Legislature(2003 - 2004)

02/27/2003 01:35 PM Senate L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
             SB  73-AIDEA AUTHORITY TO ISSUE BONDS                                                                          
                                                                                                                              
CHAIR CON BUNDE announced SB 73 to be up for consideration.                                                                     
                                                                                                                                
MR.  RON MILLER,  Executive  Director,  Alaska Industrial  Export                                                               
Development Authority  (AIDEA), said  SB 73 would  extend AIDEA's                                                               
general  bonding  authority  until  July 1,  2007.  Without  this                                                               
extension,  they would  need legislative  authorization to  issue                                                               
bonds for  development projects  under $10  million and  would be                                                               
restricted  from issuing  any bonds  to finance  the purchase  of                                                               
loan participations  without legislative  authorization. Examples                                                               
of  bond  issues  that would  require  legislative  authorization                                                               
after July 1, 2003 are in the handout he provided. He noted:                                                                    
                                                                                                                                
     The first was  a series 1995 A revolving  fund bond for                                                                    
     just  over $8  million that  provided tax  exempt funds                                                                    
     for  loan participation  for Kodiak  Fish Meal  Company                                                                    
     for a fish by-product processing  plant. The other is a                                                                    
     series 1991 A  revolving fund bond for  $7 million that                                                                    
     provided tax exempt bonds  for expansion improvement of                                                                    
     the  Unalaska  Marine  Center. That  project  also  had                                                                    
     legislative authorization.                                                                                                 
                                                                                                                                
     The following requirements are not  affected by SB 73 -                                                                    
     all  development projects  over $10  million for  which                                                                    
     bonds  are  to  be  issued do  now  require  and  still                                                                    
     require legislative authorization  prior to issuing the                                                                    
     bonds. Prior  to issuing bonds  over $6  million, AIDEA                                                                    
     is  required   to  receive  approval  from   the  local                                                                    
     government in which  the project is to  be located. All                                                                    
     development projects  for which bonds are  to be issued                                                                    
     require  AIDEA to  make findings  that  the project  is                                                                    
     economically    and    financially    feasible.    This                                                                    
     legislation affects none of those requirements.                                                                            
                                                                                                                                
     Recently,  we've  only   issued  refunded  and  conduit                                                                    
     revenue  bonds, which  are not  affected by  SB 73.  If                                                                    
     this  bill doesn't  pass, we'll  continue  to have  the                                                                    
     ability to  issue refunding  bonds and  conduit revenue                                                                    
     bonds.  However, the  sunset  extension provides  AIDEA                                                                    
     the  flexibility   to  assist   in  financing   of  key                                                                    
     development projects.  If the  sunset is allowed  to go                                                                    
     forward, and  depending on the timing  of any potential                                                                    
     project,  AIDEA  would  have to  wait  for  legislative                                                                    
     authorization  to  issue   bonds.  Allowing  this  bond                                                                    
     authority to  sunset would eliminate  a tool  for AIDEA                                                                    
     to use in economic development projects.                                                                                   
                                                                                                                                
SENATOR SEEKINS questioned whether  the due diligence requirement                                                               
of economic and financial feasibility would affected.                                                                           
                                                                                                                                
MR. MILLER replied that SB 73 wouldn't affect that.                                                                             
                                                                                                                                
SENATOR SEEKINS  asked if the  benefit is that AIDEA  could offer                                                               
it on  a tax-exempt basis  and thereby  make a project  even more                                                               
economically feasible by potentially reducing the interest rate.                                                                
                                                                                                                                
MR.  MILLER  replied  that  AIDEA  has  that  authority  now.  He                                                               
explained  that SB  73 would  allow AIDEA  to go  forward with  a                                                               
project that  it would otherwise  have to hold in  abeyance until                                                               
the Legislature convenes.                                                                                                       
                                                                                                                                
SENATOR  HOLLIS  FRENCH asked  how  many  bonding projects  AIDEA                                                               
would take up in the next 12 months that are under $10-million.                                                                 
                                                                                                                                
MS.  SARAH  FISHER-GOOD, financial  analyst  for  AIDEA and  AEA,                                                               
explained that currently nothing is  on AIDEA's docket that would                                                               
require issuing bonds for under $10-million.                                                                                    
                                                                                                                                
SENATOR FRENCH  asked the  status of  the two  examples -  the $8                                                               
million and $7 million bonding projects.                                                                                        
                                                                                                                                
MR. MILLER replied that, in  the past, those projects were funded                                                               
using this authorization.                                                                                                       
                                                                                                                                
SENATOR FRENCH asked how much bonding AIDEA does each year.                                                                     
                                                                                                                                
MS.  FISHER-GOOD replied  that  the only  bond  AIDEA has  issued                                                               
recently was a  Federal Express refunding bond.  The other issues                                                               
that are done are conduit revenue bonds.                                                                                        
                                                                                                                                
CHAIR BUNDE closed the committee discussion on SB 73.                                                                           
                                                                                                                                
SENATOR RALPH  SEEKINS moved  to pass SB  73 from  committee with                                                               
individual  recommendations. There  were  no  objections and  the                                                               
roll was  called. Senators Davis,  French, Gary  Stevens, Seekins                                                               
and Bunde voted in favor and SB 73 moved from committee.                                                                        

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