Bill Summary for Bill Number HB06-1402

Date: 04/21/2006

Final
BILL SUMMARY for HB06-1402

HOUSE COMMITTEE ON FINANCE

Votes: View-->	Action Taken:
Moved amendment L.001 (the amendment makes a techn Refer House Bill 06-1402, as amended, to the Commi	Pass Without Objection PASS

11:25 AM -- House Bill 06-1402 - Concerning the Securitization of a Portion of the Tobacco Litigation Settlement Payments

Representative Penry and Representative Plant explained the provisions of the bill. Representative Plant commented on the programs that are dependent on the tobacco settlement stream for funding and said that the proposal holds these programs harmless. Staff distributed a chart on the estimated return of a partial securitization under House Bill 06-1402 (Attachment A). Representative Penry discussed the revenues that the state would realize from a partial securitization under House Bill 06-1402.

Representative Penry said that under the proposal, the state would gain about $683 million in gross proceeds and about $600 in net proceeds from securitization. Interest earning from securitization proceeds would amount to about $61 million over the next five years through FY 2010-11 and be spent for controlled maintenance. The legislation also pays off the FPPA on June 30, 2006, which will save the state about $27 million. This assumes the FPPA repayment schedule that will occur under current law.
Representative Plant commented that under the legislation, the Budget Stabilization Fund would receive about $362 million in FY 2006-07 and reiterated that the legislation holds any diversions to the Highway Users Tax Fund and the Capital Construction Fund harmless for FY 2006-07.

The committee discussed the savings assuming the FPPA payoff and the money that would flow to a rainy day fund over the next five years. Representative Vigil asked Mr. Ben Stein to respond to questions regarding securitization.

The following persons testified:

11:41 AM -- Mr. Ben Stein, Deputy State Treasurer, testified in support of the bill. Mr. Stein responded to a number of issues discussed by the committee. Mr. Stein discussed the timing of the securitization as it is related to risk and said that there are a number of factors that affect risk under the Master Settlement Agreement.

11:47 AM -- Ms. Natalie Mullis, Legislative Council Staff, distributed a memorandum on the impact of the SB 97-1 and Highway Users Tax Fund diversions (Attachment B). Ms. Mullis briefly discussed the bill's impact on the decrease in tobacco payments, the elimination of the FPPA payment, and the impact on SB 97-1 diversions.

11:53 AM -- Mr. Kevin Bommer, Colorado Municipal League, testified in support of the legislation and commented on the benefits of the FPPA payoff. In future years, without the FPPA liability, the money that the state saves becomes available for Capital Construction and transportation projects. This is a key component of the legislation.

11:57 AM -- Mr. Bob Doherty, UBS Securities, testified in support of the legislation and explained that UBS Securities specializes in tobacco securities bond sales. Mr. Doherty commented that the timing for securitization is good because there are a number of factors that increase the state's yield. Mr. Doherty said that due to recent case law, there is greater confidence in the legal environment that governs the payout to states under the Master Settlement Agreement. Thus, bond rating agencies are rating these bonds issues more favorably. Also, since interest rates are lower, the cost to the state for securitization is more favorable. Mr. Doherty closed by saying that some of the debt that has been paid off regarding securitization issues is making more money available to reinvest in other securitization transactions for the states that have not yet securitized their revenues under the Master Settlement Agreement.

12:01 PM -- Ms. Sandra Solin, Capitol Solutions, testified in support of the legislation.

Representative Penry distributed amendment L.001 and commented that it makes a technical change that relates to a quorum for board members.


BILL:	HB06-1402
TIME:	12:03:02 PM
MOVED:	Judd
MOTION:	Moved amendment L.001 (the amendment makes a technical change that increases the number of board members that constitutes a quorum from two to three). The motion passed without objection by those members present.
SECONDED:	Massey
		VOTE
	Benefield
	Cloer
	Crane
	Frangas
	Garcia
	Harvey
	Jahn
	Kerr
	Marshall
	Massey
	McCluskey
	Judd
	Vigil
Not Final YES: 0 NO: 0 EXC: 1 ABS: 0 FINAL ACTION: Pass Without Objection


BILL:	HB06-1402
TIME:	12:03:55 PM
MOVED:	Judd
MOTION:	Refer House Bill 06-1402, as amended, to the Committee on Appropriations. The motion passed on a 13-0-0 vote.
SECONDED:	McCluskey
		VOTE
	Benefield	Yes
	Cloer	Yes
	Crane	Yes
	Frangas	Yes
	Garcia	Yes
	Harvey	Yes
	Jahn	Yes
	Kerr	Yes
	Marshall	Yes
	Massey	Yes
	McCluskey	Yes
	Judd	Yes
	Vigil	Yes
Final YES: 13 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: PASS