Legislature(1995 - 1996)
04/23/1996 08:45 AM 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
CS FOR HOUSE BILL NO. 466(FIN) am
An Act establishing the Adak Reuse Authority.
Co-chairman Halford directed that CSHB 446(Fin)am be brought
on for discussion. REPRESENTATIVE CARL MOSES came before
committee accompanied by his aide, TIM BENINTENDI. The
Representative advised that Adak could become a showpiece
for the nation, demonstrating what could be done with a base
closure. He suggested that the magnitude would be
comparable to closure of Elmendorf or Eielson Air Force
Base.
While some question the opportunity at Adak, future economic
opportunity is limited only by imagination. Fresh fish to
the Orient presents great opportunity because of the
adequate airport. Representative Moses specifically noted
that tuna could be flown from the site since, in the
summertime, the tuna industry is "considerably closer to the
Aleutians" than to Midway where the product is normally
sold.
Representative Moses referenced information from
representatives of the Aleut Corporation suggesting that the
state would become a "deep pocket" for U.S. Department of
Defense involvement at Adak. He countered that statement,
saying that the opposite is true. HB 466 would enable an
unbiased public authority to work toward the future of Adak.
The Navy will be much more lenient in dealing with a public
authority, in terms of what the military will leave behind.
It will not be a black hole for the state. The authority
would be in a position to dispose of property to commercial
interests to support management expenses of the authority
until adequate municipal entities develop.
Representative Moses expressed resentment regarding false
information indicating that Senator Stevens had suggested
creation of a profit or non-profit entity. The Senator
merely suggested that that approach should be considered.
Technically, the proposed authority is a non-profit which
would operate for the benefit of the future of Adak. The
Congressional delegation and the U.S. Navy are waiting for
HB 466 to pass. Time is of the essence.
Representative Moses next referenced concern raised by the
Aleut Corporation that stripping of facilities might occur.
He said he did not believe an authority delegated with
economic development of Adak would do anything to
disadvantage that goal. Much equipment left behind by the
U.S. Navy will be sold to commercial interests moving into
Adak. The Representative termed "ridiculous" a caveat that
equipment could not leave the island. Much equipment will
be surplus to needs on Adak. He said he was a stockholder
of the Aleut Corporation, and he suggested that a majority
of the members were in favor of the proposed bill. He urged
passage as soon as possible.
Senator Zharoff asked if the authority would receive
ownership of the land. Representative Moses said that would
have to be decided by Congressional legislation.
END: SFC-96, #90-B, Side 1
BEGIN: SFC-96, #90-B, Side 2
Senator Zharoff attested to problems associated with a
similar transfer at Kodiak. He then voiced his
understanding that if the Aleut Corporation has "top filed"
on the land, and it is vacated by the present owner, the
corporation would have first option on the land.
Representative Moses acknowledged that possibility but
reiterated that the final decision would be made by
Congress. He then described past discussion of land
selections with the corporation. He attested to
difficulties that would arise should one entity own the land
while another owns the improvements.
Further discussion followed regarding the impact of "top
filing," using both Ft. Richardson, Adak, and Kodiak as
examples. Senator Zharoff suggested that the proposed reuse
authority would merely add an additional layer of
bureaucracy.
LAMAR COTTEN, Deputy Commissioner, Dept. of Community and
Regional Affairs, came before committee. He explained that
discussions relate to an exchange rather than "top filing."
The exchange involves land that would revert from withdrawal
status from the refuge back into the refuge. It then
becomes the property of the U.S. Department of the Interior.
Interior has expressed interest in undertaking exchanges
with the Aleut Corporation for over-selection. In light of
that, the state initiated discussions involving itself, the
U.S. Navy, and the Aleut Corporation. Discussion focused on
the proper configuration of land status, in the future, for
Adak. The state recognizes that consensus on status must be
reached. Senator Stevens would then introduce legislation
to make appropriate exchanges and/or transfers.
Mr. Cotten said the state is not interested in becoming a
participant in a situation where the base is to be
transferred to the Aleut Corporation and an authority is in
place. If there is an economic value to parts of the base,
and two-years of revenue stream can be demonstrated to cover
operating costs, the authority would want to choose those
lands. The problem between the Aleut Corporation and the
authority (or the state) rests in the fact that the
corporation would prefer that "We take over things that are
traditional municipal or state responsibility." Those
things (breakwaters, roads, etc.) do not make money. The
department believes the authority should acquire properties
that can produce a revenue stream to cover responsibilities
that do not produce income.
The proposed bill reflects a conservative approach for state
review of pros and cons and to ensure a cash flow from
properties it acquires through the authority. Under a
likely scenario, the authority would not take over the
entire base. Mr. Cotten referenced over 500 housing units
and many buildings for which no use is envisioned. The
premise is private sector interest in renting, leasing, or
buying certain facilities: the fuel station, water front
property, warehousing, the school, buildings near the
airport, machine shops, etc.
