Legislature(1999 - 2000)

02/22/2000 08:10 AM House CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
              HOUSE COMMUNITY AND REGIONAL AFFAIRS                                                                              
                       STANDING COMMITTEE                                                                                       
                        February 22, 2000                                                                                       
                            8:10 a.m.                                                                                           
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                                 
                                                                                                                                
Representative John Harris, Co-Chairman                                                                                         
Representative Carl Morgan, Co-Chairman                                                                                         
Representative Lisa Murkowski                                                                                                   
Representative Fred Dyson                                                                                                       
Representative Reggie Joule                                                                                                     
Representative Albert Kookesh                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                  
                                                                                                                                
Representative Andrew Halcro                                                                                                    
                                                                                                                                
COMMITTEE CALENDAR                                                                                                              
                                                                                                                                
HOUSE BILL NO. 255                                                                                                              
"An  Act relating  to  villages; and  providing  for an  effective                                                              
date."                                                                                                                          
                                                                                                                                
     - MOVED CSHB 255(CRA) OUT OF COMMITTEE                                                                                     
                                                                                                                                
HOUSE BILL NO. 334                                                                                                              
"An Act  relating to  the establishment of  and accounting  for an                                                              
administrative cost  charge for the state's role  in the community                                                              
development  quota program  and to the  appropriation of  receipts                                                              
from the charge; and providing for an effective date."                                                                          
                                                                                                                                
     - MOVED CSHB 334(CRA) OUT OF COMMITTEE                                                                                     
                                                                                                                                
HOUSE BILL NO. 342                                                                                                              
"An Act  relating to the financing  authority, payment in  lieu of                                                              
tax agreements, and  tax exemption for assets and  projects of the                                                              
Alaska Industrial  Development and  Export Authority;  relating to                                                              
renaming  and   contingently  repealing   the  rural   development                                                              
initiative fund  within the Department  of Community  and Economic                                                              
Development,  and establishing  the  rural development  initiative                                                              
fund  within   the  Alaska   Industrial  Development   and  Export                                                              
Authority; and providing for an effective date."                                                                                
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
PREVIOUS ACTION                                                                                                                 
                                                                                                                                
BILL: HB 255                                                                                                                  
SHORT TITLE: HOME RULE VILLAGES                                                                                                 
                                                                                                                                
Jrn-Date    Jrn-Page           Action                                                                                           
 1/10/00      1886     (H)  PREFILE RELEASED 12/30/99                                                                           
 1/10/00      1886     (H)  READ THE FIRST TIME - REFERRALS                                                                     
 1/10/00      1886     (H)  CRA, FIN                                                                                            
 1/10/00      1886     (H)  REFERRED TO CRA                                                                                     
 2/17/00               (H)  CRA AT  8:00 AM CAPITOL 124                                                                         
 2/17/00               (H)  Heard & Held                                                                                        
 2/17/00               (H)  MINUTE(CRA)                                                                                         
 2/18/00      2239     (H)  COSPONSOR(S): HARRIS                                                                                
 2/21/00               (H)  CRA AT 10:30 AM CAPITOL 106                                                                         
                            <Subcommittee Meeting>                                                                              
 2/22/00               (H)  CRA AT  8:00 AM CAPITOL 124                                                                         
                                                                                                                                
BILL: HB 334                                                                                                                  
SHORT TITLE: CHARGE FOR COMMUNITY DEVELOPMENT QUOTA                                                                             
                                                                                                                                
Jrn-Date    Jrn-Page           Action                                                                                           
 2/02/00      2071     (H)  READ THE FIRST TIME - REFERRALS                                                                     
 2/02/00      2072     (H)  CRA, L&C, FIN                                                                                       
 2/02/00      2072     (H)  FISCAL NOTE (DCED)                                                                                  
 2/02/00      2072     (H)  GOVERNOR'S TRANSMITTAL LETTER                                                                       
 2/02/00      2072     (H)  REFERRED TO COMMUNITY & REGIONAL                                                                    
                            AFFAIR                                                                                              
 2/15/00               (H)  CRA AT  8:00 AM CAPITOL 124                                                                         
 2/15/00               (H)  -- Meeting Canceled --                                                                              
 2/22/00               (H)  CRA AT  8:00 AM CAPITOL 124                                                                         
                                                                                                                                
WITNESS REGISTER                                                                                                                
                                                                                                                                
JEFF BUSH, Deputy Commissioner                                                                                                  
Department of Community & Economic Development                                                                                  
P.O. Box 110800                                                                                                                 
Juneau, Alaska 99811-0800                                                                                                       
POSITION STATEMENT:  Presented HB 334.                                                                                          
                                                                                                                                
JASON BOURDUKOFSKY                                                                                                              
(No address provided)                                                                                                           
POSITION STATEMENT:  Testified, as a concerned citizen of Saint                                                                 
Paul, in opposition to HB 334.                                                                                                  
                                                                                                                                
LARRY COTTER, Chief Executive Officer                                                                                           
Aleutian Pribilof Island Community Development Association                                                                      
234 Gold Street                                                                                                                 
Juneau, Alaska 99801                                                                                                            
POSITION STATEMENT:  Discussed the inception of HB 334.                                                                         
                                                                                                                                
                                                                                                                                
DICK TREMAINE, Consultant                                                                                                       
Central Bering Seas Fishermans Association                                                                                      
(No address provided)                                                                                                           
POSITION STATEMENT:  Supported HB 334.                                                                                          
                                                                                                                                
ROBIN SAMUELSEN, President                                                                                                      
Bristol Bay Economic Development Corporation                                                                                    
(No address provided)                                                                                                           
POSITION STATEMENT:  Supported HB 334.                                                                                          
                                                                                                                                
