Legislature(1993 - 1994)
04/21/1993 04:25 PM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 7:
An Act relating to reimbursement of school construction
debt; and providing for an effective date.
Co-chair Pearce asked Bob Poe, staff to Co-chair Pearce, to
come before the committee and speak to SB 7. She thanked
those involved in the teleconference for their hard work in
helping draft a new CS for SB 7. Mr. Poe thanked Jim
Sampson, Mayor of Fairbanks, and Don Gillman, Mayor of the
Kenai Peninsula for attending and contributing to the
process. Mr. Poe went on to explain that the bond bank
looks to a revenue stream to finance its debt. Since
schools do not produce a revenue stream, it was decided a
70-30 split debt reimbursement program would be provided to
begin on the effective date of SB 7 with a cap of $400M
total debt. This cap would be in effect until November 1997
and would stop if the constitutional school construction
fund does not pass. If it does pass the program would
continue. He went on to outline amendments that were
suggested by committee members. One major change was that
DOT/PF would take up to a year to set the criteria for
school projects as required in the bill.
Co-chair Pearce invited Gary Bader, Director, Administrative
Services, Department of Education, to join the members at
the table to speak to DOE's existing criteria. GARY BADER
said, in the example of a new school, the department had
standards that related to the number of students. He felt
they were similar to federal standards in that a certain
amount of square foot was allocated per pupil depending on
projected enrollment. He explained it was a broad standard
which some school districts can work within. Square footage
could be dedicated to a gymnasium if that is what is
important to a certain school district. Currently, DOE has
established a committee that is looking at standards for
schools. There is a concern that sufficient maintenance is
not being provided. He said that some of the excesses in
school projects were appropriations that had not been
reviewed properly.
Co-chair Pearce asked how DOT/PF would be involved in this
bill. Mr. Bader said that the bill provides that DOE would
consult with DOT/PF in making contact with architects and
designers in order to provide design specifications for new
school projects. Senator Kelly objected to the year waiting
period in order for DOT/PF to provide design specifications.
Discussion followed between Mr. Poe, Senator Kelly and Co-
chair Pearce regarding the separate review process of what a
school will look like and whether it is needed. Mr. Poe
indicated that new design specifications would be more
detailed than in present statutes.
Senator Rieger asked how the one to two year cash lag
between debt service and reimbursement was addressed in the
CS for SB 7. Mr. Poe said the intention was to include the
cash lag for a narrow group of subjects including
engineering, site selection, site acquisition, and planning.
Mr. Poe explained that both mayors were very concerned that
there were no railbelt schools in the planning stages at
present. Discussion followed between Mr. Bader, Senators
Frank, Kelly and Mr. Poe in regard to the difference between
cash reimbursement and debt reimbursement and how the
reimbursement program would be accomplished.
Co-chair Pearce asked Jim Sampson, Mayor, Fairbanks, and Don
Gillman, Mayor, Kenai Peninsula, to join the members at the
table. JIM SAMPSON explained that the district would start
with no real idea of cost when planning a school project.
He felt a good method would be to fund up-front costs for
engineering, site acquisition, etc. to realize the cost of
the facility, and then design the bond issue around that
cost. He said that the state would save money in the long
run using this process. He said the municipality could not
go out and spend its cash on engineering, etc. without some
arrangement for reimbursement from the state. He explained
one way to be reimbursed was to pay the municipality back
out of the bond issue but if the bond should fail, then
there is no way for the municipality to be reimbursed. He
said one way to narrow the costs was to exclude site
development. In answer to Senator Kelly, Mr. Sampson said
that the initial costs would run about 5 percent. If site
acquisition was included that percent increased.
Co-chair Pearce announced a recess and indicated that the
committee would reconvene after the Senate floor session.
Recess 5:32pm
Reconvene 7:50pm
The committee reconvened with Co-chairs Pearce and Frank,
Senators Jacko, Kelly, Sharp and Rieger present. Senator
Kerttula arrived after the meeting had reconvened. Co-chair
Pearce announced that CSSB 7(FIN) work draft "K" dated
4/21/93 was before the committee. Co-chair Pearce invited
Mike Ford, Attorney, Legislative Legal Counsel, Division of
Legal Services, Legislative Affairs Agency, to join the
committee at the table and speak to the amendments that
would be offered.
