Legislature(2009 - 2010)BELTZ 211

02/24/2009 01:30 PM LABOR & COMMERCE

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         SB  84-AIDEA: BONDING LIMITS; CONFIDENTIALITY                                                                      
2:35:10 PM                                                                                                                    
CHAIR  PASKVAN called  the  meeting  back to  order  at 2:32  and                                                               
announced SB 84 to be up for consideration.                                                                                     
TED  LEONARD, Executive  Director, Alaska  Industrial Development                                                               
and Export Authority  (AIDEA) said AIDEA's mission  is to provide                                                               
various  means  of  financing  to  promote  economic  growth  and                                                               
diversification in  Alaska. An important way  that AIDEA fulfills                                                               
its  mission is  by providing  Alaska businesses  and non  profit                                                               
agencies  with access  to long-term  capital  at reasonable  cost                                                               
through its conduit revenue and loan participation programs.                                                                    
AIDEA  requested this  bill in  order  to amend  its statutes  to                                                               
allow the Authority  flexibility in how and when  it issues bonds                                                               
to insure that  it obtains the most favorable  terms and interest                                                               
rates it  can in order  to reduce  the overall cost  of financing                                                               
for  AIDEA and  Alaskan business  and  non profits  that use  its                                                               
financing program. This is in Sections 1 and 2                                                                                  
He said the  bill would also assist the mission  of the Authority                                                               
by  clarifying and  assuring  borrowers  and development  project                                                               
applicants that  certain records  and information provided  to it                                                               
will be kept confidential, and also  set up a process to do that.                                                               
That is in Sections 3-6.                                                                                                        
2:37:24 PM                                                                                                                    
Section 1 would amend their  annual bonding limitation to exclude                                                               
refunding  and conduit  revenue bonds  from the  $400 million/12-                                                               
month  bond limitation  (a rolling  12 months,  not an  annual 12                                                               
months).  The main  types of  bonds issued  by AIDEA  are general                                                               
obligation (GO)  bonds, revenue bonds, conduit  revenue bonds and                                                               
refunding bonds.                                                                                                                
The refunding  bonds are used  to refinance and  replace existing                                                               
bond debt; a good analogy of  that is when mortgage rates go down                                                               
it's a good time to  refinance your mortgage. Refunding bonds can                                                               
be done on GO bonds, revenue bonds and conduit revenue bonds.                                                                   
2:39:11 PM                                                                                                                    
They are  also asking conduit  revenue bonds to be  excluded from                                                               
the $400  million limit. These  bonds are provided  to businesses                                                               
and non  profits where AIDEA acts  as a conduit for  the issuance                                                               
of taxable  and tax  exempt bonds. AIDEA  has financed  over $1.1                                                               
billion in  conduit revenue bonds  for 309 projects  through this                                                               
program. These bonds are payable  solely by the project developer                                                               
primarily  from  the  revenue   generated  by  the  project.  The                                                               
Authority has no financial obligation  for the bond debt; neither                                                               
are the assets nor the credit of AIDEA at risk.                                                                                 
MR. LEONARD  said one of  the prime  benefits of this  program is                                                               
that AIDEA can pass its tax  exempt status to a project developer                                                               
who meets  certain criteria. Only states  and municipalities have                                                               
the ability  to do that. So  for businesses and non  profits that                                                               
meet certain IRS regulations, the only  way to do this is through                                                               
a state organization or a municipality.                                                                                         
2:40:32 PM                                                                                                                    
Tax exempt bonds  for each state have a $260  million annual cap,                                                               
and the  Alaska Bond Committee  has to approve those.  In essence                                                               
refunding  and   conduit  bonds  help  promote   the  Authority's                                                               
economic  development  mission without  substantially  increasing                                                               
the  amount  of its  outstanding  bond  debt. Enactment  of  this                                                               
amendment would  ensure that  the 12-month  bond limit  would not                                                               
preclude the Authority  from issuing debt that  would provide the                                                               
