Legislature(2009 - 2010)BARNES 124


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
Moved Out of Committee
Scheduled But Not Heard
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSHB 153(CRA) Out of Committee
HB 161-CERTIFICATES OF PARTICIPATION FOR SUBPORT                                                                              
8:09:13 AM                                                                                                                    
CO-CHAIR HERRON announced  that the next order  of business would                                                               
be HOUSE  BILL NO.  161, "An  Act relating  to the  Alaska Mental                                                               
Health Trust  Authority Subport Office Building;  authorizing the                                                               
issuance  of certificates  of participation  for construction  of                                                               
the building  and authorizing the  use of up to  $25,000,000 from                                                               
the mental  health trust fund  for construction of  the building;                                                               
approving  leases  of  all  or   part  of  the  building  by  the                                                               
Department  of Administration;  and  providing  for an  effective                                                               
8:09:30 AM                                                                                                                    
CO-CHAIR  MUNOZ, speaking  as the  sponsor of  HB 161,  explained                                                               
that  HB 161  will allow  the  Alaska Mental  Health Trust  ("The                                                               
Trust") to  construct a  new office facility  in Juneau,  on land                                                               
holdings The Trust owns in downtown  Juneau.  She noted that this                                                               
particular  piece of  land is  a top  priority for  The Trust  to                                                               
develop.  Co-Chair Munoz then  reviewed the history of The Trust.                                                               
Prior to  statehood individuals experiencing mental  illness were                                                               
often  taken  against  their  will  and  placed  in  institutions                                                               
outside  of   Alaska  in  Portland,   Oregon.    Many   of  these                                                               
individuals spent  the remainder of their  lives in institutions.                                                               
As Alaska  transitioned to statehood, Congress  passed the Alaska                                                               
Mental Health Enabling  Act of 1956.   The aforementioned allowed                                                               
the state  to receive title to  one million acres of  land, which                                                               
was conveyed  to The Trust,  to help  generate income to  pay for                                                               
the  services   to  care  for   the  mentally  ill   through  the                                                               
Comprehensive Integrated  Mental Health Program for  Alaska.  The                                                               
Trust's cash assets  are managed under contract  by the permanent                                                               
fund.   She explained  that a portion  of the  construction funds                                                               
that will  be enabled  through this  legislation are  Trust funds                                                               
that are  held in the  permanent fund  and invested on  behalf of                                                               
The  Trust by  the permanent  fund.   The noncash  assets of  The                                                               
Trust  are  managed   by  The  Trust  land   office,  within  the                                                               
Department of Natural Resources (DNR).                                                                                          
CO-CHAIR MUNOZ highlighted that the  core mission of The Trust is                                                               
to develop and manage The  Trust's assets for the maximum benefit                                                               
of  beneficiaries in  the  areas of  health,  safety, quality  of                                                               
life,  and economic  security.   The  Trust's beneficiaries  live                                                               
across  Alaska  and  are individuals  who  face  mental  illness,                                                               
developmental   disability,   chronic   alcoholism,   Alzheimer's                                                               
disease, and  dementia.  Co-Chair  Munoz explained that  in order                                                               
for  the development  of this  property in  downtown Juneau,  the                                                               
legislature  must  pass legislation  that  enables  The Trust  to                                                               
access  trust funds  currently  held in  the  permanent fund  and                                                               
enter into an agreement to  bond for approximately $22.7 million.                                                               
The  bond  will  be  repaid  through  lease  payments  from  four                                                               
departments  of state  government,  including  the Department  of                                                               
Corrections,  Alaska Department  of  Fish &  Game, Department  of                                                               
Public Safety,  and Department of Labor  & Workforce Development.                                                               
Currently,  the  aforementioned  agencies are  located  in  aging                                                               
facilities throughout Juneau  and Douglas.  She  opined that it's                                                               
important  for  the  state  to quickly  take  advantage  of  this                                                               
opportunity  because existing  buildings are  in drastic  need of                                                               
improvement  and  substantial  investment would  be  required  to                                                               
allow future  use.  She  then highlighted  HR 6, which  the House                                                               
unanimously passed on February 25,  2009, that urges The Trust to                                                               
develop its assets to the maximum benefit of its beneficiaries.                                                                 
8:14:56 AM                                                                                                                    
WAYNE JENSEN,  Architect, Jensen,  Yorba, Lott Inc.,  presented a                                                               
slide  presentation  entitled  "The   Trust  Land  Office  Juneau                                                               
Subport  Development".   The first  slide is  an aerial  photo of                                                               
downtown Juneau, which includes an  outlined area of the land The                                                               
Trust  owns.   The area  designated as  1 is  the area  where the                                                               
office building would be constructed.   Item 2 is the location of                                                               
the  old subport  building  site, which  would  initially be  the                                                               
parking lot  for the new  building.   However, that land  is very                                                               
valuable  and would  eventually be  developed for  something more                                                               
appropriate.   Item 3 is the  site of the existing  Department of                                                               
Public  Safety  (DPS) building  and  the  plan is  to  eventually                                                               
develop that  as a  parking garage for  sites 1 and  2.   He then                                                               
presented  a  slide illustrating  the  proposed  location of  the                                                               
building and parking.   The building will be set  back a bit from                                                               
Egan Drive but close to the  US Coast Guard building.  Mr. Jensen                                                               
informed the  committee that the  firm has been working  with the                                                               
city in  recognition of  the importance of  this site  to connect                                                               
