HB 58-ELIGIBILITY FOR AK ENERGY EFFIC LOANS  10:25:37 AM CO-CHAIR VAZQUEZ announced that the next order of business would be HOUSE BILL NO. 58, "An Act making an entity that is exempt from federal taxation under 26 U.S.C. 501(c)(3) (Internal Revenue Code) and a federally recognized tribe eligible for a loan from the Alaska energy efficiency revolving loan fund; and relating to loans from the Alaska energy efficiency revolving loan fund." [Before the committee was the committee substitute (CS) for HB 58, labeled 29-LS0254\H, Nauman, 1/27/15, which was adopted by the committee on 2/24/15.] 10:26:09 AM REPRESENTATIVE JONATHAN KREISS-TOMKINS, Alaska State Legislature, sponsor of HB 58, informed the committee the substantive change between HB 58 and the committee substitute for HB 58, [29-LS0254\H, Nauman, 1/27/15], was the inclusion of additional nonprofit entities such as the Veterans of Foreign Wars (VFW) and American Legion organizations, which qualify for a separate tax-exempt status. 10:27:13 AM The committee took a brief at ease. 10:28:15 AM REPRESENTATIVE KREISS-TOMKINS clarified that before the committee was the CS for HB 58, Version H. CO-CHAIR VAZQUEZ asked for a page-by-page explanation of the changes to the bill. REPRESENTATIVE KREISS-TOMKINS directed attention to Version H on page 4, lines 17-18, which read: (3) "tax-exempt entity" means an entity designated as tax exempt under 26U.S.C.501(c)(3),(4),(6),(12), or (19)(Internal Revenue Code). REPRESENTATIVE KREISS-TOMKINS explained that there are different kinds of nonprofits under tax code 501(c)(3). In further response to Co-Chair Vazquez, he said the CS includes additional nonprofit tax exempt entities such as those that qualify under 501(c)(19). CO-CHAIR VAZQUEZ asked how the tax code differs. 10:30:39 AM MIGUEL RORHBACHER, Staff, Representative Jonathan Kreiss- Tomkins, Alaska State Legislature, speaking on behalf of Representative Kreiss-Tomkins, sponsor of HB 58, informed the committee that examples of nonprofits are as follows: (c)(3) - United Way and food banks; (c)(4) - League of Women Voters and community softball leagues; (c)(6) - business organizations and chambers of commerce; (c)(12) - utility and agricultural cooperatives; (c)(19) - veteran's services. 10:33:03 AM JOHN ANDERSON, Director, Division of Research and Rural Development, Alaska Housing Finance Corporation (AHFC), Department of Revenue (DOR), said he was available for questions and Alaska Housing Finance Corporation had no position on the bill. CO-CHAIR VAZQUEZ asked whether HB 58 would have an impact on the [Alaska energy efficiency revolving loan program (AEERLP), Alaska Energy Authority, (AEA), Department of Commerce, Community & Economic Development (DCCED]. MR. ANDERSON was unsure. There could be an increase of activity but that is unknown at this time. Alaska Housing Finance Corporation outreach related to the energy efficiency revolving loan fund program (AEERLP) has involved many of the nonprofit entities identified by the proposed legislation. In further response to Co-Chair Vazquez, he said the program is administered by AHFC, and the last loan approved was to the Department of Transportation & Public Facilities (DOT&PF) in the amount of $3.7 million, at 3.6 percent interest for a 15-year term. 10:35:17 AM REPRESENTATIVE TILTON surmised the bill extends eligibility to some tribal entities, and the CS adds other nonprofits, but there are no eligible entities that have been awarded funds at this time. REPRESENTATIVE KREISS-TOMKINS said the fund has been underutilized to date. REPRESENTATIVE TILTON observed that the fund has not been used - perhaps because grants have been available - and asked if the fund may not be necessary. She said, "Do you have kind of an idea ... how many different entities would be, this would be able to open it up for?" MR. ANDERSON pointed out that the fund is not "sitting there." Senate Bill 220 [passed in the 26th Alaska State Legislature] provided AHFC the authority to bond for $250 million. In fact, AHFC intends to identify a group of projects and then apply for bonding. In further response to Representative Tilton, he said the interest rates are determined through a market-driven process and AHFC strives to make the best use of the program. REPRESENTATIVE TILTON asked whether other funds are available to nonprofit entities for energy efficiency. MR. ANDERSON said AHFC was not aware of any other financing mechanisms within state agencies. 10:39:49 AM REPRESENTATIVE WOOL asked how the program differs from the [Alaska Housing Finance Corporation (AHFC) homeowner weatherization and energy efficiency programs]. MR. ANDERSON advised that residential energy efficient retrofits are simple when compared to commercial projects. Superficially, the two programs are similar in concept in that an audit is done, the improvements are made, and a post-audit shows the increase in energy efficiency; however, commercial buildings are more in-depth. In further response to Representative Wool, he affirmed that the program is intended for public facilities or commercial operations of any size. REPRESENTATIVE TILTON asked for an example of a project. REPRESENTATIVE KREISS-TOMKINS said examples in Fairbanks would be provided. CO-CHAIR VAZQUEZ inquired as to pending applications. 