ACTION NARRATIVE                                                                                                                
                                                                                                                                
TAPE 00-10, SIDE A                                                                                                              
Number 0001                                                                                                                     
                                                                                                                                
CO-CHAIRMAN  HARRIS  called  the   House  Community  and  Regional                                                              
Affairs    Standing  Committee  meeting  to  order  at  8:10  a.m.                                                              
Members present at the call to order  were Representatives Harris,                                                              
Morgan,  Murkowski,  Dyson  and  Kookesh.    Representative  Joule                                                              
arrived as  the meeting  was in progress.   Representative  Halcro                                                              
was not in attendance.                                                                                                          
                                                                                                                                
HB 255-HOME RULE VILLAGES                                                                                                     
                                                                                                                                
CO-CHAIRMAN  HARRIS announced  that  the first  order of  business                                                              
would be  HOUSE BILL NO.  255, "An Act  relating to  villages; and                                                              
providing for an effective date."                                                                                               
                                                                                                                                
Number 0099                                                                                                                     
                                                                                                                                
REPRESENTATIVE DYSON,  speaking as the sponsor of  HB 255, pointed                                                              
out that the committee should have  a report from the subcommittee                                                              
on HB  255, which  had a  spirited discussion  with regard  to the                                                              
name of this  new category.  The subcommittee  determined that the                                                              
most descriptive  and user-friendly  title would  be a  "home rule                                                              
community."     He  informed  the  committee  that   Tamara  Cook,                                                              
Director,  Legislative  Legal  and   Research  Services,  had  the                                                              
opinion that a community is defined  as fitting under the category                                                              
of city.  Therefore, the name would  pass the constitutional test,                                                              
although it will require some work.                                                                                             
                                                                                                                                
REPRESENTATIVE DYSON informed members  that the Attorney General's                                                              
representative  did not  have strong objections.   Kevin  Ritchie,                                                              
Executive Director, Alaska Municipal  League, felt that the phrase                                                              
"home  rule"   was  widely   used,  with   a  recognized   meaning                                                              
nationwide.   Therefore,  the subcommittee  liked  the term  "home                                                              
rule  community" that  was in  the  proposed committee  substitute                                                              
(CS), Version H [1-LS1000\H, Cook,  1/24/00], which was before the                                                              
committee at the last hearing.                                                                                                  
                                                                                                                                
Number 0295                                                                                                                     
                                                                                                                                
REPRESENTATIVE   KOOKESH  recalled   that  the  subcommittee   had                                                              
reviewed  seven or  eight possible  names.   The subcommittee  had                                                              
tried to fit in the word "city."   However, people in rural Alaska                                                              
do  not  want  to be  known  as  a  city.   The  name  "home  rule                                                              
community" was the name that seemed  to satisfy the dislike of the                                                              
word "city" by rural communities  while recognizing that "city" is                                                              
mentioned in the constitution.                                                                                                  
                                                                                                                                
REPRESENTATIVE MURKOWSKI noted that  at the last committee meeting                                                              
she  had requested  an  opinion from  Ms. Cook.    With the  input                                                              
received  from  Ms.  Cook  at the  subcommittee  meeting  and  the                                                              
memorandum  attached to  the subcommittee  report,  Representative                                                              
Murkowski said she was satisfied.                                                                                               
                                                                                                                                
Number 0468                                                                                                                     
                                                                                                                                
REPRESENTATIVE  DYSON  moved  to   report  CSHB  255,  version  1-                                                              
LS1000\H,  Cook,   1/24/00,  out  of  committee   with  individual                                                              
recommendations.    There  being no objection,  it was  so ordered                                                              
and  CSHB 255(CRA)  was  reported  from  the House  Community  and                                                              
Regional Affairs Standing Committee.                                                                                            
                                                                                                                                
CO-CHAIRMAN  HARRIS  announced that  the  committee  would take  a                                                              
brief at-ease.   He passed the  gavel to Co-Chairman Morgan.   The                                                              
committee was at-ease from 8:16 to 8:17 a.m.                                                                                    
                                                                                                                                
HB 334-CHARGE FOR COMMUNITY DEVELOPMENT QUOTA                                                                                 
                                                                                                                                
CO-CHAIRMAN  MORGAN  announced that  the  next order  of  business                                                              
would  be   HOUSE  BILL   NO.  334,  "An   Act  relating   to  the                                                              
establishment of and accounting for  an administrative cost charge                                                              
for the  state's role in  the community development  quota program                                                              
and  to  the  appropriation  of  receipts  from  the  charge;  and                                                              
providing for an effective date."                                                                                               
                                                                                                                                
Number 0633                                                                                                                     
                                                                                                                                
JEFF  BUSH,   Deputy  Commissioner,  Department  of   Community  &                                                              
Economic Development  (DCED), commented that it is  not often that                                                              
he  could  come   before  the  committee  with   legislation  that                                                              
virtually  everyone supports.   This  legislation,  HB 334,  deals                                                              
with the Community  Development Quota program (CDQ)  with which he                                                              
has been  affiliated for  five years.   He informed the  committee                                                              
that  the  CDQ  program  is  a  federal   program  that  allocates                                                              
percentages  of the groundfish  in the  Bering Sea to  communities                                                              
located in Western Alaska.                                                                                                      
                                                                                                                                
MR.  BUSH  explained   that  the  program  is   implemented  by  a                                                              
delegation   from  the   federal   government's  National   Marine                                                              
Fisheries Service  (NMFS) to the  governor, who has  delegated the                                                              
responsibility to  DCED and the Alaska  Department of Fish  & Game                                                              
(ADF&G).  Essentially,  the departments monitor  the activities of                                                              
the communities that are receiving  the allocations.  He explained                                                              
that the communities  have joined together into  what are referred                                                              
to as  CDQ groups, which  are nonprofit  corporations.   There are                                                              
six groups that  range in size from 22 communities  [down].  Those                                                              
groups receive  varying allocations  from about  5 percent  of the                                                              
amount  in the  program up  to 23  percent  of the  amount in  the                                                              
program.                                                                                                                        
                                                                                                                                