with  pedestrian  activity  and  access.   The  next  few  slides                                                               
illustrate the  floor plans for  the four-story  office building.                                                               
He pointed out that 90-95  percent of the building is anticipated                                                               
to be  occupied by four state  agencies with some portion  of the                                                               
lower  floor open  to commercial  retail development.   The  next                                                               
couple  of  slides  provide some  conceptual  renderings  of  the                                                               
façade  of  the  building,  which he  opined  would  enhance  the                                                               
appearance  of the  building.   There  has been  discussion of  a                                                               
covered  canopy  along Egan  Drive,  which  will make  pedestrian                                                               
access more  convenient.   He then turned  attention to  the last                                                               
slide  that's  a  photograph looking  toward  downtown  with  the                                                               
building imposed  in it.  He  noted that it's to  be a four-story                                                               
8:21:40 AM                                                                                                                    
REPRESENTATIVE HARRIS opined that the  largest issue in Juneau is                                                               
parking.   Therefore, he asked  if there is adequate  parking for                                                               
this proposed building  or will there have to be  parking in area                                                               
MR. JENSEN  opined that the parking  needs can be satisfied.   In                                                               
fact, some  parking under  the second floor  of the  building has                                                               
been included.  Across the  street [from the new office building]                                                               
there  would  be a  300-car  parking  area, which  satisfies  the                                                               
state's   parking  requirements.     Furthermore,   the  proposed                                                               
building  would be  located  only  a block  from  the city's  new                                                               
transit center, which will also have parking.                                                                                   
8:23:10 AM                                                                                                                    
REPRESENTATIVE   GARDNER  inquired   as  to   the  timeframe   of                                                               
converting  area 3  into a  parking  garage.   She then  recalled                                                               
legislation to  encourage construction  of more  energy efficient                                                               
MR. JENSEN answered  that the timeframe for  development of phase                                                               
3  is  dependent upon  when  The  Trust  sees an  opportunity  to                                                               
develop lot 2.  He noted  that the Department of Transportation &                                                               
Public Facilities is already under  contract to place a signal at                                                               
Whittier and Egan to ease pedestrian and vehicular traffic.                                                                     
8:24:51 AM                                                                                                                    
REPRESENTATIVE GARDNER surmised  then that it could  be years and                                                               
years before that opportunity arises.   Therefore, she questioned                                                               
whether the parking for area 2 is adequate for the building.                                                                    
MR. JENSEN  answered that he believes  it is.  He  added that The                                                               
Trust  is in  the process  of  acquiring area  3 as  part of  the                                                               
replacement lands trust,  and thus would have control  of the lot                                                               
such that there  would be the opportunity to  develop the parking                                                               
lot in the future without any restrictions.                                                                                     
8:25:46 AM                                                                                                                    
MR. JENSEN, regarding energy efficiency,  said that this would be                                                               
a new  building and  offer the  opportunity to  incorporate newer                                                               
technologies of  energy conservation.  He  informed the committee                                                               
that they are  reviewing the geothermal process  and talking with                                                               
the U.S. Coast  Guard regarding a potential biomass  project.  He                                                               
noted that there  are three other projects in Juneau  that are in                                                               
the process of using a geothermal  ground source heat system.  He                                                               
indicated  that anything  that  can be  done  to lower  operating                                                               
costs is a high priority of The Trust.                                                                                          
8:26:57 AM                                                                                                                    
REPRESENTATIVE  MILLETT asked  if the  300 parking  spots on  The                                                               
Trust land would be available for the life of lease.                                                                            
MR. JENSEN  explained that the  requirement regarding  the number                                                               
of parking  spots will be part  of the allowable use  permit from                                                               
the city.  If the parking  lot were developed as a building later                                                               
on,  there would  still be  the  obligation to  provide the  same                                                               
number of  parking spots  to serve the  [subport building].   The                                                               
Trust  has to  provide parking,  as part  of the  lease with  the                                                               
Department  of Administration  (DOA)  and in  order  to meet  the                                                               
allowable use permit from the city.                                                                                             
8:28:14 AM                                                                                                                    
CO-CHAIR HERRON inquired  as to whether the  Zach Gordon building                                                               
would be part of this project.                                                                                                  
MR. JENSEN responded that it wouldn't be impacted at this time.                                                                 
8:28:53 AM                                                                                                                    
REPRESENTATIVE GARDNER  highlighted the  movement to  make public                                                               
buildings meet new standards.                                                                                                   
MR. JENSEN suggested that Representative  Gardner is referring to                                                               
the  Leadership   in  Energy  and  Environmental   Design  (LEED)                                                               
standard, which  will be  reviewed.  He  explained that  the LEED                                                               
standard is a  process through which buildings can  go through in                                                               
order to achieve certification at  certain levels.  Regardless of                                                               
whether  they  participate  in  the  certification  or  not,  the                                                               
criteria  will be  used  in  the design  of  the  building.   The                                                               
criteria include energy [efficiency] and sustainable materials.                                                                 