10:42:43 AM MR. ANDERSON said about six applications are in the technical review process. In further response to Co-Chair Vazquez, he advised that over the past two years AHFC has provided many presentations to organizations such as Rotary International, the Alaska Municipal League, the Institute of Architects, Renewable Energy Alaska Project, and the Alaska Association of Facility Administrators. In fact, a large energy efficiency conference in Anchorage is upcoming that will reach many other organizations. Although AHFC has no operating funds for the program, presentation requests are fulfilled by staff, including contacts with DOT&PF, and the Department of Education and Early Development (EED). CO-CHAIR VAZQUEZ asked for an example of the kind of project that can be financed through the loan program. MR. ANDERSON noted that the loan program could replace fluorescent lights with LEDs, replace old boilers with energy- efficient boilers, remove windows, add insulation, and install better heating and ventilation systems. REPRESENTATIVE TILTON asked whether the bill would extend the loan program to for-profit tribal entities. REPRESENTATIVE KREISS-TOMKINS expressed his belief that the bill would do so. He directed attention to page 4, lines 15-16, which read: (B) includes a subdivision, subsidiary, or business enterprise wholly owned by a federally recognized tribe; REPRESENTATIVE KREISS-TOMKINS said he would accept an amendment to exempt business enterprises and limit loan qualification to the service-delivery entities which make up 98 percent of tribal activity in Alaska. In response to Co-Chair Vazquez, he said the bill has a zero fiscal note. 10:48:01 AM REPRESENTATIVE TALERICO asked whether the sponsor would object to "a sunset on the eligibility for the nonprofits and tribal entities." REPRESENTATIVE KREISS-TOMKINS said he would welcome such an amendment. He assured the committee the intent of the proposed legislation was to help public facilities above nonprofits, thus another possible amendment would be to create a prioritization so AHFC satisfies the needs of public facilities first. This may be a different way to accomplish a sunset, or both concepts may be included in a future CS. REPRESENTATIVE TALERICO asked the sponsor to provide the aforementioned concepts to the committee. REPRESENTATIVE KREISS-TOMKINS agreed. [The committee treated public comment as open on HB 58.] 10:51:15 AM CHRIS ROSE, Executive Director, Renewable Energy Alaska Project (REAP), informed the committee REAP is a coalition of over 80 organizations across the state including electric utilities, Native corporations, independent power producers (IPPs), developers, businesses, and non-governmental organizations (NGOs). He said REAP was very interested in the loan fund when it was established in 2010. Through [Senate Bill 220, passed in the 26th Alaska State Legislature], the state mandated that a certain percentage of the state's public buildings are to be retrofitted by 2020. Mr. Rose said this is a very important issue for the state given its current economic situation. He recalled an AHFC white paper published 10/29/12, entitled, "Energy Use in Alaska's Public Facilities," which indicated over 5,000 public buildings could be improved by the current loan program, but unfortunately, no loans have been executed. He suggested that some potential applicants are waiting for grants, but said, "Those days are certainly over, at least for now." Potential applicants should be encouraged because AHFC estimated the state spends $642 million annually on energy, which is close to 10 percent of the state's operating budget. A 20 percent savings is possible, after a retrofit of all of the buildings, and $125 million could be saved every year. Alaska Renewable Energy Project supports the expansion of the program so that qualified entities and tribal organizations may "get some of these loans executed." Another action that may encourage the use of the program would be for EED to make it easier for school districts to participate. In conclusion, REAP supports the expansion of the program, energy efficiency, and saving money. CO-CHAIR VAZQUEZ said she had made the acting commissioner of the Department of Administration aware of the program and asked Mr. Rose to provide him with further information. 