Legislature(1993 - 1994)
03/10/1994 08:30 AM Senate FIN
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* first hearing in first committee of referral
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+ teleconferenced
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CSSB 217 An Act relating to the University of Alaska and univer-(RES): sity land, authorizing the University of Alaska to select additional state public domain land, and defining net income from the University of Alaska's endowment trust fund as `university receipts' subject to prior legislative appropriation; and providing for an effective date. Co-chair Frank, sponsor of SB 217, and Brian Rogers, Vice President for Finance, University of Alaska Anchorage, spoke in support of SB 217. Ron Swanson, Director, Division of Land, Department of Natural Resources, and McKie Campbell, Deputy Commissioner, Department of Fish & Game, voiced their concerns with the bill. Jack Chenoweth, Attorney, Legislative Legal Counsel, Legislative Affairs Agency answered questions and offered opinions on amendments before the committee. Amendments 1, 2, 3, 5, and 6 were ADOPTED. Amendment 4 was withdrawn. CSSB 217(FIN) was REPORTED OUT of committee with individual recommendations, a zero fiscal note for the Department of Revenue, and fiscal notes in the amount of $1,051.1 for Department of Natural Resources, $100.0 for the University of Alaska, and $33.0 for the Department of Fish & Game. CS FOR SENATE BILL NO. 217(RES): An Act relating to the University of Alaska and university land, authorizing the University of Alaska to select additional state public domain land, and defining net income from the University of Alaska's endowment trust fund as `university receipts' subject to prior legislative appropriation; and providing for an effective date. Co-chair Pearce announced that CSSB 217(RES) was before the committee as well as amendment 1 and revised amendment 2. Co-chair Frank said the reason for the bill was to increase the land grant to the University. The University had originally expected a much larger land grant than they had achieved. The first legislature actually granted an additional million acres. It was vetoed by the governor at that time, and had been an on-going issue. He thought it was an excellent way for the state to achieve the public purpose of supporting the University through the development of land-based resources. The bill had been drafted as uncomplicated as possible, especially in regard to the Mental Health Trust lands and municipal entitlement. The selections outlined in this bill would not take effect until after the Mental Health Trust was settled and the University would take a place behind any municipal entitlement. He said that an effort was being made to reduce the fiscal note for the Department of Natural Resources. The Department had concerns over method of conveyance and legal descriptions. Co-chair Frank went on to say he felt the University needed to rely less and less on general funds as a mix of their total funds. The University should have a substantial land base as in other states. He said the national average was 300,000 and our University only had 112,000 acres. He said the concern over oil and gas resources had been addressed by limiting potential oil and gas lands and eliminating any land that was on the state's 5-year leasing plan. Lands under other types of leases were also denied the University. Co-chair Frank said the University had done a good job so far in managing their lands, and had been responsive to public concerns with regard to land use policy. The question of Constitutionality or dedication of funds issued should be addressed. Co-chair Frank felt it was clear that the University was the state so there would be no problem with dedication of funds. The legislature would continue to approve the University's budget on an annual basis. He felt it would not be circumventing the Constitutional prohibition on dedicated funds. BRIAN ROGERS, Vice President for Finance, University of Alaska, Anchorage, said this legislation would right an old wrong since statehood. At that time, a major portion of the University's land grant was lost with the enactment of the statehood act due to the fact that most of the University land was unsurveyed at the time. He reiterated that national averages give about 5 percent of federal land grants to universities. In Alaska, that would mean about a 5 million acre land grant. He said this was particularly important since the state was looking to the University to reduce its reliance on state general fund dollars. The University had reduced its dependence from about 75 to 50 percent. The current land management brought money into a trust fund which predates statehood. As of December 31, the fund had about $27M, and currently was bringing in $4-6M a year. This year, approximately $7M was deposited in the trust fund. The income from the trust fund was used to inflation-proof the fund, to cover the costs of land management which were not covered by projects-related