Mr. Cotten directed attention to page 13, lines 9 through
16, and noted that if a municipality other than a second
class city is created or the area is annexed by a
municipality to the east, the authority would be integrated
into that municipal government within a year. The assets
and liabilities assumed by the authority would be
transferred to the municipality.
Senator Rieger asked if establishment of the authority could
evolve into a situation similar to the Alaska Railroad. Mr.
Cotten said he was unfamiliar with operations of the
railroad. He advised that any bonded indebtedness to be
issued by the authority would require legislative approval.
Tim Benintendi added that referenced language at page 13 was
tightened to accommodate the concern raised by Senator
Rieger. The authority would not linger in the wake of a
viable municipality.
Discussion of annexation followed. Two entities have
expressed interest: Unalaska and the Aleutians East
Borough.
Co-chairman Halford suggested that the ultimate means of
bringing the issue back before the legislature would be a
four-year sunset provision. Representative Moses said he
was so optimistic about the future of Adak he did not feel
sunset would be necessary. The Aleutians East Borough has
already prepared annexation paperwork, and the City of
Unalaska is having a study conducted. Mr. Cotten advised
that he had written to the Aleutians East Borough
registering concern over annexation. Concern has less to do
with Adak than state policy regarding "leapfrogging" over an
existing municipality (Unalaska). The department is leery
about setting that precedent.
Senator Zharoff referenced ability of the authority to bond.
He further referenced succession on dissolution of the
authority providing for the municipality to succeed to
authority assets, liabilities, rights and powers. He then
pointed to exemptions from taxation and asked how all
aspects of the foregoing would fit together. Mr. Cotten
explained that issuance of debt would require state
approval. The authority would be exempt from taxation, but
those who lease or buy could be taxed. Assets would consist
of properties and revenue streams; liabilities would be
contracts or bonded indebtedness.
Mr. Cotten stressed the unknown nature of the undertaking.
At the present time, there is an idea of what the authority
would acquire and what it would not, but that is the extend
of what is known. The state, the U.S. Navy, the Aleut
Corporation, and the Department of Interior are attempting
to "look at what's realistic." The Aleut Corporation has
some "chips" to deal with Interior. Mr. Cotten stressed
that the state is not going to be a "cash cow" to pay for
the operating expenses of somebody to become a capitalist.
He further advised that frustration with the Aleut
Corporation approach stems from the fact that while the
corporation anticipates taking over a portion of the
facilities, it expects the state to operate the airport
through state general funds. The state would need to
balance that general fund expenditure with a revenue stream
from the area. Co-chairman Halford suggested that once the
area is incorporated within a municipality, it is eligible
for revenue sharing, community grants, equal treatment in
terms of airports and roads. It appears that the U.S. Navy
is giving the state a multi-billion dollar asset which could
become a multi-million dollar annual drain on the treasury.
As the Navy moves out, the department will not allow
creation of a city of twenty-five people. A minimum of 400
people is needed for a first class city capable of
incorporating and taking over the assets of the base. Mr.
Cotten acknowledged that, in theory, the state might be
obligated to take on certain operations such as the airport.
He voiced a reluctance to do so unless an offsetting revenue
stream could be developed.
Representative Moses stressed that need for state
participation would triple under the Aleut Corporation
proposal. He voice need for a state authority to lease the
fuel facilities for which four different concessions are
bidding. The authority would be delegated with development
of Adak for the benefit of the future. Representative Moses
noted that it would be difficult for Alaska's Congressional
delegation to obtain federal transitional moneys if take
over is by a private entity. That is the reason for the
proposed bill.
Discussion followed between Senator Zharoff and
Representative Moses regarding responsibility for hazardous
cleanup. Representative Moses advised that the $90 to $100
million in federal cleanup over the next two years would
jump start the economy of Adak. Mr. Cotten added that
cleanup is to be coordinated with state selection of what
has the highest reuse. As an example, he noted that the
existing waterline goes through the landfill and would not
meet EPA standards. Representative Moses cited factory
trawler interest in renting warehouses for base operations.
The 1,000 units of housing are worth $50 million at "rock
bottom prices."
Co-chairman Frank asked what would happen to properties that
are not acquired. Mr. Cotten said that the property would
be transferred to the Department of Interior. The Navy and
Interior will then determine whether facilities remain or
are demolished. Since the area is within a wildlife refuge,
the Department of Interior would probably prefer removal.
The U.S. Fish and Wildlife Services wishes to continue its
presence on the island. Representative Moses cited
difficulty in determining what might be useful in the
future.
Discussion followed regarding approval of a majority of the
membership of the authority prior to disposal of property or
facilities. Senator Zharoff asked if more than a simple
majority should be required. Representative Moses expressed
reluctance to tie the hands of the unbiased authority
delegated to what is best for the future of Adak.
