Legislature(2017 - 2018)CAPITOL 17

01/31/2017 10:15 AM House ENERGY

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as

Audio Topic
10:21:26 AM Start
10:22:01 AM HB81
11:14:07 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
         HB 81-AK ENERGY EFFICIENCY LOANS: ELIGIBILITY                                                                      
10:22:01 AM                                                                                                                   
CHAIR  WOOL announced  that the  only order of  business would  be                                                              
HOUSE BILL  NO. 81, "An Act making  an entity that is  exempt from                                                              
federal taxation  under 26  U.S.C. 501(c)(3),  (4), (6),  (12), or                                                              
(19)  (Internal Revenue  Code) and  a  federally recognized  tribe                                                              
eligible for  a loan from  the Alaska energy efficiency  revolving                                                              
loan fund;  relating to  loans from  the Alaska energy  efficiency                                                              
revolving loan fund;  and relating to the annual  report published                                                              
by the Alaska Housing Finance Corporation."                                                                                     
10:22:22 AM                                                                                                                   
REPRESENTATIVE     JONATHAN    KREISS-TOMKINS,     Alaska    State                                                              
Legislature,  explained  that this  same legislation  had,  during                                                              
the 29th  Alaska State  Legislature, passed  all three  committees                                                              
of referral with  almost unanimous "do-pass" recommendations.   He                                                              
opined  that  this  was  "good,   common  sense  legislation  that                                                              
promotes energy  efficiency in Alaska."   He summarized  the bill,                                                              
stating that  it incorporated an  existing program  "Alaska Energy                                                              
Efficiency  Revolving Loan  Fund" which was  authorized under  the                                                              
Alaska  Housing  Finance Corporation  (AHFC).   He  detailed  that                                                              
this loan fund  had been created for the public  sector, primarily                                                              
school  districts,  municipalities,  and  state agencies  to  make                                                              
energy  efficiency  investments.    He  explained  that  a  public                                                              
entity could  identify energy  efficiency improvements  and borrow                                                              
money from  this revolving loan  fund to make those  improvements.                                                              
The marginal  savings would  then allow for  the repayment  of the                                                              
borrowed  money.   He pointed  out that,  at the  end of the  loan                                                              
term,  there  was  a more  energy  efficient  building  and  lower                                                              
energy costs.   He declared that  proposed HB 81 was based  on the                                                              
belief  "that energy  efficiency is  a good,  common sense  thing,                                                              
particularly in  Alaska with a climate  like ours."   The proposed                                                              
bill acknowledged  that,  as many non-profit  organizations  had a                                                              
need  for  energy  efficiency  improvements,   it  made  sense  to                                                              
broaden  the   eligibility  to   allow  greater  access   to  this                                                              
REPRESENTATIVE JOHNSTON asked about the size of the fund.                                                                       
REPRESENTATIVE  KREISS-TOMKINS  explained  that  this  was  not  a                                                              
"sitting  pot  of money,"  but  was,  instead, a  bond  authorized                                                              
10:25:39 AM                                                                                                                   
BERETT  WILBER,  Staff,  Representative  Jonathan  Kreiss-Tomkins,                                                              
Alaska   State   Legislature,  in   response   to   Representative                                                              
Johnston, stated  that the program  was authorized for up  to $250                                                              
million in bonding.                                                                                                             
REPRESENTATIVE  JOHNSTON  asked   about  any  current  outstanding                                                              
loans to the public.                                                                                                            
MS.  WILBER replied  that only  one loan  had been  closed by  the                                                              
program, a loan  to the City of Galena, for about  $2.4 million in                                                              
December, 2016.                                                                                                                 
REPRESENTATIVE  KREISS-TOMKINS   reported  that  the  program  was                                                              
currently  underused  by the  entities  able  to  access it.    He                                                              
explained  that, for  the past  decade,  there had  been "a  gravy                                                              
train  of free  money,  namely legislative  grants,  so why  would                                                              
anyone borrow  money when you can get  it for free in  the form of                                                              
grants."   He suggested  that there  would now  be more  activity,                                                              
pointing out  that less  than 1 percent  of the available  funding                                                              
had been  granted.  He  elaborated on the  intent of  the proposed                                                              
legislation,   stating   that   many   non-profit   organizations,                                                              
although  focused on  programs and  missions, did  not have  large                                                              
cash  reserves.     He   offered  an   example  of  a   non-profit                                                              
