Legislature(2009 - 2010)HOUSE FINANCE 519

04/11/2010 12:30 PM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to 6:30 pm Today --
+ HB 296 ENERGY EFFICIENCY BONDS; LOANS; FUND TELECONFERENCED
Moved CSHB 296(ENE) Out of Committee
+ HB 416 PRUDENT MANAGEMENT OF INSTITUTIONAL FUNDS TELECONFERENCED
Moved Out of Committee
*+ HB 421 PUBLIC EMPLOYEE SALARIES TELECONFERENCED
Heard & Held
+= HB 424 G.O. BONDS FOR EDUCATION PROJECTS TELECONFERENCED
Moved CSHB 424(FIN) Out of Committee
+ SB 199 MEDICAID COVERAGE FOR DENTURES TELECONFERENCED
Moved Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 296                                                                                                            
                                                                                                                                
     "An  Act authorizing  and relating  to the  issuance of                                                                    
     bonds  by  the   Alaska  Housing  Finance  Corporation;                                                                    
     establishing  the  Alaska energy  efficiency  revolving                                                                    
     loan  fund  and  relating   to  the  fund;  authorizing                                                                    
     municipalities and the State  of Alaska to borrow money                                                                    
     from  the Alaska  Housing Finance  Corporation for  the                                                                    
     purposes  of  the  Alaska energy  efficiency  revolving                                                                    
     loan fund; and providing for an effective date."                                                                           
                                                                                                                                
1:15:27 PM                                                                                                                    
                                                                                                                                
BRYAN  BUTCHER,  DIRECTOR,  GOVERNMENT  AFFAIRS  AND  PUBLIC                                                                    
RELATIONS,  ALASKA HOUSING  FINANCE CORPORATION,  DEPARTMENT                                                                    
OF REVENUE, reported that HB  296 would allow Alaska Housing                                                                    
Finance   Corporation   (AHFC)   to  establish   an   energy                                                                    
efficiency revolving loan  fund through bond sales  of up to                                                                    
$250 million. He stated that  $28.3 million was appropriated                                                                    
to  the State  Energy  Program from  the federal  government                                                                    
stimulus  funds [American  Recovery  and Reinvestment  Act].                                                                    
The state  would use  $18 million of  the funds  to leverage                                                                    
the  program.  The program  was  approved  through the  U.S.                                                                    
Department  of  Energy.  He explained  that  municipalities,                                                                    
school districts,  or state  entities could  take out  a low                                                                    
interest loans  from AHFC to perform  energy efficiency work                                                                    
to  public buildings,  as prescribed  by a  mandatory energy                                                                    
audit.  The  audit  would  be   carried  out  by  an  energy                                                                    
performance  contractor. The  loan  would be  repaid by  the                                                                    
energy costs savings achieved  through the energy efficiency                                                                    
improvements. He  added that if  the savings,  as determined                                                                    
by  the audit  were not  achieved, the  contractor would  be                                                                    
responsible for the  loan payments. He pointed  out that the                                                                    
public  entity would  realize budget  savings by  increasing                                                                    
energy efficiency in public buildings.                                                                                          
                                                                                                                                
Representative Austerman asked who the contractor would be.                                                                     
Mr.  Butcher explained  that established  energy performance                                                                    
contractors would perform the  audit and hire subcontractors                                                                    
to  perform   the  work.  The  corporation   estimated  that                                                                    
approximately 2,500 jobs will be created.                                                                                       
                                                                                                                                
1:19:16 PM                                                                                                                    
                                                                                                                                
Representative Gara  wondered how long the  loan period was.                                                                    
He  expressed  concern that  a  long  loan repayment  period                                                                    
i.e., twenty  years could diminish any  initial savings. Mr.                                                                    
Butcher indicated that the loan  tends to extend for shorter                                                                    
periods since  the amount of loan  improvement money fronted                                                                    
should  compare with  the energy  savings  realized over  an                                                                    
estimated  number of  years, with  the possibility  of early                                                                    
repayment, if additional energy costs savings are realized.                                                                     
                                                                                                                                
Representative  Gara asked  why the  bond program  costs $18                                                                    
million.  Mr. Butcher  explained that  AHFC was  required to                                                                    
have  a  two  percent  minimum debt  service  reserve;  five                                                                    
million is the  required minimum for $250  million. He added                                                                    
that  the additional  leveraged  funds of  $18 million  will                                                                    
help  reduce   interest  rates.  He  noted   that  the  U.S.                                                                    
Department  of Energy  complemented  the  program for  being                                                                    
self-sustaining ensuring the longevity of the program.                                                                          
                                                                                                                                
