CS FOR SENATE BILL NO. 248(FIN) am An Act relating to the financing authority, payment in lieu of tax agreements, and tax exemption for assets and projects of the Alaska Industrial Development and Export Authority; relating to renaming and contingently repealing the rural development initiative fund within the Department of Community and Economic Development, and establishing the rural development initiative fund within the Alaska Industrial Development and Export Authority; and providing for an effective date. KEITH LAUFER, FINANCIAL AND LEGAL AFFAIRS MANAGER, ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY (AIDEA), DEPARTMENT OF COMMUNITY & ECONOMIC DEVELOPMENT, ANCHORAGE, explained the intent of the legislation. He summarized each section: ? Section 1 would clarify changes to property tax exemption provisions. Together with Sections 6, 7 and 8, it would make clarifying changes in tax exemption and payment in lieu of tax provisions relating to AIDEA owned projects. ? Sections 2-4 would transfer the Rural Development Initiative Fund Program (RDIF) to AIDEA. ? Section 5 would extend AIDEA's general bonding authority which would otherwise sunset on July 1, 2000. Bonds for development finance projects in excess of $10 million dollars would continue to require legislative authorization. ? Section 6 would amend AS 44.88.140(a) to recognize the permissive property tax exemption that local governments may grant for AIDEA's own projects. ? Section 7 would amend AS 44.88.140(b) to clarify the mechanism to be used by local governments and users of AIDEA projects for entering into payment in lieu of tax agreements. The bill would make clarify that these agreements are to be made directly between the local governments and the project users. ? Section 8 would amend AS 44.88.140 to add a clarifying definition section for "local political subdivision". The provision provides that the political subdivision in which the AIDEA project is located is the "local political subdivision" for purposes of the statute. ? Sections 9-11 references the transfer of the Rural Development Initiative Fund Program (RDIF). ? Sections 12-15 provides for an effective date. Co-Chair Therriault referenced Page 4, Line 22, the "$2 million dollar" issue. He pointed out that he had submitted Amendment #1 to address that concern. [Copy on File]. Mr. Laufer replied that the amendment would present no problem. Representative J. Davies asked if there was a limit to the amount of a conduit bond. Mr. Laufer replied that there was no limit on the size of a conduit bond, but that AIDEA does limit bonds that can be issued in a one-year period. Conduit bonds would be subject to that limit. There is a limit under the federal Internal Revenue Service (IRS) laws as to the amount that the entire State can issue for private activity bonds. The current limit is $150 million dollars. The State Bond Committee makes the allocations for those bonds. Mr. Laufer noted that most conduit revenue bonds would fall within that cap and that certain bonds for non- profit do not fall within the cap. Co-Chair Therriault MOVED to ADOPT Amendment #1. MIKE TIBBLES, STAFF, REPRESENTATIVE GENE THERRIAULT, explained that he had worked with AIDEA and Tam Cook, Alaska Legal Services, on the amendment. Representative J. Davies asked the purpose of the amendment. Mr. Tibbles stated that the language had been adopted in the Senate Finance Committee and then passed to the House Finance Committee. The language clarifies that the assets transferred to the fund by that authority may not exceed $2 million dollars. He noted that there had been a question regarding what "asset" meant in this circumstance. He pointed out that the amendment would clarify that language. Representative J. Davies asked if the amendment would provide for a total or one time limit. Co-Chair Therriault replied that it would be a total limit. Mr. Laufer interjected that AIDEA supports the $2 million dollars being sufficient to turn this into a "true" revolving loan program. Representative J. Davies voiced concern with "other assets" becoming available. He inquired if they would have to be addressed through statute. Mr. Tibbles explained that the intent was to reflect "other" funds outside the previous sentence. Beyond that, then there would be a $2 million dollar limit. Representative J. Davies pointed out that those are items transferred to AIDEA and thought the language should be modified by AIDEA. Mr. Laufer advised that the new language begins with "in addition" after listing the assets that could be put into the account. That language reflects the fact that it would be other than those that had been appropriated to AIDEA. Mr. Laufer added that he did not think adding that language would change the meaning; the new language was designed to recognize assets that had been transferred to AIDEA for that purpose. Co-Chair Therriault agreed, pointing out the comment "in addition" to those funds. Mr. Laufer stated that it could be clarified by adding "in addition to the assets described in the previous sentence". Representative