State of Alaska
Fiscal Note
Bill Version: HB 285
2022 Legislative Session
Fiscal Note Number: 1
(H) Publish Date: 1/18/2022
Identifier: LL0543-DOR-TSY-1-13-22 Department: Department of Revenue
Title: G.O. BONDS FOR 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
FY2023 Governor's
Appropriation FY2023 Out-Year Cost Estimates
Requested Request
OPERATING EXPENDITURES FY 2023 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
Personal Services
Travel 20.0
Services 1,605.0
Commodities
Capital Outlay
Grants & Benefits
Miscellaneous 20,664.2 20,665.3 20,663.9 20,662.0 20,666.7
Total Operating 1,625.0 0.0 20,664.2 20,665.3 20,663.9 20,662.0 20,666.7
Fund Source (Operating Only)
1004 Gen Fund (UGF) 20,664.2 20,665.3 20,663.9 20,662.0 20,666.7
1008 G/O Bonds (Other) 1,625.0
Total 1,625.0 0.0 20,664.2 20,665.3 20,663.9 20,662.0 20,666.7
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 (FY2022) cost: 0.0 (separate supplemental appropriation required)
Estimated CAPITAL (FY2023) 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If yes, by what date are the regulations to be adopted, amended or repealed? N/A
Why this fiscal note differs from previous version/comments:
Initial version.
Prepared By: Deven Mitchell, Debt Manager Phone: (907)465-3750
Division: Treasury Division Date: 01/13/2022 10:00 AM
Approved By: Brian Fechter, Deputy Commissioner Date: 01/13/22
Agency: Department of Revenue
Printed 1/18/2022 Page 1 of 2 Control Code: SMGbg
 HB 285 - Fiscal Note 1
FISCAL NOTE ANALYSIS
STATE OF ALASKA BILL NO. LL0543
2022 LEGISLATIVE SESSION
Analysis
The bill authorizes the issuance of a total of $325,175,000 of general obligation bonds of the State of Alaska of which
$302,286,585 is for project costs and up to $1,625,000 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 by the Legislature, Alaska voters would consider the proposition in the November general
election in 2022. If approved by voters, the bond issuance process would take at least several months with an expectation
of bonds being issued and proceeds of bonds placed in the fund created by the 2022 act in January 2023. This timing
allows for a first interest period on the bonds of approximately 8 months, known as a "long coupon" without any expected
interest rate impact and first debt service on the bonds to fall in fiscal year 2024
The projects authorized in the current version of the bill include a number of the projects that benefit private business
activity which may require these bonds to be subject to the Alternative Minimum Tax or potentially taxable. The final
determination on these tax matters will not be made until the projects are finalized and the States bond counsel and tax
specialist has an opportunity to evaluate each project and make a determination. These matters will likely result in the
need for multiple series of bonds with alignment of expenditure of proceeds from the identified authorized project. To the
extent projects are not taxexempt eligible the annual debt payments on the bonds will increase to Alternative Minimum
Tax (approximately 1/3 of a percentage point higher) or taxable rates (approximately 1.2 percentage points higher). Two
key limits associated with taxexempt 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 will require careful state oversight of the proposed municipal projects and potentially
require additional bond issues to accommodate projects with longer cash outflow expectation. Due to uncertainty on
these matters and the difficulty in simulating multiple bond issues with various amortizations and tax statuses this fiscal
note assumes a single bond sale that would close in October or November 2022.
The current rate for a 20year level amortization of Alaska general obligation bonds remain low with a 2.50% interest rate
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 $1,625,000 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.
(Revised 11/23/2021 OMB/LFD) Page 2 of 2
LL0543-DOR-TSY-1-13-22 Page 2 of 2 Control Code: SMGbg


Statutes affected:
HB0285A, AM HB 285, introduced 01/18/2022: 37.05.315, 37.07.080, 37.25.020, 37.10.087