Legislature(1997 - 1998)
02/06/1997 08:00 AM House STA
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HJR 18 - DEDICATED FUNDS: RATE MAY BE CHANGED The first order of business to come before the House State Affairs Standing Committee was HJR 18, Proposing an amendment to the Constitution of the State of Alaska relating to changing the rate of a tax or license that supports a dedication of its proceeds. CHAIR JAMES called on Representative Ivan Ivan, sponsor of the bill, to present the amendment. Number 0127 REPRESENTATIVE IVAN IVAN explained the intent of the amendment was to try to meet the effective date of CSHB 1(STA) that passed out of the House State Affairs Standing Committee this week. REPRESENTATIVE IVAN called on Thomas W. Wright, Legislative Assistant to Representative Ivan Ivan, to explain the amendment further. Number 0181 THOMAS W. WRIGHT, Legislative Assistant to Representative Ivan Ivan, stated the amendment was the result of a suggestion made by James Baldwin, Assistant Attorney General, Department of Law. The amendment made the resolution retroactive to October 1, 1997 to coincide with the effective date of CSHB 1(STA). The amendment ensured there would not be a gap between the raised revenues from the tobacco tax and the school fund. Number 0251 REPRESENTATIVE IVAN moved that the amendment be adopted by the committee. There was no objection. Number 0294 REPRESENTATIVE IVAN moved that CSHJR 18(STA) move from the committee with individual recommendations and attached fiscal note(s). Number 0308 REPRESENTATIVE VEZEY objected. He was opposed to the resolution and objected on the grounds that a fiscal note was not attached. CHAIR JAMES asked Mr. Wright if the resolution had a fiscal note? Number 0346 MR. WRIGHT replied, "Yes." A $3,000 fiscal note was attached, and according to the Division of Elections, the note could go as high as $56,000, depending on the number of issues on the ballot. Number 0434 CHAIR JAMES asked Representative Vezey if his objection was maintained? REPRESENTATIVE VEZEY replied, "Yes." CHAIR JAMES called for a roll call vote. Representatives James, Berkowitz and Ivan voted in favor of the motion. Representative Elton, Hodgins and Vezey voted against the motion. The CSHJR 18(STA) failed to move from the House State Affairs Standing Committee. OVERVIEW: Department of Transportation and Public Facilities The next order of business to come before the House State Affairs Standing Committee was an overview presentation by the Department of Transportation and Public Facilities. Number 0458 ROD WILSON, Staff Architect, Office of the Commissioner, Department of Transportation and Public Facilities, (DOT&PF), explained the presentation would cover an overview of the state's public facilities, and the issues affecting their usability. The DOT&PF asked that the Department of Administration also address the committee members today regarding the issue of lease space. MR. WILSON cited the state currently had 1,430 facilities statewide that were occupied and maintained, excluding the university system. The number increased to 1,805 when the university system was included. The total square footage was 7.5 million square feet, excluding the university system. The number increased to 12 million square feet when the university system was included. The age of the facilities ranged from new to 50 years old. The oldest facility was built in 1912. The replacement value in 1995 dollars exceeded $1.5 billion, excluding the university system. The number increased to $2.3 billion when the university system was included. The average value was $200 per square foot. The size of the facilities ranged from 100 square feet-a cold storage building-to 200,000 square feet-the State Office Building in Juneau. And, the activities of the facilities ranged from maintenance shops to airport terminals. The facilities were located throughout the state and often they were the most significant facility in the community. MR. WILSON addressed the issue of deferred maintenance. The department conservatively estimated that the magnitude was $100 million for executive branch agencies, and as high as $250 million statewide, including the university system. These figures were based on a report from 1993. He cited the following areas of deferred maintenance as examples: roof deterioration problems, structural problems, electrical problems, and interior finishes. He announced the DOT&PF had requested through the Office of Management and Budget, $2 million for funding for the deferred maintenance of five buildings. These buildings were in dire need of maintenance. It would be up to the legislature to appropriate that money. MR. WILSON further addressed the issues surrounding the Americans with Disabilities Act (ADA). He explained there were 1,200 buildings that did not comply with the requirements of the act, according to a 1993 audit. The assessment was $8 million, of which, the legislature funded in the fiscal years 1994 and 1995. He explained 50 of the 1,200 