CS FOR SENATE BILL NO. 66(L&C) "An Act creating a new markets tax credit assistance guarantee and loan program within the Alaska Industrial Development and Export Authority and relating to the program; and providing for an effective date." Representative Wilson MOVED to ADOPT CS CSSB 66(FIN), Work Draft 27-GS1747\I (4/14/12, Martin). Representative Doogan OBJECTED for the purpose of discussion. 4:34:24 PM MARK DAVIS, DEPUTY DIRECTOR, ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY, (AIDEA), DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, spoke to the legislation. He explained that SB 66 provided loan guarantees in conjunction with the federal New Markets Tax Credit Program (NMTC). Investors making qualified equity investments would receive a federal tax credit totaling 39 percent of the cost of the investment. The program required that the remaining portion of the funding come from a loan through a financial institution. He noted that the NMTC programs, intended to foster economic development in economically challenged areas was successful in Alaska. He cited the fish processing plant [Goodnews Bay Salmon Processing Plant] in Platinum and the long term care facility in Kotzebue as examples. Mr. Davis reported that banks were reluctant to lend since the economic downturn in 2008. The program imposed two restrictions on lending: The leveraged lender is limited to interest only payments for the seven years of the tax credit period and a bank cannot foreclose during the seven year period. The Alaska Industrial Development and Export Authority (AIDEA) contacted the lending institutions and inquired how it could support the loan process in order to revitalize the program in Alaska. The banks responded that if AIDEA guaranteed the loan the banks will finance NMTC loans again. He added that often the equity investor purchased the tax credit at a discount and subsequently left money in the project to use as equity after seven years. The project can then refinance with a conventional loan. The program worked well with local banks. He assured the committee that the AIDEA loan guarantees do not affect the state. The loan guarantee was held against AIDEA's reserves. He cited Page 2, lines 22 - 23: Sec. 44.88.710. Effect of guarantee. (a) A guarantee under AS 44.88.700 -23 44.88.799 does not create a debt or liability of the state. Mr. Davis furthered that if the applicant can demonstrate that they have been unable to obtain a loan from two financial institutions then AIDEA may make a direct leveraged loan to the project. 4:37:09 PM JOE MICHEL, STAFF, REPRESENTATIVE BILL STOLTZE, explained the changes in the Committee Substitute (CS). He identified that on Page 5, Section 3 was added to the legislation: Sec. 3. The uncodified law of the State of Alaska is amended by adding a new section to read: LEGISLATIVE APPROVAL OF LOAN FROM THE POWER PROJECT FUND. Provided the Alaska Energy Authority approves a loan for the Metlakatla Power and Light, Triangle Lake hydroelectric project, the legislature authorizes the Alaska Energy Authority to loan an amount not to exceed $26,000,000 from the power project fund (AS 42.45.010) for the Metlakatla Power and Light, Triangle Lake hydroelectric project. This section constitutes legislative approval under AS 42.45.010(j) for a loan from the fund that exceeds $5,000,000. Mr. Michel explained that the section provided legislative approval to obtain a loan from the Power Project Fund for Metlakatla Power and Light. He noted that on Page 6, Sections 4 and 5 were also added to the bill: Sec. 4. Section 8, ch. 10, SLA 2010, is amended to read: Sec. 8. Section 2, ch. 10, SLA 2010, [OF THIS ACT] takes effect November 30, 2017 [2012]. Sec. 5. Section 10, ch. 71, SLA 2010, is amended to read: Sec. 10. Section 2, ch. 71, SLA 2010, [OF THIS ACT] takes effect 10 November 30, 2017 [2012]. Mr. Michel reported that the sections extended the sunset date of the property tax exemptions for the Delong Mountain Transportation System from 2012 until 2017. Representative Guttenberg requested confirmation that the loans were guaranteed by AIDEAS reserves. Mr. Davis confirmed the statement. Representative Guttenberg wondered how much was held in AIDEA reserves. Mr. Davis replied that AIDEA had $300 million in liquid assets. Representative Doogan WITHDREW his OBJECTION. There being NO further OBJECTION, the committee substitute was ADOPTED. Representative Gara requested a summary of AIDEA programs that focused on economic development in lower income areas of the state. Mr. Davis agreed to provide the update. 4:40:22 PM Vice-chair Fairclough OPENED public testimony. Vice-chair Fairclough CLOSED public testimony. Vice-chair Fairclough reviewed the fiscal notes. She noted the new zero (CED) fiscal note. She spoke to a fiscal note that would be attached to the bill when reported out of committee. The fiscal note affected Fund Transfers and was allocated to Savings Public Education Fund. The Red Dog Mine benefited from the Delong Mountain Road tax exemption. The current valuation of the road was $155,934,200. In lieu of the property taxes the Red Dog Mine contributed a payment to the borough for education. The borough was required to pay the 4 mil rate increase under the proposed educational funding legislation; an additional $623,736. Representative Joule explained that the borough would be responsible for the additional approximately $650,000 in taxes without being able to collect because of the exemption. Vice-chair Fairclough furthered that the total assessed property value was $190,000,000 and could impact the state education funding by $380,000 each year until a solution to fill the district's local contribution gap was found. She alerted the committee that an amount as large as $380,000 could appear on the fiscal note. Representative Wilson MOVED to report HCS CSSB 66 (FIN) out of committee with individual recommendations and the accompanying fiscal notes. HCS CSSB 66(FIN) was REPORTED out of committee with a "do pass" recommendation and with two new zero fiscal notes from Department of Commerce, Community and Economic Development, and Department of Education and Early Development. 4:45:38 PM RECESSED