Legislature(2011 - 2012)BARNES 124
02/03/2011 10:15 AM House ECON. DEV., TRADE & TOURISM
| Audio | Topic |
|---|---|
| Start | |
| HB119 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 119 | TELECONFERENCED | |
HB 119-AIDEA: PROCUREMENT; PROJECTS
10:17:12 AM
CHAIR HERRON announced that the only order of business would be
HOUSE BILL NO. 119, "An Act relating to the procurement of
supplies, services, professional services, and construction for
the Alaska Industrial Development and Export Authority; relating
to the definition of 'own' for the economic development account;
relating to the definitions of 'development project', 'plant',
'facility', and 'project' for the Alaska Industrial Development
and Export Authority; and providing for an effective date."
10:17:19 AM
CHAIR HERRON introduced surprise speaker Representative Doogan.
10:17:50 AM
REPRESENTATIVE MIKE DOOGAN, Alaska State Legislature, recalled
that in 1991 Governor Hickel spoke of civilization's need for
big projects, such as President Kennedy's challenge to put a man
on the moon. Governor Hickel's big project was to build a 1,700
mile aqueduct to carry water from Alaska to Southern California.
Represented Doogan reviewed the plan and noted that construction
of an aqueduct would have created many jobs, and would have been
an economic stimulus for the state and the West Coast.
Furthermore, water is more important to the world than oil; in
fact, at the price of $1.50 per 16 ounce bottle, water is worth
$504 per barrel and is about five times more valuable than oil.
Furthermore, after taxation and shipping, the state's annual
revenue for the sale of water would be about $30 billion.
Representative Doogan advised this project is an example of a
missed opportunity, and he offered to "lay down the groundwork
and get the ball rolling, if not get the water, rolling."
10:21:38 AM
REPRESENTATIVE KELLER referred to the impending shortage of
water from the Colorado River.
10:22:39 AM
REPRESENTATIVE GARDNER observed that access to clean water is a
serious topic globally, and related a conversation about the
purchase of aquifer rights.
10:23:32 AM
CHAIR HERRON stated his intent to compile a report on all of the
state's missed economic opportunities.
10:24:13 AM
REPRESENTATIVE DOOGAN regretted his past ridicule of Governor
Hickel's water pipeline proposal.
10:25:18 AM
TED LEONARD, Executive Director, Alaska Industrial Development &
Export Authority (AIDEA), Alaska Industrial Development & Export
Authority (AIDEA) and Alaska Energy Authority (AEA), Department
of Commerce, Community & Economic Development (DCCED), informed
the committee he would present a sectional analysis of HB 119
and discuss the merits of the bill. Mr. Leonard stated the bill
is a continuation of AIDEA's process to update and expand its
responsibility to diversify and grow Alaska's economy. Section
1 amends the state's procurement code to allow AIDEA to adopt
its own regulations for procurement in a similar way to other
state corporations such as the Alaska Housing Finance
Corporation (AHFC). He stressed that the procurement
regulations would reflect the competitive bid process and
provide for reasonable and equitable bid opportunities for
vendors, and would allow AIDEA the flexibility to more
effectively manage the procurement process in conjunction with
the private sector. Section 2 enables AIDEA to invest directly
into a corporation or a Limited Liability Corporation (LLC) in
order to establish partnerships with the private sector in
owning a portion of a project. Mr. Leonard advised that recent
legislation granted AIDEA the ability to own a portion of a
project; however, Section 2 of the proposed legislation is a
more effective way to work with the private sector, because LLCs
or sub corporations are generally the vehicles used by private
corporations to form partnerships and facilitate projects.
Also, using a LLC or a separate corporation can limit AIDEA's
liability; for example, liability could be limited to that of
the corporation's insurance or to the investment that AIDEA or
the other partners put in the project. Sections 3-5 of the bill
would update and expand the types of development projects that
AIDEA may own, operate, or participate in with other developers.
Currently, definitions in statute limit AIDEA to natural
resources, industrial development, energy, and tourism projects;
however, with the beginnings of a growing and more diversified
economy in the state, other areas of business development such
as aerospace, logistics, communications, and federal activities
are of interest. Mr. Leonard concluded that the enactment of
the proposed sections will also allow AIDEA to provide economic
development projects in partnership with federal agencies or the
military, thereby strengthening the presence of federal and
military facilities in the state.
10:31:23 AM
REPRESENTATIVE GARDNER asked whether the proposed legislation
has any connection to the Knik Arm Bridge and Toll Authority
(KABATA).
MR. LEONARD said no. The expansion of the definitions was
directed by AIDEA's strategic plan.