Authority, Alaska businesses and  non profits with more favorable                                                               
terms and  lower capital costs  or limit AIDEA's  conduit revenue                                                               
bond program.                                                                                                                   
2:41:56 PM                                                                                                                    
SENATOR THOMAS asked  if refinancing bonds has a  standard fee or                                                               
is the fee negotiated.                                                                                                          
MR. LEONARD  answered that  it is a  negotiated process.  Part of                                                               
Section 2  clarifies that  the proceeds  from the  refunding debt                                                               
can be used to pay those new issuant fees.                                                                                      
2:42:32 PM                                                                                                                    
Section 2  begins on page 1,  line 8, and amends  AS 44.99.095 to                                                               
provide  for   two  recommendations.   It  would   reinstate  the                                                               
Authority's ability to  issue bonds that existed  before the July                                                               
1, 2007  statutory sunset  and it clarifies  in statute  that the                                                               
Authority can  use proceeds from  the refunding bonds  to finance                                                               
certain costs  and expenses associated  with the issuance  of the                                                               
refunding bonds.                                                                                                                
Due   to  the   statutory   sunset,   AIDEA  currently   requires                                                               
legislative  approval to  issue  any bonds  except refunding  and                                                               
conduit revenue bonds.  Section 2 would eliminate  the sunset and                                                               
enable the Authority  to again issue most types  of bonds without                                                               
legislative  approval, but  it  would  still require  legislative                                                               
approval to issue  GO and revenue bonds in excess  of $10 million                                                               
to  assist in  financing  AIDEA-owned  development projects.  One                                                               
example of that would be the Red Dog Mine.                                                                                      
2:45:09 PM                                                                                                                    
MR.  LEONARD said  the  second  change in  Section  2 will  allow                                                               
proceeds  from  the refunding  bonds  to  retire the  outstanding                                                               
bonds, the  cost of  refinancing and other  costs related  to the                                                               
issuance of  the refunding bonds.  In the  past they had  to come                                                               
back to the legislature for approval to do that.                                                                                
2:46:06 PM                                                                                                                    
Sections 3-6  amend the confidentiality of  information provision                                                               
and  adds clarification  to the  definition that  certain records                                                               
and information  provided to the  Authority are  confidential and                                                               
establishes  a  process  for  the  Authority  to  determine  that                                                               
He  explained that  the Authority  has  heard several  complaints                                                               
from  several  borrowers  who  are  project  developers  that  AS                                                               
44.85.215  does  not clearly  establish  that  the Authority  can                                                               
retain  the confidentiality  of  certain  records or  information                                                               
that  is  essential  and proprietary  to  their  businesses.  So,                                                               
Section 3  clarifies and  identifies the  specific type  of trade                                                               
secrets that are kept confidential.                                                                                             
Section 6 further clarifies existing  language by defining "trade                                                               
secrets"  using  the  Alaska  Uniform Trade  Secrets  Act  in  AS                                                               
45.50.940(3).  Section  5  establishes  a process  for  AIDEA  to                                                               
determine   which   records   and  information   will   be   kept                                                               
confidential. Under sections  3 and 5 the  applicant must request                                                               
confidentiality  and make  an adequate  showing to  the executive                                                               
director  that  the  records  and   information  should  be  kept                                                               
confidential.  Based  on  that request,  the  executive  director                                                               
would  make  a  determination  and  this  process  would  provide                                                               
greater assurance to the applicants  that certain information and                                                               
records will  be kept confidential.  The important thing  is that                                                               
it does that at the start of the process.                                                                                       
2:48:41 PM                                                                                                                    
CHAIR  PASKVAN  wanted  to  hear more  about  the  template  that                                                               
determines confidentiality.                                                                                                     
BRIAN BJORKQUIST,  Senior Assistant Attorney  General, Department                                                               