1:23:08 PM                                                                                                                    
                                                                                                                                
DAN FAUSKE,  CEO/EXECUTIVE DIRECTOR, ALASKA  HOUSING FINANCE                                                                    
CORPORATION,  DEPARTMENT  OF REVENUE  (via  teleconference),                                                                    
supported Mr. Butcher's testimony.                                                                                              
                                                                                                                                
Co-Chair Stoltze requested discussion  on the fiscal note FN                                                                    
1 (REV). Mr. Butcher  relayed that the corporation submitted                                                                    
a  zero   fiscal  note;   no  additional   expenditures  are                                                                    
anticipated.                                                                                                                    
                                                                                                                                
Representative  Fairclough wondered  if the  state will  set                                                                    
energy  efficiency standards  or goals.  Mr. Butcher  stated                                                                    
that  AHFC  was  developing regulations  to  achieve  energy                                                                    
efficiency standards statewide.                                                                                                 
                                                                                                                                
Vice-Chair Thomas felt that AHFC  had good energy efficiency                                                                    
standards  for homes  and hoped  for  similar standards  for                                                                    
public  buildings.  Mr. Butcher  agreed.  He  added that  $2                                                                    
million  was  set  aside  to work  with  the  Alaska  Energy                                                                    
Authority   to  make   their   energy  efficiency   software                                                                    
applicable to public buildings as well as residences.                                                                           
                                                                                                                                
1:27:04 PM                                                                                                                    
                                                                                                                                
Representative  Doogan   inquired  further   about  interest                                                                    
rates.                                                                                                                          
                                                                                                                                
JOE  DUBLER, DIRECTOR  OF  FINANCE,  ALASKA HOUSING  FINANCE                                                                    
CORPORATION,  DEPARTMENT  OF REVENUE  (via  teleconference),                                                                    
replied that  the interest rate  was dependent on  the terms                                                                    
of the loan, determined by  the length of the payback period                                                                    
and amount  borrowed. He expected  the rate to be  low based                                                                    
on tax exempt debt on municipal or state buildings.                                                                             
                                                                                                                                
Co-Chair Hawker opened and closed public testimony.                                                                             
                                                                                                                                
Representative  Austerman   inquired  further   on  interest                                                                    
rates.  He wondered  why the  interest rates  were variable.                                                                    
Mr. Dubler responded that the  longer length of the loan the                                                                    
greater the  risk. He exemplified a  municipality that needs                                                                    
a five year  loan as opposed to a municipality  that needs a                                                                    
fifteen year  loan and  stated that  a longer  loan requires                                                                    
paying a higher return.                                                                                                         
                                                                                                                                
1:31:15 PM                                                                                                                    
                                                                                                                                
Co-Chair  Hawker  summarized  that  not  all  borrowers  are                                                                    
equal.                                                                                                                          
                                                                                                                                
Mr. Dubler agreed and added that  not all loans are equal as                                                                    
well. He  exemplified that interest  on a mortgage  loan for                                                                    
fifteen years is half of a  percent lower than a thirty year                                                                    
loan.   It is a standard  risk component built in  to fixed-                                                                    
rate debt.                                                                                                                      
                                                                                                                                
Representative  Fairclough wondered  if the  operating costs                                                                    
of new  technologies such as,  a high efficiency  boiler are                                                                    
imbedded into the formula to determine energy cost savings.                                                                     
                                                                                                                                
1:33:15 PM                                                                                                                    
                                                                                                                                
Mr. Butcher answered  that AHFC was still in  the process of                                                                    
deciding how the program will be administered.                                                                                  
                                                                                                                                
Representative Kelly  asked for  more information  about how                                                                    
the  $18  million would  be  leveraged  and how  AHFC  would                                                                    
establish  interest rates  for  specific  loans. Mr.  Dubler                                                                    
explained the  process. He stated  that AHFC  would evaluate                                                                    
each loan, use available funds  from the initial $18 million                                                                    
and set  the borrower's interest  rate at what  the interest                                                                    
rate would be  if bonds had been sold.  The corporation does                                                                    
not  intend to  issue bonds  until program  demand increases                                                                    
and more capital  is needed. The corporation  would not make                                                                    
a profit off the program;  the purpose is only to weatherize                                                                    
buildings throughout the state.  The interest rates would be                                                                    
higher  for  long  term debt  because  the  bond  purchasers                                                                    
demand a  higher interest  rate for a  longer term  bond. He                                                                    
surmised that in  the bond market AHFC would  borrow nine to                                                                    
ten year debt to cover the  eight to ten year loans they are                                                                    
financing.  He  concluded  that  the  $250  million  is  the                                                                    
eventual  estimated  total to  get  the  fund revolving  and                                                                    
continue for many years.                                                                                                        
                                                                                                                                
