Legislature(1995 - 1996)
05/02/1996 09:05 AM Senate STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 490 FINANCIAL ASSISTANCE TO BIDCO
CHAIRMAN SHARP brought up HB 490 as the next order of business
before the Senate State Affairs Committee. He called the prime
sponsor to testify.
Number 210
REPRESENTATIVE BETTYE DAVIS, prime sponsor of HB 490, stated her
aide would give testimony on the bill.
JONATHON SPERBER, Aide to Representative Bettye Davis, prime
sponsor of HB 490, stated Jamie Kenworthy, Executive Director of
the Alaska Science & Technology Foundation, should be available on
teleconference to answer questions. BIDCOs are business investment
development companies. They are middle risk private sector
financial institutions which provide emerging small and medium
sized businesses with financing, management support, and technical
assistance. The primary goal of BIDCOs is to establish private
sector businesses that create jobs.
CHAIRMAN SHARP asked if there is a limit on the amount of the
financial assistance.
REPRESENTATIVE BETTYE DAVIS stated $3,000,000.00 is needed to fund
BIDCO.
CHAIRMAN SHARP asked if present statute sets a limit of
$3,000,000.00.
REPRESENTATIVE BETTYE DAVIS stated there is nothing in statute
limiting how much can go into BIDCOs eventually. They need at
least $3,000,000.00, but more than that could go into it.
CHAIRMAN SHARP stated he will pose that question to Mr. Kenworthy.
He does not want to give them a blank check.
MR. SPERBER stated that HB 490 would allow ASTF to supplement the
originally funded amount of $1,000,000.00 with earnings from that
money, or other earnings ASTF would have. So the fiscal note truly
is zero for HB 490. HB 490 would simply provide the mechanism for
ASTF to provide certain earnings to BIDCOs.
CHAIRMAN SHARP asked if that would occur through legislative
appropriation.
SENATOR DUNCAN noted that the fiscal note prepared by Mr. Kenworthy
indicates that there is no fiscal impact. He thinks the chairman's
concern is addressed by the fiscal note and the sponsor's
statement.
CHAIRMAN SHARP stated he was under the impression that Section 8,
extending the financial assistance, was the most important part.
REPRESENTATIVE BETTYE DAVIS stated if HB 490 is not passed, the
authority to do that will sunset at the end of this year.
CHAIRMAN SHARP just wants to ensure that HB 490 will not allow ASTF
to give money to BIDCO without legislative appropriation.
REPRESENTATIVE BETTYE DAVIS thought the legislature did not want to
appropriate any money to it.
CHAIRMAN SHARP clarified that they did not want to appropriate
money to any specific BIDCO projects. But he has a problem with
adding money to the foundation without legislative appropriation.
REPRESENTATIVE BETTYE DAVIS stated she thought as long as ASTF
could come up with funds from interest-earning money that they
have, that would be acceptable to the legislature, because they
don't have any money to appropriate. If she thought they had money
to appropriate to BIDCOs, she would have gone that route. She
thinks this in an important economic development issue.
CHAIRMAN SHARP asked Representative Davis how many applications
have been approved.
REPRESENTATIVE BETTYE DAVIS stated none have been approved, because
the program is not funded.
Number 305
CHAIRMAN SHARP asked if a 50/50 match is still required from the
private sector.
REPRESENTATIVE BETTYE DAVIS responded yes.
CHAIRMAN SHARP stated he doesn't mind giving ASTF the authority to
replace the $2,000,000.00 that was vetoed.
REPRESENTATIVE BETTYE DAVIS replied that's all they want to do. We
wouldn't be authorizing anything more than that, because they don't
need it. Once that money is in the private sector, we would not
appropriate any more money to the BIDCOs.
Number 230
CHAIRMAN SHARP stated he is hesitant to not restrict the amount of
money ASTF could put into the BIDCO foundation.
REPRESENTATIVE BETTYE DAVIS stated the legislature does not
restrict ASTF in any other uses of their money.
CHAIRMAN SHARP stated he does not want to give ASTF a blank check.
You can only stretch $11,000,000.00 so far (the amount of money
ASTF has). The appropriation by ASTF into BIDCOs should be made by
legislative approval.
REPRESENTATIVE BETTYE DAVIS understands the chairman's concern, but
she cannot imagine ASTF would do that. ASTF has made a commitment
to all of the programs they're involved with. She doesn't think
ASTF would give any more preference to the BIDCOs than it does to
any of the other proposals they get.
CHAIRMAN SHARP asked Representative Davis if she would object to
the addition of language to HB 490 that would limit ASTF to
contributing $2,000,000.00 to the BIDCOs.
Number 370
REPRESENTATIVE BETTYE DAVIS stated the only problem she would have
with that is the late date at which that amendment would be added
might keep HB 490 from passing due to time constraints. She
suggested passing legislation addressing the chairman's concern
during the next legislature.
