SENATE CS FOR CS FOR HOUSE BILL NO. 304(RES) "An Act relating to issuance and sale of revenue bonds to fund drinking water projects, to the Alaska clean water fund, to creation of an Alaska clean water administrative fund and an Alaska drinking water administrative fund, to fees to be charged in connection with loans made from the Alaska clean water fund and the Alaska drinking water fund, and to clarification of the character and permissible uses of the Alaska drinking water fund; amending Rule 3, Alaska Rules of Civil Procedure; and providing for an effective date." DAN EASTON, Director, Division of Facility Construction & Operation, Department of Environmental Conservation, explained that HB 304 addresses the low interest loan program. Low interest State loans from the Alaska Drinking Water Fund and the Alaska Clean Water Fund offer municipalities the means to build drinking water and sewage facility projects. The bill would allow the State to use revenue bonds to capitalize the Alaska Drinking Water Fund. He continued, both the Drinking Water and Clean Water funds are capitalized by annual federal grants that require a 20% State match. Bond revenues will help provide the State match for federal drinking water project money. However, the State is only authorized to sell bonds for the Clean Water Fund. It would make sense to extend the leveraging power to the Drinking Water Fund. As with existing law, the bill would require the State Bond Committee to conduct its activities in the best interests of the State, in a manner that would accomplish the most advantageous sale of the bonds. The legislation would provide for a new, self-supporting structure to pay for the costs of operating these important loan programs. Mr. Easton advised that the bill had been amended in the Senate Resources Committee to stipulate how to charge interest to private and public utilities. Co-Chair Torgerson asked if the Department was supportive of the amendment adopted in the Senate Resources Committee. Mr. Easton replied that the Department could administer the bill either way. It becomes a question of whether the State wants to "level the playing field" between a privately owned utility and the public owned utilities. The amendment does not address that concern. He noted that the agency does not have a position on the amendment. Senator P. Kelly suggested that the private utility owners would have to pay the higher costs, which would need to be passed on to the customer. He recommended deleting the previous adopted amendment. Senator Adams asked if that language was the only difference between the two versions. He recommended adopting the previous version of the bill. Mr. Easton stated that was the only change from the House version. Tape: SFC - 00 #99, Side B 10:24 am Senator Green questioned if there would be an advantage to privately owned, publicly regulated utilities. Senator P. Kelly noted that the Senate Resources Committee version was attempting to address information proposed by the State Bond Council. Whether private or public, there would be no accrual; costs can not accrue to the utility owner. The costs will be passed on. The only people affected would be the ratepayers. He agreed that the playing field would not be leveled between utility owners. Senator Leman commented that if the State allows private utilities to borrow at similar rates as the municipalities, they could make less money available for others needs. He asked if that would be a danger. Mr. Easton replied that the funds have done well. It is expected that they will continue to grow and that "sharing the pie" would not be a problem. Senator Green addressed the investment, borrowing and funding choices and how that would affect the whole. Senator P. Kelly mentioned that the party with the advantage or disadvantage would be the ratepayer. It has been clarified that the utility owner does not receive either the advantage or the disadvantage accrued. Senator Leman stated that any utility would want an "advantage" in order to keep their customers satisfied. It would be to their advantage to finance less costly money. He reiterated that the utilities should have a level playing field in the State of Alaska. Senator P. Kelly MOVED a conceptual Amendment #1 to the "M" version of the legislation, Page 7, Lines 21-22. The language would delete the underlined words and insert "interest rates for each class of borrowers shall be established as the same percentage of market rate index as appropriate to that class of borrowers". He noted that language would need to be changed on Page 11, Lines 10-11, following "fund". Senator Green OBJECTED. Senator Phillips asked the concern. Senator P. Kelly replied that the issue is that language would provide higher rates of interest to private regulating utilities. All those rates would be passed on to customers. He believed that the revised language would level the playing field. Senator Phillips asked if the loan program was available to both the private and the public utility companies. Senator P. Kelly replied it was. SENATOR HALFORD explained that the language would open a new program to private utilities. He noted that the concern is that private utilities reduce the total amount money available for the public utilities. Opening to a new class would not be a beneficial action. Private utilities save under the version of the bill before the Committee, whereas, the amendment could jeopardize that fund. Senator P. Kelly pointed out that Mr. Easton had indicated that would not be an issue. Senator Wilken declared a conflict of interest and requested to abstain from voting. Senator Leman OBJECTED. Co-Chair Torgerson noted that Senator Wilken's conflict would be indicated in the record. A roll call vote was taken on the motion to adopt Amendment #1. IN FAVOR: Wilken, P. Kelly, Leman, Adams, Torgerson OPPOSED: Green, Phillips Senator Donley abstained from voting. Senator Parnell was not present for the vote. The MOTION PASSED (5-2). Senator Leman referenced Page 8, noting that on Line 8, "waste water" should instead be "wastewater". ANDY WARWICK, (Testified via Teleconference), Clean Water Fund/Drinking Water Fund, Department of Environmental Conservation, Fairbanks, offered to answer questions of the Committee. MIKE BURNS, (Testified via Teleconference), Program Manager, Municipal Matching Grants, Division of Facility Construction & Operation, Department of Environmental Conservation, Anchorage, voiced appreciation for actions that the Committee had taken. He offered to answer any questions of the Committee. Senator Leman MOVED to report SCS CS HB 304 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. SCS CS HB 304 (FIN) was reported out of Committee with "individual recommendations" and with fiscal notes by Department of Environmental Conservation dated 4/10/00 and Department of Revenue dated 12/22/99.