Legislature(2003 - 2004)
03/28/2003 01:05 PM House RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 97-LONG-TERM LEASES OF ALASKA RR LAND Number 2839 CHAIR FATE announced that the next order of business would be HOUSE BILL NO. 97, "An Act authorizing a long-term lease of certain Alaska Railroad Corporation land at Anchorage; and providing for an effective date." The committee took a brief at-ease at 1:57 p.m. Number 2804 REPRESENTATIVE VIC KOHRING, Alaska State Legislature, sponsor, explained that HB 97 would extend the lease option available on some property at Government Hill in Anchorage from 55 to 75 years. Thus a developer wishing to build senior housing on the property would be able to qualify for a U.S. Department of Housing and Urban Development (HUD) 202 grant. Representative Kohring noted that just last year the legislature passed legislation that extended the lease on lands owned by the Alaska Railroad Corporation (ARRC) to 55 years so that developers could have a longer period of time and qualify for financing. Shortly thereafter, HUD specified that for the HUD 202 grant, a 75-year lease is required rather than a 55-year lease. REPRESENTATIVE KOHRING informed the committee that Alaska Enfranchise Facilities, Inc., wishes to build [a senior] facility funded through the HUD 202 grant. However, the developer needs a 75-year lease to build. Therefore, HB 97 provides an extension on that particular piece of property on Government Hill. Number 2735 REPRESENTATIVE MASEK posed a situation in which there is development in the future and this project is in the way. In such a situation, would the state or the railroad have to buy out those who are building on the site? She inquired as to the impact this proposed project could have on long-term port expansion plans for Anchorage. REPRESENTATIVE KOHRING responded that although he couldn't predict the direction of the port expansion, he didn't expect the port to expand in the direction of Government Hill. With regard to Representative Masek's concern with the Knik Arm crossing, he said the location of that crossing hadn't been determined and thus he didn't believe it would be prudent to hold up the construction of this project, since there was no knowledge of when or if the crossing would be built. He said he has seen some of the proposed routes; the one receiving the most focus is to the west of Government Hill, far from the proposed building site. He added that the location of the proposed senior housing is in a highly developed area. REPRESENTATIVE MASEK asked where the state would fall if HB 97 was passed and later this project was in the way [of the construction of the Knik Arm crossing]. REPRESENTATIVE KOHRING answered that he didn't know who would ultimately be responsible. However, he guessed that the federal government would ultimately be responsible because it would likely fund the project. He offered to research the issue. Number 2576 REPRESENTATIVE KERTTULA asked why this isn't a general grant of leasing authority to the railroad, rather than a special grant. "Why don't we just take a look at the policies of the railroad and make it general?" she asked. REPRESENTATIVE KOHRING agreed that the legislature could make a blanket extension from 55 years to 75 years. He deferred to the ARRC representative. REPRESENTATIVE KERTTULA explained her concern that if a law of general applicability can be passed [it would be better because] there may be constitutional problems with regard to special legislation. Number 2515 WENDY LINDSKOOG, Director, External Affairs, Alaska Railroad Corporation, acknowledged that this question has been coming up throughout the hearing process. She explained that ARRC's statutes specify that it has the broad authority to lease land for up to 55 years. However, the law is written such that ARRC has to obtain specific legislative approval to lease land for over 55 years unless ARRC reserves the right to terminate the lease. Therefore, the law requires that the railroad be specific with regard to the exemptions ARRC seeks. Ms. Lindskoog related her belief that Legislative Legal and Research Services found that [interpretation] to be consistent. REPRESENTATIVE KERTTULA said ARRC's enabling statute could be changed to make [the railroad's lease option] longer if the legislature so desires. She asked if the aforementioned is a good idea. MS. LINDSKOOG informed the committee that last year there was legislation that obtained authorization for the railroad to increase its lease from 35 years to 55 years, with which ARRC is comfortable. At that time, HUD requirements were for 40 years. However, the rules for HUD changed to 