SENATOR DONLEY suggested adding a provision stating ASTF has to get
legislative approval if they want to give more than a certain
amount of money to BIDCOs.
REPRESENTATIVE BETTYE DAVIS asked if that could be done in a letter
of intent.
CHAIRMAN SHARP stated he does not believe in legislative intent
when it comes to millions of dollars.
SENATOR DUNCAN thinks it's important to keep HB 490 moving. He
asked the chairman to clarify that he is concerned ASTF might give
more than $2,000,000.00 to BIDCOs.
CHAIRMAN SHARP replied that is correct. He is concerned there are
no limits set out in HB 490.
SENATOR DUNCAN asked Representative Davis if she thought language
limiting the amount of money ASTF could give to BIDCOs would cause
a problem in the House.
REPRESENTATIVE BETTYE DAVIS did not think that provision would
cause a problem, but she is worried that since there are only seven
days before adjournment there might not be enough time for the
House to concur in Senate amendments to the bill.
SENATOR DUNCAN and SENATOR RANDY PHILLIPS think there should be
enough time for a concurrence vote.
Number 420
CHAIRMAN SHARP stated there is strong support for HB 490 in the
Rules Committee.
REPRESENTATIVE BETTYE DAVIS does not think the committee needs to
be concerned about the ASTF appropriating more than $2,000,000.00
to the BIDCOs, because that would throw all their other obligations
off.
Number 460
JAMIE KENWORTHY, Executive Director, Alaska Science & Technology
Foundation, Department of Commerce & Economic Development,
testifying from Anchorage, stated ASTF has grant authority, but
there is nothing in statute, without HB 490, that would give
authority for establishment of this kind of risk-capital capability
in Alaska. If ASTF misuses its' authority, it will have to answer
to the legislature during the next session.
CHAIRMAN SHARP asked Mr. Kenworthy if he believes that under HB
490, the ASTF would still have to come back to the legislature with
their capital budget to appropriate additional money to the BIDCO,
over and above what ASTF has right now.
MR. KENWORTHY replied no.
CHAIRMAN SHARP asked how much authority ASTF currently has.
MR. KENWORTHY stated if HB 490 passes, ASTF will have the
authority. They would take funds out of their interest earnings,
and if the funds were leveraged by the private sector, they would
establish a BIDCO. They would not need additional funds
appropriated. It is unusual to have an agency director, himself,
asking that funds be taken out of his direct authority and put into
the private sector where it will be leveraged.
CHAIRMAN SHARP asked if BIDCO will have a separate boards.
MR. KENWORTHY replied BIDCO will have its' own board. There will
be a loan agreement between ASTF and the BIDCO, but the BIDCO will
make the decisions on where to invest the money and the terms of
those investments.
CHAIRMAN SHARP asked Mr. Kenworthy if ASTF feels it has the
authority to add money up to $3,000,000.00, or unlimited.
Number 490
MR. KENWORTHY responded if HB 490 passes, ASTF would have the
authority to add unlimited funds. But he is trying to be very
clear to the legislature regarding the size of the commitment ASTF
would make, so there is no misunderstanding about what ASTF is
doing. A BIDCO needs about $6,000,000.00 to be viable.
CHAIRMAN SHARP asked if all the other projects ASTF is involved in
were approved by the legislature.
MR. KENWORTHY replied the appropriation for the agriculture project
for the last two years is a direct earmark by the legislature of
ASTF earnings. ASTF is authorized to fund other projects through
grants, however they need the legislative exemption because of the
statutory provision that they cannot spend more than half their
funds in grants of over $100,000.00 a year. HB 490 is needed to
give ASTF the authority to fund BIDCOs.
CHAIRMAN SHARP asked if there were dollar limits placed on all
other ASTF projects.
MR. KENWORTHY responded the language in the legislation relating to
the Kodiak Launch Facility was "up to $5,000,000.00".
Number 515
CHAIRMAN SHARP thinks HB 490 will have difficulty passing the
Senate without a limit on the amount ASTF is allowed to appropriate
to BIDCOs.
MR. KENWORTHY would not have a problem with the legislature
limiting the amount ASTF would be allowed to contribute to BIDCOs.
Number 533
SENATOR LEMAN made a motion to adopt a conceptual amendment that
would limit ASTF to contributing no more than a total of
$3,000,000.00 to BIDCO.
CHAIRMAN SHARP, hearing no objection, stated the amendment was
adopted.
SENATOR RANDY PHILLIPS made a motion to discharge HB 490 from the
Senate State Affairs Committee with individual recommendations.
CHAIRMAN SHARP, hearing no objection, stated HB 490 was discharged
from the Senate State Affairs Committee.
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