Legislature(2017 - 2018)SENATE FINANCE 532

03/07/2017 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSSB 14(FIN) Out of Committee
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 SENATE FINANCE COMMITTEE                                                                                       
                       March 7, 2017                                                                                            
                         9:02 a.m.                                                                                              
9:02:55 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair  MacKinnon  called  the  Senate  Finance  Committee                                                                    
meeting to order at 9:02 a.m.                                                                                                   
MEMBERS PRESENT                                                                                                               
Senator Lyman Hoffman, Co-Chair                                                                                                 
Senator Anna MacKinnon, Co-Chair                                                                                                
Senator Click Bishop, Vice-Chair                                                                                                
Senator Mike Dunleavy                                                                                                           
Senator Peter Micciche                                                                                                          
Senator Donny Olson                                                                                                             
Senator Natasha von Imhof                                                                                                       
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Representative  Adam  Wool,   Sponsor;  Juli  Lucky,  Staff,                                                                    
Representative  Anna  MacKinnon;   Gene  Therriault,  Energy                                                                    
Policy  Assistant, Alaska  Energy  Authority, Department  of                                                                    
Commerce, Community and  Economic Development; Sean Skaling,                                                                    
Deputy Director,  Alternative Energy and  Energy Efficiency,                                                                    
Alaska Energy  Authority, Department of  Commerce, Community                                                                    
and Economic Development;  Kathy Wasserman, Alaska Municipal                                                                    
League,  Juneau;  Senator   Mia  Costello,  Sponsor;  Weston                                                                    
Eiler, Staff, Senator Mia Costello.                                                                                             
PRESENT VIA TELECONFERENCE                                                                                                    
Rob  Hill,  Genesis   Energy  Systems,  Anchorage;  Brittany                                                                    
Smart,  Fairbanks   North  Star  Borough,   Mayor's  Office;                                                                    
Annabel Chang, Lyft, San  Francisco; Mitchel Matthews, Uber,                                                                    
SB 14     TRANSPORTATION NETWORK COMPANIES                                                                                      
          CSSB 14(FIN)  was REPORTED  out of  committee with                                                                    
          "no recommendation"  and with one new  zero fiscal                                                                    
          note  by  the  Department of  Administration;  and                                                                    
          three  previously  published  zero  fiscal  notes:                                                                    
          FN1(LWF), FN2(LWF), and FN4(CED).                                                                                     
HB 80     MUNI ENERGY IMPROVEMNT:ASSESSMNTS/BONDS                                                                               
          HB 80 was HEARD and HELD in committee for further                                                                     
CS FOR HOUSE BILL NO. 80(ENE)                                                                                                 
     "An Act adopting the  Municipal Property Assessed Clean                                                                    
     Energy  Act;  authorizing municipalities  to  establish                                                                    
     programs to impose  assessments for energy improvements                                                                    
     in  regions  designated   by  municipalities;  imposing                                                                    
     fees; and providing for an effective date."                                                                                
9:03:37 AM                                                                                                                    
REPRESENTATIVE ADAM  WOOL, SPONSOR,  presented HB  80, which                                                                    
was  known as  the "C-PACE"  or "PACE"  bill. He  understood                                                                    
that the  committee had  previously heard  SB 39,  which was                                                                    
identical to  the bill being  considered. He  explained that                                                                    
"C-PACE"  meant commercial  property-assessed clean  energy.                                                                    
The bill  would allow  municipalities (or  any place  with a                                                                    
property tax)  a mechanism  to finance  commercial buildings                                                                    
for  the   purposes  of  clean  or   more  efficient  energy                                                                    
conversion. The  financing would  be put as  a line  item on                                                                    
individual  businesses property  tax. The  bill would  allow                                                                    
access   to  low-interest   or   zero-interest  loans,   and                                                                    
encouraged  businesses and  those with  commercial buildings                                                                    
to convert  to a  cleaner or  more efficient  energy source.                                                                    
He   specified  that   the   program   was  voluntary,   and                                                                    
municipalities would have the opportunity to opt in.                                                                            
Representative  Wool  continued  to discuss  the  bill,  and                                                                    
explained that the program was  flexible for different kinds                                                                    
of fuel conversions. He shared  that businesses in Fairbanks                                                                    
were being  encouraged to covert  to natural gas.  The loans                                                                    
would stay with  the building, and if the  building was sold                                                                    
the new  owner would  assume the loan  and continue  to make                                                                    
payments through  the property tax. He  commented that banks                                                                    
and  municipalities  were  supportive of  the  PACE  program                                                                    
because of  the low default  rate and low  interest. Thirty-                                                                    
three states had  adapted PACE legislation, and  there was a                                                                    
zero fiscal note.                                                                                                               
Senator  Dunleavy  asked  if the  program  was  for  cleaner                                                                    
energy, more efficient energy, or both.                                                                                         
Representative Wool answered in the affirmative.                                                                                
Senator Dunleavy asked if there  was a possibility that if a                                                                    
business focused on cleaner energy,  it could cost more than                                                                    
a legacy energy method that was being abandoned.                                                                                
Representative  Wool   answered  in  the   affirmative,  and                                                                    
continued that  it was  possible to  covert to  clean energy                                                                    
that  was not  economically advantageous.  He detailed  that                                                                    
there  was language  in a  committee  substitute that  would                                                                    
possibly be discussed later in  the meeting, that would give                                                                    
a  municipality  the  option   to  assess  the  subject.  He                                                                    
detailed  that the  price of  natural gas  was not  known in                                                                    
Fairbanks,  but  he  wanted   to  encourage  conversion.  He                                                                    
considered  that there  was the  option to  go with  cleaner                                                                    
energy, or cheaper energy.                                                                                                      
Senator  Dunleavy asked  if  PACE could  be  qualified as  a                                                                    
"different" energy  program. He  asked if the  program would                                                                    
allow  a business  that was  using coal  to move  to natural                                                                    
gas; which would cost more.                                                                                                     
Representative Wool answered in the affirmative.                                                                                
9:08:04 AM                                                                                                                    
Senator von Imhof stated she  had received a letter from the                                                                    
Alaska Bankers  Association that had indicated  it supported                                                                    
SB 39, but had reservations  about the residential aspect of                                                                    
