CS FOR HOUSE BILL NO. 471(L&C) "An Act increasing the maximum amount of loans from the bulk fuel revolving loan fund operated by the Alaska Energy Authority; precluding certain legal action concerning certain technical assistance to rural utilities; relating to powers of the Alaska Energy Authority; relating to the definitions of 'net income' and 'unrestricted net income' for purposes of determining the amount of the Alaska Industrial Development and Export Authority's dividend to the state; relating to communities within which rural development loans may be made by the Alaska Industrial Development and Export Authority; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. JESSICA MENENDEZ, Staff to Representative Green, testified this legislation amends three "important" programs of the Alaska Industrial Development and Export Authority (AIEDA): AIDEA dividend calculations, the Bulk Fuel Revolving Fund and the Rural Development Initiative Fund. She reminded the Committee that AIDEA is a self-supporting State agency that contributes an annual dividend to the State general fund. She furthered that since its inception, AIDEA has contributed or authorized $129 million, including $29,149,500 for the FY 03 fiscal year. Ms. Menendez explained that under current statute, AIDEA pays an annual dividend based on the agency's net income and fund- restricted net income. She informed that statute defines these two incomes as "the net income and unrestricted income included in the audited financial statements." However, she stated that new guidelines imposed by the Governmental Accounting Standards Board (GASB) no longer include these terms and that without these amounts reported, the AIDEA Board of Directors has no clear instruction of how to determine the annual dividend to the State. Ms. Menendez added that GASB standards also stipulate that any governmental transfers, capital contributions or grants must be listed as an expense or revenue. She explained this method would reduce the agency's net income for the base fiscal year and subsequently reduce the amount of the dividend calculated from the audited financial statements. Ms. Menendez stated that Sections 2 and 3 of the bill address these issues by defining unrestricted net income using the new GASB terminology. Ms. Menendez continued that this legislation also increases the maximum amount of the Bulk Fuel Revolving Fund. She described the purpose of the fund to assist rural communities in purchasing bulk fuel supplies. She spoke of the advantage for participating communities to purchase bulk fuel in more frequent, smaller shipments; also, shipments to some communities could only be made during certain timeframes. To accommodate this, she pointed out this legislation increases the maximum amount of the fund from $100,000 to $200,000. Ms. Menendez next addressed Section 4 of the bill, which contains the eligibility requirements for the Rural Development Initiative Fund. She explained this program provides funding opportunities for those rural communities that have no other funding options available. She noted the intent of this provision is to ensure that the loans are awarded to the communities for which the program is intended. She detailed that eligible communities would have a population less of than 5,000 residents, and not connected by road or railroad to Anchorage or Fairbanks, or have a population of less than 2,000 if connected to Anchorage or Fairbanks. Ms. Menendez concluded by stressing the importance of this legislation, not only because AIDEA provides the State with an annual dividend, but also because it provides programs and financing options to allow the establishment and expansion of businesses statewide, which subsequently provides jobs for Alaska and helps diversify the economy. BOB POE, Executive Director, Alaska Industrial Development and Export Authority (AIDEA) testified the intent is to maintain the annual dividend in the current manner and that this legislation would allow that to occur. He explained the changes to the Bulk Fuel Revolving Fund are requested because the capacity of many updated fuel storage systems is increased and also because the amount of fuel that could be purchased for $100,000 has decreased due to higher fuel prices. He added that US Senator Ted Stevens was successful in securing a $5 million grant for the fund. Mr. Poe stated that the provisions of this bill governing the Rural Development Initiative Fund would "make…wording that was a little problematic, much clearer." He gave examples of businesses located outside of city limits arguing for rural status, when lending institutions were nearby that were willing to lend money under the AIDEA loan participation program. Senator Ward asked which communities would be affected by the changes to population eligibility for the Rural Development Initiative Fund program. Mr. Poe surmised no communities would be excluded. He spoke of Settlers Bay located near Wasilla would be eligible for conventional financing. He noted the City of Bethel would not be impacted, although the population of Bethel has increased beyond 5,000 residents, because businesses in this area would qualify for AHFC-sponsored conventional financing. Senator Wilken asked if passage of this bill would change the amount of the annual dividends. Mr. Poe answered the provisions in this bill would not affect the amount of dividends. Senator Wilken next asked the status of federal funding for an unrelated project. Mr. Poe replied the pending congressional legislation contains an amendment that authorizes the Secretary of the Department of Energy to negotiate with AIDEA for a loan of up to $125 million. He emphasized this is an authorization rather than an appropriation and therefore subject to negotiation. He predicted the chances of the amendment and the legislation passing into law was good. Senator Austerman "moved House Bill 471 out of Committee." Without objection CS HB 471 (CRA) with accompanying zero fiscal note #1, dated 3/22/02, from the Department of Community and Economic Development.