MR.  BUSH  commented  that  the CDQ  program  has  been  extremely                                                              
successful  over the  years.   The  department  has identified  in                                                              
excess  of  1,000  jobs  per year  in  Western  Alaska  that  were                                                              
generated through  the CDQ program.  The groups  receive royalties                                                              
when  the  allocated  fish  are  sold;  these  royalties  generate                                                              
between  $20  and  $30  million  per year  to  the  groups.    The                                                              
royalties have  allowed the groups to  grow to the point  at which                                                              
they  are also  investing  earnings.   Therefore,  the groups  are                                                              
making  earnings in  addition to  the  royalties and  thus have  a                                                              
substantial net worth.  This is a  very successful program that is                                                              
growing exponentially.                                                                                                          
                                                                                                                                
MR.   BUSH  informed   the   committee   that  last   summer   the                                                              
Administration worked  with the groups to establish  a system that                                                              
would pay for the  program at the state level.   In recognition of                                                              
budget cuts,  the program  or the state's  ability to  oversee the                                                              
program could be jeopardized.  Approximately  $250,000 per year is                                                              
used  to operate  the CDQ  program; historically,  that money  has                                                              
come  from  general  fund  (GF)  dollars.    The  groups  and  the                                                              
department tried  to find  a way to fund  the state  activities in                                                              
the program through fees paid by  the groups annually.  The groups                                                              
all agreed  with this  concept because of  the importance  for the                                                              
groups  to have  efficient  state oversight.    For instance,  the                                                              
groups  have  to  receive  [state]   approval  when  they  propose                                                              
significant changes  to the existing  business plan.  Cuts  at the                                                              
state level  would jeopardize  the state's ability  to react  in a                                                              
timely  manner.   Furthermore,  the  state  has, over  the  years,                                                              
realized that its  ability to monitor has declined  due to limited                                                              
resources.  However, that is not  necessarily bad because it comes                                                              
at a  time when  the groups  are maturing  and making more  mature                                                              
business decisions.                                                                                                             
                                                                                                                                
Number 1059                                                                                                                     
                                                                                                                                
MR. BUSH explained  that HB 334 will  take the $250,000  in GF and                                                              
zero that out and fund the program  through statutorily designated                                                              
program  receipts.    Therefore,  the  program  would  become  off                                                              
budget.  He noted  that this bill is modeled  after the regulatory                                                              
cost charge.   He explained that  the legislature would  decide on                                                              
an annual basis how much in funds  to appropriate to that program,                                                              
then  fees  are  assessed  to  equal  the  amount  that  has  been                                                              
appropriated.  For example, half  of the $250,000 allocation would                                                              
be assessed  equally  to all the  groups, which  is slightly  less                                                              
than  $21,000 per  group.   The other  half of  the allocation  is                                                              
based upon  the allocation that  each group receives.   Therefore,                                                              
the group that  receives the largest allocation of  fish would pay                                                              
the most of that allocation.                                                                                                    
                                                                                                                                
MR.  BUSH pointed  out that  HB 334  also  includes language  that                                                              
allows  the  groups to  work  among  themselves, subject  to  [the                                                              
department's/state's]  approval   of  what  the  values  of  those                                                              
allocations are.  He acknowledged  that there is some disagreement                                                              
with regard to how much a ton of  pollock is worth.  It would be a                                                              
very  complicated calculation  to determine  the values,  although                                                              
the bill provides that the state  shall do that if necessary.  The                                                              
bill also  allows the state to  accept a value  determination that                                                              
is made  by the groups.   In fact,  he understood that  the groups                                                              
had already  reached  agreement with  regard to  what the fees  or                                                              
shares would be for the next fiscal year.                                                                                       
                                                                                                                                
MR.  BUSH pointed  out that  under  the Magnuson-Stevens  [Fishery                                                              
Conservation  and  Management]  Act,  NMFS  is  allowed  to  adopt                                                              
regulations  and charge  a fee for  the services  provided  to run                                                              
this program through  the federal and state governments.   The fee                                                              
collected on  the state's behalf  is paid to  the state.   If that                                                              
sort of program  were to start,  NMFS has not done  the regulatory                                                              
process and discussions have indicated  that would be at least two                                                              
years  away.   However,  if  funds  were  ever received  from  the                                                              
federal  government, those  funds  would immediately  go into  the                                                              
program and  offset the amount that  is allocated and paid  by the                                                              
group.                                                                                                                          
                                                                                                                                
MR. BUSH  commented that the timing  of HB 334 is  significant due                                                              
to the  serious cuts the  department faces.   He pointed  out that                                                              
the current  House cap  is $2.4  million, and  the department  has                                                              
been  told  that the  Tourism  Department  is  likely to  be  held                                                              
harmless  under  any  cap program.    If  that  is the  case,  the                                                              
department would  face an approximately  40 percent cut to  its GF                                                              
operating budget; that is not counting  the revenue sharing.  With                                                              
a  40  percent  cut to  the  department's  operating  budget,  the                                                              
department  faces cuts  everywhere.   The  department will  review                                                              
cuts to  virtually all  the programs and  some programs  [in their                                                              
entirety] entirely.  He reiterated  that the CDQ program is a very                                                              
successful program  and thus every  effort would be made  in order                                                              
to not  make significant  cuts to this  program.  However,  he was                                                              
not sure  the department  could come up  with $250,000  to operate                                                              
the program in the coming years.                                                                                                
                                                                                                                                
