An Alaska state loan agency approved a controversial deal last week to sell up to $20 million in bonds to finance a new prison-sewer project.
Alaska Industrial Development and Export Authority officials told the Anchorage Daily News that the deal was so unusual they had to bypass two state laws.
Because of special circumstances, the newspaper said, AIDEA used its authority to waive its usual requirement for a bank to participate in 10% of the loan for the project, and to waive its standard policy of not lending more than 75% of the projects value. The provisions can be waived if the authority becomes the owner of the project.
The deal makes the agency the owner of the sewer project at the under construction at Goose Bay Correctional Center in the Matanuska-Susitna Borough north of Anchorage.
According to the newspaper, state revenue department officials objected to the original financing proposal for the utilities using tax-free bonds because they would have put the state’s credit rating at risk. AIDEA acted now in order to get a deal done in advance of the Dec. 31 expiration of the stimulus package holiday on the application of the federal alternative minimum tax to private-activity bonds.
The issue of how to pay for the sewer at the prison had been a problem for officials since it is being built is a remote area without access to other sewer systems, the paper said.
A local consortium of developers that won a design-build-operate-finance bid worth $28 million is building the sewer project. Alaska is ultimately on the hook for the costs, giving it an incentive to lower financing costs, state officials told the Daily News.