1:37:19 PM                                                                                                                    
                                                                                                                                
Vice-Chair   Thomas  noted   that  the   Regional  Education                                                                    
Attendance  Areas  (REAA)  in his  district  was  struggling                                                                    
financially. He wondered what they  would use for collateral                                                                    
and how  it could realistically help  them with skyrocketing                                                                    
energy costs  in rural areas. Mr.  Butcher acknowledged that                                                                    
other states  do not have  the challenges rural  Alaska has.                                                                    
He pointed out that the  school administrator would not have                                                                    
to come  up with  any additional  funds. The  energy savings                                                                    
would offset  the loan repayments. Vice-Chair  Thomas opined                                                                    
that the  school district  would rather  pass savings  on to                                                                    
their teachers or  that energy prices would  surge again and                                                                    
use up the savings, requiring  state assistance to repay the                                                                    
loan.                                                                                                                           
                                                                                                                                
Vice-Chair  Thomas  MOVED to  report  CSHB  296(ENE) out  of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes. There  being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
CSHB  296(FIN) was  REPORTED  out of  Committee  with a  "do                                                                    
pass" recommendation and  with attached previously published                                                                    
fiscal notes: FN 1(REV), FN 2(DOT).                                                                                             
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects
Energy Savings Performance Contracting Summary-DOT.pdf HFIN 4/11/2010 12:30:00 PM
HB 296
HB 296 AHFC SEP BondsL Sec Analysis.pdf HFIN 4/11/2010 12:30:00 PM
HB 296
HB 296 SEP bonds Sponsor Statement[1].pdf HFIN 4/11/2010 12:30:00 PM
HB 296
HB416 Sectional Analysis ver R.pdf HFIN 4/11/2010 12:30:00 PM
HB 416
HB416 Sponsor Statement ver R.pdf HFIN 4/11/2010 12:30:00 PM
HB 416
HB416 Supporting Documents History UMIFA and UPMIFA.pdf HFIN 4/11/2010 12:30:00 PM
HB 416
HB416 Supporting Documents UPMIFA_map.pdf HFIN 4/11/2010 12:30:00 PM
HB 416
HB416 Supporting Documents-Letter AG 3-18-10.pdf HFIN 4/11/2010 12:30:00 PM
HB 416
HB416 Supporting Documents-Letter AG 3-18-10.pdf HFIN 4/11/2010 12:30:00 PM
HB 416
HB416 Supporting Documents-Letter Foreaker Group.pdf HFIN 4/11/2010 12:30:00 PM
HB 416
HB416 Supporting Documents-Why Adopt UPMIFA.pdf HFIN 4/11/2010 12:30:00 PM
HB 416
10 HB 421 FN - pay raise 2010.pdf HFIN 4/11/2010 12:30:00 PM
HB 421
HB421-LEG-LEG-3-30-10NEW.pdf HFIN 4/11/2010 12:30:00 PM
HB 421
HB 421 Gov Transmittal Letter.pdf HFIN 4/11/2010 12:30:00 PM
HB 421
hearing_req_HB421_040710.pdf HFIN 4/11/2010 12:30:00 PM
HB 421
SUmmary by Dept hb 421 SB 310.pdf HFIN 4/11/2010 12:30:00 PM
HB 421
SB 310
H FIN letters of support.pdf HFIN 4/11/2010 12:30:00 PM
SB199-DHSS-MAA-2-9-10.pdf HFIN 4/11/2010 12:30:00 PM
SB 199
SFIN backup information.pdf HFIN 4/11/2010 12:30:00 PM
SB 199
sponsor statement.pdf HFIN 4/11/2010 12:30:00 PM
SB 199
HB421-Ex Branch-4-8-10.pdf HFIN 4/11/2010 12:30:00 PM
HB 421
CSHB424(FIN)-DOR-TRS-4-10-10 GO Bonds for Education.pdf HFIN 4/11/2010 12:30:00 PM
HB 424
HB 424 Sample Ballot.pdf HFIN 4/11/2010 12:30:00 PM
HB 424
CS WORKDRAFT HB424 (FIN) P VERSION and Sectional.pdf HFIN 4/11/2010 12:30:00 PM
HB 424