income, and, most importantly, for augmenting the teaching and research responsibilities of the University. An annual report of that fund was provided to the legislature and Governor. Mr. Rogers went on to say that the bill would allow the University to select a million acres but placed the following restrictions on those selections: the land must be unconveyed, unencumbered, and not otherwise selected for public domain; anything in a refuge or sanctuary would be off limits; anything that had existing gas or oil lease, or a 5-year oil and gas plan by Department of Natural Resources would be off limits; and any land with an existing timber claim, mining claim, or material sale or permit would be able to be selected but, for the duration of the existing agreement, DNR would continue to manage the land and all income would go to the state, and upon expiration of the existing encumbrance, the University would take possession. The bill provided that the Commissioner can deny selections if it was not in the best interests of the state. The University would attempt to provide a balance mix of land since their land currently was heavy on timber. It would look to balance that with leasing for commercial potential, gravel, or subdivision-type lands. Mr. Rogers went on to explain the fiscal note for the University of $100.0 would be funded from the earnings of the land grant fund and would not require any general funds. The University would be responsible for all costs. The base level would be about $100.0 a year depending on the pace of land selection. It could increase but it would be at the University's expense, and subject to the budget review or RPL process. The legislature would have an opportunity to review the agreement between the University and DNR. The University would be responsible for the survey of the land. One amendment included from a prior committee reducing survey costs, would provide only an exterior boundary survey at the time of initial conveyance. Interior boundary surveys would not be done until the land was developed and would be paid for by the lessee. SENATOR RIEGER referred to the Resource Committee amendments, page 10, lines 28 and 29, and asked how broad was the phrase "is subject to designation or for conveyance." He asked if that phrase covered all the land in the state. Mr. Rogers said it was his understanding subsection (1) through (3) was an attempt to put a "belt and suspenders" on the Mental Health Lands settlement to insure that anything that might be considered would be excluded from the selection until the settlement was complete. There may be new legislation on Mental Health Lands but clearly the intent was that the Mental Health lands took priority as was spelled out on page 11, line 9, Section 12. Senator Rieger asked the difference between subsection (1) and (3). Mr. Rogers said that subsection (1) referred to that portion of the original Mental Health Lands that still had not been otherwise conveyed, subsection (3) to the substitute land, and subsection (2) to anything else that would be identified. The Mental Health lands settlement may either come under the terms of chapter 66 or new legislation. Senator Rieger referred to page 7, lines 23-25, regarding the words "the commissioner reasonably believes will be made part of,..." Mr. Rogers said that in the case of selections by a municipality, there was a clause that said, if the commissioner reasonably believed a selection might occur, they could withhold the University's selection but not for more than three years. Senator Rieger asked if it could be made a part of the last clause on exploration licenses so that 1 and 2 would look similar. Mr. Rogers said the three year limit under subsection 1 was a result of the Municipal Entitlement Act which provided 3 years for a municipality to select and transfer land after the municipality was incorporated. The Resources Committee wanted it clear that the University land bill would not get in the way of exploration licensing so a blanket exception was added. Senator Rieger felt the two should parallel. He felt the Commissioner could frustrate any selection by the University by saying at some point an exploration license might be granted, and offered an idea that there be a time limit put on subsection (2) on page 7, line 22-25. Co-chair Frank said he would view that as a friendly amendment. He admitted that the potential for a Commissioner to frustrate University selections probably had not been addressed. Senator Rieger said he would hold his amendment until testimony was complete. RON SWANSON, Director, Division of Land, Department of Natural Resources, said DNR still had concerns about SB 217 and would not support it in its present form. DNR did feel that all oil and gas interests should be excluded from the bill since it provided 85 percent of the state's revenue. There was also concern over existing land status complications. 