Legislature(2009 - 2010)SENATE FINANCE 532
04/15/2010 01:30 PM FINANCE
Download Mp3. <- Right click and save file as
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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.