Legislature(2001 - 2002)
05/07/2002 01:50 PM Senate L&C
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 471-AIDEA LOANS AND DIVIDEND
CHAIRMAN STEVENS announced HB 471 to be up for consideration.
SENATOR GREEN, sponsor of HB 471, said his staff, Jessica
Menendez, would explain the bill.
MS. JESSICA MENENDEZ, Staff to Representative Green, said that HB
471 has to do with the Alaska Industrial Development and Export
Authority's (AIDEA's) calculation for their annual dividend, the
revolving fund and the Rural Development Initiative Fund(RDIF).
AIDEA is a self-supporting state agency. They
contribute a dividend to the general fund every year.
Under current state law, AIDEA pays out an annual
dividend which is between 25% - 50% of their net income
for their base fiscal year. Since AIDEA's inception,
they've authorized $129 million to the state's general
fund. That includes the 2003 dividend, which is
$20,149.500. New standards adopted by the governmental
Accounting Standards Board (GASB) makes some changes.
That is they will no longer include the term "net
income" in their audited financial statements. Without
those amounts listed, it doesn't give AIDEA a clear
direction on how to determine what our annual dividend
is going to be.
Another important change is that GASB will now require
that any of their inter governmental transfers or
capital contributions or grants be listed in expense.
So, those accounting modifications will alter the
calculation of how we get our dividends. So, in other
words, since our dividend from AIDEA is an
intergovernmental transfer, then that will reduce the
net income for that fiscal year and simultaneously,
that will then reduce the amount of the dividend that's
calculated by AIDEA. So, for the first time the payment
from AIDEA could basically reduce the amount that we
would normally be getting. Sections 2 and 3 amend the
definitions using statutory guidelines for dividend
programs to accommodate the changes of GASB.
HB 471 also increases the maximum amount from the bulk
fuel revolving loan fund to $200,000. As you know,
rural communities use this program in order to buy
their annual supply of fuel. Petroleum price increases
and the fact that there is bulk storage tank capacity,
$100,000 is too low of a number. So, bumping it back to
$200,000 would provide communities who buy their bulk
fuel in one month funding. In addition, what I learned
last week is that USDA approved a $5 million grant for
AIDEA, so that money will be used to support this
program. Finally, section 4 adds language describing
the eligibility requirements for AIDEA's Rural
Development Initiative Funds (RDIF). This program is
designed to provide financing options for rural
communities. AIDEA wants to insure that the loans are
going to the intended recipients who are truly in a
rural community. So, qualifying participants of less
than 5,000 people who are not connected by road or rail
to Anchorage or Fairbanks and less than 2,000 who are
connect to Anchorage or Fairbanks by road or rail.
HB 471 is important legislation and not just because it
contributes an annual dividend to our general fund, but
AIDEA does help promote and diversify our economy
providing businesses a means or a beginning for them to
grow. So, we appreciate your support in the bill.
SENATOR TORGERSON said the definition of "community" is not
defined in AS 29.71.800 and he wanted the Department of Law to
assure him that that worked.
MR. BRIAN BJORKQUIST, Department of Law, took a moment to review
that.
SENATOR TOGERSON asked if the 5,000 population cover Barrow and
Bethel. He thought they were bigger then that. He didn't want
them to leave anyone out.
CHAIRMAN STEVENS asked if under existing revolving bulk fuel loan
funds, are communities over 5,000-population eligible now.
MS. LYNNE KENNY, AIDEA, said they are referring to two different
loans. The first is the bulk fuel revolving loan fund. The 5,000
population or less is existing law.
MR. BJORKQUIST added that according to census information from
the Department of Labor Bethel is over 5,000 and Barrow is below
5,000.
CHAIRMAN STEVENS asked if it was his intent to make these loans
available to Bethel and Barrow.
MR. BJORKQUIST said under existing law Bethel would not be
eligible because it has a population in excess of 5,000, but
Barrow would be eligible because it has a population below 5,000.
SENATOR TORGERSON said he was asking a policy question. Should
they up the populations so that Barrow and Bethel are covered
under the loan program or are they happy with leaving Bethel out.
CHAIRMAN STEVENS asked if Bethel was the only one that was not
eligible off the road system.
MS. KENNY replied that the policy question had not been explored.
A definition of a rural community became complicated and this
language was from the Department of Law. She also thought that
Bethel would be able to secure financing in more traditional
ways, such as the loan participation program.
CHAIRMAN TORGERSON said it was her call and he wanted it on the
record that they were leaving Bethel out and that it was
intentional.
MS. KENNY said she would have to speak to others with more
authority.
SENATOR TORGERSON asked what the delinquency rate was on the bulk
fuel loans.
MS. KENNY said she didn't have that information, but would be
happy to get it for him.
MR. BJORKQUIST replied to a previous question about definition of
a community.
Community under the new legislation includes a city as
defined in AS 29.71.800, which is - reading that
statute - saying we need a general law, first or
second-class city or a home rule city. Then the second
part of the definition - or an unincorporated community
as defined in AS 29.60.140. That definition states the
following: In this section unincorporated community
means a place in the unorganized borough that is not
incorporated as a city in which 25 or more persons
reside as a social unit. That's the definition of
community as it's used in the proposed legislation.
REPRESENTATIVE GREEN said it was his understanding that Bethel
was about 4,850 people. He asked Senator Torgerson where he gets
his figures from.
SENATOR TORGERSON answered:
The attorney just gave us the numbers off the census
data, but I thought Bethel was a little better than
5,000. We're including the marine highway system and
some pretty good cities here, because we're saying the
marine highway doesn't count as a road. We have
Ketchikan in this thing and whatever they have - 8,000
or 10,000 people and you're leaving out a community in
rural Alaska. I don't think that's the intention, but
I'm not prepared to amend the bill. I want them to make
a policy call and they make the policy call to leave
Bethel out, they can handle Senator Hoffman.
MS. MENENDEZ said she knew the intention of this was to determine
better the qualifying participants, because they had some
problems at Settler's Bay, which does have other financial
options available to them. "So this program was intended for
rural communities who don't have other financing options
available to them."
CHAIRMAN STEVENS that they were essentially doubling the size of
the ability to loan the funds and asked if it has the capacity to
absorb that demand.
MS. KENNY replied yes, with the $5 million they are receiving
from the FRDA.
CHAIRMAN STEVENS asked how many loans did they issue annually.
MS. KENNY apologized that the loan specialist on this particular
fund was out of town today and she couldn't tell him that.
REPRESENTATIVE GREEN said they he was assured before hand that
there were funds available.
CHAIRMAN STEVENS asked what the balance of the loan fund was now.
He asked that the requested information be sent to Senator
Torgerson who would share it with the rest of the committee.
MR. BJORKQUIST interrupted to say that the population of Nome is
3,500.
SENATOR TORGERSON moved to pass HB 471 out of committee with
individual recommendations with the accompanying $0 fiscal note.
There were no objections and it was so ordered.
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