Legislature(1995 - 1996)
04/26/1996 03:51 PM Senate TRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CSHB 526(FIN) am AIDEA OPERATIONS/PROJECTS/LOANS
CHAIRMAN RIEGER brought CSHB 526(FIN) am before the committee. He
advised that since the last meeting on the bill the Alaska
Industrial Development & Export Authority (AIDEA) has provided
language, which are two different approaches to address the concern
about the $10 million authorization.
Number 227
SENATOR GREEN inquired which version of the bill the suggested
languages applied to. KEITH LAUFER, Assistant Attorney General
Governmental Affairs Section, Department of Law, clarified he
drafted them off of the version that came over from the House, CSHB
526(FIN) am.
Mr. Laufer explained that in response to some of the concerns
raised by the chairman, they have provided for a sunset of ADIEA's
bonding authorization similar to the sunset that went into effect
on July 1, 1995. Both versions of the suggested language before
the committee accomplish that.
The second issue the chairman was concerned about had to do with a
limitation on ADIEA's ability to bond for its loan participation
program. The version which reads "bonding authorization amendment"
provides for a limitation on AIDEA's ability to issue bonds in
order to fund participation loans under its participation program,
if those bonds would exceed $10 million.
Number 254
RANDY SIMMONS of the Alaska Industrial Development & Export
Authority, added that under the bonding authorization, the
suggested language that does not have the $10 million limitation
for loan participation bonds, there still is in AIDEA statutes a
limitation for loan participation, so they could not do a loan
participation over $10 million without coming to the legislature
for authorization. It further states that they couldn't do a bond
over $10 million. As an example, he said if they had two loan
participations in one year that were $8 million a piece, normally
what they would do to save money was issue one bond. They would
group those together and issue one bond for $16 million. Under the
bonding authorization, they could do that. Under the bonding
authorization amendments, they could not; they would have to issue
two $8 million bonds.
Number 280
CHAIRMAN RIEGER commented that on that issue he is more comfortable
with the existing language, with the exception of adding a sunset
provision. He said another issue that was raised was on the
interest rate on loan participations, and he asked for an
explanation of suggested draft language provided by AIDEA.
KEITH LAUFER explained that elsewhere in statute and being amended
in the bill are the two provisions that provide for interest rates
on loan participations when AIDEA issues both taxable, in one case,
or tax exempt bonds in the other case. At the last committee
meeting some questions were raised about the interest rate that
AIDEA would charge on loans that are not funded with newly issued
bonds, but, instead, funded out of AIDEA's own funds or equity
without issuing bonds. The amendment provides the methodology that
AIDEA uses to set its interest rates on loan participations funded
out of equity. First, a determination is made whether tax exempt
or taxable bonds could be used for the issue. In other words,
certain types of loans can be funded with tax exempt bonds and, in
that case, they would set the interest rate using the cost of funds
based on the rate that would be available to AIDEA if they were to
sell tax exempt bonds. In the other case, they use the taxable
bond rights.
Number 309
CHAIRMAN RIEGER suggested modifying that language when it's in
final draft to say that the interest rate shall be determined by
regulation, but not lower than what Mr. Laufer had described. MR.
LAUFER and MR. SIMMONS responded that they would not have a problem
with his suggested modification.
Number 315
CHAIRMAN RIEGER then directed attention to language he had drafted,
which is a shortened version of the conditions on the Delong
Mountain Transportation System (Red Dog project), to accommodate
some of the concerns of Senator Adams. It deletes from an earlier
draft of the bill the requirement for a 6.5 percent floor on the
rate of return. It also edits the language in b(2) to make it
clear that the original return on the original investment is one
deal, and the additional return on the additional investment is a
different deal as far as making sure that the return is
commensurate with the risk. He said number 3 is something that may
still be an issue; however, it no longer reads that the toll-
schedule may be periodically adjusted, but it is permissive that
the original toll schedule could be crafted in any way that the
parties negotiate.
