Legislature(2009 - 2010)SENATE FINANCE 532

04/15/2010 01:30 PM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
= HB 424 G.O. BONDS:EDUC./LIBRARY/RESEARCH FACIL.
Heard & Held
= HB 369 IN-STATE PIPELINE/ MANAGER/TEAM
Heard & Held
= HCR 22 ALASKA NORTHERN WATERS TASK FORCE
Heard & Held
+ HB 294 USE, REGULATION, AND OPERATION OF BOATS TELECONFERENCED
Heard & Held
+ HB 342 EXTEND BOARD OF REAL ESTATE APPRAISERS TELECONFERENCED
Heard & Held
+ HB 376 EXTEND BD OF PSYCHOLOGIST & PSYCH. ASSOC. TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
CS FOR HOUSE BILL NO. 424(FIN) am                                                                                             
                                                                                                                                
     "An Act providing  for and relating to  the issuance of                                                                    
     general obligation bonds for  the purpose of paying the                                                                    
     cost of design and  construction of library, education,                                                                    
     and educational research  facilities; and providing for                                                                    
     an effective date."                                                                                                        
                                                                                                                                
2:05:02 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman introduced HB 424.                                                                                             
                                                                                                                                
REPRESENTATIVE  BILL STOLTZE  explained that  HB 424  allows                                                                    
for  Alaskans to  vote  on a  General  Obligation (GO)  Bond                                                                    
package  totaling $397,200,000  for statewide  education and                                                                    
educational research  facilities. He  stated that HB  424 is                                                                    
similar to  other bond options  presented for  rural schools                                                                    
and  school  debt  reimbursement.  The  proposed  plan  will                                                                    
utilize Build America Bonds. This  approach will address the                                                                    
state's  essential  education  needs. He  commented  on  the                                                                    
Kasayulie  school litigation  and  the  moral imperative  to                                                                    
fund rural schools.                                                                                                             
                                                                                                                                
2:11:29 PM                                                                                                                    
                                                                                                                                
Representative  Stoltze commented  that  Devin Mitchell  was                                                                    
available from the Department of Revenue (DOR).                                                                                 
                                                                                                                                
Co-Chair  Stedman  asked about  the  fall  election and  its                                                                    
influence on the legislation.  Co-Chair Stoltze replied that                                                                    
the constitution  directs that bond proposals  appear in the                                                                    
general election.  He believed  that pledging the  faith and                                                                    
credit of Alaskans warranted a general election vote.                                                                           
                                                                                                                                
Senator  Thomas agreed  that a  general election  brings the                                                                    
greatest  number  of  voters,  yet  wondered  if  a  special                                                                    
election might qualify.                                                                                                         
                                                                                                                                
Co-Chair  Stedman  requested  a   general  overview  of  the                                                                    
bonding mechanism.                                                                                                              
                                                                                                                                
2:14:53 PM                                                                                                                    
                                                                                                                                
DEVEN  MITCHELL, EXECUTIVE  DIRECTOR, ALASKA  MUNICIPAL BOND                                                                    
BANK  AUTHORITY, DEPARTMENT  OF REVENUE  explained that  the                                                                    
state  compiled a  series of  legal documents  that obligate                                                                    
Alaska's full faith in taxing  authority subject to approval                                                                    
of the  legislation in concurrence  from Alaskan  voters. He                                                                    
noted that the  current market is best received  for GO bond                                                                    
propositions as  the timing  is good.  He informed  that the                                                                    
state  normally   sells  bonds   through  a   less  flexible                                                                    
competitive process whereby an  underwriter is selected upon                                                                    
the date of sale. The  common practice limits the ability to                                                                    
structure debt service.                                                                                                         
                                                                                                                                
2:17:20 PM                                                                                                                    
                                                                                                                                
Representative   Stoltze   clarified   that   his   previous                                                                    
assumption   regarding  bond   proposals  and   the  general                                                                    
election may be incorrect.                                                                                                      
                                                                                                                                
Senator  Huggins expressed  appreciation for  Representative                                                                    
Stoltze.                                                                                                                        
                                                                                                                                
Senator  Olson echoed  the comments  of Senator  Huggins. He                                                                    
asked if another bond package with the same agenda existed.                                                                     
                                                                                                                                
Representative  Stoltze responded  that  the excellent  bond                                                                    
rates  of seven  percent will  reduce the  overall cost  for                                                                    
Alaskans. He stated that the  bill may provide the mechanism                                                                    
with  optimal  timing.  He  stated  that  the  approach  was                                                                    
appropriate for the current market.                                                                                             
                                                                                                                                
2:20:37 PM                                                                                                                    
                                                                                                                                
Mr.  Mitchell  clarified  that an  allocation  of  qualified                                                                    
school construction bonds to the  state in 2009 and 2010 can                                                                    
now be issued as direct subsidy bonds.                                                                                          
                                                                                                                                
Co-Chair Stedman understood that  the three schools would be                                                                    
exempt from  interest cost. Mr.  Mitchell agreed that  up to                                                                    
$57 million in bond debt is exempt from interest.                                                                               
                                                                                                                                
Representative Stoltze  included the Mt.  Edgecombe facility                                                                    
and  the Juneau  State Archives  and  Museum in  the HB  424                                                                    
project list.                                                                                                                   
                                                                                                                                
Co-Chair Stedman  pointed out one  fiscal note from  DOR for                                                                    
$10 thousand  in general funds  to cover the cost  of public                                                                    
notice requirements.  The debt service of  approximately $30                                                                    
million would  be collected from  the operating  account. In                                                                    
the event  of a  deficit due  to decline  in oil  price, the                                                                    
general fund would fall back on the savings.                                                                                    
                                                                                                                                
Mr. Mitchell  pointed out that  an interest  expense payment                                                                    
in  FY11 would  be  expected.  He agreed  that  a catch  all                                                                    
appropriation  exists in  the operating  budget for  GO debt                                                                    
service, but  the department would  amend their  fiscal note                                                                    
to satisfy the conservative requirements of the market.                                                                         
                                                                                                                                
2:24:13 PM                                                                                                                    
                                                                                                                                
HB  424  was  HEARD  and   HELD  in  Committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                

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