Legislature(1993 - 1994)
04/21/1993 04:25 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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.