Legislature(1995 - 1996)
04/15/1996 02:00 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 162
"An Act relating to land used for agricultural purposes
and to state land classified for agricultural purposes
or subject to the restriction of use for agricultural
purposes only; and annulling certain program
regulations of the Department of Natural Resources that
are inconsistent with the amendments made by this Act."
BRETT HUBER, STAFF, SENATOR GREEN testified in support of SB
162. He noted that SB 162 was introduced to facilitate the
growth of agriculture in Alaska. He asserted that
Agriculture in Alaska is currently a $30.0 million dollar
annual industry. It is a renewable industry that creates
new wealth and provides jobs. He explained that the primary
intent of the bill is to provide for the conveyance of fee
simple title for agricultural land subject to restrictive
covenant running with the land limiting the use to
agricultural purpose. The legislation protects the
agricultural utilization of the land while allowing the
individual farmer clear property rights, protection of due
process and greater flexibility in securing conventional
financing.
Mr. Huber maintained that agricultural land owners will have
the ability to make business decisions responsive to the
market place and based on individual circumstances. He
added that the legislation will allow more Alaskan farmers
an opportunity to succeed and further contribute to the
State's economy. He noted that the legislation is supported
by the agricultural community.
Mr. Huber reviewed the legislation by section. Section 1
outlines the primary intent of the bill to provide for the
conveyance of fee simple title for agricultural land.
Representative Brown asked if fee simple title would include
subsurface land. Mr. Huber noted that subsurface land would
not be included.
Mr. Huber noted that section 2 is enabling language giving
the Department the option to eliminate the requirement for
cadastral survey of agricultural lands prior to disposal.
Representative Brown asked how people would establish land
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boundaries. Mr. Huber explained that this provision would
eliminate the requirement to survey areas that had been
previously surveyed. The provision is only enabling
language. The land would still be subject to municipal
planning regulations.
Representative Brown questioned if the State would be liable
if the land was not properly surveyed. Mr. Huber responded
that the Division would make that determination before
disposal.
Sections 3 is enabling language allowing the Department the
option to dispose of agricultural land under a site specific
plan if no regional use land plan is in place.
Section 4 removes the Department's authority to require pre-
qualification to participate in an agricultural development
project under former AS 44.33.475, repealed in 1979. This
section also allows the Department to modify existing farm
development schedules to respond to changing economic
circumstances.
Section 5 is a technical change to reflect the repeal of the
former Agricultural Action Council statutes. Mr. Huber
added that section 6 allows the Department to dispose of
land by aliquot parts. This corresponds to the language in
section 2.
Section 7 clarifies contract terms with regard to the
Department's options in declaring a payment moratorium for
agricultural land contracts.
Section 8 provides that the interest rate for agricultural
land shall not exceed 9.5 percent. This section also allows
the inclusion of interest in the payment moratoriums
authorized by AS 38.05.065(h).
Section 9 establishes the covenant that runs with the land
and limits or restricts its utilization for agricultural
purpose. This section also outlines the subdivision
parameters for agricultural land.
Section 10 provides for a corresponding change in
agricultural land title status for agricultural land that
has been transferred to municipalities. In response to a
question by Representative Therriault, Mr. Huber explained
that this section provides for the same change in title
transfer to the land that was transferred from
municipalities under the municipal entitlement, as it would
for a holder of private agricultural rights land. He
explained that a portion of municipal entitlement lands were
designated for agricultural utilization only. This allows
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the municipalities to go back and change their title status.
Representative Brown questioned if the legislation would
effect existing agricultural disposal. Mr. Huber replied
that the legislation would effect agricultural land
currently in utilization that has already been competitively
disposed. Representative Brown asked if the competitive
lease terms would be modified. Mr. Huber observed that
before or after the transfer of title or the changes allowed
by the legislation, the individual that purchased the land
had the opportunity to use it for agricultural purposes.
Section 11 states that the Department may require the land
owner to cooperate with soil conservation districts.
Section 11 also restricts the Department's use of farm
development plans unless they are modifiable due to economic
hardship or other extenuating circumstances. This section
also allows the landowner the right to construct
agricultural related improvements, the right to use the land
for purposes that are incidental and not inconsistent with
the primary agricultural use, the right to utilize gravel
and remove and dispose of timber, the right to sell and
subdivide agricultural land as set out by covenant and
provides a definition of "agricultural purposes". This
section also ensures remedy for breach of covenant will be
by civil proceeding.