Number 1414                                                                                                                     
                                                                                                                                
MR. BUSH  directed his comments  to a proposed  amendment, labeled                                                              
Option I, in the bill packet.  This  amendment would allow any new                                                              
communities  added   to  the  program  to  not   be  charged  this                                                              
administrative fee  for the first  three years of operation.   The                                                              
administration does not oppose the  amendment.  Mr. Bush said that                                                              
[the department] does not have any position on the amendment.                                                                   
                                                                                                                                
REPRESENTATIVE KOOKESH  expressed concern that there  be a ceiling                                                              
on this  amount, which  he noticed  was at $400,000.   He  did not                                                              
want to see the  state become a participant and make  money in the                                                              
CDQ program  in order to  attempt to  offset other costs  or cuts.                                                              
He  asked:   Is  there anything  in  this legislation  that  would                                                              
ensure such would not happen?                                                                                                   
                                                                                                                                
MR. BUSH  related his understanding  that the bill creates  a fund                                                              
that  can only  be  used to  run  the  CDQ program.    The cap  of                                                              
$400,000  was inserted at  the request  of the  groups.   He noted                                                              
that there  has been some discussion  of adding a secretary  or an                                                              
administrative  clerk  position  to  the program  in  the  future.                                                              
Addition of  such a position  would be  a benefit to  the program.                                                              
He   reiterated  that   it  is   subject   to  the   legislature's                                                              
appropriation  of  the  amount,  and  therefore  the  department's                                                              
operations  can  be  reviewed  on  an annual  basis  in  order  to                                                              
determine  whether  the  funds  are   being  used  properly.    He                                                              
guaranteed the  committee that  the groups are  very aware  of how                                                              
the department uses its funds.                                                                                                  
                                                                                                                                
REPRESENTATIVE  KOOKESH   expressed  concern  with   the  $150,000                                                              
difference  between the  $250,000 and  the $400,000  ceiling.   He                                                              
related his experience that normal  bureaucracy would view this as                                                              
$150,000 to play with.                                                                                                          
                                                                                                                                
CO-CHAIRMAN HARRIS inquired as to  what the $250,000 to manage the                                                              
fund would cover.                                                                                                               
                                                                                                                                
Number 1700                                                                                                                     
                                                                                                                                
MR.  BUSH informed  the committee  that the  department has  three                                                              
staff members that  run the CDQ program.  There is  a CDQ manager,                                                              
who is  the head of  the program, a  fisheries biologist  from the                                                              
ADF&G and  a CDQ specialist.   That three-person  team essentially                                                              
monitors  the business  activities  of the  [program]  as well  as                                                              
makes  recommendations  on  allocations.   The  three-person  team                                                              
probably is 80 percent of the cost  of the program.  The remainder                                                              
of the cost of  the program consists of equipment  and travel.  He                                                              
noted  that travel  is significant  because these  groups are  all                                                              
located in Western Alaska.  Mr. Bush  pointed out that he and Dave                                                              
Benton, the  Deputy Commissioner of  ADF&G, and Lamar  Cotten, the                                                              
former  Deputy  Commissioner  of  the Department  of  Community  &                                                              
Regional Affairs,  have all been  charged with overseeing  the CDQ                                                              
program.  Although  these three do not charge any  of the employee                                                              
costs, travel is charged.                                                                                                       
                                                                                                                                
CO-CHAIRMAN HARRIS understood  HB 334 to be passing  the cost from                                                              
the state GF to the CDQ program via a fee.                                                                                      
                                                                                                                                
MR. BUSH agreed with Co-Chairman Harris' understanding.                                                                         
                                                                                                                                
REPRESENTATIVE  MURKOWSKI pointed  out  that the  bill includes  a                                                              
provision  that  says  that  the   administrative  charge  can  be                                                              
adjusted  if there is  an inequitable  result.   She asked  if the                                                              
adjustment  could occur  to the variable  portion  as well  as the                                                              
standard portion.                                                                                                               
                                                                                                                                
MR.  BUSH answered  that  he  understood  that only  the  variable                                                              
portion could  be adjusted.  He  informed the committee  that with                                                              
the collapse  of the Opilio crab  in Western Alaska,  the Pribilof                                                              
Islands'  CDQ groups  are  suffering  significantly.   Under  this                                                              
bill, such a collapse could have led to an adjustment.                                                                          
                                                                                                                                
REPRESENTATIVE MURKOWSKI  suggested that it may  be appropriate to                                                              
state in the bill that its an adjustment  for the variable portion                                                              
of the  administrative cost  charge.  She  said that she  read the                                                              
language to  be applicable to either  the variable as well  as the                                                              
standard.                                                                                                                       
                                                                                                                                
MR. BUSH said that the department  would not oppose that change as                                                              
that  was  the  intention  originally.    He  commented  that  the                                                              
Department of  Law had  difficulty in drafting  this portion.   He                                                              
suggested  that  the  easiest  way  to  accomplish  Representative                                                              
Murkowski's  concern  would  be to,  on  page  3, line  1,  before                                                              
"administrative  cost  charge,"  insert  the  following  language:                                                              
"adjust the variable portion of the".                                                                                           
                                                                                                                                
Number 2083                                                                                                                     
                                                                                                                                
REPRESENTATIVE  MURKOWSKI  moved  that  the  committee  adopt  the                                                              
following amendment:                                                                                                            
                                                                                                                                
     Page 3, line 1, before "administrative"                                                                                    
          Insert "adjust the variable portion of the"                                                                           
                                                                                                                                
There being no objection, it was  so ordered and the amendment was                                                              
adopted.                                                                                                                        
                                                                                                                                
