Bill Summary – FastDemocracy

State of Alaska
                                                            Fiscal Note
                                                                                           Bill Version:                     HB 93
 2021 Legislative Session
                                                                                           Fiscal Note Number:               2
                                                                                           (H) Publish Date:                 2/18/2021
 Identifier:        2007-DOR-TREASURY-2-4-21                                 Department:       Department of Revenue
 Title:             G.O. BONDS: STATE INFRASTRUCTURE                         Appropriation: Taxation and Treasury
                    PROJECTS                                                 Allocation:       Treasury Division
 Sponsor:           RLS BY REQUEST OF THE GOVERNOR                           OMB Component Number:               121
 Requester: Governor
 Expenditures/Revenues
 Note: Amounts do not include inflation unless otherwise noted below.                                                              (Thousands of Dollars)
                                                 Included in
                                    FY2022       Governor's
                                Appropriation      FY2022                                         Out-Year Cost Estimates
                                  Requested       Request
 OPERATING EXPENDITURES               FY 2022        FY 2022       FY 2023                   FY 2024            FY 2025            FY 2026        FY 2027
 Personal Services
 Travel                                   20.0
 Services                              1,773.2
 Commodities
 Capital Outlay
 Grants & Benefits
 Miscellaneous                         3,600.0                     22,810.0                  22,810.0           22,810.0          22,810.0        22,810.0
 Total Operating                       5,393.2            0.0      22,810.0                  22,810.0           22,810.0          22,810.0        22,810.0
 Fund Source (Operating Only)
 1004 Gen Fund (UGF)                       3,620.0                         22,810.0          22,810.0           22,810.0          22,810.0        22,810.0
 1008 G/O Bonds (Other)                    1,773.2
 Total                                     5,393.2            0.0          22,810.0          22,810.0           22,810.0          22,810.0        22,810.0
 Positions
 Full-time
 Part-time
 Temporary
 Change in Revenues
 None
 Total                                          0.0           0.0                 0.0              0.0                 0.0              0.0              0.0
 Estimated SUPPLEMENTAL (FY2021) cost:                               0.0                (separate supplemental appropriation required)
 Estimated CAPITAL (FY2022) cost:                                    0.0                (separate capital appropriation required)
 Does the bill create or modify a new fund or account?       Yes
 (Supplemental/Capital/New Fund - discuss reasons and fund source(s) in analysis section)
 ASSOCIATED REGULATIONS
 Does the bill direct, or will the bill result in, regulation changes adopted by your agency?              No
 If yes, by what date are the regulations to be adopted, amended or repealed?
 Why this fiscal note differs from previous version/comments:
 Initial Version.
 Prepared By:             Deven Mitchell, Dept Manager                                                            Phone:         (907)465-3750
 Division:                Treasury Division                                                                       Date:          02/04/2021 12:00 AM
 Approved By:             Neil Steininger, Director                                                               Date:          02/04/21
 Agency:                  Office of Management and Budget
Printed 2/18/2021                                                   Page 1 of 2                                                           Control Code: veRZZ
                                                                                                                   HB 93 - Fiscal Note 2
                                                 FISCAL NOTE ANALYSIS
STATE OF ALASKA                                                                  BILL NO.
2021 LEGISLATIVE SESSION
Analysis
   The bill authorizes the issuance of a total of $356,405,952 of general obligation bonds of the State of Alaska, of which
   $354,632,788 is for project costs and up to $1,773,164 is for the costs associated with issuing the bonds. The bonds would
   carry the full faith, credit and resources pledge of the state and must be ratified in a statewide election. This is the
   strongest form of credit pledge available to the state and accordingly results in the lowest interest rates for borrowed
   funds. If the bill is approved, Alaska voters would consider the proposition in a special election to be held in May 2021. If
   approved by voters, any proceeds of bonds issued will be placed in the state Infrastructure Project Fund created by this
   act.
   This fiscal note assumes that the proposed projects will be eligible for tax-exempt financing. There may be adjustments to
   this assumption required after the state's bond counsel reviews the project list. To the extent projects are not tax-exempt
   eligible, financing costs will increase to Alternative Minimum Tax or taxable rates. Two key limits associated with tax-
   exempt bond issues are that an issuer must be able to track all funds, including any investment earnings on unspent
   proceeds, to final expenditure on an allowed public capital project and that all funds resulting from the bond issuance are
   expended within three years of the bond sale. Due to these limitations it is anticipated that the authorization would
   require careful state oversight of the proposed municipal projects and potentially require multiple bond issues. This fiscal
   note assumes a single bond sale that would close in July 2021 to provide funding as quickly as possible.
   The current rate for a 20-year level amortization of Alaska general obligation bonds are at all-time lows and estimated
   below 2% for tax exempt bonds.
   The costs associated with issuing bonds include rating agencies, bond counsel attorneys, financial advisors, marketing and
   disclosure services, administrative, trustee/paying agent, and printing/internet posting. It is estimated that these costs
   will be no more than .05% of the bonds issued, or a total of up to $1,773,164 for the anticipated bond issuance. The bonds
   will be sold on a competitive basis where underwriters provide bids on a declared date and time and the basis of award is
   the proposal with the lowest yield/true interest rate that conforms to the bidding specifications. The yield/true interest
   cost calculation includes an underwriter's discount that is retained by the underwriting firm to facilitate the sale of the
   bonds. The state is indifferent to the underwriter's discount being high or low in comparison to other bids as it is the
   yield/true interest cost that determines the winning bid. Therefore, the underwriter's discount will not be included as a
   cost of issuing the bonds.
   Fiscal year 2022 estimated costs include $1,773,164 for the cost of issuance that will be funded by bond proceeds and
   $20,000 general funds for travel associated with bond sales and $3,600,000 general funds for first-year interest. Out-year
   debt service costs are estimated to be $22,809,981 general funds based on current interest rates.
(Revised 8/20/20 OMB/LFD)                                                                                          Page 2 of 2
2007-DOR-TREASURY-2-4-21                                       Page 2 of 2                                               Control Code: veRZZ
Statutes affected: 
HB0093A, AM HB 93, introduced 02/18/2021: 37.07.080, 37.25.020
HB0093A, AM HB 93, introduced 02/15/2021: 37.07.080, 37.25.020