facilities had been updated to meet the act and were met with great approval from the disabled community. He reminded the committee members that the act required all building to meet the compliance requirements by July 1, 1995. Therefore, the state was open to litigation. The state had made a good effort to comply which was probably why it had not heard too much from the disabled community. He speculated that the state would probably hear more from them in the future, however. Number 1082 CHAIR JAMES stated the figures Mr. Wilson mentioned were startling. She believed that the state should consider selling the facilities that it could not maintain. It should consider entering into a lease arrangement so that the maintenance would be included. She asked Mr. Wilson to respond. Number 1114 MR. WILSON replied that issue was lease oriented rather than ownership oriented. He was more in favor of owning a facility than of leasing a facility. He suggested that Mr. Dugan Petty, Department of Administration, could add more to the conversation surrounding the issue of the cost of leasing. Number 1148 CHAIR JAMES expressed her concerns of the schools that were part of the list that Mr. Wilson referred to earlier. She was distressed because the House State Affairs Standing Committee just turned down an opportunity to guarantee money for schools by not passing CSHJR 18 (STA) out of the committee. She asked Mr. Wilson what could the legislators do to convey to the people that this was a serious issue? Number 1195 MR. WILSON replied media exposure would be helpful. He would not like to see exposure surrounding tragedies such as a roof collapsing, however. Number 1245 CHAIR JAMES expressed her disgust of this issue. She was pleased that the camera was here today to help inform the public of the seriousness of this issue. A $2.3 billion replacement figure was a big investment for the state. Number 1284 MR. WILSON clarified that the $2.3 billion replacement figure did not include the rural schools. The value of the schools was between $3 billion to $4 billion statewide. Number 1310 CHAIR JAMES stated in 1993 she knew the numbers of the rural schools. Most of the schools were in need of code upgrades due to health, life and safety issues. And, some of the schools had been on a list for seven years to eight years. The figure was roughly $120 million and that included the schools in the organized boroughs that the state had assumed responsibility for their maintenance costs. Number 1349 REPRESENTATIVE MARK HODGINS asked Mr. Wilson how many of these buildings were actually needed? Number 1357 MR. WILSON replied the department had not done an assessment of occupancy in each facility. He estimated that the state could reduce the square footage about 5 percent. Every facility was occupied and used. He did not know the efficiency of the occupancy, however. Number 1380 REPRESENTATIVE HODGINS asked Mr. Wilson if the cost he referred to earlier included passed-through grants that had gone to buildings that the state funded, but had a quasi ownership to? Number 1391 MR. WILSON replied, "No." These were facilities that the state owned out right. The monies that had passed through to other organizations and municipalities were not included in these numbers. Number 1402 REPRESENTATIVE HODGINS asked Mr. Wilson if there were certain areas of the state that had more of a deferred maintenance problem? Number 1407 MR. WILSON replied, "No." The problem was spread across the entire state. There were facilities that received additional care, but even that care was not at an adequate level to keep them maintained. Number 1420 REPRESENTATIVE HODGINS asked Mr. Wilson if the department had a five-year plan? Do you know how many new building were needed? Number 1440 MR. WILSON replied the department did not have an organized process as to what new buildings were brought onto line. He explained each agency campaigned for its own needs. The DOT&PF assisted other departments to determine the cost and other issues, but it was the responsibility of each agency to bring the matter forward to the legislature. Number 1487 REPRESENTATIVE ETHAN BERKOWITZ asked Mr. Wilson who the department worked with in the ADA community? Number 1493 MR. WILSON replied the department dealt directly with the Governor's Council for Employment of People with Disabilities. The council assisted the department prioritize its list of 1,200 facilities. In addition, the department had contact within local communities. Number 1525 REPRESENTATIVE BERKOWITZ stated he would like a copy of the ADA priority list Mr. Wilson referred to. He asked Mr. Wilson what was generally needed when there was a failure to comply with the ADA? He wondered if the deficiency was the lack of a ramp, for example. Number 1545 MR. WILSON replied entrances to facilities was the top priority. Nearly every building, he explained, had problems with rest rooms because they were built tightly. And, some buildings did not have an elevator so access was limited to the