Number 2166                                                                                                                     
                                                                                                                                
JASON  BOURDUKOFSKY, concerned  citizen of  Saint Paul,  testified                                                              
via teleconference  from Saint Paul.  Mr. Bourdukofsky  opposed HB
334.   The CDQ program  was developed  for the communities  not to                                                              
create another  bureaucratic office in  the state government.   He                                                              
asked if [the legislature] was going  to waive the fishing license                                                              
fee for the CDQ  participants or will other groups  beyond the CDQ                                                              
groups be charged  the administrative fee.  Mr.  Bourdukofsky said                                                              
that this would be an inequitable  tax on small groups, especially                                                              
the CDQ groups.   If HB 334  passes, he felt that a  fairer method                                                              
of collection  should  be found.   Furthermore,  he felt that  the                                                              
percentage of allocation should be  [set the same for anyone].  He                                                              
specified that  he opposed  the language on  page 3,  lines 10-13,                                                              
which  reads, "The  legislature  may  appropriate  money from  the                                                              
community development  quota program  account for expenditures  by                                                              
the department for  necessary costs incurred by  the department in                                                              
implementing any assigned  role under AS 44.33.020(11)  or for any                                                              
other public  purpose."  He interpreted  "or for any  other public                                                              
purpose" to mean  that the money could be used  for purposes other                                                              
than fishing.   He reiterated his belief that HB  334 should apply                                                              
to everyone.   In conclusion, Mr. Bourdukofsky  commented that the                                                              
CDQ program is very  effective and he hoped that  an unfair tax is                                                              
not placed on the CDQ group.                                                                                                    
                                                                                                                                
Number 2338                                                                                                                     
                                                                                                                                
REPRESENTATIVE KOOKESH referred to  the language "or for any other                                                              
public purpose."   He inquired as  to the meaning of  the language                                                              
and asked whether the language was necessary.                                                                                   
                                                                                                                                
MR.  BUSH related  his understanding  that the  cited language  is                                                              
required  and is  the standard  language  that exists  for all  of                                                              
these  programs.   Without  that language,  it  [the CDQ  program]                                                              
would  run  into  constitutional  problems as  a  dedicated  fund.                                                              
Theoretically,  that  language  would  allow  the  legislature  to                                                              
appropriate these funds  for other purposes.  Again,  that is true                                                              
for virtually  all of  the designated  program receipts  programs.                                                              
He noted  that historically, the  legislature has  refrained [from                                                              
appropriating designated  program receipts  to other areas].   Mr.                                                              
Bush  said   that  the  language   is  a  requirement   under  the                                                              
constitution.    In response  to  Representative  Joule, Mr.  Bush                                                              
agreed  that this  language is  consistent with  every other  area                                                              
that generates program receipts.                                                                                                
                                                                                                                                
REPRESENTATIVE KOOKESH  asked what the  $250,000 would be  for the                                                              
total percentage of income on a CDQ group.                                                                                      
                                                                                                                                
MR. BUSH  informed the committee  that the royalties that  the CDQ                                                              
program  generates  annually  are  between $20  and  $30  million.                                                              
However, that $30  million does not include all  of the investment                                                              
earnings that the  groups are now making.  He  reiterated that the                                                              
groups  now  earn  additional  funds  through  investments.    The                                                              
program allocates about $30 million per year.                                                                                   
                                                                                                                                
CO-CHAIRMAN  HARRIS  asked  if  this  legislation  would  place  a                                                              
financial hardship on any of the six CDQ groups.                                                                                
                                                                                                                                
MR. BUSH  replied no.   At the moment,  all the groups  agree that                                                              
this  is  a  fair and  reasonable  fee  that  represents  a  small                                                              
percentage of  a group's annual earnings.                                                                                       
                                                                                                                                
Number 2487                                                                                                                     
                                                                                                                                
REPRESENTATIVE  JOULE  inquired  as  to  whether HB  334  has  any                                                              
protections for bad years or a stint of lean years.                                                                             
                                                                                                                                
MR.  BUSH pointed  out  that  the  legislature still  retains  the                                                              
ability to  adjust the amount that  will be allocated  by reducing                                                              
the amount appropriated to the program.   From a chart, he pointed                                                              
out that  royalties  earned in the  CDQ program  between 1992  and                                                              
1998 ranged  from a low of $17  million to a high of  $20 million.                                                              
Since 1999 was a  very good year, the royalties earned  by the CDQ                                                              
program are  up close to $30  million.  Therefore,  he interpreted                                                              
that to  mean that although  the fishing  was not consistent,  the                                                              
royalty  returns were   relatively consistent.   Furthermore,  the                                                              
investment returns of the groups are growing very fast.                                                                         
                                                                                                                                
REPRESENTATIVE  KOOKESH  said  that although  he  appreciated  Mr.                                                              
Bourdukofsky's position,  the state is required  to participate in                                                              
this program.  Since  1992 the state has not charged  any costs to                                                              
the CDQ program; however, with the  current fiscal situation there                                                              
may be no  one to monitor  this program without charging  [a fee].                                                              
Representative Kookesh  also pointed out that none of  the six CDQ                                                              
groups  have  come forward  in  opposition  of  HB 334,  which  he                                                              
interpreted as the  groups recognizing the need to  pay their fair                                                              
share.  He  commented that $250,000  out of $20 to $30  million is                                                              
not much.  Representative  Kookesh believes that HB  334 is a fair                                                              
bill that should move forward.                                                                                                  
                                                                                                                                
REPRESENTATIVE JOULE  informed the  committee that a  dive fishery                                                              
started not long ago.  That group  had to pay that [administrative                                                              
cost charge] from the beginning.                                                                                                
                                                                                                                                
REPRESENTATIVE DYSON further informed  the committee that the dive                                                              
fishery came  to the ADF&G,  which said that  it did not  have the                                                              
resources to research and administer  the fishery.  Therefore, the                                                              
dive fishermen asked the department  to charge them for that work.                                                              
                                                                                                                                