10:32:08 AM
MARK DAVIS, Economic Development Officer, Alaska Industrial
Development & Export Authority (AIDEA), Alaska Industrial
Development & Export Authority (AIDEA) and Alaska Energy
Authority (AEA), Department of Commerce, Community & Economic
Development (DCCED), in further response to Representative
Gardner, opined AIDEA was always authorized to participate in
KABATA, however, AIDEA is required to make an adequate return on
investment and analyzes every project with that requirement in
mind. He pointed out that AIDEA may be interested in other
transportation projects, such as fuel storage facilities at
airports, which are prohibited under current statute. This is
the reason to amend AS 44.88.900(8) to clarify that "roads" may
be a component of a project.
10:33:33 AM
MR. LEONARD added that there is no reason for AIDEA to be
involved in KABATA, because KABATA has the powers to bond and
finance the project without assistance from AIDEA.
10:33:48 AM
CHAIR HERRON asked, "Representative Gardner, does that mean that
we're going to maintain these silos between KABATA and AIDEA?"
REPRESENTATIVE GARDNER said she did not know.
10:34:01 AM
REPRESENTATIVE MUNOZ asked Mr. Leonard, "Have you identified
specific projects that could benefit with this change?"
10:34:18 AM
MR. LEONARD referred to the project definition and said it
mainly identifies the types of projects. The change clarifies
the ability for AIDEA to assist in an industrial road that is
not part of a separate project. Additionally, it would allow
AIDEA to invest in healthcare facilities, and he gave an
example. Mr. Leonard assured the committee "this definition is
not based on a certain project waiting in the wings for us to
change this definition."
MR. DAVIS observed that the healthcare facility and the airport
would have been good investments for the agency. Research into
other states' development agencies revealed "holes in our
definitions." Thus, AIDEA found other agencies were able to
make investments to help their economies that AIDEA could not
make.
10:37:07 AM
MR. LEONARD acknowledged that AIDEA is interested in the jet
fuel storage project at the Ted Stevens Anchorage International
Airport - although a project is not presently underway - and air
transport is part of the broadening of the definition.
10:37:40 AM
REPRESENTATIVE TUCK referred to page 3, lines 28-31, of the
proposed legislation and asked for clarification that the
addition of "transportation" does not encroach on the Department
of Transportation & Public Facilities (DOTPF) funded facilities,
but that private lands and private roads are the subject areas.
He then asked whether DOTPF would normally facilitate a fuel
storage facility at the Anchorage airport.
10:38:51 AM
MR. LEONARD advised DOTPF is involved in the fuel storage tanks,
but AIDEA can help facilitate the financing of the tanks on
DOTPF land more effectively. In fact, one of the abilities
AIDEA has is to assist in the international airport functions of
the state.
10:39:44 AM
MR. DAVIS noted that AIDEA is authorized to support export
functions. He further explained that AIDEA's interpretation of
transportation is as a sector of the economy, not that AIDEA
will be building roads, but that as an identified and important
sector of the economy, transportation is included as part of
AIDEA's strategic plan, and in the proposed definition.
10:40:52 AM
REPRESENTATIVE TUCK re-stated his search for a defining line
between what DOTPF will be funding through the normal state
procurement process, and AIDEA's function. He acknowledged that
the process through AIDEA, especially when dealing with private
enterprises, is quicker, but opposed circumventing DOTPF for the
purpose of avoiding the appeal process. A question remains
about the division between the agencies regarding
transportation, airports, and highways, whether on private or
public land.
10:42:26 AM
MR. LEONARD gave the example of the industrial road owned by
AIDEA at the Red Dog mine, which traverses NANA Regional
Corporation Inc., land and federal land. The agency has the
expertise to work with the private sector on investments on
federal or state lands. Another example is the consortium that
runs the fuel tanks at the Anchorage airport, because the tanks
are on leased land and AIDEA can help build or finance the
expansion of the tanks. He encouraged the committee to look at
AIDEA in that role, as it works with other state agencies on
projects involving the private sector.
10:44:24 AM
MR. DAVIS pointed out one of the divisions between DOTPF and
AIDEA is that AIDEA must earn a rate of return on its
investments, therefore, AIDEA cannot invest in a traditional
road.
10:44:48 AM
REPRESENTATIVE TUCK asked for a list of "community public
purposes." [Found on page 3, line 30, of the proposed
legislation.]
10:45:24 AM
MR. LEONARD explained community public purposes are a general
catch-all definition that would include healthcare,
transportation, and other facilities that promote economic
development in a community.
10:45:59 AM
MR. DAVIS recalled the survey of other states found that most
economic development authorities use this language to support
health clinics and technical and vocational training facilities;
however, these projects are only appropriate for AIDEA if "they
can pay for themselves."
MR. LEONARD stressed that AIDEA must also show there is an
economic development reason for the project.
10:47:03 AM
REPRESENTATIVE TUCK expressed his concern that community public
purposes could be a water supply, telephone utilities, or public
services which should be provided by government, but "now are
going to have to have a for-profit requirement."
10:47:54 AM
REPRESENTATIVE GARDNER asked for assurance that the changes to
procurement do not affect matters of "local hire, worker's
compensation, and prevailing local wages ... that's covered in
Title 36."
