Legislature(1999 - 2000)
04/18/2000 02:45 PM House FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
April 18, 2000
2:45 P.M.
TAPE HFC 00 - 125, Side 1.
TAPE HFC 00 - 125, Side 2.
TAPE HFC 00 - 126, Side 1.
TAPE HFC 00 - 126, Side 2.
CALL TO ORDER
Co-Chair Therriault called the House Finance Committee
meeting to order at 2:45 P.M.
PRESENT
Co-Chair Therriault Representative Foster
Vice Chair Bunde Representative Grussendorf
Representative Austerman Representative Moses
Representative G. Davis Representative Phillips
Representative J. Davies Representative Williams
Co-Chair Mulder was not present for the meeting.
ALSO PRESENT
Senator Rick Halford; Mike Tibbles, Staff, Co-Chair
Therriault; James Baldwin, Assistant Attorney General,
Department of Law; Keith Laufer, Chief Financial and Legal
Affairs Manager, Alaska Industrial Development and Export
Authority (AIDEA), Department of Community & Economic
Development, Anchorage; Ken Taylor, Director, Division of
Habitat and Reforestation, Department of Fish and Game;
Kaitlan Markley, Development Specialist, Alaska Industrial
Development and Export Authority (AIDEA), Department of
Community & Economic Development, Anchorage; Diana Rhoades,
Staff, Senator Johnny Ellis; Devon Mitchell, Debt Manager,
Department of Revenue; Eddie Jeans, Deputy Commissioner,
Department of Education and Early Development; Annalee
McConnell, Director, Office of Management and Budget, Office
of the Governor; John Bitney, Legislative Liaison, Alaska
Housing Finance Corporation (AHFC), Department of Revenue;
Wendy Redman, Vice President, Statewide Services, University
of Alaska, Fairbanks.
SUMMARY
HB 281 An Act providing for the issuance of general
obligation bonds in the amount of $665,000,000 for
the purposes of paying the cost of design,
construction, and renovation of public elementary
and secondary schools, renovation of state
buildings, capital improvements at the University
of Alaska, and capital improvements to state
harbors; and providing for an effective date.
HB 281 was HEARD and HELD in Committee for further
consideration.
SB 34 An Act relating to tattooing and body piercing;
and providing for an effective date.
HCS CS SB 34 (FIN) was reported out of Committee
with a "no recommendation" recommendation and with
a fiscal note by the Office of the Governor dated
2/23/00.
SB 204 An Act extending the termination date of the
Alaska Commission on Aging; and providing for an
effective date.
SB 204 was POSTPONDED for consideration at a
latter date.
SB 212 An Act authorizing the commissioner of fish and
game to award grants for certain resource
activities; and providing for an effective date.
HCS CS SB 212 (FIN) was reported out of Committee
with a "do pass" recommendation and with a zero
fiscal note by the Department of Fish and Game
dated 1/21/00.
SB 248 An Act relating to the financing authority,
payment in lieu of tax agreements, and tax
exemption for assets and projects of the Alaska
Industrial Development and Export Authority;
relating to renaming and contingently repealing
the rural development initiative fund within the
Department of Community and Economic Development,
and establishing the rural development initiative
fund within the Alaska Industrial Development and
Export Authority; and providing for an effective
date.
HCS CS SB 248 (FIN) was reported out of Committee
with a "do pass" recommendation and with a zero
fiscal note by the Department of Community &
Economic Development dated 2/8/00.
SJR 34 Proposing an amendment to the Constitution of the
State of Alaska relating to certain public
corporations.
CS SJR 34 (FIN) was reported out of Committee with
"no recommendations" and with a fiscal note by the
Office of the Lt. Governor dated 2/23/00.
CS FOR SENATE BILL NO. 248(FIN) am
An Act relating to the financing authority, payment in
lieu of tax agreements, and tax exemption for assets
and projects of the Alaska Industrial Development and
Export Authority; relating to renaming and contingently
repealing the rural development initiative fund within
the Department of Community and Economic Development,
and establishing the rural development initiative fund
within the Alaska Industrial Development and Export
Authority; and providing for an effective date.
KEITH LAUFER, FINANCIAL AND LEGAL AFFAIRS MANAGER, ALASKA
INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY (AIDEA),
DEPARTMENT OF COMMUNITY & ECONOMIC DEVELOPMENT, ANCHORAGE,
explained the intent of the legislation. He summarized each
section:
? Section 1 would clarify changes to property tax
exemption provisions. Together with Sections 6, 7
and 8, it would make clarifying changes in tax
exemption and payment in lieu of tax provisions
relating to AIDEA owned projects.
? Sections 2-4 would transfer the Rural Development
Initiative Fund Program (RDIF) to AIDEA.
? Section 5 would extend AIDEA's general bonding
authority which would otherwise sunset on July 1,
2000. Bonds for development finance projects in
excess of $10 million dollars would continue to
require legislative authorization.
? Section 6 would amend AS 44.88.140(a) to recognize
the permissive property tax exemption that local
governments may grant for AIDEA's own projects.
? Section 7 would amend AS 44.88.140(b) to clarify
the mechanism to be used by local governments and
users of AIDEA projects for entering into payment
in lieu of tax agreements. The bill would make
clarify that these agreements are to be made
directly between the local governments and the
project users.
? Section 8 would amend AS 44.88.140 to add a
clarifying definition section for "local political
subdivision". The provision provides that the
political subdivision in which the AIDEA project
is located is the "local political subdivision"
for purposes of the statute.
? Sections 9-11 references the transfer of the Rural
Development Initiative Fund Program (RDIF).
? Sections 12-15 provides for an effective date.
Co-Chair Therriault referenced Page 4, Line 22, the "$2
million dollar" issue. He pointed out that he had submitted
Amendment #1 to address that concern. [Copy on File]. Mr.
Laufer replied that the amendment would present no problem.
Representative J. Davies asked if there was a limit to the
amount of a conduit bond. Mr. Laufer replied that there was
no limit on the size of a conduit bond, but that AIDEA does
limit bonds that can be issued in a one-year period.