RANDY SIMMONS and SENATOR ADAMS stated they had no problem with the
change in number 3.
Number 350
CHAIRMAN RIEGER noted the Senate State Affairs version did not
provide for the guarantee of interest to apply on the Small
Business Guarantee Program, and he asked if the committee thought
that should be added back in or whether that program should have a
sunset.
SENATOR TAYLOR asked why the provision was deleted in Senate State
Affairs. RANDY SIMMONS responded there wasn't a lot of debate on
the issue, and he could not speak as to what the concerns might
have been of the senators at that time. However, he thought it
might be a concern of why AIDEA would want to guarantee interest
once there was a default. He added it is something that is
generally in most loan programs, and, if a loan were to go into
default, they would give a period of 90 days to guarantee the
interest on their portion until that loan can be basically sold by
the bank. AIDEA doesn't consider it a real problem from their
standpoint because the interest is going to be fairly insignificant
if it happens, and, even though their program hasn't been used that
much so far, they've only had one default on any of the $3 million
worth of loans issued so far.
Number 397
SENATOR LINCOLN commented that it says it is for the time and in
the manner established by the authority by regulation, so it
doesn't seem to be a paragraph that would be detrimental.
Number 430
After further discussion, CHAIRMAN REIGER stated the consensus of
the committee was to add back in language limiting the interest
guarantee to no more than 90 days.
Number 434
SENATOR TAYLOR suggested modifying existing language that is
already within the bill that updates what the current cost would be
of the Bradfield Road project. This is just to provide the
opportunity that if in fact it can be developed, that there already
is legislative authorization in place to go forward with it.
CHAIRMAN RIEGER asked if AIDEA has a position on this project and
if this would work. RANDY SIMMONS answered that they have not
looked at this and he really could not speak to it without looking
at it first. He did point out that original authorization for the
project was in the Department of Transportation; however, if it is
a feasible project, AIDEA will be happy to look at it. If the
project were to happen within the next couple of years they would
not need this because they have a two-year statute of limitation.
If it were left out of the bill and in that two-year period it
became a viable project, it could either be done by conduit
financing or specific statutory legislation or authorization could
be provided under their program. If it is revenue bonds, AIDEA
would not need the authority, but if it's under their development
finance, it's a different type of bonding and ADIEA would need the
authority.
SENATOR TAYLOR asked if AIDEA could make a deal without this
amendment. RANDY SIMMONS answered they could if the project were
going to be financed by conduit financing.
SENATOR TAYLOR said he wants AIDEA to have the greatest authority
possible so that when someone comes to them with a project that is
feasible, they can move forward with some dispatch at that point.
RANDY SIMMONS said he didn't want to speak against the Bradfield
project because AIDEA just doesn't know anything about it. Their
normal process is to work with a developer beforehand to see if a
project is fairly viable just from the start, without having to go
through the full feasibility study. Then AIDEA would ask for
authorization just as they have done with Red Dog, etc.
Number 546
SENATOR TAYLOR said part of the concern is that there is a minimum
of probably a two-year EIS, there is a national concern in that it
will require an international crossing, which takes a considerable
period of time, and if there isn't the authorization to move
forward on the project upfront, it just further slows everything
down.
Number 570
CHAIRMAN RIEGER asked if there have been any further developments
in the proposal regarding the bulk unloading facility that was
testified to at the last hearing. REPRESENTATIVE NAVARRE said he
spoke to Representative Kott's staff who informed him that the
representative's position has not changed with respect to the
amendment, although Representative Kott informed him he was leaving
it up to the chairman of the Senate Transportation Committee.
Number 580
CHAIRMAN RIEGER stated it was his intention to have a committee
substitute drafted for consideration at the next meeting so that
final action can be taken on the proposed amendments and the bill
can be moved out of committee. He feels the committee is fairly
close on all the issues with the exception of the additional bond
authorization project.
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