realized net income  of the funds from which the                                                                    
dividend  was  paid.   She  said  that  the   bill  added  a                                                                    
definition for   mark to market  and  amended the definition                                                                    
of   net-income  and   unrestricted  net-income.  She  asked                                                                    
whether projections  for future  fiscal years  reflected the                                                                    
intent of HB 119.                                                                                                               
10:22:37 AM                                                                                                                   
Mr. Boutin replied that he did  not believe so. He felt that                                                                    
the $10  million was a  "place holder," and did  not reflect                                                                    
the changes from HB 119.                                                                                                        
10:23:10 AM                                                                                                                   
Co-Chair von Imhof requested a  new cash flow estimate using                                                                    
the factors in HB 119.                                                                                                          
10:24:06 AM                                                                                                                   
Mr.  Boutin agreed  to provide  that information.  He warned                                                                    
that  cash-flow   and  market  rates  of   return  used  two                                                                    
different metrics.                                                                                                              
10:24:25 AM                                                                                                                   
Co-Chair  Stedman  requested  that  Mr.  Boutin  detail  any                                                                    
problems AIDEA  could encounter  with the  implementation of                                                                    
HB 119.                                                                                                                         
10:24:47 AM                                                                                                                   
Mr.  Boutin thought  that mark  to market  was a  worthwhile                                                                    
exercise.  He  said the Blue Crest Energy Drill  Rig and the                                                                    
Blood Bank of Alaska were  loans but were listed as projects                                                                    
under AIDEA Section 172 Projects.                                                                                               
10:26:07 AM                                                                                                                   
Senator Hoffman  asked about assurances, or  collateral, for                                                                    
the loan  for the Blue Crest  Energy Drill Rig on  the Kenai                                                                    
10:26:31 AM                                                                                                                   
Mr. Boutin replied that the loan  was on the books for $22.8                                                                    
million  but needed  to get  back  to the  committee on  the                                                                    
collateral given for the loan.                                                                                                  
10:26:57 AM                                                                                                                   
Mr. Boutin agreed to provide that information.                                                                                  
10:27:19 AM                                                                                                                   
Co-Chair Stedman thanked the presenter. He discussed