17 million acres needed to be conveyed to the state from statehood entitlement. Of the 40 million acres selected, 5 million conflict with federal withdrawals, 12 million acres overlap Native selections and were unresolved, 600,000 acres need to be conveyed to municipalities, and 10 more municipalities need to certify entitlement and convey. He said DNR felt, even with all the provisions in the bill, it complicated all the existing land issues. Mr. Swanson went on to say there were also some concerns about diversifying state land management which included Mental Health, the state, and the University. This bill did complicate the public's use of land. He confirmed that the University was managing land at present and doing a good job. He also stated that selection beginning and ending dates needed to be established rather than have it be open- ended. Co-chair Frank observed that the state had few land owners and additional selections by the University, who was already a landowner, would not complicate the situation. Mr. Swanson felt the department had concerns because of all the problems it had with Mental Health Lands. Co-chair Frank agreed it was a difficult situation and assured him that the University did not want to get involved with that at all. In answer to Co-chair Pearce, Mr. Swanson said that DNR did not have any amendments to propose that would address its concerns. SENATOR SHARP observed that the longer the University waited to select lands, the smaller the opportunity became for available lands. Mr. Swanson said it was a juggling act. Considering land that had not been settled at present and adding more land for the University into the system would complicate the situation and overload DNR's already busy workload. In answer to Senator Sharp, Mr. Swanson said that of the 106 million federal acres, 89 has been conveyed to the state. MCKIE CAMPBELL, Deputy Commissioner, Department of Fish & Game, said that his department concurred with DNR and would highlight four specific points. First, if the bill should pass, the department suggested University selections occur only in areas where existing state management plans had identified lands suitable for disposal. Secondly, the department would like the bill to specifically disallow University selections in legislatively designated special areas including state game refuges, critical habitat areas, and game sanctuaries. After speaking to University staff, he was told page 4, line 13 would address that concern. However, he remained concerned it was not specific enough. Thirdly, the department requested there be a ten-year deadline on University selections (the University had suggested 20 years). Finally, the department felt that Section 144365E should be removed which allowed the University to appeal land conveyance decisions made by DNR to the Superior Court. As a general practice, he pointed out it was not good practice to set up a mechanism that encouraged various state agencies to sue each other. He asked that some other dispute mechanism be chosen. Co-chair Pearce asked for the Department of Fish & Game's position paper. This was passed out to the committee. Co- chair Frank asked for clarification of Mr. Campbell's position. Co-chair Frank then asked Rick Solie and Jack Chenoweth to come before the committee. RICK SOLIE, Aide to Co-chair Frank, sponsor of SB 217, said that amendments had been made in Senate Resources Committee that allowed the University the use of an interim conveyance procedure which was currently utilized by DNR in municipal conveyances. Unfortunately, a technical correction was needed to the amendment which had been addressed in amendment 1. He said another problem was foreseen between the time the University selected the land and the time the selection was actually accepted or rejected by DNR. Certain other claims could appear during that time. Amendment 2 addressed this problem and was then replaced by revised amendment 2. Co-chair Frank MOVED for adoption of amendment 1 dated 3/9/94. Senator Kelly OBJECTED and asked if the amendment would increase the fiscal note. Mr. Swanson answered that amendment 1 greatly reduced the fiscal note because DNR would not have to go to survey and patent immediately but an interim conveyance could be issued based on a legal description. Senator Kelly withdrew his objection. No further objection having been raised, amendment 1 was ADOPTED for incorporation within a Finance Committee Substitute for the bill. Mr. Swanson said that it was his understanding that revised amendment 2 would mean that once land had been selected by the University, the land would be segregated from any further entry, such as mining claims or other leases, until the University selection was approved or rejected. He said this was how state land selections worked with the federal government. JACK CHENOWETH, Attorney, Legislative Legal Counsel, Legislative Affairs Agency, said page 4, lines 20-24 contained a list of items that should be held in limbo if land had been selected by the University and DNR had received notice. It would refrain from taking action on leasing, or from entering into a timber contract, selling materials, or permit, or right