organization  in Sitka that  did not  have the  cash flow  to make                                                              
the  investment  in energy  efficiency  improvements.   He  stated                                                              
that  this  would  allow  cash  poor  organizations  to  "make  an                                                              
existing  program  do much,  much  more  good than  its  presently                                                              
10:28:52 AM                                                                                                                   
CHAIR  WOOL,  reiterating  the  premise  that the  loan  would  be                                                              
repaid  by savings  realized by  the improvements,  asked if  this                                                              
was  determined   through  an  audit,   and  was  this   an  exact                                                              
measurement or a  best approximation.  He asked  what would happen                                                              
if the conditions  changed, and the  savings were not the  same as                                                              
the original calculation.                                                                                                       
REPRESENTATIVE  KREISS-TOMKINS  clarified  that,  to  qualify  for                                                              
financing,  it was  necessary  to  have an  audit  to approve  the                                                              
details for the energy efficiency improvement.                                                                                  
MS. WILBER expressed  her agreement that it was  necessary to have                                                              
an energy audit certified by a third party.                                                                                     
10:31:14 AM                                                                                                                   
REPRESENTATIVE  WESTLAKE  asked   if  there  were  any  unintended                                                              
consequences,  such as  an increase  in price  due to  a shift  in                                                              
electricity use,  which could be passed  on to the community.   He                                                              
detailed an example of this to a rural program.                                                                                 
REPRESENTATIVE  KREISS-TOMKINS cited  this as  a paradox  of power                                                              
cost   equalization,   as  there   was   not  an   incentive   for                                                              
conservation.   He suggested  that the  relative change  of energy                                                              
consumption  within the  community  would  not appreciably  change                                                              
the  cost of  energy in  the community,  although he  acknowledged                                                              
that this was a cause and consequence.                                                                                          
CHAIR  WOOL  stated  that  some  of  these  discussions  would  be                                                              
brought up later during a power cost equalization presentation.                                                                 
10:34:07 AM                                                                                                                   
REPRESENTATIVE JOHNSON  offered her understanding that  the Alaska                                                              
Energy  Efficiency  Revolving  Loan   Fund  Program  (AEERLP)  was                                                              
originally   intended  for  these   buildings  housing   municipal                                                              
government  and  schools  to  be  energy  efficient  in  order  to                                                              
benefit  the taxpayers  by  not having  to  pay so  much in  power                                                              
costs.  She  asked, if this was  to be offered to  non-profits and                                                              
tribal  governments, whether  all municipal  and school  buildings                                                              
had already been  addressed.  She suggested that  there were still                                                              
schools  needing work  before  this money  was  made available  to                                                              
other groups.                                                                                                                   
REPRESENTATIVE  KREISS-TOMKINS  acknowledged  that the  loan  fund                                                              
was created  for municipalities  and school  districts, but,  with                                                              
the exception  of the City  of Galena, it  had not been used.   He                                                              
reported that  his research  had found  a universal reluctance  to                                                              
borrow  money  instead of  using  grants.    He pointed  out  that                                                              
language  had  been  added  to the  proposed  bill  in  the  prior                                                              
legislative  session which  allowed for the  original entities  to                                                              
have  priority  for  access  to financing,  "if  an  avalanche  of                                                              
interest."   He stated  that this  should never jeopardize  public                                                              
entities from being financed.                                                                                                   
REPRESENTATIVE JOHNSON  asked if  this could lead  to foreclosures                                                              
in the community.                                                                                                               
REPRESENTATIVE  KREISS-TOMKINS  opined  that  audits  would  offer                                                              
protection  against this,  as they  would  demonstrate savings  to                                                              
pay back the loan.                                                                                                              
REPRESENTATIVE  JOHNSON  shared her  concern  for state  financing                                                              
and possible defaults by private non-profits.                                                                                   
10:39:48 AM                                                                                                                   
STACY   SCHUBERT,   Director,  Governmental   Affairs   &   Public                                                              
Relations,  Alaska  Housing  Finance  Corporation,  Department  of                                                              