Representative Wool clarified that  the bill did not address                                                                    
residential properties in any way.                                                                                              
Senator von Imhof  noted that each municipality  set its own                                                                    
parameters  for   loan-to-value  ratio   and  debt-to-equity                                                                    
ratio.   She  asked   what   assurances   there  were   that                                                                    
municipalities  had the  expertise  to  properly vet  credit                                                                    
risk for each property.                                                                                                         
Representative Wool  was unsure who would  vet the financial                                                                    
liability of projects. He noted  that the municipality could                                                                    
function  in  different  roles; such  as  loan  facilitator,                                                                    
lending agent, or as a loaning entity.                                                                                          
Senator von  Imhof asked about  defaults in the  program and                                                                    
wondered who would absorb the liability.                                                                                        
Representative  Wool informed  that  the municipality  would                                                                    
absorb  any  liability,  as the  funding  was  connected  to                                                                    
property  tax.  If there  was  a  default, the  municipality                                                                    
would  take  over  the  property, as  with  any  default  on                                                                    
property tax. He reiterated that  the program had a very low                                                                    
default rate.                                                                                                                   
Senator  Olson asked  about a  default scenario  in which  a                                                                    
bank was the first financer of a property.                                                                                      
Representative  Wool stated  that a  bank would  take second                                                                    
place to  the loan.  He furthered that  commercial buildings                                                                    
were enabled  in the  legislation and  residential buildings                                                                    
were  not; because  banks were  not willing  to give  up the                                                                    
first position.                                                                                                                 
Co-Chair MacKinnon asked  if there was a  requirement that a                                                                    
bank sign  off on  each individual  property before  it went                                                                    
forward in the bill.                                                                                                            
Representative Wool answered in the affirmative.                                                                                
Senator Olson  asked if banks  were hesitant to lend  a six-                                                                    
figure  amount  for  commercial  building  purchases,  while                                                                    
knowing they were in second position.                                                                                           
Representative  Wool believed  that banks  had success  with                                                                    
loans and a low default rate  in states that had enabled the                                                                    
PACE program.                                                                                                                   
9:11:50 AM                                                                                                                    
Senator  Dunleavy asked  if there  was any  default scenario                                                                    
under which the state or local would be liable.                                                                                 
Representative  Wool informed  that the  state would  not be                                                                    
liable, and  detailed that  the municipalities  would assume                                                                    
the property if the loan was defaulted.                                                                                         
Co-Chair  MacKinnon  asked  if  it  was  fair  to  say  that                                                                    
municipalities would  vet the projects and  assess the risk,                                                                    
and  not loan  over the  assessed value  of the  property so                                                                    
that  all parties  would be  protected  by the  sale of  the                                                                    
Representative  Wool   answered  in  the   affirmative,  and                                                                    
stipulated that banks would not  loan an amount greater than                                                                    
the  assessed  value  of the  property.  All  projects  were                                                                    
vetted and had  an energy rater evaluate  consider the costs                                                                    
and savings.                                                                                                                    
Senator Dunleavy  asked if  there was  language in  the bill                                                                    
that would compel a municipality to adopt the program.                                                                          
Representative  Wool stated  that  the  program was  totally                                                                    
optional for municipalities.                                                                                                    
Senator  Micciche referred  to  Section 5,  line 14  through                                                                    
line  28.  He thought  the  waiver  under subsection  H  was                                                                    
stronger  than the  requirements  subsection  G. He  thought                                                                    
there was usually more pressure to demonstrate value.                                                                           
Representative  Wool  thought   that  Senator  Micciche  was                                                                    
referring to language from the committee substitute (CS).                                                                       
Co-Chair MacKinnon  confirmed that  the committee had  a CS.                                                                    
The  version  of  the  bill brought  to  the  committee  was                                                                    
version U. She informed that  the committee was allowing the                                                                    
sponsor to introduce the bill.  The committee had previously                                                                    
heard the bill and had  multiple questions on protection for                                                                    
municipalities and local  taxpayers.  She asked  for a pause                                                                    
before consideration of a CS.                                                                                                   
9:15:47 AM                                                                                                                    
AT EASE                                                                                                                         
9:17:20 AM                                                                                                                    
Vice-Chair   Bishop  MOVED   to  ADOPT   proposed  committee                                                                    
substitute   for  CSHB   80(FIN),  Work   Draft  30-LS0337\R                                                                    
(Shutts, 2/20/17).                                                                                                              
Co-Chair MacKinnon OBJECTED for discussion.                                                                                     
9:18:12 AM                                                                                                                    
JULI LUCKY, STAFF,  REPRESENTATIVE ANNA MACKINNON, discussed                                                                    
the  CS, and  noted that  it was  crafted based  on concerns                                                                    
that  arose in  previous discussions  of the  bill. Language                                                                    
was  drafted  based on  recommendations  from  a program  in                                                                    
Texas, which was the genesis for the bill.                                                                                      
Ms. Lucky read from the document "Explanation of Changes"                                                                       
(copy on file):                                                                                                                 
     Throughout  the bill:  the  terms "eligible  property,"                                                                    
     "qualified improvement,"  and "qualified  project" have                                                                    
     been   replaced  with   more  descriptive   terms.  The                                                                    
     definitions for these terms have  been deleted from the                                                                    
     definitions section, §29.55.160, as  they are no longer                                                                    
     used in this legislation.                                                                                                  
     Page  3, lines  15-22: New  language in  §29.55.100 (a)                                                                    
     clarifies the intent and limit of the program.                                                                             
     Page  4,  line  9:  the  requirement  to  "prepare  the                                                                    
     report"   is   added   to  §29.55.100   (b)(2),   which                                                                    
     previously  only  required   providing  notice  of  the                                                                    