upper floors. He reiterated, probably the major one issue was entrances including ramps. MR. WILSON further stated agencies conducted program remedies for the ADA requirements. The act actually said the programs and the services must be available to the disabled individual. Therefore, provisions were made to have a representative of a service meet an individual on the ground floor of an office building with no elevator, for example. That was a suitable, temporary solution. The department preferred to have a facility be in full compliance so that the agencies had a wide variety of how they would use the space within the facility. Number 1633 REPRESENTATIVE HODGINS asked Mr. Wilson what percentage of office space was leased versus owner occupied? Number 1646 MR. WILSON replied it was a 50/50 split right now. Number 1650 REPRESENTATIVE HODGINS asked Mr. Wilson if there was a situation where the state was a landlord to a third party? MR. WILSON replied, "Yes, I believe so." Number 1663 REPRESENTATIVE HODGINS asked Mr. Wilson if they would be practical candidates to divest the assets to sell to the occupant? Number 1670 MR. WILSON responded Mr. Dugan Petty, Department of Administration, could answer that question better. Number 1676 CHAIR JAMES asked Mr. Wilson how long had he worked in this capacity? MR. WILSON replied he had been with the department since 1985. Number 1682 CHAIR JAMES asked Mr. Wilson if he had a suggestion for a systemic solution to the deferred maintenance problem? Number 1717 MR. WILSON explained Mr. Keith Gerken, Department of Administration, would address her concerns later in the overview. The department did have some thoughts surrounding that issue. It could identify the problems, but it did not have a solution. The solutions, he believed, would come from the Alaska State Legislature because they were primarily budget issues. Number 1749 CHAIR JAMES stated one solution was to have every state agency that occupied a state owned building pay the rent. She believed, if that was a requirement, an agency would not occupy as much space. Number 1766 MR. WILSON replied he also believed there would be a reduction. Number 1770 REPRESENTATIVE KIM ELTON asked Mr. Wilson if there was a dramatic difference between leased space and state owned space in deferred maintenance? Was there a market incentive that meant the leased space would be better maintained to meet the requirements of the ADA, for example? Number 1812 MR. WILSON replied he could only address that question from the leased space he worked at-3132 Channel Drive, Juneau, Alaska. He explained, the care and the maintenance that went into the building was much superior than what the state could put into in a comparable building. It was also ADA accessible. It was a newer building so it would be easier to modify for the ADA requirements compared to an older building, however. Number 1850 REPRESENTATIVE ELTON asked Mr. Wilson if the state would be better off not buying old buildings to house state functions or state people than constructing new buildings, for example? Number 1870 MR. WILSON stated in some cases he believed it would be more advantageous to the state to level an old building and either re- build it or find space else where. The state had some buildings that were clearly not cost effective to keep them open. There was no other alternative at this point in time, however. Number 1893 REPRESENTATIVE BERKOWITZ asked Mr. Wilson if the state leased any facility from the Permanent Fund Corporation? Number 1905 MR. WILSON replied he had no idea. He asked the committee members to hold all lease questions for Mr. Dugan Petty, Department of Administration. Number 1915 REPRESENTATIVE VEZEY announced that the state of Alaska led the nation in ADA compliance. It was a huge nationwide problem, and Alaska was ahead of the rest. And, the legislature was remiss by not addressing the state's Congressional delegation with a resolution asking that the goals be moved forward so that there were no frivolous lawsuits. He further suggested changes were needed in the ADA. He cited a building that was built in 1912 could not be economically renovated to meet ADA compliance. There were other ways, he declared, of allowing for handicap access, but they were not allowed by the ADA. He cited a common meeting place, as an example. Furthermore, he agreed it was cheaper to level a building and build a new one than it was to upgrade the codes. In addition, the legislature made the codes by law. He had never seen an effort to address the law to recognize the inherent value in the infrastructure that already existed. Maybe, it was not necessary to bring every building up to the same standard. Number 2032 MR. WILSON stated that was one of the things that he tried to address to Representative Berkowitz. There was a program alternative. A community could create a building that was totally ADA accessible that contained 15 meeting rooms for various agencies, for example. He reiterated the act said that the "programs