HOUSE BILL NO. 268 "An Act relating to the dividends from the Alaska Industrial Development and Export Authority; relating to the meaning of 'mark-to-market fair value,' 'net income,' 'project or development,' and 'unrestricted net income' for purposes of the Alaska Industrial Development and Export Authority; and providing for an effective date." 10:00:25 AM Co-Chair MacKinnon noted that the public hearing for SB 268 had been opened and closed on April 12, 2016. GENE THERRIAULT, DEPUTY DIRECTOR, STATEWIDE ENERGY POLICY DEVELOPMENT, ALASKA ENERGY AUTHORITY, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, discussed the intent of the bill. He specified that the legislation proposed to fix two issues with computation of the AIDEA dividend. He explained that the dividend was paid out of AIDEA's net earnings on a yearly basis, and there were two issues which were starting to create unpredictability to the process. He specified that federal rules required that AIDEA make adjustments in order to get its financial audited statement. He furthered that a number of the adjustments needed were for non-cash adjustments, and the adjustments impacted net income before the calculation for the dividend took place. He specified that one of the two problems was mark to market adjustments. He illustrated an example that if one had an investment portfolio in stocks and bonds, at the end of the fiscal year the market might be up. AIDEA was required to take a snapshot of the current value, and unrealized gains were booked (as if they were sold) and created an inflated income on which dividends were based. He noted that the market could also be down, which would create an artificially reduced net income. The bill would back out the non-cash adjustments in order to calculate the dividend with true net income. Mr. Therriault discussed a second issue pertaining to calculation of the AIDEA dividend. He recounted that several years previously, the authority was instructed that when it received money from an outside source (such as federal funds or a direct capital appropriation to support a project), the funds were reflected as income. The practice had artificially inflated AIDEA's income, and the legislature had allowed for the outside funding to be disregarded for the purposes of calculating the dividend. The legislature had not anticipated that at times, funds from outside sources were spent to investigate but not go forward with a project, and the value of expenditures (such as an environmental impact study) would have to be written off the books. The periodic adjustments of such expenditures would artificially suppress the income in a particular year. He qualified that the expense write-offs happened very infrequently, and the AIDEA accounting staff had requested a remedy for the problem so that true net income would be considered when dividends were calculated. Co-Chair MacKinnon directed attention to the fiscal note, FN 1(CED), and noted that the fiscal note was indeterminate. Co-Chair Kelly MOVED to report HB 268 out of Committee with individual recommendations and the accompanying fiscal note. HB 268 was REPORTED out of committee with "no recommendation" and with one previously published indeterminate fiscal note: FN 1 (CED). 10:05:40 AM AT EASE 10:07:45 AM RECONVENED