75 years. Number 2394 CHAIR FATE asked if ARRC has any other requests for extension of lease terms. MS. LINDSKOOG answered that the 55 years brings ARRC in line with what other state agencies, such as the University of Alaska, have. She reiterated ARRC's comfort with the 55 years. At this point, there are no other requests for leasing land for more than [55 years]. In further response to Chair Fate, Ms. Lindskoog said she didn't anticipate any other [lease requests beyond the 55 years] unless another HUD financing proposal surfaces. She said it's hard to guess. REPRESENTATIVE KOHRING suggested that there was somewhat of a precedent for lease extension when there was the change from 45 to 55 years for the Healy housing project in 2000. REPRESENTATIVE KERTTULA asked what this lease is for and whether there are any specific requirements for the lease itself. Number 2295 MARK MARLOW, Alaska Enfranchise Facilities, Inc. (AEF), confirmed that the lease is just for the land. REPRESENTATIVE KERTTULA pointed out that the claim has been that [HB 97] is necessary because of HUD financing for senior housing. She asked what guarantee the state has that the land will be used for [senior housing] if the lease is only for the land. MR. MARLOW answered that if HB 97 passes, this lease isn't automatically extended. This legislation merely gives ARRC's board of directors the authority to extend the lease if they wish to do so. He pointed out that ARRC's board of directors can make any extension contingent on the land's being utilized for this HUD 202 grant. REPRESENTATIVE KERTTULA asked what Mr. Marlow intends to do with the land if the extension is granted or if it isn't. MR. MARLOW replied that, in any event, there will be a multifamily housing project built on the land. However, he said his desire is to position the property to be eligible for a HUD 202 grant through AEF. The applications are due at the end of May. He agreed with Representative Kerttula that the aforementioned is the reason for the 75 years. Number 2207 REPRESENTATIVE KERTTULA asked if there is any binding agreement that Mr. Marlow could enter into now in order to assure [the legislature] that the land will be used for senior housing. MR. MARLOW related his understanding that such an agreement would be appropriate to enter into with ARRC's board of directors. REPRESENTATIVE KERTTULA surmised, "So that before they extend your lease you've entered into something that's binding." MR. MARLOW replied, "That's correct." In further response, he said he'd applied to lease the land through ARRC's leasing policy guidelines. He related his understanding that there was another interested party, although it didn't pursue its application. REPRESENTATIVE KERTTULA asked, "Would that change if the other party were similarly able to get a 75-year lease?" MR. MARLOW said that he didn't have any way of answering that. He noted that 55 years would outlast any mortgage and thus the difference in the value of the property, whether it had a leasehold for 55 years or 75 years is probably negligible. Number 2130 REPRESENTATIVE GATTO asked if the lease would allow Mr. Marlow to build the proper unit under the conditions of the lease and use another part of the land as a parking lot or racetrack or something different. MR. MARLOW answered that the zoning of the property is controlled by the Municipality of Anchorage. The zoning of the property is R-4, which means multifamily residential [housing]. Mr. Marlow clarified that he is representing AEF, a 501(c)(3) nonprofit [corporation]. He explained that HUD 202 grant program is an outright grant that's funneled through 501(c)(3) nonprofits to a community. The nonprofits sign a contract with HUD to use the buildings built with the funds for low-income housing for people 62 years of age and older. Number 2022 THOMAS PEASE, Government Hill Community Council, noted that he is a resident of Government Hill. He informed the committee that Government Hill Community Council unanimously opposed HB 97 at its last meeting because it's special-interest legislation. Mr. Pease said that it's interesting to note that none of the legislators representing Government Hill have signed on [as cosponsors] of this legislation. Furthermore, ARRC, which owns the land, is neutral on the issue. Mr. Pease explained that the council opposes HB 97 because ARRC's leasing practices are outdated and ARRC applies the same criteria for remote parcels as it does for parcels in the heart of an urban area. He also expressed concerns with regard to density in the Government Hill area. Directly across from this parcel of land are the highest- density multifamily