Conduit bonds would be subject to that limit. There is a
limit under the federal Internal Revenue Service (IRS) laws
as to the amount that the entire State can issue for private
activity bonds. The current limit is $150 million dollars.
The State Bond Committee makes the allocations for those
bonds. Mr. Laufer noted that most conduit revenue bonds
would fall within that cap and that certain bonds for non-
profit do not fall within the cap.
Co-Chair Therriault MOVED to ADOPT Amendment #1.
MIKE TIBBLES, STAFF, REPRESENTATIVE GENE THERRIAULT,
explained that he had worked with AIDEA and Tam Cook, Alaska
Legal Services, on the amendment.
Representative J. Davies asked the purpose of the amendment.
Mr. Tibbles stated that the language had been adopted in the
Senate Finance Committee and then passed to the House
Finance Committee. The language clarifies that the assets
transferred to the fund by that authority may not exceed $2
million dollars. He noted that there had been a question
regarding what "asset" meant in this circumstance. He
pointed out that the amendment would clarify that language.
Representative J. Davies asked if the amendment would
provide for a total or one time limit. Co-Chair Therriault
replied that it would be a total limit. Mr. Laufer
interjected that AIDEA supports the $2 million dollars being
sufficient to turn this into a "true" revolving loan
program.
Representative J. Davies voiced concern with "other assets"
becoming available. He inquired if they would have to be
addressed through statute. Mr. Tibbles explained that the
intent was to reflect "other" funds outside the previous
sentence. Beyond that, then there would be a $2 million
dollar limit.
Representative J. Davies pointed out that those are items
transferred to AIDEA and thought the language should be
modified by AIDEA. Mr. Laufer advised that the new language
begins with "in addition" after listing the assets that
could be put into the account. That language reflects the
fact that it would be other than those that had been
appropriated to AIDEA. Mr. Laufer added that he did not
think adding that language would change the meaning; the new
language was designed to recognize assets that had been
transferred to AIDEA for that purpose.
Co-Chair Therriault agreed, pointing out the comment "in
addition" to those funds. Mr. Laufer stated that it could
be clarified by adding "in addition to the assets described
in the previous sentence". Representative J. Davies agreed
that would make him more comfortable. Co-Chair Therriault
recommended moving a conceptual amendment, "in addition to
these assets" in order that the drafters could make it work
grammatically.
Co-Chair Therriault modified the original MOTION to include
language as discussed above. There being NO OBJECTION, it
was adopted.
Representative G. Davis MOVED to ADOPT Amendment #2, 1-
GS2009\DA.1, Cook, 4/17/00. [Copy on File]. Co-Chair
Therriault OBJECTED for the purpose of discussion.
Mr. Laufer explained that this was a status quo amendment.
The way it is written, it only applies to facilities that
AIDEA would own that are open to the public. That type of
asset is typical of government infrastructure assets. AIDEA
has been used as a unique financing mechanism in the State
for these purposes.
Representative G. Davis questioned the contract between
COMINCO and AIDEA. He pointed out that it had been agreed
upon that it could be used by other entities. It could be
treated as a public facility for roads and ports.
Co-Chair Therriault noted that local government agrees that
it should be a tax-exempt infrastructure. He asked why the
company would be paying a payment in lieu of tax. Mr.
Laufer replied that COMINCO and Nannana have not only the
interest in the use rights of the road and the port, but
also have the mine itself, which is not owned by AIDEA and
which is not subject to these provisions. They entered into
a payment in lieu of tax provision that they thought had
encompassed cooperation. Co-Chair Therriault asked if they
were getting tax proceeds under another name.
Co-Chair Therriault WITHDREW his OBJECTION to Amendment #2.
Representative Phillips noted that there would be a
conceptual amendment submitted that would put a January 1,
1999 retroactive date into it.
Representative Phillips MOVED an amendment to Amendment #2,
which would place in the retroactive effective date.
Representative Bunde OBJECETED and asked if the taxes had
already been collected. Mr. Laufer replied that they were
not yet subject to payment and that they would "kick in" in
July 1999. Representative Bunde WITHDREW his OBJECTION.
Representative J. Davies noted that the amendment would
preserve the status quo. He asked if the tax assessor had
made a statement regarding the policy. Co-Chair Therriault
replied that the effect was that there was only one user of
the facility. Representative J. Davies asked if there had
been an event that triggered the decision. Mr. Laufer
explained that there currently is a new tax assessor; he
came to a different conclusion than the original one.
There being NO OBJECTION to Amendment #2 as amended, it was
adopted.
Representative J. Davies asked which other properties would
the amendment apply to. Mr. Laufer replied that it would
apply to the AIDEA port in Unalaska. Another potential spot
could be the AIDEA facility in Skagway. That facility is
not being used at this time and there would be no tax
ramifications.
Representative J. Davies questioned the distinction between
the road and the load-out facility. Mr. Laufer replied that
there was a possibility of using it as a coal facility.
Representative J. Davies inquired if the company using it
would pay a fee. Mr. Laufer replied they would and that
under the agreement with COMINCO, it provides including a
toll structure for other users. In the event that there are
other users, COMINCO would have a smaller burden.
Representative J. Davies asked if the local municipality was
able to tax COMINCO's leasehold interests in that facility.
Mr. Laufer responded that under the provisions adopted, they
would not be able to do so.
Representative J. Davies commented that this is not really a
public facility. Mr. Laufer pointed out that it would be
AIDEA charging the other user. COMINCO's right is not
exclusive now so the extent of other users would be making a
toll payment. COMINCO would be receiving a credit against
its toll payments.
There being NO OBJECTION to the amended Amendment #2, it was
adopted.
Co-Chair Therriault referenced Section #6 of the bill
questioning if that language should be included. Mr.
Tibbles suggested that the language does not make sense and
that it would not create a tax exemption. Mr. Laufer agreed
that the section was not needed. Representative J. Davies
asked the inference to AS 29.45.050(P). Mr. Laufer
explained that section is the provision that deals with
municipality's ability to grant exemptions for facilities.
