SB 161 PERM. FUND CORP TO MANAGE MUNI ASSETS  CHAIRMAN MACKIE brought SB 161 before the committee as the first order of business and noted there was a draft committee substitute for its consideration. SENATOR BERT SHARP , prime sponsor of SB 161, explained the legislation authorizes the Alaska Permanent Fund Corporation to manage the assets of a municipal savings or investment account. He noted the parameter of a management agreement starts on page 1, line 9 through the remainder of the bill. These parameters were set by the corporation as conditions they could accommodate without compromising their mission. The legislation offers municipalities the option of investment management services within Alaska and one in which the average citizen has confidence. Senator Sharp noted that the bill carries a break-even fiscal note because the management costs are totally reimbursable to the Alaska Permanent Fund Corporation by the municipalities based on the billings rendered by the corporation and the agreements as set out by the parameters of the bill. He said the original bill put the payments into the general fund, however, the proposed committee substitute puts the payments into the earnings reserve account. Senator Sharp related that the legislation was introduced at the request of the City of Fairbanks, however, it would give any municipality the option of engaging the Alaska Permanent Fund Corporation to manage its assets. Number 075 SENATOR WILKEN moved the adoption of CSSB 161(CRA). Hearing no objection, it was so ordered. Number 095 SENATOR HOFFMAN referred to page 1, line 14, and asked how the asset value of $50 million was established. SENATOR SHARP replied that all of the terms that are in the bill were put in at the suggestion of the Alaska Permanent Fund Corporation. Number 106 CHAIRMAN MACKIE stated the committee would take testimony via the teleconference network. JIM HAYES , Mayor of the City of Fairbanks, said the ownership of the utilities by the city was an issue that had been around for some 20 years. The Fairbanks City Council decided the city should get out of the utility business and that a permanent fund should be established with the proceeds of the sale. In October 1996, the voters approved the sale of the utilities as well as a change to the city's charter to establish a permanent fund. Approval of the sale of the utilities by the Alaska Public Utilities Commission is expected sometime this summer. Once the sale has been approved and the funds have been transferred, the City of Fairbanks would like to be able to deposit those funds into the permanent fund by the end of this year. Number 175 SENATOR PHILLIPS asked who the city utilities are being sold to. MAYOR HAYES related that PTI is purchasing the telephone utility; a group of Fairbanks investors have formed a corporation to purchase the water and sewer utility; and the electric utility is being purchased by Golden Valley. HARRY PORTER of Fairbanks advised that he and Cindy Shelling were members of the City of Fairbanks' permanent fund committee and were available to respond to questions from the committee. Number 210 JIM KELLY , Research & Liaison Officer for the Alaska Permanent Fund Corporation, testifying in Juneau, stated the corporation has not taken a position on the legislation, but he pointed out that they have provided a fiscal note showing that it will cost money. Number 245 SENATOR WILKEN informed the committee that he has a conflict in that he is one of the 10 investors in Fairbanks Sewer & Water. He then moved to be excused from voting on SB 161. SENATOR DONLEY objected. CHAIRMAN MACKIE stated he didn't think there was a conflict in that this is money that the city has and wants to invest in the permanent fund. It doesn't have anything to do with the sale of the utility. Number 250 SENATOR WILKEN asked how the City of Fairbanks will be able to access this money once it is deposited with the permanent fund. MAYOR HAYES said it is his understanding that it will not be a problem for the city to receive a certain amount every year that it may need for its operations. Number 295 SENATOR HOFFMAN asked if the state would have any liability for the investment of a municipality's funds. MR. KELLY replied that he didn't know if there was any liability there, but if they don't make income, they are not paying out any income. It is the trustees main function is to keep the money safe and to then produce income with it. There is no guarantee that the fund is going to produce income. However, he noted the corporation has a record where they have earned 11.6 percent over the last 13 years. He added that he would ask the corporation's attorney if there is any liability and what protection the state would have. Number 330 KEVIN RITCHIE , Executive Director, Alaska Municipal League, stated the League sees this as a one municipality issue, and that they do not have a position on the legislation. Number 334 SENATOR DONLEY moved CSSB 161(CRA) and the accompanying fiscal note be passed out of committee with individual recommendations. Hearing no objection, it was so ordered.