     Page  6, lines  4-8: New  §29.55.105(d)(3) expands  the                                                                    
     list  of  items that  cannot  use  C-PACE financing  to                                                                    
     include  improvements made  by  utilities to  "generate                                                                    
     electricity,  provide  thermal   energy,  or  otherwise                                                                    
    furnish a service to the public for compensation."                                                                          
9:20:58 AM                                                                                                                    
Ms. Lucky continued to discuss the explanation of changes                                                                       
     Page 6,  lines 11-13:  New section  29.55.105(f) limits                                                                    
     the  period of  assessment to  20 years  or the  useful                                                                    
     life of  the project. This required  a technical change                                                                    
     on page 7, lines 25-26.                                                                                                    
     Page  6, lines  14-28:  New  sections 29.55.105(g)  and                                                                    
     (g)(1) limits  the amount  that can  be financed  for a                                                                    
     project  to 20%  of  the total  assessed  value of  the                                                                    
     (g)(2)  requires the  Savings  to  Investment Ratio  be                                                                    
     greater  than   1.  In  other  words,   the  amount  of                                                                    
     estimated monetary  savings resulting from  the project                                                                    
     over the  term of the  financing must be more  than the                                                                    
     amount financed.                                                                                                           
     (h)(1) allows  a waiver  to the  requirements specified                                                                    
     in   (g)(1)   and   (2)   if   there   is   "reasonable                                                                    
     justification"  and  both  parties  acknowledge  it  in                                                                    
     (h)(2)  requires a  waiver for  a project  that doesn't                                                                    
     meet  the  Savings  to Investment  Ratio  specified  in                                                                    
     (g)(2)  to  also  address the  interests  of  potential                                                                    
     tenants and future property owners.                                                                                        
Ms.  Lucky  explained that  if  a  business was  not  saving                                                                    
enough  money  (via  the  energy  project)  to  pay  for  an                                                                    
assessment,  then   (h)(2)  would  kick  into   effect.  The                                                                    
provision came from model  language from previous iterations                                                                    
of  the program.  She continued  to address  the summary  of                                                                    
     Page   7,  lines   25-26:  §29.55.110(a)(7)   has  been                                                                    
     reworded  to  conform to  new  time  limits imposed  by                                                                    
     Page 8,  lines 24 &  27: In §29.55.115,  replaced "the"                                                                    
     with  "each" to  ensure that  all mortgage  holders are                                                                    
    notified and required to consent to an assessment.                                                                          
Ms. Lucky  expanded that  there had  been concern  about the                                                                    
potential for  more than  one lienholder,  so section  8 had                                                                    
been re-worded and cited an existing mortgage definition.                                                                       
Ms. Lucky continued to discuss the explanation of changes:                                                                      
     Page  8,  line  31:  Adds  language  to  §29.55.120  to                                                                    
     require the independent, third-party  review be done by                                                                    
     a "qualified energy auditor."                                                                                              
     Page 10, lines 27-28:  Reworded §29.55.140(d) to ensure                                                                    
     that  the municipality  confirms  that  bonds or  notes                                                                    
     issued  under the  authority of  this chapter  meet the                                                                    
     goals of this program.                                                                                                     
     Page 11, lines  21-23: §29.55.160 (definitions section)                                                                    
     was amended by removing  the terms "eligible property,"                                                                    
     "qualified improvement," and "qualified project" and                                                                       
     adding "mortgage."                                                                                                         
9:25:52 AM                                                                                                                    
Senator  Dunleavy   asked  why  the  bill   was  needed  for                                                                    
municipalities  to  do  something   that  was  optional.  He                                                                    
wondered  what was  preventing municipalities  from engaging                                                                    
in the program.                                                                                                                 
Ms.  Lucky  thought  the sponsor  could  better  answer  the                                                                    
question  or the  Alaska Industrial  Development and  Export                                                                    
Authority (AIDEA).                                                                                                              
Senator  Dunleavy reiterated  that he  wanted to  understand                                                                    
why the bill was needed.                                                                                                        
Senator  von Imhof  referred  to  page 8  of  the bill,  and                                                                    
assumed   that  a   municipality   would  provide   whatever                                                                    
information a  mortgage holder asked  for in order  to allow                                                                    
it to sign off on the  loan. She thought there might need to                                                                    
be a  second credit analysis, particularly  if several years                                                                    
had passed  since the original  mortgage was  performed. She                                                                    
hoped that  there would  be a  level of  cooperation between                                                                    
the community bank and the municipality.                                                                                        
Ms. Lucky  confirmed that  there was  no requirement  in the                                                                    
bill to provide  additional paperwork.  She  posited that if                                                                    
an  individual wanted  to  move forward  with  a loan,  that                                                                    
individual  would  provide  all  the  necessary  information                                                                    
Vice-Chair  Bishop referred  to line  31, "qualified  energy                                                                    
auditor"  and  wondered  if  the  language  referred  to  an                                                                    
individual  that was  certified  by  Alaska Housing  Finance                                                                    
Corporation (AHFC).                                                                                                             
Ms. Lucky  noted that  the definition  had been  provided by                                                                    
the Alaska Energy Authority (AEA).                                                                                              
Co-Chair MacKinnon  WITHDREW her  OBJECTION. There  being NO                                                                    
further OBJECTION,  it was so ordered.  The Senate Committee                                                                    
Substitute for CSHB 80 was ADOPTED.                                                                                             
Senator Dunleavy asked why the bill was necessary.                                                                              
GENE  THERRIAULT,  ENERGY  POLICY ASSISTANT,  ALASKA  ENERGY                                                                    
AUTHORITY,  DEPARTMENT OF  COMMERCE, COMMUNITY  AND ECONOMIC                                                                    
DEVELOPMENT,  stated that  the legislation  allowed a  local                                                                    
government to  use its tax  collecting power to  collect the                                                                    
payments  to  satisfy a  PACE  loan.  He  thought it  was  a                                                                    
powerful tool for a local  government, which could not do so                                                                    
without clear statutory authority.                                                                                              
9:30:24 AM                                                                                                                    
Vice-Chair Bishop referred to  his previous question about a                                                                    
third-party independent qualified rater.  He wondered if the                                                                    
definition  pertained  to a  person  that  was certified  by                                                                    