of Law  (DOL), said  the standard  applied under  AS 44.88.215(a)                                                               
wouldn't  change from  existing  law. Certain  specific types  of                                                               
information are  confidential and  not public records.  These are                                                               
listed  in  items  1-8  -  like  income  tax  returns,  financial                                                               
statements,  and  profit and  loss  statements.  The showing  the                                                               
applicant would  have to  make is that  the document  in question                                                               
fits within what is listed.                                                                                                     
CHAIR PASKVAN  asked if  a document is  submitted with  a request                                                               
that it  be confidential, and  the executive  director determines                                                               
it's not confidential,  does the business owner  or project owner                                                               
get to withdraw it before it becomes public.                                                                                    
MR. BJORKQUIST answered yes.                                                                                                    
2:50:45 PM                                                                                                                    
SENATOR  BUNDE asked  assuming someone  in the  public felt  that                                                               
things   labeled   confidential   didn't   meet   the   statutory                                                               
requirements,  would  there  be  recourse for  them  through  the                                                               
Freedom of Information Act or would it require a court lawsuit.                                                                 
MR.  BJORKQUIST answered  that under  this statute  the executive                                                               
director  would make  a determination  of confidentiality  at the                                                               
time the document is submitted  by the applicant. However, in the                                                               
process of public  records request there would  be an opportunity                                                               
for a challenge,  but because the determination  had already been                                                               
made by the  executive director, there would be  a heavier burden                                                               
to overcome.                                                                                                                    
2:52:31 PM                                                                                                                    
MR. LEONARD continued  saying that Section 8  makes the effective                                                               
date July 1, 2009.                                                                                                              
2:52:55 PM                                                                                                                    
SENATOR THOMAS asked why he wanted to revisit this issue.                                                                       
MR.  LEONARD said  a few  years back  they almost  had to  stop a                                                               
bonding project  based on the  $400 million limitation  and AIDEA                                                               
would like  to reissue  some variable rate  bonds they  have now.                                                               
They are actually also looking forward  to the time when the bond                                                               
market starts to smooth out.                                                                                                    
2:54:20 PM                                                                                                                    
SENATOR MEYER asked what the state is paying for a bond now.                                                                    
MR.  LEONARD  answered  that  AIDEA   does  not  have  the  moral                                                               
obligation  of the  state;  so  for taxable  bonds  it's about  8                                                               
percent. It  hasn't issued  a non-taxable bond  for a  while. The                                                               
last he heard the state did a AA  bond for was the prison at 5.99                                                               
2:55:57 PM                                                                                                                    
SENATOR MEYER said he liked the sunset clause. Why remove it?                                                                   
MR. LEONARD  answered the  possibility of  losing one  of AIDEA's                                                               
major  tools  every three  years  is  why  they are  against  the                                                               
sunset. It is one of their main tools to perform their mission.                                                                 
SENATOR MEYER said the AIDEA  dividend the state has received the                                                               
last  few  years has  helped  fund  the  general budget,  so  the                                                               
legislature would  probably want to continue  some oversight into                                                               
its business, and he wanted the sunset clause to stay.                                                                          
2:57:34 PM                                                                                                                    
MR. LEONARD said AIDEA believes  the budget process provides that                                                               
oversight to the state.                                                                                                         
2:58:22 PM                                                                                                                    
CHAIR PASKVAN closed  public testimony on SB 84, and  held it for                                                               
further hearing.                                                                                                                
SENATOR DAVIS thanked Mr. Leonard for his testimony.                                                                            

Document Name Date/Time Subjects
SB01 - Alaska Minimum Wage - Bill Packet.pdf SL&C 2/5/2009 1:30:00 PM
SL&C 2/12/2009 1:30:00 PM
SL&C 2/17/2009 1:30:00 PM
SL&C 2/24/2009 1:30:00 PM
SB 1
SB84 - AIDEA Bonding Limits.pdf SL&C 2/17/2009 1:30:00 PM
SL&C 2/24/2009 1:30:00 PM
SL&C 2/26/2009 1:30:00 PM
SB 84