Revenue,  in response  to  questions  on repayment  schedules  for                                                              
non-profits,  asked  for  clarification   as  to  questions  on  a                                                              
specific project.                                                                                                               
CHAIR  WOOL replied  that the question  was not  for a  particular                                                              
project,  and asked  whether the  savings predicted  by the  audit                                                              
for a project  would be used  for the repayment schedule,  and, if                                                              
there was a change in the prediction, what was the consequence.                                                                 
10:41:22 AM                                                                                                                   
ERIC   HAVELOCK,   Lending   Officer,   Alaska   Housing   Finance                                                              
Corporation,  Department  of Revenue,  explained  that the  Alaska                                                              
Housing  Finance  Corporation  (AHFC) had  written  procedures  to                                                              
follow in  the event of  a payment default.   He stated  that AHFC                                                              
relied on the  third party professionals who produced  the audits,                                                              
as  well as  a review  of the  data by  the departmental  internal                                                              
resources.   He expressed confidence  that the energy  projections                                                              
were accurate  as of  the date  of the  report, which allowed  the                                                              
application to  be taken before the  board for loan approval.   He                                                              
said that  any future changes  would be  dealt "with as  they came                                                              
REPRESENTATIVE RAUSCHER  expressed his understanding  of the needs                                                              
and benefits  to realize  energy savings,  although he  questioned                                                              
the governmental  role in  the business of  loaning money  to non-                                                              
profits.   He asked  where this  determination for the  parameters                                                              
to non-profits would  begin and end.  He declared  that there were                                                              
risks  involved,  noting  that the  costs  to  improvements  would                                                              
REPRESENTATIVE  KREISS-TOMKINS, in  response, declared  that there                                                              
was a "fairly  strong precedent in our government  and our society                                                              
for  carving out  a role  for the  non-profit  community to  play;                                                              
foremost, they  don't pay  taxes to government."   He  pointed out                                                              
that churches  and non-profit organizations  did not pay  taxes to                                                              
government  because  they  provided  "a service  to  society  that                                                              
government  might otherwise  be  compelled  to deliver  presumably                                                              
with less efficiency  and greater cost."  He  suggested that there                                                              
was a  greater good  in supporting  non-profits.   He offered  his                                                              
belief that  "small potatoes  financing" was  going to  have large                                                              
benefits  for the  non-profits  and the  communities.   He  opined                                                              
that there was a  specialization to this type of  financing, as it                                                              
reviewed  energy audits  and was  energy specific,  and that  AHFC                                                              
had the necessary background.                                                                                                   
REPRESENTATIVE  JOHNSTON asked about  a limit  on the loans.   She                                                              
suggested that  there could be  co-ordination between  the effects                                                              
on the community and on the revolving loan program.                                                                             
REPRESENTATIVE KREISS-TOMKINS,  in response, acknowledging  that a                                                              
lending  limit  could  have  a role,  declared  that  more  energy                                                              
efficiency   was  better   in  Alaska,  but   was  not   currently                                                              
happening.   He  offered his  belief that,  as the  aforementioned                                                              
behavior  was  not present,  there  was  "a  limited case  for  us                                                              
trying to solve  a problem that I don't think exists  because none                                                              
of these  investments are  happening on  this energy  efficiency."                                                              
He suggested  that parameters might  have "the effect  of limiting                                                              
what  I think  is a  pretty unadulterated,  and unqualified  good,                                                              
which  is   not  wasting  energy   and  money  in  Alaska."     He                                                              
acknowledged  the  origin  of  the  ideological  and  intellectual                                                              
objections and allowed  that there could be "some  sideboards that                                                              
make sense and I'd be happy to consider those."                                                                                 
REPRESENTATIVE  SPOHNHOLZ   shared  that  she  had   some  similar                                                              
concerns,  specifically to  retain  access for  those entities  to                                                              
which  the program  had  been originally  intended  as there  were                                                              
fewer grants now  available.  She stated that it  was important to                                                              
meet the core  mission, noting that, although the  loan fund could                                                              
