What is AIDEA?
The Alaska Industrial Development and Export Authority (AIDEA) is a public corporation of the State of Alaska, constituting a political subdivision under the laws of the State. It was created by the Alaska Legislature to "promote, develop and advance the general prosperity and economic welfare of the people of Alaska, to relieve problems of unemployment, and to create additional employment". AIDEA accomplishes this through its Credit and Development Finance Programs.
Why did the legislature create AIDEA?
The short answer is that the Legislature created AIDEA to provide financing for Alaska's business community, to expand the economy of the state, and to provide jobs for Alaskans.
The long version of this question is that when AIDEA was created in 1967, it was envisioned to be a pass through conduit agency providing Alaskan businesses with lower interest rates offered by tax-exempt financing by having AIDEA issue a bond which was then purchased by others. Changes to the tax laws in the mid 1980's dramatically changed the types of projects that are eligible for tax-exempt financing, however the Tax-Exempt Revenue Bond Program continues to help finance certain facilities at lower rates, based on the credit strength of the developer.
In 1979 and 1980, oil wealth began flowing into state coffers simultaneously with a downturn in the economy following the completion of the Trans-Alaska Pipeline System (TAPS). Legislation was enacted to expand the powers and financial capabilities of AIDEA to assist smaller businesses. The mechanism used to accomplish this was a capitalization of AIDEA with an existing loan portfolio (held by the Department of Revenue in the general fund) valued at approximately $166 million and $15 million in cash. Utilizing this newfound financial strength, AIDEA launched the Umbrella Bond Program (which is now the Loan Participation Program).
AIDEA's Development Finance Program got its start in the mid-1980's, when Cominco, in conjunction with NANA Regional Corporation, approached the state seeking assistance to develop the Red Dog Mine deposit. An approximately $128 million economic development loan portfolio held in the General Fund, was appropriated to AIDEA for this effort and the financial structure of the transaction resulted in the creation of AIDEA's Development Finance Program.
Through the years, AIDEA's mission has remained the same: encourage economic growth and diversification in Alaska by providing various means of financing and assistance to Alaska businesses. The programs, however, have changed based on the economy and the financing needs of businesses in Alaska.
What is Development Finance?
Development finance is the effort of state, regional, and local governments to support, encourage, and catalyze enterprise growth. It is a tool to help make a project successful, and in turn, to create a benefit for the long-term health of a state, region or community. Development finance is a proactive approach towards finance intended to assist enterprise economic development projects. It leverages valuable public resources to support significant private sector investment.¹
What is a Development Finance Authority?
Development finance authorities (DFA) can be public or quasi-public/private authorities that provide or otherwise support economic development through various direct and indirect financing programs. DFAs may issue tax-exempt and taxable bonds, provide credit enhancements, offer direct and indirect lending, equity investments, or a broad range of access to capital financing mechanisms. Tens of thousands of DFAs exist in the United States ranging from one-person bonding authorities to multi-faceted regional entities.¹
¹ – Practitioner’s Guide to Economic Development Finance (2nd edition), Toby Rittner (2016)
What does AIDEA do with its Profits?
AIDEA’s profit is split between two different purposes. Firstly, they are reinvested back into the Authority to strengthen its financial capacity for additional loans and investments. In addition, since 1997, subject to AS 44.88.088, AIDEA pays an annual dividend to the State, based on 25-50% of the Authority’s statutory net income. Since 1997, AIDEA has declared, and will pay, more than $407 million in dividends to the State of Alaska General Fund.
Does AIDEA Fund its Operations with State General Fund monies?
No. AIDEA is a financially self-sustaining public corporation and does not receive State General Fund appropriations to fund its operations. AIDEA is subject to the Executive Budget Act, therefore the Legislature does appropriate our own funds for our operations. AIDEA charges interest on its loans and economic development investments, receives fees for conduit bond issuances, and other usage and financing fees, while receiving a return on its cash and investment securities.
Does AIDEA Publicly Disclose Information on the Transactions it Supports?
AIDEA operates in a manner similar to a bank or other financial institution and does not disclose commercially confidential information, subject to AIDEA’s confidentiality statutes (AS 44.88.215). On the other hand, all of AIDEA’s Board meetings are open to the public and decisions regarding investments in projects are made during open sessions. Board packets with non-proprietary information regarding each requested transaction and Board action are available before the meeting. AIDEA's audited financial statements fully disclose the financial activities and results of the Authority and are available to the public. There is time for public comment on the agenda at every meeting.
How is AIDEA held Accountable?