8:30:51 AM                                                                                                                    
REPRESENTATIVE  HARRIS  moved  to  adopt CSHB  161,  Version  26-                                                               
LS0605\T, Cook,  3/11/09, as the  working document.   There being                                                               
no objection, Version T was before the committee.                                                                               
8:31:24 AM                                                                                                                    
BRUCE BOTELHO, Mayor,  City & Borough of  Juneau, related support                                                               
for HB  161, Version T.   Mayor Botelho then commended  The Trust                                                               
on  its  efforts  to  construct   a  building  of  high  quality,                                                               
durability, energy  efficiency, and  sustainability.   There have                                                               
been some questions, in terms of  the city's role.  For instance,                                                               
there  is a  requirement for  a  zoning change  that will  likely                                                               
receive  a favorable  vote on  Monday.   Although there  are many                                                               
benefits to the city, he highlighted  the following few.  This is                                                               
an area that has needed  redevelopment for many decades, and thus                                                               
is  a   fulfillment  of  aspects   of  the   downtown  waterfront                                                               
development  plan.    Furthermore,   the  project  will  generate                                                               
construction-related   economic   activity  and   will   generate                                                               
revenues  for  The Trust.    From  a statewide  perspective,  the                                                               
proposed  office  building  will  establish a  new  standard  for                                                               
excellence in public construction in Alaska.                                                                                    
8:34:06 AM                                                                                                                    
REPRESENTATIVE HARRIS asked if the  proposed office building will                                                               
pay taxes to the city.                                                                                                          
MAYOR BOTELHO replied no.   In further response to Representative                                                               
Harris,  Mayor  Botelho  confirmed   that  other  buildings,  the                                                               
Department  of Labor  &  Workforce  Development (DLWD)  building,                                                               
being vacated under  this plan are currently paying  taxes to the                                                               
REPRESENTATIVE   HARRIS  related   his  understanding   that  the                                                               
proposed office  building will include retail  space.  Therefore,                                                               
he   surmised  that   a  government   entity  will   possibly  be                                                               
contracting out for competitive service to the private sector.                                                                  
MAYOR  BOTELHO related  his agreement.   In  terms of  leasing to                                                               
private entities, that  may well be a  taxable economic activity.                                                               
Activity generated  by the businesses occupying  the retail space                                                               
will be subject to taxes.                                                                                                       
REPRESENTATIVE  HARRIS   stressed  that  any   government  entity                                                               
competing  with  the  private sector  with  government  buildings                                                               
should   pay  taxes   because   the   aforementioned  is   direct                                                               
competition  with  the  private sector.    Representative  Harris                                                               
further stressed  that he  supports The  Trust, but  doesn't want                                                               
The Trust  competing with those  who pay taxes  to the city.   In                                                               
this  process, there  will be  a vacant  private sector  building                                                               
that  will continue  to  pay  taxes that  the  city continues  to                                                               
MAYOR BOTELHO  acknowledged that economic balancing  will need to                                                               
take place.   He then opined  that the benefits of  this proposed                                                               
office  building  to  the  state and  Juneau  far  outweigh  some                                                               
economic  dislocation,   which  he   charged  would   take  place                                                               
regardless due to the nature of the existing DLWD building.                                                                     
8:36:44 AM                                                                                                                    
CO-CHAIR MUNOZ  informed the committee  that the state  will have                                                               
to go  through a Request  for Proposals (RFP) process  to replace                                                               
DLWD's  space in  the  event that  the  proposed office  building                                                               
isn't constructed.                                                                                                              
REPRESENTATIVE HARRIS clarified that his  point is that the state                                                               
isn't renewing an  existing lease and the owner  of the building,                                                               
an  existing  taxpayer, has  no  recourse.    The owner  of  that                                                               
building  will  have to  continue  to  pay  taxes even  once  the                                                               
building is  vacant.  Furthermore,  there is the fact  that there                                                               
will be vacant buildings in  Juneau where the state employee pool                                                               
isn't growing.                                                                                                                  
MAYOR BOTHELO noted his agreement.                                                                                              
8:40:28 AM                                                                                                                    
JEFF JESSEE,  Chief Executive Office, Alaska  Mental Health Trust                                                               
Authority, Department of Revenue, related  that it's been over 50                                                               
years  since The  Trust  was created.   In  1956,  as the  Mental                                                               
Health  Enabling  Act  was  nearing   enactment,  it  came  under                                                               
significant  attack.   The  attack came  most  noticeably from  a                                                               
group  that  later  became  known as  the  Scientologists.    The                                                               
federal government attempted  to send dissidents to  Alaska.  The                                                               
U.S. Senators  Goldwater and  Bartlett fought  the aforementioned                                                               
and  clarified that  a land  trust was  being created  to support                                                               
Alaska  developing  something  better for  those  needing  mental                                                               
8:42:40 AM                                                                                                                    
CO-CHAIR HERRON  highlighted how  remarkable the  national outcry                                                               
against the  Mental Health Enabling  Act was and how  many people                                                               
thought Alaska should take care of itself.                                                                                      
8:43:26 AM                                                                                                                    
