Legislature(1999 - 2000)
04/15/2000 03:15 PM Senate FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 310
"An Act providing for and relating to the issuance of
general obligation bonds for the purpose of paying the
state cost of school, University of Alaska, and port
and harbor capital projects; and providing for an
effective date."
JAMES BALDWIN, Assistant Attorney General, Department of
Law, advised that he had prepared a memo as requested by
Senator Torgerson regarding concerns whether certain items
contained in SB 310 would qualify as capital improvements
for the purpose of issuing general obligation bond debt.
[Copy on File].
Mr. Baldwin cited that the Alaska Supreme Court has made
two decisions relative to the concern: Wright versus City
of Palmer and City of Juneau versus Hixson. The Court has
not provided a specific definition of capital improvement,
but rather defined it by example. Generally, it refers to
permanent betterment of permanent structures. The
Department has concluded that major renovations designed to
preserve the permanency of a building would qualify as a
capital improvement. Expenditures for property which
become a legal fixture would be a capital improvement. In
certain circumstances, there can be expenditures associated
with capital projects that might not otherwise become a
capital item.
Mr. Baldwin suggested consideration of, for the record,
that the nature of any doubtful project be considered in
order that it may be defended against a challenge brought
when the bonds are sold.
Senator Phillips referenced Page 3, Line 11. He asked if
the allocated $11.7 million dollars would qualify.
Mr. Baldwin understood that was to be the State's 70%
contribution. The municipalities are under the same
constitutional administration and must use their bonds for
capital improvements. He assumed that those bonds were
issued for capital improvements.
Senator Phillips referenced Page 4, Line 12 & 13 requested
allocation in the amount of $25.1 million dollars for the
University of Alaska - Fairbanks in deferred maintenance.
He asked if that would qualify under the capital
improvement projects (CIP).
Mr. Baldwin noted that he did not know and that he did not
have access to all the required information to make that
determination.
Senator Phillips asked further clarification of the memo.
Mr. Baldwin reiterated the contents of the memo, stating
that if it were to be ordinary repair and maintenance, it
would not qualify under the CIP guidelines; however, a
major renovation, repair or maintenance necessary to
maintain the permanency of the facility, could be a CIP.
He noted that the current Court conclusions have not yet
gone that far.
Co-Chair Torgerson asked if the proposition proposal in
Anchorage passes, would Anchorage then be restricted on
major maintenance projects that met the criteria submitted
by the Department.
Mr. Baldwin responded that the information contained in the
voters pamphlets becomes a "contract" with the voters and
that it can not be parted from without violating the public
trust. He presumed that the ballot materials would inform
the voters what the project consists of.
Senator Adams questioned the distinguishment between
repairs and maintenance. He asked the judgement call
needed to stay in "repaired maintenance".
Senator Adams suggested that perhaps there should be an
expenditure limitation on the capital projects over a
certain amount.
Mr. Baldwin replied that the total bond issue drives the
"economics" because of the cost of issuance. He believed
that a major upgrade would most likely fall under "capital
improvement".
Co-Chair Torgerson pointed out that there had not been a
completed list submitted by the University, instead,
submitted by building name only. He advised that he had
prepared some amendments to the proposed legislation.
Senator Donley MOVED to adopt Amendment #5. [Copy on
File].
Co-Chair Torgerson explained that the amendment would
remove all reference to issuing bonds for port and harbor
projects in SB 310 they had been incorporated into SB 311.
There being NO OBJECTION, Amendment #5 was adopted.
Senator Donley MOVED to adopt Amendment #6. [Copy on
File].
Co-Chair Torgerson clarified that the amendment would
delete the "$943,565" dollars on Page 5, Lines 13-14 and
would insert "an amount equal to one percent of the
principle amount of the bonds, or as much of that amount as
is found necessary".
Senator Adams inquired what would occur if that amount were
higher than 1% of the principle.
Co-Chair Torgerson explained that the agency could then
come back to the Committee to request an increase.
There being NO OBJECTION, Amendment #6 was adopted.
Senator Phillips requested a list of the general obligation
(GO) bonds. He believed that there were items that should
not be included in these bonds. He objected to the
proposed methodology.
Senator Adams recommended that a representative from the
University of Alaska speak to the submitted requests.
Co-Chair Torgerson emphasized that if the requests do not
meet the criteria that they should be deducted from the
bill. He requested greater detail regarding all three
campuses for the University requests.
WENDY REDMAN, Vice President, Statewide Programs,
University of Alaska-Fairbanks, stated that the language
used in the past for the statewide GO bonds in the Alaska
Housing Finance Corporation (AHFC) bond issue was "deferred
maintenance/renewal and replacement/code compliance". That
phrase provides the most flexibility to the University.
She requested that if possible, that would be the preferred
language.
Co-Chair Torgerson asked if there was a list indicating
work to be done on each building.
Ms. Redman commented that the list does provide specific
types of projects for each facility. She inquired the
level of detail needed.
Co-Chair Torgerson interjected that the Committee wants a
more thorough explanation of each project. He noted that
the "rule" he follows is if it extends the "life of the
building".
Ms. Redman commented that no "on-going" maintenance had
been included in the request. She noted that it were
present problems to break it down to specific details of
each project. Some projects are a "best guess" until the
space is taken apart, making it difficult to determine the
actual costs.
Co-Chair Torgerson noted that SB 310 would be HELD in
Committee for further consideration.
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