Legislature(2003 - 2004)
02/27/2003 09:03 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE BILL NO. 51 "An Act relating to revenue bonds issued by the Alaska Municipal Bond Bank Authority and the total amount of bonds and notes outstanding of that authority; and providing for an effective date." Co-Chair Wilken gave a brief overview of the legislation, sponsored by the Senate Rules Committee by request of the Governor, as follows. SB 51 increases the Alaska Municipal Bond Bank's total borrowing limit from $300 million to $500 million. In addition, the amount of revenue bonds may be issued in any one fiscal year is increased from $50 million to $75 million. The current limits have not been raised since 1983 and 1984. LARRY PERSILY, Deputy Commissioner, Department of Revenue, gave a history of the Alaska Municipal Bond Bank Authority (MBBA) created in 1975 to assist municipalities in issuing debt for projects. By working through the bond bank authority, he stated, municipalities could obtain lower interest rates on debt and lower issuance costs. He stressed that the debt is not the State's, but rather general obligation bonds or revenue bonds issued by municipalities. Mr. Persily listed the first statutory borrowing limit of the MBBA as the $50 million annual limit on the amount of revenue bonds that could be issued during any one year, which has not increased in 20 years. He furthered that the second statutory limit is the $300 million maximum total general obligation and revenue debt that could be carried by the MBBA at any one time. This statute, he reminded has been in place since 1984. Mr. Persily assured that the MBBA has sufficient reserves to continue financing at the proposed higher levels. He informed that the MBBA reserves are utilized to pay the costs of the Authority as well as pay annual dividends to the State treasury. Mr. Persily reported that the Authority has issued $27 million in revenue bonds in FY 03 to date with an additional $50 million possible. He remarked this would be a record amount, although it would be above the statutory annual limit of $50 million. Mr. Persily furthered that the total debt amount of the MBBA was $235 million in January 2003. He stated that the possible additional issuances in the remainder of FY 03, plus issuances in FY 04, would increase the total debt and the $300 limit would almost be reached. Mr. Persily listed the proposed projects for which revenue bonds have been issued in FY 03 as follows. Juneau hospital expansion $25 million Juneau port improvements 5.6 million Valdez hospital replacement 19 million Lake Peninsula Borough dock project 1 million City of Homer seawall 1 million City of Homer dock improvements 1 million Kenai Peninsula Borough solid waste project* City of Fairbanks fire protection facility* *amount not available Mr. Persily then listed the proposed projects for which general obligation bonds have been issued in FY 03 as follows. Northwest Arctic Borough school projects* City of Petersburg refinancing existing debt $1 million Aleutians East Borough school project* Kodiak Island Borough refinancing existing debt $3 million *amount not provided Co-Chair Green asked how additional revenue would be generated and additional expense incurred yet no changes are reflected in the fiscal note, which is zero. Mr. Persily compared preparation of the annual budget for the MBBA to that of projecting oil prices; it is difficult to accurately estimate the future activity. He explained that in years of less than anticipated issuance activity, the MBBA expends fewer funds, and in years of higher activity, a supplemental budget request is submitted to cover the additional expenses. Therefore, he stated, the fiscal note does not reflect additional funds, as the intention would be to request supplemental funds if activities in FY 04 are higher than anticipated. He exampled that the FY 03 initial appropriation was $522,700 and because of higher activity the Department has requested $142,000 supplemental funding to cover bond issuance expenses. Co-Chair Green asked if the FY 03 supplemental request is for reimbursement of funds already expended. Mr. Persily corrected that the funds have not yet been expended although they would be expended by the end of March 2003 if this legislation were to pass, thus allowing additional bond issuances. Co-Chair Green wanted to know the consequences if this bill did not pass into law and the supplemental request was approved. Co-Chair Wilken commented that this bill should pass. Mr. Persily responded that once $50 million limit was reached those remaining communities requesting bond issuance in FY 03 would be instructed to reapply the following fiscal year. Senator Hoffman asked the delinquency rates. Mr. Persily assured that no community has every defaulted on a Municipal Bond Bank loan. Senator Hoffman clarified his request for the instances of overdue payments. Mr. Persily would provide this information. Senator Olson pointed out that the increase from $300 million to $500 million would almost double the amount of bonded indebtedness of the MBBA. He asked the impact this would have on the bond rating. Mr. Persily responded that the MBBA currently has sufficient reserves to cover a $500 million debt, and therefore the increase would not jeopardize the bond rating. He furthered that each bond issuance is rated individually based upon the specific project and municipality involved. Mr. Persily then elaborated on the decision to request the authority for a limit that would be viable for several years to avoid the need to make repeated requests over the same period of time. He also noted that several municipalities are now funding projects rather than obtaining funding from the State and federal governments. Therefore, he expected more bonds would be issued. Senator Taylor offered a motion to report SB 51 from Committee. Without objection SB 51 moved from Committee with individual recommendations and zero fiscal note #1 from the Department of Community and Economic Development and zero fiscal note #2 from the Department of Revenue. CHANGE IN LONGEVITY POLICY PAM VARNEY, Executive Director, Legislative Affairs Agency, testified that the Senate and House of Representatives employment policy has been in effect since 1988 "and has worked well for the Legislature with the exception of longevity steps J through M." She cited AS 39.27.022(d), which permits a committee of the Legislature to determine whether longevity pay increments would be granted under this statute to employees under the authority of that committee. She requested the Senate Finance Committee not adopt this portion of the statute, but rather adopt a separate policy. Ms. Varney informed the Members of the other committees that voted to not adopt this policy: Senate Rules Committee on February 3, 2003; House Rules Committee on February 4; Legislative Council on February 20; Administrative Regulation Review Committee on February 19. She furthered that the House Finance Committee and the Legislative Budget and Audit Committee have scheduled this matter for consideration. She noted that if all committees take this action, the Legislature would have a consistent policy throughout the Legislative Branch. Ms. Varney specified the difficulties with the term "continuous" as contained in current statute. She explained that some staff work for different legislators at various wage steps, or work at different pay ranges during the legislative session and the interim. These employees, she stated, would not qualify for scheduled step increases because the salary steps are not continuous. Ms. Varney referenced proposed language, which does not include the word "continuous." [Copy on file.] Senator Olson asked the disadvantages of adopting the different policy. Ms. Varney was unaware of opposition and could not perceive any disadvantages. She stressed that staff to both Majority and Minority legislators are affected, as well as those in nonpolitical positions. Co-Chair Green offered a motion that the Senate Finance Committee not adopt AS 39.27.022-Pay increments for longevity for State service but instead adopt their own plan, which better applies to legislative service. This new policy is before the Members and would be effective January 16, 2003. There was no objection and the motion PASSED.