MR.  JESSEE related  his surprise  when the  Palin Administration                                                               
approached  The  Trust  regarding   development  of  the  subport                                                               
building  property.   The  Trust  had,  for  some time,  been  in                                                               
discussions with  Juneau regarding  how that  waterfront property                                                               
would be developed,  as it's very valuable land.   Of course, The                                                               
Trust wanted to  be sure that the land was  developed in a manner                                                               
that's  consistent with  Juneau's  vision.   Once  The Trust  was                                                               
assured  that,  in  fact, this  [proposed  office  building]  was                                                               
consistent with Juneau's desire to  see development occur on this                                                               
property,  The  Trust  has  worked diligently  with  DOA  to  put                                                               
together this  proposal.  Mr.  Jessee related that he  is pleased                                                               
with  how  this  proposal  is  coming  together  as  it  provides                                                               
advantages for  all parties.   For the state, this  project would                                                               
provide much  needed office space  in a centrally  located place.                                                               
Mr. Jessee  explained that The Trust  is around to stay  and will                                                               
eventually  own this  building, which  is one  of the  reasons it                                                               
wants  the building  to last  as long  as it  can while  being as                                                               
inexpensive  to   operate  as   possible.     The  aforementioned                                                               
maximizes the  long-term return  on the building  as well  as The                                                               
Trust's revenue.   Mr. Jessee related the desire  to maximize the                                                               
return  on the  investment into  this building  in 50  years, and                                                               
therefore  the  intent is  to  construct  a quality  building  as                                                               
energy   efficient  as   technology  allows.     At   some  point                                                               
development of  the subport in  conjunction with  the development                                                               
of other waterfront development  will likely generate significant                                                               
revenue  to The  Trust.   At that  time, it  will financially  be                                                               
worth it  to The Trust  to build the  parking garage in  order to                                                               
move the  parking from the  subport to  the parking garage.   The                                                               
Trust  has  the  ongoing  obligation   to  provide  parking,  and                                                               
therefore  it's not  an option  to use  the subport  property for                                                               
something  else   and  not  replace   it  with   similar  parking                                                               
facilities somewhere in the area.   With regard to the tax issue,                                                               
Mr.  Jessee said  he understood  Representative Harris'  concern.                                                               
He then related  his understanding that The Trust  will pay taxes                                                               
on the  commercial space.  He  then related that an  advantage to                                                               
working  with The  Trust is  that the  lease rates  will be  less                                                               
because The Trust's expenses will  be less.  Another advantage of                                                               
this project is that ultimately all  lease payments end up in the                                                               
private sector  through either  the developer  or the  rent lease                                                               
payments will recycle through The  Trust and ultimately end up in                                                               
the hands of the nonprofit  providers who provide services to the                                                               
beneficiaries.     Mr.  Jessee  opined  that   from  the  state's                                                               
perspective, this is a good deal.                                                                                               
8:48:26 AM                                                                                                                    
REPRESENTATIVE  HARRIS  inquired  as   to  the  definition  of  a                                                               
certificate of participation.                                                                                                   
MR.  JESSEE  opined  that  DOA  would  be  the  best  to  answer.                                                               
However,  he  related his  understanding  that  it's basically  a                                                               
bond,  loan  that's sold  on  the  market.    Part of  the  lease                                                               
payments are used to payoff the bonds over 20 years.                                                                            
REPRESENTATIVE HARRIS  then inquired as  to the expected  rate of                                                               
return for this building.                                                                                                       
MR. JESSEE deferred to Tim Spernak.                                                                                             
REPRESENTATIVE HARRIS  inquired as  to when  The Trust  would own                                                               
the building.                                                                                                                   
MR. JESSEE answered  that The Trust would own the  building in 20                                                               
years, when the  certificates of participation are paid  off.  He                                                               
highlighted that  The Trust  is actually putting  up half  of the                                                               
capital for the building.                                                                                                       
8:50:43 AM                                                                                                                    
TIM SPERNAK, Senior Resource Manager,  Alaska Mental Health Trust                                                               
Authority, Department  of Revenue,  explained that there  are two                                                               
financing  mechanisms to  construct  the building.    One is  the                                                               
certificates  of participation  that  carry a  bond  rate of  5.5                                                               
percent, which  is backed  by the  full faith  and credit  of the                                                               
state.  The bond market  and the purchasers of those certificates                                                               
feel comfortable that  they have assurance of being  paid and the                                                               
interest rate  is being calculated  on that.   The other  half of                                                               
the funds to construct the building  comes from The Trust, out of                                                               
the  permanent fund,  and  it  carries an  interest  rate of  7.5                                                               
percent.   The latter  is being amortized  over 30  years whereas                                                               
the bonds are being amortized over  20 years.  The purpose of the                                                               
30-year amortization  for The Trust  funds is that it  lowers the                                                               
monthly payment.  All of  the aforementioned brings down the rate                                                               
and makes [the lease] more affordable  to the state tenants.  The                                                               
operating expenses component  is almost a direct  pass through to                                                               
DOA.    He then  noted  that  the  ground underneath  the  office                                                               