and services" needed to be accessible. The problem, however, was diffusing the staff within an agency. It would create supervisory problems. He believed this program would word best in the rural communities. This option was not being pursued by the department, however, because there was no way it could pull the agencies into a single unit. Number 2092 REPRESENTATIVE VEZEY stated Mr. Wilson was just addressing the current ADA. He believed changes were needed to the act to encourage and make more options available. Moreover, he cited in 1974 the state of Alaska adopted the building code that made every facility in the state built prior to 1974 obsolete. And, every three years there were upgrades. The requirements in the building code were not designed for arctic conditions, and the state was being straddled with the expenses. He did not see how the state could even afford to have public buildings much longer. The operating costs of mandatory air changes in the arctic environment, for example, would create prohibitive operating costs. Number 2131 MR. WILSON replied he had testified on standards for air quality in the past. He was sympathetic to what Representative Vezey stated. The air quality changes were not only difficult to do in the arctic, but energy consumption also increased dramatically. The codes that Representative Vezey referred to were adopted through the Department of Public Safety and the Department of Labor, not the DOT&PF. The Department of Transportation and Public Facilities was only responsible for the ADA. Number 2161 REPRESENTATIVE VEZEY stated the codes he referred to were actually adopted by the legislature. The legislature recently gave the agencies the authority to adopt the electrical code. MR. WILSON stated the Department of Public Safety and the Department of Labor were the two agencies that typically came to the legislature with recommendations. REPRESENTATIVE VEZEY stated, "quite frankly, the Department of Labor administers most of them, and they know the least about it of anybody in the state." There had not been an engine pushing from the engineering or the architectural communities to address the Alaskan modifications to the building code. Number 2187 MR. WILSON stated a group of design professionals pushed for some time for changes to the plumbing code. The plumbing code still worked off the 1974 requirements that called for cast iron piping in commercial buildings. REPRESENTATIVE VEZEY stated that was changed last year. The Department of Labor fought against plastic piping for 12 years. MR. WILSON said that was a classic example of expenses that did not need to be incurred. Number 2213 REPRESENTATIVE VEZEY commented the studies he had read indicated that maintenance and renovation were far cheaper than new construction because of reduced overhead. Number 2250 MR. WILSON stated he agreed 100 percent with Representative Vezey. It was more cost effective to maintain a building than it was to let a building go un-maintained for a number of years then rebuild it. Number 2259 REPRESENTATIVE VEZEY stated mechanical systems could not be put together in piecemeal. At times, they had to be replaced. Under the code, however, sometimes it was necessary to bring the entire building up to code. That was when the economics was lost. Number 2271 MR. WILSON replied under most of the maintenance activities he did not believe that was the case because of the 25 percent of the building value provision. REPRESENTATIVE VEZEY said he brought this issue up to acknowledge that the legislature as a body was responsible for adopting a lot of the codes, and there was a lack of interest in this subject. He had seen bills go through the body when he was the only person that knew what was being voted on. "But, we don't let that slow us down." Number 2319 REPRESENTATIVE BERKOWITZ stated with ADA funds there was a lot of money being spent putting in gold plated bathrooms and not enough money being spent throwing down plywood ramps. He asked Mr. Wilson what was being done to make better wheelchairs? Individuals were only looking at engineering solutions. Number 2341 MR. WILSON stated that was one of the original questions asked of the federal government in 1990. The response from the federal government was that it was more concerned about making facilities accessible than dictating how to build a better wheelchair. He was not convinced, however, that somebody out there could not build a wheelchair to climb a set of stairs. How accessible would that wheelchair be? he wondered. It became a question of affordability. Number 2395 DUGAN PETTY, Director, Division of General Services, Department of Administration, was the first person to present an overview of the Division of General Services. He explained the department allotted space in state buildings, acquired and managed leased office space. He cited the state had 1.6 million square feet of office space under lease. The three major office locations were-Anchorage, Fairbanks and Juneau. He cited 770,000 