AIDEA reports its weekly activities to The Governor’s Office through the Commissioner of the Department of Commerce, Community and Economic Development. AIDEA is required by statute (AS 44.88.210) to publish, annually, a report on its operations for distribution to the governor, legislature, and the public. The report includes such things as the Authority’s independently audited financial statements, a statement of investments, and the levels of bonding and investment activities
AIDEA is governed through its statutory authority (AS 44.88). AIDEA is also subject to provisions within the Executive Budget Act (AS 37.07), Open Meetings Act (AS 44.62.310), and Public Records Disclosure Act (As 40.25.110). Although the Authority is exempt from the State’s Procurement Code (AS 36.30), it was required to adopt its own procurement regulations that reflect competitive bidding principles. AIDEA did that in 3 AAC chap. 100.
How does the organization ensure financial accountability?
AIDEA is independently audited each year. In addition, it is subject to government audits and operates under the same standards of transparency as Alaska's state agencies.
How are AIDEA and AEA related?
Pursuant to legislation enacted in 1993, the members of the AIDEA board also serve as the board of directors for the Alaska Energy Authority (AEA). AEA contracts with AIDEA for staff to oversee AEA programs; however, AEA continues to exist as a separate legal entity. There is no commingling of funds, assets, or liabilities between AIDEA and AEA and there is no responsibility of one for the debts or the obligations of the other.
How many members serve on AIDEA's board?
AIDEA's Board, per Chapter 72 SLA10 (pdf), is made up of seven members: five members of the public appointed by the Governor to serve two year terms and the Commissioners of the Department of Revenue and the Department of Commerce, Community, and Economic Development who make up the two Cabinet appointments.
Can I get a grant through AIDEA for my business?
AIDEA does not provide grants. All projects financed through AIDEA programs must be commercially viable and able to generate sufficient revenues to cover debt service.
Can AIDEA help me finance my business?
AIDEA has a number of programs that provide financial assistance to Alaska's business community.
- Loan Participation Program AIDEA can provide up to 90% participation in a bank originated loan up to $25 million. The Loan Participation Program provides Alaskans with long-term financing for new or existing projects, or for the refinancing of existing loans.
- Project Finance, AIDEA can assist Alaskans through its ability to develop, own (in whole or in part) and operate basic infrastructure, installations and facilities within the state.
- Infrastructure Development, AIDEA can participate in financing new and expanded infrastructure which is critical to the development of Alaska's resource reserves including minerals, oil, gas, tourism, seafood, energy and forestry to name but a few. Providing the needed access to these resources is an economic imperative needed to diversify the economy and create new and lasting employment opportunities.
- Business and Export Assistance Program, AIDEA can guarantee up to 80% of a business loan originated through a commercial lender, not to exceed $1 million on the principal of the loan. Guarantees issued for export transactions guarantee both commercial and political risk.
- Conduit Revenue Bond Program, AIDEA acts as a conduit for the issuance of either taxable or tax-exempt bonds to finance a project.
- Rural Development Initiative Fund and Small Business Economic Development Program. The goal of these programs is to provide private sector employment by financing the start-up and expansion of businesses that will create significant long-term employment. Both of these programs are administered by the Department of Commerce, Community and Economic Development, Division of Economic Development.
What are the interest rates for AIDEA's Loan Participation Program?
AIDEA's Loan Participation funding rates are indexed and set by 3 AAC 99.350 (e)
• Fixed Rates
o AIDEA offers 5, 10, 15, 20, and 25-year fixed rate options.
o Fixed rates are set using the Federal Home Loan Bank (FHLB) of Des Moines’ Fixed-Rate Advances Index that most closely matches the term of the loan plus AIDEA’s allocable cost of operations; OR the five-year return on the investment funds of the authority plus AIDEA’s allocable cost of operations; whichever is greater.
• Variable Rates
o AIDEA offers 3-month, 6-month, 1-year, 3-year, and 5-year variable rate options.
o Variable rates are set using the Federal Home Loan Bank of Des Moines' Fixed-Rate Advances Index that most closely matches the time period of adjustment plus 100 basis points plus AIDEA’s allocable cost of operations; OR 375 basis points plus AIDEA’s allocable cost of operations; whichever is greater.
o Rate adjustments are made at the beginning of each quarter (1/1, 4/1, 7/1, and 10/1), semi-annually (1/1 and 7/1) and annually (1/1).
• AIDEA’s interest rate is established at commitment; variable rates are adjusted per Note terms.
Does AIDEA provide financing for my business located outside of Alaska?
No, the business must be located in Alaska in order to qualify for any of AIDEA's resources.
Can the AIDEA partner with my bank or any other credit provider?
Yes, AIDEA can partner with a bank or credit provider through our Loan Participation Program to help the business owner achieve a lower blended interest rate.
What is an OREO?
OREO stands for "other real estate owned". It refers to real estate that AIDEA has in our portfolio due to a loan default. Individual properties in AIDEA's OREO portfolio are available for sale to interested and qualified buyers.