SB 84-AIDEA: BONDING LIMITS; CONFIDENTIALITY  2:35:10 PM CHAIR PASKVAN called the meeting back to order at 2:32 and announced SB 84 to be up for consideration. TED LEONARD, Executive Director, Alaska Industrial Development and Export Authority (AIDEA) said AIDEA's mission is to provide various means of financing to promote economic growth and diversification in Alaska. An important way that AIDEA fulfills its mission is by providing Alaska businesses and non profit agencies with access to long-term capital at reasonable cost through its conduit revenue and loan participation programs. AIDEA requested this bill in order to amend its statutes to allow the Authority flexibility in how and when it issues bonds to insure that it obtains the most favorable terms and interest rates it can in order to reduce the overall cost of financing for AIDEA and Alaskan business and non profits that use its financing program. This is in Sections 1 and 2 He said the bill would also assist the mission of the Authority by clarifying and assuring borrowers and development project applicants that certain records and information provided to it will be kept confidential, and also set up a process to do that. That is in Sections 3-6. 2:37:24 PM Section 1 would amend their annual bonding limitation to exclude refunding and conduit revenue bonds from the $400 million/12- month bond limitation (a rolling 12 months, not an annual 12 months). The main types of bonds issued by AIDEA are general obligation (GO) bonds, revenue bonds, conduit revenue bonds and refunding bonds. The refunding bonds are used to refinance and replace existing bond debt; a good analogy of that is when mortgage rates go down it's a good time to refinance your mortgage. Refunding bonds can be done on GO bonds, revenue bonds and conduit revenue bonds. 2:39:11 PM They are also asking conduit revenue bonds to be excluded from the $400 million limit. These bonds are provided to businesses and non profits where AIDEA acts as a conduit for the issuance of taxable and tax exempt bonds. AIDEA has financed over $1.1 billion in conduit revenue bonds for 309 projects through this program. These bonds are payable solely by the project developer primarily from the revenue generated by the project. The Authority has no financial obligation for the bond debt; neither are the assets nor the credit of AIDEA at risk. MR. LEONARD said one of the prime benefits of this program is that AIDEA can pass its tax exempt status to a project developer who meets certain criteria. Only states and municipalities have the ability to do that. So for businesses and non profits that meet certain IRS regulations, the only way to do this is through a state organization or a municipality. 2:40:32 PM Tax exempt bonds for each state have a $260 million annual cap, and the Alaska Bond Committee has to approve those. In essence refunding and conduit bonds help promote the Authority's economic development mission without substantially increasing the amount of its outstanding bond debt. Enactment of this amendment would ensure that the 12-month bond limit would not preclude the Authority from issuing debt that would provide the Authority, Alaska businesses and non profits with more favorable terms and lower capital costs or limit AIDEA's conduit revenue bond program. 2:41:56 PM SENATOR THOMAS asked if refinancing bonds has a standard fee or is the fee negotiated. MR. LEONARD answered that it is a negotiated process. Part of Section 2 clarifies that the proceeds from the refunding debt can be used to pay those new issuant fees. 2:42:32 PM Section 2 begins on page 1, line 8, and amends AS 44.99.095 to provide for two recommendations. It would reinstate the Authority's ability to issue bonds that existed before the July 1, 2007 statutory sunset and it clarifies in statute that the Authority can use proceeds from the refunding bonds to finance certain costs and expenses associated with the issuance of the refunding bonds. Due to the statutory sunset, AIDEA currently requires legislative approval to issue any bonds except refunding and conduit revenue bonds. Section 2 would eliminate the sunset and enable the Authority to again issue most types of bonds without legislative approval, but it would still require legislative approval to issue GO and revenue bonds in excess of $10 million to assist in financing AIDEA-owned development projects. One example of that would be the Red Dog Mine. 2:45:09 PM MR. LEONARD said the second change in Section 2 will allow proceeds from the refunding bonds to retire the outstanding bonds, the cost of refinancing and other costs related to the issuance of the refunding bonds. In the past they had to come back to the legislature for approval to do that. 2:46:06 PM Sections 3-6 amend the confidentiality of information provision and adds clarification to the definition that certain records and information provided to the Authority are confidential and establishes a process for the Authority to determine that confidentiality. He explained that the Authority has heard several complaints from several borrowers who are project developers that AS 44.85.215 does not clearly establish that the Authority can retain the confidentiality of certain records or information that is essential and proprietary to their businesses. So, Section 3 clarifies and identifies the specific type of trade secrets that are kept confidential. Section 6 further clarifies existing language by defining "trade secrets" using the Alaska Uniform Trade Secrets Act in AS 45.50.940(3). Section 5 establishes a process for AIDEA to determine which records and information will be kept confidential. Under sections 3 and 5 the applicant must request confidentiality and make an adequate showing to the executive director that the records and information should be kept confidential. Based on that request, the executive director would make a determination and this process would provide greater assurance to the applicants that certain information and records will be kept confidential. The important thing is that it does that at the start of the process. 2:48:41 PM CHAIR PASKVAN wanted to hear more about the template that determines confidentiality. BRIAN BJORKQUIST, Senior Assistant Attorney General, Department of Law (DOL), said the standard applied under AS 44.88.215(a) wouldn't change from existing law. Certain specific types of information are confidential and not public records. These are listed in items 1-8 - like income tax returns, financial statements, and profit and loss statements. The showing the applicant would have to make is that the document in question fits within what is listed. CHAIR PASKVAN asked if a document is submitted with a request that it be confidential, and the executive director determines it's not confidential, does the business owner or project owner get to withdraw it before it becomes public. MR. BJORKQUIST answered yes. 2:50:45 PM SENATOR BUNDE asked assuming someone in the public felt that things labeled confidential didn't meet the statutory requirements, would there be recourse for them through the Freedom of Information Act or would it require a court lawsuit. MR. BJORKQUIST answered that under this statute the executive director would make a determination of confidentiality at the time the document is submitted by the applicant. However, in the process of public records request there would be an opportunity for a challenge, but because the determination had already been made by the executive director, there would be a heavier burden to overcome. 2:52:31 PM MR. LEONARD continued saying that Section 8 makes the effective date July 1, 2009. 2:52:55 PM SENATOR THOMAS asked why he wanted to revisit this issue. MR. LEONARD said a few years back they almost had to stop a bonding project based on the $400 million limitation and AIDEA would like to reissue some variable rate bonds they have now. They are actually also looking forward to the time when the bond market starts to smooth out. 2:54:20 PM SENATOR MEYER asked what the state is paying for a bond now. MR. LEONARD answered that AIDEA does not have the moral obligation of the state; so for taxable bonds it's about 8 percent. It hasn't issued a non-taxable bond for a while. The last he heard the state did a AA bond for was the prison at 5.99 percent. 2:55:57 PM SENATOR MEYER said he liked the sunset clause. Why remove it? MR. LEONARD answered the possibility of losing one of AIDEA's major tools every three years is why they are against the sunset. It is one of their main tools to perform their mission. SENATOR MEYER said the AIDEA dividend the state has received the last few years has helped fund the general budget, so the legislature would probably want to continue some oversight into its business, and he wanted the sunset clause to stay. 2:57:34 PM MR. LEONARD said AIDEA believes the budget process provides that oversight to the state. 2:58:22 PM CHAIR PASKVAN closed public testimony on SB 84, and held it for further hearing. SENATOR DAVIS thanked Mr. Leonard for his testimony.