HB 196-BULK FUEL LOANS/POWER PROJECT FUND  8:09:18 AM CHAIR MUNOZ announced that the first order of business would be HOUSE BILL NO. 196, "An Act relating to the power project fund and to the bulk fuel revolving loan fund; establishing a bulk fuel loan account and making the bulk fuel loan account and the bulk fuel bridge loan account separate accounts in the bulk fuel revolving loan fund; providing for technical assistance to rural borrowers under the bulk fuel bridge loan program; relating to the administration and investment of the bulk fuel revolving loan fund by the division in the Department of Commerce, Community, and Economic Development responsible for community and regional affairs; and providing for an effective date." 8:09:48 AM ADAM BERG, Staff, Representative Bryce Edgmon, Alaska State Legislature, informed the committee that HB 196 has two new fiscal notes. He explained that the goal of the fiscal notes is to pay for the program with the interest from the Bulk Fuel Revolving Loan Fund (BFRLF). With regard to concerns regarding the deleted language on page 3, lines 14-16, Mr. Berg said he spoke with the Offices of Representatives Dick and Gardner who he understands now find the bill acceptable. REPRESENTATIVE DICK confirmed that the deleted language does help everyone and keeps the process simple. REPRESENTATIVE GARDNER said that since she doesn't have much experience with small rural areas, she would take her lead from those who do. Still, she expressed some concern as it seems appropriate to have local government involvement. REPRESENTATIVE DICK emphasized that he wrestled with this issue, but opined that requiring consultation with the local government doesn't work for some communities at all. Therefore, at this time it seems best to leave the language requiring a written endorsement from the governing body of the community out. 8:13:33 AM SCOTT RUBY, Director, Division of Community and Regional Affairs, Department of Commerce, Community & Economic Development (DCCED), directed attention to the Division of Community and Regional Affairs' (DCRA) fiscal note. Currently, the Bulk Fuel Bridge Loan Program is funded by a general fund (GF) appropriation of $219,000. Those funds pay for the contractor as well as travel for the contractor and staff when providing technical assistance to communities. There is also a reimbursable services agreement (RSA) with the Division of Economic Development for $45,000 to pay for its accounting and administration of the existing program. He explained that initially, Rural Alaska Fuel Services (RAFS) managed everything. In fact, the funds were in a bank account under RAFS' name because they were grant funds. When that had to be brought into the state system, which caused a statutory change, there was no fiscal note to reflect the different form of administrative costs. Therefore, [the state] continued to pay the contractor at the rate that existed prior and then paid the Division of Economic Development (DED) for its costs. MR. RUBY pointed out that the expectation in 2013 is for program administration, in terms of DCRA's portion, to cost $252,800. Those funds would come from interest earned on the fund and would pay for a DCRA staff person to administer the contract, approve the loans, perform the due diligence on the loans prior to approval, and administer the program. Of that $252,800, $40,000 would pay for the travel of the contractor or DCRA staff when he/she has to provide technical assistance when the contractor is unable to do so. The fiscal note also specifies $120,000 for contractual costs. The DED fiscal note relates $80,000 for administration, which is based on an accounting technician II position. He recalled that at the previous meeting there was concern that the new cost of running the program is about $333,000 versus the current cost of about $272,000. The concern was that the program was being made more efficient, but it was going to cost more to run the program. He attributed the discrepancy to the fact that all the costs to run the program aren't being reflected in the amount reported. For instance, in the current funding scheme there is no funding for a DCRA position to administer the program. Therefore, part of that position administering the contract and the 11 positions is currently being paid for out of DCRA's GF and isn't reflected in the $219,000 cost. The other issue is that it may not be a full-time position in DCRA to administer the new program, but rather will be only three-quarters of a position. However, fiscal notes require that a full position and the cost for it would have to be added. Mr. Ruby said that DCRA doesn't have the funding, the ability, or the prioritization to take on the administration of the extra 60 loans with DCRA's existing staff. 8:18:02 AM REPRESENTATIVE GARDNER opined that with the efficiency of one- stop shopping, it still seems there should be a savings. 8:18:21 AM REPRESENTATIVE DICK inquired as to how the added expense would help fulfill the need to be more accountable. MR. RUBY related that many of the efficiencies are efficiencies perceived by the communities. Under HB 196, communities will only have to complete one application, the loan approval time will be shortened, and there's no danger of loans being held up by short barge deliveries. With regard to accountability, currently the 60 members under the AEA program [the BFRLF] don't receive technical assistance funded by the Bulk Fuel Bridge Loan Program. However, under HB 196 [those applying for the BFRLF] would have access to this technical assistance on a routine basis. 8:20:23 AM REPRESENTATIVE AUSTERMAN directed attention to the fiscal note from AEA, which relates that it takes $53,600 from the BFRLF to run the program. He then directed attention to the fiscal notes from the Division of Economic Development and the Division of Community & Regional Affairs, which total around $333,000. Representative Austerman said that he still doesn't understand. He asked if AEA took $252,000 from the BFRLF annually to run the [Bulk Fuel Bridge Loan Program]. MR. RUBY clarified that part of the funds are supplanting $219,000 in GF that's available. Currently, DCRA receives a $219,000 GF appropriation annually to administer the Bulk Fuel Bridge Loan Program. However, under this fiscal note, those funds would no longer be required; there would be a fund source change and the funds would now come from the proceeds of the loan program. In further response to Representative Austerman, Mr. Ruby pointed out that the funding source for the fiscal note [for DCRA] tries to reflect that by specifying that in 2013 there's a [decrement] of $219,000 and an increase in the fuel loan. REPRESENTATIVE AUSTERMAN pointed out that even with the decrement of $219,000 the remainder is [$114,000], which is about double the existing $53,000. Therefore, he surmised that the cost to run the program under DCRA is double the cost to run it under AEA. MR. RUBY specified that it will cost approximately $60,000 more to run the program under DCRA than AEA. REPRESENTATIVE AUSTERMAN questioned the inefficiency of an operation for which the cost doubles, although the goal is efficiency. 8:24:20 AM REPRESENTATIVE AUSTERMAN moved to report HB 196 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, it was so ordered. 8:24:40 AM The committee took an at-ease from 8:24 a.m. to 8:26 a.m.