square feet of office space in Anchorage and 41 leases. That was the largest. The average cost was $1.56 per square foot. He cited 135,676 square feet of office space in Fairbanks and 31 leases. The average cost was $1.45 per square foot. He cited 397,00 square feet of office space in Juneau and 68 leases. The average cost was $1.89 per square foot. TAPE 97-8, SIDE B Number 0001 MR. PETTY further explained the department's ADA requirements were more stringent in its lease acquisitions. The department must comply with Title 2 of the act and treat it as if the state owned it. Moreover, the department worked with a space standard. It used an invitation to bid formula to acquire office space that took into consideration the monthly cost. It did not consider other costs such as moving. An average lease was five years with a renewable option. The department discovered, however, that it was moving every five years due to better prices from competition. But, when the cost of moving was factored in, it was actually costing the state more money. Therefore, the formula was modified to factor in the other expenses. MR. PETTY explained lease acquisitions were relatively long-six months. The department was required under AS Sec. 36.30.080, "Leases," to bring a lease replacement to the legislature if the value exceeded $2,500,000, for approval. In addition, other issues surrounding leasing involved moving costs for agencies, for example. An office space today required heating and electrical sophistication to meet technology. The ADA requirements also remained an issue. When the state renewed a lease it required from the leaser to meet the needs of Title 2 of the act. That was not a problem, it were the longer leases that had not moved towards compliance that were a problem. In addition, space was also an issue for agencies when their programs expanded. Number 0377 MR. PETTY further explained in Anchorage it was a renters market. In Juneau the prices were higher due to less competition. For the last ten years, funding had been an issue because the department had received less money than it requested. The biggest issue now facing the department was the renewal of the Department of Natural Resources building in Anchorage. The department was also considering buying the National Bank of Alaska building in Anchorage. That was contingent on the approval of the legislature, however. Number 0536 REPRESENTATIVE HODGINS asked Mr. Petty what the average square foot cost was in the rural areas? He mentioned earlier the average square foot cost in Anchorage, Fairbanks and Juneau. Number 0553 MR. PETTY replied he did not have that figure with him now. It was an odd number. The range was dramatic. He explained it depended on the location. In Kenai the range was $1 to $1.35. Whereas, in Barrow, the department would be happy if the cost was $6. Number 0590 REPRESENTATIVE HODGINS asked Mr. Petty what the restraints and requirements were before the state invested in lease-hold improvements? And, how much of the budget would that be? Number 0600 MR. PETTY replied tenant improvements were generally rolled into the acquisition cost and amortized over the life of the lease. He cited the cost for office space was $10 to $15 per square foot in Anchorage. There was freezer space in the epidemiology department in Anchorage, for example, that was fairly expensive. There was a lab lease in Juneau that required special vent hoods that was also fairly expensive. Number 0684 REPRESENTATIVE HODGINS asked Mr. Petty if the trend in lease-space acquisition had grown? Does the state own more buildings than what was being leased 10 years ago, for example? Number 0695 MR. PETTY replied the state had not seen an addition to the inventory in terms of big buildings or spaces. It had seen some incremental growth then decline. In the late 1970's and 1980's there were new programs that defaulted to existing space because the state was not buying buildings nor building them. The state had only built very specialized building, such as, the crime lab in Anchorage. The lease-space portfolio had not changed either over the last ten years. Number 0749 REPRESENTATIVE HODGINS asked Mr. Petty if there were any constraints placed on departments or divisions when they requested lease space? Number 0759 MR. PETTY replied the department worked with them and held them accountable to the space standards formula. If specialized needs were necessary, the department looked to them to pay for that. Once it was part of the leasing budget, there was not a lot of incentive for agencies to look to save space, however. Number 0826 REPRESENTATIVE HODGINS asked Mr. Petty if the department had a priority basi s? And, was it suggested to the agencies when they requested space? Number 0842 MR. PETTY replied the department did that on a continual basis. The department was obligated to get what the agencies needed in terms of space to get their job done. It had to be in accordance with the space standard formula, and the price needed to be