Legislature(1995 - 1996)

04/26/1996 03:51 PM TRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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        CSHB 526(FIN) am AIDEA OPERATIONS/PROJECTS/LOANS                      
                                                                              
 CHAIRMAN RIEGER brought CSHB 526(FIN) am before the committee.  He            
 advised that since the last meeting on the bill the Alaska                    
 Industrial Development & Export Authority (AIDEA) has provided                
 language, which are two different approaches to address the concern           
 about the $10 million authorization.                                          
                                                                               
 Number 227                                                                    
                                                                               
 SENATOR GREEN inquired which version of the bill the suggested                
 languages applied to.  KEITH LAUFER, Assistant Attorney General               
 Governmental Affairs Section, Department of Law, clarified he                 
 drafted them off of the version that came over from the House, CSHB           
 526(FIN) am.                                                                  
                                                                               
 Mr. Laufer explained that in response to some of the concerns                 
 raised by the chairman, they have provided for a sunset of ADIEA's            
 bonding authorization similar to the sunset that went into effect             
 on July 1, 1995.  Both versions of the suggested language before              
 the committee accomplish that.                                                
                                                                               
 The second issue the chairman was concerned about had to do with a            
 limitation on ADIEA's ability to bond for its loan participation              
 program.  The version which reads "bonding authorization amendment"           
 provides for a limitation on AIDEA's ability to issue bonds in                
 order to fund participation loans under its participation program,            
 if those bonds would exceed $10 million.                                      
                                                                               
 Number 254                                                                    
                                                                               
 RANDY SIMMONS of the Alaska Industrial Development & Export                   
 Authority, added that under the bonding authorization, the                    
 suggested language that does not have the $10 million limitation              
 for loan participation bonds, there still is in AIDEA statutes a              
 limitation for loan participation, so they could not do a loan                
 participation over $10 million without coming to the legislature              
 for authorization.  It further states that they couldn't do a bond            
 over $10 million.  As an example, he said if they had two loan                
 participations in one year that were $8 million a piece, normally             
 what they would do to save money was issue one bond.  They would              
 group those together and issue one bond for $16 million.  Under the           
 bonding authorization, they could do that.  Under the bonding                 
 authorization amendments, they could not; they would have to issue            
 two $8 million bonds.                                                         
                                                                               
 Number 280                                                                    
                                                                               
 CHAIRMAN RIEGER commented that on that issue he is more comfortable           
 with the existing language, with the exception of adding a sunset             
 provision.  He said another issue that was raised was on the                  
 interest rate on loan participations, and he asked for an                     
 explanation of suggested draft language provided by AIDEA.                    
                                                                               
 KEITH LAUFER explained that elsewhere in statute and being amended            
 in the bill are the two provisions that provide for interest rates            
 on loan participations when AIDEA issues both taxable, in one case,           
 or tax exempt bonds in the other case.  At the last committee                 
 meeting some questions were raised about the interest rate that               
 AIDEA would charge on loans that are not funded with newly issued             
 bonds, but, instead, funded out of AIDEA's own funds or equity                
 without issuing bonds.  The amendment provides the methodology that           
 AIDEA uses to set its interest rates on loan participations funded            
 out of equity.  First, a determination is made whether tax exempt             
 or taxable bonds could be used for the issue.  In other words,                
 certain types of loans can be funded with tax exempt bonds and, in            
 that case, they would set the interest rate using the cost of funds           
 based on the rate that would be available to AIDEA if they were to            
 sell tax exempt bonds.  In the other case, they use the taxable               
 bond rights.                                                                  
                                                                               
 Number 309                                                                    
                                                                               
 CHAIRMAN RIEGER suggested modifying that language when it's in                
 final draft to say that the interest rate shall be determined by              
 regulation, but not lower than what Mr. Laufer had described.  MR.            
 LAUFER and MR. SIMMONS responded that they would not have a problem           
 with his suggested modification.                                              
                                                                               
 Number 315                                                                    
                                                                               
 CHAIRMAN RIEGER then directed attention to language he had drafted,           
 which is a shortened version of the conditions on the Delong                  
 Mountain Transportation System (Red Dog project), to accommodate              
 some of the concerns of Senator Adams.  It deletes from an earlier            
 draft of the bill the requirement for a 6.5 percent floor on the              
 rate of return.  It also edits the language in b(2) to make it                
 clear that the original return on the original investment is one              
 deal, and the additional return on the additional investment is a             
 different deal as far as making sure that the return is                       
 commensurate with the risk.  He said number 3 is something that may           
 still be an issue; however, it no longer reads that the toll-                 
 schedule may be periodically adjusted, but it is permissive that              
 the original toll schedule could be crafted in any way that the               
 parties negotiate.                                                            
                                                                               
