Legislature(2005 - 2006)CAPITOL 106
02/22/2005 08:00 AM House STATE AFFAIRS
| Audio | Topic |
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| Start | |
| SB14 | |
| HB100 | |
| HB62 | |
| HB48 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 14 | TELECONFERENCED | |
| *+ | HB 62 | TELECONFERENCED | |
| *+ | HB 100 | TELECONFERENCED | |
| *+ | HB 48 | TELECONFERENCED | |
HB 100-STATE VIROLOGY LABORATORY CHAIR SEATON announced that the next order of business was HOUSE BILL NO. 100, "An Act relating to a lease-purchase agreement for the construction, equipping, and financing of a state virology laboratory in Fairbanks, on land provided by the University of Alaska, Fairbanks, to be operated by the Department of Health and Social Services; relating to the issuance of certificates of participation for the laboratory; relating to the use of certain investment income for certain construction and equipment costs for the laboratory; and providing for an effective date." 8:38:32 AM RICHARD MANDSAGER, M.D., Director, Division of Public Health, Alaska Department of Health & Social Services, presented HB 100. He clarified that the word "virology" refers to the study of viruses. He directed attention to "slides" printed in a handout available in the committee packet. He offered details from the first slide on page 2, regarding the Alaska State Virology Laboratory, where the state has its laboratory capacity to make viral diagnoses. The most common virus that [the laboratory] deals with on a yearly basis, he said, is influenza. He commented that the laboratory in Fairbanks is what the Centers for Disease Control and Prevention (CDC) calls a sentinel laboratory; there are 23 of these labs around the world in which types of influenza are identified. DR. MANDSAGER stated: Our laboratory in Fairbanks, because of the air traffic from Southeast Asia, is an important laboratory to the United States.... [The influenza] virus mutates every year as it moves around the world, and the flu vaccine that we get every fall and every winter is based on the type of influenza virus that is in Southeast Asia and in the southern hemisphere.... In the last week or so CDC has been finalizing the components to next fall's vaccine.... Another example of an important virus to us is rabies. For example, right now [Fort] Wainwright is under an animal quarantine because of rabies in fox up there, and that pretty much is an annual occurrence in our state, that some part of the state will have rabies in animals. Thankfully, because of immunization of dogs and cats, because of surveillance, and ... because of our diagnostic capabilities in the state, rapidly we can adjust and isolate animals in different parts of the state, and [we] have not had a human case now for many, many decades. When SARS [Severe Acute Respiratory Syndrome] arrived in the United States in the spring of 2003, ... one of the first tasks for the World Health Organization and the CDC was to develop [an] identification test, and the laboratory here in Alaska was one of the first where that technology and competency was put in place because of the aircraft back and forth to Southeast Asia. 8:42:28 AM DR. MANDSAGER continued: [This is] important as background, and what's also important to know [is] that the kind of viruses we deal with in the Fairbanks lab should be handled in what's called a Biosafety Level 3 [BSL3] Laboratory. We don't have that in Fairbanks; they have a Level 2 lab, and use what the laboratorians call Level 3 Practices. So far, they've done really well. But [the slide on page 3 shows] how crowded it is up there.... Last summer we had a review by people from the Association of Public Health Laboratories in the United States looking at our laboratory capacity in our state.... Their comment was [that the crowded lab is] an accident waiting to happen. ... The space we have is in one of the university buildings. We've been on the Fairbanks campus now since '67, and you can see all of the problems with the building and capacity space that exists up there at present [on page 3].... One of the recommendations of this laboratory review is that our virology functions should be managed in a ... BSL3 ... because of the potential problems with the viruses that they look at. DR. MANDSAGER turned attention to [the slide on page 4], showing the building in which the lab currently resides. He reiterated that the lab is important for the rapid identification of known and new viruses. He said that the review team recommended that because of the state's earthquake potential, it is important to have redundant capacities in Alaska by having labs in two cities. He pointed out that the staff at the lab in Fairbanks are superb virologists. He told of an incident in McGrath last year in which a number of people became sick. He said that because the lab had neurovirus diagnostic capacity in Fairbanks, the diagnosis was made quickly and many people were warned early so that the outbreak was stopped. Three years ago such a sample would have been sent to Atlanta and the diagnosis would have taken two to three weeks. DR. MANDSAGER told another anecdote: In the late 1990's doctors in Juneau thought that a girl might have had measles. A sample was sent to Fairbanks and the diagnosis was completed within a day. He commented, "Days can make a big difference with viral disease in stopping outbreaks." 8:45:59 AM DR. MANDSAGER turned to the slide on page 5, which showed that the estimated cost for the design, construction, and equipping of a state public health virology lab in Fairbanks is $24.2 million. He said that building laboratories is expensive due to air-handling redundancies, special spaces, special equipment, and so on. The governor's proposal is that a new lab be financed with Certificates of Participation, he explained. Page 6 is a map showing where the proposed lab would be located on the University of Alaska Fairbanks (UAF) campus. He noted that UAF is building a human biology mission and a genetics mission, and having a BSL 3 lab on the campus would be very important to the biologists. 