It is a stand-alone exemption that exists in law and that
nothing in that section creates a tax exemption.
Co-Chair Therriault MOVED to delete Section #6. There being
NO OBJECTION, it was adopted.
Representative J. Davies asked if a new sunset had been
inserted. Mr. Laufer explained that the new sunset was
July, 2003, as indicated in Section #5.
Representative Foster MOVED to report HCS CS SB 248 (FIN)
out of Committee with individual recommendations and with
the accompanying fiscal note.
HCS CS SB 248 (FIN) was reported out of Committee with a "do
pass" recommendation and with a fiscal note by Department of
Community & Economic Development dated 2/8/00.
CS FOR SENATE JOINT RESOLUTION NO. 34(FIN)
Proposing an amendment to the Constitution of the State
of Alaska relating to public corporations.
Co-Chair Therriault noted that the proposed resolution was
the companion piece to HJR 52, which the Committee
previously took action on. There was additonal language in
Secton 1, which allowed the Legislature to exclude
corporations. That language was not necessary and is not
included in the Senate version. Discussion followed among
Committee members regarding the legislation proposed by
Representative James.
SENATOR RICK HALFORD stated that the Alaska Constitution
provides for legislative confirmation of any board or
commission at the head of a principal department or
regulatory or quasi-judicial agency. That would include the
Board of Education, the Board of Game and all the
professional and regulatory boards, such as the Board of
Dispensing Opticians.
Senator Halford noted that in sharp contrast, public
corporations which manage much money in State assets, are
not subject to the provision. The corporations including
the Permanent Fund Corporation, Alaska Railroad and Alaska
Housing Finance Corporation, have a tremendous impact on all
Alaskans and our State's economy. Members are appointed at
the Governor's pleasure and removed in the same manner,
without legislative oversight.
Senator Halford stated that the amendment proposed in SJR 34
is a necessary addition to Alaska's Constitution. It would
ensure that the people who control Alaska's largest assets
are subject to a formal appointment, confirmation and
removal process, and not the whim of a newly elected
Governor.
He stated that the framers of the Constitution would have
passed this legislation if they had had the above named
entitities before them. The size and scope of these
corporations has gone far beyond the imagination anyone 20-
30 years ago could have envisioned. He believed that the
legislation would establish a better working relationship
between the Executive and Legislative Branches of
government.
Representative J. Davies disagreed that the founding fathers
would have written the Constitution differently. He stated
that the entities included, the Alaska Railroad and the
Alaska Permanent Fund, were set up to be private
corporations. The purpose in establishing them was not to
make them departments in the State of Alaska. One of the
rationales for setting them up the way in which they were,
was to have them separate from the government process so
that they could operate more like a business.
Representative J. Davies stressed that there was a reason
for making the separation, in that they are meant to be an
executive function. They are meant to execute the
operations of a business of the State. Otherwise, they
would have been set up as a department.
Senator Halford commented that when the constitutional
fathers did look at "high breds", they wanted them to have
some independence. They worked hard on the University of
Alaska while continuing to provide for confirmations.
Representative J. Davies argued that creating an educational
enterprise is different than creating a business enterprise.
Senator Halford replied that to protect the Railroad from
internal conflict, that protection was necessary. He argued
that how the Railroad deals with the Legislative branch is
currently a problem. He did not agree that government can
operate effectively and function in the way that private
business does. Senator Halford claimed that the Judiciary
review process belongs to the people.
Representative J. Davies inquired why not run them as a
department of the State. Senator Halford replied that in
the case of the Alaska Railroad, the State was attempting to
get involved into all the arguments. He believed that would
be determinental to the operation of the Railroad.
Representative J. Davies stated that making these boards
responsive to legislative confirmation would put politics
back into the corporate business structure. Senator Halford
noted that of the major appointments, only 2% have been
turned down. Most legislators generally agree to give the
Governor his choice. Representative J. Davies disagreed
with that statement, given votes the last six years. He
pointed out that on all the significant issues, there had
been controversy.
Representative J. Davies voiced concern that the State would
get into situations in which there would be discussions
regarding each of those appointments. He agreed that a
staggered appointment system would work, however, the cure
being proposed could be worse than the problem fixed.
(TAPE CHANGE, HFC 00 - 126, Side 2).
Representative J. Davies reiterated that the political
process functions well.
Representative Grussendorf asked what the resolution would
correct. Senator Halford stated that the ability to support
staggered terms to maintain an on going policy. He noted
that the last two governors had replaced the entire
Permanent Fund Board. He stated that was a mistake as
continuity is important and added that protection is tenuous
and noted that the Railroad is difficult to deal with
through the legislative branch only. Senator Halford spoke
to the confirmation process and the possibility of creating
a better working relationship.
Representative J. Davies agreed with the notion of
staggering the terms. He asked if there had been
consideration given how to accomplish the staggering of
terms without legislative appointment. Senator Halford
noted that a bill passed the legislature to do that and it
was vetoed by Governor Knowles. The ability to control
terms and placements is derived from the sharing of
appointment which comes through confirmation. There are
questions as to whether one can reach the enforceability in
staggered terms.
Representative J. Davies agreed that the law passed did not
work. He reiterated his question if there was a
constitutional method that would simply provide for
staggered terms. Senator Halford did not know.
JAMES BALDWIN, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF
LAW, voiced caution regarding the legislation. He advised
that there are technical problems with the resolution.
Initially, there are questions whether corporations other
than the Permanent Fund are separate corporations to
insulate the State from liability. He agreed that the
Permanent Fund should be included, however, Alaska
Industrial Development and Export Authority (AIDEA), Alaska
Housing Finance Corporation (AHFC) and the Alaska Railroad
Corporation (ARRC) all have their own separate assets. The
language of the resolution creates a "disconnect" between
what the drafter intended and what the language reports to
do. It does not reach the public corporation that manages
their own assets. To bring language into the Constitution
to manage State assets would be dangerous.
