HB 119-AIDEA: PROCUREMENT; PROJECTS  2:23:07 PM CHAIR EGAN announced HB 119 to be up for consideration [CSHB 119(EDT), version 27-GH1745\M, was before the committee]. It was introduced by the House Special Committee on economic Development, Trade, and Tourism by request of the Governor. He said it was being presented by the administration. MARK DAVIS, Economic Development Officer, Alaska Industrial and Development and Export Authority (AIEDA), Department of Commerce, Community and Economic Development (DCCED), explained that this bill provides for expansion of the type of projects that AIDEA can currently finance. Presently, AIDEA is authorized to provide financing for natural resource development, industry, tourism infrastructure and energy. Those four categories have not been changed since 1993 and one major purpose of this bill is the modernization and clarification of some of the projects AIDEA could now engage in. Without the changes in CSHB 119, AIDEA could not finance new sectors of the Alaska economy such as communications or health care. Additionally, AIDEA is now prevented from providing financial support for federal facilities and they cannot support the military or the Coast Guard in their endeavor to build new facilities in the state. In the last year, AIDEA has been approached by a health care clinic in rural Alaska and by the U.S. Coast Guard; in both instances AIDEA approached the Department of Law to see whether current statutes would let them build those facilities and lease them back to the federal government, and the answer in both instances was no. He said the support of the military has an important role for economic development in Alaska. 2:25:44 PM Additionally, he explained that CSHB 119 authorizes AIDEA to better create public/private partnerships or what are commonly known as PPPs; it does so by permitting the Authority to own part of a project through the use of a limited liability (LLC) company or through a corporation. The reason is as they worked with private developers over the last year they have been approached several times with the idea of AIDEA owning part of a project, which they are allowed to do by statute, not in a partnership but through an LLC. That is based on liability, insurance and financing issues unfortunately, because they were also advised by the Department of Law that presently they cannot be a member of an LLC. The bill seeks to change that, so in the future they can own part of a project through an LLC that would also let them divest of that investment more rapidly once that project was in good enough shape to go entirely to the predecessor. This is one major of goal of AIDEA's new strategic plan - to hold things for only a period of time, have an exit strategy and get some backing in the private sector. Another portion of CSHB 119 lets AIDEA create subsidiary corporations. The purpose of letting AIDEA create a subsidiary is that it could own a project, particular one developing new technology, and the AIDEA board would be allowed to grant that subsidiary the powers to own a project or to have bonding authority, whatever is needed to get it going; but should it be successful, it would be their intent to spin off the subsidiary corporation back into the private sector as soon as it is ready. A subsidiary corporation is an excellent way to sell a project, because it can be done through selling shares rather than an asset sale. The other thing CSHB 119 does is it allows AIDEA to develop its own procurement regulations. At present, it doesn't have any procurement regulations; they are under the Department of Administration for the procurement of services and equipment and under the Department of Transportation and Public Facilities for construction. There are certain exemptions in the AIDEA statutes, for example the Healy Clean Coal Plant is entirely exempt from the Procurement Code. Mr. Davis said they would prefer to be under a single set of regulations for procurement. In that regard, they have the support of Vern Jones, the chief procurement officer for the Department of Administration and Mark O'Brien, the chief contracts officer for the Department of Transportation and Public Facilities. Both of those gentlemen who have oversight over AIDEA think this is a better way to go. This provision, which is an amendment to the Procurement Code, is identical to the authority now granted to the Alaska Housing Finance Corporation (AHFC) and the Knik Arm Bridge and Toll Authority (KABATA). So, they would be treated in a similar fashion as other public corporations in the state. Saying that, Mr. Davis said he didn't mean the regulations wouldn't follow the spirit of the Procurement Code; in fact, this is an amendment to it. So, they would be required to follow competitive bidding processes and all the provisions. The difference would be for appeals; if it's a bid for supplies that appeal goes to the commissioner of the DOA; if it's for construction it goes to the commissioner of DOTPF. And at times there has been confusion between the two. Now under the regulations. a bid appeal would go to the AIDEA board and they would hear it in a public process; all the board meetings are recorded, people are allowed to call in if they can't appear personally. It's a pretty open and transparent process to put forward a bid. 2:29:45 PM Finally, he said there has been a proposal to amend this by the AHFC with regard to their need to create a subsidiary. He said he had been authorized to tell them that the administration is comfortable with the proposed amendment by the AHFC. SENATOR MENARD asked how thorough he was in adding the new categories. Would he come back to the legislature in two years to ask for another category? MR. DAVIS replied that that is an excellent question and the genesis of the amendment to AS 44.88.909 is based on AIDEA's strategic plan, specifically page 33, that working with consultants and the public process (polling businesses throughout the state and having public meetings) developed the list over the course of a year. It includes transportation, communications, community/public purposes, technical innovations, prototype, commercial applications, or intellectual property or planning a facility used for a federal facility. It's pretty comprehensive and reflects the actual projects that have been brought in to AIDEA over the last two years. It reflects the views of both the business, banking and government communities. SENATOR MENARD said she appreciated that this could benefit the state's field of technology, which would be beneficial to the economy. She asked who makes up the board members since he wants to increase it from five to seven members. MR. DAVIS replied that the expansion of the AIDEA board was passed by the legislature last year, but it has recently been implemented. Previously, it had three government members (commissioners) and two public members; it now has two public members - the commissioner of DCCED and the commissioner of DOR - joined by five private members. It's working very well. CHAIR EGAN asked if he wanted to talk about the proposed amendment. MR. DAVIS deferred to Ms. Shubert. 2:33:54 PM STACY SHUBERT, Director, Government Relations and Public Affairs, Alaska Housing Finance Corporation (AHFC), thanked them for the opportunity for introducing the conceptual amendment that would allow for AHFC to create a subsidiary corporation as well. Currently, more than 7,000 families are on the wait list for AHFC rental assistance statewide, clearly a difficult issue. AHFC's mission is to provide Alaskans access to safe, quality and affordable housing. Currently, they are unable to become a development partner with private entities in the acquisition, creation and development of affordable housing and they understand that nearly $4 million is available through federal funds. With the creation of a subsidiary corporation such as this, that could be leveraged to create additional affordable housing in Alaska. That is what they hope the amendment accomplishes. CHAIR EGAN thanked everyone for their comments and said HB 119 would be held for the amendment to be added. 2:35:39 PM Finding no further business to come before the committee, Chair Egan adjourned the meeting at 2:35 p.m.