Number 2659                                                                                                                     
                                                                                                                                
LARRY COTTER,  Chief Executive  Officer, Aleutian Pribilof  Island                                                              
Community   Development   Association   (APICDA),   informed   the                                                              
committee that  APICDA is one of  the six CDQ groups.   The charge                                                              
of the  CDQ program is  to develop stable  local economies  in the                                                              
villages that the groups represent.   Since the fund emanates from                                                              
a public  resource there are  oversight provisions which  apply to                                                              
how  the  groups   operate  their  businesses  and   manage  their                                                              
investments.  The  groups operate in a highly  regulated area, and                                                              
therefore  it is  necessary to  plan in  advance.   To the  extent                                                              
there is a deviation from the plan,  permission has to be obtained                                                              
from  the state  and  ultimately  the  federal government.    That                                                              
process  can be  lengthy, which  can create  difficulties for  the                                                              
groups to  operate in the private  sector.  Therefore,  Mr. Cotter                                                              
emphasized the  importance of the  state, as an  oversight entity,                                                              
having adequate personnel to perform  its role as expeditiously as                                                              
possible.  The department  is not going to be able  to perform its                                                              
role expeditiously without adequate personnel and funding.                                                                      
                                                                                                                                
MR.  COTTER explained  to the  committee that  when the  Magnuson-                                                              
Stevens Act was reauthorized a provision  was inserted in the bill                                                              
which  allowed a  tax to  be levied  on CDQs  to pay  the cost  of                                                              
government oversight  by both the  state and federal  governments.                                                              
The CDQs  supported  that provision,  but that  has not gone  into                                                              
effect yet.  The CDQs voluntarily  moved forward to develop HB 334                                                              
and its own  formula, to which the  state agreed.  He  pointed out                                                              
that the department has agreed that  it will meet with the CDQs on                                                              
an  annual  basis  and  review  the  department's  current  budget                                                              
relative to  its current expenditures  as well as the  next year's                                                              
budget.   The CDQs  suggested the  upper cap  of $400,000  because                                                              
there may  be times when the  department needs to send  people out                                                              
to the  villages in order  to see the  situation first hand.   Mr.                                                              
Cotter said  that it is far more  important for the state  to have                                                              
the ability to do  that [travel to the villages]  than to save the                                                              
$5,000 to $10,000  that it would cost.  Mr.  Cotter also expressed                                                              
the need for the  program to have a secretary in  order to achieve                                                              
efficiencies  that   would  result  in  the   time  responsiveness                                                              
necessary for the groups to do business.                                                                                        
                                                                                                                                
Number 2849                                                                                                                     
                                                                                                                                
DICK  TREMAINE,   Consultant,  Central   Bering  Seas   Fishermans                                                              
Association,  testified  via teleconference  from  Anchorage.   He                                                              
informed the  committee that  he has worked  with the  CDQ program                                                              
since  its  inception, even  prior  to  its  inception.   The  CDQ                                                              
program began in  1992.  Mr. Tremaine noted that  he helped set up                                                              
the  framework that  provided the  state  oversight under  federal                                                              
auspices.   Since 1994 he  has been a  consultant for  the Central                                                              
Bering Seas Fishermans  Association.  During that  period of time,                                                              
the  CDQ program  has gone  through a  number of  changes, all  of                                                              
which have involved the staffing levels of the state.                                                                           
                                                                                                                                
TAPE 00-10, SIDE B                                                                                                              
                                                                                                                                
MR.  TREMAINE  echoed  Mr. Bourdukofsky's  comment  that  the  CDQ                                                              
program and  the money are  to be used  to benefit  the community.                                                              
One  way to  do  that  is to  make  sure  that there  is  adequate                                                              
oversight  in  terms  of  audits,  management  reviews  and  well-                                                              
thought-out  plans,  which  is  the  role  of  the  state.    This                                                              
legislation requests a user fee,  which is very popular across the                                                              
country because  user fees are reasonable.   He said that  with HB
334, the CDQ groups are looking at  about a 1 percent overall fee.                                                              
He noted that Central  Bering Sea is, by far, the  smallest of the                                                              
CDQ groups.  In the case of the Central  Bering Sea CDQ group, the                                                              
fee will amount to about 3 percent  of its revenues.  Even at that                                                              
level it is  a reasonable fee.   As mentioned earlier,  all six of                                                              
the CDQ groups  discussed with the state how much  they would pay.                                                              
The CDQ groups  suggested that the state charge  them $300,000 and                                                              
hire  a  secretary  because  the state  is  understaffed  and  the                                                              
response time  has been  slow.  Although  the state has  restaffed                                                              
slightly, he agreed with Mr. Cotter  that the state still probably                                                              
needs a secretary.                                                                                                              
                                                                                                                                
MR.  TREMAINE echoed  earlier comments  that the  CDQ groups  have                                                              
evolved  tremendously and  now a  number of the  groups have  well                                                              
over $10 million  in the bank.  Five of the  companies invested in                                                              
factory  trawler  companies; some  of  those companies  have  very                                                              
significant investments.  Within  the past month, both the Coastal                                                              
Villages  Region  Fund and  the  Central  Bering Sea  groups  have                                                              
invested  in American  Seafoods.    These groups  are  approaching                                                              
being  a major  player.    Therefore,  the state's  abilities  and                                                              
expertise in  overseeing the  CDQ program,  at its current  state,                                                              
has  changed.   Mr.  Tremaine,  personally, recommended  that  the                                                              
state  undergo management  review  in order  to  better align  the                                                              
state's staffing and procedures with  actual need.  He agreed with                                                              
the state's  recommendation  that the CDQ  groups need  management                                                              
review.   He acknowledged  that there  has been  fear on  St. Paul                                                              
that  these fees  will come  out of  halibut fisherman's  pockets;                                                              
however,  he did  not believe  that would  happen.   St. Paul  has                                                              
other concerns such as the crash  of the Opilio fishery.  St. Paul                                                              
will have to  raise some money out of the halibut  fishery through                                                              
processing  fees.   Mr.  Tremaine recognized  that  at some  point                                                              
there will  be federal fees on  top of these fees.   Nevertheless,                                                              
Mr. Tremaine supported this legislation.                                                                                        
                                                                                                                                
