04/14/1993 01:45 PM Senate JUD

 SENATOR TAYLOR introduced CS FOR SENATE BILL NO. 161(STA)                     
 (INTEREST RATES: JUDGMENTS/TAXES/ROYALTIES) sponsored by the                  
 Senate Rules Committee by request of the Governor.  SENATOR                   
 TAYLOR invited JOE GELDHOF, from the Attorney General's Office                
 to testify on SB 161.                                                         
                                                                               
 Number 435                                                                    
                                                                               
 MR. GELDHOF began by suggesting that questions relating to the                
 revenue aspects of the bill, Sections 4 and 5, could be                       
 addressed to the Revenue Department, and he offered to get                    
 those persons for testimony.                                                  
                                                                               
 MR. GELDHOF referred to Section 1 which is the interest on                    
 judgment and prejudgment interest, and noted that the                         
 Administration, the Attorney General, and the Department of                   
 Transportation and Public Facilities strongly support a move                  
 into the market rate for setting interest, both for judgement                 
 or prejudgment interest.                                                      
                                                                               
 MR. GELDHOF offered some amendment language for page 2, which                 
 would alter the language in the State Affairs version to                      
 return the bill to a tort reform compromise.  He explained,                   
 in personal injury cases, a person who prevails, might be                     
 entitled to prejudgment interest, but he proposed to change                   
 in other cases, not set by contract, that prejudgment interest                
 would only be paid from the date of the issuance of the                       
 summons.  He offered to answer questions about the proposed                   
 amendment for Section 1.                                                      
                                                                               
 SENATOR DONLEY indicated he didn't like the bill, although                    
 would support Section 2, but not the rest of the bill.                        
                                                                               
 Number 518                                                                    
                                                                               
 SENATOR TAYLOR clarified the language MR. GELDHOF was                         
 proposing to amend in Section 1 dealing with when prejudgment                 
 interest would accrue: from the date of entry of the judgement                
 or decree, from the date of injury or harm, when the initial                  
 summons was issued, or when the initial counter claim or                      
 cross-claim was filed - whichever was earliest.                               
                                                                               
 MR. GELDHOF agreed, and SENATOR TAYLOR further explained it                   
 would make a slight difference in letters-of-demand to be sent                
 or notification to be given to the other side.                                
                                                                               
 MR. GELDHOF said that was his understanding of the status quo                 
 in personal injury cases which had been changed in State                      
 Affairs, and he explained his preference for the original                     
 language.  He wanted to force the demand as well as the                       
 settlement - which is the status quo.  He said the amendment                  
 would change a contract provision eliminating the prejudgment                 
 interest, but would propose a "put up or be quiet" approach,                  
 for those who might wait to sue a day before the statute of                   
 limitations before asking for prejudgment interest.  This                     
 would be for personal injury cases only.                                      
                                                                               
 MR. GELDHOF explained for all other cases, the bill proposed                  
 prejudgment interest which would accrue from the date of                      
 summons in non-personal injury cases.                                         
                                                                               
 SENATOR DONLEY argued this didn't make sense and would defeat                 
 the purpose.  He said it would encourage the filing of a                      
 lawsuit instead of mediation.                                                 
                                                                               
 Number 544                                                                    
                                                                               
 MR. GELDHOF suggested the committee might want to make the                    
 same provisions for personal injury as a demand, but he                       
 described the breach of time before a lawsuit is filed.  He                   
 also described the involved agencies as not being wild about                  
 prejudgment interest for a period of time before a suit is                    
 filed.                                                                        
                                                                               
 SENATOR DONLEY chided the Department of Law as defending the                  
 agencies while the "poor little guy" suffers at the hands of                  
 the department for wrongful withholding of payment.  He said                  
 the legislature was there to protect those people against the                 
 thinking contemplated in the bill.                                            
                                                                               
 MR. GELDHOF thought SENATOR DONLEY had some valid                             
 considerations, but he claimed the legislation provided for                   
 the period not specified by contract what and how prejudgment                 
 would be paid.  He reiterated the request of the legislation                  
 for a market interest rate principal, and he defended the                     
 amendment to reverse the changes by the State Affairs                         
 Committee.                                                                    
                                                                               