building is  being leased separately  from the  ground underneath                                                               
the parking area  in order not to encumber the  parking area land                                                               
with the certificates of participation.                                                                                         
8:53:10 AM                                                                                                                    
REPRESENTATIVE  HARRIS  asked if  the  lease  includes an  escape                                                               
clause for the state.                                                                                                           
MR.  SPERNAK replied  yes, and  added that  if The  Trust doesn't                                                               
operate the building in accordance  with the lease, the state has                                                               
the opportunity to cancel the lease.                                                                                            
REPRESENTATIVE HARRIS asked if the  demand for those offices will                                                               
remain  even if  the trend  of  the state  reducing personnel  in                                                               
Juneau continues.                                                                                                               
MR. SPERNAK said he can't predict that.                                                                                         
8:54:55 AM                                                                                                                    
REPRESENTATIVE  MILLETT recalled  that the  Juneau Empire  quoted                                                             
Mr. Noah as saying that adding  the parking garage would make the                                                               
lease cost prohibitive.   She then asked whether the  cost of the                                                               
parking garage  will be incorporated  into the lease cost  to the                                                               
HARRY  NOAH,  Executive  Director,  Alaska  Mental  Health  Trust                                                               
Authority Land Office, Office of  the Commissioner, Department of                                                               
Natural  Resources,  responded that  the  cost  of parking  is  a                                                               
requirement of leasing  the building to the  state, and therefore                                                               
the cost will  be borne by The  Trust.  The cost  of developing a                                                               
new parking garage was about $20  million in addition to the cost                                                               
of the building, which made  the cost per foot unreasonably high.                                                               
Although The Trust,  he related, was fairly reluctant  to use the                                                               
old  subport for  parking  due  to the  fact  that it's  valuable                                                               
property,  it was  the only  reasonable  way to  proceed at  this                                                               
point.  If and when The  Trust decides to utilize the old subport                                                               
building  area for  other  development, The  Trust  will have  to                                                               
develop  other parking  which would  be  at the  location of  the                                                               
existing  DPS building.   When  The Trust  develops that  parking                                                               
garage,  there  won't  be  an  increase  in  the  lease  cost  or                                                               
additional impact  to the state.   In further response,  Mr. Noah                                                               
confirmed  that The  Trust  will  bear the  cost  of the  parking                                                               
garage and  there will be no  increase to any of  the leases held                                                               
by the state.                                                                                                                   
8:57:13 AM                                                                                                                    
REPRESENTATIVE HARRIS  asked if the cars  currently parking along                                                               
the  street will  be made  to park  in the  parking garage  being                                                               
built on the corner of Main Street and Egan.                                                                                    
MAYOR  BOTELHO said  that  the  city isn't  looking  at car  free                                                               
zones,  at this  point.   In further  response to  Representative                                                               
Harris,  Mayor Botelho  specified  that the  parking garage  will                                                               
have in excess  of 200 parking spots with the  ability to expand.                                                               
He then related  that the Juneau Assembly  Finance Committee took                                                               
action on the expansion of  express bus service, which is another                                                               
manner in  which the city  hopes to alleviate  parking congestion                                                               
and  have  a  bearing  on  the service  of  the  proposed  office                                                               
REPRESENTATIVE HARRIS expressed the desire  to have the street in                                                               
front of the capitol building closed to vehicles.                                                                               
9:00:29 AM                                                                                                                    
KEVIN BROOKS, Deputy  Commissioner, Department of Administration,                                                               
began by  noting that this process  started about a year  ago for                                                               
DOA  as it  decided the  DLWD building  is space  that should  be                                                               
replaced.   The  lease for  the  DLWD building  expires June  30,                                                               
2012.   In recent years  the building's problems  have manifested                                                               
themselves in a number of ways.   For instance, the DLWD building                                                               
has had  water intrusions and  mold problems.  The  problems have                                                               
resulted in  union issues,  grievances, and  moving staff  out of                                                               
the  building.   Therefore,  a year  or so  ago  DOA reached  the                                                               
conclusion  that  it  wouldn't  renew   the  lease  at  the  next                                                               
extension.   However, there's not much  [office space] available.                                                               
The  DOA  approached  The  Trust,  with whom  it  already  has  a                                                               
MR.  BROOKS  informed  the  committee   that  the  existing  DLWD                                                               
building is about 68,000 square feet  and houses 300 people.  The                                                               
Douglas  Island  building,  which  was constructed  in  1961,  is                                                               
nearly  32,000 square  feet and  houses nearly  200 people.   The                                                               
Department of  Public Safety building,  which was  constructed in                                                               
1970 as  a temporary  facility, is about  16,000 square  feet and                                                               
houses  34 people.    The  Douglas Island  building  and the  DPS                                                               
building  will  require  much  investment to  allow  them  to  be                                                               
tenantable.   The  maintenance required  for  the Douglas  Island                                                               
building  would be  replacement  of the  entire  envelope of  the                                                               
building, the roof, and the windows.   He recalled that there are                                                               
no  plans to  move other  state employees  in the  aforementioned                                                               