SEAN  SKALING,  DEPUTY   DIRECTOR,  ALTERNATIVE  ENERGY  AND                                                                    
ENERGY  EFFICIENCY, ALASKA  ENERGY AUTHORITY,  DEPARTMENT OF                                                                    
COMMERCE,  COMMUNITY AND  ECONOMIC DEVELOPMENT,  stated that                                                                    
AEA  had been  hesitant  to embed  qualifications in  statue                                                                    
when  the standards  frequently changed.  He noted  that AEA                                                                    
had  further  parameters  in  regulation  for  a  commercial                                                                    
energy  audit   program,  and  AHFC  had   program  guidance                                                                    
defining  "energy auditor"  as  well.  The definitions  were                                                                    
currently under  review, as the standards  were changing. He                                                                    
shared that AEA had thought  the definition should be put in                                                                    
statute at a general level  and let municipalities define it                                                                    
Senator Dunleavy  asked if Mr.  Therriault could  describe a                                                                    
worst-case scenario  for a municipality  or taxpayer  if the                                                                    
bill were to pass.                                                                                                              
Mr. Therriault  thought if a  taxpayer had an  obligation on                                                                    
its property and  was unable pay, there was a  risk that the                                                                    
property would go  into default. If a  local government were                                                                    
to  come into  control  of the  property,  it could  satisfy                                                                    
taxes owed as  well as whatever PACE obligation  was owed on                                                                    
the property.  In order to  cover any potential  defaults, a                                                                    
local government was  able to establish a  loan default fund                                                                    
by  charging   a  fee  on   lending.  He  stated   that  the                                                                    
municipality's power  to collect  all taxes  and assessments                                                                    
resulted in a very low default rate.                                                                                            
Senator  Dunleavy asked  about  a  hypothetical scenario  in                                                                    
which an  unviable "white elephant"  project ended  up being                                                                    
inherited  by  the  local  government  through  default.  He                                                                    
wondered  if  such  a  project,  if unable  to  be  sold  or                                                                    
dispersed, would be absorbed by the general tax base.                                                                           
Mr.  Therriault posited  that  ultimately  a property  would                                                                    
retain  some  value. He  considered  that  a number  of  the                                                                    
sidewalls that  the CS put into  place (such as the  loan to                                                                    
value ratio  capped at 20  percent of the  assessment) would                                                                    
be  limiting  factors. If  there  was  an existing  mortgage                                                                    
owned by a lender, in order  to take second position via the                                                                    
PACE  program,  the  lender   would  consider  the  proposed                                                                    
project for viability.                                                                                                          
9:34:17 AM                                                                                                                    
Senator Micciche  liked the changes  in the CS.  He inquired                                                                    
about  a  hypothetical scenario  under  which  a $2  million                                                                    
strip mall  that had  a failed PACE  project and  a $450,000                                                                    
lien  from  the  municipality.   If  the  municipality  took                                                                    
possession of  the property, he  mused that it  would likely                                                                    
get the  full value of the  lien. He was concerned  about an                                                                    
aggressive  administration that  might push  energy projects                                                                    
that  were   less  economically  feasible  because   it  was                                                                    
aggressive  on  the renewable  and  clean  energy front.  He                                                                    
wondered  about  a larger  lien  and  was concerned  that  a                                                                    
distressed property  often did  not sell  for 50  percent of                                                                    
its value.  He wondered  if there  should be  a cap  of some                                                                    
Mr.  Therriault relayed  that AEA  had information  from the                                                                    
program in Texas  that advised there was  a percentage above                                                                    
which it  was not wise to  proceed on a project.  He thought                                                                    
even if a  municipality was pushing for a  project, it could                                                                    
not force  a property owner  to utilize the program.  He was                                                                    
not sure that  the additional sidebars added in  the CS were                                                                    
enough to  keep projects  under control.  He thought  it was                                                                    
possible to  set an absolute  upper limit. He added  that in                                                                    
the case  of a foreclosure,  the only  thing that had  to be                                                                    
paid off  entirely was the  current year's  PACE assessment.                                                                    
He reminded that  the entire PACE loan would not  have to be                                                                    
paid  off, as  the obligation  continued with  the property,                                                                    
much like a water and sewer  assessment would in the case of                                                                    
a default.                                                                                                                      
9:37:52 AM                                                                                                                    
Co-Chair MacKinnon  asked if there  were other  questions on                                                                    
the structure of bill.                                                                                                          
Senator Dunleavy asked why a  bank would ever deny a project                                                                    
if it was guaranteed its money via the taxpayer.                                                                                
Mr. Therriault  thought a bank  might not approve  a project                                                                    
if it thought the project unwise  or that it did not improve                                                                    
the value of  a property. If a PACE  modification would make                                                                    
a building more  efficient or more effective  in the present                                                                    
or future,  a bank  would likely allow  itself to  be bumped                                                                    
into a second position as  lienholder. He thought banks were                                                                    
willing  to  do  so  since the  properties  themselves  were                                                                    
viewed as  collateral for the  mortgage, and  the collateral                                                                    
was made more attractive by any improvements being made.                                                                        
Senator  Micciche  thought if  a  commercial  lender had  85                                                                    
percent of a building's value,  it would be difficult to get                                                                    
the  value  after default  if  it  was  second in  line.  He                                                                    
thought if  it was  early in  a loan, a  bank would  be less                                                                    
likely  to   approve  an  assessment  that   was  above  the                                                                    
remaining  value  of  the  property.  He  commented  on  the                                                                    
conservative nature of banks.                                                                                                   
Vice-Chair Bishop  added to  Senator Micciche's  comments by                                                                    
saying  hypothetically  a  commercial entity  could  be  the                                                                    
first and second lienholder.                                                                                                    
Mr. Therriault  answered in the affirmative.  He stated that                                                                    
the  existing   mortgage  holder  might  be   interested  in                                                                    
providing  funding for  the PACE  loan, because  it improved                                                                    
the collateral on the mortgage.                                                                                                 
9:41:20 AM                                                                                                                    
Co-Chair MacKinnon OPENED public testimony.                                                                                     