Number 2689                                                                                                                     
                                                                                                                                
ROBIN  SAMUELSEN,  President,  Bristol  Bay  Economic  Development                                                              
Corporation   (BBEDC),    testified   via   teleconference    from                                                              
Dillingham.  Mr. Samuelsen supported  HB 334.  The CDQ groups have                                                              
recognized  the budget  shortfalls and  stepped up  to the  plate.                                                              
The CDQ  groups recognize this  as a cost  of doing business.   He                                                              
supported Mr. Cotter's comments with  regard to the need for state                                                              
oversight, which is important to  keep the program together.  With                                                              
regard  to the  amendment  that would  provide  new communities  a                                                              
three-year  honeymoon in  which they  would not  pay the fee,  the                                                              
BBEDC is opposed to the amendment.   If communities are added that                                                              
would increase  the burden  on everyone,  including the  oversight                                                              
required.    He  informed  the  committee  that  Bristol  Bay  was                                                              
recently  given  three new  communities  and  the fees  for  those                                                              
communities will  be paid.  Any  new communities should  adhere to                                                              
the  funding   formula  the  six   groups  have  developed.     In                                                              
conclusion,  Mr. Samuelsen  thanked the  committee for hearing  HB
334 and the state regulators for  making the CDQ program a success                                                              
in Western Alaska.                                                                                                              
                                                                                                                                
CO-CHAIRMAN MORGAN closed public testimony.                                                                                     
                                                                                                                                
Number 2536                                                                                                                     
                                                                                                                                
REPRESENTATIVE JOULE moved that the  committee adopt the following                                                              
amendment:                                                                                                                      
                                                                                                                                
     Page 3, line 5                                                                                                             
          Insert  "(f) The department  shall not  assess                                                                        
          nor collect administrative  cost charges under                                                                        
          this  section  from CDQ  groups,  representing                                                                        
          communities  not eligible for the  CDQ program                                                                        
          as  of  the  effective   date  established  in                                                                        
          section 6  of this act, for a period  of three                                                                        
          years from  the actual award of  fishery quota                                                                        
          to that newly formed CDQ group."                                                                                      
                                                                                                                                
     Renumber the subsequent sections.                                                                                          
                                                                                                                                
CO-CHAIRMAN HARRIS objected for purposes of discussion.                                                                         
                                                                                                                                
REPRESENTATIVE  JOULE  informed  the  committee that  if  new  CDQ                                                              
groups  enter the  program,  they have  to  do so  at the  federal                                                              
level.   Should that occur, this  amendment allows the  new groups                                                              
to have  time to enter  the program  and understand the  business.                                                              
The  amendment would  forego the  administrative  cost charge  for                                                              
three years.   He pointed out  that the new communities  would not                                                              
have the  advantage of  being at  the same  place as those  groups                                                              
that have been around and developed for eight or nine years.                                                                    
                                                                                                                                
REPRESENTATIVE MURKOWSKI asked whether  it would be reasonable for                                                              
a  new group  to be  assessed  the standard  charges,  but not  be                                                              
assessed the variable charges for the three year period.                                                                        
                                                                                                                                
MR.  COTTER noted  that he  saw the  amendment this  morning.   He                                                              
understood  that   the  amendment  would  provide   a  three  year                                                              
honeymoon for a new CDQ group that  covered villages not currently                                                              
part of the program.                                                                                                            
                                                                                                                                
REPRESENTATIVE JOULE  inquired as to how long it  took the current                                                              
CDQ groups  to reach the  point at which they  were able to  pay a                                                              
fee.                                                                                                                            
                                                                                                                                
MR.  COTTER  replied  that it  took  them  about  one month.    He                                                              
informed  the  committee  that  [the   CDQ  program]  receives  an                                                              
allocation for a  variety of species of which pollock  is the most                                                              
important.  He explained that what  the CDQ groups do is lease the                                                              
right to catch and process that fish  to private sector companies,                                                              
some of  which the  groups own all  or part of.   In  exchange the                                                              
groups  receive a  royalty.   Pollock royalties  average $250  per                                                              
ton.   If there were  seven CDQ groups,  each group  would receive                                                              
13,000 to  14,000 tons.   That  illustrates how  the money  can be                                                              
generated  very  quickly.   Therefore,  if  you are  discussing  a                                                              
$50,000 to $60,000 administrative  charge per group, there will be                                                              
enough money generated  from royalties to cover that.   Mr. Cotter                                                              
felt that every group should pay.                                                                                               
                                                                                                                                
Number 2241                                                                                                                     
                                                                                                                                
REPRESENTATIVE KOOKESH commented  that the CDQ quotas are sellable                                                              
the  day those  are  received.    Representative Kookesh  did  not                                                              
believe that this  amendment helps anyone.  He inquired  as to the                                                              
realistic future of a new group being formed.                                                                                   
                                                                                                                                
MR. COTTER answered that everything  is possible with U.S. Senator                                                              
Stevens  in  Washington,  D.C.   However,  he  indicated  that  it                                                              
remains  to be  seen  whether  the formation  of  a  new group  is                                                              
realistic.   Mr. Cotter commented,  "Frankly, I believe  the [CDQ]                                                              
program would be great everywhere."                                                                                             
                                                                                                                                
REPRESENTATIVE KOOKESH  said that he believes that if  a new group                                                              
enters, that group would understand  that one of the fixed charges                                                              
is the state's [charge].                                                                                                        
                                                                                                                                