buildings.   There  could be  an  alternate use  for the  Douglas                                                               
Island  building.     There  would  be   significant  maintenance                                                               
required for the  DPS building as well.  If  this project doesn't                                                               
move forward, then an RFP for  the DLWD building would be put out                                                               
and the other buildings would continue  to be used.  The building                                                               
being proposed  is about  120,000 square feet  and works  for the                                                               
investment  being  discussed  by  The  Trust.    With  regard  to                                                               
parking, all  of the  leases include a  formula that  specifies a                                                               
certain number  of parking spaces.   The location of  the parking                                                               
garage makes no difference to the  state, as a tenant, so long as                                                               
the parking lot  has enough spaces for the people  working in the                                                               
building.    Recalling  earlier discussion  about  the  long-term                                                               
[state  employee]   position  loss,   Mr.  Brooks   informed  the                                                               
committee  that  currently  there  are over  3,300  employees  in                                                               
Juneau.    He further  informed  the  committee that  Juneau  has                                                               
experienced about a 100 position  net loss, which is significant.                                                               
Still, the  office space will be  needed for the long-term.   Mr.                                                               
Brooks  clarified that  the term  of the  lease for  the proposed                                                               
office building  is 20 years with  two 10-year renewals.   Once a                                                               
space is filled,  it's significant to undertake a  lease and thus                                                               
the hope  would be that  the state  would be a  long-term tenant.                                                               
In the end, the  deal has to pencil out for the  state as well as                                                               
The Trust, to which The Trust has been very responsive.                                                                         
9:10:20 AM                                                                                                                    
REPRESENTATIVE HARRIS  surmised that  the state hasn't  given any                                                               
thought as to what to do with the buildings being vacated.                                                                      
MR. BROOKS  reiterated that  the DPS building  could be  used for                                                               
future parking, but  it's hard to specify when  that would occur.                                                               
The  department  is  trying  to  balance  spending  to  keep  the                                                               
buildings   tenantable  without   spending  additional   deferred                                                               
maintenance  money   foolishly.     The  possibilities   for  the                                                               
buildings being  vacated range from  demolishing them  to perhaps                                                               
cold storage  for the  Douglas Island building.   In  response to                                                               
Representative Harris,  Mr. Brooks  confirmed that  the buildings                                                               
could be  sold to the  private sector.   The main priority  is to                                                               
find a replacement  location for DLWD.  However,  if the proposal                                                               
embodied  in  HB  161  moves forward,  options  for  the  state's                                                               
vacated buildings would have to be reviewed.                                                                                    
MR.  BROOKS,  in  further   response  to  Representative  Harris,                                                               
explained  that parcel  3 belongs  to the  state, not  The Trust.                                                               
Therefore, he  wasn't clear  how the  title transfer  would occur                                                               
between the state and The Trust.   "But it's not part of any deal                                                               
we're  working  on  with  this   building  and  this  lease,"  he                                                               
clarified.   He further clarified  that parcel  3 is part  of the                                                               
deal to the  extent it's viewed as a potential  future site for a                                                               
parking garage; but it's not part of the legal deal.                                                                            
9:13:06 AM                                                                                                                    
REPRESENTATIVE HARRIS  surmised that if  The Trust builds  on the                                                               
subport  area, there's  no guarantee  that area  3 would  be made                                                               
available for parking.                                                                                                          
MR. BROOKS answered  that the state isn't in  opposition to such,                                                               
but a deal and arrangement with  The Trust would be required.  He                                                               
noted that DNR  holds title to all land, and  therefore there's a                                                               
process  that has  to be  followed.   He further  noted that  the                                                               
process isn't one that DOA would direct.                                                                                        
9:14:26 AM                                                                                                                    
REPRESENTATIVE KELLER  inquired as  to what  the state  is paying                                                               
The Trust for the parking [at the subport].                                                                                     
MR. BROOKS  responded that  it's a nominal  amount.   He informed                                                               
the committee  that [parking  at the subport]  was utilized  as a                                                               
temporary measure due to all  the other projects occurring.  Work                                                               
is being  done in the  State Office Building parking  garage that                                                               
necessitates the closure of two  levels.  Therefore, [the subport                                                               
parking]  was secured  as  a temporary  measure  to move  parking                                                               
while some  of the state's  own construction projects  were being                                                               
REPRESENTATIVE KELLER  inquired as  to the  amount of  the ground                                                               
lease for the proposed parking in the subport area.                                                                             
MR. BROOKS  said that there wouldn't  be a separate lease  on the                                                               
surface parking.  If that was  the case, the cost per space would                                                               
likely be  astronomical.   If the deal  moves forward,  DOA would                                                               
lease a  building with a certain  number of square feet  that has                                                               
to  have a  certain  amount  of parking  spots  within a  certain                                                               
proximity to the building.                                                                                                      
9:16:26 AM                                                                                                                    
REPRESENTATIVE MILLETT  inquired as to where  the displaced State                                                               
Office  Building  parking  that's  currently  using  the  subport                                                               
parking lot will be diverted.                                                                                                   