Sections 12 and 13 are transitional sections providing for
the transfer of agricultural rights only title to fee simple
title with agricultural covenants. This process is
applicant driven. The land owner may apply to the
Department for new title and must provide, at their cost,
proof of ownership through title insurance or title report.
Section 14 repeals Departmental regulations inconsistent
with the statutory changes made through the legislation.
BILL WARD, WARD FARMS, SOLDOTNA testified via the
teleconference network. He spoke in support of SB 162. He
stressed that the legislation has created a sense of
optimism in the agricultural community. He maintained that
the legislation will take the State out of the agricultural
industry. He stressed that there is no risk to the State.
Mr. Ward discussed the fiscal note. He stressed that owners
are willing to pay the cost of the legislation. He
emphasized that there would be a reduction in state
administration costs. He observed that the agricultural
industry is growing 10 percent a year.
MIKE SCHULTZ, DELTA JUNCTION testified via the
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teleconference network. He spoke in support of SB 162. He
observed that the legislation will resolve title problems
relating to agricultural lands.
LARRY PETTY, NORTH POLE testified via the teleconference
network.
He maintained that the Agricultural Revolving Loan Fund does
not have sufficient funds to loan to all the farmers in the
State. He observed that without titles it is impossible to
obtain traditional loans or borrow money to build homes on
the land.
ART GRISWOLD, NORTH POLE testified via the teleconference
network. He spoke in support of SB 162. He maintained that
agricultural farming should be a private industry.
JOHN GLOTFELTY, NORTH POLE testified via the teleconference
network. He spoke in support of SB 162. He stressed the
difficulty in obtaining loans. He observed that he could
obtain federal funding if he had title to the land.
ED BOSTROM, NORTH POLE testified via the teleconference
network. He spoke in support of SB 162. He observed the
importance of SB 162 in promoting economic development in
agriculture. He maintained that the current regulations
regarding agriculture are detrimental to the industry. He
noted other groups in support of SB 162.
PETE ROBERTS, HOMER testified via the teleconference
network. He spoke in support of SB 162. He emphasized that
SB 162 clears up ambiguities in regard to title rights of
agricultural land. He asserted that the State should not
micro manage small businesses.
DENNIS WADE, HOMER testified via the teleconference network.
He spoke in support of SB 162. He noted problems associated
with agricultural land titles. He maintained that the
lottery system should be abolished. He asserted that land
disposed of by the lottery is being used for residential
purposes only.
HARVEY BASKINS, WASILLA testified via the teleconference
network. He spoke in support of SB 162. He maintained that
SB 162 is the most aggressive piece of legislation he has
seen. He noted problems with the lack of title. He
maintained that he is still a tenant farmer for the State.
He observed that farmers can only borrow money from the
Agricultural Revolving Loan Fund.
JOHN CRAMER, WASILLA testified via the teleconference
network. He spoke in support of SB 162. He noted that
interest rates in the private sector are lower. He
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maintained that the legislation will encourage agriculture.
Representative Brown expressed concern regarding how
existing contract provisions would be affected.
RON SWANSON, DIRECTOR, DIVISION OF LANDS, DEPARTMENT OF
NATURAL RESOURCES explained that the legislation will convey
the land in fee simple with an agricultural covenant. If
the land is not used for agricultural purposes the State
would have to go to civil court to enforce the covenant.
This would give banks sufficient security for loans. He
maintained that there will be no difference "on the ground".
Representative Brown referred to section 4. She questioned
what development requirements will remain. Mr. Swanson
noted that previous sales required that bidders were pre-
qualified. The Court ruled that the legislature did not
have legislative authority to require pre-qualification of
bidders. The Department subsequently obtained legislative
authorization. However, the Department has not pre-
qualified individuals since legislative authorization was
obtained. He added that if economic consideration change
certain conditions could be waived. He stated that it is
not the Department's intent to direct farmers regarding
which crops to grow. He stressed that the Department of
Natural Resources's concern is that the land be used for
agricultural purposes.
