01/28/1994 09:15 AM Senate FIN

  SB 247 STATE LEASES & LEASE-PURCHASE FINANCING                               
                                                                               
  Co-chair  Pearce directed  that  SB 247  be  brought on  for                 
  discussion  and  further  directed   attention  to  a  draft                 
                                                                               
                                                                               
  committee substitute (8-LS1447\O, Chenoweth,  1/27/94).  Co-                 
  chair Frank  explained that the  bill was introduced  by the                 
  Legislative Budget and  Audit Committee to require  that the                 
  judicial branch bring lease-purchase arrangements before the                 
  legislature for  approval.   Statutes presently  provide the                 
  court  system  the   opportunity  to  enter  lease-purchases                 
  without legislative approval if annual  debt service is less                 
  than $1 million.                                                             
                                                                               
  The Co-chairman noted that the bill was previously heard and                 
  reported  out of  committee before  it was  learned that  it                 
  "deauthorized  the  authorization  to lease-purchase  a  new                 
  court facility in Fairbanks."  That project meets the intent                 
  of the  bill since the  facility was previously  approved by                 
  the legislature.  It should not  be unapproved at this time.                 
                                                                               
                                                                               
  Co-chair Pearce  noted that the  present draft  incorporates                 
  earlier technical amendments  made by  committee at page  6,                 
  line  14, and page 7,  line 7, were  acquisition was tied to                 
  "real property."                                                             
                                                                               
  Senator  Kelly  asked  how  the  bill  would  apply  to  the                 
  University's  purchase  of  an off-campus  office  building.                 
  RANDY  WELKER,  Legislative   Auditor,  again  came   before                 
  committee.   He  explained  that if  the  University has  an                 
  appropriation  and  legal  authority  to   pay  cash  for  a                 
  building, the subject bill would not apply.  It applies only                 
  to financing agreements that require an annual appropriation                 
  for debt service.  Co-chair  Pearce voiced her understanding                 
  that  it  would affect  the  University if  a lease-purchase                 
  arrangement  was  entered  for  the  building.   Mr.  Welker                 
  concurred.                                                                   
                                                                               
  Senator Kerttula voiced concern over  lease costs associated                 
  with rental of office space such as the Frontier Building in                 
  Anchorage.  He attested to need for legislative oversight of                 
  standard  lease  arrangements  that obligate  the  state  to                 
  sizable annual  payments.  Senator  Phillips suggested  that                 
  since  he  and   Senator  Frank  sit  on   the  subcommittee                 
  overseeing  the   leasing  budget   within   the  Dept.   of                 
  Administration,  that  the  issue  be  reviewed  within  the                 
  context of that  budget.   Co-chair Frank concurred,  noting                 
  that if the  state is  leasing a facility  long-term, it  is                 
  preferable  to eventually own  it.  Leasing  comprises a $32                 
  million item in the Dept. of Administration budget.  Senator                 
  Kerttula suggested that leases for  which the annual cost is                 
  over $500.0   and the term is longer than three years should                 
  be  brought before  the legislature for  approval.   He then                 
  voiced his  belief that  the proposed  bill might  encourage                 
  long-term leasing over lease-purchase.                                       
                                                                               
  Discussion followed  regarding automobile leasing.   Senator                 
  Phillips asked that  Senator Kelly submit a  formal, written                 
                                                                               
                                                                               
  request for audit review.                                                    
                                                                               
  Co-chair Pearce called for objections to adoption of the "O"                 
  version of  CSSB 247  (2d Fin).   No  objection having  been                 
  raised, CSSB 247 (2d Fin) was ADOPTED.                                       
                                                                               
  Discussion  followed  regarding impact  of  the bill  on the                 
  recent purchase  of the Court  Plaza Building in  Juneau and                 
  the Anchorage  Times Building  in Anchorage.   Randy  Welker                 
  advised that it would not impact  the Court Plaza.  Purchase                 
  of the Times  Building is  presently a fluid  process.   The                 
  transaction has not yet closed.  It is, however, more likely                 
  than not to  be concluded before  the effective date of  the                 
  proposed bill.  Co-chair Frank explained that it was not the                 
  Legislative Budget and Audit Committee's  intent to deny the                 
  purchase.     Further  discussion   of  the  Times  Building                 
  transaction followed.                                                        
                                                                               
  Co-chair Frank noted need  to tighten the title of  CSSB 247                 
  (2d  Fin)   to  include   wording  limiting   lease-purchase                 
  arrangements and requiring  legislative approval.   He  then                 
  MOVED  for  adoption of  a  conceptual amendment  to tighten                 
  title  language.    No  objection  having been  raised,  the                 
  amendment was ADOPTED.                                                       
                                                                               
  Senator Rieger  noted that the  bill speaks  to both  lease-                 
  purchase financing and  standard leases.  He  then suggested                 
  that,  in  light  of concerns  raised  by  Senator Kerttula,                 
  provisions  pertaining  to standard  leases,  at page  5, be                 
  strengthened prior to transport of the bill to the floor.                    
                                                                               
  Senator Kelly asked why language set  forth in the letter of                 
  intent was not incorporated within the bill.  Co-chair Frank                 
  explained  that  while  it   was  felt  it  would   be  more                 
  appropriate for DOTPF rather then DNR to hold title, manage,                 
  operate and  maintain state  facilities, the  intent was  to                 
  provide some  flexibility and  not fix  that requirement  in                 
  statute.  DOA  currently oversees  standard leases and  thus                 
  has an interest in the process as well.                                      
                                                                               
  Co-chair  Frank  MOVED  that CSSB  247  (2d  Fin)  pass from                 
  committee with individual recommendations.   He then advised                 
  that he would have no problem  holding the bill in committee                 
  for possible  amendment  of language  relating  to  standard                 
  leases.    Senator  Rieger  voiced  need  to  address  lease                 
  payments  that  are  disproportionate to  the  value  of the                 
  building.    Senator Phillips  said  he  would take  on  the                 
  project over the weekend and return to  committee on Monday.                 
  Co-chair Frank  then WITHDREW  his motion  for passage,  and                 
  CSSB 247 (2d Fin) was HELD in committee.                                     
                                                                               
  ADJOURNMENT                                                                  
                                                                               
  Co-chair  Pearce  directed  that  the  meeting  be  recessed                 
                                                                               
                                                                               
  pending  arrival  of  the  Commissioner   of  the  Dept.  of                 
  Community and Regional Affairs.  Commissioner Blatchford was                 
  precluded  from  returning  to  Juneau on  this  date.   The                 
  meeting was, in effect, adjourned at approximately 9:55 a.m.