ROB   HILL,   GENESIS   ENERGY   SYSTEMS,   ANCHORAGE   (via                                                                    
teleconference),  testified  in  support  of  the  bill.  He                                                                    
stated he  had an Anchorage-based business  that specialized                                                                    
in  survey analysis  and  specifications  of commercial  and                                                                    
government buildings. He stated that  his company was one of                                                                    
the  auditors  that  had  been  previously  referred  to  in                                                                    
committee. He  noted that  his company  had been  working on                                                                    
significant  energy-efficient retro-fits  in the  last seven                                                                    
years  varying in  scope from  $5,000 to  $900,000. He  gave                                                                    
examples such  as the Golden  Valley power  plants, numerous                                                                    
hospitals, and  the Department of Transportation  and Public                                                                    
Facilities.  He   understood  the  value  of   meeting  high                                                                    
performance standards  and meeting green solutions  that had                                                                    
a  return  on investment.  He  was  supportive of  the  PACE                                                                    
program, and  had created numerous project  models using the                                                                    
PACE finance  mechanism format.  He had  found that  most of                                                                    
the  projects  had  shown  immediate  savings  and  positive                                                                    
cashflow for owners.                                                                                                            
Mr. Hill continued, explaining that  the driver for the PACE                                                                    
program was to decrease power  consumption and cost; as well                                                                    
as   to  reduce   emissions,   especially  in   cold-weather                                                                    
climates. He thought another critical  aspect of the program                                                                    
was  the high  cost  of  imported energy  in  the North  and                                                                    
Western parts  of the state.  He saw  the PACE program  as a                                                                    
finance  bridge  to  the   energy  efficiency  projects.  He                                                                    
thought   many   former  approaches   to   energy-efficiency                                                                    
projects would put  the savings in the  hands of profiteers,                                                                    
rather  than   the  owners.  He   thought  the  CS   was  an                                                                    
improvement to the bill.                                                                                                        
9:45:58 AM                                                                                                                    
KATHY WASSERMAN, ALASKA  MUNICIPAL LEAGUE, JUNEAU, testified                                                                    
in support of the bill.  She noted that the Alaska Municipal                                                                    
League (AML)  had been  following the bill  for a  number of                                                                    
years. The  reason the  AML supported the  bill was  that it                                                                    
was  for a  voluntary program  that gave  municipalities the                                                                    
option to weigh in if they  so choose and provided a tool to                                                                    
do  things  better.  She thought  most  of  the  first-class                                                                    
cities  or  smaller  boroughs  would not  be  able  to  take                                                                    
advantage  of the  program, but  larger boroughs  would. She                                                                    
thought the  larger boroughs  had the  expertise to  run the                                                                    
program. She thought there were  safety checks along the way                                                                    
to preclude bad projects taking part in the program.                                                                            
9:47:38 AM                                                                                                                    
BRITTANY  SMART,  FAIRBANKS   NORTH  STAR  BOROUGH,  MAYOR'S                                                                    
OFFICE  (via teleconference),  testified in  support of  the                                                                    
bill  and  the  changes  incorporated in  the  CS.  She  was                                                                    
supportive of  the concept of  a waiver  if there was  not a                                                                    
perceived  energy  cost-savings.   She  mentioned  that  the                                                                    
borough was most  interested in the project  for its natural                                                                    
gas  conversion project,  in  which there  might  not be  an                                                                    
immediate  cost   savings.  The   waiver  would   allow  for                                                                    
assessment  of   conversion  projects  on   each  individual                                                                    
project values. She addressed concerns  about a possible cap                                                                    
in the bill.  She stated that PACE  financing throughout the                                                                    
nation was being used for  a number of different projects to                                                                    
achieve public interest. She recounted  that the program was                                                                    
being  used  in the  State  of  Florida to  alleviate  flood                                                                    
insurance  costs and  mitigate flood  challenges. She  urged                                                                    
the  committee to  keep the  bill  as broad  as possible  to                                                                    
allow for  flexibility of the municipalities  to establish a                                                                    
good program administration that fit its needs.                                                                                 
9:49:51 AM                                                                                                                    
Co-Chair MacKinnon CLOSED public testimony.                                                                                     
Co-Chair  MacKinnon  asked  for  the  committee  to  provide                                                                    
amendments by 5:00pm the following day.                                                                                         
Co-Chair MacKinnon remarked  that the bill was a  new way to                                                                    
finance improvements to a piece  of commercial property that                                                                    
would carry  a loan for  20 years.  She relayed that  the CS                                                                    
tried  to   address  banking  concerns  and   best  practice                                                                    
borrowing,  but  the  program  was  a  new  way  to  finance                                                                    
improvements on a piece of  commercial property. The program                                                                    
was voluntary. She  noted that debt incurred  in the program                                                                    
would not  be reflected in  the credit rating of  the entity                                                                    
engaged in the project.                                                                                                         
Senator von  Imhof understood the  purpose of the  bill, and                                                                    
thought   it   importantly    presented   opportunities   to                                                                    
municipalities  and property  owners  to improve  properties                                                                    
for  energy efficiency.  She thought  it helped  communities                                                                    
monetarily, as  well as with  carbon dioxide  emissions. She                                                                    
thought  that while  the committee  could add  safeguards to                                                                    
the program, but  thought it was important  not to suffocate                                                                    
the  program. She  thought that  the  legislature needed  to                                                                    
have faith that each municipality  and local bank that would                                                                    
be signing  off on  the loan would  make the  necessary good                                                                    
decisions to  move forward with  the program.  She discussed                                                                    
the potential  risk to small communities,  but thought there                                                                    
were many  properties that  could be  significantly improved                                                                    
through the program. She thought  the committee had a robust                                                                    
discussion on  the matter,  and was  supportive of  the bill                                                                    
moving from committee.                                                                                                          
Senator  Dunleavy  wondered  if   cities  within  a  borough                                                                    
municipality that had  adopted the program would  be able to                                                                    
opt out.                                                                                                                        
Mr. Therriault stated  that the bill language  would allow a                                                                    