of way under the Alaska Land Act. What he did not see was the opportunity of the University to reject or refuse to take any action on a mining claim. Mining claims could come in and a claimant would expect some action. He said that revised amendment 2 was directed at the presentation of a mining claim and directed DNR not to take any action on a mining claim once the University had presented its land selection or until it accepted or rejected the land selection. End SFC-94 #33, Side 2 Begin SFC-94 #35, Side 1 Mr. Swanson said that DNR's concern was that a mining claim once filed was a property right. Discussion followed between Senator Rieger and Co-chair Frank regarding the difference between amendment 2 and revised amendment 2. Co- chair Frank MOVED revised amendment 2. No objection having been raised, revised amendment 2 was ADOPTED for incorporation within a Finance Committee Substitute for the bill. Senator Rieger submitted amendment 3 to the committee for discussion purposes. He said it limited to 3 years the time the commissioner could withhold a University land selection on the basis it might be subject of an exploration lease. He said he parallelled the language on page 7, lines 14-21 and lines 22-25. Senator Rieger MOVED amendment 3. Mr. Chenoweth explained that, as written, amendment 3 did not exactly do that. Senator Rieger MOVED amendment 3 as a conceptual one and Mr. Chenoweth agreed to rewrite the amendment. No objection having been raised, conceptual amendment 3 was ADOPTED for incorporation within a Finance Committee Substitute for the bill. In answer to Co-chair Pearce, Mr. Swanson said that the new fiscal note for DNR would contain one position and $71,000, including support money with BIA receipts from the University. SENATOR KELLY said he would like to address the DF&G position paper dated March 3, 1994. Discussion followed between Co-chair Frank, Senator Sharp, and Mr. Swanson regarding land selections by the University being restricted to land in existing state management plan areas. In answer to Senator Sharp, Mr. Swanson said that of the 189 million acres owned, about 64 million acres were included within area plans. He also concurred with Co-chair Frank's earlier statement that in those management plan areas no land was being considered that had conditional conveyances to the Mental Health Trust or to the University. Mr. Rogers said the University would be opposed to this restriction since the planning process was very lengthy, and it would preclude large sections of land from the University's selection. He felt the deadline would have to be extended to at least 50 years. In answer to Co-chair Pearce, Mr. Rogers said the University would prefer a twenty-year deadline without this restriction but could live with a shorter one. In regard to the second item on the position paper, Mr. Rogers said that such lands were already reserved from the public domain on page 4, line 13. Senator Kelly MOVED conceptual amendment 4 to specifically disallow University selections in legislatively designated special areas including state game refuges, critical habitat areas, and game sanctuaries. Co-chair Frank OBJECTED. Mr. Chenoweth agreed that this amendment had already been addressed in the bill. Discussion followed by Co-chair Frank, Senator Sharp and Mr. Chenoweth clarifying the existing restrictions in the bill. Senator Kelly withdrew conceptual amendment 4. Senator Kelly MOVED amendment 5 that placed a certain year deadline on University selections. In answer to Co-chair Frank, Mr. Swanson said the Alaska Statehood Act originally gave the state 25 years for land selection and it was extended to 35 because of the land freeze between Alaska Native Claims Settlement Act and the Alaska National Interest Lands Conservation Act. The state originally did not file selections very rapidly for several reasons. One reason was the state had no resource base upon which to judge what kinds of land should be selected. The state's knowledge of resources was much broader now and that information could be given to the University. The second reason was that it was expensive for the state due to fire protection requirements. As soon as the state retained title to land, it must provide fire protection for it. At present, he felt a time period of ten years, from the date the University would first select land, was reasonable. Senator Kelly again MOVED and clarified amendment 5 placing a ten-year deadline on University selections. Mr. Rogers said that there was some confusion as to when the clock would start on the ten year deadline. Certain parcels could be selected on the effective date of the bill and certain parcels might not be selected until all the Mental Health Lands were settled. Co-chair Frank suggested the deadline be changed to 15 years. Senator Kerttula AMENDED amendment 5 be changed to 15 years. Mr. Campbell said that 15 years would take care of DF&G's concerns. In answer to Co-chair Frank, Mr. Campbell said that land status would effect DF&G. With the existing uncertainties of land