8:47:23 AM DR. MANDSAGER addressed two amendments, included in the committee packet. The first one would clarify that the Department of Health and Social Services would own the building but the land would be leased from the university. The second amendment would make a change to page 2, line 18, adding the words "cost of" before the word "acquisition". 8:49:00 AM REPRESENTATIVE LYNN asked Dr. Mandsager how big a danger avian flu is and whether the proposed new lab would be able to diagnose it. DR. MANDSAGER responded that avian flu is currently the biggest topic of discussion in public health. He remarked that the people from CDC have said that it is not a question of if, but when [there is an avian flu outbreak]. He explained that avian flu is very lethal, with a 70 percent death rate in Southeast Asia, and it attacks young, healthy people as well as elders. He pointed out that at first it appeared to be a disease that was transmissible only from birds to humans, however there now appear to be cases where the disease was transmitted from human to human. He said that this disease is one of the reasons that the proposed lab is important; the lab staff will be able to diagnose avian flu. He pointed out that birds migrate from Southeast Asia to Alaska for the winter and there is also a lot of airplane traffic between the two regions. Therefore he concluded that Alaska will be one of the first places to be impacted, so it will be very important for the state to have the ability to quarantine and isolate quickly. 8:51:15 AM REPRESENTATIVE LYNN asked how long it would take to have an operational lab. DR. MANDSAGER replied that the proposed lab would be operational in fiscal year (FY) 2009. 8:51:42 AM DR. MANDSAGER, in response to Representative Gardner, clarified that the bill had passed out of the Senate Health, Education and Social Services Standing Committee, but not the House Health, Education and Social Services Standing Committee. 8:52:08 AM CHAIR SEATON asked Dr. Mandsager to explain the Certificates of Participation. DR. MANDSAGER deferred to the Debt Manager at the Department of Revenue. 8:52:34 AM DR. MANDSAGER, in response to Representative Ramras, stated that the proposed new lab would have a gross area of about 24-25,000 square feet and a net area of about 11,500 square feet. He explained that due to the air handling systems, the gross area is much bigger than the net area. REPRESENTATIVE RAMRAS commented that $100 per gross square foot and $200-250 per net square foot is a good price. 8:54:04 AM REPRESENTATIVE GRUENBERG mentioned that when the governor signed the version of Senate Bill 65 that passed last year, he included a letter that stated his intention in bonding future indebtedness. Representative Gruenberg read from the letter as follows: I have made a commitment to the rating agencies that the state will not incur additional debt until recurring revenues match expenditures. CHAIR SEATON asked Representative Gruenberg to hold his comment for the Department of Revenue. 8:55:09 AM DR. MANDSAGER, in response to Representative Ramras, stated that there are 15-16 staff at the current laboratory and there would be 18-20 staff at the proposed lab. 8:55:44 AM CHAIR SEATON asked, "Will this fulfill all anticipated Homeland Security-type issues that might be assigned to ... our facility here in the state?" DR. MANDSAGER replied: Between the public health laboratory in Anchorage and this facility in Fairbanks, we then have capacity for diagnosis of biology and chemical agents in Anchorage, viral agents in Fairbanks, and between the two facilities, our state meets the Homeland Security intents and requests of all the states, at least for present agents. And I would assume there would be enough potential for future agents as they become identified. CHAIR SEATON commented that the state just authorized building another lab for testing biological samples, and he asked if that lab is similar to the proposed lab. DR. MANDSAGER responded that the Department of Environmental Conservation (DEC) facility will be testing food and animal samples and it is a complementary lab. He said: The partnership between that laboratory ..., the biology and chemical laboratory in Anchorage, and the virology facility in Fairbanks works very well. For example, when a dead crow shows up in our state right now, because of concerns about West Nile virus, the state veterinarian decides [if it should be] tested for West Nile virus, and then it's sent up to the virology laboratory in Fairbanks. The new [DEC] laboratory that is under construction will not have virology capacity. However, the state veterinarian will be able to do a necropsy and look for other causes besides that kind of a viral cause. And the same thing happens with food agents too, so there's a partnership between these three facilities that one should think of ... as part of our continuum for protection of public health. 8:58:08 AM REPRESENTATIVE RAMRAS asked if the proposed lab would be a magnet for the university for research funds and if there are expenses that will be picked up by the federal government through grants. He stated that he'd like more information about the costs of ongoing operations. DR. MANDSAGER answered that the university expects that the proposed lab will be a big part of their research capacity building, and that as they attract more federal funds and grants the lab will be an important component. He said: What amount of this laboratory space would be used for a given grant and how much cost will be shifted to a grant will depend grant-to-grant and year-to-year.... My expectation is that, as the university builds its mission, with the capacity growth on the facility side, then yes, we will see some off-shifting. How much, I think, is impossible to say. The biologists view it as a critically important part of building that capacity. 