REPRESENTATIVE   JOULE   asked   if   Representative   Murkowski's                                                              
suggestion made more sense.                                                                                                     
                                                                                                                                
MR. COTTER related  his belief that the potential  amount of money                                                              
represented by a fee, one-seventh  of $400,000 (if that is what it                                                              
is), is  not a significant  amount of  money in comparison  to the                                                              
revenues  that  would  be  generated by  royalties.    The  larger                                                              
question is whether a new group would  be formed.  If a group were                                                              
to form, he felt that it would gladly pay the entire fee.                                                                       
                                                                                                                                
CO-CHAIRMAN  HARRIS  interpreted   this  amendment  to  have  been                                                              
presented as a fairness  issue in order to allow  any new group to                                                              
build up its equity.   He asked if the intention  of the amendment                                                              
was to offer new groups equal footing early on.                                                                                 
                                                                                                                                
REPRESENTATIVE JOULE replied yes.                                                                                               
                                                                                                                                
CO-CHAIRMAN  HARRIS  surmised  that  new  groups  would  have  the                                                              
ability to generate  enough revenue to sustain them  and would not                                                              
be placed at a disadvantage [with this fee].                                                                                    
                                                                                                                                
MR. COTTER  said that he believed  that when a new group  comes on                                                              
line, its first  activity would be to save money.   Therefore, the                                                              
new group would  take its allocation and generate  as much royalty                                                              
revenue as  possible.   After the  group begins  to have  money in                                                              
year two or so, then the group would  move to the business side of                                                              
things.  Mr. Cotter suspected that  the royalties generated by the                                                              
new  group in  its first  year should  be in  excess of  (indisc.)                                                              
million dollars  and thus would  have more than  adequate finances                                                              
to pay the administrative cost charge.                                                                                          
                                                                                                                                
CO-CHAIRMAN HARRIS  commented that from the testimony  he surmised                                                              
that  this amendment  may be  problematic.   He further  commented                                                              
that  he would  like  to see  HB 334  move  forward.   Co-Chairman                                                              
Harris maintained his objection.                                                                                                
                                                                                                                                
Number 1931                                                                                                                     
                                                                                                                                
REPRESENTATIVE JOULE withdrew his amendment.                                                                                    
                                                                                                                                
REPRESENTATIVE MURKOWSKI noted that  the committee packet contains                                                              
a letter  from the Norton  Sound Economic Development  Corporation                                                              
(NSEDC).     The  NSEDC  suggests "that  the  bill  be amended  to                                                              
require periodic legislative reauthorization  of the bill, such as                                                              
every three years."  This is the  only negative comment on HB 334.                                                              
Does anyone know why NSEDC made that suggestion?                                                                                
                                                                                                                                
MR.  TREMAINE  said he  believes  that  all  the CDQ  groups  have                                                              
discussed this concept.   At one point, there  was discussion with                                                              
regard to whether HB 334 should be  reviewed every year, or should                                                              
sunset and  have to  be renewed.   The concept  was that  the fees                                                              
could "get out of hand."  There was  also fear that the fees could                                                              
be  put   to  other  uses   and  thus  become   disproportionately                                                              
burdensome  for the  CDQ groups.    Furthermore, the  role of  the                                                              
state has  changed and will  change in  the future as  the program                                                              
continues.    He  believes  that   the  NSEDC  does  not  want  to                                                              
perpetuate  a  fee  program  without   some  means  of  having  it                                                              
reviewed.                                                                                                                       
                                                                                                                                
REPRESENTATIVE MURKOWSKI  questioned the  lack of a sunset  in the                                                              
legislation.                                                                                                                    
                                                                                                                                
MR.  TREMAINE  restated  that  the  CDQ  groups  did  discuss  the                                                              
possibility of  a sunset,  but decided not  to suggest it  at this                                                              
time for a number of reasons.                                                                                                   
                                                                                                                                
Number 1750                                                                                                                     
                                                                                                                                
MR.   SAMUELSEN   reiterated  that   with   the   Magnuson-Stevens                                                              
reauthorization,  there will be  a 3 percent  fee that  the groups                                                              
will face.  Hopefully, that 3 percent  will satisfy both the state                                                              
and  federal government's  appetite for  state oversight  dollars.                                                              
He commented, "BBEDC is not in support  of that last statement.  I                                                              
think  that the  Magnuson-Stevens  3  percent will  override  what                                                              
we're doing  here."   However, if  there is  a shortfall  in state                                                              
budget  dollars, it  is very  important that  the state  oversight                                                              
committee  has the  state dollars  to  continue oversight  because                                                              
business continues.   He further commented that this  fee is about                                                              
the groups being able to do business alone.                                                                                     
                                                                                                                                
MR. BUSH  agreed that this  legislative review had  been discussed                                                              
and the NSEDC is the only group that still advocates the sunset.                                                                
                                                                                                                                
CO-CHAIRMAN  HARRIS commented  that  he would  not want  to see  a                                                              
sunset in HB 334 because the makeup  of this body in the future is                                                              
not known.   By moving  the program from  GF to program  receipts,                                                              
the  people  who benefit  from  the  program  are paying  for  the                                                              
program.  He  believes this [HB 334]  is a way to support  some of                                                              
the programs going on in rural Alaska.                                                                                          
                                                                                                                                
Number 1530                                                                                                                     
                                                                                                                                
REPRESENTATIVE DYSON  moved to report  HB 334, as amended,  out of                                                              
committee  with  individual  recommendations.     There  being  no                                                              
objection, it was  so ordered and CSHB 334(CRA)  was reported from                                                              
the House Community and Regional Affairs Standing Committee.                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                     
                                                                                                                                
There being  no further business  before the committee,  the House                                                              
Community  and Regional  Affairs  Standing  Committee meeting  was                                                              
adjourned at 9:25 a.m.                                                                                                          
                                                                                                                                

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