MR. BROOKS  reminded members  that the  subport parking  is being                                                               
used temporarily for displaced parking  due to renovations at the                                                               
State Office Building parking garage.   That renovation should be                                                               
completed in the next several  months, and therefore DOA wouldn't                                                               
be in an ongoing relationship  with The Trust for that particular                                                               
REPRESENTATIVE  MILLETT inquired  as to  the current  lease rates                                                               
per square foot  for each of the buildings the  state agencies to                                                               
be  moved are  located.   She  further inquired  as  to how  that                                                               
compares with what will be paid in the new building.                                                                            
MR.  BROOKS said  that he  could  provide that  information.   He                                                               
related that  the department anticipates that  the existing lease                                                               
space for  DLWD is at a  lower cost than  it will be for  the new                                                               
building.  However,  he attributed part of that  to the condition                                                               
of the  existing building  versus that  of a  new building.   Mr.                                                               
Brooks said  that DOA anticipates  an increase in lease  costs no                                                               
matter if  the scenario is  one in which  there's an RFP  or this                                                               
legislation.    With  regard to  the  state-owned  buildings,  he                                                               
related that  it's a very  nominal amount that the  state charges                                                               
itself to direct  money back into the public building  fund to do                                                               
deferred maintenance  and pay  for operating  costs.   Again, the                                                               
costs of  the Douglas  Island building and  the DPS  building are                                                               
lower [than  what's anticipated with the  proposed new building],                                                               
which he  attributed to  the age, quality,  and condition  of the                                                               
9:18:37 AM                                                                                                                    
REPRESENTATIVE  MILLETT surmised  then that  those agencies  will                                                               
face an increase in lease costs for that space.                                                                                 
MR.  BROOKS  stated that  the  costs  wouldn't  be passed  on  to                                                               
agencies.   He  informed the  committee  that DOA  has a  leasing                                                               
budget of  over $40 million  for the entire portfolio  of leases.                                                               
The department  would factor  in the inclusion  of the  new lease                                                               
that would begin in 2012, which  would be included in fiscal year                                                               
(FY)  2013.   Therefore, DOA's  FY  13 budget  would reflect  the                                                               
anticipated lease costs.                                                                                                        
REPRESENTATIVE  MILLETT  expressed  interest in  seeing  a  lease                                                               
market  analysis  of  what's  available  in  Juneau  versus  this                                                               
proposed project.   She then  related that  she is going  to have                                                               
difficulty explaining  to her constituents  the need for  a newer                                                               
waterfront building at  a higher lease cost than  what the market                                                               
is bearing in  Juneau.  She noted that she  recently went through                                                               
a similar situation with Block 39 in Anchorage.                                                                                 
MR. BROOKS  offered to  provide the  cost comparison  analysis to                                                               
the committee.                                                                                                                  
9:21:42 AM                                                                                                                    
DEVEN MITCHELL,  Debt Manager,  Treasury Division,  Department of                                                               
Revenue, clarified  that a certificate  of participation  is when                                                               
title  interest is  provided to  a trustee  with whom  one enters                                                               
into a lease,  which is fractionalized and sold to  investors.  A                                                               
certificate of  participation, which is  very similar to  a bond,                                                               
is a  subject to  appropriation commitment of  the state.   Other                                                               
projects funded  with similar commitments are  the Atwood parking                                                               
garage and  building in Anchorage,  the Goose  Creek Correctional                                                               
Facility,  and   the  virology  laboratory  in   Fairbanks.    He                                                               
explained that there  are two separate leases such  that there is                                                               
a lease  for the operating  cost of the  facility as well  as the                                                               
investment The  Trust makes in  the facility and the  other lease                                                               
is for  purposes of  securing the certificates.   He  opined that                                                               
the two are  very different, in as a much  as the commitment that                                                               
is going to be made  with the certificates of participation would                                                               
be made  to the market.   While the commitment to  pay is subject                                                               
to appropriations  and there is  discretion on  the legislature's                                                               
part,  a failure  would negatively  impact the  state's continued                                                               
access to capitol markets.                                                                                                      
9:24:16 AM                                                                                                                    
REPRESENTATIVE CISSNA  related her  observation that most  of the                                                               
locations  mentioned [with  similar commitments]  weren't Juneau.                                                               
Juneau has its own economy and  situation.  She opined that there                                                               
is risk.  She then inquired  as to Mr. Mitchell's analysis of the                                                               
MR. MITCHELL opined that HB 161  is an interesting proposal in as                                                               
much as  it's the state  and The  Trust partnering.   He recalled                                                               
his involvement with the new  Alaska Psychiatric Institute (API),                                                               
which he said was a similar project as it was a blend of forces.                                                                
9:26:11 AM                                                                                                                    
REPRESENTATIVE  HARRIS  highlighted  that  one  major  difference                                                               
between this proposal and the  API facility is that the functions                                                               
of  the API  facility were  largely involved  with The  Trust and                                                               
mental health providers.  The facility  proposed by HB 161 has no                                                               
connection with mental health providers.                                                                                        