local  government to  establish  areas for  the program.  He                                                                    
used the  Fairbanks Northstar Borough  as an example,  as it                                                                    
contained   two  independent   cities  within   the  borough                                                                    
boundary. The borough would be  able to craft a program that                                                                    
would  apply to  any city  that wanted  to participate,  and                                                                    
would remit the tax to the city.                                                                                                
9:54:40 AM                                                                                                                    
Co-Chair MacKinnon  thought it  was fair  to say  that other                                                                    
states were  using a program  like PACE. She noted  that the                                                                    
other  bills required  energy cost  savings to  backstop the                                                                    
ability  for   an  individual  to   make  payments   on  the                                                                    
improvements. She  referenced comments by Senator  von Imhof                                                                    
about in the  context of community needs. She  referred to a                                                                    
change in  the CS that  allowed debt financing based  on air                                                                    
Vice-Chair Bishop thought  there could be a  wash on savings                                                                    
with a  PACE project,  but considered  that Fairbanks  had a                                                                    
real air quality issue to  consider. He thought the monetary                                                                    
implications for  potential non-compliance with  air quality                                                                    
were significant.                                                                                                               
Senator  Micciche  appreciated   the  public  testimony.  He                                                                    
referenced  testimony about  floodwater control  in Florida.                                                                    
He had  remaining concerns  about a  cap, without  which the                                                                    
program could be abused and put properties at risk.                                                                             
Co-Chair  MacKinnon set  HB 80  aside.  She reiterated  that                                                                    
amendments were due by the following day at 5:00pm.                                                                             
HB  80  was   HEARD  and  HELD  in   committee  for  further                                                                    
9:58:02 AM                                                                                                                    
AT EASE                                                                                                                         
10:04:49 AM                                                                                                                   
SENATE BILL NO. 14                                                                                                            
     "An Act relating to transportation network companies                                                                       
     and transportation network company drivers."                                                                               
10:04:58 AM                                                                                                                   
Vice-Chair   Bishop  MOVED   to  ADOPT   proposed  committee                                                                    
substitute  for  SB  14, Work  Draft  30-LS0250\I  (Wallace,                                                                    
Co-Chair MacKinnon OBJECTED for discussion.                                                                                     
Co-Chair MacKinnon read the bill title.                                                                                         
Ms.  Lucky discussed  the Explanation  of  Changes (copy  on                                                                    
     Page  1, line  11  - Page  2, line  4:  New section  2:                                                                    
     enacts  §09.65.350 which  explicitly  asserts that  the                                                                    
     state  and   municipalities  are   not  liable   for  a                                                                    
     Transportation Network Company's  failure to follow the                                                                    
     law.  This  clarifies  the  sponsor's  intent  for  the                                                                    
     regulatory authority over this program.                                                                                    
Ms. Lucky noted that that  intent of the legislation was not                                                                    
to have  active regulation by  departments of the  state. If                                                                    
the transportation  network companies (TNCs) did  not follow                                                                    
the  law,  they  would  be  held  civilly  liable,  and  the                                                                    
recourse would  be a  civil suit. She  noted that  there had                                                                    
been some  confusion with the  previous version of  the bill                                                                    
as to  how much  regulation a department  would have  to do,                                                                    
which  had  led  to  a  large fiscal  note  discussed  at  a                                                                    
previous meeting.  Since the  bill was  last heard,  the co-                                                                    
chair's office had  been working with departments  to find a                                                                    
way to ensure  that the sponsor's intent  for regulation was                                                                    
met.  The  language that  was  agreed  upon was  to  provide                                                                    
Ms.  Lucky  continued  discussing  the  summary  of  changes                                                                    
document. She  explained that the state  did currently enjoy                                                                    
general  immunity, however  it was  thought that  having the                                                                    
explicit immunity  in statute would  make it clear  that the                                                                    
state departments  were not actively regulating  the TNCs by                                                                    
checking insurance certificates or law compliance.                                                                              
Ms. Lucky continued to discuss the changes:                                                                                     
     Page 7, lines 26-29: Rewords §28.23.050(i) for                                                                             
     Page 9, line 29: Rewords §28.23.110 to require adopted                                                                     
     policies regarding nondiscrimination and accessibility                                                                     
     to conform to existing state law.                                                                                          
     Page 12, line 2: New section 9: immediate effective                                                                        
     date. This required a conforming title change.                                                                             
Ms. Lucky  explained that  new language in  the CS  was more                                                                    
clear about how payment should  be applied in the event that                                                                    
there was a lien on a damaged car.                                                                                              
10:08:44 AM                                                                                                                   
Co-Chair MacKinnon  WITHDREW her  OBJECTION. There  being NO                                                                    
further  OBJECTION,   it  was  so  ordered.   The  Committee                                                                    
Substitute for SB 14(FIN) was ADOPTED.                                                                                          
Co-Chair  MacKinnon noted  that the  public hearing  for the                                                                    
bill was  opened and  closed on February  13, 2017;  and re-                                                                    
opened and closed on February 15, 2017.                                                                                         
Ms.  Lucky discussed  the  fiscal notes  for  the bill.  She                                                                    
explained  that when  the  bill was  moved  from the  Senate                                                                    
Labor  and  Commerce Committee,  there  had  been four  zero                                                                    
fiscal  notes:   two  from  the  Department   of  Labor  and                                                                    
Workforce  Development;  one  from  the  Division  of  Motor                                                                    
Vehicles  (DMV); and  one from  the Department  of Commerce,                                                                    
Community and  Economic Development, Division  of Insurance.                                                                    
She detailed that FN1 and  FN2 still applied. There had been                                                                    
questions about  the DMV language  in FN3.  After discussion                                                                    
with the department,  it had re-worded the  fiscal note. The                                                                    
new  fiscal note  from DMV  was  still a  zero fiscal  note.                                                                    
There was a fiscal note  from the Division of Insurance that                                                                    
had  been  produced  too  late to  move  from  the  previous                                                                    
committee along with the bill -  FN4 was a zero fiscal note.                                                                    
She summarized  that previously published FN1,  FN2, and FN4                                                                    