Mr. Baldwin added that when interpreting the Constitution,
the wording in Section 26, speaks to the governing entity of
a public corporation. Elsewhere, in Article 9, it speaks
about public corporation, debt exemption, in which you could
issue debt through a public corporation enterprise; that
language refers to a public corporation enterprise of a
State. He did not know if any entity could be "managing"
State assets and if the legislation would be applicable to
those members.
Representative J. Davies asked if there was concern with the
phrase, "as defined by law". Mr. Baldwin responded that
there would not be any uniformity in accomplishing that.
Certain corporations would escape the provision for reasons
that are not rationale and would not be included in the
requirement that their board members be confirmed. Mr.
Baldwin pointed out that there is not guidance as to what is
"significant". That word does not appear much in the
Constitution as it is a difficult word to define.
Representative J. Davies asked if "as defined by law" was
used to define the word "significant". Mr. Baldwin did not
know and recommended that the language be tightened up to
establish the intent.
Vice Chair Bunde asked if the Permanent Fund Board would be
covered by the proposed legislation. He believed that other
entities were not as clear. Mr. Baldwin acknowledged that.
He asked that his testimony not be misconstrued to look like
this was a good idea. He added, it would become more of a
problem when moving beyond the Permanent Fund.
Representative Phillips inquired if the legislation would
cover the Commercial Fishing and Agriculture Bank (CFAB).
Mr. Baldwin stated that it was initially formed as a
production credit association. Representative Phillips
pointed out that they manage State assets. Mr. Baldwin did
not know. Representative Phillips noted that could bring
the Legislature into the banking business.
Senator Halford stated that in reference to the things that
Mr. Baldwin had pointed out, the drafters solution was for
each of those questions to be decided by the Legislature.
He reiterated that each case would be a negotiation between
the Legislative and the Executive Branch.
Representative J. Davies asked about concerns raised
regarding AIDEA and AHFC and how their assets are not
considered to be the State's but rather assets of the
corporation. Senator Halford replied that would depend upon
what State law defines. He stated that "as defined by law"
could be read to apply to that. The Court would interpret
in a constitutional amendment, the simplest version of what
the words meant.
Representative J. Davies advised that the concern is, if the
State passes a law that would clarify that those assets were
assets of the State, and hence, they would fall under this,
would there then be a risk of not having those liability
assets for liability protection purposes and separate from
the State. Senator Halford explained that is the discussion
that would occur at the time of the decision and added that
the confirmation question would decide the assets of the
State.
Representative Grussendorf asked which public corporations
would be included. Senator Halford responded that AIDEA,
AHFC, Alaska Railroad Corporation and the Permanent Fund.
He emphasized that all those boards deal with large amounts
of State assets.
Representative Grussendorf asked if there had been
complaints about how these corporations had managed their
portfolios. Senator Halford explained that from a business
point of view, he had received complaints regarding the
Alaska Railroad Corporation.
Representative Williams MOVED to report CS SJR 34 (FIN) out
of Committee with individual recommendations and with the
accompanying fiscal notes.
Representative Grussendorf OBJECTED.
A roll call vote was taken on the motion.
IN FAVOR: Bunde, G. Davis, Phillips, Williams,
Austerman
OPPOSED: J. Davies, Grussendorf, Moses
Representative Foster, Co-Chair Mulder and Co-Chair
Therriault were not present for the vote.
The MOTION FAILED (5-3).
Representative Bunde noted that the Committee would need six
votes for passage out of Committee.
Representative Foster MOVED to RECONSIDER the passage of
moving the bill out of Committee. There being NO OBJECTION,
the bill was again before the Committee.
Representative Foster MOVED to report CS SJR 34 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes.
Representative Grussendorf OBJECTED.
A roll call vote was taken on the motion.
IN FAVOR: G. Davis, Foster, Moses, Williams, Austerman,
Bunde
OPPOSED: Grussendorf, Moses
Representative J. Davies, Co-Chair Therriault and Co-Chair
Mulder were not present for the vote.
The MOTION PASSED (6-2).
CS SJR 34 (FIN) was reported out of Committee with a "no
recommendation" and with a fiscal note by the Office of the
Lt. Governor dated 2/23/00.
CS FOR SENATE BILL NO. 212(FIN) am
An Act authorizing the commissioner of fish and game,
with the concurrence of the Board of Fisheries or the
Board of Game, to award grants for habitat restoration,
access, or enhancement projects; and providing for an
effective date.
KEN TAYLOR, DIRECTOR, DIVISION OF HABITAT AND REFORESTATION,
DEPARTMENT OF FISH AND GAME, stated that the bill would
authorize the Commissioner of the Department to award grants
for certain resource activities.
Under the bill, the Commissioner would have express
authority to directly award grants that serve core missions
of the Department, protecting, maintaining and improving
public access to fish, game and habitat resources of Alaska.
Current law necessitates the Department to channel money
through other agencies which cause delay and add
considerable administrative costs.
Mr. Taylor added that an increasing amount of federal funds
are available to restore fish habitat and passage. The
legislation represents a cost-effective way to continue
efforts on private and public land to rehabilitate
riverbanks, protect fish streams and enhance access to these
areas.
Vice Chair Bunde asked for further explanation of Line 10,
the "concurrence by the Board of Fisheries or the Board of
Game". Mr. Taylor replied that during review in the Senate
Resources Committee, language was amended to provide for the
concurrence of those entities. Most of the programs would
be targeting salmon restoration activities.
Mr. Taylor explained the process. The State program would
come to the Legislatture with a capital request for the
item. If the Legislature denied it, the funding would not
be made available; however, if it were approved, they would
go to the Board of Fisheries to determine if they approved
of the plan. Vice Chair Bunde pointed out that they give
the Board of Fisheries veto power. Mr. Taylor agreed.
Representative Phillips questioned why the language
insinuated that this practice had been standard in the past.
Mr. Taylor explained that it had not been a standard
practice and that there had been a separation between the
fiscal powers of the Department and the Board. It is a
deviation from standard practice.