 RANDY SIMMONS and SENATOR ADAMS stated they had no problem with the           
 change in number 3.                                                           
                                                                               
 Number 350                                                                    
                                                                               
 CHAIRMAN RIEGER noted the Senate State Affairs version did not                
 provide for the guarantee of interest to apply on the Small                   
 Business Guarantee Program, and he asked if the committee thought             
 that should be added back in or whether that program should have a            
 sunset.                                                                       
                                                                               
 SENATOR TAYLOR asked why the provision was deleted in Senate State            
 Affairs. RANDY SIMMONS responded there wasn't a lot of debate on              
 the issue, and he could not speak as to what the concerns might               
 have been of the senators at that time.  However, he thought it               
 might be a concern of why AIDEA would want to guarantee interest              
 once there was a default.  He added it is something that is                   
 generally in most loan programs, and, if a loan were to go into               
 default, they would give a period of 90 days to guarantee the                 
 interest on their portion until that loan can be basically sold by            
 the bank.  AIDEA doesn't consider it a real problem from their                
 standpoint because the interest is going to be fairly insignificant           
 if it happens, and, even though their program hasn't been used that           
 much so far, they've only had one default on any of the $3 million            
 worth of loans issued so far.                                                 
                                                                               
 Number 397                                                                    
                                                                               
 SENATOR LINCOLN commented that it says it is for the time and in              
 the manner established by the authority by regulation, so it                  
 doesn't seem to be a paragraph that would be detrimental.                     
 Number 430                                                                    
                                                                               
 After further discussion, CHAIRMAN REIGER stated the consensus of             
 the committee was to add back in language limiting the interest               
 guarantee to no more than 90 days.                                            
                                                                               
 Number 434                                                                    
                                                                               
 SENATOR TAYLOR suggested modifying existing language that is                  
 already within the bill that updates what the current cost would be           
 of the Bradfield Road project.  This is just to provide the                   
 opportunity that if in fact it can be developed, that there already           
 is legislative authorization in place to go forward with it.                  
                                                                               
 CHAIRMAN RIEGER asked if AIDEA has a position on this project and             
 if this would work.  RANDY SIMMONS answered that they have not                
 looked at this and he really could not speak to it without looking            
 at it first.  He did point out that original authorization for the            
 project was in the Department of Transportation; however, if it is            
 a feasible project, AIDEA will be happy to look at it.  If the                
 project were to happen within the next couple of years they would             
 not need this because they have a two-year statute of limitation.             
 If it were left out of the bill and in that two-year period it                
 became a viable project, it could either be done by conduit                   
 financing or specific statutory legislation or authorization could            
 be provided under their program.  If it is revenue bonds, AIDEA               
 would not need the authority, but if it's under their development             
 finance, it's a different type of bonding and ADIEA would need the            
 authority.                                                                    
                                                                               
 SENATOR TAYLOR asked if AIDEA could make a deal without this                  
 amendment.  RANDY SIMMONS answered they could if the project were             
 going to be financed by conduit financing.                                    
                                                                               
 SENATOR TAYLOR said he wants AIDEA to have the greatest authority             
 possible so that when someone comes to them with a project that is            
 feasible, they can move forward with some dispatch at that point.             
 RANDY SIMMONS said he didn't want to speak against the Bradfield              
 project because AIDEA just doesn't know anything about it.  Their             
 normal process is to work with a developer beforehand to see if a             
 project is fairly viable just from the start, without having to go            
 through the full feasibility study.  Then AIDEA would ask for                 
 authorization just as they have done with Red Dog, etc.                       
                                                                               
 Number 546                                                                    
                                                                               
 SENATOR TAYLOR said part of the concern is that there is a minimum            
 of probably a two-year EIS, there is a national concern in that it            
 will require an international crossing, which takes a considerable            
 period of time, and if there isn't the authorization to move                  
 forward on the project upfront, it just further slows everything              
 down.                                                                         
                                                                               
 Number 570                                                                    
                                                                               
 CHAIRMAN RIEGER asked if there have been any further developments             
 in the proposal regarding the bulk unloading facility that was                
 testified to at the last hearing.  REPRESENTATIVE NAVARRE said he             
 spoke to Representative Kott's staff who informed him that the                
 representative's position has not changed with respect to the                 
 amendment, although Representative Kott informed him he was leaving           
 it up to the chairman of the Senate Transportation Committee.                 
                                                                               
 Number 580                                                                    
                                                                               
 CHAIRMAN RIEGER stated it was his intention to have a committee               
 substitute drafted for consideration at the next meeting so that              
 final action can be taken on the proposed amendments and the bill             
 can be moved out of committee.  He feels the committee is fairly              
 close on all the issues with the exception of the additional bond             
 authorization project.                                                        

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