would apply to  the bill; as well as a  new zero fiscal note                                                                    
from DMV that would replace FN3 that came with the bill.                                                                        
Ms. Lucky pointed  out that her office had  been in constant                                                                    
contact  with the  departments regarding  the bill,  and she                                                                    
had been assured  that the zero fiscal notes  all applied to                                                                    
the CS being considered.                                                                                                        
10:11:16 AM                                                                                                                   
SENATOR MIA  COSTELLO, SPONSOR,  had examined  the Committee                                                                    
Substitute for SB 14, and  had worked closely with committee                                                                    
staff on  the updates to  the fiscal notes. She  thought FN3                                                                    
had caused confusion in the  public, and was appreciative of                                                                    
multiple committee hearings for the bill.                                                                                       
WESTON EILER, STAFF,  SENATOR MIA COSTELLO, spoke  to a memo                                                                    
from  Senator   Costello  that  summarized   questions  from                                                                    
committee members after the first  hearing of the bill (copy                                                                    
on file). He commented that  many of the questions pertained                                                                    
to comparisons  with regard to  TNC drivers  or ride-shares.                                                                    
He had worked with the companies Lyft and Uber.                                                                                 
Mr.  Eiler addressed  a question  from  Senator Micciche  on                                                                    
page 2 of the memo:                                                                                                             
     Senator Micciche                                                                                                           
     Does the $1 million dollar insurance coverage in the                                                                       
     bill mirror the coverage taxi cabs carry for riders                                                                        
     and drivers?                                                                                                               
     The insurance  provisions of Senate Bill  14 exceed the                                                                    
     coverage  requirements  for  many  Alaskan  taxi  cabs.                                                                    
     While   local  laws   vary,  municipal   regulation  in                                                                    
     Anchorage, Fairbanks, and Juneau  all require taxi cabs                                                                    
     to carry the following coverage:                                                                                           
     $300,000 - aggregate injuries sustained in an accident                                                                     
     $100,000 - per personal injury                                                                                             
     $50,000 - property damage per occurrence                                                                                   
     Please see:                                                                                                                
     Anchorage - Municipal Code 11.20.100                                                                                       
     Fairbanks - Ch. 86, Article II, Division 2, Sec. 86-52                                                                     
     Juneau - 20 CBJAC 40.580                                                                                                   
Mr.  Eiler  discussed   Senator  Micciche's  question  about                                                                    
comparative insurance coverage of  TNC drivers and taxicabs.                                                                    
There  were  further questions  in  the  memo pertaining  to                                                                    
coverage  throughout the  course  of a  ride-share ride.  He                                                                    
informed that  TNCs provided  commercial insurance  from the                                                                    
moment  a driver  turned the  application on  to the  moment                                                                    
when  a  passenger  exited  a  rideshare  vehicle.  Coverage                                                                    
varied according  to the course  of the ride. Once  a driver                                                                    
had  been matched  with a  passenger, the  higher levels  of                                                                    
coverage were activated for the course of the ride.                                                                             
10:15:16 AM                                                                                                                   
Mr. Eiler  continued discussing insurance coverage  of ride-                                                                    
share  drivers. He  referred to  'Period 1,'  a circumstance                                                                    
under which a driver was driving  but not yet matched with a                                                                    
rider.  He  noted  that  a   driver  was  able  to  purchase                                                                    
additional insurance.                                                                                                           
Mr. Eiler addressed questions  pertaining to safety concerns                                                                    
and background checks.  He informed that both  Lyft and Uber                                                                    
adopted local  and national background checks,  did a social                                                                    
security  trace,  and   cross-referenced  the  national  sex                                                                    
offender registry. There was a  variety of jurisdictions and                                                                    
levels at which a background check was taken.                                                                                   
Mr. Eiler  referred to a  question by Senator  Dunleavy that                                                                    
was addressed in the memo:                                                                                                      
     Please explain the difference between Uber Pool and                                                                        
     the standard Uber product.                                                                                                 
     Both  Uber  and  Lyft  offer  carpooling  options  that                                                                    
     riders can select through the  apps. This option allows                                                                    
     riders  to   match  with   another  heading   the  same                                                                    
     direction  and share  the trip  and the  cost. It's  an                                                                    
     optional  feature  riders can  elect  to  use at  their                                                                    
Mr.  Eiler continued  discussing ride  shares, and  spoke to                                                                    
the benefits  of carpooling  ride-shares. He  considered the                                                                    
structure of  the bill to  have a statewide  framework. Much                                                                    
of  the   carpooling  and  transit  could   cross  municipal                                                                    
boundaries.  In crossing  municipal  boundaries, ride  share                                                                    
cars did  what local taxis  could not, which  necessitated a                                                                    
statewide framework  for regulation.  He recalled  that over                                                                    
30  other   states  in  the  country   had  adopted  similar                                                                    
10:18:07 AM                                                                                                                   
Mr.  Eiler  noted  that  he  had  worked  with  stakeholders                                                                    
regarding protections for  lienholders, which were addressed                                                                    
on page  3 of the memo.  He noted there were  two provisions                                                                    
by which  lienholders were protected during  ride-shares. He                                                                    
furthered  that TNCs  were required  to inform  drivers that                                                                    
not  maintaining  physical  damage  insurance  coverage  may                                                                    
violate  the  contract  with the  vehicle's  lienholder.  He                                                                    
referred to  Section 28.23.05 (i),  which also  provided for                                                                    
how lienholders were  compensated in the event  of damage or                                                                    
loss to a vehicle.                                                                                                              
Mr. Eiler  stated that financial institutions  had a variety                                                                    
of  mechanisms   by  which  they  managed   risk;  including                                                                    
collateral  protection  insurance, which  covered  financial                                                                    
institutions  exposure to  loss for  incidental professional                                                                    
use  of   personal  vehicles.  He   used  the   examples  of                                                                    
individuals  using a  personal  vehicle  for small  business                                                                    
outings, such as  home health aides and  real estate agents.                                                                    
He  assured  that  there  was  existing  contract  law  that                                                                    