Co-chair Frank MOVED for ADOPTION of CSSB 7(FIN) work draft
"K" dated 4/21/93. No objections having been raised, it was
ADOPTED.
Co-chair Frank MOVED the following amendments:
Amendment #1 - page 2, line 30, would be changed to read
"(1) one person shall be an engineer in
private practice licensed under AS 08.48;"
Amendment #2 - page 3, line 2, would be changed to read "(3)
one person shall be an engineer licensed
under AS 08.48 and licensed as a construction
contractor under AS 08.18;"
Amendment #3 - page 3, line 4, would be changed to read "(4)
one person shall be an architect in private
practice licensed under AS 08.48; and"
Discussion followed between Co-chair Pearce, Senators Kelly
and Kerttula regarding public employees and private
enterprise. Senator Kerttula voiced his support to the
number of good public employees in the state.
Amendment #4 - page 3, line 5, delete the words "or
municipal."
Senator Jacko OBJECTED. Co-chair Frank said that a school
district and a borough person should be on the bond
reimbursement and grant review committee. Co-chair Frank
voiced his concern that the school and borough interests
were heard in the committee. Co-chair Pearce stated that
the committee now stood at six persons and voiced her
support of adding another person to the committee. Senator
Jacko removed his objection. Senator Kelly OBJECTED.
End SFC-93 #66, Side 2
Begin SFC-93 #68, Side 1
Discussion followed between Mr. Ford and Co-chair Frank
regarding the word "municipal." Both Co-chair Frank and Mr.
Ford felt that the board could end up with two school
district representatives since "school district could be
interpreted to be "municipal." Co-chair Frank said that was
not his intent.
Co-chair Frank changed and restated:
Amendment #4 - page 3, line 5, to read "(5) one person shall
have five years of experience in municipal facilities
management."
Senator Kelly OBJECTED. He said the majority of the
committee consisted of public sector individuals. Co-chair
Pearce suggested that the person with the teaching
certificate be eliminated from the committee, and Senator
Kerttula voiced his support.
Co-chair Frank withdrew amendment #4.
(Note: #5 was inadvertently left out when amendments were
sequenced.)
Amendment #6 - page 2, line 31 and page 3, line 1, be
deleted.
Amendment #4 - was rescinded. (This left the original
language on page 3, lines 5 and 6.)
Amendment #7 - page 6, lines 1 through 8, be deleted.
Co-chair Pearce asked for an explanation of the amendment.
Co-chair Frank said that there had been an objection to the
cash payment being included in the bill. Senator Kelly
explained that if amendment #7 passed it did not mean that
the municipality would not get reimbursed but the bond must
pass before reimbursement would happen. Senator Kerttula
voiced his support in keeping the bill as simple as
possible.
Amendment #8 - page 5, line 30, page 6, line 14, line 23,
line 27 and page 8, line 2, line 10, change
"$150,000" to "$200.000."
Co-chair Frank said that if the constitutional amendment was
passed, a sum of money should be set aside from which
revenue bonds could be issued. Then the municipalities
could refinance to get the 70 percent off of their books.
Bob Poe said that refinancing would be available but the
cost would be prohibitive. Discussion followed between
Senator Kelly, Mr. Poe, Co-chair Frank and Mr. Ford
regarding bonds and refinancing.
No objections being heard, amendments #1, #2, #3, #6, #7 and
Senator Rieger proposed an unnumbered amendment on page 7,
line 5 and line 11, to replace " March 31, 1990" with "April
30, 1990." Mr. Ford said that this section of the bill
outlined the bond process to qualify for reimbursement. He
went on to explain this section was amended on page 7, lines
5 through 7 to allow a bond to be reimbursed and not need
approval by the Commissioner before going to the voters.
Mr. Poe reiterated that the prior CS required approval from
the Commissioner before going to the voters. Mr. Ford said
this amendment on page 7, lines 5 through 7, was written in
anticipation of the Anchorage bond issue. Mr. Ford then
said page 7, line 11, was a mirror of the amendment on lines
5 and 7.