be  entirely utilized  by  the  original intended  recipients,  it                                                              
also opened up  an opportunity for the non-profit  sector to serve                                                              
the needs  that government  did not.   She  offered an  example of                                                              
grants and funding for services.                                                                                                
10:50:40 AM                                                                                                                   
REPRESENTATIVE  CLAMAN   directed  attention  to   the  amendment,                                                              
labeled  30-LS0353\A.1,  Nauman,   1/30/17  [Included  in  members                                                              
packets] and asked if this was going to be proposed.                                                                            
REPRESENTATIVE  KREISS-TOMKINS replied,  yes,  and explained  that                                                              
the background  to this  amendment was  a result of  conversations                                                              
with the Cook Inlet Housing Authority (CIHA).                                                                                   
REPRESENTATIVE   CLAMAN   asked   if  CIHA   was   interested   in                                                              
participating  as a  regional housing  authority.   He  questioned                                                              
what would  be the  response to these  new applicants,  should the                                                              
originally intended  recipients for the fund have  higher priority                                                              
and utilize all the funds.                                                                                                      
REPRESENTATIVE KREISS-TOMKINS  expressed his agreement  that these                                                              
newer  applicants would  be denied  in favor  of those  applicants                                                              
with higher priority.                                                                                                           
REPRESENTATIVE CLAMAN asked if there was a possibility of using                                                                 
up the lending capacity of this loan fund very quickly.                                                                         
MR. HAVELOCK, in response, explained that the fund was set up as                                                                
a revolving fund, and loan payments would replenish the fund for                                                                
future loans.                                                                                                                   
REPRESENTATIVE CLAMAN asked if there were any issues to lending                                                                 
capacity with a revolving loan fund.                                                                                            
MR. HAVELOCK, in response, said that the AHFC had not                                                                           
experienced the situation of loan funds running out of money.                                                                   
10:54:08 AM                                                                                                                   
REPRESENTATIVE SPOHNHOLZ moved to adopt Amendment A.1, labeled                                                                  
30-LS0353\A.1, Nauman, 1/30/17, which read:                                                                                     
     Page 1, line 2, following "(Internal Revenue Code)":                                                                     
          Insert ", a regional housing authority,"                                                                            
     Page 2, line 15, following "tribe,":                                                                                   
          Insert "a regional housing  authority,"                                                                           
     Page 2, line 20, following "tribe,":                                                                                   
          Insert "a regional housing  authority,"                                                                           
     Page 2, line 29, following "tribe,":                                                                                   
          Insert "a regional housing  authority,"                                                                           
     Page 3, line 1, following "tribe,":                                                                                    
          Insert "regional housing authority,"                                                                              
     Page 3, line 11, following "tribe,":                                                                                   
          Insert "a regional housing  authority,"                                                                           
     Page 3, line 15, following "tribe,":                                                                                   
          Insert "a regional housing  authority,"                                                                           
     Page 4, line 1, following "tribe,":                                                                                    
          Insert "a regional housing  authority,"                                                                           
     Page 4, line 4, following "tribe,":                                                                                    
          Insert "regional housing authority,"                                                                              
     Page 4, line 8, following "tribe,":                                                                                    
          Insert "a regional housing  authority,"                                                                           
     Page 4, line 10, following "tribe,":                                                                                   
          Insert "regional housing authority,"                                                                              
     Page 5, line 1, following "tribe"":                                                                                    
          Insert "means"                                                                                                    
     Page 5, line 2:                                                                                                            
          Delete "means"                                                                                                    
     Page 5, line 5:                                                                                                            
          Delete "includes"                                                                                                 
     Page 5, following line 6:                                                                                                  
          Insert a new paragraph to read:                                                                                       