10:48:34 AM
MR. DAVIS advised that the aforementioned statute is AS
36.30.170(b) that requires the following:
That the bidder holds a business license, submits a
bid for goods, services, under the name as appearing
on their actual business license, and has maintained a
place of business in the state by the bidder for a
period of at least six months .... That's about the
limit of the statute's requirement. [The bidder] is
incorporated or qualified to do business under the
state, is a limited liability company organized under
AS 10.50 and all members are residents of the state,
is a partnership and that or it's a joint venture.
MR. DAVIS clarified that the statute "is not local hire, but it
is a local preference." The Alaska statute establishing local
hire was declared unconstitutional by the U.S. Supreme Court in
1979. He said the present statute is incorporated in the
proposed bill.
REPRESENTATIVE GARDNER asked whether the language was "as strong
as we can be for local hire."
MR. DAVIS said, "That's the statute we have."
10:49:51 AM
CHAIR HERRON indicated that four questions were presented to Mr.
Leonard and Mr. Davis for their written response at a later
date. The responses will be distributed to committee members
upon receipt.
10:50:29 AM
REPRESENTATIVE TUCK asked for a list of the economic
development agencies used as samples for the proposed statutory
changes.
10:51:10 AM
REPRESENTATIVE OLSON moved to adopt Amendment 1, identified as
27G-1, which read:
Page 1, line 5, following "Authority;":
Insert "relating to the Alaska Industrial
Development and Export Authority creating subsidiaries
regarding projects financed under AS 44.88.172;"
Page 2, following line 24;
Insert a new bill section to read:
"*Sec. 3. AA 44.88 is amended by adding a new
section to read:
Sec. 44.88.178. Creation of subsidiaries.
The authority may create one or more subsidiary
corporations for the purpose of acquiring,
construction, owning, or financing a project financed
under AS 44.88.172. A subsidiary corporation created
under this section may be incorporated under AS
10.20.146 - 10.20.166. The authority may transfer
assets of the authority to a subsidiary created under
this section. A subsidiary created under this section
may borrow money and issue bonds as evidence of that
borrowing, and has all the powers of the authority
that the authority grants to it. Unless otherwise
provided by the corporation, the debts, liabilities,
and obligations of a subsidiary corporation created
under this section are not the debts, liabilities, or
obligations of the authority."
Renumber the following bill sections accordingly.
10:51:16 AM
CHAIR HERRON objected for the purposes of discussion.
10:51:33 AM
MR. LEONARD informed the committee Amendment 1 goes along with
the spirit of Section 2, and allows AIDEA to be involved in a
LLC or corporation. For example, AIDEA could set up a
subsidiary corporation for the purpose of developing a project;
the subsidiary corporation would have powers to develop the
project, but would be able to protect AIDEA's assets because the
debts, liabilities, and obligation of a subsidiary corporation
are not the debts, liabilities, or obligations of the authority.
He concluded this is an effective way to develop a project and
at the same time, protect the overall assets of the authority.
10:52:47 AM
REPRESENTATIVE GARDNER asked whether Amendment 1 is intended to
impact existing projects.
10:53:00 AM
MR. LEONARD expressed AIDEA's belief that the amendment
strengthens the agency's ability to participate in LLCs and
subsidiary corporations because it protects AIDEA's assets. The
subject came to light when the agency researched natural
resource projects related to oil and gas businesses, which may
carry risks.
10:53:55 AM
CHAIR HERRON asked the presenters to review the written
questions and respond to the chair by 2/7/11.
[House Bill 119 was held for further testimony.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB119_Bill-Projects.pdf |
HEDT 2/3/2011 10:15:00 AM HEDT 2/8/2011 10:15:00 AM SFIN 4/15/2011 9:00:00 AM |
HB 119 |
| HB119_FiscalNote-Projects.pdf |
HEDT 2/3/2011 10:15:00 AM HEDT 2/8/2011 10:15:00 AM SFIN 4/15/2011 9:00:00 AM |
HB 119 |
| HB119_RequestForHearing-Projects.pdf |
HEDT 2/3/2011 10:15:00 AM HEDT 2/8/2011 10:15:00 AM |
HB 119 |
| HB119_SectionalAnalysis-Projects.pdf |
HEDT 2/3/2011 10:15:00 AM HEDT 2/8/2011 10:15:00 AM SFIN 4/15/2011 9:00:00 AM |
HB 119 |
| HB 119 - 1.21.11 Gov Transmittal LTR.pdf |
HEDT 2/3/2011 10:15:00 AM HEDT 2/8/2011 10:15:00 AM |
HB 119 |
| HB119_Amendment-Projects.pdf |
HEDT 2/3/2011 10:15:00 AM HEDT 2/8/2011 10:15:00 AM SFIN 4/15/2011 9:00:00 AM |
HB 119 |