Representative Phillips stated that the Legislature does not
have the power to designate appropriation authority to
anyone else. She MOVED a conceptual amendment, deleting
language on Line 10. Vice Chair Bunde OBJECTED for
discussion purposes.
Representative Austerman asked why the legislation was
before the Committee. Mr. Taylor advised that in the past,
there were Exxon Valdez oil spill (EVOS) criminal settlement
funds, which were appropriated through the Senate Capital
Improvement Project (CIP) to the Department for restoration
activities. The funds could not be granted directly to
private landowners to do that work and were handled through
a cooperative agreement with a federal agency. That process
was cumbersome. The State did all the work and then the
credit went to federal agencies. Many decisions were placed
in the federal agencies.
Representative Austerman understood that some of the
concerns were about access. He noted the title. Mr. Taylor
replied that the bill was amended on the Senate floor to
include "access" as a project category that federal receipts
would be applied towards. He stated that the receipts,
which were going to be available, would be for habitat
restoration and enhancement. Mr. Taylor noted that he did
not envision many federal receipts available for purchasing
access.
Representative Grussendorf asked what would occur if the
legislation did not pass. Mr. Taylor replied that the
Department would continue to be partners with federal
agencies to funnel money in order to get people the grants.
Representative Grussendorf asked if they would actually have
veto power. Mr. Taylor explained that there had been an
amendment proposed by the Senate Resources Committee.
Representative Phillips MOVED the amendment which would
remove Line 1 from the title, "with the concurrence of the
Board of Fisheries or the Board of Game" and Line 9, "The
award of a grant under this section is subject to
concurrence by the Board of Fisheries or the Board of Game,
whichever is appropriate." There being NO OBJECTION,
Amendment #1 was adopted.
Representative J. Davies MOVED that the appropriate title
resolution be drafted to accompany the legislation.
Representative Grussendorf again asked the Department's
intent with passage of the legislation. Mr. Taylor
responded that the Department was attempting to gain better
administrative efficiency. There being NO OBJECTION, the
title change was so ordered.
Representative Austerman reiterated his concern regarding
the access. Mr. Taylor explained that the access had been
included by an amendment proposed on the Senate floor as a
category of activities that federal receipts could be used
for granting mechanisms. Mr. Taylor did not envision any
receipts, which the Department would be able to spend in
that manner.
Discussion followed regarding access concerns.
Representative Phillips questioned if it had been added as a
result of the EVOS monies. She suggested that the language
be removed.
Representative Austerman MOVED to remove "access" on Lines
Davies pointed out that it would not cause a problem for the
Department, however, it could provide a problem for the
legislation. Representative G. Davis voiced his objection
to the amendment also. Representative Austerman WITHDREW
the MOTION to adopt the amendment.
Representative Foster MOVED to report HCS CS SB 212 (FIN)
out of Committee with individual recommendations and with a
fiscal note by the Department of Fish and Game dated
1/21/00. There being NO OBJECTION, it was so ordered.
HCS CS SB 212 (FIN) was reported out of Committee with a "do
pass" recommendation and with a fiscal note by Department of
Fish and Game dated 1/21/00.
HOUSE CS FOR CS FOR SENATE BILL NO. 34(L&C)
An Act relating to tattooing, body piercing, and ear
piercing; relating to other occupations regulated by
the Board of Barbers and Hairdressers; relating to fees
charged by the Board of Barbers and Hairdressers; and
providing for an effective date.
Representative Bunde pointed out that in previous testimony,
concern had been voiced if ear piercing should remain a part
of the legislation.
DIANA RHOADES, STAFF, SENATOR JOHNNY ELLIS, noted that
Senator Ellis was supportive of the draft committee
substitute before Committee members. She added that there
were two changes made in that draft which had been
previously discussed. The first was to guarantee that the
exam for sterilization and health and safety was written and
the second was a technical change made in the definition of
tattooing and permanent cosmetics.
Representative Foster MOVED that work draft #1-LS0279\X,
Lauterbach, 4/18/00, be the version of the legislation
before the Committee. There being NO OBJECTION, it was
adopted.
Representative J. Davies asked if the draft had removed ear
piercing. Ms. Rhoades noted that it had not been removed,
but that there would be amendment offered. Representative
Bunde advised that Co-Chair Therriault had voiced a concern
regarding removal of that language. Discussion followed
regarding removing ear piercing. Representative J. Davies
voiced concern that the bill recognized that this would be a
secondary level and that it did not require beaucratic
effort. Vice Chair Bunde suggested that the problem would
rest with the enforcement.
Representative J. Davies replied that the language would add
clarity regarding standards. Representative Phillips
interjected that there should not be regulations which cover
each jewelry store in the State.
(TAPE CHANGE, HFC 00 - 126, Side 1).
Representative Foster MOVED to report HCS CS SB 34 (FIN) out
of Committee with individual recommendations and with the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
HCS CS SB 34 (FIN) was reported out of Committee with a "do
pass" recommendation and with fiscal notes by Department of
Environmental Conservation dated 4/14/00 and Department of
Community & Economic Development dated 4/14/00.
RECESSED
The Committee recessed at 4:20 p.m.
RECONVENED
The Committee reconvened at 6:15 p.m.
HOUSE BILL NO. 281
An Act providing for the issuance of general obligation
bonds in the amount of $665,000,000 for the purposes of
paying the cost of design, construction, and renovation
of public elementary and secondary schools, renovation
of state buildings, capital improvements at the
University of Alaska, and capital improvements to state
harbors; and providing for an effective date.
Co-Chair Mulder observed that there have been a number of
legal questions regarding if this fund would be dedicated.
He provided members with a legal opinion from James L.
Baldwin, Assistant Attorney General, Department of Law,
dated 4/15/00. [Copy on File].
DEVON MITCHELL, DEBT MANAGER, DEPARTMENT OF REVENUE,
provided information on the legislation. He explained that
he has had limited conversations with the State's Bond
Counsel. The issuing entity, an arm of Alaska Housing
Finance Corporation (AHFC), would be responsible for the
issuance.