 SENATOR TAYLOR thanked MR. GELDHOF for his testimony.                         
                                                                               
 TAPE 93-44, SIDE A                                                            
 Number 001                                                                    
                                                                               
 SENATOR DONLEY thought there was a significant number of                      
 people who would be impacted by the legislation and could have                
 a reverse effect by going to a market rate.  He thought this                  
 solution should be reserved for a decision by the legislature                 
 rather than the Commissioner of Revenue.                                      
                                                                               
 SENATOR DONLEY discussed with SENATOR TAYLOR about a possible                 
 constitutional separation of powers question, and he thought                  
 the present low market rate would not be an incentive for                     
 settlement.  SENATOR DONLEY reiterated his concerns for the                   
 legislation with the exception of Section 2, which he thought                 
 made sense for local governments, and he gave a possible                      
 illustration.                                                                 
                                                                               
 SENATOR TAYLOR agreed SENATOR DONLEY had given a correct                      
 illustration, but he thought there was a problem that needed                  
 to be addressed, dealing with the fluctuation of interest                     
 rates.  There was a general discussion on the diversity of                    
 interest rates.                                                               
                                                                               
 SENATOR TAYLOR invited DAN BEARDSLEY, representing the                        
 Department of Transportation to testify.                                      
                                                                               
 MR. BEARDSLEY said he echoed many of the concerns that have                   
 been expressed, and he agreed there presently was a period of                 
 no incentive to reach a settlement with some of the eminent                   
 domain cases.  He thought there was less a timing problem, but                
 more of an incentive to settle or to resolve the matter.  His                 
 department favors the market rate as an incentive not to drag                 
 out a case.                                                                   
                                                                               
 Number 109                                                                    
                                                                               
 In reference to page 3, Section 5, SENATOR TAYLOR agreed with                 
 the way in which it was expressed by SENATOR DONLEY where the                 
 determination is left to the Commissioner of Revenue to decide                
 the market rate.                                                              
                                                                               
 JEFFERY OTTENSEN, Chief of Right-of-Way for the Department of                 
 Transportation, asked to expand on the previous testimony, and                
 SENATOR TAYLOR invited him to do so.                                          
                                                                               
 MR. OTTENSEN referred to line 13 on page 1, where the interest                
 rate appears to be set no later that December 15 and explained                
 it was not an opinion of the Commissioner of Revenue, but is                  
 information based on the average accepted auction price for                   
 auctions of 52-week United States' Treasury bills (T-bills).                  
                                                                               
 There was a general discussion on this manner of setting the                  
 rate.                                                                         
                                                                               
 Number 141                                                                    
                                                                               
 ANN WILLIAMS, representing the Municipality of Anchorage,                     
 asked to speak to the committee.  She said SENATOR DONLEY had                 
 laid out quite fairly the position of the Municipality of                     
 Anchorage.  She, too, wanted Section 2 to remain in the bill                  
 and thanked SENATOR DONLEY for expressing the concerns of the                 
 Municipality of Anchorage.                                                    
                                                                               
 SENATOR JACKO moved to pass CS FOR SENATE BILL NO. 161(STA)                   
 (INTEREST RATES: JUDGMENTS/TAXES/ROYALTIES) from committee                    
 with individual recommendations.  SENATOR DONLEY objected.                    
                                                                               
 SENATOR DONLEY said he would have no problem with moving                      
 Section 2, but he thought there should be more public input                   
 on the remainder of the bill.  He reviewed areas of concern                   
 in the legislation and suggested the legislation be revised                   
 over the interim to give a more comprehensive assessment of                   
 the goals for the legislation.                                                
                                                                               
 SENATOR DONLEY suggested removing Section 2 and sending it on                 
 as a separate bill.                                                           
                                                                               
 Before a vote was completed, SENATOR JACKO withdrew his motion                
 to move SB 161.                                                               
                                                                               
 SENATOR TAYLOR thought Section 1 was good, also, and suggested                
 that those members wishing to make changes, to bring some                     
 prepared amendments next Monday.  There was agreement to this.