housing complexes in the state. MR. PEASE turned to Representative Kohring's earlier statement that the developer is stuck because of the HUD change in its minimum lease requirement. He informed the committee that last year at this time there were two applicants interested in leasing the property. Before any lease was signed on this property, HUD announced that it was changing its minimum leasing requirements. In fact, one of the two applicants withdrew its application because of the changes. The current leaseholder knew before signing the lease that he wouldn't qualify for HUD 202 grant money under the 55-year lease term. Thus Mr. Pease said he considered HB 97 to be special-interest legislation. Number 1814 REPRESENTATIVE GATTO said he has some notes referring to some railroad disputes over easement lands in Nenana. He asked if Representative Kohring knows any history [about that]. REPRESENTATIVE KOHRING answered that he wasn't aware of any. In response to Representative Lynn, Representative Kohring confirmed that Mr. Marlow is the same gentleman who owns the McKay building. Number 1755 REPRESENTATIVE GUTTENBERG directed attention to page 1, line 13, and the language reading "without reserving the right to terminate the lease if the land is needed for railroad purposes". He asked if that is standard language. MS. LINDSKOOG answered that it's standard language. She explained that legislative approval is required to lease land in excess of 55 years unless the railroad had the right to terminate. Therefore, the legislation allows the railroad to issue a longer-term lease without the right to terminate. The right to terminate is something that financers don't view as stable when issuing long-term projects. In further response to Representative Guttenberg, Ms. Lindskoog said that she didn't believe that ARRC has leased anything for longer than 55 years, but would have to check to be sure. Number 1659 CHAIR FATE requested that Ms. Lindskoog enlighten the committee with regard to the applicant who withdrew due to the HUD 202 grant requirements. MS. LINDSKOOG identified Anchorage Neighborhood Housing as that applicant. Anchorage Neighborhood Housing withdrew its application because of HUD's 75-year lease requirement. Furthermore, she recalled that there were some other environmental issues involved in that it was going to take Anchorage Neighborhood Housing longer to perform due diligence and be able to make lease payments on the land. However, Mr. Marlow said that he could make lease payments on the land at the time and he maintained his application. Therefore, ARRC's board was left with one application to review for this lease. She acknowledged that there were concerns from the neighborhood. CHAIR FATE asked if there has been any examination with regard to the impact such a project would have on a high-density area such as Government Hill. MS. LINDSKOOG replied no, although ARRC's board directive was to review ARRC's lease policy and see if it should be updated to allow for consideration when the area is dense. Now that there is a full board, the aforementioned is being reviewed and an updating of ARRC's policy should occur. Number 1496 REPRESENTATIVE GATTO related his assumption that the lease would include a default clause such that the land would be returned if the developer didn't perform. [Ms. Lindskoog nodded yes.] CHAIR FATE noted that the next committee of referral for HB 97 is the House Finance Committee. Chair Fate said that although he has some reservations, he would like to see the legislation move from committee. He inquired as to the wishes of the committee. Number 1323 REPRESENTATIVE GATTO moved to report HB 97 out of committee with individual recommendations and the accompanying fiscal notes. Number 1314 REPRESENTATIVE KERTTULA objected. She said she didn't believe HB 97 meets the standard of not being special legislation. "I think it's a second bite of the apple, and I don't like the testimony I've heard today," she added. A roll call vote was taken. Representatives Gatto, Heinze, Lynn, Morgan, Wolf, Masek, and Fate voted in favor of reporting HB 97 from committee. Representatives Guttenberg and Kerttula voted against it. Therefore, HB 97 was reported out of the House Resources Standing Committee by a vote of 7-2. CHAIR FATE noted his agreement with some of those in opposition to HB 97 because the legislation does [seem to be special- legislation], although he didn't want to stand in the way of good economic development. He related his belief that the next committee of referral would address that. [HB 97 was reported from committee.]
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