CHIS GATES, representing the Aleut Corporation, next came
before committee. Senator Zharoff again posed the question
of the majority needed to approve a disposal. Tim
Benintendi clarified that it would not be possible to move
on an action on a tie vote or less than a majority of the
board. Mr. Gates voiced his understanding that Senator
Stevens believes consideration of a non-profit corporation
instead of an authority might have merit. He then read from
correspondence from the Senator indicating that the Aleut
Corporation proposal "offers a mechanism to jump start the
process of attracting commercial enterprises to Adak."
Further, while the fiscal note is for $600.0, real state
expenditures for operation of the airport and seaport will
total millions. The Aleut non-profit (including the
Aleutians East Borough, Dutch Harbor, state representation,
and villages of the region) proposes that a corporation
operate the airport. That would save millions of general
fund dollars. Mr. Gates noted that reuse arrangements in
Alaska generally utilize non-profits rather than
authorities. He expressed his hope that the proposed bill
would not allow ability to "strip out the assets" without a
super majority (three-quarter) vote of the board. There
will be great incentive to "sell stuff that we're going to
need to make that town work."
Co-chairman Halford asked if it was the intent that the
state maintain the airport. Representative Moses
acknowledged that someone would have to operate it since it
is the mainstay of Adak. He said he anticipated a
substantial amount of help from the federal government.
Under a public authority, the Navy, other federal agencies,
and the Congressional delegation would be better able to
assist the future of Adak than if it is in the hands of a
private entity.
Co-chairman Halford referenced the $281.0 fiscal note and
voiced his understanding that $100.0 of the total is
federal. He sought assurance that only that amount would be
spent. Representative Moses noted that, one way or another,
the airport would be kept open since it serves as an
alternate for all planes to the Orient. He stressed that
the proposed bill provides a vehicle to take in moneys to
support public needs until a municipality is in place.
Discussion followed regarding activities leading to
establishment of a new town. Representation Moses stressed
that that would happen. The proposed bill would allow it to
happen along an organized path. Once seed money is
provided, the authority will be self-supporting. The
authority must be in place for the Navy and Congressional
delegation to commence transition. The Navy will be gone by
January of 1998. Senator Randy Phillips inquired regarding
a five or ten-year sunset. Representative Moses said while
he did not think it was necessary, he would have no
objection. He added that "Things are going to happen a lot
faster than that." Senator Zharoff voiced concern that
sunset provisions might impact ability to bond. Mr. Cotten
concurred in that concern.
END: SFC-96, #90-B, Side 2
BEGIN: SFC-96, #91, Side 1
Senator Rieger expressed concern that bonded indenture or
lease obligations not prevent transfer of the authority to a
successor. Co-chairman Halford agreed with the concern and
voiced his belief that pledge of the state language at page
9 has problems. It appears that the authority could enter a
covenant that supercedes state ability to change the powers
and duties of the authority at a later date.
Discussion followed regarding transition language to ensure
that bond holders would not lose their investments, since
the state would pick up the obligation, in the event of any
change. Representative Moses reiterated that the
legislature would have to approve any bonding. Further
discussion followed regarding bond issues by AIDEA.
Senator Rieger suggested that pledge of the state language
might work if coupled with a restriction on bond indenture
language so as not to preclude eventual transfer to a
municipality or other entity.
Co-chairman Halford observed that wording within the
succession section at page 13 appears in conflict with
pledge of the state language at page 9. If language in
these sections is read so as not to include transition
provisions, it may work as is.
Referencing AIDEA financing, Senator Rieger voiced his
understanding that the state has always been obligated to
defer to language in a contract or a bond indenture. That
is governed by a breach of contract provision in the
Constitution. Co-chairman Halford suggested that if general
language covers the issue, perhaps pledge of the state
language is not necessary. He concurred that necessary
provisions could be added when bonds come before the
legislature for approval.
Senator Rieger MOVED for adoption of the following
amendment:
Page 5, line 17, after "transfer" insert:
(d) The authority may not enter into a
trust indenture or contract which has
the effect of precluding the transfer of
the assets and liabilities of the
authority to a successor.
No objection having been raised, the AMENDMENT was ADOPTED.
Senator Rieger directed attention to page 11, lines 23
through 29, and advised that provisions set forth do not
reflect a "good deal" for the authority. Risk associated
with loans often occurs in the outer years. There is a
large differential in risk between initial and outer years.
He suggested that no state agency should enter such an
arrangement. Co-chairman Frank acknowledged the concern and
commented that AIDEA presently has such authority.
Senator Sharp MOVED for passage of SCS CSHB 466 (Fin) with
individual recommendations and accompanying fiscal notes.
No objection having been raised, SCS CSHB 466, (Fin) was
REPORTED OUT of committee with a $281.0 fiscal note from the
Dept. of Commerce and Economic Development and a zero note
from the Dept. of Community and Regional Affairs. All
members present signed the committee report with a "do pass"
recommendation. Senator Randy Phillips was temporarily
absent and did not sign.
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