Legislature(1993 - 1994)

04/21/1993 04:25 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                 
  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                 
  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                 
  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                 
  Amendment #6  -  page 2,  line 31  and page  3,  line 1,  be                 
  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                 
  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                 
  Co-chair Frank MOVED a letter of  intent to define the words                 
  "major rehabilitation."  No objections  being raised, it was                 
  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                 
  Amendment #9 - on  page  6, lines  14  and 15,  delete "that                 
                 exceed  $200,000  and are  approved  under AS                 
  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                 
  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."                                                         
  The meeting was adjourned at approximately 9:25 p.m.                         

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