J. Davies agreed that would make him more comfortable. Co-Chair Therriault recommended moving a conceptual amendment, "in addition to these assets" in order that the drafters could make it work grammatically. Co-Chair Therriault modified the original MOTION to include language as discussed above. There being NO OBJECTION, it was adopted. Representative G. Davis MOVED to ADOPT Amendment #2, 1- GS2009\DA.1, Cook, 4/17/00. [Copy on File]. Co-Chair Therriault OBJECTED for the purpose of discussion. Mr. Laufer explained that this was a status quo amendment. The way it is written, it only applies to facilities that AIDEA would own that are open to the public. That type of asset is typical of government infrastructure assets. AIDEA has been used as a unique financing mechanism in the State for these purposes. Representative G. Davis questioned the contract between COMINCO and AIDEA. He pointed out that it had been agreed upon that it could be used by other entities. It could be treated as a public facility for roads and ports. Co-Chair Therriault noted that local government agrees that it should be a tax-exempt infrastructure. He asked why the company would be paying a payment in lieu of tax. Mr. Laufer replied that COMINCO and Nannana have not only the interest in the use rights of the road and the port, but also have the mine itself, which is not owned by AIDEA and which is not subject to these provisions. They entered into a payment in lieu of tax provision that they thought had encompassed cooperation. Co-Chair Therriault asked if they were getting tax proceeds under another name. Co-Chair Therriault WITHDREW his OBJECTION to Amendment #2. Representative Phillips noted that there would be a conceptual amendment submitted that would put a January 1, 1999 retroactive date into it. Representative Phillips MOVED an amendment to Amendment #2, which would place in the retroactive effective date. Representative Bunde OBJECETED and asked if the taxes had already been collected. Mr. Laufer replied that they were not yet subject to payment and that they would "kick in" in July 1999. Representative Bunde WITHDREW his OBJECTION. Representative J. Davies noted that the amendment would preserve the status quo. He asked if the tax assessor had made a statement regarding the policy. Co-Chair Therriault replied that the effect was that there was only one user of the facility. Representative J. Davies asked if there had been an event that triggered the decision. Mr. Laufer explained that there currently is a new tax assessor; he came to a different conclusion than the original one. There being NO OBJECTION to Amendment #2 as amended, it was adopted. Representative J. Davies asked which other properties would the amendment apply to. Mr. Laufer replied that it would apply to the AIDEA port in Unalaska. Another potential spot could be the AIDEA facility in Skagway. That facility is not being used at this time and there would be no tax ramifications. Representative J. Davies questioned the distinction between the road and the load-out facility. Mr. Laufer replied that there was a possibility of using it as a coal facility. Representative J. Davies inquired if the company using it would pay a fee. Mr. Laufer replied they would and that under the agreement with COMINCO, it provides including a toll structure for other users. In the event that there are other users, COMINCO would have a smaller burden. Representative J. Davies asked if the local municipality was able to tax COMINCO's leasehold interests in that facility. Mr. Laufer responded that under the provisions adopted, they would not be able to do so. Representative J. Davies commented that this is not really a public facility. Mr. Laufer pointed out that it would be AIDEA charging the other user. COMINCO's right is not exclusive now so the extent of other users would be making a toll payment. COMINCO would be receiving a credit against its toll payments. There being NO OBJECTION to the amended Amendment #2, it was adopted. Co-Chair Therriault referenced Section #6 of the bill questioning if that language should be included. Mr. Tibbles suggested that the language does not make sense and that it would not create a tax exemption. Mr. Laufer agreed that the section was not needed. Representative J. Davies asked the inference to AS 29.45.050(P). Mr. Laufer explained that section is the provision that deals with municipality's ability to grant exemptions for facilities. It is a stand-alone exemption that exists in law and that nothing in that section creates a tax exemption. Co-Chair Therriault MOVED to delete Section #6. There being NO OBJECTION, it was adopted. Representative J. Davies asked if a new sunset had been inserted. Mr. Laufer explained that the new sunset was July, 2003, as indicated in Section #5. Representative Foster MOVED to report HCS CS SB 248 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. HCS CS SB 248 (FIN) was reported out of Committee with a "do pass" recommendation and with a fiscal note by Department of Community & Economic Development dated 2/8/00.