protected  lienholders as  the  new area  of technology  and                                                                    
commerce was developed.                                                                                                         
Senator  Micciche  asked  about the  insurance  levels,  and                                                                    
thought Mr. Eiler had mistakenly  combined three levels into                                                                    
two  levels. He  understood that  when the  app was  not on,                                                                    
drivers  were required  to have  the same  insurance as  any                                                                    
driver.  When a  TNC driver  was logged  in to  the app  and                                                                    
available to  receive transportation  requests, there  was a                                                                    
second  level of  insurance. He  thought there  was a  third                                                                    
level  of coverage  when the  driver was  engaged in  a pre-                                                                    
arranged ride.                                                                                                                  
Mr. Eiler  referred to an  insurance diagram (copy  on file)                                                                    
that defined  the three periods  of commerce. When  a driver                                                                    
had  accepted  a trip  and  was  in  period  2 and  3,  TNCs                                                                    
provided  primary  insurance  coverage  that  would  respond                                                                    
first in  the case  of an  accident. The  insurance coverage                                                                    
was $1 million in liability  and $1 million for uninsured or                                                                    
underinsured motorist  injury per  incident. He  stated that                                                                    
drivers should  be in contact  with banks or  lienholders to                                                                    
purchase additional  insurance for  period 1.  Throughout an                                                                    
entire  ride, there  was  not  a possibility  for  a gap  in                                                                    
coverage. Under SB 14, TNCs  were required to have insurance                                                                    
as a backstop.                                                                                                                  
Senator Micciche  thought the $1  million insurance  was not                                                                    
required  when   a  driver  was   available  to   receive  a                                                                    
transportation request;  but kicked  in when the  driver was                                                                    
engaged in a prearranged ride.                                                                                                  
Co-Chair MacKinnon asked if  Senator Costello was supportive                                                                    
of the changes in the Committee Substitute.                                                                                     
Senator Costello answered in the affirmative.                                                                                   
Co-Chair  MacKinnon noted  that  there were  representatives                                                                    
from  other companies  available  to  answer questions.  She                                                                    
wanted to hear comments from operators.                                                                                         
10:23:34 AM                                                                                                                   
ANNABEL  CHANG, LYFT,  SAN  FRANCISCO (via  teleconference),                                                                    
testified in support of the CS that was adopted.                                                                                
10:24:19 AM                                                                                                                   
MITCHEL  MATTHEWS,   UBER,  SEATTLE   (via  teleconference),                                                                    
testified in support of the Committee Substitute.                                                                               
10:24:47 AM                                                                                                                   
AT EASE                                                                                                                         
10:25:16 AM                                                                                                                   
Senator  Olson  noted  that the  committee  had  heard  from                                                                    
sizable metropolitan  carriers. He  wondered if  the service                                                                    
would   be  available   in  areas   outside  Anchorage   and                                                                    
Senator Costello  relayed that Co-Chair Hoffman  had asked a                                                                    
similar  question  in a  previous  meeting.  She thought  an                                                                    
individual interested  in being  a driver  could participate                                                                    
as an  independent contractor  if they had  a car,  a phone,                                                                    
and  passed a  background check.  As  soon as  the bill  was                                                                    
signed  in to  law, Alaska  would  be joining  the other  49                                                                    
states  in offering  the opportunity  to potential  drivers.                                                                    
She reiterated that the bill had a statewide approach.                                                                          
Senator  Olson  asked  if Senator  Costello  had  heard  any                                                                    
testimony supporting the bill.                                                                                                  
Senator  Costello   stated  that  the  bill   represented  a                                                                    
paradigm shift  that looked  to the  future. She  thought it                                                                    
was  an  innovative  approach  to  providing  transportation                                                                    
options. She  shared that there  was opposition to  the bill                                                                    
from  the  taxi  industry.  She  referred  to  studies  that                                                                    
demonstrated  that  jobs  had   expanded  and  the  pool  of                                                                    
individuals  using  transportation  had expanded.  She  knew                                                                    
that no  other jurisdiction had  resulted in a  taxi company                                                                    
going  bankrupt. She  thought  people were  using a  greater                                                                    
variety of transportation options.                                                                                              
Co-Chair MacKinnon recalled that  someone had testified that                                                                    
there  were   60,000  individuals  within  the   state  that                                                                    
possessed apps that  could access services such  as Lyft and                                                                    
10:29:54 AM                                                                                                                   
AT EASE                                                                                                                         
10:31:27 AM                                                                                                                   
Co-Chair  MacKinnon  stated  that  SB 14  had  been  in  the                                                                    
committee  for  three weeks,  and  there  had been  multiple                                                                    
public hearings.  She asked the  committee if there  was any                                                                    
further questions or concerns related to the bill.                                                                              
Vice-Chair  Bishop  MOVED  to report  CSSB  14(FIN)  out  of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes. There  being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
CSSB  14(FIN)  was  REPORTED  out   of  committee  with  "no                                                                    
recommendation" and  with one  new zero  fiscal note  by the                                                                    
Department   of   Administration;   and   three   previously                                                                    
published  zero   fiscal  notes:  FN1(LWF),   FN2(LWF),  and                                                                    
10:32:29 AM                                                                                                                   
AT EASE                                                                                                                         
10:35:16 AM                                                                                                                   
Co-Chair MacKinnon discussed the  schedule for the following                                                                    
day,  which   included  three   bills  that   concerned  the                                                                    
Permanent Fund and  use of the Permanent  Fund earnings. She                                                                    
asked that  the members  provide any  amendments as  soon as                                                                    
possible.  She noted  that the  committee  would consider  a                                                                    
comparison of how each bill functioned.                                                                                         
10:36:45 AM                                                                                                                   
The meeting was adjourned at 10:36 a.m.                                                                                         

Document Name Date/Time Subjects
HB 80 work draft version R.pdf SFIN 3/7/2017 9:00:00 AM
HB 80
HB 80 Explaination of Changes FIN version R.pdf SFIN 3/7/2017 9:00:00 AM
HB 80
SB 14 work draft version I.pdf SFIN 3/7/2017 9:00:00 AM
SB 14
SB 14 Summary work draft version I.pdf SFIN 3/7/2017 9:00:00 AM
SB 14
SB 14 Response to Senators' Questions.pdf SFIN 3/7/2017 9:00:00 AM
SB 14