Senator Kelly asked if the amount of $400M on page 8, line
5, would be the state's 70 percent share or if that was the
top end. Mr. Ford replied it was the entire amount.
Senator Kelly observed that the state would then only commit
to $280,000,000 and that might not be enough money. Mr. Poe
offered a handout that outlined a survey that had been done
quickly to arrive at the $400M figure (copy on file). Mr.
Poe reminded the committee that only bonds sold would be
reimbursed and it could take several years for that to
happen. Senators Kelly and Kerttula voiced their concern
that municipalities would feel a rush to get under the cap
of $400M. Senator Rieger suggested that each municipality
receive an allotted entitlement and then could issue bonds
at their leisure. Co-chair Pearce said that the
municipalities would have until November 8, 1994 to vote on
this issue.
Co-chair Pearce asked Co-chair Frank to define the words
"major rehabilitation." Co-chair Frank said that "major
rehabilitation" does not mean annual, routine maintenance.
Senator Kelly asked for a letter of intent to follow the
bill. Senator Kerttula voiced his support of the letter of
intent.
Co-chair Frank MOVED a letter of intent to define the words
"major rehabilitation." No objections being raised, it was
ADOPTED.
Co-chair Pearce asked Gary Bader, Director, Administrative
Services, Department of Education, to prepare a new fiscal
note since the committee has been reduced by one member.
Mr. Ford suggested a technical amendment and Senator Kelly
MOVED:
Amendment #9 - on page 6, lines 14 and 15, delete "that
exceed $200,000 and are approved under AS
14.07.020(a)(11)."
Senator Frank OBJECTED. Mr. Ford explained that the bonds
that this section would apply to could not be approved by
the department and could not meet this criteria. Senator
Frank REMOVED his objection. No further objections being
raised, amendment #9 was ADOPTED.
Discussion followed between Co-chair Pearce, Senators
Rieger, Kelly, and Mr. Poe questioning the total amount of
money ($400,000,000) approved for reimbursement by the
department on page 8, line 5.
Senator Rieger proposed an amendment which said that no
municipality may be eligible for bond issuance greater than
150 percent of their proportionate share of the state's
population. Co-chairs Pearce, Frank and Senator Kerttula
voiced their disapproval of the amendment and stated that
they did not want to complicate the bill. In answer to
Senator Kelly's concern, Co-chair Pearce assured him that
when the legislature returned to session next year, if there
had been a stampede, the $400M could be raised.
Discussion followed between Co-chair Frank, Senator Kelly,
and Mr. Bader, regarding how and when approval of bonds
issued by the Commissioner and the Department of Education
would be accomplished. Senator Kelly felt that the
Commissioner of Education should keep track of how many and
cost of the different school construction projects. Senator
Kerttula proposed that the cap be increased from $400M to
$500M and proposed the following:
Amendment #10- on page 8, line 5, and page 8, line 16,
change "$400,000,000" to "$500,000,000" and
on page 8, line 15, change "$700,000,000" to
"$800,000,000."
Senator Kerttula MOVED to adopt amendment #10. No
objections being raised, amendment #10 was ADOPTED.
Senator Rieger asked if the Department of Education would
approve the bonds referenced on page 7, lines 5 through 7.
Mr. Bader said he could not give approval for the Department
of Education. Mr. Bader said that this section allowed the
Commissioner of Education to review prior to reimbursement
those projects, but they had not been seen by the Department
as yet. Senator Kerttula assured Senator Rieger that those
projects did not seem unreasonable to have approved.
Senator Kelly MOVED that CSSB 7(FIN) as amended pass from
committee with accompanying fiscal notes. No objections
being raised, CSSB 7(FIN) was REPORTED OUT of committee with
a new fiscal note for the Department of Education for
$166.1, and a fiscal note for the Department of
Transportation & Public Facilities for $84.1. Co-chairs
Pearce, Frank, Senators Kelly, Kerttula and Sharp voted a
"do pass" recommendation. Senators Jacko and Rieger voted a
"no recommendation."
ADJOURNMENT
The meeting was adjourned at approximately 9:25 p.m.
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