selection with Native and Mental Health Land issues, and now the University, the more difficult it was for everyone involved to do land management. It eventually effected both fish and game resources and developers. He felt the shorter the deadline, the sooner those issues could be resolved. Senator Sharp said a 15-year deadline might encourage DF&G to lock up more lands prior to University selections. No objection having been raised, amendment 5 was ADOPTED for incorporation within a Finance Committee Substitute for the bill. Senator Kelly addressed the provision that allowed the University to appeal land conveyance to the Superior Court. Mr. Swanson said that he concurred with DF&G's concerns over this issue. He agreed that there should be some form of dispute resolution but did not agree that it should be the Superior Court. Mr. Rogers said that the University had no objection to an alternate dispute resolution. The concern was that a commissioner might reject all the selections that the University made. He felt there should be some balance between the University selections and the determination by the Commissioner not to grant lands because the Commissioner may want the land kept in the state's hands. Co-chair Pearce said this issue precisely explained why she was not supportive of SB 217. Governor Egan had vetoed a similar bill in the first legislature because it put one agency ahead of another in terms of their ability to produce a revenue stream. She felt the University sat at the same level as the Commissioners, and any Governor would have the ability to make such decisions. Senator Kelly MOVED conceptual amendment 6 which gave the Governor authority to make the final decision if the University and the Commissioner had a dispute over land selection. Mr. Campbell said that in existing statutes, if there was a dispute between the Commissioner of DF&G and the Board of Fisheries or Game, that decision was appealed to the Governor and the Governor was required to make a formal statement of decision within a certain time period. He felt that could be paralleled in amendment 6. Co-chair Frank asked how the municipal land grant had worked without a system of dispute resolution. Mr. Swanson said the first appeal was to himself, the Commissioner was next, and then to the Superior Court. Mr. Swanson said he did not know how many municipalities had gone to court, but there were two cases pending at present involving the Kenai Peninsula Borough. In answer to Co-chair Frank, Mr. Swanson said the system worked, however, it took a long time and was very expensive for both parties. Mr. Swanson agreed that a more inexpensive system could be provided. Senator Kelly voiced his lack of faith in arbitration. He felt the Governor was the person to make those decisions. Co-chair Pearce clarified that conceptual amendment 6 had been MOVED. Mr. Rogers said the University was not opposed to amendment 6, in fact, he preferred the Governor making such policy decisions rather than the court. No further objection having been raised, conceptual amendment 6 was ADOPTED for incorporation within a Finance Committee Substitute for the bill. Senator Kelly again MOVED amendment 4 to disallow University selections in legislatively designated special areas including state game refuges, critical habitat areas, and game sanctuaries. Mr. Campbell reiterated that the DF&G would rather have this specifically spelled out in the legislation. Senator Rieger said that it seemed to him that land status or land ownership was a bundle of rights and not always fee simple. He wondered if DF&G's concern could be addressed with an amendment that stated if the University selected land that was subject to some kind of encumbrance, etc., in that event, those encumbrances be carried forward if the commissioner should transfer title. In response to Senator Rieger, Mr. Swanson said that there were other types of legislatively designated areas such as recreation, public use, state parks, etc. that had been set up by legislative language. The appropriate division would manage the land, and if any LDA's (land disposal agreement) were conveyed, a conflict would be created right away. Co-chair Frank made a comment that the bill should be kept simple and such an amendment would only complicate matters. Mr. Chenoweth confirmed that state park lands were exempt from University selections. After the discussion, Mr. Campbell agreed that the committee had satisfied DF&G's concerns regarding designated special areas. Senator Kelly withdrew amendment 4. Mr. Chenoweth clarified amendment 1, by saying it provided, in addition to final patent, a document called interim conveyance. He noted three places in the bill where the amendment could cause problems: on page 3, line 31, when University land is removed from the public domain, or land selected by and conveyed to the University by either document; on page 6, line 11, talking about possessory interests, when land was conveyed to the University in this section, the University took the land subject to any