9:26:49 AM                                                                                                                    
REPRESENTATIVE  MILLETT  asked  whether   [the  state]  has  used                                                               
participation bonds for financing of lease space like this.                                                                     
MR. MITCHELL replied yes, adding  that the state uses its subject                                                               
to appropriation credit to acquire  things or build projects.  He                                                               
then pointed out  the Mat-Su example was a lease  revenue bond of                                                               
the  Matanuska-Susitna Borough.    However,  the borough  doesn't                                                               
pledge any  borough assets.   The documentation merely  says that                                                               
the lease that  was entered into by the state  is hereby pledged.                                                               
The last  certificate of  participation from  DOA was  issued for                                                               
the Fairbanks virology laboratory.                                                                                              
9:28:24 AM                                                                                                                    
CHARLES   COLLINS,  President,   Juneau   Chamber  of   Commerce,                                                               
testified in support  of HB 161.  He emphasized  that the project                                                               
proposed in  HB 161 is  important to Juneau, particularly  to the                                                               
businesses of  Juneau.  This  proposed project would  anchor some                                                               
of the  departments in  Juneau and  upgrades the  facilities that                                                               
customers  use.    Furthermore,   the  proposal  is  a  long-term                                                               
solution and provides a long-term  source of funds for The Trust.                                                               
More importantly  to Juneau and  its business, the  project would                                                               
provide consistency to  what business owners can plan  for in the                                                               
future.    Consistency  is  important   as  it  helps  businesses                                                               
forecast their future.  This  project provides an opportunity for                                                               
businesses  in Juneau  because any  construction project  creates                                                               
jobs and  the need to [furnish  and maintain] the building.   For                                                               
many businesses in  Juneau, the number one customer  is the State                                                               
of Alaska, which is why Mr.  Collins said he opposed losing state                                                               
jobs in Juneau.  He then  pointed out that this proposed building                                                               
will bring  diversity to  downtown Juneau.   Although  some would                                                               
suggest  that a  new  hotel  would be  a  better  project on  the                                                               
location, The  Trust is  looking for a  long-term return.   State                                                               
government business,  as the main  economic engine in  Juneau, is                                                               
very important  because services available in  Juneau wouldn't be                                                               
present without it.   State government business  allows Juneau, a                                                               
relatively small town,  the ability to offer  services that might                                                               
not otherwise be  available and increases the quality  of life in                                                               
Juneau.  Mr. Collins related  that the Juneau Chamber of Commerce                                                               
and  the business  community of  Juneau  are very  happy to  have                                                               
state jobs  and the  legislature here in  Juneau.   This building                                                               
will  allow  better  department  interaction  and  a  sharing  of                                                               
resources at a central location.                                                                                                
9:33:34 AM                                                                                                                    
CO-CHAIR HERRON, upon determining no  one else wished to testify,                                                               
closed public testimony.                                                                                                        
9:33:40 AM                                                                                                                    
CO-CHAIR MUNOZ  related her belief  that HB 161 proposes  a great                                                               
project that  would serve  The Trust  and its  beneficiaries well                                                               
while bringing  much needed office  space to the community.   She                                                               
indicated her  agreement with Mr. Collins  comments regarding the                                                               
stability  the  building  would  bring to  the  community.    She                                                               
characterized the legislation as a  great opportunity for all and                                                               
expressed her hope that there  would be action on the legislation                                                               
9:34:27 AM                                                                                                                    
REPRESENTATIVE MILLETT said that she  would like to see the lease                                                               
information prior to moving the  legislation.  With regard to the                                                               
participation bonds,  Representative Millet highlighted  that all                                                               
of  the  other   projects/buildings  discussed  were  state-owned                                                               
facilities.   However, the facility  proposed in HB 161  won't be                                                               
owned by the state.                                                                                                             
9:35:07 AM                                                                                                                    
CO-CHAIR HERRON  relayed that  he has asked  the sponsor  to work                                                               
with  members prior  to  moving  the legislation  on  March  17.                                                                
Therefore, HB 161 was held over.                                                                                                
9:36:25 AM                                                                                                                    
The committee took an at-ease from 9:36 a.m. to 9:39 a.m.                                                                       

Document Name Date/Time Subjects
FNSB Support for HB153.pdf HCRA 3/12/2009 8:00:00 AM
HB 153
draft cshb153.PDF HCRA 3/12/2009 8:00:00 AM
HB 153
HB 150 Sectional Analysis.doc HCRA 3/12/2009 8:00:00 AM
HCRA 3/17/2009 8:00:00 AM
HB 150
HB150 - SB4002Z.PDF HCRA 3/12/2009 8:00:00 AM
HCRA 3/17/2009 8:00:00 AM
HB 150
HB 150 - PCE One-Pager (3.12.09).doc HCRA 3/12/2009 8:00:00 AM
HCRA 3/17/2009 8:00:00 AM
HB 150
HB 156 Background Part 2 Support Letters.pdf HCRA 3/12/2009 8:00:00 AM
HCRA 3/17/2009 8:00:00 AM
HB 156
HB 156 Background Part 3 Relevant Alaska Statute.pdf HCRA 3/12/2009 8:00:00 AM
HB 156
HB 156 Sectional Summary.pdf HCRA 3/12/2009 8:00:00 AM
HCRA 3/17/2009 8:00:00 AM
HB 156
HB 156 Sponsor Statement (2).docx.doc HCRA 3/12/2009 8:00:00 AM
HCRA 3/17/2009 8:00:00 AM
HB 156
HB 150 Sponsor Statement.doc HCRA 3/12/2009 8:00:00 AM
HCRA 3/17/2009 8:00:00 AM
HB 150
HB 161 legal memo.PDF HCRA 3/12/2009 8:00:00 AM
HCRA 3/17/2009 8:00:00 AM
HB 161
HB 161 sponsor statement.PDF HCRA 3/12/2009 8:00:00 AM
HCRA 3/17/2009 8:00:00 AM
HB 161
HB150-CCED PCE Overview .pdf HCRA 3/12/2009 8:00:00 AM
HCRA 3/17/2009 8:00:00 AM
HB 150
HB150-CED-AEA(Fund Cap) 03-06-09.pdf HCRA 3/12/2009 8:00:00 AM
HCRA 3/17/2009 8:00:00 AM
HB 150
HB150-CED-AEA-03-06-09.pdf HCRA 3/12/2009 8:00:00 AM
HCRA 3/17/2009 8:00:00 AM
HB 150
HB150-PCE primer II (2).doc HCRA 3/12/2009 8:00:00 AM
HB150TestimonyPacket.PDF HCRA 3/12/2009 8:00:00 AM
HCRA 3/17/2009 8:00:00 AM
HB 150
HB156 Background Part 1 FNSB Ordinance.pdf HCRA 3/12/2009 8:00:00 AM
HCRA 3/17/2009 8:00:00 AM
HB 156