8:59:58 AM DEVEN MITCHELL, Debt Manager, Treasury Division, Alaska Department of Revenue, explained that a Certificate of Participation [COP] is a means of financing discrete capital projects of the State of Alaska. Facilities that the state has funded portions of or all of recently are the Alaska Psychiatric Institute (API) and the Seafood and Food Safety Laboratory. He continued as follows: How [the Certificates of Participation] work is the state provides a title interest to a trustee bank and then leases the facility back from that trustee bank, and that lease payment stream is securitized, meaning that that becomes the amount of money that's paid to folks that purchase these certificates; they become participants in that lease. Those are structured so that we obtain a rating based on the State of Alaska's credit, a subject-to-appropriation credit of the state. It's a AA/AA- type of a credit out there. We typically insure that to AAA and obtain ... market rates for a publicly offered debt at those ratings. 9:01:46 AM CHAIR SEATON asked if the Certificates of Participation are the same thing as a bond. MR. MITCHELL answered affirmatively. CHAIR SEATON asked for an explanation of the differences between a COP and a General Obligation Bond. 9:02:23 AM MR. MITCHELL explained: With a General Obligation Bond, ... the state would have pledged its full faith and credit to the folks that would be buying them - the investors. In this case, the investors have a lesser security of repayment. They are accepting risk that what they're participating in is subject to annual appropriation, and that there could be a failure to appropriate. They're banking on the legislature and the administration's recognition that a failure to appropriate would backlash on the State of Alaska's credit rating and cost the state in other ways - both from a reputation perspective as well as financially - when there were other obligations of the state that were floated in the market. 9:04:28 AM CHAIR SEATON asked how much more it would cost the state to build a new virology lab using Certificates of Participation instead of a General Obligation Bond. MR. MITCHELL said that multiplying the full principal amount by a tenth of a percent would equal the impact in year one. He explained: In the first year the impact would be $24,000 and then it would be a declining impact from that date forward. So your total impact on a present value-base, just because those future payments would be worth less, might be in the $200,000 range, because we're talking about a 15-year amortization. It would be $200,000 or less, I would guess. 9:05:45 AM CHAIR SEATON asked if the Certificates of Participation are quicker, and if that is why they are being discussed for this project. MR. MITCHELL responded that this is a discrete, stand-alone project that lends itself well to the Certificates of Participation structure. It's also a time-sensitive project, he noted, and for a General Obligation Bond the state would have to wait until the next general election to put this project on the ballot. 9:07:04 AM REPRESENTATIVE RAMRAS emphasized that he feels strongly about the state maintaining a fiscal conservative approach. He said that he supports all the benefits of the proposed lab. However he expressed concern that the Department of Health and Social Services would be the lessee and the state would be the lessor. MR. MITCHELL replied that the lessee would be the Department of Administration, and the department would enter into a lease with the trustee bank. 9:08:35 AM REPRESENTATIVE RAMRAS asked if the state is moving from something that has no mortgage and now contemplating something that has a $2.4 million obligation by the State of Alaska through the Department of Administration or through the Department of Health and Social Services payable to the State of Alaska or to the bondholders. He continued, "Is this a ... brand new obligation, this $2.4 million in rental obligations along with the increased ... annual operating costs?" MR. MITCHELL answered affirmatively. 9:09:20 AM CHAIR SEATON asked if the state pays for the current virology lab. DR. MANDSAGER answered that the lab pays a maintenance agreement to the university but pays no lease fees. 9:10:06 AM REPRESENTATIVE RAMRAS said: In the fiscal notes it says it's $150,000. The operating increases for this project would be another $200,000, and then the lease obligation would be $2,375,000 per year for 15 years, at attractive terms: 4.9 percent, [with a] 15-year amortization.... That's as good as it gets in this world, but nevertheless, it is a new obligation for the state, and the merits speak for themselves, but so does the cost side of the ledger. CHAIR SEATON closed public testimony. REPRESENTATIVE GARDNER moved Amendment 1, labeled 24G-1, 2/4/2005, (11:02 AM), which read as follows: Page 1, lines 2-3: Delete "on land provided by the University of Alaska, Fairbanks," Page 1, line 11: Delete "provided" Insert "leased from" Page 1, line 12: Delete "by" CHAIR SEATON announced that, there being no objection, Amendment 1 was adopted. 9:11:52 AM REPRESENTATIVE GARDNER moved Amendment 2, [which is encompassed in a letter from Theresa Bannister, Legislative Counsel, Legislative Legal and Research Services, in which Ms. Bannister recommends the following, original punctuation provided]: So I suggest that the phrase, "cost of construction, acquisition, and other costs," be replaced with the phrase, "cost of construction, cost of acquisition, and other costs." CHAIR SEATON announced that, there being no objection, Amendment 2 was adopted. 9:12:24 AM REPRESENTATIVE RAMRAS reiterated that he was concerned that the state would be obligating itself to additional new debt service without sufficient means of meeting ongoing operating expenses. 9:13:33 AM REPRESENTATIVE GARDNER moved to report HB 100, as amended, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 100(STA) moved out of the House State Affairs Standing Committee.
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