HB 471-AIDEA LOANS AND DIVIDEND  CHAIRMAN STEVENS announced HB 471 to be up for consideration. SENATOR GREEN, sponsor of HB 471, said his staff, Jessica Menendez, would explain the bill. MS. JESSICA MENENDEZ, Staff to Representative Green, said that HB 471 has to do with the Alaska Industrial Development and Export Authority's (AIDEA's) calculation for their annual dividend, the revolving fund and the Rural Development Initiative Fund(RDIF). AIDEA is a self-supporting state agency. They contribute a dividend to the general fund every year. Under current state law, AIDEA pays out an annual dividend which is between 25% - 50% of their net income for their base fiscal year. Since AIDEA's inception, they've authorized $129 million to the state's general fund. That includes the 2003 dividend, which is $20,149.500. New standards adopted by the governmental Accounting Standards Board (GASB) makes some changes. That is they will no longer include the term "net income" in their audited financial statements. Without those amounts listed, it doesn't give AIDEA a clear direction on how to determine what our annual dividend is going to be. Another important change is that GASB will now require that any of their inter governmental transfers or capital contributions or grants be listed in expense. So, those accounting modifications will alter the calculation of how we get our dividends. So, in other words, since our dividend from AIDEA is an intergovernmental transfer, then that will reduce the net income for that fiscal year and simultaneously, that will then reduce the amount of the dividend that's calculated by AIDEA. So, for the first time the payment from AIDEA could basically reduce the amount that we would normally be getting. Sections 2 and 3 amend the definitions using statutory guidelines for dividend programs to accommodate the changes of GASB. HB 471 also increases the maximum amount from the bulk fuel revolving loan fund to $200,000. As you know, rural communities use this program in order to buy their annual supply of fuel. Petroleum price increases and the fact that there is bulk storage tank capacity, $100,000 is too low of a number. So, bumping it back to $200,000 would provide communities who buy their bulk fuel in one month funding. In addition, what I learned last week is that USDA approved a $5 million grant for AIDEA, so that money will be used to support this program. Finally, section 4 adds language describing the eligibility requirements for AIDEA's Rural Development Initiative Funds (RDIF). This program is designed to provide financing options for rural communities. AIDEA wants to insure that the loans are going to the intended recipients who are truly in a rural community. So, qualifying participants of less than 5,000 people who are not connected by road or rail to Anchorage or Fairbanks and less than 2,000 who are connect to Anchorage or Fairbanks by road or rail. HB 471 is important legislation and not just because it contributes an annual dividend to our general fund, but AIDEA does help promote and diversify our economy providing businesses a means or a beginning for them to grow. So, we appreciate your support in the bill. SENATOR TORGERSON said the definition of "community" is not defined in AS 29.71.800 and he wanted the Department of Law to assure him that that worked. MR. BRIAN BJORKQUIST, Department of Law, took a moment to review that. SENATOR TOGERSON asked if the 5,000 population cover Barrow and Bethel. He thought they were bigger then that. He didn't want them to leave anyone out. CHAIRMAN STEVENS asked if under existing revolving bulk fuel loan funds, are communities over 5,000-population eligible now. MS. LYNNE KENNY, AIDEA, said they are referring to two different loans. The first is the bulk fuel revolving loan fund. The 5,000 population or less is existing law. MR. BJORKQUIST added that according to census information from the Department of Labor Bethel is over 5,000 and Barrow is below 5,000. CHAIRMAN STEVENS asked if it was his intent to make these loans available to Bethel and Barrow. MR. BJORKQUIST said under existing law Bethel would not be eligible because it has a population in excess of 5,000, but Barrow would be eligible because it has a population below 5,000. SENATOR TORGERSON said he was asking a policy question. Should they up the populations so that Barrow and Bethel are covered under the loan program or are they happy with leaving Bethel out. CHAIRMAN STEVENS asked if Bethel was the only one that was not eligible off the road system. MS. KENNY replied that the policy question had not been explored. A definition of a rural community became complicated and this language was from the Department of Law. She also thought that Bethel would be able to secure financing in more traditional ways, such as the loan participation program. CHAIRMAN TORGERSON said it was her call and he wanted it on the record that they were leaving Bethel out and that it was intentional. MS. KENNY said she would have to speak to others with more authority. SENATOR TORGERSON asked what the delinquency rate was on the bulk fuel loans. MS. KENNY said she didn't have that information, but would be happy to get it for him. MR. BJORKQUIST replied to a previous question about definition of a community. Community under the new legislation includes a city as defined in AS 29.71.800, which is - reading that statute - saying we need a general law, first or second-class city or a home rule city. Then the second part of the definition - or an unincorporated community as defined in AS 29.60.140. That definition states the following: In this section unincorporated community means a place in the unorganized borough that is not incorporated as a city in which 25 or more persons reside as a social unit. That's the definition of community as it's used in the proposed legislation. REPRESENTATIVE GREEN said it was his understanding that Bethel was about 4,850 people. He asked Senator Torgerson where he gets his figures from. SENATOR TORGERSON answered: The attorney just gave us the numbers off the census data, but I thought Bethel was a little better than 5,000. We're including the marine highway system and some pretty good cities here, because we're saying the marine highway doesn't count as a road. We have Ketchikan in this thing and whatever they have - 8,000 or 10,000 people and you're leaving out a community in rural Alaska. I don't think that's the intention, but I'm not prepared to amend the bill. I want them to make a policy call and they make the policy call to leave Bethel out, they can handle Senator Hoffman. MS. MENENDEZ said she knew the intention of this was to determine better the qualifying participants, because they had some problems at Settler's Bay, which does have other financial options available to them. "So this program was intended for rural communities who don't have other financing options available to them." CHAIRMAN STEVENS that they were essentially doubling the size of the ability to loan the funds and asked if it has the capacity to absorb that demand. MS. KENNY replied yes, with the $5 million they are receiving from the FRDA. CHAIRMAN STEVENS asked how many loans did they issue annually. MS. KENNY apologized that the loan specialist on this particular fund was out of town today and she couldn't tell him that. REPRESENTATIVE GREEN said they he was assured before hand that there were funds available. CHAIRMAN STEVENS asked what the balance of the loan fund was now. He asked that the requested information be sent to Senator Torgerson who would share it with the rest of the committee. MR. BJORKQUIST interrupted to say that the population of Nome is 3,500. SENATOR TORGERSON moved to pass HB 471 out of committee with individual recommendations with the accompanying $0 fiscal note. There were no objections and it was so ordered.