               "(3)  "regional housing authority" means a                                                                   
    regional    housing    authority    established    under                                                                
     AS 18.55.996;"                                                                                                         
     Renumber the following paragraph accordingly.                                                                              
CHAIR WOOL objected for discussion.                                                                                             
REPRESENTATIVE  SPOHNHOLZ explained  that  proposed Amendment  A.1                                                              
explicitly clarified  that a regional native housing  authority as                                                              
established  in AS  18.55.996 would  be  able to  apply for  loans                                                              
under the new guidelines.                                                                                                       
10:54:41 AM                                                                                                                   
The committee took a brief at-ease.                                                                                             
10:55:21 AM                                                                                                                   
CHAIR  WOOL brought  the committee  back to order.   He  clarified                                                              
that  there was  not  a plan  to  move the  proposed  bill out  of                                                              
committee today.   He asked  if there  was any more  discussion on                                                              
proposed Amendment A.1.                                                                                                         
REPRESENTATIVE RAUSCHER  asked if this proposed bill  would affect                                                              
the amount  of money available  in the future; although  testimony                                                              
had indicated  that it  had not  been affected  in the  past, this                                                              
was a piece of legislation for the future.                                                                                      
REPRESENTATIVE  CLAMAN  said that  he  had  asked about  the  past                                                              
experience  based  on history,  as  he could  not  ask  a bank  to                                                              
predict the future.                                                                                                             
REPRESENTATIVE  RAUSCHER asked  if  there was  a way  to find  how                                                              
this would affect the availability of future monies.                                                                            
MR. HAVELOCK,  in response, declared  that AHFC would  support the                                                              
policy decisions  as determined  by the  legislature.   He offered                                                              
his  belief  that the  proposed  bill  met  some of  the  original                                                              
attempts.   Regarding  any future  funding, AHFC  had a  statutory                                                              
cap on a  debt of $250 million.   He acknowledged that  AHFC would                                                              
be able  to accommodate the legislative  intent for a  priority to                                                              
the originally identified borrowers.                                                                                            
10:58:51 AM                                                                                                                   
CHAIR WOOL  removed his objection  to Amendment A.1.   There being                                                              
no further objection, it was so ordered.                                                                                        
REPRESENTATIVE WESTLAKE  asked how  many entities had  applied for                                                              
this loan.                                                                                                                      
MR.  HAVELOCK, in  response, reported  that there  had been  about                                                              
two  applications  annually  under this  program,  although  these                                                              
loan were not always  approved.  He stated that only  one loan, to                                                              
the City of  Galena, had been approved.   He shared that  the loan                                                              
regulations  were  placed in  effect  in  October, 2010,  and  the                                                              
first set of applications were made in 2012.                                                                                    
REPRESENTATIVE  JOHNSON  opined   that  municipalities  would  now                                                              
begin  looking toward  these loans  as previously  there had  been                                                              
grant  money available.    She expressed  her  concern that  loans                                                              
would  go to  any  buildings, including  private  buildings.   She                                                              
asked who had to own the building.                                                                                              
REPRESENTATIVE   KREISS-TOMKINS   offered  his   belief  that   an                                                              
organization would  need to own  the building in order  to receive                                                              
any financing for energy efficiency improvements.                                                                               
REPRESENTATIVE  JOHNSON  expressed her  concern  that these  loans                                                              
would go  to private  buildings.  She  directed attention  to page                                                              
5,  line  5  of  the  proposed   bill,  and  read:    "includes  a                                                              
subdivision, subsidiary,  or business  enterprise wholly  owned by                                                              
a  federally  recognized tribe."    She  asked  if there  was  any                                                              
contradiction  with page  5,  lines 14  - 15,  which  read:   "the                                                              
recipient of  a loan under  this section  may not be  a for-profit                                                              
REPRESENTATIVE KREISS-TOMKINS  directed attention to  page 2, line                                                              
20  of the  proposed bill,  which read:   "owned  by a  tax-exempt                                                              