Mr. Mitchell explained that the Commissioner of Department
of Revenue would negotiate a sale of the revenue stream to
the subsidiary of AHFC. The securitization of the revenue
stream would be set up with a 40-year nominal debt service
schedule. This is the minimal amount that is required to be
paid over a 40-year life, being the worst case scenario. The
amortization would be flexible. If revenues are above that
level, which is the expectation, all of the revenues, less
$1.4 million dollars, would be applied to debt service. The
average life would be reduced to 10 years.
In response to a question by Co-Chair Mulder, Mr. Mitchell
explained that the $269 million dollar target was based on
market conditions, the expectation that investment grade
bonds would be issued, and the cash flow that is expected
from the Tobacco settlement. The requirement of security
which would be required from the cash flow, limits how far a
revenue stream can be stretched when it is being
securitized. Investors are willing to take risks within an
investment grade scale. If the amount were increased there
would be a higher interest cost. He noted that more would
be paid for the capital if the revenue stream were spread
because it would be a higher risk for the investor.
Co-Chair Mulder questioned what would happen if $269 million
dollars was not derived from the sale. Mr. Mitchell did not
know. He observed that the legislation authorizes the
commissioner to sell the revenue stream to reach the target.
He clarified that the State's hand would not be tipped by
stating the amount desired and that the State bond counsel
would not have a role in the issuance.
In response to a question by Representative Williams, Mr.
Mitchell explained that the revenue stream is complex.
There is a base amount in the settlement that is on going.
There is an initial payment amount and there are strategic
contribution payments that come in from 2007 to 2018. The
on-going payment and the strategic contributions are
adjusted for inflation and volume. Inflation pushes the
number up and volume adjustment pushes the number down.
There are a variety of opinions on how the adjustments would
impact the revenue stream over time. In order to obtain
something close to a single A rate bond issuance, there has
to be an assumption of a 2.5 percent decline overtime. A
requirement exists to be within an annual debt service
amount that would allow volume adjustments to be made.
Speculations on increased smokers would be penalized in the
bond issuance.
Mr. Mitchell provided the analogy of a person with a known
salary, attempting to get a bank loan. The bank allows a
home payment of 20 percent of their income, which is based
on the opinion of how much of disposable income could be
used on the home.
Vice Chair Bunde noted that Section 5 was dropped out of the
bill, the School Major Maintenance Grant Fund.
EDDIE JEANS, DEPUTY COMMISSIONER, DEPARTMENT OF EDUCATION
AND EARLY DEVELOPMENT, provided information on the HB 281.
He thought that section had been inadvertently included in
the legislation.
Co-Chair Mulder asked if Section 5 would inadvertently
suspend the local match. Mr. Jeans noted that Section 5
suspended the evaluation process of the Capital Improvement
Projects (CIP) list. The projects that are in the bill are
the ones in which the State share and the local match has
been applied.
Co-Chair Therriault questioned how the State guaranteed that
70 percent would be covered. He asked what would happen if
the project came under budget. Mr. Jeans noted that grant
agreements are issued on every project. If the cost were
under the local match, it would be adjusted to assure that
the local match is 30 percent. That authority is under AS
14.11.088. He noted that when local communities go out for
bonds, they are reimbursed on a bond schedule. Projects in
the bill are grants and can be adjusted by the authority
listed in AS 14.11.088.
Co-Chair Mulder questioned if AS 14.11.088 should be
included. Mr. Jeans did not think it was necessary. The
local match requirement for school construction grants is
established.
Co-Chair Therriault referred to Page 3, Line 12. He noted
that AHFC "shall" make the proceeds of the bonds issued
under that section available to the Department. On Page 3,
Line 22, the legislation states that the provision is
subject to an appropriation. He noted that the legislation
is not an appropriation bill. Mr. Jeans explained that the
dollar amounts would have to be listed in a capital budget
bill.
Co-Chair Therriault questioned if the dedicated fund
argument was based on the use of "shall" and if replacing it
with "may" would alleviate the problems.
Representative J. Davies noted that Line 11 indicates that
the pledge would be subject to agreements and appropriation.
Co-Chair Mulder stated that there have been discussions
regarding inclusion in the capital bill. The decision would
be to add an introduction to an appropriation bill to
accompany the HB 281.
Co-Chair Therriault questioned if the projects would need to
be listed in the accompanying capital bill. Mr. Jeans
stated that inclusion of a list would tie the projects
between the two bills. Co-Chair Mulder agreed.
ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND
BUDGET, OFFICE OF THE GOVERNOR, spoke in support of the
discussion. She agreed that the projects would not be
needed, but that they could add convenience. The
administration supports the use of Tobacco Funds
securitization. She emphasized that the securitization
approach assists in shifting risk about the future of the
tobacco companies to the bondholders and would allow
projects to be done now. There is a timing issue which must
be addressed. She observed that other states are attempting
to securitize against the risk. There is $10 - $15 billion
dollars of investment opportunities nationwide. She
estimated that the capacity could be tapped before another
legislative session. Ms. McConnell provided members with a
letter indicating states aligning themselves to securitize
their tobacco revenues. [Copy on File]. Co-Chair Mulder
acknowledged that other states are attempting to securitize
those revenues.
Co-Chair Mulder questioned what would happen if the capacity
were met before the State's issuance. Ms. McConnell
responded that then there would not be a very good market
for the bonds. She stressed that the State is well
positioned to move quickly. She clarified that after the
bonds are paid the revenue of the Tobacco Settlement would
go into the general fund.
Co-Chair Mulder noted that "annually" should be inserted on
Page 2, Line 7 and Line 24 after "$1,400,000".
Ms. McConnell stressed that K-12 and university education
makes sense as part of the tobacco securitization plan. She
maintained that the amount for K-12 funding should be
increased. She observed that there are other vehicles to
handle transportation projects and added that it is
important to go through the priority list. She recognized
the need for balance between the districts that can do their
own bonding and those that can't. She recommended a
combination of school debt reimbursement going further down
the list for major maintenance and school construction. Ms.