10:55:30 AM JOEL NEIMEYER, Federal Co-Chair, Denali Commission, informed the committee the Denali Commission, the Rasmuson Foundation, and the Cold Climate Housing Research Center (CCHRC), have embarked on a pilot effort in Fairbanks in order to demonstrate the validity of energy audits followed by a loan program. The intent is to move the program to rural Alaska, where energy costs are very high. The Denali Commission regards the loan program as a potential tool for rural Alaska and supports expanding the number of eligible applicants. Mr. Neimeyer said work done on a community scale is more efficient as contracts for the energy audits, the construction of improvements, and the post-construction monitoring would be bundled. The program is an important tool for rural and urban Alaska. 10:57:42 AM DANIEL POWERS, Coordinator, Fairbanks Nonprofit Retrofit Pilot, CCHRC, informed the committee he is working on the Fairbanks Nonprofit Retrofit Pilot project, one of the principles of which is that Alaska is stronger when nonprofits and tribal organizations spend less money on energy. The project is trying to solve the statewide issue of energy efficiency for nonprofits and has fourteen nonprofit and tribal participants that are getting energy audits, having initial meetings with contractors, studying the technical documents, and developing five-year plans and strategies for building owners, whenever possible. He said the expansion of the loan program offers advantages such as reduced requests for capital from nonprofits and tribal organizations, changes in the grant-based culture for energy efficiency projects, and reduced operating costs for nonprofits and tribal organizations. The project is collecting information from each participant about barriers to lending, and the barriers seen by auditors and funders. The bill expands state resources to the organizations that provide essential services to citizens. Mr. Powers stated his support for HB 58. 11:01:36 AM REPRESENTATIVE WOOL asked for the status of the projects. MR. POWERS answered that the audits were completed last year and quotes from contractors are being collected. The Fairbanks Resource Agency office building is completed with boilers installed and energy monitoring in place. Using a loan, the agency installed energy efficient boilers and smart pumps to reduce its electrical load. Other recommendations include adding insulation and extending a hot water line to an adjacent property to save energy and cost. Out of the fourteen nonprofits, about seven nonprofits are still in the decision- making process to determine if they can accept the payback schedule and follow the recommendations of the audit. He said he expected a busy construction season to complete the projects that have financing through the Denali Commission and Rasmuson Foundation. In further response to Representative Wool, he said he did not have sufficient information to support the estimate of 20 percent savings made by a previous speaker because each building and audit are different; also, there is the question of whether nonprofits can afford to make improvements that are paid back from the cash flow of energy savings. The pilot project was tasked to find the point of economy for the retrofit marketplace so as not to overinvest. 11:06:54 AM DAVE MESSIER, Rural Energy Coordinator, Tanana Chiefs Conference (TCC), informed the committee TCC is a nonprofit tribal consortium that works with 42 federally recognized tribes in the Interior. He said he is in strong support of the modifications to the Alaska energy efficiency revolving loan fund proposed in HB 58. The electricity rates in the region are high and energy efficiency projects have saved school districts, clinics, tribes, and cities tens of thousands of dollars in energy costs. Expanding access to the program would assure entities have access to funding for retrofitting facilities in rural Alaska, Fairbanks, and across the state. The Tanana Chiefs Conference is a nonprofit that would benefit from the proposed legislation in that it operates more than 200,000 square feet of clinic and office space in Fairbanks, and it supports any legislation that makes energy efficiency funding easier to access for nonprofits. Spending money wisely for energy means money can be used to better serve Alaskans who are in need of help. Mr. Messier added that from his experience in the energy field, he knows that technology change takes time and successful projects will lead to more success. CO-CHAIR VAZQUEZ stated her concerns about whether there is sufficient staffing to administer the program and if there are safeguards to minimize loan defaults. 11:11:44 AM REPRESENTATIVE KREISS-TOMKINS reviewed the committee's suggestions for a new proposed CS: create a structure that guarantees public facilities have first priority access to the revolving loan fund; clarify the line between for-profit tribal enterprises and nonprofit tribal organizations that deliver services to Alaskans; default safeguards; address the staffing issue. CO-CHAIR VAZQUEZ closed public testimony on HB 58. HB 58 was held over. 11:13:17 AM The committee took an at ease from 11:13 a.m. to 11:20 a.m.