9:23:24 AM CS FOR HOUSE BILL NO. 381(FIN) "An Act relating to the financing of construction, major maintenance, and renovation of certain capital projects; authorizing the commissioner of revenue to sell the right to receive a portion of the anticipated revenue from a tobacco litigation settlement to the Northern Tobacco Securitization Corporation, and relating to that sale and the use of the revenue; authorizing the Northern Tobacco Securitization Corporation to issue bonds and use the proceeds to acquire the right to receive a portion of anticipated revenue from a tobacco litigation settlement and for other purposes, and relating to those bonds; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. 9:23:58 AM BRYAN BUTCHER, Director, Governmental Affairs and Public Relations, Alaska Housing Finance Corporation, Department of Revenue, introduced Mr. Fauske and Mr. Dubler. 9:24:19 AM DAN FAUSKE, Chief Executive Officer/Executive Director, Alaska Housing Finance Corporation, Department of Revenue, testified via teleconference from an offnet location that he would be available for questions following presentation of the bill. 9:24:58 AM Mr. Butcher pointed out that the Senate companion legislation had been heard in this Committee. He would therefore focus his testimony to changes made to the original bill by the House of Representatives. The amount of $140 million was established in conjunction with the House Finance Committee and deemed "attainable and conservative". In subsequent discussion with the Corporation's financial advisor the amount would be increased to $145 million to reflect a "slight up tick in the tobacco market." This market is very volatile and therefore difficult to determine an exact amount. A final amount should be available the following day. Mr. Butcher spoke to previous testimony in which larger amounts were announced. However, repayment of $14 million over the term of the bonds could actually cost $200 to $300 million. This represents "diminishing returns" in which each dollar was not maximized. 9:26:03 AM Mr. Fauske reiterated Mr. Butcher's testimony, noting that $14 million on "the unrated side" plus "a section of below investment grade" estimated amount of between $21 and $22 million. 9:26:29 AM Co-Chair Green requested an explanation of the process of implementing the provisions of this legislation. 9:26:34 AM JOE DUBLER, Director, Finance, Alaska Housing Finance Corporation, Department of Revenue, testified that this bill would allow the Northern Tobacco Securitization Corporation to restructure the existing two transactions; one sold in the year 2000 and the second in 2001. The tobacco market at that time was "young" and Alaska was the first state to undertake this type of transaction. The process has matured and more structures have been implemented to allow for additional proceeds from the same amount of revenues. Mr. Dubler explained this bill would allow the payoff of the existing bonds and utilize the new structures to realize more from the same revenue stream. Additionally the maturity date of the bonds would be extended. Mr. Dubler reminded that the first transactions were specifically shorter terms with the goal being receipt of a specific dollar amount. The first issuance garnered $93 net proceeds. He understood that Governor Murkowski and the legislature had decided to maximize the amount of proceeds from the transactions through the proposed restructuring. Therefore, the Corporation has proposed a more aggressive bond structure, which this bill would allow. Mr. Dubler stated this proposal would "free up" the surpluses available after the bonds currently outstanding were "defeased". Those surpluses would be expended on the capital projects listed in this legislation. 9:28:23 AM Co-Chair Green ordered the bill HELD in Committee.