McConnell believed that it would be possible to do all of
the major maintenance. She concluded that HB 281 is the
right vehicle.
JOHN BITNEY, LEGISLATIVE LIAISON, ALASKA HOUSING FINANCE
CORPORATION, DEPARTMENT OF REVENUE, provided information on
the legislation. He pointed out that there are two timing
issues:
? The purchase of the assets; and
? The issuance.
Mr. Bitney clarified that these could happen at the same
time depending on the cash flow. He stated that AHFC would
try to complete the transactions by the upcoming fall. He
agreed that actions of other states are an issue.
In response to a question by Co-Chair Mulder, Mr. Bitney
responded that the goal would be set up as an agreement that
would not require the districts to concern themselves with
the issuance of the bonds.
Co-Chair Mulder asked if the issue of risk in relationship
to the funds as a dedicated revenue stream has been
discussed with bond counsel. Mr. Bitney stated that there
had been some discussion with their bond counsel and that
they have been requested to look at the concern. The AHFC
bond counsel did not indicate that it was a problem in
earlier conversations. He observed that the concern is that
there is a pledge of the revenue stream for debt service
payments. He pointed out that the State was reimbursed up
front for the right to purchase the revenue stream. He
noted that it has been viewed by AHFC as a purchase and that
dedication is a non-issue.
Ms. McConnell clarified that even if the money was
available, communities would have to go through a bidding
process and that construction would probably not happen this
year.
Co-Chair Mulder pointed out that Mr. Baldwin's letter had
omitted "not" on Page 2.
JAMES BALDWIN, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF
LAW, provided information on the legislation. He agreed
that his letter should have stated that "this transaction
does not violate the dedicated fund prohibition." He
explained that under Alaska law, the term "property" is
defined to include what is known as a chosen action; the
right to receive something pursuant to a court type
proceeding. That is a recognized type of property in Alaska
and other jurisdictions. Since, it is property, it can be
sold or conveyed by a State agency, given proper authority
by the Legislature. The legislation grants the proper
authority.
(TAPE CHANGE, HFC 00 - 126, Side 2)
Mr. Baldwin explained that it would pick out a period of
time, stream of revenue, would reserve certain amounts for
tobacco programs and to convey this property right to AHFC
in the form of a true sale. There have been other ways that
these transactions have been done in the State by
contributing the property to another entity. He added that
because of the dedicated fund prohibition, it would be a
cleaner transaction and would support the validity better if
it were a clean sale. The Department proposed that the
bonds are issued for the projects, and in the capital bill,
it would be appropriated proceeds for those projects, which
would cover any indicated fund addressed. The Legislature
would retain its ability to appropriate the proceeds.
Co-Chair Mulder asked about the protection of a separate
bill. Mr. Baldwin explained the Governor's approach, which
would have a bond authorization and actual appropriations
would be somewhere else in an appropriation bill.
Co-Chair Therriault referenced the Four Dam Pool process.
He asked the amount in the Governor's bill for the
appropriations. Mr. Baldwin replied that their numbers were
in the Capital Bill as amendments. He noted that a similar
approach was taken with the approval of the rural
development loans in the AIDEA bill. There is a well
established precedence treating these as property rights
that can be sold.
Co-Chair Therriault noted that there is a prohibition
against substantive legislation and appropriations in the
same bill. Mr. Baldwin encouraged the Committee to take the
appropriation step. He noted that sometimes in a bonding
context, the bonding bill itself could be viewed as proper
authorization. In the proposed situation, it would be
better to have a separate appropriation.
Co-Chair Mulder asked if the revenue stream was expected to
flow between two points without an appropriation. That
arrangement could be vulnerable under Article 9, Section 13
of the State Constitution. By selling the State assets and
then appropriating them money back to those entities could
conflict with Article 9. Mr. Baldwin interjected that there
would not be a problem and that it would be a sensible
transaction. It would address the problem that the
dedicated fund was attempting to remedy, that being, taking
a revenue source and removing it completely from the
Legislature's discretion and appropriating it for any
purpose it wants.
Co-Chair Therriault noted that clearly, AHFC does not own
the revenue stream. He asked if the Legislature would have
to consider a two step process to transfer that revenue
stream over to that ownership. Mr. Baldwin noted that the
Governor proposed that authority could be given to
Department of Revenue to convey it. Then the conveyance was
made to AHFC, and they would be given value for that. Then
the Legislature would appropriate the value which was
received back. He suggested an additional step would be to
appropriate the revenue. Describing it could get "messy".
The easiest approach would be to authorize revenue to convey
it in such a way that satisfies bondholders.
Co-Chair Mulder referenced Section 3, "the sale of right to
receive anticipated special revenue..". He asked if that
language would satisfy what Mr. Baldwin was referencing.
Mr. Baldwin stated it would. The next step would be to
separate appropriations of that money. Later in the bill
would be the authorization of specific capital projects, and
their needs as a step to appropriation, beyond that.
Ms. McConnell added that there was another aspect in the
process. The point is to protect the State from the risk
that the ultimate amount of payment would be less than
anticipated. It is important to insure that the State's
full faith and credit is not involved. There are aspects of
the proposed transaction that do not have to do with the
mechanics of the sale, but to insure that the bond holders
do not become limited. She acknowledged that would add to
the complexity of the issue, at the same time, providing for
greater safety.
Co-Chair Therriault asked about the revenue stream for the
capital projects. Mr. Baldwin replied that the fund source
would be corporate receipts. Co-Chair Therriault asked if
the projects would be pro-rated. Mr. Baldwin replied that
current language of the bill states that the fees would be
allocated. Mr. Baldwin added that the projects are
allocations and if you run short in one project, you could
reallocate to another. That is how a shortage would be
addressed. There would be an issuance for a set principle
amount. It is an allocated process and can reallocate to
another project. Co-Chair Therriault asked if that would
address the issue should a project come in over budget. Mr.