possessory interest held by any other person on the effective date of the conveyance (He wanted to confirm that the effective date of the conveyance would be either the date of final patent or, the date of interim conveyance, if that document was used); and finally, on page 9, line 28 and 29, in reference to municipality property tax exemption, property became exempt from municipal property taxation when it was conveyed to the University under either circumstance, final patent or by interim conveyance. He stated that changing reference to the manner of conveyance by adding an interim conveyance document would have an effect on other laws. Mr. Swanson said the department had always considered interim conveyance as legal conveyance. He said the department had been using interim conveyance since statehood. It was how the state received title, and how Native corporations received title. He did not see any conflict. Senator Kelly asked if a similar situation could arise because of the legislation that happened with the railroad. Co-chair Frank agreed that the land conveyed to the University would be exempt from taxes, but, if leased, the value of the lease or any improvements would be taxable. Mr. Chenoweth referred Senator Kelly to page 9, lines 18-21, which said that exemptions run to municipal property including property held by a public corporation of a municipality or state property except that a private leasehold contract or other interest in the property is taxable to the extent of the interest. He said that supported Co-chair Frank's comments. Senator Kelly asked what would happen if the University developed the property. Mr. Rogers said that this legislation would add the new lands to the existing statute and a subdivision would be taxable to the extent of the improvements. He pointed out that the University was cutting timber at the present time on its land. Timber contracts were subject to municipal taxation since those were done by private parties. Lease hold or contract interests we now taxable and paid when assessed by the municipalities. Discussion was had by Senator Kelly and Co-chair Frank regarding lands and what development could be done by the University. Co-chair Frank said the University could come back to the legislature and report on such development possibilities. Senator Kelly said he was still waiting for a production report from last year that the University had failed to provide. End SFC-94 #35, Side 1 Begin SFC-94 #35, Side 2 Co-chair Pearce asked Mr. Rogers to speak to Senator Kelly's question regarding the production report. Mr. Rogers deferred this request to Wendy Redman. WENDY REDMAN, Vice President for University Relations, University of Alaska, said that she believed the intent note that the University had written placed the deadline of March 15, 1994 for the production report. She said she had personally handed Senator Kelly two copies of the report prepared by President Komisar. The additional data, individual workloads for every single faculty member, would be available March 15, 1994, which she believed was agreed upon by Senator Kelly and the University. Senator Kelly said he was satisfied by the date March 15, 1994. In general, he said, he had a problem with the fiscal impact of SB 217 on the University. He noted that DNR had said that land selections took time and were very expensive to do. The fiscal note did not indicate any personnel to make the land selections. He wanted to know who was going to do that. Mr. Rogers said that a staff of nine in the University's land management office handled the current management of lands, and this new legislation would come into this staff's workload. He noted that the University had been through two similar selection processes in 1982 and 1987. In 1987-1988, the University selected $24 million worth of selections in compensation for lands taken from the University by the state and given to the municipality of Anchorage. Those selections were made over a 60-day period with existing staff. He did not expect this selection would be made that quickly but felt the existing staff could absorb the cost of the selections. The primary costs were not in picking the land but in the legal documentation for conveyance and most significantly, in the cost of surveys. The cost of survey must be borne by someone, either the University or the private sector. Co-chair Frank MOVED for passage of CSSB 217(FIN) from committee with individual recommendations. No objection having been raised, CSSB 217(FIN) was REPORTED OUT of committee with a "do pass," and fiscal notes for the Department of Natural Resources of $1,051.1 (the department will provide a new fiscal note), the University of $100.0, the Department of Fish & Game of $33.0, and a zero fiscal note for the Department of Revenue. Co-chairs Pearce and Frank, Senators Rieger and Sharp signed "do pass." (On March 16, 1994, Senate Finance Committee replaced the Department of Revenue's fiscal note with a new one in the amount of $71.0.)
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