competitive. Number 0886 REPRESENTATIVE VEZEY asked Mr. Petty how the department evaluated the value of leasing versus owning to the state? Number 0900 MR. PETTY replied the department looked at that on a situational basis. He stated leasing on a long-term basis was a costly proposition because the maintenance cost was 50 cents to 60 cents per square foot. It also paid for profit, overhead, principle on interest, and taxes to the leaser. Therefore, the state was not getting any thing in return for its investment in a lease situation. Number 1051 REPRESENTATIVE VEZEY stated testimony indicated the state was $500 million behind in its deferred maintenance responsibilities. The state, therefore, was not putting 50 cents per square foot into building maintenance. Number 1069 MR. PETTY replied he did not disagree with Representative Vezey. If the state did the job it should do with maintenance, in the long-run it would be cheaper to own and preserve its public facilities. Number 1086 REPRESENTATIVE VEZEY stated the leased space better served the users because it was better maintained. Number 1094 MR. PETTY replied it was important to look at each situation. There were many leasers that did a good job maintaining the space. There were problems too. Number 1138 REPRESENTATIVE BERKOWITZ asked Mr. Petty if he knew if the state leased space from the Permanent Fund Corporation? Number 1148 MR. PETTY replied the state did not lease directly from the Permanent Fund Corporation. He understood the corporation was interested in two buildings-the Goldbelt Building in Juneau and the Frontier Building in Anchorage-that the state currently leased. Number 1175 REPRESENTATIVE BERKOWITZ asked Mr. Petty if he saw any problems or benefits from leasing from the Permanent Fund Corporation? Number 1181 MR. PETTY replied the department would not have any difficulty if the corporation was in that business. Number 1310 KEITH GERKEN, Architect, Facilities (Juneau), Division of General Services, Department of Administration, was the next person to present an overview of the Division of General Services. There were very few people shocked to find out that the state was not doing a good job maintaining its facilities. He explained a group of 45 to 50 people in November of 1996 gathered to agree/disagree with a list of 20 indicators presented. They agreed with all 20 and added 20 more. The ten most important were the following: a $34 million shortfall in the annual maintenance funding to prevent additional deferred maintenance, a $250 million deferred maintenance backlog, no overall policy for maintenance and operation of buildings, no statewide automated maintenance management system, a lack of a statewide capital improvement program prioritization process, a lack of criteria for an economic model for decision making, no segregation of operating budget funding, a lack of funding to provide efficient space planning, no point of responsibility established for the condition of state facilities, and lastly, an inability to respond to changing federal facility requirements. MR. GERKEN further stated that a group was established several years ago to address solutions to the issue. The group concluded the following: services should be delivered in a customer driven organization, state agencies should be accountable for their space, space should be allocated equitably, the state should be accountable for adequate future maintenance and repair, the state should not ignore its public trust to provide stewardship of its assets, the state should be innovative in applying technological solutions and human resources, the state should have a funding mechanism to reduce the deferred maintenance backlog, the state should benchmark its performance, and the state should require a contractual agreement between the customers and the service providers. Number 1950 MR. GERKEN further stated the short-term objectives were incremental so that they would not impact the programs within the agencies. There were five pilot projects that the department was working on now. He cited the following: the Nome Pilot Project, expanding the automated management system, changing accounting procedures to see what was really spent on facility maintenance and replacement, creating a rental methodology, and working together for more focus. Number 2062 CHAIR JAMES stated some of the idea Mr. Gerken just mentioned had been around for a long time. She asked for written information that he could provide to the committee members for further analysis. Number 2169 REPRESENTATIVE VEZEY commented the one question that Mr. Gerken did not address was, "Why couldn't the legislature get public support to bring the building up to a level that met their requirements? " That was the bottom line. Number 2258 CHAIR JAMES gave notice of reconsideration on her vote on CSHJR 18(STA). The bill was scheduled to be heard in the House State Affairs Standing Committee again on Tuesday, February 11, 1997.
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