Baldwin explained that in the Legislative Drafting Manual, a
General Obligation (GO) bond issue would take the allocation
approach. AHFC would be managing the funds.
Co-Chair Therriault did not like the idea of AHFC deciding,
when short of capital, which areas would be cut. He
suggested that it is important to determine if the money
would flow out of Department of Education and Early
Development.
Co-Chair Mulder suggested that it would be an interesting
"turf war". He asked if AFHC would be at risk with that
structure. Mr. Baldwin replied that would be determined in
how the structure plan was determined. Ms. McConnell
interjected, that aspect had not yet been covered. She
noted that once it was in the market, would be the time to
determine much more. She noted that they would come back to
the Legislature to determine how to move forward.
Representative J. Davies recommended cleaning up language on
Page 2, Line 27, and Page 6, Line 26. He noted that there
needs to be a method to reconcile that language. He pointed
out that how to deal with the shortfall is included in the
appropriation language contained in the second vehicle. Co-
Chair Mulder agreed that reconciliation would be a way to
address that concern.
Co-Chair Therriault asked to clarify the mechanism. He did
not think that AHFC would be "fronting" the State money and
then going out and recouping the transfer. Mr. Baldwin
understood that AHFC would hold the funds for a certain
amount of time and then the Department of Education and
Early Development would make the request, and then the funds
would be transferred. AHFC would be holding the funds as
long as they can. Co-Chair Therriault pointed out that
would occur after the sale.
Representative J. Davies commented that normally when
something like this is established, there is a fund to which
the money can be transferred. He asked if there was a
school construction fund.
Mr. Bitney noted that in 1998, when SB 360 passed, it was
the last $200 million dollars of AHFC general obligation
bonds. In that session, the appropriation fund source was
created called AHFC Bond Proceeds. All the appropriations
for each project in the capital budget were given its own
fund source.
Mr. Jeans indicated that the Department did not perceive
that to be a problem.
Vice Chair Bunde asked what would happen if there was too
much money. Ms. McConnell explained that the way it was
structured, it is not just a 40-year bond plan. The idea
was to pay it back more quickly. She noted that $1.4 would
be reserved before AHFC was to receive any of the revenue
stream.
Representative J. Davies commented that if there were excess
funds, they would presumably reside at AHFC. If they were
in an account called AHFC proceeds, then the Legislature
would know where they were and how to find them.
Co-Chair Mulder asked if the Department had anticipated
preparing an amendment to address what would happen in the
case of a shortfall. He noted that there is an
appropriation bill in Committee, the Governor's Capitol
budget. He advised that there is a committee substitute
being prepared that would marry the two recommendations.
Co-Chair Therriault referenced Page 5, the University
deferred maintenance project and asked if it was essential
to "lock" the University into those different categories.
He pointed out that in the past, they had been linked
together to give the University flexibility. He recommended
in the new committee substitute to have the language
structured to indicate deferred maintenance/renewal/code of
compliance.
Co-Chair Mulder questioned if the Bond Council would care
where the money was spent as long as there was revenue
coming in. Mr. Bitney replied that this would need to be
done for public purposes. The only instance where that
could be a problem would be in situations where grants were
provided to non profit agencies.
Co-Chair Mulder agreed that the new committee substitute
should reflect as an allocation toward the University for
deferred maintenance/code compliance/renewal replacement.
Representative Williams asked where the numbers came from.
Co-Chair Mulder replied that the numbers came from the
University.
Co-Chair Mulder replied that the list came from the actual
University list and in consultation with the specific
campuses. Representative Williams noted that he was
concerned with moving the money around. Ms. McConnell noted
that the Administration recommended clustering the deferred
maintenance projects to avoid extra accounting. That would
be consistent with how other deferred maintenance projects
have been addressed.
Representative J. Davies advised that each item was an
estimate. The language would provide the University more
flexibility.
WENDY REDMAN, VICE PRESIDENT, STATEWIDE SERVICES, UNIVERSITY
OF ALASKA, FAIRBANKS, noted that the money is allocated to
the individual campuses. There is a detailed list of the
deferred maintenance and code compliance projects. The list
contains the top priority projects from each campus. The
money would not move from campus to campus. There are many
points of accountability on how the money is spent.
Representative Austerman observed that renewal and
replacement could be listed as deferred maintenance. Ms.
Redman reiterated that the deferred maintenance was the
University's highest priority. The deferred maintenance is
the renewal and replacement that did not get done last year.
In fact it has not been done for many years. She noted that
with the AHFC bond with $35 million dollars in deferred
maintenance, this was the wording used and that it provided
flexibility to address some of the unexpected thing that may
come up.
Representative J. Davies pointed out that the Board of
Regents has to approve each project and each expenditure.
Co-Chair Mulder advised that there would be a new committee
substitute drafted which would consolidate all the concerns
which had been voiced.
Representative Grussendorf asked what happened to the
original premise of HB 281. He spoke about transferring
harbors to the local municipalities. Co-Chair Mulder
clarified that it was still the intent that harbors be
transferred to the local communities. He noted that the
Department of Transportation and Public Facilities would be
addressing that concern. With regard to the Sitka project,
unfortunately, there was only one harbor not placed into HB
269. Representative Grussendorf emphasized that the
communities that he represents are coastal communities and
that they could take over these operations and turn them
into an enterprise. Representative Phillips pointed out
that every community on the list had made the agreement that
they would take it over. Representative Grussendorf advised
that there had been some added that were not on the original
list.
Representative J. Davies asked if all the projects were in
fact "ready to go" in the next year or so. Representative
Phillips assured members that her district was ready.
Representative Grussendorf noted that in the original HB
281, there was a three-year period in which there would be
$10 million dollars available. This is no longer the
approach. Co-Chair Mulder commented that they would
continue to work on the language so to expand that concept.
HB 281 was HELD in Committee for further consideration.
ADJOURNMENT
The meeting adjourned at 7:40 P.M.
H.F.C. 26 4/18/00
| Document Name | Date/Time | Subjects |
|---|