(Tape Change, HFC 96-120, Side 2)
Mr. Huber referred to page 7, section 11. He noted that the
Department has the ability to require a farm development
plan if they feel it is reasonable. The plan would need to
be modifiable due to economic hardships. Representative
Brown maintained that the language is confusing. She
suggested that section 7 be modified to eliminate the
provision regarding development plans.
Mr. Huber observed that the Department does not want to
differentiate between agricultural purposes. He stressed
that section 7 allows the Department to require that there
is agricultural utilization without the ability to determine
how the land has to be used.
Mr. Swanson explained that failure to comply with the
development plan would be a breach in contract. This could
be resolved through administrative action. Representative
Brown summarized that the lease could be cancelled if an
individual is not in compliance with the development plan.
Mr. Swanson clarified that the legislation does not require
that the land be used for agricultural purposes, but if the
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land is used it must be for agricultural purposes.
In response to a question by Representative Brown, Mr.
Swanson stressed that contracts will not be renegotiated.
The only thing the Department will modify is the deeds that
have been issued. If an individual wants to have their deed
modified they must provided the title report and other
required documents. Any new patents that are issued after
the contract has been met and paid for will contain the new
language. New sales will come under the new provisions.
In response to a question by Representative Grussendorf, Mr.
Swanson stated that agricultural land in probate would be
treated the same as any agricultural land. Current
regulations allow agricultural land to be subdivided into
unlimited 40 acres parcels. Under the current law the 40
acre parcels cannot be built upon. The legislation would
allow land to be subdivided into 40 acres or greater
parcels, but places a limit of four subdivided portions per
contract. Under the legislation improvements can be put on
the four subdivided parcels. Residences can be put on the
land, but the land must be used for agricultural purposes.
Representative Therriault noted that farmers have difficulty
selling portions of their property if improvements are
denied. He referred to section 11 on page 6.
Mr. Huber explained that it is possible that a land
purchaser would receive help from the Division in putting
together a business or farm plan. The intent is to leave
the Division with discretion. He added that if a farm
development plan is required it must be modifiable.
Co-Chair Hanley asked why a 9.5 percent interest rate was
elected. Mr. Huber observed that the Senate Finance
Committee recommended a 9.5 percent interest rate. He
observed that 9.5 percent is the interest rate used for
small business loans. Mr. Swanson emphasized that the
interest rate cannot exceed 9.5 percent. The rate could be
below 9.5 percent.
Representative Brown noted that section 8 does not apply to
existing moratoriums. Mr. Swanson observed that the use of
timber and gravel is allowed if it is used on site and is
needed for agricultural development. Representative Brown
thought that the legislation would allow removal and sale of
gravel and timber as long as it is used for agricultural
purposes. Mr. Huber clarified that subsection (3) requires
that the gravel or timber be used on the parcel conveyed.
Representative Brown maintained that the ability to put a
residence on subdivided land would increase land value. Mr.
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Swanson explained that the Department's calculations show
that prices would remain approximately the same based on
appraisals by private industry. He noted that Delta
Junction farms are expanding. He asserted that farmers will
be able to live on their farms.
Representative Brown referred to subsection (e) on page 7.
She asked what the State can use to enforce the provisions.
Mr. Swanson stressed that it would be the same as any
reality provision. The only enforcement that would carry
over is the agricultural covenant.
Mr. Swanson noted that approximately 230 contracts are paid
off and could be conveyed fee simple. Mr. Huber noted that
the transfer is at the request of the land holder. He
reiterated that the land owner must provide the Department
with required documentation. Representative Therriault
added that those that need loans will initiate the transfer.
In response to a question by Representative Brown, Mr.
Swanson noted that the legislation was reviewed by the
Office of the Attorney General.
Representative Martin MOVED to report CSSB 162 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note. Co-Chair Hanley noted that the
fiscal note contained an error in the second year's
calculation of general funds. Mr. Swanson noted that the
fiscal note would be revised to reflect the correct amount
of 11.4 thousand dollars in the general funds funding
source. There being NO OBJECTION, it was so ordered.
CSSB 162 (FIN) was reported out of Committee with a "do
pass" recommendation and with two fiscal impact notes by the
Department of Natural Resources, one dated 2/14/96.
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