entity."   He  elaborated that  there should  be a  worry for  the                                                              
private organizations,  including private  non-profits, as  in the                                                              
past, state  governments had given  money to these  organizations.                                                              
He offered his  belief that the loan program  offered a consistent                                                              
support to these organizations.                                                                                                 
11:05:20 AM                                                                                                                   
MS. WILBER  offered her belief that  this concern had  been raised                                                              
during the last  session, and that retro fits were  not allowed by                                                              
for profit business  enterprises.  She allowed that,  as state law                                                              
and  federal law  sometimes created  grey  areas regarding  tribal                                                              
entities,  Amendment 1  would  explicitly  allow regional  housing                                                              
authorities  to borrow.   She opined  that, although the  language                                                              
for business  enterprise could be removed,  lines 14 -  15 on page                                                              
5 of the bill were added for clarity.                                                                                           
REPRESENTATIVE  CLAMAN,  reflecting  on  the role  of  for  profit                                                              
tribes, relayed  that there were tribes  in the Lower 48  that had                                                              
made  quite a  lot of  money  on gambling  casinos  and hotels  on                                                              
reservation  lands.  He  offered his  understanding that  a casino                                                              
could  not apply  for  the energy  efficiency  loan as  it was  an                                                              
entity that  was making money on  a for profit basis,  even though                                                              
the profits  would go  to the tribe;  however, a tribal  community                                                              
center would be  allowed to take out a loan for  energy efficiency                                                              
in  its  facility.   He  asked  if  this  was the  intent  of  the                                                              
REPRESENTATIVE  KREISS-TOMKINS expressed  his agreement  that this                                                              
did align  with his  intent and  thinking.   He declared  that, as                                                              
the   intent   was   not   that   for-profit   business   entities                                                              
participate,  he was open  to "tweaks  to the  language to  get to                                                              
that end."                                                                                                                      
CHAIR  WOOL  asked  if  clarification  regarding  any  for  profit                                                              
component within  tribal entities could  be presented at  the next                                                              
bill hearing.                                                                                                                   
REPRESENTATIVE  KREISS-TOMKINS expressed  his agreement  to "bring                                                              
clarity to those questions."                                                                                                    
REPRESENTATIVE  JOHNSON   asked  if  a  legal  opinion   could  be                                                              
CHAIR WOOL expressed his agreement.                                                                                             
REPRESENTATIVE WESTLAKE  asked Alaska Housing  Finance Corporation                                                              
if  there was  a different  rate for  loans to  non-profit or  for                                                              
profit entities.                                                                                                                
MR. HAVELOCK  reported that the  structure of the program  did not                                                              
differentiate between the two entities.                                                                                         
CHAIR  WOOL asked about  the majority  of loans,  other than  this                                                              
program, which AHFC processed.                                                                                                  
MR.  HAVELOCK  replied  that  the majority  of  the  business  was                                                              
financing  for residential  housing through  the tax-exempt  first                                                              
time home  buyers program.  He  reiterated that only one  loan had                                                              
been made through this authority.                                                                                               
CHAIR WOOL declared  that, as AHFC was in the  business of loaning                                                              
money to individual  homeowners, making a loan  to non-profits and                                                              
tribal entities  was in line with  this.  He pointed out  that the                                                              
fund was  underutilized,  and that many  municipalities could  use                                                              
these energy  efficient loans.   He noted  that the  proposed bill                                                              
had a zero  fiscal note from  the Department of Revenue,  and that                                                              
there was no impact fiscal.                                                                                                     
REPRESENTATIVE KREISS-TOMKINS said that he would follow-up.                                                                     
[HB 81 was held over]                                                                                                           

Document Name Date/Time Subjects
HB081 Sectional Analysis 1.27.2017.pdf HENE 1/31/2017 10:15:00 AM
HB 81
HB081 Sponsor Statement 1.27.2017.pdf HENE 1/31/2017 10:15:00 AM
HB 81
HB081 Supporting Documents Memo Leg Legal 1.27.2017.pdf HENE 1/31/2017 10:15:00 AM
HB 81
HB081 Supporting Documents Report Rural Retrofits 1.27.2017.pdf HENE 1/31/2017 10:15:00 AM
HB 81
HB081 Supporting Documents Letters of Support.pdf HENE 1/31/2017 10:15:00 AM
HB 81
HB 81 - Fiscal Note - AHFC - Zero.PDF HENE 1/31/2017 10:15:00 AM
HB 81
HB 81 - Amendment #1.pdf HENE 1/31/2017 10:15:00 AM
HB 81